Filed
Pursuant to Rule 424(b)(3)
File
No.
333-111897
PROSPECTUS
SUPPLEMENT NO. 1
(To
Prospectus Dated October 5, 2005)
Manhattan
Pharmaceuticals, Inc.
15,202,497
Shares
Common
Stock
The
information contained in this Prospectus Supplement amends and updates our
prospectus dated October 5, 2005 (the “Prospectus”), and should be read in
conjunction therewith. Please keep this Prospectus Supplement with your
Prospectus for future reference.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
supplement or the Prospectus is truthful or complete. Any representation
to the
contrary is a criminal offense.
The
date of this Prospectus Supplement is November 14,
2005
Forward-Looking
Information
This
prospectus supplement, including the documents that we incorporate by reference,
contains forward-looking statements within the meaning of Section 27A
of
the Securities Act of 1933, as amended, or the Securities Act, and
Section 21E of the Exchange Act. Any statements about our expectations,
beliefs, plans, objectives, assumptions or future events or performance are
not
historical facts and may be forward-looking. These statements are often,
but not
always, made through the use of words or phrases such as anticipate, estimate,
plan, project, continuing, ongoing, expect, management believes, we believe,
we
intend and similar words or phrases. Accordingly, these statements involve
estimates, assumptions and uncertainties that could cause actual results
to
differ materially from those expressed in them. Any forward-looking statements
are qualified in their entirety by reference to the factors discussed in
this
prospectus or incorporated by reference.
Because
the factors discussed in this prospectus or incorporated by reference could
cause actual results or outcomes to differ materially from those expressed
in
any forward-looking statements made by us or on our behalf, you should not
place
undue reliance on any such forward-looking statements. These statements are
subject to risks and uncertainties, known and unknown, which could cause
actual
results and developments to differ materially from those expressed or implied
in
such statements. Such risks and uncertainties relate to, among other factors:
the development of our drug candidates; the regulatory approval of our drug
candidates; our use of clinical research centers and other contractors; our
ability to find collaborative partners for research, development and
commercialization of potential products; acceptance of our products by doctors,
patients or payors; our ability to market any of our products; our history
of
operating losses; our ability to compete against other companies and research
institutions; our ability to secure adequate protection for our intellectual
property; our ability to attract and retain key personnel; availability of
reimbursement for our product candidates; the effect of potential strategic
transactions on our business; our ability to obtain adequate financing; and
the
volatility of our stock price. These and other risks are detailed in the
prospectus under the discussion entitled “Risk Factors,” as well as in our
reports filed from time to time under the Securities Act and/or the Exchange
Act. You are encouraged to read these filings as they are made.
Further,
any forward-looking statement speaks only as of the date on which it is made,
and we undertake no obligation to update any forward-looking statement or
statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for us to predict
which
factors will arise. In addition, we cannot assess the impact of each factor
on
our business or the extent to which any factor, or combination of factors,
may
cause actual results to differ materially from those contained in any
forward-looking statements.
Interim
Financial Statements - Quarter Ended September 30, 2005
Included
in this prospectus supplement beginning at page F-1 are our interim financial
statements as of and for the three and nine months ended September 30, 2005,
including the accompanying footnotes thereto. These interim financial
statements, which were included in our Quarterly Report on Form 10-QSB for
the
quarter ended September 30, 2005, should be read in conjunction with the
audited
financial statements as of and for the year ended December 31, 2004, which
were
included in the Prospectus.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion of our financial condition and results of operations
should
be read in conjunction with the financial statements and the notes to those
statements included in this prospectus supplement. This discussion includes
forward-looking statements that involve risks and uncertainties. As a result
of
many factors, such as those set forth under “Risk Factors” in the Prospectus,
our actual results may differ materially from those anticipated in these
forward-looking statements.
S-2
Results
of Operations
Three-Month
Period Ended September 30, 2005 vs 2004
During
the quarters ended September 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 September 30, 2006.
