Document_and_Entity_Informatio
Document and Entity Information (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | 9-May-14 | Jun. 28, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'Echo Therapeutics, Inc. | ' | ' |
Entity Central Index Key | '0001031927 | ' | ' |
Document Type | '10-Q | ' | ' |
Document Period End Date | 31-Mar-14 | ' | ' |
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 | ' | 11,979,964 | ' |
Document Fiscal Period Focus | 'Q1 | ' | ' |
Document Fiscal Year Focus | '2014 | ' | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current Assets: | ' | ' |
Cash and cash equivalents | $7,081,051 | $8,055,385 |
Cash restricted pursuant to letters of credit | 52,488 | 302,488 |
Current portion of deferred financing costs | 968,004 | 968,004 |
Prepaid expenses and other current assets | 118,202 | 49,221 |
Total current assets | 8,219,745 | 9,375,098 |
Property and Equipment, at cost: | ' | ' |
Computer equipment | 323,488 | 323,488 |
Office and laboratory equipment (including assets under capitalized leases) | 728,152 | 728,152 |
Furniture and fixtures | 755,444 | 755,444 |
Manufacturing equipment | 111,980 | 111,980 |
Leasehold improvements | 825,589 | 825,589 |
Property and equipment, at cost | 2,744,653 | 2,744,653 |
Less-Accumulated depreciation and amortization | -1,348,746 | -1,248,846 |
Net property and equipment (including assets under capitalized leases) | 1,395,907 | 1,495,807 |
Other Assets: | ' | ' |
Restricted cash | 10,490 | 10,490 |
Intangible assets, net of accumulated amortization | 9,625,000 | 9,625,000 |
Deferred financing costs | 2,339,323 | 2,581,324 |
Other assets | 1,576 | 1,576 |
Total other assets | 11,976,389 | 12,218,390 |
Total assets | 21,592,041 | 23,089,295 |
Current Liabilities: | ' | ' |
Accounts payable | 704,240 | 1,036,320 |
Deferred revenue from licensing arrangements, current portion | 76,428 | 76,428 |
Current portion of capital lease obligation | 689 | 1,361 |
Derivative warrant liability | 979,155 | 1,119,155 |
Accrued expenses and other current liabilities | 824,712 | 1,411,107 |
Total current liabilities | 2,585,224 | 3,644,371 |
Capital lease obligation, net of current portion | 57,321 | 76,428 |
Note payable, net of discount | 2,642,545 | 3,720,799 |
Deferred revenue from licensing arrangements, net of current portion | 57,321 | 76,428 |
Total liabilities | 2,642,545 | 3,720,799 |
Convertible Preferred Stock: | ' | ' |
Series C, $0.01 par value, authorized 10,000 shares, issued and outstanding 1,000 shares at March 31, 2014 and December 31, 2013 | 10 | 10 |
Series D, $0.01 par value, authorized 3,600,000 shares, issued and outstanding 1,000,000 shares at March 31, 2014 and December 31, 2013(preference in liquidation of $1,000,000) | 10,000 | 10,000 |
Series E, $0.01 par value, authorized 1,748,613 shares, issued and outstanding 1,748,613 shares at March 31, 2014 and December 31, 2013 | 17,486 | 17,486 |
Common stock, $0.01 par value, authorized 150,000,000 shares, issued and outstanding 11,967,414 and 11,776,578 shares at March 31, 2014 and December 31, 2013, respectively | 119,672 | 117,764 |
Additional paid-in capital | 133,044,781 | 132,192,648 |
Common stock subscription | 1,500,000 | ' |
Accumulated deficit | -115,742,453 | -112,969,412 |
Total stockholders' equity | 18,949,496 | 19,368,496 |
Total liabilities and stockholders' equity | $21,592,041 | $23,089,295 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
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 | 1,000 |
Convertible Preferred Stock:Series C, Share Issued | 1,000 | 1,000 |
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 | 1,000,000 | 1,000,000 |
Convertible Preferred Stock:Series D, Share Issued | 1,000,000 | 1,000,000 |
Convertible Preferred Stock:Series D,preference in liquidation | 1,000,000 | 1,000,000 |
Convertible Preferred Stock:Series E, par value | $0.01 | $0.01 |
Convertible Preferred Stock:Series E, authorized | 1,748,613 | 1,748,613 |
Convertible Preferred Stock:Series E, outstanding | 1,748,613 | 1,748,613 |
Convertible Preferred Stock:Series E, Share Issued | 1,748,613 | 1,748,613 |
Common stock, par value | $0.01 | $0.01 |
Common stock, authorized | 150,000,000 | 150,000,000 |
Common stock, outstanding | 11,967,414 | 11,776,578 |
Common stock, Share Issued | 11,967,414 | 11,776,578 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Income Statement [Abstract] | ' | ' |
Licensing revenue | $19,107 | $22,557 |
Total revenues | 19,107 | 22,557 |
Operating Expenses: | ' | ' |
Research and development | 1,149,942 | 3,219,723 |
Selling, general and administrative | 1,539,322 | 2,299,447 |
Total operating expenses | 2,689,264 | 5,519,170 |
Loss from operations | -2,670,157 | -5,496,613 |
Other Income (Expense): | ' | ' |
Interest income | 356 | 1,083 |
Interest expense | -243,240 | -3,173,781 |
Gain on revaluation of derivative warrant liability | 140,000 | 1,680,986 |
Other income (expense), net | -102,884 | -1,491,712 |
Net loss | ($2,773,041) | ($6,988,325) |
Net loss per common share, basic and diluted | ($0.23) | ($1.30) |
Basic and diluted weighted average common shares outstanding | 11,858,894 | 5,373,477 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Cash Flows From Operating Activities: | ' | ' |
Net loss | ($2,773,041) | ($6,988,325) |
Depreciation and amortization | 99,900 | 90,486 |
Share-based compensation, net | 345,637 | 362,956 |
Fair value of common stock and warrants issued for services | 8,404 | 92,745 |
Gain on revaluation of derivative warrant liability | -140,000 | -1,680,986 |
Amortization of discount on note payable | ' | 2,879,166 |
Amortization of non-cash deferred financing costs | 242,001 | 242,001 |
Prepaid expenses and other current assets | -68,981 | -155,545 |
Accounts payable | -332,080 | -819,925 |
Deferred revenue from licensing arrangements | -19,107 | -22,557 |
Accrued expenses and other liabilities | -586,395 | 178,089 |
Net cash used in operating activities | -3,223,662 | -5,821,895 |
Cash Flows from Investing Activities: | ' | ' |
Purchase of furniture, equipment and leasehold improvements | ' | -130,555 |
Decrease (increase) in restricted cash | 250,000 | -250,000 |
Net cash used in investing activities | 250,000 | -380,555 |
Cash Flows From Financing Activities: | ' | ' |
Proceeds from issuances of Common Stock, and warrants, net of expenses | 500,000 | 10,626,099 |
Repayment of Montaur note payable | ' | -3,000,000 |
Proceeds from Common Stock subscription | 1,500,000 | ' |
Principal payments on capital lease obligations | -672 | -608 |
Net cash provided by financing activities | 1,999,328 | 7,625,491 |
Net increase (decrease) in cash and cash equivalents | -974,334 | 1,423,041 |
Cash and cash equivalents, beginning of period | 8,055,385 | 3,747,210 |
Cash and cash equivalents, end of period | 7,081,051 | 5,170,251 |
Supplemental Disclosure of Cash Flow Information and Non Cash Financing Transactions: | ' | ' |
Cash paid for interest | $1,239 | $113,458 |
ORGANIZATION_AND_BASIS_OF_PRES
ORGANIZATION AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2014 | |
