UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________to _________
Commission file number 000-14242
CELSION CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 52-1256615
- ------------------------------ -------------------
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
10220-I OLD COLUMBIA ROAD, COLUMBIA, MARYLAND 21046-1705
--------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (410) 290-5390
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
----- ---
AS OF AUGUST 13, 2003, THE REGISTRANT HAD OUTSTANDING 138,545,698 SHARES OF
COMMON STOCK, $.01 PAR VALUE.
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND NOTES
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBITS
11 COMPUTATION OF EARNINGS PER SHARE.
31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Index to Financial Statements
Page
----
Balance Sheets
June 30, 2003 and September 30, 2002................. 3
Statements of Operations for the
Three and Nine Months Ended
June 30, 2003 and 2002 .............................. 5
Statements of Cash Flows for the
Nine Months Ended June 30, 2003 and 2002............. 6
Notes to Financial Statements........................ 7
CELSION CORPORATION
BALANCE SHEETS
June 30, 2003 and September 30, 2002
ASSETS
June 30, September 30,
2003 2002
---------- -------------
(Unaudited)
Current assets:
Cash........................................... $5,500,510 $ 928,819
Other receivables.............................. 226,777 84,493
Finished goods inventory....................... 297,135 68,210
Raw material inventory......................... 348,208 314,371
Work in progress inventory..................... 25,785 67,027
Prepaid expenses............................... 144,447 47,255
---------- ---------
Total current assets..................... 6,542,862 1,510,175
---------- ---------
Property and equipment - at cost:
Furniture and office equipment................. 333,156 311,481
Laboratory and shop equipment.................. 124,303 89,354
---------- ---------
457,459 400,835
Less accumulated depreciation............... 252,786 190,658
---------- ---------
Net value of property and equipment...... 204,673 210,177
---------- ---------
Other assets:
Deposits..................................... 23,622 23,622
Prepaid inventory development costs.......... 426,158 486,602
Patent licenses (net of amortization )....... 49,002 60,873
---------- ---------
Total other assets................................ 498,782 571,097
---------- ---------
Total assets.......................... 7,246,317 $2,291,449
========== ==========
3
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, September 30,
2003 2002
------------ -------------
(Unaudited)
Current liabilities:
Accounts payable - trade .............................................. $ 801,678 $ 494,650
Other accrued liabilities ............................................. 292,225 280,309
------------ ------------
Total current liabilities ....................................... 1,093,903 774,959
------------ ------------
Stockholders equity:
Common stock $.01 par value: 200,000,000 shares
authorized, 124,443,471 and 92,417,556 shares
issued and outstanding at June 30, 2003 and
September 30, 2002, respectively ......................................... 1,244,435 924,176
Series A 10% Convertible Preferred Stock -- $1,000 par value: 7,000 shares
authorized, 1,147 and 1,131 shares issued and outstanding at June
30, 2003 and September 30, 2002, respectively ............................ 1,163,900 1,130,500
Series B 8% Convertible Preferred Stock-- $1,000 par value: 5,000
shares authorized, 1,120 and 1,591shares issued and outstanding at June
30, 2003 and September 30, 2002, respectively ............................ 984,057 1,396,285
Additional paid-in capital ............................................ 56,306,820 41,885,610
Accumulated deficit .................................................. (53,546,798) (43,820,081)
------------ ------------
Total stockholders' equity ..................................... 6,152,414 1,516,490
------------ ------------
Total liabilities and stockholders' equity ............... $ 7,246,317 $ 2,291,449
============ ============
See accompanying notes.
