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EX-32 - BIO-PATH HOLDINGS INC | v188456_ex32.htm |
EX-31 - BIO-PATH HOLDINGS INC | v188456_ex31.htm |
EX-23.1 - BIO-PATH HOLDINGS INC | v188456_ex23-1.htm |
EX-21.1 - BIO-PATH HOLDINGS INC | v188456_ex21-1.htm |
As
filed with the Securities and Exchange Commission on June 17, 2010
Registration
Statement File No. 333-______
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
_______________________________
BIO-PATH
HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Utah
|
5940
|
87-0652870
|
(State
or other jurisdiction of
|
(Primary
Standard Industrial
|
(I.R.S.
Employer Identification
|
incorporation
or organization)
|
Classification
Code Number)
|
Number)
|
3293
Harrison Boulevard, Suite 220
Ogden,
UT 84403
(801)
399-5500
(Address,
including zip code, and telephone number, including area code,
of
registrant's principal executive offices)
_______________________________
Douglas
P. Morris
3293
Harrison Boulevard, Suite 220
Ogden,
UT 84403
(801)
399-5500
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
_______________________________
Copies
to:
Jeffrey
R. Harder, Esq.
Winstead
PC
24
Waterway Ave, Suite 500
The
Woodlands, TX 77380
_______________________________
APPROXIMATE DATE OF COMMENCEMENT OF
PROPOSED SALE TO THE PUBLIC: From time to time after the effective
date of this registration statement, as determined by the selling
stockholder.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933,
check the following box. x
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
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 definitions of "large accelerated filer," "accelerated
filer," and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
CALCULATION
OF REGISTRATION FEE
Title of Each Class of
Securities to be
Registered
|
Amount to be Registered
(1)
|
Proposed Maximum
Offering Price Per Unit
(2)
|
Proposed Maximum
Aggregate Offering Price
(2)
|
Amount of
Registration Fee
|
||||||||||
Common
Stock
|
7,000,000 Shares
|
$ | 0.45 | $ | 3,150,000 | $ | 225 | |||||||
Total
|
7,000,000 Shares
|
$ | 0.45 | $ | 3,150,000 | $ | 225 |
(1)
|
Includes
(i) 566,801 outstanding shares of common stock; (ii) up to 6,149,798
additional shares of common stock to be issued on various dates at various
prices pursuant to the terms of that certain Purchase Agreement dated June
2, 2010 between the Company and Lincoln Park Capital Fund, LLC, or the LPC
Purchase Agreement; and (iii) up to 283,401 additional shares of
common stock to be issued at various dates for no additional consideration
pursuant to the terms of the LPC Purchase Agreement. Pursuant to and
in accordance with Rule 416 under the Securities Act, there are also
registered hereunder such indeterminate number of securities as may be
issued to prevent dilution resulting from stock splits, stock dividends,
or similar transactions.
|
(2)
|
Estimated
solely for the purpose of calculating the amount of the registration fee
pursuant to Rule 457(c) of the Securities Act. The proposed
maximum offering price per share and proposed maximum aggregate offering
price are based upon the average of the high, or $0.45, and low, or $0.45,
sales prices of our common stock on June 14, 2010, as quoted on the
OTCBB. It is not known how many shares of our common stock
will be sold under this registration statement or at what price or prices
such shares will be sold.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale of these securities is
not permitted.
Subject
to Completion, Dated June 17, 2010
PROSPECTUS
Bio-Path
Holdings, Inc.
7,000,000
SHARES OF COMMON STOCK
This
prospectus relates to the offer and sale, from time to time, of up to 7,000,000
shares of common stock, no par value, of Bio-Path Holdings, Inc., a Utah
corporation, held by or issuable to Lincoln Park Capital Fund, LLC, or LPC or
the selling stockholder. The common shares being offered by the selling
stockholder are outstanding or issuable pursuant to the LPC Purchase Agreement.
See “The LPC Transaction” for a description of the LPC Purchase Agreement.
The prices at which the selling stockholder may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We do not know when or in what amount the selling
stockholder may offer the shares for sale. See "Plan of Distribution" on
page 52 for a description of how the selling stockholder may dispose of the
shares covered by this prospectus. We will not receive proceeds from
the sale of our shares by the selling stockholder; however, we may receive
proceeds of up to $7 million under the LPC Purchase Agreement. We have
agreed to pay certain expenses related to the registration of the shares of
common stock pursuant to the registration statement of which this prospectus
forms a part.
Our
common stock is registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended, and quoted on the Over-The-Counter Bulletin Board, or
OTCBB, under the symbol "BPTH.OB." On June 14, 2010, the last reported sale
price for our common stock as reported on the OTCBB was $0.45 per
share.
Lincoln
Park Capital Fund, LLC is an "underwriter" within the meaning of the Securities
Act of 1933, as amended.
For
information regarding sales of securities covered by this prospectus in certain
states, see the back cover page of this prospectus. Brokers or dealers
effecting transactions in these shares should confirm that the shares are
registered under the applicable state law or that an exemption from registration
is available.
INVESTING
IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS. SEE THE SECTION TITLED
"RISK FACTORS" BEGINNING ON PAGE 4] OF THIS PROSPECTUS TO READ ABOUT FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date
of this prospectus is _________ __, 2010.
TABLE OF
CONTENTS
PROSPECTUS
SUMMARY
|
1 | ||
THE
OFFERING
|
2 | ||
RISK
FACTORS
|
4 | ||
FORWARD-LOOKING
STATEMENTS
|
19 | ||
USE
OF PROCEEDS
|
21 | ||
MARKET
PRICE AND DIVIDEND INFORMATION
|
22 | ||
DESCRIPTION
OF BUSINESS
|
24 | ||
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
36 | ||
MANAGEMENT
|
42 | ||
EXECUTIVE
COMPENSATION
|
45 | ||
DIRECTOR
COMPENSATION
|
48 | ||
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
49 | ||
SELLING
STOCKHOLDER
|
50 | ||
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
51 | ||
PLAN
OF DISTRIBUTION
|
52 | ||
DESCRIPTION
OF SECURITIES
|
54 | ||
THE
LPC TRANSACTION
|
55 | ||
LEGAL
MATTERS
|
58 | ||
EXPERTS
|
58 | ||
WHERE
YOU CAN FIND MORE INFORMATION
|
59 | ||
INDEX
TO FINANCIAL STATEMENTS
|
F-1 | ||
ANNEX
A - GLOSSARY OF TERMS
|
A-1 |
You
should rely only on the information contained in this prospectus or any related
prospectus supplement, including the content of all documents incorporated by
reference into the registration statement of which this prospectus forms a
part. We have not authorized anyone to provide you with different
information. If anyone provides you with different or inconsistent
information, you should not rely on it. The information contained in this
prospectus or incorporated by reference herein is accurate only on the date of
this prospectus. Our business, financial condition, results of operations
and prospects may have changed since such date. Other than as required
under the federal securities laws, we undertake no obligation to publicly update
or revise such information, whether as a result of new information, future
events or any other reason.
i
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before making an investment decision with respect to our securities. You
should read this entire prospectus, including all documents incorporated by
reference, carefully, especially the "Risk Factors" section beginning on
page 4 of this prospectus and our financial statements and related notes
contained in this prospectus before making an investment decision with respect
to our securities. Please see the section titled, "Where You Can Find More
Information," beginning on page 59 of this prospectus. Unless the
context indicates otherwise, references to "Bio-Path," "the Company," "we,"
"us," or "our," refers to Bio-Path Holdings, Inc. and our wholly-owned
subsidiary, Bio-Path, Inc. Our wholly-owned subsidiary, Bio-Path, Inc., is
sometime hereafter referred to as "Bio-Path Subsidiary."
Some of
the industry data contained in this prospectus is derived from data from various
third-party sources. We have not independently verified any of this information
and cannot assure you of its accuracy or completeness. While we are not aware of
any misstatements regarding any industry data presented herein, such data is
subject to change based on various factors, including those discussed under the
"Risk Factors" section beginning on page 4 of this prospectus.
We have
provided definitions for some of the industry terms used in this prospectus in
the "Glossary of Terms" on page A-1 of this prospectus.
Overview
We are a
development stage company founded with technology from The University of Texas,
M. D. Anderson Cancer Center, or M. D. Anderson, dedicated to developing novel
cancer drugs under exclusive license arrangements. We have drug delivery
platform technology with composition of matter intellectual property that
enables systemic delivery of antisense, small interfering RNA, or siRNA, and
small molecules for the treatment of cancer. We recently licensed new
liposome tumor targeting technology, which has the potential to be applied to
augment our current delivery technology to improve further the effectiveness of
our antisense and siRNA drugs under development as well as future liposome-based
delivery technology drugs. In addition to our existing technology under
license, we have a close working relationship with key members of M. D.
Anderson's staff, which should provide us with a strong pipeline of promising
drug candidates in the future. We anticipate that our working relationship
with M. D. Anderson will enable us to broaden our technology to include cancer
drugs other than antisense and siRNA.
We
believe that our core technology, if successful, will enable us to be at the
center of emerging genetic and molecular target-based therapeutics that require
systemic delivery of DNA and RNA-like material. Our two lead drug
candidates treat acute myeloid leukemia, chronic myelogenous leukemia, acute
lymphoblastic leukemia and follicular lymphoma, and if successful, could
potentially be used in treating many other indications of cancer. We have
received written notification from the U. S. Food and Drug Administration, or
the FDA, that our application for Investigational New Drug, or IND, status for
the first of our lead drug candidates has been granted. This will allow us
to begin a Phase I clinical trial in this drug candidate. We expect to
start the Phase I clinical trial in 2010.
The
Company was founded in May of 2007 as a Utah corporation. In February of
2008, we completed a reverse merger with Ogden Golf Co. Corporation, a public
company traded over the counter that had no current operations. The name
of Ogden Golf was changed to Bio-Path Holdings, Inc. and the directors and
officers of Bio-Path, Inc. became the directors and officers of Bio-Path
Holdings, Inc. Bio-Path has become a publicly traded company (symbol
OTCBB: BPTH.OB) as a result of this merger. Our operations to date
have been limited to organizing and staffing the Company, acquiring, developing
and securing its technology and undertaking product development for a limited
number of product candidates including readying its lead drug product candidate
BP-100-1.01 for a Phase I clinical trial.
Our
principal executive offices are located at 3293 Harrison Boulevard, Suite 220,
Ogden, UT 84403 and our telephone number is (801) 399-5500.
1
THE
OFFERING
On June
2, 2010, we executed a purchase agreement, or the LPC Purchase Agreement, and a
registration rights agreement, or the LPC Registration Rights Agreement, with
Lincoln Park Capital Fund, LLC, or LPC, pursuant to which LPC has purchased
571,429 shares of our common stock together with warrants to purchase an
equivalent number of shares at an exercise price of $1.50 per share, for total
consideration of $200,000. The warrants have a term of two years. Under
the LPC Purchase Agreement, we also have the right to sell to LPC up to an
additional $6,800,000 of our common stock at our option as described
below. The resale of the 571,429 shares of our common stock and the shares
of common stock issuable upon exercise of the warrants purchased by LPC have not
been registered and are not a part of this offering.
Pursuant
to the LPC Purchase Agreement and the LPC Registration Rights Agreement, we have
filed a registration statement that includes this prospectus with the U.S.
Securities and Exchange Commission, or the SEC, covering the shares that have
been issued or may be issued to LPC under the LPC Purchase Agreement.
Except for the initial 571,429 shares of common stock purchased by LPC, we do
not have the right to commence any sales of our shares to LPC until the SEC has
declared effective the registration statement of which this prospectus is a
part. After the registration statement is declared effective, LPC shall
purchase 375,000 shares at a purchase price of $.40 per share for total
consideration of $150,000. Thereafter, over approximately 24 months, we
generally have the right to direct LPC to purchase up to an additional
$6,650,000 of our common stock in amounts up to $50,000 as often as every three
business days under certain conditions. We can also accelerate the amount of our
common stock to be purchased under certain circumstances. No sales of
shares may occur at a purchase price below $0.20 per share. The purchase
price of the shares will be based on the market prices of our shares at the time
of sale as computed under the LPC Purchase Agreement without any fixed
discount. We may at any time in our sole discretion terminate the LPC
Purchase Agreement without fee, penalty or cost upon one business days
notice. We issued 566,801 shares of our common stock to LPC as a
commitment fee for entering into the LPC Purchase Agreement, and we may issue up
to 283,401 shares pro rata as LPC purchases up to an additional $6,800,000 of
our common stock as directed by us.
7,000,000
shares are offered hereby by LPC consisting of 6,149,798 shares of our
common stock that we may sell to LPC in the future, 566,801 shares we have
issued as a commitment fee, and 283,401 shares that we are obligated to issue to
LPC as a commitment fee pro rata as up to an additional $6,800,000 of our stock
is purchased by LPC. If all of the 7,000,000 shares offered by LPC hereby
were issued and outstanding as of June 10, 2010, such shares would represent
12.7% of the total common stock outstanding or 21.2% of the non-affiliates
shares outstanding. The number of shares ultimately offered for sale by
LPC hereunder is dependent upon the number of shares that we sell to LPC under
the LPC Purchase Agreement. See also the section titled "The LPC
Transaction" on page 55.
Please
refer to the section titled "Selling Stockholder" beginning on page
50.
The
Company is not selling any shares of common stock in this offering and therefore
will not receive any proceeds from this offering; however, we may receive
proceeds of up to $7,000,000 under the LPC Purchase Agreement. All costs
associated with this registration statement will be borne by the
Company.
Shares of
common stock are being offered for sale by the selling stockholder at prices
established on the Over-the-Counter Bulletin Board, or the OTCBB, during the
term of this offering. On June 14, 2010, the last reported sale price of
our common stock was $0.45 per share. Our common stock is quoted on the
OTCBB under the symbol "BPTH.OB". These prices will fluctuate based on the
demand for the shares of our common stock.
Common
stock offered by the selling stockholder:
|
7,000,000
shares
|
|
Offering
price:
|
Market
price
|
|
Common
stock outstanding (held by non affiliates) as of June 10,
2010:
|
48,617,832
shares (26,649,362 shares)
|
2
Use
of proceeds:
|
The
selling stockholder will receive all net proceeds from sale by it of our
common stock covered by this prospectus; however, we may receive proceeds
of up to $7 million under the LPC Purchase Agreement. See "Use of
Proceeds" on page 21.
|
|
Risk
Factors
|
See
"Risk Factors" beginning on page 4 and other information included in
this prospectus for a discussion of factors you should carefully consider
before deciding to invest in the shares.
|
|
Ticker
Symbol:
|
BPTH.OB
|
3
RISK
FACTORS
An
investment in our securities involves a high degree of risk. Before you decide
to invest in our securities, you should consider carefully all of the
information in this registration statement, including the risks described below,
as well as other information included in this prospectus, particularly the
specific risk factors discussed in the sections titled "Risk Factors" contained
in our filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended. Any of these risks could
have a material adverse effect on our business, prospects, financial condition
and results of operations. In any such case, the trading price of our common
stock could decline and you could lose all or part of your investment. You
should also refer to the other information contained in this prospectus, or
incorporated herein by reference, including our financial statements and the
notes to those statements, and the information set forth under the caption
"Forward Looking Statements." The risks described below and contained in
our other periodic reports are not the only ones that we face. Additional
risks not presently known to us or that we currently deem immaterial may also
adversely affect our business operations.
Risks
Related to Our Business
We
are a development stage company with no revenue.
Our
operations are conducted by our subsidiary Bio-Path Subsidiary which is a
development stage company that was formed on May 10, 2007. Bio-Path
Subsidiary has generated no revenues from its contemplated principal business
activity and does not expect any revenues to be generated in the
foreseeable future. We currently have no products available for sale, no
product revenues, and may not succeed in developing or commercializing any drug
products that will generate product or licensing revenues. The drug
development process is a lengthy process and no revenues from product sales will
be generated for years, if ever. In addition, development of any of our
product candidates will require a process of pre-clinical and clinical testing,
and submission to and approval by the U.S. Food and Drug Administration ("FDA")
or other regulatory agencies, during which our products could fail.
Whether profitability is achieved may depend on success in developing,
manufacturing and marketing our product candidates or in finding suitable
partners to commercialize these candidates.
We
require substantial additional capital, which if not obtained could result in a
need to curtail or cease operations.
Our
business plan calls for us to raise an additional approximately $10,000,000 from
the sale of our securities in order to accomplish our near term
objectives. As of June 10, 2010, we have raised approximately $5,117,256
in gross funds and $4,626,181 in net funds after the payment of certain
commissions. The LPC Purchase Agreement may provide us with up to
$7,000,000 in equity financing which should help to fund our operations for the
next two (2) years. After such time, we will be required to raise
additional financing at various intervals for development programs, including
significant requirements for clinical trials, for operating expenses including
intellectual property protection and enforcement, for pursuit of regulatory
approvals and for establishing or contracting out manufacturing, marketing and
sales functions.
We may
direct LPC to purchase up to an additional $6,800,000 worth of shares of our
common stock under the LPC Purchase Agreement over a 24 month period generally
in amounts of up to $50,000 every three business days. However, LPC will not
have the right nor the obligation to purchase any shares of our common stock on
any business day that the market price of our common stock is less than
$0.20. Assuming a purchase price of $0.45 per share (the closing
sale price of the common stock on June 14, 2010) and the purchase by LPC of the
full 6,149,798 shares in the future under the LPC Purchase Agreement, proceeds
to us would be $2,767,409.
The
extent we rely on LPC as a source of funding will depend on a number of factors
including, the prevailing market price of our common stock and the extent to
which we are able to secure working capital from other sources.
Specifically, LPC will not have the right nor the obligation to purchase any
shares of our common stock on any business days that the market price of our
common stock is less than $0.20. If obtaining sufficient funding from LPC
were to prove unavailable or prohibitively dilutive and if we are unable to sell
enough of our products, we will need to secure another source of funding in
order to satisfy our working capital needs. Even if we sell all $7,000,000
under the LPC Purchase Agreement to LPC, we will still need additional capital
to fully implement our business, operating and development plans.
4
We intend
to seek additional funding from product-based collaborations, federal grants,
technology licensing, and public or private financings, but there is no
assurance that such additional funding will be available on terms acceptable to
us, or at all. Accordingly, we may not be able to secure the significant funding
which is required to maintain and continue development programs at their current
levels or at levels that may be required in the future. We may be forced
to accept funds on terms or pricing that is highly dilutive or otherwise onerous
to other equity holders. Should the financing we require to sustain our working
capital needs be unavailable or prohibitively expensive when we require it, we
may be required to delay, scale back or eliminate one or more of our development
programs or to enter into license or other arrangements with third parties to
commercialize products or technologies that we would otherwise seek to further
develop ourselves. The consequences could have a material adverse effect
on our business, operating results, financial condition and
prospects.
We
have had a history of operating losses and we may never achieve profitability.
If we continue to incur operating losses, we may be unable to continue our
operations.
From
inception on May 10, 2007 through March 31, 2010, we had a cumulative loss of
$5,594,844. If we continue to incur operating losses and fail to become a
profitable company, we may be unable to continue our operations. In the absence
of substantial revenue from the sale of products or other sources, the amount,
timing, nature or source of which cannot be predicted, our losses will continue
as we conduct our research and development activities.
Successful
development of any of our product candidates is highly uncertain.
Only a
small minority of all research and development programs ultimately result in
commercially successful drugs. Even if clinical trials demonstrate safety and
effectiveness of any of our product candidates for a specific disease and the
necessary regulatory approvals are obtained, the commercial success of any of
our product candidates will depend upon their acceptance by patients, the
medical community, and third-party payers and on our partners' ability to
successfully manufacture and commercialize our product candidates. If our
products are not successfully commercialized, we will not be able to recover the
significant investment we have made in developing such products and our business
would be severely harmed.
Clinical
trials required for our product candidates are expensive and time-consuming, and
their outcome is highly uncertain. If any of our drug trials are delayed or
yield unfavorable results, we will have to delay or may be unable to obtain
regulatory approval for our product candidates.
We must
conduct extensive testing of our product candidates before we can obtain
regulatory approval to market and sell them. We need to conduct both preclinical
animal testing and human clinical trials. Conducting these trials is a lengthy,
time-consuming, and expensive process. These tests and trials may not achieve
favorable results for many reasons, including, among others, failure of the
product candidate to demonstrate safety or efficacy, the development of serious
or life-threatening adverse events (or side effects) caused by or connected with
exposure to the product candidate, difficulty in enrolling and maintaining
subjects in the clinical trial, lack of sufficient supplies of the product
candidate or comparator drug, and the failure of clinical investigators, trial
monitors, contractors, consultants, or trial subjects to comply with the trial
plan or protocol. A clinical trial may fail because it did not include a
sufficient number of patients to detect the endpoint being measured or reach
statistical significance. A clinical trial may also fail because the dose(s) of
the investigational drug included in the trial were either too low or too high
to determine the optimal effect of the investigational drug in the disease
setting. Many of clinical trials are conducted under the oversight of
Independent Data Monitoring Committees (or IDMCs). These independent oversight
bodies are made up of external experts who review the progress of ongoing
clinical trials, including available safety and efficacy data, and make
recommendations concerning a trial's continuation, modification, or termination
based on interim, unblinded data. Any of ongoing clinical trials may be
discontinued or amended in response to recommendations made by responsible IDMCs
based on their review of such interim trial results.
We will
need to reevaluate any drug candidate that does not test favorably and either
conduct new trials, which are expensive and time consuming, or abandon the drug
development program. Even if we obtain positive results from preclinical or
clinical trials, we may not achieve the same success in future trials. Many
companies in the biopharmaceutical industry have suffered significant setbacks
in clinical trials, even after promising results have been obtained in earlier
trials. The failure of clinical trials to demonstrate safety and effectiveness
for the desired indication(s) could harm the development of our product
candidate(s), and our business, financial condition, and results of operations
may be materially harmed.
5
We
may be unable to formulate or manufacture our product candidates in a way that
is suitable for clinical or commercial use.
Changes
in product formulations and manufacturing processes may be required as product
candidates' progress in clinical development and are ultimately commercialized.
If we are unable to develop suitable product formulations or manufacturing
processes to support large scale clinical testing of our product candidates, we
may be unable to supply necessary materials for our clinical trials, which would
delay the development of our product candidates. Similarly, if we are unable to
supply sufficient quantities of our product or develop product formulations
suitable for commercial use, we will not be able to successfully commercialize
our product candidates.
Conflicts
with our collaborators could jeopardize the success of our collaborative
agreements and harm our product development efforts.
Our
business strategy depends upon our ability to enter into collaborative
relationships for the development and commercialization of products based on
licensed compounds. We will face significant competition in seeking necessary
and appropriate collaborators. Moreover, these arrangements are complex to
negotiate and time-consuming to document. We may not be successful in our
efforts to establish or maintain our existing collaborative relationships, if
any, or other alternative arrangements on commercially reasonable terms. We have
not entered into any collaborative agreements and there can be no assurance that
we will ever enter into such agreements. If we are unable to enter into
collaborative agreements, our business model must change and we will be required
to raise even greater capital to fund the costs of services that we anticipate
having provided by collaborators. This will make an investment in Bio-Path
an even greater risk to investors.
If we do
enter into collaborative agreements, of which there can be no assurance, the
success of collaboration arrangements will depend heavily on the efforts and
activities of our collaborators. Our collaborators will have significant
discretion in determining the efforts and resources that they will apply to
these collaborations. The risks that we face in connection with these
collaborations include, but are not limited to, the following:
|
·
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disputes
may arise in the future with respect to the ownership of rights to
technology developed with
collaborators;
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disagreements
with collaborators could delay or terminate the research, development or
commercialization of products, or result in litigation or
arbitration;
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we
may have difficulty enforcing the contracts if one of our collaborators
fails to perform;
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our
collaborators may terminate their collaborations with us, which could make
it difficult for us to attract new collaborators or adversely affect the
perception of us in the business or financial
communities;
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collaborators
will have considerable discretion in electing whether to pursue the
development of any additional drugs and may pursue technologies or
products either on their own or in collaboration with our competitors that
are similar to or competitive with our technologies or products that are
the subject of the collaboration with
Bio-Path; and
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our
collaborators may change the focus of their development and
commercialization efforts. Pharmaceutical and biotechnology companies
historically have re-evaluated their priorities following mergers and
consolidations, which have been common in recent years in these
industries. The ability of our products to reach their potential could be
limited if our collaborators decrease or fail to increase spending
relating to such products.
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Given
these risks, it is possible that any collaborative arrangements into which we
enter may not be successful. The failure of any of our collaborative
relationships could delay drug development or impair commercialization of our
products.
6
We
rely on third party manufacturers to supply our product candidates, which could
delay or prevent the clinical development and commercialization of our product
candidates.
We have
no manufacturing experience and no commercial scale manufacturing capabilities
and we do not expect to manufacture any products in the foreseeable future. In
order to continue to develop products, apply for regulatory approvals and
ultimately commercialize products, we will need to develop, contract for, or
otherwise arrange for the necessary manufacturing capabilities. However,
"out-license" pharmaceutical partners will likely be responsible for
manufacturing of those drug requirements.
We intend
to rely upon third parties to produce material for preclinical and clinical
testing purposes. We expect that our out-license pharmaceutical partners,
to the extent we have such partners, will produce materials that may be required
for the commercial production of our products.
We have
entered into a Supply Agreement with Althea Technologies, Inc. for the
manufacture of our drug requirements for our product candidate
BP-100-1.01. Althea is a manufacturer that operates under the FDA's
current good manufacturing practices, or cGMP, regulations and is capable of
manufacturing our products in the foreseeable future. If our
pharmaceutical company partners are unable to arrange for third party
manufacturing of our products on a timely basis, Althea could potentially
manufacture their requirements.
Reliance
on third party manufacturers will entail risks to which we would not be subject
if we manufactured our own products, including, but not limited to:
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reliance
on the third party for regulatory compliance and quality
assurance;
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the
possibility of breach of the manufacturing agreement by the third party
because of factors beyond our
control;
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the
possibility of termination or nonrenewal of the agreement by the third
party, based on its own business priorities, at a time that is costly or
inconvenient for Bio-Path;
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the
potential that third party manufacturers will develop know-how owned by
such third party in connection with the production of our products that is
necessary for the manufacture of our
products; and
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reliance
upon third party manufacturers to assist us in preventing inadvertent
disclosure or theft of Bio-Path's proprietary
knowledge.
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If
we do not obtain the support of new, and maintain the support of existing, key
scientific collaborators and management staff, it may be difficult to develop
and commercialize products using our technologies as a standard of care for
various indications, which may limit our revenue growth and profitability and
could have a material adverse effect on our business, prospects, financial
condition and operating results.
Our
success depends on the availability and contributions of members of our current
and future scientific team and our current and future senior management teams
and other key personnel that we currently have or which we may develop in the
future. The loss of services of any of these persons could delay or reduce our
product development and commercialization efforts. Furthermore, recruiting and
retaining qualified scientific personnel to perform future research and
development work will be critical to our success. The loss of members of our
management team, key clinical advisors or scientific personnel, or our inability
to attract or retain other qualified personnel or advisors, could significantly
weaken our management, harm our ability to compete effectively and harm our
business.
If
we are unable to obtain, maintain and enforce our proprietary rights, we may not
be able to compete effectively or operate profitably.
We have
entered into three license agreements with M.D. Anderson. The patents
underlying the licensed intellectual property and positions, and those of other
biopharmaceutical companies, are generally uncertain and involve complex legal,
scientific and factual questions.
7
Our
ability to develop and commercialize drugs depends in significant part on our
ability to:
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obtain
and/or develop broad, protectable intellectual
property;
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obtain
additional licenses to the proprietary rights of others on commercially
reasonable terms;
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operate
without infringing upon the proprietary rights of
others;
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prevent
others from infringing on our proprietary
rights; and
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protect
trade secrets.
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We do not
know whether any of the patent applications which we have licensed will result
in the issuance of any patents. Patents that we may acquire and those that might
be issued in the future, may be challenged, invalidated or circumvented, and the
rights granted thereunder may not provide us with proprietary protection or
competitive advantages against competitors with similar technology. Furthermore,
our competitors may independently develop similar technologies or duplicate any
technology we develop. Because of the extensive time required for development,
testing and regulatory review of a potential product, it is possible that,
before any of our products can be commercialized, any related patent may expire
or remain in force for only a short period following commercialization, thus
reducing any advantage of the patent.
Because
patent applications in the United States and many foreign jurisdictions are
typically not published until at least 12 months after filing, or in some cases
not at all, and because publications of discoveries in the scientific literature
often lag behind actual discoveries, neither we nor our licensors can be certain
that either we or our licensors were the first to make the inventions claimed in
issued patents or pending patent applications, or that we were the first to file
for protection of the inventions set forth in these patent
applications.
The
patent positions of pharmaceutical and biopharmaceutical products are complex
and uncertain.
We may
not have rights under some patents or patent applications related to products we
may develop in the future. Third parties may own or control these patents and
patent applications in the United States and abroad. Therefore, in some cases,
to develop, manufacture, sell or import some of our future products, Bio-Path or
our collaborators may choose to seek, or be required to seek, licenses under
third party patents issued in the United States and abroad or under patents that
might be issued from United States and foreign patent applications. In instances
in which Bio-Path must obtain a license for third party patents, it will be
required to pay license fees or royalties or both to the licensor. If licenses
are not available to us on acceptable terms, we or our collaborators may not be
able to develop, manufacture, sell or import these products.
If
we are unable to maintain and enforce our proprietary rights, we may not be able
to compete as effectively and our business and financial prospects may be
harmed.
There has
been substantial litigation and other proceedings regarding patent and other
intellectual property rights in the pharmaceutical and biotechnology industry.
We may become a party to various types of patent litigation or other proceedings
regarding intellectual property rights from time to time even under
circumstances where we are not using and do not intend to use any of the
intellectual property involved in the proceedings.
The cost
of any patent litigation or other proceeding, even if resolved in our favor,
could be substantial. Some of our competitors may be able to sustain the cost of
such litigation or proceedings more effectively than we will be able to because
our competitors may have substantially greater financial resources. If any
patent litigation or other proceeding is resolved against us, we or our
collaborators may be enjoined from developing, manufacturing, selling or
importing our drugs without a license from the other party and we may be held
liable for significant damages. We may not be able to obtain any required
license(s) on commercially acceptable terms or at all.
Uncertainties
resulting from the initiation and continuation of patent litigation or other
proceedings could have a material adverse effect on our ability to compete in
the marketplace. Patent litigation and other proceedings may also absorb
significant management time.
8
The
market for our services is highly competitive and is subject to rapid scientific
change, which could have a material adverse affect on our business, results of
operations and financial condition.
The
pharmaceutical and biotechnology industry is highly competitive and
characterized by rapid and significant technological change. We face intense
competition from organizations such as pharmaceutical and biotechnology
companies, as well as academic and research institutions and government
agencies. Some of these organizations are pursuing products based on
technologies similar to our future technologies. Other of these organizations
have developed and are marketing products, or are pursuing other technological
approaches designed to produce products that are competitive with our future
product candidates in the therapeutic effect these competitive products have on
diseases targeted by our product candidates. Our competitors may discover,
develop or commercialize products or other novel technologies that are more
effective, safer or less costly than any that we may develop. Our
competitors may also obtain FDA or other regulatory approval for their products
more rapidly than we may obtain approval for our products.
Many of
our competitors are substantially larger than we are and have greater capital
resources, research and development staffs and facilities than we have. In
addition, many of our competitors are more experienced in drug discovery,
development and commercialization, obtaining regulatory approvals, and drug
manufacturing and marketing.
We
anticipate that the competition with our products and technologies will be based
on a number of factors including product efficacy, safety, availability, and
price. The timing of market introduction of our future products and competitive
products will also affect competition among products. We expect the relative
speed with which we can develop products, complete the initial Phase I and
IIA clinical trials, establish a strategic partner and supply appropriate
quantities of the products for late stage trials to be important competitive
factors. Our competitive position will also depend upon our ability to attract
and retain qualified personnel, to obtain patent protection or otherwise develop
proprietary products or processes and to secure sufficient capital resources for
the period between technological conception and commercial sales or out-license
to a pharmaceutical partner.
Our
product candidates may never achieve market acceptance even if we obtain
regulatory approvals.
The
commercial success of any of our future products for which we may obtain
marketing approval from the FDA or other regulatory authorities will depend upon
their acceptance by the medical community and third party payors as clinically
useful, cost-effective and safe. Many of the products that we will develop will
be based upon technologies or therapeutic approaches that are relatively new and
unproven. As a result, it may be more difficult for us to achieve regulatory
approval or market acceptance of our products. Our efforts to educate the
medical community on these potentially unique approaches may require greater
resources than would be typically required for products based on conventional
technologies or therapeutic approaches. The safety, efficacy, convenience and
cost-effectiveness of our future products as compared to competitive products
will also affect market acceptance.
M.
D. Anderson, our sole licensor, may under certain circumstances terminate our
license agreements, which are required for us to conduct our proposed
business. In addition, we can provide no assurance that M.D. Anderson will
continue to license its intellectual property rights to us.
Our
license agreements with M. D. Anderson provide M. D. Anderson the right to
terminate the agreements upon written notice to us if we do not meet all of our
requirements under the license agreements which require us to file an
Investigational New Drug Application with the FDA, have a commercial sale of a
licensed product within an agreed upon period of time or raise certain amounts
of capital. If any of the licenses or any other agreements we enter into
with M. D. Anderson is terminated for any reason, our business will be adversely
and perhaps materially adversely affected, and our business may fail. In
addition, our relationship with M. D. Anderson is not exclusive to us. It
is possible that M. D. Anderson could enter into an exclusive relationship with
one of our future competitors. If this were to occur it could adversely
affect our competitive position and depending on the terms of any such
agreement, could make it difficult for us to succeed.
9
We
lack sales, marketing and distribution capabilities and will rely on third
parties to market and distribute our drug candidates, which may harm or delay
our product development and commercialization efforts.
We
currently have no sales, marketing, or distribution capabilities and do not
intend to develop such capabilities in the foreseeable future. If we are unable
to establish sales, marketing or distribution capabilities either by developing
our own sales, marketing, and distribution organization or by entering into
agreements with others, we may be unable to successfully sell any products that
we are able to begin to commercialize. If we, and our strategic partners, are
unable to effectively sell our products, our ability to generate revenues will
be harmed. We may not be able to hire, in a timely manner, the qualified sales
and marketing personnel for our needs, if at all. In addition, we may not be
able to enter into any marketing or distribution agreements on acceptable terms,
if at all. If we cannot establish sales, marketing and distribution capabilities
as we intend, either by developing our own capabilities or entering into
agreements with third parties, sales of future products, if any, will be
harmed.
