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ACEL > SEC Filings for ACEL > Form 10-Q on 1-May-2013All Recent SEC Filings

Show all filings for TAMIR BIOTECHNOLOGY, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for TAMIR BIOTECHNOLOGY, INC.


1-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended July 31, 2010 and presume readers have access to, and will have read, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.

The following discussion contains certain statements that may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended July 31, 2010 in the section entitled "Risk Factors" for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited financial statements and notes thereto that appear elsewhere in this report.

Overview

We are a biopharmaceutical company primarily engaged in the discovery and development of a new class of antiviral therapeutic drugs for the treatment of pathological conditions. Our proprietary drug discovery and development program consists of novel therapeutics which are being developed from amphibian ribonucleases ("RNases").

Since our inception in 1981, we have devoted the vast majority of our resources to the research and development of ONCONASE®, as well as other related drug candidates. In recent years we have focused our resources towards the completion of the clinical program for ONCONASE® in patients suffering from unresectable malignant mesothelioma ("UMM").

On February 4, 2011, we decided to suspend the Phase II trial of ONCONASE® in combination with carboplatinum regimens in patients suffering from non-small cell lung cancer who have reached maximum progression after receiving two cycles of Alimta plus Carboplatin. Given our limited resources and based upon previously reported positive in vitro results, we shifted our focus to the completion of in vivo studies for Cytomegalovirus ("CMV") and human papillomavirus ("HPV").

We have incurred losses since inception and we have not received Food and Drug Administration ("FDA") approval of any of our drug candidates. We expect to continue to incur losses for the foreseeable future as we continue our efforts to receive marketing approval for our drug candidates, which includes the sponsorship of human clinical trials. Until we are able to consistently generate sufficient revenue through the sale of drug or non-drug products, we anticipate we will be required to fund the development of our pre-clinical compounds and drug product candidates primarily by other means, including, but not limited to, licensing the development or marketing rights to some of our drug candidates to third parties, collaborating with third parties to develop our drug candidates, or selling Company issued securities.

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Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America ("US GAAP") requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. On an ongoing basis, we evaluate our estimates which are based on historical experience and on other assumptions that we believe to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions. The following accounting policies require significant management judgments and estimates:

Results of Operations

For the Three Months Ended April 30, 2011 and 2010

Revenues

Revenues were $5,200,000 and zero for the three months ended April 30, 2011 and 2010, respectively. The increase of $5.2 million was due to nonrefundable license fees recognized in fiscal 2011.

Research and Development Expenses

Research and development expense was $132,145 and $133,658 for the three months ended April 30, 2011 and 2010, respectively.

General and Administrative Expenses

General and administrative expenses were $(1,107,137) and $411,069 for the three months ended April 30, 2011 and 2010, respectively. This decrease was primarily due to the reversal of $1,318,126 in compensation expense related to 1,000,000 stock options, tied to performance, issued in April 2008 to the Company's Founder.

Other Income (Expense)

Other income (expense) was $3,310,855 and $(7,013,727) for the three months ended April 30, 2011 and 2010, respectively. This increase was directly due to the change of $10,332,858 from the mark-to-market valuation of the derivative liability.

For the Nine Months Ended April 30, 2011 and 2010

Revenues

Revenues were $5,200,000 and $18,750 for the nine months ended April 30, 2011 and 2010, respectively. The increase of $5.2 million was due to a nonrefundable license fees recognized in fiscal 2011.

Research and Development Expenses

Research and development expense was $776,446 and $416,313 for the nine months ended April 30, 2011 and 2010, respectively.

General and Administrative Expenses

General and administrative expenses were $(413,999) and $1,238,756 for the nine months ended April 30, 2011 and 2010, respectively. This decrease was primarily due to the reversal of $1,318,126 in compensation expense related to 1,000,000 stock options, tied to performance options, issued in April 2008 to the Company's Founder.

Other Income (Expense)

Other income (expense) was $7,087,704 and $(12,869,991) for the nine months ended April 30, 2011 and 2010, respectively. This increase was directly due to the change of $20,263,697 from the mark-to-market valuation of the derivative liability.

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Liquidity and Capital Resources

Net cash used in operating activities was $244,755 and $2,554,232 in the nine months ended April 30, 2011 and 2010, respectively. The decrease was primarily due to an overall decrease in the activities of the Company.

