UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31,
2014
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________
to __________
Commission file number: 000-28347
ONCOVISTA INNOVATIVE THERAPIES, INC.
(Exact name of registrant as specified
in its charter)
| Nevada |
33-0881303 |
(State or other jurisdiction of
incorporation or organization) |
(IRS Employer Identification
No.) |
14785 Omicron Drive
Suite 104
San Antonio, Texas 78245
(Address of principal executive offices)
(210) 677-6000
(Registrant's telephone number, including
area code)
Securities registered pursuant to Section
12(b) of the Exchange Act: None
Securities registered pursuant to Section
12(g) of the Exchange Act: Common Stock, $0.001 par value
Indicate
by check mark whether the Company is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ¨
No x.
Indicate
by check mark if the Company is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨
No x.
Indicate by check mark whether the Company (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
x No ¨.
Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of the Company’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨.
Indicate by check mark whether the Company is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated file and larger accelerated filer”
in Rule 12b-2 of the Exchange Act.
| Large accelerated filer
¨ |
Accelerated filer
¨ |
| Non-accelerated filer ¨ |
Smaller Reporting Company x |
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act).
Yes
¨ No
x
The aggregate market value of the voting
common equity held by non-affiliates of the registrant as of June 30, 2014 was approximately $8,783,942 (based upon 12,548,489
shares at $0.70 per share).
As of April 14, 2015, there were 22,012,896 shares of common
stock outstanding.
ONCOVISTA INNOVATIVE THERAPIES, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2014
TABLE OF CONTENTS
PART I
ITEM 1 – BUSINESS
Overview
We are a biopharmaceutical company developing
targeted anticancer therapies by utilizing tumor-associated biomarkers. Our therapeutic strategy is based on targeting the patient’s
tumor(s) with treatments that will deliver drugs selectively based upon specific biochemical characteristics of the cancer cells
comprising the tumor. Through a combination of licensing agreements, as well as mergers and acquisitions, we have acquired the
rights to several technologies with the potential to more effectively treat cancers and significantly improve quality-of-life
for patients. We believe that the development of targeted approaches to the administration of anticancer agents should lead to
improved outcomes and reduced toxicity.
We expect to be a major participant in
the oncology arena through the successful development and commercialization of innovative therapies which, as a result of their
lower toxicity and greater efficacy, will increase patient survival rates and enhance patient quality of life. In targeting compounds
for acquisition, we focus on candidates that have been previously tested in human clinical trials or animal models, as well as
technologies that may improve the delivery or targeting of previously tested, and in some cases marketed, anticancer agents. Our
senior management team and our panel of internationally-recognized clinical advisors have made significant contributions to the
development of leading drugs currently used in cancer treatment. Management, in conjunction with our advisors, will evaluate in-licensing
candidates based on several criteria, including development and registration strategies to be employed, commercialization opportunities
and competitive technologies being developed elsewhere.
| Ø | In
the second quarter of 2008, we launched the Phase I/II clinical trial for Cordycepin
(OVI-123) at two sites in the U.S. and, following completion of the Phase I portion of
the trial, we planned to collect initial Phase II efficacy data in a small cohort of
refractory leukemia patients who express the marker, TdT. In October 2009, after enrolling
five patients in this clinical trial, we placed the clinical trial on administrative
hold until such time that additional capital can be raised. We have engaged a clinical
research organization (“CRO”) in France to do additional pre-clinical in-vitro
evaluations of Cordycepin and the ADA inhibitor Pentostatin with the intent of gaining
a better understanding of the inhibition effects of Pentostatin on Cordycepin. We are
in the process of reinitiating the Phase I/II clinical trial to determine the maximum
tolerated dose, and expect to start enrolling patients in 2015 if additional financing
is obtained. |
| Ø | We
have completed Good Laboratory Practice (“GLP”) animal drug safety studies
in two species for our lead drug candidate from the L-nucleoside conjugate program (OVI-117).
We have accumulated in vitro and in vivo data indicating that several of
the L-nucleoside conjugates are effective against various types of cancer. To date, OVI-117
has undergone two proof-of-concept studies of human cancers in animal models, as both
a single agent and as a multi-agent combination therapy with oxaliplatin. The Investigational
New Drug application (IND) was submitted to the FDA on June 2, 2012 and approved by the
FDA on July 5, 2012. We have engaged a contract manufacturer and a clinical batch of
OVI-117 is available for use in our proposed Phase 1 trial. The clinical protocol has
been written and a principal investigator engaged. We believe that OVI-117 should be
ready to enter Phase I clinical trials in 2015 if additional financing is available.
|
| Ø | We
previously developed diagnostic kits through our former majority-owned German operating
subsidiary, AdnaGen AG (“AdnaGen”), for several cancer indications, and marketed
diagnostic kits in Europe for the detection of circulating tumor cells (“CTCs”)
in patients with cancer. In October 2010, we entered into a Stock Purchase
Agreement with Alere Holdings Bermuda Limited Canon's Court (“Alere Holdings”),
whereby we sold all of our shares, representing approximately 78% of the total issued
and outstanding shares of AdnaGen. Under the terms of the agreement, we and
the other AdnaGen shareholders agreed to sell our respective shares of AdnaGen, and all
AdnaGen related business assets, to Alere Holdings for: (i) a $10 million up-front payment;
(ii) $10 million in potential milestone payments contingent upon the achievement of various
balance sheet objectives within 24 months; and (iii) up to $63 million in potential milestone
payments contingent upon the achievement of various clinical, regulatory and sales objectives
within the next 36 months. We are entitled to receive our pro rata portion
of the up-front and potential milestone payments. No milestone payments were received
in 2014 or 2013. |
To date, we have financed our operations
principally through offerings of securities exempt from the registration requirements of the Securities Act of 1933 (the “Securities
Act”). We used the proceeds from the sale of our shares in AdnaGen to fund on-going development activities for our
drug candidate portfolio. We estimate that our cash reserves will be sufficient to permit us to continue at our anticipated
level of operations for at least 2 to 3 months. However, we anticipate we will need to raise additional capital to support our
current operations and fund in-licensing and research and development programs and will further require additional financing at
various intervals in the future. We can provide no assurance that additional funding will be available on a timely basis, terms
acceptable to us, or at all.
Subsequent to yearend, the Company received additional
bridge loans in the amount of $140,000 from a related party. The loans were made on various dates between January and
April on the same terms as the 2014 bridge loans.
If we are unsuccessful raising additional
funding, our business may not continue as a going concern and if sufficient capital is not available, we may be required to delay,
further scale back or eliminate one or more of our research and development or acquisition and in-licensing programs or to enter
into license or other arrangements with third parties to commercialize products or technologies that we would otherwise seek to
develop and commercialize ourselves. In such event, our business, prospects, financial condition, and results of operations may
be adversely affected because we may be required to further scale back, eliminate, or delay development or acquisition efforts
or product introductions or enter into royalty, sales, or other agreements with third parties in order to commercialize our products.
Even if we do find additional funding sources, we may be required to issue securities with greater rights than those currently
possessed by holders of our common stock. We may also be required to take other actions that may lessen the value of our common
stock or dilute our common stockholders, including borrowing money on terms that are not favorable to us or issuing additional
equity securities. If we experience difficulties raising money in the future, our business, prospects, financial condition, and
results of operation will be materially adversely affected. See Note 3 of the consolidated financial statements.
During the last five fiscal years, we
spent approximately $ 4.3 million on research and development, excluding discontinued operations.
Our Corporate Strategy
We have implemented a comprehensive, multi-faceted
approach to candidate identification and product development in the oncology treatment. Our strategic plan consists of the following
elements:
| · |
A Practical, Rational
Approach to Drug Development. Our management is well versed in the nuances associated with successful execution of the
drug development and registration process. Registration strategies will be designed to address those issues which are critical
to achieving success with respect to both the acceptability of a specific plan in the view of the FDA and the ability to achieve
that plan with respect to the designated end points for that phase of the clinical trial. Furthermore, wherever possible these
strategies will be designed to take advantage of the FDA’s accelerated approval paths for certain drugs and orphan drug
designation. |
| · |
A Disciplined Internal
Development Strategy for Therapeutics. Besides opportunistically evaluating candidates for potential in-licensing or acquisition,
we possess two proprietary technologies which we believe will produce candidates for potential out-licensing. Both technologies
target aspects of cell biology specific to most cancer cells, but not found in healthy cells and we expect these technologies
to produce an array of candidates. We believe that, in many instances, the potential candidates can address opportunities
with unmet needs, such as cancers which are very resistant to therapy or have high recurrence rates. In other instances, we
believe that the candidates may address opportunities where the effectiveness of existing chemotherapeutics is hampered by
the toxic side effects which the drugs produce. In these circumstances, we believe that the use of our product candidates
in combination with existing drug therapies administered at lower dosage levels could produce comparable or improved effectiveness
with diminished side effects versus the single agent therapy. |
| · |
In-licensing Candidate
Selection and Acquisition Program. We believe that the relationships and reputation of the members of both our management
and our clinical advisory board positions us to be exposed to many acquisition and in-licensing opportunities that would not
normally be available to a company of our size. In many instances, the acquisition of biopharmaceutical companies by larger
companies has resulted in drug programs being delayed or discontinued, due to such factors as loss of internal sponsorship
(not created at the acquiring company), a perceived lack of market size (the desire for drugs with annual sales in excess
of $1 billion) by the larger combined entity, or an overcrowded pipeline (too many product candidates to investigate, too
many products to develop and a lack of sufficient resources). Indeed, the development of hundreds of potential oncology compounds
that had been on the development track has been delayed or discontinued. We view many of these product candidates, together
with some of the 400 plus compounds in the development pipeline, as potential candidates for in-licensing. |
By leveraging the experience of our management
team and clinical advisory board in selecting, developing and obtaining approval for many important chemotherapeutics, we believe
that we will be able to discern those opportunities that truly possess the potential to become approved drugs within a targeted
three-to-five year horizon. We involve our clinical advisory board in all major acquisition and in-licensing decisions. Given
the experience and the active network of our management team and clinical advisory board, we expect to uncover many other promising
candidates. Coupled with this, we generally attempt to structure our in-licensing deals so that if the in-licensed technology
fails to perform as represented, we are able to recover any payments made by us in acquiring the technology.
Our Drug Candidate Pipeline
The following table
summarizes the status of our various pre-clinical and clinical development programs underway:
| Program |
|
Indication |
|
Status |
|
Planned Activities |
|
Commercial Rights |
| Cordycepin (OVI-123) |
|
Refractory TdT Positive Leukemias |
|
In Phase I/II Clinical Development; Open IND; Orphan Drug Designation
Received |
|
Phase I/II Trial to be Reinitiated in 2015 |
|
OncoVista-Sub |
| |
|
|
|
|
|
|
|
|
| L-Nucleoside Conjugates (OVI-117) |
|
Colon Cancer |
|
Pre-Clinical
Development; Initiated GLP animal safety studies |
|
Commence Phase I Trial in 2015 |
|
OncoVista-Sub |
The following sections discuss various
aspects of our portfolio of drug candidates and their respective therapeutic characteristics in more detail.
Cordycepin (OVI-123) (TdT-Positive Refractory Leukemias)
The American Cancer
Society estimated that 43,050 new leukemia cases were diagnosed in 2010 in the U.S. While almost 250,000 individuals are living
with, or are in remission from, leukemia in the U.S., the annual mortality rate is nearly 22,000. The four broad classifications
of leukemia are:
| |
· |
Acute lymphocytic leukemia
(“ALL”); |
| |
· |
Chronic lymphocytic leukemia (“CLL”); |
| |
· |
Acute myelogenous leukemia (“AML”);
and |
| |
· |
Chronic myelogenous leukemia (“CML”). |
Cordycepin, which
was obtained through acquisition of Aengus Pharmaceuticals, Inc. in November 2005, was our first clinical-stage development compound.
We are developing Cordycepin as a treatment option for certain leukemia patients that are either refractory to currently-used
chemotherapeutics or have experienced a relapse. Cordycepin depends upon the presence of a DNA polymerase, known as terminal deoxynucleotidyl
transferase (TdT), for our therapeutic activity. Approximately 95% of ALL patients express TdT, and approximately 10% of the AML
cases express TdT. The range of CML cases that express TdT has been estimated at between 0% and 55% in scientific literature with
an average of 21% among the cited articles. Generally, the TdT-positive patients that would either be refractory or have experienced
a relapse are older adults.
Opportunity
Leukemia is a malignant
cancer of the bone marrow and blood. Leukemia is characterized by the uncontrolled accumulation of blood cells and is categorized
as either lymphocytic or myelogenous, either of which type can be acute or chronic. The terms lymphocytic and myelogenous denote
the type of blood cell affected (lymphocytic involving lymphocyte cells in bone marrow and myelogenous implicating other blood
cells). Acute leukemia is a rapidly progressing disease that results in the accumulation of immature, functionless cells in the
marrow and blood, thereby resulting in a condition whereby the marrow often can no longer produce enough normal red blood cells,
white blood cells and platelets. Anemia, a deficiency of red cells, develops in virtually all leukemia patients, and the lack
of normal white cells impairs the body’s ability to fight infections. A shortage of platelets results in bruising and easy
bleeding. Chronic leukemia, on the other hand, progresses more slowly and allows greater numbers of more mature, functional cells
to be made.
Based on information
obtained from the Surveillance, Epidemiology, and End Results (“SEER”) Program of the National Cancer Institute, while
AML and CML have been cancers primarily of adults, with prevalence rates of 94% for AML in adults over the age of 20 and 97% for
CML in adults over 20, ALL is more evenly distributed between adults and children. Approximately 65% of new cases diagnosed with
ALL are in children under the age of 20, and while the treatment outcomes for ALL in children have generally been favorable with
a five-year survival rate of 86% for children under the age of 15, the treatment response rates for adults have resulted in a
lower overall five-year survival rate of 65%. Given the toxic profile of the treatment regimens for both adults and children,
we believe that Cordycepin, as a TdT-dependent agent, could be used as part of a combination therapy regimen in order to minimize
toxicities to both age groups while maintaining effectiveness.
Market
Currently, approximately
50 different drugs are being used to treat leukemia. In the past decade, several important new drugs and new uses for existing
drugs have greatly improved cure rates or remission duration for some patients. Because of the likelihood of increased toxicity
for standard- or lower-risk childhood ALL patients, most centers treat these patients with a less intense treatment regimen than
the four- or five-dose treatment regimen used for higher risk patients. This regimen generally results in a complete remission
rate of 95%. For adult ALL patients, the treatment regimen is similar to the childhood treatment regimen; however, for the 60%
to 80% demonstrating remission during induction, the median remission duration is approximately 15 months. Unfortunately, those
patients experiencing a relapse can succumb within one year.
AML treatment should
be sufficiently aggressive to achieve complete remission since partial remission offers no substantial survival benefit. Initial
therapy typically results in 60% to 70% of adults attaining complete remission during the induction phase. However, with an overall
five year survival rate of 20%, the long-term prognosis in general is not good for adult AML patients. Unfortunately, while AML
is a cancer of older adults, because of the therapy’s toxicity (from myelosuppression and increased risk of infection),
induction chemotherapy is not generally offered to the very elderly.
Gleevec®, the
standard primary course of treatment in CML, inhibits an enzyme (bcr-abl tyrosine kinase) resulting from the defective gene translocation.
By selectively inhibiting the activity of this enzyme, Gleevec® offers dramatic advantages to patients, including decreased
side effects, few adverse effects on normal tissues and a very high response rate. The effectiveness and tolerance of older patients
and the projections from the first several years of clinical trials suggest that the drug will prolong the duration of hematological
remission and extend the patient’s life, when compared to former therapies.
Similar to Gleevec®,
our Cordycepin selectively targets cells expressing a specific enzyme involved in the disease’s pathway. In this case, Cordycepin
is targeting cells expressing TdT. With an addressable patient population consisting primarily of 46,000 individuals with CML,
Gleevec® /Glivec® full year sales for 2010 were $4.3 billion, according to Novartis. With an addressable patient population
for Cordycepin in leukemia patients nearly half the addressable population of Gleevec®, we believe that our product possesses
a significant market.
Clinical Development
Cordycepin has been
studied in a National Cancer Institute-sponsored Phase I clinical trial for treating TdT-positive ALL leukemia patients. TdT is
a polymerase expressed in immature, pre-B, pre-T lymphoid cells, and acute lymphoblastic leukemia/lymphoma cells. TdT, and similar
enzymes found in fungi and parasites, recognize Cordycepin and its analogues and add them onto growing nucleic acid chains thereby
terminating synthesis of the nucleic acid and replication of the cell. Importantly, TdT expression in normal human tissue is limited
to primitive lymphoid cells in the bone marrow and thymus, so most normal cells in the body are unaffected by the drug. In addition
to effectively treating TdT-positive ALL and CML, Cordycepin can also be used to treat diffuse high-grade lymphoblastic lymphoma,
which also expresses TdT.
In a biological system,
Cordycepin is converted to 3’-deoxyinosine by the enzyme adenosine deaminase (“ADA”), so Cordycepin must
be administered with an ADA inhibitor, such as deoxycoformycin (Nipent ® or pentostatin) to protect Cordycepin and allow it
to maintain its antileukemic activity. If the Phase I/II trial of Cordycepin demonstrates adequate safety and efficacy, we intend
to develop an ADA-resistant analog of Cordycepin in order to eliminate the need for co-administration of deoxycoformycin.
The initial Phase
I clinical trial data for the combination therapy was obtained in an ALL study of 14 patients between 1997 and 2000. No Cordycepin-related
adverse events were noted. Biological activity in the last three patients of the escalating dosing study was noted by the transient
clearing of peripheral blood blasts. Since May 2007, we have had an open IND and in addition, in July 2007, our request
for Orphan Drug designation for Cordycepin was granted by the FDA.
