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 September 30, 2008
( )
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
|
88-0431538
|
(State or other jurisdiction
of Incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
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 [
] Smaller
reporting company [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 November 18, 2008
was 32,715,265.
SAMARITAN
PHARMACEUTICALS, INC.
CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
TABLE
OF CONTENTS
PART
I. FINANCIAL INFORMATION
|
Page No.
|
Item
1. Consolidated Financial Statements:
|
|
Consolidated
Balance Sheets as of September 30, 2008 and December 31,
2007
|
3
|
Consolidated
Statements of Operations for the Nine (9) Months and Three (3) Months
Ended September 30, 2008 and 2007
|
4
|
Consolidated
Statements of Cash Flows for the Nine (9) Months Ended September 30, 2008
and 2007
|
5
|
Notes
to Interim Consolidated Financial Statements
|
6
|
Item
2. Management's Discussion and Analysis of Financial Condition &
Results of Operations
|
17
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
31
|
Item
4(T). Controls and Procedures
|
31
|
PART
II. OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
31
|
Item
1A. Risk Factors
|
32
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
41
|
Item
3. Defaults Upon Senior Securities
|
41
|
Item
4. Submission of Matters to a Vote of Security Holders
|
41
|
Item
5. Other Information
|
41
|
Item
6. Exhibits
|
41
|
Signatures
|
|
PART I.
FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements:
SAMARITAN
PHARMACEUTICALS, INC.
|
CONSOLIDATED
BALANCE SHEETS
|
ASSETS
|
|
|
|
September 30, 2008
|
|
|
December 31, 2007
|
|
CURRENT
ASSETS:
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Cash
and cash equivalents
|
|
$ |
169,781 |
|
|
$ |
287,571 |
|
Inventory,
pharmaceutical product
|
|
|
532,688 |
|
|
|
56,358 |
|
Receivable
from license collaboration
|
|
|
254,690 |
|
|
|
311,286 |
|
Receivable
from overseas product sales
|
|
|
3,197,812 |
|
|
|
827,115 |
|
Note
receivable, net of allowance for doubtful accounts
|
|
|
- |
|
|
|
250,000 |
|
Interest
receivable, net of allowance for doubtful accounts
|
|
|
- |
|
|
|
101,096 |
|
Refundable
tax credit
|
|
|
589,845 |
|
|
|
250,000 |
|
Prepaid
expenses
|
|
|
140,889 |
|
|
|
148,614 |
|
TOTAL
CURRENT ASSETS
|
|
|
4,885,705 |
|
|
|
2,232,040 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT
|
|
|
26,570 |
|
|
|
55,919 |
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
|
Patent
registration costs
|
|
|
1,492,557 |
|
|
|
1,411,383 |
|
Purchased technology
rights
|
|
|
288,212 |
|
|
|
226,628 |
|
Deposits
|
|
|
- |
|
|
|
2,779 |
|
TOTAL
OTHER ASSETS
|
|
|
1,780,769 |
|
|
|
1,640,790 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,693,044 |
|
|
$ |
3,928,749 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
4,300,622 |
|
|
$ |
1,041,922 |
|
Accrued
expenses and other current liabilities
|
|
|
2,381,404 |
|
|
|
1,184,289 |
|
Loans
from officers/shareholders
|
|
|
485,500 |
|
|
|
300,000 |
|
TOTAL
CURRENT LIABILITIES
|
|
|
7,167,526 |
|
|
|
2,526,211 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
(DEFICIT):
|
|
|
|
|
|
|
|
|
Preferred
stock, 5,000,000 shares authorized at $.001
|
|
|
|
|
|
par
value, none issued and outstanding
|
|
|
- |
|
|
|
- |
|
Common
stock, 250,000,000 shares authorized at $.001
|
|
|
|
|
|
par
value, 32,715,266 and 30,494,816
|
|
|
|
|
|
|
|
|
issued
at September 30, 2008 and December 31, 2007
|
|
|
32,715 |
|
|
|
30,495 |
|
Additional
paid-in capital
|
|
|
46,732,287 |
|
|
|
45,896,906 |
|
Treasury
stock
|
|
|
(250,248 |
) |
|
|
(250,248 |
) |
Accumulated
other comprehensive income
|
|
|
21,310 |
|
|
|
60,525 |
|
Accumulated
deficit after development stage
|
|
|
(2,675,406 |
) |
|
|
- |
|
Accumulated
deficit during development stage
|
|
|
(44,335,140 |
) |
|
|
(44,335,140 |
) |
TOTAL
SHAREHOLDERS' EQUITY (DEFICIT)
|
|
|
(474,482 |
) |
|
|
1,402,538 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,693,044 |
|
|
$ |
3,928,749 |
|
See
accompanying notes to the consolidated financial statements
(unaudited)
|
SAMARITAN
PHARMACEUTICALS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS & COMPREHENSIVE
INCOME
|
|
|
For
the Nine Months
|
|
|
For
the Three Months
|
|
|
|
September
30
|
|
|
September
30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
Unaudited
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical
sales
|
|
$ |
2,952,399 |
|
|
$ |
477,585 |
|
|
$ |
1,144,871 |
|
|
$ |
68,773 |
|
Licensing
rights
|
|
|
- |
|
|
|
3,451,742 |
|
|
|
- |
|
|
|
750,000 |
|
|
|
|
2,952,399 |
|
|
|
3,929,327 |
|
|
|
1,144,871 |
|
|
|
818,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold (pharmaceutical sales)
|
|
|
1,634,467 |
|
|
|
357,538 |
|
|
|
498,091 |
|
|
|
20,101 |
|
Research
and development
|
|
|
1,224,191 |
|
|
|
1,125,871 |
|
|
|
593,427 |
|
|
|
154,234 |
|
Interest,
net
|
|
|
51,397 |
|
|
|
(15,536 |
) |
|
|
17,328 |
|
|
|
(487 |
) |
General
and administrative
|
|
|
2,183,045 |
|
|
|
2,044,699 |
|
|
|
610,524 |
|
|
|
666,922 |
|
Depreciation
and amortization
|
|
|
119,534 |
|
|
|
138,063 |
|
|
|
40,344 |
|
|
|
47,974 |
|
Collateral
reserve adjustment
|
|
|
415,171 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other
income (loss)
|
|
|
- |
|
|
|
62,677 |
|
|
|
- |
|
|
|
62,677 |
|
|
|
|
5,627,805 |
|
|
|
3,713,312 |
|
|
|
1,759,714 |
|
|
|
951,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
|
(2,675,406 |
) |
|
|
216,015 |
|
|
|
(614,843 |
) |
|
|
(132,648 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain on marketable securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Foreign
translation adjustment
|
|
|
(39,215 |
) |
|
|
8,609 |
|
|
|
(153,642 |
) |
|
|
21,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive Income (Loss)
|
|
$ |
(2,714,621 |
) |
|
$ |
224,624 |
|
|
$ |
(768,485 |
) |
|
$ |
(111,494 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss (earnings) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(0.09 |
) |
|
$ |
0.01 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
(0.09 |
) |
|
$ |
0.01 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
31,214,803 |
|
|
|
26,959,497 |
|
|
|
32,133,442 |
|
|
|
27,711,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
31,214,803
|
|
|
|
26,959,497 |
|
|
|
32,133,442 |
|
|
|
27,711,255 |
|
See
accompanying notes to the consolidated financial statements
(unaudited)
|
SAMARITAN
PHARMACEUTICALS, INC.
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
For
the Nine Months Ended
|
|
|
|
September
30,
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(2,675,406 |
) |
|
$ |
216,015 |
|
Adjustments
to reconcile net income (loss) to net cash used in
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
119,534 |
|
|
|
138,063 |
|
Stock
based compensation
|
|
|
440,094 |
|
|
|
- |
|
Stock
options issued for services
|
|
|
327,507 |
|
|
|
56,269 |
|
Foreign
currency gain(loss)
|
|
|
(39,215 |
) |
|
|
8,609 |
|
Other
income
|
|
|
- |
|
|
|
62,677 |
|
(Increase)
decrease in assets:
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
(476,330 |
) |
|
|
(95,912 |
) |
Accounts
receivable
|
|
|
(2,314,101 |
) |
|
|
(2,501,798 |
) |
Refundable
tax credit
|
|
|
(339,845 |
) |
|
|
- |
|
Interest
receivable and prepaids
|
|
|
7,725 |
|
|
|
(174,638 |
) |
Note
receivable and accrued interest reserved
|
|
|
351,096 |
|
|
|
- |
|
Deposits
|
|
|
2,779 |
|
|
|
- |
|
Increase
(decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
4,442,198 |
|
|
|
1,026,124 |
|
|
|
|
|
|
|
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(153,964 |
) |
|
|
(1,264,591 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase
of technology rights
|
|
|
(15,379 |
) |
|
|
- |
|
Purchase
of furniture and equipment
|
|
|
- |
|
|
|
(3,927 |
) |
Investment
in joint venture
|
|
|
- |
|
|
|
(252,339 |
) |
Patent
registration costs
|
|
|
(153,947 |
) |
|
|
(338,191 |
) |
|
|
|
|
|
|
|
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
(169,326 |
) |
|
|
(594,457 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from stock issued for cash
|
|
|
20,000 |
|
|
|
- |
|
Proceeds
from equity financing
|
|
|
- |
|
|
|
480,000 |
|
Common
stock to be issued
|
|
|
- |
|
|
|
568,748 |
|
Short-term
loan proceeds
|
|
|
185,500 |
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
205,500 |
|
|
|
1,348,748 |
|
|
|
|
|
|
|
|
|
|
CHANGE
IN CASH
|
|
|
(117,790 |
) |
|
|
(510,300 |
) |
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
287,571 |
|
|
|
742,075 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$ |
169,781 |
|
|
$ |
231,775 |
|
|
|
|
|
|
|
|
|
|
NON-CASH
FINANCING AND INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
issued
|
|
$ |
327,507 |
|
|
$ |
- |
|
Purchase
of technology rights for accounts payable
|
|
$ |
63,616 |
|
|
$ |
- |
|
Stock
as compensation for services
|
|
$ |
440,094 |
|
|
$ |
- |
|
Stock
issued in cancellation of accounts payable
|
|
$ |
50,000 |
|
|
$ |
747,561 |
|
See
accompanying notes to the consolidated financial statements
(unaudited)
|
SAMARITAN
PHARMACEUTICALS, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2008 and 2007
(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, 2007, included
in the Form 10-K for the year then ended.
The
financial information presented as of and for the nine months ended September
30, 2008 ("Q3 2008") and as of and for the nine months ended September 30, 2007
("Q3 2007") 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 of September 30, 2008, and the results
of operations and cash flows for the nine (9) month period ending September 30,
2008 have been included. The results of operations for the nine (9) month period
ended September 30, 2008 are not necessarily indicative of the results to be
expected for the full year ended December 31, 2008. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Form 10-K as filed with the U.S. Securities and Exchange
Commission on April 14, 2008 for the year ended December 31, 2007.
NOTE 2 -
ORGANIZATION AND NATURE OF BUSINESS
Samaritan
Pharmaceuticals, Inc. (including the subsidiaries, referred to as “Samaritan”,
the "Company", "its", "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 marketed
revenue-generating products, in Greece, and/or various Eastern European
countries.
Commercialization
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 drug discovery and drug development. Our commercialization
business model is entirely focused on achieving growth and maximizing value for
the benefit of our investors.
NOTE 3 –
GOING CONCERN
The
accompanying consolidated financial statements are prepared assuming the Company
will continue as a going concern. At September 30, 2008, the Company had an
accumulated deficit of $47,010,546 and had a working capital deficiency of
($2,281,820). For the nine months ended September 30, 2008, the Company incurred
net losses of ($2,675,406), and used cash flows from operations of
($153,964).
Management's
plans with regard to these matters include the following:
1.
|
Obtaining additional capital
through the sale of common stock to existing and new
shareholders;
|
2.
|
Marketing of pharmaceutical
products in Eastern Europe;
|
3.
|
Continue its efforts to attempt
to collect payment due to the Company from
Pharmaplaz;
|
4.
|
Continue its efforts to
out-license the Company’s
technologies.
|
NOTE 4 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.
Basis 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.
B.
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:
·
|
Persuasive evidence of an
arrangement exists;
|
·
|
The fee is fixed or
determinable;
|
·
|
Collection is probable;
and
|
·
|
Delivery of technology or
intellectual property rights has occurred or services have been
rendered.
|
Product
Sales. Samaritan Pharmaceuticals sells Amphocil, Collatamp, Elaprase, Erwinase,
Morphine, Rapydan, and Replagal in Greece. Product sales are recognized when
delivery of the products has occurred, title has passed to the customer, the
selling price is fixed or determinable, collectability is reasonably assured and
the Company has no further obligations. The Company records allowances for
product returns, rebates and wholesaler charge backs, wholesaler discounts, and
prescription vouchers at the time of sale and reports product sales net of such
allowances. The Company must make significant judgments in determining these
allowances. We periodically evaluate the need to maintain allowances for
doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. When making this evaluation, we made
judgments about the creditworthiness of customers based on ongoing credit
evaluations and the aging profile of customer accounts receivable and assess
current economic trends that might impact the level of credit losses in the
future. The products Amphocil, Collatamp, Elaprase, Erwinase, Morphine, Rapydan,
and Replagal have not experienced significant credit losses; therefore we have
no allowance for doubtful accounts as of September 30, 2008.
