UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30, 2004
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 charter)
NEVADA 88-0431538
------ ----------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
101 Convention Center Drive, Suite 310
Las Vegas, Nevada 89109
----------------- -----
(Address of principal executive offices) (Zip)
Issuer'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 June 30, 2004
was 130,667,291.
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 June 30, 2004.
Consolidated Statements of Operations for the period from Inception
(September 5, 1994) to June 30, 2004, and for the Three Months Ended
June 30, 2004 and 2003
Consolidated Statements of Stockholders' Equity (Deficit) for the
period from Inception (September 5, 1994) to June 30, 2004
Consolidated Statements of Cash Flows for the period from Inception
(September 5, 1994) to June 30, 2004 and for the Three Months Ended
June 30, 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 4.2
Exhibit 10.6
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Signatures
PART I
Financial Information
Item 1. Financial Statements
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, 2004
ASSETS
CURRENT ASSETS:
Cash $ 4,999,400
Prepaid expenses 19,479
----------------------
TOTAL CURRENT ASSETS 5,018,879
----------------------
PROPERTY AND EQUIPMENT 39,164
----------------------
OTHER ASSETS:
Patent registration costs 246,060
Purchased technology rights 36,327
Certificates of Deposit, held-to-maturity 2,005,914
Deposits 2,779
----------------------
TOTAL OTHER ASSETS 2,291,080
----------------------
$ 7,349,123
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 345,618
Common stock to be issued 64,500
----------------------
TOTAL CURRENT LIABILITIES 410,118
----------------------
SHAREHOLDERS' EQUITY:
Common stock, 200,000,000 shares authorized at $.001
par value, 130,667,291 issued and outstanding 130,667
Additional paid-in capital 32,224,482
Treasury stock (250,248)
Deficit accumulated during development stage (25,165,896)
----------------------
TOTAL SHAREHOLDERS' EQUITY 6,939,005
----------------------
$ 7,349,123
======================
See accompanying notes to the consolidated financial statements (unaudited).
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994), AND FOR THE FOR THE SIX MONTHS S
AND THREE MONTHS ENDED JUNE 30, 2004 AND 2003
From
Inception For the Six For the Three
(September 5, 1994) Months Ended Months Ended
To June 30, June 30,
---------------------------------- ------------------------------
June 30, 2004 2004 2003 2004 2003
-------------------- --------------- ---------------- -------------- -------------
REVENUES: $ 300,000 $ - $ - $ - $ -
-------------------- --------------- ---------------- -------------- -------------
EXPENSES:
Research and development 5,160,138 420,589 386,695 315,436 199,000
Interest 50,148 - 6,088 0 2,141
General and administrative 19,259,455 1,417,370 889,951 700,626 449,953
Forgiveness of debt (137,780) - - - -
Depreciation and amortization 1,134,077 13,461 12,674 6,773 6,337
-------------------- --------------- ---------------- -------------- -------------
25,465,896 1,851,420 1,295,408 1,022,835 657,431
-------------------- --------------- ---------------- -------------- -------------
NET INCOME (LOSS) $ (25,165,896) $ (1,851,420) $ (1,295,408) $ (1,022,835) $ (657,431)
==================== =============== ================ ============== =============
Loss per share, basic and diluted: $ (0.90) $ (0.02) $ (0.02) $ (0.01) $ (0.01)
-------------------- --------------- ---------------- -------------- -------------
Weighted average number of shares
outstanding:
Basic and diluted 27,959,366 118,256,477 70,589,969 127,560,957 75,939,791
==================== =============== ================ ============== =============
See accompanying notes to the consolidated financial statements.