We initiated a Phase
I/II trial based on the “original” ADA-sensitive compound in the second quarter of 2008. The trial was being conducted
at two U.S. centers (The Dana Farber Cancer Institute in Boston, Massachusetts and the Cancer Therapy Research Center at the University
of Texas Health Sciences Center at San Antonio, Texas) and was designed to enroll up to 24 patients in the first stage and up
to 20 patients in the second stage. The primary objective of the 1st phase of the study is to determine the maximally
tolerated dose (“MTD”) and the recommended dose (RD) of Cordycepin, given one hour following a fixed dose of
the ADA inhibitor Pentostatin, in patients with refractory TdT-positive leukemia. The primary objectives of the 2nd
phase of the study will be to determine the single and multiple dose pharmacokinetics of Cordycepin given one hour following a
fixed dose of Pentostatin and to measure and quantify any clinical responses following administration of Cordycepin/Pentostatin
at the recommended dose in 20 subjects Secondary objectives will include assessing the pharmacokinetics efficacy and safety at
the MTD. We anticipate a total time period of 18 months for the trial during which patients will receive Cordycepin for three
consecutive days repeated every 28 days. Patients will be eligible for re-treatment if all dose-related toxicities have been resolved
by day 28 and there is no evidence of disease progression. Subjects may receive treatment until disease progression and will be
followed for at least 30 days after the last administration of study drug. In October 2009, after enrolling five patients
in this clinical trial, we placed the clinical trial on administrative hold until such time that additional capital can be raised.
We have engaged a clinical research organization (“CRO”) in France to do additional pre-clinical in-vitro evaluations
of Cordycepin and the ADA inhibitor Pentostatin with the intent of gaining a better understanding of the inhibition effects of
Pentostatin on Cordycepin. We are in the process of reinitiating the Phase I/II clinical trial to determine the maximum tolerated
dose, We expect to start enrolling patients in 2015 if additional financing is available.
L-Nucleoside Conjugate (OVI-117)
Our L-nucleoside conjugate
technology selectively targets certain cancer cell characteristics which make those cancer cells vulnerable to the actions of
the drug, but leaves the healthy cells unaffected. In effect a new drug is created by conjugating an L-nucleoside to an existing
chemotherapeutic agent that would be too toxic if delivered systemically. Several product candidates have been evaluated by us
and one candidate (OVI-117) has been tested in animal models. We believe OVI-117 is a thymidylate synthase (TS) inhibitor with
enhanced pharmacological properties which results in a retention of efficacy and a reduction of toxicity. OVI-117 has shown tumor
growth inhibitory activity in human colon, breast, and prostate tumors growing in animal models.
Compounds evolving
from our L-nucleoside conjugate technology may take advantage of cell membrane changes that differentiate cancerous cells from
healthy cells. This anomalous characteristic of cancer cell membranes may present a unique opportunity for targeting these cells
with new products which are uniquely designed cytotoxic nucleosides that selectively enter cancerous cells. After entering the
cancer cells, these compounds may be enzymatically cleaved to release their cytotoxic agents causing the death of the cancer cell.
The membranes of healthy cells may deny the L-nucleoside entry, so that cancerous cells are preferentially killed. As a result,
we believe that there should be reduced side effects associated with this class of drug. Drug candidates using L-nucleoside conjugate
technology have demonstrated efficacy in cell lines for colorectal, pancreas, melanoma, leukemia, and prostate cancers. OVI-117
has shown anti-tumor activity in animal models of several human cancers (including breast, prostate and colon), and our initial
target indication is expected to be colorectal cancer.
The L-nucleoside conjugate
technology was obtained through an exclusive, world-wide, royalty and milestone-bearing right and license to utilize the patents
and technologies of Lipitek International, Inc. relating to L-nucleosides and their conjugates. Alexander L. Weis, Ph.D., Chairman
of the Board of Directors, Chief Executive Officer, President, CFO and Secretary, is the ultimate beneficial owner of Lipitek
International, Inc. and Lipitek Research LLC. Dr. Weis has agreed not to vote as a director in connection with any matter relating
to Lipitek.
Opportunity
Colorectal cancer
is the third most common form of cancer, and diagnosis of localized colon cancer is typically made by means of colonoscopy. Symptoms
of colorectal cancer include:
| |
· |
Change in bowel habits
as seen by changes in frequency (due to either constipation or diarrhea), changes in stool caliber and changes in stool consistency; |
| |
· |
Blood in stools (melena, hematochezia); |
| |
· |
Bowel obstruction (rare) by the tumor; |
| |
· |
Anemia, with symptoms such as tiredness,
malaise, pallor; and |
| |
· |
Unexplained weight loss. |
The absence of discernible
symptoms in the early stages of this disease is one reason why periodic screening with fecal occult blood testing and colonoscopy
is so widely recommended.
For 2010, in
the United States, the American Cancer Society estimated there would be 142,570 new colorectal cancer cases of which colon cancer
accounted for 102,900 cases. Colon cancer is a highly treatable and often curable disease when diagnosed early and localized to
the bowel. When detected at its earliest stage (Dukes’ A) as an in situ tumor, the curative rate for colon cancer approaches
90%, or five times the curative rate for colon cancers detected at a later stage. Unfortunately, 40% to 50% percent of patients
have metastatic disease at the time of diagnosis after many of the above symptoms have been exhibited. Surgery is the primary
form of treatment and is typically followed by a regimen of chemotherapy. Despite the fact that a majority of patients have the
entire tumor removed by surgery, as many as 50% to 60% will ultimately die from either the metastatic colon cancer or from a recurrence.
Deaths from colorectal cancer were estimated to be 51,370 in 2010 in the United States.
Market
Standard treatment
for patients with colon cancer has been open surgical resection of the primary and regional lymph nodes for localized disease.
Surgery alone is curative in 25% to 40% of highly selected patients who develop resectable metastases in the liver and lung.
For 60% to 75% of
the patients with colorectal cancer for whom surgery alone is insufficient to achieve a cure, adjuvant chemotherapy utilizing
such extremely cytotoxic regimens as 5-FU based therapies, irinotecan or oxaliplatin are employed. However, due to the non-specific
nature of these drugs (which attack both healthy and cancerous cells), the side effects profile includes severe diarrhea, neuropathy,
nausea, neutropenia and fatigue. The median survival of these patients has improved from approximately 12 months in the mid-1990s
to more than 20 months in 2003. The industry continues to research treatment methods that can improve upon both the length of
survival and reduce the toxicity profiles.
Clinical Development
One
of our L-nucleoside conjugate candidates, OVI-117, is a conjugate of an L-nucleoside (L-uridine) and the highly toxic
compound 5’-fluorodeoxyuridine monophosphate (FdUMP), a thymidylate synthase (TS) inhibitor. We have accumulated in vitro
and in vivo data indicating that several of the L-nucleoside conjugates are effective against various types of cancer.
To date, OVI-117 has undergone two proof-of-concept studies in animals, as both a single agent and as a multi-agent combination
therapy with oxaliplatin. We have completed Good Laboratory Practice (“GLP”) animal drug safety studies in two species
for OVI-117. The Investigational New Drug application (IND) was
submitted to the FDA on June 2, 2012 and approved by the FDA on July 5, 2012. We engaged a contract manufacturer and a clinical
batch of OVI-117 is available for use in our proposed Phase 1 trial. The clinical protocol has been written and a principal investigator
engaged. We believe that OVI-117 should be ready to enter Phase I clinical trials in 2015 if additional financing is available.
Drug Development Expertise and Capabilities
Dr. Alexander L. Weis,
Ph.D., our Chief Executive Officer, and our clinical advisory board have extensive experience in developing chemotherapeutics.
Dr. Weis brings over 26 years of extensive experience in the biotechnology and pharmaceutical industries and is the founder of
OncoVista-Sub and co-founder of ILEX Oncology.
Our clinical advisory
board includes industry opinion leaders and oncologists with practical, relevant regulatory expertise, who can map out the very
efficient registration strategies. Many individuals on the clinical advisory board have been instrumental in the development of
such primary chemotherapeutics as Taxol®, Taxotere®, Oxaliplatin, Hycamtin®, Paraplatin®, Campath®, and Tarceva®.
Cancer drug development
presents unique challenges in clinical development and registration. Obtaining marketing approval for a new drug depends upon
the drug’s successful attainment of significant clinical endpoints such as increased overall survival and improvement in
quality of life. According to the National Cancer Institute, less than 5% of cancer patients participate in clinical trials. This
causes intense competition for trial participants, particularly in indications with the largest market potential (breast, lung,
colon, and prostate cancer). The failure rate for drugs in clinical development is high. Fewer than one in 12 of all drugs entering
clinical trials eventually gains approval according to the FDA. Not surprisingly, the attrition rate for anti-cancer drugs is
even higher with roughly only one in 20 eventually getting to market from the clinic. Thus, successful clinical development and
registration of a new drug depends, in large part, upon judicious selection of the lead compound, designation of demonstrable
clinical end points and the availability of a sufficient pool of patients with appropriate characteristics. Our clinical advisory
board gives us a critical advantage in these essential areas. Furthermore, in order to formulate a successful clinical development
plan, it is imperative to know which drugs have already been approved and which drugs currently in clinical development are likely
to be approved, since, ultimately, any newly approved drug will need to prove itself superior to, or at least equal to, previously-approved
or about-to-be-approved therapies. Well constructed clinical development plans aimed at rapid marketing approval often take advantage
of the FDA’s accelerated approval process which applies solely to diseases for which there is an unmet medical need. For
cancers in which there are few treatment options and prognosis is poor, a new drug which shows even a small improvement in clinical
endpoints may be approved based on Phase II clinical trial data. Taking advantage of this development path can save significant
time and money in getting a drug to market. Our team is familiar with this path and plans to follow it as a part of our registration
strategy when viable.
We believe that we
will be able to monetize our product pipeline by efficiently identifying candidates, performing due diligence, negotiating in-license
agreements and developing innovative clinical development and registration plans for strong product candidates. Before either
acquiring or in-licensing any candidate, our Chief Executive Officer reviews the opportunity thoroughly with the clinical advisory
board to determine the likelihood of successful product registration.
Collaborative Relationships and Partnerships
We anticipate that
we will enter into strategic relationships with respect to the research and development, testing, manufacture, and commercialization
of our product candidates. There are significant expenses, capital expenditures, and infrastructure involved in these activities.
We believe that working together with strategic partners will expedite product formulation, production, and approval.
We
have relationships with the University of Texas Health Science Center at San Antonio (UTHSCSA), the Cancer Therapy and Research
Center (CTRC), the Dana-Farber Cancer Institute, the Cedars-Sinai Medical Center and
MD Anderson Cancer Center, one of the leading cancer research institutes in the nation.
Intellectual Property
As of December 31,
2014, we held eight issued US and worldwide patents and 2 patent applications. Our ability to protect and use our intellectual
property in the continued development and commercialization of our technologies and products and to prevent others from infringing
on our intellectual property is crucial to our success. Our basic patent strategy is to augment our current portfolio by continually
applying for patents on new developments and obtaining licenses to promising product candidates and related technologies. We also
maintain various trade secrets which we have chosen not to reveal by filing for patent protection. Our issued patents and patent
applications provide protection for our core technologies. In addition to the foregoing patent activity, several continuations-in-part,
and international patents have been filed.
We also rely on trade
secrets and unpatentable know-how that we seek to protect, in part, by confidentiality agreements. Our policy is to require our
employees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored researchers, board of directors,
technical review board and other advisors to execute confidentiality agreements upon the commencement of employment or consulting
relationships with us. These agreements provide that all confidential information developed or made known to the individual during
the course of the individual’s relationship with us are to be kept confidential and not disclosed to third parties except
in specific limited circumstances. We also require signed confidentiality or material transfer agreements from any company that
is to receive our confidential information. In the case of employees, consultants and contractors, the agreements provide that
all inventions conceived by the individual while rendering services to us shall be assigned to us as our exclusive property. There
can be no assurance, however, that all persons who we desire to sign such agreements will sign, or if they do, that these agreements
will not be breached, that we would have adequate remedies for any breach, or that our trade secrets or unpatentable know-how
will not otherwise become known or be independently developed by competitors.
Our success will also
depend in part on our ability to commercialize our technology without infringing the proprietary rights of others. Although we
have conducted freedom of use patent searches, no assurance can be given that patents do not exist or could not be filed which
would have an adverse affect on our ability to market our technology or maintain our competitive position with respect to our
technology. If our technology components, products, processes or other subject matter are claimed under other existing U.S. or
foreign patents or are otherwise protected by third party proprietary rights, we may be subject to infringement actions. In such
event, we may challenge the validity of such patents or other proprietary rights or we may be required to obtain licenses from
such companies in order to develop, manufacture or market our technology. There can be no assurances that we would be able to
obtain such licenses or that such licenses, if available, could be obtained on commercially reasonable terms. Furthermore, the
failure to either develop a commercially viable alternative or obtain such licenses could result in delays in marketing our proposed
technology or the inability to proceed with the development, manufacture, or sale of products requiring such licenses, which could
have a material adverse effect on our business, financial condition, and results of operations. If we are required to defend ourselves
against charges of patent infringement or to protect our proprietary rights against third parties, substantial costs will be incurred
regardless of whether or not we are successful. Such proceedings are typically protracted with no certainty of success. An adverse
outcome could subject us to significant liabilities to third parties and force us to curtail or cease our development and commercialization
of our technology.
We aggressively seek
U.S. and international patent protection for the chemical compounds, processes, and other commercially important technologies
which we develop. While we own specific intellectual property, we also in-license related technologies determined to be of strategic
importance to the commercialization of our products or to have commercial potential of their own. For example, to continue developing
and commercializing our current products, we may license intellectual property from commercial or academic entities to obtain
technology rights that are required for our research and development or commercialization activities.
Government Regulation
The Drug and Therapeutic Product Development
Process
The FDA requires that
pharmaceutical and certain other therapeutic products undergo significant clinical experimentation and clinical testing prior
to their marketing or introduction to the general public. Clinical testing, known as clinical trials or clinical studies,
is either conducted internally by life science, pharmaceutical, or biotechnology companies or is conducted on behalf of these
companies by contract research organizations.
The process of conducting
clinical studies is highly regulated by the FDA, as well as by other governmental and professional bodies. Below is a description
of the principal framework in which clinical studies are conducted, as well as a description of the number of the parties involved
in these studies.
Protocols.
Before commencing human clinical studies, the sponsor of a new drug or therapeutic product must submit an investigational new
drug application, or IND, to the FDA. The application contains what is known in the industry as a protocol. A protocol
is the blueprint for each drug study. The protocol sets forth, among other things, the following:
| |
· |
who must be recruited as
qualified participants; |
| |
· |
how often to administer the drug or
product; |
| |
· |
what tests to perform on the participants;
and |
| |
· |
what dosage of the drug or amount of
the product to give to the participants. |
Institutional Review
Board. An institutional review board is an independent committee of professionals and lay persons which reviews clinical research
studies involving human beings and is required to adhere to guidelines issued by the FDA. The institutional review board does
not report to the FDA, but its records are audited by the FDA. Its members are not appointed by the FDA. All clinical studies
must be approved by an institutional review board. The institutional review board’s role is to protect the rights of the
participants in the clinical studies. It approves the protocols to be used, the advertisements which we or contract research organization
conducting the study proposes to use to recruit participants, and the form of consent which the participants will be required
to sign prior to their participation in the clinical studies.
Clinical Trials.
Human clinical studies or testing of a potential product are generally done in three stages known as phase I through phase III
testing. The names of the phases are derived from the regulations of the FDA. Generally, there are multiple studies conducted
in each phase.
Phase I. Phase
I studies involve testing a drug or product on a limited number of participants, typically 24 to 100 people at a time. Phase I
studies determine a product’s basic safety and how the product is absorbed by, and eliminated from, the body. This phase
lasts an average of six months to one year.
Phase II. Phase
II trials involve testing up to 200 participants at a time who may suffer from the targeted disease or condition. Phase II testing
typically lasts an average of one to two years. In Phase II, the drug is tested to determine its safety and effectiveness for
treating a specific illness or condition. Phase II testing also involves determining acceptable dosage levels of the drug. If
Phase II studies show that a new drug has an acceptable range of safety risks and probable effectiveness, a company will continue
to review the substance in phase III studies.
Phase III. Phase III studies involve
testing large numbers of participants, typically several hundred to several thousand persons. The purpose is to verify effectiveness
and long-term safety on a large scale. Phase III studies generally last two to three years. Phase III studies are conducted at
multiple locations or sites. Like the other phases, phase III requires the site to keep detailed records of data collected and
procedures performed.
New Drug Approval. The results of
the clinical trials are submitted to the FDA as part of a new drug application (“NDA”). Following
the completion of phase III studies, assuming, the sponsor of a potential product in the United States believes it has sufficient
information to support the safety and effectiveness of a product, it submits an NDA to the FDA requesting that the product be
approved for marketing. The application is a comprehensive, multi-volume filing that includes the results of all clinical studies,
information about the drug’s composition, and the sponsor’s plans for producing, packaging, and labeling the product.
The FDA’s review of an application can take a few months to many years, with the average review lasting 18 months. Once
approved, drugs and other products may be marketed in the United States, subject to any conditions imposed by the FDA.
Phase IV. The FDA may require that
the sponsor conduct additional clinical trials following new drug approval. The purpose of these trials, known as phase IV studies,
is to monitor long-term risks and benefits, study different dosage levels, or evaluate safety and effectiveness. In recent years,
the FDA has increased its reliance on these trials. Phase IV studies usually involve thousands of participants. Phase IV studies
also may be initiated by the company sponsoring the new drug to gain broader market value for an approved drug. For example, large-scale
trials may also be used to prove effectiveness and safety of new forms of drug delivery for approved drugs. Examples may be using
an inhalation spray versus taking tablets or a sustained-release form of medication versus capsules taken multiple times per day.
Biologics License Application. Once
clinical trials are completed and the results tabulated and analyzed, a Biologics License Application (“BLA”)
is submitted to the FDA. The application presents to FDA reviewers the entire history or the “whole story” of the
drug product including animal studies/human studies, manufacturing, and labeling/medical claims. Before the FDA applies its scientific
technical expertise to the review of the application, it will decide if the application gets a “priority review” or
a “standard review.” This classification determines the review timeframe. A priority review is for a drug that appears
to represent an advance over available therapy, whereas, a standard review is for a drug that appears to have therapeutic qualities
similar to those of an already marketed product. Generally, an advisory committee (the Oncology Drug Advisory Committee, ODAC)
will review the BLA and make a recommendation to the FDA. This outside advice is sought so that the FDA will have the benefit
of wider expert input. The FDA usually agrees with the advisory committee decisions but they are not binding.
