SEC SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the Quarterly Period Ended March 31, 2003
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ____________ to ____________
Commission File No. 1-14778
---------------------------
DOR BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1505029
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
28101 BALLARD DRIVE, SUITE F, LAKE FOREST, IL 60045
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (847) 573-8990
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
At May 1, 2002, 27,261,877 shares of the registrant's common stock (par value,
$.001 per share) were outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
PART I. - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DOR BIOPHARMA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2003 2002
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 3,151,946 $ 4,147,164
Prepaid expenses 70,462 104,333
------------ ------------
Total current assets 3,222,408 4,251,497
Leasehold improvements and equipment, net of
accumulated amort. of $1,187,773 and $1,162,247 237,395 262,921
Patent issuance costs, net of accumulated amortization
of $65,701 and $46,100 1,147,817 1,097,341
Intangible assets, net of accumulated amortization
of $163,543 and $137,710 200,608 226,441
------------ ------------
TOTAL ASSETS $ 4,808,228 $ 5,838,200
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 665,109 $ 698,120
Accrued compensation 139,988 124,480
Current portion of Long-term debt 344,194 382,122
------------ ------------
Total current liabilities 1,149,291 1,204,722
Long-term liabilities:
Long-term portion of note payable 347,845 347,845
------------ ------------
Total long-term liabilities 347,845 347,845
------------ ------------
Total Liabilities 1,497,136 1,552,567
Stockholders' equity/(deficit):
Preferred stock, $.001 par value. Authorized
4,600,000 shares; none issued and outstanding -- --
Series B convertible preferred stock,
$.05 par value. Authorized 200,000 shares;
119,428 issued & outstanding at liquidation value 11,942,850 11,711,822
Common stock, $.001 par value. Authorized
50,000,000 shares; 27,424,219 issued,
and 27,251,877 outstanding 27,262 26,795
Additional paid-in capital 63,013,392 61,315,985
Common stock held in escrow, 0 and 375,498 shares 436,812
Unearned compensation (98,661) (50,148)
Deficit accumulated during the development stage (71,105,484) (68,687,366)
------------ ------------
3,779,359 4,753,900
Less:
Treasury stock, at cost, 172,342 shares (468,267) (468,267)
------------ ------------
Total Stockholders' Equity 3,311,092 4,285,633
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,808,228 $ 5,838,200
============ ============
See accompanying condensed notes to financial statements.
DOR BIOPHARMA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative from
Three Months February 15, 1985
Ended March 31, (date of inception)
2003 2002 to March 31, 2003
Revenue:
SBIR contract revenue $ -- $ -- $ 100,000
Expenses:
SBIR contract
research and development -- -- 86,168
Proprietary research
and development 387,901 1,138,801 20,634,390
General and
administrative (includes
$1,479,385 in non-cash
stock compensation) 1,905,975 757,153 19,937,494
Write-off of acquired in-process
Severance Costs 130,712 -- 130,712
research and development -- -- 10,181,000
------------ ------------ ------------
Total operating expenses 2,421,778 1,895,954 50,969,764
------------ ------------ ------------
Loss from operations (2,421,778) (1,895,954) (50,869,764)
Equity gains/(losses)in
joint ventures (86,943) (22,179,091)
Other income -- -- 262,890
Interest income 6,672 38,168 3,577,968
Interest expense (3,012) (6,898) (361,265)
------------ ------------ ------------
Net loss (2,418,118) (1,951,627) (69,569,262)
Preferred stock dividends (231,028) (394,172) (6,554,714)
------------ ------------ ------------
Net loss applicable to common
stockholders $ (2,649,146) $ (2,345,799) $(76,123,976)
============ ============ ============
Basic and diluted
net loss per share
available to common
stockholders $ (0.10) $ (0.11)
Basic and diluted
weighted average common
shares outstanding 27,261,478 20,833,350
See accompanying condensed notes to financial statements.
