Page
|
|
NOTICE
ABOUT FORWARD-LOOKING STATEMENTS
|
1
|
PROSPECTUS
SUMMARY
|
2
|
RISK
FACTORS
|
4
|
PREVIOUS
FINANCINGS
|
12
|
USE
OF PROCEEDS
|
13
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
13
|
DIVIDEND
POLICY
|
13
|
BUSINESS
|
14
|
LEGAL
PROCEEDINGS
|
20
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|
20
|
MANAGEMENT
|
24
|
CERTAIN
RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
|
29
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
29
|
DESCRIPTION
OF SECURITIES
|
31
|
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
|
32
|
PLAN
OF DISTRIBUTION
|
32
|
SELLING
STOCKHOLDERS
|
33
|
LEGAL
MATTERS
|
42
|
EXPERTS
|
42
|
AVAILABLE
INFORMATION
|
42
|
INDEX
TO FINANCIAL STATEMENTS
|
F-1
|
• |
statements
about our product development and commercialization goals and
expectations;
|
• | potential market opportunities; |
• | our plans for and anticipated results of our clinical development activities; |
• | the potential advantage of our product candidates; |
• | statements about our future capital requirements, the sufficiency of our capital resources to meet those requirements and the expected composition of our capital resources; and |
• | other statements that are not historical facts. |
Common
stock offered by selling
stockholders
(including shares underlying warrants)
|
8,119,980
shares.
|
Common
stock to be outstanding after the offering
|
30,539,931
shares (1).
|
Use
of proceeds
|
We
will not receive proceeds from the resale of shares by the selling
stockholders. If all warrants held by the selling stockholders are
exercised with cash, our proceeds from the exercise of those warrants
would be approximately $7.9 million.
|
Over-the-Counter
Bulletin Board symbol
|
PRTX
|
·
|
the
progress of pre-clinical development and laboratory testing and clinical
trials;
|
·
|
time
and costs involved in obtaining regulatory approvals;
|
·
|
the
number of products we pursue;
|
·
|
costs
in filing and prosecuting patent applications and enforcing or defending
patent claims; and
|
·
|
the
establishment of selected strategic alliances and activities required
for
product commercialization.
|
·
|
Contract
manufacturers are obliged to operate in accordance with FDA-mandated
current good manufacturing practices, or cGMPs. Their failure to
establish
and follow cGMPs and to document their adherence to such practices
may
lead to significant delays in the availability of material for clinical
study and may delay or prevent filing or approval of marketing
applications for our products. Additionally, failure to achieve and
maintain high manufacturing standards, including the incidence of
manufacturing errors, could result in patient injury or death, product
recalls or withdrawals, delays or failures in product testing or
delivery,
cost overruns or other problems that could seriously hurt our business.
|
·
|
It
may be difficult or impossible for us to find replacement manufacturers
quickly on acceptable terms, or at all. For example, we have initially
relied on a single contract manufacturer, Eurogentec S.A., to produce
PRTX-100. Changing this manufacturer, or changing the manufacturer
for any
other products we develop, may be difficult. The number of potential
manufacturers is limited, and changing manufacturers may require
confirmation of the analytical methods of the manufacturing processes
and
procedures in accordance with FDA-mandated cGMPs. Such confirmation
of the
analytical methods may be costly and
time-consuming.
|
·
|
Our
contract manufacturers may not perform as agreed or may not remain
in the
contract manufacturing business for the time required to produce,
store
and distribute our products successfully.
|
·
|
announcements
of the introduction of new products by us or our competitors;
|
·
|
market
conditions in the pharmaceutical and biotechnology sectors;
|
·
|
rumors
relating to us or our competitors;
|
·
|
litigation
or public concern about the safety of our potential products;
|
·
|
our
quarterly operating results;
|
·
|
deviations
in our operating results from the estimates of securities analysts;
and
|
·
|
FDA
or international regulatory actions.
|
(1)
|
Warrant
and Common Stock Purchase Agreement dated June 30, 2006, or the Purchase
Agreement among the Company and the several purchasers listed on
Exhibit A
thereof, or the Purchasers.
|
(2)
|
Registration
Rights Agreement dated June 30, 2006 by and among, the Company, the
Purchasers, and the Placement Agents (as defined
below).
|
(3)
|
Warrants
dated July 7, 2006 among the Company and each Purchaser and Placement
Agent.
|
|
High
|
Low
|
|||||
Fiscal
Year Ended May 31, 2005
|
|||||||
First
Quarter
|
$
|
2.95
|
$
|
2.15
|
|||
Second
Quarter
|
2.95
|
2.25
|
|||||
Third
Quarter
|
2.95
|
1.95
|
|||||
Fourth
Quarter
|
2.95
|
1.95
|
|||||
Fiscal
Year Ended May 31, 2006
|
|||||||
First
Quarter
|
$
|
2.95
|
$
|
2.00
|
|||
Second
Quarter
|
3.10
|
2.20
|
|||||
Third
Quarter
|
4.00
|
2.60
|
|||||
Fourth
Quarter
|
5.00
|
2.66
|
·
|
Analgesic/anti-inflammatory
preparations, ranging from simple aspirin to the COX-2 inhibitors;
|
·
|
Immunosuppressive/antineoplastic
drugs, including azathioprine and methotrexate;
|
·
|
TNF
(Tumor Necrosis Factor) inhibitors, also known as anti-TNF therapy,
currently represented by etanercept (Enbrel®), infliximab (Remicade®), and
adalimumab (Humira®);
|
·
|
Soluble
Interleukin-l (IL-I) Receptor Therapy, Anakinra (Kineret®).
|
·
|
Costimulatory
molecule inhibitor (abatacept, Orencia® Anti CD20 therapy, rituximab
(Rituxan®)
|
·
|
“Immunoadsorption
Therapy,” also known as Prosorba®, now in limited use in Europe and the
United States, entailing weekly sessions during which a patient’s blood is
separated and passed through a molecular filter. The use of such
extreme
treatment modalities emphasizes the unmet need for a new treatment
for
patients who cannot respond to existing therapies.
|
·
|
Employee
Agreements-Officers.
To attract and retain qualified management personnel, we have entered
into
employment agreements with three executive officers: Steven H. Kane,
president and chief executive officer, Victor S. Sloan, MD, senior
vice
president and chief medical officer, and Marc L. Rose, CPA, vice
president
of finance, chief financial officer, treasurer and corporate
secretary.
|
·
|
Directors
Agreements.
To attract and retain qualified candidates to serve on the board
of
directors, we have entered into agreements with G. Kirk Raab, Chairman
of
the Board, Carleton A. Holstrom, Chairman of the Audit Committee,
Eugene
A. Bauer, MD and Peter G. Tombros, under which Messrs. Raab, Holstrom,
Dr.
Bauer and Mr. Tombros receive aggregate annual cash payments aggregating
$150,000, $20,000, $20,000 and $20,000, respectively, as directors’
fees.
|
·
|
Operating
Lease - Office Space.
We have entered into a three year operating lease in New Hope, PA
for
3,795 square feet of office and laboratory space. The lease commenced
on
January 9, 2004 and was originally to expire on February 28, 2007.
On
November 18, 2005, the company modified the existing lease which
added an
additional 2,147 square feet and extended the lease term to January
31,
2008.
|
·
|
Operating
Lease - Copier.
We have entered into a sixty-three month operating lease for a
multi-function copier. The lease commenced on December 16, 2004 and
will
expire on March 16, 2010.
|
|
|
|
Payments
due by period
|
|
||||||||||||
Contractual
Obligations
|
|
|
Total
|
|
|
Less
than 1 year
|
|
|
1-3
years
|
|
|
3-5
years
|
|
|
More
than 5 years
|
|
Employment
Agreements-Officers
|
$
|
1,001,320
|
$
|
1,001,320
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||
Directors
Agreements
|
210,000
|
210,000
|
0
|
0
|
0
|
|||||||||||
Operating
Lease - Office Space
|
298,540
|
116,229
|
182,311
|
0
|
0
|
|||||||||||
Operating
Lease - Copier
|
11,454
|
1,743
|
8,964
|
747
|
0
|
|||||||||||
Total
|
$
|
1,521,314
|
$
|
1,329,292
|
$
|
191,275
|
$
|
747
|
$
|
0
|
Name
|
Age
|
Position
and Offices Held with the Company
|
G.
