UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31 2006
[ ] 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 Identification No.)
Incorporation or organization)
101 Convention Center Drive, Suite 310
Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip)
702-735-7001
Issuer's telephone number, including area code
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, as
amended, during the preceding twelve (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 is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [x]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes[x] No[ ]
The number of shares of common stock issued and outstanding as of May 11, 2006
was 142,221,315.
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page No.
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005... 3
Consolidated Statements of Operations for the period from Inception
(September 5, 1994) to March 31, 2006, and for the Three (3) Months
Ended March 31, 2006 and 2005........................................... 4
Consolidated Statements of Shareholder's Equity (Deficit) for
the period from Inception (September 5, 1994) to March 31, 2006.......... 5
Consolidated Statements of Cash Flow for the period from Inception
(September 5, 1994) to March 31, 2006 and for the Three (3) Months
Ended March 31, 2006 and 2005........................................... 6
Notes to Interim Financial Statements.................................... 7
Item 2. Management's Discussion and Analysis and Plan of Operation...... 12
Item 3. Controls and Procedures......................................... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... 17
Item 1A. Risk Factors.................................................... 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..... 25
Item 3. Defaults Upon Senior Securities................................. 25
Item 4. Submission of Matters to a Vote of Security Holders............. 25
Item 5. Other Information............................................... 25
Item 6. Exhibits........................................................ 25
Signatures
-2-
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of March 31, 2006 (unaudited) and December 31, 2005 (audited)
ASSETS
3/31/2006 12/31/2005
------------------ ----------------
CURRENT ASSETS:
Cash and cash equivalents $ 2,510,104 $ 456,463
Grants receivable - 51,117
Marketable securities - 496,068
Note receivable 250,000 250,000
Interest receivable 48,493 42,861
Prepaid expenses 38,132 10,587
------------------ ----------------
TOTAL CURRENT ASSETS 2,846,729 1,307,096
PROPERTY AND EQUIPMENT 187,923 206,803
------------------ ----------------
OTHER ASSETS:
Patent registration costs 691,973 700,798
Purchased technology rights 17,259 19,983
Organization costs-Samaritan Europe 4,453 -
Deposits 2,779 2,779
------------------ ----------------
TOTAL OTHER ASSETS 716,464 723,560
------------------ ----------------
$ 3,751,116 $ 2,237,459
================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 146,058 $ 267,945
Accrued officers' salaries 399,662 247,856
Common stock to be issued 1,300,000 46,259
------------------ ----------------
TOTAL CURRENT LIABILITIES 1,845,720 562,060
------------------ ----------------
SHAREHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized at $.001
par value, -0- issued and outstanding - -
Common stock, 250,000,000 shares authorized at $.001
par value, 141,155,238 and 136,866,274 issued
and outstanding 141,155 136,866
Additional paid-in capital 36,972,263 35,589,683
Deferred compensation (7,400) (40,034)
Treasury stock (250,248) (250,248)
Accumulated other comprehensive income (20,420) (24,472)
Accumulated deficit during development stage (34,929,954) (33,736,396)
------------------ ----------------
TOTAL SHAREHOLDERS' EQUITY 1,905,396 1,675,399
------------------ ----------------
$ 3,751,116 $ 2,237,459
================== ================
See accompanying notes to the consolidated financial statements (unaudited)
-3-
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) TO MARCH 31, 2006
AND FOR THE QUARTERS ENDED MARCH 31, 2006 AND 2005
From
Inception
(09/05/94) Three months ended March 31,
To ----------------------------------
March 31, 2006 2006 2005
--------------------- --------------- ---------------
REVENUES:
Consulting $ 300,000 $ - $ -
Government research grants 278,640 21,793 -
--------------------- --------------- ---------------
578,640 21,793 -
--------------------- --------------- ---------------
EXPENSES:
Research and development 10,328,990 589,219 727,097
Interest, net (55,699) (8,954) (17,018)
General and administrative 24,320,536 597,138 544,183
Depreciation and amortization 1,280,736 34,787 7,294
Other (income)loss (365,970) 3,160 -
--------------------- --------------- ---------------
35,508,593 1,215,350 1,261,556
--------------------- --------------- ---------------
NET LOSS (34,929,954) (1,193,558) (1,261,556)
Other Comprehensive Income (loss)
Unrealized loss on marketable securities - 3,933 883
Foreign currency translation adjustment (20,420) 120 (5,624)
--------------------- --------------- ---------------
Total Comprehensive loss $ (34,950,374) $ (1,189,505) $ (1,266,297)
===================== =============== ===============
Loss per share, basic and diluted $ (0.79) $ (0.01) $ (0.01)
===================== =============== ===============
Weighted average number of shares outstanding:
Basic and diluted 43,993,716 137,246,545 132,439,600
===================== =============== ===============
See accompanying notes to the consolidated financial statements (unaudited)
-4-
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) TO March 31, 2006
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
Number Par Value Reserved Additional
of Common for Paid in
Shares Stock Conversion Capital Warrants
------------- ---------- ---------- ------------ -----------
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 - - - - -
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 11,426,733 11,427 - 4,289,511 -
Shares issued as compensation,
expensed 2,081,249 2,081 - 1,788,397 -
Amortization of deferred
compensation - - - - -
Shares issued for previously
purchased shares 83,332 83 - 12,417 -
Exercise of stock options 16,950,468 16,951 - 4,841,869 -
Exercise of warrants 635,000 635 - 449,365 -
Shares issued in connection
with equity financing 8,758,240 8,758 - 3,091,243 -
Stock retired in settlement of
subscriptions receivable (13,869,656) (13,870) - (5,964,798) -
Shares reacquired in settlement
of judgement (250,000) (250) - (231,100) -
Stock options issued for services - - - 567,771 -
Other comprehensive income (loss) - - - - -
Net Loss - - - - -
------------ ---------- ---------- ------------ -----------
December 31, 2004 132,030,199 132,030 - 33,697,043 -
Shares issued as compensation,
expensed 398,900 399 - 196,785 -
Amortization of deferred
compensation - - - - -
Exercise of stock options 170,000 170 - 31,330 -
Shares issued in connection
with equity financing 4,267,175 4,267 - 1,599,473 -
Stock options issued for services - - - 65,052 -
Other comprehensive income (loss) - - - - -
Net loss - - - - -
------------ ---------- ---------- ------------ -----------
December 31, 2005 136,866,274 136,866 - 35,589,683 -
Shares issued as compensation,
expensed - - - - -
Amortization of deferred
compensation - - - - -
Exercise of stock options - - - - -
Shares issued in connection
with equity financing 4,288,964 4,289 - 1,370,484 -
Stock options issued for
services - - - 12,096 -
Other comprehensive income (loss) - - - - -
Net loss - - - - -
------------ ---------- ---------- ------------ -----------
March 31, 2006 (Unaudited) 141,155,238 $ 141,155 $ - $36,972,263 $ -
============ ========== ========== ============ ===========
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 March 31, 2006
Accumulated
Other Stock Total
Deferred Comprehensive Subscriptions Treasury Accumulated Shareholders'
Compensation Income 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-
Accumulated
Other Stock Total
Deferred Comprehensive Subscriptions Treasury Accumulated Shareholders'
Compensation Income Receivable Shares Deficit Deficit
------------- ------------ ------------ ----------- ------------- ---------------
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 - - - - - 4,300,938
Shares issued as compensation,
expensed (544,416) - - - - 1,246,062
Amortization of deferred
compensation 240,000 - - - - 240,000
Shares issued for previously
purchased shares - - - - - 12,500
Exercise of stock options - - (4,858,820) - - -
Exercise of warrants - - - - - 450,000
Shares issued in connection
with equity financing - - - - - 3,100,001
Stock retired in settlement of
subscriptions receivable - - 5,978,668 - - -
Shares reacquired in settlement
of judgement - - - - - (231,350)
Stock options issued for services - - - - - 567,771
Other comprehensive income (loss) - (16,580) - - - (16,580)
Net Loss - - - - (4,864,361) (4,864,361)
------------ ------------- ----------- ---------- ------------ ----------------
December 31, 2004 (304,416) (16,580) - (250,248) (28,178,837) 5,078,992
Shares issued as compensation,
expensed (128,034) - - - - 69,150
Amortization of deferred
compensation 392,416 - - - - 392,416
Exercise of stock options - - - - - 31,500
Shares issued in connection
with equity financing - - - - - 1,603,740
Stock options issued for services - - - - - 65,052
Other comprehensive income (loss) - (7,892) - - - (7,892)
Net loss - - - - (5,557,559) (5,557,559)
------------ ------------ ----------- ---------- ------------ ----------------
December 31, 2005 (40,034) (24,472) - (250,248) (33,736,396) 1,675,399
Shares issued as compensation,
expensed - - - - - -
Amortization of deferred
compensation 32,634 - - - - 32,634
Exercise of stock options - - - - - -
Shares issued in connection
with equity financing - - - - - 1,374,773
Stock options issued for
services - - - - - 12,096
Other comprehensive income (loss) - 4,053 - - - 4,053
Net loss - - - - (1,193,558) (1,193,558)
------------ ------------ ----------- ---------- ------------ ----------------
March 31, 2006 (Unaudited) $ (7,400) $ (20,420) $ - $(250,248) $(34,929,954) 1,905,396
============ ============ =========== ========== ============ ================
See accompanying notes to the consolidated financial statements
-5-
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) AND FOR THE QUARTERS
ENDED MARCH 31, 2006 AND 2005
From
Inception
(September 5, 1994) Three Months Ended March 31,
To --------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: MARCH 31, 2006 2006 2005
--------------------- --------------------------------------------
Net loss $ (34,929,954) $ (1,193,558) $ (1,261,556)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,280,736 34,787 7,294
Stock based compensation 9,659,280 - -
Stock options issued for services 1,454,463 12,096 48,900
Amortization of deferred compensation 1,655,122 32,634 76,104
Foreign currency loss (20,420) 120 (5,624)
(Gains) losses on disposition of assets - 3,160
Other income (231,350) - -
(Increase) decrease in assets:
Accounts receivable - 51,117 -
Interest receivable and prepaids (99,865) (33,177) (7,925)
Deposits 12,941 - -
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 2,406,534 29,919 27,501
--------------------- ------------------- ------------------
NET CASH USED IN OPERATING ACTIVITIES (18,812,513) (1,062,902) (1,115,306)
--------------------- ------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of technology (108,969) - -
Purchase of furniture and equipment (340,620) (2,124) (9,488)
Organization costs, Samaritan-Europe (4,687) (4,687) -
Note receivable (250,000) - -
(Purchase) liquidation of marketable securities - 496,840 -
Patent registration costs (746,486) (2,000) (33,440)
--------------------- ------------------- ------------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,450,762) 488,029 (42,928)
--------------------- ------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from warrants/options 638,625 - -
Proceeds from debentures 642,120 - -
Proceeds from stock issued for cash 12,583,569 - -
Proceeds from equity financing 6,032,256 1,328,514 1,000,000
Common stock to be issued 1,552,309 1,300,000 -
Short-term loan repayments (288,422) - -
Short-term loan proceeds 1,612,922 - -
--------------------- ------------------- ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 22,773,379 2,628,514 1,000,000
--------------------- ------------------- ------------------
INCREASE (DECREASE) IN CASH 2,510,104 2,053,641 (158,234)
CASH AT BEGINNING OF PERIOD - 456,463 2,438,451
--------------------- ------------------- ------------------
CASH AT END OF PERIOD $ 2,510,104 $ 2,510,104 $ 2,280,217
===================== =================== ==================
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ - $ 150 150
NON-CASH FINANCING & INVESTING ACTIVITIES:
Purchase of net, non-cash assets of subsidiary
for stock $ 195,000 $ - $ -
Short-term debt retired through issuance
of stock $ 1,890,695 $ - $ -
Issuance of common stock, previously subscribed $ 226,259 $ 46,259 $ -
Treasury stock acquired through settlement
of judgement $ 250,248 $ - $ -
Stock subscriptions receivable $ 1,119,848 $ - $ -
Stock received in settlement $ (231,350) $ - $ -
Stock as compensation for services $ 6,533,527 $ - $ -
Stock issued in cancellation of accounts payable $ 4,248,938 $ - $ -
Exercise of stock options $ 4,858,820 $ - $ -
See accompanying notes to the consolidated financial statements (unaudited)
-6-
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2006
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-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
disclosures required for annual financial statements. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related footnotes for the year ended December 31, 2005,
included in the Form 10-K for the year then ended.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to fairly present the Company's financial
position as of March 31, 2006, and the results of operations and cash flows for
the three (3) month period ending March 31, 2006 have been included. The results
of operations for the three (3) month period ended March 31, 2006 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-K as filed with the U.S.
