Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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[X]
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Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended March 31, 2014
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[ ]
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Transition Report under Section 13 or 15(d) of the Exchange Act
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For the transition period from __________ to __________
Commission file number: 333-147193
FluoroPharma Medical, Inc.
(Exact name of registrant as specified in its charter)
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Nevada
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20-8325616
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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8 Hillside Avenue, Suite 207
Montclair, NJ
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07042
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(Address of principal executive offices)
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(Zip Code)
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(973) 744-1565
(Registrant’s telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last report)
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Indicate by check mark whether the registrant (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant 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 during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files. Yes [X] No [ ]
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.
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ]
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Smaller reporting company
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[X]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of May 14, 2014, there were 28,963,158 shares of $0.001 par value common stock issued and outstanding.
FORM 10-Q
FluoroPharma Medical, Inc.
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Page
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PART I - FINANCIAL INFORMATION
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PART II - OTHER INFORMATION
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Item 1. Financial Statements
FLUOROPHARMA MEDICAL, INC. and Subisidiary (a development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, 2014
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December 31, 2013
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(unaudited)
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$ | 718,188 | $ | 1,143,175 | ||||
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Investment in trading securities
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176,413 | 634,826 | ||||||
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Prepaid expenses & other
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70,530 | 52,959 | ||||||
| Total Current Assets | 965,131 | 1,830,960 | ||||||
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Property and equipment, net
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36,072 | 35,429 | ||||||
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Intangible assets, net
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47,862 | 49,339 | ||||||
| Total Assets | $ | 1,049,065 | $ | 1,915,728 | ||||
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
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Current Liabilities:
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Accounts payable
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$ | 325,952 | $ | 183,298 | ||||
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Derivative warrant liability
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2,647,237 | 2,549,196 | ||||||
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Accrued expenses and other
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301,598 | 239,673 | ||||||
| Total Current Liabilities | 3,274,787 | 2,972,167 | ||||||
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Commitments & Contingencies
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Stockholders’ Deficit:
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Preferred stock Series A; $0.001 par value, 3,500,000 shares designated 976,703 and 2,350,196 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively (preference in liquidation of $844,819 and $1,950,663 at March 31, 2014 and December 31, 2013, respectively)
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979 | 2,352 | ||||||
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Preferred stock Series B; $0.001 par value, 12,000,000 shares designated 5,694,571 and 5,725,821 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively (preference in liquidation of $4,788,918 and $4,703,533 at March 31, 2014 and December 31, 2013, respectively)
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5,695 | 5,726 | ||||||
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Common stock - Class A - $0.001 par value, 100,000,000 shares authorized, 28,477,520 and 25,675,013 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively
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28,479 | 25,676 | ||||||
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Additional paid-in capital
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23,386,063 | 23,084,429 | ||||||
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Deficit accumulated in the development stage
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(25,646,938 | ) | (24,174,622 | ) | ||||
| Total Stockholders’ Deficit | (2,225,722 | ) | (1,056,439 | ) | ||||
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Total Liabilities and Stockholders’ Deficit
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$ | 1,049,065 | $ | 1,915,728 | ||||
The accompanying notes are an integral part of these consolidated financial statements
FLUOROPHARMA MEDICAL, INC. and Subsidiary (a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Three Months Ended March 31,
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June 13, 2003 (inception) to
March 31, 2014
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2014
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2013
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(unaudited)
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(unaudited)
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(unaudited)
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Operating Expenses:
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General and administrative
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$ | 894,848 | $ | 767,599 | $ | 14,854,816 | ||||||
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Research and development
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324,587 | 291,199 | 7,704,157 | |||||||||
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Total Operating Expenses
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1,219,435 | 1,058,798 | 22,558,973 | |||||||||
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Loss from Operations
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(1,219,435 | ) | (1,058,798 | ) | (22,558,973 | ) | ||||||
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Other Income (Expense):
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Interest income
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1,058 | 167 | 6,365 | |||||||||
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Other Income
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- | 70,525 | 70,525 | |||||||||
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Gain on debt restructuring
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- | - | 1,358,127 | |||||||||
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Loss on disposition of fixed assets
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- | - | (72,695 | ) | ||||||||
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Gain on settlement of accounts payable
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- | - | 264,625 | |||||||||
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Loss on sale of trading securities
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(183,598 | ) | - | (1,001,963 | ) | |||||||
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Change in unrealized gain (loss) on trading securities
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141,739 | - | (94,404 | ) | ||||||||
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Loss on revaluation and modification of derivative warrant liability
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(64,920 | ) | - | (281,621 | ) | |||||||
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Interest and other expense
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(1,366 | ) | - | (369,043 | ) | |||||||
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Total Other Income (Expense), net
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(107,087 | ) | 70,692 | (120,084 | ) | |||||||
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Loss Before Provision for Income Taxes
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(1,326,522 | ) | (988,106 | ) | (22,679,057 | ) | ||||||
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Provision for Income Taxes
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- | - | - | |||||||||
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Net Loss
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$ | (1,326,522 | ) | $ | (988,106 | ) | $ | (22,679,057 | ) | |||
| - | ||||||||||||
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Preferred Stock Dividends
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(145,794 | ) | (44,057 | ) | (2,967,881 | ) | ||||||
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Net Loss Attributable to Common Stockholders
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$ | (1,472,316 | ) | $ | (1,032,163 | ) | $ | (25,646,938 | ) | |||
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Net Loss per Common Share - Basic and Diluted
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$ | (0.05 | ) | $ | (0.04 | ) | $ | (2.26 | ) | |||
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Weighted Average Shares Used in per Share Calculation - Basic and Diluted:
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27,282,095 | 24,345,461 | 11,344,110 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements
FLUOROPHARMA MEDICAL, INC. and Subsidiary (a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Three Month Ended March 31,
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June 13, 2003 (inception) to
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2014
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2013
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March 31, 2014
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CASH FLOWS FROM OPERATING ACTIVITIES:
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(unaudited)
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(unaudited)
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(unaudited)
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Net loss
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$ | (1,326,522 | ) | $ | (988,106 | ) | $ | (22,679,057 | ) | |||
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Adjustments to reconcile net loss to net cash used by operating activities
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Depreciation and amortization
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6,155 | 6,102 | 286,622 | |||||||||
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Non-cash fair value of common stock issued for consulting
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- | 25,150 | 179,538 | |||||||||
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Share-based compensation related to employee stock options
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128,972 | 134,525 | 3,440,369 | |||||||||
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Amortization of debt discount
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- | - | 19,292 | |||||||||
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Non-cash fair value of stock options issued to non-employees for consulting
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2,873 | 112,292 | 1,383,588 | |||||||||
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Non-cash fair value of warrants issued to non-employees
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- | - | 134,420 | |||||||||
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Expenses paid by issuance of preferred and common stock
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- | - | 247,650 | |||||||||
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Loss on fixed asset dispositions
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- | - | 200,940 | |||||||||
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Non-cash interest expense on beneficial conversion
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- | - | 27,500 | |||||||||
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Gain on debt and accounts payable settlement
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- | - | (1,622,752 | ) | ||||||||
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Loss on early extinguishment of debt
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- | - | 61,419 | |||||||||
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Net loss on sale of trading securities
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183,598 | - | 1,001,963 | |||||||||
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Change in unrealized gain (loss) on trading securities
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(141,739 | ) | - | 94,404 | ||||||||
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Loss on revaluation and modification of derivative warrant liability
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64,920 | - | 281,621 | |||||||||
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(Increase) decrease in:
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Accounts receivable
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- | - | 50,000 | |||||||||
