Delaware
|
91-1955323
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
200
E. Del Mar Blvd., Suite 320, Pasadena, CA
|
91105
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
Accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
(do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
PAGE NO.
|
|||||
PART
I. FINANCIAL INFORMATION
|
|||||
Item
1.
|
Financial
Statements:
|
||||
Condensed
Balance Sheets as of September 30, 2008 (unaudited) and December
31, 2007
(audited)
|
4
|
||||
Condensed
Statements of Operations for the three and nine months ended
September 30,
2008 and 2007 and from August 23, 2000 (inception) through September
30,
2008 (all unaudited)
|
5
|
||||
Condensed
Statements of Cash Flows for the nine months ended September
30, 2008 and
2007 and from August 23, 2000 (inception) through September 30,
2008 (all
unaudited)
|
6
|
||||
Condensed
Statement of Stockholders’ Equity (Deficit) from August 23, 2000
(inception) through September 30, 2008 (unaudited)
|
7
|
||||
Notes
to Condensed Financial Statements
|
12 | ||||
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results Of
Operations
|
17
|
|||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
21
|
|||
Item
4T.
|
Controls
and Procedures
|
21
|
|||
PART
II. OTHER INFORMATION
|
|||||
Item
1.
|
Legal
Proceedings
|
22
|
|||
Item
1A.
|
Risk
Factors
|
22
|
|||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
23
|
|||
Item
3.
|
Defaults
Upon Senior Securities
|
23
|
|||
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
23
|
|||
Item
5.
|
Other
Information
|
23
|
|||
Item
6.
|
Exhibits
|
23
|
|||
SIGNATURES
|
24
|
September 30, 2008
|
December 31,
|
||||||
(Unaudited)
|
2007
|
||||||
ASSETS
|
|||||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
$
|
477,756
|
$
|
2,735,944
|
|||
Prepaid
expenses
|
2,087
|
37,546
|
|||||
Total
current assets
|
479,843
|
2,773,490
|
|||||
Net
property and equipment
|
22,240
|
45,450
|
|||||
Assets
held for sale
|
116,931
|
132,293
|
|||||
Deferred
financing costs
|
-
|
16,757
|
|||||
Other
assets
|
1,550
|
70,236
|
|||||
Total
assets
|
$
|
620,564
|
$
|
3,038,226
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable
|
$
|
320,578
|
$
|
434,727
|
|||
Accrued
expenses
|
386,250
|
483,617
|
|||||
Total
current liabilities
|
706,828
|
918,344
|
|||||
Long
term contract obligations
|
150,000
|
250,000
|
|||||
Total
liabilities
|
856,828
|
1,168,344
|
|||||
Stockholders'
equity (deficit)
|
|||||||
Preferred
stock, $.001 par value; 5,000,000 shares authorized:
|
|||||||
none
issued and outstanding
|
-
|
-
|
|||||
Common
stock, $.001 par value; 100,000,000 shares authorized; 25,792,747
and
25,578,461 shares issued and outstanding at September 30, 2008
and
December 31, 2007, respectively
|
25,792
|
25,578
|
|||||
Additional
paid-in capital
|
21,600,117
|
21,159,276
|
|||||
Deficit
accumulated during the development stage
|
(21,862,173
|
)
|
(19,314,972
|
)
|
|||
Total
stockholders' equity (deficit)
|
(236,264
|
)
|
1,869,882
|
||||
Total
liabilities and stockholders' equity (deficit)
|
$
|
620,564
|
$
|
3,038,226
|
For the three months ended September 30,
|
For the nine months ended September 30,
|
August 23, 2000 (inception)
