Table ofContents

 

 

 

**United States**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x****      QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended March 31,2010**

 

**Or**

 

**o****         TRANSITION REPORT PURSUANT TO SECTION 13OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from             to              **

 

**Commission File Number: 000-51708**

 

**Redpoint Bio Corporation**

(Exact name of Registrant as specified in its charter)

 

| **Delaware**                    | ** ** | **22-3393959**                       |
|---------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer Identification No.) |
| incorporation or organization)  |       |                                 |

 

**7 Graphics Drive, Ewing, New Jersey08628**

(Address of principal executive offices) (Zip Code)

 

**(609) 637-9700**

(Registrant’s Telephone Number, Including Area Code)

 

 

(Former name, former address and former fiscal year,if changed since last report)

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 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 90days.  Yes x No o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  Yes o No o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See definitions of “large accelerated filer,” “acceleratedfiler,” and “smaller reporting 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 mark whether the registrant is ashell company (as defined in Rule 12b-2 of the ExchangeAct).  Yes o No x

 

The number of shares of the registrant’s common stockoutstanding as of May 12, 2010 was 79,838,693.

 

 

 

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**REDPOINT BIO CORPORATION**

 
| ** **        | ** **                                                                                  | ** ** | **Page** |
|-------------------|---------------------------------------------------------------------------------------------|------------|----------|
| **PART I:**  | **FINANCIAL INFORMATION**                                                                   |       | 1        |
|              |                                                                                        |       |     |
| ITEM 1.           | FINANCIAL STATEMENTS (unaudited):                                                           |       | 1        |
|              |                                                                                        |       |     |
|              | Balance Sheets                                                                              |       | 1        |
|              |                                                                                        |       |     |
|              | Statements of Operations                                                                    |       | 2        |
|              |                                                                                        |       |     |
|              | Statements of Cash  Flows                                                                   |       | 3        |
|              |                                                                                        |       |     |
|              | Notes to Financial Statements                                                               |       | 4        |
|              |                                                                                        |       |     |
| ITEM 2.           | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |       | 13       |
|              |                                                                                        |       |     |
| ITEM 3.           | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 |       | 18       |
|              |                                                                                        |       |     |
| ITEM 4T.          | CONTROLS AND  PROCEDURES                                                                    |       | 18       |
|              |                                                                                        |       |     |
| **PART II:** | **OTHER INFORMATION**                                                                       |       | 20       |
|              |                                                                                        |       |     |
| ITEM 1.           | LEGAL PROCEEDINGS                                                                           |       | 20       |
|              |                                                                                        |       |     |
| ITEM 1A.          | RISK FACTORS                                                                                |       | 20       |
|              |                                                                                        |       |     |
| ITEM 2.           | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                |       | 35       |
|              |                                                                                        |       |     |
| ITEM 3.           | DEFAULTS  UPON SENIOR SECURITIES                                                            |       | 35       |
|              |                                                                                        |       |     |
| ITEM 6.           | EXHIBITS                                                                                    |       | 35       |
|              |                                                                                        |       |     |
| SIGNATURES        |                                                                                        |       | 36       |

 

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** **

**PART I.  FINANCIALINFORMATION.**

** **

**ITEM1.  FINANCIAL STATEMENTS.**

** **

**REDPOINT BIO CORPORATION**

**(A DEVELOPMENT-STAGE ENTERPRISE)**

**BALANCE SHEETS**(UNAUDITED)

 
| ** **                                                                                                                                                    | ** ** | **December 31,** | ** ** | **March 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------|------------|
| ** **                                                                                                                                                    | ** ** | **2009**              | ** ** | **2010**           | ** ** |
| **Assets**                                                                                                                                                    |       |                  |       |               |       |
| Current  assets:                                                                                                                                              |       |                  |       |               |       |
| Cash  and cash equivalents                                                                                                                                    |       | $                     | 5,557,367  |               | $          | 4,083,687 |   |
| Prepaid  expenses and other current assets                                                                                                                    |       | 176,464               |       | 58,743             |       |
| Total  current assets                                                                                                                                         |       | 5,733,831             |       | 4,142,430          |       |
| Property  and equipment, net                                                                                                                                  |       | 726,730               |       | 625,732            |       |
| Other  assets                                                                                                                                                 |       | 314,014               |       | 310,735            |       |
| Total  assets                                                                                                                                                 |       | $                     | 6,774,575  |               | $          | 5,078,897 |   |
| **Liabilities and Stockholders’  Equity**                                                                                                                |       |                  |       |               |       |
| Current  liabilities:                                                                                                                                         |       |                  |       |               |       |
| Current  portion of long-term debt                                                                                                                            |       | $                     | 374,110    |               | $          | 385,570 |   |
| Accounts  payable                                                                                                                                             |       | 658,561               |       | 479,969            |       |
| Accrued  expenses                                                                                                                                             |       | 151,893               |       | 237,423            |       |
| Accrued  compensation                                                                                                                                         |       | 37,702                |       | 94,668             |       |
| Total  current liabilities                                                                                                                                    |       | 1,222,266             |       | 1,197,630          |       |
| Long-term  debt                                                                                                                                               |       | 773,843               |       | 673,044            |       |
| Total  liabilities                                                                                                                                            |       | 1,996,109             |       | 1,870,674          |       |
| Commitments  (Note 9)                                                                                                                                         |       |                  |       |               |       |
| Stockholders’  equity:                                                                                                                                   |       |                  |       |               |       |
| Preferred  stock; 10,000,000 shares authorized, $0.0001 par value, none issued                                                                                |       | —                |       | —             |       |
| Common  stock; authorized 150,000,000 shares; $0.0001 par value, issued and  outstanding 79,838,693 shares at December 31, 2009 and March 31,  2010 |       | 7,984                 |       | 7,984              |       |
| Additional  paid-in-capital                                                                                                                                   |       | 56,103,784            |       | 56,246,882         |       |
| Deficit  accumulated during development stage                                                                                                                 |       | (51,333,302           | )          | (53,046,643        | )          |
| Total  stockholders’ equity                                                                                                                              |       | 4,778,466             |       | 3,208,223          |       |
| Total  liabilities and stockholders’ equity                                                                                                              |       | $                     | 6,774,575  |               | $          | 5,078,897 |   |

 

See accompanying notes to the unaudited financial statements.

 

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**REDPOINT BIO CORPORATION**

**(A DEVELOPMENT-STAGE ENTERPRISE)**

**STATEMENTSOF OPERATIONS**

**(UNAUDITED)**

 
| ** **                                   | ** ** | **Three Months Ended  March 31,** | ** ** | **August 16,  1995 (Inception) to** | ** ** |
|----------------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                   | ** ** | **2009**                                         | ** ** | **2010**                                           | ** ** | **March 31,  2010** | ** ** |
| Research  and grant revenue                  |       | $                                                | 1,058,741  |                                               | $          | — |   | $ | 12,330,002 |   |
| Operating  expenses:                         |       |                                             |       |                                               |       |   |   |
| Research  and development                    |       | 1,921,491                                        |       | 849,304                                            |       | 34,917,367 |   |
| General  and administrative                  |       | 1,659,265                                        |       | 928,847                                            |       | 26,091,671 |   |
| Total  operating expenses                    |       | 3,580,756                                        |       | 1,778,151                                          |       | 61,009,038 |   |
| Operating  loss                              |       | (2,522,015                                       | )          | (1,778,151                                         | )          | (48,679,036 | ) |
| Interest  income                             |       | 55,661                                           |       | 10,270                                             |       | 1,670,888 |   |
| Interest  expense                            |       | (52,049                                          | )          | (46,766                                            | )          | (3,712,890 | ) |
| Loss  before income taxes                    |       | (2,518,403                                       | )          | (1,814,647                                         | )          | (50,721,038 | ) |
| Income  tax benefit                          |       | —                                           |       | 101,306                                            |       | 1,087,284 |   |
| Net  loss                                    |       | (2,518,403                                       | )          | (1,713,341                                         | )          | $ | (49,633,754 | ) |
| Basic  and diluted net loss per common share |       | $                                                | (0.03      | )                                                  | $          | (0.02 | ) |   |   |
| Weighted  average of shares outstanding      |       | 79,495,870                                       |       | 79,838,693                                         |       |   |   |

 

See accompanying notes to the unaudited financial statements.

 

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**REDPOINT BIO CORPORATION**

**(A DEVELOPMENT-STAGE ENTERPRISE)**

**STATEMENTSOF CASH FLOWS**

**(UNAUDITED)**

 
| ** **                                                                   | ** ** | **Three Months Ended  March 31,** | ** ** | **August 16, 1995  (Inception) to  March 31,** | ** ** |
|------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2009**                                         | ** ** | **2010**                                                           | ** ** | **2010** | ** ** |
| Cash  flows from operating activities:                                       |       |                                             |       |                                                               |       |   |   |
| Net  loss                                                                    |       | $                                                | (2,518,403 | )                                                                  | $          | (1,713,341 | ) | $ | (49,633,754 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |                                             |       |                                                               |       |   |   |
| Depreciation                                                                 |       | 144,817                                          |       | 100,998                                                            |       | 2,754,470 |   |
| Amortization  of discounts and premiums on marketable securities             |       | (17,102                                          | )          | —                                                             |       | (473,654 | ) |
| Options,  warrants and stock issued for services and dilution provisions     |       | 227,934                                          |       | 143,098                                                            |       | 4,285,275 |   |
| Beneficial  conversion feature                                               |       | —                                           |       | —                                                             |       | 1,228,565 |   |
| Amortization  of discount on convertible notes                               |       | —                                           |       | —                                                             |       | 899,935 |   |
| Amortization  of deferred financing costs                                    |       | 4,700                                            |       | 3,279                                                              |       | 164,523 |   |
| Debt  inducement charge                                                      |       | —                                           |       | —                                                             |       | 361,598 |   |
| Interest  expense on convertible notes                                       |       | —                                           |       | —                                                             |       | 136,075 |   |
| Changes  in assets and liabilities:                                          |       |                                             |       |                                                               |       |   |   |
| Accounts  receivable                                                         |       | (244,426                                         | )          | —                                                             |       | — |   |
| Prepaid  expenses and other assets                                           |       | 73,231                                           |       | 117,721                                                            |       | (645,305 | ) |
| Accounts  payable                                                            |       | (63,667                                          | )          | (178,592                                                           | )          | 788,425 |   |
| Accrued  expenses and accrued compensation                                   |       | 383,680                                          |       | 142,496                                                            |       | 463,701 |   |
| Deferred  revenue                                                            |       | (92,748                                          | )          | —                                                             |       | — |   |
| Net  cash (used in) operating activities                                     |       | (2,101,984                                       | )          | (1,384,341                                                         | )          | (39,670,146 | ) |
| Cash  flows from investing activities:                                       |       |                                             |       |                                                               |       |   |   |
| Maturity  and sale of marketable securities                                  |       | 4,900,000                                        |       | —                                                             |       | (46,513,341 | ) |
| Purchases  of marketable securities                                          |       | (2,520,266                                       | )          | —                                                             |       | 46,986,994 |   |
| Purchases  of property and equipment                                         |       | (10,993                                          | )          | —                                                             |       | (3,380,219 | ) |
| Net  cash provided by (used in) investing activities                         |       | 2,368,741                                        |       | —                                                             |       | (2,906,566 | ) |
| Cash  flows from financing activities:                                       |       |                                             |       |                                                               |       |   |   |
| Proceeds  from issuance of long-term debt                                    |       | —                                           |       | —                                                             |       | 3,614,710 |   |
| Net  proceeds from convertible notes                                         |       | —                                           |       | —                                                             |       | 5,253,811 |   |
| Repayment  of debt                                                           |       | (151,206                                         | )          | (89,339                                                            | )          | (2,608,553 | ) |
| Net  proceeds from issuance of preferred stock                               |       | —                                           |       | —                                                             |       | 11,883,447 |   |
| Net  proceeds from issuance of common stock and warrants                     |       | —                                           |       | —                                                             |       | 28,624,603 |   |
| Proceeds  from exercise of common stock options and warrants                 |       | —                                           |       | —                                                             |       | 175,502 |   |
| Common  stock reacquired                                                     |       | —                                           |       | —                                                             |       | (283,121 | ) |
| Net  cash provided by (used in) financing activities                         |       | (151,206                                         | )          | (89,339                                                            | )          | 46,660,399 |   |
| Net  increase (decrease) in cash and cash equivalents                        |       | 115,551                                          |       | (1,473,680                                                         | )          | 4,083,687 |   |
| Cash  and cash equivalents, beginning of period                              |       | 3,130,561                                        |       | 5,557,367                                                          |       | — |   |
| Cash  and cash equivalents, end of period                                    |       | $                                                | 3,246,112  |                                                               | $          | 4,083,687 |   | $ | 4,083,687 |   |
| Supplemental cash flow disclosures:                                          |       |                                             |       |                                                               |       |   |   |
| Noncash investing and financing activities:                                  |       |                                             |       |                                                               |       |   |   |
| Property  and equipment included in accounts payable                         |       | $                                                | (6,630     | )                                                                  | $          | — |   | $ | — |   |
| Conversion  of notes payable and accrued interest to preferred stock         |       | —                                           |       | —                                                             |       | 1,446,395 |   |
| Conversion  of notes payable and accrued interest to common stock            |       | —                                           |       | —                                                             |       | 3,896,001 |   |
| Conversion  of preferred and junior preferred stock to common stock          |       | —                                           |       | —                                                             |       | 16,940,297 |   |
| Accretion  of preferred stock                                                |       | —                                           |       | —                                                             |       | 3,248,857 |   |
| Warrants  issued in connection with notes payable                            |       | —                                           |       | —                                                             |       | 1,258,642 |   |
| Cash  paid for interest                                                      |       | 48,106                                           |       | 33,915                                                             |       | 703,908 |   |

 

See accompanying notes to the unaudited financial statements.

 

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**REDPOINT BIO CORPORATION(A DEVELOPMENT-STAGE ENTERPRISE)**

**NOTES TO FINANCIAL STATEMENTS**

**(UNAUDITED)**

 

**1.****                                     ****Description of the Business,Liquidity and Basis of Presentation**

 

*Description of the Business and Liquidity*

 

RedpointBio (“Redpoint” or the “Company”) is a development stage biotechnology companyleveraging recent discoveries in the molecular biology of taste to discover anddevelop novel taste modulators for the food and beverage industries. TheCompany’s food and beverage program has been focused on identifying novelflavor modifiers that improve the taste of existing ingredients, enabling thedevelopment of better-tasting and more healthful foods and beverages. In June 2009,the Company announced that it had identified an all-natural sweetness enhancer,RP44. In January 2010, it disclosed that RP44 is Reb-C (rebaudioside C), acomponent of the stevia plant. Redpoint is actively seeking commercial partnersfor its all-natural sweetness enhancer, RP44.

 

Inaddition to its sweetness enhancer program, the Company’s understanding of thebiology of taste and its relationship to metabolic processes, satiety, anddiabetes have led it to initiate a pharmaceutical discovery program for thetreatment of diabetes and obesity. Redpoint’s research in diabetes and obesitystems from the observation that taste signaling in the gastrointestinal tractand pancreas is involved in important hormone secretion processes enabling theCompany to leverage its research on lingual taste modulation to potentiallyimportant therapeutic applications. The Company is actively seeking a researchcollaboration with major pharmaceutical companies for the further developmentof this discovery program.

