Attached files
file | filename |
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EX-32.1 - FENNEC PHARMACEUTICALS INC. | v210166_ex32-1.htm |
EX-31.1 - FENNEC PHARMACEUTICALS INC. | v210166_ex31-1.htm |
EX-31.2 - FENNEC PHARMACEUTICALS INC. | v210166_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
AMENDMENT
NO. 2
FORM
10-Q/A
(Mark
One)
þ
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended March 31, 2010
OR
o
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from____ to ____
Commission
File Number: 001-32295
ADHEREX
TECHNOLOGIES INC.
(Exact
Name of Registrant as Specified in Its Charter)
Canada
(State
or Other Jurisdiction of
Incorporation
or Organization
|
20-0442384
(I.R.S.
Employer
Identification
No.)
|
501
Eastowne Drive, Suite 140
|
|
Chapel
Hill, North Carolina
|
27514
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Registrant's
Telephone Number, Including Area Code: (919) 636-4530
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yessþ No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o No þ.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer ¨
|
Accelerated
Filer ¨
|
Non-Accelerated
Filer ¨
(Do not check if smaller reporting company)
|
Smaller
reporting company þ
|
Indicated
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No þ
As of May
13, 2010, there were 368,293,451 shares of Adherex Technologies Inc. common
stock outstanding.
Explanatory
Note
Adherex
Technologies, Inc. (the “Company”) is filing this Amendment No. 2 to its
Quarterly Report on Form 10-Q (the “Amendment No. 2”) to further amend its
Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, which was
filed with the Securities and Exchange Commission (“SEC”) on May 14, 2010 (the
“First Quarter 10-Q”), and subsequently amended on November 2,
2010. This Amendment No. 2 further amends the First Quarter 10-Q by:
(i) removing the explanatory note containing in the First Quarter 10-Q in its
entirety and replacing it with this explanatory note; (ii) conforming our
disclosures in Part I (Financial Information) under Item 1 (Financial
Statements) in Note 2 to the interim financial statements and under Item 2.
(Management’s Discussion and Analysis of Financial Condition) to eliminate
references to the absence of a review of the interim financial statements by the
Company’s independent auditor; (iii) revising our disclosure in Part I, Item 4
(Controls and Procedures) of management’s conclusions regarding the
effectiveness of the Company’s disclosure controls and procedures as of March
31, 2010; and (iv) revising our certifications in Exhibits 31.1 and 31.2 to be
worded exactly as required by Item 601(b)(31) of Regulation
S-K. Except as described above, no other changes have been made to
the First Quarter 10-Q, and this Amendment No. 2 does not otherwise amend,
update or change the financial statements or disclosures in the First Quarter
10-Q.
PART
I – FINANCIAL INFORMATION
Item
1. Financial Statements
Adherex
Technologies Inc.
(a
development stage company)
Unaudited
Interim Consolidated Balance Sheets
(U.S.
Dollars and shares in thousands, except per share amounts)
|
March 31,
2010
|
December 31,
2009
|
||||||
|
||||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$
|
348
|
$
|
685
|
||||
Cash
pledged as collateral
|
-
|
-
|
||||||
Accounts
receivable
|
43
|
69
|
||||||
Prepaid
expense
|
75
|
75
|
||||||
Other
current Assets
|
4
|
4
|
||||||
Total
current assets
|
470
|
833
|
||||||
Capital
assets
|
-
|
-
|
||||||
Leasehold
inducements
|
-
|
-
|
||||||
Total
assets
|
$
|
470
|
$
|
833
|
||||
Liabilities
and Stockholders' Equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$
|
338
|
$
|
318
|
||||
Accrued
liabilities
|
$
|
53
|
70
|
|||||
Other
current liabilities
|
32
|
32
|
||||||
Total
current liabilities
|
423
|
420
|
||||||
Other
long-term liabilities
|
7
|
7
|
||||||
Deferred
lease inducement
|
-
|
-
|
||||||
Total
liabilities
|
430
|
427
|
||||||
Commitments
and contingencies
|
||||||||
Stockholders'
equity:
|
||||||||
Common
stock, no par value; unlimited shares authorized; 128,227 shares issued
and outstanding
|
64,929
|
64,929
|
||||||
Additional
paid-in capital
|
35,225
|
35,225
|
||||||
Deficit
accumulated during development stage
|
(101,357
|
)
|
(100,991
|
)
|
||||
Accumulated
other comprehensive income
|
1,243
|
1,243
|
||||||
Total
stockholders’ equity
|
40
|
406
|
||||||
Total
liabilities and stockholders’ equity
|
$
|
470
|
$
|
833
|
(The
accompanying notes are an integral part of these interim consolidated financial
statements)
1
Adherex
Technologies Inc.
(a
development stage company)
Unaudited
Condensed Consolidated Statements of Operations
(U.S.
Dollars and shares in thousands, except per share amounts)
|
Three Months Ended
|
Cumulative
From
September 3,
1996 to
|
||||||||||
|
March 31,
2010
|
March 31,
2009
|
March 31,
2010
|
|||||||||
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Operating
expenses:
|
||||||||||||
Research
and development
|
163
|
1,279
|
65,053
|
|||||||||
Impairment
of Capital Assets
|
386
|
|||||||||||
Gain
on Deferred lease inducements
|
(497
|
)
|
||||||||||
Acquired
in-process research and development
|
-
|
-
|
13,094
|
|||||||||
General
and administrative
|
203
|
673
|
24,913
|
|||||||||
Total
operating expenses
|
366
|
1,952
|
102,949
|
|||||||||
Loss
from operations
|
(366
|
)
|
(1,952
|
)
|
(102,949
|
)
|
||||||
Other
income (expense):
|
||||||||||||
Settlement
of Cadherin Biomedical Inc. litigation
|
-
|
-
|
(1,283
|
)
|
||||||||
Interest
expense
|
-
|
-
|
(19
|
)
|
||||||||
Loss
on impairment of assets held for sale
|
-
|
(340
|
)
|
255
|
||||||||
Interest
income
|
-
|
46
|
2,797
|
|||||||||
Total
other income and expense, net
|
-
|
(294
|
)
|
1,252
|
||||||||
Net
loss and comprehensive loss
|
$
|
(366
|
)
|
$
|
(2,246
|
)
|
$
|
(101,199
|
)
|
|||
Basic
and diluted net loss per common share
|
$
|
(0.00
|
)
|
$
|
(0.02
|
)
|
||||||
Weighted-average
common shares used in computing basic and diluted net loss per common
share
|
128,227
|
128,227
|
(The
accompanying notes are an integral part of these condensed consolidated
financial statements)
2
Adherex
Technologies Inc.
(a
development stage company)
Unaudited
Condensed Consolidated Statements of Cash Flows
(U.S.
