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Imunon, Inc. - Quarter Report: 2008 June (Form 10-Q)

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

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

 

 

For the quarterly period ended June 30, 2008

 

or

 

o

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

 

For the transition period from              to             

 

Commission file number 000-14242

 


 

CELSION CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

52-1256615

(State or Other Jurisdiction of

 

(I.R.S. employer

Incorporation or Organization)

 

identification no.)

 

10220-L Old Columbia Road, Columbia, Maryland 21046

(Address of Principal Executive Offices)             (Zip Code)

 

(410) 290-5390

(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 “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer  o    Accelerated Filer  o    Non-accelerated Filer  o    Smaller Reporting Company x

 

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  
o     No  x

 

As of August 1, 2008 the Registrant had 10,145,850 shares outstanding of Common Stock, $.01 par value per share.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

PART I:

FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements and Notes (Unaudited)

 

 

 

Balance Sheets

 

 

 

Statements of Operations

 

 

 

Statement of Changes in Stockholders’ Equity

 

 

 

Statements of Cash Flows

 

 

 

Notes to Financial Statements

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

 

 

 

 

PART II:

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

 

Item 1A.

Risk Factors

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

Item 3.

Defaults Upon Senior Securities

 

 

Item 4.

Submission of Matters to a vote of Security Holders

 

 

Item 5.

Other Information

 

 

Item 6.

Exhibits

 

 

 

 

 

 

SIGNATURES

 

 

 

EXHIBITS

 

 

 

 

11

Statement Re: Computation of Earnings Per Share. (Filed herewith)

 

 

 

 

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

 

 

 

 

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

 

 

 

 

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. (Furnished herewith)

 

 

 

 

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Furnished herewith)

 



Table of Contents

 

PART I

FINANCIAL INFORMATION

 

Item 1.     Financial Statements.

 

Index to Financial Statements

 

 

Page

 

 

Balance Sheets as of June 30, 2008 (Unaudited) and December 31, 2007

4 - 5

 

 

Statements of Operations (Unaudited) for the Three and Six Month Periods Ended June 30, 2008 and 2007

6

 

 

Statement of Changes in Stockholders’ Equity (Unaudited) for the Six Months Ended June 30, 2008

7

 

 

 Statements of Cash Flows (Unaudited) for the Six Month Periods Ended June 30, 2008 and 2007

8

 

 

 Notes to Financial Statements (Unaudited)

9 - 16

 

3



Table of Contents

 

CELSION CORPORATION

BALANCE SHEETS

June 30, 2008 and December 31, 2007

 

 

 

June 30,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

1,038,602

 

$

2,937,373

 

Short term investments available for sale, at fair value

 

11,603,433

 

3,000,000

 

Accounts receivable - trade

 

13,182

 

183,043

 

Other receivables

 

60,403

 

47,110

 

Due from Boston Scientific Corporation

 

15,000,000

 

15,000,000

 

Prepaid expenses

 

225,786

 

256,874

 

Total current assets

 

27,941,406

 

21,424,400

 

 

 

 

 

 

 

Property and equipment - at cost

 

 

 

 

 

Furniture and office equipment

 

194,257

 

194,200

 

Computer hardware and software

 

302,148

 

338,349

 

Laboratory and shop equipment

 

300,686

 

305,340

 

Leasehold improvements

 

132,148

 

132,148

 

 

 

929,239

 

970,037

 

Less: Accumulated depreciation

 

717,131

 

702,156

 

Net value of property and equipment

 

212,108

 

267,881

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

Advances under Celsion (Canada), Ltd.

 

 

 

 

 

Transition Services Agreement (net of allowance of $449,891 and $442,225 respectively)

 

 

200,000

 

Note receivable (net of discount of $147,154 and $168,473, respectively, and an allowance of $824,831 and $0, respectively)

 

378,015

 

1,181,527

 

Due from Boston Scientific Corporation - Non Current

 

 

15,000,000

 

Deposits with CROs and other assets

 

1,397,889

 

899,268

 

Patent licensing fees (net of accumulated amortization of $13,125 and $7,500, respectively)

 

61,875

 

65,625

 

Total other assets

 

1,837,779

 

17,346,420

 

 

 

 

 

 

 

Total assets

 

$

29,991,293

 

$

39,038,701

 

 

4



Table of Contents

 

CELSION CORPORATION

BALANCE SHEETS (Continued)

June 30, 2008 and December 31, 2007

 

 

 

June 30,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(Unaudited)

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable - trade

 

$

1,309,592

 

$

1,830,457

 

Other accrued liabilities

 

3,384,948

 

5,056,380

 

Income taxes payable

 

 

546,000

 

Accrued non-cash compensation

 

8,910

 

8,910

 

Note payable - current portion

 

578,218

 

676,859

 

Total current liabilities

 

5,281,668

 

8,118,606

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

Note payable

 

 

234,742

 

Other liabilities

 

31,440

 

34,238

 

Total long-term liabilities

 

31,440

 

268,980

 

 

 

 

 

 

 

Total liabilities

 

5,313,108

 

8,387,586

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Common stock - $0.01 par value per share (250,000,000 shares authorized; 10,805,558 and 10,783,922 shares issued as of June 30, 2008 and December 31, 2007, respectively.)

 

108,056

 

107,839

 

Additional paid-in capital

 

88,866,254

 

88,319,985

 

Accumulated other comprehensive loss

 

(7,408

)

 

Accumulated deficit

 

(61,649,765

)

(55,137,757

)

Subtotal

 

27,317,137

 

33,290,067

 

Less: 659,738 shares of treasury stock - at cost

 

(2,638,952

)

(2,638,952

)

Total stockholders’ equity

 

24,678,185

 

30,651,115

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

29,991,293

 

$

39,038,701

 

 

See accompanying notes.

 

5



Table of Contents

 

CELSION CORPORATION

STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

$

1,615,082

 

$

2,349,036

 

$

4,582,192

 

$

4,119,849

 

General and administrative

 

580,910

 

1,671,388

 

1,076,528

 

2,965,556

 

Total operating expenses

 

2,195,992

 

4,020,424

 

5,658,720

 

7,085,405

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(2,195,992

)

(4,020,424

)

(5,658,720

)

(7,085,405

)

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Other expense

 

(158,825

)

(415,457

)

(839,091

)

(415,457

)

Interest income

 

28,614

 

120,253

 

104,124

 

301,032

 

Interest expense

 

(103,963

)

(317,162

)

(118,321

)

(665,425

)

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(2,430,166

)

$

(4,632,790

)

$

(6,512,008

)

$

(7,865,255

)

 

 

 

 

 

 

 

 

 

 

Discontinued Operations (Note 12)

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

49,121,362

 

 

49,996,156

 

Income tax expense

 

 

(274,000

)

 

(274,000

)

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

48,847,362

 

 

49,722,156

 

 

 

 

 

 

 

 

 

 

 

Net (loss) / income

 

$

(2,430,166

)

$

44,214,572

 

$

(6,512,008

)

$

41,856,901

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations per common share - basic

 

$

(0.24

)

$

(0.43

)

$

(0.64

)

$

(0.73

)

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations per common share - diluted

 

$

(0.24

)

$

(0.43

)

$

(0.64

)

$

(0.73

)

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations per common
share - basic

 

$

 

$

4.53

 

$

 

$

4.62

 

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations per common
share - diluted

 

$

 

$

4.20

 

$

 

$

4.33

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share - basic

 

$

(0.24

)

$

4.10

 

$

(0.64

)

$

3.89

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share - diluted

 

$

(0.24

)

$

3.80

 

$

(0.64

)

$

3.64

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

10,146,446

 

10,773,023

 

10,144,944

 

10,760,019

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted (1)

 

10,146,446

 

11,628,480

 

10,144,944

 

11,493,854

 

 


(1) Potentially dilutive securities are excluded from the computation of earnings per share for periods in which there is a loss as their effect would be anti-dilutive.

