(Mark
One)
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R
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
|
OF
THE SECURITIES EXCHANGE ACT OF 1934
|
|
For
the fiscal year ended December 31, 2006
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|
Or
|
|
£
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
|
OF
THE SECURITIES EXCHANGE ACT OF 1934
|
|
For
the transition period from
to
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Delaware
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75-2402409
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(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
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1250
Pittsford-Victor Rd
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14534
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Pittsford,
NY
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(Zip
Code)
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(Address
of principal executive offices)
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Title
of each class
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Name
of each exchange on which registered
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N/A
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N/A
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PART
I:
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Page
|
|
“Safe
Harbor” Statement under the Private Securities Litigation Reform Act of
1995
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||
Item
1.
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Business
|
5-6
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Item
1A.
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Risk
Factors
|
6-9
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Item
1B.
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Unresolved
Staff Comments
|
9
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Item
2.
|
Properties
|
9
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Item
3.
|
Legal
Proceedings
|
10
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Item
4.
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Submission
of Matters to a Vote of Security Holders
|
10
|
Executive
Officers of the Registrant
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10-11
|
|
PART
II:
|
||
Item
5.
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Market
for Registrant's Common Equity, Related Stockholder
|
11-13
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Matters
and Issuer Purchases of Equity Securities
|
||
Item
6.
|
Selected
Financial Data
|
14
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Item
7.
|
Management's
Discussion and Analysis of Financial Condition
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15-19
|
and
Results of Operations
|
||
Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
|
20
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Item
8.
|
Financial
Statements and Supplementary Data
|
20
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting
|
20
|
and
Financial Disclosure
|
||
Item
9A.
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Controls
and Procedures
|
20
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Item
9B.
|
Other
Information
|
20
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PART
III:
|
|
|
Item
10.
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Directors,
Executive Officers and Corporate Governance
|
21
|
Item
11.
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Executive
Compensation
|
21
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management
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21
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and
Related Stockholder Matters
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21
|
|
Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
|
21
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Item
14.
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Principal
Accountant Fees and Services
|
|
PART
IV:
|
||
Item
15.
|
Exhibits
and Financial Statement Schedules
|
22-26
|
· |
the
benefits of any potential business opportunity not materializing
as
planned or not materializing within the time periods or to the extent
anticipated;
|
· |
the
possibility that eXegenics will pay more than the value it derives
from
any potential business opportunity;
|
· |
difficulties
in the integration and assimilation of the operations, technologies,
products and personnel of any acquired
business;
|
· |
the
diversion of management’s attention from other potential business
opportunities;
|
· |
the
availability of favorable acquisition
financing;
|
· |
the
potential loss of key employees and/or clients of any acquired
business;
|
· |
the
assumption
of unknown liabilities, indemnities and potential disputes with the
sellers; and
|
· |
risks
of entering markets in which eXegenics has no or limited direct prior
experience.
|
· |
announcements
we make concerning new business development
activities;
|
· |
actual
or anticipated fluctuations in our financial condition and future
operations and operating results;
|
· |
changes
in the economic and political conditions in the United States and
abroad;
|
· |
terrorist
attacks, war or the threat of terrorist attacks and
war;
|
· |
regulatory
developments in the United States and foreign
countries;
|
· |
our
common stock being quoted on the OTC Bulletin Board; and
|
· |
price
and volume fluctuations in the stock
market.
|
Name
|
Age
|
Position
with the Company
|
||
John
A. Paganelli
|
72
|
Director,
Chairman of the Board, Interim Chief Executive Officer, and
Secretary
|
||
Dr.