Dollars and shares in thousands, except per share amounts)
|
Three Months Ended
|
Cumulative
From
September 3,
1996 to
|
||||||||||
|
March 31,
2010
|
March 31,
2009
|
March 31,
2010
|
|||||||||
Cash
flows from (used in):
|
||||||||||||
Operating
activities:
|
||||||||||||
Net
loss
|
$
|
(366
|
)
|
$
|
(2,246
|
)
|
$
|
(101,199
|
)
|
|||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Depreciation
and amortization
|
-
|
-
|
1,404
|
|||||||||
Non-cash
Cadherin Biomedical Inc. litigation expense
|
-
|
-
|
1,187
|
|||||||||
Unrealized
foreign exchange loss
|
-
|
-
|
9
|
|||||||||
Amortization
of deferred lease inducements
|
0
|
(24
|
)
|
(412
|
)
|
|||||||
Loss
on impairment of capital assets
|
0
|
340
|
386
|
|||||||||
Non-cash
severance expense
|
-
|
-
|
168
|
|||||||||
Stock
options issued to consultants
|
-
|
5
|
722
|
|||||||||
Stock
options issued to employees
|
-
|
296
|
7,703
|
|||||||||
Acquired
in-process research and development
|
-
|
-
|
13,094
|
|||||||||
Changes
in operating assets and liabilities
|
29
|
(673
|
)
|
(114
|
)
|
|||||||
Net
cash used in operating activities
|
(337
|
)
|
(2,302
|
)
|
(77,049
|
)
|
||||||
Investing
activities:
|
||||||||||||
Purchase
of capital assets
|
-
|
-
|
(1,440
|
)
|
||||||||
Disposal
of capital assets
|
-
|
-
|
115
|
|||||||||
Release
of restricted cash
|
-
|
-
|
190
|
|||||||||
Restricted
cash
|
-
|
-
|
(209
|
)
|
||||||||
Purchase
of short-term investments
|
-
|
-
|
(22,148
|
)
|
||||||||
Redemption
of short-term investments
|
-
|
-
|
22,791
|
|||||||||
Investment
in Cadherin Biomedical Inc.
|
-
|
-
|
(166
|
)
|
||||||||
Acquired
intellectual property rights
|
-
|
-
|
(640
|
)
|
||||||||
Net
cash used in investing activities
|
-
|
-
|
(1,507
|
)
|
||||||||
Financing
activities:
|
||||||||||||
Conversion
of long-term debt to equity
|
-
|
-
|
68
|
|||||||||
Long-term
debt repayments
|
-
|
-
|
(65
|
)
|
||||||||
Capital
lease repayments
|
-
|
-
|
(8
|
)
|
||||||||
Issuance
of common stock, net of issue costs
|
-
|
-
|
76,687
|
|||||||||
Registration
expense
|
-
|
-
|
(465
|
)
|
||||||||
Financing
expenses
|
-
|
-
|
(544
|
)
|
||||||||
Proceeds
from convertible note
|
-
|
-
|
3,017
|
|||||||||
Other
liability repayments
|
-
|
-
|
(87
|
)
|
||||||||
Security
deposits
|
-
|
-
|
35
|
|||||||||
Proceeds
from exercise of stock options
|
-
|
-
|
51
|
|||||||||
Net
cash provided in financing activities
|
-
|
-
|
78,713
|
|||||||||
368
|
||||||||||||
Effect
of exchange rate changes on cash and cash equivalents
|
-
|
-
|
-
|
|||||||||
Net
change in cash and cash equivalents
|
(337
|
)
|
(2,302
|
)
|
-
|
|||||||
Cash
and cash equivalents - Beginning of period
|
685
|
5,349
|
-
|
|||||||||
Cash
and cash equivalents - End of period
|
$
|
348
|
$
|
3,047
|
$
|
348
|
(The
accompanying notes are an integral part of these interim consolidated financial
statements)
3
Adherex
Technologies Inc.
(a
development stage company)
Unaudited
Condensed Consolidated Statements of Stockholders' Equity
(U.S.
dollars and shares in thousands, except per share information)
|
Common Stock
|
Non-redeemable
Preferred Stock
|
Additional
Paid-in
|
Accumulated
Other
Comprehensive
|
Deficit
Accumulated
During
Development
|
Total
Shareholders’
|
||||||||||||||||||||||
|
Number
|
Amount
|
of Subsidiary
|
Capital
|
Income
|
Stage
|
Equity
|
|||||||||||||||||||||
Balance
at June 30, 1996
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||||
Issuance
of common stock
|
1,600
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(37
|
)
|
(37
|
)
|
|||||||||||||||||||
Balance
at June 30, 1997
|
1,600
|
-
|
-
|
-
|
-
|
(37
|
)
|
(37
|
)
|
|||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(398
|
)
|
(398
|
)
|
|||||||||||||||||||
Balance
at June 30, 1998
|
1,600
|
-
|
-
|
-
|
-
|
(435
|
)
|
(435
|
)
|
|||||||||||||||||||
Exchange
of Adherex Inc. shares for Adherex Technologies Inc.
shares
|
(1,600
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Issuance
of common stock
|
4,311
|
1,615
|
-
|
-
|
-
|
-
|
1,615
|
|||||||||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
20
|
-
|
20
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(958
|
)
|
(958
|
)
|
|||||||||||||||||||
Balance
at June 30, 1999
|
4,311
|
1,615
|
-
|
-
|
20
|
(1,393
|
)
|
242
|
||||||||||||||||||||
Issuance
of common stock
|
283
|
793
|
-
|
-
|
-
|
-
|
793
|
|||||||||||||||||||||
Issuance
of equity rights
|
-
|
-
|
-
|
171
|
-
|
-
|
171
|
|||||||||||||||||||||
Issuance
of special warrants
|
-
|
-
|
-
|
255
|
-
|
-
|
255
|
|||||||||||||||||||||
Settlement
of advances:
|
||||||||||||||||||||||||||||
Issuance
of common stock
|
280
|
175
|
-
|
-
|
-
|
-
|
175
|
|||||||||||||||||||||
Cancellation
of common stock
|
(120
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
16
|
-
|
16
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(1,605
|
)
|
(1,605
|
)
|
|||||||||||||||||||
Balance
at June 30, 2000
|
4,754
|
2,583
|
-
|
426
|
36
|
(2,998
|
)
|
47
|
||||||||||||||||||||
Issuance
of common stock:
|
||||||||||||||||||||||||||||
Initial
Public Offering (“IPO”)
|
1,333
|
5,727
|
-
|
-
|
-
|
(38
|
)
|
5,689
|
||||||||||||||||||||
Other
|
88
|
341
|
-
|
-
|
-
|
-
|
341
|
|||||||||||||||||||||
Issuance
of special warrants
|
-
|
-
|
-
|
1,722
|
-
|
-
|
1,722
|
|||||||||||||||||||||
Conversion
of special warrants
|
547
|
1,977
|
-
|
(1,977
|
)
|
-
|
-
|
-
|
||||||||||||||||||||
Issuance
of Series A special warrants
|
-
|
-
|
-
|
4,335
|
-
|
-
|
4,335
|
|||||||||||||||||||||
Conversion
of Series A special warrants
|
1,248
|
4,335
|
-
|
(4,335
|
)
|
-
|
-
|
-
|
||||||||||||||||||||
Conversion
of equity rights
|
62
|
171
|
-
|
(171
|
)
|
-
|
-
|
-
|
||||||||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
182
|
-
|
182
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(2,524
|
)
|
(2,524
|
)
|
|||||||||||||||||||
Balance
at June 30, 2001
|
8,032
|
15,134
|
-
|
-
|
218
|
(5,560
|
)
|
9,792
|
||||||||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
11
|
-
|
11
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
(3,732
|
)
|
(3,732
|
)
|
||||||||||||||||||||
Balance
at June 30, 2002
|
8,032
|
15,134
|
-
|
-
|
229
|
(9,292
|
)
|
6,071
|
(The
accompanying notes are an integral part of these interim consolidated financial
statements)
(continued
on next page)
4
Adherex
Technologies Inc.
