SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 21, 2003
----------
MANHATTAN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-27282 36-3898269
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation or organization) identification no.)
350 Fifth Avenue
Suite 5507 10118
New York, New York (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 267-2503
Item 2. Acquisition of Disposition of Assets.
On February 21, 2003, Manhattan Pharmaceuticals, Inc., a Delaware
corporation formerly known as Atlantic Technology Ventures, Inc.
("Manhattan"), completed the acquisition of Manhattan Research Development
Corp., a privately held Delaware corporation formerly known as Manhattan
Pharmaceuticals, Inc. ("Manhattan Research"). In accordance with the terms
of a merger agreement dated as of December 17, 2002, Manhattan
Pharmaceuticals Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Manhattan, merged into Manhattan Research, with Manhattan
Research remaining as the surviving corporation.
As a result of the merger, each outstanding share of Manhattan Research
was converted into the right to receive approximately 13 shares of Manhattan
common stock. In connection with the merger, former holders of Manhattan
Research common stock received a total of 83,620,271 shares of Manhattan common
stock, representing 80% of the total number of shares of Manhattan common stock
outstanding immediately after the effective time of the merger. Also as a result
of the merger, warrants to purchase 864,280 shares of Manhattan Research common
stock were converted into warrants to purchase 9,839,313 shares of Manhattan
common stock.
David M. Tanen serves as a member of the board of directors of both
Manhattan and Manhattan Research. He has served on the Manhattan board of
directors since January 28, 2002, and on Manhattan Research's board of directors
since its inception on August 6, 2001. In addition, Dr. Lindsay Rosenwald
beneficially owned approximately 28% of the outstanding pre-merger Manhattan
common stock as well as 14.2% of the outstanding pre-merger Manhattan Research
common stock.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
The following financial statements of Manhattan Research are included in
this current report: (1) balance sheets as of September 30, 2002 and December
31, 2001; (2) statements of operations for the nine months ended September 30,
2002, for the period from August 6, 2001 (inception) to December 31, 2001 and
for the period from August 6, 2001 (inception) to September 30, 2002; (3)
statements of changes in stockholders' deficiency for the period from August 6,
2001 (inception) to September 30, 2002; (4) statements of cash flows for the
nine months ended September 30, 2002, for the period from August 6, 2001
(inception) to December 31, 2001, and for the period from August 6, 2001
(inception) to September 30, 2002; and (5) notes to financial statements as of
September 30, 2002 and December 31, 2001.
Financial statements of Manhattan Research for the year ended December 31,
2002 will be filed by an amendment to this current report within 60 days of the
filing of this current report.
(b) Pro Forma Financial Information
The following pro forma financial information is included in this current
report: (1) pro forma condensed combined balance sheet as of September 30, 2002
(unaudited); (2) pro forma condensed combined statement of operations for the
nine months ended September 30, 2002 (unaudited); (3) pro forma condensed
combined statement of operations
2
from August 6, 2001 to December 31, 2001; and (4) notes to unaudited pro forma
condensed combined financial statements.
(c) Exhibits.
2.1 Merger agreement dated as of December 17, 2002 between Atlantic
Technology Ventures, Inc., Manhattan Pharmaceuticals Acquisition Corp.
and Manhattan Pharmaceuticals, Inc.
23.1 Report of Weinberg & Company, P.A.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Manhattan Pharmaceuticals, Inc. has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: March 10, 2003 MANHATTAN PHARMACEUTICALS, INC.
By: /s/ Leonard Firestone
-------------------------------
Leonard Firestone
President and Chief Executive Officer
3
MANHATTAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
September 30, December 31,
2002 2001
------------- -----------
CURRENT ASSETS
Cash $ 3,279 $ --
Deferred consulting expense 45,442 --
--------- ---------
Total Current Assets 48,721 --
--------- ---------
OTHER ASSETS
Deferred offering costs 8,706 --
Total Other Assets 8,706 --
--------- ---------
TOTAL ASSETS $ 57,427 $ --
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 161,846 $ --
Accrued expenses 43,696 29,296
Note and interest payable 601,346 --
Due to stockholder 30,000 27,500
Due to affiliate 51,315 --
--------- ---------
Total Current Liabilities 888,203 56,796
--------- ---------
STOCKHOLDERS' DEFICIENCY
Common stock, $.001 par value, 10,000,000 shares authorized, 5,000,000
and 4,000,000 issued and outstanding in 2002 and 2001, respectively 5,000 4,000
Additional paid-in capital 60,589 --
Accumulated deficit during development stage (892,365) (56,796)
Subscription receivable (4,000) (4,000)
--------- ---------
Total Stockholders' Deficiency (830,776) (56,796)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 57,427 $ --
========= =========
See accompanying notes to financial statements.