Kirk Raab(1)(2)
|
70
|
Chairman
of the Board
|
Steven
H. Kane(1)
|
53
|
President,
Chief Executive Officer and Director
|
Victor
S. Sloan M.D.
|
46
|
Senior
Vice President and Chief Medical Officer
|
Marc
L. Rose, CPA
|
41
|
Vice
President of Finance, Chief Financial Officer, Treasurer and Corporate
Secretary
|
Dinesh
Patel, Ph.D.(3)
|
55
|
Director
|
Frank
M. Dougherty(1)(2)
|
58
|
Director
|
Carleton
A. Holstrom(3)
|
71
|
Director
|
Thomas
P. Stagnaro(3)
|
63
|
Director
|
Eugene
A. Bauer, M.D.(2)
|
64
|
Director
|
Peter
G. Tombros
|
63
|
Director
|
|
|
|
|
|
|
Annual
Compensation
|
|
|
|
|
|
|
|
|||
Name
& Principal Position
|
|
|
Year
|
|
|
Salary
$
|
|
|
Bonus
$
|
|
|
All
Other
Compensation
|
|
|
Restricted
Stock
Awards
$
|
|
Steven
H. Kane, President,
|
2006
|
$
|
356,250
|
$
|
100,000
|
$ |
0
|
$
|
0
|
|
||||||
Chief
Executive Officer, and Director
|
2005 | $ | 281,350 |
$
|
0
|
$ |
0
|
$
|
0 | |||||||
2004
|
$
|
179,165
|
$
|
176,576
|
$ |
0
|
$
|
20,835
|
(1)
|
|||||||
Victor
S. Sloan, MD, Senior Vice President and Chief Medical
Officer
|
2006
|
(2)
|
$
|
205,500
|
$
|
0
|
$ | 0 |
$
|
100,000
|
||||||
Marc
L. Rose., Vice President and Chief Financial Officer,
|
2006
|
|
$
|
180,203
|
$
|
0
|
$ | 0 |
$
|
0
|
||||||
Treasurer and Corporate Secretary |
2005
|
(3)
|
$ |
89,818
|
$
|
0
|
$ | 0 | $ |
38,250
|
||||||
Hector
W. Alila, former Senior Vice President, Drug
|
2006
|
(4) |
$
|
130,000
|
$
|
0
|
$
|
65,000
|
(4) |
$
|
0
|
|||||
Development | 2005 |
$
|
180,417 | $ |
0
|
$
|
0 | $ | 0 | |||||||
2004
|
$ |
42,500
|
$
|
0
|
$
|
0 | $ |
107,500
|
(1)
|
Mr. Kane
received 41,668 shares of restricted stock from December 16, 2002
through
May 31, 2003. The value of this restricted stock received by
Mr. Kane was computed using the closing price of Protalex’s common
stock on May 31, 2003, which was $2.25. Mr. Kane received 8,334
shares of restricted stock on June 15, 2003. The value of this stock
was also computed using the closing price of Protalex’s common stock on
May 31, 2003.
|
(2)
|
Dr.
Sloan was hired as the Company’s Senior Vice President and Chief Medical
Officer effective as of August 23, 2005. Prior to that date, he was
not
employed, in any capacity, by the Company.
|
(3)
|
Mr. Rose
was hired as the Company’s Vice President, Chief Financial Officer,
Treasurer and Corporate Secretary effective as of November 15, 2004.
Prior
to that date, he was not employed, in any capacity, by the
Company.
|
(4)
|
Dr.
Alila ceased to be employed by the Company on January 31, 2006, and
was
paid $65,000 in severance payments through May 31,
2006.
|
Number
of
Securities
Underlying
Options/SARs
Granted
(#)
|
|
|
Percent
of Total
Options/SARs
Granted
to
Employees
in Fiscal
Year
(%)
|
|
Exercise
or Base Price
($/Share)
|
|
|
Market
Price on
Date
of Grant
|
|||||
Steven
H. Kane
|
25,000
|
3
|
%
|
$
|
2.65
|
$
|
2.65
|
||||||
Victor
S. Sloan
|
296,407
|
33
|
%
|
$
|
2.50
|
$
|
2.50
|
||||||
Marc
L. Rose
|
43,571
|
5
|
%
|
$
|
2.85
|
$
|
2.85
|
||||||
Hector
W. Alila (1)
|
115,000
|
13
|
%
|
$
|
2.90
|
$
|
2.90
|
Number
of Securities Underlying
Unexercised
Options at Year End
|
Value
of Unexercised In The Money
Options
at Year End
|
||||||||||||
Name
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|||
Steven
H. Kane
|
1,025,846
|
212,396
|
$
|
1,794,358
|
$
|
298,551
|
|||||||
Victor
S. Sloan
|
70,363
|
226,044
|
$
|
57,245
|
$
|
195,419
|
|||||||
Marc
L. Rose
|
42,825
|
100,746
|
$
|
34,945
|
$
|
74,698
|
|||||||
Hector
W. Alila (1)
|
115,000
|
0
|
$
|
57,500
|
$
|
0
|
Shares
Beneficially Owned
|
|||||||
Name
and Title
|
Number
|
Percent
|
|||||
G.
Kirk Raab, Chairman of the Board and Director
|
553,340
(1
|
)
|
1.9
|
%
|
|||
Steven
H. Kane, President and Director
|
1,237,288
(2
|
)
|
4.2
|
%
|
|||
Victor
S. Sloan, M.D., Senior Vice President and Chief Medical
Officer
|
138,002
(3
|
)
|
*
|
||||
Marc
L. Rose, CPA, Vice President, Chief Financial Officer, Treasurer
and
Corporate Secretary
|
67,708
(4
|
)
|
*
|
||||
Hector
W. Alila, former Senior Vice President, Drug Development
|
165,000
(5
|
)
|
*
|
||||
Peter
G. Tombros, Director
|
150,000
(6
|
)
|
*
|
||||
Frank
M. Dougherty, Director
|
450,581
(7
|
)
|
1.6
|
%
|
|||
Carleton
A. Holstrom, Director
|
125,000
(8
|
)
|
*
|
||||
Eugene
A. Bauer, M.D., Director
|
125,000
(9
|
)
|
*
|
||||
Thomas
Stagnaro, Director
|
280,625
(10
|
)
|
1.0
|
%
|
|||
John
E. Doherty, Former Director
|
3,101,549
(11
|
)
|
10.9
|
%
|
|||
Dinesh
Patel, Ph.D., Director
|
4,433,002
(12
|
)
|
15.0
|
%
|
|||
vSpring
SBIC, L.P.
Attn:
Dinesh Patel
2795
E. Cottonwood Pkwy, Suite 360
Salt
Lake City, UT 84121
|
4,433,002
(13
|
)
|
15.0
|
%
|
|||
LB
I Group
399
Park Avenue
9th
Floor
New
York, NY 10022
|
1,600,000
(14
|
)
|
5.6%(14
|
)
|
|||
All
officers and directors as a group (10 persons)
|
7,560,546
(15
|
)
|
25.2
|
%
|
(1)
|
Includes
options to purchase 553,340 shares of our common stock exercisable
within
60 days of July 24, 2006.
|
(2)
|
Includes
options to purchase 1,237,288 shares of our common stock and warrants
to
purchase 7,778 shares of our common stock exercisable within 60 days
of
July 24, 2006.
|
(3)
|
Includes
options to purchase 93,282 shares of our common stock and warrants
to
purchase 944 shares of our common stock exercisable within 60 days
of July
24, 2006.
|
(4)
|
Includes
options to purchase 52,708 shares of our common stock exercisable
within
60 days of July 24, 2006.
|
(5)
|
Includes
options to purchase 115,000 shares of our common stock exercisable
within
60 days of July 24, 2006. Dr. Alila ceased to be employed by the
Company
on January 31, 2006.
|
(6)
|
Includes
options to purchase 100,000 shares of our common stock and warrants
to
purchase 10,000 shares of our common stock exercisable within 60
days of
July 24, 2006.
|
(7)
|
Includes
options to purchase 90,000 shares of our common stock and warrants
to
purchase 3,778 shares of our common stock exercisable within 60 days
of
July 24, 2006.
|
(8)
|
Includes
options to purchase 125,000 shares of our common stock exercisable
within
60 days of July 24, 2006.
|
(9)
|
Includes
options to purchase 125,000 shares of our common stock exercisable
within
60 days of July 24, 2006.
|
(10)
|
Includes
options to purchase 280,625 shares of our common stock exercisable
within
60 days of July 24, 2006.
|
(11)
|
Includes
options to purchase 10,000 shares of our common stock and warrants
to
purchase 27,778 shares of our common stock exercisable within 60
days of
July 24, 2006
|
(12)
|
Includes
warrants to purchase 1,097,255 shares of our common stock exercisable
within 60 days of July 24, 2006.
|
(13)
|
Includes
warrants to purchase 1,097,255 shares of our common stock exercisable
within 60 days of July 24, 2006.
|
(14)
|
Excludes
400,000 shares of common stock issuable upon exercise of warrants,
because
the terms of the warrant contain a limitation on acquiring shares
of
common stock if the exercise would result in the holder beneficially
owning more than 4.99% of the outstanding common stock.
|
(15)
|
Includes
options to purchase 443,282 shares of our common stock and warrants
to
purchase 1,108,199 shares of our common stock exercisable within
60 days
of July 24, 2006.