4
CELSION CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
2003 2002 2003 2002
---- ---- ---- ----
Operating expenses:
General and administrative ........... $ 925,279 $ 987,306 $ 2,906,344 $ 3,526,959
Research and development ............. 1,929,435 1,646,710 6,679,423 4,529,706
------------- ------------- ------------- -------------
Total operating expenses .......... 2,854,714 2,634,016 9,585,767 8,056,665
------------- ------------- ------------- -------------
Loss from operations .................. (2,854,714) (2,634,016) (9,585,767) (8,056,665)
Loss from disposal of property and
equipment ............................. -- -- -- (1,825)
Interest income ....................... 5,248 11,154 14,463 40,962
------------- ------------- ------------- -------------
Loss before income taxes .............. (2,849,466) (2,622,862) (9,571,304) (8,017,528)
Income taxes .......................... -- -- -- --
------------- ------------- ------------- -------------
Net loss .............................. $ (2,849,466) $ (2,622,862) (9,571,304) $ (8,017,528)
Beneficial conversion feature of
Series B 8% Convertible Preferred Stock -- (252,000) -- (252,000)
Dividends on preferred stock .......... (49,546) (35,645) (155,412) (80,909)
------------- ------------- ------------- -------------
Net loss attributable to common
stockholders .......................... $ (2,899,012) $ (2,910,507) $ (9,726,716) $ (8,350,437)
============= ============= ============= =============
Net loss per common share (basic) ..... $ (0.03) $ (0.03) $ (0.09) $ (0.10)
============= ============= ============= =============
Weighted average shares outstanding ... 114,611,288 90,033,347 106,151,507 85,909,745
============= ============= ============= =============
See accompanying notes.
5
CELSION CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended June 30,
--------------------------
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................... $ (9,571,304) $ (8,017,528)
Non-cash items included in net loss:
Depreciation and amortization ....................... 73,999 60,296
Common stock and stock options
issued for compensation and other operating expenses 3,292,705 519,122
Legal settlement expense ............................ -- 476,724
Loss on disposal of property and equipment .......... -- 1,825
Net changes in:
Other receivables ................................... (142,284) 1,169
Inventories ......................................... (221,520) (123,195)
Prepaid expenses .................................... (97,192) (45,012)
Other current assets ................................ -- (265,516)
Prepaid inventory development costs ................. 60,444 --
Accounts payable-trade .............................. 307,028 375,332
Other accrued liabilities ........................... 11,916 55,478
------------ ------------
Net cash used by operating
activities ..................................... (6,286,208) (6,961,305)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and
equipment .......................................... (56,624) (43,898)
------------ ------------
Net cash used by investing
activities ...................................... (56,624) (43,898)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of stock
issuances ............................................ 10,914,523 7,615,008
------------ ------------
Net cash provided by financing activities ......... 10,914,523 7,615,008
------------ ------------
NET INCREASE IN CASH ..................................... 4,571,691 609,805
Cash at beginning of period .............................. 928,819 2,510,136
------------ ------------
Cash at end of the period ................................ $ 5,500,510 $ 3,119,941
============ ============
See accompanying notes.
6
CELSION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited condensed financial statements of Celsion
Corporation (the "Company") have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal recurring accruals
considered necessary for a fair presentation, have been included in the
accompanying unaudited financial statements. Operating results for the three-
and nine-month periods ended June 30, 2003 are not necessarily indicative of the
results that may be expected for any other interim period or for the full year
ending September 30, 2003. For further information, refer to the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K/A for the fiscal year ended September 30, 2002.
Note 2. Common Stock Outstanding and Per Share Information
For the three- and nine-month periods ended June 30, 2003 and 2002, per
share data is based on the weighted average number of shares of common stock
outstanding. Outstanding warrants and options which can be converted into common
stock are not included, as their effect is anti-dilutive.
Note 3. New Accounting Pronouncements
In December 2002, the Financial Accounting Standards Boards
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" (SFAS No.
148) which amends Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation - Transition and Disclosure" (SFAS No.
123). SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation and requires disclosures in annual and interim financial statements
of the effects of stock-based compensation as reflected below.
In January 2003, the FASB issued interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, which clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, relating
to consolidation of variable interest entities (VIE). The provisions of FIN 46
are effective July 1, 2003, for VIE created on or before January 31, 2003, and
immediately for VIE created after January 31, 2003. The Company has determined
that the implementation of this standard will not have a material effect on its
financial statements.
In January 2003, the Emerging Issues Task Force (EITF) of the FASB
released issue No. 00-21, Revenue Arrangements with Multiple Deliverables, which
is effective for revenue arrangements entered into on or after July 1, 2003.
This issue addresses certain aspects of accounting for arrangements under which
a company will perform multiple revenue-generating activities. Specifically, it
addresses whether and/or how to separate multiple-deliverable arrangements and
how to allocate revenue among those deliverables. The Company has determined
that EITF issue No. 00-21 will not have a material effect on its financial
statements.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities, which is effective for
contracts entered into or modified and hedging relationships designated after
June 30, 2003. This Statement amends and clarifies financial accounting and
reporting for derivative instruments including certain derivative instruments
embedded in other contracts and for hedging activities under SFAS No. 133,
Accounting for Derivatives Instruments and Hedging Activities. The Company has
determined that the implementation of this standard will not have a material
effect on its financial statements.