 

See accompanying notes.

 

6



Table of Contents

 

CELSION CORPORATION

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2008

(Unaudited)

 

 

 

Six Months Ended June 30, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common Stock

 

Paid-in

 

Treasury Stock

 

Comprehensive

 

Accumulated

 

 

 

 

 

Shares

 

Total

 

Capital

 

Shares

 

Total

 

Loss

 

Deficit

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2008

 

10,783,922

 

$

107,839

 

$

88,319,985

 

659,738

 

$

(2,638,952

)

$

 

$

(55,137,757

)

$

30,651,115

 

Stock-based compensation expense related to employee stock options

 

 

 

493,401

 

 

 

 

 

 493,401

 

Stock based compensation - restricted stock

 

 

 

25,185

 

 

 

 

 

25,185

 

Issuance of restricted stock upon vesting

 

16,666

 

167

 

(167

)

 

 

 

 

 

Shares issued to employees

 

5,000

 

50

 

27,450

 

 

 

 

 

27,500

 

Extension of warrants

 

 

 

400

 

 

 

 

 

400

 

Change in fair value of investments

 

 

 

 

 

 

(7,408

)

 

(7,408

)

Net loss

 

 

 

 

 

 

 

(6,512,008

)

(6,512,008

)

Balance at June 30, 2008

 

10,805,588

 

$

108,056

 

$

88,866,254

 

659,738

 

$

(2,638,952

)

$

(7,408

)

$

(61,649,765

)

$

24,678,185

 

 

7



Table of Contents

 

CELSION CORPORATION

STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2008

 

2007

 

Cash flows from operating activities

 

 

 

 

 

Net (loss) / income for the year

 

$

(6,512,008

)

$

41,856,901

 

Non-cash items included in net loss:

 

 

 

 

 

Depreciation and amortization

 

62,695

 

103,069

 

Accretion of discount on note receivable

 

(21,319

)

(58,408

)

Gain on the sale of Prolieve

 

 

(48,029,793

)

Loss on disposal of fixed assets

 

1,009

 

 

Stock based compensation - Options

 

493,401

 

368,727

 

Stock based compensation - Stock grants

 

52,685

 

40,039

 

Amortization of deferred license fee

 

 

(269,840

)

Exercise of common stock options

 

 

2,718

 

Shares issued in exchange for services

 

 

39,125

 

Amortization of patent license

 

3,750

 

57,856

 

Allowance for bad debts

 

840,213

 

415,457

 

Net changes in:

 

 

 

 

 

Accounts receivable-trade

 

169,861

 

854,267

 

Other receivables

 

(19,298

)

17,567

 

Due from Boston Scientific Corporation

 

15,000,000

 

(994

)

Inventories

 

 

5,792

 

Prepaid expenses

 

31,088

 

98,689

 

Escrow account-license fee

 

 

1,824,740

 

Deposits and other assets

 

(498,621

)

(307,879

)

Accounts payable - trade and accrued interest

 

(320,865

)

1,089,923

 

Income taxes payable

 

(546,000

)

274,000

 

Other accrued liabilities

 

(1,674,230

)

(308,967

)

Net cash provided by / (used in) operating activities

 

7,062,361

 

(1,927,011

)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of short term investments

 

(11,593,541

)

(5,000,000

)

Sale of short-term investments

 

3,001,597

 

 

Proceeds from the sale of the Prolieve assets

 

 

9,958,615

 

Advances under Celsion Canada transition services agreement

 

(9,377

)

(32,134

)

Amortization of premium on investments

 

823

 

 

Accretion of discount on investments

 

(923

)

 

Accrued interest on investments

 

(18,797

)

 

Payment of licensing fee

 

 

(1,600,000

)

Purchase of property and equipment

 

(7,931

)

(68,181

)

Net cash (used in) / provided by investing activities

 

(8,628,149

)

3,258,300

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Extension of warrants

 

400

 

 

Draws on line of credit

 

3,000,000

 

 

Repayment of line of credit

 

(3,000,000

)

 

Payments on note payable

 

(333,383

)

 

Net cash used in financing activities

 

(332,983

)

 

 

 

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

 

(1,898,771

)

1,331,289

 

Cash and cash equivalents at beginning of period

 

2,937,373

 

1,032,674

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

1,038,602

 

$

2,363,963

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

Interest

 

$

36,349

 

$

 

Income taxes

 

$

546,000

 

$

 

 

See accompanying notes.

 

8



Table of Contents

 

CELSION CORPORATION

 

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

For the Three and Six Month Periods Ended June 30, 2008 and 2007

 

Note 1.     Basis of Presentation

 

The accompanying unaudited financial statements of Celsion Corporation (which we sometimes refer to as “Celsion”, the “Company”, “we” or “us”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements. Operating results for the three and six month periods ended June 30, 2008 are not necessarily indicative of the results that may be expected for any other interim period(s) or for any full year. For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 filed with the Securities and Exchange Commission on March 28, 2008.

 

Note 2. Common Stock Outstanding and Per Share Information

 

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share is computed after adjusting the denominator of the basic earnings per share computation for the effects of all dilutive potential common shares outstanding during the period. The dilutive effects of options, warrants and their equivalents are computed using the treasury stock method.

 

For the quarter ended June 30, 2008, all options and warrants that were convertible into shares of the Company’s common stock were excluded from calculation of diluted earnings per share as their effect would have been anti-dilutive. The total number of outstanding warrants and options for the periods ended June 30, 2008 and 2007 were 2,355,635 and 2,011,986, respectively. Additionally, shares unvested restricted stock were excluded from the calculation. Additionally, shares of unvested restricted stock were excluded from the calculation. The total number of shares of unvested restricted stock as of June 30, 2008 and 2007 was 38,333 and 58,100, respectively. Information relating to the calculation of earnings per share is summarized as follows:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operatons - basic and diluted

 

$

(2,430,166

)

$

(4,632,790

)

$

(6,512,008

)

$

(7,865,255

)

Net income from discontinued operations - basic and diluted

 

$

 

$

48,847,362

 

$

 

$

49,722,156

 

Net loss - basic and diluted

 

$

(2,430,166

)

$

44,214,572

 

$

(6,512,008

)

$

41,856,901

 

Weighted average shares outstanding - basic

 

10,146,446

 

10,773,023

 

10,144,944

 

10,760,019

 

Dilutive securities - options and warrants

 

 

855,457

 

 

733,835

 

Adjusted weighted average shares outstanding - dilutive

 

10,146,446

 

11,628,480

 

10,144,944

 

11,493,854

 

Net loss from continuing operations per common share - basic

 

$

(0.24

)

$

(0.43

)

$

(0.64

)

$

(0.73

)

Net loss from continuing operations per common share - diluted

 

$

(0.24

)

$

(0.43

)

$

(0.64

)

$

(0.73

)

Net income from discontinued operations per common share - basic

 

$

 

$

4.53

 

$

 

$

4.62

 

Net income from discontinued operations per common share - diluted

 

$

 

$

4.20

 

$

 

$

4.33

 

Net (loss) / income per common share - basic

 

$

(0.24

)

$

4.10

 

$

(0.64

)

$

3.89

 

Net (loss) / income per common share - diluted

 

$

(0.24

)

$

3.80

 

$

(0.64

)

$

3.64

 

 

9



Table of Contents

 

Note 3.  New Accounting Pronouncements

 

In September 2006, the Financial Accounting Standards Board issued SFAS No. 157 “Fair Value Measurements”, which defines fair value, establishes a framework for consistently measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 became effective for the Company on January 1, 2008 and did not have an impact on the Company’s financial statements.

