ABEONA THERAPEUTICS INC. - Quarter Report: 2014 June (Form 10-Q)

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(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
		(Do not check if a smaller reporting company)

 

 

 

 

 

 
 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

 

 

 

 

Compound		Originator		Technology		Indication		Clinical Stage (1)
MuGard®		Access		Mucoadhesive liquid		Mucositis		- Launched in U.S. - Licensed to AMAG – U.S. rights - Licensed to RHEI – China rights - Licensed to Hanmi – South Korea rights - Licensed to Norgine – European Union rights
ProctiGard™		Access		Mucoadhesive hydrogel technology		Radiation proctitis		Received 510(K) clearance from  FDA
LexaGard™		Access		Mucoadhesive hydrogel technology		Inflammatory and ulcerative conditions of the esophagus		Filings being reviewed at FDA
Mucoadhesive hydrogel technology		Access		Mucoadhesive hydrogel technology		Various		Various stages
CobOral™ Delivery System		Access		Cobalamin		Various		Pre-clinical
CobaCyte™-Targeted Therapeutics		Access		Cobalamin		Anti-tumor		Pre-clinical

__________________________

 

(1)	For more information, see “Government Regulation” in our Annual Report on Form 10-K for description for description of clinical stages.

 

 

 

 

 

 

 

 

 

·	decreased clinical development with trials for MuGard ($55,000);

·	decreased salary and related costs ($78,000) from reduced scientific staff;

·	offset by increased scientific consulting expense ($76,000); and

·	other net decreases in research spending ($59,000).

·	decreased net MuGard product selling expenses ($485,000) which includes an increase of $125,000 of MuGard product returns;

·	decreased legal fees ($354,000);

·	decreased salary and related costs ($263,000) from reduced general and administrative staff; and

·	net decrease other general and administrative expenses ($167,000).

 

 

 

 

·	decreased clinical development with trials for MuGard ($226,000);

·	decreased salary and related costs ($149,000) from reduced scientific staff;

·	offset by increased scientific consulting expense ($194,000); and

·	other net decreases in research spending ($114,000).

·	decreased net MuGard product selling expenses ($954,000) which includes an increase of $212,000 of MuGard product returns;

·	decreased salary and related costs ($458,000) from reduced general and administrative staff;

·	decreased legal fees ($405,000); offset by

·	net increase other general and administrative expenses ($19,000); and

·	increased stock compensation expense for options granted to employees, officers, directors and consultants ($583,000), options were granted in 2014 and no options were granted in 2013.

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

 

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

ITEM 6.

EXHIBITS.

Exhibits:

31.1	Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1*

Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. filed pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS

XBRL Instance Document**

101.SCH

XBRL Taxonomy Schema**

101.CAL

XBRL Taxonomy Calculation Linkbase Document**

101.DEF

XBRL Taxonomy Definition Linkbase Document**

101.LAB

XBRL Taxonomy Label Linkbase Document**

101.PRE

XBRL Taxonomy Presentation Linkbase Document**

 

 

 

 

Date:	August 14, 2014	By:	/s/ Jeffrey B. Davis
			Jeffrey B. Davis
			Chief Executive Officer
			(Principal Executive Officer) Acting Chief Financial Officer (Principal Financial and Accounting Officer)

 

ASSETS		June 30, 2014				December 31, 2013
		(unaudited)
Current assets Cash and cash equivalents    Receivables Prepaid expenses and other current assets		$	55,000 58,000  90,000			$	424,000 74,000 77,000
Total current assets			203,000				575,000
Property and equipment, net			5,000				6,000
Other assets			32,000				32,000
Total assets		$	240,000			$	613,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities   Accounts payable   Accrued expenses   Dividends payable   Current portion of deferred revenue		$	1,340,000 857,000 8,373,000 602,000			$	863,000  857,000 6,663,000 578,000
Total current liabilities			11,172,000				8,961,000
Derivative liability - preferred stock Long-term deferred revenue			12,300,000 5,170,000				1,190,000 5,241,000
Total liabilities			28,642,000				15,392,000
Commitments and contingencies
Stockholders' deficit   Convertible preferred stock Series A - $.01 par value; authorized       2,000,000 shares; 2,893.3617 shares issued at June 30,  2014 and 2,903.3617 at December 31, 2013   Convertible preferred stock Series B - $.01 par value; authorized       2,000,000 shares; 1,000.0 shares issued at June 30,  2014 and at December 31, 2013   Common stock - $.01 par value; authorized 200,000,000 shares;      issued, 26,449,443 at June 30, 2014 and 25,729,443 at December 31, 2013   Additional paid-in capital   Treasury stock, at cost – 163 shares   Accumulated deficit			-      -     265,000 252,575,000 (4,000 (281,238,000	) )			-       -     257,000 251,389,000 (4,000 (266,421,000	) )
Total stockholders' deficit			(28,402,000	)			(14,779,000	)
Total liabilities and stockholders' deficit		$	240,000			$	613,000

