SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to ______________
Commission file number 000-26775
Samaritan Pharmaceuticals, Inc.
----------------------------------
(Exact name of Registrant as Specified in Its Charter)
Nevada 88-0431538
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
101 Convention Center Drive, Suite 310, Las Vegas, Nevada 89109
(Address of Principal Executive Offices with Zip Code)
Registrant's Telephone Number, Including Area Code: 702-735-7001
------------
---------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
-------
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No __
-------
The number of shares of common stock issued and outstanding as of May 14, 2004
was 127,616,987
Transitional Small Business Disclosure Format (Check one): Yes No X
---- ---
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheet as of March 31, 2004
Consolidated Statements of Operations for the period from Inception
(September 5, 1994) to March 31, 2004, and for the Three Months
Ended March 31, 2004 and 2003
Consolidated Statements of Stockholders' Equity (Deficit) for the
period from Inception (September 5, 1994) to March 31, 2004
Consolidated Statements of Cash Flows for the period from Inception
(September 5, 1994) to March 31, 2004 and for the Three Months
Ended March 31, 2004 and 2003
Notes to Interim Financial Statements
Item 2. Management's Discussion and Analysis of Plan of Operations
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 6. Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Signatures
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 2004
ASSETS
CURRENT ASSETS:
Cash $ 3,786,549
Stock subscriptions receivable 2,029,543
Prepaid expenses 20,815
------------------
TOTAL CURRENT ASSETS 5,836,907
------------------
PROPERTY AND EQUIPMENT 38,335
------------------
OTHER ASSETS:
Patent registration costs 215,218
Purchased technology rights 39,051
Deposits 2,779
------------------
TOTAL OTHER ASSETS 257,048
------------------
$ 6,132,290
==================
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 357,757
------------------
TOTAL CURRENT LIABILITIES 357,757
------------------
SHAREHOLDERS' DEFICIT:
Common stock, 200,000,000 shares authorized at $.001
par value, 126,007,790 issued and outstanding 126,007
Additional paid-in capital 31,482,622
Stock subscriptions receivable (1,440,787)
Treasury stock (250,248)
Deficit accumulated during development stage (24,143,061)
------------------
TOTAL SHAREHOLDERS' DEFICIT 5,774,533
------------------
$ 6,132,290
==================
See accompanying notes to the consolidated financial statements (unaudited).
F-3
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) TO MARCH 31, 2004
AND FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
From
Inception
(September 5, 1994)
To Three months ended March 31
March 31, 2004 2004 2003
------------------ ------------ -------------
REVENUES: $ 300,000 $ - $ -
------------------ ------------ -------------
EXPENSES:
Research and development 4,844,702 105,153 187,695
Interest, net 50,006 - 3,947
General and administrative 18,558,829 716,744 439,998
Depreciation and amortization 1,127,304 6,688 6,337
Forgiveness of debt (137,780) - -
------------------ ------------ -------------
24,443,061 828,585 637,977
------------------ ------------ -------------
NET LOSS $ (24,143,061) $ (828,585) $ (637,977)
================== ============ =============
Loss per share, basic
and diluted $ (0.95) $ (0.01) $ (0.01)
================== ============ =============
Weighted average number
of shares outstanding:
Basic and diluted 25,361,063 108,951,996 66,635,265
================== ============ =============
See accompanying notes to the consolidated financial statements (unaudited)
F-4
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) TO March 31, 2004
Shares
Number Par Value Reserved Additional
of Common for Paid in
Shares Stock Conversion Capital Warrants
------------- ---------- ---------- ------------ -----------