The FDA takes action on the BLA after their
review is complete. There are three possible actions to be taken by the review team:
| |
· |
Approved – This indicates
to a company that it may now market in the U.S.; |
| |
· |
Not Approved –This tells a company that the product may not
be marketed in the U.S. and is accompanied by a detailed explanation as to why; and |
| |
· |
Approvable – This indicates that the FDA is prepared to approve
the application upon the satisfaction of certain conditions. These drug products may not be legally marketed until the deficiencies
have been satisfied, as well as any other requirements that may be imposed by the FDA. |
The drug approval process is time-consuming,
involves substantial expenditures of resources, and depends upon a number of factors, including the severity of the illness in
question, the availability of alternative treatments, and the risks and benefits demonstrated in the clinical trials.
Orphan Drug Act. The Orphan Drug
Act provides incentives to develop and market drugs (“Orphan Drugs”) for rare disease conditions in the United
States. A drug that receives Orphan Drug designation and is the first product to receive FDA marketing approval for its product
claim is entitled to a seven-year exclusive marketing period in the United States for that product claim. A drug which is considered
by the FDA to be different than such FDA-approved Orphan Drug is not barred from sale in the United States during such exclusive
marketing period even if it receives approval for the same claim. We can provide no assurance that the Orphan Drug Act’s
provisions will be the same at the time of the approval, if any, of our products.
Other U.S. Regulations.
Various Federal and state laws, regulations,
and recommendations relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase,
storage, movements, import, export, use, and disposal of hazardous or potentially hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with our research are applicable to our activities. They include,
among others, the United States Atomic Energy Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health
Act, the National Environmental Policy Act, the Toxic Substances Control Act, and Resources Conservation and Recovery Act, national
restrictions on technology transfer, import, export, and customs regulations, and other present and possible future local, state,
or federal regulation. The extent of governmental regulation which might result from future legislation or administrative action
cannot be accurately predicted.
Other Regulatory Matters.
Regulations imposed by authorities in other countries are a
significant factor in the conduct of research, development, manufacturing, and eventual marketing of our products.
Competition
In addition to the specified therapies
relative to each cancer discussed earlier, we generally face competition from pharmaceutical and biotechnology companies, academic
institutions, governmental agencies, and private research organizations in recruiting and retaining highly qualified scientific
personnel and consultants and in the development and acquisition of technologies. The pharmaceutical and biotechnology industries
are very competitive and are characterized by rapid and continuous technological innovation. We believe there are a significant
number of potential drugs in preclinical studies and clinical trials to treat cancer that may result in effective, commercially
successful treatments. In addition to most of the large pharmaceutical companies having small molecule programs, we are aware
of large biotechnology companies, such as Amgen, Inc., Genentech, Inc., Biogen Idec Inc., and Eli Lilly & Co., which are developing
small molecule therapeutics as treatments for cancer. Other, smaller companies in this field include: Allos, EntreMed, Threshold
Pharmaceuticals, and Sunesis.
We recognize that most of our competitors
have a broader range of capabilities and greater access to financial, technical, scientific, business development, recruiting,
and other resources. Additionally, third party-controlled technology, which may be advantageous to our business, could be acquired
or licensed by our competitors, thereby preventing us from obtaining technology on commercially reasonable terms, if at all. Because
part of our strategy is to target markets outside of the United States through collaborations with third parties, we will compete
for the services of third parties that may have already developed or acquired internal biotechnology capabilities or made commercial
arrangements with other biopharmaceutical companies to target the diseases on which we have focused.
Employees
As of the date hereof, we have two full-time
employees. Of our employees, one is executive and one is engaged in research and development. We have engaged the services of
experts in clinical/regulatory, quality assurance, and accounting as needed on an independent contractor basis to continue to
advance our drug candidates through clinical studies.
Corporate Information
We were originally
incorporated in Nevada on January 8, 1999 under the name, Aviation Upgrade Technologies, Inc. Our principal executive offices
are located at 14785 Omicron Drive, Suite 104, San Antonio, Texas 78245 and our telephone number is (210) 677-6000.
ITEM 1A – RISK FACTORS
We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (“Exchange Act”) and are not required
to provide the information under this item.
ITEM 1B – UNRESOLVED STAFF COMMENTS
We are a smaller reporting
company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 2 – PROPERTIES
Our fully equipped
office and research facilities are located in the Texas Research Park in San Antonio, Texas. We have a total of 6,925
square feet of office and research space, of which the labs are fully equipped for organic chemistry, as well as analytical and
biological activities. Pursuant to a Lease Agreement between Lipitek International and us, we lease the laboratory space for approximately
$12,000 per month from Lipitek International under a three-year Lease Agreement that expired in December 2013. The lease
payment was frozen from April 1, 2013. Lipitek is an affiliate of Alexander L. Weis, Ph.D., our Chief Executive Officer,
President, CFO, and Secretary. Additionally, pursuant to a Lease Agreement between Texas Research and Technology Foundation
and us, we lease office space located in San Antonio, Texas for approximately $1,200 per month on a month-to-month basis.
ITEM 3 – LEGAL PROCEEDINGS
On August 11, 2011,
an action was filed against the Company in the United States District Court for the Southern District of New York, entitled New
Millennium PR Communications, Inc., against OncoVista Innovative Therapies, Inc., seeking damages for the alleged breach of a
public relations agreement. On January 31, 2013 a settlement was reached whereby the Company agreed to pay New Millennium $7,000,
in two payments of $3,500 each, and issue 25,000 warrants at an exercise price of $0.25 per share.
On August 26, 2011, an action was filed
against the Company in the Supreme Court of the State of New York, New York County, entitled CAMOFI Master LDC and CAMHZN LDC
against OncoVista Innovative Therapies, Inc. and OncoVista, Inc. The action seeks damages for the alleged breach of a Subscription
Agreement, a Warrant Agreement and an Anti-Dilution Agreement and seeks an order directing the issuance of (i) an aggregate of
1,980,712,767 shares of the Company’s common stock, and (ii) warrants to purchase an aggregate of 702,857,767 shares of
the Company’s common stock at an exercise price of $0.001. On October 20, 2011, the Company filed an answer to the complaint.
On November 1, 2011, the plaintiffs made an extensive document request to the Company for all documents related to the matter.
The Company’s counsel has started taking depositions and has requested access to CAMOFI Master LDC and CAMHZN Master LDC
principals for further depositions. On June 29, 2012 CAMOFI Master LDC and CAMHZN Master LDC filed for summary judgment. On August
9, 2012 the parties filed a stipulation with the court extending the return date of motion for summary judgment until September
10, 2012. The court has not yet ruled on the motion to dismiss. Oral arguments for the motion were conducted before the court
on January 17, 2013. The judge asked the parties to reconvene and to try to seek a settlement. While the judge indicated her belief
that the Company was in breach of the anti-dilution agreement, she also indicated that it may not be equitable to direct the issuance
of hundreds of millions of additional shares, and reserved her decision on the issue at that time. On March 5, 2015, the parties
were able to reach a framework for settlement. The final documents of the settlement are in preparation. Management estimated,
based on the framework reached in March of 2015, that they will pay approximately $1.2 million in settlement fees. This amount
has been recorded as settlement payable and is due over a period of three years. If the Company does not meet the term of the
settlement framework, the framework would require the Company to make additional payments of approximately $3.8 million.
On February 16, 2012,
we filed an action in the 225 Judicial District Court of the State of Texas, Bexar County, entitled OncoVista Innovative Therapies,
Inc. against J. Michael Edwards. The action seeks damages relating to the executive employment agreement of J. Michael Edwards,
our former Chief Financial Officer. Specifically we are seeking to have the Stock Option Agreement granted to Mr. Edwards on January
6, 2009 be declared void ab initio. We are also seeking damages and attorney fees. On March 30, 2012, the Company received
a copy of a counterclaim that may be filed in the same court and is seeking approximately $197,000, plus certain health and life
insurance benefits, in alleged compensation due. On December 12, 2012 Mr. Edwards filed a third party petition in the court against
third party defendant Alexander L. Weis, our Chairman, CEO & President. Depositions are ongoing and the Company believes the
counterclaimant’s allegations are without merit and intends to vigorously defend these claims.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
From December 21, 2005 until January 13,
2008, our common stock was quoted on the OTC Bulletin Board under the symbol “AVUG.” Our common stock currently
trades under the symbol “OVIT” on the OTCQB™. Until October 26, 2007, there was no trading of our common stock.
The quarterly high and low reported sales prices for our common stock as quoted on the OTC QB™ for the periods indicated
are as follows:
| Year Ended December 31, 2014 | |
High | | |
Low | |
| First Quarter | |
$ | 0.28 | | |
$ | 0.04 | |
| Second Quarter | |
| 1.75 | | |
| 0.12 | |
| Third Quarter | |
| 0.76 | | |
| 0.11 | |
| Fourth Quarter | |
| 0.28 | | |
| 0.01 | |
| Year Ended December 31, 2013 | |
High | | |
Low | |
| First Quarter | |
$ | 0.32 | | |
$ | 0.06 | |
| Second Quarter | |
| 0.14 | | |
| 0.06 | |
| Third Quarter | |
| 0.25 | | |
| 0.03 | |
| Fourth Quarter | |
| 0.18 | | |
| 0.03 | |
The foregoing quotations were provided
by Yahoo! ® Finance and the quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
The last reported sale price per share
of common stock as quoted on the OTCQB was $0.49 on April, 13 2015. We have 22,012,896 shares
of common stock issued and outstanding. Based on information available from our registrar and transfer agent, we estimate that
we have approximately 226 stockholders of record.
Dividends
We have not declared nor paid any cash
dividend on our common stock, and we currently intend to retain future earnings, if any, to finance the expansion of our business,
and do not expect to pay any cash dividends in the foreseeable future. The decision whether to pay cash dividends on our common
stock will be made by the Board of Directors, in their discretion, and will depend on our financial condition, operating results,
capital requirements and other factors that the Board of Directors considers significant.
Recent Sales of Unregistered Securities
We did not sell any equity securities which
were not registered under the Securities Act during the year ended December 31, 2014 that were not otherwise disclosed on our
Quarterly Reports on Form 10-Q or our Current Reports on Form 8-K filed during the year ended December 31, 2014.
Repurchases of Equity Securities by the Issuer and Affiliated
Purchasers
None.
Use of Proceeds from Sales of Registered Securities
None.
ITEM 6 – SELECTED FINANCIAL DATA
We are a smaller reporting
company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
| ITEM 7 – |
MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Our Management’s Discussion and
Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act). Forward-looking statements are, by their
very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic
and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make
and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of
significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy
or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology;
and other risks that might be detailed from time to time in our filings with the SEC.
Although the forward-looking statements
in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently
known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties,
the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements.
You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we
attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of
operations and prospects.
The following discussion and analysis
should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Report.
Overview
We are a biopharmaceutical company developing
targeted anticancer therapies by utilizing tumor-associated biomarkers. Our therapeutic strategy is based on targeting the patient’s
tumor(s) with treatments that will deliver drugs selectively based upon specific biochemical characteristics of the cancer cells
comprising the tumor. Through a combination of licensing agreements, as well as mergers and acquisitions, we have acquired the
rights to several technologies with the potential to more effectively treat cancers and significantly improve quality-of-life
for patients. We believe that the development of targeted approaches to the administration of anticancer agents should lead to
improved outcomes and reduced toxicity.
We previously developed diagnostic kits
through our former majority-owned German operating subsidiary, AdnaGen, for several cancer indications, and marketed diagnostic
kits in Europe for the detection of CTCs in patients with cancer. On October 28, 2010, we entered into a Stock Purchase Agreement
with Alere Holdings, whereby we, and the other AdnaGen shareholders, agreed to sell our respective shares of AdnaGen, and all
AdnaGen related business assets, to Alere Holdings for: (i) a $10 million up-front payment; (ii) $10 million in potential milestone
payments contingent upon the achievement of various balance sheet objectives within 24 months; and (iii) up to $63 million in
potential milestone payments contingent upon the achievement of various clinical, regulatory and sales objectives within next
36 months. We are entitled to receive our pro rata portion of approximately 78.01% of the up-front and potential milestone payments. In
November 2010, we received $6.0 million, net of expenses and certain fees, as our share of the $10 million up-front payment. No
milestone payments were received in 2014 or 2013.
Development Program
Our most advanced product candidate is
Cordycepin (OVI-123) which is in Phase I/II clinical trials for refractory leukemia patients who express the enzyme terminal deoxynucleotidyl
transferase (TdT). We have received orphan drug designation from the FDA for Cordycepin which affords us seven years of market
exclusivity once the drug is approved for marketing. We initiated a Phase I/II trial based on the “original” ADA-sensitive
compound in the second quarter of 2008. The trial was initiated at two U.S. centers, The Dana Farber Cancer Institute in Boston,
Massachusetts and the Cancer Therapy Research Center at the University of Texas Health Sciences Center at San Antonio, Texas,
and is designed to enroll up to 24 patients in
the first stage and up to 20 patients
in the second stage. In October 2009, after enrolling five patients in this clinical trial, we placed the clinical trial on administrative
hold due to our limited capital resources. We have engaged a clinical research organization (“CRO”) in France to do
additional pre-clinical in-vitro evaluations of Cordycepin and the ADA inhibitor Pentostatin with the intent of gaining a better
understanding of the inhibition effects of Pentostatin on Cordycepin. We are in the process of reinitiating the Phase I/II clinical
trial to determine the maximum tolerated dose, and expect to start enrolling patients in 2015 if additional financing is available.
We have completed Good Laboratory Practice
(“GLP”) animal drug safety studies in two species for our lead drug candidate from the L-nucleoside conjugate program
(OVI-117). We have accumulated in vitro and in vivo data indicating that several of the L-nucleoside conjugates
are effective against various types of cancer. To date, OVI-117 has undergone two proof-of-concept studies of human cancers in
animal models, as both a single agent and as a multi-agent combination therapy with oxaliplatin. The Investigational New Drug
application (IND) was submitted to the FDA on June 2, 2012 and approved by the FDA on July 5, 2012. We engaged a contract manufacturer
and a clinical batch of OVI-117 is available for use in our proposed Phase 1 trial. The clinical protocol has been written and
a principal investigator engaged. We believe that OVI-117 should be ready to enter Phase I clinical trials in 2015 if additional
financing is available.
Research and development expenditures
for the above projects totaled approximately $669,000 and $901,000 for the years ended 2014 and 2013, respectively.
We expect we will incur additional expenses of between $2.0 million to $3.0 million to complete the current phases of development
for the projects described above.
Other Research and Development Plans
In addition to conducting Phase I and
Phase II clinical trials, we plan to conduct pre-clinical research to accomplish the following:
| |
· |
further deepen and broaden
our understanding of the mechanism of action (MoA) of our products in cancer; |
| |
· |
develop alternative delivery systems
and determine the optimal dosage for different patient groups; |
| |
· |
demonstrate proof of concept in animal
models of human cancers; and |
| |
· |
develop successor products to our current
products. |
Other Strategic Plans
In addition to developing our existing
anti-cancer drug portfolio, we plan to obtain rights to additional drug candidates or diagnostic technologies through licensing,
partnerships, and mergers/acquisitions. Our efforts in this area will, of course, be guided by business considerations (cost of
the opportunity, fit with existing portfolio, etc.) as well as input from our clinical advisory board regarding likelihood of
successful clinical development and marketing approval. Our goal is to create a well-balanced product portfolio including lead
molecules in different stages of development and addressing different medical needs.
Critical
Accounting Policies
We have identified the policies below
as critical to our business operations and the understanding of our results of operations. The impact and any associated risks
related to these policies on our business operations are disclosed throughout this section where such policies affect our reported
and expected financial results. The preparation of our financial statements requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial
statements, and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual
results will not differ from those estimates.
OncoVista Innovative Therapies, Inc.
Revenue Recognition. While we have
not recognized revenues from continuing operations, we anticipate that future revenues will be generated from product sales. We
expect to recognize revenue from product sales in accordance with SEC, Staff Accounting Bulletin (“SAB”) No. 104,
“Revenue Recognition” that requires we recognize revenue when each of the following four criteria is met: 1) a contract
or sales arrangement exists; 2) products have been shipped or services have been rendered; 3) the price of the products or services
is fixed or determinable; and 4) collectability is reasonably assured. We anticipate that our customers will have no right of
return for products sold. Revenues will be considered to be earned upon shipment.
Share-Based Compensation. We follow
Accounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation” which requires
the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including
grants of employee stock options based on estimated fair values. We have used the Black-Scholes option pricing model to estimate
grant date fair value for all option grants. The assumptions we use in calculating the fair value of share-based payment
awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of
management judgment. As such, as we use different assumptions based on a change in factors, our stock-based compensation expense
could be materially different in the future.
Results of Operations
Years Ended December 31, 2014 and 2013
Research and development. Research
and development expenses decreased by approximately $231,000, or 26%, to approximately $669,000 for the year ended December 31,
2014, as compared to approximately $901,000 for the year ended December 31, 2013. The decrease in 2014 is primarily
due to reduced activities in the Phase 1 trials due to a lack of sufficient capital.
General and administrative.
General and administrative expenses increased by approximately $1,255,000, or 202%, to approximately $1,876,000 for the year
ended December 31, 2014, as compared to approximately $622,000 for the year ended December 31, 2013. The increase was
due primarily to higher legal expenses and a settlement fee of $1,150,000 accrued at year end.
We expect general and administrative expense
in 2015 to increase primarily due to an increase in salaries and benefits as we anticipate additional headcount in 2015 to support
operations, and stock compensation expense for any restricted stock, options, or warrants granted during the year. Additionally,
we expect to continue to utilize external consultants to provide staff augmentation.
Other Income (Expense). Other income
decreased by approximately $72,000, or 98 %, to income of approximately $1,000 for the year ended December 31, 2014 compared to
income of approximately $73,000 for the year ended December 31, 2013. The decrease is due primarily to no derivative liability
arising from the warrants that were issued in 2009. These warrants expired in 2014.
Going Concern and Recent Events
Our consolidated financial statements
for the year ended December 31, 2014 have been prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of business. We reported a net loss of approximately
$2.5 million, and net cash used in operations of approximately $232,000 for the year ended December 31, 2014, an accumulated deficit
of approximately $25.9 million and a total deficit of approximately $5.7 million at December 31, 2014. The Report of the Independent
Registered Public Accounting Firm on the Company’s consolidated financial statements as of and for the year ended December
31, 2014 includes a “going concern” explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern.
