Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - Inspyr Therapeutics, Inc. | v239000_ex32-1.htm |
| EX-32.2 - EXHIBIT 32.2 - Inspyr Therapeutics, Inc. | v239000_ex32-2.htm |
| EX-31.1 - EXHIBIT 31.1 - Inspyr Therapeutics, Inc. | v239000_ex31-1.htm |
| EX-31.2 - EXHIBIT 31.2 - Inspyr Therapeutics, Inc. | v239000_ex31-2.htm |
| EXCEL - IDEA: XBRL DOCUMENT - Inspyr Therapeutics, Inc. | Financial_Report.xls |
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-Q
(Mark one)
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x
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Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the Quarterly Period Ended September 30, 2011
Or
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¨
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Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
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Commission File Number 333-153829
GENSPERA, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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20-0438951
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State or other jurisdiction of
incorporation or organization
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(I.R.S. Employer
Identification No.)
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2511 N Loop 1604 W, Suite 204
San Antonio, TX
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78258
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code (210) 479-8112
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨ (Do not check if a small reporting company)
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨ Yes x No
As of November 1, 2011, Registrant had 21,457,419 common shares, $0.0001 par value, issued and outstanding.
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Page
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PART I -
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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4 | |
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Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010
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Statements of Operations (Unaudited)
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Three and nine months ended September 30, 2011 and 2010 and for the period from November 21, 2003 (inception) to September 30, 2011
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Statement of Changes in Stockholders' Equity (Unaudited)
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For the period from November 21, 2003 (inception) to September 30, 2011
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Statements of Cash Flows (Unaudited)
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Nine months ended September 30, 2011 and 2010 and for the period from November 21, 2003 (inception) to September 30, 2011
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Notes to Financial Statements (Unaudited)
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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14 | |
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
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21 | |
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Item 4.
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Controls and Procedures
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21 | |
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PART II -
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OTHER INFORMATION
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22 | |
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Item 1.
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Legal Proceedings
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22 | |
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Item 1A.
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Risk Factors
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22 | |
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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30 | |
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Item 3.
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Defaults Upon Senior Securities
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32 | |
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Item 4.
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(Removed and Reserved)
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32 | |
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Item 5.
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Other Information
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32 | |
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Item 6.
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Exhibits
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32 |
2
ADVISEMENT
We urge you to read this entire Quarterly Report, including the “Risk Factors” section, the financial statements, and related notes included herein. As used in this Quarterly Report, unless the context otherwise requires, the words “we,” “us,” “our,” “the Company,” “GenSpera” and “Registrant” refer to GenSpera, Inc. Also, any reference to “common shares,” or “common stock,” refers to our $.0001 par value common stock. The information contained herein is current as of the date of this Quarterly Report (September 30, 2011), unless another date is specified.
We prepare our interim financial statements in accordance with United States generally accepted accounting principles. Our financials and results of operation for the three and nine month periods ended September 30, 2011 are not necessarily indicative of our prospective financial condition and results of operations for the pending full fiscal year ending December 31, 2011. The interim financial statements presented in this Quarterly Report as well as other information relating to our company contained in this Quarterly Report should be read in conjunction and together with the reports, statements and information filed by us with the United States Securities and Exchange Commission (“SEC”).
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements include, but are not limited to, statements about:
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·
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the development of our drug candidates, including when we expect to undertake, initiate and complete the clinical trials of our drug candidates;
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·
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the regulatory approval of our drug candidates;
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·
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our use of clinical research centers and other contractors;
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·
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our ability to sell, license or market any of our products if developed;
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·
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our ability to compete against other companies;
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·
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our ability to secure adequate protection for our intellectual property;
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·
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our ability to attract and retain key personnel; and
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·
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our ability to obtain adequate financing.
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These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend” and similar words or phrases. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Discussions containing these forward-looking statements may be found throughout this Form 10-Q, including Part I, the section entitled “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements involve risks and uncertainties, including the risks discussed in Part II, Item 1A of this Report, under the caption “Risk Factors” that could cause our actual results to differ materially from those in the forward-looking statements. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document. The risks discussed in this report should be considered in evaluating our business and future financial performance.
