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, 2007
( ) 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 001-32287
Samaritan Pharmaceuticals, Inc.
(Exact name of registrant as specified in charter)
Nevada 88-043153
(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 is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes[ ] No[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 15, 2007
was 159,422,456.
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, 2007 and
December 31, 2006...................................................3
Consolidated Statements of Operations for the period from
Inception (September 5, 1994) to March 31, 2007, and for
the Three (3) Months Ended March 31, 2007 and 2006..................4
Consolidated Statements of Shareholder's Equity (Deficit)
for the period from Inception (September 5, 1994) to
March 31, 2007......................................................5
Consolidated Statements of Cash Flows for the period from
Inception (September 5, 1994) to March 31, 2007 and for the
Three (3) Months Ended March 31, 2007 and 2006......................9
Notes to Interim Consolidated Financial Statements.................10
Item 2. Management's Discussion and Analysis and Plan of
Operation..........................................................21
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...............................................................30
Item 4. Controls and Procedures...................................32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..........................................32
Item 1A. Risk Factors..............................................32
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds...........................................................43
Item 3. Defaults Upon Senior Securities............................43
Item 4. Submission of Matters to a Vote of Security Holders........43
Item 5. Other Information..........................................43
Item 6. Exhibits...................................................45
Signatures
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
As of March 31, 2007 (unaudited) and December 31, 2006 (audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,912,993 $ 742,075
Receivable from license collaboration 1,301,742 -
Note receivable 250,000 250,000
Interest receivable 78,493 71,096
Prepaid expenses 15,222 10,750
-------------------- ------------------
TOTAL CURRENT ASSETS 3,558,450 1,073,921
PROPERTY AND EQUIPMENT 108,181 127,627
OTHER ASSETS:
Patent registration costs 1,175,413 1,042,791
Purchased technology rights 245,919 252,349
Deposits 2,779 2,779
-------------------- ------------------
TOTAL OTHER ASSETS 1,424,111 1,297,919
-------------------- ------------------
$ 5,090,742 $ 2,499,467
==================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 383,450 $ 414,237
Accrued officers' salaries 727,881 515,271
Accounts payable to be settled through issuance
of stock - 590,057
-------------------- ------------------
TOTAL CURRENT LIABILITIES 1,111,331 1,519,565
-------------------- ------------------
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, 159,422,456 issued and outstanding 159,422 156,653
Additional paid-in capital 42,961,824 42,094,536
Common stock to be issued 800,250 231,502
Treasury stock (250,248) (250,248)
Accumulated other comprehensive income 36,679 56,601
Accumulated deficit during development stage (39,728,516) (41,309,142)
-------------------- ------------------
TOTAL SHAREHOLDERS' EQUITY 3,979,411 979,902
-------------------- ------------------
$ 5,090,742 $ 2,499,467
==================== ==================
See accompanying notes to the consolidated financial statements (unaudited)
3
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
FROM INCEPTION (SEPTEMBER 5, 1994) TO MARCH 31, 2007
AND FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
From
Inception For the Three Months To March 31
From Sep. 5, 1994 ------------------------------------------
March 31, 2007 2007 2006
------------------------- ------------------- ------------------
(Unaudited) (Unaudited) (Unaudited)
REVENUES:
Licensing rights $ 2,701,742 $ 2,701,742 $ -
Consulting 300,000 - -
Government research grants 289,226 - 21,793
------------------------- ------------------- ------------------
3,290,968 2,701,742 21,793
------------------------- ------------------- ------------------
EXPENSES:
Research and development 14,824,347 417,523 589,219
Interest, net (85,994) (7,454) (8,954)
General and administrative 27,203,743 667,411 597,139
Depreciation and amortization 1,446,518 43,636 34,787
Other income (369,130) - 3,160
------------------------- ------------------- ------------------
43,019,484 1,121,116 1,215,351
------------------------- ------------------- ------------------
NET INCOME (LOSS) (39,728,516) 1,580,626 (1,193,558)
Other Comprehensive Income (Loss):
Unrealized gain on marketable securities - - 3,933
Foreign translation adjustment 36,679 (19,922) 120
------------------------- ------------------- ------------------
Total Comprehensive Loss $ (39,691,837) $ 1,560,704 $ (1,189,505)
========================= =================== ==================
Loss (earnings) per share
Basic $ 0.01 $ (0.01)
=================== ==================
Diluted $ 0.01 $ (0.01)
=================== ==================
Weighted average number of shares outstanding:
Basic 157,035,800 137,246,545
=================== ==================
Diluted 160,847,890 137,246,545
=================== ==================
See accompanying notes to the consolidated financial statements (unaudited)
4
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (SEPTEMBER 5, 1994) TO March 31, 2007
Shares
Number Par Value Reserved Additional Common
of Common for Paid in Stock to
Shares Stock Conversion Capital be issued 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 (Unaudited) 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 (Audited) 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 (Audited) 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 (Audited) 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 (Audited) 21,534,807 21,535 - 9,390,184 - -
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 (Audited) 37,736,699 37,736 - 12,903,173 - -
See accompanying notes to the consolidated financial statements (unaudited)
5
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (SEPTEMBER 5, 1994) TO March 31, 2007
CONTINUED
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 (Unaudited) - - - - (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 (Audited) - - - - (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 (Audited) - - - - (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 (Audited) - - - - (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 (Audited) (759,560) - - - (9,656,986) (1,004,827)
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 (Audited) (495,036) - - - (13,736,792) (1,290,919)
See accompanying notes to the consolidated financial statements (unaudited)
6
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (SEPTEMBER 5, 1994) TO March 31, 2007
CONTINUED
Shares
Number Par Value Reserved Additional Common
of Common for Paid in Stock to
Shares Stock Conversion Capital be issued Warrants
------------- ---------- ---------- ------------ ----------- -----------
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 - - - - - -
Stock options issued for services - - - 225,000 - -
Net loss - - - - - -
------------ ---------- --------- ------------ ----------- -----------
December 31, 2002 (Audited) 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 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 (Audited) 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 (Audited) 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 (Audited) 136,866,274 136,866 - 35,589,683 - -
Shares issued for cash, net of
offering cost 7,212,500 7,213 - 2,037,787 - -
Common stock to be issued - - - - 231,502 -
Amortization of deferred compensation - - - - - -
Exercise of stock options 450,926 451 - 64,049 - -
Shares issued in connection with
equity financing 12,123,008 12,123 - 4,182,651 - -
Stock options issued for services - - - 220,366 - -
Other comprehensive income (loss) - - - - - -
Net loss - - - - - -
------------ ---------- --------- ------------ ----------- -----------
December 31, 2006 (Audited) 156,652,708 156,653 - 42,094,536 231,502 -
Common stock to be issued - - - - 568,748 -
Shares issued for cash, net of
offering costs - - - - - -
Shares issued in cancellation of
accounts payable 1,649,748 1,649 - 588,408 - -
Shares issued in connection with
equity financing 1,120,000 1,120 - 278,880 - -
Other comprehensive income (loss) - - - - - -
Net income - - - - - -
------------ ---------- --------- ------------ ----------- -----------
March 31, 2007 (Unaudited) 159,422,456 $ 159,422 $ - $42,961,824 $ 800,250 $ -
============ ========== ========= ============ =========== ===========
See accompanying notes to the consolidated financial statements (unaudited)
7
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (SEPTEMBER 5, 1994) TO March 31, 2007
CONTINUED
Accumulated
Other Stock Total
Deferred Comprehensive Subscriptions Treasury Accumulated Shareholders'
Compensation Income Receivable Shares Deficit Deficit
------------- ------------ ------------ ----------- ------------- ---------------
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
Stock options issued for services - - - - - 225,000
Net loss - - - - (4,057,153) (4,057,153)
------------ ------------- ------------ ----------- ------------- ---------------
December 31, 2002 (Audited) - - - - (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 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 (Audited) - - (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 (Audited) (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 (Audited) (40,034) (24,472) - (250,248) (33,736,396) 1,675,399
Shares issued for cash, net of
offering cost - - - - - 2,045,000
Common stock to be issued - - - - - 231,502
Amortization of deferred compensation 40,034 - - - - 40,034
Exercise of stock options - - - - - 64,500
Shares issued in connection with
equity financing - - - - - 4,194,774
Stock options issued for services - - - - - 220,366
Other comprehensive income (loss) - 81,073 - - - 81,073
Net loss - - - - (7,572,746) (7,572,746)
------------ ------------ ----------- ---------- ------------ ----------------
December 31, 2006 (Audited) - 56,601 - (250,248) (41,309,142) 979 902
Common stock to be issued - - - - - 568,748
Shares issued for cash, net of
offering costs - - - - - -
Shares issued in cancellation of
accounts payable - - - - - 590,057
Shares issued in connection with
equity financing - - - - - 280,000
Other comprehensive income (loss) - (19,922) - - - (19,922)
Net income - - - - 1,580,626 1,580,626
------------ ------------ ----------- ---------- ------------ ----------------
March 31, 2007 (Unaudited) $ - $ 36,679 $ - $(250,248) $(39,728,516) $ 3,979,411
============ ============ =========== ========== ============ ================
See accompanying notes to the consolidated financial statements (unaudited)
8
SAMARITAN PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FROM INCEPTION (SEPTEMBER 5, 1994) AND FOR THE THREE MONTHS
ENDED MARCH 31, 2007 AND 2006
From For the Three Months Ended
Inception To March 31
(09/05/1994) ---------------------------------
March 31, 2007 2007 2006
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (39,728,516) $ 1,580,626 $ (1,193,558)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 1,446,518 43,636 34,787
Stock based compensation 9,659,280 - -
Stock options issued for services 1,662,733 - 12,096
Amortization of deferred compensation 1,662,522 - 32,634
Foreign currency loss 36,679 (19,922) 120
Other income (228,190) - 3,160
(Increase) decrease in assets:
Accounts receivable (1,301,742) (1,301,742) 51,117
Interest receivable and prepaids (106,954) (11,868) (33,177)
Deposits 12,941 - -
Increase (decrease) in liabilities:
Deferred revenue - - -
Accounts payable and accrued expenses 3,362,702 181,822 29,919
---------------- -------------- ---------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (23,522,027) 472,552 (1,062,902)
---------------- -------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Organization costs, Samaritan Europe - - (4,687)
Purchase of technology rights (158,969) - -
Purchase of furniture and equipment (343,661) - (2,124)
Note receivable (250,000) - -
(Purchase) liquidation of marketable securities (3,160) - 496,840
Patent registration costs (1,292,320) (150,382) (2,000)
---------------- -------------- ---------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (2,048,110) (150,382) 488,029
---------------- -------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from warrants/options 703,125 - -
Proceeds from debentures 642,120 - -
Proceeds from stock issued for cash 14,628,569 - -
Proceeds from equity financing 9,178,516 280,000 1,328,514
Common stock to be issued 1,006,300 568,748 1,300,000
Short-term loan repayments (288,422) - -
Short-term loan proceeds 1,612,922 - -
---------------- -------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 27,483,130 848,748 2,628,514
---------------- -------------- ---------------
CHANGE IN CASH 1,912,993 1,170,918 2,053,641
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - 742,075 456,463
---------------- -------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,912,993 $ 1,912,993 $ 2,510,104
================ ============== ===============
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Purchase of net, non-cash assets of subsidiary
for stock $ 195 $ - $ -
Short-term debt retired through issuance
of stock $ 1,890,695 $ - $ -
Issuance of common stock, previously subscribed $ 180,000 $ - $ 46,259
Purchase of technology rights for accounts payable
to be settled through issuance of stock $ 199,500 $ - $ -
Treasury stock acquired through settlement
of judgement $ 250,248 $ - $ -
Stock subscriptions receivable $ 1,119,848 $ - $ -
Stock retired in settlement of subscriptions
receivable $ (5,978,668) $ - $ -
Stock received in settlement $ (231,350) $ - $ -
Stock as compensation for services $ 5,175,792 $ - $ -
Stock issued in cancellation of accounts payable $ 4,838,995 $ 590,057 $ -
Exercise of stock options $ 4,858,820 $ - $ -
See accompanying notes to the consolidated financial statements (unaudited)
9
SAMARITAN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2007 and 2006
(Unaudited)
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, 2006,
included in the Form 10-K and form 10-K/A for the year then ended.