Our ability to continue as a going concern
depends on the success of management’s plans to achieve the following:
| |
· |
Continue to aggressively
seek investment capital; |
| |
· |
Develop our product pipeline; |
| |
· |
Advance scientific progress in our
research and development; and |
| |
· |
Continue to monitor and implement cost
control initiatives to conserve cash. |
Liquidity and Capital Resources
At December 31, 2014, we had cash and
cash equivalents of approximately $13,000 compared to approximately $45,000 at December 31, 2013. In order to preserve principal
and maintain liquidity, our funds are primarily invested with the primary objective of capital preservation. Based on our current
projections, we believe that our available resources and cash flows are sufficient to meet our anticipated operating cash needs
for the next month. Our ability to continue as a going concern is dependent our ability to further implement our strategic
plan, continue to obtain additional debt and/or equity financing, and generate revenues from collaborative agreements.
To date, we have financed our operations
principally through proceeds of offerings of securities exempt from the registration requirements of the Securities Act. We can
provide no assurance that additional funding will be available on terms acceptable to us, or at all. Accordingly, we may not be
able to secure the funding which is required to expand research and development programs beyond their current levels or at levels
that may be required in the future. If we cannot secure adequate financing, we may be required to delay, scale back or eliminate
one or more of our research and development programs or to enter into license or other arrangements with third parties to commercialize
products or technologies that we would otherwise seek to develop and commercialize ourselves. Our future capital requirements
will depend upon many factors, including:
| |
· |
Continued scientific progress
in our research and development programs; |
| |
· |
Costs and timing of conducting clinical
trials and seeking regulatory approvals and patent prosecutions; |
| |
· |
Competing technological and market
developments; and |
| |
· |
Our ability to establish additional
collaborative relationships. |
Accordingly, we may be required to issue
equity or debt securities or enter into other financial arrangements, including relationships with corporate and other partners,
in order to raise additional capital. Depending upon market conditions, we may not be successful in raising sufficient additional
capital for our short or long-term requirements. In such event, our business, prospects, financial condition, and results of operations
would be materially adversely affected.
Operating Activities.
For the year ended December 31, 2014, net cash used in operations decreased $234,000, or 50% to approximately $232,000
compared to approximately $467,000 for the year ended December 31, 2013. The decrease was primarily due to the reduced activities
in the clinical development of our agents due to lack of sufficient capital to start our Phase 1 trials.
Investing Activities.
There was no cash provided by or used in investing activities for years ended December 31, 2014 or 2013.
Financing Activities.
For the year ended December 31, 2014 net cash provided by financing activities increased by $200,000 compared to nil for
the year ended December 31, 2013. The increase is attributed to bridge loan of $200,000 raised during the period.
Recent Accounting Pronouncements
The Company continually
assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement
affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to
its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s
consolidated financial statements properly reflect the change.
In May 2014,
FASB issued ASU No. 2014-09 “Revenue from Contracts from Customers,” which supersedes the revenue recognition requirements
in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue in a way that depicts the transfer
of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
to the exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2016, and is to be applied retrospectively, with early adoption not permitted. The Company is currently
evaluating the new standard and assessing the potential impact on its operations and financial statements.
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We are a smaller reporting company as
defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements
and notes thereto and the related independent public accounting firm report for OncoVista Innovative Therapies, Inc. and Subsidiaries
are attached to this Annual Report beginning at Page F-1.
ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A – CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
As of December 31, 2014, the end of the
period covered by this report, we conducted, under the supervision and with the participation of our management, including our
Chief Executive Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures
(as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) in ensuring that information required to be disclosed by us
in our reports is recorded, processed, summarized and reported within the required time periods. Based on the foregoing, our Chief
Executive Officer concluded that because of the material weakness in internal control over financial reporting described below,
our disclosure controls and procedures were not effective as of December 31, 2014.
Management’s Annual Report on Internal Control over
Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our internal control
system is a process designed by, or under the supervision of, our principal executive and principal financial officer, or persons
performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles (“U.S. GAAP”).
Our internal control
over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are
being made only in accordance with the authorization of our management and directors; and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
on our consolidated financial statements.
Because of our inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2014. In making this assessment we used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.
As a result of its assessment, management identified a material weakness in our internal control over financial reporting. Based
on the material weaknesses as described below, management concluded that our internal control over financial reporting was not effective
as of December 31, 2014.
A material weakness
is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that, there is a reasonable
possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a
timely basis. As a result of our assessment, management identified the following material weaknesses in internal control over
financial reporting as of December 31, 2014:
| |
· |
While there were internal
controls and procedures in place that relate to financial reporting and the prevention and detection of material misstatements,
these controls did not meet the required documentation and effectiveness requirements under the Sarbanes-Oxley Act (“SOX
”) and therefore, management could not certify that these controls were correctly implemented. As a result, it was
management’s opinion that the lack of documentation warranted a material weakness in the financial reporting process. |
| |
· |
Our disclosure controls
and procedures were not effective to ensure that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under
the Exchange Act is accumulated and communicated to our management, including our Chief Financial Officer, as appropriate
to allow timely decisions. Inadequate controls include the lack of procedures used for identifying, determining, and calculating
required disclosures and other supplementary information requirements. |
| |
· |
There is lack of segregation
of duties in financial reporting, as our financial reporting and all accounting functions are performed by a consultant. This
weakness is due to our lack of working capital to hire additional staff during the period covered by this report. We intend
to hire additional accounting personnel to assist with financial reporting as soon as our finances will allow. |
Remediation of Material Weaknesses
Due to the increasing number and complexity
of pronouncements, emerging issues and releases, and reporting requirements and regulations, we expect there will continue to
be some risk related to financial disclosures. However, the process of identifying risk areas and implementing financial disclosure
controls and internal controls over financial reporting required under the SOX continues to be complex and subject to significant
judgment and may result in the identification in the future of areas where we may need additional resources. Additionally, due
to the complexity and judgment involved in this process, we cannot guarantee that we will not find or have pointed out to us either
by internal or external resources, additional areas needing improvement or resulting in a future assessment that our controls
are or have become ineffective as a result of overlooked or newly created significant deficiencies or unmitigated risks.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial
reporting that occurred during the year ended 2014 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
ITEM 9B – OTHER INFORMATION
None.
PART III
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE
Directors and Executive Officers
Our directors and executive officers are
as follows:
| Name |
|
Age |
|
Position |
| |
|
|
|
|
| Alexander L. Weis, Ph.D. |
|
65 |
|
Chairman of the Board of Directors,
Chief Executive Officer, President, Chief Financial Officer and Secretary |
| Alexander Ruckdaeschel |
|
42 |
|
Director, Audit Committee Member, Compensation
Committee Member |
| William J. Brock |
|
65 |
|
Director, Audit Committee Chairman,
Compensation Committee Chairman |
Set forth below is biographical information with respect
to each of the aforementioned individuals.
Alexander L. Weis, Ph.D. Dr. Weis has served as a member
of our board, Chief Executive Officer, President and Secretary since August 2007, and our Chief Financial Officer since
August 2009. Dr. Weis is the principal founder of OncoVista-Sub and has been its Chairman, Chief Executive Officer,
and President since its inception in September 2004. Since February 2009, Dr. Weis also serves as AdnaGen’s Chief
Executive Officer. Dr. Weis is a recognized leader and pioneer in the biotechnology and pharmaceutical industries and has led
pharmaceutical companies through all stages from start-up through public offerings and as a manager of a substantial public company.
Prior to forming our company, from 1989 to September 2004, Dr. Weis served as President of Lipitek International, Inc., a specialty
pharmaceutical company that Dr. Weis founded. Dr. Weis was a co-founder of ILEX Oncology, which became a publicly traded company
in 1997 (NASDAQ: ILXO) and was later acquired by Genzyme Corporation in a stock transaction valued at over $1 billion.
Dr. Weis served as ILEX’S Chief Scientific Officer and Executive Vice President from its founding in 1994 through 1998.
Dr. Weis has worked for Vector Therapeutics, MykoBiologics, the Cancer Therapy and Research Center, Sterling Drugs, the Eastman
Kodak Company and the Weizmann Institute of Science. Dr. Weis received his Ph.D. in Organic Chemistry from the Novosibirsk Institute
of Organic Chemistry. Dr. Weis is a scientist and inventor, with over 60 publications and 30 patents. He is a Chartered Chemist
and Fellow of the Royal Society of Chemistry, and was selected as the South Texas Entrepreneur of the Year in 1996.
Alexander Ruckdaeschel. Alexander Ruckdaeschel has
served as a member of our board since December 2007, as a member of OncoVista-Sub's board since January 2005 and as
a member of our Audit Committee and Compensation Committee since March 28, 2008. Mr. Ruckdaeschel is a venture capitalist
and, since August 2012, he is Managing Partner of Herakles Capital Management. From September 2006 to August 2012, he was a
partner at Alphaplus-Advisors, a U.S. based hedge fund. From January 2003 to September 2006, he was a Fund Advisor at
DAC-FONDS, a European Investment company specializing in small-cap Biotech equities worldwide. From December 2003 to July
2006, he was an investment advisor to Nanostart AG, one of Europe’s leading venture investment firms in the area of
nanotechnology. Mr. Ruckdaeschel has extensive experience in the European solar industry. He also serves on the board of
directors for several private companies. Prior to 2003, he was a research analyst with Dunmore Management, a global hedge
fund, and Thieme Associates, an investment advisor. From 1992 to 2000 Mr. Ruckdaeschel served in the German military,
participating in United Nations missions in Somalia, Croatia, and Bosnia.
William J. Brock. Mr. Brock has served on our board
since December 2007, the board of OncoVista-Sub since September 2007, and as Chairman of our Audit Committee and Compensation
Committee since March 28, 2008. Currently, Mr. Brock is the CEO of Iron Rock LLC, a financial services firm that he founded
that focuses on alternative investment products and their distribution, investment banking advisory and consulting services and
asset management. From August 2007 to December 2009, Mr. Brock served as the President of iPro One, a financial services
firm. From July 2004 to August 2007, Mr. Brock was a vice president for private client services at Bear Stearns. From November
2002 to July 2004, Mr. Brock was a director of Houlihan, Lokey, Howard, and Zukin, an investment banking firm. From 2001 to 2002,
Mr. Brock was Managing Director of Liberty Hampshire Corporation, New York, a diversified financial institution. Mr. Brock holds
a Bachelor of Arts degree cum laude from Harvard College, and an M.B.A. from the Harvard University Graduate School of Business
Administration.
On February 11, 2014, Michael F. Moloney, Chief
Operating Officer has resigned from the Company.
Board of Directors and Officers
Each director is elected until our next annual meeting and
until their successor is duly elected and qualified. The Board of Directors may also appoint additional directors up to the maximum
number permitted under our by-laws. A director so chosen or appointed will hold office until the next annual meeting of stockholders.
Each executive officer serves at the discretion of the Board of Directors and holds office until their successor is elected or
until their resignation or removal in accordance with our articles of incorporation and by-laws.
Messrs. Ruckdaeschel and Brock are considered independent directors
under Rule 4200(a)(15) of the Nasdaq Marketplace Rules, even though such definition does not currently apply to us as we are not
listed on Nasdaq.
Meetings and Committees of the Board of Directors
During the year ended December 31, 2014, our Board of Directors
held no meeting.
Committees of the Board of Directors
On March 28, 2008, we established an Audit Committee and a
Compensation Committee. Messrs. Brock and Ruckdaeschel serve on both committees with Mr. Brock serving as Chairman of both committees,
as well as being deemed the “audit committee financial expert.”
The committees are responsible, respectively, for the matters
described below.
Audit Committee
The Audit Committee is responsible for the following:
| |
· |
reviewing the results of the audit engagement
with the independent auditors; |
| |
· |
identifying irregularities in the management of our business in
consultation with our independent accountants, and suggesting an appropriate course of action; |
| |
· |
reviewing the adequacy, scope, and results of the internal accounting
controls and procedures; |
| |
· |
reviewing the degree of independence of the auditors, as well as
the nature and scope of our relationship with our independent auditors; |
| |
· |
reviewing the auditors’ fees; and |
| |
· |
recommending the engagement of auditors to the full Board of Directors. |
A charter has been adopted to govern the Audit Committee. A
copy of the charter can be found on our website at www.oncovista.com. The contents of our website, other than our Audit
and Compensation Committee Charters, are not incorporated into this Report.
Compensation Committee
The Compensation Committee determines the salaries and incentive
compensation of our officers and provides recommendations for the salaries and incentive compensation of our other employees and
consultants.
Our compensation programs to date are intended to enable the
attraction, motivation, reward, and retention of the management talent required to achieve corporate objectives and thereby increase
shareholder value. It has been our policy to provide incentives to our senior management to achieve both short-term and long-term
objectives and to reward exceptional performance and contributions to the development of our business. To attain these objectives,
the executive compensation program may include a competitive base salary, cash incentive bonuses, and stock-based compensation.
The Compensation Committee will establish on an annual basis,
subject to the approval of our Board of Directors and any applicable employment agreements, the salaries that will be paid to
our executive officers during the coming year. In setting salaries, the compensation committee intends to take into account several
factors, including the following:
| |
· |
competitive compensation data; |
| |
· |
the extent to which an individual may participate in the stock
plans which may be maintained by us; and |
| |
· |
qualitative factors bearing on an individual’s experience,
responsibilities, management, and leadership abilities, and job performance. |
A charter has been adopted to govern the Compensation Committee.
A copy of the charter can be found on our website at www.oncovista.com. The contents of our website, other than
our Audit and Compensation Committee Charters, are not incorporated into this Report.
Clinical Advisory Board
We maintain a clinical advisory board
consisting of internationally recognized physicians and scientists who advise us on scientific and technical aspects of our business. The
clinical advisory board meets periodically to review specific projects and to assess the value of new technologies and developments
to us. In addition, individual members of the scientific advisory board meet with us periodically to provide advice
in particular areas of expertise. The clinical advisory board consists of the following members:
Eric Rowinsky, M.D. – Chairman. Dr.
Rowinsky is a talented scientific executive with 20-plus years of experience in drug development in the oncology area. He
has authored approximately 300 scientific articles and 50 textbook chapters. Dr. Rowinsky has led numerous clinical
trials for oncology drugs and is a recognized leader in the field. His prior affiliations include the Johns Hopkins
University School of Medicine, the University of Texas Health Science Center at San Antonio and the Institute for Drug Development
in San Antonio. He played a key role in the development of Taxol®, Hycamtin®, Tarceva®, Erbitux®, and
many other anticancer drugs. Dr. Rowinsky is currently Executive Vice President and Chief Medical Officer at ImClone
Systems, Inc., a wholly owned subsidiary of Eli Lilly & Co and an adjunct Professor of Medicine at New York University.
Esteban Cvitkovic, M.D. Dr. Cvitkovic
is a board-certified, medical oncologist who practices medicine in Paris, France. Dr. Cvitkovic has more than 30 years
of international experience in oncology therapeutics including hands-on clinical research, clinical pharmacology, early single
agent and combination regimens development, disease-oriented therapeutic impact assessment, evaluating new agents in pre-clinical
development, and optimizing efficacy and combination development. Dr. Cvitkovic is author of more than 160 peer-reviewed
articles and 450 abstracts focusing on solid tumor oncology. He led the clinical development of cisplatin and its combinations
as well as oxaliplatin, vindesine, bleomycin, navelbine, and ET-743. He played key consulting roles in registration
strategy and post-registration development of recent products such as amifostine, docetaxel, CPT-11, and irofulven. Dr.
Cvitkovic’s career includes staff and academic appointments at Memorial Sloan-Kettering Cancer Center, Columbia Presbyterian
Medical Center, Institut Gustave Rooury (Villejuif, France), Hôpital Paul Brooure (Villejuif, France) and Hôpital
St. Louis (Paris).
Ronald P. McCaffrey, M.D. Dr. McCaffrey
is a Lecturer in Medicine at the Harvard Medical School and a Clinical Associate in Medicine, Hematology-Oncology Division at
The Brigham & Women's Hospital and Dana-Farber Cancer Institute. Dr. McCaffrey has written over 90 publications
and has co-edited two books. In all, Dr. McCaffrey has 35-plus years of experience in his specialty.
Pedro Santabárbara, M.D., Ph.D.
Dr. Santabárbara is currently Vice President of Strategic Development and Medical Affairs at PHARMA MAR S.A. He
received his M.D. and Ph.D. degrees from the University of Barcelona. He has authored over 80 articles and abstracts
in the field of oncology and has participated in a variety of hospital and academic activities as well. He has worked
for Bristol Myers Squibb (Taxol® team), Rhône–Poulenc Rorer (Taxotere® team), ILEX Oncology (Campath®
team), Gilead Pharmaceuticals and, most recently, OSI Pharmaceuticals (Tarceva® team). He is one of the most experienced
developers of anticancer drugs.
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Exchange Act requires
our directors, officers and persons who own more than 10% of a registered class of our equity securities to file with the SEC
initial reports of ownership and reports of changes in ownership of common stock and other equity securities. Officers,
directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms
they file.
To the best of our knowledge, no delinquencies
occurred.
ITEM 11 – EXECUTIVE COMPENSATION
Executive Compensation
The following table sets forth the compensation earned during
the years ended December 31, 2014 and 2013 by our current Chief Executive Officer and our only other officer. We refer to such
individuals as “named executive officers”:
Name and Principal
| |
Year | | |
Salary | | |
Bonus | | |
Stock
Awards | | |
Option
Awards | | |
Non-Equity Incentive Plan
Compensation | | |
Non-qualified Deferred
Compensation | | |
All Other
Compensation | | |
Total | |
| Position | |
(1) | | |
($) | | |
($) | | |
($) | | |
($)(2) | | |
($) | | |
($) | | |
($) | | |
($) | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Alexander L. Weis, Ph.D.
