UNITED STATES
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 September 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
Incorporation or organization) identification No.)
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 September 30,
2004 was 130,804,862.
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 September 30, 2004.
Consolidated Statements of Operations for the period from Inception
(September 5, 1994) to September 30, 2004, and for the Three and Nine
Months Ended September 30, 2004 and 2003
Consolidated Statements of Stockholders' Equity (Deficit) for the
period from Inception (September 5, 1994) to September 30, 2004
Consolidated Statements of Cash Flows for the period from Inception
(September 5, 1994) to September 30, 2004 and for the Nine Months
Ended September 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 10.10
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Signatures
PART I
Financial Information
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
September 30, 2004
ASSETS
CURRENT ASSETS:
Cash $ 3,679,679
Prepaid expenses 80,140
----------------------
TOTAL CURRENT ASSETS 3,759,819
----------------------
PROPERTY AND EQUIPMENT 40,564
----------------------
OTHER ASSETS:
Patent registration costs 327,059
Purchased technology rights 33,603
Certificates of Deposit, held-to-maturity 2,269,342
Deposits 2,779
----------------------
TOTAL OTHER ASSETS 2,632,783
----------------------
$ 6,433,166
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 412,334
Common stock to be issued 5,000
----------------------
TOTAL CURRENT LIABILITIES 417,334
----------------------
SHAREHOLDERS' EQUITY:
Common stock, 200,000,000 shares authorized at
$.001 par value, 130,804,862 issued and
outstanding 130,805
Additional paid-in capital 32,260,344
Treasury stock (250,248)
Deficit accumulated during development stage (26,125,069)
----------------------
TOTAL SHAREHOLDERS' EQUITY 6,015,832
----------------------
$ 6,433,166
======================
See accompanying notes to the consolidated financial statements
-3-
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994), AND FOR THE NINE MONTHS
AND THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
From
Inception For the Nine For the Three
(September 5, 1994) Months Ended Months Ended
To September 30, September 30,
-------------------------------- ----------------------------
September 30, 2004 2004 2003 2004 2003
------------------ -------------- --------------- ------------- ------------
REVENUES: $ 300,000 $ - $ - $ - $ -
------------------ -------------- --------------- ------------- ------------
EXPENSES:
Research and development 5,635,870 896,321 587,547 475,432 200,852
Interest 50,006 - 8,513 - 2,425
General and administrative 19,735,206 1,893,121 1,328,711 476,050 437,771
Forgiveness of debt (137,780) - - - -
Depreciation and amortization 1,141,767 21,151 19,011 7,690 6,337
------------------ -------------- --------------- ------------- ------------
26,425,069 2,810,593 1,943,782 959,172 647,385
------------------ -------------- --------------- ------------- ------------
NET INCOME (LOSS) $ (26,125,069) $ (2,810,593) $ (1,943,782) $ (959,172) $ (647,385)
================== ============== =============== ============= ============
Loss per share, basic and
diluted: $ (0.86) $ (0.02) $ (0.03) $ (0.01) $ (0.01)
------------------ -------------- --------------- ------------- ------------
Weighted average number of
shares outstanding:
Basic and diluted 30,507,869 122,420,653 74,883,314 130,749,005 83,469,996
================== ============== =============== ============= ============
See accompanying notes to the consolidated financial statements.