We
face potential product liability exposure, and if successful claims are brought
against us, we may incur substantial liability for a product candidate and may
have to limit its commercialization.
Our
business will expose us to potential product liability risks inherent in the
clinical testing and manufacturing and marketing of pharmaceutical products, and
we may not be able to avoid significant product liability exposure. A product
liability claim or recall could be detrimental to our business. Although we
intend to obtain product liability or clinical trial insurance prior to
commencing our planned Phase I clinical trial for our product candidate
BP-100-1.01, we do not currently have any product liability or clinical trial
insurance, and we may not be able to obtain or maintain such insurance on
acceptable terms, or we may not be able to obtain any insurance to provide
adequate coverage against potential liabilities. Our inability to obtain
sufficient insurance coverage at an acceptable cost or otherwise to protect
against potential product liability claims could prevent or limit the
commercialization of any products that we develop.
We
may be required to defend lawsuits or pay damages for product liability
claims.
Product
liability is a major risk in testing and marketing biotechnology and
pharmaceutical products. We may face substantial product liability exposure in
human clinical trials and for products that sell after regulatory approval.
Product liability claims, regardless of their merits, could exceed policy
limits, divert management's attention, and adversely affect our reputation and
the demand for our products.
Our
competitors may develop products that make our products obsolete.
New
products and technological developments in the healthcare field may adversely
affect our ability to complete the necessary regulatory requirements and
introduce the proposed products in the market. The healthcare field, which is
the market for our products, is characterized by rapid technological change, new
and improved product introductions, changes in regulatory requirements, and
evolving industry standards. Our future success will depend to a substantial
extent on our ability to identify new market trends on a timely basis and
develop, introduce and support proposed products on a successful and timely
basis. If we fail to develop and deploy our proposed products on a successful
and timely basis, we may not be competitive.
We
will incur increased costs as a result of recently enacted and proposed changes
in laws and regulations and our management will be required to devote
substantial time to comply with such laws and regulations.
We face
burdens relating to the recent trend toward stricter corporate governance and
financial reporting standards. Legislation or regulations such as Section 404 of
the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as other
rules implemented by the SEC, follow the trend of imposing stricter corporate
governance and financial reporting standards have led to an increase in the
costs of compliance for companies similar to us, including increases in
consulting, auditing and legal fees. New rules could make it more difficult or
more costly for us to obtain certain types of insurance, including directors'
and officers' liability insurance, and we may be forced to accept reduced policy
limits and coverage or incur substantially higher costs to obtain the same or
similar coverage. The impact of these events could also make it more difficult
for us to attract and retain qualified persons to serve on our board of
directors, our board committees or as executive officers. Failure to comply with
these new laws and regulations may impact market perception of our financial
condition and could materially harm our business. Additionally, it is unclear
what additional laws or regulations may develop, and we cannot predict the
ultimate impact of any future changes in law. Our management and other personnel
will need to devote a substantial amount of time to these
requirements.
10
In
addition, the Sarbanes-Oxley Act requires, among other things, that we maintain
effective internal controls for financial reporting and disclosure controls and
procedures. In particular, we must perform system and process evaluation and
testing of our internal controls over financial reporting to allow management to
report on the effectiveness of our internal controls over financial reporting,
as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with
Section 404 will require that we incur substantial accounting and related
expense and expend significant management efforts. In the future, we may need to
hire additional accounting and financial staff to satisfy the ongoing
requirements of Section 404. Moreover, if we are not able to comply with the
requirements of Section 404, or we or our independent registered public
accounting firm identifies deficiencies in our internal controls over financial
reporting that are deemed to be material weaknesses, the market price of our
stock could decline and we could be subject to sanctions or investigations, the
SEC or other regulatory authorities.
Risks
Related to Our Industry
Any
failure or delay in commencing or completing clinical trials for our product
candidates could severely harm our business.
The
testing, manufacturing, labeling, advertising, promotion, exporting, and
marketing of our products are subject to extensive regulation by governmental
authorities in Europe, the United States and elsewhere throughout the
world.
To date,
we have not submitted a marketing application for any product candidate to the
FDA or any foreign regulatory agency, and none of our product candidates have
been approved for commercialization in any country. Prior to
commercialization, each product candidate would be subject to an extensive and
lengthy governmental regulatory approval process in the United States and in
other countries. We may not be able to obtain regulatory approval for any
product candidate we develop or, even if approval is obtained, the labeling for
such products may place restrictions on their use that could materially impact
the marketability and profitability of the product subject to such restrictions.
Any regulatory approval of a product may also contain requirements for costly
post-marketing testing and surveillance to monitor the safety or efficacy of the
product. Any product for which we or our pharmaceutical company out-license
partner obtain marketing approval, along with the facilities at which the
product is manufactured, any post-approval clinical data and any advertising and
promotional activities for the product will be subject to continual review and
periodic inspections by the FDA and other regulatory agencies.
We have
limited experience in designing, conducting, and managing the clinical testing
necessary to obtain such regulatory approval. Satisfaction of these regulatory
requirements, which includes satisfying the FDA and foreign regulatory
authorities that the product is both safe and effective for its intended
therapeutic uses, typically takes several years depending upon the type,
complexity and novelty of the product and requires the expenditure of
substantial resources. In addition to our internal resources, we will
depend on regulatory consultants and our Scientific Advisory Board for
assistance in designing our preclinical studies and clinical trials and drafting
documents for submission to the FDA. If we are not able to obtain regulatory
consultants on commercially reasonable terms, we may not be able to conduct or
complete clinical trials or commercialize our product candidates. We
intend to establish relationships with multiple regulatory consultants for our
existing clinical trials, although there is no guarantee that the consultants
will be available for future clinical trials on terms acceptable to
us.
In
addition, submission of an application for marketing approval to the relevant
regulatory agency following completion of clinical trials may not result in the
regulatory agency approving the application if applicable regulatory criteria
are not satisfied, and may result in the regulatory agency requiring additional
testing or information.
Both
before and after approval is obtained, violations of regulatory requirements may
result in:
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the
regulatory agency's delay in approving, or refusal to approve, an
application for approval of a
product;
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restrictions
on such products or the manufacturing of such
products;
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withdrawal
of the products from the market;
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warning
letters;
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voluntary
or mandatory recall;
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fines;
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suspension
or withdrawal of regulatory
approvals;
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product
seizure;
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refusal
to permit the import or export of our
products;
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injunctions
or the imposition of civil
penalties; and
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criminal
penalties.
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If
we fail to demonstrate efficacy in our preclinical studies and clinical trials
our future business prospects, financial condition and operating results will be
materially adversely affected.
In order
to obtain regulatory approvals for the commercial sale of our products, we will
be required to complete extensive clinical trials in humans to demonstrate the
safety and efficacy of our drug candidates. We have recently received FDA
approval to start Phase I clinical trials for our BP-100-1.01. We may not
be able to obtain authority from the FDA or other equivalent foreign regulatory
agencies to move on to Phase II or Phase III clinical trials or commence
and complete any other clinical trials for any other products.
The
results from preclinical testing of a drug candidate that is under development
may not be predictive of results that will be obtained in human clinical trials.
In addition, the results of early human clinical trials may not be predictive of
results that will be obtained in larger scale, advanced stage clinical trials. A
failure of one or more of our clinical trials can occur at any stage of testing.
Further, there is to date no data on the long-term clinical safety of our lead
compounds under conditions of prolonged use in humans, nor on any long-term
consequences subsequent to human use. We may experience numerous unforeseen
events during, or as a result of, preclinical testing and the clinical trial
process that could delay or prevent its ability to receive regulatory approval
or commercialize our products, including:
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regulators
or institutional review boards may not authorize us to commence a clinical
trial or conduct a clinical trial at a prospective trial
site;
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our
preclinical tests or clinical trials may produce negative or inconclusive
results, and we may decide, or regulators may require us, to conduct
additional preclinical testing or clinical trials or we may abandon
projects that we expect may not be
promising;
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we
might have to suspend or terminate our clinical trials if the
participating patients are being exposed to unacceptable health
risks;
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regulators
or institutional review boards may require that we hold, suspend or
terminate clinical research for various reasons, including noncompliance
with regulatory requirements;
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the
cost of our clinical trials may be greater than we currently
anticipate;
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the
timing of our clinical trials may be longer than we currently
anticipate; and
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the
effects of our products may not be the desired effects or may include
undesirable side effects or the products may have other unexpected
characteristics.
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12
The rate
of completion of clinical trials is dependent in part upon the rate of
enrollment of patients. Patient accrual is a function of many factors,
including:
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the
size of the patient population;
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the
proximity of patients to clinical
sites;
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the
eligibility criteria for the study;
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the
nature of the study;
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the
existence of competitive clinical
trials; and
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the
availability of alternative
treatments.
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We may
not be able to successfully complete any clinical trial of a potential product
within any specified time period. In some cases, we may not be able to
complete the trial at all. Moreover, clinical trials may not show our
potential products to be both safe and efficacious. Thus, the FDA and other
regulatory authorities may not approve any of our potential products for any
indication.
Our
clinical development costs will increase if we experience delays in our clinical
trials. We do not know whether planned clinical trials will begin as planned,
will need to be restructured or will be completed on schedule, if at all.
Significant clinical trial delays could also allow our competitors to bring
products to market before we do and impair our ability to commercialize our
products.
If
any products we develop become subject to unfavorable pricing regulations, third
party reimbursement practices or healthcare reform initiatives, our ability to
successfully commercialize our products will be impaired.
Our
future revenues, profitability and access to capital will be affected by the
continuing efforts of governmental and private third party payors to contain or
reduce the costs of health care through various means. We expect a number of
federal, state and foreign proposals to control the cost of drugs through
government regulation. We are unsure of the impact recent health care reform
legislation may have on our business or what actions federal, state, foreign and
private payors may take in response to the recent reforms. Therefore, it is
difficult to provide the effect of any implemented reform on our business. Our
ability to commercialize our products successfully will depend, in part, on the
extent to which reimbursement for the cost of such products and related
treatments will be available from government health administration authorities,
such as Medicare and Medicaid in the United States, private health insurers and
other organizations. Significant uncertainty exists as to the reimbursement
status of newly approved health care products, particularly for indications for
which there is no current effective treatment or for which medical care
typically is not sought. Adequate third party coverage may not be available to
enable us to maintain price levels sufficient to realize an appropriate return
on our investment in product research and development. If adequate coverage and
reimbursement levels are not provided by government and third party payors for
use of our products, our products may fail to achieve market acceptance and our
results of operations will be harmed.
Regulatory
and legal uncertainties could result in significant costs or otherwise harm our
business.
In order
to manufacture and sell our products, we must comply with extensive
international and domestic regulations. In order to sell its products in the
United States, approval from the FDA is required. The FDA approval process is
expensive and time-consuming. We cannot predict whether our products will be
approved by the FDA. Even if they are approved, we cannot predict the time frame
for approval. Foreign regulatory requirements differ from jurisdiction to
jurisdiction and may, in some cases, be more stringent or difficult to obtain
than FDA approval. As with the FDA, we cannot predict if or when we may obtain
these regulatory approvals. If we cannot demonstrate that our products can be
used safely and successfully in a broad segment of the patient population on a
long-term basis, our products would likely be denied approval by the FDA and the
regulatory agencies of foreign governments.
13
Our
product candidates are based on new technology and, consequently, are inherently
risky. Concerns about the safety and efficacy of our products could limit
our future success.
We are
subject to the risks of failure inherent in the development of product
candidates based on new technologies. These risks include the possibility that
the products we create will not be effective, that our product candidates will
be unsafe or otherwise fail to receive the necessary regulatory approvals or
that our product candidates will be hard to manufacture on a large scale or will
be uneconomical to market.
Many
pharmaceutical products cause multiple potential complications and side effects,
not all of which can be predicted with accuracy and many of which may vary from
patient to patient. Long term follow-up data may reveal additional complications
associated with our products. The responses of potential physicians and
others to information about complications could materially affect the market
acceptance of our future products, which in turn would materially harm our
business.
Unsuccessful
or delayed regulatory approvals required to exploit the commercial potential of
our future products could increase our future development costs or impair our
future sales.
No
Bio-Path technologies have been approved by the FDA for sale in the United
States or in foreign countries. To exploit the commercial potential of our
technologies, we are conducting and planning to conduct additional pre-clinical
studies and clinical trials. This process is expensive and can require a
significant amount of time. Failure can occur at any stage of testing, even if
the results are favorable. Failure to adequately demonstrate safety and efficacy
in clinical trials would prevent regulatory approval and restrict our ability to
commercialize our technologies. Any such failure may severely harm our business.
In addition, any approvals obtained may not cover all of the clinical
indications for which approval is sought, or may contain significant limitations
in the form of narrow indications, warnings, precautions or contraindications
with respect to conditions of use, or in the form of onerous risk management
plans, restrictions on distribution, or post-approval study
requirements.
Federal
and State pharmaceutical marketing compliance and reporting requirements may
expose us to regulatory and legal action by state governments or other
government authorities.
The Food
and Drug Administration Modernization Act, or the FDMA, established a public
registry of open clinical trials involving drugs intended to treat serious or
life-threatening diseases or conditions in order to promote public awareness of
and access to these clinical trials. Under the FDMA, pharmaceutical
manufacturers and other trial sponsors are required to post the general purpose
of these trials, as well as the eligibility criteria, location and contact
information of the trials. Failure to comply with any clinical trial posting
requirements could expose us to negative publicity, fines and other penalties,
all of which could materially harm our business.
In recent
years, several states, including California, Vermont, Maine, Minnesota, New
Mexico and West Virginia have enacted legislation requiring pharmaceutical
companies to establish marketing compliance programs and file periodic reports
on sales, marketing, pricing and other activities. Similar legislation is being
considered in other states. Many of these requirements are new and uncertain,
and available guidance is limited. Unless we are in full compliance with these
laws, we could face enforcement actions and fines and other penalties and could
receive adverse publicity, all of which could harm our business.
Other
companies may claim that we infringe their intellectual property or proprietary
rights, which could cause us to incur significant expenses or prevent us from
selling products.
Our
success will depend in part on our ability to operate without infringing the
patents and proprietary rights of third parties. The manufacture, use and sale
of new products have been subject to substantial patent rights litigation in the
pharmaceutical industry. These lawsuits generally relate to the validity and
infringement of patents or proprietary rights of third parties. Infringement
litigation is prevalent with respect to generic versions of products for which
the patent covering the brand name product is expiring, particularly since many
companies which market generic products focus their development efforts on
products with expiring patents. Other pharmaceutical companies, biotechnology
companies, universities and research institutions may have filed patent
applications or may have been granted patents that cover aspects of our products
or its licensors' products, product candidates or other
technologies.
14
Future or
existing patents issued to third parties may contain patent claims that conflict
with our future products. We expect to be subject to infringement claims from
time to time in the ordinary course of business, and third parties could assert
infringement claims against us in the future with respect to products that we
may develop or license. Litigation or interference proceedings could force us
to:
|
·
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stop
or delay selling, manufacturing or using products that incorporate or are
made using the challenged intellectual
property;
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|
·
|
pay
damages; or
|
|
·
|
enter
into licensing or royalty agreements that may not be available on
acceptable terms, if at all.
|
Any
litigation or interference proceedings, regardless of their outcome, would
likely delay the regulatory approval process, be costly and require significant
time and attention of key management and technical personnel.
Any
inability to protect intellectual property rights in the United States and
foreign countries could limit our ability to manufacture or sell products.
We will
rely on trade secrets, unpatented proprietary know-how, and continuing
technological innovation and, in some cases, patent protection to preserve a
competitive position. Our patents and licensed patent rights may be challenged,
invalidated, infringed or circumvented, and the rights granted in those patents
may not provide proprietary protection or competitive advantages to us. We and
our licensors may not be able to develop patentable products. Even if patent
claims are allowed, the claims may not issue, or in the event of issuance, may
not be sufficient to protect the technology owned by or licensed to us. Third
party patents could reduce the coverage of the patent's license, or that may be
licensed to or owned by us.
If
patents containing competitive or conflicting claims are issued to third
parties, we may be prevented from commercializing the products covered by such
patents, or may be required to obtain or develop alternate technology. In
addition, other parties may duplicate, design around or independently develop
similar or alternative technologies.
We may
not be able to prevent third parties from infringing or using our intellectual
property, and the parties from whom we may license intellectual property may not
be able to prevent third parties from infringing or using the licensed
intellectual property. We generally will attempt to control and limit access to,
and the distribution of, our product documentation and other proprietary
information. Despite efforts to protect this proprietary information, however,
unauthorized parties may obtain and use information that we may regard as
proprietary. Other parties may independently develop similar know-how or may
even obtain access to these technologies.
The laws
of some foreign countries do not protect proprietary information to the same
extent as the laws of the United States, and many companies have encountered
significant problems and costs in protecting their proprietary information in
these foreign countries.
The U.S.
Patent and Trademark Office and the courts have not established a consistent
policy regarding the breadth of claims allowed in pharmaceutical patents. The
allowance of broader claims may increase the incidence and cost of patent
interference proceedings and the risk of infringement litigation. On the other
hand, the allowance of narrower claims may limit the value of our proprietary
rights.
Risks
Related to Our Common Stock
There
are a substantial number of shares of our common stock eligible for future sale
in the public market, and the issuance or sale of equity, convertible or
exchangeable securities in the market, or the perception of such future sales or
issuances, could lead to a decline in the trading price of our common
stock.
Our
authorized capital consists of 200,000,000 shares of common stock and 10,000,000
shares of preferred stock. Any issuance of equity, convertible or
exchangeable securities, including for the purposes of financing acquisitions
and the expansion of our business, may have a dilutive effect on our existing
stockholders. In addition, the perceived risk associated with the possible
issuance of a large number of shares of our common stock or securities
convertible or exchangeable into a large number of shares of our common stock
could cause some of our stockholders to sell their common stock, thus causing
the trading price of our common stock to decline. Subsequent sales of our common
stock in the open market or the private placement of our common stock or
securities convertible or exchangeable into our common stock could also have an
adverse effect on the trading price of our common stock. If our common stock
price declines, it may be more difficult for us to or we may be unable to raise
additional capital.
15
In
addition, future sales of substantial amounts of our currently outstanding
common stock in the public market, or the perception that such sales could
occur, could adversely affect prevailing trading prices of our common stock, and
could impair our ability to raise capital through future offerings of equity or
equity-related securities. We cannot predict what effect, if any, future sales
of our common stock, or the availability of shares for future sales, will have
on the trading price of our common stock.
We have
also issued a significant number of warrants to purchase shares of our common
stock. These stock issuances and other future issuances of common stock
underlying unexpired and unexercised warrants have and will result in,
significant dilution to our stockholders. In connection with other
collaborations, joint ventures, license agreements or future financings that we
may enter into in the future, we may issue additional shares of common stock or
other equity securities, and the value of the securities issued may be
substantial and create additional dilution to our existing and future common
stockholders.
We
can issue shares of preferred stock that may adversely affect the rights of a
stockholder of our common stock.
Our
articles of incorporation authorize us to issue up to 10,000,000 shares of
preferred stock with designations, rights and preferences determined from
time-to-time by our board of directors without any action by our stockholders.
Accordingly, our board of directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or other
rights superior to those of stockholders of our common stock. The rights
of holders of other classes or series of stock that may be issued could be
superior to the rights of holders of our common shares. The designation and
issuance of shares of capital stock having preferential rights could adversely
affect other rights appurtenant to shares of our common stock.
The
sale of our common stock to LPC may cause dilution and the sale of the shares of
common stock acquired by LPC could cause the price of our common stock to
decline.
In
connection with entering into the LPC Purchase Agreement, we authorized the sale
to LPC of up to 7,000,000 shares of our common stock. The number of shares
ultimately offered for sale by LPC under this prospectus is dependent upon the
number of shares purchased by LPC under the LPC Purchase Agreement. The purchase
price for the common stock to be sold to LPC pursuant to the LPC Purchase
Agreement will fluctuate based on the price of our common stock. All 7,000,000
shares registered in this offering are expected to be freely tradable. It
is anticipated that shares registered in this offering will be sold over a
period of up to 24 months from the date of this prospectus. Depending upon
market liquidity at the time, a sale of shares under this offering at any given
time could cause the trading price of our common stock to decline. We can
elect to direct purchases in our sole discretion but no sales may occur if the
price of our common stock is below $0.20 and therefore, LPC may ultimately
purchase all, some or none of the 7,000,000 shares of common stock not yet
issued but registered in this offering. After it has acquired such shares,
it may sell all, some or none of such shares. Therefore, sales to LPC by us
under the LPC Purchase Agreement may result in substantial dilution to the
interests of other holders of our common stock. The sale of a substantial number
of shares of our common stock under this offering, or anticipation of such
sales, could make it more difficult for us to sell equity or equity-related
securities in the future at a time and at a price that we might otherwise wish
to effect sales. However, we have the right to control the timing and
amount of any sales of our shares to LPC and the LPC Purchase Agreement may be
terminated by us at any time at our discretion without any cost to
us.
We
do not intend to pay dividends on our common stock for the foreseeable
future.
We do not
anticipate that we will have any revenues for the foreseeable future and
accordingly, we do not anticipate that we will pay any dividends for the
foreseeable future. Accordingly, any return on an investment in our Company will
be realized, if at all, only when you sell shares of our common
stock.
16
Our
common stock trades only in an illiquid trading market.
Trading
of our common stock is conducted on the "Over-The-Counter Bulletin Board." This
could have an adverse effect on the liquidity of our common stock, not only in
terms of the number of shares that can be bought and sold at a given price, but
also through delays in the timing of transactions and reduction in security
analysts' and the media's coverage of Bio-Path and our common stock. This may
result in lower prices for our common stock than might otherwise be obtained and
could also result in a larger spread between the bid and asked prices for our
common stock.
If
the trading price of our common stock continues to fluctuate in a wide range,
our stockholders will suffer considerable uncertainty with respect to an
investment in our common stock.
The
trading price of our common stock may be volatile. Factors such as
announcements of fluctuations in our or our competitors' operating results or
clinical or scientific results, regulatory matters, new or existing products or
procedures, concerns about our financial position, operating results,
litigation, government regulation, developments or disputes relating to
agreements, patents or proprietary rights, fluctuations in the trading prices or
business prospects of our competitors and collaborators, changes in our
prospects, and market conditions for biopharmaceutical stocks in general could
have a significant impact on the future trading prices of our common
stock. In particular, the trading price of the common stock of many
biopharmaceutical companies, including ours, has experienced extreme price and
volume fluctuations, which have at times been unrelated to the operating
performance of the companies whose stocks were affected. This is due to
several factors, including general market conditions, the announcement of the
results of our clinical trials or product development and the results of our
efforts to obtain regulators approval of our products. In particular,
between February 15, 2008 and June 10, 2010, the closing sales price of our
common stock fluctuated from a low of $0.27 per share to a high of $6.00 per
share. In addition, potential dilutive effects of future sales of shares
of common stock by stockholders and by the Company,
including LPC pursuant to this prospectus and subsequent sale of common stock by
the holders of warrants and options could have an adverse effect on the market
price of our common stock. While we cannot predict our future performance,
if our stock price continues to fluctuate in a wide range, an investment in our
common stock may result in considerable uncertainty for an
investor.
Our
stock is a penny stock. Trading of our stock may be restricted by the SEC's
penny stock regulations and the FINRA's sales practice requirements, which may
limit a stockholder's ability to buy and sell our stock.
Our
common stock is considered to be a "penny stock." The SEC has adopted
rules under Section 15(g) of the Securities Exchange Act of 1934, as amended,
which generally defines "penny stock" to be any equity security that meets one
or more of the following: (i) has a market price less than $5.00 per share, or
an exercise price of less than $5.00 per share, subject to certain exceptions;
(ii) is NOT traded on a "recognized" national exchange; (iii) is NOT quoted on
the NASDAQ Stock Market, or even if so, has a price less than $5.00 per share;
or (iv) is issued by a company with net tangible assets less than $2.0 million,
if in business more than a continuous three years, or with average revenues of
less than $6.0 million for the past three years. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and institutional accredited investors. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document in a form
prepared by the SEC which provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker- dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock. Potential investors in
our common stock are urged to obtain and read such disclosure documents and
information carefully before purchasing any securities that are deemed to be
"penny stock."
17
In
addition to the "penny stock" rules promulgated by the SEC, the Financial
Industry Regulatory Authority, or FINRA, has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, the FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock.
Limitation
on director liability.
As
permitted by Utah law, our Articles of Incorporation limit the liability of
directors to the Company or its stockholders for monetary damages for breach of
a director's fiduciary duty except for liability in certain instances. As a
result of such Articles of Incorporation and Utah law, our shareholders may have
limited rights to recover against directors for breach of fiduciary
duty.
18
FORWARD-LOOKING
STATEMENTS
This
prospectus, other filings with the SEC, and press releases and other public
statements by our management throughout the year contain forward-looking
statements that have been made pursuant to the provisions of the Private
Securities Litigation Reform Act of 1995. All such statements, other than
statements of historical facts, including our financial condition, future
results of operation, projected revenues and expenses, business strategies,
operating efficiencies or synergies, competitive positions, growth opportunities
for existing intellectual properties, technologies, products, plans, and
objectives of management, markets for our securities, and other matters, are
about us and our industry that involve substantial risks and uncertainties and
constitute forward-looking statements for the purpose of the safe harbor
provided by Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such forward-looking statements are based on expectations, estimates
and projections about our industry, management's beliefs, and certain
assumptions made by our management on the date on which they were made, or if no
date is stated, as of the date of the filing made with the SEC in which such
statements were made, and may include those described in the section titled
"Risk Factors," and including, but not limited to, the following:
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·
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the
sufficiency of our existing capital resources and projected cash
needs;
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·
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our
ability to obtain additional
financing;
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·
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our
clinical trials, commencement dates for new clinical trials, clinical
trial results, evaluation of our clinical trial results by regulatory
agencies in other countries;
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·
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the
potential benefits and commercial potential of our potential
products;
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·
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the
uncertainties involved in the drug development process and
manufacturing;
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·
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the
early stage of the products we are
developing;
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our
dependence on a limited number of therapeutic
compounds;
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·
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the
acceptance of any of our future products by physicians and
patients;
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level
of future sales, if any;
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·
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collections,
costs, expenses, capital requirements and cash
outflows;
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the
safety and efficacy of our product
candidates;
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·
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estimates
of the potential markets and estimated trial
dates;
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sales
and marketing plans;
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·
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any
changes in the current or anticipated market demand or medical need of our
potential products;
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need
for additional research and
testing;
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·
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dependence
on collaborative partners;
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·
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our
ability to obtain adequate intellectual property protection and to enforce
these rights;
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our
ability to avoid infringement of the intellectual property rights of
others;
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·
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our
future research and development
activities;
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·
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assessment
of competitors and potential
competitors;
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·
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potential
costs resulting from product liability or other third-party
claims;
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19
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·
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assessment
of impact of recent accounting
pronouncements;
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·
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government
regulation and approvals;
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·
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loss
of key management or scientific personnel;
and
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·
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the
other factors and risks described under the section captioned "Risk
Factors" as well as other factors not identified
therein.
|
Words
such as "anticipates," "believes," "estimates," "expects," "plans," "may,"
"might," "will," "could," "seeks," "should," "would," "projects," "predicts,"
"intends," "continues," "potential," "opportunity" or the negative of these
terms or other comparable terminology are intended to identify such
forward-looking statements, although not all forward-looking statements contain
these identifying words. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties, and assumptions
that are difficult to predict; therefore, actual results may differ materially
from those expressed or forecasted in any such forward-looking statements.
You should not place undue reliance on these statements, which only reflect
information available as of the date that they were made. We cannot give
you any assurance that such forward-looking statements will prove to be accurate
and such forward-looking events may not occur. In light of the significant
uncertainties inherent in such forward-looking statements, you should not regard
the inclusion of this information as a representation by us or any other person
that the results or conditions described in those statements or our objectives
and plans will be achieved. Unless required by law, we undertake no
obligation to update publicly any forward-looking statements, whether because of
new information, future events or otherwise. However, readers should
carefully review the risk factors set forth in other reports or documents we
file from time to time with the SEC.
All
subsequent forward-looking statements attributable to us or any person acting on
our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to herein.
20
USE
OF PROCEEDS
This
prospectus relates to shares of our common stock that may be offered and sold
from time to time by the selling stockholder. We will receive no proceeds
from the sale of shares of common stock in this offering; however, we may
receive proceeds of up to $7,000,000 under the LPC Purchase Agreement. Any
proceeds from LPC that we receive under the LPC Purchase Agreement will be used
for working capital and general corporate purposes.
21
MARKET
PRICE AND DIVIDEND INFORMATION
Our
common stock is quoted on the OTCBB under the symbol "BPTH.OB." As of June
10, 2010, there were 48,617,832 shares of our common stock issued outstanding
and 222 stockholders of record. Of those shares of outstanding common
stock, 37,840,376
shares are deemed "restricted securities," within the meaning of Rule 144
promulgated under the Securities Act, and may not be sold in the absence of
registration under the Securities Act, unless an exemption from registration is
available, including the exemption provided by Rule 144. Subject to the
satisfaction of certain conditions, as of June 10, 2010, there were 34,735,146
shares of “restricted” common stock that could be sold pursuant to the
limitations provided by Rule 144. As of June 10, 2010, we had 3,893,298
shares of common stock reserved for issuance upon exercise of outstanding
options and 5,697,046 reserved for issuance upon exercise of outstanding
warrants (inclusive of the common stock underlying the warrants issued to LPC on
June 2, 2010). We have agreed to register the resale of the shares of
common stock to be issued upon exercise of the outstanding warrants under
certain circumstances, except for the warrants held by LPC. We have no
shares of preferred stock outstanding.
There has
only been limited trading in our common stock. The following table sets
forth, for the quarterly period indicated, the range of high and low sales
prices for our common stock as reported by the OTCBB during 2010, 2009 and
2008.
High
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Low
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|||||||
Fiscal
Year Ended December 31, 2008
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||||||||
First
Fiscal Quarter (beginning March 4, 2008)
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$ | 0.90 | $ | 0.52 | ||||
Second
Fiscal Quarter
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$ | 6.00 | $ | 0.90 | ||||
Third
Fiscal Quarter
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$ | 2.60 | $ | 1.00 | ||||
Fourth
Fiscal Quarter
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$ | 1.40 | $ | 0.20 | ||||
Fiscal
Year Ended December 31, 2009
|
||||||||
First
Fiscal Quarter
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$ | 1.01 | $ | 0.12 | ||||
Second
Fiscal Quarter
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$ | 0.31 | $ | 0.15 | ||||
Third
Fiscal Quarter
|
$ | 0.55 | $ | 0.12 | ||||
Fourth
Fiscal Quarter
|
$ | 0.52 | $ | 0.26 | ||||
Fiscal
Year Ending December 31, 2010
|
||||||||
First
Fiscal Quarter
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$ | 0.71 | $ | 0.25 | ||||
Second
Fiscal Quarter (Through June 14, 2010)
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$ | 0.47 | $ | 0.33 |
On June
14, 2010, the last reported sale price for our common stock as reported on the
OTCBB was $0.45 per share.
Dividends
We have
not paid any cash dividends since our inception and do not anticipate or
contemplate paying dividends in the foreseeable future.
22
Equity
Compensation Plan Information
Plan Category
|
Number of shares
of common stock
to
be issued upon
exercise of
outstanding options
|
Weighted-average
exercise price of
outstanding options
|
Weighted-average
term to expiration
of options
outstanding
|
Number of shares
of common stock
remaining available
for future issuance
under equity
compensation plans
|
|||||||||||
Equity
compensation plans approved
by
stockholders (1)
|
3,765,000 | $ | 1.22 |
8.1
yrs
|
3,235,000 | ||||||||||
Equity
compensation plans not approved by stockholders
|
— | — | — | — |
(1)
|
Reflects
number of shares of common stock to be issued upon exercise of outstanding
options and warrants under all of our equity compensation plans, including
our 2007 Stock Incentive Plan. No shares of common stock are
available for future issuance under any of our equity compensation plans,
except the 2007 Stock Incentive Plan. The outstanding options and
restricted shares are not transferable for consideration and do not have
dividend equivalent rights attached. Remaining average term to
expiration of options outstanding is as of June 10,
2010.
|
(2)
|
There
are a total of 128,298 options that have been vested from December 31,
2009 through June 10, 2010 bringing the total number of shares of common
stock to be issued upon the exercise of outstanding options under the 2007
stock option plan to 3,893,298. Within sixty days from June 10, 2010
there will be an additional 69,444 vested options bringing the total
outstanding common stock to be issued upon exercise of outstanding options
to 3,962,742.
|
23
DESCRIPTION
OF BUSINESS
Bio-Path
Holdings, Inc. through our wholly-owned subsidiary Bio-Path, Inc., or Bio-Path
Subsidiary, is engaged in the business of financing and facilitating the
development of novel cancer therapeutics. Our initial plan is and
continues to be, the acquisition of licenses for drug technologies from The
University of Texas M. D. Anderson Cancer Center, or M. D. Anderson, funding
clinical and other trials for such technologies and commercializing such
technologies. We have acquired three exclusive licenses, or the License
Agreements, from M. D. Anderson for three lead products and related nucleic acid
drug delivery technology including tumor targeting technology. These licenses
specifically provide drug delivery platform technology with composition of
matter intellectual property that enables systemic delivery of antisense, small
interfering RNA, or siRNA, and potentially small molecules for the treatment of
cancer.
Our
business plan is to act efficiently as an intermediary in the process of
translating newly discovered drug technologies into authentic therapeutic drug
candidates. Our strategy is to selectively license potential drug
candidates for certain cancers, and, primarily utilizing the comprehensive drug
development capabilities of M. D. Anderson, to advance these candidates through
proof of concept into a safety study (Phase I), to human efficacy trials (Phase
IIA), and then out-license each successful potential drug to a pharmaceutical
company.
Research
and Development
Our
research and development is currently conducted through agreements we have with
M. D. Anderson. Research continues using grant funds at M. D. Anderson, and
research in areas within the scope of our current license agreements will
continue to benefit the Company.