Chief Executive
Officer, | |
| 2014 | | |
| 310,000 | | |
| | | |
| — | | |
| | | |
| | | |
| | | |
| 12,000 | (3) | |
| 322,000 | |
| President, Chief Financial Officer and Secretary | |
| 2013 | | |
| 310,000 | | |
| | | |
| — | | |
| | | |
| | | |
| | | |
| 12,000 | (3) | |
| 322,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Michael F. Moloney | |
| 2014 | | |
| 22,500 | | |
| | | |
| — | | |
| | | |
| | | |
| | | |
| 450 | (3) | |
| 22,950 | |
| Chief Operating Officer | |
| 2013 | | |
| 180,000 | | |
| | | |
| — | | |
| | | |
| | | |
| | | |
| 3,600 | (3) | |
| 183,600 | |
| (1) |
The information is provided
for each fiscal year which begins on January 1 and ends on December 31. |
| (2) |
The amounts reflect the compensation
expense in accordance with ASC 718 of these option awards. The assumptions used to determine the fair value of the option
awards for fiscal years ended December 31, 2014 and 2013 are set forth in Note 11 of our audited consolidated financial statements
included in this Annual Report on Form 10-K. Our named executive officers will not realize the value of these awards in cash
unless and until these awards are exercised and the underlying shares subsequently sold. |
| (3) |
See “All Other Compensation”
table below. |
All Other Compensation Table
All Other Compensation amounts in the
Summary Compensation Table above consist of the following:
| Name | |
Year | |
Automobile
Allowance
($) | | |
Medical
Premiums ($) | | |
Other
($) | | |
Total
($) | |
| Alexander L. Weis, Ph.D. | |
| |
| | | |
| | | |
| | | |
| | |
| Chief Executive Officer, President, Chief | |
2014 | |
| 12,000 | | |
| — | | |
| — | | |
| 12,000 | |
| Financial Officer, and Secretary | |
2013 | |
| 12,000 | | |
| — | | |
| — | | |
| 12,000 | |
| | |
| |
| | | |
| | | |
| | | |
| | |
| Michael F. Moloney | |
2014 | |
| 450 | | |
| — | | |
| — | | |
| 450 | |
| Chief Operating Officer | |
2013 | |
| 3,600 | | |
| — | | |
| — | | |
| 3,600 | |
The following table sets forth information
concerning stock options and stock awards held by the named executive officers as of December 31, 2014.
| |
|
Option Awards |
|
Stock Awards |
|
| Name |
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable |
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable |
|
|
Equity
Incentive
Plan Awards
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) |
|
Option
Exercise
Price
($) |
|
Option
Expiration
Date |
|
Number of
Shares or
Units of
Stock
Held That
Have Not
Vested
(#) |
|
|
Market
Value of
Shares or
Units of
Stock
Held
That Have
Not
Vested
($) |
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested (#) |
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That
Have Not
Vested ($) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Alexander L. Weis, Ph.D. Director, CEO, President,
CFO and Secretary |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Michael F. Moloney |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Chief Operating Officer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Employment Agreements
We are party to an employment agreement, dated October 1, 2004,
with Alexander L. Weis, Ph.D., pursuant to which we have agreed to employ Dr. Weis as our Chief Executive Officer and Chairman
of the Board for a four-year initial term, with one-year renewable terms, for base salary of $250,000 per year, subject to adjustment,
plus a $1,000 per month car allowance. Dr. Weis’ current base salary is $310,000 per annum. Dr. Weis is entitled
to receive an annual cash bonus up to 40% of his base salary, provided that we meet certain performance objectives established
by the Board of Directors. Dr. Weis is also entitled to a bonus upon our satisfaction of certain specified milestones. If Dr.
Weis’ employment is terminated as a result of his death or disability, he (or in the case of his death, his estate) is entitled
to severance of one year’s base salary, one year’s health insurance coverage for his wife and dependent children and,
in the case of termination as a result of disability, one year’s health insurance coverage for Dr. Weis. If Dr. Weis’
employment is terminated without cause, he is entitled to one year’s base salary and one year’s health and life insurance
that were in effect prior to his termination. No severance is payable if Dr. Weis’ employment is terminated for cause or
if Dr. Weis’ resigns, retires or otherwise terminates his employment voluntarily.
To assist us in conserving our cash, from January 1, 2009,
we paid one-half, but accrued the other half of the salaries of the former employees of our U.S. operating company, OncoVista-Sub,
through May 15, 2009, which are included in accrued liabilities on our consolidated balance sheet at December 31, 2014.
Stock Option Plans
We have adopted the following stock option plans:
2007 Stock Option Plan
In June 2007, OncoVista-Sub’s Board of Directors adopted
the 2007 Stock Option Plan (the “2007 Plan”). The Plan authorizes the grant of incentive stock options, non-qualified
stock options, and stock purchase rights (“Right ”) with respect to up to an aggregate of 3,000,000 shares
of our common stock to our employees and directors or our subsidiaries and individuals, including consultants, performing services
for our benefit or for the benefit of a subsidiary. As a result of the Merger, the 2007 Plan was adopted by our Board of Directors
and all options granted under the 2007 Plan were assumed by us. As of April 14, 2015, 869,000 non-qualified options under
the 2007 Plan were issued.
Unless earlier terminated by the Board of Directors, the Plan
(but not outstanding options or Rights) terminates in May 2017, after which no further awards may be granted under the 2007 Plan.
The 2007 Plan will be administered by the full Board of Directors or, at the board’s discretion, by a committee of the board
consisting of at least two persons who are “disinterested person ” defined under Rule 16b-2(c)(ii) under the
Exchange Act (the “Committee”).
Options and Rights. Recipients of options or Rights
under the Plan (“Optionees”) are selected by the board or the Committee. The board or Committee determines
the terms of each option or right granted including (1) the purchase price of shares subject to options or Rights, (2) the dates
on which options or Rights become exercisable and (3) the expiration date of each option or Right (which may not exceed ten years
from the date of grant). The minimum per share purchase price of options granted under the 2007 Plan for Incentive Stock Options
is the fair market value (as defined in the 2007 Plan) of one share of our common stock on the date the option is granted.
The Administrator may grant alone, in addition to or in tandem
with options granted under the 2007 Plan, to eligible persons Rights to purchase options for such number of shares of our common
stock at the price, within the period and subject to the conditions set forth in the award. The purchase is to be effected by
execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator which may at the Administrator’s
option grant us the right to repurchase the shares acquired at the original price paid in the event of the voluntary or involuntary
termination of the purchaser’s service for any reason. The agreement may provide that the repurchase option lapses in whole
or installments as to a service provider other than an officer, director, or consultant, at a rate of at least 20% per annum over
five years from the date of purchase.
Option and Rights holders have no voting, dividend or other
rights as stockholders with respect to shares of our Common Stock covered by options or Rights prior to becoming the holders of
record of such shares. The purchase price upon the exercise of options or Rights may be paid as determined by the Administrator
at the time of exercise in cash, by certified bank, cashier’s check or promissory note, by tendering stock held by the Option
or Rights holders, as well as by cashless exercise either through the surrender of other shares subject to the option or through
a broker. The total number of shares of our common stock available under the 2007 Plan and the number of shares and per share
exercise price under outstanding options and Rights will be appropriately adjusted in the event of any stock dividend, reorganization,
merger or recapitalization or a similar corporate event.
The Board of Directors may at any time terminate the 2007 Plan
or from time to time make such modifications or amendments to the 2007 Plan as it may deem advisable and the board or Committee
may adjust, reduce, cancel and re-grant an unexercised option if the fair market value declines below the exercise price except
as may be required by any national stock exchange or national market association on which our common stock is then listed. In
no event may the board, without the approval of stockholders, amend the 2007 Plan to increase the maximum number of shares of
our common stock for which options or Rights may be granted under the 2007 Plan or change the class of persons eligible to receive
options or Rights under the 2007 Plan.
Subject to limitations set forth in the 2007 Plan, the terms
of option and Rights agreements will be determined by the board or Committee but may not be longer than ten years, and need not
be uniform.
2007 Independent Directors’ Plan
In June 2007, OncoVista-Sub’s Board of Directors adopted
the 2007 Stock Option Plan for Independent and Non-Employee Directors (the “Directors Plan”) for the purpose
of promoting our interests and those of our stockholders by increasing the proprietary and vested interest of such Directors in
our growth and performance. As a result of the Merger, our Board of Directors assumed the Directors Plan and all options
granted under the Directors Plan were assumed by us.
The Directors Plan relates to a maximum of 500,000 shares of
our common stock for which options may be granted to Eligible Directors who are defined as Independent or Non-Employee Directors.
An Independent Director is defined under the Directors Plan as a director meeting the requirements of Section 10A(m) under the
Exchange Act and as defined by any exchange or market on which the common stock is traded or is listed. A Non-Employee Director
is defined by reference to our definition in Rule 16b-3 under the Exchange Act. As of April 14, 2015, 32,500 options were issued
under the Directors Plan. The Directors Plan is to be administered by the board of directors or the Compensation Committee of
the board of directors, which is authorized to adopt, interpret, and amend regulations under the Directors Plan.
The Directors Plan specifies that each newly elected Independent
or Non-Employee Director (“Eligible Director”) upon first election or appointment to the board will receive
options to purchase 10,000 shares and immediately following each Annual Meeting of Stockholders each director who has been an
Eligible Director for more than 12 months immediately preceding and including such meeting and the Chairman of the Board, if an
Eligible Director, for the same period shall be granted an additional option to purchase 15,000 shares.
The exercise price of an option is to be the Fair Market Value,
as defined in the Directors Plan. Payment shall be made in cash or unless otherwise determined by the board of directors, in shares
of our common stock. The option may be exercised in whole or in part during the period commencing on the first anniversary of
the grant date and ending on the date of termination of the option, which is the earlier of a date one year from the date the
optionee is no longer a Director or ten years from the date of grant.
The Directors Plan provides for adjustment in the exercise
price and shares subject to the Directors Plan and outstanding options in the event of a stock split, stock dividend, subdivision
or combination of the common stock or change in corporate structure.
2004 Stock Option Plan
In October 2004, OncoVista-Sub’s Board of Directors adopted
the 2004 Stock Option Plan (the “2004 Plan”). As a result of the Merger, our Board of Directors assumed the
2004 Plan and all options granted under the 2004 Plan were assumed by us. The 2004 Plan authorized the grant of options with respect
to up to an aggregate of 1,000,000 shares of our common stock to our employees, directors and consultants or to our affiliates.
As of April 14, 2015, 480,000 non-qualified options were issued under the 2004 Plan.
As the 2004 Plan was never approved by the shareholders, we
have only granted non-qualified options under the 2004 Plan. As such, the 2004 Plan permits us to grant only options
which do not qualify as incentive stock options (“Non-Qualified Options”). The 2004 Plan was terminated in
October 2014.
Financial Statement Treatment of Options. We expense
the fair equity-based awards, such as stock options and warrants, granted in accordance with accounting principles generally accepted
in the United States of America, in an amount equal to the fair value of the vested portion of the options as Rights using the
Black-Scholes option pricing method on each grant date. Modifications such as lowering the exercise prices or extending the expiration
dates could also result in material additions to our non-cash expenses.
To the extent outstanding options or Rights are repriced, such
repricing will result in charges to our earnings equal to the difference between (i) the fair value of the vested portion of the
options or Rights granted, utilizing the Black-Scholes option pricing model on each grant date and (ii) the charges to earnings
previously made as a result of the initial grants of the options or Rights being repriced, which will have a dilutive effect on
the earnings per share.
Federal Income Tax Consequences. The following is a
brief discussion of the Federal income tax consequences of transactions under the 2004 Plan and 2007 Plan. This discussion is
not intended to be exhaustive and does not describe state or local tax consequences.
Incentive Options. No taxable income is realized by
the optionee upon the grant or exercise of an ISO, except as noted below with respect to the alternative minimum tax provided
no reduction in the exercise price has been made since the date of grant except as a result of an anti-dilution event. If
common stock is issued to an optionee pursuant to the exercise of an ISO, and if no disqualifying disposition of such shares is
made by such optionee within two years after the date of grant or within one year after the transfer of such shares to such optionee,
then (i) upon sale of such shares, any amount realized in excess of the option price will be taxed to such optionee as a long-term
capital gain and any loss sustained will be a long-term capital loss, and (ii) no deduction will be allowed to the optionee’s
employer for Federal income tax purposes.
Except as noted below for corporate “insiders,”
if our common stock acquired upon the exercise of an ISO is disposed of prior to the expiration of either holding period described
above, generally (i) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if
any) of the fair market value of such shares at exercise (or, if less, the amount realized on the disposition of such shares)
over the option price paid for such shares and (ii) the optionee’s employer will be entitled to deduct such amount for Federal
income tax purposes if the amount represents an ordinary and necessary business expense. Any further gain (or loss) by the optionee
will be taxed as short-term or long-term capital gain (or loss), as the case may be, and will not result in any deduction by the
employer.
Subject to certain exceptions for disability or death, if an
ISO is exercised more than three months following termination of employment, the exercise of the option will generally be taxed
as the exercise of a Non-Qualified Option.
For purposes of determining whether an optionee is subject
to any alternative minimum tax liability, an optionee who exercises an ISO generally would be required to increase his or her
alternative minimum taxable income, and compute the tax basis in the stock so acquired, in the same manner as if the optionee
had exercised a Non-Qualified Option. Each optionee is potentially subject to the alternative minimum tax. In substance, a taxpayer
is required to pay the higher of his/her alternative minimum tax liability or his/her “regular” income tax
liability. As a result, a taxpayer has to determine his potential liability under the alternative minimum tax.
Non-Qualified Options. Except as noted below for corporate
“insiders,” with respect to Non-Qualified Options: (i) no income is realized by the optionee at the time the
option is granted; (ii) generally, at exercise, ordinary income is realized by the optionee in an amount equal to the difference
between the option price paid for the shares and the fair market value of the shares, if unrestricted, on the date of exercise,
and the optionee’s employer is generally entitled to a tax deduction in the same amount subject to applicable tax withholding
requirements; and (iii) at sale, appreciation (or depreciation) after the date of exercise is treated as either short-term or
long-term capital gain (or loss) depending on how long the shares have been held.
Special Rules Applicable To Corporate Insiders. As a
result of the rules under Section 16(b) of the Exchange Act, “insiders” (as defined in the Exchange Act), depending
upon the particular exemption from the provisions of Section 16(b) utilized, may not receive the same tax treatment as set forth
above with respect to the grant and/or exercise of options. Generally, insiders will not be subject to taxation until the expiration
of any period during which they are subject to the liability provisions of Section 16(b) with respect to any particular option.
Insiders should check with their own tax advisers to ascertain the appropriate tax treatment for any particular option.
Benefits. Inasmuch as awards to all participants under
the 2004 Plan and 2007 Plan will be granted at the sole discretion of the board or Committee, such benefits under the 2004 Plan
and 2007 Plan, as applicable, are not determinable.
We believe that the 2004 Plan and 2007 Plan are important in
attracting and retaining individuals with good ability to service us, motivating their efforts and serving our business interests,
while reducing the cash payments which we would otherwise be required to make to accomplish such purposes.
Director Compensation
Independent members of our Board of Directors are entitled
to $3,500 quarterly as remuneration for service as a member of the board plus reimbursement for travel expenses. The following
table sets forth director compensation for the year ended December 31, 2014.
| Name of Director | |
Fees Earned or
Paid in Cash
($) | | |
Stock Awards
($) | | |
Option Awards
($) | | |
Non-Equity
Incentive Plan
Compensation
($) | | |
Nonqualified
Deferred
Compensation
($) | | |
All Other
Compensation
($) | | |
Total
($) | |
| Alexander L. Weis, Ph.D.(1) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Alexander Ruckdaeschel | |
| 14,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 14,000 | |
| William Brock | |
| 14,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 14,000 | |
| (1) |
Please refer to the summary compensation table
for executive compensation with respect to the named individual. |
ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding
our shares of outstanding common stock beneficially owned as of the date hereof by (i) each of our directors and executive officers,
(ii) all directors and executive officers as a group, and (iii) each other person who is known by us to own beneficially more
than 5% of our common stock based upon 22,012,896 issued shares of common stock.
| Name and Address of Beneficial Owners(1) | |
Amount and Nature of Beneficial Ownership | | |
| |
| Alexander L. Weis, Ph.D., Director, Chief Executive Officer, President, Chief Financial Officer and Secretary | |
| 5,356,200 | (3) | |
| 24.3 | % |
| Alexander Ruckdaeschel, Director | |
| 170,000 | (4) | |
| * | |
| William J. Brock, Director | |
| 165,000 | (5) | |
| * | |
| Michael Moloney, Chief Operating Officer | |
| 595,800 | (6) | |
| 2.7 | % |
| All executive officers and directors as a group (four persons) | |
| 6,287,000 | | |
| 29.0 | % |
Wexford Spectrum Trading Ltd.
411 West Putnam Avenue
Greenwich, CT 06830 | |
| 2,164,284 | (7) | |
| 10.0 | % |
CAMOFI Master LDC/CAMHZN Master LDC
c/o Centrecourt Asset Management LLC
350 Madison Avenue, 8th Floor
New York, New York 10017 | |
| 1,987,045 | (8) | |
| 9.0 | % |
| Biormarkers | |
| 216,278 | (9) | |
| * | |
* Less than 1.0%.
| (1) |
C/o our address, 14785 Omicron Drive, Suite
104, San Antonio, Texas 78245. |
| (2) |
Except as otherwise indicated, we believe that the beneficial owners
of common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect
to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance
with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares
of common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding
for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage of any other person. |
| (3) |
Includes 4,856,200 shares of common
stock and 500,000 shares of common stock held in the name of Lipitek International, Inc. |
| (4) |
Consists of 50,000 options to purchase
shares of common stock at $0.10 per share until January 13, 2015; 40,000 options to purchase shares of common stock at $1.75
per share until September 8, 2017; and 80,000 options to purchase shares of common stock at $0.31 per share until December
3, 2020. |
| (5) |
Consists of 45,000 options to purchase
shares of common stock at $1.75 per share until August 28, 2017, and 120,000 options to purchase shares of common stock at
$0.31 per share until December 3, 2020. |
| (6) |
Includes 145,800 shares of common stock
and 450,000 options to purchase shares of common stock at $0.31 per share until December 31, 2020. |
| (7) |
Includes 1,714,284 shares of common stock and 450,000 warrants
to purchase shares of common stock at $0.10 per share until December 31, 2014. |
| (8) |
Includes 1,720,884 shares of common stock held by CAMOFI Master
LDC and 266,161 shares of common stock held by CAMHZN Master LDC. Centrecourt Asset Management LLC is the investment manager
of CAMOFI Master LDC and CAMHZN Master LDC. |
| (9) |
Issued upon conversion of warrants from 2009 |
Equity Compensation Plan Information
The following table sets forth information with respect to
our 2004 Stock Option Plan (“2004 Plan”), our 2007 Stock Option Plan (the “2007 Plan”)
and 2007 Stock Option Plan for Independent and Non-Employee Directors (the “Directors Plan”) as of December
31, 2014:
| Plan Category | |
Number of
securities
to be issued upon
exercise of
outstanding
options,
warrants and
rights | | |
Weighted-average
exercise price of
outstanding
options, warrants
and rights | | |
Number of securities
remaining available for
future issuance
under equity
compensation plans
(excluding
securities reflected in
column (a)) | |
| | |
(a) | | |
(b) | | |
(c) | |
| Equity compensation plans approved by security holders | |
| — | | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | |
| Equity compensation plans not approved by security holders | |
| 2,857,500 | (1) | |
$ | 1.70 | | |
| 1,956,700 | (2) |
| (1) |
Represents 480,000 shares granted from the 2004
Plan, 869,000 shares granted from the 2007 Plan, 37,500 shares granted from the Director Plan and 1,476,000 warrants
issued to nonemployees. |
| (2) |
Represents 170,000 shares available for issuance under the 2004
Plan, 1,319,200 shares available for issuance under the 2007 Plan and 467,500 shares available for issuance under the Director
Plan. |
ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
DIRECTOR INDEPENDENCE
Transactions with Related Persons
Our policy is to enter into transactions with related parties
on terms that, on the whole, are no more favorable, or no less favorable, than those available from unaffiliated third parties.
