|
As
filed with the Securities and Exchange Commission on October
14,
2005
|
Registration
No. 333-_________
|
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_________________________________
FORM
SB-2
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________________________
ZIOPHARM
Oncology, Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
2834
|
84-1475642
|
|
(State
or other jurisdiction of
|
(Primary
Standard Industrial
|
(I.R.S.
Employer
|
|
Incorporation
or organization)
|
Classification
Code Number)
|
Identification
No.)
|
1180
Avenue of the Americas, 19
th
Floor
New
York,
NY 10036
(646)
214-0700
(Address
and telephone number off principal executive offices and principal place
of
business)
|
Dr.
Jonathan Lewis
Chief
Executive Officer
ZIOPHARM
Oncology, Inc.
1180
Avenue of the Americas, 19th Floor
New
York, NY 10036
Telephone:
(646) 214-0700
Facsimile:
(646) 214-0711
(Name
and address of agent for service)
|
Copies
to:
William
M. Mower, Esq.
Alan
M. Gilbert, Esq.
Maslon
Edelman Borman & Brand, LLP
90
South 7th Street, Suite 3300
Minneapolis,
Minnesota 55402
Telephone:
(612) 672-8200
Facsimile:
(612) 642-8381
|
__________________________________
Approximate
date of proposed sale to the public:
From
time
to time after the effective date of this registration statement, as shall
be
determined by the selling stockholders identified herein.
If
this
Form is filed to register additional securities for an offering pursuant
to Rule
462(b) under the Securities Act, please check the following box and list
the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the
same
offering.
o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the
same
offering.
o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box.
o
CALCULATION
OF REGISTRATION FEE
|
Title
of each class of
securities
to be registered
|
Number
of shares to be registered (1)
|
Proposed
maximum
offering price per unit (2) |
Proposed
maximum
aggregate
offering
price (2)
|
Amount
of
registration
fee
|
|||||||||
|
Common
stock, par value $.001 per share
|
4,870,281
|
$
|
16.00
|
$
|
77,924,496
|
$
|
9,171.71
|
||||||
| (1) |
There
is also being registered hereunder an indeterminate number of additional
shares of common stock as shall be issuable pursuant to Rule 416
to
prevent dilution resulting from stock splits, stock dividends or
similar
transactions.
|
| (2) |
Estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457 of the Securities Act based upon the last trade of
the
registrant’s common stock on the OTC Bulletin Board, which occurred on
August 23, 2005 at a price per share equal to $16.00 (adjusted
to reflect
a 1-for-40 share combination that was effective August 24,
2005).
|
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a),
may determine.
The
information in this prospectus is preliminary and incomplete and may be changed.
Securities included in the registration statement of which this prospectus
is a
part may not be sold until the registration statement filed with the securities
and exchange commission becomes effective. This prospectus is not an offer
to
sell these securities and is not soliciting an offer to buy these securities
in
any state where the offer or sale is not permitted.
OFFERING
PROSPECTUS
ZIOPHARM
Oncology, Inc.
4,870,281
shares of common stock
The
selling stockholders identified on pages 41-49 of this prospectus are offering
on a resale basis a total of 4,870,281 shares of our common stock, including
482,407 shares issuable upon the exercise of outstanding warrants. We will
not
receive any proceeds from the sale of these shares by the selling
stockholders.
Our
common stock is quoted on the Over-the-Counter Bulletin Board under the symbol
“ZIOP.” The last sale of our common stock as reported on the OTC Bulletin Board
occurred on August 23, 2005 at a price per share equal to $16.00 (adjusted
to
reflect a 1-for-40 share combination that was effective August 24,
2005).
________________
The
securities offered by this prospectus involve a high degree of
risk.
See
“Risk Factors” beginning on page 5.
________________
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved these securities or determined that this prospectus
is
truthful or complete. A representation to the contrary is a criminal
offense.
The
date
of this prospectus is __________, 2005
TABLE
OF CONTENTS
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Page
|
||||
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PROSPECTUS
SUMMARY
|
1
|
|||
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RISK
FACTORS
|
5
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|||
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NOTE
REGARDING FORWARD-LOOKING STATEMENTS
|
15
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|||
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
16
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|||
|
DESCRIPTION
OF BUSINESS
|
18
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|||
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MANAGEMENT
|
27
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|||
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EXECUTIVE
COMPENSATION
|
30
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|||
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
35
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|||
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
37
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|||
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MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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40
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|||
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USE
OF PROCEEDS
|
40
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|||
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SELLING
STOCKHOLDERS
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41
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|||
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PLAN
OF DISTRIBUTION
|
50
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|||
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DESCRIPTION
OF CAPITAL STOCK
|
52
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|||
|
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
|
53
|
|||
|
ABOUT
THIS PROSPECTUS
|
53
|
|||
|
WHERE
YOU CAN FIND MORE INFORMATION
|
53
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|||
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VALIDITY
OF COMMON STOCK
|
54
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|||
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EXPERTS
|
54
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|||
PROSPECTUS
SUMMARY
This
summary highlights certain information found in greater detail elsewhere in
this
prospectus. This summary may not contain all of the information that may be
important to you. We urge you to read this entire prospectus carefully,
including the risks of investing in our common stock discussed under “Risk
Factors” and the financial statements and other information that is incorporated
by reference into this prospectus, before making an investment decision. In
addition, this prospectus summarizes other documents which we urge you to read.
All references in this prospectus to the “Company,” “we,” “us” and
“our” refer to ZIOPHARM Oncology, Inc.
Our
Company
We
are a
development-stage company that is seeking to develop and commercialize a
diverse, risk-sensitive portfolio of in-licensed cancer drugs that address
unmet
medical needs. Our management and advisors are focused on licensing proprietary
drug candidate families that are related to cancer therapeutics on the market
where the application of new biological understanding and our drug development
expertise will lead to a lower risk for clinical development failure while
expediting clinical registration. We expect to commercialize our products on
our
own in North America but recognize that promising clinical trial results in
cancers with a high incidence and prevalence might also be addressed in a
commercial partnership with another company with the requisite financial
resources. Currently, we are in U.S. Phase I studies for two product candidates
known as ZIO-101 and ZIO-201. We currently intend to continue with clinical
development of ZIO-101 for advanced myeloma and ZIO-201 for advanced sarcoma.
None of our product candidates have been approved by the United States Food
and
Drug Administration (the “FDA”) or any other regulatory body. Further, we have
not received any commercial revenues to date, and until we receive the necessary
approvals from the FDA or a similar foreign regulatory authority, we will not
have any commercial revenues.
| · |
ZIO-101
is
an organic arsenic compound covered by an issued U.S. patent and
applications internationally. A form of commercially available inorganic
arsenic (arsenic trioxide (Trisenox
®
)
or ATO) has been approved for the treatment of acute promyelocytic
leukemia (APL), a precancerous condition, and is on the compendia
listing
for the therapy of multiple myeloma as well as having been studied
for the
treatment of various other cancers. Nevertheless, ATO has been shown
to be
toxic to the heart and liver, limiting its use as an anti-cancer
agent.
Inorganic arsenic has also been shown to cause cancer of the skin
and lung
in humans. The toxicity of arsenic generally is correlated to its
accumulation in organs and tissues. The Company’s preclinical studies
demonstrated that ZIO-101 (and organic arsenic in general) is considerably
less toxic than inorganic arsenic, particularly with regard to heart
toxicity.
In
vitro
testing of ZIO-101 using the National Cancer Institute’s human cancer cell
panel detected activity against lung, colon, brain, melanoma, ovarian
and
kidney cancer. Moderate activity was detected against breast and
prostate
cancer. In addition to solid tumors,
in
vitro
testing in both the National Cancer Institute’s cancer cell panel and
in
vivo
testing in a leukemia animal model demonstrated substantial activity
against hematological cancers (cancers of the blood and blood-forming
tissues) such as leukemia, lymphoma, myelodysplastic syndromes and
multiple myeloma. Leukemia is a cancer that begins in blood-forming
tissue
such as the bone marrow and causes large numbers of blood cells to
be
produced and enter the bloodstream. Lymphomas are cancers that begin
in
cells of the immune system. Myelodysplastic syndromes, also called
preleukemia or smoldering leukemia, are diseases in which the bone
marrow
does not function normally.
|
|
·
|
ZIO-201
,
or isophosphoramide mustard (IPM), is a proprietary stabilized metabolite
of ifosfamide that is also related to cyclophosphamide. A patent
application for pharmaceutical composition has been filed.
Cyclophosphamide and ifosfamide are alkylating agents. Cyclophosphamide
is
the most widely used alkylating agent in cancer therapy and is used
to
treat breast cancer and non-Hodgkin’s lymphoma. Ifosfamide has been shown
to be effective in high dose by itself, or in combination in treating
sarcoma and lymphoma. Although ifosfamide-based treatment generally
represents the standard of care for sarcoma, it is not licensed for
this
indication by the FDA. Our preclinical studies have shown that, in
animal
and laboratory models, IPM evidences activity against leukemia and
solid
tumors. These studies also indicate that ZIO-201 has a better
pharmacokinetic and safety profile than ifosfamide or cyclophosphamide,
offering the possibility of safer and more efficacious therapy with
ZIO-201. Ifosfamide is metabolized to IPM. In addition to IPM, another
metabolite of ifosfamide is acrolein, which is toxic to the kidneys
and
bladder. The presence of acrolein can mandate extensive in-hospital
hydration and the administration of a protective agent called
Mesna
®
,
which is inconvenient and expensive. Chloroacetaldehyde is another
metabolite of ifosfamide and is toxic to the central nervous system,
causing “fuzzy brain” syndrome for which there is currently no protective
measure. Similar toxicity concerns pertain to high-dose cyclophosphamide,
which is widely used in bone marrow and blood cell transplantation.
Because ZIO-201 is independently active—without acrolein or
chloroacetaldehyde metabolites—the Company believes that the
administration of ZIO-201 may avoid the toxicities of ifosfamide
and
cyclophosphamide without compromising efficacy. In addition to anticipated
lower toxicity, ZIO-201 may have other advantages over ifosfamide
and
cyclophosphamide. ZIO-201 likely cross-links DNA differently than
ifosfamide or cyclophosphamide metabolites, resulting in a different
activity profile. Moreover, in some instances ZIO-201 appears to
show
activity in ifosfamide- and/or cyclophosphamide-resistant cancer
cells.
|
We
were
originally incorporated in Colorado in September 1998 (under the name Net
Escapes, Inc.) and later changed our name to “EasyWeb, Inc.” in February 1999.
We were re-incorporated in Delaware on May 16, 2005 under the same name. On
September 13, 2005, we completed a “reverse” acquisition of privately held
ZIOPHARM, Inc., a Delaware corporation. To effect this transaction, we caused
ZIO Acquisition Corp., our wholly-owned subsidiary, to merge with and into
ZIOPHARM, Inc., with ZIOPHARM, Inc. surviving as our wholly owned subsidiary.
In
accordance with the terms of the merger, the outstanding common stock of
ZIOPHARM, Inc. automatically converted into the right to receive an aggregate
of
approximately 97.3% of our outstanding common stock (after giving effect to
the
transaction).Following the merger, we caused ZIOPHARM, Inc. to merge with and
into us and we changed our name to “ZIOPHARM Oncology, Inc.”
Our
executive offices are located at 1180 Avenue of the Americas, 19th Floor, New
York, NY 10036, and our telephone number is (646) 214-0700. Our internet site
is
www.ziopharm.com
.
None of
the information on our internet site is part of the prospectus.
Recent
Developments
Reverse
Stock Split
On
August
24, 2005, we effected a 1-for-40 share combination (i.e., reverse stock split)
of our capital stock. The share combination was approved by our stockholders
at
a special stockholder meeting held on February 28, 2005. As a result of the
share combination, we had 189,922 shares of common stock outstanding immediately
prior to the Merger.
Acquisition
of ZIOPHARM, Inc.
Pursuant
to an Agreement and Plan of Merger dated August 3, 2005 (the “Merger Agreement”)
by and among us, ZIO Acquisition Corp., a Delaware corporation and our wholly
owned subsidiary, and ZIOPHARM, Inc., a Delaware corporation (“ZIOPHARM”), ZIO
Acquisition Corp. merged with and into ZIOPHARM, with ZIOPHARM remaining as
the
surviving corporation and our wholly-owned subsidiary. This transaction is
referred to throughout this report as the “Merger.” The Merger was effective as
of September 13, 2005, upon the filing of a certificate of merger with the
Delaware Secretary of State. In consideration for their shares of ZIOPHARM
capital stock and in accordance with the Agreement, the stockholders of ZIOPHARM
received an aggregate of 6,967,941 shares or approximately 97.3% of our common
stock. In addition, all securities convertible into and exercisable for shares
of ZIOPHARM capital stock outstanding immediately prior to the Merger were
cancelled, and the holders thereof received similar securities convertible
into
an aggregate of 1,366,846 shares of our common stock.
All
share
and per share data in this prospectus (other than in our financial statements
and in Item 26) have been adjusted to give effect to the conversions effected
as
part of the merger.
The
Merger Agreement was filed as Exhibit 10.1 to our current report on Form 8-K
filed with the Securities and Exchange Commission on August 9, 2005, and is
incorporated herein by reference. The foregoing description of the Merger
Agreement and the Merger do not purport to be complete and is qualified in
its
entirety by reference to the Merger Agreement.
On
September 13, 2005, our board of directors approved a transaction pursuant
to
which ZIOPHARM merged with and into us, leaving us as the surviving corporation.
In connection with this parent-subsidiary merger, we relinquished our prior
corporate name, EasyWeb, Inc., and assumed in its place the name “ZIOPHARM
Oncology, Inc.” The parent-subsidiary merger and name change became effective on
September 14, 2005.
Changes
in Board of Directors
At
the
effective time of the Merger, our board of directors was reconstituted by the
appointment of Jonathan Lewis, Richard Bagley, Murray Brennan, James Cannon,
Senator Wyche Fowler, Jr., Gary S. Fragin, Timothy McInerney and Michael Weiser
as directors (all of whom were directors of ZIOPHARM immediately prior to the
Merger), and the resignations of David C. Olson and David Floor from their
roles
as our directors.
Risk
Factors
For
a
discussion of the risks you should consider before purchasing shares of our
common stock, you are urged to carefully review and consider the section
entitled “Risk Factors” beginning on page 5 of this prospectus.
The
Offering
The
selling stockholders identified on pages 41-49 of this prospectus are offering
on a resale basis a total of 4,870,281 shares of our common stock, of which
482,407 shares are issuable upon exercise of outstanding warrants and
options.
|
Common
stock offered
|
4,870,281
shares
|
|||
|
Common
stock outstanding before the offering (1)
|
7,241,211
shares
|
|||
|
Common
stock outstanding after the offering (2)
|
7,723,618
shares
|
|||
|
Common
stock OTC Bulletin Board trading symbol
|
ZIOP
|
|
(1)
|
Based
on the number of shares outstanding as of October 12, 2005, not including
1,449,674 shares issuable upon exercise of various warrants and options
to
purchase our common stock.
|
|
(2)
|
Assumes
the issuance of all shares offered hereby that are issuable upon
exercise
of warrants.
|
RISK
FACTORS
An
investment in our common stock is very risky. You may lose the entire amount
of
your investment. Prior to making an investment decision, you should carefully
review this entire prospectus and consider the following risk
factors:
We
currently have no product revenues and will need to raise additional capital
to
operate our business.
To
date,
we have generated no product revenues. Until and unless we receive approval
from
the U.S. Food and Drug Administration (the “FDA”) and/or other regulatory
authorities for our product candidates, we cannot sell our drugs and will not
have product revenues. Currently, our only product candidates are
ZIO-101(organic arsenic) and ZIO-201 (isophosphoramide mustard), and they are
not approved by the FDA for sale.
We
will need to seek additional sources of financing which may not be available
on
favorable terms, if at all.
Currently,
we expect that we will have sufficient cash to fund our operations into the
second quarter of 2006. However, changes may occur that would consume our
existing capital prior to that time, including the progress of our research
and
development efforts, changes in governmental regulation and acquisitions of
additional product candidates. If we do not succeed in raising additional funds
on acceptable terms, we may be unable to complete planned preclinical and
clinical trials or obtain approval of any product candidates from the FDA and
other regulatory authorities. In addition, we could be forced to discontinue
product development, reduce or forego sales and marketing efforts or forego
attractive business opportunities. Any additional sources of financing will
likely involve the issuance of our equity securities, which will have a dilutive
effect on our existing stockholders.
We
are not currently profitable and may never become profitable.
We
have a
history of losses and expect to incur substantial losses and negative operating
cash flow for the foreseeable future, and we may never achieve or maintain
profitability. Even if we succeed in developing and commercializing one or
more
product candidates, we expect to incur substantial losses for the foreseeable
future and may never become profitable. We expect also to continue to incur
significant operating and capital expenditures and anticipate that our expenses
will increase substantially in the foreseeable future as we:
| · |
continue
to undertake preclinical development and clinical trials for product
candidates;
|
| · |
scale
up the formulation and manufacturing of our product candidates;
|
| · |
seek
regulatory approvals for product candidates;
|
| · |
implement
additional internal systems and infrastructure; and
|
| · |
hire
additional personnel.
|
We
also
expect to experience negative cash flow for the foreseeable future as we fund
our operating losses and capital expenditures. This may result in a negative
impact on the value of our common stock.
We
have a limited operating history upon which to base an investment decision.
Prior
to
the Merger, ZIOPHARM was a development-stage company that was incorporated
in
September 2003. To date, we have not demonstrated an ability to perform the
functions necessary for the successful commercialization of any product
candidates. The successful commercialization of any product candidates will
require us to perform a variety of functions, including:
| · |
continuing
to undertake preclinical development and clinical
trials;
|
| · |
participating
in regulatory approval processes;
|
| · |
formulating
and manufacturing products; and
|
| · |
conducting
sales and marketing activities.
|
Our
operations have been limited to organizing and staffing our Company, acquiring,
developing and securing our proprietary product candidates, undertaking
preclinical trials and clinical trials of our product candidates ZIO-101 and
ZIO-201, and manufacturing ZIO-101 and ZIO- 201. These operations provide a
limited basis for you to assess our ability to commercialize our product
candidates and the advisability of investing in our securities.
We
may not obtain the necessary U.S. or worldwide regulatory approvals to
commercialize any product candidate.
We
may
not be able to obtain the approvals necessary to commercialize our product
candidates, ZIO-101 and ZIO-201, or any product candidate that we may acquire
or
develop in the future for commercial sale. We will need FDA approval to
commercialize our product candidates in the U.S. and approvals from regulatory
authorities in foreign jurisdictions equivalent to the FDA to commercialize
our
product candidates in those jurisdictions. In order to obtain FDA approval
of
any product candidate, we must submit to the FDA a New Drug Application, or
“NDA,” demonstrating that the product candidate is safe for humans and effective
for its intended use. This demonstration requires significant research and
animal tests, which are referred to as preclinical studies, as well as human
tests, which are referred to as clinical trials. Satisfaction of the FDA’s
regulatory requirements typically takes many years, depending upon the type,
complexity and novelty of the product candidate, and will require substantial
resources for research, development and testing. We cannot predict whether
our
research, development, and clinical approaches will result in drugs that the
FDA
considers safe for humans and effective for their intended uses. The FDA has
substantial discretion in the drug approval process and may require us to
conduct additional preclinical and clinical testing or to perform post-marketing
studies. The approval process may also be delayed by changes in government
regulation, future legislation or administrative action or changes in FDA policy
that occur prior to or during our regulatory review. Delays in obtaining
regulatory approvals may:
| · |
delay
commercialization of, and our ability to derive product revenues
from, our
product candidates;
|
| · |
impose
costly procedures on us; and
|
| · |
diminish
any competitive advantages that we may otherwise enjoy.
|
Even
if
we comply with all FDA requests, the FDA may ultimately reject one or more
of
our NDAs. We cannot be sure that we will ever obtain regulatory clearance for
our product candidates, ZIO-101 and ZIO-201. Failure to obtain FDA approval
of
our product candidates will severely undermine our business by leaving us
without a saleable product, and therefore without any potential revenue source,
until another product candidate can be developed. There is no guarantee that
we
will ever be able to develop or acquire another product candidate.
In
foreign jurisdictions, we similarly must receive approval from applicable
regulatory authorities before we can commercialize any drugs. Foreign regulatory
approval processes generally include all of the risks associated with the FDA
approval procedures described above.
Our
product candidates are in early stages of clinical trials, and we cannot be
certain when we will be able to file an NDA with the FDA.
Our
product candidates, ZIO-101 and ZIO-201, are in early stages of development
and
require extensive clinical testing. In 2005 we initiated two ZIO-101 phase
I
clinical trials; one in hematological cancers and the other in solid tumors.
A
phase I trial for ZIO-201 was initiated in 2004. Notwithstanding our current
clinical trial plans for each of our existing product candidates, we may not
be
able to commence additional trials or see results from these trials within
our
anticipated timelines. As such, we cannot predict with any certainty if or
when
we might submit an NDA for regulatory approval of our product candidates or
whether such an NDA will be accepted.
Clinical
trials are very expensive, time-consuming and difficult to design and implement.
Human
clinical trials are very expensive and difficult to design and implement, in
part because they are subject to rigorous regulatory requirements. The clinical
trial process is also time consuming. We estimate that clinical trials of our
product candidates will take at least several years to complete. Furthermore,
failure can occur at any stage of the trials, and we could encounter problems
that cause us to abandon or repeat clinical trials. The commencement and
completion of clinical trials may be delayed by several factors,
including:
| · |
unforeseen
safety issues;
|
| · |
determination
of dosing issues;
|
| · |
lack
of effectiveness during clinical trials;
|
| · |
slower
than expected rates of patient recruitment;
|
| · |
inability
to monitor patients adequately during or after treatment; and
|
| · |
inability
or unwillingness of medical investigators to follow our clinical
protocols.
|
We
are
hopeful that we may be able to obtain “Fast Track” status from the FDA for one
or more of our product candidates. Fast Track status means that the FDA will
perform an expedited review of our data upon the completion of clinical trials,
which will thereby decrease the amount of time it will take a product candidate
that has achieved such designation to reach the commercial market. However,
there is no guarantee that any of our product candidates will be granted Fast
Track status by the FDA or that, even if such product candidate is granted
such
status, the product candidate’s clinical development and regulatory approval
process will not be delayed or will be successful.
In
addition, we or the FDA may suspend our clinical trials at any time if it
appears that we are exposing participants to unacceptable health risks or if
the
FDA finds deficiencies in our IND submission or in the conduct of these trials.
Therefore, we cannot predict with any certainty the schedule for future clinical
trials.
The
results of our clinical trials may not support our product candidate claims.
Even
if
our clinical trials are completed as planned, we cannot be certain that their
results will support approval of our product candidates. Success in preclinical
testing and early clinical trials does not ensure that later clinical trials
will be successful, and we cannot be sure that the results of later clinical
trials will replicate the results of prior clinical trials and preclinical
testing. The clinical trial process may fail to demonstrate that our product
candidates are safe for humans and effective for indicated uses. This failure
would cause us to abandon a product candidate and may delay development of
other
product candidates. Any delay in, or termination of, our clinical trials will
delay the filing of our NDAs with the FDA and, ultimately, our ability to
commercialize our product candidates and generate product revenues. In addition,
our clinical trials involve small patient populations. Because of small sample
size, the results of these clinical trials may not be indicative of future
results.
Physicians
and patients may not accept and use our drugs. Even if the FDA approves our
product candidates, physicians and patients may not accept and use them.
Acceptance and use of our products will depend upon a number of factors
including:
| · |
perceptions
by members of the health care community, including physicians, regarding
the safety and effectiveness of our drugs;
|
| · |
cost-effectiveness
of our products relative to competing products;
|
| · |
availability
of reimbursement for our products from government or other healthcare
payers; and
|
| · |
effectiveness
of marketing and distribution efforts by us and our licensees and
distributors, if any.
|
Because
we expect sales of our current product candidates, if approved, to generate
substantially all of our product revenues for the foreseeable future, the
failure of a drug to find market acceptance would harm our business and could
require us to seek additional financing in order to fund the development of
future product candidates.
Our
drug-development program materially depends upon third-party researchers who
are
outside our control.
We
materially rely upon independent investigators and collaborators, such as
universities and medical institutions, to conduct our preclinical and clinical
trials under agreements with us. These collaborators are not our employees
and
we cannot control the amount or timing of resources that they devote to our
programs. These investigators may not assign as great a priority to our programs
or pursue them as diligently as we would if we were undertaking such programs
ourselves. If outside collaborators fail to devote sufficient time and resources
to our drug development programs, or if their performance is substandard, the
approval of our FDA applications, if any, and our introduction of new drugs,
if
any, will be delayed. These collaborators may also have relationships with
other
commercial entities, some of whom may compete with us. If our collaborators
assist our competitors to our detriment, our competitive position would be
harmed.
We
rely exclusively on third parties to formulate and manufacture our product
candidates.
We
do not
have experience in drug formulation or manufacturing and do not intend to
establish our own manufacturing facilities. We lack the resources and expertise
to formulate or manufacture our own product candidates. We currently are
contracting for the commercial scale manufacture of our product candidates.
We
intend to contract with one or more manufacturers to manufacture, supply, store
and distribute drug supplies for our clinical trials. If a product candidate
we
develop or acquire in the future receives FDA approval, we will rely on one
or
more third-party contractors to manufacture our drugs. Our anticipated future
reliance on a limited number of third-party manufacturers exposes us to the
following risks:
| · |
We
may be unable to identify manufacturers on acceptable terms or at
all
because the number of potential manufacturers is limited and the
FDA must
approve any replacement contractor. This approval would require new
testing and compliance inspections. In addition, a new manufacturer
would
have to be educated in, or develop substantially equivalent processes
for,
production of our products after receipt of FDA approval, if any.
|
| · |
Our
third-party manufacturers might be unable to formulate and manufacture
our
drugs in the volume and of the quality required to meet our clinical
needs
and commercial needs, if any.
|
| · |
Our
future contract manufacturers may not perform as agreed or may not
remain
in the contract manufacturing business for the time required to supply
our
clinical trials or to successfully produce, store and distribute
our
products.
|
| · |
Drug
manufacturers are subject to ongoing periodic unannounced inspection
by
the FDA, the Drug Enforcement Administration (the “DEA”), and
corresponding state agencies to ensure strict compliance with good
manufacturing practices and other government regulations and corresponding
foreign standards. We do not have control over third-party manufacturers’
compliance with these regulations and standards.
|
| · |
If
any third-party manufacturer makes improvements in the manufacturing
process for our products, we may not own, or may have to share, the
intellectual property rights to the innovation.
|
Each
of
these risks could delay our clinical trials, the approval, if any, of our
product candidates by the FDA or the commercialization of our product candidates
or result in higher costs or deprive us of potential product
revenues.
We
do not have experience selling, marketing or distributing products and we have
no internal capability to do so.
We
currently have no marketing, sales or distribution capabilities. If and when
we
become reasonably certain that we will be able to commercialize our current
or
future products, we anticipate allocating resources to the marketing, sales
and
distribution of our proposed products in North America However, we cannot assure
that we will be able to market, sell and distribute our products successfully.
Our future success also may depend, in part, on our ability to enter into and
maintain collaborative relationships for such capabilities, the collaborator’s
strategic interest in the products under development and such collaborator’s
ability to successfully market and sell any such products. Although we intend
to
pursue collaborative arrangements regarding the sale and marketing of our
products, there can be no assurance that we will be able to establish or
maintain our own sales operations or affect collaborative arrangements, or
that
if we are able to do so, our collaborators will have effective sales forces.
There can also be no assurance that we will be able to establish or maintain
relationships with third party collaborators or develop in-house sales and
distribution capabilities. To the extent that we depend on third parties for
marketing and distribution, any revenues we receive will depend upon the efforts
of such third parties, and there can be no assurance that such efforts will
be
successful. In addition, there can also be no assurance that we will be able
to
market and sell our products in the United States or overseas.
If
we cannot compete successfully for market share against other drug companies,
we
may not achieve sufficient product revenues and our business will suffer.
The
market for our product candidates, ZIO-101 and ZIO-201, is characterized by
intense competition and rapid technological advances. If a product candidate
receives FDA approval, it will compete with a number of existing and future
drugs and therapies developed, manufactured and marketed by others. Existing
or
future competing products may provide greater therapeutic convenience or
clinical or other benefits for a specific indication than our products, or
may
offer comparable performance at a lower cost. If our products fail to capture
and maintain market share, we may not achieve sufficient product revenues and
our business will suffer.
We
will
compete against fully integrated pharmaceutical companies and smaller companies
that are collaborating with larger pharmaceutical companies, academic
institutions, government agencies and other public and private research
organizations. Many of these competitors have products already approved or
in
development. In addition, many of these competitors, either alone or together
with their collaborative partners, operate larger research and development
programs or have substantially greater financial resources than we do, as well
as significantly greater experience in:
| · |
developing
drugs;
|
| · |
undertaking
preclinical testing and human clinical trials;
|
| · |
obtaining
FDA and other regulatory approvals of drugs;
|
| · |
formulating
and manufacturing drugs; and
|
| · |
launching,
marketing and selling drugs.
|
If
we fail to adequately protect or enforce our intellectual property rights or
secure rights to patents of others, the value of our intellectual property
rights would diminish.
Our
success, competitive position and future revenues will depend in part on our
ability and the abilities of our licensors to obtain and maintain patent
protection for our products, methods, processes and other technologies, to
preserve our trade secrets, to prevent third parties from infringing on our
proprietary rights and to operate without infringing the proprietary rights
of
third parties.
To
date,
we have exclusive rights to certain U.S. and foreign intellectual property.
We
anticipate filing additional patent applications both in the U.S. and in other
countries, as appropriate. However, we cannot predict:
| · |
the
degree and range of protection any patents will afford us against
competitors, including whether third parties will find ways to invalidate
or otherwise circumvent our patents;
|
| · |
if
and when patents will issue;
|
| · |
whether
or not others will obtain patents claiming aspects similar to those
covered by our patents and patent applications; or
|
| · |
whether
we will need to initiate litigation or administrative proceedings
which
may be costly whether we win or lose.
|
Our
success also depends upon the skills, knowledge and experience of our scientific
and technical personnel, our consultants and advisors as well as our licensors
and contractors. To help protect our proprietary know-how and our inventions
for
which patents may be unobtainable or difficult to obtain, we rely on trade
secret protection and confidentiality agreements. To this end, it is our policy
generally to require our employees, consultants, advisors and contractors to
enter into agreements which prohibit the disclosure of confidential information
and, where applicable, require disclosure and assignment to us of the ideas,
developments, discoveries and inventions important to our business. These
agreements may not provide adequate protection for our trade secrets, know-how
or other proprietary information in the event of any unauthorized use or
disclosure or the lawful development by others of such information. If any
of
our trade secrets, know-how or other proprietary information is disclosed,
the
value of our trade secrets, know-how and other proprietary rights would be
significantly impaired and our business and competitive position would
suffer.
If
we infringe the rights of third parties we could be prevented from selling
products, forced to pay damages, and defend against
litigation.
If
our
products, methods, processes or other technologies infringe the proprietary
rights of other parties, we could incur substantial costs and we may have
to:
| · |
obtain
licenses, which may not be available on commercially reasonable terms,
if
at all;
|
| · |
abandon
an infringing drug candidate;
|
| · |
redesign
our products or processes to avoid infringement;
|
| · |
stop
using the subject matter claimed in the patents held by others;
|
| · |
pay
damages; or
|
| · |
defend
litigation or administrative proceedings which may be costly whether
we
win or lose, and which could result in a substantial diversion of
our
valuable management resources.
|
Our
ability to generate product revenues will be diminished if our drugs sell for
inadequate prices or patients are unable to obtain adequate levels of
reimbursement.
Our
ability to commercialize our drugs, alone or with collaborators, will depend
in
part on the extent to which reimbursement will be available from:
| · |
government
and health administration authorities;
|
| · |
private
health maintenance organizations and health insurers; and
|
| · |
other
healthcare payers.
|
Significant
uncertainty exists as to the reimbursement status of newly approved healthcare
products. Healthcare payers, including Medicare, are challenging the prices
charged for medical products and services. Government and other healthcare
payers increasingly attempt to contain healthcare costs by limiting both
coverage and the level of reimbursement for drugs. Even if our product
candidates are approved by the FDA, insurance coverage may not be available,
and
reimbursement levels may be inadequate, to cover our drugs. If government and
other healthcare payers do not provide adequate coverage and reimbursement
levels for our products, once approved, market acceptance of such products
could
be reduced.
We
may not be able to successfully manage our growth.
Our
success will depend upon the expansion of our operations and the effective
management of our growth, which will place a significant strain on our
management and on our administrative, operational and financial resources.
To
manage this growth, we must expand our facilities, augment our operational,
financial and management systems and hire and train additional qualified
personnel. If we are unable to manage our growth effectively, our business
may
be harmed.
Our
business will subject us to the risk of liability claims associated with the
use
of hazardous materials and chemicals.
Our
contract research and development activities may involve the controlled use
of
hazardous materials and chemicals. Although we believe that our safety
procedures for using, storing, handling and disposing of these materials comply
with federal, state and local laws and regulations, we cannot completely
eliminate the risk of accidental injury or contamination from these materials.
In the event of such an accident, we could be held liable for any resulting
damages and any liability could have a materially adverse effect on our
business, financial condition and results of operations. In addition, the
federal, state and local laws and regulations governing the use, manufacture,
storage, handling and disposal of hazardous or radioactive materials and waste
products may require our contractors to incur substantial compliance costs
that
could materially adversely affect our business, financial condition and results
of operations.
We
rely on key executive officers and scientific and medical advisors, and their
knowledge of our business and technical expertise would be difficult to replace.
We
are
highly dependent on our principal scientific, regulatory and medical advisors.
We do not have “key person” life insurance policies on any of our officers. The
loss of the technical knowledge and management and industry expertise of any
of
our key personnel could result in delays in product development, loss of
customers and sales and diversion of management resources, which could adversely
affect our operating results.
If
we are unable to hire additional qualified personnel, our ability to grow our
business may be harmed.
We
will
need to hire additional qualified personnel with expertise in preclinical
testing, clinical research and testing, government regulation, formulation
and
manufacturing, as well as sales and marketing. We compete for qualified
individuals with numerous biopharmaceutical companies, universities and other
research institutions. Competition for such individuals is intense, and we
cannot be certain that our search for such personnel will be successful.
Attracting and retaining qualified personnel will be critical to our
success.
We
may incur substantial liabilities and may be required to limit commercialization
of our products in response to product liability lawsuits.