(a
development stage company)
Unaudited
Condensed Consolidated Statements of Stockholders' Equity
(Continued)
(U.S.
dollars and shares in thousands, except per share information)
|
Common Stock
|
Non-redeemable
Preferred Stock
|
Additional
Paid-in
|
Accumulated
Other
Comprehensive
|
Deficit
Accumulated
During
Development
|
Total
Shareholders’
|
||||||||||||||||||||||
|
Number
|
Amount
|
of Subsidiary
|
Capital
|
Income
|
Stage
|
Equity
|
|||||||||||||||||||||
Balance
at June 30, 2002
|
8,032
|
15,134
|
-
|
-
|
229
|
(9,292
|
)
|
6,071
|
||||||||||||||||||||
Common
stock issued for Oxiquant acquisition
|
8,032
|
11,077
|
-
|
543
|
-
|
-
|
11,620
|
|||||||||||||||||||||
Exercise
of stock options
|
5
|
4
|
-
|
-
|
-
|
-
|
4
|
|||||||||||||||||||||
Distribution
to shareholders
|
-
|
-
|
-
|
-
|
-
|
(158
|
)
|
(158
|
)
|
|||||||||||||||||||
Stated
capital reduction
|
-
|
(9,489
|
)
|
-
|
9,489
|
-
|
-
|
-
|
||||||||||||||||||||
Stock
options issued to consultants
|
-
|
-
|
-
|
4
|
-
|
-
|
4
|
|||||||||||||||||||||
Equity
component of June convertible notes
|
-
|
-
|
-
|
1,058
|
-
|
-
|
1,058
|
|||||||||||||||||||||
Financing
warrants
|
-
|
-
|
-
|
53
|
-
|
-
|
53
|
|||||||||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
(159
|
)
|
-
|
(159
|
)
|
|||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(17,795
|
)
|
(17,795
|
)
|
|||||||||||||||||||
Balance
at June 30, 2003
|
16,069
|
16,726
|
-
|
11,147
|
70
|
(27,245
|
)
|
698
|
||||||||||||||||||||
Stock
options issued to consultants
|
-
|
-
|
-
|
148
|
-
|
-
|
148
|
|||||||||||||||||||||
Repricing
of warrants related to financing
|
-
|
-
|
-
|
18
|
-
|
-
|
18
|
|||||||||||||||||||||
Equity
component of December convertible notes
|
-
|
-
|
-
|
1,983
|
-
|
-
|
1,983
|
|||||||||||||||||||||
Financing
warrants
|
-
|
-
|
-
|
54
|
-
|
-
|
54
|
|||||||||||||||||||||
Conversion
of June convertible notes
|
1,728
|
1,216
|
-
|
(93
|
)
|
-
|
-
|
1,123
|
||||||||||||||||||||
Conversion
of December convertible notes
|
1,085
|
569
|
-
|
(398
|
)
|
-
|
-
|
171
|
||||||||||||||||||||
Non-redeemable
preferred stock
|
-
|
-
|
1,045
|
-
|
-
|
-
|
1,045
|
|||||||||||||||||||||
December
private placement
|
11,522
|
8,053
|
-
|
5,777
|
-
|
-
|
13,830
|
|||||||||||||||||||||
May
private placement
|
4,669
|
6,356
|
-
|
2,118
|
-
|
-
|
8,474
|
|||||||||||||||||||||
Exercise
of stock options
|
18
|
23
|
-
|
-
|
-
|
-
|
23
|
|||||||||||||||||||||
Amalgamation
of 2037357 Ontario Inc.
|
800
|
660
|
(1,045
|
)
|
363
|
-
|
-
|
(22
|
)
|
|||||||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
(219
|
)
|
-
|
(219
|
)
|
|||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(6,872
|
)
|
(6,872
|
)
|
|||||||||||||||||||
Balance
at June 30, 2004
|
35,891
|
33,603
|
-
|
21,117
|
(149
|
)
|
(34,117
|
)
|
20,454
|
|||||||||||||||||||
Stock
options issued to consultants
|
-
|
-
|
-
|
39
|
-
|
-
|
39
|
|||||||||||||||||||||
Stock
options issued to employees
|
-
|
-
|
-
|
604
|
-
|
-
|
604
|
|||||||||||||||||||||
Cost
related to SEC registration
|
-
|
(493
|
)
|
-
|
-
|
-
|
-
|
(493
|
)
|
|||||||||||||||||||
Acquisition
of Cadherin Biomedical Inc.
|
644
|
1,252
|
-
|
-
|
-
|
-
|
1,252
|
|||||||||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
1,392
|
-
|
1,392
|
|||||||||||||||||||||
Net
loss – six months ended December 31, 2004
|
-
|
-
|
-
|
-
|
-
|
(6,594
|
)
|
(6,594
|
)
|
|||||||||||||||||||
Balance
at December 31, 2004
|
36,535
|
34,362
|
-
|
21,760
|
1,243
|
(40,711
|
)
|
16,654
|
(The
accompanying notes are part of these interim consolidated financial
statements)
(continued
on next page)
5
Adherex
Technologies Inc.
(a
development stage company)
Unaudited
Condensed Consolidated Statements of Stockholders' Equity
(Continued)
(U.S.