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
·
|
a
combination of any such methods of sale; and
|
·
|
any
other method permitted pursuant to applicable
law.
|
·
|
LB
I Group, Inc.’s parent company, Lehman Brothers Inc., is a NASD member and
registered broker dealer.
|
·
|
Terral
Jordan employer’s wholly-owned subsidiary is a member of the
NASD.
|
·
|
William
M. Hitchcock is a registered representative of Pembroke Financial
Partners
LLC, which is a NASD member firm.
|
·
|
John
C. Lipman is the managing member of Carter Management Group LLC.
Mr.
Lipman is the chairman and sole owner of Carter Securities LLC, which
is a
NASD member firm.
|
·
|
Paramount
BioCapital Asset Management, Inc. is the general partner and investment
manager of the following selling stockholders: (i) Aries Master Fund
II,
LP (ii) Aries Domestic Fund, LP and (iii) Aries Domestic Fund II,
LP.
Lindsay A. Rosenwald is the chief executive officer, chairman and
sole
stockholder of Paramount BioCapital Asset Management, Inc. and is
the
chief executive officer, chairman and sole stockholder of Paramount
Biocapital, Inc, an NASD member
firm.
|
·
|
Larry
Gellman is a managing director of, and owns equity securities in,
Robert
W. Baird & Co. Incorporated, which is a NASD member firm. Larry
Gellman is the father of selling stockholders Samuel Gellman and
Sarah
Gellman.
|
·
|
Adrian
Z. Stecyk, is the president and chief executive officer of Griffin
Securities, Inc. which acted a placement agent for this transaction
and is
a NASD member firm.
|
·
|
Salvatore
Saraceno is an employee of Griffin Securities, Inc, which is a NASD
member
firm.
|
·
|
Mark
Zizzamia is an employee of Griffin Securities, Inc, which is a NASD
member
firm.
|
·
|
Julia
Lancian is an employee of Griffin Securities, Inc, which is a NASD
member
firm.
|
·
|
Anthony
Cantone is the sole owner and President of Cantone Research, Inc.,
which
is a NASD member firm.
|
·
|
Victor
Polakoff is a Branch Manager at Cantone Research, Inc., which is
a NASD
member firm.
|
·
|
Sunrise
Securities Corp., a NASD member firm, is the general partner of Sunrise
Equity Partners LP.
|
·
|
James
R. Walker’s son is employed by JPMorgan Chase & Co., which is a NASD
member firm.
|
·
|
Douglas
Walker’s brother is employed by JPMorgan Chase & Co., which is a NASD
member firm
|
·
|
Mark
Aridgides is an employee of Chittenden Securities, which is a NASD
member
firm.
|
NO.
OF SHARES OFFERED (INCLUDES STOCK UNDERLYING WARRANTS)
|
SHARES
OWNED PRIOR
TO
THE OFFERING
|
SHARES
OWNED AFTER THE OFFERING
|
|||
NUMBER
|
PERCENTAGE
|
NUMBER
|
PERCENTAGE
|
||
LB
I Group, Inc.
|
2,000,000
(1)
|
1,600,000(1)
|
5.6%(1)
|
0
|
*
|
Camofi
Master LDC
|
562,500
(2)
|
562,500
|
2.0%
|
0
|
*
|
Christoph
Henkel
|
500,000
(3)
|
1,443,794
|
5.1%
|
943,794
|
3.3%
|
Bruce
E. Toll
|
500,000
(4)
|
500,000
|
1.8%
|
0
|
*
|
Cordillera
Fund, L.P.
|
375,000
(5)
|
458,500
|
1.6%
|
83,500
|
*
|
Adrian
Z. Stecyk
|
296,226
(6)
|
296,226
|
1.0%
|
0
|
*
|
Anthony
J. Cantone
|
250,000
(7)
|
397,825
|
1.4%
|
147,825
|
*
|
Grand
Cathay Venture
Capital
Co. Ltd
|
250,000
(8)
|
250,000
|
*
|
0
|
*
|
Grand
Cathay Venture
Capital
III Co. Ltd
|
250,000
(9)
|
250,000
|
*
|
0
|
*
|
vSpring
SBIC, L.P.
|
250,000
(10)
|
4,433,002
|
15.6%
|
4,183,002
|
14.7%
|
USBiosciences
LLC
|
207,500
(11)
|
207,500
|
*
|
0
|
*
|
Sunrise
Equity Partners LP
|
175,000
(12)
|
175,000
|
*
|
0
|
*
|
NITE
Capital LP
|
150,000
(13)
|
205,555
|
*
|
55,555
|
*
|
Aries
Master Fund II
|
135,000
(14)
|
293,334
|
1.0%
|
158,334
|
*
|
Bushido
Capital Master Fund, LP
|
125,000
(15)
|
125,000
|
*
|
0
|
*
|
ETP/FBR
Venture Capital II, LLC
|
125,000
(16)
|
125,000
|
*
|
0
|
*
|
Pierce
Diversified Strategy Mast Fund, LLC
|
125,000
(17)
|
125,000
|
*
|
0
|
*
|
Springbridge
Capital Corporation
|
125,000
(18)
|
125,000
|
*
|
0
|
*
|
Valor
Capital Management, LP
|
125,000
(19)
|
125,000
|
*
|
0
|
*
|
Carter
Management Group, LLC
|
100,000
(20)
|
193,750
|
*
|
93,750
|
*
|
WBW
Trust No. One, William T. Weyerhaeuser, Trustee
|
100,000
(21)
|
100,000
|
*
|
0
|
*
|
Salvatore
Saraceno
|
72,102
(22)
|
102,102
|
*
|
30,000
|
*
|
Mark
Zizzamia
|
72,102
(23)
|
102,102
|
*
|
30,000
|
*
|
Carter
Securities, LLC
|
70,459
(24)
|
70,459
|
*
|
0
|
*
|
Aries
Domestic Fund, L.P.
|
70,000
(25)
|
156,111
|
*
|
86,111
|
*
|
Larry
Gellman
|
50,000
(26)
|
300,000
|
1.1%
|
250,000
|
*
|
Samuel
J. Gellman
|
50,000
(27)
|
50,000
|
*
|
0
|
*
|
Sarah
Gellman
|
50,000
(28)
|
50,000
|
*
|
0
|
*
|
William
Hitchcock
|
50,000
(29)
|
449,174
|
1.6%
|
399,174
|
1.4%
|
Richard
Molinsky
|
50,000
(30)
|
56,500
|
*
|
6,500
|
*
|
Sterling
Securities International Ltd.
|
50,000
(31)
|
77,766
|
*
|
27,766
|
*
|
Douglas
Walker
|
45,001
(32)
|
45,001
|
*
|
0
|
*
|
Aries
Domestic Fund II, LP
|
45,000
(33)
|
78,333
|
*
|
33,333
|
*
|
Boris
Volman
|
43,750
(34)
|
81,255
|
*
|
37,505
|
*
|
James
Walker
|
40,000
(35)
|
190,919
|
*
|
150,919
|
*
|
Endeavor
Asset Management, L.P.
|
37,500
(36)
|
37,500
|
*
|
0
|
*
|
Thomas
V. Zug
|
36,875
(37)
|
288,097
|
1.0%
|
251,222
|
*
|
Craig
Lunsman
|
30,000
(38)
|
58,567
|
*
|
28,567
|
*
|
Gregory
A. Armbrustor
|
25,000
(39)
|
25,000
|
*
|
0
|
*
|
BN
& Partners Private Equity GbR
|
25,000
(40)
|
25,000
|
*
|
0
|
*
|
Ronald
Jude De Gregorio
|
25,000
(41)
|
25,000
|
*
|
0
|
*
|
David
Russell Edwards
|
25,000
(42)
|
25,000
|
*
|
0
|
*
|
FIRS
Management, LLC
|
25,000
(43)
|
25,000
|
*
|
0
|
*
|
Investment
Strategies
|
25,000
(44)
|
108,750
|
*
|
83,750
|
*
|
Oakwood
Holdings, Inc.