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 Symphony, allows for enhanced skin permeation that enables extraction of analytes such as glucose. | |
The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Sontra Medical, Inc., a Delaware corporation. All significant intercompany balances and transactions have been eliminated in consolidation. These financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States consistent with those applied in, and should be read in conjunction with, the Company’s audited consolidated financial statements and related footnotes for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission (“SEC”) on March 28, 2014. These financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of March 31, 2014 and its results of operations and cash flows for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or for the full year. These interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements as allowed by the relevant SEC rules and regulations; however, the Company believes that its disclosures are adequate to ensure that the information presented is not misleading. | |
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 consolidated financial statements 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. As of March 31, 2014, the Company had cash of approximately $7,081,000, working capital of approximately $5,665,000, and an accumulated deficit of approximately $115,742,000. The Company continues to incur recurring losses from operations. The Company will need to collect the remaining proceeds under its current financing arrangement and secure additional capital to fund its product development, research, manufacturing and clinical programs in its current planned operations. The Company has funded its operations in the past primarily through debt and equity issuances. Management intends to complete its current financing arrangement with Medical Technologies Innovation Asia Ltd. (“MTIA”) and will continue to pursue additional financing to fund its operations. No assurances can be given that additional capital will be available on terms acceptable to the Company. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. | |
During the three months ended March 31, 2014, the Company received total proceeds of $2,000,000 in connection with the MTIA financing agreement. Subsequent to March 31, 2014, the Company received additional net cash proceeds from the Common Stock financing with MTIA of $400,000 as part of its total $5,000,000 investment (see Note 8). As of May 9, 2014, an additional $2,600,000 in proceeds remains to be received from this transaction. Management believes that the cash to be received from this Common Stock financing coupled with the cash on hand at March 31, 2014 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. |
CASH
CASH | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
Note 2. CASH | ' |
Cash and Cash Equivalents | |
As of March 31, 2014, the Company held approximately $7,081,000 in cash and cash equivalents. The Company’s cash equivalents consist solely of bank money market funds. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has never experienced any losses related to these balances. | |
Restricted Cash | |
As of March 31, 2014, restricted cash represents a $52,488 letter of credit issued in favor of one of its landlords. As of December 31, 2013, restricted cash consisted of a $250,000 letter of credit issued in favor of one of the Company’s key product development vendors and a $52,488 letter of credit issued in favor of one of its landlords. Non-current restricted cash as of March 31, 2014 and December 31, 2013 represents a security deposit on the Company’s leased offices. |
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 3 Months Ended | |||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||
Notes to Financial Statements | ' | |||||||||||||||||
Note 3. INTANGIBLE ASSETS | ' | |||||||||||||||||
The Company’s intangible assets are related to the acquisition of assets from Durham Pharmaceuticals Ltd. in 2007. Following the acquisition in 2007, the Company has modestly advanced the development programs for DurhalieveTM for the treatment of corticosteroid-responsive dermatoses and for the other earlier stage AzoneTS reformulation drug candidates. Among other advancements, the Company has monitored stability on new drug formulations, assembled a complete response on the Durhalieve New Drug Application, met with the United Stated Food and Drug Association (“FDA”) on development status, worked on a response for the methotrexate-AzoneTS (“MAZ”) ‘end of Phase 2’ meeting with the FDA, engaged consultants to review and recommend new product candidates and formulations, and conducted partnering activities around the technology. In addition, the Company has made applicable regulatory filings necessary to maintain the active status of the AzoneTS Drug Master File, the Durhalieve and MAZ Investigational New Drug applications and the MAZ Orphan Drug application with the FDA. | ||||||||||||||||||
As of March 31, 2014 and December 31, 2013, intangible assets related to this Acquisition are summarized as follows: | ||||||||||||||||||
2014 | 2013 | |||||||||||||||||
Estimated | Accumulated | |||||||||||||||||
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 could occur as early as the beginning of 2016. The Cato Research contract included above was amortized over a three-year period, which ended in 2010. | ||||||||||||||||||
Estimated amortization expense for each of the next five calendar years is as follows: | ||||||||||||||||||
Estimated | ||||||||||||||||||
Amortization Expense | ||||||||||||||||||
2014 | $ | — | ||||||||||||||||
2015 | $ | — | ||||||||||||||||
2016 | $ | 2,406,000 | ||||||||||||||||
2017 | $ | 2,406,000 | ||||||||||||||||
2018 | $ | 2,406,000 | ||||||||||||||||
The Company periodically reviews the carrying value of intangible assets and considers events or circumstances that would indicate that the carrying amount of the intangible assets may not be recoverable. If such events or circumstances exist, the Company performs an impairment test. If the carrying value of the intangibles exceeds undiscounted cash flows the Company writes down the carrying value of the intangible assets to their fair value in the period identified. It is the Company’s policy to evaluate intangible assets for impairment at least annually in connection with its year-end financial statement preparation. |
OPERATING_LEASE_COMMITMENTS
OPERATING LEASE COMMITMENTS | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
Note 4. 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 March 31, 2014 are approximately as follows: | |||||||||||||
Franklin | Philadelphia | Total | |||||||||||
Year Ending December 31, | |||||||||||||
2014 | $ | 332,000 | $ | 142,000 | $ | 474,000 | |||||||
2015 | 444,000 | 192,000 | 636,000 | ||||||||||
2016 | 454,000 | 196,000 | 650,000 | ||||||||||
2017 | 382,000 | 82,000 | 464,000 | ||||||||||
2018 | — | — | — | ||||||||||
Total | $ | 1,612,000 | $ | 612,000 | $ | 2,224,000 | |||||||