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, and (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 collectability of license
fees receivable from licensees is reasonably assured. We assess the
collectability 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
collectability becomes reasonably assured, assuming all other revenue
recognition criteria have been met.
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.
Inventory
The
Company's inventory consists primarily of pharmaceutical products for
distribution in its licensed territories. The Company values inventories at the
lower of cost or fair market value. The Company determines the cost of inventory
using the average cost method. The Company analyzes its inventory levels
quarterly and writes down inventory that has become obsolete, inventory that has
a cost basis in excess of its expected net realizable value and inventory
quantities in excess of expected requirements. Expired inventory is disposed of
and the related costs are written off and recognized as additional cost of
sales.
E. Financing
Arrangement
During
the quarter ended September 30, 2008, Samaritan Pharmaceuticals Europe, and ABC
Factors entered into a “Factoring Agreement”. The factoring
arrangements continue to provide Samaritan Pharmaceuticals Europe with a maximum
credit facility of 400,000 euros.
Under the Factoring Agreement,
Samaritan Pharmaceuticals Europe submits accounts receivable to be purchased by
ABC Factors, and ABC Factors pays Samaritan Pharmaceuticals Europe up to 90% of
the aggregate net face value of accounts receivable purchased, less applicable
fees charged by ABC Factors and a reserve withheld by ABC Factors to serve as
security in the event that ABC Factors receives less than full payment for
accounts purchased due to returns, allowances, deductions, disputes or
chargebacks. All accounts submitted for purchase must be approved by ABC
Factors. ABC Factors
also charges Samaritan Pharmaceuticals Europe interest on amounts advanced to
Samaritan Pharmaceuticals Europe under the Factoring Agreement at a rate of
2.00% above the prime rate of interest and ABC Factors receives a factoring
administration fee equal to 0.7% of the gross invoice amount of each account
submitted.
F.
Concentration of Credit Risks
Financial
instruments which potentially subject the Company to concentration of credit
risk consist primarily of trade receivables. In the normal course of business,
the Company provides credit terms to its customers that are customary for the
local customs in the territory. The Company also invests its excess cash
principally in marketable securities from a diversified portfolio of
institutions with strong credit ratings and in U.S. government and agency bills
and notes, and by policy, limits the amount of credit exposure at any one
institution. These investments are generally not collateralized and primarily
mature within one year. The Company has not realized any losses from such
investments. At September 30, 2008, the Company had no excess cash invested in
marketable securities. At September 30, 2008, the Company had approximately
$169,781 in bank deposits, all of which was insured. The Company has not
experienced any losses in such accounts through September 30, 2008.
The
Company presently has activities in Europe and Canada. As with all types of
international business operations, currency fluctuations, exchange controls,
restrictions on foreign investment, changes to tax regimes, political action and
political instability could impair the value of the Company's
investments.
Property
and equipment are recorded at cost. Depreciation is provided using the straight
line method over the estimated useful lives of the assets.
H.
Intangibles
Legal
fees associated with filing patents are recorded at cost and amortized over
seventeen (17) years. We currently own 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 we in-license intellectual
property from various third parties, we 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. Certain U.S. patents may be
eligible for patent term extensions under the Hatch-Waxman Act and may be
available to Samaritan for the lost opportunity to market and sell the invention
during the regulatory review process.
Purchased
technology rights are recorded at cost and are being amortized using the
straight line method over the estimated useful life of the
technology.
I.
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." In the calculation
of loss per common share, the Company’s options outstanding as of the quarter
ended September 30, 2008 and the quarter ended September 30, 2007 respectively,
which have not been included, because the effect would be anti-dilutive, thereby
decreasing the net loss per common share.
J.
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.
K.
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.
L.
Research and Development Costs
Research
and development costs are expensed when incurred.
The
Company and Samaritan Therapeutics, Canada, have signed a Research Collaboration
and Licensing Agreement with The Research Institute of McGill University Health
Centre (RI-MUHC) in Montreal, Canada, to advance its promising pipeline into
clinical trial status and develop new innovative drug candidates. Once drug
candidates, derived from the collaborative research, are clinically-validated
and deemed to hold promise, Samaritan Therapeutics intends to continue to
develop the drug candidate in Canada, while Samaritan Pharmaceuticals will focus
on the drug candidate's process through regulatory agencies and its
commercialization throughout the rest of the world. The current budget is for
$1,000,000 paid over four (4) quarterly payments of $250,000, is unallocated,
and covers the general research and development effort. As of the date of this
quarterly filing, Samaritan Pharmaceuticals and Samaritan Therapeutics’ payment
to McGill University is in arrears, which may permit our collaborator to
terminate the research and development agreement. The termination of the
research and development agreement could force the Company to curtail new
discoveries to be added to its current pipeline of innovative drugs. Currently,
all parties are in discussion to bring the balance in arrears current. Going
forward, this budget may increase or decrease depending upon changes in future
research and development and other factors.
Since the
Company does not own greater than 50% of Samaritan Therapeutics, Canada, we
evaluated, the Company’s ownership/control of Samaritan Therapeutics, Canada,
under FIN 46(R) "Consolidation
of Variable Interest Entities" requires companies to determine whether
they hold interests in a variable interest entity ("VIE") and, if so, to
consolidate any VIEs for which they are the primary beneficiary.
As of
September 30, 2008, Samaritan was a forty-five percent (45%) investor of the
above mentioned company. The amount of monies to date is insufficient to permit
the entity to finance its activities without further additional financial
support and the characteristics of Samaritan’s investment have controlling
financial interest attributes. This is considered to be a variable interest per
the provisions of FIN 46(R), and therefore has been consolidated into the
Company’s September 30, 2008 financial statements.
N.
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 September 30, 2008, the Company does not believe that any
impairment has occurred.
O.
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.
P.
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. The Company had
foreign exchange unrealized losses in the last forty-five (45) days due to the
strengthening of the US dollar.
The
Company adopted SFAS No. 123R, “Share Based Payments.” SFAS No. 123R requires
companies to expense the value of employee stock options and similar awards and
applies to all outstanding and vested stock-based awards.
In
computing the impact, the fair value of each option is estimated on the date of
grant based on the Black-Scholes options-pricing model utilizing certain
assumptions for a risk free interest rate; volatility; and expected remaining
lives of the awards. The assumptions used in calculating the fair value of
share-based payment awards represent management’s best estimates, but these
estimates involve inherent uncertainties and the application of management
judgment. As a result, if factors change and the Company uses different
assumptions, the Company’s stock-based compensation expense could be materially
different in the future. In addition, the Company is required to estimate the
expected forfeiture rate and only recognize expense for those shares expected to
vest. In estimating the Company’s forfeiture rate, the Company analyzed its
historical forfeiture rate, the remaining lives of unvested options, and the
amount of vested options as a percentage of total options outstanding. If the
Company’s actual forfeiture rate is materially different from its estimate, or
if the Company reevaluates the forfeiture rate in the future, the stock-based
compensation expense could be significantly different from what we have recorded
in the current period.
R.
Prepaid Expenses and Other Assets
Total
prepaid expenses are $140,889 and $148,614 for the quarter ended September 30,
2008 and the year ended December 31, 2007, respectively; consist of payments
made in preparation of a preclinical research project, consulting prepayments
and other miscellaneous prepayments.
S.
Notes Receivable
During
the second quarter of 2008, the Company reserved a $250,000 note receivable and
the accrued interest associated with it due to doubt about collection of the
note.
T.
Accrued Expenses and Other Current Liabilities
Accrued
Expenses and Other Current Liabilities consist of the unpaid portion of payroll
and employee benefits and interest accrued.
U.
Loan Payable
As of
September 30, 2008, the Company had borrowed from related parties an aggregate
of $485,500 (the "Notes"), all of which was loaned by related parties as
described in Note 9. Proceeds from each of the loans funded the Company's
continuing operating expenses, ongoing expenses, legal and accounting fees, as
well as for working capital and other contingencies. Under the terms of the
Notes issued by the Company to the lender, the Company will: (i) pay interest to
the lender at a rate of 16% per annum and ii) 100% warrant coverage. The
principal and interest due on the Notes are due on demand. The Notes will be
repaid from proceeds of any subsequent financing arrangement to which the
Company becomes a party or from the cash flow from the Company's operations. The
Board of Directors approved that the prior year 2007 notes of $300,000, which
paid interest to the lender at a rate of prime rate plus 4% per annum, be
changed to match the terms of notes issued during the first quarter of 2008. The
Notes will be repaid from proceeds of any subsequent financing arrangement to
which the Company becomes a party or from the cash flow from the Company's
operations.
SFAS No.
159
Liabilities
— including an amendment of FAS 115 (“SFAS No. 159”). SFAS No. 159 allows
companies 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. Unrealized gains and losses shall be reported on items
for which the fair value option has been elected in earnings at each subsequent
reporting date. SFAS No. 159 also establishes presentation and disclosure
requirements. SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007 and will be applied prospectively. The Company is currently
evaluating the impact of adopting SFAS No. 159 on our consolidated financial
position, results of operations and cash flows.
FASB Statement Number 141
(revised 2007)
In
December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business
Combinations. This Statement replaces FASB Statement No. 141, Business
Combinations. This Statement retains the fundamental requirements in Statement
141 that the acquisition method of accounting (which Statement 141 called the
purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. This Statement defines the acquirer as
the entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. This Statement’s scope is broader than that of Statement 141,
which applied only to business combinations in which control was obtained by
transferring consideration. By applying the same method of accounting—the
acquisition method—to all transactions and other events in which one entity
obtains control over one or more other businesses, this Statement improves the
comparability of the information about business combinations provided in
financial reports.
This
Statement requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions
specified in the Statement. That replaces Statement 141’s cost-allocation
process, which required the cost of an acquisition to be allocated to the
individual assets acquired and liabilities assumed based on their estimated fair
values.
This
Statement applies to all transactions or other events in which an entity (the
acquirer) obtains control of one or more businesses (the acquirer), including
those sometimes referred to as “true mergers” or “mergers of equals” and
combinations achieved without the transfer of consideration, for example, by
contract alone or through the lapse of minority veto rights. This Statement
applies to all business entities, including mutual entities that previously used
the pooling-of-interests method of accounting for some business combinations. It
does not apply to: (a) The formation of a joint venture, (b) The acquisition of
an asset or a group of assets that does not constitute a business, (c) A
combination between entities or businesses under common control, (d) A
combination between not-for-profit organizations or the acquisition of a
for-profit business by a not-for-profit organization.
This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. Management believes this Statement will have no impact on the
financial statements of the Company once adopted.
FASB Statement Number
160
In
December 2007, the FASB issued FASB Statement No. 160 - Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No. 51. This
Statement applies to all entities that prepare consolidated financial
statements, except not-for-profit organizations, but will affect only those
entities that have an outstanding noncontrolling interest in one or more
subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations
should continue to apply the guidance in Accounting Research Bulletin No. 51,
Consolidated Financial Statements, before the amendments made by this Statement,
and any other applicable standards, until the Board issues interpretative
guidance.
A
noncontrolling interest, sometimes called a minority interest, is the portion of
equity in a subsidiary not attributable, directly or indirectly, to a parent.
The objective of this Statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require: (a) The ownership interests in subsidiaries held by
parties other than the parent be clearly identified, labeled, and presented in
the consolidated statement of financial position within equity, but separate
from the parent’s equity, (b) The amount of consolidated net income attributable
to the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, (c) Changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently. A parent’s ownership
interest in a subsidiary changes if the parent purchases additional ownership
interests in its subsidiary or if the parent sells some of its ownership
interests in its subsidiary. It also changes if the subsidiary reacquires some
of its ownership interests or the subsidiary issues additional ownership
interests. All of those transactions are economically similar, and this
Statement requires that they be accounted for similarly, as equity transactions,
(d) When a subsidiary is deconsolidated, any retained noncontrolling equity
investment in the former subsidiary be initially measured at fair value. The
gain or loss on the deconsolidation of the subsidiary is measured using the fair
value of any noncontrolling equity investment rather than the carrying amount of
that retained investment, (e) Entities provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners.
