Delaware (State or other jurisdiction of incorporation or organization) | 36-3898269 (I.R.S. Employer Identification No.) |
| 1 | |
Page | ||
PART I | FINANCIAL INFORMATION | |
Item 1. | Unaudited Condensed Consolidated Financial Statements | 3 |
Unaudited Condensed Consolidated Balance Sheets | 3 | |
Unaudited Condensed Consolidated Statements of Operations | 4 | |
Unaudited Condensed Consolidated Statement of Stockholders’ Equity (Deficiency) | 5 | |
Unaudited Condensed Consolidated Statements of Cash Flows | 6 | |
Notes to Unaudited Condensed Consolidated Financial Statements | 7 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 |
Item 3. | Controls and Procedures | 14 |
PART II | OTHER INFORMATION | |
Item 2. | Changes in Securities | 15 |
Item 6. | Exhibits and Reports on Form 8-K | 15 |
Signatures | 16 |
Forward-Looking Statements
| 2 | |
MANHATTAN PHARMACEUTICALS, INC. AND SUBSIDIARIES | |||||||||||
(A Development Stage Company) | |||||||||||
Condensed Consolidated Balance Sheets | |||||||||||
(Unaudited) |
March 31, | December 31, | ||||||
Assets | 2004 | 2003 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 9,543,071 | $ | 7,413,803 | |||
Marketable equity securities, available for sale, at market | 361,100 | 352,147 | |||||
Prepaid expenses | 14,336 | 24,981 | |||||
Total current assets | 9,918,507 | 7,790,931 | |||||
Property and equipment, net | 39,561 | 8,021 | |||||
Total assets | $ | 9,958,068 | $ | 7,798,952 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 569,445 | $ | 548,595 | |||
Accrued expenses | 188,341 | 417,425 | |||||
Total liabilities | 757,786 | 966,020 | |||||
Commitments and Contingencies | |||||||
Stockholders’ equity : | |||||||
Series A convertible preferred stock, $.001 par value. | |||||||
Authorized 10,000,000 shares; 1,000,000 shares issued | |||||||
and outstanding | |||||||
(liquidation preference aggregating $10,000,000) | 1,000 | 1,000 | |||||
Common stock, $.001 par value. Authorized 150,000,000 shares; | |||||||
26,741,033 and 23,362,396 shares issued and outstanding | |||||||
at March 31, 2004 and December 31, 2003, respectively | 26,741 | 23,362 | |||||
Additional paid-in capital | 17,850,789 | 14,289,535 | |||||
Deficit accumulated during development stage | (8,780,676 | ) | (7,473,205 | ) | |||
Dividends payable in Series A preferred shares | 212,123 | — | |||||
Accumulated other comprehensive income (loss) | 1,193 | (7,760 | ) | ||||
Unearned consulting services | (110,888 | ) | — | ||||
Total stockholders’ equity | 9,200,282 | 6,832,932 | |||||
Total liabilities and stockholders' equity | $ | 9,958,068 | $ | 7,798,952 | |||
See accompanying notes to unaudited condensed consolidated financial statements. |
3 | ||
MANHATTAN PHARMACEUTICALS, INC. AND SUBSIDIARIES | |||||||||||||
(A Development Stage Company) | |||||||||||||
Condensed Consolidated Statements of Operations | |||||||||||||
(Unaudited) |
Cumulative | ||||||||||
period from | ||||||||||
August 6, 2001 | ||||||||||
Three Months ended March 31, | (inception) to | |||||||||
March 31, | ||||||||||
2004 | 2003 | 2004 | ||||||||
Revenue | $ | — | $ | — | $ | — | ||||
Costs and expenses: | ||||||||||
Research and development | 709,273 | 43,355 | 3,158,713 | |||||||
General and administrative | 413,238 | 378,872 | 2,548,899 | |||||||
Impairment of intangible assets | — | — | 1,248,230 | |||||||
Total operating expenses | 1,122,511 | 422,227 | 6,955,842 | |||||||
Operating loss | (1,122,511 | ) | (422,227 | ) | (6,955,842 | ) | ||||
Other (income) expense: | ||||||||||
Interest and other income | (27,163 | ) | (2,515 | ) | (43,242 | ) | ||||
Interest expense | — | 2,233 | 23,893 | |||||||
Loss on disposition of intangible assets | — | — | 1,213,878 | |||||||
