x |
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31,
2005
|
o |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from _________
to
_________
|
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
91-1955323
(I.R.S.
Employer
Identification
No.)
|
8797
Beverly Boulevard, #304
Los
Angeles, CA 90048
(Address
of principal executive offices)
|
90048
(Zip
Code)
|
Part
I
|
||
1.
|
Description
of Business
|
1
|
2.
|
Description
of Property
|
19
|
3.
|
Legal
Proceedings
|
19
|
4.
|
Submission
of Matters to a Vote of Security Holders
|
20
|
Part
II
|
||
5.
|
Market
for Common Equity and Related Stockholder Matters and
Small Business
Issuer
Purchases of Equity Securities
|
20
|
6.
|
Management’s
Discussion and Analysis or Plan of Operation
|
21
|
7.
|
Financial
Statements
|
35
|
8.
|
Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure
|
35
|
8A.
|
Controls
and Procedures
|
36
|
8B. | Other Information |
36
|
Part
III
|
||
9.
|
Directors,
Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act
|
37
|
10.
|
Executive
Compensation
|
41
|
11.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
46
|
12.
|
Certain
Relationships and Related Transactions
|
50
|
13.
|
Exhibits
|
51
|
14.
|
Principal
Accountant Fees and Services
|
54
|
(1) |
FDA-approved
standard operating procedures.
These are standard operating procedures for production of porcine
cells
including harvesting, freezing, storing, shipping and processing
by the
end user (thawing, washing) of the cells. These procedures and
protocols
have been reviewed by the FDA.
|
(2) |
The
cartridge used in the Phase III trial of HepatAssistTM.
We intend to use the existing, FDA-approved cartridge, and intend
to seek
the FDA’s approval to increase the number of pig cells that the cartridge
could contain, which increase we believe will improve the functionality
of
the system.
|
(3) |
An
FDA reviewed Phase III protocol acquired from Circe
Biomedical.
We may modify this protocol and submit the modified protocol
to the FDA
for approval.
|
(4) |
The
HepatAssistTM
perfusion platform.
The HepatAssist perfusion platform is Circe Biomedical’s specially
designed machine that pumped the patient’s plasma through the HepatAssist
cartridge. This machine was used in the Phase II/III trial of
HepatAssist.
|
· |
help
keep liver failure patients alive and neurologically intact before,
during
and immediately after
transplantation;
|
· |
allow
other patients to recover liver functionality and to survive
without a
transplant (a “bridge” to liver
regeneration);
|
· |
support
patients during periods of functional recovery and regeneration
after
extensive removal due to liver trauma and/or
cancer;
|
· |
accelerate
recovery from acute exacerbation of chronic liver
disease;
|
· |
shorten
length of stay in intensive care
units;
|
· |
shorten
hospital stay;
|
· |
reduce
the cost of care; and
|
· |
reduce
intractable itching associated with severe
jaundice.
|
· |
Ease
of use.
The systems bring user friendliness (e.g., pump integration,
automation
and an intuitive user interface) to traditionally complex liver
support
procedures.
|
· |
Simplicity.
Kidney dialysis systems are routinely used and, therefore, there
may be no
need for extensive personnel training for use of these similar
systems in
SEPET™. They are also commonly available in intensive care units and
other
settings where SEPET™ may be used.
|
· |
Low
cost.
The cost of therapy is expected to be lower than with any other
liver
assist device that is currently under development because the
machine to
which the SEPET™ cartridge can be attached is a standard machine (such as
a kidney dialysis machine) with commercially available tubing.
Therefore,
unlike other devices, no special equipment is
required.
|
· |
No
Intensive Care Unit needed to provide treatment.
SEPET™ may become available for treatment of patients with a lower degree
of liver failure outside of the intensive care unit setting.
We do not
believe that any changes will have to be made to SEPET™ or the dialysis
system in order for SEPET™ to become available outside of intensive care
unit settings.
|
(1) |
A
bioartificial liver system in which liver cell therapy and
blood
detoxification are integrated in a single fiber-in-fiber module
(US Patent
# 6,582,955 B2 for “Bioreactor With Application as Blood Therapy Device”
issued in June 2003). We have licensed this patent from Spectrum
Laboratories.
|
(2) |
Semi-automated
large-scale liver cell procurement technology (US Patent #5,888,409
for
“Methods for Cell Isolation and Collection” issued on March 30,
1999). We licensed this patent from Cedars-Sinai Medical
Center.
|
(3) |
Liver
cell procurement technology (US Patent #5,968,356 for “System for
Hepatocyte Cell Isolation and Collection” issued on October 19, 1999, and
related European Patent #0 830 099 for “Apparatus and Method for Cell
Isolation and Collection”). We licensed this patent from Cedars-Sinai
Medical Center.
|
(4) |
Liver
cell cryopreservation technology (US Patent #6,140,123 for
“Method for
Conditioning and Cryopreserving Cells” issued on October 31, 2000).
