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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Nevada
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87-0449967
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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Title of Each Class
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Name of Exchange on Which Registered
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Common Stock, par value $.001
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The Nasdaq Capital Market
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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o
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(do not check if a smaller reporting company)
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Smaller reporting company
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ý
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Emerging growth company
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o
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Page
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June 30,
2018 |
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December 31,
2017 |
||||
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(Unaudited)
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||||
Assets
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||||
Current assets
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||||
Cash
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$
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6,836
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$
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6,331
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Prepaid expenses and other current assets
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294
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261
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Total current assets
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7,130
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6,592
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Property and equipment, net
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56
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79
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Other long term assets
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36
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35
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Total assets
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$
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7,222
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$
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6,706
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Liabilities and stockholders’ equity
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Current liabilities
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Accounts payable
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$
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1,054
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$
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58
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Accrued expenses
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454
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|
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650
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Accrued compensation
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374
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863
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Deferred revenue
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—
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12
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Current liabilities of discontinued operations
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21
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—
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Total current liabilities
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1,903
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1,583
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Warrant liabilities
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—
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694
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Other long term liabilities
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35
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58
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|
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Total liabilities
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1,938
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2,335
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Commitments and contingencies (note 7)
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Stockholders’ equity
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||||
Preferred stock, $.001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of June 30, 2018 and December 31, 2017
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—
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—
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Common stock, $.001 par value, 60,000,000 and 30,000,000 shares authorized, 23,441,449 and 15,217,231 issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
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23
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15
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Additional paid-in-capital
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325,796
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320,343
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Accumulated deficit
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(320,535
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)
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(315,987
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)
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Total stockholders’ equity
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5,284
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4,371
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Total liabilities and stockholders’ equity
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$
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7,222
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$
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6,706
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
||||||||||||
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2018
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2017
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2018
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2017
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||||||||
Operating expense
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|
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||||||||
Research and development
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$
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162
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$
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839
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$
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379
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$
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1,266
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General and administrative
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2,075
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1,602
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4,210
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3,043
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Total operating expense
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2,237
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2,441
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4,589
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4,309
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Loss before other income (expense)
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(2,237
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)
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(2,441
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)
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(4,589
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)
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(4,309
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)
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||||
Other income (expense)
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||||||||
Interest income (expense), net
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—
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3
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—
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(92
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)
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||||
Loss on extinguishment of debt
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—
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—
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—
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(422
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)
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||||
Change in fair value of warrant liability
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—
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716
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222
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(292
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)
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||||
Amendment of equity classified warrants
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(17
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)
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—
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(158
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)
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—
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||||
Other income (expense), net
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1
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—
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1
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(26
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)
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||||
Total other income (expense)
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(16
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)
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719
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65
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(832
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)
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Loss from continuing operations
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(2,253
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)
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(1,722
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)
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(4,524
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)
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(5,141
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)
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Income (loss) from discontinued operations
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(24
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)
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248
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(24
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)
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11,740
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Net income (loss)
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$
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(2,277