The Company’s facilities lease expense, including accruals for lease incentives, was approximately $80,000 and $290,000 for the three months ended March 31, 2014 and 2013, respectively. |
CREDIT_FACILITY_WITH_PLATINUMM
CREDIT FACILITY WITH PLATINUM-MONTAUR LIFE SCIENCES, LLC | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
NOTE 5. 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 principal balance of each draw will bear interest from the applicable draw date at a rate of 10% per annum, compounded monthly. 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 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. | |
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 quarter ended March 31, 2014 was $242,001 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 across three draws in 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 in 2012 to purchase 300,000 shares of Common Stock, with a term of five years, and having exercise prices ranging from $21.10 to $22.70 per share. The fair value of these warrants issued was determined to be approximately $3,455,000, of which $3,000,000 was treated as a debt discount and was 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 March 2013 relating to the unamortized debt discount on the outstanding draws paid off. | |
DERIVATIVE_WARRANT_LIABILITY
DERIVATIVE WARRANT LIABILITY | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 6. DERIVATIVE WARRANT LIABILITY | ' | ||||||||
Derivative financial instruments are recognized as a liability on the consolidated balance sheet and measured at fair value. | |||||||||
At March 31, 2014 and December 31, 2013, the Company had outstanding warrants to purchase 1,182,393 and 1,209,211 shares of its Common Stock, respectively. Included in these outstanding warrants at March 31, 2014 and December 31, 2013 are warrants to purchase 700,000 shares, that are considered to be derivative financial instruments. The fair value of these derivative instruments at March 31, 2014 and December 31, 2013 was approximately $979,000 and $1,119,000, respectively, and is included in Derivative Warrant Liability, a current liability, in the Consolidated Balance Sheet. Changes in fair value of the derivative financial instruments are recognized in the Consolidated Statement of Operations as a gain or loss on revaluation of derivative warrant liability. The Gain on Revaluation of Derivative Warrant Liability for the three months ended March 31, 2014 and 2013 was approximately $140,000 and $1,681,000, 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. For the three months ended March 31, 2014 and 2013, no derivative warrants were exercised and none expired. | |||||||||
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: | |||||||||
2014 | 2013 | ||||||||
Derivative warrant liability as of January 1 | $ | 1,119,155 | $ | 5,585,141 | |||||
Total unrealized losses included in net loss (1) | 15,000 | 741,682 | |||||||
Total realized losses included in net loss(1) | — | — | |||||||
Total unrealized gains included in net loss (1) | (155,000 | ) | (2,270,000 | ) | |||||
Total realized gains included in net loss (1) | — | (152,668 | ) | ||||||
Reclassification of liability to additional paid-in capital for warrants exercised | — | — | |||||||
Derivative warrant liability as of March 31 | $ | 979,155 | $ | 3,904,155 | |||||
_______________ | |||||||||
(1) Included in Gain on Revaluation of Derivative Warrant Liability in the Consolidated Statement of Operations. |
PREFERRED_STOCK
PREFERRED STOCK | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
Note 7. 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. | |
The Company has authorized 10,000 shares of Series C Preferred Stock, of which 1,000 shares were issued and outstanding as of March 31, 2014 and December 31, 2013. | |
Series D Convertible Preferred Stock | |
The Company has authorized 3,600,000 shares of Series D Convertible Preferred Stock, of which 1,000,000 shares were issued and outstanding as of March 31, 2014 and December 31, 2013. | |
Series E Convertible Preferred Stock | |
The Company has authorized 1,748,613 shares of Series E Convertible Preferred Stock, all of which were issued and outstanding as of March 31, 2014 and December 31, 2013. | |
COMMON_STOCK
COMMON STOCK | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
Note 8. COMMON STOCK | ' |
The Company has authorized 150,000,000 shares of Common Stock, of which 11,967,414 and 11,776,578 shares were issued and outstanding as of March 31, 2014 and December 31, 2013, respectively. | |
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. (“Aegis”), 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 1,567,855 shares of the Company’s Common Stock (including 204,500 shares sold pursuant to the over-allotment option), at a price to the public of $7.50 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 $10,626,000. Subsequent to the offering, the Company used a portion of the net proceeds of the offering to pay off the Note issued to Montaur in connection with the $20 million non-revolving draw credit facility. 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 (see Note 5). | |
December 2013 Financing | |
On December 10, 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 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 in the fourth quarter of the year ended December 31, 2013. | |
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 March 31, 2014, 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. The Company did not receive the proceeds by the extended due date and, accordingly, 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. Due to the contingent nature of this transaction, the Company has not issued all of the shares or recorded all of the MTIA transaction. As of March 31, 2014, the Company has issued 181,818 shares of Common Stock and warrants to purchase 18,182 shares of Common Stock in exchange for $500,000 in proceeds, and has recorded Common Stock subscription of $1,500,000 in stockholders’ equity pending the issuance of the related stock and warrants. The fair value of warrants issued to MTIA to purchase 18,182 shares of Common Stock was determined to be approximately $48,000 and was recorded as a debit and a credit to Additional Paid in Capital as stock issuance costs. Through May 9, 2014, the Company has received $2,400,000 of MTIA’s $5,000,000 in proceeds in accordance with the MTIA Securities Purchase Agreement. An additional $2,600,000 in proceeds remains to be received from this transaction. | |
Stock Issued in Exchange for Services | |
During the three months ended March 31, 2014 and 2013, the Company issued 2,636 and 7,450 shares, respectively, of Common Stock with a fair value of $8,404 and $92,745, 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_PLANS
EQUITY COMPENSATION PLANS | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Compensation and Retirement Disclosure [Abstract] | ' | |||||||||||||
Note 9. EQUITY COMPENSATION PLANS | ' | |||||||||||||
