DELCATH SYSTEMS, INC. - Quarter Report: 2009 March (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 March 31, 2009.
|
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, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer o
Accelerated filer x
Non-accelerated
filer o (Do not check if
a smaller reporting
company)
Smaller
reporting company 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 April 22, 2009,
25,355,254 shares of the Company’s common stock, $0.01 par value, were issued
and outstanding.
D DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
DELCATH
SYSTEMS, INC.
Index
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i
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
PART
I:
FINANCIAL
INFORMATION
|
Condensed
Financial Statements (Unaudited)
|
Index
to Financial Statements
|
|
Page
|
|
March 31, 2009
and December 31, 2008
|
F-1
|
|
for the Three
Months Ended March 31, 2009 and 2008 and Cumulative from Inception (August
5, 1988) to March 31, 2009
|
F-2
|
|
for the Three
Months Ended March 31, 2009
|
F-3
|
|
for the Three
Months Ended March 31, 2009 and 2008 and Cumulative from Inception (August
5, 1988) to March 31, 2009
|
F-4
|
|
F-5
– F-9
|
1
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
|
March
31,
2009
(Unaudited)
|
December
31,
2008
(Audited)
|
||||||||
|
Assets
|
|||||||||
|
Current
assets
|
|||||||||
|
Cash
and cash equivalents
|
$ | 4,804,142 | $ | 6,939,233 | |||||
|
Investments
- CDs
|
3,893,356 | 3,847,904 | |||||||
|
Investments
– treasury bills
|
– | 200,710 | |||||||
|
Investments
– marketable equity securities
|
19,000 | 22,000 | |||||||
|
Prepaid
expenses
|
354,449 | 331,346 | |||||||
|
Total
current assets
|
9,070,947 | 11,341,193 | |||||||
|
Property
and equipment, net
|
16,024 | 17,489 | |||||||
|
Total
assets
|
$ | 9,086,971 | $ | 11,358,682 | |||||
|
Liabilities
and Stockholders’ Equity
|
|||||||||
|
Current
liabilities
|
|||||||||
|
Accounts
payable and accrued expenses
|
$ | 213,143 | $ | 703,489 | |||||
|
Derivative
instrument liability
|
1,010,096 | 448,318 | |||||||
|
Total
current liabilities
|
1,223,239 | 1,151,807 | |||||||
|
Commitments
and contingencies
|
– | – | |||||||
|
Stockholders’
equity
|
|||||||||
|
Preferred
stock, $.01 par value; 10,000,000 shares authorized; no shares issued and
outstanding
|
– | – | |||||||
|
Common
stock, $.01 par value; 70,000,000 shares authorized
|
253,553 | 253,553 | |||||||
|
Additional
paid-in capital
|
57,398,023 | 57,292,685 | |||||||
|
Deficit
accumulated during development stage
|
(49,760,644 | ) | (47,315,163 | ) | |||||
|
Accumulated
other comprehensive loss
|
(27,200 | ) | (24,200 | ) | |||||
|
Total
stockholders’ equity
|
7,863,732 | 10,206,875 | |||||||
|
Total
liabilities and stockholders’ equity
|
$ | 9,086,971 | $ | 11,358,682 | |||||
See
accompanying notes to condensed financial statements.
F-1
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
(Unaudited)
|
Three
Months Ended
March
31,
|
Cumulative
from Inception
(August
5, 1988)
to
March
31,
|
|||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Costs
and expenses:
|
||||||||||||
|
General
and administrative expenses
|
$ | 474,964 | $ | 441,004 | $ | 23,254,063 | ||||||
|
Research
and development costs
|
1,461,189 | 988,956 | 30,858,605 | |||||||||
|
Total costs and
expenses
|
$ | 1,936,153 | $ | 1,429,960 | $ | 54,112,668 | ||||||
|
Operating loss
|
(1,936,153 | ) | (1,429,960 | ) | $ | (54,112,668 | ) | |||||
|
Derivative
instrument (expense) income
|
(561,778 | ) | 198,251 | 3,258,904 | ||||||||
|
Interest
income
|
50,761 | 173,963 | 2,790,954 | |||||||||
|
Other
income
|
1,689 | – | (74,311 | ) | ||||||||
|
Interest
expense
|
– | – | (171,473 | ) | ||||||||
|
Net loss
|
$ | (2,445,481 | ) | $ | (1,057,746 | ) | $ | (48,308,594 | ) | |||
|
Common
share data:
|
||||||||||||
|
Basic
and diluted loss per share
|
$ | (0.10 | ) | $ | (0.04 | ) | ||||||
|
Weighted
average number of shares
of
common stock outstanding
|
25,355,254 | 25,259,284 | ||||||||||
See
accompanying notes to condensed financial statements.
