x
|
Quarterly
Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of
1934 for the Quarterly Period ended March
31, 2008
|
¨
|
Transition
Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of
1934 for the Transition Period from _______________ to
____________________
|
Delaware
|
11-2962080
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
employer identification no.)
|
4400
Biscayne Blvd., Suite 670, Miami, Florida
|
33137
|
|
(Address
of principal executive offices)
|
(Zip
code)
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
|
|
ITEM 1.
|
FINANCIAL
STATEMENTS
|
3
|
|
|
|
Condensed
Consolidated Balance Sheets as of March 31, 2008 (unaudited) and
December
31, 2007
|
3
|
|
Condensed
Consolidated Statements of Operations for the Three Months ended
March 31,
2008 and 2007, and for the period from September 15, 2005 (inception)
to
March 31, 2008 (unaudited)
|
4
|
|
Condensed
Consolidated Statements of Stockholders’ Equity for the period from
September 15, 2005 (inception) through March 31, 2008
|
5
|
|
Condensed
Consolidated Statements of Cash Flows for the Three Months ended
March 31,
2008 and 2007, and for the period from September 15, 2005 (inception)
to
March 31, 2008 (unaudited)
|
6
|
|
Notes
to unaudited condensed consolidated financial statements
|
7
|
|
ITEM 2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
15
|
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
19
|
ITEM 4T.
|
CONTROLS
AND PROCEDURES
|
19
|
PART
II. OTHER INFORMATION
|
||
|
|
|
ITEM 1.
|
LEGAL
PROCEEDINGS
|
20
|
ITEM 1A.
|
RISK
FACTORS
|
20
|
ITEM 2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
20
|
ITEM 3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
20
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
20
|
ITEM 5.
|
OTHER
INFORMATION
|
20
|
ITEM 6.
|
EXHIBITS
|
20
|
SIGNATURES
|
21
|
March 31,
|
December 31,
|
||||||
2008
|
2007
|
||||||
(Unaudited)
|
|||||||
ASSETS
|
|||||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
658
|
$
|
631
|
|||
Prepaid
expenses
|
102
|
99
|
|||||
Total
Current Assets
|
760
|
730
|
|||||
FIXED
ASSETS
|
|||||||
Property
and equipment, net
|
186
|
196
|
|||||
OTHER
ASSETS
|
|||||||
Security
deposits
|
56
|
56
|
|||||
Deferred
financing costs, net
|
1,489
|
1,702
|
|||||
Total
Other Assets
|
1,545
|
1,758
|
|||||
LONG-TERM
INVESTMENT, net of valuation adjustment of $1,754
|
-
|
-
|
|||||
TOTAL
ASSETS
|
$
|
2,491
|
$
|
2,684
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Accounts
payable and accrued liabilities
|
$
|
365
|
$
|
253
|
|||
Total
Current Liabilities
|
365
|
253
|
|||||
Stockholder
loans
|
1,010
|
10
|
|||||
Commitments
and contingencies (Note 9)
|
|||||||
STOCKHOLDERS’
EQUITY
|
|||||||
Preferred
Stock, $.01 par value per share, 25,000,000 shares authorized,
no shares
issued and outstanding
|
-
|
-
|
|||||
Common
Stock, $.001 par value per share, 225,000,000 shares authorized,16,093,016
shares issued and outstanding
|
16
|
16
|
|||||
Additional
Paid-in Capital
|
6,721
|
6,582
|
|||||
Deficit
accumulated during the development stage
|
(5,621
|
)
|
(4,177
|
)
|
|||
Total
Stockholders’ Equity
|
1,116
|
2,421
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
2,491
|
$
|
2,684
|
Three Months Ended
March 31,
|
September 15,
2005
(Inception) to
|
|||||||||
2008
|
2007
|
March 31, 2008
|
||||||||
REVENUES
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
COSTS
AND EXPENSES
|
||||||||||
Research and
development
|
814
|
366
|
3,719
|
|||||||
General
