þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 76-0837053 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
355 Alhambra Circle | ||
Suite 1370 | ||
Coral Gables, Florida | 33134 | |
(Address of principal executive offices) | (Zip Code) |
Large Accelerated Filer o | Accelerated Filer o | Non-Accelerated Filer x |
2
September 30, 2007 | December 31, 2006 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 16,886,194 | $ | 20,434,702 | ||||
Interest receivable |
65,559 | 85,787 | ||||||
Prepaid expenses |
495,831 | 67,333 | ||||||
Total current assets |
17,447,584 | 20,587,822 | ||||||
Property and equipment, net |
125,517 | 20,157 | ||||||
Other assets |
20,388 | 11,500 | ||||||
Total assets |
$ | 17,593,489 | $ | 20,619,479 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 229,478 | $ | 448,072 | ||||
Accrued expenses |
175,576 | 324,774 | ||||||
Total current liabilities |
405,054 | 772,846 | ||||||
Stockholders equity |
||||||||
Preferred Stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding |
| | ||||||
Common Stock, par value $0.001 per share,
100,000,000 shares authorized, 12,527,564 and
12,516,620 shares issued and outstanding at
September 30, 2007 and December 31, 2006,
respectively |
12,528 | 12,517 | ||||||
Additional paid-in capital |
26,129,676 | 25,593,330 | ||||||
Deficit accumulated during the development stage |
(8,953,769 | ) | (5,759,214 | ) | ||||
Total stockholders equity |
17,188,435 | 19,846,633 | ||||||
Total liabilities and stockholders equity |
$ | 17,593,489 | $ | 20,619,479 | ||||
3
Cumulative | ||||||||||||||||||||
Period from | ||||||||||||||||||||
January 4, 2002 | ||||||||||||||||||||
(date of | ||||||||||||||||||||
inception) | ||||||||||||||||||||
For the Three Months | For the Nine Months Ended | through | ||||||||||||||||||
Ended September 30, | September 30, | September 30, | ||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||
Revenues |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Operating costs and expenses: |
||||||||||||||||||||
Research and development |
503,348 | 235,467 | 2,268,648 | 668,231 | 5,373,070 | |||||||||||||||
General and administrative |
447,078 | 1,106,752 | 1,615,912 | 1,348,945 | 4,469,200 | |||||||||||||||
Total operating
costs and expenses |
950,426 | 1,342,219 | 3,884,560 | 2,017,176 | 9,842,270 | |||||||||||||||
Loss from operations |
(950,426 | ) | (1,342,219 | ) | (3,884,560 | ) | (2,017,176 | ) | (9,842,270 | ) | ||||||||||
Interest income |
216,079 | 20,831 | 690,005 | 28,963 | 888,501 | |||||||||||||||
Loss before income taxes |
(734,347 | ) | (1,321,388 | ) | (3,194,555 | ) | (1,988,213 | ) | (8,953,769 | ) | ||||||||||
Provision for income taxes |
| | | | | |||||||||||||||
Net loss |
$ | (734,347 | ) | $ | (1,321,388 | ) | $ | (3,194,555 | ) | $ | (1,988,213 | ) | $ | (8,953,769 | ) | |||||
Loss per share basic and
diluted |
$ | (0.06 | ) | $ | (0.19 | ) | $ | (0.26 | ) | $ | (0.29 | ) | ||||||||
Weighted average shares
outstanding
basic and diluted |
12,527,564 | 7,020,508 | 12,524,678 | 6,932,332 | ||||||||||||||||
4
Deficit | ||||||||||||||||||||
Accumulated | ||||||||||||||||||||
During the | ||||||||||||||||||||
Preferred | Common | Additional | Development | |||||||||||||||||
Stock | Stock | Paid-in Capital | Stage | Total | ||||||||||||||||
Balance at
December 31, 2006 |
$ | | $ | 12,517 | $ | 25,593,330 | $ | (5,759,214 | ) | $ | 19,846,633 | |||||||||
Issuance of stock options
for services |
| | 461,969 | | 461,969 | |||||||||||||||
Amortization of
restricted
shares for services |
| | 15,114 | | 15,114 | |||||||||||||||
Issuance of common
stock for services |
| 11 | 59,263 | | 59,274 | |||||||||||||||
Net loss |
| | | (3,194,555 | ) | (3,194,555 | ) | |||||||||||||
Balance at
September 30, 2007 |
$ | | $ | 12,528 | $ | 26,129,676 | $ | (8,953,769 | ) | $ | 17,188,435 | |||||||||
5
Cumulative Period | ||||||||||||
from January 4, | ||||||||||||
2002 (date of | ||||||||||||
For the Nine Months Ended | inception) through | |||||||||||
September 30, | September 30, | |||||||||||
2007 | 2006 | 2007 | ||||||||||
Operating Activities: |
||||||||||||
Net loss |
$ | (3,194,555 | ) | $ | (1,988,213 | ) | $ | (8,953,769 | ) | |||
Adjustments to reconcile net loss to net cash used
in operating activities: |
||||||||||||
Depreciation |
8,083 | 4,190 | 14,750 | |||||||||
Stock-based compensation |
477,083 | 1,069,943 | 3,357,071 | |||||||||
