As
filed with the Securities and Exchange Commission on July 31,
2008
|
Registration
No. 333-
|
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
____________________________
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
____________________________
ARNO
THERAPEUTICS, INC
.
(
Exact
name of registrant as specified in its charter)
Delaware
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2834
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52-2286452
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(State or other jurisdiction of incorporation
or
organization)
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(Primary Standard Industrial Classification
Code Number)
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(I.R.S. Employer
Identification No.)
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_______________________________
30
Two Bridges Rd., Suite #270
Fairfield,
NJ 07004
(862)
703-7170
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
____________________________
Scott
Z. Fields, M.D.
President
and Chief Medical Officer
Arno
Therapeutics, Inc.
30
Two Bridges Rd., Suite #270
Fairfield,
NJ 07004
(862)
703-7170
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
|
Copies
to:
Christopher
J. Melsha, Esq.
Fredrikson
& Byron, P.A.
200
South Sixth Street, Suite 4000
Minneapolis,
MN 55402-1425
Telephone:
(612) 492-7000
Facsimile:
(612) 492-7077
|
_____________________________
Approximate
date of commencement of proposed sale to the public:
From
time to time after the effective date of this registration statement, as shall
be determined by the selling stockholders identified herein.
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended, check the following box.
þ
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for
the
same offering.
¨
If
this
Form is a post effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
¨
If
this
Form is a post effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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(Do not check if a smaller reporting company)
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Smaller reporting company
þ
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CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
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Amount to be
Registered (1)
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Proposed
Maximum Offering
Price Per Share (2)
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Proposed Maximum
Aggregate
Offering Price (2)
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Amount of
Registration Fee
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Common
stock, par value $0.0001 per share
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10,389,145
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$
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2.90
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$
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30,128,520.50
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$
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1,184.05
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Common
stock, par value $0.0001 per share (3)
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196,189
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$
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2.90
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568,948.10
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22.36
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Total
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10,585,334
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$
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30,697,468.60
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$
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1,206.41
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___________
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(1)
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There
is also being registered hereunder an indeterminate number of additional
shares of common stock as shall be issuable pursuant to Rule 416
to
prevent dilution resulting from stock splits, stock dividends or
similar
transactions.
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(2)
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Estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457(c) of the Securities Act of 1933, as amended, based
upon the
average of the high and low price of our common stock on July 25,
2008.
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(3)
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Represents
shares of common stock issuable upon exercise of outstanding
warrants.
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THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
state.
Subject
to completion, dated July 31, 2008
OFFERING
PROSPECTUS
10,585,334
Shares
Common
Stock
The
selling stockholders identified on pages 16-18 of this prospectus are offering
on a resale basis a total of 10,585,334 shares of our common stock, including
196,189 shares issuable upon the exercise of outstanding warrants. We will
not
receive any proceeds from the sale of these shares by the selling
stockholders.
Our
common stock is quoted on the OTC Bulletin Board under the symbol “ARNI.OB.” On
_____________, 2008, the last sale price of our common stock as reported on
the
OTC Bulletin Board was $______.
The
securities offered by this prospectus involve a high degree of
risk.
See
“Risk Factors” beginning on page 5.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined that this prospectus
is truthful or complete. A representation to the contrary is a criminal
offense.
The
date of this prospectus is ______________, 2008.
TABLE
OF CONTENTS
PROSPECTUS
SUMMARY
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3
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RISK
FACTORS
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5
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NOTE
REGARDING FORWARD-LOOKING STATEMENTS
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15
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USE
OF PROCEEDS
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16
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SELLING
STOCKHOLDERS
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16
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PLAN
OF DISTRIBUTION
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22
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DESCRIPTION
OF CAPITAL STOCK
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24
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MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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25
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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26
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DESCRIPTION
OF BUSINESS
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30
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MANAGEMENT
AND BOARD OF DIRECTORS
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40
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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49
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TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
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51
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WHERE
YOU CAN FIND MORE INFORMATION
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51
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VALIDITY
OF COMMON STOCK
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51
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EXPERTS
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51
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TRANSFER
AGENT
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51
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DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
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51
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INDEX
TO FINANCIAL STATEMENTS
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F-1
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PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus. Because
it is a summary, it may not contain all of the information that is important
to
you. Accordingly, you are urged to carefully review this prospectus in its
entirety, including the risks of investing in our securities discussed under
the
caption “Risk Factors” and the financial statements and other information that
is contained in or incorporated by reference into this prospectus or the
registration statement of which this prospectus is a part before making an
investment decision.
Unless
the context otherwise requires, hereafter in this prospectus the terms the
“Company,” “we,” “us,” or “our” refer to Arno Therapeutics, Inc., after giving
effect to the merger described below. When we refer in this prospectus to Old
Arno and to Laurier, we are referring to the corporations known as Arno
Therapeutics, Inc. and Laurier International, Inc., respectively, prior to
the
June 3, 2008 merger described below under “—Company Overview.”
Company
Overview
We
are a
development stage company focused on commercially developing innovative products
for the treatment of cancer. We seek to acquire rights to novel, pre-clinical
or
early stage clinical oncology product candidates, primarily from academic and
research institutions. We currently have the rights to and are developing three
oncology product candidates:
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·
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AR-67
–
Our lead product candidate is a novel, third-generation campothecin
analogue. We are currently conducting a multi-center, ascending dose
Phase
I clinical trial of AR-67 in patients with advanced solid tumors.
Once the
maximum tolerated dose, or MTD, in the Phase I study is identified,
we
anticipate commencing a Phase II clinical trial of AR-67 in patients
with
glioblastoma multiforme, or GBM, an aggressive form of brain cancer.
We
plan to initiate additional Phase II clinical trials in a variety of
other solid and hematological cancers. We are also evaluating an
oral
formulation of AR-67.
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·
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AR-12
–
We are also developing AR-12, an orally available pre-clinical
compound that is a novel inhibitor of phosphoinositide dependent
protein
kinase-1, or PDK-1, that targets the Akt pathway while also possessing
activity in the endoplasmic reticulum stress and other pathways
targeting
apoptosis. Pre-clinical studies suggest that AR-12 may provide
therapeutic
benefit either alone or in combination with other therapeutic agents.
We
are currently conducting prelinical toxicology studies that we
anticipate
will provide the basis for the filing of an investigational new
drug
application, or IND, in early 2009 so that we may commence a Phase
I
clinical study.
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·
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AR-42
–
Our third product candidate in development is AR-42, an orally
available
pre-clinical compound for the treatment of cancer. AR-42 is a broad
spectrum inhibitor of deacetylase targets, referred to as pan-DAC
inhibition, as well as an inhibitor of Akt via the protein phosphatase
I
pathway. In pre-clinical models, AR-42 has demonstrated greater
potency
and a competitive profile in tumors when compared with vorinostat
(also
known as SAHA and marketed as Zolinza
®
by
Merck), the leading marketed histone deacetylase inhibitor. We
are
currently conducting IND-enabling studies and anticipate filing
an IND in early 2009 so that we may commence a Phase I clinical
study.
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Laurier
was incorporated in Delaware in March 2000. Old Arno was incorporated in
Delaware in August 2005. On June 3, 2008, Laurier and Old Arno entered into
a
“reverse merger” transaction whereby Laurier Acquisition, Inc., a Delaware
corporation and wholly-owned subsidiary of Laurier, merged with and into Old
Arno and Old Arno became a wholly owned subsidiary of Laurier. In accordance
with the terms of the merger, Old Arno’s outstanding common stock automatically
converted into shares of Laurier common stock at a conversion ratio of 1.99377.
Following the merger, the holders of Old Arno common stock immediately prior
to
the merger held 95 percent of the outstanding common stock of Laurier, assuming
the issuance of all shares underlying outstanding options and warrants.
Immediately following the merger, Old Arno and Laurier completed a short-form
merger, whereby Old Arno merged with and into Laurier, and Laurier’s name was
changed to “Arno Therapeutics, Inc.”
Our
executive offices are located at 30 Two Bridges Road, Suite 270, Fairfield,
New
Jersey 07004. Our telephone number is (862) 703-7170. Our website is
www.arnothera.com
.
Information contained in, or accessible through, our website does not constitute
a part of this prospectus.
Risk
Factors
As
with
most pharmaceutical product candidates, the development of our product
candidates is subject to numerous risks, including the risk of delays in or
discontinuation of development from lack of financing, inability to obtain
necessary regulatory approvals to market the products, unforeseen safety issues
relating to the products and dependence on third party collaborators to conduct
research and development of the products. Because we are a development stage
company with a very limited history of operations, we are also subject to many
risks associated with early-stage companies. For a more detailed discussion
of
some of the risks you should consider before purchasing shares of our common
stock, you are urged to carefully review and consider the section entitled
“Risk
Factors” beginning on page 5 of this prospectus.
The
Offering
The
selling stockholders identified on pages 16-18 of this prospectus are offering
on a resale basis a total of 10,585,334 shares of our common stock, including
196,189 shares issuable upon the exercise of outstanding warrants.
Common
stock offered
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10,585,334
shares
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Common
stock outstanding before the offering
(1)
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20,392,024
shares
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Common
stock outstanding after the offering
(2)
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20,588,213
shares
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Use
of Proceeds
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We
will receive none of the proceeds from the sale of the shares by
the
selling stockholders, except for the warrant exercise price upon
exercise
of the warrants, which would be used for working capital and other
general
corporate purposes
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OTC
Bulletin Board Symbol
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ARNI.OB
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_______________________
(1)
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Based
on the number of shares outstanding as of June 30, 2008, not including
1,611,760 shares issuable upon exercise of various warrants and options
to
purchase our common stock.
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(2)
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Assumes
the issuance of all shares offered hereby that are issuable upon
exercise
of warrants.
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Recent
Developments
Private
Placement Offering
On
June
2, 2008, Old Arno completed a private placement of approximately 3,691,900
shares of its common stock, resulting in gross proceeds of approximately
$17,832,000. Upon completion of the merger with Laurier, these shares were
automatically exchanged for 7,360,689 shares of our common stock. Prior to
the
completion of this private placement, Old Arno had outstanding a series of
6%
Convertible Promissory Notes in the aggregate principal amount of approximately
$4,000,000. In accordance with the terms of these notes, contemporaneously
with
the completion of the June 2, 2008 private placement, the outstanding principal
and accrued interest under the notes converted into an aggregate of 984,246
shares of Old Arno’s common stock and five-year warrants to purchase an
additional 98,409 shares of Old Arno common stock at an exercise price of $4.83
per share. After giving effect to the merger with Laurier, the shares and
warrants issued upon conversion of the notes were exchanged for an aggregate
of
1,962,338 shares of our common stock and five-year warrants to purchase
196,189 shares of our common stock at an exercise price of $2.42 per
share.
Management
Changes
Upon
completion of the merger, the current officers and directors of Laurier resigned
and were replaced by the existing officers and directors of Old Arno. In
particular, Thomas W. Colligan resigned as Laurier’s president and sole
director, and Arie S. Belldegrun, Robert I. Falk, Peter M. Kash, Joshua A.
Kazam
and David M. Tanen were appointed as directors (all of whom were directors
of
Old Arno immediately prior to and after the merger). In addition, the executive
officers of Old Arno were appointed as officers of our Company.
RISK
FACTORS
You
should carefully consider the following risk factors and all other information
contained in this prospectus before purchasing shares of our common stock.
Investing in our common stock involves a high degree of risk. If any of the
following events or outcomes actually occurs, our business, operating results
and financial condition could be materially and adversely affected. As a result,
the trading price of our common stock could decline and you may lose all or
part
of the money you paid to purchase our common stock.
Risks
Relating to Our Business
We
are a development stage
company.
We
have
not received any operating revenues to date and are in the development stage.
You should be aware of the problems, delays, expenses and difficulties
encountered by an enterprise in our stage of development, and particularly
for
companies engaged in the development of new biotechnology or biopharmaceutical
product candidates, many of which may be beyond our control. These include,
but
are not limited to, problems relating to product development, testing,
regulatory compliance, manufacturing, marketing, costs and expenses that may
exceed current estimates and competition. No assurance can be given that our
existing product candidates, or any technologies or products that we may acquire
in the future will be successfully developed, commercialized and accepted by
the
marketplace or that sufficient funds will be available to support operations
or
future research and development programs.
We
currently have no product revenues and will need to raise substantial additional
capital to operate our business
.
To
date,
we have generated no product revenues, and do not expect to generate any
revenues until, and only if, we receive approval to sell our drugs from the
U.S.
Food and Drug Administration, or FDA, and other regulatory authorities for
our
product candidates. Therefore, for the foreseeable future, we will have to
fund
all of our operations and capital expenditures from the net proceeds of our
June
2008 private placement, cash on hand, licensing fees and grants.
The
use
of our existing cash will depend on many factors, including among other things,
the course of the clinical and regulatory development of our current product
candidates, the acquisition of new technologies and the hiring of new personnel.
Based on our current development plans, we expect that our current resources
will be sufficient to fund our operations until third quarter 2009. We will
need
to seek substantial additional financing in order to continue developing our
current and any future product candidates, which additional financing may not
be
available on favorable terms, if at all.
If
we do
not succeed in raising additional funds on acceptable terms, we may be unable
to
complete planned pre-clinical testing and human clinical trials or obtain
approval of our product candidates from the FDA and other regulatory
authorities. In addition, we could be forced to discontinue product development
and/or reduce or forego attractive business opportunities. Any additional
sources of financing will likely involve the issuance of our common stock or
other securities convertible into our common stock, which will have a dilutive
effect on our stockholders.
We
are not currently profitable and may never become
profitable.
We
expect
to incur substantial losses and negative operating cash flow for the foreseeable
future, and we may never achieve or maintain profitability. For the year ended
December 31, 2007, we had a net loss of $3,359,697 and for the period from
our
inception on August 1, 2005 through March 31, 2008, we had a net loss of
$7,429,173. Since our inception through March 31, 2008, we have an accumulated
deficit of $7,429,173 and stockholders’ deficit of $6,526,455. Even if we
succeed in developing and commercializing one or more of our product candidates,
we expect to incur substantial losses for the foreseeable future, as
we:
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·
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continue
to undertake pre-clinical development and clinical trials for our
product
candidates;
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·
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seek
regulatory approvals for our product
candidates;
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·
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in-license
or otherwise acquire additional products or product
candidates;
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·
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implement
additional internal systems and infrastructure;
and
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·
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hire
additional personnel.
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We
also
expect to experience negative cash flow for the foreseeable future as we fund
our operating losses and capital expenditures. As a result, we will need to
generate significant revenues in order to achieve and maintain profitability.
We
may not be able to generate these revenues or achieve profitability in the
future. Our failure to achieve or maintain profitability could negatively impact
the value of our common stock.
We
have a limited operating history upon which to base an investment
decision.
We
are a
development stage company and have not demonstrated our ability to perform
the
functions necessary for the successful commercialization of any of our product
candidates. The successful commercialization of our product candidates will
require us to perform a variety of functions, including:
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·
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continuing
to undertake pre-clinical development and clinical trials for our
product
candidates;
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·
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participating
in regulatory approval processes;
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·
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formulating
and manufacturing products; and
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·
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conducting
sales and marketing activities.
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Our
operations have been limited to organizing our company, acquiring, developing
and securing our proprietary technology and preparing for pre-clinical and
clinical trials of our product candidates. These operations provide a limited
basis for you to assess our ability to commercialize our product candidates
and
the advisability of investing in our securities.
We
may not successfully manage our growth.
Our
success will depend upon the expansion of our operations and the effective
management of our growth, which will place a significant strain on our
management and on our administrative, operational and financial resources.
To
manage this growth, we may need to expand our facilities, augment our
operational, financial and management systems and hire and train additional
qualified personnel. If we are unable to manage our growth effectively, our
business would be harmed.
We
may be exposed to liability claims associated with the use of hazardous
materials and chemicals.
Our
research and development activities may involve the controlled use of hazardous
materials and chemicals. Although we believe that our safety procedures for
using, storing, handling and disposing of these materials comply with federal,
state and local laws and regulations, we cannot completely eliminate the risk
of
accidental injury or contamination from these materials. In the event of such
an
accident, we could be held liable for any resulting damages and any liability
could materially adversely effect our business, financial condition and results
of operations. In addition, the federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous
or
radioactive materials and waste products may require us to incur substantial
compliance costs that could materially adversely affect our business, financial
condition and results of operations.
We
will rely on key
employees
and scientific and medical advisors, whose knowledge of our business and
technical expertise would be difficult to replace.
We
currently rely on certain key employees, the loss of any one or more of whom
could delay our development program. We are and will be highly dependent on
our
principal scientific, regulatory and medical advisors. We do not have “key
person” life insurance policies for any of our officers. The loss of the
technical knowledge and management and industry expertise of any of our key
personnel could result in delays in product development, loss of customers
and
sales and diversion of management resources, which could adversely affect our
operating results.
If
we are unable to hire additional qualified personnel, our ability to grow our
business may be harmed.
Attracting
and retaining qualified personnel will be critical to our success. Our success
is highly dependent on the hiring and retention of key personnel and scientific
staff. While we are actively recruiting additional experienced members for
the
management team, there is intense competition and demand for qualified personnel
in our area of business and no assurances can be made that we will be able
to
retain the personnel necessary for the development of our business on
commercially reasonable terms, if at all. Certain of our current officers,
directors, scientific advisors and/or consultants or certain of the officers,
directors, scientific advisors and/or consultants hereafter appointed may from
time to time serve as officers, directors, scientific advisors and/or
consultants of other biopharmaceutical or biotechnology companies. We rely,
in
substantial part, and for the foreseeable future will rely, on certain
independent organizations, advisors and consultants to provide certain services,
including substantially all aspects of regulatory approval, clinical management,
and manufacturing. There can be no assurance that the services of independent
organizations, advisors and consultants will continue to be available to us
on a
timely basis when needed, or that we can find qualified
replacements.
We
may incur substantial liabilities and may be required to limit commercialization
of our products in response to product liability
lawsuits.
The
testing and marketing of medical products entail an inherent risk of product
liability. If we cannot successfully defend ourselves against product liability
claims, we may incur substantial liabilities or be required to limit
commercialization of our products. Our inability to obtain sufficient product
liability insurance at an acceptable cost to protect against potential product
liability claims could prevent or inhibit the commercialization of
pharmaceutical products we develop, alone or with corporate collaborators.
We
currently do not have product liability insurance, but do maintain clinical
trial insurance coverage with respect to AR-67. Even if our agreements with
any
future corporate collaborators entitle us to indemnification against losses,
such indemnification may not be available or adequate should any claim
arise.
There
are certain interlocking relationships among us and certain affiliates of Two
River Group Holdings, LLC, which may present potential conflicts of
interest.
Dr.
Arie
S. Belldegrun, Peter M. Kash, Joshua A. Kazam and David M. Tanen, each a
director and stockholder of Arno, are the sole members of Two River Group
Management, LLC, which serves as the managing member of Two River Group
Holdings, LLC, or Two River, a venture capital firm specializing in the
formation of biotechnology companies. Messrs. Kash, Kazam and Tanen are officers
and directors of Riverbank Capital Securities, Inc., or Riverbank, a broker
dealer registered with the Financial Industry Regulatory Authority, or FINRA
(formerly NASD). Mr. Tanen also serves as our Secretary and Scott L. Navins,
the
Vice President of Finance for Two River and Financial and Operations Principal
for Riverbank, serves as our Treasurer. Additionally, certain employees of
Two
River, who are also our stockholders, perform substantial operational activity
for us, including without limitation financial, clinical and regulatory
activities. Generally, Delaware corporate law requires that any transactions
between us and any of our affiliates be on terms that, when taken as a whole,
are substantially as favorable to us as those then reasonably obtainable from
a
person who is not an affiliate in an arms-length transaction. Nevertheless,
none
of our affiliates or Two River is obligated pursuant to any agreement or
understanding with us to make any additional products or technologies available
to us, nor can there be any assurance, and the investors should not expect,
that
any biomedical or pharmaceutical product or technology identified by such
affiliates or Two River in the future will be made available to us. In addition,
certain of our current officers and directors or certain of any officers or
directors hereafter appointed may from time to time serve as officers or
directors of other biopharmaceutical or biotechnology companies. There can
be no
assurance that such other companies will not have interests in conflict with
our
own.
We
are controlled by current directors and principal
stockholders.
Our
executive officers, directors and principal stockholders beneficially own
approximately 44% of our outstanding voting securities. Accordingly, our
executive officers, directors, principal stockholders and certain of their
affiliates will have the ability to exert substantial influence over the
election of our board of directors and the outcome of issues submitted to our
stockholders.
We
will be required to implement additional finance and accounting systems,
procedures and controls in order to satisfy requirements under the securities
laws, including the Sarbanes-Oxley Act of 2002, which will increase our costs
and divert management’s time and attention.
We
are in
a continuing process of establishing controls and procedures that will allow
our
management to report on, and our independent registered public accounting firm
to attest to, our internal controls over financial reporting when required
to do
so under Section 404 of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act. As a company with limited capital and human resources,
we
anticipate that more of management’s time and attention will be diverted from
our business to ensure compliance with these regulatory requirements than would
be the case with a company that has well established controls and procedures.
This diversion of management’s time and attention may have a material adverse
effect on our business, financial condition and results of
operations.
In
the
event we identify significant deficiencies or material weaknesses in our
internal controls over financial reporting that we cannot remediate in a timely
manner, or if we are unable to receive a positive attestation from our
independent registered public accounting firm with respect to our internal
controls over financial reporting when we are required to do so, investors
and
others may lose confidence in the reliability of our financial statements.
If
this occurs, the trading price of our common stock, if any, and our ability
to
obtain any necessary financing could suffer. In addition, in the event that
our
independent registered public accounting firm is unable to rely on our internal
controls over financial reporting in connection with its audit of our financial
statements, and in the further event that it is unable to devise alternative
procedures in order to satisfy itself as to the material accuracy of our
financial statements and related disclosures, we may be unable to file our
Annual Report on Form 10-K with the SEC. This would likely have an adverse
affect on the trading price of our common stock, if any, and our ability to
secure any necessary additional financing, and could result in the delisting
of
our common stock if we are listed on an exchange in the future. In such event,
the liquidity of our common stock would be severely limited and the market
price
of our common stock would likely decline significantly.
We
are now subject to the reporting requirements of federal securities laws, which
will increase our expenses.
Following
the merger, we will be subject to the reporting requirements of the Exchange
Act, including the requirements of the Sarbanes-Oxley Act. These requirements
may place a strain on our systems and resources. The Exchange Act requires
that
we file annual, quarterly and current reports with respect to our business
and
financial condition. The Sarbanes-Oxley Act requires that we maintain effective
disclosure controls and procedures and internal controls over financial
reporting, which is discussed below. In order to maintain and improve the
effectiveness of our disclosure controls and procedures, significant resources
and management oversight will be required. We will be implementing additional
procedures and processes for the purpose of addressing the standards and
requirements applicable to public companies. In addition, sustaining our growth
will also require us to commit additional management, operational and financial
resources to identify new professionals to join our firm and to maintain
appropriate operational and financial systems to adequately support expansion.
These activities may divert management's attention from other business concerns,
which could have a material adverse effect on our business, financial condition,
results of operations and cash flows. We expect to incur significant additional
annual expenses related to these steps and, among other things, additional
directors and officers liability insurance, director fees, reporting
requirements of the SEC, transfer agent fees, hiring additional accounting,
legal and administrative personnel, increased auditing and legal fees and
similar expenses.
Risks
Relating to the Clinical Testing, Regulatory Approval, Manufacturing
and
Commercialization of Our Product Candidates
We
may not obtain the necessary U.S. or worldwide regulatory approvals to
commercialize our product candidates.
We
will
need FDA approval to commercialize our product candidates in the U.S. and
approvals from the FDA equivalent regulatory authorities in foreign
jurisdictions to commercialize our product candidates in those jurisdictions.
In
order to obtain FDA approval of any of our product candidates, we must submit
to
the FDA a new drug application, or NDA, demonstrating that the product candidate
is safe for humans and effective for its intended use. This demonstration
requires significant research and animal tests, which are referred to as
pre-clinical studies, as well as human tests, which are referred to as clinical
trials. Satisfaction of the FDA’s regulatory requirements typically takes many
years, depends upon the type, complexity and novelty of the product candidate
and requires substantial resources for research, development and testing. We
cannot predict whether our research and clinical approaches will result in
drugs
that the FDA considers safe for humans and effective for indicated uses. The
FDA
has substantial discretion in the drug approval process and may require us
to
conduct additional pre-clinical and clinical testing or to perform
post-marketing studies. The approval process may also be delayed by changes
in
government regulation, future legislation or administrative action or changes
in
FDA policy that occur prior to or during our regulatory review. Delays in
obtaining regulatory approvals may:
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delay
commercialization of, and our ability to derive product revenues
from, our
product candidates;
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impose
costly procedures on us; or
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diminish
any competitive advantages that we may otherwise
enjoy.
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Even
if
we comply with all FDA requests, the FDA may ultimately reject one or more
of
our NDAs. We cannot be sure that we will ever obtain regulatory clearance for
our product candidates. Failure to obtain FDA approval of any of our product
candidates will severely undermine our business by reducing our number of
salable products and, therefore, corresponding product revenues.
In
foreign jurisdictions, we must receive approval from the appropriate regulatory
authorities before we can commercialize our drugs. Foreign regulatory approval
processes generally include all of the risks associated with the FDA approval
procedures described above. We cannot assure that we will receive the approvals
necessary to commercialize our product candidate for sale outside the
U.S.
All
of our product candidates are in early stages of clinical trials, which are
very
expensive and time-consuming. Any failure or delay in completing clinical trials
for our product candidates could harm our business.
All
three
of our current product candidates are in early stages of development and will
require extensive clinical and other testing and analysis before we will be
in a
position to consider seeking regulatory approval to sell such product
candidates. To date, we have only filed an investigational new drug application,
or IND, for AR-67, which is required in order to conduct clinical studies of
a
drug candidate. We do not intend to file INDs for AR-12 and AR-42 until early
2009.
Conducting
clinical trials is a lengthy, time consuming and very expensive process and
the
results are inherently uncertain. The duration of clinical trials can vary
substantially according to the type, complexity, novelty and intended use of
the
product candidate. We estimate that clinical trials of our product candidates
will take at least several years to complete. The completion of clinical trials
for our product candidates may be delayed or prevented by many factors,
including:
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de
lays
in patient enrollment, and variability in the number and types of
patients
available for clinical trials;
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difficulty
in maintaining contact with patients after treatment, resulting in
incomplete data;
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poor
effectiveness of product candidates during clinical
trials;
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safety
issues, side effects, or other adverse
events;
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results
that do not demonstrate the safety or effectiveness of the product
candidates;
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governmental
or regulatory delays and changes in regulatory requirements, policy
and
guidelines; and
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varying
interpretation of data by the FDA.
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In
conducting clinical trials, we may fail to establish the effectiveness of a
compound for the targeted indication or discover that it is unsafe due to
unforeseen side effects or other reasons. Even if our clinical trials are
commenced and completed as planned, their results may not support our product
candidate claims. Further, failure of product candidate development can occur
at
any stage of the clinical trials, or even thereafter, and we could encounter
problems that cause us to abandon or repeat clinical trials. These problems
could interrupt, delay or halt clinical trials for our product candidates and
could result in FDA, or other regulatory authorities, delaying approval of
our
product candidates for any or all indications. The results from pre-clinical
testing and prior clinical trials may not be predictive of results obtained
in
later or other larger clinical trials. A number of companies in the
pharmaceutical industry have suffered significant setbacks in clinical trials,
even in advanced clinical trials after showing promising results in earlier
clinical trials. Our failure to adequately demonstrate the safety and
effectiveness of any of our product candidates will prevent us from receiving
regulatory approval to market these product candidates and will negatively
impact our business. In addition, we or the FDA may suspend or curtail our
clinical trials at any time if it appears that we are exposing participants
to
unacceptable health risks or if the FDA finds deficiencies in the conduct of
these clinical trials or in the composition, manufacture or administration
of
the product candidates. Accordingly, we cannot predict with any certainty when
or if we will ever be in a position to submit a new drug application, or NDA,
for any of our product candidates, or whether any such NDA would ever be
approved.
Our
products use novel alternative technologies and therapeutic approaches, which
have not been widely studied.
Our
product development efforts focus on novel therapeutic approaches and
technologies that have not been widely studied. These approaches and
technologies may not be successful. We are applying these approaches and
technologies in our attempt to discover new treatments for conditions that
are
also the subject of research and development efforts of many other
companies.
Physicians
and patients may not accept and use our drugs.
Even
if
the FDA approves our product candidates, physicians and patients may not accept
and use them. Acceptance and use of our product will depend upon a number of
factors including:
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perceptions
by members of the health care community, including physicians, about
the
safety and effectiveness of our
drugs;
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cost-effectiveness
of our products relative to competing
products;
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availability
of reimbursement for our products from government or other healthcare
payers; and
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effectiveness
of marketing and distribution efforts by us and our licensees and
distributors, if any.
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Because
we expect sales of our current product candidates, if approved, to generate
substantially all of our product revenues for the foreseeable future, the
failure of any of these drugs to find market acceptance would harm our business
and could require us to seek additional financing.
Because
we are dependent on clinical research institutions and other contractors for
clinical testing and for research and development activities, the results of
our
clinical trials and such research activities are, to a certain extent, beyond
our control.
We
depend upon independent investigators and collaborators, such as universities
and medical institutions, to conduct our pre-clinical and clinical trials under
agreements with us. These parties are not our employees and we cannot control
the amount or timing of resources that they devote to our programs. These
investigators may not assign as great a priority to our programs or pursue
them
as diligently as we would if we were undertaking such programs ourselves. If
outside collaborators fail to devote sufficient time and resources to our drug
development programs, or if their performance is substandard, the approval
of
our FDA applications, if any, and our introduction of new drugs, if any, will
be
delayed. These collaborators may also have relationships with other commercial
entities, some of whom may compete with us. If our collaborators assist our
competitors at our expense, our competitive position would be harmed.
Our
reliance on third parties to formulate and manufacture our product candidates
exposes us to a number of risks that may delay the development, regulatory
approval and commercialization of our products or result in higher product
costs.
We
have no experience in drug formulation or manufacturing and do not intend to
establish our own manufacturing facilities. We lack the resources and expertise
to formulate or manufacture our own product candidates. Instead, we will
contract with one or more manufacturers to manufacture, supply, store and
distribute drug supplies for our clinical trials. If any of our product
candidates receive FDA approval, we will rely on one or more third-party
contractors to manufacture our drugs. Our anticipated future reliance on a
limited number of third-party manufacturers exposes us to the following risks:
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We
may be unable to identify manufacturers on acceptable terms or at
all
because the number of potential manufacturers is limited and the
FDA must
approve any replacement contractor. This approval would require new
testing and compliance inspections. In addition, a new manufacturer
would
have to be educated in, or develop substantially equivalent processes
for,
production of our products after receipt of FDA approval, if any.
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Our
third-party manufacturers might be unable to formulate and manufacture
our
drugs in the volume and of the quality required to meet our clinical
and/or commercial needs, if any.
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Our
future contract manufacturers may not perform as agreed or may not
remain
in the contract manufacturing business for the time required to supply
our
clinical trials or to successfully produce, store and distribute
our
products.
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Drug
manufacturers are subject to ongoing periodic unannounced inspection
by
the FDA and corresponding state agencies to ensure strict compliance
with
good manufacturing practice and other government regulations and
corresponding foreign standards. We do not have control over third-party
manufacturers’ compliance with these regulations and standards, but we
will be ultimately responsible for any of their
failures.
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If
any third-party manufacturer makes improvements in the manufacturing
process for our products, we may not own, or may have to share, the
intellectual property rights to the innovation. This may prohibit
us from
seeking alternative or additional manufacturers for our
products.
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Each
of
these risks could delay our clinical trials, the approval, if any, of our
product candidates by the FDA, or the commercialization of our product
candidates or result in higher costs or deprive us of potential product
revenues.
We
have no experience selling, marketing or distributing products and no internal
capability to do so.
We
currently have no sales, marketing or distribution capabilities. We do not
anticipate having resources in the foreseeable future to allocate to the sales
and marketing of our proposed products. Our future success depends, in part,
on
our ability to enter into and maintain sales and marketing collaborative
relationships, the collaborator’s strategic interest in the products under
development and such collaborator’s ability to successfully market and sell any
such products. We intend to pursue collaborative arrangements regarding the
sales and marketing of our products, however, there can be no assurance that
we
will be able to establish or maintain such collaborative arrangements, or if
able to do so, that they will have effective sales forces. To the extent that
we
decide not to, or are unable to, enter into collaborative arrangements with
respect to the sales and marketing of our proposed products, significant capital
expenditures, management resources and time will be required to establish and
develop an in-house marketing and sales force with technical expertise. There
can also be no assurance that we will be able to establish or maintain
relationships with third-party collaborators or develop in-house sales and
distribution capabilities. To the extent that we depend on third parties for
marketing and distribution, any revenues we receive will depend upon the efforts
of such third parties, and there can be no assurance that such efforts will
be
successful. In addition, there can also be no assurance that we will be able
to
market and sell our product in the U.S. or overseas.
If
we cannot compete successfully for market share against other drug companies,
we
may not achieve sufficient product revenues and our business will
suffer.
The
market for our product candidates is characterized by intense competition and
rapid technological advances. If our product candidates receive FDA approval,
they will compete with a number of existing and future drugs and therapies
developed, manufactured and marketed by others. Existing or future competing
products may provide greater therapeutic convenience or clinical or other
benefits for a specific indication than our products, or may offer comparable
performance at a lower cost. If our products fail to capture and maintain market
share, we may not achieve sufficient product revenues and our business will
suffer.
We
will
compete against fully integrated pharmaceutical companies and smaller companies
that are collaborating with larger pharmaceutical companies, academic
institutions, government agencies and other public and private research
organizations. Many of these competitors have technologies already approved
or
in development. In addition, many of these competitors, either alone or together
with their collaborative partners, operate larger research and development
programs and have substantially greater financial resources than we do, as
well
as significantly greater experience in:
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undertaking
pre-clinical testing and human clinical
trials;
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obtaining
FDA and other regulatory approvals of
drugs;
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formulating
and manufacturing drugs; and
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launching,
marketing and selling drugs.
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Developments
by competitors may render our products or technologies obsolete or
non-competitive
.
The
biotechnology and pharmaceutical industries are intensely competitive and
subject to rapid and significant technological change. The drugs that we are
attempting to develop will have to compete with existing therapies. In addition,
a large number of companies are pursuing the development of pharmaceuticals
that
target the same diseases and conditions that we are targeting. We face
competition from pharmaceutical and biotechnology companies in the U.S. and
abroad. In addition, companies pursuing different but related fields represent
substantial competition. Many of these organizations competing with us have
substantially greater capital resources, larger research and development staffs
and facilities, longer drug development history in obtaining regulatory
approvals and greater manufacturing and marketing capabilities than we do.
These
organizations also compete with us to attract qualified personnel and parties
for acquisitions, joint ventures or other collaborations.
Our
ability to generate product revenues will be diminished if our drugs sell for
inadequate prices or patients are unable to obtain adequate levels of
reimbursement.
Our
ability to commercialize our drugs, alone or with collaborators, will depend
in
part on the extent to which reimbursement will be available from:
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government
and health administration
authorities;
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private
health maintenance organizations and health insurers;
and
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other
healthcare payers.
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Significant
uncertainty exists as to the reimbursement status of newly approved healthcare
products. Healthcare payers, including Medicare, are challenging the prices
charged for medical products and services. Government and other healthcare
payers increasingly attempt to contain healthcare costs by limiting both
coverage and the level of reimbursement for drugs. Even if our product
candidates are approved by the FDA, insurance coverage may not be available,
and
reimbursement levels may be inadequate, to cover our drugs. If government and
other healthcare payers do not provide adequate coverage and reimbursement
levels for any of our products, once approved, market acceptance of our products
could be reduced.
Risks
Related to Our Intellectual Property
If
we fail to protect or enforce our intellectual property rights adequately or
secure rights to patents of others, the value of our intellectual property
rights would diminish.
Our
success, competitive position and future revenues will depend in part on our
ability and the abilities of our licensors to obtain and maintain patent
protection for our products, methods, processes and other technologies, to
preserve our trade secrets, to prevent third parties from infringing on our
proprietary rights and to operate without infringing upon the proprietary rights
of third parties. Additionally, if any third-party manufacturer makes
improvements in the manufacturing process for our products, we may not own,
or
may have to share, the intellectual property rights to the
innovation.
