our other internal R&D costs of approximately $0.1 million, or 35%, to approximately $0.2 million in 2009, from approximately $0.3 million in 2008.
options generally will become fully vested and exercisable (unless otherwise provided in an option holder’s award agreement).
Options granted under the 2000 Plan are restricted as to transferability. Generally, options only may be transferred by will or the laws of descent and distribution, however, non-qualified stock options also may be transferred by gift under certain circumstances and pursuant to certain domestic relations orders. Option holders may be required under the 2000 Plan to make certain investment representations in connection with the exercise of options to enable the Companyus to comply with federal and state securities laws. The CompanyWe may refuse delivery of shares under the 2000 Plan if the requested representations are not made by an option holder or if the shares have not been registered by the Companyus on a stock exchange. At the time of deliveryexercise of sharesoptions under the 2000 Plan, option holders may be required to pay any taxes associated with thesuch exercise of the option that the Company iswe are required to withhold. The 2000 Plan permits the Companyus to retain or sell shares that an option holder otherwise would receive upon exercise of the option to cover the tax amounts required to be withheld.
No person has a right to be selected as a participant in the 2000 Plan or to be granted an option under the 2000 Plan. Participation in the 2000 Plan or the grant of an option under the 2000 Plan does not give any participant or option holder rights as an employee of or a consultant or advisor to us or the right to be retained in the employ of or as a consultant or advisor to us.
The Compensation Committee generally has the authority to amend, alter, suspend, discontinue, or terminate the 2000 Plan without the consent of stockholders or 2000 Plan participants. However, to the extent that an amendment to the 2000 Plan requires shareholder approval under any applicable federal or state law or regulation or the rules of any stock exchange, the Compensation Committee will seek stockholder approval. Unless otherwise terminated, the 2000 Plan will remain effective for a term of ten years from its effective date, or until December 15, 2010. The Compensation Committee may not amend, alter, suspend, discontinue or terminate any outstanding option without the consent of the participant. We currently intend to adopt a new equity incentive plan and submit it to stockholders for approval during 2010.
Federal Income Tax Information
Incentive Stock Options. Incentive stock options under the 2000 Plan are intended to be eligible for the favorable federal income tax treatment accorded “incentive stock options” under the Internal Revenue Code of 1986, as amended (the “Code”).
There generally are no federal income tax consequences to the participant or to us by reason of the grant or exercise of an incentive stock option. However, the exercise of an incentive stock option may increase the participant’s alternative minimum tax liability, if any.
If a participant holds stock acquired through exercise of an incentive stock option for more than two years from the date on which the option is granted and more than one year from the date on which the shares are transferred to the participant upon exercise of the option, any gain or loss on a disposition of such stock will be a long-term capital gain or loss.
Generally, if the participant disposes of the stock before the expiration of either of these holding periods (a “disqualifying disposition”), then at the time of disposition the participant will realize taxable ordinary income equal to the lesser of (i) the excess of the stock’s fair market value on the date of exercise over the exercise price, or (ii) the participant’s actual gain, if any, on the purchase and sale. The participant’sAny additional gain or any loss upon the disqualifying disposition will be a capital gain or loss, which will be long-term or short-term depending on whether the stock was held for more than one year.
To the extent the participant recognizes ordinary income by reason of a disqualifying disposition, we will generally be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation) to a corresponding business expense deduction in the tax year in which the disqualifying disposition occurs.
58
Nonstatutory Stock Options. Nonstatutory stock options granted under the 2000 Plan generally have the following federal income tax consequences.
59
There are no tax consequences to the participant or to us by reason of the grant. Upon exercise of an options and acquisition of the stock, the participant normally will recognize taxable ordinary income equal to the excess, if any, of the stock’s fair market value on the acquisition date over the purchase price.price (the exercise price). However, to the extentif the stock is subject to certain types of vesting restrictions (an “early exercise” feature), the taxable event will be delayed until the vesting restrictions lapse unless the participant elects to be taxed on receipt of the stock. With respect to employees, we are generally required to withhold from regular wages or supplemental wage payments an amount based on the ordinary income recognized. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will generally be entitled to a business expense deduction equal to the taxable ordinary income realized by the participant.
Upon disposition of the stock, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock plus any amount recognized as ordinary income upon acquisition (or vesting) of the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year. Slightly different rules may apply to participants who acquire stock subject to certain repurchase options or who are subject to Section 16(b) of the Exchange Act.
Potential Limitation on Company Deductions. Section 162(m) of the Code denies a deduction to any publicly held corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to such covered employee exceeds $1 million. It is possible that compensation attributable to awards, when combined with all other types of compensation received by a covered employee from us, may cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified “performance-based compensation,” are disregarded for purposes of the deduction limitation. In accordance with Treasury Regulations issued under Section 162(m), compensation attributable to stock options will qualify as performance-based compensation if the award is granted by a compensation committee comprise solely of “outside directors” and either (i) the plan contains a per-employee limitation on the number of shares for which such awards may be granted during a specified period, the per-employee limitation is approved by the stockholders, and the exercise price of the award is no less than the fair market value of the stock on the date of grant, or (ii) the award is granted (or exercisable) only upon the achievement (as certified in writing by the compensation committee) of an objective performance goal established in writing by the compensation committee while the outcome is substantially uncertain, and the award is approved by stockholders.
5960
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a summary of transactions, and series of related transactions, since January 1, 2007 to which we have been or will be a participant, in which the amount involved exceeded or will exceed one percent of the average of our total assets at year end for the last two completed fiscal years and in which any of our executive officers, directors or beneficial holders of more than five percent of our capital stock had or will have a direct or indirect material interest, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest, other than executive and director compensation arrangements, including the employment, termination of employment and change of control arrangements, which are described in the section of this prospectus entitled “Executive Compensation.”
Since January 1, 2007, we have entered into four financing transactions with Sigma-Tau and its affiliates as described below. As described above, Mauro Bove, one of our directors, is an officer of Sigma-Tau. Each of these transactions was approved by our Board of Directors and our audit committee, following disclosure of Mr. Bove’s potential interests in these transactions.
On February 29, 2008, we issued 2,500,000 shares of common stock to each of Chaumiere-Consultadoria e Servicos SDC Unipessoal LDA, or Chaumiere, which is an indirect wholly-owned subsidiary of an entity owned by Paolo Cavazza and members of his family, who own 38% of Sigma-Tau, and Inverlochy-Consultadoria e Servicos (S.U.) LDA, or Inverlochy, an entity wholly owned by Claudio Cavazza, who directly and indirectly owns 57% of Sigma-Tau, at a purchase price of $1.00 per share in a private placement. The purchase agreements provide that the purchasers may not transfer the shares through December 31, 2010, except for transfers to affiliates, that we, rather than the purchasers, have all voting rights in respect of the shares until December 31, 2010, and that we had the right to repurchase the shares at a price of $2.00 per share until December 31, 2009, which right has expired, and that we have the right to repurchase the shares at a price of $2.50 per share until December 31, 2010. We also issued warrants to each of Chaumiere and Inverlochy to purchase 500,000 shares of our common stock at an exercise price of $1.60 per share. The warrants have vested in full as of December 31, 2009 and are exercisable until December 31, 2010.
On December 10, 2008, we issued 1,034,482 shares of common stock to each of Chaumiere and Inverlochy at a purchase price of $1.45 per share in a private placement. The purchase agreements provide that the purchasers may not transfer the shares through December 31, 2011, except for transfers to affiliates and that we, rather than the purchasers, have all voting rights in respect of the shares until December 31, 2011. We also issued warrants to each of Chaumiere and Inverlochy to purchase 372,552 shares of our common stock at an exercise price of $1.74 per share. The warrants were vested in full upon issuance and are exercisable until December 31, 2011.
On April 30, 2009, we issued 1,052,631 shares of common stock to Chaumiere at a purchase price of $0.57 per share in a private placement. The purchase agreement provides that Chaumiere may not transfer the shares through April 30, 2012 except for transfers to affiliates and that we, rather than Chaumiere, have all voting rights in respect to the shares through April 30, 2012. We also issued a warrant to Chaumiere to purchase 263,158 shares of our common stock at an exercise price of $0.91 per share. The warrant was fully vested upon issuance and is exercisable until April 30, 2012.
On October 15, 2009, we issued 1,219,512 shares of common stock to Chaumiere at a purchase price of $0.82 per share in a private placement. The purchase agreement provides that Chaumiere may not transfer the shares through September 30, 2012 except for transfers to affiliates and that we, rather than Chaumiere, have all voting rights in respect to the shares through September 30, 2012. We also issued a warrant to Chaumiere to purchase 609,756 shares of our common stock at an exercise price of $1.12 per share. The warrant was fully vested upon issuance and is exercisable until September 30, 2014.
Indemnification of Officers and Directors
Our restated certificate of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the General Corporation Law of the State of Delaware, referred to herein as the DGCL. Our restated certificate of incorporation provides that no director will have personal
6061
liability to us or to our stockholders for monetary damages for breach of fiduciary duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors for any of the following:
| | |
| • | any breach of their duty of loyalty to us or our stockholders; |
|
| • | acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; |
|
| • | voting or assenting to unlawful payments of dividends or other distributions; or |
|
| • | any transaction from which the director derived an improper personal benefit. |
Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act or failure to act, or any cause of action, suit or claim that would accrue or arise prior to any amendment or repeal or adoption of an inconsistent provision. If the DGCL is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited in accordance with the DGCL.
Section 145 of the DGCL provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation, or is or was serving at the request of such person as an officer, director, employee or agent of another corporation or enterprise. Our amended and restated bylaws include such a provision. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful.
Section 145 of the DGCL also provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. Our amended and restated bylaws contain such a provision. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses that such officer or director has actually and reasonably incurred.
Expenses incurred by any indemnitee in defending or investigating a threatened or pending action, suit or proceeding in advance of its final disposition shall be paid by us upon delivery to us of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such indemnitee is not entitled to be indemnified by us. No advance will be made by us if a determination is reasonably and promptly made by our board of directors by a majority vote of a quorum of disinterested directors, or if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that, based upon the facts known to the board or counsel at the time such determination is made, such person did not meet the applicable standard of conduct in order to be indemnified.
At present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
We have an insurance policy covering our officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act or otherwise.
6162
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock as of March 15,April 28, 2010 and as adjusted to reflect the sale of shares in this offering by:
| | |
| • | each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock; |
|
| • | each of our named executive officers; |
|
| • | each of our directors; and |
|
| • | all of our executive officers and directors as a group. |
The percentage ownership information shown in the table is based upon 60,406,828 shares of common stock outstanding as of March 15, 2010.April 28, 2010 and 71,906,828 shares outstanding following the offering.
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants that are either immediately exercisable or exercisable on or before May 14,June 27, 2010, which is 60 days after March 15,April 28, 2010. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for persons listed in the table isc/o RegeneRx Biopharmaceuticals, Inc., 15245 Shady Grove Road, Suite 470, Rockville, Maryland 20850.