3
PART I
FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL STATEMENTS
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GENSPERA INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
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September 30,
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December 31,
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|||||||
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2011
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2010
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|||||||
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Assets
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(Unaudited)
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|||||||
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Current assets:
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Cash
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$ | 6,654,026 | $ | 3,671,151 | ||||
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Total current assets
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6,654,026 | 3,671,151 | ||||||
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Fixed assets, net of accumulated depreciation of $6,250 and $3,874
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9,584 | 11,959 | ||||||
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Prepaid fees
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- | 3,500 | ||||||
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Intangible assets, net of accumulated amortization of $55,775 and $43,029
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156,393 | 169,139 | ||||||
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Total assets
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$ | 6,820,003 | $ | 3,855,749 | ||||
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Liabilities and stockholders' equity
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||||||||
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Current liabilities:
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||||||||
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Accounts payable and accrued expenses
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$ | 489,633 | $ | 139,169 | ||||
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Accrued interest - stockholder
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15,816 | 12,517 | ||||||
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Convertible note payable - stockholder, current portion
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105,000 | 105,000 | ||||||
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Total current liabilities
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610,449 | 256,686 | ||||||
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Warrant derivative liabilities
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1,757,685 | 2,314,033 | ||||||
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Total liabilities
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2,368,134 | 2,570,719 | ||||||
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Commitments and contingencies
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||||||||
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Stockholders' equity:
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||||||||
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Preferred stock, par value $.0001 per share; 10,000,000 shares authorized, none issued and outstanding
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- | - | ||||||
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Common stock, par value $.0001 per share; 80,000,000 shares authorized, 21,457,419 and 17,604,465 shares issued and outstanding, respectively
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2,146 | 1,760 | ||||||
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Common stock subscribed
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- | 611,846 | ||||||
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Additional paid-in capital
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22,683,294 | 15,120,792 | ||||||
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Deficit accumulated during the development stage
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(18,233,571 | ) | (14,449,368 | ) | ||||
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Total stockholders' equity
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4,451,869 | 1,285,030 | ||||||
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Total liabilities and stockholders' equity
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$ | 6,820,003 | $ | 3,855,749 | ||||
See accompanying notes to unaudited condensed financial statements.
4
GENSPERA, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF LOSSES
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
AND FOR THE PERIOD FROM INCEPTION (NOVEMBER 21, 2003) TO SEPTEMBER 30, 2011
(Unaudited)
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Cumulative Period
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from November 21, 2003
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(date of inception) to
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Three Months ended September 30,
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Nine Months ended September 30,
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September 30,
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||||||||||||||||||
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2011
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2010
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2011
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2010
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2011
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Operating expenses:
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General and administrative expenses
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$ | 800,708 | $ | 340,979 | $ | 2,326,647 | $ | 1,514,603 | $ | 7,214,283 | ||||||||||
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Research and development
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1,057,725 | 238,225 | 2,280,078 | 1,329,396 | 10,035,485 | |||||||||||||||
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Research and development grant received
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- | - | (244,479 | ) | - | (488,958 | ) | |||||||||||||
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Total operating expenses
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1,858,433 | 579,204 | 4,362,246 | 2,843,999 | 16,760,810 | |||||||||||||||
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Loss from operations
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(1,858,433 | ) | (579,204 | ) | (4,362,246 | ) | (2,843,999 | ) | (16,760,810 | ) | ||||||||||
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Finance cost
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- | - | - | - | (518,675 | ) | ||||||||||||||
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Change in fair value of derivative liability
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112,389 | 862,395 | 556,348 | 248,783 | (983,856 | ) | ||||||||||||||
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Interest income, net
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6,805 | 7,758 | 21,695 | 20,017 | 29,770 | |||||||||||||||
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Income (loss) before provision for income taxes
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(1,739,239 | ) | 290,949 | (3,784,203 | ) | (2,575,199 | ) | (18,233,571 | ) | |||||||||||
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Provision for income taxes
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- | - | - | - | - | |||||||||||||||
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Net income (loss)
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$ | (1,739,239 | ) | $ | 290,949 | $ | (3,784,203 | ) | $ | (2,575,199 | ) | $ | (18,233,571 | ) | ||||||
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Net income (loss) per common share, basic
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$ | (0.08 | ) | $ | 0.02 | $ | (0.18 | ) | $ | (0.15 | ) | |||||||||
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Net loss per common share, diluted - see
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||||||||||||||||||||
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Note 1
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$ | (0.08 | ) | $ | (0.03 | ) | $ | (0.18 | ) | $ | (0.15 | ) | ||||||||
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Weighted average shares outstanding, basic and diluted
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21,448,048 | 17,602,726 | 20,607,271 | 16,675,447 | ||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
5
GENSPERA, INC.