We licensed this patent from Cedars-Sinai Medical
Center.
|
(1) |
Apparatus
for Bioprocessing a Circulating Fluid. US Patent #5643794 (issued
on July
1, 1997).
|
(2) |
Cryopreserved
Hepatocytes and High Viability and Metabolic Activity. US Patent
#5795711
(issued on August 18, 1998).
|
(3) |
Closed
System for Processing Cells. US Patent #5858642 (issued on
January 12,
1999).
|
(4) |
Method
of Thawing Cryopreserved Cells. US Patent #5895745 (issued
on April 20,
1999).
|
(5) |
High
Flow Technique for Harvesting Mammalian Cells. US Patent #5912163
(issued
on June 15, 1999).
|
(6) |
Removal
of Agent From Cell Suspension. US Patent #6068775 (issued on
May 30,
2000).
|
(7) |
Method
for Cryopreserving Hepatocytes. US Patent #6136525 (issued
on October 24,
2000).
|
Patent No. | Country | Title of Patent Application | ||
2216203 | CA | Method of Thawing Cryopreserved Cells | ||
9-256534 | JP | Method of Thawing Cryopreserved Cells | ||
97307459 | EU | Method of Thawing Cryopreserved Cells | ||
99106212.6-2113 | EU | Removal of Agent From Cell Suspension |
Quarter
Ending
|
High
|
Low
|
|||||
March
31, 2004
|
$
|
3.50
|
$
|
3.40
|
|||
June
30, 2004
|
$
|
4.25
|
$
|
2.75
|
|||
September
30, 2004
|
$
|
5.15
|
$
|
4.00
|
|||
December
31, 2004
|
$
|
2.68
|
$
|
2.65
|
|||
March
31, 2005
|
$
|
1.66
|
$
|
1.60
|
|||
June
30, 2005
|
$
|
2.20
|
$
|
2.10
|
|||
September
30, 2005
|
$
|
1.90
|
$
|
1.80
|
|||
December
30, 2005
|
$
|
1.80
|
$
|
1.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
and
|
||
Contractual
Obligations
|
|
Total
|
|
|
2006
|
|
2007
|
|
thereafter
|
||||||||
Long-Term
Office Leases
|
$395,000
|
$286,000
|
$109,000
|
$-0-
|
|
· |
exercising
voting, redemption and conversion rights to the detriment of
the holders
of common stock;
|
· |
receiving
preferences over the holders of common stock regarding or surplus
funds in
the event of our dissolution or
liquidation;
|
· |
delaying,
deferring or preventing a change in control of our company;
and
|
· |
discouraging
bids for our common stock.
|
· |
announcements
of the results of clinical trials by us or our
competitors,
|
· |
developments
with respect to patents or proprietary
rights,
|
· |
announcements
of technological innovations by us or our
competitors,
|
· |
announcements
of new products or new contracts by us or our
competitors,
|
· |
actual
or anticipated variations in our operating results due to the
level of
development expenses and other
factors,
|
· |
changes
in financial estimates by securities analysts and whether our
earnings
meet or exceed such estimates,
|
· |
conditions
and trends in the pharmaceutical and other
industries,
|
· |
new
accounting standards,
|
· |
general
economic, political and market conditions and other factors,
and the
occurrence of any of the risks described in this Annual
Report.
|
Name
|
Age
|
Position
|
Walter
C. Ogier
|
49
|
Director,
President and Chief Executive Officer
|
Jacek
Rozga, M.D., Ph.D.
|
56
|
Director,
Chief Scientific Officer
|
Roy
Eddleman
|
65
|
Director
|
Marvin
S. Hausman M.D.
|
64
|
Director
|
John
M. Vierling, M.D.
(2)
|
60
|
Chairman
of the Board
|
Jack
E. Stover
(1)
|
52
|
Director
|
Thomas
C. Seoh (1)(3)
|
48
|
Director
|
Thomas
M. Tully (1)(2)(3)
|
60
|
Director
|
Dennis
Kogod (2)(3)
