Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Mar. 26, 2014 | Jun. 28, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'Echo Therapeutics, Inc. | ' | ' |
Entity Central Index Key | '0001031927 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Public Float | ' | ' | $24,732,724 |
Entity Common Stock, Shares Outstanding | ' | 11,967,414 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current Assets: | ' | ' |
Cash and cash equivalents | $8,055,385 | $3,747,210 |
Cash restricted pursuant to letters of credit | 302,488 | 407,463 |
Current portion of deferred financing costs | 968,004 | 968,004 |
Prepaid expenses and other current assets | 49,221 | 75,626 |
Total current assets | 9,375,098 | 5,198,303 |
Property and Equipment, at cost: | ' | ' |
Computer equipment | 323,488 | 367,854 |
Office and laboratory equipment (including assets under capitalized leases) | 728,152 | 732,296 |
Furniture and fixtures | 755,444 | 728,269 |
Manufacturing equipment | 111,980 | 156,435 |
Leasehold improvements | 825,589 | 818,939 |
Property and equipment, at cost | 2,744,653 | 2,803,793 |
Less-Accumulated depreciation and amortization | -1,248,846 | -1,165,398 |
Net property and equipment (including assets under capitalized leases) | 1,495,807 | 1,638,395 |
Other Assets: | ' | ' |
Restricted cash | 10,490 | 9,740 |
Intangible assets, net of accumulated amortization | 9,625,000 | 9,625,000 |
Deferred financing costs | 2,581,324 | 3,549,328 |
Other assets | 1,576 | 826 |
Total other assets | 12,218,390 | 13,184,894 |
Total assets | 23,089,295 | 20,021,592 |
Current Liabilities: | ' | ' |
Accounts payable | 1,036,320 | 2,319,219 |
Deferred revenue from licensing arrangements, current portion | 76,428 | 90,228 |
Current portion of capital lease obligation | 1,361 | 2,527 |
Derivative warrant liability | 1,119,155 | 5,585,141 |
Accrued expenses and other current liabilities | 1,411,107 | 1,581,448 |
Total current liabilities | 3,644,371 | 9,578,563 |
Capital lease obligation, net of current portion | ' | 1,361 |
Note payable, net of discount | ' | 120,834 |
Deferred revenue from licensing arrangements, net of current portion | 76,428 | 90,228 |
Total liabilities | 3,720,799 | 9,790,986 |
Convertible Preferred Stock: | ' | ' |
Series C, $0.01 par value, authorized 10,000 shares, issued and outstanding 1,000 and 9,974.185 shares at December 31, 2013 and 2012, respectively | 10 | 100 |
Series D, $0.01 par value, authorized 3,600,000 shares, issued and outstanding 1,000,000 and 3,006,000 shares at December 31, 2013 and 2012, respectively (preference in liquidation of $1,000,000 and $3,006,000) | 10,000 | 30,060 |
Series E, $0.01 par value, authorized 1,748,613 shares, issued and outstanding 1,748,613 shares at December 31, 2013 | 17,486 | ' |
Common stock, $0.01 par value, authorized 150,000,000 shares, issued and outstanding 11,776,578 and 4,437,346 shares at December 31, 2013 and 2012, respectively | 117,764 | 44,374 |
Additional paid-in capital | 132,192,648 | 104,058,087 |
Accumulated deficit | -112,969,412 | -93,902,015 |
Total stockholders' equity | 19,368,496 | 10,230,606 |
Total liabilities and stockholders' equity | $23,089,295 | $20,021,592 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Stockholders' Equity: | ' | ' |
Convertible Preferred Stock: Series C, par value | 0.01 | 0.01 |
Convertible Preferred Stock:Series C, authorized | 10,000 | 10,000 |
Convertible Preferred Stock:Series C, outstanding | 1,000 | 9,974.18 |
Convertible Preferred Stock:Series C, Share Issued | 1,000 | 9,974.18 |
Convertible Preferred Stock:Series D, par value | $0.01 | $0.01 |
Convertible Preferred Stock:Series D, authorized | 3,600,000 | 3,600,000 |
Convertible Preferred Stock:Series D, outstanding | 100,000 | 3,006,000 |
Convertible Preferred Stock:Series D, Share Issued | 100,000 | 3,006,000 |
Convertible Preferred Stock:Series D,preference in liquidation | 1,000,000 | 3,006,000 |
Convertible Preferred Stock:Series E, par value | $0.01 | ' |
Convertible Preferred Stock:Series E, authorized | 1,748,613 | ' |
Convertible Preferred Stock:Series E, outstanding | 1,748,613 | ' |
Convertible Preferred Stock:Series E, Share Issued | 1,748,613 | ' |
Common stock, par value | $0.00 | $0.01 |
Common stock, authorized | 150,000,000 | 150,000,000 |
Common stock, outstanding | 11,776,578 | 4,437,346 |
Common stock, Share Issued | 11,776,578 | 4,437,346 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Income Statement [Abstract] | ' | ' | ' |
Licensing revenue | $27,600 | $5,119 | $302,059 |
Other revenue | ' | ' | 145,152 |
Total revenues | 27,600 | 5,119 | 447,211 |
Operating Expenses: | ' | ' | ' |
Research and development | 11,298,931 | 8,670,710 | 3,796,127 |
Selling, general and administrative | 8,365,137 | 6,374,429 | 4,905,757 |
Total operating expenses | 19,664,068 | 15,045,139 | 8,701,884 |
Loss from operations | -19,636,468 | -15,040,020 | -8,254,673 |
Other Income (Expense): | ' | ' | ' |
Interest income | 3,052 | 5,466 | 4,808 |
Interest expense | -3,899,967 | -504,858 | -13,926 |
Debt financing costs | ' | -455,000 | ' |
Loss on extinguishment of debt/payables | ' | ' | -1,514 |
Loss on disposals of assets | ' | -21,272 | -1,348 |
Gain (loss) on revaluation of derivative warrant liability | 4,465,986 | 3,683,676 | -1,762,938 |
Other income (expense), net | 569,071 | 2,708,012 | -1,774,918 |
Net loss | -19,067,397 | -12,332,008 | -10,029,591 |
Deemed dividend on beneficial conversion feature convertible preferred stock | -371,140 | ' | -1,975,211 |
Deemed dividend on repricing of warrants | ' | ' | -4,559,761 |
Accretion of dividends on Series B Convertible Perpetual Redeemable Preferred Stock | ' | ' | -157,733 |
Net loss applicable to common shareholders | ($19,438,537) | ($12,332,008) | ($16,722,296) |
Net loss per common share, basic and diluted | ($2.33) | ($3.12) | ($4.89) |
Basic and diluted weighted average common shares outstanding | 8,359,837 | 3,955,046 | 3,417,490 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Cash Flows From Operating Activities: | ' | ' | ' |
Net loss | ($19,067,397) | ($12,332,008) | ($10,029,591) |
Depreciation and amortization | 391,595 | 145,155 | 47,916 |
Share-based compensation, net | 1,244,342 | 1,409,562 | 836,866 |
Fair value of common stock and warrants issued for services | 96,375 | 153,464 | 448,940 |
(Gain) loss on revaluation of derivative warrant liability | -4,465,986 | -3,683,676 | 1,762,938 |
Non-cash loss on extinguishment of debt | ' | ' | 1,514 |
Non-cash interest expense | ' | ' | 12,159 |
Non-cash loss on disposal of assets | ' | 21,272 | 5,688 |
Non-cash debt financing costs | ' | 455,000 | ' |
Cash received from lessor as a lease incentive | ' | 236,974 | ' |
Amortization of discount on note payable | 2,879,166 | 120,834 | ' |
Amortization of non-cash deferred financing costs | 968,004 | 423,126 | ' |
Accounts receivable | ' | 37,065 | 104,423 |
Prepaid expenses and other current assets | 26,405 | 98,124 | -79,003 |
Deposits and other assets | -1,500 | 9,999 | -576 |
Accounts payable | -1,282,899 | 1,953,921 | -240,336 |
Deferred revenue from licensing arrangements | -27,600 | -5,119 | -302,059 |
Accrued expenses and other liabilities | -170,341 | 668,642 | 505,184 |
Net cash used in operating activities | -19,409,836 | -10,287,665 | -6,925,937 |
Cash Flows from Investing Activities: | ' | ' | ' |
Purchase of furniture, equipment and leasehold improvements | -249,007 | -1,487,091 | -323,301 |
Decrease (increase) in restricted cash | 104,975 | -157,463 | 5,510 |
Net cash used in investing activities | -144,032 | -1,644,554 | -317,791 |
Cash Flows From Financing Activities: | ' | ' | ' |
Proceeds from Montaur note payable | ' | 3,000,000 | ' |
Repayment of Montaur note payable | -3,000,000 | ' | ' |
Proceeds from issuances of Common Stock, preferred stock and warrants, net of costs | 26,864,570 | 3,278,869 | 8,918,190 |
Principal payments for capital lease obligations | -2,527 | -2,288 | -2,071 |
Proceeds from bridge notes | ' | ' | 1,000,000 |
Repayment of bridge notes | ' | ' | -75,000 |
Proceeds from the exercise of warrants | ' | 212,018 | 4,919,346 |
Proceeds from exercise of stock options | ' | 195,259 | 136,790 |
Net cash provided by financing activities | 23,862,043 | 6,683,858 | 14,897,255 |
Net increase (decrease) in cash and cash equivalents | 4,308,175 | -5,248,361 | 7,653,527 |
Cash and cash equivalents, beginning of period | 3,747,210 | 8,995,571 | 1,342,044 |
Cash and cash equivalents, end of period | 8,055,385 | 3,747,210 | 8,995,571 |
Supplemental Disclosure of Cash Flow Information and Non Cash Financing Transactions: | ' | ' | ' |
Cash paid for interest | 275 | 515 | 1,768 |
Accretion of dividend on Series B Perpetual Redeemable Preferred Stock | ' | ' | 157,733 |
Deemed dividend on beneficial conversion feature of convertible preferred stock | 371,140 | ' | 1,975,211 |
Issuance of common stock in settlement of short term note | ' | ' | 35,500 |
Conversion of notes payable and accrued interest into Series D Convertible Preferred Stock | ' | ' | 1,006,000 |
Conversion of convertible preferred stock into Common Stock at par value | 20,150 | ' | 50,000 |
Redemption of Series B Perpetual Redeemable Preferred Stock for Series C Preferred Stock in connection with October 27, 2011 warrant exercises | ' | ' | 1,701,672 |
Reclassification of derivative warrant liability to additional paid-in capital | ' | 61,520 | 2,272,597 |
Fair value of warrants included in stock issuance costs | ' | ' | 41,363 |
Common Stock subscription receivable | ' | ' | 6,667 |
Fair value of Common Stock issued in connection with settlement agreement | ' | -82,000 | 290,000 |
Cancellation of restricted Common Stock | ' | ' | 5,250 |
Deemed dividend on repricing of warrants | ' | ' | 4,559,761 |
Fair value of Commitment Warrant issued in connection with debt financing | ' | 4,840,000 | ' |
Fair value of Draw Warrant issued for note payable recorded as discount | ' | 3,000,000 | ' |
Fair value Draw Warrant issued for note payable recorded as debt financing costs | ' | $455,000 | ' |
CONSOLIDATED_STATEMENTS_OF_CHA
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Beginning balance, Value | $10,230,606 | $16,968,589 | $8,702,284 |
Exercise of warrants, Value | ' | 212,018 | 4,919,345 |
Exercise of stock options, Value | ' | 195,259 | 136,790 |
Proceeds from issuance of Common Stock, net, Value | 21,964,570 | 3,272,202 | ' |
Series B Preferred Stock dividend paid-in-kind | ' | ' | ' |
Series B Preferred Stock redeemed for Series C Preferred Stock in warrant exercise, Value | ' | ' | ' |
Common Stock subscription | ' | ' | 6,667 |
Share-based payments - restricted stock, net of forfeitures, Value | ' | ' | ' |
Share-based payments - options, net of forfeitures | ' | ' | 836,866 |
Issuance of Common Stock, net of cash issuance costs of $188,333 and non-cash costs of $468,741, Value | ' | ' | 6,154,489 |
Issuance of Series D Preferred Stock and warrants, net of cash issuance costs of $21,299, Value | ' | ' | 3,484,702 |
Fair value of Common Stock and warrants issued for services, Value | 96,375 | 153,464 | 448,940 |
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Value | 4,900,000 | ' | ' |
Fair value of derivative warrant liabilities reclassified to additional paid-in capital | ' | 61,520 | 2,272,597 |
Common Stock issued in preferred stock conversion, Value | ' | ' | ' |
Common Stock and warrants issued to settle short-term note, Value | ' | ' | 35,500 |
Share-based compensation, Value | 1,244,342 | 1,699,562 | ' |
Net Loss | -19,067,397 | -12,332,008 | -10,029,591 |
Preferred Stock | ' | ' | ' |
Beginning balance, Value | 30,160 | 30,160 | 51 |
Beginning balance, Shares | 3,015,974 | 3,015,974 | 5,072 |
Exercise of warrants, Value | ' | ' | 32 |
Exercise of warrants, Shares | ' | ' | 3,225 |
Exercise of stock options, Value | ' | ' | ' |
Exercise of stock options, Shares | ' | ' | ' |
Proceeds from issuance of Common Stock, net, Value | ' | ' | ' |
Proceeds from issuance of Common Stock, net, Shares | ' | ' | ' |
Series B Preferred Stock dividend paid-in-kind | ' | ' | 16 |
Series B Preferred Stock redeemed for Series C Preferred Stock in warrant exercise, Value | ' | ' | 17 |
Series B Preferred Stock redeemed for Series C Preferred Stock in warrant exercise, Shares | ' | ' | 1,661 |
Common Stock subscription | ' | ' | ' |
Share-based payments - restricted stock, net of forfeitures, Value | ' | ' | ' |
Share-based payments - restricted stock, net of forfeitures, Shares | ' | ' | ' |
Share-based payments - options, net of forfeitures | ' | ' | ' |
Issuance of Common Stock, net of cash issuance costs of $188,333 and non-cash costs of $468,741, Value | ' | ' | ' |
Issuance of Common Stock, net of cash issuance costs of $188,333 and non-cash costs of $468,741, Shares | ' | ' | ' |
Issuance of Series D Preferred Stock and warrants, net of cash issuance costs of $21,299, Value | ' | ' | 35,060 |
Issuance of Series D Preferred Stock and warrants, net of cash issuance costs of $21,299, Shares | ' | ' | 3,506,000 |
Fair value of Common Stock and warrants issued for services, Value | ' | ' | ' |
Fair value of Common Stock and warrants issued for services, Shares | ' | ' | ' |
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Value | 17,486 | ' | ' |
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Shares | 1,748,613 | ' | ' |
Fair value of derivative warrant liabilities reclassified to additional paid-in capital | ' | ' | ' |
Common Stock issued in preferred stock conversion, Value | -20,150 | ' | -5,000 |
Common Stock issued in preferred stock conversion, Shares | -2,014,974 | ' | -500,000 |
Common Stock and warrants issued to settle short-term note, Value | ' | ' | ' |
Common Stock and warrants issued to settle short-term note, Shares | ' | ' | ' |
Share-based compensation, Value | ' | ' | ' |
Share-based compensation, Shares | ' | ' | ' |
Net Loss | ' | ' | ' |
Common Stock | ' | ' | ' |
Beginning balance, Value | 44,374 | 38,544 | 31,126 |
Beginning balance, Shares | 4,437,346 | 3,854,400 | 3,112,625 |
Exercise of warrants, Value | ' | 166 | 2,304 |
Exercise of warrants, Shares | ' | 16,545 | 230,346 |
Exercise of stock options, Value | ' | 225 | 706 |
Exercise of stock options, Shares | ' | 22,453 | 70,584 |
Proceeds from issuance of Common Stock, net, Value | 61,963 | 4,080 | ' |
Proceeds from issuance of Common Stock, net, Shares | 6,196,605 | 408,000 | ' |
Series B Preferred Stock dividend paid-in-kind | ' | ' | ' |
Series B Preferred Stock redeemed for Series C Preferred Stock in warrant exercise, Value | ' | ' | ' |
Series B Preferred Stock redeemed for Series C Preferred Stock in warrant exercise, Shares | ' | ' | ' |
Common Stock subscription | ' | ' | ' |
Share-based payments - restricted stock, net of forfeitures, Value | ' | ' | 190 |
Share-based payments - restricted stock, net of forfeitures, Shares | ' | ' | 19,000 |
Share-based payments - options, net of forfeitures | ' | ' | ' |
Issuance of Common Stock, net of cash issuance costs of $188,333 and non-cash costs of $468,741, Value | ' | ' | 3,550 |
Issuance of Common Stock, net of cash issuance costs of $188,333 and non-cash costs of $468,741, Shares | ' | ' | 355,045 |
Issuance of Series D Preferred Stock and warrants, net of cash issuance costs of $21,299, Value | ' | ' | ' |
Issuance of Series D Preferred Stock and warrants, net of cash issuance costs of $21,299, Shares | ' | ' | ' |
Fair value of Common Stock and warrants issued for services, Value | 92 | 95 | 138 |
Fair value of Common Stock and warrants issued for services, Shares | 9,122 | 9,533 | 13,800 |
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Value | 969 | ' | ' |
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Shares | 69,569 | ' | ' |
Fair value of derivative warrant liabilities reclassified to additional paid-in capital | ' | ' | ' |
Common Stock issued in preferred stock conversion, Value | 10,980 | ' | 500 |
Common Stock issued in preferred stock conversion, Shares | 1,098,019 | ' | 50,000 |
Common Stock and warrants issued to settle short-term note, Value | ' | ' | 30 |
Common Stock and warrants issued to settle short-term note, Shares | ' | ' | 3,000 |
Share-based compensation, Value | -341 | 1,264 | ' |
Share-based compensation, Shares | -34,083 | 126,415 | ' |
Net Loss | ' | ' | ' |
Additional Paid-In Capital | ' | ' | ' |
Beginning balance, Value | 104,058,087 | 98,463,225 | 79,926,523 |
Exercise of warrants, Value | ' | 211,852 | 4,917,009 |
Exercise of stock options, Value | ' | 195,034 | 136,084 |
Proceeds from issuance of Common Stock, net, Value | 21,902,607 | 3,268,122 | ' |
Series B Preferred Stock dividend paid-in-kind | ' | ' | ' |
Series B Preferred Stock redeemed for Series C Preferred Stock in warrant exercise, Value | ' | ' | -17 |
Common Stock subscription | ' | 6,667 | ' |
Share-based payments - restricted stock, net of forfeitures, Value | ' | ' | -190 |
Share-based payments - options, net of forfeitures | ' | ' | 836,866 |
Issuance of Common Stock, net of cash issuance costs of $188,333 and non-cash costs of $468,741, Value | ' | ' | 6,435,939 |
Issuance of Series D Preferred Stock and warrants, net of cash issuance costs of $21,299, Value | ' | ' | 3,449,642 |
Fair value of Common Stock and warrants issued for services, Value | 96,283 | 153,369 | 448,802 |
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Value | 4,881,818 | ' | ' |
Fair value of derivative warrant liabilities reclassified to additional paid-in capital | ' | 61,520 | 2,272,597 |
Common Stock issued in preferred stock conversion, Value | 9,170 | ' | 4,500 |
Common Stock and warrants issued to settle short-term note, Value | ' | ' | 35,470 |
Share-based compensation, Value | 1,244,683 | 1,698,298 | ' |
Net Loss | ' | ' | ' |
Common Stock Subscribed | ' | ' | ' |
Beginning balance, Value | ' | 6,667 | 285,000 |
Exercise of warrants, Value | ' | ' | ' |
Exercise of stock options, Value | ' | ' | ' |
Proceeds from issuance of Common Stock, net, Value | ' | ' | ' |
Series B Preferred Stock dividend paid-in-kind | ' | ' | ' |
Series B Preferred Stock redeemed for Series C Preferred Stock in warrant exercise, Value | ' | ' | ' |
Common Stock subscription | ' | -6,667 | 6,667 |