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)
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 11,297,733 11,298 - 4,210,140 -
Shares issued as compensation 597,341 597 - 664,378 -
Shares issued for previously
purchased shares 83,332 83 - 12,417 -
Shares issued in connection
with equity financing 8,758,240 8,758 - 3,091,243 -
Exercise of warrants 635,000 635 - 516,865 -
Excersise of stock options 16,950,468 16,951 - 4,841,869 -
Stock retired in settlement of
subscriptions receivable (13,869,656) (13,870) - (5,964,798) -
Net Loss - - -
------------ ---------- ---------- ------------ -----------
June 30, 2004 130,667,291 $ 130,667 $ - $32,224,482 $ -
============ ========== ========== ============ ===========
See accompanying notes to the consolidated financial statements.(unaudited)
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)
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 - - - - 4,221,438
Shares issued as compensation - - - - 664,975
Shares issued for previously
purchased shares - - - - 12,500
Shares issued in connection
with equity financing - - - - 3,100,001
Exercise of warrants
Excersise of stock options - (4,858,820) - - 517,500
Stock retired in settlement of
subscriptions receivable - 5,978,668 - - -
Net Loss - - - (1,851,420) (1,851,420)
----------- ------------ ----------- ------------- ---------------
June 30, 2004 - $ 0 $ (250,248) $(25,165,896) $ 6,939,005
=========== ============ =========== ============= ===============
See accompanying notes to the consolidated financial statements.(unaudited)
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) AND FOR THE SIX MONTHS
ENDED JUNE 30, 2004 AND 2003
From For the Six Months
Inception Ended
(September 5, 1994) June 30,
To -----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: June 30, 2004 2004 2003
---------------------- ---------------- ----------------
Net loss $ (25,165,896) $ (1,851,420) $ (1,295,408)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 143,076 13,461 75,174
Stock based compensation 9,496,775 161,706 11,940
Stock options issued for services 1,312,813 503,269 -
Amortization of deferred compensation 990,072 - -
(Increase) decrease in assets: - -
Accounts receivable and prepaids (16,999) 1,778 (5,040)
Accrued interest (5,914) (5,914)
Deposits (2,779) - -
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 2,206,433 (42,691) 65,682
---------------------- ---------------- ----------------
NET CASH USED IN OPERATING ACTIVITIES (11,042,419) (1,219,811) (1,147,652)
---------------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of technology (108,969) - -
Purchase of furniture and equipment (109,598) (10,951) (5,474)
Purchase of certificates of deposit (2,000,000) (2,000,000) -
Patent registration costs (255,479) (43,862) (2,973)
---------------------- ---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (2,474,046) (2,054,813) (8,447)
---------------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from warrants 674,625 517,500 -
Proceeds from debentures 642,120 - -
Proceeds from stock issued for cash
and short-term loan proceeds 17,216,992 7,321,439 1,118,240
Common stock to be issued 270,550 64,500 116,000
Short-term loan repayments (288,422) - (140,063)
---------------------- ---------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 18,515,865 7,903,439 1,094,177
---------------------- ---------------- ----------------
CHANGE IN CASH 4,999,400 4,628,815 (61,922)
CASH AT BEGINNING OF PERIOD - 370,585 357,826
---------------------- ---------------- ----------------
CASH AT END OF PERIOD $ 4,999,400 $ 4,999,400 $ 295,904
====================== ================ ================
NON-CASH FINANCING & INVESTING ACTIVITIES:
Purchase of net, non-cash assets of subsidiary
for stock $ 195 $ - $ -
====================== ================ ================
Issuance of common stock, subscriptions
receivable- private placement $ - $ - $ -
====================== ================ ================
Issuance of common stock, previously subscribed $ - $ 12,500 $ -
====================== ================ ================
Treasury stock acquired through settlement
of judgement $ - $ - $ -
====================== ================ ================
Stock subscriptions receivable $ - $ (1,440,787) $ -
====================== ================ ================
Stock issued in cancellation of accounts payable
and accrued salaries $ - $ - $ -
====================== ================ ================
See accompanying notes to the consolidated financial statements (unaudited)
Samaritan Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 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 June 30, 2004, and the results of operations and cash flows for
the three month period ending June 30, 2004 have been included. The results of
operations for the three month period ended June 30, 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 Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123"), encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations.
Accordingly, compensation cost for the Company's stock at the date of the grant
over the amount of an employee must pay to acquire the stock. The Company has
adopted the "disclosure only" alternative described in SFAS 123 and SFAS 148,
which require pro forma disclosures of net income and earnings per share as if
the fair value method of accounting had been applied. During the three months
ended June 30, 2004 the Company recorded $312,500 of compensation expense using
the intrinsic value method for shares to employees. The Company also recorded
$190,769 of compensation expense for options issued to non-employees using the
fair value method.