Total other (income) expense | (27,163 | ) | (282 | ) | 1,194,529 | |||||
Net loss | (1,095,348 | ) | (421,945 | ) | (8,150,371 | ) | ||||
Preferred stock dividends (including imputed amounts) | (212,123 | ) | — | (630,305 | ) | |||||
Net loss applicable to common shares | $ | (1,307,471 | ) | $ | (421,945 | ) | $ | (8,780,676 | ) | |
Net loss per common share: | ||||||||||
Basic and diluted | $ | (0.05 | ) | $ | (0.02 | ) | ||||
Weighted average shares of common stock outstanding: | ||||||||||
Basic and diluted | 26,145,361 | 19,417,795 | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements. |
4 | ||
MANHATTAN PHARMACEUTICALS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(A Development Stage Company) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Statement of Stockholders' Equity (Deficiency) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) |
Series A | Deficit | Dividends | Total | |||||||||
convertible | accumulated | payable in | Accumulated | stock– | ||||||||
preferred stock | Common stock | Additional | during | Series A | other | Unearned | holders' | |||||
paid-in | Subscription | development | preferred | comprehensive | consulting | equity | ||||||
Shares | Amount | Shares | Amount | capital | receivable | stage | shares | income/(loss) | costs | (deficiency) | ||
Stock issued at $0.0004 | ||||||||||||
per share for subscription receivable | — | $— | 10,167,741 | $10,168 | $(6,168) | $(4,000) | $— | $— | $— | $— | $— | |
Net loss | — | — | — | — | — | — | (56,796) | — | — | — | (56,796) | |
Balance at December 31, 2001 | — | — | 10,167,741 | 10,168 | (6,168) | (4,000) | (56,796) | — | — | — | (56,796) | |
Proceeds from subscription receivable | — | — | — | — | — | 4,000 | — | — | — | — | 4,000 | |
Stock issued at $0.0004 per | ||||||||||||
share for license rights | — | — | 2,541,935 | 2,542 | (1,542) | — | — | — | — | — | 1,000 | |
Stock options issued for consulting services | — | — | — | — | 60,589 | — | — | — | — | (60,589) | — | |
Amortization of unearned consulting services | — | — | — | — | — | — | — | — | — | 22,721 | 22,721 | |
Sales of common stock at $0.63 | ||||||||||||
per share through private placement, net of | ||||||||||||
expenses | — | — | 3,043,332 | 3,043 | 1,701,275 | — | — | — | — | — | 1,704,318 | |
Net loss | — | — | — | — | — | (1,037,320) | — | — | — | (1,037,320) | ||
Balance at December 31, 2002 | — | — | 15,753,008 | 15,753 | 1,754,154 | — | (1,094,116) | — | — | (37,868) | 637,923 | |
Common stock issued at $0.63 per share, net of expenses | — | — | 1,321,806 | 1,322 | 742,369 | — | — | — | — | — | 743,691 | |
Effect of reverse acquisition | — | — | 6,287,582 | 6,287 | 2,329,954 | — | — | — | — | — | 2,336,241 | |
Amortization of unearned consulting costs | — | — | — | — | — | — | — | — | — | 37,868 | 37,868 | |
Unrealized loss on marketable equity securities | — | — | — | — | — | — | — | — | (7,760) | — | (7,760) | |
Payment for fractional shares for stock combination | — | — | — | — | (300) | — | — | — | — | — | (300) | |
Preferred stock issued, net of expenses | 1,000,000 | 1,000 | — | — | 9,045,176 | — | — | — | — | — | 9,046,176 | |
Imputed preferred stock dividend | 418,182 | — | (418,182) | — | — | |||||||
Net loss | — | — | — | — | — | — | (5,960,907) | — | — | — | (5,960,907) | |
Balance at December 31, 2003 | 1,000,000 | 1,000 | 23,362,396 | 23,362 | 14,289,535 | — | (7,473,205) | — | (7,760) | — | 6,832,932 | |
Exercise of stock options | — | — | 10,000 | 10 | 12,490 | — | — | — | — | — | 12,500 | |
Common stock issued at $1.10 per share, net of expenses | — | — | 3,368,637 | 3,369 | 3,427,796 | — | — | — | — | — | 3,431,165 | |
Preferred stock dividends | — | — | — | — | — | — | (212,123) | 212,123 | — | — | — | |