 

Sinceits inception in 1995, the Company has incurred losses and negative cash flowsfrom operations, and such losses have continued subsequent to March 31,2010. As of  March  31, 2010,the Company had an accumulated deficit of $53.0 million and anticipatesincurring additional losses for the foreseeable future. The Company will needto spend significant resources over the next several years to enhance itstechnologies and to fund research and development of its pipeline of potentialproducts. Through March 31, 2010, substantially all of the Company’srevenue has been derived from corporate collaborations, license agreements, andgovernment grants. The Company expects that substantially all of its cash-flowfor the foreseeable future will come from future corporate collaborations andlicense agreements. There can be no assurance that the Company will enter intoany future corporate collaborations or license agreements. In order to achieveprofitability, the Company must continue to develop products and technologiesthat can be commercialized by the Company or through future collaborations.

 

TheCompany’s continued research and development efforts have led it to certainadvances within its taste technology platform, including its announcementconcerning the identification of RP44, an all-natural sweetness enhancer, andthe Company is beginning to understand how its technology platform plays a rolein treating metabolic disorders such as diabetes and obesity. However, since December 2007,the Company has not entered into any new funded corporate collaborations otherthan an expanded feasibility agreement with Schering Corporation, a subsidiaryof Schering-Plough Corporation, in the area of taste science research forpharmaceutical applications, and the Company is currently not pursuing itsresearch program with Schering Corporation. Redpoint was also unable to renewits one year research agreement with The Coca-Cola Company and its agreementwith Givaudan was terminated on May 1, 2009. Givaudan cited the fact thatcertain collaboration objectives had not been achieved during the collaborationas its reasoning for terminating the agreement. Furthermore, the Companyrecognizes the current difficult financing environment that has significantlyimpacted the biotechnology sector and required the Company to seek ways toconserve cash. Consequently, during the year ended December 31, 2009, theCompany announced two restructurings which reduced its workforce byapproximately 60% and currently the Company has 12 full time employees.The Company may need to make further reductions in its expenses. Redpointbelieves that its current capital resources should be sufficient to meet itsoperating and capital requirements through November 2010, which raisessubstantial doubt about its ability to continue as a going concern. Theaccompanying financial statements do not include any adjustments that mightresult from the outcome of this uncertainty. Currently, the Company is actively seeking corporate collaborations andlicense agreements from various strategic partners to enhance the Company’sliquidity position.

 

TheCompany is subject to those risks associated with any biotechnology companythat has substantial expenditures for research and development. There can be noassurance that the Company’s research and development projects will besuccessful, that products developed will obtain necessary regulatory approval,or that any approved product will be commercially viable. In addition, theCompany operates in an environment of rapid technological change and is largely

 

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dependent on the services of its employees andconsultants. For the Company to fund its operations and to commercially developits products, additional equity and/or debt financing will be required before November 2010.There is no assurance that such financing will be available to the Company asneeded, and as a result, it may need to pursue other strategicalternatives.  Failure to successfullyaddress ongoing liquidity requirements will have a material adverse effect onour business.  If we are unable to obtainadditional capital on acceptable terms when needed, we may be required to takeactions that harm our business and our ability to achieve cash flow in thefuture, including possibly the surrender of our rights to some technologies orproduct opportunities, delaying our clinical trials or curtailing or ceasingoperations.

 

*Basis of Presentation*

 

Theaccompanying unaudited financial statements of the Company have been preparedin accordance with generally accepted accounting principles for interimfinancial information and pursuant to the rules and regulations of the Securitiesand Exchange Commission, referred to herein as the SEC. Accordingly, they donot include all of the information and footnotes required by generally acceptedaccounting principles for complete financial statements.

 

Inthe opinion of management, all adjustments (consisting of normal recurringadjustments) considered necessary for a fair presentation have been included(See Note 2 for discussion of the impact of the Reverse Merger (as definedbelow)).  Operating results for the three months ended March 31, 2010are not necessarily indicative of the results that may be expected for the yearending December 31, 2010.

 

Forfurther information, refer to the 2009 financial statements and footnotesthereto of Redpoint included in the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2009.

 

**2.****                                     ****Reverse Triangular Merger,Financing and Reincorporation Merger**

 

*Completion of Merger*

 

RobcorProperties, Inc., a Florida corporation (“Robcor”), and its newly-formedsubsidiary, Robcor Acquisition Corp., a Delaware corporation (“Merger Sub”)entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated asof March 12, 2007, by and among, Redpoint, formerly a privately-heldDelaware corporation, on the one hand, and Robcor, Merger Sub, Robcor LLC, aKentucky limited liability company and wholly-owned subsidiary of Robcor (“RobcorLLC”) and Halter Financial Investments, L.P., a Texas limited partnership (“Halter”),and Michael Heitz (“Heitz”), as stockholders of Robcor, on the other hand. Pursuant to the Merger Agreement, Merger Sub, which Robcor had incorporated inthe state of Delaware for the purpose of completing the transaction, mergedinto Redpoint (the “Reverse Merger”) on March 12, 2007 (the “Closing” orthe “Closing Date”) with Redpoint continuing as the surviving entity in theReverse Merger.  As a result of the Reverse Merger, Redpoint became awholly-owned subsidiary of Robcor.  In connection with the Reverse Merger,each share of capital stock of Redpoint was converted into 2.7820 shares ofcommon stock of Robcor and all of Redpoint’s convertible promissory notes wereconverted into shares of common stock of Robcor.

 

Redpointwas deemed to have been the accounting acquirer in the Reverse Merger. Accordingly, the financial statements of the Company presented reflect thehistorical results of Redpoint prior to the Reverse Merger, and of the combinedentities following the Reverse Merger, and do not include the historicalfinancial results of Robcor prior to the consummation of the ReverseMerger.  In connection with the Reverse Merger, Redpoint issued 1,391,000shares of common stock to Robcor shareholders which have been treated asissuance costs in connection with the Private Placement.

 

*Private Placement*

 

Concurrentlywith the completion of the Reverse Merger, Robcor received $17.2 million in netproceeds from the initial closing of a private placement of approximately 24.7million shares of common stock at a price of $0.81 per share, and warrants topurchase approximately 6.2 million shares of Robcor common stock at an exerciseprice of $1.35 per share (the “Private Placement”).  The initialclosing of the Private Placement occurred on March 12, 2007, concurrentlywith the completion of the Reverse Merger.

 

Inconnection with the Private Placement, Redpoint engaged two placement agentswhich were issued five-year warrants to buy approximately 2.0 million shares ofRobcor common stock equal to 10% of the number of shares of common stock soldin the Private Placement at an exercise price of $0.97 per share; provided,however, no warrants were issued to the placement agents with respect to sharesand warrants sold to existing Redpoint stockholders.

 

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OnApril 6, 2007, Robcor sold an additional 16.1 million shares of commonstock and warrants to purchase 4.0 million shares of common stock whichresulted in net proceeds of approximately $11.3 million.  Inconnection with the April closing, warrants to purchase an additional 1.6million shares of common stock were issued to the placement agents.

 

*Reincorporation Merger*

 

OnJune 15, 2007, Robcor was merged with and into Redpoint, its wholly-ownedsubsidiary, with Redpoint being the surviving corporation pursuant to theAgreement and Plan of Merger dated May 3, 2007.  As a result of themerger, the Company’s state of incorporation changed from Florida to Delaware.

 

Inconnection with the reincorporation merger, the authorized number of shares ofcommon stock was decreased from 1,000,000,000 shares of common stock, no parvalue per share, to 150,000,000 shares of common stock, $0.0001 par value pershare, and the authorized number of shares of preferred stock was decreasedfrom 20,000,000 shares of preferred stock, no par value per share, to10,000,000 shares of preferred stock, $0.0001 par value per share.  TheCompany’s share data and capital stock have been retrospectively adjusted forall periods presented to reflect the reincorporation merger.

 

Inaddition, the maximum number of shares of common stock reserved for issuanceunder the Company’s 2007 Omnibus Equity Compensation Plan was increased from13,511,562 to 17,644,267 shares.

 

**3.****                                     ****Summary of Significant AccountingPolicies**

 

***(a)******                                ******Use of Estimates***

 

Thepreparation of financial statements in conformity with U.S. generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.Actual results could differ from such estimates.  Illiquid credit markets,volatile equity, and declines in consumer spending have combined to increasethe uncertainty inherent in such estimates and assumptions.  As futureevents and their effects cannot be determined with precision, actual resultscould differ significantly from these estimates.  Changes in thoseestimates resulting from continuing changes in the economic environment will bereflected in the financial statements in those future periods.

 

***(b)******                                ******Cash and Cash Equivalents***

 

TheCompany considers all highly liquid investments that have original maturitiesof three months or less when acquired to be cash equivalents.  As of March 31,2010, cash and cash equivalents include amounts invested in money marketaccounts.

 

***(c)******                                 ******Concentrations of CreditRisk***

 

Financialinstruments that potentially subject the Company to concentrations of creditrisk consist of cash equivalents.  TheCompany has established guidelines relating to diversification and maturitiesthat allows the Company to manage risk.

 

***(d)******                                ******Revenue Recognition***

 

Revenuefrom corporate collaborations and licensing agreements consists of up-frontfees, research and development funding, and milestone payments.

 

*LicenseFees and Multiple Element Arrangements*

 

Non-refundableupfront fees are recognized as revenue when (i) we have a contractualright to receive such payment, (ii) the contract price is fixed ordeterminable, (iii) the collection of the resulting receivable isreasonably assured, and (iv) we have no further performance obligationsunder the license agreement.

 

Multipleelement arrangements are analyzed to determine whether the deliverables, whichoften include license and performance obligations, such as research anddevelopment services, can be separated or whether they must be accounted for asa single unit of accounting. If the fair value of the undelivered performanceobligations can be determined, such obligations 

 

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would then be accounted for separately as performed.However, if the elements are considered to either (i) not have stand-alonevalue, or (ii) have standalone value but the fair value of any of theundelivered performance obligations cannot be determined, the arrangement wouldthen be accounted for as a single unit of accounting and all of the paymentsrecognized as revenue over the estimated period of when the performanceobligations are performed.  Whenever we determine that an arrangementshould be accounted for as a single unit of accounting, we must determine theperiod over which the performance obligations will be performed and revenuewill be recognized. Significant management judgment is required in determiningthe period over which we are expected to complete our performance obligationsunder an arrangement.

 

*SubstantiveMilestone Payments*

 

Ourcollaboration agreements may also contain substantive milestone payments thatare recognized upon achievement of the milestone only if all of the following conditionsare met:

 

·                  the milestone payments arenon-refundable;

 

·                  achievement of the milestone involves adegree of risk and was not reasonably assured at the inception of thearrangement;

 

·                  substantive effort is involved inachieving the milestone;

 

·                  a reasonable amount of time passesbetween the up-front license payment and the first milestone payment as well asbetween each subsequent milestone payment; and

 

·                  the amount of the milestone payment isreasonable in relation to the effort expended or the risk associated withachievement of the milestone.

 

Determinationas to whether a payment meets the aforementioned conditions involves management’sjudgment. If any of these conditions are not met, the resulting payment wouldnot be considered a substantive milestone, and therefore the resulting paymentwould be considered part of the consideration for the single unit of accountingand be recognized as revenue as such performance obligations are performed.

 

*Reimbursementof Research and Development Costs*

 

Reimbursementof research and development costs is recognized as revenue, provided theamounts are fixed and determinable, and collection of the related receivable isreasonably assured.

 

***(e)******                                 ******Property and Equipment***

 

Propertyand equipment are recorded at cost and depreciated on a straight-line basisover their estimated useful lives. The Company uses a life of four to fiveyears for laboratory equipment, three to seven years for office equipment andfurniture, and the lesser of the useful life or the remaining life of the underlyingfacility lease for leasehold improvements. Expenditures for repairs andmaintenance are charged to expense as incurred, while major renewals andbetterments are capitalized. Upon disposition of assets, the cost and relatedaccumulated depreciation are removed from the accounts and any resulting gainor loss is included in the Statements of Operations.

 

***(f)******                                   ******Research and Development***

 

Researchand development costs, including those incurred in relation to the Company’scollaborative agreements, are charged to expense as incurred. These expensesinclude internal research and development as well as amounts paid to thirdparties to conduct research on the Company’s behalf. Costs incurred inobtaining technology licenses are charged immediately to research anddevelopment expense if the technology licensed has not reached technologicalfeasibility and has no alternative future uses.

 

***(g)******                                ******Impairment of Long-LivedAssets***

 

Wereview long-lived assets, such as property and equipment, for impairmentwhenever events or changes in circumstances indicate that the carrying amountof an asset may not be recoverable. Recoverability of assets to be held and 

 

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used is measured by a comparison of the carryingamount of an asset to the estimated undiscounted future cash flows expected tobe generated by the asset. If the carrying amount of an asset exceeds itsestimated future cash flows, then an impairment charge is recognized in theamount by which the carrying amount of the asset exceeds the fair value of theasset.  The Company has not recorded any impairment charges pursuant toour review of long-lived assets.

 

***(h)******                                ******Income Taxes***

 

Incometaxes are accounted for under the asset-and-liability method. Deferred taxassets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carrying amounts ofexisting assets and liabilities and their respective tax bases and operatingloss and tax credit carryforwards. Deferred tax assets and liabilities aremeasured using enacted tax rates expected to apply to taxable income in theyears in which those temporary differences are expected to be recovered orsettled. The effect on deferred tax assets and liabilities of a change in taxrates is recognized in income in the period that includes the enactment date.

 

***(i)******                                   ******Stock-Based Compensation***

 

TheCompany recognizes compensation cost for stock-based awards to employees andnonemployee board members based on the grant-date fair value of the awards overthe period during which an award holder is required to provide service inexchange for the award. No compensation cost is recognized for awards for whichthe award holder does not render the requisite service.

 

Thefair value of stock options is determined using the Black Scholesoption-pricing model and is recognized as expense over the requisite serviceperiod using the straight-line method.

 

Tosatisfy the exercise of options, the Company plans to issue new shares ratherthan purchase shares on the open market.

 

***(j)******                                   ******Net Loss per Common Share***

 

Basicnet loss per common share is computed by dividing the net loss allocable tocommon stockholders by the weighted average number of shares of common stockoutstanding for the period. Diluted net loss per common share is computed bydividing net loss allocable to common stockholders by the sum of theweighted-average number of common shares outstanding for the period and thenumber of additional shares that would have been outstanding if dilutivepotential common shares had been issued.  Stock options and warrants topurchase an aggregate of 16,649,823 and 25,193,466 common shares were excludedfrom our computation of diluted net loss per common share for the three monthsended March 31, 2010 and 2009, respectively.  In all periodspresented, our diluted net loss per common share is equal to basic net loss percommon share because giving effect in the computation of diluted net loss percommon share to the exercise of outstanding options and warrants would havebeen antidilutive.

 

***(k)******                                ******Fair Value of FinancialInstruments***

 

Thefair value of our financial instruments is the amount for which the instrumentcould be exchanged in a current transaction between willing parties. As of December 31,2009 and March 31, 2010, the carrying values of cash and cash equivalents,prepaid expenses and other current assets, accounts payable, accrued expenses,and accrued compensation equaled or approximated their respective fair valuesbecause of the short duration of these instruments. In addition, we believe thecarrying value of our debt instruments, which do not have readily ascertainablemarket values, approximate their fair values, given that the interest rates onoutstanding borrowings approximate market rates.

 

***(l)******                                   ******Recent AccountingPronouncements***

 

InJanuary 2010, the Financial Accounting Standards Board (“FASB”) issuedguidance that amends Accounting Standards Codification Topic 820, Fair ValueMeasurements and Disclosures, that requires reporting entities to make newdisclosures about recurring or nonrecurring fair-value measurements includingsignificant transfers into and out of Level 1 and Level 2 fair-value measurementsand information about purchases, sales, issuances, and settlements on a grossbasis in the reconciliation of Level 3 fair-value measurements. This guidancealso clarifies existing fair-value measurement disclosure guidance about thelevel of disaggregation, inputs, and valuation techniques. Except for thedetailed Level 3 roll forward disclosures, the guidance was effective forreporting periods beginning after December 15, 2009 and did not have animpact on 

 

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our interim financial statements.