This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008 (that is, January 1, 2009, for
entities with calendar year-ends). Earlier adoption is prohibited. This
Statement shall be applied prospectively as of the beginning of the fiscal year
in which this Statement is initially applied, except for the presentation and
disclosure requirements. The presentation and disclosure requirements shall be
applied retrospectively for all periods presented. Management believes this
Statement will have no impact on the financial statements of the Company once
adopted.
FASB 161 - Disclosures about
Derivative Instruments and Hedging Activities
In March
2008, the FASB issued FASB Statement No. 161, which amends and expands the
disclosure requirements of FASB Statement No. 133 with the intent to provide
users of financial statements with an enhanced understanding of; how and why an
entity uses derivative instruments, how the derivative instruments and the
related hedged items are accounted for and how the related hedged items affect
an entity’s financial position, performance and cash flows. This Statement is
effective for financial statements for fiscal years and interim periods
beginning after November 15, 2008. Management believes this Statement will have
no impact on the financial statements of the Company once adopted.
FASB 162 - The Hierarchy of
Generally Accepted Accounting Principles
In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. The new standard is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles, or GAAP, for non-governmental entities. The Company is currently
evaluating the effects, if any, that SFAS No. 162 may have on our financial
reporting.
NOTE 5 -
SHAREHOLDERS' EQUITY (DEFICIT)
The
Company has 250 million common shares authorized and a class of 5 million shares
of preferred stock authorized. There were no outstanding preferred stock shares
at September 30, 2008.
On July
5, 2007, the Company's Board of Directors affected a one-for-six reverse stock
split of its Common Stock. The financial statements presented herein have been
restated to reflect the reverse stock split as if it had occurred at the
beginning of each period presented. All share and per share information included
in these consolidated financial statements has been adjusted to reflect this
reverse stock split.
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.
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.
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
Aggregate
|
|
|
|
Exercise
|
|
Intrinsic
|
|
Shares
|
|
Price
|
|
Value
|
|
|
|
|
|
|
Outstanding
and exercisable at June 30, 2008
|
6,803,792
|
|
2.49
|
|
-0-
|
Granted
|
237,895
|
|
0.24
|
|
-0-
|
Exercised
|
-0-
|
|
-0-
|
|
-0-
|
Expired
|
-0-
|
|
-0-
|
|
-0-
|
|
|
|
|
|
|
Outstanding
and exercisable at September 30, 2008
|
7,041,686
|
|
2.41
|
|
-0-
|
Information,
at date of issuance, regarding options for the quarter ended September 30,
2008:
|
|
|
Weighted
|
|
Weighted
|
|
|
|
Average
|
|
Average
|
|
|
|
Exercise
|
|
Fair
Value
|
|
Shares
|
|
Price
$
|
|
Price
$
|
|
|
|
|
|
|
Exercise price exceeds market
price
|
237,895
|
|
.24
|
|
.13
|
Exercise price equals market
price
|
-0-
|
|
-0-
|
|
-0-
|
Exercise price is less than
market price
|
-0-
|
|
-0-
|
|
-0-
|
B.
Private Placement
During
the quarter ended September 30, 2008, the Company did not issue shares under a
private placement.
NOTE 6 -
COMMITMENTS AND CONTINGENCIES
A.
Beginning October 1, 2008, the Company leases office space at fair market value
from NextGen LifeSciences, Inc., under a month to month agreement that calls for
payment of $4,500 per month.
B.
At the beginning of the third quarter 2007, the Company executed a research
collaboration (the "Research Collaboration") with The Research Institute of
McGill University Health Centre and Samaritan Therapeutics over a ten-year
period through 2017. Samaritan Therapeutics is a 50% owned subsidiary of the
Company. The budget is for $1,000,000 paid over four (4) quarterly payments of
$250,000, is unallocated, and covers the general research and development
effort. Under the Research Collaboration, the Company receives worldwide
exclusive rights, excluding Canada, to any novel therapeutic agents or
diagnostic technologies that may result from the Research Collaboration.
Samaritan Therapeutics receives exclusive rights to the Canadian market to any
novel therapeutic agents or diagnostic technologies that may result from the
Research Collaboration. As of the date of this quarterly filing, Samaritan
Pharmaceuticals and Samaritan Therapeutics’ payment to McGill University is in
arrears, which may permit our collaborator to terminate the research and
development agreement. The termination of the research and development agreement
could force the Company to curtail new discoveries to be added to its current
pipeline of innovative drugs. Currently, all parties are in discussion to bring
the balance in arrears current.
C. The
Company has no written employment agreement with the 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. Each year, all executive officers
receive 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,
and level of experience, ability and knowledge of the job. The Compensation
Committee also has the authority to award discretionary bonuses to our 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.
D. The
Company has terminated their Research Collaboration and Licensing Agreement “the
Agreement” with Georgetown University “Georgetown” effective with the principal
investigator becoming employed with another institution in July 2007. The
Company and Georgetown remain in dispute over the termination process of this
Agreement, as Georgetown has alleged additional monies due under the Agreement.
The Company disputes any additional monies due. No accrual for any alleged
additional monies has been made as of September 30, 2008, as it is managements’
position that there are no additional monies due to Georgetown under the
Agreement.
NOTE 7 -
RESEARCH AND DEVELOPMENT COSTS
For the
quarters ended September 30, 2008 and 2007, research and development expenses
were $1,224,191 and $1,125,871 respectively. Research and development
costs consist of the costs associated with our research activities, as well as
the costs associated with our drug discovery efforts, conducting preclinical
studies and clinical trials, manufacturing development efforts and activities
related to regulatory filings. Our research and development expenses consist
of:
-external
research and development expenses incurred under agreements with third-party
contract research organizations and investigative sites, third-party
manufacturing organizations and consultants;
-employee-related
expenses, which include salaries and benefits for the personnel involved in our
drug discovery and development activities.
We use
our employees across multiple research projects, including our drug development
programs. We track direct expenses related to our clinical programs on a per
project basis. Accordingly, we allocate internal employee-related, as well as
third-party costs, to each clinical program. We do not allocate expenses related
to preclinical programs.
The Company and Samaritan Therapeutics, Canada, has signed a
Research Collaboration and Licensing Agreement with The Research Institute of
McGill University Health Centre (RI-MUHC) in Montreal, Canada, to advance its
promising pipeline into clinical trial status and develop new innovative drug
candidates. Once drug candidates, derived from the collaborative research, are
clinically-validated and deemed to hold promise, Samaritan Therapeutics intends
to continue to develop the drug candidate in Canada, while Samaritan
Pharmaceuticals will focus on the drug candidate's process through regulatory
agencies and its commercialization throughout the rest of the world. The current
budget is for $1,000,000 paid over four (4) quarterly payments of $250,000, is
unallocated, and covers the general research and development effort. As of the
date of this quarterly filing, Samaritan Pharmaceuticals and Samaritan
Therapeutics’ payment to McGill University is in arrears, which may permit our
collaborator to terminate the research and development agreement. The
termination of the research and development agreement could force the Company to
curtail new discoveries to be added to its current pipeline of innovative drugs.
Currently, all parties are in discussion to bring the balance in arrears
current. Going forward, this budget may increase or decrease depending upon
changes in future research and development and other factors. This collaboration
is also entitled to participate in the SR&ED Program, which gives the
parties cash refunds and/or tax credits for their expenditures on eligible
research and development work done in Canada.
The
successful development of our product candidates is highly uncertain. At this
time, we cannot reasonably estimate or know the nature, timing and estimated
costs of the efforts that will be necessary to complete the remainder of the
development of, or the period, if any, in which material net cash inflows may
commence from, SP-01A or any of our preclinical product candidates. This is due
to the numerous risks and uncertainties associated with developing drugs,
including the uncertainty of:
-the
scope, rate of progress and expense of our clinical trials and other research
and development activities;
-the
potential benefits of our product candidates over other therapies;
-our
ability to market, commercialize and achieve market acceptance for any of our
product candidates that we are developing or may develop in the
future;
-future
clinical trial results;
-the
terms and timing of regulatory approvals; and
-the
expense of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights.
A change
in the outcome of any of these variables with respect to the development of a
product candidate could mean a significant change in the costs and timing
associated with the development of that product candidate. For example, if the
FDA or other regulatory authority were to require us to conduct clinical trials
beyond those which we currently anticipate will be required for the completion
of clinical development of a product candidate or if we experience significant
delays in enrollment in any of our clinical trials, we could be required to
expend significant additional financial resources and time on the completion of
clinical development.
NOTE 8 -
LITIGATION
Samaritan,
from time to time, is involved in various legal proceedings in the ordinary
course of its business.
NOTE 9 -
RELATED PARTY TRANSACTIONS
In the
ordinary course of business, we 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, H. Thomas Winn, is the father in law of the president of CCH, but
is not a shareholder of CCH.
The Board of Directors consists of the following members: Dr. Janet
Greeson, Chairman, Jacinto L. Ayala, Eugene Boyle, Robert Crane, Dr. Julio
Garcia, Welter “Budd” Holden, Dr. Laurent Lecanu, Cynthia Thompson, and H.
Thomas Winn. The Company has formed, by determination of the Board, an Audit
Committee, with Mr. H. Thomas Winn as Chairman, who is an independent director
and a financial expert; the Compensation Committee, with Independent Director
Ms. Cynthia C. Thompson as Chairman; the Nomination Committee, with Independent
Director, Jacinto L. Ayala as Chairman. The Company has two (2) members of the
Board that are related, Dr. Janet Greeson and Eugene Boyle, who are mother and
son.
NextGen
LifeSciences, Inc. is a company wholly owned by the Chief Executive Officer and
Chairman of the Board of Samaritan Pharmaceuticals. NextGen LifeSciences agreed
to loan the Company $250,000, $50,000, $50,000, $15,000 and $11,000 on July 16,
2007, September 18, 2007, January 9, 2008, August 4, 2008, and September 11,
2008 respectively for an aggregate of $376,000 on a short-term basis pursuant to
the terms of promissory notes from the Company and in favor of the lender. On
February 25, 2008, Marian West, a shareholder of the Company, agreed to loan the
Company $50,000. On March 17, 2008, Kristi Eads, a shareholder and
officer of the Company, agreed to loan the Company $29,500. On July
14, 2008, KLB Consulting, a shareholder of the Company, agreed to loan the
Company $30,000. Proceeds from each of the loans funded the Company's
continuing operating expenses, ongoing expenses, legal and accounting fees, as
well as for working capital and other contingencies. Under the terms of the
Notes issued by the Company to the lender, the Company will: (i) pay interest to
the lender at 16% interest annually and 100% warrant coverage. The principal and
interest due on the Notes are due on demand. The Notes will be repaid from
proceeds of any subsequent financing arrangement to which the Company becomes a
party or from the cash flow from the Company's operations. Also,
beginning October 1, 2008, the Company leases office space at fair market value
from NextGen LifeSciences, Inc., under a month to month agreement that calls for
payment of $4,500/month.
NOTE 10 -
FUSION TRANSACTION
On May
12, 2005, The Company entered into the Purchase Agreement II with Fusion
Capital, pursuant to which Fusion Capital 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 December 29, 2005, which is the date the SEC
declared effective our Registration Statement on Form SB-2 (Commission
Registration No. 051267250). Samaritan filed a post effective amendment on Form
S-1 to the above Registration Statement (Commission Registration No. 07556090)
on January 9, 2007, which was declared effective on February 6, 2007. As of
December 31, 2007, the Company decided to close the Registration Statement
(Commission Registration No. 07556090) and will not register additional shares
of Common Stock under the Purchase Agreement II with Fusion
Capital.
NOTE 11 -
RISKS AND UNCERTAINTIES
Marketability
of a product is dependent, among other things, upon securing additional capital
to successfully complete the clinical testing of the product, securing FDA
approval, and procurement of viable patents.
NOTE 12 -
SUBSEQUENT EVENTS
On
October 1, 2008, Samaritan Pharmaceuticals announced that it has signed a
worldwide exclusive agreement with Taconic Farms, Hudson, New York, to
commercialize "The Samaritan Alzheimer's Rat Model." The "forgetful"
rat model is a research tool used by scientists to study the effectiveness of
their new drugs to treat Alzheimer's disease.
General
Samaritan
Pharmaceuticals, Inc. (including the subsidiaries, referred to as Samaritan, the
"Company", "its", "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 marketed
revenue-generating products, in Greece, and/or various Eastern European
countries.
Commercialization
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. Our commercialization
business model is entirely focused on achieving growth and maximizing value for
the benefit of our investors.
Marketed
Products
Samaritan
has 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, Slovenia, 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 specialty
pharmaceutical products, Amphocil from Three Rivers Pharmaceuticals, Elaprase
and Replagal from Shire Pharmaceuticals, Infasurf from Ony, Inc, Collatamp,
Erwinase, Kidrolase, and the Rapydan pain patch from EUSA, Mepivamol, Methadone,
Morphine Sulphate, Naloxone, Naltrexone, Oramorph and Pethidine from Molteni
Farmaceutici and Abioklad from Abiogen Pharma. 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.
