WASHINGTON,
D.C. 20549
FORM
10-K/A
Amendment
No. 2
x
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December
31, 2006
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 001-16043
SYNVISTA
THERAPEUTICS, INC.
|
(Exact
name of Registrant as specified in its
charter)
|
Delaware
|
|
13-3304550
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
|
|
221
W. Grand Avenue, Montvale, New Jersey 07645
|
(Address
of principal executive offices)
(Zip
Code)
|
(201)
934-5000
|
(Registrant's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the
Act:
|
Title
of Each Class
|
|
Name
of Each Exchange On Which Registered
|
Common
Stock, Par Value $.01 per share Preferred Stock Purchase
Rights
|
|
American
Stock Exchange American Stock
Exchange
|
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act. Yes
o
No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes
o
No
x
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x
No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K. x
Indicate
by check mark whether the registrant is a
large
accelerated filer, an
accelerated filer,
or a
non-accelerated filer. See definition of “accelerated filer and large
accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer o Accelerated
filer o Non-accelerated filer x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o
No x
The
aggregate market value of the Registrant’s voting and non-voting common equity
held by non-affiliates of the Registrant, based on the American Stock Exchange
closing price of the common stock ($0.16 per share), as of June 30, 2006, was
$11,033,138.
At
September 28, 2007, 2,586,377 shares of the Registrant’s common stock, par value
$.01 per share, were outstanding.
Documents
Incorporated By Reference
None.
TABLE
OF CONTENTS
EXPLANATORY
NOTE
|
|
|
|
Item
6. Selected Financial Data
|
|
Item
7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
|
Item
8. Financial
Statements and Supplementary Data
|
|
|
|
|
|
Item
15. Exhibits, Financial
Statement Schedules
|
|
|
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|
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EX-23.1
CONSENT OF J.H. COHN LLP
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EX-31.1
SECTION 302 CERTIFICATION OF CEO
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EX-31.2
SECTION 302 CERTIFICATION OF CFO
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|
EXPLANATORY
NOTE
Synvista
Therapeutics, Inc. (“Synvista” or the “Company”) is filing this Amendment No. 2
to its Annual Report on Form 10-K for the fiscal year ended December 31, 2006,
originally filed with the Securities and Exchange Commission on March 22, 2007,
and amended on April 30, 2007, for the purpose of amending and supplementing
certain information contained in Part II of the Annual Report on Form 10-K,
as
well as the audited consolidated financial statements and notes thereto. Part
IV
is also being amended to update the Exhibit Index and to add new certifications
in accordance with Rule 13a - 14 under the Exchange Act.
Item
6. Selected
Financial Data.
The
following table sets forth financial data with respect to us as of and for
the
five years ended December 31, 2006. The selected financial data has been
derived from our audited consolidated financial statements. The selected
financial data below should be read in conjunction with the audited consolidated
financial statements and related notes included elsewhere in this Annual Report
on Form 10-K and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” included in Item 7:
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
|
|
(in
thousands, except per share data)
|
|
Statements
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
fees and other income
|
|
$
|
62
|
|
$
|
100
|
|
$
|
152
|
|
$
|
—
|
|
$
|
—
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
1896
|
|
|
9,074
|
|
|
10,147
|
|
|
9,930
|
|
|
14,992
|
|
In-process
research and development
|
|
|
11,379
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
General
and administrative
|
|
|
4,655
|
|
|
4,325
|
|
|
4,532
|
|
|
5,046
|
|
|
2,946
|
|
Total
expenses
|
|
|
17,930
|
|
|
13,399
|
|
|
14,679
|
|
|
14,976
|
|
|
17,938
|
|
Net
loss from operations
|
|
|
(17,868
|
)
|
|
(13,299
|
)
|
|
(14,527
|
)
|
|
(14,976
|
)
|
|
(17,938
|
)
|
Investment
income
|
|
|
188
|
|
|
358
|
|
|
182
|
|
|
179
|
|
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income tax benefit
|
|
|
(17,680
|
)
|
|
(12,941
|
)
|
|
(14,345
|
)
|
|
(14,797
|
)
|
|
(17,528
|
)
|
Income
tax benefit
|
|
|
—
|
|
|
327
|
|
|
386
|
|
|
345
|
|
|
647
|
|
Net
loss
|
|
|
(17,680
|
)
|
|
(12,614
|
)
|
|
(13,959
|
)
|
|
(14,452
|
)
|
|
(16,881
|
)
|
Preferred
stock dividends
|
|
|
2,653
|
|
|
4,486
|
|
|
4,135
|
|
|
3,791
|
|
|
3,485
|
|
Net
loss applicable to common stockholders
|
|
$
|
(20,333
|
)
|
$
|
(17,100
|
)
|
$
|
(18,094
|
)
|
$
|
(18,243
|
)
|
$
|
(20,366
|
)
|
Basic/diluted
net loss per share applicable to common
stockholders
|
|
$
|
(0.22
|
)
|
$
|
(0.30
|
)
|
$
|
(0.41
|
)
|
$
|
(0.50
|
)
|
$
|
(0.64
|
)
|
Weighted
average common shares used in computing
basic/diluted net loss per share
|
|
|
91,434
|
|
|
57,639
|
|
|
44,349
|
|
|
36,190
|
|
|
31,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
cash equivalents and short-term
investments
|
|
$
|
1,479
|
|
$
|
6,583
|
|
$
|
11,176
|
|
$
|
16,679
|
|
$
|
17,439
|
|
Working
capital
|
|
|
730
|
|
|
5,657
|
|
|
8,740
|
|
|
15,033
|
|
|
13,786
|
|
Total
assets
|
|
|
2,305
|
|
|
7,134
|
|
|
11,642
|
|
|
17,255
|
|
|
18,099
|
|
Accumulated
deficit
|
|
|
(243,146
|
)
|
|
(222,813
|
)
|
|
(205,713
|
)
|
|
(187,619
|
)
|
|
(169,376
|
)
|
Total
stockholders’ equity
|
|
|
1,243
|
|
|
5,992
|
|
|
9,047
|
|
|
15,384
|
|
|
14,303
|
|
Item
7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
Overview
We
are a
product-based biopharmaceutical company engaged in the development of small
molecule drugs to treat and prevent cardiovascular disease and diabetes. We
identified several promising product candidates that we believe represent novel
approaches to some of the largest pharmaceutical markets. We have advanced
one
of these products into Phase 2 clinical trials. By acquiring HaptoGuard in
July
2006, we expanded our portfolio with another compound in Phase 2 clinical
development for cardiovascular complications of diabetes.
One
of
our drug candidates, ALT-2074 has demonstrated potential efficacy in animal
models of heart attack and in a 20-patient clinical trial in ulcerative colitis.
Our goal is to develop ALT-2074 in acute coronary syndrome as a targeted drug
for high risk diabetic patients. It is currently being evaluated for evidence
of
myocardial protection following angioplasty in high-risk diabetic patients.
Alagebrium chloride or alagebrium (formerly ALT-711), is a product of our drug
discovery and development program. Alagebrium has demonstrated potential
efficacy in two clinical trials in heart failure, as well as in animal models
of
heart failure, nephropathy, hypertension and erectile dysfunction. It has been
tested in approximately 1,000 patients in a number of Phase 1 and Phase 2
clinical trials. Our goal is to develop alagebrium in diastolic heart failure
and nephropathy. These diseases represent a rapidly growing market of unmet
need, particularly common among diabetic patients, and alagebrium has
demonstrated relevant clinical activity in two Phase 2 clinical trials for
heart
failure. However, we have significantly curtailed all product development
activities due to an absence of sufficient financial resources to continue
its
development. While our goal is to pursue the development of ALT-2074 and
alagebrium in high potential cardiovascular indications, any continued
development of alagebrium by us is contingent upon our entering into strategic
collaboration agreements for this product candidate which, among other things,
would be required to include funding for product development.
We
expect
to utilize cash and cash equivalents to fund our operating activities, including
continued development of ALT-2074 and alagebrium. We have undertaken curtailment
actions and have reduced cash expenses in the fiscal year ended 2006. These
actions include evaluating clinical strategies before resuming clinical trials
for alagebrium, increased selectivity in preclinical programs and reduced
headcount. We
have
engaged third parties to assist in developing and identifying options designed
to diversify our portfolio of product candidates and to enhance our ability
to
raise financing in the future. Potential transactions include the acquisition
of
technologies and product programs, licensing opportunities, the sale to or
merger into another company, and debt and equity financing.
If we
are unable to secure additional financing on reasonable terms, unable to
generate sufficient new sources of revenue through collaborative arrangements
or
if the level of cash and cash equivalents falls below anticipated levels, we
will not have the ability to continue as a going concern beyond the second
quarter of 2007.
Since
our
inception in October 1986, we have devoted substantially all of our resources
to
research, drug discovery and development programs. To date, we have not
generated any revenues from the sale of products and do not expect to generate
any such revenues for a number of years, if at all. We have incurred an
accumulated deficit of $243,145,861 as of December 31, 2006, and expect to
incur
net losses, potentially greater than losses in prior years, for a number of
years.
We
have
financed our operations through proceeds from public offerings of common stock,
private placements of common and preferred equity securities, revenue from
former collaborative relationships, reimbursement of certain of our research
and
development expenses by our collaborative partners, investment income earned
on
cash balances and short-term investments, and in prior years from the sale
of a
portion of our New Jersey State net operating loss carryforwards.
Our
business is subject to significant risks including, but not limited to, (1)
our
ability to obtain sufficient additional funding in the near term, whether
through a strategic collaboration agreement or otherwise, to allow us to resume
the development of ALT-2074 and alagebrium and to continue operations, (2)
our
ability to continue enrollment in our clinical studies of ALT-2074 should we
have adequate financial and other resources to do so, (3) the risks inherent
in
our research and development efforts, including clinical trials and the length,
expense and uncertainty of the process of seeking regulatory approvals for
our
product candidates, (4) uncertainties associated with obtaining and enforcing
our patents and with the patent rights of others, (5) uncertainties regarding
government healthcare reforms and product pricing and reimbursement levels,
(6)
technological change and competition, (7) manufacturing uncertainties, and
(8)
dependence on collaborative partners and other third parties. Even if our
product candidates appear promising at an early stage of development, they
may
not reach the market for numerous reasons. These reasons include the
possibilities that the products will prove ineffective or unsafe during
preclinical or clinical studies, will fail to receive necessary regulatory
approvals, will be difficult to manufacture on a large scale, will be
uneconomical to market or will be precluded from commercialization by
proprietary rights of third parties. These risks and others are discussed under
the heading “Item 1A - Risk Factors.”
Results
of Operations
Years
Ended December 2006, 2005 and 2004
Revenues
Total
revenues for 2006, 2005 and 2004 were $62,000, $100,000 and $152,000,
respectively. In 2006, other income included $50,000 received from a licensing
agreement with Avon Products, Inc. In 2005, other income included $100,000
received from a licensing agreement with Avon Products, Inc. In 2004, other
income included approximately $52,000 derived from the sale of fully depreciated
laboratory equipment and supplies and a reimbursement of $100,000 for
improvements made to our former facility in Ramsey, New Jersey. The increase
in
investment income in 2005 versus 2004 was attributed to an increase in short
term interest rates, partially offset by lower investment balances.
Research
and Development
Research
and development expense consists of costs incurred in connection with developing
and advancing our drug discovery technology and identifying and developing
our
product candidates. We charge all research and development expenses to
operations as incurred.
Our
research and development expense consists of:
•
internal
costs associated with research, preclinical and clinical
activities;
• payments
to third-party contract research organizations, investigative sites and
consultants in connection with our preclinical and clinical development
programs;
• costs
associated with drug formulation and supply of drugs for clinical trials;
• personnel
related expenses, including salaries, stock-based compensation, benefits and
travel; and
• overhead
expenses, including rent.
We
currently have two lead products in clinical development. A Phase 2 clinical
study for ALT-2074 was opened for enrollment in May 2006, but progress of
enrollment has been slow due in part to ineffective study design, geopolitical
problems in Israel and a delay in acquiring the necessary financing. As of
December 31, 2006, we had suspended enrollment for the Phase 2 clinical trial
of
our second product candidate, alagebrium, in heart failure due to lack of
funding, and we had no subjects under protocol in any clinical study of
alagebrium.
On
July
25, 2007, we completed a $25 million financing, which will enable us to resume
our Phase 2 clinical trials. We have not been tracking our clinical development
costs on a project by project basis because we only had one product in clinical
development until June 2006 and were forced to curtail research activities
due
to lack of funding until July 2007. We plan to keep track of our clinical
development costs on a project by project basis going forward and will provide
applicable by project disclosures in our Annual Report on Form 10-K for the
fiscal year ending December
31, 2007.
We
do not
know if we will be successful in developing our product candidates. While
expenses associated with the development of our current clinical programs are
expected to be substantial and to increase over time, we believe that accurately
projecting total program-specific expenses through commercialization is not
possible at this time due to the following factors: the timing and amount of
these expenses will depend upon the costs associated with potential future
clinical trials of our product candidates, and the related expansion of our
research and development organization, regulatory requirements, advancement
of
our preclinical programs and product manufacturing costs, many of which cannot
be determined with accuracy at this time based on our stage of development.
This
is due to the numerous risks and uncertainties associated with the duration
and
cost of clinical trials, which vary significantly over the life of a project
as
a result of unanticipated events arising during clinical development, including
those with respect to:
• the
number of clinical sites included in the trial;
• the
length of time required to enroll suitable subjects;
• the
number of subjects that ultimately participate in the trials; and
• the
efficacy and safety results of our clinical trials and the number of additional
required clinical trials.
Our
expenditures are subject to additional uncertainties, including the terms and
timing of regulatory approvals and the expense of filing, prosecuting, defending
or enforcing any patent claims or other intellectual property rights. In
addition, we may obtain unexpected or unfavorable results from our clinical
trials. We may elect at any time to discontinue, delay or modify clinical trials
of some product candidates or focus on others. A change in the outcome of any
of
the foregoing variables in the development of a product candidate could mean
a
significant change in the costs and timing associated with the development
of
that product candidate. For example, if the FDA or other regulatory authority
were to require us to conduct clinical trials beyond those that we currently
anticipate, or if we experience significant delays in any of our clinical
trials, we would be required to expend significant additional financial
resources and time on the completion of clinical development. Additionally,
future commercial and regulatory factors beyond our control will evolve and
therefore impact our clinical development programs and plans over time. Due
to
the risks and uncertainties described above, we cannot currently estimate when
material net cash flows from significant projects may commence, if at all.