Inception at September 5, 1994 - $ - $ - - $ -
Shares issued for cash, net of
offering costs 6,085,386 609 - 635,481 -
Warrants issued for cash - - - - 5,000
Shares issued as compensation
for services 714,500 71 - 1,428,929 -
Net loss - - - - -
------------- ---------- ---------- ------------ -----------
December 31, 1996 6,799,886 680 - 2,064,410 5,000
Issuance of stock, prior to
acquisition 206,350 21 - 371,134 -
Acquisition of subsidiary for
stock 1,503,000 150 - 46,545 -
Shares of parent redeemed, par
value $.0001 (8,509,236) (851) - 851 -
Shares of public subsidiary
issued, par value $.001 7,689,690 7,690 820 (8,510) -
Net loss - - - - -
------------- ---------- ---------- ------------ -----------
December 31, 1997 7,689,690 7,690 820 2,474,430 5,000
Conversion of parent's shares 696,022 696 (696) - -
Shares issued for cash, net of
offering costs 693,500 694 - 605,185 -
Shares issued in cancellation
of debt 525,000 525 - 524,475 -
Shares issued as compensation 400,000 400 - 349,600 -
Net loss - - - - -
------------- ---------- ---------- ------------ -----------
December 31, 1998 10,004,212 10,005 124 3,953,690 5,000
Conversion of parent's shares 13,000 13 (13) - -
Shares issued in cancellation
of debt 30,000 30 - 29,970 -
Shares issued for cash, net of
offering costs 45,000 45 - 41,367 -
Shares issued as compensation 3,569,250 3,569 - 462,113 -
Detachable warrants issued - - - - 152,125
Detachable warrants exercised 100,000 100 - 148,900 (149,000)
Debentures converted to stock 1,682,447 1,682 - 640,438 -
Net loss - - - - -
------------- ---------- ---------- ------------ -----------
December 31, 1999 15,443,909 15,444 111 5,276,478 8,125
Conversion of parent's shares 128,954 129 (111) (18) -
Shares issued for cash, net of
offering costs 1,575,192 1,575 - 858,460 -
Shares issued in cancellation
of debt 875,000 875 - 660,919 -
Shares issued in cancellation
of accounts payable 100,000 100 - 31,165 -
Shares issued as compensation 3,372,945 3,373 - 2,555,094 -
Warrants exercised 38,807 39 - 3,086 (3,125)
Warrants expired - - - 5,000 (5,000)
Net loss - - - - -
------------ --------- ---------- ------------ -----------
December 31, 2000 21,534,807 21,535 - 9,390,184 -
See accompanying notes to the consolidated financial statements.(unaudited)
F-5
Shares issued for cash, net of
offering cost 6,497,088 6,497 - 1,257,758 -
Shares issued as compensation 9,162,197 9,162 - 1,558,599 -
Shares issued for previously
purchased shares 342,607 342 - 188,208 -
Shares issued in cancellation
of accounts payable 200,000 200 - 68,880 -
Amortization of deferred
compensation - - - - -
Stock options issued for
services - - - 439,544 -
Net loss - - - - -
------------ ---------- ---------- ------------ -----------
December 31, 2001 37,736,699 37,736 - 12,903,173 -
Shares issued for cash, net of
offering costs 18,657,500 18,658 - 2,077,641 -
Shares issued as compensation 3,840,525 3,841 - 1,044,185 -
Shares issued for previously
purchased shares 50,000 50 - 4,950 -
Shares issued in cancellation
of accounts payable 4,265,184 4,265 - 539,291 -
Amortization of deferred
compensation - - - -
Shares issued in cancellation
of notes payable - - - - -
Stock options issued for
services - - - 225,000 -
Net loss - - - - -
------------ ---------- ---------- ------------ -----------
December 31, 2002 64,549,908 64,550 16,794,240
Shares issued for cash, net of
offering costs 17,493,664 17,493 - 2,392,296 -
Shares issued as compensation 4,062,833 4,063 - 549,779 -
Shares issued for previously
purchased shares 1,160,714 1,161 - 161,339 -
Shares issued in cancellation
of accounts payable and
accrued compensation 9,615,870 9,616 - 3,448,950 -
Shares issued in cancellation
of notes payable 0 0 - 0 -
Shares issued in connection
with equity financing 3,125,000 3,125 (3,125) -
Exercise of stock options 7,770,892 7,771 - 1,112,077 -
Shares reacquired in settlement
of judgement (1,564,048) (1,564) - 251,812 -
Stock options issued for
services - - - 145,000 -
Net loss - - - -