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 March 31, 2014, 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. The maximum number of shares available under the 2008 Plan is 10,000,000 shares. As of March 31, 2014, there were 163,444 restricted shares of Common Stock issued and options to purchase 1,451,264 shares of Common Stock outstanding under the 2008 Plan and 8,372,292 shares available for future grants. | ||||||||||||||
The following table shows the remaining shares available for future grants for each plan and outstanding shares: | ||||||||||||||
Equity Compensation Plans | Not Pursuant to a Plan | |||||||||||||
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 | ) | (163,444 | ) | ||||||||||
Stock options granted | (154,449 | ) | (1,666,433 | ) | ||||||||||
Add back options cancelled before exercise | 74,849 | 202,169 | ||||||||||||
Less shares no longer available due to Plan expiration | (67,900 | ) | — | |||||||||||
Remaining shares available for future grants at March 31, 2014 | — | 8,372,292 | ||||||||||||
Stock options granted | 154,449 | 1,666,433 | 310,000 | |||||||||||
Less:Stock options cancelled | (74,849 | ) | (202,169 | ) | (188,333 | ) | ||||||||
Stock options exercised | (35,600 | ) | (13,000 | ) | (66,667 | ) | ||||||||
Net shares outstanding before restricted stock | 44,000 | 1,451,264 | 55,000 | |||||||||||
Net restricted stock issued net of cancellations | 12,500 | 163,444 | 6,485 | |||||||||||
Outstanding shares at March 31, 2014 | 56,500 | 1,614,708 | 61,485 | |||||||||||
STOCK_OPTIONS
STOCK OPTIONS | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Notes to Financial Statements | ' | |||||||||||||
Note 10. STOCK OPTIONS | ' | |||||||||||||
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model with certain assumptions noted below. 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 financial statements, to estimate option exercise and employee termination and forfeitures within the valuation model. The expected term of stock options granted under the Company’s stock plans is based on the average of the contractual term (generally 10 years) and the vesting period (generally 24 to 42 months). The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. | ||||||||||||||
For options issued and outstanding during the three month periods ended March 31, 2014, and 2013, the Company recorded additional paid-in capital and non-cash compensation expense of $158,000 and $202,000, respectively, each net of estimated forfeitures. | ||||||||||||||
The assumptions used principally for stock options granted to employees and members of the Company’s Board of Directors in the three months ended March 31, 2014 and 2013 were as follows: | ||||||||||||||
2014 | 2013 | |||||||||||||
Risk-free interest rate | 1.99% – 2.71 | % | 1.09% – 1.23 | % | ||||||||||
Expected dividend yield | — | — | ||||||||||||
Expected term | 6.5 years | 6.5 years | ||||||||||||
Forfeiture rate (excluding fully vested stock options) | 15 | % | 15 | % | ||||||||||
Expected volatility | 141 | % | 140% – 141 | % | ||||||||||
A summary of stock option activity as of and for the three months ended March 31, 2014 is as follows: | ||||||||||||||
Weighted- | Weighted- | |||||||||||||
Average | Average | Aggregate | ||||||||||||
Exercise | Remaining | Intrinsic | ||||||||||||
Shares | Price | Contractual | Value | |||||||||||
Stock Options | Term | |||||||||||||
Outstanding options at January 1, 2014 | 1,455,432 | $ | 4.9 | |||||||||||
Granted | 153,500 | $ | 3.31 | |||||||||||
Exercised | — | $ | — | |||||||||||
Forfeited or expired | (58,668 | ) | $ | 8.41 | ||||||||||
Outstanding options at March 31, 2014 | 1,550,264 | $ | 4.61 | 9.07 years | $ | — | ||||||||
Exercisable options at March 31, 2014 | 218,591 | $ | 10.78 | 5.74 years | $ | — | ||||||||
The weighted-average grant-date fair value of stock options granted during the three months ended March 31, 2014 was $3.31 per share. As of March 31, 2014, there was approximately $2,092,000 of total unrecognized compensation expense related to non-vested share-based option compensation 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 FDA approval for Symphony or the sale of substantially all of the stock or assets of the Company, unrecognized compensation is expected to be recognized over the next four years. |
RESTRICTED_STOCK
RESTRICTED STOCK | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 11. RESTRICTED STOCK | ' | ||||||||
For restricted stock issued and outstanding during the three month period ended March 31, 2014, and 2013, the Company incurred non-cash compensation expense of approximately $188,000 and $161,000, respectively, each net of estimated forfeitures. | |||||||||
During the three months ended March 31, 2014, the Company granted an aggregate of 17,136 restricted shares of Common Stock to certain officers, employees, directors and consultants of the Company. The grants were issued pursuant to the 2008 Plan. | |||||||||
A summary of non-vested restricted stock activity as of and for the three months ended March 31, 2014 is as follows: | |||||||||
Restricted Stock | Weighted- | ||||||||
Average | |||||||||
Shares | Grant-Date | ||||||||
Fair Value | |||||||||
Non-vested shares at January 1, 2014 | 201,655 | $ | 10.66 | ||||||
Granted | 17,136 | $ | 3.17 | ||||||
Vested | (36,362 | ) | $ | 5.1 | |||||
Forfeited | — | $ | — | ||||||
Non-vested shares at March 31, 2014 | 182,429 | $ | 11.06 | ||||||
Among the 182,429 shares of non-vested restricted stock, the various vesting criteria include the following: | |||||||||
· 54,510 shares of restricted stock vest upon the FDA approval of Symphony or the sale of the Company; and | |||||||||
· 127,919 shares of restricted stock vest over four years, at each of the anniversary dates of the grants. | |||||||||
As of March 31, 2014, there was approximately $763,000 of total unrecognized compensation expense related to non-vested share-based restricted stock arrangements granted pursuant to the Company’s equity compensation plans that vest over time in the foreseeable future. As of March 31, 2014, the Company cannot estimate the timing of completion of 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 | 3 Months Ended | |||||||||
Mar. 31, 2014 | ||||||||||
Notes to Financial Statements | ' | |||||||||
Note 12. 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: | ||||||||||
2014 | 2013 | |||||||||
Risk-free interest rate | 1.53% - 1.73 | % | 0.70% - 2.23 | % | ||||||
Expected dividend yield | — | — | ||||||||
Expected term (contractual term) | 3.42 – 5 years | 0.06 - 5 years | ||||||||
Forfeiture rate | — | — | ||||||||
Expected volatility | 121% - 122 | % | 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 three months ended March 31, 2014, the Company issued 18,182 warrants in connection with a partial closing related to the private placement of the Company’s Common Stock with MTIA (See Note 8). | ||||||||||
At March 31, 2014, the Company had the following outstanding warrants: | ||||||||||
Number of | Exercise Price | Date of Expiration | ||||||||
Shares | ||||||||||