Change in assets and liabilities |
||||||||||||
Decrease (increase) in interest receivable |
20,228 | | (65,559 | ) | ||||||||
(Increase) in other prepaid expenses and deposits |
(437,386 | ) | (2,487 | ) | (516,219 | ) | ||||||
(Decrease) increase in accounts payable |
(218,594 | ) | 350,001 | 229,477 | ||||||||
(Decrease) increase in accrued expenses |
(147,444 | ) | 65,685 | 118,057 | ||||||||
Net cash used in operating activities |
(3,492,585 | ) | (500,881 | ) | (5,816,192 | ) | ||||||
Investing Activities: |
||||||||||||
Capital expenditures |
(55,923 | ) | (19,876 | ) | (82,747 | ) | ||||||
Net cash used in investing activities |
(55,923 | ) | (19,876 | ) | (82,747 | ) | ||||||
Financing Activities: |
||||||||||||
Proceeds from issuance of common stock |
| | 18,789,536 | |||||||||
Proceeds from issuance of preferred stock |
| 3,225,140 | 3,895,597 | |||||||||
Prepaid expenses for initial public offering |
| (472,074 | ) | | ||||||||
Net cash provided by financing activities |
| 2,753,066 | 22,685,133 | |||||||||
Net increase (decrease) in cash |
(3,548,508 | ) | 2,232,309 | 16,786,194 | ||||||||
Cash and cash equivalents at beginning of period |
20,434,702 | 771,127 | 100,000 | |||||||||
Cash and cash equivalents at end of period |
$ | 16,886,194 | $ | 3,003,436 | $ | 16,886,194 | ||||||
Supplemental disclosure of noncash operating
activity: |
||||||||||||
Tenant lease incentive |
$ | 52,320 | | $ | 52,320 |
6
2. | Basis of Presentation and Significant Accounting Policies. |
a. | DEVELOPMENT STAGE COMPANY. Since inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets and raising capital. Accordingly, the Company is considered to be in the development stage and the Companys financial statements are presented in accordance with Statement of Financial Accounting Standard No. 7, Accounting and Reporting by Development Stage Enterprises. The Companys primary focus is on the development and commercialization of CPP-109, its product candidate based on the chemical compound gamma-vinyl-GABA, commonly referred to as vigabatrin, as a potential treatment for drug addiction, including cocaine addiction, methamphetamine addiction, and certain obsessive compulsive disorders. | ||
b. | INTERIM FINANCIAL STATEMENTS. The accompanying unaudited interim condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting of interim financial information. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. | ||
In the opinion of management, the accompanying unaudited interim condensed financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of the dates and for the periods presented. Accordingly, these statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2006 included in the Form 10-K filed by the Company with the Securities and Exchange Commission. The consolidated results of operations for the three and nine months ended September 30, 2007 are not necessarily indicative of the results to be expected for any future period or for the full fiscal year. |
7
2. | Basis of Presentation and Significant Accounting Policies. (continued) |
c. | USE OF ESTIMATES. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. During the three month period ended September 30, 2007, the Company revised its estimate of accrued license fees, and as a result research and development expenses were reduced by approximately $166,000. | ||
d. | EARNINGS (LOSS) PER SHARE. Basic earnings (loss) per share is computed by dividing net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net earnings (loss) for the period by the weighted average number of common shares outstanding during the period, plus the dilutive effect of common stock equivalents, such as restricted common stock and stock options. Due to the net loss for all periods presented, all common stock equivalents were excluded because their inclusion would have been anti-dilutive. | ||
Potentially dilutive common stock equivalents as of September 30, 2007 include (i) stock options to purchase up to 2,568,149 shares of common stock at exercise prices ranging from $0.69 to $6.00 per share and (ii) 15,000 shares of restricted common stock that will vest over the next three years. | |||
Potentially dilutive common stock equivalents as of September 30, 2006 include stock options to purchase up to 2,361,016 shares of common stock at exercise prices ranging from $0.69 to $6.00 per share. | |||