 

InOctober 2009, the FASB issued accounting guidance related to revenuerecognition for transactions with multiple deliverables, which impacts thedetermination of when the individual deliverables included in amultiple-element arrangement may be treated as separate units ofaccounting.  This guidance is effectivefor us beginning on January 1, 2011. We are currently evaluating the effect this guidance will have on ourfinancial statements.

 

***(m)******                             ******Comprehensive Loss***

 

Weclassify items of other comprehensive income (loss) by their nature anddisclosure of the accumulated balance of other comprehensive income (loss)separately from accumulated deficit and additional paid-in capital in thestockholders’ equity section of our balance sheet.  Other comprehensiveincome (loss) consisted of unrealized gains and losses on marketable securitiesfor the three months ended March 31, 2009.  For the three monthsended March 31, 2009 and 2010, comprehensive loss was:

 
| ** **                         | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------|------------|--------------------------------------------------|------------|
| ** **                         | ** ** | **2009**                                         | ** ** | **2010** | ** ** |
| Net Loss                           |       | $                                                | (2,518,403 | ) | $ | (1,713,341 | ) |
| Other  comprehensive income (loss) |       | (45,357                                          | )          | — |   |
| Comprehensive  income (loss)       |       | $                                                | (2,563,760 | ) | $ | (1,713,341 | ) |

 

**4.****                                     ****Accrued Expenses**

 

Accrued expensesconsisted of the following:

 
| ** **         | ** ** | **March 31,********2010** | ** ** | **December 31,********2009** | ** ** |
|--------------------|------------|--------------------------------|------------|-----------------------------------|------------|
| Professional  fees |       | $                              | 138,972    |                              | $          | 71,000 |   |
| Deferred rent      |       | 65,045                         |       | 60,976                            |       |
| Other              |       | 33,406                         |       | 19,917                            |       |
|               |       | $                              | 237,423    |                              | $          | 151,893 |   |

 

**5.****                                     ****Debt — Master Security Agreements**

 

InFebruary 2005, the Company entered into a Master Security Agreement with afinance company that provided for borrowings up to $3,200,000, subject tocertain conditions, through December 2005. During 2005, the Company borrowed$2,001,810 under the Master Security Agreement in order to finance the purchaseof laboratory and office equipment. Amounts borrowed are evidenced withpromissory notes and are repayable in equal monthly payments, over 36 to48 months, and are collateralized by the purchased equipment. The notesbear interest at rates varying between 9.4% and 10.4%.   The note was repaid in full as of December 31,2009.

 

Inconnection with the borrowings under the Master Security Agreement, the Companyissued the finance company warrants to purchase 53,039 shares of the Company’scommon stock at an exercise price of $0.75 per share. The estimated fair valueof the warrants of $30,074, determined using the Black-Scholes option-pricingmodel, was accounted for as deferred financing costs and was amortized tointerest expense over the remaining term of the notes.

 

InSeptember 2008, the Company entered into a Loan and Security Agreementwith another finance company that provided for borrowings of up to $2,000,000to be used for the purchase of certain equipment and for working capitalpurposes.  During 2008, the Company borrowed $1,556,357 under theLoan and Security Agreement.  As of December 31, 2009 and March 31,2010, $1,147,953 and $1,058,614, respectively, was outstanding under the Loanand Security Agreement. Amounts borrowed are evidenced with a promissory note,are repayable in equal monthly payments over 48 months, and are collateralizedby the purchased equipment.  The note bears interest of 12.1%.  TheLoan and Security Agreement contains certain provisions, including a materialadverse change clause (as defined in the Loan and Security Agreement) whichrestricts

 

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the Company’s ability to borrow additional money andalso enables the finance company to request full repayment of the loan if sucha change has occurred.  As of March 31, 2010, the Company was incompliance with these provisions.

 

Thescheduled maturities of long-term debt outstanding at March 31, 2010 areas follows:

 
| 2010                  |   | 284,772   |    |
|-----------------------|--------|-----------|---------|
| 2011                  |   | 422,100   |    |
| 2012                  |   | 351,742   |    |
|                  |   | 1,058,614 |    |
| Less current  portion |   | (385,570  | )       |
|                  |   | $         | 673,044 |   |
|                       |        |           |         |  |

 

Interestexpense on notes payable for the three months ended March 31, 2009 and2010 was $47,350 and $33,734, respectively.

 

**6.****                                     ****Stockholders’ Equity**

 

***(a)******                                ******Common Stock***

 

TheCompany was party to a number of agreements that provided for dilutionprotection to certain investors.  In connection with the Reverse Mergerand closing of the Private Placement, the Company issued approximately 2.0million shares of common stock to a founder and shareholder of the Company as aresult of such anti-dilution protection.  During 2007, the Company recordeda charge of $1.6 million to research and development expenses related tothe issuance of such shares of common stock, which represents the fair value ofthese shares.  As of March 31, 2010, none of the Company’s existingagreements contain dilution protection provisions.

 

***(b)******                                ******Warrants***

 

Asof March 31, 2010, the Company had the following warrants to purchaseCommon Stock outstanding:

 
| **Number of shares** | ** ** | **Exercise price** | ** ** | **Expiration** | ** **                  |
|--------------------------------|------------|-------------------------|------------|----------------|-----------------------------|
|                           |       |                    |       |           |                        |
| 53,039                         |       | $                       | 0.75       |           | February-December 2012 |   |
|                           |       |                    |       |           |                        |
| 4,015,059                      |       | $                       | 1.35       |           | April 2010             |   |
|                           |       |                    |       |           |                        |
| 3,574,906                      |       | $                       | 0.97       |           | April 2012             |   |

 

Subsequent to March 31,2010, 4,015,059 warrants to purchase Common Stock have expired and were notexercised***.***

 

***(c)******                                 ******Stock Option Plans***

 

InNovember 2003, the Company adopted the 2003 Stock Incentive Plan, asamended (the “2003 Plan”), that authorized the Company to grant up to 6,523,790shares of Common Stock to eligible employees, directors, and consultants to theCompany in the form of restricted stock and stock options. The amount and termsof grants were determined by the board of directors. The term of the optionscould have been up to 10 years, and options were exercisable in cash or asotherwise determined by the board of directors. Generally, options vested 25%upon the first anniversary of the date of grant and ratably each monththereafter through the fourth anniversary of the date of grant.

 

OnMarch 12, 2007, the Company adopted the Redpoint Bio Corporation 2007Omnibus Equity Compensation Plan (“2007 Plan”), which provided for the issuanceof up to 13,511,562 shares of common stock, subject to adjustment in certaincircumstances. In connection with the adoption of the 2007 Plan, the 2003 Planmerged with and into the 2007 Plan and no additional grants were to be madethereafter under the 2003 Plan.  Outstanding grants under the 2003 Plancontinued in effect in accordance with their terms as in effect before March 12,2007 and the shares with respect to outstanding grants under the 2003 Plan havebeen or will be issued or transferred under the 2007 Plan.  The 2007 Planis now the Company’s only plan in effect.

 

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OnApril 20, 2007, the Company approved an amendment to the 2007 Plan, whichincreased the maximum number of shares of common stock reserved for issuanceunder the 2007 Plan by an additional 4,132,705 shares from 13,511,562 to17,644,267 shares of common stock.

 

Thefollowing is a summary of stock option activity under the Plan during the threemonths ended March 31, 2010:

 
| ** **                             | ** ** | ** **         | ** ** | ** **              | ** ** | **Weighted-**   | ** ** | ** **    | ** ** |
|----------------------------------------|------------|--------------------|------------|-------------------------|------------|-----------------|------------|---------------|------------|
| ** **                             | ** ** | ** **         | ** ** | **Weighted-**           | ** ** | **average**     | ** ** | ** **    | ** ** |
| ** **                             | ** ** | **Number of** | ** ** | **average**             | ** ** | **contractual** | ** ** | **Intrinsic** | ** ** |
| ** **                             | ** ** | **shares**         | ** ** | **exercise price** | ** ** | **term**        | ** ** | **Value**     | ** ** |
| Outstanding at  December 31, 2009 |       | 9,031,819          |       | $                       | 0.4806     |            |       |          |       |   |
| Granted                                |       | —             |       | —                  |       |            |       |          |       |
| Exercised                              |       | —             |       | —                  |       |            |       |          |       |
| Forfeited/Cancelled                    |       | (25,000            | )          | 0.0451                  |       |            |       |          |       |
| Outstanding at  March 31, 2010    |       | 9,006,819          |       | $                       | 0.4818     |            | 6.12       |          | $          | 121,124 |   |
|                                        |            |                    |            |                         |            |                 |            |               |            |  |  |

 

Alloptions granted to date have exercise prices equal to the fair value of theunderlying common stock on the date of grant. Prior to the effectiveness of theregistration statement on Form S-1, which occurred on July 20, 2007,all options were granted with an exercise price equal to the estimated fairvalue of the underlying common stock as determined by the board of directors.Subsequent to that date, all options have been granted with an exercise priceequal to the most recent trading price of the Company’s common stock on thedate of grant. As of March 31, 2010, there were 7,570,630 shares of commonstock available for grant under the 2007 Plan.

 

Theper-share weighted average fair value of options granted during the threemonths ended March 31, 2009 was estimated at $0.05 on the date of grantusing the Black-Scholes option-pricing model. There were no options grantedduring the three months ended March 31, 2010.

 

TheCompany recognized $227,934 and $143,098 of stock-based compensation expenserelated to stock options for the three months ended March 31, 2009 and2010, respectively.  As of March 31,2010, there was approximately $649,613 of unrecognized compensation expenserelated to unvested stock options granted to employees and directors, which isexpected to be recognized over a weighted average period of 1.1 years.

 

***(d)******                                ******Registration Rights***

 

OnJune 5, 2007, the Company filed a “resale” registration statement with theSEC covering all shares of common stock issued in the Private Placement and inconnection with the Reverse Merger, including shares of common stock into whichcertain warrants are exercisable.  Such registration statement wasdeclared effective on July 20, 2007.  The Company will use its bestefforts to maintain its effectiveness until such time as all securitiesregistered under the registration statement have been sold or are otherwiseable to be sold under Rule 144 of the Securities Act without regard tovolume limitations, whichever is earlier.

 

**7.****                                     ****Research and DevelopmentCollaboration**

 

*Givaudan*.  In March 2007, the Company entered into aJoint Research and Development and License Agreement (the “Givaudan Agreement”)with Givaudan Schweiz AG, a Swiss company (“Givaudan”) for the development andcommercialization of compounds that act primarily through the modulation of theTRPM5 channel and that enhance sweetness or savory sensation, as well ascompounds that block or desensitize bitter taste for use in the food andbeverage industry.  In consideration of the Company’s agreement to conductresearch and develop compounds and grant exclusive licenses and other rights toGivaudan, Redpoint received an upfront payment of $1,300,000 and Givaudanprovided research funding to the Company over the term of the Agreement. Givaudan terminated the Agreement, effective as of May 1, 2009, andGivaudan reserved its rights under the Agreement with respect to certaincollaboration compounds.  The upfront payment of $1,300,000 was beingrecognized as revenue on a straight-line basis over the initial term of theGivaudan Agreement.  As of May 1, 2009, the remaining unamortizedportion of the upfront payment was approximately $526,000 and, as a result ofthe termination, was recognized as revenue upon termination of the GivaudanAgreement.  During the three months endedMarch 31, 2009, the Company recognized approximately $93,000 of revenueattributable to the amortization of the upfront fee and approximately $812,000of revenue from research funding.  During the three months ended March 31,2010, the Company did not recognize any revenue attributable to the GivaudanAgreement.

 

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**8.****                                     ****Restructuring**

 

During  2009, the Company announced tworestructurings which reduced its workforce by approximately 60% bringing thecurrent number of employees to 12.  In connection with the restructurings,the Company incurred severance costs of $526,553 which are included in generaland administrative expenses in 2009.  Asof March 31, 2010 all payments related to severance have been paid.

 
| ** **              | ** ** | **December 31,  2009** | ** ** | **2010  Expense** | ** ** | **2010  Payments** | ** ** | **March 31,  2010** | ** ** |
|-------------------------|------------|-----------------------------|------------|-------------------|------------|--------------------|------------|--------------------------|------------|
| Severance and  benefits |       | $                           | 37,148     |              | $          | —             |       | $                        | (37,148    | ) | $ | — |   |
|                    |       | $                           | 37,148     |              | $          | —             |       | $                        | (37,148    | ) | $ | — |   |

 

**9.****                                     ****Commitments**

 

*Leases*

 

Futureminimum lease payments as of March 31, 2010 are as follows:

 
| **Year Ending December 31,** | ** ** | **Amount** | ** ** |
|-----------------------------------|------------|------------|------------|
| 2010                              |       | $          | 582,060    |   |
| 2011                              |       | 839,723    |       |
| 2012                              |       | 845,915    |       |
| 2013                              |       | 852,230    |       |
| 2014                              |       | 858,672    |       |
| Thereafter                        |       | 2,038,097  |       |
|                              |       | $          | 6,019,697  |   |

 

InOctober 2006, the Company paid a $250,000 deposit for its new facilitywhich has been recorded in other assets on the accompanying balance sheet.

 

**10.****                              ****Income Taxes**

 

Duringthe three months ended March 31, 2010, the Company sold $112,562 of itsNew Jersey State Research and Development Tax Credits resulting in therecognition of an income tax benefit of $101,306 recorded in the Company’sStatement of Operations.

 

TheCompany applies the provisions of FASB Accounting Standards Codification 740-10“Accounting for Uncertainty in Income Taxes” (ASC 740-10), which clarifies theaccounting and disclosure for uncertainties in income taxes recognized in anenterprise’s financial statements. ASC 740-10 prescribes a recognitionthreshold and measurement attribute for financial statement recognition andmeasurement of a tax position reported or expected to be reported on a taxreturn. ASC 740-10 also provides guidance on the recognition and classificationof interest and penalties in an entity’s financial statements. The Company’spolicy is to recognize potential accrued interest and penalties related toincome tax matters in income tax expense. As of March 31, 2010, theCompany determined that it had no liability for uncertain income tax matters asprescribed by ASC 740-10.  Net operating lossand credit carryforwards since inception remain open to examination by taxingauthorities, and will continue to remain open for a period of time postutilization.

 

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**ITEM2.****                         ****MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**CautionaryNote Regarding Forward-Looking Statements**

 

TheSecurities and Exchange Commission, referred to herein as the SEC, encouragescompanies to disclose forward-looking information so that investors can betterunderstand a company’s future prospects and make informed investmentdecisions.  Certain statements that we may make from time to time,including, without limitation, statements contained in this Quarterly Report onForm 10-Q, referred to herein as the Quarterly Report, constitute “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Actof 1995.  These statements may be made directly in this Quarterly Report,and they may also be made a part of this Quarterly Report by reference to otherdocuments filed with the SEC, which is known as “incorporation by reference.”