The financial information presented as of and for the three months ended March
31, 2007 ("Q1 2007") and as of and for the three months ended March 31, 2006
("Q1 2006") is unaudited. 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, 2007, and the results
of operations and cash flows for the three (3) month period ending March 31,
2007 have been included. The results of operations for the three (3) month
period ended March 31, 2007 are not necessarily indicative of the results to be
expected for the full year ended December 31, 2007. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Form 10-K/A as filed with the U.S. Securities and Exchange
Commission on April 27, 2007 for the year ended December 31, 2006.
NOTE 2 - ORGANIZATION AND NATURE OF BUSINESS
Samaritan Pharmaceuticals, Inc. (the "Company") was formed in September 1994 and
became public in October 1997. Our principal executive offices are located in
Las Vegas, Nevada.
Samaritan Pharmaceuticals, Inc., is an entrepreneurial biopharmaceutical
company, focused on commercializing innovative therapeutic products to relieve
the suffering of patients with Alzheimer's disease; cancer; cardiovascular
disease, HIV, and Hepatitis C; as well as, commercializing its acquired
marketing and sales rights, to sell nine marketed revenue-generating products,
in Greece, and/or various Eastern European countries.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation
The accompanying financial statements include the accounts of the Company and
its wholly owned subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation.
10
B. Revenue recognition
Revenue Recognition. The Company recognizes revenue in accordance with SEC Staff
Accounting Bulletin SAB 104, Topic 13, "Revenue Recognition" and Emerging Issues
Task Force No. 00-21, or EITF 00-21, "Accounting for Revenue Arrangements with
Multiple Deliverables." Generally, the Company will not recognize revenue or
establish a receivable related to payments that are due greater than twelve
months from the balance sheet date. In all cases, revenue is only recognized
after all of the following four basic criteria of revenue recognition are met:
o Persuasive evidence of an arrangement exists;
o The fee is fixed or determinable;
o Collection is probable; and
o Delivery of technology or intellectual property rights has occurred or
services have been rendered.
License Revenue. The Company's license revenues are generated through an
agreement with a strategic partner. Nonrefundable, up-front license fees and
milestone payments with standalone value that are not dependent on any future
performance by us under the arrangements are recognized as revenue upon the
earlier of when payments are received or collection is assured, but are deferred
if we have continuing performance obligations. If we have continuing involvement
through contractual obligations under such agreement, such up-front fees are
deferred and recognized over the period for which we continue to have a
performance obligation, unless all of the following criteria exist: (1) the
delivered item(s) have standalone value to the customer, (2) there is objective
and reliable evidence of the fair value of the undelivered item(s). We also make
estimates and judgments when determining whether the collectibility of license
fees receivable from licensees is reasonably assured. We assess the
collectibility of accrued license fees based on a number of factors and if it is
determined that collection is not reasonably assured, the fee is recognized when
collectibility becomes reasonably assured, assuming all other revenue
recognition criteria have been met.
New Material Agreement. On March 28, 2007, Samaritan and Pharmaplaz Ltd
("Pharmaplaz"), a private Irish Healthcare company and a shareholder of
Samaritan, announced they have entered into an agreement to commercialize
SP-01A, an "oral" HIV entry inhibitor. Currently, Pharmaplaz owns 5,659,748
common shares of the Company, representing 3.55% of the total shares issued and
outstanding. Under the terms of the agreement, Pharmaplaz, a shareholder, is
required to pay Samaritan $10 million in upfront fees. The first payment of $1.4
million was received on March 28, 2007, and the remaining $8.6 million is
required to be paid on September 16, 2007. Pharmaplaz, a shareholder, will pay
for and be responsible for future research and development to bring the
technology to market. Samaritan has no remaining obligation or performance for
future research and development. The $10,000,000 payment is non-refundable. If
requested by Pharmaplaz, a shareholder, Samaritan will perform sponsored
research regarding SP-01A or participate as Principal Investigators in
applications for NIH grants, or other grant applications to advance the SP-01A,
at Pharmaplaz's cost. Samaritan and Pharmaplaz, a shareholder, will split 50/50
of all revenues stemming from SP-01A.
For the period ended March 31, 2007, Samaritan recognized as revenue $2,701,742
from the Pharmaplaz Agreement, which comprised of the $1,400,000 cash received
during the quarter, and $1,301,742 in receivable that Samaritan determined
collectibility to be reasonably assured. There was insufficient time prior to
filing of this report to perform necessary procedures to assure the
collectiblitity of the remaining balance due from Pharmaplaz on September 16,
2007. The remaining $7,298,258 will be recognized as collectibility is assured
or when the actual funds are received.
11
Government Research Grant Revenue. The Company recognizes revenues from federal
government research grants during the period in which the related expenditures
are incurred.
C. Cash Equivalents
The Company considers all highly liquid temporary cash investments with an
original maturity of three months or less to be cash equivalents.
The Company maintains its cash in bank accounts at high credit quality financial
institutions. The balances at times may exceed federally insured limits.
D. Concentration of Credit Risks
The Company is subject to concentrations of credit risk primarily in our
accounts receivable and investments in debt securities to the extent of the
amounts recorded on the balance sheet. The Company attempts to mitigate the
concentration of credit risk in their receivables through their credit
evaluation process, collection terms, sales to diverse end customers and through
geographical dispersion of sales. They generally do not require collateral for
receivables from our end customers or from distributors. In the event of
termination of a distributor agreement, inventory held by the distributor must
be returned.
E. 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.
F. Intangibles
Legal fees associated with filing patents are recorded at cost and amortized
over 17 years. The Company currently owns or in-license patents related to our
products or product candidates and own or in-license additional applications for
patents that are currently pending. In general, when they in-license
intellectual property from various third parties, they are required to pay
royalties to the parties on product sales. The Company reviews patent costs for
impairment by comparing the carrying value of the patents with the fair 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 $17,760 and $10,825 for the three (3) months ending
March 31, 2007 and 2006, respectively.
Projected amortization is $71,040 for 2007 through 2011. Certain U.S. patents
may be eligible for patent term extensions under the Hatch-Waxman Act may be
available to Samaritan for the lost opportunity to market and sell the invention
during the regulatory review process.
Purchased technology rights are recorded at cost and are being amortized using
the straight line method over the estimated useful life of the technology,
fifteen (15) years. Amortization expense was $6,430 for the three (3) months
ending March 31, 2007, and $2,734 for the three months ended March 31, 2006.
Projected amortization expense associated with these technology rights in the
future will be $25,720 for 2007 and $16,633 for 2008 through 2011.
12
G. Earnings (loss) per share
The Company reports loss per common share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." There
were 25,668,518 outstanding options at March 31, 2007. Included in the
calculation of diluted earnings per share at March 31, 2007, are 337,500 options
whose exercise price was below the closing price of the stock at March 31, 2007,
and the weighted average impact of both 5,335,000 shares of unissued common
stock for which subscriptions had been received, and 70,833 shares committed
under contracts with consultants.
H. Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
I. Income Taxes
Pursuant to 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.
J. Research and Development Costs
Research and development costs are expensed when incurred. For the quarter
ending March 31, 2007 and 2006, research and development expenses were $417,523
and $589,219, respectively.
K. 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, 2007, the Company does not believe that any impairment
has occurred.
L. 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 payable and
accrued expenses approximates fair value because of the short maturity of those
instruments.
13
M. Foreign Currency Translation
Assets and liabilities of subsidiaries operating in foreign countries are
translated into U.S. dollars using both 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.
N. 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 the interaction between SFAS No. 123(R) and certain SEC
rules and regulations and 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 No.
123(R). 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. 123(R) and
related interpretations as provided by SAB 107. The Company utilizes the
Black-Scholes option-pricing model to calculate the fair value of each
individual issuance of options. Such compensation amounts, if any, are amortized
over the respective vesting periods of the option grant. The Company applies
this statement prospectively. Prior to January 1, 2006, the Company accounted
for stock-based employee compensation plans (including shares issued under its
stock option plans) in accordance with APB Opinion No. 25 and followed the pro
forma net income, pro forma income per share, and stock-based compensation plan
disclosure requirements set forth in the Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123").
O. Accrued Officers' Compensation
Accrued officers' compensation consists of the unpaid portion of the respective
officer's contract salary.
P. Common Stock To Be Issued
Common stock to be issued consists of proceeds from private placements received
by year-end or quarter-end for stock that has yet to be issued. Such amounts are
to be retired through the issuance of shares subsequent to the balance sheet
date(s). The amount so reflected at March 31, 2007, $800,250, is to be settled
through the issuance of 5,335,000 shares once approval of the offering is
secured from the American Stock Exchange.
14
Q. New Accounting Pronouncements
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This statement requires all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable, and permits for
subsequent measurement using either fair value measurement with changes in fair
value reflected in earnings or the amortization and impairment requirements of
Statement No. 140. The subsequent measurement of separately recognized servicing
assets and servicing liabilities at fair value eliminates the necessity for
entities that manage the risks inherent in servicing assets and servicing
liabilities with derivatives to qualify for hedge accounting treatment and
eliminates the characterization of declines in fair value as impairments or
direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year
beginning after September 15, 2006. The adoption of this statement did not have
a material impact on the Company's financial position or results of operations.
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109." This interpretation provides guidance
for recognizing and measuring uncertain tax positions, as defined in SFAS No.
109, "Accounting for Income Taxes." FIN No. 48 prescribes a threshold condition
that a tax position must meet for any of the benefit of an uncertain tax
position to be recognized in the financial statements. Guidance is also provided
regarding de-recognition, classification, and disclosure of uncertain tax
positions. FIN No. 48 is effective for fiscal years beginning after December 15,
2006. The Company does not expect that this interpretation will have a material
impact on its financial position, results of operations, or cash flows.
In September 2006, the FASB issued FASB Statement No. 157. This Statement
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP), and expands disclosures about
fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is a
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practices. This Statement is effective for
financial statements for fiscal years beginning after November 15, 2007. Earlier
application is permitted provided that the reporting entity has not yet issued
financial statements for that fiscal year. The adoption of FASB No. 157 did not
have a material impact on the financial statements of the Company.
In December 2006, the FASB approved FASB Staff Position (FSP) No. EITF 00-19-2,
"Accounting for Registration Payment Arrangements" ("FSP EITF 00-19-2"), which
specifies that the contingent obligation to make future payments or otherwise
transfer consideration under a registration payment arrangement, whether issued
as a separate agreement or included as a provision of a financial instrument or
other agreement, should be separately recognized and measured in accordance with
SFAS No. 5, "Accounting for Contingencies". FSP EITF 00-19-2 also requires
additional disclosure regarding the nature of any registration payment
arrangements, alternative settlement methods, the maximum potential amount of
consideration and the current carrying amount of the liability, if any. The
guidance in FSP EITF 00-19-2 amends FASB Statements No. 133, "Accounting for
Derivative Instruments and Hedging Activities", and No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity", and FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
requirement for Guarantees, Including Indirect Guarantees of Indebtedness of
Others", to include scope exceptions for registration payment arrangements. FSP
EITF 00-19-2 is effective immediately for registration payment arrangements and
the financial instruments subject to those arrangements that are entered into or
modified subsequent to the issuance date of this FSP, or for financial
statements issued for fiscal years beginning after December 15, 2006, and
interim periods within those fiscal years, for registration payment arrangements
entered into prior to the issuance date of this FSP. The Company is currently
evaluating the impact, if any, on the Company's financial position, results of
operations or cash flows.
15
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities-including an amendment of FAS 115"
(Statement 159). Statement 159 allows entities to choose, at specified election
dates, to measure eligible financial assets and liabilities at fair value that
are not otherwise required to be measured at fair value. If a company elects the
fair value option for an eligible item, changes in that item's fair value in
subsequent reporting periods must be recognized in current earnings. Statement
159 is effective for fiscal years beginning after November 15, 2007. We are
currently evaluating the potential impact of Statement 159 on our financial
statements. We do not expect the impact will be material.
Other accounting standards that have been 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.