Securities and Exchange Commission on April 13, 2006 for the year ended December
31, 2005.
Note 2. Summary of Significant Accounting Policies
General
Samaritan Pharmaceuticals, Inc. (the Company) was formed in September 1994 and
became public in October 1997. The principle executive offices are located in
Las Vegas, Nevada.
Samaritan Pharmaceuticals, Inc. trades on the American Stock Exchange under the
symbol "LIV."
Samaritan Pharmaceuticals, Inc. 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 company with a clear
focus on advancing early stage innovative drugs through clinical development,
with the ultimate goal of bringing novel therapeutics and diagnostic products to
market.
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All inter-company balances and
transactions have been eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid temporary cash investments with an
original maturity of three (3) months or less to be cash equivalents.
-7-
The Company maintains its cash in bank accounts at high credit quality financial
institutions. The balances at times may exceed federally insured limits.
Revenue Recognition
The Company follows the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin 104 for revenue recognition. The Company recognizes
revenue when persuasive evidence of a final agreement exists, delivery has
occurred, the selling price is fixed or determinable and the ability to collect
on the final agreement is reasonably assured. Government research revenue,
consisting of grant income was recognized when the qualifying expenditure was
incurred.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the
straight line method over the estimated useful lives of the assets.
Intangibles
a) Legal fees associated with filing patents are recorded at cost and amortized
over 17 years. The Company has one (1) issued U.S. patent and thirteen (13)
pending patent applications in the U.S. to protect its proprietary methods and
processes. The Company also filed corresponding foreign patent applications for
certain of these U.S. patent applications. As of March 31, 2005, its patent
portfolio outside the U.S. comprised of two (2) issued patents and fifty-two
(52) pending patent applications. The issued U.S. patents and pending patent
applications relate to Alzheimer's, cancer, cardiovascular and HIV indications.
Certain U.S. patents may be eligible for patent term extensions under the
Hatch-Waxman Act and may be available to Samaritan for the lost opportunity to
market and sell the invention during the regulatory review process.
The Company reviews patent costs for impairment by comparing the carrying value
of the patents with the fair market value. The Company believes it will recover
the full amount of the patent costs based on forecasts of sales of the products
related to the patents. Patent registration costs are amortized over seventeen
(17) years once approved. Patent amortization expense was $10,825 and $0 for the
three months ended March 31, 2006 and 2005, respectively. Expected amortization
projected for the next five years is as follows:
------------- -----------
2006 $41,233
------------- -----------
2007 $38,798
------------- -----------
2008 $36,516
------------- -----------
2009 $34,638
------------- -----------
2010 $32,347
------------- -----------
b) Purchased technology rights are recorded at cost and are being amortized
using the straight line method over the estimated useful life of the technology.
Amortization was approximately $2,724 for the three months ended March 31, 2006
and $2,724 for the three months ended March 31, 2005. Accumulated amortization
at March 31, 2006 and December 31, 2005 was $91,710 and $88,986, respectively.
Amortization expense associated with these technology rights in the future will
be $10,896 for 2006 and $9,087 for 2007.
Loss Per Share
The Company reports loss per common share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." The per
share effects of potential common shares such as warrants, options, convertible
debt and convertible preferred stock have not been included, as the effect would
be antidilutive. The Company had 23,721,018 options outstanding at March 31,
2006, which were not included in the calculation.
-8-
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
affecting 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Income Taxes
Pursuant to the Statement of Financial Accounting Standards, No. 109 (SFAS 109)
"Accounting for Income Taxes," the Company accounts for income taxes under the
liability method. Under the liability method, a deferred tax asset or liability
is determined based upon the tax effect of the differences between the financial
statement and tax basis of assets and liabilities as measured by the enacted
rates, which will be in effect when these differences reverse.
Research and Development Costs
Research and development costs are expensed when incurred. Research and
development costs for the three (3) months ended March 31, 2006 and 2005, were
$589,219 and $727,097, respectively.
Impairment of Long-Lived Assets
The Company reviews long-lived assets and certain identifiable assets related to
those on a quarterly basis for impairment whenever circumstances and situations
change, such that there is an indication that the carrying amounts may not be
recovered. At March 31, 2006 the Company does not believe any impairment has
occurred.
Fair Value of Financial Instruments
Statement of Financial Accounting Standard No.107, "Disclosures about Fair Value
of Financial Instruments" (SFAS 107) requires the disclosure of fair value
information about financial instruments whether or not recognized on the balance
sheet, for which it is practicable to estimate the value. Where quoted, market
prices are not readily available, fair values are based on quoted market prices
of comparable instruments. The carrying amount of cash, accounts receivable,
accounts payable and accrued expenses approximates fair value because of the
short maturity of those instruments.
Marketable Securities
At December 31, 2005, the Company held a brokered Certificate of Deposit with a
total market value of $496,068. It originally cost $500,000. Unrealized gains
and losses, determined by the difference between historical purchase price and
the market value at each balance sheet date, are recorded as a component of,
"Accumulated Other Comprehensive Loss in Shareholder's Equity." Realized gains
and losses will be determined by the difference between historical purchase
price and gross proceeds received when the marketable securities are sold.
During the first quarter of 2006, Samaritan sold the brokered Certificate of
Deposit. As of March 31, 2006, the company does not hold any brokered
Certificate of Deposits.
Foreign Currency Translation
Assets and liabilities of subsidiaries operating in foreign countries are
translated into U.S. dollars, using the exchange rate in effect at the balance
sheet date of historical rate, as applicable. Results of operations are
translated using the average exchange rates prevailing throughout the year. The
effects of exchange rate fluctuations on translating foreign currency assets and
liabilities into U.S. dollars are included in stockholders equity (Accumulated
other comprehensive loss), while gains and losses resulting from foreign
currency transactions are included in operations.
Accrued Officers' Compensation
Accrued officer's compensation consists of the unpaid portion of the respective
officer's contract salary.
Common Stock To Be Issued
Unissued stock consists of proceeds received by year-end or period-end for stock
yet to be issued. Such amounts were or will be retired through the issuance of
shares subsequent to the balance sheet date.
-9-
Stock Based Compensation
In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R),
companies are required to measure the compensation costs of share-based
compensation arrangements based on the grant-date fair value and recognize the
costs in the financial statements over the period during which employees are
required to provide services. Share-based compensation arrangements include
stock options, restricted share plans, performance-based awards, share
appreciation rights and employee share purchase plans. In March 2005 the SEC
issued Staff Accounting Bulletin No. 107, or (SAB 107). SAB 107 expresses views
of the staff regarding interaction between SFAS No. 123(R) and certain SEC rules
and regulations It also provides the staff's views regarding the valuation of
share-based payment arrangements for public companies. SFAS No. 123(R) permits
public companies to adopt its requirements using one of two methods. On April
14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS
123R. Companies may elect to apply this statement either prospectively, or on a
modified version of retrospective application under which financial statements
for prior periods are adjusted on a basis consistent with the pro forma
disclosures required for those periods under SFAS 123. Effective January 1,
2006, the Company has fully adopted the provisions of SFAS No. 123R and related
interpretations as provided by SAB 107. As such, compensation cost is measured
on the date of the grant as the excess of the current market price of the
underlying stock over the exercise price. Such compensation amounts, if any, are
amortized over the respective vesting periods of the option grant. The Company
applies this statement prospectively.