Warrants issued for consulting services | — | — | — | — | 120,968 | — | — | — | — | (120,968) | — | |
Amortization of unearned consulting costs | — | — | — | — | — | — | — | — | — | 10,080 | 10,080 | |
Unrealized gain on marketable equity securities | — | — | — | — | — | — | — | — | 8,953 | — | 8,953 | |
Preferred Stock Dividends Net loss | — | — | — | — | — | — | (1,095,348) | — | — | — | (1,095,348) | |
Balance at March 31, 2004 | 1,000,000 | $1,000 | 26,741,033 | $26,741 | $17,850,789 | $— | $(8,780,676) | $212,123 | $1,193 | $(110,888) | $9,200,282 | |
See accompanying notes to unaudited condensed consolidated financial statements. |
5 | ||
MANHATTAN PHARMACEUTICALS, INC. AND SUBSIDIARIES | |||||||||||||||
(A Development Stage Company) | |||||||||||||||
Condensed Consolidated Statements of Cash Flows | |||||||||||||||
(Unaudited) |
Cumulative | ||||||||||
period from | ||||||||||
August 6, 2001 | ||||||||||
Three months ended March 31, | (inception) to | |||||||||
March 31, | ||||||||||
2004 | 2003 | 2004 | ||||||||
Cash flows from operating activities: | ||||||||||
Net loss | $ | (1,095,348 | ) | $ | (421,945 | ) | $ | (8,150,371 | ) | |
Adjustments to reconcile net loss to | ||||||||||
net cash used in operating activities: | ||||||||||
Common stock issued for license rights | — | — | 1,000 | |||||||
Amortization of unearned consulting costs | 10,080 | 15,147 | 70,669 | |||||||
Amortization of intangible assets | — | 26,393 | 145,162 | |||||||
Depreciation | 2,452 | 478 | 8,668 | |||||||
Loss on impairment of intangible assets | — | — | 1,248,230 | |||||||
Loss on disposition of intangible assets | — | — | 1,213,878 | |||||||
Changes in operating assets and liabilities, net of acquisition: | ||||||||||
Decrease (increase) in prepaid expenses | 10,645 | (16,441 | ) | 43,909 | ||||||
Increase (decrease) in accounts payable | 20,850 | (14,929 | ) | 245,710 | ||||||
Decrease in accrued expenses | (229,084 | ) | (36,715 | ) | (351,980 | ) | ||||
Decrease in due affiliate | — | (96,328 | ) | — | ||||||
Net cash used in operating activities | (1,280,405 | ) | (544,340 | ) | (5,525,125 | ) | ||||
Cash flows from investing activities: | ||||||||||
Purchase of property and equipment | (33,992 | ) | (5,066 | ) | (40,546 | ) | ||||
Cash paid in connection with acquisition | — | (32,808 | ) | (32,808 | ) | |||||
Proceeds from sale of license | — | — | 200,001 | |||||||
Net cash (used in) provided by investing activities | (33,992 | ) | (37,874 | ) | 126,647 | |||||
Cash flows from financing activities: | ||||||||||
Proceeds from issuances of notes payable to stockholders | — | (136,000 | ) | 233,500 | ||||||
Repayments of notes payable to stockholders | — | — | (233,500 | ) | ||||||
Proceeds from issuance of note payable to bank | — | (600,000 | ) | 600,000 | ||||||
Repayment of note payable to bank | — | — | (600,000 | ) | ||||||
Proceeds from subscriptions receivable | — | 743,691 | 4,000 | |||||||
Payment for fractional shares for stock combination | — | — | 300 | |||||||
Proceeds from sale of common stock, net | 3,431,165 | — | 5,878,573 | |||||||
Proceeds from sale of preferred stock, net | — | — | 9,046,176 | |||||||
Proceeds from exercise of stock options | 12,500 | — | 12,500 | |||||||
Net cash provided by financing activities | 3,443,665 | 7,691 | 14,941,549 | |||||||
Net increase (decrease) in cash and cash equivalents | 2,129,268 | (574,523 | ) | 9,543,071 | ||||||
Cash and cash equivalents at beginning of period | 7,413,803 | 1,721,123 | — | |||||||
Cash and cash equivalents at end of period | $ | 9,543,071 | $ | 1,146,600 | $ | 9,543,071 | ||||
Supplemental disclosure of cash flow information: | ||||||||||
Interest paid | $ | — | $ | 502 | $ | 26,934 | ||||