F-2
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
(Unaudited)
|
Common
Stock
$0.01
Par Value
Issued
and Outstanding
|
Additional
Paid-in Capital
|
Accumulated
Other Comprehensive Loss
|
Deficit
Accumulated During Development Stage
|
Other
Comprehensive Loss
|
|||||||||
|
No.
of Shares
|
Amount
|
Total
|
|||||||||||
|
Balance
at December 31, 2008
|
25,355,254
|
$ 253,553
|
$
57,292,685
|
$ (24,200)
|
$ (47,315,163)
|
$
10,206,875
|
–
|
||||||
|
Compensation
expense for issuance of stock options
|
–
|
–
|
65,005
|
–
|
–
|
65,005
|
–
|
||||||
|
Compensation
expense for issuance of stock
|
–
|
–
|
40,333
|
–
|
–
|
40,333
|
–
|
||||||
|
Components
of comprehensive loss:
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||
|
Change
in unrealized loss on investments
|
–
|
–
|
–
|
(3,000)
|
–
|
(3,000)
|
$ (3,000)
|
||||||
|
Net
loss
|
–
|
–
|
–
|
–
|
(2,445,481)
|
(2,445,481)
|
(2,445,481)
|
||||||
|
Total
comprehensive loss
|
–
|
–
|
–
|
–
|
–
|
–
|
$ (2,448,481)
|
||||||
|
Balance
at March 31, 2009
|
25,355,254
|
$ 253,553
|
$
57,398,023
|
$ (27,200)
|
$ (49,760,644)
|
$ 7,863,732
|
|||||||
See
accompanying notes to condensed financial statements.
F-3
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
(Unaudited)
|
Three
Months Ended
March
31,
|
Cumulative
from inception
(Aug.
5, 1988)
to
March 31,
|
|||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Cash
flows from operating activities:
|
||||||||||||
|
Net
loss
|
$ | (2,445,481 | ) | $ | (1,057,746 | ) | $ | (48,262,039 | ) | |||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Stock
option compensation expense
|
65,005 | 51,707 | 5,425,271 | |||||||||
|
Stock
and warrant compensation expense
|
40,333 | – | 1,184,611 | |||||||||
|
Depreciation
expense
|
1,465 | 1,466 | 53,227 | |||||||||
|
Amortization
of organization costs
|
– | – | 42,165 | |||||||||
|
Non-cash
interest income
|
(45,452 | ) | – | (53,356 | ) | |||||||
|
Derivative
liability fair value adjustment
|
561,778 | (198,251 | ) | (3,258,904 | ) | |||||||
|
Changes
in assets and liabilities:
|
||||||||||||
|
Decrease
(increase) in prepaid expenses
|
(23,103 | ) | (13,232 | ) | (354,449 | ) | ||||||
|
Increase
(decrease) in accounts payable and accrued expenses
|
(490,346 | ) | (45,236 | ) | 213,143 | |||||||
|
Net
cash used in operating activities
|
$ | (2,335,801 | ) | $ | (1,261,292 | ) | $ | (45,010,331 | ) | |||
|
Cash
flows from investing activities:
|
||||||||||||
|
Purchase
of equipment or furniture and fixtures
|
$ | – | $ | (8,313 | ) | $ | (69,252 | ) | ||||
|
Purchase
of short-term investments
|
– | (205,454 | ) | (41,411,452 | ) | |||||||
|
Purchase
of marketable equity securities
|
– | (46,200 | ) | (46,200 | ) | |||||||
|
Proceeds
from maturities of short-term investments
|
200,710 | 9,878,700 | 37,571,452 | |||||||||
|
Organization
costs
|
– | – | (42,165 | ) | ||||||||
|
Net
cash provided by (used in) investing activities
|
$ | 200,710 | $ | 9,618,733 | $ | (3,997,617 | ) | |||||
|
Cash
flows from financing activities:
|
||||||||||||
|
Net
proceeds from sale of stock and exercise of stock options and
warrants
|
$ | – | $ | – | $ | 52,657,764 | ||||||
|
Repurchases
of common stock
|
– | – | (51,103 | ) | ||||||||
|
Dividends
paid on preferred stock
|
– | – | (499,535 | ) | ||||||||
|
Proceeds
from short-term borrowings
|
– | – | 1,704,964 | |||||||||
|
Net
cash provided by financing activities
|
$ | – | $ | – | $ | 53,812,090 | ||||||
|
Increase
in cash and cash equivalents
|
(2,135,091 | ) | 8,357,441 | 4,804,142 | ||||||||
|
Cash
and cash equivalents at beginning of period
|
6,939,233 | 7,886,937 | – | |||||||||
|
Cash
and cash equivalents at end of period
|
$ | 4,804,142 | $ | 16,244,378 | $ | 4,804,142 | ||||||
|
Supplemental
cash flow information:
|
||||||||||||
|
Cash
paid for interest
|
– | – | $ | 171,473 | ||||||||
|
Supplemental
non-cash activities:
|
||||||||||||
|
Cashless
exercise of stock options
|
$ | – | $ | – | $ | 544,116 | ||||||
|
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 | ||||||||
See
accompanying notes to condensed financial statements.