New Accounting Pronouncements
In February 2006, the FASB issued FASB Statement No. 155, which is an amendment
of FASB Statements No. 133 and 140. This Statement; a) permits fair value
remeasurement for any hybrid financial instrument containing an embedded
derivative that otherwise would require bifurcation; b) clarifies which
interest-only strip and principal-only strip are not subject to the requirements
of Statement 133; c) establishes a requirement to evaluate interests in
securitized financial assets to identify interests that are freestanding
derivatives or hybrid financial instruments containing an embedded derivative
requiring bifurcation; d) clarifies concentrations of credit risk in the form of
subordination are not embedded derivatives; and e) amends Statement 140 to
eliminate the prohibition on a qualifying special-purpose entity from holding a
derivative financial instrument pertaining to a beneficial interest other than
another derivative financial instrument. This Statement is effective for
financial statements for fiscal years beginning after September 15, 2006.
Earlier adoption of this Statement is permitted as of the beginning of an
entity's fiscal year, provided the entity has not yet issued any financial
statements for that fiscal year. Management believes this Statement will have no
impact on the financial statements of the Company once adopted.
In March 2006, the FASB issued FASB Statement No. 156, which amends FASB
Statement No. 140. This Statement establishes, among other things, the
accounting for all separately recognized servicing assets and servicing
liabilities. This Statement amends Statement 140 to require all separately
recognized servicing assets and servicing liabilities be initially measured at
fair value, if practicable. This Statement permits, but does not require, the
subsequent measurement of separately recognized servicing assets and servicing
liabilities at fair value. An entity using derivative instruments to mitigate
the risks inherent in servicing assets and servicing liabilities is required to
account for those derivative instruments at fair value. Under this Statement, an
entity may elect subsequent fair value measurement to account for its separately
recognized servicing assets and servicing liabilities. By electing that option,
an entity may simplify its accounting because this Statement permits income
statement recognition of the potential offsetting changes in fair value of those
servicing assets and servicing liabilities and derivative instruments in the
same accounting period. This Statement is effective for financial statements for
fiscal years beginning after September 15, 2006. Earlier adoption of this
Statement is permitted as of the beginning of an entity's fiscal year, provided
the entity has not yet issued any financial statements for that fiscal year.
Management believes this Statement will have no impact on the financial
statements of the Company once adopted.
-10-
Note 3. 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 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 (3) Three (3)
Months Ended Months Ended
March 31, 2006 March 31, 2005
-------------- --------------
Net Loss:
As reported $(1,193,558) $(1,261,556)
Pro Forma $(1,193,558) $(1,261,556)
Basic and diluted loss per common share:
As reported $ (0.01) $ (0.01)
Pro Forma $ (0.01) $ (0.01)
The Company utilizes the Black-Scholes option-pricing model to calculate the
fair value of each individual issuance of options with the following assumptions
used for grants during the three months ended March 31, 2006 and 2005. The
per-share weighted average fair value of stock options granted during the three
months ended March 31, 2006 and 2005 was $0.27 and $0.15, respectively. On the
date of grant, using the Black-Scholes pricing model, the following assumptions
were used for the three (3) months ended March 31, 2006:
Three (3) Three (3)
Months Ended Months Ended
March 31, 2006 March 31, 2005
-------------- --------------
Expected dividend yield 0% 0%
Risk-free interest rate 5% 5%
Quarterly volatility 80% 31%
At March 31, 2006, the range of exercise price for all of the Company's
outstanding stock options was $0.10 to $1.26, with an average remaining life of
seven (7) years and an average exercise price of $0.60.
Stock Options
The following table summarizes the Company's stock options outstanding at March
31, 2006:
Weighted
average
Shares exercise price
----------- --------------
Outstanding and exercisable at December 31, 2005 23,856,018 $ 0.60
Granted 45,000 0.40
Exercised - -
Expired (180,000) (1.36)
----------- --------------
Outstanding and exercisable at March 31, 2006 23,721,018 $ 0.60
=========== ==============
-11-
During the three months ended March 31, 2006, the Company issued 45,000 stock
options for services rendered. The options were valued using the Black-Scholes
option pricing. They were valued at $12,096 which was expensed in the three
months ended March 31, 2006.
Note 4. Shareholder's Equity
Stock as Compensation and Settlement Of Debt
The Company issues stock as compensation for services valuing such issues
premised upon the fair market value of the stock.
During the three (3) months ended March 31, 2006 and the year ended December 31,
2005, the Company also issued 4,288,964 and 4,267,175 shares, respectively, in
connection with the common stock purchase agreement with Fusion Capital. The
gross proceeds for these shares were $1,374,773 and $1,603,740, respectively,
for the three months ended March 31, 2006 and the year ended December 21, 2005.
Authorized Capital Stock
The Company has 250,000,000 authorized shares of common stock and 5,000,000
authorized shares of preferred stock.
Note 5. Subsequent Events
The Company also completed the following two (2) private placements: On March 1,
2006, the Company received a qualified subscription for 4,000,000 shares of
common stock at a purchase price of $0.25 per share for total proceeds equal to
$1,000,000. As of May 9, 2006, the Company received qualified subscriptions for
1,612,500 shares of common stock at a purchase price of $0.40 per share for
total proceeds equal to $645,000, plus warrant coverage equal to one hundred
percent (100%) of the total number of shares subscribed for at $1.00 per share.
On May 12, 2006, the American Stock Exchange approved the Company's additional
listing application for the above transactions.
On April 26, 2006, the Company issued 200,000 shares of Common Stock at a price
of $0.20 per share upon the exercise of stock options.
On May 03, 2006, the Company issued 225,926 shares of Common Stock at a price of
$0.20 per share upon the exercise of stock options
On May 03, 2006, the Company issued 25,000 shares of Common Stock at a price of
$0.18 per share upon the exercise of stock options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
Introduction - Forward Looking Statements
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the Reform Act), Samaritan Pharmaceuticals, Inc.,
(the Company or Samaritan) is hereby providing cautionary statements identifying
important factors that could cause the Company's actual results to differ
materially from those projected in forward-looking statements made herein. Any
statements expressing, or involving discussions as to expectations, beliefs,
plans, objectives, assumptions of future events or performance are not
statements of historical facts and may be forward-looking. These forward-looking
statements are based largely on Samaritan's expectations and are subject to a
number of risks and uncertainties, including but not limited to, economic,
competitive, regulatory, growth strategies, available financing and other
factors discussed elsewhere in this report and in documents filed by Samaritan
with the U.S. Securities and Exchange Commission (SEC). Many of these factors
are beyond Samaritan's control. Actual results could differ materially from the
forward-looking statements made. In light of these risks and uncertainties,there
can be no assurance the results anticipated in the forward-looking information
contained in this report will, in fact, occur.
Any forward-looking statement speaks only to the date on which such statement is
made, and Samaritan undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Nor can management assess the impact
of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
-12-
General
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements (unaudited) and the Notes included herein. The
information contained below includes statements of Samaritan's or management's
beliefs, expectations, hopes, goals and plans that, if not historical, are
forward-looking statements subject to certain risks and uncertainties that could
cause actual results to differ materially from those anticipated in the
forward-looking statements.
Overview
Samaritan Pharmaceuticals, Inc. is a small cap biopharmaceutical
company focused on the development of novel therapeutic and diagnostic products.
We have devoted substantially all of our resources to undertaking drug discovery
and development programs.
The majority of our resources have been expended in the pursuit of Food
and Drug Administration (FDA) required preclinical studies and Phase II/III
clinical trials for Samaritan's HIV drug, SP-01A (Sphirewall), an oral entry
inhibitor. In a previous Phase I/II study, SP-01A was observed to significantly
lower the amount of HIV in the blood, improve quality of life (how well subjects
have felt), have a favorable safety profile (minimal side effects) and be
well-tolerated. Moreover, in vitro testing of SP-01A: (a) demonstrated
comparable or greater efficacy than currently approved anti-HIV drugs in
preventing HIV virus replication; (b) was observed to have minimal toxic effect
on human cells; and (c) demonstrated significant efficacy in preventing virus
replication of HIV virus strains resisting currently approved anti-HIV
treatments. The goal of our SP-01A monotherapy study, which is currently
recruiting patients, is to look further at the dose response, efficacy and
safety of SP-01A as monotherapy, given as a capsule to be swallowed, in the
treatment of HIV-infected subjects.
In addition, and at the same time, Samaritan has devoted major
resources to its Alzheimer's technology, which features: (a) three (3)
therapeutics: SP-04, SP-08 and SP-233; (b) two (2) stem cell, neuron
differentiation therapies:
SP-sc4 and SP-sc7; (c) a predictive Alzheimer's diagnostic; and (d) an
Alzheimer's animal model. Samaritan has also devoted resources to its cancer
drug, SP-C007, a breast cancer diagnostic and its cholesterol recognition
peptide, which plays a role in transforming and binding LDL cholesterol while
subsequently raising HDL.
Samaritan has established its European headquarters in Athens, Greece,
which we believe will allow access to the markets of Eastern Europe, Asia and
Africa, regions with a high proportion of HIV patients and a target population
for our most advanced drug, SP-01A. Samaritan Pharmaceuticals Europe ("Samaritan
Europe") is currently seeking to build a sales and marketing infrastructure
through distribution agreements for niche, high valued products from other
companies in the fields of HIV/infectious diseases, CNS, cancer/oncology and
cardiovascular diseases for the normally undeveloped regions of Greece,
Bulgaria, Romania, Croatia, Serbia, Bosnia and Slovenia. Samaritan
Pharmaceuticals Europe: (a) has established a manufacturing arm in Ireland with
Pharmaplaz, LTD; (b) plans to develop its pipeline of drugs through clinical
trials in preparation for European approval; (c) plans to increase its
university research collaborations and (d) plans to apply for applicable
European grants.
Plan and Results of Operations
We have used the proceeds from private placement of our capital stock,
primarily to expand our preclinical and clinical efforts, as well as for general
working capital. At this time, we are beginning to commit additional resources
to the development of SP-01A, as well as for the development of our other drugs.
Additional details regarding the human trials and INDs the Company
plans to file may be found in the section entitled "Description of Business" in
the Company's Annual Report on Form 10-K filed with the SEC on April 13, 2006
for the fiscal year ended December 31, 2005.
Results of Operations For The Three (3) Months Ended March 31, 2006 As Compared
To The Three (3) Months Ended March 31, 2005
During the quarter ended March 31, 2006, we incurred research
expenditures pursuant to a grant received from the U.S. Department of Health and
Human Services. We recognized grant revenue of $21,793, the extent of such
qualifying expenditures.