The
testing and marketing of medical products entail an inherent risk of product
liability. If we cannot successfully defend ourselves against product liability
claims, we may incur substantial liabilities or be required to limit
commercialization of our products. Our inability to obtain sufficient product
liability insurance at an acceptable cost to protect against potential product
liability claims could prevent or inhibit the commercialization of
pharmaceutical products we develop, alone or with collaborators. We currently
carry clinical trial insurance and product liability insurance.
There
are certain interlocking relationships among us and certain affiliates of
Paramount, which may present potential conflicts of interest.
Lindsay
A. Rosenwald, M.D., who may be deemed to beneficially own approximately 20.13%
of our common stock, is Chairman and Chief Executive Officer of Paramount
BioCapital, Inc., an investment banking firm that served as placement agent
in
connection with a private placement of ZIOPHARM’s Series A Convertible Preferred
Stock that was completed in May 2005. Paramount also served as a finder in
connection with the Company’s option and research agreements with Southern
Research Institute. The Company paid fees and issued securities to Paramount
or
its designees in connection with these transactions and Paramount currently
has
a right of first refusal to act as the placement agent for the private sale
of
our securities until May 31, 2008. Dr. Michael Weiser and Timothy McInerney,
each of whom is a member of the Company’s board of directors, are also full-time
employees of Paramount. See “Certain Transactions and Relationships - ZIOPHARM
Transactions and Relationship.”
Paramount,
Dr. Rosenwald, Dr. Weiser, and Mr. McInerney are not obligated pursuant to
any
agreement or understanding with us to make any additional products or
technologies available to us, nor can there be any assurance that any biomedical
or pharmaceutical products or technologies identified in the future by such
parties will be made available to us. In addition, certain of our current
officers and directors, as well as officers or directors that may be hereafter
appointed, may from time to time serve as officers or directors of other
biopharmaceutical or biotechnology companies. There can be no assurance that
such other companies will not have interests in conflict with our own.
The
resale of shares covered by this registration statement could adversely affect
the market price of our common stock in the public market, which result would
in
turn negatively affect the Company’s ability to raise additional equity capital.
The
sale,
or availability for sale, of common stock in the public market pursuant to
this
registration statement may adversely affect the prevailing market price of
our
common stock and may impair our ability to raise additional capital by selling
equity or equity-linked securities. Once effective, this registration statement
will register the resale of a significant number of shares of our common stock.
In fact, the registration statement will make publicly available for resale
an
additional 4,870,281 shares of our common stock, assuming the issuance of all
shares of common stock offered hereunder. This figure represents approximately
67% of the shares of our common stock outstanding immediately after the
effectiveness of this registration statement, assuming the issuance of all
shares of common stock offered hereunder.
As
of
October 12, 2005, we had approximately 7,241,211 shares of common stock
outstanding, and approximately 0.1% of such shares were available for sale
without restriction. When the registration statement that includes this
prospectus is declared effective, all 4,870,281 shares being offered hereby
will
be available for resale. The resale of a substantial number of shares of our
common stock in the public market pursuant to this offering, and afterwards,
could adversely affect the market price for our common stock and make it more
difficult for you to sell our shares at times and prices that you feel are
appropriate. Furthermore, we expect that, because there is a large number of
shares registered hereunder, selling stockholders will continue to offer shares
covered by this registration statement for a significant period of time, the
precise duration of which we cannot predict. Accordingly, the adverse market
and
price pressures resulting from this offering may continue for an extended period
of time and continued negative pressure on the market price of our common stock
could have a material adverse effect on our ability to raise additional equity
capital.
Because
we became public by means of a reverse merger, we may not be able to attract
the
attention of major brokerage firms.
Additional
risks may exist as a result of our becoming a public reporting company through
a
“reverse merger.” Security analysts of major brokerage firms may not provide
coverage of the Company. Because we became public through a reverse merger,
there is no incentive to brokerage firms to recommend the purchase of our common
stock. No assurance can be given that brokerage firms will want to provide
analyst coverage of our Company in the future.
We
are subject to Sarbanes-Oxley and the reporting requirements of federal
securities laws, which can be expensive.
As
a
public reporting company, we are subject to the Sarbanes-Oxley Act of 2002,
as
well as the information and reporting requirements of the Securities Exchange
Act of 1934, as amended, and other federal securities laws. The costs of
compliance with the Sarbanes-Oxley Act and of preparing and filing annual and
quarterly reports, proxy statements and other information with the SEC, and
furnishing audited reports to stockholders, will cause our expenses to be higher
than they would be if ZIOPHARM had remained privately held and did not
consummate the Merger.
Our
common stock trades only in an illiquid trading market.
Trading
of our common stock is conducted on the over-the-counter bulletin board. This
has an adverse effect on the liquidity of our common stock, not only in terms
of
the number of shares that can be bought and sold at a given price, but also
through delays in the timing of transactions and reduction in security analysts’
and the media’s coverage of our Company and its common stock. This may result in
lower prices for our common stock than might otherwise be obtained and could
also result in a larger spread between the bid and asked prices for our common
stock.
There
is not now, and there may not ever be an active market for shares of our common
stock.
In
general, there has been very little trading activity in shares of the Company’s
common stock. The small trading volume will likely make it difficult for our
stockholders to sell their shares as and when they choose. Furthermore, small
trading volumes generally depress market prices. As a result, you may not always
be able to resell shares of our common stock publicly at the time and prices
that you feel are fair or appropriate.
Because
it is a “penny stock,” you may have difficulty selling shares of our common
stock.
Our
common stock is a “penny stock” and is therefore subject to the requirements of
Rule 15g-9 under the Securities and Exchange Act of 1934. Under this rule,
broker-dealers who sell penny stocks must provide purchasers of these stocks
with a standardized risk-disclosure document prepared by the Securities and
Exchange Commission. Under applicable regulations, our common stock will
generally remain a “penny stock” until and for such time as it meets certain per
share price requirements (as determined in accordance with SEC regulations),
or
until we meet certain net asset or revenue thresholds. These thresholds include
the possession of net tangible assets (i.e., total assets less intangible assets
and liabilities) in excess of $2,000,000 in the event we have been operating
for
at least three years or $5,000,000 in the event we have been operating for
fewer
than three years, and the recognition of average revenues equal to at least
$6,000,000 for each of the last three years. We do not anticipate meeting any
of
the foregoing thresholds in the foreseeable future.
The
penny
stock rules severely limit the liquidity of securities in the secondary market,
and many brokers choose not to participate in penny stock transactions. As
a
result, there is generally less trading in penny stocks. If you become a holder
of our common stock, you may not always be able to resell shares of our common
stock publicly at the time and prices that you feel are fair or
appropriate.
We
have never paid dividends and do not intend to do so for the foreseeable future.
We
have
never paid dividends on our capital stock and we do not anticipate that we
will
pay any dividends for the foreseeable future. Accordingly, any return on an
investment in our Company will be realized, if at all, only when you sell shares
of our common stock.
Certain
statements contained in this prospectus that are forward-looking in nature
are
based on the current beliefs of our management as well as assumptions made
by
and information currently available to management, including statements related
to the markets for our products, general trends in our operations or financial
results, plans, expectations, estimates and beliefs. In addition, when used
in
this prospectus, the words
“may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict”
and similar expressions and their variants, as they relate to us or our
management, may identify forward-looking statements. These statements reflect
our judgment as of the date of this prospectus with respect to future events,
the outcome of which is subject to risks, which may have a significant impact
on
our business, operating results or financial condition. You are cautioned that
these forward-looking statements are inherently uncertain. Should one or more
of
these risks or uncertainties materialize, or should underlying assumptions
prove
incorrect, actual results or outcomes may vary materially from those described
herein. We undertake no obligation to update forward-looking statements. The
risks identified under the heading “Risk Factors” in this prospectus, among
others, may impact forward-looking statements contained in this
prospectus.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan
of Operation
Our
plan
of operation for the 12-month period commencing on the date of this prospectus,
is to continue implementing our business strategy, including the clinical
development of our two lead product candidates, ZIO-101 and ZIO-201. We also
intend to expand our drug candidate portfolio by seeking additional drug
candidates through in-licensing arrangements. We expect our principal
expenditures during the next 12 months to include:
| · |
fees
and milestone payments required under the license agreements relating
to
our existing product candidates;
|
| · |
clinical
trial expenses, including the costs incurred with respect to the
conduct
of clinical trials for ZIO-101 and ZIO-201 and preclinical costs
associated with back-up candidates ZIO-102 and ZIO-202;
|
| · |
costs
related to the scale-up and manufacture of ZIO-101 and
ZIO-201;
|
| · |
rent
for our facilities; and
|
| · |
general
corporate and working capital, including general and administrative
expenses.
|
As
part
of our plan for additional employees, we anticipate hiring at least three to
four additional full-time employees in medical, regulatory and administrative
support. In addition, we intend to use senior advisors, consultants, clinical
research organizations and third parties to perform certain aspects of product
development, manufacturing, clinical and preclinical development, and regulatory
and quality assurance functions.
At
our
current and desired pace of clinical development of our two product candidates,
over the next 12 months we expect to spend approximately $4.6 million on
clinical trials (including milestone payments that we expect to be triggered
under the license agreements relating to our product candidates), approximately
$3.7 million on manufacturing costs, $215,000 on facilities rent, and
approximately $6.8 million on general corporate and working capital.
We
believe we currently have sufficient capital to fund development and
commercialization activities of ZIO-101 and ZIO-201 into the second quarter
of
2006. Because our business does not generate any cash flow, however, we will
need to raise additional capital to continue development of the product
candidates beyond that time. We expect to raise such additional capital by
either borrowing money or by selling shares of our capital stock. To the extent
additional capital is not available when we need it, we may be forced to abandon
our development and commercialization efforts, which would have a material
adverse effect on the prospects of our business. Further, our assumptions
relating the expected costs of development and commercialization and timeframe
for completion are dependent on numerous factors other than available financing,
including significant unforeseen delays in the clinical trial and regulatory
approval process, which could be extremely costly. In addition, our estimates
assume that we will be able to enroll a sufficient number of patients in each
clinical trial.
Product
Candidate Development and Clinical Trials
ZIO-101,
organic arsenic, is being developed presently to treat advanced myeloma. As
a
follow-on to the ongoing phase I trials, a phase I/II trial in advanced multiple
myeloma is in the advanced planning stage. With the completion of this trial
in
2006, we expect to initiate a registration trial in advanced multiple myeloma.
We will continue to explore the use of ZIO-101 in solid tumors as well as a
phase II trial in advanced multiple myeloma using a different dosing regimen.
Preclinical development will continue with a back-up compound designated as
ZIO-102. Additional compounds are being synthesized under our agreement with
the
University of Texas M.D. Anderson Cancer Center and the Texas A&M University
System. Technology transfer and scale-up for the commercial manufacture of
the
active pharmaceutical ingredient, its lyophilization, and final product
specification will continue through the period leading to the expected
registration trial in the first half of 2007.
ZIO-201,
stabilized isophosphoramide mustard, is being developed presently to treat
advanced sarcoma. As follow-on to the ongoing phase I trial, a phase I/II trial
or a phase II trial in advanced sarcoma is in the advanced planning stage.
With
the completion of this trial in 2006, we expect to initiate a registration
trial
in advanced sarcoma in the first half of 2007. We will explore the potential
to
test ZIO-201 in pediatric sarcoma in a phase II trial. Preclinical development
will continue with back-up analogues, one of which we would expect to be
designated ZIO-202. Technology transfer and scale-up for the commercial
manufacture of the active pharmaceutical ingredient, its lyophilization, and
final product specification will continue through the period leading to the
expected registration trial in the first half of 2007.
Off-Balance
Sheet Arrangements
We
have
not entered into any off-balance sheet arrangements.
DESCRIPTION
OF BUSINESS
General
ZIOPHARM
Oncology, Inc. is a development-stage company that is seeking to develop and
commercialize a diverse, risk-sensitive portfolio of in-licensed cancer drugs
that address unmet medical needs. Our management and advisors are focused on
licensing proprietary drug candidate families that are related to cancer
therapeutics on the market where the application of new biological understanding
and our drug development expertise will lead to a lower risk for clinical
development failure while expediting clinical registration. We expect to
commercialize our products on our own in North America but recognize that
promising clinical trial results in cancers with a high incidence and prevalence
might also be addressed in a commercial partnership with another company with
the requisite financial resources. Currently, we are in U.S. Phase I studies
for
two product candidates known as ZIO-101 and ZIO-201. We currently intend to
continue with clinical development of ZIO-101 for advanced myeloma and ZIO-201
for advanced sarcoma.
Our
corporate office is located at 1180 Avenue of the Americas, 19th Floor, New
York, NY 10036, and our telephone number is (646) 214-0700. Our business and
development operations are located in Charlestown, Massachusetts.
Cancer
Overview
Cancer
is
a group of diseases characterized by either the runaway growth of cells or
the
failure of cells to die normally. Often, cancer cells spread to distant parts
of
the body, where they can form new tumors. Cancer can arise in any organ of
the
body and, according to the American Cancer Society, strikes one of every two
American men and one of every three American women at some point in their lives.
It
is
reported that there are more than 100 different varieties of cancer divided
into
six major categories. Carcinomas, the most common type of cancer, originate
in
tissues that cover a surface or line a cavity of the body. Sarcomas begin in
tissue that connects, supports or surrounds other tissues and organs. Lymphomas
are cancers of the lymph system, the circulatory system that bathes and cleanses
the body’s cells. Leukemias involve blood-forming tissues and blood cells. As
their name indicates, brain tumors are cancers that begin in the brain, and
skin
cancers, including dangerous melanomas, originate in the skin. Cancers are
considered metastatic if they spread via the blood or lymphatic system to other
parts of the body to form secondary tumors.
Cancer
is
caused by a series of mutations, or alterations, in genes that control cells’
ability to grow and divide. Some mutations are inherited; others arise from
environmental factors such as smoking or exposure to chemicals, radiation,
or
viruses that damage cells’ DNA. The mutations cause cells to divide relentlessly
or lose their normal ability to die.
The
cost
of cancer to the healthcare system is significant. The National Institute of
Health estimates that the overall cost of cancer in 2003 was $189.5 billion.
This cost includes an estimate of $64.2 billion in direct medical expenses,
$16.3 billion in indirect morbidity costs, and $109 billion in indirect
mortality costs.
Cancer
Treatments
Major
treatments for cancer include surgery, radiotherapy, and chemotherapy. There
are
many different drugs that are used to treat cancer, including cytotoxics or
antineoplastics, hormones, and biologics. There are also many experimental
treatments under investigation including radiation sensitizers, vaccines, gene
therapy and immunotoxins. We believe cancer treatment represents a significant
unmet medical need.
Radiotherapy
.
Also
called radiation therapy, radiotherapy is the treatment of cancer and other
diseases with ionizing radiation. Ionizing radiation deposits energy that
injures or destroys cells in the area being treated - the target tissue - by
damaging their genetic material, making it impossible for these cells to
continue growing. Although radiation damages both cancer cells and normal cells,
the latter are able to repair themselves and regain proper function.
Radiotherapy may be used to treat localized solid tumors, such as cancers of
the
skin, tongue, larynx, brain, breast, or uterine cervix. It can also be used
to
treat leukemia and lymphoma.
Scientists
are also looking for ways to increase the effectiveness of radiation therapy.
Two types of investigational drugs are being studied for their effect on cells
exposed to radiation. Radiosensitizers increase the damage done to tumor cells
by radiation; and radioprotectors protect normal tissues from the effects of
radiation.
Cytotoxics
.
Cytotoxics are anticancer drugs that destroy cancer cells by stopping them
from
multiplying. Healthy cells can also be harmed with the use of cytotoxics,
especially those that divide quickly. Harm to healthy cells is what causes
side
effects. These cells usually repair themselves after chemotherapy. Chemotherapy
can be used for different purposes which include curing cancer (when the patient
remains free of evidence of cancer cells), controlling cancer (by preventing
the
cancer from spreading), and to relieving symptoms of cancer (such as pain,
helping patients live more comfortably).
Cytotoxic
agents act primarily on macromolecular synthesis, repair or activity, which
affects the production or function of DNA, RNA or protein. Although there are
many cytotoxic agents, there is a considerable amount of overlap in their
mechanisms of action. As such, the choice of a particular agent or group of
agents is generally not a consequence of a prior prediction of antitumor
activity by the drug, but instead the result of empirical clinical
trials.
Supportive
Care
.
The
treatment of a cancer may include the use of chemotherapy, radiation therapy,
biologic response modifiers, surgery, or some combination of all of these or
other therapeutic options. All of these treatment options are directed at
killing or eradicating the cancer that exists in the patient’s body.
Unfortunately, the delivery of many cancer therapies adversely affects the
body’s normal organs. The undesired consequence of harming an organ not involved
with cancer is referred to as a complication of treatment or a side
effect.
Side
effects, or complications of treatment cause inconvenience, discomfort, and
occasionally, may even be fatal. Additionally and perhaps more importantly,
side
effects may also prevent doctors from delivering the prescribed dose of therapy
at the specific time and schedule of the treatment plan. Therefore, side effects
not only cause discomfort, but may also limit a patient’s ability to achieve the
best outcome from treatment by preventing the delivery of therapy at its optimal
dose and time.
In
addition to anemia, fatigue, hair-loss, reduction in blood platelets and white
and red blood cells, and bone pain, one of the most common side effects of
chemotherapy is nausea and vomiting. Several drugs have been developed to help
prevent and control chemotherapy-induced nausea and vomiting, which have led
to
improvements in the management of symptoms associated with this cancer
treatment, allowing for greater accuracy and consistency concerning the
administration of cancer treatment. Nausea and vomiting induced by chemotherapy
are treated by drugs such as 5HT3 receptor antagonists, like ondansetron, which
is a selective blocking agent of the hormone serotonin.
Product
Candidates
ZIO-101
General
.
ZIO-101
is an organic arsenic compound covered by an issued U.S. patent and applications
internationally. A form of commercially available inorganic arsenic (arsenic
trioxide (Trisenox
®
)
or ATO)
has been approved for the treatment of acute promyelocytic leukemia (APL),
a
precancerous condition, and is on the compendia listing for the therapy of
multiple myeloma as well as having been studied for the treatment of various
other cancers. Nevertheless, ATO has been shown to be toxic to the heart and
liver, limiting its use as an anti-cancer agent. Inorganic arsenic has also
been
shown to cause cancer of the skin and lung in humans. The toxicity of arsenic
generally is correlated to its accumulation in organs and tissues. Our
preclinical studies demonstrated that ZIO-101 (and organic arsenic in general)
is considerably less toxic than inorganic arsenic, particularly with regard
to
heart toxicity.
In
vitro
testing
of ZIO-101 using the National Cancer Institute’s human cancer cell panel
detected activity against lung, colon, brain, melanoma, ovarian and kidney
cancer. Moderate activity was detected against breast and prostate
cancer.
In
addition to solid tumors,
in
vitro
testing
in both the National Cancer Institute’s cancer cell panel and
in
vivo
testing
in a leukemia animal model demonstrated substantial activity against
hematological cancers (cancers of the blood and blood-forming tissues) such
as
leukemia, lymphoma, myelodysplastic syndromes and multiple myeloma. Leukemia
is
a cancer that begins in blood-forming tissue such as the bone marrow and causes
large numbers of blood cells to be produced and enter the bloodstream. Lymphomas
are cancers that begin in cells of the immune system. Myelodysplastic syndromes,
also called preleukemia or smoldering leukemia, are diseases in which the bone
marrow does not function normally.
Clinical
Lead Indications: Multiple Myeloma
.
Multiple myeloma, a common hematological malignancy, is among a group of plasma
cell cancers associated with the overproduction of monoclonal immunoglobulin
(M-protein). Primary treatment for multiple myeloma is systemic chemotherapy.
Approximately 15-20% of patients who have the disease are resistant to
aggressive primary treatment. Even with prompt institution of systemic
treatment, the drug-sensitive phase of the disease usually lasts only two to
three years for most patients before resistance appears (although in a small
patient population sensitivity to systemic therapy can last for five to ten
years). The median survival of patients with progressive or resistant disease
is
three to four years.
The
standard of care for progressive or resistant multiple myeloma may be in
transition. Recent clinical trials offer evidence supporting the use of
thalidomides and proteosome inhibitors, either alone or in combination with
other agents. Unfortunately, neither treatment is universally effective, each
can be quite toxic, and all patients who receive them will likely develop
progressive disease. As a result, we expect that the medical community will
continue to embrace new agents that provide incremental benefit to patients
without undue toxicity. We are hopeful that the novel mechanism of action of
ZIO-101, combined with its anticipated safety profile, will encourage its use
in
the treatment of advanced myeloma and possibly a variety of other tumors.
Currently, we expect that advanced myeloma will be the indication for which
it
is most likely to seek initial regulatory approval for ZIO-101.
Clinical
Development Plan for ZIO-101
.
We have
commenced two phase I clinical trials (hematological and solid tumor) at the
University of Texas M.D. Anderson Cancer Center using ZIO-101 in refractory
disease. Phase I testing is primarily focused on assessing drug safety; however,
one patient in the solid tumor trial has evidenced a response without toxicity
(as reported by the investigator). The starting dose in both phase I trials
was
about 14 times the labeled dose of inorganic arsenic. The dose has been
escalated to the next level in one trial, and to date has been well tolerated.
The
goal
of the phase I trials are to determine dose-limiting toxicity and maximum
tolerated dose. In addition, assessments of pharmacokinetic data will be
obtained along with any indication of efficacy. We expect to follow these phase
I trials with a phase I/II trial in advanced myeloma. We currently anticipate
reporting some phase I/II trial results in the first half of 2006. A second
phase II trial in myeloma is under consideration for initiation in early 2006.
It is expected that a pivotal trial in multiple myeloma would begin in the
first
half of 2007.
The
solid
tumor trial is seeking to confirm data collected during preclinical studies
that
indicated activity in a variety of solid tumors. While the current focus for
product registration is myeloma, these phase I study results will be instructive
for further development plans in solid tumors.
ZIO-201
General
.
ZIO-201, or isophosphoramide mustard (IPM), is a proprietary stabilized
metabolite of ifosfamide that is also related to cyclophosphamide. A patent
application for pharmaceutical composition has been filed. Cyclophosphamide
and
ifosfamide are alkylating agents. Cyclophosphamide is the most widely used
alkylating agent in cancer therapy and is used to treat breast cancer and
non-Hodgkin’s lymphoma. Ifosfamide has been shown to be effective in high dose
by itself, or in combination in treating sarcoma and lymphoma. Although
ifosfamide-based treatment generally represents the standard of care for
sarcoma, it is not licensed for this indication by the FDA.
Our
preclinical studies have shown that, in animal and laboratory models, IPM
evidences activity against leukemia and solid tumors. These studies also
indicate that ZIO-201 has a better pharmacokinetic and safety profile than
ifosfamide or cyclophosphamide, offering the possibility of safer and more
efficacious therapy with ZIO-201.
Ifosfamide
is metabolized to IPM. In addition to IPM, another metabolite of ifosfamide
is
acrolein, which is toxic to the kidneys and bladder. The presence of acrolein
can mandate extensive in-hospital hydration and the administration of a
protective agent called Mesna
®
,
which
is inconvenient and expensive. Chloroacetaldehyde is another metabolite of
ifosfamide and is toxic to the central nervous system, causing “fuzzy brain”
syndrome for which there is currently no protective measure. Similar toxicity
concerns pertain to high-dose cyclophosphamide, which is widely used in bone
marrow and blood cell transplantation. Because ZIO-201 is independently
active—without acrolein or chloroacetaldehyde metabolites—the Company believes
that the administration of ZIO-201 may avoid the toxicities of ifosfamide and
cyclophosphamide without compromising efficacy.
In
addition to anticipated lower toxicity, ZIO-201 may have other advantages over
ifosfamide and cyclophosphamide. ZIO-201 likely cross-links DNA differently
than
ifosfamide or cyclophosphamide metabolites, resulting in a different activity
profile. Moreover, in some instances ZIO-201 appears to show activity in
ifosfamide- and/or cyclophosphamide-resistant cancer cells.
Potential
Lead Indications for ZIO-201: Sarcomas
.
Sarcomas are cancers of the bone, cartilage, fat, muscle, blood vessels, or
other connective or supportive tissue. Soft tissue sarcomas, the expected lead
indication for ZIO-201, are relatively rare; there are 8,000 to 10,000 new
cases
each year in adults in the United States. On the other hand, in children, soft
tissue sarcomas account for approximately 10% of all childhood cancers. There
are more than 50 histological or tissue types of soft tissue sarcomas. The
prognosis for patients with adult soft tissue sarcomas depends on several
factors, including the patient’s age, size of the primary tumor, histological
grade, and stage of the tumor. Factors associated with a poorer prognosis
include age greater than 60 years, tumors larger than five centimeters, and
high-grade histology. While small, low-grade tumors are usually curable by
surgery alone, higher-grade or larger sarcomas are associated with higher local
treatment failure rates and increased metastatic potential. Ifosfamide-based
chemotherapy is a frequent standard of care for the treatment of metastatic
tumors. It may also used in the adjuvant setting for high-risk primary
tumors.
ZIO-201
may be a useful agent that, either alone or in combination, can deliver
therapeutic activity with fewer to no side effects of the type that have been
associated with ifosfamide. In the United States, ifosfamide is regularly
included in combination regimens for the treatment of sarcomas, testicular
cancers, head and neck cancer and some types of non-Hodgkin’s lymphomas. We
believe that ZIO-201 may be able to replace ifosfamide in any or all of these
combination protocols.
Clinical
Development Plan for ZIO-201
.
A phase
I clinical trial is being conducted at two centers with the objective of
establishing maximum tolerated dose. The current dose level in this phase I
trial is believed to be comparable to a relatively high dose of ifosfamide.
The
drug is being administered without Mesna
®
.
Furthermore, one patient has evidence of stable disease. We intend to initiate
a
phase I/II trial in advanced sarcoma and expects early results in the first
half
of 2006. We are also planning to implement a high dose phase I study in sarcoma
and is exploring a phase II study in pediatric sarcoma. These trials would
support the design and implementation of a phase III registration study in
the
first half of 2007.
Competition
The
development and commercialization for new products to treat cancer is highly
competitive, and there will be considerable competition from major
pharmaceutical, biotechnology, and specialty cancer companies. Many of our
competitors have substantially more resources than the Company, including both
financial and technical. In addition, many of these companies have more
experience than the Company in preclinical and clinical development,
manufacturing, regulatory, and global commercialization. The Company is also
competing with academic institutions, governmental agencies and private
organizations that are conducting research in the field of cancer. Competition
for highly qualified employees is intense.
There
are
a number of companies developing chemotherapies for cancer and in particular
for
multiple myeloma and sarcoma. Millennium Pharmaceuticals, Inc. and Celgene
Corporation have marketed products to treat multiple myeloma, and many other
product candidates are in clinical trials and preclinical research. There are
a
more limited number of competitors developing new approaches to treat sarcoma,
Ariad Pharmaceuticals principal among them.
In
addition to competitive companies, treatments for cancer that compete with
our
product candidates are summarized under the caption “Cancer
Treatments.”
License
Agreements and Intellectual Property
Our
goal
is to obtain, maintain and enforce patent protection for our products,
formulations, processes, methods and other proprietary technologies, to preserve
our trade secrets, and to operate without infringing the proprietary rights
of
other parties, both in the United States and in other countries. Our policy
is
to actively seek the broadest possible intellectual property protection for
our
product candidates through a combination of contractual arrangements and
patents, both in the United States and abroad.
Patent
and Technology License Agreement — University of Texas M. D. Anderson Cancer
Center and the Texas A&M University System
.
On
August 24, 2004, the Company entered into a Patent and Technology License
Agreement with The Board of Regents of the University of Texas System, acting
on
behalf of the University of Texas M. D. Anderson Cancer Center and the Texas
A&M University System (collectively, the “Licensors”). Under this agreement,
the Company was granted an exclusive, worldwide license to rights (including
rights to U.S. and foreign patent and patent applications and related
improvements and know-how) for the manufacture and commercialization of two
classes of organic arsenicals (water- and lipid-based) for human and animal
use.
The class of water-based organic arsenicals includes ZIO-101.
In
October 2004, we received a notice of allowance for U.S. Patent Application
No.
10/337969, entitled “S-dimethylarsino-thiosuccinic acid
S-dimethylarsino-2-thiobenzoic acid S-(simethylarsino) glutathione as treatments
for cancer.” The patent was granted on June 28, 2005. The patent application
claims both therapeutic uses and pharmaceutical compositions containing a novel
class of organic arsenicals, including ZIO-101, for the treatment of cancer.
As
partial consideration for the license rights obtained by us, we paid the
Licensors an upfront, nonrefundable $125,000 fee and issued 250,487 shares
of
our common stock to University of Texas M. D. Anderson Cancer Center and granted
it an option to purchase an additional 50,222 shares of our common stock for
approximately $0.002 per share (such share amounts and option exercise price
have been adjusted to reflect to the Merger). The option will vest and become
exercisable with respect to 50% of its shares upon completion of the dosing
of
the last patient for both the blood and solid tumor phase I trials for ZIO-101.
Another 25% of the shares subject to the option will vest upon enrollment of
the
first patient in a multi-center pivotal clinical trial (i.e., a human clinical
trial intended to provide the substantial evidence of efficacy necessary to
support the filing of an approvable New Drug Application (“NDA”) for ZIO-101,
with the remaining 25% vesting upon the filing of an Investigational New Drug
(“IND”) for ZIO-101. As additional consideration for the license, the Licensors
are entitled to receive up to an aggregate of $4.85 million in cash payments,
payable in varying amounts, upon the achievement of certain milestones,
including $100,000 that we paid upon the commencement of the phase I clinical
trial for ZIO-101 in May 2005. The Licensors are entitled to receive royalty
payments from sales of a licensed product (should such a product be approved
for
commercial sale), as well and a portion of any fees that we may receive from
a
sublicensee. Finally, the license agreement provides that we will enter into
two
separate sponsored research agreements with the Licensors, each of which will
require that we make annual payments of $100,000 for no less than two years.
We
will have the exclusive right to all intellectual property rights resulting
from
such research pursuant to the terms of the agreements.
The
agreement also contains other provisions customary and common in similar
agreements within the industry, such as our right to sublicense our rights
under
the agreement. Nevertheless, if we sublicense our rights prior to the
commencement of a pivotal clinical trial (i.e., a human clinical trial intended
to provide the substantial evidence of efficacy necessary to support the filing
of an approvable NDA), the Licensors will generally be entitled to receive
a
share of the payments we receive in exchange for the sublicense (subject to
certain exceptions).
License
Agreement with DEKK-Tec, Inc.
On
October 15, 2004, we entered into a license agreement with DEKK-Tec, Inc.,
pursuant to which we were granted an exclusive, worldwide license to the second
of our lead product candidates, ZIO-201.
As
partial consideration for the license rights obtained by us, we paid DEKK-Tec
an
upfront, non-refundable $50,000 fee. In addition, DEKK-Tec is entitled to
receive cash payments in the aggregate amount of up to $3.9 million, which
are
payable in varying amounts upon the occurrence of certain milestone events.
The
majority of these milestone payments will be creditable against future royalty
payments, as referenced below. We also issued DEKK-Tec an option to purchase
up
to 27,616 shares of our common stock for approximately $0.02 per share (such
share amount and option exercise price have been adjusted to reflect to the
Merger), which option vested with respect to 6,904 post-Merger shares upon
the
execution of the license agreement. The option will vest with respect to the
remaining shares upon certain milestone events culminating with final FDA
approval of the first NDA submitted by us (or by our sublicensee) for ZIO-201.
Finally, DEKK-Tec also is entitled to receive royalty payments on the sales
of
ZIO-201 should it be approved for commercial sale. The license agreement also
contains other provisions customary and common in similar agreements within
the
industry.
Option
and Research Agreements with Southern Research Institute
(“SRI”)
.
On
December 22, 2004, we entered into an Option Agreement with SRI, pursuant to
which we were granted an exclusive option to obtain an exclusive license to
SRI’s interest in certain intellectual property, including exclusive rights
related to certain isophosphoramide mustard analogs. Also on December 22, 2004,
we entered into a Research Agreement with SRI pursuant to which we agreed to
spend a sum not to exceed $200,000 between the execution of the agreement and
December 21, 2006, including a $25,000 payment that we made simultaneously
with
the execution of the agreement, to fund research and development work by SRI
in
the field of isophosphoramide mustard analogs. Under the terms of the option
agreement, our exclusive right to exercise the option will expire 60 days after
the termination or expiration of the SRI’s research and development work in the
field of isophosphoramide mustard analogs, and the delivery of the certain
required reports.
Other
Intellectual Property Rights and Protection
.
We
depend upon the skills, knowledge and experience of our scientific and technical
personnel, as well as those of our advisors, consultants and other contractors,
none of which is patentable. To help protect proprietary know-how, which is
not
patentable, and for inventions for which patents may be difficult to enforce,
we
currently rely, and in the future will continue to rely, on trade secret
protection and confidentiality agreements to protect our interests. To this
end,
we generally require employees, consultants, advisors and other contractors
to
enter into confidentiality agreements that prohibit the disclosure of
confidential information and, where applicable, require disclosure and
assignment to us of the ideas, developments, discoveries and inventions
important to our business.
Governmental
Regulation
The
research, development, testing, manufacture, labeling, promotion, advertising,
distribution, and marketing, among other things, of our products are extensively
regulated by governmental authorities in the United States and other countries.
In the United States, the FDA regulates drugs under the Federal Food, Drug,
and
Cosmetic Act, or the “FDCA,” and its implementing regulations. Failure to comply
with the applicable U.S. requirements may subject us to administrative or
judicial sanctions, such as FDA refusal to approve pending New Drug
Applications, warning letters, product recalls, product seizures, total or
partial suspension of production or distribution, injunctions, and/or criminal
prosecution.
Drug
Approval Process
.
None of
our drugs may be marketed in the U.S. until the drug has received FDA approval.
The steps required before a drug may be marketed in the U.S.
include:
| · |
preclinical
laboratory tests, animal studies, and formulation studies;
|
| · |
submission
to the FDA of an IND for human clinical testing, which must become
effective before human clinical trials may begin;
|
| · |
adequate
and well-controlled human clinical trials to establish the safety
and
efficacy of the drug for each indication;
|
| · |
submission
to the FDA of an NDA;
|
| · |
satisfactory
completion of an FDA inspection of the manufacturing facility or
facilities at which the drug is produced to assess compliance with
current
good manufacturing practices, or “cGMPs”; and
|
| · |
FDA
review and approval of the NDA.
|
Preclinical
tests include laboratory evaluation of product chemistry, toxicity, and
formulation, as well as animal studies. The conduct of the preclinical tests
and
formulation of the compounds for testing must comply with federal regulations
and requirements. The results of the preclinical tests, together with
manufacturing information and analytical data, are submitted to the FDA as
part
of an IND, which must become effective before human clinical trials may begin.