 

In November 2007, the EITF issued Issue No. 07-1 (“EITF 07-1”), Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property. Companies may enter into arrangements with other companies to jointly develop, manufacture, distribute, and market a product. Often the activities associated with these arrangements are conducted by the collaborators without the creation of a separate legal entity (that is, the arrangement is operated as a “virtual joint venture”). The arrangements generally provide that the collaborators will share, based on contractually defined calculations, the profits or losses from the associated activities. Periodically, the collaborators share financial information related to product revenues generated (if any) and costs incurred that may trigger a sharing payment for the combined profits or losses. EITF 07-1 requires collaborators in such an arrangement to present the result of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. EITF 07-1 is effective for collaborative arrangements in place at the beginning of the annual period beginning after December 15, 2008. The Company does not currently expect the adoption of EITF 07-1 to have a material impact on its financial statements.

 

In February 2007, the Financial Accounting Standards Board issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 became effective for the Company on January 1, 2008 and did not have an impact on the Company’s financial statements.

 

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (“SFAS 161”), which requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. SFAS 161 is effective for fiscal years beginning after November 15, 2008. The Company does not expect that the adoption of SFAS 160 will have a significant impact on its financial statements.

 

In April 2008, the FASB issued FASB Staff Position No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP No. 142-3”) to improve the consistency between the useful life of a recognized intangible asset (under SFAS No. 142) and the period of expected cash flows used to measure the fair value of the intangible asset (under SFAS No. 141(R)). FSP No. 142-3 amends the factors to be considered when developing renewal or extension assumptions that are used to estimate an intangible asset’s useful life under SFAS No. 142. The guidance in the new staff position is to be applied prospectively to intangible assets acquired after December 31, 2008. In addition, FSP No. 142-3 increases the disclosure requirements related

 

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to renewal or extension assumptions. The Company is currently assessing the impact of the adoption of FSP No. 142-3 on its financial statements.

 

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities.  The statement establishes that the GAAP hierarchy should be directed to entities because it is the entity (not its auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP.  This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.  The Company does not believe implementation of SFAS 162 will have a material impact on its financial statements.

 

In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force (EITF) No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF No. 03-6-1”).  Under FSP EITF No. 03-6-1, unvested share-based payment awards that contain rights to receive non-forfeitable dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. FSP EITF No. 03-6-1 is effective for fiscal years beginning after December 15, 2008, and the Company does not expect it to have a material impact on the Company’s financial statements.

 

Note 4. Stock Based Compensation

 

Employee Stock Options

 

The Company has long-term compensation plans that permit the granting of incentive awards in the form of stock options. Generally, the terms of these plans require that the exercise price of the options may not be less than the fair market value of Celsion’s Common Stock on the date the options are granted. Options generally vest over various time frames or upon milestone accomplishments. Some vest immediately. Others vest over a period between one and five years. The Company’s options generally expire ten years from the date of the grant.

 

2001 Stock Option Plan

 

The purpose of the 2001 Plan is to promote the long-term growth and profitability of Celsion by providing key associates with incentives to improve stockholder value and to contribute to the growth and financial success of Celsion and to enable the Company to attract, retain and reward the best available persons for positions of substantial responsibility. The 2001 Plan permitted the granting of stock options (including nonqualified stock options and incentive stock options qualifying under Section 422 of the Internal Revenue Code) and stock appreciation rights or any combination of the foregoing. During the year that ended December 31, 2007, 195,043 options were canceled or expired. During the six months ended June 30, 2008, no options were canceled or expired.  All of the 195,043 canceled and expired options under the 2001 Plan became available for issue under the 2007 Plan.

 

2004 Stock Incentive Plan

 

The purpose of the 2004 Plan is to promote the long-term growth and financial success of the Company and enable the Company to attract, retain and reward the best available persons for positions of substantial responsibility. The 2004 Plan permits the granting of awards in the form of incentive stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock, and performance awards, or in any combination of the foregoing. During the year that ended December 31, 2007, 90,379 options were canceled or expired. During the six months ended June 30, 2008,  no options were canceled or expired. All of the 90,379 canceled and expired options under the 2004 Plan became available for issue under the 2007 Plan.

 

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2007 Stock Incentive Plan

 

The purpose of the 2007 Plan is to promote the long-term growth and profitability of the Company by providing incentives to improve stockholder value and enable the Company to attract, retain and reward the best available persons for positions of substantial responsibility. The 2007 Plan permits the granting of awards in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock, and performance awards, or in any combination of the foregoing. During the year ended December 31, 2007, 103,500  options were issued. No options were canceled or expired under the plan for the year ended December 31, 2007. During the six months ended June 30, 2008, 335,000 options were issued and no options were canceled or expired. Additionally, 5,000 shares of stock were issued under the plan as a performance award and 5,000 shares of restricted stock were issued pursuant to a consulting agreement during the quarter ended June 30, 2008. On June 30, 2008, there were 556,500 shares available out of 1,000,000 shares authorized and available under the 2007 Plan. All canceled and expired options under the 2001 Plan and the 2004 Plan become available for issue under the 2007 Plan.

 

Options and Restricted Stock Issued to Consultants for Services

 

The Company enters into agreements with consultants in which the consultants receive restricted stock and stock options in exchange for services. Generally, the terms of these plans require that the exercise price of the options may not be less than the fair market value of Celsion’s Common Stock on the date the options are granted. Options and restricted stock generally vest over various time frames or upon milestone accomplishments. Some vest immediately. Others vest over a period between one and five years. The Company’s options generally expire ten years from the date of the grant. During the six months ended June 30, 2008, 5,000 shares of restricted stock were issued to a consultant as part of a consulting agreement. There were no options granted to non-employees for the six months ended June 30, 2008.

 

A summary of the Company’s Common Stock option and warrant activity and related information is as follows:

 

Stock Options

 

Options
Outstanding

 

Weighted
Average
Exercise
Price

 

Weighted
Average
Remaining
Contractual
Term (in
years)

 

Aggregate
Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2007

 

1,498,841

 

$

6.17

 

 

 

 

 

Granted

 

335,000

 

5.49

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

Canceled or expired

 

 

 

 

 

 

 

Outstanding at June 30, 2008

 

1,833,841

 

$

6.04

 

7.4

 

$

683,803

 

Exercisable at June 30, 2008

 

996,549

 

$

7.34

 

6.1

 

$

177,595

 

 

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Warrants

 

Warrants
Outstanding

 

Weighted
Average
Exercise
Price

 

Weighted
Average
Remaining
Contractual
Term (in
years)

 

Aggregate
Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2007

 

568,461

 

$

15.59

 

 

 

 

 

Granted

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

Canceled or expired

 

(46,667

)

6.60

 

 

 

 

 

Outstanding at June 30, 2008

 

521,794

 

$

16.40

 

0.4

 

$

54,015

 

Exercisable at June 30, 2008

 

521,794

 

$

16.40

 

0.4

 

$

54,015

 

 

A summary of the Company’s Restricted Stock activity and related information is as follows:

 

Restricted Stock

 

Outstanding

 

Weighted
Average
Exercise Price

 

 

 

 

 

 

 

Non-vested stock awards at January 1, 2008

 

50,000

 

$

2.42

 

Granted

 

5,000

 

5.50

 

Vested

 

(16,667

)

2.42

 

Forfeited

 

 

 

Non-vested stock awards at June 30, 2008

 

38,333

 

$

2.82

 

 

The following is additional information with respect to options granted during the six months ended June 30, 2008:

 

 

 

Six Months Ended
June 30, 2008

 

Risk-free interest rate

 

2.18% to 2.81%

 

Dividend Yield

 

0.0%

 

Expected volatility

 

281.83% to 282.51%

 

Expected option life in years

 

6.0

 

 

For all of the Company’s stock-based compensation plans, the fair value of each grant was estimated at the date of grant using the Black-Scholes option pricing model.  Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield and employee exercise behavior.  Expected volatilities utilized in the model are based on historical volatility of the Company’s stock price.  The risk free interest rate is derived from values assigned to U.S. Treasury strips as published in the Wall Street Journal in effect at the time of grant.  The model incorporates exercise, pre-vesting and post-vesting forfeiture assumptions based on analysis of historical data.  The expected life of the fiscal 2008 grants was generated using the simplified method as allowed under Securities and Exchange Commission Staff Accounting Bulletin No. 107.