|
||||||||||||||
2008
|
2007
|
2008
|
2007
|
through September 30, 2008
|
||||||||||||
Revenues
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
320,966
|
||||||
Operating
expenses:
|
||||||||||||||||
General
and administrative
|
147,103
|
1,025,108
|
1,358,718
|
2,651,264
|
13,100,855
|
|||||||||||
Research
and development
|
164,350
|
422,743
|
1,220,747
|
1,982,747
|
9,333,555
|
|||||||||||
Total
operating expenses
|
311,453
|
1,447,851
|
2,579,465
|
4,634,011
|
22,434,410
|
|||||||||||
Loss
before other income (expense)
|
(311,453
|
)
|
(1,447,851
|
)
|
(2,579,465
|
)
|
(4,634,011
|
)
|
(22,113,444
|
)
|
||||||
Other
income (expense):
|
||||||||||||||||
Interest
income
|
3,786
|
53,445
|
32,264
|
128,064
|
495,409
|
|||||||||||
Interest
expense
|
-
|
-
|
-
|
-
|
(244,138
|
)
|
||||||||||
Total
other income (expense)
|
3,786
|
53,445
|
32,264
|
128,064
|
251,271
|
|||||||||||
Net
loss
|
$
|
(307,667
|
)
|
$
|
(1,394,406
|
)
|
$
|
(2,547,201
|
)
|
$
|
(4,505,947
|
)
|
$
|
(21,862,173
|
)
|
|
Net
loss per share:
|
||||||||||||||||
Basic
and diluted
|
$
|
(0.01
|
)
|
$
|
(0.05
|
)
|
$
|
(0.10
|
)
|
$
|
(0.20
|
)
|
||||
Weighted-average
shares:
|
||||||||||||||||
Basic
and diluted
|
25,792,747
|
25,446,803
|
25,712,950
|
22,021,676
|
For the nine months ended September 30,
|
August 23, 2000 (inception)
|
|||||||||
2008
|
2007
|
through September 30, 2008
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss
|
$
|
(2,547,201
|
)
|
$
|
(4,505,947
|
)
|
$
|
(21,862,173
|
)
|
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
||||||||||
Amortization
of debt discount
|
-
|
-
|
244,795
|
|||||||
Depreciation
and amortization
|
32,190
|
37,506
|
334,454
|
|||||||
Patent
rights impairment
|
-
|
-
|
91,694
|
|||||||
Issuance
of common stock, options and warrants for compensation
|
441,055
|
585,376
|
4,054,502
|
|||||||
Issuance
of warrants for patent acquistion
|
-
|
74,570
|
74,570
|
|||||||
Settlement
of accrued expense
|
-
|
-
|
54,401
|
|||||||
Deferred
compensation costs
|
-
|
-
|
319,553
|
|||||||
Loss
on disposition of fixed assets
|
2,207
|
2,766
|
4,973
|
|||||||
Changes
in operating assets and liabilities:
|
||||||||||
Prepaid
expenses
|
35,459
|
96,388
|
(2,089
|
)
|
||||||
Deferred
financing costs
|
16,757
|
-
|
-
|
|||||||
Other
assets
|
68,686
|
(13,187
|
)
|
(1,550
|
)
|
|||||
Accounts
payable
|
(114,149
|
)
|
75,102
|
320,578
|
||||||
Accrued
expenses
|
(97,367
|
)
|
549,141
|
292,748
|
||||||
Other
liabilities
|
-
|
-
|
64,695
|
|||||||
Contractual
obligation
|
(100,000
|
)
|
250,000
|
150,000
|
||||||
Net
cash used in operating activities
|
(2,262,363
|
)
|
(2,848,285
|
)
|
(15,858,849
|
)
|
||||
Cash
flows from investing activities:
|
||||||||||
Dispositions
(Additions) of property and equipment
|
4,175
|
(2,500
|
)
|
(145,292
|
)
|
|||||
Purchase
of short term investments
|
-
|
-
|
(21,866,787
|
)
|
||||||
Maturities
of short term investments
|
-
|
-
|
21,866,787
|
|||||||
Net
cash provided by (used in) investing activities
|
4,175
|
(2,500
|
)
|
(145,292
|
)
|
|||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from issuance of convertible debt
|
-
|
-
|
400,000
|
|||||||
Proceeds