------------ ---------- ---------- ------------ -----------
December 31, 2003 106,214,833 $ 106,214 $ - $24,852,369 $ -
============ ========== ========== ============ ===========
Shares issued for cash, net
of offering costs 9,183,236 9,183 - 3,204,950 -
Shares issued as compensation 597,341 597 - 351,878 -
Shares issued for previously
purchased shares 83,332 83 - 12,417 -
Shares issued in connection
with equity financing 7,758,240 7,758 - 2,742,241 -
Exercise of stock options 2,170,808 2,171 - 318,768 -
Stock options issued for
services - - -
Net Loss - - -
------------ ---------- ---------- ------------ -----------
March 31, 2004 126,007,790 $ 126,007 $ - $31,482,622 $ -
============ ========== ========== ============ ===========
See accompanying notes to the consolidated financial statements.(unaudited)
F-5
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STATE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FROM INCEPTION (SEPTEMBER 5, 1994) TO DECEMBER 31, 2003
Stock Total
Deferred Subscriptions Treasury Accumulated Shareholders'
Compensation Receivable Shares Deficit Deficit
------------- ------------ ----------- ------------- ---------------
Inception at September 5, 1994 $ - $ - $ - $ - $ -
Shares issued for cash, net of
offering costs - - - - 636,090
Warrants issued for cash - - - - 5,000
Shares issued as compensation
for services - - - - 1,429,000
Net loss - - - (2,152,843) (2,152,843)
------------ ------------ ----------- ------------- ---------------
December 31, 1996 - - - (2,152,843) (82,753)
Issuance of stock, prior to
acquisition - - - - 371,155
Acquisition of subsidiary
for stock - - - - 46,695
Shares of parent redeemed,
par value $.0001 - - - - -
Shares of public subsidiary
issued, par value $.001 - - - - -
Net loss - - - (979,635) (979,635)
------------ ------------ ----------- ------------- ---------------
December 31, 1997 - - - (3,132,478) (644,538)
Conversion of parent's shares - - - - -
Shares issued for cash, net
of offering costs - - - - 605,879
Shares issued in cancellation
of debt - - - - 525,000
Shares issued as compensation - - - - 350,000
Net loss - - - (1,009,945) (1,009,945)
------------ ------------ ----------- ------------- ---------------
December 31, 1998 - - - (4,142,423) (173,604)
Conversion of parent's shares - - - - -
Shares issued in cancellation
of debt - - - - 30,000
Shares issued for cash, net of
offering costs - - - - 41,412
Shares issued as compensation - - - - 465,682
Detachable warrants issued - - - - 152,125
Detachable warrants exercised - - - - -
Debentures converted to stock - - - - 642,120
Net loss - - - (1,671,255) (1,671,255)
------------ ------------ ----------- ------------- ---------------
December 31, 1999 - - - (5,813,678) (513,520)
Conversion of parent's shares - - - - -
Shares issued for cash, net of
offering costs - - - - 860,035
Shares issued in cancellation
of debt - - - - 661,794
Shares issued in cancellation
of accounts payable - - - - 31,265
Shares issued as compensation (759,560) - - - 1,798,907
Warrants exercised - - - - -
Warrants expired - - - - -
Net loss - - - (3,843,308) (3,843,308)
------------ ------------ ----------- ------------- ---------------
December 31, 2000 (759,560) - - (9,656,986) (1,004,827)
See accompanying notes to the consolidated financial statements.(unaudited)
F-5
Shares issued for cash, net
of offering costs - - - - 1,264,255
Shares issued as compensation (230,512) - - - 1,337,249
Shares issued for previously
purchased shares - - - - 188,550
Shares issued in cancellation
of accounts payable - - - - 69,080
Amortization of deferred
compensation 495,036 - - - 495,036
Stock options issued for
services - - - - 439,544
Net loss - - - (4,079,806) (4,079,806)
----------- ------------ ----------- ------------- ---------------
December 31, 2001 (495,036) - - (13,736,792) (1,290,919)
Shares issued for cash, net
of offering costs - - - - 2,096,299
Shares issued as compensation - - - - 1,048,026
Shares issued for previously
purchased shares - - - - 5,000