NOTE 4 - SHAREHOLDERS' EQUITY
The Company amended its articles of incorporation on June 27, 2003, to increase
the authorized number of shares to 250 million and on April 24, 2001, authorized
a class of 5 million shares of preferred stock. There are no outstanding
preferred stock shares at March 31, 2007.
A. Stock Option Plans.
The short and long-term compensation program includes stock options granted
under Stock Incentive Plans as well as non-qualified stock options. The Company
currently has two stock option plans: The 2005 Stock Option Plan, approved by
the shareholders on June 10, 2005 as an additional plan to the Company's 2001
Stock Plan; and the 2001 Stock Option Plan, approved by the shareholders on
April 24, 2001. Both option plans are designed to reward executives for
achieving long-term financial performance goals over a three-year to ten-year
period, provide retention incentives for executives, and tie a significant
portion of an executive's total compensation to long-term performance. Stock
options for executive officers and key associates are part of the incentive
program and link the enhancement of shareholder value directly to their total
compensation.
Shares available under the 2005 Plan: On a calendar year basis, Awards under the
Plan may be made for a maximum of ten percent (10%) of the total shares of
Common Stock outstanding on a fully diluted basis (without taking into account
outstanding Awards at the end of the prior calendar year), less Awards
outstanding at the end of the prior calendar year. Notwithstanding this limit,
not more than three percent (3%) of the total shares of within the plan may be
subject to ISO Awards during the term of the Plan, and not more than seven
percent (7%) of the total shares within the plan may be subject to Awards in a
form other than options and SARs. No director, officer, or employee may be
granted options with respect to the total awards available under the plan to
more than half of the awards within the Plan, nor more than 5,000,000 shares per
fiscal year, subject to a limit of 2,500,000 shares per fiscal year for
individuals first hired that year. The number of shares subject to these limits
will be adjusted in the event of certain changes in the capitalization of the
Company.
16
Shares Available under the 2001 Plan: The number of awards that may be granted
under the 2001 Plan in each calendar year will not exceed twenty percent (20%)
of (i) the total shares of common stock outstanding on a fully diluted basis,
without taking into account awards outstanding under the 2001 Plan that are
exercisable for or convertible into common stock or that are unvested stock
awards (referred to as 'outstanding awards'), at the close of business on the
last day of the preceding calendar year, less (ii) the number of shares subject
to 'outstanding awards' at the close of business on that date.
The following table summarizes the Company's stock options outstanding at
December 31, 2006, and March 31, 2007:
Weighted average
Shares exercise price
----------------- -----------------------
Outstanding and exercisable at December 31, 2006 25,718,518 $.62
Granted 0 0
Exercised 0 0
Expired 50,000 0
------------------ -----------------------
Outstanding and exercisable at March 31, 2007 25,668,518 $ .62
================== =======================
Information, at date of issuance, regarding options for the quarter ended March
31, 2007 is as follows:
Weighted
Average Weighted
Exercise Average Fair
Shares Price Value
------------ ----------- ---------------
Exercise price exceeds market price -0- $-0- -0-
Exercise price equals market price -0- $-0- -0-
Exercise price is less than market price -0- $-0- -0-
During the 1st Quarter 2007, 50,000 options expired without exercise and no
options were issued.
The Company utilizes the Black-Scholes option-pricing model to calculate the
fair value of each individual issuance of options. There were no options issued
during the three months ended March 31, 2007. The per-share weighted average
fair value of stock options granted for compensation during the three months
ended March 31, 2006 and the year ended December 31, 2006 was $0.27 and $0.76,
respectively. On the date of grant, using the Black-Scholes pricing model, the
following assumptions were used for options granted during the three (3) months
ended March 31, 2007 and 2006:
17
March 31, 2007 March 31, 2006
Expected dividend yield NA 0%
Risk-free interest rate NA 5%
Volatility NA 80%
At March 31, 2007, the range of exercise price for all of the Company's
outstanding stock options was $0.16 to $1.26, with an average remaining life of
5.5 years and an average exercise price of $0.62.
B. Stock as compensation and settlement of accounts payable:
The Company issues stock as compensation for services, valuing such issues
premised upon the fair market value of the stock.
During the quarter ended March 31, 2007, the Company issued an aggregate of
1,099,748 shares of common stock in consideration of services rendered to the
Company during 2006. Such shares were valued at an aggregate of $404,447 ranging
from $.36 - $.40 per share. The Company also issued 500,000 shares for the
acquisition of Metastatin Pharmaceuticals and issued 50,000 shares for the asset
purchase from Quest Pharmatech, both accrued at December 31, 2006 and valued at
$165,000 and $19,500, respectively.
The March 31, 2007 financial statements reflect these transactions as payments
of accounts payable accrued during 2006.
Furthermore, accrued at March 31, 2007, is $15,750 in consultant fees that are
to be retired through future issuance of 70,833 shares.
C. Private Placement
The Company also completed one (1) private placement in which the Company
received qualified subscriptions for 5,335,000 shares of our Common Stock at a
purchase price of $0.15 per share generating total proceeds equal to $800,250.
We have filed an AMEX additional listing application to issue the shares.
D. Common Stock Purchase Agreement
During the quarter ended March 31, 2007, the Company issued 1.12 million shares
in exchange for $280,000 in connection with the common stock purchase agreement
with Fusion Capital.
18
NOTE 5 - COMMITMENTS AND CONTINGENCIES
A. The Company leases various facilities under operating lease agreements
expiring through September 2008. Rental expense for the three months ended March
31, 2007 and 2006 was $15,644 and $22,134, respectively. Future minimum annual
lease payments under the facilities lease agreements lasting more than one year
are as follows:
2007 $56,572
2008 $43,307
B. Samaritan has a research collaboration (the "Research Collaboration") with
Georgetown University to further develop Samaritan's pipeline. Commencing on
April 1, 2004, the Research Collaboration term was extended to 2014 with a
budget of $1,000,000 per year. The $1,000,000 paid by Samaritan over four (4)
quarterly payments of $250,000 is unallocated and covers the general research
and development effort. In the second quarter of 2007, the Company plans to
terminate the Georgetown University research collaboration, however, Samaritan
is currently negotiating a research collaboration with McGill University,
Montreal, under the same terms as the Georgetown University agreement which it
plans to initiate in the third quarter of 2007.
C. The Company has no written employment agreement with Dr. Janet Greeson and
Mr. Eugene Boyle. Dr. Thomas Lang and Dr. Christos Dakas each have employment
agreements negotiated at arm's length with the Compensation Committee, and each
such agreement provides for a minimum annual base salary. In setting base
salaries, the Board has considered (a) the contributions made by each executive
to our Company, (b) compensation paid by peer companies to their executive
officers and (c) outside compensation reports. In 2006, all executive officers
received salary increases of approximately 5% reflecting competitive trends,
general economic conditions as well as a number of factors relating to the
particular individual, including the performance of the individual executive,
level of experience and ability and knowledge of the job.
The Compensation Committee also has the authority to award discretionary bonuses
to executive officers. The incentive bonuses are intended to compensate officers
for achieving financial and operational goals and for achieving individual
annual performance objectives. These objectives vary depending on the individual
executive, but relate generally to strategic factors such as 1) initial signing
of an employment agreement; 2) upon acceptance of filing of a new drug
application by the FDA; 3) the FDA approval to move from one phase to the next
phase in the FDA application process; 4) pharmaceutical sales goals achieved 5)
completion of an in-licensing contract; 6) completion of an out-licensing
contract; and 7) increases in market capitalization. The Compensation Committee
did not make any cash bonuses to the executive officers in 2006.
NOTE 6 - LITIGATION
Samaritan, from time to time, is involved in various legal proceedings in the
ordinary course of its business.
NOTE 7 - RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company entered into transactions with
Clay County Holdings ("CCH"). These transactions include loans made to and from
CCH. In the past, CCH had made a loan to Samaritan which Samaritan paid off in
2003. During 2004, Samaritan created a note receivable with CCH for $250,000
which amount bears interest at a rate of twelve percent (12%) per annum. The
note receivable is secured by pledge of common stock in Samaritan owned by CCH.
A Director of the Company is related to the Chairman of the Board of CCH but is
not a shareholder of CCH. The CEO and CFO of the Company are mother and son.
19
NOTE 8 - FUSION TRANSACTION
On May 12, 2005, the Company entered into a second common stock purchase
agreement, as amended ("Purchase Agreement II") with Fusion Capital pursuant to
which Fusion Capital has agreed to purchase its common stock from time to time
at the Company's option up to an aggregate amount of $40,000,000 over fifty (50)
months from the date the SEC declares effective a registration statement
covering the shares of common stock to be purchased by Fusion Capital pursuant
to such Purchase Agreement II. The SEC declared effective the Company's
registration statement on Form SB-2, Commission Registration No. 333-130356 on
December 29, 2005, covering the shares of common stock to be purchased by Fusion
Capital and such shares will be priced based on the market price of our shares
at the time of sale to Fusion Capital. We have the right to sell to Fusion
Capital up to $40,000 of our common stock on each business day and may increase
that amount with additional $5,000 for every $0.25 increase in our stock price
above $1.50 for five consecutive days immediately prior to the submission of
Daily Purchase Amount Increase Notice. We have the right to control timing and
the amount of shares we sell to Fusion Capital. On February 17, 2006, the
conditions for commencement of sales of our shares specified in the purchased
agreement with Fusion Capital were satisfied. During the quarter ended March 31,
2007, the Company issued 1.12 million shares in connection with the common stock
purchase agreement with Fusion Capital. Samaritan filed a post effective
amendment on Form S-1 to the above Registration Statement No. 333-130356 on
January 9, 2007. The SEC declared it effective on February 6, 2007. Under the
Purchase Agreement II agreement, we have set a minimum purchase price ("floor
price") of $0.25. Fusion Capital shall not have the right or the obligation to
purchase shares of our Common Stock on any business day that the market price of
our Common Stock is below $0.25. On May 15, 2007, the last reported market sale
price of our Common Stock was $0.23. Accordingly, the Company cannot currently
access funds under the Purchase Agreement II and will not be able to access such
funds in the future unless the market price our Common Stock exceeds $0.25 per
share.
NOTE 9 - RISKS AND UNCERTAINTIES
Marketability of the Company's product is dependent, among other things, upon
securing additional capital to successfully complete the clinical testing,
securing FDA approval, and procurement of viable patents.
NOTE 10 - SUBSEQUENT EVENTS (Unaudited)
On April 10, 2007, The Company announced it received a notice that a European
Patent has been granted to Samaritan's SP-1000 (Cholesterol Recognition
Sequence) drug for the treatment of cardiovascular disease. The European patent
is an examined document, and is enforceable as a patent after registration
requirements have been fulfilled in designated countries. Samaritan is taking
the appropriate steps to register the patent in the following European
countries: Austria, Belgium, Switzerland/Liechtenstein, Spain, France, Great
Britain, Italy, the Netherlands, and Sweden. Previously on May 22, 2006,
Samaritan announced that its collaborating scientists in two preclinical animal
studies found that SP-1000 reduces blood cholesterol, clears plaque from clogged
arteries, and raises HDL -- the good cholesterol. The patent has been awarded to
Georgetown University and is exclusively licensed to Samaritan.
During April 2007, the Company issued 800,000 shares in exchange for $200,000 in
connection with the common stock purchase agreement with Fusion Capital.
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Samaritan Pharmaceuticals, Inc. (including the subsidiaries, referred to as
Samaritan, the "Company", "it", "we", and "our"), formed in September 1994, is
an entrepreneurial biopharmaceutical company, focused on commercializing
innovative therapeutic products to relieve the suffering of patients with
Alzheimer's disease; cancer; cardiovascular disease, HIV, and Hepatitis C; as
well as, commercializing its acquired marketing and sales rights to sell nine
marketed revenue-generating products in Greece and/or various Eastern European
countries.
Samaritan aims to commercialize three blockbuster market drug candidates with
late-stage preclinical development programs. Samaritan is evaluating the use of
Caprospinol, SP-233 in Alzheimer's disease patients; the use of SP-1000 with
acute coronary disease patients; and the use of SP-10 as an "oral treatment" for
Hepatitis C patients. In addition, Samaritan has partnered its oral entry
inhibitor HIV drug SP-01A with Pharmaplaz, Ireland.