David F. Hostelley
|
67
|
Chief
Financial Officer
|
|
High
|
Low
|
|||||
2006:
|
|||||||
First
Quarter
|
$
|
0.46
|
$
|
0.39
|
|||
Second
Quarter
|
0.45
|
0.38
|
|||||
Third
Quarter
|
1.09
|
0.38
|
|||||
Fourth
Quarter
|
0.99
|
0.72
|
|||||
2005:
|
|||||||
First
Quarter
|
$
|
0.45
|
$
|
0.32
|
|||
Second
Quarter
|
0.47
|
0.35
|
|||||
Third
Quarter
|
0.44
|
0.36
|
|||||
Fourth
Quarter
|
0.46
|
0.39
|
2002
|
2003
|
2004
|
2005
|
2006
|
||||||||||||
EXEGENICS
INC
|
$
|
100.00*
|
$
|
257.14
|
$
|
97.14
|
$
|
117.14
|
$
|
242.86
|
||||||
NASDAQ
Market Index (US)
|
$
|
100.00*
|
$
|
150.01
|
$
|
162.89
|
$
|
165.13
|
$
|
180.85
|
||||||
Nasdaq
Biotech Index
|
$
|
100.00*
|
$
|
145.75
|
$
|
154.68
|
$
|
159.06
|
$
|
160.69
|
*
|
$100
invested on 12/31/02 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
|
|
Year
Ended December 31,
|
|||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
Statement
of Operations Data
|
||||||||||||||||
Revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
13,000
|
$
|
562,000
|
||||||
Research
and development
|
—
|
—
|
—
|
154,000
|
3,948,000
|
|||||||||||
General
and administrative expenses
|
1,117000
|
1,438,000
|
2,051,000
|
2,938,000
|
4,770,000
|
|||||||||||
Expenses
related to strategic redirection
|
—
|
—
|
—
|
653,000
|
864,000
|
|||||||||||
Merger,
tender offers and consent solicitation expenses
|
—
|
—
|
—
|
2,233,000
|
2,010,000
|
|||||||||||
Operating
loss
|
(1,117,000
|
)
|
(1,438,000
|
)
|
(2,051,000
|
)
|
(5,965,000
|
)
|
(11,030,000
|
)
|
||||||
Gain
on disposition
|
—
|
—
|
—
|
—
|
4,000
|
|||||||||||
Gain
on sale of investments (net)
|
—
|
1,064,000
|
—
|
—
|
—
|
|||||||||||
Interest
income
|
469,000
|
190,000
|
127,000
|
174,000
|
686,000
|
|||||||||||
Interest
expense
|
—
|
(2,000
|
)
|
(2,000
|
)
|
(2,000
|
)
|
(18,000
|
)
|
|||||||
Loss
before tax benefit and cumulative effect of a change in accounting
principle
|
(648,000
|
)
|
(186,000
|
)
|
(1,926,000
|
)
|
(5,793,000
|
)
|
(10,358,000
|
)
|
||||||
Tax
benefit
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
Net
Loss
|
(648,000
|
)
|
(186,000
|
)
|
(1,926,000
|
)
|
(5,793,000
|
)
|
(10,358,000
|
)
|
||||||
Preferred
Stock
|
||||||||||||||||
Dividend
|
(238,000
|
)
|
(234,000
|
)
|
(223,000
|
)
|
(207,000
|
)
|
(169,000
|
)
|
||||||
Net
loss attributable to common stockholders
|
$
|
(886,000
|
)
|
$
|
(420,000
|
)
|
$
|
(2,149,000
|
)
|
$
|
(6,000,000
|
)
|
$
|
(10,527,000
|
)
|
|
Basic
and diluted loss per common share
|
$
|
(0.04
|
)
|
$
|
(0.03
|
)
|
$
|
(0.13
|
)
|
$
|
(0.38
|
)
|
$
|
(0.67
|
)
|
|
December
31,
|
|||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
Balance
Sheet Data
|
||||||||||||||||
Total
assets
|
$
|
8,752,000
|
$
|
9,000,000
|
$
|
10,071,000
|
$
|
11,342,000
|
$
|
17,515,000
|
||||||
Working
capital
|
8,079,000
|
8,723,000
|
9,829,000
|
10,296,000
|
15,924,000
|
|||||||||||
Stockholders’
equity
|
$
|
8,079,000
|
$
|
8,723,000
|
$
|
9,832,000
|
$
|
10,304,000
|
$
|
16,074,000
|
Index
|
Page
|
Report
of Rotenberg & Co., LLP, Independent Registered Public Accounting
Firm
|
F-1
|
Report
of BDO Seidman, LLP, Independent Registered Public Accounting
Firm
|
F-2
|
Balance
Sheets as of December 31, 2006 and 2005
|
F-3
|
Statements
of operations for the fiscal years ended December 31, 2006, 2005
and
2004
|
F-4
|
Statements
of changes in stockholders’ equity for the fiscal years ended December 31,
2006, 2005
and 2004
|
|
Statements
of cash flows for the fiscal years ended December 31, 2006, 2005 and
2004
|
F-6
|
Notes
to audited financial statements for the fiscal years ended December
31,
2006,
|
|
2005
and 2004
|
F-7
|
EXEGENICS INC. | ||
|
|
|
Date: March 22, 2007 | By: | /s/ JOHN A. PAGANELLI |
Name: John A. Paganelli |
||
Title:
Chairman
of the Board,
Interim
Chief Executive Officer, and Secretary
(Principal
Executive Officer)
|
|
Signatures
|
Title
|
Date
|
||
By:
|
/s/
JOHN A. PAGANELLI
|
Director,
Chairman of the Board
|
March
22, 2007
|
||
John
A. Paganelli
|
Interim
Chief Executive Officer, Secretary
|
||||
(Principal
Executive Officer)
|
|||||
By:
|
/s/
DAVID HOSTELLEY
|
Chief
Financial Officer
|
March
22, 2007
|
||
David
Hostelley
|
(Principal
Accounting Officer)
|
||||
By:
|
/s/
ROBERT BARON
|
Director
|
March
22, 2007
|
||
Robert
Baron
|
|||||
By:
|
/s/
STEVEN D. RUBIN
|
Director
|
March
22, 2007
|
||
Steven
D. Rubin
|
|||||
By:
|
/s/
JANE HSIAO
|
Director
|
March
22, 2007
|
||
Jane
Hsiao
|
|||||
By:
|
/s/
SUBBARAO V. UPPALURI
|
Director
|
March
22, 2007
|
||
Subbarao
V. Uppaluri
|
|||||
3.1(i)
|
—
|
Certificate
of Amendment of the Certificate of Incorporation of eXegenics Inc.,
filed
with the Delaware Secretary State on February 8, 2007 (Filed
herewith).