ABIOKLAD(R)
ABIOKLAD(R)
(Disodium Clodronate) is a bisphosphonate that binds to calcium and inhibits
osteoclastic bone resorption, crystal formation and dissolution, resulting in a
reduction of bone turnover.
ABIOKLAD(R)
is indicated for the control of malignancy-associated hypercalcemia (high levels
of calcium in blood), the inhibition of osteolysis (degeneration of bone tissue)
resulting malignant tumors and the decrease of bone pain.
Samaritan
signed an exclusive distribution deal for Greece, Cyprus, and Turkey with
Abiogen Pharmaceuticals on March 14, 2008.
Currently,
Samaritan Pharmaceuticals is preparing marketing applications for ABIOKLAD (R)
with regulatory authorities in Greece and Cyprus to gain country marketing
authorization drug approval.
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. Three Rivers added the territory of Ireland to Samaritan's
existing exclusive licensing agreement to market Amphocil in Greece and Cyprus
in October 2007.
Currently,
Samaritan is marketing AMPHOCIL(R) in Greece.
COLLATAMP(R)
COLLATAMP(R) is a lyophilized
collagen sponge impregnated with the aminoglycoside antibiotic gentamicin.
Collatamp(R) is approved for the treatment and prevention of post-surgical
infection.
On June
1, 2008, Samaritan signed an exclusive agreement with EUSA for the marketing and
distribution of the product Collatamp(R) in Greece and Cyprus. Collatamp(R) is
an approved FDA prescription product and is owned by EUSA Pharma and marketed by
EUSA Pharma in the U.S.
Currently,
Samaritan is marketing Collatamp(R) in Greece and has a pending marketing
application with regulatory authorities in Cyprus to gain country marketing
authorization drug approval.
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.
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.
On
December 19, 2007, the Company received pricing approval for ELAPRASE from the
Greek Ministry of Development. On March 1, 2007, Samaritan signed an exclusive
licensing agreement with Shire Human Genetic Therapies (SHPGY.O) to market and
sell Elaprase in Greece and Cyprus.
Currently,
Samaritan is marketing ELAPRASE(R) in Greece.
ERWINASE(R)
ERWINASE(R)
is indicated for the treatment of Acute Lymphoblastic Leukemia (ALL). Asparagine
is an amino acid that is essential for cell growth; it is produced by most
cells, but not all blood cells. Mutated (cancer) cells in ALL rely on asparagine
circulating in the blood for growth. L-sparaginase is an enzyme that lowers
circulating asparagine levels in the blood thereby depriving the mutated blood
cells of asparagine and inhibiting their growth.
Currently,
Samaritan is marketing Erwinase® in Greece and has a pending marketing
application with regulatory authorities in Cyprus to gain country marketing
authorization drug approval.
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 U.S.
Currently,
Samaritan 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.
KIDROLASE(R)
KIDROLASE(R)
is indicated in the treatment of Acute Lymphoblastic Leukemia. Asparagine is an
amino acid that is essential for cell growth; it is produced by most cells, but
not all blood cells. Mutated (cancer) cells in ALL rely on asparagine
circulating in the blood for growth. L-Asparaginase is an enzyme that lowers
circulating asparagine levels in the blood thereby depriving the mutated blood
cells of asparagine and inhibiting their growth.
On March
10, 2008, Samaritan signed an exclusive agreement with EUSA for the marketing
and distribution of the product Kidrolase(R) in Greece and Cyprus. Kidrolase(R)
is an approved FDA prescription product and is owned by EUSA Pharma and marketed
by EUSA Pharma, in the U.S.
Currently,
Samaritan Pharmaceuticals is utilizing the US FDA approved regulatory file in
preparing marketing applications for Kidrolase(R) with regulatory authorities in
Greece and Cyprus 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.
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 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 has a tender application prepared for the next
announcement by Greek authorities to accept price bids for this
product.
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. During the first quarter of 2008, Samaritan received its
first tender purchase order of Morphine Sulfate from the Institute of
Pharmaceutical Research and Technology (IFET). Samaritan has prepared 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.
NALTREXONE
MOLTENI(R) is approved by the Italian Ministry of Health 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.
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 and is marketed by Molteni in Italy.
ORAMORPH(R)
is approved by the Italian Ministry of Health 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 has a tender application
prepared for the next announcement by Greek authorities to accept price bids for
this product.
PETHIDINE(R)
PETHIDINE(R)
is indicated for the treatment of moderate to severe pain, and may be prescribed
as a preoperative medication, support of anesthesia, and obstetric
analgesia.
On
January 1, 2007, Samaritan entered into an exclusive licensing agreement with
Molteni Farmaceutici for the marketing and distribution of PETHIDINE(R) in the
countries of Greece and Cyprus.
Currently,
Pethidine® can only be sold in Greece and Cyprus via a centralized government
tender. Samaritan has a tender application prepared for the next announcement by
Greek authorities to accept price bids for this product.
RAPYDAN(R)
RAPYDAN(R)
is indicated for local dermal analgesia on intact skin, and consists of a thin,
uniform, local anesthetic formulation with an integrated, oxygen-activated
heating component that is intended to enhance the delivery of the local
anesthetic. The drug formulation is a eutectic mixture of lidocaine 70 mg and
tetracaine 70 mg. Rapydan(R) is indicated to provide local dermal analgesia for
superficial venous access and superficial dermatological procedures such as
excision, electrodessication and shave biopsy of skin lesions.
On August
3, 2007, Samaritan signed an exclusive agreement with EUSA for the marketing and
distribution of the product Rapydan(R) in Greece and Cyprus. Rapydan(R) is an
approved FDA prescription product under the name SYNERA(R) and is owned by ZARS
Pharmaceuticals, Inc. and marketed by Endo Pharmaceuticals, Inc. in the
US.
Currently,
Samaritan is currently marketing Rapydan(R) in Greece. The Company has a pending
marketing application with regulatory authorities in Cyprus to gain country
marketing authorization drug approval.
REPLAGAL(R)
REPLAGAL(R)
is a long-term enzyme replacement therapy used to treat patients with a
confirmed diagnosis of Fabry Disease. Fabry Disease is caused by a deficiency of
an enzyme, alpha-galactosidase A (also called ceramidetrihexosidase), involved
in the breakdown of fats.
On April
13, 2007, Samaritan signed an exclusive licensing agreement with Shire
Pharmaceuticals for the marketing and sale of Replagal(R) in Greece and
Cyprus.
Currently,
Samaritan is marketing Replagal(R) in Greece.
Sales
and Marketing
We
in-license products that focus on targeting healthcare providers, managed
healthcare organizations, specialty distribution companies, government
purchasers, and payers.
Product
Candidates
A
significant portion of our operating expenses are related to the research and
development of investigational-stage product candidates. Research and
development expenses for the quarters ended September 30, 2008 and 2007 were
$593,427 and $154,234 respectively.
We
currently focus our research and development efforts in the therapeutic areas of
Alzheimer's, cancer, cardiovascular and infectious diseases. Any of our programs
in these disease areas could become more significant to us in the future, but
there can be no assurance that any program in development or investigation will
generate viable marketable products. As such, we continually evaluate all
product candidates and may, from time to time, discontinue the development of
any given program and focus our attention and resources elsewhere. We may choose
to address new opportunities for future growth in a number of ways including,
but not limited to, internal discovery and development of new products, out
licensing and in-licensing of products and technologies, and/or acquisition of
companies with products and/or technologies. Any of these activities may require
substantial research and development efforts and expenditure of significant
amounts of capital. The following summarizes our current product candidate
programs with relevant out-licensing deals that the Company has
completed.
Alzheimer's
disease
SP-233
Caprospinol
(SP-233) is a novel Alzheimer's drug candidate that Samaritan believes has the
potential to clear beta-amyloid plaque from the brain; a problem that most
researchers today believe is the cause of Alzheimer's. Samaritan filed an IND
application for Caprospinol on October 30, 2006 and was subsequently granted an
IND number by the FDA. The Company believes that Caprospinol could be a
significant breakthrough in the treatment of Alzheimer's, and plans to provide
the information requested by the FDA in order to continue moving our Caprospinol
development program forward.
On May 6,
2008, Samaritan Pharmaceuticals, Inc. announced it had received notification
that the patent application "Neuroprotective Spirostenol Pharmaceutical
Compositions" for Caprospinol has been allowed by the Australian Patent
Office.
On
December 7, 2006, Samaritan announced that the U.S. Food and Drug Administration
(FDA) has completed its regulatory review of our IND (Investigational New Drug)
application for Caprospinol and has requested that additional information be
submitted in support of the safety of Caprospinol, prior to initiating
Samaritan's proposed Phase I clinical study. Samaritan is currently performing
additional studies to submit and support the IND submitted to the
FDA.
SP-1000
SP-1000
is a fast-acting peptide that can be used to clean the blood of excessive
cholesterol in acute high cholesterol conditions. SP-1000 plays a role in
transformation and binding of LDL cholesterol and raising HDL, the good
cholesterol, with immediate results.
To this
end, Samaritan's collaborating scientists developed SP-1000 to be a potential
hypocholesterolemic agent that acts through a new and novel mechanism of action
that is quite distinct to the mechanism of action mediating the effects of
statins.
The
effectiveness of SP-1000 peptide treatment has been demonstrated in two
validated hypercholesterolemia animal models, a genetically engineered mouse
model mimicking familial hypercholesterolemia, and in diet-induced
hypercholesterolemia guinea pigs.
Based on
the study results, Samaritan collaborative scientists believe that the SP-1000
peptide could have the following pharmacological activities:
o SP-1000
peptide will not interfere with cholesterol metabolism and
disposition;
o SP-1000
peptide will increase HDL while decreasing serum free cholesterol and total bile
cholesterol;
o SP-1000
peptide will be effective in removing atheromas and preventing plaque
formation;
o SP-1000
peptide will protect against high cholesterol-induced neurological, cardiac and
muscular suffering, and gross liver morphology.
Taken
together, these data on classic animal models of familial and dietary
hypercholesterolemia show that SP-1000 is an interesting new and novel lipid
lowering drug with a strong patent position that represents a competitive
advantage over currently available therapeutic options.
Currently,
the Company is seeking a partnership to further develop SP-1000.
Infectious
Diseases
SP-01A
SP-01A is
an HIV oral entry inhibitor drug. In order for viruses to reproduce, they must
infect or hi-jack a cell, and use it to make new viruses. Just as your body is
constantly making new skin cells, or new blood cells, each cell often makes new
proteins in order to stay alive and to reproduce itself. Viruses hide their own
DNA in the DNA of the cell, and then, when the cell tries to make new proteins,
it accidentally makes new viruses as well. HIV mostly infects cells in the
immune system.
Clinical
studies to date suggest that SP-01A prevents HIV from entering cells by
inhibiting HIV-1 viral replication through a novel mechanism that is unique to
any antiviral drug SP-01A reduces intracellular cholesterol and corticosteroid
biosynthesis, which causes the inability of lipid rafts in the cellular membrane
to organize, ultimately preventing fusion of an HIV receptor and both the CCR5
and CXCR4 cellular receptors.
On May
20, 2008, Samaritan announced that it was awarded US patent No: US 7,354,906 B2,
entitled "Composition of Anti-HIV drugs and Anti-Cortisol compounds and Methods
for Decreasing the Side Effects of Anti-HIV drugs in Humans" by the Director of
the United States Patent and Trademark Office.
SP-30 has
demonstrated promise in preclinical studies as an antiviral therapeutic in the
treatment of Hepatitis C (HCV) as well as a therapeutic adjuvant in the
treatment of HIV. SP-30 offers several distinctive competitive advantages as a
potential oral adjuvant therapeutic in the treatment of HCV infected
individuals. SP-30 is uniquely different from other inhibitors of viral
replication in that it appears to condition the cell. This unique multiple
target mechanism of action provides several advantages.
1. In HCV
infected individuals, SP-30 uses its unique mechanism to build a fence around
the cell and prevent viral entry. Consequently, HCV is unable to replicate or
mutate and is eventually eradicated by the immune system.
2.
Because SP-30's targets belong to the host cell and not to the virus itself,
SP-30 may not be susceptible to the development of resistance.
3. SP-30
does not appear to be contraindicated with any other currently approved ARV or
HCV treatments.
Therefore,
based on its favorable in-vitro inhibition data, Samaritan is developing a Phase
I clinical study protocol for SP-30 as a potential oral adjuvant therapeutic in
the treatment of HCV infected individuals.
Endocrinology
SP-6300
SP-6300
is a new and novel approach for the treatment of Cushing's syndrome, also known
as exogenous hypercortisolism. Cushing's syndrome affects adults 20 to 50 with
an estimated 10 to 15 of every million people affected each year.
Hypercortisolism occurs when the body's tissues are exposed to excessive levels
of cortisol for long periods of time.