|
25,000
(45)
|
58,419
|
*
|
33,419
|
*
|
Peter
Tombros
|
25,000
(46)
|
50,000
|
*
|
25,000
|
*
|
Market
Actives LLC Profit
Sharing
Plan
|
25,000
(47)
|
25,000
|
*
|
0
|
*
|
Bayard
Walker, Jr.
|
25,000
(48)
|
82,167
|
*
|
57,167
|
*
|
Donald
and Gwen Reinke
|
20,000
(49)
|
20,000
|
*
|
0
|
*
|
Lincoln
Fund, L.P.
|
18,750
(50)
|
388,226
|
1.4%
|
369,476
|
1.3%
|
David
R. & Terri L. Hellyer
|
15,000
(51)
|
15,000
|
*
|
0
|
*
|
Shahrokh
Saudagaran
|
13,750
(52)
|
13,750
|
*
|
0
|
*
|
Jack
Benoff
|
12,500
(53)
|
42,771
|
*
|
30,271
|
*
|
Henry
& Christine Gefken
|
12,500
(54)
|
12,500
|
*
|
0
|
*
|
Terral
Jordan
|
12,500
(55)
|
40,667
|
*
|
28,167
|
*
|
Philip
E. McDonald
|
12,500
(56)
|
26,389
|
*
|
13,889
|
*
|
Robert
H. McNulty Trust
|
12,500
(57)
|
12,500
|
*
|
0
|
*
|
Paul
E. Miller
|
12,500
(58)
|
12,500
|
*
|
0
|
*
|
Natalie
Volman
|
12,500
(59)
|
12,500
|
*
|
0
|
*
|
Cantone
Research, Inc
|
10,325
(60)
|
10,325
|
*
|
0
|
*
|
Todd
Matthew Abrams
|
10,000
(61)
|
10,000
|
*
|
0
|
*
|
Mark
D. Aridgides
|
10,000
(62)
|
10,000
|
*
|
0
|
*
|
Sona
R. Banker
|
10,000
(63)
|
27,613
|
*
|
17,613
|
*
|
Bernard
S. Carrey
|
10,000
(64)
|
10,000
|
*
|
0
|
*
|
Julia
R. Lancian
|
10,000
(65)
|
10,000
|
*
|
0
|
*
|
Karl
J. Anderson
|
8,850
(66)
|
8,850
|
*
|
0
|
*
|
Jonathan
Sloan
|
7,670
(67)
|
7,670
|
*
|
0
|
*
|
Victor
Polakoff
|
7,500
(68)
|
12,000
|
*
|
4,500
|
*
|
DCB
Enterprises, Inc.
|
7,375
(69)
|
13,625
|
*
|
6,250
|
*
|
Sonia
S. Sloan
|
7,375
(70)
|
7,375
|
*
|
0
|
*
|
Lincoln
Fund Tax Adjusted, L.P.
|
6,250
(71)
|
57,162
|
*
|
50,912
|
*
|
Frank
M. Dougherty Rev. Trust
|
5,000
(72)
|
283,970
|
*
|
278,970
|
*
|
Victor
Schorr Sloan
|
4,720
(73)
|
44,720
|
*
|
40,000
|
*
|
Diane
H. Franklin
|
4,425
(74)
|
4,425
|
*
|
0
|
*
|
Anissa
Lynn Leh
|
2,500
(75)
|
12,500
|
*
|
10,000
|
*
|
John
Martin Stockmal
|
1,475
(76)
|
1,475
|
*
|
0
|
*
|
Joe
& Elena Dervan
|
1,250
(77)
|
8,125
|
*
|
6,875
|
*
|
Lesile
Geyer
|
500
(78)
|
500
|
*
|
0
|
*
|
David
Dervan
|
500
(79)
|
595
|
*
|
95
|
*
|
Samia
M. Siddiqui
|
250
(80)
|
250
|
*
|
0
|
*
|
(1)
|
Included
in the offering is stock underlying a warrant to purchase 400,000
shares
of common stock at an exercise price of $3.85 per share. The shares
underlying this warrant are excluded from the beneficial ownership
calculation because the terms of the warrant contain a limitation
on
acquiring shares of common stock if the exercise would result in
the
holder beneficially owning more than 4.99% of the outstanding common
stock.
|
(2)
|
Includes
stock underlying a warrant to purchase 112,500 shares of common stock
at
an exercise price of $3.85 per share.
|
(3)
|
Includes
stock underlying a warrant to purchase 100,000 shares of common stock
at
an exercise price of $3.85 per share.
|
(4)
|
Includes
stock underlying a warrant to purchase 100,000 shares of common stock
at
an exercise price of $3.85 per share.
|
(5)
|
Includes
stock underlying a warrant to purchase 75,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(6)
|
Includes
stock underlying a warrant to purchase 296,226 shares of common stock
at
an exercise price of $3.85 per share. Mr. Stecyk is the President
and
Chief Executive Officer of Griffin Securities, Inc., who acted as
placement agent for the July 2006 financing
transaction.
|
(7)
|
Includes
stock underlying a warrant to purchase 50,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(8)
|
Includes
stock underlying a warrant to purchase 50,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(9)
|
Includes
stock underlying a warrant to purchase 50,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(10)
|
Includes
stock underlying a warrant to purchase 50,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(11)
|
Includes
stock underlying a warrant to purchase 41,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(12)
|
Includes
stock underlying a warrant to purchase 35,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(13)
|
Includes
stock underlying a warrant to purchase 30,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(14)
|
Includes
stock underlying a warrant to purchase 27,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(15)
|
Includes
stock underlying a warrant to purchase 25,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(16)
|
Includes
stock underlying a warrant to purchase 25,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(17)
|
Includes
stock underlying a warrant to purchase 25,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(18)
|
Includes
stock underlying a warrant to purchase 25,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(19)
|
Includes
stock underlying a warrant to purchase 25,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(20)
|
Includes
stock underlying a warrant to purchase 20,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(21)
|
Includes
stock underlying a warrant to purchase 20,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(22)
|
Includes
stock underlying a warrant to purchase 72,102 shares of common stock
at an
exercise price of $3.85 per share. Mr. Saraceno, an employee of Griffin
Securities, Inc. acted as placement agent for the July 2006 financing
transaction
|
(23)
|
Includes
stock underlying a warrant to purchase 72,102 shares of common stock
at an
exercise price of $3.85 per share. Mr. Zizzamia, an employee of Griffin
Securities, Inc., which acted as placement agent for the July 2006
financing transaction
|
(24)
|
Includes
stock underlying a warrant to purchase 70,459 shares of common stock
at an
exercise price of $3.85 per share. Carter Securities, LLC, which
acted as
placement agent for the July 2006 financing
transaction.
|
(25)
|
Includes
stock underlying a warrant to purchase 14,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(26)
|
Includes
stock underlying a warrant to purchase 10,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(27)
|
Includes
stock underlying a warrant to purchase 10,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(28)
|
Includes
stock underlying a warrant to purchase 10,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(29)
|
Includes
stock underlying a warrant to purchase 10,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(30)
|
Includes
stock underlying a warrant to purchase 10,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(31)
|
Includes
stock underlying a warrant to purchase 10,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(32)
|
Includes
stock underlying a warrant to purchase 9,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(33)
|
Includes
stock underlying a warrant to purchase 9,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(34)
|
Includes
stock underlying a warrant to purchase 8,750 shares of common stock
at an
exercise price of $3.85 per share.
|
(35)
|
Includes
stock underlying a warrant to purchase 8,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(36)
|
Includes
stock underlying a warrant to purchase 7,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(37)
|
Includes
stock underlying a warrant to purchase 7,375 shares of common stock
at an
exercise price of $3.85 per share.
|
(38)
|
Includes
stock underlying a warrant to purchase 6,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(39)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(40)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(41)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(42)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(43)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(44)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(45)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(46)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share. Mr. Tombros has served on the
Company’s
board of directors since November
2005.
