Attached files
file | filename |
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EX-32.2 - EXHIBIT 32.2 - Fibrocell Science, Inc. | c17118exv32w2.htm |
EX-31.1 - EXHIBIT 31.1 - Fibrocell Science, Inc. | c17118exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - Fibrocell Science, Inc. | c17118exv31w2.htm |
EX-32.1 - EXHIBIT 32.1 - Fibrocell Science, Inc. | c17118exv32w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2011
OR
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Fibrocell Science, Inc.
(Exact name of registrant as specified in its Charter.)
Delaware (State or other jurisdiction |
001-31564 (Commission File Number) |
87-0458888 (I.R.S. Employer |
||
of incorporation) | Identification No.) | |||
405 Eagleview Boulevard
Exton, Pennsylvania 19341
(Address of principal executive offices, including zip code)
Exton, Pennsylvania 19341
(Address of principal executive offices, including zip code)
(484) 713-6000
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for any 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 þ No o
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
o No o
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 o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
Indicate by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a court. Yes þ No o
As of May 9, 2011, issuer had 30,911,561 shares issued and outstanding of common
stock, par value $0.001.
TABLE OF CONTENTS
Page | ||||||||
1 | ||||||||
2 | ||||||||
3 | ||||||||
16 | ||||||||
17 | ||||||||
26 | ||||||||
31 | ||||||||
31 | ||||||||
32 | ||||||||
32 | ||||||||
32 | ||||||||
32 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
Table of Contents
PART I FINANCIAL INFORMATION
ITEM 1. | Financial statements. |
Fibrocell Science, Inc.
(A Development Stage Company)
(A Development Stage Company)
Condensed Consolidated Balance Sheets
(unaudited)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 3,310,138 | $ | 867,738 | ||||
Accounts receivable, net |
172,339 | 229,891 | ||||||
Inventory, net |
299,201 | 258,939 | ||||||
Prepaid expenses and other current assets |
335,965 | 559,082 | ||||||
Total current assets |
4,117,643 | 1,915,650 | ||||||
Property and equipment, net of accumulated depreciation of
$10,558 and $8,085, respectively |
36,607 | 21,589 | ||||||
Other assets |
250 | 250 | ||||||
Intangible assets |
6,340,656 | 6,340,656 | ||||||
Total assets |
$ | 10,495,156 | $ | 8,278,145 | ||||
Liabilities, Redeemable Preferred Stock, Shareholders Deficit and
Noncontrolling Interest |
||||||||
Current liabilities: |
||||||||
Current debt |
$ | 32,771 | $ | 56,911 | ||||
Accounts payable |
540,929 | 1,096,125 | ||||||
Accrued expenses |
751,422 | 789,482 | ||||||
Deferred revenue |
14,000 | | ||||||
Total current liabilities |
1,339,122 | 1,942,518 | ||||||
Long-term debt |
7,564,289 | 7,290,881 | ||||||
Deferred tax liability |
2,500,000 | 2,500,000 | ||||||
Warrant liability |
19,220,324 | 8,171,518 | ||||||
Derivative liability |
8,820,108 | 2,120,360 | ||||||
Other long-term liabilities |
227,205 | 255,606 | ||||||
Total liabilities |
39,671,048 | 22,280,883 | ||||||
Commitments and contingencies |
||||||||
Preferred stock series A, $0.001 par value; 9,000 shares
authorized; 3,250 shares issued and 2,886 and 2,886 shares
outstanding, respectively |
1,338,312 | 1,280,150 | ||||||
Preferred stock series B, $0.001 par value; 9,000 shares
authorized; 4,640 shares issued and 2,693 and 4,640 shares
outstanding, respectively |
| | ||||||
Preferred stock series B, $0.001 par value; subscription receivable |
| (210,000 | ) | |||||
Preferred stock series D, $0.001 par value; 8,000 shares
authorized; 7,779 and 1,645 shares issued and outstanding,
respectively |
| | ||||||
Fibrocell Science, Inc. shareholders deficit: |
||||||||
Successor common stock, $0.001 par value; 250,000,000 shares
authorized; 24,559,097 and 20,375,500 shares issued and
outstanding, respectively |
24,559 | 20,376 | ||||||
Additional paid-in capital |
4,055,108 | 2,437,893 | ||||||
Accumulated deficit during development stage |
(35,063,900 | ) | (17,981,530 | ) | ||||
Total Fibrocell Science, Inc. shareholders deficit |
(30,984,233 | ) | (15,523,261 | ) | ||||
Noncontrolling interest |
470,029 | 450,373 | ||||||
Total deficit and noncontrolling interest |
(30,514,204 | ) | (15,072,888 | ) | ||||
Total liabilities, preferred stock, shareholders deficit and
noncontrolling interest |
$ | 10,495,156 | $ | 8,278,145 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
1
Table of Contents
Fibrocell Science, Inc.
(A Development Stage Company)
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(unaudited)
Successor | Successor | Successor | Predecessor | ||||||||||||||
Cumulative period | Cumulative period | ||||||||||||||||
from September 1, | from December 28, | ||||||||||||||||
For the three | For the three | 2009 (date of | 1995 (date of | ||||||||||||||
months ended | months ended | inception) to | inception) to | ||||||||||||||
March 31, 2011 | March 31, 2010 | March 31, 2011 | August 31, 2009 | ||||||||||||||
Revenue |
|||||||||||||||||
Product sales |
$ | 208,636 | $ | 209,070 | $ | 1,474,946 | $ | 4,818,994 | |||||||||
License fees |
| | | 260,000 | |||||||||||||
Total revenue |
208,636 | 209,070 | 1,474,946 | 5,078,994 | |||||||||||||
Cost of sales |
97,858 | 100,519 | 782,554 | 2,279,335 | |||||||||||||
Gross profit |
110,778 | 108,551 | 692,392 | 2,799,659 | |||||||||||||
Selling, general and administrative expenses |
2,354,383 | 2,019,913 | 11,578,320 | 84,805,520 | |||||||||||||
Research and development expenses |
1,616,529 | 1,192,610 | 8,926,044 | 56,269,869 | |||||||||||||
Operating loss |
(3,860,134 | ) | (3,103,972 | ) | (19,811,972 | ) | (138,275,730 | ) | |||||||||
Other income (expense) |
|||||||||||||||||
Interest income |
| | 1 | 6,989,539 | |||||||||||||
Reorganization items, net |
| 3,303 | (69,174 | ) | 73,538,984 | ||||||||||||
Other income |
| | 244,479 | 316,338 | |||||||||||||
Warrant expense |
(6,296,330 | ) | (1,417,244 | ) | (7,080,646 | ) | | ||||||||||
Derivative revaluation expense |
(6,620,726 | ) | | (6,620,726 | ) | | |||||||||||
Interest expense |
(273,408 | ) | (197,730 | ) | (1,565,781 | ) | (18,790,218 | ) | |||||||||
Loss from continuing operations before
income taxes |
(17,050,598 | ) | (4,715,643 | ) | (34,903,819 | ) | (76,221,087 | ) | |||||||||
Income tax benefit |
| | | 190,754 | |||||||||||||
Loss from continuing operations |
(17,050,598 | ) | (4,715,643 | ) | (34,903,819 | ) | (76,030,333 | ) | |||||||||
Loss from discontinued operations |
(12,116 | ) | (17,044 | ) | (73,034 | ) | (41,091,311 | ) | |||||||||
Net loss |
(17,062,714 | ) | (4,732,687 | ) | (34,976,853 | ) | (117,121,644 | ) | |||||||||
Deemed dividend associated with beneficial
conversion |
| | | (11,423,824 | ) | ||||||||||||
Preferred stock dividends |
| | | (1,589,861 | ) | ||||||||||||
Net (income)/loss attributable to
noncontrolling interest |
(19,656 | ) | (15,138 | ) | (87,047 | ) | 1,799,523 | ||||||||||
Net loss attributable to Fibrocell Science,
Inc. common shareholders |
$ | (17,082,370 | ) | $ | (4,747,825 | ) | $ | (35,063,900 | ) | $ | (128,335,806 | ) | |||||
Per share information: |
|||||||||||||||||
Loss from continuing operations-basic and
diluted |
$ | (0.80 | ) | $ | (0.30 | ) | $ | (1.91 | ) | $ | (4.30 | ) | |||||
Loss from discontinued operations-basic
and diluted |
| | | (2.32 | ) | ||||||||||||
Income (loss) attributable to noncontrolling interest |
| | (0.01 | ) | 0.10 | ||||||||||||
Deemed dividend associated with
beneficial conversion of preferred stock |
| | | (0.65 | ) | ||||||||||||
Preferred stock dividends |
| | | (0.09 | ) | ||||||||||||
Net loss attributable to common
shareholders per common sharebasic and
diluted |
$ | (0.80 | ) | $ | (0.30 | ) | $ | (1.92 | ) | $ | (7.26 | ) | |||||
Weighted average number of basic and
diluted common shares outstanding |
21,230,249 | 15,806,989 | 18,237,924 | 17,678,219 | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
Table of Contents
Fibrocell Science, Inc.