 

Wordssuch as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,”“believes” and words and terms of similar substance used in connection with anydiscussion of future operating or financial performance, identifyforward-looking statements.  All forward-looking statements are management’spresent expectations of future events and are subject to a number of risks anduncertainties that could cause actual results to differ materially from thosedescribed in the forward-looking statements.  These risks anduncertainties include, among other things:

 

·                  our need for additional capital to fundthe current level of our research and development programs and continue as agoing concern;

 

·                  our ability to enter into and maintainfood, ingredient and pharmaceutical and biotechnology collaborations;

 

·                  our inability to further identify,develop and achieve commercial success for new products and technologies;

 

·                  our ability to protect our proprietarytechnologies, including our newly discovered sweetener enhancers;

 

·                  the possibility of delays in the researchand development necessary to select drug development candidates and delays inclinical trials;

 

·                  challenges that we may face relating tothe introduction of compounds that we may discover as food ingredients;

 

·                  patent-infringement claims;

 

·                  the risk that clinical trials may notresult in marketable products;

 

·                  the risk that we may be unable tosuccessfully finance and secure regulatory approval of and market our drugcandidates;

 

·                  the levels and timing of payments underfuture collaborative agreements;

 

·                  uncertainties about our ability to obtainnew corporate collaborations and acquire new technologies on satisfactoryterms, if at all;

 

·                  the development of competing diagnosticand therapeutic products;

 

·                  risks of new, changing and competitivetechnologies and regulations in the United States and internationally; and

 

·                  other factors discussed under the headingItem 1A “Risk Factors” in this Quarterly Report.

 

Inlight of these assumptions, risks and uncertainties, the results and eventsdiscussed in the forward-looking statements contained in this Quarterly Reportor in any document incorporated by reference might not occur.  You arecautioned not to place undue reliance on forward-looking statements, whichspeak only as of the date of this Quarterly Report or the date of the documentincorporated by reference in this Quarterly Report.  We are not under anyobligation, and we expressly disclaim any obligation, to update or alter anyforward-looking statements, whether as a result of new information, 

 

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future events or otherwise, except as may be required byapplicable law.  All subsequent forward-looking statements attributable toRedpoint, or to any person authorized to act on our behalf are expresslyqualified in their entirety by the cautionary statements contained or referredto in this section.

 

**Overview**

 

RedpointBio is a development stage biotechnology company leveraging recent discoveriesin the molecular biology of taste to discover and develop novel tastemodulators for the food and beverage industries. Our food and beverage programhas been focused on identifying novel flavor modifiers that improve the tasteof existing ingredients, enabling the development of better-tasting and morehealthful foods and beverages. In June 2009, we announced that we hadidentified an all-natural sweetness enhancer, RP44. RP44 is Reb-C (rebaudiosideC), a component of the stevia plant. We are actively seeking commercialpartners for our all-natural sweetness enhancer, RP44.

 

Inaddition to our sweetness enhancer program, our understanding of the biology oftaste and its relationship to metabolic processes, satiety, and diabetes haveled us to initiate a pharmaceutical discovery program for the treatment ofdiabetes and obesity. Our research in diabetes and obesity stems from theobservation that taste signaling in the gastrointestinal tract is involved inimportant hormone secretion processes enabling us to leverage our research onlingual taste modulation to potentially important therapeutic applications. Weare actively seeking a research collaboration with major pharmaceuticalcompanies for the further development of this discovery program.

 

Sinceits inception in 1995, Redpoint has incurred losses and negative cash flowsfrom operations, and such losses have continued subsequent to March 31,2010. As of March 31, 2010, Redpoint had an accumulated deficit of $53.0million and anticipates incurring additional losses for the foreseeable future.We will need to spend significant resources over the next several years toenhance our technologies and to fund research and development of our pipelineof potential products. We have not yet developed any products that arecommercially available. We believe that our current capital resources should besufficient to meet our operating and capital requirements through November 2010which raises substantial doubt about our ability to continue as a goingconcern.

 

ThroughMarch 31, 2010, our revenue has come solely from corporate collaborations,license agreements, and government grants. In order to achieve profitability,we must continue to develop products and technologies that can becommercialized by us or through future collaborations.

 

OnMarch 12, 2007, we completed the first closing of our private placement ofshares of common stock and warrants to purchase shares of common stock raisingapproximately $17.2 million of net proceeds. On April 6, 2007, wecompleted the final closing of the private placement raising an additional$11.4 million of net proceeds, bringing the total private placement netproceeds to $28.6 million.

 

InMarch 2007, we entered into a Joint Research and Development and LicenseAgreement with Givaudan Schweiz AG, a Swiss company, or Givaudan, for thedevelopment and commercialization of compounds that act primarily through themodulation of the TRPM5 channel and that enhance sweetness or savory sensation,as well as compounds that block or desensitize bitter taste for use in the foodand beverage industry. In consideration of the Company’s agreement to conductresearch and develop compounds and grant exclusive licenses and other rights toGivaudan, Redpoint received an upfront payment of $1.3 million andGivaudan provided research funding to the Company over the term of theagreement. Givaudan terminated the agreement, effective as of May 1, 2009,and Givaudan reserved its rights under the agreement with respect to certaincollaboration compounds. Givaudan cited the fact that certain collaborationobjectives had not been achieved as its reasoning for terminating theagreement. Through the termination date of the agreement, including the upfrontfee, we received $6.9 million in research and development funding inconnection with the agreement.

 

Recognizingthe current difficult financing environment that has significantly impacted thebiotechnology sector, during the year ended December 31, 2009, weannounced two restructurings which reduced our workforce by approximately 60%,and we currently have 12 full time employees. We may need to make furtherreductions in our expenses.

 

Wefirst announced that we had identified RP44, an all-natural sweetness enhancer,in June 2009. In January 2010, we disclosed that RP44 is Reb-C(rebaudioside C), a component of the stevia plant. Native to South America,extracts of the leaves of the stevia plant have been used as sweeteners aroundthe world for hundreds of years. More recently, a purified component of steviaknown as Reb A has received regulatory approval in the United States andelsewhere and Redpoint believes its popularity as an all-natural non-caloricsweetener is increasing.

 

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UnlikeReb A, RP44 has a very low intrinsic level of sweetness and therefore is notuseful as a sweetener. Instead, we discovered that RP44 acts as a potentsweetness enhancer. A sweetness enhancer imparts no sweet taste of its own whenused in a product. Instead, sweetness enhancers act by amplifying the existingsweet taste of caloric sweeteners such as sugar or high fructose corn syrup. Webelieve this will enable the development of food and beverage products thatrequire reduced amounts of caloric sweeteners while still retaining the “cleansweet taste” associated with a fully sugared product. We have filed severalpatent applications covering the sweetness enhancing effect of RP44.

 

Tastetests demonstrate that RP44 enables the reduction of up to 25% of the caloricsweetener content in various product prototypes, while still maintaining thetaste quality of the fully sweetened product. These enhancement results havebeen demonstrated by using RP44 in combination with several common sweetenersincluding sucrose (sugar), fructose, glucose and high-fructose corn syrup(HFCS). Additional taste tests have demonstrated that when RP44 is used incombination with Reb A, the caloric content in product prototypes can bereduced by up to 50%, while still maintaining the taste quality of the fullysweetened product. This result suggests that RP44 could add flexibility toall-natural sweetener blends in reduced-calorie sweetener systems. Theworldwide sweetener market is estimated to be in excess of $50 billionwith sugar (including sucrose, HFCS, and fructose) being the second most commoningredient used in food and beverages after water.

 

Webelieve RP44 has excellent potential for achieving GRAS (Generally RecognizedAs Safe) status, due to its long history of human exposure as a component ofstevia and its similarity to Reb A, which has already undergone extensive safetystudies. The GRAS determination/notification process requires extensive testingto ensure safety in use and usually takes 12-18 months to complete.

 

RP44is currently derived from material found in the side stream of the Reb Aproduction process. We are in discussions with suppliers of Reb A to determinethe economics and manufacturing process necessary to extract and produce RP44on a scale large enough to conduct safety studies and facilitatecommercialization. We are actively seeking commercial partners for RP44 and wehave provided our sweetness enhancer to several major ingredient suppliers andfood and beverage companies that are evaluating RP44 in their own tastesystems. However, there can be no assurance that RP44 can be produced in largescale on an economically viable basis or that the Company will consummatecollaborations with commercial partners.

 

Webelieve there is an important potential role for RP44 in all-naturalreduced-calorie products. Numerous scientific studies suggest a compelling linkbetween the high levels of refined sugar found in common food and beverageproducts and the worsening epidemic of obesity and diabetes worldwide. Healthand wellness trends continue to be major market drivers for the food andbeverage industry, creating consumer demand for natural solutions that canpreserve the clean sweet taste of sugar while reducing calories.

 

Ourinitial programs focused on the modulation of the TRPm5 ion channel, a keysignaling element in taste sensation, in order to discover novel compounds thatmodulate the taste of food and beverage products. We also believe that theTRPm5 ion channel may be an attractive target for the identification anddevelopment of a new diabetes or obesity therapeutic compound. Recentscientific research suggests that in addition to taste cells on the tongue,TRPm5 is expressed as part of a nutrient-sensing signal transduction chain inthe gastrointestinal tract and also in the pancreas. We initiated a programdesigned to leverage the research we have already conducted on the discovery ofmodulators of the TRPm5 ion channel to further explore potential opportunitiesfor the discovery of new diabetes or obesity therapeutics.

 

TRPm5modulators discovered at Redpoint have been shown to elicit the secretion ofhormones known to play important roles in metabolism in relevant model systems.We believe this discovery may serve as the foundation for a new method ofaction in the treatment of obesity and diabetes. Our therapeutic objective isthe development of an orally acting incretin and insulin secretogogue for thetreatment of Type II diabetes. Through an ongoing discovery programinvolving the synthesis of approximately 1,000 novel small molecules, we haveidentified a lead series of orally acting hormone secretogogues that havedemonstrated positive results in a number of in vitro and in vivo experimentsWe are seeking collaborations with major pharmaceutical companies for thefurther development and optimization of our TRPm5 modulators for therapeuticapplications in diabetes and obesity.

 

**Revenue**

 

Todate, our revenue has come solely from corporate collaborations, licensingagreements and government grants. Since our inception, we have undertakenresearch projects for which we were the recipient of several Small BusinessInnovative Research, or SBIR, Awards. The SBIR Awards were sponsored by theNational Institutes of Health. The last SBIR related research project wascompleted in 2004.

 

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Toleverage our technology, in March 2007, we entered into the GivaudanAgreement where we were collaborating exclusively with each other to discoverand develop Enhancer Compounds and Bitter Blocker Compounds that act primarilythrough the modulation of the TRPm5 channel.  The agreement with Givaudanwas terminated by Givaudan on May 1, 2009.

 

Weare actively seeking commercial partners for RP44, and we have provided oursweetness enhancer to several major ingredient suppliers and food and beveragecompanies which are evaluating RP44 in their own taste systems. We may alsopartner with other major ingredient suppliers, or food and beverage companies,to utilize our technology to discover new all natural sweetness enhancersand/or sweeteners, in exchange for technology access fees, research funding,product development milestones, and product royalties. We are also seekingcollaborations with major pharmaceutical companies for the further developmentand optimization of our compounds for therapeutic applications in diabetes andobesity. Any failure to maintain or establish licensing or collaborationarrangements on favorable terms could adversely affect our business prospects,financial condition or ability to develop and commercialize our productcandidates.

 

**Researchand Development**

 

Ourresearch and development expenses consist primarily of internal costsassociated with our taste modulator and diabetes/obesity research programs aswell as amounts paid to third parties to conduct research on our behalf. Ourinternal research and development costs are comprised of salaries and relatedbenefits, facilities and depreciation on laboratory equipment, compoundacquisition costs and research supplies. We charge research and developmentcosts to operations as incurred.

 

**Generaland Administrative**

 

Ourgeneral and administrative expenses consist primarily of salaries and relatedbenefit expenses for business development, financial, legal and other administrativefunctions. In addition, we incur external costs for professional fees forlegal, patent and accounting services.

 

**Resultsof Operations**

 

***Three months ended March 31, 2010 compared to threemonths ended March 31, 2009***

 

*Research and Grant Revenue*.  For the three months ended March 31,2010, we did not record any revenue. For the three months ended March 31,2009, we recorded revenue of $1.1 million, which included$0.9 million related to our Givaudan Agreement.  Our agreement withGivaudan, for the development and commercialization of compounds that actprimarily through the modulation of the TRPM5 channel and that enhancesweetness or savory sensation as well as compounds that block or desensitizebitter taste for use in the food and beverage industry, began on March 27,2007 and was terminated by Givaudan, effective May 1, 2009. The remaining$0.2 million of revenue was from other agreements including a feasibilityresearch program conducted with Schering Corporation, a subsidiary ofSchering-Plough Corporation, in the area of taste research for pharmaceuticalapplications. As of March 31, 2010, the Company does not have any currentsources of revenue.

 

*Research and Development Expenses*.  Our research and developmentexpenses were $0.8 million for the three months ended March 31, 2010compared to $1.9 million for the three months ended March 31,2009.  The decrease in expenses was primarily attributable to reductionsin workforce as a result of the corporate restructurings the Company undertookin February and May of 2009.  As a result of the restructurings,we are currently not pursuing our research program aimed at suppressing thebitterness of oral medicines. Our research and development expenses consistprimarily of internal costs associated with our taste modulator and diabetesresearch programs. Our internal research and development costs are comprised ofsalaries and related benefits, facilities and depreciation on laboratoryequipment, compound acquisition costs and research supplies.

 

*General and Administrative Expenses*.  Our general and administrativeexpenses were $0.9 million for the three months ended March 31, 2010compared to $1.7 million for the three months ended March 31,2009.  The decrease in expense was primarily attributable to reducedexpenditures associated with professional fees and reductions in workforce as aresult of the corporate restructurings the Company undertook in February andMay 2009.

 

*Interest Income*.  Interest income was a nominal amount for thethree months ended March 31, 2010 compared to $0.1 million during thethree months ended March 31, 2009. The decrease was the result ofdecreasing cash and investment balances.

 

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*Interest Expense*.  There was no change in interest expense forthe three months ended March 31, 2010 compared to the three months ended March 31,2009. In September 2008, we entered into a Loan and Security Agreement inwhich we are authorized to borrow up to $2.0 million for the purchase ofcertain equipment, a portion of the proceeds which may be used for generalcorporate working capital purposes. As of March 31, 2010, we have anoutstanding balance of $1.1 million pursuant to the Loan and SecurityAgreement.

 

*Income Tax Benefit.*For the three months ended March 31, 2010, wesold $0.1million of our New Jersey State Research and Development Tax Creditsresulting in the recognition of an income tax benefit of $0.1 million. For thethree months ended March 31, 2009, we did not have any income tax benefit.

 

**Liquidityand Capital Resources**

 

AtMarch 31, 2010, we had cash and cash equivalents of $4.1 million andworking capital of $2.9 million. Since inception, we have used$39.7 million of cash to fund our operating activities and$3.4 million for capital expenditures. Through March 31, 2010, wehave funded substantially all of our operations and capital expendituresthrough private placements of equity and convertible debt securities totaling$45.8 million, cash received from corporate collaborations totaling $10.4million, government grants totaling $1.8 million, and capital equipment andworking capital financing totaling $3.6 million.

 

InSeptember 2008, we entered into a Loan and Security Agreement with CITHealthcare LLC in which we are authorized to borrow up to$2.0 million for the purchase of certain equipment, a portion of theproceeds which may be used for general corporate working capital purposes. During2008, we borrowed approximately $1.6 million pursuant to the Loan andSecurity Agreement, of which approximately $1.0 million was for equipmentpreviously purchased and approximately $0.6 million was for generalworking capital. As of March 31, 2010, we had approximately$1.1 million outstanding under such facility. The Loan and SecurityAgreement contains certain provisions, including a material adverse changeclause (as defined in the Loan and Security Agreement) which restricts theCompany’s ability to borrow additional money and also enables the financecompany to request full repayment of the loan if such a change hasoccurred.  As of March 31, 2010, theCompany was in compliance with these provisions.

 

OnMarch 12, 2007, we completed the first closing of our Private Placement ofshares of common stock and warrants to purchase shares of common stock raisingapproximately $17.2 million of net proceeds. On April 6, 2007, wecompleted the final closing of our Private Placement raising an additional $11.4 millionof net proceeds, bringing the total private placement net proceeds to$28.6 million.