Share-based payments - restricted stock, net of forfeitures, Value | ' | ' | ' |
Share-based payments - options, net of forfeitures | ' | ' | ' |
Issuance of Common Stock, net of cash issuance costs of $188,333 and non-cash costs of $468,741, Value | ' | ' | -285,000 |
Issuance of Series D Preferred Stock and warrants, net of cash issuance costs of $21,299, Value | ' | ' | ' |
Fair value of Common Stock and warrants issued for services, Value | ' | ' | ' |
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Value | ' | ' | ' |
Fair value of derivative warrant liabilities reclassified to additional paid-in capital | ' | ' | ' |
Common Stock issued in preferred stock conversion, Value | ' | ' | ' |
Common Stock and warrants issued to settle short-term note, Value | ' | ' | ' |
Share-based compensation, Value | ' | ' | ' |
Net Loss | ' | ' | ' |
Accumulated Deficit | ' | ' | ' |
Beginning balance, Value | -93,902,015 | -81,570,007 | -71,540,416 |
Exercise of warrants, Value | ' | ' | ' |
Exercise of stock options, Value | ' | ' | ' |
Proceeds from issuance of Common Stock, net, Value | ' | ' | ' |
Series B Preferred Stock dividend paid-in-kind | ' | ' | ' |
Series B Preferred Stock redeemed for Series C Preferred Stock in warrant exercise, Value | ' | ' | ' |
Common Stock subscription | ' | ' | ' |
Share-based payments - restricted stock, net of forfeitures, Value | ' | ' | ' |
Share-based payments - options, net of forfeitures | ' | ' | ' |
Issuance of Common Stock, net of cash issuance costs of $188,333 and non-cash costs of $468,741, Value | ' | ' | ' |
Issuance of Series D Preferred Stock and warrants, net of cash issuance costs of $21,299, Value | ' | ' | ' |
Fair value of Common Stock and warrants issued for services, Value | ' | ' | ' |
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Value | ' | ' | ' |
Fair value of derivative warrant liabilities reclassified to additional paid-in capital | ' | ' | ' |
Common Stock issued in preferred stock conversion, Value | ' | ' | ' |
Common Stock and warrants issued to settle short-term note, Value | ' | ' | ' |
Share-based compensation, Value | ' | ' | ' |
Net Loss | ($19,067,397) | ($12,332,008) | ($10,029,591) |
ORGANIZATION_AND_BASIS_OF_PRES
ORGANIZATION AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note 1. ORGANIZATION AND BASIS OF PRESENTATION | ' |
Echo Therapeutics, Inc. (the “Company”) is a medical device company with expertise in advanced skin permeation technology. The Company is developing its Symphony® CGM System (“Symphony”) as a non-invasive, wireless continuous glucose monitoring (“CGM”) system for use in hospital critical care units. The Symphony® SkinPrep System (“SkinPrep”), a component of the Symphony CGM System, allows for enhanced skin permeation that enables extraction of analytes such as glucose. | |
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Sontra Medical, Inc., a Delaware corporation (and all significant intercompany balances have been eliminated by consolidation) and have been prepared on a basis assuming that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Certain amounts in prior periods have been reclassified to conform to current presentation. | |
On June 7, 2013, the Company effected a 1-for-10 reverse stock split of its common stock. All share and per share information has been retroactively restated to reflect this reverse stock split. | |
Liquidity and Management’s Plans | |
The accompanying financial statements have been prepared on a basis that assumes that the Company will continue as a going concern and that contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of December 31, 2013, the Company had cash of approximately $8,055,000, working capital of approximately $5,731,000, and an accumulated deficit of approximately $112,969,000. The Company continues to incur recurring losses from operations. The Company will need to collect proceeds under its current financing arrangement and secure additional capital to fund its product development, research, manufacturing and clinical programs in accordance with its current planned operations. The Company has funded its operations in the past primarily through debt and equity issuances. Management intends to utilize its current financing arrangements and will continue to pursue additional financing to fund its operations. Management believes that it will be successful in collecting on their current financing arrangement and raising additional capital. No assurances can be given that additional capital will be available on terms acceptable to the Company (see MTIA Securities Purchase Agreement in Note 9). The accompanying financial statements do not include any adjustments that might result from the outcome of the uncertainty. | |
Subsequent to December 31, 2013, the Company received net cash proceeds from a Common Stock financing with MTIA of $1,904,793 as part of their total $5,000,000 investment (see Note 9). | |
Management believes that the cash received from this Common Stock financing coupled with the cash on hand at December 31, 2013 will be sufficient to fund the cash requirements under the 2014 budget and fund operations through December 31, 2014. If all cash proceeds from MTIA are not received, management believes certain expenditures can be deferred until additional financing is obtained. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||
Dec. 31, 2013 | |||
Summary Of Significant Accounting Policies | ' | ||
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||
The accompanying consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States. | |||
Use of Estimates | |||
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. | |||
Cash and Cash Equivalents | |||
The Company considers all highly liquid investments with maturities of ninety days or less to be cash equivalents. Cash equivalents consisted of money market funds as of December 31, 2013 and 2012. The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. Restricted cash consists of a $250,000 letter of credit issued in favor of one of the Company’s key product development vendors as of December 31, 2013 and 2012 and a $52,488 and $157,463 letters of credit in favor of a landlord as of December 31, 2013 and 2012, respectively. Non-current restricted cash as of December 31, 2013 and 2012 represents a security deposit on the Company’s leased offices. | |||
Intangible Assets and Other Long-Lived Assets | |||
The Company records intangible assets at the acquisition date fair value. In connection with the acquisition of Durham Pharmaceuticals Ltd., a North Carolina corporation doing business as Echo Therapeutics, Inc. (the “ETI Acquisition”), intangible assets related to contractual arrangements were amortized over the estimated useful life of three (3) years and ended in 2010. Intangible assets related to technology are expected to be amortized on a straight-line basis over the period ending in 2019 and will commence upon revenue generation. | |||
The Company reviews intangible assets annually to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life of any intangible asset. Conditions that would indicate impairment and trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, or an adverse action or assessment by a regulator. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. | |||
For other long-lived assets, the Company evaluates quarterly whether events or circumstances have occurred that indicate that the carrying value of these assets may be impaired. | |||
The Company generally calculates fair value as the present value of estimated future cash flows it expects to generate from the asset using a risk-adjusted discount rate. If the estimate of an intangible asset’s remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. | |||
The Company performs a regular review of the underlying assumptions, circumstances, time projections and revenue and expense estimates to decide if there is a possible impairment. In reviewing the long-lived assets relating to the ETI Acquisition as of December 31, 2013, the Company concluded that there was no impairment of the carrying value of such long-lived assets. No impairment losses were recorded for the years ended December 31, 2013, 2012 and 2011. | |||
Depreciation and Amortization | |||
The Company provides for depreciation and amortization by charges to operations for the cost of assets using the straight-line method based on the estimated useful lives of the related assets, as follows: | |||
Asset Classification | Estimated Useful Life | ||
Computer equipment | 3 years | ||
Office and laboratory equipment | 3-5 years | ||
Furniture and fixtures | 7 years | ||
Manufacturing equipment | 5 years | ||
Leasehold improvements | Life of lease | ||
Share-Based Payments | |||
The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees and directors as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. The Company’s policy is to grant employee and director stock options with an exercise price equal to or greater than the fair value of the Common Stock at the date of grant. | |||
The Company recognizes compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. | |||
Fair Values of Assets and Liabilities | |||
The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. | |||
Level 1: | Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. | ||
Level 2: | Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. | ||
Level 3: | Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. | ||
The Company's financial liabilities measured at fair value on December 31, 2013 and 2012 consists solely of a derivative warrant liability which is classified as Level 3 in fair value hierarchy (see Note 7). The Company uses a valuation method, the Black-Scholes option pricing model, and the requisite assumptions in estimating the fair value for the warrants considered to be derivative instruments. These assumptions include the fair value of the underlying stock, risk-free interest rates, volatility, expected life and dividend rates. The Company has no financial assets measured at fair value. | |||
The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the years ended December 31, 2013, 2012 and 2011. | |||
Derivative Instruments | |||
The Company generally does not use derivative instruments to hedge exposures to cash-flow or market risks; however, certain warrants to purchase Common Stock that do not meet the requirements for classification as equity are classified as liabilities. In such instances, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net-cash settlement. Such financial instruments are initially recorded at fair value with subsequent changes in fair value charged (credited) to operations in each reporting period. If these instruments subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity. | |||
Concentration of Credit Risk | |||
The Company has no significant off-balance-sheet risk. Financial instruments, which subject the Company to credit risk, principally consist of cash and cash equivalents. The Company mitigates its risk by maintaining the majority of its cash and equivalents with high-quality financial institutions. | |||
Financial Instruments | |||
The estimated fair value of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, accounts payable and capital lease obligation, approximates their carrying value due to the short-term nature of these instruments and their market terms. | |||
Net Loss per Common Share | |||
Basic and diluted net loss per share of Common Stock has been computed by dividing the net loss applicable to common stockholders in each period by the weighted average number of shares of Common Stock outstanding during such period. For the periods presented, options, warrants and convertible securities were anti-dilutive and therefore excluded from diluted loss per share calculations. | |||
Segment Information | |||
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as principally one operating segment, which is the development of transdermal skin permeation and diagnostic medical devices and specialty pharmaceutical drugs. As of December 31, 2013 and 2012, all of the Company’s assets were located in the United States. | |||
Research and Development Expenses | |||
The Company charges research and development expenses to operations as incurred. Research and development expenses primarily consist of salaries and related expenses for personnel and outside contractor and consulting services. Other research and development expenses include the costs of materials and supplies used in research and development, prototype manufacturing, clinical studies, related information technology and an allocation of facilities costs. | |||
Income Taxes | |||
The Company is primarily subject to U.S. federal, Massachusetts, Pennsylvania and New Jersey state income tax. Tax years subsequent to 2010 remain open to examination by U.S. federal and state tax authorities. | |||
For federal and state income taxes, deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and the tax basis of assets and liabilities. Deferred income taxes are based upon prescribed rates and enacted laws applicable to periods in which differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, since the Company cannot be assured of realizing the deferred tax asset, a full valuation allowance has been provided. | |||
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. There were no uncertain tax position liabilities recorded at December 31, 2013 and 2012. | |||
The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2013 and 2012, the Company had no accruals for interest or penalties related to income tax matters. | |||
Licensing and Other Revenue Recognition | |||
To date, the Company has generated revenue primarily from licensing agreements, including upfront, nonrefundable license fees, with collaborators and licensees. The Company recognizes revenue when the following criteria have been met: | |||
· | persuasive evidence of an arrangement exists; | ||
· | delivery has occurred and risk of loss has passed; | ||
· | the price to the buyer is fixed or determinable; and | ||
· | collectability is reasonably assured. | ||
From time to time, the Company receives upfront, nonrefundable payments for the licensing of its intellectual property upon the signing of a license agreement. The Company believes that these payments generally are not separable from the payments it receives for providing research and development services because the license does not have stand-alone value from the research and development services it provides under its agreements. Accordingly, the Company accounts for these elements as one unit of accounting and recognizes upfront, nonrefundable payments as revenue on a straight-line basis over its contractual or estimated performance period. Revenue from the reimbursement of research and development efforts is recognized as the services are performed based on proportional performance adjusted from time to time for any delays or acceleration in the development of the product and is included in Other Revenue. The Company determines the basis of the estimated performance period based on the contractual requirements of its collaboration agreements. At each reporting period, the Company evaluates whether events warrant a change in the estimated performance period. | |||
Other Revenue includes amounts earned and billed under the license and collaboration agreements for reimbursement of research and development costs for contract engineering services. For the services rendered, principally third-party contract engineering services, the revenue recognized approximates the costs associated with the services. | |||
Recently Issued Accounting Pronouncements | |||
In July 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists to clarify the balance sheet presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. It was issued to resolve the diversity in practice that had developed in the absence of any on-point U.S. GAAP guidance. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company is currently assessing its adoption plans. |
CASH_AND_CASH_EQUIVALENTS
CASH AND CASH EQUIVALENTS | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note 3. CASH AND CASH EQUIVALENTS | ' |
As of December 31, 2013, the Company held approximately $8,055,000 in cash and cash equivalents. The Company’s cash equivalents consist solely of money market funds at a major banking institution. From time to time, the Company may have cash balances in excess of federal insurance limits. The Company has never experienced any previous losses related to these uninsured balances. |
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 12 Months Ended | |||||||||||||||||
Dec. 31, 2013 | ||||||||||||||||||
Notes to Financial Statements | ' | |||||||||||||||||
Note 4. INTANGIBLE ASSETS | ' | |||||||||||||||||
The Company’s intangible assets are related to the acquisition of assets from Durham Pharmaceuticals Ltd. in 2007. As of December 31, 2013 and 2012, intangible assets related to the ETI Acquisition are summarized as follows: | ||||||||||||||||||
Estimated | Accumulated | 2013 | 2012 | |||||||||||||||
Life | Cost | Amortization | Net | Net | ||||||||||||||
Contract related intangible asset: | ||||||||||||||||||
Cato Research discounted contract | 3 years | $ | 355,000 | $ | 355,000 | $ | — | $ | — | |||||||||
Technology related intangible assets: | ||||||||||||||||||
Patents for the AzoneTS-based product candidates and formulation | 4 years | 1,305,000 | — | 1,305,000 | 1,305,000 | |||||||||||||
Drug Master Files containing formulation, clinical and safety documentation used by the FDA | 4 years | 1,500,000 | — | 1,500,000 | 1,500,000 | |||||||||||||
In-process pharmaceutical products for 2 indications | 4 years | 6,820,000 | — | 6,820,000 | 6,820,000 | |||||||||||||
Total technology related intangible assets | 9,625,000 | — | 9,625,000 | 9,625,000 | ||||||||||||||
Total, net | $ | 9,980,000 | $ | 355,000 | $ | 9,625,000 | $ | 9,625,000 | ||||||||||
Intangible assets related to technology are expected to be amortized on a straight-line basis over the period ending in September 2019, when the underlying patents expire, and will commence upon revenue generation which the Company estimates may occur as early as the beginning of 2016. | ||||||||||||||||||
