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FPMI > SEC Filings for FPMI > Form 10-Q on 15-May-2013All Recent SEC Filings

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

Form 10-Q for FLUOROPHARMA MEDICAL, INC.


15-May-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This report contains forward-looking statements. These forward-looking statements include, without limitation, statements containing the words "believes,""anticipates,""expects,""intends,""projects,""will," and other words of similar import or the negative of those terms or expressions. Forward-looking statements in this report include, but are not limited to, expectations of future levels of research and development spending, general and administrative spending, levels of capital expenditures and operating results, sufficiency of our capital resources, our intention to pursue and consummate strategic opportunities available to us.. Forward-looking statements subject to certain known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to those described in "Risk Factors" of the reports we file with the Securities and Exchange Commission.

Overview

We are a biopharmaceutical company specializing in discovering, developing and commercializing molecular imaging pharmaceuticals with initial applications in the area of cardiology. Molecular imaging pharmaceuticals are radiopharmaceuticals that enable early detection of disease through the visualization of subtle changes in biochemical and biological processes. We currently have two clinical-stage molecular imaging pharmaceutical product candidates: CardioPET and BFPET. Additionally we have identified potential candidates that may be useful in the detection and/or treatment of vulnerable plaque.

Our Product Candidates

BFPET

Our BFPET ([18F]-labeled cationic lipophilic tetraphosphonium) is an imaging agent used in stress-testing for patients with presumptive or proven Cardiac Artery Disease (CAD). BFPET measures the cardiovascular blood flow through the detection of ischemic (reversibly damaged) and infarcted (irreversibly damaged) myocardium (heart) tissue. Its mechanism of action is to enter the myocardial cells of the heart muscle in direct proportion to blood flow and membrane potential (the most important indicators of adequate cardiac blood supply). Since ischemic and infarcted myocardial cells take up significantly less BFPET than normal healthy myocardial cells do, BFPET can distinguish ischemic and infarcted cells from those that are healthy. Therefore, as a result of BFPET's use, we believe ischemic heart tissue can be more reliably detected using BFPET. We anticipate that BFPET will primarily be used in conjunction with stress-testing for patients with suspected or proven chronic CAD. If approved, BFPET will represent one of the first molecular imaging blood flow agent commercialized for use in the cardiovascular segment of the PET imaging market.

Currently, cardiac perfusion imaging is performed with SPECT tracers such Cardiolite®, Thallium-201 or the PET tracer Rubidium-82. However, SPECT imaging only has approximately 75% diagnostic accuracy with research showing that 10% of patients cleared as "normal" were subsequently found to be "abnormal" using PET imaging. The current PET tracer Rubidium-82 has experienced FDA recall and high cost issues.

BFPET successfully completed the Phase Ia clinical trial in 12 healthy volunteers with no adverse events and no clinically significant changes noted in follow-up clinical and laboratory testing (trial ID# NCT00733460). The results of the trial demonstrated the required dosimetry, safety profile and high resolution myocardial imaging pharmacokinetics to justify a controlled Phase II clinical trial. In January 2013, We announced that we will begin Phase II trials at Massachusetts General Hospital to assess its efficacy in CAD subjects.

CardioPET

Our CardioPET (Trans-9-[18F]-Fluoro-3, 4-Methyleneheptadecanoic Acid) is a molecular imaging agent to assess myocardial metabolism for patients with Coronary Artery Disease (CAD), especially for patients who are unable to perform exercise cardiac stress-testing. CardioPET allows for the detection of ischemic
(reversibly damaged) and infarcted (irreversibly damaged) myocardium (heart)
tissue in patients with presumptive or proven acute and chronic CAD.

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In addition, CardioPET could be used for Cardiac Viability Assessment (CVA) for the prediction of improvement prior to and/or following revascularization in patients with acute CAD including myocardial infarction (heart attack). Because CardioPET allows for the identification of damaged but viable heart tissue, is important since revascularization in those patients with substantial viable myocardium results in improved left ventricular function and survival. Importantly, CardioPET, if approved, may have several significant advantages for assessing cardiac viability using PET, and would likely represent the first imaging agent available in the U.S. for use in patients with acute and chronic CAD that cannot undergo stress-testing. CardioPET is designed to provide the metabolic component for CVA. Accordingly, it may be used with either BFPET or other blood flow agents in performing CVA.