dollars and shares in thousands, except per share information)
|
Common Stock
|
Non-redeemable
Preferred Stock
|
Additional
Paid-in
|
Accumulated
Other
Comprehensive
|
Deficit
Accumulated
During
Development
|
Total
Shareholders’
|
||||||||||||||||||||||
|
Number
|
Amount
|
of Subsidiary
|
Capital
|
Income
|
Stage
|
Equity
|
|||||||||||||||||||||
Balance
at December 31, 2004
|
36,535
|
34,362
|
-
|
21,760
|
1,243
|
(40,711
|
)
|
16,654
|
||||||||||||||||||||
Financing
costs
|
-
|
(141
|
)
|
-
|
-
|
-
|
-
|
(141
|
)
|
|||||||||||||||||||
Exercise
of stock options
|
15
|
25
|
-
|
-
|
-
|
-
|
25
|
|||||||||||||||||||||
Stock
options issued to consultants
|
-
|
-
|
-
|
276
|
-
|
-
|
276
|
|||||||||||||||||||||
July
private placement
|
6,079
|
7,060
|
-
|
1,074
|
-
|
-
|
8,134
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(13,871
|
)
|
(13,871
|
)
|
|||||||||||||||||||
Balance
at December 31, 2005
|
42,629
|
41,306
|
-
|
23,110
|
1,243
|
(54,582
|
)
|
11,077
|
||||||||||||||||||||
Stock
options issued to consultants
|
-
|
-
|
-
|
100
|
-
|
-
|
100
|
|||||||||||||||||||||
Stock
options issued to employees
|
-
|
-
|
-
|
491
|
-
|
-
|
491
|
|||||||||||||||||||||
May
private placement
|
7,753
|
5,218
|
-
|
822
|
-
|
-
|
6,040
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(16,440
|
)
|
(16,440
|
)
|
|||||||||||||||||||
Balance
at December 31, 2006
|
50,382
|
46,524
|
-
|
24,523
|
1,243
|
(71,022
|
)
|
1,268
|
||||||||||||||||||||
Stock
options issued to consultants
|
-
|
-
|
-
|
59
|
-
|
-
|
59
|
|||||||||||||||||||||
Stock
options issued to employees
|
-
|
-
|
-
|
2,263
|
-
|
-
|
2,263
|
|||||||||||||||||||||
February
financing
|
75,759
|
17,842
|
-
|
5,379
|
-
|
-
|
23,221
|
|||||||||||||||||||||
Exercise
of warrants
|
2,086
|
563
|
-
|
131
|
-
|
-
|
694
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(13,357
|
)
|
(13,357
|
)
|
|||||||||||||||||||
Balance
at December 31, 2007
|
128,227
|
64,929
|
-
|
32,355
|
1,243
|
(84,379
|
)
|
14,148
|
||||||||||||||||||||
Stock
options issued to consultants
|
-
|
-
|
-
|
88
|
-
|
-
|
88
|
|||||||||||||||||||||
Stock
options issued to employees
|
-
|
-
|
-
|
2,417
|
-
|
-
|
2,417
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(13,600
|
)
|
(13,600
|
)
|
|||||||||||||||||||
Balance
at December 31, 2008
|
128,227
|
64,929
|
-
|
34,860
|
1,243
|
(97,979
|
)
|
3,053
|
||||||||||||||||||||
Stock
options issued to consultants
|
-
|
-
|
-
|
10
|
-
|
-
|
10
|
|||||||||||||||||||||
Stock
options issued to employees
|
-
|
-
|
-
|
355
|
-
|
-
|
355
|
|||||||||||||||||||||
Net
loss for quarter
|
-
|
-
|
-
|
-
|
-
|
(3,012
|
)
|
(3,012
|
)
|
|||||||||||||||||||
Balance
at December 31, 2009
|
128,227
|
64,929
|
-
|
35,225
|
1,243
|
(100,991
|
)
|
407
|
||||||||||||||||||||
Stock
options issued to consultants
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Stock
options issued to employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Net
loss for quarter
|
-
|
-
|
-
|
-
|
-
|
(366
|
)
|
(366
|
)
|
|||||||||||||||||||
Balance
at March 31, 2010
|
128,227
|
$
|
64,929
|
$
|
-
|
$
|
35,225
|
$
|
1,243
|
$
|
(101,357
|
)
|
$
|
40
|
(The
accompanying notes are an integral part of these interim consolidated financial
statements)
6
Adherex
Technologies Inc.
(a
development stage company)
Notes
to Unaudited Interim Consolidated Financial Statements (Continued)
(U.S.
dollars and shares in thousands, except per share information)
1.
|
Going
Concern
|
Adherex
Technologies Inc. (“Adherex”), together with its wholly owned subsidiaries
Oxiquant, Inc. (“Oxiquant”) and Adherex, Inc., both Delaware corporations, and
Cadherin Biomedical Inc. (“CBI”), a Canadian corporation, collectively referred
to herein as the “Company,” is a development stage biopharmaceutical company
focused on cancer therapeutics.
These
unaudited interim consolidated financial statements have been prepared using
generally accepted accounting principles (“GAAP”) in the United States (“U.S.”)
of America that are applicable to a going concern which contemplates that
Adherex will continue in operation for the foreseeable future and will be able
to realize its assets and discharge its liabilities in the normal course of
business.
The
Company is a development stage company and during the three months ended March
31, 2010, incurred a net loss of $366. At March 31, 2010, it had an
accumulated deficit of $101,357 and had experienced negative cash flows from
operations since inception in the amount of $77,049. As further
described in Note 5 Subsequent Events, on April 30, 2010, the Company announced
the first closing of a $7.2 million funding into the Company.
These
financial statements do not reflect the potentially material adjustments in the
carrying values of assets and liabilities, the reported expenses, and the
balance sheet classifications used, that would be necessary if the going concern
assumption were not appropriate.
2.
|
Significant Accounting
Policies
|
Basis
of presentation
The
accompanying unaudited interim consolidated financial statements have been
prepared in accordance with U.S. GAAP and are the responsibility of the
Company’s management. These financial statements do not include all of the
information and notes required by U.S. GAAP for complete financial
statements. Accordingly, these unaudited interim condensed
consolidated financial statements should be read in conjunction with the
Company's audited financial statements and notes filed with the Securities and
Exchange Commission (“SEC”) in the Company's Annual Report on Form 10-K for the
year ended December 31, 2009. Except as set out below, the Company's
accounting policies are consistent with those presented in the audited financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2009. These unaudited interim consolidated financial
statements have been prepared in U.S. dollars.
7
Adherex
Technologies Inc.
(a
development stage company)
Notes
to Unaudited Interim Consolidated Financial Statements (Continued)
(U.S.
dollars and shares in thousands, except per share information)
Use
of estimates
The
preparation of financial statements in conformity with GAAP requires management
to make judgments, assumptions and estimates that affect the amounts reported in
these interim condensed consolidated financial statements. Actual
results could differ from these estimates. In the opinion of
management, these unaudited interim consolidated financial statements include
all normal and recurring adjustments, considered necessary for the fair
presentation of the Company’s financial position at March 31, 2010, and to state
fairly the results for the periods presented.
Cash
and cash equivalents
Cash and
cash equivalents consist of highly liquid investments with original maturities
at the date of purchase of three months or less.
The
Company places its cash and cash equivalents in investments held by financial
institutions in accordance with its investment policy designed to protect the
principal investment. At March 31, 2010, the Company had $3 in money
market investments, which typically have minimal risk, and $345 in
cash. The financial markets have been volatile resulting in concerns
regarding the recoverability of money market investments. The Company
did not experience any loss or write down of its money market investments for
the three-month period ended March 31, 2010 and 2009, respectively.
3.
|
Recent Accounting
Pronouncements
|
In
January 2010, an update was made to the Fair Value Measurements and Disclosures
topic of the FASB codification that requires new disclosures for fair value
measurements and provides clarification for existing disclosure requirements.
