As
filed with the Securities and Exchange Commission on September 23,
2005
Registration
No. 333-_________
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_________________________________
FORM
SB-2
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________________________
Manhattan
Pharmaceuticals, Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
8731
|
36-3898269
|
|
(State
or other jurisdiction of
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
|
|
Incorporation
or organization)
|
Identification
No.)
|
|
|
810
Seventh Avenue, 4th
Floor
New
York, NY 10019
(212)
582-3950
|
||
|
(Address
and telephone number off principal executive offices and principal
place
of business)
|
||
|
Mr.
Nicholas J. Rossettos
Chief
Financial Officer
Manhattan
Pharmaceuticals, Inc.
810
Seventh Avenue, 4th
Floor
New
York, NY 10019
Telephone:
(212) 582-3950
Facsimile:
(212) 582-3957
(Name
and address of agent for service)
|
Copies
to:
Christopher
J. Melsha, Esq.
Maslon
Edelman Borman & Brand, LLP
90
South 7th Street, Suite 3300
Minneapolis,
Minnesota 55402
Telephone:
(612) 672-8200
Facsimile:
(612) 642-8343
|
__________________________________
Approximate
date of proposed sale to the public: From
time
to time after the effective date of this Registration Statement, as shall
be
determined by the selling stockholders identified herein.
If
this
Form is filed to register additional securities for an offering pursuant
to Rule
462(b) under the Securities Act, please check the following box and list
the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the
same
offering. [ ]
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the
same
offering. [ ]
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. [ ]
CALCULATION
OF REGISTRATION FEE
|
Title
of each class of
securities
to be registered
|
Number
of shares to be registered(1)
|
Proposed
maximum
offering price per unit(2) |
Proposed
maximum
aggregate
offering
price(2)
|
Amount
of
registration
fee (3)
|
|
Common
stock, par value $.001 per share
|
25,627,684
|
$
1.35
|
$34,597,373.40
|
$4,072.11
|
| (1) |
There
is also being registered hereunder an indeterminate number of additional
shares of common stock as shall be issuable pursuant to Rule 416
to
prevent dilution resulting from stock splits, stock dividends or
similar
transactions.
|
| (2) |
Estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457 of the Securities Act based upon a $1.35 per
share
average of high and low prices of the Registrant's common stock
on the OTC
Bulletin Board on September 20,
2005.
|
The
Registrant hereby amends this Registration Statement on such date or dates
as
may be necessary to delay its effective date until the Registrant shall file
a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a),
may determine.
OFFERING
PROSPECTUS
Manhattan
Pharmaceuticals, Inc.
25,627,684
Shares
Common
Stock
The
selling stockholders identified on pages 40 - 44 of this prospectus are
offering
on a resale basis a total of 25,627,684 shares of our common stock, including
2,978,957 shares issuable upon the exercise of outstanding warrants. We
will not
receive any proceeds from the sale of these shares by the selling
stockholders.
Our
common stock is quoted on the Over-the-Counter Bulletin Board under the
symbol
“MHTT.” On September __, 2005, the last sale price for our common stock as
reported on the OTC Bulletin Board was $______.
________________
The
securities offered by this prospectus involve a high degree of
risk.
See
“Risk Factors” beginning on page 6.
________________
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved these securities or determined that this prospectus
is
truthful or complete. A representation to the contrary is a criminal
offense.
The
date
of this Prospectus is September ___, 2005.
|
|
Page
|
|
3
|
|
|
6
|
|
|
14
|
|
|
15
|
|
|
22
|
|
|
32
|
|
|
37
|
|
|
39
|
|
|
40
|
|
|
40
|
|
|
41
|
|
|
48
|
|
|
50
|
|
|
50
|
|
|
51
|
|
|
51
|
|
|
51
|
|
|
51
|
|
|
F-1
|
This
summary highlights information contained elsewhere in this prospectus. Because
it is a summary, it may not contain all of the information that is important
to
you. Accordingly, you are urged to carefully review this prospectus in its
entirety.
Our
Company
We
are
engaged in the business of developing and commercializing early-stage
technologies, particularly biomedical and pharmaceutical technologies. We
aim to
acquire proprietary rights to these technologies, by license or acquisition
of
an ownership interest, fund their research and development and eventually
bring
the technologies to market. We currently are researching and developing three
biomedical technologies: oleoyl-estrone, an orally administered hormone which
we
believe can be used to treat obesity; lingual spray propofol, a proprietary
lingual spray technology to deliver propofol for pre-procedural sedation
prior
to diagnostic, therapeutic or endoscopic procedures; and PTH (1-34), a topical
treatment for psoriasis. None of the product candidates have been approved
by
the United States Federal Drug Administration or any other regulatory body.
Further, we have not received any commercial revenues to date and, until
we
receive the necessary approvals from the FDA or a similar foreign regulatory
authority, we will not have any commercial revenues.
| · |
Oleoyl-estrone,
our lead product candidate, is an orally administered novel therapeutic
being developed to treat obesity. We recently completed a Phase
Ia trial
relating to oleoyl-estrone pursuant to an investigational new drug
application, or “IND,” accepted by the FDA in January 2005. This study,
which was conducted at Basel, Switzerland, involved 36 obese volunteers
and was conducted to measure the pharmacokinetic (i.e., the manner
in
which the drug is absorbed, distribution, metabolism and elimination
by
the body) profile of oleoy-estrone, as well as its safety and tolerability
in obese males and females. Twelve of the 36 patients received
placebo and
24 receved a single dose in one of six strengths ranging from 1
mg to 150
mg. Oleoyl-estrone was shown to be safe with no serious adverse
events
noted in this study. We also are conducting a follow-on Phase 1b
trial
that will assess safety and tolerability in 24 obese volunteers
and
anticipate releasing the results of this study before the end of
2005.
|
| · |
PTH(1-34),
which we acquired as a result of our April 2005 acquisition of
Tarpan
Therapeutics, Inc., is being developed as a topical treatment for
psoriasis. In early 2001,
a
Phase I and II clinical trial of PTH(1-34) was completed at Boston
University Medical Center. The study evaluated safety and efficacy
of the
drug as a topical treatment for psoriasis. This double-blinded,
controlled
trial in 15 patients indicated that PTH(1-34) was a potentially
safe and
effective treatment for plaque psoriasis. After 8 weeks of treatment,
application of PTH(1-34) appeared to result in at least a partial
clearing
of the treated lesion in 85 percent of the patients and complete
clearing
in 60 percent of the patients. None of the patients appeared to
experience
any significant adverse effects. We plan to initiate additional
clinical
trials in PTH(1-34) in late 2005 or early
2006.
|
| · |
We
are developing propofol
lingual spray,
the right to which we license from NovaDel Pharma, Inc., for light
to
medium sedation on a Section 505b2 bioequivalence regulatory pathway
toward FDA approval. In January 2005, the FDA accepted our IND
for
propofol lingual spray, allowing us to commence clinical trials.
The FDA
has indicated to us in discussions that we may proceed to a pivotal
Phase
III trial of propofol lingual spray following completion of Phase
I
trials. We are actively planning the next steps for the clinical
development of this product candidate, meeting with our scientific
advisors and NovaDel regarding formulation, reviewing existing
data,
developing trial design and evaluating plans to re-enter the
clinic.
|
We
were
incorporated in Delaware in May 1993 under the name “Atlantic Pharmaceuticals,
Inc.” and, in March 2000, we changed our name to “Atlantic Technology Ventures,
Inc.” On February 21, 2003, we completed a “reverse” acquisition of
privately-held Manhattan Research Development, Inc. (formerly Manhattan
Pharmaceuticals, Inc.), a Delaware corporation. To effect this transaction,
we
caused Manhattan Pharmaceuticals Acquisition Corp., our wholly-owned subsidiary,
to merge with and into Manhattan Research Development, with Manhattan Research
Development surviving as our wholly owned subsidiary. In accordance with
the
terms of the merger, the outstanding common stock of Manhattan Research
Development automatically converted into the right to receive an aggregate
of
approximately 80 percent of our outstanding common stock (after giving effect
to
the transaction). In connection with the merger, we also changed our name
to
“Manhattan Pharmaceuticals, Inc.”
Our
executive offices are located at 810 Seventh Avenue, 4th Floor, New York,
New
York, 10019 and our telephone number is (212) 582-3950. Our Internet site
is
www.manhattanpharma.com.
Recent
Developments
Changes
in Board of Directors
In
September 2005, Joshua Kazam and David M. Tanen, who have been directors
of our
company since February 2003 and January 2002, respectively, tendered their
resignations from the board. We currently do not intend to fill the vacancies
left by these resignations, but instead will reduce the size of our board
of
directors from nine persons to seven.
2005
Private Placement
We
recently completed a private placement offering of units consisting of shares
of
our common stock and warrants to purchase additional shares of common stock.
The
private placement was completed in two separate closings held on August 26,
2005
and August 30, 2005. In the August 26 closing, we sold a total of 10,808,971
shares of common stock and five-year warrants to purchase 2,161,767 shares
for
total gross proceeds of approximately $12 million. The warrants issued at
the
August 26 closing are exercisable at a price of $1.44 per share. On August
30,
2005, we closed on the sale of an additional 1,108,709 shares of common stock
and warrants to purchase 221,741 common shares, which resulted in gross proceeds
of approximately $1.28 million. The warrants issued in connection with the
August 30 closing are exercisable at a price of $1.49 per share. Accordingly,
the total gross proceeds resulting from the private placement was $13.27
million, before deducting selling commissions and expenses.
We
engaged Paramount BioCapital, Inc. as placement agent and paid total cash
commissions of $836,360, of which $121,625 was paid to certain selected dealers
engaged by Paramount in connection with the private placement and issued
five-year warrants to purchase an aggregate of 538,191 shares of common stock
exercisable at a price of $1.44 per share, of which Paramount received warrants
to purchase 459,932 common shares. In connection with the August 30 closing,
we
paid cash commissions to Paramount of $88,550 and issued an additional five-year
warrant to purchase 55,000 common shares at a price of $1.49 per share. After
deduction of these selling commissions and expenses, we realized aggregate
net
proceeds from our August 2005 private placement of approximately $12.2
million.
In
accordance with the terms of the private placement, we agreed to file a
registration statement under the Securities Act within 30 days of the final
closing of the private placement covering the resale of the shares sold in
the
private placement, including the shares issuable upon the exercise of the
warrants.
As
a
result of this offering, we expect that our current cash position is sufficient
to fund our operations, including the development of our three product
candidates, through late 2006.
Conversion
of Series A Preferred Stock
The
terms
of our Series A Preferred Stock, which was originally issued in November
2003,
provided for its automatic conversion upon our completion of a financing
that
results in gross proceeds to of at least $10 million at a pre-money valuation
of
our company of at least $30 million. Accordingly, as a result of the August
26,
2005 closing of our private placement discussed above, all of the remaining
outstanding shares of our Series A Preferred Stock automatically converted
into
shares of our common stock. As of such date, there were 729,626 shares of
Series
A Preferred Stock outstanding, which, upon the closing of the private placement,
converted into an aggregate of 6,632,957 shares of common stock (at a rate
of
9.0909 common shares per share of preferred stock).
Acquisition
of Tarpan Therapeutics, Inc.
Pursuant
to an Agreement and Plan of Merger dated April 1, 2005 (the “Agreement”) among
us, Tarpan Therapeutics, Inc., a Delaware corporation (“Tarpan”), and Tarpan
Acquisition Corp., a Delaware corporation and our wholly-owned subsidiary
(“TAC”), TAC merged with and into Tarpan, with Tarpan remaining as the surviving
corporation and our wholly-owned subsidiary. In consideration for their shares
of Tarpan capital stock and in accordance with the Agreement, the stockholders
of Tarpan received an aggregate of approximately 10,731,000 shares or
approximately 20% of our common stock. As a result of the merger, we assumed
Tarpan’s outstanding indebtedness of approximately $648,000, which resulted from
a series of promissory notes issued to Paramount BioCapital Investments,
LLC and
Horizon BioMedical Ventures, LLC, both of which are owned or controlled by
Dr.
Lindsay Rosenwald. The notes were amended at the time of the merger to provide
that one-half of the outstanding indebtedness was payable upon completion
of the
merger and the remaining one-half will be payable at such time as we raise
at
least $5 million in new financing. As a result of the August 2005 private
placement, discussed above, we have now satisfied the remaining balance of
this
indebtedness.
Several
of Tarpan’s former stockholders are directors or significant stockholders of our
company. Dr. Rosenwald and various trusts established for the benefit of
Dr.
Rosenwald and members of his immediate family collectively beneficially owned
approximately 46 percent of Tarpan’s common stock and beneficially own
approximately 26 percent our common stock (Dr. Rosenwald disclaims beneficial
ownership of shares held by such trusts, except to the extent of any pecuniary
interest). In addition, Joshua Kazam, David Tanen, Dr. Michael Weiser and
Timothy McInerney, all of whom were then members of our board of directors,
collectively owned approximately 13.4 percent of Tarpan’s outstanding common
stock. Dr. Weiser and Mr. McInerney are also employed by Paramount BioCapital,
Inc., an entity owned and controlled by Dr. Rosenwald. As a result of such
relationships between us and Tarpan, our board of directors established a
special committee to consider and approve the merger. The special committee
consisted of three independent directors, none of whom had any prior
relationship with Tarpan.
Risk
Factors
For
a
discussion of some of the risks you should consider before purchasing shares
of
our common stock, you are urged to carefully review and consider the section
entitled “Risk Factors” beginning on page 5 of this prospectus.
The
Offering
The
selling stockholders identified on pages 40 - 44 of this prospectus are offering
on a resale basis a total of 25,627,684 shares
of
our common stock, of which 2,978,957 shares
are issuable upon exercise of outstanding warrants and options.
|
|
Common
stock offered
|
25,627,684 shares
|
|
|
|
|
|
|
Common
stock outstanding before the offering(1)
|
59,413,271
shares
|
|
|
|
|
|
|
Common
stock outstanding after the offering(2)
|
62,392,228
shares
|
|
|
|
|
|
|
Common
Stock OTC Bulletin Board symbol
|
MHTT
|
|
|
||
| (1) |
Based
on the number of shares outstanding as of September 22, 2005, not
including 12,835,672 shares issuable upon
exercise of various warrants and options to purchase common stock.
|
| (2) |
Assumes
the issuance of all shares offered hereby that are issuable upon
exercise
of warrants.
|
An
investment in our common stock is very risky. You may lose the entire amount
of
your investment. Prior to making an investment decision, you should carefully
review this entire prospectus and consider the following risk
factors:
Risks
Relating to our Business
We
currently have no product revenues and will need to raise additional funds
in
the future. If we are unable to obtain the funds necessary to continue our
operations, we will be required to delay, scale back or eliminate one or
more of
our drug development programs.
We
have
generated no product revenues to date and will not until we receive approval
from the FDA and other regulatory authorities for our product candidates.
We
have already spent substantial funds developing our potential products and
business, however, and we expect to continue to have negative cash flow from
our
operations for at least the next several years. As of June 30, 2005, we had
$889,864 of cash and cash equivalents and $1,505,853 of short-term investments,
although we received net proceeds of approximately $12.2 million in connection
with our August 2005 private placement. We will have to raise additional
funds
to complete the development of our drug candidates and to bring them to market,
however. Beyond the capital requirements mentioned above, our future capital
requirements will depend on numerous factors, including:
| · |
the
results of any clinical trials;
|
| · |
the
scope and results of our research and development programs;
|
| · |
the
time required to obtain regulatory approvals;
|
| · |
our
ability to establish and maintain marketing alliances and collaborative
agreements; and
|
| · |
the
cost of our internal marketing activities.
|
Additional
financing may not be available on acceptable terms, if at all. If adequate
funds
are not available, we will be required to delay, scale back or eliminate
one or
more of our drug development programs or obtain funds through arrangements
with
collaborative partners or others that may require us to relinquish rights
to
certain of our technologies or products that we would not otherwise
relinquish.
We
are not currently profitable and may never become
profitable.
We
have a
history of losses and expect to incur substantial losses and negative operating
cash flow for the foreseeable future, and we may never achieve or maintain
profitability. For each of the fiscal years ended December 31, 2004, 2003
and
2002 and from August 6, 2001 (inception) through December 31, 2001, we realized
net losses of $5,896,031, $5,960,907, $1,037,320 and $56,796, respectively.
Even
if we succeed in developing and commercializing one or both of our current
product candidates, we expect to incur substantial losses for the foreseeable
future and may never become profitable. We also expect to continue to incur
significant operating and capital expenditures and anticipate that our expenses
will increase substantially in the foreseeable future as we:
| · |
continue
to undertake pre-clinical development and clinical trials for our
product
candidates;
|
| · |
seek
regulatory approvals for our product
candidates;
|
| · |
implement
additional internal systems and infrastructure;
|
| · |
lease
additional or alternative office facilities;
and
|
| · |
hire
additional personnel.
|
We
also
expect to experience negative cash flow for the foreseeable future as we
fund
our operating losses and capital expenditures. As a result, we will need
to
generate significant revenues in order to achieve and maintain profitability.
We
may not be able to generate these revenues or achieve profitability in the
future. Our failure to achieve or maintain profitability could negatively
impact
the value of our common stock.
We
have a limited operating history upon which to base an investment decision.
We
are a
development-stage company and have not yet demonstrated any ability to perform
the functions necessary for the successful commercialization of any product
candidates. The successful commercialization of our product candidates will
require us to perform a variety of functions, including:
| · |
continuing
to undertake pre-clinical development and commencing clinical
trials;
|
| · |
participating
in regulatory approval processes;
|
| · |
formulating
and manufacturing products; and
|
| · |
conducting
sales and marketing activities.
|
Since
inception as Manhattan Research Development, Inc., our operations have been
limited to organizing and staffing, and acquiring, developing and securing
our
proprietary technology and undertaking pre-clinical trials of principal product
candidates. These operations provide a limited basis for you to assess our
ability to commercialize our product candidates and the advisability of
investing in our securities.
We
may not obtain the necessary U.S. or worldwide regulatory approvals to
commercialize our product candidates.
We
will
need FDA approval to commercialize our product candidates in the U.S. and
approvals from the FDA equivalent regulatory authorities in foreign
jurisdictions to commercialize our product candidates in those jurisdictions.
In
order to obtain FDA approval of any of our product candidates, we must first
submit to the FDA an Investigational New Drug Application, or an “IND,” which
will set forth our plans for clinical testing of our product candidates.
In
January 2005, the FDA accepted INDs for both our Oleoyl-estrone and Propofol
LS
product candidates. We have not yet filed an IND for PTH(1-34). In February
2005, we began dosing patients in our first Phase I trial in Basel, Switzerland
to evaluate the safety and tolerability of defined doses of orally administered
oleoyl-estrone in obese adults, in accordance with FDA guidelines. Pending
completion of formulation work, we expect to conduct a Phase I clinical study
for propofol lingual spray as early as 2005 assuming formulation work is
completed satisfactorily. Because propofol has already been approved by the
FDA
for intravenous use, the FDA has informed us that we may utilize a rapid
development strategy that will enable us to go directly to a Pivotal Phase
III
trial following completion of our planned Phase I trials. Accordingly, we
currently anticipate that development of propofol lingual spray may be completed
in 2006. See "Business - Lingual Spray Propofol." We are unable to estimate
the
size and timing of all the Phase II and Phase III programs for oleoyl-estrone
at
this time and, accordingly, cannot estimate the time when development of
that
product candidate will be completed.
When
the
clinical testing for our product candidates is complete, we will submit to
the
FDA a New Drug Application, or “NDA,” demonstrating that the product candidate
is safe for humans and effective for its intended use. This demonstration
requires significant research and animal tests, which are referred to as
pre-clinical studies, as well as human tests, which are referred to as clinical
trials. Satisfaction of the FDA’s regulatory requirements typically takes many
years, depends upon the type, complexity and novelty of the product candidate
and requires substantial resources for research, development and testing.
We
cannot predict whether our research and clinical approaches will result in
drugs
that the FDA considers safe for humans and effective for indicated uses.
The FDA
has substantial discretion in the drug approval process and may require us
to
conduct additional pre-clinical and clinical testing or to perform
post-marketing studies. The approval process may also be delayed by changes
in
government regulation, future legislation or administrative action or changes
in
FDA policy that occur prior to or during our regulatory review. Delays in
obtaining regulatory approvals may:
| · |
delay
commercialization of, and our ability to derive product revenues
from, our
product candidates;
|
| · |
impose
costly procedures on us; and
|
| · |
diminish
any competitive advantages that we may otherwise
enjoy.
|
Even
if
we comply with all FDA requests, the FDA may ultimately reject one or more
of
our NDAs. We cannot be sure that we will ever obtain regulatory clearance
for
our product candidates. Failure to obtain FDA approval of our product candidates
will severely undermine our business by reducing our number of salable products
and, therefore, corresponding product revenues.
In
foreign jurisdictions, we must receive approval from the appropriate regulatory
authorities before we can commercialize our drugs. Foreign regulatory approval
processes generally include all of the risks associated with the FDA approval
procedures described above. We have not yet made any determination as to
which
foreign jurisdictions we may seek approval and have not undertaken any steps
to
obtain approvals in any foreign jurisdiction.
Clinical
trials are very expensive, time-consuming and difficult to design and
implement.
Human
clinical trials are very expensive and difficult to design and implement,
in
part because they are subject to rigorous regulatory requirements. The clinical
trial process is also time consuming. We estimate that clinical trials of
our
product candidates will take at least several years to complete. Furthermore,
failure can occur at any stage of the trials, and we could encounter problems
that cause us to abandon or repeat clinical trials. The commencement and
completion of clinical trials may be delayed by several factors,
including:
| · |
unforeseen
safety issues;
|
| · |
determination
of dosing issues;
|
| · |
lack
of effectiveness during clinical
trials;
|
| · |
slower
than expected rates of patient
recruitment;
|
| · |
inability
to monitor patients adequately during or after treatment;
and
|
| · |
inability
or unwillingness of medical investigators to follow our clinical
protocols.
|
In addition, we or the FDA may suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in our IND submissions or the conduct of these trials.
The
results of our clinical trials may not support our product candidate
claims.
Even
if
our clinical trials are completed as planned, we cannot be certain that their
results will support our product candidate claims. Success in pre-clinical
testing and early clinical trials does not ensure that later clinical trials
will be successful, and we cannot be sure that the results of later clinical
trials will replicate the results of prior clinical trials and pre-clinical
testing. The clinical trial process may fail to demonstrate that our product
candidates are safe for humans and effective for indicated uses. This failure
would cause us to abandon a product candidate and may delay development of
other
product candidates. Any delay in, or termination of, our clinical trials
will
delay the filing of our NDAs with the FDA and, ultimately, our ability to
commercialize our product candidates and generate product revenues. In addition,
we anticipate that our clinical trials will involve only a small patient
population. We expect that our clinical trials will only involve a small
sample
size. Accordingly, the results of such trials may not be indicative of future
results over a larger patient population.
Physicians
and patients may not accept and use our drugs.
Even
if
the FDA approves our product candidates, physicians and patients may not
accept
and use them. Acceptance and use of our products will depend upon a number
of
factors including:
| · |
perceptions
by members of the health care community, including physicians,
about the
safety and
|
| · |
effectiveness
of our drugs;
|
| · |
cost-effectiveness
of our product relative to competing
products;
|
| · |
availability
of reimbursement for our products from government or other healthcare
payers; and
|
| · |
effectiveness
of marketing and distribution efforts by us and our licensees and
distributors, if any.
|
Because
we expect sales of our current product candidates, if approved, to generate
substantially all of our product revenues for the foreseeable future, the
failure of any of these drugs to find market acceptance would harm our business
and could require us to seek additional financing.
Our
drug-development program will depend upon third-party researchers and other
collaborators who are outside our control.
We
currently are collaborating with NovaDel Pharma, from which we license our
rights to lingual spray propofol, in the development of that product candidate
in the pre-clinical and early clinical trial stages. Under our agreement
with
NovaDel, it has agreed to perform certain development on our behalf and at
our
expense, including formulation stability testing, formulation analytic method
development and testing and manufacture of clinical trial material for the
pre-clinical and early clinical development of propofol lingual spray. Beyond
those limited activities, we need to engage independent investigators and
other
third party collaborators to conduct pre-clinical and clinical trials for
lingual spray propofol. We are not currently collaborating with any third
party
with respect to the development of oleoyl-estrone, but we intend to engage
third
party independent investigators and collaborators, which may include
universities and medical institutions, to conduct our pre-clinical and clinical
trials for that product candidate, as well. Accordingly, the successful
development of our product candidates will depend on the performance of these
third parties. These collaborators will not be our employees, however, and
we
cannot control the amount or timing of resources that they will devote to
our
programs. Our collaborators may not assign as great a priority to our programs
or pursue them as diligently as we would if we were undertaking such programs
ourselves. If outside collaborators fail to devote sufficient time and resources
to our drug-development programs, or if their performance is substandard,
the
approval of our FDA applications, if any, and our introduction of new drugs,
if
any, will be delayed. These collaborators may also have relationships with
other
commercial entities, some of whom may compete with us. If our collaborators
assist our competitors at our expense, our competitive position would be
harmed.
We
will rely exclusively on third parties to formulate and manufacture our product
candidates.
We
have
no experience in drug formulation or manufacturing and do not intend to
establish our own manufacturing facilities. We lack the resources and expertise
to formulate or manufacture our own product candidates. We currently have
no
contract for the manufacture of our product candidate. We intend to contract
with one or more manufacturers to manufacture, supply, store and distribute
drug
supplies for our clinical trials. If any of our product candidates receive
FDA
approval, we will rely on one or more third-party contractors to manufacture
our
drugs. Our anticipated future reliance on a limited number of third-party
manufacturers, exposes us to the following risks:
| · |
We
may be unable to identify manufacturers on acceptable terms or
at all
because the number of potential manufacturers is limited and the
FDA must
approve any replacement contractor. This approval would require
new
testing and compliance inspections. In addition, a new manufacturer
would
have to be educated in, or develop substantially equivalent processes
for,
production of our products after receipt of FDA approval, if
any.
|
| · |
Our
third-party manufacturers might be unable to formulate and manufacture
our
drugs in the volume and of the quality required to meet our clinical
needs
and commercial needs, if any.
|
| · |
Our
future contract manufacturers may not perform as agreed or may
not remain
in the contract manufacturing business for the time required to
supply our
clinical trials or to successfully produce, store and distribute
our
products.
|
| · |
Drug
manufacturers are subject to ongoing periodic unannounced inspection
by
the FDA, the DEA, and corresponding state agencies to ensure strict
compliance with good manufacturing practice and other government
regulations and corresponding foreign standards. We do not have
control
over third-party manufacturers’ compliance with these regulations and
standards.
|
| · |
If
any third-party manufacturer makes improvements in the manufacturing
process for our products, we may not own, or may have to share,
the
intellectual property rights to the
innovation.
|
We
may be
unable to identify manufacturers on acceptable terms or at all because the
number of potential manufacturers is limited and the FDA must approve any
replacement contractor. This approval would require new testing and compliance
inspections. In addition, a new manufacturer would have to be educated in,
or
develop substantially equivalent processes for, production of our products
after
receipt of FDA approval, if any.
Our
third-party manufacturers might be unable to formulate and manufacture our
drugs
in the volume and of the quality required to meet our clinical needs and
commercial needs, if any.
Our
future contract manufacturers may not perform as agreed or may not remain
in the
contract manufacturing business for the time required to supply our clinical
trials or to successfully produce, store and distribute our products. Drug
manufacturers are subject to ongoing periodic unannounced inspection by the
FDA,
the DEA, and corresponding state agencies to ensure strict compliance with
good
manufacturing practice and other government regulations and corresponding
foreign standards. We do not have control over third-party manufacturers’
compliance with these regulations and standards. If any third-party manufacturer
makes improvements in the manufacturing process for our products, we may
not
own, or may have to share, the intellectual property rights to the
innovation.
Each
of
these risks could delay our clinical trials, the approval, if any of our
product
candidates by the FDA or the commercialization of our product candidates
or
result in higher costs or deprive us of potential product revenues.
We
have no experience selling, marketing or distributing products and no internal
capability to do so.
We
currently have no sales, marketing or distribution capabilities. We do not
anticipate having the resources in the foreseeable future to allocate to
the
sales and marketing of its proposed products. Our future success depends,
in
part, on our ability to enter into and maintain such collaborative
relationships, the collaborator’s strategic interest in the products under
development and such collaborator’s ability to successfully market and sell any
such products. We intend to pursue collaborative arrangements regarding the
sales and marketing of our products, however, there can be no assurance that
we
will be able to establish or maintain such collaborative arrangements, or
if
able to do so, that they will have effective sales forces. To the extent
that we
decide not to, or are unable to, enter into collaborative arrangements with
respect to the sales and marketing of its proposed products, significant
capital
expenditures, management resources and time will be required to establish
and
develop an in-house marketing and sales force with technical expertise. There
can also be no assurance that we will be able to establish or maintain
relationships with third party collaborators or develop in-house sales and
distribution capabilities. To the extent that we depend on third parties
for
marketing and distribution, any revenues we receive will depend upon the
efforts
of such third parties, and there can be no assurance that such efforts will
be
successful. In addition, there can also be no assurance that we will be able
to
market and sell our product in the United States or overseas.
If
we cannot compete successfully for market share against other drug companies,
we
may not achieve sufficient product revenues and our business will suffer.
The
market for our product candidates is characterized by intense competition
and
rapid technological advances. If our product candidates receive FDA approval,
they will compete with a number of existing and future drugs and therapies
developed, manufactured and marketed by others. Existing or future competing
products may provide greater therapeutic convenience or clinical or other
benefits for a specific indication than our products, or may offer comparable
performance at a lower cost. If our products fail to capture and maintain
market
share, we may not achieve sufficient product revenues and our business will
suffer.
We
will
compete against fully integrated pharmaceutical companies and smaller companies
that are collaborating with larger pharmaceutical companies, academic
institutions, government agencies and other public and private research
organizations. Many of these competitors have product candidates that will
compete with ours already approved or in development. In addition, many of
these
competitors, either alone or together with their collaborative partners,
operate
larger research and development programs and have substantially greater
financial resources than we do, as well as significantly greater experience
in:
| · |
developing
drugs;
|
| · |
undertaking
pre-clinical testing and human clinical
trials;
|
| · |
obtaining
FDA and other regulatory approvals of
drugs;
|
| · |
formulating
and manufacturing drugs; and
|
| · |
launching,
marketing and selling drugs.
|
Developments
by competitors may render our products or technologies obsolete or
non-competitive.
Companies
that currently sell both generic and proprietary anti-obesity compounds
formulations include, among others, Abbot Laboratories, Inc. and Amgen Inc.
Alternative technologies are being developed to treat obesity and overweight
disease, several of which are in advanced clinical trials. In addition,
companies pursuing different but related fields represent substantial
competition. Many of these organizations competing with us have substantially
greater capital resources, larger research and development staffs and
facilities, longer drug development history in obtaining regulatory approvals
and greater manufacturing and marketing capabilities than we do. These
organizations also compete with us to attract qualified personnel, parties
for
acquisitions, joint ventures or other collaborations.
If
we fail to adequately protect or enforce our intellectual property rights
or
secure rights to patents of others, the value of our intellectual property
rights may diminish.
Our
success, competitive position and future revenues will depend in part on
our
ability and the abilities of our licensors to obtain and maintain patent
protection for our products, methods, processes and other technologies, to
preserve our trade secrets, to prevent third parties from infringing on our
proprietary rights and to operate without infringing the proprietary rights
of
third parties.
We
currently do not directly own the rights to any patents or patent applications.
We license the exclusive rights to two issued patents relating to
oleoyl-estrone, which expire in 2016, and three patent applications. We also
license the exclusive rights to three issued patents relating to lingual
spray
propofol, which expire from 2016 to 2017. In addition, our license for propofol
lingual spray covers one pending patent application. See “Business -
Intellectual Property and License Agreements.” There are no other pending patent
applications relating to either of our product candidates, although we
anticipate the need to file additional patent applications both in the U.S.
and
in other countries, as appropriate.
However,
with regard to the patents covered by our license agreements and any future
patents issued to which we will have rights, we cannot predict:
| · |
the
degree and range of protection any patents will afford us against
competitors, including whether third parties will find ways to
invalidate
or otherwise circumvent our
patents;
|
| · |
if
and when patents will issue;
|
| · |
whether
or not others will obtain patents claiming aspects similar to those
covered by our patents and patent applications;
or
|
| · |
whether
we will need to initiate litigation or administrative proceedings
which
may be costly whether we win or
lose.
|
Our
success also depends upon the skills, knowledge and experience of our scientific
and technical personnel, our consultants and advisors as well as our licensors
and contractors. To help protect our proprietary know-how and our inventions
for
which patents may be unobtainable or difficult to obtain, we rely on trade
secret protection and confidentiality agreements. To this end, we require
all of
our employees, consultants, advisors and contractors to enter into agreements
which prohibit the disclosure of confidential information and, where applicable,
require disclosure and assignment to us of the ideas, developments, discoveries
and inventions important to our business. These agreements may not provide
adequate protection for our trade secrets, know-how or other proprietary
information in the event of any unauthorized use or disclosure or the lawful
development by others of such information. For example, despite covenants
in our
license agreements with Oleoylestrone Developments and NovaDel Pharma, from
which we license oleoyl-estrone and lingual spray propofol, respectively,
that
generally prohibit those companies from disclosing information relating to
our
licensed technology, the respective license agreements allow for each company
to
publish data and other information relating to our licensed technology. If
any
of our trade secrets, know-how or other proprietary information is disclosed,
the value of our trade secrets, know-how and other proprietary rights would
be
significantly impaired and our business and competitive position would
suffer.
If
we infringe the rights of third parties we could be prevented from selling
products, forced to pay damages, and defend against litigation.
Our
business is substantially dependent on the intellectual property on which
our
product candidates are based. To date, we have not received any threats or
claims that we may be infringing on another's patents or other intellectual
property rights. If our products, methods, processes and other technologies
infringe the proprietary rights of other parties, we could incur substantial
costs and we may have to:
| · |
obtain
licenses, which may not be available on commercially reasonable
terms, if
at all;
|
| · |
redesign
our products or processes to avoid
infringement;
|
| · |
stop
using the subject matter claimed in the patents held by
others;
|
| · |
pay
damages; or
|
| · |
defend
litigation or administrative proceedings which may be costly whether
we
win or lose, and which could result in a substantial diversion
of our
valuable management resources.
|
Our
ability to generate product revenues will be diminished if our drugs sell
for
inadequate prices or patients are unable to obtain adequate levels of
reimbursement.
Our
ability to commercialize our drugs, alone or with collaborators, will depend
in
part on the extent to which reimbursement will be available from:
| · |
government
and health administration
authorities;
|
| · |
private
health maintenance organizations and health insurers;
and
|
| · |
other
healthcare payers.
|
Significant
uncertainty exists as to the reimbursement status of newly approved healthcare
products. Healthcare payers, including Medicare, are challenging the prices
charged for medical products and services. Government and other healthcare
payers increasingly attempt to contain healthcare costs by limiting both
coverage and the level of reimbursement for drugs. Even if our product
candidates are approved by the FDA, insurance coverage may not be available,
and
reimbursement levels may be inadequate, to cover our drugs. If government
and
other healthcare payers do not provide adequate coverage and reimbursement
levels for any of our products, once approved, market acceptance of our products
could be reduced.
We
may not successfully manage our growth.
Our
success will depend upon the expansion of our operations and the effective
management of our growth, which will place a significant strain on our
management and on our administrative, operational and financial resources.
To
manage this growth, we must expand our facilities, augment our operational,
financial and management systems and hire and train additional qualified
personnel. If we are unable to manage our growth effectively, our business
may
suffer.
If
we are unable to hire additional qualified personnel, our ability to grow
our
business may be harmed.
We
will
need to hire additional qualified personnel with expertise in pre-clinical
testing, clinical research and testing, government regulation, formulation
and
manufacturing and sales and marketing. We compete for qualified individuals
with
numerous biopharmaceutical companies, universities and other research
institutions. Competition for such individuals is intense, and we cannot
be
certain that our search for such personnel will be successful. Attracting
and
retaining qualified personnel will be critical to our success.
We
may incur substantial liabilities and may be required to limit commercialization
of our products in response to product liability lawsuits.
The
testing and marketing of medical products entail an inherent risk of product
liability. If we cannot successfully defend ourselves against product liability
claims, we may incur substantial liabilities or be required to limit
commercialization of our products. We currently carry clinical trial insurance
in an amount up to $2,000,000, which may be inadequate to protect against
potential product liability claims or may inhibit the commercialization of
pharmaceutical products we develop, alone or with corporate collaborators.
Although we intend to maintain clinical trial insurance during any clinical
trials, this may be inadequate to protect us against any potential claims.
Even
if our agreements with any future corporate collaborators entitle us to
indemnification against losses, such indemnification may not be available
or
adequate should any claim arise.
We
are controlled by current officers, directors and principal
stockholders.
Our
directors, executive officers and principal stockholders beneficially own
approximately 38 percent of our outstanding voting stock and, including shares
underlying outstanding options and warrants, this group beneficially owns
approximately 40 percent of our common stock. Accordingly, these persons
and
their respective affiliates have the ability to exert substantial influence
over
the election of our Board of Directors and the outcome of issues submitted
to
our stockholders.
Risks
Related to Our Securities
Trading
of our common stock is limited.
Trading
of our common stock is conducted on the National Association of Securities
Dealers’ Over-the-Counter Bulletin Board, or “OTC Bulletin Board.” This has
adversely effected the liquidity of our securities, not only in terms of
the
number of securities that can be bought and sold at a given price, but also
through delays in the timing of transactions and reduction in security analysts'
and the media's coverage of us. This may result in lower prices for our common
stock than might otherwise be obtained and could also result in a larger
spread
between the bid and asked prices for our common stock.
Because
it is a “penny stock,” it will be more difficult for you to sell shares of our
common stock.
In
addition, our common stock is a “penny stock.” Broker-dealers who sell penny
stocks must provide purchasers of these stocks with a standardized
risk-disclosure document prepared by the SEC. This document provides information
about penny stocks and the nature and level of risks involved in investing
in
the penny-stock 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 the penny stock
is a
suitable investment for the purchaser, and obtain the purchaser’s written
agreement to the purchase. The penny stock rules may make it difficult for
you
to sell your shares of our stock. Because of the rules, there is less trading
in
penny stocks. Also, many brokers choose not to participate in penny-stock
transactions. Accordingly, you may not always be able to resell shares of
our
common stock publicly at times and prices that you feel are appropriate.
A
significant number of shares of our common stock are or will become available
for sale and their sale could depress the price of our common
stock.
A
substantial number of shares of our common stock are being offered by this
prospectus. In addition, we issued an aggregate of 11,917,680 shares of common
stock in connection with our August 2005 private placement and are required
to
register the resale of those shares under the Securities Act. We may also
issue
additional shares in connection with our business and may grant additional
stock
options to our employees, officers, directors and consultants or warrants
to
third parties. Sales of a substantial number of shares of our common stock
in
the public market after this offering could adversely affect the market price
for our common stock and make it more difficult for you to sell our shares
at
times and prices that you feel are appropriate.
Our
stock price is, and we expect it to remain, volatile, which could limit
investors’ ability to sell stock at a profit.