Based on our experience in the business sectors in which we operate and the terms of our transactions with unaffiliated third
parties, we believe that all of the transactions described below met this policy standard at the time they occurred.
OncoVista
Alexander L. Weis, Ph.D., Chairman of
the Company’s Board of Directors and its CEO, President, CFO and Secretary, and a significant shareholder, is a beneficial
owner of Lipitek International, Inc. and Lipitek Research, LLC. The Company leases its laboratory space from Lipitek,
Inc. under a three-year lease agreement (see Note 8). Rent is based on reasonable and customary rates as if the space
were rented to a third party.
On November 17, 2005, the Company entered
into a purchase agreement with Lipitek and Dr. Weis, under which Lipitek granted the Company an option to purchase all membership
interests in Lipitek Research, LLC (Lipitek Research) for a purchase price of $5.0 million, which shall be payable quarterly based
upon revenues of Lipitek Research up to $50,000 per quarter. Through December 31, 2014, the Company has paid $550,000
toward this agreement and has accrued $1,050,000, representing one quarterly payment for 2009 and all of the 2010, 2011, 2012
and 2013 and 2014 amounts, which are included in accounts payable in the consolidated balance sheets as of December 31, 2014 and
2013 and as a component of research and development expense for the years ended December 31, 2014 and 2013. The Company has not
made any payments toward the agreement in 2014 and 2013.
Prior to the full payment of the purchase
price, the Company has the option, upon 30 days written notice, to abandon the purchase of Lipitek Research and would forfeit
the amounts already paid. All intellectual property developments by Lipitek Research through the term of the agreement
or 2012, whichever is later, shall remain the Company’s property, irrespective of whether the option is exercised. In
addition, the Company will receive 80% of the research and development revenue earned by Lipitek while the agreement is in place.
In 2014 and 2013, the Company did not recognize any revenue from its share of Lipitek revenues.
For the potential acquisition of Lipitek,
the Company determined that, under SEC Regulation S-X, Rule 11-01(d) (“11-01”), and ASC 805, Lipitek would
be classified as a development stage company and thus was not considered a business. As a result, purchase accounting rules did
not apply. The Company also cannot determine with any certainty at this time, if it will exercise the option to purchase
Lipitek in the future.
In addition, the Company has a license
agreement with Lipitek which requires the Company to pay minimum royalties. The Company has accrued $100,000 and $100,000, which
is included in accrued expenses in the consolidated balance sheet of as of December 31, 2014 and 2013, respectively.
2009 Bridge Notes
On January 15, 2009, we completed an initial closing of a bridge
round of debt financing, whereby we and OncoVista-Sub issued secured promissory notes (the “Bridge Notes”)
in the aggregate principal amount of $750,000, in exchange for cash equal to the face amount of such Bridge Notes, to accredited
investors as defined by Rule 501 under the Securities Act. Of the Bridge Notes issued, Bridge Notes in the principal amount of
$350,000 were sold to affiliates of Dr. Weis and Bridge Notes in the principal amount of $300,000 were sold to Wexford Spectrum
Trading Limited. Dr. Weis is Chairman of our board, Chief Executive Officer, President, and Secretary as well as one of our significant
beneficial owners. Wexford Capital LLC is the investment sub-advisor of Wexford Spectrum Trading Limited which beneficially owns
approximately 11% of our outstanding common stock.
The Bridge Notes bore interest at 10% per annum, increasing
to 18% in the case of an event of default, and matured on the earlier of (i) January 15, 2010, (ii) the date upon we consummate
a financing, the aggregate gross proceeds of which equal or exceed $5,000,000 (a “Qualified Financing”), and
(iii) the acceleration of the maturity of the Bridge Notes as described therein.
In connection with the bridge financing, we issued to holders
of the Bridge Notes detachable warrants (the “Warrants”), exercisable for a period of five years from the date
of grant, of up to an amount or number of the securities offered in the first Qualified Financing, at an exercise price per security
equal to the product of (x) and (y), where (x) equals the offering price per security in the first Qualified Financing and where
(y) equals 0.90, subject to adjustment in certain instances. In the event that no Qualified Financing shall be consummated
by us prior to the expiration of the Warrants, the Warrants shall be exercisable for up to an aggregate of 750,000 shares of common
stock, par value $0.001 per share, at an exercise price of $0.50 per share, subject to adjustment in certain instances.
One of the holders of the Bridge Notes
has been granted the right to appoint its own nominee to our Board of Directors, which right shall expire upon such time that
the Bridge Note is repaid in full.
In January 2010, we
obtained the consent of the holders of the Bridge Note financing to extend the maturity date from January 15, 2010 until the earlier
of July 15, or such time that we obtain a “Qualified Financing.” We revised the term “Qualified Financing”
from aggregate gross proceeds of which equal or exceed $5,000,000 to $3,000,000, and increased the interest rate from 10% to 12%. Additionally,
we extended the expiration date for the Warrants to July 15, 2014, and reduced the exercise price to $0.10 per share. In July
2010, we again obtained the consent of the holders of the Bridge Note financing to extend the maturity date from July 15, 2010
until the earlier of December 31, 2010, or such time that we obtain a Qualified Financing, and we further increased the number
of warrants to be issued by 50%, extending the expiration date to December 31, 2014.
In November 2010, we used the proceeds
from the sale of our shares in AdnaGen to repay the outstanding principal and interest to the holders of the Bridge Notes.
2014 Bridge Notes
During the year ended December 31, 2014,
the Company borrowed $200,000 in exchange for unsecured notes of totaling $200,000. Accrued interest at December 31, 2014 is $8,329.
The notes have an interest rate of 8%, and are due on April 15, 2015. If the Company has not paid the notes in full, or the holders
have not converted the notes by April 15, 2015, the interest rate increases to 10% per annum. The debt holders may convert the
principal and any interest into shares of common stock at a price of $0.75 per share, or 80% of the amount of the Company’s
next equity offering. The Company has evaluated the conversion and contingent conversion features of the notes and determined
that there is no beneficial conversion feature on the date of the borrowing and as of December 31, 2014.
Subsequent to yearend, the Company received additional
bridge loans in the amount of $140,000 from a related party. The loans were made on various dates between January and
April 2015 on the same terms as the 2014 bridge loans.
Lipitek Agreements
In October 2004, we entered into a License Agreement with Lipitek
International Inc. (“Lipitek International”), pursuant to which Lipitek International has granted to us an
exclusive, world-wide, royalty and milestone-bearing right and license to utilize the patents and technologies of Lipitek International
relating to L-Nucleosides and their conjugates.
On November 17, 2005, we entered into a Purchase Agreement
with Lipitek International and Alexander L. Weis, Ph.D. pursuant to which Lipitek has granted us an option to purchase all membership
interests in Lipitek Research LLC for a purchase price of $5,000,000, payable in installments. As of March 15, 2010, we have paid
Lipitek International a total of $550,000 toward this agreement and we have accrued $560,000. On or before July 28, 2012, we are
required to pay the balance of the purchase price. Prior to the full payment of the purchase price, we have the option, upon 30
day’s written notice, to abandon the purchase of Lipitek Research LLC upon forfeiture of all amounts already paid. In addition,
Lipitek International and Dr. Weis agreed to use reasonable efforts to ensure that we have the right of first negotiation with
respect to any Lipitek International intellectual property related to anti-cancer, anti-fungal, anti-parasitic and anti-malarial
activities (except that derived from South American plants and vegetation) and to intellectual property arising out of any current
research or research contract of Lipitek Research LLC. Dr. Weis who is Chairman of our board and our Chief Executive
Officer, President, Chief Financial Officer, and Secretary, has agreed not to vote as a director in connection with any matter
relating to Lipitek.
Pursuant to a three-year Lease Agreement with Lipitek International
which expired December 2013, we lease laboratory space for $12,000 per month. A new lease agreement is subject to the next financing
of the Company.
ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES
GHP Horwath P.C. (“GHP”)
GHP is our independent auditor and audited our financial statements
for the years ended December 31, 2014 and 2013. GHP performed the services listed below and was paid the fees listed
below for the years ended December 31, 2014 and 2013.
Audit Fees
GHP was paid aggregate audit fees of approximately $42,000
and $42,000 for the years ended December 31, 2014 and December 31, 2013, respectively, for professional services rendered for
the audit of our annual financial statements and for the reviews of the financial statements included in our quarterly reports
on Form 10-Q during the first, second and third quarters of 2014 and 2013.
Audit Related Fees
GHP was paid no additional fees for the years ended December
31, 2014 and December 31, 2013, respectively, for assurance and related services reasonably related to the performance of the
audit or review of our financial statements.
Tax Fees
GHP was paid $0 tax fees for the years ended December 31, 2014
and December 31, 2013, respectively, for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
GHP was not paid any other fees for professional services during
the years ended December 31, 2014 and December 31, 2013.
Committee Approval
In accordance with the Charter of the Audit Committee, the
committee must pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be
performed by its independent auditor in order to safeguard the independence of the auditors. With the exception of
de minimis amounts for non-audit services, the committee approved all provided auditing services.
PART IV
ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Report of Independent Registered
Public Accounting Firm (page F-2)
Consolidated Balance Sheets
(page F-3)
Consolidated Statements of
Operations (page F-4)
Consolidated Statements of
Changes in Equity (page F-5)
Consolidated Statements of
Cash Flows (F-6)
Notes to Financial Statements
(pages F-7 through F-18)
| Exhibit No. |
|
Description |
| |
|
|
| 3.1 |
|
Certified Copy of the Articles of Incorporation of the Registrant.
(1) |
| |
|
|
| 3.2 |
|
Bylaws. (2) |
| |
|
|
| 3.3 |
|
Certificate of Change of the Registrant. (3) |
| |
|
|
| 3.4 |
|
Certificate of Amendment to Articles of Incorporation of the Registrant.
(9) |
| |
|
|
| 10.1 |
|
Executive Employment Agreement dated as of October 1, 2004, by
and between OncoVista, Inc. and Alexander L. Weis, Ph.D. (2) |
| |
|
|
| 10.2 |
|
Agreement and Plan of Merger between Aengus Pharmaceuticals, Inc.,
OncoVista-Aengus, Inc. and OncoVista, Inc. dated as of November 7, 2005. (7) |
| |
|
|
| 10.3 |
|
License Agreement between Boston Medical Center Corporation and
Aengus Pharmaceuticals, Inc., dated as of December 2, 2005. (8) |
| |
|
|
| 10.4 |
|
Assumption of Obligations of License Agreement and Consent to Transfer
License Agreement between Boston Medical Center Corporation and OncoVista-Aengus, Inc., dated December 2, 2005. (5) |
| |
|
|
| 10.5 |
|
License Agreement dated November 21, 2003 between Oxigene, Inc.
and Aengus Pharmaceuticals, Inc. (5) |
| |
|
|
| 10.6 |
|
Consent and Agreement to Assign License Agreement between Oxigene
Inc. and OncoVista Aengus Pharmaceuticals, Inc. dated December 2005. (5) |
| |
|
|
| 10.7 |
|
License Agreement effective as of October 13, 2004 between Lipitek
International, Inc. and OncoVista, Inc. (5). |
| |
|
|
| 10.8 |
|
Purchase Agreement dated as of November 17, 2005 between Lipitek
International, Inc. and OncoVista, Inc. (5) |
| |
|
|
| 10.9 |
|
Securities Purchase Agreement, between the Registrant, Törbjorn
B. Lundqvist and OncoVista, Inc dated as of August 16, 2007. (4) |
| |
|
|
| 10.10 |
|
Form of Subscription Agreement between OncoVista, Inc. and purchasers
of units in the OncoVista private placement that closed on August 15, 2007. (5) |
| |
|
|
| 10.11 |
|
Form of Registration Rights Letter between OncoVista, Inc. and
purchasers of units in the OncoVista private placement that closed on August 15, 2007. (5) |
| 10.12 |
|
Form of Warrant issued to purchasers of units
in the OncoVista private placement that closed in August 15, 2007. (5) |
| |
|
|
| 10.13 |
|
Form of Lock-Up Agreement. (5) |
| |
|
|
| 10.14 |
|
Form of Subscription Agreement. (5) |
| |
|
|
| 10.15 |
|
2004 Stock Option Plan. (5) |
| |
|
|
| 10.16 |
|
2007 Stock Option Plan. (5) |
| |
|
|
| 10.17 |
|
2007 Stock Option Plan for Independent and Non-Employee Directors.
(5) |
| |
|
|
| 10.18 |
|
License Agreement by and between OncoVista, Inc. and OSI Pharmaceuticals,
Inc. dated October 4, 2007. (6) |
| |
|
|
| 10.19 |
|
Stock Purchase Warrant issued to OSI Pharmaceuticals, Inc., dated
November 27, 2007. (6) |
| |
|
|
| 10.20 |
|
Stock Purchase Warrant issued to OSI Pharmaceuticals, Inc., dated
November 27, 2007. (6) |
| |
|
|
| 10.21 |
|
Secured Promissory Note of OncoVista Innovative Therapies, Inc.
and OncoVista, Inc. dated January 15, 2009. (8) |
| |
|
|
| 10.22 |
|
Registration Rights Agreement dated January 15, 2009 (8) |
| |
|
|
| 10.23 |
|
Form of Warrant dated January 15, 2009 (8) |
| |
|
|
| 10.24 |
|
Agreement with Gilford Securities Incorporated, dated April 1,
2010 (10) |
| |
|
|
| 10.25 |
|
Letter of Engagement with Motion Communications, Inc., effective
May 1, 2010 (10) |
| |
|
|
| 10.26 |
|
Stock Purchase Agreement with Alere Holdings Bermuda Limited Canon’s
Court, dated October 28, 2010 (11) |
| |
|
|
| 10.27 |
|
Executive Employment Agreement with Michael Moloney, dated January
3, 2011(12) |
| |
|
|
| 10.41 |
|
Consulting Agreement with FACT Consulting LLC, dated January 3,
2011(12) |
| |
|
|
| 10.42 |
|
Media Advertising Agreement with MJD Media LLC, dated February
8, 2011(12) |
| |
|
|
| 10.43 |
|
Strategic Consulting Agreement with HealthPro BioVentures LLC,
dated January 7, 2011(12) |
| |
|
|
| 10.44 |
|
Employment Agreement with Tamas Bakos, dated November 1, 2010(12) |
| |
|
|
| 10.45 |
|
Lease Agreement between OncoVista, Inc. and Lipitek International,
Inc. dated January 3, 2011(12) |
| |
|
|
| 10.46 |
|
Consulting Agreement with New Millennium PR Communications, dated
January 31, 2011(12) |
| |
|
|
| 10.47 |
|
Consulting Agreement with Landmark Financial Corporation, dated
June 13, 2012(12) |
| |
|
|
| 14 |
|
Code of Ethics, dated March 28, 2008 (1) |
| |
|
|
| 21.1 |
|
List of Subsidiaries(14) |
| |
|
|
| 31.1 |
|
Certification of Principal Executive Officer pursuant to Rule 13a-14
and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended* |
| |
|
|
| 31.2 |
|
Certification of Principal Financial Officer pursuant to Rule 13a-14
and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended* |
| |
|
|
| 32 |
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002* |
| (1) |
Filed as an exhibit to
the Current Report on Form 8-K filed on October 29, 2007 with the Commission and incorporated by reference herein. |
| (2) |
Filed as an exhibit to
the Current Report on Form 8-K filed on November 13, 2007 with the Commission and incorporated by reference herein. |
| (3) |
Filed as an exhibit to
Form 10-SB filed on December 7, 1999 with the Commission and incorporated by reference herein. |
| (4) |
Filed as an exhibit to
the Current Report on Form 8-K filed on October 24, 2007 with the Commission and incorporated by reference herein. |
| (5) |
Filed as an exhibit to
the Current Report on Form 8-K filed August 22, 2007 with the Commission and incorporated by reference herein. |
| (6) |
Filed as an exhibit to
Current Report on Form 8-K/A filed on November 19, 2007 with the Commission and incorporated by reference herein. |
| (7) |
Filed as an exhibit to
Current Report on Form 8-K on December 3, 2007, with the Commission and incorporated by reference herein. |
| (8) |
Filed as an exhibit to
the Current Report on Form 8-K on November 19, 2007 with the Commission and incorporated by reference herein. |
| (9) |
Filed as an exhibit to
Annual Report of Form 10-K on March 30, 2009 with the Commission and incorporated by reference herein. |
| (10) |
Filed as an exhibit to
Current Report on Form 8-K filed on January 9, 2008 with the Commission and incorporated by reference herein. |
| (11) |
Filed as an exhibit to
Current Report on Form 8-K filed on January 17, 2008 with the Commission and incorporated by reference herein. |
| (12) |
Filed as an exhibit to
Quarterly Report of Form 10-Q on May 14, 2010 with the Commission and incorporated by reference herein. |
| (13) |
Filed as an exhibit to
Quarterly Report of Form 10-Q/A on December 23, 2010 with the Commission and incorporated by reference herein. |
| |
|
| (14) |
Filed as an exhibit to Annual Report
on Form 10-KSB on April 14, 2008 with the Commission and incorporated by reference herein |
| |
|
| (15) |
Filed as an exhibit to Annual Report
of Form 10-K on March 30, 2011 with the Commission and incorporated by reference herein. |
SIGNATURES
Pursuant to the requirements
of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ONCOVISTA INNOVATIVE THERAPIES, INC.
| /s/ Alexander
L. Weis |
|
| Alexander L. Weis, Ph.D. |
| Chief Executive Officer, President, Secretary |
| and Chief Financial Officer |
| (Principal Executive Officer, Principal Financial |
| Officer and Principal Accounting Officer) |
April 14, 2015
Pursuant to the requirements of the Securities
and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities
as on April 14, 2015.
| /s/ Alexander
L. Weis |
|
| Alexander L. Weis, Ph.D. |
| Chairman of the Board of Directors |
| |
| /s/ William J. Brock |
|
| William J. Brock |
| Director |
| |
| /s/ Alexander Ruckdaeschel |
|
| Alexander Ruckdaeschel |
| Director |
ONCOVISTA INNOVATIVE THERAPIES, INC. AND
SUBSIDIARIES
Consolidated Financial Statements
Years Ended December 31, 2014 and 2013
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders
of
OncoVista Innovative Therapies, Inc.