e. | STOCK COMPENSATION PLANS. Through July 2006, the Company did not have a formal stock option plan, although stock options were granted pursuant to written agreements. In July 2006, the Company adopted the 2006 Stock Incentive Plan (the Plan). See Note 7. | ||
As of September 30, 2007, there were outstanding stock options to purchase 2,568,149 shares of common stock (including options to purchase 215,888 shares granted under the Plan), of which stock options to purchase 2,320,781 shares of common stock were exercisable as of September 30, 2007. Additionally, as of September 30, 2007 there were 15,000 shares of restricted common stock granted under the Plan, none of which were vested. | |||
For the three and nine month periods ended September 30, 2007 and 2006, the Company recorded stock compensation expense as follows: |
For the three months ended | For the nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Research and development |
$ | 75,997 | $ | 88,993 | $ | 315,710 | $ | 302,368 | ||||||||
General and administrative |
18,485 | 739,825 | 161,373 | 767,575 | ||||||||||||
Total stock based
compensation |
$ | 94,482 | $ | 828,818 | $ | 477,083 | $ | 1,069,943 | ||||||||
f. | PREPAID EXPENSES. Prepaid expenses consist primarily of advances under research and development contracts, including advances to the Contract Research Organization (CRO) that is overseeing the Companys clinical trials. Such advances are recorded as expense as the related goods are received or the related services are performed. |
8
2. | Basis of Presentation and Significant Accounting Policies. (continued) |
g. | Recent Accounting Pronouncements | ||
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). This statement provides a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. Previously, different definitions of fair value were contained in various accounting pronouncements creating inconsistencies in measurement and disclosures. SFAS No. 157 applies under those previously issued pronouncements that prescribe fair value as the relevant measure of value, except SFAS No. 123(R) and related interpretations and pronouncements that require or permit measurement similar to fair value but are not intended to measure fair value. This pronouncement is effective for fiscal years beginning after November 15, 2007. The Company is evaluating the impact of SFAS No. 157, but does not expect the adoption of SFAS No. 157 to have a material impact on its financial position, results of operations, or cash flows. | |||
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (SFAS No. 159) The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The provisions of SFAS No. 159 will be effective for the Company beginning January 1, 2008. The Company is in the process of determining the effect, if any, that the adoption of SFAS No. 159 will have on its financial statements. | |||
In June 2007, the FASB ratified a consensus opinion reached by the Emerging Issues Task Force (EITF) on EITF Issue 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities. The guidance in EITF Issue 07-3 requires the Company to defer and capitalize nonrefundable advance payments made for goods or services to be used in research and development activities until the goods have been delivered or the related services have been performed. If the goods are no longer expected to be delivered nor the services expected to be performed, the Company would be required to expense the related capitalized advance payments. The consensus in EITF Issue 07-3 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2007 and is to be applied prospectively to new contracts entered into on or after December 15, 2007. The Company intends to adopt EITF Issue 07-3 effective January 1, 2008. The impact of applying this consensus will depend on the terms of the Companys future research and development contractual arrangements entered into on or after December 15, 2007. |
3. | Property and Equipment. | |
Property and equipment, net consists of the following: |
September 30, | December 31, | |||||||
2007 | 2006 | |||||||
Computer equipment |
$ | 25,867 | $ | 18,368 | ||||
Furniture and equipment |
34,225 | 8,457 | ||||||
Leasehold improvements |
80,176 | | ||||||
Accumulated depreciation |
(14,751 | ) | (6,668 | ) | ||||
Total property and equipment, net |
$ | 125,517 | $ | 20,157 | ||||