DOR BIOPHARMA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative Period
Three Months February 15, 1985
Ended March 31, (Inception) to
2003 2002 March 31, 2003
----------- ----------- ------------
OPERATING ACTIVITIES:
Net Loss: $(2,418,118) $(1,951,627) $(69,569,262)
Adjustments to reconcile net loss in
cash used in operating activities:
Depreciation and amortization 70,960 71,455 1,979,561
Gain on the sale of mkt securities -- -- (110,244)
Non-cash stock compensation 1,479,385 -- 2,597,941
Equity (gains)/losses in joint ventures -- -- 22,179,091
Amortization of fair value of warrants -- -- 3,307,546
Gain on sale of assets -- -- (4,530)
Write off patent issuance costs -- -- 439,725
Write off of acquired research
and development -- -- 10,181,000
Changes in operating assets and liabilities:
Receivable from third party -- (16,944) --
Prepaid expenses 33,871 (42,765) (66,440)
Accounts payable and accrued expenses (33,011) (222,200) 610,153
Accrued compensation 15,508 (107,104) 139,988
Due to joint ventures -- -- (1,635,466)
----------- ----------- ------------
Net cash used in operating activities (851,405) (2,269,185) (29,950,937)
INVESTING ACTIVITIES:
Cash received in acquisition of CTD, net -- -- 1,392,108
Patent issuance cost (70,077) (16,654) (1,458,068)
Investment in joint ventures -- -- 12,687,541
Organizational costs incurred -- (135)
Purchases of leasehold improvements and
equipment -- (13,330) (1,870,198)
Proceeds from assets sold -- -- 4,790
Purchases of marketable securities -- -- (11,004,080)
Proceeds from sale of marketable
securities -- -- 11,114,324
----------- ----------- ------------
Net cash provided by (used in)
investing activities (70,077) (29,984) 10,866,282
FINANCING ACTIVITIES:
Net proceeds from issuance (costs incurred
related to issuance) common stock (68,451) -- 38,683,018
Proceeds from exercise of options 32,643 -- 449,735
Proceeds from borrowings under
line of credit -- -- 1,150,913
Repayment of amounts under line of credit (37,928) (32,840) (1,101,432)
Proceeds from refinancing of due to
joint venture payable -- -- --
Repayment of long-term note receivable -- -- 50,315
Repayment of note payable issued in
exchange for legal service -- (71,968)
Purchase and retirement of common stock -- -- (130,000)
Purchase of common stock for
treasury stock -- -- (468,267)
----------- ----------- ------------
Net cash provided by (used in)
financing activities (73,736) (32,840) 38,562,314
----------- ----------- ------------
Net increase (decrease) in cash and
Cash equivalents (995,218) (2,332,009) 19,477,659
Cash and cash equivalents at beginning
of period 4,147,164 9,942,053 --
----------- ------------
Cash and cash equivalents at end
of period $ 3,151,946 $ 7,610,044 $ 19,477,659
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW:
Cash paid for interest $ 3,012 $ 6,898
NON-CASH TRANSACTIONS
Issuance of preferred stock
Dividends in kind $ 231,028 $ 394,172
The accompanying notes are an integral part of the consolidated
financial statements.
DOR BIOPHARMA, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED NOTES TO FINANCIAL STATEMENTS
These unaudited interim consolidated financial statements of DOR BioPharma,
Inc. ("the Company", "we" or "us") were prepared under the rules and regulations
for reporting on Form 10-QSB. Accordingly, we omitted some information and
footnote disclosures normally accompanying the annual financial statements. You
should read these interim financial statements and notes in conjunction with our
audited consolidated financial statements and their notes included in our annual
report on Form 10-KSB, for the year ending December 31, 2002. It is our opinion
that the consolidated financial statements include all adjustments necessary for
a fair statement of the results of operations, financial position and cash flows
for the interim periods. All adjustments were of a normal recurring nature. The
results of operations for interim periods are not necessarily indicative of the
results for the full fiscal year.
NET LOSS PER SHARE
Net loss per share is presented on the Consolidated Statements of Operations
in accordance with SFAS No. 128 for the current and prior periods. DOR BioPharma
had a net loss for all periods being presented, which resulted in diluted and
basic earnings per share being the same for all periods presented. The potential
impact of warrants and stock options outstanding was not included in the
calculation because their inclusion would have been anti-dilutive.
STOCK BASED COMPENSATION
DOR BioPharma has stock-based employee compensation plans. Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require companies to record compensation
cost for stock-based employee compensation plans at fair value. We have chosen
to continue using the intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations, in accounting for its stock option plans. Had compensation cost
been determined based upon the fair value at the grant date for awards under the
plans based on the provisions of SFAS No. 123, the Company's pro forma net loss
and net loss per share would have been as follows:
THREE MONTHS ENDED MARCH 31,
2003 2002
Net loss applicable to common stockholders:
As reported $(2,649,146) $(2,345,799)
Stock-based employee compensation
expense determined under fair value based method (233,535) (92,748)
Stock-based compensation as reported 1,479,385
Pro forma net loss $(1,403,296) $(2,438,547)
net loss per share:
As reported, basic and diluted $ (0.10) $ (0.11)
Pro forma, basic and diluted $ (0.05) $ (0.12)
The fair value of options in accordance with SFAS 123 was estimated using the
Black-Scholes option-pricing model and the following weighted-average
assumptions: dividend yield 0%, expected life of four years, volatility of 148%
and 105% in 2003 and 2002, respectively and average risk-free interest rates in
2003 and 2002 of 4.0% and 4.5%, respectively. Stock compensation expense for
options granted to non-employees has been determined in accordance with SFAS 123
and Emerging Issues Task Force (EITF) 96-18, "Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services," and represents the fair value of the consideration
received, or the fair value of the equity instruments issued, whichever may be
more reliably measured. For options that vest over future periods, the fair
value of options granted to non-employees is periodically remeasured as the
options vest.
We have also issued options to employee's and directors that conditional upon a
amendment to the 1995 omnibus option plan is approved by stockholders.
Therefore, on a quarterly basis we record an expense based on the difference
between the exercise price and the current market price. We will continue to
record this until the amendment to the plan is approved.
SEVERANCE COSTS
In June 2002, the Board of Directors authorized management to restructure the
Company and implement a cost reduction program in order to reduce future
operating costs and preserve the Company's existing working capital. As a
result, we reduced headcount from 22 to 5 employees. The Company communicated
all severance benefits to employees before June 30, 2002.
Severance charges recorded in the statement of operations during the year ended
December 31, 2002 totaled approximately $781,248, which was based on
management's best estimate of probable costs to be incurred under severance
agreements with the terminated employees. During the quarter ended March 31,
2003, our total estimate was increased to $812,053 with the increase being
recorded as an expense for the first quarter. As of March 31, 2003, severance
payments of $752,818 have been made and $59,235 is currently recorded on the
Company's balance sheet as accrued compensation. Additionally, we paid our
former Chief Executive Officer $19,154 in severance in the first quarter and
currently have recorded an accrual of $80,753 for the remainder of his six month
severance period.
LICENSES AND PATENT COSTS
Patent costs, principally legal fees, are capitalized and, upon issuance of
the patent, are amortized on a straight-line basis over the shorter of the
estimated useful life of the patent or the regulatory life. Licenses of
technology with alternative future use are capitalized and are amortized on a
straight-line basis over the shorter of the estimated useful life or the
regulatory life. Licenses of technology with no alternative future use are
expensed as incurred. The useful lives of licenses and patent costs at December
31, 2002 ranged from 15 to 17 years.
IMPAIRMENT OF LONG-LIVED ASSETS
Equipment, leasehold improvements, licenses and patent costs, and
amortizable intangible assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected undiscounted cash flows is less than the
carrying value of the related asset or group of assets, a loss is recognized for
the difference between the fair value and the carrying value of the related
asset or group of assets. Such analyses necessarily involve significant
judgment.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis provides information to explain our
results of operations and financial condition. You should also read our
unaudited consolidated interim financial statements and their notes included in
this Form 10-QSB, and the Company's audited consolidated financial statements
and their notes and other information included in our Annual Report on Form
10-KSB for the year ended December 31, 2002. This report contains
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended which are subject to the safe-harbor created by
that Section. The Forward-looking statements within this Form 10-QSB are
identified by words such as "believes," "anticipates," "expects," "intends,"
"may," "will" "plans" and other similar expressions. However, these words are
not the exclusive means of identifying such statements. In addition, any
statements that refer to expectations, projections, or other characterizations
of future events or circumstances are forward-looking statements. These
forward-looking statements are subject to significant risks, uncertainties and
other factors, including those identified in Exhibit 99.1 "Risk Factors" filed
with this Form 10-QSB, which may cause actual results to differ materially from
those expressed in, or implied by, these forward-looking statements. We
undertake no obligation to publicly update or revise any forward-looking
statements to reflect events or circumstances occurring subsequent to the filing
of this Form 10-QSB with the SEC. You should carefully review and consider the
various disclosures the Company makes in this report and our other reports filed
with the SEC that attempt to advise interested parties of the risks,
uncertainties and other factors that may affect our business.
We are a pharmaceutical company specializing in the development of oral and
nasal delivery of vaccines and drugs. Through collaborations, we are developing
a proprietary oral and nasal vaccine delivery technology called the
Microvax((TM)) system, which we are applying to biodefense vaccines, including
nasal vaccines against ricin and anthrax toxins and an orally delivered vaccine
against botulinum toxin. In addition to our biodefense vaccines, we are
developing orBec(R), an oral therapeutic product, that is currently in a pivotal
Phase III clinical trial for the treatment of intestinal graft-vs-host disease,
a life threatening complication of bone marrow transplantation. Also, using
orBec(R), we are planning a Phase II clinical trial for the treatment of
irritable bowel syndrome. We are also developing oral drug delivery systems,
named the LPM(TM), PLP(TM), and LPE(TM) systems, for the delivery of proteins
and water insoluble drugs. We have preclinical animal data demonstrating the
oral delivery of the drug leuprolide, a FDA approved injectable anticancer
product. We also have preclinical animal data demonstrating the oral delivery of
the drug paclitaxel, a FDA approved injectable anticancer product.
PLAN OF OPERATION:
Our business strategy is to (1) identify, acquire and exploit rights to new
technologies and compounds relating to biodefense and orally delivered compounds
to treat gastrointestinal disorders; (2) enhance the value of those technologies
through further out-sourced research and development, specifically preclinical
and clinical testing towards regulatory approval; (3) market our therapeutic
drugs through licensing agreements with major pharmaceutical companies; (4)
market our biodefense vaccine products directly to the U.S. and European
governmental agencies; and (5) work to develop additional promising compounds
utilizing contract research organizations and collaborations with third parties
such as our licensors at the University of Texas Southwestern Medical Center.
We have assembled an experienced management team that oversees the human
clinical trials necessary to establish preliminary evidence of effectiveness and
seek partnerships with pharmaceutical and biotechnology companies for late-stage
development and marketing of our product candidates. We also supplement our
management team through a network of consultants and contractors. By operating
in this manner, we believe we can efficiently utilize our capital resources to
advance our drug and vaccine products to market. We operate through various
subsidiary companies: DOR Vaccines, Inc., which is the successor in interest to
Innovaccines Corporation, our former joint venture, and form the basis of our
biodefense business initiative and Enteron Pharmaceuticals, Inc. and Oradel
Systems, Inc., which together form the basis of our biotherapeutics initiative.
Enteron is a majority owned subsidiary which holds the intellectual property
relating to orBec(R). Oradel is a wholly-owned subsidiary which holds the
intellectual property relating to the LPM(TM) drug delivery system. We plan to
continue to develop our later stage product opportunities while seeking to
manage our earlier stage product pipeline through collaborative licensing
arrangements.
The Company has executed a worldwide exclusive option to license patent
applications with the University of Texas Southwestern Medical Center for the
nasal, pulmonary and oral uses of a non-toxic ricin vaccine. Specifically,
during February 2003, we executed a binding, 90 day right of first negotiation
agreement with UT Southwestern to obtain the injectable rights to the ricin
vaccine. Until January 2004, we may chose to exercise the option to license the
nasal, pulmonary, and oral rights to the non-toxic ricin vaccine with a license
fee payment of $100,000.
In February, we executed a letter of intent with Thomas Jefferson
University, and have subsequently contracted to exclusively license issued U.S.
Patent No. 6,051,239 and corresponding international patent applications broadly
claiming the oral administration of nontoxic modified botulinum toxins as
vaccines. The intellectual property also includes patent applications covering
the inhaled and nasal routes of delivery of the vaccine. Upon execution in May
2003 of the license agreement, we paid a license fee of $160,000, payable in
$130,000 of restricted common stock and $30,000 in cash. We intend to enter into
a sponsored research agreement with Thomas Jefferson University, that would
provide for one year of sponsored research from Thomas Jefferson University in
exchange for $300,000 payable quarterly. We also intend to exercise a consulting
agreement with Dr. Lance Simpson, the inventor of the botulinum toxin vaccine,
for a period of three years under which Dr. Simpson would receive options to
purchase 100,000 shares of our common stock, vesting over three years.
During January 2003, we executed a binding letter of intent with the United
Kingdom Ministry of Defense to exclusively license patent applications covering
the use of microencapsulation technology. These included patent application
numbers WO00/56282; WO 00/56362; WO 00/56361 and WO 01/70200. Upon execution of
a royalty bearing license agreement, we would be obligated to pay a license
issue fee $100,000, as well as a $25,000 license fee payable on the first
anniversary of the license agreement and an additional $25,000 license fee
payable 18 months later. We would also be required to provide $100,000 of
sponsored research support for a one-year period.
During March 2003, we entered into a three-year employment agreement
with Ralph M. Ellison M.D., M.B.A. Pursuant to this employment agreement we
agreed to pay Dr. Ellison a base salary of $200,000 per year. Upon the
completion of an equity financing, Dr. Ellison would receive an increase in base
salary to $300,000 per year. Dr. Ellison will also receive a bonus of 30% of his
base salary. We agreed to issue options to purchase 2,000,000 shares of our
Common Stock, with one third immediately vesting and the remainder vesting over
three years. Upon termination by the company without "just cause" as defined by
this agreement, we would pay Dr. Ellison 6 months severance, as well as any
unpaid bonuses, and all options would immediately become vested.
CRITICAL ACCOUNTING POLICIES:
Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
expense, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate these estimates. Currently, the most significant
estimate or judgment that we make is whether or not to capitalize or expense
patent and license costs. We make this judgment based on whether the technology
has alternative future uses, as defined in SFAS 2, "Accounting for Research and
Development Costs". Accordingly, we capitalized all outside legal and filing
costs incurred in the procurement and defense of patents, as well as amounts
paid to Southern Research Institute and Elan allowing us to increase the uses of
our license on the Southern Research patents.
MATERIAL CHANGES IN RESULTS OF OPERATIONS:
We are a development stage company and to date have not generated any
material revenues from operating activities. Although our product portfolio
includes a phase III drug that we believe may be attractive to potential
pharmaceutical partners, we have no active discussions under way with any such
potential partners.
For the three-month period ended March 31, 2003, the Company had a net loss,
of $2,418,118, which was an increase of $466,491 or 24% as compared to a net
loss of $1,951,627 for the three months ended March 31, 2002. After giving
effect to dividends on preferred stock, which are paid-in-kind in the form of
additional shares of preferred stock, net loss available to common stockholders
increased $303,347 or 13%, to $2,649,146, or $0.10 per share, compared with
$2,345,799, or $0.11 per share, for the prior year period.
Research and development expenditures for the three months ended March 31,
2003, decreased $750,900, or 66%, to $294,091, compared with $1,138,801 for the
corresponding period ended March 31, 2002. This decrease reflects the Company's
decision to reduce expenditures associated with its earlier stage programs,
which were the exclusive subject of research and development expenditures during
the first quarter 2002, offset by the increase in the cost and enrollment of
phase III clinical trials of orBec(R) during the first quarter 2003.
General and administrative expenses for the first quarter 2002 increased
$1,148,822, or 152%, to $1,905,975 as compared to $757,153 for the three months
ended March 31, 2002. This increase was due primarily to non-cash stock
compensation of $1,479,385, and severance costs of $130,712. This expense
resulted from the way we account for options granted to employees, directors,
and consultants as described in the footnotes to the financial statements. This
increase was offset in part by decreases in other general and administrative
costs of $332,563, due to our lower head count, and overall cost saving
measures.