(A Development Stage Company)
(A Development Stage Company)
Condensed Consolidated Statements of Shareholders Equity (Deficit) and Comprehensive Income (Loss)
(unaudited)
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Equity | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income | Stage | (Deficit) | |||||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash on 12/28/95 |
| $ | | | $ | | 2,285,291 | $ | 2,285 | $ | (1,465 | ) | | $ | | $ | | $ | | $ | 820 | |||||||||||||||||||||||||||
Issuance of common stock for cash
on 11/7/96 |
| | | | 11,149 | 11 | 49,989 | | | | | 50,000 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for cash
on 11/29/96 |
| | | | 2,230 | 2 | 9,998 | | | | | 10,000 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for cash
on 12/19/96 |
| | | | 6,690 | 7 | 29,993 | | | | | 30,000 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for cash
on 12/26/96 |
| | | | 11,148 | 11 | 49,989 | | | | | 50,000 | ||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (270,468 | ) | (270,468 | ) | ||||||||||||||||||||||||||||||||||
Balance, 12/31/96 (Predecessor) |
| $ | | | $ | | 2,316,508 | $ | 2,316 | $ | 138,504 | | $ | | $ | | $ | (270,468 | ) | $ | (129,648 | ) | ||||||||||||||||||||||||||
Issuance of common stock for cash
on 12/27/97 |
| | | | 21,182 | 21 | 94,979 | | | | | 95,000 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for
services on 9/1/97 |
| | | | 11,148 | 11 | 36,249 | | | | | 36,260 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for
services on 12/28/97 |
| | | | 287,193 | 287 | 9,968 | | | | | 10,255 | ||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (52,550 | ) | (52,550 | ) | ||||||||||||||||||||||||||||||||||
Balance, 12/31/97(Predecessor) |
| $ | | | $ | | 2,636,031 | $ | 2,635 | $ | 279,700 | | $ | | $ | | $ | (323,018 | ) | $ | (40,683 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
3
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Equity | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income | Stage | (Deficit) | |||||||||||||||||||||||||||||||||||||
Issuance of
common stock for
cash on 8/23/98 |
| $ | | | $ | | 4,459 | $ | 4 | $ | 20,063 | | $ | | $ | | $ | | $ | 20,067 | ||||||||||||||||||||||||||||
Repurchase of
common stock on
9/29/98 |
| | | | | | | 2,400 | (50,280 | ) | | | (50,280 | ) | ||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (195,675 | ) | (195,675 | ) | ||||||||||||||||||||||||||||||||||
Balance, 12/31/98
(Predecessor) |
| $ | | | $ | | 2,640,490 | $ | 2,639 | $ | 299,763 | 2,400 | $ | (50,280 | ) | $ | | $ | (518,693 | ) | $ | (266,571 | ) | |||||||||||||||||||||||||
Issuance of
common stock for
cash on 9/10/99 |
| | | | 52,506 | 53 | 149,947 | | | | | 150,000 | ||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (1,306,778 | ) | (1,306,778 | ) | ||||||||||||||||||||||||||||||||||
Balance, 12/31/99
(Predecessor) |
| $ | | | $ | | 2,692,996 | $ | 2,692 | $ | 449,710 | 2,400 | $ | (50,280 | ) | $ | | $ | (1,825,471 | ) | $ | (1,423,349 | ) | |||||||||||||||||||||||||
Issuance of
common stock for
cash on 1/18/00 |
| | | | 53,583 | 54 | 1,869 | | | | | 1,923 | ||||||||||||||||||||||||||||||||||||
Issuance of
common stock for
services on
3/1/00 |
| | | | 68,698 | 69 | (44 | ) | | | | | 25 | |||||||||||||||||||||||||||||||||||
Issuance of
common stock for
services on
4/4/00 |
| | | | 27,768 | 28 | (18 | ) | | | | | 10 | |||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (807,076 | ) | (807,076 | ) | ||||||||||||||||||||||||||||||||||
Balance, 12/31/00
(Predecessor) |
| $ | | | $ | | 2,843,045 | $ | 2,843 | $ | 451,517 | 2,400 | $ | (50,280 | ) | $ | | $ | (2,632,547 | ) | $ | (2,228,467 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
4
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Equity | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income | Stage | (Deficit) | |||||||||||||||||||||||||||||||||||||
Issuance of
common stock for
services on 7/1/01 |
| $ | | | $ | | 156,960 | $ | 157 | $ | (101 | ) | | $ | | $ | | $ | | $ | 56 | |||||||||||||||||||||||||||
Issuance of common
stock for services
on 7/1/01 |
| | | | 125,000 | 125 | (80 | ) | | | | | 45 | |||||||||||||||||||||||||||||||||||
Issuance of common
stock for
capitalization of
accrued salaries on
8/10/01 |
| | | | 70,000 | 70 | 328,055 | | | | | 328,125 | ||||||||||||||||||||||||||||||||||||
Issuance of common
stock for
conversion of
convertible debt on
8/10/01 |
| | | | 1,750,000 | 1,750 | 1,609,596 | | | | | 1,611,346 | ||||||||||||||||||||||||||||||||||||
Issuance of common
stock for
conversion of
convertible
shareholder notes
payable on 8/10/01 |
| | | | 208,972 | 209 | 135,458 | | | | | 135,667 | ||||||||||||||||||||||||||||||||||||
Issuance of common
stock for bridge
financing on
8/10/01 |
| | | | 300,000 | 300 | (192 | ) | | | | | 108 | |||||||||||||||||||||||||||||||||||
Retirement of
treasury stock on
8/10/01 |
| | | | | | (50,280 | ) | (2,400 | ) | 50,280 | | | | ||||||||||||||||||||||||||||||||||
Issuance of common
stock for net
assets of Gemini on
8/10/01 |
| | | | 3,942,400 | 3,942 | (3,942 | ) | | | | | | |||||||||||||||||||||||||||||||||||
Issuance of common
stock for net
assets of AFH on
8/10/01 |
| | | | 3,899,547 | 3,900 | (3,900 | ) | | | | | | |||||||||||||||||||||||||||||||||||
Issuance of common
stock for cash on
8/10/01 |
| | | | 1,346,669 | 1,347 | 2,018,653 | | | | | 2,020,000 | ||||||||||||||||||||||||||||||||||||
Transaction and
fund raising
expenses on 8/10/01 |
| | | | | | (48,547 | ) | | | | | (48,547 | ) | ||||||||||||||||||||||||||||||||||
Issuance of common
stock for services
on 8/10/01 |
| | | | 60,000 | 60 | | | | | | 60 | ||||||||||||||||||||||||||||||||||||
Issuance of common
stock for cash on
8/28/01 |
| | | | 26,667 | 27 | 39,973 | | | | | 40,000 | ||||||||||||||||||||||||||||||||||||
Issuance of common
stock for services
on 9/30/01 |
| | | | 314,370 | 314 | 471,241 | | | | | 471,555 |
The accompanying notes are an integral part of these consolidated financial statements.
5
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Equity | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income | Stage | (Deficit) | |||||||||||||||||||||||||||||||||||||
Uncompensated contribution of
services3rd quarter |
| $ | | | $ | | | $ | | $ | 55,556 | | $ | | $ | | $ | | $ | 55,556 | ||||||||||||||||||||||||||||
Issuance of common stock for
services on 11/1/01 |
| | | | 145,933 | 146 | 218,754 | | | | | 218,900 | ||||||||||||||||||||||||||||||||||||
Uncompensated contribution of
services4th quarter |
| | | | | | 100,000 | | | | | 100,000 | ||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (1,652,004 | ) | (1,652,004 | ) | ||||||||||||||||||||||||||||||||||
Balance, 12/31/01 (Predecessor) |
| $ | | | $ | | 15,189,563 | $ | 15,190 | $ | 5,321,761 | | $ | | $ | | $ | (4,284,551 | ) | $ | 1,052,400 | |||||||||||||||||||||||||||
Uncompensated contribution of
services1st quarter |
| | | | | | 100,000 | | | | | 100,000 | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock for
cash on 4/26/02 |
905,000 | 905 | | | | | 2,817,331 | | | | | 2,818,236 | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock for
cash on 5/16/02 |
890,250 | 890 | | | | | 2,772,239 | | | | | 2,773,129 | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock for
cash on 5/31/02 |
795,000 | 795 | | | | | 2,473,380 | | | | | 2,474,175 | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock for
cash on 6/28/02 |
229,642 | 230 | | | | | 712,991 | | | | | 713,221 | ||||||||||||||||||||||||||||||||||||
Uncompensated contribution of
services2nd quarter |
| | | | | | 100,000 | | | | | 100,000 | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock for
cash on 7/15/02 |
75,108 | 75 | | | | | 233,886 | | | | | 233,961 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for cash
on 8/1/02 |
| | | | 38,400 | 38 | 57,562 | | | | | 57,600 | ||||||||||||||||||||||||||||||||||||
Issuance of warrants for services
on 9/06/02 |
| | | | | | 103,388 | | | | | 103,388 | ||||||||||||||||||||||||||||||||||||
Uncompensated contribution of
services3rd quarter |
| | | | | | 100,000 | | | | | 100,000 | ||||||||||||||||||||||||||||||||||||
Uncompensated contribution of
services4th quarter |
| | | | | | 100,000 | | | | | 100,000 | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock for
dividends |
143,507 | 144 | | | | | 502,517 | | | | (502,661 | ) | | |||||||||||||||||||||||||||||||||||
Deemed dividend associated with
beneficial conversion of preferred
stock |
| | | | | | 10,178,944 | | | | (10,178,944 | ) | | |||||||||||||||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (5,433,055 | ) | (5,433,055 | ) | ||||||||||||||||||||||||||||||||||
Other comprehensive income,
foreign currency translation
adjustment |
| | | | | | | | | 13,875 | | 13,875 | ||||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | (5,419,180 | ) | |||||||||||||||||||||||||||||||||||
Balance, 12/31/02 (Predecessor) |
3,038,507 | $ | 3,039 | | $ | | 15,227,963 | $ | 15,228 | $ | 25,573,999 | | $ | | $ | 13,875 | $ | (20,399,211 | ) | $ | 5,206,930 |
The accompanying notes are an integral part of these consolidated financial statements.
6
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Equity | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income | Stage | (Deficit) | |||||||||||||||||||||||||||||||||||||
Issuance of common stock for cash
on 1/7/03 |
| $ | | | $ | | 61,600 | $ | 62 | $ | 92,338 | | $ | | $ | | $ | | $ | 92,400 | ||||||||||||||||||||||||||||
Issuance of common stock for
patent pending acquisition on
3/31/03 |
| | | | 100,000 | 100 | 539,900 | | | | | 540,000 | ||||||||||||||||||||||||||||||||||||
Cancellation of common stock on
3/31/03 |
| | | | (79,382 | ) | (79 | ) | (119,380 | ) | | | | | (119,459 | ) | ||||||||||||||||||||||||||||||||
Uncompensated contribution of
services1st quarter |
| | | | | | 100,000 | | | | | 100,000 | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock for
cash on 5/9/03 |
| | 110,250 | 110 | | | 2,773,218 | | | | | 2,773,328 | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock for
cash on 5/16/03 |
| | 45,500 | 46 | | | 1,145,704 | | | | | 1,145,750 | ||||||||||||||||||||||||||||||||||||
Conversion of preferred stock into
common stock2nd qtr |
(70,954 | ) | (72 | ) | | | 147,062 | 147 | 40,626 | | | | | 40,701 | ||||||||||||||||||||||||||||||||||
Conversion of warrants into common
stock2nd qtr |
| | | | 114,598 | 114 | (114 | ) | | | | | | |||||||||||||||||||||||||||||||||||
Uncompensated contribution of
services2nd quarter |
| | | | | | 100,000 | | | | | 100,000 | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock
dividends |
| | | | | | | | | | (1,087,200 | ) | (1,087,200 | ) | ||||||||||||||||||||||||||||||||||
Deemed dividend associated with
beneficial conversion of preferred
stock |
| | | | | | 1,244,880 | | | | (1,244,880 | ) | | |||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash3rd qtr |
| | | | 202,500 | 202 | 309,798 | | | | | 310,000 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for cash
on 8/27/03 |
| | | | 3,359,331 | 3,359 | 18,452,202 | | | | | 18,455,561 | ||||||||||||||||||||||||||||||||||||
Conversion of preferred stock into
common stock3rd qtr |
(2,967,553 | ) | (2,967 | ) | (155,750 | ) | (156 | ) | 7,188,793 | 7,189 | (82,875 | ) | | | | | (78,809 | ) | ||||||||||||||||||||||||||||||
Conversion of warrants into common
stock3rd qtr |
| | | | 212,834 | 213 | (213 | ) | | | | | | |||||||||||||||||||||||||||||||||||
Compensation expense on warrants
issued to non-employees |
| | | | | | 412,812 | | | | | 412,812 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash4th qtr |
| | | | 136,500 | 137 | 279,363 | | | | | 279,500 | ||||||||||||||||||||||||||||||||||||
Conversion of warrants into common
stock4th qtr |
| | | | 393 | | | | | | | | ||||||||||||||||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (11,268,294 | ) | (11,268,294 | ) | ||||||||||||||||||||||||||||||||||
Other comprehensive income,
foreign currency translation
adjustment |
| | | | | | | | | 360,505 | | 360,505 | ||||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | (10,907,789 | ) | |||||||||||||||||||||||||||||||||||
Balance, 12/31/03 (Predecessor) |
| $ | | | $ | | 26,672,192 | $ | 26,672 | $ | 50,862,258 | | $ | | $ | 374,380 | $ | (33,999,585 | ) | $ | 17,263,725 |
The accompanying notes are an integral part of these consolidated financial statements.