Operating
Expenses
Total
expenses, excluding in-process research and development of $11,379,000,
decreased to $6,551,000 in 2006 from $13,399,000 in 2005 and from $14,679,000
in
2004, and consisted primarily of general and administrative expenses in 2006
and
research and development expenses for the years 2005 and 2004. The $11,379,000
in-process research and development charge was a result of the merger with
HaptoGuard. Research and development expenses were $1,896,000, $9,074,000,
and
$10,147,000 in 2006, 2005 and 2004, respectively. These expenses consisted
primarily of third-party expenses associated with preclinical and clinical
studies, manufacturing costs, including the development and preparation of
clinical supplies, personnel and personnel-related expenses and an allocation
of
facility expense.
Research
and development expenses, excluding in-process research and development,
decreased to $1,896,000 in 2006 from $9,074,000 in 2005, a decrease of
$7,178,000, or 79.1%. This was primarily related to decreased clinical trial
costs and manufacturing expenses as a result of the discontinuation of the
SPECTRA (Systolic Pressure
Efficacy and Safety Trial of Alagebrium) trial, partially offset by additional
preclinical toxicity testing. The 2006 results include $547,000 in personnel
and
personnel-related costs, $168,000 in clinical trial costs, $63,000 in
preclinical expenses, $279,000 of manufacturing expenses related to on-going
drug stability studies, drug destruction and storage, $396,000 in consulting
expense, $251,000 in trial-related insurance and $159,000 in facility
allocation.
Research
and development expenses decreased to $9,074,000 in 2005 from $10,147,000 in
2004, a decrease of $1,073,000, or 10.6%. This was primarily related to
decreased clinical trial costs and manufacturing expenses as a result of the
discontinuation of the SPECTRA trial, partially offset by additional preclinical
toxicity testing. The 2005 results include $3,796,000 in personnel and
personnel-related costs, $2,199,000 in clinical trial costs primarily related
to
SPECTRA, $1,288,000 in preclinical expenses primarily associated with the
additional toxicity testing, $579,000 of manufacturing expenses related to
on-going drug stability studies, drug destruction and storage, $425,000 in
consulting expenses, $396,000 in trial-related insurance and $351,000 in
facility allocation.
General
and administrative expenses were $4,655,000 in 2006, an increase from $4,325,000
in 2005 and an increase from $4,532,000 in 2004. The increase in 2006 is in
large part a result of severance costs of $1,617,000, partially offset by a
reduction of normal personnel costs of $706,000. The decrease in 2005 over
2004
includes a $397,000 reduction in business development and marketing that was
incurred in early 2004 related to the start-up of SPECTRA, $284,000 in reduced
personnel costs due to reduced headcount, and $123,000 in reduced patent
expenses. This decrease was offset by $597,000 in additional corporate expenses
related to Sarbanes-Oxley compliance and increased third-party consulting
expenses.
At
December 31, 2006, we had available federal net operating loss carryforwards
of
$168,536,821, which expire in various amounts from the years 2007 through 2026,
and state net operating loss carryforwards of $53,824,491, which expire in
the
years 2007 through 2013. In addition, at December 31, 2006, we had federal
research and development tax credit carryforwards of $6,717,647 and state
research and development tax credit carryforwards of $1,683,419.
Investment
Income
Investment
income for 2006, 2005 and 2004 was $188,000, $358,000 and $182,000,
respectively. Investment income was derived from interest earned on cash and
cash equivalents and short-term investments. Investment income in 2006 was
lower
than that in 2005 due to lower investment balance, partially offset by higher
interest rates. The increase in investment income in 2005 versus 2004 was
attributed to an increase in short term interest rates, partially offset by
lower investment balances.
Net
Loss
We
had
net losses of $17,680,000, $12,614,000 and $13,959,000 in 2006, 2005 and 2004,
respectively. Included in our net loss in 2006, 2005 and 2004 was the sale
of
$0, $4,077,000 and $3,456,000, respectively, of our state net operating loss
carryforwards and $0, $0, and $123,000, respectively, of our state research
and
development tax credit carryforwards. The
proceeds and tax benefit recognized from the sale of these carryforwards in
2006, 2005 and 2004 were $0, $327,000 and $386,000, respectively.
Included
in the net loss applicable to common stockholders for 2006, 2005 and 2004 were
preferred stock dividends of $2,653,000, $4,486,000 and $4,135,000,
respectively.
Liquidity
and Capital Resources
We
had
cash and cash equivalents at December 31, 2006, of $1,479,000 compared to
$6,583,000 at December 31, 2005, a decrease of $5,104,000. Cash used in
operating activities for the year ended December 31, 2006, totaled $7,438,000
and consisted primarily of research and development expenses, personnel and
related costs, and facility expenses. Cash used in investing activities totaled
$1,472,000 for the year ended December 31, 2006 and included $1,622,000 of
acquisition costs, net of cash acquired, offset by a release of restricted
cash
of $150,000 required by our facility lease. Cash provided by financing
activities for the year ended December 31, 2006 was $3,806,000 and arose from
an
April 2006 and September 2006 public offering of 20,430,733 shares of common
stock at $0.25, and $0.15 per share, respectively, which provided net proceeds
of $3,806,026.
In
2006,
2005 and 2004, we sold $0, $4,077,000 and $3,456,000, respectively, of our
gross
state net operating loss carryforwards and $0, $0 and $123,000, respectively,
of
our state research and development tax credit carryforwards under the State
of
New Jersey’s Technology Business Tax Certificate Transfer Program. This program
allows qualified technology
and biotechnology businesses in New Jersey to sell unused amounts of net
operating loss carryforwards and
defined research and development tax credits for cash. Due to the uncertainty
at
any time as to our ability to effectuate the sale of our available New Jersey
state net operating losses, and since we have no control or influence over
the
tax certificate transfer program, the benefits are recorded once the agreement
with the counterparty is signed and the sale is approved by the State of New
Jersey. The proceeds from the sales in 2006, 2005 and 2004 were $0, $327,000
and
$386,000, respectively, and such amounts were recorded as a tax benefit in
the
statements of operations. As of December 31, 2006, we had state net loss
carryforwards and state research and development tax credit carryforwards
available for sale of $53,824,491. We cannot be certain if we will be able
to
sell any or all of these carryforwards under the tax certificate transfer
program.
In
January 2007, we completed a private financing of senior convertible secured
promissory notes (the “Notes”) and warrants, which provided net proceeds of
approximately $3,000,000. In connection with this financing, we issued five-year
warrants to purchase 25,734,453 shares of our common stock at $0.01 per share.
Each Note accrues interest at a rate of 8% per annum and the principal and
interest on the Note are due and payable, if not converted, on May 31,2007.
The
Notes will automatically be converted into any security that is issued by us
to
the Buyers and other potential investors in connection with a proposed private
preferred stock and warrant financing of up to $20 million that is currently
being negotiated. The
closing of any such additional financing, which we anticipate will be done
at a
discount from the market price, will be subject to the satisfaction of various
conditions, including stockholder approval. In
addition, at the option of the Buyers, the Notes may be converted into any
security that is sold by the Company in any other financing on or prior to
May
31, 2007. If the Notes have not been repaid or converted prior to May 31, 2007,
we will be obligated to repay the outstanding principal amount pus any accrued
but unpaid interest as well as (i) an additional $1,000,000 and (ii) fifteen
percent (15%) of any amount received from financing, sale or licensing
transactions completed prior to June 30, 2008, subject to a cap of $2,000,000
in
the aggregate. Finally, at the option of the Buyers, unless otherwise converted,
the Notes may be converted into shares of our common stock, at a price equal
to
the closing price of our common stock on January 11, 2007. In connection with
note and warrant financing, the Company anticipates recognizing a significant
amount of non-cash, and potentially cash, interest expense in the first and
second quarters of 2007.
If
we are
unsuccessful in our efforts to raise additional funds, we will not have the
ability to continue as a going concern beyond the second quarter of 2007.
On
January 24, 2007, we received a notice from the staff (the “Staff”) of AMEX,
that AMEX has accepted our plan to regain compliance with AMEX continued listing
standards, and that our listing will be continued pursuant to an extension
until
April 9, 2008 (the “Extension Period”).
We
submitted a Plan of Compliance to AMEX on November 6, 2006, outlining our
operational plan and strategic objectives, and amended our Plan of Compliance
on
January 3, 2007 and January 5, 2007. The Plan of Compliance was prepared in
response to a letter received from AMEX on October 9, 2006, indicating we were
below certain continued listing standards. These standards were (i) Section
1003(a)(i) of the AMEX Company Guide, as a result of the Company’s shareholder’s
equity of less than $2,000,000 and losses from continuing operations and/or
net
losses in two out of its three most recent fiscal years; (ii) Section
1003(a)(ii) of the AMEX Company Guide, as a result of the Company’s
shareholder’s equity of less than $4,000,000 and losses from continuing
operations and/or net losses in three out of its four most recent fiscal years;
and (iii) Section 1003(a)(iii) of the AMEX Company Guide, as a result of the
Company’s shareholder’s equity of less than $6,000,000 and losses from
continuing operations and/or net losses in its five most recent fiscal years.
To
date, we have not regained compliance with such continued listing standards,
but
we are working towards achieving that goal consistent with our Plan of
Compliance.
We
will
be subject to periodic review by the Staff during the Extension Period, and
is
required to provide the Staff with periodic updates in connection with the
Plan
of Compliance. Failure to make progress consistent with the Plan of Compliance
or to regain compliance with the continued listing standards by the end of the
Extension Period could result in the Company being delisted from AMEX.
We
do not
have any approved products and currently derive cash from sales of our
securities, sales of our New Jersey state net operating loss carryforwards
and
interest on cash and cash equivalents. We are highly susceptible to conditions
in the global financial markets and in the pharmaceutical industry. Positive
and
negative movement in those markets will continue to pose opportunities and
challenges to us. Previous downturns in the market valuations of biotechnology
companies and of the equity markets more generally have restricted our ability
to raise additional capital on favorable terms.
We
expect
to utilize cash and cash equivalents to fund our operating activities, including
continued development of ALT-2074 and alagebrium. However, as a result of the
discontinuation of the Phase 2b SPECTRA trial in systolic hypertension and
a
decrease in our financial resources, we have significantly curtailed all product
development activities of alagebrium and have reduced expenses for the year
ended December 31, 2006. While we intend to pursue development of ALT-2074
and
alagebrium, any continued development of alagebrium by us is contingent upon
our
entering into strategic collaboration agreements for this product candidate
which, among other things, would be required to include funding for product
development. We may not be able to enter into a strategic collaboration
agreement with respect to ALT-2074 or alagebrium on reasonable terms, or at
all.
No enrollment or other activity is taking place with respect to any of our
Phase
2 trials of alagebrium pending the resolution of our financial resource issues.
If we are unable to secure additional financing on reasonable terms, unable
to
generate sufficient new sources of revenue through collaborative arrangements
or
if the level of cash and cash equivalents falls below anticipated levels, we
will not have the ability to continue as a going concern beyond the second
quarter of 2007.
The
amount and timing of our future capital requirements will depend on numerous
factors, including the timing
of
resuming
our
research and development programs, if at all, the number and characteristics
of
product candidates that we pursue, the conduct of preclinical tests and clinical
studies, the status and timelines of regulatory submissions, the costs
associated with protecting patents and other proprietary rights, the ability
to
complete strategic collaborations and the availability of third-party funding,
if any.
Selling
securities to satisfy our capital requirements may have the effect of materially
diluting the current holders of our outstanding stock. We may also seek
additional funding through corporate collaborations and other financing
vehicles. There can be no assurances that such funding will be available at
all
or on terms acceptable to us. We have significantly curtailed our research
and
development programs, until additional financing is obtained, if ever. If funds
are obtained through arrangements with collaborative partners or others, we
may
be required to relinquish rights to our technologies or product candidates
and
alter our plans for the development of our product candidates. If we are unable
to obtain the necessary funding, we may be forced to cease operations. There
can
be no assurance that the products or technologies acquired in the merger will
result in revenues to the combined company or any meaningful return on
investment to our stockholders.
Commitments
The
table
below presents our contractual obligations as of December 31, 2006:
|
|
Payments
Due by Period
|
|
|
|
Total
|
|
|
Within
1
Year
|
|
|
2-3
Years
|
|
|
4-5
Years
|
|
|
After
5
Years
|
|
Contractual
Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
agreements (1)
|
|
$
|
382,694
|
|
$
|
382,694
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Operating
lease commitments
|
|
|
293,421
|
|
|
85,581
|
|
|
195,614
|
|
|
12,226
|
|
|
—
|
|
Total
contractual obligations
|
|
$
|
676,115
|
|
$
|
468,275
|
|
$
|
195,614
|
|
$
|
12,226
|
|
$
|
—
|
|
|
(1) |
We
have employment agreements with key executives, which provide
that either
party may terminate the agreement upon written notice. If
we terminate all
of the agreements without cause, we are subject to a salary
continuation
obligation totaling
$382,694.
|
Critical
Accounting Policies
In
December 2001, the SEC issued a statement concerning certain views of the SEC
regarding the appropriate amount of disclosure by publicly held companies with
respect to their critical accounting policies. In particular, the SEC expressed
its view that in order to enhance investor understanding of financial
statements, companies should explain the effects of critical accounting policies
as they are applied, the judgments made in the application of these policies
and
the likelihood of materially different reported results if different assumptions
or conditions were to prevail. We have since carefully reviewed the disclosures
included in our filings with the SEC, including, without limitation, this Annual
Report on Form 10-K and accompanying audited consolidated financial statements
and related notes thereto. We believe the effect of the following accounting
policy is significant to our results of operations and financial condition.
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004),
“Share-Based Payment,” (“SFAS 123R”), which replaces “Accounting for Stock-Based
Compensation,” (“SFAS 123”) and supersedes Accounting Principles Board (“APB”)
Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires
all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair values
beginning with the first annual reporting period that begins after December
15,
2005. Under SFAS 123R, the pro forma disclosures previously permitted under
SFAS
123 are no longer an alternative to financial statement
recognition.
We
account for employee stock-based compensation, awards issued to non-employee
directors, and stock options issued to consultants and contractors in accordance
with SFAS 123R, SFAS No. 148 “Accounting for Stock-Based Compensation—Transition
and Disclosure” and Emerging Issues Task Force Issue No. 96-18, “Accounting for
Equity Instruments that are Issued to Other Than Employees for Acquiring or
in
Conjunction with Selling Goods or Services.” For the year ended December 31,
2006, we recognized research and development consulting expenses of $5,122.
We
have
adopted the new standard, SFAS 123R, effective January 1, 2006 and have selected
the Black-Scholes method of valuation for share-based compensation. We have
adopted the modified prospective transition method which requires that
compensation cost be recorded, as earned, for all unvested stock options and
restricted stock outstanding at the beginning of the first quarter of adoption
of SFAS 123R, and is recognized over the remaining service period after the
adoption date based on the options’ original estimate of fair value. For the
year ended December 31, 2006, we recognized share-based employee compensation
cost of $66,745. in accordance with SFAS 123R, which was recorded as general
and
administrative expenses.