The Cato Research contract related to this intangible asset was amortized over a three year period, which ended in 2010. Amortization expense relating to the contract was approximately $84,000 for the year ended December 31, 2010 and is included in research and development in the Consolidated Statement of Operations. | ||||||||||||||||||
Estimated amortization expense for each of the next five years is as follows: | ||||||||||||||||||
Estimated | ||||||||||||||||||
Amortization | ||||||||||||||||||
Expense | ||||||||||||||||||
2014 | $ | — | ||||||||||||||||
2015 | — | |||||||||||||||||
2016 | 2,406,000 | |||||||||||||||||
2017 | 2,406,000 | |||||||||||||||||
2018 | 2,406,000 | |||||||||||||||||
OPERATING_LEASE_COMMITMENTS
OPERATING LEASE COMMITMENTS | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
Note 5. OPERATING LEASE COMMITMENTS | ' | ||||||||||||
The Company leases approximately 37,000 square feet of manufacturing, laboratory and office space in a single-story building located in Franklin, Massachusetts under a lease expiring October 31, 2017. | |||||||||||||
The Company also leases approximately 7,900 square feet of corporate office space in a multi-story building located in Philadelphia, Pennsylvania under a lease expiring May 31, 2017. | |||||||||||||
The Company also leases a corporate apartment in Franklin, Massachusetts through November 21, 2014 (with the right to early termination) and a corporate apartment in Philadelphia, Pennsylvania on a month-to-month basis. | |||||||||||||
Future minimum lease payments for each of the next five years under these operating leases at December 31, 2013 are approximately as follows: | |||||||||||||
Franklin | Philadelphia | Total | |||||||||||
Year Ending December 31, | |||||||||||||
2014 | $ | 439,000 | $ | 191,000 | $ | 630,000 | |||||||
2015 | 444,000 | 191,000 | 635,000 | ||||||||||
2016 | 455,000 | 196,000 | 651,000 | ||||||||||
2017 | 382,000 | 82,000 | 464,000 | ||||||||||
2018 | — | — | — | ||||||||||
Total | $ | 1,720,000 | $ | 660,000 | $ | 2,380,000 | |||||||
The Company’s facilities lease expense was approximately $677,000, $339,000 and $224,000 for the years ended December 31, 2013, 2012 and 2011, respectively. |
CREDIT_FACILITY_WITH_PLATINUMM
CREDIT FACILITY WITH PLATINUM-MONTAUR LIFE SCIENCES, LLC | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
NOTE 6. CREDIT FACILITY WITH PLATINUM-MONTAUR LIFE SCIENCES, LLC | ' |
On August 31, 2012, the Company and Platinum-Montaur Life Sciences, LLC (“Montaur”) entered into a Loan Agreement (the “Loan Agreement”) pursuant to which Montaur made a non-revolving draw credit facility (the “Credit Facility”) of up to $20,000,000 available to the Company, a substantial portion of which is subject to the successful achievement of certain clinical and regulatory milestones set forth in the Loan Agreement, with an initial available principal amount of $5,000,000 (the “Maximum Draw Amount”). The Company issued to Montaur a Promissory Note dated August 31, 2012 (the “Note”), with a maturity date of five years from the date of closing (the “Maturity Date”). The Company has used the proceeds from the Credit Facility to fund operations. As a result of the Company's 2013 financing transactions, this Credit Facility is currently only available at Montaur's discretion. | |
The principal balance of each draw will bear interest from the applicable draw date at a rate of 10% per annum, compounded monthly. The Company is required to make interest payments on the principal amount due in connection with each draw on the first business day of each month until the Maturity Date. The Company is also required to make a mandatory prepayment on each interest payment date of an amount equal to one-third of its total revenue for the then prior fiscal quarter, up to the maximum amount outstanding under the Note at that time. The Company is not, however, required to make such interest payment or mandatory prepayment if doing so would reduce the Company’s cash and cash equivalents to less than $5,000,000. Any amounts not previously paid in full will be due and payable on the Maturity Date. The Company will have the right to permanently prepay any draw, in whole or in part, prior to the Maturity Date. | |
The Company’s subsidiary, Sontra Medical, Inc. (“Sontra”), agreed to guarantee the obligations of the Company under the Note pursuant to a guaranty agreement entered into on August 31, 2012 (the “Guaranty”). Additionally, the Note is secured by the Pledged Revenue (as defined in the Loan Agreement) of the Company and the Company’s subsidiaries pursuant to a Security Agreement dated as of August 31, 2012 by and among the Company, Sontra and Montaur. Upon the earlier of the Maturity Date of the Note or an event of default, as defined in the Loan Agreement, the Note shall be secured by substantially all of the assets of the Company and any of its subsidiaries, which security interest shall not be effective until such event of default or maturity, pursuant to a Default Security Agreement dated August 31, 2012 by and among the Company, Sontra and Montaur. The Company also has agreed to pay all costs associated with registering the shares underlying the Warrants (should it choose to register such shares) and to indemnify Montaur from liability resulting from the registration of such shares (subject to certain standard exceptions) in accordance with a Registration Indemnity Agreement between the Company and Montaur. | |
Pursuant to the Loan Agreement, the Company issued Montaur a warrant to purchase 400,000 shares of its Common Stock, with a term of five years and an exercise price of $20.00 per share (the “Commitment Warrant”). The fair value of the warrant was determined to be approximately $4,840,000 and was recorded as a deferred financing cost that will be amortized to interest expense over the term of the Note. Of this cost, $968,004 was reflected in Current Assets, representing the portion to be amortized over the next twelve months. Amortization of the deferred financing cost for the year ended December 31, 2013 was $968,004 and is included in interest expense. In addition, for each $1,000,000 of funds borrowed pursuant to the Credit Facility, the Company will issue Montaur a warrant to purchase 100,000 shares of Common Stock, with a term of five years and an exercise price equal to 150% of the market price of the Common Stock at the time of the draw, but in no event less than $20.00 or more than $40.00 per share (together with the Commitment Warrant, the “Warrants”). All of the Warrants are immediately exercisable and will have a term of five years from the issue date. The exercise price of the Warrants is subject to adjustment for stock splits, combinations or similar events. An exercise under the Warrants may not result in the holder beneficially owning more than 4.99% or 9.99%, as applicable, of all of the Common Stock outstanding at the time; provided, however, that a holder may waive the 4.99% ownership limitation upon sixty-one (61) days’ advance written notice to the Company. | |
On September 14, 2012, the Company submitted a draw request to Montaur in the amount of $3,000,000 in the form required by the Loan Agreement (the “September Request”). The Company ultimately received the $3,000,000 of draws in the following increments: $1,000,000 on September 20, 2012, $500,000 on October 17, 2012, and $1,500,000 on November 6, 2012. These draws were recorded on the Consolidated Balance Sheet under note payable, net of the initial $3,000,000 in discounts recorded related to the warrants issued and described below. In accordance with the Loan Agreement and as a result of funding received from Montaur, the Company issued to Montaur separate warrants concurrent with the three draws above to purchase 100,000, 50,000 and 150,000 shares of Common Stock each with a term of five years, and exercise prices of $21.30, $22.70 and $21.10 per share, respectively. The fair value of the warrants issued to purchase 300,000 shares of Common Stock was determined to be approximately $3,455,000, of which $3,000,000 was treated as a debt discount to be accreted to interest expense over the term of the Note, and the balance of approximately $455,000 was charged to interest expense in 2012. | |
On March 1, 2013, the Company elected to prepay all outstanding draws under the Montaur Credit Facility totaling $3,113,366, which includes interest accrued and unpaid to that date of $113,366. After such date, no principal amount is outstanding under the Credit Facility. Concurrent with this prepayment, the Company recorded non-cash interest expense of approximately $2,879,166 in 2013 relating to the unamortized debt discount on the outstanding draws paid off. |
DERIVATIVE_WARRANT_LIABILITY
DERIVATIVE WARRANT LIABILITY | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 7. DERIVATIVE WARRANT LIABILITY | ' | ||||||||
Derivative financial instruments are recognized as a liability on the consolidated balance sheet and measured at fair value. | |||||||||
At December 31, 2013 and 2012, the Company had outstanding warrants to purchase 1,209,211 and 1,254,004 shares of its common stock, respectively. Included in these outstanding warrants at December 31, 2013 and 2012 are warrants to purchase 700,000 and 736,015 shares, respectively, that are considered to be derivative instruments. The fair value of these derivative instruments at December 31, 2013 and 2012 was approximately $1,119,000 and $5,585,000, respectively, and is included in Derivative Warrant Liability, a current liability. Changes in fair value of the derivative financial instruments are recognized currently in the Statements of Operations as a Gain (Loss) on Revaluation of Derivative Warrant Liability. The changes in the fair value of the derivative warrant liability for the years ended December 31, 2013, 2012 and 2011 resulted in a gain (loss) of approximately $4,466,000, $3,684,000 and $(1,763,000), respectively. | |||||||||
The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying common stock for each reporting period. There were no warrants exercised in 2013 or 2012 pursuant to cashless exercise provisions. | |||||||||
For the year ended December 31, 2013 there were no derivative warrants exercised. For the year ended December 31, 2012, derivative warrants to purchase 165,451 shares were exercised and certain anti-dilution rights were waived which resulted in a reclassification to additional paid-in capital in the amount of approximately $62,000. | |||||||||
The table below presents the changes in the derivative warrant liability, which is measured at fair value on a recurring basis and classified as Level 3 in fair value hierarchy (see Note 2): | |||||||||
2013 | 2012 | ||||||||
Derivative warrant liability as of January 1 | $ | 5,585,141 | $ | 1,035,337 | |||||
Warrants issued under Montaur Credit Facility | — | 8,295,000 | |||||||
Total unrealized losses included in net loss (1) | 1,671,682 | 500,000 | |||||||
Total realized losses included in net loss (1) | — | 1,438 | |||||||
Total unrealized gains included in net loss (1) | (5,985,000 | ) | (4,077,433 | ) | |||||
Total realized gains included in net loss (1) | (152,668 | ) | (107,681 | ) | |||||
Reclassification of liability to additional paid-in capital | — | (61,520 | ) | ||||||
for warrants | |||||||||
Derivative warrant liability as of December 31 | $ | 1,119,155 | $ | 5,585,141 | |||||
________________________ | |||||||||
(1) Included in gain or loss on revaluation of derivative warrant liability in the Consolidated Statement of Operations. | |||||||||
PREFERRED_STOCK
PREFERRED STOCK | 12 Months Ended | ||
Dec. 31, 2013 | |||
Notes to Financial Statements | ' | ||
Note 8. PREFERRED STOCK | ' | ||
The Company is authorized to issue up to 40,000,000 shares of preferred stock with such rights, preferences and privileges as are determined by the Board of Directors. | |||
Series B Perpetual Redeemable Preferred Stock and Warrant Financing | |||
The Company had authorized 40,000 shares of non-convertible Series B Perpetual Preferred Stock, $0.01 par value (“Series B Stock”). In October 2011 certain warrants to purchase Common Stock were exercised and, in lieu of delivering to the Company the cash exercise price for such warrant exercises, the investor surrendered an aggregate of 170.1672 shares of Series B Stock with a redeemable value of $1,701.672. As a part of the exchange, the Company issued an aggregate of 1,830.895 shares of Series C Stock. After giving effect to the exchange, the Company has no authorized, issued or outstanding Series B stock. | |||
Series C Convertible Preferred Stock | |||
The Company has authorized 10,000 shares of Series C Stock, of which 1,000 and 9,974.185 shares were issued and outstanding as of December 31, 2013 and 2012, respectively. The Series C Stock was created on June 30, 2009. | |||
Key terms of the Series C Stock are as follows: | |||
· | Pursuant to the terms of the Certificate of Designation, Preference and Rights of Series C Preferred Stock (the “Series C Certificate”), each share of Series C Stock is convertible into 100 shares of Common Stock, subject to adjustment for stock splits, combinations or similar events. | ||
· | Each holder who receives Series C Stock may convert its Series C Stock at any time following its issuance. | ||
· | In the event of any Liquidation Event (as defined in the Series C Certificate), the holders of Series C Stock will be entitled to receive (subject to the rights of any securities designated as senior to the Series C Stock) a per share liquidation preference equal to an amount calculated by taking the total amount available for distribution to holders of all the Company’s outstanding Common Stock before deduction of any preference payments for the Series C Stock, divided by the total of (x) all of the then outstanding shares of Common Stock, plus (y) all of the shares of Common Stock into which all of the outstanding shares of the Series C Stock can be converted, in each case prior to any distribution to the holders of Common Stock or any other securities designated as junior to the Series C Stock. | ||
On December 23, 2013, an investor converted 8,974.185 shares of Series C Stock into 897,419 shares of Common Stock. | |||
Series D Convertible Preferred Stock | |||
The Company has authorized 3,600,000 shares of Series D Preferred Stock (the “Series D Stock”), of which 1,000,000 and 3,006,000 shares were issued and outstanding as of December 31, 2013 and December 31, 2012, respectively. | |||
Key terms of the Series D Stock are as follows: | |||
· | Pursuant to the terms of the Certificate of Designation, Preferences and Rights of the Series D Convertible Preferred Stock, the shares of Series D Stock are convertible into shares of Common Stock at a price per share equal to $1.00, subject to adjustment for stock splits, business combinations or similar events, and shall have a liquidation preference equal to their stated value. | ||
· | Each holder who receives Series D Stock may convert it at any time following its issuance. | ||
· | The Series D Stock does not pay a dividend and is not redeemable. | ||
On February 8, 2011 the Company entered into a Series D Convertible Preferred Stock Purchase Agreement (the “Series D Agreement”) with Montaur and certain other strategic accredited investors (each, a “Series D Investor” and collectively, the “Series D Investors”) in connection with the Company’s private placement (the “Series D Financing”) of Series D Convertible Preferred Stock (“Series D Stock”) at a price per share of $10.00. For every $100,000 face value of Series D Stock purchased in the Series D Financing, the Series D Investor was issued (i) Series 1 warrants to purchase 5,000 shares of Common Stock with an exercise price of $15.00 per share (the “Series D-1 Warrants”), and (ii) Series 2 warrants to purchase 5,000 shares of Common Stock with an exercise price of $25.00 per share (the “Series D-2 Warrants” and, together with the Series D-1 Warrants, the “Series D Warrants”). | |||
On February 8, 2011 there was a closing in connection with the Series D Agreement and the Company received cash proceeds of $2,500,000 for the purchase of 2,500,000 shares of Series D Stock. The Company issued 1,006,000 shares of Series D Stock in exchange for the extinguishment of an 8% Senior Promissory Note issued by the Company on January 5, 2011 in the principal amount of $1,000,000, plus interest accrued through February 1, 2011 in the amount of $6,000. | |||
The Company issued an aggregate of 175,300 Series D-1 Warrants and 175,300 Series D-2 Warrants to the Series D Investors pursuant to the Series D Agreement. The Series D Warrants are immediately exercisable and were to expire on February 7, 2013; however, since the Series D Warrants were not exercised in full by February 7, 2013 by virtue of the application of a beneficial ownership “blocker”, the term of the Series D Warrants were extended for thirty (30) days past the date on which the beneficial ownership blocker is no longer applicable. An exercise under the Series D Warrants may not result in the holder beneficially owning more than 4.99% or 9.99%, as applicable, of all of the Common Stock outstanding at the time; provided, however, that a holder may waive the foregoing provision upon 61 days’ advance written notice to the Company. The exercise price of these warrants is subject to adjustment for stock splits, business combinations or similar events. | |||
In connection with the issuance of Series D Stock, the conversion feature of Series D Stock was considered beneficial, or “in the money”, at issuance due to a conversion rate that allows the investor to obtain the Common Stock at below market price. The Company recorded a deemed dividend on the beneficial conversion feature equal to the incremental fair value resulting from the reduction in the conversion rate of $1,975,211. This deemed dividend is included in the 2011 Consolidated Statement of Operations in arriving at the Net Loss Applicable to Common Shareholders. | |||