F-4
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Note
1: Description of Business
Delcath
Systems, Inc. (the “Company”) is a development stage company that develops and
manufactures an innovative device designed to administer high dose chemotherapy
and other therapeutic agents to diseased organs or regions of the body.
The Company was incorporated in the State of Delaware in 1988 and since
its inception has focused its efforts on the development of a single product,
the Delcath PHP System™, for the treatment of tumors of the liver.
In 2006,
the Company began a Phase III clinical trial to support a pre-market approval
application for use of the Delcath PHP System™ with melphalan, a chemotherapy
agent, for the treatment of metastatic melanoma that has spread to the liver.
The trial is ongoing, and the Company hopes to complete enrollment of the
trial in 2009. In 2004, the Company began a multi-arm Phase II clinical trial
for use of the Delcath PHP System™ with certain other cancers that have spread
to the liver and metastatic melanomas that have spread to the liver and have
received certain prior regional treatment. The Company is focusing on
enrolling patients in the neuroendocrine arm of that study. The other
two arms treating metastatic adenocarcinomas and primary liver cancer will be
refocused so as to optimize the progress of those arms of the trial. The
Company has entered into a dialogue with the United States Food and Drug
Administration (the “FDA”) concerning a clinical trial that will focus on the
effectiveness of the Delcath PHP System™ in administering high-dose doxorubicin
as compared with standard systemic treatment with sorafenib for the treatment of
primary liver cancer. In September 2008, the Company received
approval from the FDA to begin working on that trial. To date, the Delcath
PHP System™ has not been approved by the FDA.
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
March 31, 2009 and 2008, and cumulative from inception (August 5, 1988) to March
31, 2009.
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, 2008,
which are contained in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008 as filed with the Securities and Exchange Commission
(the “SEC”) on March 3, 2009 (the “2008 Form 10-K”).
Certain
reclassifications have been made to the 2008 financial statement presentation in
order to correspond to the presentation of the March 31, 2009 financial
statements.
F-5
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Note
3: Recently Adopted Accounting Pronouncements
In January 2009, the
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 161,
“Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”),
which changes the disclosure requirements for derivative instruments and hedging
activities. SFAS 161 requires enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities” and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. The adoption of SFAS 161 did
not have a material impact on the condensed financial statements.
|
Note
4:
|
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 salaries and related expenses for our executive
and administrative staff, recruitment and employee retention expenses,
professional license and organizational fees, business development and certain
general legal activities.
Note
5: Investment in Marketable Equity Securities
In
January 2008, the Company entered into a research and development agreement with
Aethlon Medical, Inc., (“AEMD”) a publicly traded company whose securities are
quoted on the Over the Counter Bulletin Board. As part of this
agreement, the Company received 100,000 shares of restricted common stock of
AEMD. The Company allocated $46,200 of the cost of the
agreement to the fair value of the common stock acquired, using the closing
stock price at the date of the agreement and then discounting that value due to
certain sale restrictions on the stock being held. In September 2008,
the sale restriction on the stock being held had lapsed and as a result the fair
value of the stock is no longer being discounted. The investment is
classified as an available for sale security and had a fair value on March 31,
2009 of $19,000 which included a gross unrealized loss of $27,200, which is
included as a component of comprehensive loss.
|
Note
6:
|
Stockholders’
Equity
|
In
January 2009, the Company granted 50,000 options to its President and Chief
Executive Officer pursuant to the terms of his employment
agreement. The per share weighted average fair value of the five-year
stock option grant was $0.56 with a grant date exercise price equal to the
common stock value at the date of grant, estimated on the date of grant using
the Black-Scholes option-pricing model. All of these options vested immediately.
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 No. 123R, “Share-Based Payment”. The weighted-average
assumption of a risk free interest rate of 1.01% 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
74.83% was
F-6
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
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 Company recognized compensation expense totaling $28,076
upon grant of these fully vested options.
The
Company also recognized compensation expense of $36,929 in the first quarter of
2009 relating to options granted in previous years.
In July
2008, in accordance with an agreement with the new Chief Medical Officer, the
Company granted 200,000 restricted shares of common stock which vest
incrementally over three years that had an issuance value of
$2.42. The Company has recognized compensation expense of $40,333 in
the first quarter of 2009 relating to these shares.