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Prepaid expenses
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(17,571 | ) | 37,134 | (70,530 | ) | |||||||
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Increase (decrease) in:
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Accounts payable
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142,654 | 57,215 | 844,795 | |||||||||
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Accrued expenses and other
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(82,615 | ) | (56,511 | ) | 587,161 | |||||||
| Net Cash Used by Operating Activities | (1,039,275 | ) | (672,199 | ) | (15,531,057 | ) | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Proceeds from sale of investments
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416,554 | - | 2,222,604 | |||||||||
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Cash paid for intangible assets
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- | - | (161,609 | ) | ||||||||
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Net cash received in acquistition
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- | - | 69 | |||||||||
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Cash paid for purchase of property and equipment
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(5,321 | ) | (1,029 | ) | (423,649 | ) | ||||||
| Net Cash Provided by (Used in) Investing Activities | 411,233 | (1,029 | ) | 1,637,415 | ||||||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from issuance of notes – stockholders
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- | - | 1,730,000 | |||||||||
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Repayment of notes payable - stockholders
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- | - | (55,000 | ) | ||||||||
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Proceeds from issuance of short-term convertible notes
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- | - | 608,165 | |||||||||
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Advances from stockholders
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- | - | 679,500 | |||||||||
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Proceeds from sale of common stock, net
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203,055 | - | 9,208,199 | |||||||||
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Proceeds from sale of preferred stock, net
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- | - | 2,440,966 | |||||||||
| Net Cash Provided by Financing Activities | 203,055 | - | 14,611,830 | |||||||||
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Net Increase (Decrease) in Cash and Cash Equivalents
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(424,987 | ) | (673,228 | ) | 718,188 | |||||||
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Cash and Cash Equivalents, Beginning of Period
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1,143,175 | 1,304,088 | - | |||||||||
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Cash and Cash Equivalents, End of Period
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$ | 718,188 | $ | 630,860 | $ | 718,188 | ||||||
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Supplemental Cash Flow Disclosures:
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Interest expense paid in cash
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$ | - | $ | - | $ | 5,297 | ||||||
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Tax paid
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$ | 956 | $ | - | $ | 2,618 | ||||||
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Supplemental Non-Cash Disclosure:
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Accrued expenses settled in preferred stock
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$ | - | $ | - | $ | 57,196 | ||||||
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Sale of preferred stock for marketable equity securities
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$ | - | $ | - | $ | 3,495,384 | ||||||
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Fair value of warrants issued to Series B holders
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$ | - | $ | - | $ | (2,224,778 | ) | |||||
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Fair value of warrants modified in connection with Series B financing
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$ | (114,923 | ) | $ | - | $ | (228,608 | ) | ||||
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Fair value of warrants issued to Series B placement agents
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$ | (12,738 | ) | $ | - | $ | (36,346 | ) | ||||
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Conversion of preferred stock to common stock
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$ | - | $ | - | $ | 288 | ||||||
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Notes payable – stockholder – settled in common stock
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$ | - | $ | - | $ | 2,135,000 | ||||||
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Accrued interest – stockholder – settled in common stock
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$ | - | $ | - | $ | 188,569 | ||||||
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Notes payable – stockholder – settled in preferred stock
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$ | - | $ | - | $ | 275,000 | ||||||
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Preferred Stock Dividends
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$ | (145,794 | ) | $ | (44,057 | ) | $ | (2,967,881 | ) | |||
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Advances from stockholders settled in common stock
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$ | - | $ | - | $ | 679,500 | ||||||
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Accounts payable settled in common stock
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$ | - | $ | - | $ | 471,472 | ||||||
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Accounts payable settled in common stock options
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$ | - | $ | - | $ | 30,500 | ||||||
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Accrued expenses settled in common stock options
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$ | - | $ | - | $ | 3,000 | ||||||
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Decrease in accounts payable related to fixed asset disposition
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$ | - | $ | - | $ | 133,314 | ||||||
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Decrease in accounts payable related to settlement
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$ | - | $ | - | $ | 1,622,752 | ||||||
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Decrease in accrued expenses related to settlement
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$ | - | $ | - | $ | 3,000 | ||||||
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Increase in accounts receivable related to common stock issuance
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$ | - | $ | - | $ | 50,000 | ||||||
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Warrants issued with convertible notes payable
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$ | - | $ | - | $ | 7,474 | ||||||
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Conversion of Series A preferred shares to common stock
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$ | (1,373 | ) | $ | - | $ | (1,373 | ) | ||||
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Conversion of Series B preferred shares and accrued dividends to common stock
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$ | (31 | ) | $ | - | $ | (31 | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements
FLUOROPHARMA MEDICAL, INC. and Subsidiary (a development stage company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FluoroPharma Medical, Inc., a Nevada corporation (the “Company”), is a molecular imaging company headquartered in Montclair, N.J. The Company was founded as FluoroPharma Inc. in 2003 to engage in the discovery, development and commercialization of proprietary products for the positron emission tomography (“PET”) market. The Company’s initial focus has been on the development of novel cardiovascular imaging agents that can more efficiently and effectively detect and assess acute and chronic forms of coronary artery disease (“CAD”). Molecular imaging pharmaceuticals are radiopharmaceuticals that enable early detection of disease through the visualization of subtle changes in biochemical and biological processes.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, FluoroPharma, Inc., a Delaware corporation.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of FluoroPharma Medical, Inc. and Subsidiary have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by U.S. GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Certain prior year amounts in the condensed consolidated financial statements and notes thereto have been reclassified to conform to the current period’s presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2014 or for any other interim period. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company and the notes thereto as of and for the year ended December 31, 2013, as included in the Company's Form 10-K filed with the SEC on March 25, 2014.
As of March 31, 2014, the Company has not generated any revenues from its products and is therefore still considered to be a development stage company as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915 “Development Stage Entities”. The Company is devoting substantially all of its present efforts to research and development of commercially viable products that meet the standards of and are approved by the United States Food and Drug Administration, raising capital and attracting qualified advisors and personnel to further advance the Company’s goals. The Company has not commenced its planned principal operations, has not generated any revenues from operations and has no assurance of any future revenues. All losses accumulated since incorporation on June 13, 2003 have been considered as part of the Company's development stage activities.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. All cash balances were highly liquid at March 31, 2014 and December 31, 2013.
Use of Estimates
The accompanying consolidated financial statements are prepared in conformity with U.S. GAAP, and include certain estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period, including contingencies. Accordingly, actual results may differ from those estimates.
Concentration of Risks
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and investments. The Company primarily maintains its cash balances with financial institutions in federally insured accounts. The Company may from time to time have cash in banks in excess of FDIC insurance limits. The Company has not experienced any losses to date resulting from this practice. The Company’s investments in trading securities are comprised of a single investment in a publicly traded stock and through March 31, 2014 the Company has cumulatively recorded an unrealized loss related to that stock’s decline in value of $94,404.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, FluoroPharma, Inc. Intercompany transactions and balances have been eliminated upon consolidation.
Investments
Investments that are purchased and held principally for the purpose of selling them in the near term are classified as “trading securities” and reflected on the balance sheet at fair value, with unrealized gains and losses included in earnings. All the Company’s investments are considered “trading securities” at March 31, 2014 and December 31, 2013. Realized gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company’s property and equipment at March 31, 2014 and December 31, 2013 consisted of computer and office equipment and machinery and equipment, and leasehold improvements with estimated useful lives of three to five years. Depreciation and amortization was $4,678, $4,625 and $172,876 in the periods ended March 31, 2014, 2013 and the period from inception to March 31, 2014, respectively.
Intangible Assets
The Company’s intangible assets consist of technology licenses and are carried at the legal cost to obtain them. Intangible assets are amortized using the straight line method over their estimated useful life of 15 years.
Impairments
The Company assesses the impairment of long-lived assets, including other intangible assets, whenever events or changes in circumstances indicate that their carrying value may not be recoverable in accordance with ASC Topic 360-10-35, “Impairment or Disposal of Long-Lived Assets.” The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments, related primarily to the future profitability and/or future value of the assets. The Company records an impairment charge if it believes an investment has experienced a decline in value that is other than temporary.
Management has determined that no impairments were required as of March 31, 2014.
Derivative financial instruments
The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a binomial pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
The Company has derivative liabilities at March 31, 2014 relating to certain warrants issued in 2013 and 2014 that contain anti-dilution provisions.
Fair Value of Financial Instruments
The Company's other financial instruments primarily consist of cash, trading securities and accounts payable. The fair value of these financial instruments is calculated using current market prices, or on a historical cost basis, which, due to the short maturity of these financial instruments, approximates the fair value at the reporting dates of these financial statements.
The Company groups its assets and liabilities measured at fair value, in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).
Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
The three levels of the fair value hierarchy are as follows:
Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the financial instrument.
The Company recognizes transfers between levels at the end of the reporting period as if the transfers occurred on the last day of the reporting period.