from common stock option/warrant exercise
|
-
|
2,700
|
67,900
|
|||||||
Net
proceeds from issuance of common stock and warrants
|
-
|
4,483,831
|
15,797,080
|
|||||||
Net
proceeds from issuance of preferred stock
|
-
|
-
|
238,732
|
|||||||
Payments
on capital lease obligation, net
|
-
|
-
|
(21,815
|
)
|
||||||
Net
cash provided by financing activities
|
-
|
4,486,531
|
16,481,897
|
|||||||
Net
increase (decrease) in cash
|
(2,258,188
|
)
|
1,635,746
|
477,756
|
||||||
Cash
at beginning of period
|
$
|
2,735,944
|
$
|
2,054,280
|
$
|
-
|
||||
Cash
at end of period
|
$
|
477,756
|
$
|
3,690,026
|
$
|
477,756
|
||||
Supplemental
disclosures of non-cash financing activity
|
||||||||||
Issuance
of securities for obligation related to finder's fees
|
$
|
-
|
$
|
-
|
$
|
47,500
|
Deficit
|
|||||||||||||||||||||||||
Accumulated
|
|||||||||||||||||||||||||
Additional
|
During
the
|
||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-In
|
Deferred
|
Development
|
|||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Costs
|
Stage
|
Total
|
||||||||||||||||||
Balance,
August 23, 2000 (inception) restated for effect of reverse
merger with
Historical Autographs U.S.A. Inc.
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||
Stock
issuance in exchange for cash
|
5,000,000
|
50
|
4,950
|
5,000
|
|||||||||||||||||||||
Net
loss
|
|
|
|
|
|
|
(9,454
|
)
|
(9,454
|
)
|
|||||||||||||||
Balance,
December 31, 2000, as restated
|
-
|
-
|
5,000,000
|
50
|
4,950
|
-
|
(9,454
|
)
|
(4,454
|
)
|
|||||||||||||||
Issuance
of junior preferred stock for cash of $250,000 and in exchange
for
$400,000 in patent rights, research and development costs,
and employee
loanout costs less issuance expenses of $11,268, June 29,
2001
|
681,818
|
7
|
958,278
|
(343,553
|
)
|
614,732
|
|||||||||||||||||||
Issuance
of common stock in exchange for patent rights and deferred
research and
development costs
|
362,669
|
4
|
547,284
|
547,288
|
|||||||||||||||||||||
Services
receivable
|
(550,000
|
)
|
(550,000
|
)
|
|||||||||||||||||||||
Deferred
employee loan-out costs receivable earned
|
82,888
|
82,888
|
|||||||||||||||||||||||
|
|||||||||||||||||||||||||
Net
loss
|
|
|
|
|
|
|
(237,574
|
)
|
(237,574
|
)
|
|||||||||||||||
Balance,
December 31, 2001
|
681,818
|
7
|
5,362,669
|
54
|
1,510,512
|
(810,665
|
)
|
(247,028
|
)
|
452,880
|
Deficit
|
|||||||||||||||||||||||||
Accumulated
|
|||||||||||||||||||||||||
Additional
|
During
the
|
||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-In
|
Deferred
|
Development
|
|||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Costs
|
Stage
|
Total
|
||||||||||||||||||
Amendment
of December 31, 2001 agreement for the issuance of common
stock agreement
in exchange for research and development services
|
(495,599
|
)
|
550,000
|
54,401
|
|||||||||||||||||||||
Deferred
employee loan out costs receivable earned
|
171,776
|
171,776
|
|||||||||||||||||||||||
Issuance
of common stock for compensation
|
70,000
|
1
|
10,499
|
10,500
|
|||||||||||||||||||||
Issuance
of common stock for cash
|
999,111
|
9
|
149,857
|
149,866
|
|||||||||||||||||||||
Net
loss
|
|
|
|
|
|
|
(494,780
|
)
|
(494,780
|
)
|
|||||||||||||||
Balance,
December 31, 2002
|
681,818