(A Development Stage Company)
CONDENSED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
FROM DATE OF INCEPTION (NOVEMBER 21, 2003) TO SEPTEMBER 30, 2011
(Unaudited)
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Deficit
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||||||||||||||||||||||||
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Accumulated
|
||||||||||||||||||||||||
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Additional
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Common
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During the
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Stockholders'
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|||||||||||||||||||||
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Common Stock
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Paid-in
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Stock
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Development
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Equity
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Shares
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Amount
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Capital
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Subscribed
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Stage
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(Deficit)
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|||||||||||||||||||
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Balance, November 21, 2003
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- | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
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Sale of common stock to founders at $0.0001
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per share in November, 2003
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6,100,000 | 610 | (510 | ) | - | - | 100 | |||||||||||||||||
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Contributed services
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- | - | 120,000 | - | - | 120,000 | ||||||||||||||||||
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Net loss
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- | - | - | - | (125,127 | ) | (125,127 | ) | ||||||||||||||||
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Balance, December 31, 2003
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6,100,000 | 610 | 119,490 | - | (125,127 | ) | (5,027 | ) | ||||||||||||||||
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Contributed services
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- | - | 192,000 | - | - | 192,000 | ||||||||||||||||||
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Stock based compensation
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- | - | 24,102 | - | - | 24,102 | ||||||||||||||||||
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Net loss
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- | - | - | - | (253,621 | ) | (253,621 | ) | ||||||||||||||||
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Balance, December 31, 2004
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6,100,000 | 610 | 335,592 | - | (378,748 | ) | (42,546 | ) | ||||||||||||||||
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Contributed services
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- | - | 48,000 | - | - | 48,000 | ||||||||||||||||||
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Stock based compensation
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- | - | 24,100 | - | - | 24,100 | ||||||||||||||||||
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Net loss
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- | - | - | - | (126,968 | ) | (126,968 | ) | ||||||||||||||||
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Balance, December 31, 2005
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6,100,000 | 610 | 407,692 | - | (505,716 | ) | (97,414 | ) | ||||||||||||||||
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Contributed services
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- | - | 144,000 | - | - | 144,000 | ||||||||||||||||||
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Stock based compensation
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- | - | 42,162 | - | - | 42,162 | ||||||||||||||||||
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Net loss
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- | - | - | - | (245,070 | ) | (245,070 | ) | ||||||||||||||||
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Balance, December 31, 2006
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6,100,000 | 610 | 593,854 | - | (750,786 | ) | (156,322 | ) | ||||||||||||||||
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Shares sold for cash at $0.50 per share
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in November, 2007
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1,300,000 | 130 | 649,870 | - | - | 650,000 | ||||||||||||||||||
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Shares issued for services
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735,000 | 74 | 367,426 | - | - | 367,500 | ||||||||||||||||||
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Contributed services
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- | - | 220,000 | - | - | 220,000 | ||||||||||||||||||
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Stock based compensation
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- | - | 24,082 | - | - | 24,082 | ||||||||||||||||||
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Exercise of options for cash at $0.003 per share
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in March and June, 2007
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900,000 | 90 | 2,610 | - | - | 2,700 | ||||||||||||||||||
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Net loss
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- | - | - | - | (691,199 | ) | (691,199 | ) | ||||||||||||||||
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Balance, December 31, 2007
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9,035,000 | 904 | 1,857,842 | - | (1,441,985 | ) | 416,761 | |||||||||||||||||
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Exercise of options for cash at $0.50 per share
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on March 7,2008
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1,000,000 | 100 | 499,900 | - | - | 500,000 | ||||||||||||||||||
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Sale of common stock and warrants at $1.00 per
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||||||||||||||||||||||||
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share - July and August 2008
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2,320,000 | 232 | 2,319,768 | - | - | 2,320,000 | ||||||||||||||||||
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Cost of sale of common stock and warrants
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- | - | (205,600 | ) | - | - | (205,600 | ) | ||||||||||||||||
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Shares issued for accrued interest
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31,718 | 3 | 15,856 | - | - | 15,859 | ||||||||||||||||||
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Shares issued for services
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100,000 | 10 | 49,990 | - | - | 50,000 | ||||||||||||||||||
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Stock based compensation
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- | - | 313,743 | - | - | 313,743 | ||||||||||||||||||
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Contributed services
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- | - | 50,000 | - | - | 50,000 | ||||||||||||||||||
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Beneficial conversion feature of convertible debt
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- | - | 20,675 | - | - | 20,675 | ||||||||||||||||||
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Net loss
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- | - | - | - | (3,326,261 | ) | (3,326,261 | ) | ||||||||||||||||
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Balance, December 31, 2008
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12,486,718 | 1,249 | 4,922,174 | - | (4,768,246 | ) | 155,177 | |||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
6
GENSPERA, INC.