An IND will automatically become effective 30 days after receipt by the FDA,
unless before that time the FDA raises concerns or questions about issues such
as the conduct of the trials as outlined in the IND. In such a case, the IND
sponsor and the FDA must resolve any outstanding FDA concerns or questions
before clinical trials can proceed. The Company cannot be sure that submission
of an IND will result in the FDA allowing clinical trials to begin.
Clinical
trials involve the administration of the investigational drug to human subjects
under the supervision of qualified investigators. Clinical trials are conducted
under protocols detailing the objectives of the study, the parameters to be
used
in monitoring safety, and the effectiveness criteria to be evaluated. Each
protocol must be submitted to the FDA as part of the IND.
Clinical
trials typically are conducted in three sequential phases, but the phases may
overlap. The study protocol and informed consent information for study subjects
in clinical trials must also be approved by an Institutional Review Board for
each institution where the trials will be conducted. Study subjects must sign
an
informed consent form before participating in a clinical trial. Phase I usually
involves the initial introduction of the investigational drug into people to
evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics
and pharmacologic actions, and, if possible, to gain an early indication of
its
effectiveness. Phase II usually involves trials in a limited patient population
to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify possible
adverse effects and safety risks; and (iii) evaluate preliminarily the efficacy
of the drug for specific indications. Phase III trials usually further evaluate
clinical efficacy and test further for safety by using the drug in its final
form in an expanded patient population. There can be no assurance that phase
I,
phase II, or phase III testing will be completed successfully within any
specified period of time, if at all. Furthermore, a company or the FDA may
suspend clinical trials at any time on various grounds, including a finding
that
the subjects or patients are being exposed to an unacceptable health
risk.
The
FDCA
permits FDA and the IND sponsor to agree in writing on the design and size
of
clinical studies intended to form the primary basis of an effectiveness claim
in
an NDA application. This process is known as Special Protocol Assessment. These
agreements may not be changed after the clinical studies begin, except in
limited circumstances.
Assuming
successful completion of the required clinical testing, the results of the
preclinical studies and of the clinical studies, together with other detailed
information, including information on the manufacture and composition of the
drug, are submitted to the FDA in the form of an NDA requesting approval to
market the product for one or more indications. The testing and approval process
requires substantial time, effort, and financial resources. The agencies review
the application and may deem it to be inadequate to support the registration,
and companies cannot be sure that any approval will be granted on a timely
basis, if at all. The FDA may also refer the application to the appropriate
advisory committee, typically a panel of clinicians, for review, evaluation
and
a recommendation as to whether the application should be approved. The FDA
is
not bound by the recommendations of the advisory committee.
The
FDA
has various programs, including fast track, priority review, and accelerated
approval, that are intended to expedite or simplify the process for reviewing
drugs, and/or provide for approval on the basis surrogate endpoints. Generally,
drugs that may be eligible for one or more of these programs are those for
serious or life-threatening conditions, those with the potential to address
unmet medical needs, and those that provide meaningful benefit over existing
treatments. A company cannot be sure that any of its drugs will qualify for
any
of these programs, or that, if a drug does qualify, that the review time will
be
reduced.
Section
505(b)(2) of the FDCA allows the FDA to approve a follow-on drug on the basis
of
data in the scientific literature or a prior FDA approval of an NDA for a
related drug. This procedure potentially makes it easier for generic drug
manufacturers to obtain rapid approval of new forms of drugs based on
proprietary data of the original drug manufacturer.
Before
approving an NDA, the FDA usually will inspect the facility or the facilities
at
which the drug is manufactured and will not approve the product unless cGMP
compliance is satisfactory. If the FDA evaluates the NDA and the manufacturing
facilities as acceptable, the FDA may issue an approval letter, or in some
cases, an approvable letter followed by an approval letter. Both letters usually
contain a number of conditions that must be met in order to secure final
approval of the NDA. When and if those conditions have been met to the FDA’s
satisfaction, the FDA will issue an approval letter. The approval letter
authorizes commercial marketing of the drug for specific indications. As a
condition of NDA approval, the FDA may require post-marketing testing and
surveillance to monitor the drug’s safety or efficacy, or impose other
conditions.
After
approval, certain changes to the approved product, such as adding new
indications, making certain manufacturing changes, or making certain additional
labeling claims, are subject to further FDA review and approval. Before a
company can market products for additional indications, it must obtain
additional approvals from FDA. Obtaining approval for a new indication generally
requires that additional clinical studies be conducted. A company cannot be
sure
that any additional approval for new indications for any product candidate
will
be approved on a timely basis, or at all.
Post-Approval
Requirements
.
Often
times, even after a drug has been approved by the FDA for sale, the FDA may
require that certain post-approval requirements be satisfied, including the
conduct of additional clinical studies. If such post-approval conditions are
not
satisfied, the FDA may withdraw its approval of the drug. In addition, holders
of an approved NDA are required to: (i) report certain adverse reactions to
the
FDA, (ii) comply with certain requirements concerning advertising and
promotional labeling for their products, and (iii) continue to have quality
control and manufacturing procedures conform to cGMP after approval. The FDA
periodically inspects the sponsor’s records related to safety reporting and/or
manufacturing facilities; this latter effort includes assessment of compliance
with cGMP. Accordingly, manufacturers must continue to expend time, money,
and
effort in the area of production and quality control to maintain cGMP
compliance. We intend to use third party manufacturers to produce our products
in clinical and commercial quantities, and future FDA inspections may identify
compliance issues at the facilities of our contract manufacturers that may
disrupt production or distribution, or require substantial resources to correct.
In addition, discovery of problems with a product after approval may result
in
restrictions on a product, manufacturer, or holder of an approved NDA, including
withdrawal of the product from the market.
Employees
As
of the
date of this current report, we have 11 employees, all of which are full-time
employees. We intend to hire an additional three to four employees prior to
the
end of 2005.
Description
of Property
Our
corporate office is located at 1180 Avenue of the Americas, 19th Floor, New
York, NY 10036. The New York office space is subject to a five-year lease
agreement that expires in June 2010. Under the terms of the lease, we lease
approximately 2,580 square feet and are required to make monthly rental payments
of approximately $10,100 until December 31, 2007, with such payments increasing
to approximately $11,000 thereafter through the remainder of the term of the
lease. Our business and development operations are located as 197 Eighth Street,
Suite 300, Charlestown, Massachusetts 02129. The Charlestown office space is
subject to a five-year lease agreement that expires in October 2009. Under
the
terms of the lease, we lease approximately 2,800 square feet and are required
to
make monthly rental payments that range from $4,200 during the first year of
the
lease to $4,900 during the last year of the lease. Effective November 2005,
we
amended our lease in Charlestown, Massachsuetts to expand our commercial
space by approximately 830 square feet.
Legal
Proceedings
We
are
not currently involved in any material legal proceedings.
MANAGEMENT
Directors
and Executive Officers
At
the
effective time of the Merger, our board of directors was reconstituted by the
appointment of Jonathan Lewis, Richard Bagley, Murray Brennan, James Cannon,
Senator Wyche Fowler, Jr., Gary S. Fragin, Timothy McInerney and Michael Weiser
as directors (all of whom were directors of ZIOPHARM immediately prior to the
Merger), and the resignations of David C. Olson and David Floor from their
roles
as our directors. Our executive management team was also reconstituted and
David
C. Olson resigned from his positions as our President, Treasurer and Secretary.
The following table sets forth the name, age and position of each of our
directors and executive officers as of the date of this prospectus.
|
Name
|
Age
|
Positions
|
||
|
Jonathan
Lewis, M.D., Ph.D.
|
47
|
Director
& Chief Executive Officer
|
||
|
Richard
Bagley
|
62
|
Director,
President, Chief Operating Officer & Treasurer
|
||
|
Robert
Peter Gale, M.D., Ph.D, DSc.
|
60
|
Senior
Vice President Research
|
||
|
Murray
Brennan, M.D.
|
65
|
Director
|
||
|
James
Cannon
|
67
|
Director
|
||
|
Senator
Wyche Fowler, Jr., JD
|
64
|
Director
|
||
|
Gary
S. Fragin
|
59
|
Director
|
||
|
Timothy
McInerney
|
44
|
Director
|
||
|
Michael
Weiser, M.D., Ph.D.
|
43
|
Director
|
The
biographies of the directors and executive officers listed above are set forth
below, all of whom began serving us in their respective positions at the
effective time of the Merger.
Jonathan
Lewis
is our
Chief Executive Officer and a director, and has served as Chief Executive
Officer and a director of ZIOPHARM since January 2004. From July 1994 until
June
2001, Dr. Lewis served as Professor of Surgery and Medicine at Memorial
Sloan-Kettering Cancer Center and he served as Chief Medical Officer and
Chairman of the Medical Board at Antigenics, Inc. from June 2000 until November
2003. He serves as a director on the Board of POPPA (the Police Organization
Providing Peer Assistance) of the New York Police Department
(NYPD).
Richard
Bagley
serves
as our President, Chief Operating Officer, Treasurer and Director and has served
as President and Chief Operating Officer of ZIOPHARM since July 2004 and as
ZIOPHARM’s Treasurer since March 2005. Prior to that, he served as a consultant
to ZIOPHARM while serving as a senior advisor to The University of Texas M.D.
Anderson Cancer Center. Mr. Bagley served in several capacities at Squibb
Corporation from 1985-1990, including as President E. R. Squibb & Sons, U.S.
in 1988 and 1989. He served as Director, Chief Executive Officer and
President of ImmuLogic Pharmaceutical Corporation from 1990 to 1994, as
Director, Chief Executive Officer and Chairman of ProScript, Inc. from 1994
to
1998, as Director, President and Chief Executive Officer of AltaRex Corp. from
1998 to May 2003, and thereafter as a part time consultant and advisor in life
sciences until joining ZIOPHARM full time. Mr. Bagley initiated a career in
pharmaceuticals in 1968 with Smith Kline and French Laboratories, leaving in
1985 after serving as President of the consumer products division.
Robert
Peter Gale
is
our
Senior Vice President Research and has served ZIOPHARM in that capacity since
January 2004. Dr. Gale is also on the medical staff of UCLA School of Medicine
in the Department of Medicine, Division of Hematology and Oncology and is
Visiting Professor of Hematology at Imperial College of Science, Technology
and
Medicine, Hammersmith Hospital, London. Dr. Gale served as Senior Vice President
for Medical Affairs at Antigenics, Inc. from April 2001 until May 2002 and
as a
consultant to that company from May 2002 through May 2004.
Murray
Brennan
is a
director of the Company and has served as a member of ZIOPHARM’s board of
directors since December 22, 2004. Dr. Brennan has been Chairman of Memorial
Sloan-Kettering Cancer Center’s Department of Surgery since 1985, and is a
former
Vice
President of the American College of Surgeons, a position he held from 2004
to
2005. Dr. Brennan is also a member of the National Academy of
Sciences.
He
served as director of the American Board of Surgery from 1984 to 1990,
Chairman
of the American College of Surgeons’ Commission on Cancer from 1992 to 1994,
President of the Society of Surgical Oncology from 1995 to 1996, and President
of the American Surgical Association from 2002 to 2003.
James
Cannon
is a
director of the Company and has served as a member of ZIOPHARM’s board of
directors since December 22, 2004. Mr. Cannon is
Vice
Chairman, Chief Financial Officer and a member of the board of directors of
BBDO
Worldwide. Mr.
Cannon
joined BBDO in 1967, was appointed Chief Financial Officer of the agency in
1984, and was elected to its board of directors in 1985. In 1986,
Mr.
Cannon
was appointed
Comptroller
and a
member of the board of directors of Omnicom, a company affiliated with BBDO
Worldwide, and served in those capacities through May 2002. In 1987, Mr. Cannon
also served as Director of Financial Operations of the Omnicom Group from 1987
to 1989, when he rejoined BBDO Worldwide as
Executive
Vice President and Chief Financial Officer. Mr. Cannon was appointed Vice
Chairman of BBDO Worldwide in 1990.
Senator
Wyche Fowler, Jr.
is a
director of the Company and has served as a member of ZIOPHARM’s board of
directors since December 22, 2004. Senator Fowler has been engaged in an
international business and law practice since May 2001, and has served as
chairman of the board of the Middle East Institute, a non-profit foundation
in
Washington, DC, since September 2001. Senator Fowler served as U.S. Senator
from
Georgia from January 1987 to January 1993, and had previously served in the
U.S.
House of Representatives from 1977 until his senatorial election. During his
time in the U.S. Senate, Senator Fowler served as a member of the Senate
Appropriations, Budget, Energy and Agriculture Committees. While in the U.S.
House of Representatives, he was a member of the House Ways and Means and
Foreign Affairs Committees, as well as the Select Committee on Intelligence.
President Clinton appointed Senator Fowler as Ambassador to the Kingdom of
Saudi
Arabia in 1996, where he served through 2001. Senator Fowler is a member of
the
board of directors of Brandywine Realty Trust, a real estate investment trust
traded on the New York Stock Exchange.
Gary
S. Fragin
is
a
director of the Company and has served as a member of ZIOPHARM’s board of
directors since December 22, 2004. Mr. Fragin is currently managing partner
of
Osborn Partners, LP and managing partner of Fragin Asset Management, LP,
positions. Mr. Fragin was the
General
Partner and Chief Administrative/Operating Officer of Steinhardt Organization,
prior to which he was a partner,
Director
of
Trading
and
member of the Management Committee and Executive Committee at Oppenheimer and
Co.
Timothy
McInerney
is
a
director of the Company and has served on ZIOPHARM board of directors since
July
20, 2005. Since 1992, Mr. McInerney has been a Managing Director of Paramount
BioCapital, Inc. where he oversees the overall distribution of Paramount’s
private equity product. Prior to 1992, Mr. McInerney was a research analyst
focusing on the biotechnology industry at Ladenburg, Thalman & Co. Prior to
that, Mr. McInerney held equity sales positions at Bear, Stearns & Co. and
Shearson Lehman Brothers, Inc. Mr. McInerney also has worked in sales and
marketing for Bristol-Myers Squibb.
Michael
Weiser
is a
director of the Company and has served on ZIOPHARM’s board of directors since
ZIOPHARM’s inception. Dr. Weiser is the Director of Research of Paramount
BioCapital. In addition to serving on the boards of directors of several
privately-held companies, Dr. Weiser currently serves on the board of directors
of Manhattan Pharmaceuticals, Inc., VioQuest Pharmaceuticals, Inc., Hana
BioSciences, Inc. and Chelsea Therapeutics, Inc., all publicly-traded
biotechnology companies.
The
board
of directors of ZIOPHARM, the Company’s wholly owned subsidiary after the
Merger, consists of the same persons currently serving as Company directors.
Furthermore, the executive officers of ZIOPHARM are the same persons currently
serving in such roles for the Company.
There
are
no family relationships among our executive officers or directors.
Audit
Committee
Effective
as of the Merger, we formed an audit committee of the board of directors. The
current members of the audit committee are Mr. James Cannon, who serves as
the
committee’s Chairman, and Messrs. Fragin and Bagley. The audit committee assists
the Board of Directors in fulfilling its responsibilities of ensuring that
management is maintaining an adequate system of internal controls such that
there is reasonable assurance that assets are safeguarded and that financial
reports are properly prepared; that there is consistent application of generally
accepted accounting principles; and that there is compliance with management’s
policies and procedures. In performing these functions, the audit committee
will
meet periodically with the independent auditors and management to review their
work and confirm that they are properly discharging their respective
responsibilities. In addition, the audit committee recommends the independent
auditors for appointment by the board of directors. Prior to the Merger, the
Company did not have an audit committee. Two members of the audit committee
are
independent, as independence is defined in Rule 4200(a)(15) of the Nasdaq
listing standards and Rule 10A-3 under the Securities Exchange Act of 1934.
The
board
of directors has determined that each of the audit committee members is able
to
read and understand fundamental financial statements. In addition, the board
of
directors has determined that at least one member of the audit committee, Mr.
James Cannon, is an “audit committee financial expert” as that term is defined
in Item 401(e)(2) of Regulation S-B promulgated under the Securities and
Exchange Act of 1934. Mr. Cannon’s relevant experience includes his current
service as the Chief Financial Officer of BBDO Worldwide, a position he has
held
for the past 20 years, and his past service as director of financial operations
of the Omnicom Group.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth the cash and non-cash compensation for awarded to
or
earned by (i) each individual serving as our chief executive officer
during
the fiscal year ended December 31, 2004; and (ii) each other individual that
served as an executive officer of us or of ZIOPHARM, Inc. as of December 31,
2004 and who received in excess of $100,000 in the form of salary and bonus
during such fiscal year (collectively, the “named executives”).
|
Annual
Compensation
|
Long-Term
Compensation Awards
|
|||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual Compensation ($)
|
Securities
Underlying Options (#)
|
|||||||||||
|
Dr.
Jonathan Lewis,
|
||||||||||||||||
|
Chief
Executive Officer
(1)
|
2004
|
344,167
|
500,000
|
(2)
|
9,099
|
|
268,653
|
|||||||||
|
Richard
Bagley,
|
||||||||||||||||
|
President,
Chief Operating Officer and Treasurer
(3)
|
2004
|
43,750
|
75,000
|
(4)
|
4,057
|
150,668
|
||||||||||
|
Dr.
Robert Peter Gale,
|
||||||||||||||||
|
Senior
Vice President Research
(5)
|
2004
|
239,583
|
150,000
|
(6)
|
2,543
|
25,110
|
||||||||||
|
David
C. Olson
|
||||||||||||||||
|
Former
Chief Executive Officer
(7)
|
2004
|
0
|
—
|
—
|
—
|
|||||||||||
|
2003
|
0
|
—
|
—
|
—
|
||||||||||||
|
2002
|
0
|
—
|
—
|
—
|
||||||||||||
|
(1)
|
Dr.
Lewis became our Chief Executive Officer effective as of the
Merger. Prior
to the Merger, Dr. Lewis served as Chief Executive Officer
of ZIOPHARM,
Inc. since January 8, 2004.
|
|
(2)
|
Includes
a signing bonus of $250,000 paid on February 23, 2004 and a
guaranteed
bonus of $250,000 for work performed in fiscal 2004 that was
paid on April
22, 2005.
|
|
(3)
|
Mr.
Bagley became the President, Chief Operating Officer and Treasurer
of the
Company effective as of the Merger. Prior to the Merger, Mr.
Bagley served
President and Chief Operating Officer of ZIOPHARM, Inc. since
July 21,
2004 and as Treasurer of ZIOPHARM, Inc. since March, 2005.
|
|
(4)
|
Mr.
Bagley received a signing bonus of $50,000 on July 15, 2004
and was due
$25,000, a portion of his guaranteed bonus, as of December
31,
2004.
|
|
(5)
|
Dr.
Gale became the Company’s Senior Vice President Research effective as of
the Merger. Prior to the Merger, Dr. Gale served as Senior
Vice President
Research of ZIOPHARM, Inc. since January 15, 2004.
|
|
(6)
|
Includes
a guaranteed bonus of $150,000 for work performed in fiscal
2004 that was
paid on April 16, 2005.
|
|
(7)
|
During
fiscal year 2004, Mr. Olson received no cash compensation for
services
rendered in his capacity as our President, Chief Operating
Officer and
Treasurer. Mr. Olson resigned as an executive officer effective
upon the
Merger and, in connection with the Merger, we paid Mr. Olson
a one-time
fee of $57,500 pursuant to his December 9, 2004 employment
agreement.
|
Stock
Options
Upon
the
Merger, we assumed ZIOPHARM’s 2003 Stock Option Plan as our Stock Option Plan.
Since January 1, 2005, there have been 581,451 stock options awarded to the
named executives through September 13, 2005, and all such grants have been
made
under the 2003 Stock Option Plan. Prior to the Merger, we had an Incentive
Stock
Option Plan of EasyWeb, Inc. under which 175,000 shares of common stock were
reserved for issuance. That stock option plan was terminated effective as of
the
Merger.
Option
Grants in Last Fiscal Year
The
following table sets forth the information concerning individual grants of
stock
options made by us or ZIOPHARM to the named executives during the fiscal year
ended December 31, 2004. All share numbers and dollar amounts are set forth
on a
post-Merger basis.
|
Name
|
Number
of Securities Underlying Options Granted (#)
|
Percent
of Total Options Granted to Employees In Fiscal
Year
|
Exercise
of Base Price ($/share)
|
Expiration
Date(s)
|
|||||||||
|
Dr.
Jonathan Lewis
(1)
|
25,674
|
5.2%
|
|
$0.08
|
1/8/14
|
||||||||
|
Dr.
Jonathan Lewis
(1)
|
242,979
|
48.9%
|
|
$0.08
|
1/27/14
|
||||||||
|
Richard
Bagley
(2)
|
150,668
|
30.4%
|
|
$1.70
|
7/1/14
|
||||||||
|
Dr.
Robert Peter Gale
|
2,567
|
0.5%
|
|
$0.44
|
1/15/14
|
||||||||
|
Dr.
Robert Peter Gale
|
22,543
|
4.5%
|
|
$0.44
|
1/27/14
|
||||||||
|
David
C. Olson
|
0
|
0%
|
|
—
|
—
|
||||||||
|
(1)
|
The
number of securities underlying options is subject to an anti-dilution
provision pursuant to which Dr. Lewis is entitled to purchase no
less than
5% of the Company’s common stock until such time as the Company has raised
$25 million in financing.
|
|
(2)
|
The
number of securities underlying options is subject to an anti-dilution
provision pursuant to which Mr. Bagley is entitled to purchase no
less
than 3% of the Company’s common stock until such time as the Company has
raised $25 million in financing.
|
Aggregated
Option Exercises and Fiscal Year-End Option Values
The
following table sets forth the total amount of shares acquired by the named
executives upon exercises of stock options during fiscal year 2004, the
aggregate dollar value realized upon such exercise, the total number of
securities underlying unexercised options held at the conclusion of fiscal
year
2004 (separately identifying then-exercisable and unexercisable options), and
the aggregate dollar value of in-the-money, unexercised options held at the
conclusion of fiscal year 2004 (separately identifying then-exercisable and
unexercisable options). All share numbers and dollar amounts
with
respect to Dr. Lewis and Gale and Mr. Bagley have been adjusted to reflect
the
exchange of ZIOPHARM, Inc. securities in the Merger.
|
Name
|
Shares
Acquired on Exercise (#)
|
Value
Realized ($)
|
Number
of Unexercised Securities Underlying Options at FY-End (#) Exercisable
/
Unexercisable
|
Value
of Unexercised In-the-Money Options at FY-End ($) Exercisable /
Unexercisable
(1)
|
|||||||||
|
Dr.
Jonathan Lewis
|
0
|
0
|
0
/
268,653
|
0
/
1,136,873
|
|||||||||
|
Richard
Bagley
|
0
|
0
|
0
/
150,668
|
0
/ 393,982
|
|||||||||
|
Dr.
Robert Peter Gale
|
0
|
0
|
0
/
25,110
|
0
/ 97,237
|
|||||||||
|
David
C. Olson
|
0
|
0
|
0
/
0
|
0
/
0
|
|||||||||
|
(1)
|
Value
of unexercised in-the-money options on December 31, 2004 is based
on a
$2.16 per share value of ZIOPHARM, Inc. stock ($4.31 per share of
the
Company's common stock on a post-Merger basis), as determined
by the
ZIOPHARM, Inc. Board of Directors at such time. As of December 31,
2004,
no trades of the Company’s common stock had been conducted on the
Over-the-Counter Bulletin Board.
|
Employment
and Change-in-Control Agreements
On
December 9, 2004, we entered into an employment agreement with David C. Olson.
Under the terms of the agreement, we agreed to pay Mr. Olson a one-time fee
of
$100,000 if and when we completed a merger, acquisition, or related transaction.
In connection with the Merger, Mr. Olson agreed to reduce this amount to the
extent that our unconsolidated liabilities immediately following the Merger
exceeded $425,000. On December 10, 2004, we entered into a management consulting
services agreement with David Floor. Under the terms of the agreement, we agreed
to pay Mr. Floor a one-time fee of $10,000 plus expenses, upon the closing
of
any transaction leaving us with a positive business direction and available
finances. In connection with the Merger, we paid Messrs. Olson and Floor $57,500
and $100,000, respectively, under the terms of their agreements with us. Each
such agreement was terminated in its entirety in connection with the Merger.
On
January 8, 2004, ZIOPHARM entered into a three-year employment agreement with
Dr. Jonathan Lewis, under which we succeeded to ZIOPHARM’s rights and
obligations upon the Merger. Under the agreement, Dr. Lewis receives an annual
base salary of $350,000 and a guaranteed annual bonus of $250,000. In addition,
Dr. Lewis is eligible to receive an annual discretionary bonus of up to 100%
of
his base salary, as determined by our board of directors. ZIOPHARM also paid
Dr.
Lewis a one-time bonus of $250,000 upon execution of his employment agreement.
Depending upon the events surrounding a possible termination of Dr. Lewis’
employment, he may continue to receive his base salary and, in certain
circumstances, his guaranteed bonus for one year following such termination.
In
addition, the vesting of Dr. Lewis’ stock options may accelerate in whole or in
part upon such termination. Dr. Lewis has agreed not to compete with us during
the term of the employment agreement and for a one-year period thereafter,
provided that we continue to pay his base salary and guaranteed bonus for that
one-year period.
Pursuant
to the terms of his employment agreement, we have granted Dr. Lewis options
to
purchase up to 410,603 shares of common stock at $0.08 per share (adjusted
to
give effect to the Merger). The options vest in three equal annual installments,
the first of which vested on January 8, 2005, with the remaining installments
vesting on January 8, 2006 and January 8, 2007. The option is subject to
anti-dilution protection from the issuance of equity securities in financing
transactions to the extent that Dr. Lewis will maintain potential equity
ownership of at least 5% of our stock until such time as we have received $25
million in gross proceeds from such transactions. The options are governed
by
our 2003 Stock Option Plan.
On
July
21, 2004, ZIOPHARM entered into a three-year employment agreement with Mr.
Richard Bagley, under which we succeeded to ZIOPHARM’s rights and obligations
upon the Merger. Under the agreement, Mr. Bagley receives an annual base salary
of $250,000 and a guaranteed annual bonus of $50,000. In addition, Mr. Bagley
is
eligible to receive an annual discretionary bonus, as determined by our board
of
directors. ZIOPHARM also paid Mr. Bagley a one-time bonus of $50,000 upon
execution of his employment agreement. Depending upon the events surrounding
a
possible termination of Mr. Bagley’s employment, he may continue to receive his
base salary and, in certain circumstances, his guaranteed bonus for one year
following such termination. In addition, the vesting of Mr. Bagley’s stock
options may accelerate in whole or in part upon such termination. Mr. Bagley
has
agreed not to compete with us during the term of the employment agreement and
for a one-year period thereafter, provided that we continue to pay his base
salary for that one-year period.
Pursuant
to the terms of his employment agreement, we granted Mr. Bagley options to
purchase up to 241,282 shares common stock at $1.70 per share (adjusted to
give
effect to the Merger). The options vest in three equal annual installments,
the
first of which vested on July 1, 2005, with the remaining installments vesting
on July 1, 2006 and July 1, 2007. The option is subject to certain anti-dilution
protections from the issuance of equity securities in financing transactions
so
that Mr. Bagley will maintain potential equity ownership of at least 3% of
our
stock until such time as we have received $25 million in gross proceeds from
such transactions. The options are governed by our 2003 Stock Option Plan.
On
January 14, 2004, ZIOPHARM entered into a three-year employment agreement with
Dr. Robert Peter Gale, under which we succeeded to ZIOPHARM’s rights and
obligations upon the Merger. Under the agreement, Dr. Gale receives an annual
base salary of $250,000 and a guaranteed annual bonus of $150,000. In addition,
Dr. Gale is eligible to receive an annual discretionary bonus, as determined
by
our board of directors. Depending upon the events surrounding a termination
of
Dr. Gale’s employment, he may continue to receive his base salary and, in
certain circumstances, his guaranteed bonus for one year following such
termination. In addition, the vesting of Dr. Gale’s stock options may accelerate
in whole or in part upon such termination. Dr. Gale has agreed not to compete
with us during the term of the employment agreement and for one-year following
the expiration of his employment agreement.
Pursuant
to the terms of his employment agreement, we granted Dr. Gale options to
purchase up to 25,110 shares of common stock at $0.44 per share, respectively
(adjusted to give effect to the Merger). The options vest in three equal annual
installments, the first of which vested on January 15, 2005, with the remaining
installments vesting on January 15, 2006 and January 15, 2007. The options
are
governed by our 2003 Stock Option Plan.
Compensation
of Directors
Prior
to
the Merger, our directors received no compensation pursuant to any standard
arrangement for their services as directors. Nevertheless, during the year
ended
December 31, 2004, we issued Mr. David Floor 5,000 shares of our common stock
(adjusted to reflect to the 1-for-40 share combination effected immediately
prior to the Merger) in exchange for directors fees.
Our
Board
of Directors currently schedules monthly telephonic board meetings and quarterly
in-person meetings held at our principal corporate office. Each director
receives quarterly compensation of $3,000 in arrears. The non-management members
of the Board also receive stock options as granted from time to time and as
recommended by the Compensation Committee.
SECURITY
OWNERSHIP OF
CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table summarizes certain information regarding the beneficial
ownership (as such term is defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of our outstanding common stock as of September 29, 2005 by (i)
each person known by us to be the beneficial owner of more than 5% of our
outstanding common stock, (ii) each of our directors, (iii) each of the named
executives, and (iv) all current executive officers and directors as a group.
Except as indicated in the footnotes below, the persons listed below possess
sole voting and investment power with respect to their shares. Except
as
otherwise indicated, the address of the persons listed below is 1180 Avenue
of
the Americas, 19
th
Floor,
New York, NY 10036.
|
Name
and Address of Beneficial Owner
|
Shares
of
Common
Stock
Beneficially
Owned (#)
(1)
|
Percentage
of
Common
Stock
Beneficially
Owned (%)
|
|||||
|
Dr.
Jonathan Lewis
(2)
|
136,868
|
1.88%
|
|||||
|
Richard
Bagley
(3)
|
80,428
|
1.11%
|
|||||
|
Robert
Peter Gale
(4)
|
8,371
|
*
|
|||||
|
Murray
Brennan
|
0
|
*
|
|||||
|
James
Cannon
|
0
|
*
|
|||||
|
Hon.
Wyche Fowler
|
0
|
*
|
|||||
|
Gary
Fragin
|
0
|
*
|
|||||
|
Timothy
McInerney
(5)
|
79,972
|
1.11%
|
|||||
|
Michael
Weiser
(6)
|
119,011
|
1.65%
|
|||||
|
All
current executive officers and directors
as
a group
(7)
|
424,650
|
5.71%
|
|||||
|
Mibars,
LLC
365
West End Avenue
New
York, NY 10024
|
1,214,456
|
16.97%
|
|||||
|
Lindsay
A. Rosenwald
(8)
787
Seventh Avenue, 48th Floor
New
York, NY 10019
|
1,498,087
(8)
|
|
20.13%
|
||||
|
Atlas
Equity I, Ltd.
181
W. Madison, Suite 3600
Chicago,
IL 60602
|
695,797
|
9.72%
|
|||||
|
Lester
E. Lipschutz
1650
Arch Street, 22nd Floor
Philadelphia,
PA 19103
|
463,864
(9)
|
|
6.48%
|
||||
|
David
C. Olson
(10)
6025
South Quebec Street, Suite 135
Englewood,
CO 80111
|
54,008
(10)
|
|
*
|
||||
|
(1)
|
Beneficial
ownership is determined in accordance with SEC rules, beneficial
ownership
includes any shares as to which the security or stockholder has sole
or
shared voting power or investment power, and also any shares which
the
security or stockholder has the right to acquire within 60 days of
the
date hereof, whether through the exercise or conversion of any stock
option, convertible security, warrant or other right. The indication
herein that shares are beneficially owned is not an admission on
the part
of the security or stockholder that he, she or it is a direct or
indirect
beneficial owner of those shares.
|
|
(2)
|
Includes
136,868 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
|
(3)
|
Includes
80,428 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
|
(4)
|
Includes
8,371 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
|
(5)
|
Includes
20,767 shares issuable upon the exercise of warrants that are currently
exercisable or will become exercisable within the next 60
days.
|
|
(6)
|
Includes
35,566 shares issuable upon the exercise of warrants that are currently
exercisable or will become exercisable within the next 60
days.
|
|
(7)
|
Includes
282,000 shares issuable upon the exercise of convertible securities
that
are currently exercisable or will become exercisable within the next
60
days.
|
|
(8)
|
Excludes
463,864 shares held by certain trusts for the benefit of Dr. Rosenwald
and
his family for which Dr. Rosenwald disclaims beneficial ownership.
Includes 221,011 shares issuable upon the exercise of warrants granted
to
Dr. Rosenwald and 62,621 shares issuable upon the exercise of warrants
granted to Paramount BioCapital Investments, LLC, of which Dr. Rosenwald
is the managing member, both such warrants are currently exercisable
or
will become exercisable within the next 60 days. Also includes 737,777
shares that Dr. Rosenwald has the right to acquire from existing
stockholders under certain circumstances pursuant to the terms of
pledge
agreements between Dr. Rosenwald and such
stockholders.
|
|
(9)
|
Includes
463,864 shares held by separate trusts for the benefit of Dr. Rosenwald
or
his family with respect to which Mr. Lifschutz is either trustee
or
investment manager and has investment and voting power. Dr. Rosenwald
disclaims beneficial ownership of these
shares.
|
|
(10)
|
Mr.
Olson served as the Company’s Chief Executive Officer for the full fiscal
years indicated until the consummation of the Merger. Share ownership
is
based on the Company’s most recent annual report on Form 10-KSB for the
year ended December 31, 2004, after giving effect to the 1-for-40
share
combination.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Pre-Merger
Company Transactions and Relationships
Because
of their previous management positions, organizational efforts and/or percentage
share ownership (prior to the Merger), Messrs. David C. Olson and Robert J.
Zappa may be deemed to be “promoters,” as those terms are defined in the
Securities Act of 1933 and the applicable rules and regulations thereunder.
Because of the above-described relationships, transactions between and among
us
and Messrs. Olson and Zappa, such as the sale of our common stock to each of
them as described herein, should not be considered to have occurred at
arm’s-length.
Common
Stock Transactions
During
July 2005, we sold 333,333 shares of our common stock to David Floor for
$10,000, or $.03 per share.
In
August
and December 2004, David Olson loaned us a total of $1,300 for working capital.
During May 2005, Mr. Olson advanced us an additional $788. The loans carried
no
interest rate and were due on demand. On June 28, 2005, we issued Mr. Olson
69,600 shares of common stock as full repayment of the amounts stated above.