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 | 3.48 years | |||||||||
Outstanding warrants accounted for as equity: | ||||||||||
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 | 34,147 | 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 | |||||||
Granted to investors in private placement of common stock | 18,182 | 2.75 | 2/20/19 | |||||||
Total outstanding warrants accounted for as equity | 482,393 | |||||||||
Weighted average exercise price | $ | 14.43 | ||||||||
Weighted average time to expiration | 2.14 years | |||||||||
Totals for all warrants outstanding: | ||||||||||
Total | 1,182,393 | |||||||||
Weighted average exercise price | $ | 18.09 | ||||||||
Weighted average time to expiration | 3.01 years | |||||||||
A summary of warrant activity for the three months ended March 31, 2014 is as follows: | ||||||||||
Warrants | Shares | Weighted- Average Exercise Price | ||||||||
Outstanding warrants at January 1, 2014 | 1,209,211 | $ | 17.92 | |||||||
Granted | 18,182 | $ | 2.75 | |||||||
Exercised | — | $ | — | |||||||
Forfeited or expired | (45,000 | ) | $ | 7.3 | ||||||
Outstanding warrants at March 31, 2014 | 1,182,393 | $ | 18.09 | |||||||
LICENSING_AND_OTHER_REVENUE
LICENSING AND OTHER REVENUE | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
Note 13. LICENSING AND OTHER REVENUE | ' |
In 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 and the right to receive future milestone payments and royalties. The Company recognizes these upfront, nonrefundable payments as revenue on a straight-line basis over the contractual or estimated performance period. During the three months ended March 31, 2014 and 2013, the Company recorded approximately $19,000 and $23,000, respectively, of nonrefundable license revenue. As of March 31, 2014, approximately $76,000 is recognizable over the next 12 months and is shown as current deferred revenue. The remaining $57,000 is recognizable as revenue beyond the 12 month period and is classified as non-current. | |
In December 2013, in connection with a capital raising transaction, the Company entered into a license, development and commercialization agreement with MTIA (the “License Agreement”). Later in December 2013 and January 2014, the License Agreement with MTIA was amended as a result of difficulties in transferring funds from MTIA to the Company under the capital raising transaction. The amendment provides that the Company 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 the Company has received the full proceeds from the capital raising transaction. As of March 31, 2014, the Company had received $2,000,000 of MTIA’s $5,000,000 in proceeds in accordance with the capital raising transaction (see Note 8). Subsequent to March 31, 2014, the Company has received from MTIA an additional $400,000 in proceeds. A total of $2,600,000 in proceeds remains to be received from this transaction. |
LITIGATION
LITIGATION | 3 Months Ended |
Mar. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
NOTE 14. 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, sought 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. In March 2014, this complaint was dismissed without prejudice by the Court. The plaintiff did not file a new complaint by the April 2014 deadline, nor did the plaintiff appeal the Court’s decision by the April 2014 deadline. Accordingly, this matter is now closed. | |
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 asserting counterclaims against Dr. Mooney. Dr. Mooney has denied the allegations of the counterclaims. We believe we have strong defenses to the claims asserted and we intend to defend them vigorously. We similarly believe we have strong support for our counterclaims and will pursue them vigorously. The Court has set a tentative date in July 2015. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2014 | |
Subsequent Events | ' |
Note 15. SUBSEQUENT EVENTS | ' |
Management has evaluated events subsequent to March 31, 2014. Other than as discussed below and in Notes 1, 8, 13 and 14, there are no subsequent events that require adjustment to or disclosure in the Financial Statements. | |
On April 3, 2014, an investor group led by Platinum Management (NY) LLC (the “Platinum Group”), which owns approximately 19.9% of our common stock, notified us of its intention on behalf of itself and other members of its group (collectively, the “Platinum Group”) to nominate Shepard M. Goldberg for election as a director at the 2014 Annual Meeting of Stockholders in opposition to one of the candidates recommended for election by the Board. On April 17, 2014, the Platinum Group filed a preliminary proxy statement with the SEC confirming its intention to conduct a proxy contest in connection with the 2014 Annual Meeting and solicit proxies for the election to the Board of Mr. Goldberg. If a proxy contest involving the Platinum Group ensues, we could incur substantial costs and disruption of our operations. |
ORGANIZATION_AND_BASIS_OF_PRES1
ORGANIZATION AND BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
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 Symphony, allows for enhanced skin permeation that enables extraction of analytes such as glucose. | |
The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Sontra Medical, Inc., a Delaware corporation. All significant intercompany balances and transactions have been eliminated in consolidation. These financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States consistent with those applied in, and should be read in conjunction with, the Company’s audited consolidated financial statements and related footnotes for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission (“SEC”) on March 28, 2014. These financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of March 31, 2014 and its results of operations and cash flows for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or for the full year. These interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements as allowed by the relevant SEC rules and regulations; however, the Company believes that its disclosures are adequate to ensure that the information presented is not misleading. | |
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 consolidated financial statements 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. As of March 31, 2014, the Company had cash of approximately $7,081,000, working capital of approximately $5,665,000, and an accumulated deficit of approximately $115,742,000. The Company continues to incur recurring losses from operations. The Company will need to collect the remaining proceeds under its current financing arrangement and secure additional capital to fund its product development, research, manufacturing and clinical programs in its current planned operations. The Company has funded its operations in the past primarily through debt and equity issuances. Management intends to complete its current financing arrangement with Medical Technologies Innovation Asia Ltd. (“MTIA”) and will continue to pursue additional financing to fund its operations. No assurances can be given that additional capital will be available on terms acceptable to the Company. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. | |
