UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________
FORM
10-QSB
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For
the
quarterly period ended September
30, 2007
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For
the
transition period from __________ to __________
Commission
file number: 000-51038
MedaSorb
Technologies Corporation
(Exact
Name of Small Business Issuer as Specified in Its Charter)
Nevada
|
98-0373793
|
(State
or Other Jurisdiction of
Incorporation
Or Organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
7
Deer Park Drive, Suite K, Monmouth Junction, New Jersey
08852
(Address
of Principal Executive Offices)
|
(732)
329-8885
(Issuer’s
Telephone Number, Including Area Code)
_______________________________________________________________________
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. þ
Yes
¨
No
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). ¨
Yes
þ
No
As
of
November 15,
2007
there were 25,044,932 shares of the issuer’s common stock
outstanding.
Transitional
Small Business Disclosure Format: ¨
Yes
þ
No
MedaSorb
Technologies Corporation
(a
development stage company)
FORM
10-QSB
TABLE
OF CONTENTS
|
Page
|
PART I. FINANCIAL INFORMATION
|
|
|
|
|
|
Item
1. Financial Statements (September 30, 2007 and 2006 are
unaudited)
|
|
|
Consolidated
Balance Sheets
|
3
|
|
Consolidated
Statements of Operations
|
4
|
|
Consolidated
Statements of Changes in Stockholders’ Equity
|
5
|
|
Consolidated
Statements of Cash Flows
|
6
|
|
Notes
to Consolidated Financial Statements
|
8
|
|
|
|
|
Item
2. Management’s Discussion and Analysis or Plan of
Operation
|
13
|
|
|
|
|
Item
3. Controls and Procedures
|
14
|
|
|
|
PART
II. OTHER INFORMATION
|
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
15
|
|
Item
6. Exhibits
|
15
|
PART
I -- FINANCIAL INFORMATION
Item
1. Financial Statements.
|
|
(a
development stage company)
|
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
774,658
|
|
$
|
2,873,138
|
|
Prepaid
expenses and other current assets
|
|
|
115,155
|
|
|
24,880
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
889,813
|
|
|
2,898,018
|
|
|
|
|
|
|
|
|
|
Property
and equipment - net
|
|
|
186,975
|
|
|
303,560
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
248,812
|
|
|
243,471
|
|
|
|
|
|
|
|
|
|
Total
long-term assets
|
|
|
435,787
|
|
|
547,031
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
1,325,600
|
|
$
|
3,445,049
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
706,004
|
|
$
|
942,265
|
|
Accrued
expenses and other current liabilities
|
|
|
166,418
|
|
|
69,779
|
|
Accrued
interest
|
|
|
--
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
872,422
|
|
|
1,082,044
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity:
|
|
|
|
|
|
|
|
10%
Series A Preferred Stock, Par Value $0.001, 100,000,000
|
|
|
|
|
|
|
|
shares
authorized at September 30, 2007 and December 31, 2006,
|
|
|
|
|
|
|
|
7,823,907
and 7,403,585 shares issued and outstanding, respectively
|
|
|
7,823
|
|
|
7,403
|
|
Common
Stock, Par Value $0.001, 100,000,000
|
|
|
|
|
|
|
|
Shares
authorized at September 30, 2007 and December 31, 2006,
|
|
|
|
|
|
|
|
25,044,932
and 24,628,274 shares issued and outstanding, respectively
|
|
|
25,045
|
|
|
24,629
|
|
Additional
paid-in capital
|
|
|
71,163,575
|
|
|
69,757,556
|
|
Deficit
accumulated during the development stage
|
|
|
(70,743,265
|
)
|
|
(67,426,583
|
)
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
453,178
|
|
|
2,363,005
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
1,325,600
|
|
$
|
3,445,049
|
|
See
accompanying notes to consolidated financial statements.
|
|
|
|
|
|
|
|
MEDASORB
TECHNOLOGIES CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
(a
development stage company)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
Period
from January 22,1 997 (date of inception ) to September
30,
|
|
Nine
months ended September 30,
|
|
Three
months ended September 30,
|
|
|
|
|
|
2007
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
$
|
--
|
|
$
|
--
|
|
$
|
--
|
|
$
|
--
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
|
|
|
41,973,849
|
|
|
1,081,078
|
|
|
750,411
|
|
|
438,287
|
|
|
262,217
|
|
Legal,
financial and other consulting
|
|
|
|
|
|
6,606,199
|
|
|
346,686
|
|
|
621,923
|
|
|
85,582
|
|
|
18,920
|
|
General
and administrative
|
|
|
|
|
|
21,173,762
|
|
|
1,035,653
|
|
|
688,951
|
|
|
162,284
|
|
|
387,408
|
|
Change
in fair value of management and incentive units
|
|
|
(6,055,483
|
)
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses
|
|
|
|
|
|
63,698,327
|
|
|
2,463,417
|
|
|
2,061,285
|
|
|
686,153
|
|
|
668,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on disposal of property and equipment
|
|
|
|
(21,663
|
)
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Gain
on extinguishment of debt
|
|
|
|
|
|
(216,617
|
)
|
|
(10,009
|
)
|
|
--
|
|
|
(3,695
|
)
|
|
--
|
|
Interest
expense (income), net
|
|
|
|
|
|
5,580,914
|
|
|
(63,494
|
)
|
|
4,790,329
|
|
|
(14,496
|
)
|
|
(22,842
|
)
|
Penalties
associated with non-registration of Series
A Preferred Stock
|
|
|
361,496
|
|
|
361,496
|
|
|
--
|
|
|
(79,135
|
)
|
|
--
|
|
Net
loss
|
|
|
|
|
|
(69,402,457
|
)
|
|
(2,751,410
|
)
|
|
(6,851,614
|
)
|
|
(588,827
|
)
|
|
(645,703
|
)
|
Series
A Preferred Stock Dividends
|
|
|
|
|
|
1,340,808
|
|
|
565,272
|
|
|
397,446
|
|
|
|
|
|
397,446
|
|
Net
Loss available to common shareholders
|
|
$
|
(70,743,265
|
)
|
$
|
(3,316,682
|
)
|
$
|
(7,249,060
|
)
|
$
|
(780,601
|
)
|
$
|
(1,043,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per common share
|
|
|
|
|
$
|
(0.13
|
)
|
$
|
(0.62
|
)
|
$
|
(0.03
|
)
|
$
|
(0.04
|
)
|
Weighted
average number of shares of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
stock outstanding
|
|
|
|
|
|
|
|
|
24,780,019
|
|
|
11,599,016
|
|
|
25,010,813
|
|
|
24,095,093
|
|
See
accompanying notes to consolidated financial statements.