(A Development Stage Company)
CONDENSED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
FROM DATE OF INCEPTION (NOVEMBER 21, 2003) TO SEPTEMBER 30, 2011
(Unaudited)
|
Cumulative effect of change in accounting principle
|
- | - | (444,161 | ) | - | (290,456 | ) | (734,617 | ) | |||||||||||||||
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Warrants issued for extension of debt maturities
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- | - | 51,865 | - | - | 51,865 | ||||||||||||||||||
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Stock based compensation
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- | - | 1,530,536 | - | - | 1,530,536 | ||||||||||||||||||
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Common stock issued for services
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86,875 | 10 | 104,109 | - | - | 104,119 | ||||||||||||||||||
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Sale of common stock and warrants at $1.50 per
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||||||||||||||||||||||||
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share - February 2009
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466,674 | 46 | 667,439 | - | - | 667,485 | ||||||||||||||||||
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Sale of common stock and warrants at $1.50 per
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||||||||||||||||||||||||
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share - April 2009
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33,334 | 3 | 49,997 | - | - | 50,000 | ||||||||||||||||||
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Sale of common stock and warrants at $1.50 per
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||||||||||||||||||||||||
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share - June 2009
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1,420,895 | 142 | 2,038,726 | - | - | 2,038,868 | ||||||||||||||||||
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Sale of common stock and warrants at $1.50 per
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||||||||||||||||||||||||
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share - July 2009
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604,449 | 60 | 838,024 | - | - | 838,084 | ||||||||||||||||||
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Sale of common stock and warrants at $1.50 per
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||||||||||||||||||||||||
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share - September 2009
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140,002 | 14 | 202,886 | - | - | 202,900 | ||||||||||||||||||
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Common stock and warrants issued as payment
|
||||||||||||||||||||||||
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of placement fees
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53,334 | 5 | (5 | ) | - | - | - | |||||||||||||||||
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Common stock and warrants issued upon conversion of note and accrued interest
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174,165 | 18 | 174,147 | - | - | 174,165 | ||||||||||||||||||
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Net loss
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- | - | - | - | (5,132,827 | ) | (5,132,827 | ) | ||||||||||||||||
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Balance, December 31, 2009
|
15,466,446 | 1,547 | 10,135,737 | - | (10,191,529 | ) | (54,245 | ) | ||||||||||||||||
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Stock based compensation
|
- | - | 1,165,450 | - | - | 1,165,450 | ||||||||||||||||||
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Sale of common stock and warrants at $1.65 per
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||||||||||||||||||||||||
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share - February and March 2010
|
533,407 | 53 | 806,157 | - | - | 806,210 | ||||||||||||||||||
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Sale of common stock and warrants at $2.00 per
|
||||||||||||||||||||||||
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share - May 2010
|
1,347,500 | 135 | 2,655,365 | - | - | 2,655,500 | ||||||||||||||||||
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Common stock and warrants issued as payment
|
||||||||||||||||||||||||
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of placement fees
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43,632 | 4 | (4 | ) | - | - | - | |||||||||||||||||
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Common stock issued as payment for patents
