Attached files
file | filename |
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EX-32.2 - PROLOR Biotech, Inc. | v184847_ex32-2.htm |
EX-31.2 - PROLOR Biotech, Inc. | v184847_ex31-2.htm |
EX-32.1 - PROLOR Biotech, Inc. | v184847_ex32-1.htm |
EX-31.1 - PROLOR Biotech, Inc. | v184847_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the
quarterly period ended March 31, 2010
OR
¨ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the
transition period from
to
Commission
file number: 000-52691
PROLOR
BIOTECH, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
20-0854033
|
||
(State
or other jurisdiction
of incorporation
or organization)
|
(I.R.S.
Employer Identification
No.)
|
||
3
Sapir Street, Weizmann
Science
Park
|
|||
Nes-Ziona,
Israel
|
74140
|
||
(Address
of principal executive
offices)
|
(Zip
Code)
|
(866)
644-7811
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (check one):
Large
accelerated filer
|
¨
|
Accelerated
Filer
|
¨
|
Non-accelerated
filer
|
¨ (Do
not check if a smaller reporting
company)
|
Smaller
reporting company
|
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No
x
APPLICABLE
ONLY TO CORPORATE ISSUERS:
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date. As of May 12, 2010 there
were 46,242,813 shares
of common stock, par value $0.00001 per share (“Common Stock”),
outstanding.
PROLOR
BIOTECH, INC.
INDEX
TO FORM 10-Q FILING
FOR
THE QUARTER ENDED MARCH 31, 2010
Table of
Contents
Page
|
||||
PART
I
|
||||
ITEM
1.
|
Financial
Statements.
|
3
|
||
ITEM
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
14
|
||
ITEM
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
23
|
||
ITEM
4.
|
Controls
and Procedures
|
23
|
||
PART
II
|
||||
ITEM
1.
|
Legal
Proceedings.
|
24
|
||
ITEM
1A
|
Risk
Factors
|
24
|
||
ITEM
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
24
|
||
ITEM
3.
|
Defaults
Upon Senior Securities.
|
24
|
||
ITEM
4.
|
(Removed
and Reserved).
|
24
|
||
ITEM
5.
|
Other
Information.
|
24
|
||
ITEM
6.
|
Exhibits.
|
24
|
||
SIGNATURES
|
25
|
|||
CERTIFICATION
|
|
|
2
PART
I
|
–
FINANCIAL INFORMATION
|
ITEM
1.
|
Financial
Statements.
|
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
CONSOLIDATED
BALANCE SHEETS
March 31,
2010
|
December 31,
2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 26,119,471 | $ | 3,521,866 | ||||
Short
term deposits
|
98,664 | - | ||||||
Accounts
receivable and prepaid expenses
|
548,570 | 85,280 | ||||||
Restricted
cash
|
95,901 | 91,730 | ||||||
Total
Current Assets
|
26,862,606 | 3,698,876 | ||||||
Long-term
Assets:
|
||||||||
Property
and Equipment, net
|
280,233 | 284,315 | ||||||
Severance
pay fund
|
137,938 | 124,324 | ||||||
Long
term deposit
|
1,940 | 1,906 | ||||||
Total
Long Term Assets
|
420,111 | 410,545 | ||||||
Total
Assets
|
$ | 27,282,717 | $ | 4,109,421 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Trade
payables
|
$ | 152,510 | $ | 131,924 | ||||
Related
party payables
|
55,128 | 203,583 | ||||||
Accrued
expenses and other liabilities
|
642,397 | 504,612 | ||||||
Total
Current Liabilities
|
850,035 | 840,119 | ||||||
Accrued
Severance Pay
|
171,352 | 140,237 | ||||||
Commitments
and Contingent Liabilities
|
— | — | ||||||
Stockholders’
Equity:
|
||||||||
Stock
capital -
|
||||||||
Preferred
stock of $ 0.00001 par value – 10,000,000
shares of preferred stock authorized, 1,800,000 issued and outstanding as
of March 31, 2010 and December 31, 2009
|
18 | 18 | ||||||
Common
stock of $ 0.00001 par value – 300,000,000
shares of common stock authorized 46,178,497
and 35,569,028 shares issued and outstanding as of March 31, 2010 and
December 31, 2009, respectively
|
461 | 355 | ||||||
Additional
paid in capital
|
54,840,034 | 30,153,517 | ||||||
(Deficit)
accumulated during the development stage
|
(28,579,183 | ) | (27,024,825 | ) | ||||
Total
Stockholders’ Equity
|
26,261,330 | 3,129,065 | ||||||
Total
Liabilities and Stockholders’ Equity
|
$ | 27,282,717 | $ | 4,109,421 |
The
accompanying notes are an integral part of the consolidated financial
statements.
3
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
Period from May
31, 2005
|
||||||||||||
For the three months ended
|
(date of inception)
|
|||||||||||
March 31,
|
to March 31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Revenues
|
$ | - | $ | - | $ | - | ||||||
Operating
expenses:
|
||||||||||||
In-process
research and development write-off
|
- | - | 3,222,831 | |||||||||
Research
and development, net
|
1,002,434 | 2,585,702 | 14,103,192 | |||||||||
General
and administrative
|
485,493 | 478,734 | 11,705,019 | |||||||||
Total
operating expenses
|
1,487,927 | 3,064,436 | 29,031,042 | |||||||||
Operating
(loss)
|
(1,487,927 | ) | (3,064,436 | ) | (29,031,042 | ) | ||||||
Financial
income
|
1,319 | 30,191 | 878,565 | |||||||||
Financial
(expenses)
|
(67,750 | ) | (84,633 | ) | (426,706 | ) | ||||||
Net
(loss)
|
$ | (1,554,358 | ) | $ | (3,118,878 | ) | $ | (28,579,183 | ) | |||
(Loss)
per share (basic & diluted)
|
$ | (0.04 | ) | $ | (0.09 | ) | $ | (1.07 | ) | |||
Weighted
average number of shares outstanding
|
35,730,581 | 35,549,028 | 26,714,639 |
The
accompanying notes are an integral part of the consolidated financial
statements.
