MDRNA Inc. (MRNA, Financial) filed Quarterly Report for the period ended 2009-03-31.
MDRNA INC. is a biotechnology company developing RNAi-based therapeutics. The Company?s primary focus is on the safe and effective delivery of MDRNAi and siRNA drug candidates for the treatment of a wide range of human diseases including inflammation viral infections cancer and metabolic disorders. MDRNA will continue to leverage its expertise and capabilities toward innovation in novel and useful RNA-based compositions in order to increase the value proposition of MDRNA to investors and partners. MDRNA Inc. has a market cap of $35.8 million; its shares were traded at around $1.15 with and P/S ratio of 13.8. MDRNA Inc. had an annual average earning growth of 30% over the past 5 years.
Our financing activities in the quarter ended March 31, 2009 consisted of paying down our note payable with GECC by approximately $3.7 million. There are acceleration clauses in the Loan Agreement with GECC that require additional principal payments based on the proceeds of certain transactions. The $3.7 million in principal payments included $2.9 million of additional principal payments due to the acceleration clauses. In the quarter ended March 31, 2008, our financing activities consisted of regular monthly lease payments under our former capital lease obligations with GECC which amounted to approximately $1.3 million in total for the quarter.
On April 25, 2008, we raised net proceeds of approximately $7.3 million in a registered direct offering of 4,590,277 shares of common stock along with warrants to purchase up to 5,967,361 shares of common stock at a negotiated purchase price of $1.728 per share. Warrants to purchase up to 4,590,277 shares of common stock are exercisable during the seven-year period beginning October 25, 2008 at a price of $2.376 per share. Additional warrants to purchase up to 1,377,084 shares of common stock at a price of $2.17 per share were exercisable during the 90-day period beginning October 25, 2008 and subsequently expired in January 2009. In addition, warrants to purchase up to 229,514 shares of common stock, which are exercisable during the five-year period beginning October 25, 2008 at a price of $2.376 per share, were issued to the placement agent in connection with the transaction. The warrants provide that the exercise price of the warrant will be reduced in the event of subsequent financings at an effective price per share less than the exercise price of the warrants, subject to certain exceptions. These provisions are commonly known as down-round provisions. The warrants were originally evaluated under the guidance set forth in EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock (EITF 00-19). We originally considered the provisions of EITF 00-19 with respect to the warrants and had concluded that the warrants may be physically or net-share settled at the investors option and did not contain any net-cash settlement provisions or any provisions deemed under EITF 00-19 to be equivalent to net-cash settlement provisions and were appropriately classified as equity. On January 1, 2009, we adopted EITF Issue No. 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock (EITF 07-5). According to the provisions of EITF 07-5, warrants with down-round provisions are no longer classified as equity. The adoption of EITF 07-5 resulted in a cumulative effect from accounting change of $0.9 million and a non-current liability for the fair value of the warrants as of January 1, 2009, which reflected the net cumulative impact of initial application, determined based upon the amounts that would have been recognized if the guidance in EITF 07-5 had been applied from the issuance date of the warrants. The warrants are revalued quarterly thereafter during the periods that the warrants remain outstanding. For the quarter ended March 31, 2009, we recorded additional expense related to revaluation of the fair value of the price adjustable warrants of $1.0 million.