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options issued to employees under SFAS No. 123,
"Accounting for Stock-Based Compensation," the Company's net loss would have
been reported as follows:
Three months Six months
ended ended
June 30,2004 June 30,2004
------------- -------------
Net Loss:
As reported $ (1,022,835) $ (1,851,420)
Pro Forma $ (2,122,835) $ (2,951,420)
Basic and diluted loss per common share:
As reported $ (0.01) $ (0.02)
Pro Forma $ (0.02) $ (0.02)
Note 3 - Stockholders' Equity
The officers of the company repaid the amounts due for stock options exercised
with shares previously owned by them. Such shares were then retired.
Note 4 - Employment agreement
In June 2004, the Company entered into an employment agreement with an
individual for a four year period, with an annual salary of $300,000 plus a
bonus upon terms of agreement.
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-KSB.
General
Samaritan Pharmaceuticals is working to ensure a longer and better
life, for patients suffering with AIDS, Alzheimer's, Cancer and Cardiovascular
disease. Samaritan is a pipeline-driven Biopharmaceutical with a clear focus on
advancing early stage innovative drugs through clinical development, to become
commercially valuable compounds. Samaritan has shaped its current pipeline of
drugs by in-licensing innovative discoveries through its Samaritan
Labs/Georgetown University collaboration; and its strategic focus is to use this
model, with other top tier Universities, to create a substantial pipeline and
gain its own commercial presence.
Concurrently, Samaritan is advancing four drug programs with Georgetown
University, SP-01A (HIV) Clinical trials, SP-10 (HIV) preIND status, SP-233
(Alzheimer's) preIND status and SP-1000 (Cardiovascular) animal studies; along
with an STTR NIH grant to develop a simple blood test to diagnose Alzheimer's.
Samaritan's proprietary HIV drug SP-01A is the closest to
commercialization. SP-01A is an easy to take, oral, "Entry Inhibitor" drug that
works by blocking the HIV virus' ability to infect a cell. Preclinical In Vitro
studies suggest that SP-01A might be a promising drug for drug resistance; as
well, as having a new sought-after "mechanism of action". The action appears to
take place in the earliest stage of the HIV lifecycle, blocking the virus rather
than attacking the virus, suggesting that SP-01A may also block the development
of drug resistance, an ever increasing problem with almost every drug presently
on the market. Resistance is the ability of HIV to reproduce itself despite the
presence of HIV drugs.
Although Anti-HIV data from Phase I and Phase II human studies are never
considered conclusive, it often serves as "proof of concept" or proof that the
compound is active against HIV in the body. SP-01A, with its FDA Phase I/II
trial for HIV-1 positive patients on stable antiretroviral therapy, generated
encouraging data, suggesting SP-01A as a promising drug for patients on
antiretroviral therapy experiencing drug resistance to available drugs. SP-01A
was safe and well tolerated; and moreover saw clinically significant decreases
in viral load; and enhancement of quality of life measures with values rapidly
retuning to baseline after discontinuing SP-01A.
To date, Samaritan has in-licensed twelve breakthrough technologies from
Georgetown University, building a unique pipeline of novel drugs, to clinically
develop, and commercialize, for its future growth. In addition, Samaritan
currently has filed sixteen patent applications to protect its growing pipeline
of innovation.
Samaritan Pharmaceuticals Product Pipeline
xxx = Completed x = In Progress
Drug Candidates Patent Pre -Clinical IND Phase I Phase II Phase III
-------------------------- ------ ------------- --- ------- -------- ---------
SP-01A xxx xxx xxx xxx xxx
SP-03 x x
SP-10 xxx x
SP-04 xxx x
SP-08 x x
SP-233 xxx x
SP-sc4, Stem Cell Therapy xxx x
SP-sc7, Stem Cell Therapy xxx x
SP-C007 xxx x
SP-1000 xxx x
AD Rat Model Tool:
To Test AD Drugs In Vitro Testing In Vivo Testing
xxx xxx
In Vitro Human Human
Diagnostics Testing Test Small Test Large
Breast Cancer (BC Tumor Agress-Analysis) xxx xxx x
Alzheimer's (AD Blood Test Diagnostic) xxx xxx x
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 a total of $1,000,000 per year to further develop Samaritan's
pipeline. The $1,000,000 is paid by Samaritan over four quarterly payments of
$250,000, is unallocated, and covers the general research and development
effort.