Business Model
Our commercialization business model is focused dually on, the partnering of our
promising innovative products to pharmaceutical companies; and the acquisition
of the marketing and sales rights to revenue-generating marketed products for
sales in Greece and Eastern Europe. This model allows Samaritan to focus on our
core competencies in drug discovery and drug development. Samaritan partners
promising innovative therapeutics anywhere in the early "human" clinical trial
stage, i.e. late-stage preclinical studies, Phase I Clinical trials, or proof of
concept, Phase II clinical trials, with the objective of partnering before
costly Phase III clinical trials. Potential revenue streams with this model
could include up-front fees, milestone payments, and participation in the
marketing success of partnered products through royalties. In addition,
Samaritan is enhancing and strengthening our sales and marketing force in Greece
and Eastern Europe to allow for the significant economics gained by advancing
the commercialization of our contracted marketed products. Our business model is
entirely focused on achieving growth and maximizing value for the benefit of our
investors.
Licensing and Collaborative Agreements
To build, advance and promote our product portfolio, Samaritan often seeks to
augment our own internal programs and capabilities with collaborative projects
with a number of outside partners. For our marketed products, we have
established certain license agreements, co-promotion arrangements,
manufacturing, supply and co-development alliances with pharmaceutical and other
biotechnology companies, academic institutions and government laboratories to
which we currently pay royalties. Similarly, for product candidates now in
development, we have secured licenses to certain intellectual property and
entered into strategic alliances with third parties for various aspects of
research, development, manufacturing and commercialization, pursuant to which we
will owe or receive future royalties if the product candidates are licensed and
commercialized.
21
Pharmaplaz, LTD. On March 28, 2007, Samaritan and Pharmaplaz, a shareholder,
announced they have an agreement to commercialize SP-01A, an "oral" HIV entry
inhibitor. Under the terms of the agreement, Pharmaplaz, a shareholder, is
required to pay Samaritan $10 million in upfront fees. The first payment of $1.4
million was received on March 28, 2007, and the remaining $8.6 million is
required to be paid on September 16, 2007. Pharmaplaz, a shareholder, will pay
for and be responsible for future research and development to bring the
technology to market. Samaritan has no remaining obligation or performance for
future research and development. The $10,000,000 payment is non-refundable. If
requested by Pharmaplaz, a shareholder, Samaritan will perform sponsored
research regarding SP-01A or participate as Principal Investigators in
applications for NIH grants, or other grant applications to advance SP-01A, at
Pharmaplaz's cost. Samaritan and Pharmaplaz, a shareholder, will split 50/50 of
all revenues stemming from SP-01A.
Marketed Products
Samaritan has also entered into strategic collaborative relationships with other
pharmaceutical companies to commercialize branded approved prescription products
in selected niche territories, such as, in Greece, Albania, Bosnia, Bulgaria,
Croatia, Cyprus, Czech Republic, Egypt, FYROM, Hungary, Montenegro, Poland,
Romania, Serbia, Slovakia, Slovania, Syria and Turkey. We use our expertise to
register approved drugs with regulatory agencies in the country we have acquired
the rights for; and then, upon regulatory approval, we distribute, market and
sell these products. Currently, we have in-licensed the rights to sell nine
drugs, Amphocil from Three Rivers Pharmaceuticals, Elaprase from Shire
Pharmaceuticals, Infasurf from Ony, Inc, and Mepivamol, Methadone, Morphine
Sulphate, Naloxone, Naltrexone, and Oramorph from Molteni Farmaceutici. Our
efforts are focused on specialist physicians in private practice or at hospitals
and major medical centers in our territories. Below is a description of our
in-licensed products.
AMPHOCIL(R)
AMPHOCIL(R) is a lipid form of amphotericin B indicated for the treatment of
invasive aspergillosis, a life threatening systemic fungal infection.
AMPHOCIL(R) is indicated for the treatment of severe systemic and/or deep
mycoses in cases where toxicity or renal failure precludes the use of
conventional amphotericin B in effective doses, and in cases where prior
systemic antifungal therapy has failed. Fungal infections successfully treated
with AMPHOCIL(R) include disseminated candidiasis and aspergillosis. AMPHOCIL(R)
has been used successfully in severely neutropenic patients.
AMPHOCIL(R) is an approved FDA prescription product owned by Three Rivers
Pharmaceuticals, Inc. and marketed by Three Rivers Pharmaceuticals, Inc. in the
US. Samaritan signed an exclusive distribution deal for Greece and Cyprus with
Three Rivers on December 14, 2005.
In April 2006, Samaritan was granted marketing authorization for AMPHOCIL(R) in
Greece; however Samaritan needed to apply for a price increase for it to be
profitable, which we received in March 2007. Samaritan expects to launch
AMPHOCIL(R) in Greece in April 2007. Marketing authorization for AMPHOCIL(R) is
pending in Cyprus.
ELAPRASE(R)
ELAPRASE(R) is a human enzyme replacement therapy for the treatment of Hunter
syndrome, also known as Mucopolysaccharidosis II (MPS II). Hunter syndrome is a
rare, life-threatening genetic condition that results from the absence or
insufficient levels of the lysosomal enzyme iduronate-2-sulfatase. Without this
enzyme, cellular waste products accumulate in tissues and organs, which then
begin to malfunction.
22
ELAPRASE(R) was granted marketing authorization for the long-term treatment of
patients with Hunter's disease by the European Commission in January 2007.
ELAPRASE(R) is the first, and only, enzyme replacement therapy for Hunter's
disease patients and was launched in the U.S. in July 2006.
ELAPRASE(R) will be sold and distributed by Samaritan on a named patient basis
until the pricing and the reimbursement of ELAPRASE(R) is established in Greece
and Cyprus, with the relevant regulatory authorities. Samaritan expects to
launch ELAPRASE(R) in Greece and Cyprus in the second quarter of 2007. Samaritan
signed an exclusive licensing agreement with Shire Pharmaceuticals for the
marketing and sale of ELAPRASE(R) in Greece and Cyprus which became effective
March 1, 2007.
INFASURF(R)
INFASURF(R) treats and prevents Respiratory Distress Syndrome (RDS). This
syndrome occurs when infants lack surfactant, a natural substance normally
produced in the body, which is necessary for lungs to function normally.
INFASURF(R) is used exclusively in hospitals with a neonatal intensive care unit
(NICU) and is administered by neonatologists, neonatal nurses, neonatal nurse
practitioners and respiratory therapists.
On January 16, 2007, Samaritan signed an exclusive agreement with Siraeo, Ltd
for the marketing and distribution of the product INFASURF(R) in Turkey, Serbia,
Bosnia, Macedonia, Albania, Egypt and Syria. INFASURF(R) is an approved FDA
prescription product owned by ONY, Inc. and marketed by Forest Laboratories in
the US.
Currently, Samaritan Pharmaceuticals is utilizing the US FDA approved regulatory
file in preparing marketing applications for INFASURF(R) with regulatory
authorities in Turkey, Serbia, Bosnia, F.Y.R.O.M., Albania, Egypt and Syria to
gain country marketing authorization drug approval.
MEPIVAMOL(R)
MEPIVAMOL(R) (Mepivacaine) is an effective and reliable local anesthetic of
intermediate duration and low systemic toxicity. It is widely used for regional
anesthetic procedures such as IVRA, infiltration, epidural blockade, plexus and
peripheral nerve blockade. MEPIVAMOL(R) is approved by the Italian Ministry of
Health (The equivalent to the US FDA) and is owned by Molteni Farmaceutici, Inc.
and marketed by Molteni Farmaceutici, Inc. in Italy.
On January 1, 2007, Samaritan entered into an exclusive licensing agreement with
Molteni Farmaceutici for the marketing and distribution of MEPIVAMOL(R) in the
countries of Greece and Cyprus. Currently, Samaritan Pharmaceuticals is
utilizing the Italian Ministry of Health approved regulatory file in preparing
marketing applications for MEPIVAMOL(R) with regulatory authorities in Greece
and Cyprus to gain country marketing authorization drug approval.
23
METHADONE HCL(R)
METHADONE HCL(R) is an opiate agonist. METHADONE HCL(R) prevents heroin or
morphine from interacting with receptors for natural painkillers called
endorphins, blocking the effects of the addictive drugs and reducing the
physical cravings. METHADONE HCL(R) is approved by the Italian Ministry of
Health (The equivalent to the US FDA) and is owned by Molteni Pharmaceuticals,
Inc. and marketed by Molteni Farmaceutici, Inc. in Italy.
On January 1, 2007, Samaritan entered into an exclusive licensing agreement with
Molteni Farmaceutici for the marketing and distribution of METHADONE HCL(R) in
the countries of Greece and Cyprus.
Currently, METHADONE HCL(R) can only be sold in Greece and Cyprus via a
centralized government tender. Samaritan is preparing a tender application for
the next request by Greek authorities for applications.
MORPHINE SULPHATE(R)
MORPHINE SULPHATE(R) (Injectable Formulation) relieves moderate to severe pain
by binding to brain receptors. Morphine Sulphate may be used to control the pain
following surgery, child birth, and other procedures. It may also be used to
treat the pain associated with cancer, heart attacks, sickle cell disease and
other medical conditions.
On January 1, 2007, Samaritan entered into an exclusive licensing agreement with
Molteni Farmaceutici for the marketing and distribution of MORPHINE SULPHATE(R)
in the countries of Greece and Cyprus.
Currently, MORPHINE SULPHATE(R) can only be sold in Greece and Cyprus via a
centralized government tender. Samaritan is preparing a tender application for
the next request by Greek authorities for applications.
NALOXONE MOLTENI(R)
NALOXONE MOLTENI(R) is an opioid antagonist which reverses the effects of opioid
overdose, for example heroin and morphine overdose. Specifically, Naloxone is
used in opioid overdoses for countering life-threatening depression of the
central nervous system and respiratory system.
On January 1, 2007, Samaritan entered into an exclusive licensing agreement with
Molteni Farmaceutici for the marketing and distribution of NALOXONE MOLTENI(R)
in the countries of Greece and Cyprus.
Currently, NALOXONE(R) will be sold and distributed by Samaritan on a named
patient basis until the pricing and the reimbursement of NALOXONE(R) is
established in Greece and Cyprus, with the relevant regulatory authorities.
NALTREXONE MOLTENI(R)
NALTREXONE MOLTENI(R) is an opioid antagonist which is used to help people who
have a narcotic or alcohol addiction stay drug free. NALTREXONE MOLTENI(R) is
used after the patient has stopped taking drugs or alcohol. It works by blocking
the effects of narcotics or by decreasing the craving for alcohol.
24
NALTREXONE MOLTENI(R) is approved by the Italian Ministry of Health (The
equivalent to the US FDA) and is owned by Molteni Farmaceutici, Inc. and
marketed by Molteni Farmaceutici, Inc. in Italy.
On January 1, 2007, Samaritan entered into an exclusive licensing agreement with
Molteni Farmaceutici for the marketing and distribution of NALTREXONE MOLTENI(R)
in the countries of Greece and Cyprus.
Currently, Samaritan Pharmaceuticals is utilizing the Italian Ministry of Health
approved regulatory file in preparing marketing applications for NALTREXONE
MOLTENI(R) with regulatory authorities in Greece and Cyprus to gain country
marketing authorization drug approval.
ORAMORPH(R)
ORAMORPH(R) is morphine sulphate in an oral solution and is used for managing
moderate to severe chronic pain for more than a few days. It works by dulling
the pain perception center in the brain. ORAMORPH(R) is approved by the Italian
Ministry of Health (The equivalent to the US FDA) and is marketed by Molteni in
Italy.
ORAMORPH(R) is approved by the Italian Ministry of Health (The equivalent to the
US FDA) and is owned by Molteni Farmaceutici, Inc. and marketed by Molteni
Farmaceutici, Inc. in Italy.
On January 1, 2007, Samaritan entered into an exclusive licensing agreement with
Molteni Farmaceutici for the marketing and distribution of ORAMORPH(R) in the
countries of Greece and Cyprus.
