Table ofContents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 
| **x** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|--------------------------------------------------------------------------------------------------------|

 

**For the quarterly period ended March 31,2009**

 

**OR**

 
| **o** | **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: 000-50344**

 

**LPATH,INC.**

(Name of smallbusiness issuer in its charter)

 

| **Nevada**                                                       | ** ** | **16-1630142**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification No.) |

 

**6335Ferris Square, Suite A, San Diego, CA 92121**

(Address ofprincipal executive offices, including zip code)

 

**(858)678-0800**

(Registrant’stelephone number, including area code)

 

Indicate by check markwhether the registrant (1) filed all reports required to be filed by Section 13or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes x  No  ̈ 

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer  o                     |   | Accelerated filer o          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated filer o                        |   | Smaller reporting  company x |
| (Do not check if a  smaller reporting company) |   |                              |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes o No x

 

The number of shares ofissuer’s outstanding Class A common stock as of May 8, 2009  was 52,931,971.

 

 

 

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**LPATH, INC.**

**FORM 10-Q**

 

**March 31, 2009**

 

**TABLE OF CONTENTS**

 
| **PART I**  | **FINANCIAL  INFORMATION**                                                                  | 3      |
|------------------|---------------------------------------------------------------------------------------------|--------|
|             |                                                                                        |   |
| ITEM 1:          | Financial Statements                                                                        | 3      |
|             |                                                                                        |   |
| ITEM 2:          | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 11     |
|             |                                                                                        |   |
| ITEM 4:          | Controls and  Procedures                                                                    | 13     |
|             |                                                                                        |   |
| **PART II** | **OTHER  INFORMATION**                                                                      | 14     |
|             |                                                                                        |   |
| ITEM 1:          | Legal Proceedings                                                                           | 14     |
|             |                                                                                        |   |
| ITEM 2:          | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 14     |
|             |                                                                                        |   |
| ITEM 3:          | Defaults upon  Senior Securities                                                            | 14     |
|             |                                                                                        |   |
| ITEM 4:          | Submission of  Matters to a Vote of Security Holders                                        | 14     |
|             |                                                                                        |   |
| ITEM 5:          | Other Information                                                                           | 14     |
|             |                                                                                        |   |
| ITEM 6:          | Exhibits                                                                                    | 14     |
|             |                                                                                        |   |
| **SIGNATURES**   | 17                                                                                          |

 

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**PART I.   FINANCIAL INFORMATION**

**Item 1.****                      ****FINANCIALSTATEMENTS**

 

**LPATH,INC.**

**Condensed Consolidated Balance Sheets**

 
| ** **                                                                                                                                                                        | ** ** | **March 31,** | ** **    | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|---------------|-----------------------|------------|
| ** **                                                                                                                                                                        | ** ** | **2009**           | ** **    | **2008**              | ** ** |
| ** **                                                                                                                                                                        | ** ** | **(Unaudited)**    | ** **    | **(See note below)**  | ** ** |
| **ASSETS**                                                                                                                                                                        |       |               |          |                  |       |
| Current Assets:                                                                                                                                                                   |       |               |          |                  |       |
| Cash and cash equivalents                                                                                                                                                         |       | $                  | 6,739,289     |                  | $          | 7,775,593 |   |
| Accounts receivable                                                                                                                                                               |       | 178,765            |          | 656,221               |       |
| Prepaid expenses and other current assets                                                                                                                                         |       | 191,823            |          | 204,863               |       |
| Total current assets                                                                                                                                                              |       | 7,109,877          |          | 8,636,677             |       |
|                                                                                                                                                                              |       |               |          |                  |       |
| Equipment and leasehold improvements, net                                                                                                                                         |       | 262,400            |          | 285,218               |       |
| Patents, net                                                                                                                                                                      |       | 576,851            |          | 462,785               |       |
| Deposits and other assets                                                                                                                                                         |       | 37,097             |          | 37,272                |       |
|                                                                                                                                                                              |       |               |          |                  |       |
| Total assets                                                                                                                                                                      | ** ** | **$**              | **7,986,225** | ** **            | **$**      | **9,421,952** | ** ** |
|                                                                                                                                                                              |       |               |          |                  |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                     |       |               |          |                  |       |
| Current Liabilities:                                                                                                                                                              |       |               |          |                  |       |
| Accounts payable                                                                                                                                                                  |       | $                  | 898,410       |                  | $          | 1,123,836 |   |
| Accrued compensation                                                                                                                                                              |       | 405,295            |          | 459,831               |       |
| Accrued expenses                                                                                                                                                                  |       | 678,278            |          | 391,836               |       |
| Deferred contract revenue                                                                                                                                                         |       | 2,333,333          |          | 3,333,333             |       |
| Deferred rent, current portion                                                                                                                                                    |       | 52,597             |          | 51,130                |       |
| Leasehold improvement debt, current portion                                                                                                                                       |       | 15,586             |          | 15,278                |       |
| Total current liabilities                                                                                                                                                         |       | 4,383,499          |          | 5,375,244             |       |
|                                                                                                                                                                              |       |               |          |                  |       |
| Deferred rent, long-term portion                                                                                                                                                  |       | 35,985             |          | 49,990                |       |
| Leasehold improvement debt, long-term portion                                                                                                                                     |       | 11,103             |          | 15,116                |       |
| Long-term accrued liabilities                                                                                                                                                     |       | —             |          | 411,802               |       |
| Warrants                                                                                                                                                                          |       | 5,500,000          |          | —                |       |
| Total liabilities                                                                                                                                                                 |       | 9,930,587          |          | 5,852,152             |       |
|                                                                                                                                                                              |       |               |          |                  |       |
| Stockholders’ Equity:                                                                                                                                                        |       |               |          |                  |       |
| Common stock - $.001 par value; 100,000,000 shares authorized;  52,931,071 and 52,657,911 issued and outstanding at March 31, 2009 and  December 31, 2008, respectively |       | 52,931             |          | 52,657                |       |
| Additional paid-in capital                                                                                                                                                        |       | 33,864,515         |          | 43,144,945            |       |
| Accumulated deficit                                                                                                                                                               |       | (35,861,808        | )             | (39,627,802           | )          |
| Total stockholders’ equity                                                                                                                                                   |       | (1,944,362         | )             | 3,569,800             |       |
|                                                                                                                                                                              |       |               |          |                  |       |
| Total liabilities and stockholders’ equity                                                                                                                                   | ** ** | **$**              | **7,986,225** | ** **            | **$**      | **9,421,952** | ** ** |

 

*Note:The balance sheet at December 31, 2008 has been derived from the auditedfinancial statements at that date.*

See accompanying notes to the condensed consolidated financialstatements.