F-1
MANHATTAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Period
from For the Period
For the Nine August 6, 2001 August 6, 2001
Months Ended (Inception) to (Inception) to
September 30, December 31, September 30,
2002 2001 2002
------------ -------------- --------------
REVENUE $ -- $ -- $ --
--------- --------- ---------
OPERATING EXPENSES
Consulting fees 217,885 27,736 245,621
Selling, general and administrative 186,250 1,560 187,810
Research and development 377,654 27,500 405,154
Salaries 41,667 -- 41,667
--------- --------- ---------
Total Operating Expenses 823,456 56,796 880,252
--------- --------- ---------
LOSS FROM OPERATIONS (823,456) (56,796) (880,252)
--------- --------- ---------
OTHER EXPENSE
Interest expense 12,113 -- 12,113
--------- --------- ---------
Total Other Expense 12,113 -- 12,113
--------- --------- ---------
NET LOSS $(835,569) $ (56,796) $(892,365)
========= ========= =========
See accompanying notes to financial statements.
F-2
MANHATTAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM AUGUST 6, 2001 (INCEPTION) TO SEPTEMBER 30, 2002
Additional
Common Stock Paid-In Subscription Accumulated Total
Shares Amount Capital Receivable Deficit Equity
--------- ---------- ------------ ------------- ------------- ----------
Stock issued for subscription receivable 4,000,000 $ 4,000 $ -- $ (4,000) $ -- $ --
Net loss for the period from August 6, 2001
(inception) to December 31, 2001 -- -- -- -- (56,796) (56,796)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 2001 4,000,000 4,000 -- (4,000) (56,796) (56,796)
Stock issued for licensing fees 1,000,000 1,000 -- -- -- 1,000
Stock options issued for services -- -- 60,589 -- -- 60,589
Net loss for the period from January 1, 2002
to September 30, 2002 -- -- -- -- (835,569) (835,569)
--------- --------- --------- --------- --------- ---------
BALANCE, SEPTEMBER 30, 2002 5,000,000 $ 5,000 $ 60,589 $ (4,000) $(892,365) $(830,776)
========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
F-3
MANHATTAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the Period For the Period
from from
For the Nine August 6, 2001 August 6, 2001
Months Ended (Inception) to (Inception) to
September 30, December 31, September 30,
2002 2001 2002
-------------- -------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(835,569) $ (56,796) $(892,365)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Expense portion of stock and options issued for services 16,147 -- 16,147
Changes in operating assets and liabilities:
(Increase) in:
Deferred offering costs (8,706) -- (8,706)
Increase in:
Accounts payable 161,846 -- 161,846
Accrued expenses 14,400 29,296 43,696
Due to affiliate 51,315 -- 51,315
Interest payable 1,346 -- 1,346
--------- --------- ---------
Net Cash Used In Operating Activities (599,221) (27,500) (626,721)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES: -- -- --
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable - related parties, net
of repayments 2,500 27,500 30,000
Proceeds from notes payable 600,000 -- 600,000
--------- --------- ---------
Net Cash Provided by Financing Activities 602,500 27,500 630,000
--------- --------- ---------
NET INCREASE IN CASH 3,279 -- 3,279
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD -- -- --
--------- --------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,279 $ -- $ 3,279
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 10,767 $ -- $ 10,767
========= ========= =========
See accompanying notes to financial statements.
F-4
MANHATTAN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING FOLICIES
(A) Nature of Operations
Manhattan Pharmaceuticals, Inc. (the "Company") incorporated on August 6,
2001 under the laws of Delaware under the name CT-3 Acquisition Corp., is
a privately-held, New York based development stage biopharmaceutical
company that holds an exclusive, world-wide license to certain
intellectual property (the "Property") owned by Oleoyl-estrone
Developments, SL ("OED") of Barcelona, Spain (the "University"). The
Company's first drug candidate, oleoyl-estrone ("OE"), is an orally
administered small molecule that has been shown in extensive pre-clinical
animal studies to cause significant weight loss without the need for
dietary modifications (See Notes 2 and 7).
