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| CPCF.OB > SEC Filings for CPCF.OB > Form 10-Q on 8-May-2009 | All Recent SEC Filings |
8-May-2009
Quarterly 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. However, at the present time, we have no intention of commencing operations based on our counterpulsation technologies. Our operations are currently focused on the business of developing a patented internal puncture closure device known as "MedClose". We have not commenced revenue producing operations.
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. As of the date of this report, we believe that we are likely to receive foreign regulatory approval of the MedClose device sooner than US approval, and we are currently focusing our development efforts on the approval of the MedClose device in the European Union. We intend to submit in the second quarter of 2009 an application for a CE mark for the MedClose device, as a delivery system independent of a sealant, utilizing the previous clinical data from our clinical trials in the U.S and Canada. CE mark approval is the principal requirement for commercial sale of the MedClose device in the European Union. Regulatory approval of the MedClose in the European Union is not expected to occur until the first quarter of 2010 at the earliest.
In the meantime, we are continuing our development of a proprietary synthetic sealant suitable for use in connection with the MedClose device. In March 2009, we entered into a product development agreement with Dr. Olex Hnojewyj, a holder of 13 patents in the field of vascular closure and other medical devices, pursuant to which Dr. Hnojewyj has been retained by us to develop a synthetic sealant on our behalf suitable for utilization with the MedClose device. We have developed a synthetic compound that is undergoing tests in animals as of the date of this report. Subject to the successful completion of such testing, we expect to file patent applications relating to formulas and commence clinical trial testing of the MedClose device utilizing the synthetic sealant formula in multiple European locations during the third quarter of 2009. Upon successful completion of the European clinical trials utilizing our proprietary synthetic sealant, we intend to respond to the FDA's outstanding comments on our pending application for a investigational device exemption for the MedClose.
We are presently pursuing an ISO 13485 certification of our records and procedures relating to our development and the proposed manufacturing of our MedClose device and proprietary sealant. We expect to begin the audit phase of the ISO 13485 certification procedure in the next 30 days and expect to obtain ISO 13485 certification before the end of fiscal 2009.
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 May 7, 2009, we have sold 546,703 shares of Series E Preferred shares for the gross proceeds of $3,280,220 and issued an additional 8,333 shares in lieu of $50,000 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. Dividends on preferred stock are only payable at the time the preferred shares are converted into shares of common stock. 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. Each outstanding share of our Series E Preferred Stock is convertible into a number of shares of our common stock equal to the private placement sale price of such preferred share ($6.00 per share) divided by the conversion price of such preferred share in effect at the time of conversion (currently $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
Revenue. We have generated no revenue to date and do not expect to generate revenue until we have received commercial regulatory approval of our MedClose device in various countries and markets.
Research and Development. Our expenses related to research and development during the three month period ended March 31, 2009 increased by approximately $246,307 over the prior year period. Research and development expenses relate to our ongoing development and testing of our internal puncture closure device and technique known as "Medclose." The increase in research and development expenses during the first quarter of 2009 was due to our movement toward obtaining regulatory approval in Europe. We were also able to increase research and development 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.
General and Administrative. During the three month period ended March 31, 2009, general and administrative expenses decreased by $126,889 over the prior year period. The decrease was primarily due to a decrease of $289,445 in stock option expenses from the first quarter of 2008 compared to the first quarter of 2009, offset by increases in legal fees in the approximate amount of $28,899, professional fees in the approximate amount of $91,378 and officers salaries in the approximate amount of $30,000.
Net Loss. Our net loss increased by $118,204 for the three months ended March 31, 2009 over the prior year period. The increase in net loss was due to the increase in research and development expenses offset by the decrease in general and administrative costs.
Financial Condition
As of March 31, 2009, we had a working capital deficit of ($2,448,729), which includes accrued dividends of $2,870,752 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 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 an 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.
Forward Looking Statements
This report contains forward-looking statements that are based on our beliefs as well as assumptions and information currently available to us. When used in this report, the words "believe," "expect," "anticipate," "estimate" and similar expressions are intended to identify forward-looking statements. These statements are subject to risks, uncertainties and assumptions, including, without limitation, the risks and uncertainties concerning FDA approval of our products; the risks and uncertainties concerning the acceptance of our services and products by our potential customers; our present financial condition and the risks and uncertainties concerning the availability of additional capital as and when required; the risks and uncertainties concerning technological changes and the competition for our services and products; and the risks and uncertainties concerning general economic conditions. These and other factors that may affect our results are discussed more fully in "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2009. Forward-looking statements speak only as of the date they are made. Readers are warned that we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, and are urged to review and consider disclosures we make in this and other reports that discuss factors germane to our business. See particularly our reports on Forms 10-K, 10-Q and 8-K filed from time to time with the Securities and Exchange Commission.
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