 

Stock based compensation expense totaled $255,243 and $518,586 during the three and six months ended June 30, 2008 and $239,629 and $408,767 during the three months ended June 30, 2007. Stock based compensation is recognized

 

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ratably over the requisite service period for all awards. Unrecognized stock based compensation expense related to stock options totaled $2,832,435 at June 30, 2008 while the unrecognized stock based compensation expense related to non-vested restricted stock awards was $96,503 at June 30, 2008. These unrecognized expenses will be recognized in the income statement at various rates up to the next four years.

 

Note 5. Short Term Investments Available for Sale

 

Short term investments available for sale of $11,603,433 as of June 30, 2008 and $3,000,000 as of December 31, 2007 consist of cash and cash equivalents, corporate debt securities, and government agency debt securities. They are valued at estimated fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity in Accumulated Other Comprehensive Income.

 

Securities available for sale are evaluated periodically to determine whether a decline in their value is other than temporary.  The term “other than temporary” is not intended to indicate a permanent decline in value.  Rather, it means that the prospects for near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security.  Management reviews criteria such as the magnitude and duration of the decline, as well as the reasons for the decline, to predict whether the loss in value is other than temporary.  Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

 

 

 

June 30,

 

December 31,

 

Short term investments - at fair value

 

2008

 

2007

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,498,154

 

$

3,000,000

 

Bonds - government agencies

 

3,199,027

 

 

Bonds - corporate issuances

 

1,906,252

 

 

Total

 

$

11,603,433

 

$

3,000,000

 

 

Note 6. Fair Values of Financial Instruments

 

FASB Statement No. 157 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

 

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability.

 

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

 

Assets measured at fair value on a recurring basis are summarized below:

 

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Fair value measurements at June 30, 2008 using

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

Quoted prices in

 

other

 

Significant

 

 

 

 

 

active markets for

 

observable

 

unobservable

 

 

 

 

 

identical assets

 

inputs

 

inputs

 

 

 

June 30, 2008

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Short term investments available for sale

 

$

11,603,433

 

$

 

$

11,603,433

 

$

 

 

Note 7. Note Receivable

 

On January 16, 2006, Celsion contributed to its wholly-owned subsidiary, Celsion (Canada) Limited (“Canada”), all of the Company’s assets relating to its Adaptive Phased Array (“APA”) technology for the treatment of breast cancer. Also on that date, the Company entered into a Stock Purchase Agreement with the Company’s founder and former officer and director, Dr. Augustine Y. Cheung, whereby the Company sold to Dr. Cheung all of the issued and outstanding shares of capital stock of Canada. The Company also agreed to provide certain services to Canada pursuant to a Transition Services Agreement between the Company and Canada.

 

Under the Stock Purchase Agreement, all of the capital stock of Canada was transferred to Dr. Cheung in exchange for a promissory note made by Dr. Cheung in favor of the Company in the principal amount of $1,500,000 to be paid over a period of up to 78 months and secured by a pledge of 100,536 shares of Celsion common stock owned by Dr. Cheung and his wife and the commitment of Canada to pay a 5 % royalty on the net sales of certain products sold by, and patent royalties received by, Canada and its successors and assigns, of up to $18,500,000.

 

The terms of the note receivable only specify an interest charge in the event that scheduled payments are in arrears.  The $1,500,000 note was therefore discounted at the prime rate in effect January 16, 2006 (7.25%) plus 1.0%, or 8.25%, and the balance, net of discount, of $1,146,428 was recorded in the financial statements above.  Interest income of $21,319 and $40,045 was recorded in the six months ended June 30, 2008 and 2007, respectively.

 

During the month of May 2008, the borrower approached the Company and requested that the terms of the note be extended and/or restructured. As of the filing of this Form 10-Q, an agreement between the parties had not been reached. As a result, the collectibility of the note receivable became doubtful. Accordingly, an allowance was placed against the note to reduce the balance to the estimated net realizable value of the collateral underlying the note. As noted above, 100,536 shares of Celsion common stock are pledged as collateral to the note. The closing price of Celsion’s common stock on June 30, 2008 was $3.76, which results in a total collateral value of $378,015. Therefore, the carrying value of the note was reduced to $378,015 as of June 30, 2008.

 

Note 8.  Advances under Celsion (Canada) Limited Transition Services Agreement

 

In conjunction with the sale of Canada, a Transition Services Agreement was entered into whereby (i) Celsion sublet space in the Company’s offices for use by Canada to carry on its business, for a period of up to six (6) months from the date of the agreement; (ii) Celsion provided administrative support services as needed in the operation of Canada’s business for the period of the sublease, and (iii) Celsion advanced funds to pay salary and health and dental insurance of each of certain employees of Canada and the expenses reasonably incurred in connection with the operation of Canada’s business up to $100,000 for the shorter of the period ending June 30, 2006 or the date of closing by Canada of a transaction involving the merger of Canada into a newly created Canadian Capital Pool Company and a simultaneous funding through a private placement of shares under terms approved by the Toronto Stock Exchange (the “Canada Transaction”). Within ten days after the closing of the Canada Transaction, Canada is obligated to pay the Company all amounts due under the Transition Services Agreement.

 

The Transition Services Agreement was amended on March 28, 2006 to advance Canada an additional $200,000 to fund reasonable operating expenses. This additional advance is repayable under the same terms as the Transition Services Agreement.  The cumulative balance advanced under the Transition Services Agreement, as amended, at June 30, 2008 was $651,556.

 

When the Canada Transaction did not close by December 31, 2006, Celsion management established, based on discussions with Canada management, that diligent efforts were being made by Canada management to close the Canada

 

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Transaction on a timely basis and agreed to extend the due date for repayment of the loan to the earlier of the closing of the Canada Transaction or June 30, 2007. Canada did not close the transaction nor had it paid the amounts due as of the June 30, 2007 due date. Accordingly, during the quarter ended June 30, 2007, the Company placed an allowance against this receivable and recorded the estimated net realizable value of the receivable as $200,000, which was guaranteed by Dr. Cheung. Given the collectibility concern of Dr. Cheung’s note described in Note 7 above, the Company has increased its allowance to $449,891 as of June 30, 2008 and recorded the estimated net realizable value of the receivable as zero.

 

Note 9. Licensing Agreement

 

Celsion entered into a Distribution Agreement with Boston Scientific Corporation (“Boston Scientific” or “BSC”) on January 20, 2003 pursuant to which the Company granted Boston Scientific exclusive rights to market and distribute the Prolieve Thermodilatation® system and its component parts for the treatment of BPH in all territories other than China, Taiwan, Hong Kong, Macao, Mexico and Central and South America. The agreement was terminated upon the sale of the Prolieve assets to Boston Scientific on June 21, 2007 (as more fully described in Note 12). The Distribution Agreement had a seven-year term commencing on February 21, 2004. The parties previously shared gross sales (less costs and expenses) attributable to the product.

 

Celsion received a $4,000,000 licensing fee under the Distribution Agreement, $2,000,000 of which was placed in an interest bearing escrow account for a period of 36 months ending February 21, 2007 for payment of any legal expenses, settlements, license fees, royalties, damages or judgments incurred by Celsion or Boston Scientific in connection with any patent litigation related to alleged infringement of third party patents.   Interest on the funds was retained in the escrow account and accrued to the benefit of Celsion. The balance remaining in the escrow was released to Celsion on February 20, 2007 and applied to settlement of a patent infringement lawsuit with American Medical Systems, Inc. and AMS Research Corporation (together referred to as “AMS”).