CardioPET has completed Phase I trials and is enrolling patients in its Phase II trials to assess its safety and efficacy in CAD subjects. Phase II clinical trial plan for CardioPET will be an open label trial designed to assess the safety and diagnostic performance of CardioPET as compared to stress echocardiography, myocardial perfusion imaging and angiography as a gold standard of background disease. Specifically, the Phase II trial will consist of between 30-100 individuals with known stable chronic CAD who cannot undergo stress-testing for the evaluation of suspected or proven CAD. We could close out a phase IIa trial and switch the remaining enrolled patients into a Phase IIb trial in patients with acute CAD that are undergoing CVA for the prediction of functional improvement either prior to, or following, revascularization. Two trial sites are currently planned in Belgium and results are expected in the second half of 2013.

VasoPET

We are developing VasoPET, Diadenosine-5'5'''-P1, P4-tetraphosphate (Ap4A) analogs, such as P2, P3-monochloromethylene diadenosine 5', 5'''-P1, P4-tetraphosphate (Ap2CHClp2A), as novel molecular imaging agent for the detection of "vulnerable" coronary artery plaque in patients with CAD. VasoPET, if approved, would represent the first PET cardiac product to reliably image inflamed plaque and therefore may differentiate between vulnerable and stable coronary artery plaque.

The rupture of atherosclerotic plaques and the subsequent formation of thrombi are currently recognized as the primary mechanisms of myocardial and cerebral infarctions. Therefore, the detection of vulnerable plaque in atherosclerotic lesions is a desirable goal-and to date remains both a significant unmet clinical objective and a large unaddressed market opportunity.

Coronary artery plaques grow over time and progressively narrow the lumen of the coronary artery until blood flow to the heart diminishes to a critical level. The decrease in blood flow causes symptoms of chest pain (angina), at first during exercise and then progressively during rest. Rupture of the plaque and/or clot formation overlying the plaque may then result in myocardial ischemia and/or myocardial infarction. Coronary artery plaque that is "vulnerable" is differentiated from its "stable" form by a large lipid-rich atheromatous core, a thin fibrous cap, and infiltration by inflammatory cells such as macrophages. The risk factor for rupture (and subsequent heart attack) is currently thought to be independent of plaque size and arterial narrowing, but rather is thought to correlate more with the presence of inflammation.

Recent Accounting Pronouncements

Management does not expect any recently issued, but not yet effective, accounting standards to have a material effect on its results of operations or financial condition.

Critical Accounting Policies

This summary of significant accounting policies is presented to assist in understanding our consolidated financial statements. The consolidated financial statements and notes are representations of our management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America ("GAAP") and have been consistently applied in the preparation of the financial statements.

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Accounting for Share-Based Payments

We follow the provisions of ASC Topic 718, which establishes the accounting for transactions in which an entity exchanges equity securities for services and requires companies to expense the estimated fair value of these awards over the requisite service period. We use the Black-Scholes option pricing model in determining fair value. Accordingly, compensation is recognized using the fair value method and expected term accrual requirements as prescribed.

We account for share-based payments granted to non-employees in accordance with ASC Topic 505, "Equity Based Payments to Non-Employees." The Company determines the fair value of the stock-based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete.

The fair value of each share based payment is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:

Risk-Free Interest Rate. We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.

Expected Volatility. We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.

Dividend Yield. We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.

Expected Term. The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.

Forfeitures. Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.

Impairments

We assess the impairment of long-lived assets, including other intangible assets, whenever events or changes in circumstances indicate that their carrying value may not be recoverable in accordance with ASC Topic 360-10-35, "Impairment or Disposal of Long-Lived Assets." The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments, related primarily to the future profitability and/or future value of the assets. We hold investments in companies having operations or technologies in areas that are within or adjacent to our strategic focus when acquired, all of which are privately held and whose values are difficult to determine. We record an investment impairment charge if it believes an investment has experienced a decline in value that is other than temporary.

Management has determined that no impairments had occurred as of March 31, 2013 or December 31, 2012.

Intangible Assets
Our intangible assets consist of technology licenses and are carried at the legal cost to obtain them. Intangible assets are amortized using the straight-line method over the estimated useful life. Useful lives are as follows: technology licenses 5 to 15 years.

Research and Development Costs
Research and development costs are expensed as incurred. The cost of intellectual property purchased from others that is immediately marketable or that has an alternative future use is capitalized and amortized as intangible assets. Capitalized costs are amortized using the straight-line method over the estimated economic life of the related asset.

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Use of Estimates
The accompanying consolidated financial statements are prepared in conformity with GAAP in the United States of America, and include certain estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results may differ from those estimates.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2013 compared to the Three Months Ended March 31, 2012.

There were no operating revenues for the three months ended March 31, 2013 and 2012.

General and Administrative Expenses

General and administrative expenses were $767,599 and $641,919 for the three months ended March 31, 2013 and 2012, respectively. The increase was due primarily to increases in investor relations activities as well as a general increase in operating expenses, which we expect to increase going forward, in the long term, as we proceed to move our technologies forward toward commercialization.

Research and Development Expenses

Research and development expenses were $291,199 and $295,295 for the three months ended March 31, 2013 and 2012, respectively. In the three months ended March 31, 2013, the Company incurred approximately $65,000 in clinical trial expenses. During the three months ended March 31, 2012, the Company incurred large start-up costs for its clinical trial in Belgium, and as a result there was a net decrease in research and development expenses for the three months ended March 31, 2013. We expect research and development expenses to continue to increase in future periods as we continue our clinical studies of our lead candidates in cardiology and pursue our strategic opportunities.

Interest and Other Income and Expenses, net

Other income, net was $70,692 and $124,187 for the three months ended March 31, 2013 and 2012, respectively. For the three months ended March 31, 2013, the Company received other income of approximately $70,000 from the sale of an insurance company of which we were a policyholder. For the three months ended March 31, 2012, the Company recorded a gain on settlements of accounts payable of approximately $124,000.

Liquidity and Capital Resources

We have experienced net losses and negative cash flows from operations since our inception. We have sustained cumulative losses of $17,922,703 as of March 31, 2013. We have historically financed our operations through issuances of equity and the proceeds of debt instruments. In the past, we have also provided for our cash needs by issuing common stock, options and warrants for certain operating costs, including consulting and professional fees. During the year ended December 31, 2012, we raised gross proceeds of $1,546,250 through a private placement of our common stock and warrants.

We continue to actively pursue various funding options, including equity offerings, to obtain additional funds to continue the development of its products and bring them to commercial markets. Management continues to assess fund raising opportunities to ensure minimal dilution to its existing shareholder base and to obtain the best price for its securities. Management is optimistic based upon its ability to raise funds in prior years, through private placement offerings, that it will be able to raise additional funds in the future. In November 2012, we issued warrants to purchase 1,819,119 shares of our common stock at an exercise price of $0.90 which expire in November 2013. If these warrants are exercised, we will receive approximately $1,637,207 in funding. There can be no assurance that we will be able to consummate any fund raising transactions on terms acceptable to us or at all or in the time frames we anticipate. Also, there can be no assurance that any or all of the warrants that expire in November 2013 will be exercised by the holders. If we are unable to raise additional capital as may be needed to meet our projections for operating expenses, it could have a material adverse effect on liquidity or require us to cease or significantly delay some of its clinical trials.

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Net cash used in operating activities for the three months ended March 31, 2013 was $672,199, which primarily reflected our net loss of $988,106, offset by non-cash expenses of $278,069 and an increase in working capital of $37,838. Net cash used in operating activities for the three months ended March 31, 2012 was $847,221 which primarily reflected our net loss of $813,027, changes in working capital and gain on settlement of accounts payable of $124,000.

Net cash used by investing activities was $1,029 for the three months ended March 31, 2013, which primarily reflected purchases of office equipment. For three months ended March 31, 2012, net cash used by investing activities was $31,282, which primarily reflected a purchase of office furniture and leasehold improvements.

There were no financing activities in the three months ended March 31, 2013 and 2012.

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