|
|
MEDASORB
TECHNOLOGIES CORPORATION
|
|
|
|
(a
development stage company)
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
from December 31, 2006 to September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
During
the
|
|
Total
|
|
|
|
Common
Stock
|
|
Preferred
Stock
|
|
Paid-In
|
|
Development
|
|
Stockholders'
|
|
|
|
Shares
|
|
Par
value
|
|
Shares
|
|
Par
Value
|
|
Capital
|
|
Stage
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
|
|
24,628,274
|
|
$
|
24,629
|
|
|
7,403,585
|
|
$
|
7,403
|
|
$
|
69,757,556
|
|
$
|
(67,426,583
|
)
|
$
|
2,363,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of stock options to employees, consultants, and directors
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
457,085
|
|
|
--
|
|
|
457,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in settlement
of accounts payable
|
|
|
11,501
|
|
|
11
|
|
|
--
|
|
|
--
|
|
|
22,991
|
|
|
--
|
|
|
23,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of preferred stock
into
Common Stock
|
|
|
405,157
|
|
|
405
|
|
|
(506,446
|
)
|
|
(506
|
)
|
|
101
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Series A Preferred Stock as dividends and settlement of
dividends/penalties payable in connection with non-registration
event
|
|
|
--
|
|
|
--
|
|
|
926,768
|
|
|
926
|
|
|
925,842
|
|
|
(565,272
|
)
|
|
361,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
(2,751,410
|
)
|
|
(2,751,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2007 (Unaudited)
|
|
|
25,044,932
|
|
$
|
25,045
|
|
|
7,823,907
|
|
$
|
7,823
|
|
$
|
71,163,575
|
|
$
|
(70,743,265
|
)
|
$
|
453,178
|
|
See
accompanying notes to consolidated financial statements.
|
|
MEDASORB
TECHNOLOGIES CORPORATION
|
|
|
|
(a
development stage company)
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Period
from January 22, 1997 (date of inception) to September 30,
2007
|
|
Nine
months ended September 30, 2007
|
|
Nine
months Ended September 30, 2006
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(69,402,457
|
)
|
$
|
(2,751,410
|
)
|
$
|
(6,851,614
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued as inducement to convert
|
|
|
|
|
|
|
|
|
|
|
convertible
notes payable and accrued interest
|
|
|
3,351,961
|
|
|
--
|
|
|
3,351,961
|
|
Issuance
of common stock to consultant for services
|
|
|
30,000
|
|
|
--
|
|
|
--
|
|
Depreciation
and amortization
|
|
|
2,191,556
|
|
|
144,931
|
|
|
191,644
|
|
Amortization
of debt discount
|
|
|
1,000,000
|
|
|
--
|
|
|
1,000,000
|
|
Gain
on disposal of property and equipment
|
|
|
(21,663
|
)
|
|
--
|
|
|
--
|
|
Gain
on extinguishment of debt
|
|
|
(216,617
|
)
|
|
(10,009
|
)
|
|
--
|
|
Abandoned
patents
|
|
|
183,556
|
|
|
--
|
|
|
1,347
|
|
Bad
debts - employee advances
|
|
|
255,882
|
|
|
--
|
|
|
--
|
|
Contributed
technology expense
|
|
|
4,550,000
|
|
|
--
|
|
|
--
|
|
Consulting
expense
|
|
|
237,836
|
|
|
--
|
|
|
--
|
|
Management
unit expense
|
|
|
1,334,285
|
|
|
--
|
|
|
--
|
|
Expense
for issuance of warrants
|
|
|
478,409
|
|
|
--
|
|
|
--
|
|
Expense
for issuance of options
|
|
|
848,062
|
|
|
457,085
|
|
|
104,738
|
|
Amortization
of deferred compensation
|
|
|
74,938
|
|
|
--
|
|
|
--
|
|
Penalties
in connection with non-registration event
|
|
|
361,496
|
|
|
361,496
|
|
|
--
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other current assets
|
|
|
(386,703
|
)
|
|
(90,275
|
)
|
|
(22,542
|
)
|
Other
assets
|
|
|
(53,893
|
)
|
|
--
|
|
|
(2,730
|
)
|
Accounts
payable and accrued expenses
|
|
|
2,691,632
|
|
|
(106,612
|
)
|
|
(462,281
|
)
|
Accrued
interest expense
|
|
|
1,823,103
|
|
|
(70,000
|
)
|
|
488,310
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used by operating activities
|
|
|
(50,668,617
|
)
|
|
(2,064,794
|
)
|
|
(2,201,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of property and equipment
|
|
|
32,491
|
|
|
--
|
|
|
--
|
|
Purchases
of property and equipment
|
|
|
(2,220,522
|
)
|
|
(21,428
|
)
|
|
--
|
|
Patent
costs
|
|
|
(405,677
|
)
|
|
(12,258
|
)
|
|
(9,147
|
)
|
Loan
receivable
|
|
|
(1,632,168
|
)
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used by investing activities
|
|
|
(4,225,876
|
)
|
|
(33,686
|
)
|
|
(9,147
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
400,490
|
|
|
--
|
|
|
400,490
|
|
Proceeds
from issuance of preferred stock
|
|
|
4,679,437
|
|
|
--
|
|
|
4,679,437
|
|
Equity
contributions - net of fees incurred
|
|
|
41,711,198
|
|
|
--
|
|
|
--
|
|
Proceeds
from borrowings
|
|
|
8,378,631
|
|
|
--
|
|
|
--
|
|
Proceeds
from subscription receivables
|
|
|
499,395
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
55,669,151
|
|
|
--
|
|
|
5,079,927
|
|
See
accompanying notes to consolidated financial statements.