-4-
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) TO September 30, 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
-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 11,406,733 11,407 - 4,279,531 -
Shares issued as compensation 625,912 626 - 698,349 -
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 - 449,365 -
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 - - -
------------ ---------- ---------- ------------ -----------
September 30, 2004 130,804,862 $ 130,805 $ - $32,260,344 $ -
============ ========== ========== ============ ===========
See accompanying notes to the consolidated financial statements
-5-
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STATE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FROM INCEPTION (SEPTEMBER 5, 1994) TO September 30, 2004
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
-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 - - - - 4,290,938
Shares issued as compensation - - - - 698,975
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) - - 450,000
Stock retired in settlement of
subscriptions receivable - 5,978,668 - - -
Net Loss - - - (2,810,593) (2,810,593)
----------- ------------ ----------- ------------- ---------------
September 30, 2004 - $ 0 $ (250,248) $(26,125,096) $ 6,015,832
=========== ============ =========== ============= ===============
See accompanying notes to the consolidated financial statements
-5-
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2004 AND 2003
From
Inception For the Nine Months
(September 5, 1994) Ended
To September 30,
-----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: September 30, 2004 2004 2003
---------------------- ------------------ ------------------
Net loss $ (26,125,069) $ (2,810,593) $ (1,943,782)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 150,766 21,151 144,011
Stock based compensation 9,530,775 195,706 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 (77,660) (58,883) (3,089)
Accrued interest (19,342) (19,342)
Deposits (2,779) - -
Increase (decrease) in liabilities: - -
Deferred revenue - - -
Accounts payable and accrued expenses 2,273,148 24,024 160,197
---------------------- ------------------ ------------------
NET CASH USED IN OPERATING ACTIVITIES (11,967,276) (2,144,668) (1,630,723)
---------------------- ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of technology (108,969) - -
Purchase of furniture and equipment (115,963) (17,316) (5,474)
Purchase of certificates of deposit (2,250,000) (2,250,000) -
Patent registration costs (336,478) (124,861) (3,717)
---------------------- ------------------ ------------------
NET CASH USED IN INVESTING ACTIVITIES (2,811,410) (2,392,177) (9,191)
---------------------- ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from warrants 607,125 450,000 -
Proceeds from debentures 642,120 - -
Proceeds from stock issued for cash 15,673,570 7,390,939 1,743,690
Common stock to be issued 211,050 5,000 117,600
Short-term loan repayments (288,422) 0 (255,834)
Short-term loan proceeds 1,612,922 0 162,500
---------------------- ------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 18,458,365 7,845,939 1,767,956
---------------------- ------------------ ------------------
CHANGE IN CASH 3,679,679 3,309,094 128,042
CASH AT BEGINNING OF PERIOD - 370,585 357,826
---------------------- ------------------ ------------------
CASH AT END OF PERIOD $ 3,679,679 $ 3,679,679 $ 485,868
====================== ================== ==================
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
-6-
Item 1. Financial Statements
Samaritan Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
September 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 September 30, 2004, and the results of operations and
cash flows for the nine month period ending September 30, 2004 have been
included. The results of operations for the nine month period ended September
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 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.
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss would have been reported as follows:
Three months Nine months
ended ended
September 30,2004 September 30,2004
----------------- -----------------
Net Loss:
As reported $ (959,172) $ (2,810,593)
Pro Forma $ (959,172) $ (3,910,593)
Basic and diluted loss per common share:
As reported $ (0.01) $ (0.02)
Pro Forma $ (0.01) $ (0.02)
Note 3 - Stockholders' Equity
The officers of the company repaid the amounts due for stock options exercised
with shares previously owned. 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 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 two STTR NIH grants. The first STTR NIH grant is to develop a simple blood
test to diagnose Alzheimer's and the second STTR NIH grant is to gather
preliminary data to develop Samaritan Pharmaceutical's Alzheimer's SP-004 drug
which is believed to bind the Sigma-1 receptor and also has properties to
inhibit acetylcholinesterase (AchE). Samaritan also has research to develop
animal models and drugs for the treatment of neurodegeneration, other aging
related disorders and HIV.
Why Is Samaritan's SP-01A unique?
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 in many drugs 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 = Science Completed x = Science In Progress
Drug Candidates Patent Pre -Clinical IND Phase I Phase II Phase III
-------------------------- ------ ------------- ----- ------- -------- ---------
SP-01A xxx xxx xxx xxx xxx
SP-03 xxx 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
Diagnostic Candidates In Vitro Testing In Vivo or Human Testing
--------------------------- ------------------- ----------------------------
Alzheimer's Disease (AD) Blood Test Diagnostic xxx xxx
Cancer Diagnostic Measuring BC Tumor Aggresiveness xxx xxx
AD Pharmacologic Animal (Rat) Model For Drug Testing xxx 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 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 responsibility for the prosecution and
maintenance in respect to any patent rights related to the licensed technology.