7
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity, which
was effective May 31, 2003 for new or modified financial instruments and July 1,
2003 for existing financial instruments. This Statement addresses the
classification and measurement of financial instruments with characteristics of
both liabilities and equity. The Company has determined that the implementation
of this standard will not have a material effect on its financial statements.
Note 4. Fair Value Accounting for Stock Plans
The Company continues to account for its stock option and employee
stock purchase plans under the recognition and measurement principles of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. No stock-based employee compensation
expense related to the Company's stock option and stock purchase plans is
reflected in net loss, as all options granted under those plans had an exercise
price equal to the market value of the underlying common stock on the date of
grant. The following table illustrates the effect on net loss and loss per share
if the Company had applied the fair value recognition provisions of SFAS No. 123
to stock-based employee compensation.
Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net loss attributable to common
stockholders, as reported ................. $ (2,899,012) $ (2,910,507) $ (9,726,716) $ (8,350,437)
Add: Stock-based employee compensation
expense included in reported net loss, net
of related tax effects .................... 783,250 -- 783,250 --
Deduct: Total stock-based employee
compensation expense determined using the
fair value based method for all awards, net
of related tax effects .................... (822,861) -- (1,098,333) (980,962)
------------ ------------ ------------ -------------
Pro forma net loss ........................ $ (2,938,623) $ (2,910,507) $(10,041,799) $ (9,331,399)
============ ============ ============ =============
Loss per shares:
Basis - as reported ....................... $ (0.03) $ (0.03) $ (0.09) $ (0.10)
============ ============ ============ =============
Basic - pro forma ......................... $ (0.03) $ (0.03) $ (0.09) $ (0.11)
============ ============ ============ =============
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
Statements and terms such as "expect", "anticipate", "estimate",
"plan", "believe" and words of similar import, regarding the Company's
expectations as to the development and effectiveness of its technologies, the
potential demand for its products, and other aspects of its present and future
business operations, constitute forward- looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Although the Company
believes that its expectations are based on reasonable assumptions within the
bounds of its knowledge of its business and operations, the Company cannot
guarantee that actual results will not differ materially from its expectations.
In evaluating such statements, readers should specifically consider the various
factors contained in the Company's Annual Report on Form 10-K/A for the fiscal
year ended September 30, 2002, including, without limitation, unforeseen changes
in the course of research and development activities and in clinical trials;
possible changes in cost and timing of development and testing, capital
structure, and other financial items; changes in approaches to medical
treatment; introduction of new products by others; possible acquisitions of
other technologies, assets or businesses; and possible actions by customers,
suppliers, competitors and regulatory authorities. These and other risks and
uncertainties could cause actual results to differ materially from those
indicated by such forward-looking statements, including those set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors" contained in the Company's Annual Report on Form
10-K/A for the fiscal year ended September 30, 2002, as well as those set forth
below and elsewhere in this Report.
GENERAL
Since inception, the Company has incurred substantial operating losses.
The Company expects operating losses to continue and possibly increase in the
near term and for the foreseeable future as it continues its product development
efforts, conducts clinical trials and undertakes marketing and sales activities
for new products. The Company's ability to achieve profitability is dependent
upon its ability successfully to integrate new technology into its thermotherapy
systems, conduct clinical trials, obtain governmental approvals, and
manufacture, market and sell its new products. Major obstacles facing the
Company over the last several years have included inadequate funding, a negative
net worth, and the slow development of the thermotherapy market due to technical
shortcomings of the thermotherapy equipment available commercially. The Company
has not continued to market its older thermotherapy system, principally because
of the system's inability to provide heat treatment for other than surface and
sub-surface tumors, and has concentrated its efforts on a new generation of
thermotherapy products.
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 2003
and Three Months Ended June 30, 2002
There were no product sales for the three months ended June 30, 2003
and 2002. No product revenues are expected until the Company's equipment
incorporating new technologies receives the necessary approvals from
governmental regulatory agencies and the Company begins to market such
equipment. The new equipment is currently in pivotal Phase II clinical testing.
9
General and administrative expense decreased by 6% to $925,279 for the
three months ended June 30, 2003, from $987,306 for the comparable period in
2002. The decrease of $62,027 is the result a decrease in consulting expenses
compared to 2002, offset by recognition of compensation expense related to
employee stock options.