and administrative
|
416
|
38
|
1,437
|
|||||||
Total
Costs and Expenses
|
1,230
|
404
|
5,156
|
|||||||
LOSS
FROM OPERATIONS
|
(1,230
|
)
|
(404
|
)
|
(5,156
|
)
|
||||
INTEREST
INCOME
|
5
|
4
|
58
|
|||||||
AMORTIZATION
OF FINANCE COSTS
|
(213
|
)
|
-
|
(496
|
)
|
|||||
INTEREST
EXPENSE
|
(6
|
)
|
-
|
(27
|
)
|
|||||
LOSS
BEFORE TAX
|
(1,444
|
)
|
(400
|
)
|
(5,621
|
)
|
||||
PROVISION
FOR INCOME TAX
|
-
|
-
|
-
|
|||||||
NET
LOSS
|
$
|
(1,444
|
)
|
$
|
(400
|
)
|
$
|
(5,621
|
)
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED
|
16,093,016
|
11,256,369
|
||||||||
NET
LOSS PER BASIC AND DILUTED SHARE
|
$
|
(0.09
|
)
|
$
|
(0.04
|
)
|
Preferred Stock
|
Common Stock
|
Additional
Paid-in
|
Deficit
Accumulated
During the
Development
|
|||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stage
|
Total
|
||||||||||||||||
Inception –
September 15, 2005
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||
Capital
contributed
|
-
|
-
|
-
|
-
|
1
|
-
|
1
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(76
|
)
|
(76
|
)
|
|||||||||||||
Balance
at December 31, 2005
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
1
|
$
|
(76
|
)
|
$
|
(75
|
)
|
||||||||
Capital
contributed
|
-
|
-
|
11,256
|
11
|
1,493
|
-
|
1,504
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(1,060
|
)
|
(1,060
|
)
|
|||||||||||||
Balance
at December 31, 2006
|
-
|
$
|
-
|
11,256
|
$
|
11
|
$
|
1,494
|
$
|
(1,136
|
)
|
$
|
369
|
|||||||||
|
||||||||||||||||||||||
Exercise
of options (CTS)-September 23, 2007 at $0.79 per share
|
-
|
-
|
42
|
-
|
35
|
-
|
35
|
|||||||||||||||
Stock-based
compensation-September 4, 2007
|
-
|
-
|
-
|
-
|
77
|
-
|
77
|
|||||||||||||||
Issuance
of shares in recapitalization - September 4, 2007 at $0.64 per
share
|
-
|
-
|
4,795
|
5
|
3,078
|
-
|
3,083
|
|||||||||||||||
SafeStitch
expenses associated with recapitalization
|
-
|
-
|
-
|
-
|
(156
|
)
|
-
|
(156
|
)
|
|||||||||||||
Stock-based
compensation
|
-
|
-
|
-
|
-
|
65
|
-
|
65
|
|||||||||||||||
Warrants
issued in connection with credit facility-September 4, 2007 at $2.46
per
share
|
-
|
-
|
-
|
-
|
1,985
|
-
|
1,985
|
|||||||||||||||
Rule
16 payment received
|
-
|
-
|
-
|
-
|
4
|
-
|
4
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(3,041
|
)
|
(3,041
|
)
|
|||||||||||||
Balance
at December 31, 2007
|
-
|
$
|
-
|
16,093
|
$
|
16
|
$
|
6,582
|
$
|
(4,177
|
)
|
$
|
2,421
|
|||||||||
Stock-based
compensation
|
-
|
-
|
-
|
-
|
139
|
-
|
139
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(1,444
|
)
|
(1,444
|
)
|
|||||||||||||
Balance
at March 31, 2008 - Unaudited
|
-
|
$
|
-
|
16,093
|
$
|
16
|
$
|
6,721
|
$
|
(5,621
|
)
|
$
|
1,116
|
Three
Months Ended
March
31,
|
September
15,
2005
(Inception)
to
March
|
|||||||||
2008
|
2007
|
31,
2008
|
||||||||
OPERATING
ACTIVITIES
|
||||||||||
Net
loss
|
$
|
(1,444
|
)
|
$
|
(400
|
)
|
$
|
(5,621
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Amortization
of deferred finance costs
|
213
|
-
|
496
|
|||||||
Stock-based
compensation expense
|
139
|
-
|
281
|
|||||||
Depreciation
and amortization
|
13
|
-
|
17
|
|||||||
(Increase)
in other current assets
|
(3
|
)
|
-
|
(82
|
)
|
|||||
(Increase)
in other assets
|
-
|
-
|
(56
|
)
|
||||||
Increase
(Decrease) in accounts payable and accrued liabilities
|
112
|
30
|
80
|
|||||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(970
|
)
|
(370
|
)
|
(4,885
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||
Purchase
of equipment
|
(3
|
)
|
-
|
(203
|
