Theriva Biologics, Inc. - Annual Report: 2009 (Form 10-K)

(Mark One)
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2009
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
		For the transition period from______________________ to____________________________

Nevada	13-3808303
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)
3930 Varsity Drive Ann Arbor, MI	48108
(Address of principal executive offices)	(Zip Code)

 

Securities registered pursuant to Section 12(b) of the Act:		Name of each exchange on which registered
(Title of Class)		NYSE AMEX
Common Stock, $0.001 par value per share

 

 

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

 

				Page
		PART I.			1
Item 1.		Business			1
Item 1A.		Risk Factors			9
Item 1B.		Unresolved Staff Comments			28
Item 2.		Properties			28
Item 3.		Legal Proceedings			28
Item 4.		Submission of Matters to a Vote of Security Holders			28
		PART II.			29
Item 5.		Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities			29
Item 6.		Selected Financial Data			31
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk			36
Item 8.		Financial Statements and Supplementary Data			37
Item 9.		Changes in and Discussions with Accountants on Accounting and Financial Disclosure			61
Item 9A(T).		Controls and Procedures			61
Item 9B.		Other Information			61
		PART III.			62
Item 10.		Directors, Executive Officers, Promoters, and Corporate Governance			62
Item 11.		Executive Compensation			64
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			67
Item 13.		Certain Relationships and Related Transactions, and Director Independence			68
Item 14.		Principal Accountant Fees and Services			69
		PART IV.			71
Item 15.		Exhibits and Financial Statement Schedules			71
SIGNATURES					74

 

 

Product Candidate		Medical Indication		Stage of Development
Trimesta (estriol)		Treatment of relapsingremitting multiple sclerosis in women		10-patient, 22-month, single-agent, crossover clinical trial completed and a 150-patient, 16-center, randomized, double-blind, placebo-controlled clinical trial underway
Zinthionein™ ZC (zinc cysteine)		Dietary management of Alzheimer’s disease and mild cognitive impairment		60-patient, randomized, double-blind, placebo-controlled clinical study underway
Effirma (flupirtine)		Treatment of fibromyalgia		IND and IRB approved for 90-patient clinical trial
dnaJP1 (hsp peptide)		Treatment of  rheumatoid arthritis		160-patient, multi-center, randomized, double-blind, placebo-controlled clinical trial completed
CD4 Inhibitor 802-2 (cyclic heptapeptide)		Prevention of severe graft-versus-host disease		23-patient clinical trial completed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	●	continue to undertake pre-clinical development and clinical trials for our product candidates;
	●	seek regulatory approvals for our product candidates;
	●	implement additional internal systems and infrastructure;
	●	lease additional or alternative office facilities; and
	●	hire additional personnel, including members of our management team.

 

	●	continuing to undertake pre-clinical development and clinical trials;
	●	participating in regulatory approval processes;
	●	formulating and manufacturing products; and
	●	conducting sales and marketing activities.

 

 

 

 

 

 

able to develop diagnostic or other tests for sale in the marketplace, a number of factors could impact our ability to generate any significant revenue from the sale of such tests, including the following:

 

	•		reliance on our HartLab operations, which are subject to routine governmental oversight and inspections for continued operation pursuant to CLIA and other regulations;
	•		our ability to establish and maintain adequate infrastructure to support the commercial launch and sale of our diagnostic tests through our HartLab subsidiary, including establishing adequate laboratory space, information technology infrastructure, sample collection and tracking systems and electronic ordering and reporting systems and other infrastructure and hiring adequate laboratory and other personnel;
	•		the availability of adequate study samples for validation studies for any diagnostic tests we develop, the success of such validation studies and our ability to publish study results in peer-reviewed journals;
	•		the availability of alternative and competing tests or products and technological innovations or other advances in medicine that cause our technologies to be less competitive;
	•		compliance with federal, state and foreign regulations governing laboratory testing and the sale and marketing of diagnostic or other tests, including copper and zinc; status tests;
	•		the accuracy rates of such tests, including rates of false-negatives and/or false-positives;
	•		concerns regarding the safety or effectiveness or clinical utility of our tests;
	•		changes in the regulatory environment affecting health care and health care providers, including changes in laws regulating laboratory testing and/or device manufacturers and any laws regulating diagnostic testing;
	•		the extent and success of our sales and marketing efforts and ability to drive adoption of our diagnostic tests;
	•		coverage and reimbursement levels by government payors and private insurers;
	•		the level of physician and customer adoption of any diagnostic tests we develop;
	•		pricing pressures and changes in third-party payor reimbursement policies;
	•		general changes or developments in the market for Alzheimer’s disease diagnostics or diagnostics in general;
	•		ethical and legal issues concerning the appropriate use of the information resulting from Alzheimer’s disease diagnostic tests or other tests;
	•		our ability to promote and protect our products and technology; and
	•		intellectual property rights held by others or others infringing our intellectual property rights.

 

 

 

	●	delay commercialization of, and our ability to derive product revenues from, our product candidates;
	●	impose costly procedures on us; and
	●	diminish any competitive advantages that we may otherwise enjoy.