Research and development expense increased by 17% to $1,929,435 for the
current quarter from $1,646,710 for the three months ended June 30, 2002. The
increase of $282,725 in the current quarter was the result of recognition of
compensation expense related to employee stock options.
The net increase in expenditures discussed above resulted in an
increase in the loss from operations for the three month period ended June 30,
2003 of $220,698, or 8%, to $2,854,714 from $2,634,016 in the comparable period
during the prior fiscal year.
Interest income net of interest expense decreased by 53% to $5,248 for
the quarter ended June 30, 2003 from $11,154 during the comparable quarter in
2002. The decrease of $5,906 was due to a combination of lower average cash
balances and lower average interest rates. Preferred stock dividends increased
by 39% to $49,546 for the quarter ended June 30, 2003 from $35,645 in the
comparable period during the prior fiscal year. The increase of $13,901 in the
current quarter was due to the issuance of 2,000 shares of Series B 8%
Convertible Preferred Stock in June 2002, the dividends on which were reflected
for only a portion of the quarter ended June 30, 2002.
Comparison of Nine Months Ended June 30, 2003
and Nine Months Ended June 30, 2002
There were no product sales for the nine months ended June 30, 2003 and
2002. No product revenues are expected until the Company's equipment
incorporating new technologies receives the necessary approvals from
governmental regulatory agencies and the Company begins to market such
equipment. The new equipment is currently in pivotal Phase II clinical testing.
General and administrative expense decreased by 18% to $2,906,344 for
the nine months ended June 30, 2003, from $3,526,959 for the comparable period
in 2002. The decrease of $620,615 was primarily due to the fact that, during the
nine months ended June 30, 2002, the Company incurred costs associated with
settlement of its then ongoing lawsuit with Warren C. Stearns and his
associates. Under the terms of the settlement, Celsion issued to the Stearns
group certain common stock purchase warrants that were at issue in the
litigation, together with additional warrants as compensation for relinquishment
of certain anti-dilution rights under the disputed warrants and $265,000 in cash
to reimburse Stearns for costs incurred up to the settlement date. In addition,
during that nine-month period in 2002, the Company accrued remaining amounts due
to Spencer J. Volk, its former President and Chief Executive Officer, under the
terms of the agreement governing his retirement. Finally, during the nine months
ended June 30, 2002, the Company incurred consulting costs related to the
exploration of the feasibility of setting up a business in China (including Hong
Kong, Taiwan and Macao). Such expenses were non-recurring items.
Research and development expense increased by 47% to $6,679,423 for the
current nine-month period from $4,529,706 for the nine months ended June 30,
2002. The increase of $2,149,717 was the result of (1) a payment of $2,175,014
to Duke University pursuant to an obligation under the License Agreement between
the Company and Duke University, which was satisfied by the issuance of
3,805,366 shares of the Company's common stock to Duke University on January 16,
2003. (2) recognition of compensation expense related to employee stock options
partially offset by a reduction in clinical trial costs.
The net increase in expenditures discussed above resulted in an
increase in the loss from operations for the nine-month period ended June 30,
2003 of $1,529,102, or 19%, to $9,585,767 from $8,056,665 in the comparable
period during the prior fiscal year.
Interest income net of interest expense decreased by 65% to $14,463 for
the nine-month period ended June 30, 2003 from $40,962 during the comparable
period in 2002. The decrease of $26,499 was due to a combination of lower
average cash balances and lower average interest rates. Preferred stock
dividends increased by 92% to $155,412 for the nine-month period ended June 30,
2003 from $80,909 in the comparable period the prior year. The increase of
$74,503 in the current period was due to the issuance of 2,000 shares of Series
B 8% Convertible Preferred Stock in June 2002.
10
LIQUIDITY AND CAPITAL RESOURCES
Since inception, our expenses have significantly exceeded our revenues,
resulting in an accumulated deficit of $53,546,798 at June 30, 2003. We have
incurred negative cash flows from operations since our inception and have funded
our operations primarily through the sale of equity securities. As of June 30,
2003, we had cash of $5,500,510 and total current assets of $6,542,862, compared
with current liabilities of $1,093,903, resulting in a working capital surplus
of $5,448,959. As of September 30, 2002, we had $928,819 in cash and total
current assets of $1,510,175, compared with current liabilities of $774,959,
which resulted in a working capital surplus of $735,216 at fiscal year end. Net
cash used in the Company's operating activities was $6,286,208 for the nine
months ending June 30, 2003.