The
shares were valued at $.03 per share, or $2,088, based on contemporaneous common
stock sales to unrelated third parties.
On
May
13, 2004, the Company issued 400,000 shares of common stock to Summit Financial
Relations, Inc. (“Summit”) valued at $10,000, at $.025 per share as repayment
for expenses paid on behalf of us. The shares were valued based on
contemporaneous sales to unrelated third party investors. David Olson, who
was
then our President, Treasurer and one of our directors, is also Summit’s
President, director and sole stockholder.
During
May 2004, we issued 200,000 shares of common stock to Thomas Olson, the brother
of David Olson, in exchange for corporate governance services. The shares were
valued based on contemporaneous sales to unrelated third party investors, at
$.025 per share. The Company recorded stock-based compensation of $5,000 related
to the transaction.
During
May 2004, we issued 200,000 shares of common stock to David Floor in exchange
for director fees. The shares were valued based on contemporaneous sales to
unrelated third party investors, at $.025 per share. We recorded stock-based
compensation of $5,000 related to the transaction.
At
December 31, 2004, we owed Summit $12,268 for professional fees and other
administrative expenses paid on our behalf. David Olson, who was then our
President, Treasurer and one of our directors, is also Summit’s President,
director and sole stockholder. During the six months ended June 30, 2005, Summit
paid an additional $1,007 in expenses on our behalf. On February 4, 2005, the
Company repaid Summit $7,000 and on June 28, 2005 the Company issued Summit
209,180 shares of common stock as full repayment of all amounts stated above.
The shares issued to Summit were valued at $.03 per share, or $6,275, based
on
contemporaneous common stock sales to unrelated third parties.
During
January 2002, we sold 33,333 and 16,667 shares of our common stock to David
Olson and Barbara Petrinsky, respectively, at $.03 per share (gross proceeds
totaling $1,500). At the time of issuance, both Mr. Olson and Ms. Petrinsky
were
our officers.
Office
Space and Administrative Support
Summit
has contributed the use of office space and administrative support (including
reception, secretarial and bookkeeping services) to us for the years ended
December 31, 2004 and 2003. David Olson, who was our President, Treasurer and
one of our directors prior to the Merger, is also the President, director and
sole stockholder of Summit.
The
office space and administrative support contributed by Summit has a fair market
value of approximately $500 and $1,000 per month, respectively. We have
recognized expenses for rent and administrative support based on fair market
value. Any period in which the amount paid to Summit for office space and
administrative support was below the fair market value, the remaining balance
was considered contributed by Summit and recorded as a credit to additional
paid-in capital in our financial statements. During the years ended December
31,
2004 and 2003, we did not pay Summit for office space and we paid Summit $173
and $510, respectively, for administrative support. Accordingly, Summit
contributed the remaining fair values for the use of the office space and
administrative support. Contributed office space totaled $6,000 and $6,000,
and
contributed administrative support totaled $11,827 and $11,490 for the years
ended December 31, 2004 and 2003, respectively.
Related
Party Liabilities
In
August
and December 2004, Mr. Olson loaned us a total of $1,300 for working capital.
The loans carried no interest rate and were due on demand.
At
December 31, 2003, the Company owed Summit $18,111 for professional fees and
other administrative expenses it paid on our behalf. During the year ended
December 31, 2004, Summit paid expenses totaling $4,187 on our behalf. A portion
of the May 13, 2004 issuance of 400,000 restricted common described above under
“Certain Relationships and Related Transactions
-
Common
Stock Transactions” was used to repay Summit for these fees. As of December 31,
2004, we owed Summit $12,298.
We
owed
Barbara Petrinsky, our former Secretary and Treasurer, $10,000 for the work
she
performed over the previous five years to keep our books and records, assist
in
all of our filings with regulatory authorities, states and the Internal Revenue
Service, among others.
All
of
the above-referenced liabilities were satisfied in their entirety immediately
following the Merger.
In
connection with the Merger, we paid Messrs. Olson and Floor $57,000 and
$100,000, respectively, pursuant to a December 9, 2004 employment agreement
with
David Olson and a December 10, 2004 management consulting services
agreement with David Floor.
Consulting
Agreement with Summit Financial
On
December 10, 2004, we entered into a consulting services fee agreement under
which Summit provided certain services to us including, but not limited to,
consultation related to mergers and acquisitions, reorganizations and
divestitures. Pursuant to the agreement, Summit lent us funds and helped us
raise funds at no extra cost. Under the terms of the agreement, we paid Summit
a
one-time fee of $106,697.90 in connection with the closing of the
Merger.
ZIOPHARM
Transactions and Relationships
In
connection with a private placement of its Series A Convertible Preferred Stock
that terminated in May 2005, ZIOPHARM and Paramount BioCapital, Inc.
(“Paramount”) entered into an introduction agreement in January 2005. Upon the
Merger, we succeeded to ZIOPHARM’s rights and obligations under such agreement.
Pursuant to the introduction agreement, ZIOPHARM agreed to compensate Paramount
or its designees for their services through the payment of (a) cash commissions
equal to 7% of the gross proceeds from the offering, and (b) warrants to acquire
an aggregate of 837,956 share of ZIOPHARM’s Series A Convertible preferred
Stock per share exercise price of $2.38. Upon the Merger, this warrant
was
exchanged for a warrant to purchase an aggregate of 419,772 shares of our common
stock at a per share exercise price of $4.75. Cash commissions will also be
payable by us if we sell additional of our securities, prior to May 31, 2006,
to
investors introduced to ZIOPHARM by the Paramount. Pursuant to the introduction
agreement, Paramount has the right of first refusal to act as the placement
agent for the private sale of our securities until May 31, 2008.
In
connection with ZIOPHARM’s December 22, 2004 Option Agreement with Southern
Research Institute (“SRI”), ZIOPHARM entered into an Finders Agreement dated
December 23, 2004 with Paramount, pursuant to which ZIOPHARM agreed to
compensate Paramount for services in connection with the ZIOPHARM’s introduction
to SRI through the payment of (a) a cash fee of $60,000 and (b) a warrant to
purchase 125,000 shares of ZIOPHARM’s common stock at a price of $2.38 per
share. Upon the Merger, this warrant was exchanged for a warrant to purchase
an
aggregate of 62,619 shares of our common stock at a per share exercise price
of
$4.75.
Lindsay
A. Rosenwald, M.D., who may beneficially own approximately 20.13% of our common
stock, is Chairman and Chief Executive Officer of Paramount and its affiliates.
Dr. Michael Weiser and Timothy McInerney, each of whom is a director of the
Company (and director of ZIOPHARM), are also full-time
employees
of
Paramount.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior
to
the consummation of the Merger, our common stock traded on the over-the-counter
bulletin board under the symbol “ESWB.” As a result of the Company’s name change
to ZIOPHARM Oncology, Inc., our common stock now trades under the symbol “ZIOP.”
The following table sets forth the high and low bid prices for our common stock
as reported by the over-the-counter bulletin board since our common stock began
trading over the counter in 2004. These quotations reflect inter-dealer prices,
without retail markup, markdown or commission, and may not represent actual
transactions. Throughout the periods indicated below, only one trade in our
common stock was consummated. Prices set forth below do not reflect the 1-for-40
share combination effected on August 24, 2005.
|
|
Price
Range
|
||||||
|
Fiscal
Year 2005 (Quarter Ended)
|
High
|
Low
|
|||||
|
June
30, 2005
|
$
|
0.05
|
$
|
0.00
|
|||
|
March
31, 2005
|
$
|
0.05
|
$
|
0.00
|
|||
|
Fiscal
Year 2004 (Quarter Ended)
|
High
|
Low
|
|||||
|
December
31, 2004
|
$
|
0.00
|
$
|
0.00
|
|||
|
September
30, 2004
|
$
|
0.00
|
$
|
0.00
|
|||
|
June
30, 2004
|
$
|
0.00
|
$
|
0.00
|
|||
|
March
31, 2004
|
$
|
0.00
|
$
|
0.00
|
|||
The
approximate number of stockholders of record of our common stock as of September
29, 2005 was 3
06.
We
have never declared or paid a cash dividend on our common stock and do not
anticipate paying any cash dividends in the foreseeable future.
USE
OF PROCEEDS
We
will
not receive any proceeds from the resale of any of the shares offered by this
prospectus by the selling stockholders.
SELLING
STOCKHOLDERS
This
prospectus covers the resale by the selling stockholders identified below of
4,870,281 shares of our common stock, including 4,197,952 shares of our common
stock issued to the former stockholders of ZIOPHARM, Inc. in connection with
the
Merger, 482,407 shares issuable upon the exercise of warrants held by such
former ZIOPHARM, Inc. stockholders and 189,922 shares of which were outstanding
prior to the merger. The following table sets forth the number of shares of
our
common stock beneficially owned by the selling stockholders as of October 12,
2005, and after giving effect to this offering.
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Robert
Guercio
|
7,515
|
7,515
|
0
|
—
|
|
Ennio
DePianto
|
6,012
|
6,012
|
0
|
—
|
|
Millennium
Partners, L.P.
|
231,932
|
231,932
|
0
|
—
|
|
Michael
A. Mullen
|
5,010
|
5,010
|
0
|
—
|
|
Philip
J. Abdalla and Joyce V. Abdalla JTWROS
|
6,012
|
6,012
|
0
|
—
|
|
Frank
Calcutta
|
12,524
|
12,524
|
0
|
—
|
|
The
Henry H. Bahr QTIP Trust Dated 2/22/88
|
11,597
|
11,597
|
0
|
—
|
|
The
Bahr Family Limited Partnership
|
11,597
|
11,597
|
0
|
—
|
|
Robert
L. Bahr Revocable Trust 1985 U/A
dated 3-14-85 |
3,826
|
3,826
|
0
|
—
|
|
Stephen
C. Rabbitt
|
10,019
|
10,019
|
0
|
—
|
|
Delaware
Charter Guarantee Trust FBO
Richard S. Simms II Keogh Plan |
3,479
|
3,479
|
0
|
—
|
|
Lind
Family Investments LP
|
8,117
|
8,117
|
0
|
—
|
|
John
and Debbra Landsberger Family Trust
|
12,524
|
12,524
|
0
|
—
|
|
Balanced
Investment, LLC
|
46,386
|
46,386
|
0
|
—
|
|
Riverside
Contracting LLC
|
12,524
|
12,524
|
0
|
—
|
|
Walter
B. Martin and Paloma Munoz JTWROS
|
5,798
|
5,798
|
0
|
—
|
|
MSB
Family Trust DTD 6/25/93 Michael Blechman, TTEE
|
23,194
|
23,194
|
0
|
—
|
|
Richard
S. Simms II and Cynthia Simms JTWROS
|
3,479
|
3,479
|
0
|
—
|
|
Lawrence
M. Silver
|
23,194
|
23,194
|
0
|
—
|
|
Rick
J. Goad
|
10,019
|
10,019
|
0
|
—
|
|
Barry
Lind Revocable Trust
|
46,386
|
46,386
|
0
|
—
|
|
Stephen
N. Kitchens and Martha M. Kitchens JTWROS
|
23,194
|
23,194
|
0
|
—
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Wayne
K. Adams
|
11,597
|
11,597
|
0
|
—
|
|
Jerrold
Abrahams
|
6,958
|
6,958
|
0
|
—
|
|
Shoup
Revocable Trust DTD April 29, 2003
|
11,598
|
11,598
|
0
|
—
|
|
Shea
Ventures, LLC
|
23,193
|
23,193
|
0
|
—
|
|
James
J. Solano, Jr.
|
5,798
|
5,798
|
0
|
—
|
|
National
Investors Services Corp. FBO
Stephen J. Nelson |
23,194
|
23,194
|
0
|
—
|
|
James
C. Shepler and Diana B. Shepler JTWROS
|
6,958
|
6,958
|
0
|
—
|
|
Steven
Lisi
|
14,027
|
14,027
|
0
|
—
|
|
Phil
Lifshitz
|
23,195
|
23,195
|
0
|
—
|
|
Louis
Sanzo, Jr.
|
5,010
|
5,010
|
0
|
—
|
|
Barry
P. McIntosh
|
5,798
|
5,798
|
0
|
—
|
|
Hill
Blalock, Jr.
|
23,195
|
23,195
|
0
|
—
|
|
Joel
Braun
|
5,798
|
5,798
|
0
|
—
|
|
Far
Ventures
|
10,019
|
10,019
|
0
|
—
|
|
Brino
Investment Ltd.
|
5,798
|
5,798
|
0
|
—
|
|
Grapemeadow,
NV
|
115,966
|
115,966
|
0
|
—
|
|
Tisu
Investment Ltd.
|
17,395
|
17,395
|
0
|
—
|
|
Edmund
A. Debler
|
17,033
|
17,033
|
0
|
—
|
|
Daniel
Krieger
|
5,798
|
5,798
|
0
|
—
|
|
Andrew
W. Albstein and Carolyn Albstein JTWROS
|
23,194
|
23,194
|
0
|
—
|
|
Elizabeth
R. Moore
|
5,798
|
5,798
|
0
|
—
|
|
Ursuline
Co.
|
12,524
|
12,524
|
0
|
—
|
|
Carl
S. Sorenson
|
11,597
|
11,597
|
0
|
—
|
|
Carucci
Family Partners
|
34,790
|
34,790
|
0
|
—
|
|
Anthony
J. Ottavio
|
12,524
|
12,524
|
0
|
—
|
|
Daniel
J. Kevles and Betty Ann Kevles JTWROS
|
8,117
|
8,117
|
0
|
—
|
|
Gavin
Kent
|
5,798
|
5,798
|
0
|
—
|
|
Michael
Luftman
|
5,798
|
5,798
|
0
|
—
|
|
Anthony
J. Gerace
|
11,598
|
11,598
|
0
|
—
|
|
Isaac
R. Dweck
|
23,193
|
23,193
|
0
|
—
|
|
Fae
Moore
|
5,798
|
5,798
|
0
|
—
|
|
Ben
Heller
|
69,579
|
69,579
|
0
|
—
|
|
Elizabeth
Maas
|
5,798
|
5,798
|
0
|
—
|
|
Robert
Masters
|
11,597
|
11,597
|
0
|
—
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Klaus
Kretschmer
|
46,591
|
46,591
|
0
|
—
|
|
Dean
Glasser
|
3,757
|
3,757
|
0
|
—
|
|
Murry
J. McCabe
|
34,790
|
34,790
|
0
|
—
|
|
Cooper
A. McIntosh, MD
|
11,597
|
11,597
|
0
|
—
|
|
Harry
Newton and Susan Newton JTWROS
|
17,534
|
17,534
|
0
|
—
|
|
Nicholas
Ponzio
|
25,049
|
25,049
|
0
|
—
|
|
Gary
J. Strauss
|
23,194
|
23,194
|
0
|
—
|
|
Scott
D. Whitaker
|
11,597
|
11,597
|
0
|
—
|
|
Wolcot
Capital, Inc.
|
25,049
|
25,049
|
0
|
—
|
|
Joseph
J. Vale
|
115,966
|
115,966
|
0
|
—
|
|
Carolyn
N. Taylor
|
3,507
|
3,507
|
0
|
—
|
|
David
P. Luci
|
2,319
|
2,319
|
0
|
—
|
|
Atlas
Equity I, Ltd.
|
695,797
|
695,797
|
0
|
—
|
|
Alan
H. Auerbach
|
5,798
|
5,798
|
0
|
—
|
|
Gregory
J. Dovolis
|
10,019
|
10,019
|
0
|
—
|
|
Michele
Markowitz
|
5,798
|
5,798
|
0
|
—
|
|
Praful
Desai
|
5,010
|
5,010
|
0
|
—
|
|
Eric
Reed
|
5,010
|
5,010
|
0
|
—
|
|
Delaware
Charter Guarantee Trust FBO Mark Berg IRA
|
57,612
|
57,612
|
0
|
—
|
|
Nicole
Berg
|
57,612
|
57,612
|
0
|
—
|
|
Ivy
Scheinholz Revocable Trust U/A Dated 1/26/05
|
5,010
|
5,010
|
0
|
—
|
|
S.
Alan Lisenby
|
25,049
|
25,049
|
0
|
—
|
|
Judah
Schorr
|
34,790
|
34,790
|
0
|
—
|
|
Mark
Mazzer
|
6,262
|
6,262
|
0
|
—
|
|
Domaco
Venture Capital Fund
|
5,799
|
5,799
|
0
|
—
|
|
Fiserv
Securities, Inc. A/C/F Jack Polar IRA
|
5,799
|
5,799
|
0
|
—
|
|
Paul
D. Newman and Judith E. Newman JTWROS
|
6,012
|
6,012
|
0
|
—
|
|
Neil
J. Laird
|
6,012
|
6,012
|
0
|
—
|
|
Rachel
Family Partnership
|
34,790
|
34,790
|
0
|
—
|
|
Baruch
Z. Halberstam
|
5,798
|
5,798
|
0
|
—
|
|
Paul
J. Solit
|
5,798
|
5,798
|
0
|
—
|
|
David
Jaroslawicz
|
69,579
|
69,579
|
0
|
—
|
|
Lucile
Slocum
|
10,019
|
10,019
|
0
|
—
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Harvey
Lustig and Ronnie Lustig JTWROS
|
5,010
|
5,010
|
0
|
—
|
|
Stephen
H. Lebovitz
|
1,002
|
1,002
|
0
|
—
|
|
Joe
L. Key and Mary Lynn Key JTWROS
|
1,002
|
1,002
|
0
|
—
|
|
Delaware
Charter Guarantee & Trust Co. FBO Howard M. Tanning MD
IRA
|
25,049
|
25,049
|
0
|
—
|
|
Gitel
Family Partnership, LP
|
23,193
|
23,193
|
0
|
—
|
|
Joseph
Strassman and Barbara Strassman
|
6,958
|
6,958
|
0
|
—
|
|
David
G. Pudelsky and Nancy H. Pudelsky JTWROS
|
10,019
|
10,019
|
0
|
—
|
|
Louis
R. Reif
|
22,544
|
22,544
|
0
|
—
|
|
John
O. Dunkin
|
6,012
|
6,012
|
0
|
—
|
|
Michael
Pinney
|
2,505
|
2,505
|
0
|
—
|
|
Neel
B. Ackerman and Martha N. Ackerman JTWROS
|
25,049
|
25,049
|
0
|
—
|
|
Fiserv
Securities, Inc. A/C/F Ronald M. Lazar, STD IRA
|
5,799
|
5,799
|
0
|
—
|
|
RL
Capital Partners, LP
|
11,598
|
11,598
|
0
|
—
|
|
Neil
Herskowitz
|
6,262
|
6,262
|
0
|
—
|
|
Anthony
G. Polak “S”
|
5,799
|
5,799
|
0
|
—
|
|
Fiserv
Securities, Inc. A/C/F Anthony G. Polak Std. IRA
|
5,799
|
5,799
|
0
|
—
|
|
Tim
P. Cooper
|
4,634
|
4,634
|
0
|
—
|
|
Benito
Bucay
|
11,597
|
11,597
|
0
|
—
|
|
Edwin
A. Buckham and Wendy F. Buckham, JTWROS
|
11,597
|
11,597
|
0
|
—
|
|
Laya
Perlysky 2003 Grantor Retained Annuity Trust
|
23,193
|
23,193
|
0
|
—
|
|
Kinder
Investments L.P.
|
34,790
|
34,790
|
0
|
—
|
|
Reuben
Taub
|
12,524
|
12,524
|
0
|
—
|
|
Waterspout
Investments Pte Ltd
|
4,639
|
4,639
|
0
|
—
|
|
Matador
Investments Pte Ltd.
|
16,235
|
16,235
|
0
|
—
|
|
Ramsay
Investments Pte. Ltd.
|
2,319
|
2,319
|
0
|
—
|
|
Mega
International Corporation
|
8,581
|
8,581
|
0
|
—
|
|
Alfred
Abraham
|
4,639
|
4,639
|
0
|
—
|
|
Paul
Sallwasser and Teri Sallwasser JTWROS
|
17,395
|
17,395
|
0
|
—
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
William
S. Tyrell
|
11,597
|
11,597
|
0
|
—
|
|
Alan
J. Young
|
34,790
|
34,790
|
0
|
—
|
|
William
McCahey and Lisa Krivacka JTWROS
|
5,799
|
5,799
|
0
|
—
|
|
Dennis
F. Steadman
|
5,799
|
5,799
|
0
|
—
|
|
John
H. Miller, CGM IRA Custodian
Smith Barney #670-80424-18 |
6,262
|
6,262
|
0
|
—
|
|
Paul
Bermanski and Barbara Bermanski JTWROS
|
11,597
|
11,597
|
0
|
—
|
|
Tokenhouse
Trading Pte. Ltd.
|
46,386
|
46,386
|
0
|
—
|
|
James
E. Daly, CGM IRA Custodian #670-80477
|
6,262
|
6,262
|
0
|
—
|
|
Howard
Sorkin
|
23,193
|
23,193
|
0
|
—
|
|
Janis
H. Camp
|
5,798
|
5,798
|
0
|
—
|
|
Robert
McEntire
|
46,387
|
46,387
|
0
|
—
|
|
Andrew
H. Sabreen and Carol Sabreen JTWROS
|
11,597
|
11,597
|
0
|
—
|
|
Michael
Blechman and Barry J. Lind, Tenants in Common
|
11,597
|
11,597
|
0
|
—
|
|
Paul
F. Berlin
|
5,798
|
5,798
|
0
|
—
|
|
Eli
Jaconson
|
23,194
|
23,194
|
0
|
—
|
|
Andrew
W. Schonzeit
|
12,524
|
12,524
|
0
|
—
|
|
Nora
O’Donoghue
|
5,798
|
5,798
|
0
|
—
|
|
Mario
Pasquel and Begona Miranda JTWROS
|
16,235
|
16,235
|
0
|
—
|
|
Suzanne
Schiller
|
5,010
|
5,010
|
0
|
—
|
|
William
S. Silver and Elinor Silver JTWROS
|
6,012
|
6,012
|
0
|
—
|
|
Suzette
T. Seigel
|
5,798
|
5,798
|
0
|
—
|
|
Robert
J. Sechan II
|
5,798
|
5,798
|
0
|
—
|
|
Coqui
Capital Partners
|
57,984
|
57,984
|
0
|
—
|
|
Carolyn
P. Dietrich
|
6,007
|
6,007
|
0
|
—
|
|
Smithfield
Fiduciary LLC
|
231,932
|
231,932
|
0
|
—
|
|
Michael
S. Walsh
|
5,798
|
5,798
|
0
|
—
|
|
Vintage
Filings LLC
|
5,799
|
5,799
|
0
|
—
|
|
Keith
Rubenstein
|
5,798
|
5,798
|
0
|
—
|
|
Dr.
Jeffrey R. Shapiro
|
5,798
|
5,798
|
0
|
—
|
|
Bernard
Wachsman
|
5,798
|
5,798
|
0
|
—
|
|
Concordia
Partners L.P.
|
175,341
|
175,341
|
0
|
—
|
|
Bristol
Investment, Ltd.
|
69,579
|
69,579
|
0
|
—
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
The
Lindsay A. Rosenwald 2000 Irrevocable Trust U/A dated
5/24/2000
|
231,932
|
231,932
|
0
|
—
|
|
The
Lindsay Rosenwald 2000 Family Trust U/A dated 12/15/00
|
231,932
|
231,932
|
0
|
—
|
|
Mark
J. Ahn
|
5,798
|
5,798
|
0
|
—
|
|
Jeffrey
Kraws & Patricia Kraws
|
5,798
|
5,798
|
0
|
—
|
|
Jack
B. Petersen
|
5,798
|
5,798
|
0
|
—
|
|
Charles
Earl Cartmill
|
11,597
|
11,597
|
0
|
—
|
|
Robert
J. Whetten
|
11,597
|
11,597
|
0
|
—
|
|
Paramount
BioCapital, Inc.
|
62,621
|
0
|
62,621
|
—
|
|
Steven
Markowitz
|
6,480
|
0
|
6,480
|
—
|
|
Fabio
Migliaccio
|
2,504
|
0
|
2,504
|
—
|
|
Denise
Mormile-Liglino
|
1,252
|
0
|
1,252
|
—
|
|
Michael
Mullen
|
13,534
|
0
|
13,534
|
—
|
|
Robert
Petrozzo
|
11,083
|
0
|
11,083
|
—
|
|
Joseph
Sorbara
|
6,480
|
0
|
6,480
|
—
|
|
Robert
D. Millstone
|
3,479
|
0
|
3,479
|
—
|
|
Steven
A. Sherman
|
1,739
|
0
|
1,739
|
—
|
|
Sandgrain
Securities, Inc.
|
579
|
0
|
579
|
—
|
|
Lindsay
A. Rosenwald
|
1,498,087(3)
|
0
|
221,011
|
16.53%
|
|
Michael
Weiser
|
119,011
|
0
|
35,566
|
1.08%
|
|
Harris
Lydon
|
22,349
|
0
|
22,349
|
—
|
|
Timothy
McInerney
|
79,972
|
0
|
20,767
|
*
|
|
Michael
Rosenman
|
31,854
|
0
|
19,709
|
*
|
|
Scott
Katzman
|
28,817
|
0
|
19,709
|
*
|
|
Jill
Meleski
|
19,674
|
0
|
16,638
|
*
|
|
Bernard
Gross
|
10,285
|
0
|
8,767
|
*
|
|
Karl
Ruggeberg
|
9,368
|
0
|
7,850
|
*
|
|
Jeana
Somers
|
1,808
|
0
|
290
|
*
|
|
EasyWeb
Shareholders:
|
||||
|
Lawrence
Alpert
|
500
|
500
|
0
|
*
|
|
Associate
Capital Consulting Inc.
|
50
|
50
|
0
|
*
|
|
Vicki
D E Barone
|
25
|
25
|
0
|
*
|
|
Edward
W Bellarose
|
100
|
100
|
0
|
*
|
|
Black
Marlen Inc
|
100
|
100
|
0
|
*
|
|
Craig
M Blake
|
50
|
50
|
0
|
*
|
|
Darrell
J Brunken
|
25
|
25
|
0
|
*
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Scot
Bryant
|
100
|
100
|
0
|
*
|
|
Charles
Schwab & Co. Inc.
|
100
|
100
|
0
|
*
|
|
John
Cleaver & Karen Cleaver JTTEN
|
100
|
100
|
0
|
*
|
|
William
D. Cronin
|
100
|
100
|
0
|
*
|
|
Paul
Dragul
|
10,418
|
10,418
|
0
|
*
|
|
Michael
M Edmonds
|
100
|
100
|
0
|
*
|
|
Doyle
S Elliott
|
25
|
25
|
0
|
*
|
|
David
W. Floor
|
18,334
|
18,334
|
0
|
*
|
|
Tyler
Floor
|
3,750
|
3,750
|
0
|
*
|
|
William
R Going
|
25
|
25
|
0
|
*
|
|
B
Kathleen Goldstone
|
25
|
25
|
0
|
*
|
|
Allen
R Goldstone
|
25
|
25
|
0
|
*
|
|
Timothy
S Greufe
|
150
|
150
|
0
|
*
|
|
C.
Eugene Gronning C. Eugene Gronning
|
1,250
|
1,250
|
0
|
*
|
|
Michael
Gundzik C. Eugene Gronning
|
100
|
100
|
0
|
*
|
|
Johanna
Guttman & Robert Herskowitz JTEN
|
10,750
|
10,750
|
0
|
*
|
|
L.
Dee Hall
|
250
|
250
|
0
|
*
|
|
Mark
Hatsis C. Eugene Gronning
|
1,500
|
1.500
|
0
|
*
|
|
Anderson
J Henshaw C. Eugene Gronning
|
100
|
100
|
0
|
*
|
|
Brad
Henshaw C. Eugene Gronning
|
100
|
100
|
0
|
*
|
|
Brent
Henshaw
|
13,709
|
13,709
|
0
|
*
|
|
Brent
Henshaw
|
250
|
250
|
0
|
*
|
|
Robert
Herskowitz
|
6,875
|
6,875
|
0
|
*
|
|
Al
Hoff
|
100
|
100
|
0
|
*
|
|
James
E Hosch
|
100
|
100
|
0
|
*
|
|
Joseph
W. Hovorka
|
1,667
|
1,667
|
0
|
*
|
|
Reed
Jensen
|
1,250
|
1,250
|
0
|
*
|
|
Key
Investments
|
2,500
|
2,500
|
0
|
*
|
|
Bryant
Kligerman
|
100
|
100
|
0
|
*
|
|
Harvey
Levin
|
25
|
25
|
0
|
*
|
|
VLA
LLP
|
50
|
50
|
0
|
*
|
|
Curtis
M McQueen
|
50
|
50
|
0
|
*
|
|
Mathew
Meister c/o Beeman Holdings
|
25
|
25
|
0
|
*
|
|
Gary
Mendenhall
|
25
|
25
|
0
|
*
|
|
Jeffrey
Myers
|
25
|
25
|
0
|
*
|
|
Jeffrey
Myers
|
1,667
|
1,667
|
0
|
*
|
|
Morri
L Namaste
|
100
|
100
|
0
|
*
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
National
Financial Services LLC
|
25
|
25
|
0
|
*
|
|
NF
Clearing Inc.
|
75
|
75
|
0
|
*
|
|
Robert
E Ohman
|
25
|
25
|
0
|
*
|
|
David
C. Olson
|
43,616
|
43,616
|
0
|
*
|
|
Thomas
B. Olson
|
5,000
|
5,000
|
0
|
*
|
|
Butternut
Partners
|
5,000
|
5,000
|
0
|
*
|
|
Jeff
Peterson
|
1,250
|
1,250
|
0
|
*
|
|
Jonathan
Peterson
|
1,000
|
1,000
|
0
|
*
|
|
Barbara
Petrinsky
|
442
|
442
|
0
|
*
|
|
Merrill
Lynch Pierce Fenner & Smith Inc.
|
25
|
25
|
0
|
*
|
|
Brad
Rhodes
|
200
|
200
|
0
|
*
|
|
Jeff
Rodriguez
|
25
|
25
|
0
|
*
|
|
Lamar
F Schild
|
500
|
500
|
0
|
*
|
|
Sanford
Schwartz
|
25
|
25
|
0
|
*
|
|
Susan
Schwartz
|
25
|
25
|
0
|
*
|
|
Scott
Shovea
|
50
|
50
|
0
|
*
|
|
Don
F. Sims
|
50
|
50
|
0
|
*
|
|
Carlene
Smith
|
25
|
25
|
0
|
*
|
|
Ryan
Spencer
|
3,750
|
3,750
|
0
|
*
|
|
Michael
J Stallone
|
200
|
200
|
0
|
*
|
|
Summit
Financial Relations Inc.
|
17,314
|
17,314
|
0
|
*
|
|
James
H Swalwell & Judith A Swalwell JTTEN
|
50
|
50
|
0
|
*
|
|
Thomas
M. Vickers
|
5,000
|
5,000
|
0
|
*
|
|
James
J Trainor
|
125
|
125
|
0
|
*
|
|
Thomas
M. Vickers Revocable Trust
|
5,000
|
5,000
|
0
|
*
|
|
Thomas
M. Vickers
|
250
|
250
|
0
|
*
|
|
Douglas
a Wilkerson & Leola A Wilkerson JTTEN
|
25
|
25
|
0
|
*
|
|
Lyn
C Wilkerson
|
30
|
30
|
0
|
*
|
|
Derek
J. Zappa
|
100
|
100
|
0
|
*
|
|
Robert
J. Zappa
|
24,000
|
24,000
|
0
|
*
|
|
Albert
J. Zirkelbach
|
50
|
50
|
0
|
*
|
_______________
*
Less
than 1%
|
(1)
|
Beneficial
ownership is determined in accordance with SEC rules, beneficial
ownership
includes any shares as to which the security or stockholder has sole
or
shared voting power or investment power, and also any shares which
the
security or stockholder has the right to acquire within 60 days of
the
date hereof, whether through the exercise or conversion of any stock
option, convertible security, warrant or other right. The indication
herein that shares are beneficially owned is not an admission on
the part
of the security or stockholder that he, she or it is a direct or
indirect
beneficial owner of those shares.
|
|
(2)
|
Assumes
sales of all shares by each selling
stockholder.
|
|
(3)
|
In
addition to 221,011 shares issuable upon the exercise of warrants
being
offered hereunder, this amounts includes 476,678 shares of common
stock
held by Dr. Rosenwald, 62,621 shares issuable upon the exercise of
warrants granted to Paramount BioCapital Investments, LLC, of which
Dr.
Rosenwald is the managing member, and 737,777 shares that Dr. Rosenwald
has the right to acquire from existing stockholders under certain
circumstances pursuant to the terms of pledge agreements between
Dr.
Rosenwald and such stockholders. Excludes 463,864 shares held by
certain
trusts for the benefit of Dr. Rosenwald and his family for which
Dr.
Rosenwald disclaims beneficial
ownership.
|
PLAN
OF DISTRIBUTION
We
are
registering the resale of certain shares of common stock offered by this
prospectus on behalf of the selling stockholders. As used in this prospectus,
the term “selling stockholders” include donees, pledges, transferees and other
successors in interest selling shares received from the selling stockholders
after the date of this prospectus, whether as a gift, pledge, partnership
distribution or other form of transfer. All costs, expenses and fees in
connection with the registration of the shares of common stock offered hereby
will be borne by the Company. Brokerage commissions and similar selling
expenses, if any, attributable to the sale of shares of common stock will be
borne by the selling stockholders.
Sales
of
shares of common stock offered hereby may be effected by the selling
stockholders from time to time in one or more types of transactions (which
may
include block transactions):
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as
agent, but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
short
sales;
|
| · |
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
| · |
broker-dealers
may agree with the selling stockholder to sell a specified number
of such
shares at a stipulated price per
share;
|
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may effect sales of shares of common stock offered hereby
at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the
time
of sale, or at privately negotiated prices. Any of these transactions may or
may
not involve brokers or dealers. Any such broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the selling
stockholders and/or the purchaser(s) of shares of common stock for whom those
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). The selling stockholders have advised us that they
have
not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, nor
is
there any underwriter or coordinating broker acting in connection with the
proposed sale of shares of common stock by the selling
stockholders.
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the shares of common stock owned by them and registered hereby
and, if any such selling stockholder defaults in the performance of its secured
obligations, the pledgees or secured parties may offer and sell the shares
of
common stock, from time to time, under this prospectus, or under an amendment
to
this prospectus or other applicable provision of the Securities Act amending
the
list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this
prospectus.
In
connection with the sale of our common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities, which require the delivery to such broker-dealer or
other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the selling stockholders from the sale of the common
stock
offered by them will be the purchase price of the common stock less discounts
or
commissions, if any. The selling stockholders reserve the right to accept and,
together with their agents from time to time, to reject, in whole or in part,
any proposed purchase of common stock to be made directly or through agents.
