(4)
(4) | Includes 10,000 shares of common stock, 18,393 shares of common stock issuable upon conversion of Series B Preferred, Stock, 10,711 shares of common stock underlying warrants, 10,500 shares of common stock issuable upon exercise of options at $1.05 per share, 106,667140,000 shares of common stock issuable upon exercise of options at $0.83 per share and 25,000 shares of common stock issuable upon exercise of options at $0.51. Does not include 73,33340,000 shares of common stock issuable upon exercise of options at $0.83 per share and 25,000 shares of common stock issuable upon exercise of options at $0.51 per share which are held by Ms. Rhein but not currently exercisable nor exercisable within 60 days of November 16, 2015.January 14, 2016. |
(5) | Does not include 500,000 shares of common stock issuable upon exercise of options at $0.35 per share which are held by Dr. Tulip but not currently exercisable nor exercisable within 60 days of November 16, 2015.January 14, 2016. | | | (6) | Does not include 161,250 restricted shares that vest upon the earlier of (i) the occurrence of a Change of Control, as defined in the 2011 Equity Incentive Plan; (ii) the successful completion of a Phase II clinical trial for any of the Company’s products; or (ii) the determination by the Board to provide for immediate vesting. Does include 75,000 shares of common stock issuable upon exercise of options at $0.95 per share, 17,857 shares of common stock issuable upon exercise of options at $1.40 per share, 125,488 shares of common stock issuable upon exercise of options at $0.83 per share, and 25,000 shares of common stock issuable upon exercise of options at $$0.53 per share. | | | (7) | Includes 35,738 shares of common stock, 45,000 shares of common stock issuable upon exercise of options at $0.95 per share, 285,000 shares of common stock issuable upon exercise of options at $0.16 per share, 17,857 shares of common stock issuable upon exercise of options at $1.40 per share, 125,488 shares of common stock issuable upon exercise of options at $0.83 per share, and 25,000 shares of common stock issuable upon exercise of options at $0.53 per share. |
| | (8) | Includes 30,000 shares of common stock issuable upon conversion of Series B Preferred, Stock, 24,956 shares of common stock underlying warrants, 125,488 shares of common stock issuable upon exercise of options at $0.83 per share and 25,000 shares of common stock issuable upon exercise of options at $0.53 per share. | | | (9) | Includes 600,000 shares of common stock, 600,000 shares of common stock underlying warrants and 25,000 shares of common stock issuable upon conversion of options at $0.53 per share. | | | (10) | Includes 100,000 shares of common stock. Also includes, 5,714,2865,857,143 shares of common stock issuable upon conversion of the Convertible Notes at $0.35 per share and 2,857,143 shares of common stock issuable upon exercise of the Warrants at $0.50 per share held by Lewis Opportunity Fund. W. Austin Lewis, IV is an affiliate of Lewis Opportunity Fund and has voting and dispositive power with respect to such shares. | | | (11)(10) | Includes 1,815,193 shares of common stock. The number of shares beneficially owned by Platinum Long Term Growth VII LLC does not include 4,523,076 shares of common stock underlying 4,523,076 shares of Series B Preferred Stock and 6,020,214 shares of common stock underlying warrants, exercisable at $0.53 per share, beneficially owned by Platinum-Montaur Life Sciences, LLC. The terms of such Series B Preferred Stock and warrants provide that the holder may not convert or exercise such securities to the extent such conversion or exercise could result in the holder beneficially owning more than 4.99% of our outstanding common stock, unless waived by the holder on at least 61 daysdays’ notice and subject to the terms of such securities. Assuming such blocker provisions were waived and the full conversion and exercise of the Series B Preferred Stock and warrants held by Platinum-Montaur Life Sciences, LLC, such holder would beneficially own, together with Platinum Long Term Growth Fund VII LLC, approximately 47% of our issued and outstanding common stock. Michael Goldberg has the voting and dispositive power over the securities held for the account of this beneficial owner. The address of Platinum Long Term Growth VII LLC is 152 West 57th Street, 4th Floor, New York, NY 10019. |
During the last two fiscal years, there have been no transactions, whether directly or indirectly, between us and any of our officers, directors or their family members, except as follows:
Lewis Opportunity Fund, an affiliate of W. Austin Lewis, IV, a member of our Board, participated as an investor in the 2015 Placement and was issued 8% Convertible Notes in an aggregate principal amount of $2,000,000 and Warrants to purchase an aggregate of 2,857,143 shares of common stock. See "2015 Private Placement of Convertible Notes and Warrants" under "Prospectus Summary".
We are registering for resale shares of our common stock, including shares issuable upon conversion of the Preferred Shares and exercise of the Warrants, held by the selling stockholders identified below. We are registering the shares to permit the selling stockholders and their pledgees, donees, transferees and other successors-in-interest that receive their shares from a selling stockholder as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus to resell the shares when and as they deem appropriate in the manner described in the “Plan of Distribution.” The following selling stockholder tables set forth: ● | the name of the selling stockholders, |
● | the number of shares of common stock beneficially owned by the selling stockholders prior to the offering for resale of the shares under this prospectus, |
● | the maximum number of shares of common stock that may be offered for resale for the account of the selling stockholders under this prospectus, and |
● | the number and percentage of shares of common stock to be beneficially owned by the selling stockholders after the offering of the shares (assuming all of the offered shares are sold by the selling stockholders). |
Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, securities that are currently convertible or exercisable into shares of our common stock, including the Convertible Notes and the Warrants, or convertible or exercisable into shares of our common stock within 60 days of the date hereof, are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to the following tables, each selling stockholder has sole voting and investment power with respect to the shares set forth opposite such stockholder’s name. As of the date of this prospectus, there were 32,041,36032,908,503 shares of our common stock issued and outstanding. Other than Lewis Opportunity Fund, L.P. (of which W. Austin Lewis, IV, a member of our Board, is an affiliate), who was an investor in the 2014 Placement and the 2015 Placement, Lawrence Atinsky,a member of our Board who was an investor in the 2014 Placement, and Andrew Sassine, a former member of our Boardwho was an investor in the 2014 Placement, none of the selling stockholders has been an officer or director of us or any of our predecessors or affiliates within the last three years, nor has any selling stockholder had a material relationship with the Company. Highline Research Advisors (“Highline”) and Monarch Capital Group, LLC (“Monarch”) acted as the Company’s placement agents in connection with the 2015 Placement. Highline received five-year warrants to purchase 178,288 shares of common stock at an exercise price of $0.50 per share and Monarch received five-year warrants to purchase 228,571 shares of common stock at an exercise price of $0.50 per share. Other than Highline and Monarch, none of the selling stockholders listed below are broker-dealers and none of the selling stockholders are affiliates of broker-dealers. The following table sets forth information regarding selling stockholders that participated in the 2015 Placement: Name of Selling Stockholder | | Beneficial Ownership) Prior to the Offering | | Shares of Common Stock Included in Prospectus | | | | Beneficial Ownership After the Offering | | Percentage Owned After the Offering | | | Beneficial Ownership) Prior to the Offering | | Shares of Common Stock Included in Prospectus | | | | Beneficial Ownership After the Offering | | Percentage Owned After the Offering | | PENSCO Trust Company, Custodian FBO John Silvestri IRA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Lev Grzhonko Non-Grantor Fund | | | | | | | | | | | | | | | | | | | | | | | Pinewood Trading Fund, L.P. | | | | | | | | | | | | | | | | | | | | | | | Lewis Opportunity Fund, L.P. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Highline Research Advisors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes 357,143 shares of common stock issuable upon exercise of Warrants. John Silvestri has voting and dispositive power over the securities held by this selling stockholder. |
(2) | Includes 71,429 shares of common stock issuable upon exercise of Warrants. |
(3) | Includes 71,429 shares of common stock issuable upon exercise of Warrants. Justin Schreiber has voting and dispositive power over the securities held by this selling stockholder. |
(4) | Includes 71,429 shares of common stock issuable upon exercise of Warrants. Perspecta Trust LLC, Trustee of the Lev Grzhonko Non-Grantor Delaware Trust, has voting and dispositive power over the securities held by this selling stockholder. |
(5) | Includes 357,143 shares of common stock issuable upon exercise of Warrants. Jack Edward Brooks has voting and dispositive power over the securities held by this selling stockholder. |
(6) | Includes 2,857,142 shares of common stock issuable upon exercise of Warrants. W. Austin Lewis, IV, a member of our Board, is an affiliate of Lewis Opportunity Fund, L.P. Austin Lewis has voting and dispositive power over the securities held by the selling stockholder. |
(7) | Includes 42,857 shares of common stock issuable upon exercise of Warrants. |
(8) | Includes 142,864 shares of common stock issuable upon exercise of Warrants. Konrad Ackermann has voting and dispositive power over the securities held by this selling stockholder. |
(9) | Includes 178,288 shares of common stock issuable upon exercise of Warrants received as compensation for services rendered as a placement agent for the 2015 Placement. Nickolay V Kukekov, Ph.D. has the voting and dispositive power over the securities held by Highline. |
(10) | Includes 228,571 shares of common stock issuable upon exercise of Warrants received as compensation for services rendered as a placement agent for the 2015 Placement. Michael Potter has the voting and dispositive power over the securities held by Monarch. |
The following table sets forth information regarding selling stockholders that participated in the 2014 Placement:
Name of Selling Stockholder | | Beneficial Ownership Prior tothe Offering | | | Shares of CommonStock Included in Prospectus | | | Beneficial Ownership After the Offering(1) | | | Percentage Owned After the Offering | | Brett Nesland | | | 357,143 | | | | 357,143 | | | | 0 | | | | 0 | % | Paul J. and Julie Solit | | | 903,977 | | | | 71,429 | | | | 832,548 | | | | 3 | % | Sandor Capital Master Fund | | | 285,714 | | | | 285,714 | (1 | ) | | 0 | | | | 0 | % | Lewis C. Bosher | | | 171,429 | | | | 171,429 | | | | 0 | | | | 0 | % | PENSCO Trust Co., custodian FBO John S. Lemak IRA Rollover | | | 285,714 | | | | 285,714 | (2 | ) | | 0 | | | | 0 | % | Cavalry Fund I, LP | | | 142,857 | | | | 142,857 | (3 | ) | | 0 | | | | 0 | % | Matthew Campbell | | | 142,857 | | | | 142,857 | | | | 0 | | | | 0 | % | Larry C. Hopfenspirger Revocable Trust U/A/D April 12, 2012 | | | 185,714 | | | | 185,714 | (4 | ) | | 0 | | | | 0 | % | Ricky Solomon | | | 285,714 | | | | 285,714 | | | | 0 | | | | 0 | % | David Moss | | | 142,857 | | | | 142,857 | | | | - | | | | 0 | % | Lincoln Park Capital Fund, LLC | | | 1,123,518 | | | | 571,429 | | | | 552,089 | | | | 2 | % | Andrew Krakauer | | | 285,714 | | | | 285,714 | | | | 0 | | | | 0 | % | The Del Mar Consulting Group, Inc. | | | 1,106,295 | | | | 464,286 | (5 | ) | | 188,000 | | | | 1 | % | Mark Saad | | | 71,429 | | | | 71,429 | | | | 0 | | | | 0 | % | Lloyd J Amster | | | 57,143 | | | | 57,143 | | | | 0 | | | | 0 | % | Harry Strulovici | | | 417,979 | | | | 57,143 | | | | 360,836 | | | | 1 | % | Elmer R. Salovich, Revocable Living Trust | | | 228,571 | | | | 228,571 | (6 | ) | | 0 | | | | 0 | % | Paul J. and Gia V. Blanchard | | | 278,484 | | | | 142,857 | | | | 132,627 | | | | * | % | E.B. Berkley Trust Dated 10/31/03 | | | 171,429 | | | | 171,429 | (7 | ) | | 0 | | | | 0 | % | W.S. Berkley GST Trust of E.B. Berkley Dated 03/01/94 | | | 171,429 | | | | 171,429 | (8 | ) | | 0 | | | | 0 | % | J.L. Berkley GST Trust of E.B. Berkley Dated 3/1/94 | | | 28,571 | | | | 28,571 | (9 | ) | | 0 | | | | 0 | % | Lawrence Atinsky | | | 118,200 | | | | 42,857 | | | | 75,343 | | | | * | % | Andrew Sassine | | | 1,630,679 | | | | 21,429 | | | | 1,609,250 | | | | 5 | % | Jason Adelman | | | 562,999 | | | | 136,903 | | | | 426,096 | | | | 1 | % | W. Austin Lewis | | | 142,857 | | | | 142,857 | | | | 0 | | | | 0 | % | Robert J and Sandra S Neborsky Living Trust | | | 896,623 | | | | 357,143 | | | | 539,480 | | | | 2 | % | IRA of Harry Strulovici | | | 18,571 | | | | 18,571 | | | | 0 | | | | 0 | % | TATS of WA, Inc. Defined Benefit Pension Plan | | | 142,857 | | | | 142,857 | (10 | ) | | 0 | | | | 0 | % | Peter Backus | | | 285,714 | | | | 285,714 | | | | 0 | | | | 0 | % | Daniel J. Allen | | | 100,000 | | | | 100,000 | | | | 0 | | | | 0 | % | Brett Maas | | | 71,429 | | | | 71,429 | | | | 0 | | | | 0 | % | Alex Partners, LLC | | | 570,412 | | | | 211,429 | (11 | ) | | 0 | | | | 0 | % | LifeStyle Healthcare, LLC | | | 428,571 | | | | 428,571 | | | | 0 | | | | 0 | % | TOTAL: | | | | | | | 6,281,189 | | | | | | | | | |
(1) John S. Lemak has voting and dispositive power over the securities held by this selling stockholder. (2) John S. Lemak has voting and dispositive power over the securities held by this selling stockholder. (3) Thomas P. Walsh has voting and dispositive power over the securities held by this selling stockholder. (4) Larry C. Hopfenspirger has voting and dispositive power over the securities held by this selling stockholder.
(5) Does not include 454,009 shares of common stock issued in a separate private placement and included on page 48 of this prospectus below.
(6) Elmer R. Salovich has voting and dispositive power over the securities held by this selling stockholder.
(7) William S. Berkley has voting and dispositive power over the securities held by this selling stockholder.
(8) William S. Berkley and Janet Dubrava have voting and dispositive power over the securities held by this selling stockholder.
(9) William S. Berkley and Janet Dubrava have voting and dispositive power over the securities held by this selling stockholder.
(10) Don Stangle has voting and dispositive power over the securities held by this selling stockholder
(11) Does not include 358,983 shares of common stock issued in a separate private placement and included on page 48 of this prospectus below. The following table sets forth information regarding selling stockholders that were issued shares of common stock for consulting services and in settlement of certain outstanding liabilities: Name of Selling Stockholder | | Beneficial Ownership) Prior tothe Offering | | | Shares of CommonStock Included in Prospectus | | | Beneficial Ownership After the Offering | | | Percentage Owned After the Offering | | The Del Mar Consulting, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | * | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) Does not include 464,286 shares of common stock issuable upon conversion of Convertible Notes included on page 47 of this prospectus.
(2) Does not include 211,429 shares of common stock issuable upon conversion of Convertible Notes included on page 47 of this prospectus. Each selling stockholder of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal trading market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one or more of the following methods when selling securities:
· | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
· | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
· | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
· | an exchange distribution in accordance with the rules of the applicable exchange; |
· | privately negotiated transactions; |
· | settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part; |
· | in transactions through broker-dealers that agree with the selling stockholders to sell a specified number of such securities at a stipulated price per security; |
· | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
· | a combination of any such methods of sale; or |
· | any other method permitted pursuant to applicable law. |
The selling stockholders may also sell securities under Rule 144 under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440. In connection with the sale of the securities or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The selling stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The selling stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each selling stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities. The Company isWe are required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company hasWe have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
Because selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. The selling stockholders have advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securities by the selling stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the selling stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of securities of the common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act). This prospectus relates to the public offering of up to 12,321,167 shares of common stock by the selling stockholders. Such shares include:
● | 7,942,872 shares issuable upon conversion of outstanding Convertible Notes; and |
● | 4,378,295 shares issuable upon exercise of Warrants. |
Authorized Capital Stock We have authorized 200,000,000 shares of capital stock, par value $0.001 per share, of which 100,000,000 are shares of common stock and 100,000,000 are shares of “blank-check” preferred stock. Common Stock The holders of our common stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled to receive ratably such dividends, if any, as may be declared by our Board out of legally available funds; however, the current policy of our Board is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of our common stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of our common stock will have no preemptive, subscription, redemption or conversion rights. The holders of our common stock do not have cumulative rights in the election of directors. The rights, preferences and privileges of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of the Preferred Shares and any other series of preferred stock that may be issued in the future. Preferred Stock Our Board is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. The preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. Series A Preferred Stock We currently have outstanding 2,234,673140,069 shares of series A convertible preferred stock, or Series A Preferred Stock.Preferred. Conversion Each share of Series A Preferred Stock may, at the holder’s option, convert into common stock. The conversion rate is equal to the sum of the stated value of $0.83 per share, plus all accrued and unpaid dividends, divided by the conversion price, which is currently$0.35 and is subject to “full-ratchet” anti-dilution protection. Subject to the specified provisions, the Series A Preferred Stock will automatically convert into common stock at the conversion price on the first date on which each of the following conditions shall have been satisfied: (i) we shall have consummated, a qualified financing for aggregate gross proceeds of at least $7,000,000, (ii) the volume weighted average trading price for our common stock for each day on thirty (30) consecutive trading days immediately preceding such date, must be above $1.50 with a trading volume in excess of 1,500,000 shares over such period, and (iii) all of the underlying are registered for resale under the Securities Act or otherwise eligible for sale under Rule 144 under the Securities Act. Dividends The holders of Series A Preferred Stock are entitled to dividends on the stated value at a rate of 10% per annum payable semi-annually on June 30 and December 31 of each calendar year in cash or, at the Company’s option, in the form of additional shares of Series A Preferred Stock.Preferred. Liquidation preference In the event of liquidation, dissolution or winding up of our business, whether voluntary or involuntary, each holder of Series A Preferred Stock is entitled to receive, out of our assets legally available therefor, a preferential amount in cash, per share of Series A Preferred, Stock, equal to (and not more than) the sum of the (x) stated value, plus (y) all accrued and unpaid dividends thereon. If upon any such distribution our assets are insufficient to pay the holders of the outstanding shares of Series A Preferred Stock the full amounts to which they are entitled, such holders will share ratably in any distribution of assets in accordance with the sums which would be payable on such distribution if all sums payable thereon were paid in full. Voting The holders of the Series A Preferred Stock have the right to one vote for each share of common stock into which such Series A Preferred Stock could then convert.
Series B Preferred Stock We currently have outstanding 5,707,4755,382,071 shares of series B convertible preferred stock, or Series B Preferred Stock.Preferred. Ranking The Series B Preferred Stock ranks junior to Series A Preferred Stock and senior to our common stock with respect to distributions of assets upon the liquidation, dissolution or winding up of the Company. Conversion Each share of Series B Preferred Stock may, at the holder’s option, convert into common stock. The conversion rate is equal to the sum of the stated value of $0.80 per share, plus all accrued and unpaid dividends, divided by the conversion price, which is currently$0.35 and is subject to “full-ratchet” anti-dilution protection. The Series B Preferred Stock is subject to mandatory conversion at such time as the volume weighted average price of our common stock is at least $1.20 (subject to adjustments for stock splits and similar events) provided, that, on the mandatory conversion date, (i) a registration statement providing for the resale of the shares underlying the Series B Preferred Stock is effective, or such shares may be offered for sale to the public without limitations pursuant to Rule 144, (ii) trading in the common stock shall not have been suspended by the SEC or exchange or market on which the common stock is trading), (iii) the daily volume of the common stock is at least 50,000 shares per day for the applicable ten (10) consecutive trading days, and (i) we are in material compliance with the terms and conditions of the applicable transaction documents. Dividends Cumulative dividends on the Series B Preferred Stock accrue at the rate of 10% of the stated value per annum, compounded annually through September 2016, except with respect to Platinum, for which dividends will accrue through October 2017. Accrued dividends are payable upon the earliest to occur of (i) the third anniversary of the issuance date (or, with respect to the Major Holder, the fourth anniversary of the issuance date), (ii) mandatory conversion and (iii) an automatic conversion upon a fundamental transaction (as such term is defined in the Certificate of Designation) or triggering event (as described below). Dividends are payable in Series B Preferred Stock valued at the stated value, or in cash upon the mutual agreement of the Company and the holder. Liquidation Preference If we voluntarily or involuntarily liquidate, dissolve or wind up our affairs, each holder of the Series B Preferred Stock will be entitled to receive out of our assets available for distribution to stockholders, after satisfaction of liabilities to creditors, if any, and payments due to holders of the Series A Preferred Stock but before any distribution of assets is made on the common stock or any of our other shares of stock ranking junior as to such a distribution to the Series B Preferred, Stock, a liquidating distribution in the amount in the amount of the stated value of all such holder’s Series B Preferred Stock plus all accrued and unpaid dividends Voting Rights The holders of the Series B Preferred Stock have the right to one vote for each share of common stock into which such Series B Preferred Stock could then convert. In addition, as long as at least 25% of the Series B Preferred Stock remains outstanding, we will not, without the affirmative vote or consent of the holders of at least a majority of the outstanding Series B Preferred, Stock, voting as a separate class, (i) amend, waive or repeal (including through a merger, consolidation or similar event) any provision of our articles of incorporation or by-laws in any manner that adversely affects the rights of the holders of the Series B Preferred Stock;Preferred; (ii) alter or change adversely the preferences, rights, privileges, or restrictions of the Series B Preferred Stock;Preferred; (iii) authorize or create any class or series of stock having rights, preferences or privileges in any respect senior to the Series B Preferred Stock;Preferred; or (iv) reclassify, alter or amend any existing class or series of stock, if such reclassification, alteration or amendment would render such other class or series of stock as having rights, preferences or privileges in any respect senior to the
Warrants This prospectus relates to shares of 4,378,295 shares of common stock underlying Warrants issued in connection with the 2015 placement transactions at an exercise price of $0.50 per share. In the event there is not an effective registration statement covering the resale of the underlying shares, the Warrants may be exercised on a cashless basis. The Warrants issued in the 2015 Placement are exercisable for five years at a price of $0.50 per share. The exercise price is subject to customary adjustments for stock splits, stock dividends and similar events, as well as “full-ratchet” anti-dilution adjustments for future issuances of other Company securities. The Warrants may be exercised on a cashless basis. Anti-takeover Effects of Our Articles of Incorporation and By-laws Our articles of incorporation and bylaws contain certain provisions that may have anti-takeover effects, making it more difficult for or preventing a third party from acquiring control of our company or changing our Board and management. The holders of our common stock do not have cumulative voting rights in the election of our directors, which makes it more difficult for minority stockholders to be represented on the Board. Our articles of incorporation allow our Board to issue additional shares of our common stock and new series of preferred stock without further approval of our stockholders. The existence of authorized but unissued shares of common stock and preferred could render more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender offer, merger, or otherwise.
Anti-takeover Effects of Nevada Law Business Combinations The “business combination” provisions of Sections 78.411 to 78.444, inclusive, of the Nevada Revised Statutes, or NRS, generally prohibit a Nevada corporation with at least 200 stockholders of record, a “resident domestic corporation,” from engaging in various “combination” transactions with any “interested stockholder” unless certain conditions are met or the corporation has elected in its articles of incorporation to not be subject to these provisions. We have not elected to opt out of these provisions and if we meet the definition of resident domestic corporation, now or in the future, our company will be subject to these provisions. A “combination” is generally defined to include (a) a merger or consolidation of the resident domestic corporation or any subsidiary of the resident domestic corporation with the interested stockholder or affiliate or associate of the interested stockholder; (b) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, by the resident domestic corporation or any subsidiary of the resident domestic corporation to or with the interested stockholder or affiliate or associate of the interested stockholder having: (i) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the resident domestic corporation, (ii) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the resident domestic corporation, or (iii) 10% or more of the earning power or net income of the resident domestic corporation; (c) the issuance or transfer in one transaction or series of transactions of shares of the resident domestic corporation or any subsidiary of the resident domestic corporation having an aggregate market value equal to 5% or more of the resident domestic corporation to the interested stockholder or affiliate or associate of the interested stockholder; and (d) certain other transactions with an interested stockholder or affiliate or associate of the interested stockholder. An “interested stockholder” is generally defined as a person who, together with affiliates and associates, owns (or within two years, did own) 10% or more of a corporation’s voting stock. An “affiliate” of the interested stockholder is any person that directly or indirectly through one or more intermediaries is controlled by or is under common control with the interested stockholder. An “associate” of an interested stockholder is any (a) corporation or organization of which the interested stockholder is an officer or partner or is directly or indirectly the beneficial owner of 10% or more of any class of voting shares of such corporation or organization; (b) trust or other estate in which the interested stockholder has a substantial beneficial interest or as to which the interested stockholder serves as trustee or in a similar fiduciary capacity; or (c) relative or spouse of the interested stockholder, or any relative of the spouse of the interested stockholder, who has the same home as the interested stockholder. If applicable, the prohibition is for a period of two years after the date of the transaction in which the person became an interested stockholder, unless such transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; or the combination is approved by the board of directors and thereafter is approved at a meeting of the stockholders by the affirmative vote of stockholders representing at least 60% of the outstanding voting power held by disinterested stockholders; and extends beyond the expiration of the two-year period, unless (a) the combination was approved by the board of directors prior to the person becoming an interested stockholder; (b) the transaction by which the person first became an interested stockholder was approved by the board of directors before the person became an interested stockholder; (c) the transaction is approved by the affirmative vote of a majority of the voting power held by disinterested stockholders at a meeting called for that purpose no earlier than two years after the date the person first became an interested stockholder; or (d) if the consideration to be paid to all stockholders other than the interested stockholder is, generally, at least equal to the highest of: (i) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, plus compounded interest and less dividends paid, (ii) the market value per share of common shares on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, plus compounded interest and less dividends paid, or (iii) for holders of preferred stock, the highest liquidation value of the preferred stock, plus accrued dividends, if not included in the liquidation value. With respect to (i) and (ii) above, the interest is compounded at the rate for one-year United States Treasury obligations from time to time in effect.
