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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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Delaware
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06-1245881
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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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Large
accelerated filer
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o |
Accelerated
filer
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x
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Non-accelerated
filer
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o (Do
not check if a smaller
reporting company)
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Smaller
reporting company
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o |
Page
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PART
I: FINANCIAL INFORMATION
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1
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|
Item
1:
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Condensed
Financial Statements (Unaudited)
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1
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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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2
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Item
3.
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Quantitative
and Qualitative Disclosures about Market Risk
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5
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Item
4.
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Controls
and Procedures
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6
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PART
II: OTHER INFORMATION
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7
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Item
1.
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Legal
Proceedings
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7
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Item
1A.
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Risk
Factors
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7
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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7
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Item
3.
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Defaults
upon Senior Securities
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7
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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7
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Item
5.
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Other
Information
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7
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Item
6.
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Exhibits
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8
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SIGNATURES
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9
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Page
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||
Condensed
Balance Sheets
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F-1
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|
March
31, 2008 and December 31, 2007
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|
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Condensed
Statements of Operations
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F-2
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|
for
the Three Months Ended March 31, 2008 and 2007 and Cumulative from
Inception
(August 5, 1988) to March 31, 2008
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||
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||
Condensed
Statements of Cash Flows
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F-3
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|
for
the Three Months Ended March 31, 2008 and 2007 and Cumulative from
Inception
(August 5, 1988) to March 31, 2008
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||
Notes
to Condensed Financial Statements
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F-4
- F-10
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March
31,
2008
(Unaudited)
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December
31,
2007
(Audited)
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||||||
Assets
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|||||||
Current
assets
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|||||||
Cash
and cash equivalents
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$
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16,244,378
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$
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7,886,937
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|||
Investments
- treasury bills
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205,454
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9,878,700
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|||||
Investments
- marketable equity securities
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37,100
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-
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|||||
Prepaid
expenses
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338,684
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325,452
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|||||
Total
current assets
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$
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16,825,616
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$
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18,091,089
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|||
Property
and equipment, net
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21,884
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15,037
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|||||
Total
assets
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$
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16,847,500
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$
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18,106,126
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|||
Liabilities
and Stockholders’ Equity
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|||||||
Current
liabilities
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|||||||
Accounts
payable and accrued expenses
Derivative
instrument liability
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80,042
1,353,749
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125,278
1,552,000
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|||||
Total
current liabilities
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$
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1,433,791
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$
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1,677,278
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|||
Commitments
and contingencies
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-
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-
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|||||
Stockholders’
equity
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|||||||
Common
stock, $.01 par value; 70,000,000 shares authorized
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$
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252,593
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$
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252,593
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|||
Additional
paid-in capital
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56,678,240
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56,626,533
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|||||
Deficit
accumulated during development stage
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(41,508,024
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)
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(40,450,278
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)
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|||
Accumulated
other comprehensive loss
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(9,100
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)
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-
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||||
Total
stockholders’ equity
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$
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15,413,709
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$
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16,428,848
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|||
Total
liabilities and stockholders’ equity
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$
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16,847,500
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$
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18,106,126
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Three
Months Ended
March
31,
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Cumulative
from Inception
(August
5, 1988)
to
March
31,
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|||||||||
2008
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2007
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2008
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||||||||
Costs
and expenses:
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||||||||||
General
and administrative expenses
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$
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441,004
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$
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500,819
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$ | 20,532,415 | ||||
Research
and development costs
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988,956
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888,951
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25,008,037 | |||||||
Total
costs and expenses
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$
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1,429,960
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$
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1,389,770
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$ | 45,540,452 | ||||
Operating
loss
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$
|
(1,429,960
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)
|
$
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(1,389,770
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)
|
$ | (45,540,452 | ) | |
Derivative
instrument income
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198,251
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-
|
2,915,251 | |||||||
Interest
income
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173,963
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115,656
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2,660,755 | |||||||
Other
income
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-
|
-
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126,500 | |||||||
Interest
expense
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-
|
-
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(171,473 | ) | ||||||
Net
loss
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$
|
(1,057,746
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)
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$
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(1,274,114
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)
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$ | (40,009,419 | ) | |
Common
share data:
|
||||||||||
Basic
and diluted loss per share
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$
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(0.04
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)
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$
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(0.06
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)
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||||
Weighted
average number of shares of
common stock outstanding
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25,259,284
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21,004,943
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Three
Months Ended
March
31,
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Cumulative
from inception
(Aug.