More specifically, this update will require (a) an entity to disclose separately
the amounts of significant transfers into and out of Level 1 and 2 fair value
measurements and to describe the reasons for the transfers; and (b) information
about purchases, sales, issuances, and settlements to be presented separately on
a gross basis in the reconciliation of Level 3 fair value measurements. This
update is effective for fiscal years beginning after December 15, 2009 except
for Level 3 reconciliation disclosures which are effective for fiscal years
beginning after December 15, 2010. The Company does not expect the adoption of
the guidance to have an impact on the Company’s consolidated financial position
and results of operations.
8
Adherex
Technologies Inc.
(a
development stage company)
Notes
to Unaudited Condensed Consolidated Financial Statements
(Continued)
(U.S.
dollars and shares in thousands, except per share information)
4.
|
Stockholders'
Equity
|
Warrants
to purchase common stock
At March
31, 2010, the Company had the following warrants outstanding to purchase common
stock priced in U.S. dollars with a weighted average exercise price of $0.44 and
a weighted average remaining life of 0.7 years:
Warrant Description
|
Number
Outstanding at
March 31
2010
|
Exercise Price
In U.S. Dollars
|
Expiration Date
|
||||||
Investor
warrants
|
2,326
|
$
|
0.97
|
May
7, 2010
|
|||||
2,326
|
The 2,326
warrants with an exercise price of $0.97 expired on May 7,
2010. Please read Note 5 – Subsequent Events for further details of
additional warrants outstanding as of April 30, 2010.
Stock
option plan
The
Compensation Committee of the Board of Directors administers the Company's stock
option plan. The Compensation Committee designates eligible
participants to be included under the plan and approves the number of options to
be granted from time to time under the plan.
A maximum
of 20,000 options (not including 700 options previously issued to the former
Chief Executive Officer and specifically approved by the stockholders outside
the plan) are authorized for issuance under the plan. The option
exercise price for all options issued under the plan is based on the fair value
of the underlying shares on the date of grant. The stock option plan,
as amended, allows the issuance of U.S. and Canadian dollar denominated
grants.
During
the three-month periods ended March 31, 2010 and 2009, the Company recognized
total stock-based compensation expense of $0 and $301,
respectively.
Valuation
assumptions
There
were no options granted in the three month period ended March 31, 2010 and the
options granted in the three-month periods ended March 31, 2009 were estimated
using the Black-Scholes option-pricing model, using the following weighted
average assumptions: expected dividend 0%, risk-free interest rate of 3.15%,
expected volatility 85% and a 7 year expected life.
9
Adherex
Technologies Inc.
(a
development stage company)
Notes
to Unaudited Condensed Consolidated Financial Statements
(Continued)
(U.S.
dollars and shares in thousands, except per share information)
Stock
option activity
The
following is a summary of option activity for the three-month period ended March
31, 2010 for stock options denominated in Canadian dollars:
|
Number of
Options
|
Weighted-
average
Exercise
Price
|
||||||
Outstanding
at December 31, 2009
|
2,623
|
CAD$
|
2.19
|
|||||
Granted
|
-
|
-
|
||||||
Exercised
|
-
|
-
|
||||||
Forfeited/cancelled/expired
|
-
|
CAD$
|
2.19
|
|||||
Outstanding
at March 31, 2010
|
2,623
|
CAD$
|
2.19
|
The
following is a summary of option activity for the three-month period ended March
31, 2010 for stock options denominated in U.S. dollars:
|
Number of
Options
|
Weighted-average
Exercise
Price
|
||||||
Outstanding
at December 31, 2009
|
13,201
|
$
|
0.55
|
|||||
Granted
|
-
|
-
|
||||||
Exercised
|
-
|
-
|
||||||
Forfeited/cancelled/expired
|
-
|
-
|
||||||
Outstanding
at March 31, 2010
|
13,201
|
$
|
0.55
|
5.
|
Subsequent
Event
|
On April
30, 2010, Adherex Technologies Inc. (TSX:AHX), announced that it has completed a
first closing of a non-brokered private placement (“Private
Placement”) of 240,066,664 units, at a price of $0.03 per unit for gross
proceeds of CDN$7,202,000. Adherex intends to raise up to an additional
CDN$1,800,000 by way of a non-brokered private placement which will occur in one
or more closings and up to an additional CDN$12,750,000 by way of a rights
offering.
The
equity financings will consist of:
|
·
|
a non-brokered private placement
by Adherex of between 240,000,000 and 300,000,000 units, at a price of
$0.03 per unit for gross proceeds of between CDN$7,200,000 and
CDN$9,000,000; and
|
|
·
|
a rights offering to its
shareholders for the distribution of rights to subscribe for 425,000,000
units at a price of $0.03 per unit, for gross proceeds of up to
$12,750,000.
|
Purchasers
of units in the private placement that are existing shareholders of Adherex have
agreed not to participate in the rights offering.
Each unit
shall consist of one common share and one common share purchase warrant (a
“Warrant”). Each Warrant will entitle the holder thereof to purchase
one common share of the Company at a purchase price of CDN$0.08 per share for a
period of five years from the issue date. The subscription price for
the equity financings represents a 40% discount to the 5 day volume weighted
average price of the Company’s common shares on the TSX at the date of receipt
of the term sheet from Southpoint.
10
Adherex
Technologies Inc.
(a
development stage company)
Notes
to Unaudited Condensed Consolidated Financial Statements
(Continued)
(U.S.
dollars and shares in thousands, except per share information)
Subject
to receiving the required regulatory approvals and as soon as possible after the
completion of the first closing of the private placement, it is anticipated that
Adherex will file a preliminary short-form prospectus for the rights offering
with the securities regulatory authorities in Canada to qualify the distribution
of the rights in Canada and a Form S-1 registration statement with the
Securities and Exchange Commission to register the transaction in the United
States. The commencement of the rights offering will occur promptly
following the receipt for the final prospectus in Canada and the effectiveness
of the registration statement in the United States. Adherex intends to complete
the rights offering as soon as possible thereafter. Adherex intends to announce
additional information regarding the rights offering at the time it files the
prospectus and registration statement.
Adherex
plans to use of proceeds of the sale of the Units will be to (i) conduct and
monitor a Phase II Eniluracil study, (ii) satisfy corporate overhead and related
expenses, and (iii) pay financing related expenses.
11
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
CAUTIONARY
STATEMENT
The
discussion below contains forward-looking statements regarding our financial
condition and our results of operations that are based upon our unaudited
interim consolidated financial statements, which have been prepared in
accordance with generally accepted accounting principles, or GAAP in the United
States (“U.S.”) and have been prepared by and are the responsibility of the
Company’s management. The preparation of these financial statements
requires our management to make estimates and judgments that affect the reported
amounts of assets, liabilities, income and expenses, and related disclosure of
contingent assets and liabilities. We evaluate our estimates on an
ongoing basis. Our estimates are based on historical experience and
on various other assumptions that we believe to be reasonable.