In accordance with (i) the Certificate of Designation, Rights and Preferences of the Series B Stock (the “Series B Certificate”) and (ii) a letter agreement dated January 19, 2010 between the Company and the sole holder of the Series B Stock (the “Series B Holder”), the Company was obligated to use 25% of the gross proceeds from the Series D Financing to redeem the Series B Stock. On February 4, 2011, the Company entered into a letter agreement (the “Letter”) with the Series B Holder pursuant to which the Series B Holder waived the redemption of shares of the Series B Stock triggered by the Series D Financing. | |||
On October 19, 2011, an investor converted 500,000 shares of Series D Stock into 50,000 shares of Common Stock. | |||
On December 19, 2013, an investor converted 2,006,000 shares of Series D Stock into 200,600 shares of Common Stock. | |||
Series E Convertible Preferred Stock | |||
The Company has authorized 1,748,613 shares of Series E Stock, all of which were issued and outstanding as of December 31, 2013. The Series E Stock was created on December 10, 2013 in connection with the private placement of common stock, preferred stock and warrants with certain Montaur-related entities (see Note 9 for description of this transaction). | |||
Key terms of the Series E Stock are as follows: | |||
· | Pursuant to the terms of the Certificate of Designation, Preference and Rights of Series E Preferred Stock (the “Series E Certificate”), each share of Series E Stock is initially convertible into one share of Common Stock, subject to adjustment for stock splits, combinations or similar events. | ||
· | Each holder who receives Series E Stock may convert its Series E Stock at any time following its issuance. | ||
· | In the event of any Liquidation Event (as defined in the Series E Certificate), the holders of Series E Stock will be entitled to receive (subject to the rights of any securities designated as senior to the Series E Stock) a per share liquidation preference equal to an amount calculated by taking the total amount available for distribution to holders of all the Company’s outstanding Common Stock before deduction of any preference payments for the Series E Stock, divided by the total of (x) all of the then outstanding shares of Common Stock, plus (y) all of the shares of Common Stock into which all of the outstanding shares of the Series E Stock can be converted, in each case prior to any distribution to the holders of Common Stock or any other securities designated as junior to the Series E Stock. | ||
· | The Series E Stock does not pay a dividend and is not redeemable. |
COMMON_STOCK
COMMON STOCK | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note 9. COMMON STOCK | ' |
The Company has authorized 150,000,000 shares of Common Stock, $0.01 par value per share, of which 11,776,578 and 4,437,346 shares were issued and outstanding as of December 31, 2013 and December 31, 2012, respectively. | |
November 2010 Financings | |
In November 2010, the Company initiated a private placement (the “November 2010 Financing”) of up to 120 units (each, a “Unit” and together, the “Units”) or partial Units at a price per Unit of $25,000. Each Unit consists of (i) 2,500 shares of Common Stock, (ii) Series 1 warrants to purchase 1,250 shares of the Company’s Common Stock with an exercise price of $15.00 per share (the “Series 1 Warrants”), and (iii) Series 2 warrants to purchase 1,250 shares of Common Stock with an exercise price of $25.00 per share (the “Series 2 Warrants”). As of December 31, 2010, the Company issued an aggregate of 172,000 shares of Common Stock and under commitments for an additional 11.4 Units was obligated to issue an additional 28,500 shares and an aggregate of 100,250 Series 1 Warrants and 100,250 Series 2 Warrants to the investors. | |
In 2011, the Company entered into a subscription agreement with certain strategic institutional and accredited investors in connection with the November 2010 Financing for a total of 35.66 Units. The Company received proceeds from these subscriptions in the amount of $891,500, which included proceeds of $25,000 in the form of extinguishment of a 2010 Short Term Promissory Note issued by the Company on September 24, 2010. Pursuant to these November 2010 Financing closings that occurred in 2011, the Company issued an aggregate of 44,575 Series 1 Warrants and 44,575 Series 2 Warrants to the investors. | |
December 2011 Financing | |
On December 5, 2011, the Company entered into purchase agreements with certain strategic investors relating to the issuance and sale of an aggregate of 239,895 shares of Common Stock, par value $0.01, and warrants to purchase an aggregate of 95,958 shares of Common Stock. The Common Stock and warrants to purchase Common Stock were sold in units, with each unit consisting of (i) one share of Common Stock and (ii) a warrant to purchase 0.4 of a share of Common Stock, at a public offering price of $22.50 per unit. The warrants became exercisable six months after the date of issuance at an exercise price of $30.00 per share, and will expire three years from the date of issuance. The Company issued 239,895 shares on December 7, 2011, raising $5,397,625. | |
December 2012 Financings | |
On December 19, 2012, the Company entered into Stock Purchase Agreements with accredited investors pursuant to which the Company issued and sold an aggregate of 40,000 shares of the Company’s Common Stock at a purchase price of $8.00 per share, for aggregate consideration of $320,000 in cash. | |
On December 20, 2012, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. with respect to the issuance and sale of an underwritten public offering by the Company of 320,000 shares of the Company’s Common Stock, at a price to the public of $9.50 per share with a 45-day option to purchase up to an additional 48,000 shares. The net proceeds to the Company, after deducting the underwriting discount and other offering expenses payable by the Company, from the sale of 368,000 shares (including 48,000 shares sold pursuant to the over-allotment option) in the offering were approximately $3,036,000. | |
January 2013 Financing | |
On January 31, 2013 and February 1, 2013, the Company entered into underwriting agreements (collectively, the “Underwriting Agreements”) with Aegis Capital Corp., as a representative of several underwriters, with respect to the issuance and sale in an underwritten public offering by the Company of an aggregate 1,567,855 shares of the Company’s Common Stock, at a price to the public of $7.50 per share (including 204,500 shares sold pursuant to the over-allotment option). The net proceeds to the Company, after deducting the underwriting discount and other offering expenses payable by the Company, from the sale of the shares in the offering were approximately $10,626,000. Subsequent to the offering, the Company used a portion of the net proceeds of the offering to pay off the promissory note issued to Montaur in connection with the Credit Facility (see Note 6). The note will mature on August 31, 2017. As of March 1, 2013, the entire balance under the note that was paid off was $3,113,366, which included $3,000,000 of principal and $113,366 of accrued and unpaid interest. | |
June 2013 Common Stock and Warrants Financing | |
On June 13, 2013, the Company entered into an underwriting agreement with Aegis Capital Corp., as a representative of several underwriters, with respect to the issuance and sale in an underwritten public offering by the Company of an aggregate of 4,628,750 shares of the Company’s Common Stock (including 603,750 shares sold pursuant to the over-allotment option), at a price to the public of $2.70 per share. The net proceeds to the Company, after deducting the underwriting discount and other offering expenses payable by the Company, from the sale of the shares in the offering were approximately $11,338,000. | |
December 2013 Common Stock, Preferred Stock and Warrant Financing | |
In December 2013, in connection with a licensing transaction, the Company entered into (i) a Securities Purchase Agreement with Platinum Partners Value Arbitrage Fund L.P. (“Platinum Value”) and Platinum Partners Liquid Opportunity Master Fund L.P. (“Platinum Liquid”, and together with Platinum Value, the “Platinum Partners”) (the “Platinum Securities Purchase Agreement”) and (ii) a Securities Purchase Agreement with Medical Technologies Innovation Asia, LTD. (“MTIA”) and Beijing Sino Tau Shang Pin Tech and Development Corp. (“MTIA Affiliate”, and together with MTIA, the “China Purchasers”) (the “MTIA Securities Purchase Agreement”, and together with the Platinum Securities Purchase Agreement, the “Securities Purchase Agreements”). | |
Pursuant to the Platinum Securities Purchase Agreement, the Platinum Partners purchased an aggregate of 1,818,182 of the Company’s capital stock. Of that total, Platinum Partners purchased 69,569 shares of the Company’s Common Stock at $2.75 per share, being a premium to the NASDAQ closing price of $2.71 per share on December 9, 2013. In addition, the Platinum Partners purchased a total of 1,748,613 shares of Series E Preferred Stock (“Preferred Stock”) at a purchase price of $2.75 per share, which, under certain conditions, are exchangeable into shares of the Company’s Common Stock on a one-for-one basis. The conversion of Preferred Stock into shares of Common Stock, however, is subject to a restriction, which prohibits the conversion of shares of Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by the Platinum Partners and their affiliates at such time, the number of shares of Common Stock which would result in Platinum Partners and their affiliates beneficially owning in excess of 19.99% of all of the Company’s Common Stock outstanding at such time. Under the terms of the Platinum Securities Purchase Agreement, the Platinum Partners also received 181,818 warrants, having a five-year term and an exercise price of $2.75 per warrant. The warrants are exercisable six months and one day following the issuance date thereof. Under the terms of the Platinum Securities Purchase Agreement, the Company has, at the request of the Platinum Partners, agreed to prepare a proxy statement and seek shareholder approval of the issuance of the Common Stock underlying the Preferred Stock and the warrants. The Company received gross proceeds of $5,000,000 from the sale of the securities to the Platinum Partners on December 10, 2013 and incurred issuance costs of $100,000. | |
In connection with the issuance of this Series E Preferred Stock, the conversion feature of Series E Stock was considered beneficial, or “in the money”, at issuance due to a conversion rate that allows the investor to obtain the Common Stock at below market price. The Company recorded a deemed dividend on the beneficial conversion feature equal to its relative fair value resulting from the offering of $371,140. This deemed dividend is included in the 2013 Consolidated Statement of Operations in arriving at the Net Loss Applicable to Common Shareholders. | |
Under the MTIA Securities Purchase Agreement, the China Purchasers agreed to purchase a total of 1,818,182 shares of the Company’s Common Stock also at $2.75 per share. The China Purchasers also will receive 181,818 warrants, having a five-year term and an exercise price of $2.75. The warrants to be issued to the China Purchasers are also exercisable six months and one day following the issue date. | |
As of December 31, 2013, the Company had not received the full proceeds of the sale of the securities from the China Purchasers due to administrative issues that the China Purchasers encountered in transferring funds to the Company and the parties have extended the due date of receipt of all such proceeds past December 12, 2013. If the Company does not receive the proceeds by the extended due date, then the Company has the right to terminate the MTIA Securities Purchase Agreement and the related license, development and commercialization agreement, unless such date is extended again by mutual written consent. As of December 31, 2013, the Company had correspondingly not issued the shares or recorded the MTIA transaction due to the contingent nature of this transaction. As of March 26, 2014, the Company has received $1,904,793 of MTIA’s $5,000,000 in proceeds in accordance with the MTIA Securities Purchase Agreement. | |
The Company intends to use the proceeds of the sale of these securities for working capital and other general corporate purposes. | |
Further, pursuant to the Platinum Securities Purchase Agreement and subject to certain conditions, the Company agreed to nominate and use its reasonable best efforts to cause to be elected and cause to remain as a director on the Company’s board of directors (the “Board”) until the Company’s 2014 annual meeting of stockholders, one individual designated by the Platinum Partners (“Platinum Partners Designee”). Additionally, subject to certain conditions, the Company agreed to nominate, and solicit for election by the stockholders, the Platinum Partners Designee at the Company’s 2014 annual meeting of stockholders. Under the terms of the MTIA Securities Purchase Agreement, as amended, upon the Company’s receipt of all of the proceeds from the China Purchasers, the Company will allow one individual designated by the China Purchasers to attend meetings of the Board as an observer until the date of the 2015 annual meeting of stockholders. | |
So long as the Platinum Partners hold at least ten percent (10%) of the outstanding Common Stock, they have a right, subject to certain conditions, to purchase debt or equity securities of any kind that the Company may determine to issue in the future. The China Purchasers have the same right. This subscription right terminates upon a consolidation, merger, restructuring, reorganization, recapitalization or other form of acquisition of or by the Company that results in a change of control. | |
The Platinum Partners and the China Purchasers are also entitled to certain piggy-back registration rights. | |
Stock Issued in Exchange for Services | |
During the years ended December 31, 2013, 2012 and 2011, the Company issued 9,122, 9,533 and 13,800 shares of Common Stock, respectively, with a fair value of $96,375, $153,464 and $448,940, respectively, to vendors in exchange for their services. The Company recorded expense related to these issuances, which represents the fair value of the related stock at the time of issuance, to Selling, General and Administrative expense. |
EQUITY_COMPENSATION_PLAN
EQUITY COMPENSATION PLAN | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Compensation and Retirement Disclosure [Abstract] | ' | ||||||||||||
Note 10. EQUITY COMPENSATION PLAN | ' | ||||||||||||
In March 2003, the Company’s shareholders approved its 2003 Stock Option and Incentive Plan (the “2003 Plan”). Pursuant to the 2003 Plan, the Company’s Board of Directors (or its committees and/or executive officers delegated by the Board of Directors) may grant incentive and nonqualified stock options, restricted stock, and other stock-based awards to the Company’s employees, officers, directors, consultants and advisors. As of December 31, 2013, there were 12,500 restricted shares of Common Stock issued and options to purchase an aggregate of 44,000 shares of Common Stock outstanding under the 2003 Plan and no shares are available for future grants due to the 2003 Plan’s expiration. | |||||||||||||
In May 2008, the Company’s shareholders approved the 2008 Equity Compensation Plan (the “2008 Plan”). The 2008 Plan provides for grants of incentive stock options to employees and nonqualified stock options and restricted stock to employees, consultants and non-employee directors of the Company. In May 2013, the Company’s shareholders approved an amendment to the 2008 Plan to fix the maximum number of shares available under the 2008 Plan at 10,000,000 shares following shareholder approval of a 1-for-10 reverse stock split effective June 7, 2013. As of December 31, 2013, there were restricted shares of Common Stock issued and options to purchase an aggregate of 1,489,102 shares of Common Stock outstanding under the 2008 Plan and 8,450,142 shares available for future grants. | |||||||||||||
The tables below show the remaining shares available for future grants for each plan and the outstanding shares. | |||||||||||||
Equity Compensation Plans | |||||||||||||
2003 Plan | 2008 Plan | ||||||||||||
Shares Available For Issuance | |||||||||||||
Total reserved for stock options and restricted stock | 160,000 | 10,000,000 | |||||||||||
Net restricted stock issued net of cancellations | (12,500 | ) | (192,843 | ) | |||||||||
Stock options granted | (154,449 | ) | (1,512,933 | ) | |||||||||
Add back options cancelled before exercise | 74,849 | 155,918 | |||||||||||
Less shares no longer available due to Plan expiration | (67,900 | ) | - | ||||||||||
Remaining shares available for future grants at December 31, 2013 | - | 8,450,142 | |||||||||||
Not Pursuant to a Plan | |||||||||||||
Stock options granted | 154,449 | 1,512,933 | 310,000 | ||||||||||
Less:Stock options cancelled | (74,849 | ) | (155,819 | ) | (138,333 | ) | |||||||
Stock options exercised | (35,600 | ) | (13,000 | ) | (66,667 | ) | |||||||
Net shares outstanding before restricted stock | 44,000 | 1,344,015 | 105,000 | ||||||||||
Net restricted stock issued net of cancellations | 12,500 | 192,843 | 6,485 | ||||||||||
Outstanding shares at December 31, 2013 | 56,500 | 1,536,858 | 111,485 |
STOCK_OPTIONS
STOCK OPTIONS | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Notes to Financial Statements | ' | |||||||||||||
Note 11. STOCK OPTIONS | ' | |||||||||||||
For options issued and outstanding during the years ended December 31, 2013, 2012 and 2011, the Company recorded additional paid-in capital and non-cash compensation expense of $714,547, $938,537 and $836,866, respectively, each net of estimated forfeitures. | ||||||||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Common Stock using historical periods consistent with the expected term of the options. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the consolidated financial statements, to estimate option exercise and employee termination within the valuation model. The expected term of options granted under the Company’s stock plans, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period (generally 24 to 42 months) as permitted under SEC Staff Accounting Bulletin Nos. 107 and 110. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. Restricted stock grants are valued based on the closing market price for the Company’s Common Stock on the grant date. | ||||||||||||||