| | | | | | | | | | | | |
| | Number of
| | Percentage of Shares
|
| | Shares
| | Beneficially Owned |
| | Beneficially
| | Before
| | After
|
Name of Beneficial Owner | | Owned | | Offering | | Offering |
|
5% Stockholders: | | | | | | | | | | | | |
Entities affiliated with Sigma-Tau Finanziaria, S.p.A. Via Sudafrica, 20, Rome, Italy 00144 | | | 30,142,859 | (1) | | | 46.9 | % | | | | |
Named Executive Officers and Directors: | | | | | | | | | | | | |
J.J. Finkelstein | | | 2,299,636 | (2) | | | 3.8 | % | | | | |
Allan L. Goldstein | | | 2,152,538 | (3) | | | 3.6 | % | | | | |
Richard J. Hindin | | | 1,175,459 | (4) | | | 1.9 | % | | | | |
Joseph C. McNay | | | 1,537,135 | (5) | | | 2.5 | % | | | | |
Mauro Bove | | | 197,155 | (6) | | | * | | | | * | |
L. Thompson Bowles | | | 124,843 | (7) | | | * | | | | * | |
C. Neil Lyons | | | 329,393 | (8) | | | * | | | | * | |
David R. Crockford | | | 388,750 | (9) | | | * | | | | * | |
All current directors and executive officers as a group (8 persons) | | | 38,347,768 | (10) | | | 63.7 | % | | | | |
| | | | | | | | | | | | |
| | Number of
| | Percentage of Shares
|
| | Shares
| | Beneficially Owned |
| | Beneficially
| | Before
| | After
|
Name of Beneficial Owner | | Owned | | Offering | | Offering |
|
5% Stockholders: | | | | | | | | | | | | |
Entities affiliated with Sigma-Tau Finanziaria, S.p.A. Via Sudafrica, 20, Rome, Italy 00144 | | | 30,142,859 | (1) | | | 46.9 | % | | | 41.9 | % |
Named Executive Officers and Directors: | | | | | | | | | | | | |
J.J. Finkelstein | | | 2,299,636 | (2) | | | 3.8 | % | | | 3.2 | % |
Allan L. Goldstein | | | 2,152,538 | (3) | | | 3.5 | % | | | 3.0 | % |
Richard J. Hindin | | | 1,175,459 | (4) | | | 1.9 | % | | | 1.6 | % |
Joseph C. McNay | | | 1,537,135 | (5) | | | 2.5 | % | | | 2.1 | % |
Mauro Bove | | | 197,155 | (6) | | | * | | | | * | |
L. Thompson Bowles | | | 124,843 | (7) | | | * | | | | * | |
C. Neil Lyons | | | 348,143 | (8) | | | * | | | | * | |
David R. Crockford | | | 396,250 | (9) | | | * | | | | * | |
All current directors and executive officers as a group (8 persons) | | | 8,231,159 | (10) | | | 13.0 | % | | | 11.0 | % |
| | |
* | | Represents beneficial ownership of less than 1%. |
| | |
(1) | | Consists of 984,615 shares of common stock held of record held by Sigma-Tau Finanziaria, S.p.A. (“Sigma-Tau”); 12,011,185 shares of common stock held of record and 589,481 shares of common stock issuable upon exercise of warrants held by Defiante Farmaceutica S.A. (“Defiante”), a subsidiary of Sigma-Tau, that are exercisable within 60 days of March 15,April 28, 2010; 5,052,582 shares of common stock held of record and 1,228,486 shares of common stock issuable upon exercise of warrants held by Inverlochy-Consultadoria e Servicos (S.U.) LDA (“Inverlochy”), an entity wholly owned by Claudio Cavazza, who |
6263
| | |
| | who directly and indirectly owns 57% of Sigma-Tau, that are exercisable within 60 days of March 15,April 28, 2010; and 8,175,110 shares of common stock held of record and 2,101,400 shares of common stock issuable upon exercise of warrants held by Chaumiere-Consultadoria e Servicos SDC Unipessoal LDA (“Chaumiere”), an indirect wholly-owned subsidiary of Aptafin S.p.A., which is owned by Paolo Cavazza and members of his family, that are exercisable within 60 days of March 15,April 28, 2010. Paolo Cavazza directly and indirectly owns 38% of Sigma-Tau. The number of shares beneficially owned and the percentage of shares beneficially owned after the offering do not include any securities that affiliates of Sigma-Tau may purchase in this offering. |
| | |
(2) | | Consists of 1,377,638 shares of common stock held of record by Mr. Finkelstein and 51,000 shares of common stock held of record by Mr. Finkelstein’s minor daughter over which Mr. Finkelstein shares voting and dispositive power. Also includes 870,998 shares of common stock issuable upon exercise of options exercisable within 60 days of March 15,April 28, 2010. |
| | |
(3) | | Consists of 1,586,846 shares of common stock held of record by Dr. Goldstein and 565,692 shares of common stock issuable upon exercise of options exercisable within 60 days of March 15,April 28, 2010. |
| | |
(4) | | Consists of 967,710 shares of common stock held of record by Mr. Hindin and 207,749 shares of common stock issuable upon exercise of options exercisable within 60 days of March 15,April 28, 2010. |
| | |
(5) | | Consists of 1,339,111 shares of common stock held of record by Mr. McNay and 198,024 shares of common stock issuable upon exercise of options exercisable within 60 days of March 15,April 28, 2010. |
| | |
(6) | | Consists of shares of common stock issuable upon exercise of options exercisable within 60 days of March 15,April 28, 2010. Mr. Bove is an officer of Sigma-Tau, but he has no beneficial ownership over the reported securities as he has no voting or dispositive power with respect to the securities held by Sigma-Tau and its affiliates described in Note 2 above. |
| | |
(7) | | Consists of shares of common stock issuable upon exercise of options exercisable within 60 days of March 15,April 28, 2010. |
| | |
(8) | | Consists of 10,000 shares of common stock held of record by Mr. Lyons and 319,393338,143 shares of common stock issuable upon exercise of options exercisable within 60 days of March 15,April 28, 2010. |
| | |
(9) | | Consists of shares of common stock issuable upon exercise of options exercisable within 60 days of March 15,April 28, 2010. |
| | |
(10) | | Consists of 31,555,7975,332,305 shares of common stock held of record 3,919,367 shares of common stock issuable upon exercise of warrants exercisable within 60 days of March 15, 2010 and 2,872,6042,898,854 shares of common stock issuable upon exercise of options exercisable within 60 days of March 15,April 28, 2010. |
6364
DESCRIPTION OF SECURITIES
As of the date of this prospectus, our certificate of incorporation authorizes us to issue 100,000,000 shares of common stock, par value $0.001 per share, and 1,000,000 shares of preferred stock, par value $0.001 per share. As of March 31, 2010, 60,406,828 shares of common stock were outstanding and no shares of preferred stock were outstanding. Depending on the numberOur board of shares to be issued in this offering, we may be required to effectdirectors and stockholders have approved an amendment to our restated certificate of incorporation in order to increase the authorized number of shares of common stock.stock from 100,000,000 shares to 200,000,000 shares. We expect to effect this amendment to our restated certificate of incorporation following the completion of this offering.
As of March 31, 2010, we also had outstanding:
| | |
| • | options to purchase 4,914,112 shares of our common stock at a weighted average exercise price of $1.53 per share; and |
|
| • | warrants to purchase an aggregate of 7,933,851 shares of our common stock at a weighted average exercise price of $2.01 per share. |
The following summary description of our capital stock is based on the provisions of our certificate of incorporation, including the certificate of designation for our Series A Participating Cumulative Preferred Stock described below, as well as our bylaws, our stockholder rights plan and the applicable provisions of the Delaware General Corporation Law. This information is qualified entirely by reference to the applicable provisions of our restated certificate of incorporation, as amended to date, our bylaws, as amended to date, our stockholder rights plan and the Delaware General Corporation Law. For information on how to obtain copies of our certificate of incorporation, bylaws and stockholder rights plan, which are exhibits to the registration statement of which this prospectus is a part, see “Where You Can Find Additional Information.”
Units
In this offering, we are offering 11,500,000 units, consisting in the aggregate of 11,500,000 shares of common stock and warrants to purchase 5,290,000 shares of common stock. Each unit consists of sharesone share of common stock and a0.4 tradeable warrantwarrants to purchase shares of common stock. The units will separate immediately and the common stock and the warrants will be issued separately. There will be no market for the units. We are also issuing warrantsa warrant to purchase up to an aggregate of 805,000 shares of our common stock at an exercise price of $ per share, which is equal to 110% of the public offering price per share, to the representative of the underwriters as underwriting compensation. The terms of these underwriters’ warrantsthis warrant are summarized below under “Underwriting — Underwriters’Representative’s Warrants.” This prospectus also relates to the offering of shares of our common stock upon exercise, if any, of the warrants.warrant.
Common Stock
Voting Rights. Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Our certificate of incorporation and bylaws do not provide for cumulative voting rights. Because of this, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they should so choose.
Dividends. Subject to preferences that may be applicable to any then outstanding preferred stock, holders of common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.
Liquidation. In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.
Rights and Preferences. Holders of common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to the common stock. The rights,
65
preferences and privileges of the holders of common stock are subject to and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.
64
Fully Paid and Nonassessable. All of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering will be, fully paid and nonassessable.
Certain Repurchase Rights and Voting Restrictions.
On October 15, 2009, we issued 1,219,512 shares of common stock and a warrant to purchase an additional 609,756 shares of common stock to Sigma-Tau. The purchaser agreed to vote the shares purchased in the transaction, and any additional shares issued pursuant to the exercise of the warrant issued in the transaction, at the direction of our Board until September 30, 2012.
On April 30, 2009, we issued 1,052,631 shares of common stock and a warrant to purchase an additional 263,158 shares of common stock to Sigma-Tau. The purchaser agreed to vote the shares purchased in the transaction, and any additional shares issued pursuant to the exercise of the warrant issued in the transaction, at the direction of our Board until April 30, 2012.
On December 10, 2008, we issued an aggregate of 2,068,964 shares of common stock and warrants to purchase an additional 745,104 shares of common stock to Sigma-Tau. The purchasers agreed to vote the shares purchased in the transaction, and any additional shares issued pursuant to the exercise of the warrants issued in the transaction, at the direction of our Board until December 31, 2011.
On February 29, 2008, we issued an aggregate of 5,000,000 shares of common stock and warrants to purchase an additional 1,000,000 shares of common stock to Sigma-Tau. We may, in our sole discretion, repurchase the shares issued in the transaction at any time until December 31, 2010 for $2.50 per share. In addition, the purchasers agreed to vote the shares purchased in the transaction, and any additional shares issued pursuant to the exercise of the warrants issued in the transaction, at the direction of our Board until December 31, 2010.
On June 23, 2005, we issued an aggregate of 1,538,461 shares of common stock to Sigma-Tau. The purchasers agreed to assign the right to vote the shares issued in the transaction to us until June 23, 2010. At the end of this period, we, in our sole discretion, may repurchase for $5.00 per share the number of shares required to reduce the aggregate equity ownership of the purchasers to 30.1% of our outstanding common stock.
Warrants to Be Issued as Part of the Units
The material terms and provisions of the warrants being offered pursuant to this prospectus are summarized below. This summary is subject to, and qualified in its entirety by, the form of warrant agreement and warrant certificate included as exhibits to the registration statement filed with the SEC of which this prospectus is a part. You should review copies of these items for a complete description of the terms and conditions applicable to the warrants.
Each whole warrant entitles the registered holder to purchase one share of our common stock at a price equal to $ , which represents 110% of the closing bid price per share of our common stock on the date of this prospectus. The warrants may only be exercised for cash. The warrants may be exercised beginning 30 days after original issuance and will expire five years from the date of this prospectusissuance at 5:00 p.m., New York City time.
We may call the warrants for redemption as follows:
| | |
| • | at a price of $0.01 per share for each warrant at any time while the warrants are exercisable, so long as a registration statement relating to the common stock issuable upon exercise of the warrants is effective and current; |
|
| • | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
66
| | |
| • | if, and only if, the last reported sale price of the common stock equals or exceeds $ per share, which is equal to 350% of the closing bid price of our common stock on the date of the prospectus, for any 20 trading days within a period of 30 consecutive trading days. |
If the foregoing conditions are satisfied and we call the warrants for redemption, each warrant holder will then be entitled to exercise his or her warrant prior to the date scheduled for redemption. However, there can
65
be no assurance that the price of the common stock will exceed the call price or the warrant exercise price after the redemption call is made.
The warrants will be issued in registered form under a warrant agreement between American Stock Transfer & Trust Company, as warrant agent, and us. We intend to apply for listing ofIt is anticipated that the warrants will be quoted on the NYSE AmexOTC Bulletin Board under the symbol “ .”” promptly after the date of this prospectus.
The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances, including but not limited to in the event of a stock split, stock dividend, recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for the issuances of common stock or securities convertible or exercisable into common stock at a price below their respective exercise prices.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their warrants and received shares of common stock. After issuance of shares of common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
No warrants will be exercisable unless at the time of exercise a prospectus relating to common stock issuable upon exercise of the warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the warrant agreement, we have agreed to meet these conditions and use our best efforts to maintain a current prospectus relating to common stock issuable upon exercise of the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so, and if we do not maintain a current prospectus related to the common stock issuable upon exercise of the warrants, holders will be unable to exercise their warrants and we will not be required to settle any such warrant exercise. If the prospectus relating to the common stock issuable upon the exercise of the warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, we will not be required to net cash settle or cash settle the warrant exercise, the warrants may have no value, the market for the warrants may be limited and the warrants may expire worthless.
Preferred Stock
Under our certificate of incorporation, our board of directors has the authority, without further action by the stockholders, to issue up to 1,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding. Our board of directors has designated 200,000 of the 1,000,000 authorized shares of preferred stock as Series A Participating Cumulative Preferred Stock, none of which shares are outstanding but which could be issued under the terms of the stockholder rights plan.
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control
67
of our company and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock.
Stockholder Rights Plan. Our Board adopted a Rights Agreement, dated April 29, 1994, as amended, often referred to as a “poison pill,” as a tool to prevent an unsolicited takeover. In general, under our rights agreement, our Board has the discretion to issue certain rights to purchase our capital stock when a person acquires in excess of 25% of our outstanding common shares. These provisions may make it more difficult for
66
stockholders to take corporate actions and may have the effect of delaying or preventing a change in control, even if such actions or change in control would be in your best interests.
Delaware Anti-takeover Law and Certain Provisions of Our Amended and Restated Certificate of Incorporation and Bylaws
Delaware law. We are subject to Section 203 of the Delaware General Corporation Law. Section 203 generally prohibits a public Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:
| | |
| • | prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; |
|
| • | the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for this purpose shares owned by persons who are directors and also officers and shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
|
| • | on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock that is not owned by the interested stockholder. |
Section 203 defines a business combination to include:
| | |
| • | any merger or consolidation involving the corporation and the interested stockholder; |
|
| • | any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation; |
|
| • | subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; |
|
| • | any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; and |
|
| • | the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Certificate of Incorporation and Bylaws. Provisions of our restated certificate of incorporation and amended and restated bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock.
68
Among other things, our restated certificate of incorporation and amended and restated bylaws:
| | |
| • | permit our board of directors to issue up to 1,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change in our control; |
|
| • | provide that the authorized number of directors, which may not be less than three nor more than seven, may be changed only by resolution of the board of directors; |
67
| | |
| • | provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice; |
|
| • | do not provide for cumulative voting rights, therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose; and |
|
| • | provide that special meetings of our stockholders may be called only by the chairman of the board, our chief executive officerpresident or by the board of directors. |
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company. The transfer agent and registrar’s address is 6201 15th Street, Brooklyn, NY 11219.
NYSE Amex Listing
Our common stock is currently listed on the NYSE Amex under the trading symbol “RGN.”
6869
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement between us and Maxim Group LLC, the sole book-running manager and sole representative of the underwriters, each underwriter named below has severally agreed to purchase from us on a firm commitment basis the following respective number of units of common stock and warrants to purchase common stock opposite its name below, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus:
| | | | |
Underwriter | | Number of Units | |
|
Maxim Group LLC | | | | |
Boenning & Scattergood, Inc. | | | | |
| | | | |
Total | | | 11,500,000 | |
| | | | |
The underwriting agreement provides for the purchase of a specific number of units by each of the underwriters. The underwriters’ obligations are several, which means that each underwriter is required to purchase a specified number of units, but is not responsible for the commitment of any other underwriter to purchase units.
Subject to the terms of the underwriting agreement, the underwriters have agreed to purchase all of the units offered by this prospectus (other than those covered by the over-allotment option described below) if any are purchased. Under the underwriting agreement, if an underwriter defaults in its commitment to purchase units, the commitments of non-defaulting underwriters may be increased or the underwriting agreement may be terminated, depending on the circumstances. The underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the units are subject to the passing upon certain legal matters by counsel and to certain other conditions, such as confirmation of the accuracy of our representations and warranties made in the underwriting agreement about our financial condition and operations.
We have been advised by the representative of the underwriters that the underwriters propose to offer the units to the public at the public offering price set forth on the cover of this prospectus and to dealers at a price that represents a concession not in excess of $ per unit. The underwriters may allow, and these dealers may re-allow, a concession of not more than $ per unit to other dealers. After the securities are released for sale to the public, the underwriters may change the offering price and other selling terms at various times.
