DELCATH SYSTEMS, INC. - Quarter Report: 2007 September (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
quarterly period ended September 30, 2007
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: 001-16133
DELCATH
SYSTEMS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
06-1245881
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
600
Fifth
Avenue, 23rd Floor, New York, NY 10020
(Address
of principal executive offices)
(212)
489-2100
(Registrant’s
telephone number, including area code)
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 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 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 xNon-accelerated
filer o
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
As
of
October 31, 2007, 25,259,284 shares of the Company’s Common Stock, $0.01 par
value, were issued and outstanding.
DELCATH
SYSTEMS, INC.
Index
Page
|
||
PART I: FINANCIAL INFORMATION |
1
|
|
Item
1:
|
Condensed Financial Statements (Unaudited) |
1
|
Item
2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
2
|
Item
3.
|
Quantitative and Qualitative Disclosures about Market Risk |
6
|
Item
4.
|
Controls and Procedures |
6
|
PART II: OTHER INFORMATION |
7
|
|
Item
1.
|
Legal Proceedings |
7
|
Item
1A.
|
Risk Factors |
7
|
Item
2.
|
Unregistered Sales of Equity Securities and Use of Proceeds |
8
|
Item
3.
|
Defaults Upon Senior Securities |
9
|
Item
4.
|
Submission of Matters to a Vote of Security Holders |
9
|
Item
5.
|
Other Information |
9
|
Item
6.
|
Exhibits |
9
|
|
||
SIGNATURES |
11
|
i
PART
I:
FINANCIAL
INFORMATION
Item
1: Condensed
Financial Statements (Unaudited)
Index
to Financial Statements
Page
|
||
Condensed Balance Sheets |
F-1
|
|
September
30, 2007 and December 31, 2006
|
||
Condensed Statements of Operations |
F-2
|
|
for
the Three and Nine Months Ended September 30, 2007 and 2006 and
Cumulative from
|
||
Inception
(August 5, 1988) to September 30,
2007
|
||
Condensed Statements of Cash Flows |
F-3
|
|
for
the Nine Months Ended September 30, 2007 and 2006 and
Cumulative from
|
||
Inception
(August 5, 1988) to September 30,
2007
|
||
Notes to Condensed Financial Statements |
F-4
|
|
1
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Condensed
Balance Sheets
|
September
30,
2007
(Unaudited)
|
December
31,
2006
(Audited)
|
|
||||
Assets
|
|||||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
$
|
18,499,086
|
$
|
6,289,723
|
|||
Certificates
of deposit
|
551,290
|
2,408,302
|
|||||
Prepaid
expenses
|
253,416
|
61,917
|
|||||
Total
current assets
|
$
|
19,303,792
|
$
|
8,759,942
|
|||
Property
and equipment, net
|
16,340
|
3,719
|
|||||
Total
assets
|
$
|
19,320,132
|
$
|
8,763,661
|
|||
Liabilities
and Stockholders’ Equity
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable and accrued expenses
|
110,315
|
670,367
|
|||||
Derivative
instrument liability
|
4,347,000
|
-
|
|||||
Total
current liabilities
|
$
|
4,457,315
|
$
|
670,367
|
|||
Commitments
and contingencies
|
-
|
-
|
|||||
Stockholders’
equity
|
|||||||
Common
stock, $.01 par value; 70,000,000 shares authorized
|
$
|
252,593
|
$
|
206,608
|
|||
Additional
paid-in capital
|
56,561,701
|
44,673,458
|
|||||
Deficit
accumulated during development stage
|
(41,951,477
|
)
|
(36,786,772
|
)
|
|||
Total
stockholders’ equity
|
$
|
14,862,817
|
$
|
8,093,294
|
|||
Total
liabilities and stockholders’ equity
|
$
|
19,320,132
|
$
|
8,763,661
|
See
accompanying notes to condensed financial statements.
F-1
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Condensed
Statements of Operations
(Unaudited)
|
|
|
||||||||||||||
Three
Months
Ended
September
30,
|
Nine
Months
Ended
September
30,
|
Cumulative
from
Inception
(August
5,
1988)
to
September
30,
|
||||||||||||||
2007
|
2006
|
2007
|
2006
|
2007
|
||||||||||||
Costs
and expenses
|
||||||||||||||||
General
and administrative expenses
|
$
|
609,759
|
$
|
4,400,910
|
$
|
2,183,043
|
$
|
6,053,427
|
$
|
19,602,672
|
||||||
Research
and development costs
|
1,125,573
|
466,207
|
3,208,963
|
1,868,064
|
22,986,527
|
|||||||||||
Derivative
instrument expense
|
78,000
|
-
|
78,000
|
-
|
78,000
|
|||||||||||
Total
costs and expenses
|
1,813,332
|
4,867,117
|
5,470,006
|
7,921,491
|
42,667,199
|
|||||||||||
Operating
loss
|
(1,813,332
|
)
|
(4,867,117
|
)
|
(5,470,006
|
)
|
(7,921,491
|
)
|
(42,667,199
|
)
|
||||||
Interest
income
|
101,755
|
178,599
|
305,301
|
483,116
|
2,259,300
|
|||||||||||
Other
income
|
-
|
-
|
-
|
-
|
126,500
|
|||||||||||
Interest
expense
|
-
|
-
|
-
|
-
|
(171,473
|
)
|
||||||||||
Net
loss
|
$
|
(1,711,577
|
)
|
$
|
(4,688,518
|
)
|
$
|
(5,164,705
|
)
|
$
|
(7,438,375
|
)
|
$
|
(40,452,872
|
)
|
|
Common
share data
|
||||||||||||||||
Basic
and diluted loss per share
|
$
|
(0.08
|
)
|
$
|
(0.23
|
)
|
$
|
(0.24
|
)
|
$
|
(0.38
|
)
|
||||
Weighted
average number of shares of common stock outstanding
|
21,630,349
|
20,131,471
|
21,331,461
|
19,658,719
|
See
accompanying notes to condensed financial
statements.
F-2
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Condensed
Statements of Cash Flows
(Unaudited)
Nine
Months
Ended
September
30,
|
|
Cumulative
from
inception
(Aug.