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)
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$
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(1,474
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)
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$
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(4,548
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)
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$
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6,599
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Basic and diluted earnings (loss) per share
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|
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Continuing operations
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$
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(0.10
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)
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$
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(0.15
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)
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$
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(0.23
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)
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$
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(0.54
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)
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Discontinued operations
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$
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—
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$
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0.02
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$
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—
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$
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1.23
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Total earnings (loss) per share
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$
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(0.10
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)
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$
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(0.13
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)
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$
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(0.23
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)
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$
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0.69
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|||||||
Weighted average common shares outstanding for basic and diluted earnings (loss) per share
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23,362
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11,335
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19,648
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9,547
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For the Six Months Ended
June 30, |
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2018
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2017
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Cash flows from operating activities:
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Net income (loss)
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$
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(4,548
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)
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$
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6,599
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Net income (loss) from discontinued operations
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(24
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)
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11,740
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Net loss from continuing operations
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(4,524
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)
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(5,141
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)
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Adjustments to reconcile net income (loss) to net cash used in operating activities from continuing operations:
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||||
Depreciation and amortization
|
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23
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|
77
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|
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Non-cash interest expense
|
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—
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|
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56
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|
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Stock-based compensation expense
|
|
556
|
|
|
572
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|
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Warrant liabilities revaluation
|
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(222
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)
|
|
292
|
|
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Loss on debt extinguishment
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|
—
|
|
|
422
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|
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Amendment of equity classified warrants
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158
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|
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—
|
|
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Changes in operating assets and liabilities from continuing operations:
|
|
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|
|
||||
Prepaid expenses and other current assets
|
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(33
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)
|
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(145
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)
|
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Other assets
|
|
(1
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)
|
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14
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|
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Accounts payable
|
|
996
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|
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(547
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)
|
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Accrued expenses
|
|
(294
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)
|
|
(478
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)
|
||
Accrued compensation
|
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(489
|
)
|
|
43
|
|
||
Deferred revenue
|
|
(12
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)
|
|
—
|
|
||
Other liabilities
|
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(23
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)
|
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(16
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)
|
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Net cash used in operating activities from continuing operations
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(3,865
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)
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(4,851
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)
|
||
Cash flows from financing activities from continuing operations:
|
|
|
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|
||||
Proceeds from exercise of warrants
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1,275
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|
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—
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|
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Issuance of common stock and warrants
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|
3,550
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|
|
6,866
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|
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Issuance costs related to common stock and warrants
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(452
|
)
|
|
(788
|
)
|
||
Repayment of notes payable
|
|
—
|
|
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(7,129
|
)
|
||
Net cash provided by (used in) financing activities from continuing operations
|
|
4,373
|
|
|
(1,051
|
)
|
||
Cash flows from discontinued operations:
|
|
|
|
|
||||
Net cash used in operating activities of discontinued operations
|
|
(3
|
)
|
|
(114
|
)
|
||
Net cash provided by investing activities of discontinued operations
|
|
—
|
|
|
11,750
|
|
||
Net cash provided by (used in) discontinued operations
|
|
(3
|
)
|
|
11,636
|
|
||
Net increase in cash
|
|
505
|
|
|
5,734
|
|
||
Cash, beginning of period
|
|
6,331
|
|
|
2,087
|
|
||
Cash, end of period
|
|
$
|
6,836
|
|
|
$
|
7,821
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
||||
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
92
|
|
Non-cash investing and financing activities:
|
|
|
|
|
||||
Accrued transaction costs for financing activities
|
|
$
|
(98
|
)
|
|
$
|
(135
|
)
|
Issuance of placement agent warrants
|
|
$
|
105
|
|
|
$
|
176
|
|
Reclassification of warrant liabilities to equity
|
|
$
|
472
|
|
|
$
|
798
|
|
|
|
Common
Stock (Shares) |
|
Common
Stock (Amount) |
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Total
Stockholders’ Equity |
|||||||||
Balance as of December 31, 2017
|
|
15,217
|
|
|
$
|
15
|
|
|
$
|
320,343
|
|
|
$
|
(315,987
|
)
|
|
$
|
4,371
|
|
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
556
|
|
|
|
|
|
556
|
|
||||
Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes
|
|
83
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Proceeds from exercise of warrants
|
|
1,041
|
|
|
1
|
|
|
1,274
|
|
|
—
|
|
|
1,275
|
|
||||
Issuance of common stock and warrants
|
|
7,100
|
|
|
7
|
|
|
3,543
|
|
|
—
|
|
|
3,550
|
|
||||
Issuance costs related to common stock and warrants
|
|
—
|
|
|
—
|
|
|
(550
|
)
|
|
—
|
|
|
(550
|
)
|
||||
Amendment of equity classified warrants
|
|
—
|
|
|
—
|
|
|
158
|
|
|
—
|
|
|
158
|
|
||||
Reclassification of warrant liabilities to equity
|
|
—
|
|
|
—
|
|
|
472
|
|
|
—
|
|
|
472
|
|
||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,548
|
)
|
|
(4,548
|
)
|
||||
Balance as of June 30, 2018
|
|
23,441
|
|
|
$
|
23
|
|
|
$
|
325,796
|
|
|
$
|
(320,535
|
)
|
|
$
|
5,284
|
|
•
|
its ability to successfully complete the Merger with Seelos or, if the Merger is not completed, another strategic transaction for the Company;
|
•
|
its ability to raise additional funds to finance its operations;
|
•
|
its ability to secure a development partner for U.S. Vitaros in order to overcome deficiencies raised in the 2018 CRL;
|
•
|
its ability to maintain compliance with the listing requirements of The Nasdaq Capital Market (“Nasdaq”);
|
•
|
the outcome, costs and timing of clinical trial results for the Company’s current or future product candidates;
|
•
|
the extent and amount of any indemnification claims made by Ferring under the Ferring Asset Purchase Agreement;
|
•
|
litigation expenses, including the ongoing litigation with Laboratoires Majorelle SAS and Majorelle International SARL;
|
•
|
the emergence and effect of competing or complementary products;
|
•
|
its ability to maintain, expand and defend the scope of its intellectual property portfolio, including the amount and timing of any payments the Company may be required to make, or that it may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
|
•
|
its ability to retain its current employees and the need and ability to hire additional management and scientific and medical personnel;
|
•
|
the terms and timing of any collaborative, licensing or other arrangements that it has or may establish;
|
•
|
the trading price of its common stock; and
|
•
|
its ability to increase the number of authorized shares outstanding to facilitate future financing events.