4
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Period from
May 31, 2005
|
||||||||||||
For the three Months ended
|
(date of
inception)
|
|||||||||||
March 31,
|
to March 31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Cash
flows from operating activities
|
||||||||||||
Net
(loss)
|
$ | (1,554,358 | ) | $ | (3,118,878 | ) | $ | (28,579,183 | ) | |||
Adjustments to
reconcile net (loss) to net cash (used in) operating
activities:
|
||||||||||||
Depreciation
|
20,239 | 19,086 | 219,181 | |||||||||
In-process
research and development write-off
|
- | - | 3,222,831 | |||||||||
Stock-based
compensation
|
200,995 | 236,679 | 7,396,780 | |||||||||
Increase
(decrease) in accrued severance pay, net
|
17,501 | (2,315 | ) | 33,414 | ||||||||
Decrease
(increase) in accounts receivable and prepaid expenses
|
(463,290 | ) | 29,657 | (548,293 | ) | |||||||
Increase
(decrease) in trade payables
|
20,586 | (3,615 | ) | 142,406 | ||||||||
Increase
(decrease) in related parties
|
(148,455 | ) | (9,472 | ) | 55,128 | |||||||
Long
term deposit exchange rate differences
|
(22 | ) | - | (44 | ) | |||||||
Increase
in accrued expenses and other liabilities
|
137,785 | 930,101 | 521,381 | |||||||||
Net
cash (used in) operating activities
|
(1,769,019 | ) | (1,918,757 | ) | (17,536,399 | ) | ||||||
Cash
flows from investing activities
|
||||||||||||
Purchase
of property and equipment
|
(16,157 | ) | - | (485,058 | ) | |||||||
Payment
for the acquisition of ModigeneTech Ltd.
|
- | - | (474,837 | ) | ||||||||
Long
term deposit
|
(12 | ) | 175 | (1,896 | ) | |||||||
Short
term Deposit
|
(98,664 | ) | (98,664 | ) | ||||||||
Restricted
deposit
|
(4,171 | ) | 8,394 | (95,901 | ) | |||||||
Net
cash (used in) provided by investing activities
|
(119,004 | ) | 8,569 | (1,156,356 | ) | |||||||
Cash
flows from financing activities
|
||||||||||||
Short
term bank credit
|
- | - | (2,841 | ) | ||||||||
Proceeds
from loans
|
- | - | (173,000 | ) | ||||||||
Principal
payment of loans
|
- | - | 173,000 | |||||||||
Proceeds
from issuance of shares
|
24,485,628 | - | 44,815,067 | |||||||||
Net
cash provided by financing activities
|
24,485,628 | - | 44,812,226 | |||||||||
Increase
(decrease) in cash and cash equivalents
|
22,597,605 | (1,910,188 | ) | 26,119,471 | ||||||||
Cash
and cash equivalents at the beginning of the period
|
3,521,866 | 7,465,232 | - | |||||||||
Cash
and cash equivalents at the end of the period
|
$ | 26,119,471 | $ | 5,555,044 | $ | 26,119,471 |
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
5
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Period from
May 31, 2005
|
||||||||||||
For the three Months ended
|
(date of
inception)
|
|||||||||||
March 31,
|
to March 31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Non
cash transactions:
|
||||||||||||
Employee
options exercised into shares
|
$ | $ | - | $ | 140 | |||||||
Issuance
of common stock in reverse acquisition
|
$ | - | $ | - | $ | 73 | ||||||
Additional
information:
|
||||||||||||
Cash
paid for income taxes
|
$ | - | $ | - | $ | - | ||||||
Cash
paid for interest expense
|
$ | 4 | $ | 22 | $ | 353,728 |
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
6
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2010
(Unaudited)
NOTE
1:-
|
GENERAL
|
|
a.
|
PROLOR
Biotech, Inc. (“the Company”) was formed on August 22, 2003 under the laws
of the state of Nevada. The Company is engaged in the
development of therapeutic proteins with extended half-lifes, through its
subsidiaries, Modigene Inc., a Delaware based subsidiary and ModigeneTech
Ltd., an Israeli-based subsidiary.
|
|
b.
|
The
Company is devoting substantially all of its efforts toward conducting
research and development activities. The Company’s activities also include
raising capital, recruiting personnel and building infrastructure. In the
course of such activities, the Company has sustained operating losses and
expects such losses to continue for the foreseeable future. The Company
has not generated any revenues or product sales and has not achieved
profitable operations or positive cash flow from operations. The Company’s
deficit accumulated during the development stage aggregated $28,579,183 as
of March 31, 2010. There is no assurance that profitable operations, if
ever achieved, could be sustained on a continuing basis. The Company
believes that its current cash sources will enable the continuance of the
Company’s activities for at least a year with no need of additional
financing.
|
|
c.
|
On
March 11, 2010 and March 17, 2010, the Company entered into two
substantially identical securities purchase agreements with certain
private investors (the “Investors”), pursuant to which the Investors
agreed to purchase an aggregate of 10,382,975 shares (the “Shares”) of
Common Stock at a purchase price of $2.35 per Share. On March 17, 2010,
the Company closed on the issuance of the Shares for aggregate
consideration of $24,145,241 ($24,399,991 net of $254,750 issuing
expenses).
|
The
Company issued the Shares in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 of Regulation D promulgated thereunder. Each
Investor represented to the Company that such person was an “accredited
investor” as defined in Rule 501(a) under the Securities Act and that such
Investor’s Shares were being acquired for investment purposes.
The
Shares have not been registered under the Securities Act and are “restricted
securities” as that term is defined by Rule 144 under the Securities Act. The
Company has not undertaken to register the Shares, and no registration rights
have been granted to the Investors in respect of the Shares. Additionally, each
Investor entered into a lockup agreement in respect of the Shares, pursuant to
which such Investor may not sell or otherwise transfer such Shares for a period
of one year.
