Add
CPCF.OB to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| CPCF.OB > SEC Filings for CPCF.OB > Form 10-K on 16-Mar-2009 | All Recent SEC Filings |
16-Mar-2009
Annual Report
General
To date, our activities have included the market analysis and development of our MedClose device and counterpulsation units and the raising of development and working capital. We have developed and prepared for market our counterpulsation units, including a stand-alone unit known as the CPCA 2000. In March 2003, we received FDA clearance to market the CPCA 2000 counterpulsation unit as a Class III medical device. We are also engaged in the business of developing a patented internal puncture closure device known as "MedClose". We have not commenced revenue producing operations.
During 2003 and 2004, we pursued the potential sale of CPCA 2000, Inc., our subsidiary that owns our counterpulsation technologies and products. Based on the analysis and inquiries by our investment banker, along with our own internal inquiries and analysis, we are of the opinion that there is not sufficient interest in the acquisition of CPCA 2000, Inc. or our counterpulsation technologies at this time due to declines in the amount of reimbursable patient costs for counterpulsation treatments under the Medicare program. Between 2002 and 2005, the amount of reimbursable patient costs for counterpulsation treatments under Medicare declined by approximately 30%. The decline in coverage has had a material negative impact on projected profitability of operations based on our counterpulsation technologies and products.
At the present time, we have no intention of commencing operations based on our counterpulsation technologies, and we are no longer pursuing the potential sale of CPCA 2000, Inc. While we believe that our counterpulsation technologies continue to retain value, we do not believe we will be able to negotiate a sale of CPCA 2000, Inc. or its counterpulsation technologies that will result in a meaningful return to us or our shareholders until such time as the reimbursable patient costs for counterpulsation treatments under the Medicare program are significantly increased. We have historically charged to expense all research and development costs and expenses associated with our counterpulsation technologies. As of December 31, 2008, we had no assets on our consolidated balance sheet relating to our counterpulsation products or technologies, other than trademarks of less than $1,200.
The MedClose is a medical device that is designed to seal arterial puncture sites in patients who have undergone diagnostic or interventional catheterization procedures. It utilizes a proprietary catheter system that is designed to enhance manual compression by delivering a biologic or synthetic sealant which forms an elastic coagulum that is fully resorbed within 10 to 14 days. The MedClose is designed to significantly reduce the time to hemostasis (the stoppage of bleeding), thereby accelerating the patient's post-operative recovery and reducing the amount of time spent by post-operative professionals. The MedClose applications and usage capabilities are intended for cardiac diagnostic and interventional cardiology procedures as well as interventional radiological and proposed carotid stenting procedures. As of the date of this report, MedClose is not available for commercial distribution. We hold three patents for both the instrument and the technique used in connection with MedClose, and two additional patents pending.
We intend to analyze our options for moving forward with the commercial exploitation of the MedClose, including licensing or sale of the product and our manufacture, marketing and sale of the product directly. If we pursue the manufacture or marketing of the MedClose product, we will, in all likelihood require significant additional capital. In that event we will endeavor to acquire the necessary working capital from the sale of our securities. However, there can be no assurance we will be able to obtain the required additional working capital on commercially reasonable terms or at all.
We expect to commence revenue producing operations subject to US or foreign regulatory approval of the MedClose device. We do not expect to purchase or sell significant plant or equipment during 2009, nor do we expect a significant change in the number of our employees during the year.
In order to meet our general working capital requirements and to fund the commercial exploitation of the MedClose, in September 2007, we commenced a private placement of our Series E Preferred Stock. We are offering 1,666,667 shares of our Series E Preferred Stock, at $6.00 per share. As of March 5, 2009, we have sold 546,703 shares of Series E Preferred shares for the gross proceeds of $3,280,220 and issued an additional 6,667 shares in lieu of $40,000 of salary to our chief financial officer. The Series E Preferred stock has no voting rights and has a 10% annual dividend payable in cash or common stock at our option. Each Series E Preferred share was convertible into our common shares at a conversion price of $6.00 per share until August 31, 2008, when the conversion price was adjusted to the lower of 75% of the average last sale price of the common stock for the 30 trading days immediately preceding such date on any stock exchange or $4.50 per share; provided that the conversion price could not be adjusted to an amount below $3.92 per share. At August 31, 2008, the conversion price was deemed to be $4.50 per share. Subsequently, our board of directors approved an amendment to the Series E Preferred Stock to set the conversion price at $3.92 per share. The shares of Series E Preferred Stock have not been, and will not be, registered under the 1933 Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The Series E preferred shares are being sold by our executive officers and the proceeds of the offering are expected to be used for clinical trials, regulatory compliance, manufacturing and marketing relating to the MedClose device, and working capital.