|
||||||||||||||||||||||||
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and license
|
20,000 | 2 | 46,798 | - | - | 46,800 | ||||||||||||||||||
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Common stock and warrants subscribed
|
- | - | - | 611,846 | - | 611,846 | ||||||||||||||||||
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Salaries paid with common stock
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43,479 | 4 | 99,996 | - | - | 100,000 | ||||||||||||||||||
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Exercise of options and warrants
|
150,001 | 15 | 124,986 | - | - | 125,001 | ||||||||||||||||||
|
Reclassification of derivative liability upon exercise of warrants
|
- | - | 86,307 | - | - | 86,307 | ||||||||||||||||||
|
Net loss
|
- | - | - | - | (4,257,839 | ) | (4,257,839 | ) | ||||||||||||||||
|
Balance, December 31, 2010
|
17,604,465 | 1,760 | 15,120,792 | 611,846 | (14,449,368 | ) | 1,285,030 | |||||||||||||||||
|
Stock based compensation
|
- | - | 758,831 | - | - | 758,831 | ||||||||||||||||||
|
Sale of common stock and warrants at $1.80 per
|
||||||||||||||||||||||||
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share - January and February 2011
|
2,241,605 | 224 | 4,034,659 | (611,846 | ) | - | 3,423,037 | |||||||||||||||||
|
Sale of common stock and warrants at $1.65 per
|
||||||||||||||||||||||||
|
share - April 2011
|
1,363,622 | 136 | 2,249,839 | - | - | 2,249,975 | ||||||||||||||||||
|
Common stock and warrants issued as payment
|
||||||||||||||||||||||||
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of placement fees
|
61,498 | 6 | (6 | ) | - | - | - | |||||||||||||||||
|
Common stock and warrants issued as payment
|
||||||||||||||||||||||||
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of accrued consulting fees
|
33,334 | 3 | 59,997 | - | - | 60,000 | ||||||||||||||||||
|
Common stock and warrants issued as payment
|
||||||||||||||||||||||||
|
of consulting fees
|
152,895 | 17 | 532,685 | - | - | 532,702 | ||||||||||||||||||
|
Cost of sales of common stock and warrants
|
- | - | (73,503 | ) | - | - | (73,503 | ) | ||||||||||||||||
|
Net loss
|
- | - | - | - | (3,784,203 | ) | (3,784,203 | ) | ||||||||||||||||
|
Balance, September 30, 2011
|
21,457,419 | $ | 2,146 | $ | 22,683,294 | $ | - | $ | (18,233,571 | ) | $ | 4,451,869 |
See accompanying notes to unaudited condensed financial statements.
7
GENSPERA, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
AND FOR THE PERIOD FROM INCEPTION (NOVEMBER 21, 2003) TO SEPTEMBER 30, 2011
(Unaudited)
|
Cumulative Period
|
||||||||||||
|
from November 21, 2003
|
||||||||||||
|
(date of inception) to
|
||||||||||||
|
Nine months ended September 30,
|
September 30,
|
|||||||||||
|
2011
|
2010
|
2011
|
||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net loss
|
$ | (3,784,203 | ) | $ | (2,575,199 | ) | $ | (18,233,571 | ) | |||
|
Adjustments to reconcile net loss to net
|
||||||||||||
|
cash used in operating activities:
|
||||||||||||
|
Depreciation and amortization
|
15,121 | 13,886 | 62,024 | |||||||||
|
Stock based compensation
|
1,291,533 | 878,836 | 5,037,327 | |||||||||
|
Common stock issued for acquisition of license
|
- | 28,800 | 28,800 | |||||||||
|
Warrants issued for financing costs
|
- | - | 467,840 | |||||||||
|
Change in fair value of derivative liability
|
(556,348 | ) | (248,783 | ) | 983,856 | |||||||
|
Contributed services
|
- | - | 774,000 | |||||||||
|
Amortization of debt discount
|
- | - | 20,675 | |||||||||
|
Changes in assets and liabilities:
|
||||||||||||
|
Increase (decrease) in accounts payable and accrued expenses
|
413,763 | (28,613 | ) | 591,873 | ||||||||
|
Cash used in operating activities
|
(2,620,134 | ) | (1,931,073 | ) | (10,267,176 | ) | ||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Acquisition of property and equipment
|
- | - | (15,833 | ) | ||||||||
|
Acquisition of intangibles
|
- | (10,000 | ) | (194,168 | ) | |||||||
|
Cash used in investing activities
|
- | (10,000 | ) | (210,001 | ) | |||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Proceeds from sale of common stock and warrants
|
5,673,012 | 3,461,710 | 16,974,705 | |||||||||
|
Proceeds from exercise of warrants
|
- | 125,001 | 125,001 | |||||||||
|
Cost of common stock and warrants sold
|
(70,003 | ) | (73,503 | ) | ||||||||
|
Proceeds from convertible notes - stockholder
|
- | - | 155,000 | |||||||||
|
Repayments of convertible notes - stockholder
|
- | - | (50,000 | ) | ||||||||
|
Cash provided by financing activities
|
5,603,009 | 3,586,711 | 17,131,203 | |||||||||
|
Net increase in cash
|
2,982,875 | 1,645,638 | 6,654,026 | |||||||||
|
Cash, beginning of period