On September 19, 2008, we received a letter from the Listing Qualifications Department of the NASDAQ Stock Market notifying us that we were not in compliance with the minimum $1.00 per share minimum bid price requirement for continued inclusion on the NASDAQ Global Market set forth in NASDAQ Marketplace Rule 4450(a)(5), as a result of the bid price of our common stock having closed below $1.00 for the 30 consecutive business days prior to the date of the letter. NASDAQs letter advised us that, in accordance with the NASDAQ Marketplace Rule 4450(e)(2), we would be provided 180 calendar days, or until March 18, 2009, to regain compliance. NASDAQ has suspended enforcement of the minimum bid price requirement for all issuers until July 20, 2009, and, accordingly, our date to regain compliance with the minimum bid price requirement has been extended to December 21, 2009. Compliance with the minimum bid price requirement can be achieved if, at any time before December 21, 2009, the bid price of our common stock closes at $1.00 or more per share for a minimum of 10 consecutive business days. As one option available to management to address this deficiency, we included in the Proxy Statement for our 2009 Annual Meeting of Stockholders a proposal to approve the ability of management to enact a reverse split of our common stock in a ratio between one-for-two and one-for-ten, should such a split be determined by our Board of Directors to be in the best interest of our company. There can be no assurance that we will be able to regain compliance with the continued listing requirement of NASDAQ Marketplace Rule 4450(a)(5).
In the quarter ended March 31, 2008, license and research fee revenue was primarily related to recognition of deferred revenue related to the $2.0 million payment received in 2005 from QOL Medical LLC and revenue from other collaboration or feasibility partners. In the quarter ended March 31, 2009, license and research fee revenue was primarily from licensing our RNAi platforms including agreements with Novartis and Roche as well as a $1.0 million milestone payment received from Amylin in February 2009. In addition, in connection with the Asset Purchase Agreement with Par, our Supply Agreement with QOL was terminated, and we recognized $0.7 million in deferred revenue related to the QOL agreement in the quarter ended March 31, 2009.
Government grants revenue. The National Institutes of Health awarded us a grant in September 2006 for $1.9 million over a five year period to prevent and treat influenza. Revenue recognized under this grant totaled $0.1 million for the quarter ended March 31, 2008 and $13,000 for the quarter ended March 31, 2009.
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MDRNA INC. is a biotechnology company developing RNAi-based therapeutics. The Company?s primary focus is on the safe and effective delivery of MDRNAi and siRNA drug candidates for the treatment of a wide range of human diseases including inflammation viral infections cancer and metabolic disorders. MDRNA will continue to leverage its expertise and capabilities toward innovation in novel and useful RNA-based compositions in order to increase the value proposition of MDRNA to investors and partners. MDRNA Inc. has a market cap of $35.8 million; its shares were traded at around $1.15 with and P/S ratio of 13.8. MDRNA Inc. had an annual average earning growth of 30% over the past 5 years.
Highlight of Business Operations:
We have prepared our consolidated financial statements assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2009, we had an accumulated deficit of approximately $247.7 million and expect to incur additional losses in the future as we continue our R&D activities. We have funded our losses primarily through the sale of common stock and warrants in the public markets and private placements, revenue provided by our collaboration partners and, to a lesser extent, equipment financing facilities. The further development of our RNAi programs will require capital. At March 31, 2009, we had working capital (current assets less current liabilities) of $1.8 million and approximately $7.7 million in cash and cash equivalents, including $2.2 million in restricted cash. Our operating expenses, primarily R&D, will consume the majority of our cash resources. We have received an opinion from our independent registered public accounting firm indicating the substantial doubt about our ability to continue as a going concern due primarily to our cash position at December 31, 2008.Our financing activities in the quarter ended March 31, 2009 consisted of paying down our note payable with GECC by approximately $3.7 million. There are acceleration clauses in the Loan Agreement with GECC that require additional principal payments based on the proceeds of certain transactions. The $3.7 million in principal payments included $2.9 million of additional principal payments due to the acceleration clauses. In the quarter ended March 31, 2008, our financing activities consisted of regular monthly lease payments under our former capital lease obligations with GECC which amounted to approximately $1.3 million in total for the quarter.