Results of Operations
During the 2008 fiscal year, we incurred $1,986,790 of research and development expenses compared to $1,628,203 during fiscal 2007 and $1,600,818 during fiscal 2006. Research and development expenses relate to our ongoing development and testing of our internal puncture closure device and technique known as "MedClose." Our research and development costs were higher in 2008 than in 2007 or 2006 due to our movement toward obtaining regulatory approval in Europe. We were also able to increase research and development expenses in 2008 due to the additional capital we raised from the Series E Preferred share offering described above. We expect our research and development costs to increase as we get further into human trials and proceed towards the submission of applications for CE Mark/European commercial approval and eventually a FDA pre-market approval thereafter.
During fiscal 2008, we incurred $9,168,935 of general and administrative expenses, compared to administrative expenses of $902,094 in fiscal 2007 and $1,372,079, in fiscal 2006. General and administrative expenses in fiscal 2008 increased by $8,266,841 over fiscal 2007. The increase consisted primarily of increases of $7,689,553 in stock option expenses, $215,981 in legal fees as we move toward obtaining approvals for the MedClose device in Europe, $297,515 in professional fees as a result of hiring public relations consultants to help us raise awareness of CPC of America in general and the MedClose device in particular and $60,000 in officers' salaries as a result of hiring a chief financial officer in July 2008.
Financial Condition
As of December 31, 2008, we had a working capital deficit of ($1,565,026), which includes accrued dividends of $2,715,584 payable on our outstanding shares of Series C, Series D and Series E preferred stock as of such date. Our Series C and Series D preferred stock both have a 5% annual dividend payable in cash or shares of our common stock, at the option of the holder. Those dividends are convertible into our common shares at the rate of $3.57 per share in the case of the Series C preferred stock and $6.86 per share in the case of the Series D preferred stock. Our Series E preferred stock has a 10% annual dividend payable in cash or shares of our common stock, at the option of our company. The dividends on Series E preferred stock are convertible into our common shares at the rate of $3.92 per share. Dividends on our outstanding shares of preferred stock are only payable at the time those shares are converted into shares of our common stock. To date, all dividends to the holders of our Series C and D preferred shares have been paid in common shares. However, there can be no assurance that our Series C and D preferred share holders will continue to elect to receive dividends in common shares instead of cash.
We believe that we will require a minimum of $2.5 million of additional working capital in order to fund our proposed operations over the 12 months following the date of this report, assuming we do not receive requests for a substantial amount of dividend payments in cash. In the event we receive substantial requests for dividend payments in cash or we encounter a material amount of unexpected expenses, we may require in excess of $2.5 million additional capital over the next 12 months. We will seek to obtain additional working capital through the sale of our securities. However, we have no agreements or understandings with any third parties at this time for our receipt of such working capital. Consequently, there can be no assurance we will be able to access to capital as and when needed or, if so, that the terms of any available financing will be subject to commercially reasonable terms.
The report of our independent registered public accounting firm for the fiscal year ended December 31, 2008 states that due to our working capital deficiency at December 31, 2008 there is a substantial doubt about our ability to continue as a going concern.
As noted above, we are currently analyzing our options for moving forward with
the commercial exploitation of the MedClose, including licensing or sale of the
product and our manufacturing, marketing and sale of the product directly. If we
pursue the direct manufacturing and marketing of the MedClose product, we will,
in all likelihood require up to $40 million of additional capital in order to
(i) complete clinical trials and regulatory approvals in Europe, North America
and other designated foreign markets; (ii) commence manufacturing of the device;
and (iii) commence marketing and sales of the device, including the development
of a internal infrastructure necessary to support manufacturing and marketing.
We will endeavor to raise additional funds through the sale of our Series E preferred shares and any other available financing sources in order to meet our general working capital requirements and to fund the commercial exploitation of the MedClose. However, there are no agreements or understandings with any third parties at this time for our receipt of additional working capital and there can be no assurance that such funds will be available on commercially reasonable terms, if at all. If we are unable to access additional capital on a timely basis, we will be unable to expand or continue our development of the MedClose device and our operating results will be adversely affected.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements.
|
|