During
the last two years, the price of our common stock has ranged from a low of
$0.25
per share to a high of $2.50, as adjusted for our 1-for-5 reverse stock split
in
September 2003. The volatile price of our stock makes it difficult for investors
to predict the value of their investment, to sell shares at a profit at any
given time, or to plan purchases and sales in advance. A variety of factors
may
affect the market price of our common stock. These include, but are not limited
to:
| · |
publicity
regarding actual or potential clinical results relating to products
under
development by our competitors or
us;
|
| · |
delay
or failure in initiating, completing or analyzing pre-clinical
or clinical
trials or the unsatisfactory design or results of these
trials;
|
| · |
achievement
or rejection of regulatory approvals by our competitors or
us;
|
| · |
announcements
of technological innovations or new commercial products by our
competitors
or us;
|
| · |
developments
concerning proprietary rights, including
patents;
|
| · |
developments
concerning our collaborations;
|
| · |
regulatory
developments in the United States and foreign
countries;
|
| · |
economic
or other crises and other external factors;
|
| · |
period-to-period
fluctuations in our revenues and other results of
operations;
|
| · |
changes
in financial estimates by securities analysts;
and
|
| · |
sales
of our common stock.
|
We
will
not be able to control many of these factors, and we believe that
period-to-period comparisons of our financial results will not necessarily
be
indicative of our future performance.
In
addition, the stock market in general, and the market for biotechnology
companies in particular, has experienced extreme price and volume fluctuations
that may have been unrelated or disproportionate to the operating performance
of
individual companies. These broad market and industry factors may seriously
harm
the market price of our common stock, regardless of our operating
performance.
We
have never paid dividends.
We
have
never paid dividends on our capital stock and do not anticipate paying any
dividends for the foreseeable future. You should not rely on an investment
in
our stock if you require dividend income. Further, you will only realize
income
on an investment in our stock in the event you sell or otherwise dispose
of your
shares at a price higher than the price you paid for your shares. Such a
gain
would result only from an increase in the market price of our common stock,
which is uncertain and unpredictable.
Certain
statements contained in this prospectus that are forward-looking in nature
are
based on the current beliefs of our management as well as assumptions made
by
and information currently available to management, including statements related
to the markets for our products, general trends in our operations or financial
results, plans, expectations, estimates and beliefs. In addition, when used
in
this prospectus, the words
“may,”“could,”“should,”“anticipate,”“believe,”“estimate,”“expect,”“intend,”“plan,”“predict”
and similar expressions and their variants, as they relate to us or our
management, may identify forward-looking statements. These statements reflect
our judgment as of the date of this prospectus with respect to future events,
the outcome of which is subject to risks, which may have a significant impact
on
our business, operating results or financial condition. You are cautioned
that
these forward-looking statements are inherently uncertain. Should one or
more of
these risks or uncertainties materialize, or should underlying assumptions
prove
incorrect, actual results or outcomes may vary materially from those described
herein. We undertake no obligation to update forward-looking statements.
The
risks identified under the heading “Risk Factors” in this prospectus, among
others, may impact forward-looking statements contained in this
prospectus.
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We
have compiled the following discussion of out results of operations and
financial condition from our Quarterly Report on Form 10-QSB for the quarter
ended June 30, 2005 and from our Annual Report on Form 10-KSB for the year
ended
December 31, 2004. We have not attempted to update this discussion, except
as
specifically noted. You should read the following discussions in conjunction
with our consolidated financial statements and related notes included in
this
prospectus.
Overview
Our
company resulted from the February 21, 2003 reverse merger between Atlantic
Technology Ventures, Inc., which was incorporated on May 18, 1993, and
privately-held Manhattan Research Development, Inc., incorporated on August
6,
2001. We are incorporated in the State of Delaware. In connection with the
merger, the former stockholders of Manhattan Research received a number of
shares of Atlantic's common stock so that following the merger they collectively
owned 80 percent of the outstanding shares. Upon completion of the merger,
Atlantic changed its name to Manhattan Pharmaceuticals, Inc. and thereafter
adopted the business of Manhattan Research Development.
We
are a
development stage biopharmaceutical company that holds an exclusive world-wide,
royalty-free license to certain intellectual property related to oleoyl-estrone,
which is owned by Oleoyl-Estrone Developments, SL (“OED”) of Barcelona, Spain.
Oleoyl-estrone is an orally administered small molecule that has been shown
to
cause significant weight loss in pre-clinical animal studies regardless of
dietary modifications. We also hold the worldwide, exclusive rights to
proprietary lingual spray technology to deliver the drug propofol for
pre-procedural sedation prior to diagnostic, therapeutic or endoscopic
procedures.
Although
we are primarily focused on developing these technologies, we continue to
seek
to acquire proprietary rights to other biomedical and pharmaceutical
technologies, by licensing or acquiring an ownership interest, funding their
research and development and bringing the technologies to market. On April
1,
2005 we acquired Tarpan Therapeutics, Inc. ("Tarpan"), a privately-held,
New
York-based biopharmaceutical company developing dermatological therapeutics,
in
an all stock transaction. Former Tarpan shareholders own approximately 20%
of
the shares of Manhattan on a fully-diluted basis. Through the acquisition
we
have acquired Tarpan’s primary product candidate, PTH (1-34), a peptide believed
to be a regulator of epidermal cell growth and differentiation, which is
being
developed for the treatment of psoriasis.
Several
of Tarpan’s former stockholders were also directors or significant stockholders
of our company at the time of the acquisition. For example, Joshua Kazam,
Timothy McInerney, David Tanen and Dr. Michael Weiser, all of whom were then
directors of our company, collectively held approximately 13.4 percent of
Tarpan’s outstanding common stock. In addition, Dr. Lindsay Rosenwald and
various trusts established for the benefit of Dr. Rosenwald and members of
his
immediate family collectively beneficially owned approximately 46 percent
of
Tarpan’s common stock and beneficially owned approximately 26 percent our common
stock at the time of the acquisition (Dr. Rosenwald disclaims beneficial
ownership of shares held by such trusts, except to the extent of any pecuniary
interest). . Because of these relationships, our board established a committee
of disinterested directors to consider the Tarpan transaction.
You
should read the following discussion of our results of operations and financial
condition in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this prospectus. This discussion includes
“forward-looking” statements that reflect our current views with respect to
future events and financial performance. We use words such as we “expect,”
“anticipate,” “believe,” and “intend” and similar expressions to identify
forward-looking statements. Investors should be aware that actual results
may
differ materially from our expressed expectations because of risks and
uncertainties inherent in future events, particularly those risks identified
under the heading “Risk Factors” in this prospectus, and should not unduly rely
on these forward looking statements. All share and per share information
in this
discussion has been adjusted for the 1-for-5 combination of our common stock
effected on September 25, 2003.
Results
Of Operations
Six-Month
Period Ended June 30, 2005 vs 2004
During
the six months ended June 30, 2005 and 2004, we had no revenue. We do not
expect
to have significant revenues relating to our product candidates in development
prior to June 30, 2006.
For
the
six months ended June 30, 2005, research and development expense was $1,921,275
as compared to $1,228,234 for the six months ended June 30, 2004. The increase
of $693,041 is due primarily to an acceleration of pre-clinical development
of
our Oleoyl-estrone drug candidate.
For
the
six months ended June 30, 2005, general and administrative expense was
$1,046,403 as compared to $880,993 for the six months ended June 30, 2004.
The
increase of $165,410 is due primarily to increases in payroll and investor
relations expenses of approximately $97,000 and $52,000 respectively. In
addition we had increases in expenses related to rent, directors’ fees,
telephone and all other expenses of $32,000, $23,000, $17,000 and $16,000,
respectively. These increases are partially offset by reductions in consulting
and meetings of approximately $46,000 and $26,000, respectively.
For
the
six months ended June 30, 2005, interest and other income was $68,346 as
compared to $81,091 for the six months ended June 30, 2004. The decrease
of
$12,745 is due primarily to a reduction in cash balances and short-term
investments.
Net
loss
for the six months ended June 30, 2005, was $14,787,139 as compared to
$1,956,954 for the six months ended June 30, 2004. This increase in net loss
is
attributable primarily to the in-process research and development charge
of
$11,887,807 related to the acquisition of Tarpan. Additionally, there were
increases in research and development expenses of $693,041 and general and
administrative expenses of $165,410 as well as a reduction in interest and
other
income of $12,745. Finally in 2004 we had a realized gain on sale of marketable
equity securities of $71,182, which we did not have in the current
year.
Preferred
stock dividends of $251,401 and $392,805 reduced earnings per share for the
six
months ended June 30, 2005 and 2004 by $0.01 and $0.01,
respectively.
2004
vs 2003
During
each of the years ended December 31, 2004 and 2003, we had no revenue. We
do not
expect to have revenues relating to our technologies prior to December 31,
2005.
For
the
year ended December 31, 2004, research and development expense was $4,152,994
as
compared to $1,724,043 for the year ended December 31, 2003. The increase
of
$2,428,951 is due primarily to an acceleration of pre-clinical development
of
our Oleoyl-estrone drug to the pre-clinical and clinical development of our
Propofol Lingual Spray.
For
the
year ended December 31, 2004, general and administrative expense was $1,989,829
as compared to $1,786,080 for the year ended December 31, 2003. The increase
of
$203,749 is due primarily to investor relations expenses of approximately
$160,000 and consulting expenses of approximately $67,000. In addition, we
had
increases in expenses associated with travel of approximately $85,000 and
meetings and conferences of approximately $54,000 as well as rent and other
expenses of approximately $19,000 and $55,000, respectively. These increases
are
partially offset by a net reduction in legal and accounting fees of
approximately $91,000. Finally, in 2003 we had amortization of intangible
assets
of approximately $145,000 which we did not have in the current
year.
For
the
year ended December 31, 2004, interest and other income was $246,792 as compared
to $11,324 for the year ended December 31, 2003. The increase of $235,468
is a
result of an increase in cash balances and a gain on sale of short-term
investments.
Net
loss
for the year ended December 31, 2004, was $5,896,031 as compared to $5,960,907
for the year ended December 31, 2003. This decrease in net loss is attributable
primarily to losses in 2003 on the disposition of intangible assets as a
result
of our sale of our remaining rights to CT-3 to Indevus Pharmaceuticals, Inc.
of
$1,213,878 as well as an impairment of intangible assets of $1,248,230 as
a
result of a decision by Bausch & Lomb not to pursue the Avantix cataract
removal technology. This decrease in net loss is partially offset by an increase
in research and development expenses of $2,428,951 and an increase in general
and administrative expenses of $203,749. These expense increases are partially
offset by an increase in interest and other income of $235,468.
Preferred
stock dividends of $585,799 increased loss per common share for the year
ended
December 31, 2004 by $0.02. There were no preferred stock dividend requirements
in 2003.
Liquidity
and Capital Resources
From
inception to June 30, 2005, we incurred a deficit during the development
stage
of $28,993,575 primarily as a result of losses, and we expect to continue
to
incur additional losses and negative cash flows from operating activities
through at least June 30, 2006 and for the foreseeable future. The acquisition
of Tarpan will increase these losses. These losses have been incurred through
a
combination of research and development activities related to the various
technologies under our control and expenses supporting those
activities.
We
have
financed our operations since inception primarily through equity financing
and
our licensing and sale of residual royalty rights of CT-3 to Indevus. During
the
six months ended June 30, 2005, we had a net decrease in cash and cash
equivalents of $15,792. This decrease resulted from net cash used in operating
activities of $2,757,519, net cash provided by investing activities of
$2,979,732 and net cash used in financing activities of $238,005. Total liquid
resources including short term investments as of June 30, 2005 were $2,395,717
compared to $5,419,872 at December 31, 2004. In addition, during the six
months
ended June 30, 2005, we accrued a preferred stock dividend of
$251,401.
Our
current liabilities as of June 30, 2005 were $1,451,035 compared to $1,195,705
at December 31, 2004, an increase of $255,330. The increase was primarily
due to
an increase in expenditures associated with the commencement of our Phase
I
clinical trial for our Oleoyl-estrone product candidate and a payable to
related
parties as a result of the Tarpan acquisition. As of June 30, 2005, we had
working capital of $961,694 compared to $4,264,293 at December 31,
2004.
Our
available working capital and capital requirements will depend upon numerous
factors, including progress of our research and development programs, our
progress in and the cost of ongoing and planned pre-clinical and clinical
testing, the timing and cost of obtaining regulatory approvals, the cost
of
filing, prosecuting, defending, and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
changes in our existing collaborative and licensing relationships, the resources
that we devote to developing manufacturing and commercializing capabilities,
the
status of our competitors, our ability to establish collaborative arrangements
with other organizations and our need to purchase additional capital
equipment.
Our
continued operations will depend on whether we are able to raise additional
funds through various potential sources, such as equity and debt financing,
other collaborative agreements, strategic alliances, and our ability to realize
the full potential of our technology in development. Such additional funds
may
not become available on acceptable terms and there can be no assurance that
any
additional funding that we do obtain will be sufficient to meet our needs
in the
long term. Through June 30, 2005, a significant portion of our financing
has
been through private placements of common stock and warrants. Unless our
operations generate significant revenues and cash flows from operating
activities, we will continue to fund operations from cash on hand and through
the similar sources of capital previously described. We can give no assurances
that any additional capital that we are able to obtain will be sufficient
to
meet our needs. Management believes that we will continue to incur net losses
and negative cash flows from operating activities for the foreseeable
future.
We
recently completed a private placement offering of units consisting of shares
of
our common stock and warrants to purchase additional shares of common stock.
The
private placement was completed in two separate closings held on August 26,
2005
and August 30, 2005. In the August 26 closing, we sold a total of 10,808,971
shares of common stock and five-year warrants to purchase 2,161,767 shares
for
total gross proceeds of approximately $12 million. The warrants issued at
the
August 26 closing are exercisable at a price of $1.44 per share. On August
30,
2005, we closed on the sale of an additional 1,108,709 shares of common stock
and warrants to purchase 221,741 common shares, which resulted in gross proceeds
of approximately $1.28 million. The warrants issued in connection with the
August 30 closing are exercisable at a price of $1.49 per share. Accordingly,
the total gross proceeds resulting from the private placement was $13.27
million, before deducting selling commissions and expenses.
We
engaged Paramount BioCapital, Inc. as placement agent and paid total cash
commissions of $836,360, of which $121,625 was paid to certain selected
dealers
engaged by Paramount in connection with the private placement and issued
five-year warrants to purchase an aggregate of 538,191 shares of common
stock
exercisable at a price of $1.44 per share, of which Paramount received
warrants
to purchase 459,932 common shares. In connection with the August 30 closing,
we
paid cash commissions to Paramount of $88,550 and issued an additional
five-year
warrant to purchase 55,000 common shares at a price of $1.49 per share.
After
deduction of these selling commissions and expenses, we realized aggregate
net
proceeds from our August 2005 private placement of approximately $12.2
million.
As
a
result of this offering, we expect that our current cash position is sufficient
to fund our operations, including the development of our three product
candidates, through late 2006.
Research
And Development Projects
Oleoyl-estrone.
In
January 2005, the United States Food and Drug Administration (FDA) accepted
our
filed Investigational New Drug Application (IND) for the human clinical testing
of oleoyl estrone. This IND allowance was granted on the preclinical chemistry,
manufacturing, and safety data submitted to the FDA by the Company.
In
February 2005, we began dosing patients in our first Phase I trial in Basel,
Switzerland to evaluate the safety and tolerability of defined doses of orally
administered oleoyl-estrone in obese adults, in accordance with FDA guidelines
after obtaining formal approval from the Swiss medical regulatory authority,
Swissmedic. The objective of this human Phase I dose-escalation study was
to
determine the pharmacokinetic profile of oleoyl-estrone, as well as its safety
and tolerability in obese adult volunteers of both genders. The study was
completed in two parts, Phase Ia and Phase Ib. In May 2005, we concluded
Phase
Ia, in which 36 obese volunteers received a single dose of either OE or a
placebo, in a dose escalating manner. The Phase Ib trial was a 7-day
repeat-dose, dose escalation trial that evaluated 24 obese volunteers in
four
cohorts, randomized 2 to 1, active to placebo. Both Phase Ia and Phase Ib
have
been completed. Results from both studies will also be used, in conjunction
with
extensive preclinical work, to establish the protocol and obtain approval
from
the FDA to begin Phase II clinical trials. The Phase Ia trial was conducted
under the IND accepted by the FDA in January 2005. Under our license agreement
with Oleoyl-Estrone Developments, we made a $250,000 milestone payment upon
the
treatment of the first patient in the Phase I trial.
To
date,
we have incurred $5,735,870 of
project costs related to our development of oleoyl-estrone, of which $1,750,376
and $462,305 was incurred in the first six months of 2005 and 2004,
respectively. Currently, we anticipate that we will need to expend approximately
an additional $1,500,000 to $2,500,000 in development costs in fiscal 2005.
Since oleoyl-estrone is regarded by the FDA as a new entity, it is not realistic
to predict the size and the design of the study at this time.
We
do not
have sufficient capital to fund our anticipated 2005 R&D expenditures
relating to oleoyl-estrone in their entirety. We will need to raise additional
capital from debt financings or by selling shares of our capital stock in
order
to complete the anticipated five or six year development program for the
product. If we are unable to raise such additional capital, we may have to
sublicense our rights to oleoyl-estrone to a third party as a means of
continuing development, or though less likely, we may be required to abandon
further development efforts altogether, either of which would have a material
adverse effect on the prospects of our business.
In
addition to raising additional capital, whether we are successful in developing
oleoyl-estrone is dependent on numerous other factors, including unforeseen
safety issues, lack of effectiveness, significant unforeseen delays in the
clinical trial and regulatory approval process, both of which could be extremely
costly, and inability to monitor patients adequately before and after
treatments. Additional risks and uncertainties are also described in this
prospectus under the discussion entitled "Risk Factor." The existence
of
any of these factors could increase our development costs or make successful
completion of development impractical, which would have a material adverse
affect on the prospects of our business.
Lingual
Spray Propofol.
We
are currently working with NovaDel to develop, manufacture and commercialize
a
propofol lingual spray. In July 2004, we released the results of the first
human
trial for our proprietary lingual spray formulation of propofol. In January
2005, the FDA accepted our IND for the initiation of the human clinical trials
in the United States required for FDA approval of Propofol Lingual Spray
(Propofol LS). We continue to pursue FDA approval of Propofol LS under 505b2
regulatory pathway. Section 505b2 of the U.S. Food, Drug & Cosmetic Act
allows the FDA to approve a drug on the basis of existing data in the scientific
literature or data used by the FDA in the approval of other drugs. Accordingly,
the FDA has indicated to us that we will be able to utilize Section 505b2
to
proceed directly to a pivotal Phase III trial for lingual spray propofol
following completion of Phase I trials. We are actively planning the next
steps
of the clinical development process for Propofol LS, meeting with scientific
advisors and Novadel regarding formulation, reviewing existing data, developing
trial design, and evaluating plans to re-enter the clinic.
To
date,
we have incurred $2,787,839 of project costs related to our development of
propofol lingual spray, of which $170,899 and $797,198 was incurred during
the
first six months of 2005 and 2004, respectively. Currently, we anticipate
that
we will need to expend approximately an additional $1,000,000 to $1,500,000
in
development costs in fiscal 2005 and at least an aggregate of approximately
$3,000,000 to $5,000,000 until we receive FDA approval for propofol, should
we
opt to continue development until then, including anticipated 2005 costs.
As
with our development of oleoyl-estrone, we do not have sufficient capital
to
fund our development activities of propofol lingual spray in their entirety
during 2005. Since our business does not generate any cash flow, however,
we
will need to raise additional capital to continue development of the product
beyond 2005. We expect to raise such additional capital through debt financings
or by selling shares of our capital stock. To the extent additional capital
is
not available when we need it, we may be forced to sublicense our rights
to
propofol lingual spray or abandon our development efforts altogether, either
of
which would have a material adverse effect on the prospects of our
business.
PTH
(1-34).As
of
April 1, 2005 and as a result of the expenses we absorbed from Tarpan
Therapeutics, Inc. following completion of our acquisition of that Company,
we
have incurred $307,555 of projects costs related to our development of PTH
(1-34), of which $300,000 was incurred in the first six months of 2004.
Currently, we anticipate that we will need to expend approximately an additional
$1,000,000 to $1,500,000 in development costs in fiscal 2005. We are working
toward a meeting with the FDA to run our development plan for PTH (1-34).
In
light of the information available from the development of FORTEO® (which
contains recombinant human parathyroid hormone (1-34), [rhPTH(1-34)]) and
in the
absence of the meeting with the FDA, we are not able to realistically predict
the size and the design of the study at this time. As with the development
of
our other product candidates, we do not have sufficient capital to fund our
development activities of PTH (1-34) in their entirety during 2005. FORTEO® is
registered trademark of Eli Lilly and Company.
Off-Balance
Sheet Arrangements
We
have
not entered into any off-balance sheet arrangements.
Critical
Accounting Policies
In
December 2001, the SEC requested that all registrants discuss their most
“critical accounting policies” in management’s discussion and analysis of
financial condition and results of operations. The SEC indicated that a
“critical accounting policy” is one which is both important to the portrayal of
the company’s financial condition and results and requires management’s most
difficult, subjective or complex judgments, often as a result of the need
to
make estimates about the effect of matters that are inherently
uncertain.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect certain 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 expenses during the
reporting period. Actual results could differ from those estimates.
Research
and development expenses
Research
and development expenses are expensed as incurred.
Stock-based
Compensation
Options,
warrants and stock awards issued to non-employees and consultants are recorded
at their fair value as determined in accordance with Statement of Financial
Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” and
EITF No. 96-18, “Accounting for Equity Instruments That are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services” and
recognized as expense over the related vesting period.
Recently
Issued Accounting Standards
In
December 2004, the FASB issued SFAS No. 123(R) (revised 2004), “Share-Based
Payment”, which amends SFAS Statement No. 123 and will be effective for small
business issuers for interim or annual periods beginning after December 15,
2005. The new standard will require us to expense employee stock options
and
other share-based payments over the vesting period. The new standard
may be
adopted in one of three ways - the modified prospective transition method,
a
variation of the modified prospective transition method or the modified
retrospective transition method. We are currently evaluating how we will
adopt
the standard and evaluating the effect that the adoption of SFAS 123(R) will
have on our financial position and results of operations.
Overview
We
are
engaged in the business of developing and commercializing biomedical and
pharmaceutical technologies. We aim to acquire proprietary rights to these
technologies by licensing or otherwise acquiring an ownership interest, funding
their research and development and eventually bringing the technologies to
market. We do not have any drugs or other products available for sale, but
we
are currently researching and developing three biomedical
technologies:
| · |
Oleoyl-estrone,
an orally administered hormone attached to a fatty-acid that has
been
shown to cause significant weight loss in preclinical animal studies
regardless of dietary modifications;
|
| · |
Lingual
spray propofol, a proprietary lingual spray technology to deliver
propofol
for pre-procedural sedation prior to diagnostic, therapeutic or
endoscopic
procedures; and
|
| · |
PTH(1-34),
a peptide believed to be a regulator of epidermal cell growth and
differentiation currently under development as a topical treatment
for
psoriasis and additional dermatological
indications.
|
Although
we are primarily focused on developing these technologies, we continue to
seek
to acquire proprietary rights to other biomedical and pharmaceutical
technologies, by licensing or acquiring an ownership interest, funding their
research and development and bringing the technologies to market.
We
were
incorporated originally under the name “Atlantic Pharmaceuticals, Inc.” and in
March 2000, we changed our name to “Atlantic Technology Ventures, Inc.” On
February 21, 2003, we completed a “reverse” acquisition of privately-held
Manhattan Research Development, Inc. (formerly known as Manhattan
Pharmaceuticals, Inc.), a Delaware corporation. To effect this transaction,
Manhattan Pharmaceuticals Acquisition Corp., a wholly-owned subsidiary of
Atlantic Technology Ventures, merged with and into Manhattan Research
Development, with Manhattan Research Development surviving as a wholly owned
subsidiary of Atlantic Technology Ventures. In accordance with the terms
of the
merger, the outstanding shares of common stock of Manhattan Research Development
automatically converted into an aggregate of approximately 80 percent of
the
outstanding common stock of Atlantic Technology Ventures (after giving effect
to
the transaction). While in connection with the merger, Atlantic Technology
Ventures changed its name to “Manhattan Pharmaceuticals, Inc.”, for accounting
purposes, Manhattan Research Development was treated as the acquiring company.
Accordingly, when we refer to our business or financial information for periods
prior to the merger, we are referring to the business and financial information
of Manhattan Research Development, unless the context indicates otherwise.
Oleoyl-estrone
We
acquired the rights to develop and commercialize oleoyl-estrone, a hormone
modified by an attachment to a fatty acid, pursuant to a February 2002 license
agreement with Oleoylestrone Development, SL., a Spanish corporation.
Oleoyl-estrone is an orally administered small molecule that has been shown
to
cause significant weight loss in preclinical animal studies regardless of
dietary modifications. We believe that oleoyl-estrone causes weight loss
in two
ways. First, the scientific community believes that weight loss is regulated
by
a part of the hypothalamus, located in the brain, called the ponderostat.
It is
believed that the ponderostat regulates the body’s weight in a manner similar to
the way in which a thermostat regulates a room’s temperature. Preclinical
studies suggest that oleoyl-estrone resets the ponderostat, telling the body
that a lower weight is normal. We believe that this signal then decreases
appetite, which leads to weight loss that may be maintained even after
oleoyl-estrone treatment is discontinued. Second, fat cells that have been
treated with oleoyl-estrone appear to shrink in size, indicating a local
effect
of oleoyl-estrone acting directly on cells. The apparent dual effect of
oleoyl-estrone leads us to believe that the drug has the potential to cause
weight loss in a variety of obese and overweight patients.
Oleoyl-estrone
was initially developed by researchers at the University of Barcelona (“UB”) in
Spain. Through a decade of research, scientists of the Nitrogen-Obesity Research
Group at UB noted that hormones that effect metabolism play a significant
role
in body weight regulation. At the same time, the obesity research community
suggested that weight is regulated by the ponderostat, a central mechanism
in
the hypothalamus of the brain believed to set the point of ideal weight.
Researchers at UB believe that a hormone controls the ponderostat, raising
or
lowering body weight by changing the central set point for the entire
body.
After
examining the available work related to estrogens, changes in body weight
and
body fat percentage (such as during pregnancy), researchers at UB noted that
the
estrogen-like hormone, estrone, was elevated in the blood of both obese men
and
women. Initially thought to be a simple estrogen, UB researchers noticed
that
although estrone levels were elevated, very few obese men manifest the effects
of elevated estrogen levels. Further testing revealed that oleoyl-estrone
was
the main form of estrone that existed in obese patients. The researchers
suggested that when cells become filled with fat they produce oleoyl-estrone,
signaling the brain to lose weight. They further suggested that fat cells
in
obese people do not produce sufficiently high levels of oleoyl-estrone to
signal
the ponderostat to suppress appetite and cause weight loss. Based on this
concept, investigators at UB believed that they could induce weight loss
by
increasing levels of oleoyl-estrone in obese individuals. When oleoyl-estrone
was given to rats, the rats lost weight in a dose-dependent manner, supporting
the idea that oleoyl-estrone is a primary weight loss signal produced by
fat
cells. At the doses employed, no side effects were observed in the rats and,
in
female rats, uterine size remained unchanged, indicating that oleoyl-estrone
did
not act as an estrogen.
In
January 2005, the
FDA
accepted our filed IND for the human clinical testing of oleoyl-estrone.
In
February 2005, we began dosing patients in our first Phase I trial in Basel,
Switzerland to evaluate the safety and tolerability of defined doses of orally
administered oleoyl-estrone in obese adults, in accordance with FDA guidelines
after obtaining formal approval from the Swiss medical regulatory authority,
Swissmedic. The objective of this human Phase I dose-escalation study was
to
determine the pharmacokinetic profile of oleoyl-estrone, as well as its safety
and tolerability in obese adult volunteers of both genders. The study was
completed in two parts, Phase Ia and Phase Ib. In May 2005, we concluded
Phase
Ia, in which 36 obese volunteers received a single dose of either OE or a
placebo, in a dose escalating manner. The Phase Ib trial was a 7-day
repeat-dose, dose escalation trial that evaluated 24 obese volunteers in
four
cohorts, randomized 2 to 1, active to placebo. Both Phase Ia and Phase Ib
have
been completed. Results from both studies will also be used, in conjunction
with
extensive preclinical work, to establish the protocol and obtain approval
from
the FDA to begin Phase II clinical trials. The Phase Ia trial was being
conducted under the IND accepted by the FDA in January 2005. Under
our
license agreement with Oleoyl-Estrone Developments, we made a $250,000 milestone
payment upon the treatment of the first patient in the Phase I
trial.
Lingual
Spray Propofol
On
April
4, 2003, we entered into a License and Development Agreement (the “Propofol
License”) with NovaDel Pharma Inc. (“NovaDel”) for the worldwide, exclusive
rights to NovaDel’s proprietary lingual spray technology to deliver propofol for
pre-procedural sedation prior to diagnostic, therapeutic or endoscopic
procedures.
Propofol
is currently delivered in an oily emulsion for intravenous infusion for
induction and maintenance of general anesthesia or “monitored anesthesia care”
in operating rooms, or deep sedation in intensive care units. Propofol has
previously not been available for dosing via a convenient route of
administration for office-based and other ambulatory uses. Accordingly, we
have
filed a patent application for this new method of use. Other patent applications
are being prepared related to our non-oily, novel formulation.
We
believe that delivering propofol via this proprietary delivery system provides
many advantages over currently formulated sedatives. In addition to the
convenience and ease of administration, we believe the lingual spray route
will
eliminate delayed onset and poor coordination of timing associated with
administering oral sedatives, and allow for rapid clinical responses typical
of
intravenous delivery (i.e., less than 5 minutes). Lingual spray propofol
is
intended to allow patients to tolerate unpleasant procedures, by relieving
anxiety and producing a pleasant, short-term amnesia. Particularly in children
and adults unable to cooperate, mild sedation expedites the conduct of numerous
ambulatory procedures that are not particularly painful, but which require
the
patient to remain still for the best technical result.
Novadel’s
delivery systems (both patented and patent-pending) are lingual sprays, enabling
drug absorption through the oral mucosa and more rapid absorption into the
bloodstream than presently available oral delivery systems. NovaDel refers
to
its delivery system as Immediate-Immediate Release (I2RTM)
because
its delivery system is designed to provide therapeutic benefits within minutes
of administration. We are working with NovaDel to develop, manufacture and
commercialize the licensed product, having jointly announced commencement
of a
development program for lingual spray propofol in June 2003.
In
July
2004, we released the results of the first human trial for our proprietary
lingual spray formulation of propofol. The study, which took place in the
United
Kingdom, was a single-center, randomized, double-blind, placebo-controlled
dose-escalating study of propofol lingual spray in twelve healthy adult
volunteers. The primary objectives were to compare the safety and tolerability
of three dose levels of the propofol spray to a single intravenous bolus
low
dose of propofol, as well as to determine the respective pharmacokinetic
profiles and relative bioavailability of the three escalating doses.
No
serious adverse events, nor dose-dependent changes in vital signs, occurred
in
any group. The mean time to maximum blood concentration of propofol following
spray was approximately 30 min across all doses. Propofol was detectable
in
blood as early as 4 minutes following spray administration. The mean maximum
blood concentrations plateaued at the highest of the three doses tested,
and the
mean bioavailability of the current spray formulation was up to 18% of that
of
the intravenous formulation.
In
January 2005, the FDA accepted our IND for the initiation of the human clinical
trials in the United States required for FDA approval of Propofol Lingual
Spray.
We continue to pursue FDA approval of Propofol LS under 505b2 regulatory
pathway. Section
505b2 of the U.S. Food, Drug & Cosmetic Act allows the FDA to approve a drug
on the basis of existing data in the scientific literature or data used by
the
FDA in the approval of other drugs. Accordingly, the FDA has indicated to
us
that we will be able to utilize Section 505b2 to proceed directly to a pivotal
Phase III trial for lingual spray propofol following completion of Phase
I
trials. We are actively planning the next steps of the clinical development
process for Propofol LS, meeting with scientific advisors and Novadel regarding
formulation, reviewing existing data, developing trial design, and evaluating
plans to re-enter the clinic. See also “Management’s Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources
- Research and Development Projects - Lingual Spray Propofol.
Although
we have the sole right and obligation to develop and commercialize lingual
spray
propofol on a worldwide basis, NovaDel has undertaken to perform certain
development activities on our behalf. NovaDel’s responsibilities include
formulation development, formulation stability testing, formulation analytic
method development and testing and manufacture of clinical trial material
for
the pre-clinical and early clinical development. We will oversee pre-clinical
testing, as necessary, and have responsibility for overall product development
and product management. In addition, we will design and oversee clinical
trials
and be responsible for regulatory filings and meetings. The license agreement
provides that these development activities are to be performed under the
supervision of a development committee, which is comprised of an equal number
of
appointees of us and NovaDel. Within 30 days of the end of each calendar
quarter
in which any agreed-upon development activities are to be performed, each
of us
and NovaDel are to provide a written progress report to the development
committee, which should describe the activities that have been performed
and
evaluate the work performed in relation to the goals of the development plan
and
budget. Currently, a proprietary formulation has been prepared and is undergoing
one, two, three and six month stability tests, as well as specification
analysis. The NovaDel license agreement also provides that NovaDel will
manufacture and supply us with lingual spray propofol for use in clinical
development and for commercial purposes pursuant to a manufacturing agreement
to
be entered into between us and NovaDel.
PTH(1-34)
On
April
1, 2005, through our acquisition of Tarpan Therapeutics, Inc., we acquired
the
rights to a third biomedical technology currently under development. PTH(1-34)
is a peptide believed to be a regulator of epidermal cell growth and
differentiation currently under development as a topical treatment for psoriasis
and additional dermatological indications.
In
August
2003, researchers, led by Michael Holick, MD, PhD, Professor of Medicine,
Physiology, and Biophysics at Boston University Medical Center, reported
positive results from a US Phase I and II clinical trial evaluating the safety
and efficacy of PTH (1-34) as a topical treatment for psoriasis. This
double-blinded, controlled trial in 15 patients comparing PTH (1-34) formulated
in the Novasome® Technology versus the Novasome® vehicle alone showed PTH (1-34)
to be a potentially safe and effective treatment for plaque psoriasis. Following
8 weeks of treatment, the application of PTH (1-34) resulted in complete
clearing of the treated lesion in 60% of patients and partial clearing in
85% of
patients. Additionally, there was a statistically significant improvement
in the
global severity score. Ten patients continued into an open label extension
study
in which the Psoriasis Area and Severity Index (PASI) was measured; PASI
improvement across all 10 patients achieved statistically significant
improvement compared to baseline. No patients experienced any significant
adverse events.
Due
to
the high response rate seen in psoriasis patients in the initial trial PTH
(1-34) may have an important clinical advantage over current topical psoriasis
treatments. We intend to initiate additional clinical activities with PTH
(1-34)
in late 2005 or early 2006. Through the transaction with Tarpan, Manhattan
obtains rights to issued and pending patents for all topical uses of PTH
(1-34)
as well as access to the Novasome® technology and patents for these
applications. Novasome® is a registered trademark of IGI, Inc., Buena Park,
NJ.
Market
and Competition
According
to estimates, the market for prescription anti-obesity drugs is approximately
$10 billion, or equal to that of diabetes. It is estimated that 61 percent
of
Americans are overweight and that 26 percent are obese. According to the
National Institute of Health’s estimate, direct costs for the treatment of
obesity in 1988 were in excess of $45 billion and accounted for nearly 8
percent
of the total national cost of health care in the United States. By 1999,
direct
costs for the treatment of obesity had reached $102.2 billion dollars. Meridia®
and Xenical®, two currently approved anti-obesity medications, together
accounted for approximately $800 million in sales in 2001. We believe that
the
disease currently lacks a treatment that is safe and effective for most patient
groups, and that oleoyl-estrone has the potential to meet the needs of this
market.
Competition
in the pharmaceutical industry, and the anti-obesity drug market in particular,
is intensely competitive. In addition to Abbott Laboratories, Inc. and Roche
Holdings AG, the makers of Meridia® and Xenical,® respectively, some of the
largest drug companies in the world have anti-obesity drugs currently in
development, including GlaxoSmithKline PLC, Johnson & Johnson, Inc.,
Bristol-Myers Squibb Company, Regeneron Pharmaceutical, Inc., Phytopharm,
PLC,
Amgen, Inc. These companies are all substantially larger and more established
than we are and have significantly greater financial and other resources
than we
do.
To
date,
Midazolam (now a generic), which is delivered both intravenously and orally,
has
dominated the pre-procedural sedation market, posting sales of $536 million
in
1999. However, serious adverse events are reported in midazolam’s package
insert, including respiratory depression, airway obstruction, oxygen
desaturation, apnea and even respiratory arrest. In contrast, at the doses
being
developed by us, we believe that Propofol Lingual Spray may offer a safer,
noninvasively administered alternative to midazolam. Propofol’s rapid onset
profile will allow clinicians to more accurately time its peak effects during
procedures, as well as to determine the precise concentration needed for
desired
levels of sedation.
The
efficacy and safety profile of PTH (1-34) will potentially make it an attractive
alternative to existing topical treatments, photo therapies and systemic
treatments such as methotrexate and biologics for the treatment of psoriasis.
We
intend to achieve market share as a monotherapy at the expense of existing
and
established products to be used in combination with currently available
therapies. Some of PTH (1-34)’s competitors would include, but are not limited
to over-the-counter, or “OTC,” and prescription topical treatments, Dovonex,
phototherapies, laser treatment, methotrexate, cyclosporine, Johnson &
Johnson (Remicade), Amgen (Enbrel), BiogenIdec (Amevive) and Genentech
(Raptiva).
Topical
treatments include numerous OTC ointments that help to reduce inflammation,
soothe skin and enhance the efficacy of other therapies. Additionally, steroids
are prescribed as an adjunct therapy for pain and anti-inflammation. One
of the
most frequently prescribed topical treatments is Calcipotriene (Dovonex),
which
is an active vitamin D3 analogue. Approximately 60% of patients show some
response to Dovonex in the first few months of treatment, however, 60% of
these
become resistant to treatment in 6-12 months. Dovonex achieved $700 million
in
sales in its first two years after launch but sales have now declined to
$130
million due to high incidence of resistance.
There
are
two main types of phototherapy, Ultra-violet A, or “UVA” and Ultra-violet B, or
“UVB.” UVA penetrates deeper into the skin but requires the use of
photo-sensitizing agent and carries a higher risk of skin cancer. UVB, on
the
other hand, is 1,000 times more powerful than UVA in producing sunburn. UV
treatments are often combined with other treatments such as topicals and
methotrexate. Phototherapy treatments have been shown to clear the disease
and
induce remission but they require frequent doctor visits, making treatment
expensive and inconvenient.
Systemic
treatments are generally reserved for severe patients due to their harsh
side
effect profiles. The most effective systemic treatments are methotrexate
and
cyclosponine. Methotrexate is a classical antifolate commonly used for the
treatment of widespread plaque psoriasis the psoriatic arthritis and other
autoimmune diseases. The low cost and effectiveness of methotrexate is counter
balanced by the significant risk of liver and kidney toxicity and inability
to
be used by pregnant women. Cyclosporine inhibits Nuclear Factor of Activated
T-Cells (NFAT), which requires the transcription of cytokines and the immune
response. It is only indicated in patients who have failed prior systemic
therapies and carries the risk of impaired renal function and severe
immunosuppression. Unlike methotrexate, cyclosporine is relatively expensive
and
costs over $6,000 per year.