 

Ourcontinued research and development efforts have led us to certain advanceswithin our taste technology platform, including our announcement concerning theidentification of RP44, an all-natural sweetness enhancer, and we are beginningto understand how our technology platform plays a role in treating metabolicdisorders such as diabetes and obesity. However, since December 2007, wehave not entered into any new funded corporate collaborations other than anexpanded feasibility agreement with Schering Corporation, a subsidiary ofSchering-Plough Corporation, in the area of taste science research forpharmaceutical applications, and we are currently not pursuing our researchprogram with Schering Corporation. We were also unable to renew our one yearresearch agreement with The Coca-Cola Company and the agreement with Givaudanwas terminated by Givaudan on May 1, 2009. Givaudan cited the fact thatcertain collaboration objectives had not been achieved as its reasoning forterminating the agreement. Furthermore, we recognize the current difficultfinancing environment that has significantly impacted the biotechnology sectorand required the Company to seek ways to conserve cash. Consequently, duringthe year ended December 31, 2009, we announced two restructurings whichreduced our workforce by approximately 60%, and currently we have 12 full timeemployees. We may need to make further reductions in our expenses. We believethat our current capital resources should be sufficient to meet our operatingand capital requirements through November 2010 which raises substantialdoubt about our ability to continue as a going concern. Currently, we areactively seeking corporate collaborations and license agreements from variousstrategic partners to enhance our liquidity position.

 

Weexpect that substantially all of our cash-flow for the foreseeable future willcome from future corporate collaborations and license agreements. There can beno assurance that we will enter into any future corporate collaborations orlicense agreements. We are subject to those risks associated with anybiotechnology company that has substantial expenditures for research anddevelopment. There can be no assurance that our research and developmentprojects will be successful, that products developed will obtain necessaryregulatory approval, or that any approved product will be commercially viable.In addition, we operate in an environment of rapid technological change and weare largely dependent on the services of our employees and consultants. Thestock market in general has recently experienced large price and volumefluctuations and the 

 

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market price of our common stock has experiencedsignificant volatility. For us to fund our operations and to commerciallydevelop our products, additional equity and/or debt financing will be required.There is no assurance that such financing will be available to us as needed,and as a result, we may need to pursue other strategic alternatives, includingthe possible cessation of operations.

 

**Summaryof Contractual Obligations**

 

Thefollowing table summarizes our obligations to make future payments under ourcurrent contractual obligations as of March 31, 2010:

 
| ** **       | ** ** | **Payments  Due by Period** | ** ** |
|------------------|------------|-----------------------------|------------|
| ** **       | ** ** | **Total**                   | ** ** | **2010** | ** ** | **2011-2012** | ** ** | **2013-2014** | ** ** | **Thereafter** | ** ** |
| Operating leases |       | $                           | 6,017,000  |   | $ | 582,000 |   | $ | 1,686,000 |   | $ | 1,711,000 |   | $ | 2,038,000 |   |
| Long-term debt   |       | 1,059,000                   |       | 285,000 |   | 774,000 |   | — |   | — |   |
| License payments |       | 250,000                     |       | 25,000 |   | 50,000 |   | 50,000 |   | 125,000 |   |
|             |       | $                           | 7,326,000  |   | $ | 892,000 |   | $ | 2,510,000 |   | $ | 1,761,000 |   | $ | 2,163,000 |   |

 

**CriticalAccounting Policies**

 

Ourdiscussion and analysis of our financial condition and results of operationsare based on our financial statements, which have been prepared in accordancewith U.S. generally accepted accounting principles, or GAAP. The preparation ofthese financial statements requires us to make estimates and judgments thataffect the reported amounts of assets, liabilities, the disclosure ofcontingent assets and liabilities at the date of the financial statements, andreported amount of revenue and expenses during the reporting period. On anongoing basis, we evaluate our judgments and estimates, including those relatedto revenue recognition, long-lived assets, accrued liabilities, share-basedpayments and income taxes. We base our judgment and estimates on historicalexperience and various other factors that we believe to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities. Actual results may differ fromthese estimates under different assumptions or conditions.  A moredetailed review of our critical accounting policies is contained in our AnnualReport on Form 10-K filed with the Securities and Exchange Commission forthe year ended December 31, 2009.  During the quarter ended March 31,2010, there have been no material changes in our critical accounting policies.

 

**ITEM 3.****                            ****QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Ourcarrying values of cash and cash equivalents, marketable securities, accountsreceivable, accounts payable, accrued expenses and debt are a reasonableapproximation of their fair value. The estimated fair values of financialinstruments have been determined by us using available market information andappropriate valuation methodologies.

 

Wehave not entered into and do not expect to enter into, financial instrumentsfor trading or hedging purposes.  We do not currently anticipate enteringinto interest rate swaps and/or similar instruments.  We have no materialcurrency exchange risk exposure as of March 31, 2010.  Our primarymarket risk exposure with regard to financial instruments is to changes ininterest rates, which would impact interest income earned on such instruments.A one percent change (100 basis points) in interest rates on our investmentswould have impacted interest income by a nominal amount for the three monthsended March 31, 2010.

 

**ITEM 4T.****                    ****CONTROLS AND PROCEDURES**

 

Ourmanagement, with the participation of our chief executive officer and chieffinancial officer, evaluated the effectiveness of our disclosure controls andprocedures (as defined in Rules 13a-15(e) and 15d-15(e) underthe Exchange Act) as of March 31, 2010. Based on this evaluation, ourchief executive officer and chief financial officer concluded that, as of March 31,2010, our disclosure controls and procedures were (1) effective in thatthey were designed to ensure that material information relating to us,including our consolidated subsidiaries, is made known to our chief executiveofficer and chief financial officer by others within those entities, asappropriate, to allow timely decisions regarding required disclosures, and (2) effectivein that they provide reasonable assurance that information required to bedisclosed by us in our reports that we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specifiedin the SEC’s rules and forms.

 

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Nochanges in our internal control over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) occurred during the fiscal quarter endedMarch 31, 2010 that have materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.

 

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**PART II.  OTHER INFORMATION**

 

**ITEM 1.****                            ****LEGAL PROCEEDINGS**

 

TheCompany’s management knows of no material existing or pending legal proceedingsor claims against the Company, nor is the Company involved as a plaintiff inany material proceeding or pending litigation.  To the Company’sknowledge, no director, officer or affiliate of the Company, and no owner ofrecord or beneficial owner of more than five percent (5%) of the Company’ssecurities, or any associate of any such director, officer or security holderis a party adverse to the Company or has a material interest adverse to theCompany in reference to pending litigation.

 

**ITEM 1A.****                   ****RISK FACTORS**

 

*You should carefully consider the following risks andall of the other information set forth in this Quarterly Report before decidingto invest in shares of our common stock. The risks described below are not theonly ones facing us. Additional risks not presently known to us or that wecurrently deem immaterial may also impair our business operations.*

 

*If any of the following risks actually occurs, ourbusiness, financial condition or results of operations would likelysuffer.  In such case, the market price of our common stock would likelydecline due to the occurrence of any of these risks, and you may lose all orpart of your investment.*

 

**RisksRelated To Our Business and Our Industry**

 

***We will need substantial additionalfunding to develop our products and for our future operations. If we are unableto obtain the funds necessary to do so in the near term, we may be required todelay, scale back or eliminate our product development or may be unable tocontinue our business.***

 

Thedevelopment of our product candidates will require a commitment of substantialfunds to conduct the costly and time-consuming research, which may includepre-clinical and clinical testing, necessary to obtain regulatory approvals andbring our products to market. We believe that our current capital resourcesshould be sufficient to meet our operating and capital requirements through November 2010.Our future requirements will depend on many factors, including:

 

·                  the progress of our research anddevelopment programs, including our ability to discover and develop tastemodifiers, including RP44;

 

·                  our ability, or our partners’ ability andwillingness, to formulate these taste modifiers, including RP44, into food andbeverage products;

 

·                  our ability to discover and develop newdiabetes or obesity therapeutic compounds;

 

·                  the cost of prosecuting, defending andenforcing patent claims and other intellectual property rights;

 

·                  the progress, scope and results of ourpre-clinical and clinical testing of any future pharmaceutical products;

 

·                  the time and cost involved in obtainingregulatory approvals;

 

·                  the cost of manufacturing our productcandidates;

 

·                  competing technological and marketdevelopments; and

 

·                  our ability to establish and maintaincollaborative and other arrangements with third parties to assist in bringingour products to market and the cost of such arrangements.

 

Therecan be no assurance that we will not need additional capital sooner thancurrently anticipated.

 

Wewill need to raise substantial additional capital before November 2010 tofund our future operations. We cannot be certain that additional financing willbe available on acceptable terms, or at all. In recent years, it has beendifficult for 

 

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companies to raise capital due to a variety offactors, which may or may not continue. To the extent we raise additionalcapital through the sale of equity securities, the ownership position of ourexisting stockholders could be substantially diluted. If additional funds are raisedthrough the issuance of preferred stock or debt securities, these securitiesare likely to have rights, preferences and privileges senior to our commonstock. Fluctuating interest rates could also increase the costs of any debtfinancing we may obtain.

 

Failureto successfully address ongoing liquidity requirements will have a materialadverse effect on our business. If we are unable to obtain additional capitalon acceptable terms when needed, we may be required to take actions that harmour business and our ability to achieve cash flow in the future, includingpossibly the surrender of our rights to some technologies or productopportunities, delaying our clinical trials or curtailing or ceasingoperations.

 

***Redpoint is a development-stagecompany. We have incurred losses since inception and expect to incur additionalnet losses for at least the next several years.***

 

Sinceour inception we have incurred significant losses and negative cash flows fromoperations. As of March 31, 2010, we had an accumulated deficit of$53.0 million, and anticipate incurring additional losses for theforeseeable future. We will need to spend significant resources over the nextseveral years to enhance our technologies and to fund research and developmentof our pipeline of potential products. In order to advance our programs, wewill need to raise additional capital or fund operations through collaborationswith third parties. We have not generated significant revenues in anyparticular year since our inception. To date, substantially all of our revenuehas been derived from corporate collaborations, license agreements, andgovernment grants. In order to achieve profitability, we must develop productsand technologies that can be commercialized by us or through future collaborations.Our ability to generate revenues and become profitable will depend on ourability, alone or with potential collaborators, to timely, efficiently andsuccessfully complete the development of our product candidates, which mayinclude conducting pre-clinical and clinical tests, obtaining necessaryregulatory approvals, and manufacturing and marketing our product candidates.There can be no assurance that any such events will occur or that we will everbecome profitable. Even if we do achieve profitability, we cannot predict thelevel of such profitability. If we sustain losses over an extended period oftime, we may be unable to continue our business.

 

***We are an early stage company andcurrently have no products available for sale. Our product candidates requireadditional research, development, testing, expert reviews and/or regulatoryapprovals before marketing. We may be unable to develop, obtain regulatoryapproval or market any of our product candidates. If our product candidates aredelayed or fail, our financial condition will be negatively affected, and wemay have to curtail or cease our operations.***

 

Weare in the early stage of product development and we are dependent on newdiscoveries. We currently do not sell any products to third parties and do notexpect to have any products commercially available for several years, if atall. You must evaluate us in light of the uncertainties and complexitiesaffecting an early stage biotechnology company. Our product candidates requireadditional research and development, pre-clinical testing, clinical testing(for our pharmaceutical products) and regulatory review and/or approvalsclearances before marketing. There are many reasons that our product candidatesmay fail or not advance to commercialization, including the possibility that:

 

·                  our product candidates may beineffective, unsafe or associated with unacceptable side effects;

 

·                  our product candidates may fail toreceive the necessary regulatory approvals or otherwise fail to meet applicableregulatory standards;

 

·                  experts may not agree that our foodproduct candidates, including RP44, are generally recognized as safe;

 

·                  our product candidates, including RP44,may be too expensive to develop, manufacture or market;

 

·                  other parties may hold or acquireproprietary rights that could prevent us or our potential collaborators fromdeveloping or marketing our product candidates;

 

·                  physicians, patients, third-party payersor the medical community in general may not accept or use our contemplatedpharmaceutical products;

 

·                  our potential collaborators may withdrawsupport for or otherwise impair the development and commercialization of ourproduct candidates; or

 

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·                  others may develop equivalent or superiorproducts.

 

In addition, we may not succeed in developing tastemodulators, including RP44, with the appropriate attributes required for use insuccessful commercial products. Successful taste modulators require, amongother things, appropriate biological activity, including the correct propertiesfor the product application, an acceptable safety profile, including lack oftoxicity or allergenicity, and appropriate physical or chemical properties,including relative levels of stability, volatility and resistance to heat.Successful taste enhancers and aversive taste blockers must also becost-efficient. We may not be able to develop taste modulators that meet thesecriteria.

 

If our product candidates are delayed or we fail tosuccessfully develop and commercialize our product candidates, our financialcondition may be negatively affected, and we may have to curtail or cease ouroperations.

 

***We may not successfully establish and maintain collaborativeand licensing arrangements, which could adversely affect our ability to developand commercialize our product candidates, including RP44, and we currently haveno such arrangements.***

 

A key element of our food and beverage strategy is tocommercialize RP44 through licensing arrangements with major ingredientsuppliers and/or end users. Our pharmaceutical strategy depends on establishingcollaborations and licensing agreements with major pharmaceutical companies. Wemay not be able to maintain or expand these licenses and collaborations orestablish additional licensing and collaboration arrangements necessary todevelop and commercialize our product candidates. For example, we were unableto renew our one year research agreement with The Coca-Cola Company and ouragreement with Givaudan ended on May 1, 2009. Even if we are able tomaintain or establish licensing or collaboration arrangements, thesearrangements may not be on favorable terms and may contain provisions that willrestrict our ability to develop, test and market our product candidates. Anyfailure to maintain or establish licensing or collaboration arrangements onfavorable terms could adversely affect our business prospects, financialcondition or ability to develop and commercialize our product candidates.

 

We expect to rely at least in part on third partycollaborators to perform a number of activities relating to the development andcommercialization of our product candidates, including the manufacturing ofproduct materials, the design and conduct of clinical trials for ourpharmaceutical candidates, and potentially the obtaining of regulatoryapprovals and marketing and distribution of any successfully developed products.Our collaborative partners may also have or acquire rights to control aspectsof our product development and clinical programs. As a result, we may not beable to conduct these programs in the manner or on the time schedule wecurrently contemplate. In addition, if any of these collaborative partnerswithdraw support for our programs or product candidates or otherwise impairtheir development, our business could be negatively affected. To the extent weundertake any of these activities internally, our expenses may increase.

 

In addition, our success depends on the performance ofour collaborators of their responsibilities under these arrangements. Somepotential collaborators may not perform their obligations in a timely fashionor in a manner satisfactory to us. Because such agreements may be exclusive, wemay not be able to enter into a collaboration agreement with any other companycovering the same product field during the applicable collaborative period. Inaddition, our collaborators’ competitors may not wish to do business with us atall due to our relationship with our collaborators. If we are unable to enterinto additional product discovery and development collaborations or maintainour existing arrangements, our ability to sustain or expand our business willbe significantly diminished.

 

***If we or our collaborators are unable to obtain and maintainthe GRAS determination or regulatory approval required before any tastemodulator, including RP44, can be incorporated into products that are sold, wewould be unable to commercialize our taste modulators and our business would beadversely affected.***

 

In the United States, the development, sale andincorporation of our taste modulators into products are subject to regulationby the FDA, and in some instances, other government bodies. Obtaining andmaintaining a GRAS determination or regulatory approval is typically costly andcan take many years.