7
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2010
(Unaudited)
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES
|
|
a.
|
Basis of
presentation:
|
The
accompanying unaudited financial statements of the Company are presented in
accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) have been condensed or omitted
pursuant to such SEC rules and regulations. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been made. The results for these interim periods
are not necessarily indicative of the results for the entire year. The
accompanying financial statements should be read in conjunction with the
Company’s audited financial statements for the year ended December 31, 2009 and
the notes thereto included in the Company’s Report on Form 10-K filed with the
SEC on March 26, 2010.
|
b.
|
Principles of
consolidation:
|
The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries Modigene Inc. and ModigeneTech
Ltd. Intercompany transactions and balances have been eliminated upon
consolidation.
|
c.
|
Loss per
share:
|
Basic and
diluted losses per share are presented in accordance with ASC No. 260 “Earnings per share”.
Outstanding share options and warrants, convertible preferred stock and
restricted stock have been excluded from the calculation of the diluted loss per
share because all such securities are antidilutive. The number of shares of
Common Stock issuable upon exercise or conversion of the foregoing securities
that have been excluded from the basic and diluted losses per share calculations
for the three month periods ended March 31, 2010 and 2009 and for the period
from May 31, 2005 (date of inception) to March 31, 2010 were 12,075,765,
9,018,909 and 5,843,996, respectively.
d.
|
Fair
value measurements:
|
As
defined in ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”),
fair value is based on the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. ASC 820-10 establishes a fair value hierarchy that
prioritizes observable and unobservable inputs used to measure fair value into
three broad levels, which are described below:
8
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (continued)
|
Level 1:
Quoted prices (unadjusted) in active markets that are accessible at the
measurement date for assets or liabilities. The fair value hierarchy gives the
highest priority to Level 1 inputs.
Level 2:
Other inputs that are observable, directly or indirectly, such as quoted prices
for similar assets and liabilities or market corroborated inputs.
Level 3:
Unobservable inputs are used when little or no market data is available, which
requires the Company to develop its own assumptions about how market
participants would value the assets or liabilities. The fair value hierarchy
gives the lowest priority to Level 3 inputs.
In
determining fair value, the Company utilizes valuation techniques in its
assessment that maximize the use of observable inputs and minimize the use of
unobservable inputs.
The
following table presents the Company’s financial assets and liabilities that are
carried at fair value, classified according to the three categories described
above:
Fair Value Measurements at March 31, 2010
|
||||||||||||||||
Quoted Prices
in Active
|
Significant
Other
|
Significant
|
||||||||||||||
Markets for
Identical Assets
|
Observable
Inputs
|
Unobservable
Inputs
|
||||||||||||||
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
Cash
and cash equivalents
|
$ | 26,119,471 | $ | 26,119,471 | $ | - | $ | - | ||||||||
Short
term deposits
|
98,664 | 98,664 | - | - | ||||||||||||
Restricted
cash
|
$ | 95,901 | 95,901 | - | - | |||||||||||
Total
assets at fair value
|
$ | 26,314,036 | $ | 26,314,036 | $ | - | $ | - |
Fair Value Measurements at December 31, 2009
|
||||||||||||||||
Quoted Prices
in Active
|
Significant
Other
|
Significant
|
||||||||||||||
Markets for
Identical Assets
|
Observable
Inputs
|
Unobservable
Inputs
|
||||||||||||||
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
Cash
and cash equivalents
|
$ | 3,521,866 | $ | 3,521,866 | $ | - | $ | - | ||||||||
Restricted
cash
|
$ | 91,730 | 91,730 | - | - | |||||||||||
Total
assets at fair value
|
$ | 3,521,866 | $ | 3,521,866 | $ | - | $ | - |
9
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2010
(Unaudited)
NOTE
3:-
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
Effective
January 1, 2010, the Company adopted the following Financial Accounting
Standards Board Accounting Standards Updates:
ASC 860 -
Transfers and Servicing, and ASC 810, Consolidation that changes the way
entities account for securitizations and other transfers of financial
instruments. In addition to increased disclosure, these amendments
eliminate the concept of qualifying special purpose entities and change the test
for consolidation of variable interest entities
ASU No.
2009-14 - Software (Topic 985): Certain Revenue Arrangements That
Include Software Elements. This standard removes tangible products from
the scope of software revenue recognition guidance and also provides guidance on
determining whether software deliverables in an arrangement that includes a
tangible product, such as embedded software, are within the scope of the
software revenue guidance.
ASU No.
2009-13 - Revenue Recognition
(Topic 605): Multiple-Deliverable Revenue Arrangements. This
standard modifies the revenue recognition guidance for arrangements that involve
the delivery of multiple elements, such as product, software, services or
support, to a customer at different times as part of a single revenue generating
transaction. This standard provides principles and application
guidance to determine whether multiple deliverables exist, how the individual
deliverables should be separated and how to allocate the revenue in the
arrangement among those separate deliverables. The standard also expands the
disclosure requirements for multiple deliverable revenue
arrangements.
Effective
January 1, 2010, the Company adopted ASU 2009-16, “Transfers and Servicing (Topic 860)
– Accounting for Transfers of Financial Assets”. ASU 2009-16
requires more information about transfers of financial assets, including
securitization transactions, and where entities have continuing exposure to the
risks related to transfer of financial assets. It eliminates the concept of a
“qualifying special-purpose entity,” changes the requirements for derecognizing
financial assets, and requires additional disclosures. The adoption of
these provisions did not have any impact on the Company’s consolidated financial
statements.
The
adoption of these provisions did not have any impact on the Company’s
consolidated financial statements.
NOTE
4:-
|
EMPLOYEES’
STOCK OPTION PLANS
|
The
Company issued stock options to purchase shares of Common Stock under the
Company’s 2005 Stock Incentive Plan (the “2005 Plan”) and the Company’s 2007
Equity Incentive Plan (the “2007 Plan”)
The
Company accounts for stock-based compensation using the fair value recognition
provisions of ASC No. 718 “Compensation – stock
compensation”, The fair value of each stock option is calculated based
upon grant date fair value using the Black-Scholes option-pricing
model.