To
date,
we hold certain exclusive rights under U.S. patents and patent applications
as
well as rights under foreign patent applications. We anticipate filing
additional patent applications both in the U.S. and in other countries, as
appropriate. However, we cannot predict:
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the
degree and range of protection any patents will afford us against
competitors including whether third parties will find ways to invalidate
or otherwise circumvent our
patents;
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if
and when patents will issue;
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whether
or not others will obtain patents claiming aspects similar to those
covered by our patents and patent applications;
or
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whether
we will need to initiate litigation or administrative proceedings
which
may be costly whether we win or
lose.
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If
any of our trade secrets, know-how or other proprietary information is
disclosed, the value of our trade secrets, know-how and other proprietary rights
would be significantly impaired and our business and competitive position would
suffer.
Our
success also depends upon the skills, knowledge and experience of our scientific
and technical personnel, our consultants and advisors as well as our licensors
and contractors. To help protect our proprietary know-how and our inventions
for
which patents may be unobtainable or difficult to obtain, we rely on trade
secret protection and confidentiality agreements. To this end, we require all
of
our employees, consultants, advisors and contractors to enter into agreements
which prohibit the disclosure of confidential information and, where applicable,
require disclosure and assignment to us of the ideas, developments, discoveries
and inventions important to our business. These agreements may not provide
adequate protection for our trade secrets, know-how or other proprietary
information in the event of any unauthorized use or disclosure or the lawful
development by others of such information. If any of our trade secrets, know-how
or other proprietary information is disclosed, the value of our trade secrets,
know-how and other proprietary rights would be significantly impaired and our
business and competitive position would suffer.
If
we infringe upon the rights of third parties we could be prevented from selling
products, forced to pay damages, and defend against
litigation.
If
our
products, methods, processes and other technologies infringe upon the
proprietary rights of other parties, we could incur substantial costs and we
may
have to:
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obtain
licenses, which may not be available on commercially reasonable terms,
if
at all;
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redesign
our products or processes to avoid
infringement;
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stop
using the subject matter claimed in the patents held by
others;
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defend
litigation or administrative proceedings which may be costly whether
we
win or lose, and which could result in a substantial diversion of
our
valuable management resources.
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If
requirements under our license agreements are not met, we could suffer
significant harm, including losing rights to our
products.
We
depend
on licensing agreements with third parties to maintain the intellectual property
rights to our products under development. Presently, we have licensed rights
from the University of Pittsburgh and The Ohio State University Research
Foundation. These agreements require us and our licensors to perform certain
obligations that affect our rights under these licensing agreements. All of
these agreements last either throughout the life of the patents, or with respect
to other licensed technology, for a number of years after the first commercial
sale of the relevant product.
In
addition, we are responsible for the cost of filing and prosecuting certain
patent applications and maintaining certain issued patents licensed to us.
If we
do not meet our obligations under our license agreements in a timely manner,
we
could lose the rights to our proprietary technology.
Finally,
we may be required to obtain licenses to patents or other proprietary rights
of
third parties in connection with the development and use of our products and
technologies. Licenses required under any such patents or proprietary rights
might not be made available on terms acceptable to us, if at all.
Risks
Related to Our Securities
Because
we became public by means of a reverse merger, we may not be able to attract
the
attention of major brokerage firms.
Additional
risks may exist since we became public through a “reverse merger.” Security
analysts of major brokerage firms may not provide coverage of us since there
is
no incentive to brokerage firms to recommend the purchase of our common stock.
No assurance can be given that brokerage firms will want to conduct any
secondary offerings on behalf of our company in the future. The lack of such
analyst coverage may decrease the public demand for our common stock, making
it
more difficult for you to resell your shares when you deem
appropriate.
Our
common stock is considered “a penny stock.”
The
SEC
has adopted regulations which generally define “penny stock” to be an equity
security that has a market price of less than $5.00 per share, subject to
specific exemptions. Following the merger, the market price of our common stock
is likely to be less than $5.00 per share and therefore may be a “penny stock”
according to SEC rules. This designation requires any broker or dealer selling
these securities to disclose certain information concerning the transaction,
obtain a written agreement from the purchaser and determine that the purchaser
is reasonably suitable to purchase the securities. These rules may restrict
the
ability of brokers or dealers to sell shares of our common stock.
Because
we do not expect to pay dividends, you will not realize any income from an
investment in our common stock unless and until you sell your shares at
profit.
We
have
never paid dividends on our common stock and do not anticipate paying any
dividends for the foreseeable future. You should not rely on an investment
in
our common stock if you require dividend income. Further, you will only realize
income on an investment in our shares in the event you sell or otherwise dispose
of your shares at a price higher than the price you paid for your shares. Such
a
gain would result only from an increase in the market price of our common stock,
which is uncertain and unpredictable.
There
may be issuances of shares of blank check preferred stock in the
future.
Our
certificate of incorporation authorizes the issuance of up to 20,000,000 shares
of preferred stock, none of which are issued or currently outstanding. Our
board
of directors will have the authority to fix and determine the relative rights
and preferences of preferred shares, as well as the authority to issue such
shares, without further stockholder approval. As a result, our board of
directors could authorize the issuance of a series of preferred stock that
is
senior to our common stock and that would grant to holders preferred rights
to
our assets upon liquidation, the right to receive dividends, additional
registration rights, anti-dilution protection, the right to the redemption
to
such shares, together with other rights, none of which will be afforded holders
of our common stock.
Substantial
sales of shares may impact the market price of our common
stock.
The
number of shares of our common stock covered by this prospectus represents
a
significant portion of our total outstanding common stock. As of the date of
this prospectus, we have outstanding a total of 20,392,024 shares of our common
stock. If the selling stockholders sell substantial amounts of our common stock
covered by this prospectus, including shares issued upon the exercise of
outstanding warrants, the market price of our common stock may decline. We
are
unable to predict the effect that sales may have on the prevailing market price
of our common stock.
In
addition to the shares of our common stock covered by this prospectus, a
substantial portion of our shares will become eligible for resale pursuant
to
the provisions of Rule 144 promulgated under the Securities Act. These sales
may
also have a depressive effect on the market price of our common stock. In
general, with respect to an issuer that is current in its public reporting
obligations, a non-affiliate who has held restricted shares for at least 6
months may sell such shares into the market without volume limitations. However,
the holders of restricted shares issued by a corporation that was a public
shell
company must hold their shares for at least 12 months from the date such issuer
ceased being a public shell company before those shares may be resold pursuant
to Rule 144. Accordingly, a large number of shares of our common stock will
become freely tradable into the open market in June 2009, which could cause
our
stock price to decrease significantly.
If
our results do not meet analysts’ forecasts and expectations, our stock price
could decline.
In
the
future, analysts who cover our business and operations may provide valuations
regarding our stock price and make recommendations whether to buy, hold or
sell
our stock. Our stock price may be dependent upon such valuations and
recommendations. Analysts’ valuations and recommendations are based primarily on
our reported results and their forecasts and expectations concerning our future
results regarding, for example, expenses, revenues, clinical trials, regulatory
marketing approvals and competition. Our future results are subject to
substantial uncertainty, and we may fail to meet or exceed analysts’ forecasts
and expectations as a result of a number of factors, including those discussed
above under the sections “Risks Related to Our Business” and “Risks Related to
the Clinical Testing, Regulatory Approval, Manufacturing and Commercialization
of Our Product Candidates.” If our results do not meet analysts’ forecasts and
expectations, our stock price could decline as a result of analysts lowering
their valuations and recommendations or otherwise.
We
cannot assure you that our common stock will ever be listed on NASDAQ or any
other securities exchange.
We
expect
that our common stock will continue trading on the OTC Bulletin Board. Stocks
traded on the OTC Bulletin Board and other electronic over-the-counter markets
are often less liquid than stocks traded on national securities exchanges.
We
plan to seek listing on NASDAQ or the American Stock Exchange in the future,
but
we cannot assure you that we will be able to meet the initial listing standards
of either of those or any other stock exchange, or that we will be able to
maintain a listing of our common stock on either of those or any other stock
exchange. To the extent that our common stock is not traded on a national
securities exchange, such as the NASDAQ, the decreased liquidity of our common
stock may make it more difficult to sell your shares at desirable times and
at
prices.
We
are at risk of securities class action litigation.
In
the
past, securities class action litigation has often been brought against a
company following a decline in the market price of its securities. This risk
is
especially relevant for us because biotechnology companies have experienced
greater than average stock price volatility in recent years. If we faced such
litigation, it could result in substantial costs and a diversion of our
management’s attention and resources, which could harm our
business.
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains “forward-looking statements.” The forward-looking statements
are only predictions and provide our current expectations or forecasts of future
events and financial performance and may be identified by the use of
forward-looking terminology, including the terms “believes,” “estimates,”
“anticipates,” “expects,” “plans,” “intends,” “may,” “will” or “should” or, in
each case, their negative, or other variations or comparable terminology, though
the absence of these words does not necessarily mean that a statement is not
forward-looking. Forward-looking statements include all matters that are not
historical facts and include, without limitation, statements concerning our
business strategy, outlook, objectives, future milestones, plans, intentions,
goals, future financial conditions, our research and development programs and
planning for and timing of any clinical trials, the possibility, timing and
outcome of submitting regulatory filings for our product candidates under
development, potential INDs or NDAs, research and development of particular
drug
products, the development of financial, clinical, manufacturing and marketing
plans related to the potential approval and commercialization of our drug
products, and the period of time for which our existing resources will enable
us
to fund our operations.
Forward-looking
statements are subject to many risks and uncertainties that could cause our
actual results to differ materially from any future results expressed or implied
by the forward-looking statements. Examples of the risks and uncertainties
include, but are not limited to:
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the
risk that we may not successfully develop and market our product
candidates, and even if we do, we may not become
profitable;
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risks
relating to the progress of our research and
development;
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risks
relating to significant, time-consuming and costly research and
development efforts, including pre-clinical studies, clinical trials
and
testing, and the risk that clinical trials of our product candidates
may
be delayed, halted or fail;
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risks
relating to the rigorous regulatory approval process required for
any
products that we may develop independently, with our development
partners
or in connection with any collaboration
arrangements;
|
|
·
|
the
risk that changes in the national or international political and
regulatory environment may make it more difficult to gain FDA or
other
regulatory approval of our drug product
candidates;
|
|
·
|
risks
that the FDA or other regulatory authorities may not accept any
applications we file;
|
|
·
|
risks
that the FDA or other regulatory authorities may withhold or delay
consideration of any applications that we file or limit such applications
to particular indications or apply other label
limitations;
|
|
·
|
risks
that, after acceptance and review of applications that we file, the
FDA or
other regulatory authorities will not approve the marketing and sale
of
our drug product candidates;
|
|
·
|
risks
relating to our drug manufacturing operations, including those of
our
third-party suppliers and contract
manufacturers;
|
|
·
|
risks
relating to the ability of our development partners and third-party
suppliers of materials, drug substance and related components to
provide
us with adequate supplies and expertise to support manufacture of
drug
product for initiation and completion of our clinical
studies;
|
|
·
|
risks
relating to the transfer of our manufacturing technology to third-party
contract manufacturers;
|
|
·
|
the
risk that recurring losses, negative cash flows and the inability
to raise
additional capital could threaten our ability to continue as a going
concern; and
|
|
·
|
other
risks and uncertainties detailed in “
Risk
Factors
.”
|
Pharmaceutical
and biotechnology companies have suffered significant setbacks in advanced
clinical trials, even after obtaining promising earlier trial results. Data
obtained from such clinical trials are susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. Except to the extent
required by applicable laws or rules, we do not undertake to update any
forward-looking statements or to publicly announce revisions to any of our
forward-looking statements, whether resulting from new information, future
events or otherwise.
USE
OF PROCEEDS
We
will
receive none of the proceeds from the sale of the shares by the selling
stockholders, except for the warrant exercise price upon exercise of the
warrants, which would be used for working capital and other general corporate
purposes.
SELLING
STOCKHOLDERS
This
prospectus covers the resale by the selling stockholders identified below
of
10,585,334 shares of common stock, including 196,189 shares issuable upon
the
exercise of outstanding warrants. Of the total number of shares offered hereby,
7,360,689 shares were issued to the investors in our June 2008 private
placement, and 2,158,527 shares (including the shares issuable upon the
exercise of outstanding warrants) were issued to the former holders of our
6%
convertible promissory notes, which converted into share of our common stock
and
warrants upon the completion of our June 2008 private placement. The following
table sets forth the number of shares of our common stock beneficially owned
by
the selling stockholders as of July 15, 2008 and after giving effect to this
offering, except as otherwise referenced below.
Selling
Stockholder
|
|
Shares
beneficially
owned before
offering (1)
|
|
Number of
outstanding
shares offered
by selling
stockholder
|
|
Number of
shares offered
by selling
stockholder
upon exercise
of warrants
|
|
Percentage
beneficial
ownership
after
offering(1)
|
|
Securities issued
in June 2008 private placement
|
|
2739-1291
Quebec Inc. (2a)
|
|
|
10,317
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
3071341
Canada Inc. (2b)
|
|
|
41,277
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
4210573
Canada Inc. (2c)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
87111
Canada Limited (2c)
|
|
|
61,916
|
|
|
61,916
|
|
|
-
|
|
|
-
|
|
A.
Lapidot Pharmaceuticals Ltd. (3)
|
|
|
95,690
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
Allen
Rubin
|
|
|
10,317
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
Andre
Telio Investments Inc. (4)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Barry
Goodman
|
|
|
21,855
|
|
|
8,254
|
|
|
-
|
|
|
-
|
|
Bayside
Development Corporation Limited (5)
|
|
|
206,393
|
|
|
206,393
|
|
|
-
|
|
|
-
|
|
Bonnie
Kazam (6)
|
|
|
91,118
|
|
|
20,637
|
|
|
-
|
|
|
*
|
|
Brilar
Investments Limited (7)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Burton
Koffman
|
|
|
23,919
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
Canyon
Value Realization Fund (Cayman) Ltd. (8)
|
|
|
1,011,330
|
|
|
687,651
|
|
|
-
|
|
|
-
|
|
Canyon
Value Realization Fund, L.P. (8)
|
|
|
1,011,330
|
|
|
263,069
|
|
|
-
|
|
|
-
|
|
Canyon
Value Realization Mac-18 Ltd. (8)
|
|
|
1,011,330
|
|
|
60,610
|
|
|
-
|
|
|
-
|
|
Caroline
Sacchetti
|
|
|
10,317
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
Clairmark
Investments Ltd. (9)
|
|
|
39,875
|
|
|
39,875
|
|
|
-
|
|
|
-
|
|
Clal
Insurance Company Ltd. - Profit Participating Policies
(10)
|
|
|
1,454,727
|
|
|
825,578
|
|
|
-
|
|
|
-
|
|
Cohen
Family Enterprises LLC (11)
|
|
|
41,277
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
Danny
Ritter
|
|
|
10,317
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
David
Bengal
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
David
M. Tanen (12)
|
|
|
1,458,102
|
|
|
10,317
|
|
|
-
|
|
|
6.97
|
|
David
Wilstein and Susan Wilstein, Trustees of The Century Trust
|
|
|
137,210
|
|
|
10,317
|
|
|
-
|
|
|
*
|
|
Dikla
Insurance Company Ltd. – Nostro (13)
|
|
|
4,127
|
|
|
4,127
|
|
|
-
|
|
|
-
|
|
Dikla
Insurance Company Ltd. – Siudi (13)
|
|
|
10,317
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
Diversiplex
Corporation (14)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Egosah
Reichmann
|
|
|
41,277
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
Erez
and Elyse Halevah
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Eric
Raphael
|
|
|
10,317
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
Fred
Mermelstein
|
|
|
10,317
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
Gems
Progressive Fund II Perennial Segregated Portfolio (15)
|
|
|
412,788
|
|
|
412,788
|
|
|
-
|
|
|
-
|
|
Gerald
Lieberman
|
|
|
41,277
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
Gilad
Pension Fund Mekifa - Gilad Rivchit (16)
|
|
|
398,325
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
GMM
Capital, LLC (17)
|
|
|
235,601
|
|
|
41,277
|
|
|
-
|
|
|
*
|
|
Selling
Stockholder
|
|
Shares
beneficially
owned before
offering (1)
|
|
Number of
outstanding
shares offered
by selling
stockholder
|
|
Number of
shares offered
by selling
stockholder
upon exercise
of warrants
|
|
Percentage
beneficial
ownership
after
offering(1)
|
|
Governing Dynamics Investment,
LLC (18)
|
|
|
41,277
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
Harel
Insurance Company Ltd. – Clali (19)
|
|
|
398,325
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Harel
Insurance Company Ltd. – Mishtatefet (19)
|
|
|
|
|
|
115,580
|
|
|
-
|
|
|
-
|
|
Harel
Insurance Company Ltd. – Nostro (19)
|
|
|
|
|
|
45,406
|
|
|
-
|
|
|
-
|
|
Harel
Pension Fund Management Company Ltd.-Harel Pensia (19)
|
|
|
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
Harel
Provident Funds Ltd. – Taoz (19)
|
|
|
|
|
|
28,893
|
|
|
-
|
|
|
-
|
|
Harel
Provident Funds, Ltd.- Hishtalmut (19)
|
|
|
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
Harel
Provident Funds, Ltd.-Gmisha (19)
|
|
|
|
|
|
8,254
|
|
|
-
|
|
|
-
|
|
Harel
Provident Funds, Ltd.-Otzma (19)
|
|
|
|
|
|
107,324
|
|
|
-
|
|
|
-
|
|
High
Glen Properties Limited (20)
|
|
|
61,916
|
|
|
61,916
|
|
|
-
|
|
|
-
|
|
Irvin
R. Kessler
|
|
|
151,037
|
|
|
123,833
|
|
|
-
|
|
|
-
|
|
Joan
K. Cohn
|
|
|
10,317
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
Joseph
J. Sitt
|
|
|
68,481
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
Joshua
Kazam Trust (21)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Leonard
Grunstein
|
|
|
34,238
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Leumi
Overseas Trust Corporation Limited as Trustees of the BTL Trust
(22)
|
|
|
61,916
|
|
|
61,916
|
|
|
-
|
|
|
-
|
|
Meitavit
Atudot Pension Funds Management Company Ltd. (Sapir) (10)
|
|
|
1,454,727
|
|
|
412,788
|
|
|
-
|
|
|
-
|
|
Meitavit
Atudot Pension Funds Management Company Ltd. (Yahalom)
(10)
|
|
|
1,454,727
|
|
|
206,393
|
|
|
-
|
|
|
-
|
|
Michael
Chisek
|
|
|
34,238
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Michael
T. Cohen
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Millennium
Partners, L.P. (23)
|
|
|
412,788
|
|
|
412,788
|
|
|
-
|
|
|
-
|
|
Nancy
Spielberg Venture Trust (24)
|
|
|
10,317
|
|
|
10,317
|
|
|
-
|
|
|
-
|
|
Peter
D. Kiernan
|
|
|
82,556
|
|
|
82,556
|
|
|
-
|
|
|
-
|
|
Peter
M. Kash (25)
|
|
|
1,688,977
|
|
|
20,637
|
|
|
-
|
|
|
7.97
|
|
Peter
Strumph
|
|
|
12,383
|
|
|
12,383
|
|
|
-
|
|
|
-
|
|
Platinum-Montaur
Life Sciences, LLC (26)
|
|
|
41,277
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
Primafides
(Suisse) SA as Trustees of the Sirius Trust (27)
|
|
|
541,806
|
|
|
206,393
|
|
|
-
|
|
|
*
|
|
Raymond
Telio Investments Inc. (28)
|
|
|
41,277
|
|
|
41,277
|
|
|
-
|
|
|
-
|
|
Renato
Negrin
|
|
|
99,090
|
|
|
61,916
|
|
|
-
|
|
|
*
|
|
Rennat
Inc. (29)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Robert
I. Falk (30)
|
|
|
195,378
|
|
|
41,277
|
|
|
-
|
|
|
*
|
|
Ronnie
Fortis
|
|
|
39,875
|
|
|
39,875
|
|
|
-
|
|
|
-
|
|
Sabrinco
Inc. (31)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Sarbin
Investments Limited (32)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Shirley
Ann Lewis Enterprises, Inc. (33)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Standu
Investments Limited (34)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Venture
Enterprises, Inc. (35)
|
|
|
15,950
|
|
|
15,950
|
|
|
-
|
|
|
-
|
|
David
Lifschitz
|
|
|
10,367
|
|
|
10,367
|
|
|
-
|
|
|
-
|
|
Wealthplan
Corporation (36)
|
|
|
20,637
|
|
|
20,637
|
|
|
-
|
|
|
-
|
|
Wexford
Spectrum Investors, LLC (37)
|
|
|
2,005,789
|
|
|
1,733,712
|
|
|
-
|
|
|
-
|
|
Subtotal
|
|
|
|
|
|
7,360,689
|
|
|
|
|
|
|
|
Shares
issued upon conversion of the 6% convertible promissory notes on
June 2,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A.
Lapidot Pharmaceuticals, Ltd. (3)
|
|
|
95,690
|
|
|
49,467
|
|
|
4,946
|
|
|
-
|
|
Mark
Ahn
|
|
|
24,287
|
|
|
3,955
|
|
|
394
|
|
|
*
|
|
Alyad
Foundation (38)
|
|
|
54,413
|
|
|
49,467
|
|
|
4,946
|
|
|
-
|
|
Atlas
Master Fund, Ltd. (39)
|
|
|
12,594
|
|
|
11,450
|
|
|
1,144
|
|
|
-
|
|
Selling
Stockholder
|
|
Shares
beneficially
owned before
offering (1)
|
|
Number of
outstanding
shares offered
by selling
stockholder
|
|
Number of
shares offered
by selling
stockholder
upon exercise
of warrants
|
|
Percentage
beneficial
ownership
after
offering(1)
|
|
Beck Family
Partners, LP (40)
|
|
|
54,413
|
|
|
49,467
|
|
|
4,946
|
|
|
-
|
|
Bristol
Investment Fund, Ltd. (41)
|
|
|
292,014
|
|
|
247,345
|
|
|
24,732
|
|
|
*
|
|
Michael
Chisek
|
|
|
34,328
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
David
and Susan Wilstein, TTEES of the Century Trust
|
|
|
137,210
|
|
|
24,732
|
|
|
2,472
|
|
|
*
|
|
Diversified
Fund, Ltd. (42)
|
|
|
33,539
|
|
|
12,365
|
|
|
1,236
|
|
|
*
|
|
Falk
Family Partners, LLC (30)
|
|
|
195,378
|
|
|
49,467
|
|
|
4,946
|
|
|
*
|
|
Arnold
and Lynn Feld
|
|
|
13,601
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Gitel
Family LP (31)
|
|
|
54,413
|
|
|
49,467
|
|
|
4,946
|
|
|
-
|
|
GMM
Capital (17)
|
|
|
235,601
|
|
|
31,659
|
|
|
3,164
|
|
|
*
|
|
Barry
Goodman
|
|
|
21,855
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Leonard
Grunstein
|
|
|
34,238
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Inversiones
Miraconcha, SL (43)
|
|
|
104,257
|
|
|
49,467
|
|
|
4,946
|
|
|
*
|
|
Robert
Israel
|
|
|
13,601
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Kappa
Investors, LLC (37)
|
|
|
2,005,789
|
|
|
247,345
|
|
|
24,732
|
|
|
-
|
|
Peter
M. Kash (25)
|
|
|
1,688,977
|
|
|
24,732
|
|
|
2,472
|
|
|
7.97
|
%
|
Shimon
Katz
|
|
|
13,601
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Kauffman
Family Trust (44)
|
|
|
54,413
|
|
|
49,467
|
|
|
4,946
|
|
|
-
|
|
Joshua
Kazam (45)
|
|
|
1,566,686
|
|
|
49,467
|
|
|
4,946
|
|
|
7.35
|
%
|
Irvin
Kessler
|
|
|
151,037
|
|
|
24,732
|
|
|
2,472
|
|
|
-
|
|
Robert
Klein
|
|
|
17,190
|
|
|
12,365
|
|
|
1,236
|
|
|
*
|
|
Burton
Koffman
|
|
|
23,919
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Harvey
Krueger
|
|
|
27,204
|
|
|
24,732
|
|
|
2,472
|
|
|
-
|
|
Larich
Associates (46)
|
|
|
27,204
|
|
|
24,732
|
|
|
2,472
|
|
|
-
|
|
Leiden
Overseas (S. Pilpel) (47)
|
|
|
27,204
|
|
|
24,732
|
|
|
2,472
|
|
|
-
|
|
Bruce
Lipnick
|
|
|
13,601
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Alan
Mendelson
|
|
|
38,523
|
|
|
12,365
|
|
|
1,236
|
|
|
*
|
|
Naftali
Investments, Ltd. (48)
|
|
|
37,173
|
|
|
24,732
|
|
|
2,472
|
|
|
*
|
|
Renato
Negrin
|
|
|
99,090
|
|
|
24,732
|
|
|
2,472
|
|
|
*
|
|
Rachel
Family Partnership (49)
|
|
|
54,413
|
|
|
49,467
|
|
|
4,946
|
|
|
-
|
|
Primafides
(Suisse) SA as Trustees of the Sirius Trust (27)
|
|
|
541,806
|
|
|
123,671
|
|
|
12,365
|
|
|
*
|
|
Albert
Reichmann
|
|
|
54,413
|
|
|
49,467
|
|
|
4,946
|
|
|
-
|
|
Rel
Tech Holdings, Ltd. (50)
|
|
|
54,413
|
|
|
49,467
|
|
|
4,946
|
|
|
-
|
|
Henry
Rothman
|
|
|
27,204
|
|
|
24,732
|
|
|
2,472
|
|
|
-
|
|
Seymour
& Star Sacks, JTWROS
|
|
|
13,601
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Joseph
Sitt
|
|
|
68,481
|
|
|
24,732
|
|
|
2,472
|
|
|
-
|
|
Smithfield
Fiduciary, LLC (51)
|
|
|
119,712
|
|
|
108,831
|
|
|
10,881
|
|
|
-
|
|
Speisman
Family 2000 LP (52)
|
|
|
13,601
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Gary
Stein
|
|
|
13,601
|
|
|
12,365
|
|
|
1,236
|
|
|
-
|
|
Stephen
and Barbara Vermut Trust dtd March 19, 2002
|
|
|
27,204
|
|
|
24,732
|
|
|
2,472
|
|
|
-
|
|
David
M. Tanen (12)
|
|
|
1,444,759
|
|
|
12,365
|
|
|
1,236
|
|
|
6.97
|
%
|
Visium
Balanced Fund, LP (53)
|
|
|
205,057
|
|
|
41,572
|
|
|
4,157
|
|
|
-
|
|
Visium
Balanced Offshore Fund, Ltd (53)
|
|
|
205,057
|
|
|
66,137
|
|
|
6,613
|
|
|
-
|
|
Visium
Long Bias Fund, LP (53)
|
|
|
205,057
|
|
|
18,723
|
|
|
1,872
|
|
|
-
|
|
Visium
Long Bias Offshore Fund, Ltd. (53)
|
|
|
205,057
|
|
|
59,986
|
|
|
5,997
|
|
|
-
|
|
Subtotal
|
|
|
|
|
|
1,962,338
|
|
|
196,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Miscellaneous Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fountainhead
Capital Management Limited (54)
|
|
|
906,200
|
|
|
906,200
|
|
|
-
|
|
|
-
|
|
La
Pergola Investments Limited (54)
|
|
|
159,918
|
|
|
159,918
|
|
|
-
|
|
|
-
|
|
Subtotal
|
|
|
|
|
|
1,066,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
10,389,145
|
|
|
196,189
|
|
|
|
|
____________
*
denotes
less than 1%
(1)
|
Based
on 20,588,213 shares of outstanding common stock, which assumes the
issuance of all shares offered hereby that are issuable upon exercise
of
warrants. Beneficial ownership is determined in accordance with Rule
13d-3
under the Securities Act, and includes any shares as to which the
security
or stockholder has sole or shared voting power or investment power,
and
also any shares which the security or stockholder has the right to
acquire
within 60 days of the date hereof, whether through the exercise or
conversion of any stock option, convertible security, warrant or
other
right. The indication herein that shares are beneficially owned is
not an
admission on the part of the security or stockholder that he, she
or it is
a direct or indirect beneficial owner of those shares.
|
(2a)
|
Ira
Roth is the president of the selling
stockholder.
|
(2b)
|
Ruth
Hornstein is the president and sole owner of the selling
stockholder.
|
(2c)
|
Hershie
Schacter, president of the selling stockholder, holds voting and/or
dispositive power over the shares held by the selling
stockholder.
|
(3)
|
Mr.
Ami Lapidot, chief executive officer of the selling stockholder,
holds
voting and/or dispositive power over the shares held by the selling
stockholder.
|
(4)
|
Andre
Telio, president of the selling stockholder, holds voting and/or
dispositive power over the shares held by the
stockholder.
|
(5)
|
David
Litton is a director of the selling
stockholder.
|
(6)
|
Shares
beneficially owned by Bonnie Kazam include 20,637 shares of our common
stock held as trustee of the Joshua Kazam Trust, with respect to
which
Mrs. Kazam holds voting and/or investment power. Joshua Kazam, a
director
of our company, is a beneficiary of such trust, but disclaims any
beneficial ownership in such shares except to the extent of any pecuniary
interest therein.
|
(7)
|
Brian
Smith and Lawrence Smith hold voting and/or dispositive power
over the
shares held by the selling
stockholder.
|
(8)
|
John
Simpson, Joshua S. Friedman, Mitchell R. Julius and John P. Plaga
have
voting and/or dispositive power over the shares held by the selling
stockholder. The selling stockholder has informed us that it is affiliated
with a broker-dealer, and has represented to us that it purchased
the
shares in the ordinary course of business with no agreement or
understanding, directly or indirectly, with any persons regarding
the
distribution of the shares.
|
(9)
|
Leslie
Dan is the president of the selling
stockholder.
|
(10)
|
Beneficial
ownership includes: (i) 825,578 shares of our common stock held by
Clal
Insurance Company Ltd. - Profits Participating Policies; (ii) 412,788
shares of our common stock held by Meitavit Atudot Pension Funds
Management Company Ltd. (Sapir)("Sapir"); (iii) 206,393 shares of
our
common stock held by Meitavit Atudot Pension Funds Management Company
Ltd.
(Yahalom)("Yahalom"); and (iv) 9,968 shares of our common stock held
by
Clal Finance Underwriting Ltd. Yossi Dori holds voting and/or dispositive
power over the shares held by Sapir and Yahalom. Nir Moroz holds
voting
and/or dispositive power over the shares held by Clal Insurance Company
Ltd. - Profits Participating
Policies.
|
(11)
|
Michael
Cohen is the manager of the selling
stockholder.
|
(12)
|
Mr.
Tanen is a director of our company. Shares listed as beneficially
owned by
Mr. Tanen include 149,532 shares of our common stock held by Mr.
Tanen’s
wife, as custodian for the benefit of their minor children under
the UGMA,
for which Mr. Tanen disclaims any beneficial
ownership.
|
(13)
|
Amir
Hessel and Alfred Rozenfeld hold voting and/or dispositive power
over the
shares held by the selling
stockholder.
|
(14)
|
Stanley
Plotnick, president of the selling stockholder, holds voting and/or
dispositive power over the shares held by the selling stockholder.
|
(15)
|
Cedric
Carroll holds voting and/or dispositive power over the shares held
by the
selling stockholder.
|
(16)
|
Amir
Hessel and Yaniv Melamud hold voting and/or dispositive power over
the
shares held by the selling
stockholder.
|
(17)
|
Isaac
Dabah has voting and/or investment control over the shares held by
GMM
Capital LLC.
|
(18)
|
Alex
Mashinsky has voting and/or investment control over the shares held
by
Governing Dynamics Investment, LLC.
|
(19)
|
Amir
Hessel and Yaniv Melamud hold voting and/or dispositive power over
the
shares held by the selling
stockholder.
|
(20)
|
David
Ulmer, vice president of High Glen Properties, holds voting and/or
dispositive power over the shares beneficially owned by the selling
stockholder.
|
(21)
|
Bonnie
Kazam serves as the Trustee of the Joshus Kazam Trust. Mr. Kazam
is a
director of Arno, but disclaims beneficial ownership over such shares
except to the extent of his pecuniary interest therein.
|
(22)
|
Mr.
John Le M. Germain, director of the Leumi Overseas Trust Corporation,
holds voting and/or dispositive power over the shares beneficially
owned
by the selling stockholder.
|
(23)
|
Millennium
Management LLC, a Delaware limited liability company, is the general
partner of Millennium Partners, L.P., a Cayman Islands exempted limited
partnership, and consequently may be deemed to have voting control
and
investment discretion over securities owned by Millennium Partners,
L.P.
Israel A. Englander is the managing member of Millennium Management
LLC.
As a result, Mr. Englander may be deemed to be the beneficial owner
of any
shares deemed to by beneficially owned by Millennium Management LLC.
The
foregoing should not be construed in and of itself as an admission
by
either of Millennium Management LLC or Mr. Englander as to beneficial
ownership of the shares of our common stock owned by Millennium Partners,
L.P. Millennium Partners, L.P. has identified itself as being affiliated
with one or more registered broker-dealers, and has represented to
us that
it has purchased the shares in the ordinary course of business and,
at the
time of purchase, with no arrangement or understanding, directly
or
indirectly, with any persons regarding the distribution of such
shares.
|
(24)
|
Auram
Y. Katz, trustee of the selling stockholder, holds voting and/or
dispositive control over the shares held by the selling
stockholder.
|
(25)
|
Beneficial
ownership includes 358,876 shares of our common stock held by Mr.
Kash’s
wife as custodian for the benefit of their minor children under the
UGMA,
for which Mr. Kash disclaims any beneficial ownership. Does not include
119,626 shares of our common stock held by the Kash Family Trust,
for
which Mr. Kash disclaims any beneficial ownership interest, except
to the
extent of his pecuniary interest therein. Mr. Kash is a director
of
Arno.
|
(26)
|
Michael
M. Goldberg
has
voting and/or investment power over the shares beneficially owned
by
Platinum-Montaur
Life Sciences, LLC
.
|
(27)
|
Ari
Tatos, Nigel Mifsud, Magali Garcia-Baudin, David Moran, Phillippe
De Salis
and Ewald Scherrer are directors of Primafides (Suisse) SA
,
the trustee of the Sirius Trust, and share voting and/or dispositive
power
over the shares held by the Sirius
Trust.
|
(28)
|
Raymond
Telio, president of
Raymond
Telio Investments Inc., holds voting and/or dispositive power over
the
shares held by the selling
stockholder.
|
(29)
|
Marvin
Tanner, president of the selling stockholder, holds voting
and/or
dispositive control over the shares held by the selling
stockholder.
|
(30)
|
Beneficial
ownership includes: (i) 49,844 shares of our common stock and warrants
to
purchase 4,946 shares of our common stock at an exercise price of
$2.42
per share held by Falk Family Partners, LP, of which Mr. Falk is
General
Partner; and (ii) vested options held by Mr. Falk to purchase 49,844
shares of our common stock at an exercise price of $2.42 per share;
but
does not include options to purchase 49,844 shares of our common
stock at
an exercise price of $2.42 per share, the rights to which vest in
two
equal installments on March 31, 2009, and March 31, 2010. Mr. Falk
is a
director of Arno.
|
(31)
|
Samuel
Gewurz is the president and sole owner of the selling
stockholder.
|
(32)
|
Sarah
Rubin holds voting and/or dispositive power over the shares held
by Sarbin
Investments Limited.
|
(33)
|
Shirley
Ann Lewis is the president and sole owner of the selling
stockholder.
|
(34)
|
Stephen
Reitman is the president and sole owner of the selling
stockholder.
|
(35)
|
Bruce
Weiner holds voting and/or dispositive power over the shares held
by
Venture Enterprises, Inc.
|
(36)
|
F.
Lawrence Plotnick, president of Wealthplan Corporation, holds voting
and/or dispositive power over the shares held by the selling
stockholder.
|
(37)
|
Beneficial
ownership includes: (i) 247,345 shares of our common stock held
by Kappa
Investors, LLC (“Kappa”); (ii) a five year warrant held by Kappa to
purchase 24,372 shares of our common stock that are exercisable
at $2.42
per share; and (iii) 1,733,712 shares of our common stock held
by Wexford
Spectrum Investors LLC, a Delaware limited liability company ("Wexford
Spectrum"). Wexford Capital LLC, a Connecticut limited liability
company
("Wexford Capital") is a registered Investment Advisor and also
serves as
an investment advisor or sub-advisor to the members of Kappa and
Wexford
Spectrum. Mr. Charles E. Davidson is chairman, a managing member
and a
controlling member of Wexford Capital and Mr. Joseph M. Jacobs
is
president, a managing member and a controlling member of Wexford
Capital.