 

The Company recognized the licensing fee at a rate of $47,619 per month over the seven-year term of the Distribution Agreement which began February 21, 2004. Upon the sale of the Prolieve assets on June 21, 2007, the remaining balance of the fee was recorded as income and included in the gain on the sale of the Prolieve assets during the quarter ended June 30, 2007.

 

Note 10. Secured Line of Credit

 

On November 9, 2007, the Company entered into a Loan and Security Agreement (the “Agreement”) with Manufacturers and Traders Trust Company (“M&T”) pursuant to which M&T agreed to provide a draw-down credit facility to the Company (the “Credit Facility”).  The Company was able to request advances under the Credit Facility at a rate not to exceed $1.5 million per month, up to a maximum principal amount under the Credit Facility of $6.5 million.  Each advance was subject to, among other customary conditions, a determination by M&T in its good faith discretion that the Company owned less than $0.5 million in cash and other property readily convertible into cash, excluding a $1.0 million cash collateral account held at M&T.  Amounts borrowed by the Company under the Credit Facility and repaid could not be re-advanced to the Company.

 

The Credit Facility was secured by (i) the $1.0 million cash collateral account and (ii) substantially all of the Company’s assets.  The Credit Facility bore interest on the outstanding balance at a rate of the London Interbank Offered Rate plus 2.75%.  Accrued interest on the outstanding balance was payable monthly.  The total outstanding principal and accrued interest balance on the Credit Facility was fully repaid on June 6, 2008.

 

The Agreement specified certain events of default, pursuant to which M&T could have required immediate repayment by the Company of all outstanding amounts under the Credit Facility.  In addition to customary events of default relating to changes in the operations and financial condition of the Company, in connection with payments due to the Company pursuant to the previously announced sale by the Company of its Prolieve assets to Boston Scientific Corporation, the Agreement specified certain events of default relating to changes in the operations and financial condition of Boston Scientific Corporation.

 

Upon receipt of the second $15 million installment due from Boston Scientific under the Asset Purchase Agreement (disussed below in Note 12) on June 6, 2008, the credit facility was closed.

 

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Note 11. Note Payable

 

On July 23, 2007, the Company entered into a Premium Finance Agreement with Flatiron Capital Corporation (“Flatiron”) whereby Flatiron funded certain insurance premiums in the amount of $1,313,250 on behalf of the Company. In exchange, the Company will make 21 monthly installments of $59,418 beginning on August 23, 2007. Interest accrues at a rate of 5.98% on outstanding balances.

 

Note 12. Discontinued Operations

 

On April 17, 2007, the Company and Boston Scientific entered into an asset purchase agreement to reflect the exercise by Boston Scientific of its option to purchase all of the Prolieve assets of the Company (the “Asset Purchase Agreement”). The Board of Directors of the Company approved the Asset Purchase Agreement and the transactions contemplated thereby, and the Company’s stockholders ratified the sale at the annual meeting on June 13, 2007.  Pursuant to the Asset Purchase Agreement, Boston Scientific purchased the Prolieve assets for an aggregate purchase price of $60 million, subject to reduction in accordance with the terms and conditions of the Asset Purchase Agreement. The transaction closed on June 21, 2007, and the Company recorded a gain on the sale in the amount of $48 million.

 

The gain on the sale of Prolieve was calculated as follows:

 

Sales Price

 

$

60,000,000

 

Transaction fees and legal costs

 

(1,460,165

)

Indemnity guarantee costs

 

(5,000,000

)

Licensing fee

 

(3,100,000

)

Adjusted Sales Price

 

50,439,835

 

 

 

 

 

Net assets sold

 

 

 

Inventories

 

(2,824,757

)

Laboratory and shop equipment

 

(150,503

)

AMS License Fee

 

(1,545,893

)

 

 

 

 

Liabilities Transferred

 

 

 

Amortization of License Fee

 

2,111,111

 

 

 

 

 

Gain on Sale

 

$

48,029,793

 

 

As previously disclosed, the Company and Boston Scientific entered into a Transaction Agreement effective January 20, 2003 (the “Transaction Agreement”). As part of the consideration in the Transaction Agreement, the Company granted Boston Scientific an exclusive option to purchase the Prolieve assets for a price equal to the greater of $60 million or a multiple of sales, exercisable for a period of five years and expiring in February 2009. As previously disclosed, on August 8, 2005, the Company and Boston Scientific entered into the First Amendment pursuant to which Boston Scientific agreed to lend the Company up to $15 million to be evidenced by one or more convertible secured promissory notes (the “Notes”). The first installment of $6 million was disbursed on August 17, 2005, the second and third installments, each of $4.5 million, were disbursed on February 2, 2006, and July 28, 2006, respectively. The First Amendment also fixed the purchase option price at $60 million (eliminating the multiple of sales).

 

The Asset Purchase Agreement reflects the agreement by the Company and Boston Scientific to further modify the terms of the purchase option granted to Boston Scientific on January 20, 2003 and amended on August 8, 2005. The revised terms provided for the aggregate purchase price of $60 million to be paid in three installments consisting of $30 million at closing on June 20, 2007 and $15 million on each of the first and second anniversaries of the closing. The revised terms also provided that the $30 million first installment was reduced at closing by approximately $17 million, representing the principal and accrued interest due on the Notes.

 

In addition to the other indemnification provisions, such as indemnification for breaches of representations, warranties and covenants contained in the Asset Purchase Agreement, the Company has agreed to indemnify Boston Scientific for a period of two years from the closing, in an amount up to $15 million of incurred costs, in the event of unforeseen intellectual property claims related to the Prolieve assets.  In accordance with FASB interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB interpretation No. 34, the Company recorded an estimate for the fair value of standing ready to perform under the indemnification guarantee of

 

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$5,000,000. This estimate was consistent with the fair value of insurance premiums to cover the entire $15 million indemnity. On July 23, 2007, the Company purchased an insurance policy to cover $10 million of the indemnity guarantee. The premium for this policy was $1,313,250 and was recorded as a reduction of the accrued liability. The Company will continue to evaluate the accrued liability on a quarterly basis and reduce it as the risk of the indemnity decreases. As of June 30, 2008, the balance of this accrued liability was $2,106,716.

 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

Statements and terms such as “expect”, “anticipate”, “estimate”, “plan”, “believe” and words of similar import regarding the Company’s expectations as to the development and effectiveness of its technologies, the potential demand for our products, and other aspects of our present and future business operations, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our industry, business and operations, we cannot guarantee that actual results will not differ materially from our expectations. In evaluating such forward-looking statements, readers should specifically consider the various factors contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 including, without limitation, unforeseen changes in the course of research and development activities and in clinical trials; possible changes in cost and timing of development and testing, capital structure, and other financial items; changes in approaches to medical treatment; introduction of new products by others; possible acquisitions of other technologies, assets or businesses; and possible actions by customers, suppliers, competitors and regulatory authorities. These and other risks and uncertainties could cause actual results to differ materially from those indicated by such forward-looking statements, including those set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors” contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

 

The discussion of risks and uncertainties set forth in this Quarterly Report on Form 10-Q and in our most recent Annual Report on Form 10-K as well as in other filings with the SEC, is not necessarily a complete or exhaustive list of all risks facing the Company at any particular point in time. We operate in a highly competitive, highly regulated and rapidly changing environment and our business is in a state of evolution. Therefore, it is likely that new risks will emerge, and that the nature and elements of existing risks will change, over time. It is not possible for management to predict all such risk factors or changes therein, or to assess either the impact of all such risk factors on our business or the extent to which any individual risk factor, combination of factors, or new or altered factors, may cause results to differ materially from those contained in any forward-looking statement. We disclaim any obligation to revise or update any forward-looking statement that may be made from time to time by us or on our behalf.

 

Overview

 

Celsion is a biotechnology company dedicated to furthering the development and commercialization of oncology drugs including tumor-targeting treatments using focused heat energy in combination with heat activated drug delivery. We are currently engaged in the development of treatment systems using a combination of heat and drugs developed on our proprietary heat activated liposomal technology platform.  Our first drug, ThermoDox®, an encapsulation of doxorubicin, a common oncology drug, in our heat activated liposome, is in clinical studies for the treatment of liver cancer and breast cancer.

