þ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 75-2402409 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. | ||||||||||||
Exhibit 32.1 | Certification by John A. Paganelli, Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. | |||||||||||
Exhibit 32.2 | Certification by David Hostelley, Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. | |||||||||||
EX-10.1 Separation Agreement | ||||||||||||
EX-10.2 Agreement Between eXegenics and D. Hostelley | ||||||||||||
EX-31.1 302 Certification for CEO | ||||||||||||
EX-31.2 302 Certification for CFO | ||||||||||||
EX-32.1 906 Certification for CEO | ||||||||||||
EX-32.2 906 Certification for CFO |
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June 30, | December 31, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 8,117 | $ | 8,734 | ||||
Restricted cash |
175 | 175 | ||||||
Marketable securities available for sale |
1,003 | 1,124 | ||||||
Prepaid expenses and other current assets |
51 | 35 | ||||||
Total current assets |
9,346 | 10,068 | ||||||
Other assets |
1 | 3 | ||||||
Total assets |
$ | 9,347 | $ | 10,071 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | 160 | $ | 239 | ||||
Total current liabilities |
160 | 239 | ||||||
Total liabilities |
160 | 239 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock $.01 par value, 10,000,000 shares
authorized; 1,020,047 and 935,332 shares of Series A
convertible preferred issued and outstanding
(liquidation value $2,550,000 and $2,338,000) |
10 | 9 | ||||||
Common stock $.01 par value, 30,000,000 shares
authorized; 16,877,818 and 16,869,031 shares issued |
169 | 169 | ||||||
Additional paid-in capital |
68,384 | 68,385 | ||||||
Accumulated other comprehensive income |
1,003 | 1,124 | ||||||
Subscriptions receivable, net of reserve |
(101 | ) | (302 | ) | ||||
Accumulated deficit |
(56,941 | ) | (56,216 | ) | ||||
Treasury stock, 611,200 shares of common stock, at cost |
(3,337 | ) | (3,337 | ) | ||||
Total stockholders equity |
9,187 | 9,832 | ||||||
Total liabilities and stockholders equity |
$ | 9,347 | $ | 10,071 | ||||
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Revenue: |
$ | | $ | | $ | | $ | | ||||||||
Operating Expenses: |
| | ||||||||||||||
General and administrative |
484 | 560 | 815 | 1,329 | ||||||||||||
484 | 560 | 815 | 1,329 | |||||||||||||
Operating loss |
(484 | ) | (560 | ) | (815 | ) | (1,329 | ) | ||||||||
Other (income) expense, primarily
interest |
(50 | ) | (29 | ) | (90 | ) | (59 | ) | ||||||||
Loss before provision (benefit) for taxes |
(434 | ) | (531 | ) | (725 | ) | (1,270 | ) | ||||||||
Provision (benefit) for taxes |
| | | | ||||||||||||
Net Loss |
(434 | ) | (531 | ) | (725 | ) | (1,270 | ) | ||||||||
Preferred stock dividend |
| | (234 | ) | (223 | ) | ||||||||||
Net loss attributable to
to common shareholders |
(434 | ) | (531 | ) | (959 | ) | (1,493 | ) | ||||||||
Net loss per share-basic and diluted |
(0.03 | ) | (0.03 | ) | (0.06 | ) | (0.09 | ) | ||||||||
Weighted average number of
shares outstanding basic and diluted |
16,878 | 15,871 | 16,264 | 15,871 | ||||||||||||
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Six Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (725 | ) | $ | (1,270 | ) | ||
Adjustments to reconcile net loss to net cash used in
operating activities: |
||||||||
Depreciation and amortization |
2 | 3 | ||||||
Reserve for Subscription Receivable |
201 | | ||||||
Value assigned to warrants, options and
compensatory stock |
| 138 | ||||||
Changes in: |
||||||||
Restricted Cash |
| 375 | ||||||
Prepaids and other assets |
(16 | ) | 422 | |||||
Accounts payable and accrued expenses |
(79 | ) | (808 | ) | ||||
Net cash used in operating activities |
(617 | ) | (1,140 | ) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from option exercises |
| 192 | ||||||
Net cash provided by financing activities |
| 192 | ||||||
NET DECREASE IN CASH |
(617 | ) | (948 | ) | ||||
Cash and cash equivalents at beginning of period |
8,734 | 10,132 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 8,117 | $ | 9,184 | ||||
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(1) | Financial Statement Presentation | |
The unaudited financial statements of eXegenics Inc., a Delaware corporation (the Company), included herein have been prepared in accordance with the rules and regulations promulgated by the Securities and Exchange Commission and, in the opinion of management, reflect all adjustments necessary to present fairly the results of operations for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, management believes that the disclosures are adequate to make the information presented not misleading. These financial statements and the notes thereto should be read in conjunction with the financial statements and the notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2004. The results for the interim periods are not necessarily indicative of the results for the full fiscal year. | ||
(2) | Cash, Cash Equivalents, Restricted Cash and Marketable Securities | |
The Company considers all non-restrictive, highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents, which amount to $8,117,000 and $8,734,000 at June 30, 2005 and December 31, 2004, respectively, consist principally of interest-bearing cash deposits. Restricted cash, which amounts to $175,000 and $175,000 at June 30, 2005 and December 31, 2004, respectively, consists of certificates of deposits that are used as collateral for equipment leases. | ||
The Company accounts for marketable securities in accordance with Statement of Financial Accounting Standards No. 115 Accounting for Certain Investments in Debt and Equity Securities (SFAS 115). SFAS 115 establishes the accounting and reporting requirements for all debt securities and for investments in equity securities that have readily determinable fair values. All marketable securities must be classified as one of the following: held-to-maturity, available-for-sale, or trading. The Company classifies its marketable securities as available-for sale and, as such, carries the investments at fair value, with unrealized holding gains and losses reported in stockholders equity as a separate component of accumulated other comprehensive income (loss). The cost of securities sold is determined based on the specific identification method. Realized gains and losses, and declines in value judged to be other than temporary, are included in investment income. | ||