On July 12, 2004
Samaritan Pharmaceuticals, Samaritan Research Labs, and Georgetown
University announced that Samaritan and Georgetown University, together, were
awarded a National Institute of Health, Small Business Technology Transfer
Program (NIH-STTR) grant, of $188,000, for its innovative idea to develop a
simple blood test to predict Alzheimer's disease. The National Institute of
Neurological Disorders and Stroke will fund this research grant entitled "Plasma
Diagnostic for Alzheimer's Disease Pathology."
On August 19, 2004
Samaritan Pharmaceuticals, Samaritan Research Labs, and Georgetown
University announced its research, published in "The Journal of Steroids", a
scientific journal of Elsevier, which suggests 22R-hydroxycholesterol
derivatives as offering a possible new approach to treat Alzheimer's disease.
The study titled "Identification of naturally occurring spirostenols preventing
beta-amyloid-induced neurotoxicity" is authored by L. Lecanu, W. Yao, G. Teper,
Z. Yao, J. Greeson, and V. Papadopoulos.
On September 16, 2004
Samaritan Pharmaceuticals announced that it has been granted an exclusive
worldwide license from Georgetown University to develop and market a new lead
drug candidate (SP-08) for the treatment of Alzheimer's disease. Preclinical
data suggests SP-08 to be an attractive drug candidate that theoretically could
create a new therapeutic class, since it aims at multiple targets at the same
time. The next step for the future development of this unique drug is geared
toward an Investigational New Drug (IND) application for Alzheimer's; in
addition to Samaritan's advanced Alzheimer's drug SP-233.
On October 5, 2004
Samaritan Pharmaceuticals and Pharmaplaz, an Athlone, Ireland
pharmaceutical company, based outside of Dublin, Ireland, announced that they
have entered into a broad strategic collaboration agreement for the production
and supply of Samaritan's lead compound SP-01A, and Samaritan's pipeline of
drugs, that expands across a variety of therapeutic areas to include AIDS,
Alzheimer's, cancer and cardiovascular disease. Under the terms of the alliance,
Pharmaplaz will collaborate with Samaritan's pipeline development, scaleup, and
manufacturing requirements, while working on drug formulation and testing,
production of pilot batches, development of analytical methods, drug
specifications, process validations and drug optimization. The companies will
also work together to secure regulatory approval by the FDA for selected
products in the U.S. markets.
On October 19, 2004
Samaritan Pharmaceuticals and Georgetown University announced that the
National Institutes of Health (NIH) awarded a grant to research their new
Alzheimer's disease treatment, SP-004. The award was granted under the Small
Business Technology Transfer Program (NIH-STTR) for $100,000 to gather
preliminary data to develop Samaritan Pharmaceutical's Alzheimer's drug which is
believed to bind the Sigma-1 receptor and also has properties to inhibit
acetylcholinesterase (AchE). Samaritan's SP-004 is unique because there are
several Alzheimer's (AD) drugs that inhibit acetylcholinesterase (AchE) approved
by the FDA, however through data mining screening, Samaritan Labs believes it
has identified promising compounds that in combination inhibit
acetylcholinesterase (AchE), and the sigma-1 receptor at the same time. It's in
this potential therapeutic target combination that SP-04 hopes to demonstrate
itself as a possible drug to rescue and prevent neuronal brain cell death of
Alzheimer's disease. This grant will support the research collaboration between
Samaritan and Georgetown University, Washington, DC. Dr. Janet Greeson,
Samaritan's Chief Executive Officer, will collaborate with Dr. Lecanu Laurent,
the grant's Principal Investigator and Dr. Papadopoulos, a Co-Investigator. Dr.
Lecanu Laurent is an Assistant Professor within the Department of Biochemistry
and Molecular Biology, at Georgetown University Medical Center, and will be
responsible for the development of this novel compound.
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 September 30, 2004 as compared to the three months ended
September 30, 2003
The Company continued to have no significant revenues. During the third
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 $475,432 for the quarter; up from $200,852 in the year-earlier
period primarily due to increase in financial commitment with Georgetown
University and the hiring of additional FDA regulatory affairs personnel. We
expect that research and development expenditures related to drug discovery and
development will increase during 2004 and subsequent years due to the
continuation and expansion of clinical trials for our small molecule programs,
the initiation of trials for other potential indications and additional study
expenditures for potential pharmaceutical candidates. Research and development
expenses may fluctuate from period to period depending upon the stage of certain
projects and the level of pre-clinical testing and clinical trial-related
activities. General and administrative expenses increased to $476,050 for the
third quarter of 2004 from $437,771 in the same period in 2003.
