ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE
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33-0827593
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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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3020 CALLAN ROAD, SAN DIEGO, CALIFORNIA
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92121
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(858) 458-0900
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Large Accelerated Filer
o
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Accelerated Filer
ý
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Non-Accelerated Filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
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PART I
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FINANCIAL INFORMATION
|
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Item 1.
|
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3
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4
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5
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6
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Item 2.
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18
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Item 3.
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28
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Item 4.
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28
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PART II
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OTHER INFORMATION
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Item 1.
|
29
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Item 1A.
|
29
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Item 2.
|
38
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Item 3.
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38
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Item 4.
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38
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Item 5.
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38
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Item 6.
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39
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As of September
30, 2013
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As of December
31, 2012
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||||||
Assets
|
|
|
||||||
Current assets:
|
|
|
||||||
Cash and cash equivalents
|
$
|
10,205,000
|
$
|
25,717,000
|
||||
Accounts receivable, net of reserves of $1,218,000 and of $278,000 in 2013 and 2012, respectively
|
2,622,000
|
3,926,000
|
||||||
Inventories, net
|
4,138,000
|
3,175,000
|
||||||
Other current assets
|
1,128,000
|
1,161,000
|
||||||
|
||||||||
Total current assets
|
18,093,000
|
33,979,000
|
||||||
|
||||||||
Property and equipment, net of accumulated depreciation of $9,131,000 and of $8,609,000 in 2013 and 2012, respectively
|
1,550,000
|
2,174,000
|
||||||
Restricted cash and cash equivalents
|
350,000
|
350,000
|
||||||
Investment in joint venture
|
—
|
85,000
|
||||||
Other assets
|
1,962,000
|
2,740,000
|
||||||
Intangibles, net
|
9,345,000
|
—
|
||||||
Goodwill
|
3,922,000
|
3,922,000
|
||||||
|
||||||||
Total assets
|
$
|
35,222,000
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$
|
43,250,000
|
||||
|
||||||||
Liabilities and Stockholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$
|
5,471,000
|
$
|
7,411,000
|
||||
Current portion of long-term obligations, net of discount
|
1,193,000
|
9,784,000
|
||||||
Termination fee obligation
|
600,000
|
—
|
||||||
Puregraft divestiture obligation
|
608,000
|
—
|
||||||
Joint Venture purchase obligation
|
4,772,000
|
—
|
||||||
Warrant liability
|
—
|
418,000
|
||||||
|
||||||||
Total current liabilities
|
12,644,000
|
17,613,000
|
||||||
|
||||||||
Deferred revenues, related party
|
—
|
638,000
|
||||||
Deferred revenues
|
190,000
|
2,635,000
|
||||||
Option liability
|
—
|
2,250,000
|
||||||
Long-term deferred rent and other
|
754,000
|
756,000
|
||||||
Long-term obligations, net of discount, less current portion
|
24,822,000
|
12,903,000
|
||||||
|
||||||||
Total liabilities
|
38,410,000
|
36,795,000
|
||||||
|
||||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; -0- shares issued and outstanding in 2013 and 2012
|
—
|
—
|
||||||
Common stock, $0.001 par value; 145,000,000 shares authorized; 67,270,466 and 65,914,050 shares issued and outstanding in 2013 and 2012, respectively
|
67,000
|
66,000
|
||||||
Additional paid-in capital
|
287,752,000
|
281,117,000
|
||||||
Accumulated other comprehensive loss
|
(142,000
|
)
|
—
|
|||||
Accumulated deficit
|
(290,865,000
|
)
|
(274,728,000
|
)
|
||||
|
||||||||
Total stockholders’ (deficit) equity
|
(3,188,000
|
)
|
6,455,000
|
|||||
|
||||||||
Total liabilities and stockholders’ equity
|
$
|
35,222,000
|
$
|
43,250,000
|
|
For the Three Months
Ended September 30,
|
For the Nine Months
Ended September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Product revenues
|
$
|
1,616,000
|
$
|
1,314,000
|
$
|
4,416,000
|
$
|
4,741,000
|
||||||||
|
||||||||||||||||
Cost of product revenues
|
931,000
|
703,000
|
2,296,000
|
2,588,000
|
||||||||||||
|
||||||||||||||||
Gross profit
|
685,000
|
611,000
|
2,120,000
|
2,153,000
|
||||||||||||
|
||||||||||||||||
Development revenues:
|
||||||||||||||||
Development, related party
|
—
|
—
|
638,000
|
2,413,000
|
||||||||||||
Development revenue
|
—
|
—
|
1,179,000
|
—
|
||||||||||||
Government contracts and other
|
1,095,000
|
2,000