Messrs. Davidson and Jacobs each disclaim all beneficial ownership
of the
shares held by Kappa, Wexford Spectrum and Wexofrd Capital, except
to the
extent of any pecuniary interest
therein.
|
(38)
|
Dov
Perlysky holds voting and/or dispositive control over the shares
held by
the selling
stockholder.
|
(39)
|
Scott
Schroeder holds voting and/or dispositive power over the shares held
by
Atlas Master Fund, Ltd.
|
(40)
|
Ronald
Beck, general partner of Beck Family Partners, L.P., holds voting
and/or
dispositive power over the shares held by the selling
stockholder.
|
(41)
|
Bristol
Capital Advisors, LLC (“BCA”) is the investment advisor to Bristol
Investment Fund, Ltd. (“Brisol”). Paul Kessler is the manager of BCA and
as such has voting and investment control over the securities held
by
Bristol. Mr. Kessler disclaims beneficial ownership of these
securities.
|
(42)
|
Carlo
Pagani, president of Diversified Fund, holds voting and/or dispositive
power over the shares held by the selling
stockholder.
|
(43)
|
Jose
Luis Diaz-Rio, director of Inversiones Mirachonda, SL, holds voting
and/or
dispositive power over the shares held by the selling
stockholder.
|
(44)
|
Joseph
Martello, trustee, holds voting and/or dispositive power over the
shares
held by the selling stockholder.
|
(45)
|
Total
shares beneficially owned by Mr. Kazam include: (i) 332,293 shares
of our
common stock held by the Kazam Family Trust; and (ii) 99,688 shares
of our
common stock held by Mr. Kazam’s wife as custodian for the benefit of
their minor daughter under the Uniform Gift to Minors Act (UGMA),
for
which Mr. Kazam disclaims any beneficial ownership interest. Does
not
include 20,637 shares of our common stock held by the Joshua Kazam
Trust,
for which Mr. Kazam disclaims any beneficial ownership interest,
except to
the extent of his pecuniary interest therein. Mr. Kazam is a director
of
our company.
|
(46)
|
Lawrence
R. Gross holds voting and/or dispositive power over the shares held
by the
selling stockholder.
|
(47)
|
Shai
Pilpel, chairman of Leiden Overseas, holds voting and/or dispositive
power
over the shares held by the selling
stockholder.
|
(48)
|
Meir
Hadar, president and CEO of Naftali Investments, holds voting and/or
dispositive power over the shares held by the selling
stockholder.
|
(49)
|
Ruki
Renon holds voting and/or dispositive control over the shares
held by the
selling stockholder.
|
(50)
|
Leon
Recanti, chairman and chief executive officer of Rel Tech Holdings,
Ltd.,
holds voting and/or dispositive power over the shares held by the
selling
stockholder.
|
(51)
|
Highbridge
Capital Management, LLC is the trading manager of Smithfield Fiduciary
LLC
and has voting control and investment discretion over the securities
held
by Smithfield Fiduciary LLC. Glenn Dubin and Henry Swieca control
Highbridge Capital Management, LLC and have voting control and investment
discretion over the securities held by Smithfield Fiduciary LLC.
Each of
Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca
disclaims
beneficial ownership of the securities held by Smithfield Fiduciary
LLC.
|
(52)
|
Aaron
Speisman, general partner of Speisman Family 2000, LP,
holds
voting and/or dispositive power over the shares held by the selling
stockholder.
|
(53)
|
Jacob
Gottlieb has voting and investment power over the shares held by
Visium
Balanced Fund, LP, Visium Balanced Offshore Fund, Ltd., Visium Long
Bias Fund, LP and Visium Long Bias Offshore
Fund, Ltd.
|
(54)
|
Gisele
Le Miere and Carole Dodge share voting and/or dispositive power over
the
shares held by the selling
stockholder.
|
PLAN
OF DISTRIBUTION
We
are
registering the shares offered by this prospectus on behalf of the selling
stockholders. The selling stockholders, which as used herein includes donees,
pledgees, transferees or other successors-in-interest selling shares of common
stock or interests in shares of common stock received after the date of this
prospectus from a selling stockholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of common stock or interests
in
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These dispositions
may
be at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the
time
of sale, or at negotiated prices. To the extent any of the selling stockholders
gift, pledge or otherwise transfer the shares offered hereby, such transferees
may offer and sell the shares from time to time under this prospectus, provided
that this prospectus has been amended under Rule 424(b)(3) or other applicable
provision of the Securities Act to include the name of such transferee in the
list of selling stockholders under this prospectus.
The
selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as
agent, but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock, from time to time, under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.
The
selling stockholders have agreed with us that they will not engage in short
sales for a period of 24 months following the date of the closing of our June
2,
2008 private placement. In connection with the sale of our common stock or
interests therein, the selling stockholders may enter into hedging transactions
with broker-dealers or other financial institutions, which may in turn engage
in
short sales of the common stock in the course of hedging the positions they
assume. Following the expiration of such 24-month period, the selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the selling stockholders from the sale of the common
stock
offered by them will be the purchase price of the common stock less discounts
or
commissions, if any. Each of the selling stockholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole
or
in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering. Upon any
exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
that they meet the criteria and conform to the requirements of that
rule.
The
selling stockholders might be, and any broker-dealers that act in connection
with the sale of securities will be, deemed to be “underwriters” within the
meaning of Section 2(11) of the Securities Act, and any commissions received
by
such broker-dealers and any profit on the resale of the securities sold by
them
while acting as principals will be deemed to be underwriting discounts or
commissions under the Securities Act.
To
the
extent required, the shares of our common stock to be sold, the names of the
selling stockholders, the respective purchase prices and public offering prices,
the names of any agents, dealer or underwriter, any applicable commissions
or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
In
order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may not be
sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
We
have
advised the selling stockholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to
the
activities of the selling stockholders and their affiliates. In addition, we
will make copies of this prospectus (as it may be supplemented or amended from
time to time) available to the selling stockholders for the purpose of
satisfying the prospectus delivery requirements of the Securities Act. The
selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We
have
agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to
the
registration of the shares offered by this prospectus.
We
have
agreed with the selling stockholders to keep the registration statement that
includes this prospectus effective until the earlier of (1) such time as all
of
the shares covered by this prospectus have been disposed of pursuant to and
in
accordance with the registration statement or (2) the date on which the shares
may be sold without restriction pursuant to Rule 144 of the Securities
Act.
Shares
Eligible For Future Sale
Upon
completion of this offering and assuming the issuance of all of the shares
covered by this prospectus that are issuable upon the exercise of warrants,
there will be 20,588,213 shares of our common stock issued and outstanding.
The
shares purchased in this offering will be freely tradable without registration
or other restriction under the Securities Act, except for any shares purchased
by an “affiliate” of our company (as defined in the Securities
Act).
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of such Rule. Rule
144 governs resale of “restricted securities” for the account of any person
(other than us), and restricted and unrestricted securities for the account
of
an “affiliate” of ours. Restricted securities generally include any
securities acquired directly or indirectly from us or our affiliates, which
were
not issued or sold in connection with a public offering registered under the
Securities Act. An affiliate of ours is any person who directly or
indirectly controls us, is controlled by us, or is under common control with
us.
Our affiliates may include our directors, executive officers, and persons
directly or indirectly owing 10% or more of our outstanding common stock.
In general, under Rule 144, a person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of ours at the time
of,
or at any time during the three months preceding, a sale, and who has
beneficially owned restricted securities for at least six months would be
entitled to sell those shares, subject to the requirements of Rule 144 regarding
publicly available information about us.
Affiliates
may only sell in any three month period that number of shares that does not
exceed the greater of 1 percent of the then-outstanding shares of our common
stock or the average weekly trading volume of our shares of common stock in
the
over-the-counter market during the four calendar weeks preceding the sale.
However,
the holders of restricted securities issued by a corporation that was a public
shell corporation must hold their securities for at least 12 months from the
date such issuer ceased being a public shell corporation before those shares
may
be resold pursuant to Rule 144. Accordingly, the shares held by the selling
stockholders will become eligible for sale under Rule 144 in June
2009.
Following
the date of this prospectus, we cannot predict the effect, if any, that sales
of
our common stock or the availability of our common stock for sale will have
on
the market price prevailing from time to time. Nevertheless, sales by existing
stockholders of substantial amounts of our common stock could adversely affect
prevailing market prices for our stock.
DESCRIPTION
OF CAPITAL STOCK
General
Our
certificate of incorporation authorizes us to issue 100 million shares of
capital stock, par value $0.0001 per share, comprised of 80 million shares
of
common stock, and 20 million shares of preferred stock.
Following
the merger, we have issued and outstanding approximately: (i) 20,392,024 shares
of our common stock, (ii) options to purchase 1,116,508 shares of our
common stock at exercise prices ranging from $0.13 to $2.42 per share, and
(iii)
warrants to purchase 495,252 shares of our common stock at an exercise price
of
$2.42 per share. There are no shares of preferred stock issued or
outstanding.
The
holders of common stock are entitled to one vote for each share held of record
on all matters submitted to a vote of the stockholders and do not have
cumulative voting rights. Upon our liquidation, dissolution or winding down,
holders of our common stock will be entitled to share ratably in all of our
assets that are legally available for distribution, after payment of all debts
and other liabilities. The holders of our common stock have no preemptive,
subscription, redemption or conversion rights.
Holders
of our common stock are entitled to receive such dividends, as the board of
directors may from time to time declare out of funds legally available for
the
payment of dividends. We seek growth and expansion of our business through
the
reinvestment of profits, if any, and do not anticipate that we will pay
dividends in the foreseeable future.
Authority
to Issue Stock
Our
board
of directors has the authority to issue the authorized but unissued shares
of
our common stock without action by the shareholders. The issuance of such shares
would reduce the percentage ownership held by current shareholders.
Our
board
of directors also has the authority to issue up to 20 million shares of
preferred stock, none of which are issued or currently outstanding. The board
of
directors has the authority to fix and determine the relative rights and
preferences of preferred shares, as well as the authority to issue such shares,
without further stockholder approval. As a result, our board of directors could
authorize the issuance of a series of preferred stock that is senior to the
common stock and that would grant to holders preferred rights to our assets
upon
liquidation, the right to receive dividends, additional registration rights,
anti-dilution protection, the right to the redemption to such shares, together
with other rights, none of which will be afforded holders of our common stock.
See
“Risk
Factors – Risks Related to Our Securities – There may be additional issuances of
shares of blank check preferred stock in the future.”
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
Our common
stock is eligible for quotation on the OTC Bulletin Board, or the OTCBB, under
the symbol “ARNI.OB.” Through the date of this prospectus, there has been only
sporadic trading of our common stock reported on the OTCBB. The prices at which
our common stock traded in these limited transactions may not be indicative
of
the price of our common stock under different conditions.
Since
our
inception, we have not paid any dividends on our common stock, and we do not
anticipate that we will pay any dividends in the foreseeable future. We intend
to retain any future earnings for use in our business. At June 30, 2008, we
had
approximately 252 stockholders of record.
Penny
Stock Rules
Our
shares are covered by the “penny stock” rules under Section 15(g) of the
Exchange Act and the related rules of the Securities and Exchange Commission.
These rules impose additional sales practice requirements on U.S. broker/dealers
who sell our securities. These rules require, among other things, that a broker
engaging in a transaction in our securities provide its customers
with:
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a
standardized risk disclosure
document;
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current
quotations or similar price
information;
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disclosure
of the amount of compensation or other remuneration received by the
broker
and its sales persons as a result of the penny stock transactions;
and
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monthly
account statements.
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The
foregoing rules apply to broker/dealers. The broker must provide the bid and
offer quotations and compensation information before effecting the transaction.
This information must be contained in the customer’s confirmation. The broker
prepares the information provided to the broker’s customers. Because we do not
prepare the information, we have no control over whether information is current
or complete.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and plan of operations should be read in conjunction with
the financial statements and the notes to those statements included in this
prospectus. This discussion includes forward-looking statements that involve
risk and uncertainties. As a result of many factors, such as those set forth
in
this prospectus under “Risk Factors,” actual results may differ materially from
those anticipated in these forward-looking statements.
The
merger was completed on June 3, 2008, and as of that date, the business of
Old
Arno was adopted as our business. As such, the following management discussion
is focused on the current and historical operations of Arno, and excludes the
prior operations of Laurier.
Overview
We
commercially develop innovative products for the treatment of cancer. To date,
our efforts and resources have been focused on acquiring and developing our
pharmaceutical product candidates, raising capital and recruiting personnel.
Our
lead product, AR-67, is a novel, third-generation camptothecin analogue that
has
exhibited high potency and improved pharmacokinetic properties compared with
first- and second-generation camptothecin analogues. In addition, we are
developing two novel, pre-clinical compounds: AR-12, which is a novel inhibitor
of phosphoinositide dependent protein kinase-1, or PDK-1; and AR-42, which
is a
novel broad spectrum deacetylase inhibitor, or pan-DAC, both of which are orally
available.
We
have
no product sales to date and we will not receive any product revenue until
we
receive approval from the U.S. Food and Drug Administration, or FDA, or an
equivalent foreign regulatory body to begin selling our pharmaceutical
candidates. Developing pharmaceutical products, however, is a lengthy and very
expensive process. Assuming we do not encounter any unforeseen safety issues
during the course of developing our product candidates and that our product
candidates demonstrate the required efficacy, we do not expect to complete
the
development of a product candidate for several years. To date, a majority of
our
development expenses have related to our lead product candidate,
AR-67.
As
we
proceed with the clinical development of AR-67, and as we further develop AR-12
and AR-42, we expect that our research and development expenses will increase
significantly. To the extent we are successful in acquiring additional product
candidates for our development pipeline, our need to finance further research
and development will continue to increase. Accordingly, our success depends
not
only on the safety and efficacy of our product candidates, but also on our
ability to finance the development of the products. Our major sources of working
capital have been proceeds from various private financings, primarily private
sales of common stock and other equity securities and debt
financings.
Our
results include non-cash compensation expense as a result of the issuance of
stock and stock option grants. Effective August 2005, we adopted Statement
of
Financial Accounting Standards No. 123R,
Share
Based Payment
, or
SFAS 123R, which requires us to expense the fair value of stock options over
the
vesting period. We determine the fair value of stock options using the
Black-Scholes options pricing model. The terms and vesting schedules for
share-based awards vary by type of grant and the employment status of the
grantee. Generally, the awards vest based upon time-based or performance-based
conditions. Performance-based conditions generally include the attainment of
goals related to our financial and development performance. See “
Management
and Board of Directors – Employment Agreements, Termination of Employment and
Change-in-Control Arrangements.”
Stock-based compensation expense is included in the respective categories of
expense in the statements of operations. We expect to record additional non-cash
compensation expense in the future, which may be significant.
Results
of Operations
Three
Months Ended March 31, 2008 versus March 31, 2007
Revenues.
We
had no revenues for the three month periods ended March 31, 2008 and March
31,
2007.
Research
and development expenses.
For the three months ended March 31, 2008, research and development expenses
increased by $2,976,385 to $3,187,182 from $210,797 for the same period in
2007.
Increased research and development expenses are primarily attributable to
approximately $255,000 in increased clinical trial costs, pre-clinical research
and regulatory-related expenses, approximately $1,164,000 in costs relating
to
obtaining the OSU License Agreements, and an increase of approximately
$1,195,000 in manufacturing-related costs. The increase in expenses is also
attributable to an increase of approximately $243,000 in payroll and
employee-related costs as a result of our increasing
headcount.
General
and administrative expenses.
For the
three months ended March 31, 2008, general and administrative expenses increased
by $374,237 to $432,264 from $58,027 for the same period in 2007. The increase
is attributable to an increase of approximately $20,000 in legal fees and
approximately $4,000 in rent and related facility expenses. The increase in
expense is also attributed to an increase of approximately $329,000 in payroll
and employee-related costs resulting from our increasing headcount. These
increases were offset by an approximate $20,000 decrease in recruiting
expenses.
Interest
income (expense)
.
Interest income remained relatively flat in the three months ended March 31,
2008 compared to the same period of 2007. Interest expense increased by $54,584
during the three months ended March 31, 2008, to $89,925. The increase in
interest expense was attributable to the accrued interest under promissory
notes
that we issued February 2007.
Net
income (loss).
For the
reasons described above, the net loss increased by $3,405,968 to $3,698,583
in
the three month period ended March 31, 2008 from $292,615 for the same period
of
2007.
Fiscal
Year Ended December 31, 2007 versus December 31, 2006
Revenues.
We
had no revenues for the years ended December 31, 2007 and 2006.
Research
and development expenses.
For the year ended December 31, 2007, research and development expenses
increased by $2,533,432 to $2,899,264 from $365,832 in the year ended December
31, 2006. Increased research and development expenses in the year ended December
31, 2007 are primarily attributable to approximately $1,415,000 in increased
clinical trial costs and regulatory-related expenses, an increase of $155,000
in
pre-clinical related expenses, and an increase of approximately $466,000 in
manufacturing-related costs. The increase in expenses is also attributable
to an
increase of approximately $348,000 in payroll and employee-related costs as
a
result of our increasing headcount.
General
and administrative expenses.
For the
year ended December 31, 2007, general and administrative expenses increased
by
$355,289 to $360,349 from $5,060 in the year ended December 31, 2006. The
increase is attributable to an increase of approximately $122,000 in recruiting
expenses and approximately $30,000 for audit and tax preparation fees. The
increase in expense is also attributed to an increase of approximately $162,000
in payroll and employee-related costs resulting from our increasing
headcount.
Interest
income (expense)
.
Interest income increased by $123,962 to $123,962 in the year ended December
31,
2007 from $0 recorded in the year ended December 31, 2006. The increase is
due to higher cash balances, which was derived from our February 2007 private
placement of convertible notes that was made available for investing purposes.
We received net proceeds of approximately $4,000,000 from the February 2007
private placement. Interest expense increased by $224,046 in the year ended
December 31, 2007 from $0 recorded in the year ended December 31, 2006. This
increase was attributable to the accrued interest under the convertible notes
issued in our February 2007 private placement.
Net
income (loss).
For the
reasons described above, the net loss increased by $2,988,805 to $3,359,697
in
the year ended December 31, 2007 from $370,892 for the same period of
2006.
Plan
of Operation
We
expect
our principal expenditures during the next 12 months to include, among other
things:
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research
and development expenses, including the costs incurred with respect
to
conducting clinical trials for our lead product candidate, AR-67,
and
pre-clinical and clinical testing of AR-12 and AR-42;
and
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operating
expenses, including expanded general and administrative expenses.
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Our
plan
of operation for the year ending December 31, 2008 is to continue implementing
our business strategy, including the clinical development of our product
candidates. We also intend to expand our drug candidate portfolio by acquiring
additional drug technologies for development.
As
part
of our planned expansion, we anticipate hiring several additional full-time
employees devoted to research and development activities and one or more
additional full-time employees for general and administrative activities. In
addition, we intend to use clinical research organizations and third parties
to
perform our clinical studies and manufacturing. During 2008, we expect to spend
approximately $11,500,000 on clinical research and development activities,
and
approximately $2,200,000 on general and administrative
expenses.
Liquidity
and Capital Resources
As
of
March 31, 2008, we had approximately $693,000 in cash and cash equivalents.
However, on June 2, 2008, we completed a private placement of shares of our
common stock, resulting in net proceeds of approximately $17,732,000. In
addition, upon completion of this private placement, approximately $4,278,000
in
principal amount and interest relating to convertible promissory notes were
converted into approximately 1,962,338 shares of our common stock (as adjusted
for the merger), and five year warrants to purchase 196,189 shares of our common
stock (as adjusted for the merger). Together with our prior cash on hand, we
currently believe the net proceeds from the June 2008 private placement will
provide sufficient capital to fund development of our product candidates into
third quarter of 2009. Because our business does not generate any cash flow,
however, we will need to raise additional capital to continue development of
the
product candidates beyond that time or to fund development efforts related
to
new product candidates. We anticipate raising such additional capital by either
borrowing money or by selling shares of our capital stock. To the extent
additional capital is not available when we need it, we may be forced to abandon
some or all of our development and commercialization efforts, which would have
a
material adverse effect on the prospects of our business. Further, our
assumptions relating to the expected costs of development and commercialization
and timeframe for completion are dependent on numerous factors other than
available financing, including significant unforeseen delays in the clinical
trial and regulatory approval process, which could be extremely costly. In
addition, our estimates assume that we will be able to enroll a sufficient
number of patients in each clinical trial.
We
anticipate that losses will continue for the foreseeable future. At March 31,
2008, our accumulated deficit was approximately $7,400,000. Our ability to
continue operations after our current cash resources are exhausted depends
on
our ability to obtain additional financing and achieve profitable operations,
as
to which no assurances can be given. Our actual cash requirements may vary
materially from those planned because of a number of factors
including:
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Changes
in the focus and direction of our research and development programs,
including the acquisition and pursuit of development of new product
candidates;
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Competitive
and technical advances;
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Costs
of commercializing any of the product candidates;
and
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Costs
of filing, prosecuting, defending and enforcing any patent claims
and any
other intellectual property rights, or other
developments.
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In
order
to continue our long-term plans for clinical trials and new product development,
we will need to raise additional capital to continue to fund our research and
development as well as operations after we exhaust our current cash
resources. We expect to finance our cash needs through the sale of equity
securities and strategic collaborations or debt financings or through other
sources that may be dilutive to existing stockholders. There can be no assurance
that any such financing can be realized by us, or if realized, what the terms
thereof may be, or that any amount that we are able to raise will be adequate
to
support our working capital requirements until we achieve profitable operations.
If we are unable to raise additional funds when needed, we may not be able
to
market our products as planned or continue development and regulatory approval
of our products, or we could be required to delay, scale back or eliminate
some
or all of our research and development programs.
Since
inception, our primary source of funding for our operations has been the private
sale of our securities. In June 2008, as a result of a sale of an aggregate
of
approximately 7,360,800 shares of our common stock (after giving effect to
the
merger) at a price of $2.42 per share (as adjusted for the merger) in a private
placement in which net proceeds to us were approximately $17,732,000 as well
as
the conversion of approximately $4,278,000 of convertible notes and accrued
interest.
Research
and Development Projects; Related Expenses
AR-67
AR-67
is
a novel, third-generation camptothecin analogue that has demonstrated high
potency in pre-clinical studies and improved pharmacokinetic properties in
humans as compared with first and second-generation products. We believe that
this unique profile may translate into superior efficacy. Additionally, AR-67’s
potential for oral administration may add a marketing advantage by increasing
patient convenience. We believe these advantages could allow AR-67 to become
a
leading product in the camptothecin market. A Phase I clinical study of AR-67
in
patients with advanced solid tumors is currently ongoing. Multiple Phase II
studies are planned for initiation in 2008 in a number of tumor types including,
without limitation, glioblastoma multiforme, or GBM, a highly aggressive form
of
brain cancer.
AR-12
We
are
also developing AR-12, an orally available pre-clinical compound that is
a novel
inhibitor of phosphoinositide dependent protein kinase-1, or PDK-1, that
targets
the Akt pathway while also possessing activity in the endoplasmic reticulum
(ER)
stress and other pathways targeting apoptosis. Pre-clinical studies suggest
that
AR-12 may provide therapeutic benefit either alone or in combination with
other
therapeutic agents. We are currently conducting toxicology and manufacturing
studies that we anticipate will provide the basis for the filing of an
investigational new drug application, or IND, in early 2009.
AR-42
We
are
also developing AR-42, an orally available pre-clinical compound for the
treatment of cancer. AR-42 is a broad spectrum inhibitor of deacetylase targets,
referred to as pan-DAC inhibition, as well as an inhibitor of Akt via the
protein phosphatase I pathway. In pre-clinical models, AR-42 has demonstrated
greater potency and a competitive profile in tumors when compared with
vorinostat (also known as SAHA and marketed as Zolinza
®
by
Merck), the leading marketed histone deacetylase inhibitor. We are currently
conducting IND-enabling studies and anticipate filing an IND in early
2009.
Off
Balance Sheet Arrangements
There
were no off-balance sheet arrangements as of March 31, 2008.
DESCRIPTION
OF BUSINESS
Overview
of Arno’s Business
We
are a
development stage company focused on acquiring, developing and eventually
commercializing innovative products for the treatment of cancer. We seek
to
acquire rights to novel, pre-clinical or early stage clinical oncology product
candidates, primarily from academic and research institutions. We currently
have
the rights to and are developing three oncology product candidates:
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AR-67
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Our lead product candidate is a novel, third-generation campothecin
analogue. We are currently conducting a multi-center, ascending
dose Phase
I clinical trial of AR-67 in patients with advanced solid tumors.
Once the
maximum tolerated dose, or MTD, in the Phase I study is identified,
we
anticipate commencing a Phase II clinical trial of AR-67 in patients
with
glioblastoma multiforme, or GBM, an aggressive form of brain cancer.
We plan to initiate additional Phase II clinical trials in a
variety of other solid and hematological cancers. We are also evaluating
an oral formulation of AR-67.
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AR-12
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We are also developing AR-12, an orally available pre-clinical
compound that is a novel inhibitor of phosphoinositide dependent
protein
kinase-1, or PDK-1, that targets the Akt pathway while also possessing
activity in the endoplasmic reticulum stress and other pathways
targeting
apoptosis. Pre-clinical studies suggest that AR-12 may provide
therapeutic
benefit either alone or in combination with other therapeutic agents.
We
are currently conducting toxicology and manufacturing studies that
we
anticipate will provide the basis for the filing of an investigational
new
drug application, or IND, in early
2009.
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AR-42
–
We are also developing AR-42, an orally available pre-clinical
compound
for the treatment of cancer. AR-42 is a broad spectrum inhibitor
of
deacetylase targets, or pan-DAC, as well as an inhibitor of Akt
via the
protein phosphatase I pathway. In pre-clinical models, AR-42 has
demonstrated greater potency and a competitive profile in tumors
when
compared with vorinostat (also known as SAHA and marketed as
Zolinza
®
by
Merck), the leading marketed histone deacetylase inhibitor. We
are
currently conducting IND-enabling studies and anticipate filing
an IND in early 2009.
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Corporate
History; Merger Transactions
Laurier
International, Inc., or Laurier, was incorporated in Delaware in March 2000.
Arno Therapeutics, Inc. was incorporated in Delaware in August 2005. For
the
period from its inception until June 3, 2008, we refer to Arno Therapeutics,
Inc. as Old Arno. On June 3, 2008, Laurier and Old Arno entered into a “reverse
merger” transaction whereby Laurier Acquisition, Inc., a Delaware corporation
and wholly-owned subsidiary of Laurier, merged with and into Old Arno and
Old
Arno became a wholly owned subsidiary of Laurier. In accordance with the
terms
of the merger, Old Arno’s outstanding common stock automatically converted into
shares of Laurier common stock at a conversion ratio of 1.99377. Following
the
merger, the holders of Old Arno common stock immediately prior to the merger
held 95 percent of the outstanding common stock of Laurier, assuming the
issuance of all shares underlying outstanding options and warrants. Immediately
following the merger, Old Arno and Laurier completed a short-form merger,
whereby Old Arno merged with and into Laurier, and Laurier’s name was changed to
“Arno Therapeutics, Inc.”
Oncology
Overview
Cancer
is
the second leading cause of death in the United States, surpassed only by
heart
disease. Since 1990, over 18 million new cancer cases have been diagnosed.
According to a 2008 report by the American Cancer Society, the National
Institutes of Health estimate direct costs for medical care for cancer related
treatments in the United States in 2007 were $89.0 billion. With a 65% 5-year
relative survival rate for all cancers from 1996-2002, oncology remains a
significant unmet medical need.
Different
types of cancer behave in unique ways and respond to different treatments.
Many
types of drugs are used to treat cancer, including cytotoxics or
antineoplastics, hormones, and biologics. According to a March 2007 report
by
Cowen and Company, the global cancer market was roughly $54.0 billion in
2006,
of which cytotoxics accounted for 33% or $17.6 billion.
Cytotoxics,
known as chemotherapeutics, tend to interfere with a few essential cellular
processes in order to kill cancer cells. Although there are many cytotoxic
agents, there is a considerable amount of overlap in their mechanisms of
action.
As such, the choice of a particular agent or group of agents is generally
based
on the result of empirical clinical trials and a desire to balance an aggressive
treatment regimen with considerations to the patient’s comfort and quality of
life, a consideration that makes the convenience of oral drugs more desirable
than ones delivered intravenously.
Camptothecins
and their analogues have demonstrated potent cytotoxic profiles throughout
clinical trials and their marketed usage. They represent a significant part
of
the chemotherapeutics class with $1.1 billion in annual sales. Our lead drug
candidate, AR-67, is a novel, third-generation camptothecin analogue that
has
demonstrated high potency in pre-clinical studies and improved pharmacokinetic
properties, characteristics that we believe may translate to superior clinical
activity. Additionally, we believe that the potential for oral administration
may increase patient convenience. A Phase I clinical study of AR-67 in
patients with advanced solid tumors is currently ongoing. Multiple Phase
II studies are planned for initiation in 2008 in a variety of cancers, including
glioblastoma multiforme, a highly aggressive form of brain cancer.
Arno
Product Pipeline
Lead
Product - AR-67
Background
on Camptothecins
Camptothecin
and its analogues, together referred to as camptothecins, are a class of drugs
widely used to treat certain types of cancers, with worldwide annual sales
exceeding $1.1 billion. Camptothecins treat cancer by disrupting cell division
through the inhibition of topoisomerase I, a critical enzyme in DNA replication.
Through this inhibition and additional mechanisms of action, camptothecins
target cancer cells preferentially to normal tissues, making them a promising
class of drugs in this indication.
All
clinically relevant camptothecins react with water and exist in two forms
under
physiologic conditions: a biologically active “lactone” form and a largely
inactive but toxic “carboxylate” form. In human blood, chemical equilibrium
greatly favors the carboxylate form, with rapid conversion of the active
lactone
form to the inactive and toxic carboxylate form
in
vivo
.
Maintaining a therapeutic level of the lactone form
in
vivo
has
proven to be a significant challenge in the development of the
class.
Second-generation
camptothecin analogues focused on improving lactone stability by increasing
lipophilicity and modifying binding profiles between the compound and blood
proteins. Two second generation therapies, topotecan (Hycamtin
®
,
Glaxo-Smith-Kline) and irinotecan (also known as CPT-11 and marketed as
Camptostar
®
by
Pfizer), are approved by the FDA. Topotecan, the first camptothecin to receive
marketing approval in the United States, is used as a second-line intravenous
therapy in several tumor types including ovarian, small cell lung cancer,
and
cervical cancers. Irinotecan is a largely inactive intravenous pro-drug for
SN-38, a potent but insoluble camptothecin analogue. Irinotecan is used as
a
front-line and second-line therapy for colorectal cancer and is by far the
leading drug in the class with over $903 million in worldwide annual sales.
While these drugs represent a marked improvement compared with the parent
compound, their
in
vivo
stability profiles remain suboptimal. Exposure to the active lactone form
can be
measured by lactone:total area under the curve ratio, or AUC ratio, which
measures the ratio of the drug forms over the course of drug exposure. Lactone
AUC ratios are 30-40% for topotecan, 40-45% for CPT-11, and 50-75% for
SN-38.
AR-67
is
a novel, third-generation camptothecin analogue that has demonstrated high
potency in pre-clinical studies and improved pharmacokinetic properties in
humans as compared with first and second-generation products. In the ongoing
Phase I study, preliminary pharmacokinetic data suggest a lactone AUC ratio
of
approximately 90%.
We
believe that this unique profile may translate into superior efficacy in
the
treatment of a variety of cancers. We believe these advantages could allow
AR-67
to become a leading product in the camptothecin market. AR-67 is currently
being
evaluated in a Phase I clinical trial in patients with advanced solid tumors.
Following the completion of this Phase I trial, we anticipate initiating
multiple Phase II clinical trials in 2008 in a variety of tumor types,
including
glioblastoma multiforme, or GBM. We are also evaluating an oral formulation
of
AR-67 in pre-clinical studies, which we believe would result in additional
patient
convenience
.
Potential
Advantages of AR-67
AR-67
has
demonstrated potent topoisomerase I inhibition and greatly improved
in
vivo
stability of the active lactone form when compared with topotecan and
irinotecan. Structural characteristics make AR-67 highly lipophilic, with
pre-clinical evaluation showing 10-fold and 250-fold increases in lipophilicity
over SN-38 and topotecan, respectively. Favorable plasma protein binding
characteristics also contribute to AR-67’s superior lactone AUC ratio compared
with marketed camptothecins. In the ongoing Phase I study, preliminary data
suggests a lactone AUC ratio of approximately 90%.
Pre-clinical
studies with AR-67 have demonstrated a unique anti-cancer profile, with
in
vitro
cytotoxicity comparable to topotecan and SN-38 in several tumor lines, including
non-small-cell lung and central nervous system cancers. AR-67 was used in
pre-clinical xenograft studies and showed particular promise in brain cancers,
where the drug significantly inhibited tumor growth and elicited complete
responses in subcutaneous and intracranial glioma models. We believe that
the
pre-clinical evidence of AR-67’s potency combined with the preliminary
pharmacokinetic data observed in the Phase I study may lead to a superior
therapeutic profile.
Clinical
Development Program
We
are
currently conducting a single agent, ascending dose Phase I clinical study
of
AR-67 in patients with advanced solid tumors. The study will evaluate the
safety
of AR-67, establish the maximum tolerated dose, or MTD, and characterize
the
plasma pharmacokinetic, or PK, profile. We plan to initiate multiple Phase
II
studies of AR-67 in patients with GBM and other solid tumor or hematological
indications by the end of 2008. We believe that AR-67’s high lipophilicity may
promote blood-brain-barrier penetration of therapeutic levels of the lactone
form and increase activity relative to other drugs in the class. While there
can
be no assurances, demonstrated efficacy in GBM, an orphan indication, may
provide an accelerated path to approval, increased market protection and
expanded sales potential.
AR-12
We
are
also developing AR-12, a potentially first-in-class, orally available cancer
treatment in pre-clinical development. AR-12 is an inhibitor of phosphoinositide
dependent protein kinase-1, or PDK-1, that targets the Akt pathway, while
also
possessing activity in the endoplasmic reticulum stress pathway and other
pathways targeting apoptosis. In pre-clinical studies, AR-12 has demonstrated
activity in a wide range of tumor types and synergistic effects with several
widely used anti-cancer agents, enhancing
activity
or overcoming drug-resistance when used in combination with
Avastin
®
(Genentech), Herceptin
®
(Genentech), Gleevec
®
(Novartis), Tarceva
®
(Genentech)
and tamoxifen. We plan to file an IND for AR-12 in early
2009.
AR-42
We
are
also developing AR-42, a novel oral cancer therapy in pre-clinical development.
AR-42 is a broad spectrum deacetylace inhibitor, referred to as a pan-DAC
inhibitor that also inhibits Akt via the protein phosphate I pathway. In
pre-clinical studies, AR-42 has demonstrated greater potency and activity
in
solid tumors when compared with vorinostat (also known as SAHA and marketed
as
Zolinza
®
by
Merck), the leading marketed histone deacetylase inhibitor. The additional
mechanisms of AR-42 may contribute to the compound’s superior profile
in
vitro
and
in
vivo
.
We plan
to file an IND for AR-42 in early 2009.
Competition
We
compete primarily in the segment of the biopharmaceutical market that addresses
cancer therapeutics, which is highly competitive. We face significant
competition from many pharmaceutical, biopharmaceutical and biotechnology
companies that are researching and selling products designed to address the
cancer market. Many of our competitors have significantly greater financial,
manufacturing, marketing and drug development resources than we do. Large
pharmaceutical companies in particular have extensive experience in clinical
testing and in obtaining regulatory approvals for drugs. These companies
also
have significantly greater research capabilities than we do. In addition,
many
universities and private and public research institutes are active in cancer
research. We also compete with commercial biotechnology companies for the
rights
to product candidates developed by public and private research institutes.
Smaller or early-stage companies are also significant competitors, particularly
those with collaborative arrangements with large and established companies.
In
addition to the factors described above under “
Risk
Factors
,”
our
ability to compete in the cancer therapeutics market depends on the following
factors:
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our
ability to develop novel compounds with attractive pharmaceutical
properties and to secure and protect intellectual property rights
based on
our innovations;
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the
efficacy, safety and reliability of our drug
candidates;
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the
speed at which we develop our drug
candidates;
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our
ability to design and successfully complete appropriate clinical
trials;
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our
ability to maintain a good relationship with regulatory
authorities;
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the
timing and scope of regulatory
approvals;
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our
ability to manufacture and sell commercial quantities of future
products
to the market; and
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acceptance
of future products by physicians and other healthcare
providers.
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If
approved, we expect that AR-67 would compete in a class of chemotherapeutic
agents known as camptothecins. The annual worldwide sales of camptothecins,
which have been used for many years, collectively exceed $1.1 billion. The
leading camtothecins on the market today include Hycamitin (topotecan), marketed
by GlaxoSmithKline, and Camptostar (irinotecan or CPT-11), which is marketed
by
Pfizer. If approved, our product candidates may also compete with other
cytotoxic, or anticancer, therapies.