|
7
|
6,431,780
|
64
|
1,175,269
|
(88,889
|
)
|
(741,808
|
)
|
344,643
|
|||||||||||||||
Issuance
of common stock for cash less issuance expense of $2,956
|
417,000
|
417
|
246,827
|
247,244
|
|||||||||||||||||||||
Issuance
of common stock in private placement for cash less issuance
expense of
$519,230
|
4,000,000
|
4,000
|
3,476,770
|
3,480,770
|
|||||||||||||||||||||
Issuance
of common stock for convertible debenture less issuance expense
of
$49,500
|
400,000
|
400
|
350,100
|
350,500
|
|||||||||||||||||||||
Shares
issued in connection with acquisition of Historical Autographs
U.S.A.,
Inc. on October 30, 2003
|
1,220,000
|
8,263
|
(8,263
|
)
|
-
|
Deficit
|
|||||||||||||||||||||||||
Accumulated
|
|||||||||||||||||||||||||
Additional
|
During
the
|
||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-In
|
Deferred
|
Development
|
|||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Costs
|
Stage
|
Total
|
||||||||||||||||||
Value
of warrants and beneficial conversion feature of bridge
loan
|
244,795
|
244,795
|
|||||||||||||||||||||||
Deferred
employee loan-out costs receivable earned
|
88,889
|
88,889
|
|||||||||||||||||||||||
Preferred
Stock converted to Common Stock
|
(681,818
|
)
|
(7
|
)
|
681,818
|
7
|
|||||||||||||||||||
Net
loss
|
|
|
|
|
|
|
(885,693
|
)
|
(885,693
|
)
|
|||||||||||||||
Balance,
December 31, 2003
|
-
|
-
|
13,150,598
|
13,151
|
5,485,498
|
-
|
(1,627,501
|
)
|
3,871,148
|
||||||||||||||||
Issuance
of common stock options and warrants for compensation
|
|
972,430
|
972,430
|
||||||||||||||||||||||
|
|||||||||||||||||||||||||
Exercise
of common stock options
|
18,000
|
18
|
2,682
|
2,700
|
|||||||||||||||||||||
Issuance
of securities for payable
|
47,499
|
47
|
47,451
|
47,498
|
|||||||||||||||||||||
Net
loss
|
(3,327,827
|
)
|
(3,327,827
|
)
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance,
December 31, 2004
|
-
|
-
|
13,216,097
|
13,216
|
6,508,061
|
-
|
(4,955,328
|
)
|
1,565,949
|
||||||||||||||||
|
|||||||||||||||||||||||||
Issuance
of common stock in private placement for cash less issuance
expense of
$384,312
|
2,991,812
|
2,992
|
6,224,601
|
6,227,593
|
|||||||||||||||||||||
Issuance
of common stock options and warrants for compensation
|
|
557,080
|
557,080
|
||||||||||||||||||||||
|
|||||||||||||||||||||||||
Exercise
of common stock options
|
25,000
|
25
|
62,475
|
62,500
|
Accumulated During
|
|||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Additional Paid-In
|
Deferred
|
the Development
|
|||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Costs
|
Development Stage
|
Total
|
||||||||||||||||||
Net
loss
|
(3,823,903
|
)
|
(3,823,903
|
)
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||
Balance,
December 31, 2005
|
-
|
-
|
16,232,909
|
16,233
|
13,352,217
|
-
|
(8,779,231
|
)
|
4,589,219
|
||||||||||||||||
Issuance
of common stock in private placement for cash less issuance
expense of
$95,013
|
1,227,272
|
1,227
|
1,253,760
|
1,254,987
|
|||||||||||||||||||||
Issuance
of common stock options and warrants for compensation
|
|
703,839
|
703,839
|
||||||||||||||||||||||
|
|||||||||||||||||||||||||
Stock
warrant term extension
|
-
|
|
482,964
|
482,964
|
