The amounts in the Company’s Consolidated Condensed Balance Sheets for notes receivable, accounts payable and long-term debt approximate fair value due to their short-term nature.
There were no required fair value measurements for non-financial assets and liabilities in the second quarter of 2009.
Comprehensive Loss
The Company accounts for comprehensive loss as prescribed by SFAS No. 130, “Reporting Comprehensive Income.” Comprehensive income (loss) is the total net income (loss) plus all changes in equity during the period except those changes resulting from investment by and distribution to owners. Total comprehensive loss was $2,549 and $4,683 for the three months ended June 30, 2009 and 2008, respectively, and $5,693 and $11,577 for the six months ended June 30, 2009 and 2008, respectively.
New Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162" ("SFAS 168"), which establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with GAAP. SFAS 168 explicitly recognizes rules and interpretive releases of the SEC under federal securities laws as authoritative GAAP for SEC registrants. SFAS 168 is effective for financial statements issued for interim and annual reporting periods ending after September 15, 2009 (the quarter ending September 30, 2009 for the Company) and will not have an impact on the Company's final position or results of operations.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events," ("SFAS 165"), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. SFAS 165 is effective for financial statements issued for interim and annual reporting periods ending after June 15, 2009 (the quarter ending June 30, 2009 for the Company). The adoption of SFAS 165 did not have an impact on the Company's financial position or results of operations.
In April 2009, the FASB issued FSP No. FAS 107-1 and Accounting Principles Board ("APB") Opinion No. 28-1, "Interim Disclosures about Fair Value of Financial Instruments" ("FSP FAS 107-1" and "APB 28-1"). FSP FAS 107-1 and APB 28-1 amend SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," to require disclosures, in interim reporting periods and in financial statements for annual reporting periods, regarding the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not on the company's balance sheet. FSP FAS 107-1 and APB 28-1 also amend FASB APB Opinion No. 28, "Interim Financial Reporting," to require entities to disclose the methods and significant assumptions used to estimate the fair value of financial instruments and describe changes in methods and significant assumptions, in both interim and annual financial statements. FSP FAS 107-1 and APB 28-1 are effective for interim reporting periods ending after June 15, 2009 (the quarter ending June 30, 2009 for the Company). While the adoption of FSP FAS 107-1 and APB 28-1 impacts the Company's disclosures, it does not have an impact on the Company's financial position or results of operations.
In April 2009, the FASB issued FSP SFAS 115-2 and SFAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," which modify the recognition requirements for other-than-temporary impairments of debt securities and enhances existing disclosures with respect to other-than-temporary impairments of debt and equity securities. FSP SFAS 115-2 and SFAS 124-2 are effective for interim and annual reporting periods ending after June 15, 2009 (the quarter ending June 30, 2009 for the Company). The adoption of FSP SFAS 115-2 and SFAS 124-2 had no impact on the Company’s financial position or results of operations.
In February 2008, the FASB issued a one-year deferral for non-financial assets and liabilities to comply with SFAS No. 157. The Company adopted SFAS No. 157 for financial assets and liabilities effective January 1, 2008 (see Note 1, Fair Value Measurements). The Company adopted SFAS No. 157 as it pertains to non-financial assets and liabilities effective January 1, 2009 and the adoption had no impact on the Company’s financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141 Revised, “Business Combinations” (“SFAS 141R”). SFAS 141R requires an acquirer to determine the fair value of the consideration exchanged as of the acquisition date (i.e. the date the acquirer obtains control). Previously, an acquisition was valued as of the date the parties agreed upon the terms of the transaction. SFAS 141R also modifies, among other things, the accounting for direct costs associated with an acquisition, contingencies acquired and contingent consideration. The Company adopted SFAS 141R effective January 1, 2009 for business combinations occurring after the effective date.
In December 2007, the FASB ratified Emerging Issues Task Force No. 07-1, “Accounting for Collaborative Agreements” (“EITF 07-1”). EITF 07-1 provides guidance regarding financial statement presentation and disclosure of collaborative arrangements, as defined therein. The Company adopted EITF 07-1 effective January 1, 2009 and the adoption had no impact on the Company’s financial position or results of operations.