Biologics
are likely to play a large role in the treatment of patients with moderate
to
severe psoriasis but due to their high cost, use will likely be limited to
patients that have failed all other treatments or have experienced intolerable
side effects or toxicity with other therapies. Therefore the market will
likely
be limited to the patient population that can no longer be treated with
methotrexate or cyclosporine. Amgen’s TNF-a inhibitor, Enbrel, recently received
marketing approval for psoriasis and is expected to have strong sales due
to
physician familiarity and efficacy data. However, Enbrel has been shown to
cause
serious infections and sepsis. Genentech and Serono’s Raptiva received FDA
approval in 2003 for the treatment of chronic moderate to severe plaque
psoriasis in adults. Raptive is a humanized nonoclonal antibody that binds
to
CD11a, which leads to the inhibition of T-cell activation and migration to
sites
of inflammation. Clinical trials showed Raptive to have a fast onset of action
and to be relatively effective, however, the companies are required to conduct
post market safety and efficacy studies. There are other biologics that are
either approved or in clinical studies for psoriasis, including BiogenIdec’s
Amevive and Johnson & Johnson’s Remicade. Use of many of these will be
limited by their side effect profiles, cost and method of delivery.
Intellectual
Property and License Agreements
Our
goal
is to obtain, maintain and enforce patent protection for our products,
formulations, processes, methods and other proprietary technologies, preserve
our trade secrets, and operate without infringing on the proprietary rights
of
other parties, both in the United States and in other countries. Our policy
is
to actively seek to obtain, where appropriate, the broadest intellectual
property protection possible for our product candidates, proprietary information
and proprietary technology through a combination of contractual arrangements
and
patents, both in the U.S. and elsewhere in the world.
We
also
depend upon the skills, knowledge and experience of our scientific and technical
personnel, as well as that of our advisors, consultants and other contractors,
none of which is patentable. To help protect our proprietary know-how which
is
not patentable, and for inventions for which patents may be difficult to
enforce, we rely on trade secret protection and confidentiality agreements
to
protect our interests. To this end, we require all employees, consultants,
advisors and other contractors to enter into confidentiality agreements which
prohibit the disclosure of confidential information and, where applicable,
require disclosure and assignment to us of the ideas, developments, discoveries
and inventions important to our business.
Oleoyl-estrone
License Agreement. We
currently have worldwide, exclusive license rights to the U.S. and foreign
patents and patent applications regarding oleoyl-estrone and its use for
the
treatment of human disease:
1.
US
Patent
No. 5,798,348 entitled “Fatty-acid monesters of estrogens for the treatment of
obesity and/or overweight.” M. Alemany, Inventor. Application filed, October 30,
1996. Patent issued August 25, 1998. This patent expires on October 30,
2016.
2.
European
Patent No. 771.817 entitled “Oleate monoesters of estrogens for the treatment of
obesity and/or overweight.” M. Alemany, Inventor. Application filed, October 28,
1996. Patent issued March 26, 2003. This patent expires on October 28,
2016.
3.
Spanish
Patent Application No. ES 200100785 entitled “Fatty-acid monoesters of estrogens
acting as anti-diabetic and hypolipidemia agents.” M. Alemany Lamana, Francisco
Javier Remesar Betiloch, and Jose Antonio Fernandez Lopez, Inventors.
Application filed March 28, 2001, European Patent Application No. EP1380300A1,
filed March 25, 2002, and Canadian Patent Application No. 2441890, filed
March
25, 2002.
The
U.S.
and European patents have numerous, detailed, and specific claims for both
the
composition of oleoyl-estrone, and its method of use for weight loss. Our
rights
to these patents are subject to the terms of a February 2002 license agreement
between us and Oleoylestrone Developments. The license agreement provides
us
with an exclusive, worldwide right to the intellectual property covered by
the
license agreement, including the right to grant sublicenses. Our success
in
developing oleoyl-estrone depends on our ability to maintain and enforce
the
patents relating to oleoyl-estrone.
In
consideration for the license, we paid an initial license fee of $175,000.
The
license agreement provides for further cash payments of $9,250,000 in the
aggregate, payable as follows: $250,000 payable upon treatment of the first
patient in a Phase I clinical trial under an IND sponsored by us; $250,000
upon
treatment of the first patient in a Phase II clinical trial; $750,000 upon
the
first successful completion of a Phase II clinical trial; $2,000,000 upon
the
first successful completion of a Phase III clinical trial; and $6,000,000
upon
the first final approval of a New Drug Application (“NDA”) for oleoyl-estrone by
the FDA. The license agreement does not require us to make any royalty
payments.
Subject
to earlier termination as described below, the term of the license expires
on
the last to expire patent right licensed under the agreement, which is currently
October 2016. Oleoylestrone Developments has the right to terminate the license
agreement sooner, subject to certain requirements to provide us advance notice,
in the event we become bankrupt or similar proceedings are initiated, fail
to
make the required milestone payments required under the agreement or otherwise
materially breach the license agreement. We have the right to terminate the
license agreement for any reason upon written notice.
Propofol
LS License Agreement. Pursuant
to the NovaDel license agreement, we have an exclusive, worldwide license
to
NovaDel’s proprietary lingual spray technology to deliver propofol for
pre-procedural sedation prior to diagnostic, therapeutic or endoscopic
procedures. Our rights under the NovaDel License include license rights to
the
following patents held by NovaDel:
1.
U.S.
Patent No. 5,955,098, entitled “Buccal Non Polar Spray or Capsule.” H.A. Dugger,
III, Inventor. Application filed April 12, 1996. Patent issued September
21,
1999. This patent expires April 12, 2016.
2.
U.S.
Patent No. 6,110,486, entitled “Buccal Polar Spray or Capsule.” H.A. Dugger,
III, Inventor. Application filed November 25, 1998. Patent issued August
29,
2000. This patent expires April 12, 2016.
3.
European
Patent No. 0904055 entitled “Buccal, Non-Polar Spray or Capsule.” H.A. Dugger,
III, Inventor. Application filed, February 21, 1997. Patent issued April
16,
2003. This patent expires February 21, 2017.
4.
U.S.
Patent Application No. 10/834815 entitled “Buccal, Polar and Non-Polar Sprays
Containing Propofol.” H.A. Dugger and M.A. El-Shafy, Inventors. Application
filed April 27, 2004.
These
issued patents have numerous, detailed, and specific claims relating to the
formulation for lingual spray applications and their method of use. We have
the
right to use the technology in connection with one application - delivering
propofol. Our success in developing lingual spray propofol depends substantially
on the maintenance and enforcement of NovaDel’s patents covering its proprietary
spray technology. In consideration for our rights under the NovaDel license
agreement, we paid NovaDel an initial license fee of $500,000 and an additional
$500,000 upon the completion of our $10 million private placement of Series
A
Convertible Preferred Stock in November 2003. In addition, the license agreement
requires us to make certain milestone payments as follows: $1,000,000 payable
following the date that the first IND for lingual spray propofol is accepted
for
review by the FDA; $1,000,000 following the date that the first European
Marketing Application is accepted for review by any European Union country;
$2,000,000 following the date when the first filed NDA for lingual spray
propofol is approved by the FDA; $2,000,000 following the date when the first
filed European Marketing Application for lingual spray propofol is approved
by a
European Union country; $1,000,000 following the date on which an application
for commercial approval of lingual spray propofol is approved by the appropriate
regulatory authority in each of Australia, Canada, Japan and South Africa;
and
$50,000 following the date on which an application for commercial approval
for
lingual spray propofol is approved in any other country (other than the U.S.
or
a member of the European Union). In addition, we are obligated to pay NovaDel
an
annual royalty based on a fixed rate of net sales of licensed products, or
if
greater, the annual royalty is based on our net profits from the sale of
licensed products at a rate that is twice the net sales rate.
Subject
to certain requirements to provide us with notice and an opportunity to cure,
NovaDel may terminate the license agreement in the event we (1) become subject
to a bankruptcy or similar proceeding that is not dismissed within 60 days,
(2)
default in our obligation to make a required payment under the license
agreement, or (3) otherwise materially breach the license agreement. The
license
agreement also provided that NovaDel could terminate the license agreement
in
the event we did not raise $5 million in financing on or before March 31,
2004;
however, we satisfied that condition in November 2003 in connection with
the $10
million private placement of our Series A Convertible Preferred Stock. We
may
terminate the license agreement for any reason upon 90 days’ notice to
NovaDel.
PTH
(1-34) License Agreement.
We
currently have worldwide, exclusive license rights for all topical uses of
PTH(1-34) for the treatment of hyperproliferative skin disorders including
psoriasis.
1.
PTH
(1-34): In April 2004, Tarpan entered into an exclusive worldwide royalty
bearing License Agreement with IGI, Inc., for the rights to the intellectual
property and know-how relating to all topical uses of PTH (1-34). The topical
application of PTH (1-34) for the treatment of hyperproliferative skin disorders
(including psoriasis) is protected by US patents 5,527,772, 5,840,690, and
6,066,618 and European Patent Specification PCT/US88/03639.
2.
Novasome
Delivery Technology: In April 2004, Tarpan entered into a non-exclusive,
non-royalty bearing, world-wide License Agreement with IGI Inc., for the
rights
to use the Novosome delivery technology for the development, commercialization
and sale of PTH (1-34). IGI will supply product utilizing the Novasome
Technology at IGI’s cost.
Manufacturing
We
do not
have any manufacturing capabilities. We have been in contact with several
contract “Good Manufacturing Process” (GMP) manufacturers for the supply of
oleoyl-estrone, lingual spray propofol, and PTH(1-34) that will be necessary
to
conduct Phase I and Phase II human clinical trials. A method has been identified
for synthesizing oleoyl-estrone, and can be done through simple reactions
that
produce the substance at above 99 percent purity. We believe that the production
of oleoyl-estrone will involve one contract manufacturer for clinical trials.
In
addition, we will be outsourcing the manufacture of lingual spray propofol
and
PTH(1-34) as well.
Government
Regulation
The
research, development, testing, manufacture, labeling, promotion, advertising,
distribution, and marketing, among other things, of our products are extensively
regulated by governmental authorities in the United States and other countries.
In the United States, the FDA regulates drugs under the Federal Food, Drug,
and
Cosmetic Act, or the “FDCA,” and its implementing regulations. Failure to comply
with the applicable U.S. requirements may subject us to administrative or
judicial sanctions, such as FDA refusal to approve pending NDAs, warning
letters, product recalls, product seizures, total or partial suspension of
production or distribution, injunctions, and/or criminal prosecution.
Drug
Approval Process. None
of our drugs may be marketed in the U.S. until the drug has received FDA
approval. The steps required before a drug may be marketed in the U.S. include:
| · |
preclinical
laboratory tests, animal studies, and formulation
studies,
|
| · |
submission
to the FDA of an IND for human clinical testing, which must become
effective before human clinical trials may
begin,
|
| · |
adequate
and well-controlled human clinical trials to establish the safety
and
efficacy of the drug for each
indication,
|
| · |
submission
to the FDA of an NDA,
|
| · |
satisfactory
completion of an FDA inspection of the manufacturing facility or
facilities at which the drug is produced to assess compliance with
current
good manufacturing practices, or “cGMPs,”
and
|
| · |
FDA
review and approval of the NDA.
|
Preclinical
tests include laboratory evaluation of product chemistry, toxicity, and
formulation, as well as animal studies. The conduct of the preclinical tests
and
formulation of the compounds for testing must comply with federal regulations
and requirements. The results of the preclinical tests, together with
manufacturing information and analytical data, are submitted to the FDA as
part
of an IND, which must become effective before human clinical trials may begin.
An IND will automatically become effective 30 days after receipt by the FDA,
unless before that time the FDA raises concerns or questions about issues
such
as the conduct of the trials as outlined in the IND. In such a case, the
IND
sponsor and the FDA must resolve any outstanding FDA concerns or questions
before clinical trials can proceed. We cannot be sure that submission of
an IND
will result in the FDA allowing clinical trials to begin.
Clinical
trials involve the administration of the investigational drug to human subjects
under the supervision of qualified investigators. Clinical trials are conducted
under protocols detailing the objectives of the study, the parameters to
be used
in monitoring safety, and the effectiveness criteria to be evaluated. Each
protocol must be submitted to the FDA as part of the IND.
Clinical
trials typically are conducted in three sequential phases, but the phases
may
overlap. The study protocol and informed consent information for study subjects
in clinical trials must also be approved by an Institutional Review Board
for
each institution where the trials will be conducted. Study subjects must
sign an
informed consent form before participating in a clinical trial. Phase I usually
involves the initial introduction of the investigational drug into people
to
evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics
and pharmacologic actions, and, if possible, to gain an early indication
of its
effectiveness. Phase II usually involves trials in a limited patient population
to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify possible
adverse effects and safety risks; and (iii) evaluate preliminarily the efficacy
of the drug for specific indications. Phase III trials usually further evaluate
clinical efficacy and test further for safety by using the drug in its final
form in an expanded patient population. There can be no assurance that phase
I,
phase II, or phase III testing will be completed successfully within any
specified period of time, if at all. Furthermore, the Company or the FDA
may
suspend clinical trials at any time on various grounds, including a finding
that
the subjects or patients are being exposed to an unacceptable health risk.
The
FDCA
permits FDA and the IND sponsor to agree in writing on the design and size
of
clinical studies intended to form the primary basis of an effectiveness claim
in
an NDA application. This process is known as Special Protocol Assessment,
or
SPA. These agreements may not be changed after the clinical studies begin,
except in limited circumstances.
Assuming
successful completion of the required clinical testing, the results of the
preclinical studies and of the clinical studies, together with other detailed
information, including information on the manufacture and composition of
the
drug, are submitted to the FDA in the form of an NDA requesting approval
to
market the product for one or more indications. The testing and approval
process
requires substantial time, effort, and financial resources. The agencies
review
the application and may deem it to be inadequate to support the registration
and
we cannot be sure that any approval will be granted on a timely basis, if
at
all. The FDA may also refer the application to the appropriate advisory
committee, typically a panel of clinicians, for review, evaluation and a
recommendation as to whether the application should be approved. The FDA
is not
bound by the recommendations of the advisory committee.
The
FDA
has various programs, including fast track, priority review, and accelerated
approval, that are intended to expedite or simplify the process for reviewing
drugs, and/or provide for approval on the basis surrogate endpoints. Generally,
drugs that may be eligible for one or more of these programs are those for
serious or life-threatening conditions, those with the potential to address
unmet medical needs, and those that provide meaningful benefit over existing
treatments. We cannot be sure that any of our drugs will qualify for any
of
these programs, or that, if a drug does qualify, that the review time will
be
reduced.
Section
505b2 of the FDCA allows the FDA to approve a follow-on drug on the basis
of
data in the scientific literature or data used by FDA in the approval of
other
drugs. This procedure potentially makes it easier for generic drug manufacturers
to obtain rapid approval of new forms of drugs based on proprietary data
of the
original drug manufacturer.
Before
approving an NDA, the FDA usually will inspect the facility or the facilities
at
which the drug is manufactured, and will not approve the product unless cGMP
compliance is satisfactory. If the FDA evaluates the NDA and the manufacturing
facilities as acceptable, the FDA may issue an approval letter, or in some
cases, an approvable letter followed by an approval letter. Both letters
usually
contain a number of conditions that must be met in order to secure final
approval of the NDA. When and if those conditions have been met to the FDA’s
satisfaction, the FDA will issue an approval letter. The approval letter
authorizes commercial marketing of the drug for specific indications. As
a
condition of NDA approval, the FDA may require post marketing testing and
surveillance to monitor the drug’s safety or efficacy, or impose other
conditions.
After
approval, certain changes to the approved product, such as adding new
indications, making certain manufacturing changes, or making certain additional
labeling claims, are subject to further FDA review and approval. Before we
can
market our product candidates for additional indications, we must obtain
additional approvals from FDA. Obtaining approval for a new indication generally
requires that additional clinical studies be conducted. We cannot be sure
that
any additional approval for new indications for any product candidate will
be
approved on a timely basis, or at all.
Post-Approval
Requirements. Often
times, even after a drug has been approved by the FDA for sale, the FDA may
require that certain post-approval requirements be satisfied, including the
conduct of additional clinical studies. If such post-approval conditions
are not
satisfied, the FDA may withdraw its approval of the drug. In addition, holders
of an approved NDA are required to: (i) report certain adverse reactions
to the
FDA, (ii) comply with certain requirements concerning advertising and
promotional labeling for their products, and (iii) continue to have quality
control and manufacturing procedures conform to cGMP after approval. The
FDA
periodically inspects the sponsor’s records related to safety reporting and/or
manufacturing facilities; this latter effort includes assessment of compliance
with cGMP. Accordingly, manufacturers must continue to expend time, money,
and
effort in the area of production and quality control to maintain cGMP
compliance. We intend to use third party manufacturers to produce our products
in clinical and commercial quantities, and future FDA inspections may identify
compliance issues at the facilities of our contract manufacturers that may
disrupt production or distribution, or require substantial resources to correct.
In addition, discovery of problems with a product after approval may result
in
restrictions on a product, manufacturer, or holder of an approved NDA, including
withdrawal of the product from the market.
Orphan
Drug. The
FDA may grant orphan drug designation to drugs intended to treat a “rare disease
or condition,” which generally is a disease or condition that affects fewer than
200,000 individuals in the United States. Orphan drug designation must be
requested before submitting an NDA. If the FDA grants orphan drug designation,
which it may not, the identity of the therapeutic agent and its potential
orphan
use are publicly disclosed by the FDA. Orphan drug designation does not convey
an advantage in, or shorten the duration of, the review and approval process.
If
a product which has an orphan drug designation subsequently receives the
first
FDA approval for the indication for which it has such designation, the product
is entitled to orphan exclusivity, meaning that the FDA may not approve any
other applications to market the same drug for the same indication, except
in
certain very limited circumstances, for a period of seven years. Orphan drug
designation does not prevent competitors from developing or marketing different
drugs for that indication.
Non-United
States Regulation. Before
our products can be marketed outside of the United States, they are subject
to
regulatory approval similar to that required in the United States, although
the
requirements governing the conduct of clinical trials, including additional
clinical trials that may be required, product licensing, pricing and
reimbursement vary widely from country to country. No action can be taken
to
market any product in a country until an appropriate application has been
approved by the regulatory authorities in that country. The current approval
process varies from country to country, and the time spent in gaining approval
varies from that required for FDA approval. In certain countries, the sales
price of a product must also be approved. The pricing review period often
begins
after market approval is granted. Even if a product is approved by a regulatory
authority, satisfactory prices may not be approved for such product.
In
Europe, marketing authorizations may be submitted at a centralized, a
decentralized or national level. The centralized procedure is mandatory for
the
approval of biotechnology products and provides for the grant of a single
marketing authorization that is valid in all EU members states. As of January
1995, a mutual recognition procedure is available at the request of the
applicant for all medicinal products that are not subject to the centralized
procedure. There can be no assurance that the chosen regulatory strategy
will
secure regulatory approvals on a timely basis or at all.
Employees
We
currently have 7 employees, including 3 persons devoted to research and
development and 4 persons in administration and finance, including our senior
management.
Directors
and Executive Officers
|
Name
|
Age
|
Position
|
|
Douglas
Abel
|
44
|
President
and Chief Executive Officer and Director
|
|
Nicholas
J. Rossettos
|
40
|
Chief
Financial Officer, Chief Operating Officer and
Secretary
|
|
Neil
Herskowitz
|
48
|
Director
|
|
Malcolm
Hoenlein
|
61
|
Director
|
|
Timothy
McInerney
|
44
|
Director
|
|
Joan
Pons
|
55
|
Director
|
|
Richard
I. Steinhart
|
48
|
Director
|
|
Michael
Weiser, M.D., Ph.D.
|
42
|
Director
|
Douglas
Abel
has been
our President and Chief Executive Officer since
April
2005, when we completed our acquisition of Tarpan Therapeutics, where Mr.
Abel
had been President and CEO since November 2004. Prior to joining Tarpan,
Mr.
Abel served as Vice President of the Dermatology Business Unit at Biogen
Idec
where he worked from August 2000 to November 2004. While at Biogen, he led
the
creation of the U.S. dermatology commercial operation, building the team
from
two to more than 100 employees to support the launch of AMEVIVE®. Before that,
Mr. Abel was at Allergan Pharmaceuticals from December 1987 to August of
2000,
with his most recent position being Director of BOTOX® Marketing. Mr. Abel
received his A.B. in chemistry from Lafayette College and an M.B.A. from
Temple
University.
Nicholas
J. Rossettos
has been
our Chief Financial Officer and Treasurer since April 2000 and our Chief
Operating Officer since February 2003. From February 1999 until joining our
company, Mr. Rossettos was Manager of Finance for Centerwatch, a
pharmaceutical trade publisher headquartered in Boston, Massachusetts, that
is a
wholly owned subsidiary of Thomson Corporation of Toronto, Canada. Prior
to
that, from 1994, he was Director of Finance and Administration for
EnviroBusiness, Inc., an environmental and technical management-consulting
firm
headquartered in Cambridge, Massachusetts. Mr. Rossettos is a certified public
accountant and holds an M.S. in Accounting and M.B.A. from Northeastern
University.
Neil
Herskowitz
was
appointed to our board of directors in July 2004. Since 1998, Mr. Herskowitz
has
been a Managing Member of ReGen Partners LLC, an New York investment fund,
and
is also President of its affiliate, Riverside Claims LLC. Mr. Herskowitz
currently serves on the board of directors of Starting Point Services for
Children a not-for-profit corporation, and on the board of directors of Vacation
Village, a 220-unit development in Sullivan County, New York. Mr. Herskowitz
holds a B.B.A. in Finance from Bernard M. Baruch College.
Malcolm
Hoenlein
was
appointed to our board of directors in July 2004. Since January 2001, he
has
also served as a director of Keryx Biopharmaceuticals, Inc. (Nasdaq: KERX).
Mr.
Hoenlein currently serves as the Executive Vice Chairman of the Conference
of
Presidents of Major American Jewish Organizations, a position he has held
since
1986. He also serves as a director of Bank Leumi. Mr. Hoenlein received his
B.A.
from Temple University and his M.A. from the University of
Pennsylvania.
Timothy
McInerney
has been
a director of our company since July 2004. Since 1992, Mr. McInerney has
been a
Managing Director of Paramount BioCapital, Inc. where he oversees the overall
distribution of Paramount’s private equity product. Prior to 1992, Mr. McInerney
was a research analyst focusing on the biotechnology industry at Ladenburg,
Thalman & Co. Prior to that, Mr. McInerney held equity sales positions at
Bear, Stearns & Co. and Shearson Lehman Brothers, Inc. Mr. McInerney also
has worked in sales and marketing for Bristol-Myers Squibb. He received his
B.S.
in pharmacy from St. John’s University at New York. He also completed a
post-graduate residency at the New York University Medical Center in drug
information systems.
Joan
Pons has
been
a director of our company since February 21, 2003, the date of our merger
with
Manhattan Research Development. Prior to the merger, he served as a director
of
Manhattan Research Development from 2002. Since 2002, Mr. Pons has served
chief
executive officer of Oleoyl-Estrone Developments S.L., a spin-off of the
University of Barcelona. Pursuant to a January 2002 license agreement, we
hold
an exclusive worldwide license to several patents and patent applications
relating to oleoyl-estrone, which are owned by Oleoyl-Estrone Developments.
From
1999 until joining Oleoyl-Estrone Developments, Mr. Pons has served as Director
of Franchising of Pans & Company, a fast-food company. From 1972 until 1999,
Mr. Pons was employed in various finance and sales capacities by Gallina
Blanca
Purina S.A., a joint venture between St. Louis, Missouri based Ralston Purina
Co. and Spanish based Agrolimen S.A., most recently serving as its National
Sales & Marketing Director.
Richard
I. Steinhart
has been
a director of our company since July 2004. Since May 1992, Mr. Steinhart
has
been principal of Forest Street Capital, a boutique investment banking, venture
capital, and management consulting firm. Prior to Forest Street Capital,
from
May 1991 to May 1992, he was the Vice President and Chief Financial Officer
of
Emisphere Technologies, Inc., a publicly held biopharmaceutical company that
is
working to develop and commercialize a proprietary oral drug delivery system.
Prior to joining Emisphere Technologies, Mr. Steinhart spent seven years
at CW
Group, Inc., a venture capital firm focused on medical and healthcare
investments, where he was a General Partner and Chief Financial Officer.
Mr.
Steinhart has previously served as a director of a number of privately-held
companies, including ARRIS Pharmaceuticals, Inc., a biotechnology company
involved with rational drug design; Membrex, Inc., a laboratory equipment
manu-facturing company; and, Photest, Inc., a diagnostics company. He began
his
career working as a certified public accountant and continues to be a New
York
State Certified Public Accountant. Mr. Steinhart holds a Bachelors of Business
Administration and Masters of Business Administration from Pace University.
Michael
Weiser, M.D., Ph.D.,
has
been a director of our company since the completion of our merger transaction
with Manhattan Research Development, Inc. in February 2003. He served as
a
director of Manhattan Research Development since December 2001 and as its
Chief
Medical Officer from its inception until August 2001. Dr. Weiser is currently
also the Director of Research of Paramount BioCapital Asset Management. Dr.
Weiser is also a member of Orion Biomedical GP, LLC, and serves on the board
of
directors of several privately held companies. Dr. Weiser also serves as
a
director of Chiral Quest, Inc. (OTCBB: CQST) since February 2003.
Dr.
Weiser received an M.D. from New York University School of Medicine and a
Ph.D.
in Molecular Neurobiology from Cornell University Medical College. Dr. Weiser
completed a Postdoctoral Fellowship in the Department of Physiology and
Neuroscience at New York University School of Medicine and performed his
post-graduate medical training in the Department of Obstetrics and Gynecology
and Primary Care at New York University Medical Center.
There
are
no family relationships among our executive officers or
directors.
Compensation
of Executive Officers
The
following table sets forth, for the last three fiscal years, the compensation
earned for services rendered in all capacities by our chief executive officer
and the other highest-paid executive officers serving as such at the end
of 2004
whose compensation for that fiscal year was in excess of $100,000. The
individuals named in the table will be hereinafter referred to as the “Named
Officers.” No other executive officer of Manhattan received compensation in
excess of $100,000 during fiscal year 2004.
Summary
Compensation Table
|
|
|
Annual
Compensation
|
|
Long-Term
Compensation Awards
|
|
All
Other Compensation ($)
|
|
||||||||||||
|
Name
and Principal Position
|
|
Year
|
|
Salary($)
|
|
Bonus($)
|
|
Other
Annual Compensation ($)
|
|
Securities
Underlying
Options/SARs(#)
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonard
Firestone (1)
Chief
Executive Officer and President
|
|
|
2004
2003
2002
|
|
|
325,000
250,000
—
|
|
|
73,750
200,000
—
|
|
|
12,300
—
—
|
(3)
|
|
600,000
584,060
—
|
|
|
—
—
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas
J. Rossettos
Chief
Operating Officer, Chief Financial Officer, Treasurer &
Secretary
|
|
|
2004
2003
2002
|
|
|
150,000
142,788
107,645
|
|
|
22,500
25,000
25,000
|
|
|
7,500
22,397
10,000
|
(3)
(2)
(3)
|
|
150,000
292,030
55,000
|
|
|
—
—
—
|
|
|
(1)
|
Dr.
Firestone became chief executive officer of Manhattan Research
Development, Inc. in January 2003 and, following the merger with
Atlantic
Technology Ventures, Inc. on February 21, 2003, he was appointed
chief
executive officer of the Registrant. The above table reflects Dr.
Firestone’s combined compensation received from Manhattan Research
Development and our company during fiscal 2003. Dr. Firestone’s employment
with the Company ended in January
2005.
|
| (2) |
Represents
salary deferred from the prior fiscal year and prior to February
24,
2003.
|
| (3) |
Represents
matching contributions by us pursuant to our company’s 401(k) and SAR-SEP
retirement plans.
|
Options
and Stock Appreciation Rights
The
following table contains information concerning the grant of stock options
under
our stock option plans and otherwise to the executive officers identified
below
during the 2004 fiscal year. No stock appreciation rights were granted during
the 2004 fiscal year.
Option
Grants in Last Fiscal Year (Individual Grants)
|
Name
|
|
Number
of Securities Underlying Options Granted (#)
|
|
Percent
of Total Options/SARs Granted to Employees in Fiscal
Year
|
|
Exercise
or Base Price ($/Share)(1)
|
|
Expiration
Date
|
|
||||
|
Dr.
Firestone
|
|
|
600,000
|
|
|
36
|
|
|
1.65
|
|
|
1/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Rossettos
|
|
|
150,000
|
(2)
|
|
9
|
|
|
1.65
|
|
|
1/28/2014
|
|
|
(1)
|
Exercise
price is based on the closing sale price of our common stock on
the last
trading day preceding the grant
date.
|
| (2) |
Two-thirds
of the option vested as of January 2005; the remaining one-third
vests in
January 2006.
|
Option
Exercise and Holdings
The
following table provides information with respect to the executive officers
named below concerning the exercisability of options during the 2004 fiscal
year
and unexercisable options held as of the end of the 2004 fiscal year. No
stock
appreciation rights were exercised during the 2004 fiscal year, and no stock
appreciation rights were outstanding at the end of that fiscal
year.
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of Unexercised In-the-
|
|
||||||
|
|
|
|
|
|
|
|
|
|
No.
of Securities Underlying
|
|
|
Money
Options/SARs at FY-End
|
|
||||||
|
|
|
|
Shares
|
|
|
|
|
Unexercised
Options/SARs at
|
|
|
(Market
price of shares at FY-
|
|
|||||||
|
|
|
|
Acquired
|
|
|
Value
|
|
|
FY-End
(#)
|
|
|
End
less exercise price) ($)(2)
|
|
||||||
|
Name
|
|
|
on
Exercise
|
|
|
Realized
(1)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Dr.
Firestone (3)
|
|
|
—
|
|
|
—
|
|
|
584,060
|
|
|
600,000
|
|
|
379,639
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Rossettos
|
|
|
—
|
|
|
—
|
|
|
258,515
|
|
|
258,515
|
|
|
96,160
|
|
|
94,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Equal
to the fair market value of the purchased shares at the time of
the option
exercise over the exercise price paid for those
shares.
|
|
(2)
|
Based
on the fair market value of our common stock on December 30, 2004,
the
last trading day of fiscal 2004, of $1.05 per share, the closing
sale
price per share on that date on the OTC Bulletin
Board.
|
|
(3)
|
Although
the presentation in the above table reflects options exercisable
as of the
end of fiscal 2004, 600,000 shares subject to an option held by
Dr.
Firestone became exercisable on January 1,
2005.
|
Long
Term Incentive Plan Awards
No
long
term incentive plan awards were made to any of our executive officers during
the
last fiscal year.
Compensation
of Directors
Non-employee
directors are eligible to participate in an automatic stock option grant
program
pursuant to the 2003 stock option plan. Non-employee directors are granted
an
option for 50,000 shares of common stock upon their initial election or
appointment to the board and an option for 25,000 shares of common stock
annually thereafter. For members of a sub-committee, the annual grant is
30,000
shares and for a Chairman of the Board, the annual grant is 35,000 shares.
During 2004 our board members did not receive any cash compensation for their
services as directors, although directors are reimbursed for reasonable expenses
incurred in connection with attending meetings of the board and of committees
of
the board.
Employment
Agreements
Douglas
Abel
We
entered into an Employment Agreement with Douglas Abel dated April 1, 2005
whereby Mr. Abel will serve as our President and Chief Executive Officer
for a
period of three years in exchange for (i) an annual base salary of $300,000,
subject to a retroactive increase in the amount of $25,000 in the event we
complete a financing transaction of at least $5,000,000, (ii) a signing bonus
in
the amount of $200,000 payable in two installments of $100,000 in May and
November 2005, respectively, (iii) a discretionary performance-based bonus
in an
amount equal to up to 50% of Mr. Abel’s base salary, and (iv) an option to
purchase 2,923,900 shares of our common stock at $1.50 per share with three-year
annual vesting, purchasable for a 10-year term. As a result of the private
placement that we completed in August 2005 (see “Summary of Offering - Recent
Developments”), Mr. Abel’s salary has been increased to $325,000 retroactive to
April 1, 2005. The employment agreement contains customary provisions relating
to confidentiality, work-product assignment, non-competition and
non-solicitation. In the event Mr. Abel’s employment is terminated during
the term of the agreement, we are required to pay a severance payment ranging
from between 6 and 12 month of base salary, depending upon the circumstances
of
such termination
Nicholas
J. Rossettos
Mr. Rossettos’
employment with us is pursuant to a January 2005 employment agreement. This
agreement has a two-year term ending on January 3, 2007, which may be extended
for additional one (1) year periods thereafter. Under the agreement, Mr.
Rossettos is entitled to an annual salary of $175,000 in addition to health,
disability insurance and other benefits. Pursuant to his employment agreement,
on January 3, 2005, Mr. Rossettos was granted an option to purchase an aggregate
of 50,000 shares of common stock at a price of $1.00 per share. The option
vests
in two equal installments on each of January 3, 2006 and January 3, 2007.
Mr. Rossettos and his dependents are eligible to receive paid medical
and
long term disability insurance and such other health benefits as we make
available to other senior officers and directors. Mr. Rossettos reports
to
the Board of Directors of the Company with primary direction being given
by the
Chief Executive Officer and President.
CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding beneficial ownership
of
the our common stock as of
September 20, 2005,
by (i)
each person known by us to be the beneficial owner of more than 5 percent
of the
outstanding Common Stock, (ii) each director, (iii) each executive officer,
and
(iv) all executive officers and directors as a group. The
number of shares beneficially owned is determined under rules promulgated
by the
SEC, and the information is not necessarily indicative of beneficial ownership
for any other purpose. Under those rules, beneficial ownership includes any
shares as to which the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to acquire within
60 days of the date hereof, through the exercise or conversion of any stock
option, convertible security, warrant or other right. Inclusion of shares
in the
table does not, however, constitute an admission that the named stockholder
is a
direct or indirect beneficial owner of those shares. Unless otherwise indicated,
each person or entity named in the table has sole voting power and investment
power (or shares that power with that person’s spouse) with respect to all
shares of capital stock listed as owned by that person or entity. Unless
otherwise indicated, the address of each of the following persons is 810
Seventh
Avenue, 4th Floor, New York, New York 10019.
|
Name
|
Shares
Beneficially
Owned
|
Percent
of Class
|
|||||
|
Douglas
Abel (1)
|
984,634
|
1.6
|
|||||
|
Nicholas
J. Rossettos(2)
|
457,030
|
*
|
|||||
|
Michael
Weiser(3)
|
2,371,993
|
4.0
|
|||||
|
Joan
Pons Gimbert(4)
|
4,015,371
|
6.8
|
|||||
|
Neil
Herskowitz (5)
|
108,675
|
*
|
|||||
|
Malcolm
Hoenlien (6)
|
57,003
|
*
|
|||||
|
Timothy
McInerney (7)
|
745,784
|
1.3
|
|||||
|
Richard
I. Steinhart (6)
|
57,003
|
*
|
|||||
|
All
directors and officers as a group (8)
|
8,797,493
|
14.3
|
|||||
|
Oleoylestrone
Developments, SL(9)
Josep
Samitier 1-5, Barcelona Science Park
08028
Barcelona Spain
|
3,957,037
|
6.7
|
|||||
|
Lester
E. Lipschutz(10)
1650
Arch Street - 22nd
Floor
Philadelphia,
PA 19103
|
8,918,839
|
21.9
|
|||||
|
Lindsay
A. Rosenwald(11)
787
Seventh Avenue, 48th
Floor
New
York, NY 10019
|
3,444,506
|
5.7
|
|||||
| * |
Less
than 1.0%
|
| (1) |
Includes
974,634 shares issuable upon exercise of a portion of an option
which
vests November 1, 2005, but does not include the remaining
1,949,266
shares issuable upon the exercise of such option, which remaining
shares
vest in two equal installments of 974,633 shares on each of
November 1,
2006 and November 1, 2007.
|
| (2) |
Includes
457,030 shares issuable upon the exercise of options that are currently
exercisable or will be exercisable within 60 days.
|
| (3) |
Includes
60,000 shares issuable upon the exercise of an option, and 103,655
shares
issuance upon exercise of a
warrant.
|
| (4) |
Includes
3,957,037 shares held by Oleoylestrone Developments, SL, of which
Mr. Pons
is chief executive officer, and 58,334 shares issuable upon the
exercise
of options.
|
| (5) |
Includes
30,337 shares issuable upon exercise of options and 7,500 shares
held by
Riverside Contracting, LLC, a limited liability company of which
Mr.
Herskowitz is a member holding 50%.
|
| (6) |
Represents
shares issuable upon exercise of
options.
|
| (7) |
Includes
41,667 shares issuable upon exercise of options; and 58,642 shares
issuable upon exercise of warrants.
|
| (8) |
Includes
1,027,838 shares issuable upon exercise of currently exercisable
options,
or options that will be exercisable within 60 days, and upon exercise
of
warrants.
|
| (9) |
Mr.
Pons Gimbert is the chief executive officer of Oleoylestrone Developments,
SL.
|
| (10) |
Includes
8,918,839
shares of Common Stock held by separate
trusts for
the benefit of Dr. Rosenwald or his family with
respect to which Mr. Lipschutz is either trustee or investment
manager and
in either case has investment and voting power.
Dr. Rosenwald disclaims beneficial ownership of these shares, except
to
the extent of his pecuniary interest therein, if any.
|
| (11) |
Includes
80 shares owned by Dr. Rosenwald’s spouse, 33 shares owned by his
children, 76 shares held by corporations affiliated by Dr. Rosenwald,
and
516,885 shares issuable upon the exercise of warrants. Does not
include
8,918,354 shares held by Lester Lipschutz, as trustee of certain
trusts
established for the benefit of Dr. Rosenwald, as to which Dr. Rosenwald
disclaims beneficial ownership, except to the extent of his pecuniary
interest therein, if any.
|
Oleoylestrone
Developments, SL
Pursuant
to the terms of a license agreement dated February 15, 2002 by and between
Manhattan Research Development, Inc., our wholly owned subsidiary, and
Oleoylestrone Developments, SL (“OED”), we have an exclusive, worldwide license
to U.S. and foreign patents and patent applications relating to certain
technologies. Although we are not obligated to pay royalties to OED, the
license
agreement requires us to make certain performance-based milestone payments.
See
“Item 1 - Intellectual Property.” OED currently owns approximately 16 percent of
our outstanding common stock. Additionally, Mr. Pons, a member of our board
of
directors, is chief executive officer of OED.
NovaDel
Pharma Inc.
As
discussed above, pursuant to the terms of a license agreement dated April
4,
2003 by and between us and NovaDel Pharma Inc., we have the rights to develop
NovaDel’s proprietary lingual spray technology to deliver propofol for
pre-procedural sedation. The license agreement with NovaDel requires us to
make
certain license and milestone payments, as well as pay royalties. See “Item 1.
Business - Lingual Spray Propofol.” During 2003, we paid aggregate license fees
of $500,000 to NovaDel under the license agreement, but during 2004 did not
make
any payments to NovaDel under the agreement. Lindsay A. Rosenwald, who
beneficially owns more than 5 percent of our common stock, also beneficially
owns in excess of 20 percent of the common stock of NovaDel and may therefore
be
deemed to be an affiliate of that company.
Paramount
BioCapital, Inc.
Two
members of our board of directors, Timothy McInerney and Michael Weiser,
are
also employees of Paramount BioCapital, Inc. or one of its affiliates. In
addition, two former members our board of directors, Joshua Kazam and David
Tanen were employed by Paramount BioCapital through August 2004 and were
directors of our company until September 2005. The sole shareholder and
chairman of Paramount BioCapital, Inc. is Lindsay A. Rosenwald, M.D.
Dr.
Rosenwald beneficially owns more than 5 percent of our common
stock.