-13-
We incurred research and development expenses of $589,219 for the
quarter ended March 31, 2006, as compared to $727,097 for the quarter ended
March 31, 2005. This decrease of $137,878, or nineteen percent (19%), was
primarily attributable to fluctuations and timing of the costs associated with
our Phase IIb HIV clinical trial. We expect research and development
expenditures relating to drug discovery and development will increase during the
remainder of the 2006 and into subsequent years due to the expanding
requirements of FDA clinical trials: (a) for our HIV drug program; (b) our
Alzheimer's drug program; (c) the initiation of trials for other potential
indications; and (d) 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
preclinical testing and clinical trial-related activities.
General and administrative expenses increased to $597,138 for the
quarter ended March 31, 2006, as compared to $544,183 for the quarter ended
March 31, 2005. This increase of $52,955, or ten percent (10%), was primarily
attributable to an increase in cost of administrative, professional fees,
accounting, and legal personnel at Samaritan Europe to support the Company's
products for sales and marketing in Eastern Europe.
Depreciation and amortization amounted to $34,787 for the quarter ended
March 31, 2006, as compared to $7,294 for the quarter ended March 31, 2005. This
increase of $27,493, or three-hundred seventy-seven percent (377%), was
primarily attributable to depreciation of research equipment purchased during
the second quarter of 2005 and the inception of amortization on approved patents
later in 2005.
Net interest income amounted to $(8,954) and $(17,018) for the three
(3) months ended March 31, 2006 and 2005, respectively. The credit balance in
the interest expense account is attributable to offsetting interest earned from
holding our cash in marketable securities and certificates of deposits. Interest
income was $8,960 and $17,168, for the three (3) months ended March 31, 2006 and
2005, respectively. Interest expense was $7 and $150, for the three (3) months
ended March 31, 2006 and 2005, respectively.
We had a net loss of $1,193,558 for the quarter ended March 31, 2006,
as compared to $1,261,556 for the quarter ended March 31, 2005. The loss per
share for both quarterly periods was $0.01 per share. The decreased net loss of
$67,998 relates primarily to decreased research expenditures and grant income,
offset by increases in general, administrative, and depreciation expenses.
The net loss since our inception on September 5, 1994 through March 31,
2006 was $34,929,954. We expect losses to continue for the near future, and such
losses will likely increase as human clinical trials are undertaken in the
United States. Future profitability will be dependent upon our ability to
complete the development of our pharmaceutical products, obtain necessary
regulatory approvals and effectively market such products. In addition, future
profitability will require the Company to establish agreements with other
parties for clinical testing, manufacturing, commercialization and sale of its
products.
As of March 31, 2006, the Company's cash position was $2,510,104. We
are our continuing efforts to raise additional capital and to execute our
research and development plans. Even if we are successful in raising sufficient
money to carry out these plans, additional clinical development is necessary to
bring our products to market, which will require a significant amount of
additional capital.
Liquidity and Capital Resources
Cash used in operating activities during the three (3) month period
ended March 31, 2006 was $(1,062,902), as compared to $(1,115,306) for the three
(3) month period ended March 31, 2005. This decrease is primarily attributable
to fluctuations and timing of the cost with our Phase IIb HIV clinical trial.
Cash provided by investing activities was $488,029 for the three (3)
month period ended March 31, 2006, as compared to cash used of $(42,928) for the
three (3) month period ended March 31, 2005. During the quarter ended March 31,
2006, we liquidated a certificate of deposit which provided the proceeds.
Cash provided by financing activities was $2,628,514 for the three (3)
month period ended March 31, 2006, as compared to $1,000,000 for the three (3)
month period ended March 31, 2005, an increase of $1,628,514. This year's
results include proceeds of $1,300,000 from private placements (received but not
issued by March 31, 2006), which is not the case for the same period of 2005
when no private placements were conducted. The increase was due to proceeds from
the equity financing agreement.
-14-
Current assets as of March 31, 2006 were $2,846,729 as compared to
$1,307,096 as of December 31, 2005. This increase of $1,539,633, or one hundred
eighteen percent (118%), was primarily attributable to the receipt of proceeds
from the private placement activity fund development stage activities.
Augmenting the fund are the increased proceeds received through our equity
financing arrangement with Fusion Capital II, LLC ("Fusion Capital"). Current
liabilities as of March 31, 2006 were $1,845,720 as compared to $562,060 as of
December 31, 2005, a increase of $1,283,660. Because the shares relating to the
private placement were not issued, the current liabilities reflect proceeds from
the unissued shares.
On April 22, 2003, the company entered into a common stock purchase
agreement ("Purchase Agreement I") with Fusion Capital, pursuant to which Fusion
Capital has agreed to purchase shares of our common stock from time to time at
the Company's option up to an aggregate amount of $10,000,000. The SEC declared
effective the Company's registration statement on Form SB-2, Commission
Registration No. 333-105818 on October 9, 2003.
On May 12, 2005, we entered into a common stock purchase agreement
("Purchase Agreement II") with Fusion Capital, pursuant to which Fusion Capital
has agreed to purchase our common stock from time to time, at our option, up to
an aggregate amount of $40,000,000 over fifty (50) months commencing on the date
the SEC declared effective our registration statement covering the shares of
common stock to be purchased by Fusion Capital pursuant to such Purchase
Agreement II. On December 29, 2005 (Commission Registration No. 333-130356), the
registration statement was declared effective by the SEC. The number of
registered, yet not issued shares remaining under that registration statement as
of March 31, 2006, was 11,163,416.
The Company's dependence on raising additional capital will continue,
at least, until it is able to commercially market one (1) of its products at
significant sales level. Depending on profit margins and other factors, the
Company may still need additional funding to continue research and development
efforts. The Company's future capital requirements and the adequacy of its
financing depend upon numerous factors including: the successful
commercialization of the Company's drug candidates, progress in its product
development efforts, progress with preclinical studies and clinical trials, the
cost and timing of production arrangements, the development of effective sales
and marketing activities, the cost of filing, prosecuting, defending and
enforcing intellectual property rights, competing technological and market
developments, and the development of strategic alliances for the marketing of
its products.
We do not believe debt financing from financial institutions will be
available until at least one (1) of our products is approved for commercial
production. To date, none of our proprietary products have 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
research collaboration with Georgetown University and patent registration costs.
We have funded our operations through a series of private placements and
purchase agreements with Fusion Capital, which we believe will assist the
Company in meeting its cash needs. Except for our Purchase Agreements with
Fusion Capital, no commitment exists for continued investments, or for any
underwriting.
Even with our financing arrangements with Fusion Capital (as discussed
above), we may require substantial additional funds to sustain our operations
and to grow our business. The amount will depend, among other things, on (a) the
rate of progress and cost of our research and product development programs and
clinical trial activities; (b) the cost of preparing, filing, prosecuting,
maintaining and enforcing patent claims and other intellectual property rights;
and (c) 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 which may be expected to utilize
$5 to $20 million over a three (3) to six (6) 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 we will be able to do so in the event we seek
to do so. We need to obtain additional funds to develop our therapeutic 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 to which 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. Even if we are able to access the full amounts under Purchase
Agreements 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 selected 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. However, any of these options might have a material
adverse effect upon the Company. 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 have a material adverse effect on our
business, operating results, financial condition and prospects.
-15-
We have been able to meet our cash needs during the past twelve (12)
months through a combination of funds received through private placements and
funds received under the Purchase Agreement. We intend to continue to explore
avenues to obtain the capital needed for our operations through private
placements and by the sale of our shares to Fusion Capital.
Quantitative and Qualitative Information About Market Risk
We do not engage in trading market-risk sensitive instruments and do
not purchase hedging instruments or "other than trading" instruments likely to
expose us to market risk, whether interest rates, foreign currency exchange,
commodity price or equity price risk. We have no outstanding debt instruments,
have not entered into any forward or future contracts, have purchased no
options, and entered into no swaps. We have no credit lines or other borrowing
facilities, and do not view ourselves as subject to interest rate fluctuation
risk at the present time.
Exchange Risk
We are a multinational business operating in a number of countries with
the U.S. dollar as the primary currency in which we conduct business. The U.S.
dollar is used for planning and budgetary purposes and as the presentation
currency for financial reporting. We do, however, have costs, assets and
liabilities denominated in currencies other than U.S. dollars. Consequently, we
may enter into derivative financial instruments to manage our non-U.S. dollar
foreign exchange risk. We may use derivative financial instruments primarily to
reduce exposures to market fluctuations in foreign exchange rates. We do not
enter into derivative financial instruments for trading or speculative purposes.
All derivative contracts entered into will be in liquid markets with
credit-approved parties. The treasury function operates within strict terms of
reference that have been approved by our board of directors (the "Board").
The U.S. dollar is the base currency against which all identified
transactional foreign exchange exposures are managed and hedged. The principal
risks to which we are exposed are movements in the exchange rates of the U.S.
dollar against the Euro. The main exposures are net costs in Euro arising from a
manufacturing and research presence in Ireland, the sourcing of raw materials in
European markets and marketing and sales in South Eastern Europe.
Recently Issued Accounting Standards
In February 2006, the FASB issued FASB Statement No. 155, which is an
amendment of FASB Statements No. 133 and 140. This Statement: a) permits fair
value remeasurement for any hybrid financial instrument containing an embedded
derivative that otherwise would require bifurcation; b) clarifies which
interest-only strip and principal-only strip are not subject to the requirements
of Statement 133; c) establishes a requirement to evaluate interests in
securitized financial assets to identify interests that are freestanding
derivatives or hybrid financial instruments containing an embedded derivative
requiring bifurcation; d) clarifies concentrations of credit risk in the form of
subordination are not embedded derivatives; and e) amends Statement 140 to
eliminate the prohibition on a qualifying special-purpose entity from holding a
derivative financial instrument pertaining to a beneficial interest other than
another derivative financial instrument. This Statement is effective for
financial statements of fiscal years beginning after September 15, 2006. Earlier
adoption of this Statement is permitted as of the beginning of an entity's
fiscal year, provided the entity has not yet issued any financial statements for
that fiscal year. Management believes this Statement will have no impact on the
financial statements of the Company once adopted.