|
|
|
Warrant liabilities
|
||
Balance as of December 31, 2017
|
|
$
|
694
|
|
Change in fair value measurement of warrant liability
|
|
(222
|
)
|
|
Warrant liability reclassified to stockholders' equity
|
|
(472
|
)
|
|
Balance as of June 30, 2018
|
|
$
|
—
|
|
|
|
As of June 30,
|
||||
|
|
2018
|
|
2017
|
||
Outstanding stock options
|
|
1,064
|
|
|
400
|
|
Outstanding warrants
|
|
9,415
|
|
|
6,095
|
|
Restricted stock units
|
|
581
|
|
|
934
|
|
|
|
June 30, 2018
|
||
Risk-free interest rate
|
|
2.27%-2.29%
|
|
|
Volatility
|
|
98.09%-105.01%
|
|
|
Dividend yield
|
|
—
|
%
|
|
Expected term
|
|
5-6.08 years
|
|
|
Forfeiture rate
|
|
—
|
%
|
|
Weighted average grant date fair value
|
|
$
|
1.66
|
|
|
|
Number of
Shares |
|
Weighted
Average Exercise Price |
|||
Outstanding as of December 31, 2017
|
|
369
|
|
|
$
|
17.37
|
|
Granted
|
|
695
|
|
|
$
|
2.11
|
|
Outstanding as of June 30, 2018
|
|
1,064
|
|
|
$
|
7.40
|
|
|
|
Number of
Shares |
|
Weighted Average Grant Date Fair Value
|
|||
Unvested as of December 31, 2017
|
|
718
|
|
|
$
|
1.57
|
|
Vested
|
|
(137
|
)
|
|
$
|
2.25
|
|
Unvested as of June 30, 2018
|
|
581
|
|
|
$
|
1.41
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Research and development
|
|
$
|
37
|
|
|
$
|
85
|
|
|
$
|
78
|
|
|
$
|
137
|
|
General and administrative
|
|
219
|
|
|
202
|
|
|
478
|
|
|
435
|
|
||||
Total
|
|
$
|
256
|
|
|
$
|
287
|
|
|
$
|
556
|
|
|
$
|
572
|
|
Upfront payment received
|
$
|
11,500
|
|
Transition services payments
|
500
|
|
|
Payment received for inventory
|
709
|
|
|
Total proceeds from sale
|
$
|
12,709
|
|
Carrying value of assets sold in sale
|
(1,578
|
)
|
|
Liabilities transferred upon sale
|
1,186
|
|
|
Total gain on sale of Purchased Assets
|
$
|
12,317
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Product sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
143
|
|
Royalty revenue
|
—
|
|
|
147
|
|
|
—
|
|
|
368
|
|
||||
Cost of goods sold
|
(24
|
)
|
|
—
|
|
|
(24
|
)
|
|
(74
|
)
|
||||
Operating expenses
|
—
|
|
|
(149
|
)
|
|
—
|
|
|
(748
|
)
|
||||
Other expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
||||
Gain on sale
|
—
|
|
|
250
|
|
|
—
|
|
|
12,067
|
|
||||
Income from discontinued operations
|
$
|
(24
|
)
|
|
$
|
248
|
|
|
$
|
(24
|
)
|
|
$
|
11,740
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
Professional fees
|
$
|
379
|
|
|
$
|
575
|
|
Outside research and development services
|
21
|
|
|
61
|
|
||
Other
|
54
|
|
|
14
|
|
||
|