In
September 2007, the Company completed the sale of 3,833,108 shares of its common
stock and the issuance of warrants to purchase 1,916,554 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 warrants are
exercisable at $4.53 per share beginning six months after the issuance thereof
and on or prior to the fifth anniversary of the issuance thereof. The shares
were offered by the Company pursuant to an effective shelf registration
statement on Form S-3, which was filed with the SEC 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 the Emerging Issues Task Force (“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 its inability to deliver registered shares upon
the exercise of the warrants by such warrant holders. The warrants also contain
a cashless exercise feature. Accordingly, the warrants have been accounted for
as derivative instrument liabilities that are subject to mark-to-market
adjustment in each period. As a result, for the three month period ended March
31, 2009, the Company recorded pre-tax derivative instrument expense of
$561,778. The resulting derivative instrument liability totaled $1,010,096 at
March 31, 2009. 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 1.28%, volatility of 71.04% and an
expected life equal to the September 24, 2012 contractual life of the
warrants.
|
Note
7:
|
Stock
Option Plans
|
The
Company established the 2000 Stock Option Plan, the 2001 Stock Option Plan and
the 2004 Stock Incentive Plan (collectively, the “Plans”) under which 300,000,
750,000 and 3,000,000 shares, respectively, were reserved for the issuance of
stock options, stock appreciation rights, restricted stock, and stock grants. 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 awards shall be granted as
well as the terms and conditions of each award, the option price and the
duration of each award.
F-7
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
During
2000, 2001 and 2004, respectively, the 2000 and 2001 Stock Option Plans and the
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. Stock option activity for the
three-month period ended March 31, 2009 is as follows:
|
The
Plans
|
|||||||
|
Stock
Options
|
Exercise
Price per Share
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Life (Years)
|
||||
|
Outstanding
at December 31, 2008
|
1,460,000
|
$1.23
– $6.18
|
$3.44
|
3.68
|
|||
|
Granted
|
50,000
|
1.24
|
1.24
|
||||
|
Expired
|
-
|
-
|
-
|
||||
|
Exercised
|
-
|
-
|
-
|
||||
|
Outstanding
at March 31, 2009
|
1,510,000
|
$1.23
– $6.18
|
$3.36
|
3.47
|
|||
|
Note
8:
|
Assets
and Liabilities Measured at Fair
Value
|
Derivative financial
instruments
Currently,
the Company has allocated proceeds of warrants issued in connection with a
private placement that were classified as a liability and accounted for as a
derivative instrument in accordance with EITF 00-19, “Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company’s own
Stock.” The valuation of the
warrants is determined using the Black-Scholes model. This model uses inputs
such as the underlying price of the shares issued when the warrant is exercised,
volatility, risk free interest rate and expected life of the
instrument. The Company has determined that the inputs
associated with fair value determination are readily observable and as a result
the instrument is classified within Level 2 of the fair-value
hierarchy.
Marketable
Equity Securities
The
Company owns 100,000 shares of common stock of AEMD. At March 31,
2009, the valuation of such stock is determined utilizing the current quoted
market price of AEMD. The Company has determined that the inputs associated with
the fair value determination are readily observable and as a result the
instrument was classified within Level 1 of the fair-value
hierarchy.
Money
Market Funds and Certificates of Deposit
Cash and
cash equivalents includes a money market account valued at
$4,674,539.
The
company also holds certificates of deposit valued at $3,893,356, which are
classified as held to maturity. As such, the certificates of deposit are carried
at amortized cost. The balance reflects a cost basis of $3,840,000 and $53,356
in accrued interest income.
F-8
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
The
Company has determined that the inputs associated with the fair value
determination are based on quoted prices (unadjusted) and as a result the
investments are classified within Level 1 of the fair value
hierarchy.
The table
below presents the Company’s assets and liabilities measured at fair value on a
recurring basis as of March 31, 2009, aggregated by the level in the fair value
hierarchy within which those measurements fall.
Assets and Liabilities Measured at Fair Value on a Recurring Basis at March 31,
2009
|
Level
1
|
Level 2
|
Level 3
|
Balance
at
March
31, 2009
|
||||||||||||||
|
Assets
|
|||||||||||||||||
| Marketable equity securities |
|
$
|
19,000
|
$
|
—
|
$
|
—
|
$
|
19,000
|
||||||||
| Money market funds |
|
4,674,539
|
—
|
—
|
4,674,539
|
||||||||||||
| Certificates of deposit |
|
3,893,356
|
—
|
—
|
3,893,356
|
||||||||||||
|
Liabilities
|
|||||||||||||||||
|
Derivative
financial instruments
|
$
|
—
|
$
|
1,010,096
|
$
|
—
|
$
|
1,010,096
|
|||||||||
The
Company does not have any fair value measurements using significant unobservable
inputs (Level 3) as of March 31, 2009.
|
Note
9:
|
Income
Taxes
|
The
Company adopted the provisions of the Financial Accounting Standards Board
(“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109” (“FIN No. 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
2008 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 benefits in their balance sheet under the
provisions of FIN No. 48.