Applicability of the Nevada business combination statute would discourage parties interested in taking control of our company if they cannot obtain the approval of our Board. These provisions could prohibit or delay a merger or other takeover or change in control attempt and, accordingly, may discourage attempts to acquire our company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price. Control Share Acquisitions The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS, apply to “issuing corporations” that are Nevada corporations with at least 200 stockholders of record, including at least 100 stockholders of record who are Nevada residents, and that conduct business directly or indirectly in Nevada, unless the corporation has elected to not be subject to these provisions. The control share statute prohibits an acquirer of shares of an issuing corporation, under certain circumstances, from voting its shares of a corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested stockholders. The statute specifies three thresholds: (a) one-fifth or more but less than one-third, (b) one-third but less than a majority, and (c) a majority or more, of the outstanding voting power. Generally, once a person acquires shares in excess of any of the thresholds, those shares and any additional shares acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters’ rights. A corporation may elect to not be governed by, or “opt out” of, the control share provisions by making an election in its articles of incorporation or bylaws, provided that the opt-out election must be in place on the 10th day following the date an acquiring person has acquired a controlling interest, that is, crossing any of the three thresholds described above. We have not opted out of these provisions and will be subject to the control share provisions of the NRS if we meet the definition of an issuing corporation upon an acquiring person acquiring a controlling interest unless we later opt out of these provisions and the opt out is in effect on the 10th day following such occurrence. The effect of the Nevada control share statute is that the acquiring person, and those acting in association with the acquiring person, will obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders at an annual or special meeting. The Nevada control share law, if applicable, could have the effect of discouraging takeovers of our company.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is quoted on the OTC.QB under the symbol “FPMI.” The following table sets forth, for the calendar periods indicated, the high and low last reported price of our common stock, as reported by the OTC.QB. The quotations represent inter-dealer prices without retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions. The quotations may be rounded for presentation. 2015 | | | High | | | Low | | | | High | | | Low | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fourth Quarter (through November 16) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Holders As of November 16, 2015,January 14, 2016, we had 173177 stockholders of record.record . Our transfer agent is Vstock Transfer, LLC, Cedarhurst, New York. Dividend Policy We have not previously paid any cash dividends on our common stock and do not anticipate or contemplate paying dividends on our common stock in the foreseeable future. We currently intend to utilize all available funds to develop our business. We can give no assurances that we will ever have excess funds available to pay dividends.
WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Some items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract, agreement or any other document referred to are summaries of the material terms of the respective contract, agreement or other document. With respect to each of these contracts, agreements or other documents filed as an exhibit to the registration statement, reference is made to the exhibits for a more complete description of the matter involved. A copy of the registration statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of these materials may be obtained by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the SEC’s website is http://www.sec.gov.
We file periodic reports and other information with the SEC. Such periodic reports and other information are available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at http://www.fluoropharma.com. You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information and other content contained on our website are not part of the prospectus. Loeb & Loeb LLP, New York, New York, has acted as our counsel in connection with this offering. The validity of the shares of our common stock offered hereby have been passed upon for us by Sherman & Howard, L.L.C., Las Vegas, Nevada.
The consolidated balance sheets of the Company as of December 31, 2014 and 2013 and the related consolidated statements of operations, consolidated statements of changes in stockholders’ equity (deficit) and the consolidated statementstatements of cash flows for the years ended December 31, 2014 and 2013 included in this registration statement on Form S-1 have been so included in reliance on the consolidated report of Wolf & Company, P.C., an independent registered public accounting firm, given upon their authority as experts in accounting and auditing.
FluoroPharma Medical, Inc. Index to Financial Statements
FLUOROPHARMA MEDICAL, INC. and Subisidiary | | | | | | | | FLUOROPHARMA MEDICAL, INC. and Subsidiary | | FLUOROPHARMA MEDICAL, INC. and Subsidiary | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 2015 | | | December 31, 2014 | | | September 30, 2015 | | | December 31, 2014 | | | | (Unaudited) | | | | | | (Unaudited) | | | | | ASSETS | ASSETS | | | | | | | ASSETS | | | | | | | Current Assets: | Current Assets: | | | | | | | Current Assets: | | | | | | | Cash and cash equivalents | Cash and cash equivalents | | $ | 1,301,122 | | | $ | 252,145 | | Cash and cash equivalents | | $ | 1,301,122 | | | $ | 252,145 | | Investment in trading securities | Investment in trading securities | | | - | | | | 39,930 | | Investment in trading securities | | | - | | | | 39,930 | | Prepaid expenses & other | Prepaid expenses & other | | | 411,464 | | | | 158,849 | | Prepaid expenses & other | | | 411,464 | | | | 158,849 | | | Total Current Assets | | | 1,712,586 | | | | 450,924 | | Total Current Assets | | | 1,712,586 | | | | 450,924 | | | | | | | | | | | | | | | | | | | | | Property & equipment, net | Property & equipment, net | | | 5,712 | | | | 11,727 | | Property & equipment, net | | | 5,712 | | | | 11,727 | | Intangible assets, net | Intangible assets, net | | | 328,295 | | | | 357,540 | | Intangible assets, net | | | 328,295 | | | | 357,540 | | | | | | | | | | | | | | | | | | | | | | Total Assets | | $ | 2,046,593 | | | $ | 820,191 | | Total Assets | | $ | 2,046,593 | | | $ | 820,191 | | | | | | | | | | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ DEFICIT | LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | | Current Liabilities: | Current Liabilities: | | | | | | | | | Current Liabilities: | | | | | | | | | Convertible notes payable - short term, net (see Note 4) | Convertible notes payable - short term, net (see Note 4) | | $ | 4,330,274 | | | $ | 2,123,416 | | Convertible notes payable - short term, net (see Note 4) | | $ | 4,330,274 | | | $ | 2,123,416 | | Accounts payable | Accounts payable | | | 1,672,185 | | | | 1,064,480 | | Accounts payable | | | 1,672,185 | | | | 1,064,480 | | Derivative liabilities | Derivative liabilities | | | 1,385,695 | | | | 1,354,319 | | Derivative liabilities | | | 1,385,695 | | | | 1,354,319 | | Accrued expenses & other | Accrued expenses & other | | | 1,569,444 | | | | 1,074,611 | | Accrued expenses & other | | | 1,569,444 | | | | 1,074,611 | | | Total Current Liabilities | | | 8,957,598 | | | | 5,616,826 | | Total Current Liabilities | | | 8,957,598 | | | | 5,616,826 | | Commitments & Contingencies | Commitments & Contingencies | | | | | | | | | Commitments & Contingencies | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stockholders’ Deficit: | Stockholders’ Deficit: | | | | | | | | | Stockholders’ Deficit: | | | | | | | | | | | | | | | | | | | | | | Preferred stock Series A; $0.001 par value, 3,500,000 shares designated 462,922 and 949,477 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively (preference in liquidation of $394,032 at September 30, 2015) | Preferred stock Series A; $0.001 par value, 3,500,000 shares designated 462,922 and 949,477 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively (preference in liquidation of $394,032 at September 30, 2015) | | | 465 | | | | 951 | | Preferred stock Series A; $0.001 par value, 3,500,000 shares designated 462,922 and 949,477 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively (preference in liquidation of $394,032 at September 30, 2015) | | | 465 | | | | 951 | | Preferred stock Series B; $0.001 par value, 12,000,000 shares designated 5,694,571 shares issued and outstanding at September 30, 2015 and December 31, 2014 (preference in liquidation of $5,521,222 at September 30, 2015) | Preferred stock Series B; $0.001 par value, 12,000,000 shares designated 5,694,571 shares issued and outstanding at September 30, 2015 and December 31, 2014 (preference in liquidation of $5,521,222 at September 30, 2015) | | | 5,695 | | | | 5,695 | | Preferred stock Series B; $0.001 par value, 12,000,000 shares designated 5,694,571 shares issued and outstanding at September 30, 2015 and December 31, 2014 (preference in liquidation of $5,521,222 at September 30, 2015) | | | 5,695 | | | | 5,695 | | Common stock - Class A - $0.001 par value, 100,000,000 shares authorized, 30,366,011 and 29,197,497 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | Common stock - Class A - $0.001 par value, 100,000,000 shares authorized, 30,366,011 and 29,197,497 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | | | 30,367 | | | | 29,199 | | Common stock - Class A - $0.001 par value, 100,000,000 shares authorized, 30,366,011 and 29,197,497 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | | | 30,367 | | | | 29,199 | | Additional paid-in capital | Additional paid-in capital | | | 24,246,736 | | | | 24,034,203 | | Additional paid-in capital | | | 24,246,736 | | | | 24,034,203 | | Accumulated deficit | Accumulated deficit | | | (31,194,268 | ) | | | (28,866,683 | ) | Accumulated deficit | | | (31,194,268 | ) | | | (28,866,683 | ) | | Total Stockholders’ Deficit | | | (6,911,005 | ) | | | (4,796,635 | ) | Total Stockholders’ Deficit | | | (6,911,005 | ) | | | (4,796,635 | ) | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Stockholders’ Deficit | | $ | 2,046,593 | | | $ | 820,191 | | Total Liabilities and Stockholders’ Deficit | | $ | 2,046,593 | | | $ | 820,191 | |
The accompanying notes are an integral part of these consolidated financial statements FLUOROPHARMA MEDICAL, INC. and Subsidiary | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | Operating Expenses: | | | | | | | | | | | | | General and administrative | | $ | 492,974 | | | $ | 824,874 | | | $ | 1,773,996 | | | $ | 2,667,109 | | Research and development | | | 291,618 | | | | 641,445 | | | | 576,824 | | | | 1,232,939 | | Total Operating Expenses | | | 784,592 | | | | 1,466,319 | | | | 2,350,820 | | | | 3,900,048 | | | | | | | | | | | | | | | | | | | Loss from Operations | | | (784,592 | ) | | | (1,466,319 | ) | | | (2,350,820 | ) | | | (3,900,048 | ) | | | | | | | | | | | | | | | | | | Other Income (Expense): | | | | | | | | | | | | | | | | | Loss on disposition of intangible/fixed assets | | | - | | | | (13,005 | ) | | | - | | | | (29,596 | ) | Loss on sale of trading securities | | | - | | | | - | | | | (11,946 | ) | | | (302,116 | ) | Unrealized gain on trading securities | | | - | | | | - | | | | 7,986 | | | | 236,143 | | Gain (loss) on revaluation and modification of derivative liabilities | | | 1,130,351 | | | | 501,966 | | | | 856,327 | | | | (205,001 | ) | Interest and other expense | | | (240,851 | ) | | | (39,467 | ) | | | (398,775 | ) | | | (40,075 | ) | Total Other Income (Expense), net | | | 889,500 | | | | 449,494 | | | | 453,592 | | | | (340,645 | ) | | | | | | | | | | | | | | | | | | Income (Loss) Before Provision for Income Taxes | | | 104,908 | | | | (1,016,825 | ) | | | (1,897,228 | ) | | | (4,240,693 | ) | | | | | | | | | | | | | | | | | | Provision for Income Taxes | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | Net Income (Loss) | | $ | 104,908 | | | $ | (1,016,825 | ) | | $ | (1,897,228 | ) | | $ | (4,240,693 | ) | | | | | | | | | | | | | | | | | | Preferred Stock Dividends | | | (142,840 | ) | | | (135,053 | ) | | | (430,357 | ) | | | (415,006 | ) | | | | | | | | | | | | | | | | | | Net Loss Attributable to Common Stockholders | | $ | (37,932 | ) | | $ | (1,151,878 | ) | | $ | (2,327,585 | ) | | $ | (4,655,699 | ) | | | | | | | | | | | | | | | | | | Net Loss per Common Share - Basic and Diluted | | $ | (0.00 | ) | | $ | (0.04 | ) | | $ | (0.08 | ) | | $ | (0.16 | ) | | | | | | | | | | | | | | | | | | Weighted Average Shares Used in | | | | | | | | | | | | | | | | | per Share Calculation - Basic and Diluted: | | | 29,847,803 | | | | 29,109,320 | | | | 29,502,276 | | | | 28,452,768 | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these consolidated financial statements |
FLUOROPHARMA MEDICAL, INC. and Subsidiary | | | | | | | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | | | | 2015 | | | 2014 | | CASH FLOWS FROM OPERATING ACTIVITIES: | | (Unaudited) | | | (Unaudited) | | | | | | | | | Net loss | | $ | (1,897,228 | ) | | $ | (4,240,693 | ) | Adjustments to reconcile net loss to net cash used by operating activities | | | | | | | | | Depreciation and amortization | | | 35,260 | | | | 29,652 | | Amortization of issuance costs | | | 220,656 | | | | 19,112 | | Fair value of common stock issued for consulting | | | - | | | | 178,160 | | Share-based compensation related to stock options | | | 169,641 | | | | 330,854 | | Loss on intangible and fixed asset dispositions | | | - | | | | 29,596 | | Net loss on sale of trading securities | | | 11,946 | | | | 302,116 | | Change in unrealized loss on trading securities | | | (7,986 | ) | | | (236,143 | ) | (Gain) loss on revaluation and modification of derivative liabilities | | | (856,327 | ) | | | 205,001 | | (Increase) decrease in: | | | | | | | | | Prepaid expenses & other | | | (101,167 | ) | | | (54,946 | ) | Increase (decrease) in: | | | | | | | | | Accounts payable | | | 607,705 | | | | 357,060 | | Accrued expenses & other | | | 108,050 | | | | 218,262 | | Net Cash Used by Operating Activities | | | (1,709,450 | ) | | | (2,861,969 | ) | | | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | Proceeds from sale of investments | | | 35,970 | | | | 568,852 | | Cash paid for intangible assets | | | - | | | | (350,000 | ) | Cash paid for purchase of property and equipment | | | - | | | | (6,564 | ) | Net Cash Provided by Investing Activities | | | 35,970 | | | | 212,288 | | | | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | Proceeds from issuance of convertible notes payable – short term | | | 2,980,005 | | | | 1,372,500 | | Proceeds from other short – term financing | | | 365,000 | | | | - | | Notes payable issuance costs | | | (207,548 | ) | | | (99,655 | ) | Repayment of notes payable | | | (415,000 | ) | | | - | | Proceeds from the exercise of stock warrants | | | - | | | | 90,375 | | Proceeds from sale of common stock, net | | | - | | | | 203,055 | | Net Cash Provided by Financing Activities | | | 2,722,457 | | | | 1,566,275 | | | | | | | | | | | Net Increase (Decrease) in Cash and Cash Equivalents | | | 1,048,977 | | | | (1,083,406 | ) | Cash and Cash Equivalents, Beginning of Period | | | 252,145 | | | | 1,143,175 | | Cash and Cash Equivalents, End of Period | | $ | 1,301,122 | | | $ | 59,769 | | | | | | | | | | | Supplemental Cash Flow Disclosures: | | | | | | | | | Interest expense paid in cash | | $ | - | | | $ | - | | Tax paid | | $ | 1,912 | | | $ | 1,412 | | | | | | | | | | | Supplemental Non-Cash Disclosure: | | | | | | | | | Fair value of warrants modified in connection with Series B financing | | $ | - | | | $ | (114,923 | ) | Fair value of warrants issued to Series B placement agents | | $ | - | | | $ | (12,738 | ) | Series B Preferred Stock dividends | | $ | (376,977 | ) | | $ | (340,046 | ) | Series A Preferred Stock dividends | | $ | (44,492 | ) | | $ | (57,791 | ) | Conversion of Series A Preferred Stock dividend to Common Stock | | $ | (8,888 | ) | | $ | (17,170 | ) | Conversion of Series A Preferred Stock to Common Stock | | $ | (528 | ) | | $ | (1,494 | ) | Conversion of Series B preferred shares to Common Stock | | $ | - | | | $ | (1,254 | ) | Fair value of warrants issued with Convertible Notes | | $ | (358,255 | ) | | $ | - | | Fair value of warrants issued to Convertible Notes placement agents | | $ | (39,108 | ) | | $ | - | | Fair value of embedded derivative liability in Convertible Notes | | $ | (490,340 | ) | | $ | - | | | | | | | | | | | The accompanying notes are an integral part of these consolidated financial statements |
FLUOROPHARMA MEDICAL, INC. and Subsidiary 1. ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN FluoroPharma Medical, Inc., a Nevada corporation (the “Company”), is a molecular imaging company headquartered in Montclair, N.J. The Company was founded as FluoroPharma Inc. in 2003 to engage in the discovery, development and commercialization of proprietary products for the positron emission tomography (“PET”) market. The Company’s initial focus has been on the development of novel cardiovascular imaging agents that can more efficiently and effectively detect and assess acute and chronic forms of coronary artery disease (“CAD”). Molecular imaging pharmaceuticals are radiopharmaceuticals that enable early detection of disease through the visualization of subtle changes in biochemical and biological processes.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, FluoroPharma, Inc., a Delaware corporation. All intercompany transactions have been eliminated in consolidation.
Basis of Presentation The accompanying unaudited condensed consolidated financial statements of FluoroPharma Medical, Inc. and subsidiary have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by U.S. GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Certain prior year amounts in the condensed consolidated financial statements and notes thereto have been reclassified to conform to the current period’s presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2015 or for any other interim period. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company and the notes thereto as of and for the year ended December 31, 2014, as included in the Company's Form 10-K filed with the SEC on March 31, 2015. Going concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced net losses and negative cash flows from operations since its inception. The Company has sustained cumulative losses attributable to common stockholders of $31,194,268 as of September 30, 2015. The Company has historically financed its operations through issuances of equity and the proceeds of debt instruments. In the past, the Company has also provided for its cash needs by issuing common stock, options and warrants for certain operating costs, including consulting and professional fees. During the nine months ended September 30, 2015, the Company raised net cash proceeds of $2,722,457 through the issuance of notes payable. In addition, during the nine months ended September 30, 2015, the Company received gross proceeds of $35,970 from the sale of freely tradable securities received pursuant to the issuance and sale in a private placement of promissory notes (see Note 4). During the year ended December 31, 2014, the Company raised net cash of $2,243,102 through the issuance of notes payable, the sale of common stock and the exercise of warrants. Additionally, the Company received cash proceeds of $568,852 from the sale of freely tradable securities received as consideration in the Company’s 2013 private placement of its Series B Preferred Stock. The Company continues to actively pursue various funding options, including equity offerings, to obtain additional funds to continue the development of its products and bring them to commercial markets. Management continues to assess fund raising opportunities to ensure minimal dilution to its existing shareholder base and to obtain the best price for its securities. Management is optimistic based upon its ability to raise funds in prior years, through private placement offerings, that it will be able to raise additional funds in the future. If the Company is unable to raise additional capital as may be needed to meet its projections for operating expenses, it could have a material adverse effect on liquidity or require the Company to cease or significantly delay some of its clinical trials. These financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments
Investments that are purchased and held principally for the purpose of selling them in the near term are classified as “trading securities” and reflected on the balance sheet at fair value, with unrealized gains and losses included in earnings. All the Company’s investments are considered “trading securities” at December 31, 2014. During the nine months ended September 30, 2015, the Company sold all investments and received cash proceeds of $35,970. The Company recorded realized losses of $11,946 upon the sale.
Intangible Assets
The Company’s intangible assets consist of technology licenses and are carried at the legal cost to obtain them. Intangible assets are amortized using the straight-line method over the estimated useful life. Useful lives on technology licenses are 5 to 15 years. Fair Value of Financial Instruments
The Company groups its assets and liabilities measured at fair value, in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The three levels of the fair value hierarchy are as follows: Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 – Valuation is based on 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 for substantially the full term of the assets or liabilities. Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the financial instrument.
The Company recognizes transfers between levels at the end of the reporting period as if the transfers occurred on the last day of the reporting period.
Assets and liabilities measured at fair value on a recurring basis at September 30, 2015 are summarized below:
| | September 30, 2015 | | | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | | Current Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Assets and liabilities measured at fair value on a recurring basis at December 31, 2014 are summarized below:
| | December 31, 2014 | | | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | |
The following table sets forth the changes in the estimated fair value for our Level 3 classified derivative liability:
| | Nine Months Ended | | | Nine Months Ended | | | | September 30, 2015 | | | September 30, 2014 | | Fair value at beginning of period | | | | | | | | | | | | | | | | | | | | | | | | | | | Embedded conversion feature | | | | | | | | | Modification and reclassification of outstanding warrants | | | | | | | | | | | | | | | | | | Fair value at end of period | | | | | | | | |
Recently Issued Accounting Standards
In April 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2015-03, 'Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. ASU 2015-03 is intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. This new guidance is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of this ASU on the financial statements.
In January 2015, FASB issued ASU 2015-01 “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. This ASU removes the concept of an extraordinary item. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company is currently in the process of evaluating the impact of the adoption of this ASU on the financial statements.
3. OTHER BALANCE SHEET INFORMATION Components of selected captions in the accompanying balance sheets as of September 30, 2015 and December 31, 2014 consist of: | | September 30, 2015 | | | December 31, 2014 | | Prepaid expenses & other: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accrued expenses & other: | | | | | | | | | | | | | | | | | | Accrued dividends Series A and B Preferred Stock | | | | | | | | | | | | | | | | | | Accrued interest on notes payable | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
4. CONVERTIBLE NOTES PAYABLE – SHORT TERM
2014 Convertible Notes Payable In July, November and December 2014, the Company issued promissory notes (the “Notes”) pursuant to a Note Purchase Agreement entered into with certain accredited investors for an aggregate principal amount of approximately $1,998,500, $47,916 of which was received by the Company in marketable securities. The Notes mature one year from the date of issuance and bear interest at the rate of 8% per annum. All principal and accrued interest under the Notes will automatically convert into the Company’s next equity or equity-linked financing (a “Subsequent Financing”) in accordance with the following formula: (outstanding balance of the Notes as of the closing of the Subsequent Financing) x (1.15) / (the per security price of the securities sold in the Subsequent Financing). The investors shall be considered to be purchasers in the Subsequent Financing by way of their converted Notes. In addition, upon the closing of a Subsequent Financing, each of the investors shall be issued, in addition to any warrants issued in connection with a Subsequent Financing, an additional warrant to purchase a number of shares of common stock equal to fifty percent (50%) of the number of shares of common stock purchased by such investor in the Subsequent Financing assuming a per share purchase price of the securities to be issued in the Subsequent Financing.
In March 2015, the Company issued additional Notes for an aggregate principal amount of $200,000.
In connection with the issuance of the 2015 Convertible Notes (as defined and discussed below), the holders of the Notes, in the outstanding principal amount of $2,198,416, amended their Notes to (i) extend the maturity date an additional six months, (ii) change the terms of the conversion premium from 1.15 to 1.25 to be consistent with conversion terms of the 2015 Convertible Notes, and (iii) provide that the issuance of promissory notes by the Company in a transaction with a substantially similar structure to the transactions contemplated by the Notes shall not be deemed a Subsequent Financing. In addition, in September 2014, the Company issued a promissory note to a shareholder in the principal amount of $150,000. Interest accrues on the note at a rate of 12% per annum in the event this note is repaid upon maturity on December 31, 2014; otherwise interest accrues at a rate of 16% per annum. As of September 30, 2015, the Company accrued $20,218 in interest expense. As of September 30, 2015, the outstanding balance of this note of $75,000 is included in convertible notes payable - short term in the condensed consolidated balance sheets (see Note 9). 2015 Convertible Notes Payable
On May 28, 2015, the Company accepted subscriptions pursuant to a new Note and Warrant Purchase Agreement, as amended on August 6, 2015, for the issuance and sale in a private placement of up to $3,000,000 of convertible promissory notes (the “Convertible Notes”). The Convertible Notes mature one year from the date of issuance and bear interest at the rate of 8% per annum. All principal and accrued interest under the Convertible Notes will, at the sole option of the investor (i) convert into the Company’s next equity or equity-linked financing in which the Company raises gross proceeds of at least $3,600,000 (the “Subsequent Financing”), into such securities, including warrants of the Company as are issued in the Subsequent Financing, the amount of which shall be determined in accordance with the following formula: (the outstanding balance of the Convertible Notes plus accrued interest as of the closing of the Subsequent Financing) x (1.25) / (the per security price of the securities sold in the Subsequent Financing), or (ii) convert into a new financing in which the Company shall issue to the investor one share of common stock and one-half of one warrant at a purchase price no greater than $0.35 per share. The per security price of the securities sold in the Subsequent Financing shall not exceed $0.35. In addition, the holders of the Convertible Notes shall have the option, at any time, to convert all principal and accrued interest into common stock at price per share of $0.35. In the event that the Company shall, at any time, issue or sell additional shares of common stock or common stock equivalents, as defined, at a price per share less than $0.35, then the conversion price of the Convertible Notes shall be reduced to a price equal to the consideration paid for these additional shares of common stock.
Pursuant to the Note and Warrant Purchase Agreement, the Company issued warrants at an initial exercise price per share of $0.50 to purchase a number of shares of common stock equal to fifty percent of the number of shares of common stock such investor would receive upon full conversion of the Convertible Notes at a conversion price of $0.35 per share.