Shares issued in cancellation
of accounts payable - - - - 543,556
Amortization of deferred
compensation 495,036 - - - 495,036
Shares issued in cancellation
of notes payable - - - - -
Stock options issued for
services - - - - 225,000
Net loss - - - (4,057,153) (4,057,153)
----------- ------------ ----------- ------------- ---------------
December 31, 2002 (17,793,945) (935,155)
Shares issued for cash, net of
offering costs - - - - 2,409,789
Shares issued as compensation - - - - 553,842
Shares issued for previously
purchased shares - - - - 162,500
Shares issued in cancellation
of accounts payable and
accrued compensation - - - - 3,458,566
Shares issued in cancellation
of notes payable - -
Shares issued in connection
with equity financing - - - - -
Exercise of stock options - (1,119,848) - - -
Shares reacquired in settlement
of judgement - - (250,248) - -
Stock options issued for
services - - - - 145,000
Net loss - - - (5,520,531) (5,520,531)
----------- ------------ ----------- ------------- ---------------
December 31, 2003 $ - $(1,119,848) $ (250,248) $(23,314,476) $ 274,011
=========== ============ =========== ============= ===============
Shares issued for cash, net
of offering costs - - - - 3,214,133
Shares issued as compensation - - - - 352,475
Shares issued for previously
purchased shares - - - - 12,500
Shares issued in connection
with equity financing - - - - 2,749,999
Exercise of stock options - (320,939) - - -
Stock options issued for
services - - - - -
Net Loss - - - (828,585) (828,858)
----------- ------------ ---------- ------------- ---------------
March 31, 2004 - $(1,440,787) $(250,248) $(24,143,061) $ 5,774,533
=========== ============ ========== ============= ===============
See accompanying notes to the consolidated financial statements.(unaudited)
F-5
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) AND FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003
From For the Three Months
Inception Ended
(September 5, 1994) March 31
To -------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: March 31, 2004 2004 2003
---------------------- ------------- ---------------
Net loss $ (24,143,061) $ (828,585) $ (637,977)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 136,303 6,688 6,338
Stock based compensation 9,687,544 352,475 -
Stock options issued for services 809,544 - -
Amortization of deferred compensation 990,072 - -
(Increase) decrease in assets: - -
Accounts receivable and prepaids (18,335) 442 (4,350)
Deposits (2,779) - -
Increase (decrease) in liabilities: - -
Deferred revenue - - -
Accounts payable and accrued expenses 2,218,571 (30,553) 79,937
---------------------- ------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (10,322,141) (499,533) (556,052)
---------------------- ------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of technology (108,969) - -
Purchase of furniture and equipment (104,720) (6,073) (5,474)
Patent registration costs (224,637) (13,020) (2,410)
---------------------- ------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (438,326) (19,093) (7,884)
---------------------- ------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from warrants 157,125 - -
Proceeds from debentures 642,120 - -
Proceeds from stock issued for cash 12,217,221 3,934,590 301,000
Common stock to be issued 206,050 - 214,700
Short-term loan repayments (288,422) - (21,065)
Short-term loan proceeds 1,612,922 - -
---------------------- ------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,547,016 3,934,590 494,635
---------------------- ------------- ---------------
CHANGE IN CASH 3,786,549 3,415,964 (69,301)
CASH AT BEGINNING OF PERIOD - 370,585 357,826
---------------------- ------------- ---------------
CASH AT END OF PERIOD $ 3,786,549 $ 3,786,549 $ 288,525
====================== ============= ===============
NON-CASH FINANCING & INVESTING ACTIVITIES:
Purchase of net, non-cash assets of subsidiary
for stock $ 195 $ - $ -
====================== ============= ===============
Issuance of common stock, subscriptions