Currently, Oramorph has a Greek marketing authorization. Oramorph can only be
sold in Greece via a centralized government tender. Samaritan is preparing a
tender application for the next request by Greek authorities for applications.
Plan and Results of Operations
We have used the proceeds from private placements 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/A filed with the SEC on April 27, 2007 for the fiscal
year ended December 31, 2007.
Results of Operations For The Three (3) Months Ended March 31, 2007 As Compared
To The Three (3) Months Ended March 31, 2006
On March 28, 2007, Samaritan and Pharmaplaz, a shareholder, announced they have
entered into an agreement to commercialize SP-01A, an "oral" HIV entry
inhibitor. Under the terms of the agreement, Pharmaplaz, a shareholder, is
required to pay Samaritan $10 million in upfront fees. The first payment of $1.4
million was received on March 28, 2007, and the remaining $8.6 million is
required to be paid on September 16, 2007. Pharmaplaz, a shareholder, will pay
for and be responsible for future research and development to bring the
technology to market. Samaritan has no remaining obligation or performance for
future research and development. The $10,000,000 payment is non-refundable. If
requested by Pharmaplaz, a shareholder, Samaritan will perform sponsored
research regarding SP-01A or participate as Principal Investigators in
applications for NIH grants, or other grant applications to advance the SP-01A,
at Pharmaplaz's cost. Samaritan and Pharmaplaz, a shareholder, will split 50/50
of all revenues stemming from SP-01A.
For the period ended March 31, 2007, Samaritan recognized as revenue $2,701,742
from the Pharmaplaz Agreement, which comprised of the $1,400,000 cash received
during the quarter, and $1,301,742 in receivable that Samaritan determined
collectibility to be reasonably assured. There was insufficient time prior to
filing of this report to perform necessary procedures to assure the
collectiblitity of the remaining balance due from Pharmaplaz on September 16,
2007. The remaining $7,298,258 will be recognized as collectibility is assured
or when the actual funds are received.
We incurred research and development expenses of $417,523 for the three months
ended March 31, 2007, as compared to $589,219 for the three months ended March
31, 2006. This decrease of $171,696 or twenty-nine percent (29%) was primarily
attributable to the culmination of the costs associated with our HIV clinical
trial. We expect research and development expenditures relating to drug
discovery and development will increase during the remainder of 2007 and into
subsequent years due to the expanding requirements of FDA clinical trials for:
(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 $667,411 for the three months
ended March 31, 2007, as compared to $597,139 for the three months ended March
31, 2006. This increase of $70,272 or twelve (12%), was primarily attributable
to an increase in cost of payroll as offset by decreases in amortization of
deferred compensation and consulting.
Depreciation and amortization amounted to $43,636 for the three months ended
March 31, 2007, as compared to $34,787 for the three months ended March 31,
2006. This increase of $8,850, or twenty-five percent (25%), was primarily
attributable to increases in amortization on both purchased technology and
approved patents.
Net interest income amounted to $(7,454) and $(8,954) for the three (3) months
ended March 31, 2007 and 2006, 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
$7,454 and $8,960, for the three (3) months ended March 31, 2007 and 2005,
respectively. Interest expense was $-0- and $6, for the three (3) months ended
March 31, 2007 and 2006, respectively.
We had earnings of $1,580,626 for the three months ended March 31, 2007, as
compared to a loss of $1,193,558 for the three months ended March 31, 2006.
Earnings were the result of the sale of rights to Pharmaplaz, a shareholder, as
described in the notes. As disclosed in the financial statements, earnings
(loss) per share was $.01 and ($.01) per share (undiluted), for the three months
ended March 31, 2007 and 2006, respectively.
25
Liquidity and Capital Resources
As of March 31, 2007, the Company's cash position was $1,912,993. We are
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.
Cash provided (used) in operating activities during the three (3) month period
ended March 31, 2007 was $472,552, as compared to $(1,062,902) for the three
month period ended March 31, 2006, an increase of $1,535,454. This increase is
primarily attributable to fluctuations and timing of the cost with our HIV
clinical trial, and the receipt of the $1.4 million from Pharmaplaz, the first
payment on the sale of licensing rights.
Cash provided (used) by investing activities was ($150,382) for the three (3)
month period ended March 31, 2007, as compared to cash provided of $488,029 for
the three (3) month period ended March 31, 2006, a decrease of $638,411. Last
year, the period reflected proceeds from the liquidation of a certificate of
deposit for use in funding 2006 activities. The current year's period includes
increases in patent costs.
Cash provided by financing activities was $848,748 for the three (3) month
period ended March 31, 2007, as compared to $2,628,514 for the three (3) month
period ended March 31, 2006, an decrease of $1,779,766 or sixty-eight percent
(68%). Last year's results include proceeds of $1,300,000 from private
placements, and $1,328,514 from the equity funding agreement with Fusion.
Because of the decrease in immediate research costs and the sale of licenses
rights to Pharmaplaz, the Company did not raise as much capital. Therefore,
private placement proceeds (classified as common stock to be issued) and draws
from Fusion were $568,748 and $280,000, respectively.
Current assets as of March 31, 2007 were $3,558,450 as compared to $1,073,921 as
of December 31, 2006. This increase of $2,484,529 was primarily attributable to
the receipt of proceeds and recording of an account receivable from the sale of
licensing rights to Pharmaplaz. Current liabilities as of March 31, 2007 were
$1,111,331 as compared to $1,519,565 as of December 31, 2006, a decrease of
$408,234, primarily due to retiring accounts payable through the issuance of
common stock.
On May 12, 2005, we entered into the 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 on December 29, 2005 (Commission Registration No. 333-130356), the
Registration Statement on Form SB-2 was declared effective by the SEC. Samaritan
filed a post effective amendment on Form S-1 to the above Registration Statement
No. 333-130356 on January 9, 2007. The SEC declared it effective on February 6,
2007. The number of registered, yet not issued shares remaining under that
Registration Statement as of March 30, 2007, was 2,209,372. Under the Purchase
Agreement II agreement, we have set a minimum purchase price ("floor price") of
$0.25. Fusion Capital shall not have the right or the obligation to purchase
shares of our Common Stock on any business day that the market price of our
Common Stock is below $0.25. On May 15, 2007, the last reported market sale
price of our Common Stock was $0.23. Accordingly, the Company cannot currently
access funds under the Purchase Agreement II and will not be able to access such
funds in the future unless the market price our Common Stock exceeds $0.25 per
share.
26
We believe that existing balances of cash, cash equivalents, marketable
securities, cash generated from operations (out-licensing of SP-01A to
Pharmaplaz and future cash derived from marketed products), and funds
potentially available to us under Purchase Agreement II are sufficient to
finance our current operations and working capital requirements on both a
short-term and long-term basis. However, we cannot predict the amount or timing
of our need for additional funds under various circumstances, which could
include a significant acquisition of a business or assets, new product
development projects, expansion opportunities, or other factors that may require
us to raise additional funds in the future. We cannot provide assurance that
funds will be available to Samaritan when needed on favorable terms, or at all.
On March 28, 2007, Samaritan and Pharmaplaz, a shareholder, announced they have
an agreement to commercialize SP-01A, an "oral" HIV entry inhibitor. Under the
terms of the agreement, Pharmaplaz, a shareholder, is required to pay Samaritan
$10 million in upfront fees. The first payment of $1.4 million was received on
March 28, 2007, and the remaining $8.6 million is required to be paid on
September 16, 2007. Pharmaplaz, a shareholder, will pay for and be responsible
for future research and development to bring the technology to market. Samaritan
has no remaining obligation or performance for future research and development.
The $10,000,000 payment is non-refundable. If requested by Pharmaplaz, a
shareholder, Samaritan will perform sponsored research regarding SP-01A or
participate as Principal Investigators in applications for NIH grants, or other
grant applications to advance SP-01A, at Pharmaplaz's cost. Samaritan and
Pharmaplaz, a shareholder, will split 50/50 of all revenues stemming from
SP-01A.
We will continue to have significant general and administrative expenses,
including expenses related to clinical studies, our research collaboration with
universities and patent registration costs. Except for our Purchase Agreement
with Fusion Capital, no commitment exists for continued investments, or for any
underwriting.
In addition to 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. We may
also 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. We
also expect to generate revenues from our marketed products in the near future,
and our business model has changed from a development model to a licensing and
development model. For more information on the change in business model, please
see "Business Model" section.
27
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 (which must exceed $0.25 per share) 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 Agreement II 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.
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 Agreements. Currently, we have out-licensed our
SP-01A and in-licensed the rights to sell nine drugs, Amphocil from Three Rivers
Pharmaceuticals, Elaprase from Shire Pharmaceuticals, Infasurf from Ony, Inc,
and Mepivamol, Methadone, Morphine Sulphate, Naloxone, Naltrexone, and Oramorph
from Molteni Pharmaceuticals to meet our cash needs. We intend to continue to
explore avenues to obtain additional capital through private placements and by
the sale of our shares of Common Stock to Fusion Capital.
Forward-Looking Information and Factors that May Affect Future Results
The Securities and Exchange Commission encourages companies to disclose
forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions. This report and other
written or oral statements that we make from time to time contain such
forward-looking statements that set forth anticipated results based on
management's plans and assumptions. Such forward-looking statements involve
substantial risks and uncertainties. We have tried, wherever possible, to
identify such statements by using words such as "will," "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe," "target,"
"forecast" and other words and terms of similar meaning in connection with any
discussion of future operating or financial performance or business plans and
prospects. In particular, these include statements relating to future actions,
business plans and prospects, prospective products or product approvals, future
performance or results of current and anticipated products, sales efforts,
expenses, interest rates, foreign exchange rates, the outcome of contingencies,
such as legal proceedings, and financial results. Among the factors that could
cause actual results to differ materially are the following:
o the success of research and development activities;
o decisions by regulatory authorities regarding whether and when to approve our
drug applications, as well as their decisions regarding labeling and other
matters that could affect the availability or commercial potential of our
products;
o the speed with which regulatory authorizations, pricing approvals and product
launches may be achieved;
o the success of external business development activities;
o competitive developments, including with respect to competitor drugs and drug
candidates that treat diseases and conditions similar to those treated by our
in-line drugs and drug candidates;
28
o the ability to successfully market both new and existing products domestically
and internationally;
o difficulties or delays in manufacturing;
o trade buying patterns;
o the ability to meet generic and branded competition after the loss
of patent protection for our products and competitor products;
o the impact of existing and future regulatory provisions on product
exclusivity;
o trends toward managed care and healthcare cost containment;
o Legislation or regulatory action in our marketed territories affecting, among
other things, pharmaceutical product pricing, reimbursement or access, the
importation of prescription drugs and the involuntary approval of prescription
medicines for over-the-counter use;
o claims and concerns that may arise regarding the safety or efficacy of or
marketed products and product candidates;
o legal defense costs, insurance expenses, settlement costs and the risk of an
adverse decision or settlement related to product liability, patent protection,
governmental investigations, ongoing efforts to explore various means for
resolving asbestos litigation and other legal proceedings;
o the Company's ability to protect its patents and other intellectual property
both domestically and internationally;
o interest rate and foreign currency exchange rate fluctuations;
o governmental laws and regulations affecting domestic and foreign operations,
including tax obligations;
o changes in U.S. generally accepted accounting principles;
o any changes in business, political and economic conditions due to the threat
of terrorist activity in the U.S. and other parts of the world, and related U.S.
military action overseas;
o growth in costs and expenses;
o changes in our product, segment and geographic mix; and
We cannot guarantee that any forward-looking statement will be realized,
although we believe we have been prudent in our plans and assumptions.
Achievement of anticipated results is subject to substantial risks,
uncertainties and inaccurate assumptions. Should known or unknown risks or
uncertainties materialize, or should underlying assumptions prove inaccurate,
actual results could vary materially from past results and those anticipated,
estimated or projected. Investors should bear this in mind as they consider
forward-looking statements.
We undertake no obligation to publicly update forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make on related subjects
in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange
Commission. Our Form 10-K/A filing for the 2006 fiscal year filed on April 27,
2007 listed various important factors that could cause actual results to differ
materially from expected and historic results. We note these factors for
investors as permitted by the Private Securities Litigation Reform Act of 1995.