Depreciation expense was $3,413 and $2,139 and $8,083 and $4,190, respectively, for the three month and nine month periods ended September 30, 2007 and 2006. |
9
4. | Accrued Expenses. | |
Accrued expenses consist of the following: |
September 30, | December 31, | |||||||
2007 | 2006 | |||||||
Common stock issuable |
$ | | $ | 59,274 | ||||
Accrued professional fees |
79,192 | 72,571 | ||||||
Deferred lease incentive |
51,490 | | ||||||
Accrued compensation & benefits |
19,478 | 21,198 | ||||||
Other (See
Note 9) |
25,416 | 171,731 | ||||||
Total accrued expenses |
$ | 175,576 | $ | 324,774 | ||||
5. | Commitments | |
The Company has contracted with a CRO, various drug manufacturers, and other vendors to assist in clinical trial work, analysis, and the filing of an NDA with the FDA. The contracts are cancelable at any time, but obligate the Company to reimburse the providers for any time or costs incurred through the date of termination. | ||
The Company has executed noncancellable operating lease agreements for its corporate offices. As of September 30, 2007, future minimum annual lease payments under the noncancellable operating lease agreements are as follows: |
2007 |
$ | 12,648 | ||
2008 |
63,281 | |||
2009 |
58,402 | |||
2010 |
60,155 | |||
2011 |
61,959 | |||
Thereafter |
58,354 | |||
$ | 314,799 | |||
During the quarter ended March 31, 2007, the Company entered into a new lease agreement for its corporate offices in Coral Gables, Florida. Rent expense was $11,642 and $4,791 and $27,987 and $14,190, respectively, for the three month and nine month periods ended September 30, 2007 and 2006. The Companys office leases expire on various dates from December 2007 to November 2012. | ||
Obligations under capital leases are not significant. | ||
For commitments related to our license agreement, see Note 9. |
10
6. | Income Taxes. | |
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (FIN No. 48), on January 1, 2007. Previously, the Company had accounted for tax contingencies in accordance with Statement of Financial Accounting Standards No. 5, Accounting for Contingencies. As required by FIN 48, which clarifies FASB Statement No. 109, Accounting for Income Taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied FIN 48 to all tax positions for which the statute of limitation remained open. No resulting unrecognized tax benefits were identified in connection with the implementation of FIN 48. | ||
The Company is subject to income taxes in the U.S. federal jurisdiction, and various states jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities for the years before 2002. If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be reported as a component of income tax expense. | ||
7. | Stock Compensation. | |
Stock Options | ||
The Company has granted stock options to employees, officers, directors and scientific advisors of the Company, generally at exercise prices equal to the market value of the stock at the date of grant. The options generally vest ratably over four years, based on continued employment, with a maximum term between five and 10 years. | ||
The tables below summarize options outstanding and exercisable at September 30, 2007: |
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Weighted- | Remaining | Aggregate | ||||||||||||||
Average Exercise | Contractual | Intrinsic | ||||||||||||||
Options | Price | Term (in years) | Value | |||||||||||||
Options outstanding at December 31, 2006 |
2,374,149 | $ | 1.19 | 4.85 | ||||||||||||
Granted |
194,000 | 4.20 | 5.44 | |||||||||||||
Exercised |
| | | |||||||||||||
Forfeited |
| | | |||||||||||||
Options outstanding at September 30, 2007 |
2,568,149 | $ | 1.42 | 4.90 | $ | 4,577,186 | ||||||||||
Options exercisable at September 30, 2007 |
2,320,781 | $ | 1.15 | 4.70 | $ | 4,746,014 | ||||||||||
11
7. | Stock Compensation (continued) |
Options Outstanding | ||||||||||||||||||||
Weighted | ||||||||||||||||||||
Average | Options Exercisable | |||||||||||||||||||
Remaining | Weighted | Weighted | ||||||||||||||||||
Number | Contractual | Average | Number | Average | ||||||||||||||||
Range of Exercise Prices | Outstanding | Life (Years) | Exercise Price | Exercisable | Exercise Price | |||||||||||||||
$0.69 - $1.37 |
2,060,417 | 4.98 | $ | 0.89 | 2,060,417 | $ | 0.89 | |||||||||||||
$2.98 |
291,844 | 4.05 | $ | 2.98 | 182,402 | $ | 2.98 | |||||||||||||
$3.60 - $4.00 |
154,000 | 5.22 | $ | 3.74 | 70,666 | $ | 3.81 | |||||||||||||
$6.00 |