Note 2 – Liquidity and management’s plans
Since inception, the Company has incurred, and continues to incur, significant losses from operations. At June 30, 2009, the Company had $4,650 in cash and cash equivalents. The Company has realigned its corporate resources and as a result significantly reduced its workforce from 71 employees on December 31, 2007 to 7 employees as of June 30, 2009. In addition, the Company assigned its Cambridge, Massachusetts lease and leased new space at a lower cost. The Company believes that its existing cash and cash equivalents, continuing cash savings resulting from its ongoing realignment and cash conservation efforts and proceeds from the collection of its outstanding notes receivable, will be sufficient to allow the Company to operate through late 2010, including the costs of initiating and completing the Phase Ib/IIa clinical trial for ORE1001, which is expected to be completed in the third quarter of 2010. However, there can be no assurance that the Company will be successful in its continuing realignment and cash conservation efforts, the collection of its outstanding notes receivable or, if necessary, attracting additional financing to allow the Company to complete the clinical trial. Furthermore, there is no assurance if the Company completes its Phase Ib/IIa clinical trial, that the results will be satisfactory or will enable the Company to successfully outlicense its compound. If the Company is not successful in achieving its objectives, it might be necessary to liquidate the Company in late 2010. The balance sheet at June 30, 2009 does not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary in the event of such liquidation.
Note 3 — Stock-based compensation
At June 30, 2009, the Company has the following stock-based compensation plans: the 1997 Equity Incentive Plan (the “Stock Plan”) and the 1997 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”).
The Company recorded stock-based compensation expense of $28 and $70 for the three months ended June 30, 2009 and 2008, respectively, and $56 and $229 for the six months ended June 30, 2009 and 2008, respectively.
Stock Option Awards
The Company determined the fair value of each option grant on the date of grant using the Black-Scholes option pricing model for the indicated periods, with the following assumptions:
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Weighted average fair value of grants | | | $0.34 | | | | $0.96 | | | | $0.28 | | | | $0.97 | |
| Expected volatility | | | 79% | | | | 65% | | | | 79% | | | | 63% | |
| Risk-free interest rate | | | 1.38% | | | 2.53 % to 2.57% | | | 1.31 % to 1.38% | | | 2.53 % to 3.04% | |
| Expected lives | | 5 years | | | 3 years | | | 5 years | | | 3 years | |
| Dividend rate | | | 0% | | | | 0% | | | | 0% | | | | 0% | |
Performance-based non-vested restricted stock awards are recognized as compensation expense over the expected vesting period based on the fair value at the date of grant and the number of shares ultimately expected to vest. The Company’s outstanding restricted stock award at June 30, 2009 was forfeited in the third quarter of 2009. In 2008, the Company had reversed the previously recognized related stock-based compensation expense for this restricted stock award since the Company believed that the achievement of the performance milestones were not probable.
As of June 30, 2009, $220 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 1.9 years. This estimate does not include the impact of other possible stock-based awards that may be made during future periods.
Note 4 — Loan and grant agreements with the State of Maryland
During the second quarter of 2009, the Company received a notice requiring repayment of all amounts potentially due under a loan and a grant agreement with the State of Maryland that total $710 at June 30, 2009. The Company has recorded the amounts due under the loan and grant agreement within current portion of long-term debt and other accrued expenses. The Company is in discussions with the State of Maryland concerning the terms of potential repayment of this amount.
Note 5 — Ocimum Biosolutions Inc. promissory note and related agreements
In connection with the sale of the Company’s Genomics business pursuant to a certain Asset Purchase Agreement with Ocimum Biosolutions Limited, as parent, and Ocimum Biosolutions Inc., a Delaware corporation (“Ocimum”), as Purchaser, which was completed on December 14, 2007, and previously reported, the Company had received as partial payment for the sales price, a $3,000 secured promissory note from Ocimum and Ocimum Biosolutions Limited, guaranteed by Coramandel Prestcrete Private Limited, a company incorporated in the Republic of India. The promissory note, secured by a security agreement between Ocimum and the Company, was due and payable on June 15, 2009.
In June 2009, the Company entered into a superseding $3,000 secured promissory note (“Note”) with Ocimum and its affiliate, Ocimum Biosolutions India Limited, a company incorporated in the Republic of India, which is secured pursuant to a superseding security agreement (“Security Agreement”) with Ocimum and repayment of which is guaranteed by a guaranty agreement with Coramandel Infrastructure Private Limited, a company incorporated in the Republic of India, in favor of the Company. The superseding agreements are effective as of June 15, 2009, and the original promissory note, security agreement and related guarantee agreement have been cancelled and terminated.
In connection with the sale of the Genomics business, the Company had assigned its related real estate lease, but had remained primarily liable through January 2011 in the event Ocimum failed to perform its obligations under the lease. An escrow account served partially to secure Ocimum’s performance. In July 2009, the landlord agreed to release the Company from liability under the lease. The escrow agreement between Ocimum and the Company was terminated and $500 from the escrow amount was paid to the Company and applied to the outstanding principal of the Note.