|
2,503,000
|
21,000
|
||||||||||||
|
1,095,000
|
2,000
|
4,320,000
|
2,434,000
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
4,123,000
|
3,555,000
|
11,992,000
|
9,615,000
|
||||||||||||
Sales and marketing
|
1,786,000
|
2,450,000
|
6,453,000
|
7,406,000
|
||||||||||||
General and administrative
|
4,332,000
|
3,777,000
|
12,225,000
|
11,489,000
|
||||||||||||
Change in fair value of warrant liability
|
—
|
863,000
|
(418,000
|
)
|
1,244,000
|
|||||||||||
Change in fair value of option liability
|
—
|
300,000
|
(2,250,000
|
)
|
490,000
|
|||||||||||
|
||||||||||||||||
Total operating expenses
|
10,241,000
|
10,945,000
|
28,002,000
|
30,244,000
|
||||||||||||
|
||||||||||||||||
Operating loss
|
(8,461,000
|
)
|
(10,332,000
|
)
|
(21,562,000
|
)
|
(25,657,000
|
)
|
||||||||
|
||||||||||||||||
Other income (expense):
|
||||||||||||||||
Loss on asset disposal
|
—
|
—
|
(257,000
|
)
|
—
|
|||||||||||
Loss on debt extinguishment
|
—
|
—
|
(708,000
|
)
|
—
|
|||||||||||
Interest income
|
1,000
|
—
|
2,000
|
3,000
|
||||||||||||
Interest expense
|
(1,094,000
|
)
|
(857,000
|
)
|
(2,456,000
|
)
|
(2,582,000
|
)
|
||||||||
Other income (expense), net
|
(96,000
|
)
|
(17,000
|
)
|
(392,000
|
)
|
(91,000
|
)
|
||||||||
Gain on Puregraft divestiture
|
4,392,000
|
—
|
4,392,000
|
—
|
||||||||||||
Gain on previously held equity interest in Joint Venture
|
—
|
—
|
4,892,000
|
—
|
||||||||||||
Equity loss from investment in joint venture
|
—
|
(42,000
|
)
|
(48,000
|
)
|
(128,000
|
)
|
|||||||||
|
||||||||||||||||
Total other income (expense)
|
3,203,000
|
(916,000
|
)
|
5,425,000
|
(2,798,000
|
)
|
||||||||||
|
||||||||||||||||
Net loss
|
$
|
(5,258,000
|
)
|
$
|
(11,248,000
|
)
|
$
|
(16,137,000
|
)
|
$
|
(28,455,000
|
)
|
||||
|
||||||||||||||||
Other comprehensive income (loss) – foreign currency translation adjustments
|
(108,000
|
)
|
—
|
(142,000
|
)
|
—
|
||||||||||
|
||||||||||||||||
Net comprehensive loss
|
$
|
(5,366,000
|
)
|
$
|
(11,248,000
|
)
|
$
|
(16,279,000
|
)
|
$
|
(28,455,000
|
)
|
||||
|
||||||||||||||||
Basic and diluted net loss per common share
|
$
|
(0.08
|
)
|
$
|
(0.19
|
)
|
$
|
(0.24
|
)
|
$
|
(0.49
|
)
|
||||
|
||||||||||||||||
Basic and diluted weighted average common shares
|
67,248,384
|
58,713,036
|
67,147,584
|
58,292,911
|
|
For the Nine Months Ended September 30,
|
|||||||
|
2013
|
2012
|
||||||
Cash flows from operating activities:
|
|
|
||||||
Net loss
|
$
|
(16,137,000
|
)
|
$
|
(28,455,000
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
1,169,000
|
712,000
|
||||||
Amortization of deferred financing costs and debt discount
|
605,000
|
706,000
|
||||||
Joint Venture acquisition obligation accretion
|
204,000
|
—
|
||||||
Provision for doubtful accounts
|
938,000
|
99,000
|
||||||
Change in fair value of warrants
|
(418,000
|
)
|
1,244,000
|
|||||
Change in fair value of option liabilities
|
(2,250,000
|
)
|
490,000
|
|||||
Share-based compensation expense
|
2,723,000
|
2,907,000
|
||||||
Equity loss from investment in joint venture
|
48,000
|
128,000
|
||||||
Loss on asset disposal
|
257,000
|
—
|
||||||
Gain on previously held equity interest in Joint Venture
|
(4,892,000
|
)
|
—
|
|||||
Gain on sale of assets
|
(4,392,000
|
)
|
—
|
|||||
Loss on debt extinguishment
|
708,000
|
—
|
||||||
Increases (decreases) in cash caused by changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
361,000
|
698,000
|
||||||
Inventories
|
(975,000
|
)
|
(93,000
|
)
|
||||
Other current assets
|
69,000
|
(253,000
|
)
|
|||||
Other assets
|
(117,000
|
)
|
16,000
|
|||||
Accounts payable and accrued expenses
|
(1,080,000
|
)
|
254,000
|
|||||
Deferred revenues, related party
|
(638,000
|
)
|
(2,413,000
|
)
|
||||
Deferred revenues
|
(1,245,000
|
)
|
(97,000
|
)
|
||||
Long-term deferred rent
|
(2,000
|
)
|
180,000
|
|||||
|
||||||||
Net cash used in operating activities
|
(25,064,000
|
)
|
(23,877,000
|
)
|
||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
(536,000
|
)
|
(1,077,000
|
)
|
||||
Proceeds from Puregraft divestiture
|
5,000,000
|
|||||||
License agreement termination fee
|
(600,000
|
)
|
—
|
|||||
Cash acquired in purchase of Joint Venture
|
5,000
|
—
|
||||||
|
||||||||
Net cash provided by (used in) investing activities
|
3,869,000
|
(1,077,000
|
)
|
|||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Principal payments on long-term obligations
|
(22,292,000
|
)
|
(210,000
|
)
|
||||
Proceeds from long-term obligations
|
27,000,000
|
—
|
||||||
Debt issuance costs and loan fees
|
(1,744,000
|
)
|
—
|
|||||
Payments toward purchase of Joint Venture
|
(141,000
|
)
|
—
|
|||||
Proceeds from exercise of employee stock options and warrants and stock purchase plan
|
147,000
|
988,000
|
||||||
Proceeds from sale of common stock
|
3,001,000
|
4,946,000
|
||||||
Costs from sale of common stock
|
(184,000
|
)
|
(64,000
|
)
|
||||
|
||||||||
Net cash provided by financing activities
|
5,787,000
|
5,660,000
|
||||||
|
||||||||
Effect of exchange rate changes on cash and cash equivalents
|
(104,000
|
)
|
—
|
|||||
|
||||||||
Net decrease in cash and cash equivalents
|
(15,512,000
|
)
|
(19,294,000
|
)
|
||||
|
||||||||
Cash and cash equivalents at beginning of period
|
25,717,000
|
36,922,000
|
||||||
|
||||||||
Cash and cash equivalents at end of period
|
$
|
10,205,000
|
$
|
17,628,000
|
||||
|
||||||||
Supplemental disclosure of cash flows information:
|
||||||||
Cash paid during period for:
|
||||||||
Interest
|
$
|
1,592,000
|
$
|
1,906,000
|
||||
|
||||||||
Supplemental schedule of non-cash investing and financing activities:
|
||||||||
Fair value of warrants allocated to additional paid-in capital
|
949,000
|
—
|