|
(47)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(48)
|
Includes
stock underlying a warrant to purchase 5,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(49)
|
Includes
stock underlying a warrant to purchase 4,000 shares of common stock
at an
exercise price of $3.85 per share. Mr. Reinke, a partner at Reed
Smith
LLP, our corporate counsel, and serves as the Company’s Assistant
Corporate Secretary.
|
(50)
|
Includes
stock underlying a warrant to purchase 3,750 shares of common stock
at an
exercise price of $3.85 per share.
|
(51)
|
Includes
stock underlying a warrant to purchase 3,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(52)
|
Includes
stock underlying a warrant to purchase 2,750 shares of common stock
at an
exercise price of $3.85 per share.
|
(53)
|
Includes
stock underlying a warrant to purchase 2,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(54)
|
Includes
stock underlying a warrant to purchase 2,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(55)
|
Includes
stock underlying a warrant to purchase 2,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(56)
|
Includes
stock underlying a warrant to purchase 2,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(57)
|
Includes
stock underlying a warrant to purchase 2,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(58)
|
Includes
stock underlying a warrant to purchase 2,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(59)
|
Includes
stock underlying a warrant to purchase 2,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(60)
|
Includes
stock underlying a warrant to purchase 10,325 shares of common stock
at an
exercise price of $3.85 per share. Cantone Research, Inc. was compensated
for a finders’ fee in connection with the July 2006 financing
transaction.
|
(61)
|
Includes
stock underlying a warrant to purchase 2,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(62)
|
Includes
stock underlying a warrant to purchase 2,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(63)
|
Includes
stock underlying a warrant to purchase 2,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(64)
|
Includes
stock underlying a warrant to purchase 2,000 shares of common stock
at an
exercise price of $3.85 per share.
|
(65)
|
Includes
stock underlying a warrant to purchase 10,000 shares of common stock
at an
exercise price of $3.85 per share. Ms. Lancian, an employee of Griffin
Securities, Inc. acted as placement agents for the July 2006 financing
transaction
|
(66)
|
Includes
stock underlying a warrant to purchase 1,770 shares of common stock
at an
exercise price of $3.85 per share.
|
(67)
|
Includes
stock underlying a warrant to purchase 1,534 shares of common stock
at an
exercise price of $3.85 per share. Mr. Sloan is the brother of the
Company’s Senior Vice President and Chief Medical Officer, Victor S.
Sloan, MD
|
(68)
|
Includes
stock underlying a warrant to purchase 1,500 shares of common stock
at an
exercise price of $3.85 per share.
|
(69)
|
Includes
stock underlying a warrant to purchase 1,475 shares of common stock
at an
exercise price of $3.85 per share.
|
(70)
|
Includes
stock underlying a warrant to purchase 1,475 shares of common stock
at an
exercise price of $3.85 per share. Mrs. Sloan is the mother of the
Company’s Senior Vice President and Chief Medical Officer, Victor S.
Sloan, MD.
|
(71)
|
Includes
stock underlying a warrant to purchase 1,250 shares of common stock
at an
exercise price of $3.85 per share.
|
(72)
|
Includes
stock underlying a warrant to purchase 1,000 shares of common stock
at an
exercise price of $3.85 per share. Mr. Dougherty has served on the
Company’s board of directors since October
2001.
|
(73)
|
Includes
stock underlying a warrant to purchase 944 shares of common stock
at an
exercise price of $3.85 per share. Dr. Sloan is the Company’s Senior Vice
President and Chief Medical
Officer.
|
(74)
|
Includes
stock underlying a warrant to purchase 885 shares of common stock
at an
exercise price of $3.85 per share.
|
(75)
|
Includes
stock underlying a warrant to purchase 500 shares of common stock
at an
exercise price of $3.85 per share. Ms, Leh is an employee of the
Company.
|
(76)
|
Includes
stock underlying a warrant to purchase 295 shares of common stock
at an
exercise price of $3.85 per share. Mr. Stockmal is an employee of
the
Company.
|
(77)
|
Includes
stock underlying a warrant to purchase 250 shares of common stock
at an
exercise price of $3.85 per share. Mr. Dervan is an employee of the
Company.
|
(78)
|
Includes
stock underlying a warrant to purchase 100 shares of common stock
at an
exercise price of $3.85 per share.
|
(79)
|
Includes
stock underlying a warrant to purchase 100 shares of common stock
at an
exercise price of $3.85 per share. Mr. Dervan is the brother of Joe
Dervan, an employee of the Company.
|
(80)
|
Includes
stock underlying a warrant to purchase 50 shares of common stock
at an
exercise price of $3.85 per share. Ms. Siddiqui is an employee of
the
Company.
|
Audited
Financial Statements
|
||||
Report
of Independent Registered Accounting Firm
|
F-2
|
|||
Balance
Sheets at May 31, 2006 and 2005
|
F-3
|
|||
Statements
of Operations for the Fiscal Years Ended May 31, 2006 and 2005 and
From
Inception (September 17, 1999) through May 31, 2006
|
F-4
|
|||
Statements
of Stockholders’ Equity (Deficit) for the Fiscal Years Ended May 31, 2006
and 2005 and From Inception (September 17, 1999) through May 31,
2006
|
F-5
|
|||
Statements
of Cash Flows for the Fiscal Years Ended May 31, 2006 and 2005 and
From
Inception (September 17, 1999) through May 31, 2006
|
F-8
|
|||
Notes
to Financial Statements
|
F-9
|
ASSETS
|
|||||||
2006
|
2005
|
||||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
9,992,545
|
$
|
9,453,367
|
|||
Prepaid
expenses
|
221,187
|
9,281
|
|||||
Total
current assets
|
10,213,732
|
9,462,648
|
|||||
PROPERTY
& EQUIPMENT:
|
|||||||
Lab
equipment
|
327,287
|
313,613
|
|||||
Office
and computer equipment
|
157,787
|
157,787
|
|||||
Furniture
& fixtures
|
40,701
|
25,556
|
|||||
Leasehold
improvements
|
89,967
|
27,060
|
|||||
615,742
|
524,016
|
||||||
Less
accumulated depreciation and amortization
|
(478,785
|
)
|
(400,387
|
)
|
|||
136,957
|
123,629
|
||||||
OTHER
ASSETS:
|
|||||||
Deposits
|
7,990
|
7,590
|
|||||
Intellectual
technology property, net of
|
|||||||
accumulated
amortization of $6,693 in 2006 and
|
|||||||
$5,673
in 2005
|
13,607
|
14,627
|
|||||
Total
other assets
|
21,597
|
22,217
|
|||||
$
|
10,372,286
|
$
|
9,608,494
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Current
maturities of capital lease obligation
|
$
|
0
|
$
|
20,046
|
|||
Accounts
payable
|
744,732
|
866,628
|
|||||
Payroll
and related liabilities
|
67,415
|
28,835
|
|||||
Accrued
expenses
|
226,848
|
81,517
|
|||||
Total
current liabilities
|
1,038,995
|
997,026
|
|||||
Other
|
3,696
|
4,655
|
|||||
Total
liabilities
|
1,042,691
|
1,001,681
|
|||||
STOCKHOLDERS'
EQUITY:
|
|||||||
Common
stock, par value $0.00001,
|
|||||||
100,000,000
and 40,000,000 shares authorized as of
May
31, 2006 and May 31, 2005 respectively,
22,389,951
and 19,393,221 shares issued and outstanding as of May 31, 2006 and
May
31, 2005, respectively
|
224
|
194
|
|||||
Additional
paid in capital
|
27,740,976
|
20,913,822
|
|||||
Deficit
accumulated during the development stage
|
(18,411,605
|
)
|
(12,307,203
|
)
|
|||
Total
stockholders’ equity
|
9,329,595
|
8,606,813
|
|||||
|
$
|
10,372,286
|
$
|
9,608,494
|
|
|
|
|
From
Inception
|
|
|||||
|
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
Through
|
|
|
|
|
May
31, 2006
|
|
|
May
31, 2005
|
|
|
May
31, 2006
|
|
REVENUES
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
OPERATING
EXPENSES:
|
||||||||||
Research
and development
|
(3,840,400
|
)
|
(3,519,910
|
)
|
(11,043,216
|
)
|
||||
Administrative
|
(2,175,223
|
)
|
(1,457,694
|
)
|
(5,989,663
|
)
|
||||
Professional
fees
|
(435,289
|
)
|
(714,665
|
)
|
(1,715,247
|
)
|
||||
Depreciation
and amortization
|
(4,296
|
)
|
(5,111
|
)
|
(150,402
|
)
|
||||
Operating
Loss
|
(6,455,208
|
)
|
(5,697,380
|
)
|
(18,898,528
|
)
|
||||
Other
income (expense)
|
||||||||||
Interest
income
|
351,649
|
132,181
|
568,115
|
|||||||
Interest
expense
|
(843
|
)
|
(2,530
|
)
|
(70,612
|
)
|
||||
Loss
on disposal of equipment
|
-
|
-
|
(10,580
|
)
|
||||||
Net
Loss
|
$
|
(6,104,402
|
)
|
$
|
(5,567,729
|
)
|
$
|
(18,411,605
|
)
|
|
Weighted
average number of common
|
||||||||||
shares
outstanding
|
20,559,291
|
16,832,643
|
13,903,129
|
|||||||
Loss
per common share - basic and diluted
|
$
|
(.30
|
)
|
$
|
(.33
|
)
|
$
|
(1.32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Common
|
|
|
During
The
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
in
|
|
|
Stock-
|
|
|
Development
|
|
|
|
|
|||
|
|
|
Shares
|
Amount
|
Capital
|
Contra
|
Stage
|
Total
|
|||||||||||
September 17,
1999 — initial issuance of 10,000 shares for intellectual technology
license at $.03 per share
|
10,000
|
$
|
300
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
300
|
||||||||
September 30,
1999 — cost of public shell acquisition over net assets acquired to be
accounted for as a Recapitalization
|
—
|
—
|
—
|
(250,000
|
)
|
—
|
(250,000
|
)
|
|||||||||||
October 27,
1999 — issuance of 84 shares to individual for $25,000
|
84
|
25,000
|
—
|
—
|
—
|
25,000
|
|||||||||||||
November 15,
1999 — reverse merger transaction with Enerdyne Corporation, net
transaction amounts
|
8,972,463
|
118,547
|
—
|
(118,547
|
)
|
—
|
—
|
||||||||||||
November 18,
1999 — February 7, 2000 — issuance of 459,444 shares to various
investors at $0.36 per share
|
459,444
|
165,400
|
—
|
—
|
—
|
165,400
|
|||||||||||||
January 1,
2000 — issuance of 100,000 shares in exchange for legal services
|
100,000
|
15,000
|
—
|
—
|
—
|
15,000
|
|||||||||||||
May
1 - 27, 2000 — issuance of 640,000 shares to various investors at $1.00
per share
|
640,000
|
640,000
|
—
|
—
|
—
|
640,000
|
|||||||||||||
May 27,
2000 — issuance of 1,644 shares to individual in exchange for interest Due
|
1,644
|
1,644
|
—
|
—
|
—
|
1,644
|
|||||||||||||
Net
loss for the year ended May 31, 2000
|
—
|
—
|
—
|
—
|
(250,689
|
)
|
(250,689
|
)
|
|||||||||||
Balance,
May 31, 2000
|
10,183,635
|
965,891
|
—
|
(368,547
|
)
|
(250,689
|
)
|
346,655
|
|||||||||||
December 7,
2000 — issuance of 425,000 shares to various investors at $1.00 per share
|
425,000
|
425,000
|
—
|
—
|
—
|
425,000
|
|||||||||||||
May 31,
2001 — Forgiveness of debt owed to shareholder
|
—
|
—
|
40,000
|
—
|
—
|
40,000
|
|||||||||||||
Net
loss for the year ended May 31, 2001
|
—
|
—
|
—
|
—
|
(553,866
|
)
|
(553,866
|
)
|
|||||||||||
Balance,
May 31, 2001
|
10,608,635
|
1,390,891
|
40,000
|
(368,547
|
)
|
(804,555
|
)
|
257,789
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Common
|
|
|
During
The
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
in
|
|
|
Stock-
|
|
|
Development
|
|
|
|
|
|||
|
|
|
Shares
|
Amount
|
Capital
|
Contra
|
Stage
|
Total
|
August 13,
2001 — Contribution by Shareholders
|
—
|
—
|
143,569
|
—
|
—
|
143,569
|
|||||||||||||
November 7,
2001 — issuance of 881,600 Shares at $1.25 per share
|
881,600
|
1,102,000
|
—
|
—
|
—
|
1,102,000
|
|||||||||||||
November 26,
2001 — options issued to board member
|
—
|
—
|
133,000
|
—
|
—
|
133,000
|
|||||||||||||
Net
loss for the year ended May 31, 2002
|
—
|
—
|
—
|
—
|
(1,280,465
|
)
|
(1,280,465
|
)
|
|||||||||||
Balance,
May 31, 2002
|
11,490,235
|
2,492,891
|
316,569
|
(368,547
|
)
|
(2,085,020
|
)
|
355,893
|
|||||||||||
July 5,
2002 — issuance of 842,000 shares at $1.50 per share
|
842,000
|
1,263,000
|
—
|
—
|
—
|
1,263,000
|
|||||||||||||
July 1,
2002 - May 1, 2003 - purchase of common stock from shareholder at
$.70 per share
|
(130,955
|
)
|
(91,667
|
)
|
—
|
—
|
—
|
(91,667
|
)
|
||||||||||
January 15,
2003 - May 15, 2003 — common stock issued to Company president
|
41,670
|
82,841
|
—
|
—
|
—
|
82,841
|
|||||||||||||
May 14,
2003 — common stock issued to employee
|
5,000
|
11,250
|
—
|
—
|
—
|
11,250
|
|||||||||||||
June 1,
2002 - May 31, 2003 — options issued to board members and employees
|
—
|
—
|
287,343
|
—
|
—
|
287,343
|
|||||||||||||
Net
loss for the year ended May 31, 2003
|
—
|
—
|
—
|
—
|
(1,665,090
|
)
|
(1,665,090
|
)
|
|||||||||||
Balance,
May 31, 2003
|
12,247,950
|
3,758,315
|
603,912
|
(368,547
|
)
|
(3,750,110
|
)
|
243,570
|
|||||||||||
June 15,
2003, common stock issued to Company president
|
8,334
|
16,418
|
—
|
—
|
—
|
16,418
|
|||||||||||||
June 15,
2003, purchase of common stock from shareholder
|
(12,093
|
)
|
(8,333
|
)
|
—
|
—
|
—
|
(8,333
|
)
|
||||||||||
September 18,
2003 - issuance of 7,445,646 of common stock issued in private placement
At $1.70 per share, net of transaction costs
|
7,445,646
|
11,356,063
|
—
|
—
|
—
|
11,356,063
|
|||||||||||||
September 19,
2003 - repurchase and retired 2,994,803 shares for $300,000
|
(2,994,803
|
)
|
(300,000
|
)
|
—
|
—
|
—
|
(300,000
|
)
|
||||||||||
December 12,
2003 - issuance of 39,399 shares to terminated employees at $2.60
per
share
|
39,399
|
102,438
|
—
|
—
|
—
|
102,438
|
|||||||||||||
March 1,
2004 - common stock issued to employee at $2.55 per share
|
50,000
|
127,500
|
—
|
—
|
—
|
127,500
|
|||||||||||||
May 31,
2004 - reclassify common stock contra to common stock
|
—
|
(368,547
|
)
|
—
|
368,547
|
—
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Common
|
|
|
During
The
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
in
|
|
|
Stock-
|
|
|
Development
|
|
|
|
|
|||
|
|
|
Shares
|
Amount
|
Capital
|
Contra
|
Stage
|
Total
|
June
1 , 2003 - May 31, 2004 - options issued to board members, employees
and consultants
|
—
|
—
|
448,096
|
—
|
—
|
448,096
|
|||||||||||||
Net
loss for the year ended May 31, 2004
|
—
|
—
|
—
|
—
|
(2,989,364
|
)
|
(2,989,364
|
)
|
|||||||||||
Balance,
May 31, 2004
|
16,784,433
|
$
|
14,683,854
|
$
|
1,052,008
|
—
|
$
|
(6,739,474
|
)
|
$
|
8,996,388
|
||||||||
November
30, 2004 - adjust March 1, 2004 common stock issued to
employee
|
(20,000
|
)
|
(20,000
|
)
|
|||||||||||||||
January
13, 2005 - common stock issued to employee at $2.55 per
share
|
15,000
|
38,250
|
38,250
|
||||||||||||||||
February
28, 2005 - Reclass Par Value for Reincorporation into DE as of
12/1/04
|
(14,701,935
|
)
|
14,701,935
|
0
|
|||||||||||||||
May
25, 2005 - issuance of 2,593,788 shares of common stock issued in
private
placement At $1.95 per share, net of transaction costs
|
2,593,788
|
25
|
4,851,168
|
4,851,193
|
|||||||||||||||
June
1 , 2004 - May 31, 2005 - options issued to board members, employees
and consultants
|
308,711
|
308,711
|
|||||||||||||||||
Net
loss for the year ended May 31, 2005
|
—
|
—
|
—
|
—
|
(5,567,729
|
)
|
(5,567,729
|
)
|
|||||||||||
Balance,
May 31, 2005
|
19,393,221
|
$
|
194
|
$
|
20,913,822
|
—
|
$
|
(12,307,203
|
)
|
$
|
8,606,813
|
||||||||
August
23, 2005 - common stock issued to employee
|
40,000
|
0
|
100,000
|
100,000
|
|||||||||||||||
October
19, 2005 - common stock issued to employee
|
10,000
|
0
|
25,000
|
25,000
|
|||||||||||||||
December
30, 2005 - issuance of 2,595,132 shares of common stock issued in
private
placement At $2.25 per share, net of transaction costs
|
2,595,132
|
26
|
5,510,941
|
5,510,967
|
|||||||||||||||
June
1, 2005 - May 31, 2006 - warrants exercised
|
351,598
|
4
|
786,534
|
786,538
|
|||||||||||||||
June
1 , 2005- May 31, 2006 - options issued to board members, employees
and consultants
|
404,679
|
404,679
|
|||||||||||||||||
Net
loss for the year ended May 31, 2006
|
—
|
—
|
—
|
—
|
(6,104,402
|
)
|
(6,104,402
|
)
|
|||||||||||
Balance,
May 31, 2006
|
22,389,951
|
$
|
224
|
$
|
27,740,976
|
$
|
(18,411,605
|
)
|
$
|
9,329,595
|
|||||||||
|
|
|
|
|
|
|
From
Inception
|
|
||
|
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
Through
|
|
|
|
|
May
31, 2006
|
|
|
May
31, 2005
|
|
|
May
31, 2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||
Net
loss
|
$
|
(6,104,402
|
)
|
$
|
(5,567,729
|
)
|
$
|
(18,411,605
|
)
|
|
Adjustments
to reconcile net loss to net cash and cash equivalents
used
in operating activities:
|
||||||||||
Loss
on disposal of equipment
|
—
|
—
|
10,580
|
|||||||
Depreciation
and amortization
|
79,418
|
58,684
|
507,999
|
|||||||
Non
cash compensation expense
|
529,679
|
326,960
|
2,065,525
|
|||||||
Non
cash expenses
|
—
|
—
|
16,644
|
|||||||
(Increase)/Decrease
in prepaid expenses and deposits
|
(212,306
|
)
|
12,760
|
(229,177
|
)
|
|||||
Increase
in accounts payable and accrued expenses
|
23,435
|
571,045
|
971,580
|
|||||||
Increase
in payroll and related liabilities
|
38,580
|
4,275
|
67,415
|
|||||||
Increase/(Decrease)
in other liabilities
|
(959
|
)
|
3,111
|
3,696
|
||||||
Net
cash and cash equivalents used in operating activities
|
(5,646,555
|
)
|
(4,590,894
|
)
|
(14,997,343
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||
Acquisition
of intellectual technology license - fee portion
|
—
|
—
|
(20,000
|
)
|
||||||
Acquisition
of property and equipment
|
(91,726
|
)
|
(79,229
|
)
|
(502,262
|
)
|
||||
Excess
of amounts paid for Public Shell over assets acquired to be
accounted
for as a recapitalization
|
—
|
—
|
(250,000
|
)
|
||||||
Proceeds
from disposal of equipment
|
—
|
—
|
6,000
|
|||||||
Net
cash and cash equivalents used in investing activities
|
(91,726
|
)
|
(79,229
|
)
|
(766,262
|
)
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||
Proceeds
from stock issuance
|
6,297,505
|
4,851,194
|
26,125,163
|
|||||||
Principal
payment on capital leases and installment purchase payable
|
(20,046
|
)
|
(20,487
|
)
|
(295,411
|
)
|
||||
Contribution
by shareholders
|
—
|
—
|
183,569
|
|||||||
Principal
payment on note payable individual
|
—
|
—
|
(225,717
|
)
|
||||||
Issuance
of note payable to individual
|
—
|
—
|
368,546
|
|||||||
Acquisition
of common stock
|
—
|
—
|
(400,000
|
)
|
||||||
Net
cash and cash equivalents provided by financing activities
|
6,277,459
|
4,830,707
|
25,756,150
|
|||||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
539,178
|
160,584
|
9,992,545
|
|||||||
Cash
and cash equivalents, beginning
|
9,453,367
|
9,292,783
|
—
|
|||||||
Cash
and cash equivalents, ending
|
$
|
9,992,545
|
$
|
9,453,367
|
$
|
9,992,545
|
||||
Supplemental
disclosures of cash flow information:
|
||||||||||
Interest
paid
|
$
|
614
|
$
|
2,128
|
$
|
66,770
|
||||
Taxes
paid
|
$
|
0
|
$
|
50
|
$
|
100
|
|
|
|
|
|
|
From
Inception
|
|
|||
|
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
Through
|
|
|
|
|
May
31, 2006
|
|
|
May
31, 2005
|
|
|
May
31, 2006
|
|
Net
loss, as reported
|
$
|
(6,104,402
|
)
|
$
|
(5,567,729
|
)
|
$
|
(18,411,605
|
)
|
|
Add:
stock-based employee compensation expense included in reported net
loss
|
529,679
|
288,710
|
1,412,701
|
|||||||
Deduct:
stock-based employee compensation Expense determined under fair-value
method for all awards
|
(1,129,724
|
)
|
(1,384,715
|
)
|
(4,4419,373
|
)
|
||||
Pro
forma net loss
|
$
|
(6,704,447
|
)
|
$
|
(6,663,734
|
)
|
$
|
(21,418,277
|
)
|
|
Loss
per common share, as reported - basic and diluted
|
$
|
(.30
|
)
|
$
|
(.33
|
)
|
$
|
(1.32
|
)
|
|
Proforma
loss per common share - basic and diluted
|
$
|
(.33
|
)
|
$
|
(.40
|
)
|
$
|
(1.54
|
)
|
|
|
|
|
|
|
|
From
Inception
|
|
||
|
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
Through
|
|
|
|
|
May,
31, 2006
|
|
|
May,
31, 2005
|
|
|
May
31, 2006
|
|
Dividends
per year
|
0
|
0
|
0
|
|||||||
Volatility
percentage
|
107
|
%
|
102%-107
|
%
|
90%-131
|
%
|
||||
Risk
free interest rate
|
3.85%-4.42
|
%
|
2.57%-3.52
|
%
|
2.07%-5.11
|
%
|
||||
Expected
life (years)
|
4
|
4
|
3-5
|
|
|
|
|
|
Enerdyne
|
|
|
Transaction
|
|
|
Balance
Sheet at
|
|
Account
Description
|
|
Protalex,
Inc.
