Attached files
file | filename |
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EX-31.1 - Inspyr Therapeutics, Inc. | v178988_ex31-1.htm |
EX-31.2 - Inspyr Therapeutics, Inc. | v178988_ex31-2.htm |
EX-32.1 - Inspyr Therapeutics, Inc. | v178988_ex32-1.htm |
EX-4.27 - Inspyr Therapeutics, Inc. | v178988_ex4-27.htm |
EX-4.28 - Inspyr Therapeutics, Inc. | v178988_ex4-28.htm |
EX-32.2 - Inspyr Therapeutics, Inc. | v178988_ex32-2.htm |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
(Mark
One)
x
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the fiscal year ended December
31, 2009.
or
¨
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the transition period
from
to
.
Commission
File Number 333-153829
GENSPERA,
INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
20-0438951
|
|
State or other jurisdiction of
incorporation or organization
|
(I.R.S. Employer
Identification No.)
|
|
2511 N Loop 1604 W, Suite 204
San Antonio, TX
|
78258
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s
telephone number, including area code 210-479-8112
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act o Yes x No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. oYes x No
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. x Yes o No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). x Yes o No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
|
Accelerated filer o
|
Non-accelerated filer o
(Do not check if a smaller reporting company)
|
Smaller reporting company
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). oYes x
No
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter was $0.00 as no market existed for our common stock at such
time.
The number of shares outstanding of
Registrant’s common stock, $0.0001 par value at March 22, 2010 was
16,033,187.
DOCUMENTS
INCORPORATED BY REFERENCE
None
GENSPERA,
INC
FORM 10-K
FOR
THE YEAR ENDED DECEMBER 31, 2009
INDEX
Page
|
||||
PART I
|
||||
Item
1.
|
Business
|
3
|
||
Item
1A.
|
Risk
Factors
|
11
|
||
Item
2.
|
Properties
|
17
|
||
Item
3.
|
Legal
Proceedings
|
17
|
||
Item
4.
|
(Removed and
Reserved)
|
17
|
||
PART II
|
||||
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
17
|
||
Item
6.
|
Selected
Financial Data
|
20
|
||
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
20
|
||
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
25
|
||
Item
8.
|
Financial
Statements and Supplementary Data
|
25
|
||
Item
9.
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
|
26
|
||
Item
9A.
|
Controls
and Procedures
|
27
|
||
Item
9B.
|
Other
Items
|
28
|
||
PART III
|
||||
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
28
|
||
Item
11.
|
Executive
Compensation
|
33
|
||
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
37
|
||
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
38
|
||
Item
14.
|
Principal
Accounting Fees and Services
|
39
|
||
PART IV
|
||||
Item
15.
|
Exhibits,
Financial Statement Schedules
|
40
|
2
We
urge you to read this entire Annual Report on Form 10-K, including the” Risk
Factors” section and the financial statements and related notes included
herein. As used in this Annual Report, unless context otherwise
requires, the words “we,” “us,”“our,” “the Company,” “GenSpera” and “Registrant”
refer to GenSpera, Inc. Also, any reference to “common shares,” or
“common stock,” refers to our $.0001 par value common stock.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements contained in this Annual Report constitute “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. All statements
included in this Annual Report, including those related to our cash, liquidity,
resources and our anticipated cash expenditures, as well as any statements other
than statements of historical fact, regarding our strategy, future operations,
financial position, projected costs, prospects, plans and objectives are
forward-looking statements. These forward-looking statements are
derived, in part, from various assumptions and analyses we have made in the
context of our current business plan and information currently available to us
and in light of our experience and perceptions of historical trends, current
conditions and expected future developments and other factors we believe are
appropriate in the circumstances. You can generally identify forward looking
statements through words and phrases such as “believe”, “expect”, “seek”,
“estimate”, “anticipate”, “intend”, “plan”, “budget”, “project”, “may likely
result”, “may be”, “may continue” and other similar
expressions, although not all forward-looking statements contain these
identifying words. We cannot guarantee future results, levels of activity,
performance or achievements, and you should not place undue reliance on our
forward-looking statements.
Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including the risks
described in the section of this Annual Report entitled “Risk Factors” and
elsewhere. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers, dispositions, joint
ventures or strategic investments. In addition, any forward-looking statements
represent our expectation only as of the day this Annual Report was first filed
with the Securities and Exchange Commission (“SEC”) and should not be relied on
as representing our expectations as of any subsequent date. While we may elect
to update forward-looking statements at some point in the future, we
specifically disclaim any obligation to do so, even if our expectations
change.
When
reading any forward-looking statement you should remain mindful that actual
results or developments may vary substantially from those expected as expressed
in or implied by such statement for a number of reasons or factors, including
but not limited to:
·
|
the
success of our research and development activities, the development of a
viable commercial product, and the speed with which regulatory
authorizations may be achieved;
|
·
|
whether
or not a market for our products develops and, if a market develops, the
rate at which it develops;
|
·
|
our
ability to successfully sell or license our products if a market
develops;
|
·
|
our
ability to attract and retain qualified
personnel;
|
·
|
the
accuracy of our estimates and
projections;
|
·
|
our
ability to fund our short-term and long-term financing
needs;
|
·
|
changes
in our business plan and corporate growth strategies;
and
|
·
|
other
risks and uncertainties discussed in greater detail in the section
captioned “Risk Factors”
|
Each
forward-looking statement should be read in context with and in understanding of
the various other disclosures concerning our company and our business made
elsewhere in this Annual Report as well as our public filings with the SEC. You
should not place undue reliance on any forward-looking statement as a prediction
of actual results or developments. We are not obligated to update or revise any
forward-looking statements contained in this Annual Report or any other filing
to reflect new events or circumstances unless and to the extent required by
applicable law.
ITEM
1.
|
BUSINESS
|
We
are a pharmaceutical development stage company focused on the discovery and
development of pro-drug cancer therapeutics, an emerging medical science. A
pro-drug is an inactive precursor of a drug that is converted into its active
form only at the site of the tumor.
3
Our
History
In early
2004, the intellectual property underlying our technologies was assigned from
Johns Hopkins University to the co-inventors, Dr. John Isaacs, Dr. Soren
Christensen, Dr. Hans Lilja and Dr. Samuel Denmeade. The Co-inventors
granted us an option to license the intellectual property in return for our
continued prosecution of the patent portfolio containing the intellectual
property. This option was exercised in early 2008 by reimbursement of past
patent prosecution costs previously incurred by Johns Hopkins University.
Subsequently, the co-inventors assigned us the intellectual property in April of
2008. Our activities during the period of 2004-2007 were limited to the
continued prosecution of the relevant patents.
Dr. John
Isaacs and Dr. Sam Denmeade serve on our Scientific Advisory Board as Chief
Scientific Advisor and Chief Medical Advisor, respectively. Dr Soren
Christensen and Dr. Hans Lilja also serve on the Company’s Scientific Advisory
Board. We currently have no oral or written agreements with
Johns Hopkins University with regard to any other intellectual
property or research activities.
The
Potential of Our Pro-Drug Therapies
Cancer
chemotherapy involves treating patients with cytotoxic drugs (compounds or
agents that are toxic to cells). Chemotherapy is often combined with surgery or
radiation in the treatment of early stage disease and it is the preferred, or
only, treatment option for many forms of cancer in later stages of the disease.
However, major drawbacks of chemotherapy include:
Side
effects
|
Non-cancer
cells in the body are also affected, often leading to serious side
effects.
|
Incomplete tumor
kill
|
Many
of the leading chemotherapeutic agents act during the process
of cell division - they might be effective with tumors comprised of
rapidly-dividing cells, but are much less effective for tumors that
contain cells that are slowly
dividing.
|
Resistance
|
Cancers
will often develop resistance to current drugs after repeated exposure,
limiting the number of times that a treatment can be effectively
applied.
|
Pro-drug
chemotherapy is a relatively new approach to cancer treatment that is being
investigated as a means to get higher concentrations of cytotoxic agents at the
tumor location while avoiding the toxicity of these high doses in the rest of
the body. An inactive form of a cytotoxin (referred to as the “pro-drug”) is
administered to the patient. The pro-drug is converted into the active cytotoxin
only at the tumor site.
We
believe that, if successfully developed, pro-drug therapies have the potential
to provide an effective therapeutic approach to a broad range of solid tumors.
We have proprietary technologies that appear, in animal models, to meet the
requirements for an effective pro-drug. In addition, we believe that our
cytotoxin addresses two drawbacks prevalent with current cancer drugs - it kills
slowly- and non-dividing cancer cells as well as rapidly dividing cancer cells,
and does not appear to trigger the development of resistance to its
effects.
Our
Technology
Our
technology supports the creation of pro-drugs by attaching “masking/targeting
agents” (agents that simultaneously mask the toxicity of the cytotoxin and help
target the cytotoxin to the tumor) to the cytotoxin “12ADT”, and does so in a
way that allows conversion of the pro-drug to its active form selectively at the
site of tumors. We own patents that contain claims that cover 12ADT as a
composition of matter.
Cytotoxin
12ADT is
a chemically modified form of thapsigargin, a cytotoxin that kills fast-, slow-
and non-dividing cells. Our two issued core patents, both entitled “ Tissue Specific Prodrug, ”
contain claims which cover the composition of 12ADT.
Masking/Targeting
Agent
We use
peptides as our masking/targeting agents. Peptides are short strings of
amino-acids, the building blocks of many components found in cells. When
attached to 12ADT, they can make the cytotoxin inactive - once removed, the
cytotoxin is active again. Our technology takes advantage of the fact that the
masking peptides can be removed by chemical reactors in the body called enzymes,
and that the recognition of particular peptides by particular enzymes can be
very specific. The peptides also make 12ADT soluble in blood. When it is
removed, 12ADT returns to its natural insoluble state and precipitates directly
into nearby cells.
4
How
we make our pro-drugs

How
our pro-drugs work

Our
Approach
Our
approach is to identify specific enzymes that are found at high levels in tumors
relative to other tissues in the body. Upon identifying these enzymes, we create
peptides that are recognized predominantly by those enzymes in the tumor and not
by enzymes in normal tissues. This double layer of recognition adds to the
tumor-targeting found in our pro-drugs. Because the exact nature of our
masking/targeting peptides is so refined and specific, they form the basis for
another set of our patents and patent applications on the combination of the
peptides and 12ADT.
5
Our
Pro-Drug Development Candidates
We
currently have four pro-drug candidates identified based on this technology, as
summarized in the table below (at this time we are only developing
G-202):
Pro-Drug Candidate
|
Activating enzyme
|
Target location of activation
enzyme
|
Status
|
||||
G-202
|
Prostate
Specific Membrane Antigen (PSMA)
|
The
blood vessels of all solid tumors
|
·
|
Phase
I Clinical Trial is underway
|
|||
G-114
|
Prostate
Specific Antigen (PSA)
|
Prostate
cancers
|
·
|
Validated
efficacy in pre-clinical animal models (Johns Hopkins
University)
|
|||
G-115
|
Prostate
Specific Antigen (PSA)
|
Prostate
cancers
|
·
|
Validated
efficacy in pre-clinical animal models (Johns Hopkins
University)
|
|||
Ac-GKAFRR-L12ADT
|
Human
glandular kallikrein 2 (hK2)
|
Prostate
cancers
|
·
|
Validated
efficacy in pre-clinical animal models (Johns Hopkins
University)
|
Strategy
Business
Strategy
We plan
to develop a series of therapies based on our pro-drug technology platform and
bring them through Phase I/II clinical trials.
Manufacturing
and Development Strategy
Under the
planning and direction of key personnel, we expect to outsource all of our Good
Laboratory Practices (“GLP”) preclinical development activities (e.g.,
toxicology) and Good Manufacturing Practices (“GMP”) manufacturing and clinical
development activities to contract research organizations (“CROs”) and contract
manufacturing organizations (“CMOs”). Manufacturing will also be
outsourced to organizations with approved facilities and manufacturing
practices.
Commercialization
Strategy
We intend
to license our drug compounds to third parties after Phase I/II clinical trials.
It is expected that such third parties would then continue to develop, market,
sell, and distribute the resulting products.
Market
and Competitive Considerations
G-202
Our
primary focus is the opportunity offered by our lead pro-drug candidate, G-202.
We believe that we have validated G-202 as a drug candidate to treat various
forms of solid tumors; including breast, urinary bladder, kidney and prostate
cancer based on the ability of G-202 to cause tumor regression in animal
models. On January 19, 2010, we commenced our first Phase I Clinical
Trial on G-202 at University of Wisconsin, Carbone Cancer Center
in Madison, Wisconsin. The second clinical site for the G-202 Phase I
study, the Sidney Kimmel Comprehensive Cancer Center at Johns Hopkins
University, enrolled its first patient on March 3, 2010. Although we have
commenced the trials, the outcome of the trials is uncertain and, if we are
unable to satisfactorily complete such trials, or if such trials yield
unsatisfactory results, we will be unable to commercialize
G-202. Notwithstanding, we hope to eventually demonstrate that
G-202 is more efficacious than current commercial products that treat solid
tumors by disrupting their blood supply.
Potential
Markets for G-202
We
believe that if successfully developed, G-202 has the potential to treat a range
of solid tumors by disrupting their blood supply. It is too early in the
development process to determine target indications. The table below summarizes
a number of the potential United States patient populations which we believe may
be amenable to this therapy and represent potential target
markets.
6
Estimated Number of
|
Probability of
Developing
(birth to death)
|
|||||||
Cancer
|
New Cases (2006)
|
Male
|
Female
|
|||||
Prostate
|
192,280
|
1
in 6
|
-
|
|||||
Breast
|
194,280
|
n/a
|
1
in 8
|
|||||
Urinary
Bladder
|
70,980
|
1
in 27
|
1
in 84
|
|||||
Kidney
Cancer
|
57,760
|
n/a
|
n/a
|
The
clinical opportunity for G-202
We
believe that current anti-angiogenesis drugs (drugs that disrupt the blood
supply to tumors) validate the clinical approach and market potential of
G-202. Angiogenesis is the physiological process involving the growth
of new blood vessels from pre-existing vessels and is a normal process in growth
and development, as well as in wound healing. Angiogenesis is also a
fundamental step in the development of tumors from a clinically insignificant
size to a malignant state because no tumor can grow beyond a few millimeters in
size without the nutrition and oxygenation that comes from an associated blood
supply. Interrupting this process has been targeted as a point of intervention
for slowing or reversing tumor growth. A well known example of a successful
anti-angiogenic approach is the recently approved drug, Avastin TM , a monoclonal antibody that
inhibits the activity of Vascular Endothelial Growth Factor, which is important
for the growth and survival of endothelial cells.
These
types of anti-angiogenic drugs have only a limited therapeutic effect with
increased median patient survival times of only a few months. Our approach is
designed to destroy both the existing and newly growing tumor vasculature,
rather than just block new blood vessel formation. We anticipate that this
approach will lead to a more immediate collapse of the tumors nutrient supply
and consequently an enhanced rate of tumor destruction.
G-202
destroys new and existing blood vessels in tumors

Competition
The
pharmaceutical, biopharmaceutical and biotechnology industries are very
competitive, fast moving and intense, and expected to be increasingly so in the
future. Although we are not aware of any competitor who is developing a
drug that is designed to destroy both the existing and newly growing tumor
vasculature in a manner similar to G-202, there are several marketed drugs and
drugs in development that attack tumor-associated blood vessels to some degree.
For example, Avastin TM
is a marketed product that acts predominantly as an anti-angiogenic
agent. Zybrestat TM
is another drug in development that is described as a
vascular-disrupting agent that inhibits blood flow to tumors. It is impossible
to accurately ascertain how well our drug will compete against these or other
products that may be in the marketplace until we have human patient data for
comparison.
Other larger and well
funded companies have developed and are developing drug candidates that, if not
similar in type to our drug candidates, are designed to address the same patient
or subject population. Therefore, our lead product, other products in
development, or any other products we may acquire or in-license may not be the
best, the safest, the first to market, or the most economical to make or
use. If a competitor’s product or product in development is better than
ours, for whatever reason, then our ability to license our technology could be
diminished and our sales could be lower than that of competing products, if we
are able to generate sales at all.
7
Patents
and Proprietary Rights
Our
success will likely depend upon our ability to preserve our proprietary
technologies and operate without infringing on the proprietary rights of other
parties. However, we may rely on certain proprietary technologies and know-how
that are not patentable or that we determine to keep as trade secrets. We
protect our proprietary information, in part, by the use of confidentiality and
assignment of invention agreements with our officers, directors, employees,
consultants, significant scientific collaborators and sponsored researchers that
generally provide that all inventions conceived by the individual in the course
of rendering services to us shall be our exclusive property. The
intellectual property underlying our technology is covered by certain patents
and patent applications previously owned by JHU that were assigned to us in
April of 2008. By virtue of these assignments, we have no further
financial obligations to the inventors or to JHU with regard to the assigned
intellectual property. JHU retains a paid-up, royalty-free, non-exclusive
license to use the intellectual property for non-profit
purposes.
Number
|
Country
|
Filing
Date
|
Issue Date
|
Expiration
Date
|
Title
|
||||||
Patents
Issued
|
|||||||||||
6,504,014
|
US
|
6/7/00
|
1/7/2003
|
6/6/2020
|
Tissue
specific pro-drug (TG)
|
||||||
6,545,131
|
US
|
7/28/00
|
4/8/2003
|
7/27/2020
|
Tissue
specific pro-drug (TG)
|
||||||
6,265,540
|
US
|
5/19/98
|
7/24/2001
|
5/18/2018
|
Tissue
specific pro-drug (PSA)
|
||||||
6,410,514
|
US
|
6/7/00
|
6/25/2002
|
6/6/2020
|
Tissue
specific pro-drug (PSA)
|
||||||
7,053,042
|
US
|
7/28/00
|
5/30/2006
|
7/27/2020
|
Activation
of peptide pro-drugs by HK2
|
||||||
7,468,354
|
US
|
11/30/01
|
12/23/08
|
11/29/2021
|
Tissue
specific pro-drug
(G-202,
PSMA)
|
||||||
7,635,682
|
US
|
1/6/06
|
12/22/09
|
1/5/2026
|
Tumor
activated pro-drugs
(G-115)
|
||||||
Patents
Pending
|
|||||||||||
US
2008/0247950
|
US
|
3/15/07
|
Pending
|
N/A
|
Activation
of peptide pro-drugs by HK2
|
||||||
US
2007/0160536
|
US
|
1/6/2006
|
Pending
|
N/A
|
Tumor
Activated Pro-drugs (PSA,G-115)
|
||||||
US
2009/0163426
|
US
|
11/25/08
|
Pending
|
N/A
|
Tumor
specific pro-drugs (PSMA)
|
When
appropriate, we will continue to seek patent protection for inventions in our
core technologies and in ancillary technologies that support our core
technologies or which we otherwise believe will provide us with a competitive
advantage. We will accomplish this by filing and maintaining patent applications
for discoveries we make, either alone or in collaboration with scientific
collaborators and strategic partners. Typically, we plan to file patent
applications in the United States. In addition, we plan to obtain licenses or
options to acquire licenses to patent filings from other individuals and
organizations that we anticipate could be useful in advancing our research,
development and commercialization initiatives and our strategic business
interest.
Manufacturing
& Development
12ADT is
manufactured by chemically modifying the cytotoxin thapsigargin, which is
isolated from the seeds of
Thapsia garganica, a plant predominantly found in countries bordering the
Mediterranean Sea. Our pro-drug, G-202, is then manufactured by attaching a
specific peptide to 12ADT.
8
Outsource
Manufacturing
To
leverage our experience and available financial resources, we do not plan to
develop company-owned or company-operated manufacturing facilities. We plan to
outsource all drug manufacturing to contract manufacturers that operate in
compliance with GMP. We may also seek to refine the current manufacturing
process and final drug formulation to achieve improvements in storage
temperatures and the like.
Supply
of Raw Materials – Thapsibiza SL
To our
knowledge, there is only one commercial supplier of Thapsia garganica seeds. In
April 2007, we obtained the proper permits from the United States Department of
Agriculture (“USDA”) for the importation of Thapsia garganica
seeds. In January 2008, we entered into a sole source agreement with this
supplier, Thapsibiza, SL. The material terms of the agreement are as
follows:
Term
|
The
term of the agreement is for 5
years.
|
Exclusivity
|
Thapsibiza
shall exclusively provide Thapsia garganica
seeds to the Company. The Company has the ability to seek addition
suppliers to supplement the supply from Thapsibiza,
SL.
|
Pricing
|
The
price shall be 300 Euro/kg. Thapsibiza may, from time to time, without
notice, increase the price to compensate for any increased governmental
taxes.
|
Minimum
Order
|
Upon
successfully securing $5,000,000 of equity financing, and for so long as
the Company continues to develop drugs derived from thapsigargin, the
minimum purchase shall be 50kg per harvest period
year.
|
Indemnification
|
Once
the product is delivered to an acceptable carrier, the Company shall be
responsible for an injury or damage result from the handling of the
product. Prior to delivery, Thapsibiza shall be solely
responsible.
|
Government
Regulation
The
United States Food and Drug Administration (“FDA”), as well as drug regulators
in state and local jurisdictions, imposes substantial requirements upon the
clinical development, manufacturing and marketing of pharmaceutical
products. The process we are required by the FDA to complete before our
drug compound may be marketed in the U.S. generally involves the
following:
|
·
|
Preclinical
laboratory and animal tests;
|
|
·
|
Submission
of an Investigational New Drug Application (“IND”), which must become
effective before human clinical trials may
begin;
|
|
·
|
Adequate
and well-controlled human clinical trials to establish the safety and
efficacy of the product candidate for its intended
use;
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Submission
to the FDA of an New Drug Application (“NDA”);
and
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FDA
review and approval of an NDA.
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The
testing and approval process requires substantial time, effort, and financial
resources, and we cannot be certain that any approval will be granted on an
expeditious basis, if at all. Preclinical tests include laboratory
evaluation of the drug candidate, its chemistry, formulation and stability, as
well as animal studies to assess the potential safety and efficacy of the drug
candidate. Certain preclinical tests must be conducted in compliance with
good laboratory practice regulations. Violations of these regulations can, in
some cases, lead to invalidation of the studies, requiring such studies to be
replicated. In some cases, long-term preclinical studies are conducted
while clinical studies are ongoing.
The
results of the preclinical tests, together with manufacturing information and
analytical data, are submitted to the FDA as part of an IND, which must become
effective before we may begin human clinical trials. The IND automatically
becomes effective 30 days after receipt by the FDA, unless the FDA, within the
30-day time period, raises concerns or questions about the conduct of the trials
as outlined in the IND and imposes a clinical hold. In such a case, the
IND sponsor and the FDA must resolve any outstanding concerns before clinical
trials can begin. Our submission of an IND may not result in FDA
authorization to commence clinical trials for any particular compound. All
clinical trials must be conducted under the supervision of a qualified
investigator in accordance with good clinical practice regulations. These
regulations include the requirement that all prospective patients provide
informed consent. Further, an independent Institutional Review Board (“IRB”) at
each medical center proposing to conduct the clinical trials must review and
approve any clinical study. The IRB also monitors the study and must be
kept informed of the study’s progress, particularly as to adverse events and
changes in the research. Progress reports detailing the results of the
clinical trials must be submitted at least annually to the FDA and more
frequently if adverse events occur.
9
Human
cancer drug clinical trials are typically conducted in three sequential phases
that may overlap:
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Phase
I: The drug candidate is initially introduced into cancer patients and
tested for safety and tolerability at escalating
dosages,
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Phase
II: The drug candidate is studied in a limited cancer patient population
to further identify possible adverse effects and safety risks, to evaluate
the efficacy of the drug candidate for specific targeted diseases and to
determine dosage tolerance and optimal
dosage.
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Phase
III: When Phase II evaluations demonstrate that a dosage range of the drug
candidate may be effective and has an acceptable safety profile, Phase III
trials are undertaken to further evaluate dose response, clinical efficacy
and safety profile in an expanded patient population, often at
geographically dispersed clinical study
sites.
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Our
business strategy is to bring our drug candidates through Phase I/II clinical
trials before licensing them to third parties who would then further develop the
drugs and seek marketing approval. Once the drug is approved, the third party
licensee will be expected to market, sell, and distribute the products in
exchange for some combination of up-front payments, royalty payments, and
milestone payments. Management cannot be certain that we, or our licensees, will
successfully initiate or complete Phase I, Phase II, or Phase III testing of our
product candidates within any specific time period, if at all.
Furthermore, the FDA or the IRB or the IND sponsor may suspend clinical trials
at any time on various grounds, including a finding that the patients are being
exposed to an unacceptable health risk.
Concurrent
with clinical trials and pre-clinical studies, we also must develop information
about the chemistry and physical characteristics of the drug and finalize a
process for manufacturing the product in accordance with GMP requirements.
The manufacturing process must be capable of consistently producing quality
batches of the experimental drug, and management must develop methods for
testing the quality, purity, and potency of the final experimental drugs.
Additionally, appropriate packaging must be selected and tested.
The
results of the drug development efforts and pre-clinical and clinical studies
are then submitted to the FDA as part of an NDA for approval of the marketing
and commercial shipment of the product. The FDA reviews each NDA submitted
and may request additional information, rather than accepting the NDA for
filing. In this event, the application must be resubmitted with the additional
information included. The resubmitted application is also subject to
review before the FDA accepts it for filing. Once the FDA accepts the NDA
for filing, the agency begins an in-depth review of the NDA. The FDA has
substantial discretion in the approval process and may disagree with our, or our
licensees’, interpretation of the data submitted.
The
review process may be significantly extended by FDA requests for additional
information or clarification regarding information already provided. Also,
as part of this review, the FDA may refer the application to an appropriate
advisory committee, typically a panel of clinicians, for review, evaluation and
a recommendation. The FDA is not bound by the recommendation of the
advisory committee. Manufacturing establishments are also
subject to inspections prior to NDA approval to assure compliance with GMPs and
with manufacturing commitments made in the relevant marketing
application.
Under the
Prescription Drug User Fee Act (“PDUFA”), submission of an NDA with clinical
data requires payment of a fee to the FDA, which is adjusted annually. For
fiscal year 2010, that fee is $1,405,500. In return, the FDA assigns a
goal (often months) for standard NDA reviews from acceptance of the application
to the time the agency issues its “complete response,” in which the FDA may
approve the NDA, deny the NDA if the applicable regulatory criteria are not
satisfied, or require additional clinical data. Even if this data is submitted,
the FDA may ultimately decide that the NDA does not satisfy the criteria for
approval. If the FDA approves the NDA, the product becomes available for
physicians to prescribe. Even if the FDA approves the NDA, the agency may
decide later to withdraw product approval if compliance with regulatory
standards is not maintained or if safety problems are recognized after the
product reaches the market. The FDA may also require post-marketing
studies, also known as Phase IV studies, as a condition of approval to develop
additional information regarding the efficacy and safety of a product. In
addition, the FDA requires surveillance programs to monitor approved products
that have been commercialized, and the agency has the power to require changes
in labeling or to prevent further marketing of a product based on the results of
these post-marketing programs.
Satisfaction
of the above FDA requirements or requirements of state, local and foreign
regulatory agencies typically takes several years. Government regulation
may delay or prevent marketing of potential products for a considerable period
of time and impose costly procedures upon our activities. Management
cannot be certain that the FDA or any other regulatory agency will grant
approval for our lead product G-202 (or any other products we may develop,
acquire, or in-license) under development on a timely basis, if at all.
Success in preclinical or early-stage clinical trials does not assure success in
later-stage clinical trials. Data obtained from preclinical and clinical
activities are not always conclusive and may be susceptible to varying
interpretations that could delay, limit or prevent regulatory approval.
Even if a product receives regulatory approval, the approval may be
significantly limited to specific indications or uses. Further, even after
regulatory approval is obtained, later discovery of previously unknown problems
with a product may result in restrictions on the product or even complete
withdrawal of the product from the market. Delays in obtaining, or
failures to obtain regulatory approvals would have a material adverse effect on
our business.
10
Any
products manufactured or distributed by us, or our licensees, pursuant to the
FDA clearances or approvals are subject to pervasive and continuing regulation
by the FDA, including record-keeping requirements, reporting of adverse
experiences with the drug, submitting other periodic reports, drug sampling and
distribution requirements, notifying the FDA and gaining its approval of certain
manufacturing or labeling changes, complying with certain electronic records and
signature requirements, and complying with the FDA promotion and advertising
requirements. Failure to comply with these regulations could result, among
other things, in suspension of regulatory approval, recalls, suspension of
production or injunctions, seizures, or civil or criminal sanctions.
Management cannot be certain that our present or future subcontractors or
licensees will be able to comply with these regulations and other FDA regulatory
requirements.
Our
product candidates are also subject to a variety of state laws and regulations
in those states or localities where our lead product G-202 (and any other
products we may develop, acquire, or in-license) will be marketed. Any
applicable state or local regulations may hinder our ability to market our lead
product G-202 (and any other products we may develop, acquire, or in-license) in
those states or localities. In addition, whether or not FDA approval has
been obtained, approval of a pharmaceutical product by comparable governmental
regulatory authorities in foreign countries must be obtained prior to the
commencement of clinical trials and subsequent sales and marketing efforts in
those countries. The approval procedure varies in complexity from country
to country, and the time required may be longer or shorter than that required
for FDA approval. We may incur significant costs to comply with these laws
and regulations now or in the future.
The FDA’s
policies may change, and additional government regulations may be enacted which
could prevent or delay regulatory approval of our potential products.
Moreover, increased attention to the containment of health care costs in the
U.S. and in foreign markets could result in new government regulations that
could have a material adverse effect on our business. Management cannot
predict the likelihood, nature or extent of adverse governmental regulation that
might arise from future legislative or administrative action, either in the U.S.
or abroad.
Other
Regulatory Requirements
The U.S.
Federal Trade Commission and the Office of the Inspector General of the U.S.
Department of Health and Human Services (“HHS”) also regulate certain
pharmaceutical marketing practices. Also, reimbursement practices and HHS
coverage of medicine or medical services are important to the success of
procurement and utilization of our product candidates, if they are ever approved
for commercial marketing.
We are
also subject to numerous federal, state and local laws relating to such matters
as safe working conditions, manufacturing practices, environmental protection,
fire hazard control, and disposal of hazardous or potentially hazardous
substances. We may incur significant costs to comply with these laws and
regulations now or in the future. Management cannot assure you that any
portion of the regulatory framework under which we currently operate will not
change and that such change will not have a material adverse effect on our
current and anticipated operations.
Employees
As of
March 31, 2010 we employed 2 individuals who are also our 2 executive officers,
both of whom hold advanced degrees.
Where
to Find More Information
We make
our public filings with the SEC, including our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all
exhibits and amendments to these reports. These materials are
available on the SEC’s web site, http://www.sec.gov
. You may also read or copy any materials we file with the SEC at the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. Alternatively, you may obtain copies of
these filings, including exhibits, by writing or telephoning us at:
GENSPERA
2511 N
Loop 1604 W, Suite 204
San
Antonio, TX 78258
Attn:
Chief Executive Officer
Tel:
210-479-8112
ITEM
1A.
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RISK
FACTORS
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We
have described below a number of uncertainties and risks which, in addition to
uncertainties and risks presented elsewhere in this Annual Report, may adversely
affect our business, operating results and financial condition. The
uncertainties and risks enumerated below as well as those presented elsewhere in
this Annual Report should be considered carefully in evaluating us, our business
and the value of our securities. The following important factors, among others,
could cause our actual business, financial condition and future results to
differ materially from those contained in forward-looking statements made in
this Annual Report or presented elsewhere by management from time to
time.
11
Risks
Relating to Our Stage of Development
As
a result of our limited operating history, you cannot rely upon our historical
performance to make an investment decision.
Since
inception in 2003 and through December 31, 2009, we have raised approximately
$7,228,000 in capital. During this same period, we have recorded
accumulated losses totaling $10,191,529. As of December 31, 2009, we had working
capital of $2,134,006 and a stockholders’ deficit of $54,245. Our net losses for
the two most recent fiscal years ended December 31, 2008 and 2009 have been
3,326,261 and $5,132,827, respectively. Since inception, we have generated no
revenue.
Our
limited operating history means that there is a high degree of uncertainty in
our ability to: (i) develop and commercialize our technologies and proposed
products; (ii) obtain approval from the FDA; (iii) achieve market acceptance of
our proposed product, if developed; (iv) respond to competition; or (v) operate
the business, as management has not previously undertaken such actions as a
company. No assurances can be given as to exactly when, if at all, we will be
able to fully develop, license, commercialize, market, sell and derive material
revenues from our proposed products in development.
We
will need to raise additional capital to continue operations.
We
currently generate no cash. We have relied entirely on external financing to
fund operations. Such financing has come primarily from the sale of common stock
to third parties and the exercise of warrants/options. We have expended and will
continue to expend substantial amounts of cash in the development, pre-clinical
and clinical testing of our proposed products. We will require additional cash
to conduct drug development, establish and conduct pre-clinical and clinical
trials and for general working capital needs. We anticipate that we will require
an additional $7 million to take our lead drug through Phase II clinical
evaluation, which is currently anticipated to occur in the fourth quarter of
2011.
As of
December 31, 2009, we had cash on hand of approximately $2,255,000 and then
raised $860,000 in the first quarter of 2010 which we anticipate will fund our
operations through June of 2011. Presently, the Company has an
average monthly cash burn rate of approximately $185,000. We expect
this average monthly cash burn rate to remain constant over the next fifteen
months, assuming we do not engage in an extraordinary transaction or otherwise
face unexpected events or contingencies. Accordingly, we will need to
raise additional capital to fund anticipated operating expenses after June of
2011. In the event we are not able to secure financing, we may have to delay,
reduce the scope of or eliminate one or more of our research, development or
commercialization programs or product launches or marketing
efforts. Any such change may materially harm our business, financial
condition and operations.
Our long
term capital requirements are expected to depend on many factors,
including:
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our
development programs;
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the
progress and costs of pre-clinical studies and clinical
trials;
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the
time and costs involved in obtaining regulatory
clearance;
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the
costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims;
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the
costs and our ability to license our
products;
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competing
technological and market
developments;
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market
acceptance of our proposed products, if developed;
and
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the
costs for recruiting and retaining employees, consultants and
professionals.
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We cannot
assure you that financing whether from external sources or related parties, will
be available if needed or on favorable terms. If additional financing is not
available when required or is not available on acceptable terms, we may be
unable to fund operations and planned growth, develop or enhance our
technologies, take advantage of business opportunities or respond to competitive
market pressures.
Raising
needed capital may be difficult as a result of our limited operating
history.
When
making investment decisions, investors typically look at a company’s historical
performance in evaluating the risks and operations of the business and the
business’s future prospects. Our limited operating history makes such evaluation
and an estimation of our future performance substantially more difficult. As a
result, investors may be unwilling to invest in us or such investment may be on
terms or conditions which are not acceptable. If we are unable to secure such
additional finance, we may need to cease operations.
12
We
may not be able to commercially develop our technologies.
We have
concentrated our research and development on our pro-drug
technologies. Our ability to generate revenue and operate profitably
will depend on our being able to develop these technologies for human
applications. Our technologies are primarily directed toward the development of
cancer therapeutic agents. We cannot guarantee that the results obtained in the
pre-clinical and clinical evaluation of our therapeutic agents will be
sufficient to warrant approval by the FDA. Even if our therapeutic agents are
approved for use by the FDA, there is no guarantee that they will exhibit an
enhanced efficacy relative to competing therapeutic modalities such that they
will be adopted by the medical community. Without significant adoption by the
medical community, our agents will have limited commercial potential which could
harm our ability to generate revenues, operate profitably or remain a viable
business.
Inability
to complete pre-clinical and clinical testing and trials will impair our
viability.
In the
first quarter of 2010, we commenced our first clinical trials of G-202 at the
University of Wisconsin, Carbone Cancer Center in Madison
Wisconsin. Although we have commenced our clinical trials, the
outcome of the trials is uncertain and, if we are unable to satisfactorily
complete such trials, or if such trials yield unsatisfactory results, we will be
unable to commercialize our proposed products. No assurances can be given that
our clinical trials will be successful. The failure of such trials could delay
or prevent regulatory approval and could harm our ability to generate revenues,
operate profitably or remain a viable business.
Future
financing will result in dilution to existing stockholders.
We will
require additional financing in the future. We are authorized to issue 80
million shares of common stock and 10 million shares of preferred stock. Such
securities may be issued without the approval or consent of our stockholders.
The issuance of our equity securities in connection with a future financing will
result in a decrease of our current stockholders’ percentage
ownership.
Risks
Relating to Intellectual Property and Government Regulation
We
may not be able to withstand challenges to our intellectual property
rights.
We rely
on our intellectual property, including our issued and applied for patents, as
the foundation of our business. Our intellectual property rights may come under
challenge. No assurances can be given that, even if issued, our
patents will survive claims alleging invalidity or infringement on other
patents. The viability of our business will suffer if such patent protection
becomes limited or is eliminated.
We
may not be able to adequately protect our intellectual property.
Considerable
research with regard to our technologies has been performed in countries outside
of the United States. The laws protecting intellectual property in some of those
countries may not provide protection for our trade secrets and intellectual
property. If our trade secrets or intellectual property are
misappropriated in those countries, we may be without adequate remedies to
address the issue. At present, we are not aware of any infringement of our
intellectual property. In addition to our patents, we rely on confidentiality
and assignment of invention agreements to protect our intellectual property.
These agreements provide for contractual remedies in the event of
misappropriation. We do not know to what extent, if any, these
agreements and any remedies for their breach will be enforced by a court. In the
event our intellectual property is misappropriated or infringed upon and an
adequate remedy is not available, our future prospects will greatly
diminish.
Our
proposed products may not receive FDA approval.
The FDA
and comparable government agencies in foreign countries impose substantial
regulations on the manufacture and marketing of pharmaceutical products through
lengthy and detailed laboratory, pre-clinical and clinical testing procedures,
sampling activities and other costly and time-consuming procedures. Satisfaction
of these regulations typically takes several years or more and varies
substantially based upon the type, complexity and novelty of the proposed
product. On September 4, 2009, we received approval from the FDA for
our first IND in order to commence clinical trials with our lead drug
candidadte, G-202. Although we began the G-202 Phase I clinical
trial on January 19, 2010, we cannot assure you that we will successfully
complete the trial. Further, we cannot yet accurately predict when we
might first submit any product license application for FDA approval or whether
any such product license application would be granted on a timely basis, if at
all. Any delay in obtaining, or failure to obtain, such
approvals could have a materially adverse effect on the commercialization of our
products and the viability of the company.
General
Risks Relating to Our Business and Business Model
We
depend on Craig A. Dionne, PhD, our Chief Executive Officer, and Russell
Richerson, PhD, our Chief Operating Officer, for our continued
operations.
We only
have 2 full time employees. The loss of either Craig A. Dionne, PhD,
our Chief Executive Officer, or Russell Richerson, PhD, our Chief Operating
Officer, would be detrimental to us. Although we have entered into employment
agreements with Messrs Dionne and Richerson, there can be no assurance that
these individuals will continue to provide services to us. A voluntary or
involuntary termination of employment by Messrs. Dionne or Richerson could have
a materially adverse effect on our business. Further, as part of
their employment agreements, Messrs Dionne and Richerson agreed to not compete
with us for a certain amount of time following the termination of their
employment. Once the applicable time of these provisions expires,
Messrs Dionne and Richerson may be employed by a competitor of ours in the
future.
13
We
may be required to make significant payments to members of our management in the
event their employment with us is terminated or if we experience a change of
control.
We are a
party to employment agreements with each of Craig Dionne, our President and
Chief Executive Officer and Russell Richerson, our Chief Operating
Officer. In the event we terminate the employment of any of these
executives, we experience a change in control, or in certain cases, if such
executives terminate their employment with us, such executives will be entitled
to receive certain severance and related payments. Additionally, in
such instance, certain securities held by Messrs. Dionne and Richerson will
become immediately vested and exercisable. Upon the occurrence of any
such event, our obligation to make such payments could significantly impact our
working capital and accordingly, our ability to execute our business plan which
could have a materially adverse effect to our business. Also, these
provisions may discourage potential takeover attempts.
We
will require additional personnel to execute our business plan.
Our
anticipated growth and expansion into areas and activities requiring additional
expertise, such as clinical testing, regulatory compliance, manufacturing and
marketing, may require the addition of new management personnel and the
development of additional expertise by existing management. There is intense
competition for qualified personnel in such areas. There can be no
assurance that we will be able to continue to attract and retain the qualified
personnel necessary for the development of our business.
Our
competitors have significantly greater experience and financial
resources.
We
compete against numerous companies, many of which have substantially greater
financial and other resources than us. Several such enterprises have research
programs and/or efforts to treat the same diseases we target. Companies such as
Merck, Ipsen and Diatos, as well as others, have substantially greater resources
and experience than we do and are situated to compete with us
effectively. As a result, our competitors may bring competing
products to market that would result in a decrease in demand for our product, if
developed, which could have a materially adverse effect on the viability of the
company.
We
intend to rely exclusively upon the third-party FDA-approved manufacturers and
suppliers for our products.
We
currently have no internal manufacturing capability, and will rely exclusively
on FDA-approved licensees, strategic partners or third party contract
manufacturers or suppliers. Should we be forced to manufacture our products, we
cannot give you any assurance that we will be able to develop internal
manufacturing capabilities or procure third party suppliers. In the event we
seek third party suppliers, they may require us to purchase a minimum amount of
materials or could require other unfavorable terms. Any such event would
materially impact our prospects and could delay the development and sale of our
products. Moreover, we cannot give you any assurance that any contract
manufacturers or suppliers that we select will be able to supply our products in
a timely or cost effective manner or in accordance with applicable regulatory
requirements or our specifications.
Our
business is dependent upon securing sufficient quantities of a natural product
that currently grows in very specific locations outside of the United
States.
The
therapeutic component of our products, including our lead compound G-202, is
referred to as 12ADT. 12ADT functions by dramatically raising the levels of
calcium inside cells, which leads to cell death. 12ADT is derived from a
material called thapsigargin. Thapsigargin is derived from the seeds of a plant
referred to as Thapsia
garganica which grows along the coastal regions of the Mediterranean Sea.
We currently secure the seeds from Thapsibiza, SL, a third party supplier. There
can be no assurances that the countries from which we can secure Thapsia garganica will
continue to allow Thapsibiza, SL to collect such seeds and/or to do so and
export the seeds derived from Thapsia
garganica to the United States. In the event we are no
longer able to import these seeds, we will not be able to produce our proposed
drug and our business will be adversely affected.
The
current manufacturing process of G-202 requires acetonitrile.
The
current manufacturing process for G-202 requires the common solvent
acetonitrile. Beginning in late 2008, there was a temporary worldwide shortage
of acetonitrile for a variety of reasons. We observed that during that period of
time the available supply of acetonitrile was of variable quality, some of which
is not suitable for our purposes. If we are unable to successfully
change our manufacturing methods to avoid the reliance upon acetonitrile, we may
incur prolonged production timelines and increased production costs if an
acetonitrile shortage was to reoccur. In an extreme case this situation could
adversely affect our ability to manufacture G-202 altogether, thus significantly
impacting our future operations.
In
order to secure market share and generate revenues, our proposed products must
be accepted by the health care community.
Our
proposed products, if approved for marketing, may not achieve market acceptance
since hospitals, physicians, patients or the medical community in general may
decide not to accept and utilize them. We are attempting to develop products
that will likely be first approved for marketing in late stage cancer where
there is no truly effective standard of care. If approved for use in late stage,
the drugs will then be evaluated in earlier stage where they would represent
substantial departures from established treatment methods and will compete with
a number of more conventional drugs and therapies manufactured and marketed by
major pharmaceutical companies. It is too early in the development cycle of the
drugs for us to accurately predict our major
competitors. Nonetheless, the degree of market acceptance of any of
our developed products will depend on a number of factors,
including:
14
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our
demonstration to the medical community of the clinical efficacy and safety
of our proposed products;
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our
ability to create products that are superior to alternatives currently on
the market;
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our
ability to establish in the medical community the potential advantage of
our treatments over alternative treatment methods;
and
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the
reimbursement policies of government and third-party
payors.
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If the
health care community does not accept our products for any of the foregoing
reasons, or for any other reason, our business will be materially
harmed.
We
may be required to secure land for cultivation and harvesting of Thapsia
garganica.
We
believe that we can satisfy our needs for clinical development of G-202 through
completion of Phase III clinical studies from Thapsia garganica that grows
naturally in the wild. In the event G-202 is approved for commercial
marketing, our current supply of Thapsia garganica may not be
sufficient for the anticipated demand. We estimate that in order to
secure sufficient quantities of Thapsia garganica for the
commercialization of a product comprising G-202, we will need to secure
approximately 100 acres of land to cultivate and grow Thapsia
garganica. We anticipate the cost to lease such land
would be $40,000 per year but have not yet fully assessed what other costs would
be associated with a full-scale farming operation. There can be no assurances
that we can secure such acreage, or that even if we are able to do so, that we
could adequately grow sufficient quantities of Thapsia garganica to satisfy
any commercial objectives that involve G-202. Our inability to secure adequate
seeds will result in us not being able to develop and manufacture our proposed
drug and will adversely impact our business.
Thapsia
garganica and Thapsigargin can cause severe skin irritation.
It has
been known for centuries that the plant Thapsia garganica can cause
severe skin irritation when contact is made between the plant and the
skin. In 1978, thapsigargin was determined to be the skin-irritating
component of the plant Thapsia
garganica. The therapeutic component of our products, including our lead
product G-202, is derived from thapsigargin. We obtain thapsigargin from the
above-ground seeds of Thapsia
garganica. These seeds are harvested by hand and those conducting the
harvesting must wear protective clothing and gloves to avoid skin contact.
Although we obtain the seeds from a third-party contractor located in Spain, and
although the contractor has contractually waived any and all liability
associated with collecting the seeds, it is possible that the contractor or
those employed by the contractor may suffer medical issues related to the
harvesting and subsequently seek compensation from us via, for example,
litigation. No assurances can be given, despite our contractual
relationship with the third party contractor, that we will not be the subject of
litigation related to the harvesting.
The
synthesis of 12ADT must be conducted in special facilities.
There are
a limited number of manufacturing facilities qualified to handle and manufacture
therapeutic toxic agents and compounds. This limits the potential number of
possible manufacturing sites for our therapeutic compounds derived from Thapsia
garganica. No assurances can be provided that these
facilities will be available for the manufacture of our therapeutic compounds
under our time schedules or within the parameters of our manufacturing budget.
In the event facilities are not available for manufacturing our therapeutic
compounds, our business and future prospects will be adversely
affected.
Our
lead therapeutic compound, G-202, has not been subjected to large scale
manufacturing procedures.
To date,
G-202 has only been manufactured at a scale adequate to supply early stage
clinical trials. There can be no assurances that the current procedure for
manufacturing G-202 will work at a larger scale adequate for commercial
needs. In the event G-202 cannot be manufactured in sufficient
quantities, our future prospects could be significantly impacted.
We
may not have adequate insurance coverage.
The
testing, manufacturing, marketing and sale of human therapeutic products entail
an inherent risk of product liability claims. We cannot assure you
that substantial claims will not be asserted against us. In the event
we are forced to expend significant funds on defending such claims beyond our
current coverage, and in the event those funds come from operating capital, we
will be required to reduce our business activities, which could lead to
significant losses.