(B) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(C) Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("Statement 109"). Under Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes
the enactment date. There was no current or deferred income tax expense
(benefit) recorded for period from August 6, 2001 (inception) to December
31, 2001 and for the nine months ended September 30, 2002 because of the
Company's continued losses from operations. Any deferred tax asset
arising from the Company's available net operating loss carryforwards has
been offset by an equal valuation allowance.
(D) New Accounting Pronouncements
The Financial Accounting Standards Board has recently issued several new
Statements of Financial Accounting Standards.
Statement No. 141, "Business Combinations" supersedes APB Opinion 16 and
various related pronouncements. Pursuant to the new guidance in Statement
No. 141, all business combinations must be accounted for under the
purchase method of accounting; the pooling-of-interests method is no
longer permitted. SFAS 141 also establishes new rules concerning the
recognition of goodwill and other intangible assets arising in a purchase
business combination and requires disclosure of more information
concerning a business combination in the period in which it is completed.
This statement is generally effective for business combinations initiated
on or after July 1, 2001.
Statement No. 142, "Goodwill and Other Intangible Assets" supercedes APB
Opinion 17 and related interpretations. Statement No. 142 establishes new
rules on accounting for the acquisition of intangible assets not acquired
in a business combination and the manner in which goodwill and all other
intangibles should be accounted for subsequent to their initial
recognition in a business combination accounted for under SFAS No. 141.
Under SFAS No. 142, intangible assets should be recorded at fair value.
Intangible assets with finite useful lives should be amortized over such
period and those with indefinite lives should not be amortized. All
F-5
MANHATTAN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to Financial Statements
intangible assets being amortized as well as those that are not, are both
subject to review for potential impairment under SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". SFAS No. 142 also requires that goodwill
arising in a business combination should not be amortized but is subject
to impairment testing at the reporting unit level to which the goodwill
was assigned to at the date of the business combination.
SFAS No. 142 is effective for fiscal years beginning after December 15,
2001 and must be applied as of the beginning of such year to all goodwill
and other intangible assets that have already been recorded in the
balance sheet as of the first day in which SFAS No. 142 is initially
applied, regardless of when such assets were acquired. Goodwill acquired
in a business combination whose acquisition date is on or after July 1,
2001, should not be amortized, but should be reviewed for impairment
pursuant to SFAS No. 121, even though SFAS No. 142 has not yet been
adopted. However, previously acquired goodwill should continue to be
amortized until SFAS No. 142 is first adopted.
Statement No. 143 "Accounting for Asset Retirement Obligations"
establishes standards for the initial measurement and subsequent
accounting for obligations associated with the sale, abandonment, or
other type of disposal of long-lived tangible assets arising from the
acquisition, construction, or development and/or normal operation of such
assets. SFAS No. 143 is effective for fiscal years beginning after June
15, 2002, with earlier application encouraged.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No.
121, "Accounting for the Impairment of Long-lived Assets and Long-lived
Assets to be Disposed of" and APB No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of Business
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." SFAS No. 144 established a single accounting model for
assets to be disposed of by sale whether previously held and used or
newly acquired. SFAS No. 144 retains the provision of APB No. 30 for
presentation of discontinued operations in the income statement but
broadens the presentation to include a component of an entity. SFAS No.
144 is effective for fiscal years beginning after December 15, 2001 and
the interim periods within.
In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS 145 rescinds the provisions of SFAS No. 4 that requires
companies to classify certain gains and losses from debt extinguishments
as extraordinary items, eliminates the provisions of SFAS No. 44
regarding transition to the Motor Carrier Act of 1980 and amends the
provisions of SFAS No. 13 to require that certain lease modifications be
treated as sale leaseback transactions. The provisions of SFAS 145
related to classification of debt extinguishments are effective for
fiscal years beginning after May 15, 2002. Earlier application is
encouraged. The Company does not believe the adoption of this standard
will have a material impact the financial statements.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Restructuring
Costs." SFAS 146 applies to costs associated with an exit activity
(including restructuring) or with a disposal of long-lived assets. Those
activities can include eliminating or reducing product lines, terminating
employees and contracts and relocating plant facilities or personnel.