receivable- private placement $ 2,029,543 $ 2,029,543 $ -
====================== ============= ===============
Issuance of common stock, previously subscribed $ - $ 12,500 $ -
====================== ============= ===============
Treasury stock acquired through settlement
of judgement $ - $ - $ -
====================== ============= ===============
Stock subscriptions receivable $ 1,440,787 $ 320,939 $ -
====================== ============= ===============
Stock issued in cancellation of accounts payable
and accrued salaries $ - $ - $ -
====================== ============= ===============
See accompanying notes to the consolidated financial statements (unaudited)
F-6
Samaritan Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2004
Note 1. - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
disclosures required for annual financial statements. These financial statements
should be read in conjunction with the consolidated financial statements and
related footnotes for the year ended December 31, 2003, included in the
Form10-KSB for the year then ended.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of March 31, 2004, and the results of operations and cash flows for
the three month period ending March 31, 2004 have been included. The results of
operations for the three month period ended March 31, 2004 are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Form 10-KSB/A as filed with the Securities and
Exchange Commission for the year ended December 31, 2003.
Note 2 - Stock Subscriptions Receivable
The subscriptions receivable classified as a current asset at March 31, 2004
were collected on various dates between April 1, 2004 and April 26, 2004.
Item 2. Management's Discussion and Analysis or Plan of Operation
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO OF THE COMPANY, CONTAINED ELSEWHERE IN
THE FORM 10-QSB.
General
Samaritan Pharmaceuticals is a Biopharmaceutical Company that focuses on
bridging University bright ideas through drug development, thereby, creating a
path for promising new innovative drugs to become commercially viable products.
Samaritan's HIV drug is the closest to commercialization, having completed Phase
II human clinical trials, with significance in demonstrating antiviral
properties and increasing the quality of life. Samaritan plans to advance its
HIV drug to Phase III trials as soon as the FDA clears its proposed protocol. In
addition, Samaritan is advancing a growing pipeline of future drugs for AIDS,
Alzheimer's, and Cardiovascular disease through preclinical trials, in
preparation, for future growth, under its collaboration with Georgetown
University.
A key currency in the biotechnology and pharmaceutical market is patents,
intellectual property. Our central intellectual property activity has been, and
continues to be, the acquisition of patents, development, and patent
maintenance, directly in support of our product development. We continue to
expend significant funds and efforts on licensed technology and patent
protection. In addition, we are continually examining our intellectual property
positions in relation to competitive activities and our ability to operate and
defend our patent positions in relation to products. We believe that this is a
key value element for our continued development.
Samaritan Pharmaceuticals Product Pipeline
xxx = Completed x = In Progress
Drug Candidates Patent Pre -Clinical IND Phase I Phase II Phase III
-----------------------------------------------------------------------------------------------------------
HIV.Procaine HCl (SP-01) xxx xxx xxx xxx xxx
HIV, Alzheimer's(AD),
Dementia.(SP-10) x x
HIV, AD.(SP-02 to 25) x x
HIV, AD.(SP-26 to 50) x x
Alzheimer's.(SP-222) x x
Alzheimer's.(SP-233) x x
Alzheimer's.(SP234-250) x x
Nerve Gas Inhibitor.(SP-04) x
Stem Cell Therapy.(SP-sc2) x x
Stem Cell Therapy.(SP-sc7) x x
Cancer.(SP-222c) x x
Cancer.(SP-234c-250c) x x
Cancer Diagnostic
and Drug. (SP-5000) x x
Pharmacologic AD Rat Model
Alzheimer's Rat Model.