Many
people suffer the symptoms of exogenous hypercortisolism because they take
glucocorticoid hormones such as prednisone, dexamethasone (Decadron) and
methylprednisolone (Medrol), for asthma, rheumatoid arthritis, lupus and other
inflammatory diseases or for immunosuppression after transplantation. People can
also develop exogenous hypercortisolism from injectable corticosteroids – for
example, repeated injections for joint pain, bursitis and back
pain.
On
September 18, 2007, Samaritan announced that the U.S. Food and Drug
Administration (FDA) has completed its regulatory review of our IND
(Investigational New Drug) application for SP-6300.
Currently,
the Company is seeking a partnership to further develop SP-6300.
SP-6310
In
analyzing the data from clinical study SII-101 and preclinical studies,
Samaritan Pharmaceuticals learned that SP-6310 (procaine hydrochloride), given
orally, may be a potential therapy for the normalization of both low and high
urinary cortisol levels in HIV-infected patients.
On July
8, 2008, Samaritan Pharmaceuticals announced that it has filed an IND
(Investigational New Drug) application for SP-6310 in the treatment of
HIV-infected patients with abnormal cortisol levels.
Non
Drug Products
Alzheimer's
Diagnostic Blood Test
Our
Alzheimer's diagnostic is a simple blood test which can be used as an
alternative or supplement to spinal taps or expensive MRIs currently used by
competitors.
Breast
Cancer Diagnostic
Our
non-invasive blood test could be the first diagnostic tool to predict if a
breast tumor is cancerous, with the added possibility to detect one single
aggressive cancer cell out of a million blood cells. This tool could also be
used as a monitoring tool to measure the success of chemotherapy, radiation and
other drug treatments for aggressive cancer and ultimately allow patients to
avoid the high costs and negative effects of unnecessary
chemotherapy.
The
Research Institute of McGill University Health Centre and Samaritan
Therapeutics
On July
1, 2007, Samaritan executed research collaboration (the "Research
Collaboration") with the Research Institute of McGill University Health Centre
and Samaritan Therapeutics over a ten-year period through 2017 to discover and
develop new compounds. The budget is for $1,000,000 paid over four (4) quarterly
payments of $250,000, is unallocated, and covers the general research and
development effort. Under the Research Collaboration, the Company receives
worldwide exclusive rights, excluding Canada, to any novel therapeutic agents or
diagnostic technologies that may result from the Research Collaboration.
Samaritan Therapeutics receives exclusive rights to the Canadian market to any
novel therapeutic agents or diagnostic technologies that may result from the
Research Collaboration. As of the date of this quarterly filing, Samaritan
Pharmaceuticals and Samaritan Therapeutics’ payment to McGill University is in
arrears, which may permit our collaborator to terminate the research and
development agreement. The termination of the research and development agreement
could force the Company to curtail new discoveries to be added to its current
pipeline of innovative drugs. Currently, all parties are in discussion to bring
the balance in arrears current.
Under the
Research Collaboration, Samaritan receives worldwide exclusive rights to any
novel therapeutic agents or diagnostic technologies that may result from the
Research Collaboration. Dr. Vassilios Papadopoulos, Dr. Janet Greeson and Dr.
Wolfgang Renz lead our team of eight (8) research professionals (including five
(5) Ph.D. level research scientists) who have expertise in the fields of
endocrinology, pharmacology, cell biology, organic and steroid chemistry, and
computer modeling. We are not obligated to pay the Research Collaboration any
milestone payments. Our collaborators are entitled to receive royalties based on
our revenue from product sales and sublicenses, if any. Samaritan
Pharmaceuticals and Samaritan Therapeutics have both assumed responsibility, at
their own individual expense, for the process of seeking any regulatory
approvals for and conducting clinical trials with respect to any licensed
product or application of the licensed technology. Samaritan controls and has
the financial responsibility for the prosecution and maintenance in respect to
any patent rights related to the licensed technology.
Taconic
Farms, Inc.
Taconic
Farms, Inc. (“Taconic”) was founded in 1952 as a family-owned business in New
York's Hudson River Valley. Since then, the company has become one of the
largest laboratory rodent providers in the world with a reputation for
consistently producing high quality, well-defined rats and mice. Taconic's
expertise in the custom design and generation of genetically modified mice,
mouse and rat breeding, barrier systems, genetics and animal health supports
researchers focused on drug development using in vivo models. Taconic has six
breeding facilities and three service laboratories in the USA and Europe, a
staff of over 1,000, and a commitment to technological innovation.
On
October 1, 2008, Samaritan Pharmaceuticals announced that it has signed a
worldwide exclusive agreement with Taconic Farms, Hudson, New York, to
commercialize "The Samaritan Alzheimer's Rat Model." The "forgetful"
rat model is a research tool used by scientists to study the effectiveness of
their new drugs to treat Alzheimer's disease.
Shire
Pharmaceuticals
On March
1, 2007, Samaritan executed a two-year exclusive licensing deal with Shire
Pharmaceuticals for the marketing of Elaprase in Greece and Cyprus. The product
shall be supplied on a named patient basis until the conclusion of the
negotiations relating to the pricing and reimbursement of Elaprase in the
territories with the relevant regulatory authorities.
Founded
in 1986, Shire is a global specialty pharmaceutical company marketing products
to defined customer groups (specialist doctors). Sales and marketing is a core
Shire competence, where effective targeting of prescribers allows maximization
of sales by a relatively small but high quality sales force.
Shire's
strategic goal is to become the leading specialty pharmaceutical company that
focuses on meeting the needs of the specialist physician. Shire focuses its
business on attention deficit and hyperactivity disorder (ADHD), human genetic
therapies (HGT), gastrointestinal (GI) and renal diseases. The structure is
sufficiently flexible to allow Shire to target new therapeutic areas to the
extent opportunities arise through acquisitions. Shire believes that a carefully
selected portfolio of products with a strategically aligned and relatively
small-scale sales force will deliver strong results. Shire's in-licensing,
merger and acquisition efforts are focused on products in niche markets with
strong intellectual property protection either in the US or Europe.
On
December 12, 2005, Samaritan signed a ten-year (with five-year automatic
renewals) exclusive licensing agreement with Three Rivers Pharmaceuticals, Inc.
for the marketing of Amphocil, a prescription drug in Greece; authorization is
pending for Cyprus and Ireland.
Established
in 2000, Three Rivers Pharmaceuticals(R) devotes its efforts and resources to
developing, manufacturing, and marketing pharmaceutical therapies which are
indicated for diseases/medical conditions requiring specialized treatment.
Currently, Three Rivers Pharmaceuticals markets prescription drugs in both the
U.S. and internationally, in the therapeutic categories of antiviral and
antifungal agents.
Three
Rivers has continued to expand its product line into the branded market with the
acquisition of AMPHOTEC/AMPHOCIL(R) in May of 2005. This product is currently
being marketed in over 40 countries worldwide.
Molteni
Farmaceutici
On
January 1, 2007, Samaritan executed a four-year (with two-year automatic
renewals) exclusive licensing agreement with Molteni Farmaceutici for the
marketing of Mepivamol, Methadone, Morphine Sulphate, Naloxone, Naltrexone, and
Oramorph in Greece and Cyprus.
Molteni
is rich in history with over a century of experience beginning with the opening
of its manufacturing facility at the Molteni Pharmacy Laboratory located in the
historic center of Florence, Italy. The strategic therapeutic areas on which
Molteni makes an effort for trading new alliances are concentrated on Analgesia,
Anesthesia and Drug Addition Therapy.
Siraeo,
Ltd.
On
December 28, 2006, Samaritan signed a ten-year (with three-year automatic
renewals) exclusive licensing agreement with Siraeo, Ltd for the marketing of
Infasurf in Turkey, Serbia, Bosnia, Macedonia, Albania, Egypt and Syria.
Infasurf is an approved FDA prescription product owned by Ony, Inc. and marketed
by Forest Laboratories in the US.
EUSA
Pharma
On August
3, 2007, Samaritan signed a five-year (with annual renewals) exclusive agreement
with EUSA for the marketing and distribution of the product RAPYDAN(R) in Greece
and Cyprus. Rapydan(R) is an approved FDA prescription product under the name
SYNERA(R) and is owned by ZARS Pharmaceuticals, Inc. and marketed by Endo
Pharmaceuticals, Inc. in the US.
On March
10, 2008, Samaritan signed an amendment to the above agreement with EUSA for the
marketing and distribution of the products ERWINASE(R) and KIDROLASE(R) in
Greece and Cyprus. Erwinase(R) and Kidrolase(R) are approved FDA prescription
products and are owned by EUSA Pharma and marketed by EUSA Pharma in the
U.S.
On June
1, 2008, Samaritan signed an amendment to the above agreement with EUSA for the
marketing and distribution of the products COLLATAMP(R) in Greece and Cyprus.
Collatamp(R) is an approved FDA prescription product owned by EUSA Pharma and
marketed by EUSA Pharma in the U.S.
EUSA
Pharma is a specialty pharma company with a strong and growing portfolio of
specialty hospital medicines which has been built through the acquisition of
Talisker Pharmaceuticals in July 2006 and OPI in March 2007. Its primary
marketed products are Erwinase(R) Rapydan(R), Kidrolase(R), Fomepizole(R) and
Xenazine(R). In addition, it has an active development pipeline including
candidates in rheumatoid arthritis and Alzheimer’s disease, schizophrenia and
Lambert Eaton Syndrome.
On March
14, 2008, Samaritan signed a five-year (with two-year automatic renewals)
exclusive agreement with Abiogen for the marketing and distribution of the
product ABIOKLAD (R) in Greece, Cyprus and Turkey.
Abiogen
Pharma is a private Italian pharmaceutical company, founded in Pisa in 1997,
involved in R&D, manufacturing and marketing. Abiogen has a prestigious
R&D pipeline, has demonstrated significant skills in innovative compound
development and is now broadening into the biotechnological field. Abiogen’s
research on the osteo-articular metabolism led to the marketing of four
bisphosphonates and established Abiogen Pharma as a unique world-wide
company.
Results
of Operations
Results
of Operations For The Three (3) Months Ended September 30, 2008 As Compared To
The Three (3) Months Ended September 30, 2007.
During
the quarter ended September 30, 2008, revenues increased by 157% to
$1,144,871 from $68,773 for the quarter ended September 30, 2007. This
increase is due to the increase in marketed products. Currently, Samaritan sells
Amphocil, Collatamp, Elaprase, Erwinase, Morphine, Rapydan and Replagal in
Greece.
During
the quarter ended September 30, 2008, cost of goods sold for pharmaceutical
sales increased to $498,091 from $20,101 for the quarter ended September
30, 2007. Cost of goods sold was attributed to the sales of Amphocil, Collatamp,
Elaprase, Erwinase, Morphine, Rapydan and Replagal in Greece.
We
incurred research and development expenses of $593,427 for the quarter ended
September 30, 2008, as compared to of $154,234 for the quarter ended September
30, 2007. This increase of $439,193, or two hundred eighty-five percent
(285%), was primarily attributable to a temporary reduction in research
expenditures during the prior year. We expect that research and development
expenditures relating to drug discovery and development will increase in 2008
and into subsequent years due to FDA clinical trials which include the
continuation and expansion of clinical trials (i) our Alzheimer's drug program,
(ii) the initiation of trials for other potential indications and (iii)
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 decreased to $610,524 for the quarter ended
September 30, 2008, as compared to $666,922 for the quarter ended September 30,
2007. This decrease of $56,398 or eight percent (8%) was primarily attributable
to the decrease in administrative support.
Depreciation
and amortization amounted to $40,344 for the quarter ended September 30,
2008, as compared to $47,974 for the quarter ended September 30, 2007. This
decrease of $7,630 or sixteen percent (16%) was primarily attributable to a
decline in depreciation of fixed assets.
Net
interest expense amounted to $17,328 and ($487) for the quarters ended September
30, 2008 and 2007, respectively. As of September 30, 2008, the Company had
borrowed an aggregate of $485,500 under the terms of the Notes issued by the
Company to the lender. The Company pays interest to the lender at a
rate of 16% per annum.
Other
comprehensive income (loss) is comprised of two components. The Company invests
in marketable securities to earn a return on cash not needed in the short-term.
Temporary, unrealized gains and losses are recorded to reflect changes in the
market value of the temporary investments as they occur. There were no
marketable securities owned for the three-month periods ended September 30, 2008
and 2007. The other component of comprehensive income is due to the payment in
foreign currency of operations that occur in Canada, Ireland and Greece. The
amount of the gain or loss is a function of the relative strength of the
American dollar to the Euro. For the quarter ending September 30, 2008, the
foreign currency translation loss was $153,642.
We had a net loss of ($614,843) for the quarter ended September 30,
2008, as compared to a net loss of ($132,648) for the quarter ended
September 30, 2007, a decrease of $482,195. The loss per share for the period
ended September 30, 2008 was ($0.02), as compared to earnings per share of
($0.00) for the period ended September 30, 2007.