During the nine months ended June 30, 2003, we have expended
approximately $9,585,767 for clinical testing of our breast cancer, Benign
Prostatic Hyperplasia (BPH) and prostate cancer treatment systems, as well as
corporate overhead. For all of fiscal year 2003, we expect to expend a total of
approximately $12,500,000 for such clinical testing and overhead, which we
expect to fund from our current resources. The foregoing amounts are estimates
based upon assumptions as to the availability of funding, the scheduling of
institutional clinical research and testing personnel, the timing of clinical
trials and other factors, not all of which are fully predictable. Accordingly,
estimates and timing concerning projected expenditures and programs are subject
to change.
On October 15, 2002, Celsion completed a private placement resulting in
net proceeds of approximately $775,000 and, on November 12, 2002, Celsion
completed a private placement generating approximately $300,000 in net proceeds.
On December 31, 2002, we received further funding through a private placement of
$425,000 and issuance of a note in the amount of $500,000 payable to Boston
Scientific Corporation. In the nine-month period ended June 30, 2003, Celsion
received $4,414,523 in cash upon exercise of stock purchase warrants and options
On January 21, 2003, Celsion reached an agreement with Boston
Scientific Corporation under which Boston Scientific will market and distribute
the Company's BPH treatment system. In connection with this agreement, Boston
Scientific purchased 9,375,354 shares of Celsion common stock for an initial
investment of $5,000,000 and agreed to invest an additional $10 million in a
combination of equity and licensing fees upon Celsion meeting certain
milestones. The initial investment was sufficient to repay the $500,000 note
issued to Boston Scientific on December 31, 2002 and is expected to be
sufficient to fund the Company's operations through the end of fiscal year 2003.
Further investments by Boston Scientific would contribute to Celsion's funding
requirements for the future.
In July 2003, Celsion received an additional $765,550 in cash upon
exercise of stock purchase warrants and options. Celsion also completed a
private placement in July 2003, generating $7,317,346 in gross proceeds.
Our dependence on raising additional capital will continue at least
until we are able to begin marketing our new technologies. Our future capital
requirements and the adequacy of our financing depend upon numerous factors,
including the successful commercialization of our Microwave Uretheroplasty(TM)
and breast cancer treatment systems, progress in other product development
efforts, progress with pre-clinical studies and clinical trials, the cost and
timing of production arrangements, the development of effective sales and
marketing activities, the cost of filing, prosecuting, defending and enforcing
intellectual property rights, competing technological and market developments
and the development of strategic alliances for the marketing of our products. We
will be required to obtain such funding through equity or debt financing,
strategic alliances with corporate partners and others, or through other sources
not yet identified. We do not have any committed sources of financing, and
cannot guarantee that additional funding will be available in a timely manner,
on acceptable terms, or at all. If adequate funds are not available, we may be
required to delay, scale back or eliminate certain aspects of our operations or
attempt to obtain funds through unfavorable arrangements with partners or others
that may require us to relinquish rights to certain of our technologies, product
candidates, products or potential markets or which otherwise may be materially
unfavorable to us. Furthermore, if we cannot fund our ongoing development and
other operating requirements, particularly those associated with our obligation
to conduct clinical trials under our licensing agreements, we will be in breach
of our commitments under these licensing agreements and could therefore lose our
license rights, which could have material adverse effects on our business.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
We have conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as such term is defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) under
the supervision of our Chief Executive Officer and Chief Financial Officer as of
the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q.
Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that, as of June 30, 2003, our disclosure controls and
procedures were effective to ensure that information required to be disclosed in
reports that Celsion files or submits under the Exchange Act is recorded,
processed, summarized and reported in a timely manner. In designing,
implementing and evaluating our disclosure controls and procedures, our
management recognizes that any controls and procedures, no matter how well
designed and implemented, may not be effective in all circumstances. However, we
believe that our disclosure controls and procedures provide reasonable assurance
of achieving the desired disclosure control objectives.