5,
1988)
to
September 30,
|
||||||||
2007
|
2006
|
2007
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss
|
$
|
(5,164,705
|
)
|
$
|
(7,438,375
|
)
|
$
|
(40,452,871
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Stock
option compensation expense
|
1,339,776
|
505,282
|
4,915,886
|
|||||||
Stock
and warrant compensation expense issued for legal settlement, consulting
services
|
211,250
|
-
|
856,961
|
|||||||
Depreciation
expense
|
3,020
|
3,003
|
44,598
|
|||||||
Amortization
of organization costs
|
-
|
-
|
42,165
|
|||||||
Derivative
liability fair value adjustment
|
78,000
|
-
|
78,000
|
|||||||
Changes
in assets and liabilities:
|
||||||||||
(Increase)
decrease in prepaid expenses
|
(191,499
|
)
|
500
|
(253,416
|
)
|
|||||
Decrease
in interest receivable
|
-
|
91,574
|
-
|
|||||||
(Decrease)
increase in accounts payable and accrued expenses
|
(560,050
|
)
|
1,445,240
|
110,317
|
||||||
Net
cash used in operating activities
|
$
|
(4,284,208
|
)
|
$
|
(5,392,776
|
)
|
$
|
(34,658,360
|
)
|
|
Cash
flows from investing activities:
|
||||||||||
Purchase
of property and equipment
|
$
|
(15,641
|
)
|
-
|
$
|
(60,939
|
)
|
|||
Purchase
of short-term investments
|
-
|
$
|
(5,394,701
|
)
|
(27,492,042
|
)
|
||||
Proceeds
from maturities of short-term investments
|
1,856,762
|
11,097,790
|
26,940,502
|
|||||||
Organization
costs
|
-
|
-
|
(42,165
|
)
|
||||||
Net
cash provided by (used in) investing activities
|
$
|
1,841,121
|
$
|
5,703,089
|
$
|
(654,644
|
)
|
|||
Cash
flows from financing activities:
|
||||||||||
Net
proceeds from sale of stock and exercise of stock options and
warrants
|
$
|
14,652,450
|
$
|
5,098,556
|
$
|
52,657,764
|
||||
Repurchases
of outstanding common stock
|
-
|
-
|
(51,103
|
)
|
||||||
Dividends
paid
|
-
|
-
|
(499,535
|
)
|
||||||
Proceeds
from short-term borrowings
|
-
|
-
|
1,704,964
|
|||||||
Net
cash provided by financing activities
|
$
|
14,652,450
|
$
|
5,098,556
|
$
|
53,812,090
|
||||
Increase
in cash and cash equivalents
|
12,209,363
|
5,408,869
|
18,499,086
|
|||||||
Cash
and cash equivalents at beginning of period
|
6,289,723
|
1,704,131
|
-
|
|||||||
Cash
and cash equivalents at end of period
|
$
|
18,499,086
|
$
|
7,113,000
|
$
|
18,499,086
|
||||
Supplemental
cash flow information:
|
||||||||||
Cash
paid for interest
|
-
|
-
|
$
|
171,473
|
||||||
Supplemental
non-cash activities:
|
||||||||||
Cashless
exercise of stock options
|
$
|
450,999
|
-
|
$
|
542,165
|
|||||
Conversion
of debt to common stock
|
-
|
-
|
$
|
1,704,964
|
||||||
Common
stock issued for preferred stock dividends
|
-
|
-
|
$
|
999,070
|
||||||
Conversion
of preferred stock to common stock
|
-
|
-
|
$
|
24,167
|
||||||
Common
stock issued as compensation for stock sale
|
-
|
-
|
$
|
510,000
|
||||||
Fair
value of warrants issued
|
$
|
4,269,000
|
$
|
4,269,000
|
See
accompanying notes to condensed financial
statements.
F-1
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Notes
to Condensed Financial Statements
Note
1: Description
of Business
Delcath
Systems, Inc. (the “Company”) is a development stage company founded in 1988 for
the purpose of developing and marketing a proprietary drug delivery system
capable of introducing and removing high dose chemotherapy agents to a diseased
organ system, while greatly inhibiting their entry into the general circulation
system. It is hoped that the procedure will result in a meaningful treatment
for
cancer. In November 1989, the Company was granted an Investigational Device
Exemption (“IDE”) and an Investigational New Drug (“IND”) status for its product
by the Food and Drug Administration (“FDA”). The Company is seeking to complete
clinical trials in order to obtain separate FDA pre-market approvals for the
use
of its delivery system using Melphalan, a chemotherapeutic agent, to treat
malignant melanoma that has spread to the liver.
Note
2: Basis
of Financial Statement Presentation
The
accompanying condensed financial statements are unaudited and were prepared
by
the Company in accordance with accounting principles generally accepted in
the
United States of America (“GAAP”). Certain information and footnote disclosures
normally included in the Company’s annual financial statements have been
condensed or omitted. The interim financial statements, in the opinion of
management, reflect all adjustments (consisting of normal recurring accruals)
necessary for a fair statement of the results for the interim periods ended
September 30, 2007 and 2006, and cumulative from inception (August 5, 1988)
to
September 30, 2007.
The
results of operations for the interim periods are not necessarily indicative
of
the results of operations to be expected for the fiscal year. These interim
financial statements should be read in conjunction with the audited financial
statements and notes thereto for the year ended December 31, 2006, which are
contained in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2006 as filed with the Securities and Exchange Commission (the
“SEC”) on March 16, 2007 (the “2006 Form 10-K”).
Note
3: Costs
and Expenses
Research
and Development Costs
Research
and development costs include the costs of materials, personnel, outside
services and applicable indirect costs incurred in development of the Company’s
proprietary drug delivery system. All such costs are charged to expense when
incurred.
General
and Administrative Costs
General
and administrative costs include the Company’s general and administrative
operating expenses.
Note
4: Stockholders’
Equity
The
Company received a net amount of $1,349,184 upon the exercise of stock options
for 617,850 shares of common stock, $0.01 par value per share (the “Common
Stock”) during the nine months ended September 30, 2007. Of those options: (i)
100,000 were exercised at a price of $0.71 per share, (ii) 126,000 were
exercised at a price of $1.03 per share, (iii) 20,000 were exercised at a price
of $1.32 per share, (iv) 200,000 were exercised at a price of $2.78 per share,
(v) 100,000 were exercised at a price of $3.28 per share, and (vi) 71,850 were
exercised at a price of $3.31 per share.