In November 2003, we paid to Paramount BioCapital approximately $460,000
as
commissions earned in consideration for placement agent services rendered
in
connection with the private placement of our Series A Convertible Preferred
Stock, which amount represented 7 percent of the shares sold by Paramount
BioCapital in the offering. In connection with the November 2003 private
placement, we did not engage Paramount BioCapital directly, but rather Paramount
BioCapital was engaged as a sub-agent of Maxim Group, the broker-dealer we
engaged for the offering. In addition, in January 2004, we paid approximately
$260,000 as commissions earned in consideration for placement agent services
rendered by Paramount BioCapital in connection with a private placement of
our
common stock, which amount represented 7 percent of the shares sold by Paramount
BioCapital in the private placement. The engagement of Paramount BioCapital
in
connection with the January 2004 private placement was approved by all of
our
disinterested directors. In connection with both private placements and as
a
result of their employment with Paramount BioCapital, Mr. Kazam, Mr. McInerney
and Dr. Weiser were allocated 5-year placement agent warrants to purchase
60,174, 58,642 and 103,655 shares of our common stock, respectively, at a
price
of $1.10 per share.
Paramount
also served as our placement agent in connection with our August 2005 private
placement. See “Summary of Offering - Recent Developments - 2005 Private
Placement.”
Acquisition
of Tarpan Therapeutics, Inc.
On
April
1, 2005, we completed the acquisition of Tarpan Therapeutics, Inc., a
private-held biotechnology company that owns the rights to develop PTH (1-34),
in a merger transaction. Several of Tarpan’s former stockholders are directors
or significant stockholders of the Company. Dr. Rosenwald and various trusts
established for the benefit of Dr. Rosenwald and members of his immediate
family
collectively beneficially owned approximately 46 percent of Tarpan’s common
stock and beneficially own approximately 26 percent our common stock. In
addition, Joshua Kazam, David Tanen, Dr. Michael Weiser and Timothy McInerney,
all of whom were members of the Company’s board of directors at the time of such
acquisition (Messrs. Kazam and Tanen have since resigned), collectively owned
approximately 13.4 percent of Tarpan’s outstanding common stock. Dr. Weiser and
Mr. McInerney are also employed by Paramount BioCapital, Inc., an entity
owned
and controlled by Dr. Rosenwald. As a result of such relationships between
the
Company and Tarpan, the Company’s board of directors established a special
committee to consider and approve the Agreement. The special committee consisted
of three independent directors, none of whom had any prior relationship with
Tarpan.
We
believe that all the transactions described above were made on terms no less
favorable to us than could have been obtained from unaffiliated third
parties.
Market
for Common Stock
Our
common stock trades on the OTC Bulletin Board under the symbol “MHTT.OB.” The
following table lists the high and low price for our common stock (as adjusted
for our 1-for-5 stock combination effected on September 25, 2003) as quoted
on
the OTC Bulletin Board during each quarter within the last two fiscal years,
plus the first and second quarters of fiscal 2005:
|
|
Price
Range
|
||||||
|
Quarter
Ended
|
High
|
Low
|
|||||
|
June
30, 2005
|
$
|
1.64
|
$
|
1.20
|
|||
|
March
31, 2005
|
1.55
|
1.42
|
|||||
|
December
31, 2004
|
1.05
|
0.91
|
|||||
|
September
30, 2004
|
0.90
|
0.87
|
|||||
|
June
30, 2004
|
2.48
|
1.27
|
|||||
|
March
31, 2004
|
2.00
|
1.35
|
|||||
|
December
31, 2003
|
2.00
|
1.20
|
|||||
|
September
30, 2003
|
2.50
|
1.10
|
|||||
|
June
30, 2003
|
1.65
|
0.60
|
|||||
|
March
31, 2003
|
0.85
|
0.25
|
|||||
The
quotations from the OTC Bulletin Board reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not represent actual
transactions.
Record
Holders
The
number of holders of record of our common stock as of September 9, 2005 was
approximately 282.
Dividends
We
have
not paid or declared any dividends on our common stock and we do not anticipate
paying dividends on our common stock for the foreseeable future.
We
will
not receive any proceeds from the resale of any of the shares offered by
this
prospectus by the selling stockholders.
SELLING
STOCKHOLDERS
This
prospectus covers the resale by the selling stockholders identified below
of
25,627,684 shares
of
our common stock, including shares issuable upon the exercise of warrants.
This
offering includes the 11,917,680 common shares and 2,978,957 common
shares issuable upon the exercise of the warrants issued in our August
2005
private placement, of which 595,449 common shares are issuable upon the
exercise
of warrants issued to placement agents that provided services to us in
the
private placement. The warrants received by the investors in the private
placement are exercisable until April 2010 at an exercise price of $1.44
per
share. These warrants are also redeemable by us, upon 30 days’ prior notice,
when the average closing sale price of our common stock, as reported on
the OTC
Bulletin Board or such other market or exchange on which our common stock
is
then listed or quoted, equals or exceeds 200 percent of the exercise price
for a
period of 30 consecutive days. Upon redemption, we are obligated to pay
to each
warrant holder $0.001 per share underlying each outstanding
warrant.
This
prospectus also covers 10,731,047 shares of our common stock issued y us
in
connection with our acquisition of Tarpan Therapeutics, Inc. in April 2005.
Holders of approximately 7,238,000 of these shares have agreed that they
will
not sell or otherwise dispose of their shares for a period of at least
90 days
following the effective date of the registration statement that contains
this
prospectus. See “Plan of Distribution - Shares Eligible for Future
Sale.”
The
following table sets forth the number of shares of our common stock beneficially
owned by the selling stockholders as of September 20, 2005, and after giving
effect to this offering.
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
|
|
|
Shares
Issued in August 2005 Private
Placement
|
|
Philip
Abdalla and Joyce V. Abdalla JTWROS
|
27,026
|
22,522
|
4,504
|
--
|
||
|
Neel
B. Ackerman and Matha N. Ackerman JTWROS
|
216,216
|
180,180
|
36,036
|
--
|
||
|
Andrew
W. Albstein
|
54,054
|
45,045
|
9,009
|
--
|
||
|
Alyad
Foundation (a)
|
166,308
|
90,090
|
18,018
|
*
|
||
|
Alfred
J. Anzalone Family Limited Partnership
|
27,026
|
22,522
|
4,504
|
--
|
||
|
Atlas
Master Fund, Ltd.(b)
|
2,899,261
|
900,900
|
180,180
|
3.1
|
||
|
Marvin
Belsky
|
54,054
|
45,045
|
9,009
|
--
|
||
|
David
Benadum
|
47,026
|
22,522
|
4,504
|
--
|
||
|
Delaware
Charter F/B/O Mark Steven Berg IRA
|
300,000
|
250,000
|
50,000
|
--
|
||
|
Nicole
Berg
|
300,000
|
250,000
|
50,000
|
--
|
||
|
Paul
Bermanski and Barbara Bermanski
|
27,026
|
22,522
|
4,504
|
--
|
||
|
Alan
Bresler and Hanna Bresler
|
13,513
|
11,261
|
2,252
|
--
|
||
|
Brino
Investment Ltd.(c)
|
49,107
|
22,522
|
4,504
|
*
|
||
|
Frank
Calcutta
|
266,216
|
180,180
|
36,036
|
*
|
||
|
Chase
Finacing, Inc.(d)
|
54,054
|
45,045
|
9,009
|
--
|
||
|
Concordia
Institutional Multistrategy Ltd. (e)
|
243,242
|
157,657
|
31,531
|
--
|
||
|
Concordia
Partners LP(e)
|
243,242
|
743,243
|
148,648
|
--
|
||
|
Cranshire
Capital, L.P.(f)
|
270,270
|
225,225
|
45,045
|
--
|
||
|
Edmund
A. Debler
|
26,621
|
18,018
|
3,603
|
*
|
||
|
Charles
F. G. DeCell
|
27,026
|
22,522
|
4,504
|
--
|
||
|
Praful
Desai
|
54,054
|
45,045
|
9,009
|
--
|
||
|
Carolyn
P. Dietrich
|
27,026
|
22,522
|
4,504
|
--
|
||
|
Gregory
J. Dovolis
|
152,080
|
90,090
|
18,018
|
*
|
||
|
John
O. Dunkin
|
86,997
|
45,045
|
9,009
|
*
|
||
|
Isaac
R. Dweck
|
113,700
|
90,090
|
18,018
|
*
|
||
|
Helen
Eisen
|
27,026
|
22,522
|
4,504
|
--
|
||
|
Joseph
C. Eisen
|
27,026
|
22,522
|
4,504
|
--
|
||
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
|
|
|
Nathan
Eisen
|
54,054
|
45,045
|
9,009
|
--
|
|
|
Jeff
Eisenberg
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Roger
Erickson
|
74,054
|
45,045
|
9,009
|
*
|
|
|
Eugenia
VI Venture Holdings, Ltd.(g)
|
1,556,752
|
900,900
|
180,180
|
*
|
|
|
Fusion
Capital Fund II, LLC(h)
|
151,313
|
90,090
|
18,018
|
*
|
|
|
Susan
Gartenberg
|
13,513
|
11,261
|
2,252
|
--
|
|
|
Gitel
Family Limited Partnership (i)
|
257,770
|
90,090
|
18,018
|
*
|
|
|
Dean
Glasser
|
15,651
|
13,043
|
2,608
|
--
|
|
|
John
Goodman
|
37,026
|
22,522
|
4,504
|
*
|
|
|
Grapemeadow
NV(j)
|
1,111,339
|
450,450
|
90,090
|
*
|
|
|
Arthur
Greco
|
32,432
|
27,027
|
5,405
|
--
|
|
|
Robert
Guercio
|
84,054
|
45,045
|
9,009
|
*
|
|
|
Baruch
Z. Halberstam
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Jack
Ham
|
52,026
|
22,522
|
4,504
|
*
|
|
|
Harewood
Nominees Ltd A/C 4721300(k)
|
248,648
|
45,045
|
9,009
|
--
|
|
|
Harewood
Nominees Ltd A/C 4689000(k)
|
248,648
|
162,162
|
32,432
|
*
|
|
|
Ben
Heller
|
216,216
|
180,180
|
36,036
|
--
|
|
|
Steven
R. Hurlburt
|
27,026
|
22,522
|
4,504
|
--
|
|
|
David
Jaroslawicz
|
216,216
|
180,180
|
36,036
|
--
|
|
|
Jack
M. Johnson
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Patrick
M. Kane
|
45,478
|
31,531
|
6,306
|
*
|
|
|
Abraham
Katsman
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Jay
Kestenbaum
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Daniel
J. Kevles and BettyAnn Kevles JTWROS
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Kier
Family LP(l)
|
108,108
|
90,090
|
18,018
|
--
|
|
|
Jack
Klebanow
|
32,432
|
27,027
|
5,405
|
--
|
|
|
Klaus
Kretschmer
|
54,054
|
45,045
|
9,009
|
--
|
|
|
Daniel
Krieger
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Delaware
Charter Guarantee & Trust Company F/B/O John Kuehn SEP
IRA
|
47,026
|
22,522
|
4,504
|
*
|
|
|
John
Kuehn
|
47,026
|
22,522
|
4,504
|
*
|
|
|
Gregory
and Donna Lenchner
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Lewis
Opportunity Fund LP(m)
|
54,054
|
45,045
|
9,009
|
--
|
|
|
The
Hyman A. Lezell Revocable Intervivos Trust, Hyman A. Lezell
Trustee U/A/D
12/30/91
|
146,595
|
67,567
|
13,513
|
*
|
|
|
John
Liatos
|
10,440
|
8,700
|
1,740
|
--
|
|
|
Phil
Lifschitz
|
108,108
|
90,090
|
18,018
|
--
|
|
|
Linden
Growth Partners(n)
|
54,054
|
45,045
|
9,009
|
--
|
|
|
S.
Alan Lisenby
|
247,103
|
180,180
|
36,036
|
*
|
|
|
Michael
Luftman
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Robert
Masters
|
54,054
|
45,045
|
9,009
|
--
|
|
|
Murray
J. McCabe
|
54,054
|
45,045
|
9,009
|
--
|
|
|
Barry
P. McIntosh, M.D.
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Cooper
A. McIntosh, M.D.
|
88,344
|
45,045
|
9,009
|
*
|
|
|
Matador
Investments Pte Ltd.(o)
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Mark
Mazzer
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Mega
International Corporation(p)
|
58,746
|
22,522
|
4,504
|
*
|
|
|
MHR
Capital Partners LP(q)
|
1,081,078
|
791,415
|
158,283
|
--
|
|
|
MHR
Capital Partners (100) LP(q)
|
1,081,078
|
109,484
|
21,896
|
--
|
|
|
Mike
Pat Mike Family Ltd. Partnership
|
16,215
|
13,513
|
2,702
|
--
|
|
|
Albert
Milstein
|
73,026
|
22,522
|
4,504
|
*
|
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
|
|
|
Elizabeth
R. Moore
|
32,432
|
27,027
|
5,405
|
--
|
|
|
Susan
Newton and Harry Newton, JTWROS
|
196,453
|
90,090
|
18,018
|
*
|
|
|
Nite
Capital, L.P.(x)
|
104,359
|
86,966
|
17,393
|
--
|
|
|
North
American Equity Multi Strategy Fund A/C 10000788(k)
|
216,216
|
180,180
|
36,036
|
--
|
|
|
Anthony
J. Ottavio
|
75,675
|
63,063
|
12,612
|
--
|
|
|
Barry
M. Pearl
|
37,837
|
31,531
|
6,306
|
--
|
|
|
Perceptive
Life Sciences Master Fund, Ltd.(w)
|
1,206,954
|
1,000,000
|
200,000
|
*
|
|
|
Laya
Davidowitz Perlysky 2003 Grantor Retained Annuity Trust
|
112,254
|
45,045
|
9,009
|
*
|
|
|
Pleiades
Investment Partners-R, LP(r)
|
540,538
|
132,432
|
26,486
|
*
|
|
|
Daniel
Polatsch
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Potomac
Capital International Ltd.(r)
|
540,538
|
120,720
|
24,144
|
*
|
|
|
Potamac
Capital Partners, LP(r)
|
540,538
|
197,297
|
39,459
|
*
|
|
|
David
G. Pudelsky and Nancy H. Pudelsky JTWROS
|
54,054
|
45,045
|
9,009
|
--
|
|
|
Rachel
Family Partnership(s)
|
197,162
|
135,135
|
27,027
|
*
|
|
|
Ramsay
Investment Pte Ltd.(o)
|
5,404
|
4,504
|
900
|
--
|
|
|
Louis
R. Reif
|
170,106
|
135,135
|
27,027
|
*
|
|
|
Frank
Restivo
|
37,026
|
22,522
|
4,504
|
*
|
|
|
Philip
J. Schiller
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Andrew
W. Schonzeit
|
43,243
|
36,036
|
7,207
|
--
|
|
|
Judah
Schorr
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Albert
Sebag
|
54,054
|
45,045
|
9,009
|
--
|
|
|
Diana
Shepler
|
37,837
|
31,531
|
6,306
|
--
|
|
|
The
Shoup Revocable Trust U/A/D 4/29/03(t)
|
74,513
|
61,261
|
12,252
|
*
|
|
|
William
S. and Elinor Silver JTWROS
|
54,054
|
45,045
|
9,009
|
*
|
|
|
The
Silverman 1984 Trust D/T/D 5/02/84, Robert J. Silverman
and Judith A.
Silverman Trustees
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Lucille
Slocum
|
177,749
|
135,135
|
27,027
|
*
|
|
|
Carl
S. Sorenson
|
27,026
|
22,522
|
4,504
|
--
|
|
|
C.
Richard Stafford IRA
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Stahler
Investments, LLC(u)
|
203,554
|
45,045
|
9,009
|
*
|
|
|
Dennis
F. Steadman
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Katherine
S. Steele
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Stern
Joint Venture, L.P.(v)
|
108,108
|
90,090
|
18,018
|
--
|
|
|
Joseph
Strassman and Barbara Strassman, Tenants in Common
|
54,054
|
45,045
|
9,009
|
--
|
|
|
Gary
Strauss
|
166,064
|
22,522
|
4,504
|
*
|
|
|
Anne
Stringfield
|
27,026
|
22,522
|
4,504
|
--
|
|
|
Delaware
Charter Guarantee & Trust Company, F/B/O Howard M. Tanning, MD IRA
R/O
|
135,134
|
112,612
|
22,522
|
--
|
|
|
Reuben
Taub
|
43,243
|
36,036
|
7,207
|
--
|
|
|
Carolyn
N. Taylor
|
54,054
|
45,045
|
9,009
|
--
|
|
|
Tisu
Investment Ltd.(j)
|
71,336
|
45,045
|
9,009
|
*
|
|
|
Joseph
J. Vale
|
783,524
|
225,225
|
45,045
|
*
|
|
|
Michael
Wallace
|
37,026
|
22,522
|
4,504
|
*
|
|
|
Waterspout
Investments Pte. Ltd.(o)
|
10,810
|
9,009
|
1,801
|
--
|
|
|
Hillel
Weinberger
|
324,324
|
270,270
|
54,054
|
--
|
|
|
Scott
D. Whitaker
|
47,026
|
22,522
|
4,504
|
*
|
|
|
Olen
C. Wilson
|
37,026
|
22,522
|
4,504
|
*
|
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
|
|
|
Tad
Wilson
|
37,026
|
22,522
|
4,504
|
*
|
|
|
Paramount
BioCapital, Inc.(z)
|
3,961,690
|
0
|
517,184
|
5.7
|
|
|
Sandgrain
Securities, Inc.
|
1,407
|
0
|
1,407
|
--
|
|
|
Steve
A. Sherman
|
4,223
|
0
|
4,223
|
--
|
|
|
Robert
D. Millstone
|
8,446
|
0
|
8,446
|
--
|
|
|
Alan
Ferraro
|
12,900
|
0
|
12,900
|
--
|
|
|
Steven
Markowitz
|
9,000
|
0
|
9,000
|
--
|
|
|
Fabio
Migliaccio
|
2,257
|
0
|
2,257
|
--
|
|
|
Denise
Mormile-Miglino
|
2,000
|
0
|
2,000
|
--
|
|
|
Michael
Mullen
|
29,032
|
0
|
29,032
|
--
|
|
|
Joseph
Sorbara
|
9,000
|
0
|
9,000
|
--
|
|
|
Subtotal
|
11,917,680
|
2,978,957
|
|||
|
Shares
Issued to Former Stockholders of Tarpan Therapeutics,
Inc.
|
|
Lester
E. Lipschutz, as ttee for Lindsay A. Rosenwald 2000
Family Trusts dtd
12/15/2000
|
8,918,354
|
2,474,393
|
0
|
6.7
|
|
|
Michael
Weiser(y)
|
2,371,993
|
851,777
|
0
|
2.6
|
|
|
Jason
Stein
|
1,927,016
|
851,777
|
0
|
1.8
|
|
|
Jeffrey
Serbin
|
528,639
|
477,800
|
0
|
*
|
|
|
Lester
E. Lipschutz, as ttee for Lindsay A. Rosenwlad 2000
Irrevocable Indenture
Trust dtd 5/24/2000
|
8,918,354
|
617,035
|
0
|
6.7
|
|
|
Lester
E. Lipschutz, as ttee for the Lindsay A. Rosenwald
Rhode Island
Irrevocable Trust dtd 8/28/2001
|
8,918,354
|
617,035
|
0
|
6.7
|
|
|
Lester
E. Lipschutz, ttee for The Lindsay A. Rosenwald Alaska
Irrevocable Trust
dtd 8/28/2001
|
8,918,354
|
617,035
|
0
|
6.7
|
|
|
Lester
E. Lipschutz, Investment Trustee of The Lindsay A.
Rosenwald Nevada
Irrevocable Trust dtd 8/28/2001
|
8,918,354
|
617,035
|
0
|
6.7
|
|
|
Melvyn
Weiss
|
53,654
|
53,654
|
0
|
--
|
|
David
Bershad
|
13,414
|
13,414
|
0
|
--
|
|
Everest
Capital
|
53,654
|
53,654
|
0
|
--
|
|
Future
Global Holdings
|
2,683
|
2,683
|
0
|
--
|
|
GMM
Capital
|
42,923
|
42,923
|
0
|
--
|
|
NTP
Partners c/o William Natbony
|
13,414
|
13,414
|
0
|
--
|
|
Fidulex
|
7,512
|
7,512
|
0
|
--
|
|
Lilian
Hahn
|
13,414
|
13,414
|
0
|
--
|
|
Peter
and Donna Kash
|
21,461
|
21,461
|
0
|
--
|
|
Pearl
Capital Partners LP
|
5,366
|
5,366
|
0
|
--
|
|
Aaron
Speisman
|
6,707
|
6,707
|
0
|
--
|
|
Joseph
Friedman Trust
|
5,366
|
5,366
|
0
|
--
|
|
Robert
Falk
|
5,366
|
5,366
|
0
|
--
|
|
335
MAD, LLC
|
16,097
|
16,097
|
0
|
--
|
|
Yitzhak
Nissan
|
5,366
|
5,366
|
0
|
--
|
|
Alan
Clingman
|
5,366
|
5,366
|
0
|
--
|
|
Benjamin
Feinswog Trust
|
16,097
|
16,097
|
0
|
--
|
|
Henry
and Monica Millin
|
5,366
|
5,366
|
0
|
--
|
|
Robert
Klein
|
5,366
|
5,366
|
0
|
--
|
|
The
Holding Company
|
18,779
|
18,779
|
0
|
--
|
|
Kanter
Family Foundation
|
8,048
|
8,048
|
0
|
--
|
|
Jonathan
Serbin
|
321,932
|
321,932
|
0
|
--
|
|
|
Peter
Kash
|
978,459
|
256,593
|
0
|
1.2
|
|
|
Joshua
A. Kazam
|
553,026
|
248,826
|
0
|
*
|
|
|
J.
Jay Lobell
|
279,611
|
254,192
|
0
|
*
|
|
|
David
M. Tanen
|
674,917
|
233,937
|
0
|
*
|
|
|
Stephen
C. Rocamboli
|
412,496
|
233,937
|
0
|
*
|
|
|
Jillian
Hoffman
|
267,378
|
150,449
|
0
|
*
|
|
|
William
Corcoran
|
116,567
|
107,310
|
0
|
*
|
|
|
Kyle
Kuhn
|
103,756
|
103,756
|
0
|
--
|
|
|
David
Butera
|
103,756
|
103,756
|
0
|
--
|
|
|
Peter
Barber
|
103,756
|
103,756
|
0
|
--
|
|
|
Timothy
McInerney(aa)
|
745,784
|
103,756
|
0
|
1.1
|
|
|
Benjamin
Bernstein
|
136,639
|
77,800
|
0
|
*
|
|
|
Colby
Kash
|
51,871
|
51,871
|
0
|
--
|
|
|
Jared
Kash
|
51,871
|
51,871
|
0
|
--
|
|
|
Shantall
Kash
|
51,871
|
51,871
|
0
|
--
|
|
|
Zena
Kash
|
51,871
|
51,871
|
0
|
--
|
|
|
Kash
Family Trust
|
51,871
|
51,871
|
0
|
--
|
|
|
John
Knox
|
164,229
|
93,897
|
0
|
*
|
|
|
Jennifer
McNealey
|
46,680
|
46,660
|
0
|
--
|
|
|
John
Cipriano
|
46,680
|
46,680
|
0
|
--
|
|
|
Elena
Guttenplan
|
97,519
|
46,680
|
0
|
*
|
|
|
Donna
Lozito
|
36,311
|
36,311
|
0
|
--
|
|
|
Louis
Smookler
|
34,809
|
34,809
|
0
|
--
|
|
|
Scott
Katzmann
|
105,093
|
25,942
|
0
|
*
|
|
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
|
|
|
John
Papadimitropoulos
|
40,818
|
25,942
|
0
|
*
|
|
|
Kate
Solomito
|
25,942
|
25,942
|
0
|
--
|
|
|
Geanine
Haddad
|
25,942
|
25,942
|
0
|
--
|
|
|
Basil
Christakos
|
35,546
|
25,942
|
0
|
*
|
|
|
Eric
Lee
|
25,942
|
25,942
|
0
|
--
|
|
|
Timothy
Shands
|
25,942
|
25,942
|
0
|
--
|
|
|
Claudia
Donat
|
51,362
|
25,942
|
0
|
*
|
|
|
Bernard
Gross
|
25,942
|
25,942
|
0
|
--
|
|
|
John
Best
|
23,340
|
23,340
|
0
|
--
|
|
|
Elbert
Chu
|
23,340
|
23,340
|
0
|
--
|
|
|
Ravi
Chervu
|
23,340
|
23,340
|
0
|
--
|
|
|
Allison
Robbins
|
23,340
|
23,340
|
0
|
--
|
|
|
Jamie
Cabibihan
|
4,641
|
4,641
|
0
|
--
|
|
|
Kelly
McCarthy
|
2,682
|
2,682
|
0
|
--
|
|
|
Elizabeth
Marrero
|
2,682
|
2,682
|
0
|
--
|
|
|
Marion
Birch
|
2,682
|
2,682
|
0
|
--
|
|
|
Subtotal
|
10,731,047
|
0
|
|
||
|
TOTAL
|
22,648,727
|
2,978,957
|
|||
_______________
*
Less
than 1%
|
(a)
|
Dov
Perlysky has voting and investment control over the
shares held by the
selling stockholder.
|
|
(b)
|
Dimitry
Balyasny has voting and investment control over the
shares held by the
selling stockholder.
|
|
(c)
|
Tis
Prager and Bruno Widmer share voting and investment
control over the
shares held by the selling stockholder.
|
|
(d)
|
Robert
Herskowitz has voting and investment control over
the shares held by the
selling stockholder.
|
|
(e)
|
Alexander
Ribaroff, Alan Daniel Wood and Peter Martin share
voting and investment
control over the shares held by the selling
stockholder.
|
|
(f)
|
Mitchell
P. Kopin has voting and investment control over the
shares held by the
selling stockholder.
|
|
(g)
|
Evan
Burtton shares voting and investment control over
the shares held by the
selling stockholder.
|
|
(h)
|
Steven
G. Martin and Joshua B. Schoenfeld share voting and
investment control
over the shares held by the selling stockholder.
|
|
(i)
|
Esther
Stahler has voting and investment control over the
shares held by the
selling stockholder.
|
|
(j)
|
Tis
Prager has voting and/or investment control over
the shares held by the
selling stockholder.
|
|
(k)
|
Robert
Villiers has voting and investment control over the
shares held by the
selling stockholder.
|
|
(l)
|
Isaac
Kier has has voting and investment control over the
shares held by the
selling stockholder.
|
|
(m)
|
William
A. Lewis IV has voting and investment control over
the shares held by the
selling stockholder.
|
|
(n)
|
Paul
J. Corrello has voting and investment control over the shares
held by the
selling stockholder.
|
|
(o)
|
Janet
Roos, Graziella Leone, Peter Brown and Suzanne Callister share
voting and
investment control over the shares held by the selling
stockholder.
|
|
(p)
|
Arturo
Quintero has voting and/or investment control over the shares
held by the
selling stockholder.
|
|
(q)
|
Mark
Rachesky has voting and/or investment control over the shares
held by the
selling stockholder.
|
|
(r)
|
Paul
J. Solit has voting and/or investment control over the shares
held by the
selling stockholder.
|
|
(s)
|
Ruki
Renov has voting and/or investment control over the shares held
by the
selling stockholder.
|
|
(t)
|
Stefan
P. Shoup and Jane R. Shoup have voting and/or investment control
over the
shares held by the selling stockholder.
|
|
(u)
|
Esther
Stahler has voting and/or investment control over the shares
held by the
selling stockholder.
|
|
(v)
|
Richard
L. Stern has voting and/or investment control over the shares
held by the
selling stockholder.
|
|
(w)
|
Joseph
E. Edelman and Andrew C. Sankin have voting and/or investment
control over
the shares held by the selling stockholder.
|
|
(x)
|
Keith
Goodman has voting and/or investment control over the shares
held by the
selling stockholder.
|
|
(y)
|
Michael
Weiser is a director of our company.
|
|
(z)
|
Lindsay
A. Rosenwald has voting and/or investment control over the shares
held by
the selling stockholder.
|
|
(aa)
|
Timothy
McInerney is a director of our
company.
|
We
are
registering the shares offered by this prospectus on behalf of the selling
stockholders. The selling stockholders, which as used herein includes donees,
pledgees, transferees or other successors-in-interest selling shares of common
stock or interests in shares of common stock received after the date of this
prospectus from a selling stockholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of common stock or interests
in
shares of common stock on any stock exchange, market or trading facility
on
which the shares are traded or in private transactions. These dispositions
may
be at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the
time
of sale, or at negotiated prices.
The
selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein:
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as
agent, but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer
for its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
short
sales;
|
| · |
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
| · |
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured
parties
may offer and sell the shares of common stock, from time to time, under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also
may
transfer the shares of common stock in other circumstances, in which case
the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
In
connection with the sale of our common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or
more
derivative securities which require the delivery to such broker-dealer or
other
financial institution of shares offered by this prospectus, which shares
such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the selling stockholders from the sale of the common
stock
offered by them will be the purchase price of the common stock less discounts
or
commissions, if any. Each of the selling stockholders reserves the right
to
accept and, together with their agents from time to time, to reject, in whole
or
in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering. Upon
any
exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of
1933,
provided that they meet the criteria and conform to the requirements of that
rule.
The
selling stockholders and any broker-dealers that act in connection with the
sale
of the shares offered hereby might be deemed to be “underwriters” within the
meaning of Section 2(11) of the Securities Act, and any commissions received
by
such broker-dealers and any profit on the resale of the securities sold by
them
while acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act.
To
the
extent required, the shares of our common stock to be sold, the names of
the
selling stockholders, the respective purchase prices and public offering
prices,
the names of any agents, dealer or underwriter, any applicable commissions
or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
In
order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may not
be sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
We
have
advised the selling stockholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to
the
activities of the selling stockholders and their affiliates. In addition,
we
will make copies of this prospectus (as it may be supplemented or amended
from
time to time) available to the selling stockholders for the purpose of
satisfying the prospectus delivery requirements of the Securities Act. The
selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We
have
agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating
to the
registration of the shares offered by this prospectus.
We
have
agreed with the selling stockholders to keep the registration statement of
which
this prospectus constitutes a part effective until the earlier of (1) such
time
as all of the shares covered by this prospectus have been disposed of pursuant
to and in accordance with the registration statement or (2) the date on which
the shares may be sold pursuant to Rule 144(k) of the Securities
Act.
Shares
Eligible For Future Sale
Upon
completion of this offering and assuming the issuance of all of the shares
covered by this prospectus that are issuable upon the exercise or conversion
of
convertible securities, there will be 62,392,228 shares of our common stock
issued and outstanding. The shares purchased in this offering will be freely
tradable without registration or other restriction under the Securities Act,
except for any shares purchased by an “affiliate” of our company (as defined in
the Securities Act).
Notwithstanding
the foregoing, Lester E. Lipschutz (as trustee for various trusts), J. Jay
Lobell, Timothy McInerney (a director of our company), Stephen C. Rocamboli,
Jason Stein and Michael Weiser (a director of our company), all of whom were
former stockholders of Tarpan Therapeutics, Inc., entered into an agreement
with
us in connection with our acquisition of Tarpan pursuant to which such persons
agreed not to sell or dispose of the shares they acquired in connection with
our
acquisition of Tarpan for a period of at least 90 days following the effective
date of the registration statement that included this prospectus. This agreement
relates to an aggregate of 7,237,972 shares of our common stock, or
approximately 67 percent of the shares we issued in connection with the Tarpan
acquisition.
Our
currently outstanding shares that were issued in reliance upon the “private
placement” exemptions provided by the Act are deemed “restricted securities”
within the meaning of Rule 144. Restricted securities may not be sold unless
they are registered under the Securities Act or are sold pursuant to an
applicable exemption from registration, including an exemption under Rule
144 of
the Securities Act. The 18,689,916 restricted shares of our common stock
that
were issued in connection with the February 2003 merger with Manhattan Research
Development, Inc. are now eligible for resale, provided that all of the other
requirements of Rule 144 can be satisfied.
In
general, under Rule 144 as currently in effect, any person (or persons whose
shares are aggregated) including persons deemed to be affiliates, whose
restricted securities have been fully paid for and held for at least one
year
from the later of the date of issuance by us or acquisition from an affiliate,
may sell such securities in broker’s transactions or directly to market makers,
provided that the number of shares sold in any three month period may not
exceed
the greater of 1 percent of the then-outstanding shares of our common stock
or
the average weekly trading volume of our shares of common stock in the
over-the-counter market during the four calendar weeks preceding the sale.
Sales
under Rule 144 are also subject to certain notice requirements and the
availability of current public information about our company. After two years
have elapsed from the later of the issuance of restricted securities by us
or
their acquisition from an affiliate, such securities may be sold without
limitation by persons who are not affiliates under the rule.
Following
the date of this prospectus, we cannot predict the effect, if any, that sales
of
our common stock or the availability of our common stock for sale will have
on
the market price prevailing from time to time. Nevertheless, sales by existing
stockholders of substantial amounts of our common stock could adversely affect
prevailing market prices for our stock.
General
Our
certificate of incorporation, as amended to date, authorizes us to issue
up to
150,000,000 shares of common stock and 10,000,000 shares of preferred stock.
As
of September 20, 2005, we had 59,413,271 shares of common stock and no shares
of
preferred stock issued and outstanding. The transfer agent and registrar
for our
common stock is Continental Stock Transfer and Trust Company, New York, New
York.
Common
Stock
Holders
of our common stock are entitled to one vote for each share on all matters
to be
voted on by our stockholders. Holders of our common stock do not have any
cumulative voting rights. Common stockholders are entitled to share ratably
in
any dividends that may be declared from time to time on the common stock
by our
board of directors from funds legally available for dividends. Holders of
common
stock do not have any preemptive right to purchase shares of common stock.
There
are no conversion rights or sinking fund provisions for our common
stock.
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Pursuant
to our certificate of incorporation and bylaws, we may indemnify an officer
or
director who is made a party to any proceeding, because of his position as
such,
to the fullest extent authorized by Delaware General Corporation Law, as
the
same exists or may hereafter be amended. In certain cases, we may advance
expenses incurred in defending any such proceeding.
To
the
extent that indemnification for liabilities arising under the Securities
Act may
be permitted to directors, officers or persons controlling our company pursuant
to the foregoing provisions, we have been informed that, in the opinion of
the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
If a
claim for indemnification against such liabilities (other than the payment
by us
of expenses incurred or paid by a director, officer or controlling person
of our
company in the successful defense of any action, suit or proceeding) is asserted
by any of our directors, officers or controlling persons in connection with
the
securities being registered, we will, unless in the opinion of our counsel
the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us
is
against public policy as expressed in the Securities Act and will be governed
by
the final adjudication of that issue.
This
prospectus is not an offer or solicitation in respect to these securities
in any
jurisdiction in which such offer or solicitation would be unlawful. This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission. The registration statement that contains this
prospectus (including the exhibits to the registration statement) contains
additional information about our company and the securities offered under
this
prospectus. That registration statement can be read at the SEC web site or
at
the SEC’s offices mentioned under the heading “Where You Can Find More
Information.” We have not authorized anyone else to provide you with different
information or additional information. You should not assume that the
information in this prospectus, or any supplement or amendment to this
prospectus, is accurate at any date other than the date indicated on the
cover
page of such documents.
Federal
securities law requires us to file information with the SEC concerning our
business and operations. Accordingly, we file annual, quarterly, and special
reports, proxy statements and other information with the SEC. You can inspect
and copy this information at the Public Reference Facility maintained by
the SEC
at Judiciary Plaza, 450 5th Street, N.W., Room 1024, Washington, D.C. 20549.
You
can receive additional information about the operation of the SEC’s Public
Reference Facilities by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a web site at http://www.sec.gov
that
contains reports, proxy and information statements and other information
regarding companies that, like us, file information electronically with the
SEC.
Legal
matters in connection with the validity of the shares offered by this prospectus
will be passed upon by Maslon Edelman Borman & Brand, LLP, Minneapolis,
Minnesota.
The
consolidated financial statements of Manhattan Pharmaceuticals, Inc. as of
December 31, 2004 and 2003, and for the years then ended and the period from
August 6, 2001 (date of inception) to December 31, 2004, included in this
prospectus, have been included herein in reliance on the report, dated March
18,
2005, of J.H. Cohn LLP, independent registered public accounting firm, given
on
the authority of that firm as experts in accounting and auditing.