||||||
Fair value of intangible assets acquired
|
9,394,000
|
—
|
||||||
Fair value of tangible assets acquired
|
260,000
|
—
|
||||||
Joint Venture purchase obligation
|
4,709,000
|
—
|
||||||
Fair value of previously held equity interest at acquisition date
|
4,928,000
|
—
|
1. | Basis of Presentation |
2. | Use of Estimates |
3. | Capital Availability |
4. | Transactions with Olympus Corporation |
|
Useful Life
(in years)
|
Estimated
Fair Value
|
||||||
Intangible assets:
|
|
|
||||||
Developed technology
|
7
|
$
|
9,394,000
|
|
Estimated
Fair Value
|
|||
Current assets
|
$
|
236
|
||
Property and equipment
|
260
|
|||
Intangible assets
|
9,394
|
|||
|
||||
Total assets acquired
|
9,890
|
|||
|
||||
Accrued and other current liabilities
|
(33
|
)
|
||
Total fair value of the Joint Venture
|
$
|
9,857
|
5. | Warrant Liability |
|
As of
September 30, 2013
|
As of
December 31, 2012
|
||||||
Expected term
|
—
|
0.61 years
|
||||||
Common stock market price
|
$
|
—
|
$
|
2.80
|
||||
Risk-free interest rate
|
—
|
0.11
|
%
|
|||||
Expected volatility
|
—
|
73.88
|
%
|
|||||
Resulting fair value (per warrant)
|
$
|
—
|
$
|
0.20
|
6. | Long-term Debt |
7. | Revenue Recognition |
· | initial consulting services; |
· | license rights and standard operating procedures; |
· | equipment and supplies; |
· | installation services; |
· | training services; |
· | database hosting services; |
· | technical support services; and |
· | maintenance services. |
|
Nine months ended
|
|||||||||||||||
|
|
|
|
|
||||||||||||
|
September 30, 2013
|
September 30, 2012
|
||||||||||||||
|
Product
Revenues
|
% of
Total
|
Product
Revenues
|
% of
Total
|
||||||||||||
|
|
|
|
|
||||||||||||
North America
|
$
|
822,000
|
19
|
%
|
$
|
810,000
|
17
|
%
|
||||||||
Japan
|
1,892,000
|
43
|
%
|
2,273,000
|
48
|
%
|
||||||||||
Europe
|
865,000
|
19
|
%
|
1,006,000
|
21
|
%
|
||||||||||
Other countries
|
837,000
|
19
|
%
|
652,000
|
14
|
%
|
||||||||||
Total product revenues
|
$
|
4,416,000
|
100
|
%
|
$
|
4,741,000
|
100
|
%
|
8.
|
Inventories
|
|
September 30,
2013
|
December 31,
2012
|
||||||
|
|
|
||||||
Raw materials
|
$
|
1,900,000
|
$
|
1,384,000
|
||||
Work in process
|
473,000
|
404,000
|
||||||
Finished goods
|
1,765,000
|
1,387,000
|
||||||
|
$
|
4,138,000
|
$
|
3,175,000
|
9. | Share-Based Compensation |
11. | Accumulated Other Comprehensive Loss |
|
For the three months ended September 30, 2013
|
For the nine months ended September 30, 2013
|
||||||||||||||
|
|
|
|
|
||||||||||||
|
Foreign currency
translation adjustments
|
Accumulated other
comprehensive loss
|
Foreign currency
translation adjustments
|
Accumulated other
comprehensive loss
|
||||||||||||
|
|
|
|
|
||||||||||||
Beginning balance
|
$
|
(34,000
|
)
|
$
|
(34,000
|
)
|
$
|
—
|
$
|
—
|
||||||
Net current period other comprehensive loss
|
(108,000
|
)
|
(108,000
|
)
|
(142,000
|
)
|
(142,000
|
)
|
||||||||
Ending balance
|
$
|
(142,000
|
)
|
$
|
(142,000
|
)
|
$
|
(142,000
|
)
|
$
|
(142,000
|
)
|
12. | Commitments and Contingencies |
13. | Sale and Exclusive License/Supply Agreement with Bimini Technologies LLC |
15. | Fair Value Measurements |
|
Balance as of
|
Basis of Fair Value Measurements
|
||||||||||||||
|
September 30, 2013
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Assets:
|
|
|
|
|
||||||||||||
Cash equivalents
|
$
|
4,644,000
|
$
|
4,644,000
|
$
|
—
|
$
|
—
|
||||||||
|
||||||||||||||||
Liabilities:
|
||||||||||||||||
Warrant liability
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|
Balance as of
|
Basis of Fair Value Measurements
|
||||||||||||||
|
December 31, 2012
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Assets:
|
|
|
|
|
||||||||||||
Cash equivalents
|
$
|
6,145,000
|
$
|
6,145,000
|
$
|
—
|
$
|
—
|
||||||||
|
||||||||||||||||
Liabilities:
|
||||||||||||||||
Put option liability
|
$
|
(2,250,000
|
)
|
$
|
—
|
$
|
—
|
$
|
(2,250,000
|
)
|
||||||
Warrant liability
|
$
|
(418,000
|
)
|
$
|
—
|
$
|
—
|
$
|
(418,000
|
)
|
Put option liability
|
Three months ended
September 30, 2013
|
Nine months ended
September 30, 2013
|
||||||
|
|
|
||||||
Beginning balance
|
$
|
—
|
$
|
(2,250,000
|
)
|
|||
Decrease in fair value recognized in operating expenses
|
—
|
2,250,000
|
||||||
Ending balance
|
$
|
—
|
$
|
—
|
Put option liability
|
Three months ended
September 30, 2012
|
Nine months ended
September 30, 2012
|
||||||
|
|
|
||||||
Beginning balance
|
$
|
(2,100,000
|
)
|
$
|
(1,910,000
|
)
|
||
Increase in fair value recognized in operating expenses
|
(300,000
|
)
|
(490,000
|
)
|
||||
Ending balance
|
$
|
(2,400,000
|
)
|
$
|
(2,400,000
|
)
|
Warrant liability
|
Three months ended
September 30, 2013
|
Nine months ended
September 30, 2013
|
||||||
|
|
|
||||||
Beginning balance
|
$
|
—
|
$
|
(418,000
|
)
|
|||
Decrease in fair value recognized in operating expenses
|
—
|
418,000
|
||||||
Ending balance
|
$
|
—
|
$
|
—
|
Warrant liability
|
Three months ended
September 30, 2012
|
Nine months ended
September 30, 2012
|
||||||
|
|
|
||||||
Beginning balance
|
$
|
(1,008,000
|
)
|
$
|
(627,000
|
)
|
||
Increase in fair value recognized in operating expenses
|
(863,000
|
)
|
(1,244,000
|
)
|
||||
Ending balance
|
$
|
(1,871,000
|
)
|
$
|
(1,871,000
|
)
|
16. | Fair Value |
|
September 30, 2013
|
December 31, 2012
|
||||||||||||||
|
|
|
|
|
||||||||||||
|
Fair Value
|
Carrying Value
|
Fair Value
|
Carrying Value
|
||||||||||||
|
|
|
|
|
||||||||||||
Fixed rate long-term debt
|
$
|
25,979,000
|
$
|
25,950,000
|
$
|
22,425,000
|
$
|
22,608,000
|
17. | Stockholders’ Equity |
18. | Subsequent Events |
·
|
Overview that discusses our operating results and some of the trends that affect our business.