|
46
|
Director
|
Richard
W. Bank, M.D.
|
72
|
Director
|
Amy
Factor
|
48
|
Director
|
Scott
L. Hayashi
|
33
|
Vice
President of Administration,
Chief Financial Officer
and Secretary
|
David
J. Zeffren
|
49
|
Vice
President of Product Development
|
Shawn
P. Cain
|
39
|
Vice
President of Operations
|
Annual
Compensation
|
Long-Term
Compensation
Awards
|
||||||||||||||||||
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Other
Annual
Compensation
|
Securities
Underlying
Options
|
All
Other
Compensation(10)
|
|||||||||||||
Walter
C. Ogier,(1)
President
and Chief Executive Officer
|
2005
|
$
|
46,057
|
$
|
50,000
|
500,000
|
|||||||||||||
Amy
Factor(2)
|
2005
|
$
|
190,582
|
-
|
$
|
137,750(3)
|
|
300,000
|
$
|
1,125
|
|||||||||
Jacek
Rozga, M.D., Ph.D.,
Chief
Scientific Officer
|
2005
2004
2003
|
$
$
$
|
199,177
198,909
143,125
|
$
$
$
|
24,000
20,000
15,000
|
12,000
30,000
18,000(4)
|
|
$
|
2,750
|
||||||||||
Scott
L. Hayashi,
Vice
President of Administration, Chief Financial Officer and
Secretary
|
2005
2004(5)
|
|
$
$
|
102,291
80,000
|
$
$
|
9,450
12,000
|
$
|
8,000(6)
|
|
22,000
10,000
|
$
|
1,969
|
|||||||
David
J. Zeffren,
Vice
President of Product Development
|
2005
2004(7)
|
|
$
$
|
114,346
120,000
|
$
|
5,400
|
12,000
10,000
|
$
|
2,080
|
||||||||||
Shawn
P. Cain,(8)
Vice
President of Operations
|
2005
|
$
|
110,000
|
$
|
12,000
|
$
|
3,465(9)
|
|
30,000
|
$
|
3,000
|
Individual
Grants
|
|||||||||||||
Number
of
|
%
of Total Options
|
||||||||||||
Securities
Underlying
|
Granted
to Employees
|
Exercise | Expiration | ||||||||||
Name
|
Options
Granted
|
In
Fiscal Year
|
Price | Date | |||||||||
Walter
C. Ogier
|
500,000
(1
|
)
|
57
|
%
|
$
|
1.85
|
November
8, 2010
|
||||||
|
|||||||||||||
|
34
|
%
|
$
|
1.65
|
April
1, 2010
|
||||||||
Amy
Factor
|
97,000(2
|
)
|
|||||||||||
103,000(2
|
)
|
$
|
1.65
|
April
1, 2010
|
|||||||||
25,000(2
|
)
|
$
|
1.85
|
November
8, 2010
|
|||||||||
75,000(2
|
)
|
$
|
2.90
|
March
1, 2010
|
|||||||||
200,000(3
|
)
|
$
|
2.90
|
February
1, 2010
|
|||||||||
Jacek
Rozga, M.D., Ph.D.
|
12,000(4
|
)
|
2
|
%
|
$
|
2.22
|
July
7, 2012
|
||||||
Scott
L. Hayashi
|
12,000(4
|
)
|
3
|
%
|
$
|
2.90
|
March
1, 2010
|
||||||
10,000(5
|
)
|
$
|
1.85
|
March
24, 2010
|
|||||||||
|
|||||||||||||
David
J. Zeffren
|
12,000(4
|
)
|
1
|
%
|
$
|
2.90
|
March
1, 2010
|
||||||
Shawn
P. Cain
|
30,000(6
|
)
|
3
|
%
|
$
|
1.65
|
March
31, 2010
|
Name
|
Shares
Acquired
on
Exercise
|
Value
Realized
|
Number
of Securities Underlying Unexercised Options at FY-End (#)
Exercisable/
Unexercisable
|
Value
of Unexercised In-the-Money Options at FY-End (#)
Exercisable/
Unexercisable(1)
|
|||||||||
Walter
C. Ogier
|
-
|
-
|
0/500,000
|
-
|
|||||||||
Amy
Factor
|
-
|
-
|
475,000/0
|
$
|
170,000/0
|
||||||||
Jacek
Rozga, M.D., Ph.D
|
-
|
-
|
71,000/7,000
|
$
|
44,100/0
|
||||||||
Scott
Hayashi
|
-
|
-
|
27,000/5,000
|
-
|
|||||||||
David
J. Zeffren
|
-
|
-
|
20,000/2,000
|
-
|
|||||||||
Shawn
P. Cain
|
-
|
-
|
11,250/18,750
|
$
|
1,688/2,813
|
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(1)
|
2,100,000
|
$
|
1.62
|
1,900,000
|
||||||
Equity
compensation plans not approved by security holders
|
475,000(2
|
)
|
$
|
1.15
|
-0-
|
|||||
Total
|
2,575,000
|
$
|
1.54
|
1,900,000
|
Name
and Address of Beneficial Owner
|
Shares
Beneficially Owned (1)
|
Percentage
of Class
|
|||||
Jacek
Rozga, M.D., Ph.D.