For
the
quarter ended September 30, 2005, research and development expense was
$1,370,733 as compared to $1,678,939 for the third quarter of 2004. The decrease
of $308,206 is due primarily to completion of studies of our propofol lingual
spray candidate partially offset by an acceleration of our Oleoyl-estrone
drug
candidate.
For
the
quarter ended September 30, 2005, general and administrative expense was
$490,894 as compared to $562,752 for the quarter ended September 30, 2004.
The
decrease of $71,858 is due primarily to decreases in consulting, outside
services and rent expense of approximately $68,000, $37,000 and $21,000
respectively. These decreases are partially offset by increases in taxes,
travel
and entertainment, directors’ fees and all other expenses of approximately
$17,000, $13,000, $11,000 and $13,000, respectively.
For
the
quarter ended September 30, 2005, interest and other income was $49,137 as
compared to $47,614 for the quarter ended September 30, 2004. The increase
of
$1,523 is due primarily to an increase in cash balances and short-term
investments.
Net
loss
for the quarter ended September 30, 2005, was $1,812,490 as compared to
$2,194,077 for the quarter ended September 30, 2004. This decrease in net
loss
is attributable primarily to decreases in research and development expenses
of
$308,206 and general and administrative expenses of $71,858, partially offset
by
an increase in interest and other income of $1,523.
Preferred
stock dividends of $75,018 and $102,273 reduced earnings per share for the
three
months ended September 30, 2005 and 2004 by $0.00 and $0.00,
respectively.
Nine-Month
Period Ended September 30, 2005 vs 2004
During
the nine months ended September 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 September 30, 2006.
For
the
nine months ended September 30, 2005, research and development expense was
$3,292,008 as compared to $2,907,173 for the nine months ended September
30,
2004. The increase of $384,835 is due primarily to an acceleration of
pre-clinical development of our Oleoyl-estrone drug candidate.
For
the
nine months ended September 30, 2005, general and administrative expense
was
$1,537,298 as compared to $1,443,745 for the nine months ended September
30,
2004. The increase of $93,553 is due primarily to increases in payroll and
investor relations expenses of approximately $92,000 and $59,000, respectively.
In addition we had increases in expenses related to taxes, directors’ fees and
travel and entertainment of approximately $45,000, $34,000 and $25,000,
respectively. These increases are partially offset by reductions in consulting,
outside services and all other expenses of approximately $114,000, $29,000
and
$18,000, respectively.
For
the
nine months ended September 30, 2005, interest and other income was $117,484
as
compared to $128,705 for the nine months ended September 30, 2004. The decrease
of $11,221 is due primarily to a reduction in cash balances and short-term
investments.
Net
loss
for the nine months ended September 30, 2005, was $16,599,629 as compared
to
$4,151,031 for the nine months ended September 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 $384,835 and general and
administrative expenses of $93,553 as well as a reduction in interest and
other
income of $11,221. 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 $326,419 and $495,078 reduced earnings per share for the
nine
months ended September 30, 2005 and 2004 by $0.01 and $0.02,
respectively.
S-3
Liquidity
and Capital Resources
From
inception to September 30, 2005, we incurred a deficit during the development
stage of $30,881,083 primarily as a result of losses, and we expect to continue
to incur additional losses through at least September 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
nine months ended September 30, 2005, we had a net increase in cash and cash
equivalents of $10,963,152. This increase resulted from net cash provided
by
financing activities, substantially all of which was from the net proceeds
of
$12,269,604 from the private placement of 11,917,680 shares of common stock
at
$1.11 and $1.15 per share and investing activities, which included proceeds
from
the sale of short-term investments, of $3,494,147. These increases are partially
offset by net cash used in operating activities of $4,182,664. Total liquid
resources including short term investments as of September 30, 2005 were
$12,878,601 compared to $5,419,872 at December 31, 2004.