The assumptions used principally for options granted to employees in the years ended December 31, 2013 and 2012 were as follows: | ||||||||||||||
2013 | 2012 | |||||||||||||
Risk-free interest rate | 0.10% - 2.71 | % | 0.92% - 2.05 | % | ||||||||||
Expected dividend yield | — | — | ||||||||||||
Expected term | 1-10 years | 6.5 years | ||||||||||||
Forfeiture rate (excluding fully vested options) | 15 | % | 15 | % | ||||||||||
Expected volatility | 129% - 141 | % | 131% - 142 | % | ||||||||||
A summary of option activity under the Company’s stock plans and options granted to officers of the Company outside any plan as of December 31, 2013 and changes during the year then ended is presented below: | ||||||||||||||
Weighted- | ||||||||||||||
Weighted- | Average | |||||||||||||
Average | Remaining | Aggregate | ||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||
Stock Options | Shares | Price | Term | Value | ||||||||||
Outstanding at January 1, 2013 | 343,334 | $ | 14.75 | |||||||||||
Granted | 1,264,432 | 3.05 | ||||||||||||
Exercised | — | — | ||||||||||||
Forfeited or expired | (152,334 | ) | 11.72 | |||||||||||
Outstanding at December 31, 2013 | 1,455,432 | $ | 4.9 | 3.99 years | $ | 81,085 | ||||||||
Exercisable at December 31, 2013 | 230,842 | $ | 11.37 | 3.99 years | $ | 81,085 | ||||||||
The weighted-average grant-date fair value of options granted during the year ended December 31, 2013 was $3.05 per share. As of December 31, 2013, there was approximately $891,000 of total unrecognized compensation expense related to non-vested share-based option arrangements. With the exception of the unrecognized share-based compensation related to certain restricted stock grants to officers and employees that contain performance conditions related to United States Food and Drug Administration (FDA) approval for Symphony or the sale of the Company, unrecognized compensation is expected to be recognized over the next 12 months. |
RESTRICTED_STOCK
RESTRICTED STOCK | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 12. RESTRICTED STOCK | ' | ||||||||
Share-Based Compensation – Restricted Stock | |||||||||
For restricted stock issued and outstanding during the years ended December 31, 2013, 2012 and 2011, the Company incurred non-cash compensation expense of $529,795, $574,024 and $323,463, respectively, each net of estimated forfeitures. | |||||||||
As of December 31, 2013, the Company had outstanding restricted stock grants of 201,655 shares with a weighted-average grant-date value of $10.66. A summary of the status of the Company’s non-vested restricted stock grants as of December 31, 2013, and changes during the year ended December 31, 2013 is presented below: | |||||||||
Weighted- | |||||||||
Average | |||||||||
Restricted Stock | Shares | Grant-Date | |||||||
Fair Value | |||||||||
Non-vested shares at January 1, 2013 | 316,044 | $ | 17.84 | ||||||
Granted | 132,710 | $ | 4.44 | ||||||
Vested | (47,580 | ) | $ | 16.41 | |||||
Forfeited | (199,519 | ) | $ | 16.34 | |||||
Non-vested shares at December 31, 2013 | 201,655 | $ | 10.66 | ||||||
Of the 201,655 shares of non-vested restricted stock, the vesting criteria are as follows: | |||||||||
· | 54,510 shares of restricted stock vest upon the FDA approval of Symphony or the sale of the Company; and | ||||||||
· | 147,145 shares of restricted stock vest over 4 years, at each of the anniversary dates of the grants. | ||||||||
As of December 31, 2013, there was approximately $902,000 of total unrecognized compensation expense related to non-vested share-based restricted stock arrangements granted under the Company’s equity compensation plans that vest over time in the foreseeable future. As of December 31, 2013, the Company cannot estimate the timing of completion of the performance vesting requirements required by certain of these restricted stock grant arrangements. Compensation expense related to these restricted share grants will be recognized when the Company concludes that achievement of the performance vesting conditions is probable. |
WARRANTS
WARRANTS | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Notes to Financial Statements | ' | |||||||||
Note 13. WARRANTS | ' | |||||||||
The Company uses valuation methods and assumptions that consider among other factors the fair value of the underlying stock, risk-free interest rate, volatility, expected life and dividend rates in estimating fair value for the warrants considered to be derivative instruments. The following assumptions were utilized by the Company: | ||||||||||
2013 | 2012 | |||||||||
Risk-free interest rate | 0.65% - 1.85 | % | 0.70% - 2.23 | % | ||||||
Expected dividend yield | — | — | ||||||||
Expected term (contractual term) | 0.33 - 5 years | 0.06 - 5 years | ||||||||
Forfeiture rate | — | — | ||||||||
Expected volatility | 122% - 123 | % | 123% - 144 | % | ||||||
Expected volatilities are based on historical volatility of the Common Stock using historical periods consistent with the expected term of the warrant. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the warrant. | ||||||||||
In the year ended December 31, 2012, the Company issued warrants with a fair value of approximately $8,655,000. Included in this warrant fair value are warrants with a fair value of approximately $4,840,000 recorded as a debit to deferred financing costs and credit to additional paid-in capital for stock issuance costs related to the Montaur Credit Facility. The warrants issued in the years ended December 31, 2012 generally have a term of 2 to 5 years, a non-redeemable feature, and a cashless exercise provision. Certain of these warrants have a standard weighted average anti-dilution protection and piggy back registration rights. | ||||||||||
In the year ended December 31, 2013, the Company issued warrants with a relative fair value of $371,140 in connection with a private placement of the Company’s Common Stock and Series E Preferred Stock with Montaur-related entities (See Note 9). | ||||||||||
At December 31, 2013, the Company had the following outstanding warrants: | ||||||||||
Number of | Exercise | Date of | ||||||||
Shares | Price | Expiration | ||||||||
Exercisable | ||||||||||
Outstanding warrants accounted for as derivative warrant liability: | ||||||||||
Granted to debt holder | 400,000 | $ | 20 | 8/31/17 | ||||||
Granted to debt holder | 100,000 | 21.3 | 9/20/17 | |||||||
Granted to debt holder | 50,000 | 22.7 | 10/17/17 | |||||||
Granted to debt holder | 150,000 | 21.1 | 11/6/17 | |||||||
Total outstanding warrants accounted for as derivative warrant liability | 700,000 | |||||||||
Weighted average exercise price | $ | 20.61 | ||||||||
Weighted average time to expiration in years | 3.72 years | |||||||||
Outstanding warrants accounted for as equity: | ||||||||||
Granted to investors in private placement of preferred stock | 39,000 | $ | 7.5 | 2/28/14 | ||||||
Granted to vendor | 6,000 | 6 | 3/15/14 | |||||||
Granted to investors in private placement | 40,000 | 15.9 | 6/30/14 | |||||||
Granted to investors in private placement | 76,800 | 20 | 11/13/14 | |||||||
Granted to placement agent in private placement | 25,695 | 15 | 11/13/14 | |||||||
Granted to investors in private placement | 6,300 | 20 | 12/3/14 | |||||||
Granted to investors in private placement | 34,146 | 22.5 | 2/9/15 | |||||||
Granted to placement agents in private placement | 2,853 | 22.5 | 2/9/15 | |||||||
Granted to investor in private placement | 638 | 22.5 | 3/18/15 | |||||||
Granted to investors in private placement | 95,960 | 30 | 12/7/14 | |||||||
Granted to investors in private placement of common and preferred stock | 181,818 | 2.75 | 12/10/18 | |||||||
Total outstanding warrants accounted for as equity | 509,211 | |||||||||
Weighted average exercise price | $ | 14.21 | ||||||||
Weighted average time to expiration in years | 2.26 years | |||||||||
Totals for all warrants outstanding: | ||||||||||
Total | 1,209,211 | |||||||||
Weighted average exercise price | $ | 17.92 | ||||||||
Weighted average time to expiration in years | 3.11 years | |||||||||
A summary of warrant activity in the year ended December 31, 2013 is as follows: | ||||||||||
Weighted- | ||||||||||
Average | ||||||||||
Exercise | ||||||||||
Warrants | Shares | Price | ||||||||
Outstanding at January 1, 2013 | 1,254,004 | $ | 20.08 | |||||||
Granted | 190,993 | $ | 3.22 | |||||||
Exercised | — | $ | — | |||||||
Forfeited or expired | (235,786 | ) | $ | 17.36 | ||||||
Outstanding at December 31, 2013 | 1,209,211 | $ | 17.92 | |||||||
Exercise of Common Stock Warrants | ||||||||||
During 2013, there were no warrants exercised. During 2012, warrants to purchase 16,545 shares of Common Stock were exercised, resulting in cash proceeds to the Company of approximately $212,000. During 2011, warrants to purchase 141,947 shares of Common Stock were exercised through cashless exercises provisions, resulting in the issuance of 74,424 shares of Common Stock. During 2011, warrants to purchase 661,530 shares of Common Stock were exercised, resulting in cash proceeds to the Company of approximately $6,628,000. No such warrant exercises in exchange for cash occurred in 2010. Also, during 2011, the Company encouraged certain holders of its warrants to exercise their warrants by reducing the exercise prices provided they elected to simultaneously exercise for cash proceeds. Of the 661,530 warrant exercises, warrants to purchase an aggregate of 454,893 shares of Common Stock were exercised under this arrangement during the year ended December 31, 2011 and cash proceeds of $4,471,631 from these transactions were received. As a result of the reductions in exercise price, the Company recorded $4,559,761 in deemed dividends for the year ended December 31, 2011 in the Consolidated Statement of Operations. |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Income Taxes | ' | ||||||||||||
Note 14. INCOME TAXES | ' | ||||||||||||
No provision or benefit for federal or state income taxes has been recorded because the Company has incurred a net loss for all periods presented and has provided a valuation allowance against its deferred tax assets. | |||||||||||||
At December 31, 2013, the Company had gross federal net operating loss carryforwards of approximately $89,600,000, which begin expiring in 2018. The Company had gross state net operating loss carryforwards of approximately $45,893,000, which begin expiring in 2014. The Company also had federal and state research and development tax credit carryforwards of approximately $2,488,000 which will begin to expire in 2018. The United States Tax Reform Act of 1986 contains provisions that may limit the Company’s net operating loss carryforwards available to be used in any given year in the event of significant changes in the ownership interests of significant stockholders, as defined. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period prior to the change, and the federal published interest rate. | |||||||||||||
Significant components of the Company’s net deferred tax asset are as follows: | |||||||||||||
December 31, | |||||||||||||
2013 | 2012 | ||||||||||||
Deferred Tax Assets/(Liabilities): | |||||||||||||
Net operating loss carryforwards | $ | 32,487,000 | $ | 24,428,000 | |||||||||
Research credit carryforwards | 2,488,000 | 1,486,000 | |||||||||||
Acquired intangible assets, net | (3,697,000 | ) | (3,724,000 | ) | |||||||||
Restricted stock and warrants | 374,000 | 222,000 | |||||||||||
Other temporary differences | 207,000 | 219,000 | |||||||||||
Total deferred tax assets, net | 31,859,000 | 22,631,000 | |||||||||||
Valuation allowance | (31,859,000 | ) | (22,631,000 | ) | |||||||||
Net deferred tax asset | $ | — | $ | — | |||||||||
The Company has maintained a full valuation allowance against its deferred tax items in both 2013 and 2012. A valuation allowance is required to be recorded when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Since the Company cannot be assured of realizing the net deferred tax asset, a full valuation allowance has been provided. In the years ended December 31, 2013 and 2012, the valuation allowance increased by $9,228,000 and $4,999,000, respectively. | |||||||||||||
The Company has no uncertain tax positions as of December 31, 2013 and 2012 that would affect its effective tax rate. The Company does not anticipate a significant change in the amount of unrecognized tax benefits over the next twelve months. Because the Company is in a loss carryforward position, the Company is generally subject to US federal and state income tax examinations by tax authorities for all years for which a loss carryforward is available. If and when applicable, the Company will recognize interest and penalties as part of income tax expense. | |||||||||||||
Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate primarily due to the following: | |||||||||||||
Years Ended December 31, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Income taxes benefit (expense) at statutory rate | 34 | % | 34 | % | 35 | % | |||||||
State income tax, net of federal benefit | (4.4 | )% | (4.7 | )% | (2.2 | )% | |||||||
Permanent Differences: | |||||||||||||
Gain/loss or revaluation of derivative warrant liability | 7.8 | % | 10.2 | % | (6.2 | )% | |||||||
Stock-based compensation expense | (1.3 | )% | (2.6 | )% | (2.9 | )% | |||||||
Stock issues for services | — | % | — | % | (1.6 | )% | |||||||
Other | (1.7 | )% | (2.2 | )% | — | % | |||||||
R&D credits | (4.7 | )% | — | % | (0.6 | )% | |||||||
Change in valuation allowance | (29.7 | )% | (34.7 | )% | (21.5 | )% | |||||||
— | % | — | % | — | % |
LITIGATION
LITIGATION | 12 Months Ended |
Dec. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
NOTE 15. LITIGATION | ' |
In August 2013, a stockholder derivative action was filed in the Court of Common Pleas of Philadelphia County (the “Court”) against the Company, and certain of its directors and officers. The complaint, as amended on September 18, 2013, seeks an unspecified amount of damages and principally alleges breaches of fiduciary duty related to the conduct of the Company’s directors and officers in a series of capital raising transactions in 2011 to 2013. Based on a review and analysis of the complaint, the Company believes that this lawsuit is without merit and intends to continue to defend it vigorously. In March 2014, this complaint was dismissed without prejudice by the Court. | |
In February 2014, Patrick T. Mooney, M.D., our former President and Chief Executive Officer, and his wife, Elizabeth Mooney, filed a complaint against us and certain of our directors and officers in the Court of Common Pleas in Philadelphia County. The complaint, which alleges (i) that Dr. Mooney’s termination was in breach of his employment agreement and that he is entitled to certain severance benefits, (ii) that certain legally required disclosures by the Company and its general counsel defamed Dr. Mooney, and (iii) that Dr. Mooney’s wife is entitled to damages under a theory of loss of consortium, seeks in excess of $20 million in damages. We have filed a response to the complaint seeking dismissal of four of the six counts, denying the allegations in the two counts we have not sought to dismiss, and filing counterclaims against Dr. Mooney. We believe we have strong defenses to the claims asserted and we intend to defend them vigorously. |
LICENSING_AND_OTHER_REVENUE
LICENSING AND OTHER REVENUE | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note 16. LICENSING AND OTHER REVENUE | ' |
Ferndale License of Prelude — In May 2009, the Company entered into a License Agreement with Ferndale Pharma Group, Inc. (“Ferndale”) pursuant to which the Company granted Ferndale a license in North America and the United Kingdom to develop, assemble, use, market, sell and export Prelude for skin preparation prior to the application of a topical analgesic or anesthetic cream for local dermal anesthesia or analgesia prior to a needle insertion or IV procedure (the “Ferndale License”). The Ferndale License has a minimum term of 10 years from the date of the first commercial sale of Prelude product components in North America or the United Kingdom. | |
The Company received a licensing fee of $750,000 upon execution of the Ferndale License. In addition, the Company will receive a payment of $750,000 within ninety (90) days after receipt of the FDA’s 510(k) medical device clearance of Prelude. Ferndale will pay the Company an escalating royalty on net sales of Prelude product components. The Company will also receive milestone payments based on Ferndale’s achievement of certain net sales targets of the product components, as well as guaranteed minimum annual royalties. The Company recognizes the upfront, nonrefundable payments as revenue on a straight-line basis over the contractual or estimated performance period. Accordingly, the Company determined that approximately $241,000 and $105,000 of the non-refundable license revenue was recognizable in the years ended December 31, 2011 and 2010, respectively. As of December 31, 2011, the Company had recognized the entire $750,000 as license revenue. | |
Other Revenue — The Company has retained contract engineering services in connection with product development pursuant to the Ferndale License and the Company is reimbursed by Ferndale for the cost of those product development engineering services. Other Revenue of approximately $145,000 relates to product development costs incurred during the year ended December 31, 2011 and reimbursed by Ferndale. The related expenses billed to the Company are included in Research and Development expenses on the Statements of Operations. There was no markup on those expenses. | |