We
operate in a highly competitive environment that involves significant risks and
uncertainties, some of which are beyond our control. Our actual
results, performance or achievements may be materially different from any
results, performance or achievements expressed or implied by such
forward-looking statements. Words such as “may,” “will,” “expect,”
“might”, “believe,” “anticipate,” “intend,” “could,” “estimate,” “project,”
“plan,” and other similar words are one way to identify such forward-looking
statements. Forward-looking statements in this report include, but
are not limited to, statements with respect to (1) our anticipated sources and
uses of cash and cash equivalents; (2) our anticipated commencement dates,
completion dates and results of clinical trials; (3) our efforts to pursue
collaborations with the government, industry groups or other companies; (4) our
anticipated progress and costs of our clinical and preclinical research and
development programs; (5) our corporate and development strategies; (6) our
expected results of operations; (7) our anticipated levels of expenditures; (8)
our ability to protect our intellectual property; (9) the anticipated
applications and efficacy of our drug candidates; (10) our ability to attract
and retain key employees; and (11) the nature and scope of potential markets for
our drug candidates. All statements, other than statements of
historical fact, included in this report that address activities, events or
developments that we expect or anticipate will or may occur in the future are
forward-looking statements. We include forward-looking statements
because we believe it is important to communicate our expectations to our
investors. However, all forward-looking statements are based on
management’s current expectations of future events and are subject to a number
of risks and uncertainties, including our need to raise money in the very near
term and others as discussed in this report. Although we believe the
expectations reflected in the forward-looking statements are based upon
reasonable assumptions, we can give no assurance that our expectations will be
attained, and we caution you not to place undue reliance on such
statements.
12
Overview
On July
7, 2009, we announced that we intended to focus our remaining financial
resources on the development of oral eniluracil. We will focus our
resources on the development of a redesigned study combining oral eniluracil,
5-fluorouracil, or 5-FU, and leucovorin targeting anti-cancer
indications. After a careful evaluation of the data from the
prior GlaxoSmithKline, or GSK, studies and data from our own and other studies
using eniluracil, we believe we can begin patient enrollment in a Phase II study
with eniluracil, 5-FU and leucovorin within the next nine
months. Additionally, throughout the remainder of 2009, we conducted
a strategic review of ADH-1 and STS. Our evaluation of ADH-1 resulted
in the termination of our license agreement with McGill
University. We continue to hold various ADH-1 and small molecule
patents that are property of Adherex. We are also supporting an
investigator led Phase I study that will combine ADH-1 with
gemcitabine. With regards to STS, we continue patient enrollment of
our Phase III studies for both the International Childhood Liver Tumour Strategy
Group, known as SIOPEL, and the Children's Oncology Group, or COG.
As
discussed in Note 5 - Subsequent Events, we recently completed a funding into
the Company which will allow for our planned clinical development of eniluracil
as well as the support of our remaining programs. We currently have four
employees and members of the Board of Directors have agreed to continue to serve
for the benefit of the shareholders without further cash
compensation.
We are a
biopharmaceutical company focused on cancer therapeutics. We have the
following products in the clinical stage of
development: (1) Eniluracil, an oral dihydropyrimidine
dehydrogenase, or DPD, inhibitor, which may improve the tolerability and
effectiveness of 5-fluorouracil (5-FU), one of the most widely used oncology
drugs in the world; and (2) STS, a chemoprotectant being developed to reduce or
prevent hearing loss that may result from treatment with platinum-based
chemotherapy drugs and (3) ADH-1, a peptide molecule that selectively
targets N-cadherin, a protein present on the blood vessels of solid
tumors.
We are
evaluating a study design for a Phase II study in which we will dose patients
with eniluracil, 5-FU and leucovorin. Our prior eniluracil studies
have shown that the dose of eniluracil was too low and consequently provided
inadequate inactivation of DPD. We plan to increase the dose of
eniluracil and also include leucovorin in our planned clinical
trial. Leucovorin potentiates the anticancer activity of 5-FU and has
been shown to be well tolerated in patients treated with both eniluracil and
5FU. Leucovorin is uniquely appropriate to eniluracil regimens
because it greatly reduces the variability of 5-FU dosing. We are
evaluating cancer disease targets for our planned Phase II trial and are
currently considering colorectal and breast cancer, where Xeloda is indicated.
The combination of eniluracil and 5-FU has been shown to be active and well
tolerated against these diseases. However, the previous studies used
eniluracil in a ten to one ratio to 5-FU. Because such high ratios of
eniluracil to 5-FU were found to decrease the antitumor activity in laboratory
animals, our planned study will use a strategy that adequately inactivates DPD
and does not have high levels of eniluracil present when 5-FU is
administered. We expect to design and commence these studies
within the next nine months. We will solicit the assistance of
certain key opinion leaders for the design of these studies.
We
continue to enroll patients in our Phase III trials of STS with the
International Childhood Liver Tumour Strategy Group, known as SIOPEL and the
Children's Oncology Group, or COG. The SIOPEL trial is expected to
enroll approximately 100 pediatric patients with liver (hepatoblastoma) cancer
at participating SIOPEL centers worldwide and the COG study is expected to
enroll up to 120 pediatric patients worldwide in five different disease
indications.
We have
terminated our license agreement with McGill University related to
ADH-1. However, Adherex continues to hold various ADH-1 and small
molecule patents that are our property. We are also supporting an
investigator led Phase I study that will combine ADH-1 with
gemcitabine.
Our
current prioritization initiative focuses primarily on our clinical activities
with eniluracil, as well as logistical and product support of ongoing clinical
programs.
In
addition to our current development efforts, we continue to pursue
collaborations with other pharmaceutical and biotechnology companies,
governmental agencies, academic or other corporate collaborators with respect to
these molecules. Some of these preclinical molecules are currently
being tested under agreements with third parties that may help to advance these
products into future clinical development, either by us or under
investigator-initiated studies.
13
The
trading of our common stock in the U.S. must now be conducted in the
over-the-counter markets, on the pink sheets. Our common stock
continues to trade on the Toronto Stock Exchange, or TSX. The TSX
also has continued listing standards, including minimum market capitalization
and other requirements, that we might not meet in the future, particularly if
the price of our common stock does not increase or we are unable to raise
capital to continue our operations. On April 22, 2010, the TSX issued
an official delisting review of our common stock. The Company has
been granted 120 days in which to regain compliance with these
requirements.
We have
not received and do not expect to have significant revenues from our product
candidates until we are either able to sell our product candidates after
obtaining applicable regulatory approvals or we establish collaborations that
provide us with up-front payments, licensing fees, milestone payments, royalties
or other revenue. We experienced net losses of approximately $366 for the
three months ended March 31, 2010 and $2.2 million for the three months ended
March 31, 2009. As of March 31, 2010, our deficit accumulated
during development stage was approximately $101.4 million.