|
3.1(ii)
|
—
|
Certificate
of Correction to the Certificate of Amendment to the Certificate
of
Incorporation of eXegenics
Inc. filed with the Delaware Secretary of State on July 14, 2003,
incorporated herein by reference to Exhibit 3.1 to eXegenics Inc.’s Form
10-Q for the fiscal quarter ended June 30, 2003 filed with the SEC
on
August 14, 2003.
|
3.1(iii) |
— |
Certificate of Designation Series B Junior Participating Preferred Stock, filed with the Delaware Secretary of State on June 9, 2003, incorporated by reference to Exhibit A to Exhibit 4.1 to eXegenics Inc.’s Current Report on Form 8-K filed with the SEC on June 9, 2003. |
3.1(iv)
|
—
|
Certificate
of Incorporation of eXegenics Inc., as amended, incorporated by reference
to Exhibit 3.1 and Exhibit 3.3 to eXgenics Inc.’s Registration Statement
on Form SB-2 (File No. 33-91802).
|
3.2
|
—
|
By-laws,
as amended, incorporated by reference to Exhibit 3.2 to eXgenics
Inc.’s
Registration Statement on Form SB-2 (File No.
33-91802).
|
4.1
|
—
|
Specimen
certificates representing Class C Warrants, Class D Warrants and
Common
Stock, incorporated by reference to eXegenics Inc.’s Registration
Statement on Form SB-2 (File No. 33-91802) filed with the SEC on
May 2,
1995.
|
4.2
|
—
|
Stockholders
Rights Agreement, dated June 9, 2003, between eXegenics
Inc. and American Stock Transfer & Trust Company, which includes as
Exhibit A the Form of Certificate of Designations of Series B Junior
Participating Preferred Stock, as Exhibit B the Form of Rights Certificate
and as Exhibit C the Summary of Rights to Purchase Preferred Stock,
incorporated by reference to Exhibit 4.1 to eXegenics Inc.’s Current
Report on Form 8-K filed with the SEC on June 9, 2003.
|
4.3
|
—
|
Amendment
to Stockholders Rights Agreement entered into as of July 16, 2003,
by and
between eXegenics
Inc. and American Stock Transfer & Trust Company, as Rights Agent,
incorporated by reference to Exhibit 4.1 to eXegenics Inc.’s Form 10-Q for
the fiscal quarter ended June 30, 2003 filed with the SEC on August
14,
2003.
|
4.4
|
—
|
Amendment
to Stockholders Rights Agreement entered into as of December 4, 2006,
by
and between eXegenics Inc. and American Stock Transfer & Trust
Company, as Rights Agent, incorporated by reference to Exhibit 99.1
to
eXegenics Inc.’s Current Report on Form 8-K filed with the SEC on December
4, 2006.
|
4.5(1)
|
—
|
Form
of Warrant Agreement between eXegenics
Inc. and Roan Meyers Associates LP, incorporated by reference to
Exhibit
4.2 to eXegenics Inc.’s Form 10-Q for the fiscal quarter ended March 31,
2004 filed with the SEC on May 14, 2004.
|
4.6(1)
|
—
|
Form
of Warrant Agreement between eXegenics
Inc. and Petkevich & Partners, LLC, incorporated by reference to
Exhibit 4.1 to eXegenics Inc.’s Form 10-Q for the fiscal quarter ended
March 31, 2004 filed with the SEC on May 14, 2004.
|
10.1
|
—
|
1992
Stock Option Plan, as amended, incorporated by reference to Exhibit
4 to
eXegenics Inc.’s Registration Statement on Form S-8 (File No. 333-37049)
filed with the SEC on October 2, 1997.
|
10.2
|
—
|
License
Agreement dated June 10, 1993 between eXegenics Inc. and Research
&
Development Institute, Inc. (“RDI”), as amended, relating to the
Paclitaxel Fermentation Production System, incorporated by reference
to
eXegenics Inc.’s Registration Statement on Form SB-2 (File No. 33-91802)
filed with the SEC on May 2, 1995.
|
10.3
|
—
|
Research
and Development Agreement effective June 10, 1993 between eXegenics
Inc.
and RDI, as amended, incorporated by reference to eXegenics Inc.’s
Registration Statement on Form SB-2 (File No. 33-91802) filed with
the SEC
on May 2, 1995.
|
10.4
|
—
|
License
Agreement dated February 22, 1995 between eXegenics Inc. and RDI,
as
amended, relating to FTS-2, incorporated by reference to eXegenics
Inc.’s
Registration Statement on Form SB-2 (File No. 33-91802) filed with
the SEC
on May 2, 1995.
|
10.5
|
—
|
Extension
Agreement with RDI dated June 5, 1995, incorporated by reference
to
eXegenics Inc.’s Registration Statement on Form SB-2 (File No. 33-91802)
filed with the SEC on May 2, 1995.
|
10.6
|
—
|
September
25, 1995 RDI Extension, incorporated by reference to eXegenics Inc.’s
Registration Statement on Form SB-2 (File No. 33-91802) filed with
the SEC
on May 2, 1995.
|
10.7
|
—
|
October
25, 1995 RDI Extension, incorporated by reference to eXegenics Inc.’s
Registration Statement on Form SB-2 (File No. 33-91802) filed with
the SEC
on May 2, 1995.
|
10.8
|
—
|
Amendment
to License Agreement dated June 10, 1993, as amended, and Research
and
Development Agreement effective June 10, 1993, as amended, both agreements
between eXegenics Inc. and RDI, incorporated by reference to eXegenics
Inc.’s Form 10-KSB for the fiscal year ended December 31, 1995 filed with
the SEC on March 29, 1996.
|
10.9
|
—
|
License
Agreement No. W960206 effective February 27, 1996 between eXegenics
Inc.
and The Regents of the University of California, incorporated by
reference
to eXegenics Inc.’s Form 10-KSB for the fiscal year ended December 31,
1995 filed with the SEC on March 29, 1996.
|
10.10
|
—
|
License
Agreement No. W960207 effective February 27, 1996 between eXegenics
Inc.
and The Regents of the University of California, incorporated by
reference
to eXegenics Inc.’s Form 10-KSB for the fiscal year ended December 31,
1995 filed with the SEC on March 29, 1996.
|
10.11
|
—
|
License
Agreement with the Washington State University, dated July 2, 1996*,
incorporated by reference to Exhibit 10.33 to eXegenics Inc.’s Post
Effective Amendment No. 1 (File No. 33-91802) on Form SB-2 filed
with the
SEC on July 25, 1996.
|
10.12
|
—
|
1996
Stock Option Plan, as amended, incorporated by reference to Exhibit
4 to
eXegenics Inc.’s Registration Statement on Form S-8 (File No. 333-11691)
filed with the SEC on September 10, 1996 and as amended by reference
to
eXegenics Inc.’s Definitive Proxy Statement filed with the SEC on August
5, 1998.
|
10.13
|
—
|
Patent
License Agreement, dated August 4, 1998, between The Regents of the
University of California and eXegenics Inc. for Peptide Anti-estrogen
for
Breast Cancer Therapy*, incorporated by reference to Exhibit 10.42
to
eXegenics Inc.’s Post Effective Amendment No. 2 (File No. 33-91802) to
Form SB-2 on Form S-3 filed with the SEC on September 30,
1998.
|
10.14
|
—
|
Master
License Agreement, dated as of June 12, 1998, between eXegenics Inc.
and
Bristol-Myers Squibb Company*, incorporated by reference to Exhibit
10.1
to eXegenics Inc.’s Current Report on Form 8-K filed with the SEC on
September 9, 1998.
|
10.15
|
—
|
Sublicense
Agreement, dated May 27, 1998, between eXegenics Inc. and Bristol-Myers
Squibb under The Research & Development Institute, Inc. License
Agreement, as amended, dated June 10, 1998*, incorporated by reference
to
Exhibit 10.2 to eXegenics Inc.’s Current Report on Form 8-K filed with the
SEC on September 9, 1998.
|
10.16
|
—
|
Sublicense
Agreement, dated May 19, 1998, between eXegenics Inc. and Bristol-Myers
Squibb Company under the Washington State University Research Foundation
License Agreement, dated June 8, 1996*, incorporated by reference
to
Exhibit 10.3 to eXegenics Inc.’s Current Report on Form 8-K filed with the
SEC on September 9, 1998.
|
10.17
|
—
|
Amended
and Restated License Agreement, dated June 3, 1998, between the Washington
State University Research Foundation and eXegenics Inc* , incorporated
by
reference to Exhibit 10.4 to eXegenics Inc.’s Current Report on Form 8-K
filed with the SEC on September 9, 1998.
|
10.18
|
—
|
Amendment,
dated May 27, 1998, to the License Agreement, dated June 10, 1993,
between
The Research and Development Institute, Inc. and eXegenics Inc.*
,
incorporated by reference to Exhibit 10.5 to eXegenics Inc.’s Current
Report on Form 8-K filed with the SEC on September 9,
1998.
|
10.19
|
—
|
Amended
and Restated 2000 Stock Option Plan, incorporated by reference to
Appendix
B to eXegenics Inc.’s Definitive Proxy Statement filed with the SEC on May
1, 2001.
|
10.20(1)
|
—
|
Employment
Agreement dated March 21, 2001, between eXegenics
Inc. and Ronald L. Goode, Ph.D., incorporated by reference to Exhibit
10.41 to eXegenics Inc.’s Form 10-K for the fiscal year ended December 31,
2000 and filed with the SEC on April 2, 2001.
|
10.21
|
—
|
Termination
Agreement dated November 25, 2002 between eXegenics
Inc., Innovative Drug Delivery Systems, Inc., and IDDS Merger Corp.,
incorporated by reference to Exhibit 2.1 to eXegenics Inc.’s Current
Report on Form 8-K filed with the SEC on December 3,
2002.
|
10.22(1)
|
—
|
Amendment,
dated September 9, 2003, to Employment Agreement dated March 20,
2001,
between eXegenics
Inc. and Ronald L. Goode, Ph.D., incorporated by reference to Exhibit
10.1
to eXegenics Inc.’s Form 10-Q for the fiscal quarter ended September 30,
2003 and filed with the SEC on November 14, 2003.
|
10.23(1)
|
—
|
Amendment,
dated October 16, 2003, to Employment Agreement dated March 20, 2001,
between eXegenics
Inc. and Ronald L. Goode, Ph.D., incorporated by reference to Exhibit
10.2
to eXegenics Inc.’s Form 10-Q for the fiscal quarter ended September 30,
2003 and filed with the SEC on November 14, 2003.
|
10.24
|
—
|
Form
of Indemnification Agreement by and among eXegenics
and certain of its current and former directors and officers, incorporated
by reference to Exhibit 10.1 to eXegenics Inc.’s Form 10-Q for the fiscal
quarter ended June 30, 2003 and filed with the SEC on August 14,
2003.
|
10.25
|
—
|
Promissory
Note and Pledge Agreement between eXegenics
Inc.
and Ronald L. Goode, Ph.D., incorporated by reference to Exhibit
10.33 to
eXegenics Inc.’s Form 10-K for the fiscal year ended December 31, 2003 and
filed with the SEC on April 7, 2004.
|
10.26
|
—
|
Sublease
Agreement between
eXegenics
Inc. and RFG Associates dated as of January 1, 2004, incorporated
by
reference to Exhibit 10.1 to eXegenics Inc.’s Form 10-Q for the fiscal
quarter ended June 30, 2004 and filed with the SEC on August 16,
2004.
|
10.27
|
—
|
Intellectual
Property Assignment Agreement between
eXegenics
Inc. and NLC Pharma, Inc., incorporated by reference to Exhibit 4.1
to
eXegenics Inc.’s Current Report on Form 8-K filed with the SEC on
September 10, 2004.
|
10.28(1)
|
—
|
Separation
Agreement between
eXegenics
Inc. and David Riggs dated July 26, 2005, incorporated by reference
to
Exhibit 10.1 to eXegenics Inc.’s Form 10-Q for the fiscal quarter ended
June 30, 2005 and filed with the SEC on August 15,
2005.
|
10.29(1)
|
—
|
Agreement
between
eXegenics
Inc. and David Hostelley dated July 20, 2005, incorporated by reference
to
Exhibit 10.2 to eXegenics Inc.’s Form 10-Q for the fiscal quarter ended
June 30, 2005 and filed with the SEC on August 15,
2005.
|
23.1
|
—
|
Consent
of Rotenberg & Co., LLC (Filed herewith)
|
23.2
|
—
|
Consent
of BDO Seidman, LLP (Filed herewith)
|
31.1
|
—
|
Certification
of the Chief Executive Officer Pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002. (Filed herewith)
|
31.2
|
—
|
Certification
of the Chief Financial Officer Pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002. (Filed herewith)
|
32.1
|
—
|
Certification
of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Filed
herewith)
|
32.2
|
—
|
Certification
of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(Filed
herewith)
|
|
Page
|
Report
of Rotenberg & Co., LLP, Independent Registered Public Accounting Firm
|
F-1
|
Report
of BDO Seidman, LLP, Independent Registered Public Accounting
Firm
|
F-2
|
Balance
sheets as of December 31, 2006 and 2005
|
F-3
|
Statements
of operations for the fiscal years ended December 31, 2006, 2005
and
2004
|
F-4
|
Statements
of changes in stockholders’ equity for the fiscal years ended December 31,
2006, 2005 and 2004
|
F-5
|
Statements
of cash flows for the fiscal years ended December 31, 2006, 2005
and
2004
|
F-6
|
Notes
to audited financial statements for the fiscal years ended December
31,
2006, 2005 and 2004
|
F-7
|
|
December
31,
|
||||||
|
2006
|
2005
|
|||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
8,596,000
|
$
|
8,901,000
|
|||
Prepaid
expenses and other current assets
|
156,000
|
99,000
|
|||||
Total
current assets
|
$
|
8,752,000
|
$
|
9,000,000
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
674,000
|
$
|
277,000
|
|||
Stockholders’
equity:
|
|||||||
Preferred
stock — $.01 par value, 10,000,000 shares authorized; 1,002,017 and
952,829 shares of Series A convertible preferred issued and outstanding
(liquidation value $2,505,000 and $2,382,000)
|
10,000
|
10,000
|
|||||
Common
stock — $.01 par value, 30,000,000 shares authorized; 16,991,101 and
16,945,026 shares issued
|
170,000
|
169,000
|
|||||
Additional
paid in capital
|
68,285,000
|
68,384,000
|
|||||
Subscriptions
receivable, net of reserve
|
—
|
(101,000
|
)
|
||||
Accumulated
deficit
|
(57,050,000
|
)
|
(56,402,000
|
)
|
|||
Treasury
stock, 611,200 and 611,200 shares of common stock, at cost
|
(3,337,000
|
)
|
(3,337,000
|
)
|
|||
8,078,000
|
8,723,000
|
||||||
$
|
8,752,000
|
$
|
9,000,000
|
|
Year
Ended December 31,
|
|||||||||
|
2006
|
2005
|
2004
|
|||||||
Revenue:
|
||||||||||
License
and research fees
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
Operating
expenses:
|
||||||||||
General
and administrative
|
1,117,000
|
1,438,000
|
2,051,000
|
|||||||
1,117,000
|
1,438,000
|
2,051,000
|
||||||||
Other
(income) expenses:
|
||||||||||
Gain
on sale of investments, net
|
—
|
(1,064,000
|
)
|
—
|
||||||
Interest
income
|
(469,000
|
)
|
(190,000
|
)
|
(127,000
|
)
|
||||
Interest
expense
|
—
|
2,000
|
2,000
|
|||||||
(469,000
|
)
|
(1,252,000
|
)
|
(125,000
|
)
|
|||||
Loss
before provision (benefit) for taxes
|
(648,000
|
)
|
(186,000
|
)
|
(1,926,000
|
)
|
||||
Provision
(benefit) for taxes
|
—
|
—
|
—
|
|||||||
Net
loss
|
(648,000
|
)
|
(186,000
|
)
|
(1,926,000
|
)
|
||||
Preferred
stock dividend
|
(238,000
|
)
|
(234,000
|
)
|
(223,000
|
)
|
||||
Net
loss attributable to common stockholders
|
$
|
(886,000
|
)
|
$
|
(420,000
|
)
|
$
|
(2,149,000
|
)
|
|
Basic
and diluted loss per common share:
|
$
|
(0.04
|
)
|
$
|
(0.03
|
)
|
$
|
(0.13
|
)
|
|
Weighted
average number of shares outstanding — basic and
diluted
|
16,369,000
|
16,271,000
|
16,050,000
|
Convertible
Preferred
Stock
|
Common
Stock
|
Additional
Paid in
|
Subscriptions
|
Reserve
on
|
Accumulated
|
Accumulated
Other
Comprehensive
|
Treasury
Stock
|
||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Receivable
|
Subscp.
Rec
|
Deficit
|
Income
(Loss)
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||||
Balance
— January 1, 2003
|
890,564
|
9,000
|
16,314,779
|
163,000
|
68,061,000
|
(302,000
|
)
|
—
|
(54,290,000
|
)
|
—
|
611,200
|
(3,337,000
|
)
|
10,304,000
|
||||||||||||||||||||||
Preferred
stock converted to common stock
|
(44,252
|
)
|
(500
|
)
|
44,252
|
500
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||
Preferred
dividend (stock)
|
89,020
|
500
|
—
|
—
|
(500
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Exercise
of stock options
|
—
|
—
|
360,000
|
4,000
|
188,000
|
—
|
—
|
—
|
—
|
—
|
—
|
192,000
|
|||||||||||||||||||||||||
Compensation
related to grant of stock and options to board members
|
—
|
—
|
150,000
|
1,500
|
132,000
|
—
|
—
|
—
|
—
|
—
|
—
|
133,500
|
|||||||||||||||||||||||||
Value
assigned to warrants and options issued for professional services
|
—
|
—
|
—
|
—
|
4,500
|
—
|
—
|
—
|
—
|
—
|
—
|
4,500
|
|||||||||||||||||||||||||
Comprehensive
Income:
|
|||||||||||||||||||||||||||||||||||||
Net
Loss for the year
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(1,926,000
|
)
|
—
|
—
|
—
|
(1,926,000
|
)
|
|||||||||||||||||||||||
Unrealized
gain on available for sale securities
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
1,124,000
|
—
|
—
|
1,124,000
|
|||||||||||||||||||||||||
Total
comprehensive income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(802,000
|
)
|
||||||||||||||||||||||||
Balance
— December 31, 2004
|
935,332
|
$
|
9,000
|
16,869,031
|
$
|
169,000
|
$
|
68,385,000
|
($302,000
|
)
|
—
|
($56,216,000
|
)
|
$
|
1,124,000
|
611,200
|
($3,337,000
|
)
|
$
|
9,832,000
|
|||||||||||||||||
Preferred
stock converted to common stock
|
(75,995
|
)
|
—
|
75,995
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Preferred
dividend (stock)
|
93,502
|
1,000
|
—
|
—
|
(1,000
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Accrued
Interest on subscription receivable
|
—
|
—
|
—
|
—
|
—
|
(14,000
|
)
|
—
|
—
|
—
|
—
|
—
|
(14,000
|
)
|
|||||||||||||||||||||||
Reserve
on stock subscriptions receivable
|
—
|
—
|
—
|
—
|
—
|
—
|
215,000
|
—
|
—
|
—
|
—
|
215,000
|
|||||||||||||||||||||||||
Comprehensive
Income:
|
|||||||||||||||||||||||||||||||||||||
Net
Loss for the year
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(186,000
|
)
|
—
|
—
|
—
|
(186,000
|
)
|
|||||||||||||||||||||||
Realized
gain on available for sale securities
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(1,124,000
|
)
|
—
|
—
|
(1,124,000
|
)
|
|||||||||||||||||||||||
Total
comprehensive income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||||
Balance
— December 31, 2005
|
952,839
|
$
|
10,000
|
16,945,026
|
$
|
169,000
|
$
|
68,384,000
|
($316,000
|
)
|
$
|
215,000
|
($56,402,000
|
)
|
—
|
611,200
|
($3,337,000
|
)
|
$
|
8,723,000
|
|||||||||||||||||
Preferred
stock converted to common stock
|
(46,075
|
)
|
(1,000
|
)
|
46,075
|
1,000
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||
Preferred
dividend (stock)
|
95,253
|
1,000
|
—
|
—
|
(1,000
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Accrued
interest on subscription receivable
|
—
|
—
|
—
|
—
|
—
|
(5,000
|
)
|
—
|
—
|
—
|
—
|
—
|
(5,000
|
)
|
|||||||||||||||||||||||
Reserve
on stock subscriptions receivable
|
—
|
—
|
—
|
—
|
—
|
—
|
5,000
|
—
|
—
|
—
|
—
|
5,000
|
|||||||||||||||||||||||||
Share-based
compensation
|
—
|
—
|
—
|
—
|
3,000
|
—
|
—
|
—
|
—
|
—
|
—
|
3,000
|
|||||||||||||||||||||||||
Write
off of stock subscription receivable
|
—
|
—
|
—
|
—
|
(101,000
|
)
|
321,000
|
(220,000
|
)
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||
Comprehensive
income:
|
|||||||||||||||||||||||||||||||||||||
Net
loss for the year
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(648,000
|
)
|
—
|
—
|
—
|
(648,000
|
)
|
|||||||||||||||||||||||
Total
comprehensive income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||||
Balance
— December 31, 2006
|
1,002,017
|
$
|
10,000
|
16,991,101
|
$
|
170,000
|
$
|
68,285,000
|
—
|
—
|
($57,050,000
|
)
|
—
|
611,200
|
($3,337,000
|
)
|
$
|
8,078,000
|
|
Year
Ended December 31,
|
|||||||||
|
2006
|
2005
|
2004
|
|||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss
|
$
|
(648,000
|
)
|
$
|
(186,000
|
)
|
$
|
(1,926,000
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Depreciation
and amortization
|
—
|
3,000
|
5,000
|
|||||||
Share-base
compensation expense
|
3,000
|
—
|
138,000
|
|||||||
Interest
accrual on subscriptions receivable
|
—
|
(14,000
|
)
|
(2,000
|
)
|
|||||
Reserve
for subscriptions receivable
|
—
|
215,000
|
—
|
|||||||
Gain
on Sale of Investments, net
|
—
|
(1,064,000
|
)
|
—
|
||||||
Changes
in:
|
||||||||||
Release
of cash restricted for operating lease obligations
|
—
|
175,000
|
425,000
|
|||||||
Prepaid
expenses and other current assets
|
(57,000
|
)
|
(64,000
|
)
|
569,000
|
|||||
Payment
of operating lease obligations
|
—
|
—
|
(87,000
|
)
|
||||||
Accounts
payable and accrued expenses
|
397,000
|
38,000
|
(712,000
|
)
|
||||||
Net
cash used in operating activities
|
(305,000
|
)
|
(897,000
|
)
|
(1,590,000
|
)
|
||||
Cash
flows from investing activities:
|
||||||||||
Sales
of investment securities
|
—
|
1,064,000
|
—
|
|||||||
Net
cash provided by investing activities
|
—
|
1,064,000
|
—
|
|||||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from sale of common stock through exercise of options and
warrants
|
—
|
—
|
192,000
|
|||||||
Net
cash provided by (used in) financing activities
|
—
|
—
|
192,000
|
|||||||
Net
increase (decrease) in cash and cash equivalents
|
(305,000
|
)
|
167,000
|
(1,398,000
|
)
|
|||||
Cash
and cash equivalents at beginning of year
|
8,901,000
|
8,734,000
|
10,132,000
|
|||||||
Cash
and cash equivalents at end of year
|
$
|
8,596,000
|
$
|
8,901,000
|
$
|
8,734,000
|
||||
Supplemental
disclosures of cash flow information:
|
||||||||||
Cash
paid for interest
|
—
|
$
|
2,000
|
$
|
2,000
|
|||||
Cash
paid for income taxes
|
$
|
16,000
|
$
|
36,000
|
—
|
|||||
Noncash
investing activities:
|
||||||||||
Investment
in Intrac, Inc.