On
December 15, 2005, the Compensation Committee of the Board of Directors of
the
Company approved the acceleration of the vesting date of all previously issued,
outstanding and unvested options, effective December 31, 2005. Approximately
1.47 million options were accelerated, of which 1.3 million belong to executive
officers and non-employee members of the Board of Directors. As such there
was
no compensation recognized under Statement 123(R) related to options granted
prior to January 1, 2006.
Prior
to
adoption of SFAS 123R, we applied the intrinsic-value method under APB Opinion
No. 25, “Accounting for Stock Issued to Employees,” and related interpretations,
under which no compensation cost (excluding those options granted below fair
market value) has been recognized. SFAS 123, “Accounting for Stock-Based
Compensation,” established accounting and disclosure requirements using a
fair-value based method of accounting for stock-based employee compensation
plans. As permitted by SFAS 123, we elected to continue to apply the
intrinsic-value based method of accounting described above, and adopted only
the
disclosure requirements of SFAS 123, as amended, which were similar in most
respects to SFAS 123R.
Revenue
Recognition
Our
revenue recognition policy is consistent with the criteria set forth in Staff
Accounting Bulletin 104 - Revenue Recognition in Financial Statements (SAB
104)
for determining when revenue is realized or realizable and earned. In accordance
with the requirements of SAB 104, the Company recognizes revenue when (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred; (3)
the
seller’s price is fixed or determinable; and (4) collectibility is reasonably
assured.
Due
to
the immaterial nature of our current licensing revenues under the Avon Products,
Inc. license agreement, we recognize revenues from non-refundable, up-front
license fees as received which approximates the straight-line basis. The Company
has no further obligations under this agreement.
Recently
Issued Accounting Pronouncements
In
July 2006, the FASB issued FASB Interpretation No. 48, or FIN 48,
“Accounting
for Uncertainty in Income Taxes,”
which
prescribes a recognition threshold and measurement process for recording in
the
financial statements uncertain tax positions taken or expected to be taken
in a
tax return. Additionally, FIN 48 provides guidance on the derecognition,
classification, accounting in interim periods and disclosure requirements for
uncertain tax positions. The provisions of FIN 48 will be effective for us
beginning January 1, 2007. We are in the process of determining the effect,
if
any, the adoption of FIN 48 will have on our financial statements.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, or SFAS 157, “Fair
Value Measurements.”
SFAS 157
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements. The provisions of SFAS 157 will be effective for us
beginning January 1, 2007. We are in the process of determining the
effect, if any, the adoption of SFAS 157 will have on our financial
statements.
In
December 2006, the FASB issued FSP
EITF
00-19-2, "Accounting for Registration Payment Arrangements." This FASB Staff
Position (“FSP”) addresses an issuer’s accounting for registration payment
arrangements. This FSP specifies that the contingent obligation to make future
payments or otherwise transfer consideration under a registration payment
arrangement, whether issued as a separate agreement or included as a provision
of a financial instrument or other agreement, should be separately recognized
and measured in accordance with FASB Statement No. 5, Accounting
for Contingencies.
The
guidance in this FSP amends FASB Statements No. 133, Accounting
for Derivative Instruments and Hedging Activities, and
No.
150, Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and
Equity, and
FASB
Interpretation No. 45, Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, to
include scope exceptions for registration payment arrangements. This FSP further
clarifies that a financial instrument subject to a registration payment
arrangement should be accounted for in accordance with other applicable
generally accepted accounting principles (“GAAP”) without regard to the
contingent obligation to transfer consideration pursuant to the registration
payment arrangement. This provisions of EITF 00-19-2 will be effective for
us
beginning January 1, 2007. We are in the process of determining the effect,
if
any, the adoption of EITF 00-19-2 will have on our financial
statements.
Item
8. Financial
Statements and Supplementary Data.
(a) The
consolidated financial statements required to be filed pursuant to this Item
8
are appended to this Amendment No. 2 to Annual Report on Form 10-K/A. A list
of
the consolidated financial statements filed herewith is found at “Index to
Consolidated Financial Statements” on page 12.
(b) The
unaudited quarterly financial data for the two-year period ended December
31,
2006 is as follows:
|
|
Income
|
|
Expenses
|
|
Loss
Before Income Tax Benefit
|
|
Net
Loss Applicable to Common Stockholders
|
|
Basic/Diluted Loss
Per Share
|
|
|
|
(in
thousands, except per share amounts)
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0
|
|
$
|
1,682
|
|
$
|
(1,621
|
)
|
$
|
(2,796
|
)
|
$
|
(0.05
|
)
|
Second
Quarter
|
|
|
50
|
|
|
1,159
|
|
|
(1,043
|
)
|
|
(2,237
|
)
|
|
(0.03
|
)
|
Third
Quarter
|
|
|
0
|
|
|
14,115
|
|
|
(14,076
|
)
|
|
(14,360
|
)
|
|
(0.13
|
)
|
Fourth
Quarter
|
|
|
12
|
|
|
974
|
|
|
(940
|
)
|
|
(940
|
)
|
|
(0.01
|
)
|
Total
Year
|
|
$
|
62
|
|
$
|
17,930
|
|
$
|
(17,680
|
)
|
$
|
(20,333
|
)
|
$
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0
|
|
$
|
4,741
|
|
$
|
(4,642
|
)
|
$
|
(5,714
|
)
|
$
|
(0.10
|
)
|
Second
Quarter
|
|
|
100
|
|
|
3,577
|
|
|
(3,376
|
)
|
|
(4,482
|
)
|
|
(0.08
|
)
|
Third
Quarter
|
|
|
0
|
|
|
3,043
|
|
|
(2,957
|
)
|
|
(4,098
|
)
|
|
(0.07
|
)
|
Fourth
Quarter
|
|
|
0
|
|
|
2,038
|
|
|
(1,966
|
)
|
|
(2,806
|
)
|
|
(0.05
|
)
|
Total
Year
|
|
$
|
100
|
|
$
|
13,399
|
|
$
|
(12,941
|
)
|
$
|
(17,100
|
)
|
$
|
(0.30
|
)
|
PART
IV
Item
15. Exhibits, Financial Statement Schedules.
(a)
Consolidated Financial Statements.
Our
audited consolidated financial statements and the Report of Independent
Registered Public Accounting Firm are filed with this Report.
(b)
Exhibits.
The
exhibits required to be filed are listed on the “Exhibit Index” attached hereto,
which is incorporated herein by reference.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
|
Report
of Independent Registered Public Accounting Firm - J.H. Cohn
LLP
|
13
|
|
|
Consolidated
Financial Statements:
|
|
|
|
Consolidated
Balance Sheets at December 31, 2006 and 2005
|
14
|
|
|
Consolidated
Statements of Operations for the years ended December 31, 2006,
2005 and
2004
|
15
|
|
|
Consolidated
Statements of Changes in Stockholders’ Equity for the years ended December
31, 2006, 2005 and 2004
|
16
|
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2006,
2005 and
2004
|
17
|
|
|
|
18
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board
of Directors and Stockholders
Alteon
Inc.
We
have
audited the accompanying consolidated balance sheets of Alteon Inc. and
subsidiaries as of December 31, 2006 and 2005, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 2006. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Alteon Inc. and subsidiaries
as of December 31, 2006 and 2005, and their results of operations and cash
flows
for each of the years in the three-year period ended December 31, 2006, in
conformity with accounting principles generally accepted in the United States
of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2, the Company incurred
a
net loss of $17,679,737 and used $7,438,275 of cash in operating activities
during the year ended December 31, 2006. These matters, among others, raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
/s/
J.H.
Cohn LLP
Roseland,
New Jersey
February
15, 2007
ALTEON
INC.
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,478,780
|
|
$
|
6,582,958
|
|
Other
current assets
|
|
|
314,156
|
|
|
216,290
|
|
Total
current assets
|
|
|
1,792,936
|
|
|
6,799,248
|
|
Property
and equipment, net
|
|
|
10,500
|
|
|
55,154
|
|
Restricted
cash
|
|
|
-
|
|
|
150,000
|
|
Other
assets
|
|
|
501,889
|
|
|
129,195
|
|
Total
assets
|
|
$
|
2,305,325
|
|
$
|
7,133,597
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
Accounts
payable.
|
|
$
|
809,492
|
|
$
|
351,232
|
|
Accrued
expenses
|
|
|
253,022
|
|
|
790,705
|
|
Total
current liabilities.
|
|
|
1,062,514
|
|
|
1,141,937
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; 1,993,329 shares authorized, 0 shares issued
and
outstanding at December 31, 2006 and 1,389 shares of Series G Preferred
Stock, and 4,172 shares of of Series H Preferred Stock issued and
outstanding at December 31, 2005
|
|
|
-
|
|
|
56
|
|
Common
stock, $.01 par value; 300,000,000 shares authorized and 129,318,858
and
57,996,711 shares issued and outstanding, as of December 31, 2006
and
December 31, 2005
|
|
|
1,293,189
|
|
|
579,967
|
|
Additional
paid-in capital
|
|
|
243,095,483
|
|
|
228,225,082
|
|
Accumulated
deficit
|
|
|
(243,145,861
|
)
|
|
(222,813,445
|
)
|
Total
stockholders' equity
|
|
|
1,242,811
|
|
|
5,991,660
|
|
Total
liabilities and stockholders' equity
|
|
$
|
2,305,325
|
|
$
|
7,133,597
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
ALTEON
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Year
ended December 31,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
Revenues:
|
|
|
|
|
|
|
|
License
fees and other income
|
|
$
|
62,069
|
|
$
|
100,000
|
|
$
|
151,821
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
1,896,204
|
|
|
9,074,244
|
|
|
10,147,298
|
|
In-process
research and development
|
|
|
11,379,348
|
|
|
-
|
|
|
-
|
|
General
and administrative
|
|
|
4,654,689
|
|
|
4,325,225
|
|
|
4,531,953
|
|
Total
expenses
|
|
|
17,930,241
|
|
|
13,399,469
|
|
|
14,679,251
|
|
Net
loss from operations
|
|
|
(17,868,172
|
)
|
|
(13,299,469
|
)
|
|
(14,527,430
|
)
|
Investment
income
|
|
|
188,435
|
|
|
358,446
|
|
|
182,574
|
|
Loss
before income tax benefit
|
|
|
(17,679,737 |
) |
|
(12,941,023
|
)
|
|
(14,344,856
|
)
|
Income
tax benefit
|
|
|
0
|
|
|
326,564
|
|
|
386,210
|
|
Net
loss
|
|
|
(17,679,737
|
)
|
|
(12,614,459
|
)
|
|
(13,958,646
|
)
|
Preferred
stock dividends
|
|
|
2,652,679
|
|
|
4,486,336
|
|
|
4,135,145
|
|
Net
loss applicable to common shares
|
|
$
|
(20,332,416
|
)
|
$
|
(17,100,795
|
)
|
$
|
(18,093,791
|
)
|
Net
loss per common share:
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.22
|
)
|
$
|
(0.30
|
)
|
$
|
(0.41
|
)
|
Weighted
average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
91,434,386
|
|
|
57,639,255
|
|
|
44,349,015
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
ALTEON
INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Total
|
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
|
|
Accumulated
|
|
Stockholders' |
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Equity
|
|
Balance,
December 31, 2003.
|
|
|
4,699
|
|
$
|
47
|
|
|
40,467,148
|
|
$
|
404,671
|
|
$
|
202,598,573
|
|
$
|
(187,618,859
|
)
|
$
|
15,384,432
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(13,958,646
|
)
|
|
(13,958,646
|
)
|
Issuance
of Series G and H preferred stock dividends
|
|
|
414
|
|
|
4
|
|
|
-
|
|
|
-
|
|
|
4,135,141
|
|
|
(4,135,145
|
)
|
|
-
|
|
Exercise
of employee stock
|
|
|
-
|
|
|
-
|
|
|
5,750
|
|
|
58
|
|
|
5,027
|
|
|
-
|
|
|
5,085
|
|
Public
offerings of common stock
|
|
|
-
|
|
|
|
|
|
8,000,000
|
|
|
80,000
|
|
|
7,501,318
|
|
|
-
|
|
|
7,581,318
|
|
Compensation
expense in connection with the issuance of non-qualified stock options
granted to non-employees
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
34,731
|
|
|
-
|
|
|
34,731
|
|
Balance,
December 31, 2004
|
|
|
5,113
|
|
|
51
|
|
|
48,472,898
|
|
|
484,729
|
|
|
214,274,790
|
|
|
(205,712,650
|
)
|
|
9,046,920
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(12,614,459
|
)
|
|
(12,614,459
|
)
|
Issuance
of Series G and H preferred stock dividends
|
|
|
448
|
|
|
5
|
|
|
-
|
|
|
-
|
|
|
4,486,331
|
|
|
(4,486,336
|
)
|
|
-
|
|
Public
offerings of common stock
|
|
|
-
|
|
|
-
|
|
|
9,523,813
|
|
|
95,238
|
|
|
9,437,057
|
|
|
-
|
|
|
9,532,295
|
|
Compensation
expense in connection with the issuance of non-qualified stock options
granted to non-employees
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
26,904
|
|
|
-
|
|
|
26,904
|
|
Balance,
December 31, 2005
|
|
|
5,561
|
|
|
56
|
|
|
57,996,711
|
|
|
579,967
|
|
|
228,225,082
|
|
|
(222,813,445
|
)
|
|
5,991,660
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(17,679,737
|
)
|
|
(17,679,737
|
)
|
Private
placement of common stock
|
|
|
-
|
|
|
-
|
|
|
10,960,400
|
|
|
109,604
|
|
|
2,366,402
|
|
|
-
|
|
|
2,476,006
|
|
Issuance
of Series G and H preferred stock dividends
|
|
|
238
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
2,652,677
|
|
|
(2,652,679
|
)
|
|
-
|
|
Common
stock issued in connection with the merger
|
|
|
-
|
|
|
-
|
|
|
37,399,065
|
|
|
373,991
|
|
|
8,426,009
|
|
|
-
|
|
|
8,800,000
|
|
Preferred
stock converted to common stock as a result of the merger
|
|
|
(5,799
|
)
|
|
(58
|
)
|
|
13,492,349
|
|
|
134,923
|
|
|
(134,865
|
)
|
|
-
|
|
|
-
|
|
Assumption
of HaptoGuard vested stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
235,000
|
|
|
-
|
|
|
235,000
|
|
Private
placement of common stock
|
|
|
-
|
|
|
-
|
|
|
9,470,333
|
|
|
94,704
|
|
|
1,235,316
|
|
|
-
|
|
|
1,330,020
|
|
Stock-based
compensation.