(New Drug Test) In Vitro Testing In Vivo Testing
---------------------------------------------------------------------------------------
xxx xxx
Diagnostics In Vitro Human Human
Testing Test Small Test Large
-----------------------------------------------------------------------------------------
Breast Cancer.(BC Tumor Agress-Analysis) xxx xxx x
Alzheimer's.(AD Blood Test Diagnostic) xxx xxx x
Alzheimer's Generation II xxx xxx
Alzheimer's Generation III xxx
Current Research Agreement
Samaritan Pharmaceuticals has a research collaboration agreement with Georgetown
University with the objectives: (1) to develop "one molecule" drugs and extend
clinical studies to in vivo experiments in animal models simulating Alzheimer's
disease, (2) to develop an accurate, reliable diagnostic for nuero-degeneration
(Alzheimer's), and (3) to focus on new drug development in Oncology and
Neurology with the ability to protect the brain from neuronal damage and tumor
growth.
Starting with the quarter beginning April 1, 2004, the research collaboration
between Georgetown University and Samaritan budget has been increased to
$1,000,000 per year to further develop Samaritan's pipeline. The $1,000,000 is
paid quarterly, is unallocated, and covers the general research and development
effort. In addition, we have incurred direct research and development expenses
of approximately $350,000 for each of the last two fiscal years related
primarily to clinical trials and the retention of consultants to assist in the
FDA process.
Under the agreement, Samaritan receives worldwide exclusive rights, to any novel
therapeutic agents or diagnostic technologies that may result from the research
collaboration. Dr. Vassilios Papadopoulos and Dr. Janet Greeson lead their team
of seven research professionals (including five Ph.D. level research scientists)
who have expertise in the fields of endocrinology, pharmacology, cell biology,
organic and steroid chemistry and computer modeling. We are not obligated to pay
Georgetown any milestone payments. Georgetown is entitled to receive royalties
based on our revenue from product sales and sublicenses, if any. Samaritan has,
at its own expense, assumed responsibility for the process of seeking any
regulatory approvals for and conducting clinical trials with respect to any
licensed product or application of the licensed technology. Samaritan controls
and has the financial responsibilities for the prosecution and maintenance in
respect to any patent rights related to the licensed technology.
SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies is included in Note 3 to
the audited consolidated financial statements included in the Company's Annual
Report on Form10-KSB for the year ended December 31, 2003. Management believes
that the application of these policies on a consistent basis enables the Company
to provide useful and reliable financial information about the company's
operating results and financial condition.
Results of Operations
Three months ended March 31, 2004 as compared to the three months ended March
31, 2003
The Company continued to have no significant revenues. During the first quarter
of 2004, we continued our research and development efforts in connection with
our products for HIV/AIDS. We incurred research and development expenses of
$105,153 for the quarter; down from $187,695 in the year-earlier period. General
and administrative expenses for the first quarter of 2004 increased by $276,746
to $716,744 from $439,569 in the year-earlier period primarily due to the
increased expenses related to patent prosecution and the increased use of
consultants to the company.
Depreciation and amortization amounted to $6,668 and $6,337 for three months
ended March 31, 2003 and 2002, respectively. Interest expense amounted to $0 and
$3,947 for the three months ended March 31, 2004 and 2003, respectively. The
decrease is due to the retirement of notes payable during 2003.
As a result of the factors noted above, net losses since inception on September
5, 1994 to March 31, 2004 was $24 million. We had net losses of $(828,585) and
$(637,977) for three months ended March 31, 2004 and 2003, respectively and the
loss per share save the same at $(0.01) per share in the year-earlier period.
Liquidity and Capital Resources
To date, none of our proprietary products has reached a commercial stage, and
hence, we do not have, nor do we anticipate revenue in the near future. We have
been unprofitable since our inception and have incurred significant losses. We
will continue to have significant general and administrative expenses, including
expenses related to clinical studies, our collaboration with Georgetown
University, and patent prosecution. We have funded our operations through a
series of private placements and through our agreement with Fusion Capital dated
April 22, 2003, described below, which we believe will assist the Company in
meetings its cash needs. Except for an agreement to sell shares to Fusion
Capital, discussed below, no commitment exists for continued investments, or for
any underwriting.