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 United States
Internal Revenue Service (“the IRS”) or any states in connection with income
taxes. The periods from December 31, 2005 to December 31, 2008 remain open to
examination by the IRS and state authorities.
F-9
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the accompanying condensed and
consolidated financial statements and notes thereto contained in Item 1 of Part
I of this Form 10-Q and our audited “financial statements and notes thereto as
of and for the year ended December 31, 2008” included in our Form 10-K for the
year ended December 31, 2008 filed with the Securities and Exchange Commission
to provide an understanding of our results of operations, financial condition
and cash flows.
FORWARD-LOOKING
STATEMENTS
This Form
10-Q, including the section titled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” contains forward-looking
statements regarding our future performance. All forward-looking
information is inherently uncertain and actual results may differ materially
from assumptions, estimates or expectations reflected or contained in the
forward-looking statements as a result of various factors, including those set
forth in this quarterly report on Form 10-Q and in our annual report on Form
10-K for the year ended December 31, 2008. Forward-looking statements
convey our current expectations or forecasts of future events. All
statements contained in this Form 10-Q other than statements of historical fact
are forward-looking statements. Forward-looking statements include
statements regarding our future financial position, business strategy, budgets,
projected costs, plans and objectives of management for future
operations. The words “may,” “continue,” “estimate,” “intend,”
“plan,” “will,” “believe,” “project,” “expect,” “anticipate” and similar
expressions may identify forward-looking statements, but the absence of these
words does not necessarily mean that a statement is not
forward-looking. With respect to the forward-looking statements, we
claim the protection of the safe harbor for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995.
These
forward-looking statements speak only as of the date of this Form
10-Q. Unless required by law, we undertake no obligation to publicly
update or revise any forward-looking statements to reflect new information or
future events or otherwise.
Overview
We are a
medical technology company that develops and manufactures an innovative device
designed to administer high dose chemotherapy and other therapeutic agents
directly to diseased organs or regions of the body. We are currently
focusing on the development of a single product, the Delcath PHP System™, for
the treatment of tumors of the liver. Based on human clinical data, we believe
that the Delcath PHP System™ allows physicians to deliver significantly higher
chemotherapy doses to the liver than could be administered by conventional
intravenous delivery.
The
Delcath PHP System™ is a disposable kit consisting of various catheters,
filters, and a tubing circuit used during cancer treatment to isolate the liver
from the patient’s general circulatory system. Our system allows for
ultra-high doses of chemotherapy agents to be directed at a patient’s liver
while at the same time limiting the exposure of healthy tissue and organs to the
harmful effects of those chemotherapeutic agents. By providing higher
dosing of chemotherapy agents than would otherwise be possible through
conventional chemotherapy, we believe that treatment with the Delcath PHP
System™ is more effective than conventional treatment at killing cancer cells
and preventing new cancer cell formation.
2
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
In 2006,
we began a Phase III clinical trial to support a pre-market approval application
for use of the Delcath PHP System™ with melphalan, a chemotherapy agent, for the
treatment of metastatic melanoma that has spread to the liver. The
trial is being conducted under the FDA’s Special Protocol Assessment (“SPA”).
Patients enrolled in this study currently receive treatment at the National
Cancer Institute, or NCI, which serves as the coordinating center for this
multi-center trial or at one of the other participating centers. The
trial is currently approved for expansion to a maximum of 28
centers. In April 2008, the Institutional Review Board of the
University of Maryland Medical Center agreed to participate in our Phase III
study. In June 2008, St. Luke’s Cancer Center, the Albany Medical
Center, the Atlantic Melanoma Center of Atlantic Health and the University of
Texas Medical Branch joined this clinical trial. In the third
quarter, Swedish Medical Center of Colorado, John Wayne Cancer Institute,
Providence Health Systems, and Moffitt Cancer Center agreed to join the clinical
trial. In the fourth quarter of 2008, University of Pittsburgh Medical Center
agreed to join the trial. Ohio State University Comprehensive Cancer Center
recently joined the trial bringing the total to twelve centers. Each
of the center’s Institutional Review Board (“IRB”) has approved our treatment
protocol. Critical to expediting completion of this trial, the
Western International Review Board, or WIRB, has also approved our
protocol. The WIRB, which provides review services for more than 100
institutions (academic centers, hospitals, networks and in-house biotech
research) in all 50 states and internationally, will help accelerate the
internal review process at a number of the hospitals currently participating in
the study. As of March 31, 2009, we have enrolled a total of 58
patients of the expected 92-patient trial. We expect to complete
patient enrollment in this study in 2009. Once the FDA grants
approval, we plan to conduct additional pre-clinical and clinical trials on the
use of the Delcath PHP System™ with other chemotherapy agents used to treat
cancer in the liver and seek additional FDA pre-market approvals.