F-2
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Notes
to Condensed Financial Statements
During
the nine months ended September 30, 2007, a cashless exercise of 70,000 options
with an exercise price of $2.78 per share, 140,000 options with an exercise
price of $3.59 per share, 80,000 options with an exercise price of $3.28 per
share, and 60,300 options with an exercise price of $3.31 per share collectively
resulted in the issuance of 97,563 shares of Common Stock.
During
the nine months ended September 30, 2007, the Company issued 50,000 shares
of
Common Stock to its Chief Executive Officer that had an issuance value of $3.90
per share for the 25,000 issued on May 24, 2007 and $4.49 for the 25,000 shares
issued on July 2, 2007.
In
September 2007, the Company completed the sale of 3,833,108 shares of its Common
Stock and the issuance of warrants to purchase 1,916,558 common shares in a
private placement to institutional and accredited investors. The Company
received net proceeds of $13,303,267 in this transaction. The Company allocated
$4,269,000 of the total proceeds to warrants (see below). The shares were
offered by the Company pursuant to an effective shelf registration statement
on
Form S-3, which was filed with the Securities and Exchange Commission on May
25,
2007 and was declared effective on June 7, 2007 (File No. 333-143280).
The
$4,269,000 in proceeds allocated to the warrants was classified as a liability
in accordance with EITF 00-19, “Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company’s own Stock.” The warrants may
require cash settlement in the event of certain circumstances, including the
Company’s inability to deliver registered shares upon the exercise of the
warrants by such warrant holders. The warrants also contain a cashless exercise
feature in certain circumstances. Accordingly, the warrants have been accounted
for as derivative instrument liabilities which are subject to mark-to-market
adjustment in each period. As a result, for the nine-month and three-month
periods ended September 30, 2007, the Company recorded a pre-tax charge for
derivative instrument expense of $78,000. The resulting derivative instrument
liability totaled $4,347,000 at September 30, 2007. Management believes that
the
possibility of an actual cash settlement with a warrant holder of the recorded
liability is quite remote, and expects that the warrants will either be
exercised or expire worthless, at which point the then existing derivative
liability will be credited to equity. The fair value of the warrants was
determined by using the Black-Scholes model assuming a risk free interest rate
of 4.20%, volatility of 81.30% and an expected life equal to the September
24,
2012 contractual life of the warrants.
The
per
share weighted average fair value of five-year stock options granted to new
members of the Board of Directors in May 2007 was $1.51 for those options with
a
grant date exercise price equal to the common stock value at the date of grant
(options for an aggregate of 150,000 shares) and $.99 for those options with
an
exercise price equal to 150% of the common stock value at the date of grant
(options for an aggregate of 200,000 shares), estimated on the date of grant
using the Black-Scholes option-pricing model. The expected term was estimated
using a midpoint between the date of grant and the expiration date as required
by the Simplified Method of term calculation in accordance with SFAS 123R (See
Note 5). The weighted-average assumption of a risk free interest rate of 4.64%
was based on the implied yield available on a U.S. Treasury note with a term
equal to the estimated term of the underlying options as indicated above. The
expected volatility of 58% was estimated based upon the historical volatility
of
the Company’s share price. The Company used a dividend yield percentage of zero
based on the fact that the Company has not paid dividends in the past nor does
it expect to pay dividends in the future.
F-3
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Notes
to Condensed Financial Statements
The
per
share weighted average fair value of five-year stock options granted to a new
member of the Board of Directors in June 2007 was $1.85 for those options with
an exercise price equal to the common stock value at the date of grant (options
for an aggregate of 50,000 shares) and $1.22 for those options with an exercise
price equal to 150% of the common stock value at the date of grant (options
for
an aggregate of 100,000 shares), estimated on the date of grant using the
Black-Scholes option-pricing model. The expected term was estimated using a
midpoint between the date of grant and the expiration date as required by the
Simplified Method of term calculation in accordance with SFAS 123R (See Note
5).
The weighted-average assumption of a risk free interest rate of 4.64% was based
on the implied yield available on a U.S. Treasury note with a term equal to
the
estimated term of the underlying options as indicated above. The expected
volatility of 58% was estimated based upon the historical volatility of the
Company’s share price. The Company used a dividend yield percentage of zero
based on the fact that the Company has not paid dividends in the past nor does
it expect to pay dividends in the future.
The
per
share weighted average fair value of stock options that will vest incrementally
over three years during the term of employment granted to newly hired employees
in June 2007 was $1.92 for those options granted in April 2007 with an exercise
price equal to the fair value of the common stock at the date of grant (options
for an aggregate of 50,000 shares), $1.75 for those options granted in May
2007
with an exercise price equal to the fair value of the common stock at the date
of grant (options for an aggregate of 50,000 shares), and $1.22 for those
options granted in May 2007 with an exercise price equal to 150% of the fair
value of the common stock at the date of grant (options for an aggregate of
25,000 shares), estimated on the date of acceptance using the Black-Scholes
option-pricing model. The expected term was estimated to be the full three
year
vesting period as the Company does not have a calculable history of forfeitures
by employees granted options. The weighted-average assumption of a risk free
interest rate of 4.60% was based on the implied yield available on a U.S.
Treasury note with a term equal to the estimated term of the underlying options
as indicated above. The expected volatility of 58% was estimated based upon
the
historical volatility of the Company’s share price. The Company used a dividend
yield percentage of zero based on the fact that the Company has not paid
dividends in the past nor does it expect to pay dividends in the
future.