Depreciation and amortization amounted to $7,690 and $6,337 for three
months ended September 30, 2004 and 2003, respectively. Interest expense
amounted to $0 and $2,425 for the three months ended September 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 September 30, 2004 was $26.1 million. We had a net loss of
$959,172 and $647,385 for three months ended September 30, 2004 and 2003,
respectively and the loss per share stayed the same at $(0.01) per share in the
year-earlier period.
Nine months ended September 30, 2004 as compared to the Nine months ended
September 30, 2003
The Company continued to have no significant revenues. During the first
nine 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 $896,321 for the nine months ended September 30, 2004,
up from $587,547 for the nine months ended September 30, 2003, primarily due to
increase in financial commitment with Georgetown University and the hiring of
additional FDA regulatory affairs personnel. We expect that research and
development expenditures related to drug discovery and development will increase
during 2004 and subsequent years due to the continuation and expansion of
clinical trials for our small molecule programs, the initiation of trials for
other potential indications and additional study expenditures for potential
pharmaceutical candidates. Research and development expenses may fluctuate from
period to period depending upon the stage of certain projects and the level of
pre-clinical testing and clinical trial-related activities. General and
administrative expenses for the nine months ended September 30, 2004 increased
to $1,893,121 from $1,328,711 in the year-earlier period, primary due to the
hiring of additional FDA regulatory affairs personnel and associated cost for
listing on the American Stock Exchange. The additional FDA regulatory affairs
personnel in this quarter was reclassified from general and administrative
expenses to research and development expense in this quarter since the majority
of their time is spend in development of Samaritan's pipeline.
Depreciation and amortization amounted to $21,151 and $19,011 for nine
months ended September 30, 2004 and 2003, respectively. Interest expense
amounted to $0 and $8,513 for the nine months ended September 30, 2004 and 2003,
respectively. The decrease is due to the retirement of notes payable during
2003.
We had a net loss of $2,810,593 for nine months ended September 30,
2004 and a net loss of $1,943,782 for the year earlier period. The loss per
share was $(0.02) for the 2004 period and $(0.03) for the 2003 period.
Liquidity and Capital Resources
Cash used in operating activities during the nine months period ended
September 30, 2004 was $2,144,668, compared to $1,630,723 for the same period a
year earlier. The increase related to the Company's increased net loss, offset
by $195,706 in stock based compensation and $503,269 in stock options issued for
services.
Cash used in investing activities was $2,392,177 for the nine months
period ended September 30, 2004, compared to $9,191 in for the same period in
2003. The increase was almost entirely due to the purchase of $2,250,000 of
certificates of deposit.
Cash provided by financing activities was $7,845,939 for the nine
months period ended September 30, 2004, compared to $1,767,956 in the same
period for 2003. The cash provided in the 2004 period was almost entirely from
$450,000 in proceeds from the purchase of warrants, $7,390,939 in proceeds from
stock issued for cash.
Current assets as of September 30, 2004 were $3,759,819 as compared to
current liabilities of $417,333.
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, 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 September 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.
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
financial statements of the Company.
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
September 30, 2004.
No. of shares Issued Pursuant To Price/valuation
--------------- ----------------------------- ----------------------
15,000 Sale of restricted stock $ 15,000
94,000 Subscriptions due $ 54,500
28,571 Stock as payment for services $ 34,000
The total offering price, during the third quarter as to these shares was
$103,500 less expenses, estimated the total to be $3,700 for printing, legal,
postage, and other expenses related to respective offering.
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 (9)
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 (9)
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)
10.10...Master Clinical Trial and Full Scale Manufacturing Agreement dated
October 5, 2004 (Provided herewith)
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.
(9).....Filed as an exhibit to Form 10-QSB on August 16, 2004 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: November 15, 2004 By: /s/ Eugene Boyle
-----------------------
Eugene Boyle, CFO, COO,
Director