In 2004,
we began a multi-arm Phase II clinical trial for the use of the Delcath PHP
System™ with melphalan in the treatment of hepatocellular carcinomas as well as
neuroendocrine and adenocarcinoma cancers that have spread to the
liver. In 2007, an additional arm was added to the Phase II trial to
treat patients with metastatic melanomas that have spread to the liver who have
received prior surgical isolated hepatic perfusion. Based on
promising initial clinical results, we plan to focus our efforts on enrolling
patients for the treatment of metastatic neuroendocrine cancer. We
have currently enrolled 23 of the 25 patients required for the neuroendocrine
arm of the trial and we anticipate that we will complete patient enrollment in
this arm of the study in 2009.
As
indicated above, the Company is focusing on enrolling patients in the
neuroendocrine arm of the Phase II study. The other two arms treating
adenocarcinoma and primary liver cancer will be refocused so as to optimize the
progress of those arms of the trial. The Company has entered into a
dialogue with the FDA concerning a clinical trial that will focus on the
effectiveness of the Delcath PHP System™ in administering high-dose doxorubicin
as compared with standard systemic treatment with sorafenib for the treatment of
primary liver cancer. In September 2008, the Company received
approval from the FDA to begin working on that trial.
The
successful development of the Delcath PHP System™ is highly uncertain, and
development costs and timelines can vary significantly and are difficult to
accurately predict. Various statutes and regulations also impact the
manufacturing, safety, labeling, storage, record keeping and marketing of our
system. The lengthy process of completing clinical trials, seeking
FDA approval and subsequent compliance with applicable statutes and regulations
require the expenditure of substantial resources. Any failure by us
to obtain, or any delay in obtaining, regulatory approvals could materially,
adversely affect our business. To
3
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
date, we
have not received approval for the sale of our system in any market and,
therefore, have not generated any revenues. The Delcath PHP System™ has not yet
been approved by the FDA and may not be marketed in the United States without
FDA pre-market approval.
In June
2008 and July 2008 we hired two senior executives. We hired a Chief
Medical Officer to oversee the expansion of clinical activity, moving us towards
the conclusion of our first Phase III clinical trial. We also hired a Senior
Vice President for Regulatory Affairs and Quality Systems, a position newly
created to manage the extensive FDA process. Our expenses generally
include costs for clinical studies, securing patents, regulatory activities,
manufacturing, personnel, rent for our facilities, and general corporate and
working capital, including general and administrative
expenses. Because we have no FDA-approved product and no commercial
sales, we will continue to be dependent upon existing cash, the sale of equity
or debt securities, or establishing a strategic alliance with appropriate
partners to fund future activities. We cannot be assured that the pace of
patient enrollment will meet our projections, that we will obtain FDA approval
for our Delcath PHP System™, that we will have, or could raise, sufficient
financial resources to sustain our operations pending FDA approval, or that, if
and when the required approvals are obtained, there will be a market for any of
our products.
The
Company’s expenditures are highly variable and are dependent upon the
number and pace of patients enrolled in our clinical trials. We
expect that the amount of capital required for our trials will increase over the
coming months due to the increased number of patients enrolled at newly added
clinical trial centers. We believe that we have sufficient capital
for operations through 2009 and to substantially advance our ongoing Phase III
trial.
We are a
development stage company, and since our inception we have raised approximately
$52.7 million (net of fundraising expenses). We have financed our
operations primarily through public and private placements of equity
securities. We have incurred net losses since we were founded and we
expect to continue to incur significant and increasing net losses over the
coming years.
Results
of Operations for the Three Months Ended March 31, 2009
We have
operated at a loss for our entire history. We had a net loss for the
three months ended March 31, 2009, of $2,445,481, which is a $1,387,735 increase
in the net loss for the same period in 2008. The increase in net loss
in 2009 is mainly attributable to a $760,029 fluctuation of derivative
instrument income/expense, as well as to increased research and development
costs related to the Phase III clinical trial.
General
and administrative expenses increased from $441,004 during the three months
ended March 31, 2008 to $474,964 for the three months ended March 31, 2009, or
$33,960, a 7.7% change. This increase is primarily due to the addition of two
members to the Board of Directors and an increase in fees paid to outside
consultants.