 

Depending on the amount or intended use of aparticular taste modulator added to a product and the number of productcategories in which the flavor or flavor enhancer will be incorporated,specific testing, safety assessment protocols, and regulatory processes must besatisfied before we or our collaborators can commercially market and sellproducts containing any taste modulators, including RP44, that we may discover.A key element of our strategy is to develop flavors and flavor enhancers thatwill be evaluated by the FEMA (Flavor and Extracts Manufacturers Association)GRAS Panel, which we expect 

 

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will take 18 to24 months and which is less expensive than the alternative of filing afood additive petition with the FDA, which can take eight years or more. TheFEMA GRAS review process may take longer than 24 months and cost more thanwe currently anticipate if additional safety studies are requested by the FEMAGRAS Panel or are necessary to explain unexpected safety study findings. Thereis a risk that one or more of our product candidates, including RP44, may notqualify for a FEMA GRAS determination. This may occur for a variety of reasons,including the taste modulator’s intended use, the amount of the taste modulatorintended to be added to packaged foods and beverages, the number of productcategories in which the taste modulator will be incorporated, whether the tasteenhancer imparts sweetness, the safety profile of the taste enhancers and theFEMA GRAS Panel’s interpretation of the safety data. Even if we obtain a GRASdetermination with respect to a taste enhancer, the FDA has the ability tochallenge such determination, which could materially adversely affect ourability to market products on schedule or at all. In the event that aparticular taste modulator does not qualify for a FEMA GRAS determination, wemay be required to pursue a lengthy FDA approval process to reach the U.S.market, or dedicate our development efforts to alternative compounds, which wouldfurther delay commercialization. In addition, laws, regulations or FDA practicegoverning the regulatory approval process, the availability of the GRASdetermination process or the manufacture or labeling of such products, maychange in a manner that could adversely affect our ability to commercializeproducts on schedule or at all.

 

Sales of our taste modulators, including RP44, outsideof the United States will be subject to foreign regulatory requirements. Inmost cases, whether or not a GRAS determination or FDA approval has beenobtained, approval of a product by the comparable regulatory authorities offoreign countries must still be obtained prior to manufacturing or marketingthe product in those countries. A GRAS determination or FDA approval in theUnited States or in any other jurisdiction does not ensure approval in otherjurisdictions because the requirements from jurisdiction to jurisdiction mayvary widely. Obtaining foreign approvals could result in significant delays,difficulties and costs for us and require additional safety studies andadditional expenses. If we fail to comply with these regulatory requirements orto obtain and maintain required approvals, our ability to generate revenue willbe diminished.

 

We and our collaborators may not be successful inovercoming these regulatory hurdles, which could result in product launchdelays, unanticipated expenses, termination of collaborations, and flavors andflavor enhancers not being approved for incorporation into consumer products. Theseconsequences would have a material adverse effect on our business financialcondition and results of operations.

 

***Even if we or our collaborators receive a GRAS determinationor regulatory approval and incorporate our taste modulators, including RP44, intoproducts, those products may never be commercially successful.***

 

Even if we discover anddevelop modulators, including RP44, that obtain the necessary GRASdetermination or regulatory approval, our success depends to a significantdegree upon the commercial success of packaged food and beverage productsincorporating those modulators. If these products fail to achieve orsubsequently maintain market acceptance or commercial viability, our businesswould be significantly harmed because our royalty revenue is dependent uponconsumer sales of these products. In addition we could be unable to maintainour existing collaborations or attract new product discovery and developmentcollaborators. Many factors may affect the market acceptance and commercialsuccess of any potential products incorporating taste modulators that we maydiscover, including:

 

·                  health concerns, whether actual orperceived, or unfavorable publicity regarding our taste modulators, includingRP44, or those of our competitors;

 

·                  the timing of market entry as compared tocompetitive products;

 

·                  the rate of adoption of products by ourcollaborators and other companies in the flavor industry; and

 

·                  any product labeling that may be requiredby the FDA or other United States or foreign regulatory agencies for productsincorporating our taste modulators, including RP44.

 

***We may experience delays in clinical trials and regulatoryapproval relating to our products that could adversely affect our financialresults and our commercial prospects for our pharmaceutical product candidates.***

 

Any uses of our compounds that we develop as drugsacting to modulate incretin secretion with potential utility as therapeuticagents for diabetes or obesity, will be subject to full FDA 505(b)(1) safetytesting and clinical trials demonstrating therapeutic efficacy as required todevelop an NDA. We will be required to conduct clinical trials to demonstratesafety and 

 

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efficacy of our productcandidates for each intended use. For product candidates that advance toclinical testing, we cannot be certain that we or a collaborator willsuccessfully complete the clinical trials, and will obtain the resultsnecessary to receive regulatory approvals for the drug. These processes arelengthy, expensive and can have uncertain outcomes. Regulatory authorities maydisagree with our interpretations of the clinical trial results. There can beno assurance that clinical trials will be deemed by regulatory authorities asdemonstrating that our product candidates are safe and effective to obtainapproval for commercial distribution.

 

We do not know when clinical trials for our productswill commence or whether we will complete any of our clinical trials onschedule or at all. We may not be able to identify and successfully contractwith an adequate number of clinical trial sites and clinical investigators. Wemay not be able to find a sufficient number of study subjects or may experiencedelays in enrolling patients for our clinical trials. Trial sites may not beable to meet the targets for recruiting study subjects, because of limitedpatient pools, or strict criteria for enrolling in the trial.

 

Additionally, the FDA, the IRB or we may suspend ourclinical trials at any time if there is reason to believe that we are exposingthe subjects participating in the trials to unacceptable health risks. The FDAor institutional review boards and/or institutional biosafety committees at themedical institutions and healthcare facilities where we seek to sponsorclinical trials may not permit a trial to proceed or may suspend any trialindefinitely if they find deficiencies in the conduct of the trials or patientsdevelop an unacceptable number or severity of adverse events.

 

Product development costs to us and our potentialcollaborators will increase if we have delays in testing or approvals or if weneed to perform more or larger clinical trials than planned. We expect tocontinue to rely on third party clinical investigators at medical institutionsand healthcare facilities to conduct our clinical trials, and, as a result, wemay face additional delaying factors outside our control. Significant delays mayadversely affect our financial results and the commercial prospects for ourproduct candidates and delay our ability to become profitable.

 

***If our pharmaceutical product candidates, including anyproduct candidates we may develop under our early stage diabetes program, donot successfully complete the clinical trial process, we will not be able tomarket them. Even successful clinical trials may not result in a marketableproduct and may not be entirely indicative of a product’s safety or efficacy.***

 

Many factors, known and unknown, can adversely affectclinical trials and the ability to evaluate a product’s efficacy. During thecourse of treatment, patients can die or suffer other adverse events forreasons that may or may not be related to the proposed product being tested.Even if unrelated to our product, certain events can nevertheless adverselyimpact our clinical trials. As a result, our ability to ultimately develop andmarket the products and obtain revenues would suffer.

 

Even promising results in pre-clinical studies andinitial clinical trials do not ensure successful results in later clinicaltrials, which test broader human use of our products. Many companies in ourindustry have suffered significant setbacks in advanced clinical trials, despitepromising results in earlier trials. Even successful clinical trials may notresult in a marketable product or be indicative of the efficacy or safety of aproduct. Many factors or variables could affect the results of clinical trialsand cause them to appear more promising than they may otherwise be. Productcandidates that successfully complete clinical trials could ultimately be foundto be unsafe or ineffective.

 

In addition, our abilityto complete clinical trials depends on many factors, including obtainingadequate clinical supplies and having a sufficient rate of patient recruitment.For example, patient recruitment is a function of many factors, including:

 

·                  the size of the patient population;

 

·                  the proximity of patients to clinicalsites;

 

·                  the eligibility criteria for the trial;

 

·                  the perceptions of investigators andpatients regarding safety; and

 

·                  the availability of other treatmentoptions.

 

Even if patients are successfully recruited, we cannotbe sure that they will complete the treatment process. Delays in patientenrollment or treatment in clinical trials may result in increased costs,program delays or both.

 

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With respect to markets in other countries, we or apartner will also be subject to regulatory requirements governing clinicaltrials in those countries. Even if we complete clinical trials, we may not beable to submit a marketing application. If we submit an application, theregulatory authorities may not review or approve it in a timely manner, if atall.

 

***Because we cannot predict whether or when we will obtainregulatory approval to commercialize our pharmaceutical product candidates, wecannot predict the timing of any future revenue from these product candidates.***

 

We cannot commercialize any of our pharmaceuticalproduct candidates to generate revenue until the appropriate regulatoryauthorities have reviewed and approved the applications for our productcandidates. We cannot assure you that the regulatory agencies will completetheir review processes in a timely manner or that we will obtain regulatoryapproval for any product candidate we or our potential collaborators develop.Satisfaction of regulatory requirements typically takes many years, isdependent upon the type, complexity and novelty of the product and requires theexpenditure of substantial resources. Regulatory approval processes outside theUnited States include all or many of the risks associated with the FDA approvalprocess and potentially others as well. In addition, we may experience delaysor rejections based upon additional government regulation from futurelegislation or administrative action or changes in FDA policy, or the policiesof other relevant governmental or nongovernmental entities during the period ofproduct development, pre-clinical and clinical trials and FDA regulatoryreview.

 

***We will rely on third parties to manufacture tastemodulators, including RP44, and pharmaceutical product candidates. There can beno guarantee that we can obtain sufficient and acceptable quantities of ourtaste modulators or pharmaceutical product candidates on acceptable terms,which may delay or impair our ability to develop, test and market suchproducts.***

 

Our business strategy relies on third parties tomanufacture and produce our taste modulators, including RP44, andpharmaceutical product candidates in accordance with good manufacturingpractices established by the FDA, or similar regulations in other countries.Our taste modulators, including RP44, and pharmaceutical product candidates maybe in competition with other products for access to these facilities and may besubject to delays in manufacture if third parties give other products greaterpriority than our product candidates. These third parties also may not deliversufficient quantities of our taste modulators, including RP44, andpharmaceutical product candidates, manufacture our taste modulators, includingRP44, and pharmaceutical product candidates in accordance with specifications,or comply with applicable government regulations. Additionally, if themanufactured products fail to perform as specified, our business and reputationcould be severely impacted.

 

We expect to enter into manufacturing agreements forthe production of product materials. If any manufacturing agreement isterminated or any third party collaborator experiences a significant problemthat could result in a delay or interruption in the supply of product materialsto us, there are very few contract manufacturers who currently have thecapability to produce our taste modulators, including RP44, and pharmaceuticalproduct candidates on acceptable terms, or on a timely and cost-effectivebasis. There can be no assurance that manufacturers on whom we will depend willbe able to successfully produce our taste modulators and pharmaceutical productcandidates on acceptable terms, or on a timely or cost-effective basis. Therecan also be no assurance that manufacturers will be able to manufacture ourproducts in accordance with our product specifications, or will meet FDA orother requirements. We must have sufficient and acceptable quantities of ourproduct materials to conduct our clinical trials and to market our productcandidates, if and when such products have been approved by the FDA formarketing. If we are unable to obtain sufficient and acceptable quantities ofour product material, we may be required to delay the clinical testing andmarketing of our products.

 

***If we do not comply with applicable regulatory requirementsin the manufacture and distribution of our product candidates, we may incurpenalties that may inhibit our ability to commercialize our products andadversely affect our revenue.***

 

Our failure or the failure of our potentialcollaborators or third party manufacturers to comply with applicable FDA orother regulatory requirements including manufacturing, quality control,labeling, safety surveillance, promoting and reporting may result in criminalprosecution, civil penalties, recall or seizure of our products, total orpartial suspension of production or an injunction, as well as other regulatoryaction against our product candidates or us. Discovery of previously unknownproblems with a product, supplier, manufacturer or facility may result inrestrictions on the sale of our products, including a withdrawal of suchproducts from the market. The occurrence of any of these events wouldnegatively impact our business and results of operations.

 

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***If we are unable to create and maintain sales, marketing anddistribution capabilities or enter into agreements with third parties toperform those functions, we will not be able to commercialize our productcandidates.***

 

We currently have no sales, marketing or distributioncapabilities. Therefore, to commercialize our product candidates, if and whensuch products have been approved and are ready for marketing, we expect tocollaborate with third parties to perform these functions. We have noexperience in developing, training or managing a sales force and will incursubstantial additional expenses if we decide to market any of our futureproducts directly. Developing a marketing and sales force is also timeconsuming and could delay launch of our future products. In addition, we willcompete with many companies that currently have extensive and well-fundedmarketing and sales operations. Our marketing and sales efforts may be unableto compete successfully against these companies.

 

***Many potential competitors, including those who have greaterresources and experience than we do, may develop products or technologies thatmake ours obsolete or noncompetitive.***

 

We believe our taste technology approach is applicableto a wide range of food and beverage products representing many and diversecompetitive companies and approaches. The life sciences and other technologyindustries are characterized by rapid technological change, and the area ofsensory or taste research is a rapidly evolving field. Our future success willdepend on our ability to maintain a competitive position with respect totechnological advances. Technological developments by others may result in ourtaste modulators and technologies, as well as our pharmaceutical products,becoming obsolete.

 

We face substantial competition from companiespursuing the commercialization of products and services relevant to taste usingvarious methods for the discovery of taste modulators. These competitorsinclude leading flavor companies, such as International Flavors & Fragrances Inc.,Givaudan SA, Symrise and Firmenich. Senomyx is principally focused in thearea of taste enhancement for food products and uses a high throughputscreening technology and synthetic chemistry to discover novel flavorenhancers, which it licenses to end users in the food industry. Nutrinova, aGerman ingredients company, is also developing a biotechnology approach tofinding novel taste enhancers in collaboration with the German BiotechnologyResearch and Information Network. In certain instances we may also compete withcompanies who are commercializing Reb A. These companies includePureCircle Ltd and GLG Life Tech Corporation. We currently compete andwill continue to compete in the future with these companies in collaboratingwith and selling flavor products and technologies to manufacturers of packagedfood and beverage products.

 

We also face substantial competition with respect toour diabetes program. Type 2 diabetes is a disease characterized bypersistent hyperglycemia due to the body’s inability to produce enough orrespond to insulin, a hormone regulating the absorption of sugar. Mosttreatments, outside of insulin replacement, focus on correcting high bloodsugar by either stimulating the pancreas to produce more insulin, enhancing tissuesensitivity to insulin, or by inhibiting the production and release of glucosefrom the liver. There are many drugs currently available for treating diabetesand metabolic disease, either alone or in combination with other drugs.However, many patients are still inadequately treated with poorly controlledblood sugar levels, and the unmet medical need remains a concern.

 

There are several classes of anti-diabetic treatments,either orally available or injectable, including insulin, GLP-1 receptoragonists, sulfonylureas, DPP-IV inhibitors, PPAR agonists, and biguanides. Manyof these drugs exhibit not only limited efficacy, but are also associated withless than desired tolerability and significant mechanism-based side effects.Several new classes of anti-diabetic treatments have recently been developed,including incretin mimetics such as Exendin-4 (Byetta®), a GLP-1 mimetic, whichenhance glucose-dependent insulin secretion by the pancreatic beta-cell andslows gastric emptying, and DPP-IV inhibitors which work by preventing theinactivation of endogenous GLP-1. Additionally, new mechanisms suchas GPR119 receptor agonists are being developed as glucose-dependentinsulin and GLP-1 secretagogues expected to lower postprandial glucose andreduce weight gain.