Recent
Updated Information
On March
12, 2010, we issued a press release announcing that the US Food and Drug
Administration (FDA) has allowed an IND (Investigational New Drug) for our lead
cancer drug candidate liposomal BP-100-1.01 to proceed into clinical
trials. The IND review process was performed by the FDA's Division of
Oncology Products and involved a comprehensive review of data submitted by
Bio-Path covering pre-clinical studies, safety, chemistry, manufacturing and
controls, and the protocol for the Phase I clinical trial. Bio-Path
is developing a neutral lipid-based liposome delivery technology for nucleic
acid cancer drugs (including antisense and siRNA molecules). Bio-Path's
drug candidate liposomal BP-100-1.01 is an antisense drug substance targeted to
treat several types of cancer. The FDA's clearance of the IND allows
Bio-Path to proceed with a Phase I clinical trial in patients with chronic
myelogenous leukemia (CML), acute myeloid leukemia (AML), acute lymphoblastic
leukemia (ALL) and myelodysplastic syndrome (MDS). Commencement of the
trial will occur after patients are enrolled and administrative details are
finalized. Bio-Path does not expect significant delays for these steps and
expect our Phase I clinical trials to commence in 2010.
Basic
Technical Information
Ribonucleic
acid (RNA) is a biologically significant type of molecule consisting of a chain
of nucleotide units. Each nucleotide consists of a nitrogenous base, a ribose
sugar, and a phosphate. Although similar in some ways to DNA, RNA differs from
DNA in a few important structural details. RNA is transcribed from
DNA by enzymes called RNA polymerases and is generally further processed by
other enzymes. RNA is central to protein synthesis. DNA carries the genetic
information of a cell and consists of thousands of genes. Each gene serves as a
recipe on how to build a protein molecule. Proteins perform important tasks for
the cell functions or serve as building blocks. The flow of information from the
genes determines the protein composition and thereby the functions of the
cell.
The DNA
is situated in the nucleus of the cell, organized into chromosomes. Every cell
must contain the genetic information and the DNA is therefore duplicated before
a cell divides (replication). When proteins are needed, the corresponding genes
are transcribed into RNA (transcription). The RNA is first processed so that
non-coding parts are removed (processing) and is then transported out of the
nucleus (transport). Outside the nucleus, the proteins are built based upon the
code in the RNA (translation).
24
Our basic
drug development concept is to modify the genetic material RNA to treat
disease. RNA is essential in the process of creating proteins. The
"i" in RNAi stands for "interference." We intend to develop drugs and drug
delivery systems that are intended to work by using RNA to interfere with the
production of proteins associated with disease. The discovery of RNAi, in
1998, has led not only to its widespread use in the research of biological
mechanisms and target validation, but also to its application in down-regulating
the expression of certain disease-causing proteins found in a wide spectrum of
diseases including inflammation, cancer, and metabolic dysfunction.
RNAi-based therapeutics work through a naturally occurring process within cells
that has the effect of reducing levels of messenger RNA (mRNA) required for the
production of proteins. At this time, several RNAi-based therapeutics are
being evaluated in human clinical trials.
The
historical perspective of cancer treatments has been drugs that affect the
entire body. Advances in the past decade have shifted to treating the
tumor tissue itself. One of the main strategies in these developments has
been targeted therapy, involving drugs that are targeted to block the expression
of specific disease causing proteins while having little or no effect on other
healthy tissue. Nucleic acid drugs, specifically antisense and siRNA, are
two of the most promising fields of targeted therapy. Development of
antisense and siRNA, however, has been limited by the lack of a suitable method
to deliver these drugs to the diseased cells with high uptake into the cell and
without causing toxicity. Bio-Path's currently licensed neutral-lipid
based liposome technology is designed to accomplish this. Studies have
shown a 10-fold to 30-fold increase in tumor cell uptake with this technology
compared to other delivery methods.
BP-100-1.01
BP-100-1.01
is our lead lipid delivery RNAi drug, which will be clinically tested for
validation in Acute Myeloid Leukemia (AML), Myelodysplastic Syndrome (MDS) and
Chronic Myelogenous Leukemia (CML). If this outcome is favorable, we
expect there will be opportunities to negotiate non-exclusive license
applications involving upfront cash payments with pharmaceutical companies
developing antisense drugs that need systemic delivery technology.
The IND
for BP-100-1.01 was submitted to the FDA in February of 2008 and included
all in vitro testing,
animal studies and manufacturing and chemistry control studies completed.
The FDA requested some changes be made to the application submission. We
resubmitted information to the FDA in response to such request. On March 12,
2010, we issued a press release announcing that the US Food and Drug
Administration (FDA) has allowed an IND (Investigational New Drug) for
Bio-Path's lead cancer drug candidate liposomal BP-100-1.01 to proceed into
clinical trials. The IND review process was performed by the FDA's
Division of Oncology Products and involved a comprehensive review of data
submitted by us covering pre-clinical studies, safety, chemistry, manufacturing,
and controls, and the protocol for the Phase I clinical trial. We
anticipate that patient enrollment and final preparations for the Phase I
clinical trial will start sometime during Fiscal Year 2010. We believe the
trial will commence by the end of the second quarter, but there can be no
assurance or exact time estimates. The primary objective of the Phase I clinical
trial, as in any Phase I clinical trial, is the safety of the drug for treatment
of human patients. An additional key objective of the trial is to assess
that the effectiveness of the delivery technology.
The
clinical trial will be conducted at the M. D. Anderson Cancer Center and is
expected to last approximately one year. The primary objective of the
Phase I trial is to demonstrate the safety of the Company's drug candidate
liposomal BP-100-1.01 for use in human patients. Additional objectives are
to demonstrate the effectiveness of our drug delivery technology similar to that
experienced in pre-clinical treatment of animals, and further, to assess whether
the drug candidate test article produces a favorable impact on the cancerous
condition of the patient at the dose levels of the study. The clinical
trial is structured to test five rounds of patients, with each round comprising
treatment of three patients. Each succeeding round in the study has a
higher dose of the drug candidate test article being administered to the
patients.
We will
reimburse M. D. Anderson at the rate of approximately $13,000 per patient for
treating patients in the study. We currently expect to reimburse M. D.
Anderson a total of approximately $250,000 spread out over one year for patient
treatment costs.
25
We are
also required to supply M. D. Anderson with the actual drugs to be administered
to the patients in the study. We have entered into a drug supply contract
with Althea Technologies which will produce sufficient drugs for testing through
two rounds. We expect to pay no more than $150,000 to Althea to complete
payments under the current contract. Drug costs for the entire study could
cost an additional $1 million including requirements for drug candidate test
article for additional treatments of the patients if the drug is having a
positive effect on the patients' disease. We have sufficient cash
resources to fund the trial through the initial two or three rounds of the
study. We will need to raise additional cash resources through the sale of
common stock in 2010 or other financing options in order to be able to continue
our development efforts. We have the right to terminate the Althea
agreement at any time, subject to payment of a termination fee to Althea.
The termination fee is not material.
BP-100-2.01
BP-100-2.01
is our lead siRNA drug, which will be clinically tested for validation as a
novel, targeted ovarian cancer therapeutic agent. The Company prepared a
review package of the testing material for this drug product and reviewed the
information with the FDA. Based on this review and feedback, performing
the remaining pre-clinical development work for BP-100-2.01 expected to be
required for an IND is budgeted for $225,000. The additional pre-clinical work
is expected to include two toxicity studies in mice and primates.
Projected
Financing Needs
In
December of 2009, we anticipated that we needed to raise an additional
$10,000,000 to enable us to complete all projected clinical trials for our
product candidates and conduct certain additional clinical trials in other
Bio-Path drug candidates. The completion LPC Purchase Agreement may
provide Bio-Path with up to $7,000,000 in new capital. This amount of
funding is expected to support clinical develop of our lead products and sustain
operations for an additional two years. We will still need to raise
additional capital to complete our funding plan.
The Phase
I clinical trial of BP-100-1.01 is expected to cost $1,600,000. If
the Phase I clinical trial in BP-100-1.01 is successful, we will follow with a
Phase IIa trial in BP-100-1.01. Successful Phase I and IIA trials of
BP-100-1.01 will demonstrate clinical proof-of-concept that BP-100-1.01 is a
viable therapeutic drug product for treatment of AML, MDS and CML. The
Phase IIA clinical trial in BP-100-1.01 is expected to cost approximately
$1,600,000.
The Phase
I clinical trial of BP-100-2.01 is expected to cost $2,000,000.
Commencement of the Phase I clinical trial depends on the FDA approving the IND
for BP-100-2.01. Success in the Phase I clinical trial will be based on
the demonstration that the delivery technology for siRNA has the same delivery
characteristics seen in our pre-clinical studies of the drug in
animals.
If we are
able to raise the entire $10,000,000, we anticipate that such capital raised
will also allow us to conduct a Phase I clinical trial of BP-100-1.02,
which is an anti-tumor drug that treats a broad range of cancer tumors.
This trial is budgeted to cost $2,500,000 and is higher than the Phase I
clinical trial for BP-100-1.01 due to expected higher hospital, patient
monitoring and drug costs. Similar to the case with BP-100-1.01,
commencement of the Phase I clinical trial of BP-100-1.02 requires that the FDA
approve the IND application for BP-100-1.02.
We have
currently budgeted approximately $3,000,000 out of the total $10,000,000 in net
proceeds to be raised for additional drug development opportunities. The
balance of the funding is planned to fund patent expenses, licensing fees,
pre-clinical costs to M. D. Anderson's Pharmaceutical Development Center,
consulting fees and management and administration.
We have
generated approximately two full years of financial information and have not
previously demonstrated that we will be able to expand our business through an
increased investment in our technology and trials. We cannot guarantee that
plans as described in this report will be successful. Our business is subject to
risks inherent in growing an enterprise, including limited capital resources and
possible rejection of our new products and/or sales methods. If financing is not
available on satisfactory terms, we may be unable to continue expanding our
operations. Equity financing will result in a dilution to existing
stockholders.
There can
be no assurance of the following:
|
1)
|
That
the actual costs of a particular trial will come within our budgeted
amount.
|
|
2)
|
That
any trials will be successful or will result in drug commercialization
opportunities.
|
26
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3)
|
That
we will be able to raise the sufficient funds to allow us to complete our
planned clinical trials.
|
Background
Information about M. D. Anderson
We
anticipate that our initial drug development efforts will be pursuant to three
exclusive License Agreements with M. D. Anderson. M. D. Anderson's stated
mission is to "make cancer history" (www.mdanderson.org ). Achieving that
goal begins with integrated programs in cancer treatment, clinical trials,
educational programs and cancer prevention. M. D. Anderson is one of the
largest and most widely recognized cancer centers in the world: U.S. News &
World Report's "America's Best Hospitals" survey has ranked M. D. Anderson as
one of 2 best hospitals for 16 consecutive years. M. D. Anderson will treat more
than 100,000 patients this year, of which approximately 11,000 will participate
in therapeutic clinical research exploring novel treatments the largest such
program in the nation. M. D. Anderson employs more than 15,000 people
including more than 1,000 M. D. and Ph.D clinicians and researchers, and is
routinely conducting more than 700 clinical trials at any one time.
Each
year, researchers at M. D. Anderson and around the globe publish numerous
discoveries that have the
potential to become or enable new cancer drugs. The pharmaceutical and
biotechnology industries have more than four hundred cancer drugs in various
stages of clinical trials. Yet the number of actual new drugs
that are approved to treat this dreaded disease is quite small and its growth
rate is flat or decreasing. A successful new drug in this market is a "big deal"
and substantially impacts those companies who have attained it: Genentech's
Avastin, Novartis' Gleevec, OSI's Tarceva and Millennium's Velcade are examples
of such.
Over the
past several years M. D. Anderson has augmented its clinical and research
prominence through the establishment of the Pharmaceutical Development Center
("PDC"). The PDC was formed for the sole purpose of helping researchers at
M. D. Anderson prepare their newly discovered compounds for clinical
trials. It has a full-time staff of professionals and the capability to
complete all of the studies required to characterize a compound for the filing
of an Investigational New Drug Application ("IND") with the FDA, which is
required to initiate clinical trials. These studies include
pharmacokinetics ("pK"), tissue distribution, metabolism studies and toxicology
studies.
We
anticipate being able to use the PDC as a source for some of the pre-clinical
work needed in the future, potentially at a lower cost than what it would cost
to use a for-profit contract research organization. There is no formal
arrangement between the Company and PDC and there can be no certainty that we
will have access to PDC or that even if we do have access, that our costs will
be reduced over alternative service providers.
Relationship
with M. D. Anderson
Bio-Path
was founded to focus on bringing the capital and expertise needed to translate
drug candidates developed at M. D. Anderson (and potentially other research
institutions) into real treatment therapies for cancer patients. To carry
out this mission, Bio-Path plans to negotiate several agreements with M.
D. Anderson that will:
|
·
|
give
Bio-Path ongoing access to M. D. Anderson's Pharmaceutical Development
Center for drug development;
|
|
·
|
provide
rapid communication to Bio-Path of new drug candidate disclosures in
the Technology Transfer
Office;
|
|
·
|
standardize
clinical trial programs sponsored by Bio-Path;
and
|
|
·
|
standardize
sponsored research under a master agreement addressing intellectual
property sharing.
|
Bio-Path's
Chief Executive Officer is experienced working with M. D. Anderson and its
personnel. Bio-Path believes that if Bio-Path obtains adequate financing,
Bio-Path will be positioned to help develop current and future M. D. Anderson
technology into treatments for cancer patients. This in turn is expected
to provide a steady flow of cancer drug candidates for out-licensing to
pharmaceutical partners.
27
Licenses
Bio-Path
Subsidiary has negotiated and signed three licenses with M. D. Anderson for late
stage preclinical molecules, and intends to use our relationship with M. D.
Anderson to develop these drug compounds through Phase IIa clinical trials, the
point at which we will have demonstrated proof-of-concept of the efficacy and
safety for our product candidates in cancer patients. At such time, we may
seek a development and marketing partner in the pharmaceutical or biotech
industry. In certain cases, we may choose to complete development and
market the product ourselves. Our basic guide to a decision to obtain a license
for a potential drug candidate is as follows:
Likelihood of efficacy: Are
the in vitro
pre-clinical studies on mechanism of action and the in vivo animal models robust
enough to provide a compelling case that the "molecule/compound/technology" has
a high probability of working in humans?
Does it fit with the Company's
expertise: Does Bio-Path possess the technical and clinical assets to
significantly reduce the scientific and clinical risk to a point where a
pharmaceutical company partner would likely want to license this candidate
within 36-40 months from the date of Bio-Path acquiring a license?
Affordability and potential for
partnering: Can the clinical trial endpoints be designed in a manner that
is unambiguous, persuasive, and can be professionally conducted consistent with
that expected by the pharmaceutical industry at a cost of less than $5-$7
million dollars without "cutting corners"?
Intellectual property and competitive
sustainability: Is the intellectual property and competitive
analysis sufficient to meet Big Pharma criteria assuming successful early
clinical human results?
Out-Licenses
and Other Sources of Revenue
Subject
to adequate capital, we intend to develop a steady series of drug candidates
through Phase IIa clinical trials and then to engage in a series of
out-licensing transactions to the pharmaceutical and biotechnology
companies. These companies would then conduct later-stage clinical
development, regulatory approval, and eventual marketing of the drug. We
expect that such out-license transactions would include upfront license fees,
milestone/success payments, and royalties. We intend to maximize the
quality and frequency of these transactions, while minimizing the time and cost
to achieve meaningful candidates for out-licensing.
In
addition to this source of revenue and value, we may forward integrate one or
more of our own drug candidates. For example, there are certain cancers that are
primarily treated only in a comprehensive cancer center; of which there are
approximately forty in the US and perhaps two hundred throughout the
world. Hence, "marketing and distribution" becomes a realistic possibility
for select products. These candidates may be eligible for Orphan Drug
Status which provides additional incentives in terms of market exclusivities and
non-dilutive grant funding for clinical trials.
Finally,
there are technologies for which we anticipate acquiring licenses whose
application goes well beyond cancer treatment. The ability to provide a unique
and greatly needed solution to the delivery of small molecules, DNA and siRNA
and their efficient uptake by targeted physiological tissues is a very important
technological asset that may be commercialized in other areas of
medicine.
License
Agreements
We have
entered into three Patent and Technology License Agreements (the "License
Agreements") with M. D. Anderson relating to its technology.
These
License Agreements relate to the following technologies: 1) a lead siRNA
drug product; 2) two single nucleic acid (antisense) drug products; and 3)
delivery technology platform for nucleic acids. These licenses require, among
other things, that we reimburse M. D. Anderson for ongoing patent expense.
One license requires us to raise at least $2.5 million in funding and, based on
the aggregate amount raised, we have agreed to sponsor additional research at M.
D. Anderson's laboratories. To maintain our rights to the licensed
technology, we must meet certain development and funding
milestones.
28
August
2009 License
The most
recent of such License Agreements was entered into effective August 27,
2009. Such License Agreement relates to the development of liposome tumor
targeting technology. Bio-Path is currently developing a neutral-lipid based
liposome delivery technology for nucleic acid cancer drugs (including antisense
and siRNA molecules). The new technology, being licensed in the field of neutral
lipid-based liposome delivery of antisense technologies and FAK siRNA, is
projected to enhance our liposome delivery technology by adding vectors to the
liposomes targeted to a receptor that is specifically over-expressed on a
majority of solid and hematological tumors and on 80 percent of metastatic
epithelial tumors. We believe this liposome tumor-targeting technology for
antisense and FAK siRNA delivery is a highly promising strategy for treating
primary and metastatic cancers.
The
historical perspective of cancer treatments has been drugs that affect the
entire body. Advances in the past decade have shifted to treating the tumor
tissue itself. One of the main strategies in these developments has been
targeted therapy, involving drugs that are targeted to block the expression of
specific disease causing proteins while having little or no effect on other
healthy tissue. Nucleic acid drugs, specifically antisense and siRNA, are two of
the most promising fields of targeted therapy. Development of antisense and
siRNA, however, has been limited by the lack of a suitable method to deliver
these drugs to the diseased cells with high uptake into the cell and without
causing toxicity. Bio-Path's currently licensed neutral-lipid based liposome
technology is designed to accomplish this. Studies have shown a tenfold to
thirtyfold increase in tumor cell uptake with this technology compared to other
delivery methods. Our first drug with this delivery technology is scheduled to
commence a Phase I clinical trial in 2011.
FAK
(facal adhesion kinase) is a cancer protein target that we intend our SIRNA to
block. Accordingly, the FAK SIRNA is a drug candidate that is intended to
treat forms of cancer involving abnormal or over-expression of the FAK gene
including ovarian, colon, breast, thyroid, head and neck and metastatic
cancer.
The new
liposome tumor targeting technology being licensed will be developed as an
extension of our current delivery technology, with a goal toward more powerfully
focusing delivery of the antisense and FAK siRNA cancer treatments to the tumor
tissue. Adding a vector to the liposome that targets a receptor that is highly
expressed on the surface of tumor cells is expected to drive uptake of the
liposomes into the tumor tissue, enhancing relative deposition in the target
tumor tissue. In animal studies conducted at M. D. Anderson Cancer Center,
researchers demonstrated an ability for vector targeted neutral lipid-based
liposomes to increase transfection efficiency and siRNA molecule uptake fivefold
to eightfold into cancer cells compared to those of untargeted liposomes and
controls. These efficiencies are in addition to the delivery efficiencies noted
above from the core neutral lipid-based liposome delivery
technology.
Pursuant
to such License Agreement, we are obligated to various one time and recurring
fees, expenses, royalties, milestone payments, and other compensation and
expenses to the licensor.
Business
Strategy
Our plan
of operation over the next 36 months is focused on achievement of milestones
with the intent to demonstrate clinical proof-of concept of our drug delivery
technology and lead drug products. Furthermore, subject to adequate capital, we
will attempt to validate our business model by in-licensing additional products
to broaden our drug product pipeline.
At
December 31, 2009, we anticipated that over the next 36 months we would need to
raise approximately $10,000,000 to completely implement our current business
plan. Completion of the LPC Purchase Agreement may provide up to
$7,000,000 in new funding. Over the next three years we expected to raise
additional capital to complete our funding plan. We have previously
completed several financings for use in our Bio-Path operations and have
received total net proceeds of $4,626,181 as of June 10, 2010. Our short term
plan is to achieve the following three key milestones:
29
|
1)
|
Conduct
a Phase I clinical trial of our lead drug BP-100-1.01, which if
successful, will validate our liposomal delivery technology for nucleic
acid drug products including siRNA. As described above we recently
received FDA clearance to commence Phase I clinical trials of our
BP-100-1.01 drug. In this Phase I trial, we will leverage M. D.
Anderson’s pre-clinical and clinical development capabilities, including
using the PDC for pre-clinical studies as well as clinical
pharmacokinetics and pharmacodynamics and the institution’s world-renowned
clinics, particularly for early clinical trials. This should allow
us to develop our drug candidates with experienced professional staff at a
reduced cost compared to using external contract laboratories. This
should also allow us to operate in an essentially virtual fashion, thereby
avoiding the expense of setting up and operating laboratory facilities,
without losing control over timing or quality or IP
contamination;
|
|
2)
|
Perform
necessary pre-clinical studies in our lead liposomal siRNA drug candidate,
BP-100-2.01 to enable the filing of an Investigational New Drug (“IND”)
for a Phase I clinical trial; and
|
|
3)
|
Out-license
(non-exclusively) our delivery technology for either antisense or siRNA to
a pharmaceutical partner to speed development applications of our
technology.
|
We plan
to pursue and achieve the above short term milestones by utilizing the following
tactics:
|
1)
|
Manage
trials as if they were being done by Big Pharma: seamless transition;
quality systems; documentation; and disciplined program management
recognized by Big Pharma diligence teams; trials conducted, monitored and
data collected consistent with applicable FDA regulations to maximize
Bio-Path’s credibility and value to minimize time to gain registration by
Partner;
|
|
2)
|
Use
our Scientific Advisory Board to supplement our Management Team to
critically monitor existing programs and evaluate new technologies and/or
compounds discovered or developed at M. D. Anderson, or elsewhere, for
in-licensing;
|
|
3)
|
Hire
a small team of employees or consultants: business development, regulatory
management, and project management;
and
|
|
4)
|
Outsource
manufacturing and regulatory capabilities. Bio-Path will not need to
invest its resources in building functions where it does not add
substantial value or differentiation. Instead, it will leverage an
executive team with expertise in the selection and management of high
quality contract manufacturing and regulatory
firms.
|
In order
to capitalize on the growing need for new drug candidates by the pharmaceutical
industry, and recognizing the value of clinical data, we have developed our
commercialization strategy based on the following concepts:
|
·
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Develop
in-licensed compounds to proof-of-concept in patients through Phase
IIA.
|
|
·
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Leverage
M. D. Anderson's pre-clinical and clinical development capabilities,
including using the PDC for pre-clinical studies as well as clinical
pharmacokinetics and pharmacodynamics and the institution's world-renowned
clinics, particularly for early clinical trials. This should allow
us to develop our drug candidates with experienced professional staff at a
reduced cost compared to using external contract laboratories. This
should also allow us to operate in an essentially virtual fashion, thereby
avoiding the expense of setting up and operating laboratory facilities,
without losing control over timing or quality or IP
contamination.
|
|
·
|
Use
our Scientific Advisory Board to supplement our Management Team to
critically monitor existing programs and evaluate new technologies and/or
compounds discovered or developed at M. D. Anderson, or elsewhere, for
in-licensing.
|
|
·
|
Hire
a small team of employees or consultants: business development, regulatory
management, and project management.
|
|
·
|
Outsource
manufacturing and regulatory capabilities. Bio-Path will not need to
invest its resources in building functions where it does not add
substantial value or differentiation. Instead, it will leverage an
executive team with expertise in the selection and management of high
quality contract manufacturing and regulatory
firms.
|
30
Manufacturing
We have
no manufacturing capabilities and intend to outsource our manufacturing
function. The most likely outcome of the out-license of a Bio-Path drug to
a pharmaceutical partner will be that the pharmaceutical partner will be
responsible for manufacturing drug product requirements. However, in the
event Bio-Path is required to supply a drug product to a distributor or
pharmaceutical partner for commercial sale, Bio-Path will need to develop,
contract for, or otherwise arrange for the necessary manufacturing capabilities.
There are a limited number of manufacturers that operate under the FDA's current
good manufacturing practices (cGMP) regulations capable of manufacturing our
future products. In September 2008, we executed a Supply Agreement with
Althea Technologies, Inc., a cGMP manufacturer of pharmaceutical products, for
the supply of drug product needed for Bio-Path's upcoming clinical
trials.
Intellectual
Property
Patents,
trademarks, trade secrets, technology, know-how, and other proprietary rights
are important to our business. Our success will depend in part on our
ability to develop and maintain proprietary aspects of our technology. To this
end, we intend to have an intellectual property program directed at developing
proprietary rights in technology that we believe will be important to our
success.
We will
actively seek patent protection in the U.S. and, as appropriate, abroad and
closely monitor patent activities related to our business.
In
addition to patents, we will rely on trade secrets and proprietary know-how,
which we seek to protect, in part, through confidentiality and proprietary
information agreements.
Agreement
with Acorn CRO
On April
23, 2009, we announced that had we entered into an agreement with ACORN CRO, a
full service, oncology-focused clinical research organization (CRO), to provide
us with a contract medical officer and potentially other clinical trial support
services. Under such agreement, Bradley G. Somer, M.D., started
serving as our Medical Officer and medical liaison for the conduct of our
upcoming Phase I clinical study of liposomal BP-100-1.01 in refractory or
relapsed Acute Myeloid Leukemia (AML), Chronic Myelogenous Leukemia (CML), Acute
Lymphoblastic Leukemia (ALL) and Myelodysplastic Syndrome (MDS).
Employees
We
currently employ two (2) full time employees. We also have contractual
relationships with 4 additional professionals who perform medical officer,
regulatory and drug development duties. We expect to hire additional
employees once additional funding has been secured that will enable additional
clinical programs to be undertaken.
Scientific
Advisory Board
Our
Scientific Advisory Board consists of the following scientists and
oncologists:
Gabriel Lopez-Berestein,
M.D. – Chairman
of the Scientific Advisory Board and founder of Bio-Path; Professor of
Medicine and Internist, Director, Cancer Therapeutics Discovery Program, Chief,
Section of Immunobiology and Drug Carriers at M. D. Anderson Cancer
Center.
Anil Sood, M.D. —
Member of the Scientific Advisory Board and co-founder of Bio-Path; Professor,
Department of Gynecologic Oncology & Professor, Department of Cancer Biology
M. D. Anderson Cancer Center; Director, Ovarian Cancer Research & Director,
Blanton-Davis Ovarian Cancer Research Program; Faculty Scholar Award, M. D.
Anderson Cancer Center.
Ana M. Tari, Ph.D., M.S. –
Member of the Scientific Advisory Board and co-founder of Bio-Path; Associate
Professor at the University of Florida at Gainsville.
31
We
anticipate that additional scientists and clinicians will join the Scientific
Advisory Board once additional funding has been secured to expend Bio-Path's
operations.
Competition
We are
engaged in fields characterized by extensive research efforts, rapid
technological progress, and intense competition. There are many public and
private companies, including pharmaceutical companies, chemical companies, and
biotechnology companies, engaged in developing products for the same human
therapeutic applications that we are targeting. Currently, substantially all of
our competitors have substantially greater financial, technical and human
resources than Bio-Path and are more experienced in the development of new drugs
than Bio-Path. In order for us to compete successfully, we may need to
demonstrate improved safety, efficacy, ease of manufacturing, and market
acceptance of our products over the products of our competitors.
We will
face competition based on the safety and efficacy of our drug candidates, the
timing and scope of regulatory approvals, the availability and cost of supply,
marketing and sales capabilities, reimbursement coverage, price, patent position
and other factors. Our competitors may develop or commercialize more effective,
safer or more affordable products than we are able to develop or commercialize
or obtain more effective patent protection. As a result, our competitors may
commercialize products more rapidly or effectively than we may be able to, which
would adversely affect our competitive position, the likelihood that our drug
candidates, if approved, will achieve initial market acceptance and our ability
to generate meaningful revenues from those drugs. Even if our drug candidates
are approved and achieve initial market acceptance, competitive products may
render such drugs obsolete or noncompetitive.
If any
such drug is rendered obsolete, we may not be able to recover the expenses of
developing and commercializing that drug. With respect to all of our drugs and
drug candidates, Bio-Path is aware of existing treatments and numerous drug
candidates in development by our competitors.
Government
Regulation
Regulation
by governmental authorities in the United States and foreign countries is a
significant factor in the development, manufacturing, and expected marketing of
our future drug product candidates and in its ongoing research and development
activities. The nature and extent to which such regulations will apply to
Bio-Path will vary depending on the nature of any drug product candidates
developed. We anticipate that all of our drug product candidates will require
regulatory approval by governmental agencies prior to
commercialization.
In
particular, human therapeutic products are subject to rigorous pre-clinical and
clinical testing and other approval procedures of the FDA and similar regulatory
authorities in other countries. Various federal statutes and regulations also
govern or influence testing, manufacturing, safety, labeling, storage, and
record-keeping related to such products and their marketing. The process of
obtaining these approvals and the subsequent compliance with the appropriate
federal statutes and regulations requires substantial time and financial
resources. Any failure by us or our collaborators to obtain, or any delay in
obtaining, regulatory approval could adversely affect the marketing of any drug
product candidates developed by us, our ability to receive product revenues, and
our liquidity and capital resources.
The steps
ordinarily required before a new drug may be marketed in the United States,
which are similar to steps required in most other countries,
include:
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·
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pre-clinical
laboratory tests, pre-clinical studies in animals, formulation studies and
the submission to the FDA of an investigational new drug
application;
|
|
·
|
adequate
and well-controlled clinical trials to establish the safety and efficacy
of the drug;
|
|
·
|
the
submission of a new drug application or biologic license application to
the FDA; and
|
|
·
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FDA
review and approval of the new drug application or biologics license
application.
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32
Bio-path's business model relies on
entering into out-license agreements with pharmaceutical licensee partners who
will be responsible for post-Phase IIA clinical testing and working with the FDA
on necessary regulatory submissions resulting in approval of new drug
applications for commercialization.
Non-clinical tests include laboratory
evaluation of drug product candidate chemistry, formulation and toxicity, as
well as animal studies. The results of pre-clinical testing are submitted to the
FDA as part of an investigational new drug application. A 30-day waiting period
after the filing of each investigational new drug application is required prior
to commencement of clinical testing in humans. At any time during the 30-day
period or at any time thereafter, the FDA may halt proposed or ongoing clinical
trials until the FDA authorizes trials under specified terms. The
investigational new drug application process may be extremely costly and
substantially delay the development of our drug product candidates. Moreover,
positive results of non-clinical tests will not necessarily indicate positive
results in subsequent clinical trials in humans. The FDA may require additional
animal testing after an initial investigational new drug application is approved
and prior to Phase III trials.
Clinical trials to support new drug
applications are typically conducted in three sequential phases, although the
phases may overlap. During Phase I, clinical trials are conducted with a small
number of subjects to assess metabolism, pharmacokinetics, and pharmacological
actions and safety, including side effects associated with increasing doses.
Phase II usually involves studies in a limited patient population to assess the
efficacy of the drug in specific, targeted indications; assess dosage tolerance
and optimal dosage; and identify possible adverse effects and safety
risks.
If a compound is found to be potentially
effective and to have an acceptable safety profile in Phase II evaluations,
Phase III trials are undertaken to further demonstrate clinical efficacy and to
further test for safety within an expanded patient population at geographically
dispersed clinical trial sites.
After successful completion of the
required clinical trials, a new drug application is generally submitted. The FDA
may request additional information before accepting the new drug application for
filing, in which case the new drug application must be resubmitted with the
additional information. Once the submission has been accepted for filing, the
FDA reviews the new drug application and responds to the applicant. The FDA's
request for additional information or clarification often significantly extends
the review process. The FDA may refer the new drug application to an appropriate
advisory committee for review, evaluation, and recommendation as to whether the
new drug application should be approved, although the FDA is not bound by the
recommendation of an advisory committee.
If the FDA evaluations of the
application and the manufacturing facilities are favorable, the FDA may issue an
approval letter or an "approvable" letter. An approvable letter will usually
contain a number of conditions that must be met in order to secure final
approval of the new drug application and authorization of commercial marketing
of the drug for certain indications. The FDA may also refuse to approve the new
drug application or issue a "not approvable" letter outlining the deficiencies
in the submission and often requiring additional testing or
information.
Sales outside the United States of any
drug product candidates Bio-Path develops will also be subject to foreign
regulatory requirements governing human clinical trials and marketing for drugs.
The requirements vary widely from country to country, but typically the
registration and approval process takes several years and requires significant
resources.
To date, we have not submitted a
marketing application for any product candidate to the FDA or any foreign
regulatory agency, and none of our proposed product candidates have been
approved for commercialization in any country. We have no experience
in designing, conducting and managing the clinical testing necessary to obtain
such regulatory approval. In addition to our internal resources and our
Scientific Advisory Board, Bio-Path will depend on regulatory consultants for
assistance in designing preclinical studies and clinical trials and drafting
documents for submission to the FDA. If we are not able to obtain regulatory
consultants on commercially reasonable terms, we may not be able to conduct or
complete clinical trials or commercialize our future product
candidates. We intend to establish relationships with multiple
regulatory consultants for our future clinical trials, although there is no
guarantee that the consultants will be available for future clinical trials on
terms acceptable to us.
33
Under the FDA Modernization Act of 1997,
the FDA may grant "Fast Track" designation to facilitate the development of a
drug intended for the treatment of a serious or life-threatening condition if
the drug demonstrates, among other things, the potential to address an unmet
medical need. The benefits of Fast Track designation include scheduled meetings
with the FDA to receive input on development plans, the option of submitting an
NDA in sections (rather than submitting all components simultaneously), and the
option of requesting evaluation of trials using surrogate endpoints. Fast Track
designation does not necessarily lead to a priority review or accelerated
approval of a drug candidate by the FDA.
We estimate that it generally takes 10
to 15 years or possibly longer, to discover, develop and bring to market a
new pharmaceutical product in the United States. A drug candidate may
fail at any point during this process. Animal and other non-clinical studies
typically are conducted during each phase of human clinical
trials.
Post-approval
Studies
Even after FDA approval has been
obtained, further studies, including post-approval trials, may be required to
provide additional data on safety and will be required to gain approval for the
sale of a product as a treatment for clinical indications other than those for
which the product initially was approved. Also, the FDA will require
post-approval reporting to monitor the side effects of the drug. Results of
post-approval programs may limit or expand the indications for which the drug
product may be marketed. Further, if there are any requests for modifications to
the initial FDA approval for the drug, including changes in indication,
manufacturing process, labeling or manufacturing facilities, a supplemental NDA
may be required to be submitted to the FDA or we may elect to seek changes and
submit a supplemental NDA to obtain approval.