)
|
|||||
Payment
received under Rule 16b
|
-
|
-
|
4
|
|||||||
NET
CASH USED IN INVESTING ACTIVITIES
|
(3
|
)
|
-
|
(199
|
)
|
|||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||
Net
cash provided in connection with the acquisition of SafeStitch
LLC
|
-
|
-
|
3,192
|
|||||||
Capital
contributions
|
-
|
-
|
1,505
|
|||||||
Stockholder
loans
|
1,000
|
-
|
1,010
|
|||||||
Exercise
of options
|
-
|
-
|
35
|
|||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
1,000
|
-
|
5,742
|
|||||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
27
|
(370
|
)
|
658
|
||||||
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
631
|
546
|
-
|
|||||||
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
658
|
$
|
176
|
$
|
658
|
||||
Supplemental
disclosure of non cash activities:
|
||||||||||
Stockholder
loans contributed to capital
|
$
|
74
|
March
31, 2008
|
Estimated
Useful lives
|
||||||
Machinery
and equipment
|
$
|
162,000
|
5
years
|
||||
Furniture
and fixtures
|
41,000
|
5
years
|
|||||
Accumulated
depreciation and amortization
|
(17,000
|
)
|
|||||
Property
and equipment, net
|
$
|
186,000
|
Expected
volatility
|
88.31%
- 94.46%
|
Expected
dividend yield
|
0.00%
|
Risk-free
interest rate
|
1.96% –
2.61%
|
Expected
life
|
3.5 –
5.5 years
|
Forfeiture
rate
|
2.50%
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding at December 31, 2007
|
88,667
|
$
|
2.60
|
9.96
|
|||||||||
Granted
|
148,500
|
$
|
3.06
|
6.97
|
|||||||||
Exercised
|
-
|
-
|
-
|
||||||||||
Canceled
or expired
|
-
|
-
|
-
|
||||||||||
Outstanding
at March 31, 2008
|
237,167
|
$
|
2.89
|
7.90
|
$
|
35,467
|
|||||||
Exercisable
at March 31, 2008
|
87,667
|
$
|
2.97
|
7.59
|
$
|
8,867
|
|||||||
Vested
and expected to vest at March 31, 2008
|
232,107
|
$
|
2.89
|
7.92
|
$
|
35,467
|
Stock Options
|
Weighted Average Grant
Date Fair Value
|
||||||
Non-Vested at December 31,
2007
|
66,500
|
$
|
2.21
|
||||
Options
Granted
|
148,500
|
2.02
|
|||||
Options
Vested
|
(65,500
|
)
|
1.88
|
||||
Non-Vested
at March 31, 2008
|
149,500
|
$
|
2.16
|
March 31, 2008
|
March 31, 2007
|
||||||
Stock
options
|
237,167
|
173,000
|
|||||
Stock
warrants
|
805,521
|
-
|
|||||
Total
|
1,042,688
|
173,000
|
· |
FDA
Registration and initial marketing and commercialization of standard
and
airway bite blocks.
|
· |
Continued
product development of gastroplasty device for obesity and GERD
procedures.
|
· |
Manufacturing
of gastroplasty devices for clinical trials and engineering (performance,
validation) testing.
|
· |
Feasibility
trial of gastroplasty device and commencement of multicenter US and
international trials.
|
· |
Continued
product development of Barrett’s Excision
Device.
|
· |
Final
product development, FDA approval and initial marketing and
commercialization of smart dilator.
|
· |
Institutional
Review Board (IRB) clinical evaluation trials for standard and airway
bite
blocks and smart dilator.
|
· |
Early
development efforts on hernia device and NOTES devices, for which
we have
existing intellectual property and
licenses.
|
|
|
Exhibits:
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a)
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a)
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
SAFESTITCH
MEDICAL, INC.
|
||
Date:
May 12, 2008
|
By:
|
/s/
Jeffrey G. Spragens
|
|
|
Jeffrey
G. Spragens
|
|
|
President
and Chief Executive Officer
|
|
||
Date:
May 12, 2008
|
By:
|
/s/
Adam S. Jackson
|
|
|
Adam
S. Jackson
|
|
|
Chief
Financial Officer
|