The
financial statements of Tarpan Therapeutics, Inc. as of December 31, 2004
and
2003, and for the year ended December 31, 2004, the period from July 16,
2003
(inception) to December 31, 2003, and the period from July 16, 2003 (inception)
to December 31, 2004, included in this prospectus, have been included herein
in
reliance on the report, dated April 1, 2005, of J.H. Cohn LLP, independent
registered public accounting firm, given on the authority of that firm as
experts in accounting and auditing.
|
Page
|
|
|
Unaudited
Interim Consolidated Financial Statements of Manhattan Pharmaceuticals,
Inc. and Subsidiaries:
|
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
|
|
Audited
Financial Statements of Manhattan Pharmaceuticals, Inc. and
Subsidiaries:
|
|
|
|
F-12
|
|
|
F-13
|
|
|
F-14
|
|
|
F-15
|
|
|
F-16
|
|
|
F-17
|
|
Unaudited
Interim Financial Statements of Tarpan Therapeutics, Inc.
|
|
|
|
F-34
|
|
|
F-35
|
|
|
F-36
|
|
|
F-37
|
|
|
F-38
|
|
Audited
Financial Statements of Tarpan Therapeutics, Inc.:
|
|
|
|
F-40
|
|
|
F-41
|
|
|
F-42
|
|
|
F-43
|
|
|
F-44
|
|
|
F-45
|
|
Unaudited
Pro Forma Condensed Combined Financial Statements Reflecting
Manhattan
Pharmaceuticals, Inc.’s acquisition of Tarpan Therapeutics,
Inc.:
|
|
|
Introduction
to the Unaudited Pro Forma Condensed Combined Financial
Statements
|
F-51
|
|
Unaudited
Pro Forma Condensed Combined Statements of Operations for the
Six
Months Ended June 30, 2005
|
F-53
|
|
Unaudited
Pro Forma Condensed Combined Statements of Operations for
the Year
Ended December 31, 2004
|
F-54
|
|
Notes
to Unaudited Pro Forma Condensed Combined Financial
Statements
|
F-55
|
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
(Unaudited)
|
June
30,
|
December
31,
|
||||||
|
Assets
|
2005
|
2004
|
|||||
|
Current
assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
889,864
|
$
|
905,656
|
|||
|
Short-term
investments, available for sale, at market
|
1,505,853
|
4,514,216
|
|||||
|
Prepaid
expenses
|
17,012
|
40,126
|
|||||
|
Total
current assets
|
2,412,729
|
5,459,998
|
|||||
|
Property
and equipment, net
|
115,891
|
119,017
|
|||||
|
Other
assets
|
70,506
|
70,506
|
|||||
|
Total
assets
|
$
|
2,599,126
|
$
|
5,649,521
|
|||
|
Liabilities
and Stockholders’ Equity
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
1,302,961
|
$
|
1,143,603
|
|||
|
Accrued
expenses
|
148,074
|
52,102
|
|||||
|
Total
current liabilities
|
1,451,035
|
1,195,705
|
|||||
|
Notes
payable to related parties
|
324,392
|
—
|
|||||
|
Total
liabilities
|
1,775,427
|
1,195,705
|
|||||
|
Commitments
and Contingencies
|
|||||||
|
Stockholders’
equity:
|
|||||||
|
Series
A convertible preferred stock, $.001 par value.
|
|||||||
|
Authorized
1,500,000 shares; 731,964 and 854,373 shares issued and
|
|||||||
|
outstanding
at June 30, 2005 and December 31, 2004, respectively
|
|||||||
|
(liquidation
preference aggregating $7,369,640 and $8,973,730 at
|
|||||||
|
June
30, 2005 and December 31, 2004, respectively)
|
732
|
854
|
|||||
|
Common
stock, $.001 par value. Authorized 150,000,000 shares;
|
|||||||
|
40,820,601
and 28,309,187 shares issued and outstanding
|
|||||||
|
at
June 30, 2005 and December 31, 2004, respectively
|
40,821
|
28,309
|
|||||
|
Additional
paid-in capital
|
29,789,111
|
18,083,208
|
|||||
|
Deficit
accumulated during development stage
|
(28,993,575
|
)
|
(13,955,035
|
)
|
|||
|
Dividends
payable in Series A preferred shares
|
75,738
|
303,411
|
|||||
|
Accumulated
other comprehensive income
|
—
|
13,237
|
|||||
|
Unearned
consulting services
|
(89,128
|
)
|
(20,168
|
)
|
|||
|
Total
stockholders’ equity
|
823,699
|
4,453,816
|
|||||
|
Total
liabilities and stockholders' equity
|
$
|
2,599,126
|
$
|
5,649,521
|
|||
See
accompanying notes to unaudited condensed consolidated financial
statements.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
(Unaudited)
|
Cumulative
|
||||||||||
|
period
from
|
||||||||||
|
August
6, 2001
|
||||||||||
|
(inception)
to
|
||||||||||
|
Six
Months ended June 30,
|
June
30,
|
|||||||||
|
2005
|
2004
|
2005
|
||||||||
|
Revenue
|
$—
|
$—
|
$—
|
|||||||
|
Costs
and expenses:
|
||||||||||
|
Research
and development
|
1,921,275
|
1,228,234
|
8,523,709
|
|||||||
|
General
and administrative
|
1,046,403
|
880,993
|
5,171,893
|
|||||||
|
In-process
research and development charge
|
11,887,807
|
—
|
11,887,807
|
|||||||
|
Impairment
of intangible assets
|
—
|
—
|
1,248,230
|
|||||||
|
Loss
on disposition of intangible assets
|
—
|
—
|
1,213,878
|
|||||||
|
Total
operating expenses
|
14,855,485
|
2,109,227
|
28,045,517
|
|||||||
|
Operating
loss
|
(14,855,485
|
)
|
(2,109,227
|
)
|
(28,045,517
|
)
|
||||
|
Other
(income) expense:
|
||||||||||
|
Interest
and other income
|
(68,346
|
)
|
(81,091
|
)
|
(260,035
|
)
|
||||
|
Interest
expense
|
—
|
—
|
23,893
|
|||||||
|
Realized
gain on sale of marketable equity securities
|
—
|
(71,182
|
)
|
(71,182
|
)
|
|||||
|
Total
other income
|
(68,346
|
)
|
(152,273
|
)
|
(307,324
|
)
|
||||
|
Net
loss
|
(14,787,139
|
)
|
(1,956,954
|
)
|
(27,738,193
|
)
|
||||
|
Preferred
stock dividends (including imputed amounts)
|
(251,401
|
)
|
(392,805
|
)
|
(1,255,382
|
)
|
||||
|
Net
loss applicable to common shares
|
$
|
(15,038,540
|
)
|
$
|
(2,349,759
|
)
|
$
|
(28,993,575
|
)
|
|
|
Net
loss per common share:
|
||||||||||
|
Basic
and diluted
|
$
|
(0.43
|
)
|
$
|
(0.09
|
)
|
||||
|
Weighted
average shares of common stock outstanding:
|
||||||||||
|
Basic
and diluted
|
34,663,130
|
26,444,118
|
||||||||
See
accompanying notes to unaudited condensed consolidated financial
statements.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
(Unaudited)
|
Dividends
|
||||||||||||||||||||||||||||||||||
|
Deficit
|
payable
|
Total
|
||||||||||||||||||||||||||||||||
|
Series
A
|
accumulated
|
in
|
Accumulated
|
stock–
|
||||||||||||||||||||||||||||||
|
convertible
|
Additional
|
during
|
Series
A
|
other
|
Unearned
|
holders'
|
||||||||||||||||||||||||||||
|
preferred
stock
|
Common
stock
|
paid-in
|
Subscription
|
development
|
preferred
|
comprehensive
|
consulting
|
equity
|
||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
receivable
|
stage
|
shares
|
income/(loss)
|
costs
|
(deficiency)
|
||||||||||||||||||||||||
|
Stock
issued at $0.0004 per share for
|
||||||||||||||||||||||||||||||||||
|
subscription
receivable
|
—
|
$
|
—
|
10,167,741
|
$
|
10,168
|
$
|
(6,168
|
)
|
$
|
(4,000
|
)
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(56,796
|
)
|
—
|
—
|
—
|
(56,796
|
)
|
|||||||||||||||||||||
|
Balance
at December 31, 2001
|
—
|
—
|
10,167,741
|
10,168
|
(6,168
|
)
|
(4,000
|
)
|
(56,796
|
)
|
—
|
—
|
—
|
(56,796
|
)
|
|||||||||||||||||||
|
Proceeds
from subscription receivable
|
—
|
—
|
—
|
—
|
—
|
4,000
|
—
|
—
|
—
|
—
|
4,000
|
|||||||||||||||||||||||
|
Stock
issued at $0.0004 per share for
|
||||||||||||||||||||||||||||||||||
|
license
rights
|
—
|
—
|
2,541,935
|
2,542
|
(1,542
|
)
|
—
|
—
|
—
|
—
|
—
|
1,000
|
||||||||||||||||||||||
|
Stock
options issued for consulting services
|
—
|
—
|
—
|
—
|
60,589
|
—
|
—
|
—
|
—
|
(60,589
|
)
|
—
|
||||||||||||||||||||||
|
Amortization
of unearned consulting services
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
22,721
|
22,721
|
|||||||||||||||||||||||
|
Sales
of common stock at $0.63 per share
|
||||||||||||||||||||||||||||||||||
|
through
private placement, net of
|
||||||||||||||||||||||||||||||||||
|
expenses
|
—
|
—
|
3,043,332
|
3,043
|
1,701,275
|
—
|
—
|
—
|
—
|
—
|
1,704,318
|
|||||||||||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(1,037,320
|
)
|
—
|
—
|
—
|
(1,037,320
|
)
|
||||||||||||||||||||||
|
Balance
at December 31, 2002
|
—
|
—
|
15,753,008
|
15,753
|
1,754,154
|
—
|
(1,094,116
|
)
|
—
|
—
|
(37,868
|
)
|
637,923
|
|||||||||||||||||||||
|
Common
stock issued at $0.63 per share, net of expenses
|
—
|
—
|
1,321,806
|
1,322
|
742,369
|
—
|
—
|
—
|
—
|
—
|
743,691
|
|||||||||||||||||||||||
|
Effect
of reverse acquisition
|
—
|
—
|
6,287,582
|
6,287
|
2,329,954
|
—
|
—
|
—
|
—
|
—
|
2,336,241
|
|||||||||||||||||||||||
|
Amortization
of unearned consulting costs
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
37,868
|
37,868
|
|||||||||||||||||||||||
|
Unrealized
loss on short-term investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(7,760
|
)
|
—
|
(7,760
|
)
|
|||||||||||||||||||||
|
Payment
for fractional shares for stock combination
|
—
|
—
|
—
|
—
|
(300
|
)
|
—
|
—
|
—
|
—
|
—
|
(300
|
)
|
|||||||||||||||||||||
|
Preferred
stock issued at $10 per share, net of expenses
|
1,000,000
|
1,000
|
—
|
—
|
9,045,176
|
—
|
—
|
—
|
—
|
—
|
9,046,176
|
|||||||||||||||||||||||
|
Imputed
preferred stock dividend
|
418,182
|
—
|
(418,182
|
)
|
—
|
—
|
||||||||||||||||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(5,960,907
|
)
|
—
|
—
|
—
|
(5,960,907
|
)
|
|||||||||||||||||||||
|
Balance
at December 31, 2003
|
1,000,000
|
1,000
|
23,362,396
|
23,362
|
14,289,535
|
—
|
(7,473,205
|
)
|
—
|
(7,760
|
)
|
—
|
6,832,932
|
|||||||||||||||||||||
|
Exercise
of stock options
|
—
|
—
|
27,600
|
27
|
30,073
|
—
|
—
|
—
|
—
|
—
|
30,100
|
|||||||||||||||||||||||
|
Common
stock issued through private placement at $1.10 per share,
net of
expenses
|
||||||||||||||||||||||||||||||||||
|
per
share, net of expenses
|
—
|
—
|
3,368,952
|
3,369
|
3,358,349
|
—
|
—
|
—
|
—
|
—
|
3,361,718
|
|||||||||||||||||||||||
|
Conversion
of preferred stock to common stock
|
(170,528
|
)
|
(171
|
)
|
1,550,239
|
1,551
|
(1,380
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||
|
Preferred
stock dividends paid by issuance of shares
|
24,901
|
25
|
—
|
—
|
281,073
|
—
|
—
|
(282,388
|
)
|
—
|
—
|
(1,290
|
)
|
|||||||||||||||||||||
|
Preferred
stock dividend accrued
|
—
|
—
|
—
|
—
|
—
|
—
|
(585,799
|
)
|
585,799
|
—
|
—
|
—
|
||||||||||||||||||||||
|
Warrants
issued for consulting services
|
—
|
—
|
—
|
—
|
125,558
|
—
|
—
|
—
|
—
|
(120,968
|
)
|
4,590
|
||||||||||||||||||||||
|
Amortization
of unearned consulting costs
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
100,800
|
100,800
|
|||||||||||||||||||||||
|
Reversal
of unrealized loss on short-term investments
|
||||||||||||||||||||||||||||||||||
|
and
unrealized gain on short-term investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
20,997
|
—
|
20,997
|
|||||||||||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(5,896,031
|
)
|
—
|
—
|
—
|
(5,896,031
|
)
|
|||||||||||||||||||||
|
Balance
at December 31, 2004
|
854,373
|
854
|
28,309,187
|
28,309
|
18,083,208
|
—
|
(13,955,035
|
)
|
303,411
|
13,237
|
(20,168
|
)
|
4,453,816
|
|||||||||||||||||||||
|
Exercise
of stock options
|
—
|
—
|
32,400
|
33
|
32,367
|
—
|
—
|
—
|
—
|
—
|
32,400
|
|||||||||||||||||||||||
|
Exercise
of warrants
|
—
|
—
|
255,342
|
255
|
68,236
|
—
|
—
|
—
|
—
|
—
|
68,491
|
|||||||||||||||||||||||
|
Conversion
of preferred stock to common stock
|
(164,190
|
)
|
(164
|
)
|
1,492,620
|
1,493
|
(1,329
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||
|
Preferred
stock dividends paid by issuance of shares
|
41,781
|
42
|
—
|
—
|
477,736
|
—
|
—
|
(479,074
|
)
|
—
|
—
|
(1,296
|
)
|
|||||||||||||||||||||
|
Preferred
stock dividend accrued
|
—
|
—
|
—
|
—
|
—
|
—
|
(251,401
|
)
|
251,401
|
—
|
—
|
—
|
||||||||||||||||||||||
|
Options
issued for consulting services
|
—
|
—
|
—
|
—
|
97,230
|
—
|
—
|
—
|
—
|
(97,230
|
)
|
—
|
||||||||||||||||||||||
|
Amortization
of unearned consulting costs
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
28,270
|
28,270
|
|||||||||||||||||||||||
|
Reversal
of unrealized gain on short-term investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(13,237
|
)
|
—
|
(13,237
|
)
|
|||||||||||||||||||||
|
Costs
associated with private placement
|
—
|
—
|
—
|
—
|
(10,590
|
)
|
—
|
—
|
—
|
—
|
—
|
(10,590
|
)
|
|||||||||||||||||||||
|
Stock
issued in connection with acquisition of Tarpan Therapeutics,
Inc.
|
—
|
—
|
10,731,052
|
10,731
|
11,042,253
|
—
|
—
|
—
|
—
|
—
|
11,052,984
|
|||||||||||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(14,787,139
|
)
|
—
|
—
|
—
|
(14,787,139
|
)
|
|||||||||||||||||||||
|
Balance
at June 30, 2005
|
731,964
|
$
|
732
|
40,820,601
|
$
|
40,821
|
$
|
29,789,111
|
$
|
—
|
$
|
(28,993,575
|
)
|
$
|
75,738
|
$
|
—
|
$
|
(89,128
|
)
|
$
|
823,699
|
||||||||||||
See
accompanying notes to unaudited condensed consolidated financial
statements.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
(Unaudited)
|
Cumulative
|
||||||||||
|
period
from
|
||||||||||
|
August
6, 2001
|
||||||||||
|
(inception)
to
|
||||||||||
|
Six
months ended June 30,
|
June
30,
|
|||||||||
|
2005
|
2004
|
2005
|
||||||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
loss
|
$
|
(14,787,139
|
)
|
$
|
(1,956,954
|
)
|
$
|
(27,738,193
|
)
|
|
|
Adjustments
to reconcile net loss to
|
||||||||||
|
net
cash used in operating activities:
|
||||||||||
|
Common
stock issued for license rights
|
—
|
—
|
1,000
|
|||||||
|
Amortization
of unearned consulting costs
|
28,270
|
40,320
|
189,659
|
|||||||
|
Warrants
issued for consulting services
|
—
|
—
|
4,590
|
|||||||
|
Amortization
of intangible assets
|
—
|
—
|
145,162
|
|||||||
|
Gain
on sale of marketable equity securities
|
—
|
—
|
(71,182
|
)
|
||||||
|
Depreciation
|
27,334
|
7,350
|
60,894
|
|||||||
|
Non
cash portion of in-process research and development charge
|
11,721,623
|
—
|
11,721,623
|
|||||||
|
Loss
on impairment of intangible assets
|
—
|
—
|
1,248,230
|
|||||||
|
Loss
on disposition of intangible assets
|
—
|
—
|
1,213,878
|
|||||||
|
Changes
in operating assets and liabilities, net of acquisitions:
|
||||||||||
|
Decrease
(increase) in prepaid expenses
|
23,114
|
(2,492
|
)
|
41,233
|
||||||
|
Increase
in other assets
|
—
|
—
|
(70,506
|
)
|
||||||
|
Increase
(decrease) in accounts payable
|
133,307
|
(135,088
|
)
|
953,175
|
||||||
|
Increase
(decrease) in accrued expenses
|
95,972
|
(206,518
|
)
|
(392,247
|
)
|
|||||
|
Net
cash used in operating activities
|
(2,757,519
|
)
|
(2,253,382
|
)
|
(12,692,684
|
)
|
||||
|
Cash
flows from investing activities:
|
||||||||||
|
Purchase
of property and equipment
|
(22,171
|
)
|
(53,992
|
)
|
(167,065
|
)
|
||||
|
Cash
paid in connection with acquisitions
|
—
|
—
|
(32,808
|
)
|
||||||
|
Purchase
of short-term investments
|
—
|
—
|
(5,000,979
|
)
|
||||||
|
Proceeds
from sale of short-term investments
|
2,995,126
|
431,089
|
3,926,215
|
|||||||
|
Proceeds
from sale of license
|
—
|
—
|
200,001
|
|||||||
|
Cash
acquired in acquisition
|
6,777
|
—
|
6,777
|
|||||||
|
Net
cash provided by (used in) investing activities
|
2,979,732
|
377,097
|
(1,067,859
|
)
|
||||||
|
Cash
flows from financing activities:
|
||||||||||
|
Proceeds
from issuances of notes payable to stockholders
|
—
|
—
|
233,500
|
|||||||
|
Repayments
of notes payable to stockholders
|
(327,010
|
)
|
—
|
(560,510
|
)
|
|||||
|
Proceeds
from issuance of note payable to bank
|
—
|
—
|
600,000
|
|||||||
|
Repayment
of note payable to bank
|
—
|
—
|
(600,000
|
)
|
||||||
|
Proceeds
from subscriptions receivable
|
—
|
—
|
4,000
|
|||||||
|
Payment
for fractional shares for stock combination
|
(1,296
|
)
|
—
|
(2,286
|
)
|
|||||
|
Proceeds
from sale of common stock, net
|
—
|
3,431,165
|
5,809,126
|
|||||||
|
Costs
associated with private placement
|
(10,590
|
)
|
(46,423
|
)
|
(10,590
|
)
|
||||
|
Proceeds
from sale of preferred stock, net
|
—
|
—
|
9,046,176
|
|||||||
|
Proceeds
from exercise of stock options
|
32,400
|
14,500
|
62,500
|
|||||||
|
Proceeds
from exercise of warrants
|
68,491
|
—
|
68,491
|
|||||||
|
Net
cash provided by (used in) financing activities
|
(238,005
|
)
|
3,399,242
|
14,650,407
|
||||||
|
Net
increase (decrease) in cash and cash equivalents
|
(15,792
|
)
|
1,522,957
|
889,864
|
||||||
|
Cash
and cash equivalents at beginning of period
|
905,656
|
7,413,803
|
—
|
|||||||
|
Cash
and cash equivalents at end of period
|
$
|
889,864
|
$
|
8,936,760
|
$
|
889,864
|
||||
|
Supplemental
disclosure of cash flow information:
|
||||||||||
|
Interest
paid
|
$
|
—
|
$
|
—
|
$
|
26,934
|
||||
|
Supplemental
disclosure of noncash investing and financing activities:
|
||||||||||
|
Stock
options/warrants issued for consulting services
|
$
|
97,230
|
$
|
120,968
|
$
|
278,787
|
||||
|
Preferred
stock dividends accrued
|
251,401
|
392,805
|
837,200
|
|||||||
|
Conversion
of preferred stock to common stock
|
164
|
—
|
335
|
|||||||
|
Preferred
stock dividends paid by issuance of shares
|
477,778
|
—
|
759,176
|
|||||||
|
Issuance
of common stock for acquisitions
|
11,052,984
|
—
|
13,389,226
|
|||||||
|
Marketable
equity securities received in connection with
|
||||||||||
|
sale
of license
|
—
|
—
|
359,907
|
|||||||
|
Subscription
receivable from exercise of options
|
—
|
15,600
|
—
|
|||||||
|
Net
liabilities assumed in business combination
|
(675,416
|
)
|
—
|
(675,416
|
)
|
|||||
See
accompanying notes to unaudited condensed consolidated financial
statements.
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
June
30,
2005
| (1) |
BASIS
OF PRESENTATION
|
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information. Accordingly,
the
consolidated financial statements do not include all information and footnotes
required by accounting principles generally accepted in the United States
of
America for complete annual financial statements. In the opinion of management,
the accompanying unaudited condensed consolidated financial statements reflect
all adjustments, consisting of only normal recurring adjustments, considered
necessary for a fair presentation. Interim operating results are not necessarily
indicative of results that may be expected for the year ending December 31,
2005 or for any subsequent period. These unaudited condensed consolidated
financial statements should be read in conjunction with audited financial
statements of Manhattan Pharmaceuticals, Inc. and its subsidiaries (“Manhattan”
or the “Company”) as of and for the year ended December 31, 2004, which are
included elsewhere in this prospectus. The condensed consolidated balance
sheet
as of December 31, 2004 has been derived from the audited consolidated financial
statements included elsewhere in this prospectus.
| (2) |
LIQUIDITY
|
The
Company reported a net loss of $14,787,139 and negative cash flows from
operating activities of $2,757,519 for the six months ended June 30, 2005.
The
net loss from date of inception, August 6, 2001, to June 30, 2005 amounts
to
$27,738,193.
Management
believes that the Company will continue to incur net losses and negative
cash
flows from operating activities through at least June 30, 2006. Based on
the
resources of the Company available at June 30, 2005, management believes
that
the Company will need additional equity or debt financing or will need to
generate revenues during 2005 through licensing of its products or entering
into
strategic alliances to be able to sustain its operations through 2005 and
that
it will need additional financing thereafter until it can achieve profitability,
if ever. These matters raise substantial doubt about the Company’s ability to
continue as a going concern.
The
Company’s continued operations will depend on its ability to raise additional
funds through various potential sources such as equity and debt financing,
collaborative agreements, strategic alliances and its ability to realize
the
full potential of its technology in development. Additional funds may not
become
available on acceptable terms, and there can be no assurance that any additional
funding that the Company does obtain will be sufficient to meet the Company’s
needs in the long term. Through June 30, 2005, a significant portion of the
Company’s financing has been through private placements of common and preferred
stock. Until and unless the Company’s operations generate significant revenues
and cash flows from operating activities, the Company will attempt to continue
to fund operations from cash on hand and through the sources of capital
previously described. See Note 6 below.
| (3) |
COMPUTATION
OF NET LOSS PER COMMON SHARE
|
Basic
net
loss per common share is calculated by dividing net loss applicable to common
shares by the weighted-average number of common shares outstanding for the
period. Diluted net loss per common share is the same as basic net loss per
common share, since potentially dilutive securities from stock options, stock
warrants and convertible preferred stock would have an antidilutive effect
because the Company incurred a net loss during each period presented. The
amount
of potentially dilutive securities excluded from the calculation was 16,349,537
and 15,970,578 as of June 30, 2005 and 2004, respectively.
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June
30,
2005
| (4) |
STOCK
OPTIONS
|
On
January 11, 2005, the Company granted directors and employees options to
purchase an aggregate of 367,280 shares of common stock under the Company’s 2003
Stock Option Plan at an exercise price of $1.00 per share. 168,030 shares
subject to these options vest in three equal annual installments starting
on the
grant date and
continuing each anniversary thereafter,
provided the optionee continues in service. 50,000 shares subject to these
options vest in two equal annual installments starting on January 3, 2006,
provided the optionee continues in service, and 149,250 shares subject to
these
options vest in three equal annual installments starting one year from the
grant
date, provided the optionee continues in service. On April 1, 2005, the Company
granted its chief executive officer an option to purchase an
aggregate
of 2,923,900 shares of common stock under the Company’s 2003 Stock Option Plan
at an exercise price of $1.50 per share. The option vests in three equal
installments, on November 1, 2005, November 1, 2006 and November 1, 2007.
On
June 16, 2005, the Company granted a consultant options to purchase an aggregate
of 100,000 shares of common stock under the Company’s 2003 Stock Option Plan at
an exercise price of $1.60 per share. All shares subject to these options
vest
in thirty-six equal monthly installments beginning on the first month
anniversary of the date of the grant, provided the consultant continues to
provide services to the Company.
The
Company uses the intrinsic value method of accounting for employee stock
options
pursuant to the provisions of APB Opinion No. 25. Since all of the options
granted by the Company have been at exercise prices that were at least equal
to
the market value at the date of grant, there were no charges to operations
upon
issuance. Had compensation costs been determined using the Black-Scholes
option
pricing model in accordance with the fair value method prescribed by SFAS
No. 123 for all options issued to employees and amortized over the
vesting
period, the Company’s net loss applicable to common shares and net loss per
common share (basic and diluted) would have been increased to the pro forma
amounts indicated below.
|
Six
months ended
|
|||||||
|
June
30,
|
|||||||
|
2005
|
2004
|
||||||
|
Net
loss applicable to common shares, as reported
|
$
|
(15,038,540
|
)
|
$
|
(2,349,759
|
)
|
|
|
Deduct:
Total stock-based employee
|
|||||||
|
compensation
expense determined
|
|||||||
|
under
fair value method
|
(561,219
|
)
|
(564,288
|
)
|
|||
|
Net
loss applicable to common shares, pro forma
|
$
|
(15,599,759
|
)
|
$
|
(2,914,047
|
)
|
|
|
Net
loss per common share – basic
|
|||||||
|
As
reported
|
$
|
(0.43
|
)
|
$
|
(0.09
|
)
|
|
|
Pro
forma
|
(0.45
|
)
|
(0.11
|
)
|
|||
As
a
result of amendments to SFAS No. 123, the Company will be required to expense
the fair value of employee stock options over the vesting period, beginning
January 1, 2006.
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June
30,
2005
The
fair
value of each option granted is estimated on the date of the grant using
the
Black-Scholes option pricing model with the following weighted average
assumptions used for the grants in the six months ended June 30, 2005: dividend
yield of 0%; expected volatility of 70%; risk-free interest rate of 3.7%;
and
expected lives of five years. The following assumptions were used for the
grants
in the six months ended June 30, 2004: dividend yield of 0%; expected volatility
of 82%; risk-free interest rate of 3.2%; and expected lives of eight years.
| (5) |
ACQUISITION
OF TARPAN THERAPEUTICS, INC.
|
On
April
1, 2005, the Company entered into an Agreement and Plan of
Merger (the
“Agreement”) with Tarpan Therapeutics, Inc., a Delaware corporation (“Tarpan”),
and Tarpan Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of the Company (“TAC”). The Agreement provided that TAC would merge with and
into Tarpan, with Tarpan remaining as the surviving corporation and a
wholly-owned subsidiary of the Company (the “Merger”). The Merger was completed
April 1, 2005. In consideration for their shares of Tarpan capital stock
and in
accordance with the Agreement, the stockholders of Tarpan received 10,731,052
shares of the Company’s common stock such that, upon the effective time of the
Merger, the Tarpan stockholders collectively received approximately
20
percent of the Company’s outstanding common stock on a fully-diluted basis.
Based on the five day average price of the Company’s common stock of $1.03 per
share, the purchase price totaled $11,052,984, plus $166,184 of acquisition
costs. At the time of the Merger, Tarpan had outstanding indebtedness of
$651,000 resulting from a series of promissory notes issued to Paramount
BioCapital Investments, LLC and Horizon BioMedical Ventures, LLC, both of
which
are owned or controlled by Dr. Lindsay Rosenwald. The notes were amended
at the
time of the Merger to provide that one-half of the outstanding indebtedness
was
payable upon completion of the Merger and the remaining one-half will be
payable
at such time as the Company raises at least $5 million in new
financing.
The
acquisition of Tarpan has been accounted for by the Company under the purchase
method of accounting in accordance with Statement of Financial Accounting
Standards No. 141 “Business Combinations”. Under the purchase method, assets
acquired and liabilities assumed by the Company are recorded at their estimated
fair values and the results of operations of the acquired company are
consolidated with those of the Company from the date of
acquisition.
Several
of Tarpan’s former stockholders are directors or significant stockholders of the
Company. Dr. Rosenwald and various trusts established for the benefit of
Dr.
Rosenwald and members of his immediate family collectively beneficially owned
approximately 46 percent of Tarpan’s common stock and beneficially own
approximately 26 percent of the Company’s common stock. In addition,
Joshua Kazam, David Tanen, Dr. Michael Weiser and Timothy McInerney, all
of whom
are members of the Company’s board of directors, collectively owned
approximately 13.4 percent of Tarpan’s outstanding common stock. Dr. Weiser and
Mr. McInerney are also employed by Paramount BioCapital, Inc., an entity
owned
and controlled by Dr. Rosenwald. As a result of such relationships between
the
Company and Tarpan, the Company’s board of directors established a special
committee to consider and approve the Agreement. The members of the special
committee did not have any prior relationship with
Tarpan.
F-9
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June
30,
2005
Upon
completion of the Merger, Douglas Abel, formerly chief executive officer
of
Tarpan, was appointed President and Chief Executive Officer of the Company.
Pursuant to the agreement, the Company entered into an employment agreement
dated April 1, 2005 with Mr. Abel. This agreement has a three-year term
commencing on April 1, 2005, which may be extended for additional one year
periods thereafter. Under the agreement, Mr. Abel is entitled to an annual
salary of $300,000, in addition to health, disability insurance and other
benefits. The annual salary shall be increased to $325,000 at such time as
the
Company completes a financing transaction that results in aggregate gross
proceeds to the Company of at least $5,000,000, retroactive to the date of
the
employment agreement. In addition, the Company will pay Mr. Abel a cash bonus
of
$200,000 in the first year and he may receive a discretionary bonus in the
first
and subsequent years of up to 50 percent of his base salary. Pursuant to
his
employment agreement, Mr. Abel was granted an option to purchase an aggregate
of
2,923,900 shares of common stock at a price of $1.50 per share. The option
vests
in three equal installments, on November 1, 2005, November 1, 2006, and November
1, 2007.
The
excess purchase price paid by the Company to acquire the net assets of Tarpan
was allocated to acquired in-process research and development totaling
$11,887,807. As required by FASB Interpretation No. 4, “Applicability of FASB
Statement No. 2 to Business combinations Accounted for by the Purchase Method
“
(“FIN4”), the Company recorded a charge in its statements of operations for the
three and six months ended June 30, 2005 for the in-process research and
development. Tarpan is a biopharmaceutical company engaged in the development
of
the Phase II pharmaceutical product candidate, PTH (1-34). The acquisition
of
Tarpan gives Manhattan this third product candidate. Results of operations
of
Tarpan are included in the consolidated financials since April 1, 2005.
A
summary
of the purchase price is as follows:
|
Assets
purchased:
|
||||
|
Cash
|
$
|
6,777
|
||
|
Property
and equipment
|
2,037
|
|||
|
Acquired
in-process research and development
|
11,887,807
|
|||
|
Total
|
11,896,621
|
|||
|
Liabilities:
|
||||
|
Accounts
payable
|
26,051
|
|||
|
Notes
payable - related parties
|
651,402
|
|||
|
Total
|
677,453
|
|||
|
Net
purchase price
|
$
|
11,219,168
|
The
following unaudited pro forma financial information presents the condensed
consolidated results of operations of the Company and Tarpan, as if the
acquisition had occurred on January 1, 2005 and 2004 instead of April 1,
2005,
after giving effect to certain adjustments, including the issuance of the
Company’s common stock as part of the purchase price. The pro forma information
does not necessarily reflect the results of operations that would have occurred
had the entities been a single company during the period.
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June
30,
2005
|
Six
months ended
|
|||||||
|
June
30,
|
|||||||
|
2005
|
2004
|
||||||
|
Net
loss
|
$
|
(14,914,400
|
)
|
$
|
(14,150,463
|
)
|
|
|
Weighted
average number of common shares outstanding
|
40,058,300
|
37,175,170
|
|||||
|
Loss
per common share - basic and fully diluted
|
$
|
(0.37
|
)
|
$
|
(0.38
|
)
|
|
(6) SUBSEQUENT
EVENT - PRIVATE PLACEMENT
The
Company recently completed a private placement offering of units consisting
of
shares of the Company’s common stock and warrants to purchase additional shares
of common stock. The private placement was completed in two separate closings
held on August 26, 2005 and August 30, 2005. In the August 26 closing,
the
Company sold a total of 10,808,971 shares of common stock and five-year
warrants
to purchase 2,161,767 shares for total gross proceeds of approximately
$12
million. The warrants issued at the August 26 closing are exercisable at
a price
of $1.44 per share. On August 30, 2005, the Company closed on the sale
of an
additional 1,108,709 shares of common stock and warrants to purchase 221,741
common shares, which resulted in gross proceeds of approximately $1.28
million.
The warrants issued in connection with the August 30 closing are exercisable
at
a price of $1.49 per share. Accordingly, the total gross proceeds resulting
from
the private placement was $13.27 million, before deducting selling commissions
and expenses.
The
Company engaged Paramount BioCapital, Inc. as placement agent and paid
total
cash commissions of $836,360, of which $121,625 was paid to certain selected
dealers engaged by Paramount in connection with the private placement and
issued
five-year warrants to purchase an aggregate of 538,191 shares of common
stock
exercisable at a price of $1.44 per share, of which Paramount received
warrants
to purchase 459,932 common shares. In connection with the August 30 closing,
the
Company paid cash commissions to Paramount of $88,550 and issued an additional
five-year warrant to purchase 55,000 common shares at a price of $1.49
per
share. After deduction of these selling commissions and expenses, the Company
realized aggregate net proceeds from the Company’s August 2005 private placement
of approximately $12.2 million.
As
a
result of this offering, the Company expects that the its current cash
position
is sufficient to fund the Company’s operations, including the development of the
Company’s three product candidates, through late 2006.
The
Board
of Directors and Stockholders
Manhattan
Pharmaceuticals, Inc.
We
have
audited the accompanying consolidated balance sheets of Manhattan
Pharmaceuticals, Inc. and Subsidiaries (a development stage company) as of
December 31, 2004 and 2003, and the related consolidated statements of
operations, stockholders' equity (deficiency) and cash flows for the years
then
ended, and for the period from August 6, 2001 (date of inception) to December
31, 2004. These consolidated financial statements are the responsibility
of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the consolidated financial position of Manhattan
Pharmaceuticals, Inc. and Subsidiaries as of December 31, 2004 and 2003,
and
their consolidated results of operations and cash flows for the years then
ended
and for the period from August 6, 2001 (date of inception) to December 31,
2004,
in conformity with accounting principles generally accepted in the United
States
of America.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note 2, the
Company incurred a net loss of $5,896,031 and used $5,690,445 of cash in
operating activities during the year ended December 31, 2004 and, as of that
date, it had a loss from inception of $12,951,054. These matters raise
substantial doubt about the Company’s ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 2.
The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/J.H.
Cohn LLP
Roseland,
New Jersey
March
18,
2005
|
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
|
|||||||||||
|
(A
Development Stage Company)
|
|||||||||||
|
|
|
December
31,
|
December
31,
|
||||
|
Assets
|
2004
|
2003
|
|||||
| Current assets: | |||||||
|
Cash
and cash equivalents
|
$
|
905,656
|
$
|
7,413,803
|
|||
|
Short-term
investments, available for sale, at market
|
4,514,216
|
352,147
|
|||||
|
Prepaid
expenses
|
40,126
|
24,981
|
|||||
|
Total
current assets
|
5,459,998
|
7,790,931
|
|||||
| Property and equipment, net |
119,017
|
8,021
|
|||||
| Other assets |
70,506
|
—
|
|||||
|
Total
assets
|
$
|
5,649,521
|
$
|
7,798,952
|
|||
|
Liabilities
and Stockholders’ Equity
|
|||||||
| Current liabilities: | |||||||
|
Accounts
payable
|
$
|
1,143,603
|
$
|
548,595
|
|||
|
Accrued
expenses
|
52,102
|
417,425
|
|||||
|
Total
liabilities
|
1,195,705
|
966,020
|
|||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
|
Series
A convertible preferred stock, $.001 par value.
|
|||||||
|
Authorized
1,500,000 shares; 854,373 and 1,000,000 shares issued and
|
|||||||
|
outstanding
at December 31, 2004 and December 31, 2003, respectively
|
|||||||
|
(liquidation
preference aggregating $8,973,730 and $10,000,000 at
|
|||||||
|
December
31, 2004 and 2003, respectively)
|
854
|
1,000
|
|||||
|
Common
stock, $.001 par value. Authorized 150,000,000 shares;
|
|||||||
|
28,309,187
and 23,362,396 shares issued and outstanding
|
|||||||
|
at
December 31, 2004 and December 31, 2003, respectively
|
28,309
|
23,362
|
|||||
|
Additional
paid-in capital
|
18,083,208
|
14,289,535
|
|||||
|
Deficit
accumulated during development stage
|
(13,955,035
|
)
|
(7,473,205
|
)
|
|||
|
Dividends
payable in Series A preferred shares
|
303,411
|
—
|
|||||
|
Accumulated
other comprehensive income (loss)
|
13,237
|
(7,760
|
)
|
||||
|
Unearned
consulting costs
|
(20,168
|
)
|
—
|
||||
|
Total
stockholders’ equity
|
4,453,816
|
6,832,932
|
|||||
|
Total
liabilities and stockholders' equity
|
$
|
5,649,521
|
$
|
7,798,952
|
|||
|
See
accompanying notes to consolidated financial
statements.
|
|
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
|
|||||||||||||
|
(A
Development Stage Company)
|
|||||||||||||
|
Cumulative
|
||||||||||
|
period
from
|
||||||||||
|
August
6, 2001
|
||||||||||
|
(inception)
to
|
||||||||||
|
Years
ended December 31,
|
December
31,
|
|||||||||
|
2004
|
2003
|
2004
|
||||||||
|
Revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
Costs
and expenses:
|
||||||||||
|
Research
and development
|
4,152,994
|
1,724,043
|
6,602,434
|
|||||||
|
General
and administrative
|
1,989,829
|
1,786,080
|
4,125,490
|
|||||||
|
Impairment
of intangible assets
|
—
|
1,248,230
|
1,248,230
|
|||||||
|
Loss
on disposition of intangible assets
|
—
|
1,213,878
|
1,213,878
|
|||||||
|
Total
operating expenses
|
6,142,823
|
5,972,231
|
13,190,032
|
|||||||
|
Operating
loss
|
(6,142,823
|
)
|
(5,972,231
|
)
|
(13,190,032
|
)
|
||||
|
Other
(income) expense:
|
||||||||||
|
Interest
and other income
|
(175,610
|
)
|
(16,079
|
)
|
(191,689
|
)
|
||||
|
Interest
expense
|
—
|
4,755
|
23,893
|
|||||||
|
Realized
gain on sale of short-term investments
|
(71,182
|
)
|
—
|
(71,182
|
)
|
|||||
|
Total
other income
|
(246,792
|
)
|
(11,324
|
)
|
(238,978
|
)
|
||||
|
Net
loss
|
(5,896,031
|
)
|
(5,960,907
|
)
|
(12,951,054
|
)
|
||||
|
Preferred
stock dividends (including imputed amounts)
|
(585,799
|
)
|
(418,182
|
)
|
(1,003,981
|
)
|
||||
|
Net
loss applicable to common shares
|
$
|
(6,481,830
|
)
|
$
|
(6,379,089
|
)
|
$
|
(13,955,035
|
)
|
|
|
Net
loss per common share:
|
||||||||||
|
Basic
and diluted
|
$
|
(0.24
|
)
|
$
|
(0.28
|
)
|
||||
|
Weighted
average shares of common stock outstanding:
|
||||||||||
|
Basic
and diluted
|
26,936,658
|
22,389,755
|
||||||||
|
See
accompanying notes to consolidated financial
statements.