The
per
share weighted average fair value of five-year stock options granted to the
President and Chief Executive Officer in July 2007 was $1.89 for those options
with an exercise price below the grant date common stock value (options for
an
aggregate of 50,000 shares) and $1.31 for those options with an exercise price
greater than the grant date common stock value (options for an aggregate of
100,000 shares), estimated on the date of grant using the Black-Scholes
option-pricing model. The expected term was estimated using a midpoint between
the date of grant and the expiration date as required by the Simplified Method
of term calculation in accordance with SFAS 123R (See Note 5). The
weighted-average assumption of a risk free interest rate of 4.64% was based
on
the implied yield available on a U.S. Treasury note with a term equal to the
estimated term of the underlying options as indicated above. The expected
volatility of 58% was estimated based upon the historical volatility of the
Company’s share price. The Company used a dividend yield percentage of zero
based on the fact that the Company has not paid dividends in the past nor does
it expect to pay dividends in the future. The following table sets forth changes
in stockholders’ equity during the nine months ended September 30,
2007:
F-4
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Notes
to Condensed Financial Statements
Common
Stock,
$0.01
Par Value
Issued
and Outstanding
|
|
Deficit
Accumulated
|
||||||||||||||
No.
of Shares
|
Amount
|
Additional
Paid
in
Capital
|
During
Development
Stage
|
Total
|
||||||||||||
Balance
at December 31, 2006
|
20,660,763
|
$
|
206,608
|
$
|
44,673,458
|
$
|
(36,786,772
|
)
|
$
|
8,093,294
|
||||||
Exercise
of stock options
|
715,413
|
7,154
|
1,793,029
|
-
|
1,800,183
|
|||||||||||
Shares
issued as compensation
|
50,000
|
500
|
210,500
|
-
|
211,000
|
|||||||||||
Sale
of stock
Compensation
expense for issuance of stock options
|
3,833,108
-
|
38,331
-
|
8,995,936
888,778
|
-
|
9,034,267
888,778
|
|||||||||||
Net
loss for nine months ended
September
30, 2007
|
-
|
-
|
-
|
(5,164,705
|
)
|
(5,164,705
|
)
|
|||||||||
Balance
at September 30, 2007
|
25,259,284
|
$
|
252,593
|
$
|
56,561,701
|
$
|
(41,951,477
|
)
|
$
|
14,862,817
|
Note
5: Stock
Option Plan
In
December 2004, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS 123R).
This Statement is a revision of SFAS No. 123, “Accounting for Stock-Based
Compensation” (SFAS 123), and supersedes Accounting Principles Board Opinion No.
25, “Accounting for Stock Issued to Employees” (APB 25), and its related
implementation guidance. SFAS 123R establishes accounting for equity instruments
exchanged for employee services. Under the provisions of SFAS 123R, share-based
compensation is measured at the grant date, based upon the fair value of the
award, and is recognized as an expense over the option holders’ requisite
service period (generally the vesting period of the equity grant). Prior to
January 1, 2006, the Company accounted for share-based compensation to employees
in accordance with APB 25, as permitted by SFAS No. 123, and, accordingly,
did
not recognize compensation expense for the issuance of options with an exercise
price equal to or greater than the market price at the date of grant. The
Company also followed the disclosure requirements of SFAS 123 as amended by
SFAS
148, “Accounting for Stock-Based Compensation - Transition and Disclosure.”
Effective January 1, 2006, the Company adopted the modified prospective approach
and, accordingly, prior period amounts have not been restated. Under this
approach, the Company is required to record compensation cost for all
share-based payments granted after the date of adoption based upon the grant
date fair value, estimated in accordance with the provisions of SFAS 123R,
and
for the unvested portion of all share-based payments previously granted that
remain outstanding based on the grant date fair value, estimated in accordance
with the original provisions of SFAS 123. The Company has expensed its
share-based compensation for share-based payments granted after January 1,
2006
under the ratable method, which treats each vesting tranche as if it were an
individual grant.
The
Company periodically grants stock options for a fixed number of shares of Common
Stock to its employees, directors and non-employee contractors, with an exercise
price greater than or equal to the fair market value of our Common Stock at
the
date of the grant. The Company estimates the fair value of stock options using
a
Black-Scholes valuation model. Key inputs used to estimate the fair value of
stock options include the exercise price of the award, the expected post-vesting
option life, the expected volatility of our stock over the option’s expected
term, the risk-free interest rate over the option’s expected term, and our
expected annual dividend yield. Estimates of fair value are not intended to
predict actual future events or the value ultimately realized by persons who
receive equity awards.
F-5
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Notes
to Condensed Financial Statements
The
required adoption of SFAS No. 123R as of January 1, 2006 has significantly
increased compensation expense for future grants. The actual impact on future
years will be dependent on a number of factors, including our stock price and
the level of future grants and awards. In addition, costs related to accounting
and valuation services of stock options currently outstanding in accordance
with
SFAS No. 123R would have been cost prohibitive to the Company if the Company
had
not adopted certain measures. Based on these considerations and after discussion
of applicable accounting literature, the Compensation Committee of the Board
of
Directors approved accelerating the vesting of all unvested stock options
effective January 1, 2006. The acceleration of vesting resulted in the
recognition of a non-cash compensation expense of $505,282 on January 1, 2006
which is included in costs and expenses in the statements of operations for
2006.
The
Company established its Incentive Stock Option Plan, Non-Incentive Stock Option
Plan, 2000 Stock Option Plan, 2001 Stock Option Plan and 2004 Stock Incentive
Plan (collectively, the “Plans”), under which stock options, stock appreciation
rights, restricted stock, and stock grants may be awarded. A stock option grant
allows the holder of the option to purchase a share of the Company’s Common
Stock in the future at a stated price. The Plans are administered by the
Compensation and Stock Option Committee of the Board of Directors, which
determines the individuals to whom the options shall be granted as well as
the
terms and conditions of each option grant, the option price and the duration
of
each option.
During
2000, 2001 and 2004, respectively, the 2000 and 2001 Stock Option Plans and
2004
Stock Incentive Plan became effective. Options granted under the Plans vest
as
determined by the Company and expire over varying terms, but not more than
five
years from the date of grant. All currently outstanding options are fully vested
except for those issued to recently hired employees whose options shall vest
incrementally over three years based on continued employment. Stock option
activity for the nine-month period ended September 30, 2007 is as
follows:
The
Plans
|
|||||||||||||
|
Stock
Options
|
Exercise
Price per Share
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Life (Years)
|
|
||||||||
Outstanding
at December 31, 2006
|
1,465,650
|
$
|
0.71
- $3.59
|
$
|
2.87
|
3.57
|
|||||||
Granted
|
775,000
|
$
|
3.90
- $7.14
|
$
|
5.26
|
||||||||
Expired
|
(202,500
|
)
|
$
|
3.59
|
$
|
3.59
|
|||||||
Exercised
|
(968,150
|
)
|
$
|
0.71
- $3.59
|
$
|
2.59
|
|||||||
Outstanding
at September 30, 2007
|
1,070,000
|
$
|
2.78
- $7.14
|
$
|
4.71
|
4.13
|
At
September 30, 2007, $190,222 of compensation expense remains to be amortized
over the vesting period for options issued to certain employees in 2007.