Provisions
in Delaware law and executive employment agreements may prevent or delay a
change of control
We are
subject to the Delaware anti-takeover laws regulating corporate
takeovers. These anti-takeover laws prevent Delaware corporations
from engaging in a merger or sale of more than 10% of its assets with any
stockholder, including all affiliates and associates of the stockholder, who
owns 15% or more of the corporation’s outstanding voting stock, for three years
following the date that the stockholder acquired 15% or more of the
corporation’s assets unless:
15
|
·
|
the
Board of Directors approved the transaction in which the stockholder
acquired 15% or more of the corporation’s
assets;
|
|
·
|
after
the transaction in which the stockholder acquired 15% or more of the
corporation’s assets, the stockholder owned at least 85% of the
corporation’s outstanding voting stock, excluding shares owned by
directors, officers and employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held under the plan will be tendered in a tender or exchange offer;
or
|
|
·
|
on
or after this date, the merger or sale is approved by the Board of
Directors and the holders of at least two-thirds of the outstanding voting
stock that is not owned by the
stockholder.
|
A
Delaware corporation may opt out of the Delaware anti-takeover laws if its
certificate of incorporation or bylaws so provide. We have not opted out of the
provisions of the anti-takeover laws. As such, these laws could prohibit or
delay mergers or other takeover or change of control of GenSpera and may
discourage attempts by other companies to acquire us.
In
addition, employment agreements with certain executive officers provide for the
payment of severance and acceleration of the vesting of options and restricted
stock in the event of termination of the executive officer following a change of
control of GenSpera. These provisions could have the effect of
discouraging potential takeover attempts.
Risks
Relating To Our Common Stock
There
is no established public market for our securities.
On
September 18, 2009, our common shares began quotation on the
OTCBB. Notwithstanding, there has been sporadic trading in our common
shares. Accordingly, there is no established public market for our
securities. An investment in our common stock should be considered
totally illiquid. No assurances can be given that a public market for
our securities will ever materialize. Additionally, even if a public market for
our securities develops and our securities become traded, the trading volume may
be limited, making it difficult for an investor to sell shares.
We
face risks related to compliance with corporate governance laws and financial
reporting standards.
The
Sarbanes-Oxley Act of 2002, as well as related new rules and regulations
implemented by the SEC and the Public Company Accounting Oversight Board,
require changes in the corporate governance practices and financial reporting
standards for public companies. These new laws, rules and
regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of
2002 relating to internal control over financial reporting (“Section 404”), will
materially increase the Company's legal and financial compliance costs and make
some activities more time-consuming and more burdensome. As a result, management
will be required to devote more time to compliance which could result in a
reduced focus on the development thereby adversely affecting the Company’s
development activities. Also, the increased costs will require the Company to
seek financing sooner that it may otherwise have had to.
Starting
in 2007, Section 404 of the Sarbanes-Oxley Act of 2002 requires a company’s
management to assess the company’s internal control over financial reporting
annually and include a report on such assessment in our annual report filed with
the SEC. For small reporting companies with fiscal years ending on or
after June 15, 2010, independent registered public accounting firms will be
required to audit both the design and operating effectiveness of our internal
controls and management's assessment of the design and the operating
effectiveness of such internal controls. If this deadline is not
extended, we will be required to expand substantial capital in connection with
compliance.
Because
of our limited resources, management has concluded that our internal control
over financial reporting may not be effective in providing reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. To mitigate the current limited
resources and limited employees, we rely heavily on direct management oversight
of transactions, along with the use of legal and accounting professionals. As we
grow, we expect to increase our number of employees, which will enable us to
implement adequate segregation of duties within the Committee of Sponsoring
Organizations of the Treadway Commission internal control
framework.
We
do not intend to pay cash dividends.
We do not
anticipate paying cash dividends in the foreseeable future. Accordingly, any
gains on your investment will need to come through an increase in the price of
our common stock. The lack of a market for our common stock makes
such gains highly unlikely.
16
Our
board of directors has broad discretion to issue additional
securities.
We are
entitled under our certificate of incorporation to issue up to 80,000,000 common
and 10,000,000 “blank check” preferred shares. Blank check preferred shares
provide the board of directors broad authority to determine voting, dividend,
conversion, and other rights. As of December 31, 2009, we have issued and
outstanding 15,466,446 common shares and we have 7,648,684 common shares
reserved for issuance upon the exercise of current outstanding options, warrants
and convertible securities. Accordingly, we will be entitled to issue up to
56,884,870 additional common shares and 10,000,000 additional preferred shares.
Our board may generally issue those common and preferred shares, or options or
warrants to purchase those shares, without further approval by our
shareholders. Any preferred shares we may issue will have such
rights, preferences, privileges and restrictions as may be designated from
time-to-time by our board, including preferential dividend rights, voting
rights, conversion rights, redemption rights and liquidation provisions. It is
likely that we will be required to issue a large amount of additional securities
to raise capital to further our development and marketing plans. It is also
likely that we will be required to issue a large amount of additional securities
to directors, officers, employees and consultants as compensatory grants in
connection with their services, both in the form of stand-alone grants or under
our various stock plans. The issuance of additional securities may cause
substantial dilution to our shareholders.
Our
Officers and Scientific Advisors beneficially own approximately 41%of our
outstanding common shares.
Our
Officers and Scientific Advisors own approximately 41% of our issued and
outstanding common shares. As a consequence of their level of stock ownership,
the group will substantially retain the ability to elect or remove members of
our board of directors, and thereby control our management. This group of
shareholders has the ability to significantly control the outcome of corporate
actions requiring shareholder approval, including mergers and other changes of
corporate control, going private transactions, and other extraordinary
transactions any of which may be in opposition to the best interest of the other
shareholders and may negatively impact the value of your
investment.
ITEM
2.
|
PROPERTIES
|
Our
executive offices
are located at 2511 N Loop 1604 W, Suite 204San Antonio, TX 78258. We lease this
facility consisting of approximately 850square feet, for $1,422 per month. Our
lease expires on September 15, 2012.
The
aforesaid properties are in good condition and we believe they will be suitable
for our purposes for the next 12 months. There is no affiliation between us or
any of our principals or agents and our landlords or any of their principals or
agents.
ITEM
3.
|
LEGAL
PROCEEDINGS
|
ITEM
4.
|
(REMOVED
AND RESERVED)
|
PART
II
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
Market
Information
Our
common stock is currently quoted on the Over-the-Counter Bulletin Board under
the symbol GNSZ. The trading and quotation of our shares is limited
and sporadic. Accordingly, we have concluded that no established
public trading market for our common stock exists.
Holders
As of
March 29, 2010, our common stock was held by approximately 118 record holders.
We believe that our actual number of shareholders may be significantly higer as
4,957,975 shares are currently held in street name.
Dividends
We have
not paid any cash dividends to date, and we have no plans to do so in the
future.
Equity
Compensation Plan Information
The
following table sets forth information as of December 31, 2009 with respect to
our compensation plans under which equity securities may be
issued.
17
(a)
|
(b)
|
(c)
|
||||||
Number of Securities
to be Issued
upon Exercise of
Outstanding
Options, Warrants
and Rights
|
Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights
|
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
|
||||||
Equity
compensation plans approved by security holders
|
||||||||
2007 Stock Plan, as
amended (1)
|
784,000
|
$
|
0.67
|
5,216,000
|
||||
Equity
compensation plans not approved by security holders
|
||||||||
2009
Executive Compensation Plan
|
1,775,000
|
1.58
|
0
|
|||||
Total
|
2,559,000
|
$
|
1.30
|
5,216,000
|
(1)
|
Our
2007 Stock Plan, as amended, provides for the issuance of up to 1,500,000
common shares during any calendar year. The plan provides for
authorizes the issuance of up to 6,000,000 common shares in the
aggregate.
|
GenSpera2009
Executive Compensation Plan
Our 2009
Executive Compensation Plan (“2009 Plan”) is administered by our Board or any of
its committee. The purpose of our 2009 Plan is to advance the interests of
GenSpera and our stockholders by attracting, retaining and rewarding persons
performing services for us and to motivate such persons to contribute to our
growth and profitability. The issuance of awards under our 2009 Plan
is at the discretion of the administrator, which has the authority to determine
the persons to whom any awards shall be granted and the terms, conditions and
restrictions applicable to any award. Under our 2009 Plan, we may grant stock
options, restricted stock, stock appreciation rights, restricted stock units,
performance units, performance shares and other stock based awards. Our 2009
Plan authorizes the issuance of up to 1,775,000 shares of our common stock for
the foregoing awards.
Recent
Sales of Unregistered Securities.
The
following securities were issued in private offerings pursuant to the exemption
from registration contained in the Securities Act and the rules promulgated
thereunder:
|
·
|
On
February 17, 2009, we entered into a modification with TRW with regard to
our 5% Convertible Debenture issued to TRW in the amount of
$163,600. Pursuant to the modification, TRW agreed to extend
the maturity date of the debenture from July 14, 2009 to July 14,
2010. As consideration for the modification, we issued TRW a
common stock purchase warrant entitling TRW to purchase 50,000 shares of
our common stock at a per share purchase price of $1.50. The
warrant has a five year term and contains certain anti-dilution provisions
requiring us to adjust the exercise price and number of shares upon the
occurrence of a stock split, stock dividends or stock
consolidation.
|
|
·
|
On
February 17, 2009, we entered into a modification with Craig Dionne, our
Chief Executive Officer and Chairman with regard to our 4% Convertible
Promissory Note issued to Mr. Dionne in the amount of
$35,000. Pursuant to the modification, Mr. Dionne agreed to
extend the maturity date of the Note from December 2, 2008 to December 2,
2009. Mr. Dionne had previously deferred repayment of the
note. As consideration for the modification, we issued Mr.
Dionne a common stock purchase warrant entitling Mr. Dionne to purchase
11,000 shares of our common stock at a per share purchase price of
$1.50. The warrant has a five year term and contains certain
anti-dilution provisions requiring us to adjust the exercise price and
number of shares upon the occurrence of a stock split, stock dividends or
stock consolidation.
|
|
·
|
On
February 19, 2009, we entered into a securities purchase agreement with a
number of accredited investors. Pursuant to the terms of the
securities purchase agreement, we sold the investors 500,000 units in the
aggregate amount of approximately $750,000. The price per unit
was $1.50. Each unit consists of: (i) one share of common
stock; and (ii) one-half common stock purchase warrant. The
warrants have a term of five years and allow the holder to purchase our
common shares at a price per share of $3.00. The warrants also
contain anti-dilution protection in the event of stock splits, stock
dividends and other similar transactions. The provisions
do not provide for any adjustment in the event of subsequent equity sales
or transactions. The warrants are also callable by the Company
in the event the Company’s shares are publically traded in the future and
certain price and volume conditions are
met.
|
As a
result of offering, the anti-dilution provisions in our warrants issued during
the July and August 2008 financing were triggered. These
anti-dilution provisions resulted in the exercise price of these warrants being
reduced from $2.00 to $1.50. Additionally, we issued holders of these
warrants an additional 506,754 additional warrants. We were obligated
to file a registration statement for the common stock underlying such warrants
pursuant to the registration rights agreement entered into in connection with
the July and August 2008 financing.