|
3,671,151 | 2,255,311 | - | |||||||||
|
Cash, end of period
|
$ | 6,654,026 | $ | 3,900,949 | $ | 6,654,026 | ||||||
|
Supplemental cash flow information:
|
||||||||||||
|
Cash paid for interest
|
$ | - | $ | - | ||||||||
|
Cash paid for income taxes
|
$ | - | $ | - | ||||||||
|
Non-cash investing and financing activities:
|
||||||||||||
|
Common stock units issued as payment of placement fees
|
$ | 110,695 | $ | - | ||||||||
|
Common stock issued for acquistion of patent
|
- | 18,000 | ||||||||||
|
Derivative liability reclassified to equity upon exercise of warrants
|
- | 86,307 | ||||||||||
See accompanying notes to unaudited condensed financial statements.
8
GENSPERA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
AND FOR THE PERIOD FROM NOVEMBER 21, 2003
(INCEPTION) TO SEPTEMBER 30, 2011
(Unaudited)
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
Business and Basis of Presentation
GenSpera Inc. (“we”, “us”, “our company”, “our”, “GenSpera” or the “Company”) was formed under the laws of the State of Delaware in 2003. We are a development stage entity, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915. GenSpera, Inc. is a pharmaceutical company focused on the development of targeted cancer therapeutics for the treatment of cancerous tumors, including breast, prostate, bladder and kidney cancer. Our operations are based in San Antonio, Texas.
To date, we have generated no sales revenues, have incurred significant expenses and have sustained losses. Consequently, our operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from inception on November 21, 2003 through September 30, 2011, we have accumulated losses of $18,233,571.
Liquidity
As
of September 30, 2011, we had working capital (current assets in excess of current liabilities) of $6,043,577. Our
cash flow used in operations was $2,620,134 and $1,931,073 for the nine months ended September 30, 2011 and 2010, respectively. At
September 30, 2011, we had cash on hand of approximately $6,654,000 and raised approximately $5,673,000 in the first nine months
of 2011. Based upon current cash flow projections, management believes the Company will have sufficient capital resources
to meet projected cash flow requirements until August 2012.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management's best knowledge of current events and actions the Company may undertake in the future, actual results may differ from those estimates.
Research and Development
Research and development costs include expenses incurred by the Company for research and development of therapeutic agents for the treatment of cancer and are charged to operations as incurred. Our research and development expenses consist primarily of expenditures for toxicology and other studies, manufacturing, clinical trials and compensation and consulting costs.
GenSpera incurred net research and development expenses of $1,057,725 and $238,225 for the three months ended September 30, 2011 and 2010, respectively, and $2,035,599 and $1,329,396 for the nine months ended September 30, 2011 and 2010, respectively, and $9,546,527 from November 21, 2003 (inception) through September 30, 2011.
Loss Per Share
We use ASC 260, “Earnings Per Share” for calculating the basic and diluted income (loss) per share. We compute basic income (loss) per share by dividing net income (loss) and net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding.
Dilutive common stock equivalents consist of shares issuable upon conversion of debt and the exercise of our stock options and warrants. In accordance with ASC 260-45-20, common stock equivalents derived from shares issuable through the exercise of our warrants subject to derivative accounting are not considered in the calculation of the weighted average number of common shares outstanding because the adjustments in computing income available to common stockholders would result in a loss. Accordingly, the diluted EPS would be computed in the same manner as basic earnings per share.
9
The following is a reconciliation of net income and share amounts used in the computation of loss per share for the three months ended September 30, 2010:
|
Three Months
|
||||
|
Ended
|
||||
|
September 30, 2010
|
||||
|
Net income used in computing basic net income per share
|
$
|
290,949
|
||
|
Impact of assumed assumptions:
|
||||
|
Gain on warrant liability marked to fair value
|
862,395
|
|||
|
Net loss used in computing diluted net loss per share
|
$
|
(571,446
|
)
|
|
There were 12,113,791 common share equivalents at September 30, 2011 and 8,959,649 at September 30, 2010. For the three and nine months ended September 30, 2011 and 2010, these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.