 

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**LPATH, INC.**

**CondensedConsolidated Statements of Operations**

**(Unaudited)**

 
| ** **                                                     | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                     | ** ** | **March 31,**     | ** ** |
| ** **                                                     | ** ** | **2009**               | ** ** | **2008** | ** ** |
|                                                           |       |                   |       |   |   |
| Revenues:                                                      |       |                   |       |   |   |
| Grant and royalty revenue                                      |       | $                      | 178,765    |   | $ | 13,126 |   |
| Research and development revenue under collaborative agreement |       | 2,500,000              |       | — |   |
| Total revenues                                                 |       | 2,678,765              |       | 13,126 |   |
|                                                           |       |                   |       |   |   |
| Expenses:                                                      |       |                   |       |   |   |
| Research and development                                       |       | 1,917,639              |       | 3,604,437 |   |
| General and administrative                                     |       | 1,020,219              |       | 1,545,292 |   |
| Total expenses                                                 |       | 2,937,858              |       | 5,149,729 |   |
|                                                           |       |                   |       |   |   |
| Loss from operations                                           |       | (259,093               | )          | (5,136,603 | ) |
|                                                           |       |                   |       |   |   |
| Other income (expense), net                                    |       | 25,087                 |       | 58,422 |   |
| Change in fair value of warrants                               |       | 800,000                |       | — |   |
| Total other income (expense)                                   |       | 825,087                |       | 58,422 |   |
|                                                           |       |                   |       |   |   |
| Net income (loss)                                              |       | $                      | 565,994    |   | $ | (5,078,181 | ) |
|                                                           |       |                   |       |   |   |
| Earnings (loss) per share                                      |       |                   |       |   |   |
| Basic                                                          |       | $                      | 0.01       |   | $ | (0.11 | ) |
| Diluted                                                        |       | $                      | 0.01       |   | $ | (0.11 | ) |
|                                                           |       |                   |       |   |   |
| Weighted average shares outstanding used in the calculation    |       |                   |       |   |   |
| Basic                                                          |       | 53,624,399             |       | 45,167,120 |   |
| Diluted                                                        |       | 55,960,229             |       | 45,167,120 |   |
|                                                           |       |                   |       |   |   |

 

See accompanying notes to the condensed consolidated financialstatements.

 

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**Lpath, Inc.**

**CondensedConsolidated Statement of Changes in Stockholders’ Equity**

**Three Months Ended March 31, 2009**

**(Unaudited)**

 
| ** **                                          | ** ** | **Common Stock** | ** ** | **Additional Paid-** | ** ** | **Accumulated** | ** ** | **Total  Stockholders'** | ** ** |
|-----------------------------------------------------|------------|------------------|------------|----------------------|------------|-----------------|------------|--------------------------|------------|
| ** **                                          | ** ** | **Shares**       | ** ** | **Amount**           | ** ** | **in Capital**  | ** ** | **Deficit**              | ** ** | **Equity** | ** ** |
| ** **                                          | ** ** | ** **       | ** ** | ** **           | ** ** | ** **      | ** ** | ** **               | ** ** | ** ** | ** ** |
| **Balance, December 31, 2008**                      |       | 52,657,911       |       | $                    | 52,657     |            | $          | 43,144,945               |       | $ | (39,627,802 | ) | $ | 3,569,800 |   |
|                                                |       |             |       |                 |       |            |       |                     |       |   |   |
| Cumulative effect of change in accounting principle |       |             |       |                 |       | (9,500,000      | )          | 3,200,000                |       | (6,300,000 | ) |
| Stock options exercised                             |       | 273,160          |       | 274                  |       | 30,202          |       |                     |       | 30,476 |   |
| Stock-based compensation                            |       |             |       |                 |       | 189,368         |       |                     |       | 189,368 |   |
| Net income                                          |       |             |       |                 |       |            |       | 565,994                  |       | 565,994 |   |
|                                                |       |             |       |                 |       |            |       |                     |       |   |   |
| **Balance, March 31, 2009**                         |       | 52,931,071       |       | $                    | 52,931     |            | $          | 33,864,515               |       | $ | (35,861,808 | ) | $ | (1,944,362 | ) |
|                                                     |            |                  |            |                      |            |                 |            |                          |            |  |  |  |  |  |  |  |  |  |  |

 

See accompanying notes to the condensed consolidated financialstatements.

 