|
·
|
Results of Operations that includes a more detailed discussion of our revenue and expenses.
|
· | Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our financial position and our financial commitments. |
· | Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Significant Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements. |
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Product revenues - third party
|
$
|
1,616,000
|
$
|
1,314,000
|
$
|
4,416,000
|
$
|
4,741,000
|
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Cost of product revenues
|
$
|
911,000
|
$
|
683,000
|
$
|
2,234,000
|
$
|
2,532,000
|
||||||||
Share-based compensation
|
20,000
|
20,000
|
62,000
|
56,000
|
||||||||||||
Total cost of product revenues
|
$
|
931,000
|
$
|
703,000
|
$
|
2,296,000
|
$
|
2,588,000
|
||||||||
Total cost of product revenues as % of product revenues
|
57.6
|
%
|
53.5
|
%
|
52.0
|
%
|
54.6
|
%
|
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|
||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Development (Olympus)
|
$
|
—
|
$
|
—
|
$
|
638,000
|
$
|
2,413,000
|
||||||||
Development (Senko)
|
—
|
—
|
1,179,000
|
—
|
||||||||||||
Government contract (BARDA)
|
1,113,000
|
—
|
2,503,000
|
—
|
||||||||||||
Other
|
(18,000
|
)
|
2,000
|
—
|
21,000
|
|||||||||||
Total development revenues
|
$
|
1,095,000
|
$
|
2,000
|
$
|
4,320,000
|
$
|
2,434,000
|
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
General research and development
|
$
|
3,968,000
|
$
|
3,415,000
|
$
|
11,540,000
|
$
|
9,134,000
|
||||||||
Share-based compensation
|
155,000
|
140,000
|
452,000
|
481,000
|
||||||||||||
Total research and development expenses
|
$
|
4,123,000
|
$
|
3,555,000
|
$
|
11,992,000
|
$
|
9,615,000
|
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Sales and marketing
|
$
|
1,625,000
|
$
|
2,306,000
|
$
|
5,910,000
|
$
|
6,877,000
|
||||||||
Share-based compensation
|
161,000
|
144,000
|
543,000
|
529,000
|
||||||||||||
Total sales and marketing expenses
|
$
|
1,786,000
|
$
|
2,450,000
|
$
|
6,453,000
|
$
|
7,406,000
|
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
General and administrative
|
$
|
3,783,000
|
$
|
3,152,000
|
$
|
10,559,000
|
$
|
9,648,000
|
||||||||
Share-based compensation
|
549,000
|
625,000
|
1,666,000
|
1,841,000
|
||||||||||||
Total general and administrative expenses
|
$
|
4,332,000
|
$
|
3,777,000
|
$
|
12,225,000
|
$
|
11,489,000
|
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Cost of product revenues
|
$
|
20,000
|
$
|
20,000
|
$
|
62,000
|
$
|
56,000
|
||||||||
Research and development-related
|
155,000
|
140,000
|
452,000
|
481,000
|
||||||||||||
Sales and marketing-related
|
161,000
|
144,000
|
543,000
|
529,000
|
||||||||||||
General and administrative-related
|
549,000
|
625,000
|
1,666,000
|
1,841,000
|
||||||||||||
Total share-based compensation
|
$
|
885,000
|
$
|
929,000
|
$
|
2,723,000
|
$
|
2,907,000
|
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Change in fair value of warrant liability
|
$
|
—
|
$
|
863,000
|
$
|
(418,000
|
)
|
$
|
1,244,000
|
|
For the three months ended September 30,
|
For the nine months ended September 30,
|
||||||||||||||
|
|
|
|
|||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Change in fair value of put option liability
|
$
|
—
|
$
|
300,000
|
$
|
(2,250,000
|
)
|
$
|
490,000
|
|
For the three months
ended September 30,
|
For the nine months ended
September 30,
|
||||||||||||||
|
|
|
|
|
||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Loss on asset disposal
|
$
|
—
|
$
|
—
|
$
|
(257,000
|
)
|
$
|
—
|
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|
||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Loss on debt extinguishment
|
$
|
—
|
$
|
—
|
$
|
(708,000
|
)
|
$
|
—
|
|||||||
Interest income
|
1,000
|
—
|
2,000
|
3,000
|
||||||||||||
Interest expense
|
(1,094,000
|
)
|
(857,000
|
)
|
(2,456,000
|
)
|
(2,582,000
|
)
|
||||||||
Other income (expense)
|
(96,000
|
)
|
(17,000
|
)
|
(392,000
|
)
|
(91,000
|
)
|
||||||||
Total
|
$
|
(1,189,000
|
)
|
$
|
(874,000
|
)
|
$
|
(3,554,000
|
)
|
$
|
(2,670,000
|
)
|
· | In June 2013, we entered into a Loan and Security Agreement, pursuant to which the Lenders funded an aggregate principal amount of $27.0 million. The proceeds from the June 2013 loan were used to repay the prior loan obligation and related fees. Interest expense increased for the three months ended September 30, 2013 as compared to the same period in 2012 due to the interest only payments on the new loan entered into in June 2013. Interest expense decreased for the nine months ended September 30, 2013 as compared to the same period in 2012 due to principal payments made on the prior loan obligations. |
· | The changes in other income (expense) during the three and nine months ended September 30, 2013 as compared to the same periods in 2012 resulted primarily from changes in foreign currency exchange rates. |
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||||
|
|
|
|
|
||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Gain on previously held equity interest
|
$
|
—
|
$
|
—
|
$
|
4,892,000
|
$
|
—
|
||||||||
Equity loss in investment
|
—
|
(42,000
|
)
|
(48,000
|
)
|
(128,000
|
)
|
|||||||||
Total
|
$
|
—
|
$
|
(42,000
|
)
|
$
|
4,844,000
|
$
|
(128,000
|
)
|
|
As of September 30,
2013
|
As of December 31,
2012
|
||||||
|
|
|
||||||
Cash and cash equivalents
|
$
|
10,205,000
|
$
|
25,717,000
|
||||
|
||||||||
Current assets
|
$
|
18,093,000
|
$
|
33,979,000
|
||||
Current liabilities
|
12,644,000
|
17,613,000
|
||||||
Working capital
|
$
|
5,449,000
|
$
|
16,366,000
|
|
Payments due by period
|
|||||||||||||||||||
Contractual Obligations
|
Total
|
Less than 1
year