61,888 | 5.45 | $ | 6.00 | 7,296 | $ | 6.00 | |||||||||||||
2,568,149 | 4.90 | $ | 1.42 | 2,320,781 | $ | 1.15 | ||||||||||||||
Beginning January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards 123(R) Share-Based Payment (SFAS No.123R) using the modified prospective transition method. The Company utilizes the Black-Scholes option-pricing model to determine the fair value of stock options on the date of grant. This model derives the fair value of stock options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate and dividend yield. The Companys expected volatility is based on the historical volatility of other publicly traded development stage companies in the same industry. The estimated expected option life is based upon estimated employee exercise patterns and considers whether and the extent to which the options are in-the-money. The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the estimated expected life of the Companys stock options awards. No options were granted during the three months ended September 30, 2007. For the nine month periods ended September 30, 2007 and 2006 and the three month period ended September 30, 2006, the assumptions used were an estimated annual volatility of 100%, average expected holding periods of four to five years, and risk-free interest rates of 4.57%, 5.50% and 5.50%, respectively. The expected dividend rate is zero and no forfeiture rate was applied. | ||
The weighted-average grant date fair value of stock options granted during the nine months ended September 30, 2007 and September 30, 2006 were $2.65 and $5.02, respectively. The total fair value of vested stock options for the three months ended September 30, 2007 and nine months ended September 30, 2007 and 2006 were $218,661, $433,736 and $23,729, respectively. | ||
As of September 30, 2007, there was approximately $807,000 of unrecognized compensation expense related to non-vested stock compensation awards granted under the Plan. The cost is expected to be recognized over a weighted average period of approximately 2.05 years. | ||
Restricted Stock Units | ||
Under the Plan, participants may be granted restricted stock units, each of which represents a conditional right to receive shares of common stock in the future. The restricted stock units granted under this plan generally vest ratably over a three to four-year period. Upon vesting, the restricted stock units will convert into an equivalent number of shares of common stock. The amount of expense relating to the restricted stock units is based on the closing market price of the Companys common stock on the date of grant and is amortized on a straight-line basis over the requisite service period. Restricted stock unit activity for the nine months ended September 30, 2007 was as follows: |
12
7. | Stock Compensation (continued) |
Number of | Weighted- | |||||||
Restricted Stock | Average Grant | |||||||
Units | Date Fair Value | |||||||
Nonvested balance at December 31, 2006 |
| $ | | |||||
Granted |
15,000 | 4.03 | ||||||
Vested |
| | ||||||
Forfeited |
| | ||||||
Nonvested balance at September 30, 2007 |
15,000 | $ | 4.03 | |||||
The Company recorded stock-based compensation related to restricted stock units totaling $5,038 and $0 and $15,114 and $0, respectively, during the three month and nine month periods ended September 30, 2007 and 2006. As of September 30, 2007, there was $45,337 of total restricted stock unit compensation expense related to non-vested awards not yet recognized, which is expected to be recognized over a weighted average period of 2.25 years. | ||
8. | Related Party Transactions. | |
Since its inception in 2002, the Company has entered into various consulting agreements with non-employee officers and with members of the Companys Scientific Advisory Board. During the three month and nine month periods ended September 30, 2007 and 2006, the Company paid approximately $15,000 and $38,000 and $42,000 and $103,000, respectively, in consulting fees to related parties. A fair value of $6.00 and $2.98 per share was used to determine the related expense with respect to the stock-based portion of this compensation for the nine months ended September 30, 2006. | ||