We
will not receive any of the proceeds from this offering.
The
selling stockholders may also resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
that they meet the criteria and conform to the requirements of that
rule.
The
selling stockholders and any broker-dealers that act in connection with the
sale
of securities might be deemed to be “underwriters” within the meaning of Section
2(11) of the Securities Act, and any commissions received by such broker-dealers
and any profit on the resale of the securities sold by them while acting as
principals might be deemed to be underwriting discounts or commissions under
the
Securities Act. In addition, each broker-dealer selling under this prospectus
for its own account or the account of an affiliate is an “underwriter” under
Section 2(11) of the Securities Act.
To
the
extent required, the shares of our common stock to be sold, the name of the
selling stockholders, the respective purchase prices and public offering prices,
the names of any agents, dealer or underwriter, any applicable commissions
or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
In
order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may not be
sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
We
have
advised the selling stockholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to
the
activities of the selling stockholders and their affiliates. In addition, we
will make copies of this prospectus (as it may be supplemented or amended from
time to time) available to the selling stockholders for the purpose of
satisfying the prospectus-delivery requirements of the Securities Act. The
selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We
are
unable to predict with certainty the effect which sales of the shares of common
stock offered by this prospectus might have upon our ability to raise additional
capital. Nevertheless, it is possible that the resale of shares offered hereby
could adversely affect the trading price of our common stock.
Shares
Eligible For Future Sale
Upon
completion of this offering and assuming the issuance of all of the shares
covered by this prospectus that are issuable upon the exercise of outstanding
warrants to purchase our common stock, there will be 7,723,618 shares of our
common stock issued and outstanding. The shares purchased in this offering
will
be freely tradable without registration or other restriction under the
Securities Act, except for any shares purchased by an “affiliate” of our Company
(as defined under the Securities Act).
Our
currently outstanding shares issued in connection with the Merger are deemed
“restricted securities” within the meaning of Rule 144 under the Securities Act.
Restricted securities may not be sold unless they are registered under the
Securities Act or are sold pursuant to an applicable exemption from
registration, including an exemption under Rule 144. Assuming that all of the
other requirements of Rule 144 are then satisfied, then the 6,967,941 restricted
shares of our common stock that were issued in connection with the Merger will
first be eligible for resale without registration on September,
2006.
In
general, under Rule 144, any person (or persons whose shares are aggregated)
including persons deemed to be affiliates, whose restricted securities have
been
fully paid for and held for at least one year from the later of the date of
issuance by us or acquisition from an affiliate, may sell such securities in
broker’s transactions or directly to market makers, provided that the number of
shares sold in any three-month period may not exceed the greater of one percent
of the then-outstanding shares of our common stock or the average weekly trading
volume of our shares of common stock in the over-the-counter market during
the
four calendar weeks preceding the sale. Sales under Rule 144 are also subject
to
certain notice requirements and the availability of current public information
about our Company. After two years have elapsed from the later of the issuance
of restricted securities by us or their acquisition from an affiliate, persons
who are not affiliates under the rule may sell such securities without any
limitation.
DESCRIPTION
OF CAPITAL STOCK
Our
authorized capital stock consists of 280,000,000 shares of common
stock, $.001 value per share. All shares of common stock have equal
voting
rights and are entitled to one vote per share on all matters to be voted upon
by
our stockholders. The shares of common stock have no preemptive, subscription,
conversion or redemption rights and may be issued only as fully-paid and
non-assessable shares. Cumulative voting in the election of directors is not
permitted. In the event of our liquidation, each holder of our common stock
is
entitled to receive a proportionate share of our assets available for
distribution to stockholders after the payment of liabilities. All shares of
our
common stock issued and outstanding are fully-paid and
non-assessable.
Holders
of our common stock are entitled to share pro rata in dividends and
distributions with respect to the common stock when, as and if declared by
our
board of directors out of funds legally available therefor. We have not paid
any
dividends on our common stock and intend to retain earnings, if any, to finance
the development and expansion of our business. Future dividend policy is subject
to the discretion of our board of directors and will depend upon a number of
factors, including future earnings, capital requirements and our financial
condition.
The
transfer agent and registrar for our common stock is American Stock Transfer
and
Trust, 6201 15th Avenue, Brooklyn, New York, 11219. As of the date of this
prospectus, we had 7,241,211 shares of common stock outstanding held by
approximately 306 holders of record. Our common stock is eligible for trading
on
the over-the-counter bulletin board under the symbol “ZIOP.OB.”
DISCLOSURE
OF COMMISSION POSITION ON
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Pursuant
to our certificate of incorporation and bylaws, we may indemnify an officer
or
director who is made a party to any proceeding, because of his position as
such,
to the fullest extent authorized by Delaware General Corporation Law, as the
same exists or may hereafter be amended. In certain cases, we may advance
expenses incurred in defending any such proceeding.
To
the
extent that indemnification for liabilities arising under the Securities Act
may
be permitted to directors, officers or persons controlling our company pursuant
to the foregoing provisions, we have been informed that, in the opinion of
the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. If
a
claim for indemnification against such liabilities (other than the payment
by us
of expenses incurred or paid by a director, officer or controlling person of
our
company in the successful defense of any action, suit or proceeding) is asserted
by any of our directors, officers or controlling persons in connection with
the
securities being registered, we will, unless in the opinion of our counsel
the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed
by
the final adjudication of that issue.
ABOUT
THIS PROSPECTUS
This
prospectus is not an offer or solicitation in respect to these securities in
any
jurisdiction in which such offer or solicitation would be unlawful. This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission. The registration statement that contains this
prospectus (including the exhibits to the registration statement) contains
additional information about our company and the securities offered under this
prospectus. That registration statement can be read at the SEC web site or
at
the SEC’s offices mentioned under the heading “Where You Can Find More
Information.” We have not authorized anyone else to provide you with different
information or additional information. You should not assume that the
information in this prospectus, or any supplement or amendment to this
prospectus, is accurate at any date other than the date indicated on the cover
page of such documents.
WHERE
YOU CAN FIND MORE INFORMATION
Federal
securities law requires us to file information with the SEC concerning our
business and operations. Accordingly, we file annual, quarterly, and special
reports, proxy statements and other information with the SEC. You can inspect
and copy this information at the Public Reference Facility maintained by the
SEC
at Judiciary Plaza, 450 5th Street, N.W., Room 1024, Washington, D.C. 20549.
You
can receive additional information about the operation of the SEC’s Public
Reference Facilities by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding companies that, like
us,
file information electronically with the SEC.
VALIDITY
OF COMMON STOCK
Legal
matters in connection with the validity of the shares offered by this prospectus
will be passed upon by Maslon Edelman Borman & Brand, LLP, Minneapolis,
Minnesota.
EXPERTS
The
consolidated financial statements of ZIOPHARM Oncology, Inc. as of December
31,
2004 and 2003, and for the years then ended and for the period from August
6,
2001 (date of inception) to December 31, 2004, included in this prospectus,
have
been included herein in reliance on the report, dated March 18, 2005, of
Cordovano and Honeck, P.C., independent registered public accounting firm,
given
on the authority of that firm as experts in accounting and
auditing.
The
financial statements of ZIOPHARM, Inc. for the years ended December 31, 2004
and
the period from inception (September 9, 2003) through December 31, 2003 included
in this prospectus have been audited by Vitale, Caturano & Company, Ltd.,
independent registered public accounting firm, as indicated in its report with
respect to such Statements are included herein in reliance upon the authority
of
said firm as experts in auditing and accounting.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
||
|
Audited
Financial Statements of ZIOPHARM, Inc.:
|
||
|
Report
of Vitale, Caturano & Company
|
F-1
|
|
|
Balance
Sheets as at December 31, 2004 and December 31, 2003
|
F-2
|
|
|
Statements
of Operations for the Year Ended December 31, 2004 and For
the Periods
from Inception (September 9, 2003) through December 31, 2003
and 2004
|
F-3
|
|
|
Statements
of Stockholders’ Equity (Deficit) for the Year Ended December 31, 2004 and
For the Periods from Inception (September 9, 2003) through
December 31,
2003 and 2004
|
F-4
|
|
|
Statements
of Cash Flows for the Year Ended December 31, 2004 and For
the Periods
from Inception (September 9, 2003) through December 31, 2003
and 2004
|
F-5
|
|
|
Notes
to Consolidated Financial Statements
|
F-7
|
|
|
Audited
Financial Statements of EasyWeb, Inc.:
|
||
|
Report
of Cordovano and Honeck, P.C.
|
F-21
|
|
|
Balance
Sheets as of December 31, 2004
|
F-22
|
|
|
Statements
of Operations for the Year Ended December 31, 2004, and December
31,
2003
|
F-23
|
|
|
Statement
of Stockholders’ Deficit for the Year Ended December 31,
2004
|
F-24
|
|
|
Statement
of Cash Flows for the Years Ended December 31, 2004, and December
31,
2003
|
F-25
|
|
|
Notes
to Financial Statements
|
F-26
|
|
|
Unaudited
Interim Financial Statements of EasyWeb, Inc.:
|
||
|
Condensed
Balance Sheets as of June 30, 2005
|
F-34
|
|
|
Condensed
Statements of Operations for the Three and the Six Months Ended
June 30,
2005
|
F-35
|
|
|
Condensed
Statement of Stockholders’ Deficit for the Six Months Ended June 30,
2005
|
F-36
|
|
|
Condensed
Statement of Cash Flows for the Six Months Ended June 30,
2005
|
F-37
|
|
|
Notes
to Condensed Financial Statements
|
F-38
|
|
|
Unaudited
Interim Financial Statements of ZIOPHARM, Inc.:
|
||
|
Balance
Sheets as of June 30, 2005
|
F-43
|
|
|
Statements
of Operations for the Three and the Six Months Ended June 30,
2005 and
2004
|
F-44
|
|
|
Statement
of Cash Flows for the Six Months Ended June 30, 2005 and
2004
|
F-45
|
|
|
Statement
of Changes in Convertible Preferred Stock and Stockholders’ Equity
(Deficit) for the Six Months Ended June 30, 2005
|
F-46
|
|
|
Notes
to Condensed Financial Statements
|
F-47
|
|
|
Unaudited
Pro Forma Combined Financial Statements of ZIOPHARM
Oncology,
Inc.:
|
||
|
Pro
Forma Combined Balance Sheet as at June 30, 2005
|
F-55
|
|
|
Pro
Forma Combined Statement of Operations Six Months ended June
30,
2005
|
F-56
|
|
|
Notes
to Unaudited Pro Forma Combined Financial Statements
|
F-57
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of
ZIOPHARM,
Inc.
Charlestown,
Massachusetts
We
have
audited the accompanying balance sheets of ZIOPHARM, Inc. (a development
stage
enterprise) as of December 31, 2004 and 2003, and the related statements
of
operations, changes in stockholders’ equity (deficit), and cash flows for the
year ended December 31, 2004 and the periods from inception (September 9,
2003)
through December 31, 2003 and 2004. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but
not
for expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the
accounting principles used and significant estimates made by management,
as well
as evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of ZIOPHARM, Inc. as of December
31,
2004, and the results of its operations and its cash flows for the year ended
December 31, 2004 and for the periods from inception (September 9, 2003)
through
December 31, 2003 and 2004, in conformity with accounting principles generally
accepted in the United States of America.
Boston,
Massachusetts
August
5,
2005
(except
for Note 10, as to which the date is
September 13, 2005)
|
ZIOPHARM,
Inc.
|
||
|
(A
Development Stage Enterprise)
|
||
|
Balance
Sheets
|
||
|
December
31, 2004 and 2003
|
||
|
|
|
|
|
2004
|
2003
|
||||||
|
ASSETS
|
|||||||
|
Current
assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
1,026,656
|
$
|
402,363
|
|||
|
Prepaid
expenses and other current assets
|
117,571
|
—
|
|||||
|
Total
current assets
|
1,144,227
|
402,363
|
|||||
|
Property
and equipment, net
|
240,733
|
—
|
|||||
|
Deposits
|
60,046
|
—
|
|||||
|
$
|
1,445,006
|
$
|
402,363
|
||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
709,947
|
$
|
62,499
|
|||
|
Accrued
expenses
|
879,376
|
—
|
|||||
|
Total
current liabilities
|
1,589,323
|
62,499
|
|||||
|
Commitments
and contingencies
|
|||||||
|
Stockholders'
equity (deficit):
|
|||||||
|
Series
A convertible preferred stock,
|
|||||||
|
$.001
par value; 20,000,000 shares authorized; no
|
|||||||
|
shares
issued and outstanding at December 31, 2004
|
|||||||
|
and
December 31, 2003, respectively
|
—
|
—
|
|||||
|
Common
stock, $.001 par value; 30,000,000
shares
authorized;
|
|||||||
|
5,512,500
and 500,000 shares issued and outstanding
|
|||||||
|
at
December 31, 2004 and December 31, 2003, respectively
|
5,513
|
500
|
|||||
|
Additional
paid-in capital
|
5,697,603
|
499,500
|
|||||
|
Deficit
accumulated during the development stage
|
(5,847,433
|
)
|
(160,136
|
)
|
|||
|
Total
stockholders' equity (deficit)
|
(144,317
|
)
|
339,864
|
||||
|
$
|
1,445,006 |
$
|
402,363 | ||||
The
accompanying notes are an integral part of these financial
statements.
|
ZIOPHARM,
Inc.
|
|||
|
(A
Development Stage Enterprise)
|
|||
|
Statements
of Operations
|
|||
|
Year
Ended December 31, 2004 and
|
|||
|
For
the Periods from Inception (September 9, 2003) through December
31, 2003
and 2004
|
|||
|
For
the Period
|
For
the Period
|
|||||||||
|
from
Inception
|
from
Inception
|
|||||||||
|
(September
9, 2003)
|
(September
9, 2003)
|
|||||||||
|
Year
Ended
|
through
|
through
|
||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2004
|
2003
|
2004
|
||||||||
|
Research
contract revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
Operating
expenses:
|
||||||||||
|
Research
and development, including
|
||||||||||
|
costs
of research contracts
|
2,126,607
|
—
|
2,126,607
|
|||||||
|
General
and administrative
|
3,581,959
|
160,634
|
3,742,593
|
|||||||
|
Total
operating expenses
|
5,708,566
|
160,634
|
5,869,200
|
|||||||
|
Loss
from operations
|
(5,708,566
|
)
|
(160,634
|
)
|
(5,869,200
|
)
|
||||
|
Interest
income
|
21,269
|
498
|
21,767
|
|||||||
|
Net
loss
|
$
|
(5,687,297
|
)
|
$
|
(160,136
|
)
|
$
|
(5,847,433
|
)
|
|
|
Basic
and diluted net loss per share
|
$
|
(1.19
|
)
|
$
|
(1.02
|
)
|
||||
|
Weighted
average common shares outstanding
|
||||||||||
|
used
to compute basic and diluted net loss per share
|
4,794,692
|
156,336
|
||||||||
The
accompanying notes are an integral part of these financial
statements.
|
ZIOPHARM,
Inc.
|
|||||||
|
(A
Development Stage Enterprise)
|
|||||||
|
Statements
of Changes in Stockholders' Equity (Deficit)
|
|||||||
|
Year
Ended December 31, 2004 and
|
|||||||
|
For
the Periods from Inception (September 9, 2003) through December
31, 2003
and 2004
|
|||||||
|
|
|
Deficit
|
||||||||||||||||||||||
|
Series
A
|
Accumulated
|
Total
|
||||||||||||||||||||
|
Convertible
|
Additional
|
during
the
|
Stockholders'
|
|||||||||||||||||||
|
Preferred
Stock
|
Common
Stock
|
Paid-in
|
Development
|
Equity
|
||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stage
|
(Deficit)
|
||||||||||||||||
|
Stockholders'
contribution, September 9, 2003
|
—
|
$
|
—
|
500,000
|
$
|
500
|
$
|
499,500
|
$
|
—
|
$
|
500,000
|
||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(160,136
|
)
|
(160,136
|
)
|
|||||||||||||
|
Balance
at December 31, 2003
|
—
|
—
|
500,000
|
500
|
499,500
|
(160,136
|
)
|
339,864
|
||||||||||||||
|
Issuance
of common stock
|
—
|
—
|
4,500,000
|
4,500
|
4,495,500
|
—
|
4,500,000
|
|||||||||||||||
|
Issuance
of common stock for services
|
—
|
—
|
512,500
|
513
|
438,326
|
—
|
438,839
|
|||||||||||||||
|
Fair
value of options/warrants issued for nonemployee services
|
—
|
—
|
—
|
—
|
264,277
|
—
|
264,277
|
|||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(5,687,297
|
)
|
(5,687,297
|
)
|
|||||||||||||
|
Balance
at December 31, 2004
|
—
|
$
|
—
|
5,512,500
|
$
|
5,513
|
$
|
5,697,603
|
$
|
(5,847,433
|
)
|
$
|
(144,317
|
)
|
||||||||
|
ZIOPHARM,
Inc.
|
|||
|
(A
Development Stage Enterprise)
|
|||
|
Statements
of Cash Flows
|
|||
|
Year
Ended December 31, 2004 and
|
|||
|
For
the Periods from Inception (September 9, 2003) through
December 31, 2003
and 2004
|
|||
|
|
|
For
the Period
|
For
the Period
|
|||||||||
|
from
Inception
|
from
Inception
|
|||||||||
|
(September
9, 2003)
|
(September
9, 2003)
|
|||||||||
|
Year
Ended
|
through
|
through
|
||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2004
|
2003
|
2004
|
||||||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
loss
|
$
|
(5,687,297
|
)
|
$
|
(160,136
|
)
|
$
|
(5,847,433
|
)
|
|
|
Adjustments
to reconcile net loss to net cash
|
||||||||||
|
used
in operating activities:
|
||||||||||
|
Depreciation
and amortization
|
33,953
|
—
|
33,953
|
|||||||
|
Stock-based
compensation
|
703,116
|
—
|
703,116
|
|||||||
|
Change
in operating assets and liabilities:
|
||||||||||
|
(Increase)
in:
|
||||||||||
|
Prepaid
expenses and other current assets
|
(117,571
|
)
|
—
|
(117,571
|
)
|
|||||
|
Increase
(decrease) in:
|
||||||||||
|
Accounts
payable
|
647,448
|
62,499
|
709,947
|
|||||||
|
Accrued
expenses
|
879,376
|
—
|
879,376
|
|||||||
|
Deposits
|
(60,046
|
)
|
—
|
(60,046
|
)
|
|||||
|
Net
cash used in operating activates
|
(3,601,021
|
)
|
(97,637
|
)
|
(3,698,658
|
)
|
||||
|
Cash
flows from investing activities:
|
||||||||||
|
Purchases
of property and equipment
|
(274,686
|
)
|
—
|
(274,686
|
)
|
|||||
|
Net
cash used in investing activities
|
(274,686
|
)
|
—
|
(274,686
|
)
|
|||||
|
Cash
flows from financing activities:
|
||||||||||
|
Stockholders'
capital contribution
|
—
|
500,000
|
500,000
|
|||||||
|
Proceeds
from issuance of common stock
|
4,500,000
|
—
|
4,500,000
|
|||||||
|
Net
cash provided by financing activities
|
4,500,000
|
500,000
|
5,000,000
|
|||||||
|
Net
increase in cash and cash equivalents
|
624,293
|
402,363
|
1,026,656
|
|||||||
|
Cash
and cash equivalents, beginning of period
|
402,363
|
—
|
—
|
|||||||
|
Cash
and cash equivalents, end of period
|
$
|
1,026,656
|
$
|
402,363
|
$
|
1,026,656
|
||||
The
accompanying notes are an integral part of
these financial statements.
|
ZIOPHARM,
Inc.
|
|||
|
(A
Development Stage Enterprise)
|
|||
|
Statements
of Cash Flows…continued
|
|||
|
Year
Ended December 31, 2004 and
|
|||
|
For
the Periods from Inception (September 9, 2003) through
December 31, 2003
and 2004
|
|||
|
|
|
For
the Period
|
For
the Period
|
|||||||||
|
from
Inception
|
from
Inception
|
|||||||||
|
(September
9, 2003)
|
(September
9, 2003)
|
|||||||||
|
Year
Ended
|
through
|
through
|
||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2004
|
2003
|
2004
|
||||||||
|
Supplementary
disclosure of cash flow information:
|
||||||||||
|
Cash
paid for interest
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
Cash
paid for income taxes
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
The
accompanying notes are an integral part of
these financial statements.
1.
ORGANIZATION
ZIOPHARM,
Inc. (the “Company”) is a development stage biopharmaceutical company that
seeks
to
acquire,
develop
and
commercialize,
on
its
own or with other commercial partners, products for the treatment of
important
unmet medical needs in
cancer.
The
Company has operated at a loss since its inception in 2003 and has no revenues.
The Company anticipates that losses may continue for the foreseeable future.
At
December 31, 2004, the Company’s accumulated deficit was approximately $5.8
million. The Company’s ability to continue operations after its current cash
resources are exhausted depends on its ability to obtain additional financing
and achieve profitable operations, as to which no assurances can be given.
Cash
requirements may vary materially from those now planned because of changes
in
the focus and direction of our research and development programs, competitive
and technical advances, patent developments or other developments. Additional
financing will be required to continue operations after we exhaust our current
cash resources and to continue our long-term plans for clinical trials and
new
product development.
On
June
6, 2005, the Company completed an offering of Series A Convertible Preferred
Stock (Series A Stock) offering. The Company issued 8,379,564 shares at $2.16
per share for gross proceeds of approximately $18.1 million.
In
connection with the Series A Preferred Stock Offering, the Company compensated
Paramount, an affiliate for its services in connection with the Offering
through the payment of (a) cash commissions equal to 7% of the gross proceeds
from the sale of the shares of Series A Preferred Stock,
and
(b)
placement warrants to acquire 837,956 shares of Series A Preferred Stock
(the
Series A Stock Warrants), exercisable for a period of 7 years from the Closing
Date at a per Share exercise price equal to 110% of the price per Share sold
in
the Offering. These commissions are also payable on additional sales by the
Company of securities (other than in a public offering) to investors introduced
to the Company by Paramount during the twelve (12) month period subsequent
to
the final closing of the Offering. The Company also paid Paramount an expense
allowance of $50,000 to reimburse Paramount for its out-of-pocket expenses
(the
“Expense Allowance”). Also, for a period of 36 months from the final Closing,
Paramount has the right of first refusal to act as the placement agent for
any
private sale of the Company’s securities. Lastly, the Company has agreed to
indemnify Paramount against certain liabilities, including liabilities under
the
Securities Act.
The
net
proceeds were $16.8 million have been allocated between the Series A Stock
and
the Series A Stock warrants, based on their relative fair value. The Company
has
valued the warrants using the Black-Scholes model recording a cost of
$1,682,683.
The
net
proceeds from the Offering will be used for research and development, licensing
fees and expenses, and for working capital and general corporate
purposes.
None
of the share or per share data included herein
have been adjusted to effect for the conversions effected as part of the
merger
(see Note 10).
F-7
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
Use
of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash
and Cash Equivalents
Cash
equivalents
consist
of short-term, highly liquid investments with a maturity of three months
or less
when purchased
.
Concentrations
of Credit Risk
Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of cash and cash equivalents. The Company maintains
cash accounts in commercial banks, which may, at times, exceed federally
insured
limits. The Company has not experienced any losses in such accounts. The
Company
believes it is not exposed to any significant credit risk on cash and cash
equivalents.
Fair
Value of Financial Instruments
The
carrying amounts of cash equivalents, accounts payable and accrued expenses
approximate their fair value because of their short-term nature. Short-term
investments are carried at aggregate fair value. At December 31, 2004 and
2003,
there were no short-term investments.
Income
Taxes
The
Company recognizes deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the Company’s financial
statements or tax returns. Deferred tax assets and liabilities are determined
based upon the difference between the financial reporting basis and the tax
basis of existing assets and liabilities using enacted tax rates expected
to be
in effect in the year(s) in which the differences are expected to reverse.
A
valuation allowance is provided against deferred tax assets if it is more
likely
than not that such assets will not be realized.
Property
and Equipment
Property
and equipment are stated at cost. Depreciation and amortization are provided
on
the straight-line method over the estimated useful lives of the related assets,
which is three years.
F-8
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
…continued
|
Research
and Development Costs
Costs
related to research and development are charged to expense when incurred.
Such
costs include proprietary research and development activities and expenses
associated with research and development contracts, whether performed by
the
Company or contracted with independent third parties.
Accounting
for Stock-Based Compensation
The
Company accounts for stock-based awards to employees using the intrinsic
value
method as prescribed by Accounting Principles Board (APB) Opinion No. 25,
Accounting
for Stock Issued to Employees
,
and
related interpretations. The Company follows the provisions of SFAS
No. 123,
Accounting
for Stock-Based Compensation
,
for
disclosure purposes (Note 9). All stock-based awards to nonemployees
are
accounted for at their fair value in accordance with SFAS No. 123
and
Emerging Issues Task Force (EITF) 96-18,
Accounting
for Equity Instruments that are Issued to Other than Employees for Acquiring,
or
in Conjunction with Selling, Goods or Services
.
The
Company has adopted the disclosure provisions of SFAS No. 148,
Accounting
for Stock-Based Compensation
–
Transition
and
Disclosure – an amendment of SFAS No. 123
,
for all
stock-based awards as of December 31, 2004.
The
following illustrates the effect on net loss had the Company applied the
fair
value recognition provisions of SFAS No. 123:
|
2004
|
2003
|
||||||
|
Net
loss:
|
|||||||
|
As
reported
|
$
|
(5,687,297
|
)
|
$
|
(160,136
|
)
|
|
|
Stock-based
compensation expense included in reported net loss
|
703,116
|
—
|
|||||
|
Stock-based
compensation expense under the fair value-based method
|
(813,095
|
)
|
—
|
||||
|
Pro
forma net loss
|
$
|
(5,797,276
|
)
|
$
|
(160,136
|
)
|
|
|
Basic
and diluted net loss per share:
|
|||||||
|
As
reported
|
$
|
(1.19
|
)
|
$
|
(1.02
|
)
|
|
|
Pro
forma
|
$
|
(1.21
|
)
|
$
|
(1.02
|
)
|
|
F-9
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
…continued
|
Accounting
for Stock-Based Compensation...continued
The
fair
value of each stock option is estimated at the date of grant using the
Black-Scholes option pricing model. The estimated weighted average fair value
of
stock options granted to employees in 2004 was approximately $0.66 per share.
The following table summarizes the assumptions used in the Black-Scholes
option
pricing model:
|
2004
|
2003
|
||
|
Expected
life
|
5
years
|
—
|
|
|
Expected
volatility
|
134%
|
—
|
|
|
Dividend
yield
|
3.6%
|
—
|
|
|
Weighted
average risk-free interest rate
|
0
%
|
—
|
Recently
Issued Pronouncements
In
December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123R, Share-Based Payment
("SFAS
No. 123R"). This Statement is a revision of SFAS No. 123, Accounting for
Stock-Based Compensation, and supersedes Accounting Principles Board Opinion
No.
25, Accounting for Stock Issued to Employees, and its related implementation
guidance. SFAS No. 123R focuses primarily on accounting for transactions
in
which an entity obtains employee services in share-based payment transactions.
The Statement requires entities to recognize stock compensation expense for
awards of equity instruments to employees based on the grant-date fair value
of
those awards (with limited exceptions). SFAS No. 123R is effective for the
first
fiscal year beginning after December 15, 2005. Based on current options
outstanding, the Company anticipates the adoption of this statement to result
in
approximately $313,009 of additional compensation costs to be recognized
in the
year of adoption.
|
3.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment at December 31, 2004 and 2003 consisted of the
following:
|
Estimated
|
||||||||||
|
Useful
Life
|
|
|||||||||
|
(Years)
|
2004
|
2003
|
||||||||
|
Computer
equipment
|
3
|
$
|
78,914
|
$
|
—
|
|||||
|
Office
equipment
|
3
|
|
179,193
|
—
|
||||||
|
Software
|
3
|
16,579
|
—
|
|||||||
|
274,686
|
—
|
|||||||||
|
Less
- accumulated depreciation and amortization
|
|
33,953
|
—
|
|||||||
|
$
|
240,733
|
$
|
—
|
|||||||
F-10
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
3.
|
PROPERTY
AND EQUIPMENT
...continued
|
Depreciation
and amortization expense was $33,953 and $0 for the year ended December 31,
2004
and for the period from inception (September 9, 2003) to December 31, 2003,
respectively.
|
4.
|
ACCRUED
EXPENSES
|
Accrued
expenses at December 31, 2004 and December 31, 2003, consisted of the
following:
|
2004
|
2003
|
||||||
|
Employee
compensation
|
$
|
506,391
|
$
|
—
|
|||
|
Professional
services
|
42,767
|
—
|
|||||
|
Research
and development consulting services
|
258,218
|
—
|
|||||
|
Founders
Fee
|
60,000
|
—
|
|||||
|
Other
|
12,000
|
—
|
|||||
|
$
|
879,376
|
$
|
—
|
||||
|
5.
|
RELATED
PARTY TRANSACTIONS
|
The
Company has engaged
Paramount
BioCapital, Inc.
(“
Paramount
”)
to
assist in placing shares of Series A Preferred Stock on a “best efforts” basis
(see Note 10). Lindsay A. Rosenwald, M.D. is Chairman and Chief Executive
Officer of Paramount.
Dr.
Rosenwald is also managing member of Horizon BioMedical Ventures, LLC
(“Horizon”). On December 30, 2004, Horizon authorized the distribution of
4,848,376 shares of Common Stock (such shares, the “Horizon Distributed
Shares”), in equal installments of 2,424,188 shares of Common Stock to Mibars,
LLC (“Mibars”) and to Dr. Rosenwald and his designees (the “Designated Shares”).
The disposition of the Designated Shares will be subject to certain restrictions
as agreed to among Dr. Rosenwald and Dr. Rosenwald’s designees. Among other
things, under certain circumstances set forth in pledge agreements between
Dr.
Rosenwald and his designees, Dr. Rosenwald has the right to re-acquire the
Designated Shares from his designees. As a result of those rights, Dr. Rosenwald
may be deemed to be an affiliate of the Company.
In
connection with the December 22, 2004 Option Agreement with Southern Research
Institute (“SRI”), the Company entered into a Finders Agreement, dated December
23, 2004, with Paramount pursuant to which the Company has agreed to compensate
Paramount
,
for
services in connection with the Company’s introduction to SRI through the
payment of (a) a cash fee of $60,000 and (b) warrants to purchase 125,000
shares
of the Company’s Common Stock at a price equal to $2.38 per share. The Company
has estimated the fair value of such warrants using the Black-Scholes model,
using an assumed risk-free rate of 3.93%, and expected life of 7 years,
volatility of 134% and dividend yield of 0%. In December 2004, the Company
expensed the $60,000 that was payable to Paramount and recognized compensation
expense in the amount of $251,037 for the issuance of the warrants.
F-11
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
5.
|
RELATED
PARTY TRANSACTIONS
...continued
|
In
connection with the Series A Preferred Stock Offering (see Note 10), the
Company
and
Paramount
entered
into an Introduction Agreement in January 2005 (the “Introduction Agreement”),
pursuant to which the Company has agreed to compensate Paramount for its
services in connection with the Offering through the payment of (a) cash
commissions equal to 7% of the gross proceeds from the sale of the
shares
of
Series A Preferred Stock,
and
(b)
placement warrants to acquire a number of shares of Series A Preferred Stock
equal to 10% of the number of shares of Series A Preferred Stock issued in
the
Offering, exercisable for a period of 7 years from the Closing Date at a
per
Share exercise price equal to 110% of the price per Share sold in the Offering.
These commissions are also payable on additional sales by the Company of
securities (other than in a public offering) to investors introduced to the
Company by
Paramount
during
the twelve (12) month period subsequent to the final closing of the Offering.
The Company also agreed to pay to
Paramount
a
non-accountable expense allowance of $50,000 to reimburse the
Paramount
for
its
out-of-pocket expenses (the “Expense Allowance”). Also, for a period of 36
months from the final Closing,
Paramount
has
the
right of first refusal to act as the placement agent for the private sale
of the
Company’s securities. Lastly, the Company has agreed to indemnify
Paramount
against
certain liabilities, including liabilities under the Securities Act.
Dr.
Michael Weiser, who is a member of the Board of Directors of the Company,
is
also a full-time
employee
of
Paramount
.
In
addition, David M. Tanen, who is a member of the Board of Directors of the
Company, was a full-time employee of
Paramount
from
July
1996 through August 2004. Mr. John Knox, our treasurer, is a full time Paramount
employee.
|
6.
|
COMMITMENTS
AND CONTINGENCIES
|
Lease
Commitment
The
Company leases office space in two locations under agreements expiring in
2009.
The leases includes payment increases over the term of the agreements. The
total
amount of the lease payments is being charged to expense using the straight-line
method over the term of the agreement.
Future
minimum lease payments under noncancelable operating and capital leases as
of
December 31, 2004, were as follows:
|
Operating
|
||||
|
Leases
|
||||
|
2005
|
$
|
93,318
|
||
|
2006
|
103,434
|
|||
|
2007
|
114,103
|
|||
|
2008
|
121,455
|
|||
|
2009
|
87,699
|
|||
|
$
|
520,009
|
|||
F-12
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
6.
|
COMMITMENTS
AND CONTINGENCIES
...continued
|
License
Agreement
Patent
and Technology License Agreement- University of Texas M. D. Anderson Cancer
Center and the Texas A&M University System.
On
August
24, 2004, the Company entered into a patent and technology license agreement
with The Board of Regents of the University of Texas System, acting on behalf
of
the University of Texas M. D. Anderson Cancer Center and the Texas A&M
University System (collectively, the “Licensors”). Under this agreement, the
Company was granted an exclusive, worldwide license to rights (including
rights
to US and foreign patent and patent applications and related improvements
and
know-how) for the manufacture and commercialization of two classes of organic
arsenicals (water - and lipid-based) for human and animal use. The class
of
water-based organic arsenicals includes ZIO-101.
In
October 2004, the Company received a notice of allowance for US Patent
Application No. 10/337969, entitled “S-dimethylarsino-thiosuccinic acid
S-dimethylarsino-2-thiobenzoic acid S-(simethylarsino) glutathione as treatments
for cancer.” The patent application claims both therapeutic uses and
pharmaceutical compositions containing a novel class of organic arsenicals,
including ZIO-101, for the treatment of cancer.