 

If successful, our core diabetes program will facecompetition. The major competitors to TPRM5 modulators would likely includeseveral new classes of anti-diabetic treatments, including the incretin mimeticByetta® (marketed by Eli Lilly and Company and Amylin Pharmaceuticals), DPP-IVinhibitors (including JanuviaTM marketed by Merck & Co., Inc.),and GPR119 receptor agonists, currently in development by Metabolex, Inc.,OSI Pharmaceuticals, GlaxoSmithKline, and Arena Pharmaceuticals, Inc./Johnson &Johnson.

 

Many of the abovementioned companies havesubstantially greater capital resources, research and development resources andexperience, manufacturing capabilities, regulatory expertise, sales andmarketing resources, established relationships with consumer products companiesand production facilities than us.

 

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We may in the future face competition from life sciencesand other technology companies and other commercial enterprises. These entitiesengage as we do in biotechnology, biology or chemistry and could apply thistechnology to the discovery and development of taste modulators and newpharmaceutical products. We cannot guarantee that products developed as aresult of our competitors’ existing or future collaborations will not competewith our taste modifiers and new pharmaceutical products.

 

Universities and public and private researchinstitutions are also potential competitors. While these organizationsprimarily have educational objectives, they may develop proprietarytechnologies related to the sense of taste or secure patent protection that wemay need for the development of our technologies and products. We may attemptto license these proprietary technologies, but these licenses may not beavailable to us on acceptable terms, if at all.

 

***If we are unable to attract and retain key personnel andadvisors, it may adversely affect our ability to obtain financing, pursuecollaborations or develop our product candidates.***

 

We are highly dependent on F. Raymond Salemme, Ph.D.,our Chief Executive Officer and President, as well as Scott Horvitz, our ChiefFinancial Officer.

 

Our future success depends on our ability to attract,retain and motivate highly qualified management and scientific, development andcommercial personnel and advisors. To pursue our business strategy, we may needto hire or otherwise engage qualified personnel and managers, including personnelwith expertise in discovery, development, clinical trials, governmentregulation, manufacturing, marketing and sales. Competition for qualifiedpersonnel is intense among companies, academic institutions and otherorganizations. If we are unable to attract and retain key personnel andadvisors, it may negatively affect our ability to successfully develop, testand commercialize our product candidates.

 

***We use hazardous and biological materials in our business.Any claims relating to improper handling, storage or disposal of thesematerials could be time consuming and costly.***

 

Our products and processes will involve the controlledstorage, use and disposal of certain hazardous and biological materials andwaste products. We and our suppliers and other collaborators are subject tofederal, state and local regulations governing the use, manufacture, storage,handling and disposal of materials and waste products. Even if we and thesesuppliers and collaborators comply with the standards prescribed by law and regulation,the risk of accidental contamination or injury from hazardous materials cannotbe completely eliminated. In the event of an accident, we could be held liablefor any damages that result, and any liability could exceed the limits or falloutside the coverage of any insurance we may obtain and exceed our financialresources. We may not be able to maintain insurance on acceptable terms, or atall. We may incur significant costs to comply with current or futureenvironmental laws and regulations.

 

***We may be sued for product liability, which could adverselyaffect our business.***

 

Because our business strategy involves the developmentand sale by either us or our collaborators of commercial products incorporatingour taste modulators, including RP44, and our pharmaceutical products, we maybe sued for product liability. We may be held liable if any product we developand commercialize, or any product our collaborators commercialize thatincorporates any of our taste modulators or pharmaceutical products, causesinjury or is found otherwise unsuitable during product testing, manufacturing,marketing, sale or consumer use. In addition, the safety studies we mustperform and the FEMA GRAS determination we must obtain prior to incorporatingour taste modulators, including RP44, into a commercial product, and theregulatory approvals required to commercialize our pharmaceutical products,will not protect us from any such liability.

 

If we and our collaborators commence sale ofcommercial products we will need to obtain product liability insurance, andthis insurance may be prohibitively expensive, or may not fully cover ourpotential liabilities. Inability to obtain sufficient insurance coverage at anacceptable cost or otherwise to protect against potential product liabilityclaims could prevent or inhibit the commercialization of products developed byus or our product discovery and development collaborators. We may be obligatedto indemnify our product discovery and development collaborators for productliability or other losses they incur as a result of our modulators. Anyindemnification we receive from such collaborators for product liability thatdoes not arise from our taste modulators or pharmaceutical products may not besufficient to satisfy our liability to injured parties. If we are sued for anyinjury caused by our modulators or products incorporating our taste modulatorsor any other products we develop, our liability could exceed our total assets.

 

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**Risks Related To Intellectual Property**

 

***If our product candidates are not effectively protected byvalid, issued patents or if we are not otherwise able to protect ourproprietary information and technologies, it could harm our business.***

 

The success of ouroperations will depend in part on our ability and that of our licensors to:

 

·                  obtain patent protection for our tastescreening technology and our taste enhancers and aversive taste blockers bothin the United States and in other countries with substantial markets;

 

·                  obtain patent protection for our diabetesand obesity therapeutic compounds;

 

·                  maintain patents once obtained;

 

·                  maintain trade secrets and operatewithout infringing upon the intellectual property rights of others; and

 

·                  obtain appropriate licenses uponreasonable terms to patents or proprietary rights held by others that arenecessary or useful to us in commercializing our technology, both in the UnitedStates and in other countries with substantial markets.

 

In the event we are not adequately able to protect ourintellectual property and proprietary information, our business will bematerially harmed.

 

***We may not have adequate protection for our unpatentedproprietary information, which could adversely affect our competitive position.***

 

In addition to patents, we will substantially rely ontrade secrets, know-how, continuing technological innovations and licensingopportunities to develop and maintain our competitive position. However, it isconceivable that others may independently develop substantially equivalentproprietary information and techniques or otherwise gain access to our tradesecrets or disclose our technology. To protect our trade secrets, we may enterinto confidentiality agreements with employees, consultants and potentialcollaborators. However, these agreements may not provide meaningful protectionof our trade secrets or adequate remedies in the event of unauthorized use ordisclosure of such information. Likewise, our trade secrets or know-how maybecome known through other means or be independently discovered by ourcompetitors. Any of these events could hinder us from developing orcommercializing our product candidates.

 

***Our ability to compete in the ingredient, food and beveragemarket and the pharmaceutical market may decline if we do not adequatelyprotect our proprietary technologies, including RP44.***

 

Because of thesubstantial length of time and expense associated with the development of newproducts, we, along with the rest of the ingredient, food and beverage industryand pharmaceutical industry, place considerable importance on obtaining andmaintaining patent protection for new technologies, products and processes. Oursuccess depends in part on our ability to obtain and maintain intellectual propertythat protects our technologies, taste enhancers or aversive taste blockers andour pharmaceutical products. Patent positions may be highly uncertain and mayinvolve complex legal and factual questions, including the ability to establishpatentability of sequences and or structures relating to taste receptors,proteins, chemical synthesis techniques, compounds and methods for using themto modulate taste for which we seek patent protection. No consistent patternregarding the allowability or scope of claims in many of our pending patentapplications has emerged to date. As a result, we cannot predict the breadth ofclaims that will ultimately be allowed in our patent applications, if any,including those we have in-licensed or the extent to which we may enforce theseclaims against our competitors. The degree of future protection for ourproprietary rights is therefore highly uncertain and we cannot assure you that:

 

·                  we, or our licensors, were the first tofile patent applications or to invent the subject matter claimed in patentapplications relating to the technologies upon which we rely;

 

·                  others will not independently developsimilar or alternative technologies or duplicate any of our technologies;

 

·                  others did not publicly disclose ourclaimed technology before we conceived the subject matter included in any ofour patent applications;

 

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·                  any of our patent applications willresult in issued patents;

 

·                  any of our patent applications will notresult in interferences or disputes with third parties regarding priority ofinvention;

 

·                  any patents that may be issued to us, ourcollaborators or our licensors will provide a basis for commercially viableproducts or will provide us with any competitive advantages or will not bechallenged by third parties;

 

·                  we will develop additional proprietarytechnologies that are patentable;

 

·                  the patents of others will not have anadverse effect on our ability to do business; or

 

·                  new proprietary technologies from thirdparties, including existing licensors, will be available for licensing to us onreasonable commercial terms, if at all.

 

In addition, the legal standards for patents outsidethe United States vary greatly and in many countries intellectual property lawsare undergoing review and revision. The laws of some countries do not protectintellectual property rights to the same extent as domestic laws. It may benecessary or useful for us to participate in opposition proceedings todetermine the validity of our competitors’ patents or to defend the validity ofany of our or our licensor’s future patents, which could result in substantialcosts and would divert our efforts and attention from other aspects of ourbusiness.

 

Technologies licensed to us by others, or in-licensedtechnologies, are important to our business. In particular, we depend oncertain technologies relating to taste biology licensed from the Mount SinaiSchool of Medicine. In addition, we may in the future acquire rights toadditional technologies by licensing such rights from existing licensors orfrom third parties. Such in-licenses may be costly. Also, we do not alwayscontrol the patent prosecution, maintenance or enforcement of in-licensedtechnologies. Accordingly, we are unable to exercise the same degree of controlover this intellectual property as we do over our internally developedtechnologies. Moreover, some of our academic institution licensors,collaborators and scientific advisors have rights to publish data andinformation to which we have rights. If we cannot maintain the confidentialityof our technologies and other confidential information in connection with ourcollaborations, our ability to protect our proprietary information or obtainpatent protection in the future may be impaired, which could have a significantadverse effect on our business, financial condition and results of operations.

 

***Many of the patent applications we and our licensors havefiled have not yet been substantively examined and may not result in patentsbeing issued.***

 

Many of the patent applications filed by us and ourlicensors were filed recently with the United States Patent and TrademarkOffice and many have not been substantively examined and may not result inpatents being issued. It is difficult to predict whether any of our or ourlicensors’ applications will ultimately be found to be patentable or, if so, topredict the scope of any allowed claims. In addition, the disclosure in our orour licensors’ patent applications, particularly in respect of the utility ofour claimed inventions, may not be sufficient to meet the statutoryrequirements for patentability in all cases. As a result, it is difficult topredict whether any of our or our licensors’ applications will be allowed, or,if so, to predict the scope of any allowed claims or the enforceability of thepatents. Even if enforceable, others may be able to design around any patentsor develop similar technologies that are not within the scope of such patents.Our and our licensors’ patent applications may not issue as patents that willprovide us with any protection or competitive advantage.

 

***Disputes concerning the infringement or misappropriation ofour proprietary rights or the proprietary rights of others could be timeconsuming and extremely costly and could delay our research and developmentefforts.***

 

Our commercial success, if any, will be significantlyharmed if we infringe the patent rights of third parties or if we breach anylicense or other agreements that we have entered into with regard to ourtechnology or business.

 

We are aware of other companies and academicinstitutions that have been performing research in the areas of tastemodulation. In particular, other companies and academic institutions haveannounced that they have conducted taste-receptor research and have published dataon taste receptor sequence information and taste receptors or filed patentapplications or obtained patent protection on taste modulation or tastereceptors and their uses. To the extent any of these companies or academicinstitutions currently have, or obtain in the future, broad patent claims, suchpatents could block our ability to use various aspects of our discovery anddevelopment process and might prevent us from developing or commercializingnewly 

 

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discovered tasteenhancers and aversive taste blockers or otherwise conducting our business. Inaddition, it is possible that some of the taste enhancers or aversive tasteblockers that are discovered using our technology may not be patentable or maybe covered by intellectual property of third parties. Additionally, we may besubject to disputes with our collaborative partners relating to the scope of ourresearch, our related agreements and the resulting rights or ownership of anydiscoveries.

 

With respect to third-party patent rights in the areaof the TRPm5 receptor specifically, we are aware of pending U.S. and foreignpatent applications by competitors and others that have claims directed to theTRPm5 receptor and/or methods of using the TRPm5 receptor to identify noveltaste modulating compounds. Although these patent applications are currentlyundergoing examination by the U.S. Patent and Trademark Office, and it ispossible that they will not be granted or will not be granted with the currentclaims, it is also possible that patents will be granted on these applicationswith claims that are relevant to our current or future commercialization plans.To the extent we determine that we need a license to these or other patentsrelating to the TRPm5 receptor and are unable to obtain such licenses oncommercially reasonable terms or at all, we may be restricted in our ability tocommercialize our own TRPm5 technologies.

 

We are not currently a party to any litigation,interference, opposition, protest, reexamination or any other potentiallyadverse governmental, ex parte or inter-party proceeding with regard to ourpatent or trademark positions. However, the life sciences and other technologyindustries are characterized by extensive litigation regarding patents andother intellectual property rights. Many life sciences and other technologycompanies have employed intellectual property litigation as a way to gain acompetitive advantage. If we become involved in litigation, interferenceproceedings, oppositions, reexaminations, protests or other potentially adverseintellectual property proceedings as a result, for example, of allegedinfringement by us of the rights of others or as a result of priority ofinvention disputes with third parties, we might have to spend significantamounts of money, time and effort defending our position and we may not besuccessful. In addition, any claims relating to the infringement of third-partyproprietary rights or proprietary determinations, even if not meritorious,could result in costly litigation, lengthy governmental proceedings, diversionof management’s attention and resources, or require us to enter into royalty orlicense agreements that are not advantageous to us.

 

Should any person have filed patent applications orobtained patents in the United States that claim inventions also claimed by us,we may have to participate in an interference proceeding declared by U.S.Patent and Trademark Office to determine priority of invention and, thus, theright to a patent for these inventions in the United States. Such a proceedingcould result in substantial cost to us even if the outcome is favorable. Evenif successful on priority grounds, an interference action may result in loss ofclaims based on patentability grounds raised in the interference action.Litigation, interference proceedings or other proceedings could divertmanagement’s time and efforts. Even unsuccessful claims could result insignificant legal fees and other expenses, diversion of management’s time anddisruption in our business. Uncertainties resulting from initiation andcontinuation of any patent proceeding or related litigation could harm ourability to compete and could have a significant adverse effect on our business,financial condition and results of operations.

 

An adverse ruling arising out of any intellectualproperty dispute, including an adverse decision as to the priority of ourinventions, could undercut or invalidate our intellectual property position. Anadverse ruling could also subject us to significant liability for damages,including possible treble damages, prevent us from using technologies ordeveloping products, or require us to negotiate licenses to disputed rightsfrom third parties. Although patent and intellectual property disputes in thetechnology area are often settled through licensing or similar arrangements,costs associated with these arrangements may be substantial and could includelicense fees and ongoing royalties. Furthermore, necessary licenses may not beavailable to us on satisfactory terms, if at all. Failure to obtain a licensein such a case could have a significant adverse effect on our business,financial condition and results of operations.

 

**Risks Related to Our Fluctuating Operating Results, PossibleAcquisitions and Management of Growth**

 

***We expect that our results of operations will fluctuate fromperiod to period, and this fluctuation could cause our stock price to decline,causing investor losses.***

 

Our operating results have fluctuated in the past andare likely to vary significantly in the future based upon a number of factors,many of which we have little or no control over. We operate in a highly dynamicindustry and future results could be subject to significant fluctuations. Thesefluctuations could cause us to fail to meet or exceed financial expectations ofsecurities analysts or investors, which could cause our stock price to declinerapidly and significantly. Revenue and expenses in future periods may begreater or less than revenue and expenses in the immediately preceding periodor in the comparable period of the prior year. Therefore, period-to-periodcomparisons of our operating results are not necessarily a good indication ofour future performance. Some of the factors that could cause our operatingresults to fluctuate include:

 

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·                  our ability to discover and develop tastemodulators;

 

·                  our ability to discover and develop newdiabetes or obesity therapeutic compounds;

 

·                  our ability or the ability of our productdiscovery and development collaborators, to incorporate our taste modulators,including RP44, into packaged food and beverage products;

 

·                  our receipt of milestone payments in anyparticular period;

 

·                  the ability and willingness ofcollaborators to commercialize products incorporating our taste modulators,including RP44, on expected timelines, or at all;

 

·                  our ability to enter into productdiscovery and development collaborations and technology collaborations, or toextend the terms of any existing collaboration agreements, and our paymentobligations, expected revenue and other terms of any other agreements of thistype;

 

·                  our ability, or our collaborators’ability, to successfully satisfy all pertinent regulatory requirements;

 

·                  the demand for our future products andour collaborators’ products containing our taste modulators, including RP44;and

 

·                  general and industry specific economicconditions, which may affect our collaborators’ research and developmentexpenditures.