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**LPATH, INC.**

**CondensedConsolidated Statements of Cash Flows**

**(Unaudited)**

 
| ** **                                                                            | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                            | ** ** | **March 31,**     | ** ** |
| ** **                                                                            | ** ** | **2009**               | ** ** | **2008** | ** ** |
| Cash flows from operating activities:                                                 |       |                   |       |   |   |
| Net income (loss)                                                                     |       | $                      | 565,994    |   | $ | (5,078,181 | ) |
| Adjustments to reconcile net income (loss) to net cash used in  operating activities: |       |                   |       |   |   |
| Stock-based compensation expense                                                      |       | 189,368                |       | 1,536,156 |   |
| Change in fair value of warrants                                                      |       | (800,000               | )          | — |   |
| Depreciation and amortization                                                         |       | 39,184                 |       | 38,766 |   |
| Deferred rent expense                                                                 |       | (12,538                | )          | (11,114 | ) |
| Foreign currency exchange gain                                                        |       | (7,980                 | )          | (1,865 | ) |
| Changes in operating assets and liabilities:                                          |       |                   |       |   |   |
| Accounts receivable                                                                   |       | 477,456                |       | (2,624 | ) |
| Prepaid expenses and other current assets                                             |       | 13,040                 |       | (3,612 | ) |
| Accounts payable and accrued expenses                                                 |       | (393,542               | )          | 1,340,803 |   |
| Deferred contract revenue                                                             |       | (1,000,000             | )          | — |   |
| Deposits and other assets                                                             |       | 175                    |       | 2,272 |   |
| Net cash used in operating activities                                                 |       | (928,843               | )          | (2,179,399 | ) |
|                                                                                  |       |                   |       |   |   |
| Cash flows from investing activities:                                                 |       |                   |       |   |   |
| Equipment and leasehold improvement expenditures                                      |       | (13,868                | )          | — |   |
| Patent expenditures                                                                   |       | (120,364               | )          | (15,917 | ) |
| Net cash used in investing activities                                                 |       | (134,232               | )          | (15,917 | ) |
|                                                                                  |       |                   |       |   |   |
| Cash flows from financing activities:                                                 |       |                   |       |   |   |
| Proceeds from options and warrants exercised                                          |       | 30,476                 |       | 79,679 |   |
| Repayments of leasehold improvement debt                                              |       | (3,705                 | )          | (3,421 | ) |
| Net cash provided by financing activities                                             |       | 26,771                 |       | 76,258 |   |
|                                                                                  |       |                   |       |   |   |
| Net increase/(decrease) in cash                                                       |       | (1,036,304             | )          | (2,119,058 | ) |
|                                                                                  |       |                   |       |   |   |
| Cash and cash equivalents at beginning of period                                      |       | 7,775,593              |       | 7,521,071 |   |
| Cash and cash equivalents at end of period                                            |       | $                      | 6,739,289  |   | $ | 5,402,013 |   |
| ** **                                                                            | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Supplemental disclosures of cash flow  information:**                               | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Cash paid during the period for:**                                                  | ** ** | ** **             | ** ** | ** ** | ** ** |
| Income taxes                                                                          |       | $                      | 1,600      |   | $ | 1,600 |   |
| **Supplemental Schedule of Non-cash Investing and  Financing Activities:**            |       |                   |       |   |   |
| Incurred patent expenditures contained in accrued expenses                            |       | $                      | —     |   | $ | 57,677 |   |

 

See accompanying notes to the condensed consolidated financialstatements.

 

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**LPATH, INC.**

**Notes toCondensed Consolidated Financial Statements**

**March 31,2009**

 

**Note 1 – BASIS FOR PRESENTATION**

 

Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with generally accepted accounting principles forinterim financial information and with the instructions to Form 10-Q and Article 8of Regulation S-X. Accordingly, they do not include all information and notesrequired by accounting principles generally accepted in the United States forcomplete financial statements.

 

Inthe opinion of management, all adjustments considered necessary for a fairpresentation have been included. Except as otherwise disclosed, all suchadjustments are of a normal recurring nature. Operating results for the three month period ended March 31, 2009are not necessarily indicative of the results that may be expected for the yearending December 31, 2009. For further information, refer to theconsolidated financial statements and footnotes thereto included in the company’sannual report on Form 10-K for the year ended December 31, 2008.

 

Thepreparation of the financial statements in conformity with U. S. generallyaccepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

 

Asset forth in the financial statements and described in Note 4 below, Lpath adopted Emerging Issues Task ForceIssue No. 07-5, *DeterminingWhether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock* (EITF07-5) effective January 1, 2009. The adoption of EITF 07-5’s requirementsresulted in a cumulative effect adjustment and triggered recognition in theincome statement of the change in the fair value of the warrants during thethree months ended March 31, 2009.

 

# **Note 2**–GOING CONCERN UNCERTAINTY

# ** **

Theaccompanying financial statements have been prepared assuming that the companywill continue as a going concern. In the three months ended March 31, 2009Lpath incurred an operating loss and utilized net cash in operating activitiesof $259,093 and $928,843, respectively.  In the year ended December 31,2008 the company incurred an operating loss and utilized net cash in operatingactivities of $11,735,235 and $6,192,041, respectively. These conditions raisesubstantial doubt about the company’s ability to continue as a going concern.Management’s plans with regard to these matters are discussed below. Theaccompanying consolidated financial statements do not include any adjustmentsthat might result from the outcome of this uncertainty.

 

During2009 the company expects to continue to incur cash losses fromoperations.  While the company had cash totaling $6,739,289 as of March 31,2009, the cost of its ongoing drug discovery and development efforts, includinggeneral and administrative expenses, are expected to consume between $12 and$19 million in 2009.  We believe that our existing cash and expectedfunding under Lpath’s collaborative research and development agreement withMerck will be sufficient to meet Lpath’s projected operating requirements atleast through 2009.  Although we believe work under the collaborativeagreement with Merck is progressing as planned, there can be no assurance thatMerck will not cancel the agreement before the conclusion of the initialdevelopment period.  In the event that Merck cancels its agreement withus, we would need to seek additional sources of capital to finance our researchand development activities into 2010.

 

UnlessMerck elects to extend its agreement with Lpath beyond the initial developmentperiod, we expect to continue to incur cash losses from operations during2009.  Additional capital may be required to continue to fund the company’sresearch and development projects in 2009 and beyond.  In the event weneed to raise additional capital, we would:

 

1.               Pursue additional fund raising activitiesfrom both existing and potential new investors.

 

2.               Explore cash generating opportunitiesfrom strategic alliances, including licensing portions of our technology orentering into corporate partnerships or collaborations.  In suchtransactions, Lpath could transfer certain rights to one or more of its drugdiscovery or development programs, or to specific indications within thoseprograms and receive infusions of cash in the short-term, and potentially inthe long-term as well.

 

3.               Continue to seek additional researchgrants from the National Institutes of Health or other sources.

 

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# **Note 3**–SHARE-BASED PAYMENTS

# ** **

The company recognized share-based compensationexpense in accordance with SFAS No. 123R, “Share-Based Payment,” asfollows:

 
| ** **                             | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------|------------|------------------------|------------|
| ** **                             | ** ** | **March 31,**     | ** ** |
| ** **                             | ** ** | **2009**               | ** ** | **2008** | ** ** |
|                                   |       |                   |       |   |   |
| Research and development               |       | $                      | (51,052    | ) | $ | 605,432 |   |
| General and administrative             |       | 240,420                |       | 930,724 |   |
| Total share-based compensation expense |       | $                      | 189,368    |   | $ | 1,536,156 |   |

 

As of March 31, 2009there was a total of $1.9 million unrecognized compensation expense related tounvested stock-based compensation under the plan.  That expense is expected to be recognizedover a weighted-average period of 2 years. Because of its net operating losses, the company did not realize any taxbenefits for the tax deductions from share-based payment arrangements duringthe periods ended March 31, 2009 and 2008.