The Companys marketable securities consist of equity securities in Intrac, Inc. stock, which, as of June 30, 2005, were not fully tradable as we were awaiting effective registration of the stock. On or about July 2005 a registration statement filed by Intrac, Inc. was declared effective by the Securities and Exchange Commission permitting the resale, by the Company, of these shares of Intrac, Inc. common stock. Intrac, Inc. stock is traded on the over the counter bulletin board under the symbol ITRD.OB. As of June 30, 2005 and December 31, 2004, the fair value of the Companys investment in these securities was equal to approximately $1,003,000 and $1,124,000, respectively and corresponding unrealized gains were included as a component of other comprehensive income. The Companys investments involve the risk of loss, price volatility and other uncertainties and, as such, the results of operations can vary substantially each year. | ||
(3) | Loss Per Common Share | |
Basic and diluted loss per common share is based on the net loss increased by dividends on preferred stock divided by the weighted average number of common shares outstanding during the period. No effect has been given to outstanding options, warrants or convertible preferred stock in the diluted computation, as their effect would be antidilutive. |
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(4) | Stock-Based Compensation | |
The Company accounts for stock-based compensation according to Accounting Principles Board Opinion No. 25 and the related interpretations under Financial Accounting Standards Board (FASB) Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation. The Company adopted the required disclosure provisions under Statement of Financial Accounting Standards No. 148 and continues to use the intrinsic value method of accounting for stock-based compensation. No options to purchase shares of common stock were granted in return for consulting services for the six months ended June 30, 2005 and June 30, 2004. | ||
The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of SFAS Statement No. 123, Accounting for Stock-Based Compensation, to stock-based compensation. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net loss attributable to
common stockholders as
reported |
$ | (434 | ) | $ | (531 | ) | $ | (959 | ) | $ | (1,493 | ) | ||||
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects |
(1 | ) | (14 | ) | (7 | ) | (36 | ) | ||||||||
Pro forma net loss |
$ | (435 | ) | $ | (545 | ) | $ | (966 | ) | $ | (1,529 | ) | ||||
Earnings per share: |
||||||||||||||||
Basic and diluted-as reported |
$ | (0.03 | ) | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.09 | ) | ||||
Basic-pro forma |
$ | (0.03 | ) | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.10 | ) | ||||
(5) | Comprehensive Income | |
SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive income and its components within the financial statements. Other comprehensive income is comprised of charges to stockholders equity, other than contributions from or distributions to stockholders, excluded from the determination of net income. For the six months ended June 30, 2005, the Companys accumulated other comprehensive income decreased by $121,000 as a result of a reduction in the fair value of available for sale marketable securities. | ||
(6) | Dividends | |
During the six month periods ended June 30, 2005 and June 30, 2004, 10% preferred stock dividends were declared equal to $234,000 and $223,000 respectively. |
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(7) | Subscriptions Receivable | |
In May, 2001, the Company entered into a limited recourse note and pledge agreement with a former President and Chief Executive Officer (Dr. Ronald Goode) in connection with a stock subscription arrangement. The amount of this note is $300,000 plus 4.71% interest paid on a semi-annual basis. Dr. Goode failed to make the semi-annual interest payment due May 2005. The Company is in discussion with Dr. Goode relative to the interest payment due and the status of the note. During the second quarter period ended June 30, 2005, the Company created a reserve and the subscription receivable balance on June 30, 2005 is presented net, equal to the value of the underlying collateral. | ||
(8) | Recently Issued Accounting Standards | |
In December 2004, the FASB issued FASB Staff Position 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes (SFAS No. 109) to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004 (FSP 109-1). The American Jobs Creation Act of 2004 (the Jobs Act) enacted October 22, 2004, provides a tax deduction for income from qualified domestic production activities. FSP 109-1 provides the treatment for the deduction as a special deduction as described in SFAS No. 109. FSP 109-1 is effective prospectively as of January 1, 2005. The Company is currently evaluating the effect that the manufacturers deduction will have on the future results and has completed a preliminary evaluation of the impact the deduction for qualified production activities will have on its effective tax rate for 2005. | ||
In December 2004, the FASB issued FASB Staff Position 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Action of 2004 (FSP 109-2), which provides guidance under SFAS No. 109 with respect to recording the potential impact of the repatriation provisions of the Jobs Act on enterprises income tax expense and deferred tax liability. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on it plan for reinvestment or repatriation of foreign earnings for purposes of applying FASB Statement No. 109. The Company has not yet completed evaluating the impact of the repatriation provisions and has not adjusted its tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act. | ||