$
|
454
|
|
|
$
|
650
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
Deferred rent
|
$
|
16
|
|
|
$
|
46
|
|
Security deposit
|
12
|
|
|
12
|
|
||
Other
|
7
|
|
|
—
|
|
||
|
$
|
35
|
|
|
$
|
58
|
|
|
Common Shares
Issuable upon Exercise |
|
Weighted
Average Exercise Price |
|||
Outstanding as of December 31, 2017
|
7,084
|
|
|
$
|
3.91
|
|
Issued
|
3,905
|
|
|
$
|
0.51
|
|
Exercised
|
(1,041
|
)
|
|
$
|
1.48
|
|
Cancelled
|
(533
|
)
|
|
19.81
|
|
|
Outstanding as of June 30, 2018
|
9,415
|
|
|
$
|
0.96
|
|
Exercisable as of June 30, 2018
|
9,415
|
|
|
$
|
0.96
|
|
Shares Issuable Upon Exercise
|
|
Exercise Price
|
|
Expiration Date
|
|||
1,103
|
|
|
$
|
0.60
|
|
|
March 2020
|
252
|
|
|
$
|
1.75
|
|
|
April 2022
|
3,251
|
|
|
$
|
1.55
|
|
|
May 2022
|
89
|
|
|
$
|
0.71
|
|
|
January 2023
|
340
|
|
|
$
|
0.42
|
|
|
January 2023
|
109
|
|
|
$
|
0.71
|
|
|
March 2023
|
332
|
|
|
$
|
0.42
|
|
|
March 2023
|
355
|
|
|
$
|
0.625
|
|
|
March 2023
|
3,550
|
|
|
$
|
0.50
|
|
|
May 2023
|
19
|
|
|
$
|
12.90
|
|
|
October 2024
|
15
|
|
|
$
|
16.40
|
|
|
July 2025
|
9,415
|
|
|
|
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
our ability to successfully complete the Merger with Seelos or, if the Merger is not completed, another strategic transaction for the Company;
|
•
|
our ability to raise additional funds to finance our operations;
|
•
|
our ability to secure a development partner for U.S. Vitaros in order to overcome deficiencies raised in the 2018 CRL;
|
•
|
our ability to maintain compliance with the listing requirements of Nasdaq;
|
•
|
the outcome, costs and timing of any clinical trial results for our current or future product candidates;
|
•
|
the extent and amount of any indemnification claims made by Ferring under the Ferring Asset Purchase Agreement;
|
•
|
litigation expenses, including the ongoing litigation with Laboratoires Majorelle SAS and Majorelle International SARL;
|
•
|
the emergence and effect of competing or complementary products;
|
•
|
our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
|
•
|
our ability to retain our current employees and the need and ability to hire additional management and scientific and medical personnel;
|
•
|
the terms and timing of any collaborative, licensing or other arrangements that we have or may establish;
|
•
|
the trading price of our common stock; and
|
•
|
our ability to increase the number of authorized shares outstanding to facilitate future financing events.