During
the three months ended March 31, 2009, we incurred $1,461,189 in research and
development costs, as compared to $988,956 during the first quarter of 2008, an
increase of $472,233. This increase is attributed to the continued expansion and
acceleration of our Phase III clinical trial. During the first quarter of 2008
we had one center (the NCI) performing PHP™ treatments. For the same period of
2009, nine of our centers performed PHP™ treatments. The continued expansion of
our Phase III trial has
4
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
created
additional expenses related to patient treatment costs, clinical trial set-up
expenses, IRB approvals, and other clinical expenses.
Interest
income shown is from our money market account and investment in various
certificates of deposit. During the three months ended March 31,
2009, the Company had interest income of $50,761, as compared to interest income
of $173,963 for the same period in 2008. This decrease is due to our
reduced cash position as we continue to direct our funds towards the completion
of our Phase III trial, as well as the overall market conditions which continue
to yield a lower percentage of return on our investments than the same period
last year.
Liquidity
and Capital Resources
Our
future results are subject to substantial risks and uncertainties. We
have operated at a loss for our entire history and we anticipate that losses
will continue for the foreseeable future. There can be no assurance
that we will ever generate significant revenues or achieve
profitability. We expect to use cash, cash equivalents and investment
proceeds to fund our operating activities. Our future liquidity and
capital requirements will depend on numerous factors, including the progress of
our research and product development programs, including our ongoing Phase II
and Phase III clinical trials; 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. We continue to move forward aggressively, most notably by adding
new sites to our ongoing clinical trials and increasing our efforts to enroll
additional patients in these trials. As we seek FDA approval
and get our product to market we expect that our capital expenditures will
increase significantly.
At March
31, 2009, we had cash and cash equivalents of $4,804,142, as compared to
$6,939,233 at December 31, 2008. Nearly all of our
available funds are invested in money market accounts and certificates of
deposit.
During
the three months ended March 31, 2009, we used $2,335,801 of cash in our
operating activities. This amount compares to $1,261,292 used in our operating
activities during the comparable three month period in 2008. The
increase of $1,074,509, or 85.2%, is primarily due to increased payroll expenses
related to the hiring of two senior executives in the second half of 2008 and
accelerated clinical development costs related to all facets of the Delcath PHP
System™. We expect that our cash allocated to operating activities
will continually increase as we aggressively move toward the full enrollment and
completion of our first Phase III clinical trial, and continue to navigate the
extensive FDA approval process. We believe we have sufficient capital to fund
our current clinical trials through 2009. Even in light of potential
increased expenditures, we believe that our cash and cash equivalents will be
adequate to satisfy our capital needs through fiscal 2009.
At March
31, 2009, the Company’s accumulated deficit was approximately $49.8
million. Because our business does not generate any positive cash
flow from operating activities, we will likely need to raise additional capital
to develop our product beyond the current clinical trials or to fund development
efforts relating to new products. We anticipate that we could raise
additional capital in the event that we find it in our best interest to do so.
We anticipate raising such additional capital by either borrowing money, selling
shares of our capital stock, or entering into strategic alliances with
appropriate partners. To the
5
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
extent
additional capital is not available when we need it, we may be forced to abandon
some or all of our development and commercialization efforts, which would have a
material adverse effect on the prospects of our business. Further,
our assumptions relating to our cash requirements may differ materially from
those planned because of a number of factors, including significant unforeseen
delays in the regulatory approval process, changes in the focus and direction of
our clinical trials and costs related to commercializing our
product.
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
along with our registered direct offering in 2007. Please see the
detailed discussion of our various sales of securities described in Note 3 of
the financial statements in the 2008 Form 10-K.
Critical
Accounting Estimates
Our
financial statements have been prepared in accordance with
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 our financial
statements contained in our 2008 Form 10-K. We are still in the
development stage and have no revenues, trade receivables, inventories, or
significant fixed or intangible assets, and therefore have very limited
opportunities to choose among accounting policies or methods. In many
cases, we must use an accounting policy or method because it is the only policy
or method permitted under GAAP.
Additionally,
we devote substantial resources to clinical trials and other research and
development activities relating to obtaining FDA and other approvals for the
Delcath PHP System™, the cost of which is required to be charged to expense as
incurred. This further limits our choice of accounting policies and
methods. Similarly, management believes there are very limited
circumstances in which our financial statement estimates are significant or
critical.
We
consider the valuation allowance for the deferred tax assets to be a significant
accounting estimate. In applying SFAS No. 109, “Accounting for Income
Taxes,” management estimates future taxable income from operations and tax
planning strategies in determining if it is more likely than not that we will
realize the benefits of our deferred tax assets. Management believes
the Company does not have any uncertain tax positions as defined under FASB
Interpretation No. 48 “Accounting for Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109.”
The
Company has adopted the provisions of SFAS 123R. 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). 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.