In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Retirement Obligations, an interpretation of FASB Statement No. 143 (FIN 47), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the |
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liabilities fair value can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company does not expect the adoption of this Interpretation to have a material impact on its consolidated financial statements. |
In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections-a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154). This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 requires retrospective application to prior periods financial statements for changes in accounting principle, unless it is impractical to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that a change in depreciation, amortization, or depletion method for long, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. SFAS is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company believes that adoption of the provisions of SFAS 154 will not have a material effect on the Companys consolidated financial statements. | ||
In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB 25. Among other items, SFAS 123R eliminates the use of APB 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS 123R is the first reporting period beginning after June 15, 2005, which is third quarter 2005 for calendar year companies, although early adoption is allowed. However, on April 14, 2005, the Securities and Exchange Commission (SEC) announced that the effective date of SFAS 123R will be suspended until January 1, 2006, for calendar year companies. | ||
SFAS 123R permits companies to adopt its requirements using either a modified prospective method, or a modified retrospective method. Under the modified prospective method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS 123R for all share-based payments granted after that date, and based on the requirements of SFAS 123 for all unvested awards granted prior to the effective date of SFAS 123R. Under the modified retrospective method, the requirements are the same as under the modified prospective method, but also permits entities to restate financial statements of previous periods based on proforma disclosures made in accordance with SFAS 123. | ||
The Company currently utilizes a standard option pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS 123R permits entities to continue to use such a model, the standard also permits the use of a lattice model. The Company has not yet determined which model it will use to measure the fair value of employee stock options upon the adoption of SFAS 123R. | ||
SFAS 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts cannot be estimated because they depend on, among other things, when employees exercise stock options. | ||
The Company currently expects to adopt SFAS 123R effective January 1, 2006, based on the new effective date announced by the SEC; however, the Company has not yet determined which of the aforementioned adoption methods it will use. In addition, the Company has not yet determined the financial statement impact of adopting SFAS 123R for periods beyond 2005. | ||
(9) | Subsequent Events | |
On or about July 2005 a registration statement filed by Intrac, Inc. was declared effective by the Securities and |
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Exchange Commission permitting the resale, by the Company, of the of Intrac, Inc. common stock. |
On June 29, 2005, the Company and David E. Riggs mutually agreed that Mr. Riggs would relinquish his duties as President, Chief Executive and Chief Financial Officer of the Company. Chairman of the Board, John A. Paganelli assumed the role of Interim Chief Executive Officer and Interim Chief Financial Officer. On or about July 2005 the Company entered into a Separation Agreement with David Riggs (our former President, Chief Financial Officer and Chief Executive Officer). | ||
On July 1, 2005, the Company Board of Directors appointed Dr. David F. Hostelley to the position of Chief Financial Officer. |
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
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Exhibit 10.1
|
Separation Agreement dated July 26, 2005 between eXegenics, Inc. and David Riggs. | |
Exhibit 10.2
|
Agreement dated July 20, 2005 between the eXegenics, Inc. and David Hostelley. | |
Exhibit 31.1
|
Certification by John Paganelli, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. | |
Exhibit 31.2
|
Certification by David Hostelley, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. | |
Exhibit 32.1
|
Certification by John Paganelli, Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. | |
Exhibit 32.2
|
Certification by David Hostelley, Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. |
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eXegenics Inc. |
|||||
Date: August 15, 2005 |
|||||
/s/ John A. Paganelli | |||||
John A. Paganelli | |||||
Chairman of the Board, | |||||
Chief Executive Officer (Interim) | |||||
/s/ David Hostelley | |||||
David Hostelley | |||||
Chief Financial Officer |
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EXHIBIT | ||
NUMBER | DESCRIPTION | |
Exhibit 10.1
|
Separation Agreement dated July 26, 2005 between eXegenics, Inc. and David Riggs. | |
Exhibit 10.2
|
Agreement dated July 20, 2005 between the eXegenics, Inc. and David Hostelley. | |
Exhibit 31.1
|
Certification by John A. Paganelli, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. | |
Exhibit 31.2
|
Certification by David Hostelley, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. | |
Exhibit 32.1
|
Certification by John A. Paganelli, Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. | |
Exhibit 32.2
|
Certification by David Hostelley, Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2005. |
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