|
2,319,000
|
(2)
|
13.2
|
%
|
|||
Achilles
A. Demetriou, M.D., Ph.D and Kristin P. Demetriou
|
2,500,000
|
(3)
|
14.3
|
%
|
|||
John
M. Vierling, M.D.
|
147,667
|
(4)
|
*
|
||||
Walter
C. Ogier
|
-0-
|
*
|
|||||
Roy
Eddleman
|
444,919
|
(5)
|
2.5
|
%
|
|||
Marvin
S. Hausman, M.D.
|
655,750
|
(6)
|
3.7
|
%
|
|||
Jack
E. Stover
|
61,667
|
(7)
|
*
|
||||
Amy Factor | 901,250 | (8) | 4.9 | % | |||
Thomas C. Seoh | 36,440 | (7) | * | ||||
Dennis Kogod | 28,334 | (7) | * |
Thomas Tully | 38,750 | (7) | * | ||||
Richard W. Bank, M.D. | 308,851 | (9) | 1.7 | % | |||
Scott L. Hayashi | 27,000 | (7) | * | ||||
David J. Zeffren | 72,000 | (10) | * | ||||
Shawn P. Cain | 11,250 | (7) | * | ||||
Gary
Ballen 140 Burlingame, Los Angeles, California 90049 |
1,139,222 | (11) | 6.3 | % | |||
LibertyView
Funds, LP
111
River Street – Suite 1000
Hoboken,
NJ 07030-5776
|
1,521,892
|
(12)
|
8.5
|
%
|
|||
LibertyView
Special Opportunities Fund, LP
111 River Street -- Suite
1000
Hoboken,
NJ 07030-5776
|
2,339,444
|
(13)
|
12.9
|
%
|
|||
Neuberger
Berman LLC
111
River Street – Suite 1000
Hoboken,
NJ 07030-5776
|
4,384,388
|
(14)
|
23.5
|
%
|
|||
All
executive officers and directors as a group (14 persons)
|
5,052,878
|
(15)
|
26.1
|
%
|
(1) |
Beneficial
ownership is determined in accordance with the rules of the
Securities and
Exchange Commission and generally includes voting or investment
power with
respect to securities. Shares of common stock subject to options,
warrants
and convertible securities currently exercisable or convertible,
or
exercisable or convertible within 60 days, are deemed outstanding,
including for purposes of computing the percentage ownership
of the person
holding such option, warrant or convertible security, but not
for purposes
of computing the percentage of any other
holder.
|
(2) |
Includes
currently exercisable options to purchase 74,000 shares of
common stock.
|
(3) |
Consists
of 2,500,000 shares owned by the A & K Demetriou Family Trust, of
which Achilles A. Demetriou, M.D., Ph.D. and Kristin P. Demetriou
each are
co-trustees with the right to vote or dispose of the trust’s
shares.
|
(4) |
Consists
of currently exercisable options to purchase 147,667 shares
of common
stock.
|
(5) |
Consists
of currently exercisable options to purchase 82,250 shares
of common stock
and 362,669 shares of common stock owned by Spectrum Laboratories,
Inc.
Mr. Eddleman is the Chairman of the Board and Chief Executive
Officer of
Spectrum Laboratories, Inc.
|
(6) |
Consists
of (i) currently exercisable options to purchase 124,250 shares
of common
stock, (ii) currently exercisable warrants to purchase 187,500
shares of
common stock, (iii) 100,000 shares owned by the Marvin Hausman
Revocable
Trust, and (iv) 244,000 shares owned by Northwest Medical Research,
Inc.
Dr. Hausman is the trustee of the Marvin Hausman Revocable
Trust and the
Chief Executive Officer and principal stockholder of Northwest
Medical
Research, Inc.
|
(7) |
Consists
of currently exercisable options.
|
(8) |
Consists
of (i) currently exercisable options to purchase 486,250 shares
of common
stock, (ii) warrants to purchase 200,000 shares exercisable
by AFO
Advisors, LLC, (iii) warrants to purchase 100,000 shares exercisable
by
AFO Capital Advisors, LLC, (iv) 5,000 shares owned by the Jay
H. Oyer and
Amy Factor Foundation, (v) 5,000 shares owned by the Melissa
H. Oyer
Trust, (vi) 5,000 shares owned by the Zachary D. Oyer Trust,
and (vii)
100,000 shares owned by AFO Capital Advisors, LLC. Amy Factor
is the owner
and President of AFO Capital Advisors, LLC and AFO Advisors,
LLC. She is
also the trustee of The Jay H. Oyer and Amy Factor Family Foundation,
The
Melissa H. Oyer Trust, and The Zachary D. Oyer Trust and has
voting and
investment control of the securities of these
entities.
|
(9) |
Consists
of (i) currently exercisable options to purchase 115,00 shares
of common
stock, (ii) a warrant to purchase 40,000 shares of common stock
exercisable by Richard W. Bank, M.D. (iii) 40,000 shares of
common stock
owned by Richard W. Bank. M.D., (iv) 13,851 shares of common
stock held by
LibertyView Health Sciences Fund, LP, and (iv) a warrant to
purchase
100,000 shares of common stock exercisable by LibertyView Health
Sciences
Fund, LP. Dr. Bank is the Senior Portfolio Manager, Managing
Director and
Senior Vice President of LibertyView Capital Management, a
division of
Neuberger Berman, LLC, which is affiliated with the General
Partner of the
LibertyView Health Sciences Fund,
LP.