Assets and liabilities measured at fair value on a recurring basis at March 31, 2014 are summarized below:
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March 31, 2014
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Level 1
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Level 2
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Level 3
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Fair Value
|
||||||||
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Current Assets:
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|
|||||||||||
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Trading securities
|
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$
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176,413
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$
|
--
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$
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--
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$
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176,413
|
|
|
Current Liabilities:
|
||||||||||||
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Derivative warrant liability
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$
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-
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$
|
--
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$
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2,647,237
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$
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2,647,237
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||||
Assets and liabilities measured at fair value on a recurring basis at December 31, 2013 are summarized below:
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December 31, 2013
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|||||||||||
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Level 1
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Level 2
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Level 3
|
Fair Value
|
|||||||
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Current Assets:
|
|
|
||||||||||
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Trading securities
|
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$
|
634,826
|
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$
|
--
|
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$
|
--
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$
|
634,826
|
|
|
Current Liabilities:
|
||||||||||||
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Derivative warrant liability
|
$
|
-
|
$
|
--
|
$
|
2,549,196
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$
|
2,549,196
|
||||
The following table sets forth the changes in the estimated fair value during 2014 for our Level 3 classified derivative warrant liability:
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Three Months Ended
|
||||
|
March 31, 2014
|
||||
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Fair value at beginning of period
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$
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$ 2,549,196
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||
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Modification and reclassification of outstanding warrants
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114,923
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|||
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Change in fair value
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(16,882
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) | ||
|
Fair value at end of period
|
$
|
$ 2,647,237
|
||
At December 31, 2013, the Company measured at fair value on a nonrecurring basis certain equipment in accordance with ASC Topic 360-10-35. Fair value was determined to be $0 using certain Level 3 inputs and resulted in the Company recording a loss of $128,245 in 2013. Fair value was estimated using quantitative and qualitative considerations including the expected use and disposition of the equipment.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of the existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in results of operations in the period that the tax rate change occurs. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company accounts for uncertain tax positions in accordance with FASB ASC Topic 740-10, Accounting for Uncertainty in Income Taxes. Income tax positions must meet a more-likely-than-not threshold in order to be recognized in the financial statements. There were no recognized uncertain tax positions at March 31, 2014 and December 31, 2013. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within operations as income tax expense. As new information becomes available, the assessment of the recognition threshold and the measurement of the associated tax benefit of uncertain tax positions may result in financial statement recognition or de-recognition. The Company had no accrual for interest or penalties on its balance sheets at March 31, 2014 or December 31, 2013, and has not recognized interest and/or penalties in the statement of operations for the periods ended March 31, 2014 and 2013. Further, the Company currently has no open tax years, subject to audit prior to December 31, 2010.
Accounting for Share-Based Payments
The Company follows the provisions of ASC Topic 718, which establishes the accounting for transactions in which an entity exchanges equity securities for services and requires companies to expense the estimated fair value of these awards over the requisite service period. The Company uses the Black-Scholes option pricing model in determining fair value. Accordingly, compensation cost has been recognized using the fair value method, which resulted in employee stock-based compensation expense for the three months ended March 31, 2014 and 2013 of $128,972 and $134,525, respectively, and $3,440,369 for the period from June 13, 2003 (inception) to March 31, 2014.
The Company accounts for share-based payments granted to non-employees in accordance with ASC Topic 505, “Equity Based Payments to Non-Employees.” The Company determines the fair value of the stock-based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.
To compute compensation expense, the Company estimated the fair value of each option award on the date of grant using the Black-Scholes option pricing model for employees, and calculated the fair value of each option award at the end of the period for non-employees. The Company based the expected volatility assumption on a volatility index of peer companies as the Company did not have sufficient historical market information to estimate the volatility of its own stock. The expected term of options granted represents the period of time that options are expected to be outstanding. The Company estimated the expected term of stock options by using the simplified method. The expected forfeiture rates are based on the historical employee forfeiture experiences. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards. The Company has not declared a dividend on its common stock since its inception and has no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
The fair value of each share-based payment is estimated on the measurement date using the Black-Scholes model with the following assumptions:
|
2014
|
2013
|
|||||||
|
Risk-free interest rate
|
3.40
|
%
|
2.61
|
%
|
||||
|
Expected volatility
|
60.13
|
%
|
62.20
|
%
|
||||
|
Dividend yield
|
none
|
none
|
||||||
|
Expected term
|
5.5 years
|
6 years
|
||||||
Net Loss per Common Share
The Company computes net loss per common share in accordance with ASC Topic 260. Net loss per share is based upon the weighted average number of outstanding common shares and the dilutive effect of common share equivalents, such as options and warrants to purchase common stock, and convertible notes, if applicable, that are outstanding each year.
Basic and diluted earnings per share were the same for all periods presented as including common stock equivalents in the calculation of diluted earnings per share would have been antidilutive. As of March 31, 2014, the Company had outstanding options exercisable for 4,756,928 shares of its common stock, warrants exercisable for 15,131,535 shares of its common stock, series A preferred stock (the “Series A Preferred Stock”) convertible into 1,689,638 shares of common stock, and series B preferred stock (the “Series B Preferred Stock”) convertible into 6,724,952 shares of common stock. At March 31, 2013, the Company had outstanding options exercisable for 4,475,428 shares of its common stock, and warrants exercisable for 7,318,312 shares of common stock, and Series A Preferred Stock convertible into 2,179,656 shares of common stock.
Research and Development Costs
Research and development costs are expensed as incurred.
Segment Reporting
The Company has determined that it operates in only one segment currently, which is biopharmaceutical research and development.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Going concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced net losses and negative cash flows from operations since its inception. The Company has sustained cumulative losses attributable to common stockholders of $25,646,938 as of March 31, 2014. The Company has historically financed its operations through issuances of equity and the proceeds of debt instruments. In the past, the Company has also provided for its cash needs by issuing common stock, options and warrants for certain operating costs, including consulting and professional fees. During the three months ended March 31, 2014, the Company raised $203,055 in cash, net of offering costs, through the private placement of common stock and warrants (see Note 3). In addition, during the three months ended March 31, 2014, the Company received gross proceeds of $416,554 from the sale of freely tradable securities received as consideration in the 2013 Series B Offering. During the year ended December 31, 2013, the Company raised $1,370,190 in cash and converted notes and freely tradable securities valued at $3,495,384 (based upon the closing price of such securities on the day prior to closing), net of offering costs, through the through the private placements of common stock, Series B Preferred Stock and warrants . As of December 31, 2013, the Company received gross proceeds of $1.8 million from the sale of a portion of such freely tradable securities received as consideration in the 2013 Series B Offering.
The Company continues to actively pursue various funding options, including equity offerings, to obtain additional funds to continue the development of its products and bring them to commercial markets. Management continues to assess fund raising opportunities to ensure minimal dilution to its existing shareholder base and to obtain the best price for its securities. Management is optimistic based upon its ability to raise funds in prior years, through private placement offerings (see description of private placement offerings in Note 3), that it will be able to raise additional funds in the future. If the Company is unable to raise additional capital as may be needed to meet its projections for operating expenses, it could have a material adverse effect on liquidity or require the Company to cease or significantly delay some of its clinical trials. These financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
2. TRADING SECURITIES
On September 18, 2013, the Company received 1,230,769 shares of freely tradable equity securities with a fair value of $3,495,384 (based upon the closing price on the day prior to closing) in connection with the sale of Series B Preferred Stock. The Company’s investments in trading securities are comprised of a single investment in a publicly traded stock and through March 31, 2014, the Company has cumulatively recorded an unrealized loss related to that stock’s decline in value of $94,404. In addition, during the three months ended March 31, 2014, the Company received cash proceeds of $416,554 and recorded $183,598 in realized losses upon the sale of a portion of these securities. As at March 31, 2014, the Company has shares with a fair value of $176,413 in trading securities included in its condensed consolidated balance sheet.
During the year ended December 31, 2013, the Company received cash proceeds of $1,806,050 and recorded $818,365 in realized losses upon the sale of these securities. As at December 31, 2013, the Company has shares with a fair value of $634,826 in trading securities included in its consolidated balance sheet.
3. 2013 PRIVATE PLACEMENT - Common Stock
On December 31, 2013, the Company closed a private placement offering and raised aggregate gross proceeds of $642,500 upon the sale of 1,285,000 shares of common stock (the “2013 Common Stock Offering”). For each share of common stock purchased at a price per share of $0.50, the investors received a five-year warrant to purchase a share of common stock at an exercise price of $0.83. In January 2014, pursuant to the terms of the 2013 Common Stock Offering, the Company issued an additional 470,000 shares of common stock at a price per share $0.50 and five-year warrants to purchase 470,000 shares of common stock at an exercise price of $0.83 for an aggregate purchase price of $235,000.