|
|
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||
|
(A
Development Stage Company)
|
||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||
|
Series
A
|
Deficit accumulated |
Dividends payable
in |
Accumulated
|
Total
stock-
|
||||||||||||||||||||||||||||||
|
convertible
|
Additional
|
during
|
Series
A
|
other
|
Unearned
|
holders'
|
||||||||||||||||||||||||||||
|
preferred
stock
|
Common
stock
|
paid-in
|
Subscription
|
development
|
preferred
|
comprehensive
|
consulting
|
equity
|
||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
receivable
|
stage
|
shares
|
income/(loss)
|
costs
|
(deficiency)
|
||||||||||||||||||||||||
|
Stock
issued at $0.0004 per share for subscription
|
||||||||||||||||||||||||||||||||||
|
receivable
|
—
|
$
|
—
|
10,167,741
|
$
|
10,168
|
$
|
(6,168
|
)
|
$
|
(4,000
|
)
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(56,796
|
)
|
—
|
—
|
—
|
(56,796
|
)
|
|||||||||||||||||||||
|
Balance
at December 31, 2001
|
—
|
—
|
10,167,741
|
10,168
|
(6,168
|
)
|
(4,000
|
)
|
(56,796
|
)
|
—
|
—
|
—
|
(56,796
|
)
|
|||||||||||||||||||
|
Proceeds
from subscription receivable
|
—
|
—
|
—
|
—
|
—
|
4,000
|
—
|
—
|
—
|
—
|
4,000
|
|||||||||||||||||||||||
|
Stock
issued at $0.0004 per share for
|
||||||||||||||||||||||||||||||||||
|
license
rights
|
—
|
—
|
2,541,935
|
2,542
|
(1,542
|
)
|
—
|
—
|
—
|
—
|
—
|
1,000
|
||||||||||||||||||||||
|
Stock
options issued for consulting services
|
—
|
—
|
—
|
—
|
60,589
|
—
|
—
|
—
|
—
|
(60,589
|
)
|
—
|
||||||||||||||||||||||
|
Amortization
of unearned consulting services
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
22,721
|
22,721
|
|||||||||||||||||||||||
|
Sales
of common stock at $0.63 per sharethrough
|
||||||||||||||||||||||||||||||||||
|
private
placement, net of expenses
|
—
|
—
|
3,043,332
|
3,043
|
1,701,275
|
—
|
—
|
—
|
—
|
—
|
1,704,318
|
|||||||||||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(1,037,320
|
)
|
—
|
—
|
—
|
(1,037,320
|
)
|
||||||||||||||||||||||
|
Balance
at December 31, 2002
|
—
|
—
|
15,753,008
|
15,753
|
1,754,154
|
—
|
(1,094,116
|
)
|
—
|
—
|
(37,868
|
)
|
637,923
|
|||||||||||||||||||||
|
Common
stock issued at $0.63 per share, net of expenses
|
—
|
—
|
1,321,806
|
1,322
|
742,369
|
—
|
—
|
—
|
—
|
—
|
743,691
|
|||||||||||||||||||||||
|
Effect
of reverse acquisition
|
—
|
—
|
6,287,582
|
6,287
|
2,329,954
|
—
|
—
|
—
|
—
|
—
|
2,336,241
|
|||||||||||||||||||||||
|
Amortization
of unearned consulting costs
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
37,868
|
37,868
|
|||||||||||||||||||||||
|
Unrealized
loss on short-term investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(7,760
|
)
|
—
|
(7,760
|
)
|
|||||||||||||||||||||
|
Payment
for fractional shares for stock combination
|
—
|
—
|
—
|
—
|
(300
|
)
|
—
|
—
|
—
|
—
|
—
|
(300
|
)
|
|||||||||||||||||||||
|
Preferred
stock issued at $10 per share, net of expenses
|
1,000,000
|
1,000
|
—
|
—
|
9,045,176
|
—
|
—
|
—
|
—
|
—
|
9,046,176
|
|||||||||||||||||||||||
|
Imputed
preferred stock dividend
|
418,182
|
—
|
(418,182
|
)
|
—
|
—
|
||||||||||||||||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(5,960,907
|
)
|
—
|
—
|
—
|
(5,960,907
|
)
|
|||||||||||||||||||||
|
Balance
at December 31, 2003
|
1,000,000
|
1,000
|
23,362,396
|
23,362
|
14,289,535
|
—
|
(7,473,205
|
)
|
—
|
(7,760
|
)
|
—
|
6,832,932
|
|||||||||||||||||||||
|
Exercise
of stock options
|
—
|
—
|
27,600
|
27
|
30,073
|
—
|
—
|
—
|
—
|
—
|
30,100
|
|||||||||||||||||||||||
|
Common
stock issued through private placement at $1.10 per share,
net of
|
||||||||||||||||||||||||||||||||||
|
expenses
per share, net of expenses
|
—
|
—
|
3,368,952
|
3,369
|
3,358,349
|
—
|
—
|
—
|
—
|
—
|
3,361,718
|
|||||||||||||||||||||||
|
Conversion
of preferred stock to common stock
|
(170,528
|
)
|
(171
|
)
|
1,550,239
|
1,551
|
(1,380
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||
|
Preferred
stock dividends paid by issuance of shares
|
24,901
|
25
|
—
|
—
|
281,073
|
—
|
—
|
(282,388
|
)
|
—
|
—
|
(1,290
|
)
|
|||||||||||||||||||||
|
Preferred
stock dividend accrued
|
—
|
—
|
—
|
—
|
—
|
—
|
(585,799
|
)
|
585,799
|
—
|
—
|
—
|
||||||||||||||||||||||
|
Warrants
issued for consulting services
|
—
|
—
|
—
|
—
|
125,558
|
—
|
—
|
—
|
—
|
(120,968
|
)
|
4,590
|
||||||||||||||||||||||
|
Amortization
of unearned consulting costs
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
100,800
|
100,800
|
|||||||||||||||||||||||
|
Reversal
of unrealized loss on short-term investments and unrealized
gain
|
||||||||||||||||||||||||||||||||||
|
on
short-term investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
20,997
|
—
|
20,997
|
|||||||||||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(5,896,031
|
)
|
—
|
—
|
—
|
(5,896,031
|
)
|
|||||||||||||||||||||
|
Balance
at December 31, 2004
|
854,373
|
$
|
854
|
28,309,187
|
$
|
28,309
|
$
|
18,083,208
|
$
|
—
|
$
|
(13,955,035
|
)
|
$
|
303,411
|
$
|
13,237
|
$
|
(20,168
|
)
|
$
|
4,453,816
|
||||||||||||
|
See
accompanying notes to consolidated financial
statements.
|
||||||||||||||||||||||||||
|
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
|
|||||||||||||||
|
(A
Development Stage Company)
|
|||||||||||||||
|
Cumulative
|
||||||||||
|
period
from
|
||||||||||
|
August
6, 2001
|
||||||||||
|
(inception)
to
|
||||||||||
|
Years
ended December 31,
|
December
31,
|
|||||||||
|
2004
|
2003
|
2004
|
||||||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
loss
|
$
|
(5,896,031
|
)
|
$
|
(5,960,907
|
)
|
$
|
(12,951,054
|
)
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
|
Common
stock issued for license rights
|
—
|
—
|
1,000
|
|||||||
|
Amortization
of unearned consulting costs
|
100,800
|
37,868
|
161,389
|
|||||||
|
Warrants
issued for consulting services
|
4,590
|
—
|
4,590
|
|||||||
|
Amortization
of intangible assets
|
—
|
145,162
|
145,162
|
|||||||
|
Gain
on sale of short-term investments
|
(71,182
|
)
|
—
|
(71,182
|
)
|
|||||
|
Depreciation
|
27,344
|
6,216
|
33,560
|
|||||||
|
Loss
on impairment of intangible assets
|
—
|
1,248,230
|
1,248,230
|
|||||||
|
Loss
on disposition of intangible assets
|
—
|
1,213,878
|
1,213,878
|
|||||||
|
Changes
in operating assets and liabilities, net of acquisition:
|
||||||||||
|
(Increase)/decrease
in prepaid expenses and other current assets
|
(15,145
|
)
|
33,264
|
18,119
|
||||||
|
Increase
in other assets
|
(70,506
|
)
|
—
|
(70,506
|
)
|
|||||
|
Increase
in accounts payable
|
595,008
|
59,961
|
819,868
|
|||||||
|
Decrease
in accrued expenses
|
(365,323
|
)
|
(138,869
|
)
|
(488,219
|
)
|
||||
|
Decrease
in due affiliate
|
—
|
(96,328
|
)
|
—
|
||||||
|
Net
cash used in operating activities
|
(5,690,445
|
)
|
(3,451,525
|
)
|
(9,935,165
|
)
|
||||
|
Cash
flows from investing activities:
|
||||||||||
|
Purchase
of property and equipment
|
(138,340
|
)
|
(6,554
|
)
|
(144,894
|
)
|
||||
|
Cash
paid in connection with acquisition
|
—
|
(32,808
|
)
|
(32,808
|
)
|
|||||
|
Purchase
of short-term investments
|
(5,000,979
|
)
|
—
|
(5,000,979
|
)
|
|||||
|
Proceeds
from sales of short-term investments
|
931,089
|
—
|
931,089
|
|||||||
|
Proceeds
from sale of license
|
—
|
200,000
|
200,001
|
|||||||
|
Net
cash provided by (used in) investing activities
|
(4,208,230
|
)
|
160,638
|
(4,047,591
|
)
|
|||||
|
Cash
flows from financing activities:
|
||||||||||
|
Proceeds
from issuances of notes payable to stockholders
|
—
|
—
|
233,500
|
|||||||
|
Repayments
of notes payable to stockholders
|
—
|
(206,000
|
)
|
(233,500
|
)
|
|||||
|
Proceeds
from issuance of note payable to bank
|
—
|
—
|
600,000
|
|||||||
|
Repayment
of note payable to bank
|
—
|
(600,000
|
)
|
(600,000
|
)
|
|||||
|
Proceeds
from subscriptions receivable
|
—
|
—
|
4,000
|
|||||||
|
Payment
for fractional shares for stock combination
|
(1,290
|
)
|
(300
|
)
|
(990
|
)
|
||||
|
Proceeds
from sale of common stock, net
|
3,361,718
|
743,691
|
5,809,126
|
|||||||
|
Proceeds
from sale of preferred stock, net
|
—
|
9,046,176
|
9,046,176
|
|||||||
|
Proceeds
from exercise of stock options
|
30,100
|
—
|
30,100
|
|||||||
|
Net
cash provided by financing activities
|
3,390,528
|
8,983,567
|
14,888,412
|
|||||||
|
Net
increase (decrease) in cash and cash equivalents
|
(6,508,147
|
)
|
5,692,680
|
905,656
|
||||||
|
Cash
and cash equivalents at beginning of period
|
7,413,803
|
1,721,123
|
—
|
|||||||
|
Cash
and cash equivalents at end of period
|
$
|
905,656
|
$
|
7,413,803
|
$
|
905,656
|
||||
|
Supplemental
disclosure of cash flow information:
|
||||||||||
|
Interest
paid
|
$
|
—
|
$
|
502
|
$
|
26,934
|
||||
|
Supplemental
disclosure of noncash investing and financing activities:
|
||||||||||
|
Stock
options/warrants issued for consulting services
|
$
|
120,968
|
$
|
—
|
$
|
181,557
|
||||
|
Preferred
stock dividends accrued
|
585,799
|
—
|
585,799
|
|||||||
|
Conversion
of preferred stock to common stock
|
171
|
—
|
171
|
|||||||
|
Preferred
stock dividends paid by issuance of shares
|
282,388
|
—
|
282,388
|
|||||||
|
Issuance
of common stock for acquisition
|
—
|
2,336,242
|
2,336,242
|
|||||||
|
Short-term
investments received in connection with sale of
license
|
—
|
359,907
|
359,907
|
|||||||
|
See
accompanying notes to consolidated financial
statements.
|
F-16
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
| (1) | Merger and Nature of Operations |
On
February 21, 2003, the Company (formerly known as “Atlantic Technology Ventures,
Inc.”) completed a reverse acquisition of privately held Manhattan Research
Development, Inc. (formerly Manhattan Pharmaceuticals, Inc.), a Delaware
corporation. The merger was effected pursuant to an Agreement and Plan of
Merger
dated December 17, 2002 (the “Merger Agreement”) by and among the Company,
Manhattan Research and Manhattan Pharmaceuticals Acquisition Corp, the Company’s
wholly owned subsidiary (“MPAC”). In accordance with the terms of the Merger
Agreement, MPAC merged with and into Manhattan Research, with Manhattan Research
remaining as the surviving corporation and a wholly owned subsidiary of the
Company. Pursuant to the Merger Agreement, upon the effective time of the
merger, the outstanding shares of common stock of Manhattan Research
automatically converted into an aggregate of 18,689,917 shares of the Company’s
common stock, which represented 80 percent of the Company’s outstanding voting
stock after giving effect to the merger. All share and per share amounts
have
been adjusted for a 1-for-5 combination on September 25, 2003 (see Note 5).
In
addition, immediately prior to the merger Manhattan Research had outstanding
options and warrants to purchase an aggregate of 172,856 shares of its common
stock, which, in accordance with the terms of the merger, automatically
converted into options and warrants to purchase an aggregate of 2,196,944
shares
of the Company’s common stock. Since the stockholders of Manhattan Research
received the majority of the voting shares of the Company, the merger was
accounted for as a reverse acquisition whereby Manhattan Research was the
accounting acquirer (legal acquiree) and the Company was the accounting acquiree
(legal acquirer). Based on the five-day average price of the Company’s common
stock of $0.50 per share, the purchase price approximated $2,336,000 ($3,167,178
including net liabilities assumed) which represents 20 percent of the market
value of the combined Company’s post-merger total outstanding shares of
23,362,396. In connection with the merger, the Company changed its name from
“Atlantic Technology Ventures, Inc.” to “Manhattan Pharmaceuticals, Inc.” At the
time of the merger, Manhattan Research recognized patents and licenses for
substantially all of the purchase price. A purchase price allocation was
completed in the third quarter of 2003 and did not result in changes to the
initial estimate. As a result of acquiring Manhattan Research, the Company
received new technologies.
A
summary
of the purchase price allocation is as follows:
F-17
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
|
Common
stock issued
|
$
|
2,336,241
|
||
|
Acquisition
costs paid
|
32,808
|
|||
|
Total
purchase price
|
2,369,049
|
|||
|
Net
liabilities assumed in acquisition
|
798,129
|
|||
| Excess purchase price (allocated to intangible assets) |
$
|
3,167,178
|
||
|
Assets
purchased:
|
||||
|
Prepaid
expenses
|
$
|
38,307
|
||
|
Property
and equipment
|
7,683
|
|||
|
Deposits
|
19,938
|
|||
|
65,928
|
||||
|
Liabilities
assumed:
|
||||
|
Accounts
payable
|
323,735
|
|||
|
Accrued
expenses
|
540,322
|
|||
|
864,057
|
||||
|
Net
liabilities assumed
|
$
|
(798,129
|
)
|
|
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
The
following unaudited pro forma financial information presents the combined
results of operations of Manhattan Pharmaceuticals and Manhattan Research
as if
the acquisition had occurred as of January 1, 2003, after giving effect to
certain adjustments, including the issuance of Manhattan Pharmaceuticals
common
stock as part of the purchase price. For the purpose of this pro forma
presentation, both Manhattan Pharmaceuticals’ and Manhattan Research’s financial
information is presented for the year ended December 31, 2003. The unaudited
pro
forma condensed consolidated financial information does not necessarily reflect
the results of operations that would have occurred had Manhattan Pharmaceuticals
and Manhattan Research been a single entity during such period.
|
Year
ended
December 31, |
||||
|
2003
|
||||
|
Revenues
|
$
|
—
|
||
|
Net
loss
|
(6,160,455
|
)
|
||
| Weighted-average shares of common stock outstanding: Basic and diluted |
23,362,396
|
|||
| Basic and diluted net loss per common share |
$
|
(0.26
|
)
|
|
On
August
22, 2003, the Company sold all if its remaining rights to its CT-3 technology
to
Indevus Pharmaceuticals, Inc. (“Indevus”), the Company’s licensee, for aggregate
consideration of approximately $559,000. The purchase price was paid through
a
combination of cash and shares of Indevus’ common stock. On the same date, the
Company settled its arbitration with Dr. Sumner Burstein, the inventor
of the
CT-3 technology, which includes a complete mutual release from all claims
that
either party had against the other. As a result of the sale of the Company’s
rights to the CT-3 technology to Indevus, the Company recorded a one-time
charge
of $1,213,878 in 2003.
In
addition, on August 8, 2003, Bausch & Lomb informed the Company that it had
elected not to pursue its development of the Avantix technology, effective
August 11, 2003. According to the terms of the Company’s agreement with Bausch
& Lomb, the Company may re-acquire the technology from Bausch & Lomb and
sell or re-license the technology to a third party. The price to re-acquire
the
technology from Bausch & Lomb is 50% of the proceeds from a third party sale
to a maximum of $3,000,000. The Company has no further obligation under the
agreement. As a result of Bausch & Lomb’s decision not to develop the
Avantix technology, the Company recorded a one-time charge of $1,248,230
in 2003
for the impairment of the related intangible asset.
As
a
result of the events discussed in the two preceding paragraphs, as of December
31, 2003, all intangible assets were eliminated from the Company’s consolidated
financial statements and amortization of such intangible assets
ceased.
As
described above, the Company resulted from the February 21, 2003 reverse
merger
between Atlantic Technology Ventures, Inc., which was incorporated on May
18,
1993, and privately-held Manhattan Research Development, Inc., incorporated
on
August 6, 2001. The Company was incorporated in the State of Delaware. In
connection with the merger, the former stockholders of Manhattan Research
received a number of shares of Atlantic's common stock so that following
the
merger they collectively owned 80 percent of the outstanding shares. Upon
completion of the merger, Atlantic changed its name to Manhattan
Pharmaceuticals, Inc. and thereafter adopted the business of Manhattan Research
Development.
The
Company is a development stage biopharmaceutical company that holds an exclusive
world-wide, royalty-free license to certain intellectual property related
to
oleoyl-estrone, which is owned by Oleoyl-Estrone Developments, SL (“OED”) of
Barcelona, Spain. Oleoyl-estrone is an orally administered small molecule
that
has been shown to cause significant weight loss in pre-clinical animal studies
regardless of dietary modifications. The Company also holds the worldwide,
exclusive rights to proprietary lingual spray technology to deliver the drug
propofol for proprocedural sedation prior to diagnostic, therapeutic or
endoscopic procedures.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
| (2) | Liquidity and Basis of Presentation |
Liquidity
The
Company has reported a net loss of $5,960,907 and negative cash flows from
operating activities of $3,451,525 for the year ended December 31, 2003 and
a
net loss of $5,896,031 and negative cash flows from operating activities
of
$5,690,445 for the year ended December 31, 2004. The net loss from date of
inception, August 6, 2001 to December 31, 2004 amounts to
$12,951,054.
Management
believes that the Company will continue to incur net losses and negative
cash
flows from operating activities through at least December 31, 2005. Based
on the
resources of the Company available at December 31, 2004, management believes
that the Company will need additional equity or debt financing or will need
to
generate revenues during 2005 through licensing of its products or entering
into
strategic alliances to be able to sustain its operations through 2005 and
that
it will need additional financing thereafter until it can achieve profitability,
if ever. These matters raise substantial doubt about the Company’s ability to
continue as a going concern.
The
Company’s continued operations will depend on its ability to raise additional
funds through various potential sources such as equity and debt financing,
collaborative agreements, strategic alliances and its ability to realize
the
full potential of its technology in development. Additional funds may not
become
available on acceptable terms, and there can be no assurance that any additional
funding that the Company does obtain will be sufficient to meet the Company’s
needs in the long term. Through December 31, 2004, a significant portion
of the
Company’s financing has been through private placements of common and preferred
stock and debt financing. Until and unless the Company’s operations generate
significant revenues and cash flows from operating activities, the Company
will
attempt to continue to fund operations from cash on hand and through the
sources
of capital previously described.
Basis
of Presentation
The
consolidated financial statements have been prepared in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 7,
“Accounting and Reporting by Development Stage Enterprises.”
| (3) | Summary of Significant Accounting Policies |
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect certain 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 expenses during the
reporting period. Actual results could differ from those estimates.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
Research
and Development
All
research and development costs are expensed as incurred and include costs
of
consultants who conduct research and development on behalf of the Company
and
its subsidiaries. Costs related to the acquisition of technology rights and
patents for which development work is still in process are expensed as incurred
and considered a component of research and development costs.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between financial statement carrying
amounts of existing assets and liabilities, and their respective tax bases
and
operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income
in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax
rates is recognized in income in the period that includes the enactment date.
A
valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
Computation
of Net Loss per Common Share
Basic
net
loss per common share is calculated by dividing net loss applicable to common
shares by the weighted-average number of common shares outstanding for the
period. Diluted net loss per common share is the same as basic net loss per
common share, since potentially dilutive securities from stock options, stock
warrants and convertible preferred stock would have an antidilutive effect
because the Company incurred a net loss during each period presented. The
amounts of potentially dilutive securities excluded from the calculation
were
14,871,502 and 15,420,033 shares at December 31, 2004 and 2003,
respectively.
Stock-Based
Compensation
Statement
of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation
(“SFAS
123”), provides for the use of a fair value based method of accounting for
employee stock compensation. However, SFAS 123 also allows an entity to continue
to measure compensation cost for stock options granted to employees using
the
intrinsic value method of accounting prescribed by Accounting Principles
Board
Opinion No. 25, Accounting
for Stock Issued to Employees
(“APB
25”), which only requires charges to compensation expense for the excess, if
any, of the fair value of the underlying stock at the date a stock option
is
granted (or at an appropriate subsequent measurement date) over the amount
the
employee must pay to acquire the stock,
if such
amounts differ materially from historical amounts. The Company has elected
to
continue to account for employee stock options using the intrinsic value
method
under APB 25. By making that election, it is required by SFAS 123 and SFAS
148,
“Accounting for Stock-Based Compensation - Transition and Disclosure” to provide
pro forma disclosures of net income (loss) and earnings (loss) per share
as if a
fair value based method of accounting had been applied.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
Had
compensation costs been determined in accordance with the fair value method
prescribed by SFAS No. 123 for all options issued to employees and
amortized over the vesting period, the Company’s net loss applicable to common
shares and net loss per common share (basic and diluted) for plan options
would
have been increased to the pro forma amounts indicated below.
|
|
2004
|
2003
|
|||||
|
Net
loss applicable to common shares, as reported
|
$
|
(6,481,830
|
)
|
$
|
(6,379,089
|
)
|
|
|
Deduct:
Total
stock-based employee compensation expense determined under
fair value method
|
(1,211,384
|
)
|
(302,974
|
)
|
|||
|
Net
loss applicable to common shares, pro forma
|
$
|
(7,693,214
|
)
|
$
|
(6,682,063
|
)
|
|
|
Net
loss applicable to common shares – basic
|
|||||||
|
As
reported
|
$
|
(0.24
|
)
|
$
|
(0.28
|
)
|
|
|
Pro
forma
|
(0.29
|
)
|
(0.30
|
)
|
|||
The
fair
value of each option granted is estimated on the date of the grant using
the
Black-Scholes option pricing model with the following assumptions used for
the
grants in 2004 and 2003: dividend yield of 0%; expected volatility of 73%
and
78% for 2004 and 82% for 2003; risk-free interest rate of 2.0% for 2004 and
3.2%
for 2003; and expected lives of eight years for each year
presented.
As
a
result of amendments to SFAS No. 123, the Company will be required to expense
the fair value of employee stock options over the vesting period, beginning
January 1, 2006.
Financial
Instruments
At
December 31, 2004 and 2003, the fair values of cash and cash equivalents,
short-term investments, accounts payable and accrued expenses approximate
carrying values due to the short-term nature of these instruments.
Short-term
Investments
Short-term
investments are carried at market value since they are considered
available-for-sale. The following is a summary of the Company’s short-term
investments:
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
|
Unrealized
|
||||||||||
|
Cost
|
loss
|
Fair
value
|
||||||||
|
2003
|
||||||||||
|
Indevus
Pharmaceuticals, Inc. common stock
|
$
|
359,907
|
$
|
(7,760
|
)
|
$
|
352,147
|
|||
|
|
Cost
|
Unrealized
gain
|
Fair
value
|
|||||||
|
2004
|
||||||||||
|
Eaton
Vance Floating Rate Fund
|
$
|
4,500,979
|
$
|
13,237
|
$
|
4,514,216
|
||||
Unrealized
gain (and loss, if any) is excluded from operations and included in accumulated
other comprehensive income (loss). The Company’s comprehensive losses (net
losses adjusted for changes in unrealized gains/losses on short-term
investments) for 2004 and 2003 were $5,875,034 and $5,968,667,
respectively.
| (4) | Property and Equipment |
Property
and equipment consists of the following at December 31:
|
2004
|
2003
|
||||||
|
Property
and equipment
|
$
|
165,394
|
$
|
27,054
|
|||
|
Less
accumulated depreciation
|
(46,377
|
)
|
(19,033
|
)
|
|||
|
Net
property and equipment
|
$
|
119,017
|
$
|
8,021
|
|||
| (5) | Stockholders’ Equity |
Common
Stock
On
January 13, 2004, the Company completed a private placement of 3,368,637
shares
of its common stock at a per share price of $1.10. After deducting commissions
and other expenses relating to the private placement, the Company received
aggregate net proceeds of approximately $3,362,000. In connection with the
common stock private placement and the Series A Convertible Preferred private
placement, the Company issued to the placement agents a 5-year warrant to
purchase 1,235,589 shares of common stock at a price of $1.10 per
share.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
On
July
25, 2003, the Board of Directors adopted a resolution authorizing an amendment
to the certificate of incorporation providing for a 1-for-5 combination of
the
Company’s common stock. A resolution approving the 1-for-5 combination was
thereafter consented to in writing by holders of a majority of the Company’s
outstanding common stock. The 1-for-5 combination became effective on September
25, 2003. Accordingly, all share and per share information in these consolidated
financial statements has been restated to retroactively reflect the 1-for-5
combination.
The
Company issued 10,167,740 shares of common stock to investors during December
2001 for subscriptions receivable of $4,000 or $0.0004 per share. During
2002,
the Company received the $4,000.
In
August
2002, the Company entered into one-year agreements with four consultants
and
issued options to these consultants to purchase 101,678 shares of the Company's
common stock at an exercise price of $.0039 per share expiring in August
2007.
The Company valued these options at $60,589, using the minimum value method,
and
amortized the expense through August 2003. Therefore, the Company expensed
$22,721 in 2002 and $37,868 in 2003. During 2002 and 2003 no options were
exercised.
During
2002, the Company commenced a private placement and sold 239,450 shares of
common stock at $8 ($0.63 post merger) per share and received proceeds of
$1,704,318, net of expenses of $211,281. These shares converted into 3,043,332
shares of the Company’s common stock when the Company completed the reverse
acquisition of Manhattan Research as discussed in Note 1. In addition, each
investor received warrants equal to 10% of the number of shares of common
stock
purchased and, accordingly, Manhattan Research issued warrants to purchase
23,945 shares of common stock in 2002 in connection with the private placement.
Upon the merger, these converted into warrants to purchase approximately
304,000
shares of the Company’s common stock. Each warrant had an exercise price of $8
per share, which post merger converted to approximately $0.63. These warrants
expire in 2007.
During
January and February 2003, the Company sold an additional 104,000 shares
of
common stock at $8 ($0.63, post merger) per share and warrants to purchase
10,400 shares of common stock exercisable at $8 ($0.63 post merger) through
the
private placement and received net proceeds of $743,691. These shares converted
into 1,321,806 shares of the Company’s common stock when the Company completed
its reverse acquisition of Manhattan Research. The warrants to purchase 10,400
shares of common stock converted into warrants to purchase 132,181 common
shares
of the Company.
In
addition, in connection with the private placement, the Company issued to
Joseph
Stevens & Co., Inc., a NASD-member broker-dealer, warrants to purchase
130,511 shares of its common stock that are exercisable at $8 ($0.63 post
merger) per share and expire in 2008. Upon the merger, these warrants converted
into warrants to purchase 1,658,753 shares of common stock of the
Company.
Series
A Preferred Stock
On
November 7, 2003, the Company completed a private placement of 1,000,000
shares
of its newly-designated Series A Convertible Preferred Stock at a price of
$10
per share, resulting in gross proceeds to the Company of $10,000,000 (net
proceeds $9,046,176). Each share of Series A Convertible Preferred Stock
is
convertible at the holder’s election into shares of the company’s common stock
at a conversion price of $1.10 per share. The conversion price of the Series
A
Convertible Preferred Stock was less than the market value of the Company’s
common stock on November 7, 2003. Accordingly, the Company recorded a charge
for
the beneficial conversion feature associated with the convertible preferred
stock of $418,182. The Series A Convertible Preferred Stock has a
payment-in-kind dividend of 5 percent.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
Maxim
Group, LLC of New York, together with Paramount Capital, Inc., a related
party,
acted as the placement agents in connection with the private
placement.
On
all
matters submitted for stockholder approval, each share of Series A stock
is
entitled to such number of votes as is equal to the number of common shares
into
which such preferred shares are then convertible. In addition, so long as
at
least 50 percent of the number of Series A shares originally issued are
outstanding, the affirmative vote of at least two-thirds of all outstanding
Series A shares voting separately as a class shall be necessary to permit,
effect any one or more of the following:
| · |
the
amendment, alteration or repeal of any provision of our certificate
of
incorporation or bylaws so as to adversely affect the relative
rights and
preferences of the Series A stock;
|
| · |
the
declaration or payment of any dividend or distribution on any securities
of the Company other than the Series A
stock;
|
| · |
the
authorization, issuance or increase of any security ranking prior
to or on
parity with the Series A stock in connection with a dissolution,
sale of
all or substantially all of our assets or other “Liquidation Event,” or
with respect to the payment of any dividends or
distributions;
|
| · |
the
approval of any Liquidation Event;
and
|
| · |
the
effect any amendment of our certificate of incorporation or bylaws
that
would materially adversely affect the rights of the Series A
stock.
|
| (6) | Stock Options |
2003
Stock Option Plan
In
December 2003 the Company established the 2003 Stock Option Plan (the 2003
Plan), which provides for the granting of up to 5,400,000 options to officers,
directors, employees and consultants for the purchase of stock. At
December 31, 2004 and 2003, 5,400,000 shares were authorized for issuance.
The options have a maximum term of 10 years and vest over a period determined
by
the Company’s Board of Directors (generally 3 years) and are issued at fair
market value. The 2003 Plan expires on December 10, 2013 or when all options
have been granted, whichever is sooner.
1995
Stock Option Plan
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
In
July
1995, the Company established the 1995 Stock Option Plan (the 1995 Plan),
which
provided for the granting of up to 130,000 options to officers, directors,
employees and consultants for the purchase of stock. In July 1996, the 1995
Plan
was amended to increase the total number of shares authorized for issuance
by
60,000 shares to a total of 190,000 shares and beginning with the 1997 calendar
year, by an amount equal to one percent (1%) of the shares of common stock
outstanding on December 31 of the immediately preceding calendar year. At
December 31, 2004 and 2003, 522,381 and 298,767 shares were authorized
for
issuance. The options have a maximum term of 10 years and vest over a period
determined by the Company’s Board of Directors (generally 4 years) and are
issued at fair market value. The 1995 Plan expires June 30, 2005.
A
summary
of the status of the Company’s stock options as of December 31, 2004 and 2003
and changes during the years then ended is presented below:
|
2004
|
2003
|
||||||||||||
|
Shares
|
|
Weighted
average exercise price
|
|
Shares
|
|
Weighted
average exercise price
|
|||||||
|
Outstanding
at beginning of year
|
1,392,690
|
$
|
1.68
|
689,840
|
$
|
5.00
|
|||||||
|
Granted
|
1,672,000
|
1.44
|
876,490
|
0.40
|
|||||||||
|
Exercised
|
(27,600
|
)
|
1.09
|
||||||||||
|
Cancelled
|
(214,950
|
)
|
6.57
|
(173,640
|
)
|
8.43
|
|||||||
|
Outstanding
at end of year
|
2,822,140
|
$
|
1.17
|
1,392,690
|
$
|
1.68
|
|||||||
|
Options
exercisable at year-end
|
1,282,292
|
398,617
|
|||||||||||
|
Weighted-average
fair value of options granted during the
year
|
$
|
0.91
|
$
|
0.06
|
|||||||||
The
following table summarizes the information about stock options outstanding
at
December 31, 2004:
F-26
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
|
Remaining
|
Number
of
|
|||||||||
|
Exercise
|
Number
|
contractual
|
options
|
|||||||
|
price
|
outstanding
|
life
(years)
|
exercisable
|
|||||||
|
$0.400
|
876,090
|
8.16
|
730,075
|
|||||||
|
0.425
|
400
|
8.15
|
400
|
|||||||
|
0.970
|
503,500
|
8.75
|
113,334
|
|||||||
|
1.000
|
97,400
|
7.24
|
97,400
|
|||||||
|
1.250
|
175,750
|
7.14
|
160,083
|
|||||||
|
1.650
|
1,149,000
|
9.08
|
161,000
|
|||||||
|
4.375
|
10,000
|
6.14
|
10,000
|
|||||||
|
20.938
|
10,000
|
5.28
|
10,000
|
|||||||
|
2,822,140
|
1,282,292
|
|||||||||
| (7) | Stock Warrants Relating to Atlantic Technology Ventures, Inc. |
As
of
December 31, 2004, the Company had a total of 348,901 warrants outstanding
relating to Atlantic Technology Ventures, Inc. The prices of these warrants
range from $2.95 to approximately $27. These warrants expire between 2005
and
2007.
| (8) | Related-Party Transactions |
In
2004
and 2003 the Company entered into consulting agreements with certain members
of
its Board of Directors. These agreements required aggregate payments of $10,417
per month. Consulting expense under these agreements was approximately $173,000
and $125,000 for the years ended December 31, 2004 and 2003, respectively.
These agreements were terminated during 2004.
Oleoylestrone
Developments, SL
Pursuant
to the terms of a license agreement dated February 15, 2002 by and between
Manhattan Research Development, Inc., the Company’s wholly owned subsidiary, and
Oleoylestrone Developments, SL (“OED”), the Company has an exclusive, worldwide
license to U.S. and foreign patents and patent applications relating to certain
technologies. Although the Company is not obligated to pay royalties to OED,
the
license agreement requires the Company to make certain performance-based
milestone payments. See Note 10. OED currently owns approximately 16 percent
of
the Company’s outstanding common stock. Additionally, Mr. Pons, a member of the
Company’s board of directors, is chief executive officer of OED.
NovaDel
Pharma Inc.
As
discussed in Note 10, pursuant to the terms of a license agreement dated
April
4, 2003 by and between the Company and NovaDel Pharma Inc. (NovaDel), the
Company has the rights to develop NovaDel’s proprietary lingual spray technology
to deliver propofol for preprocedural sedation. The license agreement with
NovaDel requires the Company to make certain license and milestone payments,
as
well as pay royalties. During 2003, the Company paid aggregate license fees
of
$500,000 to NovaDel under the license agreement. In 2004, there were no similar
payments made to NovaDel. Lindsay A. Rosenwald, who beneficially owns more
than
10 percent of the Company’s common stock, also beneficially owns in excess of 20
percent of the common stock of NovaDel and may therefore be deemed to be
an
affiliate of that company.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
Paramount
BioCapital, Inc.
Two
members of the Company’s board of directors, Timothy McInerney and Michael
Weiser, are also employees of Paramount BioCapital, Inc. or one of its
affiliates. In addition, two members of the Company’s board of directors, Joshua
Kazam and David Tanen were employed by Paramount BioCapital through August
2004.
The sole shareholder of Paramount BioCapital, Inc. (Paramount BioCapital)
is
Lindsay A. Rosenwald, M.D. Dr. Rosenwald beneficially owns more than 10
percent
of the Company’s common stock as of December 31, 2004. In November 2003, the
Company paid to Paramount BioCapital approximately $460,000 as commissions
earned in consideration for placement agent services rendered in connection
with
the private placement of the Company’s Series A Convertible Preferred Stock,
which amount represented 7 percent of the shares sold by Paramount BioCapital
in
the offering. In addition, in January 2004, the Company paid approximately
$260,000 as commissions earned in consideration for placement agent services
rendered by Paramount BioCapital in connection with a private placement
of the
Company’s common stock, which amount represented 7 percent of the shares sold by
Paramount BioCapital in the private placement. In connection with both
private
placements and as a result of their employment with Paramount BioCapital,
Mr.
Kazam, Mr. McInerney and Dr. Weiser were allocated 5-year placement agent
warrants to purchase 60,174, 58,642 and 103,655 shares of the Company’s common
stock, respectively, at a price of $1.10 per share.
| (9) | Income Taxes |
There
was
no current or deferred tax expense for the years ended December 31,
2004
and 2003 because of the Company’s operating losses.
The
components of deferred tax assets as of December 31, 2004 and 2003
are as
follows:
|
2004
|
2003
|
||||||
| Deferred tax assets: | |||||||
|
Tax
loss carryforwards
|
$
|
4,175,000
|
$
|
1,889,000
|
|||
|
Research
and development credit
|
226,000
|
51,000
|
|||||
|
License
and other costs
|
115,000
|
84,000
|
|||||
|
Gross
deferred tax assets
|
4,516,000
|
2,024,000
|
|||||
|
Less
valuation allowance
|
(4,516,000
|
)
|
(2,024,000
|
)
|
|||
|
Net
deferred tax assets
|
$
|
—
|
$
|
—
|
|||
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
The
reasons for the difference between actual income tax benefit for the years
ended
December 31, 2004 and 2003 and the amount computed by applying the
statutory federal income tax rate to losses before income tax benefit are
as
follows:
|
2004
|
2003
|
||||||||||||
|
%
of
|
%
of
|
||||||||||||
|
pretax
|
pretax
|
||||||||||||
|
Amount
|
loss
|
Amount
|
loss
|
||||||||||
|
Income
tax benefit at statutory rate
|
$
|
(2,005,000
|
)
|
(34.0
|
%)
|
$
|
(2,027,000
|
)
|
(34.0
|
%)
|
|||
|
State
income taxes, net of Federal tax
|
(342,000
|
)
|
(5.8
|
%)
|
(354,000
|
)
|
(5.9
|
%)
|
|||||
|
Change
in valuation allowance
|
2,492,000
|
42.3
|
%
|
1,568,000
|
26.3
|
%
|
|||||||
|
Credits
generated in current year
|
(175,000
|
)
|
(3.0
|
%)
|
(30,000
|
)
|
(0.5
|
%)
|
|||||
|
Impairment
of intangible assets
|
—
|
—
|
424,000
|
7.1
|
%
|
||||||||
|
Loss
on sale of intangible assets
|
—
|
—
|
412,000
|
6.9
|
%
|
||||||||
|
Other,
net
|
30,000
|
0.5
|
%
|
7,000
|
0.1
|
%
|
|||||||
|
Income
tax benefit
|
$
|
—
|
—
|
%
|
$
|
—
|
—
|
%
|
|||||
A
valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The net change
in the total valuation allowance for the years ended December 31,
2004 and
2003 was an increase of $2,492,000 and $1,568,000, respectively. The tax
benefit
assumed using the federal statutory tax rate of 34% has been reduced to an
actual benefit of zero due principally to the aforementioned valuation
allowance.
At
December 31, 2004, the Company had potentially utilizable federal
and state
net operating loss tax carryforwards of approximately $10,619,000. The net
operating loss carryforwards expire in various amounts through 2024 for federal
and state tax purposes. The Tax Reform Act of 1986 contains provisions, which
limit the ability to utilize net operating loss carryforwards in the case
of
certain events including significant changes in ownership interests. As a
result
of the merger with Manhattan Research Development, Inc. in February 2003,
the
Company incurred a significant change in its ownership, limiting its ability
to
utilize net operating loss carryforwards to approximately $100,000 annually.
If
the Company has taxable income in the future which exceeds this permissible
annual net operating loss carryforward, the Company would incur a federal
income
tax liability even though net operating loss carryforwards would be available
in
future years. At December 31, 2004, the Company also had research and
development credit carryforwards of approximately $226,000 for federal tax
purposes which expire in various amounts through 2024.
F-29
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
Notes
to
Consolidated Financial Statements
December
31, 2004 and 2003
| (10) | License and Consulting Agreements |
On
February 15, 2002, the Company entered into a License Agreement (the "License
Agreement") with OED. Under the terms of the License Agreement, OED granted
to
the Company a world-wide license to make, use, lease and sell the products
incorporating the licensed technology (see Note 1). OED also granted to the
Company the right to sublicense to third parties the licensed technology
or
aspects of the licensed technology with the prior written consent of OED.
OED
retains an irrevocable, nonexclusive, royalty-free right to use the licensed
technology solely for its internal, noncommercial use. The License Agreement
shall terminate automatically upon the date of the last to expire patent
contained in the licensed technology or upon the Company's bankruptcy. OED
may
terminate the License Agreement in the event of a material breach by the
Company
that is not cured within the notice period. The Company may terminate the
License Agreement for any reason upon 60 days notice.