 

**Note 4****–****WARRANTS**

 

Lpath adopted EITF 07-5effective January 1, 2009. The adoption of EITF 07-5’s requirements canaffect the accounting for warrants that contain provisions that protect holdersfrom a decline in the stock price (or “down-round” protection). For example,warrants with such provisions will no longer be recorded in equity. Down-round protectionprovisions reduce the exercise price of a warrant or convertible instrument ifa company either issues equity shares for a price that is lower than theexercise price of those instruments or issues new warrants or convertibleinstruments that have a lower exercise price. The company evaluated whetherwarrants to acquire stock of the company contain provisions that protectholders from declines in the stock price or otherwise could result inmodification of the exercise price and/or shares to be issued under therespective warrant agreements based on a variable that is not an input to thefair value of a “fixed-for-fixed” option. The company determined that thefollowing warrants contained such provisions, and therefore pursuant to thecriteria of EITF-07-5, they were not indexed to the company’s own stock:

 

| **Warrant  Expiration Dates** | ** ** | **Number of  Shares** | ** ** | **Exercise Price  per Share** | ** ** |
|------------------------------------|------------|----------------------------|------------|-----------------------------------------|------------|
| ** **                         | ** ** | ** **                 | ** ** | ** **                              | ** ** |
| April –  June 2012  |       | 8,017,951                  |       | $                                       | 1.04       |   |
|                               |       |                       |       |                                    |       |
| August 2013                   |       | 1,940,490                  |       | $                                       | 1.25       |   |

 

In accordance with EITF07-5, the company, beginning on January 1, 2009, recognizes these warrantsas liabilities at their respective fair values on each reporting date. Thecumulative effect of the change in accounting for these warrants of $3,200,000was recognized as an adjustment to the opening balance of accumulated deficitat January 1, 2009. The cumulative effect adjustment was the differencebetween the amounts recognized in the consolidated balance sheet before initialadoption of EITF 07-5 and the amounts recognized in the consolidated balancesheet upon the initial application of EITF 07-5. The amounts recognized in theconsolidated balance sheet as a result of the initial application of EITF 07-5on January 1, 2009 were determined based on the amounts that would havebeen recognized if EITF 07-5 had been applied from the issuance date of thewarrants. The Company measured the fair value of these warrants as of March 31,2009, and recorded other income of $800,000 credit ($0.01 per share) to recordthe liabilities associated with these warrants at their respective fair valuesas of March 31, 2009.

 

The warrant liabilityreflected on Lpath’s balance sheet is a consequence of current generallyaccepted accounting principles, arising from the implementation of EITF07-05.  There is no foreseeable circumstanceunder which Lpath can be required to make any cash payment to settle thewarrant liability now carried on the balance sheet.

 

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**Note 5****–****FAIR VALUE MEASUREMENTS**

 

The company measures fairvalue in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 157, *Fair Value Measurements* (“SFAS No. 157”).SFAS No. 157 defines fair value, establishes a framework and givesguidance regarding the methods used for measuring fair value, and expandsdisclosures about fair value measurements. SFAS No. 157 clarifiesthat fair value is an exit price, representing the amount that would bereceived to sell an asset or paid to transfer a liability in an orderlytransaction between market participants. As such, fair value is amarket-based measurement that should be determined based on assumptions thatmarket participants would use in pricing an asset or liability. As a basisfor considering such assumptions there exists a three-tier fair valuehierarchy, which prioritizes the inputs used in measuring fair value asfollows:

 
| · | Level 1 —  unadjusted quoted prices in active markets for identical assets or  liabilities that the Company has the ability to access as of the measurement  date.                                  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                          |
| · | Level 2 — inputs  other than quoted prices included within Level 1 that are directly observable  for the asset or liability or indirectly observable through corroboration  with observable market data. |
|   |                                                                                                                                                                                                          |
| · | Level 3 —  unobservable inputs for the asset or liability only used when there is  little, if any, market activity for the asset or liability at the measurement  date.                                  |

 

Thishierarchy requires the company to use observable market data, when available,and to minimize the use of unobservable inputs when determining fair value.

 

**Recurring Fair Value Estimates**

 

Thecompany’s recurring fair value measurements at March 31, 2009 were asfollows:

 
| ** **                                    | ** ** | ** **              | ** **      | ** **      | ** ** | ** **      | ** ** | ** **       | ** ** | ** **              | ** ** |
|-----------------------------------------------|------------|-------------------------|-----------------|-----------------|------------|-----------------|------------|------------------|------------|-------------------------|------------|
| ** **                                    | ** ** | ** **              | ** **      | **in Active**   | ** ** | **Significant** | ** ** | ** **       | ** ** | **Unrealized**          | ** ** |
| ** **                                    | ** ** | ** **              | ** **      | **Markets for** | ** ** | **other**       | ** ** | **Significant**  | ** ** | **gains (losses)**      | ** ** |
| ** **                                    | ** ** | ** **              | ** **      | **Identical**   | ** ** | **Observable**  | ** ** | **Unobservable** | ** ** | **during the three**    | ** ** |
| ** **                                    | ** ** | **Fair Value as of**    | ** **      | **Assets**      | ** ** | **Inputs**      | ** ** | **Inputs**       | ** ** | **months ended**        | ** ** |
| ** **                                    | ** ** | **March 31, 2009** | ** **      | **(Level 1)**   | ** ** | **(Level 2)**   | ** ** | **(Level 3)**    | ** ** | **March 31, 2009** | ** ** |
| Liabilities:                                  |       |                    |            |            |       |            |       |             |       |                    |       |
| Warrants expiring April - June 2012 |       | $                       | 4,200,000       |            | $          | —          |       | $                | —     |                    | $          | 4,200,000 |   | $ | 600,000 |   |
|                                          |       |                    |            |            |       |            |       |             |       |                    |       |
| Warrants expiring August 2013            |       | 1,300,000               |            | —          |       | —          |       | 1,300,000        |       | 200,000                 |       |
|                                          |       |                    |            |            |       |            |       |             |       |                    |       |
|                                          |       | $                       |  5,500,000 |            | $          | —          |       | $                | —     |                    | $          | 5,500,000 |   | $ | 800,000 |   |
|                                               |            |                         |                 |                 |            |                 |            |                  |            |                         |            |  |  |  |  |  |  |  |  |  |  |

 

Theunrealized gains for the quarter ended March 31, 2009 are included on theincome statement as change in fair value of warrants.