Monarch Capital and Brookline acted as the Company’s placement agents in connection with the 2013 Common Stock Offering. Monarch Capital received a cash fee of $55,400 and five-year warrants to purchase 138,500 shares of common stock at an exercise price of $0.83 per share. Brookline received a cash fee of $14,000 and five-year warrants to purchase 35,000 shares of common stock at an exercise price of $0.83 per share. The fair value of the placement agent warrants was approximately $51,100 and was recorded as both a debit and credit to additional paid-in capital as a stock issuance cost.
All warrants issued in the 2013 Common Stock Offering meet the requirements for classification as equity instruments.
As a result of the issuance of the shares in the 2013 Common Stock Offering, the conversion price of the Company’s outstanding shares of Series A Preferred Stock and Series B Preferred Stock was adjusted to $0.50 per share; provided, however, Platinum Montaur Life Sciences, LLC (“Platinum”) waived its right to (i) adjust the conversion price of the 4,523,076 shares of Series B Preferred Stock and accordingly, such conversion price remains $0.80 per share solely with respect to Platinum, and (ii) adjust the exercise price of 6,020,214 warrants held by it.
In connection with the 2013 Common Stock Offering, the Company also entered into a registration rights agreement with the investors, in which the Company agreed to file a registration statement with the SEC to register for resale the shares and the shares of common stock issuable upon exercise of the warrants within 30 calendar days of the final closing date, and to have the registration statement declared effective within 90 calendar days of the final closing date or within 150 calendar days of the final closing date in the event of a full review of the registration statement by the SEC. The registration statement was filed and declared effective by the SEC on February 12, 2014.
4. CAPITAL STOCK
SERIES A PREFERRED STOCK
The Company is authorized to issue 100,000,000 shares of preferred stock, $0.001 par value per share, of which 3,500,000 shares have been designated Series A Preferred Stock. At March 31, 2014 and December 31, 2013, 976,703 and 2,350,196 shares of Series A Preferred Stock, respectively, were issued and outstanding.
The material terms of the Series A Preferred Stock, as specified in the Certificate of Designation for the Series A Preferred Stock, are as follows:
Conversion
Each share of Series A Preferred Stock may, at the holder’s option, convert into common stock. The conversion rate is equal to the sum of the stated value of the Series A Preferred Stock, which is $0.83 per share, plus all accrued and unpaid dividends, divided by the conversion price. As a result of the issuance of the Series B Preferred Stock pursuant to the 2013 Series B Offering, the conversion price of the Series A Preferred Stock was reduced from $0.83 to $0.50. As of March 31, 2014, 1,373,493 shares of Series A Preferred Stock were converted into 2,280,010 shares of the Company’s Common Stock.
Subject to the specified provisions, the Series A Preferred Stock will automatically convert into common stock at the conversion price on the mandatory conversion date, which is defined as the first date at least six (6) months after the issuance of the Series A Preferred Stock on which each of the following conditions shall have been satisfied: (i) the Company shall have consummated, a qualified financing for aggregate gross proceeds to the Company of $7,000,000, (ii) the volume weighted average trading price for the Company’s common stock for each day on thirty (30) consecutive trading days immediately preceding such date, must be above $1.50 and the trading volume over that period must exceed 1,500,000 shares, and (iii) as of such date, all shares of common stock issuable upon conversion of the Series A Preferred Stock are registered under the Securities Act of 1933, as amended (the “Act”) pursuant to an effective registration statement or are otherwise eligible for sale under Rule 144 under the Act. As of March 31, 2014, no mandatory conversion has taken place as all of the conditions required for such mandatory conversion have not occurred.
Dividends
(a) Cumulative Preferred Dividends. Each holder of the Series A Preferred Stock shall be entitled to receive cash dividends payable on the stated value of the Series A Preferred Stock at a rate of 10% per annum which shall be cumulative and accrue daily from the original issuance date; provided however, if either (i) the Company shall not have consummated a qualified financing with aggregate gross proceeds to the Company of $7,000,000 on or before June 30, 2012, or (ii) for any reason, any shares of common stock issuable upon conversion of the Series A Preferred Stock are not registered pursuant to an effective registration statement on or before June 30, 2012 or are not otherwise eligible for sale under Rule 144 of the Act, then, effective July 1, 2012, the rate of dividends on the Series A Preferred Stock shall increase to 12% per annum. As of June 30, 2012, both of the above conditions have been met by the Company and accordingly, the rate of dividends on the Series A Preferred Stock remains at 10% per annum.
(b) Payment of Dividends. The Company shall be required to pay all accrued and unpaid dividends (whether or not declared) in respect of the Series A Preferred Stock semi-annually on each June 30 and December 31 of each calendar year. All such dividends shall be paid in cash; provided, that, at the option of the Company, the Company may pay any accrued and unpaid dividends on the Series A Preferred Stock in the form of additional shares of Series A Preferred Stock, with each share of Series A Preferred Stock being valued for this purpose at the stated value in effect on the date of payment.
For the three months ended March 31, 2014, the Company accrued a preferred stock dividend of $34,155. For the three months ended March 31, 2013, the Company accrued a preferred stock dividend of $44,057.
Liquidation preference
In the event of liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, each holder of Series A Preferred Stock shall be entitled to receive, for each share thereof, out of assets of the Company legally available therefor, a preferential amount in cash, per share of Series A Preferred Stock, equal to (and not more than) the sum of the (x) stated value, plus (y) all accrued and unpaid dividends thereon. All preferential amounts to be paid to the holders of Series A Preferred Stock in connection with such liquidation, dissolution or winding up shall be paid before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Company to the holders of the Company's Common Stock. If upon any such distribution the assets of the Company shall be insufficient to pay the holders of the outstanding shares of Series A Preferred Stock the full amounts to which they shall be entitled, such holders shall share ratably in any distribution of assets in accordance with the sums which would be payable on such distribution if all sums payable thereon were paid in full.
Voting
The holders of the Series A Preferred Stock have the right to one vote for each share of common stock into which such Series A Preferred Stock could then convert.
SERIES B PREFERRED STOCK
The Company is authorized to issue 100,000,000 shares of preferred stock, $0.001 par value per share, of which 12,000,000 shares have been designated Series B Preferred Stock. At March 31, 2014 and December 31, 2013, 5,694,571 and 5,725,821 shares of Series B Preferred Stock were issued and outstanding.
The material terms of the Series B Preferred Stock, as specified in the Certificate of Designation for the Series B Preferred Stock, are as follows:
Ranking
The Series B Preferred Stock will rank junior to the Company’s Series A Preferred Stock and senior to the Company’s common stock with respect to distributions of assets upon the liquidation, dissolution or winding up of the Company.
Stated Value
Each share of Series B Preferred Stock will have a stated value of $0.80, subject to adjustment for stock splits, combinations and similar events.
Dividends
Cumulative dividends on the Series B Preferred Stock accrue at the rate of 10% of the stated value per annum, compounded annually, from and after the date of the initial issuance through the third anniversary of the issuance date; provided, however, that any holder of at least 4,500,000 shares of Series B Preferred Stock after the issuance date and prior to October 1, 2013 (a “Major Holder”) will be entitled to accrued dividends through the fourth anniversary of the issuance date (as applicable, the “Accrual Period”). Accrued dividends are payable upon the earliest to occur of (i) the third anniversary of the issuance date (or, with respect to the Major Holder, the fourth anniversary of the issuance date), (ii) mandatory conversion (as described below) and (iii) an automatic conversion upon a fundamental transaction (as such term is defined in the Certificate of Designation) or triggering event (as described below). Dividends are payable in Series B Preferred Stock valued at the stated value, or in cash upon the mutual agreement of the Company and the holder.
For the three months ended March 31, 2014, the Company accrued a Series B Preferred Stock dividend of $111,639. For the year ended December 31, 2013, the Company accrued a Series B Preferred Stock dividend of $122,876.
Liquidation Preference
If the Company voluntarily or involuntarily liquidates, dissolves or winds up its affairs, each holder of the Series B Preferred Stock will be entitled to receive out of the Company’s assets available for distribution to stockholders, after satisfaction of liabilities to creditors, if any, and payments due to holders of the Series A Preferred Stock but before any distribution of assets is made on the Company’s common stock or any of our other shares of stock ranking junior as to such a distribution to the Series B Preferred Stock, a liquidating distribution in the amount in the amount of the stated value of all such holder’s Series B Preferred Stock plus all accrued and unpaid dividends thereon.