18
We also
entered into registration rights agreements with the investors granting certain
registration rights with regard to the shares and the shares underlying the
warrants. The registration rights Agreement provides for penalties to
be paid in restricted shares in the event the Company: (i) fails to file a
registration statement or have such registration statement declared effective
within a certain period of time; or (ii) fails to maintain the registration
statement effective until all the securities registered therein are sold or are
eligible for resale pursuant to Rule 144 without manner of sale or volume
restrictions. Subsequent to the issuance, a majority of the investors
agreed to waive the date by which the registration statement needed to be
filed. As a result of the waiver, a registration statement covering
the shares and shares underlying the warrants was filed.
|
·
|
On
May 8, 2009, we issued 61,875 common shares to Lyophilization Services of
New England, Inc. as payment for services valued at $74,869 provided in
connection with manufacturing of our first drug
compound. The shares were valued at $1.50 per
share.
|
|
·
|
In
June and July of 2009 we entered into a series of securities purchase
agreements with a number of accredited and institutional
investors. Pursuant to the terms of the agreements, we offered
and sold an aggregate of 2,025,344 units resulting in gross proceeds to us
of approximately $3,038,000. The price per unit was
$1.50. Each unit consists of: (i) one share of common stock;
and (ii) one half common stock purchase warrant. The warrants
have a term of five years and entitle the investors to purchase our common
shares at a price per share of $3.00. The warrants also contain
provisions providing for an adjustment in the underlying number of shares
and exercise price in the event of stock splits or stock dividends and
fundamental transactions. The provisions do not provide for any
adjustment in the event of subsequent equity sales or
transactions. The warrants are also callable in the event our
common stock becomes publically traded and certain other conditions, as
described in the warrants, are met. The Company incurred a
total of $222,050 in fees and expenses incurred in connection with the
transactions. Of this amount, $64,000 was paid through the
issuance of 42,667 units. We also issued a total of 83,895 additional
common stock purchase warrants as compensation to certain
finders. The warrants have the same terms as the investor
warrants. The securities purchase agreements are substantially
similar other than the agreement entered into on June 29, 2009 extended
the expiration of most favored nation treatment from 90 days until
December 31, 2009.
|
The
Company also entered into two Registration Rights Agreements with the investors
granting the Investors certain registration rights with regard to the Shares and
the shares underlying the Warrants. The Company has fulfilled all of
its requirements pursuant to the Registration Rights Agreements.
|
·
|
On
July 10, 2009, we issued Kemmerer Resources Corp. a common stock purchase
warrant to purchase 150,000 common shares as reimbursement of due
diligence expenses. The warrants have a term of five years and entitle the
investors to purchase our common shares at a price per share of
$3.00. The warrants also contain provisions providing for an
adjustment in the underlying number of shares and exercise price in the
event of stock splits or stock dividends and fundamental
transactions. The provisions do not provide for any adjustment
in the event of subsequent equity sales or
transactions.
|
|
·
|
On
September 2, 2009 we entered a securities purchase agreement with a number
of accredited investors. Pursuant to the terms of the
agreement, the Company sold units in the aggregate of 140,000 units
resulting in gross proceeds of $210,000. The price per unit was
$1.50. Each unit consists of: (i) one share of the Company’s
common stock; and (ii) one half common stock purchase
warrant. The warrants have a term of five years and entitle the
Investors to purchase the Company’s common shares at a price per share of
$3.00. The warrants also contain provisions providing for an
adjustment in the underlying number of shares and exercise price in the
event of stock splits or stock dividends and fundamental
transactions. The provisions do not provide for any adjustment
in the event of subsequent equity sales or transactions. The
warrants are also callable in the event the our common stock becomes
publically traded and certain other conditions, as described in the
warrants, are met. In connection with the offering, we incurred
a total of $23,100 in fees and expenses incurred in connection with the
transaction. Of this amount, $16,000 has been paid through the
issuance of 10,667 units. We also issued warrants to purchase 12,267,
common shares, with identical terms to the warrant, as a partial finder’s
fee in connection with the
offering.
|
|
·
|
The
Company also entered into a Registration Rights Agreement with the
investors granting the Investors certain registration rights with regard
to the Shares and the shares underlying the Warrants. The
Company has fulfilled all of its requirements pursuant to the Registration
Rights Agreements.
|
|
·
|
On
September 2, 2009, in connection with their employment agreements, we
issued Messrs Dionne and Richerson common stock purchase options to
purchase an aggregate of 1,775,000 common shares (Dionne-1,000,000,
Richerson—775,000) for a further description of the transaction see
the section of this Report entitled “Employment Agreements and
Change in Control.”
|
|
·
|
On
September 2, 2009, we issued certain consultants options to purchase an
aggregate of 125,000 common shares. The options were granted
pursuant to our 2007 Equity Compensation Plan, have an exercise price of
$1.50 per share and are fully vested at the grant date. The
options have a term of 5 years and can be exercised at any time during
their term.
|
|
·
|
On
September 2, 2009, we issued a consultant a warrant to purchase 20,000
common shares. The warrant was issued as compensation for
services related to our clinical trials. The warrant has an
exercise price of $1.50 per share and is fully vested at the grant
date. The warrant has a term of 5
years.
|
19
|
·
|
On
September 2, 2009, we issued a consultant a warrant to purchase 100,000
common shares. The warrant was issued as compensation for
investor relations services. The warrant has an exercise price
of $1.50 per share and is fully vested at the grant date. The
warrant has a term of 5 years.
|
|
·
|
On
September 2, 2009, we issued one of our service providers 25,000 common
shares as compensation for services relating to the coordination of
clinical trial sites and CRO services. The shares were valued
at $1.50 per share or an aggregate consideration of
$37,500.
|
|
·
|
On
November 2, 2009, we issued TR Winston & Company, LLC, 174,165 common
shares as payment in full ($163,500 principal and $10,565 accrued
interest) of its 5% convertible debenture dated July 14,
2009.
|
|
·
|
During
January and March 2010, we entered into securities purchase agreements
with a number of accredited investors. Pursuant to the
terms of the agreements, we sold 553,407 units resulting in gross proceeds
of approximately $880,000. The price per unit was
$1.65. Each unit consists of: (i) one share of common stock;
and (ii) one half common stock purchase warrant. The warrants
have a term of five years and allow the investors to purchase our common
shares at a price per share of $3.10. The warrants also contain
anti-dilution protection in the event of stock splits, stock dividends and
other similar transactions. We incurred placement agent fees
of of $70,410 in connection with the transaction. We also
issued a total of 42,673 additional common stock purchase warrants as
compensation. The warrants have the same terms as the investor
warrants except that 12,160 warrants have an exercise price of $2.20 and
30,513 warrants have an exercise price of $2.94.
|
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
We are
not required to provide the information as to selected financial data as we are
considered a smaller reporting company.
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Our
Management’s Discussion and Analysis of Financial Condition and Results of
Operations (“MD&A”) is provided in addition to the accompanying financial
statements and notes to assist readers in understanding our results of
operations, financial condition, and cash flows. MD&A is organized as
follows:
|
·
|
Overview —
Discussion of our business and plan of operations, overall analysis
of financial and other highlights affecting our business in order to
provide context for the remainder of
MD&A.
|
|
·
|
Significant Accounting
Policies — Accounting policies that we believe are important to
understanding the assumptions and judgments incorporated in our reported
financial results and forecasts.
|
|
·
|
Results of Operations
— Analysis of our financial results comparing 2009 to
2008.
|
|
·
|
Liquidity and Capital
Resources — A discussion of our financial condition and
potential sources of liquidity.
|
The
various sections of this MD&A contain a number of forward-looking
statements. Such statements are based on our current expectations and could be
affected by the uncertainties and risk factors described throughout this filing
and particularly in the Risk Factors section of this Prospectus. Our actual
results may differ materially.
Overview
We are a
development stage company focused on the development of targeted cancer
therapeutics for the treatment of cancerous tumors, including breast, prostate,
bladder, and kidney cancer. Our operations are based in San Antonio,
TX.
Management's
Plan of Operation
We are
pursuing a business plan related to the development of targeted cancer
therapeutics for the treatment of cancerous tumors, including breast, prostate,
bladder, and kidney cancer. We are considered to be in the
development stage as defined by Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 915 “Development Stage
Entities”.
Business
Strategy
Our
business strategy is to develop a series of therapeutics based on our
target-activated pro-drug technology platform and bring them through Phase I/II
clinical trials. At that point, we plan to license the rights to further
development of the drug candidates to major pharmaceutical companies. We believe
that major pharmaceutical companies see significant value in drug candidates
that have passed one or more phases of clinical trials, and these organizations
have the resources and expertise to finalize drug development and market the
drugs.
20
Plan of
Operation
We have
made significant progress in key areas such as drug manufacture, toxicology, and
pre-clinical activities for our lead compound G-202.
For the
manufacture of G-202, we have secured a stable supply of source material (Thapsia garganica seeds) from
which thapsigargin is isolated, have a sole source agreement with a European
supplier, Thapsibiza, SL, and have obtained the proper import permits from the
USDA for these materials. We have also identified a clinically and commercially
viable formulation for G-202 and have manufactured sufficient G-202 to supply
our Phase I clinical needs.
On June
23, 2009, we submitted our first Investigational New Drug application (“IND”)
for G-202 to the United States Food and Drug Administration
(“FDA”). On September 4, 2009, we received approval from the FDA for
our IND in order to commence clinical trials. Although we have
received approval from the FDA to commence trials, the outcome of the trials is
uncertain and, if we are unable to satisfactorily complete such trials, or if
such trials yield unsatisfactory results, we will be unable to commercialize our
proposed products. Over the next twelve months we plan to focus on clinical
trials of G-202 in cancer patients.
Additionally,
we will continue to protect our intellectual property position particularly with
regard to the outstanding claims contained within the core PSMA-pro-drug patent
application in the United States. We will also continue to prosecute the claims
contained in our other patent applications in the United States.
We
anticipate that during much of 2010, we will be engaged in conducting the Phase
I clinical trial of G-202, and, if appropriate, extension into a Phase II
clinical trial of G-202. The purpose of a Phase I study of G-202 is to evaluate
safety, understand the pharmacokinetics (the process by which a compound is
absorbed, distributed, metabolized, and eliminated by the body) of the drug
candidate in humans, and to determine an appropriate dosing regime for the
subsequent clinical studies. We currently plan to conduct the Phase I study in
refractory cancer patients (those who have relapsed after former treatments)
with any type of solid tumors. This strategy is intended to facilitate
enrollment and perhaps give us a glimpse of safety across a wider variety of
patients. We expect to enroll up to 30 patients in this Phase I study at: (i)
Sidney Kimmel Comprehensive Cancer Center at Johns Hopkins (Michael Carducci, MD
as Principal Investigator); and (ii) University of Wisconsin Carbone Cancer
Center (George Wilding, MD as Principal Investigator). We are currently
negotiating contracts for conduct of the Phase I studies. The final
terms of the contracts have not yet been determined.
Assuming
successful completion of the Phase I clinical trial, we expect to conduct a
Phase II clinical trial to determine the therapeutic efficacy of G-202 in cancer
patients. Although we believe that G-202 will be useful across a wide variety of
cancer types, it is usually most efficient and medically prudent to evaluate a
drug candidate in a single tumor type within a single trial. It is currently too
early in the pre-clinical development process to determine which single tumor
type will be evaluated, but we expect that over 40 patients will be required for
an appropriate evaluation over a total time span of 18 months.
We have
identified 4 pro-drug candidates: G-202, G-114, G-115 and Ac-GKAFRR-L12ADT. At
this time, we are engaged solely in the development of G-202. It is anticipated
that the development of the remaining candidates will not commence until we have
sufficient resources to devote to their development and in all likelihood this
will not occur until after the development of G-202.
From
inception through December 31, 2009, the vast majority of costs incurred have
been devoted to G-202. We estimate that we have incurred costs of approximately
$235,000 related to G-114, G-115 and Ac-GKAFRR-L12ADT. All of these costs were
incurred prior to December 2007, at which time we began focusing solely on
G-202. The balance of our costs, aggregating approximately $5,277,000, was
incurred in the development of G-202. For the years ended December 31, 2009 and
2008, approximately $2,087,000 and $2,433,000, respectively, was incurred in the
development of G-202.
It is
estimated that the development of G-202 will occur as follows:
It is
estimated that the ongoing Phase I clinical trial will cost an additional
approximately $1,600,000 and will be completed in the second quarter of
2011.
Phase II
clinical studies will cost an additional $4,200,000 and will be completed in the
fourth quarter of 2012.
We
anticipate that we will license G-202 to a third party during Phase
I/II. In the event we are not able to license G-202, we will proceed
with Phase III Clinical trials. We estimate that Phase III Clinical
trials will cost approximately $25,000,000 and will be completed in the fourth
quarter of 2015. If all goes as planned, we may expect marketing approval in the
second half of 2016 with an additional $3,000,000 spent to get the NDA approved.