|
|
Three Months Ended June 30,
|
|
2018 vs 2017
|
|
Six Months Ended
June 30, |
|
2018 vs 2017
|
||||||||||||||||||||||
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
||||||||||||||
Operating expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Research and development
|
$
|
162
|
|
|
$
|
839
|
|
|
$
|
(677
|
)
|
|
(81
|
)%
|
|
$
|
379
|
|
|
$
|
1,266
|
|
|
$
|
(887
|
)
|
|
(70
|
)%
|
General and administrative
|
2,075
|
|
|
1,602
|
|
|
473
|
|
|
30
|
%
|
|
4,210
|
|
|
3,043
|
|
|
1,167
|
|
|
38
|
%
|
||||||
Total operating expense
|
2,237
|
|
|
2,441
|
|
|
(204
|
)
|
|
(8
|
)%
|
|
4,589
|
|
|
4,309
|
|
|
280
|
|
|
6
|
%
|
||||||
Loss before other income (expense)
|
$
|
(2,237
|
)
|
|
$
|
(2,441
|
)
|
|
$
|
204
|
|
|
(8
|
)%
|
|
$
|
(4,589
|
)
|
|
$
|
(4,309
|
)
|
|
$
|
(280
|
)
|
|
6
|
%
|
|
Three Months Ended June 30,
|
|
2018 vs 2017
|
|
Six Months Ended
June 30, |
|
2018 vs 2017
|
||||||||||||||||||||||
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
||||||||||||||
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income (expense), net
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
(3
|
)
|
|
(100
|
)%
|
|
$
|
—
|
|
|
$
|
(92
|
)
|
|
$
|
92
|
|
|
(100
|
)%
|
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
N/M
|
|
|
—
|
|
|
(422
|
)
|
|
422
|
|
|
(100
|
)%
|
|||||
Change in fair value of warrant liability
|
—
|
|
|
716
|
|
|
(716
|
)
|
|
(100
|
)%
|
|
222
|
|
|
(292
|
)
|
|
514
|
|
|
(176
|
)%
|
||||||
Amendment of equity classified warrants
|
(17
|
)
|
|
—
|
|
|
(17
|
)
|
|
N/M
|
|
|
(158
|
)
|
|
—
|
|
|
(158
|
)
|
|
N/M
|
|
||||||
Other income (expense), net
|
1
|
|
|
—
|
|
|
1
|
|
|
N/M
|
|
|
1
|
|
|
(26
|
)
|
|
27
|
|
|
(104
|
)%
|
||||||
Total other income (expense)
|
$
|
(16
|
)
|
|
$
|
719
|
|
|
$
|
(735
|
)
|
|
(102
|
)%
|
|
$
|
65
|
|
|
$
|
(832
|
)
|
|
$
|
897
|
|
|
(108
|
)%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Product sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
143
|
|
Royalty revenue
|
—
|
|
|
147
|
|
|
—
|
|
|
368
|
|
||||
Cost of goods sold
|
(24
|
)
|
|
—
|
|
|
(24
|
)
|
|
(74
|
)
|
||||
Operating expenses
|
—
|
|
|
(149
|
)
|
|
—
|
|
|
(748
|
)
|
||||
Other expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
||||
Gain on sale
|
—
|
|
|
250
|
|
|
—
|
|
|
12,067
|
|
||||
Income from discontinued operations
|
$
|
(24
|
)
|
|
$
|
248
|
|
|
$
|
(24
|
)
|
|
$
|
11,740
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2018
|
|
2017
|
||||
Net cash used in operating activities from continuing operations
|
|
$
|
(3,865
|
)
|
|
$
|
(4,851
|
)
|
Net cash provided by (used in) financing activities from continuing operations
|
|
4,373
|
|
|
(1,051
|
)
|
||
Net cash provided by (used in) discontinued operations
|
|
(3
|
)
|
|
11,636
|
|
||
Net increase in cash
|
|
$
|
505
|
|
|
$
|
5,734
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
•
|
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
|
•
|
difficulties in achieving identified financial revenue synergies, growth opportunities, operating synergies and cost savings;
|
•
|
difficulties in assimilating the personnel, operations and products of an acquired company, and the potential loss of key employees;
|
•
|
difficulties in consolidating information technology platforms, business applications and corporate infrastructure;
|
•
|
difficulties in integrating our corporate culture with local customs and cultures;
|
•
|
possible overlap between our products or customers and those of an acquired entity that may create conflicts in relationships or other commitments detrimental to the integrated businesses;
|
•
|
our inability to achieve expected revenues and gross margins for any products we may acquire;
|
•
|
the diversion of management’s attention from other business concerns;
|
•
|
risks and challenges of entering or operating in markets in which we have limited or no prior experience, including the unanticipated effects of export controls, exchange rate fluctuations, foreign legal and regulatory requirements, and foreign political and economic conditions; and
|
•
|
difficulties in reorganizing, winding-down or liquidating operations if not successful.
|
•
|
collaborators may not have sufficient resources or may decide not to devote the necessary resources due to internal constraints such as budget limitations, lack of human resources, or a change in strategic focus;
|
•
|
collaborators may believe our intellectual property is not valid or is unenforceable or the product candidate infringes on the intellectual property rights of others;
|
•
|
collaborators may dispute their responsibility to conduct development and commercialization activities pursuant to the applicable collaboration, including the payment of related costs or the division of any revenues;
|
•
|
collaborators may decide to pursue a competitive product developed outside of the collaboration arrangement;
|
•
|
collaborators may not be able to obtain, or believe they cannot obtain, the necessary regulatory approvals;
|
•
|
collaborators may delay the development or commercialization of our product candidates in favor of developing or commercializing their own or another party’s product candidate; or
|
•
|
collaborators may decide to terminate or not to renew the collaboration for these or other reasons.