|
|
|
Corporation
|
|
|
Adjustments
|
|
|
November
16, 1999
|
|
Cash
|
$
|
23,531
|
$ | — |
$
|
—
|
$
|
23,531
|
||||
Note
receivable shareholder
|
—
|
118,547 |
—
|
118,547
|
||||||||
License
|
20,300
|
— |
—
|
20,300
|
||||||||
Investment
in Enerdyne
|
368,547
|
— |
(368,547
|
)
|
—
|
|||||||
Other
current assets
|
8,212
|
— |
—
|
8,212
|
||||||||
Other
current liabilities
|
(17,555
|
)
|
— |
—
|
(17,555
|
)
|
||||||
Accounts
payable Alex
|
(40,000
|
)
|
— |
—
|
(40,000
|
)
|
||||||
Note
payable
|
(368,546
|
)
|
— |
—
|
(368,546
|
)
|
||||||
Common
stock
|
(25,300
|
)
|
(833,459
|
)
|
714,912
|
(143,847
|
)
|
|||||
Additional
paid in capital
|
—
|
(1,105,014
|
)
|
1,105,014
|
—
|
|||||||
Treasury
stock
|
—
|
430,424 |
(430,424
|
)
|
—
|
|||||||
Accumulated
deficit
|
30,811
|
1,389,502 |
(1,389,502
|
)
|
30,811
|
|||||||
Common
stock - contra
|
—
|
— |
368,547
|
368,547
|
||||||||
|
$
|
— | $ | — |
$
|
—
|
$
|
—
|
Year
Ended
May
31, 2006
|
Year
Ended
May
31, 2005
|
||||||
Statutory
federal and state rates of 40%
|
$
|
2,465,000
|
$
|
2,227,000
|
|||
Increase
in valuation allowance
|
(2,465,000
|
)
|
(2,227,000)
|
)
|
|||
Actual
tax benefit
|
$
|
—
|
$
|
—
|
Current:
|
Year
Ended
May
31, 2006
|
|
|
Year
Ended
May
31, 2005
|
|||
Federal
|
$
|
—
|
$
|
—
|
|||
State
|
—
|
—
|
|||||
Deferred:
|
|||||||
Federal
|
2,095,250
|
1,858,000
|
|||||
State
|
369,750
|
369,000
|
|||||
Increase
in valuation allowance
|
(2,465,000
|
)
|
(2,227,000
|
)
|
|||
Income
tax benefit
|
$
|
—
|
$
|
—
|
Assets:
|
May
31, 2006
|
|
|
May
31, 2005
|
|||
Net
operating losses
|
$
|
5,780,000
|
$
|
3,818,000
|
|||
Vacation
accrual
|
12,000
|
12,000
|
|||||
Stock
based compensation
|
826,000
|
613,000
|
|||||
General
business credit
|
771,000
|
506,000
|
|||||
Deferred
tax assets
|
7,389,000
|
4,949,000
|
|||||
Liability:
|
|||||||
Equipment
|
(1,000
|
)
|
(26,000
|
)
|
|||
Gross
deferred tax asset
|
7,388,000
|
4,923,000
|
|||||
Less
valuation allowance
|
(7,388,000
|
)
|
(4,923,000
|
)
|
|||
Deferred
tax asset, net of valuation allowance
|
$
|
—
|
$
|
—
|
Options
|
|
|
Weighted
Average
Exercise
Prices
|
|
|
Exercisable
|
||||
Balance,
September 17, 1999
|
—
|
$
|
—
|
—
|
||||||
Granted,
April 28, 2000
|
40,000
|
0.36
|
—
|
|||||||
Granted,
November 26, 2001
|
100,000
|
1.25
|
100,000
|
|||||||
Expired,
April 28, 2002
|
(40,000
|
)
|
0.36
|
—
|
||||||
Granted,
June 1, 2002
|
125,000
|
1.50
|
—
|
|||||||
Granted,
July 18, 2002
|
233,680
|
1.50
|
233,680
|
|||||||
Granted,
October 24, 2002
|
100,000
|
1.45
|
100,000
|
|||||||
Granted,
December 16, 2002
|
863,242
|
1.50
|
750,847
|
|||||||
Granted,
December 16, 2002
|
50,000
|
1.70
|
40,000
|
|||||||
Granted,
March 15, 2003
|
130,000
|
1.50
|
—
|
|||||||
Granted,
April 1, 2003
|
40,000
|
1.50
|
30,832
|
|||||||
Granted,
July 1, 2003
|
40,000
|
1.50
|
20,000
|
|||||||
Granted,
August 13, 2003
|
100,000
|
1.50
|
100,000
|
|||||||
Granted,
September 19, 2003
|
584,333
|
1.50
|
422,883
|
|||||||
Granted,
October 28, 2003
|
60,000
|
1.50
|
60,000
|
|||||||
Granted,
January 22, 2004
|
75,000
|
2.13
|
75,000
|
|||||||
Granted,
January 22, 2004
|
100,000
|
2.13
|
52,497
|
|||||||
Granted,
January 22, 2004
|
50,000
|
2.75
|
—
|
|||||||
Forfeited,
January 22, 2004
|
(130,000
|
)
|
1.50
|
—
|
||||||
Granted,
March 1, 2004
|
150,000
|
2.17
|
—
|
|||||||
Granted,
July 22, 2004
|
15,000
|
2.60
|
6,874
|
|||||||
Granted,
October 26, 2004
|
30,000
|
2.70
|
3,958
|
|||||||
Granted,
October 26, 2004
|
100,000
|
2.30
|
100,000
|
|||||||
Granted,
January 13, 2005
|
330,000
|
2.55
|
71,664
|
|||||||
Granted,
January 13, 2005
|
125,000
|
2.55
|
125,000
|
|||||||
Forfeited,
January 26, 2005
|
(10,000
|
)
|
1.70
|
—
|
||||||
Forfeited,
January 26, 2005
|
(10,000
|
)
|
2.13
|
—
|
||||||
Granted,
February 15, 2005
|
100,000
|
2.80
|
100,000
|
|||||||
Granted,
April 13, 2005
|
50,000
|
2.60
|
13,541
|
|||||||
Forfeited,
June 1, 2005
|
(125,000
|
)
|
1.50
|
—
|
||||||
Granted,
July 29, 2005
|
51,429
|
2.80
|
17,914
|
|||||||
Granted,
August 23, 2005
|
250,000
|
2.50
|
46,873
|
|||||||
Forfeited,
October 22, 2005
|
(10,000
|
)
|
2.70
|
—
|
||||||
Forfeited,
October 22, 2005
|
(1,000
|
)
|
2.55
|
—
|
||||||
Granted,
October 25, 2005
|
200,714
|
2.65
|
153,749
|
|||||||
Granted,
November 8, 2005
|
121,407
|
2.75
|
121,407
|
|||||||
Granted,
January 11, 2006
|
133,000
|
2.85
|
9,829
|
|||||||
Forfeited,
January 25, 2006
|
(50,000
|
)
|
2.75
|
—
|
||||||
Forfeited,
January 25, 2006
|
(25,000
|
)
|
2.55
|
—
|
||||||
Forfeited,
January 25, 2006
|
(25,000
|
)
|
2.65
|
—
|
||||||
Forfeited,
February 28, 2006
|
(150,000
|
)
|
2.17
|
—
|
||||||
Forfeited,
February 28, 2006
|
(50,000
|
)
|
2.55
|
—
|
||||||
Forfeited,
March 13, 2006
|
(10,000
|
)
|
2.70
|
—
|
||||||
Forfeited,
March 13, 2006
|
(1,500
|
)
|
2.55
|
—
|
||||||
Forfeited,
March 13, 2006
|
(1,429
|
)
|
2.80
|
—
|
||||||
Granted,
March 16, 2006
|
115,000
|
2.90
|
115,000
|
|||||||
Granted,
April 20, 2006
|
27,000
|
4.50
|
—
|
|||||||
Forfeited,
April 30, 2006
|
(16,251
|
)
|
2.80
|
—
|
||||||
3,834,625
|
2,871,548
|
Total
|
|
|
Exercisable
|
|
|||||||||||||||
Exercise
Price
|
|
|
|
|
|
Weighted
Average
|
|
|
Weighted
Average
|
|
|
|
|
|
Weighted
Average
|
|
|
Weighted
Average
|
|
Range
|
|
|
Number
|
|
|
Exercise
Price
|
|
|
Remaining
Life
|
|
|
Number
|
|
|
Exercise
Price
|
|
|
Remaining
Life
|
|
(yrs)
|
|||||||||||||||||||
$0.90
- 1.35
|
100,000
|
$
|
1.25
|
5.5
|
100,000
|
$
|
1.25
|
5.5
|
|||||||||||
$1.36
- 1.80
|
2,061,255
|
$
|
1.50
|
6.8
|
1,758,242
|
$
|
1.50
|
6.8
|
|||||||||||
$1.81
- 2.25
|
165,000
|
$
|
2.13
|
7.6
|
127,497
|
$
|
2.13
|
7.6
|
|||||||||||
$2.26
- 2.70
|
978,214
|
$
|
2.53
|
8.9
|
521,659
|
$
|
2.53
|
8.9
|
|||||||||||
$2.71
- 3.15
|
503,156
|
$
|
2.82
|
9.3
|
364,150
|
$
|
2.82
|
9.3
|
|||||||||||
$3.16
- 4.50
|
27,000
|
$
|
4.50
|
9.9
|
0
|
$
|
-
|
9.9
|
|||||||||||
3,834,625
|
$
|
1.98
|
2,871,548
|
$
|
1.87
|
Year
ending May 31,
|
||||
2007
|
126,506
|
|||
2008
|
115,721
|
|||
2009
|
2,988
|
|||
2010
|
2,490
|
|||
Total
|
$
|
247,705
|