Voluntary Conversion
Each share of Series B Preferred Stock will be convertible at the holder’s option into the Company’s common stock in an amount equal to the stated value plus accrued and unpaid dividends thereon through the conversion date divided by the then applicable conversion price. The initial conversion price is $0.80 per share and is subject to customary adjustments for issuances of shares of common stock as a dividend or distribution on shares of the common stock, or mergers or reorganizations, as well as “full-ratchet” anti-dilution adjustments for future issuances of other Company securities. As a result of the issuance of common stock pursuant to the 2013 Common Stock Offering, the conversion price of the Series B Preferred Stock was reduced from $0.80 to $0.50, provided, however, Platinum waived its right to adjust the conversion price of the 4,523,076 shares of Series B Preferred Stock held by it and accordingly, such conversion price remains $0.80 per share solely with respect to Platinum. As of March 31, 2014, 31,250 shares of Series B Preferred Stock were converted into 50,000 shares of the Company’s Common Stock.
Holders also have the option to convert their Series B Preferred Stock upon the occurrence of a fundamental transaction or one of the following triggering events: Johan (Thijs) Spoor ceases to be the chief executive officer of the Company; or there is a change in three of the five current members of the Company’s board of directors, such conversion will be on the same terms as a mandatory conversion.
Mandatory Conversion
The Series B Preferred Stock is subject to mandatory conversion at such time as the volume weighted average price of the Company’s common stock is at least $1.20 (subject to adjustments for stock splits and similar events) provided, that, on the mandatory conversion date, (A) a registration statement providing for the resale of the shares underlying the Series B Preferred Stock is effective, or such shares may be offered for sale to the public without limitations pursuant to Rule 144 (B) trading in the common stock shall not have been suspended by the SEC or exchange or market on which the common stock is trading), (C) the daily volume of the common stock is at least 50,000 shares per day for the applicable ten (10) consecutive trading days, and (D) the Company is in material compliance with the terms and conditions of the transaction documents. In the event of mandatory conversion, each share of Series B Preferred Stock will convert into the number of shares of common stock equal to the stated value plus accrued and unpaid dividends for the Accrual Period divided by the conversion price.
Voting Rights
The holders of the Series B Preferred Stock will be entitled to vote upon all matters upon which holders of common stock have the right to vote, such votes to be counted together with all other shares of capital stock having general voting powers and not separately as a class. The holders of the Series B Preferred Stock will be entitled to the number of votes equal to the number of common stock into which the Series B Preferred Stock are then convertible.
In addition, as long as at least 25% of the Series B Preferred Stock remains outstanding, the Company will not, without the affirmative vote or consent of the holders of at least a majority of the outstanding Series B Preferred Stock, voting as a separate class, (i) amend, waive or repeal (including through a merger, consolidation or similar event) any provision of the Company’s articles of incorporation or by-laws in any manner that adversely affects the rights of the holders of the Series B Preferred Stock; (ii) alter or change adversely the preferences, rights, privileges, or restrictions of the Series B Preferred Stock; (iii) authorize or create any class or series of stock having rights, preferences or privileges in any respect senior to the Series B Preferred Stock; or (iv) reclassify, alter or amend any existing class or series of stock, if such reclassification, alteration or amendment would render such other class or series of stock as having rights, preferences or privileges in any respect senior to the Series B Preferred Stock.
COMMON STOCK
The Company has authorized 100,000,000 shares of its common stock, $0.001 par value per share. At March 31, 2014 and December 31, 2013, the Company had issued and outstanding 28,477,520 and 25,675,013, respectively, shares of its common stock.
During the year ended December 31, 2013, the Company issued 60,000 shares of common stock for services performed pursuant to a consulting agreement. The total fair value of these shares, $45,550, is included in operating expenses. In addition, on December 31, 2013, the Company issued 1,285,000 shares of common stock, valued at $0.50 per share, in connection with the 2013 Common Stock Offering.
In January 2014, the Company issued 470,000 shares of common stock, valued at $0.50 per share, in connection with the 2013 Common Stock Offering. (See Note 3)
5. STOCK PURCHASE WARRANTS
During the three months ended March 31, 2014, the Company issued 470,000 common stock warrants to investors and 45,000 common stock warrants to the placement agents in connection with the additional closings related to the 2013 Common Stock Offering.
In addition, during the three months ended March 31, 2014, the Company exchanged 546,470 common stock warrants for an equal number of warrants with the same terms as the warrants issued in the 2013 sale of Series B preferred stock. As a result of this exchange and because such new warrants are derivative instruments, the Company increased its derivative warrant liability by approximately $115,000, the fair value of the warrants on the date of the modification. In addition, in conjunction with the exchange, the Company recognized a one-time expense of approximately $82,000 representing the incremental fair value resulting from the modification, which is included in the accompanying statements of operations.
During the year ended December 31, 2013, the Company issued 7,621,070 common stock warrants to investors and 82,772 common stock warrants to the placement agents in connection with the sale of Series B preferred stock. These warrants are recorded as derivative warrant liability. In addition, the Company issued 1,285,000 common stock warrants to investors and 128,500 common stock warrants to placement agents in connection with 2013 Common Stock Offering.
As a result of the issuance of common stock pursuant to the 2013 Common Stock Offering, the exercise price of the warrants issued in connection with sale of Series B preferred stock was reduced from $0.83 to $0.50, provided, however, Platinum waived its right to adjust the exercise price of the 6,020,214 warrants held by it and accordingly, such exercise price remains $0.83 per share solely with respect to Platinum.
In addition, during the year ended December 31, 2013, the Company exchanged 426,096 common stock warrants for an equal number of warrants with the same terms as the warrants issued in the Series B Offering. As a result of this exchange and because such warrants are derivative instruments, the Company increased its derivative warrant liability by approximately $114,000, the fair value of the warrants on the date of the modification. In addition, in conjunction with the exchange, the Company recognized a one-time expense of approximately $30,000 representing the incremental fair value resulting from the modification.
The following is a summary of all common stock warrant activity:
|
Number of Shares
Under Warrants
|
Exercise
Price
Per Share
|
Weighted
Average Exercise Price
|
||||||||||
|
Warrants issued and exercisable at December 31, 2013
|
14,616,535
|
$
|
0.50 - 1.33
|
$
|
0.90
|
|||||||
|
Warrants Granted
|
1,061,470
|
$
|
0.83
|
$
|
0.83
|
|||||||
|
Warrants Expired/Forfeited/Exchanged
|
(546,470
|
)
|
$
|
0.83 - 1.33
|
$
|
0.94
|
||||||
|
Warrants issued and exercisable at March 31, 2014
|
15,131,535
|
$
|
0.50 - 1.33
|
$
|
0.89
|
|||||||
The following represents additional information related to common stock warrants outstanding and exercisable at March 31, 2014:
|
Exercise Price
|
Number of Shares
Under Warrants
|
Weighted Average Remaining
Contract
Life in Years
|
Weighted Average
Exercise Price
|
|||||||||||
|
$
|
0.50
|
2,109,724
|
4.51
|
$
|
0.50
|
|||||||||
|
$
|
0.83
|
6,566,684
|
4.51
|
$
|
0.83
|
|||||||||
|
Total warrants accounted for as derivative liability
|
8,676,408
|
4.51
|
$
|
0.75
|
||||||||||
|
$
|
0.50
|
277,500
|
0.05
|
$
|
0.50
|
|||||||||
|
$
|
0.83
|
2,379,046
|
4.17
|
$
|
0.83
|
|||||||||
|
$
|
0.84
|
20,000
|
2.34
|
$
|
0.84
|
|||||||||
|
$
|
0.85
|
281,912
|
3.32
|
$
|
0.85
|
|||||||||
|
$
|
0.95
|
20,000
|
2.51
|
$
|
0.95
|
|||||||||
|
$
|
1.00
|
165,417
|
5.10
|
$
|
1.00
|
|||||||||
|
$
|
1.33
|
3,311,252
|
1.26
|
$
|
1.33
|
|||||||||
|
Total warrants accounted for as equity
|
6,455,127
|
2.47
|
$
|
1.08
|
||||||||||
|
Total for all warrants outstanding
|
15,131,535
|
3.64
|
$
|
0.89
|
||||||||||
The Company used the Black-Scholes option price calculation to value the warrants granted during the quarter ended March 31, 2014 using the following assumptions: risk-free rate of 1.59%, respectively, volatility of 60.13%, actual term and exercise price of warrants granted. For warrants granted that are accounted for as a derivative liability, the Company used a Binomial Options Pricing model. The primary assumptions used to determine the fair values of these warrants were: risk free interest rate with a range from 1.59 % - 3.40%, volatility of 60.13%, actual term and exercise price of the warrants granted.