Other
Regulations
Pursuant to the Drug Price Competition
and Patent Term Restoration Act of 1984, under certain conditions a sponsor may
be granted marketing exclusivity for a period of five years following FDA
approval. During this period, third parties would not be permitted to obtain FDA
approval for a similar or identical drug through an Abbreviated NDA, which is
the application form typically used by manufacturers seeking approval of a
generic drug. The statute also allows a patent owner to extend the term of the
patent for a period equal to one-half the period of time elapsed between the
submission of an IND and the filing of the corresponding NDA plus the period of
time between the filing of the NDA and FDA approval. We intend to seek the
benefits of this statute, but there can be no assurance that Bio-Path will be
able to obtain any such benefits.
Whether or not FDA approval has been
obtained, approval of a drug product by regulatory authorities in foreign
countries must be obtained prior to the commencement of commercial sales of the
product in such countries. Historically, the requirements governing the conduct
of clinical trials and product approvals, and the time required for approval,
have varied widely from country to country.
The FDA may grant orphan drug
designation to drugs intended to treat a "rare disease or condition" that
affects fewer than 200,000 individuals in the United States. Orphan drug
designation must be requested before submitting an application for marketing
authorization. Orphan drug designation does not convey any advantage in, or
shorten the duration of, the regulatory review and approval process. If a
product that has an orphan drug designation subsequently receives the first FDA
approval for the indication for which it has such designation, the product is
entitled to orphan exclusivity, which means the FDA may not approve any other
application to market the same drug for the same indication for a period of
seven years; except in limited circumstances, such as a showing of clinical
superiority to the product with orphan exclusivity. Also, competitors may
receive approval of different drugs or biologics for the indications for which
the orphan product has exclusivity. As a result of our License
Agreements with M. D. Anderson, we have the rights to drug
BP-100-1.01. This drug has been granted orphan drug status by the
FDA.
Pharmaceutical companies are also
subject to various federal and state laws pertaining to health care "fraud and
abuse," including anti-kickback laws and false claims laws. Anti-kickback laws
make it illegal for any entity or person to solicit, offer, receive, or pay any
remuneration in exchange for, or to induce, the referral of business, including
the purchase or prescription of a particular drug. False claims laws prohibit
anyone from knowingly and willingly presenting, or causing to be presented, for
payment to third party payors, including Medicare and Medicaid, claims for
reimbursed drugs or services that are false or fraudulent, claims for items or
services not provided as claimed, or claims for medically unnecessary items or
services.
34
In addition to the statutes and
regulations described above, Bio-Path is also subject to regulation under the
Occupational Safety and Health Act, the Environmental Protection Act, the Toxic
Substances Control Act, the Resource Conservation and Recovery Act and other
federal, state, local and foreign regulations, now or hereafter in
effect.
Facilities
We currently do not have any significant
facilities. We lease two small offices in Ogden, Utah and Houston,
Texas. The offices will be expanded as additional employees join
Bio-Path. Due to the anticipated use of the PDC or another laboratory
company for pre-clinical development of our sponsored drug candidates, Bio-Path
does not foresee at this time the need to lease laboratory
space.
Legal
Proceedings
We are not a party to any legal
proceedings.
35
In addition to historical information,
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" section contains forward-looking statements that involve risks and
uncertainties, which may cause our actual results to differ materially from
plans and results discussed in forward-looking statements. We
encourage you to review the risks and uncertainties, discussed in the section
titled "Risk Factors" and the "Note Regarding Forward-Looking Statements"
included in the beginning of this prospectus. The risks and
uncertainties can cause actual results to differ significantly from those
forecasted in forward-looking statements or implied in historical results and
trends.
The following discussion should be read
in conjunction with our consolidated financial statements and related notes
appearing elsewhere in this prospectus.
Overview
We were formed under the name of Ogden
Golf Co. Corporation. We terminated our retail golf store operations
in December 2006. On February 14, 2008, we acquired Bio-Path, Inc.
("Bio-Path Subsidiary") in a reverse merger transaction. In
connection with the Merger, we changed our name to Bio-Path Holdings, Inc., we
acquired Bio-Path Subsidiary as a wholly owned subsidiary and we appointed new
officers and directors. In connection with the Merger, we also
increased our authorized capital stock and adopted a Stock Incentive
Plan. The Merger and related matters are further described in a Form
8-K filed with the SEC on February 19, 2008. Subsequent to the Merger, we
changed our fiscal year end from June 30th to December 31st.
Bio-Path Subsidiary was formed to
finance and facilitate the development of novel cancer
therapeutics. Our initial plan was to acquire licenses for drug
technologies from The University of Texas M. D. Anderson Cancer Center, or M. D.
Anderson, to fund clinical and other trials for such technologies and to
commercialize such technologies. Bio-Path has negotiated and executed three
exclusive licenses, or the License Agreements, for three lead products and
nucleic acid delivery technology. These licenses specifically provide drug
delivery platform technology with composition of matter intellectual property
that enables systemic delivery of antisense, small interfering RNA, or siRNA,
and small molecules for treatment of cancer. Bio-Path's business plan
is to act efficiently as an intermediary in the process of translating newly
discovered drug technologies into authentic therapeutic drugs
candidates. Its strategy is to selectively license potential drug
candidates for certain cancers, and, primarily utilizing the comprehensive drug
development capabilities of M. D. Anderson, to advance these candidates into
initial human efficacy trials (Phase IIa), and out-license each successful
potential drug to a pharmaceutical company.
Except as discussed below, a discussion
of our past financial results is not pertinent to the business plan of the
Company on a going forward basis, due to the change in our business which
occurred upon consummation of the Merger on February
14, 2008.
Results
of Operations for the three months ended March 31, 2010 and March 31,
2009.
Revenues. We have no operating revenues since our
inception. We
had interest income of $602 for the three months ended March 31, 2010 compared
to $3,232 for the three months ended March 31, 2009. Our interest income was
derived from cash and cash equivalents net of bank fees.
Research and
Development Expenses. Our
research and development
costs were $137,082 for the three months ended March 31, 2010; a decrease of
$75,527 from the three months ended March 31, 2009. This
decrease results from the majority of the manufacturing and drug research
expenses for BP-100-1.01 being paid in Fiscal Year 2009.
General and
Administrative Expenses.
Our general and administrative expenses were $162,818 for the three months ended
March 31, 2010; a decrease of $30,507 from the three months ended March 31,
2009.
Net
Loss. Our net
loss was $490,941 for the
three months ended March 31, 2010, compared to a loss of $596,694 for the three
months ended March 31, 2009. Net loss per share, both basic and
diluted was $0.01 and $0.01 for the respective periods. The primary
reason for the difference in the decrease in net loss in the comparable periods
results from decreases in research and development expenses related to preparing
the lead drug candidate, BP-100-1.01 for the upcoming clinical
trial.
36
Results
of Operations for the twelve months ended December 31, 2009 and December 31,
2008.
Revenues. We have no operating revenues since our
inception. Our operating expenses for the twelve months ended
December 31, 2009 were $1,973,122 and included general and administrative
expenses of $721,029, fair value expense of stock options and warrants of
$588,857 and amortization expense of $182,981 for our technology
licenses. We expended $480,255 on research and development costs
during the year ended December 31, 2009.
Research and
Development Expenses. Our operating expenses for the year
ended December 31, 2008 were $2,893,828 and included general and administrative
expenses of $587,163, fair value expense of stock options, warrants and stock
issued for services of $1,801,239 and amortization expense of $171,954 for our
technology licenses. We expended $333,472 on research and development
costs during the year ended December 31, 2008.
Interest
Income. We had
interest income of $3,384 for the twelve months ended December 31, 2009 compared
to interest income of $41,061 for the year ended December 31, 2008. Our interest
income was derived from cash and cash equivalents net of bank
fees.
Net
Loss. Our net
loss was $1,969,738 for the twelve months ended December 31, 2009 compared to a
net loss of $2,852,767 for the year ended December 31, 2008. Net loss
per share, both basic and diluted was $.05 for the twelve months ended December
31, 2009 and $.07 for the twelve months ended December 31,
2008.
Liquidity
and Capital Resources
Since our inception, we have funded our
operations primarily through private placements of our capital
stock. We expect to finance our foreseeable cash requirements through
cash on hand, cash from operations, public or private equity offerings and debt
financings. Additionally, we are seeking collaborations and license arrangements
for our three product candidates. We may seek to access the public or
private equity markets whenever conditions are favorable. There can
be no assurance that the Company can raise additional capital to fund its
operations as
necessary.
On June 2, 2010, we entered into the LPC
Purchase Agreement, whereby we may sell up to $7,000,000 of our common stock to
LPC. See “The LPC Transaction” below.
On May 20, 2010, we entered into
subscription agreements with certain investors, pursuant to which we issued an
aggregate of 780,000 shares of our common stock and warrants to purchase 780,000
shares of our common stock at an exercise price of $1.50. We received
aggregate proceeds from such sales of $273,000.
At March 31, 2010, we had cash of
$454,574 compared to $567,249 at December 31, 2009. We currently have
no lines of credit or other arranged access to debt
financing.
Net cash used in operations during the
three months ended March 31, 2010 was $286,502 compared to $719,847 for the
three months ended March 31, 2009. The significant decrease in net
cash used in the first
quarter of 2010 results
from the majority of the manufacturing and drug research expenses for
BP-100-1.01 being paid in Fiscal Year 2009. Net cash used during the
year ended December 31, 2009 was $939,822 compared to a surplus of $287,713 for
the year ended December 31, 2008. Inasmuch as we have not yet generated
revenues, our entire expenses of operations are funded by our cash
assets.
In the year ended December 31, 2008, we
paid $150,000 for the cash portion of the purchase price of the licenses we
acquired from M.D. Anderson. In 2009 we paid or incurred $110,000 in
license fees to M. D. Anderson.
Currently all of our cash is, and has
been, generated from financing activities. We raised a total of
$198,827 cash from financing activities for the three months ended March 31,
2010 and $473,000 since
such date through June 10, 2010. Net cash provided by financing
activities in 2009 was $737,624 compared to $1,368,313 for
2008. Since
inception through June 10,
2010, we have net cash from
financing activities of $4,626,181. As discussed in Projected Financing Need above, we believe that our available
cash will be sufficient to fund our liquidity and capital expenditure
requirements for the next
two (2) years. We will need to raise additional capital
after such time in order to continue to fund our operations thereafter. There can be no assurance
that we will be able to raise cash when it is needed to fund our
operations.
37
We believe that our available cash will
not be sufficient to fund our liquidity and capital expenditure requirements
through the fiscal year ending December 31, 2012. There is no assurance or guarantee that
we will raise any additional capital at such time.
Future
capital needs
We anticipate that the total cost of
additional needed funds for Phase I Clinical trials of our BP-100-1.01 will
range from $1,500,000 to $2,000,000. Inasmuch as we have received no
income from operations, we are required to depend upon the sale of our
securities as our principal sources of cash for the foreseeable
future. We intend to use proceeds from the sale of our common stock
to LPC under the LPC Purchase Agreement for such use. There can be no
assurance that we will be able to continue to raise cash through the sale of our
securities in the future. The amount and pace of research and
development work that we can do or sponsor, and our ability to commence and
complete the clinical trials that are required in order for us to obtain FDA and
foreign regulatory approval of products, depend upon the amount of money we
have. We have attempted to reduce overhead expenses due to the
limited amount of funds available. Future research and clinical study
costs are not presently determinable due to many factors, including the inherent
uncertainty of these costs and the uncertainty as to timing, source, and amount
of capital that will become available for these projects.
Other
Events
In April of 2008 we granted stock
options for services to be performed over the next three years, to
purchase in the aggregate 1,165,000 shares of our common stock. Terms
of the stock option grants require, among other things, that the individual
continues to provide services over the vesting period of the option, which is
four or five years from the date that each option granted to the individual
becomes effective. The exercise price of the options is $0.90 a
share. In April of 2008 we awarded warrants for services to purchase
in the aggregate 85,620 shares of our common stock. The exercise
price is $0.90 a share. In April of 2008, we issued 200,000 shares of
our common stock to a firm in connection with introducing Bio-Path, Inc. to its
merger partner Ogden Golf. In October, 2008 we granted a total of 2,500,000
employee stock options to our two corporate officers, Peter Nielsen and Douglas
Morris.
As of May 31, 2010, a total of
2,114,235 of these options are now vested, and
the remaining 1,650,765 vest over an average of an eight
year period with a weighted average price of $1.22.
Contractual
Obligations and Commitments
Bio-Path has entered into three Patent and Technology License
Agreements with M. D.
Anderson relating to its technology. A summary of certain material terms of each
of such licenses is detailed in the section titled “License Agreements”
on page 28.
In September 2008, we entered into a
supply agreement with Althea Technologies, Inc. for the manufacture of
BP-100-1.01 for our upcoming Phase I Clinical Trial. Althea is a
contract manufacturer who will formulate and lyophilize our BP-100-1.01 product
requirements according to current Good Manufacturing Practices
(cGMP). The contract includes estimated remaining payments by
Bio-Path of approximately $300,000 for process development and manufacture of
cGMP product suitable for use in human patients in the Company's Phase I clinical
trial. Bio-Path has the right to terminate the agreement at any time,
subject to payment of a termination fee to Althea. The termination
fee is not material.
In April 2009, we entered into an
agreement with ACORN CRO, a full service, oncology-focused clinical research
organization, to provide Bio-Path with a contract medical officer and
potentially other clinical trial support services. Concurrent with
signing the agreement, Bradley G. Somer, M.D., will serve as
Bio-Path's Medical Officer and medical liaison
for the conduct of the Company's upcoming Phase I clinical study of
liposomal BP-100-1.01 in refractory or relapsed Acute Myeloid Leukemia (AML),
Chronic Myelogenous Leukemia (CML), Acute Lymphoblastic Leukemia (ALL) and
Myelodysplastic Syndrome (MDS).
38
Inflation
The Company does not believe that
inflation will negatively impact its business plans.
Critical
Accounting Policies
The preparation of financial statements
in conformity with generally accepted accounting principles ("GAAP") in the
United States has required the management of the Company to make assumptions,
estimates and judgments that affect the amounts reported in the financial
statements, including the notes thereto, and related disclosures of commitments
and contingencies, if any. The Company considers its critical accounting
policies to be those that require the more significant judgments and estimates
in the preparation of financial statements, including the
following:
Concentration
of Credit Risk — Financial
instruments that potentially subject the Company to a significant concentration
of credit risk consist of cash. The Company maintains its cash
balances with one major commercial bank, J. P. Morgan Chase Bank. The
balances are insured by the Federal Deposit Insurance Corporation up to
$250,000. As a result, $317,249 of the Company's cash balances as of
December 31, 2009 is not covered by the FDIC.
Intangible
Assets/Impairment of Long-Lived Assets. As of December 31, 2009, Other Assets
totals $2,431,680 for the Company's three technology licenses, comprised of
$2,814,166 in value acquiring the Company's technology licenses and its
intellectual property, less accumulated amortization of $382,486. The
technology value consists of $460,000 in cash paid or accrued to be paid to M.
D. Anderson, plus 3,138,889 shares of common stock granted to M. D. Anderson
valued at $2,354,166. This value is being amortized over a fifteen
year (15 year) period from November 7, 2007, the date that the technology
licenses became effective. As of December 31, 2009 accrued payments
to be made to M. D. Anderson totaled $125,000, and such payments are expected to
be made in 2010. The Company accounts for the impairment and disposition of its
long-lived assets in accordance with generally accepted accounting principles
(GAAP). Long-lived assets are reviewed for events of changes in
circumstances which indicate that their carrying value may not be
recoverable. The Company estimates that approximately $190,000 will
be amortized per year for each future year for the current value of the
technology licenses acquired until approximately 2022.
Research
and Development. Costs and
expenses that can be clearly identified as research and development are charged
to expense as incurred in accordance with GAAP. For the year 2009,
the Company had $480,255 of costs classified as research and development
expense. Of this amount, approximately $280,000 is comprised of raw
materials and costs for the Company's raw material suppliers and contract drug
manufacturer to perform unplanned additional engineering test runs of the
Company's lead drug product in advance of manufacturing a current Good
Manufacturing Practice (cGMP) clinical batch of this drug for use in an upcoming
Phase I Clinical Trial.
Stock-Based
Compensation — The Company
has accounted for stock-based compensation under the provisions
of GAAP, which requires us to record an expense associated with the
fair value of stock-based compensation. We currently use the
Black-Scholes option valuation model to calculate stock based compensation at
the date of grant. Option pricing models require the input of highly
subjective assumptions, including the expected price
volatility. Changes in these assumptions can materially affect the
fair value estimate.
In October 2008, the Company made stock
option grants to management and officers to purchase in the aggregate 2,500,000
shares of the Company's common stock. Terms of the stock option
grants require that the individuals continue employment with the Company over
the vesting period of the option, fifty percent (50%) of which vested upon the
date of the grant of the stock options and fifty percent (50%) of which will
vest over 3 years from the date that the options were granted. The
exercise price of the options is $1.40 a share. The Company
determined the fair value of the stock options granted using the Black Scholes
model and expenses this value monthly based upon the vesting schedule for each
stock option award.
39
For purposes of determining fair value,
the Company used an average annual volatility of eighty four percent (84%),
which was calculated based upon taking a weighted average of the volatility of
the Company's common stock and the volatility of similar biotechnology
stocks. The risk free rate of interest used in the model was taken
from a table of the market rate of interest for U. S. Government Securities for
the date of the stock option awards and interpolated as necessary to match the
appropriate effective term for the award. The total value of
stock options granted to management and officers was determined using this
methodology to be $2,485,000, half of which was expensed at the date of grant
and the balance will be expensed over the next three years based on the stock
option service period.
In December 2008, the Company made stock
option grants for services over the next three years to purchase in the
aggregate 100,000 shares of the Company's common stock. Terms of the
stock option grants require, among other things, that the individual continues
to provide services over the vesting period of the option, which is three or
four years from the date that each option granted to the individual becomes
effective. The exercise price of the options is $0.30 a
share. None of these stock options grants were for current management
and officers of the Company. The Company determined the fair value of
the stock options granted using the Black Scholes model and expenses this value
monthly based upon the vesting schedule for each stock option
award. For purposes of determining fair value, the Company used an
average annual volatility of eighty four percent (84%), which was calculated
based upon taking a weighted average of the volatility of the Company's common
stock and the volatility of similar biotechnology stocks. The risk
free rate of interest used in the model was taken from a table of the market
rate of interest for U. S. Government Securities for the date of the stock
option awards and interpolated as necessary to match the appropriate effective
term for the award. The total value of stock options granted
was determined using this methodology to be $21,450, which will be expensed over
the next four years based on the stock option vesting
schedule.
Total stock option expense for the year
2008 being reported on totaled $1,465,189. There were no stock option awards
granted in 2009. Total stock option expense for the year 2009 being
reported on totaled $588,857.
Warrant
Grants. In April 2008, the
Company awarded warrants for services to purchase in the aggregate 85,620 shares
of the Company's common stock. The exercise price is $0.90 a
share. The warrants were one hundred percent (100%) vested upon
issuance and were expensed upfront as warrants for services. The fair
value of the warrants expensed was determined using the same methodology as
described above for stock options. The total value of the warrants
granted was determined using this methodology to be $36,050, the total amount of
which was expensed in the second quarter 2008.
Net
Loss Per Share. In accordance with GAAP, and SEC Staff
Accounting Bulletin ("SAB") No. 98, basic net loss per common share is computed
by dividing net loss for the period by the weighted average number of common
shares outstanding during the period. Although there were warrants
and stock options outstanding during 2008, no potential common shares shall be
included in the computation of any diluted per-share amount when a loss from
continuing operations exists. Consequently, diluted net loss per
share is not presented in the financial statements for the year 2009. The
calculation of Basic and Diluted earnings per share for 2009 did not include
1,985,937 shares and 745,620 shares issuable pursuant to the exercise of vested
common stock and vested warrants, respectively, as of December 31, 2009 as the
effect would be anti-dilutive. The calculation of Basic and Diluted earnings per
share for 2008 did not include 1,250,000 shares and 85,620 shares issuable
pursuant to the exercise of vested common stock and vested warrants,
respectively, as of December 31, 2008 as the effect would be
anti-dilutive.
Comprehensive
Income — Comprehensive
income (loss) is defined as all changes in a company's net assets, except
changes resulting from transactions with stockholders. At December
31, 2009, the Company has no reportable differences between net loss and
comprehensive loss.
Use
of Estimates — The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the Company's
consolidated financial statements and accompanying notes. On an ongoing basis,
the Company evaluates its estimates and judgments, which are based on historical
and anticipated results and trends and on various other assumptions that the
Company believes to be reasonable under the circumstances. By their nature,
estimates are subject to an inherent degree of uncertainty and, as such, actual
results may differ from the Company's estimates.
40
Recent
Accounting Pronouncements:
In June 2009, the FASB issued FASB ASC
860-10-05 (Prior authoritative
literature: FASB Statement
166,
Accounting for Transfers of Financial Assets). FASB ASC 860-10-05 is effective for
fiscal years beginning after November 15, 2009. The Company is currently
assessing the impact of FASB ASC 860-10-05 on its financial position and results
of operations.
In June 2009, the FASB issued FASB ASC
810-10-25 (Prior authoritative
literature: FASB Statement
167-Amendment to FIN 46(R), Consolidation of
Variable Entities). FASB
ASC 810-10-25 eliminates the quantitative approach previously required for
determining the primary beneficiary of a variable interest entity and requires a
qualitative analysis to determine whether an enterprise's variable interest
gives it a controlling financial interest in a variable interest entity. FASB
ASC 810-10-25 contains certain guidance for determining whether an entity is a
variable interest entity. This statement also requires ongoing reassessments of
whether an enterprise is the primary beneficiary of a variable interest entity.
FASB ASC 810-10-25 will be effective as of the beginning of the Company's 2010
fiscal year. The Company is currently evaluating the impact of the adoption of
FASB ASC 810-10-25.
In October 2009, the FASB issued ASU No.
200-13, Revenue Recognition – Multiple Deliverable Revenue Arrangements ("ASU
2009-13"). ASU 2009-13 updates the existing multiple-element revenue
arrangements guidance currently included in FASB ASC 605-25. The
revised guidance provides for two significant changes to the existing
multiple-element revenue arrangements guidance. The first change
relates to the determination of when the individual deliverables included in a
multiple-element arrangement may be treated as separate units of
accounting. This change will result in the requirement to separate
more deliverables within an arrangement, ultimately leading to less revenue
deferral. The second change modifies the manner in which the
transaction consideration is allocated across the separately identified
deliverables. Together, these changes will result in earlier
recognition of revenue and related costs for multiple-element arrangements than
under previous guidance. This guidance expands the disclosures
required for multiple-element revenue arrangements and is effective for interim
and annual reporting periods beginning after December 15, 2009. The
Company is currently evaluating the potential impact, if any, of this guidance
on its financial statements.
41
Identification
of Directors and Executive Officers
The current directors and officers of
Bio-Path Holdings, Inc. who will serve until the next annual meeting of
stockholders or until their successors are elected or appointed and qualified,
are set forth below:
Name
|
Age
|
Position -
Committee
|
||
Peter
Nielsen
|
60
|
Chief Executive
Officer/President/Chief Financial Officer/Treasurer/ Chairman of the Board
of Directors
|
||
Douglas P.
Morris
|
54
|
Vice President of Corporate
Development/ Secretary/Director
|
||
Dr. Thomas
Garrison
|
51
|
Director
|
||
Gillian
Ivers-Read
|
56
|
Director
|
Background
Information
Peter
Nielsen, CEO is a
co-founder of Bio-Path, serving as its Chief Executive Officer, President and
Chief Financial Officer/Treasurer and Chairman of the Board of Directors. Mr.
Nielsen has developed a close working relationship over the last five years with
key individuals at M. D. Anderson and suppliers. Mr. Nielsen has a broad
management background in senior management, leading turnarounds of several large
companies. He also has experience in finance, product development,
cost and investment analysis, manufacturing and planning. He has also
worked with several other biotech companies developing and executing on
strategies for growth and is currently a Director of Synthecon, Inc., a
manufacturer of 3D bioreactors. Prior to joining Bio-Path, Mr.
Nielsen served as Chief Financial Officer of Omni Energy Services Corp., a
NASDAQ traded energy services company. Mr. Nielsen was a Lieutenant
in the U.S. Naval Nuclear Power program where he was director of the physics
department. and was employed at Ford Motor Company in product
development. He holds engineering and M.B.A. finance degrees from the
University of California-Berkeley.
Douglas
P. Morris is a co-founder
of Bio-Path serving as its Vice President of Corporate Development, Secretary
and a Director. Since 1993, Mr. Morris has been an officer and director of
Celtic Investment, Inc., a financial services company. Celtic Investment owns
Celtic Bank, an FDIC insured industrial loan company chartered under the laws of
the State of Utah. Since 1990, Mr. Morris has also owned and operated Hyacinth
Resources, LLC ("Hyacinth"). Hyacinth is a privately held business
consulting firm. Hyacinth consults with privately held and publicly held
corporations relating to management, merger and acquisitions, debt and equity
financing, capital market access, and market support for publicly traded
securities. Hyacinth also holds investments purchased by Mr.
Morris. In 2007, Mr. Morris formed Sycamore Ventures, LLC, a
privately-held consulting firm. Mr. Morris has a B.A. from Brigham
Young University and a Masters in Public Administration from the University of
Southern California.
Dr.
Thomas Garrison is a
practicing medical doctor with over twenty years experience in the clinical
medical field with extensive administration responsibilities. He
is
residency trained
and board certified in emergency medicine. He has extensive experience in
high-acuity, high-volume emergency departments with large trauma referral
bases. He has co-authored several textbooks on emergency
medicine. In addition to his professional medical career, he has been
involved in a number of successful entrepreneurial pursuits. He is
currently involved as the Medical Director of Sono Bello Body Contour Centers
and has ownership in several of the centers. Sono Bello is a
nationally growing Company, specializing in minimally invasive liposuction and
non-invasive body contouring. He is responsible for medical
oversight, written policies, regulatory input, equipment selection,
pharmaceuticals, training and other medically relevant
issues.
42
Dr. Garrison was formally involved with
Advanced Laser Clinics, Inc., serving as Corporate Medical Director. He received
his Doctor of Medicine, Uniformed Services University of the Health
Sciences, Bethesda, Maryland in 1982, and his Bachelor of Science, Chemistry
Major, Engineering Minor from the University of Utah in
1978.
Gillian
Ivers-Read. Ms. Ivers-Read is currently head of
Techinical Operations at Clovis Oncology, a recently formed bio-technology
company. From April 2002 until April 2009, Ms. Ivers-Read had been Executive
Vice President, Development Operations of Pharmion Corp., a publicly held
biotech company. From 1996 to 2001, Ms. Ivers-Read held various
regulatory positions with Hoechst Marion Roussel and its successor Aventis
Pharmaceuticals, Inc., where she most recently held the position of Vice
President, Global Regulatory Affairs. From 1994 to 1996, Ms. Ivers-Read was Vice
President, Development and Regulatory Affairs for Argus Pharmaceuticals and from
1984 to 1994 she served as a regulatory affairs director for Marion Merrell
Dow.
Board of Directors
Our
operations are managed under the broad supervision of the board of directors,
which has ultimate responsibility for the establishment and implementation of
our general operating philosophy, objectives, goals and policies. Our
board of directors is currently comprised of two independent directors and two
non-independent directors. The board of directors has determined that
current directors, Dr. Thomas Garrison and Gillian Ivers-Read
are “independent” as independence is defined under the listing standards for The
Nasdaq Stock Market. The board based these determinations primarily
on a review of the responses our directors provided to questions regarding
employment and compensation history, affiliations and family and other
relationships.
Committees
of the Board of Directors
We currently have a compensation
committee of the Board of Directors consisting of Ms. Gillian Ivers-Read and
Douglas P. Morris. We anticipate as our Board of Directors increases
in size, we will appoint an audit committee and a nominating and corporate
governance committee.
Key
Consultants
Bradley
G. Somer, MD. Dr. Somer is employed by ACORN CRO, a
full service, oncology-focused clinical research organization
(CRO). Under our agreement with ACORN, Dr. Somer will serve as
Bio-Path's Medical Officer and medical liaison for the conduct of the Company's
upcoming Phase I clinical study of liposomal BP-100-1.01 in refractory or
relapsed Acute Myeloid Leukemia (AML), Chronic Myelogenous Leukemia (CML), Acute
Lymphoblastic Leukemia (ALL) and Myelodysplastic Syndrome
(MDS).
Thomas
A. Walker, Ph.D. Dr. Walker was
appointed as Bio-Path's Chemistry, Manufacturing and Controls CMC Development
Specialist. Dr. Walker has more than twenty years of broad analytical
chemistry experience in the pharmaceutical industry. He was involved
significantly with the start up and qualification of Quality Control
laboratories and a Quality Assurance department for GEL Analytics, a
pharmaceutical drug supplier. He also has provided oversight in
setting up and qualifying current Good Manufacturing Practice (cGMP) analytical
and Good Laboratory Practices (GLP) analytical and bioanalytical
laboratories. His experience in drug development includes preparation
of regulatory filings for pharmaceutical drug products and experience managing
preformulation, analytical methods development/validation and drug delivery
departments. Dr. Walker has authored numerous articles and a book
chapter covering various topics in analytical chemistry. Thomas
Walker has a Ph.D. in Analytical Chemistry from The University of Iowa and a
B.S. in Chemistry from Oral Roberts University.
Alan
MacKenzie, Ph.D. Dr. MacKenzie is a leading
lyophilization expert with a particular emphasis on developing lyophilization
processes for solvents based products. Dr. MacKenzie has been a
Associate Professor at the University of Washington. Dr. MacKenzie provides
consulting services to the Company in the area of manufacturing development, as
it pertains to lyophilization of the Company’s drug products in the drug
manufacturing process.
43
Ana
Tari, Ph.D. Dr.
Tari is an Associate Professor at the University of Florida at
Gainsville. Dr. Tari was the lead researcher who has developed
Bio-Path's lead cancer drug BP-100-1.01. Dr. Tari provides consulting services in
the areas of manufacturing development of the drug BP-100-1.01, methods and
assays for the drug product and the pre-clinical testing program performed on
the drug product.
Communications
with Board Members
We have not adopted a formal process by
which stockholders may communicate with the Board of
Directors.
44
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The compensation committee
(a) annually reviews and determines salaries, bonuses and other forms of
compensation paid to our executive officers and management; (b) selects
recipients of awards of incentive stock options and non-qualified stock options
and establishes the number of shares and other terms applicable to such awards;
and (c) construes the provisions of and generally administers the 2007
Stock Incentive Plan (the "2007 Plan"). We do not currently have a compensation
committee charter.
The compensation committee of our board
of directors has overall responsibility for the compensation program for our
executive officers. Our compensation committee consists of an independent
director and a non-independent director. The compensation committee
is responsible for establishing policies and otherwise discharging the
responsibilities of the board with respect to the compensation of our executive
officers, senior management, and other employees. In evaluating executive
officer pay, the compensation committee may retain the services of an
independent compensation consultant or research firm and consider
recommendations from the chief executive officer and persons serving in
supervisory positions over a particular officer or executive officer with
respect to goals and compensation of the other executive officers. The
compensation committee assesses the information it receives in accordance with
its business judgment. The compensation committee also periodically is
responsible for administering all of our incentive and equity-based
plans.
All decisions with respect to executive
compensation are first approved by the compensation committee and then
submitted, together with the compensation committee's recommendation, to the
members of the board for final approval.
Elements of compensation for our
executives generally include:
|
·
|
base salary (typically subject to
upward adjustment annually based on individual
performance);
|
|
·
|
stock option
awards;
|
|
·
|
health, disability and life
insurance.
|
Our primary objective with respect to
executive compensation is to design a reward system that will align executives'
compensation with Bio-Path's overall business strategies and attract and retain
highly qualified executives. The principal elements of executive
compensation are salary, bonus and will, from time to time, include stock option
grants. We intend to stay competitive in the marketplace with our
peers. In considering the elements of compensation, Bio-Path
considers its current cash position in determining whether to adjust salaries,
bonuses and stock option grants. The following table sets forth summary
information about the compensation paid to our officers.
SUMMARY
COMPENSATION TABLE
Name
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Option
($)(1)
|
Total ($)
|
|||||||||||||
Peter Nielsen, CEO,
President,
|
2009
|
$ | 250,000 | -0- | -0- | $ | 250,000 | |||||||||||
Chairman
|
2008
|
$ | 250,000 | -0- | $ | 1,491,000 | $ | 1,741,000 | ||||||||||
2007
|
$ | 133,333 | $ | 20,000 | -0- | $ | 153,333 | |||||||||||
Douglas P. Morris, VP Corporate
Development/Director
|
2009
|
$ | 120,000 | -0- | -0- | $ | 120,000 | |||||||||||
Corporate Development
Director
|
2008
|
$ | 120,000 | -0- | $ | 994,000 | $ | 1,114,000 | ||||||||||
2007
|
$ | 80,000 | -0- | -0- | $ | 80,000 |
(1)
|
In
2008, we granted Mr. Nielsen options to purchase 1,500,000 shares of our
common stock at $1.40 per share, the fair market value on the date of
grant. In 2008 we granted Mr. Morris options to purchase
1,000,000 shares of our common stock at $1.40 per share, the fair market
value on the date of grant. Each of these grants of options
were ½ vested at the time of grant with the remaining ½ vesting monthly
over a three year period. This column shows the grant date fair
value of awards computed in accordance with stock-based compensation
accounting rules.
|
45
Stock
Option Grants and Exercises During the Fiscal Years Ended December 31, 2009 and
2008
The following table sets forth
information concerning stock option grants made during the fiscal year ended
December 31, 2009 and 2008, to our executive officers named in the "Summary
Compensation Table" above. The fair value information in the far right column is
for illustration purposes only and is not intended to predict the future price
of our Common Stock. The actual future value of the stock options will depend on
the market value of the Common Stock.