We do not expect material net cash inflows before late 2015. The
Phase III estimated costs are subject to major revision simply because we have
not yet entered clinical testing of our drug in patients. The estimates will
become more refined as we obtain clinical data.
At this
time, we have suspended the development of our other drug candidates, G-114,
G-115 and Ac-GKAFRR-L12ADT. As a result we are unable to reasonably estimate the
nature, timing and estimated costs and completion dates of those projects at
this time.
21
We
currently have budgeted $2,219,000 in cash expenditures for the twelve month
period following the date of this report, including (1) $1,013,000 to cover our
projected general and administrative expense during this period; and (2)
$1,206,000 for research and development activities. Our cash on hand as of
December 31, 2009 together with the monies raised in the fisrt quarter of 2010
is sufficient to fund our operations for the next through June, 2011 after which
time we will need to undertake additional financings.
The
amounts and timing of our actual expenditures may vary significantly from our
expectations depending upon numerous factors, including our results of
operation, financial condition and capital requirements. Accordingly, we will
retain the discretion to allocate the available funds among the identified uses
described above, and we reserve the right to change the allocation of available
funds among the uses described above.
Significant
Accounting Policies
Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Note 1 of the Notes to Financial Statements describes the significant
accounting policies used in the preparation of the financial statements. Certain
of these significant accounting policies are considered to be critical
accounting policies, as defined below. We do not believe that there have been
significant changes to our accounting policies during the year ended December
31, 2009, as compared to those policies disclosed in the December 31, 2008
financial statements except as disclosed in the notes to financial
statements.
A
critical accounting policy is defined as one that is both material to the
presentation of our financial statements and requires management to make
difficult, subjective or complex judgments that could have a material effect on
our financial condition and results of operations. Specifically, critical
accounting estimates have the following attributes: 1) we are required to
make assumptions about matters that are highly uncertain at the time of the
estimate; and 2) different estimates we could reasonably have used, or
changes in the estimate that are reasonably likely to occur, would have a
material effect on our financial condition or results of
operations.
Estimates
and assumptions about future events and their effects cannot be determined with
certainty. We base our estimates on historical experience and on various other
assumptions believed to be applicable and reasonable under the circumstances.
These estimates may change as new events occur, as additional information is
obtained and as our operating environment changes. These changes have
historically been minor and have been included in the financial statements as
soon as they became known. Based on a critical assessment of our accounting
policies and the underlying judgments and uncertainties affecting the
application of those policies, management believes that our financial statements
are fairly stated in accordance with accounting principles generally accepted in
the United States, and present a meaningful presentation of our financial
condition and results of operations. We believe the following critical
accounting policies reflect our more significant estimates and assumptions used
in the preparation of our financial statements:
Use of
Estimates — These financial statements have been prepared in accordance
with accounting principles generally accepted in the United States and,
accordingly, require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Specifically, our management has estimated the expected
economic life and value of our licensed technology, our net operating loss for
tax purposes and our stock, option and warrant expenses related to compensation
to employees and directors and consultants. Actual results could differ from
those estimates.
Cash and
Equivalents — Cash equivalents are comprised of certain highly liquid
investments with maturity of three months or less when purchased. We maintain
our cash in bank deposit accounts, which at times, may exceed federally insured
limits. We have not experienced any losses in such accounts.
Intangible and
Long-Lived Assets — We follow Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic 360, "Property, Plant and Equipment
", which established a "primary asset" approach to determine the cash flow
estimation period for a group of assets and liabilities that represents the unit
of accounting for a long lived asset to be held and used. Long-lived assets to
be held and used are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The carrying amount of a long-lived asset is not recoverable if it
exceeds the sum of the undiscounted cash flows expected to result from the use
and eventual disposition of the asset. Long-lived assets to be disposed of are
reported at the lower of carrying amount or fair value less cost to sell. We
have not recognized any impairment losses.
Research and
Development Costs — Research and development costs include expenses
incurred by the Company for research and development of therapeutic agents for
the treatment of cancer and are charged to operations as incurred.
Stock Based
Compensation — We account for our share-based compensation under the
provisions of ASC Topic 718 “Compensation – Stock Compensation”.
Fair Value of
Financial Instruments — Our
short-term financial instruments, including cash, accounts payable and other
liabilities, consist primarily of instruments without extended maturities, the
fair value of which, based on management’s estimates, reasonably approximate
their book value. The fair value of long term convertible notes is based on
management estimates and reasonably approximates their book value after
comparison to obligations with similar interest rates and maturities. The fair
value of the Company’s derivative instruments is determined using option pricing
models.
22
Recent
Accounting Pronouncements
For a
discussion of new accounting pronouncements affecting the Company, refer to Note
1 of Notes to Financial Statements.
Result
of Operations
Our
results of operations have varied significantly from year to year and quarter to
quarter and may vary significantly in the future.
Year
Ended December 31, 2009 Compared to the Year Ended December 31,
2008
Revenue
We did
not have revenue during the years ending December 31, 2009 and
2008. We do not anticipate any revenues for 2010.
Operating
Expenses
Operating
expense totaled $3,511,981 and $3,287,285 during 2009 and 2008,
respectively. The increase in operating expenses is the result of the
following factors.
|
|
|
|
|
Change in
|
|
||||||||||
|
|
|
|
|
|
2009
|
|
|||||||||
Versus 2008
|
||||||||||||||||
2009
|
2008
|
$
|
%
|
|||||||||||||
Operating
Expenses
|
||||||||||||||||
General
and administrative expenses
|
$
|
1,424,847
|
$
|
854,294
|
$
|
570,553
|
66.8
|
% | ||||||||
Research
and development
|
2,087,134
|
2,432,991
|
(345,857
|
) |
(14.2
|
)% | ||||||||||
Total
expense
|
$
|
3,511,981
|
$
|
3,287,285
|
$
|
224,696
|
6.8
|
% |
General
and Administrative Expenses
G&A
expenses totaled $1,424,847 and $854,294 during 2009 and 2008,
respectively. The increase of $570,553 or 66.8% for 2009
compared to 2008 was primarily attributable to increases of approximately
$292,000 in compensation and consulting expense (including an increase in stock
based compensation of approximately $215,000), $31,000 in travel and
entertainment expense, $25,000 in insurance expense and $203,000 in professional
fees (including stock based cost of approximately $88,000).
Research
and Development Expenses
Research
and development expenses totaled $2,087,134 and $2,432,991 during 2009 and 2008,
respectively. The decrease of $345,857
or 14.2%
for 2009 compared to 2008 was primarily attributable to an increase of
approximately $852,000 in compensation expense (including stock based
compensation of approximately $831,000), which was more than offset by a
decrease of approximately $1,198,000 in costs associated with manufacture and
other expenses related to our lead drug.
Our
research and development expenses consist primarily of expenditures for
toxicology and other studies, manufacturing, clinical trials and compensation
and consulting costs.
Under the
planning and direction of key personnel, we expect to outsource all of our GLP
preclinical development activities (e.g., toxicology) and GMP manufacturing and
clinical development activities to CROs and CMOs. Manufacturing will be
outsourced to organizations with approved facilities and manufacturing
practices.
23
Other
Expenses
Other
expenses totaled $1,620,846 and $38,976 for 2009 and 2008,
respectively.
|
|
|
|
|
Change in
|
|
||||||||||
|
|
|
|
|
|
2009
|
|
|||||||||
|
|
|
|
|
|
Versus 2008
|
|
|||||||||
|
|
2009
|
|
|
2008
|
|
|
$
|
|
|
%
|
|
||||
Other
Expenses
|
||||||||||||||||
Financing
Cost
|
$
|
(478,886
|
) |
$
|
(39,789
|
)
|
$
|
(439,097
|
) |
1104
|
% | |||||
Change
in fair value of derivative liablity
|
(1,140,094
|
) |
-
|
(1,140,094
|
) |
-
|
||||||||||
Interest
income (expense)
|
(1,886
|
) |
813
|
(2,699
|
) |
331
|
% | |||||||||
Total
expense
|
$
|
(1,620,846
|
) |
$
|
(38,976
|
)
|
$
|
(1,581,870
|
) |
4058
|
% |
Finance
Cost
Finance
Cost totaled $478,886 and $39,789 during 2009 and 2008, respectively. The
increase of $439,097 or 1104% for 2009 compared to 2008 was primarily
attributable to a $415,976 charge for the fair value of additional warrants
issued when the anti-dilution provisions in our warrants issued during the July
and August 2008 financing were triggered plus a $51,864 charge for the fair
value of additional warrants issued as consideration for the extension of the
maturity dates of notes payable. The balance of the cost consists of the
amortization of debt discount of $11,046 and $9,629 during 2009 and 2008,
respectively, and a 2008 charge of $30,160 related to a penalty for the late
filing of our registration statement.
Change
in fair value of derivative liability
The
charge for the change in fair value of derivative liability totaled $1,140,094
for 2009 compared to $0 for 2008. The increase of $1,140,094 for 2009 compared
to 2008 was the result of a change to the accounting treatment of our issued and
outstanding warrants which contain certain anti-dilution
provisions.
At
December 31, 2009 we recalculated the fair value of our warrants subject to
derivative accounting and have determined that their fair value at December 31,
2009 is $2,290,686. The fair value of the warrants was determined using the
Black-Scholes method based on the following
assumptions: (1) risk free interest rate of 1%;
(2) dividend yield of 0%; (3) volatility factor of the expected market
price of our common stock of 98%; and (4) an expected life of the
warrants of 2 years. We have recorded an expense of $1,140,094
during 2009 related to the change in fair value during that
period.
Interest
expense
Interest
expense totaled $1,886 for 2009 compared to interest income of $813 for
2008. The increase of $2,699 for 2009 compared to 2008 was attributable to an
increase in debt outstanding in 2009, partially offset by interest earned on
deposits.
Net
Loss
Net
losses for 2009 and 2008 were $5,132,827 and $3,326,261, respectively, resulting
from the expenses described above.
Liquidity
and Capital Resources
Since our
inception, we have financed our operations through the private placement of our
securities. At December 31, 2009 we had cash on hand of approximately $2,255,000
and raised an additional $860,000 in the first quarter of 2010. Our currently
average monthly cash burn rate is approximately $185,000. We anticipate
that our available cash will be sufficient to finance most of our current
activities for at least the next eighteen months from December 31, 2009,
assuming we do not engage in an extraordinary transaction or otherwise face
unexpected events or contingencies.
Change in
|
||||||||||||||||
2009
|
||||||||||||||||
Versus 2008
|
||||||||||||||||
2009
|
2008
|
$
|
%
|
|||||||||||||
Cash
& Cash Equivalents
|
$
|
2,255,311
|
$
|
534,290
|
$
|
1,721,021
|
322.1
|
% | ||||||||
Net
cash used in operating activities
|
$
|
(2,010,483
|
) |
$
|
(2,649,977
|
) |
$
|
639,494
|
24.1
|
% | ||||||
Net
cash used in investing activities
|
$
|
(15,833
|
) |
$
|
(184,168
|
) |
$
|
168,335
|
91.4
|
% | ||||||
Net
cash provided by financing activities
|
$
|
3,747,337
|
$
|
2,778,000
|
$
|
969,337
|
34.9
|
% |
Net
Cash Used in Operating Activities
In our
operating activities we used 2,010,483 and $2,649,977 during 2009 and 2008,
respectively. An increase in net loss of approximately $1,806,000 was
offset by increases in noncash expenses of approximately $2,835,000. We also had
a decrease in accounts payable and accrued expenses of approximately
$389,000.
Net
Cash Used in Investing Activities
In our
investment activities we used $15,833 and $184,168 during 2009 and 2008,
respectively. The decrease in investment activities of $168,335 for
2009 compared to 2008 was attributable to the $184,168 cost associated with
acquisition of key intellectual property in 2008, with $15,833 expended on fixed
assets in 2009.
24
Net
Cash Provided by Financing Activities
During
2009 and 2008 we raised approximately $3,797,000 and $2,778,000 through the sale
of our securities.
