x
|
Quarterly
Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of
1934 for the Quarterly Period ended June
30, 2008
|
¨
|
Transition
Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of
1934 for the Transition Period from _______________ to
____________________
|
Commission
File Number 0-19437
|
|||
SAFESTITCH
MEDICAL, INC.
|
|||
|
|||
(Exact
name of registrant as specified in its
charter)
|
Delaware
|
11-2962080
|
||
|
|||
(State
or other jurisdiction of
incorporation
or organization)
|
|
|
(I.R.S.
employer identification no.)
|
4400
Biscayne Blvd., Suite 670, Miami, Florida
|
33137
|
|||
(Address
of principal executive offices)
|
(Zip
code)
|
|
|
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
|
|
ITEM
1.
|
FINANCIAL
STATEMENTS
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2008 (unaudited) and
December
31, 2007
|
3
|
|
Unaudited
Condensed Consolidated Statements of Operations for the Three and
Six
Months ended June 30, 2008 and 2007, and for the period from September
15,
2005 (inception) to June 30, 2008
|
4
|
|
Condensed
Consolidated Statements of Stockholders’ Equity for the period from
September 15, 2005 (inception) through June 30, 2008
(unaudited)
|
5
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the Six Months
ended
June 30, 2008 and 2007, and for the period from September 15, 2005
(inception) to June 30, 2008
|
6
|
|
Notes
to unaudited condensed consolidated financial statements
|
7
|
|
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
16
|
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
20
|
ITEM
4T.
|
CONTROLS
AND PROCEDURES
|
20
|
|
|
|
PART
II. OTHER INFORMATION
|
||
|
|
|
ITEM
1.
|
LEGAL
PROCEEDINGS
|
21
|
ITEM
1A.
|
RISK
FACTORS
|
21
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
21
|
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
21
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
21
|
ITEM
5.
|
OTHER
INFORMATION
|
21
|
ITEM
6.
|
EXHIBITS
|
21
|
SIGNATURES
|
22
|
June
30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
ASSETS
|
(Unaudited)
|
||||||
CURRENT
ASSETS
|
|||||||
Cash and cash equivalents
|
$
|
2,401
|
$
|
631
|
|||
Accounts Receivable - related-party
|
43
|
-
|
|||||
Prepaid expenses
|
82
|
99
|
|||||
Total
Current Assets
|
2,526
|
730
|
|||||
FIXED
ASSETS
|
|||||||
Property and equipment, net
|
196
|
196
|
|||||
OTHER
ASSETS
|
|||||||
Security deposits
|
57
|
56
|
|||||
Deferred financing costs, net
|
1,276
|
1,702
|
|||||
Total Other Assets
|
1,333
|
1,758
|
|||||
LONG-TERM
INVESTMENT, net of valuation adjustment of $1,754
|
-
|
-
|
|||||
TOTAL
ASSETS (Note
6)
|
$
|
4,055
|
$
|
2,684
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Accounts payable and accrued liabilities
|
$
|
324
|
$
|
253
|
|||
Total Current Liabilities
|
324
|
253
|
|||||
Stockholder
loans
|
10
|
10
|
|||||
Commitments
and contingencies (Note 9)
|
|||||||
STOCKHOLDERS’
EQUITY
|
|||||||
Preferred
Stock, $.01 par value per share, 25,000,000 shares authorized,
|
|||||||
no shares issued and outstanding
|
-
|
-
|
|||||
Common
Stock, $.001 par value per share, 225,000,000 shares
authorized,
|
|||||||
17,954,521
and 16,093,016 shares
issued and outstanding, respectively
|
18
|
16
|
|||||
Additional
Paid-in Capital
|
10,741
|
6,582
|
|||||
Deficit
accumulated during the development stage
|
(7,038
|
)
|
(4,177
|
)
|
|||
Total
Stockholders’ Equity
|
3,721
|
2,421
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
4,055
|
$
|
2,684
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
September
15, 2005 (Inception) to June 30,
|
||||||||||||||
2008
|
2007
|