Results
of Operations For The Nine (9) Months Ended September 30, 2008 As Compared To
The Nine (9) Months Ending September 30, 2007.
During
the nine months ended September 30, 2008 and 2007, revenues decreased to
$2,952,399 from $3,929,327. During the first nine months of 2007, Samaritan
recognized revenue of $3,451,742 from the Pharmaplaz Agreement. During the nine
months ended September 30, 2008, Samaritan’s pharmaceutical sales were
$2,952,399, as compared to pharmaceutical sales of $477,585 for the nine months
ended September 30, 2007, an increase of $2,474,814 or 518%. Currently,
Samaritan sells Amphocil, Collatamp, Elaprase, Erwinase, Morphine, Rapydan and
Replagal in Greece.
During
the nine months ended September 30, 2008 and 2007, cost of goods sold for
pharmaceutical sales increased to $1,634,467 from $357,538. During the nine
months ended September 30, 2008, cost of goods sold was attributed to the sales
of Amphocil, Collatamp, Elaprase, Erwinase, Morphine, Rapydan and Replagal in
Greece.
We
incurred research and development expenses of $1,224,191 for the nine months
ended September 30, 2008, as compared to of $1,125,871for the nine months
ended September 30, 2007. This increase of $98,320, or nine percent (9%), was
primarily attributable to a temporary reduction in research expenditures during
the third quarter of the prior year. We expect that research and development
expenditures relating to drug discovery and development will increase in 2008
and into subsequent years due to FDA clinical trials which include the
continuation and expansion of clinical trials (i) our Alzheimer's drug program,
(ii) the initiation of trials for other potential indications and (iii)
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 $2,183,045 for the nine months ended
September 30, 2008, as compared to $2,044,699 for the nine months ended
September 30, 2007. This increase of $138,346 or seven percent (7%) was
primarily attributable to increases in compensation and hiring of new employees
for our sales force in Eastern Europe.
Depreciation
and amortization amounted to $119,534 for the nine months ended September 30,
2008, as compared to $138,063 for the nine months ended September 30, 2007. This
decrease of $18,529 or thirteen percent (13%) was primarily attributable to a
decline in depreciation of fixed assets.
Net
interest expense amounted to $51,397 and ($15,536) for the nine months
ended September 30, 2008 and 2007, respectively. As of September 30, 2008, the
Company had borrowed from related parties an aggregate of $485,500. Under the
terms of the Notes issued by the Company to the lender, the Company pays
interest to the lender at a rate of 16% per annum.
Other
comprehensive income (loss) is comprised of two components. The Company invests
in marketable securities to earn a return on cash not needed in the short-term.
Temporary, unrealized gains and losses are recorded to reflect changes in the
market value of the temporary investments as they occur. There were no
marketable securities owned for the six-month periods ended September 30, 2008
and 2007. The other component of comprehensive income is due to the payment in
foreign currency of operations that occur in Canada, Ireland and Greece. The
amount of the gain or loss is a function of the relative strength of the
American dollar to the Euro. For the nine months ending September 30, 2008, the
foreign currency translation loss was $39,215.
We had a
net loss of ($2,675,406) for the nine months ended September 30, 2008, as
compared to a net income of $216,015 for the nine months ended September 30,
2007. The net loss was due to the collection of one-time licensing fees which
occurred in the previous year, and not collected in the current
year. The loss per share for the period ended September 30, 2008 was
($0.09), as compared to earnings per share of $0.01 for the nine months ended
September 30, 2007.
Cash used in operating activities during the nine (9) month period
ending September 30, 2008 was ($153,964), as compared to ($1,264,591) for the
nine (9) month period ending September 30, 2007, an increase of $1,110,627, or
eighty-eight percent (88%). This decrease is primarily attributable to an
increase in accrued expenses and accounts payable which offset the loss from
operations and increases in receivables.
Cash used
in investing activities during the nine (9) month period ending September 30,
2008 was ($169,326), as compared to ($594,457) for the nine (9) month period
ending September 30, 2007, a decrease of $425,131, or seventy-two percent (72%).
This decrease is primarily attributable to a decrease in patent registration
costs.
Cash
provided by financing activities was $205,500 for the nine (9) month period
ending September 30, 2008, as compared to $1,348,748 for the nine (9) month
period ending September 30, 2007, a decrease of $1,143,248 or eighty-five
percent (85%). This decrease is primarily from the Company deciding to close the
Registration Statement (Commission Registration No. 07556090) and not
registering additional shares of Common Stock under the Purchase Agreement II
with Fusion Capital.
Liquidity
and Capital Resources
Current
assets as of September 30, 2008 were $4,885,705 as compared to $ 2,232,040
as of December 31, 2007. This increase of $2,653,665, or one hundred nineteen
percent (119%), is primarily attributable to the overseas product accounts
receivable. Current liabilities as of September 30, 2008 were $7,167,525 as
compared to $2,526,211 as of December 31, 2007, an increase of $4,641,314 or one
hundred eighty-four percent (184%). Such increase is the result of accounts
payable relating to the overseas product sales and research, and loans made to
the Company.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in note 3 to the financial
statements, the Company has generated minimal revenues and at September 30,
2008, the Company had an accumulated deficit of $47,010,546. For the nine months
ended September 30, 2008 and 2007, the Company incurred net loss of
$(2,675,406) and net income of $216,015, respectively and used cash
flows from operations of $(153,964) and $(1,264,591) respectively. Our
current resources are insufficient to fund all of our planned development and
commercialization efforts. As of September 30, 2008, we have a working capital
deficiency of approximately $2,281,820. These matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regards to these matters are described in note 3. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
Currently,
we have out-licensed our SP-01A and in-licensed the rights to sell specialty
pharmaceutical products, Amphocil from Three Rivers Pharmaceuticals, Elaprase
and Replagal from Shire Pharmaceuticals, Infasurf from Ony, Inc, Mepivamol,
Methadone, Morphine Sulphate, Naloxone, Naltrexone, Oramorph, and Pethidine from
Molteni Pharmaceuticals, Collatamp, Erwinase, Kidrolase, and Rapydan from EUSA
Pharma and Abioklad from Abiogen Pharma. We intend to continue to explore
avenues to obtain additional capital through private placements, 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. 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.
|
|
September
30, 2008
|
|
|
September
30, 2007
|
|
Cash
provided by (used in):
|
|
|
|
|
|
|
Operating
activities
|
|
$ |
(153,964 |
) |
|
$ |
(1,264,591 |
) |
Investing
activities
|
|
$ |
(169,326 |
) |
|
$ |
(594,457 |
) |
Financing
activities
|
|
$ |
205,500 |
|
|
$ |
1,348,748 |
|
As of September 30, 2008, the Company's
cash position was $169,781. During the quarter ended September 30,
2008, Samaritan Pharmaceuticals Europe, and ABC Factors entered into a
“Factoring Agreement”. The factoring arrangements continue to provide
Samaritan Pharmaceuticals Europe with a maximum credit facility of €400,000.
Under the Factoring Agreement, Samaritan Pharmaceuticals Europe submits accounts
receivable to be purchased by ABC Factors, and ABC Factors pays Samaritan
Pharmaceuticals Europe up to 90% of the aggregate net face value of accounts
receivable purchased, less applicable fees charged by ABC Factors and a reserve
withheld by ABC Factors to serve as security in the event that ABC Factors
receives less than full payment for accounts purchased due to returns,
allowances, deductions, disputes or chargebacks. All accounts submitted for
purchase must be approved by ABC Factors. ABC Factors also charges Samaritan
Pharmaceuticals Europe interest on amounts advanced to Samaritan Pharmaceuticals
Europe under the Factoring Agreement at a rate of 2.00% above the prime rate of
interest and ABC Factors receives a factoring administration fee equal to 0.7%
of the gross invoice amount of each account submitted.
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.
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 trading instruments that are likely to expose us to
market risk, whether interest rate, foreign currency exchange, commodity price
or equity price risk. As of September 30, 2008, the Company had borrowed from
related parties an aggregate of $485,500 (the "Notes"). Proceeds from each of
the loans funded the Company's continuing operating expenses, ongoing expenses,
legal and accounting fees, as well as for working capital and other
contingencies. Under the terms of the Notes issued by the Company to the lender,
the Company will: (i) pay interest to the lender at a rate of 16% per annum and
ii) 100% warrant coverage. The principal and interest due on the Notes are due
on demand. The Notes will be repaid from proceeds of any subsequent financing
arrangement to which the Company becomes a party or from the cash flow from the
Company's operations. The Board of Directors approved that the prior year 2007
notes of $300,000, which paid interest to the lender at a rate of prime rate
plus 4% per annum, be changed to match the terms of notes issued during the
first quarter of 2008. The Notes will be repaid from proceeds of any subsequent
financing arrangement to which the Company becomes a party or from the cash flow
from the Company's operations. We have not entered into any forward or future
contracts, and have purchased no options and entered into no swaps. Other than
the ABC Factors agreement, 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.
ITEM
4(T). CONTROLS AND PROCEDURES
Evaluation
of Disclosures, Controls and Procedures
Based on
an evaluation under the supervision and with the participation of our
management, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(“Exchange Act”) were effective as of the date of this report to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is (i) recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission
rules and forms and (ii) accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required
disclosures.
Changes
in Internal Control Over Financial Reporting
There was
no change in our internal control over financial reporting that occurred during
the first quarter of 2008, which was identified in connection with management’s
evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the
Exchange Act, which has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
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 an adverse material effect on the financial statements
of the Company. Other than routine litigation incidental to our business, there
are no legal proceedings or actions pending at this time.
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.
RISKS
ASSOCIATED WITH OUR BUSINESS
We
Have A Limited Operating History With Significant Losses And Expect Losses To
Continue In The Near Future
We have
yet to establish any history of profitable operations. At September 30, 2008,
the Company had an accumulated deficit of $47,010,546. For the nine-month period
ended September 30, 2008 and 2007, the Company incurred a net loss of
($2,675,406) and net income of $216,015, respectively and used cash flows from
operations of ($153,964), and ($1,264,591), respectively. We also have a
working capital deficiency of approximately ($2,281,820). To date, our revenues
have not been sufficient to sustain our operations. Our profitability will
require the successful commercialization of several drugs for our territories 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 specialty pharmaceutical 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. We expect losses
to continue for the near future, and such losses will likely increase as human
clinical trials are undertaken in the United States. Future profitability will
be dependent upon our ability to complete the development of our pharmaceutical
products, obtain necessary regulatory approvals and effectively market such
products. In addition, future profitability will require the Company to
establish agreements with other parties for clinical testing, manufacturing,
commercialization, and sale of our products.
We
Will Need Additional Capital In The Future, But Our Access To Such Capital Is
Uncertain.
Our current resources are insufficient to fund all of our planned
development and commercialization efforts. As of September 30, 2008, we have a
working capital deficiency of ($2,281,820) and we had cash, and cash
equivalents, of approximately $169,781. At our current level of expenditures and
profits from our sales in Eastern Europe, we believe that our cash resources may
not adequate to meet our requirements into 2009. Our capital needs will depend
on many factors, including our research and development activities, the scope
and timing of our clinical trial programs, the timing of regulatory approval for
our products under development and the successful commercialization of our
products. Our needs may also depend on the magnitude and scope of these
activities, the progress and the level of success in our clinical trials, the
costs of preparing, filing, prosecuting, maintaining and enforcing patent claims
and other intellectual property rights, competing technological and market
developments, changes in or terminations of collaboration and existing licensing
arrangements, the establishment of new collaboration and licensing arrangements
and the cost of manufacturing scale-up and development of marketing activities,
if undertaken by us. We do not have committed external sources of funding. If
adequate funds are not available, we may be required to:
|
·
|
delay,
reduce the scope of, or eliminate one or more of our research and
development programs;
|
|
·
|
obtain funds through arrangements
with collaboration partners or others that may require us to relinquish
rights to technologies,
product candidates or products that we would otherwise seek to
retain
in order to develop
or commercialize them
ourselves;
|
|
·
|
license rights to technologies,
product candidates or products on terms that are less favorable to us
than
might otherwise be
available; or
|
|
·
|
curtail
all business operations.
|
We intend
to actively seek new financing from time to time to provide financial support
for our activities. If we raise additional funds by issuing additional stock,
further dilution to our stockholders may result, and new investors could have
rights superior to existing stockholders. If funding is insufficient at any time
in the future, we may be unable to develop or commercialize our products, take
advantage of business opportunities or respond to competitive pressures, which
could have a material adverse effect on our business.
Changes
In The Credit Market Or The Financial Position Of The Providers Of Our Credit
Facilities May
Impact Our Ability To Borrow Money Or Our Interest Expense.