License
Agreements and Intellectual Property
General
Our
goal
is to obtain, maintain and enforce patent protection for our products,
formulations, processes, methods and other proprietary technologies, preserve
our trade secrets, and operate without infringing on the proprietary rights
of
other parties, both in the United States and in other countries. Our policy
is
to actively seek to obtain, where appropriate, the broadest intellectual
property protection possible for our current product candidates and any future
product candidates, proprietary information and proprietary technology through
a
combination of contractual arrangements and patents, both in the U.S. and
abroad. However, even patent protection may not always afford us with complete
protection against competitors who seek to circumvent our patents. If we
fail to
adequately protect or enforce our intellectual property rights or secure
rights
to patents of others, the value of our intellectual property rights would
diminish.
See
“Risk Factors.”
We
will
continue to depend upon the skills, knowledge and experience of our scientific
and technical personnel, as well as that of our advisors, consultants and
other
contractors, none of which is patentable. To help protect our proprietary
know-how, which is not patentable, and for inventions for which patents may
be
difficult to enforce, we currently rely and will in the future rely on trade
secret protection and confidentiality agreements to protect our interests.
To
this end, we require all of our employees, consultants, advisors and other
contractors to enter into confidentiality agreements that prohibit the
disclosure of confidential information and, where applicable, require disclosure
and assignment to us of the ideas, developments, discoveries and inventions
important to our business.
We
will
actively seek to obtain, where appropriate, the broadest intellectual property
protection possible for our product candidates, proprietary information and
proprietary technology through a combination of contractual arrangements
and
patents, both in the U.S. and abroad.
AR-67
License Agreement
Our
rights to AR-67 are governed by an October 2006 license agreement with the
University of Pittsburgh, or Pitt. Under this agreement, we hold an exclusive,
worldwide, royalty-bearing license for the rights to commercialize technologies
embodied by certain issued patents, patent applications and know-how relating
to
AR-67 for all therapeutic uses. We have expanded, and intend to continue
to
expand, our patent portfolio by filing additional patents covering expanded
uses
for this technology.
Under
the
terms of our license agreement with Pitt, we made a one-time cash payment
of
$350,000 to Pitt and reimbursed it for past patent expenses. Additionally,
Pitt
will receive performance-based cash payments upon successful completion of
clinical and regulatory milestones relating to AR-67. We will make the first
milestone payment to Pitt following the filing of the first New Drug
Application, or NDA, filed with the FDA for AR-67. We are also required to
pay
to Pitt an annual maintenance fee on each anniversary of the license agreement,
and to pay Pitt a royalty equal to a percentage of net sales of AR-67. To
the
extent we enter into a sublicensing agreement relating to AR-67, we will
pay
Pitt a portion of all non-royalty income received from such
sublicensee.
Under
the
license agreement with Pitt, we also agreed to indemnify and hold Pitt and
its
affiliates harmless from any and all claims, actions, demands, judgments,
losses, costs, expenses, damages and liabilities (including reasonable
attorneys’ fees) arising out of or in connection with (i) the production,
manufacture, sale, use, lease, consumption or advertisement of AR-67, (ii)
the
practice by us or any affiliate or sublicensee of the licensed patent; or
(iii)
any obligation of us under the license agreement unless any such claim is
determined to have arisen out of the gross negligence, recklessness or willful
misconduct of Pitt. The license agreement will terminate upon the expiration
of
the last patent relating to AR-67. Pitt may generally terminate the agreement
at
any time upon a material breach by us to the extent we fail to cure any such
breach within 60 days after receiving notice of such breach or in the event
we
file for bankruptcy. We may terminate the agreement for any reason upon 90
days’
prior written notice.
AR-12
and AR-42 License Agreements
Our
rights to both of AR-12 and AR-42 are governed by separate license agreements
with The Ohio State University Research Foundation, or Ohio State, entered
into
in January 2008. Pursuant to each of these agreements, we have exclusive,
worldwide, royalty-bearing licenses to commercialize certain patent
applications, know-how and improvements relating to AR-42 and AR-12 for all
therapeutic uses.
Pursuant
to our license agreements for AR-12 and AR-42, we made one-time cash payments
to
Ohio State in the aggregate amount of $450,000 and reimbursed it for past
patent
expenses. Additionally, we are required to make performance-based cash payments
upon successful completion of clinical and regulatory milestones relating
to
AR-12 and AR-42 in the U.S., Europe and Japan. The first milestone payment
for
each of the licensed compounds will be due when the first patient is dosed
in
the first company sponsored Phase I clinical trial of each of AR-42 and AR-12.
To the extent we enter into a sublicensing agreement relating to either or
both
of AR-12 or AR-67, we will be required to pay Ohio State a portion of all
non-royalty income received from such sublicensee.
The
license agreements with Ohio State further provide that we will indemnify
Ohio
State from any and all claims arising out of the death of or injury to any
person or persons or out of any damage to property, or resulting from the
production, manufacture, sale, use, lease, consumption or advertisement of
either AR-12 or AR-42, except to the extent that any such claim arises out
of
the gross negligence or willful misconduct of Ohio State. The license agreements
for AR-12 and AR-42, respectively, expire on the later of (i) the expiration
of
the last valid claim contained in any licensed patent and (ii) 20 years after
the effective date of the license. Ohio State will generally be able to
terminate either license upon our breach of the terms of the license the
extent
we fail to cure any such breach within 90 days after receiving notice of
such
breach or our bankruptcy. We may terminate either license upon 90 days’ prior
written notice.
Government
Regulation and Product Approval
The
FDA and comparable regulatory agencies in state and local jurisdictions and
in
foreign countries impose substantial requirements upon the testing (pre-clinical
and clinical), manufacturing, labeling, storage, recordkeeping, advertising,
promotion, import, export, marketing and distribution, among other things,
of
drugs and drug product candidates. If we do not comply with applicable
requirements, we may be fined, the government may refuse to approve our
marketing applications or allow us to manufacture or market our products,
and we
may be criminally prosecuted. We and our manufacturers may also be subject
to
regulations under other United States federal, state, and local laws.
United
States Government Regulation
In
the United States, the FDA regulates drugs under the Food, Drug and Cosmetic
Act, or FDCA, and implementing regulations. The process required by the FDA
before our drug candidates may be marketed in the United States generally
involves the following (although the FDA is given wide discretion to impose
different or more stringent requirements on a case-by-case basis):
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completion
of extensive pre-clinical laboratory tests, pre-clinical animal
studies
and formulation studies, all performed in accordance with the FDA’s good
laboratory practice regulations and other
regulations;
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submission
to the FDA of an IND application, which must become effective before
clinical trials may begin;
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performance
of multiple adequate and well-controlled clinical trials meeting
FDA
requirements to establish the safety and efficacy of the product
candidate
for each proposed indication;
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submission
of a new drug application, or NDA, to the
FDA;
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satisfactory
completion of an FDA pre-approval inspection of the manufacturing
facilities at which the product candidate is produced, and potentially
other involved facilities as well, to assess compliance with current
good
manufacturing practice, or cGMP, regulations and other applicable
regulations; and
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FDA
review and approval of the NDA prior to any commercial marketing,
sale or
shipment of the drug.
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The
testing and approval process requires substantial time, effort and financial
resources, and we cannot be certain that any approvals for our drug candidates
will be granted on a timely basis, if at all. Risks to us related to these
regulations are described in this prospectus under the caption entitled
“
Risk
Factors – Risks Relating to the Clinical Testing, Regulatory Approval,
Manufacturing and Commercialization of Our Product Candidates.
”
Pre-clinical
tests may include laboratory evaluation of product chemistry, formulation
and
stability, as well as studies to evaluate toxicity and other effects in animals.
The results of pre-clinical tests, together with manufacturing information
and
analytical data, among other information, are submitted to the FDA as part
of an
IND application. Subject to certain exceptions, an IND becomes effective
30 days after receipt by the FDA, unless the FDA, within the 30-day time
period, issues a clinical hold to delay a proposed clinical investigation
due to
concerns or questions about the conduct of the clinical trial, including
concerns that human research subjects will be exposed to unreasonable health
risks. In such a case, the IND sponsor and the FDA must resolve any outstanding
concerns before the clinical trial can begin. Our submission of an IND, or
those
of our collaboration partners, may not result in the FDA authorization to
commence a clinical trial. A separate submission to an existing IND must
also be
made for each successive clinical trial conducted during product development.
The FDA must also approve changes to an existing IND. Further, an independent
institutional review board, or IRB, for each medical center proposing to
conduct
the clinical trial must review and approve the plan for any clinical trial
before it commences at that center and it must monitor the study until
completed. The FDA, the IRB or the sponsor may suspend a clinical trial at
any
time on various grounds, including a finding that the subjects or patients
are
being exposed to an unacceptable health risk. Clinical testing also must
satisfy
extensive Good Clinical Practice requirements and regulations for informed
consent.
Clinical
Trials
For
purposes of NDA submission and approval, clinical trials are typically conducted
in the following three sequential phases, which may overlap (although additional
or different trials may be required by the FDA as well):
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Phase
I clinical trials
are
initially conducted in a limited population to test the drug candidate
for
safety, dose tolerance, absorption, metabolism, distribution and
excretion
in healthy humans or, on occasion, in patients, such as cancer
patients.
In some cases, particularly in cancer trials, a sponsor may decide
to
conduct what is referred to as a “Phase Ib” evaluation, which is a second
safety-focused Phase I clinical trial typically designed to evaluate
the
impact of the drug candidate in combination with currently FDA-approved
drugs or in a particular patient
population.
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Phase
II clinical trials
are
generally conducted in a limited patient population to identify
possible
adverse effects and safety risks, to determine the efficacy of
the drug
candidate for specific targeted indications and to determine dose
tolerance and optimal dosage. Multiple Phase II clinical trials
may be
conducted by the sponsor to obtain information prior to beginning
larger
and more expensive Phase III clinical trials. In some cases, a
sponsor may
decide to conduct what is referred to as a “Phase IIb” evaluation, which
is a second, confirmatory Phase II clinical trial that could, if
accepted
by the FDA, serve as a pivotal clinical trial in the approval of
a drug
candidate.
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Phase
III clinical trials
are
commonly referred to as pivotal trials. When Phase II clinical
trials
demonstrate that a dose range of the drug candidate is effective
and has
an acceptable safety profile, Phase III clinical trials are undertaken
in
large patient populations to further evaluate dosage, to provide
substantial evidence of clinical efficacy and to further test for
safety
in an expanded and diverse patient population at multiple, geographically
dispersed clinical trial sites.
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In
some cases, the FDA may condition continued approval of an NDA on the sponsor’s
agreement to conduct additional clinical trials with due diligence. In other
cases, the sponsor and the FDA may agree that additional safety and/or efficacy
data should be provided; however, continued approval of the NDA may not always
depend on timely submission of such information. Such post-approval studies
are
typically referred to as Phase IV studies.
New
Drug Application
The
results of drug candidate development, pre-clinical testing and clinical
trials,
together with, among other things, detailed information on the manufacture
and
composition of the product and proposed labeling, and the payment of a user
fee,
are submitted to the FDA as part of an NDA. The FDA reviews all NDAs submitted
before it accepts them for filing and may request additional information
rather
than accepting an NDA for filing. Once an NDA is accepted for filing, the
FDA
begins an in-depth review of the application.
During
its review of an NDA, the FDA may refer the application to an advisory committee
for review, evaluation and recommendation as to whether the application should
be approved. The FDA may refuse to approve an NDA and issue a not approvable
letter if the applicable regulatory criteria are not satisfied, or it may
require additional clinical or other data, including one or more additional
pivotal Phase III clinical trials. Even if such data are submitted, the FDA
may
ultimately decide that the NDA does not satisfy the criteria for approval.
Data
from clinical trials are not always conclusive and the FDA may interpret
data
differently than we or our collaboration partners interpret data. If the
FDA’s
evaluations of the NDA and the clinical and manufacturing procedures and
facilities are favorable, the FDA may issue either an approval letter or
an
approvable letter, which contains the conditions that must be met in order
to
secure final approval of the NDA. If and when those conditions have been
met to
the FDA’s satisfaction, the FDA will issue an approval letter, authorizing
commercial marketing of the drug for certain indications. The FDA may withdraw
drug approval if ongoing regulatory requirements are not met or if safety
problems occur after the drug reaches the market. In addition, the FDA may
require testing, including Phase IV clinical trials, and surveillance programs
to monitor the effect of approved products that have been commercialized,
and
the FDA has the power to prevent or limit further marketing of a drug based
on
the results of these post-marketing programs. Drugs may be marketed only
for the
FDA-approved indications and in accordance with the FDA-approved label. Further,
if there are any modifications to the drug, including changes in indications,
other labeling changes, or manufacturing processes or facilities, we may
be
required to submit and obtain FDA approval of a new NDA or NDA supplement,
which
may require us to develop additional data or conduct additional pre-clinical
studies and clinical trials.
The
Hatch-Waxman Act
Under
the Hatch-Waxman Act, newly-approved drugs and new conditions of use may
benefit
from a statutory period of non-patent marketing exclusivity. The Hatch-Waxman
Act provides five-year marketing exclusivity to the first applicant to gain
approval of an NDA for a new chemical entity, meaning that the FDA has not
previously approved any other new drug containing the same active entity.
The
Hatch-Waxman Act prohibits the submission of an abbreviated NDA, or ANDA,
or a
Section 505(b)(2) NDA for another version of such drug during the five-year
exclusive period; however, submission of a Section 505(b)(2) NDA or an ANDA
for a generic version of a previously-approved drug containing a paragraph
IV
certification is permitted after four years, which may trigger a 30-month
stay
of approval of the ANDA or Section 505(b)(2) NDA. Protection under the
Hatch-Waxman Act does not prevent the submission or approval of another “full”
505(b)(1) NDA; however, the applicant would be required to conduct its own
pre-clinical and adequate and well-controlled clinical trials to demonstrate
safety and effectiveness. The Hatch-Waxman Act also provides three years
of
marketing exclusivity for the approval of new and supplemental NDAs, including
Section 505(b)(2) NDAs, for, among other things, new indications, dosages,
or
strengths of an existing drug, if new clinical investigations that were
conducted or sponsored by the applicant are essential to the approval of
the
application. Some of our product candidates may qualify for Hatch-Waxman
non-patent marketing exclusivity.
In
addition to non-patent marketing exclusivity, the Hatch-Waxman Act amended
the
FDCA to require each NDA sponsor to submit with its application information
on
any patent that claims the drug for which the applicant submitted the NDA
or
that claims a method of using such drug and with respect to which a claim
of
patent infringement could reasonably be asserted if a person not licensed
by the
owner engaged in the manufacture, use, or sale of the drug. Generic applicants
that wish to rely on the approval of a drug listed in the Orange Book must
certify to each listed patent, as discussed above. We intend to submit for
Orange Book listing all relevant patents for our product candidates.
Finally,
the Hatch-Waxman Act amended the patent laws so that certain patents related
to
products regulated by the FDA are eligible for a patent term extension if
patent
life was lost during a period when the product was undergoing regulatory
review,
and if certain criteria are met. We intend to seek patent term extensions,
provided our patents and products, if they are approved, meet applicable
eligibility requirements.
Pediatric
Studies and Exclusivity
The
FDCA provides an additional six months of non-patent marketing exclusivity
and
patent protection for any such protections listed in the Orange Book for
new or
marketed drugs if a sponsor conducts specific pediatric studies at the written
request of the FDA. The Pediatric Research Equity Act of 2003, or PREA,
authorizes the FDA to require pediatric studies for drugs to ensure the drugs’
safety and efficacy in children. PREA requires that certain new NDAs or NDA
supplements contain data assessing the safety and effectiveness for the claimed
indication in all relevant pediatric subpopulations. Dosing and administration
must be supported for each pediatric subpopulation for which the drug is
safe
and effective. The FDA may also require this data for approved drugs that
are
used in pediatric patients for the labeled indication, or where there may
be
therapeutic benefits over existing products. The FDA may grant deferrals
for
submission of data, or full or partial waivers from PREA. PREA pediatric
assessments may qualify for pediatric exclusivity. Unless otherwise required
by
regulation, PREA does not apply to any drug for an indication with orphan
designation.
Orphan
Drug Designation and Exclusivity
The
FDA may grant orphan drug designation to drugs intended to treat a rare disease
or condition, which generally is a disease or condition that affects fewer
than
200,000 individuals in the United States. Orphan drug designation must be
requested before submitting an NDA. If the FDA grants orphan drug designation,
which it may not, the identity of the therapeutic agent and its potential
orphan
use are publicly disclosed by the FDA. Orphan drug designation does not convey
an advantage in, or shorten the duration of, the review and approval process.
If
a product which has an orphan drug designation subsequently receives the
first
FDA approval for the indication for which it has such designation, the product
is entitled to seven years of orphan drug exclusivity, meaning that the FDA
may
not approve any other applications to market the same drug for the same
indication for a period of seven years, except in limited circumstances,
such as
a showing of clinical superiority to the product with orphan exclusivity
(superior efficacy, safety, or a major contribution to patient care). Orphan
drug designation does not prevent competitors from developing or marketing
different drugs for that indication. We may seek orphan drug designation
for
AR-67 for the treatment of GBM, and potentially for certain uses of AR-12
and
AR-42.
Under
European Union medicines laws, the criteria for designating a product as
an
“orphan medicine” are similar but somewhat different from those in the United
States. A drug is designated as an orphan drug if the sponsor can establish
that
the drug is intended for a life-threatening or chronically debilitating
condition affecting no more than five in 10,000 persons in the European Union
or
that is unlikely to be profitable, and if there is no approved satisfactory
treatment or if the drug would be a significant benefit to those persons
with
the condition. Orphan medicines are entitled to ten years of marketing
exclusivity, except under certain limited circumstances comparable to United
States law. During this period of marketing exclusivity, no “similar” product,
whether or not supported by full safety and efficacy data, will be approved
unless a second applicant can establish that its product is safer, more
effective or otherwise clinically superior. This period may be reduced to
six
years if the conditions that originally justified orphan designation change
or
the sponsor makes excessive profits.
Fast
Track Designation
The
FDA’s fast track program is intended to facilitate the development and to
expedite the review of drugs that are intended for the treatment of a serious
or
life-threatening condition and that demonstrate the potential to address
unmet
medical needs. Under the fast track program, applicants may seek traditional
approval for a product based on data demonstrating an effect on a clinically
meaningful endpoint, or approval based on a well-established surrogate endpoint.
The sponsor of a new drug candidate may request the FDA to designate the
drug
candidate for a specific indication as a fast track drug at the time of original
submission of its IND, or at any time thereafter prior to receiving marketing
approval of a marketing application. The FDA will determine if the drug
candidate qualifies for fast track designation within 60 days of receipt of
the sponsor’s request.
If
the FDA grants fast track designation, it may initiate review of sections
of an
NDA before the application is complete. This so-called “rolling review” is
available if the applicant provides and the FDA approves a schedule for the
submission of the remaining information and the applicant has paid applicable
user fees. The FDA’s review clock for both a standard and priority NDA for a
fast track product does not begin until the complete application is submitted.
Additionally, fast track designation may be withdrawn by the FDA if it believes
that the designation is no longer supported by emerging data, or if the
designated drug development program is no longer being pursued.
In
some cases, a fast track designated drug candidate may also qualify for one
or
more of the following programs:
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Priority
Review.
As
explained above, a drug candidate may be eligible for a six-month
priority
review. The FDA assigns priority review status to an application
if the
drug candidate provides a significant improvement compared to marketed
drugs in the treatment, diagnosis or prevention of a disease. A
fast track
drug would ordinarily meet the FDA’s criteria for priority review, but may
also be assigned a standard review. We do not know whether any
of our drug
candidates will be assigned priority review status or, if priority
review
status is assigned, whether that review or approval will be faster
than
conventional FDA procedures, or that the FDA will ultimately approve
the
drug.
|
|
·
|
Accelerated
Approval.
Under
the FDA’s accelerated approval regulations, the FDA is authorized to
approve drug candidates that have been studied for their safety
and
efficacy in treating serious or life-threatening illnesses and
that
provide meaningful therapeutic benefit to patients over existing
treatments based upon either a surrogate endpoint that is reasonably
likely to predict clinical benefit or on the basis of an effect
on a
clinical endpoint other than patient survival or irreversible morbidity.
In clinical trials, surrogate endpoints are alternative measurements
of
the symptoms of a disease or condition that are substituted for
measurements of observable clinical symptoms. A drug candidate
approved on
this basis is subject to rigorous post-marketing compliance requirements,
including the completion of Phase IV or post-approval clinical
trials to
validate the surrogate endpoint or confirm the effect on the clinical
endpoint. Failure to conduct required post-approval studies with
due
diligence, or to validate a surrogate endpoint or confirm a clinical
benefit during post-marketing studies, may cause the FDA to seek
to
withdraw the drug from the market on an expedited basis. All promotional
materials for drug candidates approved under accelerated regulations
are
subject to prior review by the FDA.
|
When
appropriate, we and/or our collaboration partners intend to seek fast track
designation, accelerated approval or priority review for our drug candidates.
We
cannot predict whether any of our drug candidates will obtain fast track,
accelerated approval, or priority review designation, or the ultimate impact,
if
any, of these expedited review mechanisms on the timing or likelihood of
the FDA
approval of any of our drug candidates.
Satisfaction
of the FDA regulations and approval requirements or similar requirements
of
foreign regulatory agencies typically takes several years, and the actual
time
required may vary substantially based upon the type, complexity and novelty
of
the product or disease. Typically, if a drug candidate is intended to treat
a
chronic disease, as is the case with some of the drug candidates we are
developing, safety and efficacy data must be gathered over an extended period
of
time. Government regulation may delay or prevent marketing of drug candidates
for a considerable period of time and impose costly procedures upon our
activities. The FDA or any other regulatory agency may not grant approvals
for
changes in dosage form or new indications for our drug candidates on a timely
basis, or at all. Even if a drug candidate receives regulatory approval,
the
approval may be significantly limited to specific disease states, patient
populations and dosages. Further, even after regulatory approval is obtained,
later discovery of previously unknown problems with a drug may result in
restrictions on the drug or even complete withdrawal of the drug from the
market. Delays in obtaining, or failures to obtain, regulatory approvals
for any
of our drug candidates would harm our business. In addition, we cannot predict
what adverse governmental regulations may arise from future United States
or
foreign governmental action.
Special
Protocol Assessment
The
FDCA directs the FDA to meet with sponsors, pursuant to a sponsor’s written
request, for the purpose of reaching agreement on the design and size of
clinical trials intended to form the primary basis of an efficacy claim in
an
NDA. If an agreement is reached, the FDA will reduce the agreement to writing
and make it part of the administrative record. This agreement is called a
special protocol assessment, or SPA. While the FDA’s guidance on SPAs states
that documented SPAs should be considered binding on the review division,
the
FDA has the latitude to change its assessment if certain exceptions apply.
Exceptions include identification of a substantial scientific issue essential
to
safety or efficacy testing that later comes to light, a sponsor’s failure to
follow the protocol agreed upon, or the FDA’s reliance on data, assumptions or
information that are determined to be wrong.
Other
Regulatory Requirements
Any
drugs manufactured or distributed by us or our collaboration partners pursuant
to future FDA approvals are subject to continuing regulation by the FDA,
including recordkeeping requirements and reporting of adverse experiences
associated with the drug. Drug manufacturers and their subcontractors are
required to register with the FDA and certain state agencies, and are subject
to
periodic unannounced inspections by the FDA and certain state agencies for
compliance with ongoing regulatory requirements, including cGMP, which impose
certain procedural and documentation requirements upon us and our third-party
manufacturers. Failure to comply with the statutory and regulatory requirements
can subject a manufacturer to possible legal or regulatory action, such as
warning letters, suspension of manufacturing, sales or use, seizure of product,
injunctive action or possible civil penalties. We cannot be certain that
we or
our present or future third-party manufacturers or suppliers will be able
to
comply with the cGMP regulations and other ongoing FDA regulatory requirements.
If our present or future third-party manufacturers or suppliers are not able
to
comply with these requirements, the FDA may halt our clinical trials, require
us
to recall a drug from distribution, or withdraw approval of the NDA for that
drug.
The
FDA closely regulates the post-approval marketing and promotion of drugs,
including standards and regulations for direct-to-consumer advertising,
off-label promotion, industry-sponsored scientific and educational activities
and promotional activities involving the Internet. A company can make only
those
claims relating to safety and efficacy that are approved by the FDA. Failure
to
comply with these requirements can result in adverse publicity, warning and/or
untitled letters, corrective advertising and potential civil and criminal
penalties.
Foreign
Regulation
In
addition to regulations in the United States, we will be subject to a variety
of
foreign regulations governing clinical trials and commercial sales and
distribution of our products. Whether or not we obtain FDA approval for a
product, we must obtain approval of a product by the comparable regulatory
authorities of foreign countries before we can commence clinical trials or
marketing of the product in those countries. The approval process varies
from
country to country, and the time may be longer or shorter than that required
for
FDA approval. The requirements governing the conduct of clinical trials,
product
licensing, pricing and reimbursement vary greatly from country to country.
Under
European Union regulatory systems, marketing authorizations may be submitted
either under a centralized or mutual recognition procedure. The centralized
procedure provides for the grant of a single marking authorization that is
valid
for all European Union member states. The mutual recognition procedure provides
for mutual recognition of national approval decisions. Under this procedure,
the
holder of a national marking authorization may submit an application to the
remaining member states. Within 90 days of receiving the applications and
assessment report, each member state must decide whether to recognize approval.
In
addition to regulations in Europe and the United States, we will be subject
to a
variety of foreign regulations governing clinical trials and commercial
distribution of our future products.
Legal
Proceedings
We
are
not currently involved in any legal proceedings.
Description
of Property
On
August
10, 2007, we entered into a 3-year office lease for approximately 1,956 square
feet on the 2nd floor of a building located at 30 Two Bridges Rd., Fairfield,
NJ
07004. The lease term expires on November 30, 2010. Monthly base rent is
$3,749
with 4% annual escalations to $3,899 per month effective December 1, 2008
and to
$4,055 per month effective December 1, 2009. In addition, utility rent is
$282
per month over the term of the lease, subject to future increases. We are
also
responsible for payment of our share of certain charges such as operating
costs
and taxes in excess of the base year and additional rent. In connection with
this lease, we have made a $12,165 cash deposit.
Employees
As
of the
date of this prospectus, we have five employees, all of whom are full-time.
We
also retain several consultants who serve in various operational capacities.
We
anticipate hiring a full-time chief executive officer and a chief financial
officer, as well as additional members of our research and development staff
in
support of product development and administrative staff.
MANAGEMENT
AND BOARD OF DIRECTORS
Directors
and Executive Officers
The
following table lists our executive officers, directors and key employees
and
their respective ages and positions as of the date of this
prosepctus:
Name
|
|
Age
|
|
Positions
|
|
Scott
Z. Fields, M.D.
|
|
|
54
|
|
|
President
and Chief Medical Officer
|
|
Arie
S. Belldegrun, M.D., FACS
|
|
|
58
|
|
|
Non-Executive
Chairman of the Board
|
|
Robert
I. Falk
|
|
|
65
|
|
|
Director
|
|
Peter
M. Kash
|
|
|
46
|
|
|
Director
|
|
Joshua
A. Kazam
|
|
|
31
|
|
|
Director
|
|
David
M. Tanen
|
|
|
37
|
|
|
Director
and Secretary
|
|
Scott
L. Navins
|
|
|
36
|
|
|
Treasurer
|
|
J.
Chris Houchins
|
|
|
44
|
|
|
Vice
President, Clinical Operations
|
|
Scott
Z. Fields, M.D.
has over
12 years of industry experience heading clinical programs. Prior to joining
Arno, he was Global Vice President for all therapeutic areas at Eisai (2002
-
2007) where he was responsible for forming their global clinical oncology
group.
Prior to that, he was Head of the Oncology Therapeutic area for Amgen from
2000
to 2002. From 1995 to 2000, he was Head of Oncology Development and Medical
Affairs in North America for Smithkline Beecham, where his group was responsible
for the development of topotecan, the first approved camptothecin. Dr. Fields
and his teams have been involved in the development of a number of other
oncology agents, which include Hycamptin
®
,
Bexxar
®
,
Aranesp
®
,
Neulasta
®
,
Vectibix
®
and
Kepivance
®
.
He is a
former Assistant Professor of Medicine, co-director of Bone Marrow Transplant,
and Head of Intramural Research at SUNY Upstate Medical Center (1991-1995).
In
addition, Dr. Fields was involved in the development of the RECIST criteria
now
routinely used to evaluate response of cancer to treatment. In 2003 and 2004,
he
was a faculty member of the AACR/ASCO Methods in Clinical Cancer Research
Workshop. He has been an Assistant Professor of Medicine at Columbia University
Medical Center from 2003 - present. Dr. Fields received his M.D. from SUNY
Downstate and trained in Internal Medicine, Oncology and Hematology at Columbia
University Medical Center.
Arie
S. Belldegrun, M.D., FACS
has
served as the non-executive chairman of Arno’s board of directors since March
2008. He is currently the Chairman of Two River Group Management, LLC, the
managing member of Two River Group Holdings, LLC, or Two River, a venture
capital firm that specializes in the creation of new companies that acquire
rights to commercially develop biotechnology products. Dr. Belldegrun is
also
Professor and Chief of Urologic Oncology at the David Geffen School of Medicine
at the University of California, Los Angeles, where he holds the Carol and
Roy
Doumani Chair in Urologic Oncology. He received his medical degree at the
Hebrew
University Hadassah Medical School, and conducted his post-doctoral studies
at
the Weizmann Institute of Science in Israel. He completed his Urologic
Surgery residency at Harvard Medical School in 1985 and his Surgical Oncology
fellowship at the National Cancer Institute/National Institute of Health
(NIH)
in 1988. He is certified by the American Board of Urology and is a Fellow
of the
American College of Surgeons and the American Association of Genitourinary
Surgeons (AAGUS). Dr. Belldegrun is also the founder and founding chairman
of
Agensys Inc., a privately held biotechnology company developing fully human
antibody cancer therapeutics based on novel and clinically relevant targets.
In
December 2007, Agensys was acquired by Astellas Pharma, Inc. in a deal valued
at
$537 million. Dr. Belldegrun serves as Vice-Chairman of the Board of Directors
and Chairman of the Scientific Advisory Board of Cougar Biotechnology, a
publicly-held biopharmaceutical company (Nasdaq:CGRB) with a specific focus
on
the field of oncology, and as a director of Hana Biosciences, Inc., a
publicly-held biopharmaceutical company (Nasdaq:HNAB). Dr. Belldegrun is
on the
scientific boards of several biotechnology and pharmaceutical companies and
is a
reviewer for many medical journals and granting organizations. He served
as
Chairman of the Molecular and Biological Technology Committee of the American
Urological Association and member of its Technology Assessment Council, as
a
member of the Governor’s council on Bioscience for the State of California, and
as a biotechnology group leader and member of The Los Angeles Economy and
Jobs
Committee established in October 2006 by Mayor Antonio Villaraigosa. He is
the
author of several books on prostate and kidney cancers, holds several
biopharmaceutical patents, and has written over 400 scientific publications
with
an emphasis on Urologic Oncology. He will devote only a portion of his time
to
the business of the Company.
Robert
I. Falk
has
served on Arno’s board of directors since March 2008. Mr. Falk is the owner and
founder of Healthcare Corporation, an organization involved in the startup
of
new business ventures with a specialty in healthcare that included renal
dialysis, acute care hospitals, outpatient services and extended care
facilities. Previously, Mr. Falk merged his 18 affiliated companies through
a
“pooling of interest” stock merger with Renal Treatment Centers (RTC) a New York
Stock Exchange company and transitioned the merger of both companies which
later
merged with Total Renal Care (TRC) through a stock exchange. Mr. Falk’s
experience includes: Vice President of Hospital Affiliates International,
Inc.
involved in the development and acquisition of hospitals in the USA and abroad;
Manager of the Chicago office of McKee Berger Mansueto, Inc., and engineering
consulting firm; Project Manager for Uniroyal Inc.; President/CEO of Executive
Business Aviation, International Marine Corporation, Affiliated HealthCare,
Pyramid Capital Corporation and various business partnerships; Guest lecturer
on
“Value Engineering” for various professional groups; Guest lecturer for
Vanderbilt University Owen School of Management on “Negotiations”; Co-author on
various publications regarding construction cost, project management, and
value
engineering. Mr. Falk has served on many profit and non-profit boards;
Centerstone Mental Health, Mental Health Management, National Dialysis
Association, National Kidney Foundation, Vanderbilt Wilkerson Center, Commodore
Yacht Club, Cedar Creek Yacht Club, Ocean Reef Yacht Club and various community
boards. Mr. Falk received his MBA from Vanderbilt University - Owen School
of
Management, and has an undergraduate degree in mechanical Engineering (BSME).
He
will devote only a portion of his time to the business of the
Company.
Peter
M. Kash
has
served as a member of our board of directors since our inception. In September
2004, Mr. Kash co-founded Two River, where he currently serves as the President
of Two River Group Management, LLC. Mr. Kash is also the President and Chairman
of Riverbank Capital Securities, Inc., a broker dealer registered with FINRA
(“Riverbank”). From 1992 until 2004, Mr. Kash was a Senior Managing Director of
Paramount BioCapital, Inc., a FINRA member broker dealer, and Paramount
BioCapital Investments, LLC, a biotechnology focused venture capital company.
Mr. Kash also served as Director of Paramount Capital Asset Management, Inc.,
the general partner of several biotechnology-related hedge funds (the Paramount
companies are collectively referred to as Paramount), and as member of the
General Partner of the Orion Biomedical Fund, LP, a private equity fund.
Mr.
Kash currently serves as a member of board of directors of Nile Therapeutics,
Inc. (NASDAQ:NLTX), as well as several privately held biotechnology companies.
Mr. Kash received his B.S. in Management Science from SUNY Binghamton and
his
M.B.A. in Banking and International Finance from Pace University. Mr. Kash
is
currently pursuing his doctorate in Jewish education at Yeshiva University.
Mr.
Kash will devote only a portion of his time to the business of the
Company.
Joshua
A. Kazam
is a
co-founder of Two River and currently serves as Vice President and Director
of
Two River’s managing member. Mr. Kazam also serves as an Officer and Director of
Riverbank. From 1999 to 2004, Mr. Kazam was a Managing Director of Paramount,
where he was responsible for ongoing operations of venture investments, and
as
the Director of Investment for the Orion Biomedical Fund, LP. Mr. Kazam
currently serves as a director of Velcera, Inc. (VLCR.OB) and Nile Therapeutics,
Inc. (NASDAQ:NLTX), each a public reporting company, and an officer or director
of several privately held companies. Mr. Kazam is a graduate of the Wharton
School of the University of Pennsylvania. He will devote only a portion of
his
time to the business of the Company.
David
M. Tanen
is
also a
co-founder of Two River and serves as Vice President and Director of Two
River’s
managing member. Mr. Tanen also serves as an Officer and Director of Riverbank.
Prior to founding Two River, from October 1996 to September 2004, Mr. Tanen
was
a Director of Paramount. Mr. Tanen also served as a member of the General
Partner of the Orion Biomedical Fund, LP. Mr. Tanen currently serves as an
officer and director of Nile Therapeutics, Inc. (NASDAQ:NLTX) as well as
several
privately held biotechnology companies. Mr. Tanen received his B.A. from
The
George Washington University and his J.D. from Fordham University School
of Law.
He will devote only a portion of his time to the business of the
Company.
Scott
L. Navins
is the
Vice President of Finance at Two River, where he is responsible for all
accounting, finance and control activities. Mr. Navins joined Two River in
2005.
Mr. Navins also serves as Financial and Operations Principal of Riverbank.
Prior
to joining Two River, from 2004 to 2005 Mr. Navins was the Senior Controller
at
Westbrook Partners, where he managed the accounting for a $560 million real
estate private equity fund, including financial and partner reporting, tax
coordination, maintaining internal controls and overseeing a $300 million
credit
facility, among other things. Before that, from 2002 to 2004 Mr. Navins was
a
Senior Manager at Morgan Stanley, where he managed the accounting for a $2.4
billion real estate private equity fund. Prior to that, Mr. Navins was an
Associate in the Finance Group at BlackRock, Inc. and the controller for
a
high-tech venture capital fund. Mr. Navins also currently serves in a part-time
role as Treasurer of Nile Therapeutics, Inc., a publicly-held biotechnology
company, and he is an officer of several privately held biotechnology companies.