 

*Recurring Level 3 Activity, Reconciliation and Basis forValuation*

 

Thetable below provides a reconciliation of the beginning and ending balances forthe liabilities measured at fair value using significant unobservable inputs(Level 3). The table reflects gains and losses for the quarter for allfinancial assets and liabilities categorized as Level 3 as of March 31,2009.

 

FairValue Measurements Using Significant Unobservable Inputs (Level 3):

 
| Liabilities:                       |   |     |      |
|------------------------------------|--------|----------|-----------|
| Balance as of January 1, 2009 |   | $        | 6,300,000 |   |
| Decrease in fair value of warrants |   | (800,000 | )         |
| Balance as of March 31, 2009  |   | $        | 5,500,000 |   |

 

The company determinedthe fair value of the warrants using a Black-Scholes model with considerationgiven to their “down-round” protection provisions that reduce the exerciseprice if the company issues new warrants or equity at a price lower than thestated exercise price. The model considered amounts and timing of futurepossible equity and warrant issuances and historical volatility of the company’sstock price.

 

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**Note 6****–****EARNINGS (LOSS) PER SHARE**

 

Basic and dilutedearnings (loss) per share were calculated as follows:

 
| ** **                                                                   | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                   | ** ** | **March 31,**     | ** ** |
| ** **                                                                   | ** ** | **2009**               | ** ** | **2008** | ** ** |
| Net income  (loss)                                                           |       | $                      | 565,994    |   | $ | (5,078,181 | ) |
|                                                                         |       |                   |       |   |   |
| Weighted average number of shares used in basic earnings (loss) per  share   |       | 53,624,399             |       | 45,167,120 |   |
|                                                                         |       |                   |       |   |   |
| Dilutive potential common shares:                                            |       |                   |       |   |   |
| Options                                                                      |       | 1,406,962              |       | — |   |
| Restricted stock units                                                       |       | 119,119                |       | — |   |
| Warrants                                                                     |       | 809,749                |       | — |   |
| Weighted average number of shares used in diluted earnings (loss) per  share |       | 55,960,229             |       | 45,167,120 |   |
|                                                                              |            |                        |            |  |  |  |  |

 

Options to purchase832,100 shares of common stock, warrants to purchase 15,343,549 shares ofcommon stock, and 986,936 restricted stock units were outstanding during thequarter ended March 31, 2009 but were not included in the computation ofdiluted earnings (loss) per share because they were anti-dilutive.

 

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**Item 2.****          ****MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

Thisdiscussion and analysis of our financial condition and results of operationsshould be read in conjunction with our financial statements andnotes thereto included in this quarterly report on Form 10-Q (the “QuarterlyReport”) and the audited financial statements and notes thereto included in ourannual report on Form 10-K for the year ended December 31, 2008 (the “2008Annual Report”), as filed with the Securities and Exchange Commission (the “SEC”).  In addition to historical information, thisdiscussion and analysis contains forward-looking statements that involve risks,uncertainties, and assumptions. Our actual results may differ materially fromthose anticipated in these forward-looking statements as a result of certainfactors including but not limited to those identified in the 2008 Annual Reportin the section entitled “Market Risks.”

 

**Overview**

 

Lpath, Inc.is a biotechnology company focused on the discovery and development oflipidomic-based therapeutics.  Lipidomicsis an emerging field of medical science whereby bioactive signaling lipids aretargeted to treat important human diseases. Our lead product candidate, ASONEP**TM**, is a monoclonalantibody against sphingosine-1-phosphate (S1P). ASONEP is currently in Phase 1clinical trials and holds promise for the treatment of cancer, multiplesclerosis, and other diseases.  A secondproduct candidate, iSONEPTM (another formulation of the same S1P-targetedantibody) is currently in Phase I clinical trials, and has demonstratedsuperior results in various models of human ocular disease, includingage-related macular degeneration, retinopathy, and glaucoma.  Our third product candidate, LpathomabTM, isan antibody against lysophosphatidic acid (LPA), a key bioactive lipid that hasbeen long recognized as a valid disease target. Lpath’s unique ability to generate novel antibodies against bioactivelipids is based on its ImmuneY2TM technology, a series of proprietary processesdeveloped by the company.  We arecurrently applying the Immune Y2 process to other lipid-signaling agents thatare validated targets for disease treatment, thereby potentially creating apipeline of monoclonal antibody-based drug candidates.

 

Lpath has incurred significant netlosses since its inception. As of March 31, 2009, Lpath had an accumulateddeficit of approximately $35.9 million. Lpath expects its operating losses to increase for the next severalyears as it pursues the clinical development of its product candidates.

 

**Results of Operations**

 

***Comparison of theThree Months Ended March 31, 2009 and March 31, 2008***

 

*Grant and Royalty Revenue.*  Grant and royalty revenue for the three-monthperiod ended March 31, 2009 increased to $179,000 from $13,000 forthe three-month period ended March 31, 2008.  The $166,000 increase reflects ongoing workon grants awarded to Lpath by the National Institutes of Health (“NIH”) in2008.  Such work commenced in the secondquarter of 2008.

 

*Research and development revenue under collaborativeagreement. * In the first quarter of 2009, work continuedas planned on the collaborative research and development agreement with MerckKgaA, (“Merck”).  We received researchand development funding of $1,500,000 and recognized $1,000,000 of revenuerelated to the $4,000,000 upfront licensing fee received in November 2008.

 

*Research and Development Expenses.*  Research and development expenses decreasedfrom $3,604,000 for the first quarter of 2008 to $1,918,000 for the firstquarter of 2009, a decrease of $1,686,000. Outside services and lab supplies expenses decreased by $1,123,000 in2009 due to significant costs incurred in the first quarter of 2008 tomanufacture drug supplies to be used in clinical trials.  Employee compensation and benefits expenseincreased by $257,000 in 2009 compared to 2008. The increase is due principally to severance costs related to thedeparture of a senior research and development executive. Stock-based compensationcharges decreased by $656,000 due principally to two factors: (1) themarket value of Lpath’s common stock was relatively low at March 31, 2009(Lpath’s stock price is a key factor in the calculation of stock-basedcompensation expense for outside consultants), and (2) forfeiture catch-upadjustments for forfeited restricted stock units.