 

 

 

 

 

 

 

 

 

 

We rely on suppliers for our drug substance raw materials and third parties for certain manufacturing-related services to produce material that meets appropriate content, quality and stability standards and use in clinical trials of our products and, after approval, for commercial distribution. To succeed, clinical trials require adequate supplies of drug substance and drug product, which may be difficult or uneconomical to procure or manufacture. We and our suppliers and vendors may not be able to (i) produce our drug substance or drug product to appropriate standards for use in clinical studies, (ii) perform under any definitive manufacturing, supply or service agreements with us or (iii) remain in business for a sufficient time to successfully produce and market our product candidates. If we do not maintain important manufacturing and service relationships, we may fail to find a replacement supplier or required vendor or develop our own manufacturing capabilities which could delay or impair our ability to obtain regulatory approval for our products and substantially increase our costs or deplete profit margins, if any. If we do find replacement manufacturers and vendors, we may not be able to enter into agreements with them on terms and conditions favorable to us and, there could be a substantial delay before a new facility could be qualified and registered with the FDA and foreign regulatory authorities.

	●	unforeseen safety issues;
	●	determination of dosing;
	●	lack of effectiveness during clinical trials;
	●	slower than expected rates of patient recruitment;
	●	inability to monitor patients adequately during or after treatment; and
	●	inability or unwillingness of medical investigators to follow our clinical protocols.

 

	●	the perception of members of the health care community, including physicians, regarding the safety and effectiveness of our drugs;
	●	the cost-effectiveness of our product relative to competing products;
	●	availability of reimbursement for our products from government or other healthcare payers; and
	●	the effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.

 

 

	●	developing drugs;
	●	undertaking pre-clinical testing and human clinical trials;
	●	obtaining FDA and other regulatory approvals of drugs;
	●	formulating and manufacturing drugs; and
	●	launching, marketing and selling drugs.

 

 

 

We cannot assure you that we will be able to maintain the listing standards of the NYSE Amex formerly the American Stock Exchange or NYSE Alternext US. The NYSE Amex requires companies to meet certain continued listing criteria including certain minimum stockholders' equity and equity prices per share as outlined in the Exchange Company Guide. We may not be able to maintain such minimum stockholders' equity or prices per share or may be required to affect a reverse stock split to maintain such minimum prices and/or issue additional equity securities in exchange for cash or other assets, if available, to maintain certain minimum stockholders' equity required by the NYSE Amex. If we are delisted from the Exchange then our common stock will trade, if at all, only on the over-the-counter market, such as the OTC Bulletin Board securities market, and then only if one or more registered broker-dealer market makers comply with quotation requirements. In addition, delisting of our common stock could further depress our stock price, substantially limit liquidity of our common stock and materially adversely affect our ability to raise capital on terms acceptable to us, or at all. Delisting from the Exchange could also have other negative results, including the potential loss of confidence by suppliers and employees, the loss of institutional investor interest and fewer business development opportunities.  During 2010, due to our history of losses, in order to remain listed on NYSE Amex, we will be required to maintain a minimum stockholders’ equity of $6 million or our stock may be subject to delisting.

	●	Preclinical laboratory and animal tests;
	●	Submission of an IND, prior to commencing human clinical trials;
	●	Adequate and well-controlled human clinical trials to establish safety and efficacy for intended use;
	●	Submission to the FDA of a NDA; and
	●	FDA review and approval of a NDA.

 

 

 

 

 

 

		High					Low
YEAR ENDED DECEMBER 31, 2009
Fourth quarter		$	.92				$	.41
Third quarter		$	1.70				$	.30
Second quarter		$	1.10				$	.16
First quarter		$	.56				$	.10
YEAR ENDED DECEMBER 31, 2008
Fourth quarter		$	0.55				$	0.03
Third quarter		$	1.02				$	0.48
Second quarter		$	1.40				$	0.65
First quarter		$	5.25				$	0.80

Period	Total Number of Shares Purchased				Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs			Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Month Ended October 31, 2008		0			$           .00			0			0
Month Ended November 30, 2008		81,482			.61			81,482			0
Month Ended December 31, 2008		0			.00			0			0
Total		81,482			$           .61			81,482			0

During the year ended December 31, 2009, the Company issued 104,633 shares of common stock, in connection with the exercise of stock options, for proceeds of $27,834; issued 235,538 shares of common stock for consulting fees, having a fair value of $65,786 ($0.28 per share), based on the quoted closing trading prices; issued 257,813 shares of common stock for license fees, having a fair value of $41,250 ($0.16 per share), based on the quoted closing trading price; and  issued 50,000 shares of common stock for the acquisition of Hart Lab, LLC, having a fair value of $19,000 ($0.38 per share), based on the quoted closing trading price. These offerings and sales of shares qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuances did not involve a public offering. The offerings were not a public offering as defined in Section 4(2) because the offer and sale was made to an insubstantial number of persons and because of the manner of the offering. This offering was done with no general solicitation or advertising by the Registrant. Based on an analysis of the above factors, the Registrant has met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for these sales.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		Year
		2010				2011				2012				2013				2014				Total
License Agreements		$	152,563			$	140,000			$	137,335			$	105,000			$	105,000			$	639,898
Lease Agreements		$	201,282			$	92,725			$	14,919			$	-			$	-			$	308,926
Consulting Agreements		$	-			$	-			$	-			$	-			$	-			$	-
Total		$	353,845			$	232,725			$	152,254			$	105,000			$	105,000			$	948,823

 

		Page
Report of Independent Registered Public Accounting Firm		38
Consolidated Balance Sheets		39
Consolidated Statements of Operations		40
Consolidated Statements of Changes in Stockholders’ Equity		41
Consolidated Statements of Cash Flows		42
Notes to Consolidated Financial Statements		43