There have not been any significant changes in our internal controls or
in other factors subsequent to the date the evaluation was completed that could
significantly affect such controls and no corrective actions have been required
with regard to significant deficiencies and material weaknesses.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are currently no legal proceedings that are not within the
normal course of business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During the fiscal quarter ended June 30, 2003, the Company issued the
following securities without registration under the Securities Act of 1933, as
amended (the "Securities Act"):
During the quarter, the Company issued a total of 683,608
shares of its common stock to the holders of shares of its
Series A 10% Convertible Preferred Stock and Series B 8%
Convertible Preferred Stock upon conversion of 43 shares of
Series A Convertible Preferred Stock and 308 shares of Series
B Convertible Preferred Stock. These common shares are
restricted stock, endorsed with the Company's standard
restricted stock legend, with a stop transfer instruction
recorded by the transfer agent. Accordingly, the Company views
the shares issued as exempt from registration under Sections
4(2) and/or 4(6) of the Securities Act.
During the quarter, from time to time the Company also issued
a total of 91,504 shares of its common stock to three outside
consultants for services valued at $39,500. These shares are
restricted stock, endorsed with the Company's standard
restricted stock legend, with stop transfer instructions
recorded by the transfer agent. Accordingly, the Company views
the shares issued as exempt from registration under Sections
4(2) and/or 4(6) of the Securities Act.
At various times during the quarter, the Company issued a
total of 11,013,069 shares of its common stock for a cash
consideration of $4,281,006 to holders of stock purchase
warrants upon exercise of such warrants. These shares are
restricted stock, endorsed with the Company's standard
restricted stock legend, with stop transfer instructions
recorded by the transfer agent. Accordingly, the Company views
the shares issued as exempt from registration under Sections
4(2) and/or 4(6) of the Securities Act.
12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5 OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
11 Computation of Earnings Per Share.
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
None.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: August 14, 2003
CELSION CORPORATION
-------------------
Registrant
By: /s/ Augustine Y. Cheung
--------------------------
Augustine Y. Cheung
President and Chief Executive Officer
By: /s/Anthony P. Deasey
--------------------------
Anthony P. Deasey
Executive Vice President-Finance and Administration
(Principal Financial and Chief Accounting Officer)
14
EXHIBIT 11
CELSION CORPORATION
COMPUTATION OF EARNINGS PER SHARE
-----------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, Nine Months Ended June 30,
-----------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------
Net loss attributable to common $(2,899,012) $(2,874,862) $(9,726,716) $(8,350,437)
stockholders
-----------------------------------------------------------------------------------------------------------------
Net (loss) income per common $(0.03) $(0.03) $(0.09) $(0.10)
share*
-----------------------------------------------------------------------------------------------------------------
Weighted average shares 114,611,288 90,033,347 106,151,507 85,909,745
outstanding
-----------------------------------------------------------------------------------------------------------------
* Common stock equivalents have been excluded from the calculation of net loss
per share as their inclusion would be anti-dilutive.
EXHIBIT 31.1
CELSION COROPRATION
CERTIFICATION
I, Augustine Y. Cheung, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Celsion Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 14, 2003 /s/ Augustine Y. Cheung
--------------- -----------------------
Augustine Y. Cheung
Chief Executive Officer
Celsion Corporation
EXHIBIT 31.2
CELSION COROPRATION
CERTIFICATION
I, Anthony P. Deasey, certify that
1. I have reviewed this quarterly report on Form 10-Q of Celsion Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 14, 2003 /s/ Anthony P. Deasey
--------------- ---------------------
Anthony P. Deasey
Chief Financial Officer
Celsion Corporation
EXHIBIT 32.1
CELSION CORPORATION
CERTIFICATION
PURSUANT TO 18 UNITED STATES CODE ss. 1350
The undersigned hereby certifies that the Quarterly Report on Form 10-Q
for the quarter ended June 30, 2003 of Celsion Corporation (the "Company") filed
with the Securities and Exchange Commission on the date hereof fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended, and that the information contained in such report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Augustine Y. Cheung
-----------------------
Augustine Y. Cheung
Chief Executive Officer
August 14, 2003
EXHIBIT 32.2
CELSION CORPORATION
CERTIFICATION
PURSUANT TO 18 UNITED STATES CODE ss. 1350
The undersigned hereby certifies that the Quarterly Report on Form
10-Q for the quarter ended June 30, 2003 of Celsion Corporation (the "Company")
filed with the Securities and Exchange Commission on the date hereof fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, and that the information contained in such
report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ Anthony P. Deasey
---------------------
Anthony P. Deasey
Chief Financial Officer
August 14, 2003