Commissions and Expenses
The following table summarizes the underwriting discounts and commissions we will pay to the underwriters.
| | | | | | | | | | | | |
| | | | Total Without
| | Total With
|
| | Fee per
| | Exercise of
| | Exercise of
|
| | Unit(2) | | Over-Allotment | | Over-Allotment |
|
Public offering price | | $ | | | | $ | | | | $ | | |
Underwriting discount(1) | | $ | | | | $ | | | | $ | | |
Proceeds, before expenses, to us | | $ | | | | $ | | | | $ | | |
| | |
(1) | | Does not include a corporate finance fee in the amount of 1% of the gross proceeds payable to the representative of the underwriters for structuring the terms of the offering. No underwriting discount will be paid on units purchased by Sigma-Tau. |
| | |
(2) | | The fees shown do not include the warrantswarrant to purchase shares of common stock issuable to the representative of the underwriters at the closing. |
We estimate that the total expenses of the offering, including registration, filing and listing fees, printing fees, legal and accounting expenses and transfer and warrant agent fees, and the 1% corporate finance fee payable to the representative of the underwriters, but excluding underwriting discounts and commissions, and not taking into account the underwriters’ over-allotment option, will be approximately $ ,$500,000, all of which are payable by us.
6970
Over-Allotment Option
We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriters to purchase a maximum of 1,725,000 additional units, consisting of an aggregate of 1,725,000 shares of common stock and warrants to purchase an aggregate of 690,000 shares of common stock, from us to cover over-allotments. If the underwriters exercise all or part of this option, they will purchase units covered by the option at the public offering price that appears on the cover page of this prospectus, less the underwriting discount. The underwriters have severally agreed that, to the extent the over-allotment option is exercised, they will each purchase a number of additional units proportionate to the underwriter’s initial amount reflected in the foregoing table.
Underwriters’ WarrantsRepresentative’s Warrant
We have also agreed to issue to the representative of the underwriters warrantsa warrant to purchase a number of shares of our common stock equal to an aggregate of seven percent (7%) of the shares of common stock underlying units sold in the offering (or 805,000 shares). The warrantswarrant will have an exercise price equal to $ per share.share, which is 110% of the public offering price. The warrant is exercisable commencing six months following the closing of this offering, and will be exercisable for five years thereafter.following the closing date of this offering. The warrant is not redeemable by us, and allows for “cashless” exercise. The warrant also provides for one demand registration during the five-year period following the closing of this offering and for unlimited “piggyback” registration rights with respect to the underlying shares during the five year period commencing six months after the effective date of this offering. Pursuant to the rules of the Financial Industry Regulatory Authority, Inc., or FINRA, and in particular Rule 5110,5110(g)(1), the warrantswarrant (and underlying shares of common stock) issued to the representative of the underwriters may not be sold, transferred, assigned, pledged, or hypothecated, or the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective disposition of the securities by any person for a period of 180 days immediately following the date of delivery and payment for the units offered; provided, however, the warrant (and underlying shares) may be transferred to officers or directors of the representative of the underwriters and members of the underwriting syndicate and their affiliates as long as the warrantswarrant (and underlying shares) remain subject to the lockup.
The warrant contains anti-dilution terms that allow the underwriters to receive more shares or exercise at a lower price than originally agreed to upon at the time of the offering, provided that the public stockholders are proportionally affected by a stock split, stock dividend, or other similar event. The warrant will not provide for the underwriters to accrue cash dividends prior to the exercise or conversion of the warrant.
Lock-Up Agreements
Our executive officers, directors and certain of our stockholders have agreed to a90-day“lock-up” from the date of this prospectus of shares of our common stock that they beneficially own, including the issuance of common stock upon the exercise of currently outstanding options and options which may be issued. This means that, for a period of 90 days following the date of this prospectus, such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of the representative of the underwriters. Thelock-up period described in the preceding paragraph will be extended if (1) during the last 17 days of thelock-up period we issue an earnings release or material news or a material event relating to us occurs or (2) prior to the expiration of thelock-up period we announce that we will release earnings results during the16-day period beginning on the last day of thelock-up period, in which case thelock-up period will be extended until the expiration of the18-day period beginning on the date of issuance of the earnings release or the occurrence of the material news or material event.
The representative of the underwriters has no present intention to waive or shorten thelock-up period; however, the terms of thelock-up agreements may be waived at its discretion. In determining whether to waive the terms of the lockup agreements, the representative of the underwriters may base its decision on its assessment of the relative strengths of the securities markets and companies similar to ours in general, and the trading pattern of, and demand for, our securities in general.
71
In addition, the underwriting agreement provides that we will not, for a period of 90 days following the date of this prospectus, offer, sell or distribute any of our securities, without the prior written consent of the representative of the underwriters.
70
Other Terms
We have advanced $50,000 to Maxim Group LLC, which represents a reasonable estimate of the actual accountable expenses Maxim Group LLC will incur in the offering. Maxim Group LLC shall only receive an accountable expense reimbursement if the offering is terminated. If the offering is consummated, Maxim Group LLC will not receive an expense reimbursement and will refund the advance to us at the closing of the offering.
We also have agreed that, upon successful completion of this offering, for a period of six (6) months from the closing of this offering, we will grant Maxim Group LLC the right of participation to act as lead managing underwriter and book runner or minimally as a co-lead manager and co-book runnerand/or co-lead placement agent with at least 50.0% of the economics; or, in the case of a three-handed deal 33.0% of the economics, for any and all future equity offerings as well as any convertible debt offerings undertaken during this period by us.
The underwriting agreement provides for indemnification between us and the underwriters against specified liabilities, including liabilities under the Securities Act, and for contribution by us and the underwriters to payments that may be required to be made with respect to those liabilities. We have been advised that, in the opinion of the SEC, indemnification liabilities under the Securities Act is against public policy as expressed in the Securities Act, and is therefore, unenforceable.
This prospectus in electronic format may be made available on a website maintained by the representatives of the underwriters and may also be made available on a website maintained by other underwriters. The underwriters may agree to allocate a number of units to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives of the underwriters to underwriters that may make Internet distributions on the same basis as other allocations. In connection with the offering, the underwriters or syndicate members may distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe® PDF will be used in connection with this offering.
The underwriters have informed us that they do not expect to confirm sales of the securities offered by this prospectus to accounts over which they exercise discretionary authority without obtaining the specific approval of the account holder.
Stabilization
Until the distribution of the securities offered by this prospectus is completed, rules of the SEC may limit the ability of the underwriters to bid for and to purchase our common stock. As an exception to these rules, the underwriters may engage in transactions effected in accordance with Regulation M under the Securities Exchange Act of 1934 that are intended to stabilize, maintain or otherwise affect the price of our common stock or publicly traded warrants. The underwriters may engage in over-allotment sales, syndicate covering transactions, stabilizing transactions and penalty bids in accordance with Regulation M.
| | |
| • | Stabilizing transactions permit bids or purchases for the purpose of pegging, fixing or maintaining the price of our common stock and publicly traded warrants, so long as stabilizing bids do not exceed a specified maximum. |
|
| • | Over-allotment involves sales by the underwriters of securities in excess of the number of securities the underwriters are obligated to purchase, which creates a short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stock or warrants over-allotted by the underwriters is not greater than the number of shares of common stock or warrants that they may purchase in the over-allotment option. In a naked short position, the number of shares of common stock or warrants involved is greater than the number of shares of common stock or warrants in the over-allotment option. The underwriters may close out any |
72
| | |
| | covered short position by either exercising their over-allotment option or purchasing common stock or warrants in the open market. |
71
| | |
| • | Covering transactions involve the purchase of securities in the open market after the distribution has been completed in order to cover short positions. In determining the source of securities to close out the short position, the underwriters will consider, among other things, the price of securities available for purchase in the open market as compared to the price at which they may purchase securities through the over-allotment option. If the underwriters sell more shares of common stock or warrants than could be covered by the over-allotment option, creating a naked short position, the position can only be closed out by buying securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares of common stock or publicly traded warrants in the open market after pricing that could adversely affect investors who purchase in this offering. |
|
| • | Penalty bids permit the underwriters to reclaim a selling concession from a selected dealer when the securities originally sold by the selected dealer are purchased in a stabilizing or syndicate covering transaction. |
These stabilizing transactions, covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or publicly traded warrants or preventing or retarding a decline in the market price of our common stock or publicly traded warrants. As a result, the price of our common stock or publicly traded warrants may be higher than the price that might otherwise exist in the open market.
Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the prices of our securities. These transactions may occur on the NYSE Amex or on any other trading market. If any of these transactions are commenced, they may be discontinued without notice at any time.
Foreign Regulatory Restrictions on Purchase of Units
We have not taken any action to permit a public offering of the units outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to this offering of units and the distribution of the prospectus outside the United States.
European Economic Area. In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date) an offer of securities to the public in that relevant member state prior to the publication of a prospectus in relation to the securities that have been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in that relevant member state, all in accordance with the Prospectus Directive, except that, with effect from and including the relevant implementation date, an offer of securities may be offered to the public in that relevant member state at any time:
| | |
| • | to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
|
| • | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; |
|
| • | to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of for any such offer; or |
|
| • | in any other circumstances which do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive. |
7273
Each purchaser of securities described in this prospectus located within a relevant member state will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” within the meaning of Article 2(1)(e) of the Prospectus Directive.
For the purposes of this provision, the expression an “offer to the public” in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each relevant member state.
Israel. The units offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (ISA). The units may not be offered or sold, directly or indirectly, to the public in Israel. The ISA has not issued permits, approvals or licenses in connection with the offering of the units or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale, directly or indirectly, to the public of the units offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
United Kingdom. In the United Kingdom, the units offered by this prospectus are directed to and will only be available for purchase to a person who is an exempt person as referred to at paragraph (c) below and who warrants, represents and agrees that: (a) it has not offered or sold, will not offer or sell, any units offered by this prospectus to any person in the United Kingdom except in circumstances which do not constitute an offer to the public in the United Kingdom for the purposes of section 85 of the Financial Services and Markets Act 2000 (as amended) (“FSMA”); and (b) it has complied and will comply with all applicable provisions of FSMA and the regulations made thereunder in respect of anything done by it in relation to the units offered by this prospectus in, from or otherwise involving the United Kingdom; and (c) it is a person who falls within the exemptions to Section 21 of the FSMA as set out in The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“the Order”), being either an investment professional as described under Article 19 or any body corporate (which itself has or a group undertaking has a called up share capital or net assets of not less than £500,000 (if more than 20 members) or otherwise £5 million) or an unincorporated association or partnership (with net assets of not less than £5 million) or is a trustee of a high value trust or any person acting in the capacity of director, officer or employee of such entities as defined under Article 49(2)(a) to (d) of the Order, or a person to whom the invitation or inducement may otherwise lawfully be communicated or cause to be communicated. The investment activity to which this document relates will only be available to and engaged in only with exempt persons referred to above. Persons who are not investment professionals and do not have professional experience in matters relating to investments or are not an exempt person as described above, should not review nor rely or act upon this document and should return this document immediately. It should be noted that this document is not a prospectus in the United Kingdom as defined in the Prospectus Regulations 2005 and has not been approved by the Financial Services Authority or any competent authority in the United Kingdom.
Italy. This offering of the units has not been cleared by Consob, the Italian Stock Exchanges regulatory agency of public companies, pursuant to Italian securities legislation and, accordingly, no units may be offered, sold or delivered, nor may copies of this prospectus or of any other document relating to the units to be distributed in Italy, except (1) to professional investors (operatori qualificati); or (2) in circumstances which are exempted from the rules on solicitation of investments pursuant to Decree No. 58 and Article 33, first paragraph, of Consob Regulation No. 11971 of May 14, 1999, as amended. Any offer, sale or delivery of the securities or distribution of copies of this prospectus or any other document relating to the securities in Italy under (1) or (2) above must be (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in Italy in accordance with the Decree No. 58 and Legislative Decree No. 385 of September 1, 1993, or the Banking Act; and (ii) in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy, as amended from time to time, pursuant to which the issue or the offer of securities in Italy may need to be preceded and followed by an appropriate notice to be filed with
7374
the Bank of Italy depending,inter alia, on the aggregate value of the securities issued or offered in Italy and their characteristics; and (iii) in compliance with any other applicable laws and regulations.
Germany. The offering of the units is not a public offering in the Federal Republic of Germany. The units may only be acquired in accordance with the provisions of the Securities Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz), as amended, and any other applicable German law. No application has been made under German law to publicly market the securities in or out of the Federal Republic of Germany. The units are not registered or authorized for distribution under the Securities Sales Prospectus Act and accordingly may not be, and are not being, offered or advertised publicly or by public promotion. Therefore, this prospectus is strictly for private use and the offering is only being made to recipients to whom the document is personally addressed and does not constitute an offer or advertisement to the public. The units will only be available to persons who, by profession, trade or business, buy or sell securities for their own or a third party’s account.
France. The units offered by this prospectus may not be offered or sold, directly or indirectly, to the public in France. This prospectus has not been or will not be submitted to the clearance procedure of the Autorité des Marchés Financiers, or the AMF, and may not be released or distributed to the public in France. Investors in France may only purchase the securities offered by this prospectus for their own account and in accordance with articles L.411-1, L.441-2 and L.412-1 of the Code Monétaire et Financier and decreeno. 98-880 dated October 1, 1998, provided they are “qualified investors” within the meaning of said decree. Each French investor must represent in writing that it is a qualified investor within the meaning of the aforesaid decree. Any resale, directly or indirectly, to the public of the units offered by this prospectus may be effected only in compliance with the above mentioned regulations.
“Les actions offertes par ce document d’information ne peuvent pas être, directement ou indirectement, offertes ou vendues au public en France. Ce document d’information n’a pas été ou ne sera pas soumis au visa de l’Autorité des Marchés Financiers et ne peut être diffusé ou distribué au public en France. Les investisseurs en France ne peuvent acheter les actions offertes par ce document d’information que pour leur compte propre et conformément aux articles L.411-1, L.441-2 et L.412-1 du Code Monétaire et Financier et du décretno. 98-880 du 1 octobre 1998, sous réserve qu’ils soient des investisseurs qualifiés au sens du décret susvisé. Chaque investisseur doit déclarer par écrit qu’il est un investisseur qualifié au sens du décret susvisé. Toute revente, directe ou indirecte, des actions offertes par ce document d’information au public ne peut être effectuée que conformément à la réglementation susmentionnée.”