|
(10) |
Consists
of (i) 25,000 shares owned by Mira Zeffren, David Zeffren’s wife, (ii)
warrants to purchase 25,000 shares registered in the name of
Mira Zeffren,
and (iii) currently exercisable options held by David Zeffren
for the
purchase of 22,000 shares of common
stock.
|
(11) |
Consists
of (i) 417,000 shares of common stock registered in Mr. Ballen’s name,
(ii) currently exercisable warrants to purchase 600,000 shares
of common
stock owned by Mr. Ballen, and (iii) 122,222 shares registered
in the name
of American Charter & Marketing LLC, over which Mr. Ballen has voting
and investment control.
|
(12) |
Consists
of (i) 1,100,619 shares of common stock and (ii) currently
exercisable
warrants to purchase 421,273 shares of common stock. LibertyView
Funds,
LP, LibertyView Special Opportunities Fund, LP and Trust D
for a Portion
of the Assets of the Kodak Retirement Income Plan have a common
investment
advisor, Neuberger Berman, LLC, that has voting and dispositive
power over
the shares held by them, which is exercised by Richard A. Meckler.
Since
they have hired a common investment advisor, these entities
are likely to
vote together. Additionally, there may be common investors
within the
different accounts managed by the same investment advisor.
The General
Partner of LibertyView Special Opportunities Fund, LP and LibertyView
Funds, LP is Neuberger Berman Asset Management, LLC, which
is affiliated
with Neuberger Berman, LLC, a registered broker-dealer. LibertyView
Capital Management, a division of Neuberger Berman, LLC, is
affiliated
with the General Partner of the LibertyView Health Sciences
Fund, LP. The
shares were purchased for investment in the ordinary course
of business
and at the time of purchase, there were no agreements or understandings,
directly or indirectly, with any person to distribute the shares.
Trust D
for a Portion of the Assets of the Kodak Retirement Income
Plan is not in
any way affiliated with a broker-dealer.
|
(13) |
Consists
of (i) 1,724,169 shares of common stock and (ii) currently
exercisable
warrants to purchase 615,275 shares of common stock. LibertyView
Special
Opportunities Fund, LP, LibertyView Funds, LP and Trust D for
a Portion of
the Assets of the Kodak Retirement Income Plan have a common
investment
advisor, Neuberger Berman, LLC, that has voting and dispositive
power over
the shares held by them, which is exercised by Richard A. Meckler.
Since
they have hired a common investment advisor, these entities
are likely to
vote together. Additionally, there may be common investors
within the
different accounts managed by the same investment advisor.
The General
Partner of LibertyView Special Opportunities Fund, LP and LibertyView
Funds, LP is Neuberger Berman Asset Management, LLC, which
is affiliated
with Neuberger Berman, LLC, a registered broker-dealer. LibertyView
Capital Management, a division of Neuberger Berman, LLC, is
affiliated
with the General Partner of the LibertyView Health Sciences
Fund, LP. The
shares were purchased for investment in the ordinary course
of business
and at the time of purchase, there were no agreements or understandings,
directly or indirectly, with any person to distribute the shares.
Trust D
for a Portion of the Assets of the Kodak Retirement Income
Plan is not in
any way affiliated with a
broker-dealer.
|
(14) |
Includes
shares of common stock and currently exercisable warrants to
purchase
shares of common stock held by Liberty Funds, LP and LibertyView
Special
Opportunities Fund, LP (see footnotes 12 and 13). Also includes
(i)
386,689 shares of common stock held by Trust D for a Portion
of the Assets
of the Kodak Retirement Income Fund and (ii) currently exercisable
warrants to purchase 136,363 shares of common stock held by
Trust D for a
Portion of the Assets of the Kodak Retirement Income Plan.
LibertyView
Funds, LP, LibertyView Special Opportunities Fund, LP and Trust
D for a
Portion of the Assets of the Kodak Retirement Income Plan have
a common
investment advisor, Neuberger Berman, LLC, that has voting
and dispositive
power over the shares held by them, which is exercised by Richard
A.
Meckler. Since they have hired a common investment advisor,
these entities
are likely to vote together. Additionally, there may be common
investors
within the different accounts managed by the same investment
advisor. The
General Partner of LibertyView Special Opportunities Fund,
LP and
LibertyView Funds, LP is Neuberger Berman Asset Management,
LLC, which is
affiliated with Neuberger Berman, LLC, a registered broker-dealer.