Fair value of financial instruments
Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of long term convertible notes is based on management estimates and reasonably approximates their book value after comparison to obligations with similar interest rates and maturities. The fair value of the Company’s derivative instruments is determined using option pricing models.
Fair value measurements
We follow the guidance established pursuant to ASC 820 which established a framework for measuring fair value and expands disclosure about fair value measurements. ASC 820 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes the following three levels of inputs that may be used:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.
Level 3: Unobservable inputs when there is little or no market data available, thereby requiring an entity to develop its own assumptions. The fair value hierarchy gives the lowest priority to Level 3 inputs.
The table below summarizes the fair values of our financial liabilities as of September 30, 2011:
|
Fair Value at
|
Fair Value Measurement Using
|
|||||||||||||||
|
September 30,
2011
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
|
Warrant derivative liability
|
$
|
1,757,685
|
$
|
—
|
$
|
—
|
$
|
1,757,685
|
||||||||
|
$
|
1,757,685
|
$
|
—
|
$
|
—
|
$
|
1,757,685
|
|||||||||
The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (warrant derivative liability) for the nine months ended September 30, 2011.
|
2011
|
||||
|
Balance at beginning of year
|
$
|
2,314,033
|
||
|
Change in fair value of warrant liability
|
(556,348
|
)
|
||
|
Balance at end of period
|
$
|
1,757,685
|
||
The following is a description of the valuation methodologies used for these items:
Warrant derivative liability — these instruments consist of certain of our warrants with anti-dilution provisions. These instruments were valued using pricing models which incorporate the Company’s stock price, volatility, U.S. risk free rate, dividend rate and estimated life.
10
Income Taxes
We utilize ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.
Stock-Based Compensation
We account for our stock based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial statements.
NOTE 2 - CAPITAL STOCK AND STOCKHOLDER’S EQUITY
We are authorized to issue 80,000,000 shares of common stock with a par value of $.0001 per share and 10,000,000 shares of preferred stock with a par value of $.0001 per share.
On January 21, 2011, pursuant to a securities purchase agreement (the “Securities Purchase Agreement”), we sold 2,074,914 units resulting in gross proceeds to the Company of $3,734,840 (“Offering”). The price per unit was $1.80. Each unit consists of: (i) one (1) share of the Company’s common stock, par value $.0001 (“Shares”), and (ii) one half (1/2) Common Stock Purchase Warrant (“Warrant(s)”). Of these units, 339,915 were subscribed at December 31, 2010 with gross proceeds to the Company of $611,847 recorded in the December 31, 2010 financial statements as Common Stock Subscribed.
The Warrants have a term of five years and entitle the holders to purchase the Company’s common shares at a price per share of $3.30. In the event the shares underlying the Warrants are not subject to a registration statement, the warrants may be exercised on a cashless basis after 12 months from the issuance date. The Warrants also contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends and fundamental transactions. The Warrants do not contain any price protection provisions. The Warrants are callable by the Company assuming the following: (i) the Common Stock trades above $5.50 for ten (10) consecutive days; (ii) the daily average minimum volume over such ten (10) days is 15,000 or greater; and (iii) there is an effective registration statement covering the underlying shares. The Securities Purchase Agreement also grants the investors certain piggy-back registration rights.
In connection with the Offering, we incurred placement agent and finder’s fees in the amount of $114,295 in cash and issued warrants to purchase a total of 63,498 shares at an average exercise price per share of $3.26. Of the fees incurred, $110,695 was reinvested in the Offering on the same terms and conditions as the investors, resulting in the issuance of 61,498 units.
On February 16, 2011, pursuant to a securities purchase agreement, we sold an additional 166,691 units resulting in gross proceeds to the Company of $300,044. The units contain the same terms as the January 21, 2011 units described above. In connection with the offering, we incurred placement agent and finder’s fees in the amount of $6,403 in cash and issued warrants to purchase a total of 3,558 shares at an exercise price per share of $2.16.