From May through September 2015, the Company issued Convertible Notes in the aggregate principal amount of $2,780,005 and warrants to purchase 3,971,436 shares of common stock at $0.50 per share. In connection with the issuance of the Convertible Notes, the Company paid to placement agents a cash fee of $142,400 and issued 406,859 five-year warrants to purchase shares of common stock at an exercise price of $0.50 per share. On the issuance date, the fair value of the placement agent warrants was $39,108 which was recorded as a deferred offering cost and as a derivative warrant liability.
Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity” (“ASC Topic 815-40”), the Company has determined that since the exercise price of the warrants may be reduced if the Company issues shares at a price below the then-current exercise price, the warrants issued in connection with the Convertible Notes must be classified as derivative instruments. In accordance with ASC Topic 815-40, these warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant changes in fair value is being recorded in the Company’s consolidated statement of operations. In order to account for the issuance of the Convertible Notes and warrants, the Company allocated the total gross proceeds of $2,780,005 between the Convertible Notes and the warrants. The warrants were allocated their full fair value as of the respective grant dates totaling $358,255 and the residual net proceeds of $2,421,750 were allocated to the Convertible Notes. The conversion feature of the Convertible Notes was then analyzed. The Company determined that the embedded conversion feature did not meet the requirements for equity classification in accordance with ASC Topic 815-40. Therefore, the conversion feature fair value of $490,340 was bifurcated from the host contract, the Convertible Notes, and recorded as a derivative liability, thereby creating a further discount on the Convertible Notes. The conversion feature is also being re-measured at each balance sheet date based on estimated fair value, and any resultant changes in fair value is being recorded in the Company’s consolidated statement of operations. In connection with the issuance of the short-term financing Notes and the Convertible Notes, the Company incurred $335,877 in issuance costs. These costs are recorded as deferred issuance costs, included in prepaid expenses and other current assets on the Company’s balance sheet and amortized to interest expense over the term of such Convertible Notes. For the nine months ended September 30, 2015 and 2014, the Company has amortized $95,207 and $19,112, respectively, of issuance costs to expense. For the nine months ended September 30, 2015 and 2014, the Company recorded non-cash interest expense related to the amortization of the discount on the Convertible Notes of $125,449 and $0, respectively.
Interest expense, including amortization of deferred issuance costs and debt discounts related to the warrants and beneficial conversion feature, totaled $396,863 and $38,680 for the nine months ended September 30, 2015 and 2014, respectively.
The issuance of the Convertible Notes has resulted in an adjustment to the conversion price and exercise price of certain of the Company’s outstanding securities, including its Series A Preferred Stock, Series B Preferred Stock and certain outstanding warrants, to $0.35 per share as a result of the various “full-ratchet” anti-dilution provisions contained in such securities.
In connection with the private placement of the Convertible Notes, the Company entered into a registration rights agreement with the investors, in which the Company agreed to file a registration statement with the SEC to register for resale the shares underlying the Convertible Notes and the warrants within 90 calendar days of the final closing date of the Convertible Notes and to have the registration statement declared effective within 120 calendar days after the filing date.
5. CAPITAL STOCK SERIES A PREFERRED STOCK
The Company is authorized to issue 100,000,000 shares of preferred stock, $0.001 par value per share, of which 3,500,000 shares have been designated Series A Preferred Stock. At September 30, 2015 and December 31, 2014, 462,922 and 949,477 shares of Series A Preferred Stock, respectively, were issued and outstanding.
During the nine months ended September 30, 2015, 528,345 shares of Series A Preferred Stock were converted into 1,145,796 shares of common stock. In addition, the Company issued 22,718 shares of its common stock in satisfaction of a $8,889 dividend accrued on the shares of Series A Preferred Stock that were converted.
For the nine months ended September 30, 2015, the Company accrued a preferred stock dividend of $44,491. The Company issued 41,790 shares of Series A Preferred Stock in payment of such dividends as related to the Series A Preferred Stock outstanding at June 30, 2015.
During the nine months ended September 30, 2014, 1,493,976 shares of Series A Preferred Stock were converted into 2,480,000 shares of the Company’s common stock. In addition, the Company issued 34,339 shares of the Company’s common stock in satisfaction of a $17,170 dividend accrued on the shares of Series A Preferred Stock that were converted.
For the nine months ended September 30, 2014, the Company accrued a preferred stock dividend of $57,791. The Company issued 46,586 shares of Series A Preferred Stock in payment of such dividends as related to the Series A Preferred Stock outstanding at June 30, 2014. SERIES B PREFERRED STOCK The Company is authorized to issue 100,000,000 shares of preferred stock, $0.001 par value per share, of which 12,000,000 shares have been designated Series B Preferred Stock. At September 30, 2015 and December 31, 2014, 5,694,571 shares of Series B Preferred Stock were issued and outstanding.
For the nine months ended September 30, 2015 and 2014, the Company accrued a Series B Preferred Stock dividend of $376,977 and $340,046, respectively. In addition, the Company issued 2,507 shares of common stock in payment of such dividends as related to the Series B Preferred Stock converted to common stock during the nine months ended September 30, 2014.
During the nine months ended September 30, 2015, there were no voluntary conversions. COMMON STOCK
The Company has authorized 100,000,000 shares of its common stock, $0.001 par value per share. At September 30, 2015 and December 31, 2014, the Company had issued and outstanding 30,366,011 and 29,197,497 shares of its common stock, respectively. 6. STOCK PURCHASE WARRANTS
During the nine months ended September 30, 2015, the Company issued 3,971,436 common stock warrants to investors and 406,859 common stock warrants to the placement agents in connection with issuance of the Convertible Notes. These warrants are recorded as a derivative warrant liability.
During the nine months ended September 30, 2015, 3,017,490 stock purchase warrants expired with a weighted average exercise price of $1.29.
As a result of the issuance of the Convertible Notes payable pursuant to the Note and Warrant Purchase Agreement entered into with certain accredited investors on May 28, 2015, the exercise price of the warrants issued in connection with the sale of the Company's Series B Preferred Stock was reduced to $0.35 per share.
The following represents additional information related to common stock warrants outstanding and exercisable at September 30, 2015: Exercise Price | | Number of Shares Under Warrants | | | Weighted Average Remaining Contract Life in Years | | | Weighted Average Exercise Price | | | | | | | | | | | | | | | | | | | | | | | | | Total warrants accounted for as derivative liability | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total warrants accounted for as equity | | | | | | | | | | | Total for all warrants outstanding | | | | | | | | | | |
For warrants granted that are accounted for as a derivative liability, the Company used a Binomial Options Pricing model. The primary assumptions used to determine the fair values of these warrants were: risk free interest rate of 1.37%, volatility of 49.42%, and actual term and exercise price of the warrants granted.
7. COMMON STOCK OPTIONS On February 11, 2011, the Company adopted its 2011 Equity Incentive Plan (the “Plan”) under which 6,475,750 shares of common stock were reserved for issuance under options or other equity interests as set forth in the Plan. Under the Plan, options are available for issuance to employees, officers, directors, consultants and advisors. The Plan provides that the board of directors will determine the exercise price and vesting terms of each option on the date of grant. Options granted under the Plan generally expire ten years from the date of grant.
Under the Plan, the Company has issued 161,250 shares of fully paid and non-assessable restricted common stock to a director of the Company. These shares of restricted stock are subject to the terms of the Plan and are unvested and outstanding as of September 30, 2015. The shares shall vest upon the earlier of (i) the occurrence of a Change of Control, as defined in the Plan, (ii) the successful completion of a Phase II clinical trial for any of the Company’s products, or (iii) the determination by the board of directors to provide for immediate vesting. The weighted average grant-date fair value is $1.07 per share. The following is a summary of all common stock option activity for the nine months ended September 30, 2015: | | Options Outstanding | | | Weighted Average Exercise Price | | Outstanding at December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at September 30, 2015 | | | | | | | | |
| | Options Exercisable | | | Weighted Average Exercise Price per Share | | Exercisable at December 31, 2014 | | | | | | | | | Exercisable at September 30, 2015 | | | | | | | | |
The weighted average fair value of options granted during the nine months ended September 30, 2015 was $0.15.
At September 30, 2015, the weighted average remaining contractual term for exercisable and outstanding options is 5.10 and 5.25 years, respectively. At September 30, 2015, the aggregate intrinsic value of all of the Company’s exercisable and outstanding options is $74,250 and $74,250, respectively.
Employee stock-based compensation expense for the nine months ended September 30, 2015 and 2014 is $169,641 and $330,854, respectively.
To compute compensation expense, the Company estimated the fair value of each option award on the date of grant using the Black-Scholes option pricing model for employees, and calculated the fair value of each option award at the end of the period for non-employees. The Company based the expected volatility assumption on a volatility index of peer companies as the Company did not have sufficient historical market information to estimate the volatility of its own stock. The expected term of options granted represents the period of time that options are expected to be outstanding. The Company estimated the expected term of stock options by using the simplified method. The expected forfeiture rates are based on the historical employee forfeiture experiences. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards. The Company has not declared a dividend on its common stock since its inception and has no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero. The fair value of each share-based payment is estimated on the measurement date using the Black-Scholes model with the following assumptions as of September 30, 2015 and 2014, respectively: risk-free rate with a range from 1.82% - 2.06% and 2.52% - 3.40%, respectively, volatility of 49.42% and 60.13%, respectively, and expected term of 5 years and 5.5 years, respectively. There was no dividend yield included in the calculations.
As of September 30, 2015, there was $12,678 of unrecognized compensation cost related to non-vested options. The unrecognized compensation expense is estimated to be recognized over a period of 0.40 years at September 30, 2015. 8. COMMITMENTS AND CONTINGENCIES License Agreements On June 26, 2014, the Company and The General Hospital Corporation, d/b/a Massachusetts General Hospital (“MGH”) entered into two license agreements (the “Agreements”), which Agreements replace the single license agreement between the Company and MGH dated April 27, 2009, as amended by letter dated June 21, 2011 and agreement dated October 31, 2011 (the “Original Agreement”). The Agreements provide exclusive licenses for the Company’s two lead product candidates, BFPET and CardioPET, two of the three cardiac imaging technologies covered by the Original Agreement. The Company and MGH are in discussions regarding the exclusive license to VasoPET, the third product candidate covered by the Original Agreement, the Company’s rights to which ceased upon the termination of the Original Agreement contemporaneously with the execution of the new Agreements. The Agreements were entered into primarily for the purpose of separating the Company’s rights and obligations with respect to its different product development programs. Each of the Agreements requires the Company to pay MGH an initial license fee of $175,000 and annual license maintenance fees of $125,000 each. The Agreements require the Company to meet certain obligations, including, but not limited to, meeting certain development milestones relating to clinical trials and filings with the United States Food and Drug Administration. MGH has the right to cancel or make non-exclusive certain licenses on certain patents should the Company fail to meet stipulated obligations and milestones. Additionally, upon commercialization, the Company is required to make specified milestone payments and royalties on commercial sales. The Company is amortizing the cost of these intangible assets over the remaining useful life of the Agreements of 10 years. On July 31, 2015, the Company paid annual maintenance fees of $125,000 for each of its license agreements. These costs are recorded as prepaid expenses, included in prepaid expenses and other current assets on the Company’s balance sheet and expensed over the term of one year. For the nine months ended September 30, 2015, the Company has recorded license fee expense of $83,333.
The Company is current with all stipulated obligations and milestones under the Agreements and the Agreements remain in full force and effect. The Company believes that it maintains a good relationship with MGH and will be able to obtain waivers or extension of its obligations under the Agreement, should the need arise. If MGH were to refuse to provide the Company with a waiver or extension of any of its obligations or were to cancel or make the license non-exclusive, this would have a material adverse impact on the Company as it may be unable to commercialize products without exclusivity and would lose its competitive edge for portions of the patent portfolio. Clinical Research Services Agreements
On September 7, 2012, the Company entered into a Clinical Research Services Agreement with SGS Life Science Services (“SGS”), a company with its registered offices in Belgium, for clinical research services relating to the Company’s CardioPET Phase II study to assess myocardial perfusion and fatty acid uptake in coronary artery disease (CAD) patients. The phase II trial will be an open label trial designed to assess the safety and diagnostic performanceBasis of CardioPET as compared to stress echocardiography, myocardial perfusion imaging and angiography as a gold standard of background disease. Presentation
In addition, the Company engaged FGK Representative Service GmbH to serve as the Company’s sponsorThe accompanying unaudited condensed consolidated financial statements of FluoroPharma Medical, Inc. and subsidiary have been prepared in complianceaccordance with the laws governing clinical trials conducted in the European Union. On February 28, 2013, the Company announced that the Phase II trial had begun and released the initial data and images from the trial. On February 6, 2014, the Company presented interim data from the trial at the SNMMI mid-winter meeting. On October 20, 2014, the Company presented additional interim data at the EANM meeting in Gothenburg, Sweden. In December 2014, the Company announced that the enrollment for a Phase II clinical trial of CardioPET was closed. The estimated remaining cost payable to SGS through the completion of the trial is approximately $330,000.
On May 23, 2014, the Company entered into a Master Services Agreement with PPD Development, LP, a clinical research organization engaged in the business of managing clinical research programs and providing clinical development and other related services, for the clinical research services relating to the Company’s BFPET Phase II study. The Phase II trial will be an open label trial designed to assess the safety and diagnostic performance of BFPET. Multiple trial sites are planned in various locationsaccounting principles generally accepted in the United States.States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by U.S. GAAP for complete annual financial statements. In connectionthe opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Certain prior year amounts in the condensed consolidated financial statements and notes thereto have been reclassified to conform to the current period’s presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2015 or for any other interim period. The unaudited condensed consolidated financial statements should be read in conjunction with this agreement,the audited financial statements of the Company and the notes thereto as of and for the year ended December 31, 2014, as included in the Company's Form 10-K filed with the SEC on March 31, 2015.
Going concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has recorded approximately $285,000experienced net losses and negative cash flows from operations since its inception. The Company has sustained cumulative losses attributable to common stockholders of $31,194,268 as of September 30, 2015. The Company has historically financed its operations through issuances of equity and the proceeds of debt instruments. In the past, the Company has also provided for its cash needs by issuing common stock, options and warrants for certain operating costs, including consulting and professional fees. During the nine months ended September 30, 2015, relatedthe Company raised net cash proceeds of $2,722,457 through the issuance of notes payable. In addition, during the nine months ended September 30, 2015, the Company received gross proceeds of $35,970 from the sale of freely tradable securities received pursuant to start-up costs. the issuance and sale in a private placement of promissory notes (see Note 4). During the year ended December 31, 2014, the Company raised net cash of $2,243,102 through the issuance of notes payable, the sale of common stock and the exercise of warrants. Additionally, the Company received cash proceeds of $568,852 from the sale of freely tradable securities received as consideration in the Company’s 2013 private placement of its Series B Preferred Stock. The trialCompany continues to actively pursue various funding options, including equity offerings, to obtain additional funds to continue the development of its products and bring them to commercial markets. Management continues to assess fund raising opportunities to ensure minimal dilution to its existing shareholder base and to obtain the best price for its securities. Management is expectedoptimistic based upon its ability to commenceraise funds in prior years, through private placement offerings, that it will be able to raise additional funds in the future. If the Company is unable to raise additional capital as may be needed to meet its projections for operating expenses, it could have a material adverse effect on liquidity or require the Company to cease or significantly delay some of its clinical trials. These financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments
Investments that are purchased and held principally for the purpose of selling them in the near future.term are classified as “trading securities” and reflected on the balance sheet at fair value, with unrealized gains and losses included in earnings. All the Company’s investments are considered “trading securities” at December 31, 2014. During the nine months ended September 30, 2015, the Company sold all investments and received cash proceeds of $35,970. The estimated costCompany recorded realized losses of this program is $1.7 million.$11,946 upon the sale.
Executive Employment ContractsIntangible Assets
The Company maintains employment contracts with key Company executives that provide forCompany’s intangible assets consist of technology licenses and are carried at the continuation of salary andlegal cost to obtain them. Intangible assets are amortized using the grant of certain optionsstraight-line method over the estimated useful life. Useful lives on technology licenses are 5 to the executives if terminated for reasons other than cause, as defined within the agreements. 15 years. Operating Lease CommitmentFair Value of Financial Instruments
The Company groups its assets and liabilities measured at fair value, in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The three levels of the fair value hierarchy are as follows: Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 – Valuation is based on 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 for substantially the full term of the assets or liabilities. Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the financial instrument.
The Company recognizes transfers between levels at the end of the reporting period as if the transfers occurred on the last day of the reporting period.
Assets and liabilities measured at fair value on a recurring basis at September 30, 2015 are summarized below:
| | September 30, 2015 | | | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | | Current Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Assets and liabilities measured at fair value on a recurring basis at December 31, 2014 are summarized below:
| | December 31, 2014 | | | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | |
The following table sets forth the changes in the estimated fair value for our Level 3 classified derivative liability:
| | Nine Months Ended | | | Nine Months Ended | | | | September 30, 2015 | | | September 30, 2014 | | Fair value at beginning of period | | | | | | | | | | | | | | | | | | | | | | | | | | | Embedded conversion feature | | | | | | | | | Modification and reclassification of outstanding warrants | | | | | | | | | | | | | | | | | | Fair value at end of period | | | | | | | | |
Recently Issued Accounting Standards
In April 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2015-03, 'Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. ASU 2015-03 is intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. This new guidance is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of this ASU on the financial statements.
In January 2015, FASB issued ASU 2015-01 “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. This ASU removes the concept of an extraordinary item. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company is currently in the process of evaluating the impact of the adoption of this ASU on the financial statements.
3. OTHER BALANCE SHEET INFORMATION Components of selected captions in the accompanying balance sheets as of September 30, 2015 and December 31, 2014 consist of: | | September 30, 2015 | | | December 31, 2014 | | Prepaid expenses & other: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accrued expenses & other: | | | | | | | | | | | | | | | | | | Accrued dividends Series A and B Preferred Stock | | | | | | | | | | | | | | | | | | Accrued interest on notes payable | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
4. CONVERTIBLE NOTES PAYABLE – SHORT TERM
2014 Convertible Notes Payable In July, 2011, the Company entered into a three-year lease for office space, which commenced May 1, 2012November and was to expire on April 30, 2015. On July 1,December 2014, the Company increased its office spaceissued promissory notes (the “Notes”) pursuant to a Note Purchase Agreement entered into with certain accredited investors for an aggregate principal amount of approximately $1,998,500, $47,916 of which was received by the Company in marketable securities. The Notes mature one year from the date of issuance and bear interest at the rate of 8% per annum. All principal and accrued interest under the Notes will automatically convert into the Company’s next equity or equity-linked financing (a “Subsequent Financing”) in accordance with the following formula: (outstanding balance of the Notes as of the closing of the Subsequent Financing) x (1.15) / (the per security price of the securities sold in the Subsequent Financing). The investors shall be considered to be purchasers in the Subsequent Financing by way of their converted Notes. In addition, upon the closing of a Subsequent Financing, each of the investors shall be issued, in addition to any warrants issued in connection with a Subsequent Financing, an additional warrant to purchase a number of shares of common stock equal to fifty percent (50%) of the number of shares of common stock purchased by such investor in the Subsequent Financing assuming a per share purchase price of the securities to be issued in the Subsequent Financing.
In March 2015, the Company issued additional Notes for an aggregate principal amount of $200,000.
In connection with the issuance of the 2015 Convertible Notes (as defined and discussed below), the holders of the Notes, in the outstanding principal amount of $2,198,416, amended their Notes to (i) extend the maturity date an additional six months, (ii) change the terms of the conversion premium from 1.15 to 1.25 to be consistent with conversion terms of the 2015 Convertible Notes, and (iii) provide that the issuance of promissory notes by the Company in a transaction with a substantially similar structure to the transactions contemplated by the Notes shall not be deemed a Subsequent Financing. In addition, in September 2014, the Company issued a promissory note to a shareholder in the principal amount of $150,000. Interest accrues on the note at a rate of 12% per annum in the event this agreement.note is repaid upon maturity on December 31, 2014; otherwise interest accrues at a rate of 16% per annum. As of September 30, 2015, the Company accrued $20,218 in interest expense. As of September 30, 2015, the outstanding balance of this note of $75,000 is included in convertible notes payable - short term in the condensed consolidated balance sheets (see Note 9). 2015 Convertible Notes Payable
On May 28, 2015, the Company accepted subscriptions pursuant to a new Note and Warrant Purchase Agreement, as amended on August 6, 2015, for the issuance and sale in a private placement of up to $3,000,000 of convertible promissory notes (the “Convertible Notes”). The amended annual minimum lease paymentsConvertible Notes mature one year from the date of issuance and bear interest at the rate of 8% per annum. All principal and accrued interest under the Convertible Notes will, at the sole option of the investor (i) convert into the Company’s next equity or equity-linked financing in which the Company raises gross proceeds of at least $3,600,000 (the “Subsequent Financing”), into such securities, including warrants of the Company as are issued in the Subsequent Financing, the amount of which shall be determined in accordance with the following formula: (the outstanding balance of the Convertible Notes plus accrued interest as of the closing of the Subsequent Financing) x (1.25) / (the per security price of the securities sold in the Subsequent Financing), or (ii) convert into a new financing in which the Company shall issue to the investor one share of common stock and one-half of one warrant at a purchase price no greater than $0.35 per share. The per security price of the securities sold in the Subsequent Financing shall not exceed $0.35. In addition, the holders of the Convertible Notes shall have the option, at any time, to convert all principal and accrued interest into common stock at price per share of $0.35. In the event that the Company shall, at any time, issue or sell additional shares of common stock or common stock equivalents, as defined, at a price per share less than $0.35, then the conversion price of the Convertible Notes shall be reduced to a price equal to the consideration paid for this office space are $76,200these additional shares of common stock.
Pursuant to the Note and Warrant Purchase Agreement, the Company issued warrants at an initial exercise price per year plusshare of $0.50 to purchase a number of shares of common area costs.stock equal to fifty percent of the number of shares of common stock such investor would receive upon full conversion of the Convertible Notes at a conversion price of $0.35 per share.
From May through September 2015, the Company issued Convertible Notes in the aggregate principal amount of $2,780,005 and warrants to purchase 3,971,436 shares of common stock at $0.50 per share. In connection with the issuance of the Convertible Notes, the Company paid to placement agents a cash fee of $142,400 and issued 406,859 five-year warrants to purchase shares of common stock at an exercise price of $0.50 per share. On the issuance date, the fair value of the placement agent warrants was $39,108 which was recorded as a deferred offering cost and as a derivative warrant liability.
Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity” (“ASC Topic 815-40”), the Company has determined that since the exercise price of the warrants may be reduced if the Company issues shares at a price below the then-current exercise price, the warrants issued in connection with the Convertible Notes must be classified as derivative instruments. In accordance with ASC Topic 815-40, these warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant changes in fair value is being recorded in the amended agreement,Company’s consolidated statement of operations. In order to account for the issuance of the Convertible Notes and warrants, the Company maintainsallocated the total gross proceeds of $2,780,005 between the Convertible Notes and the warrants. The warrants were allocated their full fair value as of the respective grant dates totaling $358,255 and the residual net proceeds of $2,421,750 were allocated to the Convertible Notes. The conversion feature of the Convertible Notes was then analyzed. The Company determined that the embedded conversion feature did not meet the requirements for equity classification in accordance with ASC Topic 815-40. Therefore, the conversion feature fair value of $490,340 was bifurcated from the host contract, the Convertible Notes, and recorded as a $9,525 security deposit. On February 24, 2015,derivative liability, thereby creating a further discount on the Convertible Notes. The conversion feature is also being re-measured at each balance sheet date based on estimated fair value, and any resultant changes in fair value is being recorded in the Company’s consolidated statement of operations. In connection with the issuance of the short-term financing Notes and the Convertible Notes, the Company signed a three-year renewalincurred $335,877 in issuance costs. These costs are recorded as deferred issuance costs, included in prepaid expenses and other current assets on the Company’s balance sheet and amortized to interest expense over the term of such Convertible Notes. For the nine months ended September 30, 2015 and 2014, the Company has amortized $95,207 and $19,112, respectively, of issuance costs to expense. For the nine months ended September 30, 2015 and 2014, the Company recorded non-cash interest expense related to the amortization of the lease which will expirediscount on April 30, 2018. Subsequent to April 30, 2016, the Company will have the option to terminate the lease with 6 months prior notice. The future minimum lease payments remaining through April 30, 2018 are as follows:
Convertible Notes of $125,449 and $0, respectively. RentInterest expense, netincluding amortization of sublease income, was $57,634deferred issuance costs and $55,630debt discounts related to the warrants and beneficial conversion feature, totaled $396,863 and $38,680 for the nine months ended September 30, 2015 and 2014, respectively.
Legal ContingenciesThe issuance of the Convertible Notes has resulted in an adjustment to the conversion price and exercise price of certain of the Company’s outstanding securities, including its Series A Preferred Stock, Series B Preferred Stock and certain outstanding warrants, to $0.35 per share as a result of the various “full-ratchet” anti-dilution provisions contained in such securities.
In connection with the private placement of the Convertible Notes, the Company entered into a registration rights agreement with the investors, in which the Company agreed to file a registration statement with the SEC to register for resale the shares underlying the Convertible Notes and the warrants within 90 calendar days of the final closing date of the Convertible Notes and to have the registration statement declared effective within 120 calendar days after the filing date.