Mr. Navins graduated with honors from The George Washington University in
1993,
where he earned a Bachelor of Accountancy degree. Mr. Navins passed the Uniform
Certified Public Accounting examination in 1993. Mr. Navins will devote only
a
portion of his business time to the Company’s business.
J.
Chris Houchins
has over
16 years of clinical operations and drug development experience focusing
in
oncology. From 2004 to 2006, Mr. Houchins was the Director of Specialty Care
-
Clinical Project Management at Schering-Plough, where he was involved with
the
FDA and European submissions and approvals of Temozolomide, the standard
of care
for patients with GBM. From 1999 to 2004, Mr. Houchins was on the Searle
Celebrex Oncology Team that received FDA approval for familial adenomatous
polyposis, a new indication in oncology. After the merger of Searle and
Pharmacia & Upjohn, he oversaw the development and clinical operations for
the Global Celebrex Oncology Program that grew to over 300 clinical and
pre-clinical trials world-wide within 2 years. When Pfizer, Inc acquired
Pharmacia Corp., Mr. Houchins was selected as Director - Team Leader of Oncology
Clinical Operations overseeing all eight oncology compounds
(Camptosar
®
,
Aromasin
®
,
Ellence
®
,
Celebrex
®
,
Emcyt
®
,
Zavedos
®
,
Trelstar
®
and
Zinecard
®
)
encompassing over 500 clinical and pre-clinical studies. In addition, he
was
appointed to the Pfizer Global Oncology Advisory board of directors. Mr.
Houchins also has six years of experience as a Clinical Research Manager
at The
RUSH Cancer Institute in Chicago where he managed clinical trials across
all
tumor types including Ovarian Cancer using Topotecan. He is certified by
examination through SoCRA and ACRP as a Certified Clinical Research Associate,
Coordinator and Professional and holds a BS in Economics from Northern Illinois
University.
Audit
Committee
We
do not
currently have a separate audit committee. Our full board of directors performs
the functions normally designated to an audit committee. When acting in this
capacity, the board of directors does not have a charter.
Compensation
Committee
Our
board
of directors does not have a standing compensation committee responsible
for
determining executive and director compensation. Instead, the entire board
of directors fulfills this function, and each member of the board of directors
participates in the determination. Given the small size of the Company and
its board of directors and the Company's limited resources, locating, obtaining
and retaining independent directors is extremely difficult. In the absence
of independent directors, the board of directors does not believe that creating
a separate compensation committee would result in any improvement in the
compensation determination process. Accordingly, the board of directors has
concluded that the Company and its stockholders would be best served by having
the entire board of directors act in place of a compensation committee.
When acting in this capacity, the board of directors does not have a
charter.
In
considering and determining executive and director compensation, our board
of
directors reviews compensation that is paid by other similar public companies
to
its officers and takes that into consideration in determining the compensation
to be paid to the Company’s officers. The board of directors also
determines and approves any non-cash compensation to any employee. The Company
does not engage any compensation consultants to assist in determining or
recommending the compensation to the Company’s officers or employees.
Our
board
of directors, or a committee thereof, serving as plan administrator of our
2005
Stock Option Plan, has the authority to provide for accelerated vesting of
the
options granted to our employees, including our executive officers and directors
in connection with a change of control.
Executive
Compensation
The
following table sets forth all of the compensation awarded to, earned by
or paid
to (i) each individual serving as an Old Arno principal executive officer
during
the fiscal year ended December 31, 2007; and (ii) each other individual that
served as an Old Arno executive officer at the conclusion of the fiscal year
ended December 31, 2007 and who received in excess of $100,000 in the form
of
salary and bonus during such fiscal year. We refer to these individuals as
our
named executives.
Summary
Compensation Table
Name
and
Principal
Position
|
|
Year
|
|
Salary
|
|
Bonus
(1)
|
|
|
Option
Awards
(2)
|
|
Non-Equity
Incentive Plan Compensation
|
|
All
Other Compensation
|
|
Total
|
|
Scott
Z. Fields, M.D. (3)
President
and Chief Medical Officer
|
|
|
2007
2006
|
|
$
|
198,333
-
|
|
$
|
72,900
-
|
|
|
$
|
73,600
-
|
|
$
|
-
-
|
|
$
|
-
-
|
|
$
|
344,833
-
|
|
J.
Chris Houchins (4)
Vice
President, Clinical Development
|
|
|
2007
2006
|
|
$
|
52,500
-
|
|
$
|
15,000
-
|
|
|
$
|
9,200
|
|
$
|
-
-
|
|
$
|
-
-
|
|
$
|
76,700
-
|
|
Joshua
Kazam (5)
President
|
|
|
2007
2006
|
|
$
|
-
-
|
|
$
|
-
-
|
|
|
$
|
-
-
|
|
$
|
-
-
|
|
$
|
-
-
|
|
$
|
-
-
|
|
Thomas
W. Colligan (6)
Former
CEO of Laurier
|
|
|
2007
2006
|
|
$
|
-
-
|
|
$
|
-
-
|
|
|
$
|
-
-
|
|
$
|
-
-
|
|
$
|
-
-
|
|
$
|
-
-
|
|
(1)
|
The
named executives are eligible for annual bonuses upon the successful
achievement of agreed upon corporate and individual performance-based
milestones.
|
(2)
|
Amount
reflects the dollar amount recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2007 in accordance
with
SFAS 123R of stock option awards, and may include amounts from
awards
granted in and prior to fiscal year
2006.
|
(3)
|
Dr.
Fields is entitled to an annual performance-based bonus of up to
$150,000
upon the successful completion of annual corporate and individual
performance-based milestones. See “
—Employment
Agreements, Termination of Employment and Change-in-Control
Arrangements.
”
|
(4)
|
Mr.
Houchins is entitled to an annual performance-based bonus of up
to $45,500
upon the successful completion of annual corporate and individual
performance based milestones. See “
—Employment
Agreements, Termination of Employment and Change-in-Control
Arrangements.
”
|
|
Joshua
Kazam served as President of Arno until June 1, 2007. During
this time, he
did not receive any
compensation.
|
(6)
|
Mr.
Colligan served as President of Laurier until June 3, 2008, when
he
resigned and was replaced by Dr. Fields, in connection with the
merger.
During this time, Mr. Colligan did not receive any
compensation.
|
Employment
Agreements, Termination of Employment and Change-in-Control
Arrangements
Scott
Z. Fields, M.D.
President
and Chief Medical Officer
On
June
1, 2007, we entered into a two year employment agreement with Dr. Fields
to
serve as our President and Chief Medical Officer. Under the agreement, Dr.
Fields is entitled to an annualized base salary of $340,000 and is eligible
to
receive an annual performance-based bonus of up to $150,000 upon the successful
completion of annual corporate and individual milestones at an exemplary
metric
(e.g., ahead of schedule, under budget, etc.). Dr. Fields is also entitled
to a
cash bonus upon the successful completion of a merger or acquisition transaction
that results in a “change of control” of Arno. The merger with Laurier did not
constitute a “change of control” and, therefore, no such bonus to Dr. Fields was
triggered.
Upon
the
commencement of his employment, we made two stock option grants to Dr. Fields
pursuant to our 2005 Stock Option Plan. The first stock option grant, referred
to as the Employment Options, relates to 199,377 shares of our common stock
at
an exercise price equal to $1.00 per share (as adjusted for the merger).
The Employment Options vest, if at all, and become exercisable in two equal
installments on each anniversary of his employment agreement. In addition,
we
also granted to Dr. Fields performance-based stock options, referred to as
the
Performance Options, to purchase up to an additional 199,377 shares of our
common stock at an exercise price equal to $2.42 per share (as adjusted for
the
merger). The Performance Options vest, if at all, and become exercisable
upon
the successful completion of annual corporate and individual milestones in
an
exemplary manner (i.e., ahead of schedule, under budget, etc.). To date,
the
right to purchase 99,688 shares subject to the Employment Options and 99,688
shares subject to the Performance Options have vested. The remaining shares
subject to the Employment Options and Performance Options will vest, if at
all,
on June 1, 2009.
In
the
event that we acquire by license, acquisition or otherwise, an additional
biotechnology product or series of biotechnology products for development
that
is first identified by Dr. Fields, then we will grant to Dr. Fields additional
stock options, referred to as Technology Options, to purchase a number of
shares
of our common stock as follows:
|
·
|
1%
of the then fully diluted outstanding shares of our common stock
for the
rights to a product candidate that is in pre-clinical development;
and
|
|
·
|
2%
of the then fully diluted outstanding shares of our common
stock for the
rights to a product candidate that is in human clinical
trials.
|
Upon
a
change of control of Arno pursuant to which Arno is ascribed a valuation
of at
least $75,000,000, then we will pay Dr. Fields a cash bonus ranging from
$50,000
to $200,000.
We
have
also agreed to pay for up to $1,000,000 of life insurance for Dr. Fields.
He
will be entitled to up to four (4) weeks of vacation per year and may
participate in company sponsored benefit plans (i.e., health, dental,
etc.).
In
the
event that Dr. Fields’ employment is terminated as a result of his death or
disability, we will pay him or his estate (a) any accrued but unpaid base
salary, performance bonus, vacation and expense reimbursement through the
date
of termination; (b) his base salary for a period of six months thereafter;
(c) a
pro rata performance bonus for the year in which his employment is terminated;
(d) all Employment Options shall vest immediately; and (e) all vested Employment
and Performance Options shall remain exercisable for a period of five (5)
years
from the date of termination, but in no event beyond their scheduled expiration
date.
If
Dr.
Fields’ employment is terminated by Arno for “cause” or by Dr. Fields other than
for “good reason,” then we shall pay to him any accrued but unpaid base salary,
performance bonus, vacation and expense reimbursement through the date of
his
termination and he shall have no further entitlement to any other compensation
or benefits from us except as provided in our compensation and benefit plans.
All of Dr. Fields’ stock options, other than any Technology Options, that have
not previously vested shall expire immediately and all vested Employment
Options
and Performance Options shall remain exercisable for a period of 90 days
from
the date of termination.
If
Dr.
Fields’ employment is terminated upon a change of control, by Dr. Fields for
“good reason” or by Arno for any other reason, then we will (a) pay Dr. Fields
all Accrued Obligations, (b) continue to pay to his base salary and benefits
for
a period of one (1) year following such termination; (c) pay Dr. Field’s a pro
rata Performance Bonus for the year in which his employment is terminated;
(d)
all unvested Employment Options shall vest and become exercisable immediately
and shall remain exercisable for a period of not less than five (5) years;
and
(e) all vested Performance Options shall remain exercisable for a period
of five
(5) years from the date of termination, but in no event beyond their scheduled
expiration date.
In
the
event of non-renewal of his employment agreement, we shall pay Dr. Fields
all
Accrued Obligations and all vested Employment and Performance Options shall
remain exercisable for a period of 12 months.
J.
Chris Houchins
Vice
President of Clinical Operations
Pursuant
to a September 2007 letter agreement with us, Mr. Houchins is entitled to
an
annualized base salary of $180,000 (which was increased to $182,000 effective
January 1, 2008) and is eligible for an annual cash bonus in an amount up
to 25
percent of his base salary based on the achievement of individual and company
milestones and other criteria established by the President. Upon the
commencement of his employment, Mr. Houchins was awarded a 10-year stock
option
to purchase 99,688 shares of our common stock at an exercise price of $1.00
per
share (as adjusted to reflect the merger). The options shall be subject to
the
terms and conditions of our 2005 Stock Option Plan and shall vest and become
exercisable in accordance with the following schedule:
|
·
|
options
to purchase 24,922 shares of our common stock shall become exercisable
on
the first anniversary of his employment;
and
|
|
·
|
thereafter,
options to purchase 2,077 shares of our common stock shall become
exercisable on the last day of each calendar month until all remaining
options are fully vested and
exercisable.
|
Mr.
Houchins is not entitled to any compensation in connection with or upon the
termination of his employment with us.
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information concerning stock options held by the
named executives of Arno at December 31, 2007. The shares and the corresponding
option exercise price have been adjusted to give effect to the merger. Prior
to
the merger, Laurier had never granted stock options or other equity-based
compensation to its executive officers.
Name
|
|
Number of
Securities
Underlying
Unexercised Options
Exercisable
|
|
Number of
Securities
Underlying
Unexercised Options
Unexercisable
|
|
Option Exercise
Price ($)
|
|
Option
Expiration Date
|
|
Dr.
Fields
|
|
|
-
|
|
|
398,754
|
|
|
1.00
|
|
|
06/01/2017
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Houchins
|
|
|
-
|
|
|
99,688
|
|
|
1.00
|
|
|
09/01/2017
|
(2)
|
(1)
|
The
right to purchase 199,377 shares vests in two equal installments
in June
2008 and June 2009. The remaining 199,377 shares vest upon the
completion
of corporate and individual milestones.
|
(2)
|
The
right to purchase 24,922 shares vests in September 2008, and thereafter,
2,077 shares vest each month until fully
vested.
|
Compensation
of Directors
On
March
31, 2008, in connection with their appointments as directors of Old Arno,
Dr.
Belldegrun and Mr. Falk received 10-year options to purchase, at an exercise
price of $2.42 per share, 199,337 and 99,688 shares of our common stock,
respectively (as adjusted for the merger with Laurier). One half of the shares
subject to the options vested immediately and the remainder vest in two equal
installments on December 31, 2008 and December 31, 2009. Other than as described
above, we currently do not compensate any non-employee member of our board
of
directors for serving as a board member, although we may, in our sole
discretion, decide to compensate certain of our non-employee members of our
board of directors in the future.
Prior
to
the merger, no director of Laurier had ever received any compensation for
his or
her services.
2005
Stock Option Plan
General
In
connection with the Laurier merger transaction, we assumed the 2005 Stock
Option
Plan, or the 2005 Plan, that had been adopted by Old Arno. After giving effect
to the merger, the 2005 Plan authorizes a total of 2,990,655 shares of our
common stock for issuance. As of June 30, 2008, stock options relating to
an
aggregate of 1,116,508 shares of common stock had been granted under the
2005
Plan at exercise prices ranging from $0.13 to $2.42 per share, leaving a
total
of 1,874,147 shares available for issuance.
The
purpose of the 2005 Plan is to increase shareholder value and to advance
the
interests of our company by furnishing a variety of economic incentives designed
to attract, retain and motivate our employees and consultants.
The
2005
Plan provides that a committee composed of at least two non-employee members
of
our board of directors may grant incentives in the following forms:
|
·
|
stock
appreciation rights, or SARs;
|
|
·
|
performance
shares; and
|
Incentives
may be granted to participants who are employees of or consultants to our
company (including our officers and directors who may also be employees or
consultants) selected from time to time by the committee. In the event there
is
no committee, then our entire board of directors shall have responsibility
for
administering the 2005 Plan.
Types
of Incentives
Stock
Options
Under
the
2005 Plan, the committee may grant non-qualified and incentive stock options
to
eligible participants to purchase shares of our common stock from us. The
2005
Plan provides the committee with discretion to determine the number and purchase
price of the shares subject to any such option, the term of each option and
the
time or times during its term when the option becomes exercisable. The purchase
price for incentive stock options may not be less than the fair market value
of
the shares subject to the option on the date of grant. The number of shares
subject to an option will be reduced proportionately to the extent that the
optionee exercises a related SAR. The term of a non-qualified option may
not
exceed 10 years from the date of grant and the term of an incentive stock
option
may not exceed 10 years from the date of grant. The committee may accelerate
the
exercisability of any option.
In
the
event of a change of control, the 2005 Plan provides that if the acquiring
company does not agree to assume an outstanding stock option, then, unless
the
committee determines otherwise, all outstanding options will become immediately
exercisable and will remain exercisable for the remainder of their term.
Further, upon a change of control, the committee may approve the purchase
by us
of an unexercised stock option for the difference between the exercise price
and
the fair market value of the shares covered by such option.
The
option price may be paid in cash, check, bank draft or by delivery of shares
of
common stock valued at their fair market value at the time of purchase or
by
withholding from the shares issuable upon exercise of the option shares of
common stock valued at their fair market value or as otherwise authorized
by the
committee.
In
the
event that an optionee ceases to be an employee of or consultant to our company
for any reason, including death, any stock option or unexercised portion
thereof
which was otherwise exercisable on the date of termination from us shall
expire
at the time or times established by the committee.
Stock
Appreciation Rights
A
SAR is
a right to receive, without payment to us, a number of shares, cash or any
combination thereof, the amount of which is determined pursuant to the formula
described below. A SAR may be granted with respect to any stock option granted
under the 2005 Plan, or alone, without reference to any stock option. A SAR
granted with respect to any stock option may be granted concurrently with
the
grant of such option or at such later time as determined by the committee
and as
to all or any portion of the shares subject to the option.
The
2005
Plan confers on the committee discretion to determine the number of shares
as to
which a SAR will relate as well as the duration and exercisability of a SAR.
In
the case of a SAR granted with respect to a stock option, the number of shares
of common stock to which the SAR pertains will be reduced in the same proportion
that the holder exercises the related option. The term of a SAR may not exceed
10 years and one day from the date of grant. Unless otherwise provided by
the
committee, a SAR will be exercisable for the same time period as the stock
option to which it relates is exercisable. Any SAR shall become immediately
exercisable in the event of specified changes in corporate ownership or control.
The committee may accelerate the exercisability of any SAR.
Upon
exercise of a SAR, the holder is entitled to receive an amount which is equal
to
the aggregate amount of the appreciation in the shares of common stock as
to
which the SAR is exercised. For this purpose, the “appreciation” in the shares
consists of the amount by which the fair market value of the shares of common
stock on the exercise date exceeds (a) in the case of a SAR related to a
stock option, the purchase price of the shares under the option or (b) in
the case of a SAR granted alone, without reference to a related stock option,
an
amount determined by the committee at the time of grant. We may pay the amount
of this appreciation to the holder of the SAR by the delivery of common stock,
cash, or any combination of common stock and cash.
Restricted
Stock
Restricted
stock consists of the sale or transfer by us to an eligible participant of
one
or more shares of our common stock which are subject to restrictions on their
sale or other transfer by the employee. The price at which restricted stock
will
be sold will be determined by the committee, and it may vary from time to
time
and among employees and may be less than the fair market value of the shares
at
the date of sale. All shares of restricted stock will be subject to such
restrictions as the committee may determine. Subject to these restrictions
and
the other requirements of the 2005 Plan, a participant receiving restricted
stock shall have all of the rights of a shareholder as to those shares,
including, for example, the right to vote such shares.
Stock
Awards
Stock
awards consist of the transfer by us to an eligible participant of shares
of our
common stock, without payment, as additional compensation for services to
our
company. The number of shares transferred pursuant to any stock award will
be
determined by the committee.
Performance
Shares
Performance
shares consist of the grant by us to an eligible participant of a contingent
right to receive cash or payment of shares of common stock. The performance
shares shall be paid in shares of our common stock to the extent performance
objectives set forth in the grant are achieved. The number of shares granted
and
the performance criteria will be determined by the committee.
Non-Transferability
of Most Incentives
No
stock
option, SAR, performance share or restricted stock granted under the 2005
Plan
is transferable by its holder, except in the event of the holder’s death, by
will or the laws of descent and distribution. During an employee’s lifetime, an
incentive awarded under the 2005 Plan may be exercised only by him or her
or by
his or her guardian or legal representative.
Amendment
to the Plan
Our
board
of directors may amend or discontinue the 2005 Plan at any time. However,
no
such amendment or discontinuance may, subject to adjustment in the event
of a
merger, recapitalization, or other corporate restructuring, (a) change or
impair, without the consent of the recipient thereof, an incentive previously
granted, (b) materially increase the maximum number of shares of common
stock which may be issued to all participants under the 2005 Plan,
(c) materially change or expand the types of incentives that may be granted
under the 2005 Plan, (d) materially modify the requirements as to
eligibility for participation in the 2005 Plan, or (e) materially increase
the benefits accruing to participants. Certain amendments require stockholder
approval, including amendments which would materially increase benefits accruing
to participants, increase the number of securities issuable under the 2005
Plan,
or change the requirements for eligibility under the plan.
Federal
Income Tax Consequences
The
following discussion sets forth certain United States income tax considerations
in connection with the ownership of common stock. These tax considerations
are
stated in general terms and are based on the Internal Revenue Code of 1986
in
its current form and current judicial and administrative interpretations
thereof. This discussion does not address state or local tax considerations
with
respect to the ownership of common stock. Moreover, the tax considerations
relevant to ownership of the common stock may vary depending on a holder’s
particular status.
An
employee who receives restricted stock or performance shares subject to
restrictions which create a “substantial risk of forfeiture” (within the meaning
of section 83 of the Code) will normally realize taxable income on the date
the
shares become transferable or are no longer subject to substantial risk of
forfeiture or on the date of their earlier disposition. The amount of such
taxable income will be equal to the amount by which the fair market value
of the
shares of common stock on the date such restrictions lapse (or any earlier
date
on which the shares are disposed of) exceeds their purchase price, if any.
An
employee may elect, however, to include in income in the year of purchase
or
grant the excess of the fair market value of the shares of common stock (without
regard to any restrictions) on the date of purchase or grant over its purchase
price. We will be entitled to a deduction for compensation paid in the same
year
and in the same amount as income is realized by the employee.
An
employee who receives a stock award under the 2005 Plan consisting of shares
of
common stock will realize ordinary income in the year of the award in an
amount
equal to the fair market value of the shares of common stock covered by the
award on the date it is made, and we will be entitled to a deduction equal
to
the amount the employee is required to treat as ordinary income. An employee
who
receives a cash award will realize ordinary income in the year the award
is paid
equal to the amount thereof, and the amount of the cash will be deductible
by
us.
When
a
non-qualified stock option granted pursuant to the 2005 Plan is exercised,
the
employee will realize ordinary income measured by the difference between
the
aggregate purchase price of the shares of common stock as to which the option
is
exercised and the aggregate fair market value of shares of the common stock
on
the exercise date, and we will be entitled to a deduction in the year the
option
is exercised equal to the amount the employee is required to treat as ordinary
income.
Options
that qualify as incentive stock options are entitled to special tax treatment.
Under existing federal income tax law, if shares purchased pursuant to the
exercise of such an option are not disposed of by the optionee within two
years
from the date of granting of the option or within one year after the transfer
of
the shares to the optionee, whichever is longer, then (i) no income will be
recognized to the optionee upon the exercise of the option; (ii) any gain
or loss will be recognized to the optionee only upon ultimate disposition
of the
shares and, assuming the shares constitute capital assets in the optionee’s
hands, will be treated as long-term capital gain or loss; (iii) the
optionee’s basis in the shares purchased will be equal to the amount of cash
paid for such shares; and (iv) we will not be entitled to a federal income
tax deduction in connection with the exercise of the option. We understand
that
the difference between the option price and the fair market value of the
shares
acquired upon exercise of an incentive stock option will be treated as an
“item
of tax preference” for purposes of the alternative minimum tax. In addition,
incentive stock options exercised more than three months after termination
of
employment are treated as non-qualified options.
We
further understand that if the optionee disposes of the shares acquired by
exercise of an incentive stock option before the expiration of the holding
period described above, the optionee must treat as ordinary income in the
year
of that disposition an amount equal to the difference between the optionee’s
basis in the shares and the lesser of the fair market value of the shares
on the
date of exercise or the selling price. In addition, we will be entitled to
a
deduction equal to the amount the employee is required to treat as ordinary
income.
If
the
exercise price of an option is paid by surrender of previously owned shares,
the
basis of the shares surrendered is carried over to the shares received in
replacement of the previously owned shares. If the option is a nonstatutory
option, the gain recognized on exercise is added to the basis. If the option
is
an incentive stock option, the optionee will recognize a gain if the shares
surrendered were acquired through the exercise of an incentive stock option
and
have not been held for the applicable holding period. This gain will be added
to
the basis of the shares received in replacement of the previously owned shares.
When
a
stock appreciation right granted pursuant to the 2005 Plan is exercised,
the
employee will realize ordinary income in the year the right is exercised
equal
to the value of the appreciation the employee is entitled to receive pursuant
to
the formula previously described, and we will be entitled to a deduction
in the
same year and in the same amount.
The
2005
Plan is intended to enable us to provide certain forms of performance-based
compensation to executive officers that will meet the requirements for tax
deductibility under Section 162(m) of the Internal Revenue Code.
Section 162(m) provides that, subject to certain exceptions, we may not
deduct compensation paid to any one of certain executive officers in excess
of
$1 million in any one year. Section 162(m) excludes certain
performance-based compensation from the $1 million limitation.
The
discussion set forth above does not purport to be a complete analysis of
the
potential tax consequences relevant to recipients of options or to us or
to
describe tax consequences based on particular circumstances. It is based
on
federal income tax and interpretational authorities as of the date of this
proxy
statement, which are subject to change at any time.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table summarizes certain information regarding the beneficial
ownership (as such term is defined in Rule 13d-3 under the Exchange Act)
of our
outstanding common stock as of June 30, 2008 (after giving effect to the
merger)
by (i) each person known by us to be the beneficial owner of more than 5%
of our outstanding common stock, (ii) each of our directors, (iii) each of
our named executive officers (as defined in Item 402(a)(3) of Regulation
S-K
under the Securities Act), and (iv) all executive officers and directors
as a
group. Except as indicated in the footnotes below, the security and stockholders
listed below possess sole voting and investment power with respect to their
shares.
Name of Beneficial Owner
|
|
|
Shares of
Common Stock
Beneficially Owned
(#)(1
)
|
|
|
Percentage of
Common Stock
Beneficially Owned
(%)(1)
|
|
Scott Z. Fields,
M.D. (2)
30
Two Bridges Rd., Suite #270
Fairfield,
NJ 07004
|
|
|
199,377
|
|
|
*
|
|
Scott
L. Navins
Two
River Group Holdings, LLC
689
Fifth Avenue, 14
th
Floor
New
York, NY 10022
|
|
|
149,532
|
|
|
*
|
|
David
M. Tanen (3)
Two
River Group Holdings, LLC
689
Fifth Avenue, 12th Floor
New
York, NY 10022
|
|
|
1,458,102
|
|
|
7.15
|
|
Peter
M. Kash (4)
Two
River Group Holdings, LLC
689
Fifth Avenue, 12th Floor
New
York, NY 10022
|
|
|
1,688,987
|
|
|
8.87
|
|
Joshua
A. Kazam (5)
Two
River Group Holdings, LLC
689
Fifth Avenue, 12th Floor
New
York, NY 10022
|
|
|
1,566,686
|
|
|
7.68
|
|
Arie
S. Belldegrun (6)
Two
River Group Holdings, LLC
689
Fifth Avenue, 12th Floor
New
York, NY 10022
|
|
|
186,526
|
|
|
*
|
|
Robert
I. Falk (7)
507
Belle Meade Blvd.
Nashville,
TN 37205
|
|
|
195,378
|
|
|
*
|
|
Wexford
Capital LLC (8)
411
West Putnam Avenue
Greenwich,
CT 06830
|
|
|
2,005,789
|
|
|
9.82
|
|
Clal
Finance Management Ltd. (9)
c/o
Clal Finance Underwriting, Ltd.
Bet
Rubinstein, 37 Menachem Begin St.
Tel
Aviv 67137 Israel
|
|
|
1,454,727
|
|
|
7.13
|
|
All
Executive Officers and Directors as a group (7
persons)
|
|
|
5,564,204
|
|
|
26.81
|
|
*
represents less than 1%.
(1)
|
Assumes
20,392,024 shares of our common stock are outstanding. Beneficial
ownership is determined in accordance with Rule 13d-3 under the
Securities
Act, and includes any shares as to which the security or stockholder
has
sole or shared voting power or investment power, and also any shares
which
the security or stockholder has the right to acquire within 60
days of the
date hereof, whether through the exercise or conversion of any
stock
option, convertible security, warrant or other right. The indication
herein that shares are beneficially owned is not an admission on
the part
of the security or stockholder that he, she or it is a direct or
indirect
beneficial owner of those shares.
|
(2)
|
Represents
shares issuable upon the exercise of options to purchase shares
of our
common stock that are exercisable within 60 days of the date hereof.
See
“Executive
Compensation - Employment Agreements, Termination of Employment
and
Change-in-Control
Arrangements.”
|
(3)
|
Includes:
(i) 1,236 shares of our common stock issuable upon exercise of
a five year
warrant held by Mr. Tanen exercisable at a price per share of $2.42;
and
(ii) 149,532 shares of our common stock held by Mr. Tanen’s wife as
custodian for the benefit of two of their minor children under
the Uniform
Gift to Minors Act (UGMA).
|
(4)
|
Includes:
(i) 2,472 shares of our common stock issuable upon exercise of
a five year
warrant held by Mr. Kash exercisable at a price per share of $2.42;
and
(ii) 358,876 shares held by Mr. Kash’s wife as custodian for the benefit
of each of their minor children under UGMA; and (iii) 119,626 shares
of
out common stock held by the Kash Family Irrevocable Trust.
|
(5)
|
Includes:
(i) 4,946 shares of our common stock issuable upon exercise of a five
year warrant held by Mr. Kazam exercisable at a price per share
of $2.42;
(ii) 332,293 shares of our common stock held by the Kazam Family
Trust; (iii) 99,688 shares of our common stock held by Mr. Kazam’s
wife as custodian for the benefit of their minor daughter under
the UGMA;
and (iv) 20,637 shares of our common stock held by the Joshua Kazam
Trust,
in which Mr. Kazam has a pecuniary
interest.
|
(6)
|
Includes:
(i) 61,916 shares of our common stock held by a trust of which
Dr.
Belldegrun is a beneficiary; and (ii) 10 year options to purchase
99,688
shares of our common stock at an exercise price equal to $2.42
per
share.
|
(7)
|
Includes:
(i) 49,844 shares of our common stock held by the Falk Family
Partners, L.P. a Tennessee limited partnership for which Mr. Falk
serves
as general partner; and (ii) 4,946 shares of our common stock issuable
upon exercise of a five year warrant held by Falk Family Partners.
Also
includes 10 year options to purchase 49,844 shares of our common
stock at
an exercise price equal to $2.42 per
share.
|
(8)
|
Includes:
(i) 247,345 shares of our common stock held by Kappa Investors,
LLC
(“Kappa”); (ii) a five year warrant held by Kappa to purchase 24,734
shares of our common stock that are exercisable at $2.42 per share;
and
(ii) 1,733,712 shares of our common stock held by Wexford Spectrum
Investors LLC, a Delaware limited liability company ("Wexford Spectrum").
Wexford Capital LLC, a Connecticut limited liability company ("Wexford
Capital") is a registered Investment Advisor and also serves as
an
investment advisor or sub-advisor to the members of Kappa and Wexford
Spectrum. Mr. Charles E. Davidson is chairman, a managing member
and a
controlling member of Wexford Capital and Mr. Joseph M. Jacobs
is
chairman, a managing member and a controlling member of Wexford
Capital.
|
(9)
|
Includes:
(i) 825,578 shares of our common stock held by Clal Insurance Company
Ltd.
- Profits Participating Policies; (ii) 412,788 shares of our common
stock
held by Meitavit Atudot Pension Funds Management Company Ltd. (Sapir);
(iii) 206,393 shares of our common stock held by Meitavit Atudot
Pension
Funds Management Company Ltd. (Yahalom); and (iv) 9,968 shares
of our
common stock held by Clal Finance Underwriting
Ltd.
|
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
Arno
was
incorporated in August 2005 by Two River. Dr. Belldegrun, Mr. Kash, Mr. Kazam
and Mr. Tanen, each a director and substantial stockholder of Arno, control
the
managing member of Two River. Mr. Tanen also serves as our Secretary, and Mr.
Scott Navins, the Vice President of Finance for Two River, serves as our
Treasurer. Additionally, certain employees of Two River, who are also
stockholders of Arno, perform substantial operational activity for us, including
without limitation, financial, clinical and regulatory activities.
Mr.
Kash,
Mr. Kazam and Mr. Tanen are also the principals of Riverbank Capital Securities,
Inc. (“Riverbank”), a FINRA member broker dealer that acted as placement agent
for Old Arno in connection with the June 2008 private placement. Riverbank
did
not receive any selling commission for its services in connection with the
Financing, but received a non-accountable expense allowance of $100,000. Mr.
Navins is also the Financial and Operations Principal of Riverbank.
Pursuant
to a Consulting Agreement entered into between Arno and Fountainhead Capital
Management Limited (“Fountainhead Capital”), we paid a $500,000 consulting fee
to Fountainhead Capital upon completion of the merger with Laurier. Fountainhead
Capital was a significant stockholder of Laurier at the time of the
merger.
WHERE
YOU CAN FIND MORE INFORMATION
Federal
securities laws require us to file information with the SEC concerning our
business and operations. Accordingly, we file annual, quarterly, and special
reports, proxy statements and other information with the SEC. You can inspect
and copy this information at the Public Reference Facility maintained by the
SEC
at Judiciary Plaza, 100 F Street, N.E., Washington, D.C. 20549. You can receive
additional information about the operation of the SEC’s Public Reference
Facilities by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web
site at
http://www.sec.gov
that
contains reports, proxy and information statements and other information
regarding companies that, like us, file information electronically with the
SEC.
VALIDITY
OF COMMON STOCK
Legal
matters in connection with the validity of the shares offered by this prospectus
will be passed upon by Fredrikson & Byron, P.A., Minneapolis,
Minnesota.
EXPERTS
The
financial statements of Arno Therapeutics, Inc. as of December 31, 2007 and
2006, and for the years then ended, and for the period from August 1, 2005
(date of inception) through December 31, 2007, included in this prospectus,
have
been included herein in reliance on the report, which includes an explanatory
paragraph relating to our ability to continue as a going concern, dated February
27, 2008, of Hays & Company LLP, independent registered public accounting
firm, given on the authority of that firm as experts in accounting and
auditing.
The
balance sheet of Laurier International, Inc. as of December 31, 2007, and the
related statements of operations, changes in shareholders’ equity and cash flows
for the years ended December 31, 2007 and 2006 and for the period from March
8,
2000 (inception) to December 31, 2007, included in this prospectus, have been
included herein in reliance on the report, which includes an explanatory
paragraph relating to Laurier’s ability to continue as a going concern, dated
February 28, 2008, of Chang G. Park, CPA, certified public accountants, given
on
the authority of that firm as experts in accounting and auditing.
TRANSFER
AGENT
The
transfer agent for our common stock is American Stock Transfer & Trust
Company, and its address is 40 Wall Street, New York, New York,
10005.
DISCLOSURE
OF COMMISSION POSITION ON
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar
as indemnification for liabilities arising under the Securities Act of may
be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
INDEX
TO FINANCIAL STATEMENTS
Arno
Therapeutics, Inc. for the years ended December 31, 2007 and
2006
|
|
|
|
Independent
Auditor's Report
|
|
|
F-2
|
|
Balance
Sheets as of December 31, 2007 and 2006
|
|
|
F-3
|
|
Statements
of Operations for the years ended December 31, 2007 and 2006 and
the
period from August 1, 2005 (Inception) through December 31,
2007
|
|
|
F-4
|
|
Statement
of Changes in Stockholders’ Equity for the period from August 1, 2005
(Inception) through December 31, 2007
|
|
|
F-5
|
|
Statements
of Cash Flows for the years ended December 31, 2007 and 2006 and
the
period from August 1, 2005(Inception) through December 31,
2007
|
|
|
F-6
|
|
Notes
to Financial Statements
|
|
|
F-7
|
|
|
|
|
|
|
Arno
Therapeutics, Inc. for the three months ended March 31, 2008 and 2007
(Unaudited)
|
|
|
|
|
Condensed
Balance Sheets as of March 31, 2008 and December 31, 2007
|
|
|
F-16
|
|
Condensed
Statements of Operations for the three months ended March 31, 2008
and 2007 and the period from August 1, 2005 (Inception) through March
31, 2008
|
|
|
F-17
|
|
Condensed
Statement of Changes in Stockholders’ Equity for the period from
August 1, 2005 (Inception) through March 31, 2008
|
|
|
F-18
|
|
Condensed
Statements of Cash Flows for the three months ended March 31, 2008
and 2007 and the period from August 1, 2005 (Inception) through March
31, 2008
|
|
|
F-19
|
|
Notes
to Unaudited Condensed Financial Statements
|
|
|
F-20
|
|
|
|
|
|
|
Laurier
International, Inc. for the period from March 8, 2000 (Inception)
to
December 31, 2007
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
|
F-30
|
|
Balance
Sheet as of December 31, 2007
|
|
|
F-31
|
|
Statements
of Operations for the period from March 8, 2000 (Inception) to
December
31, 2007
|
|
|
F-32
|
|
Statements
of Changes in Stockholders’ Equity for the period from March 8, 2000
(Inception) to December 31, 2007
|
|
|
F-33
|
|
Statements
of Cash Flows for the period from March 8, 2000 (Inception) to
December
31, 2007
|
|
|
F-34
|
|
Notes
to Financial Statements
|
|
|
F-35
|
|
|
|
|
|
|
Laurier
International, Inc. for the three months ended March 31, 2008
(Unaudited)
|
|
|
|
|
Condensed
Balance Sheets as of March 31, 2008 and December 31, 2007
|
|
|
F-41
|
|
Condensed
Consolidated Statements of Operations for the three months ended
March 31,
2008 and for the period from March 8, 2000 (Inception) to March
31,
2008
|
|
|
F-42
|
|
Consolidated
Statements of Cash Flows for the three months ended March 31, 2008
and for
the period from March 8, 2000 (Inception) to March 31,
2008
|
|
|
F-43
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
|
|
F-44
|
|
To
the
Stockholders of
Arno
Therapeutics, Inc.