|
•
|
an annual, nondeductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents;
|
•
|
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
|
•
|
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
|
•
|
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts, which, through subsequent legislative amendments, was increased to 70%, off negotiated prices of applicable brand drugs to eligible beneficiaries under their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
|
•
|
extension of manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations;
|
•
|
expansion of eligibility criteria for Medicaid programs;
|
•
|
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
|
•
|
a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
|
•
|
the availability of financial resources for our partners to commence and complete the planned clinical trials;
|
•
|
reaching agreement on acceptable terms and pricing with prospective contract research organizations (“CROs”) and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;
|
•
|
obtaining independent institutional review board (“IRB”) approval at each clinical trial site;
|
•
|
obtaining regulatory approval to commence clinical trials in each country;
|
•
|
recruiting a sufficient number of eligible patients to participate in a clinical trial;
|
•
|
having patients complete a clinical trial or return for post-treatment follow-up;
|
•
|
clinical trial sites deviating from trial protocol or dropping out of a trial;
|
•
|
adding new clinical trial sites; or
|
•
|
manufacturing sufficient quantities of our product candidate for use in clinical trials.
|
•
|
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
|
•
|
we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidates are safe and effective for any of the proposed indications;
|
•
|
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
|
•
|
we may be unable to demonstrate that our product candidates’ clinical and other benefits outweigh their safety risks;
|
•
|
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
|
•
|
the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to support the submission of an NDA or other comparable submission in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere;
|
•
|
the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;
|
•
|
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval; and
|
•
|
even after following regulatory guidance or advice, the FDA or comparable foreign regulatory authorities may still reject our ultimate regulatory submissions since their guidance is generally considered non-binding and the regulatory authorities have the authority to revise or adopt new and different guidance at any time.
|
•
|
restrictions on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory product recalls;
|
•
|
fines, warning letters or holds on clinical trials;
|
•
|
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;
|
•
|
product seizure or detention, or refusal to permit the import or export of our product candidates; and
|
•
|
injunctions or the imposition of civil or criminal penalties.
|
•
|
the federal Anti-Kickback Statute which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
|
•
|
the federal False Claims Act, which imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
|
•
|
the federal HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;
|
•
|
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
|
•
|
the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the government information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members and payments or other “transfers of value” to such physician owners (manufacturers are required to submit reports to the government by the 90
th
day of each calendar year); and
|
•
|
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
|
•
|
regulatory authorities may withdraw approvals of such product;
|
•
|
regulatory authorities may require additional warnings on the label;
|
•
|
we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
|
•
|
we could be sued and held liable for harm caused to patients; and
|
•
|
our reputation may suffer.
|
ITEM 6.
|
EXHIBITS
|
EXHIBITS
NO. |
|
DESCRIPTION
|
|
|
|
|
Stock Purchase Agreement, dated December 15, 2011, by and among Apricus Biosciences Inc., TopoTarget A/S, and TopoTarget USA, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2012).
|
|
|
|
|
|
Stock Contribution Agreement, dated June 19, 2012, by and among Apricus Biosciences, Inc., Finesco SAS, Scomedica SA and the shareholders of Finesco named therein (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report Form 8-K filed with the Securities and Exchange Commission on July 13, 2012).
|
|
|
|
|
|
Asset Purchase Agreement by and between Apricus Pharmaceuticals USA, Inc. and Biocodex, Inc., dated March 26, 2013 (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2013).
|
|
|
|
|
|
Amendment to Stock Purchase Agreement, dated June 13, 2014, by and between Apricus Biosciences, Inc. and Samm Solutions, Inc. (doing business as BTS Research and formerly doing business as BioTox Sciences) (incorporated herein by reference to Exhibit 2.1 to the Company’s Form 10-Q filed with Securities and Exchange Commission on August 11, 2014).
|
|
|
|
|
|
Agreement and Plan of Merger, dated July 30, 2018, by and among Apricus Biosciences, Inc., Arch Merger Sub, Inc. and Seelos Therapeutics, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Form 8-K filed with Securities and Exchange Commission on July 30, 2018).