Readers can find them in Part I, Item 1A, of that filing under the heading "Risk
Factors and Cautionary Factors That May Affect Future Results." We incorporate
that section of that Form 10 K in this filing and investors should refer to it.
You should understand that it is not possible to predict or identify all such
factors. Consequently, you should not consider any such list to be a complete
set of all potential risks or uncertainties.
29
This report includes discussion of certain clinical studies relating to various
in-line products and/or product candidates. These studies typically are part of
a larger body of clinical data relating to such products or product candidates,
and the discussion herein should be considered in the context of the larger body
of data.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We do not engage in trading market-risk sensitive instruments and do not
purchase hedging instruments or other than trading instruments that are likely
to expose us to market risk, whether interest rate, foreign currency exchange,
commodity price or equity price risk. We have no outstanding debt instruments,
have not entered into any forward or future contracts, and 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 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 March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This statement requires all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable, and permits for
subsequent measurement using either fair value measurement with changes in fair
value reflected in earnings or the amortization and impairment requirements of
Statement No. 140. The subsequent measurement of separately recognized servicing
assets and servicing liabilities at fair value eliminates the necessity for
entities that manage the risks inherent in servicing assets and servicing
liabilities with derivatives to qualify for hedge accounting treatment and
eliminates the characterization of declines in fair value as impairments or
direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year
beginning after September 15, 2006. The adoption of this statement did not have
a material impact on the Company's financial position or results of operations.
30
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109." This interpretation provides guidance
for recognizing and measuring uncertain tax positions, as defined in SFAS No.
109, "Accounting for Income Taxes." FIN No. 48 prescribes a threshold condition
that a tax position must meet for any of the benefit of an uncertain tax
position to be recognized in the financial statements. Guidance is also provided
regarding de-recognition, classification, and disclosure of uncertain tax
positions. FIN No. 48 is effective for fiscal years beginning after December 15,
2006. The Company does not expect that this interpretation will have a material
impact on its financial position, results of operations, or cash flows.
In September 2006, the FASB issued FASB Statement No. 157. This Statement
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP), and expands disclosures about
fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is a
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practices. This Statement is effective for
financial statements for fiscal years beginning after November 15, 2007. Earlier
application is permitted provided that the reporting entity has not yet issued
financial statements for that fiscal year. The adoption of FASB No. 157did not
have a material impact on the financial statements of the Company.
In December 2006, the FASB approved FASB Staff Position (FSP) No. EITF 00-19-2,
"Accounting for Registration Payment Arrangements" ("FSP EITF 00-19-2"), which
specifies that the contingent obligation to make future payments or otherwise
transfer consideration under a registration payment arrangement, whether issued
as a separate agreement or included as a provision of a financial instrument or
other agreement, should be separately recognized and measured in accordance with
SFAS No. 5, "Accounting for Contingencies". FSP EITF 00-19-2 also requires
additional disclosure regarding the nature of any registration payment
arrangements, alternative settlement methods, the maximum potential amount of
consideration and the current carrying amount of the liability, if any. The
guidance in FSP EITF 00-19-2 amends FASB Statements No. 133, "Accounting for
Derivative Instruments and Hedging Activities", and No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity", and FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
requirement for Guarantees, Including Indirect Guarantees of Indebtedness of
Others", to include scope exceptions for registration payment arrangements. FSP
EITF 00-19-2 is effective immediately for registration payment arrangements and
the financial instruments subject to those arrangements that are entered into or
modified subsequent to the issuance date of this FSP, or for financial
statements issued for fiscal years beginning after December 15, 2006, and
interim periods within those fiscal years, for registration payment arrangements
entered into prior to the issuance date of this FSP. The Company is currently
evaluating the impact, if any, on the Company's financial position, results of
operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities-including an amendment of FAS 115"
(Statement 159). Statement 159 allows entities to choose, at specified election
dates, to measure eligible financial assets and liabilities at fair value that
are not otherwise required to be measured at fair value. If a company elects the
fair value option for an eligible item, changes in that item's fair value in
subsequent reporting periods must be recognized in current earnings. Statement
159 is effective for fiscal years beginning after November 15, 2007. We are
currently evaluating the potential impact of Statement 159 on our financial
statements. We do not expect the impact will be material.
31
Other accounting standards that have been 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 4. 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.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below before purchasing our
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 of 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.
32
RISK ASSOCIATED WITH OUR BUSINIES
We Have A Limited Operating History
Prior to the Samaritan and Pharmaplaz's Research, Development and
Commercialization Collaboration Agreement, we had limited operating history and
our revenue had not been sufficient to sustain our operations. We have incurred
annual operating losses over various years and as a result, at March 31, 2007,
we had an accumulated deficit of $39,728,516. Our future profitability will
require the successful commercialization of our marketed drugs in Eastern Europe
as well as the out-licensing of our internal development programs in
Alzheimer's, Cancer Cardiovascular disease and Infectious Diseases. Currently,
the Company has in-licensed nine products to be marketed and distributed in our
Eastern Europe territories. No assurances can be given when this will occur or
when we will become profitable.
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We Will Require Additional Financing To Sustain Our Operations And Without It We
May Not Be Able To Continue Operations. We Cannot Currently Access Funds Under
The Purchase Agreement II.
We had an operating cash flow deficit of $6.25 million for the year ended
December 31, 2006 and $4.64 million for the year ended December 31, 2005.
The availability of funds under the Purchase Agreement II with Fusion Capital is
subject to many conditions, some of which are predicated on events that are not
within our control. Accordingly, we cannot guarantee that these capital
resources will be sufficient to fund our business operations.
Fusion Capital shall not have the right nor 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. Accordingly, if the stock price is below $0.25,
the Company cannot access funds under the Purchase Agreement II. On May 15,
2007, the last reported market sale price of our Common Stock was $0.23.
Accordingly, the Company cannot currently access funds under the Purchase
Agreement II and will not be able to access such funds in the future unless the
market price our Common Stock exceeds $0.25 per share. If we continue to be
unable to access funds under the Purchase Agreement II, we may need to sell
additional equity securities in private placements. As of March 30, 2007, with
2,209,372 remaining available under the Registration Statement, the selling
price of our Common Stock to Fusion Capital will have to average at least $16.16
per share for us to receive the remaining proceeds of $35,700,000 without
registering additional shares of Common Stock. Shares issued to date under the
Common Stock Purchase Agreement are 12,790,628, with proceeds of $4,300,000.
Assuming a minimum purchase price of $0.25 per share and the purchase by Fusion
Capital of the full 2,209,372 remaining shares under the Purchase Agreement II,
the remaining proceeds to us would be $552,343 unless we choose to register more
than 2,209,372 shares, which we have the right, but not the obligation, to do.
In the event we elect to sell more than the 2,209,372 shares, we will be
required to file a new Registration Statement and have it declared effective by
the U.S. Securities & Exchange Commission. The number of shares ultimately
offered for sale by Fusion Capital is dependent upon the number of shares
purchased by Fusion Capital under the Purchase Agreement II. We have the right
to receive $40,000 per trading day under the Purchase Agreement II, unless our
stock price equals or exceeds $1.50, in which case the daily amount may be
increased under certain conditions as the price of our Common Stock increases.
33
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, which as of May 15, 2007, was $0.23, and the extent to which we are able
to secure working capital from other sources, such as through the sale of our
products. If obtaining sufficient financing from Fusion Capital were to prove
unavailable or prohibitively dilutive and if we are unable to sell enough of our
products, we may need to secure another source of funding in order to satisfy
our working capital needs. Even if we are able to access the remaining
$35,700,000 under the Purchase Agreement II with Fusion Capital, 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, we
could be forced to curtail or cease our business operations.
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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 And Other Shares
Registered for Selling Stockholders Could Cause The Price Of Our Common Stock To
Decline
In connection with entering into the Purchase Agreement II with Fusion Capital,
we authorized the sale to Fusion Capital of up to 26,643,100 shares of our
Common Stock and registered 16,700,000. The number of shares ultimately offered
for sale by Fusion Capital is dependent upon the number of shares purchased by
Fusion Capital under the agreement. The purchase price for the Common Stock to
be sold pursuant to the Purchase Agreement II will fluctuate based on the price
of our Common Stock. Depending upon market liquidity at the time, a sale of
shares by Fusion Capital at any given time could cause the trading price of our
Common Stock to decline. Fusion Capital may ultimately purchase all, some or
none of the 16,700,000 shares of Common Stock registered under the Purchase
Agreement II. Further, the lower the stock price, the more shares we would have
to sell to Fusion Capital to receive the same proceeds. After it has acquired
such shares, Fusion Capital may sell all, some or none of such shares registered
under the accompanying Registration Statement. Therefore, sales to Fusion
Capital by us under the Purchase Agreement II may result in substantial dilution
to the interests of other holders of our Common Stock. The sale of a substantial
number of shares of our Common Stock by Fusion Capital, 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 that we might otherwise wish
to effect sales. However, we have the right to control the timing and amount of
any sales of our shares of Common Stock to Fusion Capital and the Purchase
Agreement II may be terminated by us at any time at our discretion without any
cost to us.
Further, the sale by Fusion Capital of our Common Stock will increase the number
of our publicly traded shares, which could depress the market price of our
Common Stock. Moreover, the mere prospect of resales by Fusion Capital and other
selling stockholders as contemplated in the prospectus filed January 26, 2007
could depress the market price for our Common Stock. The issuance of shares to
Fusion Capital under the Purchase Agreement II, will dilute the equity interest
of existing stockholders and could have an adverse effect on the market price of
our Common Stock.
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34
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, including
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
could force us to curtail our business operations.
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Protecting Our Proprietary Rights Is Difficult and Costly
The patent positions of pharmaceutical companies can be highly uncertain and
involve complex legal and factual questions. 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. 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.
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Our Success Will Depend On Our Ability To Attract And Retain Key Personnel
In order to execute our business plan, we need to attract, retain and motivate a
significant number of highly qualified managerial, technical, financial and
sales personnel. If we fail to attract and retain skilled scientific and
marketing personnel, our research and development and sales and marketing
efforts will be hindered. Our future success depends to a significant degree
upon the continued services of key management personnel, including 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. 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.
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35
We Are Forming A New Collaboration with McGill University and Our Success Is
Dependent Upon A Smooth Transition from Our Long Term Collaboration with
Georgetown University.
Dr. Vassilios Papadopoulos, the lead scientist in the Georgetown
University/Samaritan research collaboration, has been appointed as the new
Director of the Research Institute of the McGill University Health Centre (MUHC)
in Montreal, Canada. Dr. Papadopoulos has an international reputation as a
scientist and a proven track record of leadership in biomedical research and
administration. Dr. Papadopoulos will assume his new role officially on July 1,
2007. Between now and then he expects to be at the Research Institute of the
MUHC on a regular basis, working on development and operational issues.
Each license granted or to be granted from Georgetown to Samaritan shall not be
terminated or any way affected if the research collaboration between Georgetown
and Samaritan is terminated. Each such license has its own termination
provisions as set forth in the respective license.
Samaritan has the right to terminate the Georgetown research collaboration under
this Agreement upon a 60-day notice in the event that Dr. Papadopoulos' ceases
to be the Principal Investigator or have responsibility for directing our
collaborated research. Samaritan intends to transfer our research collaboration
with Georgetown to MUHC and expects to initiate a research collaboration with
McGill officially in the third quarter of 2007.
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We Are Faced With Intense Competition And Industry Changes, Which May Make It
More Difficult For Us To Achieve Significant Market Penetration.
The pharmaceutical and biotech industry generally is characterized by rapid
technological change, changing customer needs, and frequent new product
introductions. If our competitors' existing products or new products are more
effective than or considered superior to our products, the commercial
opportunity for our products will be reduced or eliminated. We face intense
competition from companies in our marketplace as well as companies offering
other treatment options. Many of our potential competitors are significantly
larger than we are and have greater financial, technical, research, marketing,
sales, distribution and other resources than we do. We believe there will be
intense price competition for products developed in our markets. Our competitors
may develop or market technologies and products that are more effective or
commercially attractive than any that we are developing or marketing. Our
competitors may obtain regulatory approval, and introduce and commercialize
products before we do. These developments could force us to curtail or cease or
business operations. Even if we are able to compete successfully, we may not be
able to do so in a profitable manner.