 

***If we acquire products, technologies or other businesses, wewill incur a variety of costs, may have integration difficulties and mayexperience numerous other risks that could adversely affect our business.***

 

To remain competitive, wemay decide to acquire additional businesses, products and technologies. Wecurrently have no commitments or agreements with respect to, and are notactively seeking, any material acquisitions. We have limited experience inidentifying acquisition targets, successfully acquiring them and integratingthem into our current infrastructure. We may not be able to successfully integrateany businesses, products, technologies or personnel that we might acquire inthe future without a significant expenditure of operating, financial andmanagement resources, if at all. In addition, future acquisitions could requiresignificant capital infusions and could involve many risks, including, but notlimited to, the following:

 

·                  we may have to issue convertible debt orequity securities to complete an acquisition, which would dilute ourstockholders and could adversely affect the market price of our common stock;

 

·                  an acquisition may negatively impact ourresults of operations because it may require us to incur large one-time chargesto earnings, amortize or write down amounts related to goodwill and

 

·                  other intangible assets, or incur orassume substantial debt or liabilities, or it may cause adverse taxconsequences, substantial depreciation or deferred compensation charges;

 

·                  we may encounter difficulties inassimilating and integrating the business, technologies, products, personnel oroperations of companies that we acquire;

 

·                  certain acquisitions may disrupt ourrelationship with existing collaborators who are competitive to the acquiredbusiness;

 

·                  acquisitions may require significantcapital infusions and the acquired businesses, products or technologies may notgenerate sufficient revenue to offset acquisition costs;

 

·                  an acquisition may disrupt our ongoingbusiness, divert resources, increase our expenses and distract our management;

 

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·                  acquisitions may involve the entry into ageographic or business market in which we have little or no prior experience;and

 

·                  key personnel of an acquired company maydecide not to work for us.

 

Any of the foregoing risks could have a significantadverse effect on our business, financial condition and results of operations.

 

***To the extent we enter markets outside of the United States,our business will be subject to political, economic, legal and social risks inthose markets, which could adversely affect our business.***

 

There are significantregulatory and legal barriers in markets outside the United States that we mustovercome to the extent we enter or attempt to enter markets in countries otherthan the United States. We will be subject to the burden of complying with awide variety of national and local laws, including multiple and possiblyoverlapping and conflicting laws. We also may experience difficulties adaptingto new cultures, business customs and legal systems. Any sales and operationsoutside the United States would be subject to political, economic and socialuncertainties including, among others:

 

·                  changes and limits in import and exportcontrols;

 

·                  increases in custom duties and tariffs;

 

·                  changes in currency exchange rates;

 

·                  economic and political instability;

 

·                  changes in government regulations andlaws;

 

·                  absence in some jurisdictions of effectivelaws to protect our intellectual property rights; and

 

·                  currency transfer and other restrictionsand regulations that may limit our ability to sell certain products orrepatriate profits to the United States.

 

Any changes related to these and other factors couldadversely affect our business to the extent we enter markets outside the UnitedStates.

 

***We may encounter difficulties managing our growth, whichcould adversely affect our business.***

 

Our strategy includes entering into and working on simultaneousdiscovery and development programs across multiple markets that include boththe food and beverage industry and the pharmaceutical industry. We expect togrow to meet our strategic objectives. If we grow, it will place a strain onus, our management and our resources. Our ability to effectively manage ouroperations, growth and various projects requires us to continue to improve ouroperational, financial and management controls, reporting systems andprocedures and to attract and retain sufficient numbers of talented employees.We may not be able to successfully implement these tasks on a larger scale and,accordingly, we may not achieve our research, development and commercializationgoals. If we fail to improve our operational, financial and managementinformation systems, or fail to effectively monitor or manage our new andfuture employees or our growth, our business would suffer significantly. Inaddition, no assurance can be made that we will be able to secure adequatefacilities to house our staff, conduct our research or achieve our businessobjectives.

 

***An economic downturn and adverse economic conditions mayharm our business.***

 

The recent economic downturn and adverse conditions inthe national and global markets may negatively affect our operations in thefuture. Our revenues are contingent upon the expenditures of thepharmaceutical, biotech, and food and beverage industries, and as theseindustries continue to cut costs in response to the economic downturn, ourrevenues may be similarly decreased. Furthermore, while our revenues maydecrease, our costs may remain fixed, resulting in decreased earnings.

 

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**Risks Related to our Common Stock; Liquidity Risks**

 

***The sale of a significant number of our shares of commonstock in the public market, as well as substantial future issuances of ourcommon stock, could depress the market price of common stock.***

 

The sale of a significant number of shares of ourcommon stock in the public market could harm the market price of our commonstock. The number of shares that may be sold into the marketplace pursuant tothe registration statement is significant. We believe that such sales mayseverely depress the market price of our common stock. In addition, some or allof the shares of common stock may be offered from time to time in the openmarket pursuant to Rule 144 (or pursuant to an additional registrationstatement, if one is effective), and these sales may also have a depressiveeffect on the market for the shares of common stock. In general, a person whois deemed to be an affiliate who has held shares for a period of six monthsmay, upon filing of a notification on Form 144 with the SEC, sell into themarket common stock in an amount up to the greater of 1% of the outstandingshares or the average weekly number of shares sold in the last four weeksbefore such sale. Such sales may be repeated once each three months. Anon-affiliate holding restricted shares may sell such shares withoutrestrictions after they have been held six months, subject only to the currentpublic information requirement. After an additional six months have lapsed, anon-affiliate may sell such shares without any restrictions.

 

The market price for our common stock could alsodecline, perhaps significantly, as a result of issuances of a large number ofshares of our common stock in the public market or even the perception thatsuch issuances could occur. Under our Registration Rights Agreement, certainholders of our outstanding shares of our common stock and other securities havedemand and Form S-3 registration rights. The existence of suchregistration rights could also make it more difficult for us to raise fundsthrough future offerings of our equity securities.

 

***The price of our common stock is expected to continue to bevolatile.***

 

The market price of ourcommon stock, and the market prices for securities of biotechnology companiesin general, have been, and are expected to be, highly volatile. The followingfactors, in addition to other risk factors described in this Quarterly Reporton Form 10-Q, and the potentially low volume of trades in our commonstock, may have a significant impact on the market price of our common stock,some of which are beyond our control:

 

·                  announcements of technologicalinnovations and discoveries by the Company or its competitors;

 

·                  developments concerning any research anddevelopment, clinical trials, manufacturing, and marketing collaborations;

 

·                  new products or services that the Companyor its competitors offer;

 

·                  actual or anticipated variations inoperating results;

 

·                  the initiation, conduct and/or outcome ofintellectual property and/or litigation matters;

 

·                  changes in financial estimates bysecurities analysts;

 

·                  conditions or trends inbio-pharmaceutical or other healthcare industries;

 

·                  regulatory developments in the UnitedStates and other countries;

 

·                  changes in the economic performanceand/or market valuations of other biotechnology and flavor companies;

 

·                  the Company’s announcement of significantacquisitions, strategic partnerships, joint ventures or capital commitments;

 

·                  additions or departures of key personnel;

 

·                  global unrest, terrorist activities, andeconomic and other external factors; and

 

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·                  sales or other transactions involvingcommon stock.

 

The stock market in general has recently experiencedrelatively large price and volume fluctuations. In particular, market prices ofsecurities of biotechnology companies have experienced fluctuations that oftenhave been unrelated or disproportionate to the operating results of thesecompanies. Continued market fluctuations could result in extreme volatility inthe price of our common stock, which could cause a decline in the value of ourcommon stock. Investors should also be aware that price volatility may be worseif the trading volume of our common stock is low.

 

***We do not expect to pay cash dividends in the foreseeablefuture.***

 

We currently intend to retain any future earnings tofinance the growth and development of our business; therefore, we do not expectto pay any cash dividends in the foreseeable future. Any future dividends willdepend on our earnings, if any, and our financial requirements.

 

***Because Redpoint became a public company as a result of theReverse Merger and Reincorporation Merger and not through a traditionalunderwritten initial public offering of securities, the Company may not attractthe attention of major brokerage firms. Additionally, as a public company, weincur substantial expenses.***

 

As a result of the Reverse Merger and ReincorporationMerger, Redpoint became a publicly-traded company and, accordingly, will besubject to the information and reporting requirements of the United Statessecurities laws. The costs to public companies of preparing and filing annualand quarterly reports, proxy statements and other information with the SEC andfurnishing audited reports to stockholders have caused the Company’s expensesto be higher than they would be if it were a privately-held company. Inaddition, the Company incurred substantial expenses in connection with thepreparation of the registration statement and related documents with respect tothe registration of the common stock issued in the Private Placement and theReverse Merger. Security analysts of major brokerage firms may not providecoverage of the Company. No assurance can be given that brokerage firms willwant to conduct any secondary offerings on behalf of the Company in the future.

 

***We have discretion on how we use any proceeds we receivefrom the exercise of warrants and options.***

 

Our management has broad discretion on how to use andspend any proceeds we receive as a result of our security holders exercisingtheir warrants and options. Our stockholders may not agree with our decision onhow to use such proceeds. If we fail to spend the proceeds effectively, ourbusiness and financial condition could be harmed and we may need to seekadditional financing sooner than expected.

 

***It is not anticipated that there will be an active publicmarket for shares of our common stock in the near term and stockholders mayhave to hold their shares of common stock for an indefinite period of time.Stockholders may be unable to resell a large number of their shares of commonstock within a short time frame or at or above their purchase price.***

 

To have purchased shares of our common stock andwarrants to purchase common stock in the Private Placement, an investor musthave represented that it was acquiring such shares and warrants for investmentand not with a view to distribution or resale, that the investor understoodthat neither the common stock nor the warrants are readily transferable and, inany event, that it must bear the economic risk of an investment in the commonstock for an indefinite period of time.

 

***If we do not comply with registration rights granted tocertain holders of our restricted securities, we may be required to pay damagesto such holders.***

 

We filed a “resale” registration statement with theSEC covering all shares of common stock issued in connection with the PrivatePlacement, including shares of common stock into which any warrants areexercisable, within 60 days after the final closing of the PrivatePlacement. Such registration statement has been declared effective by the SEC.We will use our best efforts to have such “resale” registration statementmaintain its effectiveness until such time as all securities registered underthe registration statement have been sold or are otherwise able to be soldunder Rule 144 of the Securities Act without regard to volume limitations,whichever is earlier. We cannot assure you that we will be able to obtain ormaintain such effective registration statement.

 

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***Our common stock may be considered “a penny stock” and maybe difficult to sell.***

 

The SEC has adopted regulations that generally define “pennystock” to be an equity security that has a market or exercise price of lessthan $5 per share, subject to specific exemptions. The market price of ourcommon stock has been and may continue to be less than $5 per share andtherefore may be designated a “penny stock” under SEC rules. This designationrequires any broker or dealer selling our common stock to disclose certaininformation about the transaction, obtain a written agreement from the investorand determine that the investment in our common stock by the investor is a reasonablysuitable investment for such investor. These rules may restrict theability of brokers or dealers to sell our common stock and, as a result, mayaffect the ability of investors to sell their shares. In addition, unless anduntil our common stock is listed for trading on the American Stock Exchange orNASDAQ Capital Market or similar market, investors may experience a lack ofbuyers to purchase such stock or a lack of market makers to support the stockprice. Resale restrictions on transferring “penny stocks” are sometimes imposedby some states, which may make transactions in our stock more difficult and mayreduce the value of your investment.

 

***Our stockholders may experience additional dilution upon theexercise of warrants or options.***

 

As of the final closing of the Private Placement, weissued warrants to investors to acquire approximately 10.2 million sharesof common stock and warrants to the placement agents to acquire approximately3.6 million shares of common stock in the Private Placement. In addition,as of March 31, 2010, there were 16.6 million shares of common stockunderlying options that have been or may be granted pursuant to the RedpointBio Corporation 2007 Omnibus Equity Compensation Plan. As of March 31,2010, there were 7.6 million warrants outstanding to purchase shares of commonstock.  Subsequent to March 31,2010, approximately 4.0 million warrants to purchase common stock expiredand were not exercised. If the remaining warrants are exercised or converted,or if the options are exercised, you may experience dilution in the nettangible book value of our common stock.

 

***Directors and officers of the Company have a highconcentration of our common stock ownership.***

 

Based on the aggregate number of shares of our commonstock that are outstanding as of March 31, 2010, our officers anddirectors beneficially own approximately 11.51% of our outstanding common stockand our 5% stockholders beneficially own approximately 31.50% of ouroutstanding common stock. Such a high level of ownership by such persons mayhave a significant effect in delaying, deferring or preventing any potentialchange in control of the Company. Additionally, as a result of their high levelof ownership, our officers and directors might be able to strongly influencethe actions of the Company’s board of directors, and the outcome of actionsbrought to our stockholders for approval. Such a high level of ownership mayadversely affect the voting and other rights of our stockholders.

 

**ITEM 2.****                            ****UNREGISTERED SALES OFEQUITY SECURITIES AND USE OF PROCEEDS**

 

None.

 

**ITEM 3.****                            ****DEFAULTS UPON SENIORSECURITIES**

 

Not applicable.

 

**ITEM 6.****                            ****EXHIBITS**

 
| **Exhibit No.** |   |                                                                                                                                                   |
|----------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                   |
| 31.1                 |   | Certification of  principal executive officer pursuant to Section 302(a) of the  Sarbanes-Oxley Act of 2002 (filed herewith).                |
|                 |   |                                                                                                                                                   |
| 31.2                 |   | Certification of  principal accounting and financial officer pursuant to  Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed herewith). |
|                 |   |                                                                                                                                                   |
| 32.1                 |   | Certification of  principal executive officer pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 (furnished herewith).                    |
|                 |   |                                                                                                                                                   |
| 32.2                 |   | Certification of  principal accounting and financial officer pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 (furnished herewith).     |

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
|              | REDPOINT BIO  CORPORATION |
|-------------------|---------------------------|
|              |                      |   |
| May 14, 2010 | By:                       | /s/ F. Raymond Salemme |
|              |                      | F. Raymond Salemme |
|              |                      | President and Chief  Executive Officer |
|              |                      | (Principal Executive  Officer) |
|              |                      |   |
| May 14, 2010 | By:                       | /s/ Scott M. Horvitz |
|              |                      | Scott M. Horvitz |
|              |                      | Chief Financial  Officer, Treasurer and Secretary |
|              |                      | (Principal Financial  and Accounting Officer) |

 

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**EXHIBIT INDEX**

 
| **Exhibit No.** |   |                                                                                                                                                   |
|----------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                   |
| 31.1                 |   | Certification of  principal executive officer pursuant to Section 302(a) of the  Sarbanes-Oxley Act of 2002 (filed herewith).                |
|                 |   |                                                                                                                                                   |
| 31.2                 |   | Certification of  principal accounting and financial officer pursuant to  Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed herewith). |
|                 |   |                                                                                                                                                   |
| 32.1                 |   | Certification of  principal executive officer pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 (furnished herewith).                    |
|                 |   |                                                                                                                                                   |
| 32.2                 |   | Certification of  principal accounting and financial officer pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 (furnished herewith).     |

 

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