6. COMMON STOCK OPTIONS
On February 11, 2011, the Company adopted its 2011 Equity Incentive Plan (the “Plan”) under which 6,475,750 shares of common stock were reserved for issuance under options or other equity interests as set forth in the Plan. Under the Plan, options are available for issuance to employees, officers, directors, consultants and advisors. The Plan provides that the board of directors will determine the exercise price and vesting terms of each option on the date of grant. Options granted under the Plan generally expire ten years from the date of grant.
Under the Plan, the Company has issued 161,250 shares of fully paid and non-assessable restricted common stock to a director of the Company. These shares of restricted stock are subject to the terms of the Plan and are unvested and outstanding as of December 31, 2013. The shares shall vest upon the earlier of (i) the occurrence of a Change of Control, as defined in the Plan, (ii) the successful completion of a Phase II clinical trial for any of the Company’s products, or (iii) the determination by the board of directors to provide for immediate vesting. The weighted average grant-date fair value is $1.07 per share.
The following is a summary of all common stock option activity for the quarter ended March 31, 2014:
|
Shares Under
Options Outstanding
|
Weighted Average
Exercise Price
|
|||||||
|
Outstanding at December 31, 2013
|
4,536,928
|
$
|
0.68
|
|||||
|
Options granted
|
220,000
|
$
|
0.51
|
|||||
|
Options forfeited
|
-
|
$
|
-
|
|||||
|
Options exercised
|
-
|
$
|
-
|
|||||
|
Outstanding at March 31, 2014
|
4,756,928
|
$
|
0.67
|
|||||
|
Options Exercisable
|
Weighted Average Exercise
Price per Share
|
|||||||
|
Exercisable at December 31, 2013
|
2,786,928
|
$
|
0.69
|
|||||
|
Exercisable at March 31, 2014
|
3,008,596
|
$
|
0.68
|
|||||
The weighted average fair value of options granted during the three months ended March 31, 2014 was $0.51
At March 31, 2014, the weighted average remaining contractual term for exercisable and outstanding options is 5.64 and 6.47 years, respectively. At March 31, 2014, the aggregate intrinsic value of all of the Company’s exercisable and outstanding options is $429,675 and $572,975, respectively.
As of March 31, 2014, there was $463,320 of unrecognized compensation cost related to non-vested options. The unrecognized compensation expense is estimated to be recognized over a period of 1.2 years at March 31, 2014.
The Company used the Black-Scholes option pricing model to value the all option grants (see Note 1, Summary of Significant Accounting Policies, “Accounting for Share-Based Payments”).
7. COMMITMENTS AND CONTINGENCIES
License Agreements
The Company has one exclusive technology license with Massachusetts General Hospital (MGH) which consists of three of its cardiac imaging licenses. The license requires the Company to meet certain obligations, including, but not limited to, meeting certain development milestones relating to clinical trials and filings with the FDA. MGH has the right to cancel or make non-exclusive certain licenses on certain patents should the Company fail to meet stipulated obligations and milestones. In accordance with the terms of the license, the Company is required to pay MGH an annual license maintenance fee of $30,000. Additionally, upon commercialization, the Company is required to make specified milestone payments and royalties on commercial sales.
The Company is current with all stipulated obligations and milestones under the cardiac imaging license agreement and the agreement remains in full force and effect. The Company believes that it maintains a good relationship with MGH and will be able to obtain waivers or extension of its obligations under the license agreement, should the need arise. If MGH were to refuse to provide the Company with a waiver or extension of any of its obligations or were to cancel or make the license non-exclusive, this would have a material adverse impact on the Company as it may be unable to commercialize products without exclusivity and would lose its competitive edge for portions of the patent portfolio.
All of the Company’s other license agreements stipulate certain annual license fees and development milestone payments in addition to royalty payments upon commercialization.
Clinical Research Services Agreement
On September 7, 2012, the Company entered into a Clinical Research Services Agreement (“CRS Agreement”) with SGS Life Science Services (“SGS”), a company with its registered offices in Belgium, for clinical research services relating to the Company’s CardioPET Phase II study to assess myocardial perfusion and fatty acid uptake in coronary artery disease (CAD) patients. The phase II trial will be an open label trial designed to assess the safety and diagnostic performance of CardioPET as compared to stress echocardiography, myocardial perfusion imaging and angiography as a gold standard of background disease. Two trial sites are planned in Belgium and are expected to be concluded in the second half of 2014.
In March 2012, the Company had signed a Letter of Intent (“LOI”) that provided for the pre-payment of $290,271 for start-up services. The CRS Agreement provides for additional payments of $346,234 to SGS subject to a schedule of milestones relating to the progress of the clinical trial. Immediately before entry into the LOI, the Company engaged FGK Representative Service GmbH to serve as the Company’s sponsor in compliance with the laws governing clinical trials conducted in the European Union. On February 28, 2013, the Company announced that the Phase II trial had begun and released the initial data and images from the trial. On February 6, 2014, the Company presented interim data from the trial at the SNMMI mid-winter meeting.
Executive Employment Contracts
The Company maintains employment contracts with key Company executives that provide for the continuation of salary and the grant of certain options to the executives if terminated for reasons other than cause, as defined within the agreements. One contract also provides for a $1 million bonus should the Company execute transactions as specified in the contract, including the sale of substantially all of the Company’s assets or stock or a merger transaction, any of which resulting in compensation to the Company’s stockholders aggregating in excess of $50 million for such transaction.
Operating Lease Commitment
In July 2011, the Company entered into a three-year lease for office space, which commenced May 1, 2012 and expires on April 30, 2015. The annual minimum lease payments over this three-year period for this office space are $45,600 per year plus common area costs. In conjunction with this agreement, the Company paid $5,700 as a security deposit and an additional $25,171 for leasehold improvements. The future minimum lease payments through April 30, 2015 are as follows:
|
Year ending December 31, 2014
|
$
|
45,600
|
||
|
2015
|
15,200
|
|||
|
$
|
60,800
|
Rent expense, net of sublease income, was $8,365, $7,800 and $327,318 for the three months ended March 31, 2014 and 2013 and the period from inception to March 31, 2014, respectively.
Legal Contingencies
On July 16, 2013, Todd Nelson, as plaintiff, served Fluoropharma Medical, Inc. with process in the matter captioned, Todd Nelson v. Fluoropharma Medical, Inc.; and Does 1 through 10, No. 13 CV 01152 JAD CWH, which is pending before the United States District Court for the District of Nevada. In this action, the plaintiff alleged that he suffered damages attributable to the Company’s refusal to honor certain stock options after February 28, 2012. Plaintiff seeks at least $325,200 in damages, as well as punitive and exemplary damages, prejudgment interest, and costs. On August 16, 2013, the Company filed a motion to dismiss the complaint. The Court has scheduled oral argument for this motion for May 27, 2014. The Company’s attorneys will attend this argument to argue the motion’s merits and answer any questions the Court may have regarding this matter. Management believes that it has meritorious defenses in all such matters, and accordingly, no accrual has been recorded for these matters as of March 31, 2014.
The Company is not aware of any other material, active, pending or threatened proceeding, nor is the Company, or any subsidiary, involved as a plaintiff or defendant in any other material proceeding or pending litigation.
8. SUBSEQUENT EVENTS
The Company evaluated events occurring subsequent to March 31, 2014, identifying those that are required to be disclosed as follows:
In April and May 2014, the Company issued 304,888 shares of common stock with a fair value of $178,160 for consulting services performed.
In addition, in April 2014, the Company issued 180,750 shares of common stock related to the exercise of certain warrants.
Subsequent to March 31, 2014 and through May 9, 2014, the Company received gross proceeds of approximately $95,000 from the sale of a portion of the freely tradable securities received as consideration in the 2013 Private Placement.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This report contains forward-looking statements. These forward-looking statements include, without limitation, statements containing the words “believes”,“anticipates”,“expects”,“intends”,“projects”,“will” and other words of similar import or the negative of those terms or expressions. Forward-looking statements in this report include, but are not limited to, expectations of future levels of research and development spending, general and administrative spending, levels of capital expenditures and operating results, sufficiency of our capital resources, our intention to pursue and consummate strategic opportunities available to us.. Forward-looking statements are subject to certain known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to those described in “Risk Factors” of the reports we file with the SEC.