46
GRANTS
OF PLAN-BASED AWARDS
All Other
|
||||||||||||||
Options
|
||||||||||||||
Awards:
|
Exercise
|
|||||||||||||
Number of
|
or Base
|
Grant Date
|
||||||||||||
Securities
|
Price of
|
Fair Value
|
||||||||||||
Grant
|
Underlying
|
Option
|
of Option
|
|||||||||||
Name
|
Date
|
Options (#)
|
Awards (1)
|
Awards
|
||||||||||
|
|
|
|
|||||||||||
Peter
Nielsen
|
10/7/08
|
1,500,000 | $ | 1.40 | $ | .99 | ||||||||
Douglas
Morris
|
10/7/08
|
1,000,000 | $ | 1.40 | $ | .99 |
(1)
|
This
column shows the exercise price for the stock options granted, which was
the closing price of our Common Stock on October 7, 2008, the date of
grant.
|
For the fiscal year ended December 31,
2007 neither of the persons listed in the Summary Compensation Table were
granted options or other rights to purchase shares of our common stock. In
October 2008 we granted our Chief Executive Officer, Peter Nielsen, an option to
purchase 1,500,000 shares of our common stock at a price of $1.40 per
share. In October 2008 we also granted our Vice President of
Corporate Development, Douglas P. Morris, an option to purchase 1,000,000 shares
of our common stock at a price of $1.40 per share. Each of the
options provides that one-half of the option shares are immediately vested and
the remaining one-half of the option shares vest in 36 equal monthly increments.
The options are exercisable for a term of ten years from the date of
grant.
The following table sets forth certain
information with respect to outstanding stock option and warrant awards of the
named executive officers for the fiscal year ended December 31,
2009.
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2009
Option/Warrant Awards
|
|||||||||||||||||
Name
|
Number of Securities
Underlying
Unexercised Options
Exercisable (#)(1)
|
Number of Securities
Underlying
Unexercised Options
Unexercisable (#)(1)
|
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date)
|
||||||||||||
Peter
Nielsen
|
1,500,000 | 0 | - | $ | 1.40 |
Oct 2018
|
|||||||||||
Douglas P.
Morris
|
1,000,000 | 0 | - | $ | 1.40 |
Oct
2018
|
(1)
|
Except
as indicated, the options granted vest and become exercisable in monthly
installments over a three year period, commencing on the date of
grant.
|
Option
Exercises
No officer or director exercised any
option during the fiscal year ended December 31, 2009.
Employment
Agreements
Bio-Path Subsidiary has entered into
employment agreements with its Chief Executive Officer, Peter Nielsen and its
Vice President of Corporate Development, Douglas P. Morris, dated May 1,
2007. The employment agreement for Mr. Nielsen provides for a base
salary of $250,000. The employment agreement for Mr. Morris provides
for a base salary of $120,000.
47
DIRECTOR
COMPENSATION
The following table presents summary
information for the year ended December 31, 2009 regarding the compensation of
the non-employee members of our board of directors.
Name
|
Fees
Earned or
Paid in
Cash(1)
|
Stock
Awards
|
Option
Awards(2)
|
Non-Equity
Incentive Plan
Compensation
|
Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
|
Total
|
|||||||||||||||||||||
Dr. Thomas
Garrison
|
$ | — | — | $ | 5,475 | — | — | — | $ | 5,475 | ||||||||||||||||||
Gillian
Ivers-Read
|
$ | 250 | — | $ | 14,825 | - | — | — | $ | 15,075 | ||||||||||||||||||
(1)
|
All of the amounts in this column
reflect cash fees paid to or earned by our non-employee directors for
attending board or committee meetings during fiscal
2009.
|
(2)
|
The amounts set forth in this
column reflect the value attributed to the option awards granted to our
non-employee directors during 2009. During 2009 all of our
non-employee directors received an annual grant of an option to purchase
25,000 shares of our common stock which was the only grant received by
such directors during 2009. The following table reflects the
aggregate number of outstanding options (including unexercisable options)
held by our non-employee directors as of December 31,
2009:
|
Director
|
Number of shares underlying outstanding options
|
|||
Dr. Thomas
Garrison
|
50,000 | |||
Gillian
Ivers-Read
|
300,000 |
Overview of Compensation and
Procedures
Our non-employee directors receive cash
compensation of $500 for each meeting of the board of directors attended and
$250 for each telephonic meeting of the board of directors in which they
participate. Our non-employee directors also receive annual stock
options to purchase 25,000 shares of the our common stock for each 12 month
period they serve as a director.
48
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Security
Ownership of Certain Beneficial Owners
The following table sets forth
information regarding shares of our common stock beneficially owned at June 10,
2010 by: (1) each of our officers and directors; (ii) all officers and directors
as a group; and (iii) each person known by us to beneficially own five percent
or more of the outstanding shares of our common stock.
Stockholder
|
Shares Owned
|
Percentage
|
||||||
Peter
Nielsen
(1) (2)
|
6,372,765 | 12.8 | % | |||||
Douglas P.
Morris (1)
(3)
|
2,439,467 | 4.9 | % | |||||
Dr. Tom
Garrison (1)
(4)
|
3,421,767 | 6.9 | % | |||||
Gillian
Ivers-Read (1)
(5)
|
118,750 | * | ||||||
M.
D. Anderson
7515 S. Main, Suite 490, Unit
0510
Houston Texas 77030
|
6,930,025 | 14.3 | % | |||||
Tom
Fry
(6)
4069 W. Red Pine
Cove
Cedar Hills, Utah 84062
|
5,593,334 | 11.5 | % | |||||
All officers
and
directors
as a group
(7)
|
12,352,749 | 24.0 | % |
*Less
than 1%
(1)
|
These
are the officers and directors of
Bio-Path.
|
(2)
|
Includes
5,164,433 shares owned of record and 1,208,332 shares issuable upon the
exercise of options that are currently exercisable or will be
exercisable within 60 days.
|
(3)
|
Includes
1,633,911 shares owned of record and 805,556 shares issuable upon the
exercise of options that are currently exercisable or will be exercisable
within 60 days.
|
(4)
|
Includes
2,646,767 shares owned of record and 25,000 shares issuable upon the
exercise of options that are currently exercisable or will be exercisable
within 60 days and 750,000 shares issuable upon the exercise of currently
exercisable warrants at a price of $1.50 per
share.
|
(5)
|
Includes
118,750 shares issuable upon the exercise of options that are currently
exercisable or will be exercisable within 60
days.
|
(6)
|
Includes
2,649,3555 shares owned of record by Amy fry, the spouse of Tom Fry and
2,943,729 shares owned of record by Brick & Mortar, LLC, an affiliate
of Tom Fry.
|
(7)
|
Includes
9,445,111 shares of record and 2,907,638 shares issuable upon the exercise
of options and warrants currently exercisable or will be exercisable
within 60 days.
|
49
SELLING
STOCKHOLDER
The following table presents information
regarding the selling stockholder. Neither the selling stockholder
nor any of its respective affiliates has held a position or office, or had any
other material relationship, with us.
Selling Stockholder
|
Shares Beneficially
Owned Before
Offering
|
Percentage of
Outstanding Shares
Beneficially Owned
Before Offering
|
Shares to be Sold in
the Offering
Assuming The
Company Issues The
Maximum Number of
Shares Under the
Purchase Agreement
|
Percentage of
Outstanding Shares
Beneficially Owned
After Offering
|
||||||||||||
Lincoln Park Capital Fund, LLC
(1)
|
1,150,227 | (2) | 2.4 | %(2) | 7,000,000 | * |
|
*less than
1%
|
(1)
|
Josh
Scheinfeld and Jonathan Cope, the managing members of LPC, are deemed to
be beneficial owners of all of the shares of common stock owned by LPC.
Messrs. Scheinfeld and Cope have shared voting and investment power over
the shares being offered under this
prospectus.
|
(2)
|
1,150,227 shares of our common
stock have been previously acquired by LPC under or relating to the LPC
Purchase Agreement, consisting of 571,429 shares purchased by LPC, 566,801 shares we issued to LPC as
a commitment fee and
12,000 shares we issued to LPC for expenses relating to the LPC Purchase
Agreement. The 571,429 shares purchased by
LPC are not included in this offering. We may at our discretion elect to
issue to LPC up to an
additional 6,149,798
shares of our common stock (which would include up to an
additional 283,401 shares of our common stock as an additional commitment
fee) and such shares
are not included in determining the percentage of shares beneficially
owned before the offering.
|
50
Review,
Approval or Ratification of Transactions with Related Persons
It is our policy that we will not enter
into any transactions required to be disclosed under Item 404 of Regulation S-K
promulgated by the SEC unless the board of directors first reviews and approves
the transactions. The board of directors is required to review on an on-going
basis, and pre-approve all related party transactions before they are entered
into, including those transaction that are required to be disclosed under Item
404 of Regulation S-K. Related party transactions involving a director must also
be approved by the disinterested members of the board of directors. It is the
responsibility of our employees and directors to disclose any significant
financial interest in a transaction between the Company and a third party,
including an indirect interest. All related party transactions shall be
disclosed in our filings with the SEC as required under SEC
rules.
In addition, pursuant to our Code of
Business Conduct and Ethics, all employees, officers and directors of ours and
our subsidiaries are prohibited from engaging in any relationship or financial
interest that is an actual or potential conflict of interest with us without
approval. Employees, officers and directors are required to provide written
disclosure to the Chief Executive Officer as soon as they have any knowledge of
a transaction or proposed transaction with an outside individual, business or
other organization that would create a conflict of interest or the appearance of
one.
Since the beginning of our last fiscal
year, there has not been nor is there currently proposed any transaction or
series of similar transactions to which we were or are to be a party in which
the amount involved exceeds the lesser of $120,000 or 1% of the average of our
total assets at the end of our last two fiscal years, and in which any of our
directors, executive officers, persons who we know hold more than 5% of our
common stock, or any member of the immediate family of any of the foregoing
persons had or will have a direct or indirect material interest other than: (i)
compensation agreements and other arrangements, which are described elsewhere in
this prospectus, and (ii) the transactions described below.
During
2009, director Thomas Garrison purchased 750,000 shares of Bio-Path’s common
stock for a total of $187,500. These shares were purchased in connection with a
private offering and were on the same terms and conditions applicable to all
other purchasers. Each purchaser was issued one warrant for each share purchased
and accordingly, Dr. Garrison was issued warrants to purchase 750,000 shares.
The exercise price of such warrants is $1.50 per share and are exercisable until
November 30, 2011.
51
PLAN
OF DISTRIBUTION
The common stock offered by this
prospectus is being offered by the selling stockholder. The common
stock may be sold or distributed from time to time by the selling stockholder
directly to one or more purchasers or through brokers, dealers, or underwriters
who may act solely as agents at market prices prevailing at the time of sale, at
prices related to the prevailing market prices, at negotiated prices, or at
fixed prices, which may be changed. The sale of the common stock
offered by this prospectus may be effected in one or more of the following
methods:
|
·
|
ordinary brokers'
transactions;
|
|
·
|
transactions involving cross or
block trades;
|
|
·
|
through brokers, dealers, or
underwriters who may act solely as
agents
|
|
·
|
"at the market" into an existing market for the
common stock;
|
|
·
|
in other ways not involving market
makers or established business markets, including direct sales to
purchasers or sales effected through
agents;
|
|
·
|
in privately negotiated
transactions; or
|
|
·
|
any combination of the
foregoing.
|
In order to comply with the securities
laws of certain states, if applicable, the shares may be sold only through
registered or licensed brokers or dealers. In addition, in certain
states, the shares may not be sold unless they have been registered or qualified
for sale in the state or an exemption from the registration or qualification
requirement is available and complied with.
Brokers, dealers, underwriters or agents
participating in the distribution of the shares as agents may receive
compensation in the form of commissions, discounts, or concessions from the
selling stockholder and/or purchasers of the common stock for whom the
broker-dealers may act as agent. The compensation paid to a
particular broker-dealer may be less than or in excess of customary
commissions.
LPC is an "underwriter" within the meaning of the Securities
Act.
Neither we nor the selling stockholder
can presently estimate the amount of compensation that any agent will
receive. We know of no existing arrangements between LPC,
any other stockholder,
broker, dealer, underwriter or agent relating to the sale or distribution of the
shares offered by this prospectus. At the time a particular offer of
shares is made, a prospectus supplement, if required, will be distributed that
will set forth the names of any agents, underwriters or dealers and any
compensation from the selling stockholder, and any other required
information.
We will pay all of the expenses incident
to the registration, offering and sale of the shares to the public other than
commissions or discounts of underwriters, broker-dealers or
agents. We have also agreed to indemnify LPC and related persons
against specified liabilities, including liabilities under the Securities
Act.
Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to our directors,
officers and controlling persons, we have been informed that in the opinion of the SEC
such indemnification is against public
policy as expressed in the Securities Act and is
therefore
unenforceable.
LPC and its affiliates have agreed not
to engage in any direct or indirect short selling or hedging of our common stock
during the term of the LPC Purchase Agreement.
We have advised LPC that while it is
engaged in a distribution of the shares included in this prospectus it is
required to comply with Regulation M promulgated under the Exchange
Act. With certain exceptions, Regulation M precludes the selling
stockholder, any affiliated purchasers, and any broker-dealer or other person
who participates in the distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the
subject of the distribution until the entire distribution is
complete. Regulation M also prohibits any bids or purchases made in
order to stabilize the price of a security in connection with the distribution
of that security. All of the foregoing may affect the marketability
of the shares offered by this prospectus.
52
This offering will terminate on the
earliest of (1) the date as of which the selling stockholder may sell all of the shares without restriction pursuant to the
last sentence of Rule 144(b)(1)(i) promulgated under the Securities Act (or
successor thereto), (ii) the date on which all shares offered by this prospectus
have been sold by the selling stockholder, or (iii) three years from the date the
registration statement that includes this prospectus
is declared effective by the
SEC.
53
DESCRIPTION
OF SECURITIES
Common
Stock
We are authorized to issue 200,000,000
shares of common stock, no par value, of which 48,617,832 shares were issued and outstanding as
of June
10, 2010. Our
common stock is registered under Section 12(g) of the Exchange Act and
quoted on the OTCBB under the symbol "BPTH.OB."
The securities being offered hereby are
common stock. The outstanding shares of our common stock are fully paid and
non-assessable. The holders of common
stock are entitled to one
vote for each share held of record on all matters to be voted on by the
stockholders. There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50 percent of the
shares voted for the election of directors can elect all of the directors. The holders of our
common stock are entitled
to receive dividends when, as and if declared by the board of directors out of
funds legally available therefore. In the event of our liquidation,
dissolution, or winding up,
the holders of our common stock are entitled to share ratably in
all assets remaining available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the common stock. The holders of our common stock do not have preemptive rights. In
the future, preemptive rights may be granted by way of amendment of our articles
of incorporation, which would require a vote by the board of directors and
stockholders on such
matter.
Preferred
Stock
We are authorized to issue 10,000,000
shares of preferred stock, no par value, or the Preferred Stock. The
Preferred Stock may be issued from time to time in one or more series pursuant
to a resolution or resolutions providing for such issue duly adopted by the
board of directors. The board of directors is further authorized, subject
to limitations prescribed by law, to fix by resolution or resolutions the
designations, powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, of any wholly unissued series of Preferred
Stock, including without limitation authority to fix by resolution or
resolutions the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions),
redemption price or prices, and liquidation preferences of any such series, and
the number of shares constituting any such series and the designation thereof,
or any of the foregoing. The board of directors is further authorized to
increase (but not above the total number of authorized shares of the class) or
decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any series, the number of which was fixed
by it, subsequent to the issuance of shares of such series then outstanding,
subject to the powers, preferences and rights, and the qualifications,
limitations and restrictions thereof stated in
our articles of incorporation or the resolution of the
board of directors originally fixing the number of
shares of such series. If the number of shares of any series is so
decreased, then the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series. As of June 10, 2010, no such shares had been
designated.
Warrants
As of June 10, 2010, warrants to purchase 5,697,049 shares of our common stock were
outstanding. The warrants have a term of two
years. The exercise price of these warrants is $1.50 per share.
Options
As of June 10, 2010 or exercisable within
sixty days thereafter,
options to purchase
3,962,742 shares of our common stock were
outstanding, of which
2,907,638 shares were vested. The
exercise prices of these options range from $0.30 to $1.40 per
share.
Transfer
Agent
Our transfer agent is Fidelity Transfer
Company, 8915 South 700 East, Suite 102, Sandy, Utah 84070; telephone (801)
562-1300.
54
THE
LPC TRANSACTION
General
On June 2, 2010, we executed the LPC Purchase
Agreement and the LPC Registration Rights Agreement with LPC, pursuant to which
LPC has purchased 571,429 shares of our common stock together
with warrants to purchase an equivalent number of shares at an exercise price of
$1.50 per share, for total consideration of $200,000. The
warrants have a term of two years. Under the LPC Purchase Agreement, we also
have the right to sell to LPC, and LPC has the obligation to purchase, under
certain conditions, up to an additional $6,800,000 of our common stock at our
option as described below. The 571,429 shares and the equivalent number of
warrants purchased by LPC have not been registered hereby and are not a part of
this offering.
Pursuant to the LPC Registration Rights
Agreement, we have filed a registration statement that includes this prospectus
with the SEC covering the shares that have been
issued or may be issued to LPC under the LPC Purchase Agreement. We do not
have the right to commence any additional sales of our shares to LPC until the
registration statement of which this Prospectus is a part has been declared
effective. After the registration statement is declared effective,
LPC shall purchase 375,000 shares at a purchase price of $.40 per share for
total consideration of $150,000. Thereafter, over approximately 24
months, we generally have the right to direct LPC to purchase up to an
additional $6,650,000 of our common stock in amounts up to $50,000 as often as
every three business days under certain conditions. We can also accelerate the
amount of our common stock to be purchased under certain
circumstances. No sales of shares may occur at a purchase price below
$0.20 per share. The purchase price of the shares will be based on
the market prices of our shares at the time of sale as computed under the
Purchase Agreement without any fixed discount. We may at any time in
our sole discretion terminate the LPC Purchase Agreement without fee, penalty or
cost upon one business days notice. We issued 566,801 shares of our
common stock to LPC as a commitment fee for entering into the LPC Purchase
Agreement, and we may issue up to 283,401 shares pro rata as LPC purchases up to
an additional $6,800,00 of our stock as directed by
us. LPC may not assign any of its rights or obligations under the LPC
Purchase Agreement.
As of June 10, 2010, there were 48,617,832 shares of our common stock outstanding (26,649,362 shares held by non-affiliates)
which does not
include the shares offered
by LPC pursuant to this Prospectus. 7,000,000 shares are offered hereby consisting of
6,149,798 shares that we may sell to LPC, 566,801
shares we have issued to LPC as a commitment fee, and 283,401 shares that we may issue to LPC
as a commitment fee pro rata as up to an additional 6,800,000 of our stock is
purchased by LPC. If all of the 7,000,000 shares offered by LPC
hereby were issued and outstanding as of June 10, 2010, such shares would
represent 12.7% of the total common stock outstanding or 21.2% of the
non-affiliates shares outstanding, as of June 10, 2010. The
number of shares ultimately
offered for sale by LPC is dependent upon the number of shares that we sell to
LPC under the Purchase Agreement.
Purchase
Of Shares Under The LPC Purchase Agreement
Under the LPC Purchase Agreement, on any
business day selected by us and as often as every three business days, we may direct LPC to purchase up to $50,000 of
our common stock. The purchase price per share is equal to the lesser
of:
|
·
|
the lowest sale price of our
common stock on the purchase date;
or
|
|
·
|
the average of the three (3)
lowest closing sale prices of our common stock during the twelve (12) consecutive business days prior to
the date of a purchase by
LPC.
|
The purchase price will be equitably
adjusted for any reorganization, recapitalization, non-cash dividend, stock
split, reverse stock split or other similar transaction occurring during the
business days used to compute the purchase price.
In addition to purchases of up to
$50,000, we may direct LPC as often as every three business days to purchase up
to $75,000 of our common stock provided that our closing share price on the purchase date is not
below $0.40 per share. We may increase this amount: up to
$100,000 of our common stock provided that our closing share price on the purchase date is not
below $0.50 per share; up to $250,000 of our common stock provided that our
closing share price on the
purchase date is not below $0.70 per share; up to $500,000 of our common stock
provided that our closing share price on the purchase date is not below $1.00
per share; up to $1,000,000 of our common stock provided that our closing share
price on the purchase date is not below $2.30 per share. The price at
which LPC would purchase these accelerated amounts of our stock will be the
lesser of (i) the lowest sale price of our common stock on the purchase date and
(ii) the average of the three (3) lowest closing sale prices of our common stock
during the ten (10) consecutive business days prior to the
date of a purchase by
LPC.
55
Minimum
Purchase Price
Under the Purchase Agreement, we have
set a floor price of $0.20 per share. LPC shall not have the right
nor the obligation to purchase any shares of our common stock in the event that
the purchase price per share would be less than the floor
price. Specifically, LPC shall not have the right or the obligation
to purchase shares of our common stock on any business day that the price of our
common stock is below $0.20.
Events
of Default
Generally, LPC may terminate the LPC
Purchase Agreement without any liability or payment to the Company upon the
occurrence of any of the following events of default:
|
·
|
while any registration statement
is required to be maintained effective pursuant to the terms of the LPC
Registration Rights Agreement, the effectiveness of the registration
statement of which this prospectus is a part of lapses for any reason
(including, without limitation, the issuance of a stop order) or is
unavailable to LPC for sale of our common stock offered hereby and such
lapse or unavailability continues for a period of ten (10) consecutive
business days or for more than an aggregate of thirty (30) business days
in any 365-day period;
|
|
·
|
suspension by our principal market
of our common stock from trading for a period of three (3) consecutive
business days;
|
|
·
|
the de-listing of our common stock
from our principal market provided our common stock is not immediately
thereafter trading on the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange or the NYSE
AMEX;
|
|
·
|
the transfer agent's failure for five (5) business
days to issue to LPC shares of our common stock which LPC is entitled to
under the LPC Purchase
Agreement;
|
|
·
|
any material breach of the
representations or warranties or covenants contained in the LPC Purchase
Agreement or any related agreements which has or which could have a
material adverse effect on us subject to a cure period of five (5)
business days;
|
|
·
|
any participation or threatened
participation in insolvency or bankruptcy proceedings by or against
us;
or
|
|
·
|
a material adverse change in our
business.
|
Our
Termination Rights
We have the unconditional right at any
time for any reason to give notice to LPC terminating the LPC Purchase Agreement
without any cost to us.
No
Short-Selling or Hedging by LPC
LPC has agreed that neither it nor any
of its affiliates shall engage in any direct or indirect short-selling or
hedging of our common stock during any time prior to the termination of the LPC
Purchase Agreement.
56
Effect
of Performance of the LPC Purchase Agreement on Our Stockholders
All 7,000,000 shares registered in this offering which
may be sold by us to LPC under the LPC Purchase Agreement are expected to be
freely tradable. It is anticipated that shares registered in this
offering will be sold over a period of up to 24 months from the date of this
prospectus. The sale by LPC of a significant amount of shares
registered in this offering at any given time could cause the market price of
our common stock to decline and to be highly volatile. LPC may
ultimately purchase all, some or none of the 6,433,199 shares of common stock not yet issued
but registered in this offering (including the shares to be purchased
under the LPC Purchase Agreement upon the SEC declaring the registration
statement effective). After it has acquired such
shares, it may sell all, some or none of such shares. Therefore,
sales to LPC by us under the agreement may result in substantial dilution to the
interests of other holders of our common stock. However, we have the right to
control the timing and amount of any sales of our shares to LPC and the
agreement may be terminated by us at any time at our discretion without any cost
to us.
In connection with entering into the LPC
Purchase Agreement, we authorized the sale and issuance to LPC of up to
6,149,798 shares of our common stock exclusive of
the 566,801 commitment shares issued and the 283,401 commitment shares that may
be issued and are part of this offering. We have the right to
terminate the agreement without any payment or liability to LPC at any time,
including in the event that all $7,000,000 is sold to LPC under the LPC Purchase
Agreement. The number of shares ultimately offered for sale by LPC
under this prospectus is dependent upon the number of shares purchased by LPC
under the LPC Purchase Agreement. The following table sets forth the
amount of proceeds we would receive from LPC from the sale of shares at varying
purchase prices:
Assumed Average
Purchase Price
|
Number of Shares to be
Issued if Full Purchase
(1) |
Percentage of Outstanding
Shares After Giving Effect to the
Issuance to LPC (2)
|
Proceeds from the Sale of Shares
to LPC Under the
LPC Purchase Agreement
|
||||||||||
$ |
0.20
|
(3) | 6,201,059 | 11.3 | % | $ | 1,229,960 | ||||||
$ |
0.30
|
|
6,226,689 | 11.4 | % | $ | 1,844,940 | ||||||
$ |
0.45
|
(4) | 6,265,134 | 11.4 | % | $ | 2,767,410 | ||||||
$ |
0.50
|
6,277,949 | 11.4 | % | $ | 3,074,899 | |||||||
$ |
0.75
|
6,342,025 | 11.5 | % | $ | 4,612,349 | |||||||
$ |
1.00
|
6,406,101 | 11.6 | % | $ | 6,149,798 | |||||||
$ |
2.00
|
3,683,401 | 7.0 | % | $ | 6,800,000 |
(1)
|
The
number of shares to be issued includes the additional commitment shares
issuable to LPC (but not the initial commitment shares), and no proceeds
will be attributable to such commitment
shares.
|
(2)
|
The
denominator is based on 48,617,832 shares outstanding as of June 10, 2010,
which includes the 571,429 shares previously issued to LPC, which shares
are not a part of this offering, the 566,801 commitment shares and the
number of shares set forth in the adjacent column which includes the
commitment shares issued pro rata as up to $7,000,000 of our stock is
purchased by LPC. The numerator is based on the number of shares issuable
under the LPC Purchase Agreement at the corresponding assumed purchase
price set forth in the adjacent column, including the additional
commitment shares, but excluding the 571,429 shares previously issued to
LPC.
|
(3)
|
Under
the LPC Purchase Agreement, we may not sell and LPC may not purchase any
shares in the event the purchase price of such shares is below $0.20 per
share.
|
(4)
|
The
closing sale price of our shares on June 14,
2010.
|
57
The validity of the common stock offered
hereby will be passed on for us by _________________. Any underwriter, dealer or agent may be
advised about issues relating to any offering by its own legal
counsel.
The annual consolidated financial statements of
the Company appearing in this prospectus and
registration statement have been audited by Mantyla McReynolds LLC, independent
auditors, to the extent indicated in their reports thereon also appearing
elsewhere herein and in the registration statement. Such consolidated financial
statements have been included herein in reliance upon such reports given on the
authority of such firm as experts in accounting and
auditing.
58
WHERE
YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information that we file with the SEC at
the SEC's Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549 on official business days during the hours of 10AM
to 3PM. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room. Our SEC filings are also available to the public from
commercial document retrieval services and on the website maintained by the SEC
at http://www.sec.gov. Reports, proxy statements and other information
concerning us also may be inspected at the offices of the Financial Industry
Regulatory Authority, Inc., Listing Section, 1735 K Street, Washington, D.C.
20006. You may also obtain free copies of the documents that we file with the
SEC by going to the "SEC Filings" section of our website,
www.biopathholdings.com. The information provided on our website is not part of
this prospectus, and therefore is not incorporated by
reference.
We have filed with the SEC a
registration statement on Form S-1 relating to the securities covered by this
prospectus. This prospectus is a part of the registration statement and does not
contain all the information in the registration statement. Whenever a reference
is made in this prospectus to a contract or other document, the reference is
only a summary and you should refer to the exhibits that are a part of the
registration statement for a copy of the contract or other document. You may
review a copy of the registration statement at the SEC's Public Reference Room in Washington,
D.C., as well as through the SEC's internet website.
The SEC allows us to "incorporate by reference" the information we file with it, which
means that we can disclose important information to you by referring you to
another document that we have filed separately with the SEC. You should read the
information incorporated by reference because it is an important part of this
prospectus. Any information incorporated by reference into this prospectus is
considered to be part of this prospectus from the date we file that document. We
incorporate by reference the following information or documents that we have
filed with the SEC (Commission File No. 000-25571) which shall not include, in
each case, documents, or information deemed to have been furnished and not filed
in accordance with SEC rules:
|
·
|
Annual Report of Form 10-K for the
fiscal year ended December 31,
2009;
|
|
·
|
Quarterly Report on Form 10-Q
for the quarter ended March 31, 2010;
and
|
|
·
|
Current Reports on Form 8-K filed with the SEC on
March 15, 2010 and
June 4, 2010.
|
We will provide to each person,
including any beneficial owner, to whom a prospectus is delivered, without
charge upon written or oral request, a copy of any or all of the documents that
are incorporated by reference into this prospectus but not delivered with the
prospectus, including exhibits which are specifically incorporated by reference
into such documents. If you would like to request documents from us, please send
a request in writing or by telephone to us at the following
address:
Bio-Path Holdings,
Inc.
3293 Harrison Boulevard, Suite
220
Ogden,
UT 84403
(801) 399-5500
Attn: Secretary
Information
on Our Website
Information on any Bio-Path website, any
subsection, page, or other subdivision of any Bio-Path website, or any website
linked to by content on any Bio-Path website, is not part of this prospectus and
you should not rely on that information unless that information is also in this
prospectus or incorporated by reference in this prospectus.
Trademark
Notice
Bio-Path, our logos and all of our
product candidates and trade names are our registered trademarks or our
trademarks in the United States and in other select countries. Other third-party
logos and product/trade names are registered trademarks or trade names of their
respective companies.
59
INDEX
TO FINANCIAL STATEMENTS
Bio-Path Holdings, Inc. Unaudited
Financial Statements
|
Page
|
||
Consolidated
Balance Sheets as of March 31, 2010
|
F-2
|
||
Unaudited
Consolidated Statements of Operations for the three months ended March 31,
2010 and 2009
|
F-3
|
||
Unaudited
Consolidated Statements of Cash Flows for the three months ended March 31,
2010 and 2009
|
F-4
|
||
Notes
to Unaudited Financial Statements
|
F-5
|
||
Bio-Path
Holdings, Inc. Audited Financial Statements
|
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
F-10
|
||
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
F-11
|
||
Consolidated
Statements of Operations for the years ended December 31, 2009 and 2008
and for the cumulative period from May 10, 2007 (inception) to December
31, 2009
|
F-12
|
||
Consolidated
Statements of Cash Flows for the years ended December 31, 2009 and 2008
and for the cumulative period from May 10, 2007 (inception) to December
31, 2009
|
F-13
|
||
Consolidated
Statement of Shareholders' Equity for period from May 10, 2007 (inception)
to December 31, 2008 and the year ended December 31, 2009
|
F-14
|
||
Notes
to Audited Financial Statements
|
F-16
|
F-1
BIO-PATH HOLDINGS,
INC.
(A Development Stage
Company)
CONSOLIDATED BALANCE
SHEETS
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 454,574 | $ | 567,249 | ||||
Drug product for
testing
|
608,440 | 608,440 | ||||||
Other current
assets
|
132,483 | 74,297 | ||||||
Total current
assets
|
1,195,497 | 1,249,986 | ||||||
Other
assets
|
||||||||
Technology
licenses
|
2,839,167 | 2,814,166 | ||||||
Less Accumulated
Amortization
|
(430,183 | ) | (382,486 | ) | ||||
2,408,984 | 2,431,680 | |||||||
TOTAL
ASSETS
|
$ | 3,604,481 | $ | 3,681,666 | ||||
LIABILITIES & SHAREHOLDERS'
EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
- | 6,453 | ||||||
Accrued
expense
|
260,885 | 133,450 | ||||||
Accrued license
payments
|
75,000 | 125,000 | ||||||
Total current
liabilities
|
335,885 | 264,903 | ||||||
Long term
debt
|
- | - | ||||||
TOTAL
LIABILITIES
|
335,885 | 264,903 | ||||||
Shareholders'
Equity
|
||||||||
Preferred Stock, no par value,
$0.001 assigned par value, 10,000,000 shares authorized, no shares issued
and outstanding
|
- | - | ||||||
Common Stock, no par value, $0.001
assigned par value, 200,000,000 shares authorized 46,609,602 and
42,649,602 shares issued and outstanding as of 3/31/10 and 12/31/09,
respectively
|
46,609 | 42,649 | ||||||
Additional paid in
capital
|
8,816,831 | 7,803,016 | ||||||
Additional paid in capital for
shares to be issued a/
|
- | 675,000 | ||||||
Accumulated deficit during
development stage
|
(5,594,844 | ) | (5,103,902 | ) | ||||
Total shareholders'
equity
|
3,268,596 | 3,416,763 | ||||||
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY
|
$ | 3,604,481 | $ | 3,681,666 | ||||
a/ Represents 2,700,000 shares of
common stock
|
SEE ACCOMPANYING NOTES TO FINANCIAL
STATEMENTS
F-2
BIO-PATH HOLDINGS,
INC.
(A Development Stage
Company)
CONSOLIDATED STATEMENTS OF
OPERATIONS
Unaudited
First Quarter
|
From inception
|
|||||||||||
January 1 to March 31
|
05/10/07 to
|
|||||||||||
2010
|
2009
|
3/31/10
|
||||||||||
Revenue
|
$ | - | $ | - | $ | - | ||||||
Operating
expense
|
||||||||||||
Research and
development
|
137,082 | 212,609 | 958,984 | |||||||||
General &
administrative
|
162,818 | 193,325 | 1,742,691 | |||||||||
Stock issued for
services
|
300,000 | |||||||||||
Stock options &
warrants
|
143,946 | 148,727 | 2,234,041 | |||||||||
Amortization
|
47,697 | 45,265 | 430,183 | |||||||||
Total operating
expense
|
491,543 | 599,926 | 5,665,899 | |||||||||
Net operating
loss
|
$ | (491,543 | ) | $ | (599,926 | ) | $ | (5,665,899 | ) | |||
Other
income
|
||||||||||||
Interest
income
|
602 | 3,232 | 71,055 | |||||||||
Total Other
Income
|
602 | 3,232 | 71,055 | |||||||||
Net Loss
|
$ | (490,941 | ) | $ | (596,694 | ) | $ | (5,594,844 | ) | |||
Loss per
share
|
||||||||||||
Net loss per share, basic and
diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.15 | ) | |||
Basic and diluted weighted average
number of common shares outstanding
|
46,609,602 | 41,923,602 | 38,146,106 |
SEE ACCOMPANYING NOTES TO FINANCIAL
STATEMENTS
F-3
BIO-PATH HOLDINGS,
INC.