|
|
|
|
|
|
Form of Support Agreement, by and between Apricus Biosciences, Inc., Seelos Therapeutics, Inc. and certain stockholders of Apricus Biosciences, Inc. (incorporated herein by reference to Exhibit 2.2 to the Company’s Form 8-K filed with Securities and Exchange Commission on July 30, 2018).
|
|
|
|
|
|
Support Agreement, dated July 30, 2018, by and between Apricus Biosciences, Inc., Seelos Therapeutics, Inc. and Raj Mehra (incorporated herein by reference to Exhibit 2.3 to the Company’s Form 8-K filed with Securities and Exchange Commission on July 30, 2018).
|
|
|
|
|
|
Amended and Restated Articles of Incorporation of Apricus Biosciences, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on March 14, 1997).
|
|
|
|
|
|
Certificate of Amendment to Articles of Incorporation of Apricus Biosciences, Inc., dated June 22, 2000 (incorporated herein by reference to Exhibit 3.2 to the Company’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2003).
|
|
Certificate of Amendment to Articles of Incorporation of Apricus Biosciences, Inc., dated June 14, 2005 (incorporated herein by reference to Exhibit 3.4 to the Company’s Form 10-K filed with the Securities and Exchange Commission on March 16, 2006).
|
|
|
|
|
|
Certificate of Amendment to Amended and Restated Articles of Incorporation of Apricus Biosciences, Inc., dated March 3, 2010 (incorporated herein by reference to Exhibit 3.6 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010).
|
|
|
|
|
|
Certificate of Correction to Certificate of Amendment to Amended and Restated Articles of Incorporation of Apricus Biosciences, Inc., dated March 3, 2010 (incorporated herein by reference to Exhibit 3.7 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010).
|
|
Certificate of Designation for Series D Junior-Participating Cumulative Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-A12GK filed with the Securities and Exchange Commission on March 24, 2011).
|
|
|
|
|
|
Certificate of Change filed with the Nevada Secretary of State (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 17, 2010).
|
|
|
|
|
|
Certificate of Amendment to Amended and Restated Articles of Incorporation of Apricus Biosciences, Inc., dated September 10, 2010 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2010).
|
|
|
|
|
|
Certificate of Withdrawal of Series D Junior Participating Cumulative Preferred Stock, dated May 15, 2013 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2013).
|
|
|
|
|
|
Certificate of Change filed with the Nevada Secretary of State (incorporated herein by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 25, 2016).
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Certificate of Amendment filed with the Nevada Secretary of State (incorporated herein by reference to Exhibit 3.10 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 2, 2017).
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Certificate of Amendment filed with the Nevada Secretary of State
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Fourth Amended and Restated Bylaws, dated December 18, 2012 (incorporated herein by reference to Exhibit 3.9 to the Company’s Form 10-K filed with the Securities and Exchange Commission on March 18, 2013).
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Amendment to the Fourth Amended and Restated Bylaws of Apricus Biosciences, Inc., dated January 11, 2016 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 13, 2016).
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Second Amendment to the Fourth Amended and Restated Bylaws of Apricus Biosciences, Inc., dated March 3, 2016 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2016).
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Form of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 24, 2011).
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Form of Warrant (incorporated herein by reference to Exhibit 1.1 to the Company’s Current Report on From 8-K filed with the Securities and Exchange Commission on May 24, 2013).
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Form of Warrant issued to the lenders under the Loan and Security Agreement, dated as of October 17, 2014, by and among Apricus Biosciences, Inc., NexMed (U.S.A.), Inc., NexMed Holdings, Inc. and Apricus Pharmaceuticals USA, Inc., as borrowers, Oxford Finance LLC, as collateral agent, and the lenders party thereto from time to time including Oxford Finance LLC and Silicon Valley Bank. (incorporated herein by reference to Exhibit 4.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 20, 2014).
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Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2015).
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Form of Warrant issued to Sarissa Capital Domestic Fund LP and Sarissa Capital Offshore Master Fund LP (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 13, 2016).
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Form of Warrant issued to other purchasers (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 13, 2016).
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Form of Warrant Amendment (incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 13, 2016).
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Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 28, 2016).
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Form of Warrant Amendment (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 21, 2017).