10
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2010
(Unaudited)
NOTE
4:-
|
EMPLOYEES’
STOCK OPTION PLANS (continued):
|
The
following weighted average assumptions were used for the options granted for the
three months ended March 31, 2010: (i) annual dividends of $0.00,
(ii) expected volatility of 104.29%, (iii) risk-free interest rate of 0.3%,
and (iv) expected average option lives of 7 years.
The
following is a summary of the stock options granted under the 2005 Plan and 2007
Plan:
For the three months ended
|
||||||||
March 31, 2010
|
||||||||
Number
of Options
|
Weighted Average
Exercise Price
|
|||||||
Outstanding
at the beginning of the period
|
4,785,439 | $ | 1.11 | |||||
Exercised
|
(165,323 | ) | $ | 1.29 | ||||
Issued
under the 2005 Plan
|
50,000 | $ | 2.35 | |||||
Issued
under the 2007 Plan
|
500,000 | $ | 2.40 | |||||
Outstanding
at the end of the period
|
5,170,116 | $ | 1.24 | |||||
Options
exercisable
|
2,536,074 | $ | 1.18 |
For the three months ended
|
||||||||
March 31, 2009
|
||||||||
Number
of Options
|
Weighted Average
Exercise Price
|
|||||||
Outstanding
at the beginning of the period
|
4,432,292 | $ | 1.14 | |||||
Issued
under the 2005 Plan
|
175,500 | $ | 0.65 | |||||
Issued
under the 2007 Plan
|
200,000 | $ | 0.65 | |||||
Forfeited
|
( 2,353 | ) | $ | 1.49 | ||||
Outstanding
at the end of the period
|
4,805,439 | $ | 1.10 | |||||
Options
exercisable
|
2,538,522 | $ | 1.14 |
11
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2010
(Unaudited)
NOTE
4:-
|
EMPLOYEES’
STOCK OPTION PLANS (continued)
|
The
options outstanding as of March 31, 2010 have been separated into exercise
prices, as follows:
Remaining Weighted
Average
|
||||||||||||||
Exercise Price
|
Options Outstanding
|
Contractual Life (years)
|
Options Exercisable
|
|||||||||||
$ | 0.650 | 375,500 | 8.85 | - | ||||||||||
$ | 0.879 | 1,130,151 | 6.01 | 1,130,151 | ||||||||||
$ | 0.900 | 1,950,000 | 7.92 | 487,500 | ||||||||||
$ | 0.930 | 25,000 | 7.93 | 8,333 | ||||||||||
$ | 1.318 | 435,146 | 2.92 | 435,146 | ||||||||||
$ | 1.500 | 130,500 | 8.07 | 40,958 | ||||||||||
$ | 2.000 | 450,000 | 7.11 | 316,667 | ||||||||||
$ | 2.350 | 50,000 | 9.77 | - | ||||||||||
$ | 2.400 | 500,000 | 9.79 | - | ||||||||||
$ | 2.500 | 123,819 | 3.19 | 117,319 | ||||||||||
5,170,116 | 6.13 | 2,536,074 |
Weighted
average fair values and average exercise prices of options at date of grant and
total aggregate intrinsic value of outstanding options are as
follows:
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Weighted
average fair value on date of grant
|
$ | 0.82 | $ | 0.71 | ||||
Total
aggregate intrinsic value
|
$ | 17,027,595 | $ | 6,556,831 |
Stock-based
compensation expense for the three months ended March 31, 2010 and 2009 and for
the period from May 31, 2005 (date of inception) through March 31, 2010 were
$200,995, $236,679 and $7,396,780, respectively. Stock-based compensation
expenses for the period from May 31, 2005 (date of inception) through March 31,
2010 includes $3,876,960 expensed in the acquisition of a subsidiary and on
behalf of deferred compensation on restricted shares.
12
PROLOR
BIOTECH, INC. AND SUBSIDIARIES
(A
development stage company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2010
(Unaudited)
NOTE
5:-
|
COMMON
STOCK WARRANTS
|
For the three months ended
|
||||||||
March 31, 2009
|
||||||||
Number
of warrants
|
Weighted Average
Exercise Price
|
|||||||
Outstanding
and exercisable at the beginning of the period
|
3,558,924 | $ | 2.18 | |||||
Exercised
|
( 70,546 | ) | $ | 2.19 | ||||
Outstanding
and exercisable at the end of the period
|
3,488,378 | $ | 2.18 |
Total
aggregate intrinsic value of warrants outstanding as of March 31, 2010 was
$7,742,637.
NOTE
6:-
|
SUBSEQUENT
EVENTS
|
As
defined in FASB ASC 855-10, “Subsequent Events”, subsequent events are events or
transactions that occur after the balance sheet date but before financial
statements are issued or available to be issued.
The
Company has evaluated subsequent events through May 12, 2010. Subsequent to
March 31, 2010, 62,975 new common shares were issued in connection with
the exercise of outstanding warrants.
13
ITEM
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Note
Regarding Forward-Looking Statements
This
Quarterly Report on Form 10-Q contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”),
Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”), about our expectations, beliefs or intentions regarding our
product development efforts, business, financial condition, results of
operations, strategies or prospects. You can identify such forward-looking
statements by the words “expects,” “intends,” “plans,” “projects,” “believes,”
“estimates,” “likely,” “goal,” “assumes,” “targets” and similar expressions
and/or the use of future tense or conditional constructions (such as “will,”
“may,” “could,” “should” and the like) and by the fact that these statements do
not relate strictly to historical or current matters. Rather, forward-looking
statements relate to anticipated or expected events, activities, trends or
results as of the date they are made. Because forward-looking statements relate
to matters that have not yet occurred, these statements are inherently subject
to risks and uncertainties that could cause our actual results to differ
materially from any future results expressed or implied by the forward-looking
statements. Many factors could cause our actual operations or results to differ
materially from the operations and results anticipated in forward-looking
statements. These factors include, but are not limited to the factors contained
in “Item 1A — Risk Factors” of our Annual Report on Form 10-K as updated by our
subsequently filed Forms 10-Q or other documents we file with the
SEC. We do not undertake any obligation to update forward-looking
statements, except as required by applicable law. We intend that all
forward-looking statements be subject to the safe harbor provisions of PSLRA.
These forward-looking statements are only predictions and reflect our views as
of the date they are made with respect to future events and financial
performance.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion should be read in conjunction with the consolidated
financial statements and the related notes thereto that appear in Item 1 of this
Quarterly Report on Form 10-Q.
The
discussion and analysis of the Company’s financial condition and results of
operations are based on the Company’s financial statements, which the Company
has prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”). The preparation of these financial statements requires the Company to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported revenues and expenses
during the reporting periods. On an ongoing basis, the Company evaluates such
estimates and judgments, including those described in greater detail below. The
Company bases its estimates on historical experience and on various other
factors that the Company believes are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
14
Overview
We are a
development stage biopharmaceutical company utilizing patented technology to
develop longer-acting, proprietary versions of already-approved therapeutic
proteins that currently generate billions of dollars in annual global
sales. We have obtained certain exclusive worldwide rights from
Washington University in St. Louis, Missouri to use a short, naturally-occurring
amino acid sequence (peptide) that has the effect of slowing the removal from
the body of the therapeutic protein to which it is attached. This
Carboxyl Terminal Peptide (CTP) can be readily attached to a wide array of
existing therapeutic proteins, stabilizing the therapeutic protein in the
bloodstream and extending its life span without additional toxicity or loss of
desired biological activity. We are using the CTP technology to
develop new, proprietary versions of certain existing therapeutic proteins that
have longer life spans than therapeutic proteins without CTP. We
believe that our products will have greatly improved therapeutic profiles and
distinct market advantages.
We
believe our products in development will provide several key advantages over our
competitor’s existing products:
|
·
|
significant
reduction in the number of injections required to achieve the same or
superior therapeutic effect from the same
dosage;
|
|
·
|
extended
patent protection for proprietary new formulations of existing
therapies;
|
|
·
|
faster
commercialization with greater chance of success and lower costs than
those typically associated with a new therapeutic protein;
and
|
|
·
|
manufacturing
using industry-standard biotechnology-based protein production
processes.
|
Merck
& Co. has developed the first novel protein containing CTP, named ELONVA®, a
long-acting CTP-modified version of the fertility drug follicle stimulating
hormone (FSH). On January 28, 2010, Merck received marketing
authorization from the European Commission for ELONVA® with unified labeling
valid in all European Union Member States. Merck licensed the CTP
technology directly from Washington University (prior to the formation of
Modigene Delaware) for application only to Follicle Stimulating Hormone (FSH)
and three other hormones, human Chorionic Gonadotropin (hCG), Luteinizing
Hormone (LH) and Thyroid-Stimulating Hormone (TSH).
Our
internal product development program is currently focused on extending the life
span of the following biopharmaceuticals, which together address an established
market in excess of $15 billion:
|
·
|
Human
Growth Hormone (hGH)
|
|
·
|
Interferon
β
|
|
·
|
Factor
VIIa, Factor IX
|
|
·
|
Erythropoietin
(EPO)
|
|
·
|
Anti-Obesity
Peptide
|
|
·
|
Glucagon-Like
Peptide-1 (GLP-1)
|
Worldwide sales of hGH are
estimated at $3.0 billion, those of EPO are estimated at $10.0 billion, those of
interferon β are estimated at $5.3 billion, and those of Factor VIIa and
Factor IX are estimated at $1.5 billion in the aggregate. We believe
that the CTP technology will be broadly applicable to these as well as other
best-selling therapeutic proteins in the market and will be attractive to
potential partners because it will allow them to extend proprietary rights for
therapeutic proteins with near-term patent expirations.
Critical
Accounting Policies
The
historical financial statements of the Company included with this Quarterly
Report have been prepared in accordance with GAAP. The significant accounting
policies followed in the preparation of the financial statements, on a
consistent basis, are described below.
15
Use of Estimates: The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
Financial Statements in United
States Dollars: The functional currency
of the Company is the U.S. dollar, as the U.S. dollar is the primary currency of
the economic environment in which the Company expects to continue to operate in
the foreseeable future. The majority of ModigeneTech’s operations are currently
conducted in Israel, and most of the Israeli expenses are paid in new Israeli
schekels; however, most of the expenses are denominated and determined in U.S.
dollars. Financing and investing activities, including loans and equity
transactions, are made in U.S. dollars.
Accordingly,
the functional and reporting currency of the Company is the dollar. Monetary
accounts maintained in currencies other than the dollar are remeasured into U.S.
dollars. All transaction gains and losses from the remeasurement of monetary
balance sheet items are reflected in the statements of operations as financial
income or expenses, as appropriate.
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company’s
wholly-owned subsidiary, Modigene Delaware, and its wholly-owned subsidiary,
ModigeneTech. Intercompany transactions and balances have been eliminated upon
consolidation.
Cash Equivalents: For
purposes of reporting within the statement of cash flows, the Company considers
all cash on hand, cash accounts not subject to withdrawal restrictions or
penalties, and all highly liquid debt instruments purchased with a maturity of
three months or less to be cash and cash equivalents.
Accounts receivable: Accounts
receivable are recorded at net realizable value consisting of the carrying
amount less the allowance for uncollectible accounts. As of March 31,
2010 the Company had not accrued an allowance for uncollectible
accounts.
Property and Equipment:
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is calculated by the straight-line method over the estimated useful
lives of the assets. The annual depreciation rates are as
follows:
%
|
||||
Office
furniture and equipment
|
6 | |||
Laboratory
equipment
|
15 | |||
Computers
and electronic equipment
|
33 | |||
Leasehold
improvements
|
25 |
The
Company reviews the carrying value of its long-lived assets, including
intangible assets subject to amortization, for impairment whenever events and
circumstances indicate that the carrying value of the assets may not be
recoverable. Recoverability of these assets is measured by comparing the
carrying value of the assets to the undiscounted cash flows estimated to be
generated by those assets over their remaining economic life. If the
undiscounted cash flows are not sufficient to recover the carrying value of the
assets, the assets are considered impaired. The impairment loss is measured by
comparing the fair value of the assets to their carrying value. Fair value is
determined by either a quoted market price or a value determined by a discounted
cash flow technique, whichever is more appropriate under the circumstances
involved. No impairments were recognized from May 31, 2005 (inception date) to
March 31, 2010.
16
Research and Development Costs and
Participation: Research and development (“R&D”) costs are expensed as
they are incurred and consist of salaries, benefits and other personnel-related
costs, fees paid to consultants, clinical trials and related clinical
manufacturing costs, license and milestone fees, and facilities and overhead
costs. R&D expenses consist of independent R&D costs and costs
associated with collaborative R&D and in-licensing arrangements.
Participation from government for development of approved projects are
recognized as a reduction of expenses as the related costs are
incurred.
Severance Pay: The liability
of ModigeneTech for severance pay is calculated pursuant to the Severance Pay
Law in Israel, based on the most recent salary of the employees multiplied by
the number of years of employment as of the balance sheet date and is presented
on an undiscounted basis. ModigeneTech’s employees are entitled to one month’s
salary for each year of employment or a portion thereof. According to agreements
with key employees that are related parties of the Company, upon retirement, the
key employees will be entitled to receive a lump-sum payment; therefore the
Company does not accumulate severance pay for those employees, and the sum will
be accrued when the Company has to pay such payments according to the employment
agreements. Severance (income) expenses for the three months ended March 31,
2009 and 2008 and for the period from May 31, 2005 (inception date) through
March 31, 2010 amounted to $17,501, ($751) and $34,414,
respectively.
Income Taxes: The Company
accounts for income taxes in accordance with the provisions of ASC 740-10, Income Taxes. ASC 740-10
requires companies to recognize deferred tax assets and liabilities based on the
differences between financial reporting and tax bases of assets and liabilities.
These differences are measured using the enacted tax rates and laws that are
expected to be in effect when the temporary differences are expected to reverse.
A valuation allowance is established against net deferred tax assets, if based
on the weighted available evidence, it is more likely than not that all or a
portion of the deferred tax assets will not be realized.
Concentrations of Credit
Risk: Financial instruments that potentially subjected the Company,
Modigene Delaware and ModigeneTech to concentrations of credit risk consist
principally of cash and cash equivalents.
Cash and
cash equivalents are invested in major banks in Israel and the United States.
Such deposits in the United States are not insured. Management believes that the
financial institutions that hold the Company’s investments are financially
sound, and, accordingly, minimal credit risk exists with respect to these
investments.
The
Company has no off-balance sheet concentration of credit risk, such as foreign
exchange contracts or other foreign hedging arrangements.
Royalty-bearing Grants:
Royalty-bearing grants from the Government of Israel for participation in the
development of approved projects are recognized as a reduction of expenses as
the related costs are incurred. Funding is recognized at the time ModigeneTech
is entitled to such grants, on the basis of the costs incurred.
Research
and development grants received by ModigeneTech for the three months ended March
31, 2010 and 2009 and for the period from May 31, 2005 (inception date) through
March 31, 2010 amounted to $57,319, $208,000 and $2,062,084,
respectively.
17
Loss per Share: Basic and
diluted losses per share are presented in accordance with ASC 260-10 “Earnings per share”.
Outstanding share options, warrants and restricted shares have been excluded
from the calculation of the diluted loss per share because all such securities
are antidilutive. The total weighted average number of Common Stock
related to outstanding options warrants and restricted shares excluded from the
calculations of diluted loss per share were 12,075,765, 9,018,909 and 5,843,996
for the three months ended March 31, 2010 and 2009 and for the period from May
31, 2005 (inception date) through March 31, 2010,
respectively.
Results
of Operation
Three
Months Ended March 31, 2010 Compared to the Three Months ended March 31,
2009
Revenue
The
Company has not generated any revenue from operations since its inception. To
date, the Company has funded its operations primarily through grants from the
Israeli Office of the Chief Scientist (the “OCS”), and the sale of equity
securities. If the Company’s development efforts result in clinical success,
regulatory approval and successful commercialization of the Company’s products,
then the Company could generate revenue from sales of its products.
Research
and Development Expense
The
Company expects its research and development expense to increase as it continues
to develop its product candidates. Research and development expense consists
of:
|
·
|
internal
costs associated with research and development
activities;
|
|
·
|
payments
made to third party contract research organizations, contract
manufacturers, investigative sites, and
consultants;
|
|
·
|
manufacturing
development costs;
|
|
·
|
personnel-related
expenses, including salaries, benefits, travel, and related costs for the
personnel involved in the research and
development;
|
|
·
|
activities
relating to the advancement of product candidates through preclinical
studies and clinical trials; and
|
|
·
|
facilities
and other expenses, which include expenses for rent and maintenance of
facilities, as well as laboratory and other
supplies.
|
These
costs and expenses are partially funded by grants received by the Company from
the OCS. There can be no assurance that the Company will continue to receive
grants from the OCS in amounts sufficient for its operations, if at
all.
The
Company expects its research and development expenditures to increase
significantly in the near future in connection with the ongoing production of
its protein drug candidates. The Company intends to continue to hire new
employees, in research and development, in order to meet its operation
plans.
18
The
Company has multiple research and development projects ongoing at any one time.
The Company utilizes its internal resources, employees, and infrastructure
across multiple projects and tracks time spent by employees on specific
projects. The Company believes that significant investment in product
development is a competitive necessity and plans to continue these investments
in order to realize the potential of its product candidates. For the
three months ended March 31, 2010 and 2009 and for the period from May 31, 2005
(inception date) through March 31, 2010, the Company incurred net research and
development expense in the aggregate of $1,002,434, $2,585,702 and $14,103,192,
respectively. The decrease for the three month period resulted primarily from
reduction in development expenses associated with the manufacturing of high
quantities of non-GMP and GMP of hGH-CTP. The successful development of the
Company’s product candidates is subject to numerous risks, uncertainties, and
other factors. Beyond the next twelve months, the Company cannot reasonably
estimate or know the nature, timing and costs of the efforts that will be
necessary to complete the remainder of the development of, or the period, if
any, in which material net cash inflows may commence from the Company’s product
candidates or any of the Company’s other development efforts. This is due to the
numerous risks and uncertainties associated with the duration and cost of
clinical trials which vary significantly over the life of a project as a result
of differences arising during clinical development, including:
|
·
|
completion
of such preclinical and clinical
trials;
|
|
·
|
receipt
of necessary regulatory approvals;
|
|
·
|
the
number of clinical sites included in the
trials;
|
|
·
|
the
length of time required to enroll suitable
patients;
|
|
·
|
the
number of patients that ultimately participate in the
trials;
|
|
·
|
adverse
medical events or side effects in treated
patients;
|
|
·
|
lack
of comparability with complementary
technologies;
|
|
·
|
obtaining
capital necessary to fund operations, including the research and
development efforts; and
|
|
·
|
the
results of clinical trials.
|
The
Company’s expenditures are subject to additional uncertainties, including the
terms and timing of regulatory approvals, and the expense of filing,
prosecuting, defending and enforcing any patent claims or other intellectual
property rights. The Company may obtain unexpected results from its clinical
trials. The Company may elect to discontinue, delay or modify clinical trials of
some product candidates or focus on others. A change in the outcome of any of
the foregoing variables with respect to the development of a product candidate
could mean a significant change in the costs and timing associated with the
development of that product candidate. For example, if the United States Food
and Drug Administration (“FDA”) or other regulatory authorities were to require
the Company to conduct clinical trials beyond those which it currently
anticipates will be required for the completion of the clinical development of a
product candidate, or if the Company experiences significant delays in
enrollment in any of its clinical trials, the Company could be required to
expend significant additional financial resources and time on the completion of
clinical development. Drug development may take several years and millions of
dollars in development costs. If the Company does not obtain or maintain
regulatory approval for its products, its financial condition and results of
operations will be substantially harmed.
19
General
and Administrative Expense
General
and administrative expense consists primarily of salaries and other related
costs, including stock-based compensation expense, for persons serving in the
Company’s executive and administration functions. Other general and
administrative expense includes facility-related costs not otherwise included in
research and development expense, and professional fees for legal and accounting
services. The Company expects that its general and administrative expenses will
increase as it adds additional personnel. For the three months ended
March 31, 2010 and 2009 and for the period from May 31, 2005 (inception date)
through March 31, 2010, the Company incurred general and administrative expenses
in the aggregate of $485,493, $478,734 and $11,705,019,
respectively.
Financial
Expense and Income
Financial
expense and income consists of the following:
|
·
|
interest
earned on the Company’s cash and cash
equivalents;
|
|
·
|
interest
expense on short term bank credit and loan;
and
|
|
·
|
expense
or income resulting from fluctuations of the New Israeli Shekel, which a
portion of the Company’s assets and liabilities are denominated in,
against the United States Dollar and other foreign
currencies.
|
For the
three months ended March 31, 2010 and 2009 and for the period from May 31, 2005
(inception date) through March 31, 2010, the Company incurred net financial
income/(expense) in the aggregate of ($66,431), ($54,442) and $451,859,
respectively. The financial expense resulted primarily from the lower balance of
cash and cash equivalents held by the Company, as well as currency fluctuations
on deposits in Israeli Shekels.
Stock-based
Compensation
The
Company’s stock-based compensation expense is recorded according to ASC 718-10,
“Compensation - Stock Compensation”, which requires the measurement and
recognition of compensation expense for all stock-based payment awards made to
employees and directors, including employee stock options under the Company’s
stock plans, based on estimated fair values.
ASC
718-10 requires companies to estimate the fair value of equity-based payment
awards on the date of grant using an option-pricing model. The value of the
portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods in the Company’s consolidated
statement of operations. The Company estimates the fair value of stock options
granted using the Black-Scholes-Merton option-pricing model.
The
Company estimates the fair value of stock options granted using the
Black-Scholes-Merton option-pricing model. For the three months ended March 31,
2010 and March 31, 2009 and for the period from May 31, 2005 (inception date)
through March 31, 2010, the Company incurred stock-based compensation expenses
in the aggregate of $200,995, $236,679 and $7,396,780,
respectively.
The
Company applies ASC 505 "Equity" with respect to options and warrants issued to
non-employees. ASC 505 requires the use of an option valuation model to measure
the fair value of the options at the grant date.
20
Cash
Flows
For the
three months ended March 31, 2010 and 2009 and for the period from May 31, 2005
(inception date) through March 31, 2010, net cash (used in) provided by
operations was approximately $1,769,019, $1,918,757 and $17,536,399,
respectively. The decrease resulted primarily from reduction of accrued
expenses.
For the
three months ended March 31, 2010 and 2009 and for the period from May 31, 2005
(inception date) through March 31, 2010, net cash (used in) provided by
investing activities was approximately $(119,004), $8,569 and $(1,156,356),
respectively. The difference in the 2010 period resulted primarily from a cash
investment in a bank deposit.
For the
three months ended March 31, 2010 and 2009 and for the period from May 31, 2005
(inception date) through March 31, 2010, net cash (used in) provided by
financing activities was approximately $24,485,628, $0 and $44,812,226,
respectively. The increase in 2010 resulted from our issuance of Common Stock in
a private placement that was consummated in March 2010.
Liquidity
and Capital Resources
On March
11, 2010 and March 17, 2010, the Company entered into two substantially
identical securities purchase agreements with certain private investors,
pursuant to which the investors agreed to purchase an aggregate of 10,382,975
shares of Common Stock at a purchase price of $2.35 per share. On March 17,
2010, the Company closed on the issuance of the shares for aggregate
consideration of $24,399,991 before expenses.