In January 2005, the Company entered into an agreement with Patrick J. McEnany to act as the Companys Chief Executive Officer. The agreement called for an annual salary of $100,000 per year commencing on March 1, 2005. The agreement stipulated that half of Mr. McEnanys salary was to be deferred until the Company raised equity in the amount of not less than $2,000,000. Mr. McEnany also deferred the other half of his compensation until the equity minimum was met. The condition requiring full payment of this obligation was satisfied in July 2006 when the Company closed a private placement, at which time all deferred compensation was paid to Mr. McEnany. The January 2005 agreement was replaced with a new employment agreement in November 2006 in connection with the completion of the Companys initial public offering. |
9. | Contingent Liability. | |
The Company has an exclusive worldwide license agreement with Brookhaven Science Associates, as operator of Brookhaven National Laboratory (Brookhaven) pursuant to which it licenses nine U.S. patents, four U.S. patent applications and numerous foreign patents, applications and filings relating to the use of vigabatrin for a wide variety of substance addictions and obsessive compulsive disorders. Under the license agreement, the Company has agreed to pay Brookhaven a fee of $100,000 in the year of NDA approval of CPP-109, $250,000 in the each of the second and third years following approval and $500,000 per year thereafter until the license agreement expires. The Company is also obligated to reimburse Brookhaven, upon the filing of an NDA for CPP-109 and upon obtaining FDA regulatory approval, to sell any product, for certain of their patent-related expenses. The Company believes that at September 30, 2007 it had a contingent liability of approximately $166,000 related to this obligation. | ||
Subsequent to the end of the quarter ended September 30, 2007, Brookhaven formally advised the Company that they believe that the amount potentially due for patent related expenses as of that date is approximately $1,000,000. The Company believes that it is potentially only liable to Brookhaven for the approximately $166,000 described above, and it has advised Brookhaven that it disputes their determination of patent-related expenses due under the license agreement. The Company intends to consult with Brookhaven in an effort to resolve this dispute. However, there can be no assurance as to the outcome of this matter. In any event, the total amount of patent-related expenses due to Brookhaven under the license agreement is payable no earlier than submission by the Company of an NDA for CPP-109. |
13
| the scope, rate of progress and expense of our clinical trials and our other product development activities; | |
| the results of future clinical trials, and the number of clinical trials (and the scope of such trials) that will be required to seek and obtain approval of an NDA for CPP-109; and | |
| the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights. |
14
15
16
17
18
| the scope, rate of progress and cost of our clinical trials and other product development activities; | |
| future clinical trial results; | |
| the terms and timing of any collaborative, licensing and other arrangements that we may establish; | |
| the cost and timing of regulatory approvals; | |
| the cost and delays in product development as a result of any changes in regulatory oversight applicable to our products; | |
| the cost and timing of establishing sales, marketing and distribution capabilities; | |
| the effect of competition and market developments; |
19
| the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and | |
| the extent to which we acquire or invest in other products. |
Payments Due by Period | ||||||||||||||||||||
Less than | After | |||||||||||||||||||
Total | 1 year | 1-3 years | 4-5 years | 5 years | ||||||||||||||||
Debt |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Capital leases |
| | | | | |||||||||||||||
Operating leases |
314,799 | 61,647 | 117,687 | 124,854 | 10,611 | |||||||||||||||
Total |
$ | 314,799 | $ | 61,647 | $ | 117,687 | $ | 124,854 | $ | 10,611 | ||||||||||
20
| Payment to Brookhaven under our license agreement. We have agreed to pay Brookhaven a fee of $100,000 in the year of NDA approval for CPP-109, $250,000 in each of the second and third years following approval, and $500,000 per year thereafter until the license agreement expires. We are also obligated to reimburse Brookhaven upon the filing of an NDA for CPP-109 and upon obtaining FDA regulatory approval to sell any licensed product for certain of their patent-related expenses. We believe that such potential obligation is approximately $166,000 as of September 30, 2007. See Dispute with Brookhaven below. | ||