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 eight 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 Form 10-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 June 30, 2004 as compared to the three months ended June 30,
2003
The Company continued to have no significant revenues. During the
second quarter of 2004, we continued our research and development efforts in
connection with our drug programs for HIV/AIDS. We incurred research and
development expenses of $315,436 for the quarter; up from $199,000 in the
year-earlier period primarily due to increase in financial commitment with
Georgetown University. General and administrative expenses increased to $700,626
for the second quarter of 2004 from $499,953 in the same period in 2003.
Depreciation and amortization amounted to $6,773 and $6,337 for three
months ended June 30, 2004 and 2003, respectively. Interest expense amounted to
$0 and $2,141 for the three months ended June 30, 2004 and 2003, respectively.
The decrease is due to the retirement of notes payable during 2003.
As a result of the factors noted above, the net loss since inception on
September 5, 1994 to June 30, 2004 was $24.8 million. We had a net loss of
$1,022,835 and $647,431 for three months ended June 30, 2004 and 2003,
respectively and the loss per share stayed the same at $(0.01) per share in the
year-earlier period.
Six months ended June 30, 2004 as compared to the Six months ended June 30, 2003
The Company continued to have no significant revenues. During the first
six months of 2004, we continued our research and development efforts in
connection with our drug programs for HIV/AIDS. We incurred research and
development expenses of $420,589 for the six months ended June 30, 2004, up from
$386,695 for the six months ended June 30, 2003. General and administrative
expenses for the six months ended June 30, 2004 increased to $1,417,370 from
$889,951 in the year-earlier period.
Depreciation and amortization amounted to $13,461 and $12,674 for six
months ended June 30, 2004 and 2003, respectively. Interest expense amounted to
$0 and $6,288 for the six months ended June 30, 2004 and 2003, respectively. The
decrease is due to the retirement of notes payable during 2003.
We had a net loss of $1,851,420 for six months ended June 30, 2004 and
a net loss of $1,295,408 for the year earlier period. The loss per share was
$(0.01) for the 2004 period and $(0.02) for the 2003 period.
Liquidity and Capital Resources
Cash used in operating activities during the six months period ended
June 30, 2004 was $1,219,811, compared to $1,147,652 for the same period a year
earlier. The increase related to the Company's increased net loss, offset by
$161,706 in stock based compensation and $503,269 in stock options issued for
services.
Cash used in investing activities was $2,054,813 for the six months
period ended June 30, 2004, compared to $8,447 in for the same period in 2003.
The increase was almost entirely due to the purchases of $2,000,000 of
certificates of deposit.
Cash provided by financing activities was $7,903,489 for the six months
period ended June 30, 2004, compared to $1,094,177 in the same period for 2003.
The cash provided in the 2004 period was almost entirely from $517,500 in
proceeds from the purchase of warrants, $7,321,439 in proceeds from stock issued
for cash.
Current assets as of June 30, 2004 were $5,018,879 as compared to
current liabilities of $410,118.
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 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.
The SEC declared effective the Company's registration statement on Form
SB-2, Commission Registration No. 333-105818, on October 9, 2003 (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. There were no proceeds under this registration statement during this
quarter.
We have been able to substantially meet our cash needs during the past
12 months. We believe we will be able to continue to fund our operations for the
next 12 months with the cash on hand. We continue to explore 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-QSB, 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
(A) Evaluation Of Disclosure Controls And Procedures
As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's Principal Executive Officer and Principal Financial Officer of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. The Company's disclosure controls and procedures are designed to
provide a reasonable level of assurance of achieving the Company's disclosure
control objectives. The Company's Principal Executive Officer and Principal
Accounting Officer have concluded that the Company's disclosure controls and
procedures are, in fact, effective at this reasonable assurance level as of the
period covered.
(B) Changes In Internal Controls Over Financial Reporting
In connection with the evaluation of the Company's internal controls
during the Company's quarter ended June 30, 2004, the Company's Principal
Executive Officer and Principal Financial Officer have determined that there are
no changes to the Company's internal controls over financial reporting that has
materially affected, or is reasonably likely to materially effect, the Company's
internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
Securities, unregistered, were sold by the Company in the second
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
June 30, 2004.
No. of shares Issued Pursuant To Price/valuation
--------------------- ------------------------ ------------------------
2,114,496 Sale of restricted stock $1,007,305
The total offering price, during the third quarter as to these shares,
was $1,007,305 less expenses, estimated the total to be $8,500 for printing,
legal, postage, and other expenses related to respective offering.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The company held its Annual meeting on June 18, 2004.