2008
|
2007
|
2008
|
||||||||||||
REVENUES
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
COSTS
AND EXPENSES
|
||||||||||||||||
Research
and development
|
804
|
552
|
1,618
|
918
|
4,524
|
|||||||||||
General
and administrative
|
390
|
126
|
806
|
164
|
1,826
|
|||||||||||
Total
Costs and Expenses
|
1,194
|
678
|
2,424
|
1,082
|
6,350
|
|||||||||||
LOSS
FROM OPERATIONS
|
(1,194
|
)
|
(678
|
)
|
(2,424
|
)
|
(1,082
|
)
|
(6,350
|
)
|
||||||
INTEREST
INCOME
|
7
|
1
|
12
|
6
|
65
|
|||||||||||
AMORTIZATION
OF DEBT ISSUANCE EXPENSE
|
(212
|
)
|
-
|
(425
|
)
|
-
|
(708
|
)
|
||||||||
INTEREST
EXPENSE
|
(18
|
)
|
-
|
(24
|
)
|
-
|
(45
|
)
|
||||||||
LOSS
BEFORE INCOME TAX
|
(1,417
|
)
|
(677
|
)
|
(2,861
|
)
|
(1,076
|
)
|
(7,038
|
)
|
||||||
PROVISION
FOR INCOME TAX
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
NET
LOSS
|
$
|
(1,417
|
)
|
$
|
(677
|
)
|
$
|
(2,861
|
)
|
$
|
(1,076
|
)
|
$
|
(7,038
|
)
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
|
16,843,415
|
11,256,369
|
16,468,215
|
11,256,369
|
||||||||||||
NET
LOSS PER BASIC AND DILUTED SHARE
|
$
|
(0.08
|
)
|
$
|
(0.06
|
)
|
$
|
(0.17
|
)
|
$
|
(0.10
|
)
|
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
|
Deficit
Accumulated
During
the
Development
|
|||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stage
|
Total
|
||||||||||||||||
Inception
- September 15, 2005
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||
Capital
contributed
|
-
|
-
|
-
|
-
|
1
|
-
|
1
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(76
|
)
|
(76
|
)
|
|||||||||||||
Balance
at December 31, 2005
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
1
|
$
|
(76
|
)
|
$
|
(75
|
)
|
||||||||
Capital
contributed
|
-
|
-
|
11,256
|
11
|
1,493
|
-
|
1,504
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(1,060
|
)
|
(1,060
|
)
|
|||||||||||||
Balance
at December 31, 2006
|
-
|
$
|
-
|
11,256
|
$
|
11
|
$
|
1,494
|
$
|
(1,136
|
)
|
$
|
369
|
|||||||||
|
||||||||||||||||||||||
Exercise
of options (CTS) -
September
23, 2007 at $0.79 per share
|
-
|
-
|
42
|
-
|
35
|
-
|
35
|
|||||||||||||||
Stock-based
compensation-September 4, 2007
|
-
|
-
|
-
|
-
|
77
|
-
|
77
|
|||||||||||||||
Issuance
of shares in recapitalization - September 4, 2007 at $0.64 per
share
|
-
|
-
|
4,795
|
5
|
3,078
|
-
|
3,083
|
|||||||||||||||
SafeStitch
expenses associated with recapitalization
|
-
|
-
|
-
|
-
|
(156
|
)
|
-
|
(156
|
)
|
|||||||||||||
Stock-based
compensation
|
-
|
-
|
-
|
-
|
65
|
-
|
65
|
|||||||||||||||
Warrants
issued in connection with credit facility-September 4, 2007 at $2.46
per
share
|
-
|
-
|
-
|
-
|
1,985
|
-
|
1,985
|
|||||||||||||||
Rule
16 payment received
|
-
|
-
|
-
|
-
|
4
|
-
|
4
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(3,041
|
)
|
(3,041
|
)
|
|||||||||||||
Balance
at December 31, 2007
|
-
|
$
|
-
|
16,093
|
$
|
16
|
$
|
6,582
|
$
|
(4,177
|
)
|
$
|
2,421
|
|||||||||
Issuance
of shares in private offering - May 2008 at $2.15 per share, net
of
offering costs
|
-
|
-
|
1,862
|
2
|
3,988
|
-
|
3,990
|
|||||||||||||||
Stock-based
compensation
|
-
|
-
|
-
|
-
|
171
|
-
|
171
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(2,861
|
)
|
(2,861
|
)
|
|||||||||||||
Balance
at June 30, 2008 - Unaudited
|
-
|
$
|
-
|
17,955
|
$
|
18
|
$
|
10,741
|
$
|
(7,038
|
)
|
$
|
3,721
|
Six
Months Ended June 30,
|
September
15, 2005 (Inception) to June
30,
|
|||||||||
2008
|
2007
|
2008
|
||||||||
OPERATING
ACTIVITIES
|
||||||||||
Net
loss
|
(2,861
|
)
|
(1,076
|
)
|
(7,038
|
)
|
||||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Amortization