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Form of Warrant (incorporated herein by reference to Exhibit 4.9 of Amendment No. 1 to Company’s Registration Statement on Form S-1 (File No. 333-217036) filed with the Securities and Exchange Commission on April 17, 2017).
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Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 11, 2017).
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Form of Indenture (incorporated herein by reference to Exhibit 4.13 to the Company’s Form S-3 (File No. 333-221285) filed with the Securities and Exchange Commission on November 2, 2017).
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Amendment to Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.12 of Amendment No. 1 to the Company's Registration Statement on Form S-3 (File No. 333-2223353) filed with the Securities and Exchange Commission on March 22, 2018).
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Amendment to Warrant to Purchase Common Stock, dated as of March 27, 2018 (incorporated by reference to Exhibit 4.1 to the Company’s 8-K filed with the Securities and Exchange Commission on March 29, 2018).
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Form of Warrant (incorporated by reference to Exhibit 4.2 to the Company’s 8-K filed with the Securities and Exchange Commission on March 29, 2018).
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Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.3 to the Company’s 8-K filed with the Securities and Exchange Commission on March 29, 2018).
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Amendment to Warrant to Purchase Common Stock, dated as of June 22, 2018, by and between the Company and Sarissa Offshore (incorporated by reference to Exhibit 4.1 to the Company’s 8-K filed with the Securities and Exchange Commission on June 22, 2018).
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Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s 8-K filed with the Securities and Exchange Commission on March 29, 2018).
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Engagement Agreement, dated as of March 27, 2018, between the Company and H.C. Wainwright & Co., LLC (incorporated by reference to Exhibit 10.2 to the Company’s 8-K filed with the Securities and Exchange Commission on March 29, 2018).
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Amendment No. 1 to Subscription Agreement, dated as of June 22, 2018, by and between the Investors and the Company (incorporated by reference to Exhibit 10.1 to the Company’s 8-K filed with the Securities and Exchange Commission on June 22, 2018).
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Form of CVR Agreement (incorporated by reference to Exhibit 10.1 to the Company’s 8-K filed with the Securities and Exchange Commission on July 30, 2018).
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Certification of Principal Executive Officer and Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS
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XBRL Instance Document. (1)
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101.SCH
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XBRL Taxonomy Extension Schema. (1)
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase. (1)
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase. (1)
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101.LAB
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XBRL Taxonomy Extension Label Linkbase. (1)
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase. (1)
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(1)
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Furnished, not filed.
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Apricus Biosciences, Inc.
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Date: August 9, 2018
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/s/ RICHARD W. PASCOE
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Richard W. Pascoe
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Chief Executive Officer and Secretary
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Certificate of Amendment
(Pursuant to NRS 78.385 AND 78.390)
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USE BLACK INK ONLY - DO NOT HIGHLIGHT
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ABOVE SPACE IS FOR OFFICE USE ONLY
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1. Name of corporation:
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Apricus Biosciences, Inc.
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2. The articles have been amended as follows: (provide article numbers, if available)
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Paragraph A of Article FIFTH of the Amended and Restated Articles of Incorporation of Apricus Biosciences, Inc., as heretofore amended, is hereby amended and restated to read in its entirety as follows:
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"FIFTH: A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is seventy million (70,000,000), consisting of sixty million (60,000,000) shares of Common Stock, par value one-tenth of one cent ($0.001) per share (the "Common Stock") and ten million
(10,000,000) shares of preferred stock, par value one-tenth of one cent ($0.001) per share (the "Preferred Stock")." |
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3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is:
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in excess of a majority
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4. Effective date and time of filing: (optional)
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Date:
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Time:
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(must not be later than 90 days after the certificate is filed)
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8. Signature: (required)
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X
/s/ Richard W. Pascoe
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Signature of Officer
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This form must be accompanied by appropriate fees.
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Nevada Secretary of State Amend Profit-After
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Revised 1-5-15
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1.
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I have reviewed this
Quarterly
Report on Form
10-Q
of Apricus Biosciences, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 9, 2018
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/S/ RICHARD W. PASCOE
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Richard W. Pascoe
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Chief Executive Officer & Secretary
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Date: August 9, 2018
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By:
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/S/ RICHARD W. PASCOE
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Name:
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Richard W. Pascoe
|
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Title:
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Chief Executive Officer & Secretary
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