|
|
Period
from January 22, 1997 (date of inception) to September 30,
2007
|
|
Nine
months ended September 30, 2007
|
|
Nine
months Ended September 30, 2006
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
Net
increase in cash and cash equivalents
|
|
|
774,658
|
|
|
(2,098,480
|
)
|
|
2,869,613
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - beginning of period
|
|
|
--
|
|
|
2,873,138
|
|
|
707,256
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - end of period
|
|
$
|
774,658
|
|
$
|
774,658
|
|
$
|
3,576,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
$
|
588,116
|
|
$
|
76,336
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of noncash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
payable principal and interest conversion to equity
|
|
$
|
10,201,714
|
|
$
|
--
|
|
$
|
8,030,149
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of member units for leasehold improvements
|
|
$
|
141,635
|
|
$
|
--
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of management units in settlement of cost of raising
capital
|
|
$
|
437,206
|
|
$
|
--
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of management units for cost of raising
capital
|
|
$
|
278,087
|
|
$
|
--
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
of loan receivable for member units
|
|
$
|
1,632,168
|
|
$
|
--
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of equity in settlement of accounts payable
|
|
$
|
1,609,446
|
|
$
|
23,002
|
|
$
|
420,720
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in exchange for stock subscribed
|
|
$
|
399,395
|
|
$
|
--
|
|
$
|
399,395
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
paid from proceeds in conjunction with issuance preferred
stock
|
|
$
|
620,563
|
|
$
|
--
|
|
$
|
620,563
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A Preferred Stock Dividends
|
|
$
|
1,340,808
|
|
$
|
565,272
|
|
$
|
397,446
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 10,000,000 shares of common stock in consideration for funding
$1,000,000 convertible note payable
|
|
$
|
1,000,000
|
|
$
|
--
|
|
$
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
effect of conversion of common stock to preferred stock prior to
merger
|
|
$
|
559
|
|
$
|
--
|
|
$
|
559
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the nine months ended September 30, 2007 and 2006, 506,446 and -0-
Series
A Preferred Shares were converted into 405,157 and -0- Common Shares,
respectively. For the period from January 22, 1997 (date of inception)
to
September 30, 2007, 506,446 Series A Preferred Shares were converted
into
405,157 Common Shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the nine months ended September 30, 2007 and 2006, 553,629 and -0-Series
A
Preferred Shares were issued in connection with the non-registration
event
as settlement of dividends/penalties payable, respectively. For the
period
from January 22, 1997 (date of inception) to September 30, 2007,
553,629
Series A Preferred Shares were issued in connection with the
non-registration event as settlement of dividends/penalties
payable.
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
Notes
to Consolidated Financial Statements
(UNAUDITED)
September
30, 2007
1.
BASIS
OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the requirements of Form 10-QSB and Item 310 of
Regulation S-B of the Securities and Exchange Commission (the “Commission”) and
include the results of MedaSorb Technologies Corporation (the “Parent”),
formerly known as Gilder Enterprises, Inc., and MedaSorb Technologies, Inc.,
its
wholly-owned subsidiary (the “Subsidiary”), collectively referred to as “the
Company.” Accordingly, certain information and footnote disclosures required in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. Interim
statements are subject to possible adjustments in connection with the annual
audit of the Company's
accounts
for the year ended December
31, 2007.
In the
opinion of the Company’s management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for the fair
presentation of the Company's consolidated financial position as of September
30, 2007 and the results of its operations and cash flows for the nine and
three
month periods ended September 30, 2007 and 2006, and for the period January
22,
1997 (date of inception) to September 30, 2007. Results for the nine and three
months ended are not necessarily indicative of results that may be expected
for
the entire year. The unaudited condensed consolidated financial statements
should be read in conjunction with the audited financial statements of the
Company and the notes thereto as of and for the year ended December 31, 2006
as
included in the Company’s Form 10-KSB filed with the Commission on March 30,
2007.
The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction
of
liabilities in the normal course of business. The Company has experienced
negative cash flows from operations since inception and has a deficit
accumulated during the development stage at September 30, 2007 of $70,743,265.