|
1 – 3 years
|
3 – 5 years
|
More than
5 years
|
|||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Long-term obligations
|
$
|
28,677,000
|
$
|
1,324,000
|
$
|
17,428,000
|
$
|
9,925,000
|
$
|
—
|
||||||||||
Interest commitment on long-term obligations
|
6,451,000
|
2,632,000
|
3,443,000
|
376,000
|
—
|
|||||||||||||||
Operating lease obligations
|
7,981,000
|
2,180,000
|
3,713,000
|
2,088,000
|
—
|
|||||||||||||||
Minimum purchase requirements
|
850,000
|
850,000
|
—
|
—
|
—
|
|||||||||||||||
License termination fee obligation
|
600,000
|
600,000
|
—
|
—
|
—
|
|||||||||||||||
Puregraft divestiture obligation
|
608,000
|
608,000
|
||||||||||||||||||
Joint Venture purchase obligation*
|
4,772,000
|
4,772,000
|
—
|
—
|
—
|
|||||||||||||||
Pre-clinical research study obligations
|
23,000
|
23,000
|
—
|
—
|
—
|
|||||||||||||||
Clinical research study obligations
|
4,080,000
|
3,530,000
|
550,000
|
—
|
—
|
|||||||||||||||
Total
|
$
|
54,042,000
|
$
|
16,519,000
|
$
|
25,134,000
|
$
|
12,389,000
|
$
|
—
|
|
For the nine months ended September 30,
|
|||||||
|
2013
|
2012
|
||||||
|
|
|
||||||
Net cash used in operating activities
|
$
|
(25,064,000
|
)
|
$
|
(23,877,000
|
)
|
||
Net cash provided by (used in) investing activities
|
3,869,000
|
(1,077,000
|
)
|
|||||
Net cash provided by financing activities
|
5,787,000
|
5,660,000
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
(104,000
|
)
|
—
|
|||||
Net decrease in cash and cash equivalents
|
(15,512,000
|
)
|
(19,294,000
|
)
|
• | political unrest, terrorism and economic or financial instability; |
• | unexpected changes and uncertainty in regulatory requirements and systems related |
• | nationalization programs that may be implemented by foreign governments; |
• | import-export regulations; |
• | difficulties in enforcing agreements and collecting receivables; |
• | difficulties in ensuring compliance with the laws and regulations of multiple jurisdictions; |
• | changes in labor practices, including wage inflation, labor unrest and unionization policies; |
• | longer payment cycles by international customers; |
• | currency exchange fluctuations; |
• | disruptions of service from utilities or telecommunications providers, including electricity shortages; |
• | difficulties in staffing foreign branches and subsidiaries and in managing an expatriate workforce, and differing employment practices and labor issues; |
• | potentially adverse tax consequences; |
· | audit or object to our contract-related costs and fees, and require us to reimburse all such costs and fees; |
· | suspend or prevent us for a set period of time from receiving new contracts or extending our existing contracts based on violations or suspected violations of laws or regulations; |
· | cancel, terminate or suspend our contracts based on violations or suspected violations of laws or regulations; |
· | terminate our contracts if in the Government’s best interest, including if funds become unavailable to the applicable governmental agency; |
· | reduce the scope and value of our contracts; and |
· | change certain terms and conditions in our contracts. |
· | termination of contracts; |
· | forfeiture of profits; |
· | suspension of payments; |
· | fines; and |
· | suspension or prohibition from conducting business with the United States government. |
• | fluctuations in our operating results or the operating results of our competitors; |
• | changes in estimates of our financial results or recommendations by securities analysts; |
• | variance in our financial performance from the expectations of securities analysts; |
• | changes in the estimates of the future size and growth rate of our markets; |
• | changes in accounting principles or changes in interpretations of existing principles, which could affect our financial results; |
• | conditions and trends in the markets we serve; |
• | changes in general economic, industry and market conditions; |
• | success of competitive products and services; |
• | changes in market valuations or earnings of our competitors; |
• | announcements of significant new products, contracts, acquisitions or strategic alliances by us or our competitors; |
• | the timing and outcome of regulatory reviews and approvals of our products; |
• | the commencement or outcome of litigation involving our company, our general industry or both; |
• | changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; |
• | actual or expected sales of our common stock by the holders of our common stock; and |
• | the trading volume of our common stock. |
• | authorize our Board of Directors to issue without stockholder approval up to 5,000,000 shares of preferred stock, the rights of which will be determined at the discretion of the Board of Directors; |
• | require that stockholder actions must be effected at a duly called stockholder meeting and cannot be taken by written consent; |
• | establish advance notice requirements for stockholder nominations to our Board of Directors or for stockholder proposals that can be acted on at stockholder meetings; and |
• | limit who may call stockholder meetings. |
Exhibit No.
|
|
Description
|
|
|
|
3.4 |
|
Certificate of Amendment of Certificate of Incorporation, dated September 23, 2013
|
|
|
|
|
Puregraft Sale-License-Supply Agreement, dated July 30, 2013, by and among the Company and Bimini Technologies LLC. (filed herewith). | |
|
|
|
|
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
|
|
|
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
|
|
|
Certifications Pursuant to 18 U.S.C. Section 1350/ Securities Exchange Act Rule 13a-14(b), as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 (filed herewith).
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Schema Document
|
|
|
|
101.CAL
|
|
XBRL Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Presentation Linkbase Document
|
|
CYTORI THERAPEUTICS, INC.
|
|
|
|
|
|
By:
|
/s/ Christopher J. Calhoun
|
Dated: November 12, 2013
|
|
Christopher J. Calhoun
|
|
|
Chief Executive Officer
|
|
|
|
|
By:
|
/s/ Mark E. Saad
|
Dated: November 12, 2013
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Mark E. Saad
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Chief Financial Officer
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By: /s/ Christopher J. Calhoun
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Name: Christopher J. Calhoun
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Title: Chief Executive Officer
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1. | I have reviewed this quarterly report on Form 10-Q of Cytori Therapeutics, Inc.; |
2. | 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; |
3. | 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; |
4. | 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: |
(a) | 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; |
(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) | 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 |
(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. | 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): |
(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: November 12, 2013
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/s/ Christopher J. Calhoun
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Christopher J. Calhoun,
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Chief Executive Officer
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1. | I have reviewed this quarterly report on Form 10-Q of Cytori Therapeutics, Inc.; |
2. | 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; |
3. | 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; |
4. | 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: |
(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. | 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): |
(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: November 12, 2013
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/s/ Mark E. Saad
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Mark E. Saad
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Chief Financial Officer
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1. | The Form 10-Q report of Cytori Therapeutics, Inc. that this certification accompanies fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934. |
2. | The information contained in the Form 10-Q report of Cytori Therapeutics, Inc. that this certification accompanies fairly presents, in all material respects, the financial condition and results of operations of Cytori Therapeutics, Inc. |
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By:
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/s/ Christopher J. Calhoun
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Dated: November 12, 2013
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Christopher J. Calhoun
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Chief Executive Officer
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By:
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/s/ Mark E. Saad
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Dated: November 12, 2013
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Mark E. Saad
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Chief Financial Officer
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1.
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DEFINITIONS
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1.1 | Defined Terms . As used in this Agreement, the capitalized terms set forth in this Section 1 shall have the following meanings: |
1.2 | References . In this Agreement, a reference to: |
1.3 | Headings . Headings in this Agreement are for ease of reference only and shall not affect the interpretation or construction of this Agreement. |
1.4 | Attachments, Schedules and Exhibits . The Attachments, Schedules and Exhibits attached hereto are incorporated herein and form a part of this Agreement. |
2.
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PURCHASE AND LICENSES GRANTED BY CYTORI
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2.1 | Purchase and License Grants and Sublicenses . |
2.2
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Purchase Payments& Closing
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2.2.1
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Initial Payment& Closing
. In consideration of the rights granted by Cytori to Bimini, pursuant to Section 2.1 above, and for each parties rights &obligations set forth in this Agreement, Bimini shall pay Cytori an “Initial Payment” in the amount of five million dollars ($5,000,000), payable upon execution of this Agreement by wire transfer of immediately available funds to the bank account designated by Cytori below:
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a. | One Million ($1,000,000) is payable to Cytori upon Bimini’s achievement of Ten Million ($10,000,000) in cumulative Gross Profit; |
b. | One Million Five Hundred Thousand ($1,500,000) is payable to Cytori upon Bimini’s achievement of Twenty Five Million ($25,000,000) in cumulative Gross Profit; |
c. | Two Million Five Hundred Thousand ($2,500,000) is payable to Cytori upon Bimini’s achievement of Fifty Million ($50,000,000) in cumulative Gross Profit; and |
d. | Five Million ($5,000,000) is payable to Cytori upon Bimini’s achievement of One Hundred Million ($100,000,000) in cumulative Gross Profit. |
a.
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Cytori shall be entitled to a
…..[REDACTED]
*
…..
in all Asset Sale proceeds to the extent any one or all Asset Sale proceeds taken together cumulatively exceed a total of
…..[REDACTED]*…..
in proceeds to Bimini. Cytori’s share of any or all Asset Sale proceeds shall not exceed
…..[REDACTED]*…..
payable hereunder.
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b.
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The Asset Sale payments shall be paid in cash (at the fair value of the proceeds received, if not received by Bimini in cash) and shall be fully creditable against the Section 2.2.3 Royalty Purchase Payments not yet paid to Cytori (whether or not due) to the extent such payments remain outstanding. The credits against the Royalty Purchase Payments shall apply first to the last payment due (Section 2.2.3 (d)), and proceed thereafter from last to the third, second and first of Royalty Purchase Payments until the full amount payable under Section 2.2.3 has been paid.
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c.
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This Section shall terminate once
…..[REDACTED]*…..
have been paid to Cytori in cash as accrued under Section 2.2.3, and/or once the full Royalty Purchase Payments are paid (and credited) through Bimini’s payments to Cytori of Cytori’s share of Asset Sale proceeds. For the avoidance of doubt, Cytori shall never be entitled to more than
…..[REDACTED]*…..
in total from the combination of:
…..[REDACTED]*……
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2.3 | T erm, Termination& Bankruptcy . |
a. | Upon a material breach of this Agreement by a Party, including its Affiliates, successors or assigns, or any of their sublicensees (“Breaching Party”), which material breach has not been cured within sixty (60) days of its receipt of a written notice of breach from the Non-Breaching Party, the Breaching Party shall be in “Default” (excluding …..[REDACTED]*….. and the Non-Breaching Party shall have the following rights: |
i. | If the Default is due to a …..[REDACTED] * ….. event by either Party, such Default shall be handled exclusively as provided in Section 3.4, which shall be the sole remedy therefore. |
ii. | If Bimini is in Default with respect to its duties or obligations relating to the Celution Products, then Cytori shall be entitled to any remedies that Cytori may have available at law or in equity, and Cytori shall be entitled to suspend, but not cancel any and all Celution Product licenses& supply obligations to Bimini, until such time as the default is fully remedied. |
iii. | If Cytori is in Default with respect to its duties or obligations relating to the Bimini’s Standalone Fat Transplantation Products(including the Puregraft Products), then Bimini shall be entitled to any remedies that Bimini may have available at law or in equity, and Bimini shall be entitled to suspend, but not cancel any and all licenses& supply obligations to Cytori, until such time as the default is fully remedied. |
iv. | If Bimini’s Default is due to failure to pay Cytori the Initial Payment, or Royalty Purchase Payments due for the Puregraft Products, then Cytori shall be entitled to terminate this Agreement in its entirety, and all rights title and interest in the Cytori Technology related Standalone Fat Transplantation products (including the Puregraft Products and all future generations of each) are immediately hereby transferred and assigned back to Cytori. |
v. | All other Defaults shall be subject to available remedies at law and in equity as appropriate. |
a. | If Cytori (including its successors and assigns) is the Party subject to the Insolvency Proceeding, then Bimini shall be entitled to exercise all rights pursuant to …..[REDACTED]* ….. , including access to all Technology and Source Codes in Escrow, unless Cytori is able to provide commercially reasonable assurances that it can and will continue to supply the Celution Products to Bimini as contemplated by the Agreement. |
b. | If Bimini (including its successors and assigns) is the Party subject to the Insolvency Proceeding, then the Celution Product license granted Bimini in Section 2.1.6 shall become non-exclusive, and Cytori shall then have the full, unrestricted right to market, distribute and sell the Celution Products within the Hair Field. Cytori shall be entitled to exercise all rights pursuant to …..[REDACTED]*….. , including access to all Technology and Source Codes in Escrow, unless Bimini is able to provide commercially reasonable assurances that it can and will continue to supply the Puregraft Products/Standalone Fat Transplantation Products to Cytori as contemplated by the Agreement. |
2.4
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R
epresentations and
W
arranties
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3.
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COMMERCIAL AGREEMENT
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3.2
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P
rices and
P
ayment
T
erms
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3.3
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Order and Forecast
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For Cytori:
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Cytori Therapeutics, Inc.
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3020 Callan Road
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San Diego, CA 92121, U.S.A.
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Fax: 858-200-0951
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E-mail:
orders@cytori.com
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Attn: Customer Service
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For Bimini :
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Bimini Technologies LLC
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3020 Callan Road
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San Diego, CA 92121, U.S.A.
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Fax: 858-200-0951
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E-mail: bconlan@puregraft.com
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Attn: Bradford A. Conlan
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Flexibility
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Month 1:
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Binding (100%)
(Shall be reflected without change in Orders sent in the month immediately following the month on which the Forecast is delivered).
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Month 2:
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Binding (100%)
(Shall be reflected without change in the Forecast of the immediately following month as Month 1).
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Month 3:
(Partially Binding Month)
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Partially binding
(Upward adjustment by no more than thirty percent (30%), or downward adjustment by no more than thirty percent (30%) of the amounts indicated for Month 3 may be made, as any such adjustments shall be reflected in the Forecast of the immediately following month as Month 2).
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Month 4:
(Partially Binding Month)
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Partially binding
(Upward adjustment by no more than fifty percent (50%), or downward adjustment by no more than fifty percent (50%) of the amounts indicated for Month 4may be made, as any such adjustments shall be reflected in the Forecast of the immediately following month as Month 3).
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Month 5:
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Non-binding (0%)
(May be completely changed in the Forecast, as any such adjustments shall be reflected in the Forecast of the immediately following month as Month 4).
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Month 6:
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Non-binding (0%)
(May be completely changed in the Forecast, as any such adjustments shall be reflected in the Forecast of the immediately following month as Month 5).
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3.5
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Inventory Management and Shipment of Products
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3.6
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Product Warranties
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(i) | operate in a manner that meets the relevant Celution Product (s) specifications; and |
(ii) | be free from defects, for reason(s) attributable to Cytori , in material, design and workmanship. |
(i) | operate in a manner that meets the relevant Puregraft Product (s) specifications; and |
(ii) | be free from defects, for reason(s) attributable to the manufacturer , in material, design and workmanship. |
3.7
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Obsolescence
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3.12 | REGULATORY . |
3.17 | EXAMINATION AND AUDIT OF BOOKS & RECORDS . Each party (a) shall maintain for at least five (5) years its books, records, contracts and accounts relating to the manufacture, marketing and sale of the products covered in this Agreement, including, without limitation, information concerning customer accounts (both distributors and end-user sales identity), inventory levels, unit sales, historical product sales prices, competitor information, market trends and strategies, promotional activities, manufacturing expenses and any other information reasonably required to calculate the COGS and royalty payments required in this Agreement, and compliance with each parties marketing rights and restrictions(collectively, "Auditable Information"), and (b) shall permit examination of the Auditable Information to the extent necessary to confirm compliance with this Agreement at all reasonable times and upon reasonable notice (in no event shall such notice be less than five (5) days) by the other Party, and(c)shall allow representatives of the other Party at any reasonable time to examine its place(s) of businesses and inventory of products. |
4. | MISCELLANEOUS PROVISIONS |
4.1 | Governing Law . This Agreement shall be governed in all respects by the laws of Illinois without regard to provisions regarding choice of laws. |