Handok License of Symphony — In June 2009, the Company entered into a License Agreement with Handok Pharmaceuticals Co., Ltd. (“Handok”) pursuant to which the Company granted Handok a license to develop, use, market, sell and import Symphony for continuous glucose monitoring for use by medical facilities and/or individual consumers in South Korea (the “Handok License”). The Handok License has a minimum term of 10 years from the date of the first commercial sale of Symphony in South Korea. | |
The Company received a licensing fee of approximately $500,000 upon execution of the Handok License. In addition, the Company will receive milestone payments upon receipt of the FDA’s clearance of Symphony and upon the first commercial sale of Symphony in South Korea. Handok will also pay the Company a royalty on net sales of Symphony. The Company also will receive milestone payments based on Handok’s achievement of certain other targets. | |
The Company recognizes the upfront, nonrefundable payments as revenue on a straight-line basis over the contractual or estimated performance period. Accordingly, the Company determined that approximately $28,000, $5,000 and $61,000 of the non-refundable license revenue was recognizable in the years ended December 31, 2013, 2012 and 2011, respectively. Approximately $76,000 is recognizable over the next 12 months and is shown as current deferred revenue. The remaining $76,000 is recognizable as revenue beyond the 12 month period and is classified as non-current. | |
MTIA License, Development and Commercialization Agreement — In December 2013, in connection with a capital raising transaction, the Company entered into a license, development and commercialization agreement with Medical Technologies Innovation Asia, Ltd. (“MTIA”). In this agreement the Company granted MTIA rights, under certain intellectual property and know-how that relate to Symphony, to (i) exclusively research, develop, manufacture, and use Symphony in connection with the development activities needed for regulatory approval in the People’s Republic of China, Hong Kong, Macau and Taiwan (the “Territory”), and (ii) exclusively make, have made, use, sell, have sold, offer for sale and import Symphony in the Territory once regulatory approval has been received. Additionally, subject to the terms and conditions set forth in the agreement, MTIA received the right to grant certain distribution rights to its affiliates or third parties. MTIA is responsible for conducting all required clinical trials and all development costs relating to regulatory approval of Symphony in the Territory, as well as manufacturing and marketing costs relating to commercialization of Symphony in the Territory. MTIA is also responsible for obtaining and maintaining all regulatory approvals from applicable authorities in the Territory. | |
Upon the earlier of regulatory approval of Symphony by the China Food and Drug Administration or Echo’s termination of the agreement, Echo is required, subject to certain terms and conditions, to reimburse MTIA up to $1,500,000 for development costs incurred by MTIA. The reimbursement will be in the form of Common Stock, valued at $2.71 per share, which was the NASDAQ closing price on December 9, 2013, the date prior to the date the parties entered into the agreement. Additionally, the Company and MTIA will share future net sales of Symphony generated within the Territory. The Company has the option, at its sole discretion, to enter into negotiations with MTIA for supply of Symphony in territories that are not licensed to MTIA under the agreement. The agreement has a term of ten years, subject to earlier termination rights including, but not limited to, for breach of the agreement, change of control events, and certain performance obligations. | |
Later in December 2013 and January 2014, this agreement with MTIA was amended as a result of difficulties in transferring funds from MTIA to Echo under the capital raising transaction. The amendment provide that Echo is not required to commence its obligations under the license agreement, including the transfer of any technology or other documents, products or information to MTIA, until Echo has received the full proceeds from the capital raising transaction. As of March 26, 2014, the Company has received $1,904,793 of MTIA’s $5,000,000 in proceeds in accordance with the MTIA Securities Purchase Agreement. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2013 | |
Subsequent Events | ' |
Note 17. SUBSEQUENT EVENTS | ' |
Management has evaluated events subsequent to December 31, 2013. Other than as discussed in Notes 1, 9, 15 and 16, there are no subsequent events that require adjustment to or disclosure in the Financial Statements. |
ORGANIZATION_AND_BASIS_OF_PRES1
ORGANIZATION AND BASIS OF PRESENTATION (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Organization And Basis Of Presentation Policies | ' |
ORGANIZATION AND BASIS OF PRESENTATION | ' |
Echo Therapeutics, Inc. (the “Company”) is a medical device company with expertise in advanced skin permeation technology. The Company is developing its Symphony® CGM System (“Symphony”) as a non-invasive, wireless continuous glucose monitoring (“CGM”) system for use in hospital critical care units. The Symphony® SkinPrep System (“SkinPrep”), a component of the Symphony CGM System, allows for enhanced skin permeation that enables extraction of analytes such as glucose. | |
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Sontra Medical, Inc., a Delaware corporation (and all significant intercompany balances have been eliminated by consolidation) and have been prepared on a basis assuming that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Certain amounts in prior periods have been reclassified to conform to current presentation. | |
On June 7, 2013, the Company effected a 1-for-10 reverse stock split of its common stock. All share and per share information has been retroactively restated to reflect this reverse stock split. | |
LIQUIDITY AND MANAGEMENT'S PLAN | ' |
The accompanying financial statements have been prepared on a basis that assumes that the Company will continue as a going concern and that contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of December 31, 2013, the Company had cash of approximately $8,055,000, working capital of approximately $5,731,000, and an accumulated deficit of approximately $112,969,000. The Company continues to incur recurring losses from operations. The Company will need to collect proceeds under its current financing arrangement and secure additional capital to fund its product development, research, manufacturing and clinical programs in accordance with its current planned operations. The Company has funded its operations in the past primarily through debt and equity issuances. Management intends to utilize its current financing arrangements and will continue to pursue additional financing to fund its operations. Management believes that it will be successful in collecting on their current financing arrangement and raising additional capital. No assurances can be given that additional capital will be available on terms acceptable to the Company (see MTIA Securities Purchase Agreement in Note 9). The accompanying financial statements do not include any adjustments that might result from the outcome of the uncertainty. | |
Subsequent to December 31, 2013, the Company received net cash proceeds from a Common Stock financing with MTIA of $1,904,793 as part of their total $5,000,000 investment (see Note 9). | |
Management believes that the cash received from this Common Stock financing coupled with the cash on hand at December 31, 2013 will be sufficient to fund the cash requirements under the 2014 budget and fund operations through December 31, 2014. If all cash proceeds from MTIA are not received, management believes certain expenditures can be deferred until additional financing is obtained. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Organization And Basis Of Presentation Policies | ' | ||
Use of Estimates | ' | ||
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. | |||
Cash and Cash Equivalents | ' | ||
The Company considers all highly liquid investments with maturities of ninety days or less to be cash equivalents. Cash equivalents consisted of money market funds as of December 31, 2013 and 2012. The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. Restricted cash consists of a $250,000 letter of credit issued in favor of one of the Company’s key product development vendors as of December 31, 2013 and 2012 and a $52,488 and $157,463 letters of credit in favor of a landlord as of December 31, 2013 and 2012, respectively. Non-current restricted cash as of December 31, 2013 and 2012 represents a security deposit on the Company’s leased offices. | |||
Intangible Assets and Other Long-Lived Assets | ' | ||
The Company records intangible assets at the acquisition date fair value. In connection with the acquisition of Durham Pharmaceuticals Ltd., a North Carolina corporation doing business as Echo Therapeutics, Inc. (the “ETI Acquisition”), intangible assets related to contractual arrangements were amortized over the estimated useful life of three (3) years and ended in 2010. Intangible assets related to technology are expected to be amortized on a straight-line basis over the period ending in 2019 and will commence upon revenue generation. | |||
The Company reviews intangible assets annually to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life of any intangible asset. Conditions that would indicate impairment and trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, or an adverse action or assessment by a regulator. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. | |||
For other long-lived assets, the Company evaluates quarterly whether events or circumstances have occurred that indicate that the carrying value of these assets may be impaired. | |||
The Company generally calculates fair value as the present value of estimated future cash flows it expects to generate from the asset using a risk-adjusted discount rate. If the estimate of an intangible asset’s remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. | |||
The Company performs a regular review of the underlying assumptions, circumstances, time projections and revenue and expense estimates to decide if there is a possible impairment. In reviewing the long-lived assets relating to the ETI Acquisition as of December 31, 2013, the Company concluded that there was no impairment of the carrying value of such long-lived assets. No impairment losses were recorded for the years ended December 31, 2013, 2012 and 2011. | |||
Depreciation and Amortization | ' | ||
The Company provides for depreciation and amortization by charges to operations for the cost of assets using the straight-line method based on the estimated useful lives of the related assets, as follows: | |||
Asset Classification | Estimated Useful Life | ||
Computer equipment | 3 years | ||
Office and laboratory equipment | 3-5 years | ||
Furniture and fixtures | 7 years | ||
Manufacturing equipment | 5 years | ||
Leasehold improvements | Life of lease | ||
Share-Based Payments | ' | ||
The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees and directors as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. The Company’s policy is to grant employee and director stock options with an exercise price equal to or greater than the fair value of the Common Stock at the date of grant. | |||
The Company recognizes compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. | |||
Fair Values of Assets and Liabilities | ' | ||
The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. | |||
Level 1: | Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. | ||
Level 2: | Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. | ||
Level 3: | Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. | ||
The Company's financial liabilities measured at fair value on December 31, 2013 and 2012 consists solely of a derivative warrant liability which is classified as Level 3 in fair value hierarchy (see Note 7). The Company uses a valuation method, the Black-Scholes option pricing model, and the requisite assumptions in estimating the fair value for the warrants considered to be derivative instruments. These assumptions include the fair value of the underlying stock, risk-free interest rates, volatility, expected life and dividend rates. The Company has no financial assets measured at fair value. | |||
The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the years ended December 31, 2013, 2012 and 2011. | |||
Derivative Instruments | ' | ||
The Company generally does not use derivative instruments to hedge exposures to cash-flow or market risks; however, certain warrants to purchase Common Stock that do not meet the requirements for classification as equity are classified as liabilities. In such instances, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net-cash settlement. Such financial instruments are initially recorded at fair value with subsequent changes in fair value charged (credited) to operations in each reporting period. If these instruments subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity. | |||
Concentration of Credit Risk | ' | ||
The Company has no significant off-balance-sheet risk. Financial instruments, which subject the Company to credit risk, principally consist of cash and cash equivalents. The Company mitigates its risk by maintaining the majority of its cash and equivalents with high-quality financial institutions. | |||
Financial Instruments | ' | ||
The estimated fair value of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, accounts payable and capital lease obligation, approximates their carrying value due to the short-term nature of these instruments and their market terms. | |||
Net Loss per Common Share | ' | ||
Basic and diluted net loss per share of Common Stock has been computed by dividing the net loss applicable to common stockholders in each period by the weighted average number of shares of Common Stock outstanding during such period. For the periods presented, options, warrants and convertible securities were anti-dilutive and therefore excluded from diluted loss per share calculations. | |||
Segment Information | ' | ||
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as principally one operating segment, which is the development of transdermal skin permeation and diagnostic medical devices and specialty pharmaceutical drugs. As of December 31, 2013 and 2012, all of the Company’s assets were located in the United States. | |||
Research and Development Expenses | ' | ||
The Company charges research and development expenses to operations as incurred. Research and development expenses primarily consist of salaries and related expenses for personnel and outside contractor and consulting services. Other research and development expenses include the costs of materials and supplies used in research and development, prototype manufacturing, clinical studies, related information technology and an allocation of facilities costs. | |||
Income Taxes | ' | ||
The Company is primarily subject to U.S. federal, Massachusetts, Pennsylvania and New Jersey state income tax. Tax years subsequent to 2010 remain open to examination by U.S. federal and state tax authorities. | |||
For federal and state income taxes, deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and the tax basis of assets and liabilities. Deferred income taxes are based upon prescribed rates and enacted laws applicable to periods in which differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, since the Company cannot be assured of realizing the deferred tax asset, a full valuation allowance has been provided. | |||
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. There were no uncertain tax position liabilities recorded at December 31, 2013 and 2012. | |||
The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2013 and 2012, the Company had no accruals for interest or penalties related to income tax matters. | |||
Licensing and Other Revenue Recognition | ' | ||
To date, the Company has generated revenue primarily from licensing agreements, including upfront, nonrefundable license fees, with collaborators and licensees. The Company recognizes revenue when the following criteria have been met: | |||
· | persuasive evidence of an arrangement exists; | ||
· | delivery has occurred and risk of loss has passed; | ||
· | the price to the buyer is fixed or determinable; and | ||
· | collectability is reasonably assured. | ||
From time to time, the Company receives upfront, nonrefundable payments for the licensing of its intellectual property upon the signing of a license agreement. The Company believes that these payments generally are not separable from the payments it receives for providing research and development services because the license does not have stand-alone value from the research and development services it provides under its agreements. Accordingly, the Company accounts for these elements as one unit of accounting and recognizes upfront, nonrefundable payments as revenue on a straight-line basis over its contractual or estimated performance period. Revenue from the reimbursement of research and development efforts is recognized as the services are performed based on proportional performance adjusted from time to time for any delays or acceleration in the development of the product and is included in Other Revenue. The Company determines the basis of the estimated performance period based on the contractual requirements of its collaboration agreements. At each reporting period, the Company evaluates whether events warrant a change in the estimated performance period. | |||
Other Revenue includes amounts earned and billed under the license and collaboration agreements for reimbursement of research and development costs for contract engineering services. For the services rendered, principally third-party contract engineering services, the revenue recognized approximates the costs associated with the services. | |||
Recently Issued Accounting Pronouncements | ' | ||