7
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Equity | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income | Stage | (Deficit) | |||||||||||||||||||||||||||||||||||||
Conversion of warrants into common
stock1st qtr |
| $ | | | $ | | 78,526 | $ | 79 | $ | (79 | ) | | $ | | $ | | $ | | $ | | |||||||||||||||||||||||||||
Issuance of common stock for cash in
connection with exercise of stock
options1st qtr |
| | | | 15,000 | 15 | 94,985 | | | | | 95,000 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for cash in
connection with exercise of
warrants1st qtr |
| | | | 4,000 | 4 | 7,716 | | | | | 7,720 | ||||||||||||||||||||||||||||||||||||
Compensation expense on options and warrants
issued to non-employees and
directors1st qtr |
| | | | | | 1,410,498 | | | | | 1,410,498 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with
exercise of warrants2nd qtr |
| | | | 51,828 | 52 | (52 | ) | | | | | | |||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash2nd qtr |
| | | | 7,200,000 | 7,200 | 56,810,234 | | | | | 56,817,434 | ||||||||||||||||||||||||||||||||||||
Compensation expense on options and warrants
issued to non-employees and
directors2nd qtr |
| | | | | | 143,462 | | | | | 143,462 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with
exercise of warrants3rd qtr |
| | | | 7,431 | 7 | (7 | ) | | | | | | |||||||||||||||||||||||||||||||||||
Issuance of common stock for cash in
connection with exercise of stock
options3rd qtr |
| | | | 110,000 | 110 | 189,890 | | | | | 190,000 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock for cash in
connection with exercise of
warrants3rd qtr |
| | | | 28,270 | 28 | 59,667 | | | | | 59,695 | ||||||||||||||||||||||||||||||||||||
Compensation expense on options and warrants
issued to non-employees and
directors3rd qtr |
| | | | | | 229,133 | | | | | 229,133 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with
exercise of warrants4th qtr |
| | | | 27,652 | 28 | (28 | ) | | | | | | |||||||||||||||||||||||||||||||||||
Compensation expense on options and warrants
issued to non-employees, employees, and
directors4th qtr |
| | | | | | 127,497 | | | | | 127,497 | ||||||||||||||||||||||||||||||||||||
Purchase of treasury stock4th qtr |
| | | | | | | 4,000,000 | (25,974,000 | ) | | | (25,974,000 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (21,474,469 | ) | (21,474,469 | ) | ||||||||||||||||||||||||||||||||||
Other comprehensive income, foreign currency
translation adjustment |
| | | | | | | | | 79,725 | | 79,725 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income, net unrealized
gain on available-for-sale investments |
| | | | | | | | | 10,005 | | 10,005 | ||||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | (21,384,739 | ) | |||||||||||||||||||||||||||||||||||
Balance, 12/31/04 (Predecessor) |
| $ | | | $ | | 34,194,899 | $ | 34,195 | $ | 109,935,174 | 4,000,000 | $ | (25,974,000 | ) | $ | 464,110 | $ | (55,474,054 | ) | $ | 28,985,425 |
The accompanying notes are an integral part of these consolidated financial statements.
8
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Equity | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income (Loss) | Stage | (Deficit) | |||||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash in connection with
exercise of stock
options1st qtr |
| $ | | | $ | | 25,000 | $ | 25 | $ | 74,975 | | $ | | $ | | $ | | $ | 75,000 | ||||||||||||||||||||||||||||
Compensation expense on
options and warrants issued to
non-employees1st
qtr |
| | | | | | 33,565 | | | | | 33,565 | ||||||||||||||||||||||||||||||||||||
Conversion of warrants into
common stock2nd
qtr |
| | | | 27,785 | 28 | (28 | ) | | | | | | |||||||||||||||||||||||||||||||||||
Compensation expense on
options and warrants issued to
non-employees2nd
qtr |
| | | | | | (61,762 | ) | | | | | (61,762 | ) | ||||||||||||||||||||||||||||||||||
Compensation expense on
options and warrants issued to
non-employees3rd
qtr |
| | | | | | (137,187 | ) | | | | | (137,187 | ) | ||||||||||||||||||||||||||||||||||
Conversion of warrants into
common stock3rd
qtr |
| | | | 12,605 | 12 | (12 | ) | | | | | | |||||||||||||||||||||||||||||||||||
Compensation expense on
options and warrants issued to
non-employees4th
qtr |
| | | | | | 18,844 | | | | | 18,844 | ||||||||||||||||||||||||||||||||||||
Compensation expense on
acceleration of
options4th qtr |
| | | | | | 14,950 | | | | | 14,950 | ||||||||||||||||||||||||||||||||||||
Compensation expense on
restricted stock award issued
to employee4th
qtr |
| | | | | | 606 | | | | | 606 | ||||||||||||||||||||||||||||||||||||
Conversion of predecessor
company shares |
| | | | 94 | | | | | | | | ||||||||||||||||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (35,777,584 | ) | (35,777,584 | ) | ||||||||||||||||||||||||||||||||||
Other comprehensive loss,
foreign currency translation
adjustment |
| | | | | | | | | (1,372,600 | ) | | (1,372,600 | ) | ||||||||||||||||||||||||||||||||||
Foreign exchange gain on
substantial liquidation of
foreign entity |
133,851 | 133,851 | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net
unrealized gain on
available-for-sale investments |
| | | | | | | | | (10,005 | ) | | (10,005 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | (37,026,338 | ) | |||||||||||||||||||||||||||||||||||
Balance, 12/31/05 (Predecessor) |
| $ | | | $ | | 34,260,383 | $ | 34,260 | $ | 109,879,125 | 4,000,000 | $ | (25,974,000 | ) | $ | (784,644 | ) | $ | (91,251,638 | ) | $ | (8,096,897 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
9
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Noncontrolling | Equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income | Stage | Interest | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense on options
and warrants issued to
non-employees1st
qtr |
| $ | | | $ | | | $ | | $ | 42,810 | | $ | | $ | | $ | | $ | | $ | 42,810 | ||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to employees and
directors1st qtr |
| | | | | | 46,336 | | | | | | 46,336 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
restricted stock issued to
employees1st qtr |
| | | | 128,750 | 129 | 23,368 | | | | | | 23,497 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on options
and warrants issued to
non-employees2nd
qtr |
| | | | | | 96,177 | | | | | | 96,177 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to employees and
directors2nd qtr |
| | | | | | 407,012 | | | | | | 407,012 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
restricted stock to
employees2nd qtr |
| | | | | | 4,210 | | | | | | 4,210 | |||||||||||||||||||||||||||||||||||||||
Cancellation of unvested
restricted stock
2nd qtr |
| | | | (97,400 | ) | (97 | ) | 97 | | | | | | | |||||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash in connection with
exercise of stock
options2nd qtr |
| | | | 10,000 | 10 | 16,490 | | | | | | 16,500 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on options
and warrants issued to
non-employees3rd
qtr |
| | | | | | 25,627 | | | | | | 25,627 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to employees and
directors3rd qtr |
| | | | | | 389,458 | | | | | | 389,458 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
restricted stock to
employees3rd qtr |
| | | | | | 3,605 | | | | | | 3,605 | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash in connection with
exercise of stock
options3rd qtr |
| | | | 76,000 | 76 | 156,824 | | | | | | 156,900 | |||||||||||||||||||||||||||||||||||||||
Acquisition of Agera |
| | | | | | | | | | | 2,182,505 | 2,182,505 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on options
and warrants issued to
non-employees4th
qtr |
| | | | | | 34,772 | | | | | | 34,772 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to employees and
directors4th qtr |
| | | | | | 390,547 | | | | | | 390,547 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
restricted stock to
employees4th qtr |
| | | | | | 88 | | | | | | 88 | |||||||||||||||||||||||||||||||||||||||
Cancellation of unvested
restricted stock
award4th qtr |
| | | | (15,002 | ) | (15 | ) | 15 | | | | | | | |||||||||||||||||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (35,821,406 | ) | (78,132 | ) | (35,899,538 | ) | ||||||||||||||||||||||||||||||||||||
Other comprehensive gain,
foreign currency translation
adjustment |
| | | | | | | | | 657,182 | | | 657,182 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | | (35,242,356 | ) | ||||||||||||||||||||||||||||||||||||||
Balance 12/31/06 (Predecessor) |
| $ | | | $ | | 34,362,731 | $ | 34,363 | $ | 111,516,561 | 4,000,000 | $ | (25,974,000 | ) | $ | (127,462 | ) | $ | (127,073,044 | ) | $ | 2,104,373 | $ | (39,519,209 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
10
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Noncontrolling | Equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income (Loss) | Stage | Interest | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense on options
and warrants issued to
non-employees1st
qtr |
| $ | | | $ | | | $ | | $ | 39,742 | | $ | | $ | | $ | | $ | | $ | 39,742 | ||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to employees and
directors1st qtr |
| | | | | | 448,067 | | | | | | 448,067 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
restricted stock issued to
employees1st qtr |
| | | | | | 88 | | | | | | 88 | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash in connection with
exercise of stock
options1st qtr |
| | | | 15,000 | 15 | 23,085 | | | | | | 23,100 | |||||||||||||||||||||||||||||||||||||||
Expense in connection with
modification of employee stock
options 1st qtr |
| | | | | | 1,178,483 | | | | | | 1,178,483 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on options
and warrants issued to
non-employees2nd
qtr |
| | | | | | 39,981 | | | | | | 39,981 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to employees and
directors2nd qtr |
| | | | | | 462,363 | | | | | | 462,363 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
restricted stock issued to
employees2nd qtr |
| | | | | | 88 | | | | | | 88 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to employees and
directors3rd qtr |
| | | | | | 478,795 | | | | | | 478,795 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
restricted stock issued to
employees3rd qtr |
| | | | | | 88 | | | | | | 88 | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon
exercise of
warrants3rd qtr |
| | | | 492,613 | 493 | 893,811 | | | | | | 894,304 | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash, net of offering
costs3rd qtr |
| | | | 6,767,647 | 6,767 | 13,745,400 | | | | | | 13,752,167 | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock for
cash in connection with
exercise of stock
options3rd qtr |
| | | | 1,666 | 2 | 3,164 | | | | | | 3,166 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to employees and
directors4thqtr |
| | | | | | 378,827 | | | | | | 378,827 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
restricted stock issued to
employees4thqtr |
| | | | | | 88 | | | | | | 88 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (35,573,114 | ) | (246,347 | ) | (35,819,461 | ) | ||||||||||||||||||||||||||||||||||||
Other comprehensive gain,
foreign currency translation
adjustment |
| | | | | | | | | 846,388 | | | 846,388 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | | (34,973,073 | ) | ||||||||||||||||||||||||||||||||||||||
Balance 12/31/07 (Predecessor) |
| $ | | | $ | | 41,639,657 | $ | 41,640 | $ | 129,208,631 | 4,000,000 | $ | (25,974,000 | ) | $ | 718,926 | $ | (162,646,158 | ) | $ | 1,858,026 | $ | (56,792,935 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
11
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Shareholders | |||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Noncontrolling | Equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income (Loss) | Stage | Interest | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense on vested options related to