Even with our financing arrangement with Fusion Capital, we may require
substantial additional funds to sustain our operations and to grow our business.
The amount of which will depend, among other things, on the rate of progress and
the cost of our research and product development programs and clinical trial
activities, the cost of preparing, filing, prosecuting, maintaining and
enforcing patent claims and other intellectual property rights, and the cost of
developing manufacturing and marketing capabilities, if we decide to undertake
those activities. The clinical development of a therapeutic product is a very
expensive and lengthy process and may be expected to utilize $5 to $20 million
over a three to six year development cycle. Although we believe we could license
the manufacturing and marketing rights to our products in return for up-front
licensing and other fees and royalties on any sales, there can be no assurance
that we will be able to do so in the event we seek to do so. We need to obtain
additional funds to develop our therapeutics products and our future access to
capital is uncertain. The allocation of limited resources is an ongoing issue
for us as we move from research activities into the more costly clinical
investigations required to bring therapeutic products to market.
The extent we rely on Fusion Capital as a source of funding will depend on a
number of factors including, the prevailing market price of our common stock and
the extent to which we are able to secure working capital from other sources. If
obtaining sufficient financing from Fusion Capital were to prove prohibitively
expensive, we will need to secure another source of funding in order to satisfy
our working capital needs. Even if we are able to access the full $10.0 million
under the common stock purchase agreement with Fusion Capital, we may still need
additional capital to fully implement our business, operating and development
plans. If we are unable to obtain additional financing we might be required to
delay, scale back or eliminate certain of our research and product development
programs or clinical trials, or be required to license third parties to
commercialize products or technologies that we would otherwise undertake
ourselves, or cease certain operations all together, any of which might have a
material adverse effect upon us. If we raise additional funds by issuing equity
securities, dilution to stockholders may result, and new investors could have
rights superior to existing holders of shares. Should the financing we require
to sustain our working capital needs be unavailable or prohibitively expensive
when we require it, the consequences would be a material adverse effect on our
business, operating results, financial condition, and prospects.
We have been able to substantially meet our cash needs during the past 12
months. We believe we will be able to continue to find avenues to obtain the
capital needed for our operations through private placements and by sale of our
shares to Fusion Capital.
Forward-Looking Statements. This report and other oral and written statements
made by us to the public contain forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. Such statements are based upon management's current expectations that
are subject to a number of factors and uncertainties that could cause actual
results to differ materially from those described in our forward-looking
statements. Such statements address the following subjects: our need for and
ability to obtain additional capital, including from the sale of equity and/or
from federal or other grant sources; our expected future losses; the sufficiency
of cash and cash equivalents; our ability to generate revenues; our ability to
develop commercially successful products, including our ability to obtain FDA
approval to initiate further studies of our potential products and our
technologies; the high cost and uncertainty of the research and development of
pharmaceutical products; the unpredictability of the duration and results of the
U.S. Food and Drug Administration's review of new drug applications; the
possible impairment of our existing, and the inability to obtain new,
intellectual property rights and the cost of protecting such rights as well as
the cost of obtaining rights from third parties when needed on acceptable terms;
our ability to enter into successful partnering relationships with respect to
the development and/or commercialization of our product candidates; our
dependence on third parties to research, develop, manufacture and commercialize
and sell any products developed; our ability to improve awareness and
understanding of our Company, our technology and our business objectives;
whether our predictions about market size and market acceptability of our
products will prove true; and our understandings and predictions regarding the
utility of our potential products and our technology.
Statements in this report expressing our expectations and beliefs regarding our
future results or performance are forward-looking statements that involve a
number of substantial risks and uncertainties. When used in this Form 10-KSB,
the words "anticipate," "believe," "estimate," "expect," "intend," may be,"
"seek," "plan," "focus," and "potential" and similar expressions as they relate
to the Company or its management are intended to identify such forward-looking
statements. Our actual future results may differ significantly from those stated
in any forward-looking statements.