Under
the
License Agreement, the Company agreed to pay to OED certain licensing fees
which
are being expensed as they are incurred. Through December 31, 2004, the Company
paid $175,000 in licensing fees which is included in 2002 research and
development expense. In addition, pursuant to the License Agreement, the
Company
issued 1,000,000 shares of its common stock to OED. The Company valued these
shares at their then estimated fair value of $1,000.
In
connection with the License Agreement, the Company has agreed to future
milestone payments to OED as follows:
(i)
$250,000 upon the treatment of the first patient in a Phase I clinical trial
under a Company-sponsored investigational new drug application ("IND"); (ii)
$250,000 upon the treatment of the first patient in a Phase II clinical trial
under a Company-sponsored IND; (iii) $750,000 upon the first successful
completion of a Company-sponsored Phase II clinical trial under a
Company-sponsored IND; (iv) $2,000,000 upon the first successful completion
of a
Company-sponsored Phase III clinical trial under a Company sponsored IND;
and
(v) $6,000,000 upon the first final approval of the first new drug application
for the first licensed product by the United States Food and Drug Administration
(“FDA”).
In
addition to the License Agreement, the Company entered into a consulting
agreement with OED. The agreement became effective in February 2002, at a
fee of
$6,250 per month, and will terminate when the License Agreement terminates.
The
fees associated with the consulting agreement are expensed as incurred. OED
agreed to serve as a member of the Company's Scientific Advisory Board and
to
render consultative and advisory services to the Company. Such services include
research, development and clinical testing of the Company's technology as
well
as the reporting of the findings of such tests, assistance in the filing
of
patent applications and oversight and direction of efforts in regards to
personnel for clinical development.
In
April
2003, the Company entered into a license and development agreement with NovaDel
Pharma, Inc. (“NovaDel”), under which the Company received certain worldwide,
exclusive rights to develop and commercialize products related to NovaDel’s
proprietary lingual spray technology for delivering propofol for pre-procedural
sedation. Under the terms of this agreement, the Company agreed to use its
commercially reasonable efforts to develop and commercialize the licensed
products, to obtain necessary regulatory approvals and to thereafter exploit
the
licensed products. The agreement also provides that NovaDel will undertake
to
perform, at the Company’s expense, a substantial portion of the development
activities, including, without limitation, preparation and filing of various
applications with applicable regulatory authorities. Holders of a significant
portion of the Company’s common stock own a significant portion of the common
stock of NovaDel.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
In
consideration for our rights under the NovaDel license agreement, we paid
NovaDel an initial license fee of $500,000 upon the completion of our $10
million private placement of Series A Convertible Preferred Stock in November
2003. In addition, the license agreement requires us to make certain milestone
payments as follows: $1,000,000 payable following the date that the first
IND
for lingual spray propofol is accepted for review by the FDA; $1,000,000
following the date that the first European Marketing Application is accepted
for
review by any European Union country; $2,000,000 following the date when
the
first filed NDA for lingual spray propofol is approved by the FDA; $2,000,000
following the date when the first filed European Marketing Application for
lingual spray propofol is accepted for review; $1,000,000 following the date
on
which an application for commercial approval of lingual spray propofol is
approved by the appropriate regulatory authority in each of Australia, Canada,
Japan and South Africa; and $50,000 following the date on which an application
for commercial approval for lingual spray propofol is approved in any other
country (other than the U.S. or a member of the European Union).
In
addition, the Company is obligated to pay to NovaDel an annual royalty based
on
a fixed rate of net sales of licensed products, or if greater, the annual
royalty is based on the Company’s net profits from the sale of licensed products
at a rate that is twice the net sales rate. In the event the Company sublicenses
the licensed product to a third party, the Company is obligated to pay royalties
based on a fixed rate of fees or royalties received from the sublicensee
until
such time as the Company recovers its out-of-pocket costs, and thereafter
the
royalty rate doubles. Because of the continuing development efforts required
of
NovaDel under the agreement, the royalty rates are substantially higher than
customary for the industry. The Company is also required to pay an up-front
fee
in installments contingent on whether the Company receives certain amounts
through financings, revenues or otherwise. Through December 31, 2003, the
Company has paid and expensed $500,000 of such up-front fee.
NovaDel
may terminate the agreement (i) upon 10 days’ notice if the Company fails to
make any required milestone or royalty payments, or (ii) if the Company becomes
bankrupt or if a petition in bankruptcy or insolvency is filed and not dismissed
within 60 days or if the Company becomes subject to a receiver or trustee
for
the benefit of creditors. Each party may terminate the agreement upon 30
days’
written notice and an opportunity to cure in the event the other party committed
a material breach or default. The Company may also terminate the agreement
for
any reason upon 90 days’ notice to NovaDel.
On
August
22, 2003, the Company sold all of its remaining rights to its CT-3 technology
to
Indevus Pharmaceuticals, Inc. (“Indevus”), the Company’s licensee, for aggregate
consideration of approximately $559,000. The purchase price was paid through
a
combination of cash and shares of Indevus’ common stock. On the same date, the
Company settled its arbitration with Dr. Sumner Burstein, the inventor of
the
CT-3 technology, which includes a complete mutual release from all claims
that
either party had against the other. As a result of the sale of the Company’s
rights to the CT-3 technology to Indevus, the Company recorded a one-time
charge
of $1,213,878 in 2003.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
On
August
8, 2003, Bausch & Lomb informed the Company that it had elected not to
pursue its development of the Avantix technology effective August 11, 2003.
According to the terms of Company’s agreement with Bausch & Lomb, the
Company may re-acquire the technology from Bausch & Lomb and sell or
re-license the technology to a third party. The price to re-acquire the
technology from Bausch & Lomb is 50 percent of the proceeds from a third
party sale to a maximum of $3 million. The Company has no further obligation
under the agreement. As a result of Bausch & Lomb’s decision not to develop
the Avantix technology, the Company recorded a one-time charge of $1,248,230
in
2003 for the impairment of the related intangible asset.
| (11) | Commitments and Contingencies |
Legal
Proceedings
The
Company is currently not party to any claims or lawsuits.
Employment
Agreement
The
Company has an employment agreement with one employee for the payment of
a base
salary of $175,000 as well as performance based bonuses. The agreement is
for a
term of two years and has a remaining obligation of $350,000.
Consulting
Agreements
The
Company had month to month agreements with certain employees requiring aggregate
monthly payments of $20,834. These agreements were terminated during
2004.
Leases
Rent
expense for the years ended December 31, 2004 and 2003 was $112,176 and $93,346,
respectively.
Future
minimum rental payments subsequent to December 31, 2004 under an operating
lease
for the Company's office facility are as follows:
|
Years
Ending December 31,
|
Commitment
|
|||
|
2005
|
$
|
141,600
|
||
|
2006
|
$
|
141,600
|
||
|
2007
|
$
|
141,600
|
||
|
2008
|
$
|
100,000
|
||
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
| (12) | Subsequent Events |
On
January 5, 2005, the Company announced it had signed a letter of intent
to merge
with Tarpan Therapeutics, Inc. (“Tarpan”), a privately-held, New York-based
pharmaceutical company developing dermatological therapeutics, in an
all stock
transaction. Upon consummation of the transaction, Tarpan shareholders
will own
approximately 20% of the shares of Manhattan on a fully-diluted
basis.
Pursuant
to the merger, Douglas Abel, President and CEO of Tarpan will be appointed
Chief
Executive Officer of the Company, overseeing all operations and clinical
development.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
|
TARPAN
THERAPEUTICS, INC.
|
||||||||||
|
(A
Development Stage Company)
|
||||||||||
|
March
31, 2005 and December 31,
2004
|
||||||||||
|
(Unaudited)
|
||||||||||
|
March
31,
|
December
31,
|
|||||||||
|
Assets
|
|
2005
|
2004
|
|||||||
|
Current
assets:
|
||||||||||
|
Cash
|
$
|
6,777
|
$
|
12,202
|
||||||
|
Total
current assets
|
6,777
|
12,202
|
||||||||
|
Computer
equipment, net
|
2,037
|
2,156
|
||||||||
|
Total
assets
|
$
|
8,814
|
$
|
14,358
|
||||||
|
Liabilities
and Stockholders’ Deficiency
|
||||||||||
|
Current
liabilities:
|
||||||||||
|
Accounts
payable and accrued expenses
|
$
|
26,052
|
$
|
4,939
|
||||||
|
Accrued
interest - related parties
|
17,318
|
11,397
|
||||||||
|
Due
to related parties
|
3,381
|
—
|
||||||||
|
Total
liabilities
|
46,751
|
16,336
|
||||||||
|
Notes
payable - related parties
|
630,702
|
550,702
|
||||||||
|
Total
liabilities
|
677,453
|
567,038
|
||||||||
|
Commitments
|
||||||||||
|
Stockholders’
deficiency:
|
||||||||||
|
Preferred
stock, $.001 par value; 5,000,000 shares authorized;
|
||||||||||
|
none
issued
|
—
|
—
|
||||||||
|
Common
stock, $.001 par value; 20,000,000 shares authorized;
|
||||||||||
|
4,000,000
shares issued and outstanding
|
4,000
|
4,000
|
||||||||
|
Deferred
compensation
|
(118,668
|
)
|
(129,970
|
)
|
||||||
| Additional paid-in capital | 135,621 | 135,621 | ||||||||
|
Deficit
accumulated during development stage
|
(689,592
|
)
|
(562,331
|
)
|
||||||
|
Total
stockholders’ deficiency
|
(668,639
|
)
|
(552,680
|
)
|
||||||
|
Total
liabilities and stockholders' deficiency
|
$
|
8,814
|
$
|
14,358
|
||||||
|
See
accompanying notes to unaudited condensed financial
statements.
|
||||||||||
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
|
TARPAN
THERAPEUTICS, INC.
|
||||||||||
|
(A
Development Stage Company)
|
||||||||||
|
Three
months ended March 31, 2005 and 2004 and
cumulative period from July 16, 2003 (inception) to March 31,
2005
|
||||||||||
|
(Unaudited)
|
||||||||||
|
Cumulative
|
||||||||||
|
period
from
|
||||||||||
|
July
16, 2003
|
||||||||||
|
(inception)
to
|
||||||||||
|
Three
months ended March 31,
|
March
31,
|
|||||||||
|
2005
|
2004
|
2005
|
||||||||
|
Operating
expenses:
|
||||||||||
|
Research
and development, principally license fee
|
$
|
—
|
$
|
25,000
|
$
|
307,555
|
||||
|
General
and administrative
|
119,901
|
—
|
363,280
|
|||||||
|
Total operating
expenses
|
119,901
|
25,000
|
670,835
|
|||||||
|
Loss
from operations
|
(119,901
|
)
|
(25,000
|
)
|
(670,835
|
)
|
||||
|
Interest
expense
|
(7,360
|
)
|
—
|
(18,757
|
)
|
|||||
|
Net
loss
|
$
|
(127,261
|
)
|
$
|
(25,000
|
)
|
$
|
(689,592
|
)
|
|
|
See
accompanying notes to unaudited condensed financial
statements.
|
||||||||||
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
|
TARPAN
THERAPEUTICS, INC.
|
|||||||||||||||||||
|
(A
Development Stage Company)
|
|||||||||||||||||||
|
For
the three months ended March 31,
2005
|
|||||||||||||||||||
|
(Unaudited)
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
accumulated
|
|
Total
|
|
||||||
|
|
|
|
|
|
|
|
|
Additional
|
|
during
the
|
|
stock–
|
|
||||||
|
|
|
Common
stock
|
|
Deferred
|
|
paid-in
|
|
development
|
|
holders'
|
|
||||||||
|
|
|
Shares
|
|
Amount
|
|
compensation
|
|
capital
|
|
stage
|
|
deficiency
|
|||||||
|
Balance
at January 1, 2005
|
|
|
4,000,000
|
|
$
|
4,000
|
|
$
|
(129,970
|
)
|
$
|
135,621
|
|
$
|
(562,331
|
)
|
$
|
(552,680
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred compensation
|
|
|
—
|
|
|
—
|
|
|
11,302
|
|
|
—
|
|
|
—
|
|
|
11,302
|
|
|
Net loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(127,261
|
)
|
|
(127,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2005
|
|
|
4,000,000
|
|
$
|
4,000
|
|
$
|
(118,668
|
)
|
$
|
135,621
|
|
$
|
(689,592
|
)
|
$
|
(668,639
|
)
|
See
accompanying notes to unaudited condensed financial
statements.
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
December
31, 2004 and 2003
|
TARPAN
THERAPEUTICS. INC.
|
||||||||||
|
(A
Development Stage Company)
|
||||||||||
|
Three
months ended March 31, 2005 and 2004
and cumulative period from July 16, 2003 (inception) to
March 31,
2005
|
||||||||||
|
(Unaudited)
|
||||||||||
|
Cumulative
|
||||||||||
|
period
from
|
||||||||||
|
July
16, 2003
|
||||||||||
|
(inception)
to
|
||||||||||
|
Three
months ended March 31,
|
March
31,
|
|||||||||
|
2005
|
2004
|
2005
|
||||||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
loss
|
$
|
(127,261
|
)
|
$
|
(25,000
|
)
|
$
|
(689,592
|
)
|
|
|
Adjustments
to reconcile net loss to
|
||||||||||
|
net
cash used in operating activities:
|
||||||||||
|
Expenses
paid by related entities on behalf of company
|
3,381
|
—
|
309,083
|
|||||||
|
Amortization
of deferred compensation
|
11,302
|
—
|
16,953
|
|||||||
|
Depreciation
|
119
|
—
|
359
|
|||||||
|
Changes
in operating assets and liabilities:
|
||||||||||
|
Accounts
payable and accrued expenses
|
21,113
|
—
|
26,052
|
|||||||
|
Accrued
interest - related parties
|
5,921
|
—
|
17,318
|
|||||||
|
Net
cash used in operating activities
|
(85,425
|
)
|
(25,000
|
)
|
(319,827
|
)
|
||||
|
Cash
flows from investing activities:
|
||||||||||
|
Purchase
of computer equipment
|
—
|
—
|
(2,396
|
)
|
||||||
|
Net
cash used in investing activities
|
—
|
—
|
(2,396
|
)
|
||||||
|
Cash
flows from financing activities:
|
||||||||||
|
Proceeds
from notes from related parties
|
80,000
|
25,000
|
325,000
|
|||||||
|
Receipt
of cash for subscription receivable
|
—
|
—
|
4,000
|
|||||||
|
Net
cash provided by financing activities
|
80,000
|
25,000
|
329,000
|
|||||||
|
Net
increase (decrease) in cash
|
(5,425
|
)
|
—
|
6,777
|
||||||
|
Cash at
beginning of period
|
12,202
|
—
|
—
|
|||||||
|
Cash at
end of period
|
$
|
6,777
|
$
|
—
|
$
|
6,777
|
||||
|
Supplemental
disclosure of cash flow information:
|
||||||||||
|
Stock
options granted to the Company's Chief Executive Officer
|
$
|
—
|
$
|
—
|
$
|
135,621
|
||||
|
See
accompanying notes to unaudited condensed financial
statements.
|
||||||||||
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
March
31, 2005
| (1) | BASIS OF PRESENTATION |
The
accompanying unaudited condensed financial statements of Tarpan Therapeutics,
Inc. ("Tarpan" or the "Company") have been prepared in accordance with
accounting principles generally accepted in the United States of America
for
interim financial information. Accordingly, the financial statements do not
include all information and footnotes required by accounting principles
generally accepted in the United States of America for complete annual financial
statements. In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation. Interim operating
results are not necessarily indicative of results that may be expected for
the
year ending December 31, 2005 or for any subsequent period. These
unaudited
condensed financial statements should be read in conjunction with the audited
financial statements included elsewhere in this prospectus.
| (2) | LIQUIDITY |
On
April
1, 2005, Manhattan Pharmaceuticals, Inc. ("Manhattan") entered into an
Agreement
and Plan of Merger ("the Agreement") with Tarpan. Pursuant to the Agreement,
Manhattan issued 10,731,052 shares of its common stock to Tarpan's stockholders
in exchange for 100% of the outstanding common stock of Tarpan. Manhattan
is a
pharmaceutical company that acquires and develops proprietary prescription
drugs.
The
Company's financial statements have been prepared on a going concern basis
which
contemplates the realization of assets and the settlement of liabilities
and
commitments in the normal course of business. For the three months ended
March
31, 2005 and from inception, the Company has reported a net loss of $689,592
and
negative cash flows from operating activities of $319,827 and, at March
31,
2005, it had a working capital deficiency of $39,974 and a stockholders'
deficiency of $668,639. As discussed above, Manhattan acquired 100% of
Tarpan's
assets and assumed 100% of its liabilities. Manhattan has also incurred
losses
from inception and as of March 31, 2005, had a deficit accumulated during
the
development stage of $15,508,580. Based on the resources available to the
Company and Manhattan, at March 31, 2005, management believes that the
combined
company will continue to incur net losses through at least March 31, 2006
and
will need additional equity or debt financing or will need to generate
revenues
from the licensing of its products or by entering into strategic alliances
to be
able to sustain its operations until it can achieve profitability, if ever.
These matters raise substantial doubt about the Company's ability to continue
as
a going concern. The condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
| (3) | STOCK OPTIONS |
Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), provides for the use of a fair value based method
of
accounting for employee stock compensation. The Company has elected to account
for employee stock options using the fair value based method of
accounting.
On
November 14, 2004, the Company granted stock options to the Company's Chief
Executive Officer to purchase 301,000 shares of the Company's common stock
at an
exercise price of $2.00 per share. These options vest equally over a three-year
period and expire on November 14, 2014. The Company valued the options on
the
date of grant using the minimum value method and recorded a deferred stock-based
compensation charge of $135,621, which represents the estimated fair value
of
the options granted. Such amount is being amortized over the vesting period
of
the stock options on a straight-line basis. The Company recorded compensation
expense of $11,302 for the three months ended March 31, 2005 in conjunction
with
this grant. There were no options granted during the first quarter of 2005.
| (4) | RELATED PARTY TRANSACTIONS |
Note
Payable
At
various times during the three months ended March 31, 2005, the Company
issued
5% promissory notes payable totaling $80,000 to Paramount BioCapital
Investments, LLC, an affiliate of a significant stockholder of the Company.
These notes and other notes previously issued to related parties which
had an
aggregate balance of $630,702 at March 31, 2005 were initially due to mature
on
various dates from January 2007 through December 2007 (see Note 5).
Administrative
Services
The
Company pays monthly fees for administrative services of $500 to Paramount
BioCapital Investments, LLC. For the three months ended March 31, 2005,
the
Company has accrued $1,500 for administrative services.
| (5) | SUBSEQUENT EVENTS |
On
April
1, 2005, the Company entered into the Agreement and Plan of Merger
(the
“Agreement”) with Manhattan Pharmaceuticals, Inc., a Delaware corporation
(“Manhattan”), and Tarpan Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Manhattan (“TAC”). The Agreement provided that TAC
would merge with and into the Company, with the Company remaining as the
surviving corporation and a wholly-owned subsidiary of Manhattan (the “Merger”).
The Merger was completed April 1, 2005. In consideration for their shares
of
capital stock and in accordance with the Agreement, the stockholders of
the
Company received a number of shares of Manhattan’s common stock such that, upon
the effective time of the Merger, the Company’s stockholders collectively
received (or are entitled to receive) approximately 20 percent of
Manhattan’s outstanding common stock on a fully-diluted basis (i.e., assuming
the issuance of common stock underlying outstanding options, warrants and
other
rights). Based on the number of fully-diluted outstanding shares of Manhattan’s
common stock on the date of the Merger, the Company’s stockholders as of April
1, 2005 will receive an aggregate of 10,731,052 shares of Manhattan’s common
stock in the Merger. At the time of the Merger, the Company had outstanding
indebtedness of approximately $651,000 resulting from a series of promissory
notes issued to Paramount BioCapital Investments, LLC and Horizon BioMedical
Ventures, LLC, both of which are owned or controlled by Dr. Lindsay Rosenwald.
The notes were amended at the time of the Merger to provide that one-half
of the
outstanding indebtedness was payable upon completion of the Merger and
the
remaining one-half will be payable at such time as Manhattan raises at
least $5
million in new financing.
Several
of the Company’s former stockholders are directors or significant stockholders
of Manhattan. Dr. Rosenwald and various trusts established for the benefit
of
Dr. Rosenwald and members of his immediate family collectively beneficially
owned approximately 46 percent of our common stock and beneficially own
approximately 26 percent Manhattan’s common stock. In addition, Joshua Kazam,
David Tanen, Dr. Michael Weiser and Timothy McInerney, all of whom are
members
of Manhattan’s board of directors, collectively owned approximately 13.4 percent
of the Company's outstanding common stock. Dr. Weiser and
Mr.
McInerney are also employed by Paramount BioCapital, Inc., an entity owned
and
controlled by Dr. Rosenwald.
The
Board
of Directors and Stockholders
Tarpan
Therapeutics, Inc.
We
have
audited the accompanying balance sheets of Tarpan Therapeutics, Inc. (A
Development Stage Company) as of December 31, 2004 and 2003, and the related
statements of operations, changes in stockholders' deficiency and cash flows
for
the year ended December 31, 2004, the period from July 16, 2003 (Inception)
to
December 31, 2003 and the cumulative amounts for the period from July 16,
2003
(Inception) to December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Tarpan Therapeutics, Inc. as
of
December 31, 2004 and 2003, and its results of operations and cash flows
for the
year ended December 31, 2004, the period from July 16, 2003 (Inception) to
December 31, 2003 and the cumulative amounts for the period from July 16,
2003
(Inception) to December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying financial statements have prepared assuming that the Company
will
continue as a going concern. As discussed in Note 1, from its inception the
Company has incurred net losses and negative cash flows from operating
activities and had working capital and stockholders' deficiencies at December
31, 2004. These matters raise substantial doubt about the Company's ability
to
continue as a going concern. Management's plans concerning these matters
are
also described in Note 1. The accompanying financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
/s/
J.H.
Cohn LLP
Roseland,
New Jersey
April
1,
2005
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
DECEMBER
31, 2004 AND 2003
|
ASSETS
|
2004
|
2003
|
|||||
|
Current
assets - cash
|
$
|
12,202
|
$
|
—
|
|||
|
Computer
equipment, net of accumulated depreciation
|
|||||||
|
of
$240
|
2,156
|
—
|
|||||
|
Totals
|
$
|
14,358
|
$
|
—
|
|||
|
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable and accrued expenses
|
$
|
4,939
|
$
|
—
|
|||
|
Accrued
interest - related parties
|
11,397
|
—
|
|||||
|
Total
current liabilities
|
16,336
|
—
|
|||||
|
Notes
payable - related parties
|
550,702
|
—
|
|||||
|
Total
liabilities
|
567,038
|
$
|
—
|
||||
|
Commitments
|
|||||||
|
Stockholders'
deficiency:
|
|||||||
|
Preferred
stock, $.001 par value; 5,000,000 shares
|
|||||||
|
authorized;
none issued
|
—
|
—
|
|||||
|
Common
stock, $.001 par value; 20,000,000 shares
|
|||||||
|
authorized,
4,000,000 shares issued and outstanding
|
4,000
|
4,000
|
|||||
|
Less
stock subscription receivable
|
(4,000
|
)
|
|||||
|
Deferred
compensation
|
(129,970
|
)
|
—
|
||||
|
Additional
paid-in capital
|
135,621
|
—
|
|||||
|
Deficit
accumulated during the development stage
|
(562,331
|
)
|
—
|
||||
|
Total
stockholders' deficiency
|
(552,680
|
)
|
—
|
||||
|
Totals
|
$
|
14,358
|
$
|
—
|
|||
See
Notes
to Financial Statements.
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
YEAR
ENDED DECEMBER 31, 2004, PERIOD FROM JULY 16, 2003
(Inception)
TO DECEMBER 31, 2003 AND
PERIOD
FROM JULY 16, 2003 (Inception) TO DECEMBER 31, 2004
|
Period
from
|
Period
from
|
|||||||||
|
Year
|
July
16, 2003
|
July
16, 2003
|
||||||||
|
Ended
|
(Inception)
to
|
(Inception)
to
|
||||||||
|
December
|
December
|
December
|
||||||||
|
31,
2004
|
31,
2003
|
31,
2004
|
||||||||
|
Operating
expenses:
|
||||||||||
|
Research
and development, principally
|
||||||||||
|
license
fee
|
$
|
307,555
|
$
|
307,555
|
||||||
|
General
and administrative
|
243,379
|
243,379
|
||||||||
|
Totals
|
550,934
|
550,934
|
||||||||
|
Loss
from operations
|
(550,934
|
)
|
(550,934
|
)
|
||||||
|
Interest
expense
|
(11,397
|
)
|
(11,397
|
)
|
||||||
|
Net
loss
|
$
|
(562,331
|
)
|
$
|
—
|
$
|
(562,331
|
)
|
||
See
Notes
to Financial Statements.
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
YEAR
ENDED DECEMBER 31, 2004 AND PERIOD FROM JULY 16, 2003 (Inception) TO DECEMBER
31, 2003
|
Deficit
|
||||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||||
|
Stock
|
Additional
|
During
the
|
||||||||||||||||||||
|
Common
Stock
|
Subscription
|
Deferred
|
Paid-in
|
Development
|
||||||||||||||||||
|
Shares
|
Amount
|
Receivable
|
Compensation
|
Capital
|
Stage
|
Total
|
||||||||||||||||
|
Issuance
of common stock
|
||||||||||||||||||||||
|
to
founders in July 2003
|
||||||||||||||||||||||
|
at
$.001 per share
|
4,000,000
|
$
|
4,000
|
$
|
(4,000
|
)
|
||||||||||||||||
|
Balance,
December 31, 2003
|
4,000,000
|
4,000
|
(4,000
|
)
|
||||||||||||||||||
|
Payments
received for
|
||||||||||||||||||||||
|
stock
subscriptions
|
||||||||||||||||||||||
|
from
founders
|
4,000
|
$
|
4,000
|
|||||||||||||||||||
|
Issuance
of stock options
|
$
|
(135,621
|
)
|
$
|
135,621
|
|||||||||||||||||
|
Amortization
of deferred
|
||||||||||||||||||||||
|
compensation
|
5,651
|
5,651
|
||||||||||||||||||||
|
Net
loss
|
|
|
|
|
|
$
|
(562,331
|
)
|
(562,331
|
)
|
||||||||||||
|
Balance,
December 31, 2004
|
4,000,000
|
$
|
4,000
|
$
|
—
|
$
|
(129,970
|
)
|
$
|
135,621
|
$
|
(562,331
|
)
|
$
|
(552,680
|
)
|
||||||
See
Notes
to Financial Statements.
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
YEAR
ENDED DECEMBER 31, 2004,
PERIOD
FROM JULY 16, 2003 (Inception) TO DECEMBER 31, 2003 AND
THE
PERIOD FROM JULY 16, 2003 (Inception) TO DECEMBER 31, 2004
|
Period
from
|
Period
from
|
|||||||||
|
Year
|
July
16, 2003
|
July
16, 2003
|
||||||||
|
Ended
|
(Inception)
to
|
(Inception)
to
|
||||||||
|
December
|
December
|
December
|
||||||||
|
31,
2004
|
31,
2003
|
31,
2004
|
||||||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
loss
|
$
|
(562,331
|
)
|
$
|
(562,331
|
)
|
||||
|
Adjustments
to reconcile net loss to
|
||||||||||
|
net
cash used in operating activities:
|
||||||||||
|
Expenses
paid by related entities on
|
||||||||||
|
behalf
of the Company
|
305,702
|
305,702
|
||||||||
|
Amortization
of deferred compensation
|
5,651
|
5,651
|
||||||||
|
Depreciation
|
240
|
240
|
||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||
|
Accounts
payable and accrued
|
||||||||||
|
expenses
|
4,939
|
4,939
|
||||||||
|
Accrued
interest - related parties
|
11,397
|
11,397
|
||||||||
|
Net
cash used in operating
|
||||||||||
|
activities
|
(234,402
|
)
|
(234,402
|
)
|
||||||
|
Cash
flows from investing activities - purchase of computer
|
||||||||||
|
equipment
|
(2,396
|
)
|
(2,396
|
)
|
||||||
|
Cash
flows from financing activities:
|
||||||||||
|
Proceeds
from notes from related parties
|
245,000
|
245,000
|
||||||||
|
Receipt
of cash for stock subscription
|
||||||||||
|
receivable
|
4,000
|
4,000
|
||||||||
|
Net
cash provided by financing
|
||||||||||
|
activities
|
249,000
|
249,000
|
||||||||
|
Net
increase in cash
|
12,202
|
$
|
—
|
12,202
|
||||||
|
Cash,
beginning of period
|
—
|
—
|
—
|
|||||||
|
Cash,
end of period
|
$
|
12,202
|
$
|
—
|
$
|
12,202
|
||||
|
Supplemental
schedule of noncash financing activities:
|
||||||||||
|
Stock
options granted to the Company's
|
||||||||||
|
Chief
Executive Officer
|
$
|
135,621
|
$
|
135,621
|
||||||
See
Notes
to Financial Statements.
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
Note
1 - Business,
basis of presentation and summary of significant accounting
policies:
Business:
Tarpan
Therapeutics, Inc. ("Tarpan" or the "Company") was incorporated in the State
of
Delaware on July 16, 2003. Tarpan is a specialty pharmaceutical company focused
on the acquisition, development and commercialization of innovative
pharmaceutical products. The Company’s currently licensed compound targets the
treatment of skin disorders.
Basis
of presentation:
The
Company's primary activities since incorporation have been organizational
activities, including recruiting personnel, establishing office facilities,
payment of a license fee, performing business and financial planning and
raising
capital through the issuance of notes payable. Accordingly, the Company is
considered to be in the development stage.
On
April
1, 2005, Manhattan Pharmaceuticals, Inc. ("Manhattan") entered into an Agreement
and Plan of Merger (the "Agreement") with Tarpan. Pursuant to the Agreement,
Manhattan issued 10,731,052 shares of its common stock to Tarpan's stockholders
in exchange for 100% of the outstanding common stock of Tarpan. Manhattan
is a
pharmaceutical company that acquires and develops proprietary prescription
drugs.
The
Company's financial statements have been prepared on a going concern basis
which
contemplates the realization of assets and the settlement of liabilities
and
commitments in the normal course of business. For the year ended December
31,
2004 and from inception, the Company has reported a net loss of $562,331
and
negative cash flows from operating activities of $234,402 and, at December
31,
2004, it had a working capital deficiency of $4,134 and a stockholders'
deficiency of $552,680. As discussed above, Manhatan acquired 100% of Tarpan's
assets and assumed 100% of its liabilities. Manhattan has also incurred losses
from inception and as of December 31, 2004, had a deficit accumulated during
the
development stage of $13,955,035. Based on the resources available to the
Company and Manhattan, at December 31, 2004, management believes that the
combined company will continue to incur net losses through at least December
31,
2005 and will need additional equity or debt financing or will need to generate
revenues from the licensing of its products or by entering into strategic
alliances to be able to sustain its operations until it can achieve
profitability, if ever. These matters raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements
do
not include any adjustments that might result from the outcome of this
uncertainty.
Use
of estimates:
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
Note
1 - Business,
basis of presentation and summary of significant accounting policies
(continued):
Computer
equipment:
Computer
equipment is stated at cost and depreciated using the straight-line method
over
the estimated useful life of the related asset of five years.
Research
and development:
Research
and development costs are expensed as incurred.
In
2004,
the Company incurred costs of $300,000 for license fees which have been expensed
(see Note 3).
Income
taxes:
In
accordance with Statement of Financial Accounting Standards ("SFAS") No.
109,
"Accounting for Income Taxes," a deferred tax asset or liability is determined
based on temporary differences between the financial statement and the tax
bases
of assets and liabilities. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years
in
which these assets and liabilities are expected to be recovered or settled.
The
Company provides a valuation allowance when it is more likely than not that
the
net deferred tax assets will not be realized.
Stock-based
compensation:
Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), provides for the use of a fair value based method
of
accounting for employee stock compensation. The Company has elected to account
for employee stock options using the fair value based method of
accounting.
On
November 14, 2004, the Company granted stock options to the Company's Chief
Executive Officer to purchase 301,000 shares of the Company's common stock
at an
exercise price of $2.00 per share. These options vest equally over a three-year
period and expire on November 14, 2014. The Company valued the options on
the
date of grant using the minimum value method and recorded a deferred stock-based
compensation charge of $135,621, which represents the estimated fair value
of
the options granted. Such amount will be amortized over the vesting period
of
the stock options on a straight-line basis. The Company recorded compensation
expense of $5,651 for the year ended December 31, 2004 in conjunction with
this
grant. The expected future amortization expense for the deferred stock-based
compensation for stock option grants through December 31, 2004 is as
follows:
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
Note
1 - Business,
basis of presentation and summary of significant accounting policies
(concluded):
Stock-based
compensation (concluded):
|
Year
Ending
|
||||
|
December
31,
|
Amount
|
|||
|
2005
|
$
|
45,207
|
||
|
2006
|
45,207
|
|||
|
2007
|
39,556
|
|||
|
Total
|
$
|
129,970
|
||
The
fair
value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:
|
2004
|
2003
|
||
|
Dividend
yield
|
0%
|
N/A
|
|
|
Risk-free
interest rate
|
3.68%
|
N/A
|
|
|
Volatility
|
0%
|
N/A
|
|
|
Expected
life
|
7
years
|
N/A
|
Note
2 - Related party transactions:
Notes
payable:
At
various times during 2004, the Company issued 5% promissory notes payable
totaling $550,702 to both Paramount BioCapital Investments, LLC and Horizon
Biomedical Ventures LLC, both of which are affiliates of a significant
stockholder of Tarpan. These notes mature on various dates from January 2007
through December 2007 (see Note 7). The Company received proceeds totaling
$245,000 from these notes payable and the related balance of these notes
payable
were issued to the lenders for expenses paid on behalf of the
Company.
Administrative
services:
The
Company pays monthly fees for administrative services of $500 to Paramount
BioCapital Investments, LLC. For the year ended December 31, 2004, the Company
has accrued $1,500 for administrative services.
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
Note
3 - License agreement:
The
Company is a specialty pharmaceutical company focused on acquiring, developing
and commercializing innovative pharmaceutical products. In April 2004, the
Company entered into an agreement to acquire the rights to an exclusive,
world-wide, royalty-bearing sublicense to develop and commercialize a technology
for topical dermatologic products for localized usage at the delivery zone
(the
"Novasome Technology").
The
amount expended under these agreements and charged to research and development
expense during the year ended December 31, 2004 was $300,000. Future potential
milestone payments under this agreement total approximately $9,100,000. The
Company may also owe the licensor royalty payments based on future net sales,
as
defined, from Novasome Technology. There are no minimum royalties required
under
the agreement.
Note
4 - Stockholders' deficiency:
In
2003,
the Company issued 4,000,000 shares of common stock to its founders for
subscriptions receivable of $4,000 or $.001 per share. During 2004, the Company
received the $4,000.
The
Company has a stock inventive plan (the "Plan") under which incentive stock
options may be granted to officers, directors, consultants and key employees
of
the Company for the purchase of up to 1,000,000 shares of common stock.
A
summary
of the Company's stock option activity and related information for the year
ended December 31, 2004 is as follows:
|
Weighted
|
||||||||||
|
Average
|
||||||||||
|
Available
|
Exercise
|
|||||||||
|
for
Grant
|
Granted
|
Price
|
||||||||
|
Establish
2004 Stock Option Plan
|
1,000,000
|
|||||||||
|
2004
option grants
|
(301,000
|
)
|
301,000
|
$
|
2.00
|
|||||
|
Balance,
December 31, 2004
|
699,000
|
301,000
|
||||||||
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
Note
4 - Stockholders' deficiency (concluded):
The
exercise price for all vested and unvested options outstanding is $2.00 per
share. The average remaining contractual life of options outstanding at December
31, 2004 is 9.875 years. The average fair value of options granted during
the
year ended December 31, 2004 was approximately $.45 per share. At December
31,
2004, no options were vested and no options have been exercised.
Note
5 - Income taxes:
There
was
no current or deferred income tax expense for the year ended December 31,
2004
or the period from July 16, 2003 (date of inception) to December 31, 2003.
The
Company's deferred tax assets as of December 31, 2004 and 2003 are as
follows:
|
2004
|
2003
|
||||||
|
Net
operating loss carryforwards - Federal
|
$
|
189,000
|
|||||
|
Net
operating loss carryforwards - state
|
34,000
|
||||||
|
Total
|
223,000
|
||||||
|
Less
valuation allowance
|
(223,000
|
)
|
|||||
|
Deferred
tax assets
|
$
|
—
|
$
|
—
|
|||
At
December 31, 2004, the Company had potentially utilizable Federal and state
net
operating loss tax carryforwards of approximately $555,000.
The
utilization of the Company's net operating losses may be subject to a
substantial limitation due to the "change of ownership provisions" under
Section
382 of the Internal Revenue Code and similar state provisions. Such limitation
may result in the expiration of the net operating loss carryforwards before
their utilization.
Note
6 - Employment agreement:
The
Company has entered into a three-year employment agreement with its President
and Chief Executive Officer at $300,000 annually. In addition, the Company
is
required to pay its President and Chief Executive Officer a guaranteed bonus
of
$200,000 payable in two equal installments. The first installment of $100,000
is
payable on May 15, 2005 and the second installment is payable on November
15,
2005.
Note
7 - Subsequent events:
During
the period from January 1, 2005 through March 14, 2005, the Company issued
$80,000 of additional promissory notes to Paramount BioCapital Investments,
LLC
(see Note 1).
TARPAN
THERAPEUTICS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
On
April
1, 2005, the Company entered into the Agreement with Manhattan,
a
Delaware corporation, and Tarpan Acquisition Corp., a Delaware corporation
and
wholly-owned subsidiary of Manhattan (“TAC”). The Agreement provided that TAC
would merge with and into the Company, with the Company remaining as the
surviving corporation and a wholly-owned subsidiary of Manhattan (the “Merger”).
The Merger was completed April 1, 2005. In consideration for their shares
of
capital stock and in accordance with the Agreement, the stockholders of the
Company received a number of shares of Manhattan’s common stock such that, upon
the effective time of the Merger, the Company’s stockholders collectively
received (or are entitled to receive) approximately 20 percent of
Manhattan’s outstanding common stock on a fully-diluted basis (i.e., assuming
the issuance of common stock underlying outstanding options, warrants and
other
rights). Based on the number of fully-diluted outstanding shares of Manhattan’s
common stock on the date of the Merger, the Company’s stockholders as of April
1, 2005 will receive an aggregate of 10,731,052 shares of Manhattan’s common
stock in the Merger. At the time of the Merger, the Company had outstanding
indebtedness of approximately $651,000 resulting from a series of promissory
notes issued to Paramount BioCapital Investments, LLC and Horizon BioMedical
Ventures, LLC, both of which are owned or controlled by Dr. Lindsay Rosenwald.
The notes were amended at the time of the Merger to provide that one-half
of the
outstanding indebtedness was payable upon completion of the Merger and the
remaining one-half will be payable at such time as Manhattan raises at least
$5
million in new financing.
Several
of the Company’s former stockholders are directors or significant stockholders
of Manhattan. Dr. Rosenwald and various trusts established for the benefit
of
Dr. Rosenwald and members of his immediate family collectively beneficially
owned approximately 46 percent of our common stock and beneficially own
approximately 26 percent Manhattan’s common stock. In addition, Joshua Kazam,
David Tanen, Dr. Michael Weiser and Timothy McInerney, all of whom are
members
of Manhattan’s board of directors, collectively owned approximately 13.4 percent
of the Company's outstanding common stock. Dr. Weiser and
Mr.