 

*General and AdministrativeExpenses.*  General andadministrative expenses decreased from $1,545,000 for the three-month periodended March 31, 2008 to $1,020,000 for the three-month period ended March 31,2009, a decrease of $525,000.  Stockcompensation expense decreased by $690,000 in 2009.  This decrease is due principally to thedecline in Lpath’s stock price compared to 2008 and cliff vesting of restrictedstock units that occurred in the first quarter of 2008.  Employee compensation and benefits expensesincreased in 2009 compared to 2008 by $63,000 due to increased staffing andmerit increases in pay rates.

 

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*Other Income (Expense), net*.  Other income (expense), net decreased from$58,000 in 2008 to $25,000 in 2009, a decrease of $33,000.   Interest income was $23,000 for the quarterended March 31, 2009, compared with $57,000 for the quarter ended March 31,2008.  The $34,000 decrease wasprincipally a result of lower interest rates that prevailed in 2009.

 

*Change in fair value of warrants.*  As discussed in the notes to the financialstatements, Lpath implemented EITF 07-5 effective January 1, 2009.  As required by EITF 07-5, changes in the fairvalue of the warrant liability are to be reflected in the statement ofoperations each reporting period. Various factors are considered in the Black-Scholes model we use to value the warrants, including thecompany’s current stock price, the remaining life of the warrants, thevolatility of the company’s stock price and the risk free interest rate.  Future changes in these factors will have asignificant impact on the computed fair value of the warrant liability.  The most significant factor in the valuationmodel is the company’s stock price. Lpath’s stock is very thinly traded and relatively small transactionscan impact the company’s quoted stock price significantly.  As a result, the company’s stock pricevolatility factor is approximately 90%. As such, we expect future changes in the fair value of the warrants tovary significantly from quarter to quarter. Management cautions that the $800,000 change in fair value of thewarrants recognized during the three months ended March 31, 2009, and allfuture such changes, should not be given undue importance when considering thefinancial condition of Lpath and the results of its operations.  These accounting entries are not relevantwhen assessing the financial condition of the company and the results of itsoperations.  Management believes theseadjustments, required by current generally accepted accounting principles, donot reflect economic activities undertaken by the company.

 

**Liquidity and Capital Resources**

 

**Since Lpath’sinception, its operations have been financed primarily through the privateplacement of equity and debt securities. Through March 31, 2009 Lpath had received net proceeds ofapproximately $36,400,000 from the sale of equity securities and from theissuance of convertible promissory notes. In the fourth quarter of 2008 Lpath began to receive substantial fundingfrom a research and development arrangment with Merck.  Through March 31, 2009 Lpath hadreceived $6,500,000 from this collaborative research and developmentagreement.  As of March 31, 2009,Lpath had cash and cash equivalents totaling $6,739,000.**

** **

Duringthe quarter ended March 31, 2009 we used net cash of $929,000 foroperating activities compared to $2,179,000 in the quarter ended March 31,2008.  The $1,250,000 decrease in netcash used in operating activities was driven primarily by funds received fromMerck in connection with our collaborative research and developmentagreement.  Net cash used in investingactivities during the quarter period ended March 31, 2009 was $134,000compared to $16,000 during the same period in 2008.  Of the amount used for investing activitiesin 2009, $120,000 was invested in the prosecution of additional patentscompared to $16,000 in 2008.  Inaddition, 2009 acquisitions of equipment and leasehold improvements totaled$14,000 in 2009 compared to none in 2008.

 

Net cash provided from financing activities duringthe three-month period ended March 31, 2009 totaled approximately $27,000compared to $76,000 in the first quarter of 2008.

 

Due tothe implementation of EITF 07-5, Lpath’s balance sheet carries a warrantliability of $5,500,000 as of March 31, 2009.  That warrant liability is a consequence ofcurrent generally accepted accounting principles.  There is no foreseeable circumstance underwhich Lpath can be required to make any cash payment to settle this warrantliability.

 

During2009 the company expects to continue to incur cash losses fromoperations.  While the company had cash totaling $6,739,289 as of March 31,2009, the cost of its ongoing drug discovery and development efforts, includinggeneral and administrative expenses, are expected to consume between $12 and$19 million in 2009.  We believe that our existing cash and expectedfunding under Lpath’s collaborative research and development agreement withMerck will be sufficient to meet Lpath’s projected operating requirements atleast through 2009.  Although we believe work under the collaborativeagreement with Merck is progressing as planned, there can be no assurance thatMerck will not cancel the agreement before the conclusion of the initialdevelopment period.  In the event that Merck cancels its agreement withus, we would need to seek additional sources of capital to finance our researchand development activities into 2010.

 

UnlessMerck elects to extend its agreement with Lpath beyond the initial developmentperiod, we expect to continue to incur cash losses from operations during2009.  Additional capital may be required to continue to fund the company’sresearch and development projects in 2009 and beyond.  In the event weneed to raise additional capital, we would:

 

1.               Pursue additional fund raising activitiesfrom both existing and potential new investors.

 

2.               Explore cash generating opportunitiesfrom strategic alliances, including licensing portions of our technology orentering into corporate partnerships or collaborations.  In suchtransactions, Lpath could transfer certain rights to one or more of its drugdiscovery or development programs, or to specific indications within thoseprograms and receive infusions of cash in the short-term, and potentially inthe long-term as well.

 

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3.               Continue to seek additional researchgrants from the NIH or other sources.

 

**Critical Accounting Policies,Estimates and Judgments**

 

Ourfinancial statements are prepared in accordance with accounting principles thatare generally accepted in the United States. The preparation of these financialstatements requires us to make estimates and judgments that affect the reportedamounts of assets and liabilities, and disclosure of contingent assets andliabilities at the date of the financial statements, and the reported amountsof revenues and expenses during the reporting period. We continually evaluateour estimates and judgments, the most critical of which are those related torevenue recognition, valuation of long-lived assets and warrant liability,share-based compensation, the timing of the achievement of drug developmentmilestones, and income taxes. We base our estimates and judgments on historicalexperience and other factors that we believe to be reasonable under thecircumstances. Materially different results can occur as circumstances changeand additional information becomes known.

 

Besidesthe estimates identified above that are considered critical, we make many otheraccounting estimates in preparing our financial statements and relateddisclosures. All estimates, whether or not deemed critical, affect reportedamounts of assets, liabilities, revenues and expenses, as well as disclosuresof contingent assets and liabilities. These estimates and judgments are alsobased on historical experience and other factors that are believed to bereasonable under the circumstances. Materially different results can occur ascircumstances change and additional information becomes known, even forestimates and judgments that are not deemed critical.