F-6
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Notes
to Condensed Financial Statements
Note
6: Income
Taxes
The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” ("FIN
48"), on January 1, 2007. FIN No. 48 requires that the impact of tax positions
be recognized in the financial statements if they are more likely than not
of
being sustained upon examination, based on the technical merits of the position.
As discussed in the financial statements in the 2006 Form 10-K, the
Company has a valuation allowance against the full amount
of its net deferred tax assets. The Company
currently provides a valuation allowance against deferred tax
assets when it is more likely than not that some portion, or all of its deferred
tax assets, will not be realized. The Company has not recognized any
unrecognized tax benefit under the provisions of FIN 48. In addition, there
is
no impact to accumulated deficit at the date of adoption as a result of the
implementation of FIN 48 and there is no interest or penalties accrued as
management believes the Company has no uncertain tax positions at September
30,
2007.
The
Company is subject to U.S. federal income tax as well as income tax of certain
state jurisdictions. The Company has not been audited by the I.R.S. or any
states in connection with income taxes. The periods from 2003 - 2006 remain
open
to examination by the I.R.S. and state authorities.
F-7
Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
FORWARD
LOOKING STATEMENTS
Certain
statements in this Quarterly Report on Form 10-Q, including statements of our
and management’s expectations, intentions, plans, objectives and beliefs,
including those contained in or implied by “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” are “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended,
that
are subject to certain events, risks and uncertainties that may be outside
our
control. These forward-looking statements may be identified by the use of words
such as “expects,” “anticipates,” “intends,” “plans” and similar expressions.
They include statements of our future plans and objectives for our future
operations and statements of future economic performance, information regarding
our expansion and possible results from expansion, our expected growth, our
capital budget and future capital requirements, the availability of funds and
our ability to meet future capital needs, the realization of our deferred tax
assets, and the assumptions described in this report underlying such
forward-looking statements. Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including without limitation, those described in the context of
such
forward-looking statements, our expansion strategy, our ability to achieve
operating efficiencies, industry pricing and technology trends, evolving
industry standards, domestic and international regulatory matters, general
economic and business conditions, the strength and financial resources of our
competitors, our ability to find and retain skilled personnel, the political
and
economic climate in which we conduct operations, the risks discussed in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2006 filed
with the Securities and Exchange Commission (the “SEC”) on March 16, 2007 (the
“2006 Form 10-K”), under Item 1A, “Risk Factors” and other risk factors
described from time to time in our other documents and reports filed with the
SEC. We do not assume any responsibility to publicly update any of our
forward-looking statements regardless of whether factors change as a result
of
new information, future events or for any other reason. We advise you to review
any additional disclosures we make in our Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and Annual Reports on Form 10-K, and any amendments
thereto, filed with the SEC.
Overview
Since
our
founding in 1988 by a team of physicians, we have been a development stage
company engaged primarily in developing and testing the Delcath drug delivery
system for the treatment of liver cancer. A substantial portion of our
historical expenses have been for the development of our medical device and
the
clinical trials of our product, and the pursuit of patents worldwide, as
described in our 2006 Form 10-K under Item 1, “Patents, Trade Secrets and
Proprietary Rights” and our Current Report on Form 8-K filed with the SEC on
September 18, 2007. We expect to continue to incur significant losses from
costs
for product development, clinical studies, securing patents, regulatory
activities, manufacturing and establishment of a sales and marketing
organization without any significant revenues. A detailed description of the
cash used to fund historical operations is in the financial statements and
the
notes thereto. Without an FDA-approved product and commercial sales, we will
continue to be dependent upon existing cash and the sale of equity or debt
to
fund future activities. While the amount of future net losses and time required
to reach profitability are uncertain, our ability to generate significant
revenue and become profitable will depend on our success in commercializing
our
device.
2
During
2001, Delcath initiated the clinical trial of the drug delivery system for
isolated liver perfusion using the chemotherapeutic agent Melphalan. Enrollment
of new patients in the Phase I trial was completed in 2003.
In
2004,
we commenced a Phase II clinical trial protocol for the study of the Delcath
drug delivery system using Melphalan for inoperable primary liver cancer and
adenocarcinomas and neuroendocrine cancers that have metastasized to the
liver.
In
2006,
we started enrolling and treating patients in a pivotal Phase III trial for
the
study of the Delcath drug delivery system for inoperable melanoma in the liver
using Melphalan under the FDA’s Fast Track and Special Protocol Assessment
approved protocol.
On
October 23, 2007, we announced that we received on the afternoon of October
22,
2007,
a
letter from the FDA recommending that we temporarily suspend enrollment in
the
Phase III and Phase II trials of the Delcath System, and submit an analysis
of
adverse events in anticipation of a meeting with the FDA to discuss certain
gastrointestinal (“GI”) safety concerns. The recommendation was issued by the
FDA following reports of four serious adverse GI events that were submitted
to
the FDA, the National Cancer Institute’s Institutional Review Board and the Data
Safety Monitoring Board, which may have been related to the infusion of
Melphalan. Following receipt of this letter, we decided to voluntarily defer
accrual of new patients in our Phase III and Phase II trials.
We
plan
to work as expeditiously as possible with the FDA to resolve the FDA’s safety
concerns. The Phase III and Phase II trials are still ongoing, and patients
currently enrolled in the trials will continue to receive their treatments
under
the approved protocols.
Over
the
next 12 months, we expect to continue to incur substantial expenses related
to
the research and development of our technology, including Phase III and Phase
II
clinical trials using Melphalan with the Delcath system. Additional funds,
when
available, will be committed to pre-clinical and clinical trials for the use
of
other chemotherapy agents with the Delcath system for the treatment of liver
cancer and other cancers, and the development of additional products and
components. We will also continue efforts to qualify additional sources of
the
key components of our device, in an effort to further reduce manufacturing
costs
and minimize dependency on a single source of supply.