In July 2013, an action was filed against the Company in the United States District Court for the District of Nevada. The action, Todd Nelson v. Fluoropharma Medical, Inc. and Does 1 through 10, No. 13 CV 01152 JAD CWH, alleges that the plaintiff suffered losses attributable to the Company’s refusal to honor certain stock options after February 28, 2012. Plaintiff seeks at least $325,200 in damages, as well as punitive and exemplary damages, prejudgment interest, and costs. Discovery has closed and on April 13, 2015, the Company filed a motion for summary judgment seeking to dismiss the entire action with prejudice. The motion for summary judgment has been fully submitted and the Company anticipates the Court scheduling oral argument. Management believes that it has meritorious defenses in all such matters, and accordingly, no accrual has been recorded for these matters as of September 30, 2015.5. CAPITAL STOCK
SERIES A PREFERRED STOCK
The Company is not awareauthorized to issue 100,000,000 shares of any other material, active, pending or threatened proceeding, nor is the Company, or any subsidiary, involved as a plaintiff or defendant in any other material proceeding or pending litigation.preferred stock, $0.001 par value per share, of which 3,500,000 shares have been designated Series A Preferred Stock. At September 30, 2015 and December 31, 2014, 462,922 and 949,477 shares of Series A Preferred Stock, respectively, were issued and outstanding.
9. SUBSEQUENT EVENTS
Executive Employment Agreements
On October 5,During the nine months ended September 30, 2015, the Company appointed Dr. Thomas H. Tulip as President of the Company. Mr. Johan M. (Thijs) Spoor resigned his role as President but will retain his roles as the Company’s Chief Executive Officer and Chairman of the Board. Mr. Spoor will continue to oversee corporate strategy and investor relations while Dr. Tulip will focus on operations and pipeline development.
Dr. Tulip’s contract provides for a $1 million bonus should the Company execute transactions as specified in the contract, including the sale of substantially all of the Company’s assets or stock or a merger transaction, any of which resulting in compensation to the Company’s stockholders aggregating in excess of $50 million for such transaction.
Convertible Notes Payable
On October 12 and 13, 2015, the Company repaid the remaining principal balance of $75,000 on the short-term note payable issued on September 19, 2014.
Capital Stock
From October 1, 2015 through October 29, 2015, 327,874528,345 shares of Series A Preferred Stock were converted into 777,5281,145,796 shares of common stock. In addition, the Company issued 23,26922,718 shares of its common stock in satisfaction of a $5,102$8,889 dividend accrued on the shares of Series A Preferred Stock that were converted.
From October 15,For the nine months ended September 30, 2015, through November 9,the Company accrued a preferred stock dividend of $44,491. The Company issued 41,790 shares of Series A Preferred Stock in payment of such dividends as related to the Series A Preferred Stock outstanding at June 30, 2015.
During the nine months ended September 30, 2014, 1,493,976 shares of Series A Preferred Stock were converted into 2,480,000 shares of the Company’s common stock. In addition, the Company issued 34,339 shares of the Company’s common stock in satisfaction of a $17,170 dividend accrued on the shares of Series A Preferred Stock that were converted.
For the nine months ended September 30, 2014, the Company accrued a preferred stock dividend of $57,791. The Company issued 46,586 shares of Series A Preferred Stock in payment of such dividends as related to the Series A Preferred Stock outstanding at June 30, 2014. SERIES B PREFERRED STOCK The Company is authorized to issue 100,000,000 shares of preferred stock, $0.001 par value per share, of which 12,000,000 shares have been designated Series B Preferred Stock. At September 30, 2015 382,617and December 31, 2014, 5,694,571 shares of Series B Preferred Stock were converted into 874,552 sharesissued and outstanding.
For the nine months ended September 30, 2015 and 2014, the Company accrued a Series B Preferred Stock dividend of common stock. $376,977 and $340,046, respectively. In October 2015,addition, the Company issued warrants to purchase 607,2292,507 shares of common stock at an exercise pricein payment of $0.50 per share with a five-year term. These warrants were issued in consideration of the warrant holder waiving its rights with respect to indebtedness incurred by the Company in excess of the amount permitted pursuantsuch dividends as related to the Certificate of Designation ofSeries B Preferred Stock converted to common stock during the Relative Rights and Preferences ofnine months ended September 30, 2014.
During the Company’s Series A Preferred Stock. Appointments and Resignation of Directors
On November 6,nine months ended September 30, 2015, the Board of Directors of the Company appointed each of Dr. Thomas Tulip and Austin Lewis as directors. Effective as of November 12, 2015, Dr. Joseph A. Pierro resigned as a director. The resignation was not due to any disagreement on any matter relating to the Company’s operations, policies or practices.
there were no voluntary conversions. To the Board of Directors of FluoroPharma Medical, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of FluoroPharma Medical, Inc. and Subsidiary as of December 31, 2014 and 2013 and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FluoroPharma Medical, Inc. and Subsidiary as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.COMMON STOCK
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a significant accumulated deficitauthorized 100,000,000 shares of its common stock, $0.001 par value per share. At September 30, 2015 and at December 31, 2014, the Company did not have sufficient capitalhad issued and outstanding 30,366,011 and 29,197,497 shares of its common stock, respectively. 6. STOCK PURCHASE WARRANTS
During the nine months ended September 30, 2015, the Company issued 3,971,436 common stock warrants to fundinvestors and 406,859 common stock warrants to the placement agents in connection with issuance of the Convertible Notes. These warrants are recorded as a derivative warrant liability.
During the nine months ended September 30, 2015, 3,017,490 stock purchase warrants expired with a weighted average exercise price of $1.29.
As a result of the issuance of the Convertible Notes payable pursuant to the Note and Warrant Purchase Agreement entered into with certain accredited investors on May 28, 2015, the exercise price of the warrants issued in connection with the sale of the Company's Series B Preferred Stock was reduced to $0.35 per share.
The following represents additional information related to common stock warrants outstanding and exercisable at September 30, 2015: Exercise Price | | Number of Shares Under Warrants | | | Weighted Average Remaining Contract Life in Years | | | Weighted Average Exercise Price | | | | | | | | | | | | | | | | | | | | | | | | | Total warrants accounted for as derivative liability | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total warrants accounted for as equity | | | | | | | | | | | Total for all warrants outstanding | | | | | | | | | | |
For warrants granted that are accounted for as a derivative liability, the Company used a Binomial Options Pricing model. The primary assumptions used to determine the fair values of these warrants were: risk free interest rate of 1.37%, volatility of 49.42%, and actual term and exercise price of the warrants granted.
7. COMMON STOCK OPTIONS On February 11, 2011, the Company adopted its operations. This raises substantial doubt about2011 Equity Incentive Plan (the “Plan”) under which 6,475,750 shares of common stock were reserved for issuance under options or other equity interests as set forth in the Plan. Under the Plan, options are available for issuance to employees, officers, directors, consultants and advisors. The Plan provides that the board of directors will determine the exercise price and vesting terms of each option on the date of grant. Options granted under the Plan generally expire ten years from the date of grant.
Under the Plan, the Company has issued 161,250 shares of fully paid and non-assessable restricted common stock to a director of the Company. These shares of restricted stock are subject to the terms of the Plan and are unvested and outstanding as of September 30, 2015. The shares shall vest upon the earlier of (i) the occurrence of a Change of Control, as defined in the Plan, (ii) the successful completion of a Phase II clinical trial for any of the Company’s abilityproducts, or (iii) the determination by the board of directors to continue as a going concern. Management’s plans in regards to these matters are described in Note 1.provide for immediate vesting. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. weighted average grant-date fair value is $1.07 per share.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
March 31, 2015
The following is a summary of all common stock option activity for the nine months ended September 30, 2015: FLUOROPHARMA MEDICAL, INC. and Subsidiary | | | | | | | | | | | | | | | | | | | | ASSETS | | | December 31, 2014 | | | December 31, 2013 | | | | | | | | | | Current Assets: | | | | | | | Cash and cash equivalents | | $ | 252,145 | | | $ | 1,143,175 | | Investment in trading securities | | | 39,930 | | | | 634,826 | | Prepaid expenses & other | | | 158,849 | | | | 52,959 | | Total Current Assets | | | | 450,924 | | | | 1,830,960 | | | | | | | | | | | | Property and equipment, net | | | 11,727 | | | | 35,429 | | Intangible assets, net | | | 357,540 | | | | 49,339 | | | | | | | | | | | | Total Assets | | | $ | 820,191 | | | $ | 1,915,728 | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ DEFICIT | ` | | | | | | | | | | | | | | | | | | | Current Liabilities: | | | | | | | | | Convertible notes payable - short term (see Note 8) | | $ | 2,123,416 | | | $ | - | | Accounts payable | | | 1,064,480 | | | | 183,298 | | Derivative warrant liability | | | 1,354,319 | | | | 2,549,196 | | Accrued expenses and other | | | 1,074,611 | | | | 239,673 | | Total Current Liabilities | | | | 5,616,826 | | | | 2,972,167 | | | | | | | | | | | | Commitments & Contingencies | | | | | | | | | | | | | | | | | | | Stockholders’ Deficit: | | | | | | | | | Preferred stock Series A; $0.001 par value, 3,500,000 shares designated 949,477 and 2,350,196 shares issued and outstanding at December 31, 2014 and 2013, respectively (preference in liquidation of $788,066 at December 31, 2014) | | | 951 | | | | 2,352 | | Preferred stock Series B; $0.001 par value, 12,000,000 shares designated 5,694,571 and 5,725,821 shares issued and outstanding at December 31, 2014 and 2013, respectively (preference in liquidation of $5,132,152 at December 31, 2014) | | | 5,695 | | | | 5,726 | | Common stock - Class A - $0.001 par value, 100,000,000 shares authorized, 29,197,497 and 25,675,013 shares issued and outstanding at December 31, 2014 and 2013, respectively | | | 29,199 | | | | 25,676 | | Additional paid-in capital | | | 24,034,203 | | | | 23,084,429 | | Accumulated deficit | | | (28,866,683 | ) | | | (24,174,622 | ) | Total Stockholders’ Deficit | | | | (4,796,635 | ) | | | (1,056,439 | ) | Total Liabilities and Stockholders’ Deficit | | | $ | 820,191 | | | $ | 1,915,728 | | | | | | | | | | | | See the report of independent registered public accounting firm and the accompanying notes to these consolidated financial statements. | |
| | Options Outstanding | | | Weighted Average Exercise Price | | Outstanding at December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at September 30, 2015 | | | | | | | | |
| | Options Exercisable | | | Weighted Average Exercise Price per Share | | Exercisable at December 31, 2014 | | | | | | | | | Exercisable at September 30, 2015 | | | | | | | | |
The weighted average fair value of options granted during the nine months ended September 30, 2015 was $0.15.
At September 30, 2015, the weighted average remaining contractual term for exercisable and outstanding options is 5.10 and 5.25 years, respectively. At September 30, 2015, the aggregate intrinsic value of all of the Company’s exercisable and outstanding options is $74,250 and $74,250, respectively.
Employee stock-based compensation expense for the nine months ended September 30, 2015 and 2014 is $169,641 and $330,854, respectively.
To compute compensation expense, the Company estimated the fair value of each option award on the date of grant using the Black-Scholes option pricing model for employees, and calculated the fair value of each option award at the end of the period for non-employees. The Company based the expected volatility assumption on a volatility index of peer companies as the Company did not have sufficient historical market information to estimate the volatility of its own stock. The expected term of options granted represents the period of time that options are expected to be outstanding. The Company estimated the expected term of stock options by using the simplified method. The expected forfeiture rates are based on the historical employee forfeiture experiences. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards. The Company has not declared a dividend on its common stock since its inception and has no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero. The fair value of each share-based payment is estimated on the measurement date using the Black-Scholes model with the following assumptions as of September 30, 2015 and 2014, respectively: risk-free rate with a range from 1.82% - 2.06% and 2.52% - 3.40%, respectively, volatility of 49.42% and 60.13%, respectively, and expected term of 5 years and 5.5 years, respectively. There was no dividend yield included in the calculations.
As of September 30, 2015, there was $12,678 of unrecognized compensation cost related to non-vested options. The unrecognized compensation expense is estimated to be recognized over a period of 0.40 years at September 30, 2015.
FLUOROPHARMA MEDICAL, INC. and Subsidiary | | | | | | | | | | | | | | | | | | | | | | | For the Years Ended December 31, | | | | 2014 | | | 2013 | | | | | | | | | | | | | | | | Operating Expenses: | | | | | | | General and administrative | | $ | 3,415,340 | | | $ | 3,049,591 | | Research and development | | | 1,753,500 | | | | 1,312,507 | | Total Operating Expenses | | | 5,168,840 | | | | 4,362,098 | | | | | | | | | | | Loss from Operations | | | (5,168,840 | ) | | | (4,362,098 | ) | | | | | | | | | | Other Income (Expense): | | | | | | | | | Interest income | | | 18 | | | | 211 | | Other income | | | 6,864 | | | | 70,525 | | Loss on disposition of intangible/fixed assets | | | (29,596 | ) | | | - | | Gain on settlement of accounts payable | | | 11,126 | | | | 6,594 | | Loss on sale of trading securities | | | (302,116 | ) | | | (818,365 | ) | Change in unrealized gain (loss) on trading securities | | | 228,156 | | | | (236,143 | ) | Gain (loss) on revaluation and modification of derivative warrant liability | | | 1,227,998 | | | | (216,701 | ) | Interest and other expense | | | (104,132 | ) | | | (51,351 | ) | Total Other Income (Expense), net | | | 1,038,318 | | | | (1,245,230 | ) | | | | | | | | | | Loss Before Provision for Income Taxes | | | (4,130,522 | ) | | | (5,607,328 | ) | | | | | | | | | | Provision for Income Taxes | | | - | | | | - | | | | | | | | | | | Net Loss | | $ | (4,130,522 | ) | | $ | (5,607,328 | ) | | | | | | | | | | Preferred Stock Dividends | | | (561,539 | ) | | | (1,676,754 | ) | | | | | | | | | | Net Loss Attributable to Common Stockholders | | $ | (4,692,061 | ) | | $ | (7,284,082 | ) | | | | | | | | | | Net Loss per Common Share - Basic and Diluted | | $ | (0.16 | ) | | $ | (0.30 | ) | | | | | | | | | | Weighted Average Shares Used in | | | | | | | | | per Share Calculation - Basic and Diluted: | | | 28,641,197 | | | | 24,373,970 | | | | | | | | | | | See the report of independent registered public accounting firm and the accompanying notes to these consolidated financial statements. | |
8. COMMITMENTS AND CONTINGENCIES FLUOROPHARMA MEDICAL, INC. and Subsidiary
| | Preferred Stock - Series A | | | Preferred Stock - Series B | | | Common Stock | | | | | | | | | | | | | | | | Amount | | | | | | Amount | | | | | | Amount | | | | | | | | BALANCE, December 31, 2012 | | | 2,126,574 | | | $ | 2,127 | | | | - | | | $ | - | | | | 24,330,013 | | | $ | 24,331 | | | $ | 18,242,109 | | | $ | (16,890,540 | ) | | $ | 1,378,027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share Based Compensation | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 632,413 | | | | - | | | | 632,413 | | Preferred Stock Dividend - Series A | | | 223,622 | | | | 225 | | | | | | | | | | | | | | | | | | | | 185,381 | | | | (185,606 | ) | | | - | | Fair value of common stock issued for consulting services | | | | | | | | | | | | | | | | | | | 60,000 | | | | 60 | | | | 45,490 | | | | - | | | | 45,550 | | Common Stock issued for cash, net of offering costs of $68,276 | | | | | | | | | | | | | | | | | | | 1,285,000 | | | | 1,285 | | | | 572,939 | | | | | | | | 574,224 | | Preferred Stock issued for cash, investments held for sale and conversion of bridge notes, net of offering costs of $81,534 and warrant liability | | | | | | | | | | | 5,725,821 | | | | 5,726 | | | | - | | | | | | | | 2,121,932 | | | | | | | | 2,127,658 | | Deemed dividend related to beneficial conversion feature on Series B issuance | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,368,272 | | | | (1,368,272 | ) | | | - | | Preferred Stock Dividend Accrued - Series B | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (122,876 | ) | | | (122,876 | ) | Warrant modification and reclassification to derivative liability | | | | | | | | | | | | | | | | | | | | | | | | | | | (84,107 | ) | | | | | | | (84,107 | ) | Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (5,607,328 | ) | | | (5,607,328 | ) | BALANCE, December 31, 2013 | | | 2,350,196 | | | | 2,352 | | | | 5,725,821 | | | | 5,726 | | | | 25,675,013 | | | | 25,676 | | | | 23,084,429 | | | | (24,174,622 | ) | | | (1,056,439 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share Based Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | 417,569 | | | | | | | | 417,569 | | Fair value of common stock issued for consulting services | | | | | | | | | | | | | | | 304,888 | | | | 305 | | | | 177,855 | | | | | | | | 178,160 | | Preferred Stock Dividend - Series A | | | 93,257 | | | | 93 | | | | | | | | | | | | 34,339 | | | | 34 | | | | 94,446 | | | | (94,573 | ) | | | - | | Common Stock issued for cash, net of offering costs of $31,445 | | | | | | | | | | | | | | | 470,000 | | | | 470 | | | | 202,585 | | | | | | | | 203,055 | | Conversion of Series A Preferred to Common Stock | | | (1,493,976 | ) | | | (1,494 | ) | | | | | | | | | | | 2,480,000 | | | | 2,480 | | | | (986 | ) | | | | | | | - | | Conversion of Series B Preferred to Common Stock | | | | | | | | | | (31,250 | ) | | | (31 | ) | | | 50,000 | | | | 50 | | | | (19 | ) | | | | | | | - | | Preferred Stock Dividend Accrued - Series B | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (466,966 | ) | | | (466,966 | ) | Warrant modification and reclassification to derivative liability | | | | | | | | | | | | | | | | | | | | | | | (33,121 | ) | | | | | | | (33,121 | ) | Common Stock issued in lieu of accumulated dividend on Series B | | | | | | | | | | | | | | | 2,507 | | | | 3 | | | | 1,251 | | | | | | | | 1,254 | | Exercise of Warrants | | | | | | | | | | | | | | | | | | | 180,750 | | | | 181 | | | | 90,194 | | | | | | | | 90,375 | | Net loss | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (4,130,522 | ) | | | (4,130,522 | ) | BALANCE, December 31, 2014 | | | 949,477 | | | $ | 951 | | | | 5,694,571 | | | $ | 5,695 | | | | 29,197,497 | | | $ | 29,199 | | | $ | 24,034,203 | | | $ | (28,866,683 | ) | | $ | (4,796,635 | ) |
License Agreements SeeOn June 26, 2014, the reportCompany and The General Hospital Corporation, d/b/a Massachusetts General Hospital (“MGH”) entered into two license agreements (the “Agreements”), which Agreements replace the single license agreement between the Company and MGH dated April 27, 2009, as amended by letter dated June 21, 2011 and agreement dated October 31, 2011 (the “Original Agreement”). The Agreements provide exclusive licenses for the Company’s two lead product candidates, BFPET and CardioPET, two of independent registered public accounting firmthe three cardiac imaging technologies covered by the Original Agreement. The Company and MGH are in discussions regarding the accompanying notesexclusive license to VasoPET, the third product candidate covered by the Original Agreement, the Company’s rights to which ceased upon the termination of the Original Agreement contemporaneously with the execution of the new Agreements. The Agreements were entered into primarily for the purpose of separating the Company’s rights and obligations with respect to its different product development programs. Each of the Agreements requires the Company to pay MGH an initial license fee of $175,000 and annual license maintenance fees of $125,000 each. The Agreements require the Company to meet certain obligations, including, but not limited to, meeting certain development milestones relating to clinical trials and filings with the United States Food and Drug Administration. MGH has the right to cancel or make non-exclusive certain licenses on certain patents should the Company fail to meet stipulated obligations and milestones. Additionally, upon commercialization, the Company is required to make specified milestone payments and royalties on commercial sales. The Company is amortizing the cost of these consolidated financial statements.
FLUOROPHARMA MEDICAL, INC. and Subsidiary | | For the Years Ended December 31, | | | | 2014 | | | 2013 | | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | | | | | | Net loss | | $ | (4,130,522 | ) | | $ | (5,607,328 | ) | Adjustments to reconcile net loss to net cash used in operating activities | | | | | | | | | Depreciation and amortization | | | 42,470 | | | | 24,479 | | Amortization of issuance costs | | | 44,388 | | | | - | | Fair value of common stock issued for consulting | | | 178,160 | | | | 45,550 | | Share-based compensation related to stock options | | | 417,569 | | | | 632,413 | | Loss on fixed/intangible asset dispositions | | | 29,596 | | | | 128,245 | | Non-cash interest expense on beneficial conversion | | | - | | | | 27,500 | | Gain on accounts payable settlement | | | (11,126 | ) | | | (6,594 | ) | Net loss on sale of trading securities | | | 302,116 | | | | 818,365 | | Change in unrealized gain (loss) on trading securities | | | (228,156 | ) | | | 236,143 | | Gain (loss) on revaluation and modification of derivative warrant liability | | | (1,227,998 | ) | | | 216,701 | | (Increase) decrease in: | | | | | | | | | Prepaid expenses & other | | | (21,949 | ) | | | 24,351 | | Increase (decrease) in: | | | | | | | | | Accounts payable | | | 914,808 | | | | 52,112 | | Accrued expenses and other | | | 369,225 | | | | 76,266 | | Net Cash Used in Operating Activities | | | (3,321,419 | ) | | | (3,331,797 | ) | | | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | Proceeds from sale of investments | | | 568,852 | | | | 1,806,050 | | Cash paid for intangible assets | | | (350,000 | ) | | | - | | Cash paid for purchase of property and equipment | | | (6,564 | ) | | | (5,356 | ) | Net Cash Provided by Investing Activities | | | 212,288 | | | | 1,800,694 | | | | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | Proceeds from issuance of convertible notes payable - short term | | | 2,078,000 | | | | 330,000 | | Issuance costs related to notes payable | | | (128,329 | ) | | | - | | Repayment of notes payable | | | (25,000 | ) | | | (55,000 | ) | Proceeds from the exercise of stock warrants | | | 90,375 | | | | - | | Proceeds from sale of common stock, net | | | 203,055 | | | | 574,224 | | Proceeds from sale of preferred stock, net | | | - | | | | 520,966 | | Net Cash Provided by Financing Activities | | | 2,218,101 | | | | 1,370,190 | | | | | | | | | | | Net Change in Cash and Cash Equivalents | | | (891,030 | ) | | | (160,913 | ) | Cash and Cash Equivalents, Beginning of Year | | | 1,143,175 | | | | 1,304,088 | | Cash and Cash Equivalents, End of Year | | $ | 252,145 | | | $ | 1,143,175 | | | | | - | | | | | | Supplemental Cash Flow Disclosures: | | | | | | | | | Interest expense paid in cash | | $ | - | | | $ | 5,297 | | Tax paid | | $ | 1,412 | | | $ | 1,662 | | | | | | | | | | | Supplemental Non-Cash Disclosure: | | | | | | | | | Accrued expenses settled in preferred stock | | $ | - | | | $ | 57,196 | | Sale of preferred stock for marketable equity securities | | $ | - | | | $ | 3,495,384 | | Fair value of warrants issued to Series B holders | | $ | - | | | $ | (2,247,778 | ) | Fair value of warrants modified in connection with Series B financing | | $ | (33,121 | ) | | $ | (113,685 | ) | Fair value of warrants issued to Series B placement agents | | $ | (12,738 | ) | | $ | (23,608 | ) | Notes payable – stockholder – settled in common stock | | $ | - | | | $ | 275,000 | | Notes payable issued for securities | | $ | (47,916 | ) | | $ | - | | Notes payable issued as accounts payable settlement | | $ | (22,500 | ) | | $ | - | | Series B Preferred Stock dividend accrued | | $ | (466,966 | ) | | $ | (122,876 | ) | Series B Preferred Stock deemed dividend | | $ | - | | | $ | (1,368,272 | ) | Series A Preferred Stock dividend settled in Series A Preferred | | $ | (77,403 | ) | | $ | (185,606 | ) | Conversion of Series A Preferred Stock dividend to common stock | | $ | (17,170 | ) | | $ | - | | Conversion of Series A preferred shares to common stock | | $ | (1,494 | ) | | $ | - | | Conversion of Series B preferred shares to common stock | | $ | (50 | ) | | $ | - | | Conversion of Series B preferred shares and accrued dividends to common stock | | $ | (1,254 | ) | | $ | - | |
See the reportAgreements of independent registered public accounting firm and the accompanying notes to these consolidated financial statements.
FLUOROPHARMA MEDICAL, INC. and Subsidiary
1. ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERNOn July 31, 2015, the Company paid annual maintenance fees of $125,000 for each of its license agreements. These costs are recorded as prepaid expenses, included in prepaid expenses and other current assets on the Company’s balance sheet and expensed over the term of one year. For the nine months ended September 30, 2015, the Company has recorded license fee expense of $83,333.
FluoroPharma Medical, Inc. (the “Company”) was organized on January 25, 2007The Company is current with all stipulated obligations and milestones under the lawsAgreements and the Agreements remain in full force and effect. The Company believes that it maintains a good relationship with MGH and will be able to obtain waivers or extension of its obligations under the Agreement, should the need arise. If MGH were to refuse to provide the Company with a waiver or extension of any of its obligations or were to cancel or make the license non-exclusive, this would have a material adverse impact on the Company as it may be unable to commercialize products without exclusivity and would lose its competitive edge for portions of the State of Nevada. The Company’s subsidiary, FluoroPharma Inc. (“FPI” or “the Subsidiary”), a Delaware corporation, is a molecular imaging company headquartered in Montclair, NJ. FPI was founded in 2003 to engage in the discovery, development and commercialization of proprietary products for the positron emission tomography (PET) market. The Company’s initial focus has been on the development of novel cardiovascular imaging agents that can more efficiently and effectively detect and assess acute and chronic forms of coronary artery disease (CAD). Molecular imaging pharmaceuticals are radiopharmaceuticals that enable early detection of disease through the visualization of subtle changes in biochemical and biological processes.patent portfolio.