Our
current liabilities as of September 30, 2005 were $1,808,695 compared to
$1,195,705 at December 31, 2004, an increase of $612,990. 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. As of
September 30, 2005, we had working capital of $11,090,084 compared to $4,264,293
at December 31, 2004.
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. an affiliate of a significant stockholder
of
the Company, 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. Timothy McInerney
and Dr. Michael Weiser, each a director of the Company, are employees of
Paramount BioCapital, Inc.
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 2006.
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.
S-4
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 September 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.
Based on the resources available to us at September 30, 2005, management
believes that we will need additional equity or debt financing or will need
to
generate revenues during 2006 through licensing our products or entering
into
strategic alliances to be able to sustain our operations beyond 2006
and we
will need additional financing thereafter until we can achieve profitability,
if
ever.
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
to
begin Phase II clinical trials. The trial was being conducted under the IND
accepted by the FDA in January 2005. Oleoyl-estrone was well tolerated at
all
doses and demonstrated no serious adverse events. In addition, there was
evidence of reduction in weight and evidence of a reduction in desire to
eat and
hunger level, reduced fasting glucose, reduced LDL cholesterol and other
key
measures. Oleoyl-estrone also showed reversible, dose dependent elevations
in
estrone and estradiol levels as well as reductions in testosterone
levels.
To
date,
we have incurred $6,697,551 of
project costs related to our development of oleoyl-estrone, including milestone
payments triggered under our license agreement for oleoyl-estrone, of which
$2,712,058 and $1,714,333 was incurred in the first nine 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. 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.
Although
we currently have sufficient capital to fund our anticipated 2005 R&D
expenditures relating to oleoyl-estrone, we will need to raise additional
capital 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, although 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 the
Prospectus. 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.
S-5
Lingual
Spray Propofol.
We
are currently working 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 505(b)2 regulatory
pathway. Section 505(b)2 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 505(b)2 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,
Novadel and other research organizations regarding formulation, reviewing
existing data, developing trial design, and evaluating plans to re-enter
the
clinic.
To
date,
we have incurred $2,801,285 of project costs related to our development of
propofol lingual spray, of which $184,345 and $1,266,644 was incurred during
the
first nine months of 2005 and 2004, respectively. Currently, we anticipate
that
we will need to expend approximately an additional $375,000 to $750,000 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 believe we currently have sufficient
capital to fund our development activities of propofol lingual spray during
2005
and 2006. Since our business does not generate any cash flow, however, we
will
need to raise additional capital to continue development of the product beyond
2006. 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). To
date,
we have incurred $395,606 of
project costs related to our development of PTH (1-34), which was incurred
since
April 1, 2005, the date of the Tarpan Therapeutics, Inc. acquisition. Currently,
we anticipate that we will need to expend approximately an additional $750,000
to $1,500,000 in development costs in fiscal 2005. We are working toward
re-entering the clinic utilizing the existing open physician IND. In addition,
we are planning for a meeting with the FDA to discuss 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 our development of our other product candidates, we believe we currently
have sufficient capital to fund our development activities of PTH (1-34)
in
their entirety during 2005. FORTEO® is a registered trademark of Eli Lilly and
Company.
Off-Balance
Sheet Arrangements
We
have
not entered into any off-balance sheet arrangements.
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 our
quarter ending March 31, 2006. 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.
Preliminary
Results of Oleoyl-Estrone Phase I Clinical Trial
On
October 17, 2005, we issued a press release announcing preliminary results
from
two Phase I clinical trials of oleoyl-estrone. Excerpts from the press release
are set forth below:
S-6
“October
17, 2005 - Manhattan Pharmaceuticals, Inc. (AMEX: MHA) announced preliminary
results from two Phase I clinical trials of oleoyl-estrone (OE), an
experimental, orally administered small molecule in development for the
treatment of obesity. The data were presented in a poster yesterday at the
2005
Annual Scientific Meeting of NAASO, The Obesity Society, in Vancouver, BC.