The
Company expects to incur losses from operations for the foreseeable future. The
Company expects to incur increasing research and development expenses, including
expenses related to the hiring of personnel and additional clinical trials. The
Company expects that general and administrative expenses will also increase as
the Company expands its finance and administrative staff, adds infrastructure,
and incurs additional costs related to being a public company in the United
States, including the costs of directors’ and officers’ insurance, investor
relations programs, and increased professional fees. Our future capital
requirements will depend on a number of factors, including the continued
progress of our research and development of product candidates, the timing and
outcome of clinical trials and regulatory approvals, the costs involved in
preparing, filing, prosecuting, maintaining, defending, and enforcing patent
claims and other intellectual property rights, the status of competitive
products, the availability of financing, and our success in developing markets
for our product candidates.
We
believe that our existing cash and cash equivalents and short-term investments
will be sufficient to enable us to fund our operating expenses and capital
expenditure requirements at least for the next twelve months. We have based this
estimate on assumptions that may prove to be wrong or subject to change, and we
may be required to use our available capital resources sooner than we currently
expect. Because of the numerous risks and uncertainties associated with the
development and commercialization of our product candidates, we are unable to
estimate the amounts of increased capital outlays and operating expenditures
associated with our current and anticipated clinical trials. Our future capital
requirements will depend on many factors, including the progress and results of
our clinical trials, the duration and cost of discovery and preclinical
development, and laboratory testing and clinical trials for our product
candidates, the timing and outcome of regulatory review of our product
candidates, the number and development requirements of other product candidates
that we pursue, and the costs of commercialization activities, including product
marketing, sales, and distribution. We do not anticipate that we will generate
product revenues for at least the next several years. In the absence of
additional funding, we expect continuing operating losses to result in increases
in our cash used in operations over the next several years. To the extent that
our capital resources are insufficient to meet our future capital requirements,
we will need to finance our future cash needs through public or private equity
offerings, debt financings, or corporate collaboration and licensing
arrangements
21
On July
23, 2009, we issued 1,000,000 shares of our Series B preferred stock, at a
purchase price of $2.00 per share, each share of which is currently convertible
into two shares of our Common Stock. Under the purchase agreement
pursuant to which we issued the Series B preferred stock, we may, at our
election, cause the investors party thereto to purchase from us up to an
additional 4,000,000 shares of Series B preferred stock at $2.00 per share.
Except for this purchase agreement, we do not currently have any commitments for
future external funding. We may need to raise additional funds more quickly if
one or more of our assumptions proves to be incorrect or if we choose to expand
our product development efforts more rapidly than we presently anticipate, and
we may decide to raise additional funds even before we need them if the
conditions for raising capital are favorable. We may seek to sell additional
equity or debt securities or obtain a bank credit facility. The sale of
additional equity or debt securities may result in dilution to our stockholders.
The incurrence of indebtedness would result in increased fixed obligations and
could also result in covenants that would restrict our operations. Additional
equity or debt financing, grants, or corporate collaboration and licensing
arrangements may not be available on acceptable terms, if at all. If adequate
funds are not available, we may be required to delay, reduce the scope of or
eliminate our research and development programs, reduce our planned
commercialization efforts or obtain funds through arrangements with
collaborators or others that may require us to relinquish rights to certain
product candidates that we might otherwise seek to develop or commercialize
independently.
Effects
of Inflation and Currency Fluctuations
Inflation
generally affects the Company by increasing its cost of labor and clinical trial
costs. The Company does not believe that inflation has had a material effect on
its results of operations for the three months ended March 31, 2010 or
2009.
Currency
fluctuations could affect the Company by increasing or decreasing costs mainly
for goods and services acquired in Israel. The Company does not believe currency
fluctuations have had a material effect on its results of operations for the
three month periods ended March 31, 2010 or 2009.
Off-Balance
Sheet Arrangements
The
Company had no off-balance sheet arrangements as of March 31,
2010.
22
ITEM
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Not
required for smaller reporting companies as defined in rule 12b-2 of the
Exchange Act.
ITEM
4.
|
Controls
and Procedures
|
Evaluation of Disclosure
Controls and Procedures
We
maintain a system of disclosure controls and procedures (as defined in Exchange
Act Rule 13a-15(e)) that is designed to provide reasonable assurance that
information we are required to disclose in the reports we file or submit under
the Exchange Act is accumulated and communicated to management in a timely
manner. Our Chief Executive Officer and Chief Financial Officer
evaluated this system of disclosure controls and procedures as of the end of the
period covered by this quarterly report and have concluded that the system is
operating effectively to ensure appropriate disclosure.
Changes in Internal Control
over Financial Reporting
There
were no changes in our internal control over financial reporting identified in
connection with the evaluation required by paragraph (d) of Rule 13a-15 of the
Exchange Act that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
23
PART
II
|
OTHER
INFORMATION
|
ITEM
1.
|
Legal
Proceedings.
|
Not
Applicable.
ITEM
1A
|
Risk
Factors
|
There
have been no material changes in our risk factors since the filing of our Annual
Report on Form 10-K for the year ended December 31, 2009.
ITEM
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
None.
ITEM
3.
|
Defaults
Upon Senior Securities.
|
None.
ITEM
4.
|
(Removed
and Reserved).
|
ITEM
5.
|
Other
Information.
|
None.
ITEM
6.
|
Exhibits.
|
10.1
|
Form
of Securities Purchase Agreement, incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the
SEC on March 17, 2010.
|
|
10.2
|
Form
of Lockup Agreement, incorporated herein by reference to Exhibit 10.2 to
the Company’s Current Report on Form 8-K filed with the SEC on March 17,
2010.
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K
(Filed herewith).
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Item 601(b)(31) of Regulation
S-K (Filed herewith).
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Item 601(b)(32) of Regulation S-K
(Filed herewith).
|
|
32.2
|
|
Certification
of Principal Financial Officer pursuant to Item 601(b)(32) of Regulation
S-B (Filed
herewith).
|
24
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
PROLOR
BIOTECH, INC.
|
|
May
14, 2010
|
/s/ Abraham Havron
|
Date
|
Abraham
Havron
|
Chief
Executive Officer
|
25