Basis of Presentation The accompanying unaudited condensed consolidated financial statements of FluoroPharma Medical, Inc. and subsidiary have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by U.S. GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Certain prior year amounts in the condensed consolidated financial statements and notes thereto have been reclassified to conform to the current period’s presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2015 or for any other interim period. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company and the notes thereto as of and for the year ended December 31, 2014, as included in the Company's Form 10-K filed with the SEC on March 31, 2015. Going concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced net losses and negative cash flows from operations since its inception. The Company has sustained cumulative losses attributable to common stockholders of $31,194,268 as of September 30, 2015. The Company has historically financed its operations through issuances of equity and the proceeds of debt instruments. In the past, the Company has also provided for its cash needs by issuing common stock, options and warrants for certain operating costs, including consulting and professional fees. During the nine months ended September 30, 2015, the Company raised net cash proceeds of $2,722,457 through the issuance of notes payable. In addition, during the nine months ended September 30, 2015, the Company received gross proceeds of $35,970 from the sale of freely tradable securities received pursuant to the issuance and sale in a private placement of promissory notes (see Note 4). During the year ended December 31, 2014, the Company raised net cash of $2,243,102 through the issuance of notes payable, the sale of common stock and the exercise of warrants. Additionally, the Company received cash proceeds of $568,852 from the sale of freely tradable securities received as consideration in the Company’s 2013 private placement of its Series B Preferred Stock. The Company continues to actively pursue various funding options, including equity offerings, to obtain additional funds to continue the development of its products and bring them to commercial markets. Management continues to assess fund raising opportunities to ensure minimal dilution to its existing shareholder base and to obtain the best price for its securities. Management is optimistic based upon its ability to raise funds in prior years, through private placement offerings, that it will be able to raise additional funds in the future. If the Company is unable to raise additional capital as may be needed to meet its projections for operating expenses, it could have a material adverse effect on liquidity or require the Company to cease or significantly delay some of its clinical trials. These financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments
Investments that are purchased and held principally for the purpose of selling them in the near term are classified as “trading securities” and reflected on the balance sheet at fair value, with unrealized gains and losses included in earnings. All the Company’s investments are considered “trading securities” at December 31, 2014. During the nine months ended September 30, 2015, the Company sold all investments and received cash proceeds of $35,970. The Company recorded realized losses of $11,946 upon the sale.
Intangible Assets
The Company’s intangible assets consist of technology licenses and are carried at the legal cost to obtain them. Intangible assets are amortized using the straight-line method over the estimated useful life. Useful lives on technology licenses are 5 to 15 years.
Fair Value of Financial Instruments
The Company groups its assets and liabilities measured at fair value, in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The three levels of the fair value hierarchy are as follows: Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 – Valuation is based on 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 for substantially the full term of the assets or liabilities. Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the financial instrument.
The Company recognizes transfers between levels at the end of the reporting period as if the transfers occurred on the last day of the reporting period.
Assets and liabilities measured at fair value on a recurring basis at September 30, 2015 are summarized below:
| | September 30, 2015 | | | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | | Current Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Assets and liabilities measured at fair value on a recurring basis at December 31, 2014 are summarized below:
| | December 31, 2014 | | | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | |
The following table sets forth the changes in the estimated fair value for our Level 3 classified derivative liability:
| | Nine Months Ended | | | Nine Months Ended | | | | September 30, 2015 | | | September 30, 2014 | | Fair value at beginning of period | | | | | | | | | | | | | | | | | | | | | | | | | | | Embedded conversion feature | | | | | | | | | Modification and reclassification of outstanding warrants | | | | | | | | | | | | | | | | | | Fair value at end of period | | | | | | | | |
Recently Issued Accounting Standards
In April 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2015-03, 'Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. ASU 2015-03 is intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. This new guidance is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of this ASU on the financial statements.
In January 2015, FASB issued ASU 2015-01 “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. This ASU removes the concept of an extraordinary item. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company is currently in the process of evaluating the impact of the adoption of this ASU on the financial statements.
3. OTHER BALANCE SHEET INFORMATION Components of selected captions in the accompanying balance sheets as of September 30, 2015 and December 31, 2014 consist of: | | September 30, 2015 | | | December 31, 2014 | | Prepaid expenses & other: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accrued expenses & other: | | | | | | | | | | | | | | | | | | Accrued dividends Series A and B Preferred Stock | | | | | | | | | | | | | | | | | | Accrued interest on notes payable | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
4. CONVERTIBLE NOTES PAYABLE – SHORT TERM
2014 Convertible Notes Payable In July, November and December 2014, the Company issued promissory notes (the “Notes”) pursuant to a Note Purchase Agreement entered into with certain accredited investors for an aggregate principal amount of approximately $1,998,500, $47,916 of which was received by the Company in marketable securities. The Notes mature one year from the date of issuance and bear interest at the rate of 8% per annum. All principal and accrued interest under the Notes will automatically convert into the Company’s next equity or equity-linked financing (a “Subsequent Financing”) in accordance with the following formula: (outstanding balance of the Notes as of the closing of the Subsequent Financing) x (1.15) / (the per security price of the securities sold in the Subsequent Financing). The investors shall be considered to be purchasers in the Subsequent Financing by way of their converted Notes. In addition, upon the closing of a Subsequent Financing, each of the investors shall be issued, in addition to any warrants issued in connection with a Subsequent Financing, an additional warrant to purchase a number of shares of common stock equal to fifty percent (50%) of the number of shares of common stock purchased by such investor in the Subsequent Financing assuming a per share purchase price of the securities to be issued in the Subsequent Financing.
In March 2015, the Company issued additional Notes for an aggregate principal amount of $200,000.
In connection with the issuance of the 2015 Convertible Notes (as defined and discussed below), the holders of the Notes, in the outstanding principal amount of $2,198,416, amended their Notes to (i) extend the maturity date an additional six months, (ii) change the terms of the conversion premium from 1.15 to 1.25 to be consistent with conversion terms of the 2015 Convertible Notes, and (iii) provide that the issuance of promissory notes by the Company in a transaction with a substantially similar structure to the transactions contemplated by the Notes shall not be deemed a Subsequent Financing. In addition, in September 2014, the Company issued a promissory note to a shareholder in the principal amount of $150,000. Interest accrues on the note at a rate of 12% per annum in the event this note is repaid upon maturity on December 31, 2014; otherwise interest accrues at a rate of 16% per annum. As of September 30, 2015, the Company accrued $20,218 in interest expense. As of September 30, 2015, the outstanding balance of this note of $75,000 is included in convertible notes payable - short term in the condensed consolidated balance sheets (see Note 9). 2015 Convertible Notes Payable
On May 28, 2015, the Company accepted subscriptions pursuant to a new Note and Warrant Purchase Agreement, as amended on August 6, 2015, for the issuance and sale in a private placement of up to $3,000,000 of convertible promissory notes (the “Convertible Notes”). The Convertible Notes mature one year from the date of issuance and bear interest at the rate of 8% per annum. All principal and accrued interest under the Convertible Notes will, at the sole option of the investor (i) convert into the Company’s next equity or equity-linked financing in which the Company raises gross proceeds of at least $3,600,000 (the “Subsequent Financing”), into such securities, including warrants of the Company as are issued in the Subsequent Financing, the amount of which shall be determined in accordance with the following formula: (the outstanding balance of the Convertible Notes plus accrued interest as of the closing of the Subsequent Financing) x (1.25) / (the per security price of the securities sold in the Subsequent Financing), or (ii) convert into a new financing in which the Company shall issue to the investor one share of common stock and one-half of one warrant at a purchase price no greater than $0.35 per share. The per security price of the securities sold in the Subsequent Financing shall not exceed $0.35. In addition, the holders of the Convertible Notes shall have the option, at any time, to convert all principal and accrued interest into common stock at price per share of $0.35. In the event that the Company shall, at any time, issue or sell additional shares of common stock or common stock equivalents, as defined, at a price per share less than $0.35, then the conversion price of the Convertible Notes shall be reduced to a price equal to the consideration paid for these additional shares of common stock.
Pursuant to the Note and Warrant Purchase Agreement, the Company issued warrants at an initial exercise price per share of $0.50 to purchase a number of shares of common stock equal to fifty percent of the number of shares of common stock such investor would receive upon full conversion of the Convertible Notes at a conversion price of $0.35 per share.
From May through September 2015, the Company issued Convertible Notes in the aggregate principal amount of $2,780,005 and warrants to purchase 3,971,436 shares of common stock at $0.50 per share. In connection with the issuance of the Convertible Notes, the Company paid to placement agents a cash fee of $142,400 and issued 406,859 five-year warrants to purchase shares of common stock at an exercise price of $0.50 per share. On the issuance date, the fair value of the placement agent warrants was $39,108 which was recorded as a deferred offering cost and as a derivative warrant liability.
Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity” (“ASC Topic 815-40”), the Company has determined that since the exercise price of the warrants may be reduced if the Company issues shares at a price below the then-current exercise price, the warrants issued in connection with the Convertible Notes must be classified as derivative instruments. In accordance with ASC Topic 815-40, these warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant changes in fair value is being recorded in the Company’s consolidated statement of operations. In order to account for the issuance of the Convertible Notes and warrants, the Company allocated the total gross proceeds of $2,780,005 between the Convertible Notes and the warrants. The warrants were allocated their full fair value as of the respective grant dates totaling $358,255 and the residual net proceeds of $2,421,750 were allocated to the Convertible Notes. The conversion feature of the Convertible Notes was then analyzed. The Company determined that the embedded conversion feature did not meet the requirements for equity classification in accordance with ASC Topic 815-40. Therefore, the conversion feature fair value of $490,340 was bifurcated from the host contract, the Convertible Notes, and recorded as a derivative liability, thereby creating a further discount on the Convertible Notes. The conversion feature is also being re-measured at each balance sheet date based on estimated fair value, and any resultant changes in fair value is being recorded in the Company’s consolidated statement of operations. In connection with the issuance of the short-term financing Notes and the Convertible Notes, the Company incurred $335,877 in issuance costs. These costs are recorded as deferred issuance costs, included in prepaid expenses and other current assets on the Company’s balance sheet and amortized to interest expense over the term of such Convertible Notes. For the nine months ended September 30, 2015 and 2014, the Company has amortized $95,207 and $19,112, respectively, of issuance costs to expense. For the nine months ended September 30, 2015 and 2014, the Company recorded non-cash interest expense related to the amortization of the discount on the Convertible Notes of $125,449 and $0, respectively.
Interest expense, including amortization of deferred issuance costs and debt discounts related to the warrants and beneficial conversion feature, totaled $396,863 and $38,680 for the nine months ended September 30, 2015 and 2014, respectively.
The issuance of the Convertible Notes has resulted in an adjustment to the conversion price and exercise price of certain of the Company’s outstanding securities, including its Series A Preferred Stock, Series B Preferred Stock and certain outstanding warrants, to $0.35 per share as a result of the various “full-ratchet” anti-dilution provisions contained in such securities.
In connection with the private placement of the Convertible Notes, the Company entered into a registration rights agreement with the investors, in which the Company agreed to file a registration statement with the SEC to register for resale the shares underlying the Convertible Notes and the warrants within 90 calendar days of the final closing date of the Convertible Notes and to have the registration statement declared effective within 120 calendar days after the filing date.
5. CAPITAL STOCK SERIES A PREFERRED STOCK
The Company is authorized to issue 100,000,000 shares of preferred stock, $0.001 par value per share, of which 3,500,000 shares have been designated Series A Preferred Stock. At September 30, 2015 and December 31, 2014, 462,922 and 949,477 shares of Series A Preferred Stock, respectively, were issued and outstanding.
During the nine months ended September 30, 2015, 528,345 shares of Series A Preferred Stock were converted into 1,145,796 shares of common stock. In addition, the Company issued 22,718 shares of its common stock in satisfaction of a $8,889 dividend accrued on the shares of Series A Preferred Stock that were converted.
For the nine months ended September 30, 2015, the Company accrued a preferred stock dividend of $44,491. The Company issued 41,790 shares of Series A Preferred Stock in payment of such dividends as related to the Series A Preferred Stock outstanding at June 30, 2015.
During the nine months ended September 30, 2014, 1,493,976 shares of Series A Preferred Stock were converted into 2,480,000 shares of the Company’s common stock. In addition, the Company issued 34,339 shares of the Company’s common stock in satisfaction of a $17,170 dividend accrued on the shares of Series A Preferred Stock that were converted.
For the nine months ended September 30, 2014, the Company accrued a preferred stock dividend of $57,791. The Company issued 46,586 shares of Series A Preferred Stock in payment of such dividends as related to the Series A Preferred Stock outstanding at June 30, 2014. SERIES B PREFERRED STOCK The Company is authorized to issue 100,000,000 shares of preferred stock, $0.001 par value per share, of which 12,000,000 shares have been designated Series B Preferred Stock. At September 30, 2015 and December 31, 2014, 5,694,571 shares of Series B Preferred Stock were issued and outstanding.
For the nine months ended September 30, 2015 and 2014, the Company accrued a Series B Preferred Stock dividend of $376,977 and $340,046, respectively. In addition, the Company issued 2,507 shares of common stock in payment of such dividends as related to the Series B Preferred Stock converted to common stock during the nine months ended September 30, 2014.
During the nine months ended September 30, 2015, there were no voluntary conversions.
COMMON STOCK
The Company has authorized 100,000,000 shares of its common stock, $0.001 par value per share. At September 30, 2015 and December 31, 2014, the Company had issued and outstanding 30,366,011 and 29,197,497 shares of its common stock, respectively. 6. STOCK PURCHASE WARRANTS
During the nine months ended September 30, 2015, the Company issued 3,971,436 common stock warrants to investors and 406,859 common stock warrants to the placement agents in connection with issuance of the Convertible Notes. These warrants are recorded as a derivative warrant liability.
During the nine months ended September 30, 2015, 3,017,490 stock purchase warrants expired with a weighted average exercise price of $1.29.
As a result of the issuance of the Convertible Notes payable pursuant to the Note and Warrant Purchase Agreement entered into with certain accredited investors on May 28, 2015, the exercise price of the warrants issued in connection with the sale of the Company's Series B Preferred Stock was reduced to $0.35 per share.
The following represents additional information related to common stock warrants outstanding and exercisable at September 30, 2015: Exercise Price | | Number of Shares Under Warrants | | | Weighted Average Remaining Contract Life in Years | | | Weighted Average Exercise Price | | | | | | | | | | | | | | | | | | | | | | | | | Total warrants accounted for as derivative liability | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total warrants accounted for as equity | | | | | | | | | | | Total for all warrants outstanding | | | | | | | | | | |
For warrants granted that are accounted for as a derivative liability, the Company used a Binomial Options Pricing model. The primary assumptions used to determine the fair values of these warrants were: risk free interest rate of 1.37%, volatility of 49.42%, and actual term and exercise price of the warrants granted.
7. COMMON STOCK OPTIONS On February 11, 2011, the Company adopted its 2011 Equity Incentive Plan (the “Plan”) under which 6,475,750 shares of common stock were reserved for issuance under options or other equity interests as set forth in the Plan. Under the Plan, options are available for issuance to employees, officers, directors, consultants and advisors. The Plan provides that the board of directors will determine the exercise price and vesting terms of each option on the date of grant. Options granted under the Plan generally expire ten years from the date of grant.
Under the Plan, the Company has issued 161,250 shares of fully paid and non-assessable restricted common stock to a director of the Company. These shares of restricted stock are subject to the terms of the Plan and are unvested and outstanding as of September 30, 2015. The shares shall vest upon the earlier of (i) the occurrence of a Change of Control, as defined in the Plan, (ii) the successful completion of a Phase II clinical trial for any of the Company’s products, or (iii) the determination by the board of directors to provide for immediate vesting. The weighted average grant-date fair value is $1.07 per share. The following is a summary of all common stock option activity for the nine months ended September 30, 2015: | | Options Outstanding | | | Weighted Average Exercise Price | | Outstanding at December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at September 30, 2015 | | | | | | | | |
| | Options Exercisable | | | Weighted Average Exercise Price per Share | | Exercisable at December 31, 2014 | | | | | | | | | Exercisable at September 30, 2015 | | | | | | | | |
The weighted average fair value of options granted during the nine months ended September 30, 2015 was $0.15.
At September 30, 2015, the weighted average remaining contractual term for exercisable and outstanding options is 5.10 and 5.25 years, respectively. At September 30, 2015, the aggregate intrinsic value of all of the Company’s exercisable and outstanding options is $74,250 and $74,250, respectively.
Employee stock-based compensation expense for the nine months ended September 30, 2015 and 2014 is $169,641 and $330,854, respectively.
To compute compensation expense, the Company estimated the fair value of each option award on the date of grant using the Black-Scholes option pricing model for employees, and calculated the fair value of each option award at the end of the period for non-employees. The Company based the expected volatility assumption on a volatility index of peer companies as the Company did not have sufficient historical market information to estimate the volatility of its own stock. The expected term of options granted represents the period of time that options are expected to be outstanding. The Company estimated the expected term of stock options by using the simplified method. The expected forfeiture rates are based on the historical employee forfeiture experiences. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards. The Company has not declared a dividend on its common stock since its inception and has no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero. The fair value of each share-based payment is estimated on the measurement date using the Black-Scholes model with the following assumptions as of September 30, 2015 and 2014, respectively: risk-free rate with a range from 1.82% - 2.06% and 2.52% - 3.40%, respectively, volatility of 49.42% and 60.13%, respectively, and expected term of 5 years and 5.5 years, respectively. There was no dividend yield included in the calculations.
As of September 30, 2015, there was $12,678 of unrecognized compensation cost related to non-vested options. The unrecognized compensation expense is estimated to be recognized over a period of 0.40 years at September 30, 2015. 8. COMMITMENTS AND CONTINGENCIES License Agreements On June 26, 2014, the Company and The General Hospital Corporation, d/b/a Massachusetts General Hospital (“MGH”) entered into two license agreements (the “Agreements”), which Agreements replace the single license agreement between the Company and MGH dated April 27, 2009, as amended by letter dated June 21, 2011 and agreement dated October 31, 2011 (the “Original Agreement”). The Agreements provide exclusive licenses for the Company’s two lead product candidates, BFPET and CardioPET, two of the three cardiac imaging technologies covered by the Original Agreement. The Company and MGH are in discussions regarding the exclusive license to VasoPET, the third product candidate covered by the Original Agreement, the Company’s rights to which ceased upon the termination of the Original Agreement contemporaneously with the execution of the new Agreements. The Agreements were entered into primarily for the purpose of separating the Company’s rights and obligations with respect to its different product development programs. Each of the Agreements requires the Company to pay MGH an initial license fee of $175,000 and annual license maintenance fees of $125,000 each. The Agreements require the Company to meet certain obligations, including, but not limited to, meeting certain development milestones relating to clinical trials and filings with the United States Food and Drug Administration. MGH has the right to cancel or make non-exclusive certain licenses on certain patents should the Company fail to meet stipulated obligations and milestones. Additionally, upon commercialization, the Company is required to make specified milestone payments and royalties on commercial sales. The Company is amortizing the cost of these intangible assets over the remaining useful life of the Agreements of 10 years. On July 31, 2015, the Company paid annual maintenance fees of $125,000 for each of its license agreements. These costs are recorded as prepaid expenses, included in prepaid expenses and other current assets on the Company’s balance sheet and expensed over the term of one year. For the nine months ended September 30, 2015, the Company has recorded license fee expense of $83,333.
The Company is current with all stipulated obligations and milestones under the Agreements and the Agreements remain in full force and effect. The Company believes that it maintains a good relationship with MGH and will be able to obtain waivers or extension of its obligations under the Agreement, should the need arise. If MGH were to refuse to provide the Company with a waiver or extension of any of its obligations or were to cancel or make the license non-exclusive, this would have a material adverse impact on the Company as it may be unable to commercialize products without exclusivity and would lose its competitive edge for portions of the patent portfolio. Clinical Research Services Agreements
On September 7, 2012, the Company entered into a Clinical Research Services Agreement with SGS Life Science Services (“SGS”), a company with its registered offices in Belgium, for clinical research services relating to the Company’s CardioPET Phase II study to assess myocardial perfusion and fatty acid uptake in coronary artery disease (CAD) patients. The phase II trial will be an open label trial designed to assess the safety and diagnostic performance of CardioPET as compared to stress echocardiography, myocardial perfusion imaging and angiography as a gold standard of background disease. In addition, the Company engaged FGK Representative Service GmbH to serve as the Company’s sponsor in compliance with the laws governing clinical trials conducted in the European Union. On February 28, 2013, the Company announced that the Phase II trial had begun and released the initial data and images from the trial. On February 6, 2014, the Company presented interim data from the trial at the SNMMI mid-winter meeting. On October 20, 2014, the Company presented additional interim data at the EANM meeting in Gothenburg, Sweden. In December 2014, the Company announced that the enrollment for a Phase II clinical trial of CardioPET was closed. The estimated remaining cost payable to SGS through the completion of the trial is approximately $330,000. On May 23, 2014, the Company entered into a Master Services Agreement with PPD Development, LP, a clinical research organization engaged in the business of managing clinical research programs and providing clinical development and other related services, for the clinical research services relating to the Company’s BFPET Phase II study. The Phase II trial will be an open label trial designed to assess the safety and diagnostic performance of BFPET. Multiple trial sites are planned in various locations in the United States. In connection with this agreement, the Company has recorded approximately $285,000 as of September 30, 2015 related to start-up costs. The trial is expected to commence in the near future. The estimated cost of this program is $1.7 million.
Executive Employment Contracts
The Company maintains employment contracts with key Company executives that provide for the continuation of salary and the grant of certain options to the executives if terminated for reasons other than cause, as defined within the agreements.
Operating Lease Commitment
In July 2011, the Company entered into a three-year lease for office space, which commenced May 1, 2012 and was to expire on April 30, 2015. On July 1, 2014, the Company increased its office space and amended this agreement. The amended annual minimum lease payments for this office space are $76,200 per year plus common area costs. In accordance with the amended agreement, the Company maintains a $9,525 security deposit. On February 24, 2015, the Company signed a three-year renewal of the lease which will expire on April 30, 2018. Subsequent to April 30, 2016, the Company will have the option to terminate the lease with 6 months prior notice. The future minimum lease payments remaining through April 30, 2018 are as follows:
Rent expense, net of sublease income, was $57,634 and $55,630 for the nine months ended September 30, 2015 and 2014, respectively. Legal Contingencies In July 2013, an action was filed against the Company in the United States District Court for the District of Nevada. The action, Todd Nelson v. Fluoropharma Medical, Inc. and Does 1 through 10, No. 13 CV 01152 JAD CWH, alleges that the plaintiff suffered losses attributable to the Company’s refusal to honor certain stock options after February 28, 2012. Plaintiff seeks at least $325,200 in damages, as well as punitive and exemplary damages, prejudgment interest, and costs. Discovery has closed and on April 13, 2015, the Company filed a motion for summary judgment seeking to dismiss the entire action with prejudice. The motion for summary judgment has been fully submitted and the Company anticipates the Court scheduling oral argument. Management believes that it has meritorious defenses in all such matters, and accordingly, no accrual has been recorded for these matters as of September 30, 2015.
The Company is not aware of any other material, active, pending or threatened proceeding, nor is the Company, or any subsidiary, involved as a plaintiff or defendant in any other material proceeding or pending litigation.
9. SUBSEQUENT EVENTS Executive Employment Agreements On October 5, 2015, the Company appointed Dr. Thomas H. Tulip as President of the Company. Mr. Johan M. (Thijs) Spoor resigned his role as President but will retain his roles as the Company’s Chief Executive Officer and Chairman of the Board. Mr. Spoor will continue to oversee corporate strategy and investor relations while Dr. Tulip will focus on operations and pipeline development.
Dr. Tulip’s contract provides for a $1 million bonus should the Company execute transactions as specified in the contract, including the sale of substantially all of the Company’s assets or stock or a merger transaction, any of which resulting in compensation to the Company’s stockholders aggregating in excess of $50 million for such transaction.
Convertible Notes Payable On October 12 and 13, 2015, the Company repaid the remaining principal balance of $75,000 on the short-term note payable issued on September 19, 2014.
Capital Stock From October 1, 2015 through October 29, 2015, 327,874 shares of Series A Preferred Stock were converted into 777,528 shares of common stock. In addition, the Company issued 23,269 shares of its common stock in satisfaction of a $5,102 dividend accrued on the shares of Series A Preferred Stock that were converted.
From October 15, 2015 through November 9, 2015, 382,617 shares of Series B Preferred Stock were converted into 874,552 shares of common stock. In October 2015, the Company issued warrants to purchase 607,229 shares of common stock at an exercise price of $0.50 per share with a five-year term. These warrants were issued in consideration of the warrant holder waiving its rights with respect to indebtedness incurred by the Company in excess of the amount permitted pursuant to the Certificate of Designation of the Relative Rights and Preferences of the Company’s Series A Preferred Stock.
Appointments and Resignation of Directors On November 6, 2015, the Board of Directors of the Company appointed each of Dr. Thomas Tulip and Austin Lewis as directors. Effective as of November 12, 2015, Dr. Joseph A. Pierro resigned as a director. The resignation was not due to any disagreement on any matter relating to the Company’s operations, policies or practices. To the Board of Directors of FluoroPharma Medical, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of FluoroPharma Medical, Inc. and Subsidiary as of December 31, 2014 and 2013 and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FluoroPharma Medical, Inc. and Subsidiary as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a significant accumulated deficit and, at December 31, 2014, the Company did not have sufficient capital to fund its operations. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Wolf & Company, P.C.