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If We Are Unable To Continue Product Development, Our Business Will Suffer
Our growth depends in part on continued ability to successfully develop our
products. We may experience difficulties that could delay or prevent the
successful development and commercialization of these products. Our products in
development may not prove safe and effective in clinical trials. Clinical trials
may identify significant technical or other obstacles that must be overcome
before obtaining necessary regulatory or reimbursement approvals. In addition,
our competitors may succeed in developing commercially viable products that
render our products obsolete or less attractive. Failure to successfully develop
and commercialize new products and enhancements would likely have a significant
negative effect on our financial prospects.
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36
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. If our products do not develop market acceptance,
we will be forced to curtail or cease our business operations.
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There Is Uncertainty Relating To Third-Party Reimbursement, Which Is Critical To
Market Acceptance Of Our Products.
International market acceptance of our products may depend, in part, upon the
availability of reimbursement within prevailing health care payment systems.
Reimbursement and health care payment systems in international markets vary
significantly by country, and include both government sponsored health care and
private insurance. We may not obtain international reimbursement approvals in a
timely manner, if at all. Our failure to receive international reimbursement
approvals may negatively impact market acceptance of our products in the
international markets in which those approvals are sought and could force us to
curtail or cease our business operations.
From time to time significant attention has been focused on reforming the health
care system in the United States and other countries. Any changes in Medicare,
Medicaid or third-party medical expense reimbursement, which may arise from
health care reform, may have a material adverse effect on reimbursement for our
products or procedures in which our products are used and may reduce the price
we are able to charge for our products. In addition, changes to the health care
system may also affect the commercial acceptance of products we are currently
developing and products we may develop in the future.
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37
If We Fail To Protect Our Licensed Intellectual Property Rights, Our Competitors
May Take Advantage Of Our Ideas And Compete Directly Against Us.
Our success will depend to a significant degree on our ability to secure and
protect intellectual property rights and to enforce patent and trademark
protections relating to our technology which we license. From time to time,
litigation may be advisable to protect our intellectual property position.
However, these legal means afford only limited protection and may not adequately
protect our rights or permit us to gain or keep any competitive advantage. Any
litigation in this regard could be costly, and it is possible that we will not
have sufficient resources to fully pursue litigation or to protect our other
intellectual property rights. It could result in the rejection or invalidation
of our existing and future patents. Any adverse outcome in litigation relating
to the validity of our patents, or any failure to pursue litigation or otherwise
to protect our patent position, could force us to curtail or cease our business
operations. Also, even if we prevail in litigation, the litigation would be
costly in terms of management distraction as well as in terms of money. In
addition, confidentiality agreements with our employees, consultants, customers,
and key vendors may not prevent the unauthorized disclosure or use of our
technology. It is possible that these agreements could be breached or that they
might not be enforceable in every instance, and that we might not have adequate
remedies for any such breach. Enforcement of these agreements may be costly and
time consuming. Furthermore, the laws of foreign countries may not protect our
intellectual property rights to the same extent as the laws of the United
States.
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We May Be Sued For Allegedly Violating The Intellectual Property Rights Of
Others.
The pharmaceutical industry has in the past been characterized by a substantial
amount of litigation and related administrative proceedings regarding patents
and intellectual property rights. In addition, major pharmaceutical companies
have used litigation against emerging growth companies as a means of gaining or
preserving a competitive advantage.
Should third parties file patent applications or be issued patents claiming
technology also claimed by us in pending applications, we may be required to
participate in interference proceedings in the United States Patent and
Trademark Office to determine the relative priorities of our inventions and the
third parties' inventions. We could also be required to participate in
interference proceedings involving our issued patents and pending applications
of another entity. An adverse outcome in an interference proceeding could
require us to cease using the technology or to license rights from prevailing
third parties and force us to curtail or cease our business operations.
Third parties may claim we are using their patented inventions and may go to
court to stop us from engaging in our normal operations and activities. These
lawsuits are expensive to defend and conduct and would also consume and divert
the time and attention of our management. A court may decide that we are
infringing a third party's patents and may order us to cease the infringing
activity. A court could also order us to pay damages for the infringement. These
damages could be substantial and could have a material adverse effect on our
business, financial condition, results of operations and cash flows. An adverse
outcome on an infringement claim could force us to curtail or cease our business
operations.
If we are unable to obtain any necessary license following an adverse
determination in litigation or in interference or other administrative
proceedings, we would have to modify our products to avoid infringing a third
party's patent and could temporarily or permanently have to discontinue
manufacturing and selling some of our products. If this were to occur, it would
negatively impact future sales and, in turn, our business, financial condition,
results of operations and cash flows, which could force us to curtail or cease
our business operations.
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38
If We Fail To Obtain Or Maintain Necessary Regulatory Clearances Or Approvals
For Products, Or If Approvals Are Delayed Or Withdrawn, We Will Be Unable To
Commercially Distribute And Market Our Products Or Any Product Modifications.
Government regulation has a significant impact on our business. Government
regulation in the United States and other countries is a significant factor
affecting the research and development, manufacture and marketing of our
products. In the United States, the Food and Drug Administration (FDA) has broad
authority under the federal Food, Drug and Cosmetic Act to regulate the
distribution, manufacture and sale of pharmaceutical products. The process of
obtaining FDA and other required regulatory clearances and approvals is lengthy
and expensive. We may not be able to obtain or maintain necessary approvals for
clinical testing or for the manufacturing or marketing of our products. Failure
to comply with applicable regulatory approvals can, among other things, result
in fines, suspension or withdrawal of regulatory approvals, product recalls,
operating restrictions, and criminal prosecution. In addition, governmental
regulations may be established which could prevent, delay, modify or rescind
regulatory approval of our products. Any of these actions by the FDA, or change
in FDA regulations, could have a material adverse effect on our business,
financial condition, results of operations and cash flows.
Regulatory approvals, if granted, may include significant limitations on the
indicated uses for which our products may be marketed. In addition, to obtain
such approvals, the FDA and foreign regulatory authorities may impose numerous
other requirements on us. FDA enforcement policy prohibits the marketing of
approved medical devices for unapproved uses. In addition, product approvals can
be withdrawn for failure to comply with regulatory standards or unforeseen
problems following initial marketing. We may not be able to obtain or maintain
regulatory approvals for our products on a timely basis, or at all, and delays
in receipt of or failure to receive such approvals, the loss of previously
obtained approvals, or failure to comply with existing or future regulatory
requirements could have a material adverse effect on our business, financial
condition, results of operations and cash flows, which could force us to curtail
or cease our business operations.
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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.
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39
If We Become Subject To Product Liability Claims, We May Be Required To Pay
Damages That Exceed Our Insurance Coverage.
Our business exposes us to potential product liability claims that are inherent
in the testing, production, marketing and sale of pharmaceuticals products.
While we maintain a commercial general liability policy for $2 million, we may
not be able to maintain insurance in amounts or scope sufficient to provide us
with adequate coverage. A claim in excess of our insurance coverage would have
to be paid out of cash reserves, which could have a material adverse effect on
our business, financial condition, results of operations and cash flows and
force us to curtail or cease our business operations. In addition, any product
liability claim likely would harm our reputation in the industry and our ability
to develop and market products in the future.
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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.
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We Are Dependent On Third Parties For A Significant Portion Of Our Bulk Supply
And The Formulation, Fill And Finish Of Our Product Candidates.
We currently produce a substantial portion of clinical product candidates'
supply at our collaborative partner's Ireland manufacturing facility. However,
we also depend on third parties for a significant portion of our product
candidates' bulk supply as well as for some of the formulation, fill and finish
of product candidates that we manufacture. Pharmaplaz is our third-party
contract manufacturer of product candidates' bulk drug; accordingly, our
clinical supply of product candidates is currently significantly dependent on
Pharmaplaz's production schedule for product candidates. We would be unable to
produce product candidates in sufficient quantities to substantially offset
shortages in Pharmaplaz's scheduled production if Pharmaplaz or other
third-party contract manufacturers used for the formulation, fill and finish of
product candidates bulk drug were to cease or interrupt production or services
or otherwise fail to supply materials, products or services to us for any
reason, including due to labor shortages or disputes, regulatory requirements or
action or contamination of product lots or product recalls. We cannot guarantee
that an alternative third-party contract manufacturer would be available on a
timely basis or at all. This in turn could materially reduce our ability to
satisfy demand for product candidates, which could materially and adversely
affect our operating results.
--------------------------------------------------------------------------------
Our Corporate Compliance Program Cannot Guarantee That We Are In Compliance With
All Potentially Applicable U.S. Federal And State Regulations And All
Potentially Applicable Foreign Regulations.
The development, manufacturing, distribution, pricing, sales, marketing and
reimbursement of our products, together with our general operations, is subject
to extensive federal and state regulation in the United States and to extensive
regulation in foreign countries. While we have developed and instituted a
corporate compliance program based on what we believe to be current best
practices, we cannot assure you that we or our employees are or will be in
compliance with all potentially applicable U.S. federal and state regulations
and/or laws or all potentially applicable foreign regulations and/or laws. If we
fail to comply with any of these regulations and/or laws a range of actions
could result, including, but not limited to, the termination of clinical trials,
the failure to approve a product candidate, restrictions on our products or
manufacturing processes, including withdrawal of our products from the market,
significant fines, exclusion from government healthcare programs or other
sanctions or litigation.
40
RISKS ASSOICAITED WITH AN INVESTMENT IN OUR COMMON STOCK
If We Do Not Show Progress Consistent With Our Compliance Plan, There Is No
Assurance That Our Stock Will Not Be Delisted From The American Stock Exchange
("AMEX", the "Exchange").
On April 3, 2007, the American Stock Exchange ("AMEX") notified Samaritan
Pharmaceuticals, Inc. that its listing on the AMEX exchange is being continued
pursuant to an extension with a plan completion date of May 31, 2007, which
encompasses the due date for Samaritan's quarterly Report (Form 10-Q) for the
period ending March 31, 2007 to demonstrate that it has regained compliance with
the continued listing standards in Section 1003(a)(ii) and (iii) of the AMEX
Company Guide. The Company must also address Section 1003(f)(v) of the AMEX
Company Guide.
Previously on November 6, 2006 and on January 30, 2007 , the AMEX Listing
Qualifications staff notified the Company it no longer complies with the
Exchange's continued listing standard due to its shareholder's equity of less
than $4 million and losses from continuing operations and/or losses in three out
of its four most recent fiscal years, as set forth in Section 1003(a)(ii) of the
Company Guide; with its shareholder's equity of less than $6 million from
continuing operations and/or net losses in its five most recent fiscal years, as
set forth in Section 1003(a)(iii) of the Company Guide; and with its low selling
price, as set forth in Section 1003(f)(v) of the Company Guide.
The Company is required by the AMEX to provide periodic reports showing progress
consistent with the Company's compliance plan. If the Company does not show
progress consistent with our compliance plan, the Staff will review the
circumstances and may immediately commence delisting proceedings. Thus, there is
no assurance that the Company will be able to maintain continued listing on the
AMEX.
--------------------------------------------------------------------------------
The Market Price Of Our Common Stock Is Highly Volatile.
The market price of our Common Stock has been and is expected to continue to be
highly volatile. Various factors, including announcements of technological
innovations by us or other companies, regulatory matters, new or existing
products or procedures, concerns about our financial position, operating
results, litigation, government regulation, developments or disputes relating to
agreements, patents or proprietary rights may have a significant impact on the
market price of our stock. If our operating results are below the expectations
of securities analysts or investors, the market price of our Common Stock may
fall abruptly and significantly.
Future sales of our Common Stock, including shares issued upon the exercise of
outstanding options and warrants or hedging or other derivative transactions
with respect to our stock, could have a significant negative effect on the
market price of our Common Stock. These sales also might make it more difficult
for us to sell equity securities or equity-related securities in the future at a
time and price that we would deem appropriate.