As
partial consideration for the license rights obtained, the Company made an
upfront payment of $125,000 and granted the Licensors 500,000 shares of our
Common Stock, as well as options to purchase up to an additional 100,250
shares
of our Common Stock for $0.001 per share, following the successful completion
of
certain clinical milestones (the “Anderson Options”). The Company expensed the
$125,000 upfront payment and recognized research and development compensation
expense of $426,339 in connection with the issuance of the Common Stock in
the
year ended December 31, 2004. The Anderson Options will vest and become
immediately exercisable with respect to 25,063 shares of our Common Stock
upon
the filing of an Investigational New Drug Application (“IND”) for ZIO-101, will
vest and become exercisable with respect to an additional 50,125 shares upon
the
completion of dosing of the last patient for both Phase I clinical trials,
and
will vest and become exercisable with respect to an additional 25,062 shares
upon the commencement of a pivotal clinical trial. In addition, the Licensors
are entitled to receive certain milestone payments (the “Anderson Milestones”),
including $100,000 to be paid upon the commencement of phase I clinical trial.
The Company may be required to make additional payments upon achievement
of
certain other milestones, in varying amounts which on a cumulative basis
may
total $4,850,000. In addition, the Licensors are entitled to receive royalty
payments on sales from a licensed product should such a product be approved
for
commercial sale and sales of a licensed product be effected in the United
States, Canada, the European Union or Japan. The Licensors also will be entitled
to receive a portion of any fees that the Company may receive from a possible
sublicensee. Finally, the Company agreed to remit to the Licensors $100,000
for
at least each of the next two years to be used by the Licensors to conduct
scientific research funding. The Company will have the exclusive right to
all
intellectual property rights resulting from such research pursuant to the
terms
of the license agreement.
F-13
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
6.
|
COMMITMENTS
AND CONTINGENCIES
...continued
|
License
Agreement...continued
The
license agreement also contains other provisions customary and common in
similar
agreements within the industry, such as the right to sublicense our rights
under
the agreement. However, if we sublicense our rights prior to the commencement
of
a pivotal study (
i.e.
,
a human
clinical trial intended to provide the substantial evidence of efficacy
necessary to support the filing of an approvable NDA), the Licensors will
be
entitled to receive a share of the payments we receive in exchange for the
sublicense (subject to certain exceptions).
License
Agreement with DEKK-TEC, Inc.
On
October 15, 2004, the Company entered into a license agreement with DEKK-TEC,
Inc., pursuant to which it was granted an exclusive, worldwide license to
the
second lead product candidate, ZIO-201. As part of the signing of license
agreement with DEKK-TEC, the Company expensed a $50,000 up-front payment
in the
year ended December 31, 2004.
In
consideration for our license rights, DEKK-TEC is entitled to receive milestone
payments upon the occurrence of certain events. In consideration for our
license
rights, DEKK-TEC is entitled to receive milestone payments upon the occurrence
of certain events. The Company may be required to make payments upon
achievements of certain milestones, in varying amounts which on a cumulative
basis may total $3,900,000. Of the aggregate milestone payments, most of
the
total amount will be creditable against future royalty payments, as referenced
below. The Company also issued DEKK-TEC an option to purchase 55,125 shares
of
our Common Stock for $0.01 per share, which option vested with respect to
13,781
shares upon the execution of the license agreement.
The
Company has estimated the fair value of such options using the Black-Scholes
model, using an assumed risk-free rate of 3.35%, and expected life of 5 years,
volatility of 134% and dividend yield of 0%.
The
Company recorded a charge of $12,190 to research and development expense
for the
vested options. The option will vest with respect to the remaining shares
upon
certain milestone events, culminating with final FDA approval of the first
NDA
submitted by us (or by our sublicensee) for ZIO-201. Finally, DEKK-TEC also
is
entitled to receive royalty payments on the sales of ZIO-201 should it be
approved for commercial sale.
The
license agreement also contains other provisions customary and common in
similar
agreements within the industry.
Option
Agreement with Southern Research Institute (“SRI”)
On
December 22, 2004, the Company entered into an Option Agreement with SRI
(the
“Option Agreement”), pursuant to which the Company was granted an exclusive
option to obtain an exclusive license to SRI’s interest in certain intellectual
property, including exclusive rights related to certain isophosphoramide
mustard
analogs (the “SRI Option”).
F-14
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
6.
|
COMMITMENTS
AND CONTINGENCIES
...continued
|
Option
Agreement with Southern Research Institute (“SRI”)...continued
Also
on
December 22, 2004, the Company entered into a Research Agreement with SRI
pursuant to which the Company agreed to spend a sum not to exceed $200,000
between the execution of the agreement and December 21, 2006, including a
$25,000 payment that we made simultaneously with the execution of the agreement,
to fund research and development work by
SRI
in
the field of isophosphoramide mustard analogs (the “SRI Research Program”).
Under the terms of the Option Agreement, the Company’s exclusive right to
exercise the SRI Option will expire sixty days after the termination or
expiration of the SRI Research Program and the delivery of the reports required
thereunder.
Guarantees
and indemnification Obligations
Certain
officers and employees have agreements with the company that call for a
guarantee bonus that is payable 30 days after employee’s anniversary date.
Certain officer and employees also have specific severance agreements.
|
7.
|
INCOME
TAXES
|
The
components of the net deferred tax asset (liability) are as
follows:
|
December
31,
|
December
31,
|
||||||
|
2004
|
2003
|
||||||
|
Net
operating loss carryforwards
|
$
|
494,881
|
$
|
26,118
|
|||
|
Start-up
and organizational costs
|
1,502,217
|
—
|
|||||
|
Research
and development credit carryforwards
|
81,670
|
—
|
|||||
|
Accrued
bonus
|
200,343
|
—
|
|||||
|
Depreciation
|
(4,102
|
)
|
—
|
||||
|
Other
|
8,816
|
—
|
|||||
|
Net
deferred tax assets
|
2,283,825
|
26,118
|
|||||
|
Deferred
tax asset valuation allowance
|
(2,283,825
|
)
|
(26,118
|
)
|
|||
|
|
$ |
—
|
$
|
—
|
|||
|
8.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’
EQUITY
|
We
have
authorized capital of 50,000,000 shares, of which 30,000,000 shares have
been
designated as common stock, par value $.001 per share (the “Common Stock”), and
20,000,000 shares have been designated as preferred stock, par value $.001
per
share.
F-15
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
8.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
...continued
|
Convertible
Preferred Stock
Voting
Rights
The
holders of Series A Preferred Stock will be entitled to vote together with
all
other holders of the Company’s voting stock on an “as-converted” basis on all
matters submitted to a vote of holders generally. The holders of Series A
Preferred Stock, voting as a separate class, will also have the right to
approve
by a 66% supermajority certain actions proposed to be taken by the
Company.
Dividend
Rights
The
holders of Series A Preferred Stock will be entitled to receive dividends
on an
equal basis with the holders of Common Stock when, as and if declared by
the
Board of Directors.
Liquidation
Preferences
The
Series A Preferred Stock shall rank senior to the Common Stock and any future
class of junior securities, and will be entitled to a liquidation
preference
equal
to
the Stated Value, subject to adjustment (as defined in the Certificate of
Designations)
,
upon any
liquidation, dissolution or winding up of the Company
or upon
a voluntary or involuntary bankruptcy of the Company.
Conversion
Rights
Each
share of Series A Preferred Stock will be convertible into Common Stock at
any
time at the option of the holder thereof (the Series A Preferred Stock and
the
Common Stock issuable upon conversion of the Series A Preferred Stock are
sometimes herein collectively referred to as the “Securities”). All of the
outstanding shares of Series A Preferred Stock will automatically convert
into
Common Stock upon the first date (the “Trading Date”) on which the Common Stock
(or securities received in exchange for Common Stock) trades on a national
securities exchange or on NASDAQ, including the Over the Counter Bulletin
Board
(a “Trading Event”). The rate at which shares of Series A Preferred Stock will
convert into Common Stock will initially be one-for-one, subject to adjustment
in connection with certain anti-dilution protections and other
adjustments.
F-16
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
8.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
...continued
|
Convertible
Preferred Stock...continued
Conversion
Rights...continued
In
the
event of a reclassification, capital reorganization or other similar change
in
the outstanding shares of Common
Stock
,
a
consolidation or merger of the Company with or into another entity (other
than a
consolidation or merger in which the Corporation is the continuing entity
and
which does not result in a reclassification, capital reorganization or other
change of outstanding shares of Common Stock other than the number thereof),
or
a sale of the property of the Company as, or substantially as, an entirety
(other than a sale/leaseback, mortgage or other financing transaction), the
Series A Preferred Stock will become convertible into the kind and
number
of shares of stock or other securities or property (including cash) that
the
holders of Series A Preferred Stock would have received if the Series A
Preferred Stock had been converted into Common Stock immediately prior to
such
reclassification, capital reorganization or other change, consolidation,
merger
or sale.
Common
Stock
We
currently have issued and outstanding 5,512,500 shares of Common Stock and
no
shares of preferred stock.
In
September 2003, the Company issued 2,000,000 (before the split discussed
below)
shares of Common Stock at $0.25 per share for gross proceeds of
$500,000.
In
January 2004, the Company issued 18,000,000 (before the split discussed below)
shares of Common Stock at $0.25 per share for gross proceeds of
$4,500,000.
In
February 2004, the Company amended its articles of incorporation to provide
for
the combination of the Company’s common stock, par value $0.001 per share on a
1-for-4 basis (all other share amounts presented reflect the reverse
split).
F-17
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
9.
|
STOCK
OPTION PLAN
|
We
have
adopted the 2003 Stock Option Plan (the “Plan”), under which we have reserved
for the issuance of 2,500,000 shares of our Common Stock. The Plan was approved
by our stockholders on December 21, 2004. The Company has issued under its
2003
Stock Option Plan 1,170,826 shares that are issuable upon exercise of
outstanding options to purchase Common Stock. To date, we have issued to
our
employees options to purchase up to 990,326 shares of the Company’s Common
Stock. In addition, we have issued to our directors options to purchase up
to
180,000 shares of the Company’s Common Stock, as well as options to a consultant
in connection with services rendered to purchase up to 500 shares of the
Company’s Common Stock. The Company has estimated the fair value of such options
using the Black-Scholes model, using an assumed risk-free rate of 4.23%,
and
expected life of 10 years, volatility of 134% and dividend yield of 0%. The
options issued to the consultant were valued at $1,050, and recorded as a
charge
to compensation expense. We have also reserved an aggregate of 155,375
additional shares for issuance under options granted outside of the 2003
Stock
Option Plan and warrants to purchase 125,000 shares of the Company’s Common
Stock to the Paramount as compensation for services rendered in connection
with
our entering into an option agreement with Southern Research Institute. In
connection with the warrants issued, the Company recorded a charge of $251,037
to general and administrative expense. The Company has valued the options
using
the Black-Scholes model as of the issue date of the warrants. There are no
other
securities of the Company currently issued or outstanding.
Transactions
under the Plan for the year December 31, 2004 were as follows:
|
|
Weighted-
|
||||||
|
|
Average
|
||||||
|
Number
of
|
Exercise
|
||||||
|
Shares
|
Price
|
||||||
|
Outstanding,
January 1, 2004
|
—
|
$
|
—
|
||||
|
Granted
|
1,170,826
|
0.63
|
|||||
|
Exercised
|
—
|
—
|
|||||
|
Canceled
|
—
|
—
|
|||||
|
Outstanding,
December 31, 2004
|
1,170,826
|
$
|
0.63
|
||||
|
Options
available for future grants
|
1,329,174
|
||||||
F-18
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
9.
STOCK
OPTION PLAN
…continued
The
following table summarizes information about stock options outstanding at
December 31, 2004:
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
|
Exercise
Price
|
Number
Outstanding
|
Weighted-
Average
Remaining
Contractual
Life
(Years)
|
Weighted-
Average
Exercise
Price
|
Number
Exercisable
|
Weighted-
Average
Exercise
Price
|
|||||||||||
|
$0.04
|
536,263
|
9.03
|
$
|
0.04
|
—
|
$
|
—
|
|||||||||
|
$0.22
|
100,250
|
9.08
|
$
|
0.22
|
—
|
$
|
—
|
|||||||||
|
$0.85
|
353,813
|
9.51
|
$
|
0.85
|
—
|
$
|
—
|
|||||||||
|
$2.16
|
180,500
|
9.98
|
$
|
2.16
|
500
|
$
|
2.16
|
|||||||||
|
1,170,826
|
9.33
|
$
|
0.63
|
500
|
$
|
2.16
|
||||||||||
On
August, 3, 2005 the Company entered into an Agreement and Plan of Merger
dated
as of August 3, 2005 (as may be amended from time to time, the “Merger
Agreement”) with EasyWeb, Inc., a Delaware corporation (OTC:ESYW.OB)
(“EasyWeb”), and ZIO Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of EasyWeb (“ZIO Acquisition”). EasyWeb is a company that was
incorporated in September 1998 and has been in the business of designing,
marketing, selling and maintaining customized and template turnkey sites
on the
Internet that are hosted by third parties. Currently, however, EasyWeb has
no
operating business and has limited assets and liabilities. Pursuant to the
Merger Agreement, ZIO Acquisition merged with and into ZIOPHARM, with ZIOPHARM
remaining as the surviving company and a wholly-owned subsidiary of EasyWeb
(the
“Merger”). In connection with the Merger, which was effective as of September
13, 2005, ZIO Acquisition ceased to exist and the surviving company changed
its
corporate name to ZIOPHARM, Inc. In exchange for all of their shares of capital
stock in ZIOPHARM, the Stockholders received a number of shares of Common
Stock
of EasyWeb such that, upon completion of the Merger, the then-current
Stockholders held approximately 96.8% of the outstanding shares of Common
Stock
of EasyWeb on a fully-diluted basis. Upon completion of the Merger, EasyWeb
ceased all of its remaining operations, and adopted and continued implementing
the business plan of ZIOPHARM. Further, upon completion of the Merger, the
current officers and directors of EasyWeb resigned, the current officers
and
directors of ZIOPHARM were appointed officers and directors of EasyWeb, and
EasyWeb changed its name to ZIOPHARM Oncology, Inc. In conjunction with the
Merger, ZIOPHARM made certain payments not to exceed $425,000 to certain
affiliates of EasyWeb.
F-19
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
10.
SUBSEQUENT
EVENTS
…continued
On
June
6, 2005, the Company completed its Series A Convertible Preferred Stock
offering. (see Note 1).
On
May
26, 2005, the Company signed a lease for five years with USP 1180 Avenue
of the
Americas to lease approximately 2,580 square feet of office space.
On
April
25, 2005, the company entered into a Surrender and Termination Agreement
and an
Escrow agreement with WE George Street, L.L.C and Cohm Birnbaum & Shea P.C.
relating to the escrow of a termination fee for $90,000, for an early
termination to the New Haven, Connecticut office space.
Report
of Independent Registered Public Accounting Firm
To
the
Board of Directors and Shareholders:
EasyWeb,
Inc.
We
have
audited the accompanying balance sheet of EasyWeb, Inc. as of December 31,
2004,
and the related statements of operations, shareholders’ deficit and cash flows
for the years ended December 31, 2004 and 2003. These financial statements
are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of EasyWeb, Inc. as of December
31,
2004, and the results of its operations and its cash flows for the years
ended
December 31, 2004 and 2003 in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming the Company
will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has a net capital deficit at December 31, 2004 and has suffered
significant operating losses since inception. These factors raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s
plans regarding those matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome
of
this uncertainty.
Cordovano
and Honeck, LLP
Denver,
Colorado
February
19, 2005
EASYWEB,
INC.
Balance
Sheet
|
Assets
|
||||
|
Current
Assets:
|
||||
|
Cash
|
$
|
21
|
||
|
Liabilities
and Shareholders’ Deficit
|
||||
|
Current
Liabilities:
|
||||
|
Accounts
payable
|
$
|
63
|
||
|
Accrued
liabilities
|
7,385
|
|||
|
Due
to officer (Note 2)
|
1,300
|
|||
|
Due
to affiliate (Note 2)
|
12,298
|
|||
|
Total
current liabilities
|
21,046
|
|||
|
Shareholders’
deficit (Notes 4 and 6):
|
||||
|
Common
stock, no par value; 30,000,000 shares authorized,
|
||||
|
5,746,200
shares issued and outstanding
|
156,050
|
|||
|
Stock
options outstanding
|
20,600
|
|||
|
Additional
paid-in capital
|
87,808
|
|||
|
Retained
deficit
|
(285,483
|
)
|
||
|
Total
shareholders’ deficit
|
(21,025
|
)
|
||
|
$
|
21
|
|||
See
accompanying notes to financial statements
EASYWEB,
INC.
Statements
of Operations
|
For
the Years Ended
|
|||||||
|
December
31,
|
|||||||
|
2004
|
2003
|
||||||
|
Operating
expenses:
|
|||||||
|
Stock-based
compensation (Note 2):
|
|||||||
|
Director
fees
|
$
|
5,000
|
$
|
—
|
|||
|
Related
party
|
5,000
|
—
|
|||||
|
Contributed
rent (Note 2)
|
6,000
|
6,000
|
|||||
|
Administrative
support
|
173
|
510
|
|||||
|
Contributed
administrative
|
|||||||
|
support
(Note 2)
|
11,827
|
11,490
|
|||||
|
Professional
fees
|
8,535
|
12,812
|
|||||
|
Web
site consulting and maintenance
|
150
|
120
|
|||||
|
Dues
and subscriptions
|
1,200
|
2,975
|
|||||
|
Depreciation
and amortization
|
—
|
486
|
|||||
|
Other
|
1,281
|
1,449
|
|||||
|
Total
operating expenses
|
39,166
|
35,842
|
|||||
|
Loss
before income taxes
|
(39,166
|
)
|
(35,842
|
)
|
|||
|
Income
tax provision (Note 3)
|
—
|
—
|
|||||
|
Net
loss
|
$
|
(39,166
|
)
|
$
|
(35,842
|
)
|
|
|
Basic
and diluted loss per share
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
Basic
and diluted weighted average
|
|||||||
|
common
shares outstanding
|
5,439,533
|
4,672,867
|
|||||
See
accompanying notes to financial
statements
EASYWEB,
INC.
Statement
of Changes in Shareholders' Deficit
|
Outstanding
|
Additional
|
||||||||||||||||||
|
Common
Stock
|
Stock
|
Paid-In
|
Retained
|
||||||||||||||||
|
Shares
|
Amount
|
Options
|
Capital
|
Deficit
|
Total
|
||||||||||||||
|
Balance
at January 1, 2003
|
4,506,200
|
$
|
120,050
|
$
|
20,600
|
$
|
52,491
|
$
|
(210,475
|
)
|
$
|
(17,334
|
)
|
||||||
|
March
2003, sale of common stock
|
|||||||||||||||||||
|
($.05/share)
(Note 4)
|
200,000
|
10,000
|
—
|
—
|
—
|
10,000
|
|||||||||||||
|
Office
space and administrative support
|
|||||||||||||||||||
|
contributed
by an affiliate (Note 2)
|
—
|
—
|
—
|
17,490
|
—
|
17,490
|
|||||||||||||
|
Net
loss, year ended December 31, 2003
|
—
|
—
|
—
|
—
|
(35,842
|
)
|
(35,842
|
)
|
|||||||||||
|
Balance
at December 31, 2003
|
4,706,200
|
130,050
|
20,600
|
69,981
|
(246,317
|
)
|
(25,686
|
)
|
|||||||||||
|
March
2004, sale of common stock
|
|||||||||||||||||||
|
($.025/share)
(Note 4)
|
240,000
|
6,000
|
—
|
—
|
—
|
6,000
|
|||||||||||||
|
May
2004, common stock issued to an
|
|||||||||||||||||||
|
affiliate
to repay obligations ($.025/share)
|
|||||||||||||||||||
|
(Note
2)
|
400,000
|
10,000
|
—
|
—
|
—
|
10,000
|
|||||||||||||
|
May
2004, common stock issued to a
|
|||||||||||||||||||
|
related
party in exchange for services
|
|||||||||||||||||||
|
($.025/share)
(Note 2)
|
200,000
|
5,000
|
—
|
—
|
—
|
5,000
|
|||||||||||||
|
May
2004, common stock issued to a
|
|||||||||||||||||||
|
director
in exchange for director fees
|
|||||||||||||||||||
|
($.025/share)
(Note 2)
|
200,000
|
5,000
|
—
|
—
|
—
|
5,000
|
|||||||||||||
|
Office
space and administrative support
|
|||||||||||||||||||
|
contributed
by an affiliate (Note 2)
|
—
|
—
|
—
|
17,827
|
—
|
17,827
|
|||||||||||||
|
Net
loss, year ended December 31, 2004
|
—
|
—
|
—
|
—
|
(39,166
|
)
|
(39,166
|
)
|
|||||||||||
|
Balance
at December 31, 2004
|
5,746,200
|
$
|
156,050
|
$
|
20,600
|
$
|
87,808
|
$
|
(285,483
|
)
|
$
|
(21,025
|
)
|
||||||
See
accompanying notes to financial statements
EASYWEB,
INC.
Statements
of Cash Flows
|
For
the Years Ended
|
|||||||
|
December
31,
|
|||||||
|
2004
|
2003
|
||||||
|
Cash
flows from operating activities:
|
|||||||
|
Net
loss
|
$
|
(39,166
|
)
|
$
|
(35,842
|
)
|
|
|
Adjustments
to reconcile net loss to net cash
|
|||||||
|
used
by operating activities:
|
|||||||
|
Depreciation
and amortization
|
—
|
486
|
|||||
|
Stock-based
compensation
|
10,000
|
—
|
|||||
|
Office
space and administrative support
|
|||||||
|
contributed
by an affiliate (Note 2)
|
17,827
|
17,490
|
|||||
|
Changes
in operating assets and liabilities:
|
|||||||
|
Accounts
payable, accrued expenses
|
|||||||
|
and
due to affiliate
|
4,027
|
8,534
|
|||||
|
Net
cash used in
|
|||||||
|
operating
activities
|
(7,312
|
)
|
(9,332
|
)
|
|||
|
Cash
flows from financing activities:
|
|||||||
|
Proceeds
on loans from related parties
|
1,300
|
—
|
|||||
|
Repayment
of related party loans
|
—
|
(650
|
)
|
||||
|
Proceeds
from the sale of common stock
|
6,000
|
10,000
|
|||||
|
Net
cash provided by
|
|||||||
|
financing
activities
|
7,300
|
9,350
|
|||||
|
Net
change in cash
|
(12
|
)
|
18
|
||||
|
Cash,
beginning of period
|
33
|
15
|
|||||
|
Cash,
end of period
|
$
|
21
|
$
|
33
|
|||
|
Supplemental
disclosure of cash flow information:
|
|||||||
|
Cash
paid during the year for:
|
|||||||
|
Income
taxes
|
$
|
—
|
$
|
—
|
|||
|
Interest
|
$
|
—
|
$
|
—
|
|||
See
accompanying notes to financial statements
(1)
Organization
and Summary of Significant Accounting Policies With Basis of
Presentation
Organization
EasyWeb,
Inc. (referenced as “we”, “us”, “our” in the accompanying footnotes) was
incorporated in Colorado on September 24, 1998 under the name NetEscapes,
Inc.
Our name was changed to EasyWeb, Inc. on February 2, 1999. We design, market,
sell and maintain web sites on the Internet, which are built and hosted by
third
party consultants. Our operations were very limited during the year ended
December 31, 2003. We did not perform any services or earn any revenue during
2004 due to the lack of working capital.
As
of
December 31, 2004, we have a net capital deficit and have suffered significant
operating losses since inception, which raises substantial doubt about our
ability to continue as a going concern. The financial statements do not include
any adjustments relating to the recoverability and classification of liabilities
that might be necessary should we be unable to continue as a going concern.
Inherent in our business are various risks and uncertainties, including our
limited operating history, historical operating losses, and dependence upon
our
officers and strategic alliances. We are currently dependent upon an affiliate,
Summit Financial Relations, Inc. (“Summit”), which has paid expenses on our
behalf, in order to maintain our limited operations. Our president has also
advanced us working capital to maintain our limited operations. There is
no
assurance that Summit or our president will continue to pay our expenses
in the
future.
Our
future success will be dependent upon our ability (1) to locate and consummate
a
merger or acquisition with an operating company, (2) to finance Internet
opportunities and, ultimately, (3) to attain profitability. There is no
assurance that we will be successful in consummating a merger or acquisition
with an operating company, financing Internet investments, or attaining
profitability. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Cash
equivalents and fair value of financial instruments
For
the
purposes of the statement of cash flows, we consider all highly liquid debt
instruments purchased with an original maturity of three months or less to
be
cash equivalents. We had no cash equivalents at December 31, 2004.
The
carrying amounts of cash, accounts payable and accrued liabilities approximate
fair value due to the short-term maturity of the instruments.
Use
of estimates
The
preparation of the financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions
that
affect certain reported amounts of assets and liabilities; disclosure of
contingent assets and liabilities at the date of the financial statements;
and
the reported amounts of revenues and expenses during the reporting period.
Accordingly, actual results could differ from those estimates.
Intangible
assets and amortization
Our
intangible assets consist of computer software and web site development costs.
We capitalize internal and external costs incurred to develop its web site
during the application development stage in accordance with Statement of
Position 98-1, “Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use”. Capitalized web site development costs are amortized
over an estimated life of three years commencing on the date the software
is
ready for its intended use. We commenced amortization of our web site
development costs on April 11, 2000. The web site development costs were
fully
amortized as of December 31, 2003. Amortization expense totaled $-0- and
$486,
respectively, for the years ended December 31, 2004 and 2003.
In
addition, we have adopted the Emerging Issues Task Force Issue No. 00-2 (“EITF
00-2”), “Accounting for Web Site Development Costs”. EITF 00-2 requires the
implementation of SOP 98-1 when software is used by a vendor in providing
a
service to a customer but the customer does not acquire the software or the
right to use it.
Impairments
on long-lived assets
We
evaluate the carrying value of our long-lived assets under the provisions
of
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.
Statement No. 144 requires impairment losses to be recorded on long-lived
assets
used in operations when indicators of impairment are present and the
undiscounted future cash flows estimated to be generated by those assets
are
less than the assets’ carrying amount. If such assets are impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying value or fair value, less costs
to
sell.
Loss
per common share
We
account for loss per share under the provisions of SFAS No. 128, “Earnings Per
Share”. Under SFAS No. 128, net loss per share-basic excludes dilution and is
determined by dividing income available to common shareholders by the weighted
average number of common shares outstanding during the period. Net loss per
share-diluted reflects the potential dilution that could occur if securities
and
other contracts to issue common stock were exercised or converted into common
stock. Common stock options outstanding at December 31, 2004 were not included
in the diluted loss per share as all 100,000 options were anti-dilutive.
Therefore, basic and diluted losses per share at December 31, 2004 were
equal.
Advertising
barter transactions
We
report
our advertising barter transactions in accordance with EITF 99-17, “Accounting
for Advertising Barter Transactions”. Under EITF 99-17, revenue and expense
should be recognized at fair value from an advertising barter transaction
only
if the fair value of the advertising surrendered in the transaction is
determinable based on the entity’s own historical transactions involving cash.
We did not recognize any revenues or expenses in connection with our advertising
barter transactions for the periods presented.
Stock-based
Compensation
We
account for stock-based compensation arrangements in accordance with SFAS
No.
123, “Accounting for Stock-Based Compensation,” which permits entities to
recognize as expense, over the vesting period, the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 allows entities
to
continue to apply the provisions of Accounting Principle Board (“APB”) Opinion
No. 25 and provide pro forma net earnings (loss) disclosures for employee
stock
option grants as if the fair value-based method defined in SFAS No. 123 had
been
applied. We have elected to continue to apply the provisions of APB Opinion
No.
25 and provide the pro forma disclosure provisions of SFAS No. 123. We did
not
report pro forma disclosures in the accompanying financial statements as
the
Company did not grant any employee stock options as of December 31,
2004.
Income
Taxes
Income
taxes are provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes related
primarily to differences between the recorded book basis and the tax basis
of
assets and liabilities for financial and income tax reporting. The deferred
tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized
for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
Recent
accounting standards
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
153, “Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29."
This Statement eliminates the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges
of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected
to
change significantly as a result of the exchange. This Statement is effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after
June
15, 2005. We do not expect the application of SFAS No. 153 to have a material
affect on our financial statements.
In
December 2004, the FASB issued a revision to SFAS No. 123, “Share-Based
Payment." This Statement supercedes APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and its related implementation guidance. It establishes
standards for the accounting for transactions in which an entity exchanges
its
equity instruments for goods or services. It also addresses transactions
in
which an entity incurs liabilities in exchange for goods or services that
are
based on the fair value of the entity's equity instruments or that may be
settled by the issuance of those equity instruments. This Statement does
not
change the accounting guidance for share-based payment transactions with
parties
other than employees provided in Statement No. 123 as originally issued and
EITF
Issue No. 96-18. This Statement is effective for public entities that file
as
small business issuers as of the beginning of the first fiscal period that
begins after December 15, 2005. We do not expect the application of SFAS
No. 123
(revised) to have a material affect on our financial statements.
(2)
Related
Party Transactions
Liabilities
In
August
and December 2004, an officer loaned us a total of $1,300 for working capital.
The loans carry no interest rate and are due on demand. The $1,300 is included
in the accompanying financial statements as “Due to officer”.
At
December 31, 2003, the Company owed Summit $18,111 for professional fees
and
other administrative expenses paid on behalf of the Company. During the year
ended December 31, 2004, Summit paid expenses totaling $4,187 on behalf of
the
Company. On May 13, 2004, the Company issued 400,000 restricted common shares
to
Summit valued at $10,000, or $.025 per share. The shares were valued based
on
contemporaneous sales to unrelated third party investors. As of December
31,
2004, the Company owed the affiliate $12,298, which is included in the
accompanying financial statements as “Due to affiliate”.
Common
stock
During
May 2004, the Company issued 200,000 to the brother of the Company’s principal
executive officer in exchange for corporate governance services. The shares
were
valued based on contemporaneous sales to unrelated third party investors,
or
$.025 per share. The Company recorded stock-based compensation of $5,000
related
to the transaction.
During
May 2004, the Company issued 200,000 to a director in exchange for director
fees. The shares were valued based on contemporaneous sales to unrelated
third
party investors, or $.025 per share. The Company recorded stock-based
compensation of $5,000 related to the transaction.
Rent
and administrative support
Rent
Summit
contributed office space to us during the years ended December 31, 2004 and
2003. Our management has estimated the fair market value of the office space
at
$500 per month, which is included in the accompanying financial statements
as
“Contributed rent” with an offsetting credit to “Additional paid-in capital”.
Administrative
support
Summit
contributed administrative services to the Company during the years ended
December 31, 2004 and 2003. Our management has estimated the fair market
value
of the services at $1,000 per month, which is included in the accompanying
condensed financial statements as “Contributed administrative support” with an
offsetting credit to “Additional paid-in capital”. We paid Summit $173 and $510,
respectively, for services during the years ended December 31, 2004 and 2003;
therefore, contributed administrative support totaled $11,827 and $11,490
for
the years ended December 31, 2004 and 2003, respectively.
Service
Agreements
The
Company entered into three service agreements with an officer, director and
an
affiliate (see Note 5).
(3)
Income
Taxes
A
reconciliation of U.S. statutory federal income tax rate to the effective
rate
is as follows:
|
Years
Ended
|
|||
|
December
31,
|
|||
|
2004
|
2003
|
||
|
U.S.
statutory federal rate
|
15.00%
|
15.00%
|
|
|
State
income tax rate, net of federal benefit
|
3.94%
|
3.94%
|
|
|
Permanent
differences
|
-8.62%
|
-9.24%
|
|
|
Net
operating loss for which no tax
|
|||
|
benefit
is currently available
|
-10.32%
|
-9.70%
|
|
|
0.00%
|
0.00%
|
||
At
December 31, 2004, deferred taxes consisted of a net tax asset of $41,983
due to
operating loss carryforwards of $209,315, which was fully allowed for, in
the
valuation allowance of $41,983. The valuation allowance offsets the net deferred
tax asset for which there is no assurance of recovery. The changes in the
valuation allowance for the years ended December 31, 2004 and 2003 were $4,041
and $3,475, respectively. Net operating loss carryforwards will expire through
2024.
The
valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized.
At that
time, the allowance will either be increased or reduced; reduction could
result
in the complete elimination of the allowance if positive evidence indicates
that
the value of the deferred tax asset is no longer impaired and the allowance
is
no longer required.
Should
we
undergo an ownership change, as defined in Section 382 of the Internal Revenue
Code, our net tax operating loss carryforwards generated prior to the ownership
change will be subject to an annual limitation which could reduce or defer
the
utilization of those losses.
(4)
Shareholders’
Deficit
Sale
of common stock
During
March 2004, we sold 240,000 shares of our common stock to an unrelated investor
for $6,000, or $.025 per share.
During
March 2003, we sold 200,000 shares of our common stock to an unrelated investor
for $10,000, or $.05 per share.
Stock
option plan
We
have
adopted an incentive stock option plan for the benefit of key personnel and
others providing significant services. An aggregate of 175,000 shares of
common
stock has been reserved under the plan. Options granted pursuant to the plan
will be exercisable at a price no less than 100 percent of fair market value
of
a common share on the date of grant.
Following
is a schedule of changes in our outstanding stock options for years ended
December 31, 2004 and 2003:
|
Weighted
|
Weighted
Avg
|
||||||||||||
|
Options
|
Avg
|
Remaining
|
|||||||||||
|
Description
|
Options
|
Exercisable
|
Exercise
Price
|
Life
|
|||||||||
|
Outstanding
at January 1, 2003
|
100,000
|
100,000
|
|
$
0.25
|
9
years
|
||||||||
|
Granted
|
—
|
—
|
—
|
—
|
|||||||||
|
Exercised
|
—
|
—
|
—
|
—
|
|||||||||
|
Expired/Cancelled
|
—
|
—
|
|
—
|
—
|
||||||||
|
Outstanding
at December 31, 2003
|
100,000
|
100,000
|
|
$
0.25
|
8
years
|
||||||||
|
Granted
|
—
|
—
|
—
|
—
|
|||||||||
|
Exercised
|
—
|
—
|
—
|
—
|
|||||||||
|
Expired/Cancelled
|
—
|
—
|
—
|
—
|
|||||||||
|
Outstanding
at December 31, 2004
|
100,000
|
100,000
|
|
$0.25
|
7
years
|
||||||||
(5)
Commitments
On
October 1, 2004, the Company entered into a management consulting services
agreement whereby the consultant will provide services including, but not
limited to:
| a. |
Mergers
and acquisition;
|
| b. |
Due
diligence studies, reorganizations,
divestitures;
|
| c. |
Capital
structures, banking methods and
systems;
|
| d. |
Periodic
reporting as to the developments concerning the general financial
markets
and public securities markets and industry which may be relevant
or of
interest or concern to the Company or the Company’s
business;
|
| e. |
Guidance
and assistance in available alternatives for accounts receivable
financing
and/or other asset financing; and
|
| f. |
Structural
recommendations to assist the Company’s capability to
finance.
|
Under
the
terms of the agreement, the Company has agreed to pay the consultant a one-time
fee of $120,000 on the date of closing of any of the above business transactions
or any transaction giving the Company a valid financial direction.