non-employees1st qtr |
| $ | | | $ | | | $ | | $ | 44,849 | | $ | | $ | | $ | | $ | | $ | 44,849 | ||||||||||||||||||||||||||||||
Compensation expense on option awards issued to
employees and directors1st qtr |
| | | | | | 151,305 | | | | | | 151,305 | |||||||||||||||||||||||||||||||||||||||
Expense in connection with modification of employee
stock options 1st qtr |
| | | | | | 1,262,815 | | | | | | 1,262,815 | |||||||||||||||||||||||||||||||||||||||
Retirement of restricted stock |
| | | | (165 | ) | (1 | ) | | | | | | | (1 | ) | ||||||||||||||||||||||||||||||||||||
Compensation expense on vested options related to
non-employees2nd qtr |
| | | | | | 62,697 | | | | | | 62,697 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option awards
issued to employees and directors2nd qtr |
| | | | | | 193,754 | | | | | | 193,754 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on vested options
related to non-employees3rd qtr |
| | | | | | 166,687 | | | | | | 166,687 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option awards
issued to employees and directors3rd qtr |
| | | | | | 171,012 | | | | | | 171,012 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on vested options
related to non-employees4th qtr |
| | | | | | (86,719 | ) | | | | | | (86,719 | ) | |||||||||||||||||||||||||||||||||||||
Compensation expense on option awards
issued to employees and directors4th qtr |
| | | | | | 166,196 | | | | | | 166,196 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (31,411,179 | ) | (1,680,676 | ) | (33,091,855 | ) | ||||||||||||||||||||||||||||||||||||
Reclassification of foreign exchange gain on
substantial liquidation of foreign entities |
| | | | | | | | | (2,152,569 | ) | | | (2,152,569 | ) | |||||||||||||||||||||||||||||||||||||
Other comprehensive gain, foreign currency translation
adjustment |
| | | | | | | | | 1,433,643 | | | 1,433,643 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | | (33,810,781 | ) | ||||||||||||||||||||||||||||||||||||||
Balance 12/31/08 (Predecessor) |
| $ | | | $ | | 41,639,492 | $ | 41,639 | $ | 131,341,227 | 4,000,000 | $ | (25,974,000 | ) | $ | | $ | (194,057,337 | ) | $ | 177,350 | $ | (88,471,121 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
12
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Total | |||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Noncontrolling | Equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income (Loss) | Stage | Interest | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense on vested options
related to non-employees1st
qtr |
| $ | | | $ | | | $ | | $ | 1,746 | | $ | | $ | | $ | | $ | | $ | 1,746 | ||||||||||||||||||||||||||||||
Compensation expense on option awards
issued to employees and
directors1st qtr |
| | | | | | 138,798 | | | | | | 138,798 | |||||||||||||||||||||||||||||||||||||||
Conversion of debt into common stock
1st qtr 2009 |
| | | | 37,564 | 38 | 343,962 | | | | | | 344,000 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option awards
issued to employees and directors2nd
qtr |
| | | | | | 112,616 | | | | | | 112,616 | |||||||||||||||||||||||||||||||||||||||
Conversion of debt into common stock
2nd qtr 2009 |
| | | | 1,143,324 | 1,143 | 10,468,857 | | | | | | 10,470,000 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option awards
issued to employees and directors2
months ended 8/31/09 |
| | | | | | 35,382 | | | | | | 35,382 | |||||||||||||||||||||||||||||||||||||||
Balance of expense due to cancellation
of options issued to employees and
directors in bankruptcy2 months ended
8/31/09 |
| | | | | | 294,912 | | | | | | 294,912 | |||||||||||||||||||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income |
| | | | | | | | | | 65,721,531 | 205,632 | 65,927,163 | |||||||||||||||||||||||||||||||||||||||
Comprehensive income |
| | | | | | | | | | | | 65,927,163 | |||||||||||||||||||||||||||||||||||||||
Balance 8/31/09 (Predecessor) |
| | | | 42,820,380 | $ | 42,820 | $ | 142,737,500 | 4,000,000 | $ | (25,974,000 | ) | $ | | $ | (128,335,806 | ) | $ | 382,982 | $ | (11,146,504 | ) | |||||||||||||||||||||||||||||
Cancellation of Predecessor common stock
and fresh start adjustments |
| | | | (42,820,380 | ) | (42,820 | ) | (150,426,331 | ) | (4,000,000 | ) | 25,974,000 | | | | (124,495,151 | ) | ||||||||||||||||||||||||||||||||||
Elimination of Predecessor accumulated
deficit and accumulated other
comprehensive loss |
| | | | | | | | | | 128,335,806 | | 128,335,806 | |||||||||||||||||||||||||||||||||||||||
Balance 9/1/09 (Predecessor) |
| | | | | | (7,688,831 | ) | | | | | 382,982 | (7,305,849 | ) | |||||||||||||||||||||||||||||||||||||
Issuance of 11.4 million shares of
common stock in connection with
emergence from Chapter 11 |
| | | | 11,400,000 | 11,400 | 5,460,600 | | | | | | 5,472,000 | |||||||||||||||||||||||||||||||||||||||
Balance 9/1/09 (Successor) |
| | | | 11,400,000 | 11,400 | (2,228,231 | ) | | | | | 382,982 | (1,833,849 | ) | |||||||||||||||||||||||||||||||||||||
Issuance of 2.7 million shares of common
stock in connection with the exit
financing |
| | | | 2,666,666 | 2,667 | 1,797,333 | | | | | | 1,800,000 | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock on Oct. 28, 2009 |
| | | | 25,501 | 25 | 58,627 | | | | | | 58,652 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on shares issued to
management |
| | | | 600,000 | 600 | 167,400 | | | | | | 168,000 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option awards
issued to directors |
| | | | | | 326,838 | | | | | | 326,838 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option awards
issued to non-employees |
| | | | | | 386,380 | | | | | | 386,380 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (5,049,999 | ) | 15,493 | (5,034,506 | ) | |||||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | | (5,034,506 | ) | ||||||||||||||||||||||||||||||||||||||
Balance 12/31/09 (Successor) |
| $ | | | $ | | 14,692,167 | $ | 14,692 | $ | 508,347 | | $ | | $ | | $ | (5,049,999 | ) | $ | 398,475 | $ | (4,128,485 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
13
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Total | |||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Noncontrolling | Equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income (Loss) | Stage | Interest | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Issuance of 5.1 million shares of
common stock in March 2010, net of
issuance costs of $338,100 |
| $ | | | $ | | 5,076,664 | $ | 5,077 | $ | 3,464,323 | | $ | | $ | | $ | | $ | | $ | 3,469,400 | ||||||||||||||||||||||||||||||
Warrant fair value associated with
common shares issued in March 2010 |
| | | | | | (2,890,711 | ) | | | | | | (2,890,711 | ) | |||||||||||||||||||||||||||||||||||||
Compensation expense on shares
issued to management 1Q10 |
| | | | | | 18,000 | | | | | | 18,000 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to
directors/employees 1Q10 |
| | | | | | 324,377 | | | | | | 324,377 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to
non-employees 1Q10 |
| | | | | | 18,391 | | | | | | 18,391 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on shares
issued to management 2Q10 |
| | | | | | 18,000 | | | | | | 18,000 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to
directors/employees 2Q10 |
| | | | | | 222,011 | | | | | | 222,011 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to
non-employees 2Q10 |
| | | | | | 33,206 | | | | | | 33,206 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on shares
issued to management 3Q10 |
| | | | | | 18,000 | | | | | | 18,000 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to
directors/employees 3Q10 |
| | | | | | 183,231 | | | | | | 183,231 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to
non-employees 3Q10 |
| | | | | | 7,724 | | | | | | 7,724 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on shares
issued to management 4Q10 |
| | | | | | 18,000 | | | | | | 18,000 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to
directors/employees 4Q10 |
| | | | | | 104,094 | | | | | | 104,094 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on option
awards issued to
non-employees 4Q10 |
| | | | | | 27,507 | | | | | | 27,507 | |||||||||||||||||||||||||||||||||||||||
Preferred Stock Series A conversion |
| | | | 606,667 | 607 | 363,393 | | | | | | 364,000 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (12,931,531 | ) | 51,898 | (12,879,633 | ) | |||||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | | (12,879,633 | ) | ||||||||||||||||||||||||||||||||||||||
Balance 12/31/10 (Successor) |
| $ | | | $ | | 20,375,498 | $ | 20,376 | $ | 2,437,893 | | $ | | $ | | $ | (17,981,530 | ) | $ | 450,373 | $ | (15,072,888 | ) | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
14
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Accumulated | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Additional | Treasury Stock | Other | During | Total | |||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Development | Noncontrolling | Equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Income (Loss) | Stage | Interest | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense on
shares issued to
management 1Q11 |
| | | | | | 18,000 | | | | | | 18,000 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
option awards issued to
directors/employees 1Q11 |
| | | | | | 995,551 | | | | | | 995,551 | |||||||||||||||||||||||||||||||||||||||
Compensation expense on
option awards issued to
non-employees 1Q11 |
| | | | | | 38,203 | | | | | | 38,203 | |||||||||||||||||||||||||||||||||||||||
Preferred Stock and
warrants exercised 1Q11 |
| | | | 289,599 | 289 | 241,542 | | | | | | 241,831 | |||||||||||||||||||||||||||||||||||||||
Preferred Stock Series A
and B converted 1Q11 |
| | | | 3,894,000 | 3,894 | 323,919 | | | | | | 327,813 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (17,082,370 | ) | 19,656 | (17,062,714 | ) | |||||||||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | | | (17,062,714 | ) | ||||||||||||||||||||||||||||||||||||||
Balance 3/31/11 (Successor) |
| $ | | | $ | | 24,559,097 | $ | 24,559 | $ | 4,055,108 | | $ | | $ | | $ | (35,063,900 | ) | $ | 470,029 | $ | (30,514,204 | ) | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
15
Table of Contents
Fibrocell Science, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(unaudited)
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(unaudited)
Successor | Successor | Successor | Predecessor | ||||||||||||||
Cumulative | Cumulative | ||||||||||||||||
period from | period from | ||||||||||||||||
September 1, | December 31, | ||||||||||||||||
For the three | For the three | 2009 (date of | 1995 (date of | ||||||||||||||
months ended | months ended | inception) to | inception) to | ||||||||||||||
March 31, 2011 | March 31, 2010 | March 31, 2011 | August 31, 2009 | ||||||||||||||
Cash flows from operating activities: |
|||||||||||||||||
Net loss |
$ | (17,082,370 | ) | $ | (4,747,825 | ) | $ | (35,063,900 | ) | $ | (115,322,121 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating
activities: |
|||||||||||||||||
Reorganization items, net |
| | 72,477 | (74,648,976 | ) | ||||||||||||
Expense related to equity awards and issuance of stock |
1,051,754 | 360,768 | 2,925,513 | 10,608,999 | |||||||||||||
Warrant expense |
6,296,330 | 1,417,244 | 7,080,646 | | |||||||||||||
Derivative revaluation expense |
6,620,726 | | 6,620,726 | | |||||||||||||
Uncompensated contribution of services |
| | | 755,556 | |||||||||||||
Depreciation and amortization |
2,473 | 852 | 10,558 | 9,091,990 | |||||||||||||
Provision for doubtful accounts |
(8,372 | ) | (4,948 | ) | (62,809 | ) | 337,810 | ||||||||||
Provision for excessive and/or obsolete inventory |
5,387 | (34,532 | ) | (43,315 | ) | 259,427 | |||||||||||