In July 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists to clarify the balance sheet presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. It was issued to resolve the diversity in practice that had developed in the absence of any on-point U.S. GAAP guidance. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company is currently assessing its adoption plans. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | |
Dec. 31, 2013 | ||
Summary Of Significant Accounting Policies Tables | ' | |
Depreciation and Amortization | ' | |
The Company provides for depreciation and amortization by charges to operations for the cost of assets using the straight-line method based on the estimated useful lives of the related assets, as follows: | ||
Asset Classification | Estimated Useful Life | |
Computer equipment | 3 years | |
Office and laboratory equipment | 3-5 years | |
Furniture and fixtures | 7 years | |
Manufacturing equipment | 5 years | |
Leasehold improvements | Life of lease | |
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 12 Months Ended | |||||||||||||||||
Dec. 31, 2013 | ||||||||||||||||||
Intangible Assets Tables | ' | |||||||||||||||||
Intangible assets | ' | |||||||||||||||||
As of December 31, 2013 and 2012, intangible assets related to the ETI Acquisition are summarized as follows: | ||||||||||||||||||
Estimated | Accumulated | 2013 | 2012 | |||||||||||||||
Life | Cost | Amortization | Net | Net | ||||||||||||||
Contract related intangible asset: | ||||||||||||||||||
Cato Research discounted contract | 3 years | $ | 355,000 | $ | 355,000 | $ | — | $ | — | |||||||||
Technology related intangible assets: | ||||||||||||||||||
Patents for the AzoneTS-based product candidates and formulation | 4 years | 1,305,000 | — | 1,305,000 | 1,305,000 | |||||||||||||
Drug Master Files containing formulation, clinical and safety documentation used by the FDA | 4 years | 1,500,000 | — | 1,500,000 | 1,500,000 | |||||||||||||
In-process pharmaceutical products for 2 indications | 4 years | 6,820,000 | — | 6,820,000 | 6,820,000 | |||||||||||||
Total technology related intangible assets | 9,625,000 | — | 9,625,000 | 9,625,000 | ||||||||||||||
Total, net | $ | 9,980,000 | $ | 355,000 | $ | 9,625,000 | $ | 9,625,000 | ||||||||||
Amortization expense | ' | |||||||||||||||||
Estimated amortization expense for each of the next five years is as follows: | ||||||||||||||||||
Estimated | ||||||||||||||||||
Amortization | ||||||||||||||||||
Expense | ||||||||||||||||||
2014 | $ | — | ||||||||||||||||
2015 | — | |||||||||||||||||
2016 | 2,406,000 | |||||||||||||||||
2017 | 2,406,000 | |||||||||||||||||
2018 | 2,406,000 |
OPERATING_LEASE_COMMITMENTS_Ta
OPERATING LEASE COMMITMENTS (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Operating Lease Commitments Tables | ' | ||||||||||||
Future minimum lease payments | ' | ||||||||||||
Future minimum lease payments for each of the next five years under these operating leases at December 31, 2013 are approximately as follows: | |||||||||||||
Franklin | Philadelphia | Total | |||||||||||
Year Ending December 31, | |||||||||||||
2014 | $ | 439,000 | $ | 191,000 | $ | 630,000 | |||||||
2015 | 444,000 | 191,000 | 635,000 | ||||||||||
2016 | 455,000 | 196,000 | 651,000 | ||||||||||
2017 | 382,000 | 82,000 | 464,000 | ||||||||||
2018 | — | — | — | ||||||||||
Total | $ | 1,720,000 | $ | 660,000 | $ | 2,380,000 | |||||||
DERIVATIVE_WARRANT_LIABILITY_T
DERIVATIVE WARRANT LIABILITY (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Derivative Warrant Liability Tables | ' | ||||||||
Derivative warrant liability | ' | ||||||||
The table below presents the changes in the derivative warrant liability, which is measured at fair value on a recurring basis and classified as Level 3 in fair value hierarchy (see Note 2): | |||||||||
2013 | 2012 | ||||||||
Derivative warrant liability as of January 1 | $ | 5,585,141 | $ | 1,035,337 | |||||
Warrants issued under Montaur Credit Facility | — | 8,295,000 | |||||||
Total unrealized losses included in net loss (1) | 1,671,682 | 500,000 | |||||||
Total realized losses included in net loss (1) | — | 1,438 | |||||||
Total unrealized gains included in net loss (1) | (5,985,000 | ) | (4,077,433 | ) | |||||
Total realized gains included in net loss (1) | (152,668 | ) | (107,681 | ) | |||||
Reclassification of liability to additional paid-in capital | — | (61,520 | ) | ||||||
for warrants | |||||||||
Derivative warrant liability as of December 31 | $ | 1,119,155 | $ | 5,585,141 | |||||
________________________ | |||||||||
(1) Included in gain or loss on revaluation of derivative warrant liability in the Consolidated Statement of Operations. | |||||||||
EQUITY_COMPENSATION_PLAN_Table
EQUITY COMPENSATION PLAN (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Compensation and Retirement Disclosure [Abstract] | ' | ||||||||||||
Share based compensation options | ' | ||||||||||||
The tables below show the remaining shares available for future grants for each plan and the outstanding shares. | |||||||||||||
Equity Compensation Plans | |||||||||||||
2003 Plan | 2008 Plan | ||||||||||||
Shares Available For Issuance | |||||||||||||
Total reserved for stock options and restricted stock | 160,000 | 10,000,000 | |||||||||||
Net restricted stock issued net of cancellations | (12,500 | ) | (192,843 | ) | |||||||||
Stock options granted | (154,449 | ) | (1,512,933 | ) | |||||||||
Add back options cancelled before exercise | 74,849 | 155,918 | |||||||||||
Less shares no longer available due to Plan expiration | (67,900 | ) | - | ||||||||||
Remaining shares available for future grants at December 31, 2013 | - | 8,450,142 | |||||||||||
Not Pursuant to a Plan | |||||||||||||
Stock options granted | 154,449 | 1,512,933 | 310,000 | ||||||||||
Less:Stock options cancelled | (74,849 | ) | (155,819 | ) | (138,333 | ) | |||||||
Stock options exercised | (35,600 | ) | (13,000 | ) | (66,667 | ) | |||||||
Net shares outstanding before restricted stock | 44,000 | 1,344,015 | 105,000 | ||||||||||
Net restricted stock issued net of cancellations | 12,500 | 192,843 | 6,485 | ||||||||||
Outstanding shares at December 31, 2013 | 56,500 | 1,536,858 | 111,485 |
STOCK_OPTIONS_Tables
STOCK OPTIONS (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Stock Options Tables | ' | |||||||||||||
Assumption used for stock option granted | ' | |||||||||||||
The assumptions used principally for options granted to employees in the years ended December 31, 2013 and 2012 were as follows: | ||||||||||||||
2013 | 2012 | |||||||||||||
Risk-free interest rate | 0.10% - 2.71 | % | 0.92% - 2.05 | % | ||||||||||
Expected dividend yield | — | — | ||||||||||||
Expected term | 1-10 years | 6.5 years | ||||||||||||
Forfeiture rate (excluding fully vested options) | 15 | % | 15 | % | ||||||||||
Expected volatility | 129% - 141 | % | 131% - 142 | % | ||||||||||
Stock option activity | ' | |||||||||||||
A summary of option activity under the Company’s stock plans and options granted to officers of the Company outside any plan as of December 31, 2013 and changes during the year then ended is presented below: | ||||||||||||||
Weighted- | ||||||||||||||
Weighted- | Average | |||||||||||||
Average | Remaining | Aggregate | ||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||
Stock Options | Shares | Price | Term | Value | ||||||||||
Outstanding at January 1, 2013 | 343,334 | $ | 14.75 | |||||||||||
Granted | 1,264,432 | 3.05 | ||||||||||||
Exercised | — | — | ||||||||||||
Forfeited or expired | (152,334 | ) | 11.72 | |||||||||||
Outstanding at December 31, 2013 | 1,455,432 | $ | 4.9 | 3.99 years | $ | 81,085 | ||||||||
Exercisable at December 31, 2013 | 230,842 | $ | 11.37 | 3.99 years | $ | 81,085 | ||||||||
RESTRICTED_STOCK_Tables
RESTRICTED STOCK (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Nonvested restricted stock activity | ' | ||||||||
A summary of the status of the Company’s non-vested restricted stock grants as of December 31, 2013, and changes during the year ended December 31, 2013 is presented below: | |||||||||
Weighted- | |||||||||
Average | |||||||||
Restricted Stock | Shares | Grant-Date | |||||||
Fair Value | |||||||||
Non-vested shares at January 1, 2013 | 316,044 | $ | 17.84 | ||||||
Granted | 132,710 | $ | 4.44 | ||||||
Vested | (47,580 | ) | $ | 16.41 | |||||
Forfeited | (199,519 | ) | $ | 16.34 | |||||
Non-vested shares at December 31, 2013 | 201,655 | $ | 10.66 | ||||||
WARRANTS_Tables
WARRANTS (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Warrants Tables | ' | |||||||||
Warrants assumptions utilized by the Company | ' | |||||||||
The following assumptions were utilized by the Company: | ||||||||||
2013 | 2012 | |||||||||
Risk-free interest rate | 0.65% - 1.85 | % | 0.70% - 2.23 | % | ||||||
Expected dividend yield | — | — | ||||||||
Expected term (contractual term) | 0.33 - 5 years | 0.06 - 5 years | ||||||||
Forfeiture rate | — | — | ||||||||
Expected volatility | 122% - 123 | % | 123% - 144 | % | ||||||
Outstanding Warrants | ' | |||||||||
At December 31, 2013, the Company had the following outstanding warrants: | ||||||||||
Number of | Exercise | Date of | ||||||||
Shares | Price | Expiration | ||||||||
Exercisable | ||||||||||
Outstanding warrants accounted for as derivative warrant liability: | ||||||||||
Granted to debt holder | 400,000 | $ | 20 | 8/31/17 | ||||||
Granted to debt holder | 100,000 | 21.3 | 9/20/17 | |||||||
Granted to debt holder | 50,000 | 22.7 | 10/17/17 | |||||||
Granted to debt holder | 150,000 | 21.1 | 11/6/17 | |||||||
Total outstanding warrants accounted for as derivative warrant liability | 700,000 | |||||||||
Weighted average exercise price | $ | 20.61 | ||||||||
Weighted average time to expiration in years | 3.72 years | |||||||||
Outstanding warrants accounted for as equity: | ||||||||||
Granted to investors in private placement of preferred stock | 39,000 | $ | 7.5 | 2/28/14 | ||||||
Granted to vendor | 6,000 | 6 | 3/15/14 | |||||||
Granted to investors in private placement | 40,000 | 15.9 | 6/30/14 | |||||||
Granted to investors in private placement | 76,800 | 20 | 11/13/14 | |||||||
Granted to placement agent in private placement | 25,695 | 15 | 11/13/14 | |||||||
Granted to investors in private placement | 6,300 | 20 | 12/3/14 | |||||||
Granted to investors in private placement | 34,146 | 22.5 | 2/9/15 | |||||||
Granted to placement agents in private placement | 2,853 | 22.5 | 2/9/15 | |||||||
Granted to investor in private placement | 638 | 22.5 | 3/18/15 | |||||||
Granted to investors in private placement | 95,960 | 30 | 12/7/14 | |||||||
Granted to investors in private placement of common and preferred stock | 181,818 | 2.75 | 12/10/18 | |||||||
Total outstanding warrants accounted for as equity | 509,211 | |||||||||
Weighted average exercise price | $ | 14.21 | ||||||||
Weighted average time to expiration in years | 2.26 years | |||||||||
Totals for all warrants outstanding: | ||||||||||
Total | 1,209,211 | |||||||||
Weighted average exercise price | $ | 17.92 | ||||||||
Weighted average time to expiration in years | 3.11 years | |||||||||
Warrant Activity | ' | |||||||||
A summary of warrant activity in the year ended December 31, 2013 is as follows: | ||||||||||
Weighted- | ||||||||||
Average | ||||||||||
Exercise | ||||||||||
Warrants | Shares | Price | ||||||||
Outstanding at January 1, 2013 | 1,254,004 | $ | 20.08 | |||||||
Granted | 190,993 | $ | 3.22 | |||||||
Exercised | — | $ | — | |||||||
Forfeited or expired | (235,786 | ) | $ | 17.36 | ||||||
Outstanding at December 31, 2013 | 1,209,211 | $ | 17.92 | |||||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Income Taxes Tables | ' | ||||||||||||
Company's net deferred tax asset | ' | ||||||||||||
Significant components of the Company’s net deferred tax asset are as follows: | |||||||||||||
December 31, | |||||||||||||
2013 | 2012 | ||||||||||||
Deferred Tax Assets/(Liabilities): | |||||||||||||
Net operating loss carryforwards | $ | 32,487,000 | $ | 24,428,000 | |||||||||
Research credit carryforwards | 2,488,000 | 1,486,000 | |||||||||||
Acquired intangible assets, net | (3,697,000 | ) | (3,724,000 | ) | |||||||||
Restricted stock and warrants | 374,000 | 222,000 | |||||||||||
Other temporary differences | 207,000 | 219,000 | |||||||||||
Total deferred tax assets, net | 31,859,000 | 22,631,000 | |||||||||||
Valuation allowance | (31,859,000 | ) | (22,631,000 | ) | |||||||||
Net deferred tax asset | $ | — | $ | — | |||||||||
Income taxes computed using the federal statutory income tax rate | ' | ||||||||||||
Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate primarily due to the following: | |||||||||||||
Years Ended December 31, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Income taxes benefit (expense) at statutory rate | 34 | % | 34 | % | 35 | % | |||||||
State income tax, net of federal benefit | (4.4 | )% | (4.7 | )% | (2.2 | )% | |||||||
Permanent Differences: | |||||||||||||
Gain/loss or revaluation of derivative warrant liability | 7.8 | % | 10.2 | % | (6.2 | )% | |||||||
Stock-based compensation expense | (1.3 | )% | (2.6 | )% | (2.9 | )% | |||||||
Stock issues for services | — | % | — | % | (1.6 | )% | |||||||
Other | (1.7 | )% | (2.2 | )% | — | % | |||||||
R&D credits | (4.7 | )% | — | % | (0.6 | )% | |||||||
Change in valuation allowance | (29.7 | )% | (34.7 | )% | (21.5 | )% | |||||||
— | % | — | % | — | % |
ORGANIZATION_AND_BASIS_OF_PRES2
ORGANIZATION AND BASIS OF PRESENTATION (Details Narrative) (USD $) | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | |
Organization And Basis Of Presentation | ' | ' | ' | ' |
Reverse stock split ratio | '1-for-10 | ' | ' | ' |
Liquidity and Management's Plans | ' | ' | ' | ' |
Cash | $8,055,385 | $3,747,210 | $8,995,571 | $1,342,044 |
Working capital deficit | 5,731,000 | ' | ' | ' |
Accumulated deficit | 112,969,000 | ' | ' | ' |
Net cash proceeds from MTIA Common Stock financing | 1,904,793 | ' | ' | ' |
Total MTIA investment | $5,000,000 | ' | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Dec. 31, 2013 | |
Computer Equipment [Member] | ' |
Assets Useful Life | '3 years |
Office Equipment [Member] | ' |
Assets Useful Life | '3 years |
Office Equipment Max [Member] | ' |
Assets Useful Life | '5 years |
Furniture and Fixtures [Member] | ' |
Assets Useful Life | '7 years |
Manufacturing Equipment [Member] | ' |
Assets Useful Life | '5 years |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Landlord [Member] | ' | ' |
Letter of credit issued | $52,488 | $157,463 |
Vendor 1 [Member] | ' | ' |
Letter of credit issued | $250,000 | $250,000 |
CASH_AND_CASH_EQUIVALENTS_Deta
CASH AND CASH EQUIVALENTS (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
Cash And Cash Equivalents | ' | ' | ' | ' |
Cash and cash equivalents | $8,055,385 | $3,747,210 | $8,995,571 | $1,342,044 |
INTANGIBLE_ASSETS_Details
INTANGIBLE ASSETS (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Cost | $9,980,000 | ' |
Accumulated Amortization | 355,000 | ' |
Total | 9,625,000 | 9,625,000 |
Research [Member] | ' | ' |
Estimated Life | '3 years | ' |
Cost | 355,000 | ' |
Accumulated Amortization | 355,000 | ' |
Total | ' | ' |
Patents [Member] | ' | ' |
Estimated Life | '4 years | ' |
Cost | 1,305,000 | ' |
Accumulated Amortization | ' | ' |
Total | 1,305,000 | 1,305,000 |
Drug [Member] | ' | ' |
Estimated Life | '4 years | ' |
Cost | 1,500,000 | ' |
Accumulated Amortization | ' | ' |
Total | 1,500,000 | 1,305,000 |
Pharmaceutical [Member] | ' | ' |
Estimated Life | '4 years | ' |
Cost | 6,820,000 | ' |
Accumulated Amortization | ' | ' |
Total | 6,820,000 | 6,820,000 |
PatentedTechnologyMember | ' | ' |
Cost | 9,625,000 | ' |
Accumulated Amortization | ' | ' |
Total | 9,625,000 | ' |
Intangible Assets [Member] | ' | ' |
Cost | 9,625,000 | ' |
Accumulated Amortization | ' | ' |
Total | $9,625,000 | $9,625,000 |
INTANGIBLE_ASSETS_Details_1
INTANGIBLE ASSETS (Details 1) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Estimated amortization expense | ' |
2014 | ' |
2015 | ' |
2016 | 2,406,000 |
2017 | 2,406,000 |
2018 | $2,406,000 |
INTANGIBLE_ASSETS_Details_Narr
INTANGIBLE ASSETS (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Intangible Assets Details Narrative | ' |
Amortization expense related to CATO contract | $84,000 |
OPERATING_LEASE_COMMITMENTS_De
OPERATING LEASE COMMITMENTS (Details) (USD $) | Dec. 31, 2013 |
OPERATING LEASE COMMITMENTS | ' |
Year ended December, 2014 | $630,000 |
Year ended December, 2015 | 635,000 |
Year ended December, 2016 | 651,000 |
Year ended December, 2017 | 464,000 |
Year ended December, 2018 | ' |
Total | 2,380,000 |
Franklin [Member] | ' |
OPERATING LEASE COMMITMENTS | ' |
Year ended December, 2014 | 439,000 |
Year ended December, 2015 | 444,000 |
Year ended December, 2016 | 455,000 |
Year ended December, 2017 | 382,000 |
Year ended December, 2018 | ' |
Total | 1,720,000 |
Philadelphia [Member] | ' |
OPERATING LEASE COMMITMENTS | ' |
Year ended December, 2014 | 191,000 |
Year ended December, 2015 | 191,000 |
Year ended December, 2016 | 196,000 |
Year ended December, 2017 | 82,000 |
Year ended December, 2018 | ' |
Total | $660,000 |
OPERATING_LEASE_COMMITMENTS_De1
OPERATING LEASE COMMITMENTS (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Operating Lease Commitments | ' | ' | ' |
Facilities lease expense | $677,000 | $339,000 | $224,000 |
Manfc Lab Office [Member] | ' | ' | ' |
Operating Lease Commitments | ' | ' | ' |
Leased space square footage | '37,000 | ' | ' |
Office lease expiry date | 31-Oct-17 | ' | ' |
Apartment [Member] | ' | ' | ' |
Operating Lease Commitments | ' | ' | ' |
Office lease expiry date | 21-Nov-14 | ' | ' |
Philadelphia [Member] | ' | ' | ' |
Operating Lease Commitments | ' | ' | ' |
Leased space square footage | '7,900 | ' | ' |
Office lease expiry date | 31-May-17 | ' | ' |
CREDIT_FACILITY_WITH_PLATINUMM1
CREDIT FACILITY WITH PLATINUM-MONTAUR LIFE SCIENCES, LLC (Details Narrative) (USD $) | 12 Months Ended | ||||
Dec. 31, 2013 | Dec. 31, 2012 | Sep. 20, 2012 | Sep. 14, 2012 | Aug. 31, 2012 | |
Notes to Financial Statements | ' | ' | ' | ' | ' |
Loan agreement initial credit facility | ' | ' | ' | ' | $20,000,000 |
Loan agreement Maximum Draw Amount | ' | ' | ' | ' | 5,000,000 |
Promissory note period | ' | ' | ' | ' | '5 years |
Principal interest rate per annum | ' | ' | ' | ' | 10.00% |
Accrued interest expenses | 3,000 | ' | ' | ' | ' |
Cash and cash equivalent minimum requirements on credit facility | ' | ' | ' | ' | 5,000,000 |