Boston, Massachusetts March 31, 2015
FLUOROPHARMA MEDICAL, INC. and Subsidiary | | | | | | | | | | | | | | | | | | | | ASSETS | | | December 31, 2014 | | | December 31, 2013 | | | | | | | | | | Current Assets: | | | | | | | Cash and cash equivalents | | $ | 252,145 | | | $ | 1,143,175 | | Investment in trading securities | | | 39,930 | | | | 634,826 | | Prepaid expenses & other | | | 158,849 | | | | 52,959 | | Total Current Assets | | | | 450,924 | | | | 1,830,960 | | | | | | | | | | | | Property and equipment, net | | | 11,727 | | | | 35,429 | | Intangible assets, net | | | 357,540 | | | | 49,339 | | | | | | | | | | | | Total Assets | | | $ | 820,191 | | | $ | 1,915,728 | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ DEFICIT | ` | | | | | | | | | | | | | | | | | | | Current Liabilities: | | | | | | | | | Convertible notes payable - short term (see Note 8) | | $ | 2,123,416 | | | $ | - | | Accounts payable | | | 1,064,480 | | | | 183,298 | | Derivative warrant liability | | | 1,354,319 | | | | 2,549,196 | | Accrued expenses and other | | | 1,074,611 | | | | 239,673 | | Total Current Liabilities | | | | 5,616,826 | | | | 2,972,167 | | | | | | | | | | | | Commitments & Contingencies | | | | | | | | | | | | | | | | | | | Stockholders’ Deficit: | | | | | | | | | Preferred stock Series A; $0.001 par value, 3,500,000 shares designated 949,477 and 2,350,196 shares issued and outstanding at December 31, 2014 and 2013, respectively (preference in liquidation of $788,066 at December 31, 2014) | | | 951 | | | | 2,352 | | Preferred stock Series B; $0.001 par value, 12,000,000 shares designated 5,694,571 and 5,725,821 shares issued and outstanding at December 31, 2014 and 2013, respectively (preference in liquidation of $5,132,152 at December 31, 2014) | | | 5,695 | | | | 5,726 | | Common stock - Class A - $0.001 par value, 100,000,000 shares authorized, 29,197,497 and 25,675,013 shares issued and outstanding at December 31, 2014 and 2013, respectively | | | 29,199 | | | | 25,676 | | Additional paid-in capital | | | 24,034,203 | | | | 23,084,429 | | Accumulated deficit | | | (28,866,683 | ) | | | (24,174,622 | ) | Total Stockholders’ Deficit | | | | (4,796,635 | ) | | | (1,056,439 | ) | Total Liabilities and Stockholders’ Deficit | | | $ | 820,191 | | | $ | 1,915,728 | | | | | | | | | | | | See the report of independent registered public accounting firm and the accompanying notes to these consolidated financial statements. | |
FLUOROPHARMA MEDICAL, INC. and Subsidiary | | | | | | | | | | | | | | | | | | | | | | | For the Years Ended December 31, | | | | 2014 | | | 2013 | | | | | | | | | | | | | | | | Operating Expenses: | | | | | | | General and administrative | | $ | 3,415,340 | | | $ | 3,049,591 | | Research and development | | | 1,753,500 | | | | 1,312,507 | | Total Operating Expenses | | | 5,168,840 | | | | 4,362,098 | | | | | | | | | | | Loss from Operations | | | (5,168,840 | ) | | | (4,362,098 | ) | | | | | | | | | | Other Income (Expense): | | | | | | | | | Interest income | | | 18 | | | | 211 | | Other income | | | 6,864 | | | | 70,525 | | Loss on disposition of intangible/fixed assets | | | (29,596 | ) | | | - | | Gain on settlement of accounts payable | | | 11,126 | | | | 6,594 | | Loss on sale of trading securities | | | (302,116 | ) | | | (818,365 | ) | Change in unrealized gain (loss) on trading securities | | | 228,156 | | | | (236,143 | ) | Gain (loss) on revaluation and modification of derivative warrant liability | | | 1,227,998 | | | | (216,701 | ) | Interest and other expense | | | (104,132 | ) | | | (51,351 | ) | Total Other Income (Expense), net | | | 1,038,318 | | | | (1,245,230 | ) | | | | | | | | | | Loss Before Provision for Income Taxes | | | (4,130,522 | ) | | | (5,607,328 | ) | | | | | | | | | | Provision for Income Taxes | | | - | | | | - | | | | | | | | | | | Net Loss | | $ | (4,130,522 | ) | | $ | (5,607,328 | ) | | | | | | | | | | Preferred Stock Dividends | | | (561,539 | ) | | | (1,676,754 | ) | | | | | | | | | | Net Loss Attributable to Common Stockholders | | $ | (4,692,061 | ) | | $ | (7,284,082 | ) | | | | | | | | | | Net Loss per Common Share - Basic and Diluted | | $ | (0.16 | ) | | $ | (0.30 | ) | | | | | | | | | | Weighted Average Shares Used in | | | | | | | | | per Share Calculation - Basic and Diluted: | | | 28,641,197 | | | | 24,373,970 | | | | | | | | | | | See the report of independent registered public accounting firm and the accompanying notes to these consolidated financial statements. | |
FLUOROPHARMA MEDICAL, INC. and Subsidiary
| | Preferred Stock - Series A | | | Preferred Stock - Series B | | | Common Stock | | | | | | | | | | | | | | | | Amount | | | | | | Amount | | | | | | Amount | | | | | | | | BALANCE, December 31, 2012 | | | 2,126,574 | | | $ | 2,127 | | | | - | | | $ | - | | | | 24,330,013 | | | $ | 24,331 | | | $ | 18,242,109 | | | $ | (16,890,540 | ) | | $ | 1,378,027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share Based Compensation | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 632,413 | | | | - | | | | 632,413 | | Preferred Stock Dividend - Series A | | | 223,622 | | | | 225 | | | | | | | | | | | | | | | | | | | | 185,381 | | | | (185,606 | ) | | | - | | Fair value of common stock issued for consulting services | | | | | | | | | | | | | | | | | | | 60,000 | | | | 60 | | | | 45,490 | | | | - | | | | 45,550 | | Common Stock issued for cash, net of offering costs of $68,276 | | | | | | | | | | | | | | | | | | | 1,285,000 | | | | 1,285 | | | | 572,939 | | | | | | | | 574,224 | | Preferred Stock issued for cash, investments held for sale and conversion of bridge notes, net of offering costs of $81,534 and warrant liability | | | | | | | | | | | 5,725,821 | | | | 5,726 | | | | - | | | | | | | | 2,121,932 | | | | | | | | 2,127,658 | | Deemed dividend related to beneficial conversion feature on Series B issuance | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,368,272 | | | | (1,368,272 | ) | | | - | | Preferred Stock Dividend Accrued - Series B | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (122,876 | ) | | | (122,876 | ) | Warrant modification and reclassification to derivative liability | | | | | | | | | | | | | | | | | | | | | | | | | | | (84,107 | ) | | | | | | | (84,107 | ) | Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (5,607,328 | ) | | | (5,607,328 | ) | BALANCE, December 31, 2013 | | | 2,350,196 | | | | 2,352 | | | | 5,725,821 | | | | 5,726 | | | | 25,675,013 | | | | 25,676 | | | | 23,084,429 | | | | (24,174,622 | ) | | | (1,056,439 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share Based Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | 417,569 | | | | | | | | 417,569 | | Fair value of common stock issued for consulting services | | | | | | | | | | | | | | | 304,888 | | | | 305 | | | | 177,855 | | | | | | | | 178,160 | | Preferred Stock Dividend - Series A | | | 93,257 | | | | 93 | | | | | | | | | | | | 34,339 | | | | 34 | | | | 94,446 | | | | (94,573 | ) | | | - | | Common Stock issued for cash, net of offering costs of $31,445 | | | | | | | | | | | | | | | 470,000 | | | | 470 | | | | 202,585 | | | | | | | | 203,055 | | Conversion of Series A Preferred to Common Stock | | | (1,493,976 | ) | | | (1,494 | ) | | | | | | | | | | | 2,480,000 | | | | 2,480 | | | | (986 | ) | | | | | | | - | | Conversion of Series B Preferred to Common Stock | | | | | | | | | | (31,250 | ) | | | (31 | ) | | | 50,000 | | | | 50 | | | | (19 | ) | | | | | | | - | | Preferred Stock Dividend Accrued - Series B | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (466,966 | ) | | | (466,966 | ) | Warrant modification and reclassification to derivative liability | | | | | | | | | | | | | | | | | | | | | | | (33,121 | ) | | | | | | | (33,121 | ) | Common Stock issued in lieu of accumulated dividend on Series B | | | | | | | | | | | | | | | 2,507 | | | | 3 | | | | 1,251 | | | | | | | | 1,254 | | Exercise of Warrants | | | | | | | | | | | | | | | | | | | 180,750 | | | | 181 | | | | 90,194 | | | | | | | | 90,375 | | Net loss | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (4,130,522 | ) | | | (4,130,522 | ) | BALANCE, December 31, 2014 | | | 949,477 | | | $ | 951 | | | | 5,694,571 | | | $ | 5,695 | | | | 29,197,497 | | | $ | 29,199 | | | $ | 24,034,203 | | | $ | (28,866,683 | ) | | $ | (4,796,635 | ) |
See the report of independent registered public accounting firm and the accompanying notes to these consolidated financial statements. FLUOROPHARMA MEDICAL, INC. and Subsidiary | | For the Years Ended December 31, | | | | 2014 | | | 2013 | | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | | | | | | Net loss | | $ | (4,130,522 | ) | | $ | (5,607,328 | ) | Adjustments to reconcile net loss to net cash used in operating activities | | | | | | | | | Depreciation and amortization | | | 42,470 | | | | 24,479 | | Amortization of issuance costs | | | 44,388 | | | | - | | Fair value of common stock issued for consulting | | | 178,160 | | | | 45,550 | | Share-based compensation related to stock options | | | 417,569 | | | | 632,413 | | Loss on fixed/intangible asset dispositions | | | 29,596 | | | | 128,245 | | Non-cash interest expense on beneficial conversion | | | - | | | | 27,500 | | Gain on accounts payable settlement | | | (11,126 | ) | | | (6,594 | ) | Net loss on sale of trading securities | | | 302,116 | | | | 818,365 | | Change in unrealized gain (loss) on trading securities | | | (228,156 | ) | | | 236,143 | | Gain (loss) on revaluation and modification of derivative warrant liability | | | (1,227,998 | ) | | | 216,701 | | (Increase) decrease in: | | | | | | | | | Prepaid expenses & other | | | (21,949 | ) | | | 24,351 | | Increase (decrease) in: | | | | | | | | | Accounts payable | | | 914,808 | | | | 52,112 | | Accrued expenses and other | | | 369,225 | | | | 76,266 | | Net Cash Used in Operating Activities | | | (3,321,419 | ) | | | (3,331,797 | ) | | | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | Proceeds from sale of investments | | | 568,852 | | | | 1,806,050 | | Cash paid for intangible assets | | | (350,000 | ) | | | - | | Cash paid for purchase of property and equipment | | | (6,564 | ) | | | (5,356 | ) | Net Cash Provided by Investing Activities | | | 212,288 | | | | 1,800,694 | | | | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | Proceeds from issuance of convertible notes payable - short term | | | 2,078,000 | | | | 330,000 | | Issuance costs related to notes payable | | | (128,329 | ) | | | - | | Repayment of notes payable | | | (25,000 | ) | | | (55,000 | ) | Proceeds from the exercise of stock warrants | | | 90,375 | | | | - | | Proceeds from sale of common stock, net | | | 203,055 | | | | 574,224 | | Proceeds from sale of preferred stock, net | | | - | | | | 520,966 | | Net Cash Provided by Financing Activities | | | 2,218,101 | | | | 1,370,190 | | | | | | | | | | | Net Change in Cash and Cash Equivalents | | | (891,030 | ) | | | (160,913 | ) | Cash and Cash Equivalents, Beginning of Year | | | 1,143,175 | | | | 1,304,088 | | Cash and Cash Equivalents, End of Year | | $ | 252,145 | | | $ | 1,143,175 | | | | | - | | | | | | Supplemental Cash Flow Disclosures: | | | | | | | | | Interest expense paid in cash | | $ | - | | | $ | 5,297 | | Tax paid | | $ | 1,412 | | | $ | 1,662 | | | | | | | | | | | Supplemental Non-Cash Disclosure: | | | | | | | | | Accrued expenses settled in preferred stock | | $ | - | | | $ | 57,196 | | Sale of preferred stock for marketable equity securities | | $ | - | | | $ | 3,495,384 | | Fair value of warrants issued to Series B holders | | $ | - | | | $ | (2,247,778 | ) | Fair value of warrants modified in connection with Series B financing | | $ | (33,121 | ) | | $ | (113,685 | ) | Fair value of warrants issued to Series B placement agents | | $ | (12,738 | ) | | $ | (23,608 | ) | Notes payable – stockholder – settled in common stock | | $ | - | | | $ | 275,000 | | Notes payable issued for securities | | $ | (47,916 | ) | | $ | - | | Notes payable issued as accounts payable settlement | | $ | (22,500 | ) | | $ | - | | Series B Preferred Stock dividend accrued | | $ | (466,966 | ) | | $ | (122,876 | ) | Series B Preferred Stock deemed dividend | | $ | - | | | $ | (1,368,272 | ) | Series A Preferred Stock dividend settled in Series A Preferred | | $ | (77,403 | ) | | $ | (185,606 | ) | Conversion of Series A Preferred Stock dividend to common stock | | $ | (17,170 | ) | | $ | - | | Conversion of Series A preferred shares to common stock | | $ | (1,494 | ) | | $ | - | | Conversion of Series B preferred shares to common stock | | $ | (50 | ) | | $ | - | | Conversion of Series B preferred shares and accrued dividends to common stock | | $ | (1,254 | ) | | $ | - | |
See the report of independent registered public accounting firm and the accompanying notes to these consolidated financial statements. FLUOROPHARMA MEDICAL, INC. and Subsidiary 1. ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN
FluoroPharma Medical, Inc. (the “Company”) was organized on January 25, 2007 under the laws of the State of Nevada. The Company’s subsidiary, FluoroPharma Inc. (“FPI” or “the Subsidiary”), a Delaware corporation, is a molecular imaging company headquartered in Montclair, NJ. FPI was founded in 2003 to engage in the discovery, development and commercialization of proprietary products for the positron emission tomography (PET) market. The Company’s initial focus has been on the development of novel cardiovascular imaging agents that can more efficiently and effectively detect and assess acute and chronic forms of coronary artery disease (CAD). Molecular imaging pharmaceuticals are radiopharmaceuticals that enable early detection of disease through the visualization of subtle changes in biochemical and biological processes.
Basis of Presentation In previous filings, the Company has reported as a “Development Stage Entity”. However, in June 2014, the Financial Accounting Standards Board (FASB) published Accounting Standards Update 2014-10, “Development Stage Entities” (ASU 2014-10). ASU 2014-10 removed the development stage entity guidance under Accounting Standards Codification Topic 915 (ASC 915), “Development Stage Entities”, thereby removing the financial reporting distinction between development stage entities and other reporting entities. In addition, ASU 2014-10 eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.
Presentation and disclosure requirements under ASC 915 are no longer required for the first annual period beginning after December 15, 2014, including interim periods therein. Earlier adoption of the new guidance for ASC 915 is permitted for any annual or interim period for which financial statements have not yet been issued for public business entities. Accordingly, the Company has elected to adopt these changes effective with the filing of the Company’s 10-Q for the period ended June 30, 2014.
Going concern The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced net losses and negative cash flows from operations since its inception. The Company has sustained cumulative losses attributable to common stockholders of $28,866,683 as of December 31, 2014. The Company has historically financed its operations through issuances of equity and the proceeds of debt instruments. In the past, the Company has also provided for its cash needs by issuing common stock, options and warrants for certain operating costs, including consulting and professional fees. During the year ended December 31, 2014, the Company raised net cash of $2,243,102 through the issuance of notes payable, the sale of common stock and the exercise of warrants. Additionally, the Company received cash proceeds of $568,852 from the sale of freely tradable securities received as consideration in the Company’s 2013 private placement of its Series B Preferred Stock.
The Company continues to actively pursue various funding options, including equity offerings, to obtain additional funds to continue the development of its products and bring them to commercial markets. Management continues to assess fund raising opportunities to ensure minimal dilution to its existing shareholder base and to obtain the best price for its securities. Management is optimistic based upon its ability to raise funds in prior years, through private placement offerings (see description of private placement offerings in Notes 6 and 7), that it will be able to raise additional funds in the future. If the Company is unable to raise additional capital as may be needed to meet its projections for operating expenses, it could have a material adverse effect on liquidity or require the Company to cease or significantly delay some of its clinical trials. These financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less from date of purchase to be cash equivalents. All cash balances were highly liquid at December 31, 2014 and 2013.
Use of Estimates The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, and include certain estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period, including contingencies. Accordingly, actual results may differ from those estimates. Concentration of Risks
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company primarily maintains its cash balances with financial institutions in federally insured accounts. The Company may from time to time have cash in banks in excess of FDIC insurance limits. The Company has not experienced any losses to date resulting from this practice.
At December 31, 2014 and 2013, the Company’s investments in trading securities are comprised of single investments in a publicly traded stock. As of December 31, 2014, the Company had sold all of the securities received as consideration in the 2013 Series B Offering resulting in a realized loss of $302,116. In addition, during 2014, the Company received shares of another publicly traded stock in exchange for the issuance of a note payable (see Notes 5 and 8). As of December 31, 2014, the Company has recorded an unrealized loss of $7,986 due to a decline in value of that stock.
Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, FluoroPharma, Inc. Intercompany transactions and balances have been eliminated upon consolidation.
Investments Investments that are purchased and held principally for the purpose of selling them in the near term are classified as “trading securities” and reflected on the balance sheet at fair value, with unrealized gains and losses included in earnings. All the Company’s investments are considered “trading securities” at December 31, 2014 and 2013. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company’s property and equipment at December 31, 2014 and 2013 consisted of computer and office equipment and machinery and equipment, and leasehold improvements with estimated useful lives of three to five years. Depreciation and amortization was $17,262 and $18,571 in the years ended December 31, 2014 and 2013, respectively.
The Company’s intangible assets consist of technology licenses and are carried at the legal cost to obtain them. Intangible assets are amortized using the straight-line method over the estimated useful life. Useful lives on technology licenses are 5 to 15 years.
Impairments
The Company assesses the impairment of long-lived assets, including other intangible assets, whenever events or changes in circumstances indicate that their carrying value may not be recoverable in accordance with ASC Topic 360-10-35, “Impairment or Disposal of Long-Lived Assets.” The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments, related primarily to the future profitability and/or future value of the assets. The Company records an impairment charge if it believes an investment has experienced a decline in value that is other than temporary.
Management has determined that no impairments were required as of December 31, 2014. As of December 31, 2013, management has recorded an impairment on equipment of $128,245, which is included in general and administrative expense in the consolidated statements of operations. The circumstances leading to impairment included reconsideration of the equipment's utilization in future operations of the Company as well as the current condition of the equipment. Fair value was estimated using quantitative and qualitative considerations including the expected use and disposition of the equipment.
Derivative financial instruments The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a binomial pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The Company has derivative liabilities at December 31, 2014 relating to certain warrants that contain anti-dilution provisions.
Fair Value of Financial Instruments
The Company's financial instruments primarily consist of cash, trading securities, accounts payable, notes payable and derivative warrant liabilities. The fair value of these instruments is calculated using current market prices, or on a historical cost basis, which, due to the short maturity of these financial instruments, approximates the fair value at the reporting dates of these financial statements.
The Company groups its assets and liabilities measured at fair value, in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).
Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
The three levels of the fair value hierarchy are as follows:
Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 – Valuation is based on 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 for substantially the full term of the assets or liabilities.
Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the financial instrument.
The Company recognizes transfers between levels at the end of the reporting period as if the transfers occurred on the last day of the reporting period.
Assets and liabilities measured at fair value on a recurring basis are summarized below: | | December 31, 2014 | | | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | | Current Assets: | | | | | | | | | | | | | | | $ | 39,930 | | | $ | -- | | | $ | -- | | | $ | 39,930 | | | | | | | | | | | | | | | | | | | Derivative warrant liability | | $ | - | | | $ | -- | | | $ | 1,354,319 | | | $ | 1,354,319 | |
| | December 31, 2013 | | | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | | Current Assets: | | | | | | | | | | | | | | | $ | 634,826 | | | $ | -- | | | $ | -- | | | $ | 634,826 | | | | | | | | | | | | | | | | | | | Derivative warrant liability | | $ | - | | | $ | -- | | | $ | 2,549,196 | | | $ | 2,549,196 | |
The following table sets forth the changes in the estimated fair value for our Level 3 classified derivative warrant liability:
| | Year Ended | | | Year Ended | | | | December 31, 2014 | | | December 30, 2013 | | Fair value at beginning of the year | | | | | | | | | Issuance of derivative warrant liability: | | | | | | | | | Warrants issued to investors in 2013 Series B Offering | | | | | | | | | Placement agent warrants in 2013 Series B Offering | | | | | | | | | Modification and reclassification of outstanding warrants | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value at end of the year | | | | | | | | |
Of the 2014 modification and reclassification totaling $114,923, $81,802 was recorded as a modification expense and $33,121 was recorded as a reclassification from equity to derivative warrant liability.
At December 31, 2013, the Company measured at fair value on a nonrecurring basis certain equipment in accordance with ASC Topic 360-10-35. Fair value was determined to be $0 using certain Level 3 inputs and resulted in the Company recording a loss of $128,245. Fair value was estimated using quantitative and qualitative considerations including the expected use and disposition of the equipment. Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of the existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in results of operations in the period that the tax rate change occurs. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company accounts for uncertain tax positions in accordance with FASB ASC Topic 740-10, Accounting for Uncertainty in Income Taxes. Income tax positions must meet a more-likely-than-not threshold in order to be recognized in the financial statements. There were no recognized uncertain tax positions at December 31, 2014 and 2013. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within operations as income tax expense. As new information becomes available, the assessment of the recognition threshold and the measurement of the associated tax benefit of uncertain tax positions may result in financial statement recognition or de-recognition. The Company had no accrual for interest or penalties on its balance sheets at December 31, 2014 or 2013, and has not recognized interest and/or penalties in the statement of operations for the years ended December 31, 2014 and 2013. Further, the Company currently has no open tax years, subject to audit prior to December 31, 2011. Accounting for Share-Based Payments
The Company follows the provisions of ASC Topic 718, which establishes the accounting for transactions in which an entity exchanges equity securities for services and requires companies to expense the estimated fair value of these awards over the requisite service period. The Company uses the Black-Scholes option pricing model in determining fair value. Accordingly, compensation cost has been recognized using the fair value method and expected term accrual requirements as prescribed, which resulted in stock-based compensation expense for the years ended December 31, 2014 and 2013 of $417,569 and $632,413, respectively.
The Company accounts for share-based payments granted to non-employees in accordance with ASC Topic 505, “Equity Based Payments to Non-Employees.” The Company determines the fair value of the stock-based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.
To compute compensation expense, the Company estimated the fair value of each option award on the date of grant using the Black-Scholes-Merton option pricing model for employees, and calculated the fair value of each option award at the end of the period for non-employees. The Company based the expected volatility assumption on a volatility index of peer companies as the Company did not have sufficient historical market information to estimate the volatility of its own stock. The expected term of options granted represents the period of time that options are expected to be outstanding. The Company estimated the expected term of stock options by using the simplified method. The expected forfeiture rates are based on the historical employee forfeiture experiences. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards. The Company has not declared a dividend on its common stock since its inception and has no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
The fair value of each share-based payment is estimated on the measurement date using the Black-Scholes model with the following assumptions:
Net Loss per Common Share
The Company computes net loss per common share in accordance with ASC Topic 260. Net loss per share is based upon the weighted average number of outstanding common shares and the dilutive effect of common share equivalents, such as options and warrants to purchase common stock, and convertible notes, if applicable, that are outstanding each year. Basic and diluted earnings per share were the same for all periods presented as including common stock equivalents in the calculation of diluted earnings per share would have been antidilutive. As of December 31, 2014, the Company had outstanding options exercisable for 4,644,428 shares of its common stock, warrants exercisable for 14,854,035 shares of its common stock, series A preferred stock (the “Series A Preferred Stock”) convertible into 1,576,132 shares of common stock, and series B preferred stock (the “Series B Preferred Stock”) convertible into 9,802,817 shares of common stock. At December 31, 2013, the Company had outstanding options exercisable for 4,536,928 shares of its common stock, and warrants exercisable for 14,616,535 shares of common stock, Series A Preferred Stock convertible into 3,901,325 shares of common stock, and Series B Preferred Stock convertible into 6,621,099 shares of common stock.
Research and Development Costs Research and development costs are expensed as incurred. Segment Reporting The Company has determined that it operates in only one segment currently, which is biopharmaceutical research and development.
Recent Accounting Pronouncements
In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, requiring management to assess the reporting entity’s ability to continue as a going concern. The Company is required to comply with this new guidance for their first annual period ending after December 15, 2016, but early adoption is permitted.