On
December 9, 2004, the Company entered into an employment agreement with its
president/CEO. Under the terms of the agreement, the Company has agreed to
pay
its president/CEO a one-time fee of $100,000 if and when the Company completes
a
merger, acquisition, reverse merger, financing, or any other related transaction
non-detrimental to the immediate future of the Company, that leaves the Company
in a position and direction better than it was prior to the
transaction.
On
December 10, 2004, the Company entered into a management consulting services
agreement with a director. Under the terms of the agreement, the Company
has
agreed to pay the director a one-time fee of $10,000 plus expenses, upon
the
closing of any transaction leaving the Company with a positive business
directive and available finances, non-detrimental to the survival of the
Company.
On
December 10, 2004, the Company entered into a consulting services agreement
whereby Summit will provide services including, but not limited to:
| a. |
Mergers
and acquisition;
|
| b. |
Due
diligence studies, reorganizations,
divestitures;
|
| c. |
Capital
structures, banking methods and
systems;
|
| d. |
Periodic
reporting as to the developments concerning the general financial
markets
and public securities markets and industry which may be relevant
or of
interest or concern to the Company or the Company’s
business;
|
| e. |
Guidance
and assistance in available alternatives for accounts receivable
financing
and/or other asset financing; and
|
| f. |
Conclude
business and transactions necessary to keep the Company current
in all
public filings, a-float and in business until an aforementioned
business
transaction is closed, to include lending funds to the Company
when
absolutely necessary as has been done over the prior three years
at no
charge, allowing the Company to
survive.
|
Under
the
terms of the agreement, the Company has agreed to pay Summit a one-time fee
of
$120,000 on the date of closing of any transaction leaving the Company with
a
positive business directive and available finances, non-detrimental to the
survival of the Company.
(6)
Subsequent
Events
On
February 28, 2005, the Company’s shareholders approved the following
proposals:
| a. |
Reincorporate
the Company in the State of
Delaware;
|
| b. |
Authorize
the Board of Directors to implement a reverse stock split at a
ratio no
greater than 40:1;
|
| c. |
Increase
the Company’s authorized capital by 250,000,000 shares (from 30,000,000 to
280,000,000);
|
As
of the
date of this report, the Company’s re-incorporation in the State of Delaware had
not yet been finalized and no reverse stock split had yet been
implemented.
During
January 2005, the Company sold 430,000 shares of its common stock to unrelated
investors for $13,200, or $.03 per share.
On
January 18, 2005, the Company sold a common stock option to an unrelated
third
party for $1,800. Under terms of the option agreement, the holder may purchase,
for an additional $1,000, 1% of the Company’s outstanding common stock as of the
exercise date. The option expires on June 7, 2005.
F-31
F-32
EASYWEB,
INC.
Condensed
Balance Sheet
June
30, 2005
|
Assets
|
||||
|
Current
Assets:
|
||||
|
Cash
|
$
|
1,118
|
||
|
Liabilities
and Shareholders’ Deficit
|
||||
|
Current
Liabilities:
|
||||
|
Accounts
payable and accrued liabilities
|
$
|
9,914
|
||
|
Total
current liabilities
|
9,914
|
|||
|
Shareholders’
deficit (Note 4):
|
||||
|
Common
stock, no par value; 280,000,000 shares authorized,
6,654,980 shares
issued and outstanding
|
183,613
|
|||
|
Additional
paid-in capital
|
118,353
|
|||
|
Retained
deficit
|
(310,762
|
)
|
||
|
Total
shareholders’ deficit
|
(8,796
|
)
|
||
|
$
|
1,118
|
|||
See
accompanying notes to condensed financial statements
EASYWEB,
INC.
Condensed
Statements of Operations
(Unaudited)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
|
June
30,
|
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Operating
expenses:
|
|||||||||||||
|
Contributed
rent (Note 2)
|
$
|
1,500
|
$
|
1,500
|
$
|
3,000
|
$
|
3,000
|
|||||
|
Contributed
administrative
|
|||||||||||||
|
support
(Note 2)
|
2,805
|
2,925
|
5,145
|
5,925
|
|||||||||
|
Administrative
support (Note 2)
|
195
|
75
|
855
|
75
|
|||||||||
|
Stock-based
compensation
|
—
|
10,000
|
—
|
10,000
|
|||||||||
|
Professional
fees
|
4,122
|
1,299
|
12,730
|
3,127
|
|||||||||
|
Web
site consulting and maintenance
|
140
|
—
|
170
|
60
|
|||||||||
|
Dues
and subscriptions
|
—
|
—
|
1,250
|
—
|
|||||||||
|
Other
|
1,192
|
429
|
2,129
|
682
|
|||||||||
|
Total
operating expenses
|
9,954
|
16,228
|
25,279
|
22,869
|
|||||||||
|
Loss
before income taxes
|
(9,954
|
)
|
(16,228
|
)
|
(25,279
|
)
|
(22,869
|
)
|
|||||
|
Income
tax provision (Note 3)
|
—
|
—
|
—
|
—
|
|||||||||
|
Net
loss
|
$
|
(9,954
|
)
|
$
|
(16,228
|
)
|
$
|
(25,279
|
)
|
$
|
(22,869
|
)
|
|
|
Basic
and diluted loss per share
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
Basic
and diluted weighted average
|
|||||||||||||
|
common
shares outstanding
|
6,255,997
|
5,479,533
|
6,198,999
|
5,132,867
|
|||||||||
EASYWEB,
INC.
Condensed
Statement of Changes in Shareholders' Equity
(Unaudited)
|
Additional
|
||||||||||||||||
|
Common
Stock
|
Paid-In
|
Retained
|
||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||
|
Balance
at January 1, 2005
|
5,746,200
|
$
|
156,050
|
$
|
108,408
|
$
|
(285,483
|
)
|
$
|
(21,025
|
)
|
|||||
|
January
2005, sale of common stock ($.03/share) (Note 4)
|
430,000
|
13,200
|
—
|
—
|
13,200
|
|||||||||||
|
January
2005, common stock option granted for cash (Note 4)
|
—
|
—
|
1,800
|
—
|
1,800
|
|||||||||||
|
June
2005, sale of common stock ($.03/share) (Note 4)
|
200,000
|
6,000
|
—
|
—
|
6,000
|
|||||||||||
|
June
2005, common stock issued to officer as repayment for
working capital
advances ($.03/share) (Note 2)
|
69,600
|
2,088
|
—
|
—
|
2,088
|
|||||||||||
|
June
2005, common stock issued to affiliate as repayment
for working capital
advances ($.03/share) (Note 2)
|
209,180
|
6,275
|
—
|
—
|
6,275
|
|||||||||||
|
Office
space and administrative support contributed by an
affiliate (Note
2)
|
—
|
—
|
8,145
|
—
|
8,145
|
|||||||||||
|
Net
loss, six months ended June 30, 2005
|
—
|
—
|
—
|
(25,279
|
)
|
(25,279
|
)
|
|||||||||
|
Balance
at June 30, 2005
|
6,654,980
|
$
|
183,613
|
$
|
118,353
|
$
|
(310,762
|
)
|
$
|
(8,796
|
)
|
|||||
EASYWEB,
INC.
Condensed
Statements of Cash Flows
(Unaudited)
|
Six
Months Ended
|
|||||||
|
June
30,
|
|||||||
|
2005
|
2004
|
||||||
|
Net
cash used in operating activities
|
$
|
(19,903
|
)
|
$
|
(6,006
|
)
|
|
|
Cash
flows from financing activities:
|
|||||||
|
Proceeds
from granting of stock option (Note 4)
|
1,800
|
—
|
|||||
|
Proceeds
from the sale of common stock (Note 4)
|
19,200
|
6,000
|
|||||
|
Net
cash provided by financing activities
|
21,000
|
6,000
|
|||||
|
Net
change in cash
|
1,097
|
(6
|
)
|
||||
|
Cash,
beginning of period
|
21
|
33
|
|||||
|
Cash,
end of period
|
$
|
1,118
|
$
|
27
|
|||
|
Supplemental
disclosure of cash flow information:
|
|||||||
|
Cash
paid during the period for:
|
|||||||
|
Income
taxes
|
$
|
—
|
$
|
—
|
|||
|
Interest
|
$
|
—
|
$
|
—
|
|||
|
Non-cash
financing transactions:
|
|||||||
|
Common
stock issued to officer to repay working capital advances
|
$
|
2,088
|
$
|
—
|
|||
|
Common
stock issued to affiliate to repay working capital
advances
|
$
|
6,275
|
$
|
—
|
|||
See accompanying notes to condensed financial statements
EASYWEB,
INC.
Notes
to Unaudited Condensed Financial Statements
Note
1: Basis of presentation
The
financial statements presented herein have been prepared by the Company
in
accordance with the accounting policies in its Form 10-KSB dated December
31,
2004, and should be read in conjunction with the notes thereto.
In
the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) which are necessary to provide a fair presentation of
operating
results for the interim period presented have been made. The results
of
operations for the periods presented are not necessarily indicative
of the
results to be expected for the year.
Financial
data presented herein are unaudited.
Note
2: Related party transactions
Rent
Summit
Financial Relations, Inc. (“Summit”), an affiliate under common control,
contributed office space to the Company during the six months ended
June 30,
2005. The Company’s management has estimated the fair market value of the office
space at $500 per month, which is included in the accompanying condensed
financial statements as Contributed Rent with an offsetting credit
to Additional
Paid-in Capital.
Administrative
support
Summit
contributed administrative services to the Company during the six months
ended
June 30, 2005. The Company’s management has estimated the fair market value of
the services at $1,000 per month, which is included in the accompanying
condensed financial statements as Contributed Administrative Support
with an
offsetting credit to Additional Paid-in Capital. During the six months
ended
June 30, 2005, the Company paid $855 for services, which reduced the
amount of
contributed services for the period from $6,000 to $5,145.
Indebtedness
to related parties
At
December 31, 2004, the Company owed Summit $12,268 for professional
fees and
other administrative expenses paid on behalf of the Company. During
the six
months ended June 30, 2005, Summit paid an additional $1,007 in expenses
on the
Company’s behalf. On February 4, 2005, the Company repaid Summit $7,000 and
on
June 28, 2005 the Company issued Summit 209,180 shares of common stock
for full
payment of all amounts owed to Summit. The shares issued to Summit
were valued
at $.03 per share, or $6,275, based on contemporaneous common stock
sales to
unrelated third parties. As of June 30, 2005, the balance owed to Summit
was
$-0-.
In
August
and December 2004, an officer loaned us a total of $1,300 for working
capital.
During May 2005, the officer advanced the Company an additional $788.
The loans
carried no interest rate and were due on demand. On June 28, 2005,
the Company
issued the officer 69,600 shares of common stock for full payment of
all amounts
owed to the officer. The shares issued to the officer were valued at
$.03 per
share, or $2,088, based on contemporaneous common stock sales to unrelated
third
parties. As of June 30, 2005, the balance owed to the officer was
$-0-.
Common
stock
During
June 2005, the Company sold 200,000 shares of its common stock to a
director for
$6,000, or $.03 per share.
Service
agreements
On
December 9, 2004, the Company entered into an employment agreement
with its
president/CEO. Under the terms of the agreement, the Company has agreed
to pay
its president/CEO a one-time fee of $100,000 if and when the Company
completes a
merger, acquisition, reverse merger, financing, or any other related
transaction
non-detrimental to the immediate future of the Company, that leaves
the Company
in a position and direction better than it was prior to the transaction
(see
Note 7).
On
December 10, 2004, the Company entered into a management consulting
services
agreement with a director. Under the terms of the agreement, the Company
has
agreed to pay the director a one-time fee of $10,000 plus expenses,
upon the
closing of any transaction leaving the Company with a positive business
directive and available finances, non-detrimental to the survival of
the Company
(see Note 7).
On
December 10, 2004, the Company entered into a consulting services agreement
whereby Summit will provide services including, but not limited to:
|
a.
|
Mergers
and acquisition;
|
|
b.
|
Due
diligence studies, reorganizations,
divestitures;
|
|
c.
|
Capital
structures, banking methods and
systems;
|
|
d.
|
Periodic
reporting as to the developments concerning the general financial
markets
and public securities markets and industry which may be relevant
or of
interest or concern to the Company or the Company’s
business;
|
|
e.
|
Guidance
and assistance in available alternatives for accounts receivable
financing
and/or other asset financing; and
|
|
f.
|
Conclude
business and transactions necessary to keep the Company current
in all
public filings, a-float and in business until an aforementioned
business
transaction is closed, to include lending funds to the Company
when
absolutely necessary as has been done over the prior three
years at no
charge, allowing the Company to
survive.
|
Under
the
terms of the agreement, the Company has agreed to pay Summit a one-time
fee of
$120,000 on the date of closing of any transaction leaving the Company
with a
positive business directive and available finances, non-detrimental
to the
survival of the Company (see Note 7).
Note
3: Income taxes
The
Company records its income taxes in accordance with SFAS No. 109, “Accounting
for Income Taxes”. The Company incurred net operating losses during all periods
presented resulting in a deferred tax asset, which was fully allowed
for;
therefore, the net benefit and expense resulted in $-0- income
taxes.
Note
4: Shareholder’s deficit
Common
stock
During
January 2005, the Company sold 430,000 shares of its common stock to
unrelated
investors for $13,200, or $.03 per share.
Common
stock options
On
January 18, 2005, the Company sold a common stock option to an unrelated
third
party for $1,800. Under terms of the option agreement, the holder could
purchase, for an additional $1,000, 1% of the Company’s outstanding common stock
as of the exercise date. On July 30, 2005, the parties amended the
agreement
whereby the option holder is now entitled to purchase that number of
shares of
our common stock equal to the number of such shares the option holder
would have
received in the merger with ZIOPHARM, Inc. (see Note 7) had the option
holder
owned 1% of the ZIOPHARM’s capital stock immediately prior to such merger
(calculated on a fully-diluted basis). The aggregate exercise price
for such
option is $1,000.
Corporate
governance
On
February 28, 2005, the Company’s shareholders approved the following
proposals:
|
a.
|
Reincorporate
the Company in the State of
Delaware;
|
|
b.
|
Authorize
the Board of Directors to implement a reverse stock split
at a ratio no
greater than 40:1; and
|
|
c.
|
Increase
the Company’s authorized capital by 250,000,000 shares (from 30,000,000
to
280,000,000).
|
The
Company’s re-incorporation in the State of Delaware was completed on May 16,
2005. As of the date of this report, no reverse stock split had yet
been
implemented.
Note
5: Commitment
On
October 1, 2004, the Company entered into a management consulting services
agreement whereby the consultant will provide services including, but
not
limited to:
|
a.
|
Mergers
and acquisition;
|
|
b.
|
Due
diligence studies, reorganizations,
divestitures;
|
|
c.
|
Capital
structures, banking methods and
systems;
|
|
d.
|
Periodic
reporting as to the developments concerning the general financial
markets
and public securities markets and industry which may be relevant
or of
interest or concern to the Company or the Company’s
business;
|
|
e.
|
Guidance
and assistance in available alternatives for accounts receivable
financing
and/or other asset financing; and
|
|
f.
|
Structural
recommendations to assist the Company’s capability to
finance.
|
Under
the
terms of the agreement, the Company has agreed to pay the consultant
a one-time
fee of $120,000 on the date of closing of any of the above business
transactions
or any transaction giving the Company a valid financial direction (see
Note
7).
Note
6: Termination of Proposed Merger
On
May 6,
2005, the Company signed a term sheet with Zephyr Sciences, Inc. (“Zephyr”),
which outlined the conditions of a proposed merger between the two
parties.
Under
the
structure of the term sheet, the Company would form a wholly-owned
Delaware
subsidiary, which would merge into Zephyr and Zephyr would be the surviving
entity. Zephyr’s shareholders would then exchange their shares of common stock
for common stock in the Company, which would result in Zephyr becoming
the
Company’s wholly-owned subsidiary. The transaction would result in a change
in
control, whereby the Company’s directors would resign and the directors of
Zephyr would become the directors of the Company.
The
parties terminated the proposed transaction in June 2005.
Note
7: Subsequent
Events
Common
stock
During
July 2005, the Company sold 333,333 shares of its common stock to an
unrelated
investor for $10,000, or $.03 per share.
During
July 2005, the Company sold 333,333 shares of its common stock to a
director for
$10,000, or $.03 per share.
On
August
3, 2005, the Company sold 275,000 shares of its common stock to an
unrelated
third party for $24,000, or $.087 per share.
Agreement
and Plan of Merger
On
August
3, 2005, the Company signed an Agreement and Plan of Merger with ZIOPHARM,
Inc.
(“ZIOPHARM”), which outlines the conditions of a proposed merger between the two
parties.
In
connection with the Agreement and Plan of Merger, the Company has formed
a
wholly-owned Delaware subsidiary, Zio Acquisition Corp., which will
merge into
ZIOPHARM with ZIOPHARM remaining as the surviving entity and as a wholly-owned
subsidiary of the Company following the merger. Holders of ZIOPHARM’s capital
stock or securities convertible into such capital stock will be exchanged
for
shares of the Company’s common stock or securities convertible into such shares.
The transaction will result in a change in control, whereby the Company’s
directors will resign and the directors of ZIOPHARM will become the
directors of
the Company. On the closing date of the merger transaction, the consolidated
EasyWeb entity will pay all unconsolidated liabilities of the Company
then due,
a portion of which will be payable to David C. Olson and an entity
affiliated
with Mr. Olson. However, Mr. Olson and this affiliated entity have
agreed to
reduce the amount of the payments to which they are otherwise entitled
to the
extent that the unconsolidated liabilities of the Company immediately
following
the Merger exceed $425,000.
In
addition to a range of standard closing conditions set forth in the
Agreement
and Plan of Merger, the closing of the transaction is subject to the
follow
closing conditions:
| 1. |
The
merger transaction shall have been approved by the requisite
vote of
ZIOPHARM’s stockholders, with ZIOPHARM stockholders holding no more
than
4% of the issued and outstanding shares of Ziopharm capital
stock having
exercised their right to dissent from the transaction and
obtain the fair
value of their shares;
|
| 2. |
As
of the closing date, the Company’s common stock shall have traded and
shall continue to be eligible for trading on the
OTCBB;
|
| 3. |
ZIOPHARM
shall have received an opinion from its counsel stating that
the
transaction qualifies as a tax-free reorganization under
Section 368(a) of
the Internal Revenue Code of 1986, as
amended;
|
| 4. |
ZIOPHARM
shall have received an opinion from the Company’s counsel stating that the
issuance of the Company’s common stock in the merger is exempt from the
registration requirements of the Securities Act of 1933,
as amended;
and
|
| 5. |
The
Company’s shall have completed a 1-for-40 reverse stock
split.
|
Should
the Company close the above transaction, the Company will incur the
following
approximate charges subject to update at closing:
|
a.
|
Employment
agreement fee with president/CEO (Note 2)
|
|
$
|
100,000
|
|||
|
b.
|
Management
consulting services agreement with director (Note 2)
|
|
10,000
|
||||
|
c.
|
Consulting
agreement with affiliate (Note 2)
|
|
120,000
|
||||
|
d.
|
Management
consulting services agreement with consultant (Note 5)
|
|
120,000
|
||||
|
e.
|
Transaction
introduction fees
|
100,000
|
|||||
|
f.
|
Other
consulting fees
|
10,000
|
|||||
|
f.
|
Ongoing
business expenses
|
17,000
|
|||||
|
TOTAL
|
$
|
477,000
|
|||||
On
July
14, 2005, the Board of Directors approved a $50,000 fee for the Company’s
president in the event the above transaction does not close. The fee
is to be
paid for services provided in connection with the due diligence and
negotiations
related to the proposed merger as well as previous uncompleted transactions.
If
the proposed merger does close, the $50,000 fee will be inclusive within
and
covered by payment of the $100,000 employment agreement fee (see Note
2).
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Balance
Sheets
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Statements
of Operations
For
the
three and six months ended June 30, 2005 and 2004 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
For
the Period
|
||||||||||||||||
|
|
|
For
the three
|
|
For
the three
|
|
For
the six
|
|
For
the six
|
|
from
Inception
|
|
|||||
|
|
|
months
|
|
months
|
|
months
|
|
months
|
|
(September
9, 2003)
|
|
|||||
|
|
|
ended
|
|
ended
|
|
ended
|
|
ended
|
|
through
|
|
|||||
|
|
|
June
30, 2005
|
|
June
30, 2004
|
|
June
30, 2005
|
|
June
30, 2004
|
|
June
30, 2005
|
||||||
|
Research
contract revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Operating
expenses and other income:
|
||||||||||||||||
|
Research
and development, including
|
||||||||||||||||
|
costs
of research contracts
|
1,362,508
|
-
|
2,961,079
|
-
|
5,087,686
|
|||||||||||
|
General
and administrative
|
746,229
|
915,584
|
1,412,090
|
1,717,910
|
5,154,683
|
|||||||||||
|
Total
operating expenses
|
2,108,737
|
915,584
|
4,373,169
|
1,717,910
|
10,242,369
|
|||||||||||
|
Loss
from operations
|
(2,108,737
|
)
|
(915,584
|
)
|
(4,373,169
|
)
|
(1,717,910
|
)
|
(10,242,369
|
)
|
||||||
|
Interest
income
|
79,607
|
6,141
|
83,479
|
10,242
|
105,246
|
|||||||||||
|
Net
loss
|
$
|
(2,029,130
|
)
|
$
|
(909,443
|
)
|
$
|
(4,289,690
|
)
|
$
|
(1,707,668
|
)
|
(10,137,123
|
)
|
||
|
Basic
and diluted net loss per share
|
$
|
(0.40
|
)
|
$
|
(0.18
|
)
|
$
|
(0.86
|
)
|
$
|
(0.40
|
)
|
||||
|
Weighted
average common shares outstanding used to compute
basic
and diluted net loss per share
|
5,012,500
|
5,012,500
|
5,012,500
|
4,216,920
|
||||||||||||
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Statements
of Cash Flows
For
the
six months ended June 30, 2005 and 2004 (unaudited)
|
|
|
|
|
|
|
|||||
|
For
the Period
|
||||||||||
|
|
|
For
the
|
|
For
the
|
|
from
Inception
|
|
|||
|
|
|
Six
months
|
|
Six
months
|
|
(September
9, 2003)
|
|
|||
|
|
|
ended
|
|
ended
|
|
through
|
|
|||
|
|
|
June
30, 2005
|
|
June
30, 2004
|
|
June
30, 2005
|
||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
loss
|
$
|
(4,289,690
|
)
|
$
|
(1,707,668
|
)
|
$
|
(10,137,123
|
)
|
|
|
Adjustments
to reconcile net loss to net cash
|
||||||||||
|
used
in operating activities:
|
||||||||||
|
Depreciation
and amortization
|
45,789
|
-
|
79,742
|
|||||||
|
Stock-based
compensation
|
- | - | 703,116 | |||||||
|
Change
in operating assets and liabilities:
|
|
|||||||||
|
Increase
in:
|
||||||||||
|
Prepaid
expenses and other current assets
|
(139,646
|
)
|
-
|
(257,217
|
)
|
|||||
|
Other
noncurrent assets
|
(92,237
|
)
|
-
|
(92,237
|
)
|
|||||
|
Increase
(decrease) in:
|
||||||||||
|
Deposits
|
4,014
|
(83,687
|
)
|
(56,032
|
)
|
|||||
|
Accounts
payable
|
(261,354
|
)
|
42,728
|
448,593
|
||||||
|
Accrued
expenses
|
113,671
|
-
|
993,047
|
|||||||
|
Net
cash used in operating activates
|
(4,619,453
|
)
|
(1,748,627
|
)
|
(8,318,111
|
)
|
||||
|
Cash
flows from investing activities:
|
||||||||||
|
(Purchases)
returns of property and equipment
|
948
|
(39,834
|
)
|
(273,738
|
)
|
|||||
|
Net
cash provided by (used) in investing activities
|
948
|
(39,834
|
)
|
(273,738
|
)
|
|||||
|
Cash
flows from financing activities:
|
||||||||||
|
Stockholder's
capital contribution
|
-
|
-
|
500,000
|
|||||||
|
Proceeds
from issuance of common stock, net
|
-
|
4,500,000
|
4,500,000
|
|||||||
|
Proceeds
from issuance of preferred stock, net
|
16,759,596
|
-
|
16,759,596
|
|||||||
|
Net
cash provided by financing activities
|
16,759,596
|
4,500,000
|
21,759,596
|
|||||||
|
Net
increase in cash and cash equivalents
|
12,141,091
|
2,711,539
|
13,167,747
|
|||||||
|
Cash
and cash equivalents, beginning of period
|
1,026,656
|
402,363
|
- | |||||||
|
Cash
and cash equivalents, end of period
|
$
|
13,167,747
|
$
|
3,113,902
|
13,167,747
|
|||||
|
Supplementary
disclosure of cash flow information:
|
||||||||||
|
Cash
paid for interest
|
$
|
-
|
$
|
-
|
- | |||||
|
Cash
paid for income taxes
|
$
|
-
|
$
|
-
|
- | |||||
|
Supplementary
disclosure of noncash investing and
financing
activities:
|
||||||||||
|
Warrants
issued to placement agent, in connection with
preferred stock
issuance
|
$
|
1,682,863
|
$
|
-
|
$
|
1,682,863
|
||||
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Statement
of Changes in Convertible Preferred Stock and Stockholders' Equity
(Deficit)
For
the
six months ended June 30, 2005, For the Year ended December 31, 2004
and
For
the
Period from Inception (September 9, 2003) to December 31, 2003
|
|
|
||||||||||||||||||||||||
|
Warrants
to
|
|
|
|||||||||||||||||||||||
|
Purchase
|
Deficit
|
||||||||||||||||||||||||
|
Series
A
|
Series
A
|
|
Accumulated
|
||||||||||||||||||||||
|
Convertible
|
Convertible
|
|
during
|
Total
|
|||||||||||||||||||||
|
Preferred
|
Preferred
|
Additional
|
the
|
Stockholders'
|
|||||||||||||||||||||
|
Stock
|
Stock
|
Common
Stock
|
Paid-in
|
Development
|
Equity/
|
||||||||||||||||||||
|
Shares
|
Amount
|
Warrants
|
Shares
|
Amount
|
Capital
|
Stage
|
(Deficit)
|
||||||||||||||||||
|
Stockholders'
contribution, September 9, 2003
|
-
|
$
|
-
|
$
|
-
|
500,000
|
$
|
500
|
$
|
499,500
|
$
|
-
|
$
|
500,000
|
|||||||||||
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(160,136
|
)
|
(160,136
|
)
|
|||||||||||||||
|
Balance
at December 31, 2003 (audited)
|
-
|
-
|
-
|
500,000
|
500
|
499,500
|
(160,136
|
)
|
339,864
|
||||||||||||||||
|
Issuance
of common stock
|
-
|
-
|
-
|
4,500,000
|
4,500
|
4,495,500
|
-
|
4,500,000
|
|||||||||||||||||
|
Issuance
of common stock for services
|
512,500
|
513
|
438,326
|
-
|
438,839
|
||||||||||||||||||||
|
Fair
value of options/warrants issued for nonemployee services
|
-
|
-
|
-
|
-
|
-
|
264,277
|
-
|
264,277
|
|||||||||||||||||
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,687,297
|
)
|
(5,687,297
|
)
|
|||||||||||||||
|
Balance
at December 31, 2004 (audited)
|
-
|
-
|
-
|
5,512,500
|
$
|
5,513
|
5,697,603
|
(5,847,433
|
)
|
(144,317
|
)
|
||||||||||||||
|
Issuance
of Series A convertible preferred stock
|
8,379,564
|
15,076,733
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||
|
Fair
value of warrants to purchase Series A convertible preferred
stock
|
-
|
-
|
1,682,863
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,289,690
|
)
|
(4,289,690
|
)
|
|||||||||||||||
|
Balance
at June 30, 2005 (unaudited)
|
8,379,564
|
$
|
15,076,733
|
$
|
1,682,863
|
5,512,500
|
$
|
5,513
|
$
|
5,697,603
|
$
|
(10,137,123
|
)
|
$
|
(4,434,007
|
)
|
|||||||||
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
1.
|
BASIS
OF PRESENTATION AND
OPERATIONS
|
The
financial statements included herein have been prepared by ZIOPHARM,
Inc.
(“ZIOPHARM” or the “Company”) without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and
footnote disclosures normally included in financial statements
prepared in
accordance with accounting principles generally accepted in the
United States of
America have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of management, the accompanying unaudited financial
statements
include all adjustments (consisting of normal recurring adjustments)
necessary
to present fairly the financial position, results of operations
and cash flows
of the Company at the dates and for the periods indicated. The
unaudited
financial statements included herein should be read in conjunction
with the
audited financial statements and the notes thereto included in
ZIOPHARM Oncology
Inc.’s Form 8-K filed on September 19, 2005 for the fiscal year ended
December
31, 2004.
ZIOPHARM
is a development stage biopharmaceutical company that
seeks
to
acquire,
develop
and
commercialize,
on
its
own or with other commercial partners, products for the treatment
of
important
unmet medical needs in
cancer.
The
Company has operated at a loss since its inception in 2003 and
has no revenues.
The Company anticipates that losses may continue for the foreseeable
future. At
June 30, 2005, the Company’s accumulated deficit was approximately $10.1
million. The Company’s ability to continue operations after its current cash
resources are exhausted depends on its ability to obtain additional
financing
and achieve profitable operations, as to which no assurances can
be given. Cash
requirements may vary materially from those now planned because
of changes in
the focus and direction of our research and development programs,
competitive
and technical advances, patent developments or other developments.
Additional
financing will be required to continue operations after we exhaust
our current
cash resources and to continue our long-term plans for clinical
trials and new
product development.
On
June
6, 2005, the Company completed an offering of Series A Convertible
Preferred
Stock (“Series A Stock”). The Company issued 8,379,564 shares at $2.16 per share
for gross proceeds of approximately $18.1 million.
In
connection with the Series A Preferred Stock Offering, the Company
compensated
Paramount or its affiliates for its services through the payment
of (a) cash
commissions equal to 7% of the gross proceeds from the sale of
the shares of
Series A Preferred Stock,
and
(b)
placement warrants to acquire 837,956 shares of Series A Preferred
Stock (the
Series A Stock Warrants), exercisable for a period of 7 years from
the Closing
Date at a per Share exercise price equal to 110% of the price per
Share sold in
the Offering. These commissions are also payable on additional
sales by the
Company of securities (other than in a public offering) to investors
introduced
to the Company by Paramount during the twelve (12) month period
subsequent to
the final closing of the Offering. The Company also paid Paramount
an expense
allowance of $50,000 to reimburse Paramount for its out-of-pocket
expenses (the
“Expense Allowance”). Also, for a period of 36 months from the final Closing,
Paramount has the right of first refusal to act as the placement
agent for any
private sale of the Company’s securities. Lastly, the Company has agreed to
indemnify Paramount against certain liabilities, including liabilities
under the
Securities Act.
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
1.
|
BASIS
OF PRESENTATION AND
OPERATIONS….continued
|
The
Company has valued the warrants using the Black-Scholes model recording
a
non-cash issuance cost of $1,682,683.
The
net
proceeds from the Offering will be used for research and development,
licensing
fees and expenses, and for working capital and general corporate
purposes.
On
August, 3, 2005 the Company entered into an Agreement and Plan
of Merger dated
as of August 3, 2005 (as may be amended from time to time, the
“Merger
Agreement”) with EasyWeb, Inc., a Delaware corporation (OTC:ESYW.OB)
(“EasyWeb”), and ZIO Acquisition Corp., a Delaware corporation and wholly
owned
subsidiary of EasyWeb (“ZIO Acquisition”). EasyWeb is a company that was
incorporated in September 1998 and has been in the business of
designing,
marketing, selling and maintaining customized and template turnkey
sites on the
Internet that are hosted by third parties. Currently, however,
EasyWeb has no
operating business and has limited assets and liabilities. Pursuant
to the
Merger Agreement, ZIO Acquisition merged with and into ZIOPHARM,
with ZIOPHARM
remaining as the surviving company and a wholly-owned subsidiary
of EasyWeb (the
“Merger”). In connection with the Merger, which was effective as of September
13, 2005, ZIO Acquisition ceased to exist and the surviving company
changed its
corporate name to ZIOPHARM, Inc. In exchange for all of their shares
of capital
stock in ZIOPHARM, the Stockholders received a number of shares
of Common Stock
of EasyWeb such that, upon completion of the Merger, the then-current
Stockholders held approximately 96.8% of the outstanding shares
of Common Stock
of EasyWeb on a fully-diluted basis. Upon completion of the Merger,
EasyWeb
ceased all of its remaining operations and adopted and continued
implementing
the business plan of ZIOPHARM. Further, effective with the Merger,
the current
officers and directors of EasyWeb resigned, the current officers
and directors
of ZIOPHARM were appointed officers and directors of EasyWeb and
EasyWeb changed
its name to ZIOPHARM Oncology, Inc. In conjunction with the Merger,
ZIOPHARM
made certain payments not to exceed $425,000 to certain affiliates
of
EasyWeb.
The
results disclosed in the Statement of Operations for the six months
ended June
30, 2005 are not necessarily indicative of the results to be expected
for the
full year.
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
| 2. |
STOCK
BASED COMPENSATION
|
Accounting
for Stock-Based Compensation
The
Company accounts for stock-based awards to employees using the
intrinsic value
method as prescribed by Accounting Principles Board (APB) Opinion
No. 25,
Accounting
for Stock Issued to Employees
,
and
related interpretations. The Company follows the provisions of
SFAS No. 123,
Accounting
for Stock-Based Compensation
,
for
disclosure purposes. All stock-based awards to nonemployees are
accounted for at
their fair value in accordance with SFAS No. 123 and Emerging Issues
Task Force
(EITF) 96-18,
Accounting
for Equity Instruments that are Issued to Other than Employees
for Acquiring, or
in Conjunction with Selling, Goods or Services
.
The
Company has adopted the disclosure provisions of SFAS No. 148,
Accounting
for Stock-Based Compensation - Transition and Disclosure - an amendment
of SFAS
No. 123
,
for all
stock-based awards as of December 31, 2004.