Amortization of debt issue costs |
| | | 4,107,067 | |||||||||||||
Amortization of debt discounts on investments |
| | | (508,983 | ) | ||||||||||||
Loss on disposal or impairment of property and equipment |
| | | 17,668,477 | |||||||||||||
Foreign exchange loss (gain) on substantial liquidation of
foreign entity |
(859 | ) | 2,448 | (8,545 | ) | (2,256,408 | ) | ||||||||||
Net (loss) income attributable to non-controlling interest |
19,656 | 15,138 | 87,047 | (1,799,523 | ) | ||||||||||||
Change in operating assets and liabilities, excluding
effects of acquisition: |
|||||||||||||||||
Decrease (increase) in accounts receivable |
65,924 | 994 | 137,154 | (91,496 | ) | ||||||||||||
Decrease (increase) in other receivables |
1,674 | (88 | ) | 2,381 | 218,978 | ||||||||||||
Decrease (increase) in inventory |
(45,649 | ) | 818 | 12,733 | (455,282 | ) | |||||||||||
Decrease in prepaid expenses |
221,449 | 110,650 | 19,343 | 34,341 | |||||||||||||
Decrease in other assets |
| | 4,120 | 71,000 | |||||||||||||
Increase (decrease) in accounts payable |
(555,196 | ) | (23,887 | ) | 403,528 | 57,648 | |||||||||||
Increase in accrued expenses, liabilities subject to
compromise and other liabilities |
238,320 | 583,164 | 1,068,666 | 3,311,552 | |||||||||||||
Increase (decrease) in deferred revenue |
14,000 | | 14,000 | (50,096 | ) | ||||||||||||
Net cash used in operating activities |
(3,154,753 | ) | (2,319,204 | ) | (16,719,677 | ) | (148,610,040 | ) | |||||||||
Cash flows from investing activities: |
|||||||||||||||||
Acquisition of Agera, net of cash acquired |
| | | (2,016,520 | ) | ||||||||||||
Purchase of property and equipment |
(17,491 | ) | (26,335 | ) | (47,165 | ) | (25,515,170 | ) | |||||||||
Proceeds from the sale of property and equipment, net of
selling costs |
| | | 6,542,434 | |||||||||||||
Purchase of investments |
| | | (152,998,313 | ) | ||||||||||||
Proceeds from sales and maturities of investments |
| | | 153,507,000 | |||||||||||||
Net cash used in investing activities |
(17,491 | ) | (26,335 | ) | (47,165 | ) | (20,480,569 | ) | |||||||||
Cash flows from financing activities: |
|||||||||||||||||
Proceeds from convertible debt |
| | | 91,450,000 | |||||||||||||
Offering costs associated with the issuance of convertible debt |
| | | (3,746,193 | ) | ||||||||||||
Proceeds from notes payable to shareholders, net |
| | | 135,667 | |||||||||||||
Proceeds from the issuance of redeemable preferred stock series
A, net |
| | 2,870,000 | 12,931,800 | |||||||||||||
Proceeds from the issuance of redeemable preferred stock series
B, net |
193,200 | | 4,212,770 | | |||||||||||||
Proceeds from the issuance of redeemable preferred stock series
D, net |
5,642,780 | | 7,152,180 | | |||||||||||||
Proceeds from the issuance of common stock, net |
| 3,469,400 | 5,269,400 | 93,753,857 | |||||||||||||
Costs associated with secured loan and debtor-in-possession loan |
| | | (360,872 | ) | ||||||||||||
Proceeds from secured loan |
| | | 500,471 | |||||||||||||
Proceeds from debtor-in-possession loan |
| | | 2,750,000 | |||||||||||||
Payments on insurance loan |
(24,139 | ) | (20,273 | ) | (109,713 | ) | (79,319 | ) | |||||||||
Cash dividends paid on preferred stock |
(198,227 | ) | | (337,977 | ) | (1,087,200 | ) | ||||||||||
Cash paid for fractional shares of preferred stock |
| | | (38,108 | ) | ||||||||||||
Merger and acquisition expenses |
| | | (48,547 | ) | ||||||||||||
Repurchase of common stock |
| | | (26,024,280 | ) | ||||||||||||
Net cash provided by financing activities |
5,613,614 | 3,449,127 | 19,056,660 | 170,137,276 | |||||||||||||
Effect of exchange rate changes on cash balances |
1,030 | (2,631 | ) | 10,044 | (36,391 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents |
2,442,400 | 1,100,957 | 2,299,862 | 1,010,276 | |||||||||||||
Cash and cash equivalents, beginning of period |
867,738 | 1,362,488 | 1,010,276 | | |||||||||||||
Cash and cash equivalents, end of period |
$ | 3,310,138 | $ | 2,463,445 | $ | 3,310,138 | $ | 1,010,276 | |||||||||
Supplemental disclosures of cash flow information: |
|||||||||||||||||
Predecessor cash paid for interest |
$ | | $ | | $ | | $ | 12,715,283 | |||||||||
Successor cash paid for dividends |
198,227 | | 337,977 | | |||||||||||||
Non-cash investing and financing activities: |
|||||||||||||||||
Predecessor deemed dividend associated with beneficial
conversion of preferred stock |
$ | | $ | | $ | | $ | 11,423,824 | |||||||||
Predecessor preferred stock dividend |
| | | 1,589,861 | |||||||||||||
Successor accrued preferred stock dividend |
197,582 | 48,260 | 197,582 | | |||||||||||||
Predecessor uncompensated contribution of services |
| | | 755,556 | |||||||||||||
Predecessor common stock issued for intangible assets |
| | | 540,000 | |||||||||||||
Predecessor common stock issued in connection with conversion
of debt |
| | | 10,814,000 | |||||||||||||
Predecessor equipment acquired through capital lease |
| | | 167,154 | |||||||||||||
Successor/Predecessor financing of insurance premiums |
| | 178,582 | 87,623 | |||||||||||||
Successor issuance of notes payable |
| | | 6,000,060 | |||||||||||||
Successor common stock issued in connection with reorganization |
| | | 5,472,000 | |||||||||||||
Successor intangible assets |
| | | 6,340,656 | |||||||||||||
Successor deferred tax liability in connection with fresh-start |
| | | 2,500,000 | |||||||||||||
Elimination of Predecessor common stock and fresh start
adjustment |
| | | 14,780,320 | |||||||||||||
Successor accrued warrant liability |
4,994,307 | 2,890,711 | 12,381,509 | | |||||||||||||
Successor conversion of preferred stock into common stock |
327,813 | | 691,813 | | |||||||||||||
Exercise of warrants-cashless |
241,831 | | 241,831 | | |||||||||||||
Successor accrued derivative liability |
510,810 | | 2,631,170 | | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
16
Table of Contents
Fibrocell Science, Inc.
(A Development Stage Company)
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1Business and Organization
Fibrocell Science, Inc. (Fibrocell or the Company or the Successor) is the parent
company of Fibrocell Technologies (Fibrocell Tech) and Agera Laboratories, Inc., a Delaware
corporation (Agera). Fibrocell Technologies is the parent company of Isolagen Europe Limited, a
company organized under the laws of the United Kingdom (Isolagen Europe), Isolagen Australia Pty
Limited, a company organized under the laws of Australia (Isolagen Australia), and Isolagen
International, S.A., a company organized under the laws of Switzerland (Isolagen Switzerland).
The Company is an aesthetic and therapeutic company focused on developing novel skin and
tissue rejuvenation products. The Companys clinical development product candidates are designed
to improve the appearance of skin injured by the effects of aging, sun exposure, acne and burns
with a patients own, or autologous, fibroblast cells produced in the Companys proprietary
Fibrocell Process. The Company also markets an advanced skin care line with broad application in
core target markets through its Agera subsidiary.
Note 2Development-Stage Risks and Liquidity
The Successor Company emerged from Bankruptcy in September 2009 and continues to operate as a
going concern. At March 31, 2011, the Successor Company had cash and cash equivalents of
approximately $3.3 million and working capital of $2.8 million.
As of May 9, 2011, the Company had cash and cash equivalents of approximately $2.0 million and
current liabilities of approximately $1.1 million. The Companys current monthly cash run-rate is
approximately $1.0 million. The Company is in the process of purchasing manufacturing equipment and incurring
marketing expenditures over the next couple of months to prepare the Company for launch post a possible
FDA approval. Thus, the Successor Company will need to access the capital markets in the
near future in order to fund future operations. There is no guarantee that any such required
financing will be available on terms satisfactory to the Successor Company or available at all.
These matters create uncertainty relating to its ability to continue as a going concern. The
accompanying consolidated financial statements do not reflect any adjustments relating to the
recoverability and classification of assets or liabilities that might result from the outcome of
these uncertainties.
Further, if the Successor Company raises additional cash resources in the near future, it may
be raised in contemplation of or in connection with bankruptcy. In the event of a bankruptcy, it
is likely that its common stock and common stock equivalents will become worthless and our
creditors will receive significantly less than what is owed to them.
Through March 31, 2011, the Successor Company has been primarily engaged in developing its
initial product technology. In the course of its development activities, the Company has sustained
losses and expects such losses to continue through at least 2011. During the quarter ended March
31, 2011, the Successor Company financed its operations primarily through its existing cash
received from external financings, but as discussed above it now requires additional financing.
There is substantial doubt about the Successor Companys ability to continue as a going concern.
The Successor Companys ability to complete additional offerings is dependent on the state of
the debt and/or equity markets at the time of any proposed offering, and such markets reception of
the Successor Company and the offering terms. The Successor Companys ability to complete an
offering is also dependent on the status of its FDA regulatory milestones and its clinical trials,
and in particular, the status of its indication for the treatment of nasolabial folds/wrinkles and
the potential approval of the related BLA, which cannot be predicted. There is no assurance that
capital in any form would be available to the Company, and if available, on terms and conditions
that are acceptable.
As a result of the conditions discussed above, and in accordance with U.S. generally accepted
accounting principles (GAAP), there exists substantial doubt about the Successor Companys ability
to continue as a going concern, and its ability to continue as a going concern is contingent, among
other things, upon its ability to secure additional adequate financing or capital in the near
future. If the Successor Company does not obtain additional funding, or does not anticipate
additional funding, in the near future, it will likely enter into bankruptcy and/or cease
operations. Further, if it does raise additional cash resources in the near future, it may be
raised in contemplation of or in connection with bankruptcy. If the Successor Company enters into
bankruptcy, it is likely that its common stock and common stock equivalents will become worthless
and its creditors, including preferred stock holders, will receive significantly less than what is
owed to them.
17
Table of Contents
Note 3Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with GAAP for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnote disclosures required by
GAAP for complete consolidated financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a fair presentation have
been included. These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2010, filed with the Securities and Exchange Commission (SEC). The results of
the Companys operations for any interim period are not necessarily indicative of the results of
operations for any other interim period or full year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts in the consolidated financial statements
and notes. In addition, managements assessment of the Successor Companys ability to continue as
a going concern involves the estimation of the amount and timing of future cash inflows and
outflows. Actual results may differ materially from those estimates.