 

Forfurther information, refer to the consolidated financial statements and notesthereto included in the company’s annual report on Form 10-K for the yearended December 31, 2008.

 

**Recent Accounting Pronouncements**

 

Thereare no unadopted new accounting pronouncements issued or effective during 2009that will have or are expected to have a material impact on the consolidatedfinancial statements when adopted by the company.

 

**Item4.**           CONTROLS AND PROCEDURES

** **

We maintain disclosure controls and procedures thatare designed to ensure that information required to be disclosed in ourExchange Act reports is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms, and that suchinformation is accumulated and communicated to our management, including ourprincipal executive officer and principal financial officer, as appropriate, toallow timely decisions regarding required disclosure.

 

Under the supervision of our principal executiveofficer and principal financial officer, and with the participation of allmembers of management, we conducted an evaluation of our disclosure controlsand procedures, as such term is defined under Rule 13a- 15(e) promulgatedunder the Exchange Act. Based on this evaluation, our principal executiveofficer and our principal financial officer concluded that our disclosurecontrols and procedures were designed and operating effectively as of the endof the period covered by this Quarterly Report on Form 10-Q.

 

Our management, including our principal executiveofficer and our principal financial officer, does not expect that ourdisclosure controls and procedures or our internal controls will prevent allerrors and all fraud. A control system, no matter how well conceived andoperated, can provide only reasonable, not absolute, assurance that theobjectives of the control system are met. Further, the design of a controlsystem must reflect the fact that there are resource constraints, and thebenefits of controls must be considered relative to their costs. Because of theinherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, ifany, within the company have been detected.

 

**Changes in Internal Control OverFinancial Reporting**

 

There has been no change in our internal controlover financial reporting during the quarter ended March 31, 2009 that hasmaterially affected, or is reasonably likely to materially affect, our internalcontrol over financial reporting.

 

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**PART II – OTHER INFORMATON**

 

**Item 1.****                              ****LEGALPROCEEDINGS**

 

None.

 

**Item 2.****                              ****UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

 

None.

 

**Item 3.****                              ****DEFAULTSUPON SENIOR SECURITIES**

 

None.

 

**Item 4.****                              ****SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

None.

 

**Item 5.****                              ****OTHERINFORMATION**

 

None.

 

**Item 6.****          ****EXHIBITS**

 

The following exhibit index shows those exhibitsfiled with this report and those incorporated herein by reference:

 
| 2.1*   |   | Agreement and Plan of Reorganization, by and between Neighborhood  Connections, Inc., Neighborhood Connections Acquisition Corporation, and  Lpath Therapeutics Inc. dated July 15, 2005.                                                                                                         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                             |
| 2.2    |   | Acquisition Agreement and Plan of Merger, dated as of March 19,  2004, between Neighborhood Connections, Inc. and JCG, Inc. (filed  as Exhibit 2.1 to the Current Report on Form 8-K filed on  March 22, 2004 and incorporated herein by reference).                               |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 3.1*   |   | Amendment to Articles of Incorporation filed December 1, 2005.                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 3.2    |   | Articles of Incorporation filed on September 18, 2002 (filed as Exhibit 3.1  to Amendment No. 1 to the Annual Report on Form 10-KSB/A for the  year ended December 31, 2003 (the “2003 Amended 10-KSB”) (filed on  March 25, 2004 and incorporated herein by reference). |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 3.3    |   | Amendment to Articles of Incorporation filed on December 27,  2002 (filed as Exhibit 3.3 to the Current Report on  Form 8-K/A filed on January 9, 2006 and incorporated herein by  reference).                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 3.4    |   | Amended and Restated By-laws (filed as Exhibit 3.4 to the  Quarterly Report on Form 10-QSB filed on November 13, 2006 and  incorporated herein by reference).                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 3.5    |   | Amended and Restated Bylaws, as amended on April 3, 2007  (conformed) (filed as Exhibit 3.5 to the Registration Statement on  Form SB-2, SEC File No. 144199 (the “June 2007 SB-2”) and  incorporated herein by reference).                                                   |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 3.6    |   | Amendment to Articles of Incorporation filed on June 8, 2007  (filed as Exhibit 3.6 to the June 2007 SB-2 and incorporated herein  by reference).                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 4.1*   |   | Form of Warrant issued to Western States Investment Corporation  for lease guaranty.                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 4.2*   |   | Form of Warrant issued pursuant to the Common Stock and Warrant  Purchase Agreement dated June 30, 2005.                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 4.3*   |   | Form of Warrant issued to Johnson & Johnson Development  Corporation dated April 3, 2002.                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                             |
| 4.4*   |   | Form of Warrant issued to purchasers of Convertible Secured  Promissory Notes as amended by the Omnibus Amendment to Convertible Secured  Promissory Notes and Warrants dated November 30, 2005.                                                                                                       |

 