McInerney are also employed by Paramount BioCapital, Inc., an entity owned
and
controlled by Dr. Rosenwald.
Introduction
to Unaudited Pro Forma Condensed Combined Financial
Statements
On
April
1, 2005, Manhattan Pharmaceuticals, Inc. (the “Company”) entered into an
Agreement and Plan of Merger (the “Agreement”) with Tarpan Therapeutics, Inc., a
Delaware corporation (“Tarpan”), and Tarpan Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of the Company (“TAC”). The Agreement
provided that TAC would merge with and into Tarpan, with Tarpan remaining
as the
surviving corporation and a wholly-owned subsidiary of the Company (the
“Merger”). The Merger was completed April 1, 2005. In consideration for their
shares of Tarpan capital stock and in accordance with the Agreement, the
stockholders of Tarpan received a number of shares of the Company’s common stock
such that, upon the effective time of the Merger, the Tarpan stockholders
collectively received approximately 20 percent of the Company’s outstanding
common stock on a fully-diluted basis (i.e., assuming the issuance of common
stock underlying outstanding options, warrants and other rights). Based on
the
number of fully-diluted outstanding shares of the Company’s common stock on the
date of the Merger, the former stockholders of Tarpan received an aggregate
of
10,731,052 shares of the Company’s common stock in the Merger. At the time of
the Merger, Tarpan had outstanding indebtedness of approximately $651,000
resulting principally from a series of promissory notes issued to Paramount
BioCapital Investments, LLC and Horizon BioMedical Ventures, LLC, both of
which
are owned or controlled by Dr. Lindsay Rosenwald. The notes were amended
at the
time of the Merger to provide that one-half of the outstanding indebtedness
was
payable upon completion of the Merger and the remaining one-half will be
payable
at such time as the Company raises at least $5 million in new
financing.
The
Unaudited Pro Forma Condensed Combined Statements of Operations combine the
historical consolidated statements of operations of the Company and Tarpan
giving effect to the merger as if it had been consummated on January 1,
2004.
You
should read this information in conjunction with the:
Accompanying
notes to the Unaudited Pro Forma Condensed Combined Financial Statements;
Separate
audited historical consolidated financial statements of the Company as of
and
for the years ended December 31, 2004 and 2003 and for the period from August
6,
2001 (inception) to December 31, 2004 included elsewhere in this
prospectus;
Separate
unaudited historical consolidated financial statements of the Company as
of and
for the six months ended June 30, 2005 and 2004 and the period from August
6,
2001 (inception) to June 30, 2005 included elsewhere in this
prospectus;
Separate
audited and unaudited historical financial statements of Tarpan as of December
31, 2004 and 2003 and March 31, 2005 and for the year ended December 31,
2004,
the period from July 16, 2003 (inception) to December 31, 2003 and 2004 and
the
three months ended March 31, 2005 and 2004 and the period from July 16, 2003
(inception) to March 31, 2005 which are included elsewhere in this prospectus.
We
present the unaudited pro forma condensed combined financial information
for
informational purposes only. The pro forma information is not necessarily
indicative of what our results of operations actually would have been had
we
completed the merger on January 1, 2004. In addition, the unaudited pro forma
condensed combined financial information does not purport to project the
future
operating results of the combined company.
We
prepared the unaudited pro forma condensed combined financial information
using
the purchase method of accounting with the Company treated as the acquirer.
Accordingly, the Company’s cost to acquire Tarpan has been allocated to the
assets acquired and liabilities assumed (substantially in process research
and
development ("IPR&D")) based upon their estimated fair values as of the date
of acquisition.
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(Development
Stage Companies)
For
the
six months ended June 30, 2005
(Unaudited)
($000,
except share information)
|
Manhattan
|
Tarpan
|
Pro
Forma
|
Pro
Forma
|
||||||||||
|
Pharmaceuticals,
Inc.
|
Therapeutics,
Inc.
|
Adjustments
|
Combined
|
||||||||||
|
Revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||
|
Costs
and expenses:
|
|||||||||||||
|
Research
and development
|
1,921
|
—
|
1,921
|
||||||||||
|
General
and administrative
|
1,046
|
120
|
1,166
|
||||||||||
|
In-process
research and development charge
|
11,888
|
—
|
(11,888
|
)
|
—
|
||||||||
|
Total
operating expenses
|
14,855
|
120
|
(11,888
|
)
|
3,087
|
||||||||
|
Operating
loss
|
(14,855
|
)
|
(120
|
)
|
11,888
|
(3,087
|
)
|
||||||
|
Other,
net
|
(68
|
)
|
7
|
—
|
(61
|
)
|
|||||||
|
Net
loss
|
(14,787
|
)
|
(127
|
)
|
11,888
|
(3,026
|
)
|
||||||
|
Preferred
stock dividends (including imputed amounts)
|
(252
|
)
|
—
|
—
|
(252
|
)
|
|||||||
|
Net
loss applicable to common shares
|
$
|
(15,039
|
)
|
$
|
(127
|
)
|
$
|
11,888
|
$
|
(3,278
|
)
|
||
|
Net
loss per common share:
|
|||||||||||||
|
Basic
and diluted
|
$
|
(0.43
|
)
|
$
|
(0.08
|
)
|
|||||||
|
Weighted
average shares of common stock outstanding:
|
|||||||||||||
|
Basic
and diluted
|
34,663,130
|
40,058,300
|
|||||||||||
See
accompanying notes to unaudited condensed combined financial
statements.
|
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS
|
|||||||||||||
|
(Development
Stage Companies)
|
|||||||||||||
|
For
the year ended December 31, 2004
|
|||||||||||||
|
(Unaudited)
|
|||||||||||||
|
($000,
except share information)
|
|||||||||||||
|
|
|
|
|
||||||||||
|
Manhattan Pharmaceuticals,
Inc. |
Tarpan Therapeutics,
Inc. |
Pro
Forma Adjustments |
Pro
Forma Combined |
||||||||||
|
Revenue
|
$
|
—
|
$
|
—
|
$ | — |
$
|
—
|
|||||
|
Costs
and expenses:
|
|||||||||||||
|
Research
and development
|
4,153
|
308
|
— |
4,461
|
|||||||||
|
General
and administrative
|
1,990
|
243
|
— |
2,233
|
|||||||||
|
Total
operating expenses
|
6,143
|
551
|
—
|
6,694
|
|||||||||
|
Operating
loss
|
(6,143
|
)
|
(551
|
)
|
—
|
(6,694
|
)
|
||||||
|
Other,
net
|
(247
|
)
|
11
|
— |
(236
|
)
|
|||||||
|
|
|
||||||||||||
|
Net
loss
|
(5,896
|
)
|
(562
|
)
|
—
|
(6,458
|
)
|
||||||
|
Preferred
stock dividends (including imputed amounts)
|
(586
|
)
|
— | — |
(586
|
)
|
|||||||
|
|
|
||||||||||||
|
Net
loss applicable to common shares
|
$
|
(6,482
|
)
|
$
|
(562
|
)
|
$
|
—
|
$
|
(7,044
|
)
|
||
|
Net
loss per common share:
|
|||||||||||||
|
Basic
and diluted
|
$
|
(0.24
|
)
|
$
|
(0.19
|
)
|
|||||||
|
Weighted
average shares of common stock outstanding:
|
|||||||||||||
|
Basic
and diluted
|
26,936,658
|
37,667,710
|
|||||||||||
|
See
accompanying notes to unaudited condensed combined financial
statements.
|
|||||||||||||
Notes
to Unaudited Pro Forma Condensed Combined Financial
Statements
(1)
Description of Transaction and Basis of Presentation
On
April
1, 2005, Manhattan Pharmaceuticals, Inc. (the “Company”) consummated an
Agreement and Plan of Merger (the “Agreement”) with Tarpan Therapeutics, Inc., a
Delaware corporation (“Tarpan”), and Tarpan Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of the Company (“TAC”). The Agreement
provided that TAC would merge with and into Tarpan, with Tarpan remaining
as the
surviving corporation and a wholly-owned subsidiary of the Company (the
“Merger”). The Merger was completed April 1, 2005. In consideration for their
shares of Tarpan capital stock and in accordance with the Agreement, the
stockholders of Tarpan received a number of shares of the Company’s common stock
such that, upon the effective time of the Merger, the Tarpan stockholders
collectively received approximately 20 percent of the Company’s outstanding
common stock on a fully-diluted basis (i.e., assuming the issuance of common
stock underlying outstanding options, warrants and other rights). Based on
the
number of fully-diluted outstanding shares of the Company’s common stock on the
date of the Merger, the former stockholders of Tarpan received an aggregate
of
10,731,052 shares of the Company’s common stock in the Merger. At the time of
the Merger, Tarpan had outstanding indebtedness of approximately $651,000
resulting principally from a series of promissory notes issued to Paramount
BioCapital Investments, LLC and Horizon BioMedical Ventures, LLC, both of
which
are owned or controlled by Dr. Lindsay Rosenwald. The notes were amended
at the
time of the Merger to provide that one-half of the outstanding indebtedness
was
payable upon completion of the Merger and the remaining one-half will be
payable
at such time as the Company raises at least $5 million in new financing,
which
occurred August 26, 2005.
The
merger was accounted for as a purchase by the Company under accounting
principles generally accepted in the United States of America. Under the
purchase method of accounting, the assets and liabilities of Tarpan were
recorded as of the acquisition date, at their respective fair values, and
combined with those of the Company. The estimated purchase price
has been
allocated to acquired in process research and development. Since the charge
to
acquired in process research and development is non-recurring and directly
related to the merger, such amount is not reflected in the pro forma
information.
As
required by FASB Interpretation No. 4, “Applicability of FASB Statement No. 2 to
Business Combinations Accounted for by the Purchase Method” (“FIN 4”), the
Company recorded a charge in the second quarter of 2005 of $12,567,000 for
the
portion of the purchase price allocated to acquired in-process research and
development.
A
valuation using the guidance in SFAS No. 141, “Business Combinations” and the
AICPA Practice Aid “Assets Acquired in a Business Combination to Be Used in
Research and Development Activities: A Focus on Software, Electronic Devices
and
Pharmaceutical Industries” was performed to determine the fair value of research
and development projects of Tarpan which were in-process but not yet
completed.
25,627,684
Shares
Common
Stock
Manhattan
Pharmaceuticals, Inc.
______________________
PROSPECTUS
______________________
September
, 2005
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
24. Indemnification of Directors and Officers.
Under
provisions of the certificate of incorporation and bylaws of the Registrant,
directors and officers will be indemnified for any and all judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys fees,
in
connection with threatened, pending or completed actions, suits or proceedings,
whether civil, or criminal, administrative or investigative (other than an
action arising by or in the right of the Registrant), if such director or
officer has been wholly successful on the merits or otherwise, or is found
to
have acted in good faith and in a manner he or she reasonably believes to
be in
or not opposed to the best interests of the Registrant, and, with respect
to any
criminal action or proceeding, had no reasonable cause to believe his or
her
conduct was unlawful. In addition, directors and officers will be indemnified
for reasonable expenses in connection with threatened, pending or completed
actions or suits by or in the right of Registrant if such director or officer
has been wholly successful on the merits or otherwise, or is found to have
acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Registrant, except in the case of certain
findings by a court that such person is liable for negligence or misconduct
in
his or her duty to the Registrant unless such court or the Delaware Court
of
Chancery also finds that such person is nevertheless fairly and reasonably
entitled to indemnity. The Registrant’s Certificate of Incorporation also
eliminates the liability of directors of the Registrant for monetary damages
to
the fullest extent permissible under Delaware law.
Section
145 of the Delaware General Corporation Law states:
(a)
A
corporation shall have the power to indemnify any person who was or is a
party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action arising by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or
proceeding if he acted in good faith and in a manner he reasonably believed
to
be in or not opposed to the best interests of the corporation, and, with
respect
to any criminal action or proceeding, had no reasonable cause to believe
his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or
its equivalent, shall not, of itself, create a presumption that the person
did
not act in good faith and in a manner which he reasonably believed to be
in or
not opposed to the best interests of the corporation, and, with respect to
any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b)
A
corporation shall have power to indemnify any person who was or is a party
or is
threatened to be made a party to any threatened, pending or completed action
or
suit by or in the right of the corporation to procure a judgment in its favor
by
reason of the fact that he is or was a director, officer, employee or agent
of
the corporation, or is or was serving at the request of the corporation as
a
director, officer, employee or agent of another corporation, partnership,
joint
venture, trust, or other enterprise against expenses (including attorneys’ fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect to
any
claim, issue or matter as to which such person shall have been adjudged to
be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view
of all
the circumstances of the case, such person is fairly and reasonably entitled
to
indemnity for such expense which the Court of Chancery or such other court
shall
deem proper.
Item
25. Other Expenses Of Issuance And Distribution.
The
Registrant estimates that expenses payable by the Registrant is connection
with
the offering described in this Registration Statement will be as follows:
|
SEC
registration fee
|
$
|
4,200
|
||
|
Legal
fees and expenses
|
10,000
|
|||
|
Accounting
fees and expenses
|
5,000
|
|||
|
Printing
and engraving expenses
|
3,000
|
|||
|
Miscellaneous
|
5,000
|
|||
|
Total
|
$
|
27,200
|
Item
26. Recent Sales of Unregistered Securities.
The
following sales of unregistered securities reflect the Registrant’s 1-for-5
stock combination effected September 25, 2003.
Issuance
in connection with Acquisition of Manhattan Research Development,
Inc.
In
connection with the Registrant’s merger with Manhattan Research Development,
Inc., effective as of February 21, 2003, it issued an aggregate of 18,689,916
shares of its common stock to the former stockholders of Manhattan Research
Development in exchange for their shares of Manhattan Research Development
common stock. In addition, at the time of the merger, Manhattan Research
Development had outstanding warrants to purchase an aggregate of 864,280
shares
of its common stock, which automatically converted into warrants to purchase
an
aggregate of 2,196,943 shares of the Registrant’s common stock. The form of
warrant such warrant was attached as Exhibit 4.1 to the Registrant’s Form 10-QSB
for the quarter ended March 31, 2003. The Registrant relied on the exemption
from federal registration under Section 4(2) of the Securities Act, based
on its
belief that the issuance of such securities did not involve a public offering,
as there were fewer than 35 “non-accredited” investors, all of whom, either
alone or through a purchaser representative, had such knowledge and experience
in financial and business matters so that each was capable of evaluating
the
risks of the investment.
Series
A Convertible Preferred Stock
On
November 5, 2003, the Registrant issued 1,000,000 shares of its Series A
Convertible Preferred Stock at a total offering price of $10,000,000. Each
share
of Series A Convertible Preferred Stock is convertible into approximately
9.1
shares of common stock. The Registrant engaged Maxim Group LLC and, indirectly,
Paramount Capital, Inc. as placement agents and paid aggregate commissions
of
$700,000, plus non-accountable expenses of $150,000. The Registrant also
issued
to the placement agents warrants to purchase an aggregate of 9,090,909 shares
of
common stock at a price of $1.10 per share. The offer and sale of the Series
A
Convertible Preferred Stock and the placement agent warrants did not involve
a
public offering and was made solely to “accredited investors,” and was,
therefore, exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) and Rule 506 promulgated thereunder.
January
2004 Private Placement
On
January 12, 2004, the Registrant issued 3,368,637 shares of common stock
at a
price of $1.10 per share. The Registrant engaged Paramount Capital, Inc.
as a
placement agent in connection with the private placement, paying an aggregate
commission of approximately $251,000, plus non-accountable expenses of $10,000.
The Registrant also issued to the placement agent a warrant to purchase 326,499
shares of common stock exercisable at a price of $1.10 per share. The offer
and
sale of the shares of common stock and the placement agent warrants did not
involve a public offering and was made solely to accredited investors, and
was,
therefore, exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) and Rule 506 promulgated thereunder.
Issuance
in connection with Acquisition of Tarpan Therapeutics, Inc.
In
connection with the Registrant’s merger of its wholly-owned subsidiary Tarpan
Acquisition Corp., with Tarpan Therapeutics, Inc. (“Tarpan”), effective as of
April 1, 2005, it issued an aggregate of 10,731,052 shares of its common
stock
to the former stockholders of Tarpan in exchange for their shares of Tarpan
common stock. The Registrant relied on the exemption from federal registration
under Section 4(2) of the Securities Act, based on its belief that the issuance
of such securities did not involve a public offering, as there were fewer
than
35 “non-accredited” investors, all of whom, either alone or through a purchaser
representative, had such knowledge and experience in financial and business
matters so that each was capable of evaluating the risks of the
investment.
August
2005 Private Placement
In
August
2005, the Registrant sold in a private placement offering to accredited
investors units of its securities consisting of shares of common stock and
warrants to purchase additional shares of common stock. The private placement
was completed in two separate closings held on August 26, 2005 and August
30,
2005. In the August 26 closing, the Registrant sold a total of 10,763,926
shares
of common stock and five-year warrants to purchase 2,152,758 shares for total
gross proceeds of approximately $11.95 million. The warrants issued at the
August 26 closing are exercisable at a price of $1.44 per share, which
represented approximately 110% of the average closing price of the Registrant’s
common stock during the five trading days preceding such closing date. On
August
30, 2005, the Registrant sold an additional 1,108,709 shares of common stock
and
five-year warrants to purchase 221,741 shares of common stock, which resulted
in
gross proceeds of approximately $1.28 million. The warrants issued in connection
with the August 30 closing are exercisable at a price of $1.49 per share,
which
represented approximately 110% of the average closing price of the Company's
common stock during the five trading days preceding such closing date. The
total
gross proceeds resulting from this offering was approximately $13.22 million,
before deducting selling commissions and expenses. The Registrant paid total
cash commissions of approximately $925,000 to selling agents engaged in
connection with the offering and issued 5-year warrants to purchase an aggregate
of 593,196 shares of common stock, of which warrants to purchase 538,196
shares
are exercisable at a price of $1.44 per share and the remaining are exercisable
at a price of $1.49 per share. In connection with this offering, the Registrant
relied on the exemption from federal registration under Section 4(2) of the
Securities Act and/or Rule 506 promulgated thereunder, based on its belief
that
the offer and sale of the shares and warrants did not involve a public offering
as each investor was “accredited” and no general solicitation was involved in
the offering.
Item
27. Exhibits.
The
following exhibits are filed as part of this Registration
Statement:
|
Exhibit
No.
|
Description
|
|
2.1
|
Agreement
and Plan of Merger among the Company, Manhattan Pharmaceuticals
Acquisition Corp. and Manhattan Research Development, Inc. (formerly
Manhattan Pharmaceuticals, Inc.) dated December 17, 2002 (incorporated
by
reference to Exhibit 2.1 from Form 8-K filed March 5,
2003).
|
|
2.2
|
Agreement
and Plan of Merger among the Company, Tarpan Therapeutics, Inc.
and Tarpan
Acquisition Corp. dated April 1, 2005 (incorporated by reference
to
Exhibit 2,1 of registrant’s Form 8-K/A filed June 15,
2005).
|
|
3.1
|
Certificate
of incorporation, as amended through September 25, 2003 (incorporated
by
reference to Exhibit 3.1 to the Registrant’s Form 10-QSB for the quarter
ended September 30, 2003).
|
|
3.2
|
Bylaws,
as amended to date (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
3.3
|
Certificate
of Designations of Series A Convertible Preferred Stock (incorporated
by
reference to Exhibit 3.3 to the Registrant’s Registration Statement on
Form SB-2 filed January 13, 2004 (File No. 333-111897).
|
|
4.1
|
Form
of unit certificate (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.2
|
Specimen
common stock certificate (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.3
|
Form
of redeemable warrant certificate (incorporated by reference
from
Registrant’s registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.4
|
Form
of redeemable warrant agreement between the Registrant and Continental
Stock Transfer & Trust Company (incorporated by reference from
Registrant’s registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.5
|
Form
of underwriter’s warrant certificate (incorporated by reference from
Registrant’s registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.6
|
Form
of underwriter’s warrant agreement between the Registrant and Joseph
Stevens & Company, L.P. (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.7
|
Form
of bridge warrant (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.8
|
Warrant
issued to John Prendergast to purchase 37,500 shares of Registrant’s
common stock (incorporated by reference from Exhibit 10.24 to
the
Registrant’s Form 10-QSB for the quarter ended March 31,
1997).
|
|
4.9
|
Warrant
No. 2 issued to Joseph Stevens & Company, Inc. to purchase 150,000
shares of Registrant’s Common Stock exercisable January 4, 2001
(incorporated by reference to Exhibit 10.29 to the Registrant’s Form
10-KSB for the year ended December 31, 1999).
|
|
4.10
|
Warrant
No. 3 issued to Joseph Stevens & Company, Inc. to purchase 150,000
shares of Registrant’s Common Stock exercisable January 4, 2002
(incorporated by reference to Exhibit 10.30 to the Registrant’s Form
10-KSB for the year ended December 31, 1999).
|
|
4.11
|
Form
of stock purchase warrants issued on September 28, 2000 to BH
Capital
Investments, L.P., exercisable for shares of common stock of
the
Registrant (incorporated by reference to Exhibit 10.6 to the
Registrant’s
Form 10-QSB for the quarter ended September 30, 2000).
|
|
4.12
|
Form
of stock purchase warrants issued on September 28, 2000 to Excalibur
Limited Partnership, exercisable for shares of common stock of
the
Registrant (incorporated by reference to Exhibit 10.7 to the
Registrant’s
Form 10-QSB for the quarter ended September 30, 2000).
|
|
4.13
|
Warrant
certificate issued March 8, 2001 by the Registrant to Dian Griesel
(incorporated by reference to Exhibit 10.56 to the Registrant’s Form
10-QSB for the quarter ended March 31, 2001).
|
|
4.14
|
Form
of warrant issued by Manhattan Research Development, Inc., which
automatically converted into warrants to purchase shares of the
Registrant’s common stock upon the merger transaction with such company
(incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-QSB
for the quarter ended March 31, 2003).
|
|
4.15
|
Form
of warrant issued to placement agents in connection with the
Registrant’s
November 2003 private placement of Series A Convertible Preferred
Stock
and the Registrant’s January 2004 private placement (incorporated by
reference to Exhibit 4.18 to the Registrant’s Registration Statement on
Form SB-2 filed January 13, 2004 (File No.
333-111897)).
|
|
4.16
|
Form
of subscription agreement between Registrant and the selling
stockholders
(incorporated by reference from Registrant's registration statement
on
Form SB-2, as amended (File No.
33-98478)).
|
|
Exhibit
No.
|
Description
|
|
4.17
|
Form
of warrant issued to investors in the Registrant’s August 2005 private
placement (incorporated by reference to Exhibit 4.1 of the
Registrant’s
Form 8-K filed September 1, 2005).
|
|
4.18
|
Form
of warrant issued to placement agents in the Registrant’s August 2005
private placement (incorporated by reference to Exhibit 4.2
of the
Registrant’s Form 8-K filed September 1, 2005).
|
|
5.1
|
Opinion
of Maslon Edelman Borman & Brand, LLP.
|
|
10.1
|
1995
Stock Option Plan, as amended (incorporated by reference to
Exhibit 10.18
to the Registrant’s Form 10-QSB for the quarter ended September 30,
1996).
|
|
10.2
|
Employment
Agreement dated January 2, 2005, between the Registrant and
Nicholas J.
Rossettos (incorporated by reference to Exhibit 10.1 to the
Registrant’s
Form 10-QSB for the quarter ended June 30, 2005).
|
|
10.3
|
License
Agreement dated on or about February 28, 2002 between Manhattan
Research
Development, Inc. (f/k/a Manhattan Pharmaceuticals, Inc.) and
Oleoyl-Estrone Developments SL (incorporated by reference to
Exhibit 10.6
to the Registrant’s Amendment No. 2 to Form 10-QSB/A for the quarter ended
March 31, 2003 filed on March 12, 2004).
|
|
10.4
|
License
Agreement dated April 4, 2003 between the Registrant and NovaDel
Pharma,
Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s
Amendment No. 1 to Form 10-QSB/A for the quarter ended June
30, 2003 filed
on March 12, 2004).++
|
|
10.5
|
Employment
Agreement dated January 2, 2004 between the Registrant and
Leonard
Firestone (incorporated by reference to Exhibit 10.10 of the
Registrant’s
Form Sb-2 filed January 13, 2004 (No. 333-111897).
|
|
10.6
|
2003
Stock Option Plan (incorporated by reference to Exhibit 4.1
to
Registrant’s Registration Statement on Form S-8 filed February 17,
2004).
|
|
10.7
|
Employment
Agreement dated April 1, 2005, between the Registrant and Douglas
Abel
(incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K/A
filed June 15, 2005).
|
|
10.8
|
Sublicense
Agreement dated April 14, 2004 between Tarpan Therapeutics,
Inc. and IGI,
Inc., as acquired by the Registrant effective as of April 1,
2005
(incorporated by reference to Exhibit 10.109 to IGI, Inc.’s Form 10-Q for
the quarter ended March 31, 2004 (File No. 001-08568).
|
|
10.9
|
Form
of subscription agreement between the Registrant and the investors
in the
Registrant’s August 2005 private placement (incorporated by reference
as
Exhibit 10.1 to the Registrant’s Form 8-K filed September 1,
2005)
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm - J.H. Cohn
LLP.
|
|
23.2
|
Consent
of Independent Registered Public Accounting Firm - J.H. Cohn
LLP.
|
|
23.3
|
Consent
of Maslon, Edelman Borman & Brand, LLP (included as part of Exhibit
5.1)
|
|
24.1
|
Power
of Attorney (included on signature page
hereof)
|
|
++
|
Confidential
treatment has been granted as to certain portions of this exhibit
pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
|
Item
28. Undertakings.
(a)
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being
registered, the Registrant will, unless in the opinion of its counsel the
matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of
such
issue.
(b)
The
undersigned Registrant hereby undertakes:
(1)
To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement: (i) to include any prospectus required
by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus
any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually
or in
the aggregate, represent a fundamental change in the information set forth
in
the registration statement; and (iii) to include any material information
with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
(2)
That,
for
the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(3)
To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering;
and
(4)
That,
for
purposes of determining any liability under the Securities Act, each filing
of
the Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a
new registration statement relating to the securities offered therein, and
the
offering of such securities at that time shall be deemed to be the initial
bona
fide
offering
thereof.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form SB-2 and has duly caused this registration statement to
be signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of New
York, State of New York, on September 23, 2005.
|
|
|
|
|
|
Manhattan
Pharmaceuticals, Inc.
|
|
|
|
|
|
|
|
By:
|
/s/ Douglas
Abel
|
|
|
Douglas
Abel
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
||
POWER
OF ATTORNEY
Each
person whose signature to this Registration Statement appears below hereby
constitutes and appoints Douglas Abel and Nicholas J. Rossettos, and each of
them, as his true and lawful attorney-in-fact and agent, with full power of
substitution, to sign on his or her behalf individually and in the capacity
stated below and to perform any acts necessary to be done in order to file
all
amendments to this Registration Statement and any and all instruments or
documents filed as part of or in connection with this Registration Statement
or
the amendments thereto and each of the undersigned does hereby ratify and
confirm all that said attorney-in-fact and agent, or his substitutes, shall
do
or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1933, this Registration
Statement has been signed by the following persons in the capacities
indicated.
|
Signature
|
Title
|
Date
|
|
/s/
Douglas Abel
Douglas
Abel
|
President,
Chief Executive Officer and Director (Principal Executive
Officer)
|
September
23, 2005
|
|
/s/
Nicholas J. Rossettos
Nicholas
J. Rossettos
|
Treasurer,
Secretary and Chief Financial Officer (Principal Accounting and
Financial
Officer)
|
September
23, 2005
|
|
Neil Herskowitz |
Director
|
September
__, 2005
|
|
/s/
Malcolm Hoenlein
Malcolm Hoenlein |
Director
|
September
23, 2005
|
|
/s/
Timothy McInerney
Timothy McInerney |
Director
|
September
23, 2005
|
|
/s/
Joan Pons
Joan
Pons
|
Director
|
September
23, 2005
|
|
/s/
Richard Steinhart
Richard Steinhart |
Director
|
September
23, 2005
|
|
/s/
Michael Weiser
Michael
Weiser
|
Director
|
September
22, 2005
|
EXHIBIT
INDEX
|
Exhibit
No.
|
Description
|
|
2.1
|
Agreement
and Plan of Merger among the Company, Manhattan Pharmaceuticals
Acquisition Corp. and Manhattan Research Development, Inc. (formerly
Manhattan Pharmaceuticals, Inc.) dated December 17, 2002 (incorporated
by
reference to Exhibit 2.1 from Form 8-K filed March 5,
2003).
|
|
2.2
|
Agreement
and Plan of Merger among the Company, Tarpan Therapeutics, Inc.
and Tarpan
Acquisition Corp. dated April 1, 2005 (incorporated by reference
to
Exhibit 2,1 of registrant’s Form 8-K/A filed June 15,
2005).
|
|
3.1
|
Certificate
of incorporation, as amended through September 25, 2003 (incorporated
by
reference to Exhibit 3.1 to the Registrant’s Form 10-QSB for the quarter
ended September 30, 2003).
|
|
3.2
|
Bylaws,
as amended to date (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
3.3
|
Certificate
of Designations of Series A Convertible Preferred Stock (incorporated
by
reference to Exhibit 3.3 to the Registrant’s Registration Statement on
Form SB-2 filed January 13, 2004 (File No. 333-111897).
|
|
4.1
|
Form
of unit certificate (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.2
|
Specimen
common stock certificate (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.3
|
Form
of redeemable warrant certificate (incorporated by reference from
Registrant’s registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.4
|
Form
of redeemable warrant agreement between the Registrant and Continental
Stock Transfer & Trust Company (incorporated by reference from
Registrant’s registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.5
|
Form
of underwriter’s warrant certificate (incorporated by reference from
Registrant’s registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.6
|
Form
of underwriter’s warrant agreement between the Registrant and Joseph
Stevens & Company, L.P. (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.7
|
Form
of bridge warrant (incorporated by reference from Registrant’s
registration statement on Form SB-2, as amended (File
No. 33-98478)).
|
|
4.8
|
Warrant
issued to John Prendergast to purchase 37,500 shares of Registrant’s
common stock (incorporated by reference from Exhibit 10.24 to the
Registrant’s Form 10-QSB for the quarter ended March 31,
1997).
|
|
4.9
|
Warrant
No. 2 issued to Joseph Stevens & Company, Inc. to purchase 150,000
shares of Registrant’s Common Stock exercisable January 4, 2001
(incorporated by reference to Exhibit 10.29 to the Registrant’s Form
10-KSB for the year ended December 31, 1999).
|
|
4.10
|
Warrant
No. 3 issued to Joseph Stevens & Company, Inc. to purchase 150,000
shares of Registrant’s Common Stock exercisable January 4, 2002
(incorporated by reference to Exhibit 10.30 to the Registrant’s Form
10-KSB for the year ended December 31, 1999).
|
|
4.11
|
Form
of stock purchase warrants issued on September 28, 2000 to BH Capital
Investments, L.P., exercisable for shares of common stock of the
Registrant (incorporated by reference to Exhibit 10.6 to the Registrant’s
Form 10-QSB for the quarter ended September 30, 2000).
|
|
4.12
|
Form
of stock purchase warrants issued on September 28, 2000 to Excalibur
Limited Partnership, exercisable for shares of common stock of
the
Registrant (incorporated by reference to Exhibit 10.7 to the Registrant’s
Form 10-QSB for the quarter ended September 30, 2000).
|
|
4.13
|
Warrant
certificate issued March 8, 2001 by the Registrant to Dian Griesel
(incorporated by reference to Exhibit 10.56 to the Registrant’s Form
10-QSB for the quarter ended March 31, 2001).
|
|
4.14
|
Form
of warrant issued by Manhattan Research Development, Inc., which
automatically converted into warrants to purchase shares of the
Registrant’s common stock upon the merger transaction with such company
(incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-QSB
for the quarter ended March 31, 2003).
|
|
4.15
|
Form
of warrant issued to placement agents in connection with the Registrant’s
November 2003 private placement of Series A Convertible Preferred
Stock
and the Registrant’s January 2004 private placement (incorporated by
reference to Exhibit 4.18 to the Registrant’s Registration Statement on
Form SB-2 filed January 13, 2004 (File No.
333-111897)).
|
|
4.16
|
Form
of subscription agreement between Registrant and the selling stockholders
(incorporated by reference from Registrant's registration statement
on
Form SB-2, as amended (File No.
33-98478)).
|
|
Exhibit
No.
|
Description
|
|
4.17
|
Form
of warrant issued to investors in the Registrant’s August 2005 private
placement (incorporated by reference to Exhibit 4.1 of the Registrant’s
Form 8-K filed September 1, 2005).
|
|
4.18
|
Form
of warrant issued to placement agents in the Registrant’s August 2005
private placement (incorporated by reference to Exhibit 4.2 of
the
Registrant’s Form 8-K filed September 1, 2005).
|
|
5.1
|
Opinion
of Maslon Edelman Borman & Brand, LLP.
|
|
10.1
|
1995
Stock Option Plan, as amended (incorporated by reference to Exhibit
10.18
to the Registrant’s Form 10-QSB for the quarter ended September 30,
1996).
|
|
10.2
|
Employment
Agreement dated January 2, 2005, between the Registrant and Nicholas
J.
Rossettos (incorporated by reference to Exhibit 10.1 to the Registrant’s
Form 10-QSB for the quarter ended June 30, 2005).
|
|
10.3
|
License
Agreement dated on or about February 28, 2002 between Manhattan
Research
Development, Inc. (f/k/a Manhattan Pharmaceuticals, Inc.) and
Oleoyl-Estrone Developments SL (incorporated by reference to Exhibit
10.6
to the Registrant’s Amendment No. 2 to Form 10-QSB/A for the quarter ended
March 31, 2003 filed on March 12, 2004).
|
|
10.4
|
License
Agreement dated April 4, 2003 between the Registrant and NovaDel
Pharma,
Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s
Amendment No. 1 to Form 10-QSB/A for the quarter ended June 30,
2003 filed
on March 12, 2004).++
|
|
10.5
|
Employment
Agreement dated January 2, 2004 between the Registrant and Leonard
Firestone (incorporated by reference to Exhibit 10.10 of the Registrant’s
Form Sb-2 filed January 13, 2004 (No. 333-111897).
|
|
10.6
|
2003
Stock Option Plan (incorporated by reference to Exhibit 4.1 to
Registrant’s Registration Statement on Form S-8 filed February 17,
2004).
|
|
10.7
|
Employment
Agreement dated April 1, 2005, between the Registrant and Douglas
Abel
(incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K/A
filed June 15, 2005).
|
|
10.8
|
Sublicense
Agreement dated April 14, 2004 between Tarpan Therapeutics, Inc.
and IGI,
Inc., as acquired by the Registrant effective as of April 1, 2005
(incorporated by reference to Exhibit 10.109 to IGI, Inc.’s Form 10-Q for
the quarter ended March 31, 2004 (File No. 001-08568).
|
|
10.9
|
Form
of subscription agreement between the Registrant and the investors
in the
Registrant’s August 2005 private placement (incorporated by reference as
Exhibit 10.1 to the Registrant’s Form 8-K filed September 1,
2005)
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm - J.H. Cohn LLP.
|
|
23.2
|
Consent
of Independent Registered Public Accounting Firm - J.H. Cohn
LLP.
|
|
23.3
|
Consent
of Maslon, Edelman Borman & Brand, LLP (included as part of Exhibit
5.1)
|
|
24.1
|
Power
of Attorney (included on signature page
hereof)
|
|
++
|
Confidential
treatment has been granted as to certain portions of this exhibit
pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
|
II-9
Exhibit
5.1
MASLON
EDELMAN BORMAN & BRAND, LLP
90
South
Seventh Street, Suite 3300
Minneapolis,
Minnesota 55402
September
23, 2005
Manhattan
Pharmaceuticals, Inc.
810
Seventh Avenue, 4th
Floor
New
York,
NY 10019
RE: Registration
Statement on Form SB-2
Gentlemen:
We
have
acted as counsel to Manhattan Pharmaceuticals, Inc., a Delaware corporation
(the
“Company”), in connection with the preparation of the Company’s Registration
Statement on Form SB-2 (the “Registration Statement”), to be filed by the
Company with the Securities and Exchange Commission on or about September
23,
2005, relating to the registration under the Securities Act of 1933, as amended
(the “Securities Act”), of the resale by the selling stockholders identified in
the Registration Statement of an aggregate of 25,627,684 shares
of
the Company’s common stock, $.001 par value per share, consisting of 22,648,727
issued and outstanding shares (the “Shares”) of common stock and 2,978,957
shares (the “Warrant Shares”) of common stock issuable upon the exercise of
various outstanding warrants (the “Warrants”). This opinion is being furnished
in accordance with the requirements of Item 601(b)(5) of Regulation S-B under
the Securities Act.
In
connection with the rendering of this opinion, we have examined and are familiar
with originals or copies, certified or otherwise identified to our satisfaction,
of (i) the Registration Statement; (ii) the Certificate of Incorporation
and the
Bylaws of the Company, as amended, each as currently in effect; (iii) certain
resolutions adopted by the Board of Directors of the Company relating to
the
issuance of the shares covered by the Registration Statement, the preparation
and filing of the Registration Statement and certain related matters; and
(iv)
such other documents, certificates and records as we deemed necessary or
appropriate as a basis for the opinions expressed herein.
In
our
examination, we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted
to us
as originals, the conformity to original documents of all documents submitted
to
us as certified, conformed or photostatic copies and the authenticity of
the
originals of such copies. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives
of the
Company and others. We
are
attorneys licensed to practice in the State of Minnesota and the opinions
expressed herein are limited to the laws of the State of Minnesota and the
federal securities laws of the United States.
Based
upon and subject to the limitations, qualifications, exceptions and assumptions
set forth herein, it is our opinion that:
1. The
Shares have been duly authorized and are validly issued, fully paid and
nonassessable.
2. The
Warrant Shares have been duly authorized and, when issued against payment
of the
requisite exercise price, will be validly issued, fully paid and nonassessable.
Manhattan
Pharmaceuticals, Inc.
September
23, 2005
Page
2
of
2
We
hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement. We also consent to the reference to our name under the caption
“Validity of Common Stock” in the prospectus filed as part of the Registration
Statement.
Very
truly yours,
/s/
MASLON EDELMAN BORMAN & BRAND, LLP
Exhibit
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the inclusion in this registration statement on Form SB-2 of our
report, which includes an explanatory paragraph relating to the Company's
ability to continue as a going concern, dated March 18, 2005 on our
audits
of the consolidated financial statements of Manhattan Pharmaceuticals, Inc.
as
of December 31, 2004 and 2003, and for the years then ended, and the period
from
August 6, 2001 (date of inception) to December 31, 2004. We also consent
to the
reference to our firm under the caption "Experts."
/s/
J.H.
Cohn LLP
Roseland,
New Jersey
September
19, 2005
Exhibit
23.2
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the inclusion in this registration statement on Form SB-2 of our
report, which includes an explanatory paragraph relating to the Company's
ability to continue as a going concern, dated April 1, 2005 on our
audits
of the financial statements of Tarpan Therapeutics, Inc. as of December 31,
2004
and 2003, and for the year ended December 31, 2004, the period from July
16,
2003 (date of inception) to December 31, 2003, and the period from July 16,
2003
(date of inception) to December 31, 2004. We also consent to the reference
to
our firm under the caption "Experts."
/s/
J.H.
Cohn LLP
Roseland,
New Jersey
September
19, 2005