We may
rely on credit facilities or factoring agreements to provide working capital to
support the operations of business. Commercial banks and lenders have faced
challenges recently related to nonperforming loans, including principally
subprime based real estate loans. The impact of losses in the subprime mortgage
industry has broadly affected the availability of commercial loans. We regularly
evaluate alternative financing sources; however we have no other agreements or
arrangement in place at this time. Further changes in the commercial credit
market or in the financial stability of our creditors may impact the ability of
our creditors to provide additional financing. In addition, the financial
condition of our credit facility providers, which is beyond our control, may
adversely change. Any decrease in our access to borrowings under our credit
facilities, tightening of lending standards and other changes to our sources of
liquidity could adversely impact our ability to obtain the financing we need to
continue operating the business in our current manner or impact our cost of
capital.
Our
Independent Registered Public Accounting Firm Has Issued An Unqualified Opinion
With An
Explanatory
Paragraph, To The Effect That There Is Substantial Doubt About Our Ability To
Continue As
A
Going Concern.
The
Company’s independent registered public accounting firm has issued an
unqualified opinion with an explanatory paragraph, to the effect that there is
substantial doubt about the Company’s ability to continue as a going concern.
This unqualified opinion with an explanatory paragraph could have a material
adverse effect on the business, financial condition, results of operations and
cash flows of the Company.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 3 to the
financial statements, the Company has generated minimal revenues and at
September 30, 2008, the Company had an accumulated deficit of $47,010,546. For
the nine-month periods ended September 30, 2008 and 2007, the Company incurred a
net loss of ($2,675,406) and net income of $216,015, respectively and used cash
flows from operations of ($153,964) and ($1,264,591) respectively. In addition,
as of September 30, 2008, we have a working capital deficiency of approximately
(2,281,820). These matters raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regards to these matters
are described in note 3. The accompanying financial statements do not include
any adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might
result should the Company be unable to continue as a going
concern.
We have
no committed sources of capital and do not know whether additional financing
will be available when needed on terms that are acceptable, if at all. Our
current lack of resources is exacerbated by our inability to date to collect the
remaining balance from Pharmaplaz. As of the date of this quarterly filing,
Samaritan Pharmaceuticals and Samaritan Therapeutics’ payment to McGill
University is in arrears, which may permit our collaborator to terminate the
research and development agreement. The termination of the research and
development agreement could force the Company to curtail new discoveries to be
added to its current pipeline of innovative drugs. Currently, all parties are in
discussion to bring the balance in arrears current. The addition of this going
concern statement from our independent registered public accounting firm may
discourage some investors from purchasing our Common Stock or providing
alternative capital financing. The failure to satisfy our capital requirements
will adversely affect our business, financial condition, results of operations
and prospects.
Unless we
raise additional funds, either through the sale of equity securities or one or
more collaborative arrangements, we will need to reduce our research and
development and significantly reduce our workforce and our operating expenses.
If we do not take these actions, we will not have sufficient funds to continue
operations. Even if we take these actions, they may be insufficient,
particularly if our costs are higher than projected or unforeseen expenses
arise. Reducing our research and development or significantly reducing our
workforce or operating expenses will adversely affect our business and
prospects.
If We Do Not Receive
And Maintain Regulatory Approvals For Our Products Or Product Candidates, We
Will Not Be Able
To Commercialize Our
Products, Which Would Substantially Impair Our Ability To Generate Revenues And
Materially Harm Our
Business And Financial Condition.
Approval
from the FDA is necessary to manufacture and market pharmaceutical products in
the United States. The regulatory approval process is extensive, time-consuming
and costly, and the FDA may not approve additional product candidates, or the
timing of any such approval may not be appropriate for our product launch
schedule and other business priorities, which are subject to
change.
Clinical
testing of pharmaceutical products is also a long, expensive and uncertain
process. Even if initial results of preclinical studies or clinical trial
results are positive, we may obtain different results in later stages of drug
development, including failure to show desired safety and efficacy. The clinical
trials of any of our product candidates could be unsuccessful, which would
prevent us from obtaining regulatory approval and commercializing the
product.
|
·
|
FDA
officials may not find a product candidate safe or effective to merit an
approval;
|
|
·
|
FDA officials may not find that
the data from preclinical testing and clinical trials justifies
approval,
or they may require
additional studies that would make it commercially unattractive to
continue pursuit of approval;
|
|
·
|
the FDA might not approve the
processes or facilities of our contract manufacturers or raw material
suppliers or our
manufacturing processes or
facilities;
|
|
·
|
the
FDA may change its approval policies or adopt new regulations;
and
|
|
·
|
the FDA may approve a product
candidate for indications that are narrow or under conditions that
place
our product at a
competitive disadvantage, which may limit our sales and marketing
activities
or otherwise adversely impact the commercial
potential of a product.
|
If the
FDA does not approve our product candidates in a timely fashion on commercially
viable terms or we terminate development of any of our product candidates due to
difficulties or delays encountered in clinical testing and the regulatory
approval process, it will have a material adverse impact on our
business.
If
Our Products Do Not Gain Market Acceptance, Our Business Will Suffer Because We
Might Not Be Able To Fund Future Operations.
A number
of factors may affect the market acceptance of our products or any other
products we develop or acquire, including, among others:
|
·
|
the
price of our products relative to other therapies for the same or similar
treatments;
|
|
·
|
the
perception by patients, physicians and other members of the
health;
|
|
·
|
the
safety and effectiveness of our products for their prescribed
treatments;
|
|
·
|
the availability of satisfactory
levels, or at all, of third party reimbursement for our products and
related
treatments;
|
|
·
|
our
ability to fund our sales and marketing efforts;
and
|
|
·
|
the
effectiveness of our sales and marketing
efforts.
|
In
addition, our ability to market and promote our products is restricted to the
labels approved by the FDA. If the approved labels are restrictive, our sales
and marketing efforts and market acceptance and the commercial potential of our
products may be negatively affected.
If our
products do not gain market acceptance, we may not be able to fund future
operations, including the development or acquisition of new product candidates
and/or our sales and marketing efforts for our approved products, which would
cause our business to suffer.
If
We Fail To Properly Manage Our Anticipated Growth, Our Business Could
Suffer.
Rapid
growth of our business is likely to place a significant strain on our
managerial, operational and financial resources and systems. To manage our
anticipated growth successfully, we must attract and retain qualified personnel
and manage and train them effectively. We are dependent on our personnel and
third parties to effectively manufacture, market, sell and distribute our
products. We will also continue to depend on our personnel and third parties to
successfully develop and acquire new products. Further, our anticipated growth
will place additional strain on our suppliers and manufacturers, resulting in
increased need for us to carefully manage these relationships and monitor for
quality assurance. Although we may not grow as we expect, if we fail to manage
our growth effectively or to develop and expand a successful commercial
infrastructure to support marketing and sales of our products, our business and
financial results will be materially harmed. In addition, we have certain raw
materials manufactured in foreign countries. We may also elect in the future to
market certain of our products, and perhaps have certain of our products or
certain additional raw materials manufactured, in foreign countries. Many other
countries, including the countries where the Company currently markets products
have similar requirements as the United States for the manufacture, marketing,
and sale of pharmaceutical products.
The
license agreements pursuant to which the Company has licensed its core
technologies for its potential drug products permit the licensors 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.
As of the date of this quarterly filing, Samaritan Pharmaceuticals and Samaritan
Therapeutics’ payment to McGill University is in arrears, which may permit our
collaborator to terminate the research and development agreement. The
termination of the research and development agreement could force the Company to
curtail new discoveries to be added to its current pipeline of innovative drugs.
Currently, all parties are in discussion to bring the balance in arrears
current.
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. Currently, the Company is in arrears with its patent
attorneys, which could cause our patent protection to suffer. The
Company is currently working to bring the balance in arrears
current.
The
Company's Success Will Be Dependent Upon The Licenses And Proprietary Rights It
Receives From Other Parties, And On Any Patents It May Obtain
The
Company and Samaritan Therapeutics Canada, have signed a Research Collaboration
and Licensing Agreement with The Research Institute of McGill University Health
Centre (RI-MUHC) in Montreal, Canada, to advance its promising pipeline into
clinical trial status and develop new innovative drug candidates. Once drug
candidates, derived from the collaborative research, are clinically-validated
and deemed to hold promise, Samaritan Therapeutics intends to continue to
develop the drug candidate in Canada, while Samaritan Pharmaceuticals will focus
on the drug candidate's process through regulatory agencies and its
commercialization throughout the rest of the world.
Our
success will depend in large part on the ability of the Company and its
licensors to (a) maintain license and patent protection with respect to their
drug products, (b) defend patents and licenses once obtained, (c) maintain trade
secrets, (d) operate without infringing upon the patents and proprietary rights
of others and (e) obtain appropriate licenses to patents or proprietary rights
held by third parties if infringement should otherwise occur, both in the United
States and in foreign countries. We have obtained licenses to patents and other
proprietary rights from Georgetown University and George Washington
University.
The
patent positions of pharmaceutical companies, including those of the Company,
are uncertain and involve complex legal and factual questions. There is no
guarantee the Company or its licensors have or will develop or obtain the rights
to products or processes that are patentable, that patents will issue from any
of the pending applications or that claims allowed will be sufficient to protect
the technology licensed to the Company. In addition, we cannot be certain that
any patents issued to or licensed by the Company will not be challenged,
invalidated, infringed or circumvented, or that the rights granted thereunder
will provide competitive advantages to the Company.
We may
also rely on unpatented trade secrets and expertise to maintain a competitive
position, which we seek to protect, in part, by confidentiality agreements with
employees, consultants and others. There can be no assurance these agreements
will not be breached or terminated, that we will have adequate remedies for any
breach or that trade secrets will not otherwise become known or be independently
discovered by competitors.
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 our
business operations. Even if we are able to compete successfully, we may not be
able to do so in a profitable manner.
If
We Are Unable To Continue Product Development, Our Business Will
Suffer
Our
growth depends in part on a 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.
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. We will 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 will 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 continue to generate revenues from our marketed products and our
commercialization 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 the "Commercialization Business Model" section.
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.
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.
The
Payments To Our Patent Attorneys Are In Arrears; If We Are Unable To Protect Our
Intellectual Property, We May Not Be Able To Operate Our Business
Profitably
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 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 intellectual
property. 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. As of the date of this quarterly filing, Samaritan Pharmaceuticals
payments to our patent attorneys are in arrears, which may result in the loss of
intellectual property protection.
Our
success depends on our ability to operate without infringing upon the
proprietary rights of others. We endeavor to follow developments in our field,
and we do believe that we have freedom to operate with respect to our core
technologies. To the extent that planned or potential products would infringe
patents or other intellectual property rights held by third parties, we would
need licenses under such patents or other intellectual property rights to
continue development and marketing of our products protected by those third
party patents or other intellectual property rights. Any required licenses may
not be available on acceptable terms, if at all. If we do not obtain such
licenses, we may need to design around other parties’ patents or we may not be
able to proceed with the development, manufacture or sale of our
products.
We
Maintain No General Liability Insurance Policy
Our
business exposes us to potential product liability claims that are inherent in
the testing, production, marketing, and sale of pharmaceuticals products. We
maintain no commercial general liability policy and do not maintain insurance in
amounts or scope sufficient to provide us with adequate coverage. A claim 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.
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 requires the Company to assume more risk in the
future. If we are subject to third party claims or suffer a loss or damage, we
will be required to bear that risk. Furthermore, any first-or-third-party claims
made against the Company may impact our ability to obtain or maintain insurance
coverage at reasonable costs or at all in the future.
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 the
Research Centre of McGill University. In addition, the loss of Dr. Greeson is
grounds for our Research Collaboration with the Research Centre of McGill
University Health Centre to terminate. In addition, competition for qualified
employees among companies in the biotechnology and biopharmaceutical industry is
intense and we cannot be assured that we would be able to recruit qualified
personnel on commercially acceptable terms, or at all, to replace
them.
We
Are Dependent On Third Parties For A Significant Portion Of Our Bulk Supply And
The Formulation, Fill And Finish Of Our Products; Our Payments To These Third
Parties Are In Arrears.
We depend
on third parties for a significant portion of our products' bulk supply as well
as for some of the formulation, fill and finish of products that we manufacture.
Our third-party contract manufacturer of products' bulk drug; accordingly, our
supply of products are currently significantly dependent on third parties’
production schedule for products. We would be unable to produce products in
sufficient quantities to substantially offset shortages in third parties’
scheduled production if our third-party contract manufacturers used for the
formulation, fill and finish of products’ 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.
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.