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| 4.5*     | Form of Warrant issued pursuant to the Common Stock and Warrant  Purchase Agreement dated November 30, 2005.                                                                                                                                                                                                                                                                                                  |
|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.6#     | Form of Warrant issued pursuant to the Common Stock and Warrant  Purchase Agreement dated January 31, 2006.                                                                                                                                                                                                                                                                                                   |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.7      | Form of Warrant issued pursuant to the Common Stock and Warrant  Purchase Agreement dated March 28, 2006 (filed as Exhibit 4.7 to  the registration statement on Form SB-2 filed on March 30, 2006,  SEC File No. 333-132850, and incorporated herein by reference).                                                                                                                      |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.8      | Form of Warrant issued pursuant to the Securities Purchase  Agreement dated April 6, 2007 (April 2007 Warrants) (filed as  Exhibit 4.7 to the June 2007 SB-2 and incorporated herein by  reference).                                                                                                                                                                                           |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.9      | Form of Warrant issued pursuant to the Securities Purchase  Agreement dated June 13, 2007 (June 2007 Warrants) (filed as  Exhibit 4.8 to the June 2007 SB-2 and incorporated herein by  reference).                                                                                                                                                                                            |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.10     | Form of Warrant issued pursuant to the Securities Purchase  Agreement dated August 12, 2008 (August 2008 Warrants) (filed as  Exhibit 4.10 to the registration statement on Form S-1 filed on  September 11, 2008, SEC File No. 333-153423 and incorporated herein  by reference).                                                                                                   |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.1*    | Lease Agreement dated August 12, 2005 between Lpath Therapeutics  Inc. and Pointe Camino Windell, LLC.                                                                                                                                                                                                                                                                                                             |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.2*    | Research Agreement dated January 28, 2004 between  Medlyte, Inc. and San Diego State University, together with Amendments  No.1 and No.2.                                                                                                                                                                                                                                                                     |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.3*    | Assignment Agreement dated June 9, 2005 between Lpath  Therapeutics Inc. and LPL Technologies, Inc.                                                                                                                                                                                                                                                                                                           |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.4     | Research Collaboration Agreement dated August 2, 2005 between  Lpath Therapeutics Inc. and AERES Biomedical Limited (filed as  Exhibit 10.4 to the Current Report on Form 8-K/A filed on  January 9, 2006 and incorporated herein by reference) (portions of this  exhibit have been omitted pursuant to a request for confidential treatment).                                                     |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.5*    | Lpath, Inc. Amended and Restated 2005 Equity Incentive Plan  (filed as Appendix A to the Company’s Schedule 14-A Proxy Statement filed on  August 28, 2007 and incorporated herein by reference).                                                                                                                                                                                                        |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.6#    | Assignment and Assumption Agreement dated December 1, 2005 by  and between Lpath, Inc. and Lpath Therapeutics, Inc.                                                                                                                                                                                                                                                                                      |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.7**   | Form of Employment Agreement between Lpath, Inc. and Scott  R. Pancoast dated as of January 1, 2006.                                                                                                                                                                                                                                                                                                     |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.8**   | Form of Employment Agreement between Lpath, Inc. and Gary  Atkinson dated as of February 6, 2006.                                                                                                                                                                                                                                                                                                        |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.9**   | Form of Consultant Agreement between Lpath, Inc. and  William Garland dated as of January 1, 2006.                                                                                                                                                                                                                                                                                                       |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.10**  | Form of Consultant Agreement between Lpath, Inc. and Roger  Sabbadini dated as of February 1, 2006.                                                                                                                                                                                                                                                                                                      |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.11*** | Employment Agreement between Lpath, Inc. and John Bender dated  September 22, 2008.                                                                                                                                                                                                                                                                                                                           |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.12    | Development and Manufacturing Services Agreement dated  August 16, 2006 between Lpath Inc. and Laureate Pharma, Inc. (filed  as Exhibit 10.13 to the Quarterly Report on Form 10-QSB for the  quarter ended September 30, 2006 filed on November 13, 2006 and  incorporated by reference) (portions of this exhibit have been omitted  pursuant to a request for confidential treatment). |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.13    | Securities Purchase Agreement, dated as of April 6, 2007, by and  among Lpath, Inc. and each investor identified therein (filed as  Exhibit 10.14 to the June 2007 SB-2 and incorporated herein by  reference).                                                                                                                                                                                     |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.14    | Registration Rights Agreement, dated as of April 6, 2007, by and  among Lpath, Inc. and each investor identified                                                                                                                                                                                                                                                                                              |

 

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|     | therein (filed as Exhibit 10.15 to the June 2007 SB-2 and  incorporated herein by reference).                                                                                                                     |
|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                                        |
| 10.15##  | License Agreement dated August 8, 2006 between Lonza Biologics  PLC and Lpath, Inc. (portions of this exhibit have been omitted pursuant  to a request for confidential treatment).                               |
|     |                                                                                                                                                                                                                        |
| 10.16    | Securities Purchase Agreement, dated August 12, 2008, by and  among Lpath, Inc. and each of the investors identified therein (filed as  Exhibit 10.17 to the 2008 S-1 and incorporated herein by reference). |
|     |                                                                                                                                                                                                                        |
| 10.17    | Registration Rights Agreement, dated August 12, 2008, by and  among Lpath, Inc. and each of the investors identified therein (filed as  Exhibit 10.18 to the 2008 S-1 and incorporated herein by reference). |
|     |                                                                                                                                                                                                                        |
| 10.18*** | License Agreement, dated as of October 28, 2008, by and between  Lpath, Inc. and Merck KgaA (portions of this exhibit  have been omitted pursuant to a request for confidential treatment)                        |
|     |                                                                                                                                                                                                                        |
| 31.1     | Section 302 Certification by Chief Executive Officer of  Lpath, Inc.                                                                                                                                              |
|     |                                                                                                                                                                                                                        |
| 31.2     | Section 302 Certification by Chief Financial Officer of  Lpath, Inc.                                                                                                                                              |
|     |                                                                                                                                                                                                                        |
| 32.1     | Section 906 Certification by Chief Executive Officer and Chief  Financial Officer of Lpath, Inc.                                                                                                                  |

 

----

*Filedas an exhibit to the Current Report on Form 8-K filed with the SEC on December 6,2005 and incorporated herein by reference

 

#Filed as an exhibit to the Annual Report on Form 10-KSBfor the year ended December 31, 2005 filed with the SEC on March 16,2006 and incorporated herein by reference

 

**Filed as an exhibit to the Current Report on Form 8-Kfiled with the SEC on March 29, 2006 and incorporated herein by reference

 

##Filed as an exhibit to the Quarterly Report on Form 10-QSBfor the quarterly period ended September 30, 2007 filed with the SEC on November 13,2007 and incorporated herein by reference

 

*** Filed as an exhibit to the Annual Report on Form 10-Kfor the year ended December 31, 2008 filed with the SEC on March 25,2009 and incorporated herein by reference

 

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##### ***SIGNATURES***

##### *** ***

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the Registrant and in the capacities and on the datesindicated.

 

 
| ** **              | **Lpath, Inc.**                         |
|-------------------------|----------------------------------------------|
|                    |                                         |
| Date: May 15, 2009 | /s/ Scott R. Pancoast                        |
| ** **              | Scott R. Pancoast                            |
| ** **              | President and Chief Executive Officer        |
| ** **              | (Principal executive officer)                |
| ** **              | ** **                                   |
| ** **              | /s/ Gary J.G. Atkinson,                      |
|                    | Gary J.G. Atkinson,                          |
|                    | Vice President and Chief Financial Officer   |
|                    | (Principal financial and accounting officer) |

 

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