On April 29, 2011, pursuant to a securities purchase agreement, we sold an additional 1,363,622 units resulting in gross proceeds of $2,249,750. The price per unit was $1.65. Each unit consists of: (i) one (1) share of the common stock, par value $.0001, and (ii) one half (1/2) common stock purchase warrant. The warrants have a term of five years and entitle the holders to purchase the common shares at a price per share of $3.15. In the event the shares underlying the warrants are not subject to a registration statement, the warrants may be exercised on a cashless basis after 12 months from the issuance date. The warrants also contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends and fundamental transactions. The warrants do not contain any price protection provisions. The warrants are callable assuming the following: (i) our common stock trades above $6.50 for ten (10) consecutive days; (ii) the daily average minimum volume over such ten (10) days is 15,000 or greater; and (iii) there is an effective registration statement covering the underlying shares. We also granted the investors certain piggy-back registration rights. In connection with the offering, we incurred finder’s fees in the amount of $60,000 in cash and issued warrants to purchase a total of 36,364 shares at an exercise price per share of $3.15. The warrants have the same terms and conditions as the investor warrants.
11
As a result of the offerings, the reinvestment of fees, and the issuance of placement agent and finder’s warrants, we issued a total of 3,666,725 shares and 1,936,785 common stock purchase warrants.
During March, 2011, we issued 33,334 units as payment of accrued consulting fees in the amount of $60,000. These fees had been accrued at December 31, 2010.
During March, 2011, we issued 82,500 shares of common stock and 144,000 warrants as payment of consulting fees. The warrants have an exercise price of $3.30 per share and have the same terms as the warrants issued with the offerings described above. The common shares have been valued at $144,375 based on the market price of our common stock. The warrants have been valued at $149,249, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 2.25%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 89%; and (4) an expected life of the warrants of 5 years.
On March 1, 2011, we granted 39,000 common stock options to a director. The options have an exercise price of $1.90 per share. The options will vest quarterly over one year. The options lapse if unexercised after five years. The options have a grant date fair value of $20,416, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 0.225%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 89%; and (4) an expected life of the options of 0.625 years. During the three and nine months ended September 30, 2011 we have recorded an expense of $5,104 and $11,909 related to the fair value of the options that vested or are expected to vest.
During May 2011, we issued 52,500 shares of common stock and 91,000 warrants as payment of consulting fees. The warrants have an exercise price of $3.15 per share and have the same terms as the warrants issued with the offerings described above. The common shares have been valued at $100,800 based on the market price of our common stock. The warrants have been valued at $104,277, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 1.50%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 87%; and (4) an expected life of the warrants of 5 years.
During May 2011 we issued 4,211 shares of common stock, valued at $8,000, as payment for services.
On May 18, 2011, we granted a total of 80,000 common stock options to the four members of our Advisory Board. The options have an exercise price of $1.85 per share. The options will vest 20,000 upon grant and the balance quarterly over the remainder of 2011. The options lapse if unexercised after five years. During the three and nine months ended September 30, 2011 we have recorded an expense of $22,567 and $73,533, respectively, related to the fair value of the options that vested, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 1.3%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 84%; and (4) an expected life of the options of 4.86 years.
During January 2011, we granted a total of 25,000 common stock options for legal and consulting services. The options have an exercise price of $1.90 per share. Of these options, 5,000 vested upon grant and 20,000 vests quarterly during 2011. The options and warrants lapse if unexercised after five years. We have recorded an expense of $5,424 and $24,352 during the three and nine months ended September 30, 2011, respectively, related to the fair value of the options and warrants that vested or are expected to vest, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 1.75%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 87%; and (4) an expected life of the warrants of 4.7 years.
On July 1, 2011, our compensation committee approved the 2010 Long Term Incentive Grants for our chief executive officer and chief operating officer. The 2010 Long Term Incentive Grants aggregate $510,000 and were paid via the issuance of common stock options in lieu of cash. For purposes of calculating the number of options to be issued as payment of the discretionary bonuses, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 0.375%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 87%; and (4) an expected life of the options of 2.5 years, the grant date is July 1, 2011. The aggregate number of options granted is 559,370, with a weighted average exercise price of $1.93.
During August 2011, we granted 10,000 common stock options for consulting services. The options have an exercise price of $1.82 per share. The options vested upon grant. The options lapse if unexercised after five years. We have recorded an expense of $11,485 during the three months ended September 30, 2011 related to the fair value of the options