5, 1988)
to
March 31,
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|||||||||
2008
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2007
|
2008
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||||||||
Cash
flows from operating activities:
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||||||||||
Net
loss
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$
|
(1,057,746
|
)
|
$
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(1,274,114
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)
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$ | (40,009,418 | ) | |
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Stock
option compensation expense
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51,707
|
-
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5,032,427 | |||||||
Stock
and warrant compensation expense issued for legal settlement, consulting
services
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-
|
-
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856,711 | |||||||
Depreciation
expense
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1,466
|
969
|
47,367 | |||||||
Amortization
of organization costs
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-
|
-
|
42,165 | |||||||
Derivative
liability fair value adjustment
|
(198,251
|
)
|
-
|
(2,915,251 | ) | |||||
Changes
in assets and liabilities:
|
||||||||||
Increase
in prepaid expenses
|
(13,232
|
)
|
(249,500
|
)
|
(338,684 | ) | ||||
Increase
in interest receivable
|
-
|
-
|
- | |||||||
(Decrease)
increase in accounts payable and accrued expenses
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(45,236
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)
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(394,425
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)
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80,041 | |||||
Net
cash used in operating activities
|
$
|
(1,261,292
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)
|
$
|
(1,917,070
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)
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$ | (37,204,641 | ) | |
Cash
flows from investing activities:
|
||||||||||
Purchase
of equipment or furniture and fixtures
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$
|
(8,313
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)
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$
|
(8,740
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)
|
$ | (69,252 | ) | |
Purchase
of short-term investments
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(205,454
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)
|
-
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(37,576,196 | ) | |||||
Purchase
of common stock
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(46,200
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)
|
-
|
(46,200 | ) | |||||
Proceeds
from maturities of short-term investments
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9,878,700
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1,867,330
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37,370,742 | |||||||
Organization
costs
|
-
|
-
|
(42,165 | ) | ||||||
Net
cash provided by (used in) investing activities
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$
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9,618,733
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$
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1,858,590
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$ | (363,071 | ) | |||
Cash
flows from financing activities:
|
||||||||||
Net
proceeds from sale of stock and exercise of stock options and
warrants
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$
|
-
|
$
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1,343,004
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$ | 52,657,764 | ||||
Repurchases
of common stock
|
-
|
-
|
(51,103 | ) | ||||||
Dividends
paid on preferred stock
|
-
|
-
|
(499,535 | ) | ||||||
Proceeds
from short-term borrowings
|
-
|
-
|
1,704,964 | |||||||
Net
cash provided by financing activities
|
$
|
-
|
$
|
1,
343,004
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$ | 53,812,090 | ||||
Increase
(decrease) in cash and cash equivalents
|
8,357,441
|
(1,284,524
|
)
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16,244,378 | ||||||
Cash
and cash equivalents at beginning of period
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7,886,937
|
6,289,723
|
- | |||||||
Cash
and cash equivalents at end of period
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$
|
16,244,378
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$
|
7,574,247
|
$ | 16,244,378 | ||||
Supplemental
cash flow information:
|
||||||||||
Cash
paid for interest
|
-
|
-
|
$ | 171,473 | ||||||
Supplemental
non-cash activities:
|
||||||||||
Cashless
exercise of stock options
|
-
|
-
|
$ | 542,166 | ||||||
Conversion
of debt to common stock
|
-
|
-
|
$ | 1,704,964 | ||||||
Common
stock issued for preferred stock dividends
|
-
|
-
|
$ | 999,070 | ||||||
Conversion
of preferred stock to common stock
|
-
|
-
|
$ | 24,167 | ||||||
Common
stock issued as compensation for stock sale
|
-
|
-
|
$ | 510,000 | ||||||
Fair
value of warrants issued
|
-
|
-
|
$ | 4,269,000 |
(i)
|
with
respect to the first employee, $1.92 for options with a grant date
in
April 2007 (the date of acceptance of the offer of employment) with
an
exercise price equal to the fair value of the common stock at the
date of
grant (options for an aggregate of 50,000 shares); and
|
(ii)
|
with
respect to the second employee, (a) $1.75 for options with a grant
date in
May 2007 (the date of acceptance of the offer of employment) with
an
exercise price equal to the fair value of the common stock at the
date of
grant (options for an aggregate of 50,000 shares), and (b) $1.22
for
options with a grant date of May 2007 (the date of acceptance of
the offer
of employment) with an exercise price equal to 150% of the fair value
of
the common stock at the date of grant (options for an aggregate of
25,000
shares).