 

From 1995 until early in 2004, we engaged in research and development of new treatment systems. On January 16, 2006, we transferred all of our rights to the Microfocus 1000, together will all associated technology, to Celsion (Canada) Ltd. and on the same day sold all the stock of Celsion (Canada) to our founder and former officer and director, Dr. Augustine Cheung.

 

On February 19, 2004, we obtained pre-marketing approval (“PMA”) for the Prolieve Thermodilatation System from the Food and Drug Administration (the “FDA”) for the treatment of Benign Prostatic Hyperplasia (“BPH”). From 2004 through June 2007, Prolieve was marketed and sold through our commercial distributor, Boston Scientific Corporation (“BSC” or “Boston Scientific”).  On June 21, 2007, we sold all of our Prolieve assets to Boston Scientific.

 

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Table of Contents

 

Development pipeline

 

Our pipeline presently consists of the following product, in the indicated stage of development:

 

Product

 

Status

ThermoDox® (doxorubicin encapsulated in our heat activated liposome) plus heat for the treatment of cancer

 

We began a Phase III study during the second quarter of 2008 to determine the efficacy of ThermoDox® in combination with RFA in the treatment of primary liver cancer. The study will incorporate approximately 40 clinical sites in North America, Italy, China, Taiwan, Hong Kong, and Korea and is planned to enroll a total of 600 patients.

 

We expect to commence an Open Label, Single Arm Phase II study in patients with Recurrent Chest Wall cancer (“RCW”) during the 4th quarter of 2008. The study will test the efficacy of ThermoDox® in combination with hyperthermia.

 

We are currently conducting a confirmatory Phase I clinical study for our single vial formulation of ThermoDox® used in conjunction with RFA in the treatment of liver cancer. This study is being performed at the North Shore Long Island Jewish Health System.

 

We have recently completed a Phase I clinical study to establish the maximum tolerable dose, the safety, and the pharmacokinetics of ThermoDox® used in conjunction with radio frequency ablation (“RFA”) in the treatment of liver cancer. The study was conducted at the National Cancer Institute of the National Institutes of Health and Queen Mary’s Hospital in Hong Kong.

 

From 1995 to 2004, we generated only minimal revenues and funded our operations primarily through private placements of our equity securities. During 2004, following FDA premarketing approval of the Prolieve Thermodilatation System, we received a one-time licensing fee of $4 million under our agreement with Boston Scientific, the former distributor of our Prolieve system. From 2004 through June 2007, sales of Prolieve products generated revenues of approximately $29 million. The proceeds from the sale of the Prolieve assets to BSC, along with raising additional equity, is anticipated to generate sufficient funding until such time as we are able to complete development and testing of, and gain necessary regulatory approvals for, one or more of our products.

 

While the Company is currently funded from the available cash resources and amounts due from the sale of the Prolieve assets, we anticipate that in the longer term revenues will be generated from licensing fees paid for our technologies by pharmaceutical manufacturers and royalties generated from eventual product sales to major institutional health care providers. In the event that such licensing fees are not forthcoming and/or the Company elects to make investments in additional drug development and/or commercial opportunities, funding will be generated from sale of our equity securities.

 

Our principal costs consist of:

 

·                  Research and development costs, including licensing fees due in connection with various of our technologies, the costs of sponsored research and pre-clinical and clinical trials for ThermoDox®, and the costs of development and design of other products;

 

·                  Research and development costs, including payments to investigators, acquisition of materials, and preclinical work associated with the feasibility analysis of three new heat sensitive liposomal anticancer formulations including Liposomal Docetaxel, Liposomal Carboplatin, and ThermoDox® enhanced with a ligand having an affinity for epidermal growth factor receptors (EGFR); and

 

·                  Corporate overhead.

 

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Table of Contents

 

Our research and development activities, preclinical tests and clinical trials, and the manufacturing, marketing and labeling of each of our products, are subject to extensive regulation by the FDA. We may not bring to market any product in the U.S. without a premarketing approval from the FDA. We are currently conducting basic research and development activities, pursuing prototype products through clinical testing and regulatory approval. Our ultimate objective is to commercialize those products to generate a return on investment for our stockholders through one of several means including: (a) selling products directly to end users; (b) selling products through a distributor; or (c) licensing the technology to third parties and generating income through royalties and milestone payments.

 

Recent Events

 

In January 2008, the FDA provided written agreement with the Company’s application for a Special Protocol Assessment for its Pivotal Phase III Primary Liver Cancer Trial.  The study is designed to demonstrate the efficacy of ThermoDox® in combination with RFA.  The study incorporates approximately 40 clinical sites in North America, Italy, China, Taiwan, Hong Kong, and Korea and is planned to enroll a total of 600 patients.  The Company enrolled the first patient in the study during the second quarter of 2008. As of June 30, 2008, 2 patients have begun treatments under the study.

 

On January 15, 2008, the FDA provided a favorable written response to Celsion on its proposed Open Label, Single Arm Phase II study in patients with RCW. The agency agreed with the patient population as defined by Celsion, an objective response endpoint, and confirmed that depending on the final data obtained, that this study could be used to support a New Drug Application (“NDA”) submission. In light of this positive response from the FDA, Celsion is planning and working diligently to enable this Phase II study to commence as soon as a safe dose for multiple ThermoDox® treatments per patient, in this patient population, is determined from the Phase I study. Celsion believes that this Phase II study will commence enrollment late in 2008 and will be completed in 2009.

 

On February 8, 2008, the Company voluntarily moved the listing of its Common Stock from the American Stock Exchange to The NASDAQ Stock Market, LLC.  On June 30, 2008, the Company changed its NASDAQ ticker symbol from CLN to CLSN.

 

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Table of Contents

 

Results of Operations

 

Comparison of the Three Months Ended June 30, 2008 and 2007.

 

 

 

Three Months Ended

 

 

 

 

 

 

 

June 30,

 

Change

 

 

 

2008

 

2007

 

Dollars

 

Percent

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

$

1,615,082

 

$

2,349,036

 

$

(733,954

)

-31

%

General and administrative

 

580,910

 

1,671,388

 

(1,090,478

)

-65

%

Total operating expenses

 

2,195,992

 

4,020,424

 

(1,824,432

)

-45

%

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(75,349

)

(196,909

)

121,560

 

-62

%

 

 

 

 

 

 

 

 

 

 

Other expense, net

 

(158,825

)

(415,457

)

256,632

 

-62

%

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(2,430,166

)

(4,632,790

)

2,202,624

 

-48

%

 

 

 

 

 

 

 

 

 

 

Discontinued Operations (Note 12)

 

 

 

 

 

 

 

 

 

Income from discontinued operations (including gain on sale of $48,029,793)

 

 

49,121,362

 

(49,121,362

)

-100

%

Income from discontinued operations

 

 

(274,000

)

274,000

 

-100

%

 

 

 

 

 

 

 

 

 

 

Net (loss) / income

 

$

(2,430,166

)

$

44,214,572

 

$

(46,644,738

)

-105

%

 

The decrease of $733,954, or 31%, in research and development expense during the second quarter of 2008 in comparison to the second quarter of 2007 was due to:

 

 

 

$

 

·                  Decrease in drug development and manufacturing costs due to the non-recurrence of start up and manufacturing testing costs

 

(298,000

)

·                  Decrease in clinical costs due to the Phase I Liver Cancer study nearing completion in 2008

 

(167,000

)

·                  Decrease in marketing expenses due to the non-recurrence of costs associated with the assessment of the marketing landscape for ThermoDox®

 

(133,000

)

·                  Decrease in legal costs due to a change in attorneys and the non-recurrence of patent costs

 

(90,000

)

·                  Decrease in recruiting and relocation costs as staff positions were filled

 

(60,000

)

 

The $1,090,478, or 65%, decrease in general and administrative expense during the quarter ended June 30, 2008 as compared to the same period of 2007 was attributable to:

 

 

 

$

 

·                 Decrease in the indemnity reserve related to the sale of the Prolieve  Assets (see Note 12 to the Financial Statements)

 

(526,000

)

·                 Decrease in salaries, benefits, and relocation costs due to  head count reductions

 

(171,000

)

·                 Decrease in consulting fees due to the termination of certain strategic  business advisors

 

(146,000

)

·                 Decrease in legal fees due to the non-recurrence of the fees associated with the American Medical Systems lawsuit

 

(117,000

)

·                 Decrease in stockholder costs due to the non-recurrence of proxy  solicitation costs incurred in 2007

 

(55,000

)

·                 Decrease in corporate insurances due to the elimination of the  product liability insurance upon the sale of the Prolieve assets

 

(34,000

)

·                  Increase in accounting and audit costs

 

14,000

 

 

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Table of Contents

 

Net interest expense for the quarter ended June 30, 2008 was $75,349, compared to a net expense of $196,909 for the quarter ended June 30, 2007.  This change was due to the repayment of the loan to Boston Scientific Corporation during the quarter ended June 30, 2007.

 

The discontinued operations reflect the income and expense of the former Prolieve division. These assets were sold to Boston Scientific Corporation on June 21, 2007 for $60 million. See Note 12 to the financial statements for further detail on the discontinued operations.

 

Comparison of the Six Months Ended June 30, 2008 and 2007.

 

 

 

Six Months Ended

 

 

 

 

 

 

 

June 30,

 

Change

 

 

 

2008

 

2007

 

Dollars

 

Percent

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

$

4,582,192

 

$

4,119,849

 

$

462,343

 

11

%

General and administrative

 

1,076,528

 

2,965,556

 

(1,889,028

)

-64

%

Total operating expenses

 

5,658,720

 

7,085,405

 

(1,426,685

)

-20

%

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(14,197

)

(364,393

)

350,196

 

-96

%

 

 

 

 

 

 

 

 

 

 

Other expense, net

 

(839,091

)

(415,457

)

(423,634

)

102

%

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(6,512,008

)

(7,865,255

)

1,353,247

 

-17

%

 

 

 

 

 

 

 

 

 

 

Discontinued Operations (Note 12)

 

 

 

 

 

 

 

 

 

Income from discontinued operations (including gain on sale of $48,029,793)

 

 

49,996,156

 

(49,996,156

)

-100

%

Income tax expense

 

 

(274,000

)

274,000

 

-100

%

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

49,722,156

 

(49,722,156

)

-100

%

 

 

 

 

 

 

 

 

 

 

Net (loss) / income

 

$

(6,512,008

)

$

41,856,901

 

$

(48,368,909

)

-116

%

 

The increase of $462,343, or 11%, in research and development expense during the six months ended June 30, 2008 in comparison to 2007 was primarily due to:

 

 

 

$

 

·                  Increase in clinical costs due to start-up of the Phase III  Primary Liver Cancer study

 

630,000

 

·                  Increase in drug development and manufacturing costs due to  increase in supplies of ThermoDox® for clinical trials

 

128,000

 

·                  Increase in travel expenses due to site initiation visits related to the  start up of the Phase III Primary Liver Cancer trial

 

42,000

 

·                  Increase in consultants to support the Phase III Primary Liver Cancer Study

 

17,000

 

·                  Decrease in non-recurrence of patent and trademark costs

 

(171,000

)

·                  Decrease in marketing costs due to the non-recurrence of costs  associated with the assessment of the marketing landscape for ThermoDox®

 

(130,000

)

·                  Decrease in preclinical costs due to the non-recurrence of certain animal testing

 

(27,000

)

 

The $1,889,028, or 64%, decrease in general and administrative expense during the quarter ended June 30, 2008 as compared to the same period of 2007 was primarily attributable to:

 

22



Table of Contents

 

 

 

 

$

 

·                 Decrease in the indemnity reserve related to the sale of the Prolieve  Assets (see Note 12 to the Financial Statements)

 

(1,052,000

)

·                 Decrease in salaries, benefits, and relocation costs due to  head count reductions

 

(503,000

)

·                 Decrease in consulting fees due to the non-recurrence of financial  consultants used in the first quarter of 2007 as a result of the then controller’s departure and the termination of certain strategic business advisors

 

(246,000

)

·                 Decrease in legal fees due to the non-recurrence of the fees associated  with the American Medical Systems lawsuit

 

(128,000

)

·                 Decrease in stockholder costs due to the non-recurrence of proxy  solicitation costs in the first quarter of 2007

 

(83,000

)

·                 Decrease in corporate insurances due to the elimination of the  product liability insurance upon the sale of the Prolieve assets

 

(63,000

)

·                 Increase in occupancy costs due to higher taxes and utilities

 

16,000

 

·                 Increase in investor/public relation costs

 

19,000

 

·                 Increase in State of Delaware franchise taxes due to the increase in  authorized shares in 2006 (increase impact began 2Q07)

 

32,000

 

·                 Increase in Board of Director costs, including travel and stock based  compensation expense

 

32,000

 

·                 Increase in costs related to redesign of the Company’s website

 

46,000

 

·                 Increase in audit and tax preparation costs due to tax research issues related to the sale of the Prolieve assets

 

52,000

 

 

Net interest expense for the six months ended June 30, 2008 was $14,197, compared to a net expense of $364,393 for the six months ended June 30, 2007.  This change was due to the repayment of the loan to Boston Scientific Corporation during the quarter ended June 30, 2007.

 

The discontinued operations reflect the income and expense of the former Prolieve division. These assets were sold to Boston Scientific Corporation on June 21, 2007 for $60 million. See Note 12 to the financial statements for further detail on the discontinued operations.

 

Comparison of Discontinued Operations for the three months ended June 30, 2008 and 2007.

 

23



Table of Contents

 

 

 

Three Months Ended

 

 

 

 

 

 

 

June 30,

 

Change

 

 

 

2008

 

2007

 

Dollars

 

Percent

 

Revenues

 

 

 

 

 

 

 

 

 

Net sales of equipment and parts

 

$

 

$

2,893,330

 

$

(2,893,330

)

-100

%

Cost of Sales

 

 

1,482,365

 

(1,482,365

)

-100

%

Gross Profit

 

 

1,410,965

 

(1,410,965

)

-100

%

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

 

446,380

 

(446,380

)

-100

%

Total operating expenses

 

 

446,380

 

(446,380

)

-100

%

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

964,585

 

(964,585

)

-100

%

 

 

 

 

 

 

 

 

 

 

Gain on sale of Prolieve

 

 

 

48,029,793

 

 

 

 

 

Other income, net

 

 

126,984

 

(126,984

)

-100

%

 

 

 

 

 

 

 

 

 

 

Net income before taxes

 

$

 

$

49,121,362

 

$

(49,121,362

)

-100

%

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

(274,000

)

274,000

 

0

%

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations

 

$

 

$

48,847,362

 

$

(48,847,362

)

-100

%

 

The Prolieve assets were sold to Boston Scientific Corporation on June 21, 2007. There were no ongoing activities related to the Prolieve business during the first quarter of 2008.

 

Comparison of Discontinued Operations for the six months ended June 30, 2008 and 2007.