Commitment warrant value, shares | ' | ' | ' | ' | 400,000 |
Fair value Commitment warrant, recorded as deferred financing costs | ' | ' | ' | ' | 4,840,000 |
Commitment warrant period | ' | ' | ' | ' | '5 years |
Commitment warrant exercise price | ' | ' | ' | ' | $20 |
Fair value Commitment warrant, current portion | ' | ' | ' | ' | 968,004 |
Fair value Commitment warrant, current portion period | ' | ' | ' | ' | '1 year |
Amortization of fair value Commitment warrant | 242,000 | 323,000 | ' | ' | ' |
Funds borrowed pursuant to the Credit Facility | ' | ' | ' | ' | 1,000,000 |
Purchase warrant value per 1,000,000 borrowed amount, shares | ' | ' | ' | ' | 100,000 |
Purchase warrant value term | ' | ' | ' | ' | '5 years |
Commitment Warrant exercise price maximimum | ' | ' | ' | ' | $40 |
Commitment Warrant exercise price minimum | ' | ' | ' | ' | $20 |
Commitment Warrant beneficial ownership maximum | ' | ' | ' | ' | 49.90% |
Commitment Warrant beneficial ownership minimum | ' | ' | ' | ' | 99.90% |
Loan agreement September Request | ' | ' | ' | 3,000,000 | ' |
September Request amount received | ' | ' | 1,000,000 | ' | ' |
September Request warrant issued | ' | ' | 100,000 | ' | ' |
September Request warrant term | ' | ' | '5 years | ' | ' |
Warrant exercise price September Request | ' | ' | $21.30 | ' | ' |
Fair value September Request | ' | ' | 3,455,000 | ' | ' |
Debt Discount | ' | ' | 3,000,000 | ' | ' |
Interest Expense | ' | ' | 455,000 | ' | ' |
Amortization September request | 5,556 | ' | ' | ' | ' |
Repayment of outstanding draws | 3,113,366 | ' | ' | ' | ' |
Interest accrued | 113,366 | ' | ' | ' | ' |
Non-cash interest expense | $2,879,166 | ' | ' | ' | ' |
DERIVATIVE_WARRANT_LIABILITY_D
DERIVATIVE WARRANT LIABILITY (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | ||
DERIVATIVE WARRANT LIABILITY | ' | ' | |
Beginning balance | $5,585,141 | $1,035,337 | |
Warrants issued under Montaur Credit Facility | ' | 8,295,000 | |
Total unrealized losses included in net loss | 1,671,682 | 500,000 | |
Total realized losses included in net loss | ' | 1,438 | |
Total unrealized gains included in net loss | -5,985,000 | [1] | -4,077,433 |
Total realized gains included in net loss | -152,668 | [1] | -107,681 |
Reclassification of derivative warrant liability to additional paid-in capital for derivative warrants exercised | ' | -61,520 | |
Ending balance | $1,119,155 | $5,585,141 | |
[1] | Included in Gain (Loss) on Revaluation of Derivative Warrant Liability in the Consolidated Statement of Operations. |
DERIVATIVE_WARRANT_LIABILITY_D1
DERIVATIVE WARRANT LIABILITY (Details Narrative) (USD $) | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | |
Derivative Warrant Liability Details Narrative | ' | ' | ' | ' |
Outstanding warrants | $1,254,004 | ' | ' | $1,209,211 |
Derivative financial instruments | 700,000 | 736,015 | ' | ' |
Fair value of derivative instruments on recurring basis | 1,119,000 | 5,585,000 | ' | ' |
Gain/Loss on Revaluation of Derivative Warrant Liability | 4,466,000 | 3,684,000 | -1,763,000 | ' |
Exercised warrants Shares | ' | $165,451 | ' | ' |
Reclassification from Derivative Warrant Liability to Additional Paid-in Capital | ' | $62,000 | ' | ' |
PREFERRED_STOCK_Details_Narrat
PREFERRED STOCK (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Class of Stock [Line Items] | ' | ' |
Authorized Preferred Stock | 40,000,000 | ' |
Series C stock issued as part of Series B exchange | 1,830.89 | ' |
Series B Preferred Stock [Member] | ' | ' |
Class of Stock [Line Items] | ' | ' |
Authorized Preferred Stock | 40,000 | ' |
Par value | 0.01 | ' |
Shares surrendered | 170 | ' |
Redeemable value of shares surrendered | 1,701 | ' |
SeriesCPreferredStock [Member] | ' | ' |
Class of Stock [Line Items] | ' | ' |
Authorized Preferred Stock | 10,000 | 10,000 |
Issued and outstanding | 1,000 | 9,974.18 |
SeriesDPreferredStock [Member] | ' | ' |
Class of Stock [Line Items] | ' | ' |
Authorized Preferred Stock | 3,600,000 | 3,600,000 |
Issued and outstanding | 1,000 | 3,006,000 |
Series E Preferred Stock [Member] | ' | ' |
Class of Stock [Line Items] | ' | ' |
Authorized Preferred Stock | 1,748,613 | ' |
COMMON_STOCK_Details_Narrative
COMMON STOCK (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Common stock, shares authorized | 150,000,000 | 150,000,000 | ' |
Common stock, Shares issued | 11,776,578 | 4,437,346 | ' |
Common stock, Shares outstanding | 11,776,578 | 4,437,346 | ' |
Stock issued in exchange for services | 9,122 | 9,533 | 13,800 |
Fair value of stock issued in exchange for services | $96,375 | $153,464 | $448,940 |
January [Member] | ' | ' | ' |
Common Stock public offering | 1,567,833 | ' | ' |
Shares sold pursuant to over-allotment | 204,500 | ' | ' |
Share sale price | $7.50 | ' | ' |
Net proceeds from sale of shares in public offering | 10,626,000 | ' | ' |
Total balance paid off | 3,113,366 | ' | ' |
Principal balance | 3,000,000 | ' | ' |
Accrued and unpaid interest balance | 113,366 | ' | ' |
June [Member] | ' | ' | ' |
Common Stock public offering | 4,628,750 | ' | ' |
Shares sold pursuant to over-allotment | 603,750 | ' | ' |
Share sale price | $2.70 | ' | ' |
Net proceeds from sale of shares in public offering | 11,338,000 | ' | ' |
December 2013 [Member] | ' | ' | ' |
Common Stock public offering | 1,818,182 | ' | ' |
Shares purchased | 69,569 | ' | ' |
Share sale price | $2.75 | ' | ' |
Gross proceeds | 5,000,000 | ' | ' |
Issuance costs | $100,000 | ' | ' |
EQUITY_COMPENSATION_PLAN_Detai
EQUITY COMPENSATION PLAN (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Shares Available For Issuance | ' |
Add back options cancelled before exercise | -152,334 |
Outstanding Options and Restricted Stock | ' |
Options exercised | ' |
Ending Balance | 111,485 |
Plan2003Member | ' |
Shares Available For Issuance | ' |
Total reserved for stock options and restricted stock | 160,000 |
Net restricted stock issued net of cancellations | -12,500 |
Stock options granted | -154,449 |
Add back options cancelled before exercise | 74,849 |
Options cancelled by plan vote | -67,900 |
Remaining shares available for future grants | ' |
Outstanding Options and Restricted Stock | ' |
Total granted | 154,449 |
Options cancelled | -74,849 |
Options exercised | -35,600 |
Net shares outstanding before restricted stock | 44,000 |
Net restricted stock issued net of cancellations | 12,500 |
Ending Balance | 56,500 |
Plan2008Member | ' |
Shares Available For Issuance | ' |
Total reserved for stock options and restricted stock | 10,000,000 |
Net restricted stock issued net of cancellations | -192,843 |
Stock options granted | -1,512,933 |
Add back options cancelled before exercise | 155,918 |
Options cancelled by plan vote | ' |
Remaining shares available for future grants | 8,450,142 |
Outstanding Options and Restricted Stock | ' |
Total granted | 1,512,933 |
Options cancelled | -155,819 |
Options exercised | -13,000 |
Net shares outstanding before restricted stock | 1,344,015 |
Net restricted stock issued net of cancellations | 195,843 |
Ending Balance | 1,536,858 |
NotPursuanttoaPlanMember | ' |
Outstanding Options and Restricted Stock | ' |
Total granted | 310,000 |
Options cancelled | -138,333 |
Options exercised | -66,667 |
Net shares outstanding before restricted stock | 105,000 |
Net restricted stock issued net of cancellations | 6,485 |
EQUITY_COMPENSATION_PLAN_Detai1
EQUITY COMPENSATION PLAN (Details Narrative) | Dec. 31, 2013 | Dec. 31, 2012 |
Stock Options And Restricted Stock | ' | ' |
Maximum authorized shares | 150,000,000 | 150,000,000 |
EqPlan 2003 [Member] | ' | ' |
Stock Options And Restricted Stock | ' | ' |
Restricted shares of Common Stock issued | 12,500 | ' |
Options to purchase an aggregate of shares | 44,000 | ' |
EqPlan 2008 [Member] | ' | ' |
Stock Options And Restricted Stock | ' | ' |
Restricted shares of Common Stock issued | 1,489,102 | ' |
Options to purchase an aggregate of shares | 1,489,102 | ' |
Maximum authorized shares | 10,000,000 | ' |
Shares Future grants | 8,450,142 | ' |
STOCK_OPTIONS_Details_1
STOCK OPTIONS (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
STOCK OPTIONS AND RESTRICTED STOCK | ' | ' |
Risk-free interest rate minimum | 0.10% | 0.94% |
Risk-free interest rate maximum | 2.71% | 2.05% |
Expected dividend yield | ' | ' |
Expected term, minimum | '1 year | ' |
Expected term, maximum | '10 years | '6 years 6 months |
Forfeiture rate (excluding fully vested stock options) minimum | 15.00% | 15.00% |
Forfeiture rate (excluding fully vested stock options) maximum | 15.00% | 15.00% |
Expected volatility | 129.00% | 131.00% |
Expected volatility | 141.00% | 142.00% |
STOCK_OPTIONS_Details_2
STOCK OPTIONS (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Shares | ' | ' |
Beginning Balance | 343,334 | ' |
Granted | 1,264,432 | ' |
Exercised | ' | ' |
Forfeited or expired | -152,334 | ' |
Ending Balance | 1,455,432 | 343,334 |
Exercisable at June 30, 2013 | 230,842 | ' |
Weighted-Average Exercise Price | ' | ' |
Beginning Balance | $14.75 | ' |
Granted | $3.05 | ' |
Exercised | ' | $165,451 |
Forfeited or expired | $11.72 | ' |
Ending Balance | $4.90 | $14.75 |
Exercisable at June 30, 2013 | $11.37 | ' |
Weighted-Average Remaining Contractual Term | ' | ' |
Beginning Balance | '3 years 11 months 27 days | ' |
Ending Balance | '3 years 11 months 27 days | '3 years 11 months 27 days |
Aggregate Intrinsic Value | ' | ' |
Beginning Balance | $81,085 | ' |
Ending Balance | $81,085 | ' |
STOCK_OPTIONS_Details_Narrativ
STOCK OPTIONS (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Stock Options And Restricted Stock | ' | ' | ' |
Additional paid-in capital and non-cash compensation expense | $714,547 | $938,537 | $836,866 |
Weighted-average grant-date fair value of stock options granted | $3.05 | ' | ' |
Total unrecognized compensation expense | $891,000 | ' | ' |
RESTRICTED_STOCK_Details
RESTRICTED STOCK (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Shares | ' |
Nonvested at January 1, 2013 | 316,044 |
Granted | 132,710 |
Vested | -47,580 |
Forfeited | -199,519 |
Nonvested at December 31, 2013 | 201,655 |
Weighted- Average Grant-DateFair Value | ' |
Nonvested at January 1, 2013 | $17.84 |
Granted | $4.44 |
Vested | $16.41 |
Forfeited | $16.34 |
Nonvested at December 31, 2013 | $10.66 |
RESTRICTED_STOCK_Details_Narra
RESTRICTED STOCK (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Stock Options And Restricted Stock | ' | ' | ' |
Non-cash compensation expense | $529,795 | $574,024 | $323,463 |
Outstanding restricted stock grants | 201,655 | ' | ' |
Weighted average grant date value | $10.66 | ' | ' |
Shares of non-vested restricted stock | 201,655 | ' | ' |
Total unrecognized compensation expense | $902,000 | ' | ' |
FDA Approval [Member] | ' | ' | ' |
Stock Options And Restricted Stock | ' | ' | ' |
Restricted stock to vest upon FDA approval | 54,510 | ' | ' |
Yearly [Member] | ' | ' | ' |
Stock Options And Restricted Stock | ' | ' | ' |
Restricted stock to vest upon FDA approval | 147,145 | ' | ' |
WARRANTS_Details
WARRANTS (Details) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Warrants Details | ' | ' |
Risk-free interest rate | 0.65% | 0.70% |
Risk-free interest rate, maximum | 1.85% | 2.23% |
Expected term (contractual term) | '0 years 3 months 29 days | '0 years 0 months 22 days |
Expected term (contractual term), maximum | '5 years | '5 years |
Expected volatility | 122.00% | 123.00% |
Expected volatility, maximum | 123.00% | 144.00% |
WARRANTS_Details_1
WARRANTS (Details 1) (USD $) | Dec. 31, 2013 |
Warrants | ' |
Total outstanding warrants accounted for as derivative warrant liability | 700,000 |
Weighted average exercise price | $20.61 |
Weighted average time to expiration in years | '3 years 8 months 19 days |
DebtHolderAcquisition1 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 400,000 |
Exercise Price | $20 |
Date of Expiration | 31-Aug-17 |
DebtHolderAcquisition2 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 100,000 |
Exercise Price | $21.30 |
Date of Expiration | 20-Sep-17 |
Investors1 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 50,000 |
Exercise Price | $22.70 |
Date of Expiration | 17-Oct-17 |
Investors2 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 150,000 |
Exercise Price | $21.10 |
Date of Expiration | 6-Nov-17 |
WARRANTS_Details_2
WARRANTS (Details 2) (USD $) | Dec. 31, 2013 |
Warrants | ' |
Total Warrants Outstanding | 1,209,211 |
Total Weighted average exercise price | $17.92 |
Total Weighted average time to expiration in years | '3 years 1 month 10 days |
PreferredStock3 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 39,000 |
Exercise Price | $7.50 |
Date of Expiration | '2014-02-28 |
Vendor 1 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 6,000 |
Exercise Price | $6 |
Date of Expiration | '2014-03-15 |
Investors1 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 40,000 |
Exercise Price | $15.90 |
Date of Expiration | '2014-06-30 |
Investors2 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 76,800 |
Exercise Price | $20 |
Date of Expiration | '2014-11-13 |
Investors3 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 25,695 |
Exercise Price | $15 |
Date of Expiration | '2014-11-13 |
Investors4 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 6,300 |
Exercise Price | $20 |
Date of Expiration | '2014-12-03 |
Investors5 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 34,146 |
Exercise Price | $22.50 |
Date of Expiration | '2015-02-09 |
PlacementAgents1 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 2,853 |
Exercise Price | $22.50 |
Date of Expiration | '2015-02-09 |
Investors6 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 638 |
Exercise Price | $22.50 |
Date of Expiration | '2015-03-18 |
Investors19 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 95,960 |
Exercise Price | $30 |
Date of Expiration | '2014-12-07 |
PreferredStock1 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 181,818 |
Exercise Price | $2.75 |
Date of Expiration | '2018-12-10 |
TotaloutstandingwarrantsaccountedforasequityMember | ' |
Warrants | ' |
Number of Shares Exercisable | 509,211 |
WeightedaverageexercisepriceMember | ' |
Warrants | ' |
Exercise Price | $14.21 |
WeightedaveragetimetoexpirationinyearsMember | ' |
Warrants | ' |
Expiration period | '2 years 3 months 4 days |
WARRANTS_Details_3
WARRANTS (Details 3) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Shares | ' |
Beginning Balance | 1,254,004 |
Granted | 190,993 |
Exercised | ' |
Forfeited or expired | -235,786 |
Ending Balance | 1,209,211 |
Weighted-Average Exercise Price | ' |
Beginning Balance | $20.08 |
Granted | 3.22 |
Exercised | ' |
Forfeited or expired | 17.36 |
Ending Balance | $17.92 |
WARRANTS_Details_Narrative
WARRANTS (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Warrants Details Narrative | ' | ' | ' |
Fair value warrants issued | $371,140 | $8,655,000 | ' |
Fair value warrants recorded as a debit to deferred financing costs | ' | 4,840,000 | ' |
Warrants exercised, shares | ' | 16,545 | 661,530 |
Cash proceeds | ' | 212,000 | 6,628,000 |
Warrants exercised under arrangement with holders | ' | ' | 454,893 |
Cash proceeds from holder arrangement | ' | ' | 4,471,631 |
Deemed dividends | ' | ' | $4,559,761 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Income Taxes Details | ' | ' |
Net operating loss carryforwards | $32,487,000 | $24,428,000 |
Research credit carryforward | 2,488,000 | 1,486,000 |
Acquired intangible assets, net | -3,697,000 | -3,724,000 |
Restricted stock and warrants | 374,000 | 222,000 |
Other temporary differences | 207,000 | 219,000 |
Total deferred tax assets, net | 31,859,000 | 22,631,000 |
Valuation allowance | -32,859,000 | -22,631,000 |
Net deferred tax asset | ' | ' |
INCOME_TAXES_Details_1
INCOME TAXES (Details 1) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Income Taxes Details 1 | ' | ' | ' |
Income taxes benefit (expense) at statutory rate | 34.00% | 34.00% | 35.00% |
State income tax, net of federal benefit | -4.40% | -4.70% | -2.20% |
Permanent Differences | ' | ' | ' |
Gain/loss or revaluation of derivative warrant liability | 7.80% | 10.20% | -6.20% |
Stock-based compensation expense | -1.30% | -2.60% | -2.90% |
Other | -1.70% | -2.20% | ' |
R&D credits | -4.70% | ' | -0.60% |
Change in valuation allowance | -29.70% | -34.70% | -21.50% |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Taxes Details Narrative | ' | ' |
Gross federal net operating loss carryforwards | $89,600,000 | ' |
Gross state net operating loss carryforwards | 45,893,000 | ' |
Federal research and development tax credit carryforwards | 2,488,000 | ' |
Increase in valuation allowance | $9,228,000 | $4,999,000 |
LITIGATION_Details_Narrative
LITIGATION (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Litigation Details Narrative | ' |
Mooney damages seeked in Court | $20,000,000 |
LICENSING_AND_OTHER_REVENUE_De
LICENSING AND OTHER REVENUE (Details Narrative) (USD $) | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | |
Licensing and Other Revenue | ' | ' | ' | ' |
Nonrefundable license revenue | $27,600 | $5,119 | $302,059 | $105,000 |
Nonrefundable license revenue, recognizable | ' | ' | 61,000 | ' |
License revenue recognized | ' | ' | 750,000 | ' |
Other revenue relating to product development costs | ' | ' | 145,000 | ' |
Deferred revenue recognized over next twelve months | 76,428 | 90,228 | ' | ' |
Deferred revenue to be recognized after next twelve months | 76,428 | 90,228 | ' | ' |
Net cash proceeds from MTIA Common Stock financing | 1,904,793 | ' | ' | ' |
Total MTIA investment | 5,000,000 | ' | ' | ' |
Handok [Member] | ' | ' | ' | ' |
Licensing and Other Revenue | ' | ' | ' | ' |
Minimum licensing term | '10 years | ' | ' | ' |
Initial licensing fee | 750,000 | ' | ' | ' |
Nonrefundable license revenue, recognizable | 28,000 | 5,000 | ' | ' |
Licensing fee relating to Handok | 500,000 | ' | ' | ' |
Deferred revenue recognized over next twelve months | 76,000 | ' | ' | ' |
Deferred revenue to be recognized after next twelve months | 76,000 | ' | ' | ' |
Net cash proceeds from MTIA Common Stock financing | 1,904,793 | ' | ' | ' |
Total MTIA investment | $5,000,000 | ' | ' | ' |