41
We entered into registration rights agreements in connection with Fusion Capital
and other financings pursuant to which we agreed to register for resale by the
investors the shares of Common Stock issued. Sales of these shares could have a
material adverse effect on the market price of our shares of Common Stock. . If
obtaining sufficient financing from Fusion Capital were to prove unavailable or
prohibitively dilutive and if we are unable to sell enough of our products, we
may need to secure another source of funding in order to satisfy our working
capital needs.
--------------------------------------------------------------------------------
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 blank check preferred stock, where the Board of Directors can
designate rights or preferences, 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.
--------------------------------------------------------------------------------
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.
42
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Securities, were sold by the Company in the first quarter of 2007
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.
During the first quarter 2007, we issued 1,099,748 shares in consideration of
services performed in 2006; issued 500,000 shares for the acquisition of
Metastatin Pharmaceuticals; issued 50,000 shares for the asset purchase from
Quest Pharmatech. Additionally in first quarter 2007, the Company received
$280,000 in exchange for the issuance of 1.12 million shares to Fusion Capital.
The Company also completed one (1) private placement in which the Company
received qualified subscriptions for 5,335,000 shares of our Common Stock at a
purchase price of $0.15 per share of total proceeds equal to $800,250, for which
we are in the process of filing an AMEX additional listing application to issue
the shares.
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 that
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 and Chief Operating Officer, is the son of Dr. Janet Greeson.
On May 30, 2006 the Board of Directors of Samaritan approved and adopted the
Change in Control Severance Plan for Certain Covered Executives and Employees of
Samaritan Pharmaceuticals (the "Plan"), effective May 30, 2006. The Plan is
intended to help avoid the loss and distraction of certain key employees of the
Company in the event of a change in control. The Plan has an initial term of
three years with automatic three-year extensions, unless terminated by the Board
at least six (6) months prior to the end of the then current term.
43
The Chief Executive Officer, Chief Operating Officer, Senior Vice Presidents,
Vice Presidents, and Directors are eligible to participate in the Plan, and the
Board may designate other employees of the Company as Plan participants. The
Company shall pay or cause to be paid to the participant a cash severance
calculated based on a multiplier of four (4) months of base salary for every
year of service up to maximum in of either twenty four (24) months or thirty six
(36) months depending on the participants job title or job category. The
severance amount equals the applicable multiplier times the sum of (A) the
Participant's highest annual rate of base salary as reported on the
participant's W-2 for employee or on the participant's 1099 for directors within
the thirty six (36) month period immediately preceding the Effective Date of the
change in control and (B) the participant's maximum annual target bonus in
effect upon the date of the change in control under the Company's bonus plan or
the Participant's actual earned commission incentive for the last two quarters,
which will be annualized, prior to the change in Control, not to exceed the
target at 100% of achievement as defined in the Company's Sales Incentive Plan
in effect upon the date of the change in control.
The Plan provides that, if, within three years following a "change in control"
(as defined in the Plan), a participant's employment is terminated by the
Company without "cause" (as defined in the Plan) or by the participant for "good
reason" (as defined in the Plan), the participant is eligible for severance
benefits equal to a multiple of the sum of the participant's base salary and the
higher of the participant's target bonus opportunity during the year in which
the change in control occurs or his or her target bonus opportunity following
the change in control. Each participant will also receive his or her salary
through the date of termination, a pro rata target bonus payment for the year in
which the termination occurs, a pro rata long-term incentive payment to the
extent provided in the Company's Long Term Incentive Plan, and any earned but
unpaid long-term incentive payments or annual bonuses. In the event that a
participant becomes subject to an excise tax under section 280G of the Internal
Revenue Code of 1986, as amended, the participant will generally be entitled to
receive an additional amount such that the participant is placed in the same
after-tax position as if no excise tax had been imposed. The plan may be amended
by the Board at any time, except that no amendment that adversely affects the
rights or potential rights of a participant will be effective in the event that
a change in control occurs within three (3) year of such amendment.
On May 30, 2006, the Board of Directors of Samaritan approved and adopted
indemnification agreement forms for certain covered executives and employees of
Samaritan. The Company has entered into indemnification agreements with each of
its current directors and certain of its executive officers. At present, there
is no pending litigation or proceeding involving a director, officer or employee
of the Company regarding which indemnification is sought, nor is the Company
aware of any threatened litigation that may result in claims for
indemnification.
44
ITEM 6. EXHIBITS
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.
EXHIBIT NO. DESCRIPTION LOCATION
--------------- ---------------------------------------- -------------------------------------------
3.1 Articles of Incorporation, restated as Incorporated by reference to Exhibit 3.1 to
last amended June 10, 2005 the Company's Current Report on Form 8-K as
filed with the U.S. Securities and Exchange
Commission on July 8, 2005.
3.2 Bylaws, restated as last amended Incorporated by reference to Exhibit 3.2 to
April 18, 2005 the Company's Current Report on Form 8-K as
filed with the U.S. Securities and Exchange
Commission on July 8, 2005.
4.1 Form of Common Stock Certificate Incorporated by reference to Exhibit 4.1 to
the Company's Current Report Form 10-SB12G
as filed with the U.S. Securities and
Exchange Commission on July 21, 1999.
4.2 Amended Samaritan Pharmaceuticals, Inc. Incorporated by reference to Exhibit 4.2 to
2001 Stock Option Plan the Company's Quarterly Report on Form
10-QSB as filed with the U.S. Securities
and Exchange Commission on August 16,
2004.
4.3 Samaritan Pharmaceuticals, Inc. Incorporated by reference to Schedule 14-A
2005 Stock Option Plan Information Statement as filed with the
U.S. Securities and Exchange Commission
on April 29, 2005 and approved by the
shareholders on June 10, 2005.
10.1 Research, Development and Incorporated by reference to Exhibit 10.1
Commercialization Collaboration Agreement to the Company's Form 10-K as filed with
for SP-01A dated March 28, 2007 by and the U.S. Securities and Exchange Commission
between Pharmaplaz and the Company. on April 13, 2007.
10.2 Common Stock Purchase Agreement (Purchase Incorporated by reference to Exhibit 10.1
Agreement I), dated April 22, 2003, by and to the Company's Current Report on Form 8-K
between the Company and Fusion Capital as filed with the U.S. Securities and
Fund II, LLC Exchange Commission on April 25, 2003.
10.3 Registration Rights Agreement, dated April Incorporated by reference to Exhibit 10.2
22, 2003, by and between the Company and to the Company's Current Report on Form 8-K
Fusion Capital Fund II, LLC as filed with the U.S. Securities and
Exchange Commission on April 25, 2003.
45
10.4 Employment Agreement, dated as of January Incorporated by reference to Exhibit 10.6
1, 2001, by and between Samaritan to the Company's Quarterly Report on Form
Pharmaceuticals, Inc. and Mr. Thomas Lang. 10-QSB as filed with the U.S. Securities
and Exchange Commission on August 16, 2004.
10.5 Form of Trust Under Samaritan Incorporated by reference to Exhibit 10.10
Pharmaceuticals, Inc. Deferred to the Company's Quarterly Report on Form
Compensation Plan 10-QSB as filed with the U.S. Securities
and Exchange Commission on August 14, 2002.
10.6 Master Clinical Trial and Full Scale Incorporated by reference to Exhibit 10.10
Manufacturing Agreement, dated October 5, to the Company's Quarterly Report on Form
2004, by and between the Company and 10-QSB as filed with the U.S. Securities
Pharmaplaz, LTD and Exchange Commission on November 15,
2004.
10.7 Common Stock Purchase Agreement (Purchase Incorporated by reference to Exhibit 10.11
Agreement II), dated May 12, 2005, by and to the Company's Quarterly Report on Form
between the Company and Fusion Capital 10-QSB as filed with the U.S. Securities
Fund II, LLC and Exchange Commission on May 13, 2005.
10.8 Amendment to Common Stock Purchase Incorporated by reference to Exhibit 10.12
Agreement, dated December 19, 2005, by and to the Company's Registration Statement on
between the Company and Fusion Capital Form SB-2 as filed with the U.S. Securities
Fund II, LLC and Exchange Commission on December 15,
2005.
10.9 Registration Rights Agreement, dated May Incorporated by reference to Exhibit 10.12
12, 2005, by and between the Company and to the Company's Quarterly Report on Form
Fusion Capital Fund II, LLC 10-QSB as filed with the U.S. Securities
and Exchange Commission on May 13, 2005.
10.10 Norbrook Supply Agreement Incorporated by reference to Exhibit 1 to
the Company's Current Report on Form 8-K as
filed with the U.S. Securities and Exchange
Commission on September 27, 2005.
10.11 Research Collaboration and Licensing Incorporated by reference to Exhibit 10.10
Agreement, dated June 8, 2001, by and to the Company's Registration Statement on
between Georgetown University and Form SB-2 as filed with the U.S. Securities
Samaritan Pharmaceuticals, Inc. and Exchange Commission on July 30, 2003.
46
10.12 Change in Control Severance Plan for Incorporated by reference to Exhibit 10.16
Certain Covered Executives and Employees to the Company's Quarterly Report on Form
of Samaritan Pharmaceuticals, Inc. 10-Q as filed with the U.S. Securities and
Exchange Commission on August 14, 2006.
10.13 Samaritan Pharmaceuticals, Inc.'s Incorporated by reference to Exhibit 10.17
Director/Officer's Indemnification to the Company's Quarterly Report on Form
Agreement 10-Q as filed with the U.S. Securities and
Exchange Commission on August 14, 2006.
10.14 Stock Purchase Agreement among Samaritan Incorporated by reference to Exhibit 10.18
Pharmaceuticals, Metastatin to the Company's Quarterly Report on Form
Pharmaceuticals, and the shareholders of 10-Q as filed with the U.S. Securities and
Metastatin Pharmaceuticals. Exchange Commission on November 14, 2006.
10.15 Samaritan Pharmaceuticals, Inc.'s Provided herewith
In-Licensing Agreement with Three Rivers
Pharmaceuticals dated December, 2005.
10.16 Samaritan Pharmaceuticals, Inc.'s Provided herewith
In-Licensing Agreement with Molteni dated
January 1, 2007.
10.17 Pharmaplaz Research, Development and Incorporated by reference to Exhibit 10.1
Commercialization Collaboration Agreement to the Company's Quarterly Report on Form
8-K as filed with the SEC on March 28, 2007.
10.18 Pharmaplaz Research, Development and Provided herewith
Commercialization Collaboration Agreement
Supplement
14.1 The Samaritan Pharmaceuticals, Inc. Code Incorporated by reference to Exhibit 14.1
of Conduct to the Company's Form 10-KSB as filed with
the U.S. Securities and Exchange Commission
on April 15, 2003.
16.1 Letter Regarding Change in Certifying Incorporated by reference to Exhibit 16.1
Accountant to the Company's Current Report on Form 8-K
as filed with the U.S. Securities and
Exchange Commission on September 27, 2002.
47
21 List of Subsidiaries Incorporated by reference to Exhibit 21 to
the Company's Quarterly Report on Form
10-QSB as filed with the U.S. Securities
and Exchange Commission on August 15, 2005.
23.1 Consent of Independent Registered Public Incorporated by reference to Exhibit 23.1
Accounting Firm to the Company's Registration Statement on
Form SB-2 as filed with the U.S. Securities
and Exchange Commission on December 15, 2005.
23.2 Consent of Nevada Counsel Incorporated by reference to Exhibit 23.2
to the Company's Registration Statement
on Form SB-2 as filed with the U.S. Securities
and Exchange Commission on December 15, 2005.
31.1 Certification of Chief Executive Officer Provided herewith
re: Section 302
31.2 Certification of Chief Financial Officer Provided herewith
re: Section 302
32.1 Certification of Chief Executive Officer Provided herewith
re: Section 906
32.2 Certification of Chief Financial Officer Provided herewith
re: Section 906
(B) Current Reports on Form 8-K Filed During The Quarter Ended March 31, 2007
None.
48
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SAMARITAN PHARMACEUTICALS, INC
Dated: May 21, 2007
By: /s/ Eugene Boyle
--------------------------
Eugene Boyle,
Chief Financial Officer, Director