Results
of Operations for the Nine Months Ended September 30, 2007
The
Company has operated at a loss for its entire history. We had a net loss for
the
nine months ended September 30, 2007, of $5,164,705, which is $2,273,670, or
30.6%, less than the net loss from continuing operations for the same period
in
2006. This substantial decrease is primarily due to the resolution of
various legal matters that had been instituted in 2006, and their related costs
which were incurred in 2006. There were, however, additional expenses relating
to a five-year extension to the Company’s Cooperative Research and Development
Agreement (“CRADA”) with the National Cancer Institute (“NCI”) that initially
expired in December 2006. This extension was necessary for continuing and
expanding the collaboration between the Company and the NCI, but will result
in
greater costs to the Company. The agreement with the NCI required that the
annual payments to them be increased five-fold from the previous
agreement.
General
and administrative expenses decreased by 63.9% from $6,053,427 during the nine
months ended September 30, 2006, to $2,183,043 for the nine months ended
September 30, 2007. While legal fees incurred during the current period were
substantially less than those incurred in 2006 and would have resulted in a
greater reduction in period-to-period expenses due to the resolution of various
legal matters, additional charges to general operations were incurred during
this period by share-based compensation for options granted to new members
of
the Board of Directors, options granted to the President and Chief Executive
Officer, and options granted to newly hired management employees. Further,
the
cashless exercise of options by outgoing members of the Board of Directors
resulted in additional charges to general operations.
3
During
the nine months ended September 30, 2007, we incurred $3,208,963 in research
and
development costs, which is a 71.8% increase as compared to $1,868,064 of
research and development costs during the first nine months of 2006. This
increase is primarily due to increased expenses with the NCI, as discussed
above, as well as accelerated clinical development costs relating to all facets
of the Delcath system which has required greater expense but is expected to
hasten the progress toward final approval. In addition, a portion of the
share-based compensation for options discussed above is allocated to research
and development.
Interest
income shown is from our money market accounts and certificate of deposit (“CD”)
investments. During the nine months ended September 30, 2007, the Company had
interest income of $305,301, as compared to interest income of $483,116, or
a 37
% change, for the same period in 2006. This decrease is primarily due to a
reduced cash position in 2007 from that in 2006. There was no other income
during the nine months ended September 30, 2007 or the comparable period in
2006. The net proceeds from the sale of our Common Stock and warrants in
September 2007 were received on the last day of the quarter and had minimal
effect on interest income.
Results
of Operations for the Three Months Ended September 30, 2007
We
had a
net loss for the three months ended September 30, 2007, of $1,711,577, which
is
$2,976,941, or 63.5% less than, the net loss from continuing operations for
the
same period in 2006. This decrease as stated above is primarily due to the
resolution of various legal matters that had been instituted in 2006, and their
related costs which were incurred in 2006.
General
and administrative expenses decreased by 86.1% from $4,400,910 during the three
months ended September 30, 2006, to $609,759 for the three months ended
September 30, 2007. While legal fees incurred during the current period were
substantially less than those incurred in 2006 and would have resulted in a
greater reduction in period-to-period expenses due to the resolution of various
legal matters, additional charges to general operations were incurred during
this period by share-based compensation for options granted to the President
and
Chief Executive Officer and newly hired management employees. Further, the
cashless exercise of options by an outgoing member of the Board of Directors
resulted in additional charges to general operations.
During
the three months ended September 30, 2007, we incurred $1,125,573 in research
and development costs, as compared to $466,207 during the corresponding period
in 2006, which is a 141% increase. This increase is primarily due to increased
expenses with the NCI, as discussed above, as well as accelerated clinical
development costs relating to all facets of the Delcath drug delivery system
which management believes will hasten the progress toward final approval.
Additionally, as mentioned above, a portion of the share-based compensation
for
options is allocated to research and development.
4
Interest
income shown is from our money market accounts and CD investments. During the
three months ended September 30, 2007, the Company had interest income of
$101,755, as compared to interest income of $178,599 for the same period in
2006. This decrease is primarily due to a reduced cash position in 2007 from
that in 2006. There was no other income during the three months ended September
30, 2007 or the comparable period in 2006.
Liquidity
and Capital Resources
The
Company’s future results are subject to substantial risks and uncertainties. The
Company has operated at a loss for its entire history and there can be no
assurance of its ever achieving consistent profitability. The Company is not
projecting any capital expenditures that will significantly affect the Company’s
liquidity during the next 12 months. However, our future liquidity and capital
requirements will depend on numerous factors, including the progress of our
research and product development programs, including clinical studies; the
timing and costs of making various United States and foreign regulatory filings,
obtaining approvals and complying with regulations; the timing and effectiveness
of product commercialization activities, including marketing arrangements
overseas; the timing and costs involved in preparing, filing, prosecuting,
defending and enforcing intellectual property rights; and the effect of
competing technological and market developments.
At
September 30, 2007, we had cash, cash equivalents and certificates of deposit
of
$19,050,376, as compared to $8,698,025 at December 31, 2006. Because money
market rates have been equal to or greater than what the Company could receive
in CDs, nearly all of our funds are currently invested in money market accounts
which are shown in our financial statements as part of “Cash and Cash
Equivalents.”
During
the nine months ended September 30, 2007, we used $4,284,208 of cash in our
operating activities. This amount compares to $5,392,776 used in our
operating activities during the comparable nine-month period in 2006. The
decrease of $1,108,568, or 20.5%, was primarily due to the substantial reduction
in legal fees which is offset by a material decline in accounts payable, as
well
as the increased payments to NCI as part of our newly extended CRADA agreement
and payments to various medical consultants to further advance and expand our
ongoing clinical trials.
We
have
funded our operations through a combination of private placements of our
securities and through the proceeds of our public offerings in 2000 and 2003.
Please see the detailed discussion of our various sales of securities described
in Note 2 to our 2006 financial statements included in our 2006 Form 10-K.
In
addition, we received proceeds of approximately $5.6 million from private
placements we completed in 2004, approximately $2.2 million on exercise of
warrants and options in 2004, approximately $2.5 million from a private
placement we completed in 2005, approximately $5.5 million on exercise of
warrants and options in 2005, and approximately $5.1 million on exercise of
warrants and options in 2006. During the nine months ended September 30, 2007,
we received approximately $1.3 million on exercise of warrants and options,
and
approximately $13.3 million from the registered direct offering of our Common
Stock and warrants we completed in September, 2007. Although there can be no
assurances, management believes that, as of September 30, 2007, the Company
currently has sufficient capital to complete our existing Phase II and Phase
III
clinical trials.