In March 2006, the FASB issued FASB Statement No. 156, which amends
FASB Statement No. 140. This Statement establishes, among other things, the
accounting for all separately recognized servicing assets and liabilities. This
Statement amends Statement 140 to require all separately recognized servicing
assets and liabilities be initially measured at fair value, if practicable. This
Statement permits, but does not require, the subsequent measurement of
separately recognized servicing assets and liabilities at fair value. An entity
using derivative instruments to mitigate the risks inherent in servicing assets
and liabilities is required to account for those derivative instruments at fair
value. Under this Statement, an entity can elect subsequent fair value
measurement to account for its separately recognized servicing assets and
liabilities. By electing that option, an entity may simplify its accounting
because this Statement permits income statement recognition of the potential
offsetting changes in fair value of those servicing assets and liabilities and
derivative instruments in the same accounting period. This Statement is
effective for financial statements for fiscal years beginning after September
15, 2006. Earlier adoption of this Statement is permitted as of the beginning of
an entity's fiscal year, provided the entity has not yet issued any financial
statements for that fiscal year. Management believes this Statement will have no
impact on the financial statements of the Company once adopted.
-16-
Opinion 20 previously required most voluntary changes in accounting
principles be recognized by including in the net income of the period of change
the cumulative effect of changing to the new accounting principle. This
Statement requires retrospective application to the prior periods' financial
statements of changes in the accounting principle, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of the
change. When it is impracticable to determine the period-specific effects of an
accounting change on one or more individual prior period presented, this
Statement requires the new accounting principle be applied to the balances of
assets and liabilities as of the beginning of the earliest period for which
retrospective application is practicable and a corresponding adjustment be made
to the opening balance of retained earnings (or other appropriate components of
equity or net assets in the statement of financial position) for that period
rather than being reported in an income statement. When it is impracticable to
determine the cumulative effect of applying a change in accounting principle to
all prior periods, this Statement requires the new accounting principle be
applied as if it were adopted prospectively from the earliest date practicable.
This Statement shall be effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. The Company does
not believe that the adoption of SFAS 154 will have a significant effect on its
financial statements.
Other accounting standards issued or proposed by the FASB, or other
standards-setting bodies, that do not require adoption until a future date, are
not expected to have a material impact on the consolidated financial statements
upon adoption.
ITEM 3. CONTROLS AND PROCEDURES
(A) Evaluation of Disclosure Controls And Procedures
As of the end of the period covered by this Quarterly Report, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's Principal Executive Officer and Principal
Accounting and 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 and Financial
Officer have concluded the Company's disclosure controls and procedures are, in
fact, effective at this reasonable assurance level as of the period covered. In
addition, the Company reviewed its internal controls, and there have been no
significant changes in its internal controls or in other factors that could
significantly affect those controls subsequent to the date of their last
evaluation or from the end of the reporting period to the date of this Quarterly
Report on Form 10-Q.
(B) Changes in Internal Controls Over Financial Reporting
In connection with the evaluation of the Company's internal controls
during the Company's last fiscal quarter covered by this Quarterly Report, the
Company's Principal Executive Officer and Principal Accounting and Financial
Officer have determined 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 the
outcome of these proceedings will not have a material adverse effect on the
financial statements of the Company.
-17-
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below before purchasing our
common stock ("Common Stock"). Our most significant risks and uncertainties are
described below; however, they are not the only risks we face. If any of the
following risks actually occur, our business, financial condition, or results or
operations could be materially adversely affected, the trading of our Common
Stock could decline, and you may lose all or part of your investment therein.
You should acquire shares of our Common Stock only if you can afford to lose
your entire investment.
We Have A Limited Operating History With Significant Losses And Expect Losses To
Continue For The Foreseeable Future
We have yet to establish any history of profitable operations. We had a
net loss of $1,193,558 for the quarter ended March 31, 2006, as compared to
$1,261,556 for the quarter ended March 31, 2005. The net loss since our
inception on September 5, 1994 through March 31, 2006 was $34,929,954. Our
revenues have not been sufficient to sustain our operations. We expect that our
revenues will not be sufficient to sustain our operations for the near future.
Our profitability will require the successful commercialization of one or more
of drugs for AIDS, Alzheimer's, Cancer and Cardiovascular disease. No assurances
can be given when this will occur or that we will ever be profitable.
We Will Require Additional Financing To Sustain Our Operations And Without It We
Will Not Be Able To Continue Operations
We do not currently have sufficient financial resources to fund our
operations. Current assets as of March 31, 2006 were $2,846,729 as compared to
$1,307,096 as of December 31, 2005. Therefore, we need additional funds to
continue operations.
We only have the right to receive $40,000 per trading day under the
Purchase Agreement II with Fusion Capital unless our stock price equals or
exceeds $1.50 per share, in which case the daily amount may be increased under
certain conditions as the price of our Common Stock increases. Since we have
16,700,000 registered shares to be offered for sale from time to time by Fusion
Capital, the selling price of our Common Stock to Fusion Capital will have to
average at least $2.67 per share for us to receive the maximum proceeds of
$40,000,000 without registering additional shares of Common Stock. Assuming a
purchase price of $0.79 per share (the last reported market sale price of our
Common Stock on March 28, 2006) and the purchase by Fusion Capital of the
remaining 11,545,052 shares under the Purchase Agreement II as of March 28, 2006
(excluding the 1,700,000 shares previously issued as a commitment fee), proceeds
to us would only be $9,120,591 unless we choose to register more than 15,000,000
shares, which we have the right, but not the obligation, to do. Subject to
approval by our Board of Directors, we have the right but not the obligation to
issue more than 15,000,000 shares to Fusion Capital. In the event we elect to
issue more than 15,000,000 shares, we will be required to file a new
registration statement and have it declared effective by the U.S. Securities &
Exchange Commission (SEC). In order to be in compliance with the rules and
regulations of the American Stock Exchange, the Company would be required to
obtain shareholder approval to sell more than 26,643,192 shares of our Common
Stock (i.e., 19.9% of our issued and outstanding shares as of May 12, 2005, the
date of the Purchase Agreement II).
To 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. Specifically, Fusion Capital shall not have the right or the
obligation to purchase any shares of our Common Stock on any trading days that
the market price of our Common Stock is less than $0.25. If obtaining sufficient
financing from Fusion Capital were to prove unavailable or prohibitively
dilutive, 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 $40,000,000
under the Purchase Agreement II, we may still need additional capital to fully
implement our business, operating and development plans. Should the financing we
require to sustain our working capital needs be unavailable or prohibitively
expensive when we require it, the consequences would have a material adverse
effect on our business, operating results, financial condition and prospects.
We Have An Accumulated Deficit
The Company had an accumulated deficit of $34,929,954 as of March 31,
2006. Since the Company presently has no source of revenues and is committed to
continuing its product research and development program, significant
expenditures and losses will continue until development of new products is
completed and such products have been clinically tested, approved by the FDA and
successfully marketed. In addition, the Company has funded its operations
primarily through the sale of Company securities, its working capital for its
product development and other activities. We do not believe that debt financing
from financial institutions will be available until at least the time that one
of our products is approved for commercial production.
We Have A Limited Amount of Revenues Or Profits
The Company has devoted its resources to developing a new generation of
therapeutic drug products, but such products cannot be marketed until clinical
testing is completed and governmental approvals have been obtained. Accordingly,
there is a small amount of revenue from grants, much less profits, to sustain
the Company's present activities. A substantial amount of revenue will not
likely be available until, and unless, the new products are clinically tested,
approved by the FDA and successfully marketed, either by the Company or a
marketing partner, an outcome the Company is not able to guarantee.
-18-
The Sale Of Our Common Stock To Fusion Capital May Cause Dilution And The Sale
Of The Shares Of Common Stock Acquired By Fusion Capital Could Cause The Price
Of Our Common Stock To Decline
The purchase price for the Common Stock to be sold to Fusion Capital
pursuant to the Purchase Agreement II will fluctuate based on the price of our
Common Stock. All shares in this offering are freely tradable. Fusion Capital
may sell none, some or all of the shares of Common Stock purchased from us at
any time. We expect the shares offered will be sold over a period of up to fifty
(50) months. Depending upon market liquidity at the time, a sale of shares at
any given time could cause the trading price of our Common Stock to decline. The
sale of a substantial number of shares of our Common Stock under the offering,
or anticipation of such sales, could make it more difficult for us to sell
equity or equity-related securities in the future at a time and at a price when
we might otherwise wish to effect sales.
The sale of shares to Fusion Capital pursuant to the Purchase Agreement
II will have a dilutive impact on our shareholders. The sale of shares may
result in our net income per share could decrease in future periods, and the
market price of our Common Stock could decline. In addition, the lower our stock
price is, the more shares of Common Stock we will have to issue under the
Purchase Agreement II to draw down the full amount. If our stock price is lower,
then our existing shareholders would experience greater dilution.
Existing Shareholders Will Experience Significant Dilution From Our Sale Of
Shares Under The Purchase Agreement II With Fusion Capital And Any Other Equity
Financing
The sale of shares pursuant to the Purchase Agreement II with Fusion
Capital or any other future equity financing transaction will have a dilutive
impact on our shareholders. As a result, our net loss per share could decrease
in future periods, and the market price of our Common Stock could decline. In
addition, the lower our stock price is, the more shares of Common Stock we will
have to issue under the Purchase Agreement II in order to draw down the full
amount. If our stock price is lower, then our existing shareholders would
experience greater dilution. We cannot predict the actual number of shares of
Common Stock that will be issued pursuant to the Purchase Agreement II or any
other future equity financing transaction, in part, because the purchase price
of the shares will fluctuate based on prevailing market conditions and we do not
know the exact amount of funds we will need.
The Market Price of Our Common Stock Is Highly Volatile, Which Could Hinder Our
Ability to Raise Additional Capital
The market price of our Common Stock has been and is expected to
continue to be highly volatile. Factors, including regulatory matters, concerns
about our financial condition, operating results, litigation, government
regulation, developments or disputes relating to agreements, title to our
properties or proprietary rights, may have a significant impact on the market
price of our stock. The range of the high and low bid prices of our Common Stock
over the last full fiscal years has been between $0.33 and $0.90. In addition,
potential dilutive effects of future sales of shares of Common Stock by
shareholders and by the Company, and subsequent sale of Common Stock by the
holders of warrants and options could have an adverse effect on the price of our
securities, which could hinder our ability to raise additional capital to fully
implement our business, operating and development plans.