LibertyView Capital Management, a division of Neuberger Berman,
LLC, is
affiliated with the General Partner of the LibertyView Health
Sciences
Fund, LP. The shares were purchased for investment in the ordinary
course
of business and at the time of purchase, there were no agreements
or
understandings, directly or indirectly, with any person to
distribute the
shares. Trust D for a Portion of the Assets of the Kodak Retirement
Income
Plan is not in any way affiliated with a broker-dealer.
|
(15) |
Includes
currently exercisable options and warrants to purchase 1,907,358
shares of
common stock.
|
Exhibit
Number
|
Description
|
2.1
|
Agreement
and Plan of Reorganization, dated October 20, 2003, between
the
Registrant, Arbios Technologies, Inc., HAUSA Acquisition, Inc.,
Cindy
Swank and Raymond Kuh (1)
|
3.1
|
Certificate
of Incorporation filed with the Secretary of State of the State
of
Delaware on June 3, 2005
|
3.2
|
Certificate
of Correction filed with the Secretary of State of the State
of Delaware
on July 6, 2005
|
3.3
|
Certificate
of Ownership and Merger filed with the Secretary of State of
the State of
Delaware on July 25, 2005
|
3.4
|
Certificate
of Ownership and Merger filed with the Secretary of State of
the State of
Delaware on July 26, 2005
|
3.5
|
Bylaws
|
4.1
|
Form
of Common Stock certificate
|
4.2
|
Form
of Warrant for the Purchase of Shares of Common Stock issued
by the
Registrant upon the assumption of the Arbios Technologies,
Inc.
outstanding Warrant (3)
|
4.3
|
Common
Stock Purchase Warrant, dated April 1, 2004, issued to Wolfe
Axelrod
Weinberger Associates LLC (4)
|
4.4
|
Form
of Warrant to Purchase Common Stock of Arbios Systems, Inc.,
dated January
11, 2005, issued to investors and placement agent (5)
|
10.1
|
Form
of 2001 Stock Option Plan (2)*
|
10.2
|
Facilities
Lease, entered into as of June 30, 2001, by and between Cedars-Sinai
Medical Center and Arbios Technologies, Inc. (3)
|
10.3
|
Standard
Multi-Tenant Office Lease, dated as of August 16, 2005, by
and between
Beverly Robertson Design Plaza and Arbios Systems, Inc.
|
10.4
|
Employee
Loan-Out Agreement, entered into effective as of July 1, 2001,
by and
between Cedars-Sinai Medical Center and Arbios Technologies,
Inc.
(3)
|
10.5
|
Second
Amendment to Employee Loan-Out Agreement, entered into effective
as of May
7, 2003, by and between Cedars-Sinai Medical Center and Arbios
Technologies, Inc. (3)
|
10.6
|
License
Agreement, entered into as of June 2001, by and between Cedars-Sinai
Medical Center and Arbios Technologies, Inc. (3)
|
10.7
|
Spectrum
Labs License Agreement (3)
|
10.8
|
Third
Amendment to Employee Loan-Out Agreement, entered into effective
as of
June 21, 2004, by and between Cedars-Sinai Medical Center and
Arbios
Systems, Inc. (4)
|
10.9
|
Asset
Purchase Agreement among Circe Biomedical, Inc., a Delaware
corporation,
Arbios Technologies, Inc., and Arbios Systems, Inc., dated
as of April 7,
2004(4)
|
10.10
|
Manufacturing
and Supply Agreement, dated as of December 26, 2001, between
Spectrum
Laboratories, Inc. and Arbios Technologies, Inc. (4)
|
10.11
|
Research
Agreement, dated as of December 26, 2001, between Spectrum
Laboratories,
Inc. and Arbios Technologies, Inc. (4)
|
10.12
|
First
Amendment to Research Agreement, dated as of October 14, 2002,
between
Spectrum Laboratories, Inc. and Arbios Technologies, Inc.
(4)
|
10.13
|
Third
Amendment to Facilities Lease, entered into effective as of
June __, 2004,
by and between Cedars-Sinai Medical Center and Arbios Technologies,
Inc.
(4)
|
10.14
|
Form
of Purchase Agreement, dated as of January 11, 2005, by and
among Arbios
Systems, Inc. and the Investors named therein. (5)
|
10.15
|
Form
of Registration Rights Agreement, dated as of January 11, 2005,
by and
among Arbios Systems, Inc. and the Investors named
therein.(5)
|
10.16
|
Omnibus
Stockholders’ Agreement, dated as of October 24, 2003, by and among Arbios
Technologies, Inc., Historical Autographs U.S.A., Inc., Spectrum
Laboratories, Inc., Cedars-Sinai Medical Center, Achilles A.