On April 25, 2008, we raised net proceeds of approximately $7.3 million in a registered direct offering of 4,590,277 shares of common stock along with warrants to purchase up to 5,967,361 shares of common stock at a negotiated purchase price of $1.728 per share. Warrants to purchase up to 4,590,277 shares of common stock are exercisable during the seven-year period beginning October 25, 2008 at a price of $2.376 per share. Additional warrants to purchase up to 1,377,084 shares of common stock at a price of $2.17 per share were exercisable during the 90-day period beginning October 25, 2008 and subsequently expired in January 2009. In addition, warrants to purchase up to 229,514 shares of common stock, which are exercisable during the five-year period beginning October 25, 2008 at a price of $2.376 per share, were issued to the placement agent in connection with the transaction. The warrants provide that the exercise price of the warrant will be reduced in the event of subsequent financings at an effective price per share less than the exercise price of the warrants, subject to certain exceptions. These provisions are commonly known as down-round provisions. The warrants were originally evaluated under the guidance set forth in EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock (EITF 00-19). We originally considered the provisions of EITF 00-19 with respect to the warrants and had concluded that the warrants may be physically or net-share settled at the investors option and did not contain any net-cash settlement provisions or any provisions deemed under EITF 00-19 to be equivalent to net-cash settlement provisions and were appropriately classified as equity. On January 1, 2009, we adopted EITF Issue No. 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock (EITF 07-5). According to the provisions of EITF 07-5, warrants with down-round provisions are no longer classified as equity. The adoption of EITF 07-5 resulted in a cumulative effect from accounting change of $0.9 million and a non-current liability for the fair value of the warrants as of January 1, 2009, which reflected the net cumulative impact of initial application, determined based upon the amounts that would have been recognized if the guidance in EITF 07-5 had been applied from the issuance date of the warrants. The warrants are revalued quarterly thereafter during the periods that the warrants remain outstanding. For the quarter ended March 31, 2009, we recorded additional expense related to revaluation of the fair value of the price adjustable warrants of $1.0 million.
On September 19, 2008, we received a letter from the Listing Qualifications Department of the NASDAQ Stock Market notifying us that we were not in compliance with the minimum $1.00 per share minimum bid price requirement for continued inclusion on the NASDAQ Global Market set forth in NASDAQ Marketplace Rule 4450(a)(5), as a result of the bid price of our common stock having closed below $1.00 for the 30 consecutive business days prior to the date of the letter. NASDAQs letter advised us that, in accordance with the NASDAQ Marketplace Rule 4450(e)(2), we would be provided 180 calendar days, or until March 18, 2009, to regain compliance. NASDAQ has suspended enforcement of the minimum bid price requirement for all issuers until July 20, 2009, and, accordingly, our date to regain compliance with the minimum bid price requirement has been extended to December 21, 2009. Compliance with the minimum bid price requirement can be achieved if, at any time before December 21, 2009, the bid price of our common stock closes at $1.00 or more per share for a minimum of 10 consecutive business days. As one option available to management to address this deficiency, we included in the Proxy Statement for our 2009 Annual Meeting of Stockholders a proposal to approve the ability of management to enact a reverse split of our common stock in a ratio between one-for-two and one-for-ten, should such a split be determined by our Board of Directors to be in the best interest of our company. There can be no assurance that we will be able to regain compliance with the continued listing requirement of NASDAQ Marketplace Rule 4450(a)(5).
In the quarter ended March 31, 2008, license and research fee revenue was primarily related to recognition of deferred revenue related to the $2.0 million payment received in 2005 from QOL Medical LLC and revenue from other collaboration or feasibility partners. In the quarter ended March 31, 2009, license and research fee revenue was primarily from licensing our RNAi platforms including agreements with Novartis and Roche as well as a $1.0 million milestone payment received from Amylin in February 2009. In addition, in connection with the Asset Purchase Agreement with Par, our Supply Agreement with QOL was terminated, and we recognized $0.7 million in deferred revenue related to the QOL agreement in the quarter ended March 31, 2009.
Government grants revenue. The National Institutes of Health awarded us a grant in September 2006 for $1.9 million over a five year period to prevent and treat influenza. Revenue recognized under this grant totaled $0.1 million for the quarter ended March 31, 2008 and $13,000 for the quarter ended March 31, 2009.
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