Supplemental disclosure of noncash investing and financing activities: | ||||||||||
Stock options issued for consulting services | $ | — | — | $ | 60,589 | |||||
Issuance of common stock for acquisition | — | 2,336,242 | 2,336,242 | |||||||
Marketable equity securities received in connection with | ||||||||||
sale of license | — | 359,907 | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements. |
6 | ||
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES
(A Development Stage Company)
7 | ||
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2004 |
| 8 | |
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2004 |
Three | Three | |||||
months ended | months ended | |||||
March 31, | March 31, | |||||
2004 | 2003 | |||||
Net loss, as reported | $ | (1,095,348 | ) | $ | (421,945 | ) |
Deduct: Total stock-basedemployee | ||||||
compensation expense determined | ||||||
under fair value method | (282,168 | ) | (57,603 | ) | ||
Net loss, pro forma | $ | (1,377,516 | ) | $ | (479,548 | ) |
Net loss per common share – basic | ||||||
As reported | $ | (0.04 | ) | $ | (0.00 | ) |
Pro forma | (0.05 | ) | (0.00 | ) |
On November 7, 2003, the Company completed a private placement of 1,000,000 shares of its newly-designated Series A Convertible Preferred Stock at a price of $10 per share, resulting in gross proceeds to the Company of $10,000,000 (net proceeds of $9,046,176). Each share of Series A Convertible Preferred Stock is convertible at the holder's election into shares of the company's common stock at a conversion price of $1.10 per share. In addition, each share at the option of the holders is convertible into 9.09 shares of common stock. The Series A Convertible Preferred Stock has a payment-in-kind dividend of 5 percent payable semi-annually. Accordingly, at March 31, 2004, the Company recorded a preferred stock dividend of $212,123.
| 9 | |
10 | ||
11 | ||
12 | ||
13 | ||
14 | ||
Exhibit No. | Description |
4.1 | Form of warrant issued January 12, 2004 to Paramount BioCapital, Inc. as compensation for placement agency services rendered in connection with the Company’s January 2004 private placement (incorporated by reference to Exhibit 4.18 to the Company’s Form SB-2 filed January 13, 2004 (File No. 333- 111897)). |
10.1 | Employment Agreement dated January 2, 2004 between the Company and Dr. Leonard Firestone (incorporated by reference to Exhibit 10.10 to the Company’s Form SB-2 filed January 13, 2004 (File No. 333- 111897)). |
31.1 | Certification of Chief Executive Officer |
31.2 | Certification of Chief Financial Officer |
32.1 | Certifications of Chief Executive and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
15 | ||
MANHATTAN PHARMACEUTICALS, INC. | ||
| | |
Date: May 14, 2004 | By: | /s/ Leonard Firestone |
Leonard Firestone President and Chief Executive Officer |
Date: May 14, 2004 | By: | /s/ Nicholas J. Rossettos |
Nicholas J. Rossettos Chief Financial Officer and Chief Operating Officer |
16 | ||
Exhibit No. | Description |
4.1 | Form of warrant issued January 12, 2004 to Paramount BioCapital, Inc. as compensation for placement agency services rendered in connection with the Company’s January 2004 private placement (incorporated by reference to Exhibit 4.18 to the Company’s Form SB-2 filed January 13, 2004 (File No. 333- 111897)). |
10.1 | Employment Agreement dated January 2, 2004 between the Company and Dr. Leonard Firestone (incorporated by reference to Exhibit 10.10 to the Company’s Form SB-2 filed January 13, 2004 (File No. 333- 111897)). |
31.1 | Certification of Chief Executive Officer |
31.2 | Certification of Chief Financial Officer |
32.1 | Certifications of Chief Executive and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |