Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Echo Therapeutics, Inc. (1031927) 10-Q published on Nov 16, 2016 at 2:26 pm
Reporting Period: Sep 29, 2016
On September 23, 2016, Scott W. Hollander, President and Chief Executive Officer and a director of the Company, and the Company entered into a separation agreement (the “Separation Agreement”) pursuant to which the parties mutually agreed to Mr. Hollander’s separation from the Company, effective September 23, 2016 (the “Separation Date”). Under the Separation Agreement, Mr. Hollander will receive: (i) severance pay equal to the gross amount of $420,000 (the “Severance Amount”), less applicable federal, state and local withholding and taxes, payable in monthly amounts of $17,500 commencing on October 15, 2016, subject to increase to $25,000 per month if the Company shall consummate a debt or equity financing as described in Section 3(a)(ii) of the Severance Agreement, until the Severance Amount is fully paid; (ii) 150,000 shares of restricted stock previously awarded in March 2016 pursuant to a restricted stock agreement shall vest in quarterly installments of 37,500 shares; (iii) accelerated vesting of all unvested stock options previously awarded to him in December 2014 and March 2016 with three (3) months from the Separation Date to exercise such options; and (iv) reimbursement of COBRA payments for up to eighteen (18) months.
In order to improve clinical performance of the older CGM product that MTIA is testing, the R&D team made a number of specific updates to the design of the Exfoliator and the Sensor Module. Extensive clinical testing was done both before the changes were made and afterwards. MTIA is now transferring these changes into their production facilities and will be completing the design verification activities, prior to the initiation of the CFDA clinical trial.
While this focus on improving the older generation product has enabled MTIA to make more forward progress in moving this system forward towards an anticipated approval in China, the effort resulted in a delay in the development our NextGen system. Furthermore, a lack of adequate funding has delayed the critical R&D spending necessary to complete the design. Once funding has been re-established a new set of milestones will be published.
Selling, General and Administrative Expenses — S,G&A expenses increased by $377,666, or 46%, to $1,198,328 for the three months ended 2016 from $820,662 for the same period in 2015. S,G&A expenses represented 66% and 56% of total operating expenses during the quarter ended 2016 and 2015, respectively. We saw a net increase in salary and other benefits of $363,000 in this quarter which was primarily attributable to severance payable to our chief executive officer of approximately $462,000. This is also inclusive of share-based compensation charges for the accelerated vesting of our former CEO’s 150,000 shares of restricted stock and options to purchase 500,000 shares of our common stock in accordance with the terms of his separation agreement.
S,G&A expenses decreased by $888,030, or 23%, to $2,927,716 for the nine months ended 2016 from $3,815,746 for the same period in 2015. S,G&A expenses represented 59% and 58% of total operating expenses (excluding the impairment charge in 2015) during the nine months ended 2016 and 2015, respectively. The decline for the 2016 quarter was attributable to approximate declines in: legal fees of $804,000, salary and benefits of $130,000, telephone and internet expenses of $73,000, information technology costs of $51,000, insurance expense of $70,000, relocation costs of $35,000, rent of $21,000, and website costs of $10,000. These declines were offset by an approximate increase in investor relations charges of $87,000 as well as increased costs relative to our former chief executive’s separation agreement more fully described above.