Net cash used in investing activities was $0 and $2,748 in the nine months ended April 30, 2011 and 2010, respectively. The difference was the decrease in capital equipment purchases for the nine months ending April 30, 2010.

Net cash provided by financing activities was $495,670 and $3,099,155 in the nine months ended April 30, 2011 and 2010, respectively. The difference of $2,603,485 in cash flows from financing activities was due to proceeds from the issuance of convertible debt in fiscal 2010.

The Company suffered recurring losses from operations and has an accumulated deficit of $111,193,960 at April 30, 2011.

In connection with our private financing completed in October 2009, we also entered into an escrow agreement whereby certain investors placed $1,600,000 of the proceeds paid for their Units in an escrow account pursuant to the terms of the Securities Purchase Agreement. Such amounts were disbursed from the escrow account to satisfy obligations we owed to clinical research organizations, hospitals, doctors and other vendors and service providers associated with the clinical trials for our ONCONASEāproduct. The escrow agreement was terminated on April 20, 2011 as all funds had been used.

In April 2011, the Company completed the sale of 2,500,000 shares of its common stock and the issuance of warrants to purchase 2,500,000 common shares pursuant to an agreement with Unilab LP. The Company received proceeds of $500,000. The warrants have a 5-year term and a purchase price of $0.50 per share.

On December 14, 2012, the Company completed a private placement of 10 "Units" at $100,000 per Unit, for $1 million pursuant to the Purchase Agreement. Each Unit consisted of (i) 13,846,945 shares of Common Stock, (ii) 1,000 Preferred Shares, each such Preferred Share being initially convertible into 17,718.52 shares of Common Stock, and (iii) Warrants to purchase 12,626,184 shares of Common Stock at $0.003168 per share.

In connection with the Offering, and as a condition precedent thereto under the Purchase Agreement, the Requisite Holders of the Company's outstanding Notes, entered into a Consent and Waiver under which (i) the Notes were amended to provide for the automatic conversion of the outstanding principal and interest of all of the Notes upon the election of the Requisite Holders, (ii) the Requisite Holders elected to convert all outstanding principal and interest under the Notes, of $3,891,838, into shares of Common Stock at $0.15 per share (the conversion price under the Notes), and (iii) the exercise price of the Series B Warrants held by the holders of the Notes were reduced from $0.25 to $0.01 per share.

The Company has financed its operations since inception primarily through the sale of equity securities and convertible debentures in registered offerings and private placements. Additionally, we have raised capital through other debt financings, the sale of our state tax benefit and research products. Because our business does not generate positive cash flow from operating activities, the Company will need to raise additional capital to commercialize our product or fund development efforts relating to additional indications. To the extent additional capital is not available when needed, the Company may be forced to abandon some or all of its development and commercialization efforts, which would have a material adverse effect on the prospects of the business. Based upon the reduced operations, we currently believe that our cash reserves can support our activities through September 2013. We may seek to satisfy future funding requirements through public or private offerings of securities or with collaborative or other arrangements with corporate partners. Additional financing or strategic transactions may not be available when needed or on terms acceptable to us, if at all. If adequate financing is not available, we may be required to delay, scale back, or eliminate certain of our research and development programs, relinquish rights to certain of our technologies, drugs or products, or license third parties to commercialize products or technologies that we would otherwise seek to develop ourselves.

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Inflation and Seasonality

Inflation and seasonality have not been material to us during the past five years.

Recent Accounting Pronouncements

In January, 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, "Improving Disclosure about Fair Value Measurements." This ASU added new requirements for disclosures into and out of Levels 1 and 2 fair value measurements and information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. It also clarifies existing fair value disclosures about the level of disaggregation, inputs and valuation techniques. The guidance in the ASU was effective for annual and interim reporting periods in fiscal years beginning after November 15, 2010. Adoption of this guidance did not have any effect on our financial statements or results of operations.

Refer to the notes to the financial statements in our July 31, 2010 Form 10-K for a complete description of recent accounting standards which we have not yet been required to implement and may be applicable to our operation, as well as those significant accounting standards that have been adopted during the current year.

Off-Balance Sheet Arrangements

As of April 30, 2011, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

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