Our
operating expenses will depend on many factors, including the progress of our
drug development efforts and the implementation of further cost reduction
measures. Our research and development expenses, which include
expenses associated with our clinical trials, drug manufacturing to support
clinical programs, salaries for research and development personnel, stock-based
compensation, consulting fees, sponsored research costs, toxicology studies,
license fees, milestone payments, and other fees and costs related to the
development of product candidates, will depend on the availability of financial
resources, the results of our clinical trials and any directives from regulatory
agencies, which are difficult to predict. Our general and
administration expenses include expenses associated with the compensation of
employees, stock-based compensation, professional fees, consulting fees,
insurance and other administrative matters associated with our facilities in
Chapel Hill, North Carolina in support of our drug development
programs.
Results
of Operations
Three
months ended March 31, 2010 versus three months ended March 31,
2009:
In thousands of U.S. Dollars
|
Three Months
Ended
March 31,
2010
|
%
|
Three Months
Ended
March 31,
2009
|
%
|
Change
|
|||||||||||||||
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
Operating
expenses:
|
||||||||||||||||||||
Research
and development
|
163
|
45
|
%
|
1,279
|
86
|
%
|
(1,116
|
)
|
||||||||||||
General
and administration
|
203
|
55
|
%
|
673
|
14
|
%
|
(470
|
)
|
||||||||||||
Total
operating expenses
|
366
|
100
|
%
|
1,952
|
100
|
%
|
(1,586
|
)
|
||||||||||||
Loss
from operations
|
366
|
(1,952
|
)
|
(1,586
|
)
|
|||||||||||||||
Loss
on impairment of assets held for sale and leasehold
inducements
|
-
|
(340
|
)
|
(340
|
)
|
|||||||||||||||
Other
income
|
-
|
-
|
-
|
|||||||||||||||||
Interest
income
|
-
|
46
|
46
|
|||||||||||||||||
Net
loss and total comprehensive loss
|
$
|
(366
|
)
|
$
|
(2,246
|
)
|
$
|
(3,295
|
)
|
|
·
|
Total operating expense decreased
significantly in the three months ended March 31, 2010, as compared to the
same period in 2009 primarily due to a significant decrease in our overall
clinical development studies and reduction in our employee headcount
effective April 2009 and continuing through March 31,
2010.
|
|
·
|
The Company recorded a loss on
impairment of assets related to the write-down of certain assets value
held for sale and leasehold improvements during the three months ended
March 31, 2009.
|
14
|
·
|
The decrease in interest income
in the three months ended March 31, 2010, as compared to the same period
in 2009, is due to less cash on hand due to funding our operations during
the three months ended March 31, 2010, as compared to the same period in
2009.
|
Quarterly
Information
The
following table presents selected consolidated financial data for each of the
last eight quarters through March 31, 2010, as prepared under U.S. GAAP (U.S.
dollars in thousands, except per share information):
Period
|
Net Loss for
the Period
|
Basic and Diluted
Net Loss per
Common Share
|
||||||
September
30, 2007
|
$
|
(3,202
|
)
|
$
|
(0.02
|
)
|
||
December
31, 2007
|
$
|
(3,008
|
)
|
$
|
(0.02
|
)
|
||
March
31, 2008
|
$
|
(4,304
|
)
|
$
|
(0.03
|
)
|
||
June
30, 2008
|
$
|
(3,442
|
)
|
$
|
(0.03
|
)
|
||
September
30, 2008
|
$
|
(3,244
|
)
|
$
|
(0.03
|
)
|
||
December
31, 2008
|
$
|
(2,610
|
)
|
$
|
(0.02
|
)
|
||
March
31, 2009
|
$
|
(2,246
|
)
|
$
|
(0.02
|
)
|
||
June
30, 2009
|
$
|
(761
|
)
|
$
|
(0.01
|
)
|
||
September
30, 2009
|
$
|
(35
|
)
|
$
|
(0.00
|
)
|
||
December
31, 2009
|
$
|
30
|
$
|
0.00
|
||||
March
31, 2010
|
$
|
(366
|
)
|
$
|
(0.00
|
)
|
Liquidity
and Capital Resources
|
March 31,
|
December 31,
|
||||||
In thousands of U.S. dollars
|
2010
|
2009
|
||||||
Selected
Asset and Liability Data:
|
||||||||
Cash
and cash equivalents
|
$
|
348
|
$
|
685
|
||||
Working
capital
|
47
|
412
|
||||||
Selected
Stockholders’ Equity Data:
|
||||||||
Common
stock
|
$
|
64,929
|
$
|
64,929
|
||||
Deficit
accumulated during the development stage
|
(101,357
|
)
|
(100,991
|
)
|
||||
Total
stockholders’ equity
|
40
|
406
|
We have
financed our operations since inception on September 3, 1996 through the sale of
equity and debt securities and have raised gross proceeds totaling approximately
$93.0 million through April 30, 2010. We have incurred net losses and
negative cash flow from operations each year, and we had an accumulated deficit
of approximately $101.4 million at March 31, 2010. We have not
generated any revenues to date through the sale of products. We do
not expect to have significant revenues or income, other than interest income,
until we are able to sell our product candidates after obtaining applicable
regulatory approvals or we establish collaborations that provide us with
up-front payments, licensing fees, milestone payments, royalties or other
payments.
The net
cash flow used in operating activities for the three months ended March 31, 2010
was approximately $337, as compared to $2.3 million during the same period in
2009. This decrease is due to a decrease in our overall clinical
activities and lower headcount during the three months ended March 31, 2010, as
compared to the same period in 2009.
At March
31, 2010, our working capital decreased by approximately $366 from December
31, 2009 primarily due to funding research and development activities and
general corporate operations.
15
Our
projections of further capital requirements are subject to substantial
uncertainty. Our working capital requirements may fluctuate in future
periods depending upon numerous factors, including: our ability to obtain
additional financial resources; our ability to enter into collaborations that
provide us with up-front payments, milestones or other payments; results of our
research and development activities; progress or lack of progress in our
preclinical studies or clinical trials; unfavorable toxicology in our clinical
programs, our drug substance requirements to support clinical programs; change
in the focus, direction, or costs of our research and development programs;
headcount expense; the costs involved in preparing, filing, prosecuting,
maintaining, defending and enforcing our patent claims; competitive and
technological advances; the potential need to develop, acquire or license new
technologies and products; our business development activities; new regulatory
requirements implemented by regulatory authorities; the timing and outcome of
any regulatory review process; and commercialization activities, if
any.
Outstanding
Share Information
The
outstanding share data for our company as of March 31, 2010 (in
thousands):
|
March 31,
2010
|
|||
Common
shares
|
128,227
|
|||
Warrants
|
2,326
|
|||
Stock
options
|
15,823
|
|||
Total
|
146,376
|
As
described in Note 5 - Subsequent Events, the Company closed a $7.2 million
funding on April 30, 2010 which consists of 240,066,664 units. Each unit
represents one common share and one warrant.
Financial
Instruments
We invest
excess cash and cash equivalents in high credit quality investments held by
financial institutions in accordance with our investment policy designed to
protect the principal investment. At March 31, 2010, we had $0.3
million in cash accounts. We have not experienced any loss or write
down of our money market investments for the three months ended March 31, 2010
and 2009, respectively.