Under SFAS 146, the Company will record a liability for a cost associated
with an exit or disposal activity when that liability is incurred and can
be measured at fair value. SFAS 146 will require the Company to disclose
information about its exit and disposal activities, the related costs,
and changes in those costs in the notes to the interim and annual
financial statements that include the period in which an exit activity is
initiated and in any subsequent period until the activity is completed.
SFAS 146 is effective prospectively for exit or disposal activities
initiated after December 31, 2002, with earlier adoption encouraged.
Under SFAS 146, a company cannot restate its previously issued financial
statements and the new statement grandfathers the accounting for
liabilities that a company had previously recorded under Emerging Issues
Task Force Issue 94-3.
The Company believes that the adoption of these pronouncements will not
have a material impact on the Company's financial position or results of
operations.
F-6
MANHATTAN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 2 RIGHTS TO INTELLECTUAL PROPERTY
The Company's exclusive right to OED's Property, in the aggregate, are of
material importance for the Company's survival. Protection for OED's
individual products extends for varying periods in accordance with the
date of grant and the legal life of patents in the various countries. The
protection afforded, which may also vary from country to country, depends
upon the type of patent and its scope of coverage. The Company is
financially responsible for all aspects of OED's inventions, including
legal and research and development expenses associated with the product
developments.
During the periods ended September 30, 2002 and December 31, 2001, the
Company capitalized approximately $236,303 and $25,000, respectively, in
legal fees, U.S. Patent office handling fees and other expenses that OED
incurred in relation to the patents and licensing fees (See Note 7).
Expenses incurred for research and development of the patents were
expensed in the period ended September 30, 2002.
The Intellectual Property Rights are being amortized over the lives of
the underlying patents, which generally are twenty years. Amortization
expense was not recorded for the period ended December 31, 2001.
Amortization expense related to patents for the period ended September
30, 2002 was approximately $263. No amortization has been recorded
related to the capitalized licensing costs that the Company has paid
under its licensing agreement with OED (See Note 7). Capitalized
licensing costs will be amortized when the licensing agreement generates
revenues from the underlying intellectual property rights.
The Company evaluates the recoverability of the Intellectual Property
Rights, where indicators of impairment are present, by reviewing current
and projected profitability or undiscounted cash flows of such assets.
Intangible assets that are subject to amortization are reviewed for
potential impairment whenever events or circumstances indicate that
carrying amounts may not be recoverable. Intangible assets not subject to
amortization are tested for impairment at least annually. For the period
ended September 30, 2002, the Company determined that, based on projected
profitability and estimated future cash flows, the carrying amount of the
Intellectual Property Rights, equals the fair value. Accordingly, no
impairment loss was required for the period ended September 30, 2002.
NOTE 3 NOTE PAYABLE
During the period ended September 30, 2002, the Company received $600,000
from an independent financial institution with an annual interest rate of
3.23%. During the period ended September 30, 2002, the Company paid
$10,767 and accrued $1,346 of the $12,113 total interest expense
incurred. The note is due in January 2003 and is secured by a
stockholder's personal investment account of $600,000. The note and
related interest payable are recorded in current liabilities in the
accompanying financial statements.
NOTE 4 DUE TO STOCKHOLDER
In order to provide operating funds for the Company, a stockholder (the
"Stockholder") loaned the Company $30,000 during September 2002. The loan
is payable on the earlier to occur of (a) one year from the date of
issuance or (b) a financing in which gross proceeds to the Company
exceeds $1,000,000. The loan bears interest at 5% and is unsecured. Since
the proceeds were received in late September 2002, no interest expense
has been recognized for this loan as of September 30, 2002 because the
Company deems it to be immaterial.
As discussed in Note 10, the Company received an additional $80,000 from
the Stockholder during October 2002 as additional operating funds. The
total proceeds from the Stockholder since inception is $110,000 (See Note
10).
NOTE 5 DUE TO AFFILIATE
During the period ended September 30, 2002, an affiliate, owned by the
Stockholder as defined in Note 4, paid
F-7
MANHATTAN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to Financial Statements
paid $6,315 for deferred offering expenses on behalf of the Company. The
Company also owes $45,000 at September 30, 2002 for office space rental
expense to the affiliate. These expenses are included in selling, general
and administrative expense on the accompanying financial statements.