of deferred finance costs
|
425
|
-
|
708
|
|||||||
Stock-based
compensation expense
|
171
|
-
|
314
|
|||||||
Depreciation
and amortization
|
25
|
-
|
29
|
|||||||
(Increase)
in receivables and other current assets
|
(26
|
)
|
-
|
(105
|
)
|
|||||
(Increase)
in other assets
|
(1
|
)
|
-
|
(58
|
)
|
|||||
Increase
in accounts payable and accrued liabilities
|
72
|
45
|
40
|
|||||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(2,195
|
)
|
(1,031
|
)
|
(6,110
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||
Purchase
of equipment
|
(25
|
)
|
-
|
(225
|
)
|
|||||
Payment
received under Rule 16b
|
-
|
-
|
4
|
|||||||
NET
CASH USED IN INVESTING ACTIVITIES
|
(25
|
)
|
-
|
(221
|
)
|
|||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||
Net
cash provided in connection with the acquisition of SafeStitch
LLC
|
-
|
-
|
3,192
|
|||||||
Issuance
of 1,861,505 shares of Common Stock, net of offering costs
|
3,990
|
-
|
3,990
|
|||||||
Capital
contributions
|
-
|
-
|
1,431
|
|||||||
Proceeds
from Stockholder loans
|
1,000
|
592
|
1,960
|
|||||||
Repayment
of Stockholder loans
|
(1,000
|
)
|
-
|
(1,876
|
)
|
|||||
Exercise
of options
|
-
|
-
|
35
|
|||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
3,990
|
592
|
8,732
|
|||||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
1,770
|
(439
|
)
|
2,401
|
||||||
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
631
|
546
|
-
|
|||||||
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
2,401
|
107
|
2,401
|
|||||||
Supplemental
disclosures:
|
||||||||||
Cash
paid for interest
|
$
|
24
|
$
|
-
|
$
|
45
|
||||
Non
cash activities:
|
||||||||||
Stockholder
loans contributed to capital
|
$
|
-
|
$
|
-
|
$
|
74
|
June
30, 2008
|
Estimated
Useful lives
|
||
Machinery
and equipment
|
$
151,000
|
5
years
|
|
Furniture
and fixtures
|
37,000
|
3-5
years
|
|
Software
|
37,000
|
3-5
years
|
|
|
|||
Accumulated
depreciation and amortization
|
(29,000)
|
||
Property
and equipment, net
|
$
196,000
|
Expected
volatility
|
88.31%
- 94.46%
|
Expected
dividend yield
|
0.00%
|
Risk-free
interest rate
|
1.96%
- 2.61%
|
Expected
life
|
3.5
- 5.5 years
|
Forfeiture
rate
|
2.50%
|
Shares
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Term (Years)
|
Aggregate
Intrinsic Value
|
||||||||||
Outstanding
at December 31, 2007
|
88,667
|
$
|
2.60
|
9.20
|
|||||||||
Granted
|
148,500
|
$
|
3.06
|
6.72
|
|||||||||
Exercised
|
-
|
-
|
-
|
||||||||||
Canceled
or expired
|
-
|
-
|
-
|
||||||||||
Outstanding
at June 30, 2008
|
237,167
|
$
|
2.89
|
7.65
|
$
|
-
|
|||||||
Exercisable
at June 30, 2008
|
87,667
|
$
|
2.97
|
7.34
|
$
|
-
|
|||||||
Vested
and expected to vest at June 30, 2008
|
232,107
|
$
|
2.89
|
7.67
|
$
|
-
|
Stock
Options
|
Weighted
Average Grant Date Fair Value
|
||||||
Non-Vested
at December 31, 2007
|
66,500
|
$
|
2.21
|
||||
Options
Granted
|
148,500
|
2.02
|
|||||
Options
Vested
|
(65,500
|
)
|
1.88
|
||||
Non-Vested
at June 30, 2008
|
149,500
|
$
|
2.16
|
June
30, 2008
|
June
30, 2007
|
||
Stock
options
|
237,167
|
171,400
|
|
Stock
warrants
|
805,521
|
–
|
|
Total
|
1,042,688
|
171,400
|
|
|
|
|
|
Exhibits:
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a)
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a)
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
|
SAFESTITCH
MEDICAL, INC.
|
|
|||
Date:
August 8, 2008
|
By:
|
/s/
Jeffrey G. Spragens
|
|
|
|
|
Jeffrey
G. Spragens
|
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
||||
Date:
August 8, 2008
|
By:
|
/s/
Adam S. Jackson
|
|
|
|
|
Adam
S. Jackson
|
|
|
|
|
Chief
Financial Officer
|
|
|