 

 

 

Six Months Ended

 

 

 

 

 

 

 

June 30,

 

Change

 

 

 

2008

 

2007

 

Dollars

 

Percent

 

Revenues

 

 

 

 

 

 

 

 

 

Net sales of equipment and parts

 

$

 

$

5,816,295

 

$

(5,816,295

)

-100

%

Cost of Sales

 

 

3,018,765

 

(3,018,765

)

-100

%

Gross Profit

 

 

2,797,530

 

(2,797,530

)

-100

%

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

 

1,101,008

 

(1,101,008

)

-100

%

Total operating expenses

 

 

1,101,008

 

(1,101,008

)

-100

%

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

1,696,522

 

(1,696,522

)

100

%

 

 

 

 

 

 

 

 

 

 

Gain on sale of Prolieve

 

 

48,029,793

 

(48,029,793

)

100

%

Other income, net

 

 

269,841

 

(269,841

)

-100

%

 

 

 

 

 

 

 

 

 

 

Net income before taxes

 

 

49,996,156

 

(49,996,156

)

100

%

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

274,000

 

(274,000

)

100

%

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations

 

$

 

$

49,722,156

 

$

(49,722,156

)

100

%

 

The Prolieve assets were sold to Boston Scientific Corporation on June 21, 2007. There were no ongoing activities related to the Prolieve business during the first half of 2008.

 

24



Table of Contents

 

Financial Condition, Liquidity and Capital Resources

 

Celsion’s core business activity is the development of products to treat cancer and other diseases and to commercialize those products to generate a return on investment for its stockholders through one of several means including: (a) selling products directly to end users; (b) selling products through a distributor; or (c) licensing its technology to third parties and generating income through royalties and milestone payments. This business model will generate uneven cash flows, inasmuch as continuing development expenditures will not necessarily be matched by revenues from one of the above sources. In the event that annual development expenditures are not covered by current revenues, funding will be provided from other sources including any cash on hand, revenues provided as above, income generated from licensing agreements and debt or equity funding raised in the capital markets.

 

Since inception, our expenses have significantly exceeded our revenues, resulting in an accumulated deficit of $61,649,765 at June 30, 2008. We have incurred negative cash flows from operations since our inception and have funded our operations primarily through the sale of equity securities and more recently through the sale of our Prolieve assets. As of June 30, 2008, we had total current assets of $27,941,406, including cash and short term investments of $12,642,035, compared with current liabilities of $5,281,668, resulting in a working capital surplus of $22,659,738. At December 31, 2007, we had total current assets of $21,424,400 (including cash and short term investments of $5,937,373) and current liabilities of $8,118,606, resulting in a working capital surplus of $13,305,794.

 

Net cash provided by the Company’s operating activities for the six months ended June 30, 2008 was $7,062,761 compared to net cash used of $1,927,011 for the six months ending June 30, 2007. The increase of net cash provided of $8,989,772 is primarily due to:

 

·                  The collection of the $15,000,000 receivable from Boston Scientific;

·                  The non-recurrence of the gain on the sale of the Prolieve assets of $48,029,073;

·                  The non-recurrence of the amortization of the deferred license and patent fees of $212,034;

·                  An increase in stock based compensation expense of $137,670; and

·                  An increase in the allowance for bad debts of $424,756.

 

The sources of cash were offset by uses of:

 

·                  A decrease in net income of $48,368,909;

·                  An increase in deposits and other assets due to prepayments to CROs of $190,742;

·                  A decrease in accounts receivable due to the sale of the Prolieve assets in 2007 of $684,406;

·                  A decrease in accounts payable of $1,410,788 due to the sale of the Prolieve assets in 2007 and the related reduction in payables;

·                  A decrease in other accrued liabilities of $1,365,263, largely due to the reduction of the indemnity reserve to Boston Scientific (see footnote 12 to the Financial Statements);

·                  A decrease in income taxes payable related to Alternative Minimum taxes due on the sale of the Prolieve assets of $820,000; and

·                  The non-recurrence of the escrow funds received in the first quarter of 2007 of $1,824,740.

 

In the six months ended June 30, 2008, total assets and total liabilities and stockholders’ equity decreased by $9,047,408 to $29,991,293 compared to $39,038,701 as of December 31, 2007.

 

The decrease in total assets was primarily due to:

 

·                  The allowances placed against the Celsion Canada receivable and note receivable of $1,003,512 (see Note 7 to the financial statements);

·                  The collection of the $15,000,000 receivable from Boston Scientific; and was

·                  Offset by the increase in cash and the purchase of short term investments of $6,704,662.

 

The decrease in total liabilities and equity was due to a number of factors, including:

 

·                  A decrease in accounts payable and other accrued liabilities of $2,192,297 mainly due to the reduction of the indemnity reserve related to the sale of the Prolieve assets;

·                  A decrease in income taxes payable of $546,000 which represents the alternative minimum tax paid on the gain realized on the sale of the Prolieve assets;

·                  Payments on note payable of $333.383; and

·                  The net loss for the six months ended June 30, 2008 of $6,512,008 (as described above).

 

25



Table of Contents

 

For the balance of fiscal year 2008, we expect to expend approximately $9,000,000 for clinical testing of liver cancer and breast cancer treatment systems as well as corporate overhead, all of which we expect to fund from cash on hand. The foregoing is an estimate, based upon assumptions as to the scheduling of institutional clinical research and testing personnel, the timing of clinical trials and other factors, not all of which are fully predictable.

 

Item 3.           Quantitative and Qualitative Disclosure About Market Risk.

 

We are exposed to interest rate risk on investments of our excess cash. The primary objective of our investment activities is to preserve capital. To achieve this objective and minimize the exposure due to adverse shifts in interest rates, we invest in high quality short-term maturity commercial paper, municipal bonds, and money market funds operated by reputable financial institutions in the United States. Due to the nature of our investments, we believe that we do not have a material interest rate risk exposure.

 

Item 4.           Controls and Procedures

 

We have carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended.  Based on that evaluation, our principal executive officer and principal financial officer concluded that as of June 30, 2008, which is the end of the period covered by this report, our disclosure controls and procedures are effective.

 

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15of the Securities Exchange Act of 1934, as amended that occurred during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

26



Table of Contents

 

PART II

OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

None.

 

Item 1A. Risk Factors.

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4.           Submission of Matters to a Vote of Security Holders.

 

On May 21, 2008, the Company held its Annual Meeting of Stockholders (“Annual Meeting”).  At the Annual Meeting, the stockholders voted to elect Dr. Augustine Chow and Gregory Weaver to the Board of Directors, to serve as Class I directors, for a term of three years, until the Company’s annual meeting of stockholders in 2011 and until their successors are elected and shall have qualified.  The results of the voting on this matter were as follows:

 

Nominee

 

For

 

Withheld

 

 

 

 

 

 

 

Dr. Augustine Chow

 

7,036,787

 

279,827

 

Gregory Weaver

 

7,020,275

 

287,339

 

 

The terms of the Class II director, Mr. Gary Pace, will expire with the election and qualification of directors at the annual meeting of the stockholders in 2009. The terms of the Class III directors, Dr. Max Link and Mr. Michael Tardugno, will expire with the election and qualification of directors at the annual meeting of the stockholders in 2010.

 

The stockholders voted to ratify the appointment of Stegman & Company as the Company’s Independent Public Accounting Firm for the fiscal year ending December 31, 2008. The results of the voting on this matter were as follows:

 

Votes For

 

7,162,980

 

Votes Against

 

98,430

 

Abstentions and Non-Votes

 

55,204

 

 

Item 5. Other Information

 

None.

 

27



Table of Contents

 

Item 6.           Exhibits.

 

11

 

Statement Re: Computation of Earnings Per Share. (Filed herewith)

 

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

 

 

 

31.2

 

Certification of Interim Chief Accounting Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

 

 

 

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. (Furnished herewith)

 

 

 

32.2

 

Certification of Interim Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Furnished herewith)

 

 

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.

 

August 14, 2008

 

 

 

CELSION CORPORATION

 

 

Registrant

 

 

 

 

By:

/s/ Michael H. Tardugno

 

 

  Michael H. Tardugno

 

 

  President and Chief Executive Officer

 

 

 

 

 

 

 

By:

/s/ Paul B. Susie

 

 

  Paul B. Susie

 

 

  Chief Accounting Officer

 

 

  Principal Financial Officer

 

28