(A Development Stage
Company)
CONSOLIDATED STATEMENT OF CASH
FLOWS
Unaudited
From inception
|
||||||||||||
January 1 to March 31
|
05/10/2007 to
|
|||||||||||
2010
|
2009
|
3/31/2010
|
||||||||||
CASH FLOW FROM OPERATING
ACTIVITIES
|
||||||||||||
Net loss
|
$ | (490,941 | ) | $ | (596,694 | ) | $ | (5,594,844 | ) | |||
Adjustments to reconcile net
loss to net cash used in operating activities
|
||||||||||||
Amortization
|
47,697 | 45,265 | 430,183 | |||||||||
Common stock issued for
services
|
300,000 | |||||||||||
Stock options and
warrants
|
143,946 | 148,727 | 2,234,041 | |||||||||
(Increase) decrease in
assets
|
||||||||||||
Restricted escrow
cash
|
||||||||||||
Drug product for
testing
|
(298,800 | ) | (608,440 | ) | ||||||||
Other current
assets
|
(58,186 | ) | 44,358 | (132,483 | ) | |||||||
Increase (decrease) in
liabilities
|
||||||||||||
Accounts payable and accrued
expenses
|
70,982 | (62,703 | ) | 335,885 | ||||||||
Net cash used in operating
activities
|
(286,502 | ) | (719,847 | ) | (3,035,658 | ) | ||||||
CASH FLOW FROM INVESTING
ACTIVITIES
|
||||||||||||
Purchase of exclusive
license
|
(25,000 | ) | (485,000 | ) | ||||||||
Net cash used in investing
activities
|
(25,000 | ) | - | (485,000 | ) | |||||||
CASH FLOW FROM FINANCING
ACTIVITIES
|
||||||||||||
Proceeds from convertible
notes
|
435,000 | |||||||||||
Cash repayment of convertible
notes
|
. | (15,000 | ) | |||||||||
Net proceeds(costs) from sale of
common stock
|
198,827 | (4,069 | ) | 3,555,232 | ||||||||
Net cash from financing
activities
|
198,827 | (4,069 | ) | 3,975,232 | ||||||||
NET INCREASE/(DECREASE) IN
CASH
|
(112,675 | ) | (723,916 | ) | 454,574 | |||||||
Cash, beginning of
period
|
567,249 | 1,507,071 | - | |||||||||
Cash, end of
period
|
$ | 454,574 | $ | 783,155 | $ | 454,574 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
|
||||||||||||
Cash paid
for
|
||||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
taxes
|
$ | - | $ | - | $ | - | ||||||
Non-cash financing
activities
|
||||||||||||
Common stock issued upon
conversion of convertible notes
|
$ | 420,000 | ||||||||||
Common stock issued to Placement
Agent
|
$ | 90,000 | $ | 384,845 | ||||||||
Common stock issued to M.D.
Anderson for technology license
|
$ | 2,354,167 |
SEE ACCOMPANYING NOTES TO FINANCIAL
STATEMENTS
F-4
Notes to the Unaudited Consolidated
Financial Statements Ending March 31, 2010
The accompanying unaudited financial
statements have been prepared in accordance with the instructions to Form 10-Q
pursuant to the rules and regulations of the Securities and Exchange Commission
and, therefore, do not include all information and footnotes necessary for a
complete presentation of our financial position, results of operations, cash
flows, and stockholders' equity in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered
necessary for a fair presentation of the results of operations and financial
position have been included and all such adjustments are of a normal recurring
nature. The unaudited quarterly financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Annual Report on Form 10-K of Bio-Path Holdings, Inc. (together with its
subsidiary, the "Company") as of and for the fiscal year ended December 31,
2009. The results of operations for the period ended March 31, 2010, are not
necessarily indicative of the results for a full-year
period.
Our unaudited balance sheet at March 31,
2010; the related unaudited consolidated statements of operations for the three
month periods ended March 31, 2010 and 2009, and from inception (May 10, 2007)
to March 31, 2010; and the related unaudited statement of cash flows for the
three month periods ended March 31, 2010 and 2009, and from inception (May 10,
2007) through March 31, 2010, are attached hereto.
Organization
and Business
|
Bio-Path Holdings, Inc. ("Bio-Path" or
the "Company") is a development stage company founded with technology from The
University of Texas, M. D. Anderson Cancer Center ("M. D. Anderson") dedicated
to developing novel cancer drugs under exclusive license
arrangements. The Company has drug delivery platform technology with
composition of matter intellectual property that enables systemic delivery of
antisense, small interfering RNA ("siRNA") and small molecules for the treatment
of cancer. Bio-Path recently licensed new liposome tumor targeting
technology, which has the potential to be applied to augment the Company's
current delivery technology to improve further the effectiveness of its
antisense and siRNA drugs under development as well as future liposome-based
delivery technology drugs. In addition to its existing technology
under license, the Company expects to have a close working relationship with key
members of the M. D. Anderson's staff, which should provide Bio-Path with a
strong pipeline of promising drug candidates in the future. Bio-Path
anticipates that its working relationship with M. D. Anderson will enable the
Company to broaden its technology to include cancer drugs other than antisense
and siRNA.
Bio-Path believes that its core
technology, if successful, will enable it to be at the center of emerging
genetic and molecular target-based therapeutics that require systemic delivery
of DNA and RNA-like material. The Company's two lead drug candidates
treat acute myeloid leukemia, chronic myelogenous leukemia, acute lymphoblastic
leukemia and follicular lymphoma, and if successful, could potentially be used
in treating many other indications of cancer. Bio-Path has received
written notification from the U. S. Food and Drug Administration (the "FDA")
that its application for Investigational New Drug ("IND") status for the first
of the Company's lead drug candidates has been granted. This will
allow Bio-Path to begin a Phase I clinical trial in this drug
candidate. The Company expects to start the Phase I clinical trial in
2010.
The Company was founded in May of 2007
as a Utah corporation. In February of 2008, Bio-Path completed a
reverse merger with Ogden Golf Co. Corporation, a public company traded over the
counter that had no current operations. The name of Ogden Golf was
changed to Bio-Path Holdings, Inc. and the directors and officers of Bio-Path,
Inc. became the directors and officers of Bio-Path Holdings,
Inc. Bio-Path has become a publicly traded company (symbol OTCBB:
BPTH.OB) as a result of this merger. The Company's operations
to date have been limited to organizing and staffing the Company, acquiring,
developing and securing its technology and undertaking product development for a
limited number of product candidates including readying its lead drug product
candidate BP-100-1.01 for a Phase I clinical trial.
Bio-Path raised an additional $225,000
in funds for operations in the first quarter of 2010 through a private placement
sale of shares of the Company's common stock and associated
warrants. The Company will need to raise additional capital to
continue beyond 2010 to complete Bio-Path's first clinical trial. The
Company's strategy has been to minimize the amount of funds raised at the
current lower, pre-Phase I trial share prices to avoid excessive dilution and
raise larger amounts of new capital with anticipated higher valuation of the
Company's common stock after commencement of the Phase I trial when the
Company's technology is expected to be further validated. To further
this end, the Company is currently working on putting in place a longer term
financing commitment. Management anticipates completion of this task
successfully during the second quarter of 2010. In the interim,
Bio-Path is selling additional common stock with associated warrants in a
private placement to raise approximately $275,000 in additional
capital. Management believes this sale of equity will be completed in
the second quarter of 2010.
F-5
As the Company has not begun its planned
principal operations of commercializing a product candidate, the accompanying
financial statements have been prepared in accordance with principles
established for development stage enterprises.
2.
|
Drug
Product for Testing
|
The Company has paid installments to its
contract drug manufacturing and raw material suppliers totaling $292,800 during
2008 and $315,640 during 2009 pursuant to a Project Plan and Supply Agreement
(see Note 9.) for the manufacture and delivery of the Company's lead drug
product for testing in a Phase I clinical trial. This amount is
carried on the Balance Sheet as of March 31, 2010 at cost as Drug Product for
Testing and will be expensed as the drug product is used during the Phase I
clinical trial.
3.
|
Accrued
Expense
|
As of March 31, 2010, Current
Liabilities included accrued expense of $260,885. R&D expenses
for drug development comprised approximately $116,000 of this amount, including
$26,000 to the Company's contract drug manufacturer. Bonus pool
accrual comprised approximately $116,000 and corporate expense for auditors,
legal and insurance comprised an additional $20,000.
4.
|
Convertible
Debt
|
The Company issued $435,000 in notes
convertible into common stock at a rate of $.25 per common
share. During 2007, $15,000 of the convertible notes had been repaid
in cash and $420,000 of the convertible notes had been converted into 1,680,000
shares of Bio-Path common stock and was included in the seed round completed in
August of 2007. No interest was recorded because interest was nominal
prior to conversion. No beneficial conversion feature existed as of
the debt issuance date since the conversion rate was greater than or equal to
the fair value of the common stock on the issuance date.
5.
|
Accrued
License Payments
|
Accrued license payments totaling
$75,000 were included in Current Liabilities as of March 31,
2010. These amounts represent patent expenses for the licensed
technology expected to be invoiced from M. D. Anderson. It is
expected that the accrued license payments will be made to M. D. Anderson in
2010.
6.
|
Additional
Paid In Capital For Shares To Be
Issued
|
In November and December of 2009, the
Company sold shares of common stock and warrants to purchase shares of common
stock for $675,000 in cash to investors pursuant to a private placement
memorandum. These shares were not issued as of the December 31, 2009
year end and the $675,000 was carried on the Balance Sheet as Additional Paid In
Capital For Shares To Be Issued. Subsequently in January of 2010, the
Company issued these investors 2,700,000 shares of common stock and warrants to
purchase an additional 2,700,000 shares of common stock. The warrants
must be exercised within two years from the date of issuance. The exercise price
of the warrants is $1.50 a share.
7.
|
Stockholders'
Equity
|
Issuance
of Common Stock – In
November and December of 2009, the Company sold shares of common stock and
warrants to purchase shares of common stock for $675,000 in cash to investors
pursuant to a private placement memorandum. These shares were not
issued by the December 31, 2009 year end. In January 2010, the
Company issued these investors 2,700,000 shares of common stock and warrants to
purchase an additional 2,700,000 shares of common stock. The warrants
must be exercised within two years from the date of issuance. The exercise price
of the warrants is $1.50 a share. In January 2010, the Company also
sold an additional 900,000 shares of common stock and warrants to purchase an
additional 900,000 shares of common stock for $225,000 in cash to investors in
the Company pursuant to a private placement memorandum. The warrants
must be exercised within two years from the date of issuance and the exercise
price is $1.50 a share. In connection with these private placement
sales of equity, the Company issued 360,000 shares of common stock to the
Placement Agent as commission for the shares of common stock sold to
investors.
F-6
As of March 31, 2010, there were
46,609,602 shares of common stock issued and outstanding. There are
no preferred shares outstanding as of March 31, 2010.
8.
|
Stock
Options and Warrants
|
Stock
Options - In April of 2008
the Company made stock option grants for services over the next three years to
purchase in the aggregate 1,615,000 shares of the Company's common
stock. Terms of the stock option grants require, among other things,
that the individual continues to provide services over the vesting period of the
option, which is four or five years from the date that each option granted to
the individual becomes effective. The exercise price of the options
is $0.90 a share. None of these stock options grants were for current
management and officers of the Company. The Company determined the
fair value of the stock options granted using the Black Scholes model and
expenses this value monthly based upon the vesting schedule for each stock
option award. For purposes of determining fair value, the Company
used an average annual volatility of seventy two percent (72%), which was
calculated based upon an average of volatility of similar biotechnology
stocks. The risk free rate of interest used in the model was taken
from a table of the market rate of interest for U. S. Government Securities for
the date of the stock option awards and interpolated as necessary to match the
appropriate effective term for the award. The total value of
stock options granted was determined using this methodology to be $761,590,
which will be expensed over the next six years based on the stock option service
period.
In October of 2008 the Company made
stock option grants to management and officers to purchase in the aggregate
2,500,000 shares of the Company's common stock. Terms of the stock
option grants require that the individuals continue employment with the Company
over the vesting period of the option, fifty percent (50%) of which vested upon
the date of the grant of the stock options and fifty percent (50%) of which will
vest over 3 years from the date that the options were granted. The
exercise price of the options is $1.40 a share. The Company
determined the fair value of the stock options granted using the Black Scholes
model and expenses this value monthly based upon the vesting schedule for each
stock option award. For purposes of determining fair value, the
Company used an average annual volatility of eighty four percent (84%), which
was calculated based upon taking a weighted average of the volatility of the
Company's common stock and the volatility of similar biotechnology
stocks. The risk free rate of interest used in the model was taken
from a table of the market rate of interest for U. S. Government Securities for
the date of the stock option awards and interpolated as necessary to match the
appropriate effective term for the award. The total value of
stock options granted to management and officers was determined using this
methodology to be $2,485,000, half of which was expensed at the date of grant
and the balance will be expensed over the next three years based on the stock
option service period.
In December of 2008 the Company made
stock option grants for services over the next three years to purchase in the
aggregate 100,000 shares of the Company's common stock. Terms of the
stock option grants require, among other things, that the individual continues
to provide services over the vesting period of the option, which is three or
four years from the date that each option granted to the individual becomes
effective. The exercise price of the options is $0.30 a
share. None of these stock options grants were for current management
and officers of the Company. The Company determined the fair value of
the stock options granted using the Black Scholes model and expenses this value
monthly based upon the vesting schedule for each stock option
award. For purposes of determining fair value, the Company used an
average annual volatility of eighty four percent (84%), which was calculated
based upon taking a weighted average of the volatility of the Company's common
stock and the volatility of similar biotechnology stocks. The risk
free rate of interest used in the model was taken from a table of the market
rate of interest for U. S. Government Securities for the date of the stock
option awards and interpolated as necessary to match the appropriate effective
term for the award. The total value of stock options granted
was determined using this methodology to be $21,450, which will be expensed over
the next four years based on the stock option vesting schedule. Total
stock option expense for the year 2008 totaled $1,465,189.
There were no stock option awards
granted in 2009. Total stock option expense for the year 2009 totaled
$588,857.
F-7
There were no stock option awards
granted in the first quarter of 2010. Total stock option expense for
the current quarter being reported on totaled $143,946.
Warrants
- In April of 2008 the
Company awarded warrants for services to purchase in the aggregate 85,620 shares
of the Company's common stock. The exercise price is $0.90 a
share. The warrants were one hundred percent (100%) vested upon
issuance and were expensed upfront as warrants for services. The fair
value of the warrants expensed was determined using the same methodology as
described above for stock options. The total value of the warrants
granted was determined using this methodology to be $36,050, the total amount of
which was expensed in the second quarter 2008.
There were no warrants for services
granted in 2009 and there was no warrant expense for the year
2009.
There were no warrants for services
granted in the first quarter of 2010 and there was no warrant expense in the
current quarter being reported on. Warrants issued in connection with
the sale of units of common stock were for cash value received and as such were
not grants of compensation-based warrants.
9.
|
Commitments
and Contingencies
|
Technology
License - The Company has
negotiated exclusive licenses from M. D. Anderson to develop drug delivery
technology for siRNA and antisense drug products and to develop liposome tumor
targeting technology. These licenses require, among other things, the
Company to reimburse M. D. Anderson for ongoing patent
expense. Accrued license payments totaling $75,000 are included in
Current Liabilities as of March 31, 2010. As of March 31, 2010, the
Company estimates reimbursable patent expenses will total approximately
$175,000. The Company will be required to pay when invoiced the
patent expenses at the rate of $25,000 per quarter.
Drug
Supplier Project Plan - In
June of 2008, Bio-Path entered into a Project Plan agreement with a contract
drug manufacturing suppler for delivery of drug product to support commencement
of the Company's Phase I clinical trial of its first cancer drug
product. The Company currently expects to start this trial in
2010. In 2009, the Company paid $315,640 to this manufacturer and its
drug substance raw material supplier that is carried at cost as Drug Product for
Testing on the balance sheet (see Note 4.). The Company expects to
pay no more than $150,000 to its contract drug manufacturing supplier to
complete payments under the current contract when the supplier delivers clinical
grade drug product for testing in the Company's clinical
trial. Future contracts will be required as the Company's requirement
for clinical drug product increase.
10.
|
Subsequent
Events
|
In April of 2010, the Company entered
into a commission agreement for the sale of common stock and warrants to
purchase shares of common stock with a Placement Agent. Under
this arrangement, the Company expects to sell common stock with associated
warrants for approximately $275,000 in cash.
11.
|
New
Accounting Pronouncements
|
In October 2009, the FASB issued ASU
2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC
Topic 605, Revenue Recognition) ("ASU 2009-13") and ASU 2009-14, Certain
Arrangements That Include Software Elements, (amendments to FASB ASC Topic 985,
Software) ("ASU 2009-14"). ASU 2009-13 requires entities to allocate revenue in
an arrangement using estimated selling prices of the delivered goods and
services based on a selling price hierarchy. The amendments eliminate the
residual method of revenue allocation and require revenue to be allocated using
the relative selling price method. ASU 2009-14 removes tangible products from
the scope of software revenue guidance and provides guidance on determining
whether software deliverables in an arrangement that includes a tangible product
are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU
2009-14 should be applied on a prospective basis for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June
15, 2010, with early adoption permitted. The Company is currently evaluating,
but does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material
impact on the Company's consolidated results of operations
or financial condition.
F-8
In January 2010, the Financial
Accounting Standards Board issued Accounting Standards Update No. 2010-06, an
update to Statement of Financial Accounting Standards Board Auditing Standard
Codification Topic 820 "Fair Value Measurements and Disclosures" (FASB ASC 820).
The update provides amendments to FASB ASC 820 that will provide more robust
disclosures about (1) the different classes of assets and liabilities
measured at fair value, (2) the valuation techniques and inputs used,
(3) the activity in Leve1 3 fair value measurements, and (4) the
transfers between Levels 1, 2, and 3. The new disclosures and clarifications of
existing disclosures are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 15, 2010, and for interim periods within
those fiscal years. The adoption of the updates to FASB ASC 820 did not and is
not expected to have a material impact on the financial
statements.
F-9
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Shareholders
Bio-Path
Holdings, Inc.
We have
audited the accompanying balance sheets of Bio-Path Holdings, Inc. [a
development stage company] as of December 31, 2009 and 2008, and the related
statements of operations, cash flows, and stockholders' equity, for the years
ended December 31, 2009 and 2008, and the period from inception to December 31,
2009. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company has
determined that it 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 also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Bio-Path Holdings, Inc., as of
December 31, 2009 and 2008, and the results of their operations and their cash
flows for the years ended December 31, 2009 and 2008, and the period from
inception to December 31, 2009 in conformity with accounting principles
generally accepted in the United States of America.
/s/
Mantyla McReynolds LLC
Mantyla
McReynolds LLC
Salt Lake
City, Utah
March 30,
2010
F-10
BIO-PATH
HOLDINGS, INC.
(A
Development Stage Company)
DECEMBER
31, 2009 AND 2008
December
31,
|
||||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 567,249 | $ | 1,507,071 | ||||
Drug
product for testing
|
608,440 | 292,800 | ||||||
Other
current assets
|
74,297 | 82,772 | ||||||
Total
current assets
|
1,249,986 | 1,882,643 | ||||||
Other
assets
|
||||||||
Technology
licenses
|
2,814,166 | 2,704,167 | ||||||
Less
Accumulated Amortization
|
(382,486 | ) | (199,505 | ) | ||||
2,431,680 | 2,504,662 | |||||||
TOTAL
ASSETS
|
$ | 3,681,666 | $ | 4,387,305 | ||||
LIABILITIES
& SHAREHOLDERS' EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
6,453 | 185,843 | ||||||
Accrued
expenses
|
133,450 | 16,442 | ||||||
Accrued
license payments
|
125,000 | 125,000 | ||||||
Total
current liabilities
|
264,903 | 327,285 | ||||||
Long
term debt
|
- | - | ||||||
TOTAL
LIABILITIES
|
264,903 | 327,285 | ||||||
Shareholders'
Equity
|
||||||||
Preferred
Stock, $.001 par value 10,000,000 shares authorized, no shares issued and
outstanding
|
- | - | ||||||
Common
Stock, $.001 par value, 200,000,000 shares authorized 42,649,602 and
41,923,602 shares issued and outstanding as of 12/31/09 and 12/31/08,
respectively
|
42,649 | 41,923 | ||||||
Additional
paid in capital
|
7,803,016 | 7,152,261 | ||||||
Additional
paid in capital for shares to be issued *
|
675,000 | |||||||
Accumulated
deficit during development stage
|
(5,103,902 | ) | (3,134,164 | ) | ||||
Total
shareholders' equity
|
3,416,763 | 4,060,020 | ||||||
TOTAL
LIABILITIES & SHAREHOLDERS' EQUITY
|
$ | 3,681,666 | $ | 4,387,305 | ||||
*
Represents 2,700,000 shares of common stock
|
SEE
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-11
BIO-PATH
HOLDINGS, INC.
(A
Development Stage Company)
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND THE PERIOD
FROM
INCEPTION (MAY 10, 2007) THROUGH DECEMBER 31, 2009
From
inception
|
||||||||||||
05/10/07
to
|
||||||||||||
2009
|
2008
|
12/31/09
|
||||||||||
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Operating
expense
|
||||||||||||
Research
and development
|
480,255
|
333,472
|
821,901
|
|||||||||
General
& administrative
|
721,029
|
587,163
|
1,579,473
|
|||||||||
Stock
issued for services
|
-
|
300,000
|
300,000
|
|||||||||
Stock
options & warrants
|
588,857
|
1,501,239
|
2,090,096
|
|||||||||
Amortization
|
182,981
|
171,954
|
382,486
|
|||||||||
Total
operating expense
|
1,973,122
|
2,893,828
|
5,173,956
|
|||||||||
Net
operating loss
|
$
|
(1,973,122
|
)
|
$
|
(2,893,828
|
)
|
$
|
(5,173,956
|
)
|
|||
Other
income
|
||||||||||||
Interest
income
|
3,384
|
41,061
|
70,054
|
|||||||||
Total
Other Income
|
3,384
|
41,061
|
70,054
|
|||||||||
Net
Loss
|
$
|
(1,969,738
|
)
|
$
|
(2,852,767
|
)
|
$
|
(5,103,902
|
)
|
|||
Loss
per share
|
||||||||||||
Net
loss per share, basic and diluted
|
$
|
(0.05
|
)
|
$
|
(0.07
|
)
|
$
|
(0.14
|
)
|
|||
Basic
and diluted weighted average number of common shares
outstanding
|
42,347,102
|
41,162,099
|
37,352,654
|
SEE
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-12
BIO-PATH
HOLDINGS, INC.
(A
Development Stage Company)
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND THE PERIOD
FROM
INCEPTION (MAY 10, 2007) THROUGH DECEMBER 31, 2009
From
inception
|
||||||||||||
05/10/2007
to
|
||||||||||||
2009
|
2008
|
12/31/2009
|
||||||||||
CASH
FLOW FROM OPERATING ACTIVITIES
|
||||||||||||
Net
loss
|
$
|
(1,969,738
|
)
|
$
|
(2,852,767
|
)
|
$
|
(5,103,902
|
)
|
|||
Adjustments
to reconcile net loss to net cash used in operating
activities
|
||||||||||||
Amortization
|
182,981
|
171,954
|
382,486
|
|||||||||
Common
stock issued for services
|
300,000
|
300,000
|
||||||||||
Stock
options and warrants
|
588,857
|
1,501,239
|
2,090,096
|
|||||||||
(Increase)
decrease in assets
|
||||||||||||
Restricted
escrow cash
|
208,144
|
|||||||||||
Drug
product for testing
|
(315,640
|
)
|
(292,800
|
)
|
(608,440
|
)
|
||||||
Other
current assets
|
8,475
|
(55,338
|
)
|
(74,298
|
)
|
|||||||
Increase
(decrease) in liabilities
|
||||||||||||
Accounts
payable and accrued expenses
|
(62,381
|
)
|
297,112
|
264,904
|
||||||||
Escrow
cash payable
|
(208,144
|
)
|
||||||||||
Net
cash used in operating activities
|
(1,567,446
|
)
|
(930,600
|
)
|
(2,749,154
|
)
|
||||||
CASH
FLOW FROM INVESTING ACTIVITIES
|
||||||||||||
Purchase
of exclusive license
|
(110,000
|
)
|
(150,000
|
)
|
(460,000
|
)
|
||||||
Net
cash used in investing activities
|
(110,000
|
)
|
(150,000
|
)
|
(460,000
|
)
|
||||||
CASH
FLOW FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds
from convertible notes
|
-
|
-
|
435,000
|
|||||||||
Cash
repayment of convertible notes
|
-
|
-
|
(15,000
|
)
|
||||||||
Net
proceeds from sale of common stock
|
737,624
|
1,368,313
|
3,356,403
|
|||||||||
Net
cash from financing activities
|
737,624
|
1,368,313
|
3,776,403
|
|||||||||
NET
INCREASE/(DECREASE) IN CASH
|
(939,822
|
)
|
287,713
|
567,249
|
||||||||
Cash, beginning
of period
|
1,507,071
|
1,219,358
|
-
|
|||||||||
Cash, end
of period
|
$
|
567,249
|
$
|
1,507,071
|
$
|
567,249
|
||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||||||
Cash
paid for
|
||||||||||||
Interest
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Income
taxes
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Non-cash
financing activities
|
||||||||||||
Common
stock issued upon conversion of convertible notes
|
$
|
420,000
|
||||||||||
Common
stock issued to Placement Agent
|
$
|
78,970
|
$
|
294,845
|
||||||||
Common
stock issued to M.D. Anderson for technology license
|
$
|
2,354,167
|
SEE
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-13
BIO-PATH
HOLDINGS, INC.
(A
Development Stage Company)
Additional
|
||||||||||||||||||||||||||
Additional
|
Paid
in Capital
|
|||||||||||||||||||||||||
Common
Stock
|
Paid
in
|
Shares
to be
|
Accumulated
|
|||||||||||||||||||||||
Date
|
Description
|
Shares
|
Amount
|
Capital
|
Issued
|
Deficit
|
Total
|
|||||||||||||||||||
May-07
|
Common
stock issued for cash
|
6,480,994
|
$
|
6,481
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
6,481
|
||||||||||||||
Jun-07
|
Common
stock issued for cash
|
25,000
|
25
|
25
|
||||||||||||||||||||||
2nd
Quarter fund raising expense
|
(26,773
|
)
|
(26,773
|
)
|
||||||||||||||||||||||
Net
loss 2nd Quarter 2007
|
(56,210
|
)
|
(56,210
|
)
|
||||||||||||||||||||||
Balances
at June 30, 2007
|
6,505,994
|
$
|
6,506
|
$
|
(26,773
|
)
|
$
|
-
|
$
|
(56,210
|
)
|
$
|
(76,477
|
)
|
||||||||||||
Aug-07
|
Common
stock issued for cash in seed round
|
3,975,000
|
3,975
|
989,775
|
993,750
|
|||||||||||||||||||||
Aug-07
|
Common
stock issued for cash in second round
|
1,333,334
|
1,333
|
998,667
|
1,000,000
|
|||||||||||||||||||||
Aug-07
|
Common
stock issued to Placement Agent for services
|
530,833
|
531
|
198,844
|
199,375
|
|||||||||||||||||||||
3rd
Quarter fund raising expense
|
(441,887
|
)
|
(441,887
|
)
|
||||||||||||||||||||||
Net
loss 3rd Quarter 2007
|
(81,986
|
)
|
(81,986
|
)
|
||||||||||||||||||||||
Balances
at September 30, 2007
|
12,345,161
|
$
|
12,345
|
$
|
1,718,626
|
$
|
-
|
$
|
(138,196
|
)
|
$
|
1,592,775
|
||||||||||||||
Nov-07
|
Common
stock issued MD Anderson for License
|
3,138,889
|
3,139
|
2,351,028
|
2,354,167
|
|||||||||||||||||||||
4th
Quarter fund raising expense
|
(60,506
|
)
|
(60,506
|
)
|
||||||||||||||||||||||
Net
loss 4th Quarter 2007
|
(143,201
|
)
|
(143,201
|
)
|
||||||||||||||||||||||
Balances
at December 31, 2007
|
15,484,050
|
$
|
15,484
|
$
|
4,009,148
|
$
|
-
|
$
|
(281,397
|
)
|
$
|
3,743,235
|
||||||||||||||
Feb-08
|
Common
stock issued for cash in 3rd round
|
1,579,400
|
1,579
|
1,577,821
|
1,579,400
|
|||||||||||||||||||||
Feb-08
|
Common
stock issued to Placement Agent
|
78,970
|
79
|
78,891
|
78,970
|
|||||||||||||||||||||
Feb-08
|
Common
stock issued for services
|
80,000
|
80
|
79,920
|
80,000
|
|||||||||||||||||||||
Feb-08
|
Merger
with 2.20779528 : 1 exchange ratio
|
20,801,158
|
20,801
|
(20,801
|
)
|
-
|
||||||||||||||||||||
Feb-08
|
Add
merger partner Odgen Golf shareholders
|
3,600,000
|
3,600
|
(3,600
|
)
|
-
|
||||||||||||||||||||
1st
Quarter fund raising expense
|
(251,902
|
)
|
(251,902
|
)
|
||||||||||||||||||||||
Net
loss 1st Quarter 2008
|
(226,206
|
)
|
(226,206
|
)
|
||||||||||||||||||||||
Balances
at March 31, 2008
|
41,623,578
|
$
|
41,623
|
$
|
5,469,477
|
$
|
-
|
$
|
(507,603
|
)
|
$
|
5,003,497
|
||||||||||||||
Apr-08
|
Common
stock issued to PCS, Inc. in connection with merger
|
200,000
|
200
|
179,800
|
180,000
|
F-14
Apr-08
|
Stock
option awards
|
42,216
|
42,216
|
|||||||||||||||||||||||
Apr-08
|
Warrants
issued for services
|
36,050
|
36,050
|
|||||||||||||||||||||||
Apr-08
|
Share
rounding
|
24
|
-
|
|||||||||||||||||||||||
2nd
Quarter fund raising expense
|
(6,243
|
)
|
(6,243
|
)
|
||||||||||||||||||||||
Net
loss 2nd Quarter 2008
|
(496,256
|
)
|
(496,256
|
)
|
||||||||||||||||||||||
Balances
at June 30, 2008
|
41,823,602
|
$
|
41,823
|
$
|
5,721,300
|
$
|
-
|
$
|
(1,003,859
|
)
|
$
|
4,759,264
|
||||||||||||||
Stock
option vesting
|
30,770
|
30,770
|
||||||||||||||||||||||||
3rd
Quarter fund raising expense
|
(12,886
|
)
|
(12,886
|
)
|
||||||||||||||||||||||
Net
loss 3rd Quarter 2008
|
(239,049
|
)
|
(239,049
|
)
|
||||||||||||||||||||||
Balances
at September 30, 2008
|
41,823,602
|
$
|
41,823
|
$
|
5,739,184
|
$
|
-
|
$
|
(1,242,908
|
)
|
$
|
4,538,099
|
||||||||||||||
Common
stock issued for services
|
100,000
|
100
|
39,900
|
40,000
|
||||||||||||||||||||||
Stock
option vesting
|
1,392,202
|
1,392,202
|
||||||||||||||||||||||||
4th
Quarter fund raising expense
|
(19,025
|
)
|
(19,025
|
)
|
||||||||||||||||||||||
Net
loss 4th Quarter 2008
|
(1,891,256
|
)
|
(1,891,256
|
)
|
||||||||||||||||||||||
Balances
at December 31, 2008
|
41,923,602
|
$
|
41,923
|
$
|
7,152,261
|
$
|
-
|
$
|
(3,134,164
|
)
|
$
|
4,060,020
|
||||||||||||||
Stock
option vesting
|
148,727
|
148,727
|
||||||||||||||||||||||||
1st
Quarter fund raising expense
|
(4,069
|
)
|
(4,069
|
)
|
||||||||||||||||||||||
Net
loss 1st Quarter 2009
|
(596,694
|
)
|
(596,694
|
)
|
||||||||||||||||||||||
Balances
at March 31, 2009
|
41,923,602
|
$
|
41,923
|
$
|
7,296,919
|
$
|
-
|
$
|
(3,730,858
|
)
|
$
|
3,607,984
|
||||||||||||||
Jun-09
|
Common
stock and warrants for cash 4th round
|
660,000
|
660
|
164,340
|
165,000
|
|||||||||||||||||||||
Jun-09
|
Common
stock issued to Placement Agent
|
66,000
|
66
|
16,434
|
16,500
|
|||||||||||||||||||||
Stock
option vesting
|
150,156
|
150,156
|
||||||||||||||||||||||||
2nd
Quarter fund raising expense
|
(34,841
|
)
|
(34,841
|
)
|
||||||||||||||||||||||
Net
loss 2nd Quarter 2009
|
(533,049
|
)
|
(533,049
|
)
|
||||||||||||||||||||||
Balances
at June 30, 2009
|
42,649,602
|
$
|
42,649
|
$
|
7,593,008
|
$
|
-
|
$
|
(4,263,907
|
)
|
$
|
3,371,750
|
||||||||||||||
Stock
option vesting
|
147,685
|
147,685
|
||||||||||||||||||||||||
3rd
Quarter fund raising expense
|
(4,891
|
)
|
(4,891
|
)
|
||||||||||||||||||||||
Net
loss 3rd Quarter 2009
|
(407,200
|
)
|
(407,200
|
)
|
||||||||||||||||||||||
Balances
at September 30, 2009
|
42,649,602
|
$
|
42,649
|
$
|
7,735,802
|
$
|
-
|
$
|
(4,671,107
|
)
|
$
|
3,107,344
|
||||||||||||||
Common
stock sold shares to be issued
|
675,000
|
675,000
|
||||||||||||||||||||||||
Stock
option vesting
|
142,288
|
142,288
|
||||||||||||||||||||||||
4th
Quarter fund raising expense
|
(75,074
|
)
|
(75,074
|
)
|
||||||||||||||||||||||
Net
loss 4th Quarter 2009
|
(432,795
|
)
|
(432,795
|
)
|
||||||||||||||||||||||
Balances
at December 31, 2009
|
42,649,602
|
$
|
42,649
|
$
|
7,803,016
|
$
|
675,000
|
$
|
(5,103,902
|
)
|
$
|
3,416,763
|
SEE
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-15
Bio-Path
Holdings, Inc.
(A
Development Stage Company)
December
31, 2009
1.
|
Organization
and Business
|
Bio-Path
Holdings, Inc. ("Bio-Path" or the "Company") is a development stage company
founded with technology from The University of Texas, M. D. Anderson Cancer
Center ("M. D. Anderson") dedicated to developing novel cancer drugs under an
exclusive license arrangement. The Company has drug delivery platform
technology with composition of matter intellectual property that enables
systemic delivery of antisense, small interfering RNA ("siRNA") and small
molecules for treatment of cancer. Bio-Path recently licensed new
liposome tumor targeting technology, which has the potential to be applied to
augment the Company's current delivery technology to improve further the
effectiveness of its antisense and siRNA drugs under development as well as
future liposome-based delivery technology drugs in the future. In
addition to its existing technology under license, the Company expects to have a
close working relationship with key members of the M. D. Anderson's staff, which
should provide Bio-Path with a strong pipeline of promising drug candidates in
the future. Bio-Path expects the program with M. D. Anderson to
enable the Company to broaden its technology to include cancer drugs other than
antisense and siRNA.