We have audited the accompanying consolidated balance sheets of
OncoVista Innovative Therapies, Inc. and Subsidiary (the “Company”) as of December 31, 2014 and 2013, and the related
consolidated statements of operations, changes in equity (deficit), and cash flows for each of the two years in the period ended
December 31, 2014. These consolidated financial statements are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of OncoVista Innovative Therapies,
Inc and Subsidiary as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the two
years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of
America.
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial
statements, the Company has suffered recurring losses and negative cash flows from operations that raise substantial doubt about
its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ GHP Horwath, P.C.
Denver, Colorado
April 14 , 2015
ONCOVISTA INNOVATIVE THERAPIES, INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2014 and 2013
| | |
2014 | | |
2013 | |
| ASSETS | |
| | |
| |
| Current assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 12,514 | | |
$ | 44,898 | |
| Prepaid and other current assets | |
| - | | |
| 50,945 | |
| Total current assets | |
| 12,514 | | |
| 95,843 | |
| | |
| | | |
| | |
| Equipment, net | |
| - | | |
| 477 | |
| Total assets | |
$ | 12,514 | | |
$ | 96,320 | |
| | |
| | | |
| | |
| LIABILITIES AND DEFICIT | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Accounts payable (including related party of $1,240,000 and $896,000, respectively) | |
$ | 1,671,909 | | |
$ | 1,266,391 | |
| Accrued expenses (including related party of $760,000 and $660,000, respectively) | |
| 2,579,436 | | |
| 1,873,959 | |
| Loan payable (including accrued interest of $8,329) | |
| 208,329 | | |
| - | |
| Current portion of Settlement payable | |
| 450,000 | | |
| - | |
| Derivative liability | |
| - | | |
| 9,732 | |
| Other liability – stock grant | |
| 66,000 | | |
| 66,000 | |
| Total current liabilities | |
| 4,975,674 | | |
| 3,216,082 | |
| | |
| | | |
| | |
| Settlement payable – net of current portion | |
| 700,000 | | |
| - | |
| Total liabilities | |
| 5,675,674 | | |
| 3,216,082 | |
| | |
| | | |
| | |
| Commitments and contingencies | |
| | | |
| | |
| Deficit: | |
| | | |
| | |
| Common stock, $.001 par value; 147,397,390 shares
authorized, 22,012,896 and 21,627,868, respectively shares issued and outstanding | |
| 22,012 | | |
| 21,627 | |
| Additional paid-in capital | |
| 20,217,341 | | |
| 20,216,731 | |
| Accumulated deficit | |
| (25,902,513 | ) | |
| (23,358,120 | ) |
| Total deficit | |
| (5,663,160 | ) | |
| (3,119,762 | ) |
| Total liabilities and deficit | |
$ | 12,514 | | |
$ | 96,320 | |
See accompanying notes to consolidated financial
statements
ONCOVISTA INNOVATIVE THERAPIES, INC. AND
SUBSIDIARIES
Consolidated Statements of Operations
For the years ended December 31, 2014 and
2013
| | |
2014 | | |
2013 | |
| | |
| | | |
| | |
| Revenue | |
$ | – | | |
$ | – | |
| | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | |
| Research and development | |
| 669,405 | | |
| 900,558 | |
| General and administrative | |
| 1,876,398 | | |
| 621,632 | |
| Total operating expenses | |
| 2,545,803 | | |
| 1,522,190 | |
| | |
| | | |
| | |
| Operating loss | |
| (2,545.803 | ) | |
| (1,522,190 | ) |
| | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | |
| Interest (expense) income | |
| (8,322 | ) | |
| 109 | |
| Gain on derivative liability | |
| 9,732 | | |
| 72,468 | |
| Total other income (expense) | |
| 1,410 | | |
| 72,577 | |
| | |
| | | |
| | |
| Net loss | |
$ | (2,544,393 | ) | |
$ | (1,449,613 | ) |
| | |
| | | |
| | |
| Net loss per share - basic and diluted | |
$ | (0.12 | ) | |
$ | (0.07 | ) |
| | |
| | | |
| | |
| Weighted average number of shares outstanding during the period - basic and diluted | |
| 21,651,075 | | |
| 21,627,868 | |
See accompanying notes to consolidated financial
statements
ONCOVISTA INNOVATIVE THERAPIES, INC. AND
SUBSIDIARIES
Consolidated Statements of Changes in Equity
(Deficit)
For the Years Ended December 31, 2014 and
2013
| | |
| | |
| | |
Additional | | |
| | |
| |
| | |
Number of | | |
Common | | |
Paid-in | | |
Accumulated | | |
Total | |
| | |
Shares | | |
Stock | | |
Capital | | |
Deficit | | |
Equity (Deficit) | |
| Balance, January 1, 2013 | |
| 21,627,868 | | |
$ | 21,627 | | |
$ | 20,207,647 | | |
$ | (21,908,507 | ) | |
$ | (1,679,233 | ) |
| Warrants to be issued in legal settlement | |
| | | |
| | | |
| 3,200 | | |
| | | |
| 3,200 | |
| Employee stock-based compensation | |
| | | |
| | | |
| 5,884 | | |
| | | |
| 5,884 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net loss | |
| | | |
| | | |
| | | |
| (1,449,613 | ) | |
| (1,449,613 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, December 31, 2013 | |
| 21,627,868 | | |
| 21,627 | | |
| 20,216,731 | | |
| (23,358,120 | ) | |
| (3,119,762 | ) |
| Exercise of warrants | |
| 385,028 | | |
| 385 | | |
| (385 | ) | |
| | | |
| - | |
| Employee stock-based compensation | |
| | | |
| | | |
| 995 | | |
| | | |
| 995 | |
| Net loss | |
| | | |
| | | |
| | | |
| (2,544,393 | ) | |
| (2,544,393 | ) |
| Balance, December 31, 2014 | |
| 22,012,896 | | |
$ | 22,012 | | |
$ | 20,217,341 | | |
$ | (25,902,513 | ) | |
$ | (5,663,160 | ) |
See accompanying notes to consolidated financial
statements
ONCOVISTA INNOVATIVE
THERAPIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2014 and
2013
| | |
2014 | | |
2013 | |
| Cash flows from operating activities | |
| | | |
| | |
| Net loss | |
$ | (2,544,393 | ) | |
$ | (1,449,613 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Depreciation | |
| 477 | | |
| 2,987 | |
| Employee stock-based compensation | |
| 995 | | |
| 5,884 | |
| Gain on derivative liability | |
| (9,732 | ) | |
| (72,468 | ) |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Prepaid and other assets | |
| 50,945 | | |
| 9,170 | |
| Accounts payable | |
| 405,518 | | |
| 332,844 | |
| Accrued expenses and other liabilities | |
| 705,477 | | |
| 704,407 | |
| Settlement payable | |
| 1,150,000 | | |
| | |
| Accrued interest payable | |
| 8,329 | | |
| | |
| Net cash used in operating activities | |
| (232,384 | ) | |
| (466,789 | ) |
| | |
| | | |
| | |
| Cash flows from investing activities | |
| - | | |
| - | |
| Cash flows from financing activities | |
| | | |
| | |
| Proceeds from loans payable | |
| 200,000 | | |
| - | |
| Net cash provided by financing activities | |
| 200,000 | | |
| - | |
| Decrease in cash and cash equivalents | |
| (32,384 | ) | |
| (466,789 | ) |
| Cash and cash equivalents at beginning of year | |
| 44,898 | | |
| 511,687 | |
| Cash and cash equivalents at end of year | |
$ | 12,514 | | |
$ | 44,898 | |
| Supplemental disclosures of cash flow information: | |
| | | |
| | |
| Cash paid for interest | |
$ | - | | |
$ | - | |
| Non-Cash financing and investing activities: | |
| | | |
| | |
| Warrants issued for legal settlement | |
$ | - | | |
| 3,200 | |
See accompanying notes to consolidated financial
statements
Note 1. BASIS OF PRESENTATION,
ORGANIZATION AND NATURE OF OPERATIONS
OncoVista Innovative Therapies, Inc. (“OVIT”) is a biopharmaceutical
company developing targeted anticancer therapies by utilizing tumor-associated biomarkers. OVIT’s product pipeline
is comprised of advanced (Phase II) and early (Phase I) clinical-stage compounds, late preclinical drug candidates and early preclinical
leads. OVIT is not committed to any single treatment modality or class of compound, but believes that successful treatment of cancer
requires a tailored approach based upon individual patient disease characteristics.
Through its former subsidiary, AdnaGen AG (“AdnaGen”),
OVIT previously developed diagnostic kits for several cancer indications, and marketed diagnostic kits in Europe for the detection
of circulating tumor cells (“CTCs”) in patients with cancer.
OVIT used the proceeds from the sale of its shares in AdnaGen to
fund development activities for its drug candidate portfolio. Additionally, OVIT is evaluating several opportunities
to license or acquire other compounds or diagnostic technologies that it believes will provide for treatments that are highly targeted
with low or no toxicity.
At December 31, 2014, OVIT had two full time employees. OncoVista,
Inc. (“OncoVista”), OVIT’s operating subsidiary, had no full-time employees.
Note 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of OVIT
and OncoVista (collectively, the “Company”). All intercompany balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and 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.
Significant estimates during 2014 and 2013 include the valuation
of warrants and stock options granted for services or as compensation, estimates of the probability and potential magnitude of
contingent liabilities, estimates relating to the fair value of derivative liabilities, and the valuation allowance for deferred
tax assets due to continuing operating losses.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less at the time of purchase to be cash equivalents.
The Company minimizes its credit risk associated with cash by periodically
evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured
limits. The Company historically has not incurred any losses related to this credit risk.
Equipment
Equipment is stated at cost, less accumulated depreciation. Costs
greater than $1,000 are capitalized and depreciated on a straight-line basis over the estimated useful lives, which range from
three to fourteen years.
Long-Lived Assets
Long-lived assets are reviewed for impairment periodically and whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows
expected to be generated by the asset. If such assets are considered 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. As a result of these
reviews, no impairment charge has been recorded during the years ended December 31, 2014 and 2013.
Revenue Recognition
While the Company has not recognized revenues from continuing operations,
the Company anticipates that future revenues will be generated from product sales. The Company expects to recognize
revenue from product sales in accordance with SEC, Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”
that requires the Company recognize revenue when each of the following four criteria is met: 1) a contract or sales arrangement
exists; 2) products have been shipped or services have been rendered; 3) the price of the products or services is fixed or determinable;
and 4) collectability is reasonably assured. The Company anticipates that customers will have no right of return for products sold.
Revenues will be considered to be earned upon shipment.
Income Taxes
The Company accounts for income taxes under the asset and liability
method, in which deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the enactment date. If it is more likely than
not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized.
The Company’s policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of income tax expense. The Company does not have any accrued interest or
penalties associated with any unrecognized tax benefits, nor was any interest expense related to unrecognized tax benefits recognized
for the years ended December 31, 2014 and 2013.
Significant management judgment is required in developing the provision
for income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be
required against the deferred tax assets. Management evaluates its ability to realize its deferred tax assets on a quarterly
basis and adjusts its valuation allowance when it believes that it is more likely than not that the asset will not be realized.
Research and Development Expenses
The Company’s research and development expense consists of
costs associated with discovery research and product development. Discovery research is comprised of employee costs,
laboratory materials and supplies, and research-related overhead allocations. Included in product development are clinical
trial costs, including expenses associated with contract research organizations, contract manufacturing, employee costs, pharmacology
studies, and costs to obtain, maintain and defend patents. These costs are expensed as incurred.
Regulatory Matters
Regulations imposed by federal, state and local authorities in the
United States, as well as authorities in other countries, are a significant factor in the conduct of research, development, manufacturing
and eventual marketing of the Company’s products. In the United States, drugs, biological products, and medical
devices are regulated by the United States Food, Drug, and Cosmetic Act, which is administered by the U.S. Food and Drug Administration.
Net Loss per Share
Basic earnings (loss) per share are computed by dividing the net
income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share is computed by
dividing net income by the weighted average number of common shares outstanding including the effect of share equivalents. Common
stock equivalents consist of shares issuable upon the exercise of certain common stock purchase warrants and stock options.
As the Company has had losses from operations for the last two years,
all unvested restricted stock, stock options and warrants are considered to be anti-dilutive. For the years ended December
31, 2014 and 2013, the following shares have been excluded since their inclusion in the computation of diluted EPS would be anti-dilutive:
| | |
2014 | | |
2013 | |
| Stock options outstanding under our various stock option plans | |
| 1,381,500 | | |
| 1,381,500 | |
| Warrants | |
| 350,000 | | |
| 1,625,000 | |
| Restricted shares | |
| 336,847 | | |
| 300,000 | |
| Total | |
| 2,068,347 | | |
| 3,306,500 | |
Share-Based Compensation
All share-based payments to employees are recorded
and expensed in the statements of operations under Accounting Standards Codification (“ASC”) 718 “Compensation
– Stock Compensation.” ASC 718 requires the measurement and recognition of compensation expense for
all share-based payment awards made to employees and directors including grants of employee stock options based on estimated fair
values. The Company has used the Black-Scholes option-pricing model to estimate grant date fair value for all option
grants.
Share-based compensation expense is based on
the value of the portion of share-based payment awards that is ultimately expected to vest during the year, less expected forfeitures. ASC
718 requires forfeitures to be estimated at the time of grant and revised, if necessary in subsequent periods if actual forfeitures
differ from those estimates.
Recent Accounting Pronouncements
The Company continually
assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement
affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to
its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s
consolidated financial statements properly reflect the change.
In May 2014, FASB
issued ASU No. 2014-09 “Revenue from Contracts from Customers,” which supersedes the revenue recognition requirements
in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue in a way that depicts the transfer
of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
to the exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2016, and is to be applied retrospectively, with early adoption not permitted. The Company is currently
evaluating the new standard and assessing the potential impact on its operations and financial statements.
Note 3. GOING CONCERN
AND MANAGEMENT’S PLANS
As reflected in the accompanying consolidated financial statements,
the Company reported a net loss of approximately $2,544,000 and net cash used in operations of approximately $232,000 for
the year ended December 31, 2014, an accumulated deficit of approximately $25,903,000, and a total deficit of approximately $5,663,000
at December 31, 2014. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets
or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. The
ability of the Company to continue as a going concern is dependent on management’s ability to further implement its strategic
plan, obtain additional capital, principally by obtaining additional debt and/or equity financing, and generate revenues from collaborative
agreements or sale of pharmaceutical products. There can be no assurance that these plans will be sufficient or that additional
financing will be available in amounts or terms acceptable to the Company, if at all.
Note 4. EQUIPMENT
Equipment balances at December 31, 2014 and 2013 are summarized
below:
| | |
2014 | | |
2013 | |
| Equipment | |
$ | 30,132 | | |
$ | 30,132 | |
| Computer and office equipment | |
| 9,326 | | |
| 9,326 | |
| | |
| 39,458 | | |
| 39,458 | |
| Less: accumulated depreciation | |
| (39,458 | ) | |
| (38,981 | ) |
| Equipment, net | |
$ | - | | |
$ | 477 | |
Note 5. ACCRUED EXPENSES
Accrued expenses at December 31, 2014 and 2013 are summarized below:
| | |
2014 | | |
2013 | |
| Legal and professional | |
$ | 58,025 | | |
$ | 28,008 | |
| Clinical and other studies | |
| 138,427 | | |
| 138,427 | |
| Compensation | |
| 1,341,338 | | |
| 840,820 | |
| Minimum royalty | |
| 1,010,000 | | |
| 860,000 | |
| Other | |
| 31,646 | | |
| 6,704 | |
| Total accrued expenses | |
$ | 2,579,436 | | |
$ | 1,873,959 | |
Note 6. DEBT
During the year ended December 31,
2014, the Company borrowed $200,000 in exchange for unsecured notes totaling $200,000. Accrued interest at December 31, 2014
is $8,329. The notes have an interest rate of 8%, and are due on April 15, 2015. If the Company has not paid the notes in
full, or the holders have not converted the notes by April 15, 2015, the interest rate increases to 10% per annum. The debt
holders may convert the principal and any interest into shares of common stock at a price of $0.75 per share, or 80% of the
per share price of the Company’s next equity offering. The Company has evaluated the conversion and contingent
conversion features of the notes and determined that there is no bifurcation of the embedded conversion option required, and
that there is no beneficial conversion feature on the date of the borrowing as of December 31, 2014.
Subsequent to year ended, the Company
received additional bridge loans in the amount of $140,000 from a related party. The loans were made on various dates between
January and April 2015 on the same terms as the 2014 bridge loans.