RISKS
ASSOCIATED WITH AN INVESTMENT IN OUR COMMON STOCK
Our
Stock Is Currently Listed On The OTC Bulletin Board Which Limits The Trading Of
Our Stock
Our
Common Stock currently trades on the OTC Bulletin Board which is generally
considered to be a less efficient market than markets such as NASDAQ or other
national exchanges, and which may cause difficulty in obtaining future
financing. Broker-dealers who sell stock on the OTC market must provide
purchasers of these stocks with a standardized risk-disclosure document prepared
by the SEC. This document provides information about our Common Stock and the
nature and level of risks involved in investing in the OTC market. A broker must
also give a purchaser, orally or in writing, bid and offer quotations and
information regarding broker and salesperson compensation, make a written
determination that our Common Stock is a suitable investment for the purchaser,
and obtain the purchaser's written agreement to the purchase. Broker-dealers
must also provide customers that hold OTC stock in their accounts with such
broker-dealer a monthly statement containing price and market information
relating to the OTC stock. If an OTC stock is sold in violation of the OTC stock
rules, purchasers may be able to cancel their purchase and get their money back.
If applicable, the OTC stock rules may make it difficult for investors to sell
their shares of our Common Stock. Because of the rules and restrictions
applicable to an OTC market stock, there is less trading in OTC stocks and the
market price of our Common Stock may be adversely affected. Also, many brokers
choose not to participate in OTC stock transactions. Accordingly, purchasers may
not always be able to resell shares of our Common Stock publicly at times and
prices that they feel are appropriate.
A
Sale Of A Substantial Number Of Shares Of Our Common Stock May Cause The Price
Of Our Common Stock To Decline.
If our
stockholders sell substantial amounts of our Common Stock in the public market,
the market price of our Common Stock could fall. These sales also may make it
more difficult for us to sell equity or equity-related securities in the future
at a time and price that we deem reasonable or appropriate. Several of our
shareholders hold restricted common stock that may be eligible for sale pursuant
to Rule 144 under the Securities Act of 1933. Sales of our Common Stock by
certain present stockholders under Rule 144 may, in the future, have a
depressive effect on the market price of our securities. In addition, the sale
of shares by officers and directors and other affiliated shareholders may also
have a depressive effect on the market for our securities.
We have
paid no cash dividends on any of our Common Stock to date, and we currently
intend to retain our future earnings, if any, to fund the development and growth
of our business. As a result, we do not expect to pay any cash dividends in the
foreseeable future. The success of your investment in our Common Stock will
likely depend entirely upon any future appreciation. There is no guarantee that
our Common Stock will appreciate in value or even maintain the price at which
you purchased your shares.
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 Common 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 Common 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.
We may
enter into registration rights agreements in connection with certain 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.
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 November 1, 2007) and in our Bylaws (restated as last
amended March 20, 2008), 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 November 1,
2007) and Bylaws (restated as last amended March 20, 2008), 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 November 1, 2007) and Bylaws (restated
as last amended March 20, 2008) 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.
The
following discussion sets forth securities sold by the Company in the
three-month period ending September 30, 2008. These securities were shares of
Common Stock of the Company. They were sold for cash and, unless otherwise
noted, sold in private transactions to persons believed to be of a class of
accredited investors not affiliated with the Company unless otherwise noted and
purchasing the shares with investment intent, and the Company relied upon, among
other possible exemptions, Section 4(2) of the Securities Act of 1933, as
amended. The Company's 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 legend shares, along with a notation at the respective transfer
agent, restricting the shares from sale or transfer as is customary with
reference to Rule 144 of the SEC.
During
the quarter ended September 30, 2008, the Company issued an aggregate of
1,745,472 shares of Common Stock in consideration of services rendered or to be
rendered to the Company. Such shares were valued at an aggregate of $349,095 at
a price of $0.20 per share, representing the fair value of the shares
issued.
Issuer
Purchase of Equity Securities
We did
not make any purchases of our Common Stock during the three months ended
September 30, 2008.
Holders
As of
November 14, 2008, there were approximately 932 holders of record of our Common
Stock. This number was determined from records maintained by our transfer agent
and does not include beneficial owners of our securities whose securities are
held in the names of various dealers and/or clearing agencies.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No
matters were submitted to a vote of security holders for the quarter ended
September 30, 2008.
ITEM 5.
OTHER INFORMATION
Yannis S. Kalantzakis joined Samaritan in November 2008 as
Appointed Representative to oversee European operations, including Samaritan
Ireland Pharmaceuticals, Ltd. Prior to joining Samaritan, Mr.
Kalantzakis had a successful career in various executive positions with Zesi
Ltd, Hygeia SA, Ministry of Health (Hellas), and Fresenius
AG. His background has been in the areas of hospital
management, network health services, and business development. He is
fluent in English, German, and Greek. Mr. Kalantzakis holds a
bachelor of science degree from the University of Athens. Mr. Yannis
S. Kalantzakis replaces Dr. Christos Dakas, who left the Company for personal
reasons.
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
Securities Exchange Act of 1934, as amended.
EXHIBIT
NO.
|
DESCRIPTION
|
|
LOCATION
|
3.1
|
Articles
of Incorporation, restated as last amended November 1,
2007
|
|
Incorporated
by reference to Exhibit 3.1 to the Company's Current Quarterly Report on
Form 10-Q as filed with the U.S. Securities and Exchange Commission on
November 19, 2007.
|
3.2
|
Bylaws,
restated as last amended March 20, 2008
|
|
Incorporated
by reference to Exhibit 3.2 to the Company's Form 10-K as filed with the
U.S. Securities and Exchange Commission on April 14,
2008.
|
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. 2001 Stock Option Plan
|
|
Incorporated
by reference to Exhibit 4.2 to 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. 2005 Stock Option Plan
|
|
Incorporated
by reference to Schedule 14-A 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 Commercialization Collaboration Agreement for SP-01A dated
March 28, 2007 by and between Pharmaplaz and the Company.
|
|
Incorporated
by reference to Exhibit 10.1 to the Company's Form 10-K as filed with the
U.S. Securities and Exchange Commission on April 13, 2007.
|
10.2
|
Common
Stock Purchase Agreement (Purchase Agreement I), dated April 22, 2003, by
and between the Company and Fusion Capital Fund II, LLC
|
|
Incorporated
by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on April 25,
2003.
|
10.3
|
Registration
Rights Agreement, dated April 22, 2003, by and between the Company and
Fusion Capital Fund II, LLC
|
|
Incorporated
by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on April 25,
2003.
|
10.4
|
Employment
Agreement, dated as of January 1, 2001, by and between Samaritan
Pharmaceuticals, Inc. and Mr. Thomas Lang.
|
|
Incorporated
by reference to Exhibit 10.6 to the Company's Quarterly Report on Form
10-QSB as filed with the U.S. Securities and Exchange Commission on August
16, 2004.
|
10.5
|
Form
of Trust Under Samaritan Pharmaceuticals, Inc. Deferred Compensation
Plan
|
|
Incorporated
by reference to Exhibit 10.10 to the Company's Quarterly Report on Form
10-QSB as filed with the U.S. Securities and Exchange Commission on August
14, 2002.
|
10.6
|
Master
Clinical Trial and Full Scale Manufacturing Agreement, dated October 5,
2004, by and between the Company and Pharmaplaz, LTD
|
|
Incorporated
by reference to Exhibit 10.10 to the Company's Quarterly Report on Form
10-QSB as filed with the U.S. Securities and Exchange Commission on
November 15, 2004.
|
10.7
|
Common
Stock Purchase Agreement (Purchase Agreement II), dated May 12, 2005, by
and between the Company and Fusion Capital Fund II, LLC
|
|
Incorporated
by reference to Exhibit 10.11 to the Company's Quarterly Report on Form
10-QSB as filed with the U.S. Securities and Exchange Commission on May
13, 2005.
|
10.8
|
Amendment
to Common Stock Purchase Agreement, dated December 19, 2005, by and
between the Company and Fusion Capital Fund II, LLC
|
|
Incorporated
by reference to Exhibit 10.12 to the Company's Registration Statement on
Form SB-2 as filed with the U.S. Securities and Exchange Commission on
December 15, 2005.
|
10.9
|
Registration
Rights Agreement, dated May 12, 2005, by and between the Company and
Fusion Capital Fund II, LLC
|
|
Incorporated
by reference to Exhibit 10.12 to the Company's Quarterly Report on Form
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 Agreement, dated June 8, 2001, by and between
Georgetown University and Samaritan Pharmaceuticals, Inc.
|
|
Incorporated
by reference to Exhibit 10.10 to the Company's Registration Statement on
Form SB-2 as filed with the U.S. Securities and Exchange Commission on
July 30, 2003.
|
10.12
|
Change
in Control Severance Plan for Certain Covered Executives and Employees of
Samaritan Pharmaceuticals, Inc.
|
|
Incorporated
by reference to Exhibit 10.16 to the Company's Quarterly Report on Form
10-Q as filed with the U.S. Securities and Exchange Commission on August
14, 2006.
|
10.13
|
Samaritan
Pharmaceuticals, Inc.'s Director/Officer's Indemnification
Agreement
|
|
Incorporated
by reference to Exhibit 10.17 to the Company's Quarterly Report on Form
10-Q as filed with the U.S. Securities and Exchange Commission on August
14, 2006.
|
10.14
|
Stock
Purchase Agreement among Samaritan Pharmaceuticals, Metastatin
Pharmaceuticals, and the shareholders of Metastatin
Pharmaceuticals.
|
|
Incorporated
by reference to Exhibit 10.18 to the Company's Quarterly Report on Form
10-Q as filed with the U.S. Securities and Exchange Commission on November
14, 2006.
|
10.15
|
Samaritan
Pharmaceuticals, Inc.’s In-Licensing Agreement with Three Rivers
Pharmaceuticals.
|
|
Incorporated
by reference to Exhibit 10.15 to the Company's Form 10-Q as filed with the
U.S. Securities and Exchange Commission on May 21,
2007.
|
10.16
|
Samaritan
Pharmaceuticals, Inc.’s In-Licensing Agreement with Molteni
Pharmaceuticals.
|
|
Incorporated
by reference to Exhibit 10.16 to the Company's Form 10-Q as filed with the
U.S. Securities and Exchange Commission on May 21,
2007.
|
10.17
|
Pharmaplaz
Research, Development and Commercialization Collaboration
Agreement
|
|
Incorporated
by reference to Exhibit 10.17 to the Company's Quarterly Report on Form
8-K as filed with SEC on March 28, 2007.
|
10.18
|
Pharmaplaz
Research, Development and Commercialization Collaboration Agreement
Supplement
|
|
Incorporated
by reference to Exhibit 10.18 to the Company's Quarterly Report on Form
10-Q as filed with the U.S. Securities and Exchange Commission
on May 21, 2007.
|
10.19
|
Research
Collaboration and Licensing Agreement by and between The Research Centre
at McGill University, Samaritan Therapeutics, Inc., and Samaritan
Pharmaceuticals, Inc.
|
|
Incorporated
by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on
July 25, 2007.
|
10.20
|
Cooperative
Lock Up Agreement between Samaritan Pharmaceuticals, inc. and Doug Bessert
and KD1, Inc.
|
|
Incorporated
by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on
June 12, 2007.
|
10.21
|
Samaritan
Pharmaceuticals, Inc.’s In-Licensing Agreement with EUSA
Pharma
|
|
Incorporated
by reference to Exhibit 10.21 to the Company's Form 10-K as filed with the
U.S. Securities and Exchange Commission on April 14,
2008.
|
10.22
|
Samaritan
Pharmaceuticals, Inc.’s In-Licensing Agreement with Abiogen
Pharma
|
|
Incorporated
by reference to Exhibit 10.22 to the Company's Form 10-K as filed with the
U.S. Securities and Exchange Commission on April 14,
2008.
|
10.23
|
Samaritan
Pharmaceuticals, Inc.’s In-Licensing Agreement with Siraeo,
Ltd
|
|
Incorporated
by reference to Exhibit 10.23 to the Company's Form 10-K as filed with the
U.S. Securities and Exchange Commission on April 14,
2008.
|
10.24
|
Samaritan
Pharmaceuticals, Inc.’s Out-Licensing Agreement with Taconic Farms,
Inc.
|
|
Provided
herewith
|
|
|
|
|
14.1
|
The
Samaritan Pharmaceuticals, Inc. Code of Conduct
|
|
Incorporated
by reference to Exhibit 14.1 to the Company's Form 10-KSB as filed with
the U.S. Securities and Exchange Commission on April 15,
2003.
|
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 Accounting Firm
|
|
Incorporated
by reference to Exhibit 23.1 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 re: Section 302
|
|
Provided
herewith
|
31.2
|
Certification
of Chief Financial Officer re: Section 302
|
|
Provided
herewith
|
32.1
|
Certification
of Chief Executive Officer re: Section 906
|
|
Provided
herewith
|
32.2
|
Certification
of Chief Financial Officer re: Section 906
|
|
Provided
herewith
|
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:
November 18, 2008
By: /s/ Eugene Boyle
Eugene
Boyle
Principal
Financial Officer
Duly
Authorized Officer
44