Bio-Path
believes that its core technology, if successful, will enable it to be at the
center of emerging genetic and molecular target-based therapeutics that require
systemic delivery of DNA and RNA-like material. The Company's two
lead drug candidates treat acute myeloid leukemia, chronic myelogenous leukemia,
acute lymphoblastic leukemia and follicular lymphoma, and if successful, could
potentially be used in treating many other indications of
cancer. These two lead drug candidates will be ready for clinical
trials after receiving an investigational new drug ("IND") status from the
FDA. The Company has filed an IND application for its lead drug
candidate liposomal Grb-2 (BP-100-1.01) and received notice from the FDA
subsequent to December 31, 2009 that the IND has been allowed for commencement
of a Phase I clinical trial of this drug.
The
Company was founded in May of 2007 as a Utah corporation. In February
of 2008, Bio-Path completed a reverse merger with Ogden Golf Co. Corporation, a
public company traded over the counter that had no current
operations. The name of Ogden Golf was changed to Bio-Path Holdings,
Inc. and the directors and officers of Bio-Path, Inc. became the directors and
officers of Bio-Path Holdings, Inc. Bio-Path has become a publicly
traded company (symbol OTCBB: BPTH) as a result of this
merger. The Company's operations to date have been limited to
organizing and staffing the Company, acquiring, developing and securing its
technology and undertaking product development for a limited number of product
candidates including readying its lead drug product candidate BP-100-1.01 for a
Phase I clinical trial.
Bio-Path
raised an additional $675,000 of funds for operations in the fourth quarter of
2009 through a private placement sale of shares of the Company's common stock
and associated warrants. The private placement offering remained open
at the end of the year, and subsequent to December 31, 2009, the Company raised
an additional $225,000 through sale of shares of the Company's common stock and
associated warrants (see Footnote 13.). Subsequent to December 31,
2009, the IND was granted for Bio-Path's drug candidate BP-100-1.01, and
Management believes there will be sufficient liquidity to commence the Phase I
clinical trial in BP-100-1.01 and continue testing into the summer of
2010. The Company will need to raise additional capital to continue
beyond in 2010 to complete this clinical trial. The Company's
strategy has been to minimize the amount of funds raised at the current lower,
pre-Phase I trial share prices to avoid excessive dilution and raise larger
amounts of new capital with anticipated higher valuation of the Company's common
stock after commencement of the Phase I trial when the Company's technology is
expected to be further validated.
As the
Company has not begun its planned principal operations of commercializing a
product candidate, the accompanying financial statements have been prepared in
accordance with principles established for development stage
enterprises.
F-16
2.
|
Summary
of Significant Accounting Policies
|
Principles of
Consolidation — The consolidated financial statements include the
accounts of Bio-Path Holdings, Inc., and its wholly-owned subsidiary Bio-Path,
Inc. All intercompany accounts and transactions have been eliminated
in consolidation.
Cash and Cash
Equivalents — The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
Concentration of
Credit Risk — Financial instruments that potentially subject the Company
to a significant concentration of credit risk consist of cash. The
Company maintains its cash balances with one major commercial bank, JPMorgan
Chase Bank. The balances are insured by the Federal Deposit Insurance
Corporation up to $250,000. As a result, $317,249 of the Company's
cash balances as of December 31, 2009 is not covered by the FDIC.
Intangible
Assets/Impairment of Long-Lived Assets — As of December 31, 2009, Other
Assets totals $2,431,680 for the Company's three technology licenses, comprised
of $2,814,166 in value acquiring the Company's technology licenses and its
intellectual property, less accumulated amortization of $382,486. The
technology value consists of $460,000 in cash paid or accrued to be paid to MD
Anderson, plus 3,138,889 shares of common stock granted to MD Anderson valued at
$2,354,166. This value is being amortized over a fifteen year (15
year) period from November 7, 2007, the date that the technology licenses became
effective. As of December 31, 2009 accrued payments to be made to M.
D. Anderson totaled $125,000, and such payments are expected to be made in 2010.
The Company accounts for the impairment and disposition of its long-lived assets
in accordance with generally accepted accounting principles
(GAAP). Long-lived assets are reviewed for events of changes in
circumstances which indicate that their carrying value may not be
recoverable. The Company estimates that approximately $190,000 will
be amortized per year for each future year for the current value of the
technology licenses acquired until approximately 2022.
Research and
Development Costs — Costs and expenses that can be clearly identified as
research and development are charged to expense as incurred in accordance with
GAAP For the year 2009, the Company had $480,255 of costs classified
as research and development expense. Of this amount, approximately
$280,000 is comprised of raw materials and costs for the Company's raw material
suppliers and contract drug manufacturer to perform unplanned additional
engineering test runs of the Company's lead drug product in advance of
manufacturing a current Good Manufacturing Practice (cGMP) clinical batch of
this drug for use in an upcoming Phase I Clinical Trial.
Stock-Based
Compensation — The Company has accounted for stock-based compensation
under the provisions of GAAP requires us to record an expense associated with
the fair value of stock-based compensation. We currently use the
Black-Scholes option valuation model to calculate stock based compensation at
the date of grant. Option pricing models require the input of highly
subjective assumptions, including the expected price
volatility. Changes in these assumptions can materially affect the
fair value estimate.
Net Loss Per
Share – In accordance with GAAP, and SEC Staff Accounting Bulletin
("SAB") No. 98, basic net loss per common share is computed by dividing net loss
for the period by the weighted average number of common shares outstanding
during the period. Although there were warrants and stock options
outstanding during 2008, no potential common shares shall be included in the
computation of any diluted per-share amount when a loss from continuing
operations exists. Consequently, diluted net loss per share is not
presented in the financial statements for the year 2009. The calculation of
Basic and Diluted earnings per share for 2009 did not include 1,985,937 shares
and 745,620 shares issuable pursuant to the exercise of vested common stock and
vested warrants, respectively, as of December 31, 2009 as the effect would be
anti-dilutive. Further, the calculation of Basic and Diluted earnings
per share for 2009 did not include 2,700,000 shares that are to be issued
subsequent to December 31, 2009 relating to private placement proceeds received
prior to that date, nor did it include the 270,000 shares to be issued to the
placement agent once these shares are issued. The calculation of Basic and
Diluted earnings per share for 2008 did not include 1,250,000 shares and 85,620
shares issuable pursuant to the exercise of vested common stock and vested
warrants, respectively, as of December 31, 2008 as the effect would be
anti-dilutive.
F-17
Comprehensive
Income — Comprehensive income (loss) is defined as all changes in a
company's net assets, except changes resulting from transactions with
shareholders. At December 31, 2009 and 2008, the Company has no
reportable differences between net loss and comprehensive loss.
Use of Estimates
— The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the Company's consolidated financial statements and accompanying notes. On an
ongoing basis, the Company evaluates its estimates and judgments, which are
based on historical and anticipated results and trends and on various other
assumptions that the Company believes to be reasonable under the circumstances.
By their nature, estimates are subject to an inherent degree of uncertainty and,
as such, actual results may differ from the Company's estimates.
Income Taxes
— Deferred income tax assets and liabilities are determined based upon
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
New Accounting
Pronouncements — In June 2009, the FASB issued FASB ASC 860-10-05 (Prior authoritative
literature: FASB Statement 166, Accounting for Transfers of
Financial Assets). This Statement removes the concept of a qualifying
special-purpose entity from Statement 140 and removes the exception from
applying FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest
Entities, to qualifying special-purpose entities. FASB ASC
860-10-05 is effective for fiscal years beginning after November 15, 2009. The
Company is currently assessing the impact of FASB ASC 860-10-05 on its financial
position and results of operations.
In June
2009, the FASB issued FASB ASC 810-10-25 (Prior authoritative
literature: FASB Statement 167-Amendment to FIN 46(R), Consolidation of Variable
Entities). FASB ASC 810-10-25 eliminates the quantitative approach
previously required for determining the primary beneficiary of a variable
interest entity and requires a qualitative analysis to determine whether an
enterprise's variable interest gives it a controlling financial interest in a
variable interest entity. FASB ASC 810-10-25 contains certain guidance for
determining whether an entity is a variable interest entity. This statement also
requires ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity. FASB ASC 810-10-25 will be effective
as of the beginning of the Company's 2010 fiscal year. The Company is currently
evaluating the impact of the adoption of FASB ASC 810-10-25.
In
October 2009, the FASB issued ASU No. 200-13, Revenue Recognition – Multiple
Deliverable Revenue Arrangements ("ASU 2009-13"). ASU 2009-13 updates
the existing multiple-element revenue arrangements guidance currently included
in FASB ASC 605-25. The revised guidance provides for two significant
changes to the existing multiple-element revenue arrangements
guidance.
The first
change relates to the determination of when the individual deliverables included
in a multiple-element arrangement may be treated as separate units of
accounting. This change will result in the requirement to separate
more deliverables within an arrangement, ultimately leading to less revenue
deferral. The second change modifies the manner in which the
transaction consideration is allocated across the separately identified
deliverables. Together, these changes will result in earlier
recognition of revenue and related costs for multiple-element arrangements than
under previous guidance. This guidance expands the disclosures
required for multiple-element revenue arrangements. Effective for
interim and annual reporting periods beginning after December 15,
2009. The Company is currently evaluating the potential impact, if
any, of this guidance on its financial statements.
3.
|
Restricted
Cash
|
As of
December 31, 2007, Current Assets included $208,144 of restricted
cash. This represented funds deposited in an escrow account pursuant
to an ongoing placement memorandum for the sale of the Company's common
stock. Since the conditions of the offering required that a minimum
of $500,000 of common stock be sold to enable closing of the round and release
of the funds to the Company, the $208,144 was classified as a Current Liability
on the December 31, 2007 Balance Sheet. Subsequently, in February of
2008 these funds were released to the Company when the private placement sales
of common stock exceeded the $500,000 minimum.
F-18
4.
|
Drug
Product for Testing
|
The
Company has paid installments to its contract drug manufacturing and raw
material suppliers totaling $292,800 during 2008 and $315,640 during 2009
pursuant to a Project Plan and Supply Agreement (see Note 11.) for the
manufacture and delivery of the Company's lead drug product for testing in a
Phase I clinical trial. This amount is carried on the Balance Sheet
as of December 31, 2009 at cost as Drug Product for Testing and will be expensed
as the drug product is used during the Phase I clinical trial.
5.
|
Accounts
Payable
|
As of
December 31, 2009 and 2008, Current Liabilities included accounts payable of
$6,453 and $185,843, respectively. These amounts were subsequently
paid in the first quarter of each succeeding year.
6.
|
Accrued
Expense
|
As of
December 31, 2009 and 2008, Current Liabilities included accrued expense of
$133,450 and $16,442, respectively. For December 31, 2009, the bonus
pool accrual comprised $92,500 of this amount and accrued expense for payments
to the Company's contract manufacturing supplier totaled $24,000.
7.
|
Convertible
Debt
|
The
Company issued $435,000 in notes convertible into common stock at a rate of $.25
per common share. As of December 31, 2007, $15,000 of the
convertible notes had been repaid in cash and $420,000 of the convertible notes
had been converted into 1,680,000 shares of Bio-Path common stock and was
included in the seed round completed in August of 2007. No interest
was recorded because interest was nominal prior to conversion. No
beneficial conversion feature existed as of the debt issuance date since the
conversion rate was greater than or equal to the fair value of the common stock
on the issuance date.
8.
|
Accrued
License Payments
|
Accrued
license payments totaling $125,000 were included in Current Liabilities as of
December 31, 2009 and 2008. These amounts represent patent expenses
for the licensed technology expected to be invoiced from M. D. Anderson and
maintenance fees needed to keep the licenses underlying patents in current good
standing with the institution. It is expected that the accrued
license payments will be made to M. D. Anderson in 2010.
9.
|
Stockholder's
Equity
|
Issuance of
Common Stock – In May and June of 2007, the Company issued 6,505,994
shares of common stock for $6,506 in cash to founders of the
Company. In August of 2007, the Company issued 3,975,000 shares of
common stock for $993,750 in cash to investors in the Company pursuant to a
private placement memorandum. In August of 2007 the Company issued an
additional 1,333,334 shares of common stock for $1,000,000 in cash to investors
in the Company pursuant to a second round of financing. The Company
issued 530,833 in common stock to the Placement Agent as commission for the
shares of common stock sold to investors. In November of 2007, the
Company issued 3,138,889 shares in common stock to MD Anderson as partial
consideration for its two technology licenses from MD Anderson.
In
February of 2008, the Company completed a reverse merger with Ogden Golf Co.
Corporation and issued 38,023,578 shares of common stock of the public company
Bio-Path Holdings (formerly Ogden Golf Co. Corporation) in exchange for
pre-merger common stock of Bio-Path, Inc. In addition, shareholders
of Ogden Golf Co. Corporation retained 3,600,000 shares of common stock of
Bio-Path Holdings. In February of 2008 Bio-Path issued 80,000 shares
of common stock to strategic consultants pursuant to executed agreements and the
fair value was expensed upfront as common stock for services. In
April of 2008, the Company issued 200,000 shares of common stock to a firm in
connection with introducing Bio-Path, Inc. to its merger partner Ogden Golf Co.
Corporation. The fair value of this stock issuance was expensed
upfront as common stock for services valued at $180,000. In April of
2008, the Company recorded an additional 24 shares for rounding in accordance
with FINRA rules. In December of 2008, the Company issued 100,000
shares of common stock to an investor relations firm for
services. The fair value of this stock issuance was expensed upfront
as common stock for services valued at $40,000. There were no
issuances of shares during the first quarter of 2009. In June of
2009, the Company issued 660,000 shares of common stock and warrants to purchase
an additional 660,000 shares of common stock for $165,000 in cash to investors
in the Company pursuant to a private placement memorandum. The
warrants must be exercised within two years from the date of issuance. The
exercise price of the warrants is $1.50 a share. In connection with
this private placement, the Company issued 66,000 shares of common stock to the
Placement Agent as commission for the shares of common stock sold to
investors. There were no issuances of shares during the fourth
quarter of 2009. As of December 31, 2009, there were 42,649,602
shares of common stock issued and outstanding. There are no preferred
shares outstanding as of December 31, 2009.
F-19
In
November and December of 2009, the Company sold shares of common stock and
warrants to purchase shares of common stock for $675,000 in cash to investors
pursuant to a private placement memorandum. These shares were not
issued by the December 31, 2009 year end. However, when issued
investors will receive 2,700,000 shares of common stock and warrants to purchase
an additional 2,700,000 shares of common stock. The warrants must be
exercised within two years from the date of issuance. The exercise price of the
warrants is $1.50 a share. In connection with this private placement,
the Company will issue 270,000 shares of common stock to the Placement Agent as
commission for the shares of common stock sold to investors.
10.
|
Stock-Based
Compensation Plans
|
The Plan -
In 2007, the Company adopted the 2007 Stock Incentive Plan, as amended (the
"Plan"). The Plan provides for the grant of Incentive Stock Options,
Nonqualified Stock Options, Restricted Stock Awards, Restricted Stock Unit
Awards, Performance Awards and other stock-based awards, or any combination of
the foregoing to our key employees, non-employee directors and
consultants. The total number of Shares reserved and available for
grant and issuance pursuant to this Plan is 7,000,000 Shares, subject to
the automatic annual Share increase as defined in the Plan. Under the
Plan, the exercise price is determined by the compensation committee of the
Board of Directors, and for options intended to qualify as qualified incentive
stock options, may not be less than the fair market value as determined by the
closing stock price at the date of the grant. Each option and award
shall vest and expire as determined by the compensation
committee. Options expire no later than ten years from the date of
grant. All grants provide for accelerated vesting if there is a
change of control, as defined in the Plan.
There
were no stock options or compensation-based warrants granted in the year 2009
being reported on. Stock option and warrant awards granted for the
year 2008 were estimated to have a weighted average fair value per share of
$0.86. There were no stock options or warrants granted prior to
2008. The fair value calculation is based on stock options and
warrants granted during the period using the Black-Scholes option-pricing model
on the date of grant. In addition, for all stock options and warrants
granted, exercise price was determined based on the fair market value as
determined by the closing stock price at the date of the grant. For
stock option and compensation-based warrants granted for the year ended December
31, 2008 the following weighted average assumptions were used in determining
fair value:
2008
|
||||
Risk-free
interest rate
|
3.10 | % | ||
Dividend
yield
|
- | % | ||
Expected
volatility
|
80 | % | ||
Expected
term in months
|
76 |
The
Company determines the expected term of its stock option and warrant awards
based on the numerical average of the length of the vesting period and the term
of the exercise period. Expected volatility is determined by
weighting the volatility of the Company's historical stock price with the
volatility of a group of peer group stock over the expected term of the grant,
which method compensates for the limited trading history of the Company's share
price. The risk-free interest rate for the expected term of each
option and warrant granted is based on the U.S. Treasury yield curve in effect
at the time of grant.
Option
activity under the Plan for the year ended December 31, 2009 and 2008, was as
follows:
F-20
Weighted
|
||||||||||||||||
Weighted-
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Options
|
Price
|
Term
|
Value
|
|||||||||||||
(In
years)
|
||||||||||||||||
Year
Ended December 31, 2008
|
||||||||||||||||
Outstanding
at December 31, 2007
|
-
|
-
|
-
|
-
|
||||||||||||
Granted
|
3,765,000
|
$
|
1.22
|
|||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited/expired
|
-
|
-
|
||||||||||||||
Outstanding
at December 31, 2008
|
3,765,000
|
$
|
1.22
|
9.6
|
$
|
25,000
|
||||||||||
Vested
and expected to vest December 31, 2008
|
1,250,000
|
$
|
1.40
|
9.8
|
-
|
|||||||||||
Exercisable
at December 31, 2008
|
-
|
-
|
-
|
-
|
Weighted
|
||||||||||||||||
Weighted-
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Options
|
Price
|
Term
|
Value
|
|||||||||||||
(In
years)
|
||||||||||||||||
Year
Ended December 31, 2009
|
||||||||||||||||
Outstanding
at December 31, 2008
|
3,765,000
|
$
|
1.22
|
9.6
|
$
|
25,000
|
||||||||||
Granted
|
-
|
|||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited/expired
|
-
|
-
|
||||||||||||||
Outstanding
at December 31, 2009
|
3,765,000
|
$
|
1.22
|
8.6
|
$
|
13,000
|
||||||||||
Vested
and expected to vest December 31, 2009
|
1,985,937
|
$
|
1.34
|
8.7
|
$
|
4,130
|
||||||||||
Exercisable
at December 31, 2009
|
31,771
|
$
|
0.30
|
7.9
|
$
|
4,130
|
The
aggregate intrinsic value in the table above represents the total pretax
intrinsic value (the difference between the Company's closing stock price on the
last trading day of the year and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option holders had
all option holders exercised their options on December 31, 2009. This
amount changes based on the fair market value of the Company's
stock.
F-21
A summary
of options outstanding and exercisable as of December 31, 2009:
Options
Outstanding
|
Options
Exercisable
|
||||||||||||||||||||
Weighted
|
|||||||||||||||||||||
Average
|
|||||||||||||||||||||
Range of |
Remaining
|
Weighted
|
Weighted
|
||||||||||||||||||
Exercise
|
Number
|
Contractual
|
Average
|
Number
|
Average
|
||||||||||||||||
Prices
|
Outstanding
|
Life
|
Exercise
Price
|
Exercisable
|
Exercise
Price
|
||||||||||||||||
(Years)
|
|||||||||||||||||||||
$ |
0.30
|
100,000
|
7.7
|
$
|
0.30
|
31,771
|
$
|
0.30
|
|||||||||||||
$ |
0.90
|
1,165,000
|
8.3
|
$
|
0.90
|
-
|
-
|
||||||||||||||
$ |
1.40
|
2,500,000
|
8.8
|
$
|
1.40
|
-
|
-
|
||||||||||||||
3,765,000
|
8.6
|
$
|
1.22
|
31,771
|
$
|
0.30
|
Warrant
activity under the Plan for the years ended December 31, 2009 and 2008, was as
follows:
Weighted
|
||||||||||||||||
Weighted-
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Warrants
|
Price
|
Term
|
Value
|
|||||||||||||
(In
years)
|
||||||||||||||||
Year
Ended December 31, 2008
|
||||||||||||||||
Outstanding
at December 31, 2007
|
-
|
-
|
-
|
-
|
||||||||||||
Granted
|
85,620
|
$
|
0.90
|
|||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited/expired
|
-
|
-
|
||||||||||||||
Outstanding
at December 31, 2008
|
85,620
|
$
|
0.90
|
4.9
|
$
|
-
|
||||||||||
Vested
and expected to vest December 31, 2008
|
85,620
|
$
|
0.90
|
4.9
|
$
|
-
|
||||||||||
Exercisable
at December 31, 2008
|
-
|
-
|
-
|
-
|
Weighted
|
||||||||||||||||
Weighted-
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Warrants
|
Price
|
Term
|
Value
|
|||||||||||||
(In
years)
|
||||||||||||||||
Year
Ended December 31, 2009
|
||||||||||||||||
Outstanding
at December 31, 2008
|
85,620
|
$
|
0.90
|
4.9
|
$
|
-
|
||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited/expired
|
-
|
-
|
||||||||||||||
Outstanding
at December 31, 2009
|
85,620
|
$
|
0.90
|
3.9
|
$
|
-
|
||||||||||
Vested
and expected to vest December 31, 2009
|
85,620
|
$
|
0.90
|
3.9
|
$
|
-
|
||||||||||
Exercisable
at December 31, 2009
|
-
|
-
|
-
|
-
|
F-22
A summary
of options outstanding and exercisable as of December 31, 2009:
Options
Outstanding
|
Options
Exercisable
|
||||||||||||||||||||
Weighted
|
|||||||||||||||||||||
Average
|
Weighted
|
Weighted
|
|||||||||||||||||||
Range
of Exercise
|
Number
|
Remaining
|
Average
|
Number
|
Average
|
||||||||||||||||
Prices
|
Outstanding
|
Contractual
Life
|
Exercise
Price
|
Exercisable
|
Exercise
Price
|
||||||||||||||||
(Years)
|
|||||||||||||||||||||
$ |
0.90
|
85,620
|
3.9
|
$
|
0.90
|
-
|
-
|
||||||||||||||
85,620
|
3.9
|
$
|
0.90
|
-
|
-
|
Stock Option
Grants - In April of 2008 the Company made stock option grants for
services over the next three years to purchase in the aggregate 1,165,000 shares
of the Company's common stock. Terms of the stock option grants
require, among other things, that the individual continues to provide services
over the vesting period of the option, which is four or five years from the date
that each option granted to the individual becomes effective. The
exercise price of the options is $0.90 a share. None of these stock
options grants were for current management and officers of the
Company. The Company determined the fair value of the stock options
granted using the Black Scholes model and expenses this value monthly based upon
the vesting schedule for each stock option award. For purposes of
determining fair value, the Company used an average annual volatility of seventy
two percent (72%), which was calculated based upon an average of volatility of
similar biotechnology stocks. The risk free rate of interest used in
the model was taken from a table of the market rate of interest for U. S.
Government Securities for the date of the stock option awards and interpolated
as necessary to match the appropriate effective term for the
award. The total value of stock options granted was determined
using this methodology to be $761,590, which will be expensed over the next six
years based on the stock option service period.
In
October of 2008 the Company made stock option grants to management and officers
to purchase in the aggregate 2,500,000 shares of the Company's common
stock. Terms of the stock option grants require that the individuals
continue employment with the Company over the vesting period of the option,
fifty percent (50%) of which vested upon the date of the grant of the stock
options and fifty percent (50%) of which will vest over 3 years from the date
that the options were granted. The exercise price of the options is
$1.40 a share. The Company determined the fair value of the stock
options granted using the Black Scholes model and expenses this value monthly
based upon the vesting schedule for each stock option award. For
purposes of determining fair value, the Company used an average annual
volatility of eighty four percent (84%), which was calculated based upon taking
a weighted average of the volatility of the Company's common stock and the
volatility of similar biotechnology stocks. The risk free rate of
interest used in the model was taken from a table of the market rate of interest
for U. S. Government Securities for the date of the stock option awards and
interpolated as necessary to match the appropriate effective term for the
award. The total value of stock options granted to management
and officers was determined using this methodology to be $2,485,000, half of
which was expensed at the date of grant and the balance will be expensed over
the next three years based on the stock option service period.
In
December of 2008 the Company made stock option grants for services over the next
three years to purchase in the aggregate 100,000 shares of the Company's common
stock. Terms of the stock option grants require, among other things,
that the individual continues to provide services over the vesting period of the
option, which is three or four years from the date that each option granted to
the individual becomes effective. The exercise price of the options
is $0.30 a share. None of these stock options grants were for current
management and officers of the Company. The Company determined the
fair value of the stock options granted using the Black Scholes model and
expenses this value monthly based upon the vesting schedule for each stock
option award. For purposes of determining fair value, the Company
used an average annual volatility of eighty four percent (84%), which was
calculated based upon taking a weighted average of the volatility of the
Company's common stock and the volatility of similar biotechnology
stocks. The risk free rate of interest used in the model was taken
from a table of the market rate of interest for U. S. Government Securities for
the date of the stock option awards and interpolated as necessary to match the
appropriate effective term for the award. The total value of
stock options granted was determined using this methodology to be $21,450, which
will be expensed over the next four years based on the stock option vesting
schedule.
F-23
Total
stock option expense for the year 2008 being reported on totaled
$1,465,189.
There
were no stock option awards granted in 2009. Total stock option
expense for the year 2009 being reported on totaled $588,857.
Warrant Grants
- In April of 2008 the Company awarded warrants for services to purchase
in the aggregate 85,620 shares of the Company's common stock. The
exercise price is $0.90 a share. The warrants were one hundred
percent (100%) vested upon issuance and were expensed upfront as warrants for
services. The fair value of the warrants expensed was determined
using the same methodology as described above for stock options. The
total value of the warrants granted was determined using this methodology to be
$36,050, the total amount of which was expensed in the second quarter
2008.
There
were no warrants for services granted in 2009 and there was no warrant expense
for the year 2009 being reported on. The warrants issued in
connection with the sale of units of common stock were for cash value received
and as such were not grants of compensation-based warrants.
11.
|
Commitments
and Contingencies
|
Technology
License - The Company has negotiated exclusive licenses from M. D.
Anderson to develop drug delivery technology for siRNA and antisense drug
products and to develop liposome tumor targeting technology. These
licenses require, among other things, the Company to reimburse M. D. Anderson
for ongoing patent expense. Accrued license payments totaling
$125,000 are included in Current Liabilities as of December 31,
2009. As of December 31, 2009, the Company estimates reimbursable
patent expenses will total approximately $200,000. The Company will
be required to pay when invoiced the patent expenses at the rate of $25,000 per
quarter.
Drug Supplier
Project Plan - In June of 2008, Bio-Path entered into a Project Plan
agreement with a contract drug manufacturing supplier for delivery of drug
product to support commencement of the Company's Phase I clinical trial of its
first cancer drug product. The Company currently expects to start
this trial in 2010. In 2009, the Company paid $315,640 to this
manufacturer and its drug substance raw material supplier that is carried at
cost as Drug Product for Testing on the balance sheet (see Note
4.). The Company expects to pay no more than $150,000 to its contract
drug manufacturing supplier to complete payments under the current contract when
the supplier delivers clinical grade drug product for testing in the Company's
clinical trial. Future contracts will be required as the Company's
requirement for clinical drug product increases.
Additional Paid
In Capital For Shares To Be Issued - In November and December of 2009,
the Company sold shares of common stock and warrants to purchase shares of
common stock for $675,000 in cash to investors pursuant to a private placement
memorandum. These shares were not issued as of the December 31, 2009
year end. However, the Company is committed to issuing these
investors 2,700,000 shares of common stock and warrants to purchase an
additional 2,700,000 shares of common stock. The warrants must be
exercised within two years from the date of issuance. The exercise price of the
warrants is $1.50 a share.
Placement Agent
Agreement – In the fourth quarter of 2009, the Company entered into a
Placement Agent Agreement to raise additional capital. Under the
terms of this Agreement, the Company is required to pay cash and stock
commissions to the Placement Agent for funds raised. As of December
31, 2009 the Company sold shares and warrants under this Agreement totaling
$675,000. The Placement Agent was paid $65,000 for cash commission,
leaving a remaining obligation of $2,500. The 2,700,000 shares
purchased by investors had not been issued as of December 31, 2009, however,
when issued, the Company is committed to issuing Placement Agent 270,000 shares
representing the stock commission.
F-24
12.
|
Income
Taxes
|
At
December 31, 2009, the Company has a net operating loss carryforward for Federal
income tax purposes of $3,009,065 which expires in varying amounts through
2029. The Company recorded an increase in the valuation allowance of
$528,599 for the year ended December 31, 2009.
The
components of the Company's deferred tax asset are as follows:
December
31,
|
||||||||
2009
|
2008
|
|||||||
Net
Operating Loss (NOL) Carryover
|
$
|
1,023,082
|
$
|
553,879
|
||||
Share
Based Expense
|
112,163
|
52,767
|
||||||
Total
Deferred Tax Asset
|
1,135,245
|
606,646
|
||||||
Less:
Valuation Allowance
|
(1,135,245
|
)
|
(606,646
|
)
|
||||
Net
Deferred Tax Asset
|
$
|
-
|
$
|
-
|
Reconciliation
between income taxes at the statutory tax rate (34%) and the actual income tax
provision for continuing operations follows:
December 31,
|
||||||||
2009
|
2008
|
|||||||
Loss
Before Income Taxes
|
$
|
(1,969,738
|
)
|
$
|
(2,852,767
|
)
|
||
Tax
Benefit @ Statutory Tax Rate
|
669,711
|
969,941
|
||||||
Effects
of:
|
||||||||
Exclusion
of ISO Expense
|
(140,816
|
)
|
(457,654
|
)
|
||||
(Increase)/Decrease
in Valuation Allowance
|
(528,599
|
)
|
(509,274
|
)
|
||||
Other
|
(296
|
)
|
(3,013
|
)
|
||||
Provision
(Benefit) for Income Taxes
|
$
|
-
|
$
|
-
|
As of
December 31, 2009 and 2008, the Company has no unrecognized income tax benefits.
The Company is in process of completing an analysis of its tax credit
carryforwards. Any uncertain tax positions identified in the course of this
analysis will not impact its financial statements due to the full valuation
allowance. A reconciliation of our unrecognized tax benefits for the
years ending December 31, 2009 and 2008 is presented in the table
below:
December 31,
|
||||||||
2009
|
2008
|
|||||||
Beginning
balance
|
$
|
0.0
|
$
|
0.0
|
||||
Additions
based on tax positions related to current year
|
0.0
|
0.0
|
||||||
Reductions
for tax positions of prior years
|
0.0
|
0.0
|
||||||
Reductions
due to expiration of statute of limitations
|
0.0
|
0.0
|
||||||
Settlements
with taxing authorities
|
0.0
|
0.0
|
||||||
Ending
Balance
|
$
|
0.0
|
$
|
0.0
|
The
Company's policy for classifying interest and penalties associated with
unrecognized income tax benefits is to include such items as tax expense. No
interest or penalties have been recorded during the years ended December 31,
2009, and 2008.
F-25
The tax
years from 2007 and forward remain open to examination by federal and Texas
authorities due to net operating loss and credit carryforwards. The Company is
currently not under examination by the Internal Revenue Service or any other
taxing authorities.
13.
|
Subsequent
Events
|
In
November and December of 2009, the Company sold shares of common stock and
warrants to purchase shares of common stock for $675,000 in cash to investors
pursuant to a private placement memorandum. These shares were not
issued as of the December 31, 2009 year end. In the first quarter of
2010, the Company issued these investors 2,700,000 shares of common stock and
warrants to purchase an additional 2,700,000 shares of common stock, completing
the Company's obligation to these investors. The warrants must be
exercised within two years from the date of issuance. The exercise price of the
warrants is $1.50 a share.
In
January of 2010, the Company paid the Placement Agent the balance of $2,500 for
cash commissions owed for the sale of common stock and warrant in the fourth
quarter of 2009. In addition, the Company issued 270,000 shares of
common stock to the Placement Agent representing stock commission on shares of
common stock sold.
In
January of 2009, the Company issued 900,000 shares of common stock and warrants
to purchase an additional 900,000 shares of common stock for $225,000 in cash to
an investor in the Company pursuant to a private placement
memorandum. In connection with this private placement, the Company
paid $22,500 in cash commissions and issued 90,000 shares of common stock to the
Placement Agent as commission for the shares of common stock sold to
investors.
In March
of 2010, the Company received written notification from the U. S. Food and Drug
Administration (FDA) that it has allowed an IND (Investigational New Drug) for
the Company's lead cancer drug candidate liposomal Grb-2 (BP-100-1.01) to
proceed into clinical trials. The IND review process was performed by
the FDA's Division of Oncology Products and involved a comprehensive review of
data submitted by the Company covering pre-clinical studies, safety, chemistry,
manufacturing and controls, and the protocol for the Phase I clinical
trial. The clinical trial will be conducted at the M. D. Anderson
Cancer Center and is expected to last one year. The primary objective
of the Phase I trial is to demonstrate the safety of the Company's drug
candidate liposomal Grb-2 for use in human patients. Additional
objectives are to demonstrate the effectiveness of the Company's delivery
technology similar to that experienced in pre-clinical treatment of animals, and
further, to assess whether the drug candidate test article produces a favorable
impact on the cancerous condition of the patient at the dose levels of the
study. The clinical trial is structured to test five rounds of
patients, with each round comprising treatment of three
patients. Each succeeding round in the study has a higher dose of the
drug candidate test article being administered to the patients. The
Company will reimburse M. D. Anderson at the rate of approximately $13,000 per
patient for treating patients in the study. In total, the Company
currently expects to reimburse M. D. Anderson approximately $250,000 spread out
over one year for patient treatment costs. The Company is also
required to supply the drug candidate test article for administration to the
patients in the study, for which the Company has in place a drug supply contract
with Althea Technologies (see Note 11.) that will supply sufficient drug
candidate test article for testing through two rounds. The Company
expects to pay no more than $150,000 to its contract drug manufacturing supplier
to complete payments under the current contract. Drug costs for the
entire study could cost an additional $1 million including requirements for drug
candidate test article for additional treatments of the patients if the drug is
having a positive effect on the patients' disease. The Company has
sufficient cash resources to fund the trial through the initial two or three
rounds of the study. The Company plans to raise additional cash
resources through the sale of common stock in an offering planned for early
summer of 2010. Commencement of the trial will begin in 2010 after
completion of final preparations and enrollment of patients into the
study.