INDEPENDENT
AUDITOR'S REPORT
We
have
audited the accompanying balance sheets of Arno Therapeutics, Inc. (a
development stage company) (the “Company”) as of December 31, 2007 and 2006 and
the related statements of operations, changes in stockholders' equity and cash
flows for the years then ended
and
the
period from
August
1,
2005 (inception) to December 31, 2007. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an
opinion on these financial statements based on our audit.
We
conducted our audit in accordance with auditing standards generally accepted
in
the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures
that
are appropriate in the circumstances, but not for the purpose of expressing
an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Arno Therapeutics, Inc. (a
development stage company) as of December 31, 2007 and 2006, and the
results of its operations and its cash flows for the years then ended and for
the period from to August 1, 2005 (inception) to December 31, 2007 in conformity
with accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company is in its development stage, has not generated any
revenues and has incurred recurring losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome
of
this uncertainty.
/s/
Hays
& Company LLP
February
27, 2008
New
York,
New York
ARNO
THERAPEUTICS, INC.
(a
development stage company)
BALANCE
SHEET
S
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,646,243
|
|
$
|
18,201
|
|
Deposits
|
|
|
12,165
|
|
|
-
|
|
Prepaid
expenses
|
|
|
74,092
|
|
|
18,275
|
|
Total
Current assets
|
|
|
1,732,500
|
|
|
36,476
|
|
Deferred
financing fees, net of accumulated
amortization
of $11,459
|
|
|
13,541
|
|
|
-
|
|
Property
and equipment, net of accumulated
depreciation
of $1,650
|
|
|
38,193
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
|
-
|
|
|
85,125
|
|
Total
assets
|
|
$
|
1,784,234
|
|
$
|
121,601
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
1,231,653
|
|
$
|
27,794
|
|
Due
to related party
|
|
|
583
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
1,232,236
|
|
|
377,794
|
|
|
|
|
|
|
|
|
|
Convertible
notes and accrued interest payable
|
|
|
4,179,588
|
|
|
100,000
|
|
Total
liabilities
|
|
|
5,411,824
|
|
|
477,794
|
|
Commitments
and contingencies
(Notes
3, 5, 6, 7, 8, 9 and 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity (deficiency)
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value;
5,000,000
shares authorized,
none
issued and outstanding
|
|
|
-
|
|
|
-
|
|
Common
stock, $0.001 par value;
25,000,000
shares authorized,
5,000,000
issued and outstanding
|
|
|
5,000
|
|
|
5,000
|
|
Additional
paid-in capital
|
|
|
98,000
|
|
|
9,700
|
|
Deficit
accumulated during the development stage
|
|
|
(3,730,590
|
)
|
|
(370,893
|
)
|
Total
stockholders' deficiency
|
|
|
(3,627,590
|
)
|
|
(356,193
|
)
|
Total
liabilities and stockholders' deficiency
|
|
$
|
1,784,234
|
|
$
|
121,601
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
STATEMENTS
OF OPERATIONS
|
|
|
|
|
|
Period from
August 1, 2005
(inception)
|
|
|
|
Year ended December 31,
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
2,899,264
|
|
$
|
365,833
|
|
$
|
3,265,097
|
|
General
and administrative
|
|
|
360,349
|
|
|
5,060
|
|
|
365,409
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(3,259,613
|
)
|
|
(370,893
|
)
|
|
(3,630,506
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
123,962
|
|
|
-
|
|
|
123,962
|
|
Interest
expense
|
|
|
(224,046
|
)
|
|
-
|
|
|
(224,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,359,697
|
)
|
$
|
(370,893
|
)
|
$
|
(3,730,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$
|
(0.67
|
)
|
$
|
(0.07
|
)
|
$
|
(0.75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
5,000,000
|
|
|
5,000,000
|
|
|
5,000,000
|
|
The
accompanying notes are an integral part of these financial
statements.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
|
|
|
|
|
|
|
|
|
|
|
|
during
the
|
|
|
|
|
|
Common
stock
|
|
Additional
|
|
development
|
|
|
|
|
|
Shares
|
|
Amount
|
|
paid-in
capital
|
|
stage
|
|
Total
|
|
Issuance
of common stock to founders at $0.001 per share
|
|
|
5,000,000
|
|
$
|
5,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
5,000
|
|
Net
loss, period from August 1, 2005 (inception)
through
December 31, 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Balance,
December 31, 2005
|
|
|
5,000,000
|
|
|
5,000
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
Issuance
of stock options for services at $0.25
|
|
|
-
|
|
|
-
|
|
|
9,700
|
|
|
-
|
|
|
9,700
|
|
Net
loss, year ended December 31, 2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(370,893
|
)
|
|
(370,893
|
)
|
Balance,
December 31, 2006
|
|
|
5,000,000
|
|
|
5,000
|
|
|
9,700
|
|
|
(370,893
|
)
|
|
(356,193
|
)
|
Issuance
of stock options for services at $2.00
|
|
|
-
|
|
|
-
|
|
|
88,300
|
|
|
-
|
|
|
88,300
|
|
Net
loss, year ended December 31, 2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,359,697
|
)
|
|
(3,359,697
|
)
|
Balance,
December 31, 2007
|
|
|
5,000,000
|
|
$
|
5,000
|
|
$
|
98,000
|
|
$
|
(3,730,590
|
)
|
$
|
(3,627,590
|
)
|
The
accompanying notes are an integral part of these
financial statements.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
STATEMENTS
OF CASH FLOWS
|
|
|
|
|
|
Period from
August 1, 2005
(inception)
|
|
|
|
Year ended December 31,
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,359,697
|
)
|
$
|
(370,893
|
)
|
$
|
(3,730,590
|
)
|
Adjustments
to reconcile net loss to
net
cash used in operating activities
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
13,109
|
|
|
-
|
|
|
13,109
|
|
Stock
based compensation
|
|
|
88,300
|
|
|
9,700
|
|
|
98,000
|
|
Write-off
of intangible assets
|
|
|
85,125
|
|
|
-
|
|
|
85,125
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
Increase
in deposits
|
|
|
(12,165
|
)
|
|
-
|
|
|
(12,165
|
)
|
Increase
in prepaid expenses
|
|
|
(55,817
|
)
|
|
(18,275
|
)
|
|
(74,092
|
)
|
Increase
in accounts payable and
accrued
expenses
|
|
|
1,203,859
|
|
|
27,794
|
|
|
1,231,653
|
|
Increase
in due to related party
|
|
|
583
|
|
|
-
|
|
|
583
|
|
Increase
in accrued interest - notes payable
|
|
|
212,588
|
|
|
-
|
|
|
212,588
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,824,115
|
)
|
|
(351,674
|
)
|
|
(2,175,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(39,843
|
)
|
|
-
|
|
|
(39,843
|
)
|
Cash
paid for intangible assets
|
|
|
-
|
|
|
(85,125
|
)
|
|
(85,125
|
)
|
Proceeds
from related party advance
|
|
|
175,000
|
|
|
350,000
|
|
|
525,000
|
|
Repayment
of related party advance
|
|
|
(525,000
|
)
|
|
-
|
|
|
(525,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(389,843
|
)
|
|
264,875
|
|
|
(124,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Deferred
financing fees paid
|
|
|
(25,000
|
)
|
|
-
|
|
|
(25,000
|
)
|
Proceeds
from sale of common stock
|
|
|
-
|
|
|
5,000
|
|
|
5,000
|
|
Proceeds
from sale of convertible notes payable
|
|
|
3,867,000
|
|
|
100,000
|
|
|
3,967,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
3,842,000
|
|
|
105,000
|
|
|
3,947,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
1,628,042
|
|
|
18,201
|
|
|
1,646,243
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
18,201
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
1,646,243
|
|
$
|
18,201
|
|
$
|
1,646,243
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
Note
1
|
Organization
and business
activities
|
The
Company
Arno
Therapeutics, Inc. (the “Company”), a Delaware corporation, was incorporated on
August 1, 2005. The Company is a biotechnology company that is initially
focusing its efforts on developing, testing and commercializing its lead
compound, AR-67, as a novel therapeutic for the treatment of cancer.
Additionally, as discussed in Note 11, the Company has begun development of
two
newly licensed compounds, AR-42 and AR-12.
The
Company’s primary activities since incorporation have been organizational;
including recruiting personnel, establishing office facilities, acquiring a
license to develop each of the Company's technologies, performing business
and
financial planning, conducting research and development activities and raising
capital and have not generated any revenues. Accordingly, the Company is
considered to be in the development stage.
Going
concern
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has incurred a significant working
capital deficiency and recurring losses from operations that raise substantial
doubt about its ability to continue as a going concern. Management’s plans with
regard to this uncertainty are discussed below.
On
February 12, 2008, the Company entered into a Confidential Term Sheet with
Laurier International, Inc., a Delaware corporation (“Laurier”) pursuant to
which the Company will enter into an Agreement and Plan of Merger with Laurier
and its wholly-owned subsidiary, Laurier Acquisition, Inc., also a Delaware
corporation, pursuant to which Laurier Acquisition, Inc. shall be merged with
and into the Company (the “Merger”), the separate corporate existence of Laurier
Acquisition, Inc. shall cease and the Company shall continue as the surviving
corporation and shall become a wholly-owned subsidiary of Laurier. Laurier
is
subject to the reporting requirements of the Securities Exchange Act of 1934,
as
amended, and is publicly traded on the OTC Bulletin Board. Laurier does not
operate any business.
As
a
condition to the closing of the Merger, the Company must obtain gross proceeds
from an equity financing equal to at least $12,500,000 (the “Financing”). Upon
the closing of the Financing, the outstanding balance of the Notes (as defined
in Note 5) will automatically convert into shares of the Company’s common stock.
The Company expects to use the proceeds from the Financing to satisfy its
current outstanding obligations, including obligations under the Notes and
to
provide sufficient funds in order to continue its business plan over the next
year or more. Management can provide no assurances that the Company will be
able
to raise sufficient funds in order to complete the Merger or satisfy its current
outstanding obligations. The accompanying financial statements do not include
any adjustments that might result from this uncertainty.
At
the
effective time of the Merger, each of the Company’s then issued and outstanding
shares of common stock, including shares purchased in the Financing, will be
exchanged for shares of Laurier common stock, $0.0001 par value per share,
so
that, after giving effect to the Merger, the holders of the Company’s common
stock on a fully-diluted basis, will hold approximately 95% of the issued and
outstanding shares of Laurier common stock and the holders of Laurier common
stock immediately prior to the Merger shall hold approximately 5% of the
outstanding shares of Laurier common stock on a fully-diluted basis. All
outstanding warrants, options and other rights to purchase or acquire shares
of
the Company’s common stock outstanding immediately prior to the Merger shall
convert into the right to purchase that number of shares of Laurier common
stock
at the same exchange ratio used in connection with the exchange of shares of
the
Company's common stock for shares of common stock of Laurier in the Merger
at
adjusted exercise prices.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
Upon
completion of the Merger, Laurier will adopt and continue implementing the
Company’s business plan. Further, upon completion of the Merger, the current
officers and directors of Laurier will resign and the current officers and
directors of the Company will be appointed officers and directors of Laurier.
For accounting purposes, the Merger will be accounted for as an acquisition
of
Laurier and recapitalization of the Company with the Company as the accounting
acquirer (legal acquiree) and Laurier as the accounting acquiree (legal
acquirer). Also at the effective date of the Merger, the Company will pay to
Fountainhead Capital Partners Limited (“Fountainhead”) a consulting fee of
$500,000 for their work in connection with the Merger. Fountainhead holds
approximately 82.4% of Laurier’s issued and outstanding common
stock.
As
a
result of the Merger, the Company expects to incur increased operating costs
primarily related to public company regulatory compliance.
Note
2
|
Significant
accounting policies
|
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of
the financial statements and reported amounts of revenue and expenses during
the
reporting period. Accordingly, actual results could differ from those
estimates.
Cash
and cash equivalents
For
purposes of the statements of cash flows, cash equivalents include time
deposits, money market accounts, and all highly liquid debt instruments with
original maturities of three months or less. The Company maintains cash in
bank
deposit accounts which, at times, exceeds federally insured limits. The Company
has not experienced any losses on these accounts.
Property
and equipment
Property
and equipment, which consists principally of office furniture, computer and
related equipment, are stated at cost. Maintenance and repairs are charged
to
expense as incurred. Additions, improvements and replacements are
capitalized.
Depreciation
of property and equipment, including leasehold improvements, is provided for
by
the straight line method over the estimated useful lives of the related
assets.
Impairment
of long lived assets
The
Company reviews long-lived assets for impairment whenever events or changes
in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An asset is considered to be impaired when the sum of the
undiscounted future net cash flows expected to result from the use of the asset
and its eventual disposition is less than its carrying amount. The amount of
impairment loss, if any, is measured as the difference between the net book
value of the asset and its estimated fair value.
Research
and development costs
Research
and development costs are expensed as incurred. Clinical trial costs incurred
by
third parties are expensed as the contracted work is performed. Where contingent
milestone payments are due to third parties under research and development
arrangements, the milestone payment obligations are expensed when the milestone
results are achieved. Costs related to the acquisition of technology rights
and
patents for which development work is still in process are expensed as incurred
and considered a component of research and development costs.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
Income
taxes
In
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109,
Accounting for Income Taxes
, deferred tax assets and liabilities are
recognized based on temporary differences between the financial statement and
the tax bases of assets and liabilities. Deferred tax assets and liabilities
are
measured using enacted tax rates expected to apply to taxable income in the
years in which these assets and liabilities are expected to be recovered or
settled. The Company provides a valuation allowance when it appears more likely
than not that some or
all
of
the net deferred tax assets will not be realized.
Share
based payments
Effective
August 2005, the Company adopted SFAS No. 123(R),
Share-Based
Payment
.
SFAS
No. 123(R) requires the recognition of stock-based compensation expense in
the
financial statements. The terms and vesting schedules for share-based awards
vary by type of grant and the employment status of the grantee. Generally,
the
awards vest based upon time-based or performance-based conditions.
Performance-based vesting conditions generally include the attainment of goals
related to the Company’s financial and development performance.
Deferred
financing fees
Fees
associated with obtaining long-term financing have been deferred and are being
amortized to interest expense over the term of the related debt.
Loss
per Common Share
The
Company calculates loss per share in accordance with SFAS No. 128,
Earnings
per Share.
Basic
loss per share is computed by dividing the loss available to common shareholders
by the weighted-average number of common shares outstanding. Diluted loss per
share is computed similarly to basic loss per share except that the denominator
is increased to include the number of additional common shares that would have
been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive.
For
all
periods presented, potentially dilutive securities are excluded from the
computation of fully diluted loss per share as their effect is anti-dilutive.
Potentially
dilutive securities include:
|
|
December 31, 2007
|
|
December 31, 2006
|
|
Warrants
to purchase common stock
|
|
|
-
|
|
|
-
|
|
Options
to purchase common stock
|
|
|
345,000.00
|
|
|
75,000.00
|
|
Total
potentially dilutive securities
|
|
|
345,000.00
|
|
|
75,000.00
|
|
In
October 2006, the Company entered into a license agreement (the “Pitt License
Agreement”) with the University of Pittsburgh to acquire the rights to develop
and commercialize AR-67 and its analogs, believed to have use in the treatment
of, but not limited to, cancer.
During
2006, an initial license fee of $350,000 was paid to the licensor and was
charged to research and development expense. Pursuant to the terms of the Pitt
License Agreement, the Company is obligated to make additional milestone
payments based on the occurrence of certain events. No such milestone payments
are required as of December 31, 2007. The total amount of all potential future
clinical, regulatory and commercial milestone payments as of December 31, 2007
are $4,000,000, of which $1,500,000 is payable following the acceptance by
the
United States Food and Drug Administration ("FDA") of the first New Drug
Application (“NDA”) for AR-67 and $2,500,000 upon FDA approval of the first NDA
for the licensed technology.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
Under
the
Pitt License Agreement, the Company is also obligated to pay the licensor annual
maintenance fees and royalty payments based on sales of licensed products,
as
defined.
Note
4
|
Stockholders'
equity
|
In
August
2005, the Company issued 5,000,000 shares of common stock to its founders for
$5,000 or $0.001 per share.
Note
5
|
Convertible
notes payable
|
During
February 2007, the Company completed a private placement offering of 6%
convertible promissory notes (the “Notes”) in the aggregate principal amount of
$3,967,000, which mature on February 9, 2009.
The
Notes
are unsecured obligations convertible into the Company’s common stock. Interest
on the Notes accrues at 6% per year and is payable in full on
maturity. The Notes mandatorily convert upon the closing of the Company's next
equity financing (“Subsequent Financing”) in which the Company sells
newly-issued shares of its equity securities or securities convertible into
equity securities, of one or more series (the “Equity Securities”) for cash
proceeds of $5,000,000 or more. At conversion, the outstanding principal and
accrued but unpaid interest shall automatically convert into validly issued,
fully paid and non-assessable Equity Securities of the same kind issued in
the
Subsequent Financing at a conversion price equal to 90% of the per share or
unit
purchase price of the Subsequent Financing.
In
addition, upon conversion, the Company shall issue warrants entitling the holder
to purchase, for a period of five years from the effective date of the
conversion, a number of shares of common stock of the Company computed by
dividing 10% of the principal amount of the Note plus any unpaid accrued
interest by either (a) the price per share paid by investors in the Subsequent
Financing or (b) if a Subsequent Financing does not occur on or before the
maturity date, the price per share paid by the most recent investor in the
common stock of the Company.
At
December 31, 2007, $212,588 in interest has been accrued on the Notes.
Note
6
|
Stock
based compensation
|
In
2005,
the Company established a stock option plan (the “Plan”) under which incentives
may be granted to officers, employees, directors, consultants and advisors.
Incentives under the Plan may be granted in any one or a combination of the
following forms: (a) incentive stock options and non-statutory stock options;
(b) stock appreciation rights; (c) stock awards; (d) restricted stock; and
(e)
performance shares. The number of shares of common stock, which may be issued
under the Plan, shall not exceed 1,500,000. During the
period
from August 1, 2005 (inception) through December 31, 2007
,
the
Company granted a total of 345,000 stock options to employees and advisors
with
exercise prices ranging from $0.25 per share to $2.00 per share.
The
stock-based compensation expense in connection with stock option grants amounted
to $98,000 for the period from August 1, 2005 (inception) through December
31,
2007 of which $58,600 is included in research and development costs and $39,400
is included in general and administrative expense.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
The
fair
value of each stock option granted has been determined using the Black-Scholes
Option Pricing model. The material factors incorporated in the Black-Scholes
Option Pricing model in estimating the value of the options are reflected in
the
following table:
|
|
|
4.23%
- 4.85%
|
|
|
|
|
Volatility
|
|
|
62.67%
- 67.88%
|
|
|
|
|
Estimated
life in years
|
|
|
4-6
years
|
|
|
|
|
Dividends
paid
|
|
|
None
|
A
summary
of option activity under the Plan since inception is as follows:
|
|
Shares
|
|
Weighted-
Average
Exercise Price
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Options
granted
|
|
|
75,000
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
Options
exercised
|
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
granted
|
|
|
270,000
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
Options
exercised
|
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2007
|
|
|
345,000
|
|
$
|
1.62
|
|
|
|
|
|
|
|
|
|
Exercisable
at December 31, 2007
|
|
|
75,000
|
|
$
|
0.25
|
|
As
of
December 31, 2007, the aggregate fair value of stock options outstanding was
$352,900, with a weighted-average remaining term of eight years. The aggregate
fair value of stock options exercisable at that same date was $9,700, with
a
weighted-average remaining term of four years. As of December 31, 2007, the
Company has 1,155,000 shares available for future stock option
grants.
As
of
December 31, 2007, total compensation expense not yet recognized related to
stock option grants amounted to $254,900, which will be recognized over the
next
four years.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
On
October 1, 2007, the Company established a defined contribution 401(k) plan
(the
“401(k) Plan”) for the benefit of its employees. Substantially all of the
employees of the Company are eligible to participate in the 401(k) Plan which
permits employees to make voluntary contributions up to the dollar limit allowed
under the Internal Revenue Code. The 401(k) Plan also provides for matching
contributions by the Company of up to a combined total of 3% of an employee’s
eligible annual compensation, as defined. The Company has recorded $2,198 of
matching contributions for the year ended December 31, 2007.
From
time-to-time, some of the Company’s expenses are paid for by Two River Group
Holdings, LLC, (“Two River”), an entity that is partially controlled by several
of the Company's founders. The Company reimburses Two River for these expenses
and no interest is charged on the outstanding balance. For the year ended
December 31, 2007 and 2006, reimbursable expenses amounted to $82,976 and
$350,000, respectively, of which $583 is unpaid at December 31,
2007.
During
2006 and 2007, Two River advanced a total of $525,000 to the Company on a
short-term basis in order for it to execute the Pitt License Agreement and
make
the initial license fee payment. The Company repaid this amount to Two River,
without interest, out of proceeds from the Notes.
The
Company utilized the services of Riverbank Capital Securities, Inc.
(“Riverbank"), a company owned by several of the Company's founders, for
investment banking and other investment advisory services in connection with
the
Company's private placement of the Notes. Riverbank charged the Company a
$25,000 non-accountable expense allowance and no brokerage fees or commissions
in connection with the private placement.
The
financial condition and result of operations of the Company, as reported, are
not necessarily indicative of the results that would have been reported had
the
Company operated completely independently.
At
December 31, 2007, the Company had no federal income tax expense or benefit
but
did have federal tax net operating loss carry-forwards of approximately
$3,479,000. The federal net operating loss carry-forwards will begin to expire
in 2026, unless previously utilized. Pursuant to Internal Revenue Code Sections
382 and 383, use of the Company’s net operating loss carry-forwards may be
limited if a cumulative change in ownership of more than 50% occurs within
a
three-year period. No assessment has been made as to whether such a change
in
ownership has occurred. The Company incurred approximately $729 of statutory
state tax expense for the year ended December 31, 2007.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
Significant
components of the Company’s net deferred tax assets at December 31, 2007 are
shown below. A valuation allowance of $1,695,000 has been established to offset
the net deferred tax assets at December 31, 2007, as realization of such assets
is uncertain.
|
|
$
|
1,496,000
|
|
|
|
|
|
|
Noncurrent
R&D credit
|
|
|
157,000
|
|
|
|
|
|
|
Other
noncurrent
|
|
|
42,000
|
|
|
|
|
|
|
Total
noncurrent
|
|
|
1,695,000
|
|
|
|
|
|
|
Other
current
|
|
|
-
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
|
1,695,000
|
|
|
|
|
|
|
Deferred
tax asset valuation allowance
|
|
|
(1,695,000
|
)
|
|
|
|
|
|
Net
deferred taxes
|
|
$
|
-
|
|
During
2007, the Company entered into an operating lease for office space located
in
Fairfield, New Jersey. The Company is obligated under non-cancelable operating
leases for the office space and related office equipment expiring at various
dates through 2010. The aggregate minimum future payments under these leases
are
as follows:
Year
ending December 31,
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
39,750
|
|
|
|
|
|
|
2009
|
|
|
55,000
|
|
|
|
|
|
|
2010
|
|
|
52,000
|
|
|
|
|
|
|
|
|
$
|
146,750
|
|
The
Company has entered into various contracts with third parties in connection
with
the development of the licensed technology described in Note 3. The aggregate
minimum commitment under these contracts as of December 31, 2007 is
$5,237,200.
The
Company has also entered into various agreements with third party consultants
which expire at various dates through 2008 for which the Company is obligated
to
pay for services based upon hourly rates or completion of services, as
defined.
As
of
December 31, 2007, the Company has an employment agreement with one key
executive expiring in June 2009. The agreement provides for a base salary of
$350,000 plus additional incentive compensation, as defined in the employment
agreement.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
Future
minimum commitments under the agreement as of December 31, 2007 are as
follows:
Year
ending December 31,
|
|
|
|
|
|
|
|
|
2008
|
|
|
355,000
|
|
|
|
|
|
|
2009
|
|
|
183,333
|
|
|
|
$
|
538,333
|
|
In
the
normal course of business, the Company enters into contracts that contain a
variety of indemnification obligations to its employees, licensors, suppliers
and service providers. Further, the Company indemnifies its directors and
officers who are, or were, serving at the Company’s request in such capacities.
The Company’s maximum exposure under these arrangements is unknown as of
December 31, 2007. The Company does not anticipate recognizing any significant
losses relating to these arrangements.
Note
11
|
Subsequent
events
|
On
January 3, 2008, the Company entered into an exclusive, worldwide, royalty
bearing license agreement (the “AR-12 License Agreement") with the Ohio State
University Research Foundation (“OSU”), which agreement includes the right to
grant sublicenses, for the rights to intellectual property and know-how relating
to AR-12, a small molecule with cancer-fighting properties, for all therapeutic
uses.
Pursuant
to the AR-12 License Agreement, a one-time license fee of $250,000 was paid
to
OSU during February 2008. In addition, the Company is obligated to make
additional milestone payments based on the occurrence of certain events. The
total amount of all potential future milestone payments is $5,100,000, of which,
$4,000,000 is payable following receipt of regulatory approval of AR-12 in
the
United States, the European Union or Japan. The Company is also obligated to
make a milestone payment in the amount of $1,000,000 upon the first commercial
sale of the licensed technology in a second field of use as an anti-infective
agent.
Under
the
AR-12 License Agreement, the Company is also obligated to pay the licensor
royalty payments based on sales of the licensed technology, as defined.
On
January 9, 2008, the Company entered into an exclusive, worldwide, royalty
bearing license agreement (the “AR-42 License Agreement") with OSU, which
agreement includes the right to grant sublicenses, for the rights to
intellectual property and know-how relating to AR-42, a small molecule
considered to have powerful cancer-fighting properties, for all therapeutic
uses.
Pursuant
to the AR-42 License Agreement, a one-time license fee of $200,000 was paid
to
OSU during February 2008. In addition, the Company is obligated to make
additional milestone payments based on the occurrence of certain events. The
total amount of all potential future milestone payments is $5,100,000, of which,
$4,000,000 is payable following receipt of regulatory approval of AR-42 in
the
United States, the European Union or Japan.
Under
the
AR-42 License Agreement, the Company is also obligated to pay the licensor
royalty payments based on sales of the licensed technology, as defined.
In
addition, as compensation for their efforts in obtaining the AR-42 and AR-12
License Agreements, the Company may also pay to certain employees of Two River,
a cash finder’s fee and issue them warrants to purchase the Company’s common
stock exercisable at fair market value.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
DECEMBER 31, 2007
On
January 31, 2008, the Company signed a letter agreement with an individual
to
serve as the Company’s Director of Product Development. The letter agreement
calls for a base salary equal to $150,000 per year, plus additional incentive
compensation.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
BALANCE
SHEET
|
|
March
31,
|
|
December
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
692,518
|
|
$
|
1,646,243
|
|
Prepaid
expenses
|
|
|
63,342
|
|
|
74,092
|
|
Total
current assets
|
|
|
755,860
|
|
|
1,720,335
|
|
|
|
|
|
|
|
|
|
Deferred
fees, net of accumulated
amortization of $42,041 and $11,459
|
|
|
182,959
|
|
|
13,541
|
|
Property
and equipment, net of accumulated
depreciation of $4,048 and $1,650
|
|
|
49,745
|
|
|
38,193
|
|
Deposits
|
|
|
12,165
|
|
|
12,165
|
|
Total
assets
|
|
$
|
1,000,729
|
|
$
|
1,784,234
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
2,076,410
|
|
$
|
1,231,653
|
|
Note
payable - related party
|
|
|
1,080,000
|
|
|
-
|
|
Due
to related party
|
|
|
131,844
|
|
|
583
|
|
Total
current liabilities
|
|
|
3,288,254
|
|
|
1,232,236
|
|
|
|
|
|
|
|
|
|
Convertible
notes and accrued interest payable
|
|
|
4,238,930
|
|
|
4,179,588
|
|
Total
liabilities
|
|
|
7,527,184
|
|
|
5,411,824
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Stockholders'
equity (deficiency)
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value;
5,000,000 shares authorized,
none issued or outstanding
|
|
|
-
|
|
|
-
|
|
Common
stock, $0.001 par value;
25,000,000 shares authorized,
5,000,000 issued and outstanding
|
|
|
5,000
|
|
|
5,000
|
|
Additional
paid-in capital
|
|
|
897,718
|
|
|
98,000
|
|
Deficit
accumulated during the development stage
|
|
|
(7,429,173
|
)
|
|
(3,730,590
|
)
|
Total
stockholders' deficiency
|
|
|
(6,526,455
|
)
|
|
(3,627,590
|
)
|
Total
liabilities and stockholders' deficiency
|
|
$
|
1,000,729
|
|
$
|
1,784,234
|
|
The
accompanying notes are an integral part of these financial
statements.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
STATEMENTS
OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
August 1, 2005
|
|
|
|
|
|
|
|
(inception)
|
|
|
|
Three months ended March 31,
|
|
through
|
|
|
|
2008
|
|
2007
|
|
March 31, 2008
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
3,187,182
|
|
$
|
210,797
|
|
$
|
6,452,279
|
|
General
and administrative
|
|
|
432,264
|
|
|
58,027
|
|
|
797,673
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(3,619,446
|
)
|
|
(268,824
|
)
|
|
(7,249,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
10,788
|
|
|
11,550
|
|
|
134,750
|
|
Interest
expense
|
|
|
(89,925
|
)
|
|
(35,341
|
)
|
|
(313,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,698,583
|
)
|
$
|
(292,615
|
)
|
$
|
(7,429,173
|
)
|
The
accompanying notes are an integral part of these financial
statements.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
(Unaudited)
|
|
Common stock
|
|
Additional
paid-in
|
|
Deficit
accumulated
during the
development
|
|
|
|
|
|
Shares
|
|
Amount
|
|
capital
|
|
stage
|
|
Total
|
|
Issuance
of common stock to founders at $0.001 per share
|
|
|
5,000,000
|
|
$
|
5,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of stock options for services
|
|
|
-
|
|
|
-
|
|
|
98,000
|
|
|
-
|
|
|
98,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss, period from August 1, 2005 (inception) through December 31,
2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,730,590
|
)
|
|
(3,730,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
5,000,000
|
|
|
5,000
|
|
|
98,000
|
|
|
(3,730,590
|
)
|
|
(3,627,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of stock options for services
|
|
|
-
|
|
|
-
|
|
|
319,318
|
|
|
-
|
|
|
319,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of warrants for services
|
|
|
-
|
|
|
-
|
|
|
480,400
|
|
|
-
|
|
|
480,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss, for the three months ended March 31, 2008
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,698,583
|
)
|
|
(3,698,583
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2008
|
|
|
5,000,000
|
|
$
|
5,000
|
|
$
|
897,718
|
|
$
|
(7,429,173
|
)
|
$
|
(6,526,455
|
)
|
The
accompanying notes are an integral part of these financial
statements.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
STATEMENTS
OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
August 1, 2005
|
|
|
|
|
|
|
|
(inception)
|
|
|
|
Three months ended March 31,
|
|
through
|
|
|
|
2008
|
|
2007
|
|
March 31, 2008
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,698,583
|
)
|
$
|
(292,615
|
)
|
$
|
(7,429,173
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
32,981
|
|
|
2,083
|
|
|
46,089
|
|
Stock
based compensation
|
|
|
799,718
|
|
|
-
|
|
|
897,718
|
|
Write-off
of intangible assets
|
|
|
-
|
|
|
-
|
|
|
85,125
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
Increase
in deposits
|
|
|
-
|
|
|
-
|
|
|
(12,165
|
)
|
Decrease
(increase) in prepaid expenses
|
|
|
10,749
|
|
|
5,482
|
|
|
(63,342
|
)
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
844,757
|
|
|
(16,224
|
)
|
|
2,076,410
|
|
Increase
in accrued interest - convertible notes
|
|
|
59,342
|
|
|
33,258
|
|
|
271,930
|
|
Increase
in due to related party
|
|
|
31,261
|
|
|
47,613
|
|
|
31,844
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,919,775
|
)
|
|
(220,403
|
)
|
|
(4,095,564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(13,950
|
)
|
|
-
|
|
|
(53,793
|
)
|
Cash
paid for intangible assets
|
|
|
-
|
|
|
(14,993
|
)
|
|
(85,125
|
)
|
Proceeds
from related party advance
|
|
|
-
|
|
|
-
|
|
|
525,000
|
|
Repayment
of related party advance
|
|
|
-
|
|
|
(350,000
|
)
|
|
(525,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(13,950
|
)
|
|
(364,993
|
)
|
|
(138,918
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Deferred
fees paid
|
|
|
(20,000
|
)
|
|
(25,000
|
)
|
|
(45,000
|
)
|
Proceeds
from issuance of common stock
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
Proceeds
from issuance of note payable - related party
|
|
|
1,000,000
|
|
|
-
|
|
|
1,000,000
|
|
Proceeds
from issuance of convertible notes payable
|
|
|
-
|
|
|
3,867,000
|
|
|
3,967,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
980,000
|
|
|
3,842,000
|
|
|
4,927,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(953,725
|
)
|
|
3,256,604
|
|
|
692,518
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
1,646,243
|
|
|
18,201
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
692,518
|
|
$
|
3,274,805
|
|
$
|
692,518
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
(Unaudited)
1
|
Organization
and business activities
|
The
Company
Arno
Therapeutics, Inc. (the “Company”), a Delaware corporation, was incorporated on
August 1, 2005. The Company is a biotechnology company that is initially
focusing its efforts on developing, testing and commercializing its lead
compound, AR-67, as a novel therapeutic for the treatment of cancer.
Additionally, as discussed in Note 3, the Company has begun development of
two
newly licensed compounds, AR-42 and AR-12.
The
Company’s primary activities since incorporation have been organizational;
including recruiting personnel, establishing office facilities, acquiring a
license to develop each of the Company's technologies, performing business
and
financial planning, conducting research and development activities and raising
capital and have not generated any revenues. Accordingly, the Company is
considered to be in the development stage.
Going
concern
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has a significant working capital
deficiency and has incurred recurring losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management’s
plans with regard to this uncertainty are discussed below.
On
March
5, 2008, the Company entered into an Agreement and Plan of Merger with Laurier
International, Inc., a Delaware corporation (“Laurier”) and its wholly-owned
subsidiary, Laurier Acquisition, Inc., also a Delaware corporation, pursuant
to
which Laurier Acquisition, Inc. shall be merged with and into the Company (the
“Merger”), the separate corporate existence of Laurier Acquisition, Inc. shall
cease and the Company shall continue as the surviving corporation and shall
become a wholly-owned subsidiary of Laurier. Laurier is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, and is publicly
traded on the OTC Bulletin Board. Laurier does not operate any
business.
As
a
condition to the closing of the Merger, the Company must obtain gross proceeds
from an equity-financing equal to at least $12,500,000 (the “Financing”). Upon
the closing of the Financing, the outstanding balance of the Notes (as defined
in Note 5) will automatically convert into shares of the Company’s common stock.
The Company expects to use the proceeds from the Financing to satisfy its
current outstanding obligations, including obligations under the Notes, the
Promissory Note (as defined in Note 6) and to provide sufficient funds in order
to continue its business plan over the next year or more. Management can provide
no assurances that the Company will be able to raise sufficient funds in order
to complete the Merger or satisfy its current outstanding obligations. The
accompanying financial statements do not include any adjustments that might
result from this uncertainty.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
(Unaudited)
At
the
effective time of the Merger, each of the Company’s then issued and outstanding
shares of common stock, including shares purchased in the Financing, will be
exchanged for shares of Laurier common stock, $0.0001 par value per share,
so
that, after giving effect to the Merger, the holders of the Company’s common
stock on a fully-diluted basis, will hold approximately 95% of the issued and
outstanding shares of Laurier common stock and the holders of Laurier common
stock immediately prior to the Merger shall hold approximately 5% of the
outstanding shares of Laurier common stock on a fully-diluted basis. All
outstanding warrants, options and other rights to purchase or acquire shares
of
the Company’s common stock outstanding immediately prior to the Merger shall
convert into the right to purchase that number of shares of Laurier common
stock
at the same exchange ratio used in connection with the exchange of shares of
the
Company's common stock for shares of common stock of Laurier in the Merger
at
adjusted exercise prices.