Earnings (loss) per share data
Basic earnings (loss) per share is calculated based on the weighted average common shares
outstanding during the period. Diluted earnings per share (Diluted EPS) also gives effect to the
dilutive effect of stock options, warrants, restricted stock and convertible preferred stock
calculated based on the treasury stock method.
The Predecessor and Successor Companys potentially dilutive securities consist of potential
common shares related to stock options, warrants, restricted stock and convertible preferred stock.
Diluted EPS includes the impact of potentially dilutive securities except in periods in which
there is a loss because the inclusion of the potential common shares would be anti-dilutive. The
Company does not present diluted earnings per share for periods in which it incurred net losses as
the effect is anti-dilutive.
Note 4Agera Laboratories, Inc.
On August 10, 2006, the Predecessor Company acquired 57% of the outstanding common shares of
Agera. Agera is a skincare company that has proprietary rights to a scientifically-based advanced
line of skincare products. Agera markets its product primarily in the United States and Europe.
The results of Ageras operations and cash flows have been included in the consolidated financial
statements from the date of the acquisition. The assets and liabilities of Agera have been
included in the consolidated balance sheets since the date of the acquisition.
18
Table of Contents
Note 5Fair Value Measurements
The Company adopted the accounting guidance on fair value measurements for financial assets
and liabilities measured on a recurring basis. The guidance requires fair value measurements be
classified and disclosed in one of the following three categories:
Level 1: Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities; |
Level 2: Quoted prices in markets that are not active or inputs which are observable,
either directly or indirectly, for substantially the full term of the asset or liability. |
Level 3: Prices or valuation techniques that require inputs that are both significant
to the fair value measurement and unobservable (i.e., supported by little or no market
activity). |
The following fair value hierarchy table presents information about each major category of the
Companys financial assets and liability measured at fair value on a recurring basis as of March
31, 2011 and December 31, 2010:
Fair value measurement using | ||||||||||||||||
Significant | Significant | |||||||||||||||
Quoted prices in | other | unobservable | ||||||||||||||
active markets | observable | inputs | ||||||||||||||
(Level 1) | inputs (Level 2) | (Level 3) | Total | |||||||||||||
Balance at March 31, 2011 |
||||||||||||||||
Cash and cash equivalents |
$ | 3,310,138 | $ | | $ | | $ | 3,310,138 | ||||||||
Liabilities |
||||||||||||||||
Warrant liability |
$ | | $ | | $ | 19,220,324 | $ | 19,220,324 | ||||||||
Derivative liability |
| | 8,820,108 | 8,820,108 | ||||||||||||
Total |
$ | | $ | | $ | 28,040,432 | $ | 28,040,432 | ||||||||
Fair value measurement using | ||||||||||||||||
Significant | Significant | |||||||||||||||
Quoted prices in | other | unobservable | ||||||||||||||
active markets | observable | inputs | ||||||||||||||
(Level 1) | inputs (Level 2) | (Level 3) | Total | |||||||||||||
Balance at December 31, 2010 |
||||||||||||||||
Cash and cash equivalents |
$ | 867,738 | $ | | $ | | $ | 867,738 | ||||||||
Liabilities |
||||||||||||||||
Warrant liability |
$ | | $ | | $ | 8,171,518 | $ | 8,171,518 | ||||||||
Derivative liability |
| | 2,120,360 | 2,120,360 | ||||||||||||
Total |
$ | | $ | | $ | 10,291,878 | $ | 10,291,878 | ||||||||
The reconciliation of warrant liability measured at fair value on a recurring basis using
unobservable inputs (Level 3) is as follows:
Warrant | ||||
Liability | ||||
Balance at December 31, 2010 |
$ | 8,171,518 | ||
Issuance of additional warrants |
4,994,307 | |||
Exercise of warrants |
(241,831 | ) | ||
Change in fair value of warrant liability |
6,296,330 | |||
Balance at March 31, 2011 |
$ | 19,220,324 | ||
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The fair value of the warrant liability is based on Level 3 inputs. For this liability,
the Company developed its own assumptions that do not have observable inputs or available market
data to support the fair value. See note 9 for further discussion of the warrant liability.
The reconciliation of derivative liability measured at fair value on a recurring basis using
unobservable inputs (Level 3) is as follows:
Derivative | ||||
Liability | ||||
Balance at December 31, 2010 |
$ | 2,120,360 | ||
Issuance of additional preferred stock |
510,810 | |||
Conversion of preferred stock |
(431,788 | ) | ||
Change in fair value of derivative liability |
6,620,726 | |||
Balance at March 31, 2011 |
$ | 8,820,108 | ||
The fair value of the derivative liability is based on Level 3 inputs. For this
liability, the Company developed its own assumptions that do not have observable inputs or
available market data to support the fair value. See note 8 for further discussion of the
derivative liability.
Note 6Accrued Expenses
Accrued expenses consist of the following:
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Accrued professional fees |
$ | 393,392 | $ | 413,384 | ||||
Accrued compensation |
40,676 | 7,076 | ||||||
Dividend on preferred stock payable |
190,772 | 191,417 | ||||||
Accrued other |
126,582 | 177,605 | ||||||
Accrued expenses |
$ | 751,422 | $ | 789,482 | ||||
Note 7Commitments and Contingencies
Legal Proceedings
As of March 31, 2011, there were no legal proceedings.
Note 8Equity
Redeemable Preferred stock
As of March 31, 2011, the number of Redeemable Preferred stock (Preferred) outstanding, with
a par value of $0.001 per share and a stated value of $1,000 per share is as follows:
Preferred Stock Series A |
2,886 | |||
Preferred Stock Series B |
2,693 | |||
Preferred Stock Series D |
7,779 | |||
Total |
13,358 | |||
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The Successor Company records accrued dividends at a rate of 6% per annum on the Series A,
Series B and Series D Preferred. As of March 31, 2011, $190,772 was accrued for dividends payable.
The Successor Company paid cash of $198,227 during the three months ended March 31, 2011.
Preferred Stock Series D
On January 21 and 28, February 9 and March 1, 2011, the Successor Company completed a private
placement of securities of Series D Preferred and warrants. Each of the foregoing securities were
subject to the down-round protection and if at any time while the Series D Preferred is
outstanding, we sell or grant any option to purchase or sell or grant any right to reprice, or
otherwise dispose of or issue (or announce any sale, grant or any option to purchase or other
disposition), any common stock or common stock equivalents at an effective price per share that is
lower than the then Conversion Price, then the Conversion Price will be reduced to equal the lower
price. The preferred stock has been classified within the mezzanine section between liabilities
and equity in its consolidated balance sheets in accordance with ASC 480, Distinguishing
Liabilities from Equity (ASC 480) because any holder of Series D Preferred may require the
Successor Company to redeem all of its Series D Preferred in the event of a triggering event which
is outside of the control of the Successor Company.
The details of the Series D Preferred financing for the three months ended March 31, 2011 are
as follows:
Number of shares of | Number of warrants | |||||||
Date of Financing | Series D Preferred (1) | issued (2) | ||||||
January 21, 2011 |
1,234 | 2,665,440 | ||||||
January 28, 2011 |
1,414 | 3,054,240 | ||||||
February 9, 2011 |
3,436 | 7,421,760 | ||||||
March 1, 2011 |
50 | 108,000 | ||||||
6,134 | 13,249,440 | |||||||
(1) | Series D Preferred at a stated par value of $1,000. |
|
(2) | Warrants issued shares of Common Stock at an exercise price of $0.50 per share to
certain accredited investors and placement agents. |
Conversion option of Redeemable Preferred stock
The embedded conversion option for the Series A Preferred, Series B Preferred and Series D
Preferred has been recorded as a derivative liability under ASC 815 in the consolidated balance
sheet as of March 31, 2011 and December 31, 2010. As of March 31, 2011 the derivative liability
was re-measured resulting in an expense of $6,620,726 in our statement of operations. The fair
value of the derivative liability is determined using the Black-Scholes option pricing model and is
affected by changes in inputs to that model including our stock price, expected stock price
volatility, the contractual term, and the risk-free interest rate. The Company will continue to
classify the fair value of the embedded conversion option as a liability and re-measure on the
Companys reporting dates until the preferred stock is converted into common stock.
The embedded conversion option for the Series A Preferred, Series B Preferred and Series D
Preferred was valued at $8,820,108 at March 31, 2011 at fair value using the Black-Scholes option
pricing model. The fair market value of the derivative liability was computed using the
Black-Scholes option-pricing model with the following weighted average assumptions as of the dates
indicated:
March 31, 2011 | December 31, 2010 | |||||||
Expected life (years) |
1.4 years | 1.6 years | ||||||
Interest rate |
0.6 | % | 1.3 | % | ||||
Dividend yield |
| | ||||||
Volatility |
62 | % | 63 | % |
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Note 9Warrants
Preferred Stock Series D Warrants and Co-placement Agent Warrants
In connection with the Series D Convertible Preferred Stock transaction, the Successor Company
issued 12,268,000 warrants at an exercise price of $0.50 per share and 981,440 placement agent
warrants at an exercise price of $0.50 per share during the first quarter of 2011. The warrants
are liability classified since they have down-round price protection and they are re-measured on
the Companys reporting dates. The weighted average fair market value of the warrants, at the date
of issuance, granted to the accredited investors and co-placement agents, based on the
Black-Scholes valuation model, is estimated to be $0.45 per warrant.
The fair market value of the warrants was computed using the Black-Scholes option-pricing
model with the following key weighted average assumptions as of the dates indicated:
March 31, 2011 | December 31, 2010 | |||||||
Expected life (years) |
4.6 years | 4.7 years | ||||||
Interest rate |
2.2 | % | 1.8 | % | ||||
Dividend yield |
| | ||||||
Volatility |
62 | % | 63 | % |
The following table summarizes outstanding warrants to purchase Common Stock as of March
31, 2011: |
Warrant liability | ||||||||||||
Number of | Balance as of | |||||||||||
Warrants | Expiration Dates | March 31, 2011 | ||||||||||
Warrants and
co-placement
warrants issued in
Series A Preferred
Stock offering |
3,555,493 | Oct. 2014 | $ | 1,484,193 | ||||||||
Warrants and
co-placement
warrants issued in
March 2010 offering |
10,183,469 | Mar. 2015 | 4,380,593 | |||||||||
Warrants and
co-placement
warrants issued in
Series B Preferred
Stock offering |
12,932,565 | Jul.-Nov. 2015 | 5,774,963 | |||||||||
Warrants and
co-placement
warrants issued in
Series D Preferred
Stock offering |
16,802,640 | Dec. 2015-Mar. 2016 | 7,580,575 | |||||||||
Total |
43,474,167 | $ | 19,220,324 | |||||||||
All warrants have an exercise price of $0.50 per share as a result of the December 2010
Preferred Stock Series D financing transaction. There were 953,568 warrants exercised on a
cashless basis in the first quarter of 2011.