Under the Note, Ocimum was required to pay at least fifty percent (50%) of the unpaid principal to the Company on or before August 1, 2009. To date, the Company has received payments of $1,500 (including the $500 discussed above), and the remaining balance is required to be paid on or before September 15, 2009. The Note bears interest at the rate of 15% per annum and includes an adjustment to the unpaid principal of four percent (4%) on July 15, 2009, five percent (5%) on August 15, 2009 and eight percent (8%) on September 15, 2009. The Security Agreement secures the Note with Ocimum collateral that includes, but is not limited to, the assets, properties and rights of Ocimum, its cash accounts and its receivables.
Note 6 — Lease abandonment
In the second quarter of 2009, the Company vacated substantially all of its Gaithersburg, Maryland facility and recorded a non-cash accelerated lease expense and write-down of leasehold improvements and other related assets of $749, which is included in Selling, General and Administrative expenses in the Company’s Consolidated Condensed Statements of Operations.
Note 7 — Subsequent events
In May 2009, the Company was notified by Nasdaq that it no longer met the requirement for continued listing on the Nasdaq Global Market, due to the fact that its stockholders’ equity fell below the minimum of $10,000. In response, the Company applied for, and Nasdaq approved, a transfer of the Company’s listing from the Nasdaq Global Market to the Nasdaq Capital Market. This transfer occurred on August 3, 2009. The Company’s Common Stock is currently trading below the $1.00 per share price required by Nasdaq for continued listing.
The Company evaluated all events or transactions that occurred after June 30, 2009 and through August 14, 2009, the date these financial statements were issued for recognition and disclosure.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements regarding future events and the future results of Ore Pharmaceuticals Inc. (“Ore Pharmaceuticals”) that are based on current expectations, estimates, forecasts and projections about the industries in which Ore Pharmaceuticals operates and the beliefs and assumptions of the management of Ore Pharmaceuticals. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 under the section entitled “Risk Factors” and in our subsequent filings with the United States Securities and Exchange Commission (“SEC”). Ore Pharmaceuticals undertakes no obligation to revise or update publicly any forward-looking statements to reflect any change in management’s expectations with regard thereto or any change in events, conditions, or circumstances on which any such statements are based.
Unless the context otherwise requires, references in this Form 10-Q to “Ore Pharmaceuticals,” “DioGenix,” the “Company,” “we,” “us,” and “our” refer to Ore Pharmaceuticals Inc. and its formerly wholly owned subsidiary, DioGenix Inc.
Overview
Ore Pharmaceuticals Inc. is a pharmaceutical asset management company. We acquire interests in pharmaceutical assets whose value, we believe, we can significantly enhance through targeted development, with the goal of then monetizing these assets through a sale or out-licensing. In order to fund these activities, we intend to source third-party financing using alternative investment vehicles designed to align the investment profile of each program with the interests of its direct investors, as well as Ore shareholders.
We are establishing a business model under which Ore will earn program management advisory fees, as well as retain substantial economic interests in successful programs. Our goal is to create an investment-driven, investor returns-focused organization with the appropriate corporate structure and skill sets to execute on our strategy. To this end, we have assembled a management team with three key areas of expertise: clinical development, public- and private-market healthcare finance and pharmaceutical business development.
Initially, we will focus on developing and monetizing our current portfolio, which includes four clinical-stage compounds in-licensed from major pharmaceutical companies. Each of these compounds has been successfully tested for tolerability in human clinical trials. We are evaluating our lead compound, ORE1001, as a potential treatment for Inflammatory Bowel Disease (IDB). IDB is a severe gastrointestinal condition that is estimated to affect as many as one million patients in the United States alone. We expect to initiate a Phase Ib/IIa clinical trial in patients with ulcerative colitis – one of the two main disorders comprising IBD – in the second half of 2009.
In May 2009, we were notified by Nasdaq that we no longer met the requirement for continued listing on the Nasdaq Global Market, due to the fact that our stockholders’ equity fell below the minimum of $10 million. In response, we applied for, and Nasdaq approved, a transfer of our listing from the Nasdaq Global Market to the Nasdaq Capital Market effective August 3, 2009.
We have incurred net losses in each year since our inception, including losses of $22.5 million in 2008 and $34.7 million in 2007. At June 30, 2009, we had an accumulated deficit of $378.5 million. Our losses have resulted principally from costs incurred by our ongoing business, as well as businesses we have sold. We expect to incur additional losses in the future.