Upon
completion of the Merger, Laurier will adopt and continue implementing the
Company’s business plan. Further, upon completion of the Merger, the current
officers and directors of Laurier will resign and the current officers and
directors of the Company will be appointed officers and directors of Laurier.
For accounting purposes, the Merger will be accounted for as an acquisition
of
Laurier and recapitalization of the Company with the Company as the accounting
acquirer (legal acquiree) and Laurier as the accounting acquiree (legal
acquirer). Also at the effective date of the Merger, the Company will pay to
Fountainhead Capital Partners Limited (“Fountainhead”) a consulting fee of
$500,000 for their work in connection with the Merger. Fountainhead holds
approximately 82.4% of Laurier’s issued and outstanding common
stock.
As
a
result of the Merger, the Company expects to incur increased operating costs
primarily related to public company regulatory compliance.
2
|
Significant
accounting policies
|
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of
the financial statements and reported amounts of revenue and expenses during
the
reporting periods. Accordingly, actual results could differ from those
estimates.
Cash
and cash equivalents
For
purposes of the statements of cash flows, cash equivalents include time
deposits, money market accounts, and all highly liquid debt instruments with
original maturities of three months or less. The Company maintains cash in
bank
deposit accounts, which, at times, exceeds federally insured limits. The Company
has not experienced any losses on these accounts.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
(Unaudited)
Property
and equipment
Property
and equipment, which consists principally of office furniture, computer and
related equipment, are stated at cost. Maintenance and repairs are charged
to
expense as incurred. Additions, improvements and replacements are
capitalized.
Depreciation
of property and equipment, including leasehold improvements, is provided for
by
the straight-line method over the estimated useful lives of the related
assets.
Impairment
of long-lived assets
The
Company reviews long-lived assets for impairment whenever events or changes
in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An asset is considered impaired when the sum of the undiscounted
future net cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount. The amount of impairment
loss, if any, is measured as the difference between the net book value of the
asset and its estimated fair value.
Research
and development costs
Research
and development costs are expensed as incurred. Clinical trial costs incurred
by
third parties are expensed as the contracted work is performed. Where contingent
milestone payments are due to third parties under research and development
arrangements, the milestone payment obligations are expensed when the milestone
results are achieved. Costs related to the acquisition of technology rights
and
patents for which development work is still in process are expensed as incurred
and considered a component of research and development expense.
Income
taxes
In
accordance with Statement of Financial Accounting Standards (“SFAS”), No. 109,
Accounting for Income Taxes, deferred tax assets and liabilities are recognized
based on temporary differences between the financial statement and the tax
bases
of assets and liabilities. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which these assets and liabilities are expected to be recovered or settled.
The
Company provides a valuation allowance when it appears more likely than not
that
some or all of the net deferred tax assets will not be realized.
Share
based payments
The
Company accounts for its share based payments in accordance with Statement
of
Financial Accounting Standards No. 123R,
Share-Based
Payment
,
(“SFAS
123R”). SFAS 123R requires the recognition of stock-based compensation expense
in the financial statements. The terms and vesting schedules for share-based
awards vary by type of grant and the employment status of the grantee.
Generally, the awards vest based upon time-based or performance-based
conditions. Performance-based vesting conditions generally include the
attainment of goals related to the Company’s financial and development
performance.
Deferred
fees
Fees
associated with obtaining long and short-term debt financing have been deferred
and are being amortized to interest expense over the expected term of the
related debt. Fees directly related with the Financing are capitalized and
will
be charged to stockholders’ equity upon completion of the Financing.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
(Unaudited)
Pitt
license agreement
In
October 2006, the Company entered into an exclusive, worldwide, royalty bearing
license agreement (the “Pitt License Agreement”) with the University of
Pittsburgh to acquire the rights to develop and commercialize AR-67 and its
analogs, believed to have use in the treatment of, but not limited to,
cancer.
During
2006, a one-time fee of $350,000 was paid to the licensor and was charged to
research and development expense. Pursuant to the terms of the Pitt License
Agreement, the Company is obligated to make additional milestone payments based
on the occurrence of certain events. No such milestone payments are required
as
of March 31, 2008. The total amount of all potential future clinical, regulatory
and commercial milestone payments as of March 31, 2008 are $4,000,000, of which
$1,500,000 is payable following the acceptance by the United States Food and
Drug Administration ("FDA") of the first New Drug Application (“NDA”) for AR-67
and $2,500,000 upon FDA approval of the first NDA for AR-67.
Under
the
Pitt License Agreement, the Company is also obligated to pay the licensor annual
maintenance fees and royalty payments based on sales of licensed products,
as
defined.
AR-12
license agreement
On
January 3, 2008, the Company entered into an exclusive, worldwide, royalty
bearing license agreement (the “AR-12 License Agreement") with the Ohio State
University Research Foundation (“OSU”), which agreement includes the right to
grant sublicenses, for the rights to intellectual property and know-how relating
to AR-12, a small molecule with cancer-fighting properties, for all therapeutic
uses.
Pursuant
to the AR-12 License Agreement, a one-time license fee of $250,000 was paid
to
OSU during February 2008 and charged to research and development expense. In
addition, the Company is obligated to make additional milestone payments based
on the occurrence of certain events. The total amount of all potential future
milestone payments is $5,100,000, of which, $4,000,000 is payable following
receipt of regulatory approval of AR-12 in the United States, the European
Union
or Japan. The Company is also obligated to make a milestone payment in the
amount of $1,000,000 upon the first commercial sale of the licensed technology
in a second field of use as an anti-infective agent.
Under
the
AR-12 License Agreement, the Company is also obligated to pay OSU royalty
payments based on sales of the licensed technology, as defined.
AR-42
license agreement
On
January 9, 2008, the Company entered into an exclusive, worldwide, royalty
bearing license agreement (the “AR-42 License Agreement") with OSU, which
agreement includes the right to grant sublicenses, for the rights to
intellectual property and know-how relating to AR-42, a small molecule
considered to have powerful cancer-fighting properties, for all therapeutic
uses.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
(Unaudited)
Pursuant
to the AR-42 License Agreement, a one-time license fee of $200,000 was paid
to
OSU during February 2008 and charged to research and development expense. In
addition, the Company is obligated to make additional milestone payments based
on the occurrence of certain events. The total amount of all potential future
milestone payments is $5,100,000, of which, $4,000,000 is payable following
receipt of regulatory approval of AR-42 in the United States, the European
Union
or Japan.
Under
the
AR-42 License Agreement, the Company is also obligated to pay OSU royalty
payments based on sales of the licensed technology, as defined.
As
consideration for the performance of consulting and due diligence efforts
related to the AR-12 and AR-42 licensing agreements, the Company will pay
$200,000 and has granted fully vested warrants to purchase 150,000 shares of
its
common stock to certain consultants and related parties. The exercise price
of
the warrants will be equal to the price per share of common stock sold in the
Financing. The warrants were valued at $480,400 using the Black-Scholes
option-pricing model and the following assumptions: exercise price $4.83, a
3.27% risk-free interest rate, 5-year contractual term, dividend rate of 0%,
and
80.8% expected volatility. Of the total warrants granted, 120,000 with an
aggregate value of $384,320 were granted to employees of Two River Group
Holdings, LLC (“Two River”), a related party as discussed in Note 9. The
remaining warrants were granted to outside consultants.
In
August
2005, the Company issued 5,000,000 shares of common stock to its founders for
$5,000 or $0.001 per share.
5
|
Convertible
notes payable
|
During
February 2007, the Company completed a private placement offering of 6%
convertible promissory notes (the “Notes”) in the aggregate principal amount of
$3,967,000, which matures on February 9, 2009.
The
Notes
are unsecured obligations convertible into the Company’s common stock. Interest
on the Notes accrues at 6% per year and is payable in full on
maturity. The Notes mandatorily convert upon the closing of the Company's next
equity financing (“Subsequent Financing”) in which the Company sells
newly-issued shares of its equity securities or securities convertible into
equity securities, of one or more series (the “Equity Securities”) for cash
proceeds of $5,000,000 or more. At conversion, the outstanding principal and
accrued but unpaid interest shall automatically convert into validly issued,
fully paid and non-assessable Equity Securities of the same kind issued in
the
Subsequent Financing at a conversion price equal to 90% of the per share or
unit
purchase price of the Subsequent Financing.
In
addition, upon conversion, the Company shall issue warrants entitling the holder
to purchase, for a period of five years from the effective date of the
conversion, a number of shares of common stock of the Company computed by
dividing 10% of the principal amount of the Notes plus any unpaid accrued
interest by either (a) the price per share paid by investors in the Subsequent
Financing or (b) if a Subsequent Financing does not occur on or before the
maturity date, the price per share paid by the most recent investor in the
common stock of the Company.
At
March
31, 2008
and
December 31, 2007
, $271,930
and
$212,588
in interest has been accrued on the Notes,
respectively
.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
(Unaudited)
6
|
Note
payable - related party
|
During
March 2008, the Company issued an unsecured promissory note to an existing
holder of a portion of the Notes for an aggregate amount of $1,000,000 (the
“Promissory Note”). The full 8% premium is due upon early prepayment or at
maturity on July 3, 2008. Any amount of the Promissory Note that is unpaid
on
the maturity date will bear interest at 18% per year.
The
Company also paid a 2% financing fee to the holder of the Promissory Note,
which
has been deferred and is being amortized to interest expense over the expected
term of the Promissory Note.
At
March
31, 2008, $23,256 of interest has been accrued on the Promissory
Note.
7
|
Stock
based compensation
|
In
2005,
the Company established a stock option plan (the “Plan”) under which incentives
may be granted to officers, employees, directors, consultants and advisors.
Incentives under the Plan may be granted in any one or a combination of the
following forms: (a) incentive stock options and non-statutory stock options;
(b) stock appreciation rights; (c) stock awards; (d) restricted stock; and
(e)
performance shares. The number of shares of common stock, which may be issued
under the Plan, shall not exceed 1,500,000. During the period from August 1,
2005 (inception) through March 31, 2008, the Company granted a total of 535,000
stock options to employees and advisors with exercise prices ranging from $0.25
per share to $4.83 per share.
The
stock-based compensation expense in connection with stock option grants amounted
to $417,318 for the period from August 1, 2005 (inception) through March 31,
2008 of which $96,700 is included in research and development costs and $320,618
is included in general and administrative expense.
On
January 31, 2008, the Company granted stock options to a new employee, to
purchase 40,000 shares of its common stock, subject to certain vesting
requirements at an exercise price equal to the price per share of common stock
sold in the next equity financing. The options were valued at $138,100 using
the
Black-Scholes option-pricing model and the following assumptions: exercise
price
$4.83, a 2.83% risk-free interest rate, 4-year contractual term, dividend rate
of 0%, and 82.7% expected volatility.
On
March
31, 2008, the Company granted stock options to two newly appointed members
of
its Board of Directors, to purchase an aggregate of 150,000 shares of its common
stock, subject to certain vesting requirements at an exercise price equal to
the
price per share of common stock sold in the Financing. These options were valued
at $540,700 using the Black-Scholes option-pricing model and the following
assumptions: exercise price $4.83, a 2.47% risk-free interest rate, 5-year
contractual term, dividend rate of 0%, and 89.4% expected volatility.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
(Unaudited)
The
fair
value of each stock option granted has been determined using the Black-Scholes
Option Pricing model. The material factors incorporated in the Black-Scholes
Option Pricing model in estimating the value of the options are reflected in
the
following table:
Exercise
price
|
|
$0.25
- $4.83
|
|
|
|
|
|
Risk-free
interest rate
|
|
2.47%
- 4.85%
|
|
|
|
|
|
Volatility
|
|
62.67%
- 89.40%
|
|
|
|
|
|
Estimated
life in years
|
|
4-6
years
|
|
|
|
|
|
Dividends
paid
|
|
None
|
|
A
summary
of option activity under the Plan since inception is as follows:
Options
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
2006
|
|
|
|
|
|
Options
granted
|
|
|
75,000
|
|
$
|
0.25
|
|
Options
exercised
|
|
|
-
|
|
$
|
-
|
|
2007
|
|
|
|
|
|
|
|
Options
granted
|
|
|
270,000
|
|
$
|
2.00
|
|
Options
exercised
|
|
|
-
|
|
$
|
-
|
|
2008
|
|
|
|
|
|
|
|
Options
granted
|
|
|
190,000
|
|
$
|
4.83
|
|
Options
exercised
|
|
|
-
|
|
$
|
-
|
|
Outstanding
at March 31, 2008
|
|
|
535,000
|
|
|
2.76
|
|
Exercisable
at March 31, 2008
|
|
|
150,000
|
|
$
|
2.54
|
|
As
of
March 31, 2008, the aggregate fair value of stock options outstanding was
$1,031,700, with a weighted-average remaining term of approximately eight years.
The aggregate fair value of stock options exercisable at that same date was
$280,050, with a weighted-average remaining term of approximately seven years.
As of March 31, 2008, the Company has 965,000 shares available for future stock
option grants.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
(Unaudited)
As
of
March 31, 2008, total compensation expense not yet recognized related to stock
option grants amounted to $614,382, which will be recognized over the next
4
years.
On
October 1, 2007, the Company established a defined contribution 401(k) plan
(the
“401(k) Plan”) for the benefit of its employees. Substantially all of the
employees of the Company are eligible to participate in the 401(k) Plan that
permits employees to make voluntary contributions up to the dollar limit allowed
under the Internal Revenue Code. The 401(k) Plan also provides for matching
contributions by the Company of up to a combined total of 3% of eligible
compensation for each eligible employee, as defined. The Company has recorded
$4,163 of matching contributions for the period from August 1, 2005 (inception)
through March 31, 2008.
From
time-to-time, Two River Group Holdings, LLC, (“Two River”), an entity that is
partially controlled by several of the Company’s directors and founders, pays
for some of the Company’s expenses. The Company reimburses Two River for these
expenses and no interest is charged on the outstanding balance. For the three
months ended March 31, 2008, reimbursable expenses amounted to $31,261, with
a
total balance due of $31,844 at March 31, 2008
and
$583
at December 31, 2007.
During
2006 and 2007, Two River advanced a total of $525,000 to the Company on a
short-term basis in order for it to execute the Pitt License Agreement and
make
the initial license fee payment. The Company repaid this amount to Two River,
without interest, out of proceeds from the Notes.
The
Company utilized the services of Riverbank Capital Securities, Inc.
(“Riverbank"), a company owned by several of the Company's directors and
founders, for investment banking and other investment advisory services in
connection with the Company's private placement of the Notes. Riverbank charged
the Company a $25,000 non-accountable expense allowance and no brokerage fees
or
commissions in connection with the private placement.
In
connection with the Financing as discussed in Note 1, the Company is obligated
to pay Riverbank a $100,000 non-accountable expense allowance. At March 31,
2008
the Company has accrued for this fee and included it in due to related parties
on the accompanying balance sheet
The
financial condition and result of operations of the Company, as reported, are
not necessarily indicative of the results that would have been reported had
the
Company operated completely independently.
At
March
31, 2008, the Company had no federal income tax expense or benefit but did
have
federal tax net operating loss carry-forwards of approximately $6,101,000.
The
federal net operating loss carry-forwards will begin to expire in 2026, unless
previously utilized. Pursuant to Internal Revenue Code Sections 382 and 383,
use
of the Company’s net operating loss carry-forwards may be limited if a
cumulative change in ownership of more than 50% occurs within a three-year
period. No assessment has been made as to whether such a change in ownership
has
occurred. The Company incurred approximately $4,559 of statutory state tax
expense for the three months ended March 31, 2008.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
Significant
components of the Company’s net deferred tax assets at March 31, 2008 are shown
below. A valuation allowance of $2,965,000 has been established to offset the
net deferred tax assets at March 31, 2008, as realization of such assets is
uncertain.
Noncurrent
net operating loss carryforwards
|
|
$
|
2,624,000
|
|
Noncurrent
R&D credit
|
|
|
281,000
|
|
Other
noncurrent
|
|
|
60,000
|
|
Total
noncurrent
|
|
|
2,965,000
|
|
Other
current
|
|
|
-
|
|
Total
deferred tax assets
|
|
|
2,965,000
|
|
Deferred
tax asset valuation allowance
|
|
|
(2,965,000
|
)
|
Net
deferred taxes
|
|
$
|
-
|
|
During
2007, the Company entered into an operating lease for office space located
in
Fairfield, New Jersey. The Company is obligated under non-cancelable operating
leases for the office space and related office equipment expiring at various
dates through 2010. The aggregate remaining minimum future payments under these
leases at March 31, 2008 are as follows:
Year
ending December 31,
|
|
|
|
2008
|
|
$
|
39,750
|
|
2009
|
|
|
55,000
|
|
2010
|
|
|
52,000
|
|
|
|
$
|
146,750
|
|
The
Company has entered into various contracts with third parties in connection
with
the development of the licensed technology described in Note 3. The aggregate
minimum commitment under these contracts as of March 31, 2008 is
$1,909,499.
The
Company has also entered into various agreements with third party consultants,
which expire at various dates, through 2009 for which the Company is obligated
to pay for services based upon hourly rates or completion of services, as
defined.
As
of
March 31, 2008, the Company has an employment agreement with one key executive
expiring in June 2009. The agreement provides for a base salary of $350,000
plus
additional incentive compensation, as defined in the employment agreement.
ARNO
THERAPEUTICS, INC.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
PERIOD
FROM AUGUST 1, 2005 (INCEPTION)
TO
MARCH 31, 2008
Future
minimum commitments remaining under the employment agreement as of March 31,
2008 are as follows:
Year
ending December 31,
|
|
|
|
2008
|
|
|
355,000
|
|
2009
|
|
|
183,333
|
|
|
|
$
|
538,333
|
|
In
the
normal course of business, the Company enters into contracts that contain a
variety of indemnification obligations to its employees, licensors, suppliers
and service providers. Further, the Company indemnifies its directors and
officers who are, or were, serving at the Company’s request in such capacities.
The Company’s maximum exposure under these arrangements is unknown as of March
31, 2008. The Company does not anticipate recognizing any significant losses
relating to these arrangements.
Chang
G. Park, CPA, Ph. D.
t
371
E STREET
t
CHULA VISTA
t
CALIFORNIA 91910-2615
t
t
TELEPHONE (858)722-5953
t
FAX (858) 761-0341
t
FAX (858) 764-5480
t
E-MAIL
changgpark@gmail.com
t
Report
of Independent Registered Public Accounting Firm
To
the Board of Directors and Stockholders
Laurier
International, Inc.
(A
Development Stage Company)
We
have
audited the accompanying balance sheet of Laurier International, Inc. (A
Development Stage “Company”) as of December 31, 2007 and the related statements
of operations, changes in shareholders’ equity and cash flows for the years
ended December 31, 2007 and 2006 and for the period from March 8, 2000
(inception) to December 31, 2007. These financial statements are the
responsibility of the Company’s management.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Laurier International, Inc. as
of
December 31, 2007, and the results of its operation and its cash flows for
the
years ended December 31, 2007 and 2006, and for the period from March 8, 2000
(inception) to December 31, 2007 in conformity with U.S. generally accepted
accounting principles.
The
financial statements have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 4 to the financial statements, the
Company’s losses from operations raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/
Chang G. Park
__
CHANG
G. PARK, CPA
February
28, 2008
San
Diego, CA. 91910
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
BALANCE
SHEET
DECEMBER
31, 2007
ASSETS
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
Prepaid
Expense
|
|
|
3,333
|
|
TOTAL
ASSETS
|
|
$
|
3,333
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
Note
payable—related party
|
|
$
|
17,132
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
17,132
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIENCY:
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value, 20,000,000
Shares
authorized, none issued and outstanding Common Stock, $0.0001
par value,
80,000,000
shares
authorized, 5,501,000 shares issued
and
outstanding as of December 31,
2007
|
|
|
550
|
|
Additional
paid-in capital
|
|
|
120,098
|
|
Accumulated
deficit during development stage
|
|
|
(134,447
|
)
|
TOTAL
STOCKHOLDERS’ DEFICIENCY
|
|
|
(13,779
|
)
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
|
$
|
3,333
|
|
See
accompanying notes to financial statements
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
STATEMENTS
OF OPERATIONS
|
|
YEAR ENDED DECEMBER 31,
|
|
FROM
INCEPTION
(MAR. 8, 2000)
TO
|
|
|
|
2007
|
|
2006
|
|
DEC.
31, 2007
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
18,357
|
|
|
15,270
|
|
|
126,385
|
|
TOTAL
OPERATING EXPENSES
|
|
|
18,357
|
|
|
15,270
|
|
|
126,385
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS
|
|
|
(18,357
|
)
|
|
(15,270
|
)
|
|
(126,385
|
)
|
|
|
|
|
|
|
|
|
|
|
|
DISCONTINUED
OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
Gain/Loss
from Subsidiary (including gain on disposal of $85,326)
|
|
|
55,585
|
|
|
-
|
|
|
(8,062
|
)
|
GAIN/LOSS
FROM DISCONTINUED OPERATIONS
|
|
|
55,585
|
|
|
-
|
|
|
(8,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
|
|
|
37,228
|
|
|
(15,270
|
)
|
|
(134,447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for Income Taxes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$
|
37,228
|
|
$
|
(15,270
|
)
|
$
|
(134,447
|
)
|
BASIC
AND DILUTED INCOME (LOSS) PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
|
Continued
operation
|
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
|
Discontinued
operation
|
|
$
|
0.01
|
|
$
|
(0.00
|
)
|
|
|
|
Net
income (loss)
|
|
$
|
0.01
|
|
$
|
(0.00
|
)
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF
|
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING—BASIC AND DILUTED
|
|
|
5,501,000
|
|
|
5,501,000
|
|
|
|
|
See
accompanying notes to financial statements
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
Statement
of Changes in Stockholders' Equity (Deficit)
From
March 8, 2000 (inception) through December 31, 2007
|
|
Common Stock
|
|
Common
Stock
Amount
|
|
Additional
Paid-in
Capital
|
|
Deficit
Accumulated
During
Development
Stage
|
|
Total
|
|
Beginning balance, March
8, 2000
|
|
$
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Stock
issued for cash on August 1,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000
@ $0.0001 per share
|
|
|
5,000,000
|
|
|
500
|
|
|
|
|
|
|
|
|
500
|
|
Net
income, December 31, 2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
DECEMBER 31, 2000
|
|
|
5,000,000
|
|
|
500
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for cash on March 16, 2001 @ $0.15 per share
|
|
|
231,000
|
|
|
23
|
|
|
34,627
|
|
|
|
|
|
34,650
|
|
Stock
issued for cash on May 1, 2001 @ $0.15 per share
|
|
|
5,000
|
|
|
|
|
|
750
|
|
|
|
|
|
750
|
|
Stock
issued for cash on June 8, 2001 @ $0.15 per share
|
|
|
20,000
|
|
|
2
|
|
|
2,998
|
|
|
|
|
|
3,000
|
|
Stock
issued for cash on July 18, 2001 @ $0.15 per share
|
|
|
10,000
|
|
|
1
|
|
|
1,499
|
|
|
|
|
|
1,500
|
|
Stock
issued for cash on August 2, 2001 @ $0.15 per share
|
|
|
110,000
|
|
|
11
|
|
|
16,489
|
|
|
|
|
|
16,500
|
|
Stock
issued for cash on August 13, 2001 @ $0.15 per share
|
|
|
50,000
|
|
|
5
|
|
|
7,495
|
|
|
|
|
|
7,500
|
|
Stock
issued for cash on September 7, 2001 @ $0.15 per share
|
|
|
10,000
|
|
|
1
|
|
|
1,499
|
|
|
|
|
|
1,500
|
|
Stock
issued for cash on October 25, 2001 @ $0.15 per share
|
|
|
15,000
|
|
|
2
|
|
|
2,248
|
|
|
|
|
|
2,250
|
|
Net
loss, December 31, 2001
|
|
|
|
|
|
|
|
|
|
|
|
(47,341
|
)
|
|
(47,341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
DECEMBER 31, 2001
|
|
|
5,451,000
|
|
|
545
|
|
|
67,605
|
|
|
(47,341
|
)
|
|
20,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for cash on March 1, 2002 @ $0.15 per share
|
|
|
50,000
|
|
|
5
|
|
|
7,495
|
|
|
|
|
|
7,500
|
|
Net
loss, December 31, 2002
|
|
|
|
|
|
|
|
|
|
|
|
(46,364
|
)
|
|
(46,364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
DECEMBER 31, 2002
|
|
|
5,501,000
|
|
|
550
|
|
|
75,100
|
|
|
(93,705
|
)
|
|
(18,055
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
contribution
|
|
|
|
|
|
|
|
|
12,213
|
|
|
|
|
|
12,213
|
|
Net
loss, December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
(35,565
|
)
|
|
(35,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
DECEMBER 31, 2003
|
|
|
5,501,000
|
|
$
|
550
|
|
$
|
87,313
|
|
$
|
(129,270
|
)
|
$
|
(41,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
contribution
|
|
|
|
|
|
|
|
|
5,253
|
|
|
|
|
|
5,253
|
|
Net
loss, December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
(11,298
|
)
|
|
(11,298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
DECEMBER 31, 2004
|
|
|
5,501,000
|
|
$
|
550
|
|
$
|
92,566
|
|
$
|
(140,568
|
)
|
$
|
(47,452
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
contribution
|
|
|
|
|
|
|
|
|
27,532
|
|
|
|
|
|
27,532
|
|
Net
loss, December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
(15,837
|
)
|
|
(15,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
DECEMBER 31, 2005
|
|
|
5,501,000
|
|
$
|
550
|
|
$
|
120,098
|
|
$
|
(156,405
|
)
|
$
|
(35,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss, December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
(15,270
|
)
|
|
(15,270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
DECEMBER 31, 2006
|
|
|
5,501,000
|
|
$
|
550
|
|
$
|
120,098
|
|
$
|
(171,675
|
)
|
$
|
(51,027
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Profit, December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
37,228
|
|
|
37,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
DECEMBER 31, 2007
|
|
|
5,501,000
|
|
$
|
550
|
|
$
|
120,098
|
|
$
|
134,447
|
|
$
|
(13,799
|
)
|
See
Notes
to Consolidated Financial Statements
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
|
|
YEAR ENDED DEC. 31
|
|
FROM
INCEPTION
(MAR. 8, 2000)
TO
|
|
|
|
2007
|
|
2006
|
|
DEC.
31, 2007
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
37,228
|
|
$
|
(15,270
|
)
|
$
|
(134,447
|
)
|
Adjustments
to reconcile net income (loss) to
net
cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
369
|
|
|
713
|
|
|
3,744
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
-
|
|
|
554
|
|
|
-
|
|
Prepaid
Expense
|
|
|
(3,333
|
)
|
|
|
|
|
(3,333
|
)
|
Accounts
payable
|
|
|
(12,000
|
)
|
|
6,000
|
|
|
-
|
|
Sales
tax payable
|
|
|
(43
|
)
|
|
-
|
|
|
-
|
|
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
22,221
|
|
|
(8,003
|
)
|
|
(134,036
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of property & equipment
|
|
|
-
|
|
|
(207
|
)
|
|
(3,744
|
)
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
-
|
|
|
(207
|
)
|
|
(3,744
|
)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from note payable
|
|
|
(14,193
|
)
|
|
8,459
|
|
|
17,132
|
|
Increase
in loan from officer
|
|
|
(8,995
|
)
|
|
-
|
|
|
-
|
|
Common
stock issued for cash
|
|
|
|
|
|
-
|
|
|
550
|
|
Additional
paid-in capital
|
|
|
|
|
|
-
|
|
|
120,098
|
|
NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
(23,188
|
)
|
|
8,459
|
|
|
137,780
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE
(DECREASE) IN CASH
|
|
|
(967
|
)
|
|
249
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
- BEGINNING OF YEAR
|
|
|
967
|
|
|
718
|
|
|
-
|
|
CASH
- END OF YEAR
|
|
$
|
-
|
|
$
|
967
|
|
$
|
-
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Cash
paid for taxes
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
See
accompanying notes to financial statements
LAURIER
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2007
NOTE
1
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
|
A.
ORGANIZATION
The
Company was incorporated in the State of Delaware on March 8, 2000. From
inception through September 27, 2007, the Company was a development stage
company in the business of producing written resources for students through
its
wholly owned subsidiary, Geotheatre Productions, Inc. On September 27, 2007,
the
Company divested Geotheatre Productions, Inc. and changed its business plan.
The
Company’s business plan now consists of exploring potential targets for a
business combination through the purchase of assets, share purchase or exchange,
merger or similar type of transaction. The Company has limited operations and
in
accordance with SFAS # 7, the Company is considered a development stage
company.
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
A.
BASIS OF ACCOUNTING
The
financial statements have been prepared using the accrual basis of accounting.
Under the accrual basis of accounting, revenues are recorded as earned and
expenses are recorded at the time liabilities are incurred. The Company has
adopted a December 31, year-end.
B.
CASH EQUIVALENTS
The
Company considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
C.
BASIS OF CONSOLIDATION
The
consolidated financial statements include the accounts of Laurier International,
the parent Company, and Geotheatre Productions, Inc. Geotheatre Productions,
Inc., which until September 27, 2007 was a wholly owned subsidiary. On September
27, 2007, the Company divested its wholly-owned subsidiary, Geotheatre
Productions, Inc. in consideration of the assumption by the purchaser of current
liabilities in the amount of $32,138. As a result, Geotheatre Productions,
Inc.
is treated as a discontinued operation for the purposes of these financial
statements. As of September 27, 2007, the Company’s net investment in Geotheatre
Productions, Inc. was ($53,188). The divestiture therefore resulted in a gain
on
disposal of $85,326. After netting operational losses attributable to such
discontinued operations, the Company recorded a gain from Geotheatre
Productions, Inc. of $60,920 and $55,585 for the three and nine months ended
September 30, 2007, respectively. All significant inter-company balances and
transactions have been eliminated in consolidation.
D.
PROPERTY AND EQUIPMENT
Property
and equipment are stated at cost. Equipment and fixtures are depreciated using
the straight-line method over the estimated asset lives ranging from 3 to 7
years.
LAURIER
INTERNATIONAL, INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2007
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
E.
USE OF ESTIMATES
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F.
DEVELOPMENT STAGE
The
Company continues to devote substantially all of its efforts to exploring
potential targets for a business combination through the purchase of assets,
share purchase or exchange, merger or similar type of transaction.
G.
BASIC EARNINGS PER SHARE
In
February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share.
Basic
net
loss per share amounts is computed by dividing the net income by the weighted
average number of common shares outstanding. Diluted earnings per share are
the
same as basic earnings per share due to the lack of dilutive items in the
Company.
H.
INCOME TAXES
Income
taxes are provided in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset
or liability is recorded for all temporary differences between financial and
tax
reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
I.
REVENUE RECOGNITION
The
Company has not recognized any revenues from its continuing
operations.
J.
NEW ACCOUNTING PRONOUNCEMENTS
In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." This
statement defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements. The statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within that fiscal year. The Company
is
currently evaluating the impact of adopting this statement.
LAURIER
INTERNATIONAL, INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2007
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities - including an amendment of FAS
115".
This statement permits entities to choose to measure many financial instruments
and certain other items at fair value. This statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007, including
interim periods within that fiscal year. The Company is currently evaluating
the
impact of adopting this statement.
NOTE
3
|
WARRANTS
AND OPTIONS
|
There
are
no warrants or options outstanding to acquire any additional shares of common
or
preferred stock.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company generated net losses of $134,447
during the period of March 8, 2000 (inception) to December 31, 2007. This
condition raises substantial doubt about the Company's ability to continue
as a
going concern. The Company's continuation as a going concern is dependent on
its
ability to meet its obligations, to obtain additional financing as may be
required and ultimately to attain profitability. The financial statements do
not
include any adjustments that might result from the outcome of this
uncertainty.
Management
has no plans to raise additional funds through debt or equity offerings and
is
dependent on advances from shareholders to meet its operating expenses. No
shareholder has given the Company any commitment with respect to any additional
funding. There is no guarantee that the Company will be able to raise the
capital necessary to meet its continuing operating expenses.
NOTE
5
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consists of the following:
|
|
December
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Office
Equipment
|
|
$
|
–
|
|
$
|
2,528
|
|
Equipment
|
|
|
–
|
|
|
1,216
|
|
|
|
|
|
|
|
|
|
Total
Property and Equipment
|
|
|
–
|
|
|
3,744
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated Depreciation
|
|
|
–
|
|
|
(3,375
|
)
|
|
|
|
|
|
|
|
|
Net
Property and Equipment
|
|
|
–
|
|
|
369
|
|
Depreciation
expense for the year ended December 31, 2007 was $-0-.
LAURIER
INTERNATIONAL, INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2007
NOTE
6
|
NOTE
PAYABLE - (A RELATED
PARTY)
|
At
December 31, 2007, the Company had loans and notes outstanding from certain
shareholders in the aggregate amount of $17,132, which represents amounts loaned
to the Company to pay the Company’s expenses of operation. On December 31, 2007,
this shareholder payable was exchanged for a convertible promissory note with
a
principal balance of $17,132 due and payable on December 31, 2008. The principal
balance of the convertible promissory note and all accrued interest thereunder
is convertible, in whole or in part, into shares of the Company’s common stock
at the option of the payee or other holder thereof at any time prior to
maturity, upon ten days advance written notice to the Company. The number of
shares of the Company’s common stock issuable upon such conversion shall be
determined by the Board of Directors of the Company based on what it determines
the fair market value of the Company is at the time of such conversion. Upon
conversion, the note shall be cancelled and a replacement note in identical
terms shall be promptly issued by the maker to the holder thereof to evidence
the remaining outstanding principal amount thereof as of the date of the
conversion, if applicable. In the event of a stock split, combination, stock
dividend, recapitalization of the Company or similar event, the conversion
price
and number of shares issuable upon conversion shall be equitably adjusted to
reflect the occurrence of such event.
NOTE
7
|
RELATED
PARTY TRANSACTION
|
Effective
as of November 1, 2007, the Company entered into a Services Agreement with
Fountainhead Capital Management Limited (“FHM”). The term of the Services
Agreement is one year and the Company is obligated to pay FHM a quarterly fee
in
the amount of $10,000, in cash or in kind, on the first day of each calendar
quarter commencing November 1, 2007. Pursuant to the terms of the Services
Agreement, FHMP shall provide the following services to the
Company:
(a)
FHM will familiarize itself to the extent it deems appropriate with the
business, operations, financial condition and prospects of the
Company;
(b) At
the request of the Company’s management, FHM will provide strategic advisory
services relative to the achievement of the Company’s business
plan;
(c) FHM
will undertake to identify potential merger and acquisition targets for the
Company and assist in the analysis of proposed transactions;
(d) FHM
will assist the Company in identifying potential investment bankers, placement
agents and broker-dealers who are qualified to act on behalf of the Company
to
achieve its strategic goals.
(e) FHM
will assist in the identification of potential investors which might have an
interest in evaluating participation in financing transactions with the
Company;
(f) FHM
will assist the Company in the negotiation of merger, acquisition and corporate
finance transactions;
LAURIER
INTERNATIONAL, INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2007
NOTE
7
|
RELATED
PARTY TRANSACTION
|
(g) At
the request of the Company’s management, FHM will provide advisory services
related to corporate governance and matters related to the maintenance of the
Company’s status as a publicly-reporting company; and
(h) At
the request of the Company’s management, FHM will assist the Company in
satisfying various corporate compliance matters.
|
|
As of
December
31,
2007
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
Net
operating tax carryforwards
|
|
$
|
45,712
|
|
Other
|
|
|
0
|
|
|
|
|
|
|
Gross
deferred tax assets
|
|
|
45,712
|
|
Valuation
allowance
|
|
|
(45,712
|
)
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
0
|
|
Realization
of deferred tax assets is dependent upon sufficient future taxable income during
the period that deductible temporary differences and carryforwards are expected
to be available to reduce taxable income. As the achievement of required future
taxable income is uncertain, the Company recorded a valuation
allowance.
NOTE
9
|
SCHEDULE
OF NET OPERATING LOSSES
|
2000
Net Operating Income
|
|
$
|
0
|
|
2001
Net Operating Loss
|
|
|
(47,341
|
)
|
2002
Net Operating Loss
|
|
|
(46,364
|
)
|
2003
Net Operating Loss
|
|
|
(35,565
|
)
|
2004
Net Operating Loss
|
|
|
(11,298
|
)
|
2005
Net Operating Loss
|
|
|
(15,837
|
)
|
2006
Net Operating Loss
|
|
|
(15,270
|
)
|
2007
Net Operating Income
|
|
|
37,228
|
|
Net
Operating Loss
|
|
$
|
(134,447
|
)
|
As
of
December 31, 2007, the Company has a net operating loss carryforward of
approximately $134,447, which will expire 20 years from the date the loss was
incurred.