During the three months ended March 31, 2014, the Company received total proceeds of $2,000,000 in connection with the MTIA financing agreement. Subsequent to March 31, 2014, the Company received additional net cash proceeds from the Common Stock financing with MTIA of $400,000 as part of its total $5,000,000 investment (see Note 8). As of May 9, 2014, an additional $2,600,000 in proceeds remains to be received from this transaction. Management believes that the cash to be received from this Common Stock financing coupled with the cash on hand at March 31, 2014 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. |
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 3 Months Ended | |||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||
Intangible Assets Tables | ' | |||||||||||||||||
Intangible assets | ' | |||||||||||||||||
As of March 31, 2014 and December 31, 2013, intangible assets related to this Acquisition are summarized as follows: | ||||||||||||||||||
2014 | 2013 | |||||||||||||||||
Estimated | Accumulated | |||||||||||||||||
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 calendar 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) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Operating Lease Commitments Tables | ' | ||||||||||||
Future minimum lease payments | ' | ||||||||||||
Future minimum lease payments for each of the next five years under these operating leases at March 31, 2014 are approximately as follows: | |||||||||||||
Franklin | Philadelphia | Total | |||||||||||
Year Ending December 31, | |||||||||||||
2014 | $ | 332,000 | $ | 142,000 | $ | 474,000 | |||||||
2015 | 444,000 | 192,000 | 636,000 | ||||||||||
2016 | 454,000 | 196,000 | 650,000 | ||||||||||
2017 | 382,000 | 82,000 | 464,000 | ||||||||||
2018 | — | — | — | ||||||||||
Total | $ | 1,612,000 | $ | 612,000 | $ | 2,224,000 | |||||||
DERIVATIVE_WARRANT_LIABILITY_T
DERIVATIVE WARRANT LIABILITY (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
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: | |||||||||
2014 | 2013 | ||||||||
Derivative warrant liability as of January 1 | $ | 1,119,155 | $ | 5,585,141 | |||||
Total unrealized losses included in net loss (1) | 15,000 | 741,682 | |||||||
Total realized losses included in net loss(1) | — | — | |||||||
Total unrealized gains included in net loss (1) | (155,000 | ) | (2,270,000 | ) | |||||
Total realized gains included in net loss (1) | — | (152,668 | ) | ||||||
Reclassification of liability to additional paid-in capital for warrants exercised | — | — | |||||||
Derivative warrant liability as of March 31 | $ | 979,155 | $ | 3,904,155 | |||||
_______________ | |||||||||
(1) Included in Gain on Revaluation of Derivative Warrant Liability in the Consolidated Statement of Operations. |
EQUITY_COMPENSATION_PLANS_Tabl
EQUITY COMPENSATION PLANS (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Compensation and Retirement Disclosure [Abstract] | ' | |||||||||||||
Share based compensation options | ' | |||||||||||||
The following table shows the remaining shares available for future grants for each plan and outstanding shares: | ||||||||||||||
Equity Compensation Plans | Not Pursuant to a Plan | |||||||||||||
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 | ) | (163,444 | ) | ||||||||||
Stock options granted | (154,449 | ) | (1,666,433 | ) | ||||||||||
Add back options cancelled before exercise | 74,849 | 202,169 | ||||||||||||
Less shares no longer available due to Plan expiration | (67,900 | ) | — | |||||||||||
Remaining shares available for future grants at March 31, 2014 | — | 8,372,292 | ||||||||||||
Stock options granted | 154,449 | 1,666,433 | 310,000 | |||||||||||
Less:Stock options cancelled | (74,849 | ) | (202,169 | ) | (188,333 | ) | ||||||||
Stock options exercised | (35,600 | ) | (13,000 | ) | (66,667 | ) | ||||||||
Net shares outstanding before restricted stock | 44,000 | 1,451,264 | 55,000 | |||||||||||
Net restricted stock issued net of cancellations | 12,500 | 163,444 | 6,485 | |||||||||||
Outstanding shares at March 31, 2014 | 56,500 | 1,614,708 | 61,485 | |||||||||||
STOCK_OPTIONS_Tables
STOCK OPTIONS (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Stock Options Tables | ' | |||||||||||||
Assumption used for stock option granted | ' | |||||||||||||
The assumptions used principally for stock options granted to employees and members of the Company’s Board of Directors in the three months ended March 31, 2014 and 2013 were as follows: | ||||||||||||||
2014 | 2013 | |||||||||||||
Risk-free interest rate | 1.99% – 2.71 | % | 1.09% – 1.23 | % | ||||||||||
Expected dividend yield | — | — | ||||||||||||
Expected term | 6.5 years | 6.5 years | ||||||||||||
Forfeiture rate (excluding fully vested stock options) | 15 | % | 15 | % | ||||||||||
Expected volatility | 141 | % | 140% – 141 | % | ||||||||||
Stock option activity | ' | |||||||||||||
A summary of stock option activity as of and for the three months ended March 31, 2014 is as follows: | ||||||||||||||
Weighted- | Weighted- | |||||||||||||
Average | Average | Aggregate | ||||||||||||
Exercise | Remaining | Intrinsic | ||||||||||||
Shares | Price | Contractual | Value | |||||||||||
Stock Options | Term | |||||||||||||
Outstanding options at January 1, 2014 | 1,455,432 | $ | 4.9 | |||||||||||
Granted | 153,500 | $ | 3.31 | |||||||||||
Exercised | — | $ | — | |||||||||||
Forfeited or expired | (58,668 | ) | $ | 8.41 | ||||||||||
Outstanding options at March 31, 2014 | 1,550,264 | $ | 4.61 | 9.07 years | $ | — | ||||||||
Exercisable options at March 31, 2014 | 218,591 | $ | 10.78 | 5.74 years | $ | — | ||||||||
RESTRICTED_STOCK_Tables
RESTRICTED STOCK (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
Nonvested restricted stock activity | ' | ||||||||
A summary of non-vested restricted stock activity as of and for the three months ended March 31, 2014 is as follows: | |||||||||
Restricted Stock | Weighted- | ||||||||
Average | |||||||||
Shares | Grant-Date | ||||||||
Fair Value | |||||||||
Non-vested shares at January 1, 2014 | 201,655 | $ | 10.66 | ||||||
Granted | 17,136 | $ | 3.17 | ||||||
Vested | (36,362 | ) | $ | 5.1 | |||||
Forfeited | — | $ | — | ||||||
Non-vested shares at March 31, 2014 | 182,429 | $ | 11.06 | ||||||
WARRANTS_Tables
WARRANTS (Tables) | 3 Months Ended | |||||||||
Mar. 31, 2014 | ||||||||||
Warrants Tables | ' | |||||||||
Warrants assumptions utilized by the Company | ' | |||||||||
The following assumptions were utilized by the Company: | ||||||||||
2014 | 2013 | |||||||||
Risk-free interest rate | 1.53% - 1.73 | % | 0.70% - 2.23 | % | ||||||
Expected dividend yield | — | — | ||||||||
Expected term (contractual term) | 3.42 – 5 years | 0.06 - 5 years | ||||||||
Forfeiture rate | — | — | ||||||||
Expected volatility | 121% - 122 | % | 123% - 144 | % | ||||||
Outstanding Warrants | ' | |||||||||
At March 31, 2014, the Company had the following outstanding warrants: | ||||||||||
Number of | Exercise Price | Date of Expiration | ||||||||
Shares | ||||||||||
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 | 3.48 years | |||||||||
Outstanding warrants accounted for as equity: | ||||||||||
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 | 34,147 | 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 | |||||||
Granted to investors in private placement of common stock | 18,182 | 2.75 | 2/20/19 | |||||||
Total outstanding warrants accounted for as equity | 482,393 | |||||||||
Weighted average exercise price | $ | 14.43 | ||||||||
Weighted average time to expiration | 2.14 years | |||||||||
Totals for all warrants outstanding: | ||||||||||
Total | 1,182,393 | |||||||||
Weighted average exercise price | $ | 18.09 | ||||||||
Weighted average time to expiration | 3.01 years | |||||||||
Warrant Activity | ' | |||||||||
A summary of warrant activity for the three months ended March 31, 2014 is as follows: | ||||||||||
Warrants | Shares | Weighted- Average Exercise Price | ||||||||
Outstanding warrants at January 1, 2014 | 1,209,211 | $ | 17.92 | |||||||
Granted | 18,182 | $ | 2.75 | |||||||
Exercised | — | $ | — | |||||||
Forfeited or expired | (45,000 | ) | $ | 7.3 | ||||||
Outstanding warrants at March 31, 2014 | 1,182,393 | $ | 18.09 | |||||||
ORGANIZATION_AND_BASIS_OF_PRES2
ORGANIZATION AND BASIS OF PRESENTATION (Details Narrative) (USD $) | 3 Months Ended | |||
Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | |
Organization And Basis Of Presentation | ' | ' | ' | ' |
Reverse stock split ratio | '1-for-10 | ' | ' | ' |
Liquidity and Management's Plans | ' | ' | ' | ' |
Cash | $7,081,051 | $8,055,385 | $5,170,251 | $3,747,210 |
Working capital deficit | 5,665,000 | ' | ' | ' |
Accumulated deficit | 115,742,000 | ' | ' | ' |
Net cash proceeds from MTIA Common Stock financing | 2,000,000 | ' | ' | ' |
Total MTIA investment | 5,000,000 | ' | ' | ' |
Additional proceeds from MTIA financing | 400,000 | ' | ' | ' |
Proceeds remaining to be received | $2,600,000 | ' | ' | ' |
CASH_AND_CASH_EQUIVALENTS_Deta
CASH AND CASH EQUIVALENTS (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 | Dec. 31, 2012 |
Cash And Cash Equivalents | ' | ' | ' | ' |
Cash and cash equivalents | $7,081,051 | $8,055,385 | $5,170,251 | $3,747,210 |
Letter of credit, landlord | 52,488 | ' | ' | ' |
Letter of credit, vendor | $250,000 | ' | ' | ' |
INTANGIBLE_ASSETS_Details
INTANGIBLE ASSETS (Details) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 |
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 $) | 3 Months Ended |
Mar. 31, 2014 | |
Estimated amortization expense | ' |
2014 | ' |
2015 | ' |
2016 | 2,406,000 |
2017 | 2,406,000 |
2018 | $2,406,000 |
OPERATING_LEASE_COMMITMENTS_De
OPERATING LEASE COMMITMENTS (Details) (USD $) | Mar. 31, 2014 |
OPERATING LEASE COMMITMENTS | ' |
Year ended December 31, 2014 | $474,000 |
Year ended December 31, 2015 | 636,000 |
Year ended December 31, 2016 | 650,000 |
Year ended December 31, 2017 | 464,000 |
Year ended December 31, 2018 | ' |
Total | 2,224,000 |
Franklin [Member] | ' |
OPERATING LEASE COMMITMENTS | ' |
Year ended December 31, 2014 | 332,000 |
Year ended December 31, 2015 | 444,000 |
Year ended December 31, 2016 | 454,000 |
Year ended December 31, 2017 | 382,000 |
Year ended December 31, 2018 | ' |
Total | 1,612,000 |
Philadelphia [Member] | ' |
OPERATING LEASE COMMITMENTS | ' |
Year ended December 31, 2014 | 142,000 |
Year ended December 31, 2015 | 192,000 |
Year ended December 31, 2016 | 196,000 |
Year ended December 31, 2017 | 82,000 |
Year ended December 31, 2018 | ' |
Total | $612,000 |
OPERATING_LEASE_COMMITMENTS_De1
OPERATING LEASE COMMITMENTS (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Operating Lease Commitments | ' | ' |
Facilities lease expense | $80,000 | $290,000 |
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 $) | 3 Months Ended | |||
Mar. 31, 2014 | 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% |
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 |
Amortization of fair value Commitment warrant | 242,001 | ' | ' | ' |
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 warrant issued | ' | 300,000 | ' | ' |
September Request warrant term | ' | ' | '5 years | ' |
Warrant exercise price September Request | ' | ' | $21.10 | ' |
Warrant exercise price September Request, maximum | ' | ' | $22.70 | ' |
Fair value September Request | ' | ' | 3,455,000 | ' |
Debt Discount | ' | ' | 3,000,000 | ' |
Interest Expense | ' | ' | 455,000 | ' |
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 $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | ||
DERIVATIVE WARRANT LIABILITY | ' | ' | |
Beginning balance | $1,119,155 | $5,585,141 | |
Total unrealized losses included in net loss | 15,000 | 741,982 | |
Total realized losses included in net loss | ' | ' | |
Total unrealized gains included in net loss | -155,000 | [1] | -2,270,000 |
Total realized gains included in net loss | ' | [1] | -152,668 |
Reclassification of derivative warrant liability to additional paid-in capital for derivative warrants exercised | ' | ' | |
Ending balance | $979,155 | $3,904,155 | |
[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 $) | 3 Months Ended | |||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | |
Derivative Warrant Liability Details Narrative | ' | ' | ' | ' |
Outstanding warrants | $1,209,211 | ' | $1,182,393 | ' |
Derivative financial instruments | 700,000 | ' | ' | 700,000 |
Fair value of derivative instruments on recurring basis | 979,000 | ' | ' | 1,119,000 |
Gain/Loss on Revaluation of Derivative Warrant Liability | $140,000 | $1,681,000 | ' | ' |
PREFERRED_STOCK_Details_Narrat
PREFERRED STOCK (Details Narrative) | Mar. 31, 2014 | Dec. 31, 2013 |
Series B Preferred Stock [Member] | ' | ' |
Class of Stock [Line Items] | ' | ' |
Authorized Preferred Stock | 40,000 | ' |
SeriesCPreferredStock [Member] | ' | ' |
Class of Stock [Line Items] | ' | ' |
Authorized Preferred Stock | 10,000 | 10,000 |
Issued and outstanding | 1,000 | 1,000 |
SeriesDPreferredStock [Member] | ' | ' |
Class of Stock [Line Items] | ' | ' |
Authorized Preferred Stock | 3,600,000 | 3,600,000 |
Issued and outstanding | 1,000,000 | 1,000,000 |
Series E Preferred Stock [Member] | ' | ' |
Class of Stock [Line Items] | ' | ' |
Authorized Preferred Stock | 1,748,613 | 1,748,613 |
COMMON_STOCK_Details_Narrative
COMMON STOCK (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Common stock, shares authorized | 150,000,000 | ' | 150,000,000 |
Common stock, Shares outstanding | 11,967,414 | ' | 11,776,578 |
Share sale price | $2.75 | ' | ' |
Stock issued in exchange for services | 2,636 | 7,450 | ' |
Fair value of stock issued in exchange for services | $8,404 | $92,745 | ' |
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 | ' | ' |
December 2013 [Member] | ' | ' | ' |
Common Stock public offering | 1,818,182 | ' | ' |
Shares purchased | 69,569 | ' | ' |
Share sale price | $2.75 | ' | ' |
Series E Preferred Stock purchased | 1,748,613 | ' | ' |