The
following illustrates the effect on net loss had the Company applied
the fair
value recognition provisions of SFAS No. 123:
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
loss:
|
$
|
(2,029,130
|
)
|
$
|
(909,443
|
)
|
$
|
(4,289,690
|
)
|
$
|
(1,707,668
|
)
|
|
|
As
reported
|
|||||||||||||
|
Stock-based
compensation expense included in reported net loss
|
—
|
—
|
—
|
—
|
|||||||||
|
Stock-based
compensation expense under the fair value-based method
|
(73,780
|
)
|
(14,180
|
)
|
(163,270
|
)
|
(26,726
|
)
|
|||||
|
Pro
forma net loss
|
$
|
(2,102,910
|
)
|
$
|
(923,623
|
)
|
$
|
(4,452,960
|
)
|
$
|
(1,734,394
|
)
|
|
|
Basic
and diluted net loss per share:
|
|||||||||||||
|
As
reported
|
$
|
(0.40
|
)
|
$
|
(0.18
|
)
|
$
|
(0.86
|
)
|
$
|
(0.40
|
)
|
|
|
Pro
forma
|
$
|
(0.42
|
)
|
$
|
(0.18
|
)
|
$
|
(0.89
|
)
|
$
|
(0.41
|
)
|
|
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
| 2. |
STOCK
BASED
COMPENSATION…..continued
|
Accounting
for Stock-Based Compensation...continued
The
fair
value of each stock option is estimated at the date of grant using
the
Black-Scholes option pricing model. The following table summarizes
the
assumptions used in the Black-Scholes option pricing model:
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Expected
life
|
5
years
|
5
years
|
5
years
|
5
years
|
|||||||||
|
Expected
volatility
|
114%
|
134%
|
114%
|
114%
|
|||||||||
|
Dividend
yield
|
3.77%
|
3.60%
|
3.77%
|
3.60%
|
|||||||||
|
Weighted
average risk-free interest rat
|
0%
|
0%
|
0%
|
0%
|
|||||||||
Recently
Issued Pronouncements
In
December 2004, the Financial Accounting Standards Board ("FASB")
issued
Statement of Financial Accounting Standards No. 123R, Share-Based
Payment ("SFAS
No. 123R"). This Statement is a revision of SFAS No. 123, Accounting
for
Stock-Based Compensation, and supersedes Accounting Principles
Board Opinion No.
25, Accounting for Stock Issued to Employees, and its related implementation
guidance. SFAS No. 123R focuses primarily on accounting for transactions
in
which an entity obtains employee services in share-based payment
transactions.
The Statement requires entities to recognize stock compensation
expense for
awards of equity instruments to employees based on the grant-date
fair value of
those awards (with limited exceptions). SFAS No. 123R is effective
for the first
fiscal year beginning after December 15, 2005. Based on current
options
outstanding, the Company anticipates the adoption of this statement
to result in
approximately $723,918 of additional compensation cost to be recognized
in the
year of adoption.
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
3.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’
EQUITY
|
On
June
6, 2005, the Company completed its Series A Convertible Preferred
Stock offering
(see Note 1).
We
have
authorized capital of 50,000,000 shares, of which 30,000,000 shares
have been
designated as common stock, par value $.001 per share (the “Common Stock”), and
20,000,000 shares have been designated as preferred stock, par
value $.001 per
share.
Convertible
Preferred Stock
Voting
Rights
The
holders of Series A Preferred Stock will be entitled to vote together
with all
other holders of the Company’s voting stock on an “as-converted” basis on all
matters submitted to a vote of holders generally. The holders of
Series A
Preferred Stock, voting as a separate class, will also have the
right to approve
by a 66% supermajority certain actions proposed to be taken by
the
Company.
Dividend
Rights
The
holders of Series A Preferred Stock will be entitled to receive
dividends on an
equal basis with the holders of Common Stock when, as and if declared
by the
Board of Directors.
Liquidation
Preferences
The
Series A Preferred Stock shall rank senior to the Common Stock
and any future
class of junior securities, and will be entitled to a liquidation
preference
equal
to
the Stated Value, subject to adjustment (as defined in the Certificate
of
Designations)
,
upon any
liquidation, dissolution or winding up of the Company
or upon
a voluntary or involuntary bankruptcy of the Company.
Conversion
Rights
Each
share of Series A Preferred Stock will be convertible into Common
Stock at any
time at the option of the holder thereof (the Series A Preferred
Stock and the
Common Stock issuable upon conversion of the Series A Preferred
Stock are
sometimes herein collectively referred to as the “Securities”). All of the
outstanding shares of Series A Preferred Stock will automatically
convert into
Common Stock upon the first date (the “Trading Date”) on which the Common Stock
(or securities received in exchange for Common Stock) trades on
a national
securities exchange or on NASDAQ, including the Over the Counter
Bulletin Board
(a “Trading Event”). The rate at which shares of Series A Preferred Stock will
convert into Common Stock will initially be one-for-one, subject
to adjustment
in connection with certain anti-dilution protections and other
adjustments.
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
3.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
...continued
|
Convertible
Preferred Stock...continued
Conversion
Rights...continued
In
the
event of a reclassification, capital reorganization or other similar
change in
the outstanding shares of Common
Stock
,
a
consolidation or merger of the Company with or into another entity
(other than a
consolidation or merger in which the Corporation is the continuing
entity and
which does not result in a reclassification, capital reorganization
or other
change of outstanding shares of Common Stock other than the number
thereof), or
a sale of the property of the Company as, or substantially as,
an entirety
(other than a sale/leaseback, mortgage or other financing transaction),
the
Series A Preferred Stock will become convertible into the kind
and number of
shares of stock or other securities or property (including cash)
that the
holders of Series A Preferred Stock would have received if the
Series A
Preferred Stock had been converted into Common Stock immediately
prior to such
reclassification, capital reorganization or other change, consolidation,
merger
or sale.
Common
Stock
We
currently have issued and outstanding 5,512,500 shares of Common
Stock.
In
September 2003, the Company issued 2,000,000 (before the split
discussed below)
shares of Common Stock at $0.25 per share for gross proceeds of
$500,000.
In
January 2004, the Company issued 18,000,000 (before the split discussed
below)
shares of Common Stock at $0.25 per share for gross proceeds of
$4,500,000.
In
February 2004, the Company amended its articles of incorporation
to provide for
the combination of the Company’s common stock, par value $0.001 per share on a
1-for-4 basis (all other share amounts presented reflect the reverse
split).
|
4.
|
RELATED
PARTY TRANSACTIONS
|
The
Company had engaged
Paramount
BioCapital, Inc.
(“
Paramount
”)
to
assist in placing shares of Series A Preferred Stock on a “best efforts” basis
(see Note 1). Lindsay A. Rosenwald, M.D. is Chairman and Chief
Executive Officer
of Paramount.
Dr.
Rosenwald is also managing member of Horizon BioMedical Ventures,
LLC
(“Horizon”). On December 30, 2004, Horizon authorized the distribution of
4,848,376 shares of Common Stock (such shares, the “Horizon Distributed
Shares”), in equal installments of 2,424,188 shares of Common Stock to
Mibars,
LLC (“Mibars”) and to Dr. Rosenwald and his designees (the “Designated Shares”).
The disposition of the Designated Shares will be subject to certain
restrictions
as agreed to among Dr. Rosenwald and Dr. Rosenwald’s designees. Among other
things, under certain circumstances set forth in pledge agreements
between Dr.
Rosenwald and his designees, Dr. Rosenwald has the right to re-acquire
the
Designated Shares from his designees. As a result of those rights,
Dr. Rosenwald
may be deemed to be an affiliate of the Company.
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
4.
|
RELATED
PARTY TRANSACTIONS
...continued
|
In
connection with the December 22, 2004 Option Agreement with Southern
Research
Institute (“SRI”), the Company entered into a Finders Agreement, dated December
23, 2004, with Paramount pursuant to which the Company had agreed
to compensate
Paramount
,
for
services in connection with the Company’s introduction to SRI through the
payment of (a) a cash fee of $60,000 and (b) warrants to purchase
125,000 shares
of the Company’s Common Stock at a price equal to $2.38 per share. The Company
has estimated the fair value of such warrants using the Black-Scholes
model,
using an assumed risk-free rate of 3.93%, and expected life of
7 years,
volatility of 134% and dividend yield of 0%. In December 2004,
the Company
expensed the $60,000 that was payable to Paramount and recognized
compensation
expense in the amount of $251,037 for the issuance of the warrants.
In
connection with the Series A Preferred Stock Offering (see Note
1), the Company
and
Paramount
entered
into an Introduction Agreement in January 2005 (the “Introduction Agreement”),
pursuant to which the Company has agreed to compensate Paramount
for its
services in connection with the Offering through the payment of
(a) cash
commissions equal to 7% of the gross proceeds from the sale of
the
shares
of
Series A Preferred Stock,
and
(b)
placement warrants to acquire a number of shares of Series A Preferred
Stock
equal to 10% of the number of shares of Series A Preferred Stock
issued in the
Offering, exercisable for a period of 7 years from the Closing
Date at a per
Share exercise price equal to 110% of the price per Share sold
in the Offering.
These commissions are also payable on additional sales by the Company
of
securities (other than in a public offering) to investors introduced
to the
Company by
Paramount
during
the twelve (12) month period subsequent to the final closing of
the Offering.
The Company also agreed to pay to
Paramount
a
non-accountable expense allowance of $50,000 to reimburse the
Paramount
for
its
out-of-pocket expenses (the “Expense Allowance”). Also, for a period of 36
months from the final Closing,
Paramount
has
the
right of first refusal to act as the placement agent for the private
sale of the
Company’s securities. Lastly, the Company has agreed to indemnify
Paramount
against
certain liabilities, including liabilities under the Securities
Act.
Dr.
Michael Weiser, who is a member of the Board of Directors of the
Company, is
also a full-time
employee
of
Paramount
.
In
addition, David M. Tanen, who is a member of the Board of Directors
of the
Company, was a full-time employee of
Paramount
from
July
1996 through August 2004.
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
5.
|
STOCK
OPTION PLAN
|
The
Company has adopted the 2003 Stock Option Plan (the “Plan”), under which we have
reserved for the issuance of 2,500,000 shares of our Common Stock.
The Plan was
approved by our stockholders on December 21, 2004.
As
of
December 31, 2004, the Company has issued under its 2003 Stock
Option Plan
1,170,826 shares that are issuable upon exercise of outstanding
options to
purchase Common Stock. As of December 31, 2004, we had issued to
our employees
options to purchase up to 990,326 shares of the Company’s Common Stock. In
addition, we had issued to our directors options to purchase up
to 180,000
shares of the Company’s Common Stock, as well as options to a consultant in
connection with services rendered to purchase up to 500 shares
of the Company’s
Common Stock. The Company had estimated the fair value of such
options using the
Black-Scholes model, using an assumed risk-free rate of 4.23%,
and expected life
of 10 years, volatility of 134% and dividend yield of 0%. The options
issued to
the consultant were valued at $1,050, and recorded as a charge
to compensation
expense in December 2004. We have also reserved an aggregate of
155,375
additional shares for issuance under options granted outside of
the 2003 Stock
Option Plan and warrants to purchase 125,000 shares of the Company’s Common
Stock to Paramount as compensation for services rendered in connection
with our
entering into an option agreement with Southern Research Institute.
In
connection with the warrants issued, the Company recorded a charge
of $251,037
to general and administrative expense in December 2004. The Company
had valued
the options using the Black-Scholes model as of the issue date
of the warrants.
During
the three and six months ended June 30, 2005, 451,388 options were
granted and
no options were exercised and 34,416 options were cancelled under
the 2003 Stock
Option plan.
|
6.
|
COMMITMENTS
AND CONTIGENCIES
|
On
May
26, 2005, the Company signed five-year lease agreement for its
corporate office
located in New York that expires in June 2010. Under the terms
of the lease, the
Company leases approximately 2,580 square feet of office space
and is required
to make monthly rental payments of approximately $10,100 until
December 31,
2007, with such payments increasing to approximately $11,000 thereafter
through
the remainder of the term of the lease.
On
April
25, 2005, the company entered into a Surrender and Termination
Agreement and an
Escrow agreement with WE George Street, L.L.C and Cohm Birnbaum
& Shea P.C.
relating to the escrow of a termination fee for $90,000, for an
early
termination to the New Haven, Connecticut office space.
|
ZIOPHARM
Oncology, Inc.
|
|||||
|
(A
Development Stage Enterprise)
|
|||||
|
Pro
Forma Consolidated Balance Sheet
|
|||||
|
June
30, 2005
|
|||||
|
(Unaudited)
|
The
accompanying notes are an integral part of these financial
statements.
|
ZIOPHARM
Oncology, Inc.
|
|||||
|
(A
Development Stage Enterprise)
|
|||||
|
Pro
Forma Combined Statement of Operations
|
|||||
|
Six
Months ended June 30, 2005
|
|||||
|
(Unaudited)
|
|||||
|
|
|
ZIOPHARM
|
||||||||||||||||
|
Pro
Forma
|
Oncology,
Inc.
|
|||||||||||||||
|
EasyWeb,
Inc.
|
ZIOPHARM,
Inc.
|
Adjustments
|
|
Pro
Forma
|
||||||||||||
|
Research
contract revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
Operating
expenses and other income:
|
||||||||||||||||
|
Research
and development, including
|
||||||||||||||||
|
costs
of research contracts
|
—
|
2,867,919
|
—
|
2,867,919
|
||||||||||||
|
General
and administrative
|
9,954
|
1,505,250
|
514,575
|
(E)(F)
|
|
2,029,779
|
||||||||||
|
Total
operating expenses
|
9,954
|
4,373,169
|
514,575
|
4,897,698
|
||||||||||||
|
Operating
loss
|
(9,954
|
)
|
(4,373,169
|
)
|
(514,575
|
)
|
(4,897,698
|
)
|
||||||||
|
Interest
income
|
—
|
(83,479
|
)
|
—
|
(83,479
|
)
|
||||||||||
|
Net
loss
|
$
|
(9,954
|
)
|
$
|
(4,289,690
|
)
|
$
|
(514,575
|
)
|
$
|
(4,814,219
|
)
|
||||
The
accompanying notes are an integral part of
these financial statements.
Notes
to
Unaudited Pro Forma Consolidated Financial Statements for the six months
ended
June 30, 2005
1.
Basis
of
Presentation
The
unaudited Pro Forma consolidated financial statements present the Pro Forma
consolidated financial position and results of operations of the companies
based
upon historical and projected financial information after giving effect
to the
merger of ZIOPHARM, Inc. (ZIOPHARM) with and into ZIO Acquisition Corp.
(ZIO
Acquisition) a wholly owned subsidiary of EasyWeb, Inc. (EasyWeb). The
unaudited
pro forma financial statements have been prepared to reflect certain adjustments
to our historical financial information, which are described in the Notes
to
Unaudited Pro Forma Financial Statements, to give effect to the merger,
as if it
had been completed on June 30, 2005 for balance sheet purposes and for
January
1, 2005 for the statement of operations.
The
unaudited Pro Forma consolidated financial statements are based on the
balance
sheets of the following:
a)
EasyWeb
at June 30, 2005 (unaudited).
b)
ZIOPHARM,
Inc. at June 30, 2005 (unaudited)
The
unaudited Pro Forma combined financial statements included the statements
of
operations for the following:
a)
EasyWeb
for the six months ended at June 30, 2005 (unaudited).
b)
ZIOPHARM,
Inc. for the six months ended June 30, 2005 (unaudited)
The
unaudited Pro Forma combined financial statements are not necessarily indicative
of the actual results that would have occurred had the merger occurred
on the
dates indicated and not necessarily indicative of future earnings or financial
position.
This
unaudited combined Pro Forma information should be read in conjunction
with the
annual audited financial statements of EasyWeb as of and for the year ended
December 31, 2004 included in EasyWeb’s Annual Report on From 10-KSB and the
quarterly report of EasyWeb on Form 10-QSB for the quarter ended June 30,
2005.
In addition, this unaudited combined Pro Forma information should be read
in
conjunction with the audited financial statements of ZIOPHARM, Inc. as
of
December 31, 2004 and for the year then ended, included as an Exhibit 99.2
in
this Current Report on Form 8-K.
2.
Pro
Forma
Adjustments
The
unaudited combined financial statements include the following Pro Forma
adjustments:
| A) |
In
connection with the merger, ZIO Acquisition will merge with and
into
ZIOPHARM with ZIOPHARM remaining as the surviving corporation
and a wholly
owned subsidiary of EasyWeb, Inc. following the merger. In exchange
for
the shares of ZIOPHARM, Inc. capital stock, the holders of ZIOPHARM
Common
Stock and ZIOPHARM Preferred Stock received a number of shares
of common
stock, $.001 par value per share of EasyWeb, Inc. such that upon
completion of the Merger, ZIOPHARM’s current stockholders will hold
approximately 97.4% of the outstanding EasyWeb Common Stock on
a
fully-diluted basis. In order that ZIOPHARM, Inc. stockholders
obtain such
percentage of the EasyWeb Common stock following the merger,
each holder
of the ZIOPHARM Common Stock will receive approximately .50097
(the
“Exchange Ratio”) shares of EasyWeb’s Common stock (subject to appropriate
adjustment as provided for in the merger agreement) for each
share of
ZIOPHARM Common Stock held by such holder immediately prior to
the Merger,
and each holder of ZIOPHARM Preferred Stock will receive the
number of
shares of EasyWeb’s Common Stock equal to the product of the Exchange
Ratio multiplied by the number of shares of ZIOPHARM Common Stock
into
which shares of the holder’s ZIOPHARM Preferred Stock are convertible
immediately prior to the Merger.
|
| B) |
In
connection with the merger, EasyWeb will cease all of its remaining
operations, if any, and will adopt and continue implementing
the business
plan of ZIOPHARM.
|
| C) |
In
connection with the merger, the current officers and directors
of EasyWeb,
Inc. will resign, and the current officers and directors of ZIOPHARM,
Inc.
will be appointed officers and directors of EasyWeb. In connection
with
the merger, EasyWeb changed its name to ZIOPHARM Oncology, Inc.
|
| D) |
The
acquisition has been accounted for as a reverse merger of ZIOPHARM
with
and into a shell company, with ZIOPHARM being the surviving company.
|
| E) |
In
connection with the merger, ZIOPHARM, Inc. was to make certain
payments
not to exceed for $425,000.
|
| F) | As a public company, ZIOPHARM Oncology expects to incur, on a Pro Forma basis, professional fees (legal, accounting and transfer agent fees) and premium expense for directors and officers insurance of $179,150 per year, or $44,787.50 per quarter. |
ZIOPHARM
ONCOLOGY, INC.
4,870,281
shares of common stock
______________________
PROSPECTUS
______________________
,
2005
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
24. Indemnification of Directors and Officers.
Under
provisions of the certificate of incorporation and bylaws of the registrant,
directors and officers will be indemnified for any and all judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys fees,
in
connection with threatened, pending or completed actions, suits or proceedings,
whether civil, or criminal, administrative or investigative (other than an
action arising by or in the right of the registrant), if such director or
officer has been wholly successful on the merits or otherwise, or is found
to
have acted in good faith and in a manner he or she reasonably believes to be
in
or not opposed to the best interests of the registrant, and, with respect to
any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In addition, directors and officers will be indemnified
for reasonable expenses in connection with threatened, pending or completed
actions or suits by or in the right of registrant if such director or officer
has been wholly successful on the merits or otherwise, or is found to have
acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the registrant, except in the case of certain
findings by a court that such person is liable for negligence or misconduct
in
his or her duty to the registrant unless such court or the Delaware Court of
Chancery also finds that such person is nevertheless fairly and reasonably
entitled to indemnity. The registrant’s Certificate of Incorporation also
eliminates the liability of directors of the registrant for monetary damages
to
the fullest extent permissible under Delaware law.
Section
145 of the Delaware General Corporation Law states:
(a)
A
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action arising by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or
proceeding if he acted in good faith and in a manner he reasonably believed
to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or
its equivalent, shall not, of itself, create a presumption that the person
did
not act in good faith and in a manner which he reasonably believed to be in
or
not opposed to the best interests of the corporation, and, with respect to
any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b)
A
corporation shall have power to indemnify any person who was or is a party
or is
threatened to be made a party to any threatened, pending or completed action
or
suit by or in the right of the corporation to procure a judgment in its favor
by
reason of the fact that he is or was a director, officer, employee or agent
of
the corporation, or is or was serving at the request of the corporation as
a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including attorneys’ fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect to
any
claim, issue or matter as to which such person shall have been adjudged to
be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all
the circumstances of the case, such person is fairly and reasonably entitled
to
indemnity for such expense which the Court of Chancery or such other court
shall
deem proper.
Item
25. Other Expenses Of Issuance And Distribution.
The
registrant estimates that expenses payable by the registrant is connection
with
the offering described in this registration statement will be as follows:
|
SEC
registration fee
|
$
|
9,171.71
|
||
|
Legal
fees and expenses
|
15,000.00
|
|||
|
Accounting
fees and expenses
|
5,000.00
|
|||
|
Printing
and engraving expenses
|
3,000.00
|
|||
|
Miscellaneous
|
2,000.00
|
|||
|
|
||||
|
Total
|
$
|
34,171.71
|
Item
26. Recent Sales of Unregistered Securities.
The
following summarizes all sales of unregistered securities by ZIOPHARM since
inception in September 2003 on a premerger basis:
On
September 25, 2003, in connection with ZIOPHARM’s incorporation, ZIOPHARM issued
500,000 shares of common stock for aggregate consideration of $500,000. On
October 7, 2003, ZIOPHARM issued 12,500 shares of common stock to a consultant
in exchange for certain consulting services. On March 14, 2004, ZIOPHARM issued
an additional 4,500,000 shares of common stock in exchange for aggregate
consideration of $4,500,000. On August 31, 2004, ZIOPHARM issued 500,000 shares
of common stock to the University of Texas M.D. Anderson Cancer Center pursuant
to the terms of the license agreement dated August 24, 2004.
In
connection ZIOPHARM’s license agreements with the University of Texas M. D.
Anderson Cancer Center and DEKK-Tec, Inc. ZIOPHARM issued warrants to such
parties to acquire an aggregate of 155,375 shares of common stock.
In
connection with ZIOPHARM’s December 22, 2004 Option Agreement with SRI, ZIOPHARM
issued a warrant to purchase 125,000 shares of common stock Paramount.
In
connection with an offering of Series A Convertible Preferred Stock of ZIOPHARM
that was completed on May 30, 2005, ZIOPHARM issued an aggregate of 8,379,564
shares of such Series A Convertible Preferred Stock in exchange for a purchase
price per share equal to $2.16. ZIOPHARM issued to placement agents in
connection with the offering warrants to purchase up to an aggregate of 837,956
share of ZIOPHARM’s Series A Convertible Preferred Stock.
Since
ZIOPHARM’s inception through the date of the Merger, ZIOPHARM granted
to directors, officers, employees and consultants options to purchase an
aggregate of 1,706,214 shares of common stock at exercise prices ranging from
$0.04 to $2.16 per share with a weighted average exercise price of $0.79 per
share. The issuances of these options were deemed to be exempt from registration
under the Securities Act by virtue of Rule 701 promulgated under Section 3(b)
of
the Securities Act as transactions pursuant to compensation benefits plans
and
contracts relating to compensation.
Except
as
noted above, the sales of the securities identified above were made pursuant
to
privately negotiated transactions that did not involve a public offering of
securities and, accordingly, ZIOPHARM believes that these transactions were
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof and rules promulgated thereunder. Each of the
above-referenced investors in ZIOPHARM’s stock represented to ZIOPHARM in
connection with their investment that they were “accredited investors” (as
defined by Rule 501 under the Securities Act) and were acquiring the shares
for
investment and not distribution, that they could bear the risks of the
investment and could hold the securities for an indefinite period of time.
The
investors received written disclosures that the securities had not been
registered under the Securities Act and that any resale must be made pursuant
to
a registration or an available exemption from such registration. All of the
foregoing securities are deemed restricted securities for purposes of the
Securities Act.
The
following summarizes the sales of unregistered securities by the Company (f/k/a
EasyWeb, Inc.) during the three years prior to and including the closing of
the
Merger:
During
January 2002, the Company sold 13,750 shares of its common stock (adjusted
for
the 1-for-40 share combination effected on August 24, 2005) for $16,500, or
$1.20 per share (as adjusted). Of the 13,750 shares sold, 1,250 shares were
sold
to officers of the Company and 12,500 shares were sold to unrelated third
parties. The shares were sold to seven persons pursuant Section 4(2) of the
Securities Act.
During
March 2003, the Company sold 5,000 shares of its common stock (adjusted for
the
1-for-40 share combination effected on August 24, 2005) for $10,000, or $2.00
per share (as adjusted). The shares were sold to an individual pursuant to
Section 4(2) of the Securities Act.
During
March 2004, the Company sold 6,000 shares of our common stock for $6,000, or
$1.00 per share. The shares were sold to an individual pursuant to Section
4(2)
of the Securities Act.
On
May
13, 2004, the Company issued 10,000 common shares (adjusted for the 1-for-40
share combination effected on August 24, 2005) to Summit Financial valued at
$10,000, or $1.00 per share (as adjusted). On May 13, 2004, we issued 5,000
common shares (adjusted for the 1-for-40 share combination effected on August
24, 2005) in exchange for corporate governance services. On May 13, 2004, we
issued 5,000 common shares (adjusted for the 1-for-40 share combination effected
on August 24, 2005) to a director in exchange for director fees. All shares
were
valued based on contemporaneous sales to unrelated third party investors. These
issuances were made pursuant to Section 4(2) of the Securities Act.
During
January 2005, the Company sold 10,750 common shares (adjusted for the 1-for-40
share combination effected on August 24, 2005) for $13,200, or $1.20 per share
(as adjusted). The shares were issued pursuant to Section 4(2) of the Securities
Act.
During
June 2005, the Company sold 5,000 shares of its common stock (adjusted for
the
1-for-40 share combination effected on August 24, 2005) to a director for
$6,000, or $1.20 per share (as adjusted). During July 2005, the Company sold
8,333 shares of its common stock (adjusted for the 1-for-40 share combination
effected on August 24, 2005) for $10,000, or $1.20 per share (as adjusted).
During August 2005, the Company sold 6,875 shares of its common stock (adjusted
for the 1-for-40 share combination effected on August 24, 2005) to a director
for $24,000, or $3.48 per share. These sales were made pursuant to Section
4(2)
of the Securities Act.
On
September 13, 2005 and in connection with the Merger, EasyWeb, Inc. issued
an
aggregate of 6,967,941 shares of its common stock to the former holders of
ZIOPHARM capital stock, and other securities having the right to purchase
approximately an additional 1,366,846 shares of EasyWeb’s common stock, all of
which were unregistered. For these issuances, EasyWeb relied on the exemption
from federal registration under Section 4(2) of the Securities Act of 1933.
EasyWeb relied on this exemption based on the fact that there were approximately
only 230 (excludes options and warrants) stockholders of ZIOPHARM who were
recipients of such unregistered shares in connection with the Merger, all of
whom, either alone or through a purchaser representative, had knowledge and
experience in financial and business matters such that each was capable of
evaluating the risks of the investment, and had access to information regarding
ZIOPHARM, EasyWeb and the Merger transaction.
Item
27. Exhibits.
|
Exhibit
No.
|
Description
|
|
|
|
|
2.1
|
Agreement
and Plan of Merger among the Registrant (formerly EasyWeb, Inc.),
ZIO
Acquisition Corp. and ZIOPHARM, Inc., dated August 3, 2005 (incorporated
by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed August 9,
2005).
|
|
3.1
|
Certificate
of Incorporation of the Registrant (formerly EasyWeb. Inc.), as filed
with
the Delaware Secretary of State on May 16, 2005.
|
|
3.2
|
Certificate
of Merger dated September 13, 2005, relating to the merger of ZIO
Acquisition Corp. with and into ZIOPHARM, Inc. (incorporated by reference
to Exhibit 3.1 to the Registrant’s Form 8-K filed September 19,
2005).
|
|
3.3
|
Certificate
of Ownership of the Registrant (formerly EasyWeb, Inc.) dated as
of
September 14, 2005, relating the merger of ZIOPHARM, Inc. with and
into
the Registrant and changing the Registrant’s corporate name from EasyWeb,
Inc. to ZIOPHARM Oncology, Inc. (incorporated by reference to Exhibit
3.2
to the Registrant’s Form 8-K filed September 19, 2005).
|
|
3.4
|
Bylaws,
as amended to date (incorporated by reference to Exhibit 3.3 to the
Registrant’s Form 8-K filed September 19, 2005).
|
|
4.1
|
Specimen
common stock certificate.
|
|
4.2
|
Form
of Warrant issued to placement agents in connection with ZIOPHARM,
Inc.
2005 private placement.
|
|
4.3
|
Schedule
identifying holders of Warrants in the form filed as Exhibit 4.2
to this
report.
|
|
4.4
|
Warrant
for the Purchase of Shares of Common Stock dated December 23,
2004.
|
|
5.1
|
Opinion
of Maslon Edelman Borman & Brand, LLP.
|
|
10.1
|
2003
Stock Incentive Plan.
|
|
10.2
|
Employment
Agreement dated January 8, 2004, between the Registrant and Dr. Jonathan
Lewis.
|
|
10.3
|
Employment
Agreement dated January 15, 2004, between the Registrant and Dr.
Robert
Peter Gale.
|
|
10.4
|
Employment
Agreement dated July 21, 2004, between the Registrant and Richard
Bagley.
|
|
10.5
|
Patent
and Technology License Agreement dated August 24, 2004, among ZIOPHARM,
Inc. (predecessor to the Registrant), the Board of Regents of the
University of Texas System on behalf of the University of Texas M.D.
Anderson Cancer Center and the Texas A&M University System.++
|
|
10.6
|
License
Agreement dated October 15, 2004, between ZIOPHARM, Inc. (predecessor
to
the Registrant) and DEKK-Tec, Inc.++
|
|
10.7
|
Form
of subscription agreement between the ZIOPHARM, Inc. and the investors
in
ZIOPHARM, Inc.’s private placement.
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm - Vitale, Caturano
&
Company, Ltd.
|
|
23.2
|
Consent
of Independent Registered Public Accounting Firm - Cordovano and
Honeck,
LLP.
|
|
23.3
|
Consent
of Maslon, Edelman Borman & Brand, LLP (included as part of Exhibit
5.1)
|
|
24.1
|
Power
of Attorney (included on signature page
hereof)
|
____________________
|
++
|
Confidential
treatment has been requested as to certain portions of this exhibit
pursuant to Rule 406 of the Securities Act of 1933, as
amended.
|
Item
28. Undertakings.
(a)
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant
has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of
such
issue.
(b)
The undersigned registrant hereby undertakes:
(1)
To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement: (i) to include any prospectus required
by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus
any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or
in
the aggregate, represent a fundamental change in the information set forth
in
the registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
(2)
That,
for
the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(3)
To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering;
and
(4)
That,
for
purposes of determining any liability under the Securities Act, each filing
of
the registrant’s annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan’s
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a
new registration statement relating to the securities offered therein, and
the
offering of such securities at that time shall be deemed to be the initial
bona
fide
offering
thereof.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form SB-2 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New
York, State of New York, on October 14, 2005.
| ZIOPHARM Oncology, Inc. | ||
|
|
|
|
| By: | /s/ Jonathan Lewis | |
|
Jonathan Lewis |
||
| Chief Executive Officer | ||
POWER
OF ATTORNEY
Each
person whose signature to this registration statement appears below hereby
constitutes and appoints Jonathan Lewis and Richard Bagley, and each of them,
as
his true and lawful attorney-in-fact and agent, with full power of substitution,
to sign on his or her behalf individually and in the capacity stated below
and
to perform any acts necessary to be done in order to file all amendments to
this
registration statement and any and all instruments or documents filed as part
of
or in connection with this registration statement or the amendments thereto
and
each of the undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or his substitutes, shall do or cause to be done
by
virtue hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1933, this registration
statement has been signed by the following persons in the capacities
indicated.
|
Signature
|
Title
|
Date
|
||
|
/s/
Jonathan Lewis
|
Director
and Chief Executive Officer
|
October
14, 2005
|
||
|
Jonathan
Lewis
|
(Principal Executive Officer) | |||
|
/s/
Richard E. Bagley
|
Director,
President, Treasurer and Chief
|
October
14, 2005
|
||
|
Richard
Bagley
|
Operating Officer (Principal Accounting and Financial Officer) | |||
|
/s/
Murray Brennan
|
Director
|
October
14, 2005
|
||
|
Murray
Brennan
|
||||
|
/s/
James Cannon
|
Director
|
October
14, 2005
|
||
|
James
Cannon
|
||||
|
|
Director
|
|
||
|
Timothy
McInerney
|
||||
|
|
Director
|
|
||
|
Wyche
Fowler, Jr.
|
||||
|
|
Director
|
|
||
|
Gary
S. Fragin
|
||||
|
/s/
Michael Weiser
|
Director
|
October
14, 2005
|
||
|
Michael
Weiser
|
EXHIBIT
INDEX
|
3.1
|
Certificate
of Incorporation of the Registrant (formerly EasyWeb. Inc.), as filed
with
the Delaware Secretary of State on May 16, 2005.
|
|
4.1
|
Specimen
common stock certificate.
|
|
4.2
|
Form
of Warrant issued to placement agents in connection with ZIOPHARM,
Inc.
2005 private placement.
|
|
4.3
|
Schedule
identifying holders of Warrants in the form filed as Exhibit 4.2
to this
report.
|
|
4.4
|
Warrant
for the Purchase of Shares of Common Stock dated December 23,
2004.
|
|
5.1
|
Opinion
of Maslon Edelman Borman & Brand, LLP.
|
|
10.1
|
2003
Stock Incentive Plan.
|
|
10.2
|
Employment
Agreement dated January 8, 2004, between the Registrant and Dr. Jonathan
Lewis.
|
|
10.3
|
Employment
Agreement dated January 15, 2004, between the Registrant and Dr.
Robert
Peter Gale.
|
|
10.4
|
Employment
Agreement dated July 21, 2004, between the Registrant and Richard
Bagley.
|
|
10.5
|
Patent
and Technology License Agreement dated August 24, 2004, among ZIOPHARM,
Inc. (predecessor to the Registrant), the Board of Regents of the
University of Texas System on behalf of the University of Texas M.D.
Anderson Cancer Center and the Texas A&M University System.++
|
|
10.6
|
License
Agreement dated October 15, 2004, between ZIOPHARM, Inc. (predecessor
to
the Registrant) and DEKK-Tec, Inc.++
|
|
10.7
|
Form
of subscription agreement between the ZIOPHARM, Inc. and the investors
in
ZIOPHARM, Inc.’s private placement.
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm - Vitale, Caturano
&
Company, Ltd.
|
|
23.2
|
Consent
of Independent Registered Public Accounting Firm - Cordovano and
Honeck,
LLP
|
____________________
|
++
|
Confidential
treatment has been requested as to certain portions of this exhibit
pursuant to Rule 406 of the Securities Act of 1933, as
amended.
|