These non-interest bearing payables are due on demand and unsecured.
NOTE 6 STOCKHOLDERS' DEFICIENCY
The Company accounts for equity based compensation in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation". The standard requires the Company to adopt the
"fair value" method with respect to equity-based compensation of
consultants and other non-employees. For financial statement disclosure
purposes, the fair market value of each stock option granted during the
period ended September 30, 2002 was estimated on the date of grant using
the Black-Scholes Pricing Model in accordance with FASB No. 123 using the
following weighted average assumptions: expected dividend yield 0%,
risk-free interest rate of 3.21%, volatility of 0% and expected term of
five years.
The Company issued a total of 40,000 options to four consultants to
purchase 40,000 shares of the Company's common stock at an exercise price
of $.01 during August 2002. The fair value of the option issuances was
estimated, using the Black-Scholes Pricing Model as described in the
previous paragraph, at $60,589. The option issuances were granted as
payment in full for four one-year consulting contracts, which all
terminate in August 2003. Therefore the Company has expensed $15,147 as
consulting fee expense in the accompanying statement of operations and
has deferred $45,442 over the remaining lives of the contracts, which is
presented as deferred consulting expense on the balance sheet of the
accompanying financial statements.
There were no options exercised during the period ended September 30,
2002.
The Company did not adopt the fair value method, in accordance with SFAS
123, with respect to employee stock options. The Company accounts for
employee stock options under the "intrinsic value" method in accordance
with APB 25. For the period from August 6, 2001 (inception) through
September 30, 2002, the Company did not issue options to employees.
Therefore, there was no financial statement impact for employee option
issuances for the periods presented.
The Company issued 4,000,000 shares of common stock to thirty-eight
investors during December 2001 for a subscription receivable of $4,000.
In connection with the subscription receivable, the Company entered into
thirty-eight note receivable agreements with the respective investors,
which all mature during 2002. (See Note 10 for discussion of subsequent
proceeds from subscriptions receivable). During February 2002, the
Company issued 1,000,000 shares of common stock to OED related to the
license agreement discussed in Note 7 and capitalized the full amount as
licensing fees.
NOTE 7 LICENSE AND CONSULTING AGREEMENTS
On February 15, 2002, the company entered into a License Agreement (the
"Agreement") with OED. Under the terms of the Agreement, OED grants to
the Company a worldwide license to make, use, lease and sell the licensed
products as the Company's sees fit. OED also grants the right to the
Company to sublicense to third parties the Property or aspects of the
Property with prior written consent of OED. OED retains an irrevocable,
non-exclusive, royalty-free right to use the Property solely for its
internal, non-commercial use. The Agreement will terminate on (i) the
date that the Company files a petition for bankruptcy, (ii) within thirty
days notice that the University's research agreement ceases to be in full
force, (iii) within sixty days notice by either party for due reason as
specified in the Agreement or (iv) the date for the last patent to expire
under the Agreement.
Under the Agreement, the Company agreed to pay to OED certain equity and
milestone licensing fees, which are being capitalized as they are paid in
the accompanying financial statements. As of September 30, 2002 and 2001
the Company paid $175,000 and $25,000, respectively in licensing fees
which is included in the balance
F-8
MANHATTAN PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to Financial Statements
sheet as intellectual property rights (See Note 2).
In relation to the Agreement, the Company entered into a consulting
agreement with Oleoyl-estrone Developments, SL ("OED"). The agreement
became effective during February 2002, at a fee of $6,250 per month, and
will terminate when the license agreement terminates. The fees associated
with the consulting agreement are expensed in the accompanying financial
statements. OED agreed to serve as a member of the Company's Scientific
Advisory Board and to render consultative and advisory services to the
Company. Such services include research, development and clinical testing
of the Company's technology as well as the reporting of the findings of
such tests, assistance in filing of patents and oversight and direction
of efforts in regards to personnel for clinical development.
NOTE 8 PRIVATE PLACEMENT
During the period ended September 30, 2002, the Company commenced a
private placement share offering wherein it offered to accredited
investors a minimum amount of 312,500 shares and a maximum amount of
937,500 shares of common stock. The purchase price per share was $1.60
per share with an individual minimum investment of $50,000, although the
Company may accept, at their discretion, subscriptions for lesser
amounts. As of September 30, 2002, the Company had not closed on any
proceeds related to the offering. In connection with this private
placement offering the Company incurred offering costs of $8,706 which
have been deferred.