 

 

		Three months ended June 30,								Six months ended June 30,
		2014				2013				2014				2013
Revenues
Product sales		$	-			$	380,000			$	-			$	1,542,000
License revenues			150,000				84,000				296,000				146,000
Royalties			97,000				3,000				159,000				3,000
Total revenues			247,000				467,000				455,000				1,691,000
Expenses
Research and development			81,000				197,000				225,000				520,000
Product costs			-				53,000				-				119,000
Selling, general and administrative			868,000				2,137,000				2,260,000				3,475,000
Depreciation and amortization			1,000				1,000				1,000				1,000
Total expenses			950,000				2,388,000				2,486,000				4,115,000
Loss from operations			(703,000	)			(1,921,000	)			(2,031,000	)			(2,424,000	)
Interest and miscellaneous income			26,000				75,000				34,000				169,000
Interest and other expense			(137,000	)			(43,000	)			(259,000	)			(86,000	)
Gain (loss) on change in fair value of derivative - warrants			-				219,000				-				(28,000	)
Gain (loss) on change in fair value of derivative - preferred stock			(11,693,000	)			3,270,000				(11,110,000	)			8,050,000
			(11,804,000	)			3,521,000				(11,335,000	)			8,105,000
Net income (loss)			(12,507,000	)			1,600,000				(13,366,000	)			5,681,000
Less preferred stock dividends			726,000				733,000				1,451,000				1,460,000
Net income (loss) allocable to common stockholders		$	(13,233,000	)		$	867,000			$	(14,817,000	)		$	4,221,000
Net income (loss) per common share
Basic		$	(0.51	)		$	0.03			$	(0.57	)		$	0.17
Diluted		$	(0.51	)		$	0.03			$	(0.57	)		$	0.17
Weighted average number of common shares outstanding
Basic			26,191,311				25,111,713				26,034,995				24,957,183
Diluted			26,191,311				25,469,229				26,034,995				25,314,699

		Common Stock								Preferred Stock – A								Preferred Stock – B
		Shares				Amount				Shares				Amount				Shares				Amount				Additional paid-in capital				Treasury stock				Accumulated deficit
Balance   December 31, 2013			25,729,443			$	257,000				2,903.3617			$	-				1,000.0			$	-			$	251,389,000			$	(4,000	)		$	(266,421,000	)
Common stock   issued for services			225,000				3,000				-				-				-				-				72,000				-				-
Stock option   compensation expense			-				-				-				-				-				-				795,000				-				-
Preferred dividends			-				-				-				-				-				-				-				-				(725,000	)
Net loss			-				-			- _ -					-				-				-				-				-				(859,000	)
Balance  March 31, 2014			25,954,443			$	260,000				2,903.3617			$	-				1,000.0			$	-			$	252,256,000			$	(4,000	)		$	(268,005,000	)
Common stock   issued for services			295,000				3,000				-				-				-				-				129,000				-				-
Preferred stock  converted into  common stock			200,000				2,000				(10.0000	)			-				-				-				(2,000	)			-				-
Stock option   compensation expense			-				-				-				-				-				-				192,000				-				-
Preferred dividends			-				-				-				-				-				-				-				-				(726,000	)
Net loss			-				-				-				-				-				-				-				-				(12,507,000	)
Balance  June 30, 2014			26,449,443			$	265,000				2,893.3617			$	-				1,000.0			$	-			$	252,575,000			$	(4,000	)		$	(281,238,000	)