(b) The two matters voted upon at the meeting were: (i) To elect three directors
for a term expiring at the Annual Meeting of Stockholders in year indicated
("Proposal 1"); (ii) To ratify the appointment of Sherb & Co., LLP, as our
independent auditors for the fiscal year ending December 31, 2004 ("Proposal
2").
(i) With respect to "Proposal 1", Janet Greeson, Ph.D. (2007) received
87,385,196 shares in favor for and 243,645 shares against, Welter Holden (2007)
received 87,378,419 shares in favor for and 250,442 shares against, Erasto R.C.
Saldi, M.D. (2007) received 87,674,716 shares in favor for and 0 shares against,
and there were 195,925 abstentions for each director. All nominees were declared
to have been elected as directors to hold office until the annual meeting of
stockholders in the year indicated.
(ii) With respect to "Proposal 2", 87,551,998 shares were in favor for and
12,775 shares were against, 260,003 shares abstained. Proposal 2 was declared to
have been approved.
Item 6. Exhibits and Reports on Form 8-K.
(b) Exhibits
Listed below are all exhibits filed as part of this report. Some exhibits are
filed by the Registrant with the Securities and Exchange Commission pursuant to
Rule 12b-32 under the Securities Exchange Act of 1934, as amended.
Exhibits
No. Description
----------------------------------------------------------------------
2.1.....Agreement and Plan of Reorganization (1)
3.1.....Articles of Incorporation, as amended and restated (6)
3.2.....By-laws (3)
4.1.....Form of common stock certificate (1)
4.2.....2001 Stock Option Plan (Provided herewith)
10.1....Assignment between Linda Johnson and the Company dated September 6,
2000. (5)
10.2....Assignment between Linda Johnson and Spectrum Pharmaceuticals
Corporation dated May 14, 1999. (5)
10.3....Agreement containing the assignment of U.S. Patent Application
07/233,247 with improvements dated May 22, 1990. (5)
10.4....Common Stock Purchase Agreement between Company and Fusion Capital Fund
II, LLC, dated April 22, 2003 (2)
10.5....Registration Rights Agreement between Company and Fusion Capital Fund
II, LLC dated April 22, 2003. (2)
10.6 ...Agreement between Samaritan Pharmaceuticals, Inc. and Thomas Lang
(Provided herewith)
10.7....Agreement between Samaritan Pharmaceuticals, Inc. and Eugene Boyle (5)
10.8....Agreement between Samaritan Pharmaceuticals, Inc and Janet Greeson (5)
10.9....Research Collaboration and Licensing Agreement between Georgetown
University and Samaritan Pharmaceuticals, Inc., dated June 8, 2001 (6)
10.9....Research Collaboration and Licensing Agreement between Georgetown
University and Samaritan Pharmaceuticals, Inc., dated June 8, 2001 (6)
14.1....Code of Ethics (8)
16.1....Letter on change in certifying accountant (7)
21.1....List of Subsidiaries (1)
31.1....Certification of Chief Executive Officer
31.2....Certification of Chief Financial Officer
32.1....Certification re: Section 906
------------------------------------------
(1).....Filed as an exhibit to Samaritan Pharmaceutical's Form 10-SB, filed on
July 21, 1999, and incorporated herein by reference. (2)......Filed as an
exhibit to Samaritan Pharmaceutical's Report on Form 8-K filed on April 25,
2003, and incorporated herein by reference.
(3).....Filed as an exhibit to Samaritan Pharmaceutical's Annual Report on Form
10K- SB, filed on April 3, 2001, and incorporated herein by reference.
(4).....Filed as an exhibit to Samaritan Pharmaceutical's Schedule 14A filed on
April 3, 2001, and incorporated herein by reference (5)......Filed as an exhibit
to Samaritan Pharmaceutical's Quarterly Report on Form 10-QSB filed on August
14, 2002, and incorporated herein by reference.
(6).....Filed as an exhibit to Samaritan Pharmaceutical's Registration Statement
on Form SB-2 (SEC file number 333-105818) an incorporated herein by reference.
(7).....Filed as an exhibit to Form 8-K, on September 27, 2002 and incorporated
herein by reference.
(8).....Filed as an exhibit to Form 10-KSB on April 15, 2003 and incorporated
herein by reference.
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: August 18, 2004 By: /s/ Eugene Boyle
--------------------------
Eugene Boyle, CFO, COO,
Director