NOTE 9 GOING CONCERN
The Company's financial statements have been prepared on a going concern
basis which contemplated the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The Company
has a net loss from operations of $630,325 since inception, a negative
cash flow from operating activities of $365,418 since inception, a
working capital deficiency of $839,482 and a stockholders' deficiency of
$568,736. The Company's working capital deficiency may not enable it to
meet such objectives as presently structured. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
The ability of the Company to continue as a going concern is dependent on
the Company's ability to obtain additional financing and achieve
profitable operations. Management believes that actions presently taken
to obtain additional financing and its business plan to achieve
profitable operations will provide the opportunity for the Company to
continue as a going concern.
NOTE 10 SUBSEQUENT EVENTS
During October 2002, the Company received an additional $80,000 of
operating funds from the Stockholder referred to in Note 4. The loans are
unsecured and bear interest at 5%.
During October 2002, the Company received proceeds of $4,000 as payment
in full of the $4,000 subscription receivable.
F-9
INTRODUCTION TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Atlantic Technology Ventures, Inc. recently signed a merger agreement with
Manhattan Pharmaceuticals, Inc. providing for the merger of a wholly owned
subsidiary of Atlantic into Manhattan. If the merger is consummated,
shareholders of Manhattan will be issued approximately 92,647,100 shares of
Atlantic which represents 80% of Atlantic's post-merger outstanding capital
stock. We anticipate that the merger will close in the first quarter of 2003.
The merger will be recorded as a reverse acquisition since the Manhattan
stockholders become the controlling stockholders of Atlantic. Based on the
recent thirty-day average price of Atlantic's common stock of $0.12, the
preliminary estimate of the total purchase price is approximately $2,979,413. On
completion of a valuation, it is expected that the combined company will record
intangible assets (patents and licenses) for substantially all of the purchase
price.
The Unaudited Pro Forma Condensed Combined Statements of Operations
combine the historical consolidated statements of operations of Atlantic and
Manhattan. The Unaudited Pro Forma Condensed Combined Balance Sheet combines the
historical consolidated balance sheet of Atlantic and the historical
consolidated balance sheet of Manhattan, giving effect to the merger as if it
had been consummated on September 30, 2002.
You should read this information in conjunction with the:
o accompanying notes to the Unaudited Pro Forma Condensed Combined
Financial Statements;
o separate historical unaudited financial statements of Atlantic as of
and for the nine months ended September 30, 2002 and for the period
from July 13, 1993 (inception) to September 30, 2002 included in
Atlantic's Quarterly Report on Form 10-QSB for the nine month period
ended September 30, 2002, which is included in this document;
o separate historical financial statements of Manhattan as of and for
the nine months ended September 30, 2002 and for the period ended
December 31, 2001; and
o separate historical financial statements of Atlantic for the year
ended December 31, 2001 included in Atlantic's Annual Report on Form
10-KSB for the year ended December 31, 2001, and for the period from
July 13, 1993 (inception) to December 31, 2001, which is incorporated
by reference into this document.
We present the unaudited pro forma condensed combined financial
information for informational purposes only. The pro forma information is not
necessarily indicative of what our financial position or results of operations
actually would have been had we completed the merger on September 30, 2002. In
addition, the unaudited pro forma condensed combined financial information does
not purport to project the future financial position or operating results of the
combined company.
We prepared the unaudited pro forma condensed combined financial
information using the purchase method of accounting with Manhattan treated as
the acquirer. Accordingly, Manhattan's cost to acquire Atlantic will be
allocated to the assets acquired and liabilities assumed based upon their
estimated fair values as of the date of acquisition. The allocation is dependent
upon certain valuations and other studies that have not progressed to a stage
where there is sufficient information to make a definitive allocation.
Accordingly, the purchase price allocation pro forma adjustments are preliminary
and have been made solely for the purpose of providing unaudited pro forma
condensed combined financial information.