Demetriou,
M.D., Ph.D. and Kristin P. Demetriou, as Trustees of the A
& K
Demetriou Family Trust created on November 13, 2000, and Jacek
Rozga,
M.D., Ph.D. and Joanna Rozga.
|
10.17
|
Employment
Offer Letter, dated December 30, 2004, between Arbios Systems,
Inc. and
David Zeffren.*
|
10.18
|
Employment
Offer Letter, dated March 25, 2005, between Arbios Systems,
Inc. and Shawn
Cain.*
|
10.19
|
Employment
Offer Letter, dated March 29, 2005, between Arbios Systems,
Inc. and Scott
Hayashi.*
|
10.20
|
Employment
Agreement, entered into between Arbios Systems, Inc. and Amy
Factor,
effective as of March 31, 2005 (6)*
|
10.21
|
Employment
Offer Letter, dated July 28, 2005, between Arbios Systems,
Inc. and Jacek
Rozga, M.D., Ph.D. (7)*
|
10.22
|
2005
Stock Incentive Plan (8)*
|
10.23
|
Form
of Stock Option Agreement for the 2005 Stock Incentive Plan
(8)*
|
10.24
|
Employment
Offer Letter, dated October 17, 2005, between Arbios Systems,
Inc. and
Walter C. Ogier. (9)*
|
10.25
|
Consulting
Agreement, dated October 1, 2005, between Arbios Systems, Inc.
and Marvin
S. Hausman, M.D. (9)
|
10.26
|
Form
of Lease, dated April 1, 2005, between Arbios Technologies,
Inc. and
American Integrated Biologics, Inc.
(7)
|
31.1
|
Certification
of Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
31.2
|
Certification
of Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
32.1
|
Certification
of Principal Executive Officer Pursuant to 18 U.S.C. Section
1350
|
32.2
|
Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section
1350
|
Independent
Registered Public Accounting Firm Report
|
F-1
|
|||
Balance
Sheet - As of December 31, 2005 and 2004
|
F-2
|
|||
Statement
of Operations - For the Years Ended December 31, 2005, 2004
and
Period From August 23, 2000 (Inception) to December 30,
2005
|
F-3
|
|||
Statement
of Cash Flows - For the Years Ended December 31, 2005, 2004
and
Period From August 23, 2000 (Inception) to December 30,
2005
|
F-4
|
|||
Statements
of Change in Stockholders’ Equity - For the Years Ended
December 31,
2005, 2004 and Period From August 23, 2000 (Inception)
to December 30,
2005
|
F-5
|
|||
Notes
to Financial Statements
|
F-9
|
ARBIOS
SYSTEMS, INC.
|
|||||||
(A
development stage company)
|
|||||||
BALANCE
SHEETS
|
|||||||
December
31, 2005 and 2004
|
|||||||
December
31,
|
|||||||
ASSETS
|
2005
|
2004
|
|||||
|
|||||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
$
|
2,379,738
|
$
|
1,501,905
|
|||
Short
term investments
|
$
|
1,996,000
|
|||||
Prepaid
expenses
|
195,841
|
97,653
|
|||||
Total
current assets
|
$
|
4,571,579
|
$
|
1,599,558
|
|||
Property
and equipment, net
|
101,629
|
107,789
|
|||||
Patent
rights, net of accumulated amortization of $93,418
for 2005 & $105,457
for 2004
|
173,249
|
294,543
|
|||||
Other
assets
|
55,773
|
33,164
|
|||||
Total
assets
|
$
|
4,902,230
|
$
|
2,035,054
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable
|
$
|
160,649
|
$
|
92,304
|
|||
Accrued
expenses
|
152,362
|
121,460
|
|||||
Contract
commitment
|
250,000
|
||||||
Current
portion of capitalized lease obligation
|
5,341
|
||||||
Total
current liabilities
|
313,011
|
469,105
|
|||||
Stockholders'
equity
|
|||||||
Preferred
stock, $.001 par value; 5,000,000 shares authorized: none
issued and outstanding
|
|||||||
Common
stock, $.001 par value; 60,000,000 and 25,000,000 shares authorized
as
of 2005 and 2004; 16,232,909 and 13,216,097 shares issued and
outstanding
in 2005 and 2004, respectively
|
16,233
|
13,216
|
|||||
Additional
paid-in capital
|
13,352,217
|
6,508,061
|
|||||
Deficit
accumulated during the development stage
|
(8,779,231
|
)
|
(4,955,328
|
)
|
|||
Total
stockholders' equity
|
4,589,219
|
1,565,949
|
|||||
Total
liabilities and stockholders' equity
|
$
|
4,902,230
|
$
|
2,035,054
|
|||
ARBIOS
SYSTEMS, INC.
|
||||||
(A
development stage company)
|
||||||
STATEMENTS
OF OPERATIONS
|
|
||||||||||
For
the years ended December 31,
|
Inception,
Aug.
23, 2000 to |
|||||||||
2005
|
2004
|
Dec.