The
Phase
I study, conducted in Switzerland, was done in two parts which consisted
of a
single dose study and a seven day repeat dose study. The primary purpose
was to
assess the safety, tolerability and pharmacokinetics of OE. Some efficacy
parameters were included and measured in the repeat dose component of the
study.
Highlights
of the study included:
| · |
OE
was generally well tolerated at all doses investigated.
|
| · |
OE
demonstrated evidence of reduction in
weight.
|
| · |
OE
demonstrated evidence of: reduction in desire to eat
and hunger level,
reduction in prospective food consumption, reduced fasting
glucose,
reduced LDL cholesterol and changes in other key
measures.
|
| · |
There
were no clinically significant changes in the physical
exams, vital signs,
ECGs, coagulation or liver function
tests.
|
| · |
No
serious adverse events were reported. Clinical laboratory
findings
included reversible, dose-dependent elevations in estrone
and estradiol
levels as well as reductions in testosterone
levels.
|
Phase
Ia
was a dose-escalating study to measure OE's pharmacokinetic profile, safety
and
tolerability in 36 obese males and females ages 18-65, with a body mass index
greater than 30.0 (a BMI of greater than 30.0 is classified as obese per
guidelines from the U.S. Department of Health and Human Services). Twelve
of the
subjects received placebo and 24 received a single dose of OE in one of six
doses ranging from 1mg to 150mg.
Phase
Ib
measured OE's safety and tolerability in 24 obese volunteers in four cohorts
of
six patients each who received either placebo or OE in doses ranging from
10mg
to 150mg once daily for seven consecutive days. The protocol provided that
subjects should maintain their normal diet and level of activity, but required
that subjects abstain from consuming alcohol.
The
OE-treated groups in the Phase Ib study demonstrated evidence of greater
weight
loss than the placebo group. Weights were assessed at baseline, Day 15, and
Day
28. Weight loss appeared to be maintained for longer periods in the OE groups
compared to placebo at Day 28, twenty-one days following cessation of treatment.
This data may support the contention that the mechanism of action of OE involves
a "resetting" of the ponderostat, or appetite "set point". It also provides
a
rationale for testing alternative regimens such as low or intermittent dosing.
Average
change from baseline weight (in kilograms)
The
OE-treated groups in the Phase Ib study also demonstrated evidence of a
reduction in the feeling of desire to eat, hunger level and prospective food
consumption as measured by changes in the visual analogue scales
(VAS).
S-7
Average
percent change in VAS scores as measured day 7 vs. baseline
*
Note:
In items 1, 2 and 3 increasing VAS scores indicate an increase in desire
to eat.
In item 4 an increase in VAS score indicates an increase in
fullness.
OE
was
generally well tolerated. The most common side effects reported included
headache, back pain, and diarrhea. No serious adverse events were
reported.
Total
mean cholesterol decreased at Day 7 at the 100mg and 150mg dose. Mean
HDL-cholesterol increased and mean LDL-cholesterol decreased with a trend
toward
improvement in the LDL-to-HDL cholesterol ratio, even at the lower doses.
Mean
glucose concentration decreased in a reversible and dose dependent manner
and
remained decreased at Day 15. Mean estradiol and estrone levels were elevated,
while mean testosterone levels were suppressed, all in a reversible and dose
dependent manner. In addition, there were no clinically significant changes
in
the physical exams, vital signs, ECG's, coagulation or liver function
tests.
The
preliminary plasma concentration-time profiles show that the plasma
concentration of OE did not increase with the administered dose level. There
were no significantly elevated plasma concentrations of OE on Day 7 which
may
indicate that there is no clear accumulation in plasma after daily oral dosing
for seven consecutive days. In this small sample study there were no clear
differences between the sexes with respect to plasma concentration.