| Payments to our contract manufacturer. We are obligated to pay our contract manufacturer approximately $828,000, with payments to be based on the achievement of milestones relating to the schedule of work that it has agreed to perform for us. At September 30, 2007, we had paid approximately $673,000 of this amount. | ||
| Payments to our CRO. We are obligated to pay our CRO approximately $4,800,000, with respect to our U.S. Phase II cocaine trial, with payments to be based on the achievement of milestones relating to the agreed upon service agreement. At September 30, 2007, we had paid approximately $780,000 of this amount, $302,414 of which had been advanced to the CRO for future expenses and as such have been included in prepaid expenses in the accompanying condensed balance sheet at September 30, 2007. | ||
| Payments for laboratories and other trial related tests. We are obligated to pay approximately $567,000, in connection with laboratories and other tests related to our US Phase II cocaine clinical trial during the next 13 months. At September 30, 2007, we had paid approximately $157,000 of this amount, $118,000 of which have been advanced upon signing of the contracts and as such have been included in prepaid expenses in the accompanying balance sheet at September 30, 2007. | ||
| Employment agreements. We have entered into employments agreements with two of our executive officers that require us to make aggregate base salary payments of $515,000 per annum. |
21
a. | We have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of September 30, 2007, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended, was recorded, processed, summarized or reported within the time periods specified in the rules and regulations of the SEC, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. | ||
b. | There have been no changes in our internal controls or in other factors that could have a material effect, or are reasonably likely to have a material effect, to the internal controls subsequent to the date of their evaluation in connection with the preparation of this Quarterly Report on Form 10-Q. |
22
31.1 | Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31.2 | Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32.1 | Certification of Principal Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32.2 | Certification of Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 |
23
Catalyst Pharmaceutical Partners, Inc. |
||||
By: | /s/ Jack Weinstein | |||
Jack Weinstein | ||||
Chief Financial Officer | ||||
24
Exhibit | ||||
Number | Description | |||
31.1 | Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 |
|||
31.2 | Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 |
|||
32.1 | Certification of Principal Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 |
|||
32.2 | Certification of Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 |
25
1. | I have reviewed this quarterly report on Form 10-Q of Catalyst Pharmaceutical Partners, Inc.; | ||
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Intentionally omitted. | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting. Date: November 14, 2007 |
/s/ Patrick J. McEnany | ||||
Patrick J. McEnany | ||||
Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Catalyst Pharmaceutical Partners, Inc.; | ||
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Intentionally omitted. | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting. Date: November 14, 2007 |
/s/ Jack Weinstein | ||||
Jack Weinstein | ||||
Chief Financial Officer (Principal Financial Officer) |
1. | the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2007 (the Report), filed with the U.S. Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | ||
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 14, 2007 | /s/ Patrick J. McEnany | |||
Patrick J. McEnany | ||||
Chief Executive Officer (Principal Executive Officer) |
1. | the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2007 (the Report), filed with the U.S. Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | ||
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 14, 2007 | /s/ Jack Weinstein | |||
Jack Weinstein | ||||
Chief Financial Officer (Principal Financial Officer) |
||||