F-10
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
(DEVELOPMENT STAGE COMPANIES)
As of September 30, 2002
Atlantic Manhattan
Technology Pharmaceuticals Pro forma Pro forma
Ventures, Inc. Inc. Adjustments Combined
Assets ------------ --------------- ----------- ---------
Current assets:
Cash and cash equivalents $ 375,845 3,279 (200,000) (e) 179,124
Prepaid expenses 81,614 -- -- 81,614
Deferred consulting expense -- 45,442 -- 45,442
------------ ------------ ------------ ---------
Total current assets 457,459 48,721 (200,000) 306,180
Property and equipment, net 70,237 -- (55,000) (f) 15,237
Intangible assets -- -- 2,979,413 2,979,413
Other assets 19,938 8,706 -- 28,644
------------ ------------ ------------ ---------
Total assets $ 547,634 57,427 (2,724,413) 3,329,474
============ ============ ============ =========
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities:
Accounts payable and accrued
expenses $ 503,945 205,542 -- 709,487
Note and interest payable -- 601,346 -- 601,346
Due to stockholder -- 30,000 -- 30,000
Due to affiliate -- 51,315 -- 51,315
------------ ------------ ------------ ---------
Total current liabilities $ 503,945 888,203 -- 1,392,148
Stockholders' equity (deficiency):
Preferred stock 379 -- (379) (a) --
Preferred warrants 520,263 -- (520,263) (a) --
Common Stock 16,990 5,000 93,819 (b) 115,809
Additional paid-in capital 27,411,259 60,589 (24,753,966) (g) 2,717,882
Deficit accumulated during (27,904,660) (892,365) 27,904,660 (c) (892,365)
development stage
------------ ------------ ------------ ---------
44,231 (826,776) 2,723,871 1,941,326
Less common stock subscriptions
receivable (218) (4,000) 218 (d) (4,000)
Less treasury stock, at cost (324) -- 324 (d) --
------------ ------------ ------------ ---------
Total stockholders'
equity (deficiency) 43,689 (830,776) 2,724,413 1,937,326
------------ ------------ ------------ ---------
Total liabilities and
stockholders' equity (deficiency) $ 547,634 57,427 2,724,413 3,329,474
============ ============ ============ =========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
F-11
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
(DEVELOPMENT STAGE COMPANIES)
For the Nine Months Ended September 30, 2002
Atlantic Manhattan
Technology Pharmaceuticals, Pro forma Pro forma
Ventures, Inc. Inc. Adjustments Combined
--------------- --------------- ------------ -----------
License Revenues: 500,000 $ -- $ -- $ --
------------ ------------ ------------ ------------
Costs and expenses:
Research and development 467,153 377,654 -- 844,807
Amortization of intangibles -- -- 223,456 (h) 223,456
Consulting fees -- 217,885 -- 217,885
General and administrative 1,219,356 227,917 -- 1,447,273
------------ ------------ ------------ ------------
Total operating expenses 1,686,509 823,456 223,456 2,733,421
------------ ------------ ------------ ------------
Operating loss (1,686,509) (823,456) (223,456) (2,733,421)
Other (income) expense:
Interest and other (income) (10,255) 12,113 -- 1,858
expense
------------ ------------ ------------ ------------
Total other (income) expense (10,255) 12,113 -- 1,858
------------ ------------ ------------ ------------
Net loss (1,176,254) $ (835,569) $ (223,456) (2,735,279)
============ ============ ============ ============
Preferred stock dividend issued in
preferred shares 65,760 -- -- 65,760
------------ ------------ ------------ ------------
Net loss applicable to common (1,242,014) $ (835,569) $ (223,456) (2,801,039)
shares
============ ============ ============ ============
Net loss per common share:
Basic and diluted (0.02)
============
Weighted average shares of common stock outstanding:
Basic and diluted 115,808,875
============
See accompanying notes to unaudited pro forma condensed combined financial
statements.
F-12
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
(DEVELOPMENT STAGE COMPANIES)
For the Year Ended December 31, 2002
Manhattan
Pharmaceuticals,
Inc.