Results of Operations
Three Months Ended June 30, 2009 and 2008
Revenue. We had less than $0.1 million of revenue for the three months ended June 30, 2009 compared to $1.0 million for the three months ended June 30, 2008. During the three months ended June 30, 2008, our revenue resulted primarily from a licensing agreement for certain technology unrelated to our pharmaceutical asset management business.
Research and Development Expense. Research and development expenses, which now consist almost entirely of costs associated with the further development of ORE1001, decreased to $0.6 million for the three months ended June 30, 2009 from $3.4 million for the same period in 2008. The decrease is primarily a result of lower employee and facility-related costs due to our significant workforce reductions and lower third-party costs for the further development of our lead compound, ORE1001. For 2009, we expect a significant decrease in research and development expenses over 2008, primarily as a result of workforce reductions.
Selling, General and Administrative Expense. Selling, general and administrative expenses, which now consist primarily of accounting, legal, human resources and other general corporate expenses, decreased to $2.0 million for the three months ended June 30, 2009 from $2.5 million for the same period in 2008 primarily as a result of lower employee costs due to our significant workforce reductions, partially offset by $0.7 million of facility-related lease abandonment costs (see Note 6). For 2009, we expect a significant decrease in selling, general and administrative expenses over 2008, primarily as a result of workforce reductions.
Net Interest Income. Net interest income decreased to $0.1 million for the three months ended June 30, 2009 from $0.2 million for the same period in 2008, due to the decline in the balance of our cash and cash equivalents and marketable securities available-for-sale and a decrease in our rates of return on investments.
Six Months Ended June 30, 2009 and 2008
Revenue. We had less than $0.1 million of revenue for the six months ended June 30, 2009 compared to $1.8 million for the six months ended June 30, 2008. During the six months ended June 30, 2008, our revenue resulted primarily from a licensing agreement for certain technology unrelated to our pharmaceutical asset management business.
Research and Development Expense. Research and development expenses, which now consist almost entirely of costs associated with the further development of ORE1001, decreased to $1.6 million for the six months ended June 30, 2009 from $6.2 million for the same period in 2008. The decrease is primarily a result of lower employee and facility-related costs due to our significant workforce reductions.
Selling, General and Administrative Expense. Selling, general and administrative expenses, which now consist primarily of accounting, legal, human resources and other general corporate expenses, decreased to $4.3 million for the six months ended June 30, 2009 from $7.7 million for the same period in 2008 primarily as a result of lower employee costs due to our significant workforce reductions, reduced professional fees relating to strategic planning and the absence of $0.4 million of expense related to the purchase of shares from a former director that occurred in 2008, partially offset by $0.4 million in net facility-related lease abandonment costs in 2009.
Net Interest Income. Net interest income decreased to $0.2 million for the six months ended June 30, 2009 from $0.5 million for the same period in 2008, due to the decline in the balance of our cash and cash equivalents and marketable securities available-for-sale and a decrease in our rates of return on investments.
Liquidity and Capital Resources
Historically, we have financed our operations through the issuance and sale of equity securities, payments from customers and sales of parts of our business and assets from time to time. As of June 30, 2009, we had approximately $4.6 million in cash and cash equivalents, compared to $10.8 million as of December 31, 2008.
Net cash used in operating activities decreased to a negative $6.1 million for the six months ended June 30, 2009 from a negative $12.5 million for the same period in 2008, primarily due to our reduced net loss for the six months ended June 30, 2009. Based on current expectations of cash usage and collection of outstanding notes, we presently anticipate that we will have sufficient cash to operate through late 2010, including the costs of initiating and completing the Phase Ib/IIa clinical trial for ORE1001, which is expected to begin in the second half 2009 and to be completed in the third quarter of 2010. We currently expect our operating cash usage for the third quarter of 2009 to be lower than that of the second quarter. We also expect our operating cash usage for the fourth quarter of 2009 to be significantly lower than in the third quarter.
For the six months ended June 30, 2009, our investing activities were not significant.
In connection with the 2008 sale of DioGenix Inc. to Nerveda, Inc., the balance of the purchase price is due pursuant to a $0.8 million interest bearing promissory note, with receipt of two principal payments of $0.4 million plus interest due December 2009 and June 2010, subject to acceleration in certain events.
In 2008, we assigned our lease in Cambridge, Massachusetts, but remain liable under the lease in the event of the assignee’s default. The lease expires in August 2013 and at June 30, 2009, the total remaining amounts due under the lease for the balance of the term is $4.7 million.