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere herein.
Overview
We are a biopharmaceutical company specializing in discovering, developing and commercializing molecular imaging pharmaceuticals with initial applications in the area of cardiology. Molecular imaging pharmaceuticals are radiopharmaceuticals that enable early detection of disease through the visualization of subtle changes in biochemical and biological processes. We currently have two clinical-stage molecular imaging pharmaceutical product candidates: CardioPET and BFPET. Additionally we have identified potential candidates that may be useful in the detection and/or treatment of vulnerable plaque.
Our Product Candidates
BFPET
Our BFPET program has ([18F]-labeled cationic lipophilic tetraphosphonium, 18-F TPP) as an imaging agent designed for use in stress-testing for patients with presumptive or proven CAD. 18-F TPP measures the cardiovascular blood flow through the detection of ischemic (i.e. reversibly damaged) and infarcted (i.e., irreversibly damaged) myocardium (i.e., heart) tissue. Its mechanism of action is to enter the myocardial cells of the heart muscle in direct proportion to blood flow and membrane potential-the most important indicators of adequate cardiac blood supply. Since ischemic and infarcted myocardial cells take up significantly less 18-F TPP than normal healthy myocardial cells do, 18-F TPP can distinguish ischemic and infarcted cells from those that are healthy. If approved, 18-F TPP will represent one of the first molecular imaging blood flow agents commercialized for use in the cardiovascular segment of the PET imaging market.
Currently, cardiac perfusion imaging is performed with SPECT tracers such as Sestamibi, Thallium-201 or the PET tracer Rubidium-82. However, SPECT imaging only has approximately 75% diagnostic accuracy with research showing that 10% of patients cleared as “normal” were subsequently found to be “abnormal” using PET imaging. The current PET tracer Rubidium-82 has experienced FDA recall and high cost issues.
18-F TPP successfully completed a Phase Ia clinical trial in 12 healthy volunteers with no adverse events and no clinically significant changes noted in follow-up clinical and laboratory testing. The results of the trial demonstrated the required dosimetry, safety profile and high resolution myocardial imaging pharmacokinetics to justify a controlled Phase II clinical trial. In January 2013, we announced that we will begin Phase II trials at Massachusetts General Hospital to assess its efficacy in CAD subjects; however, the process for enrollment in this clinical trial has been progressing slowly. We currently expect actual enrollment to commence in the first half of 2014.
CardioPET
Our CardioPET program has (Trans-9-[18F]-Fluoro-3, 4-Methyleneheptadecanoic Acid, 18-F FCPHA) as a molecular imaging agent designed to assess myocardial metabolism for patients with CAD, especially for patients who are unable to perform exercise cardiac stress-testing. 18-F FCPHA allows for the detection of ischemic (i.e. reversibly damaged) and infarcted (i.e. irreversibly damaged) myocardium (i.e. heart) tissue in patients with presumptive or proven acute and chronic CAD.
In addition, 18-F TCPHA could be used for Cardiac Viability Assessment (“CVA”) for the prediction of improvement prior to and/or following revascularization in patients with acute CAD, including myocardial infarction, or heart attack). 18-F FCPHA allows for the identification of damaged but viable heart tissue, which is important since revascularization in those patients with substantial viable myocardium results in improved left ventricular function and survival. Importantly, 18-F FCPHA, if approved, may have several significant advantages for assessing cardiac viability using PET, and would likely represent the first imaging agent available in the U.S. for use in patients with acute and chronic CAD that cannot undergo stress-testing. 18-F FCPHA is designed to provide the metabolic component for CVA. Accordingly, it may be used with either 18-F TPP or other blood flow agents in performing CVA.
The safety and tolerability of 18-F FCPHA have been demonstrated in a Phase I trial conducted at the Massachusetts General Hospital. Phase II trials are ongoing at four sites in Belgium to assess its safety and efficacy in CAD patients. The Phase II clinical trial plan for 18-F FCPHA is an open label trial designed to assess the safety and diagnostic performance of 18-F FCPHA as compared to myocardial perfusion imaging and angiography as a gold standard of background disease. Specifically, the Phase II trial consists of between 30-100 individuals with known stable chronic CAD who cannot undergo stress-testing for the evaluation of suspected or proven CAD. Interim results of imaging data received from the ongoing Phase II clinical trial and were presented in February 2014.
VasoPET
The rupture of atherosclerotic plaques and the subsequent formation of thrombi are currently recognized as the primary mechanisms of myocardial and cerebral infarctions. Therefore, the detection of vulnerable plaque in atherosclerotic lesions is a desirable goal—and to date remains both a significant unmet clinical objective and a large unaddressed market opportunity.
Coronary artery plaques grow over time and progressively narrow the lumen of the coronary artery until blood flow to the heart diminishes to a critical level. The decrease in blood flow causes symptoms of chest pain (angina), at first during exercise and then progressively during rest. Rupture of the plaque and/or clot formation overlying the plaque may then result in myocardial ischemia and/or myocardial infarction. Coronary artery plaque that is “vulnerable” is differentiated from its “stable” form by a large lipid-rich atheromatous core, a thin fibrous cap, and infiltration by inflammatory cells such as macrophages. The risk factor for rupture (and subsequent heart attack) is currently thought to be independent of plaque size and arterial narrowing, but rather is thought to correlate more with the presence of inflammation.
We are developing our VasoPET program with the lead compounds being Diadenosine-5’5’’’-P1, P4-tetraphosphate (Ap4A) analogs, such as P2, P3-monochloromethylene diadenosine 5’, 5’’’-P1, P4-tetraphosphate (Ap2CHClp2A), as a novel molecular imaging agent for the detection of “vulnerable” coronary artery plaque in patients with CAD. VasoPET, if approved, would represent the first PET cardiac product to reliably image inflamed plaque and therefore may differentiate between vulnerable and stable coronary artery plaque. However, in light of the limited remaining patent life and our cash constraints, we are not currently allocating resources to this program.
Although we believe vulnerable plaque imaging is a valuable therapeutic area, the regulatory landscape is constantly evolving and it is still unclear if the VasoPET program will progress in its development as a drug or as a biomarker. The ability to commercialize an agent as a biomarker is still undefined in the current U.S. regulatory framework and we will iterate our strategies based on the evolving commercial and regulatory landscape.
Recent Accounting Pronouncements
Management does not expect any recently issued, but not yet effective, accounting standards to have a material effect on its results of operations or financial condition.
Critical Accounting Policies
This summary of significant accounting policies is presented to assist in understanding our consolidated financial statements. The consolidated financial statements and notes are representations of our management, which is responsible for their integrity and objectivity. These accounting policies conform to U.S. GAAP and have been consistently applied in the preparation of the financial statements.
Accounting for Share-Based Payments
We follow the provisions of ASC Topic 718, which establishes the accounting for transactions in which an entity exchanges equity securities for services and requires companies to expense the estimated fair value of these awards over the requisite service period. We use the Black-Scholes option pricing model in determining fair value. Accordingly, compensation is recognized using the fair value method and expected term accrual requirements as prescribed.
We account for share-based payments granted to non-employees in accordance with ASC Topic 505, “Equity Based Payments to Non-Employees.” The Company determines the fair value of the stock-based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.
The fair value of each share based payment is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:
Risk-Free Interest Rate. We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
Expected Volatility. We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.
Dividend Yield. We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
Expected Term. The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
Forfeitures. Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.
Derivative financial instruments. We evaluate all financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, we use a binomial pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
At March 31, 2014, we have a derivative warrant liability relating to certain warrants issued in 2013 and 2014 that contain anti-dilution provisions.
Impairments
We assess the impairment of long-lived assets, including other intangible assets, whenever events or changes in circumstances indicate that their carrying value may not be recoverable in accordance with ASC Topic 360-10-35, “Impairment or Disposal of Long-Lived Assets.” The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments, related primarily to the future profitability and/or future value of the assets. We hold investments in companies having operations or technologies in areas that are within or adjacent to our strategic focus when acquired, all of which are privately held and whose values are difficult to determine. We record an investment impairment charge if it believes an investment has experienced a decline in value that is other than temporary.
Management has determined that no impairments had occurred as of March 31, 2014.