|
—
|
—
|
1,124,000
|
|||||||
Noncash
financing activities:
|
||||||||||
Preferred
stock converted to common stock.
|
—
|
—
|
$
|
—
|
||||||
Preferred
stock dividend.
|
—
|
—
|
$
|
—
|
||||||
Write
off of stock subscription receivable.
|
—
|
—
|
—
|
|||||||
Accrued
interest on subscription receivable.
|
$
|
(5,000
|
)
|
$
|
(14,000
|
)
|
—
|
|
December
31,
|
||||||
|
2006
|
2005
|
|||||
Office
equipment
|
$
|
26,000
|
$
|
26,000
|
|||
Less
accumulated depreciation
|
(26,000
|
)
|
(26,000
|
)
|
|||
Net
|
$
|
—
|
$
|
—
|
|
December
31,
|
||||||
|
2006
|
2005
|
|||||
Professional
fees
|
$
|
28,000
|
$
|
23,000
|
|||
Legal
Reserve
|
638,000
|
250,000
|
|||||
Other
|
8,000
|
4,000
|
|||||
$
|
674,000
|
$
|
277,000
|
Warrant
Type
|
Exercise
Price
|
Expiration
Dates
|
Number
of
Shares
Reserved
|
Other
|
$0.55
to $1.00
|
August
2007-March 2008
|
290,000
|
|
Year
Ended December 31,
|
||||||||||||||||||
|
2006
|
2005
|
2004
|
||||||||||||||||
|
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
|||||||||||||
Options
outstanding at beginning of year
|
905,000
|
$
|
3.37
|
1,100,000
|
$
|
3.02
|
2,158,000
|
$
|
3.02
|
||||||||||
Granted
|
60,000
|
0.40
|
80,000
|
0.40
|
165,000
|
0.82
|
|||||||||||||
Exercised
|
—
|
—
|
—
|
—
|
(360,000
|
)
|
0.53
|
||||||||||||
Expired
|
(670,000
|
)
|
4.31
|
(275,000
|
)
|
0.72
|
(863,000
|
)
|
3.64
|
||||||||||
Options
outstanding at end of year
|
295,000
|
0.62
|
905,000
|
3.37
|
1,100,000
|
3.02
|
|||||||||||||
Options
exercisable at end of year
|
295,000
|
0.62
|
880,000
|
3.44
|
971,660
|
3.32
|
|
Options
Outstanding and Exercisable
|
|||||||||
Range
of
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Life
in Years
|
|||||||
$0.40-$2.99
|
295,000
|
$
|
0.62
|
8.03
|
|
2006
|
2005
|
2004
|
|||||||
Risk-free
interest rates
|
4.3%
to 5.1
|
%
|
3.6%
to 4.3
|
%
|
2.9%
to 3.6
|
%
|
||||
Expected
option life in years
|
5
|
5
|
5
|
|||||||
Expected
stock price volatility
|
10%
to 37
|
%
|
63%
to 75
|
%
|
72%
to 75
|
%
|
||||
Expected
dividend yield
|
0
|
%
|
0
|
%
|
0
|
%
|
|
Year
Ended December 31,
|
||||||
|
2005
|
2004
|
|||||
Net
loss attributable to common stockholders as reported
|
$
|
(420,000
|
)
|
$
|
(2,149,000
|
)
|
|
Deduct:
Total stock-based employee compensation expense determined under
fair
value based method for all awards, net of related tax
effects
|
(11,000
|
)
|
(32,000
|
)
|
|||
Pro
forma net income
|
$
|
(431,000
|
)
|
$
|
(2,181,000
|
)
|
|
Earnings
per share:
|
|||||||
Basic
and diluted-as reported
|
$
|
(0.03
|
)
|
$
|
(0.13
|
)
|
|
Basic
and Diluted-pro forma
|
$
|
(0.03
|
)
|
$
|
(0.14
|
)
|