6
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
On
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines
fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. SFAS No. 157 applies to
reported balances that are required or permitted to be measured at fair value
under existing accounting pronouncements; accordingly, the standard does not
require any new fair value measurements of reported balances. The
adoption of SFAS No. 157 did not have a material effect on the carrying values
of the Company’s assets.
SFAS No.
157 emphasizes that fair value is a market-based measurement, not an
entity-specific measurement. Therefore, a fair value measurement
should be determined based on the assumptions that market participants would use
in pricing the asset or liability. As a basis for considering market
participant assumptions in fair value measurements, SFAS No. 157 establishes a
fair value hierarchy that distinguishes between market participant assumptions
based on market data obtained from sources independent of the reporting entity
(observable inputs that are classified within Levels 1 and 2 of the hierarchy)
and the reporting entity’s own assumptions about market participant assumptions
(unobservable inputs classified within Level 3 of the hierarchy).
Level 1
inputs utilize quoted prices (unadjusted) in active markets for identical assets
or liabilities that the Company has the ability to access. Level 2 inputs are
inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs may include
quoted prices for similar assets and liabilities in active markets, as well as
inputs that are observable for the asset or liability (other than quoted
prices), such as interest rates, foreign exchange rates, and yield curves that
are observable at commonly quoted intervals. Level 3 inputs are unobservable
inputs for the asset or liability which are typically based on an entity’s own
assumptions, as there is little, if any, related market activity. In instances
where the determination of the fair value measurement is based on inputs from
different levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls is based on the
lowest level input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a particular input to
the fair value measurement in its entirety requires judgment, and considers
factors specific to the asset or liability.
|
Quantitative
and Qualitative Disclosures about Market
Risk
|
We may be
exposed to market risk through changes in market interest rates that could
affect the value of our investments. However, 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 fair value of our investment portfolio or related income.
In
January 2008, the Company entered into a research and development agreement with
AEMD, a publicly traded company whose securities are quoted on the Over the
Counter Bulletin Board. As part of this agreement, the Company
received 100,000 shares of restricted common stock of AEMD. The
Company allocated $46,200 of the cost of the agreement to the fair value of the
common stock acquired, using the closing stock price at the date of the
agreement and then discounting that value due to certain sale restrictions on
the stock being held. During the quarter ending September 30, 2008,
the restriction on the common stock held lapsed and as a result the fair value
of the stock is calculated using the closing stock price (unadjusted) at March
31, 2009. The investment is classified as an available for sale
security and had a fair value on March 31, 2009 of $19,000, which included a
gross unrealized loss of $27,200, which is included as a
component of comprehensive loss.
7
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
The
Company measures all derivatives, including certain derivatives embedded in
contracts, at fair value and recognizes them in the balance sheet as an asset or
a liability, depending on the Company’s rights and obligations under the
applicable derivative contract. In 2007, the Company completed the
sale of 3,833,108 shares of its Common Stock and the issuance of warrants to
purchase 1,916,554 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.
The shares were offered by the Company pursuant to an effective shelf
registration statement on Form S-3, which was filed with the SEC 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 three month period ended March
31, 2009, the Company recorded derivative instrument expense of $561,778. The
resulting derivative instrument liability totaled $1,010,096 at March 31, 2009.
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 1.28%, volatility of 71.04% and an expected life equal to the
September 24, 2012 contractual life of the warrants.
|
Controls
and Procedures
|
Based on
an evaluation of the Company’s disclosure controls and procedures performed by
the Company’s Principal Executive Officer and Principal Financial Officer as of
the end of the period covered by this report, the Company’s Principal Executive
Officer and Principal 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.
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 materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
8
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
OTHER
INFORMATION
|
Legal
Proceedings
|
Not
Applicable.
|
Risk
Factors
|
Our 2008
Form 10-K contains a detailed discussion of certain risk factors that could
materially adversely affect our business, operating results or financial
condition. There were no material changes in these risk factors since
such disclosure.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Not
Applicable.
|
Defaults
upon Senior Securities
|
Not
Applicable.
Not
Applicable.
|
Other
Information
|
Not
Applicable.
|
Exhibits
|
31.1 Certification
of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the
Exchange Act.
31.2 Certification
of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the
Exchange Act.
32.1 Certification
of Principal 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 Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
9
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
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.
|
April 24,
2009
|
DELCATH
SYSTEMS, INC.
(Registrant)
|
|
/s/
Barbra Keck
|
|
|
Barbra
Keck
|
|
|
Controller
|
|
|
(Principal
financial officer)
|
10
DELCATH
SYSTEMS, INC.
(A
Development Stage Company)
EXHIBIT
INDEX
Exhibit
No. Description
|
31.1
|
Certification
of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
of the Exchange Act.
|
|
31.2
|
Certification
of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
of the Exchange Act.
|
|
32.1
|
Certification
of Principal 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 Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
11