31, 2005
|
||||||||
Revenues
|
$
|
-
|
$
|
72,030
|
$
|
320,966
|
||||
Operating
expenses:
|
||||||||||
General
and administrative
|
2,394,546
|
1,988,763
|
5,006,915
|
|||||||
Research
and development
|
1,554,509
|
1,426,379
|
3,990,562
|
|||||||
Total
operating expenses
|
3,949,055
|
3,415,142
|
8,997,477
|
|||||||
Loss
before other income (expense)
|
(3,949,055
|
)
|
(3,343,112
|
)
|
(8,676,511
|
)
|
||||
Other
income (expense):
|
||||||||||
Interest
income
|
125,286
|
16,132
|
141,418
|
|||||||
Interest
expense
|
(134
|
)
|
(847
|
)
|
(244,138
|
)
|
||||
Total
other income (expense)
|
125,152
|
15,285
|
(102,720
|
)
|
||||||
Net
loss
|
$
|
(3,823,903
|
)
|
$
|
(3,327,827
|
)
|
$
|
(8,779,231
|
)
|
|
Net
earnings per share:
|
||||||||||
Basic
and diluted
|
$
|
(0.24
|
)
|
$
|
(0.25
|
)
|
||||
Weighted-average
shares:
|
||||||||||
Basic
and diluted
|
16,137,676
|
13,199,325
|
ARBIOS
SYSTEMS, INC.
|
|||||
(A
development stage company)
|
|||||
STATEMENTS
OF CASH FLOWS
|
|||||
For
the years ended December 31,
|
|
|||||||||
2005
|
2004
|
Inception to December 31, 2005 |
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss
|
$
|
(3,823,903
|
)
|
$
|
(3,327,827
|
)
|
$
|
(8,779,231
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
||||||||||
used
in operating activities:
|
||||||||||
Amortization
of debt discount
|
244,795
|
|||||||||
Depreciation
and amortization
|
59,249
|
48,191
|
199,777
|
|||||||
Patent
rights impairment
|
91,694
|
91,694
|
||||||||
Issuance
of common stock and warrants for compensation
|
557,079
|
1,045,552
|
1,613,131
|
|||||||
Interest
earned on discounted short term investments
|
(8,652
|
)
|
(8,652
|
)
|
||||||
Settlement
of accrued expenses
|
54,401
|
|||||||||
Deferred
compensation costs
|
319,553
|
|||||||||
Changes
in operating assets and liabilities:
|
||||||||||
Prepaid
expenses
|
(98,188
|
)
|
58,333
|
(195,843
|
)
|
|||||
Other
assets
|
(22,609
|
)
|
(25,730
|
)
|
(55,773
|
)
|
||||
Accounts
payable and accrued expenses
|
34,552
|
36,727
|
219,509
|
|||||||
Other
liabilities
|
64,695
|
(5,556
|
)
|
64,695
|
||||||
Contract
obligation
|
(250,000
|
)
|
250,000
|
-
|
||||||
Net
cash used in operating activities
|
(3,396,083
|
)
|
(1,920,310
|
)
|
(6,231,944
|
)
|
||||
Cash
flows used in investing activities:
|
||||||||||
Additions
of property and equipment
|
(23,489
|
)
|
(80,745
|
)
|
(141,349
|
)
|
||||
Purchase
of short term investments
|
(8,977,714
|
)
|
(8,977,714
|
)
|
||||||
Maturities
of short term investments
|
6,990,366
|
6,990,366
|
||||||||
Net
cash used in investing activities
|
(2,010,837
|
)
|
(80,745
|
)
|
(2,128,697
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from issuance of convertible debt
|
400,000
|
|||||||||
Proceeds
from common stock option exercise
|
62,500
|
2,700
|
65,200
|
|||||||
Proceeds
from issuance of common stock, net of costs
|
6,227,594
|
10,058,262
|
||||||||
Proceeds
from issuance of preferred stock, net of costs
|
238,732
|
|||||||||
Payments
on capital lease obligation, net
|
(5,341
|
)
|
(6,826
|
)
|
(21,815
|
)
|
||||
Net
cash provided by (used in) financing activities
|
6,284,753
|
(4,126
|
)
|
10,740,379
|
||||||
Net
increase (decrease) in cash
|
877,833
|
(2,005,181
|
)
|
2,379,738
|
||||||
Cash:
|
||||||||||
At
beginning of period
|
1,501,905
|
3,507,086
|
||||||||
At
end of period
|
$
|
2,379,738
|
$
|
1,501,905
|
$
|
2,379,738
|
||||
Supplemental
disclosures of non-cash financing activity
|
||||||||||
Issuance
of securities for obligation related to finder's fees
|
$
|
47,500
|
$
|
47,500
|
ARBIOS
SYSTEMS, INC.
|
||||||||||
(A
Development Stage Company)
|
||||||||||
STATEMENT
OF STOCKHOLDERS' EQUITY
|
||||||||||
PERIOD
FROM AUGUST 23, 2000 (INCEPTION) TO DECEMBER 31,
2005
|
Deficit
|
|||||||||||||||||||||||||