The Company is not currently generating revenue and is dependent on the proceeds
of present and future financings to fund its research, development and
commercialization program. The Company is continuing its fund-raising
efforts. Although the Company has historically been successful in raising
additional capital through equity and debt financings, there can be no assurance
that the Company will be successful in raising additional capital in the future
or that it will be on favorable terms. Furthermore, if the Company is
successful in raising the additional financing, there can be no assurance that
the amount will be sufficient to complete the Company's plans. These
consolidated financial statements do not include any adjustments related to
the
outcome of this uncertainty.
The
Company is a development stage company and has not yet generated any revenues.
Since inception, the Company's expenses relate primarily to research and
development, organizational activities, clinical manufacturing, regulatory
compliance and operational strategic planning. Although the Company has
made advances on these matters, there can be no assurance that the Company
will
continue to be successful regarding these issues, nor can there be any assurance
that the Company will successfully implement its long-term strategic
plans.
The
Company has developed an intellectual property portfolio, including 24 issued
and multiple pending patents, covering materials, methods of
production, systems incorporating the technology and multiple medical
uses.
2. PRINCIPAL
BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Nature
of Business
The
Company, through its subsidiary, is engaged in the research, development and
commercialization of medical devices with its platform blood purification
technology incorporating a proprietary adsorbent polymer technology. The
Company is focused on developing this technology for multiple applications
in
the medical field, specifically to provide improved blood purification for
the
treatment of acute and chronic health complications associated with blood
toxicity. As of September 30, 2007, the Company has not commenced commercial
operations and, accordingly, is in the development stage. The Company has
yet to generate any revenue and has no assurance of future revenue.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Parent, MedaSorb
Technologies Corporation, and its wholly-owned subsidiary, MedaSorb
Technologies, Inc. All significant intercompany transactions and balances have
been eliminated in consolidation.
Development
Stage Corporation
The
accompanying consolidated financial statements have been prepared in accordance
with the provisions of Statement of Financial Accounting Standard (SFAS) No.
7,
"Accounting and Reporting by Development Stage Enterprises."
Cash
and Cash Equivalents
The
Company considers all
highly liquid investments purchased with an original maturity of three months
or
less to be cash equivalents.
Property
and Equipment
Property
and equipment are recorded at cost less accumulated depreciation. Depreciation
of property and equipment is provided for by the straight-line method over
the
estimated useful lives of the related assets. Leasehold improvements are
amortized over the lesser of their economic useful lives or the term of the
related leases. Gains and losses on depreciable assets retired or sold are
recognized in the statements of operations in the year of disposal. Repairs
and
maintenance expenditures are expensed as incurred.
Patents
Legal
costs incurred to establish patents are capitalized. When patents are issued,
capitalized costs are amortized on the straight-line method over the related
patent term. In the event a patent is abandoned, the net book value of the
patent is written off.
Impairment
or Disposal of Long-Lived Assets
The
Company assesses the impairment of patents and other long-lived assets under
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”
whenever events or changes in circumstances indicate that the carrying value
may
not be recoverable. For long-lived assets to be held and used, the Company
recognizes an impairment loss only if its carrying amount is not recoverable
through its undiscounted cash flows and measures the impairment loss based
on
the difference between the carrying amount and fair value.
Research
and Development
All
research and development costs, payments to laboratories and research
consultants are expensed when incurred.
Income
Taxes
Income
taxes are accounted for under the asset and liability method prescribed by
SFAS
No. 109, “Accounting for Income Taxes.” Deferred income taxes are recorded for
temporary differences between financial statement carrying amounts and the
tax
basis of assets and liabilities. Deferred tax assets and liabilities reflect
the
tax rates expected to be in effect for the years in which the differences are
expected to reverse. A valuation allowance is provided if it is more likely
than
not that some or all of the deferred tax asset will not be realized. Under
Section 382 of the Internal Revenue Code the net operating losses (NOL)
generated prior to the June 30, 2006 reverse merger may be limited due to the
change in ownership. In addition, the Company was a limited liability company
through December 31, 2005. Consequently, all losses generated prior to December
31, 2005 are not available for utilization as an NOL for the
Company.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities. Actual results
could differ from these estimates.
Concentration
of Credit Risk
The
Company maintains cash balances, at times, with financial institutions in excess
of amounts insured by the Federal Deposit Insurance Corporation. Management
monitors the soundness of these institutions and considers the Company’s risk
negligible.
Financial
Instruments
The
carrying values of accounts payable and other debt obligations approximated
their fair values due to their short-term nature.
Stock-Based
Compensation
The
Company accounts for its stock-based compensation under the recognition
requirements of Statement of Financial Accounting Standards (“SFAS”) No. 123(R).
“Accounting
for Stock-Based Compensation”,
for
employees and directors whereby each option granted is valued at fair market
value on the date of grant. Under SFAS No. 123, the fair value of each option
is
estimated on the date of grant using the Black-Scholes option pricing
model.
The
Company also follows the guidance in EITF 96-18
“Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services” for equity
instruments issued to consultants.
Net
Loss Per Common Share
Basic
EPS
is computed by dividing income (loss) available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding during
the
period. The computation of Diluted EPS does not assume conversion, exercise
or
contingent exercise of securities that would have an anti-dilutive effect on
earnings.