Note 10Stock-based Compensation
Total stock-based compensation expense recognized using the straight-line attribution method
in the consolidated statement of operations is as follows:
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Stock option compensation expense for employees
and directors |
$ | 995,551 | $ | 324,377 | ||||
Restricted stock expense |
18,000 | 18,000 | ||||||
Equity awards for nonemployees issued for services |
38,203 | 18,391 | ||||||
Total stock-based compensation expense |
$ | 1,051,754 | $ | 360,768 | ||||
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Weighted- | ||||||||||||||||
average | ||||||||||||||||
Weighted- | remaining | |||||||||||||||
average | contractual | Aggregate | ||||||||||||||
Number of | exercise | term (in | intrinsic | |||||||||||||
shares | price | years) | value | |||||||||||||
Outstanding at December 31, 2010 |
5,677,000 | $ | 0.86 | 7.46 | $ | | ||||||||||
Granted |
5,008,000 | $ | 0.62 | |||||||||||||
Exercised |
| $ | | |||||||||||||
Forfeited |
| $ | | |||||||||||||
Outstanding at March 31, 2011 |
10,685,000 | $ | 0.75 | 8.28 | $ | 694,960 | ||||||||||
Exercisable at March 31, 2011 |
6,379,720 | $ | 0.75 | 7.97 | $ | 330,380 | ||||||||||
The total fair value of shares vested during the three months ended March 31, 2011 was $1.0
million. As of March 31, 2011, there was $1.4 million of total unrecognized compensation cost,
related to non-vested stock options which vest over time. That cost is expected to be recognized
over a weighted-average period of 1.8 years. As of March 31, 2011, there was $0.3 million of total
unrecognized compensation expense related to performance-based, non-vested employee and consultant
stock options. That cost will be recognized when the performance criteria within the respective
performance-based option grants become probable of achievement. As of March 31, 2011, there was
no intrinsic value to the outstanding and exercisable options.
During the three months ended March 31, 2011 and 2010, the weighted average fair market value
using the Black-Scholes option-pricing model of the options granted was $0.35 and $0.63,
respectively, for this period. The fair market value of the warrants was computed using the
Black-Scholes option-pricing model with the following key weighted average assumptions for the
three months ended as of the dates indicated:
March 31, 2011 | March 31, 2010 | |||||||
Expected life (years) |
5.4 years | 5.5 years | ||||||
Interest rate |
2.1 | % | 2.4 | % | ||||
Dividend yield |
| | ||||||
Volatility |
62 | % | 65 | % |
There were no stock options exercised during the first quarter of March 31, 2011.
Restricted stock
As of March 31, 2011, there was less than $0.1 million of total unrecognized compensation cost
related to non-vested restricted stock that is expected to be recognized over a weighted-average
period less than 1 year.
23
Table of Contents
Note 11Segment Information and Geographical information
The Successor Company has two reportable segments: Fibrocell Therapy and Agera. The Fibrocell
Therapy segment specializes in the development and commercialization of autologous cellular
therapies for soft tissue regeneration. The Agera segment maintains proprietary rights to a
scientifically-based advanced line of skincare products. There is no intersegment revenue. The
following table provides operating financial information for the continuing operations of the
Successor Companys two reportable segments:
Segment | ||||||||||||
Three Months Ended March 31, 2011 | Fibrocell Therapy | Agera | Consolidated | |||||||||
Total operating revenue |
$ | | $ | 208,636 | $ | 208,636 | ||||||
Segment income (loss) from
continuing operations |
$ | (17,072,010 | ) | $ | 21,412 | $ | (17,050,598 | ) | ||||
Supplemental information related to
continuing operations |
||||||||||||
Depreciation and amortization expense |
$ | 2,473 | $ | | $ | 2,473 | ||||||
Total assets, including assets from
discontinued operations as of March
31, 2011 |
9,859,336 | 635,820 | 10,495,156 | |||||||||
Property and equipment, net |
36,607 | | 36,607 | |||||||||
Intangible assets, net |
6,340,656 | | 6,340,656 |
An intercompany receivable as of March 31, 2011, of $0.9 million, due from the Agera segment
to the Fibrocell Therapy segment, is eliminated in consolidation. This intercompany receivable is
primarily due to the intercompany management fee charge to Agera by Fibrocell Technologies, Inc.,
as well as Ageras working capital needs provided by Fibrocell Technologies, Inc., and has been
excluded from total assets of the Fibrocell Therapy segment in the above table. There is no
intersegment revenue. Total assets on the consolidated balance sheet at March 31, 2011 are
approximately $10.5 million, which includes assets of discontinued operations of less than $0.1
million.
Segment | ||||||||||||
Three Months Ended March 31, 2010 | Fibrocell Therapy | Agera | Consolidated | |||||||||
Total operating revenue |
$ | | $ | 209,070 | $ | 209,070 | ||||||
Segment income (loss) from
continuing operations |
$ | (4,726,548 | ) | $ | 10,905 | $ | (4,715,643 | ) | ||||
Supplemental information related to
continuing operations |
||||||||||||
Depreciation and amortization expense |
$ | 852 | $ | | $ | 852 | ||||||
Total assets, including assets from
discontinued operations as of March
31, 2010 |
9,094,140 | 683,610 | 9,777,750 | |||||||||
Property and equipment, net |
25,483 | | 25,483 | |||||||||
Intangible assets, net |
6,340,656 | | 6,340,656 |
An intercompany
receivable as of March 31, 2010, of $1.0 million, due from the Agera segment to the Fibrocell
Therapy segment, is eliminated in consolidation. This intercompany receivable is primarily due to
the intercompany management fee charge to Agera by Fibrocell Technologies, as well as Ageras
working capital needs provided by Fibrocell Technologies, and has been excluded from total assets
of the Fibrocell Therapy segment in the above table. There is no intersegment revenue. Total
assets on the consolidated balance sheet at March 31, 2010 are approximately $9.8 million.
24
Table of Contents
Geographical information concerning the Companys revenue is as follows:
Three months ended | Three months ended | |||||||
March 31, 2011 | March 31, 2010 | |||||||
United States |
$ | 48,123 | $ | 60,194 | ||||
United Kingdom |
148,164 | 141,667 | ||||||
Other |
12,349 | 7,209 | ||||||
Total |
$ | 208,636 | $ | 209,070 | ||||
During the three months ended March 31, 2011, revenue from one foreign customer and one
domestic customer represented 71% and 16% of consolidated revenue, respectively. During the three
months ended March 31, 2010, revenue from one foreign customer and one domestic customer
represented 68% and 19% of consolidated revenue, respectively.
As of March 31, 2011 and December 31, 2010, one foreign customer represented 86% and 88%,
respectively, of accounts receivable, net.
Note 12Subsequent Events
Subsequent to March 31, 2011, 2,037 preferred shares were converted into 4,074,000 common
shares and 2,536,967 warrants were exercised. Cash received for the warrants subsequent to March
31, 2011 was $739,984.
25
Table of Contents
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
This report contains certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, as well as information relating to Fibrocell that is based on managements exercise of
business judgment and assumptions made by and information currently available to management. When
used in this document, the words anticipate, believe, estimate, expect, intend, the
facts suggest and words of similar import, are intended to identify any forward-looking
statements. You should not place undue reliance on these forward-looking statements. These
statements reflect our current view of future events and are subject to certain risks and
uncertainties as noted below. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, our actual results could differ materially from
those anticipated in these forward-looking statements. Actual events, transactions and results may
materially differ from the anticipated events, transactions or results described in such
statements. Although we believe that our expectations are based on reasonable assumptions, we can
give no assurance that our expectations will materialize. Many factors could cause actual results
to differ materially from our forward looking statements. Several of these factors include, without
limitation:
our ability to finance our business and continue in operations;
whether the results of our full Phase III pivotal study and our BLA filing will
result in approval of our product candidate, and whether any approval will occur on a timely
basis;
our ability to meet requisite regulations or receive regulatory approvals in the
United States, Europe, Asia and the Americas, and our ability to retain any regulatory
approvals that we may obtain; and the absence of adverse regulatory developments in the
United States, Europe, Asia and the Americas or any other country where we plan to conduct
commercial operations;
whether our clinical human trials relating to the use of autologous cellular therapy
applications, and such other indications as we may identify and pursue can be conducted
within the timeframe that we expect, whether such trials will yield positive results, or
whether additional applications for the commercialization of autologous cellular therapy can
be identified by us and advanced into human clinical trials;
our ability to develop autologous cellular therapies that have specific applications
in cosmetic dermatology, and our ability to explore (and possibly develop) applications for
periodontal disease, reconstructive dentistry, treatment of restrictive scars and burns and
other health-related markets;
our ability to decrease our manufacturing costs for our Fibrocell Therapy product
candidates through the improvement of our manufacturing process, and our ability to validate
any such improvements with the relevant regulatory agencies;
our ability to reduce our need for fetal bovine calf serum by improved use of less
expensive media combinations and different media alternatives;
continued availability of supplies at satisfactory prices;
new entrance of competitive products or further penetration of existing products in
our markets;
the effect on us from adverse publicity related to our products or the company
itself;
any adverse claims relating to our intellectual property;
the adoption of new, or changes in, accounting principles;
our issuance of certain rights to our shareholders that may have anti-takeover
effects;
our dependence on physicians to correctly follow our established protocols for the
safe administration of our Fibrocell Therapy; and
other risks referenced from time to time elsewhere in our filings with the SEC.
26
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These factors are not necessarily all of the important factors that could cause actual results
of operations to differ materially from those expressed in these forward-looking statements. Other
unknown or unpredictable factors also could have material adverse effects on our future results.
We cannot assure you that projected results will be achieved.
General
We are an aesthetic and therapeutic development stage biotechnology company focused on
developing novel skin and tissue rejuvenation products. Our clinical development product
candidates are designed to improve the appearance of skin injured by the effects of aging, sun
exposure, acne and burn scars with a patients own, or autologous, fibroblast cells produced by our
proprietary Fibrocell Process. Our clinical development programs encompass both aesthetic and
therapeutic indications. Our most advanced indication utilizing the Fibrocell Therapy is for the
treatment of nasolabial folds/wrinkles, which completed Phase III clinical studies and the related
Biologics License Application (BLA) was accepted for filing by the Food and Drug Administration
(FDA) during May 2009. On October 9, 2009 the FDA Cellular, Tissue and Gene Therapies Advisory
Committee reviewed our nasolabial folds/wrinkles product candidate. The Committee voted 11 yes
to 3 no that the data presented on our product demonstrated efficacy, and 6 yes to 8 no that
the data demonstrated safety; both for the proposed indication of treatment of nasolabial
folds/wrinkles. The committees recommendations are not binding on the FDA, but the FDA will
consider their recommendations during their review of our application. The United States Adopted
Names (USAN) Council adopted the USAN name, azficel-T, for our product on October 28, 2009, and
the FDA is currently evaluating a proposed brand name, laViv®. On December 21, 2009, Fibrocell
Science received a Complete Response letter from the FDA related to the BLA for azficel-T. A
Complete Response letter is issued by the FDAs Center for Biologics Evaluation and Research (CBER)
when the review of a file is completed and additional data are needed prior to approval. The
Complete Response letter requested that Fibrocell Science provide data from a histopathological
study on biopsied tissue samples from patients following injection of azficel-T. The letter also
requested finalized Chemistry, Manufacturing and Controls (CMC) information regarding the
manufacture of azficel-T as follow-up to discussions that occurred during the BLA review period, as
well as revised policies and procedures regarding shipping practices, and proposed labeling. The
Company announced on December 20, 2010, that it had submitted its complete response to the Complete
Response (CR) letter issued by the FDA regarding the Companys BLA for azficel-T. On January 22,
2011, the FDA accepted for review the Companys complete response submission for azficel-T. Even
though the FDA has accepted the Companys response for complete evaluation, there is no assurance
that it will approve our product. The FDA, under the Prescription Drug User Fee Act (PDUFA), has a
target six months review window to completely evaluate the Companys response upon acceptance of
the response. The PDUFA date is June 22, 2011. The Company announced on March 16, 2011, that it
had submitted a final study report to the FDA for the completed, six-month histological study
examining skin after injections of azficel-T.