In connection with the 2007 sale of our Genomics business to Ocimum, the balance of the sales price is now due pursuant to a $3 million interest bearing promissory note of which 50% was due August 1, 2009, and the remaining balance in September 2009. To date, we have received payments from Ocimum of $1.5 million under the note.
In connection with the 2006 sale of our Preclinical Division to Bridge Pharmaceuticals, Inc. (“Bridge”), less than $0.1 million of the sales price remains in escrow pending resolution between the parties. We continue to guarantee two leases now held by Bridge. The leases expire in February 2011 and December 2013 and at June 30, 2009, the total remaining amounts due under the leases for the balance of the terms is $0.9 million and $3.2 million, respectively.
Our financing activities for the six months ended June 30, 2008 consisted of the purchase of shares from a former director for $3.0 million.
In the second quarter of 2009, we received a notice requiring repayment of all amounts potentially due under a loan and a grant agreement with the State of Maryland that total $0.7 million. We have recorded the amounts due under the loan and grant agreement within current portion of long-term debt and other accrued expenses. We are in discussions with the State of Maryland concerning the terms of potential repayment of this amount.
We believe that existing cash and cash equivalents, the anticipated receipt of approximately $2.3 million remaining principal relating to the promissory notes from Ocimum and Nerveda and our ongoing realignment and cash conservations efforts, will enable us to support our operations through late 2010, including the costs of initiating and completing the Phase Ib/IIa clinical trial for ORE1001, which is expected to be completed in the third quarter of 2010. However, there can be no assurance that we will be successful in our continuing realignment and cash conservation efforts, the full collection of our outstanding notes receivable or, if necessary, attracting additional financing to allow us to complete the clinical trial. Furthermore, there is no assurance if we complete our clinical trial, that the results will be satisfactory or will enable us to successfully out-license our compound. If we are not successful in achieving our objectives, it might be necessary to liquidate the Company in late 2010. We currently expect long-term support of our operations to come from possible future financings and payments from commercial arrangements from our pipeline of drug candidates. These estimates are forward-looking statements that involve risks and uncertainties. Our actual future capital requirements and the adequacy of our available funds will depend on those factors discussed above and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 under the section entitled “Risk Factors” and in our subsequent filings with the SEC.
Recently Issued Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162" ("SFAS 168"), which establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with generally accepted accounting principles ("GAAP"). SFAS 168 explicitly recognizes rules and interpretive releases of the SEC under federal securities laws as authoritative GAAP for SEC registrants. SFAS 168 is effective for financial statements issued for interim and annual reporting periods ending after September 15, 2009 (the quarter ending September 30, 2009 for the Company) and will not have an impact on our final position or results of operations.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events," ("SFAS 165"), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. SFAS 165 is effective for financial statements issued for interim and annual reporting periods ending after June 15, 2009 (the quarter ending June 30, 2009 for the Company). The adoption of SFAS 165 did not have an impact on our financial position or results of operations.
In April 2009, the FASB issued FSP No. FAS 107-1 and Accounting Principles Board ("APB") Opinion No. 28-1, "Interim Disclosures about Fair Value of Financial Instruments" ("FSP FAS 107-1" and "APB 28-1"). FSP FAS 107-1 and APB 28-1 amend SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," to require disclosures, in interim reporting periods and in financial statements for annual reporting periods, regarding the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not on the company's balance sheet. FSP FAS 107-1 and APB 28-1 also amend FASB APB Opinion No. 28, "Interim Financial Reporting," to require entities to disclose the methods and significant assumptions used to estimate the fair value of financial instruments and describe changes in methods and significant assumptions, in both interim and annual financial statements. FSP FAS 107-1 and APB 28-1 are effective for interim reporting periods ending after June 15, 2009 (the quarter ending June 30, 2009 for the Company). While the adoption of FSP FAS 107-1 and APB 28-1 impacts our disclosures, it does not have an impact on our financial position or results of operations.
In April 2009, the FASB issued FSP SFAS 115-2 and SFAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," which modify the recognition requirements for other-than-temporary impairments of debt securities and enhances existing disclosures with respect to other-than-temporary impairments of debt and equity securities. FSP SFAS 115-2 and SFAS 124-2 are effective for interim and annual reporting periods ending after June 15, 2009 (the quarter ending June 30, 2009 for the Company). The adoption of FSP SFAS 115-2 and SFAS 124-2 had no impact on our financial position or results of operations.