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
66,745
|
|
|
-
|
|
|
66,745
|
|
Options
issued for consulting services
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,122
|
|
|
-
|
|
|
5,122
|
|
Compensation
costs related to restricted stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
17,995
|
|
|
-
|
|
|
17,995
|
|
Balance,
December 31, 2006
|
|
|
-
|
|
$
|
-
|
|
|
129,318,858
|
|
$
|
1,293,189
|
|
$
|
243,095,483
|
|
$
|
(243,145,861
|
)
|
$
|
1,242,811
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
ALTEON
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Year
ended December 31,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(17,679,737
|
)
|
$
|
(12,614,459
|
)
|
$
|
(13,958,646
|
)
|
Adjustments
to reconcile net loss to cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation.
|
|
|
66,745
|
|
|
26,904
|
|
|
34,731
|
|
Options
issued for consulting services
|
|
|
5,122
|
|
|
-
|
|
|
-
|
|
Compensation
costs related to restricted stock
|
|
|
17,995
|
|
|
-
|
|
|
-
|
|
In-process
research and development
|
|
|
11,379,348
|
|
|
-
|
|
|
-
|
|
Gain
on sale of laboratory equipment
|
|
|
-
|
|
|
-
|
|
|
(51,821
|
)
|
Depreciation
and amortization
|
|
|
49,116
|
|
|
65,223
|
|
|
74,870
|
|
Changes
in operating assets and liabilities, net of acquisition:
|
|
|
|
|
|
|
|
|
|
|
Other
current assets.
|
|
|
(408,026
|
)
|
|
(56,926
|
)
|
|
66,075
|
|
Other
assets
|
|
|
(501,889
|
)
|
|
-
|
|
|
-
|
|
Accounts
payable and accrued expenses
|
|
|
(366,949
|
)
|
|
(1,453,538
|
)
|
|
724,922
|
|
Net
cash used in operating activities
|
|
|
(7,438,275
|
)
|
|
(14,032,796
|
)
|
|
(13,109,869
|
)
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures.
|
|
|
-
|
|
|
(13,108
|
)
|
|
(81,175
|
)
|
Proceeds
on sale of laboratory equipment
|
|
|
-
|
|
|
-
|
|
|
51,821
|
|
Restricted
cash.
|
|
|
150,000
|
|
|
50,000
|
|
|
50,000
|
|
Acquisition
costs, net of cash acquired.
|
|
|
(1,621,929
|
)
|
|
(129,195
|
)
|
|
-
|
|
Net
cash provided by (used in) investing activities
|
|
|
(1,471,929
|
)
|
|
(92,303
|
)
|
|
20,646
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Net
proceeds from issuance of common stock
|
|
|
3,806,026
|
|
|
9,532,295
|
|
|
7,581,318
|
|
Net
proceeds from exercise of employee stock options
|
|
|
-
|
|
|
-
|
|
|
5,085
|
|
Net
cash provided by financing activities
|
|
|
3,806,026
|
|
|
9,532,295
|
|
|
7,586,403
|
|
Net
decrease in cash and cash equivalents
|
|
|
(5,104,178
|
)
|
|
(4,592,804
|
)
|
|
(5,502,820
|
)
|
Cash
and cash equivalents, beginning of period
|
|
|
6,582,958
|
|
|
11,175,762
|
|
|
16,678,582
|
|
Cash
and cash equivalents, end of period
|
|
$
|
1,478,780
|
|
$
|
6,582,958
|
|
$
|
11,175,762
|
|
Supplemental
disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
Common
stock and other equity consideration issued as a result of the
merger
|
|
$
|
9,035,000
|
|
$
|
-
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
NOTE
1 - Organization and Summary of Significant Accounting Policies
Organization
and Business
Alteon
Inc. (“Alteon” or the “Company”) is a product-based biopharmaceutical company
engaged in the development of small molecule drugs to treat and prevent
cardiovascular disease and diabetes. The Company has identified several
promising product candidates that represent novel approaches to some of the
largest pharmaceutical markets. Alteon has advanced one of these products into
Phase 2 clinical trials. By acquiring HaptoGuard, Inc. in July 2006, Alteon
has
expanded its portfolio with another compound in Phase 2 clinical development
for
cardiovascular complications of diabetes.
Alteon
is
primarily focused on fund-raising activities and exploring strategic
relationships to support our development programs. During 2006, as part of
these
efforts, we acquired HaptoGuard, Inc. At the present time, we have significantly
curtailed all product development activities of alagebrium due to the absence
of
sufficient financial resources to continue its development.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of Alteon
Inc. and its wholly owned subsidiaries. All inter-company accounts and
transactions have been eliminated in consolidation.
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 at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Estimates
are used for, but not limited to: accrued expenses, income tax valuation
allowances and assumptions utilized within the Black-Scholes options pricing
model and the model itself. Accounting estimates require the use of judgment
regarding uncertain future events and their related effects and, accordingly,
may change as additional information is obtained.
Cash
and Cash Equivalents
Cash
and
cash equivalents include cash and highly liquid investments that have a maturity
of less than three months at the time of purchase.
Revenue
Recognition
Our
revenue recognition policy is consistent with the criteria set forth in Staff
Accounting Bulletin 104 - Revenue Recognition in Financial Statements (SAB
104)
for determining when revenue is realized or realizable and earned. In accordance
with the requirements of SAB 104, the Company recognizes revenue when (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred; (3)
the
seller’s price is fixed or determinable; and (4) collectibility is reasonably
assured.
Due
to
the immaterial nature of our current licensing revenues under the Avon Products,
Inc. license agreement, we recognize revenues from non-refundable, up-front
license fees as received which approximates the straight-line basis. The Company
has no further obligations under this agreement.
Financial
Instruments
Financial
instruments reflected in the balance sheets are recorded at cost, which
approximates fair value for cash equivalents, restricted cash and accounts
payable.
Property
and Equipment
Property
and equipment are stated at cost. Depreciation and amortization are computed
using the straight-line method over the useful lives of owned assets, which
range from three to five years.
Research
and Development
Research
and development expenses consist primarily of costs associated with determining
feasibility, licensing and preclinical and clinical testing of our licensed
pharmaceutical candidates, including salaries and related personnel costs,
certain legal expenses, fees paid to consultants and outside service providers
for drug manufacture and development, and other expenses. Expenditures for
research and development are charged to operations as incurred.
Stock-Based
Compensation
The
Company has stockholder-approved stock incentive plans for employees, directors,
officers and consultants. Prior to January 1, 2006, the Company accounted for
the employee, director and officer plans using the intrinsic value method under
the recognition and measurement provisions of Accounting Principles Board
(“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and
related interpretations, as permitted by Statement of Financial Accounting
Standards (“SFAS” or “Statement”) No. 123, “Accounting for Stock-Based
Compensation.”
Effective
January 1, 2006, the Company adopted SFAS No. 123(R), “Share-Based Payment,”
(“Statement 123(R)”) for employee options using the modified prospective
transition method. Statement 123(R) revised Statement 123 to eliminate the
option to use the intrinsic value method and required the Company to expense
the
fair value of all employee options over the vesting period. Under the modified
prospective transition method, the Company recognized compensation cost for
the
year ended December 31, 2006, which includes compensation cost related to
share-based payments granted on or after January 1, 2006, based on the grant
date fair value estimated in accordance with Statement 123(R). In accordance
with the modified prospective method, the Company has not restated prior period
results.
On
December 15, 2005, the Compensation Committee of the Board of Directors of
the
Company approved the acceleration of the vesting date of all previously issued,
outstanding and unvested options, effective December 31, 2005. Approximately
1.47 million options were accelerated, of which, approximately 1.3 million
belong to executive officers and non-employee members of the Board of Directors.
As such there was no compensation recognized under Statement 123(R) related
to
options granted prior to January 1, 2006.
Options
granted to consultants and other non-employees are accounted for in accordance
with EITF No. 96-18 "Accounting for Equity Instruments That Are Issued to Other
than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." Accordingly, such options are recorded at fair value at the
date of grant and subsequently adjusted to fair value at the end of each
reporting period until such options vest, and the fair value of the
options, as adjusted, is charged to consulting expense over the related
vesting period. For the year ended December 31, 2006, the Company
recognized research and development consulting expenses of $5,122.
For
the
year ended December 31, 2006, the Company recognized share-based employee
compensation cost of $66,745 in accordance with Statement 123(R), which was
recorded as general and administrative expense. This expense related to the
granting of stock options to employees, directors and officers on or after
January 1, 2006. None of this expense resulted from the grants of stock options
prior to January 1, 2006. The Company recognized compensation expense related
to
these stock options, taking into consideration a forfeiture rate of
approximately ten percent based on historical experience, on a straight line
basis over the vesting period. The Company did not capitalize any share-based
compensation cost.
As
a
result of adopting Statement 123(R), net loss for year ended December 31, 2006
was greater than if the Company had continued to account for share-based
compensation under APB 25 by $66,745. The effect of adopting Statement 123(R)
on
basic and diluted earnings per share for the year ended December 31, 2006 was
immaterial.
As
of
December 31, 2006, the total compensation cost related to non-vested option
awards not yet recognized is $266,910. The weighted average period over which
it
is expected to be recognized is approximately 2.55 years.
The
following table illustrates the pro forma effect on net loss and loss per share
assuming the Company had applied the fair value recognition provisions of SFAS
No. 123 instead of the intrinsic value method under APB 25 to stock-based
employee compensation for 2005 and 2004 would be as follows:
|
|
Year
Ended December 31,
|
|
|
|
2005
|
|
2004
|
|
Net
loss, as reported
|
|
$
|
(12,614,459
|
)
|
$
|
(13,958,646
|
)
|
Less: Total
stock-based compensation expense
determined
under fair value method
|
|
|
(1,701,681
|
)
|
|
(868,390
|
)
|
Pro
forma net loss
|
|
|
(14,316,140
|
)
|
|
(14,827,036
|
)
|
Preferred
stock dividends
|
|
|
4,486,336
|
|
|
4,135,145
|
|
Pro
forma net loss applicable to common stockholders
|
|
$
|
(18,802,476
|
)
|
$
|
(18,962,181
|
)
|
|
|
|
|
|
|
|
|
Net
loss per share applicable to common stockholders:
|
|
|
|
|
|
|
|
Basic/diluted,
as reported
|
|
$
|
(0.30
|
)
|
$
|
(0.41
|
)
|
Basic/diluted,
pro forma
|
|
$
|
(0.33
|
)
|
$
|
(0.43
|
)
|
As
noted
above, the Company has shareholder-approved stock incentive plans for employees
under which it has granted non-qualified and incentive stock options. Options
granted under these plans must be at a price per share not less than the fair
market value per share of common stock on the date the option is granted. The
options generally vest over a four-year period and expire ten years from the
date of grant.
Recently
Issued Accounting Pronouncements
In
July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, or FIN 48, “Accounting
for Uncertainty in Income Taxes,”
which
prescribes a recognition threshold and measurement process for recording in
the
financial statements uncertain tax positions taken or expected to be taken
in a
tax return. Additionally, FIN 48 provides guidance on the derecognition,
classification, accounting in interim periods and disclosure requirements for
uncertain tax positions. The provisions of FIN 48 will be effective for us
beginning January 1, 2007. We are in the process of determining the effect,
if
any, the adoption of FIN 48 will have on our consolidated financial
statements.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, or SFAS 157, “Fair
Value Measurements.”
SFAS 157
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements. The provisions of SFAS 157 will be effective for us
beginning January 1, 2007. The Company is in the process of determining
the effect, if any, the adoption of SFAS 157 will have on our consolidated
financial statements.
In
December 2006, the FASB issued FSP
EITF
00-19-2, "Accounting for Registration Payment Arrangements." This FASB Staff
Position (“FSP”) addresses an issuer’s accounting for registration payment
arrangements. This FSP specifies that the contingent obligation to make future
payments or otherwise transfer consideration under a registration payment
arrangement, whether issued as a separate agreement or included as a provision
of a financial instrument or other agreement, should be separately recognized
and measured in accordance with FASB Statement No. 5, Accounting
for Contingencies.
The
guidance in this FSP amends FASB Statements No. 133, Accounting
for Derivative Instruments and Hedging Activities, and
No.
150, Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and
Equity, and
FASB
Interpretation No. 45, Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, to
include scope exceptions for registration payment arrangements. This FSP further
clarifies that a financial instrument subject to a registration payment
arrangement should be accounted for in accordance with other applicable
generally accepted accounting principles (“GAAP”) without regard to the
contingent obligation to transfer consideration pursuant to the registration
payment arrangement. This provision of EITF 00-19 will be effective for us
beginning January 1, 2007. The Company is in the process of determining the
effect, if any, the adoption of EITF 00-19 will have on our consolidated
financial statements.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax basis and
net operating loss and tax credit carryforwards. A valuation allowance is
provided when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in operations in the period that includes the enactment
date.
Net
Loss Per Share Applicable to Common Stockholders
Basic
net
loss per share is computed by dividing net loss applicable to common
stockholders by the weighted average number of shares outstanding during the
year. Diluted net loss per share is the same as basic net loss per share
applicable to common stockholders, since the assumed exercise of stock options
and warrants and the conversion of preferred stock would be antidilutive. The
amount of potentially dilutive shares excluded from the calculation as of
December 31, 2006, 2005 and 2004 was 33,372,125, 286,187,720 and 50,297, shares,
respectively. (See Note 12 - Merger with HaptoGuard, Inc.).
NOTE
2 — Liquidity
The
Company has devoted substantially all of its resources to research, drug
discovery and development programs. To date, it has not generated any revenues
from the sale of products and does not expect to generate any such revenues
for
a number of years, if at all. As a result, Alteon has incurred net losses since
inception, has an accumulated deficit of $243,145,861 at December 31, 2006,
and
expects to incur net losses, potentially greater than losses in prior years,
for
a number of years assuming the Company is able to continue as a going concern,
of which there can be no assurance.
The
Company has financed its operations through proceeds from the sale of common
and
preferred equity securities, revenue from former collaborative relationships,
reimbursement of certain of our research and development expenses by
collaborative partners, investment income earned on cash and cash equivalent
balances and short-term investments and in years prior from the sale of a
portion of the Company’s New Jersey state net operating loss carryforwards and
research and development tax credit carryforwards.
As
of
December 31, 2006, the Company had working capital of $730,422, including
$1,478,780 of cash and cash equivalents. During 2006, the Company sold
20,430,733 shares of common stock, raising net proceeds of $3,806,026 (see
Note
9 - Stockholders’ Equity). The Company’s cash used in operating activities for
the years ended December 31, 2006, 2005 and 2004 was $7,438,275, $14,032,796
and
$13,109,869, respectively.