Platinum Securities Purchase Agreement warrants | 181,818 | ' | ' |
Gross proceeds | 5,000,000 | ' | ' |
Issuance costs | 100,000 | ' | ' |
Fair value of stock issued in exchange for services | $371,140 | ' | ' |
EQUITY_COMPENSATION_PLANS_Deta
EQUITY COMPENSATION PLANS (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Shares Available For Issuance | ' |
Add back options cancelled before exercise | -58,668 |
Outstanding Options and Restricted Stock | ' |
Options exercised | ' |
Ending Balance | 61,485 |
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 | -163,444 |
Stock options granted | -1,666,433 |
Add back options cancelled before exercise | 202,169 |
Options cancelled by plan vote | ' |
Remaining shares available for future grants | 8,372,292 |
Outstanding Options and Restricted Stock | ' |
Total granted | 1,666,433 |
Options cancelled | -202,169 |
Options exercised | -13,000 |
Net shares outstanding before restricted stock | 1,451,264 |
Net restricted stock issued net of cancellations | 163,444 |
Ending Balance | 1,614,708 |
NotPursuanttoaPlanMember | ' |
Outstanding Options and Restricted Stock | ' |
Total granted | 310,000 |
Options cancelled | -188,333 |
Options exercised | -66,667 |
Net shares outstanding before restricted stock | 55,000 |
Net restricted stock issued net of cancellations | 6,485 |
EQUITY_COMPENSATION_PLANS_Deta1
EQUITY COMPENSATION PLANS (Details Narrative) | Mar. 31, 2014 | Dec. 31, 2013 |
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 | 163,444 | ' |
Options to purchase an aggregate of shares | 1,451,264 | ' |
Maximum authorized shares | 10,000,000 | ' |
Shares Future grants | 8,372,292 | ' |
STOCK_OPTIONS_Details_1
STOCK OPTIONS (Details 1) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
STOCK OPTIONS AND RESTRICTED STOCK | ' | ' |
Risk-free interest rate minimum | 1.99% | 1.09% |
Risk-free interest rate maximum | 2.71% | 1.23% |
Expected dividend yield | ' | ' |
Expected term, minimum | '6 years 6 months | '6 years 6 months |
Expected term, maximum | '6 years 6 months | '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 | 141.00% | 140.00% |
Expected volatility | 141.00% | 141.00% |
STOCK_OPTIONS_Details_2
STOCK OPTIONS (Details 2) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Shares | ' |
Beginning Balance | 1,455,432 |
Granted | 153,500 |
Exercised | ' |
Forfeited or expired | -58,668 |
Ending Balance | 1,550,264 |
Exercisable at March 31, 2014 | 218,591 |
Weighted-Average Exercise Price | ' |
Beginning Balance | $4.90 |
Granted | $3.31 |
Exercised | ' |
Forfeited or expired | $8.41 |
Ending Balance | $4.61 |
Exercisable at March 31, 2014 | $10.78 |
Weighted-Average Remaining Contractual Term | ' |
Beginning Balance | '9 years 0 months 26 days |
Ending Balance | '5 years 8 months 27 days |
Aggregate Intrinsic Value | ' |
Beginning Balance | ' |
Ending Balance | ' |
STOCK_OPTIONS_Details_Narrativ
STOCK OPTIONS (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Stock Options And Restricted Stock | ' | ' |
Weighted-average grant-date fair value of stock options granted | $3.31 | ' |
Total unrecognized compensation expense | $2,092,000 | ' |
Additional paid-in capital | 158,000 | 202,000 |
Non-cash compensation expense | $158,000 | $202,000 |
RESTRICTED_STOCK_Details
RESTRICTED STOCK (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Shares | ' |
Nonvested at January 1, 2014 | 201,655 |
Granted | 17,136 |
Vested | -36,362 |
Forfeited | ' |
Nonvested at March 31, 2014 | 182,429 |
Weighted- Average Grant-DateFair Value | ' |
Nonvested at January 1, 2014 | $10.66 |
Granted | $3.17 |
Vested | $5.10 |
Forfeited | ' |
Nonvested at March 31, 2014 | $11.06 |
RESTRICTED_STOCK_Details_Narra
RESTRICTED STOCK (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Stock Options And Restricted Stock | ' | ' |
Non-cash compensation expense | $188,000 | $161,000 |
Aggregate restricted shares of Common Stock pursuant to 2008 plan | 17,136 | ' |
Shares of non-vested restricted stock | 182,429 | ' |
Total unrecognized compensation expense | $763,000 | ' |
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 | 127,919 | ' |
WARRANTS_Details
WARRANTS (Details) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Warrants Details | ' | ' |
Risk-free interest rate | 1.53% | 0.70% |
Risk-free interest rate, maximum | 1.73% | 2.23% |
Expected dividend yield | 0.00% | 0.00% |
Expected term (contractual term) | '3 years 5 months 1 day | '0 years 0 months 22 days |
Expected term (contractual term), maximum | '5 years | '5 years |
Forfeiture rate | 0.00% | 0.00% |
Expected volatility | 121.00% | 123.00% |
Expected volatility, maximum | 122.00% | 144.00% |
WARRANTS_Details_1
WARRANTS (Details 1) (USD $) | Mar. 31, 2014 |
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 5 months 23 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 $) | Mar. 31, 2014 |
Warrants | ' |
Total Warrants Outstanding | 1,182,393 |
Total Weighted average exercise price | $18.09 |
Total Weighted average time to expiration in years | '3 years 0 months 4 days |
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 | 34,147 |
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 |
PreferredStock3 [Member] | ' |
Warrants | ' |
Number of Shares Exercisable | 18,182 |
Exercise Price | $2.75 |
Date of Expiration | '2019-02-20 |
TotaloutstandingwarrantsaccountedforasequityMember | ' |
Warrants | ' |
Number of Shares Exercisable | 482,393 |
WeightedaverageexercisepriceMember | ' |
Warrants | ' |
Exercise Price | $14.43 |
WeightedaveragetimetoexpirationinyearsMember | ' |
Warrants | ' |
Expiration period | '2 years 1 month 21 days |
WARRANTS_Details_3
WARRANTS (Details 3) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Shares | ' |
Beginning Balance | 1,209,211 |
Granted | 18,182 |
Exercised | ' |
Forfeited or expired | -45,000 |
Ending Balance | 1,182,393 |
Weighted-Average Exercise Price | ' |
Beginning Balance | $17.92 |
Granted | 2.75 |
Exercised | ' |
Forfeited or expired | 7.3 |
Ending Balance | $18.09 |
LICENSING_AND_OTHER_REVENUE_De
LICENSING AND OTHER REVENUE (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Licensing and Other Revenue | ' | ' | ' |
Nonrefundable license revenue | $19,107 | $22,557 | ' |
Deferred revenue recognized over next twelve months | 76,428 | ' | 76,428 |
Deferred revenue to be recognized after next twelve months | 57,321 | ' | 76,428 |
Net cash proceeds from MTIA Common Stock financing | 2,000,000 | ' | ' |
Total MTIA investment | 5,000,000 | ' | ' |
Additional proceeds from MTIA financing | 400,000 | ' | ' |
Proceeds remaining to be received | 2,600,000 | ' | ' |
Handok [Member] | ' | ' | ' |
Licensing and Other Revenue | ' | ' | ' |
Minimum licensing term | '10 years | ' | ' |
Nonrefundable license revenue | 19,000 | 23,000 | ' |
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 | 57,000 | ' | ' |
Net cash proceeds from MTIA Common Stock financing | 2,000,000 | ' | ' |
Total MTIA investment | 5,000,000 | ' | ' |
Additional proceeds from MTIA financing | 400,000 | ' | ' |
Proceeds remaining to be received | $2,600,000 | ' | ' |