In February 2008, the FASB issued a one-year deferral for non-financial assets and liabilities to comply with SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). We adopted SFAS No. 157 for financial assets and liabilities effective January 1, 2008. We adopted SFAS No. 157 as it pertains to non-financial assets and liabilities effective January 1, 2009 and the adoption had no impact on our financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141 Revised, “Business Combinations” (“SFAS 141R”). SFAS 141R requires an acquirer to determine the fair value of the consideration exchanged as of the acquisition date (i.e. the date the acquirer obtains control). Previously, an acquisition was valued as of the date the parties agreed upon the terms of the transaction. SFAS 141R also modifies, among other things, the accounting for direct costs associated with an acquisition, contingencies acquired and contingent consideration. We adopted SFAS 141R effective January 1, 2009 for business combinations occurring after the effective date.
In December 2007, the FASB ratified Emerging Issues Task Force No. 07-1, “Accounting for Collaborative Agreements” (“EITF 07-1”). EITF 07-1 provides guidance regarding financial statement presentation and disclosure of collaborative arrangements, as defined therein. We adopted EITF 07-1 effective January 1, 2009 and the adoption had no impact on our financial position or results of operations.
Evaluation of Disclosure Controls and Procedures
As of June 30, 2009, under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), an evaluation was performed of the effectiveness of the design and operation of our “disclosure controls and procedures” (“Disclosure Controls”). These are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities and Exchange Act of 1934, as amended (the "Exchange Act”), such as this Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the CEO and CFO as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our CEO and CFO have concluded that, as of June 30, 2009, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that material information relating to us is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared.
Our management, including the CEO and CFO, does not expect that our Disclosure Controls or our internal control over financial reporting will prevent or detect all errors and all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting during the second quarter of 2009 that materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
We are not currently a party to any material legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
The Board of Directors of the Company has determined that the Company's 2009 Annual Meeting of Stockholders (the "2009 Annual Meeting") is currently anticipated to be held on Tuesday, October 20, 2009 at 11:00 a.m. Eastern Daylight Time at the Company’s offices located at One Main Street, Cambridge, MA 02142. The record date for determining the stockholders entitled to receive notice of, and to vote at, the 2009 Annual Meeting will be the close of business on September 4, 2009.
In order to be considered timely, a stockholder proposal submitted in accordance with Rule 14a-8 under the Exchange Act, for inclusion in our proxy materials for the 2009 Annual Meeting must have been received by our Corporate Secretary no later than August 20, 2009.
Proposals shall be sent to our principal executive offices at 610 Professional Drive, Suite 101, Gaithersburg, Maryland 20879, Attention: Benjamin L. Palleiko, Corporate Secretary.
Stockholders also have the right under our Amended and Restated Bylaws (the "Bylaws") to directly nominate director candidates and make other stockholder proposals by following specified procedures. For a stockholder proposal for the 2009 Annual Meeting that is not intended to be included in our proxy statement under Rule 14a-8 of the Exchange Act, including director nominations, the stockholder must (1) provide the information required by our Bylaws and (2) give timely notice to our Corporate Secretary at the address above in accordance with our Bylaws. The notice must have been received by our Corporate Secretary not earlier than the close of business on the 120th day prior to the 2009 Annual Meeting, or June 22, 2009, and not later than the close of business on the 10th day following the day on which public announcement of the date of the 2009 Annual Meeting is first made, or August 24, 2009.
| | 3.2 | Bylaws of Ore Pharmaceuticals Inc., as amended. (1) |
| | 10.6 | Registrant’s 1997 Non-Employee Directors’ Stock Option Plan, as amended. |
| | *10.55b | Amendment to Executive Severance Plan, effective April 30, 2009. |
| | 10.111 | Secured Note dated as of June 15, 2009 from Ocimum Biosolutions, Inc. and Ocimum Biosolutions India Limited to Registrant. (2) |
| | 10.112 | Security Agreement dated as of June 15, 2009 between Ocimum Biosolutions, Inc. and Registrant. (2) |
| | 10.113 | Unconditional Guaranty Agreement dated as of June 15, 2009 from Coramandel Infrastructure Private Limited in favor of Registrant. (2) |
| | *10.116 | Consulting Agreement between Registrant and Michael J. Brennan, effective April 24, 2009. |
| | 10.117 | Lease Agreement, dated June 9, 2009, between Registrant and RREEF America REIT II Corp. PPP. |
| | 31 | Certifications pursuant to Rule 13a-14(a)/15d-14(a). |
| | 32 | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
16.