As a result of the foregoing and other factors, we may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect our business, financial condition,
operating results and stock price. We are not under any duty to update any of
the forward-looking statements in this report to conform these statements to
actual results, unless required by law. For further information, refer to the
more specific risks and uncertainties discussed above and throughout this
report.
Item 3. Controls and Procedures
Based on their evaluation, as of a date within 90 days of the filing date of
this Form 10-QSB, the Company's Chief Executive Officer and Chief Financial
Officer have concluded that the Company's disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934, as amended) are effective. There have been no significant changes in
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are, from time to time, involved in various legal proceedings in the ordinary
course of our business. While it is impossible to predict accurately or to
determine the eventual outcome of these matters, the Company believes that the
outcome of these proceedings will not have a material adverse effect on the
annual financial statements of the Company.
Item 2. Changes in Securities.
Securities, unregistered, were sold by the Company in the first quarter of 2004
under an exemption from registration. The title of these securities was the
Common Stock of the Company. They were sold for cash unless otherwise noted in
this section. They were sold in private transactions to persons believed to be
of a class of private investors acting on their own comprised of "accredited
investors" (as such term is defined in Regulation D of the U.S. Securities and
Exchange Commission or "SEC") and a limited number of non-accredited investors.
All investors, to the best knowledge of the Company, not affiliated with the
Company, purchased the shares with apparent investment intent. The Company
relied upon, among other possible exemptions, Section 4(2) of the Securities Act
of 1933, as amended. It's reliance on said exemption was based upon the fact
that no public solicitation was used by the Company in the offer or sale, and
that the securities were legended shares, along with a notation at the
respective transfer agent, restricting the shares from sale or transfer as is
customary with reference to Rule 144 of the SEC.
Management notes that stock was issued as follows during the three months ended
March 31, 2004.
No. of shares Issued Pursuant To Price/valuation
------------- --------------- ----------------------
3,384,591 Sale of restricted stock $1,184,590
5,798,645 Subscriptions due at March 31, 2004 $2,029,543
The total offering price, during the first quarter as to these shares, was
$3,214,133 less expenses, estimated the total to be $7,000 for printing, legal,
postage, and other expenses related to respective offering.
The SEC declared effective the Company's registration statement on Form SB2,
Commission Registration No. 333-105818, on June 6, 2004 (as amended and
supplemented from time to time, "Registration Statement"). Under the
Registration Statement, certain selling shareholders may sell shares of Common
Stock, acquired from the Company. The Company will not receive any proceeds from
the sale of securities being offered by the selling shareholders under the
Registration Statement. The Company registered the shares for sale to provide
the selling shareholders with freely tradable securities, but the registration
of the shares does not necessarily mean that any of the shares will be offered
or sold by the selling shareholders. However, we may receive payments under
agreements relating to the shares and may receive proceeds from the exercise of
warrants. Such proceeds are intended for use as to working capital and other
corporate purposes. The Registration Statement registered a total of 18,125,000
shares (inclusive of the 3,125,000 shares issued to Fusion Capital as a
commitment fee) assuming Fusion Capital purchases all $10.0 million of common
stock. The amount of shares sold by the selling shareholders during this quarter
is believed to be for aggregate proceeds of $2,750,000. The Company received,
under its agreements as noted above, proceeds of $2,750,000 and incurred, in
connection with the registration, estimated expenses of $12,000 for legal,
printing, and related offering expenses, with net proceeds to the Company of
approximately $2,738,000 used primarily for working capital, legal fees and for
payments to Georgetown University (again not from the sale of the securities
under the Registration Statement, but from agreements with the selling
shareholders).
Item 6. Exhibits and Reports on Form 8-K.
(b) Exhibits
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SAMARITAN PHARMACEUTICAL, INC
Dated: May 14, 2004 By: /s/ Eugene Boyle
------------
Eugene Boyle,
CFO, COO, Director