Our
investment policy is to manage investments to achieve, in the order of
importance, the financial objectives of preservation of principal, liquidity and
return on investment. Investments may be made in U.S. or Canadian
obligations and bank securities, commercial paper of U.S. or Canadian industrial
companies, utilities, financial institutions and consumer loan companies, and
securities of foreign banks provided the obligations are guaranteed or carry
ratings appropriate to the policy. Securities must have a minimum Dun
& Bradstreet rating of A for bonds or R1 low for commercial
paper. The policy also provides for investment limits on
concentrations of securities by issuer and maximum-weighted average time to
maturity of twelve months. This policy applies to all of our
financial resources.
The
policy risks are primarily the opportunity cost of the conservative nature of
the allowable investments. As our main purpose is research and
development, we have chosen to avoid investments of a trading or speculative
nature.
Off-Balance
Sheet Arrangements
Since our
inception, we have not had any material off-balance sheet
arrangements. In addition, we do not engage in trading activities
involving non-exchange traded contracts. As such, we are not
materially exposed to any financing, liquidity, market or credit risk that could
arise if we had engaged in such activities.
Contractual
Obligations and Commitments
Since our
inception, inflation has not had a material impact on our
operations. We had no material commitments for capital expenses as of
March 31, 2010.
16
The
following table represents our contractual obligations and commitments at March
31, 2010 (in thousands of U.S. dollars):
|
Less than 1 year
|
1-3
years
|
3-5
years
|
More than 5
years
|
Total
|
|||||||||||||||
Englert
Lease (1)
|
$
|
50
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
50
|
||||||||||
Eastowne
Lease (2)
|
18
|
-
|
-
|
-
|
18
|
|||||||||||||||
Drug
purchase commitments (3)
|
-
|
25
|
-
|
-
|
25
|
|||||||||||||||
Total
|
$
|
68
|
$
|
25
|
$
|
-
|
$
|
-
|
$
|
93
|
(1)
|
In April 2004, we entered into a
lease for facilities in Durham, North Carolina. Amounts shown
assume the maximum amounts due under the lease. In July 2008,
we entered into an agreement with another company to sublease this
facility until September 2010; however, in the event of their default, we
would become responsible for the obligation. We are
contractually obligated under the lease until September
2010.
|
|
|
(2)
|
In December 2009, we entered into
a lease for new office facilities in Chapel Hill, North
Carolina. Amounts shown assume the maximum amounts due under
the lease.
|
|
|
(3)
|
Commitments to our third party
manufacturing vendors that supply drug substance primarily for our
clinical studies.
|
Research
and Development
Our
research and development efforts have been focused on the development of cancer
and currently include eniluracil, STS, ADH-1 and various cadherin-based
preclinical programs.
We have
established relationships with contract research organizations, universities and
other institutions, which we utilize to perform many of the day-to-day
activities associated with our drug development. Where possible, we
have sought to include leading scientific investigators and advisors to enhance
our internal capabilities. Research and development issues are reviewed
internally and major development issues are presented to the members of our
Scientific and Clinical Advisory Board for discussion and review.
Research
and development expenses totaled $163 and $1.3 million for the three months
ended March 31, 2010 and 2009, respectively.
Our
product candidates are in various stages of development and still require
significant, time-consuming and costly research and development, testing and
regulatory clearances. In developing our product candidates, we are
subject to risks of failure that are inherent in the development of products
based on innovative technologies. For example, it is possible that
any or all of these products will be ineffective or toxic, or will otherwise
fail to receive the necessary regulatory clearances. There is a risk that our
product candidates will be uneconomical to manufacture or market or will not
achieve market acceptance. There is also a risk that third parties may hold
proprietary rights that preclude us from marketing our product candidates or
that others will market a superior or equivalent product. As a result
of these factors, we are unable to accurately estimate the nature, timing and
future costs necessary to complete the development of these product candidates.
In addition, we are unable to reasonably estimate the period when material net
cash inflows could commence from the sale, licensing or commercialization of
such product candidates, if ever.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenue and expense
during the reporting period. These estimates are based on assumptions
and judgments that may be affected by commercial, economic and other
factors. Actual results could differ from these
estimates.
Our
accounting policies are consistent with those presented in our annual
consolidated financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2009.
17
Item 4. Controls and
Procedures
(a) Evaluation of Disclosure Controls
and Procedures. In connection with the preparation of this quarterly
report on Form 10-Q/A, an evaluation was carried out by the Company’s
management, with the participation of the Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the Company’s disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (“Exchange Act”)) as of March 31,
2010. Disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports filed or submitted under the
Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in Securities and Exchange Commission rules and forms and that
such information is accumulated and communicated to management, including the
Chief Executive Officer and the Chief Financial Officer, to allow timely
decisions regarding required disclosures. In designing and evaluating
our disclosure controls and procedures, management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control
objectives. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded, as of the end of the period covered by
this report, that the Company’s disclosure controls and procedures were not
effective as a result of having identified two material weaknesses in our
internal control over financial reporting, as described in further detail
below.
Our
management has identified a control deficiency because we lack sufficient staff
to segregate accounting duties. We believe the control deficiency results
primarily because we have one person performing all accounting and financial
reporting duties. As a result, we do not maintain adequate segregation of duties
within our critical financial reporting applications, the related modules and
financial reporting processes. This control deficiency could result in a
misstatement of balance sheet and income statement accounts in our interim or
annual financial statements that would not be detected. Accordingly, management
has determined that this control deficiency constitutes a material
weakness.
Our
management has also identified another control deficiency that it believes
constitutes a material weakness in our control over financial
reporting. We did not maintain sufficient personnel with an
appropriate level of technical accounting knowledge, experience, and training in
the application of U.S. GAAP commensurate with our complexity and our financial
accounting and reporting requirements. This control deficiency could
result in a misstatement of the financial statements including disclosure that
would not be prevented or detected on a timely basis. We have not,
therefore, timely prepared our consolidated financial statements and filed our
periodic reports with the SEC. While we strive to ensure we have appropriate
accounting personnel as well as an appropriate segregation of duties as much as
practicable, we currently have insufficient financial resources to justify
additional staff. The Company continues to seek solutions to
improve internal control over financial reporting. As a result, these
significant internal control deficiencies are not expected to be remediated
until we secure additional financial resources.
(b) Changes in Internal Controls.
There were no changes in our internal control over financial reporting that
occurred during the fiscal quarter ended March 31, 2010 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
18
SIGNATURES
Pursuant
to requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Adherex
Technologies Inc.
|
||
Date:
February 4, 2011
|
By:
|
/s/ Rostislav Raykov |
Rostislav
Raykov
|
||
Chief
Executive Officer
|
||
(principal
executive officer)
|
||
Date:
February 4, 2011
|
By:
|
/s/ Robert Andrade |
Robert
Andrade
|
||
Chief
Financial Officer
|
||
(principal
financial and chief accounting
officer)
|
19