4.2 | Dispute Resolution . Except for Bimini's right to specific performance provided in Section 2.2.2 which may be enforced (including in the first instance) in a Court of law, all disputes arising out of or in connection with this Agreement, or any relationship created by or in accordance with this Agreement, shall be finally settled under the Rules of the American Arbitration Association (the “ Rules ”) by three arbitrators. Judgment on the award rendered by the panel of arbitrators shall be binding upon the Parties and may be entered in any court having jurisdiction thereof. Bimini shall nominate one arbitrator and Cytori shall nominate one arbitrator. The arbitrators so nominated by Bimini and Cytori, respectively, shall jointly nominate the third arbitrator within fifteen (15) days following the confirmation of arbitrators nominated by Bimini and Cytori. If the arbitrators nominated by Bimini and Cytori cannot agree on the third arbitrator, then such third arbitrator shall be selected as provided in the Rules. The place of the arbitration and all hearings and meetings shall be Chicago, USA for the Standalone Fat Transplantation Products and Puregraft Products and San Diego, CA for the Celution Products, unless the Parties to the arbitration otherwise agree. The arbitrators may order pre-hearing production or exchange of documentary evidence, and may require written submissions from the relevant Parties hereto, but may not otherwise order pre-hearing depositions or discovery. The arbitrators shall apply the laws of Illinois as set forth in Section 4.1; provided, however, that the Federal Arbitration Act shall govern. The language of the arbitral proceedings shall be English. The arbitrators shall not issue any award, grant any relief or take any action that is prohibited by or inconsistent with the provisions of this Agreement. |
(b) | Indemnification by Cytori . Except to the extent Bimini is obligated to indemnify, defend and hold Cytori harmless hereunder, Cytori, and its successors and assigns will indemnify, defend and hold harmless Bimini and its affiliates, officers, directors and employees and assigns (the "Bimini Indemnified Parties") from any claim, liability, loss, damage, lien, judgment, expense and cost (including reasonable attorneys' fees and other litigation expenses) with respect to any 3rd party claims against a Bimini Indemnified Party arising from Cytori’s, and its successors, assigns, sublicensees and/or customers: (a) operations, or facilities; (b) its sale and use of the Puregraft or Celution Products; (c) products liability claims (for Products manufactured by or on behalf of Cytori); (d) failure to comply with applicable Laws; or (e) the negligence or willful misconduct in the handling, labeling, manufacture, inspection, packaging, storage and delivery, marketing, sale or disposal of the Standalone Fat Transplantation Products or Puregraft Products or Celution Products. Nothing in the foregoing shall obligate Cytori to indemnify Bimini to the extent any such claim is the result of a material breach by Bimini of Bimini' obligations under this Agreement, or to the extent the claim is one for which Bimini is obliged to indemnify Cytori hereunder (collectively, "Bimini Claims"). |
(c) | Procedure . Indemnifying party shall have the right to control the defense of any claim for which indemnification is tendered provided it promptly assumes such defense and selects counsel reasonably acceptable to the party to be indemnified, and provided reasonable assurances with respect to the capability to conduct such defense (financial or otherwise) can be provided. The indemnified party shall cooperate in the defense and shall have the right to consent to any settlement of the claims provided that such consent may not be unreasonably withheld or delayed in the event that the proposed settlement fully releases the indemnified party from all Claims. |
4.5 | SUCCESSORS AND ASSIGNS . Except as otherwise expressly provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the Parties hereto. |
4.6 | ENTIRE AGREEMENT . This Agreement and the attachments, schedules and exhibits hereto, which are hereby expressly incorporated herein by this reference, constitute the entire understanding and agreement between the Parties with regard to the subject matter hereof and thereof, and this Agreement supersedes, cancels and annuls in its entirety any and all prior or contemporaneous agreements and understandings, express or implied, oral or written among them with respect thereto. No alteration, modification, interruption or amendment of this Agreement shall be binding upon the Parties unless in writing designated as an amendment hereto, and executed with equal formality by each of the Parties. |
4.7 | NOTICES . Except as otherwise expressly provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given (a) when hand delivered to the other Party; (b) when received, if sent by facsimile at the address and number set forth below, with a written confirmation copy of such facsimile sent the next business day in accordance with (c) below; (c) the second business day after deposit with a national overnight delivery service, postage prepaid, addressed to the other Party as set forth below, provided that the sending Party receives a confirmation of delivery from the delivery service provider; or (d) if earlier, when actually received. |
To Cytori:
3020 Callan Road, San Diego, CA 92121, U.S.A.
Attn:
Christopher J. Calhoun
Fax:
858-458-0995
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To Bimini:
3020 Callan Road, San Diego, CA 92121, U.S.A.
Attn: Bradford A. Conlan
Fax:
858-458-0995
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4.9 | CUMULATIVE REMEDIES . Unless expressly so stated in this Agreement in respect of any particular right or remedy, the rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. |
4.10 | TITLES AND SUBTITLES . The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. |
4.11 | RELATIONSHIP OF PARTIES . This Agreement shall not be deemed to constitute either Party, the agent, the partner, the licensee, the affiliate or the representative of the other Party, and neither Party shall represent to any third party that it has any such relationship or right of representation. |
4.12 | PRESS RELEASE . No public announcements or press releases shall be issued by either Party regarding this Agreement or any of the activities engaged in by the Parties pursuant to this Agreement without the prior written approval of the other Party; provided, however, that either Party shall have the right to make such public disclosure as may be necessary or appropriate to comply with applicable securities or other laws. |
4.13 | COUNTERPARTS . This Agreement may be executed by facsimile signature in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. |
4.14 | SEVERABILITY . Should any provision of this Agreement be determined to be illegal or unenforceable, such determination shall not affect the remaining provisions of this Agreement. |
4.15 | ..... |
4.16
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The rights and obligations of each Party herein, shall survive any transfer of assets or interests or assignments by either Party and be fully binding on any purchaser or successor in interest to such rights and obligations.
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CYTORI THERAPEUTICS, INC
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BIMINI TECHNOLOGIES LLC
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By: /s/ Christopher J. Calhoun
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By: /s/ Bradford A. Conlan
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Title: Chief Executive Officer
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Title: Chief Executive Officer
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Date: July 30, 2013
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Date: July 30, 2013
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Exhibit A:
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Description of Puregraft Products
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Exhibit B:
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Description of Celution Products
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Exhibit C:
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Description of Ancillary Products
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Exhibit D:
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NDA
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Schedule 1:
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Limited Warranties for Celution Products
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Schedule 2:
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Limited Warranties for Puregraft Products
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