Penny Stock Regulations Affect Our Stock Price, Which May Make It More Difficult
For Investors to Sell Their Stock
Broker-dealer practices in connection with transactions in penny stocks
are regulated by certain penny stock rules adopted by the SEC. Penny stocks
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on the
NASDAQ system, providing current price and volume information, with respect to
transactions in such securities is released by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that furnishes information about penny stocks and the risks
in the penny stock market. The broker-dealer must also supply the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules generally require that prior to a
transaction in a penny stock the broker-dealer make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. Our securities are subject to the penny stock rules, and investors
may find it more difficult to sell their securities.
-19-
It Is Uncertain The Company Will Have Access To Future Capital Or Government
Grants
It is not expected that the Company will generate positive cash flow
from operations for at least the next several years. As a result, substantial
additional equity or debt financing or the receipt of one or more government
grants for research and development and/or clinical development will be required
to fund our activities. We cannot be certain that we will be able to consummate
any such financing on favorable terms, if at all, or receive any such government
grants or that such financing or government grants will be adequate to meet our
capital requirements. Any additional equity financing could result in
substantial dilution to shareholders, and debt financing, if available, will
most likely involve restrictive covenants which preclude the Company from making
distributions to shareholders and taking other actions beneficial to
shareholders. If adequate funds are not available, the Company may be required
to delay or reduce the scope of our drug development program or attempt to
continue development by entering into arrangements with collaborative partners
or others that may require the Company to relinquish some or all of our rights
to proprietary drugs. The inability to fund our capital requirements would have
a material adverse effect on the Company.
The Company Is Not Certain That It Will Be Successful In The Development Of Its
Dug Candidates
The successful development of any new drug is highly uncertain and is
subject to a number of significant risks. Our drug candidates, all of which are
in a development stage, require significant, time-consuming and costly
development, testing and regulatory clearance. This process typically takes
several years and can require substantially more time. Risks include, among
others, the possibility that a drug candidate will (a) be found to be
ineffective or unacceptably toxic, (b) have unacceptable side effects, (c) fail
to receive necessary regulatory clearances, (d) not achieve broad market
acceptance, (e) be subject to competition from third parties who may market
equivalent or superior products or (f) be affected by third parties holding
proprietary rights that will preclude the Company from marketing a drug product.
There can be no assurance that the development of drug candidates will
demonstrate the efficacy and safety of a drug candidate as a therapeutic drug,
or, even if demonstrated, that there will be sufficient advantages to its use
over other drugs or treatments so as to render the drug product commercially
viable. In the event the Company is not successful in developing and
commercializing one or more drug candidates, investors are likely to realize a
loss of their entire investment.
Positive Results In Preclinical And Early Clinical Trials Do Not Ensure Future
Clinical Trials Will Be Successful Or Drug Candidates Will Receive Any Necessary
Regulatory Approvals For The Marketing, Distribution Or Sale Of Such Drug
Candidates.
Success in preclinical and early clinical trials does not ensure that
large-scale clinical trials will be successful. Clinical results are frequently
susceptible to varying interpretations, delaying, limiting or preventing
regulatory approvals. The length of time necessary to complete clinical trials
and submit an application for marketing approval for a final decision by a
regulatory authority varies significantly and may be difficult to predict.
The Company Will Face Intense Competition From Other Companies In The
Pharmaceutical Industry
The Company is engaged in a segment of the pharmaceutical industry that
is highly competitive and rapidly changing. If successfully developed and
approved, any of our drug candidates will likely compete with several existing
therapies. In addition, other companies are pursuing the development of
pharmaceuticals that target the same diseases as are targeted by the drugs being
developed by the Company. We anticipate that we will face intense and increasing
competition in the future as new products enter the market and advanced
technologies become available. We cannot guarantee existing products or new
products developed by competitors will not be more effective, or more
effectively marketed and sold than those by the Company. Competitive products
may render our drugs obsolete or noncompetitive prior to the Company's recovery
of development and commercialization expenses.
Many of our competitors also have significantly greater financial,
technical and human resources and will likely be better equipped to develop,
manufacture and market products. In addition, many of these competitors have
extensive experience in preclinical testing and clinical trials, obtaining FDA
and other regulatory approvals and manufacturing and marketing pharmaceutical
products. A number of these competitors also have products that have been
approved or are in late-stage development and operate large, well-funded
research and development programs. Smaller companies may also prove to be
significant competitors, particularly through collaborative arrangements with
large pharmaceutical and biotechnology companies. Furthermore, academic
institutions, government agencies and other public and private research
organizations are becoming increasingly aware of the commercial value of their
inventions and are actively seeking to commercialize the technology they have
developed. Accordingly, competitors may succeed in commercializing products more
rapidly or effectively than the Company, which would have a material adverse
effect on the Company.
-20-
There Is No Assurance That Our Products Will Have Market Acceptance
The success of the Company will depend in substantial part on the
extent to which a drug product, once approved, achieves market acceptance. The
degree of market acceptance will depend upon a number of factors, including (a)
the receipt and scope of regulatory approvals, (b) the establishment and
demonstration in the medical community of the safety and efficacy of a drug
product, (c) the product's potential advantages over existing treatment methods
and (d) reimbursement policies of government and third party payers. We cannot
predict or guarantee physicians, patients, healthcare insurers, maintenance
organizations, or the medical community in general, will accept or utilize any
drug product of the Company.
Health care reimbursement for any of our products is uncertain.
Moreover, the unavailability of health care reimbursement for any of our
products will likely adversely impact our ability to effectively market such
products.
Our ability to commercialize our technology successfully will depend in
part on the extent to which reimbursement for the costs of such products and
related treatments will be available from government health administration
authorities, private health insurers and other third-party payors. Significant
uncertainty exists as to the reimbursement status of newly-approved medical
products. We cannot guarantee adequate third-party insurance coverage will be
available to establish and maintain price levels sufficient for realization of
an appropriate return on investments in developing new therapies. Government,
private health insurers, and other third-party payors are increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new therapeutic products approved for marketing by the FDA.
Accordingly, even if coverage and reimbursement were provided by government,
private health insurers, and third-party payers for uses of the Company's
products, the market acceptance of these products would be adversely affected if
the amount of reimbursement available proved to be unprofitable for health care
providers.
Uncertainties Related To Health Care Reform Measures May Affect The Company's
Success
There have been a number of federal and state proposals during the last
few years to subject the pricing of health care goods and services, including
prescription drugs, to government control and to make other changes to the U.S.
health care system. It is uncertain which legislative proposals will be adopted
or what actions federal, state, or private payors for health care treatment and
services may take in response to any health care reform proposals or
legislation. We cannot predict the effect health care reforms may have on its
business, and there is no guarantee any such reforms will not have an adverse
material effect on the Company.
Further Testing Of Our Drug Candidates Will Be Required And There Is No
Assurance Of FDA Approval
The FDA and comparable agencies in foreign countries impose substantial
requirements upon the introduction of medical products, through lengthy and
detailed laboratory and clinical testing procedures, sampling activities and
other costly and time-consuming procedures. Satisfaction of these requirements
typically takes several years or more and varies substantially based upon the
type, complexity, and novelty of the product.
The effect of government regulation and the need for FDA approval will
delay marketing of new products for a considerable period of time, impose costly
procedures upon the Company's activities, and provide an advantage to larger
companies considered competitors of the Company. There can be no assurance that
FDA or other regulatory approval for any products developed by the Company will
be granted on a timely basis or at all. Any such delay in obtaining, or failure
to obtain, such approvals would materially and adversely affect the marketing of
any contemplated products and the ability to earn product revenue. Further,
regulation of manufacturing facilities by state, local, and other authorities is
subject to change. Any additional regulation could result in limitations or
restrictions on our ability to utilize any of its technologies, thereby
adversely affecting the Company's operations.
Human pharmaceutical products are subject to rigorous preclinical
testing, clinical trials, and other approval procedures mandated by the FDA and
foreign regulatory authorities. Various federal and foreign statutes and
regulations also govern or influence the manufacturing, safety, labeling,
storage, record keeping and marketing of pharmaceutical products. The process of
obtaining these approvals and the subsequent compliance with appropriate U.S.
and foreign statutes and regulations are time-consuming and require the
expenditure of substantial resources. In addition, these requirements and
processes vary widely from country to country.
Among the uncertainties and risks of the FDA approval process are the
following: (a) the possibility that studies and clinical trials will fail to
prove the safety and efficacy of the drug, or that any demonstrated efficacy
will be so limited as to significantly reduce or altogether eliminate the
acceptability of the drug in the marketplace, (b) the possibility that the costs
of development, which can far exceed the best of estimates, may render
commercialization of the drug marginally profitable or altogether unprofitable
and (c) the possibility that the amount of time required for FDA approval of a
drug may extend for years beyond that which is originally estimated. In
addition, the FDA or similar foreign regulatory authorities may require
additional clinical trials, which could result in increased costs and
significant development delays. Delays or rejections may also be encountered
based upon changes in FDA policy and the establishment of additional regulations
during the period of product development and FDA review. Similar delays or
rejections may be encountered in other countries.
-21-
The Company's Success Will Be Dependent Upon The Licenses And Proprietary Rights
It Receives From Other Parties, And On Any Patents It May Obtain
Our success will depend in large part on the ability of the Company and
its licensors to (a) maintain license and patent protection with respect to
their drug products, (b) defend patents and licenses once obtained, (c) maintain
trade secrets, (d) operate without infringing upon the patents and proprietary
rights of others and (e) obtain appropriate licenses to patents or proprietary
rights held by third parties if infringement should otherwise occur, both in the
United States and in foreign countries. We have obtained licenses to patents and
other proprietary rights from Georgetown University.
The patent positions of pharmaceutical companies, including those of
the Company, are uncertain and involve complex legal and factual questions.
There is no guarantee the Company or its licensors have or will develop or
obtain the rights to products or processes that are patentable, that patents
will issue from any of the pending applications or that claims allowed will be
sufficient to protect the technology licensed to the Company. In addition, we
cannot be certain that any patents issued to or licensed by the Company will not
be challenged, invalidated, infringed or circumvented, or that the rights
granted thereunder will provide competitive disadvantages to the Company.