Alteon
expects to utilize cash and cash equivalents to fund its operating activities,
including continued development of ALT-2074 and alagebrium. It has significantly
curtailed product development activities and has reduced expenses for the year
ended December 31, 2006. While the Company intends to pursue development of
ALT-2074 and alagebrium, any continued development by the Company of alagebrium
is contingent upon its entering into strategic collaboration agreements for
these products which, among other things, would be required to include funding
for product development. The Company may not be able to enter into a strategic
collaboration agreement with respect to ALT-2074 or alagebrium on reasonable
terms, or at all. No enrollment or other activity is taking place with respect
to any of its Phase 2 trials of alagebrium pending the resolution of its
financial resource issues. The Company is urgently continuing to pursue
fund-raising possibilities through the sale of its securities. If the Company
is
unable to secure additional financing on reasonable terms, unable to generate
sufficient new sources or revenue through collaborative arrangements or if
the
level of cash and cash equivalents falls below anticipated levels, the Company
will not have the ability to continue as a going concern beyond the second
quarter of 2007. (See Note 13 - Subsequent Event).
The
amount and timing of the Company’s future capital requirements will depend on
numerous factors, including the timing
of
resuming
its
research
and development programs, if
at
all, the
number and characteristics of product candidates that the Company pursues,
the
conduct of preclinical tests and clinical studies, the status and timelines
of
regulatory submissions, the costs associated with protecting patents and other
proprietary rights, the ability to complete strategic collaborations and the
availability of third-party funding, if any.
Selling
securities to satisfy its capital requirements may have the effect of materially
diluting the current holders of the Company’s outstanding stock. The Company may
also seek additional funding through corporate collaborations and other
financing vehicles. There can be no assurances that such funding will be
available at all or on terms acceptable to the Company. The Company has
significantly curtailed its research and development programs, until additional
financing is obtained, if ever. If funds are obtained through arrangements
with
collaborative partners or others, the Company may be required to relinquish
rights to its technologies or product candidates and alter its plans for the
development of its product candidates. If the Company is unable to obtain the
necessary funding, it will likely be forced to cease operations.
NOTE
3 — Other Current Assets
|
|
December 31,
|
|
|
|
2006
|
|
2005
|
|
Deferred
financing costs
|
|
$
|
49,200
|
|
$
|
—
|
|
Prepaid
insurance
|
|
|
242,615
|
|
|
216,290
|
|
Prepaid
other
|
|
|
22,341
|
|
|
—
|
|
|
|
$
|
314,156
|
|
$
|
216,290
|
|
NOTE
4 — Property and Equipment
|
|
December 31,
|
|
|
|
2006
|
|
2005
|
|
Laboratory
equipment
|
|
$
|
24,650
|
|
$
|
24,650
|
|
Furniture
and equipment
|
|
|
218,627
|
|
|
218,627
|
|
Computer
equipment
|
|
|
159,529
|
|
|
155,067
|
|
|
|
|
402,806
|
|
|
398,344
|
|
Less:
Accumulated depreciation & amortization
|
|
|
(392,306
|
)
|
|
(343,190
|
)
|
|
|
$
|
10,500
|
|
$
|
55,154
|
|
NOTE
5 — Other Assets
|
|
December 31,
|
|
|
|
2006
|
|
2005
|
|
Prepaid
insurance - non-current
|
|
$
|
501,889
|
|
$
|
—
|
|
Deferred
acquisition costs
|
|
|
—
|
|
|
129,195
|
|
|
|
$
|
501,889
|
|
$
|
129,195
|
|
|
|
|
|
|
|
|
|
NOTE
6 — Collaborative Research and Development Agreements
Alteon
previously entered into a licensing and supply agreement with OXIS
International, Inc. (“OXIS”) in September 2004. Under this agreement, the
Company acquired an exclusive, worldwide, royalty-bearing license, with the
right to grant sublicenses, under certain patents, compounds, process, know-how
relating to ALT-2074 and a family of related compounds for therapeutic,
diagnostic, preventative, ameliorative and/or prognostic indications in certain
defined cardiovascular fields. Alteon is obligated to make future payments
to OXIS upon achievement of certain FDA-related milestones and to pay OXIS
royalties on sales of ALT-2074 upon commercialization, net of various customary
discounts, attributable to certain licensed products. Pursuant to the terms
of
this agreement, the Company is obligated to make milestone payments to OXIS
that
could total up to $7 million over the term of the agreement. Alteon is also
obligated to achieve certain development milestones in accordance with the
timelines set forth in the license agreement.
In
addition, the license agreement with OXIS requires Alteon to treat Oxis as
the
sole supplier of ALT-2074, provided OXIS meets its supply requirements under
the
agreement. The agreement provides that all product purchased from OXIS shall
be
priced on a cost plus basis. Alteon has certain rights to inspect and analyze
representative samples of licensed products from batches supplied by OXIS and
to
reject any non-conforming goods.
Alteon
also previously entered into a license agreement with BIO-RAP Ltd. (“BIO-RAP”),
on its own and on behalf of the Rappaport Family Institute for Research in
the
Medical Sciences, in July 2004. Under this agreement, Alteon received an
exclusive, worldwide, royalty-bearing license, with the right to grant
sublicenses, to certain technology, patents and technology relating to products
in the field of testing and/or measurement for diagnostic predictive purposes
of
vascular or cardiac diseases. Alteon is obligated to make annual research
funding payments to BIO-RAP and pay a portion of BIO-RAP’s direct overhead
costs. Alteon is also obligated to make future payments upon achievement of
certain milestones, including FDA-related milestones, as well as royalty
payments on sales, net of various customary discounts, attributable to
therapeutic products derived from the technology being licensed to Alteon by
BIO-RAP. Pursuant to the terms of this agreement, the Company is obligated
to
make milestone payments to BIO-RAP that could total up to $387,500 over the
term
of the agreement. Alteon has a first right to acquire a license to any of the
technology developed as part of the research conducted pursuant to the
agreement. If Alteon exercises this right but the parties acting in good
faith fail to reach an agreement in respect of such license then Alteon has
a
right of first refusal to license the research technology on the same terms
offered by BIO-RAP to a third party.
As
part
of a stock adjustment in the context of Alteon’s merger with HaptoGuard, Inc.
(“HaptoGuard”) in July 2006, Alteon issued to Genentech, Inc. (“Genentech”),
rights to collect milestones and royalties on net sales of alagebrium. Pursuant
to the terms of this agreement, the Company is obligated to make milestone
payments to Genentech that could total up to $5 million over the term of the
agreement. Further, as part of this adjustment, Genentech also was given a
right of first negotiation on ALT-2074 if Alteon were to seek a licensing
partner for the drug.
On
November 6, 2002, Alteon entered into an agreement, effective as of April 15,
2002, with The Picower Institute for Medical Research, or The Picower, which
terminated its License Agreement dated as of September 5, 1991. Pursuant to
this
termination agreement, The Picower assigned to Alteon all of its patents, patent
applications and other technology related to A.G.E.s and Alteon agreed to
prosecute and maintain the patents and patent applications. Alteon will pay
The
Picower royalties on any sales of products falling within the claims of these
patents and patent applications until they expire or are allowed to lapse.
There
are no milestone payments associated with this agreement.
The
Company has also entered into various arrangements with independent research
laboratories to conduct studies in conjunction with the development of the
Company's technology. The Company pays for this research and receives certain
rights to inventions or discoveries that may arise from this
research.
NOTE
7 — Accrued Expenses
Accrued
expenses consisted of the following:
|
|
December 31,
|
|
|
|
2006
|
|
2005
|
|
Clinical
trial expense
|
|
$
|
99,747
|
|
$
|
282,854
|
|
Professional
fees
|
|
|
69,572
|
|
|
195,375
|
|
Payroll
and related expenses
|
|
|
24,816
|
|
|
238,344
|
|
Other
|
|
|
58,887
|
|
|
74,132
|
|
|
|
$
|
253,022
|
|
$
|
790,705
|
|
NOTE
8 — Commitments and Contingencies
Commitments
The
Company’s lease for its office space in Parsippany, New Jersey, expired on
December 31, 2006, and was extended through February 28, 2007. On January 19,
2007, Alteon signed a three-year lease, commencing February 26, 2007, for office
space in Montvale, New Jersey. This facility lease includes two, three-year
renewal options. Rent expense for the years ended December 31, 2006, 2005 and
2004 was $270,180, $266,294, and $351,499, respectively.
As
of
December 31, 2006, after giving effect to the Company’s lease entered into
on January 19, 2007, future minimum rentals under operating leases, including
employment agreements and office equipment, which have initial or remaining
non-cancelable terms in excess of one year are as follows:
|
|
Operating Leases
|
|
2007
|
|
$
|
85,581
|
|
2008
|
|
|
97,807
|
|
2009
|
|
|
97,807
|
|
2010
|
|
|
12,226
|
|
|
|
$
|
293,421
|
|
The
Company has employment agreements with key executives, which provide severance
benefits. If we terminate all of the agreements, we are subject to obligations
totaling $382,694.
Contingencies
In
the
ordinary course of its business, the Company may from time to time be subject
to
claims and lawsuits.
NOTE
9 — Stockholders' Equity
Common/Preferred
Stock Issuances
In
January 2007, Alteon completed a private financing of senior convertible
promissory notes, which provided net proceeds of approximately $3,000,000.
In
connection with this financing, the Company issued five-year warrants to
purchase 25,734,453 shares of its common stock at $0.01 per share. (See
Note
13 - Subsequent Event).
In
September 2006, Alteon Inc. completed a private placement of Units, consisting
of common stock and warrants, for net proceeds, after expenses and fees, of
approximately $1,300,000. Each Unit consists of one share of Alteon common
stock
and one warrant to purchase one share of Alteon common stock, comprising a
total
of approximately 9,500,000 shares of Alteon common stock and warrants to
purchase approximately 9,500,000 shares of Alteon common stock. The Units were
sold at a price of $0.15 per Unit, and the warrants are exercisable for a period
of five years, commencing six months from the date of issuance, at an exercise
price of $0.1875 per share. Rodman & Renshaw, LLC served as placement agent
in the transaction and received a 6% placement fee which was paid in Units.
In
connection with this offering, certain warrants previously issued in 2000 (the
“2000 Warrants”) were repriced from $1.00 to $0.15 per share pursuant to
antidilution provisions connected to the warrants.
In
April
2006, Alteon completed a private placement of Units, consisting of common stock
and warrants, for gross proceeds of approximately $2,600,000. Each Unit
consisted of one share of Alteon common stock and one warrant to purchase one
share of Alteon common stock, comprising a total of 10,340,000 shares of Alteon
common stock and warrants to purchase 10,340,000 shares of Alteon common stock.
The Units were sold at a price of $0.25 per Unit, and the warrants will be
exercisable for a period of five years commencing six months from the date
of
issue at a price of $0.30 per share. Rodman & Renshaw, LLC served as
placement agent in the transaction and received a 6% placement fee that was
paid
in cash and warrants.
In
January 2005, Alteon completed a public offering of 9,523,813 shares of common
stock at $1.05 per share, which provided net proceeds of approximately
$9,532,295. In connection with this offering, the Company issued a five-year
warrant to purchase 312,381 shares of common stock at $1.37 per
share.
In
July
2004, Alteon completed a public offering of 8,000,000 shares of common stock
at
$1.00 per share, which provided net proceeds of $7,581,318. In connection with
this offering, the Company issued a five-year warrant to purchase 272,500 shares
of common stock at $1.30 per share. In connection with this offering, the 2000
Warrants were repriced from $1.75 to $1.00 per share pursuant to antidilution
provisions connected to the warrants.
In
October 2003, Alteon completed a public offering of 4,457,146 shares of common
stock at $1.75 per share, which provided net proceeds of
$7,772,331.
In
July
2003, warrants for 87,462 shares of common stock were exercised in a “net”
exercise transaction in which the exercise price was paid by cancellation of
29,989 shares of common stock issuable upon the exercise for a net issuance
of
57,473 shares. The shares canceled in payment of the exercise were valued at
the
average of the closing prices on the American Stock Exchange for the 20 business
days prior to the exercise of the warrants.
In
March
2003, Alteon completed a public offering of 2,300,000 shares of common stock
at
$3.50 per share, which provided net proceeds of $7,655,945.
In
connection with a 2000 offering of common stock, Alteon issued a seven-year
warrant to purchase 1,133,636 shares of common stock of which 1,046,174 are
outstanding as of December 31, 2006. In connection with subsequent
offerings, the exercise price of 953,890 of the 2000 Warrants was adjusted
to
$0.15 per share, which could be adjusted further if Alteon sells common stock
below $0.15 per share. The exercise price of 46,142 of the 2000 Warrants, which
was adjusted to $2.92 per share, and 46,142 of the 2000 Warrants, which was
adjusted to $2.93 per share, is not subject to further adjustment upon the
sale
of more common stock.
The
following table summarizes the outstanding warrants:
Warrants
Outstanding at
December
31, 2006
|
|
Warrants
|
|
Exercise
Price
Per
Warrant
|
|
9,990,533
|
|
|
0.1875
|
|
10,960,400
|
|
|
0.3000
|
|
312,381
|
|
|
1.3700
|
|
272,500
|
|
|
1.3000
|
|
953,890
|
|
|
0.1500
|
|
46,142
|
|
|
2.9300
|
|
46,142
|
|
|
2.9200
|
|
22,581,988
|
|
|
|
|
In
December 1997, the Company and Genentech entered into a stock purchase agreement
pursuant to which Genentech agreed to buy shares of common stock, Series G
Preferred Stock and Series H Preferred Stock. In December 1997, Genentech
purchased common stock and Series G Preferred Stock for an aggregate purchase
price of $15,000,000. On July 27, 1998 and October 1, 1998, Genentech purchased
$8,000,000 and $14,544,000, respectively, of Series H Preferred Stock. Prior
to
the merger with HaptoGuard, Series G Preferred Stock and Series H Preferred
Stock dividends were payable quarterly in shares of preferred stock at a rate
of
8.5% of the accumulated balance . Each share of Series G Preferred Stock and
Series H Preferred Stock was convertible, upon 70 days’ prior written notice,
into the number of shares of common stock determined by dividing $10,000 by
the
average of the closing sales price of the common stock, as reported on the
American Stock Exchange, for the 20 business days immediately preceding the
date
of conversion. As of December 31, 2006, 2005 and 2004, respectively, $2,652,679,
$4,486,336 and $4,135,145 of Preferred Stockholder dividends were recorded.
As
of December 31, 2006, the Series G and Series H Preferred Stock had been
cancelled or converted into common stock as a result of the merger. The Series
G
and Series H Preferred Stock had no voting rights. (See Note 12 -Merger with
HaptoGuard).
Stock
Option Plan
In
March
2005, the Company’s Board of Directors approved the adoption of a new stock
plan, the “2005 Stock Plan.” Upon shareholder approval of the 2005 Stock Plan at
the Company’s 2005 annual meeting, the two existing stock option plans were
terminated. On July 19, 2006, the Company’s stockholders approved an amendment
to the 2005 Stock Plan which was previously approved by the Company’s Board of
Directors, providing for an increase in the number of shares available under
the
2005 Stock Plan from 5,000,000 shares to 10,000,000 shares, an increase of
5,000,000 shares. The options have a maximum term of ten years and vest over
a
period to be determined by the Company’s Board of Directors (generally over a
four-year period) and are issued at an exercise price equal to the fair market
value of the shares at the date of grant. The 2005 Stock Plan expires on April
19, 2015 or may be terminated at an earlier date by vote of the shareholders
or
the Board of Directors of the Company. Under the 2005 Stock Plan, the Company
granted directors options to purchase in aggregate of 1,920,000 shares of common
stock at an exercise price of $0.15 for the year ended December 31, 2006. In
addition, under the 2005 stock plan, the Company assumed options related to
HaptoGuard option holders (see Note 12 - Merger with HaptoGuard) in the amount
of 2,816,800 shares of common stock at an exercise price of $0.16 in the year
ended December 31, 2006.
The
plan
is administered by a committee of the Board of Directors, which may grant either
non-qualified or incentive stock options. The committee determines the exercise
price and vesting schedule at the time the option is granted. Options vest
over
a four-year period and expire 10 years from date of grant. Each option entitles
the holder to purchase one share of common stock at the indicated exercise
price. The plan also provides for certain antidilution and change in control
rights, as defined.
The
following table summarizes the activity in the Company’s stock
options:
|
|
Shares
|
|
Weighted average exercise price
|
|
Weighted Average Remaining
Contractual Term (years)
|
|
Aggregate Intrinsic Value
|
|
Outstanding
at December 31, 2003
|
|
|
5,979,318
|
|
$
|
2.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,663,409
|
|
|
1.09
|
|
|
|
|
|
|
|
Assumed
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
(5,750
|
)
|
|
0.09
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(1,087,670
|
)
|
|
4.39
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2004
|
|
|
6,549,307
|
|
$
|
2.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
375,022
|
|
|
0.47
|
|
|
|
|
|
|
|
Assumed
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(437,664
|
)
|
|
2.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2005
|
|
|
6,486,665
|
|
$
|
2.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,920,000
|
|
|
0.16
|
|
|
|
|
|
|
|
Assumed
|
|
|
2,816,800
|
|
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(433,328
|
)
|
|
2.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2006
|
|
|
10,790,137
|
|
$
|
1.25
|
|
|
6.02
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable at December 31, 2006
|
|
|
7,884,276
|
|
$
|
1.65
|
|
|
4.87
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
fair value of options granted during the year ended December 31,
2006
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
The
Company estimated the fair value of each option award on the date of grant
using
the Black-Scholes model. The Company based expected volatility on historical
volatility. The expected term of options granted represents the period of time
that options granted are expected to be outstanding. The Company estimated
the
expected term of stock options using historical exercise and employee forfeiture
experience.
The
following table shows the weighted average assumptions the Company used to
develop the fair value estimates for the determination of the compensation
charges:
|
|
Year
Ended December 31
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
Expected
volatility
|
|
|
140.67
|
%
|
|
135.55
|
%
|
|
134.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
yield
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
term (in years)
|
|
|
6.51
|
|
|
3.54
|
|
|
4.07
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
4.63
|
%
|
|
3.72
|
%
|
|
3.34
|
%
|
The
fair
values of options granted during the last three years are as
follows:
|
|
2006
|
|
2005
|
|
2004
|
|
Fair
value of each option granted/assumed
|
|
$
|
0.14
|
|
$
|
0.39
|
|
$
|
0.89
|
|
Total
number of options granted/assumed
|
|
|
4,736,800
|
|
|
375,022
|
|
|
1,663,409
|
|
Total
fair value of options granted/assumed
|
|
$
|
663,152
|
|
$
|
146,259
|
|
$
|
1,480,434
|
|
The
following table summarizes information regarding stock options outstanding
and
exercisable at December 31, 2006:
|
|
Options
Outstanding at
December
31, 2006
|
|
Options
Exercisable at
December
31, 2006
|
|
Range
of
Exercise Prices
|
|
Number
Outstanding
|
|
Weighted
Average Remaining Contractual Life
(Years)
|
|
Weighted
Average Exercise Price
|
|
Number
Exercisable
|
|
Weighted
Average Exercise Price
|
|
$0.150
- $ 0.150
|
|
|
1,830,000
|
|
|
9.77
|
|
$
|
0.1500
|
|
|
0
|
|
$
|
0.0000
|
|
0.160
- 0.160
|
|
|
2,816,800
|
|
|
8.24
|
|
|
0.1600
|
|
|
1,740,939
|
|
|
0.1600
|
|
0.200
- 0.875
|
|
|
1,192,405
|
|
|
2.95
|
|
|
0.7592
|
|
|
1,192,405
|
|
|
0.7592
|
|
1.030-
1.030
|
|
|
1,252,949
|
|
|
5.67
|
|
|
1.0300
|
|
|
1,252,949
|
|
|
1.0300
|
|
1.063
- 1.560
|
|
|
1,186,461
|
|
|
3.49
|
|
|
1.2815
|
|
|
1,186,461
|
|
|
1.2815
|
|
1.625
- 2.875
|
|
|
1,134,305
|
|
|
4.59
|
|
|
2.2920
|
|
|
1,134,305
|
|
|
2.2920
|
|
3.500
- 4.620
|
|
|
1,030,567
|
|
|
2.97
|
|
|
4.0503
|
|
|
1,030,567
|
|
|
4.0503
|
|
5.125
- 5.125
|
|
|
76,000
|
|
|
0.17
|
|
|
5.1250
|
|
|
76,000
|
|
|
5.1250
|
|
5.625
- 5.625
|
|
|
48,000
|
|
|
0.08
|
|
|
5.6250
|
|
|
48,000
|
|
|
5.6250
|
|
7.000
- 7.000
|
|
|
222,650
|
|
|
3.70
|
|
|
7.0000
|
|
|
222,650
|
|
|
7.0000
|
|
$0.200
- $7.000
|
|
|
10,790,137
|
|
|
6.02
|
|
$
|
1.2450
|
|
|
7,884,276
|
|
$
|
1.6472
|
|
Expenses
recorded for options granted to consultants totaled $5,122, $26,904 and $34,731
in 2006, 2005 and 2004, respectively.
Restricted
Stock
The
Company granted awards of restricted stock to its Board of Directors. The awards
vest at various periods ranging from one to three years. There were 960,000
shares of restricted stock granted during the year ended December 31, 2006,
of
which 160,000 were forfeited. There were no restricted stock shares granted
during the years ended December 31, 2005 and 2004. The Company recognized
compensation cost of $17,995, which was recorded as general and administrative
expense for the year ended December 31, 2006. There was no compensation expense
for the years ended December 31, 2005 and 2004.
A
summary
of the status of the Company’s non-vested shares as of December 31, 2006 and
changes during the year ended December 31, 2006, is presented
below:
Nonvested
Shares
|
|
Shares
|
|
Weighted average grant
date fair value
|
|
|
|
|
|
|
|
Nonvested
at January 1, 2006
|
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
960,000
|
|
$
|
0.15
|
|
Vested
|
|
|
-
|
|
|
-
|
|
Forfeited
|
|
|
160,000
|
|
|
0.15
|
|
|
|
|
|
|
|
|
|
Nonvested
at December 31, 2006
|
|
|
800,000
|
|
$
|
0.15
|
|
As
of
December 31, 2006, there was $102,000 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted. That cost
is expected to be recognized over a weighted-average period of 2.55 years.
The
total fair value of shares vested during the year ended December 31, 2006 was
$0.
NOTE
10 — Savings and Retirement Plan
The
Company maintains a savings and retirement plan under Section 401(k) of the
Internal Revenue Code that allows eligible employees to annually contribute
a
portion of their annual salary to the plan. In 1998, the Company began making
discretionary contributions at a rate of 25% of an employee’s contribution up to
a maximum of 5% of the employee’s base salary, as defined. The Company made
contributions of $15,835, $50,703 and $62,641 for the years ended December
31,
2006, 2005 and 2004, respectively.
NOTE
11 — Income
Taxes
The
components of the deferred tax assets and the valuation allowance are as
follows:
|
|
December 31,
|
|
|
|
2006
|
|
2005
|
|
Net
operating loss carryforwards
|
|
$
|
60,500,000
|
|
$
|
57,600,000
|
|
Research
and development credits
|
|
|
8,400,000
|
|
|
8,600,000
|
|
Capitalized
research and development expenses
|
|
|
12,800,000
|
|
|
13,800,000
|
|
Other
temporary differences
|
|
|
500,000
|
|
|
100,000
|
|
Gross
deferred tax assets
|
|
|
82,200,000
|
|
|
80,100,000
|
|
Valuation
allowance
|
|
|
(82,200,000
|
)
|
|
(80,100,000
|
)
|
Net
deferred tax assets
|
|
$
|
—
|
|
$
|
—
|
|
The
effective tax rate varied from the statutory rate, as follows:
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
Statutory
federal income tax rate
|
|
|
(34.0
|
)%
|
|
(34.0
|
)%
|
|
(34.0
|
)%
|
State
income tax rate (net of federal)
|
|
|
(6.0
|
)%
|
|
(6.0
|
)%
|
|
(6.0
|
)%
|
In-process
research and development
|
|
|
26.0
|
%
|
|
|
%
|
|
—
|
%
|
Expiration
of fully reserved state net operating
loss carryforwards
|
|
|
4.0
|
%
|
|
—
|
%
|
|
—
|
%
|
Other
|
|
|
(2.0
|
)%
|
|
—
|
%
|
|
—
|
%
|
Certain
nondeductible expenses
|
|
|
—
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
Effect
of net operating loss carryforwards and valuation
allowance
|
|
|
12.0
|
%
|
|
37.4
|
%
|
|
37.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Effective
tax rate
|
|
|
—
|
%
|
|
(2.5)%
|
|
|
(2.7)%
|
|
At
December 31, 2006, the Company had available federal net operating loss
carryforwards of $168,536,821, which expire in the years 2007 through 2026
and
state net operating loss carryforwards of $53,824,491, which expire in the
years
2007 through 2013. In addition, the Company has federal research and development
tax credit carryforwards of $6,717,647 and state research and development tax
credit carryforwards of $1,683,419. The amount of federal net operating loss
and
research and development tax credit carryforwards that can be utilized in any
one period are limited by federal income tax regulations if a cumulative change
in ownership of more than 50% occurs within a three-year period which management
believes has occurred.
Given
the
Company’s history of incurring operating losses, management believes that it is
unlikely that any of the deferred tax assets will be recoverable. As a result,
a
valuation allowance equal to the gross deferred tax assets was established.
The
valuation allowance increased by $2,100,000, $1,500,000 and $4,700,000 in 2006,
2005 and 2004, respectively. In
2006,
2005 and 2004, the Company sold $0, $4,077,000 and $3,456,000, respectively,
of
its state net operating loss carryforwards and $0, $0 and $123,000,
respectively, of its state research and development tax credit carryforwards
under the State of New Jersey’s Technology Business Tax Certificate Transfer
Program, or the Program. The Program allows qualified technology and
biotechnology businesses in New Jersey to sell unused amounts of net operating
loss carryforwards and defined research and development tax credits for
cash.
The
proceeds from the sale of the Company’s carryforwards and credits in 2006, 2005
and 2004 were $0, $327,000, and $386,000, respectively, and such amounts were
recorded as a tax benefit in the statements of operations. Due to the
uncertainty at any time as to the Company’s ability to effectuate the sale of
Alteon’s available New Jersey state net operating losses, and since the Company
has no control or influence over the Program, the benefits are recorded once
the
agreement with the counterparty is signed and the sale is approved by the
State.
Note
12 - Merger with HaptoGuard, Inc.
On
April 19, 2006, the Company (“Alteon”), entered into a definitive Agreement
and Plan of Merger (the “Merger Agreement”) with Alteon Merger Sub, Inc., a
Delaware corporation and wholly-owned subsidiary of Alteon (“Merger Sub”),
HaptoGuard, Inc., a Delaware corporation (“HaptoGuard”), and Genentech, Inc., a
Delaware corporation (“Genentech”). The Merger Agreement provided that upon the
terms and subject to the conditions set forth in the Merger Agreement, Merger
Sub merge with and into HaptoGuard, with HaptoGuard becoming the surviving
corporation (the “Surviving Corporation”) and a wholly-owned subsidiary of
Alteon (the “Merger”). On July 19, 2006, Alteon’s shareholders approved the
Merger and on July 21, 2006, the Merger was completed.
The
Merger of the two companies was structured as an acquisition by Alteon. Under
the terms of the Merger Agreement, HaptoGuard shareholders received a total
of
37.4 million shares of Alteon common stock. As an additional part of the merger,
a portion of existing shares of Alteon preferred stock held by Genentech was
converted into 13,492,349 shares of Alteon common stock.
Key
components of the transactions completed in July 2006 between Alteon, HaptoGuard
and Genentech were as follows:
|
|
Alteon
acquired all outstanding equity of HaptoGuard. In exchange, HaptoGuard
shareholders received from Alteon $5.3 million in Alteon common stock,
or
approximately 22.5 million shares.
|
|
|
Genentech
converted a portion of its existing Alteon preferred stock to Alteon
common stock. A portion of Alteon preferred stock held by Genentech,
which, when converted to Alteon common stock is equal to $3.5 million
in
Alteon common stock, was transferred to HaptoGuard
shareholders.
|
|
|
The
remaining Alteon preferred stock held by Genentech was cancelled.
|
|
|
Genentech
will receive milestone payments and royalties on any future net sales
of
alagebrium, and received a right of first negotiation on
ALT-2074.
|
The
acquisition of HaptoGuard has been accounted for by the Company under the
purchase method of accounting in accordance with Statement of Financial
Accounting Standards No. 141, “Business Combinations.” Under the purchase
method, assets acquired and liabilities assumed by the Company are recorded
at
their estimated fair values and the results of operations of the acquired
company are consolidated with those of the Company from the date of
acquisition.
The
excess purchase price paid by the Company to acquire the net assets of
HaptoGuard was allocated to acquired in-process research and development
totaling $11,379,348. As required by FASB Interpretation No. 4, “Applicability
of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase
Method” (“FIN4”), the Company recorded a charge in its statements of operations
for the year ended December 31, 2006 for the in-process research and
development. Alteon and HaptoGuard have complementary product platforms in
cardiovascular diseases, diabetes and other inflammatory diseases, including
two
Phase 2 clinical-stage compounds focused on cardiovascular diseases in diabetic
patients. Results of operations of HaptoGuard are included in the consolidated
financial statements since July 21, 2006.
A
summary
of the allocation of the purchase price, including acquisition costs of
$1,758,928 is as follows:
Assets
purchased:
|
|
|
|
|
Cash
|
|
$
|
7,804
|
|
Prepaid
expenses and other current assets
|
|
|
25,839
|
|
Property
and equipment
|
|
|
4,462
|
|
Acquired
in-process research and development
|
|
|
11,379,348
|
|
Total
|
|
|
11,417,453
|
|
|
|
|
|
|
Liabilities
assumed:
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
623,467
|
|
Net
purchase price
|
|
$
|
10,793,986
|
|
Common
stock and other equity consideration issued
|
|
|
9,035,058
|
|
Acquisition
costs incurred
|
|
$
|
1,758,928
|
|
The
following unaudited pro forma financial information presents the consolidated
results of operations of the Company and HaptoGuard, as if the acquisition
had
occurred on January 1, 2006 and January 1, 2005 instead of July 21, 2006, after
giving effect to certain adjustments, including the issuance of the Company’s
common stock as part of the purchase price. The unaudited pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the entities been a single company during these
periods.
|
|
Year
ended December 31,
|
|
|
|
2006
|
|
2005
|
|
Net
loss
|
|
$
|
(18,735,530
|
)
|
$
|
(25,648,502
|
)
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
119,459,521
|
|
|
108,530,669
|
|
Loss
per common share - basic and fully diluted
|
|
$
|
(0.16
|
)
|
$
|
(0.24
|
)
|
The
pro
forma financial information for the years ended December 31, 2006 and 2005
include a one-time non-recurring acquired in-process research and development
charge of $11,379,348.
NOTE
13 – Subsequent Event
Note
and Warrant Financing
On
January 11, 2007, the Company entered into a Note and Warrant Purchase Agreement
(the “Agreement”) with institutional investors (the “Buyers” and together with
the Company, the “Parties”). Pursuant to the terms and subject to the conditions
contained in the Agreement, the Company issued and sold to the Buyers $3,000,000
principal amount of senior convertible secured promissory notes (the “Notes”).
Each Note accrues interest at a rate of 8% per annum and the principal and
interest on the Note are due and payable, if not converted, on May 31, 2007.
The
Notes will automatically be converted into any security that is issued by the
Company to the Buyers and other potential investors in connection with a
proposed private preferred stock and warrant financing of up to $20 million
that
is currently being negotiated. The closing of any such additional financing,
which the Company anticipates will be done at a discount from the market price,
will be subject to the satisfaction of various conditions, including stockholder
approval. In addition, at the option of the Buyers, the Notes may be converted
into any security that is sold by the Company in any other financing on or
prior
to May 31, 2007. If the Notes have not been repaid or converted prior to May
31,
2007, the Company will be obligated to repay the outstanding principal amount
plus any accrued but unpaid interest as well as (i) an additional $1,000,000
and
(ii) fifteen percent (15%) of any amount received from financing, sale or
licensing transactions completed prior to June 30, 2008, subject to a cap of
$2,000,000 in the aggregate. Finally, at the option of the Buyers, unless
otherwise converted, the Notes may be converted into shares of the Company’s
common stock, $0.01 par value per share (the “Common Stock”), at a price equal
to the closing price of the Common Stock on January 11, 2007. The Buyers may,
at
their option, demand that we repay the outstanding principal amount of the
Notes
plus any accrued but unpaid interest if (i) we fail to make any payments under
the Notes; (ii) we breach any representation, warranty, covenant or agreement
in
the Agreement; (iii) we fail to pay any Indebtedness (as defined in the
Agreement) when due in the aggregate amount of $500,000 or greater at any one
time; (iv) a final judgment for the payment of money aggregating in excess
of
$500,000 is rendered against us and such judgment is not discharged within
60
days; (v) we are dissolved, become insolvent or make an assignment for the
benefit of creditors; (vi) any petition for relief under bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, receivership,
liquidation or dissolution is filed or commenced against us or (vii) any trustee
or receiver is appointed for us or any of our property, a meeting of creditors
is convened or a committee of creditors is appointed for, or any petition for
any relief under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, liquidation or dissolution is filed or
commenced against us and is not dismissed within 120 days.
In
connection with the Agreement, the Company also issued to the Buyers warrants
to
purchase 25,734,453 shares of the Company’s Common Stock for a period of
five years commencing on January 11, 2007 at an exercise price of $0.01 per
share (the “Warrants”). The Warrants will be exercisable starting as of May 31,
2007, unless the Notes are converted prior to such date, in which case the
Warrants will expire. The Company estimated the value of the warrants using
the
Black-Scholes model at approximately $3,660,000.
In
connection with note and warrant financing, the Company anticipates recognizing
a significant amount of non-cash, and potentially cash, interest expense in
the
first and second quarters of 2007.
Contemporaneously
with the execution and delivery of the Agreement and the issuance by the Company
to the Buyers of the Notes and the Warrants, the Parties executed (i) a Security
and Guaranty Agreement (the “Security Agreement”), pursuant to which the Company
and its wholly owned subsidiary HaptoGuard agreed to provide to the Buyers
a
first priority security interest in certain Collateral (as this term is defined
in the Security Agreement) to secure our obligations under the Agreement and
the
Notes, and (ii) an Intellectual Property Security Agreement (“Intellectual
Property Security Agreement”), pursuant to which the Company and its wholly
owned subsidiary HaptoGuard agreed to provide to Buyer a first priority security
interest in certain IP Collateral (as this term is defined in the Intellectual
Property Security Agreements) to secure the Company’s obligations under the
Agreement and the Notes. The
Security Agreement and the security interest in certain Collateral terminate
upon the conversion of the Notes.
Contemporaneously
with the execution and delivery of the Agreement, the Parties entered into
a
Registration Rights Agreement (the “Registration Rights Agreement”). Under the
terms of the Registration Rights Agreement, the Company has agreed to file
a
registration statement with the United States Securities and Exchange Commission
for the resale of the shares of common stock underlying the warrants and the
Notes sold in the private placement by April 30, 2007. Failure to file the
registration statement in a timely manner will result in payment by the Company
to each investor of liquidated damages, subject to certain limitations set
forth
in the Registration Rights Agreement. Such liquidated damages are also payable
in the event that the resale registration statement has not been declared
effective within certain time periods or if sales cannot be made pursuant to
the
registration statement following its effectiveness, each as described in the
Registration Rights Agreement.
In
addition, in connection with the execution and delivery of the Agreement, the
Company amended its Amended and Restated Stockholder Rights Agreement, dated
as
of July 27, 2005 (the “Rights Agreement”), to provide that the Buyers would not
be deemed Acquiring Persons (as defined in the Rights Agreement) and that the
purchase of the notes and warrants by the Buyers would not be deemed to trigger
a Stock Acquisition Date or a Distribution Date each as defined in the Rights
Agreement.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on
its
behalf by the undersigned, thereunto duly authorized this 16th day of October
2007.
|
SYNVISTA
THERAPEUTICS, INC.
|
|
|
|
|
By:
|
/s/
Noah Berkowitz
|
|
Noah
Berkowitz, M.D., Ph.D.
|
|
President
and Chief Executive Officer
|
|
|
|
|
By:
|
/s/
Jeffrey P. Stein
|
|
Jeffrey
P. Stein, CPA
|
|
(principal
financial and accounting officer)
|
EXHIBIT
INDEX
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
2.1
|
|
Agreement
and Plan of Merger by and among Alteon Inc., Alteon Merger Sub,
Inc.,
HaptoGuard, Inc. and Genentech, Inc., dated as of April 19, 2006.
(Incorporated by reference to Annex A to the Company’s Schedule 14A filed
on June 22, 2006, SEC File Number 000-16043.)
|
|
|
|
3.1
|
|
Restated
Certificate of Incorporation, as amended. (Incorporated by reference
to
Exhibit 3.1 to the Company's Report on Form 10-Q filed on November
10,
1999, SEC File Number 000-19529.)
|
|
|
|
3.2
|
|
Certificate
of the Voting Powers, Designations, Preference and Relative Participating,
Optional and Other Special Rights and Qualifications, Limitations
or
Restrictions of Series F Preferred Stock of Alteon Inc. (Incorporated
by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for
the year ended December 31, 2000, SEC File Number
001-16043.)
|
|
|
|
3.3
|
|
Certificate
of Retirement of Alteon Inc., dated September 10, 2000. (Incorporated
by
reference to Exhibit 3.1 to the Company's Report on Form 10-Q filed
on
November 10, 1999, SEC File Number 000-19529.)
|
|
|
|
3.4
|
|
Certificate
of Designations of Series G Preferred Stock of Alteon Inc. (Incorporated
by reference to Exhibit 3.4 to the Company's Annual Report on Form
10-K
for the year ended December 31, 1997, SEC File Number
000-19529.)
|
|
|
|
3.5
|
|
Certificate
of Amendment of Certificate of Designations of Series G Preferred
Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.4 to the Company's
Report on Form 10-Q filed on August 14, 1998, SEC File Number
000-19529.)
|
|
|
|
3.6
|
|
Certificate
of Designations of Series H Preferred Stock of Alteon Inc. (Incorporated
by reference to Exhibit 3.5 to the Company's Annual Report on Form
10-K
for the year ended December 31, 1997, SEC File Number
000-19529.)
|
|
|
|
3.7
|
|
Amended
Certificate of Designations of Series H Preferred Stock of Alteon
Inc.
(Incorporated by reference to Exhibit 3.6 to the Company's Report
on Form
10-Q filed on August 14, 1998, SEC File Number
000-19529.)
|
|
|
|
3.8
|
|
Certificate
of Retirement of Alteon Inc., dated November 20, 2000. (Incorporated
by
reference to Exhibit 3.8 to the Company's Annual Report on Form
10-K for
the year ended December 31, 2000, SEC File Number
001-16043.)
|
|
|
|
3.9
|
|
Certificate
of Amendment to Restated Certificate of Incorporation of Alteon
Inc.,
dated June 7, 2001. (Incorporated by reference to Exhibit 3.8 to
the
Company’s Report on Form 10-Q filed on August 14, 2001, SEC File Number
001-16043.)
|
|
|
|
3.10
|
|
By-laws,
as amended. (Incorporated by reference to Exhibit 3.10 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2002,
SEC File
Number 001-16043.)
|
|
|
|
3.11
|
|
Certificate
of Amendment to Restated Certificate of Incorporation of Alteon
Inc.,
dated September 17, 2004. (Incorporated by reference to Exhibit
3.1 to the
Company’s Report on Form 10-Q filed on November 9, 2004, SEC File Number
001-16043.)
|
|
|
|
3.12
|
|
Amended
Certificate of Designations of Series G Preferred Stock of Alteon
Inc.,
dated October 6, 2004. (Incorporated by reference to Exhibit 3.2
to the
Company’s Report on Form 10-Q filed on November 9, 2004, SEC File Number
001-16043.)
|
EXHIBIT
INDEX
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
3.13
|
|
Amended
Certificate of the Voting Powers, Designations, Preferences and
Relative
Participating, Optional and Other Special Rights and Qualifications,
Limitations or Restrictions or Series F Preferred Stock of Alteon
Inc.
(Incorporated by reference to Exhibit 3.1.1 to the Company’s Report on
Form 10-Q filed on August 9, 2005, SEC File Number
001-16043.)
|
|
|
|
3.14
|
|
Certificate
of Amendment to Restated Certificate of Incorporation of Alteon
Inc.,
dated October 24, 2005. (Incorporated by reference to Exhibit 3.14
to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2005,
SEC File Number 001-16043.)
|
|
|
|
3.15
|
|
Certificate
of Amendment to the Corrected Certificate of Designations of Series G
Preferred Stock of Alteon Inc., dated July 20, 2006. (Incorporated
by
reference to Exhibit 3.14 to the Company’s Registration Statement on Form
S-8 filed on September 5, 2006, SEC File Number
333-137115.)
|
|
|
|
3.16
|
|
Certificate
of Amendment to the Corrected Certificate of Designations of Series
H
Preferred Stock of Alteon Inc., dated July 20, 2006. (Incorporated
by
reference to Exhibit 3.15 to the Company’s Registration Statement on Form
S-8 filed on September 5, 2006, SEC File Number
333-137115.)
|
|
|
|
3.17
|
|
Form
of Amended and Restated Certificate of Incorporation of the Company.
(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report
on Form 8-K filed on April 11, 2007, SEC File No.
001-16043.)
|
|
|
|
3.18
|
|
Amended
and Restated Certificate of Incorporation of the Company dated
July 23,
2007. (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007, SEC File
Number
001-16043.)
|
|
|
|
4.1
|
|
Stockholders'
Rights Agreement between Alteon Inc. and Registrar and Transfer
Company,
as Rights Agent, dated as of July 27, 1995. (Incorporated by reference
to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for the
year ended
December 31, 2000, SEC File Number 001-16043.)
|
|
|
|
4.2
|
|
Amendment
to Stockholders' Rights Agreement between Alteon Inc. and Registrar
and
Transfer Company, as Rights Agent, dated as of April 24, 1997.
(Incorporated by reference to Exhibit 4.4 to the Company's Current
Report
on Form 8-K filed on May 9, 1997, SEC File Number
000-19529.)
|
|
|
|
4.3
|
|
Registration
Rights Agreement between Alteon Inc. and the investors named on
the
signature page thereof, dated as of April 24, 1997. (Incorporated
by
reference to Exhibit 4.1 to the Company's Current Report on Form
8-K filed
on May 9, 1997, SEC File Number 000-19529.)
|
|
|
|
4.4
|
|
Form
of Common Stock Purchase Warrant. (Incorporated by reference to
Exhibit
4.2 to the Company's Current Report on Form 8-K filed on May 9,
1997, SEC
File Number 000-19529.)
|
|
|
|
4.5
|
|
Amendment
to Stockholders' Rights Agreement between Alteon Inc. and Registrar
and
Transfer Company, as Rights Agent, dated as of December 1, 1997.