		Six Months ended June 30,
		2014				2013
Cash flows from operating activities:
Net income (loss)		$	(13,366,000	)		$	5,681,000
Adjustments to reconcile net income (loss) to cash provided               by (used in) operating activities:
Gain (loss) on change in fair value of derivative - warrants			-				28,000
Gain (loss) on change in fair value of derivative - preferred stock			11,110,000				(8,050,000	)
Depreciation and amortization			1,000				1,000
Stock option compensation expense Stock issued to directors and employees			987,000 -				328,000 66,000
Stock issued for services			207,000				97,000
Change in operating assets and liabilities:
Receivables			16,000				581,000
Inventory			-				194,000
Prepaid expenses and other current assets			(13,000	)			(41,000	)
Accounts payable and accrued expenses			477,000				(734,000	)
Interest payable on dividends			259,000				86,000
Deferred revenue			(47,000	)			3,154,000
Net cash provided by (used in) operating activities			(369,000	)			1,391,000
Cash flows from financing activities:
Proceeds from exercise of stock options			-				11,000
Net cash provided by financing activities			-				11,000
Net increase (decrease) in cash and cash equivalents			(369,000	)			1,402,000
Cash and cash equivalents at beginning of period			424,000				396,000
Cash and cash equivalents at end of period		$	55,000			$	1,798,000
Supplemental cash flow information:
Cash paid for interest		$	-			$	-
Supplemental disclosure of noncash transactions:
Preferred stock dividends in dividends payable		$	1,451,000			$	1,460,000

(1)	Interim Financial Statements

 

 

·	Level 1 – Quoted prices in active markets for identical assets or liabilities.

·

Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

·

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.

(in thousands)
Description		As of June 30, 2014				Level 1				Level 2				Level 3				Total Gains (Losses)
Liabilities:   Derivative liability- preferred stock		$	12,300			$	-			$	-			$	12,300			$	(11,110	)

(in thousands)
Description		As of December 31, 2013				Level 1				Level 2				Level 3				Total Gains
Liabilities:   Derivative liability- preferred stock		$	1,190			$	-			$	-			$	1,190			$	8,010

		Three months ended June 30,								Six months ended June 30,
		2014				2013				2014				2013
Research and development		$	18,000			$	10,000			$	95,000			$	19,000
Selling, general and administrative			174,000				241,000				892,000				309,000
Stock-based compensation expense included in operating expense		$	192,000			$	251,000			$	987,000			$	328,000

		6/30/14
Expected life(b)		5.5 yrs
Risk free interest rate			1.65	%
Expected volatility(a)			102	%
Expected dividend yield			0.0	%

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(a)	Reflects movements in our stock price over the most recent historical period equivalent to the expected life.
(b)	Based on the simplified method.

 

(in thousands, except share and per share amounts)		Three months ended June 30,								Six months ended June 30,
		2014				2013				2014				2013
Net income (loss)		$	(13,233	)		$	867			$	(14,817	)		$	4,221
Weighted average shares outstanding			26,191,311				25,111,713				26,034,995				24,957,183
Basic net income (loss) per common share		$	(0.51	)		$	0.03			$	(0.57	)		$	0.17
Net income (loss)		$	(13,233	)		$	867			$	(14,817	)		$	4,221
Weighted average shares outstanding			26,191,311				25,111,713				26,034,995				24,957,183
Effect of dilutive options and warrants			-				357,516				-				357,516
Weighted average shares outstanding assuming dilution			26,191,311				25,469,229				26,034,995				25,314,699
Diluted net income (loss) per common share		$	(0.51	)		$	0.03			$	(0.57	)		$	0.17

		Three months ended June 30,								Six months ended June 30,
		2014				2013				2014				2013
Warrants			28,885,570				35,683,943				28,885,570				35,683,943
Stock options			11,941,700				1,967,284				11,941,700				1,967,284
Preferred stock Series A			57,867,234				58,267,234				57,867,234				58,267,234
Preferred stock Series B			20,000,000				20,000,000				20,000,000				20,000,000
Total			118,694,504				115,918,461				118,694,504				115,918,461

 

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