|
Table
of Stockholders' Equity
|
|
|
|
|
|
|
|
|||||||||||||||
|
Common
Stock
$0.01
Par Value
Issued
and Outstanding
|
Additional
|
Accumulated
Other
|
Deficit
Accumulated During
|
|
|
||||||||||||||||
|
No.
of Shares
|
Amount
|
Paid
in Capital
|
Comprehensive
Loss
|
Development
Stage
|
Total
|
Comprehensive
loss
|
|||||||||||||||
Balance
at December 31, 2007
|
25,287,384
|
$
|
252,593
|
$
|
56,626,533
|
-
|
$
|
(40,450,278
|
$
|
16,428,848
|
||||||||||||
Compensation
expense for issuance of stock options
|
51,707
|
51,707
|
||||||||||||||||||||
Components
of comprehensive loss:
|
||||||||||||||||||||||
Change
in unrealized loss on investments
|
$
|
(9,100
|
(9,100
|
)
|
$
|
(9,100
|
||||||||||||||||
Net
loss for three months ended March 31, 2008
|
(1,057,746
|
)
|
(1,057,746
|
)
|
$
|
(1,057,746
|
||||||||||||||||
Total
comprehensive loss
|
$
|
(1,066,846
|
||||||||||||||||||||
Balance
at March 31, 2008
|
25,287,384
|
$
|
252,593
|
$
|
56,678,240
|
$
|
(9,100
|
$
|
(41,508,024
|
$
|
15,413,709
|
The
Plans
|
|||||||||||||
Stock
Options
|
Exercise
Price per Share
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Life (Years)
|
||||||||||
Outstanding
at December 31, 2007
|
1,140,000
|
$
|
1.88
- $7.14
|
$
|
4.54
|
3.96
|
|||||||
Granted
|
50,000
|
1.74
|
1.74
|
||||||||||
Expired
|
-
|
-
|
-
|
||||||||||
Exercised
|
-
|
-
|
-
|
||||||||||
Outstanding
at March 31, 2008
|
1,190,000
|
$
|
1.74
- $7.14
|
$
|
4.42
|
3.76
|
|
Level
1
|
Level 2
|
Level 3
|
Balance
at
March
31, 2008
|
|||||||||
Assets
|
|||||||||||||
Restricted
stock
|
$ | — |
$
|
37,100
|
$
|
—
|
$
|
37,100
|
|||||
Money Market Funds | $ | 16,223,868 | $ | — | $ | — | $ | 16,223,868 | |||||
Treasury bills | $ | 205,454 | $ | — | $ | — | $ | 205,454 | |||||
Liabilities
|
|||||||||||||
Derivative
financial instruments
|
$ | — |
$
|
1,353,749
|
$
|
—
|
$
|
1,353,749
|
May
9, 2008
|
DELCATH
SYSTEMS, INC.
(Registrant)
/s/
Paul M.
Feinstein
Paul
M. Feinstein
Chief
Financial Officer and Treasurer
(on
behalf of the registrant and as the principal financial and accounting
officer of the registrant)
|