|||||||||||||||||||||
|
|||||||||||||||||||||||||
Warrant
liability
|
(1,284,841
|
)
|
(1,284,841
|
)
|
|||||||||||||||||||||
Net
loss
|
(4,461,904
|
)
|
(4,461,904
|
)
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||
Balance,
December 31, 2006
|
-
|
-
|
17,460,181
|
17,460
|
14,507,939
|
-
|
(13,241,135
|
)
|
1,284,264
|
||||||||||||||||
Cumulative
effect of change in accounting principle: Adjust retained
earnings at
January 1, 2007 for change in accounting principle
|
(521,187
|
)
|
(521,187
|
)
|
|||||||||||||||||||||
Reclassification
of warrants
|
1,284,841
|
1,284,841
|
|||||||||||||||||||||||
Issuance
of common stock and warrants in private placement for cash
less issuance
expense of $377,169
|
7,478,462
|
7,479
|
4,476,352
|
4,483,831
|
|||||||||||||||||||||
Exercise
of common stock warrants
|
18,000
|
18
|
2,682
|
2,700
|
|||||||||||||||||||||
Stock
option based compensation expense
|
|
438,263
|
438,263
|
||||||||||||||||||||||
|
|||||||||||||||||||||||||
Stock
warrant term extension
|
-
|
|
59,025
|
59,025
|
|||||||||||||||||||||
Restricted
stock based compensation expense
|
621,818
|
621
|
315,604
|
316,225
|
|||||||||||||||||||||
Issuance
of warrants for patent acquistion
|
74,570
|
74,570
|
|||||||||||||||||||||||
Net
loss
|
(5,552,650
|
)
|
(5,552,650
|
)
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||
Balance,
December 31, 2007
|
-
|
-
|
25,578,461
|
25,578
|
21,159,276
|
-
|
(19,314,972
|
)
|
1,869,882
|
Accumulated
|
|||||||||||||||||||||||||
Additional
|
During
the
|
||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-In
|
Deferred
|
Development
|
|||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Costs
|
Stage
|
Total
|
||||||||||||||||||
Issuance
of common stock for compensation
|
214,286
|
214
|
59,786
|
60,000
|
|||||||||||||||||||||
Stock
option based compensation expense
|
|
97,866
|
97,866
|
||||||||||||||||||||||
Stock
warrant term extension
|
-
|
|
175,256
|
175,256
|
|||||||||||||||||||||
Restricted
stock based compensation expense
|
-
|
-
|
107,933
|
107,933
|
|||||||||||||||||||||
Net
loss
|
(2,547,201
|
)
|
(2,547,201
|
)
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||
Balance,
September 30, 2008 (unaudited)
|
-
|
-
|
25,792,747
|
$
|
25,792
|
$
|
21,600,117
|
-
|
$
|
(21,862,173
|
)
|
$
|
(236,264
|
)
|
Contractual
Obligations
|
Total
|
2008
|
2009
|
2010
|
2011
|
|||||||||||
License
Agreement
|
$
|
250,000
|
–
|
$
|
100,000
|
$
|
150,000
|
–
|
||||||||
Total
|
$
|
250,000
|
$
|
–
|
$
|
100,000
|
$
|
150,000
|
$
|
–
|
31.1
|
Certification
of Principal Executive Officer Pursuant to Section 302
|
|
|
||
31.2
|
Certification
of Principal Financial Officer Pursuant to Section 302
|
|
|
||
32
|
Section
906 certification of periodic financial report by Chief Executive
Officer
and Chief Financial Officer.
|
|
33
|
Compensation
Agreement Between Scott Hayashi and Company dated November 10,
2008
|
ARBIOS
SYSTEMS, INC.
|
|
DATE:
November 14, 2008
|
By:
/S/ Shawn P. Cain
|
Shawn
P. Cain
|
|
Interim
Chief Executive Officer (Principal Executive Officer)
|
|
DATE:
November 14, 2008
|
By:
/S/ Scott L. Hayashi
|
Scott
L. Hayashi
|
|
Interim
Chief Financial Officer (Principal Financial
Officer)
|