Application
of Critical Accounting Policies
The
Company’s financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”). Certain
accounting policies have a significant impact on amounts reported in the
financial statements. A summary of those significant accounting policies can
be
found in Note 1 to the Company’s financial statements contained in the Company’s
2006 Form 10-K. The Company is still in the development stage and has no
revenues, trade receivables, inventories, or significant fixed or intangible
assets. The Company has not adopted any significant new accounting policies
or
modified the application of existing policies during the nine months ended
September 30, 2007.
5
Additionally,
the Company devotes substantial resources to clinical trials and other research
and development activities relating to obtaining FDA and other approvals for
the
Delcath drug delivery system, the cost of which is required to be charged to
expense as incurred. This further limits the Company’s choice of accounting
policies and methods. Similarly, management believes there are very limited
circumstances in which the Company’s financial statement estimates are
significant or critical.
The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” ("FIN
48"), on January 1, 2007. FIN No. 48 requires that the impact of tax positions
be recognized in the financial statements if they are more likely than not
of
being sustained upon examination, based on the technical merits of the position.
As discussed in the financial statements in the 2006 Form 10-K, the
Company has a valuation allowance against the full amount
of its net deferred tax assets. The Company
currently provides a valuation allowance against deferred tax
assets when it is more likely than not that some portion, or all of its deferred
tax assets, will not be realized. The Company has not recognized any
unrecognized tax benefit under the provisions of FIN 48. In addition, there
is
no impact to accumulated deficit at the date of adoption as a result of the
implementation of FIN 48 and there is no interest or penalties accrued as
management believes the Company has no uncertain tax positions at September
30,
2007.
The
Company accounts for employee stock-based compensation costs in accordance
with
Statement of Financial Accounting Standards No. 123R, “Share-Based Payment”
(“SFAS 123R”). The Black-Scholes option pricing model is utilized to estimate
the fair value of employee stock based compensation at the date of grant, which
requires the input of highly subjective assumptions, including expected
volatility and expected life. As required under SFAS 123R, forfeitures for
options granted, which are not expected to vest are estimated. Changes in these
assumptions can materially affect the measure of estimated fair value of our
share-based compensation.
Item
3. Quantitative
and Qualitative Disclosures about Market Risk
The
Company’s marketable securities consist of short-term and/or variable rate
instruments and, therefore, a change in interest rates would not have a material
impact on the value of these securities.
Item
4. Controls
and Procedures
Based
on
an evaluation of the Company’s disclosure controls and procedures performed by
the Company’s Chief Executive Officer and Chief Financial Officer as of the end
of the period covered by this report, the Company’s Chief Executive Officer and
Chief Financial Officer concluded that the Company’s disclosure controls and
procedures have been effective.
As
used
herein, “disclosure controls and procedures” means controls and other procedures
of the Company that are designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms issued by the SEC. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company’s
management, including its principal executive officer or officers and its
principal financial officer or officers, or persons performing similar
functions, as appropriate, to allow timely decisions regarding required
disclosure.
6
There
were no changes in the Company’s internal control over financial reporting
identified in connection with the evaluation described above that occurred
during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
PART
II:
OTHER
INFORMATION
Item
1. Legal
Proceedings
We
have
been involved in a legal proceeding that was originally filed on August 12,
2005
in the United States District Court, District of Connecticut against Elizabeth
L. Enney (the “Defendant”). The named plaintiffs are Delcath Systems, Inc. and
M.S. Koly (former CEO, President, Treasurer and Director of Delcath),
individually and as a Director of Delcath Systems, Inc. The operative complaint
seeks damages for libel. In May 2006, the libel claims were dismissed for lack
of personal jurisdiction, and in July 2006, Plaintiffs filed a new libel claim
in the United States District Court for the Northern District of Georgia. On
November 1, 2006, Defendant filed a Motion for Judgment claiming that
Plaintiffs’ complaint and the attachments thereto, on their face, were
insufficient to support Plaintiffs’ libel claim as a matter of law. On December
22, 2006, Defendant filed a motion under Rule 11 of the Federal Rules of Civil
Procedure seeking an order directing payment to the Defendant of reasonable
attorneys’ fees and expenses by Plaintiff. On April 19, 2007, the entire action
was ordered and adjudged to be dismissed, and the Defendant was granted recovery
of her court costs only; however, her motion for sanctions against the
Plaintiffs was denied. On May 21, 2007 Defendant filed an appeal to the United
States Court of Appeals for the 11th
Circuit
from the final judgment and order of the court entered on April 19, 2007 denying
Defendant’s motion for sanctions against the Plaintiffs.
Item
1A. Risk
Factors
Our
2006
Form 10-K contains a detailed discussion of certain risk factors that could
materially adversely affect our business, operating results or financial
condition. The following risk factor has been amended and updated to reflect
recent events, and should be read in conjunction with the risk factors and
information disclosed in the 2006 Form 10-K.
We
may be delayed in, and limited or precluded from continuing, our clinical
testing of the Delcath System for the infusion of Melphalan, given that we
have
voluntarily suspended enrollment in our Phase III and Phase II clinical trials,
which could cause our stock price to decline.
On
October 23, 2007, we announced that we received on the afternoon of October
22,
2007,
a
letter from the FDA recommending that we temporarily suspend enrollment in
the
Phase III and Phase II trials of the Delcath System, and submit an analysis
of
adverse events in anticipation of a meeting with the FDA to discuss certain
gastrointestinal (“GI”) safety concerns. The recommendation was issued by the
FDA following reports of four serious adverse GI events that were submitted
to
the FDA, the National Cancer Institute’s Institutional Review Board and the Data
Safety Monitoring Board, which may have been related to the infusion of
Melphalan. Following receipt of this letter, we decided to voluntarily defer
accrual of new patients in our Phase III and Phase II trials; however, both
trials will continue for patients who are currently enrolled. We do not know
when or if we will resume enrollment in the Phase III and Phase II clinical
trials.
7
We
plan
to work as expeditiously as possible with the FDA to resolve the FDA’s safety
concerns and recommence enrollment of new patients, however, there can be no
assurance that we will be able to do so, or if we can do so in a timely manner.