Interest income for the three months ending March 31, 2003 was $6,672, a
decrease of $31,496, or 83%, compared to $38,168 for the same period in 2002,
due to the decrease in interest rates on investment instruments versus the prior
year as well as lower cash balances in 2003.
FINANCIAL CONDITION
On March 31, 2003 and December 31, 2002, We had cash, cash equivalents, and
marketable securities of $3,151,946 and $4,147,164, respectively. Working
capital was $2,073,117 at March 31, 2003 compared with $3,046,775, at December
31, 2002.
For the first quarter 2003, we lowered our rate of cash expenditures by
$1,336,791 or 57% to $995,218 compared to $2,332,009 for the same period in
2002. We had an operating loss of $2,418,118, however $1,479,385 of the loss was
in the form of non-cash stock compensation. The overall reduction was
attributable to a vast reduction in payroll and operating expenses, coupled with
the granting of options as opposed to cash to attract and retain qualified
personnel.
We are continuing development of our biodefense vaccine candidates in
advance of the anticipated passage of the proposed Project Bioshield Act of
2003, currently being considered in both the U.S. Senate and House of
Representatives. Upon enactment of such Capital Act, as proposed by President
Bush, we intend to manufacture and provide investigational stockpiles of our
vaccine candidates to the U.S. Government while conducting the testing necessary
for FDA licensure.
We believe our current cash position of $3,151,946 will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures for
at least the next 12 months. However, within this period, possibly in the very
near term, we may decide to seek additional capital in the private and/or public
equity markets to support a higher level of growth, to respond to competitive
pressures, to develop new products and services and to support new strategic
partnership expenditures. After that 12 month period, if cash generated from
operations are insufficient to satisfy our liquidity requirements, we may need
to raise additional funds through public or private financing, strategic
relationships or other arrangements. If we receive additional funds through the
issuance of equity securities, stockholders may experience significant dilution
and these equity securities may have rights, preferences or privileges senior to
those of our common stock. Further, we may not be able to obtain additional
financing when needed or on terms favorable to our stockholders or us. If we are
unable to obtain additional financing when needed, or to do so on acceptable
terms, we may be unable to develop our products, take advantage of business
opportunities or respond to competitive pressures.
ITEM 4. Controls and Procedures
(a) Our Chief Executive Officer and the Controller of the Company (our
principal executive officer and principal financial officer, respectively) have
concluded, based on their evaluation as of a date within 90 days prior to the
date of the filing of this Report, that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports filed or submitted by it under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
include controls and procedures designed to ensure that information required to
be disclosed by the Company in such reports is accumulated and communicated to
our management, including our Chairman and Chief Executive Officer and our
Controller (principal financial and accounting officer), as appropriate to allow
timely decisions regarding required disclosure.
(b) There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of such evaluation.
PART II. - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) 99.1 Risk Factors
99.2 Certification of Chief Executive Officer, pursuant to the
Sarbanes-Oxley Act of 2002.
99.3 Certification of Principal Financial Officer, pursuant to the
Sarbanes-Oxley Act of 2002.
--------------
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the first quarter of 2003.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DOR BIOPHARMA, INC.
May 15, 2003 /s/ Ralph M. Ellison
--------------------
Ralph M. Ellison
Chief Executive Officer and President
May 15, 2003 /s/ William D. Milling
----------------------
William D. Milling
Controller
(principal financial and accounting officer)
SECTION 302 CERTIFICATION
I, Ralph M. Ellison, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of DOR BioPharma, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors, or persons performing the equivalent functions,
a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: 05/15/03
--------
/S/ Ralph M. Ellison
------------------------------------------
Ralph M. Ellison
Chief Executive Officer and President
I, William D. Milling, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of DOR BioPharma, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors, or persons performing the equivalent functions,
a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: 5/15/03
-------
/S/William D. Milling
----------------------------
William D. Milling
Controller
(Principal financial and accounting officer)