F-26
ANNEX
A - GLOSSARY OF TERMS
The
following definitions are intended to assist you in understanding certain
matters discussed in this Business Section:
Antisense is a
medication containing part of the non-coding strand of messenger RNA (mRNA), a
key molecule involved in the translation of DNA into protein. Antisense drugs
hybridize with and inactivate mRNA. This stops a particular gene from producing
the protein for which it holds the recipe. Antisense drugs have been developed
or are "in the pipeline" to treat eye disease in AIDS, lung cancer, diabetes and
diseases such as arthritis and asthma with a major inflammatory
component.
Acute Myeloid
Leukemia is a cancer of the myeloid line of white blood cells,
characterized by the rapid proliferation of abnormal cells which accumulate in
the bone marrow and interfere with the production of normal blood cells. AML is
the most common acute leukemia affecting adults, and its incidence increases
with age. Although AML is a relatively rare disease, accounting for
approximately 1.2% of cancer deaths in the United States, its incidence is
expected to increase as the population ages. The symptoms of AML are caused by
replacement of normal bone marrow with leukemic cells, resulting in a drop in
red blood cells, platelets, and normal white blood cells. These symptoms include
fatigue, shortness of breath, easy bruising and bleeding, and increased risk of
infection. Although several risk factors for AML have been identified, the
specific cause of AML remains unclear. As an acute leukemia, AML progresses
rapidly and is typically fatal within weeks or months if left untreated. Acute
myeloid leukemia is a potentially curable disease; but only a minority of
patients is cured with current therapy.
Chronic
Myelogenous Leukemia is a form of leukemia
characterized by the increased and unregulated growth of predominantly myeloid
cells in the bone marrow and the accumulation of these cells in the blood. CML
is a clonal bone marrow stem cell disorder in which proliferation of mature
granulocytes (neutrophils, eosinophils, and basophils) and their precursors is
the main finding. It is a type of myeloproliferative disease associated with a
characteristic chromosomal translocation called the Philadelphia
chromosome
Liposomal
Delivery Technology Liposomes are used for drug delivery
due to their unique properties. A liposome encapsulates a region on aqueous
solution inside a hydrophobic membrane; dissolved hydrophilic solutes cannot
readily pass through the lipids. Hydrophobic chemicals can be dissolved into the
membrane, thereby incorporating the materials, and in this way liposome can
carry both hydrophobic molecules and hydrophilic molecules. To deliver the
molecules to sites of action, the lipid bilayer can fuse with other bilayers
such as the cell membrane, thus delivering the liposome contents. By making
liposomes in a solution of DNA or drugs (which would normally be unable to
diffuse through the membrane) they can be (indiscriminately) delivered past the
lipid bilayer.
Liposomal Tumor
Targeting. The new
technology, being licensed in the field of
neutral lipid-based liposome delivery of antisense technologies and siRNA, will
enhance the Company's liposome delivery technology by adding vectors to the
liposomes targeted to a receptor that is specifically over-expressed on a
majority of solid and hematological tumors and on eighty percent (80%) of
metastatic epithelial tumors. The Company believes this liposome
tumor-targeting technology for antisense and siRNA delivery is a highly
promising strategy for treating primary and metastatic cancers.
Myelodysplastic
Syndromes are a diverse collection of hematological conditions united by
ineffective production (or dysplasia) of myeloid blood cells and risk of
transformation to acute myelogenous leukemia (AML). Anemia requiring chronic
blood transfusion is frequently present. Myelodysplastic syndromes are bone
marrow stem cell disorders resulting in disorderly and ineffective hematopoiesis
(blood production) manifested by irreversible quantitative and qualitative
defects in hematopoietic (blood-forming) cells. In a majority of cases, the
course of disease is chronic with gradually worsening cytopenias due to
progressive bone marrow failure.
Nucleic Acid Drug
Products. Nucleic acid base sequence of proteins plays a
crucial role in the expression of gene. The gene is responsible for the
synthesis of proteins and these proteins, which are synthesized, are responsible
for the biological process including diseases. If the nucleic acid sequence is
altered, it could be possible to block or transfer the message for protein
synthesis, thereby preventing the particular protein, which is responsible for
the disease. These nucleic acids act as drugs by different mechanisms, they may
bind with the synthesized proteins, and they can hybridize to a messenger RNA
leading to translation arrest or may induce degradation to target RNA. In this
way the nucleic acids can act as drugs for inhibiting gene expression or protein
synthesis.
A-1
siRNA. Small
interfering RNA (siRNA), sometimes known as short interfering RNA or silencing
RNA, is a class of 20-25 nucleotide-long double-stranded RNA molecules that play
a variety of roles in biology. Most notably, siRNA is involved in the RNA
interference (RNAi) pathway, where it interferes with the expression of a
specific gene. A therapeutic siRNA drug is designed to block the
cell's ability to produce a disease causing protein, effectively controlling the
disease.
A-2
Bio-Path
Holdings, Inc.
7,000,000
SHARES OF COMMON STOCK
PROSPECTUS
____________,
2010
PENDING
STATES: Application for registration may be, is being or has been
made for the securities represented in this Prospectus under the applicable
securities laws of the following states: Illinois; New York; Texas; and Utah
(the "Pending States"). The various state agencies and/or departments in the
Pending States to whom the registrations have been submitted have not approved
or disapproved of the securities represented in this Prospectus, nor have they
ruled upon the accuracy or adequacy of this Prospectus. The securities
represented in this Prospectus may not be offered for sale, sold, assigned,
transferred, pledged or otherwise disposed of in the Pending States until the
Company's submissions for registration have become effective under applicable
state law or unless an exemption from registration is available. The Company
will amend the Prospectus to indicate the Pending States in which the Company's
application for registration has become effective.
EXCLUDED
STATES: The securities represented in this Prospectus have not been,
and will not be, registered under the applicable securities laws of the
following states: Alabama; Alaska; Arizona; Arkansas; California; Colorado;
Connecticut; Delaware; Washington DC; Florida; Georgia; Hawaii; Idaho; Indiana;
Iowa; Kansas; Kentucky; Louisiana; Maine; Maryland; Massachusetts; Michigan;
Minnesota; Mississippi; Missouri; Montana; Nebraska; Nevada; New Hampshire; New
Jersey; New Mexico; New York; North Carolina; North Dakota; Ohio; Oklahoma;
Oregon; Pennsylvania; Rhode Island; South Carolina; South Dakota; Tennessee;
Texas; Vermont; Virginia; Washington; West Virginia; Wisconsin; and Wyoming. The
securities represented in this Prospectus may not be offered for sale, sold,
assigned, transferred, pledged or otherwise disposed of in the Excluded States
without registering such securities under such state's applicable securities
laws or unless an exemption from such registration is available.
The
following states have notified Bio-Path that the application for registration of
the common stock registered under the Registration Statement has been accepted
or that an exemption is available for sale through a registered broker-dealer
and the shares may be sold in such states: NONE.
Until ,
2010, all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters.
Part
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Other
Expenses of Issuance and
Distribution
|
The
following table lists the costs and expenses payable by the Company in
connection with the sale of the common stock covered by this prospectus other
than any sales commissions or discounts. All amounts shown are
estimates except for the SEC registration fee, and all of the fees and expenses
will be borne by the Company.
SEC
registration fee
|
$ | 225 | ||
Legal
fees and expenses
|
75,000 | |||
Accounting
fees and expenses
|
30,000 | |||
Printing
expenses
|
1,000 | |||
Miscellaneous
fees and expenses
|
1,000 | |||
Total
|
$ | 107,225 |
Indemnification
of Directors and Officers
|
The laws
of Utah generally permit the indemnification of directors, employees, officers
and agents of Utah corporations. Utah law also enables corporations to limit
available relief to equitable remedies such as injunction or
rescission. Our Articles of Incorporation provide that we shall
indemnify our directors and officers to the fullest extent permitted by Utah
law. Our Articles of Incorporation also limit the liability of our
directors to us or to our stockholders (in their capacity as directors but not
in their capacity as officers) to the fullest extent permitted by Utah
law. The inclusion of this provision in our Articles of Incorporation
may have the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter stockholders or management from bringing a
lawsuit against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefited the Company and its
stockholders.
Our
Bylaws provide indemnification to our officers and directors and certain other
persons with respect to certain matters. Insofar as indemnification
for liabilities arising under the Securities Act of 1933, as amended, or the
Securities Act, may be permitted to our directors and officers, we have been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
We have
entered into indemnification and reimbursement agreements with each of our
directors. The contractual rights to indemnification provided by
these indemnity agreements are subject to the limitations and conditions
specified in such agreements.
The
effect of the foregoing is to require us to indemnify our officers and directors
for any claim arising against such persons in their official capacities if such
person acted in good faith and in a manner that he or she reasonably believed to
be in or not contrary to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful.
We have
directors and officers insurance which includes insurance for claims against
these persons brought under securities laws.
Item
15.
|
Recent
Sales of Unregistered
Securities
|
The
information contained in this Item 15 relates to all securities of the
Registrant sold by the Registrant since May 10, 2007 which were not
registered under the Securities Act.
II-1
Common
Stock/ Stock Options Granted Pursuant to Bio-Path's Incentive Compensation
Plan
From May
10, 2007 through March 31, 2010, Bio-Path entered into stock option agreements
under its Amended 2007 Stock Incentive Plan to issue the following stock options
to purchase a total of 3,732,188 shares of our common stock.
Grant Date / Type of Stock
Option(1)
|
Type of Optionee
|
Number of Stock
Options
|
Exercise
Price |
|||||||
October
13,, 2008 / ISO
|
Employees
|
2,500,000 | $ | 1.40 | ||||||
April,
25, 2008 / NQ
|
Board
Members
|
450,000 | $ | 0.90 | ||||||
December
18, 2008 / NQ
|
Board
Members
|
75,000 | $ | 0.30 | ||||||
December
18, 2008 / NQ
|
Consultants
|
25,000 | $ | 0.30 | ||||||
April
25, 2008 / NQ
|
Consultants
|
715,000 | $ | 0.90 | ||||||
Total
stock option grants
|
3,765,000 |
(1)
|
NQ
– Non-qualified stock option. ISO – Incentive stock options. All stock
options expire ten years from grant date. These issuances were exempt from
registration under the Securities Act pursuant to an exemption under
Section 4(2) thereof as a sale of securities not involving any public
offering. These issuances were made to members of our board of directors,
employees and consultants of Bio-Path in exchange for services rendered to
Bio-Path by or on behalf of such optionee. The stock options have various
vesting schedules.
|
Bio-Path's
June 2009 and November-December 2009 Private Placements
During
June 2009 and November-December 2009, the Company closed private placements of
units of its securities at a purchase price of $0.50 per unit, each unit
comprised of two shares of Bio-Path's common stock and two warrants to purchase
one share of Bio-Path's common stock. In these private placements, the
Company sold an aggregate of 1,630,000 units for aggregate gross proceeds
of $815,000. The warrants, exercisable for two years from closing,
entitle the investors to purchase up to an aggregate of 3,260,000 shares of
Bio-Path's common stock at an exercise price of $1.50 per share.
The
transaction was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act because, among other things, the
transaction did not involve a public offering, the investors were accredited
investors and/or qualified institutional buyers and the investors had access to
information about the Company and their investment. The proceeds from this
transaction were used to fund working capital to continue and expand Bio-Path's
ongoing business.
II-2
June 2009 and November-December private placement security
holders
|
Number of
shares of
common
stock
|
Number of shares of
common stock
issuable pursuant to
warrants issued
|
||||||
Bubbling
Springs, LLC
|
936,000 | 936,000 | ||||||
Valley
Associates LLC
|
380,000 | 380,000 | ||||||
Gorden
L. King
|
360,000 | 360,000 | ||||||
Devin
Durrant
|
200,000 | 200,000 | ||||||
Thomas
E. Garrison
|
750,000 | 750,000 | ||||||
Delaware
Charter Guarantee & Trust FBO Kirk Ferguson IRA
|
200,000 | 200,000 | ||||||
Jersey
Isles Holdings LP
|
40,000 | 40,000 | ||||||
David
and Meredith Dodgen
|
20,000 | 20,000 | ||||||
Mcjacksen
LLC
|
200,000 | 200,000 | ||||||
Gary
V. Petersen
|
20,000 | 20,000 | ||||||
Mark
Witt
|
40,000 | 40,000 | ||||||
John
G. McMillian
|
100,000 | 100,000 | ||||||
Bryan
Kowacich
|
14,000 | 14,000 | ||||||
ACAP
(1)
|
326,000 | — | ||||||
Total
securities issued in June 2009 and November and December 2009 private
placements
|
3,586,000 | 3,260,000 |
(1)
|
In
connection with the private placement, the Company issued shares of common
stock and a cash fee to ACAP as a placement agent to compensate it for
placing investors into the financing. ACAP was issued shares of common
stock and a cash fee based upon the proceeds of the sale of the units of
the private placement. Bio-Path issued 326,000 shares of Bio-Path's common
stock and cash fees totaling
$81,500.
|
Bio-Path's
December 2009-January 2010 Private Placement
In
December 2009-January 2010, the Company entered into subscription agreements
with certain investors for the private placement of units of Bio-Path at a
purchase price of $0.50 per unit, each unit comprised of two shares of
Bio-Path's common stock and two warrants to purchase one share of
Bio-Path's common stock. In this private placement, the Company sold an
aggregate of 500,000 units for aggregate gross proceeds of $250,000. The
warrants, exercisable for two years from closing, entitle the investors to
purchase up to an aggregate of 1,000,000 shares of Bio-Path's common stock at an
exercise price of $1.50 per share.
The
transaction was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act because, among other things, the
transaction did not involve a public offering, the investors were accredited
investors and/or qualified institutional buyers and the investors had access to
information about the Company and their investment. The proceeds from this
transaction were used to fund working capital to continue and expand Bio-Path's
ongoing business.
II-3
December 2009-January 2010 private placement
security holders
|
Number of
shares of
common
stock
|
Number of
shares of
common
stock
issuable
pursuant
to
warrants
issued
|
||||||
Jerry
Harley
|
100,000 | 100,000 | ||||||
Alan
Noal
|
900,000 | 900,000 | ||||||
ACAP
(1)
|
100,000 | — | ||||||
Total
securities issued in December 2009-January 2010 private
placement
|
1,100,000 | 1,000,000 |
(1)
|
In
connection with the private placement, the Company issued shares of common
stock and a cash fee to ACAP as a placement agent to compensate them for
placing investors into the financing. ACAP was issued one share of common
stock for every five units issued to investors placed by them as part of
the financing units and a 10% cash fee based upon the proceeds of the sale
of the units of the private placement placed by them. Bio-Path issued ACAP
100,000 shares of Bio-Path's common stock and cash fees totaling
$25,000.
|
Bio-Path's
May 2010 Private Placement
On May
20, 2010, the Company entered into subscription agreement with certain investors
for the private placement of units of Bio-Path at a purchase price of $0.70 per
unit, each unit comprised of two shares of Bio-Path's common stock and two
warrants to purchase one share of Bio-Path's common stock. In this private
placement, the Company sold an aggregate of 390,000 units for aggregate gross
proceeds of $273,000. The warrants, exercisable for two years from closing,
entitle the investors to purchase up to an aggregate of 780,000 shares of
Bio-Path's common stock at an exercise price of $1.50 per share. The shares
have not yet been issued for this transaction by the Company’s transfer
agent.
The
transaction was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act because, among other things, the
transaction did not involve a public offering, the investors were accredited
investors and/or qualified institutional buyers and the investors had access to
information about the Company and their investment. The proceeds from this
transaction were used to fund working capital to continue and expand Bio-Path's
ongoing business.
May 2010 private placement security
holders
|
Number of
shares of
common
stock
|
Number of
shares of
common
stock
issuable
pursuant
to
warrants
issued
|
||||||
Bubbling
Springs LLC
|
310,000 | 310,000 | ||||||
Valley
Associates LLC
|
70,000 | 70,000 | ||||||
Don
Patterson Farmiy Trust
|
80,000 | 80,000 | ||||||
Jersey
Isles Holdings LP
|
50,000 | 50,000 | ||||||
Mcjacksen
LLC
|
80,000 | 80,000 | ||||||
DG
Development & Investment, Inc.
|
120,000 | 120,000 | ||||||
Jerry
Hartley
|
70,000 | 70,000 | ||||||
ACAP
(1)
|
78,000 | —— | ||||||
Total
securities issued in the May 2010 private placement
|
858,000 | 780,000 |
(1)
|
In
connection with the private placement, the Company issued shares of common
stock and a cash fee to ACAP as a placement agent to compensate them for
placing investors into the financing. ACAP was issued one share of common
stock for every five units issued to investors placed by them as part of
the financing units and a 10% cash fee based upon the proceeds of the sale
of the units of the private placement placed by them. Bio-Path issued ACAP
78,000 shares of Bio-Path's common stock and cash fees totaling
$27,300.
|
Common
Stock Issued to LPC Pursuant to LPC Purchase Agreement
On
June 2, 2010, we executed a purchase agreement, or the LPC Purchase
Agreement, and a registration rights agreement, or the LPC Registration Rights
Agreement, with Lincoln Park Capital, LLC, or LPC. Under the LPC
Purchase Agreement, we have the right to sell to LPC up to $7,000,000 of our
common stock at our option as described below.
II-4
Pursuant
to the LPC Registration Rights Agreement, we have filed this registration
statement with the SEC covering the shares that have been issued or may be
issued to LPC under the LPC Purchase Agreement. We do not have the
right to commence any sales of our shares to LPC until the SEC has declared
effective this registration statement. Thereafter, over approximately
24 months, generally we have the right to direct LPC to purchase up to
$7,000,000 of our common stock in amounts up to $100,000 as often as every two
business days under certain conditions. We can also accelerate the amount of our
common stock to be purchased under certain circumstances. No sales of
shares may occur at a purchase price below $0.20 per share. The
purchase price of the shares will be based on the market prices of our shares at
the time of sale as computed under the LPC Purchase Agreement without any fixed
discount. We may at any time in our sole discretion terminate the LPC
Purchase Agreement without fee, penalty or cost upon one business day
notice.
We issued
566,801 shares of our common stock to LPC as a commitment fee for entering into
the LPC Purchase Agreement, and we are obligated to issue up to 283,401 shares
pro rata as LPC purchases up to $7,000,000 of our common stock as directed by
us. For the issuance of the 566,801 commitment fee shares, we claim an
exemption from the registration requirements of the Securities Act because,
among other things, the transaction did not involve a public offering, LPC was
an accredited investor and LPC had access to information about us and its
investment. Additionally, as compensation for entering into the term
sheet related to the LPC Purchase Agreement, we issued 12,000 shares of our
common stock to LPC.
Securityholder
|
Issuance Date
|
Number of Shares of
Common Stock Issued
|
||
Lincoln
Park Capital, LLC
|
June 2,
2010
|
1,150,230
|
II-5
Other
Bio-Path Common Stock Issuances
Other Issuances of Common Stock
|
Date of
Issuance
|
Number of
Shares of
Common
Stock
Issued(3)
|
||||
ACAP
Financial, Inc.
|
February
14, 2008
|
1,346,321 | ||||
All
World Consortium
|
February
14, 2008
|
1,103,898 | ||||
Bailey,
Dr. Chris
|
February
14, 2008
|
883,119 | ||||
Berestein,
Dr. Gabriel H. Lopez-
|
February
14, 2008
|
1,103,898 | ||||
Berger
Eneterprises
|
February
14, 2008
|
441,560 | ||||
Bonanne,
Thomas J. TTEE
|
February
14, 2008
|
22,078 | ||||
Brick
& Mortar Investments
|
February
14, 2008
|
2,649,355 | ||||
Brick
and Mortar, LLC
|
February
14, 2008
|
2,943,729 | ||||
Cearley,
Larry & Sherri
|
February
14, 2008
|
88,312 | ||||
Cobb
IV Family Trust
|
February
14, 2008
|
110,390 | ||||
David
William Pew Revocable Trust
|
February
14, 2008
|
220,780 | ||||
DSP
Investments
|
February
14, 2008
|
331,170 | ||||
Frisk,
Rick
|
February
14, 2008
|
176,624 | ||||
Garrison,
Dr. Thomas
|
February
14, 2008
|
110,390 | ||||
Gately,
Jay
|
February
14, 2008
|
88,312 | ||||
Halm,
Anthony
|
February
14, 2008
|
55,195 | ||||
Harlin,
William P. Jr.
|
February
14, 2008
|
44,156 | ||||
Helbach,
Morris
|
February
14, 2008
|
33,117 | ||||
Jerry
Harley
|
February
14, 2008
|
133,086 | ||||
Hellwig
Family Trust
|
February
14, 2008
|
55,195 | ||||
Hoellein,
James C.
|
February
14, 2008
|
220,780 | ||||
Holmdahl,
Mike
|
February
14, 2008
|
55,195 | ||||
Hunt,
David
|
February
14, 2008
|
441,560 | ||||
Investment
Source, INC.
|
February
14, 2008
|
66,234 | ||||
King,
Gordon
|
February
14, 2008
|
220,780 | ||||
Kings
View, LLC
|
February
14, 2008
|
607,144 | ||||
KSM
LLC
|
February
14, 2008
|
441,560 | ||||
Janes,
Kevin
|
February
14, 2008
|
88,312 | ||||
John
Paulsen Family Trust
|
February
14, 2008
|
441,560 | ||||
Kissee,
Charles N.
|
February
14, 2008
|
220,780 | ||||
Lee, Renata |
February
14, 2008
|
110,390 | ||||
Lagius,
Robert Dale
|
February
14, 2008
|
88,312 | ||||
Lesueur,
Larry
|
February
14, 2008
|
33,117 | ||||
MD
Anderson Cancer Center
|
February
14, 2008
|
6,930,025 | ||||
McCrae,
Gary & Debbie
|
February
14, 2008
|
110,390 | ||||
Morgan,
Richard Creighton Jr.
|
February
14, 2008
|
441,560 | ||||
Nielsen,
Peter
|
February
14, 2008
|
5,164,433 | ||||
Northcliff
Consulting, LLC
|
February
14, 2008
|
55,195 | ||||
Otteson
Financial
|
February
14, 2008
|
176,624 | ||||
Parnow
LLC
|
February
14, 2008
|
883,119 | ||||
Penny
Family LP
|
February
14, 2008
|
110,390 | ||||
Progressive
Investment Properties, LLC
|
February
14, 2008
|
110,390 | ||||
Roberts,
Jim
|
February
14, 2008
|
88,312 | ||||
Roberts,
Jim
|
February
14, 2008
|
176,624 | ||||
Roberts,
Linda Ann
|
February
14, 2008
|
44,156 | ||||
Roberts,
Linda Ann
|
February
14, 2008
|
44,156 | ||||
Schneider,
Janette
|
February
14, 2008
|
88,312 | ||||
Schneider,
Mark N.
|
February
14, 2008
|
220,780 | ||||
Sood,
Dr. Anil K.
|
February
14, 2008
|
424,577 | ||||
Sutila,
Monique
|
February
14, 2008
|
184,131 | ||||
Swarup,
Monte & Mona
|
February
14, 2008
|
110,390 | ||||
Sycamore
Ventures, LLC, Series 2
|
February
14, 2008
|
5,164,433 | ||||
Sylvester,
Kimberlee
|
February
14, 2008
|
40,227 | ||||
Tari,
Dr. Ana Maria
|
February
14, 2008
|
127,373 | ||||
Uinta
Equlity Partners, LLC
|
February
14, 2008
|
1,468,476 | ||||
Vetcro,
Michael Family Trust
|
February
14, 2008
|
441,560 | ||||
Vesper
21 Family LP
|
February
14, 2008
|
110,390 | ||||
Wheeler,
Dr. Michael & Lisa
|
February
14, 2008
|
110,390 | ||||
Willetta
Cold Storage
|
February
14, 2008
|
220,780 | ||||
Windmill
Palm Family LP
|
February
14, 2008
|
110,390 | ||||
Total
other common stock issuances
|
38,133,992 |
(1)
|
Proceeds
were used for working capital to fund
operations
|
(2)
|
The
issuance of the common stock is exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act and Rule
506 of Regulation D promulgated thereunder, as a transaction by an issuer
not involving a public offering. We relied on representations made
available to us in determining that such exemptions were available. No
underwriting discounts or commissions were paid by us in connection with
the issuance of common stock.
|
(3)
|
Shares
issued following the Merger in February 2008 pursuant to the applicable
exchange ratio.
|
II-6
Other
Issuances of Bio-Path Warrants
Other Issuances of Warrants
(1)
|
Date of
Issuance
|
Number of
Warrants to
Purchase
One
Share of
Common
Stock
|
Explanation
|
||||
Sunja
Randeep
|
April
25, 2008
|
10,000 |
Issuance
in connection with medical services
|
||||
Roensch-Kreider
|
April
25, 2008
|
75,620 |
Issuance
in connection with services regarding Merger
|
||||
Total
other issuances of warrants
|
85,620 |
(1)
|
The
issuance of the warrants is exempt from registration under the Securities
Act in reliance on Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder, as a transaction by an issuer not
involving a public offering. We relied on representations made available
to us in determining that such exemptions were available. No underwriting
discounts or commissions were paid by us in connection with the issuance
of the warrants.
|
Item
16. Exhibits and Financial Statement Schedules
(a)
Exhibits
The
following exhibits are filed as part of, or incorporated by reference into this
registration statement:
Exhibit
No.
|
Exhibit
|
|
2.1
|
Agreement
and Plan of Merger and Reorganization dated September 27, 2007, by and
among Ogden Golf Co. Corporation, a Utah corporation (the registrant),
Biopath Acquisition Corp., a Utah corporation and wholly owned subsidiary
of the registrant, and Bio-Path, Inc., a Utah corporation (incorporated by
reference to exhibit 2.1 to the registrant's current report on Form 8-K
filed on September 27, 2007)
|
|
3.1
|
Restated
Articles of Incorporation (incorporated by reference to exhibit 3.2 to the
registrant's current report on Form 8-A filed on September 10,
2008)
|
|
3.2
|
Bylaws
(incorporated by reference to exhibit 3.2 to the registrant's current
report on Form 8-A filed on September 10, 2008)
|
|
3.3
|
Articles
of Merger relating to the merger of Biopath Acquisition Corp. with and
into Bio-Path, Inc. (incorporated by reference to exhibit 3.2 to the
registrant's current report on Form 8-K filed on February 19,
2008)
|
|
4.1
|
Specimen
Stock certificate (incorporated by reference to exhibit 3.2 to the
registrant's current report on Form 8-A filed on September 10,
2008)
|
|
4.2
|
Form
of Warrant issued to Lincoln Park Capital Fund, LLC (incorporated by
reference to exhibit 4.1 to the registrant’s current report on Form 8-K
filed on June 4, 2010)
|
|
**5.1
|
Legal
Opinion
|
|
10.1†
|
Employment
Agreement – Peter Nielsen (incorporated by reference to exhibit 3.2 to the
registrant's current report on Form 8-K filed on February 19,
2008)
|
II-7
10.2†
|
Employment
Agreement – Douglas P. Morris (incorporated by reference to exhibit 3.2 to
the registrant's current report on Form 8-K filed on February 19,
2008)
|
|
10.3
|
Drug
Product Development and Clinical Supply Agreement (incorporated by
reference to exhibit 10.1 to the registrant's current report on Form 8-K
filed on October 16, 2008)
|
|
10.4†
|
Amended
2007 Stock Incentive Plan (incorporated by reference to exhibit 4.1 to the
registrant's registration on Form S-8 filed on December 10,
2008)
|
|
10.5
|
Patent
and Technology License Agreement (incorporated by reference to exhibit
10.1 to the registrant’s current report on Form 8-K filed on September 24,
2009)
|
|
10.6
|
Purchase
Agreement, dated as of June 2, 2010, by and between the Company and
Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1
to the registrant’s current report on Form 8-K filed on June 4,
2010)
|
|
10.7
|
Registration
Rights Agreement, dated as of June 2, 2010, by and between the Company and
Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2
to the registrant’s current report on Form 8-K filed on June 4,
2010)
|
|
*21.1
|
Subsidiaries
of Bio-Path Holdings, Inc.
|
|
*23.1
|
Consent
of Independent Registered Public Accounting Firm
|
|
**23.2
|
Consent
(included in Exhibit 5.1)
|
|
24.1
|
Power
of Attorney (included in the signature page)
|
|
*31
|
Certificate
of Chief Executive Officer/Chief Financial Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 Sarbanes
Oxley Act of 2002
|
|
*32
|
Certificate
of Chief Executive Officer/Chief Financial Officer pursuant to Section 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes
Oxley Act of 2002
|
†
|
Indicates
a management contract or compensatory plan or
arrangement.
|
*
|
Filed
herewith.
|
**
|
To
be subsequently filed by an amendment to this registration
statement.
|
(b)
Financial Statement Schedules
All
schedules are omitted because they are not applicable or the required
information is shown in the financial statements or the notes thereto on
pages F-1 through F-26 of the prospectus included in this registration
statement. The Index to Financial Statements appears on page F-1.
Item
17.
|
Undertakings
|
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i)
to include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
a prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate,
the change in volume and price represents no more than a 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
II-8
(iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on 430B or other than prospectuses filed in reliance on Rule
430A shall be deemed to be part of and included in the registration statement as
of the date it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first
use.
(5) That,
for the purpose of determining liability of the undersigned registrant under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such
purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule 424
under the Securities Act;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or
controlling person connected with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-9
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Houston, State of Texas,
on June 17, 2010.
BIO-PATH
HOLDINGS, INC.
|
|
By: /s/
Peter Nielsen
|
|
Peter
Nielsen
|
|
President
|
|
Chief
Executive Officer
|
|
Chief
Accounting Officer/Principal Financial
Officer
|
KNOW ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Peter Nielsen and Douglas P. Morris, and each or any
one of them, his or her true and lawful attorney-in-fact, with the power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments (including
pre-effective amendments and post-effective amendments) to this registration
statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her substitutes
or substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed below by the following persons in the capacities and on the
dates indicated.
Date
|
Title
|
Signature
|
||
June
17, 2010
|
Chief
Executive
|
/s/ Peter Nielsen
|
||
Officer/Principal
Financial
Officer/President/
Director
|
Peter Nielsen
|
|||
June
17, 2010
|
Secretary
and Director
|
/s/ Douglas P. Morris
|
||
Douglas
P. Morris
|
||||
June
17, 2010
|
Director
|
/s/ Dr. Thomas Garrison
|
||
Dr.
Thomas Garrison
|
||||
June 17,
2010
|
Director
|
/s/ Dr. Gillian
Ivers-Read
|
||
Dr.
Gillian Ivers-Read
|
S-1
EXHIBIT
INDEX
The
following exhibits are filed as part of, or incorporated by reference into this
Report:
Exhibit
No.
|
Exhibit
|
|
2.1
|
Agreement
and Plan of Merger and Reorganization dated September 27, 2007, by and
among Ogden Golf Co. Corporation, a Utah corporation (the registrant),
Biopath Acquisition Corp., a Utah corporation and wholly owned subsidiary
of the registrant, and Bio-Path, Inc., a Utah corporation (incorporated by
reference to exhibit 2.1 to the registrant's current report on Form 8-K
filed on September 27, 2007)
|
|
3.1
|
Restated
Articles of Incorporation (incorporated by reference to exhibit 3.2 to the
registrant's current report on Form 8-A filed on September 10,
2008)
|
|
3.2
|
Bylaws
(incorporated by reference to exhibit 3.2 to the registrant's current
report on Form 8-A filed on September 10, 2008)
|
|
3.3
|
Articles
of Merger relating to the merger of Biopath Acquisition Corp. with and
into Bio-Path, Inc. (incorporated by reference to exhibit 3.2 to the
registrant's current report on Form 8-K filed on February 19,
2008)
|
|
4.1
|
Specimen
Stock certificate (incorporated by reference to exhibit 3.2 to the
registrant's current report on Form 8-A filed on September 10,
2008)
|
|
4.2
|
Form
of Warrant issued to Lincoln Park Capital Fund, LLC (incorporated by
reference to exhibit 4.1 to the registrant’s current report on Form 8-K
filed on June 4, 2010)
|
|
**5.1
|
Legal
Opinion
|
|
10.1†
|
Employment
Agreement – Peter Nielsen (incorporated by reference to exhibit 3.2 to the
registrant's current report on Form 8-K filed on February 19,
2008)
|
|
10.2†
|
Employment
Agreement – Douglas P. Morris (incorporated by reference to exhibit 3.2 to
the registrant's current report on Form 8-K filed on February 19,
2008)
|
|
10.3
|
Drug
Product Development and Clinical Supply Agreement (incorporated by
reference to exhibit 10.1 to the registrant's current report on Form 8-K
filed on October 16, 2008)
|
|
10.4†
|
Amended
2007 Stock Incentive Plan (incorporated by reference to exhibit 4.1 to the
registrant's registration on Form S-8 filed on December 10,
2008)
|
|
10.5
|
Patent
and Technology License Agreement (incorporated by reference to exhibit
10.1 to the registrant’s current report on Form 8-K filed on September 24,
2009)
|
|
10.6
|
Purchase
Agreement, dated as of June 2, 2010, by and between the Company and
Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1
to the registrant’s current report on Form 8-K filed on June 4,
2010)
|
|
10.7
|
Registration
Rights Agreement, dated as of June 2, 2010, by and between the Company and
Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2
to the registrant’s current report on Form 8-K filed on June 4,
2010)
|
|
*21.1
|
Subsidiaries
of Bio-Path Holdings, Inc.
|
|
*23.1
|
Consent
of Independent Registered Public Accounting
Firm
|
**23.2
|
Consent
(included in Exhibit 5.1)
|
|
24.1
|
Power
of Attorney (included in the signature page)
|
|
*31
|
Certificate
of Chief Executive Officer/Chief Financial Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 Sarbanes
Oxley Act of 2002
|
|
*32
|
Certificate
of Chief Executive Officer/Chief Financial Officer pursuant to Section 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes
Oxley Act of 2002
|
Indicates
a management contract or compensatory plan or
arrangement.
|
*
|
Filed
herewith.
|
**
|
To
be subsequently filed by an amendment to this registration
statement.
|