Intangible Assets
Our intangible assets consist of technology licenses and are carried at the legal cost to obtain them. Intangible assets are amortized using the straight-line method over the estimated useful life. Useful lives are as follows: technology licenses 5 to 15 years.
Research and Development Costs
Research and development costs are expensed as incurred. The cost of intellectual property purchased from others that is immediately marketable or that has an alternative future use is capitalized and amortized as intangible assets. Capitalized costs are amortized using the straight-line method over the estimated economic life of the related asset.
Use of Estimates
The accompanying consolidated financial statements are prepared in conformity with GAAP in the United States of America, and include certain estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results may differ from those estimates.
RESULTS OF OPERATIONS
General
To date, we have not generated any revenues from operations and at March 31, 2014, we had an accumulated deficit of approximately $25.6 million, primarily as a result of research and development, or R&D, expenses and general and administrative, or G&A, expenses. While we may in the future generate revenue from a variety of sources, including license fees, research and development payments in connection with strategic partnerships and/or government grants, our product candidates are at an early stage of development and may never be successfully developed or commercialized. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future and there can be no assurance that we will ever generate significant revenues.
R&D Expenses
Conducting R&D is central to our business. For the period from inception through March 31, 2014, R&D expenses aggregated approximately $7.7 million. R&D expenses consist primarily of:
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●
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employee-related expenses, which include salaries and benefits, and rent expense;
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●
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license fees and annual payments related to in-licensed products and intellectual property;
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●
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expenses incurred under agreements with clinical research organizations, investigative sites and consultants that conduct or provide other services relating to our clinical trials and a substantial portion of our preclinical activities;
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●
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the cost of acquiring clinical trial materials from third party manufacturers; and
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●
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costs associated with non-clinical activities, patent filings and regulatory filings.
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From inception through March 31, 2014, direct, external development costs incurred for our CardioPET, BFPET and VasoPET product development programs were $1.7 million, $0.4 million and $0.2 million, respectively.
We expect to continue to incur substantial expenses related to our R&D activities for the foreseeable future as we continue product development. Since product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials, we expect that our R&D expenses will increase in the future. In addition, if our product development efforts are successful, we expect to incur substantial costs to prepare for potential commercialization of any late-stage product candidates and, in the event one or more of these product candidates receive regulatory approval, to fund the launch of the product.
G&A Expenses
G&A expenses consist principally of personnel-related costs, professional fees for legal, consulting and audit services, rent and other general operating expenses not otherwise included in R&D. For the period from inception through March 31, 2014, G&A expenses aggregated approximately $14.9 million. We anticipate G&A expenses will increase in future periods, reflecting continued and increasing costs associated with:
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●
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support of our expanded R&D activities;
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an expanding infrastructure and increased professional fees and other costs associated with the compliance with the Exchange Act, the Sarbanes-Oxley Act and stock exchange regulatory requirements and compliance; and
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●
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business development and financing activities.
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Comparison of Three Months Ended March 31, 2014 and 2013
G&A expenses were $894,848 and $767,599 for the three months ended March 31, 2014 and 2013, respectively. The 16.6% increase was due primarily to increases in investor relations activities, personnel costs, as well as a general increase in operating expenses. We expect G&A expenses to increase going forward as we proceed to advance our product candidates through the development and regulatory process.
R&D expenses were $324,587 and $291,199 for the three months ended March 31, 2014 and 2013, respectively. The 11.5% increase was due primarily to increased expenses related to the scientific advisory board. We expect R&D expenses to increase in future periods as our product candidates continue through clinical trials and we seek strategic collaborations.
Other (expense) income, net was $(107,087) and $70,692 for the three months ended March 31, 2014 and 2013, respectively. For the three months ended March 31, 2014, other expenses consisted primarily of realized and unrealized losses on trading securities of approximately $42,000 and a loss on revaluation and modification of the Company’s derivative warrant liability of approximately $65,000. For the three months ended March 31, 2013, we received other income of approximately $70,000 from the sale of an insurance company of which we were a policyholder.
Liquidity and Capital Resources
We have experienced net losses and negative cash flows from operations since our inception. We have sustained cumulative losses attributable to common stockholders of approximately $25.6 million as of March 31, 2014. We have historically financed our operations through issuances of equity and the proceeds of debt instruments. In the past, we have also provided for our cash needs by issuing common stock, options and warrants for certain operating costs, including consulting and professional fees. During the three months ended March 31, 2014, we raised $203,055 in cash, net of offering costs, through the private placement of common stock and warrants. In addition, during the three months ended March 31, 2014, we received gross proceeds of $416,554 from the sale of freely tradable securities received as consideration in the private placement of our Series B Preferred Stock.
During the year ended December 31, 2013, we raised $1,370,190 in cash and freely tradable securities valued at $3,495,384 (based upon the closing price of such securities on the day prior to closing), net of offering costs, through the private placements of our Series B Preferred Stock and common stock. As of December 31, 2013, we received gross proceeds of $1.8 million from the sale of a portion of such freely tradable securities received as consideration in the private placement of our Series B Preferred Stock.
At March 31, 2014, we had cash, cash equivalents and trading securities of approximately $0.9 million, which we believe is sufficient, together with proceeds of the private placement of our common stock that closed in 2014, to fund our planned operations through August 2014 based on our current business plan. We continue to actively pursue various funding options, including equity offerings, to obtain additional funds to continue our product development activities beyond such date. We will seek funds through equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources. Adequate additional funding may not be available to us on acceptable terms or at all. If adequate funds are not available to us, we will be required to delay, curtail or eliminate one or more of our research and development programs.
Cash Flows for the Three Months Ended March 31, 2014 and 2013
Net cash used in operating activities for the three months ended March 31, 2014 was $1,039,275 which primarily reflected our net loss of $1,326,522 offset by non-cash expenses of $244,779 and an increase in working capital of $42,468. Net cash used in operating activities for the three months ended March 31, 2013 was $672,199 which primarily reflected our net loss of $988,106, offset by non-cash expense of $278,069, an increase in working capital of $37,838.
Net cash provided by investing activities was $411,233 for the three months ended March 31, 2014, which primarily reflected the proceeds from the sale of trading securities offset by the purchase of office equipment. For the three months ended March 31, 2013, net cash used by investing activities was $1,029, which primarily reflected the purchase of office equipment.
For the three months ended March 31, 2014, net cash provided by financing activities was $203,055, which reflects net cash received from the sale of our common stock. For the three months ended March 31, 2013, there were no financing activities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
At the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting during our first fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
On July 16, 2013, Todd Nelson, as plaintiff, served Fluoropharma Medical, Inc. with process in the matter captioned, Todd Nelson v. Fluoropharma Medical, Inc.; and Does 1 through 10, No. 13 CV 01152 JAD CWH, which is pending before the United States District Court for the District of Nevada. In this action, the plaintiff alleged that he suffered damages attributable to the Company’s refusal to honor certain stock options after February 28, 2012. Plaintiff seeks at least $325,200 in damages, as well as punitive and exemplary damages, prejudgment interest, and costs. On August 16, 2013, the Company filed a motion to dismiss the complaint. The Court has scheduled oral argument for this motion for May 27, 2014. The Company’s attorneys will attend this argument to argue the motion’s merits and answer any questions the Court may have regarding this matter. Management believes that it has meritorious defenses in all such matters, and accordingly, no accrual has been recorded for these matters as of March 31, 2014.
The Company is not aware of any other material, active, pending or threatened proceeding, nor is the Company, or any subsidiary, involved as a plaintiff or defendant in any other material proceeding or pending litigation.
Item 1A. Risk Factors
Not Applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.
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Exhibit No.
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Title of Document
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31.1
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Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2
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Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1
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Certification of the Chief Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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32.2
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Certification of the Chief Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS
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XBRL Instance Document*
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101.SCH
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XBRL Schema Document*
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101.CAL
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XBRL Calculation Linkbase Document*
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101.LAB
|
XBRL Label Linkbase Document*
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101.PRE
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XBRL Presentation Linkbase Document*
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101.DEF
|
XBRL Definition Linkbase Document*
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* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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FluoroPharma Medical, Inc.
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Date: May 15, 2014
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/s/ Johan M. (Thijs) Spoor
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Johan M. (Thijs) Spoor
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President and Chief Executive Officer
(Principal Executive Officer)
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Date: May 15, 2014
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/s/ Tamara Rhein
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Tamara Rhein
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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