Management does not expect any recently issued, but not yet effective, accounting standards to have a material effect on the accompanying financial statements. 3. OTHER BALANCE SHEET INFORMATION Components of selected captions in the accompanying balance sheets as of December 31, 2014 and 2013 consist of: | | | | December 31, 2013 | | Prepaid expenses and other: | | | | | | | | | | | | Prepaid insurance | $ | 24,576 | | | $ | 10,679 | | Deferred closing costs | | 83,941 | | | | - | | Other | | 50,332 | | | | 42,280 | | Prepaid expenses and other | $ | 158,849 | | | $ | 52,959 | | | | | | | | | | Property and equipment: | | | | | | | | | | | | | | | | Computers and office equipment | $ | 67,217 | | | $ | 60,653 | | Machinery and equipment | | 112,421 | | | | 112,421 | | Leasehold improvements | | - | | | | 25,171 | | Less: accumulated depreciation and amortization | | (167,911 | ) | | | (162,816 | ) | Property and equipment, net | $ | 11,727 | | | $ | 35,429 | | | | | | | | | | Accrued expenses and other: | | | | | | | | Professional fees | $ | 47,028 | | | $ | 51,646 | | Accrued dividends Series B Preferred Stock | | 588,588 | | | | 122,876 | | Deferred salary | | 63,542 | | | | - | | Accrued interest on Notes Payable | | 53,749 | | | | - | | Research and development | | 170,292 | | | | 35,988 | | Other | | 151,412 | | | | 29,163 | | Accrued expenses | $ | 1,074,611 | | | $ | 239,673 | |
4. INTANGIBLE ASSETS
Intangible assets as of December 31, 2014 and 2013 consist of the following:
| | December 31, 2014 | | | December 31, 2013 | | | | | | | | | | | Less: accumulated amortization | | | | | | | | | | | | | | | | | |
Amortization expense relating to intangible assets was $25,208 and $5,908 during the periods ended December 31, 2014 and 2013, respectively.
On June 26, 2014, the Company and The General Hospital Corporation, d/b/a Massachusetts General Hospital (“MGH”) entered into two license agreements, which replaced the single license agreement dated April 27, 2009. The Company paid to MGH an initial license fee of $175,000 for each license.
The assumptions and estimates used to determine future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy. Based on our assessment, we did not recognize any impairment as of December 31, 2014. As of June 1, 2014, the Company has relinquished its Alzheimer’s license and accordingly has recorded a loss on disposal of $16,591 in the year ended December 31, 2014.
Future amortization will approximate $39,000 for each of the next five years.
See Note 15 for commitments and contingencies associated with the Company’s technology licenses.
5. TRADING SECURITIES
On November 18, 2014, the Company received 36,300 shares of freely tradable equity securities with a fair value of $47,916 pursuant to the issuance and sale in a private placement of promissory notes (see Note 8). The Company’s investment in trading securities is comprised of a single publicly traded stock and as of December 31, 2014, the Company has recorded an unrealized loss related to that stock’s decline in value of $7,986. As at December 31, 2014, the Company has shares with a fair value of $39,930 in trading securities included in its consolidated balance sheet.
On September 18, 2013, the Company received 1,230,769 shares of freely tradable equity securities with a fair value of $3,495,384 (based upon the closing price on the day prior to closing) in connection with the 2013 Series B Offering (see Note 6). During the year ended December 31, 2014, the Company has received cash proceeds of $568,852 from the sale of this investment, and has recorded realized losses of $302,116. As of December 31, 2014, the Company sold all of these securities. As of December 31, 2013, the Company has recorded an unrealized loss related to that stock’s decline in value of $236,143. In addition, during the year ended December 31, 2013, the Company has received cash proceeds of $1,806,050 and has recorded $818,365 in realized losses upon the sale of these securities.
6. 2013 PRIVATE PLACEMENT – Series B Offering
From September 18 through November 21, 2013, the Company conducted a private placement offering and raised aggregate gross proceeds of $4,155,080 upon the sale of 5,725,821 shares of Series B Preferred Stock (the “2013 Series B Offering”). For each share of Series B Preferred Stock purchased, the investors received 1.331 five-year warrants to purchase a share of the Company’s common stock at an exercise price of $0.83 per share. Gross proceeds included cash payments of $602,500, 1,230,769 shares of freely tradable equity securities with a fair value of $3,495,384 (based upon the closing price on the day prior to closing), satisfaction of $35,000 of deferred compensation, and payment of $22,196 of employees’ bonuses. Net cash proceeds amounted to $520,966 after deducting offering expenses.
In connection with the 2013 Series B Offering, $275,000 of the Company’s outstanding short-term notes payable were exchanged by the holders for 378,125 shares of Series B Preferred Stock (see Note 9). The short-term notes payable were exchanged at a 10% premium to their face value. As a result, the Company recognized a beneficial conversion feature of $27,500 as additional paid-in capital and non-cash interest expense upon the exchange of the notes payable for the shares.
Monarch and LifeTech Capital, a division of Aurora Capital, LLC (“LifeTech”), acted as the Company’s placement agents in connection with the 2013 Series B Offering. Monarch received a cash fee of $25,800 and five-year warrants to purchase 53,656 shares of common stock at an exercise price of $0.83 per share and LifeTech received a cash fee of $17,500 and five-year warrants to purchase 29,116 shares of common stock at an exercise price of $0.83 per share. On the grant date, the fair value of the placement agent warrants was $23,608 which was recorded as a stock issuance cost and derivative warrant liability.
Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity” (“ASC Topic 815-40”), the Company has determined that since the exercise price of the warrants may be reduced if the Company issues shares at a price below the then-current exercise price, the warrants issued in connection with the 2013 Series B Offering must be classified as derivative instruments. In accordance with ASC Topic 815-40, these warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant changes in fair value is being recorded in the Company’s consolidated statement of operations.
In order to account for the sale of Series B Preferred Stock and the issuance of the warrants, the Company allocated the total gross proceeds of $4,457,580, which included the dollar value of notes payable exchanged at a 10% premium, between the Series B Preferred Stock and the warrants. The warrants were allocated their full fair value as of the respective grant dates totaling $2,224,778 and the residual net proceeds of $2,232,802 were allocated to the Series B Preferred Stock. The conversion feature of the Series B Preferred Stock was determined to be beneficial, or “in the money”, at the issuance date due to a conversion rate that allows the investor to obtain the common stock at a below market price. The Company recorded a deemed dividend on the beneficial conversion feature of $1,368,272 equal to the intrinsic value resulting from the reduction in the effective conversion rate. This deemed dividend is included in the Statement of Operations in arriving at the Net Loss Applicable to Common Shareholders. A summary of the accounting for the Series B Preferred Stock is as follows:
Proceeds from sale of Series B Preferred Stock: | | | | | | | | | | | | | | Beneficial conversion on note payable | | | | | | | | | | Accrued expenses settled in Series B Preferred Stock | | | | | | | | | | | | | | | | | | | | Fair value of warrants issued to Series B Preferred Stock purchasers | | | | | Fair value of warrants issued to Placement Agents | | | | | | | | | | Net proceeds from sale of Series B Preferred Stock | | | | |
In connection with the closing of the 2013 Series B Offering, the Company entered into a registration rights agreement with the investors, in which the Company agreed to file a registration statement with the Securities and Exchange Commission ("SEC") to register for resale the shares underlying the Series B Preferred Stock and the warrant shares within 60 calendar days of the final closing of the 2013 Series B Offering, and to have the registration statement declared effective within 60 calendar days after the filing date or within 120 calendar days of the filing date in the event of a full review of the registration statement by the SEC. The registration rights agreement does not contain any provisions for liquidated damages. The registration statement was filed by the Company and declared effective on February 12, 2014 by the SEC.
7. 2013 PRIVATE PLACEMENT - Common Stock
On December 31, 2013, the Company closed a private placement offering and raised aggregate gross proceeds of $642,500 upon the sale of 1,285,000 shares of common stock (the “2013 Common Stock Offering”). For each share of common stock purchased at a price per share of $0.50, the investors received a five-year warrant to purchase a share of common stock at an exercise price of $0.83. In January 2014, pursuant to the terms of the 2013 Common Stock Offering, the Company issued an additional 470,000 shares of common stock at a price per share of $0.50 and five-year warrants to purchase 470,000 shares of common stock at an exercise price of $0.83 per share for an aggregate purchase price of $235,000. Monarch Capital and Brookline acted as the Company’s placement agents in connection with the 2013 Common Stock Offering. Of the total offering costs, Monarch Capital received a cash fee of $55,400 and five-year warrants to purchase 138,500 shares of common stock at an exercise price of $0.83 per share. Brookline received a cash fee of $14,000 and five-year warrants to purchase 35,000 shares of common stock at an exercise price of $0.83 per share. The fair value of the placement agent warrants was approximately $51,100 and was recorded as both a debit and credit to additional paid-in capital as a stock issuance cost.
All warrants issued in the 2013 Common Stock Offering meet the requirements for classification as equity instruments.
As a result of the issuance of the shares in the 2013 Common Stock Offering, the conversion price of the Company’s outstanding shares of Series A Preferred Stock and Series B Preferred Stock was adjusted to $0.50 per share; provided, however, Platinum Montaur Life Sciences, LLC (“Platinum”) waived its right to (i) adjust the conversion price of the 4,523,076 shares of Series B Preferred Stock and accordingly, such conversion price remained $0.80 per share solely with respect to Platinum, and (ii) adjust the exercise price of 6,020,214 warrants held by it. In April 2014, the conversion price of the Series B Preferred Stock and exercise price of the warrants held by Platinum was adjusted to $0.53 (see Notes 9 and 10). In connection with the 2013 Common Stock Offering, the Company also entered into a registration rights agreement with the investors, in which the Company agreed to file a registration statement with the SEC to register for resale the shares and the shares of common stock issuable upon exercise of the warrants within 30 calendar days of the final closing date, and to have the registration statement declared effective within 90 calendar days of the final closing date or within 150 calendar days of the final closing date in the event of a full review of the registration statement by the SEC. The registration statement was filed and declared effective by the SEC on February 12, 2014.
8. CONVERTIBLE NOTES PAYABLE - SHORT TERM
In July, November and December 2014, the Company issued promissory notes (the “Notes”) pursuant to a Note Purchase Agreement entered into with certain accredited investors for an aggregate principal amount of approximately $1,998,500, $47,916 of which was received by the Company in marketable securities (see Note 5). The Notes mature one year from the date of issuance and bear interest at the rate of 8% per annum. All principal and accrued interest under the Notes will automatically convert into the Company’s next equity or equity-linked financings (a “Subsequent Financing”) in accordance with the following formula: (outstanding balance of the Notes as of the closing of the Subsequent Financing) x (1.15) / (the per security price of the securities sold in the Subsequent Financing). The investors shall be considered to be purchasers in the Subsequent Financing by way of their converted Notes. In addition, upon the closing of a Subsequent Financing, each of the investors shall be issued, in addition to any warrants issued in connection with a Subsequent Financing, an additional warrant to purchase a number of shares of common stock equal to fifty percent (50%) of the number of shares of common stock purchased by such investor in the Subsequent Financing assuming a per share purchase price of the securities to be issued in the Subsequent Financing.
In connection with the issuance of the Notes, the Company incurred $128,329 in issuance costs. These costs are recorded as deferred issuance costs, included in prepaid and other current assets on the Company’s balance sheet and amortized to interest expense over the term of the Notes. For the year ended December 31, 2014, $44,388 of issuance costs has been amortized to expense.
In addition, in September 2014, the Company issued a promissory note to a shareholder in the principal amount of $150,000. Interest accrues on the note at a rate of 12% per annum, in the event this note is repaid upon maturity on December 31, 2014; otherwise interests accrues at a rate of 16% per annum. As of December 31, 2014, the Company has made principal repayments on this promissory note totaling $25,000.
Interest expense, including amortization of deferred costs, totaled $104,132 and $51,351 for the years ended December 31, 2014 and 2013, respectively.
9. CAPITAL STOCK SERIES A PREFERRED STOCK
The Company is authorized to issue 100,000,000 shares of preferred stock, $0.001 par value, of which 3,500,000 shares have been designated Series A Preferred Stock. At December 31, 2014 and 2013, 949,477 and 2,350,196 shares of Series A Preferred Stock, respectively, were issued and outstanding.
The material terms of the Series A Preferred Stock, as specified in the Certificate of Designation for the Series A Preferred Stock, are as follows: Conversion
Each share of Series A Preferred Stock may, at the holder’s option, convert into common stock. The conversion rate is equal to the sum of the stated value of the Series A Preferred Stock, which is $0.83 per share, plus all accrued and unpaid dividends, divided by the conversion price. As a result of the issuance of the Series B Preferred Stock pursuant to the 2013 Series B Offering, the conversion price of the Series A Preferred Stock was reduced from $0.83 to $0.50. During the year ended December 31, 2014, 1,493,976 shares of Series A Preferred Stock were converted into 2,480,000 shares of the Company’s common stock. In addition, the Company issued 34,339 shares of the Company’s common stock in satisfaction of $17,170 dividend accrued on the shares of Series A preferred Stock that were converted. No Series A Preferred Stock was converted during 2013.
Subject to the specified provisions, the Series A Preferred Stock will automatically convert into common stock at the conversion price on the mandatory conversion date, which is defined as the first date at least six (6) months after the issuance of the Series A Preferred Stock on which each of the following conditions shall have been satisfied: (i) the Company shall have consummated, a qualified financing for aggregate gross proceeds to the Company of $7,000,000, (ii) the volume weighted average trading price for the Company’s common stock for each day on thirty (30) consecutive trading days immediately preceding such date, must be above $1.50 and the trading volume over that period must exceed 1,500,000 shares, and (iii) as of such date, all shares of common stock issuable upon conversion of the Series A Preferred Stock are registered under the Securities Act of 1933, as amended (the “Act”) pursuant to an effective registration statement or are otherwise eligible for sale under Rule 144 under the Act. As of December 31, 2014, no mandatory conversion has taken place as all of the conditions required for such mandatory conversion have not occurred.
Dividends
(a) Cumulative Preferred Dividends. Each holder of the Series A Preferred Stock shall be entitled to receive cash dividends payable on the stated value of the Series A Preferred Stock at a rate of 10% per annum which shall be cumulative and accrue daily from the original issuance date; provided however, if either (i) the Company shall not have consummated a qualified financing with aggregate gross proceeds to the Company of $7,000,000 on or before June 30, 2012, or (ii) for any reason, any shares of common stock issuable upon conversion of the Series A Preferred Stock are not registered pursuant to an effective registration statement on or before June 30, 2012 or are not otherwise eligible for sale under Rule 144 of the Act, then, effective July 1, 2012, the rate of dividends on the Series A Preferred Stock shall increase to 12% per annum. Both of the above conditions have been met by the Company and accordingly, the rate of dividends on the Series A Preferred Stock remains at 10% per annum. (b) Payment of Dividends. The Company shall be required to pay all accrued and unpaid dividends (whether or not declared) in respect of the Series A Preferred Stock semi-annually on each June 30 and December 31 of each calendar year. All such dividends shall be paid in cash; provided, that, at the option of the Company, the Company may pay any accrued and unpaid dividends on the Series A Preferred Stock in the form of additional shares of Series A Preferred Stock, with each share of Series A Preferred Stock being valued for this purpose at the stated value in effect on the date of payment.
For the year ended December 31, 2014, the Company accrued a preferred stock dividend of $94,573 and issued 93,257 shares of Series A Preferred Stock in payment of such dividend. In addition, during the year ended December 31, 2014, the Company issued 34,399 shares of common stock in payment of such dividend as related to the shares of Series A Preferred Stock converted into common stock. For the year ended December 31, 2013, the Company accrued a preferred stock dividend of $185,606 and issued 223,622 shares of Series A Preferred Stock in payment of such dividends.
Liquidation preference
In the event of liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, each holder of Series A Preferred Stock shall be entitled to receive, for each share thereof, out of assets of the Company legally available therefor, a preferential amount in cash, per share of Series A Preferred Stock, equal to (and not more than) the sum of the (x) stated value, plus (y) all accrued and unpaid dividends thereon. All preferential amounts to be paid to the holders of Series A Preferred Stock in connection with such liquidation, dissolution or winding up shall be paid before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Company to the holders of the Company's common stock. If upon any such distribution the assets of the Company shall be insufficient to pay the holders of the outstanding shares of Series A Preferred Stock the full amounts to which they shall be entitled, such holders shall share ratably in any distribution of assets in accordance with the sums which would be payable on such distribution if all sums payable thereon were paid in full.
Voting
The holders of the Series A Preferred Stock have the right to one vote for each share of common stock into which such Series A Preferred Stock could then convert.
SERIES B PREFERRED STOCK The Company is authorized to issue 100,000,000 shares of preferred stock, $0.001 par value, of which 12,000,000 shares have been designated Series B Preferred Stock. At December 31, 2014 and 2013, 5,694,571 and 5,725,821 shares of Series B Preferred Stock were issued and outstanding, respectively.
The material terms of the Series B Preferred Stock, as specified in the Certificate of Designation for the Series B Preferred Stock, are as follows:
Ranking The Series B Preferred Stock ranks junior to the Company’s Series A Preferred Stock and senior to the Company’s common stock with respect to distributions of assets upon the liquidation, dissolution or winding up of the Company.
Stated Value Each share of Series B Preferred Stock will have a stated value of $0.80, subject to adjustment for stock splits, combinations and similar events.
Dividends Cumulative dividends on the Series B Preferred Stock accrue at the rate of 10% of the stated value per annum, compounded annually, from and after the date of the initial issuance through the third anniversary of the issuance date; provided, however, that any holder of at least 4,500,000 shares of Series B Preferred Stock after the issuance date and prior to October 1, 2013 (a “Major Holder”) will be entitled to accrued dividends through the fourth anniversary of the issuance date (as applicable, the “Accrual Period”). Accrued dividends are payable upon the earliest to occur of (i) the third anniversary of the issuance date (or, with respect to the Major Holder, the fourth anniversary of the issuance date), (ii) mandatory conversion (as described below) and (iii) an automatic conversion upon a fundamental transaction (as such term is defined in the Certificate of Designation) or triggering event (as described below). Dividends are payable in Series B Preferred Stock valued at the stated value, or in cash upon the mutual agreement of the Company and the holder.
For the year ended December 31, 2014, the Company accrued a Series B Preferred Stock dividend of $466,966 which is included in accrued expenses in the Company’s consolidated balance sheet. The Company issued 2,507 shares of common stock in payment of such dividend as related to the 31,250 shares of Series B Preferred Stock converted to common stock during the year ended December 31, 2014. For year ended December 31, 2013, the Company accrued a Series B Preferred Stock dividend of $122,876.
Liquidation Preference If the Company voluntarily or involuntarily liquidates, dissolves or winds up its affairs, each holder of the Series B Preferred Stock will be entitled to receive out of the Company’s assets available for distribution to stockholders, after satisfaction of liabilities to creditors, if any, and payments due to holders of the Series A Preferred Stock but before any distribution of assets is made on the Company’s common stock or any of our other shares of stock ranking junior as to such a distribution to the Series B Preferred Stock, a liquidating distribution in the amount in the amount of the stated value of all such holder’s Series B Preferred Stock plus all accrued and unpaid dividends thereon.
Voluntary Conversion Each share of Series B Preferred Stock is convertible at the holder’s option into the Company’s common stock in an amount equal to the stated value plus accrued and unpaid dividends thereon through the conversion date divided by the then applicable conversion price. The initial conversion price is $0.80 per share and is subject to customary adjustments for issuances of shares of common stock as a dividend or distribution on shares of the common stock, or mergers or reorganizations, as well as “full-ratchet” anti-dilution adjustments for future issuances of other Company securities. As a result of the issuance of common stock pursuant to the 2013 Common Stock Offering, the conversion price of the Series B Preferred Stock was reduced from $0.80 to $0.50, provided, however, Platinum waived its right to adjust the conversion price of the 4,523,076 shares of Series B Preferred Stock held by it and accordingly, such conversion price remains $0.80 per share solely with respect to Platinum until the issuance of common stock to consultants in April 2014 with a fair value of $0.53 per share. During the year ended December 31, 2014, 31,250 shares of Series B Preferred Stock were converted into 50,000 shares of the Company’s common stock. No Series B Preferred Stock was converted during 2013.
Holders also have the option to convert their Series B Preferred Stock upon the occurrence of a fundamental transaction or one of the following triggering events: Johan (Thijs) Spoor ceases to be the chief executive officer of the Company; or there is a change in three of the five current members of the Company’s board of directors, such conversion will be on the same terms as a mandatory conversion. Mandatory Conversion The Series B Preferred Stock is subject to mandatory conversion at such time as the volume weighted average price of the Company’s common stock is at least $1.20 (subject to adjustments for stock splits and similar events) provided, that, on the mandatory conversion date, (A) a registration statement providing for the resale of the shares underlying the Series B Preferred Stock is effective, or such shares may be offered for sale to the public without limitations pursuant to Rule 144, (B) trading in the common stock shall not have been suspended by the SEC or exchange or market on which the common stock is trading), (C) the daily volume of the common stock is at least 50,000 shares per day for the applicable ten (10) consecutive trading days, and (D) the Company is in material compliance with the terms and conditions of the transaction documents. In the event of mandatory conversion, each share of Series B Preferred Stock will convert into the number of shares of common stock equal to the stated value plus accrued and unpaid dividends for the Accrual Period divided by the conversion price.
Voting Rights The holders of the Series B Preferred Stock will be entitled to vote upon all matters upon which holders of common stock have the right to vote, such votes to be counted together with all other shares of capital stock having general voting powers and not separately as a class. The holders of the Series B Preferred Stock will be entitled to the number of votes equal to the number of common stock into which the Series B Preferred Stock are then convertible.
In addition, as long as at least 25% of the Series B Preferred Stock remains outstanding, the Company will not, without the affirmative vote or consent of the holders of at least a majority of the outstanding Series B Preferred Stock, voting as a separate class, (i) amend, waive or repeal (including through a merger, consolidation or similar event) any provision of the Company’s articles of incorporation or by-laws in any manner that adversely affects the rights of the holders of the Series B Preferred Stock; (ii) alter or change adversely the preferences, rights, privileges, or restrictions of the Series B Preferred Stock; (iii) authorize or create any class or series of stock having rights, preferences or privileges in any respect senior to the Series B Preferred Stock; or (iv) reclassify, alter or amend any existing class or series of stock, if such reclassification, alteration or amendment would render such other class or series of stock as having rights, preferences or privileges in any respect senior to the Series B Preferred Stock.
COMMON STOCK
The Company has authorized 100,000,000 shares of its common stock, $0.001 par value, At December 31, 2014 and 2013, the Company had issued and outstanding 29,197,497 and 25,675,013, respectively, shares of its common stock.
During the year ended December 31, 2013, the Company issued 60,000 shares of common stock for services performed pursuant to a consulting agreement. The total fair value of these shares, $45,550, is included in operating expenses. In addition, on December 31, 2013, the Company issued 1,285,000 shares of common stock, valued at $0.50 per share, in connection with the 2013 Common Stock Offering.
In January 2014, the Company issued 470,000 shares of common stock, at $0.50 per share for net cash proceeds of $203,055, in connection with the 2013 Common Stock Offering (see Note 7).
In April 2014, the Company issued 304,888 shares of common stock for services performed pursuant to a consulting agreement. The total fair value of these shares, $178,160, is included in operating expenses. As a result of issuing these shares, the conversion price of the remaining Series B Preferred Stock, not previously adjusted to $0.50, (including Platinum) was reduced from $0.80 to $0.53.
10. STOCK PURCHASE WARRANTS
Common Stock Warrants
During the year ended December 31, 2014, the Company issued 470,000 common stock warrants to investors and 45,000 common stock warrants to the placement agents in connection with the additional closings related to the 2013 Common Stock Offering (see Note 7).
In addition, during the year ended December 31, 2014, the Company exchanged 546,470 common stock warrants for an equal number of warrants with the same terms as the warrants issued in the 2013 Series B Offering. As a result of this exchange and because such new warrants are derivative instruments, the Company increased its derivative warrant liability by approximately $115,000, the fair value of the warrants on the date of the modification. In addition, in conjunction with the exchange, the Company recognized a one-time expense of approximately $82,000 representing the incremental fair value resulting from the modification, which is included in the accompanying statements of operations.
During the year ended December 31, 2014, various warrant holders exercised their rights to purchase 180,750 shares of the Company’s common stock, with an average exercise price of $0.50 per share, pursuant to a cash exercise whereby the Company received cash proceeds of $90,375.
During the year ended December 31, 2013, the Company issued 7,621,070 common stock warrants to investors and 82,772 common stock warrants to the placement agents in connection with the 2013 Series B Offering. These warrants are recorded as Derivative Warrant Liability. In addition, the Company issued 1,285,000 common stock warrants to investors and 128,500 common stock warrants to placement agents in connection with 2013 Common Stock Offering.
As a result of the issuance of common stock pursuant to the 2013 Common Stock Offering, the exercise price of the warrants issued in connection with the 2013 Series B Offering was reduced from $0.83 to $0.50, provided, however, Platinum waived its right to adjust the exercise price of the 6,020,214 warrants held by it and accordingly, such exercise price remains $0.83 per share, as of December 31, 2013, solely with respect to Platinum. In April 2014, the Company issued common stock for services performed pursuant to a service agreement. The shares of common stock were issued at the market value of $0.53 per share. As a result of this issuance, the exercise price of the remaining warrants issued in connection with the Series B Offering, including the warrants issued to Platinum, was reduced to $0.53.