Effects
of Recent Accounting Pronouncements
The
Company has adopted the provisions of FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”
(“FIN 48”), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements in accordance
with FASB Statement 109 “Accounting for Income Taxes”, and prescribes a
recognition threshold and measurement process for financial statement
recognition and measurement of a tax position taken or expected to be taken
in a
tax return. FIN 48 also provides guidance on derecognition classification,
interest and penalties accounting in interim periods disclosure and
transition.
Based
on
our evaluation, we have concluded that there are no significant uncertain tax
positions requiring recognition in our financial statements or adjustments
to
our deferred tax assets and related valuation allowance. Our evaluation was
performed for the tax years ended December 31, 2003, 2004, 2005 and 2006, the
tax years which remain subject to examination by major tax jurisdictions as
of
September 30, 2007.
The
Company may from time to time be assessed interest or penalties by major tax
jurisdictions, although such assessments historically have been minimal and
immaterial to our financial results. In the event we have received an assessment
for interest and/or penalties, it has been classified in the financial
statements as general and administrative expense.
In
September 2006 the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”). SFAS 157 defines fair value, establishes a framework for measuring fair
value in accordance with accounting principles generally accepted in the United
States, and expands disclosures about fair value measurements. SFAS No. 157
is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, with earlier application encouraged. Any amounts recognized
upon adoption as a cumulative effect adjustment will be recorded to the opening
balance of retained earnings in the year of adoption. The Company has not yet
determined the impact of this statement on its results of operations or
financial condition.
In
February 2007, the FASB issued SFAS No. 159, “Establishing the Fair Value Option
for Financial Assets and Liabilities” to permit all entities to choose to elect
to measure eligible financial instruments and certain other items at fair value.
The decision whether to elect the fair value option may occur for each eligible
items either on a specified election date or according to a preexisting policy
for specified types of eligible items. However, that decision must also take
place on a date on which criteria under SFAS 159 occurs. Finally, the decision
to elect the fair value option shall be made on an instrument-by-instrument
basis, except in certain circumstances. An entity shall report unrealized gains
and losses on items for which the fair value option has been elected in earnings
at each subsequent reporting date. SFAS No. 159 applies to fiscal years
beginning after November 15, 2007, with early adoption permitted for an entity
that has also elected to apply the provisions of SFAS No. 157. The Company
is
currently evaluating this pronouncement in connection with SFAS No.
157.
3. STOCKHOLDERS'
EQUITY
The
Company has recorded non-cash stock dividends in connection with the issuance
of
Series A Preferred Stock as a stock dividend
to its preferred shareholders as of September 30, 2007. Prior to February 26, 2007 and after May 7, 2007, the
dividend rate was
10% per annum. Effective
February 26, 2007 due to the Company’s failure to have the registration
statement it filed declared effective by the Commission within the time required
under agreements with the June 30, 2006 purchasers of the Series A Preferred
Stock (i) dividends on the shares of Series A Preferred Stock issued to those
purchasers were required to be paid in cash, (ii) the dividend rate increased
from 10% per annum to 20% per annum, and (iii) such purchasers were entitled
to
liquidating damages of 2% of their principal investment payable in cash per
30
day period until the registration statement was declared effective. In
connection with such cash dividend and penalty obligations, as modified by
the
Settlement Agreement described below, the Company’s financial statements for the
nine month period ending September 30, 2007 also reflects an aggregate charge
of
$361,496. On
May 7, 2007 the Company’s registration statement filed in connection with the
Company’s obligations to the June 30, 2006 purchasers of its Series A Preferred
Stock was declared effective by the Commission.
Pursuant
to a settlement agreement entered into in August 2007 with the June 30, 2006
purchasers of the Series A Preferred Stock, cash dividends stopped accruing
on
the Series A Preferred Stock effective on the date the Company’s registration
statement was declared effective (May 7, 2007) and all cash dividends and
penalties due through that date were paid with additional shares of Series
A
Preferred Stock at its stated value of $1.00 per share in lieu of cash. The
settlement, did not result in a gain or loss on extinguishment of debt
for the nine months ended September 30, 2007. Additionally, as part of the
settlement, the dividend rate on the Series A Preferred Stock issued to these
purchasers was reset to 10% effective as of May 7, 2007. During
the nine months ended September 30, 2007, the Company issued 565,272 shares
of
Series A Preferred Stock as payment of stock dividends and 361,496 shares of
Series A Preferred Stock as settlement of the dividends and penalties payable
to
the purchasers under the agreement.
During
the nine months ended September 30, 2007, 506,446 shares of Series A Preferred
Stock were converted into 405,157 shares of Common Stock at a rate of $1.25
as
stipulated in the preferred stock agreements. The conversions had no effect
on
the statement of operations for the nine months ended September 30, 2007.
During
the nine months ended September 30, 2007, the Company issued stock options
to
employees, consultants and directors resulting in aggregate compensation expense
of approximately $457,000, approximately $6,000 and $451,000 of which is
presented in research and development expenses and general and administrative
expenses, respectively.
During
the nine months ended September 30, 2007, the Company issued 11,501 shares
of
common stock to settle accounts payable in the amount of $23,002. The settlement
had no effect on the statements of operations for the nine months ended
September 30, 2007.
The
summary of the stock option activity for the nine months ended September 30,
2007 is as follows:
|
|
|
|
Weighted
|
|
Weighted
|
|
|
|
|
|
Average
|
|
Average
|
|
|
|
|
|
Exercise
|
|
Remaining
|
|
|
|
Shares
|
|
per
Share
|
|
Life
(Years)
|
|
|
|
|
|
|
|
|
|
Outstanding,
January 1, 2007
|
|
|
1,185,001
|
|
$
|
15.66
|
|
|
6.7
|
|
Granted
|
|
|
776,000
|
|
$
|
1.50
|
|
|
9.3
|
|
Cancelled
|
|
|
121
|
|
$
|
41.47
|
|
|
0.0
|
|
Exercised
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Outstanding
September 30, 2007
|
|
|
1,960,880
|
|
$
|
10.06
|
|
|
7.7
|
|
At
September 30, 2007, the aggregate intrinsic value of options outstanding and
currently exercisable amounted to approximately $0.
The
summary of the status of the Company’s non-vested options for the nine months
ended September 30, 2007 is as follows:
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
|
Grant
Date
|
|
|
|
Shares
|
|
Fair
Value
|
|
|
|
|
|
|
|
Non-vested,
January 1, 2007
|
|
|
79,665
|
|
$
|
.77
|
|
Granted
|
|
|
776,000
|
|
$
|
.73
|
|
Cancelled
|
|
|
--
|
|
|
--
|
|
Vested
|
|
|
664,668
|
|
$
|
.69
|
|
Exercised
|
|
|
--
|
|
|
--
|
|
Non-vested,
September 30, 2007
|
|
|
190,997
|
|
$
|
.87
|
|
As
of
September 30, 2007, approximately $167,500 of total unrecognized compensation
cost related to stock options is expected to be recognized over a weighted
average period of 5.0 years.
As
of
September 30, 2007, the Company has the following warrants to purchase common
stock outstanding:
Number
of Shares
|
|
|
Warrant
Exercise
|
|
|
|
|
To
be Purchased
|
|
|
Price
per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
15,569
|
|
$
|
6.64
|
|
|
March
31, 2010
|
|
816,691
|
|
$
|
4.98
|
|
|
June
30, 2011
|
|
2,100,000
|
|
$
|
2.00
|
|
|
June
30, 2011
|
|
339,954
|
|
$
|
2.00
|
|
|
September
30, 2011
|
|
52,
080
|
|
$
|
2.00
|
|
|
July
31, 2011
|
|
400,000
|
|
$
|
2.00
|
|
|
October
31, 2011
|
|
240,125
|
|
$
|
2.00
|
|
|
October
24, 2016
|
|
As
of
September 30, 2007, the Company has the following warrants to purchase preferred
stock outstanding:
Number
of
|
|
Warrant
Exercise
|
|
Warrant
|
|
Shares
to be
|
|
Price
per
|
|
Expiration
|
|
Purchased
|
|
Preferred
Share
|
|
Date
|
|
525,000
|
|
$
|
1.00
|
|
|
June
30, 2011
|
|
If
the
holder of warrants for preferred stock exercises in full, the holder will
receive additional five-year warrants to purchase a total of 210,000 shares
of
common stock at $2.00 per share.
4. COMMITMENTS
AND CONTINGENCIES
Pending
Litigation
The
Company may at times, become involved in various claims and legal actions.
At
the date of this filing the Company was not involved in any legal claims
expected to have a material adverse impact on the consolidated financial
position of the Company and/or the results of its operations.
Employment
Agreements
The
Company has employment agreements with certain key executives through July
2008.
One of these agreements provides for an additional bonus payment based on
achieving specific milestones as defined in the agreement. However, as of the
date of this report, these milestones have not been met. Furthermore, this
agreement includes an anti-dilution provision whereby the employee is entitled
to be issued additional options to purchase common stock so as to maintain
beneficial ownership of 5% of the outstanding stock of the Company on a fully
diluted basis, until such time as the Company has raised $20 million in
financing following the commencement of his employment.
Royalty
Agreements
Pursuant
to an agreement dated August 11, 2003, an existing investor agreed to make
a $4
million equity investment in the Company. These amounts were received by the
Company in 2003. In connection with this agreement, the Company granted the
investor a future royalty of 3% on all gross revenues received by the Company
from the sale of its CytoSorb device. The Company has not generated any revenue
from this product and has not incurred any royalty costs through September
30,
2007. The amount of future revenue subject to the royalty agreement could not
be
reasonably estimated nor has a liability been incurred, therefore, an accrual
for royalty payments has not been included in the consolidated financial
statements.
License
Agreements
In
an
agreement dated September 1, 2006, the Company entered into a license agreement
which provides the Company the exclusive right to use its patented technology
and proprietary know how relating to adsorbent polymers for a period of 18
years. Under the terms of the agreement, MedaSorb has agreed to pay royalties
of
2.5% to 5% on the sale of certain of its products if and when those products
are
sold commercially for a term not greater than 18 years commencing with the
first
sale of such product The Company has not generated any revenue from its products
and has not incurred any royalty costs through September 30, 2007.The amount
of
future revenue subject to the license agreement could not be reasonably
estimated nor has a liability been incurred, therefore, an accrual for royalty
payments has not been included in the consolidated financial
statements.
5.
NET LOSS PER SHARE
Basic
loss per share and diluted loss per share for the nine months ended
September 30, 2007 and 2006 have been computed by dividing the net loss for
each
respective period by the weighted average number of shares outstanding during
that period. All outstanding warrants and options representing 5,925,299 and
4,253,767 incremental shares at September 30, 2007 and 2006, respectively,
as
well as shares issuable upon conversion of Series A Preferred Stock and
Preferred Stock Warrants representing 6,889,126 and 5,614,908 incremental shares
at September 30, 2007 and 2006 respectively, have been excluded from the
computation of diluted loss per share as they are anti-dilutive.
6.
SUBSEQUENT EVENTS
In
August
2007, the Company received a notice of allowance for one of its pending patent
applications from the U.S. Patent and Trademark Office.
Item
2. Management’s Discussion and Analysis or Plan of
Operation.
These
unaudited condensed consolidated financial statements and management’s
discussion should be read in conjunction with the audited financial statements
of the Company and the notes thereto as of and for the year ended December
31,
2006 as included in the Company’s Form 10-KSB filed with the Securities and
Exchange Commission (the “Commission”) on March 30, 2007.
Forward-looking
statements
Statements
contained in this Quarterly Report on Form 10-QSB, other than the historical
financial information, constitute forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. All such
forward-looking statements involve known and unknown risks, uncertainties or
other factors which may cause actual results, performance or achievement of
the
Company to be materially different from any future results, performance or
achievement expressed or implied by such forward-looking statements. Primary
risk factors include, but are not limited to: ability
to successfully develop commercial operations; the ability to obtain adequate
financing in the future when needed; dependence on key personnel; acceptance
of
the Company's medical devices in the marketplace; obtaining government
approvals, including required FDA approvals; compliance with governmental
regulations; reliance on research and testing facilities of various universities
and institutions; product liability risks; limited manufacturing experience;
limited marketing, sales and distribution experience; market acceptance of
the
Company's products; competition; unexpected changes in technologies and
technological advances; and other factors detailed in the Company's Current
Report on Form 10-KSB filed with the Commission on March 30,
2007.
Plan
Of Operations
We
are a
development stage company and expect to remain so for at least the next twelve
months. We have not generated revenues to date and do not expect to do so until
we commercialize and receive the necessary approvals to sell our proposed
products. We will seek to commercialize a blood purification technology that
efficiently removes middle molecular weight toxins from circulating blood.
We
intend
to initially focus our efforts on the commercialization of our CytoSorb™ product
which we believe will provide a relatively faster regulatory pathway to market.
The first indication for CytoSorb™ will be in the adjunctive treatment of sepsis
(bacterial infection of the blood), which causes systemic inflammatory response
syndrome. CytoSorb™ has been designed to prevent or reduce the accumulation of
high concentrations of cytokines in the bloodstream associated with sepsis.
We
believe that current state of the art blood purification technology (such as
dialysis) is incapable of effectively clearing the toxins intended to be
adsorbed by our CytoSorb™ device.
Following
the sepsis indication, we intend to continue our research in other acute
conditions where CytoSorb™ has indicated potential in preliminary studies to
prevent or reduce the accumulation of cytokines in the bloodstream. These
conditions include the prevention of post-operative complications of cardiac
surgery (cardiopulmonary bypass surgery) and damage to organs donated for
transplant prior to organ harvest. We are also exploring the potential benefits
the CytoSorb™ device may have in removing drugs from blood in situations such as
patient overdoses.
In
the
first quarter of 2007, the Company received approval from the FDA to conduct
a
limited study of five patients in the adjunctive treatment of sepsis. The
Company had also been pursuing approval to conduct clinical trials in Europe
with the ultimate goal being to obtain a CE Mark for its CytoSorb™ device. In
August of 2007, the German Ethics Committee approved MedaSorb’s application to
proceed with a clinical trial enrolling up to 80 patients with acute respiratory
distress syndrome or acute lung injury in the setting of sepsis. The Company
estimates that the market potential in Europe for its products are substantially
equivalent to that in the U.S. Given the opportunity to conduct a much larger
clinical study in Europe, and the Company’s belief that the path to a CE Mark
should be faster than that of an FDA approval, MedaSorb intends to launch its
next clinical study in Germany. The Company will, however, continue to work
with
the FDA and keep the FDA informed of its progress with its European clinical
trial. The clinical protocol has been designed to support future U.S. studies
after the Company receives the CE Mark and successfully commercializes its
products in the European market. No assurance can be given that our proposed
CytoSorb™ product will work as intended or that we will be able to obtain CE
Mark (or FDA) approval to sell CytoSorb™. Even if we ultimately obtain CE Mark
approval, because we cannot control the timing of responses from regulators
to
our submissions, there can be no assurance as to when such approval will be
obtained.
Our
research and development costs were, $1,081,078 and $750,411 for the nine months
ended September 30, 2007 and 2006, respectively, and
$438,287 and $262,217, for the three months ended September 30, 2007 and 2006
respectively. We have experienced substantial operating losses since inception.
As of September 30, 2007, we had an accumulated deficit of $70,743,265 which
included losses from operations of $588,827 and $2,751,410, respectively, for
the three and nine month periods ended September 30, 2007. In comparison, we
had
losses from operations of $645,703 and $6,851,614, respectively, for the three
and nine month periods ended September 30, 2006. Historically, our losses have
resulted principally from costs incurred in the research and development of
our
polymer technology, and general and administrative expenses, which together
were
$600,571 and $2,116,731, respectively, for the three and nine month periods
ended September 30, 2007.
Our
net
loss available to common shareholders for the three and nine months ended
September 30, 2007 includes $(79,135), and $361,496, respectively, for penalties
and increased dividends payable to the June 30, 2006 purchasers of our Series
A
Preferred Stock. The penalties were payable as a result of our failure to have
the registration statement we filed on behalf of these purchasers declared
effective by the Commission by February 26, 2007. As a result, from that date
through May 7, 2007 (the date the registration statement was declared effective
by the SEC), (i) cash dividends on the shares of Series A Preferred Stock issued
to those purchasers accrued at the rate of 20% per annum, and (ii) penalties
of
$105,000 per 30-day period accrued to those purchasers. The registration
statement was declared effective by the Commission on May 7, 2007.
In
August
2007, the Company entered into a settlement agreement with the
June
30, 2006 purchasers of the Series A Preferred Stock.
These
purchasers had been entitled to receive cash dividends at a rate of 20% per
annum and cash penalties as described above. Pursuant to the settlement
agreement, cash dividends stopped accruing on the Series A Preferred Stock
effective on the date the registration statement was declared effective (May
7,
2007) and all cash dividends and penalties due through that date were paid
with
additional shares of Series A Preferred Stock at its stated value of $1.00
per
share in lieu of cash. Additionally, as part of the settlement, the dividend
rate on the Series A Preferred Stock issued to these purchasers was reset to
10%
effective as of May 7, 2007. The settlement, did not result in a gain
or loss on extinguishment of debt for the nine months ended September 30,
2007.
Liquidity
and Capital Resources
Since
inception, our operations have been financed through the private placement
of
our debt and equity securities. At December 31, 2006 we had cash of $2,873,138.
Due to our losses and limited amounts of available cash, our audited
consolidated financial statements for the year ended December 31, 2006 have
been
prepared assuming we will continue as a going concern, and the auditors’ report
on those financial statements expresses substantial doubt about our ability
to
continue as a going concern.
As
of
September 30, 2007 we had cash on hand of $774,658, and current liabilities
of
$872,422.
We
believe that we have sufficient cash to fund our operation through the fourth
quarter of 2007, following which time we will need additional financing before
we can complete clinical studies and the commercialization of our proposed
products. There can be no assurance that we will be successful in our capital
raising efforts.
Item
3. Controls and Procedures.
An
evaluation was performed, under the supervision of, and with the participation
of, our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-(e)
to
the Securities and Exchange Act of 1934). Based on that evaluation, the
Company’s management, including our Chief Executive Officer and Chief Financial
Officer, concluded that the Company’s disclosure controls and procedures were
adequate and effective, as of September 30, 2007, to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act of 1934, is recorded, processed, summarized,
and reported within the time periods specified in the Commission’s rules and
forms, and that such information is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure.
We
do not
expect that our disclosure controls and procedures or internal control over
financial reporting will prevent all errors and all fraud. A control system,
no
matter how well conceived and operated, can provide only reasonable assurance
that the objectives of the system are met and cannot detect all deviations.
Because of the inherent limitations in all control systems, no evaluation of
control can provide absolute assurance that all control issues and instances
of
fraud or deviations, if any, within the Company have been detected.
There
were no significant changes in our internal controls over financial reporting
that occurred subsequent to our evaluation of our internal control over
financial reporting for the three months ended September 30, 2007 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART
II. OTHER INFORMATION
In
July
2007, one of the June 30, 2006 institutional purchasers of our Series A
Preferred Stock converted an aggregate of 348,946 shares of such stock into
279,157 shares of our Common Stock. The issuance of such shares of Common Stock
was exempt from registration pursuant to Sections 4(2) and 3(a)(9), and
Regulation D, under the Securities Act.
In
August
2007, pursuant to the Settlement Agreement described above, we issued an
aggregate of 639,429 shares of Series A Preferred Stock to the June 30, 2006
purchasers of the Series A Preferred Stock in satisfaction of liquidated damages
and accrued dividends owed to them. The issuance of such shares was exempt
from
registration pursuant to Section 4(2) and Regulation D under the Securities
Act.
Item
6. Exhibits.
Number
|
Description
|
|
|
31.1
|
Certification
of Al Kraus, Chief Executive Officer of the Registrant, pursuant
to Rules
13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of
1934
|
|
|
31.2
|
Certification
of David Lamadrid, Chief Financial Officer of the Registrant, pursuant
to
Rules 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of
1934
|
|
|
32.1
|
Certification
of Al Kraus, Chief Executive Officer of the Registrant, pursuant
to Rules
13a-14(B) and 15(d)-14(b) of the Securities Exchange Act of
1934
|
|
|
32.2
|
Certification
of David Lamadrid, Chief Financial Officer of the Registrant, pursuant
to
Rules 13a-14(B) and 15(d)-14(b) of the Securities Exchange Act of
1934
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
|
|
|
|
MEDASORB
TECHNOLOGIES CORPORATION
|
|
|
|
Date: November
15, 2007 |
|
By:
/s/ David Lamadrid |
|
Name: David Lamadrid
Title: Chief Financial Officer
|
|
(On
behalf of the registrant and as
principal
accounting officer)
|
EXHIBIT
INDEX
Number
|
Description
|
|
|
31.1
|
Certification
of Al Kraus, Chief Executive Officer of the Registrant, pursuant
to Rules
13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of
1934
|
|
|
31.2
|
Certification
of David Lamadrid, Chief Financial Officer of the Registrant, pursuant
to
Rules 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of
1934
|
|
|
32.1
|
Certification
of Al Kraus, Chief Executive Officer of the Registrant, pursuant
to Rules
13a-14(B) and 15(d)-14(b) of the Securities Exchange Act of
1934
|
|
|
32.2
|
Certification
of David Lamadrid, Chief Financial Officer of the Registrant, pursuant
to
Rules 13a-14(B) and 15(d)-14(b) of the Securities Exchange Act of
1934
|