Atlantic Technology For the period from
Ventures, Inc. August 6, 2001
For the year ended (inception) to Pro forma Pro forma
December 31, 2001 December 31, 2001 Adjustments Combined
-------------------- ------------------- ----------- ----------
Revenues:
Development revenue $ 2,461,922 $ -- $ -- 2,461,922
Grant revenue 250,000 -- -- 250,000
----------- ----------- ----------- -----------
Total revenues $ 2,711,922 $ -- $ -- $ 2,711,922
----------- ----------- ----------- -----------
Costs and expenses:
Cost of development revenue 2,082,568 -- -- 2,082,568
Research and development 886,716 27,500 -- 914,216
Amortization of intangibles -- -- 297,941 (h) 297,941
Consulting Fees -- 27,736 -- 27,736
General and administrative 2,771,407 1,560 -- 2,772,967
Compensation expense (benefit) relating to stock
warrants (general and administrative), net 78,611 -- -- 78,611
----------- ----------- ----------- -----------
Total operating expenses 5,819,302 56,796 297,941 6,174,039
----------- ----------- ----------- -----------
Operating loss (3,107,380) (56,796) (297,941) (3,462,117)
Other (income) expense:
Interest and other income (42,010) -- -- (42,010)
Gain on sale of Optex assets (2,569,451) -- -- (2,569,451)
Loss on sale of Gemini assets 334,408 -- -- 334,408
Equity in loss of affiliate 67,344 -- -- 67,344
Distribution to minority shareholders 837,274 -- -- 837,274
----------- ----------- ----------- -----------
Total other income (1,372,435) -- -- (1,372,435)
----------- ----------- ----------- -----------
Net loss $(1,734,945) $ (56,796) $ (297,941) (2,089,682)
=========== =========== =========== ===========
Imputed convertible preferred stock dividend 600,000 -- -- 600,000
Dividend paid upon repurchase of Series B 167,127 -- -- 167,127
Preferred stock dividend issued in
preferred shares 107,449 -- -- 107,449
----------- ----------- ----------- -----------
Net loss applicable to common shares $(2,609,521) $ (56,796) $ (297,941) (2,964,258)
=========== =========== =========== ===========
Net loss per common share:
Basic and diluted (0.03)
===========
Weighted average shares of common stock outstanding:
Basic and diluted 115,808,875
===========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
F-13
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(DEVELOPMENT STAGE COMPANIES)
(1) DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
The merger is expected to be completed in the first quarter of 2003. The
Unaudited Pro Forma Condensed Combined Statements of Operations combine the
historical consolidated statements of operations of Atlantic, a public company,
and Manhattan. The merger agreement, dated December 17, 2002, provides for the
stockholders of Manhattan exchanged all of their shares of Manhattan stock for
92,647,100 shares of common stock of Atlantic. The merger, which is subject to
shareholder approval, will be recorded as a reverse acquisition since the
Manhattan stockholders become the controlling stockholders of Atlantic. Based on
the recent thirty-day average price of Atlantic's common stock of $0.12, the
preliminary estimate of the total purchase price approximates $2,979,413. Upon
completion of a valuation, it is expected that the combined company will record
intangible assets (patents and licenses) for substantially all of the purchase
price.
We recognize that if the final valuation, which is expected to be
completed within three to six weeks from the completion of the merger, derives
different amounts from our preliminary estimate, we will adjust the combined
condensed financial statements.
The merger will be accounted for as a purchase by Manhattan under
accounting principles generally accepted in the United States of America. Under
the purchase method of accounting, the assets and liabilities of Atlantic will
be recorded as of the acquisition date, at their respective fair values, and
combined with those of Manhattan. The reported financial condition and results
of operations of Manhattan after completion of the merger will reflect these
values, but will not be restated retroactively to reflect the historical
financial position or results of operations of Atlantic. The merger is subject
to customary closing conditions, including regulatory approvals, as well as
approval by Atlantic and Manhattan shareholders of certain merger-related
proposals.
(2) pro forma adjustments
(a) To reflect conversion of preferred stock and preferred warrants to
4,044,634 shares of common stock.
(b) To reflect issuance of 92,647,100 shares to the common shareholders of
Manhattan and the conversion of Atlantic's preferred stock and preferred
warrants and the exchange of certain common stock warrants in connection
with the merger.
(c) To eliminate deficit accumulated during development stage of Atlantic and
to record (1) the estimated in-process research and development charge
based on the preliminary estimated purchase price of Atlantic and (2)
estimated expenses associated with the merger.
(d) To eliminate subscriptions receivable and treasury stock of Atlantic.
(e) To reflect estimated merger expenses.
(f) To reflect the fair value of property and equipment.
(g) To eliminate historical paid in capital of Atlantic and to reflect issuance
of new common shares in connection with the merger.
(h) To record amortization expense of intangible assets (patents and licenses)
assuming a weighted average ten year life.
F-14