Switzerland. This prospectus may only be used by those persons to whom it has been directly handed out by the offeror or its designated distributors in connection with the offer described therein. The units are only offered to those personsand/or entities directly solicited by the offeror or its designated distributors, and are not offered to the public in Switzerland. This prospectus constitutes neither a public offer in Switzerland nor an issue prospectus in accordance with the respective Swiss legislation, in particular but not limited to Article 652A Swiss Code Obligations. Accordingly, this prospectus may not be used in connection with any other offer, whether private or public and shall in particular not be distributed to the public in Switzerland.
Norway. This prospectus has not been produced in accordance with the prospectus requirements laid down in the Norwegian Securities Trading Act 1997 as amended. This prospectus has not been approved or disapproved by, or registered with, neither the Oslo Stock Exchange nor the Norwegian Registry of Business Enterprises. This prospectus may not, either directly or indirectly be distributed to other Norwegian potential investors than the addressees without the prior consent of Vringo, Inc.
Denmark. This prospectus has not been prepared in the context of a public offering of securities in Denmark within the meaning of the Danish Securities Trading Act No. 171 of 17 March 2005 as amended from time to time or any Executive Orders issued on the basis thereof and has not been and will not be filed with or approved by or filed with the Danish Financial Supervisory Authority or any other public authorities in Denmark. The offering of units will only be made to persons pursuant to one or more of the exemptions set out in Executive Order No. 306 of 28 April 2005 on Prospectuses for Securities Admitted for Listing or Trade on a Regulated Market and on the First Public Offer of Securities exceeding EUR 2,500,000 or Executive
7475
Order No. 307 of 28 April 2005 on Prospectuses for the First Public Offer of Certain Securities between EUR 100,000 and EUR 2,500,000, as applicable.
Sweden. Neither this prospectus nor the units offered hereunder have been registered with or approved by the Swedish Financial Supervisory Authority under the Swedish Financial Instruments Trading Act (1991:980) (as amended), nor will such registration or approval be sought. Accordingly, this prospectus may not be made available nor may the units offered hereunder be marketed or offered for sale in Sweden other than in circumstances which are deemed not to be an offer to the public in Sweden under the Financial Instruments Trading Act. This prospectus may not be distributed to the public in Sweden and a Swedish recipient of the prospectus may not in any way forward the prospectus to the public in Sweden.
British Virgin Islands. No shares, warrants or units of the Company shall be offered or sold, directly or indirectly, to the public or any member of the public in the British Virgin Islands.
Relationships
Certain of the underwriters or their affiliates have provided from time to time and may in the future provide investment banking, lending, financial advisory and other related services to us and our affiliates for which they have received and may continue to receive customary fees and commissions.
LEGAL MATTERS
The validity of the securities being offered by this prospectus will be passed upon for us by Cooley Godward Kronish LLP, Reston, Virginia. The underwriters are being represented by Lowenstein Sandler PC, Roseland, New Jersey.
EXPERTS
Reznick Group P.C., independent registered public accounting firm, has audited our financial statements at December 31, 2009 and 2008, and for each of the two years in the period ended December 31, 2009, as set forth in their report, which includes an explanatory paragraph relating to our ability to continue as a going concern. We have included our financial statements in this prospectus and elsewhere in the registration statement of which it is a part in reliance on Reznick Group’s report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement onForm S-1 under the Securities Act, with respect to the securities being offered by this prospectus. This prospectus does not contain all of the information in the registration statement and its exhibits. For further information with respect to RegeneRx and the securities offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.
We are subject to the information reporting requirements of the Exchange Act, and we file reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website atwww.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at1-800-SEC-0330 for further information on the operation of the public reference facilities.
7576
We also maintain a website atwww.regenerx.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of, and is not incorporated into, this prospectus.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITY
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
7677
RegeneRx Biopharmaceuticals, Inc.
| | | | |
| | Page |
|
| | | F-2 | |
| | | F-3 | |
| | | F-4 | |
| | | F-5 | |
| | | F-6 | |
| | | F-7 | |
| | | F-18 | |
| | | F-19 | |
| | | F-20 | |
| | | F-21 | |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
RegeneRx Biopharmaceuticals, Inc.
We have audited the accompanying balance sheets of RegeneRx Biopharmaceuticals, Inc. (the “Company”) as of December 31, 2009 and 2008, and the related statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2009. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of RegeneRx Biopharmaceuticals, Inc. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company has experienced negative cash flows from operations since inception and is dependent upon future financing in order to meet its planned operating activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ REZNICK GROUP, P.C.
Vienna, Virginia
March 31, 2010
F-2
RegeneRx Biopharmaceuticals, Inc.
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
|
ASSETS |
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | 4,355,768 | | | $ | 5,655,367 | |
Prepaid expenses and other current assets | | | 196,546 | | | | 236,477 | |
| | | | | | | | |
Total current assets | | | 4,552,314 | | | | 5,891,844 | |
Property and equipment, net of accumulated depreciation of $98,171 and $81,623 | | | 8,492 | | | | 25,039 | |
Other assets | | | 22,948 | | | | 5,693 | |
| | | | | | | | |
Total assets | | $ | 4,583,754 | | | $ | 5,922,576 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
Current liabilities | | | | | | | | |
Accounts payable | | $ | 140,206 | | | $ | 70,554 | |
Accrued expenses | | | 740,198 | | | | 1,255,358 | |
| | | | | | | | |
Total current liabilities | | | 880,404 | | | | 1,325,912 | |
| | | | | | | | |
Commitments | | | — | | | | — | |
Stockholders’ equity | | | | | | | | |
Preferred stock, $.001 par value per share, 1,000,000 shares authorized; no shares issued | | | — | | | | — | |
Common stock, $.001 par value per share, 100,000,000 shares authorized; 60,406,828 and 53,622,491 issued and outstanding | | | 60,407 | | | | 53,623 | |
Additional paid-in capital | | | 88,144,347 | | | | 82,550,585 | |
Accumulated deficit | | | (84,501,404 | ) | | | (78,007,544 | ) |
| | | | | | | | |
Total stockholders’ equity | | | 3,703,350 | | | | 4,596,664 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 4,583,754 | | | $ | 5,922,576 | |
| | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-3
RegeneRx Biopharmaceuticals, Inc.
| | | | | | | | |
| | Years Ended December 31, | |
| | 2009 | | | 2008 | |
|
Sponsored research revenue | | $ | — | | | $ | 168,412 | |
Operating expenses | | | | | | | | |
Research and development | | | 3,724,514 | | | | 7,149,808 | |
General and administrative | | | 2,781,790 | | | | 3,805,346 | |
| | | | | | | | |
Total operating expenses | | | 6,506,304 | | | | 10,955,154 | |
| | | | | | | | |
Loss from operations | | | (6,506,304 | ) | | | (10,786,742 | ) |
| | | | | | | | |
Interest income | | | 12,444 | | | | 149,777 | |
| | | | | | | | |
Net loss | | $ | (6,493,860 | ) | | $ | (10,636,965 | ) |
| | | | | | | | |
Basic and diluted net loss per common share | | $ | (0.12 | ) | | $ | (0.21 | ) |
| | | | | | | | |
Weighted average number of common shares outstanding | | | 55,680,525 | | | | 50,967,617 | |
| | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-4
RegeneRx Biopharmaceuticals, Inc.
Years ended December 31, 2009 and 2008
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Accumulated
| | | | |
| | | | | | | | | | | | | | Other
| | | Total
| |
| | Common Stock | | | Additional
| | | Accumulated
| | | Comprehensive
| | | Stockholders’
| |
| | Shares | | | Amount | | | Paid-in Capital | | | Deficit | | | Income/(loss) | | | Equity | |
|
Balance, December 31, 2007 | | | 46,553,527 | | | $ | 46,554 | | | $ | 73,513,292 | | | $ | (67,405,579 | ) | | $ | (1,543 | ) | | $ | 6,152,724 | |
Cumulative effect of a change in accounting principle — ASC Topic 730 | | | — | | | | — | | | | — | | | | 35,000 | | | | — | | | | 35,000 | |
Issuance of common stock, net of offering costs of $52,240 | | | 7,068,964 | | | | 7,069 | | | | 7,940,691 | | | | — | | | | — | | | | 7,947,760 | |
Share-based compensation expense | | | — | | | | — | | | | 1,096,602 | | | | — | | | | — | | | | 1,096,602 | |
Net loss | | | — | | | | — | | | | — | | | | (10,636,965 | ) | | | — | | | | (10,636,965 | ) |
Unrealized gain on available for sale securities | | | — | | | | — | | | | — | | | | — | | | | 1,543 | | | | 1,543 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | (10,635,422 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2008 | | | 53,622,491 | | | | 53,623 | | | | 82,550,585 | | | | (78,007,544 | ) | | $ | — | | | $ | 4,596,664 | |
Issuance of common stock, net of offering costs of $447,933 | | | 6,784,337 | | | | 6,784 | | | | 4,845,282 | | | | — | | | | — | | | | 4,852,066 | |
Share-based compensation expense | | | — | | | | — | | | | 748,480 | | | | — | | | | — | | | | 748,480 | |
Net loss | | | — | | | | — | | | | — | | | | (6,493,860 | ) | | | — | | | | (6,493,860 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2009 | | | 60,406,828 | | | $ | 60,407 | | | $ | 88,144,347 | | | $ | (84,501,404 | ) | | $ | — | | | $ | 3,703,350 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-5
RegeneRx Biopharmaceuticals, Inc.
| | | | | | | | |
| | Years Ended December 31, | |
| | 2009 | | | 2008 | |
|
Operating activities: | | | | | | | | |
Net loss | | $ | (6,493,860 | ) | | $ | (10,636,965 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Depreciation and amortization | | | 16,547 | | | | 19,396 | |
Non-cash share-based compensation | | | 748,480 | | | | 1,096,602 | |
Gain on settlement of accrued expenses | | | (100,000 | ) | | | — | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | — | | | | 26,951 | |
Prepaid expenses and other current assets | | | 39,931 | | | | 66,767 | |
Other assets | | | (17,255 | ) | | | — | |
Accounts payable | | | 69,652 | | | | (203,007 | ) |
Accrued expenses | | | (415,160 | ) | | | (940,150 | ) |
| | | | | | | | |
Net cash used in operating activities | | | (6,151,665 | ) | | | (10,570,406 | ) |
| | | | | | | | |
Investing activities: | | | | | | | | |
Sales/maturities of short-term investments | | | — | | | | 4,581,135 | |
| | | | | | | | |
Net cash provided by investing activities | | | — | | | | 4,581,135 | |
| | | | | | | | |
Financing activities: | | | | | | | | |
Net proceeds from issuance of common stock | | | 4,852,066 | | | | 7,947,760 | |
| | | | | | | | |
Net cash provided by financing activities | | | 4,852,066 | | | | 7,947,760 | |
| | | | | | | | |
Net (decrease) increase in cash and cash equivalents | | | (1,299,599 | ) | | | 1,958,489 | |
| | | | | | | | |
Cash and cash equivalents at beginning of year | | | 5,655,367 | | | | 3,696,878 | |
| | | | | | | | |
Cash and cash equivalents at end of year | | $ | 4,355,768 | | | $ | 5,655,367 | |
| | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-6
RegeneRx Biopharmaceuticals, Inc.
| |
1. | ORGANIZATION AND BUSINESS |
Organization and Nature of Operations. RegeneRx Biopharmaceuticals, Inc. (the “Company”, “We”, “Us”, “Our”), a Delaware corporation, was incorporated in 1982. We are focused on the discovery and development of novel molecules to accelerate tissue and organ repair. Our operations are confined to one business segment: the development and marketing of product candidates based on Thymosin Beta 4 (“Tß4”), an amino acid peptide.
Management Plans to Address Operating Conditions. We have incurred net losses of $6.5 million and $10.6 million for the years ended December 31, 2009 and 2008, respectively. Since inception, and through December 31, 2009, we have an accumulated deficit of $84.5 million and we had cash and cash equivalents of $4.4 million as of December 31, 2009. Based on our operating plan, we believe that our cash and cash equivalents will fund our operations into the third quarter of 2010.
We anticipate incurring additional losses in the future as we continue to explore the potential clinical benefits of Tß4-based product candidates over multiple indications. We will need substantial additional funds in order to initiate any further preclinical studies or clinical trials, and to fund our operations beyond the third quarter of 2010. Accordingly, we will have a need for financing and are in the process of exploring various alternatives, including, without limitation, a public or private placement of our securities, debt financing or corporate collaboration and licensing arrangements or the sale of our company or certain of our intellectual property rights.
These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of our liabilities in the normal course of business.
Although we intend to continue to seek additional financing or a strategic partner, we may not be able to complete a financing or corporate transaction, either on favorable terms or at all. If we are unable to complete a financing or strategic transaction, we may not be able to continue as a going concern after our funds have been exhausted, and we could be required to significantly curtail or cease operations, file for bankruptcy or liquidate and dissolve. There can be no assurance that we will be able to obtain any sources of funding. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be forced to take any such actions.
In addition to our current operational requirements, we expect to continue to expend substantial funds to complete our planned product development efforts. Additionally, we continually refine our operating strategy and evaluate alternative clinical uses of Tß4. However, substantial additional resources will be needed before we will be able to achieve sustained profitability. Consequently, we continually evaluate alternative sources of financing such as the sharing of development costs through strategic collaboration agreements. There can be no assurance that our financing efforts will be successful, and if we are not able to obtain sufficient levels of financing, we would delay certain clinicaland/or research activities, and our financial condition would be materially and adversely affected. Even if we are able to obtain sufficient funding, other factors including competition, dependence on third parties, uncertainty regarding patents, protection of proprietary rights, manufacturing of peptides and technology obsolescence could have a significant impact on us and our operations.
To achieve profitability we must successfully conduct pre-clinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture and market those pharmaceuticals we wish to commercialize. The time required to reach profitability is highly uncertain, and there can be no assurance that we will be able to achieve sustained profitability, if at all.
F-7
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
| |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United Stated of America (“U.S. GAAP”) requires management to make certain estimates and assumptions that affect the reported earnings, financial position and various disclosures. Critical accounting policies involved in applying our accounting policies are those that require management to make assumptions about matters that are highly uncertain at the time the accounting estimate was made and those for which different estimates reasonably could have been used for the current period. Critical accounting estimates are also those which are reasonably likely to change from period to period, and would have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. Our most critical accounting estimates relate to accounting policies for clinical trial accruals and share-based arrangements. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances. Actual results could differ from these estimates.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash and highly-liquid investments with original maturities of three months or less when acquired and are stated at cost that approximates their fair market value.
Concentration of Credit Risk. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, and cash equivalents. We limit our exposure to credit loss by placing our cash and cash equivalents with high quality financial institutions and, in accordance with our investment policy, in securities that are rated investment grade.
Property and Equipment. Property and equipment consists of office furniture and equipment, and is stated at cost and depreciated over the estimated useful lives of the assets (generally two to five years) using the straight-line method. Expenditures for maintenance and repairs which do not significantly prolong the useful lives of the assets are charged to expense as incurred. Depreciation expense was $16,547 and $19,396 for the years ended December 31, 2009 and 2008, respectively.
Impairment of Long-lived Assets. When we record long-lived assets our policy is to regularly perform reviews to determine if and when the carrying value of our long-lived assets becomes impaired. During the two years ended December 31, 2009 we did not report qualifying long-lived assets and therefore no impairment losses were recorded.
Sponsored Research Revenues. We account for non-refundable grants as “Sponsored research revenues” in the accompanying statements of operations. Revenues are recognized when the associated research has been performed and the related underlying costs are incurred.
Research and Development. Research and development (“R&D”) costs are expensed as incurred and include all of the wholly-allocable costs associated with our various clinical programs passed through to us by our outsourced vendors. Those costs include: manufacturing Tß4; formulation of Tß4 into the various product candidates; stability for both Tß4 and the various formulations; pre-clinical toxicology; safety and pharmacokinetic studies; clinical trial management; medical oversight; laboratory evaluations; statistical data analysis; regulatory compliance; quality assurance; and other related activities. R&D includes cash and non-cash compensation, employee benefits, travel and other miscellaneous costs of our internal R&D personnel, seven persons in total, who are wholly dedicated to R&D efforts. R&D also includes a pro-ration of our common infrastructure costs for office space and communications.
On January 1, 2008, pursuant to Accounting Standards Codification (“ASC”)730-20 (formerly EITF IssueNo. 07-3, “Accounting for Advance Payments for Goods or Services to Be Used in Future Research and Development Activities”), “Research and Development Costs,” we changed our accounting for non-refundable advance payments to acquire goods or pay for services that will be consumed or performed in a future period
F-8
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
in conducting research and development activities on behalf of the entity. Advance payments are recorded as an asset when the advance payments are made. Capitalized amounts are recognized as expense when the research and development activities are performed; that is, when the goods without alternative future use are acquired or the service is rendered. We determined that approximately $35,000 in qualifying transactions required capitalization as of January 1, 2008, and accordingly recognized a cumulative-effect adjustment to our accumulated deficit as of that date.
Cost of Preclinical Studies and Clinical Trials. We accrue estimated costs for preclinical studies based on estimates of work performed. We estimate expenses incurred for clinical trials that are in process based on patient enrollment and based on clinical data collection and management. Costs based on clinical data collection and management are recognized based on estimates of unbilled goods and services received in the reporting period. We monitor the progress of the trials and their related activities and adjust the accruals accordingly. Adjustments to accruals are charged to expense in the period in which the facts that give rise to the adjustment become known. In the event of early termination of a clinical trial, we would accrue an amount based on estimates of the remaining non-cancelable obligations associated with winding down the clinical trial.
Patent Costs. Costs related to filing and pursuing patent applications are recognized as general and administrative expenses as incurred since recoverability of such expenditures is uncertain.
Income Taxes. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. 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 recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company’s policy for recording interest and penalties associated with audits is that penalties and interest expense are recorded in “Income taxes” in the Company’s statements of operations.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making that assessment. We recorded a full valuation allowance against all estimated net deferred tax assets at December 31, 2009 and 2008. We have significant net operating loss carryforwards to potentially reduce future federal and state taxable income, and research and experimentation tax credit carryforwards available to potentially offset future federal and state income taxes. Use of our net operating loss and research and experimentation credit carryforwards may be limited due to changes in our ownership as defined within Section 382 of the Internal Revenue Code.
Net Loss Per Common Share. Net loss per common share for the years ended December 31, 2009 and 2008, respectively, is based on the weighted-average number of shares of common stock outstanding during the periods. Basic and diluted loss per share are identical for all periods presented as potentially dilutive securities have been excluded from the calculation of the diluted net loss per common share because the inclusion of such securities would be antidilutive. The potentially dilutive securities include 12,847,963 shares and 9,366,590 shares in 2009 and 2008, respectively, reserved for the exercise of outstanding options and warrants.
F-9
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
Share-Based Compensation. We measure share-based compensation expense based on the grant date fair value of the awards which is then recognized over the period which service is required to be provided. We estimate the grant date fair value using the Black-Scholes option-pricing model (“Black-Scholes”). We recognized $748,480 and $1,096,602 in share-based compensation expense for the years ended December 31, 2009 and 2008, respectively.
Fair Value of Financial Instruments. The carrying amounts of our financial instruments, as reflected in the accompanying balance sheets, approximate fair value. Financial instruments consist of cash and cash equivalents, and accounts payable.
Recent Accounting Pronouncements. In February 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU 2010 — 09) to address potential practice issues associated with FASB ASC 855 (formerly SFAS 165), “Subsequent Events.” The ASU was effective upon issuance and eliminated the requirement for entities that file or furnish financial statements with the SEC to disclose the date through which subsequent events have been evaluated in originally issued and reissued financial statements. Other entities would continue to be required to disclose the date through which subsequent events have been evaluated; however, disclosures about the date would be required only in financial statements revised because of an error correction or retrospective application of U.S. GAAP. Our adoption of this standard changed our presentation of subsequent events when preparing our financial statements.
In September 2009, the FASB ratified ASU2009-13 (formerlyEITF 08-1), “Revenue Recognition” (ASC 605): Multiple-Deliverable Revenue Arrangements, the final consensus reached by the Emerging Issues Task Force that revised the authoritative guidance for revenue arrangements with multiple deliverables. The guidance addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how the arrangement consideration should be allocated among the separate units of accounting. The guidance will be effective for our fiscal year beginning January 1, 2011 with early adoption permitted. The guidance may be applied retrospectively or prospectively for new or materially modified arrangements. We currently do not have any multiple-deliverable revenue arrangements, accordingly, the adoption of the guidance will not have an impact on our financial statements.
In August 2009, the FASB issued ASUNo. 2009-05, “Fair Value Measurements and Disclosures (ASC 820) — Measuring Liabilities at Fair Value” (ASU2009-05). ASU2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using a valuation technique that uses the quoted price of the identical liability when traded as an asset or the quoted prices for similar liabilities or similar liabilities when traded as assets. The guidance provided is effective for the first reporting period (including interim periods) beginning after issuance. Our adoption of ASU2009-05 did not impact our financial position or results of operations.
In June 2009, the FASB issued ASC 105 (formerly SFAS 168), “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (ASC 105). ASC 105 is now the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernment entities. It also modifies the GAAP hierarchy to include only two levels of GAAP: authoritative and non-authoritative. ASC 105 is effective for financial statements issued for interim and annual periods ended after September 15, 2009. The adoption of this standard in 2009 changed how we reference various elements of U.S. GAAP when preparing our financial statement disclosures, but did not have an impact on our financial position or results of operations.
Other new pronouncements issued but not effective until after December 31, 2009 are not expected to have a significant effect on our financial position or results of operations.
Reclassifications. Certain account balances as of and for the year ended December 31, 2008 were reclassified to conform to current year presentation.
F-10
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
| |
3. | FAIR VALUE MEASUREMENTS |
We adopted a new accounting standard that defines fair value and establishes a framework for fair value measurements effective January 1, 2008 for financial assets and liabilities and effective January 1, 2009 for non-financial assets and liabilities. This standard establishes a three-level hierarchy for fair value measurements. The hierarchy is based upon the transparency of inputs and the valuation of an asset or a liability as of the measurement date. The three levels of inputs are as follows:
| | |
| • | Level 1 — Quoted prices in active markets for identical assets and liabilities. |
|
| • | Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities. |
|
| • | Level 3 — Unobservable inputs. |
At December 31, 2009 and 2008, we held no qualifying liabilities, and our only qualifying assets that required measurement under the foregoing fair value hierarchy were money market funds and U.S. Treasury Bills included in Cash and Cash Equivalents valued at $4.4 million and $5.7 million, respectively, using Level 1 inputs.
| |
4. | LICENSES, INTELLECTUAL PROPERTY, AND RELATED PARTY TRANSACTIONS |
We have an exclusive, worldwide licensing agreement with the National Institutes of Health (“NIH”) for all claims to Tß4 within their broadly-defined patent application. In exchange for this exclusive worldwide license, we must make certain royalty and milestone payments to the NIH. Through December 31, 2009 we have complied with these requirements. No assurance can be given as to whether or when a patent will be issued, or as to any claims that may be included or excluded within the patent. We have also filed numerous additional patent applications covering various compositions, uses, formulations and other components of Tß4, as well as to novel peptides resulting from our research efforts. Some of these patents have issued, while many patent applications are still pending. Minimum annual maintenance fees for each of the years ended December 31, 2009 and 2008 were $25,000.
We have entered into a License and Supply Agreement (the “Agreement”) with Defiante Farmaceutica, S.A. (“Defiante”) a Portuguese company that is a wholly owned subsidiary of Sigma-Tau, S.p.A., an international pharmaceutical company and an affiliate of Sigma-Tau Finanziaria S.p.A., who together with its affiliates comprise our largest stockholder group (the “Sigma-Tau Group”). This Agreement grants to Defiante the exclusive right to use Tß4 to conduct research and development activities in Europe. Under the Agreement, we will receive fees and royalty payments based on a percentage of specified sales of Tß4-related products by Defiante. The term of the Agreement continues until the later of the expiration of any patents developed under the Agreement, the expiration of marketing rights, or December 31, 2016.
In furtherance of the licensed rights, Sigma-Tau Group funded and managed the RegeneRx-sponsored Phase II dermal wound healing clinical trials in venous stasis ulcers conducted in Italy and Poland that concluded in the first quarter of 2009.
F-11
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
| |
5. | COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS |
Accrued expenses are comprised of the following:
| | | | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
|
Accrued clinical research | | $ | 496,997 | | | $ | 944,283 | |
Accrued professional fees | | | 122,590 | | | | 155,000 | |
Accrued vacation | | | 35,300 | | | | 61,714 | |
Accrued license fees | | | 30,000 | | | | — | |
Accrued compensation | | | 28,995 | | | | 84,361 | |
Other | | | 26,316 | | | | 10,000 | |
| | | | | | | | |
| | $ | 740,198 | | | $ | 1,255,358 | |
| | | | | | | | |
| |
6. | EMPLOYEE BENEFIT PLANS |
We have a defined contribution retirement plan that complies with Section 401(k) of the Internal Revenue Code (the “Code”). All employees of the Company are eligible to participate in the plan. The Company matches 100% of each participant’s voluntary contributions, subject to a maximum Company contribution of 4% of the participant’s compensation. The Company’s matching portion totaled $18,269 and $51,494 for the years ended December 31, 2009 and 2008, respectively. In order to conserve cash, the Company discontinued the matching contribution effective June 5, 2009 and reinstated it on March 1, 2010.
Shareholders Rights Plan. Our Board of Directors adopted a Rights Agreement, dated April 29, 1994, as amended, that is intended to discourage an unsolicited change in control of the Company. In general, if an entity acquires more than a 25% ownership interest in the Company without the endorsement of our Board of Directors, then our current stockholders (other than the acquiring entity) will be issued a significant number of new shares, the effect of which would dilute the ownership of the acquiring entity and could delay or prevent the change in control.
Registration Rights Agreements. In connection with the sale of certain equity instruments, we have entered into Registration Rights Agreements. Generally, these Agreements required us to file registration statements with the Securities and Exchange Commission to register common shares to permit re-sale of common shares previously sold under an exemption from registration or to register common shares that may be issued on exercise of outstanding warrants.
The Registration Rights Agreements usually require us to pay penalties for any failure or time delay in filing or maintaining the effectiveness of the required registration statements. These penalties are usually expressed as a fixed percentage, per month, of the original amount we received on issuance of the common shares, options or warrants. While to date we have not incurred any penalties under these agreements, if a penalty is determined to be probable we would recognize the amount as a contingent liability and not as a derivative instrument.
Common Stock. In February 2008, the Company sold 5,000,000 shares of its common stock at a price of $1.00 per share, raising net proceeds of $4,947,760 (the “February 2008 Private Placement”) from Sigma Tau Group. In connection with the February 2008 Private Placement, the Company also issued warrants to the investors. The warrants are exercisable for an aggregate of 1,000,000 shares of common stock at an exercise price of $1.60 per share. The warrants, which have a term of three years and an exercise price of $1.60 per
F-12
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
share, were valued using the Black-Scholes option-pricing model as of the closing date and accounted for in permanent equity. The estimated fair market value of the warrants at the date of issuance was $0.3 million.
Under the terms of the February 2008 Private Placement, the Company may, in its sole discretion, repurchase the shares at any time between January 1, 2010 and December 31, 2010, for $2.50 per share. The Company’s repurchase right terminates after December 31, 2010. In addition, the investors have agreed to vote the shares, and any additional shares issued pursuant to the exercise of the warrants, as recommended by the Company’s Board of Directors until December 31, 2010.
In December 2008, the Company sold 2,068,964 shares of its common stock at a price of $1.45 per share, raising net proceeds of $3,000,000 (the “December 2008 Private Placement”) from Sigma Tau Group. In connection with the December 2008 Private Placement, the Company also issued warrants to the investors. The warrants are exercisable for an aggregate of 745,104 shares of common stock at an exercise price of $1.74 per share. The warrants, which have a term of three years and an exercise price of $1.74 per share, were valued using the Black-Scholes option-pricing model as of the closing date and accounted for in permanent equity. The estimated fair market value of the warrants at the date of issuance was $0.4 million.
Under the terms of the December 2008 Private Placement, the investors have agreed to vote the shares, and any additional shares issued pursuant to the exercise of the warrants, as recommended by the Company’s Board of Directors until December 31, 2011.
On April 30, 2009 we issued 1,052,631 shares of common stock at a price of $0.57 per share, and warrants to purchase 263,158 shares of our common stock at $0.91 per share, to Sigma-Tau Group for gross proceeds of $600,000. The warrants, which have a term of three years and an exercise price of $0.91 per share, were valued using the Black-Scholes option-pricing model as of the closing date and accounted for in permanent equity. The estimated fair market value of the warrants at the date of issuance was $0.1 million.
On October 5, 2009, we issued 4,512,194 shares of common stock and warrants to purchase 2,256,097 shares of our common stock in a registered direct offering to new institutional investors, for proceeds of approximately $3.3 million, net of approximately $400,000 of offering costs. The warrants, which have a term of five years and an exercise price of $1.12 per share, were valued using the Black-Scholes option-pricing model as of the closing date and accounted for in permanent equity. The estimated fair market value of the warrants at the date of issuance was $1.0 million.
On October 15, 2009, we issued 1,219,512 shares of common stock and warrants to purchase 609,756 shares of our common stock to Sigma-Tau Group for gross proceeds of $1.0 million. The warrants, which become exercisable on April 15, 2010 and have a term through September 30, 2014, and an exercise price of $1.12 per share, were valued using the Black-Scholes option-pricing model as of the closing date and accounted for in permanent equity. The estimated fair market value of the warrants at the date of issuance was $0.2 million.
Share-Based Compensation. We recognized $748,480 and $1,096,602 in stock-based compensation expense for the years ended December 31, 2009 and 2008, respectively. Given our current estimates of future forfeitures, we expect to recognize the compensation cost related to non-vested options as of December 31, 2009 of $723,000 over the weighted average remaining recognition period of 1.1 years.
2000 Stock Option and Incentive Plan, as amended. Our Board of Directors (the “Board”) and stockholders have approved the 2000 Stock Option and Incentive Plan under which the Board may grant options to purchase shares of our common stock. Options may only be granted to our directors, officers, employees, consultants or advisors, and no single participant can receive more than 450,000 shares in any one year. The exercise price and term of any grant are determined by the Board at the time of grant but the exercise price may not be less than the fair market value of our common stock on the date of the grant, and the term of the option shall not exceed ten years. As of December 31, 2009, there were 6,500,000 shares
F-13
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
reserved for issuance under the plan, of which 4,914,112 were outstanding and 1,550,888 were available for issuance.
The following summarizes share-based compensation expense for the years ended December 31, 2009 and 2008, which was allocated as follows:
| | | | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
|
Research and development | | $ | 369,814 | | | $ | 440,850 | |
General and administrative | | | 378,666 | | | | 655,752 | |
| | | | | | | | |
| | $ | 748,480 | | | $ | 1,096,602 | |
| | | | | | | | |
The following summarizes stock option activity for the years ended December 31, 2009 and 2008:
| | | | | | | | | | | | | | | | |
| | | | | Options Outstanding | |
| | | | | | | | | | | Weighted
| |
| | Shares
| | | | | | | | | Average
| |
| | Available for
| | | Number of
| | | Exercise Price
| | | Exercise
| |
| | Grant | | | Shares | | | Range | | | Price | |
|
December 31, 2007 | | | 620,000 | | | | 3,545,000 | | | $ | 0.28 - $3.82 | | | $ | 1.80 | |
Grants | | | (572,500 | ) | | | 572,500 | | | | 1.14 - 1.50 | | | | 1.23 | |
Exercises | | | — | | | | — | | | | — | | | | — | |
Cancellations | | | — | | | | — | | | | — | | | | — | |
Newly authorized | | | 2,300,000 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
December 31, 2008 | | | 2,347,500 | | | | 4,117,500 | | | | 0.28 - 3.82 | | | | 1.72 | |
Grants | | | (1,192,939 | ) | | | 1,192,939 | | | | 0.57 - 0.76 | | | | 0.64 | |
Exercises | | | — | | | | — | | | | — | | | | — | |
Cancellations | | | 396,327 | | | | (396,327 | ) | | | 0.57 - 2.59 | | | | 0.82 | |
| | | | | | | | | | | | | | | | |
December 31, 2009 | | | 1,550,888 | | | | 4,914,112 | | | $ | 0.28 - $3.82 | | | $ | 1.53 | |
| | | | | | | | | | | | | | | | |
The following summarizes information about stock options outstanding at December 31, 2009:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Outstanding Options | | | Exercisable Options | |
| | | | | Weighted-
| | | | | | | | | Weighted-
| | | | |
| | | | | Average
| | | Weighted-
| | | | | | Average
| | | Weighted-
| |
| | Number of
| | | Remaining
| | | Average
| | | Number of
| | | Remaining
| | | Average
| |
| | Shares
| | | Contractual
| | | Exercise
| | | Shares
| | | Contractual
| | | Exercise
| |
Range of Exercise Prices | | Outstanding | | | Life (in Years) | | | Price | | | Exercisable | | | Life (in Years) | | | Price | |
|
$0.28-$0.86 | | | 2,151,612 | | | | 4.5 | | | $ | 0.50 | | | | 1,724,112 | | | | 4.0 | | | $ | 0.43 | |
$1.07-$1.93 | | | 827,500 | | | | 5.0 | | | $ | 1.31 | | | | 435,625 | | | | 4.6 | | | $ | 1.40 | |
$2.02-$2.68 | | | 860,000 | | | | 4.3 | | | $ | 2.26 | | | | 323,750 | | | | 4.4 | | | $ | 2.31 | |
$3.00-$3.82 | | | 1,075,000 | | | | 5.4 | | | $ | 3.19 | | | | 950,832 | | | | 5.4 | | | $ | 3.19 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 4,914,112 | | | | | | | | | | | | 3,434,319 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Intrinsic value ofin-the-money options, using the December 31, 2009 closing price of $0.55 | | $ | 254,450 | | | | | | | | | | | $ | 254,450 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Determining the Fair Value of Options. We use the Black-Scholes valuation model to estimate the fair value of options granted. Black-Scholes considers a number of factors, including the market price and
F-14
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
volatility of our common stock. We used the following forward-looking range of assumptions to value each stock option granted to employees, directors and consultants during the years ended December 31, 2009 and 2008:
| | | | |
| | 2009 | | 2008 |
|
Dividend yield | | 0.0% | | 0.0% |
Risk free rate of return | | 1.9 - 2.3% | | 0.8 - 3.7% |
Expected life in years | | 4.75 - 5.38 | | 1.00 - 4.75 |
Volatility | | 71 - 72% | | 68 - 82% |
Forfeitures | | 2.61% | | — |
Our dividend yield assumption is based on the fact that we have never paid cash dividends and do not anticipate paying cash dividends in the foreseeable future. Our risk-free interest rate assumption is based on yields of U.S. Treasury notes in effect at the date of grant. Our expected life represents the period of time that options granted are expected to be outstanding and is calculated in accordance with the Securities and Exchange Commission (“SEC”) guidance provided in the SEC’s Staff Accounting Bulletin 107 (“SAB 107”), using a “simplified” method. The Company has used the simplified method and will continue to use the simplified method as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate an expected term. Our volatility assumption is based on reviews of the historical volatility of our common stock. We estimate forfeiture rates at the time of grant and adjust these estimates, if necessary, periodically based on the extent to which future actual forfeitures differ, or are expected to differ, from such estimates. Accordingly, we have estimated forfeiture percentages for the unvested portion of previously granted awards that remain outstanding at the date of adoption and for awards granted subsequent to the date of adoption. Forfeitures are estimated based on the demographics of current option holders and standard probabilities of employee turnover. Using Black-Scholes and these factors, the weighted average fair value of stock options granted to employees and directors was $0.39 for the year ended December 31, 2009 and $0.73 for the year ended December 31, 2008.
We do not record tax-related effects on stock-based compensation given our historical and anticipated operating experience and offsetting changes in our valuation allowance which fully reserves against potential deferred tax assets.
Warrants to Purchase Common Stock.
The following table summarizes our warrant activity for 2009 and 2008:
| | | | | | | | | | | | |
| | | | | Warrants Outstanding | |
| | | | | | | | Weighted
| |
| | | | | | | | Average
| |
| | Number of
| | | Exercise Price
| | | Exercise
| |
| | Shares | | | Range | | | Price | |
|
December 31, 2007 | | | 3,522,544 | | | $ | 2.75 - $4.06 | | | $ | 3.26 | |
Grants | | | 1,745,104 | | | | 1.60 - 1.74 | | | | 1.66 | |
Exercises | | | — | | | | — | | | | — | |
Cancellations | | | (18,558 | ) | | | 4.05 - 4.06 | | | | 4.05 | |
| | | | | | | | | | | | |
December 31, 2008 | | | 5,249,090 | | | | 1.60 - 4.06 | | | | 2.80 | |
Grants | | | 3,129,011 | | | | 0.91 - 1.12 | | | | 1.10 | |
Exercises | | | — | | | | — | | | | — | |
Cancellations | | | (444,250 | ) | | | 4.06 | | | | 4.06 | |
| | | | | | | | | | | | |
December 31, 2009 | | | 7,933,851 | | | $ | 0.91 - $4.06 | | | $ | 2.01 | |
| | | | | | | | | | | | |
F-15
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
Significant components of the Company’s deferred tax assets at December 31, 2009 and 2008 and related valuation reserves are presented below:
| | | | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
|
Deferred tax assets: | | | | | | | | |
Net operating loss carryforwards | | $ | 16,988,000 | | | $ | 18,370,000 | |
Research and development tax credit carryforward | | | 1,710,000 | | | | 1,628,000 | |
Charitable contribution carryforward | | | 37,000 | | | | 39,000 | |
Accrued vacation | | | 8,000 | | | | 12,000 | |
Accrued expenses | | | 163,000 | | | | 150,000 | |
Amortization | | | 5,000 | | | | 6,000 | |
Depreciation | | | 1,000 | | | | — | |
Stock option expense | | | 975,000 | | | | 919,000 | |
| | | | | | | | |
| | | 19,887,000 | | | | 21,124,000 | |
Less — valuation allowance | | | (19,887,000 | ) | | | (21,123,000 | ) |
| | | | | | | | |
Net deferred tax asset | | | — | | | | 1,000 | |
Deferred tax liabilities: | | | | | | | | |
Depreciation | | | — | | | | (1,000 | ) |
| | | | | | | | |
Net deferred tax amounts | | $ | — | | | $ | — | |
| | | | | | | | |
A full valuation allowance has been provided at December 31, 2009 and 2008 to reserve for deferred tax assets, as it appears more likely than not that net deferred tax assets will not be realized.
At December 31, 2009, we had net operating loss carryforwards for income tax purposes of approximately $43.1 million, which are available to offset future federal and state taxable income, if any, and, research and development tax credit carryforwards of approximately $1.7 million. The carryforwards, if not utilized, will expire in increments through 2029.
The Code imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of a corporation’s ownership change, as defined in Section 382 of the Code. During 2009, the Company completed a preliminary study to compute any limits on the net operating losses and credit carryforwards for purposes of Section 382. It was determined that the Company experienced a cumulative change in ownership, as defined by the regulations, in 2002. This change in ownership triggers an annual limitation on the Company’s ability to utilize certain U.S. federal and state net operating loss carryforwards and research tax credit carryforwards, resulting in the potential loss of approximately $9.8 million of net operating loss carryforwards and $0.2 million in research credit carryforwards. The Company has reduced the deferred tax assets associated with these carryforwards in its balance sheet at December 31, 2009 and 2008.
F-16
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
The provision for income taxes on earnings subject to income taxes differs from the statutory Federal rate at December 31, 2009 and 2008, due to the following:
| | | | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
|
Tax benefit at statutory rate | | $ | (2,213,000 | ) | | $ | (3,617,000 | ) |
State taxes | | | (354,000 | ) | | | (579,000 | ) |
Permanent M-1s | | | 339,000 | | | | 563,000 | |
Limited/expired net operating loss carryforwards | | | 3,546,000 | | | | 6,150,000 | |
Limited/expired research and development tax credit carryforward | | | 120,000 | | | | 284,000 | |
Research and development tax credit carryforward | | | (202,000 | ) | | | (504,000 | ) |
Change in effective tax rate | | | — | | | | (455,000 | ) |
Change in valuation allowance | | | (1,236,000 | ) | | | (1,842,000 | |
| | | | | | | | |
| | $ | — | | | $ | — | |
| | | | | | | | |
As discussed in Note 2, we recognize the effect of income tax positions only if those positions more likely than not of being sustained. At December 31, 2009, and December 31, 2008 we had no gross unrecognized tax benefits. We do not expect any significant changes in unrecognized tax benefits over the next 12 months. In addition, we did not recognize any interest or penalties related to uncertain tax positions at December 31, 2009 and 2008.
Lease. Our rent expense, related solely to office space, for 2009 and 2008 was $91,183 and $100,196, respectively. We are committed under an office space lease that expires on January 31, 2013 that requires the following approximate annual lease payments: $63,000, $94,000, $98,000 and $8,000 for the years ending December 31, 2010, through 2013, respectively.
Employment Continuity Agreements. We have entered into employment contracts with our executive officers which provide for severance if the executive is dismissed without cause or under certain circumstances after a change of control in our ownership. At December 31, 2009 these obligations, if triggered, could amount to a maximum of approximately $900,000 in the aggregate.
F-17
RegeneRx Biopharmaceuticals, Inc.
| | | | | | | | |
| | March 31,
| | | December 31,
| |
| | 2010 | | | 2009 | |
| | (Unaudited) | | | | |
|
ASSETS |
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | 3,189,990 | | | $ | 4,355,768 | |
Prepaid expenses and other current assets | | | 225,166 | | | | 196,546 | |
| | | | | | | | |
Total current assets | | | 3,415,156 | | | | 4,552,314 | |
Fixed assets, net of accumulated depreciation of $101,444 and $98,171 | | | 23,443 | | | | 8,492 | |
Other assets | | | 17,255 | | | | 22,948 | |
| | | | | | | | |
Total assets | | $ | 3,455,854 | | | $ | 4,583,754 | |
| | | | | | | | |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
Current liabilities | | | | | | | | |
Accounts payable | | $ | 177,718 | | | $ | 140,206 | |
Accrued expenses | | | 588,651 | | | | 740,198 | |
| | | | | | | | |
Total current liabilities | | | 766,369 | | | | 880,404 | |
| | | | | | | | |
Commitments | | | — | | | | — | |
Stockholders’ equity | | | | | | | | |
Preferred stock, $.001 par value per share, 1,000,000 authorized; no shares issued | | | — | | | | — | |
Common stock, par value $.001 per share, 100,000,000 shares authorized; 60,406,828 issued and outstanding | | | 60,407 | | | | 60,407 | |
Additional paid-in capital | | | 88,276,191 | | | | 88,144,347 | |
Accumulated deficit | | | (85,647,113 | ) | | | (84,501,404 | ) |
| | | | | | | | |
Total stockholders’ equity | | | 2,689,485 | | | | 3,703,350 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 3,455,854 | | | $ | 4,583,754 | |
| | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-18
RegeneRx Biopharmaceuticals, Inc.
(unaudited)
| | | | | | | | |
| | Three Months Ended
| |
| | March 31, | |
| | 2010 | | | 2009 | |
|
Revenues | | $ | — | | | $ | — | |
Operating expenses: | | | | | | | | |
Research and development | | | 470,434 | | | | 1,661,600 | |
General and administrative | | | 678,068 | | | | 859,568 | |
| | | | | | | | |
Total operating expenses | | | 1,148,502 | | | | 2,521,168 | |
| | | | | | | | |
Loss from operations | | | (1,148,502 | ) | | | (2,521,168 | ) |
| | | | | | | | |
Interest income | | | 2,793 | | | | 6,518 | |
| | | | | | | | |
Net loss | | $ | (1,145,709 | ) | | $ | (2,514,650 | ) |
| | | | | | | | |
Basic and diluted net loss per common share | | $ | (0.02 | ) | | $ | (0.05 | ) |
| | | | | | | | |
Weighted average number of common shares outstanding | | | 60,406,828 | | | | 53,622,491 | |
| | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-19
RegeneRx Biopharmaceuticals, Inc.
(unaudited)
| | | | | | | | |
| | For the Three Months Ended
| |
| | March 31, | |
| | 2010 | | | 2009 | |
|
Operating activities: | | | | | | | | |
Net loss | | $ | (1,145,709 | ) | | $ | (2,514,650 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Depreciation and amortization | | | 3,273 | | | | 4,467 | |
Non-cash share-based compensation | | | 131,844 | | | | 266,628 | |
Gain on settlement of accrued liabilities | | | (141,016 | ) | | | — | |
Changes in operating assets and liabilities: | | | | | | | | |
Prepaid expenses and other current assets | | | (28,620 | ) | | | 72,405 | |
Other assets | | | 5,693 | | | | — | |
Accounts payable | | | 37,512 | | | | 301,075 | |
Accrued expenses | | | (10,531 | ) | | | 119,016 | |
| | | | | | | | |
Net cash used in operating activities | | | (1,147,554 | ) | | | (1,751,059 | ) |
| | | | | | | | |
Investing activities: | | | | | | | | |
Purchase of fixed assets | | | (18,224 | ) | | | — | |
| | | | | | | | |
Net cash used in investing activities | | | (18,224 | ) | | | — | |
| | | | | | | | |
Net decrease in cash and cash equivalents | | | (1,165,778 | ) | | | (1,751,059 | ) |
| | | | | | | | |
Cash and cash equivalents at beginning of period | | | 4,355,768 | | | | 5,655,367 | |
| | | | | | | | |
Cash and cash equivalents at end of period | | $ | 3,189,990 | | | $ | 3,904,308 | |
| | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-20
RegeneRx Biopharmaceuticals, Inc.
For the three months ended March 31, 2010 and 2009 (Unaudited)
| |
1. | organization, business overview and basis of presentation |
Organization and Nature of Operations. RegeneRx Biopharmaceuticals, Inc. (the “Company”, “We”, “Us”, “Our”), a Delaware corporation, was incorporated in 1982. We are focused on the development of a novel therapeutic peptide, Thymosin Beta 4 (“Tß4”), for tissue and organ protection, repair and regeneration. Our operations are confined to one business segment: the development and marketing of product candidates based on Tß4.
Management Plans to Address Operating Conditions. We incurred net losses of $6.5 million for the year ended December 31, 2009 and $1.1 million for the three months ended March 31, 2010. Since inception, and through March 31, 2010, we have an accumulated deficit of $85.6 million and we had cash and cash equivalents of $3.2 million as of March 31, 2010. Based on our operating plan, we believe that our cash and cash equivalents as of March 31, 2010 will fund our operations into the third quarter of 2010, without additional capital. We anticipate incurring substantial future losses as we continue development of Tß4-based product candidates. We will therefore need substantial additional funds in order to fund our operations beyond the third quarter of 2010.
We have filed a registration statement with the Securities and Exchange Commission (“SEC”) for the public offering of our common stock and warrants to purchase additional common stock. In May 2010, we were awarded a grant from the National Institutes of Health as more fully described in Note 6 below, and we intend to apply for additional grant funding and tax credits set aside for biotechnology companies under recently enacted healthcare reform legislation.
We may explore other funding alternatives, including, without limitation, public or private placements of our securities, debt financing, corporate collaborations and licensing arrangements or the sale of our company or certain of our intellectual property rights. If we are unable to complete the contemplated public offering or another financing or strategic transaction, we may not be able to continue as a going concern after our funds have been exhausted, and we could be required to significantly curtail or cease operations, file for bankruptcy or liquidate and dissolve.
These factors raise substantial doubt about our ability to continue as a going concern as of the date of the accompanying financial statements. The accompanying financial statements have been prepared assuming that we will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of our liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be forced to take any such actions.
Even if we are able to obtain sufficient funding, other factors including competition, dependence on third parties, uncertainty regarding patents, protection of proprietary rights, manufacturing of peptides and technology obsolescence could have a significant impact on us and our operations.
To achieve profitability we, or a strategic partner, must successfully conduct pre-clinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture and market those pharmaceutical products we wish to commercialize. The time required to reach profitability is highly uncertain and there can be no assurance that we will be able to achieve sustained profitability, if at all.
Basis of Presentation. The accompanying unaudited interim financial statements reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. These statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the rules and regulations of the SEC, for interim financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP. The accounting policies underlying our
F-21
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
For the three months ended March 31, 2010 and 2009 (Unaudited)
unaudited interim financial statements are consistent with those underlying our audited annual financial statements. These unaudited interim financial statements should be read in conjunction with the audited annual financial statements as of and for the year ended December 31, 2009, and related notes thereto, included in our Annual Report onForm 10-K for the year ended December 31, 2009 (the “Annual Report”).
The accompanying December 31, 2009 financial information was derived from our audited financial statements. Operating results for the three-month period ended March 31, 2010 are not necessarily indicative of the results to be expected for the year ending December 31, 2010 or any other future period.
References in this Quarterly Report onForm 10-Q to “authoritative guidance” are to the Accounting Standards Codification issued by the Financial Accounting Standards Board (“FASB”) in June 2009.
Subsequent events have been evaluated through the filing date of these unaudited financial statements.
Use of Estimates. The preparation of financial statements in conformity with GAAP 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.
| |
2. | Net Loss per Common Share |
Net loss per common share for the three-month periods ended March 31, 2010 and 2009, respectively, is based on the weighted-average number of shares of common stock outstanding during the periods. Basic and diluted loss per share are identical for all periods presented as potentially dilutive securities have been excluded from the calculation of the diluted net loss per common share because the inclusion of such securities would be antidilutive. The potentially dilutive securities include 12,847,963 shares and 9,366,590 shares for the three months ended March 31, 2010 and 2009, respectively, reserved for the exercise of outstanding options and warrants.
| |
3. | Stock Based Compensation |
We recognized $131,844 and $266,628 in stock-based compensation expense for the three months ended March 31, 2010 and 2009, respectively. Given our current estimates of future forfeitures, we expect to recognize the compensation cost related to non-vested options as of March 31, 2010 of $590,780 over the weighted average remaining recognition period of 1.1 years.
We estimate the value of our stock option awards on the date of grant using the Black-Scholes option pricing model. We did not grant any stock options during the three months ended March 31, 2010 and 2009.
As of March 31, 2010, there have been no material changes to our uncertain tax positions disclosures as provided in Note 8 of the Annual Report. We do not anticipate that total unrecognized tax benefits will significantly change prior to March 31, 2011.
| |
5. | Fair Value Measurements |
We have adopted authoritative guidance that defines fair value and establishes a framework for fair value measurements. This authoritative guidance established a three-level hierarchy for fair value measurements. The hierarchy is based upon the transparency of inputs and the valuation of an asset or a liability as of the measurement date. The three levels of inputs are as follows:
| | |
| • | Level 1 — Quoted prices in active markets for identical assets and liabilities. |
F-22
RegeneRx Biopharmaceuticals, Inc.
Notes to Financial Statements — (Continued)
For the three months ended March 31, 2010 and 2009 (Unaudited)
| | |
| • | Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities. |
| | |
| • | Level 3 — Unobservable inputs. |
At March 31, 2010, we held no qualifying liabilities, and our only qualifying assets that required measurement under the foregoing fair value hierarchy were money market funds included in Cash and Cash Equivalents valued at $0.2 million using Level 1 inputs.
On May 13, 2010, we were awarded a $3 million grant from the National Institutes of Health’s National Heart, Lung and Blood Institute to support and accelerate the clinical development of our product candidate RGN-352, an injectable formulation Tß4, for patients who have suffered an acute myocardial infarction, commonly known as a heart attack. The award is being issued under the American Reinvestment and Recovery Act of 2009.
F-23
11,500,000 Units
Common Stock
Warrants
PROSPECTUS
Maxim Group LLC
Boenning & Scattergood, Inc.
, 2010
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| |
Item 13. | Other Expenses of Issuance and Distribution. |
The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the NYSE Amex listing fee.
| | | | |
| | Amount to
| |
| | be Paid | |
|
SEC registration fee | | $ | 855.60 | |
FINRA filing fee | | | 1,700 | |
NYSE Amex listing fee | | | * | |
Reimbursable expenses of the underwriters | | | * | |
Printing and engraving expenses | | | * | |
Legal fees and expenses | | | * | |
Blue Sky fees and expenses | | | * | |
Accounting fees and expenses | | | * | |
Transfer agent and registrar fees and expenses | | | * | |
Miscellaneous expenses | | | * | |
| | | | |
Total | | $ | * | |
| | | | |
| | | | |
| | Amount to
| |
| | be Paid | |
|
SEC registration fee | | $ | 798 | |
FINRA filing fee | | | 1,619 | |
NYSE Amex listing fee | | | 45,000 | |
Corporate finance fee payable to the representative of the underwriters | | | 64,400 | |
Printing and engraving expenses | | | 75,000 | |
Legal fees and expenses | | | 250,000 | |
Accounting fees and expenses | | | 25,000 | |
Transfer agent and registrar fees and expenses | | | 5,000 | |
Miscellaneous expenses | | | 10,000 | |
| | | | |
Total | | $ | 476,816 | |
| | | | |
| | |
* | | To be filed by amendment. |
| |
Item 14. | Indemnification of Directors and Officers. |
We are incorporated under the laws of the State of Delaware. Section 102(b)(7) of the Delaware General Corporation Law, or DGCL, permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:
| | |
| • | transaction from which the director derives an improper personal benefit; |
|
| • | act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
|
| • | unlawful payment of dividends or redemption of shares; or |
|
| • | breach of a director’s duty of loyalty to the corporation or its stockholders. |
Our restated certificate of incorporation includes such a provision.
Section 145 of the DGCL provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation, or is or was serving at the request of such person as an officer, director, employee or agent of another corporation or enterprise. Our amended and restated bylaws include such a provision. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful.
II-1
Section 145 of the DGCL also provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. Our amended and restated bylaws contain such a provision. The indemnity
II-1
may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses that such officer or director has actually and reasonably incurred.
Expenses incurred by any indemnitee in defending or investigating a threatened or pending action, suit or proceeding in advance of its final disposition shall be paid by us upon delivery to us of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such indemnitee is not entitled to be indemnified by us. No advance will be made by us if a determination is reasonably and promptly made by our board of directors by a majority vote of a quorum of disinterested directors, or if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that, based upon the facts known to the board or counsel at the time such determination is made, such person did not meet the applicable standard of conduct in order to be indemnified.
At present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
We have an insurance policy covering our officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act or otherwise.
We plan to enter into an underwriting agreement that provides that the underwriters are obligated, under some circumstances, to indemnify our directors, officers and controlling persons against specified liabilities, including liabilities under the Securities Act.
| |
Item 15. | Recent Sales of Unregistered Securities. |
The following list sets forth information regarding all unregistered securities sold by us since January 1, 2007 through the date of this registration statement.
1) In February 2008, we issued and sold 5,000,000 shares of common stock at a price of $1.00 per share, and warrants to purchase an aggregate of 1,000,000 shares of common stock at an exercise price of $1.60 per share, to two accredited investors for aggregate consideration of approximately $5.0 million.
2) In December 2008, we issued and sold 2,068,964 shares of common stock at a price of $1.45 per share, and warrants to purchase an aggregate of 745,104 shares of common stock at an exercise price of $1.74 per share, to two accredited investors for aggregate consideration of approximately $3.0 million.
3) On April 30, 2009 we issued and sold 1,052,631 shares of common stock at a price of $0.57 per share, and warrants to purchase an aggregate of 263,158 shares of common stock at an exercise price of $0.91 per share, to one accredited investor for aggregate consideration of $600,000.
4) On October 5, 2009, we issued and sold 4,512,194 shares of common stock at a price of $0.82 per share, and warrants to purchase an aggregate of 2,256,097 shares of common stock at an exercise price of $1.12 per share, to three accredited investors for aggregate consideration of $3.7 million.
5) On October 15, 2009, we issued and sold 1,219,512 shares of common stock at a price of $0.82 per share, and warrants to purchase an aggregate of 609,756 shares of common stock at an exercise price of $1.12 per share, to one accredited investor for aggregate consideration of $1.0 million.
II-2
The offers, sales and issuances of the securities described in paragraphs (1) through (5) were exempt from registration under the Securities Act under Section 4(2) of the Securities Act and Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection
II-2
with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor as defined in Rule 501 promulgated under the Securities Act.
| |
Item 16. | Exhibits and Financial Statement Schedules. |
| | | | |
Exhibit
| | |
Number | | Description of Document |
|
| 1 | .1† | | Form of Underwriting Agreement. |
| 3 | .1 | | Restated Certificate of Incorporation. |
| 3 | .2 | | Certificate of Amendment of Restated Certificate of Incorporation. |
| 3 | .3 | | Certificate of Amendment of Restated Certificate of Incorporation. |
| 3 | .4 | | Certificate of Designation of Series A Participating Cumulative Preferred Stock. |
| 3 | .5(1) | | Amended and Restated Bylaws adopted July 26, 2006. |
| 3 | .6(2) | | Amendment to Amended and Restated Bylaws. |
| 4 | .1 | | Specimen Common Stock Certificate. |
| 4 | .2 | | Specimen Rights Certificate. |
| 4 | .3 | | Rights Agreement, dated April 29, 1994, between the Company and American Stock Transfer & Trust Company, as Rights Agent. |
| 4 | .4 | | Amendment No. 1 to Rights Agreement, dated March 4, 2004, between the Company and American Stock Transfer & Trust Company, as Rights Agent. |
| 4 | .5† | | Form of Warrant Agreement. |
| 4 | .6† | | Form of Warrant Certificate. |
| 5 | .1† | | Opinion of Cooley Godward Kronish LLP. |
| 10 | .1+(3) | | Amended and Restated 2000 Stock Option and Incentive Plan, as amended. |
| 10 | .2*(4) | | Patent License Agreement — Exclusive, dated January 24, 2001, between the Company and the U.S. Public Health Service. |
| 10 | .3*(5) | | Thymosin Beta 4 License and Supply Agreement, dated January 21, 2004, between the Company and Defiante Farmaceutica S.A. |
| 10 | .4(6) | | Lease by and between RegeneRx Biopharmaceuticals, Inc. and The Realty Associates Fund V, L.P., dated December 10, 2009. |
| 10 | .5+(8) | | Second Amended and Restated Employment Agreement, dated March 11, 2009, between the Company and Allan L. Goldstein, as amended. |
| 10 | .6+(7) | | Second Amended and Restated Employment Agreement, dated March 12, 2009, between the Company and J.J. Finkelstein, as amended. |
| 10 | .7+(7) | | Second Amended and Restated Employment Agreement, dated March 31, 2009, between the Company and C. Neil Lyons, as amended. |
| 10 | .8+(7) | | Second Amended and Restated Employment Agreement, dated March 31, 2009, between the Company and David Crockford. |
| 10 | .1(9) | | Stock Purchase Agreement, dated as of June 23, 2005. |
| 10 | .2(10) | | Form of Warrant to Purchase Common Stock, dated March 17, 2006. |
| 10 | .3(11) | | Form of Warrant to Purchase Common Stock, dated December 18, 2006. |
| 10 | .4(11) | | Registration Rights Agreement, dated as of December 15, 2006. |
| 10 | .5(12) | | Securities Purchase Agreement, dated as of February 27, 2008. |
| | | | |
Exhibit
| | |
Number | | Description of Document |
|
| 1 | .1 | | Form of Underwriting Agreement. |
| 3 | .1# | | Restated Certificate of Incorporation. |
| 3 | .2# | | Certificate of Amendment of Restated Certificate of Incorporation. |
| 3 | .3# | | Certificate of Amendment of Restated Certificate of Incorporation. |
| 3 | .4# | | Certificate of Designation of Series A Participating Cumulative Preferred Stock. |
| 3 | .5(1) | | Amended and Restated Bylaws adopted July 26, 2006. |
| 3 | .6(2) | | Amendment to Amended and Restated Bylaws. |
| 4 | .1# | | Specimen Common Stock Certificate. |
| 4 | .2# | | Specimen Rights Certificate. |
| 4 | .3# | | Rights Agreement, dated April 29, 1994, between the Company and American Stock Transfer & Trust Company, as Rights Agent. |
| 4 | .4# | | Amendment No. 1 to Rights Agreement, dated March 4, 2004, between the Company and American Stock Transfer & Trust Company, as Rights Agent. |
| 4 | .5 | | Form of Warrant Agreement. |
| 4 | .6 | | Form of Warrant Certificate. |
| 4 | .7 | | Form of Representative’s Warrant. |
| 5 | .1 | | Opinion of Cooley LLP. |
| 10 | .1+(3) | | Amended and Restated 2000 Stock Option and Incentive Plan, as amended. |
| 10 | .2*(4) | | Patent License Agreement — Exclusive, dated January 24, 2001, between the Company and the U.S. Public Health Service. |
| 10 | .3*(5) | | Thymosin Beta 4 License and Supply Agreement, dated January 21, 2004, between the Company and Defiante Farmaceutica S.A. |
| 10 | .4(6) | | Lease by and between RegeneRx Biopharmaceuticals, Inc. and The Realty Associates Fund V, L.P., dated December 10, 2009. |
| 10 | .5+(8) | | Second Amended and Restated Employment Agreement, dated March 11, 2009, between the Company and Allan L. Goldstein, as amended. |
| 10 | .6+(7) | | Second Amended and Restated Employment Agreement, dated March 12, 2009, between the Company and J.J. Finkelstein, as amended. |
| 10 | .7+(7) | | Second Amended and Restated Employment Agreement, dated March 31, 2009, between the Company and C. Neil Lyons, as amended. |
| 10 | .8+(7) | | Second Amended and Restated Employment Agreement, dated March 31, 2009, between the Company and David Crockford. |
| 10 | .1(9) | | Stock Purchase Agreement, dated as of June 23, 2005. |
| 10 | .2(10) | | Form of Warrant to Purchase Common Stock, dated March 17, 2006. |
| 10 | .3(11) | | Form of Warrant to Purchase Common Stock, dated December 18, 2006. |
| 10 | .4(11) | | Registration Rights Agreement, dated as of December 15, 2006. |
| 10 | .5(12) | | Securities Purchase Agreement, dated as of February 27, 2008. |
| 10 | .6(12) | | Form of Warrant to Purchase Common Stock, dated February 29, 2008. |
| 10 | .7(13) | | Securities Purchase Agreement, dated as of December 10, 2008. |
| 10 | .8(13) | | Form of Warrant to Purchase Common Stock, dated December 10, 2008. |
II-3
| | | | |
Exhibit
| | |
Number | | Description of Document |
|
| 10 | .6(12) | | Form of Warrant to Purchase Common Stock, dated February 29, 2008. |
| 10 | .7(13) | | Securities Purchase Agreement, dated as of December 10, 2008. |
| 10 | .8(13) | | Form of Warrant to Purchase Common Stock, dated December 10, 2008. |
| 10 | .9(14) | | Securities Purchase Agreement, dated as of April 13, 2009. |
| 10 | .10(14) | | Form of Warrant to Purchase Common Stock, dated April 30, 2009. |
| 10 | .11(15) | | Securities Purchase Agreement, dated as of September 30, 2009. |
| 10 | .12(15) | | Form of Warrant to Purchase Common Stock, dated October 5, 2009. |
| 10 | .13(16) | | Securities Purchase Agreement, dated as of September 30, 2009. |
| 10 | .14(16) | | Form of Warrant to Purchase Common Stock, dated October 15, 2009. |
| 23 | .1 | | Consent of Reznick Group, P.C., independent registered public accounting firm. |
| 23 | .2† | | Consent of Cooley Godward Kronish LLP (included in Exhibit 5.1). |
| 24 | .1 | | Power of Attorney. Reference is made to the signature page hereto. |
| | | | |
Exhibit
| | |
Number | | Description of Document |
|
| 10 | .9(14) | | Securities Purchase Agreement, dated as of April 13, 2009. |
| 10 | .10(14) | | Form of Warrant to Purchase Common Stock, dated April 30, 2009. |
| 10 | .11(15) | | Securities Purchase Agreement, dated as of September 30, 2009. |
| 10 | .12(15) | | Form of Warrant to Purchase Common Stock, dated October 5, 2009. |
| 10 | .13(16) | | Securities Purchase Agreement, dated as of September 30, 2009. |
| 10 | .14(16) | | Form of Warrant to Purchase Common Stock, dated October 15, 2009. |
| 23 | .1 | | Consent of Reznick Group, P.C., independent registered public accounting firm. |
| 23 | .2 | | Consent of Cooley LLP (included in Exhibit 5.1). |
| 24 | .1# | | Power of Attorney. Reference is made to Page II-6 of the Registration Statement onForm S-1 (FileNo. 333-166146) filed with the SEC on April 16, 2010. |
| | |
(1) | | Filed as an exhibit to the registrant’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2006 filed with the Securities and Exchange Commission on August 14, 2006 and incorporated herein by reference. |
|
(2) | | Filed as an exhibit to the registrant’s Registration Statement onForm S-8 (File No.333-152250) filed with the Securities and Exchange Commission on July 10, 2008 and incorporated herein by reference. |
|
(3) | | Filed as Annex A to the registrant’s definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on May 9, 2008 and incorporated herein by reference. |
|
(4) | | Filed as an exhibit to the registrant’s Annual Report onForm 10-KSB for the year ended December 31, 2000 (FileNo. 1-15070) filed with the Securities and Exchange Commission on April 2, 2001 and incorporated herein by reference. |
|
(5) | | Filed as an exhibit to the registrant’s Registration Statement onForm SB-2 (File No.333-113417) filed with the Securities and Exchange Commission on March 9, 2004 and incorporated herein by reference. |
|
(6) | | Filed as an exhibit to the registrant’s Annual Report onForm 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission on March 31, 2010 and incorporated herein by reference. |
|
(7) | | Filed as an exhibit to the registrant’s Annual Report onForm 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on April 15, 2009 and incorporated herein by reference. |
|
(8) | | Filed as an exhibit to Amendment No. 1 the registrant’s Annual Report onForm 10-K/A for the year ended December 31, 2008 filed with the Securities and Exchange Commission on April 30, 2009 and incorporated herein by reference. |
|
(9) | | Filed as an exhibit to the registrant’s Current Report onForm 8-K filed with the Securities and Exchange Commission on June 23, 2005 and incorporated herein by reference. |
|
(10) | | Filed as an exhibit to the registrant’s Current Report onForm 8-K filed with the Securities and Exchange Commission on March 7, 2006 and incorporated herein by reference. |
|
(11) | | Filed as an exhibit to the registrant’s Current Report onForm 8-K filed with the Securities and Exchange Commission on December 18, 2006 and incorporated herein by reference. |
|
(12) | | Filed as an exhibit to the registrant’s Current Report onForm 8-K filed with the Securities and Exchange Commission on February 27, 2008 and incorporated herein by reference. |
|
(13) | | Filed as an exhibit to the registrant’s Current Report onForm 8-K filed with the Securities and Exchange Commission on December 12, 2008 and incorporated herein by reference. |
|
(14) | | Filed as an exhibit to the registrant’s Current Report onForm 8-K filed with the Securities and Exchange Commission on April 16, 2009 and incorporated herein by reference. |
II-4
| | |
(15) | | Filed as an exhibit to the registrant’s Current Report onForm 8-K filed with the Securities and Exchange Commission on September 30, 2009 and incorporated herein by reference. |
II-4
| | |
(16) | | Filed as an exhibit to the registrant’s Current Report onForm 8-K filed with the Securities and Exchange Commission on October 5, 2009 and incorporated herein by reference. |
| | |
†# | | To be filed by amendment.Previously filed. |
| | |
+ | | Indicates management contract or compensatory plan. |
| | |
* | | The registrant has been granted confidential treatment with respect to certain portions of this exhibit (indicated by asterisks), which have been filed separately with the Securities and Exchange Commission. |
| | |
| (b) | Financial Statement Schedules |
No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or the notes thereto.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
II-5
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-5II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Amendment No. 2 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Rockville, State of Maryland, on the 16th17th day of April,May, 2010.
REGENERX BIOPHARMACEUTICALS, INC.
J.J. Finkelstein
President and Chief Executive Officer
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints J.J. Finkelstein and C. Neil Lyons, and each of them, his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement or any such amendment or any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and (iv) take any and all actions which may be necessary or appropriate to be done, as fully for all intents and purposes as he might or could do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Amendment No. 2 to Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
| | | | | | |
| | Signature | | Title | | Date |
|
/s/ J.J. Finkelstein J.J. Finkelstein | | President and Chief Executive Officer and Director(Principal Executive Officer) | | April 16,May 17, 2010 |
| | | | |
/s/ C. Neil Lyons C. Neil Lyons | | Chief Financial Officer (Principal Accounting and Financial Officer) | | April 16,May 17, 2010 |
| | | | |
/s/ Allan L. Goldstein*
Allan L. Goldstein | | Chairman of the Board of Directors | | April 16,May 17, 2010 |
| | | | |
/s/ Richard J. Hindin*
Richard J. Hindin | | Director | | April 16,May 17, 2010 |
| | | | |
/s/ Joseph C. McNay*
Joseph C. McNay | | Director | | April 16,May 17, 2010 |
| | | | |
/s/ Mauro Bove*
Mauro Bove | | Director | | April 16,May 17, 2010 |
| | | | |
/s/ L. Thompson Bowles*
L. Thompson Bowles | | Director | | April 16,May 17, 2010 |
| | | | |
*By: /s/ C. Neil Lyons C. Neil LyonsAttorney-in-fact | | | | |
II-6II-7