Litigation, which could result in substantial cost, may also be
necessary to enforce any patents to which the Company has rights, or to
determine the scope, validity and unenforceability of other parties' proprietary
rights, which may affect the rights of the Company. U.S. patents carry a
presumption of validity and generally can be invalidated only through clear and
convincing evidence. There can be no assurance that our licensed patents would
be held valid by a court or administrative body or an alleged infringer would be
found to be infringing. The mere uncertainty resulting from the institution and
continuation of any technology-related litigation or interference proceeding
could have an adverse material effect on the Company pending resolution of the
disputed matters.
We may also rely on unpatented trade secrets and expertise to maintain
its competitive position, which it seeks to protect, in part, by confidentiality
agreements with employees, consultants and others. There can be no assurance
these agreements will not be breached or terminated, that we will have adequate
remedies for any breach or that trade secrets will not otherwise become known or
be independently discovered by competitors.
The Company's License Agreements May Be Terminated In The Event Of A Breach
The license agreements pursuant to which the Company has licensed its
core technologies for its potential drug products permit the licensors,
respectively Georgetown University, to terminate such agreements under certain
circumstances, such as the failure by the licensee to use its reasonable best
efforts to commercialize the subject drug or the occurrence of any uncured
material breach by the licensee. The license agreements also provide that the
licensor is primarily responsible for obtaining patent protection for the
licensed technology, and the licensee is required to reimburse the licensor for
costs it incurs in performing these activities. The license agreements also
require the payment of specified royalties. Any inability or failure to observe
these terms or pay these costs or royalties may result in the termination of the
applicable license agreement in certain cases. The termination of any license
agreement would have an adverse material effect on the Company.
Protecting Our Proprietary Rights Is Difficult and Costly
The patent positions of pharmaceutical and biotechnology companies can
be highly uncertain and involve complex legal and factual questions.
Accordingly, we cannot predict the breadth of claims allowed in these companies'
patents or whether the Company may infringe or be infringing on these claims.
Patent disputes are common and could preclude the commercialization of our
products. Patent litigation is costly in its own right and could subject us to
significant liabilities to third parties. In addition, an adverse decision could
force us to either obtain third-party licenses at a material cost or cease using
the technology or product in dispute.
The Company's Success Is Dependent On Our Key Personnel
The Company is dependent on a small management group and on independent
researchers, some of whom are inventors of the patents licensed to the Company
for core technologies and drugs developed at Georgetown University. Scientific
personnel may from time to time serve as consultants to the Company and may
devote a portion of their time to the Company's business, as well as continue to
devote substantial time to the furtherance of the Company's sponsored research
at Georgetown University and at other affiliated institutions, as may be agreed
to in the future. Such personnel are not employees of the Company and are not
bound under written employment agreements. The services of such persons are
important to the Company, and the loss of any of these services may adversely
affect the Company.
-22-
Our success is dependent upon the continued services and performance of
Dr. Janet Greeson, our Chief Executive Officer, President and Chairman of the
Board of Directors, and Dr. Vassilios Papadopoulos, Chief Scientist of the
Science of Technology Advisory Committee and our Key Consultant. We do not
maintain key man insurance on either of these individuals. We are currently
negotiating a written employment agreement with Dr. Greeson and have a
consulting arrangement with Dr. Papadopoulos. The loss of their services could
delay our product development programs and our research and development efforts
at Georgetown University. In addition, the loss of Dr. Greeson is grounds for
our Research Collaboration with Georgetown University to terminate. In addition,
competition for qualified employees among companies in the biotechnology and
biopharmaceutical industry is intense and we cannot be assured that we would be
able to recruit qualified personnel on commercially acceptable terms, or at all,
to replace them.
We May Be Unable To Retain Skilled Personnel And To Maintain Key Relationships
The success of our business depends, in large part, on our ability to
attract and retain highly qualified management, scientific and other personnel,
and on our ability to develop and maintain important key relationships with
leading research institutions, consultants and advisors. Competition for these
types of personnel and relationships is intense from numerous pharmaceutical and
biotechnology companies, universities and other research institutions. There can
be no assurance that we will be able to attract and retain such individuals on
commercially acceptable terms or at all, and the failure to do so would have an
adverse material effect on the Company.
We Currently Have No Sales Or Marketing Capability In The United States
We do not have marketing or sales personnel. The Company will have to
develop a sales force or rely on marketing partners or other arrangements with
third parties for the marketing, distribution and sale of any drug product that
is ready for distribution. There is no guarantee that we will be able to
establish marketing, distribution or sales capabilities or arrange with third
parties to perform those activities on terms satisfactory to the Company, or
that any internal capabilities or third party arrangements will be
cost-effective.
In addition, any third parties with which the Company may establish
marketing, distribution or sales arrangements may have significant control over
important aspects of the commercialization of a drug product, including market
identification, marketing methods, pricing, composition of sales force and
promotional activities. There can be no assurance the Company will be able to
control the amount and timing of resources that any third party may devote to
the products of the Company or prevent any third party from pursuing alternative
technologies or products that could result in the development of products that
compete with, and/or the withdrawal of support for, the products of the Company.
The Company Does Not Have Internal Manufacturing Capabilities And May Not Be
Able To Develop Efficient Manufacturing Capabilities Or Contract For Such
Services From Third Parties, Such As Pharmaplaz, LTD, On Commercially Acceptable
Terms
We do not have any manufacturing capacity. When required, we will seek
to establish relationships with third party manufacturers for the manufacture of
clinical trial material and the commercial production of a drug product just as
it has with Pharmaplaz, LTD in Ireland. There can be no assurance that we will
be able to establish relationships with third party manufacturers on
commercially acceptable terms or that third party manufacturers will be able to
manufacture a drug product on a cost-effective basis in commercial quantities
under good manufacturing practices as mandated by the FDA.
The dependence upon third parties for the manufacture of products may
adversely affect future costs and the ability to develop and commercialize a
drug product on a timely and competitive basis. Further, there can be no
assurance that manufacturing or quality control problems will not arise in
connection with the manufacture of the drug product or that third party
manufacturers will be able to maintain the necessary governmental licenses and
approvals to continue manufacturing such products. Any failure to establish
relationships with third parties for its manufacturing requirements on
commercially acceptable terms would have an adverse material effect on the
Company.
The Company Does Not Have Its Own Research Facilities and Will Be Dependent On
Third Parties For Drug Development Which Could Subject Us To Product Liability
Claims
We do not have our own research and development facilities and engage
consultants and independent contract research organizations to design and
conduct clinical trials in connection with the development of a drug. As a
result, these important aspects of a drug's development will be outside the
direct control of the Company. In addition, there can be no assurance that such
third parties will perform all of their obligations under arrangements with the
Company or will perform those obligations satisfactorily.
-23-
In the future, we anticipate that we will need to obtain additional or
increased product liability insurance coverage and it is uncertain that such
increased or additional insurance coverage can be obtained on commercially
reasonable terms.
The business of the Company will expose us to potential product
liability risks inherent in the testing, manufacturing and marketing of
pharmaceutical products. There can be no assurance that product liability claims
will not be asserted against the Company. We intend to obtain additional limited
product liability insurance for our clinical trials, directly or through its
marketing development partners or CRO (Contract Research Organization) partners,
when they begin in the U.S. and to expand our insurance coverage if and when the
Company begins marketing commercial products. However, there can be no assurance
the Company will be able to obtain product liability insurance on commercially
acceptable terms or the Company will be able to maintain such insurance at a
reasonable cost or in sufficient amounts to protect against potential losses. A
successful product liability claim or series of claims brought against the
Company could have an adverse material effect on the Company.
Insurance Coverage Is Increasingly More Difficult To Obtain or Maintain
Obtaining insurance for our business, property and products is
increasingly more costly and narrower in scope, and we may be required to assume
more risk in the future. If we are subject to third party claims or suffer a
loss or damage in excess of our insurance coverage, we may be required to share
that risk in excess of our insurance limits. Furthermore, any
first-or-third-party claims made on any of our insurance policies may impact our
ability to obtain or maintain insurance coverage at reasonable costs or at all
in the future.
The Market Price of Our Shares, Like That Of Many Biotechnology Companies, Is
Highly Volatile
Market prices for our Common Stock and the securities of other medical
and biomedical technology companies have been highly volatile and may continue
to be highly volatile in the future. Factors such as announcements of
technological innovations or new products by the Company or its competitors,
government regulatory action, litigation, patent or proprietary rights
developments and market conditions for medical and high technology stocks in
general can have a significant impact on any future market for our Common Stock.
We Are Not Paying Dividends On Our Common Stock
The Company has never paid cash dividends on its Common Stock and does
not intend to do so in the near future.
The Issuance of More Common Shares Or Our Preferred Stock May Adversely Affect
Our Common Stock
The Board of Directors is authorized to issue additional shares of
Common Stock and to designate one (1) or more series of preferred stock and to
fix the rights, preferences, privileges and restrictions thereof. The
designation and issuance of such shares of our preferred stock may adversely
affect the Common Stock if the rights, preferences and privileges of such
preferred stock (a) restrict the declaration or payment of dividends on our
Common Stock, (b) dilute the voting power of our Common Stock, (c) impair the
liquidation rights of our Common Stock or (d) delay or prevent a change in
control of the Company from occurring, among other possibilities.
Under Provisions Of The Company's Articles Of Incorporation, Bylaws And Nevada
Law, The Company's Management May Be Able To Block Or Impede A Change In Control
The issuance of preferred stock may make it more difficult for a third
party to acquire, or may discourage a third party from acquiring, a majority of
our voting stock. These and other provisions in our Articles of Incorporation
(restated as last amended June 10, 2005) and in our Bylaws (restated as last
amended April 18, 2005), as well as certain provisions of Nevada law, could
delay or impede the removal of incumbent Directors and could make it more
difficult to effect a merger, tender offer or proxy contest involving a change
of control of the Company, even if such events could be beneficial to the
interest of the shareholders as a whole. Such provisions could limit the price
that certain investors might be willing to pay in the future for our Common
Stock.
-24-
Officers and Directors Liabilities Are Limited Under Nevada Law
Pursuant to the Company's Articles of Incorporation (restated as last
amended June 10, 2005) and Bylaws (restated as last amended April 18, 2005), and
as authorized under applicable Nevada law, Directors are not liable for monetary
damages for breach of fiduciary duty, except in connection with a breach of the
duty of loyalty for (a) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (b) for dividend payments
or stock repurchases illegal under applicable Nevada law or (c) any transaction
in which a Director has derived an improper personal benefit. The Company's
Articles of Incorporation (restated as last amended June 10, 2005) and Bylaws
(restated as last amended April 18, 2005) provide that the Company must
indemnify its officers and Directors to the fullest extent permitted by
applicable Nevada law for all expenses incurred in the settlement of any actions
against such persons in connection with their having served as officers or
Directors.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Securities Unregistered, were sold by the Company in the first quarter of 2005
under an exemption from registration. These shares of common stock were sold for
cash, unless otherwise noted in this section, and 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 SEC) and a limited number of non-accredited investors. All
investors, to the best knowledge of the Company, are not affiliated with the
Company and purchased the shares with apparent investment intent. The Company
relied upon, among other possible exemptions, Section 4(2) of the Securities Act
of 1933 (the "Securities Act"), as amended. Its reliance on said exemption was
based upon the fact no public solicitation was used by the Company in the offer
or sale, and 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 Securities Act.
The Company also completed the following two (2) private placements: On March 1,
2006, the Company received a qualified subscription for 4,000,000 shares of
common stock at a purchase price of $0.25 per share for total proceeds equal to
$1,000,000. As of May 9, 2006, the Company received qualified subscriptions for
1,612,500 shares of common stock at a purchase price of $0.40 per share for
total proceeds equal to $645,000, plus warrant coverage equal to one hundred
percent (100%) of the total number of shares subscribed for at $1.00 per share.
On April 26, 2006, the Company issued 200,000 shares of Common Stock at a price
of $0.20 per share upon the exercise of stock options.
On May 03, 2006, the Company issued 225,926 shares of Common Stock at a price of
$0.20 per share upon the exercise of stock options
On May 03, 2006, the Company issued 25,000 shares of Common Stock at a price of
$0.18 per share upon the exercise of stock options.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
The Company has formed, by the determination of the Board, an Audit Committee
with Independent Director Mr. H. Thomas Winn as Chairman. Mr. Winn is a
qualified financial expert, such a term is used in Item 7(d)(3)(iv) of Schedule
14A (240.14a-101 of this chapter) under the Exchange Act of 1934, as amended,
(the "Exchange Act"). The Company has also formed a Compensation and Governance
Committee, with Independent Director, Ms. Cynthia C. Thompson as Chairman; a
Nomination Committee with Independent Director Mr. Welter Holden as Chairman;
and a Science and Technology Advisory Committee with Dr. Vassilios Papadopoulos
as Chief Scientist and Key Consultant to the Board. It should also be noted no
director or executive officer, key employee or key consultant of the Company has
any family relationships with any other director, executive officer, key
employee or key consultant of the Company, except Mr. Eugene Boyle, our Chief
Financial Officer, is the son of Dr. Janet Greeson.
ITEM 6. EXHIBITS AND CURRENT REPORTS ON FORM 8-K
Listed below are all exhibits filed as part of this Quarterly Report on Form
10-Q. Some exhibits are filed by the Company with the SEC pursuant to Rule
12b-32 under the Exchange Act.
-25-
(A) Exhibits:
EXHIBIT NO. DESCRIPTION LOCATION
2.1 Agreement and Plan of Reorganization Incorporated by reference to Exhibit 2.1
to the Company's Form 10-SB12G as filed
with the SEC on July 21, 1999
3.1 Articles of Incorporation, restated Incorporated by reference to Exhibit 3.1
as last amended June 10,2005 to the Company's Current Report on Form
8-K as filed with SEC on July 8, 2005
3.2 Bylaws, restated as last amended Incorporated by reference to Exhibit 3.2
April 18, 2005 to the Company's Current Report on Form
8-K as filed with the SEC on July 21, 1999
4.1 Form of Common Stock Certificate Incorporated by reference to Schedule
14-A Information Statement as filed with
SEC on April 29, 2005 and approved by the
shareholders on June 10, 2005
4.2 Amended Samaritan Pharmaceuticals, Incorporated by reference to Exhibit 4.2
Inc. 2001 Stock Option Plan to the Company's Quarterly Report on Form
10-QSB as filed with the U.S. Securities
4.3 Samaritan Pharmaceuticals, Inc. 2005 Incorporated by reference to Schedule
Stock Option Plan 14-A Information Statement as filed with
the SEC on April 29, 2005 and approved by
the shareholders on June 10, 2005
10.1 Assignment of Invention, dated Incorporated by reference to Exhibit 10.1
September 6, 2000, by and between to the Company's Quarterly Report on
Linda Johnson and the Company Form-QSB as filed with the SEC on August
14, 2002
10.2 Assignment of Invention, dated May Incorporated by reference to Exhibit 10.2
14, 2999, by and between Linda to the Company's Quarterly Report on Form
Johnson and Spectrum Pharmaceuticals 10-QSB as filed with the SEC on August
Corporation 14, 2002
10.3 Assignment of Invention, dated May Incorporated by reference to Exhibit 10.3
22, 1990, by and between Alfred T. to the Company's Current Report on form
Sapse and Spectrum Pharmaceutical 10-QSB as filed with the SEC on April 14,
Corporation 2002
10.4 Common Stock Purchase Agreement Incorporated by reference to Exhibit 10.1
(Purchase Agreement I), dated April to the Company's Current Report on Form
22, 2003, by and between the Company 8-K as filed with the SEC on April 25,
and Fusion Capital Fund II, LLC 2003
10.5 Registration Rights Agreement, dated Incorporated by reference to Exhibit 10.2
April 22, 2003, by and between the to the Company's Current Report on Form
Company and Fusion Capital Fund II, 8-K as filed with the SEC on April 25,
LLC 2003
10.6 Employment Agreement, dated as of Incorporated by reference to Exhibit 10.6
January 1, 2001, by and between to the Company's Quarterly Report on Form
Samaritan Pharmaceuticals, Inc. and 10-QSB as filed with the SEC on August
Mr. Thomas Lang 16, 2004
10.7 Form of Trust Under Samaritan Incorporated by reference to Exhibit
Pharmaceuticals, Inc. Deferred 10.10 to the Company's Quarterly Report
Compensation Plan on Form 10-QSB as filed with the U.S.
Securities and Exchange Commission on
August 14, 2002
10.8 Employment Agreement, dated as of Incorporated by reference to Exhibit 10.8
June 1, 2004, by and between to the Company's Quarterly Report on Form
Samaritan Pharmaceuticals, Inc. and 10-QSB as filed with the SEC on August
Eugene Boyle 14, 2002
10.9 Employment Agreement, dated as of Incorporated by reference to Exhibit 10.9
January 1, 2001, by and between to the Company's Quarterly Report on Form
Samaritan Pharmaceuticals, Inc. and 10-QSB as filed with the SEC on August
Janet Greeson 14, 2002
10.10 Master Clinical Trial and Full Scale Incorporated by reference to Exhibit
Manufacturing Agreement, dated 10.10 to the Company's Quarterly Report
October 5, 2004, by and between the on Form 10-QSB as filed with the SEC on
Company and Pharmaplaz, LTD November 15, 2004
10.11 Common Stock Purchase Agreement Incorporated by reference to Exhibit
(Purchase Agreement II), dated May 10.11 to the Company's Quarterly Report
12, 2005, by and between the Company on Form 10-QSB as filed with the SEC on
and Fusion Capital Fund II, LLC May 13, 2005
10.12 Amendment to Common Stock Purchase Incorporated by reference to Exhibit
Agreement, dated December 19, 2005, 10.12 to the Company's Registration
by and between the Company and Statement on Form SB-2 as filed with the
Fusion Capital Fund II, LLC SEC on December 15, 2005
10.13 Registration Rights Agreement, dated Incorporated by reference to Exhibit
May 12, 2005, by and between the 10.12 to the Company's Quarterly Report
Company and Fusion Capital Fund II , on Form 10-QSB as filed with the SEC on
LLC May 13, 2005
-26-
10.14 Norbrook Supply Agreement Incorporated by reference to Exhibit 1 to
the Company's Current Report on Form 8-K
as filed with the SEC on September 27,
2005
10.15 Research Collaboration and Licensing Incorporated by reference to Exhibit
Agreement, dated June 8, 2001, by 10.10 to the Company's Registration
and between Statement on Form SB-2 as filed with the
SEC on July 30, 2003
14.1 The Samaritan Pharmaceuticals, Inc. Incorporated by reference to Exhibit 14.1
Code of Conduct to the Company's Quarterly Report on Form
10-KSB as filed with the SEC on April 15,
2003
16.1 Letter Regarding Change in Incorporated by reference to Exhibit 16.1
Certifying Accountant to the Company's Quarterly Report on Form
8-K as filed with the SEC on September
27, 2002
21 List of Subsidiaries Provided herewith
31.1 Certification of Chief Executive Provided herewith
Officer re: Section 302
31.2 Certification of Chief Financial Provided herewith
Officer re: Section 302
32.1 Certification of Chief Executive Provided herewith
Officer re: Section 906
32.2 Certification of Chief Financial Provided herewith
Officer re: Section 906
(B) Current Reports on Form 8-K Filed During The Quarter Ended March
31, 2006
On February 9, 2006 the Company filed a Current Reprot on Form 8-K
announcing the Company's receipt of a warning letter from the staff of
the American Stock Exchange advising the Company of its failure to
comply with the continued listing standard described in Section 301 of
the AMEX Company Guide, which provides that a listed company is not
permitted to issue, or authorize its transfer agent or registrar to
issue or register, additional securities of a listed class until is
has filed an application for the listing of such additional securities
and received notification from the AMEX that the securities have been
approved for listing.
SIGNATURES
In accordance with Section 13 OR 15 (d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SAMARITAN PHARMACEUTICALS, INC
Dated: May 15, 2006
By: /s/ Eugene Boyle
-----------------------------
Eugene Boyle,
Chief Financial Officer,
Director