(Incorporated by reference to Exhibit 4.1 to the Company's Current
Report
on Form 8-K filed on December 10, 1997, SEC File Number
000-19529.)
|
|
|
|
4.6
|
|
Registration
Rights Agreement, dated September 29, 2000. (Incorporated by reference
to
Exhibit 4.1 to the Company's Current Report on Form 8-K filed on
October
5, 2000, SEC File Number 001-16043.)
|
|
|
|
4.7
|
|
Form
of Series 1 Common Stock Purchase Warrant. (Incorporated by reference
to
Exhibit 4.2 to the Company's Current Report on Form 8-K filed on
October
5, 2000, SEC File Number
001-16043.)
|
EXHIBIT
INDEX
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
4.8
|
|
Form
of Series 2 Common Stock Purchase Warrant. (Incorporated by reference
to
Exhibit 4.3 to the Company's Current Report on Form 8-K filed on
October
5, 2000, SEC File Number 001-16043.)
|
|
|
|
4.9
|
|
Notice
of Appointment of The American Stock Transfer & Trust Company as
successor Rights Agent, dated August 29, 2002, pursuant to Stockholders’
Rights Agreement, dated as of July 27, 1995. (Incorporated by reference
to
Exhibit 4.4 of the Company’s Report on Form 10-Q filed on November 13,
2002, SEC File Number 001-16043.)
|
|
|
|
4.10
|
|
Form
of Common Stock Purchase Warrant, dated July 2, 2004. (Incorporated
by
reference to Exhibit 4.10 to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2005, SEC File Number
000-16043.)
|
|
|
|
4.11
|
|
Form
of Common Stock Purchase Warrant, dated January 5, 2005. (Incorporated
by
reference to Exhibit 4.11 to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2005, SEC File Number
000-16043.)
|
|
|
|
4.12
|
|
Amended
and Restated Stockholder Rights Agreement between Synvista Therapeutics,
Inc. and American Stock Transfer & Trust Company as Rights Agent,
dated as of July 27, 2005. (Incorporated by reference to Exhibit
4.1 to
the Company’s Registration Statement on Form 8-A/A filed on July 27, 2005,
SEC File Number 001-16043.)
|
|
|
|
4.13
|
|
Registration
Rights Agreement by and between Synvista Therapeutics, Inc. and
the
Purchasers named therein, dated as of April 19, 2006. (Incorporated
by
reference to Exhibit 10.2 to the Company’s Registration Statement on Form
S-3 filed on May 31, 2006, SEC File No. 333-134584.)
|
|
|
|
4.14
|
|
Form
of Common Stock Purchase Warrant issued to Investors pursuant to
the
Securities Purchase Agreement by and between Synvista Therapeutics,
Inc.
and the Purchasers named therein, dated as of April 19, 2006.
(Incorporated by reference to Exhibit 10.27 to the Company’s Registration
Statement on Form S-3 filed on May 31, 2006, SEC File No.
333-134584.)
|
|
|
|
4.15
|
|
Registration
Rights Agreement by and between Synvista Therapeutics, Inc. and
the
Purchasers named therein, dated as of September 13, 2006. (Incorporated
by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed on September 19, 2006, SEC File No. 001-16043.)
|
|
|
|
4.16
|
|
Form
of Common Stock Purchase Warrant issued to Investors pursuant to
the
Securities Purchase Agreement by and between the Company and the
Purchasers named therein, dated as of September 13, 2006. (Incorporated
by
reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
filed on September 19, 2006, SEC File No. 001-16043.)
|
|
|
|
4.17
|
|
Registration
Rights Agreement among Synvista Therapeutics, Inc. and the Purchasers
named therein, dated as of January 11, 2007. (Incorporated by reference
to
Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on January
16, 2007, SEC File No. 001-16043.)
|
|
|
|
4.18
|
|
Form
of Senior Convertible Secured Promissory Note issued to Lenders
pursuant
to the Note and Warrant Purchase Agreement, dated as of January
11, 2007.
(Incorporated by reference to Exhibit 10.5 to the Company’s Current Report
on Form 8-K filed on January 16, 2007, SEC File No.
001-16043.)
|
|
|
|
4.19
|
|
Form
of Common Stock Purchase Warrant issued to Lenders pursuant to
the Note
and Warrant Purchase Agreement, dated as of January 11, 2007.
(Incorporated by reference to Exhibit 10.6 to the Company’s Current Report
on Form 8-K filed on January 16, 2007, SEC File No.
001-16043.)
|
EXHIBIT
INDEX
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
4.20
|
|
Amendment
No. 1 Stockholder Rights Agreement by and between Synvista Therapeutics,
Inc. and American Stock Transfer & Trust Company, dated as of January
11, 2007. (Incorporated by reference to Exhibit 10.7 to the Company’s
Current Report on Form 8-K filed on January 16, 2007, SEC File
No.
001-16043.)
|
|
|
|
4.21
|
|
Form
of Registration Rights Agreement among Synvista Therapeutics, Inc.
and
each Purchaser identified on the signature pages thereto. (Incorporated
by
reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
filed on April 11, 2007, SEC File No. 001-16043.)
|
|
|
|
4.22
|
|
Form
of Preferred Stock Purchase Warrant to be issued to the Purchasers
pursuant to the Series B Preferred Stock and Warrant Purchase Agreement,
dated as of April 5, 2007. (Incorporated by reference to Exhibit
10.4 to
the Company’s Current Report on Form 8-K filed on April 11, 2007, SEC File
No. 001-16043.)
|
|
|
|
4.23
|
|
Amendment
No. 1 to Registration Rights Agreement dated May 14, 2007 by and
among the
Company and the purchasers identified on the signature pages to
that
certain Registration Rights Agreement dated as of January 11, 2007.
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on May 18, 2007, SEC File Number
001-16043.)
|
|
|
|
4.24
|
|
Amendment
No. 1 to Registration Rights Agreement dated September 7, 2007
by and
among the Company and the purchasers identified on the signature
pages to
that certain Registration Rights Agreement dated as of July 25,
2007.
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on September 13, 2007, SEC File Number
001-16043.)
|
|
|
|
10.1
|
|
Amended
and Restated 1987 Stock Option Plan. (Incorporated by reference
to Exhibit
10.1 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, SEC File Number 000-19529.)
|
|
|
|
10.2
|
|
Amended
1995 Stock Option Plan. (Incorporated by reference to Exhibit 10.2
to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2001,
SEC File Number 001-16043.)
|
|
|
|
10.3†
|
|
Form
of Employee's or Consultant's Invention Assignment, Confidential
Information and Non-Competition Agreement executed by all key employees
and consultants as employed or retained from time to time. (Incorporated
by Reference to Exhibit 10.1 to the Company's Registration Statement
on
Form S-1, SEC File Number 33-42574, which became effective on November
1,
1991.)
|
|
|
|
10.4†
|
|
Alteon
Inc. Change in Control Severance Benefits Plan. (Incorporated by
reference
to Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the year
ended December 31, 2000, SEC File Number 001-16043.)
|
|
|
|
10.5
|
|
Preferred
Stock Investment Agreement between Alteon Inc. and the investors
named on
the signature page thereof, dated as of April 24, 1997. (Incorporated
by
reference to Exhibit 10.1 to the Company's Current Report on Form
8-K
filed on May 9, 1997, SEC File Number 000-19529.)
|
|
|
|
10.6
|
|
Common
Stock and Warrants Purchase Agreement among Alteon Inc. and EGM
Medical
Technology Fund, L.P., EGM Technology Offshore Fund, Narragansett
I, L.P.,
Narragansett Offshore, Ltd., S.A.C. Capital Associates, LLC, SDS
Merchant
Fund, LP and Herriot Tabuteau, dated as of September 29, 2000.
(Incorporated by reference to Exhibit 10.1 to the Company's Current
Report
on Form 8-K filed on October 5, 2000, SEC File Number
001-16043.)
|
|
|
|
10.7
|
|
Stock
Purchase Agreement between Alteon Inc. and the Purchasers named
therein,
dated January 4, 2002. (Incorporated by reference to the Company’s Current
Report on Form 8-K filed on January 7, 2002, SEC File Number
001-16043.)
|
|
|
|
10.8
|
|
Stock
Purchase Agreement between Alteon Inc. and the Purchasers named
therein,
dated December 20, 2002. (Incorporated by reference to Exhibit
10.1 of the
Company’s Current Report on Form 8-K filed on December 24, 2002, SEC File
Number 001-16043.)
|
|
|
|
10.9
|
|
Stock
Purchase Agreement, dated October 15, 2003. (Incorporated by reference
to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October
20, 2003, SEC File Number
001-16043.)
|
EXHIBIT
INDEX
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
10.10
|
|
Amendment
to Stock Purchase Agreement, dated October 24, 2003. (Incorporated
by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q
filed on November 13, 2003, SEC File Number 001-16043.)
|
|
|
|
10.11
|
|
Alteon
Inc. Description of Director Compensation Arrangements. (Incorporated
by
reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K
filed on March 22, 2007, SEC File Number 001-16043.)
|
|
|
|
10.12
|
|
Alteon
Inc. Description of Executive Officer Compensation Arrangements.
(Incorporated by reference to Exhibit 10.12 to the Company’s Annual Report
on Form 10-K filed on March 22, 2007, SEC File Number
001-16043.)
|
|
|
|
10.13†
|
|
Alteon
Inc. 2005 Stock Plan. (Incorporated by reference to Exhibit 99.1
to the
Company’s Current Report on Form 8-K filed on July 6, 2005, SEC File
Number 001-16043.)
|
|
|
|
10.14†
|
|
Form
of Employee’s Stock Option Grant Agreement. (Incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on
August 9, 2005, SEC File Number 001-16043.)
|
|
|
|
10.15
|
|
Form
of Director’s Formula Award Non-Qualified Stock Option Grant Agreement.
(Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q filed on August 9, 2005, SEC File Number
001-16043.)
|
|
|
|
10.16
|
|
Form
of Consultant’s Non-Qualified Stock Option Grant Agreement. (Incorporated
by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form
10-Q filed on August 9, 2005, SEC File Number
001-16043.)
|
|
|
|
10.17
|
|
Notice
of Option Acceleration. (Incorporated by reference to Exhibit 10.27
to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2005,
SEC File Number 001-16043.)
|
|
|
|
10.18
|
|
Alteon
Inc. Severance Plan and Summary Plan Description. (Incorporated
by
reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2005, SEC File Number
001-16043.)
|
|
|
|
10.19
|
|
Voting
Agreement by and between the stockholders named therein, HaptoGuard,
Inc.
and Alteon Inc., dated as of April 19, 2006. (Incorporated by
reference to Annex B to the Company’s Schedule 14A filed on June 22, 2006,
SEC File Number 000-16043.)
|
|
|
|
10.20
|
|
Employment
Agreement between HaptoGuard, Inc. and Noah Berkowitz, dated March
1,
2005. (Incorporated by reference to Exhibit 99.2 to the Company’s Current
Report on Form 8-K filed on July 25, 2006, SEC File Number
000-16043.)
|
|
|
|
10.21
|
|
Alteon
Inc. Stock Plan as amended on July 19, 2006. (Incorporated by reference
to
Exhibit 10.1 to the Company’s Registration Statement on Form S-8 filed on
September 5, 2006, SEC File Number333-137115.)
|
|
|
|
10.22
|
|
Securities
Purchase Agreement among Alteon Inc. and each Purchaser identified
on the
signature pages thereto, dated as of September 13, 2006. (Incorporated
by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on September 19, 2006, SEC File No.
001-16043.)
|
EXHIBIT
INDEX
No.
|
|
Description
of Exhibit
|
|
|
|
10.23
|
|
Convertible
Note and Warrant Purchase Agreement among Alteon Inc. and each
Lender
identified on the signature pages thereto, dated as of January
11, 2007.
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on January 16, 2007, SEC File No.
001-16043.)
|
|
|
|
10.24
|
|
Security
& Guaranty Agreement by and between Alteon Inc., HaptoGuard, Inc.,
and
Baker Bros Advisors, LLC, dated as of January 11, 2007. (Incorporated
by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed on January 16, 2007, SEC File No. 001-16043.)
|
|
|
|
10.25
|
|
Intellectual
Property Security Agreement by and between Alteon Inc., HaptoGuard,
Inc.,
and Baker Bros Advisors, LLC., dated as of January 11, 2007. (Incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
filed on January 16, 2007, SEC File No. 001-16043.)
|
|
|
|
10.26
|
|
Lease
Agreement by and between Synvista Therapeutics, Inc. and DS Montvale,
LLC,
dated as of January 19, 2007. (Incorporated by reference to Exhibit
10.1
to the Company’s Current Report on Form 8-K filed on January 22, 2007, SEC
File No. 001-16043.)
|
|
|
|
10.27†
|
|
Letter
Amendment to Employment Agreement between HaptoGuard, Inc. and
Noah
Berkowitz, dated as of February 1, 2007. (Incorporated by reference
to
Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February
2, 2007, SEC File Number 000-16043.)
|
|
|
|
10.28
|
|
Waiver
and Acknowledgement, dated as of March 30, 2007, by the Lenders
identified
in the Convertible Note and Warrant Purchase Agreement, dated as
of
January 11, 2007. (Incorporated by reference to Exhibit 10.1 to
the
Company’s Current Report on Form 8-K filed on April 5, 2007, SEC File
Number 000-16043.)
|
|
|
|
10.29
|
|
Series
B Preferred Stock and Warrant Purchase Agreement among Alteon Inc.
and
each Purchaser identified on the signature pages thereto, dated
as of
April 5, 2007. (Incorporated by reference to Exhibit 10.1 to the
Company’s
Current Report on Form 8-K filed on April 11, 2007, SEC File No.
001-16043.)
|
|
|
|
10.30†
|
|
Employment
Agreement between HaptoGuard, Inc. and Malcolm MacNab, M.D., Ph.D.
dated
February 7, 2005. (Incorporated by reference to Exhibit 10.1 to
the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2007, SEC File Number 001-16043.)
|
|
|
|
10.31
|
|
Omnibus
Amendment dated June 1, 2007 by and among the Company and the purchasers
identified on the signature pages to that certain Note and Warrant
Purchase Agreement dated as of January 11, 2007. (Incorporated
by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on June 7, 2007, SEC File Number 001-16043.)
|
|
|
|
10.32
|
|
Amendment
No. 1 to Series B Preferred Stock and Warrant Purchase Agreement
dated
June 1, 2007 by and among the Company and the purchasers identified
on the
signature pages to that certain Series B Preferred Stock and Warrant
Purchase Agreement dated as of April 5, 2007. (Incorporated by
reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June
7, 2007, SEC File Number 001-16043.)
|
|
|
|
10.33
|
|
Amended
and Restated Exclusive License Agreement entered into as of April
2, 2007
by and between the Company and OXIS International. (Incorporated
by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2007, SEC File Number
001-16043.)
|
|
|
|
10.34
|
|
License
and Research Agreement entered into as of July 12, 2004 by and
between
HaptoGuard, Inc. and BIO-RAP Technologies Ltd. (Incorporated by
reference
to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2007, SEC File Number
001-16043.)
|
|
|
|
23.1*
|
|
Consent
of J.H. Cohn LLP.
|
|
|
|
31.1*
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
31.2*
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
†
Denotes
a
management contract or compensatory plan or arrangement required to be filed
as
an exhibit pursuant to Item 15(b) to this Form 10-K/A.