The following is a summary of all common stock warrant activity during the year ended December 31, 2014: | | Number of Shares Under Warrants | | | Exercise Price Per Share | | | Weighted Average Exercise Price | | Warrants issued and exercisable at December 31, 2013 | | | | | | | | | | | | | Warrants Issued/Exchanged | | | | | | | | | | | | | Warrants Expired/Forfeited | | | | | | | | | | | | | | | | | | | | | | | | | | Warrants issued and exercisable at December 31, 2014 | | | | | | | | | | | | |
The following represents additional information related to common stock warrants outstanding and exercisable at December 31, 2014:
Exercise Price | | | Number of Shares Under Warrants | | | Weighted Average Remaining Contract Life in Years | | | Weighted Average Exercise Price | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total warrants accounted for as derivative liability | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total warrants accounted for as equity | | | | | | | | | | | | Total for all warrants outstanding | | | | | | | | | | | |
The Company used the Black-Scholes option price calculation to value the warrants granted in 2014 using the following assumptions: risk-free rate of 1.62%, volatility of 60.13%, actual term and exercise price of warrants granted. For warrants granted that are accounted for as a derivative liability, the Company used a Binomial Options Pricing model. The primary assumptions used to determine the grant date fair value of these warrants were: a risk free interest rate with the range from 1.59% - 3.40%, volatility of 60.13%, actual term and exercise price of the warrants granted. There were no material changes to the primary assumptions, as noted above, used to determine the fair value of the warrants as of December 31, 2014.
The Company used the Black-Scholes option price calculation to value the warrants granted in 2013 using the following assumptions: risk-free rate of 1.75%, volatility of 61.67%, actual term and exercise price of warrants granted. For warrants granted that were accounted for as a derivative liability, the Company used a Binomial Options Pricing model. The primary assumptions used to determine the grant date fair value of these warrants were: a risk free interest rate of 1.4%, volatility of 61.67%, actual term and exercise price of the warrants granted. There were no material changes to the primary assumptions, as noted above, used to determine the fair value of the warrants as of December 31, 2013.
11. COMMON STOCK OPTIONS On February 11, 2011, the Company adopted its 2011 Equity Incentive Plan (the “Plan”) under which 6,475,750 shares of common stock were reserved for issuance under options or other equity interests as set forth in the Plan. Under the Plan, options are available for issuance to employees, officers, directors, consultants and advisors. The Plan provides that the board of directors will determine the exercise price and vesting terms of each option on the date of grant. Options granted under the Plan generally expire ten years from the date of grant.
Under the Plan, the Company has issued 161,250 shares of fully paid and non-assessable restricted common stock to a director of the Company. These shares of restricted stock are subject to the terms of the Plan and are unvested and outstanding as of December 31, 2014. The shares shall vest upon the earlier of (i) the occurrence of a Change of Control, as defined in the Plan, (ii) the successful completion of a Phase II clinical trial for any of the Company’s products, or (iii) the determination by the board of directors to provide for immediate vesting. The weighted average grant-date fair value is $1.07 per share. The following is a summary of all common stock option activity for the year ended December 31, 2014:
| | Options Outstanding | | | Weighted Average Exercise Price | | Outstanding at December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31, 2014 | | | | | | | | |
| | Options Exercisable | | | Weighted Average Exercise Price per Share | | Exercisable at December 31, 2013 | | | | | | | | | Exercisable at December 31, 2014 | | | | | | | | |
The weighted average fair value of options granted during the year ended December 31, 2014 was $0.30.
The weighted average remaining contractual term for exercisable and outstanding options is 5.54 and 5.87 years, respectively. The aggregate intrinsic value of all of the Company’s exercisable and outstanding options is approximately $159,300 and $159,300, respectively.
As of December 31, 2014, there was approximately $167,110 of unrecognized compensation cost related to non-vested options. The unrecognized compensation expense is estimated to be recognized over a period of 0.67 years at December 31, 2014.
The Company used the Black-Scholes option pricing model to value all option grants (see Note 2, Summary of Significant Accounting Policies, “Accounting for Share Based Payments”).
12. RETIREMENT PLAN
In 2011, the Company adopted a defined contribution plan intended to qualify under Section 401(k) of the Internal Revenue Code covering all eligible employees of the Company. All employees are eligible to become participants of the plan upon reaching age 21 on the first day of the month following the hire date. Each employee may elect, voluntarily, to contribute a percentage of their compensation to the plan each year, subject to certain limitations. The Company reserves the right to make additional contributions to the plan. The Company has elected to make “safe harbor” contributions equal to 100% of the first 6% of participants’ elective deferrals. In the years ended December 31, 2014 and 2013, the Company recognized expense related to its contributions of $25,079 and $20,562, respectively.
13. INCOME TAXES
The Company is subject to taxation in the U.S. and the State of New Jersey. At December 31, 2014 and 2013, the Company had gross deferred tax assets calculated at an expected blended rate of 39.94% of approximately $9,669,000 and $7,662,000, respectively. As the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax asset, a valuation allowance of approximately $9,669,000 and $7,662,000 has been established at December 31, 2014 and 2013, respectively. The significant components of the Company’s net deferred tax assets (liabilities) at December 31, 2014 and 2013 are as follows:
| | December 31, 2014 | | | December 31, 2013 | | Gross deferred tax assets: | | | | | | | Net operating loss carry-forwards | | | | | | | | | | | | | | | | | | Tax credit carry-forwards | | | | | | | | | Capital loss carry-forwards & unrealized losses on investments | | | | | | | | | Long lived assets | | | 33,866 | | | | - | | | | | | | | | | | | | | | | | | | | Deferred tax asset valuation allowance | | | | | | | | | | | | | | | | | |
Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate primarily due to the following: | | December 31, 2014 | | | December 31, 2013 | | Income taxes benefit (expense) at statutory rate | | | | | | | State income tax, net of federal benefit | | | | | | | | | | | | | | | | | | | | | | | | | | | Share-based compensation & Warrant adjustments | | | | | | | | | Change in valuation allowance | | | | | | | | | | | | | | | | | |
At December 31, 2014, the Company has gross net operating loss carry-forwards for federal income tax purposes of approximately $21,200,000 which expire in the years 2023 through 2034. The Company has gross state net operating loss carryforwards of approximately $10,900,000 which expire in the years 2031 through 2034. The Company also has federal research and development carryforwards of approximately $391,000 which expire twenty years from the date of inception. The net increase in the valuation allowance in the years ended December 31, 2014 and 2013 was approximately $2,000,000 and $1,800,000, respectively.
The Company is subject to the net operating loss utilization provisions of Section 382 of the Internal Revenue Code. Due to the reverse merger/recapitalization, the Company is restricted in the future use of net operating loss and tax credit carry-forwards generated by the Company before the effective date of the merger. Other ownership changes may cause the net operating losses to further be limited. Both of the separate loss years’ net operating losses will be subject to possible limitations concerning changes of control and other limitations under the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period prior to the change, and the federal published interest rate.
Topic 740 in the Accounting Standards Codification (ASC 740) prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2014, the Company had taken no uncertain tax positions that would require disclosure under ASC 740.
14. COMMITMENTS AND CONTINGENCIES License Agreements
On June 26, 2014, the Company and The General Hospital Corporation, d/b/a Massachusetts General Hospital (“MGH”) entered into two license agreements (the “Agreements”), which Agreements replace the single license agreement between the Company and MGH dated April 27, 2009, as amended by letter dated June 21, 2011 and agreement dated October 31, 2011 (the “Original Agreement”). The Agreements provide exclusive licenses for the Company’s two lead product candidates, BFPET and CardioPET, two of the three cardiac imaging technologies covered by the Original Agreement. The Company and MGH are in discussions regarding the exclusive license to VasoPET, the third product candidate covered by the Original Agreement, the Company’s rights to which ceased upon the termination of the Original Agreement contemporaneously with the execution of the new Agreements. The Agreements were entered into primarily for the purpose of separating the Company’s rights and obligations with respect to its different product development programs. Each of the Agreements requires the Company to pay MGH an initial license fee of $175,000 and annual license maintenance fees of $125,000 each. The Agreements require the Company to meet certain obligations, including, but not limited to, meeting certain development milestones relating to clinical trials and filings with the United States Food and Drug Administration. MGH has the right to cancel or make non-exclusive certain licenses on certain patents should the Company fail to meet stipulated obligations and milestones. Additionally, upon commercialization, the Company is required to make specified milestone payments and royalties on commercial sales. The Company is amortizing the cost of these intangible assets over the remaining useful life of the Agreements of 10 years.
The Company is current with all stipulated obligations and milestones under the Agreements and the Agreements remain in full force and effect. The Company believes that it maintains a good relationship with MGH and will be able to obtain waivers or extension of its obligations under the Agreement, should the need arise. If MGH were to refuse to provide the Company with a waiver or extension of any of its obligations or were to cancel or make the license non-exclusive, this would have a material adverse impact on the Company as it may be unable to commercialize products without exclusivity and would lose its competitive edge for portions of the patent portfolio.
During 2014, the Company relinquished its Alzheimer’s license and accordingly recorded a loss on disposal of $16,591.
Clinical Research Services Agreement
On September 7, 2012, the Company entered into a Clinical Research Services Agreement with SGS Life Science Services (“SGS”), a company with its registered offices in Belgium, for clinical research services relating to the Company’s CardioPET Phase II study to assess myocardial perfusion and fatty acid uptake in coronary artery disease (CAD) patients. The phase II trial will be an open label trial designed to assess the safety and diagnostic performance of CardioPET as compared to stress echocardiography, myocardial perfusion imaging and angiography as a gold standard of background disease. In addition, the Company engaged FGK Representative Service GmbH to serve as the Company’s sponsor in compliance with the laws governing clinical trials conducted in the European Union. On February 28, 2013, the Company announced that the Phase II trial had begun and released the initial data and images from the trial. On February 6, 2014, the Company presented interim data from the trial at the SNMMI mid-winter meeting. On October 20, 2014, the Company presented additional interim data at the EANM meeting in Gothenburg, Sweden. In December 2014, the Company announced that the enrollment for a Phase II clinical trial of CardioPET was closed. The estimated remaining cost payable to SGS through the completion of the trial is approximately $680,000. On May 23, 2014, the Company entered into a Master Services Agreement with PPD Development, LP, a clinical research organization engaged in the business of managing clinical research programs and providing clinical development and other related services, for the clinical research services relating to the Company’s BFPET Phase II study. The Phase II trial will be an open label trial designed to assess the safety and diagnostic performance of BFPET. Multiple trial sites are planned in various locations in the United States. In connection with this agreement, the Company has recorded $255,000 as of December 31, 2014 related to start-up costs. The trial is expected to commence in the first half of 2015. The estimated cost of this program is $1.7 million.
Executive Employment Contracts
The Company maintains employment contracts with key Company executives that provide for the continuation of salary and the grant of certain options to the executives if terminated for reasons other than cause, as defined within the agreements. One contract also provides for a $1 million bonus should the Company execute transactions as specified in the contract, including the sale of substantially all of the Company’s assets or a stock, or merger transaction, any of which resulting in compensation to the Company’s stockholders aggregating in excess of $50 million for such transaction. Operating Lease Commitment
In July 2011, the Company entered into a three-year lease for office space, which commenced May 1, 2012 and expires on April 30, 2015. On July 1, 2014, the Company increased its office space and amended this agreement. The amended annual minimum lease payments for this office space are $76,200 per year plus common area costs. In accordance with the amended agreement, the Company maintains a $9,525 security deposit. On February 24, 2015, the Company signed a three-year renewal of the lease which will expire on April 30, 2018. Subsequent to April 30, 2016, the Company will have the option to terminate the lease with 6 months prior notice. The future minimum lease payments remaining through April 30, 2018 are as follows:
Rent expense, net of sublease income, was $74,680 and $31,485 for the years ended December 31, 2014 and 2013, respectively.
Legal Contingencies
On July 16, 2013, Todd Nelson, as plaintiff, served Fluoropharma Medical, Inc. with process in the matter captioned, Todd Nelson v. Fluoropharma Medical, Inc.; and Does 1 through 10, No. 13 CV 01152 JAD CWH, which is pending before the United States District Court for the District of Nevada. In this action, the plaintiff alleged that he suffered damages attributable to the Company’s refusal to honor certain stock options after February 28, 2012. Plaintiff seeks at least $325,200 in damages, as well as punitive and exemplary damages, prejudgment interest, and costs. Discovery has closed and the Company is reviewing its options to dismiss Plaintiff's claims without the necessity of a trial. Management believes that it has meritorious defenses in all such matters, and accordingly, no accrual has been recorded for these matters as of December 31, 2014. The Company is not aware of any other material, active, pending or threatened proceeding, nor is the Company, or any subsidiary, involved as a plaintiff or defendant in any other material proceeding or pending litigation. 15. SUBSEQUENT EVENTS
On March 25, 2015, the Company issued promissory notes for $200,000 with terms substantially similar to the Notes described in Note 8.
PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution. We will pay all expenses in connection with the registration and sale of the common stock by the selling stockholders. The expenses of issuance and distribution are set forth below. | | $ | 310.19 | | | | $ | 634.54 | | | | | $ | 15,000 | * | | $ | 15,000 | * | | | $ | 10,000 | * | | $ | 10,000 | * | | | $ | 4,689.81 | * | | $ | 4,365.46 | * | | | $ | 30,000 | * | | $ | 30,000 | * |
* Estimate Item 14. Indemnification of Directors and Officers. We are a Nevada corporation and generally governed by the Nevada Private Corporations Code, Title 78 of the Nevada Revised Statutes, or NRS. Section 78.138 of the NRS provides that, unless the corporation’s articles of incorporation provide otherwise, a director or officer will not be individually liable unless it is proven that (i) the director’s or officer’s acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud, or a knowing violation of the law. Our articles of incorporation provide the personal liability of our directors is eliminated to the fullest extent permitted under the NRS. Section 78.7502 of the NRS permits a company to indemnify its directors and officers against expenses, judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending, or completed action, suit, or proceeding, if the officer or director (i) is not liable pursuant to NRS 78.138, or (ii) acted in good faith and in a manner the officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful. Section 78.7502 of the NRS requires a corporation to indemnify a director or officer that has been successful on the merits or otherwise in defense of any action or suit. Section 78.7502 of the NRS precludes indemnification by the corporation if the officer or director has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court determines that in view of all the circumstances, the person is fairly and reasonably entitled to indemnity for such expenses and requires a corporation to indemnify its officers and directors if they have been successful on the merits or otherwise in defense of any claim, issue, or matter resulting from their service as a director or officer. Section 78.751 of the NRS permits a Nevada company to indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit, or proceeding as they are incurred and in advance of final disposition thereof, upon determination by the stockholders, the disinterested board members, or by independent legal counsel. If so provided in the corporation’s articles of incorporation, bylaws, or other agreement, Section 78.751 of the NRS requires a corporation to advance expenses as incurred upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the company. Section 78.751 of the NRS further permits the company to grant its directors and officers additional rights of indemnification under its articles of incorporation, bylaws, or other agreement.
Section 78.752 of the NRS provides that a Nevada company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee, or agent of the company, or is or was serving at the request of the company as a director, officer, employee, or agent of another company, partnership, joint venture, trust, or other enterprise, for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee, or agent, or arising out of his status as such, whether or not the company has the authority to indemnify him against such liability and expenses. Our bylaws implement the indemnification provisions permitted by Chapter 78 of the NRS by providing that we shall indemnify our directors and officers to the fullest extent permitted by the NRS against expense, liability, and loss reasonably incurred or suffered by them in connection with their service as an officer or director. Our bylaws provide shall advance costs and expenses incurred with respect to any proceeding to which a person is made a party as a result of being a director or officer in advance of final disposition of such proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it is ultimately determined that such person is not entitled to indemnification. We may purchase and maintain liability insurance, or make other arrangements for such obligations or otherwise, to the extent permitted by the NRS. At the present time, there is no pending litigation or proceeding involving a director, officer, employee, or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification. Item 15. Recent Sales of Unregistered Securities. The information below lists all of the securities sold by us during the past three years which were not registered under the Securities Act: Sales by FluoroPharma, Inc. Between April 2010 and February 2011, FPI issued 46,800 warrants to purchase shares of class A common stock in connection with the issuance of certain convertible promissory notes in the aggregate principal amounts of $585,000. Sales by FluoroPharma Medical, Inc. On May 16, 2011, June 23, 2011, June 30, 2011, and July 15, 2011 we entered into subscription agreements with certain investors for the sale of an aggregate of 7,208,509 shares of common stock and 1,807,229 shares of Series A Preferred, par value $.001 per share in a private placement at a price of $0.83 per share for aggregate gross proceeds of approximately $4,984,856 plus the conversion of $367,600 of deferred compensation to certain officers and directors of the Company and the automatic exchange at 110% of the outstanding principal amount plus all accrued and unpaid interest (the “Outstanding Balance”) of certain convertible promissory notes issued by the Company with an Outstanding Balance of $614,118. Investors who invested in the aggregate a minimum of $1,500,000 received Series A Preferred, which has the rights and preferences set forth in a Certificate of Designation of the Relative Rights and Preferences of the Series A Preferred, Stock, filed with the Secretary of State of Nevada on May 13, 2011 (the “Certificate of Designation”). Pursuant to the terms of the Certificate of Designation, the Series A Preferred are currently convertible into an estimated 1,807,229 shares of common stock. The Investors who purchased Series A Preferred received a four year warrant to purchase 50% of the shares purchased and the investors who purchased common stock received a four year warrant to purchase 35% of the shares purchased. On December 13, 2011 and December 16, 2011 we entered into subscription agreements with certain investors for the sale of an aggregate of 1,216,870 shares of common stock at a price of $0.83 per share for aggregate gross proceeds of $1,010,002. On March 19, 2012, the Company issued 130,000 shares of common stock in connection with a consulting agreement.
On November 19, 2012, we entered into a securities purchase agreement with certain accredited investors identified therein for the issuance and sale in a private placement consisting of, in the aggregate, (a) 1,819,119 shares of common stock at a price per share of $0.85, and (b) one-year non-cashless warrants to purchase up to 1,819,119 shares of common stock at an exercise price of $0.90 per share, for aggregate gross proceeds of $1,546,250. In September, October and November 2013, we completed a private placement to accredited investors pursuant to which we issued an aggregate of 5,707,475 shares of Series B Preferred Stock that are currently convertible into an equal number of shares of common stock and five-year Warrants to purchase an aggregate of 7,596,650 shares of common stock. In December 2013 and January 2014, we completed a private placement to accredited investors pursuant to which we issued an aggregate of 1,755,000 shares of common stock and five-year Warrants to purchase an aggregate of 1,755,000 shares of common stock.
In July through December 2014, we issued promissory notes, as amended (the “Notes”), pursuant to a Note Purchase Agreement entered into with certain accredited investors for an aggregate principal amount of approximately $1,714,000.$2,000,000 . The Notes mature one year from the date of issuance and bear interest at the rate of 8%12% per annum. All principal and accrued interest under the Notes will automatically convert into the Company’s next equity or equity-linked (A “Subsequent Financing”) financing in accordance with the following formula: (outstanding balance of the Notes as of the closing of the Subsequent Financing) x (1.15)( 1.25 ) / (the per security price of the securities sold in the Subsequent Financing). The investors shall be considered to be purchasers in the Subsequent Financing by way of their converted Notes. In addition, upon the closing of a Subsequent Financing, each of the investors shall be issued, in addition to any warrants issued in connection with a Subsequent Financing, an additional warrant, to purchase a number of shares of common stock equal to fifty percent (50%) of the number of shares of common stock purchased by such investor in the Subsequent Financing assuming a per share purchase price of the securities to be issued in the Subsequent Financing.
In May through October 2015, we issued Convertible Notes to accredited investors pursuant to the Purchase Agreement dated as of May 28, 2015, as amended on August 6, 2015, which notes are convertible into shares of common stock at a conversion price per share of $0.35, for an aggregate principal amount of approximately $2,580,005. In addition, the Company issued warrants at an initial exercise price per share of $0.50 to purchase a number of shares of common stock equal to fifty percent of the number of shares of common stock such investor would receive upon full conversion of the notes.
In December 2015, we issued an aggregate of 1,089,151 shares of common stock for consulting services and in settlement of certain outstanding liabilities to third parties. For each of the transactions referred to above, we relied upon an exemption from registration afforded by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, which exempt transactions by an issuer not involving any public offering.
Item 16. Exhibits and Financial Statement Schedules. Exhibit No. | | Description | | | Agreement and Plan of Merger, dated as of May 16, 2011, by and among FluoroPharma Medical, Inc., FPI Merger Corporation and FluoroPharma, Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on July 12, 2011). | | | Certificate of Merger, dated May 16, 2011 merging FPI Merger Corporation with and into FluoroPharma, Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2011). | | | Articles of Incorporation (Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed on November 7, 2007). | | | Bylaws (Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed on November 7, 2007). | | | Certificate of Designation of the Relative Rights and Preferences of the Series A Preferred Stock, filed with the Secretary of State of Nevada on May 13, 2011 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2011). | | | Certificate of Designation of the Relative Rights and Preferences of the Series B Preferred Stock, filed with the Secretary of State of Nevada on September 18, 2013 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 19, 2013) | | | Form of 2012 Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 21, 2012). | | | Form of 2011 Warrant (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2011). | | | Form of Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 19, 2013). | | | Form of Warrant (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 7, 2014). | 4 .5 | | Form of 2014 Promissory Note (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 25, 2014). | 4.6 | | Form of Amendment to 2014 Promissory Note (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2016). |
| | Form of 2015 Convertible Note (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2015). | | | Form of 2015 Warrant (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2015). | | | Opinion of Sherman & Howard L.L.C. | | | Exclusive License Agreement with Massachusetts General Hospital dated as of April 27, 2009, as amended.** +amended (Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 333-193520) filed with the Securities and Exchange Commission on January 23, 2014). | | | Securities Purchase Agreement dated November 19, 2012 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2012). |
| | Registration Rights Agreement dated November 19, 2012 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2012). | | | Form of 2011 Subscription Agreement - Lead Investor (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2011). | | | Form of 2011 Registration Rights Agreement (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2011). | | | Form of Securities Purchase Agreement dated September 18, 2013 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 19, 2013). | | | Form of Registration Rights Agreement dated September 18, 2013 (Incorporated by reference to the Company̵’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 19, 2013). | | | Form of Securities Purchase Agreement dated December 31, 2013 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 7, 2014). | | | Form of Registration Rights Agreement dated December 31, 2013 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 7, 2014). | | | FluoroPharma Medical, Inc. 2011 Incentive Plan (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2011). | | | Lease Agreement between Hillside Square, LLC and FluoroPharma Medical, Inc. dated as of September 8, 2011 (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2011). | | | Employment Agreement dated July 30, 2012 between the Company and Johan (Thijs) Spoor (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 1, 2012). | | | Employment Agreement dated August 22, 2012 between the Company and Tamara Rhein (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 22, 2012). |
| | Amendment to Employment Agreement dated October 5, 2015 between the Company and Tamara Rhein (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 8, 2015). | | | Employment Agreement dated October 5, 2015 between the Company and Thomas H. Tulip (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 8, 2015). | 10.16 | | Note Purchase Agreement dated July 22, 2014 (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 25, 2014). | | | Note and Warrant Purchase Agreement dated May 28, 2015 (Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2015). | | | Code of Ethics adopted by the Board of Directors (Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2012). |
| List of Subsidiaries (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2011). | | Consent of Wolf & Company, P.C. | | Consent of Sherman & Howard L.L.C. (included in Exhibit 5.1). | | Power of Attorney (included on signature page).page filed with initial filing ). | | | | | | XBRL Calculation Linkbase Document++ | 101.LAB | XBRL Label Linkbase Document++ | | XBRL Presentation Linkbase Document++ | | XBRL Definition Linkbase Document++ |
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* To be filed by amendment
+ Confidential treatment has been granted with respect to portions of this exhibit.
++ The XBRL-related information in Exhibit 101 to this Registration Statement on Form S-1 shall not be deemed “filed” or a part of this registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of those sections.
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Item 17. Undertakings. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: i. To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; ii. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
iii. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post- effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That for the purpose of determining any liability under the Securities Act of 1933 in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser (b) The undersigned hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Montclair, State of New Jersey, on November 24, 2015.January 26, 2016 .
| FLUOROPHARMA MEDICAL, INC. | | | | | By: | /s/ Johan M. (Thijs) SpoorThomas H. Tulip | | Name: | Johan M. (Thijs) SpoorThomas H. Tulip | | Title: | President and Chief Executive Officer | | | (Principal Executive Officer) |
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Thomas H. Tulip his true and lawful attorney-in-fact, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this registration statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.
In accordance with the requirements of the Securities Act, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
/s/ Johan M. (Thijs) SpoorThomas H. Tulip | | November 24, 2015January 26, 2016 | Johan M. (Thijs) SpoorThomas H. Tulip | | | President, Chief Executive Officer Chairman & Director (principal executive officer) | | | | | | /s/ Tamara Rhein | | November 24, 2015January 26, 2016 | Tamara Rhein | | | Chief Financial Officer (principal financial and accounting officer) | | | | | | /s/* /s/ Thomas H. Tulip | | November 24, 2015 | Thomas H. Tulip, Ph.D. | | | Director | | | | | | /s/ Thomas H. Tulip | | November 24, 2015 | Thomas H. Tulip, Ph.D. | | | Director | | | | | | /s/ Peter S. Conti | | November 24, 2015January 26, 2016 | Peter S. Conti, M.D., Ph.D. | | | Director | | | | | | | | November 24, 2015January 26, 2016 | Lawrence Atinsky | | | Director | | | | | | /s/ Walter Witoshkin* /s/ Thomas H. Tulip | | November 24, 2015January 26, 2016 | Walter Witoshkin | | | Director | | | | | | /s/ W. Austin Lewis* /s/ Thomas H. Tulip | | November 24, 2015January 26, 2016 | W. Austin Lewis, IVJohan M. (Thijs) Spoor | | | Director | | | | | | * /s/ Thomas H. Tulip | | November 24, 2015 | Andrew H. SassineW. Austin Lewis, IV | | | Director | | |
* By: Thomas H. Tulip, as attorney-in-fact
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