Note 7. DERIVATIVE LIABILITY
AND FAIR VALUE INFORMATION
The Company determined that warrants issued in connection with a
bridge round of debt financing entered into by the Company in January 2009 required liability classification due to certain provisions
that may result in an adjustment to the number shares issued upon settlement.
The estimated fair value of the derivative liability was zero and
$9,732 at December 31, 2014 and 2013, respectively. These warrants were exercised in December, 2014.
The Company uses the Black-Scholes pricing model to calculate the
fair value of its warrant liabilities. Key assumptions used to apply these models in 2013 are as follows:
| Expected term |
1 year |
|
| Volatility |
94.7 |
% |
| Risk-free interest rate |
0.25 |
% |
| Dividend yield |
0 |
% |
Fair value measurements
Assets and liabilities measured at fair value as of December 31,
2013 are as follows (no assets or liabilities measured at fair value at December 31, 2014):
| | |
Value | | |
Quoted prices
in active
markets
(Level 1) | | |
Significant
other observable
inputs
(Level 2) | | |
Significant
unobservable
inputs
(Level 3) | |
| | |
| | |
| | |
| | |
| |
| Derivative liability at December 31, 2014 | |
$ | - | | |
$ | – | | |
$ | - | | |
$ | – | |
| Derivative liability at December 31, 2013 | |
$ | 9,732 | | |
$ | – | | |
$ | 9,732 | | |
$ | – | |
The fair value framework requires a categorization of assets and
liabilities into three levels based upon the assumptions (inputs) used to price the assets and liabilities. Level 1 provides the
most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined
as follows:
Level 1: Unadjusted quoted prices in active markets for
identical assets and liabilities.
Level 2: Observable inputs other than those included in
Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or
liabilities in inactive markets.
Level 3: Unobservable inputs reflecting management’s
own assumptions about the inputs used in pricing the asset or liability.
There were no financial assets or liabilities measured at fair value,
with the exception of cash and cash equivalents and the above mentioned liability as of December 31, 2014 and 2013, respectively.
The fair values of accounts payable and note payable approximate the carrying amounts because of their interest rates and/or the
short-term nature of these instruments. The fair value of related party accounts payable is not practicable to estimate
due to the related party nature of the underlying transactions.
Note 8. LEASES, COMMITMENTS
AND CONTINGENCIES
Lease Obligations
In January 2011, the Company entered a three-year
lease with an affiliate of the CEO for laboratory space which expired in December 2013. During 2014, the Company utilized the space,
however, no terms have been negotiated and no payments have been made; however, the Company continued to record rent expense on
a month to month basis. Total rent expense amounted to approximately $187,000 and $159,000 for the years ended December 31, 2014
and 2013, respectively. These amounts are included in accrued expenses.
Employment Contracts
The Company has employment contracts with certain
executive officers. The contracts have commitment periods of between one and two years, and are subject to automatic renewal for
one year terms. Compensation provided under the contracts ranges from $183,600 to $322,000, as well as bonuses of up to 30% to
40% of base salary. Bonuses are based on performance milestones, which have not yet been met; therefore, bonuses have
not been paid or accrued for the years ended December 31, 2014 and 2013. In the event of termination without cause,
the contract provides for a severance of salary and benefits continuation for periods of between three months and one year.
Legal Matters
On August 11, 2011, an action was filed against
the Company in the United States District Court for the Southern District of New York, entitled New Millennium PR Communications,
Inc., against OncoVista Innovative Therapies, Inc., seeking damages for the alleged breach of a public relations agreement. On
January 31, 2013 a settlement was reached whereby the Company agreed to pay New Millennium $7,000, in two payments of $3,500 each,
and issue 25,000 warrants at an exercise price of $0.25 per share.
On August 26, 2011, an action was filed against
the Company in the Supreme Court of the State of New York, New York County, entitled CAMOFI Master LDC and CAMHZN LDC against OncoVista
Innovative Therapies, Inc. and OncoVista, Inc. The action seeks damages for the alleged breach of a Subscription Agreement, a Warrant
Agreement and an Anti-Dilution Agreement and seeks an order directing the issuance of (i) an aggregate of 1,980,712,767 shares
of the Company’s common stock, and (ii) warrants to purchase an aggregate of 702,857,767 shares of the Company’s common
stock at an exercise price of $0.001. On October 20, 2011, the Company filed an answer to the complaint. On November 1, 2011, the
plaintiffs made an extensive document request to the Company for all documents related to the matter. The Company’s counsel
has started taking depositions and has requested access to CAMOFI Master LDC and CAMHZN Master LDC principals for further depositions.
On June 29, 2012 CAMOFI Master LDC and CAMHZN Master LDC filed for summary judgment. On August 9, 2012 the parties filed a stipulation
with the court extending the return date of motion for summary judgment until September 10, 2012. The court has not yet ruled on
the motion to dismiss. Oral arguments for the motion were conducted before the court on January 17, 2013. The judge asked the parties
to reconvene and to try to seek a settlement. While the judge indicated her belief that the Company was in breach of the anti-dilution
agreement, she also indicated that it may not be equitable to direct the issuance of hundreds of millions of additional shares,
and reserved her decision on the issue at that time. On March 5, 2015, the parties were able to reach a framework for settlement.
The final documents of the settlement are in preparation. Management estimated, based on the framework reached in March of 2015,
that they will pay approximately $1.2 million in settlement fees. This amount has been recorded as settlement payable and is due
over a period of three years. If the Company does not meet the term of the settlement framework, the framework would require the
Company to make additional payments of approximately $3.8 million.
On February 16, 2012, the Company filed an
action in the 225 Judicial District Court of the State of Texas, Bexar County, entitled OncoVista Innovative Therapies, Inc. against
J. Michael Edwards. The action seeks damages relating to the executive employment agreement of J. Michael Edwards, our former Chief
Financial Officer. Specifically we are seeking to have the Stock Option Agreement granted to Mr. Edwards on January 6, 2009 be
declared void ab initio. The Company is also seeking damages and attorney fees. On March 30, 2012, the Company received
a copy of a counterclaim that may be filed in the same court and is seeking approximately $197,000, plus certain health and life
insurance benefits, in alleged compensation due. On December 12, 2012 Mr. Edwards filed a third party petition in the court against
third party defendant Alexander L. Weis, our Chairman, CEO & President. Depositions are ongoing and the Company believes the
counterclaimant’s allegations are without merit and intends to vigorously defend these claims.
Note 9. RELATED PARTY TRANSACTIONS
OncoVista
Alexander L. Weis, Ph.D., Chairman of the Company’s
Board of Directors and its CEO, President, CFO and Secretary, and a significant shareholder, is a beneficial owner of Lipitek International,
Inc. and Lipitek Research, LLC. The Company leases its laboratory space from Lipitek, Inc. under a three-year lease
agreement (see Note 8). Rent is based on reasonable and customary rates as if the space were rented to a third party.
On November 17, 2005, the Company entered into
a purchase agreement with Lipitek and Dr. Weis, under which Lipitek granted the Company an option to purchase all membership interests
in Lipitek Research, LLC (Lipitek Research) for a purchase price of $5.0 million, which shall be payable quarterly based upon revenues
of Lipitek Research up to $50,000 per quarter. Through December 31, 2014, the Company has paid $550,000 toward this
agreement and has accrued $1,050,000, representing one quarterly payment for 2009 and all of the 2010, 2011, 2012 and 2013 and
2014 amounts, which are included in accounts payable in the consolidated balance sheets as of December 31, 2014 and 2013 and as
a component of research and development expense for the years ended December 31, 2014 and 2013. The Company has not made any payments
toward the agreement in 2014 and 2013.
Prior to the full payment of the purchase price,
the Company has the option, upon 30 days written notice, to abandon the purchase of Lipitek Research and would forfeit the amounts
already paid. All intellectual property developments by Lipitek Research through the term of the agreement or 2012,
whichever is later, shall remain the Company’s property, irrespective of whether the option is exercised. In addition,
the Company will receive 80% of the research and development revenue earned by Lipitek while the agreement is in place. In 2014
and 2013, the Company did not recognize any revenue from its share of Lipitek revenues.
For the potential acquisition of Lipitek, the
Company determined that, under SEC Regulation S-X, Rule 11-01(d) (“11-01”), and ASC 805, Lipitek would be classified
as a development stage company and thus was not considered a business. As a result, purchase accounting rules did not apply. The
Company also cannot determine with any certainty at this time, if it will exercise the option to purchase Lipitek in the future.
In addition, the Company has a license agreement
with Lipitek which requires the Company to pay minimum royalties. The Company has accrued $100,000 and $100,000, which is included
in accrued expenses in the consolidated balance sheet of as of December 31, 2014 and 2013, respectively.
Note 10. CHANGES IN EQUITY (DEFICIT)
Common Stock
The Company is authorized to issue up to 147,397,390 shares of common
stock. At December 31, 2014, shares of common stock reserved for future issuance are as follows:
| Stock options outstanding | |
| 1,381,500 | |
| Warrants outstanding | |
| 350,000 | |
| Stock options available for grant | |
| 2,159,250 | |
| Restricted shares | |
| 336,847 | |
| | |
| | |
| | |
| 4,227,597 | |
Restricted Stock
On June 13, 2012, the Company entered into
an agreement to grant an aggregate of 300,000 shares of common stock to Landmark Financial Corporation which shares vest at the
rate of 50,000 shares per month for six months, the term of the agreement. These shares will be granted for services to be provided
by Landmark Financial Corporation related to identifying and evaluating alternative strategies for expanding the Company’s
business. As of December 31, 2014 the shares have not been issued to Landmark Financial Corporation. The Company recorded $66,000
in consulting expense for the restricted stock grant for the year ended December 31, 2013, all of which is in accrued expenses
as the shares were not issued as of December 31, 2014 and 2013.
In June 2014, the Company agreed to grant 15,000
shares of restricted stock for services. As of December 31, 2014, the shares had not been granted. The Company recorded consulting
expense of $3,900 for the restricted stock grant for the year ended December 31, 2014, all of which is in accrued expenses.
On December 9, 2014, 1,150,000 warrants were exercised on a net issuance basis for 385,028 shares of common
stock due to 36,847 shares being subject to volume restrictions as the holder is an affiliate of the Company.
Stock Option Plans
In May 2007, the Company’s Board of Directors adopted the
2007 Stock Option Plan (“2007 Plan”). The 2007 Plan provides for the grant of incentive stock options, non-statutory
stock options, and restricted stock awards to employees, directors and consultants who provide services to OncoVista. The
Company has reserved 3,000,000 shares of common stock for issuance under the 2007 Plan.
In May 2007, the Board of Directors authorized the 2007 Stock Option
Plan for Independent and Non-Employee Directors (the “Directors Plan”). Options granted under the Directors
Plan shall be nonstatutory options and may be granted to nonemployee directors at an exercise price equal to the fair market value
at the date of grant. The maximum term of options granted under the Directors Plan is ten years. The term of the Directors Plan
is ten years. The Company has reserved 500,000 shares of common stock for issuance under the Director’s Plan.
The Company may also grant options to its officers and employees
under its 2004 Stock Incentive Plan (the “2004 Plan”). The 2004 Plan is authorized to grant options for
up to 1,000,000 shares of common stock to employees, directors, and consultants who provide service to the Company. Options
granted have a vesting schedule with a term ranging from grant date to four years and become fully exercisable based on specific
terms imposed at the date of grant. All awards pursuant to the 2004 Plan shall terminate upon the termination of the
grantees employment for any reason.
All option grants are expensed in the appropriate period based upon
each award’s vesting terms, in each case with an offsetting credit to additional paid in capital. Under the authoritative
guidance for share-based compensation, in the event of termination, the Company will cease to recognize compensation expense. There
is no deferred compensation recorded upon initial grant date, instead, the fair value of the share-based payment is recognized
ratably over the stated vesting period. No options were granted in 2014 or 2013.
The stock-based compensation expense recorded by the Company for
the years ended December 31, 2014 and 2013, with respect to awards under all option plans is as follows:
| | |
2014 | | |
2013 | |
| Research and development | |
$ | 995 | | |
$ | 5,884 | |
| Total employee stock-based compensation | |
$ | 995 | | |
$ | 5,884 | |
The Company follows fair value accounting and the related provisions
of ASC 718 for all share-based payment awards. The fair value of each option or warrant granted is estimated on the date of grant
using the Black-Scholes option-pricing model.
The following is a summary of the Company’s
stock option activity for the year ended December 31, 2014:
| | |
Shares | | |
Weighted
Average
Exercise
Price | | |
Weighted
Average
Remaining
Contractual
Term | | |
Aggregate
Intrinsic
Value | |
| Outstanding at January 1, 2014 | |
| 1,381,500 | | |
$ | 0.91 | | |
| | | |
| | |
| Granted | |
| – | | |
| – | | |
| | | |
| | |
| Exercised | |
| – | | |
| – | | |
| | | |
| | |
| Forfeited | |
| – | | |
| – | | |
| | | |
| | |
| Outstanding at December 31, 2014 | |
| 1,381,500 | | |
$ | 0.91 | | |
| 3.84 years | | |
$ | - | |
| Options Exercisable at December 31, 2014 | |
| 1,381,250 | | |
$ | 0.91 | | |
| 3.84 years | | |
$ | - | |
As of December 31, 2014, there was no unrecognized compensation
cost related to stock options.
Warrants
In 2014, the Company agreed to grant 50,000 warrants at the
price of $0.30 per warrant for consulting services. The estimate fair value of the warrants was $25,034 at December 31,
2014, which was recorded as consulting expense, and included in accrued expenses as of December 31, 2014.
The Company uses the Black-Scholes pricing model to calculate the
fair value of its warrants. Key assumptions used to apply these models in 2014 are as follows:
| Expected term | |
| 2 years | |
| Volatility | |
| 104.2 | % |
| Risk-free interest rate | |
| 0.67 | % |
| Dividend yield | |
| 0 | % |
The following is a summary of the Company’s warrant activity
for the year ended December 31, 2014:
| | |
Shares | | |
Weighted
Average
Exercise
Price | | |
Weighted
Average
Remaining
Contractual
Term | | |
Aggregate
Intrinsic
Value | |
| Outstanding at January 1, 2014 | |
| 1,625,000 | | |
$ | 0.46 | | |
| | | |
| | |
| Granted | |
| 50,000 | | |
| 0.30 | | |
| | | |
| | |
| Exercised | |
| (1,125,000 | ) | |
| 0.10 | | |
| | | |
| | |
| Forfeited | |
| (200,000 | ) | |
| 2.50 | | |
| | | |
| | |
| Outstanding at December 31, 2014 | |
| 350,000 | | |
$ | 0.37 | | |
| 0.75 years | | |
$ | – | |
| Exercisable at December 31, 2014 | |
| 350,000 | | |
$ | 0.37 | | |
| 0.75 years | | |
$ | – | |
As of December 31, 2014, there was no unrecognized compensation
cost related to warrants.
Note 11. INCOME TAXES
The Company has not incurred any U.S. Federal or state tax expense
since its inception. Significant deferred tax assets at December 31, 2014 and 2013 are as follows:
| | |
2014 | | |
2013 | |
| Deferred tax assets: | |
| | | |
| | |
| Net operating loss carryforwards, United States | |
$ | 6,043,000 | | |
$ | 5,729,000 | |
| Installment sale | |
| 305,000 | | |
| 305,000 | |
| Settlement expense | |
| 391,000 | | |
| – | |
| Deferred compensation | |
| 318,000 | | |
| 160,000 | |
| Share-based compensation and consulting | |
| 2,179,000 | | |
| 2,179,000 | |
| Other | |
| 61,000 | | |
| 61,000 | |
| Total deferred tax assets | |
| 9,297,000 | | |
| 8,434,000 | |
| Less: valuation allowance | |
| (9,297,000 | ) | |
| (8,434,000 | ) |
| Net deferred tax assets | |
$ | – | | |
$ | – | |
In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets
will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled
reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based
on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred
income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2014 and 2013.
At December 31, 2014, OncoVista, Inc. had U.S.
tax net operating loss carryforwards of approximately $18 million available to offset
future taxable income which will expire on various dates through 2031. The utilization of tax net operating losses may
be limited due to the change in ownership under Internal Revenue Code Section 382.
The actual tax benefit differs from the expected
tax benefit for the years ended December 31, 2014 and 2013 (computed by applying the U.S. Federal Corporate tax rate of 34% to
income before taxes) are as follows:
| | |
2014 | | |
2013 | |
| Expected tax benefit | |
| (34.0 | )% | |
| (34.0 | )% |
| | |
| | | |
| | |
| Permanent differences: | |
| | | |
| | |
| Other | |
| 0.1 | % | |
| 0.1 | % |
| Change in valuation allowance | |
| 33.9 | % | |
| 33.9 | % |
| Effective tax rate | |
| – | % | |
| – | % |
The Company files income tax returns in the U.S. federal and Texas
jurisdictions, and is no longer subject to tax examinations for years prior to 2005.
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND PRESIDENT
PURSUANT TO THE SECURITIES EXCHANGE ACT
OF 1934,
RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002
I, Alexander L. Weis, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2014 of OncoVista Innovative Therapies, Inc. |
| 2. | Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report. |
| 3. | Based upon my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report. |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure control and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrants’ board of directors
(or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weakness in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
April 14, 2015
| /s/ Alexander L. Weis |
|
| Alexander L. Weis, Ph.D., |
| Chief Executive Officer and |
| President |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO THE SECURITIES EXCHANGE ACT
OF 1934,
RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002
I, Alexander L. Weis, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2014 of OncoVista Innovative Therapies, Inc. |
| 2. | Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report. |
| 3. | Based upon my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report. |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure control and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrants’ board of directors
(or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weakness in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
April 14, 2015
| /s/ Alexander L. Weis |
|
| Alexander L. Weis, Ph.D., |
| Chief Financial Officer |
Exhibit 32
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Annual Report of OncoVista Innovative
Therapies, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2014 as filed with the Securities and
Exchange Commission on the date hereof, I, Alexander L. Weis, Chief Executive Officer, President and Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
1. The
report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The
information contained in the report fairly presents, in all material respects, the financial condition and result of operations
of the Company.
April 14, 2015
| /s/ Alexander L. Weis |
|
| Alexander L. Weis, Ph.D., |
| Chief Executive Officer, President and |
| Chief Financial Officer |
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