During 2009 we completed a Phase II/III study for the treatment of acne scars. During 2008 we
completed our open-label Phase II study related to full face rejuvenation.
We also develop and market an advanced skin care product line through our Agera subsidiary, in
which we acquired a 57% interest in August 2006.
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make significant judgments and estimates that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of expenses during the
reporting period. Management bases these significant judgments and
estimates on historical experience and other assumptions it believes to be reasonable based
upon information presently available. Actual results could differ from those estimates under
different assumptions, judgments or conditions. There were no material changes to our critical
accounting policies and use of estimates previously disclosed in our 2010 Annual Report on Form
10-K.
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Results of Operations
Three Months Ended March 31, 2011 compared to the Three Months Ended March 31, 2010
Revenues and Cost of Sales. Revenue and cost of sales for the three months ended March 31, 2011
and 2010 were comprised of the following:
Three months ended | Increase | |||||||||||||||
March 31, | (Decrease) | |||||||||||||||
2011 | 2010 | $ | % | |||||||||||||
(in thousands) | ||||||||||||||||
Total revenue |
$ | 209 | $ | 209 | $ | | | % | ||||||||
Cost of sales |
98 | 100 | (2 | ) | (2 | %) | ||||||||||
Gross profit |
$ | 111 | $ | 109 | $ | (2 | ) | (2 | %) | |||||||
The revenue and cost of sales for Agera remained flat comparing the three months ended March
31, 2011 and 2010. Our revenue from continuing operations is from the operations of Agera which we
acquired on August 10, 2006. Agera markets and sells a complete line of advanced skin care systems
based on a wide array of proprietary formulations, trademarks and peptide technology. As a
percentage of revenue, Agera cost of sales were approximately 47% for the three months ended March
31, 2011 and 48% for the three months ended March 31, 2010.
Selling General and Administrative Expense. Selling, general and administrative expense for the
three months ended March 31, 2011 and 2010 were comprised of the following:
Three months ended | Increase | |||||||||||||||
March 31, | (Decrease) | |||||||||||||||
2011 | 2010 | $ | % | |||||||||||||
(in thousands) | ||||||||||||||||
Compensation and related expense |
$ | 1,264 | $ | 951 | $ | 313 | 33 | % | ||||||||
External services consulting |
236 | 237 | (1 | ) | ( | %) | ||||||||||
Facilities and related expense and other |
854 | 832 | 22 | 3 | % | |||||||||||
Total selling, general and administrative expense |
$ | 2,354 | $ | 2,020 | $ | 334 | 17 | % | ||||||||
Selling, general and administrative expense increased primarily due to an increase in
compensation and related expense related to an increase of $0.6 million for stock compensation
expense offset by a decrease of $0.3 million in payroll expenses, due primarily to no bonuses
accrued in 2011 and decreased payroll taxes.
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Research and Development Expense. Research and development expense for the three months ended
March 31, 2011 and 2010 were comprised of the following:
Three months ended | Increase | |||||||||||||||
March 31, | (Decrease) | |||||||||||||||
2011 | 2010 | $ | % | |||||||||||||
(in thousands) | ||||||||||||||||
Compensation and related expense |
$ | 524 | $ | 364 | $ | 160 | 44 | % | ||||||||
External services consulting |
622 | 397 | 225 | 57 | % | |||||||||||
Lab costs and related expense |
277 | 223 | 54 | 24 | % | |||||||||||
Facilities and related expense |
194 | 209 | (15 | ) | (7 | %) | ||||||||||
Total research and development expense |
$ | 1,617 | $ | 1,193 | $ | 424 | 36 | % | ||||||||
Research and development expense increased primarily due to an increase in compensation and
related expense related to an increase of $0.1 million for stock compensation expense, $0.1 million
for increase headcount and $0.2 million for increased consulting fees. The increase of $0.2
million for external services related primarily to the histology study. Research and development
costs are composed primarily of costs related to our efforts to gain FDA approval for our Fibrocell
Therapy for specific dermal applications in the United States, as well as costs related to other
potential indications for our Fibrocell Therapy, such as acne scars and burn scars. Also, research
and development expense includes costs to develop manufacturing, cell collection and logistical
process improvements. Research and development costs primarily include personnel and laboratory
costs related to these FDA trials and certain consulting costs. The total inception (December 28,
1995) to date cost of research and development as of August 31, 2009 for the Predecessor Company
was $56.3 million and total inception (September 1, 2009) to date cost of research and development
as of March 31, 2011, for the Successor Company was $8.9 million.
The FDA approval process is extremely complicated and is dependent upon our study protocols
and the results of our studies. In the event that the FDA requires additional studies for our
product candidate or requires changes in our study protocols or in the event that the results of
the studies are not consistent with our expectations, the process will be more expensive and time
consuming. Due to the complexities of the FDA approval process, we are unable to predict what the
cost of obtaining approval for our dermal product candidate will be.
Interest Income (Expense). Interest expense for the three months ended March 31, 2011 increased by
$0.1 million, or 38%, from the three months ended March 31, 2010 due to higher debt balances. Our
interest expense is related to the notes we issued in connection with our bankruptcy plan. We have
been accreting the interest to principal at the rate of 15% per annum due to contractual terms.
Change in Revaluation of Warrant and Derivative Liability. During the three months ended March 31,
2011, we recorded a non-cash expense of $6.3 million and $6.6 million for warrant expense and
derivative revaluation expense, respectively, in our statements of operations due to an increase in
the fair value of the warrant liability and derivative liability related to the preferred stock
series A, B and D financing. This increase in fair value was primarily due to an increase in the
price per share of our common stock on March 31, 2011 as compared to December 31, 2010. During the
three months ended March 31, 2010, we recorded a non-cash expense of $1.4 million for warrant
expense in our statements of operations due to an increase in the fair value of the warrant
liability for warrants to purchase preferred stock that were liability-classified.
Net loss attributable to common shareholders. Net loss attributable to common shareholders
decreased approximately $12.3 million to a net loss of $17.1 million for the three months ended
March 31, 2011, as compared to a net loss of $4.7 million for the three months ended March 31, 2010
primarily due to an increase in the fair value of the warrant liability and derivative liability
related to the preferred stock series A, B and D financing.
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Liquidity and Capital Resources
The following table summarizes our cash flows from operating, investing and financing
activities for the three months ended March 31, 2011 and 2010:
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(in thousands) | ||||||||
Statement of Cash Flows Data: |
||||||||
Total cash provided by (used in): |
||||||||
Operating activities |
$ | (3,155 | ) | $ | (2,319 | ) | ||
Investing activities |
(17 | ) | (26 | ) | ||||
Financing activities |
5,613 | 3,449 |
Operating Activities. Cash used in operating activities during the three months ended March 31,
2011 amounted to $3.1 million, an increase of $0.8 million over the three months ended March 31,
2010. The increase in our cash used in operating activities over the prior year is primarily due
to an increase in net losses (adjusted for non-cash items) of $0.1 million, in addition to
operating cash outflows from changes in operating assets and liabilities.
Investing Activities. Minimal or no cash was used in investing activities during the three months
ended March 31, 2011 and during the three months ended March 31, 2010.
Financing Activities. There were $5.6 million cash proceeds from financing activities during the
three months ended March 31, 2011, as compared to $3.4 million received from financing activities
during the three months ended March 31, 2010. During the three months ended March 31, 2011, we
raised cash from the issuance of preferred stock and warrants. During the three months ended March
31, 2010, we raised cash from the issuance of common stock and warrants.
Working Capital
As of March 31, 2011, we had cash and cash equivalents of $3.3 million and working capital of
$2.8 million. The Company has raised approximately $6.1 million less fees as the result of the
issuance of Series D Preferred Stock and warrants in the period from January 1, 2011 through March
1, 2011. As of May 9, 2011, the Company had cash and cash equivalents of approximately $2.0
million and current liabilities of approximately $1.1 million. The Companys current monthly cash
run-rate is approximately $1.0 million. The Company is in the process of purchasing manufacturing equipment and incurring marketing expenditures over the next couple of months to prepare the Company for launch post a possible FDA approval. Thus, the Company will need to access the capital markets in
the near future in order to fund future operations. There is no guarantee that any such required
financing will be available on terms satisfactory to the Company or available at all. These
matters create uncertainty relating to its ability to continue as a going concern. The
accompanying consolidated financial statements do not reflect any adjustments relating to the
recoverability and classification of assets or liabilities that might result from the outcome of
these uncertainties.
Debt
The Companys outstanding long-term debt at March 31, 2011 and December 31, 2010 consists of
$7.6 million and $7.3 million, respectively, of Unsecured Promissory Notes (New Notes). Unpaid
interest has been accreted to the principal at a rate of 15%. The New Notes have the following
features: (1) 12.5% interest payable quarterly in cash or, at the Companys option, 15% payable in
kind by capitalizing such unpaid amount and adding it to the principal as of the date it was due;
(2) maturing June 1, 2012; (3) at any time prior to the maturity date, the Company may redeem any
portion of the outstanding principal of the New Notes in Cash at 125% of the stated face value of
the New Notes. There is a mandatory redemption feature that requires the Company to redeem all
outstanding new notes if: (1) the Company successfully completes a capital campaign raising in
excess of $10 million during a six month period; or (2) the Successor Company is acquired by, or
sell a majority stake to, an outside party.
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Market risk is the potential loss arising from adverse changes in market rates and prices,
such as foreign currency exchange rates or interest rates.
Foreign Exchange Rate Risk
We do not believe that we have significant foreign exchange rate risk at March 31, 2011.
We do not enter into derivatives or other financial instruments for trading or speculative
purposes.
Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial
Reporting
Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of
the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures as of the end of the period
covered by this report were effective in ensuring that information required to be disclosed by us
in reports that we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commissions rules and
forms. We believe that a control system, no matter how well designed and operated, cannot provide
absolute assurance that the objectives of the control system are met, and no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, within a
company have been detected.
There was no change in our internal control over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) that occurred during the period covered by this report that has
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
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PART II. OTHER INFORMATION
Item 1. | Legal Proceedings. |
None
Item 1A. | Risk Factors. |
There were no material changes from the risk factors previously disclosed in the Annual Report
on Form 10-K filed on March 30, 2011.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
All information regarding the financings we completed during the three months ended March 31,
2011, have been previously disclosed in current reports we have filed on Form 8-K.
Item 3. | Defaults Upon Senior Securities. |
None
Item 4. | (Removed and Reserved) |
Item 5. | Other Information. |
None
Item 6. | Exhibits |
(a) Exhibits
EXHIBIT NO. | IDENTIFICATION OF EXHIBIT | |
*31.1 | Certification pursuant to Rule 13a-14(a) and 15d-14(a),
required under Section 302 of the Sarbanes-Oxley Act of
2002 |
|
*31.2 | Certification pursuant to Rule 13a-14(a) and 15d-14(a),
required under Section 302 of the Sarbanes-Oxley Act of
2002 |
|
*32.1 | Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
|
*32.2 | Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
* | -Filed herewith |
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