We may experience a number of events that could continue to delay or prevent
development of the Delcath System, including:
· |
the
FDA may put the Phase III and/or Phase II trials on clinical hold,
meaning
that they will not allow for further enrollment in and/or permanently
suspend our clinical trials;
|
· |
additional
serious adverse events in the clinical trials could
occur;
|
· |
the
Company could fail to resume enrollment in the clinical trials in
a timely
manner or at all; or
|
· |
other
regulators or institutional review boards may not authorize, or may
delay,
suspend or terminate the clinical trial program due to any unresolved
safety concerns.
|
If
we
cannot resume enrollment, or if the resumption is delayed, our clinical trials,
and as a result, our business, operations and stock price could be materially
adversely affected.
Our
Common Stock is listed on the NASDAQ Capital Market. If we fail to meet the
requirements of the NASDAQ Capital Market for continued listing, our Common
Stock could be delisted.
Our
Common Stock is currently listed on the NASDAQ Capital Market. To keep such
listing, we are required to maintain: (i) a minimum bid price of $1.00 per
share, (ii) a certain public float, (iii) a certain number of round lot
shareholders and (iv) one of the following: a net income from continuing
operations (in the latest fiscal year or two of the three last fiscal years
) of
at least $500,000, a market value of listed securities of at least $35 million
or a stockholders' equity of at least $2.5 million. We are presently in
compliance with these requirements.
We
are
also required to maintain certain corporate governance requirements. On April
30, 2007, we were notified by NASDAQ that due to the resignations of two of
our
independent directors on April 16, 2007, we no longer complied with NASDAQ’s
requirements to have a majority of independent directors on our Board of
Directors, and for our Audit Committee to have three members. On May 24, 2007,
the Company regained compliance with both of these requirements within the
cure
period allowed by NASDAQ (on or before October 13, 2007). However, in the event
that in the future we are notified that we no longer comply with NASDAQ’s
corporate governance requirements, and we fail to regain compliance within
the
applicable cure period, our Common Stock could be delisted from the NASDAQ
Capital Market. In addition, if we fail to meet any of the other applicable
criteria, our Common Stock could be delisted from the NASDAQ Capital Market.
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
None.
8
Item
3. Defaults
Upon Senior Securities
None.
Item
4. Submission
of Matters to a Vote of Security Holders
None.
Item
5. Other
Information
There
were no matters required to be disclosed in a Current Report on Form 8-K during
the fiscal quarter covered by this report that were not so disclosed.
There
were no changes to the procedures by which security holders may recommend
nominees to the Company’s Board of Directors since the Company last disclosed
such procedures in its proxy statement filed in connection with its Annual
Meeting of Stockholders held on June 5, 2007.
Item
6. Exhibits
10.1 Employment
Agreement dated as of July 2, 2007 between Delcath Systems, Inc. and Richard
L.
Taney (incorporated by reference to Exhibit 10.1 of the Company’s Current Report
on Form 8-K filed July 5, 2007).
10.2 Lease
Agreement between Rockbay Capital Management, L.P. and the Company, dated as
of
July 9, 2007 (incorporated by reference to Exhibit 10.2 of the Company’s Current
Report on Form 8-K filed August 30, 2007).
10.3 Consent
of Master Landlord to the Sublease, dated August 21, 2007 (incorporated by
reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed
August 30, 2007).
10.4 Placement
Agency Agreement dated September 18, 2007 by and among Delcath Systems, Inc.,
Canaccord Adams Inc. and Think Equity Partners LLC. (incorporated by reference
to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 24,
2007).
10.5 Form
of
Subscription Agreement in connection with the Company’s September 2007
registered direct offering (incorporated by reference to Exhibit 10.2 of the
Company’s Current Report on Form 8-K filed September 24, 2007).
10.6 Form
of
Warrant issued to investors in connection with the Company’s September 2007
registered direct offering (incorporated by reference to Exhibit 10.3 of the
Company’s Current Report on Form 8-K filed September 24, 2007).
10.7 Escrow
Agreement dated September 18, 2007 between Delcath Systems, Inc., Canaccord
Adams Inc., Think Equity Partners LLC and JPMorgan Chase Bank, N.A.
(incorporated by reference to Exhibit 10.4 of the Company’s Current Report on
Form 8-K filed September 24, 2007).
31.1
Certification
of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the
Exchange Act.
9
31.2
Certification
of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the
Exchange Act.
32.1
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
10
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
November 8, 2007 | DELCATH SYSTEMS, INC. | |
(Registrant) | ||
/s/ Paul M. Feinstein | ||
Paul M. Feinstein |
||
Chief
Financial Officer and Treasurer
(principal
financial and accounting officer)
|
11
INDEX
TO EXHIBITS
10.1 Employment
Agreement dated as of July 2, 2007 between Delcath Systems, Inc. and Richard
L.
Taney (incorporated by reference to Exhibit 10.1 of the Company’s Current Report
on Form 8-K filed July 5, 2007).
10.2 Lease
Agreement between Rockbay Capital Management, L.P. and the Company, dated as
of
July 9, 2007 (incorporated by reference to Exhibit 10.2 of the Company’s Current
Report on Form 8-K filed August 30, 2007).
10.3 Consent
of Master Landlord to the Sublease, dated August 21, 2007 (incorporated by
reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed
August 30, 2007).
10.4 Placement
Agency Agreement dated September 18, 2007 by and among Delcath Systems, Inc.,
Canaccord Adams Inc. and Think Equity Partners LLC. (incorporated by reference
to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 24,
2007).
10.5 Form
of
Subscription Agreement in connection with the Company’s September 2007
registered direct offering (incorporated by reference to Exhibit 10.2 of the
Company’s Current Report on Form 8-K filed September 24, 2007).
10.6 Form
of
Warrant issued to investors in connection with the Company’s September 2007
registered direct offering (incorporated by reference to Exhibit 10.3 of the
Company’s Current Report on Form 8-K filed September 24, 2007).
10.7 Escrow
Agreement dated September 18, 2007 between Delcath Systems, Inc., Canaccord
Adams Inc., Think Equity Partners LLC and JPMorgan Chase Bank, N.A.
(incorporated by reference to Exhibit 10.4 of the Company’s Current Report on
Form 8-K filed September 24, 2007).
31.1
Certification
of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the
Exchange Act.
31.2
Certification
of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the
Exchange Act.
32.1
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.