LAURIER
INTERNATIONAL, INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2007
NOTE
10
|
STOCK
TRANSACTIONS
|
Transactions,
other than employees' stock issuance, are in accordance with paragraph 8 of
SFAS
123. Thus issuances shall be accounted for based on the fair value of the
consideration received. Transactions with employees' stock issuance are in
accordance with paragraphs (16-44) of SFAS 123. These issuances shall be
accounted for based on the fair value of the consideration received or the
fair
value of the equity instruments issued, or whichever is more readily
determinable.
On
August
1, 2000 the Company issued 5,000,000 shares of common stock for cash at $0.0001
per share.
On
March
16, 2001 the Company issued 231,000 shares of common stock for cash at $0.15
per
share.
On
May 1,
2001 the Company issued 5,000 shares of common stock for cash at $0.15 per
share.
On
September 8, 2001 the Company issued 20,000 shares of common stock for cash
at
$0.15 per share.
On
July
18, 2001 the Company issued 10,000 shares of common stock for cash at $0.15
per
share.
On
August
2, 2001 the Company issued 110,000 shares of common stock for cash at $0.15
per
share.
On
August
13, 2001 the Company issued 50,000 shares of common stock for cash at $0.15
per
share.
On
September 7, 2001 the Company issued 10,000 shares of common stock for cash
at
$0.15 per share.
On
October 25, 2001 the Company issued 15,000 shares of common stock for cash
at
$0.15 per share.
On
March
1, 2002 the Company issued 50,000 shares of common stock for cash at $0.15
per
share.
As
of
December 31, 2007 the Company had 5,501,000 shares of common stock issued and
outstanding.
NOTE
11
|
STOCKHOLDERS'
EQUITY
|
The
stockholders' equity section of the Company contains the following classes
of
capital stock as of December 31, 2007:
*
Preferred stock, $0.0001 par value: 20,000,000 shares authorized; -0- shares
issued and outstanding.
*
Common
stock, $0.0001 par value: 80,000,000 shares authorized; 5,501,000 shares issued
and outstanding.
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
Balance
Sheet
|
|
(Unaudited)
|
|
|
|
|
|
As of
March 31,
2008
|
|
As of
December 31,
2007
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Prepaid
expense
|
|
$
|
-
|
|
$
|
3,333
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
-
|
|
$
|
3,333
|
|
|
|
|
|
|
|
|
|
LIABILITIES
& STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,945
|
|
$
|
-
|
|
Note
payable - (a related party)
|
|
|
30,159
|
|
|
17,132
|
|
Accrued
interest
|
|
|
257
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
34,361
|
|
|
17,132
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
34,361
|
|
|
17,132
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, ($.0001 par value, 20,000,000 shares authorized; none issued
and
outstanding)
|
|
|
-
|
|
|
-
|
|
Common
stock, ($.0001 par value, 80,000,000 shares authorized; 5,501,000
shares
outstanding as of March 31, 2008 and December 31, 2007)
|
|
|
550
|
|
|
550
|
|
Additional
paid-in capital
|
|
|
120,098
|
|
|
120,098
|
|
Deficit
accumulated during development stage
|
|
|
(155,009
|
)
|
|
(134,447
|
)
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity (Deficit)
|
|
|
(34,361
|
)
|
|
(13,799
|
)
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
|
|
$
|
-
|
|
$
|
3,333
|
|
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
Consolidated
Statement of Operations (Unaudited)
|
|
Three Months
Ended
March 31,
2008
|
|
Three Months
Ended
March 31,
2007
|
|
March 8, 2000
(Inception)
through
March 31,
2008
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenues
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Costs
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative expenses
|
|
|
20,305
|
|
|
4,630
|
|
|
146,690
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Costs
|
|
|
20,305
|
|
|
4,630
|
|
|
146,690
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (loss)
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(257
|
)
|
|
-
|
|
|
(257
|
)
|
Total
other income (loss)
|
|
|
(257
|
)
|
|
-
|
|
|
(257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Continuing Operation
|
|
$
|
(20,562
|
)
|
$
|
(4,630
|
)
|
$
|
(146,947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
Operation
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) from Subsidiary-Geotheatre
|
|
|
-
|
|
|
-
|
|
|
(8,062
|
)
|
(Including
gain on disposal of $85,326)
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) from discontinued operation
|
|
|
-
|
|
|
-
|
|
|
(8,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Gain (Loss)
|
|
$
|
(20,562
|
)
|
$
|
(4,630
|
)
|
$
|
(155,009
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
Continued
operation
|
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operation
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
5,501,000
|
|
|
5,501,000
|
|
|
|
|
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
Statement
of Cash Flows (Unaudited)
|
|
Three Months
Ended
March 31,
2008
|
|
Three Months
Ended
March 31,
2007
|
|
March 8, 2000
(Inception)
through
March 31,
2008
|
|
CASH FLOWS
FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(20,562
|
)
|
$
|
(4,630
|
)
|
$
|
(155,009
|
)
|
Adjustments
to reconcile net loss to net cash provided
|
|
|
|
|
|
|
|
|
|
|
(used
in) by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
-
|
|
|
141
|
|
|
3,744
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
-
|
|
Decrease
(increase) in prepaid expense
|
|
|
3,333
|
|
|
-
|
|
|
-
|
|
Increase
(decrease) in accounts payable
|
|
|
3,945
|
|
|
1,500
|
|
|
1,445
|
|
Increase
(decrease) in interest payable
|
|
|
257
|
|
|
-
|
|
|
257
|
|
Net
cash provided by (used in) operating
activities
|
|
$
|
(13,027
|
)
|
$
|
(2,989
|
)
|
$
|
(149,563
|
)
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of property & equipment
|
|
|
-
|
|
|
-
|
|
|
(3,744
|
)
|
Net
cash provided by (used in) investing
activities
|
|
|
-
|
|
|
-
|
|
|
(3,744
|
)
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Proceeds
(payments) from note payable
|
|
|
13,027
|
|
|
-
|
|
|
30,159
|
|
Increase
in loan from officer
|
|
|
-
|
|
|
2,097
|
|
|
-
|
|
Common
stock issued for cash
|
|
|
|
|
|
|
|
|
550
|
|
Additional
paid-in capital
|
|
|
-
|
|
|
-
|
|
|
120,098
|
|
Net
cash provided by (used in) financing
activities
|
|
|
13,027
|
|
|
2,097
|
|
|
150,807
|
|
Net
increase (decrease) in cash
|
|
|
-
|
|
|
(892
|
)
|
|
(2,500
|
)
|
Cash
at beginning of period
|
|
|
-
|
|
|
967
|
|
|
-
|
|
Cash
at end of period
|
|
$
|
-
|
|
$
|
75
|
|
$
|
-
|
|
Supplemental
cash flows disclosures:
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during period for interest
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Cash
paid during period for income taxes
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
NOTES
TO THE INTERIM FINANCIAL STATEMENTS
March
31, 2008
(Stated
in US Dollars)
(Unaudited)
NOTE
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
The
accompanying un-audited condensed financial statements 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-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all
of
the information and footnotes required by accounting principles generally
accepted in the United States of America for annual financial statements. In
the
opinion of management, all adjustments, consisting of normal recurring accruals
considered necessary for a fair presentation, have been included. Operating
results for the three months ended March 31, 2008 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2008.
For
further information, refer to the financial statements and footnotes thereto
included in the Form 10-KSB for the year ended December 31, 2007.
Business
description
The
Company was incorporated in the State of Delaware on March 8, 2000. From
inception through September 27, 2007, the Company was a development stage
company in the business of producing written resources for students through
its
wholly owned subsidiary, Geotheatre Productions, Inc. On September 27, 2007,
the
Company divested Geotheatre Productions, Inc. and changed its business plan.
The
Company’s business plan now consists of exploring potential targets for a
business combination through the purchase of assets, share purchase or exchange,
merger or similar type of transaction. The Company has limited operations and
in
accordance with SFAS # 7, the Company is considered a development stage
company.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.
BASIS OF ACCOUNTING
The
financial statements have been prepared using the accrual basis of accounting.
Under the accrual basis of accounting, revenues are recorded as earned and
expenses are recorded at the time liabilities are incurred. The Company has
adopted a December 31, year-end.
B.
CASH EQUIVALENTS
The
Company considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
C.
BASIS OF CONSOLIDATION
The
consolidated financial statements include the accounts of Laurier International,
the parent Company, and Geotheatre Productions, Inc. Geotheatre Productions,
Inc., which until September 27, 2007 was a wholly owned subsidiary. On September
27, 2007, the Company divested its wholly-owned subsidiary, Geotheatre
Productions, Inc. in consideration of the assumption by the purchaser of current
liabilities in the amount of $32,138. As a result, Geotheatre Productions,
Inc.
is treated as a discontinued operation for the purposes of these financial
statements.
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
NOTES
TO THE INTERIM FINANCIAL STATEMENTS
March
31, 2008
(Stated
in US Dollars)
(Unaudited)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CON’T)
D.
PROPERTY AND EQUIPMENT
Property
and equipment are stated at cost. Equipment and fixtures are depreciated using
the straight-line method over the estimated asset lives ranging from 3 to 7
years.
E.
USE OF ESTIMATES
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F.
DEVELOPMENT STAGE
The
Company continues to devote substantially all of its efforts to exploring
potential targets for a business combination through the purchase of assets,
share purchase or exchange, merger or similar type of transaction.
G.
BASIC EARNINGS PER SHARE
In
February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share.
Basic
net
loss per share amounts is computed by dividing the net income by the weighted
average number of common shares outstanding. Diluted earnings per share are
the
same as basic earnings per share due to the lack of dilutive items in the
Company.
H.
INCOME TAXES
Income
taxes are provided in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset
or liability is recorded for all temporary differences between financial and
tax
reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
I.
REVENUE RECOGNITION
The
Company has not recognized any revenues from its continuing
operations.
NOTE
3. WARRANTS AND OPTIONS
There
are
no warrants or options outstanding to acquire any additional shares of common
or
preferred stock.
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
NOTES
TO THE INTERIM FINANCIAL STATEMENTS
March
31, 2008
(Stated
in US Dollars)
(Unaudited)
NOTE
4. GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company generated net losses of 155,009
during the period of March 8, 2000 (inception) to March 31, 2008. This condition
raises substantial doubt about the Company's ability to continue as a going
concern. The Company's continuation as a going concern is dependent on its
ability to meet its obligations, to obtain additional financing as may be
required and ultimately to attain profitability. The financial statements do
not
include any adjustments that might result from the outcome of this
uncertainty.
The
Company is dependent on advances from its principal shareholders for continued
funding. There are no commitments or guarantees from any third party to provide
such funding nor is there any guarantee that the Company will be able to access
the funding it requires to continue its operations.
NOTE
5. PROPERTY AND EQUIPMENT
All
property and equipment was divested on September 27, 2007 as a result of the
divestiture of the Company’s sole subsidiary, Geothermal Productions,
Inc.
NOTE
6. NOTE PAYABLE - (RELATED PARTY)
At
March
31, 2008, the Company had loans and notes outstanding from certain shareholders
in the aggregate amount of $13,027, which represents amounts loaned to the
Company to pay the Company’s expenses of operation. On March 31, 2008, this
shareholder payable was exchanged for a convertible promissory note with a
principal balance of $13,027 due and payable on March 31, 2009. The Company
had
previously issued a convertible promissory note with a principal balance of
$17,132 to the same shareholder, and as a result, the aggregate principal amount
due to this shareholder as of March 31, 2008 was $30,159, together with accrued
interest payable of $257. The principal balance of the convertible promissory
notes and all accrued interest thereunder is convertible, in whole or in part,
into shares of the Company’s common stock at the option of the payee or other
holder thereof at any time prior to maturity, upon ten days advance written
notice to the Company. The number of shares of the Company’s common stock
issuable upon such conversion shall be determined by the Board of Directors
of
the Company based on what it determines the fair market value of the Company
is
at the time of such conversion. Upon conversion, the note shall be cancelled
and
a replacement note in identical terms shall be promptly issued by the maker
to
the holder thereof to evidence the remaining outstanding principal amount
thereof as of the date of the conversion, if applicable. In the event of a
stock
split, combination, stock dividend, recapitalization of the Company or similar
event, the conversion price and number of shares issuable upon conversion shall
be equitably adjusted to reflect the occurrence of such event.
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
NOTES
TO THE INTERIM FINANCIAL STATEMENTS
March
31, 2008
(Stated
in US Dollars)
(Unaudited)
NOTE
7. RELATED PARTY TRANSACTION
Effective
as of November 1, 2007, the Company entered into a Services Agreement with
Fountainhead Capital Management Limited (“FHM”). The term of the Services
Agreement is one year and the Company is obligated to pay FHM a quarterly fee
in
the amount of $10,000, in cash or in kind, on the first day of each calendar
quarter commencing November 1, 2007. Pursuant to the terms of the Services
Agreement, FHMP shall provide the following services to the
Company:
(a)
FHM will familiarize itself to the extent it deems appropriate with the
business, operations, financial condition and prospects of the
Company;
(b) At
the request of the Company’s management, FHM will provide strategic advisory
services relative to the achievement of the Company’s business
plan;
(c) FHM
will undertake to identify potential merger and acquisition targets for the
Company and assist in the analysis of proposed transactions;
(d) FHM
will assist the Company in identifying potential investment bankers, placement
agents and broker-dealers who are qualified to act on behalf of the Company
to
achieve its strategic goals.
(e) FHM
will assist in the identification of potential investors which might have an
interest in evaluating participation in financing transactions with the
Company;
(f) FHM
will assist the Company in the negotiation of merger, acquisition and corporate
finance transactions;
(g) At
the request of the Company’s management, FHM will provide advisory services
related to corporate governance and matters related to the maintenance of the
Company’s status as a publicly-reporting company; and
(h) At
the request of the Company’s management, FHM will assist the Company in
satisfying various corporate compliance matters.
NOTE
8. INCOME TAXES
|
|
As of March 31, 2008
|
|
Deferred
tax assets:
|
|
|
|
Net
operating tax carryforwards
|
|
$
|
52,703
|
|
Other
|
|
|
0
|
|
Gross
deferred tax assets
|
|
|
52,703
|
|
Valuation
allowance
|
|
|
(52,703
|
)
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
0
|
|
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
NOTES
TO THE INTERIM FINANCIAL STATEMENTS
March
31, 2008
(Stated
in US Dollars)
(Unaudited)
NOTE
8. INCOME TAXES (CON’T)
Realization
of deferred tax assets is dependent upon sufficient future taxable income during
the period that deductible temporary differences and carryforwards are expected
to be available to reduce taxable income. As the achievement of required future
taxable income is uncertain, the Company recorded a valuation
allowance.
NOTE
9. STOCKHOLDERS' EQUITY
The
stockholders' equity section of the Company contains the following classes
of
capital stock as of March 31, 2008:
|
*
|
Preferred
stock, $0.0001 par value: 20,000,000 shares authorized; -0- shares
issued
and outstanding.
|
|
*
|
Common
stock, $0.0001 par value: 80,000,000 shares authorized; 5,501,000
shares
issued and outstanding.
|
NOTE
10. SIGNIFICANT EVENTS
On
September 27, 2007, the Company divested its wholly-owned subsidiary, Geotheatre
Productions, Inc. in consideration of the assumption by the purchaser of current
liabilities in the amount of $32,138. As a result, Geotheatre Productions,
Inc.
is treated as a discontinued operation for the purposes of these financial
statements.
On
March
5, 2008, the Company entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with Arno Therapeutics, Inc., a Delaware corporation (“Arno”) and
the Company’s wholly-owned subsidiary, Laurier Acquisition, Inc., a Delaware
corporation (“Laurier Merger Sub”), pursuant to which Arno will complete an
acquisition and recapitalization transaction (the “Merger”) with the Company.
Arno is a development-stage biopharmaceutical company that develops and
commercializes innovative products for the treatment of cancer. The Merger
is
subject to customary conditions of closing, including a financing requirement
regarding Arno. However, there can be no assurance that the conditions to
closing will be fulfilled or that the Merger will ultimately be
consummated.
At
the
effective time of the Merger, each of the then issued and outstanding shares
of
common stock, $0.001 par value per share (Arno “Common Stock”) of Arno will
be automatically converted into such number of shares of the Company’s common
stock par value $0.0001 per share (the “Laurier Common Stock”) determined by
dividing (x) 20,903,000 by (y) the aggregate number of shares of Arno Common
Stock issued and outstanding immediately prior to the effective time, on a
fully
diluted basis, after giving effect to the conversion, exchange and exercise
of
all securities that are currently directly or indirectly convertible into or
exercisable for Arno Common Stock (the “Exchange Ratio”), so that, after giving
effect to such Merger, the holders of Arno Common Stock will hold approximately
95% of the issued and outstanding shares of Laurier Common Stock. All
outstanding warrants, options and other rights to purchase or acquire shares
of
Arno Common Stock outstanding immediately prior to the Merger shall convert
into
the right to purchase that number of shares of Laurier Common Stock based upon
and at exercise prices adjusted by the Exchange Ratio.
At
the
effective time of the Merger, the stockholders of the Company immediately prior
to the Merger will hold 1,100,200 shares of Laurier Common Stock, which shall
represent approximately 5% of the outstanding shares of Laurier Common Stock
on
a fully-diluted basis immediately following the effective time. At December
31,
2007, the Company was indebted to Fountainhead Capital Management Limited,
a
shareholder holding approximately 82.4% of the Company’s Common Stock, in the
amount of $17,132.00 comprising a convertible promissory note due and payable
on
December 31, 2008 (the “Laurier Note”). As a condition to the closing of the
Merger, the principal balance of the Laurier Note and all accrued interest
thereunder shall be converted into a number of shares of Laurier such that
the
total number of shares of Laurier Common Stock outstanding immediately prior
to
the effective time of the Merger will not exceed 1,100,200.
LAURIER
INTERNATIONAL, INC.
(A
Development Stage Company)
NOTES
TO THE INTERIM FINANCIAL STATEMENTS
March
31, 2008
(Stated
in US Dollars)
(Unaudited)
NOTE
10. SIGNIFICANT EVENTS (CON’T)
Upon
completion of the Merger, the Company will adopt and continue implementing
Arno’s business plan. Further, upon completion of the Merger, the current
officers and directors of the Company will resign and the current officers
and
directors of Arno will be appointed officers and directors of the Company.
For
accounting purposes, the Merger is expected to be accounted for as a reverse
acquisition with Arno as the accounting acquiror (legal acquiree) and the
Company as the accounting acquiree (legal acquiror).
Pursuant
to the terms of the Merger Agreement, the Merger shall close on or before May
15, 2008. Outside of the Merger Agreement and the transactions contemplated
thereby, there is no material relationship between the Company and
Arno.
10,585,334
Shares
Common
Stock
,
2008
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND
DISTRIBUTION.
The
following table sets forth all costs and expenses, other than underwriting
discounts and commissions, payable by us in connection with the sale of the
common stock being registered. All amounts shown are estimates except for the
SEC registration fee.
|
|
Amount
to be Paid
|
|
SEC
registration fee
|
|
$
|
1,206
|
|
Legal
fees and expenses
|
|
|
50,000
|
|
Accounting
fees and expenses
|
|
|
20,000
|
|
Printing
and engraving and miscellaneous expenses
|
|
|
5,000
|
|
Total
|
|
$
|
76,206
|
|
ITEM
14. INDEMNIFICATION OF DIRECTORS AND
OFFICERS.
Section 145
of the General Corporation Law of the State of Delaware provides as follows:
A
corporation may indemnify any person who was or is a party or is threatened
to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than
an action by or in the right of the corporation) by reason of the fact that
the
person is or was a director, officer, employee or agent of the corporation,
or
is or was serving at the request of the corporation as a director, officer,
employee or agent or another corporation, partnership, joint venture, trust
or
other enterprise, against expenses (including attorneys’ fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the person
in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed
to
the best interest of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe the person’s conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed
to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that the person’s conduct was
unlawful.
A
corporation may indemnify any person who was or is a party or is threatened
to
be made a party to any threatened, pending or completed action or suit by or
in
the right of the corporation to procure a judgment in its favor by reason of
the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys’ fees)
actually and reasonably incurred by the person in connection with the defense
or
settlement of such action or suit if the person acted in good faith and in
a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification will be made
in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that
the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Our
certificate of incorporation provides that we will indemnify any person,
including persons who are not our directors and officers, to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law.
In
addition, pursuant to our bylaws, we will indemnify our directors and officers
against expenses (including judgments or amounts paid in settlement) incurred
in
any action, civil or criminal, to which any such person is a party by reason
of
any alleged act or failure to act in his capacity as such, except as to a matter
as to which such director or officer shall have been finally adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation or not to have acted in good faith in the reasonable belief that
his
action was in the best interest of the corporation.
Reference
is made to Item 17 for our undertakings with respect to indemnification for
liabilities arising under the Securities Act of 1933.
ITEM
15. RECENT SALES OF UNREGISTERED
SECURITIES.
The
following summarizes all sales of unregistered securities by Old Arno since
inception in August 2005. Each issued and outstanding share of Old Arno common
stock converted to 1.99377 shares of the Registrant’s common stock as of the
closing of the merger transaction between Laurier International, Inc. and Arno
Therapeutics, Inc., as described above in the accompanying
prospectus:
In
August
2005, in connection with Old Arno’s incorporation, Old Arno issued an aggregate
of 5,000,000 shares of Old Arno common stock, or 9,968,787 shares of
Company common stock after giving effect to the merger, for aggregate
consideration of $5,000.
In
November 2006, Old Arno issued options to purchase an aggregate of 75,000 shares
of Old Arno common stock at an exercise price of $0.25 per share to three
members of Old Arno’s scientific advisory board. The options expire in February
2011. The options were automatically converted at the merger for options to
purchase approximately 149,532 shares of our common stock at an exercise price
equal to $0.13 per share. In April 2008, following his appointment to the
Scientific Advisory Board, Old Arno issued options to purchase 25,000 shares
of
common stock to Dr. Francis Giles at an exercise price equal to $4.83
per share. The options expire in April 2013. The options were automatically
converted at the merger for options to purchase approximately 49,844 shares
of
our common stock at an exercise price equal to $2.42 per share.
On
February 9, 2007, Old Arno issued to certain accredited investors 6% Convertible
Promissory Notes in the aggregate principal amount of approximately $4,000,000
(the “6% Notes”). The 6% Notes provided that upon the next closing of any equity
financing in excess of $5,000,000 (a “Qualified Financing”), the 6% Notes would
automatically convert into the same securities issued by Old Arno in the
Qualified Financing (“Conversion Shares”), in an amount determined by dividing
the principal amount of the 6% Notes, and all accrued interest thereon, by
90%
of the price per share sold in the Qualified Financing (the “Offering Price”).
In addition, upon conversion, Old Arno agreed to issue to the holders of the
6%
Notes five-year warrants (“Conversion Warrants”), to purchase a number of shares
of Old Arno common stock equal to 10% of the Conversion Shares at an exercise
price equal to the Offering Price.
On
March
31, 2008, Old Arno issued 10 year options to purchase 100,000 shares of Old
Arno
common stock to Dr. Arie Belldegrun at an exercise price equal to $4.83. The
options were automatically converted at the merger for options to purchase
approximately 199,337 shares of our common stock at an exercise price equal
to
$2.42 per share. One half of the options were vested immediately. On the same
date Old Arno issued 10 year options to purchase 50,000 shares of Old Arno
common stock to Robert I. Falk at an exercise price equal to $4.83. The options
were automatically converted at the merger for options to purchase approximately
99,688 shares of our common stock at an exercise price equal to $2.42 per share.
One half of the options were vested immediately.
As
a
condition and immediately prior to the closing of the merger, on June 2, 2008,
Old Arno completed a private placement of its equity securities whereby it
received gross proceeds of approximately $17,732,000 through the sale of
approximately 3,691,900 shares of Old Arno common stock to selected accredited
investors, which shares were exchanged for 7,360,689 shares of Company common
stock after giving effect to the merger. Contemporaneously with the June 2008
private placement, the 6% Notes converted into 984,246 Conversion Shares and
the
holders of the 6% Notes received Conversion Warrants to purchase an aggregate
of
98,409 shares of Old Arno common stock at an exercise price equal to $4.83
per
share. The Conversion Shares were exchanged for an aggregate of approximately
1,962,338 shares of our common stock and the Conversion Warrants were
exchanged for an aggregate of approximately 196,189 five year warrants to
purchase our common stock at an exercise price equal to $2.42 per
share.
Except
as
noted above, the sales of the securities identified above were made pursuant
to
privately negotiated transactions that did not involve a public offering of
securities and, accordingly, we believe that these transactions were exempt
from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof and rules promulgated thereunder. Each of the above-referenced investors
in our stock represented to us in connection with their investment that they
were “accredited investors” (as defined by Rule 501 under the Securities Act)
and were acquiring the shares for investment and not distribution, that they
could bear the risks of the investment and could hold the securities for an
indefinite period of time. The investors received written disclosures that
the
securities had not been registered under the Securities Act and that any resale
must be made pursuant to a registration or an available exemption from such
registration. All of the foregoing securities are deemed restricted securities
for purposes of the Securities Act.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES.
(a) Exhibits.
Exhibit Number
|
|
Description of Document
|
2.1
|
|
Agreement
and Plan of Merger dated March 5, 2008, by and among Laurier
International, Inc., Laurier Acquisition, Inc. and Arno Therapeutics,
Inc.
(incorporated by reference to Exhibit 2.1 of Registrant’s Current Report
on Form 8-K filed on March 6, 2008).
|
2.2
|
|
Amendment
No. 1 dated May 12, 2008 to Agreement and Plan of Merger by and among
Laurier International, Inc., Laurier Acquisition, Inc. and Arno
Therapeutics, Inc.
|
2.3
|
|
Amendment
No. 2 dated May 30, 2008 to Agreement and Plan of Merger by and among
Laurier International, Inc., Laurier Acquisition, Inc. and Arno
Therapeutics, Inc.
|
3.1
|
|
Certificate
of Incorporation of the Registrant (incorporated by reference to
Exhibit
3.1 of the Registrant’s Registration Statement on Form SB-2 filed on
October 2, 2002, SEC File No. 333-100259).
|
3.2
|
|
Bylaws
of the Registrant (incorporated by reference to Exhibit 3.2 of the
Registrant’s Registration Statement on Form SB-2 filed on October 2, 2002,
SEC File No. 333-100259).
|
4.1
|
|
Specimen
Common Stock Certificate (incorporated by reference to Exhibit 4.1
of the
Registrant’s Form 8-K filed June 9, 2008).
|
4.2
|
|
Form
of Common Stock Purchase Warrant issued to former note holders of
Arno
Therapeutics, Inc. (incorporated by reference to Exhibit 4.2 of the
Registrant’s Form 8-K filed June 9, 2008).
|
5.1
|
|
Opinion
of Fredrikson & Byron, P.A.
|
10.1
|
|
Employment
Agreement dated June 1, 2007 between Arno Therapeutics, Inc. and
Scott Z.
Fields, M.D. (incorporated by reference to Exhibit 10.1 of the
Registrant’s Form 8-K filed June 9, 2008).
|
10.2
|
|
Letter
agreement dated September 2, 2007 between Arno Therapeutics, Inc.
and J.
Chris Houchins (incorporated by reference to Exhibit 10.2 of the
Registrant’s Form 8-K filed June 9, 2008).
|
10.3
|
|
Arno
Therapeutics, Inc. 2005 Stock Option Plan (incorporated by reference
to
Exhibit 10.3 of the Registrant’s Form 8-K filed June 9,
2008).
|
10.4
|
|
Form
of stock option agreement for use under Arno Therapeutics, Inc. 2005
Stock
Option Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s
Form 8-K filed June 9, 2008).
|
10.5
|
|
License
Agreement dated October 25, 2006 between Arno Therapeutics, Inc.
and The
University of Pittsburgh (incorporated by reference to Exhibit 10.5
of the
Registrant’s Form 8-K filed June 9, 2008).++
|
10.6
|
|
License
Agreement dated January 3, 2008 between Arno Therapeutics, Inc. and
The
Ohio State University Research Foundation (incorporated by reference
to
Exhibit 10.6 of the Registrant’s Form 8-K filed June 9,
2008).++
|
10.7
|
|
License
Agreement dated January 9, 2008 between Arno Therapeutics, Inc. and
The
Ohio State University Research Foundation (incorporated by reference
to
Exhibit 10.7 of the Registrant’s Form 8-K filed June 9,
2008).++
|
10.8
|
|
Form
of Subscription Agreement between Arno Therapeutics, Inc. and the
investors in the June 2, 2008 private placement (incorporated by
reference
to Exhibit 10.8 of the Registrant’s Form 8-K filed June 9,
2008).
|
16.1
|
|
Letter
from Chang G. Park, CPA, dated June 5, 2008, regarding change in
certifying accountants (incorporated by reference to Exhibit 16.1
of the
Registrant’s Form 8-K filed June 9, 2008).
|
23.1
|
|
Consent
of Hays & Company LLP
|
23.2
|
|
Consent
of Chang G. Park, CPA
|
23.3
|
|
Consent
of Fredrikson & Byron, P.A. (included in Exhibit
5.1).
|
24.1
|
|
Power
of Attorney (included on signature page
hereof).
|
|
++
|
Portions
of this exhibit have been omitted pursuant to an order granting
confidential treatment pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934. Such omitted portions have been filed separately
with the Securities and Exchange
Commission.
|
ITEM
17. UNDERTAKINGS.
The
undersigned registrant hereby undertakes:
|
(1)
|
To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration
statement:
|
|
(i)
|
To
include any prospectus required by section 10(a)(3) of the
Securities Act;
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the
effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent
a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high end of the estimated maximum offering range may
be
reflected in the form of prospectus filed with the Commission pursuant
to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in
the effective registration statement;
and
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement.
|
|
(2)
|
That,
for the purpose of determining any liability under the Securities
Act,
each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of
the securities at that time shall be deemed to be the initial bona
fide
offering thereof.
|
|
(3)
|
To
remove from registration by means of a post-effective amendment
any of the
securities being registered that remain unsold at the termination
of this
offering.
|
|
(4)
|
That,
for the purpose of determining liability under the Securities Act
to any
purchaser, if the registrant is subject to Rule 430C, each prospectus
filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness.
Provided,
however
,
that no statement made in a registration statement or prospectus
that is
part of the registration statement or made in a document incorporated
or
deemed incorporated by reference into the registration statement
or
prospectus that is part of the registration statement will, as
to a
purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement
or
made in any such document immediately prior to such date of first
use.
|
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC this form of indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against these
liabilities (other than the payment by the registrant of expenses incurred
or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of this issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fairfield, State of
New
Jersey, on July 31, 2008.
|
ARNO
THERAPEUTICS, INC.
|
|
|
|
By:
|
|
/s/
Scott Z. Fields
|
|
|
Scott
Z. Fields, M.D.
|
|
|
President
& Chief Medical Officer
|
KNOW
ALL
MEN BY THESE PRESENTS, that each person whose signature appears below hereby
constitutes and appoints Scott L. Navins and David M. Tanen, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him in his name, place and stead, in any
and all capacities, to sign any or all amendments to this registration statement
and additional registration statements relating to the same offering, and to
file the same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do
and perform each and every act and thing requisite and necessary to be done
in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Scott Z. Fields
|
|
President
& Chief Medical Officer
|
|
July
31, 2008
|
Scott
Z. Fields, M.D.
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/
Scott
L. Navins
|
|
Treasurer
|
|
July
31, 2008
|
Scott
L. Navins
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Arie S. Belldegrun
|
|
Non-Executive
Chairman and Director
|
|
July
31, 2008
|
Arie
S. Belldegrun, M.D.
|
|
|
|
|
|
|
|
|
|
/s/
Robert
I. Falk
|
|
Director
|
|
July
31, 2008
|
Robert
I. Falk
|
|
|
|
|
|
|
|
|
|
/s/
Peter
M. Kash
|
|
Director
|
|
July
31, 2008
|
Peter
M. Kash
|
|
|
|
|
|
|
|
|
|
/s/
Joshua
A. Kazam
|
|
Director
|
|
July
31, 2008
|
Joshua
A. Kazam
|
|
|
|
|
|
|
|
|
|
/s/
David
M. Tanen
|
|
Director
|
|
July
31, 2008
|
David
M. Tanen
|
|
|
|
|
INDEX
TO EXHIBITS
Exhibit Number
|
|
Description of Document
|
2.1
|
|
Agreement
and Plan of Merger dated March 5, 2008, by and among Laurier
International, Inc., Laurier Acquisition, Inc. and Arno Therapeutics,
Inc.
(incorporated by reference to Exhibit 2.1 of Registrant’s Current Report
on Form 8-K filed on March 6, 2008).
|
2.2
|
|
Amendment
No. 1 dated May 12, 2008 to Agreement and Plan of Merger by and among
Laurier International, Inc., Laurier Acquisition, Inc. and Arno
Therapeutics, Inc.
|
2.3
|
|
Amendment
No. 2 dated May 30, 2008 to Agreement and Plan of Merger by and among
Laurier International, Inc., Laurier Acquisition, Inc. and Arno
Therapeutics, Inc.
|
3.1
|
|
Certificate
of Incorporation of the Registrant (incorporated by reference to
Exhibit
3.1 of the Registrant’s Registration Statement on Form SB-2 filed on
October 2, 2002, SEC File No. 333-100259).
|
3.2
|
|
Bylaws
of the Registrant (incorporated by reference to Exhibit 3.2 of the
Registrant’s Registration Statement on Form SB-2 filed on October 2, 2002,
SEC File No. 333-100259).
|
4.1
|
|
Specimen
Common Stock Certificate (incorporated by reference to Exhibit 4.1
of the
Registrant’s Form 8-K filed June 9, 2008).
|
4.2
|
|
Form
of Common Stock Purchase Warrant issued to former note holders of
Arno
Therapeutics, Inc. (incorporated by reference to Exhibit 4.2 of the
Registrant’s Form 8-K filed June 9, 2008).
|
5.1
|
|
Opinion
of Fredrikson & Byron, P.A.
|
10.1
|
|
Employment
Agreement dated June 1, 2007 between Arno Therapeutics, Inc. and
Scott Z.
Fields, M.D. (incorporated by reference to Exhibit 10.1 of the
Registrant’s Form 8-K filed June 9, 2008).
|
10.2
|
|
Letter
agreement dated September 2, 2007 between Arno Therapeutics, Inc.
and J.
Chris Houchins (incorporated by reference to Exhibit 10.2 of the
Registrant’s Form 8-K filed June 9, 2008).
|
10.3
|
|
Arno
Therapeutics, Inc. 2005 Stock Option Plan (incorporated by reference
to
Exhibit 10.3 of the Registrant’s Form 8-K filed June 9,
2008).
|
10.4
|
|
Form
of stock option agreement for use under Arno Therapeutics, Inc. 2005
Stock
Option Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s
Form 8-K filed June 9, 2008).
|
10.5
|
|
License
Agreement dated October 25, 2006 between Arno Therapeutics, Inc.
and The
University of Pittsburgh (incorporated by reference to Exhibit 10.5
of the
Registrant’s Form 8-K filed June 9, 2008).++
|
10.6
|
|
License
Agreement dated January 3, 2008 between Arno Therapeutics, Inc. and
The
Ohio State University Research Foundation (incorporated by reference
to
Exhibit 10.6 of the Registrant’s Form 8-K filed June 9,
2008).++
|
10.7
|
|
License
Agreement dated January 9, 2008 between Arno Therapeutics, Inc. and
The
Ohio State University Research Foundation (incorporated by reference
to
Exhibit 10.7 of the Registrant’s Form 8-K filed June 9,
2008).++
|
10.8
|
|
Form
of Subscription Agreement between Arno Therapeutics, Inc. and the
investors in the June 2, 2008 private placement (incorporated by
reference
to Exhibit 10.8 of the Registrant’s Form 8-K filed June 9,
2008).
|
16.1
|
|
Letter
from Chang G. Park, CPA, dated June 5, 2008, regarding change in
certifying accountants (incorporated by reference to Exhibit 16.1
of the
Registrant’s Form 8-K filed June 9, 2008).
|
23.1
|
|
Consent
of Hays & Company LLP
|
23.2
|
|
Consent
of Chang G. Park, CPA
|
23.3
|
|
Consent
of Fredrikson & Byron, P.A. (included in Exhibit
5.1).
|
24.1
|
|
Power
of Attorney (included on signature page
hereof).
|
++
|
Portions
of this exhibit have been omitted pursuant to an order granting
confidential treatment pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934. Such omitted portions have been filed separately
with the Securities and Exchange
Commission.
|
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