Listed
below are key financing transactions we have entered
into.
|
·
|
During November of 2007, we sold
an aggregate of 1,300,000 common shares resulting in gross proceeds of
$650,000.
|
|
·
|
During March of 2008, we issued
1,000,000 common shares upon the exercise of outstanding warrants which
resulted in gross proceeds to us of
$500,000.
|
|
·
|
During July and August of 2008,
we sold an aggregate of 2,320,000 units resulting in gross proceeds of
$2,320,000.
|
|
·
|
In February and April of 2009, we
sold 500,000 units resulting in gross proceeds of approximately
$750,000.
|
|
·
|
In June and July of 2009, we sold
2,025,344 units resulting in gross proceeds of approximately
$3,038,000.
|
|
·
|
In September of 2009, we sold
140,002 units resulting in gross proceeds of approximately
$210,000.
|
|
·
|
In January and March of 2010, we
sold 553,407 units resulting in gross proceeds of approximately
$880,000.
|
We have
incurred significant operating losses and negative cash flows since inception.
We have not achieved profitability and may not be able to realize sufficient
revenue to achieve or sustain profitability in the future. We do not expect to
be profitable in the next several years, but rather expect to incur additional
operating losses. We have limited liquidity and capital resources and must
obtain significant additional capital resources in order to sustain our product
development efforts, for acquisition of technologies and intellectual property
rights, for preclinical and clinical testing of our anticipated products,
pursuit of regulatory approvals, acquisition of capital equipment, laboratory
and office facilities, establishment of production capabilities, for general and
administrative expenses and other working capital requirements. We rely on cash
balances and the proceeds from the offering of our securities, exercise of
outstanding warrants and grants to fund our operations.
The
source, timing and availability of any future financing will depend principally
upon market conditions, interest rates and, more specifically, on our progress
in our exploratory, preclinical and future clinical development programs.
Funding may not be available when needed, if at all, or on terms acceptable to
us. Lack of necessary funds may require us, among other things, to delay, scale
back or eliminate some or all of our research and product development programs,
planned clinical trials, and/or our capital expenditures or to license our
potential products or technologies to third parties.
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
|
We are
not required to provide the information as to selected financial data as we are
considered a smaller reporting company.
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
INDEX
TO FINANCIAL STATEMENTS
Page
|
||
Report
of RBSM, LLP, Independent Registered Public Accounting
Firm
|
F-1
|
|
Balance Sheets
|
F-2
|
|
Statements of Losses |
F-3
|
|
Statements of Stockholders’
Equity
|
F-4
|
|
Statements of Cash Flows |
F-5
|
|
Notes to Financial Statements
|
F-6
|
25
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
GenSpera
Inc.
San
Antonio, TX
We have
audited the accompanying balance sheets of GenSpera Inc., a development stage
company, as of December 31, 2009 and 2008, and the related statements of losses,
statement of stockholders' equity, and cash flows for each of the two years in
the period ended December 31, 2009 and the period November 21, 2003 (date of
inception) through December 31, 2009. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on the financial statements based upon our audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of GenSpera Inc., a development stage
company, at December 31, 2009 and 2008 and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2009 and
the period November 21, 2003 (date of inception) through December 31, 2009 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ RBSM
LLP
|
|
RBSM LLP | |
New
York, New York
|
|
March
30, 2010
|
F-1
GENSPERA
INC.
(A
Development Stage Company)
BALANCE
SHEETS
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 2,255,311 | $ | 534,290 | ||||
Total
current assets
|
2,255,311 | 534,290 | ||||||
Fixed
assets, net of accumulated depreciation of $708 and $0
|
15,125 | - | ||||||
Intangible
assets, net of accumulated amortization of $26,858 and
$11,511
|
157,310 | 172,657 | ||||||
Total
assets
|
$ | 2,427,746 | $ | 706,947 | ||||
Liabilities
and stockholders' equity (deficit)
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 78,198 | $ | 238,817 | ||||
Accrued
interest - stockholder
|
8,107 | 5,399 | ||||||
Convertible
note payable - stockholder, current portion
|
35,000 | 50,000 | ||||||
Total
current liabilities
|
121,305 | 294,216 | ||||||
Convertible
note payable, net of discount of $0 and $11,046
|
- | 152,554 | ||||||
Convertible
notes payable - stockholder, long term portion
|
70,000 | 105,000 | ||||||
Derivative
liabilities
|
2,290,686 | - | ||||||
Total
liabilities
|
2,481,991 | 551,770 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders'
equity (deficit):
|
||||||||
Preferred
stock, par value $.0001 per share; 10,000,000 shares
authorized,
|
||||||||
none
issued and outstanding
|
- | - | ||||||
Common
stock, par value $.0001 per share; 80,000,000 shares
authorized,
|
||||||||
15,466,446
and 12,486,718 shares issued and outstanding
|
1,547 | 1,249 | ||||||
Additional
paid-in capital
|
10,135,737 | 4,922,174 | ||||||
Deficit
accumulated during the development stage
|
(10,191,529 | ) | (4,768,246 | ) | ||||
Total
stockholders' equity (deficit)
|
(54,245 | ) | 155,177 | |||||
Total
liabilities and stockholders' equity (deficit)
|
$ | 2,427,746 | $ | 706,947 |
See
accompanying notes to financial statements.
F-2
GENSPERA,
INC.
(A
Development Stage Company)
STATEMENTS
OF LOSSES
FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
AND FOR
THE PERIOD FROM INCEPTION (NOVEMBER 21, 2003) TO DECEMBER 31, 2009
Cumulative Period
|
||||||||||||
from November 21, 2003
|
||||||||||||
(date of inception) to
|
||||||||||||
Years ended December 31,
|
December 31,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
Operating
expenses:
|
||||||||||||
General
and administrative expenses
|
$ | 1,424,847 | $ | 854,294 | $ | 2,714,389 | ||||||
Research
and development
|
2,087,134 | 2,432,991 | 5,511,541 | |||||||||
Total
operating expenses
|
3,511,981 | 3,287,285 | 8,225,930 | |||||||||
Loss
from operations
|
(3,511,981 | ) | (3,287,285 | ) | (8,225,930 | ) | ||||||
Finance
cost
|
(478,886 | ) | (39,789 | ) | (518,675 | ) | ||||||
Change
in fair value of derivative liability
|
(1,140,094 | ) | - | (1,430,550 | ) | |||||||
Interest
income (expense), net
|
(1,866 | ) | 813 | (16,374 | ) | |||||||
Loss
before provision for income taxes
|
(5,132,827 | ) | (3,326,261 | ) | (10,191,529 | ) | ||||||
Provision
for income taxes
|
- | - | - | |||||||||
Net
loss
|
$ | (5,132,827 | ) | $ | (3,326,261 | ) | $ | (10,191,529 | ) | |||
Net
loss per common share, basic and diluted
|
$ | (0.37 | ) | $ | (0.30 | ) | ||||||
Weighted
average shares outstanding
|
14,035,916 | 11,030,657 |
See
accompanying notes to financial statements.
F-3
GENSPERA,
INC.
(A
Development Stage Company)
STATEMENT
OF STOCKHOLDERS' (DEFICIT) EQUITY
FROM DATE
OF INCEPTION (NOVEMBER 21, 2003) TO DECEMBER 31, 2009
Deficit
|
||||||||||||||||||||
Accumulated
|
||||||||||||||||||||
Additional
|
During the
|
Stockholders'
|
||||||||||||||||||
Common Stock
|
Paid-in
|
Development
|
Equity
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Stage
|
(Deficit)
|
||||||||||||||||
Balance,
November 21, 2003
|
- | $ | - | $ | - | $ | - | $ | - | |||||||||||
Sale
of common stock to founders at $0.0001
|
||||||||||||||||||||
per
share in November, 2003
|
6,100,000 | 610 | (510 | ) | - | 100 | ||||||||||||||
Contributed
services
|
- | - | 120,000 | - | 120,000 | |||||||||||||||
Net
loss
|
- | - | - | (125,127 | ) | (125,127 | ) | |||||||||||||
Balance,
December 31, 2003
|
6,100,000 | 610 | 119,490 | (125,127 | ) | (5,027 | ) | |||||||||||||
Contributed
services
|
- | - | 192,000 | - | 192,000 | |||||||||||||||
Stock
based compensation
|
- | - | 24,102 | - | 24,102 | |||||||||||||||
Net
loss
|
- | - | - | (253,621 | ) | (253,621 | ) | |||||||||||||
Balance,
December 31, 2004
|
6,100,000 | 610 | 335,592 | (378,748 | ) | (42,546 | ) | |||||||||||||
Contributed
services
|
- | - | 48,000 | - | 48,000 | |||||||||||||||
Stock
based compensation
|
- | - | 24,100 | - | 24,100 | |||||||||||||||
Net
loss
|
- | - | - | (126,968 | ) | (126,968 | ) | |||||||||||||
Balance,
December 31, 2005
|
6,100,000 | 610 | 407,692 | (505,716 | ) | (97,414 | ) | |||||||||||||
Contributed
services
|
- | - | 144,000 | - | 144,000 | |||||||||||||||
Stock
based compensation
|
- | - | 42,162 | - | 42,162 | |||||||||||||||
Net
loss
|
- | - | - | (245,070 | ) | (245,070 | ) | |||||||||||||
Balance,
December 31, 2006
|
6,100,000 | 610 | 593,854 | (750,786 | ) | (156,322 | ) | |||||||||||||
Shares
sold for cash at $0.50 per share
|
||||||||||||||||||||
in
November, 2007
|
1,300,000 | 130 | 649,870 | - | 650,000 | |||||||||||||||
Shares
issued for services
|
735,000 | 74 | 367,426 | - | 367,500 | |||||||||||||||
Contributed
services
|
- | - | 220,000 | - | 220,000 | |||||||||||||||
Stock
based compensation
|
- | - | 24,082 | - | 24,082 | |||||||||||||||
Exercise
of options for cash at $0.003 per share
|
||||||||||||||||||||
in
March and June, 2007
|
900,000 | 90 | 2,610 | - | 2,700 | |||||||||||||||
Net
loss
|
- | - | - | (691,199 | ) | (691,199 | ) | |||||||||||||
Balance,
December 31, 2007
|
9,035,000 | 904 | 1,857,842 | (1,441,985 | ) | 416,761 | ||||||||||||||
Exercise
of options for cash at $0.50 per share
|
||||||||||||||||||||
on
March 7,2008
|
1,000,000 | 100 | 499,900 | - | 500,000 | |||||||||||||||
Sale
of common stock and warrants at $1.00 per
|
||||||||||||||||||||
share
- July and August 2008
|
2,320,000 | 232 | 2,319,768 | - | 2,320,000 | |||||||||||||||
Cost
of sale of common stock and warrants
|
- | - | (205,600 | ) | - | (205,600 | ) | |||||||||||||
Shares
issued for accrued interest
|
31,718 | 3 | 15,856 | - | 15,859 | |||||||||||||||
Shares
issued for services
|
100,000 | 10 | 49,990 | - | 50,000 | |||||||||||||||
Stock
based compensation
|
- | - | 313,743 | - | 313,743 | |||||||||||||||
Contributed
services
|
- | - | 50,000 | - | 50,000 | |||||||||||||||
Beneficial
conversion feature of convertible debt
|
- | - | 20,675 | - | 20,675 | |||||||||||||||
Net
loss
|
- | - | - | (3,326,261 | ) | (3,326,261 | ) | |||||||||||||
Balance,
December 31, 2008
|
12,486,718 | 1,249 | 4,922,174 | (4,768,246 | ) | 155,177 | ||||||||||||||
Cumulative
effect of change in accounting principle for derivative
liability
|
- | - | (444,161 | ) | (290,456 | ) | (734,617 | ) | ||||||||||||
Warrants
issued for extension of debt maturities
|
- | - | 51,865 | - | 51,865 | |||||||||||||||
Stock
based compensation
|
- | - | 1,530,536 | - | 1,530,536 | |||||||||||||||