"Given
the current crisis that we face with the growing prevalence of obesity, I
am
encouraged to see signs of efficacy in this study, though the metabolic and
hormonal effects merit further study. Obesity and its complications,
particularly type 2 diabetes, are rapidly becoming the number one health
threat
around the globe. Oleoyl-estrone may provide a new treatment option," said
J.
Larry Jameson, M.D., a leading endocrinologist who is Professor and Chairman
of
Medicine at Northwestern University Medical School.
"We
are
excited to have seen this much evidence of benefit in a phase I trial with
only
7 days of exposure" said Doug Abel, President and CEO of Manhattan
Pharmaceuticals. "We are working closely with our scientific and clinical
advisors to interpret this data and finalize study designs. We plan to initiate
a phase IIa trial early next year."
The
full
scientific poster of these results can be viewed on the company's website
at
www.manhattanpharma.com
ABOUT
OLEOYL-ESTRONE
Oleoyl-estrone
(OE) is an orally administered small molecule that has been shown to cause
significant weight loss in extensive preclinical animal studies, without
the
need for dietary modifications. Developed by researchers at the University
of
Barcelona, OE has been tested in both obese and lean rats; treatment with
OE
resulted in significant weight loss even in the presence of abundant food
and
water. We believe that OE may prove to be a safe and effective treatment
of
obesity, potentially representing a significant advantage over currently
available anti-obesity medications.
ABOUT
OBESITY
Obesity
is one of the most common metabolic disorders in the world. Nearly 61% of
all
Americans are considered to be overweight, and 26% percent are considered
to be
obese. The World Bank estimates that obesity alone accounts for more than
12% of
the U.S. national health care budget. The National Institutes of Health
estimated that direct costs for the treatment of obesity in 1988 were in
excess
of $45 billion and accounted for nearly 8% of the total national cost of
health
care; a decade later, annual direct costs for the treatment of obesity had
risen
to $102.2 billion dollars. As these statistics illustrate, obesity is a rapidly
growing, costly disease, for which there is currently no effective
treatment.”
S-8
SELLING
STOCKHOLDERS
The
following table sets forth the number of shares of the common stock owned
by the
selling stockholders as of November 14, 2005, and after giving effect to
this
offering. The information in the table included under the heading “Selling
Stockholders” in the Prospectus is superceded by the information appearing in
the following table.
|
Name
|
|
|
Shares
beneficially
owned before
offering
|
|
Number
of outstanding
shares
offered by selling
stockholder
|
|
|
Number
of shares offered by selling stockholder issued upon conversion
of Series
A stock
|
|
|
Number
of shares offered by selling stockholder issuable upon exercise
of
warrants
|
|
|
Percentage
beneficial
ownership after
offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued in connection with January 2004 private
placement
|
||||||||||||||||
|
|
||||||||||||||||
|
Atlas
Fund, LLC
|
|
|
1,818,182
|
|
|
1,818,182
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
MHR
Capital Partners, L.P.
|
|
|
1,233,050
|
|
|
674,852
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
Jacob
Gottlieb
|
|
|
2,045,454(1)
|
|
|
227,272
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
Mark
Rechesky
|
|
|
454,546
|
|
|
454,546
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
Hillel
Goldstein
|
|
|
14,546
|
|
|
14,546
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
Sai
Devabhaktuni
|
|
|
45,455
|
|
|
45,455
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
Mark
Rosenberg
|
|
|
9,090
|
|
|
9,090
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
Emily
Fine
|
|
|
18,181
|
|
|
18,181
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
Tariq
Fancy
|
|
|
2,728
|
|
|
2,728
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
Luciano
M. Murelli
|
|
|
13,650
|
|
|
13,650
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
Paramount
Capital, Inc.
|
|
|
935,941
|
|
|
0
|
|
|
0
|
|
|
326,499
|
|
|
—
|
|
|
Subtotal:
|
|
|
|
|
|
3,278,502
|
|
|
|
|
|
326,499
|
|
|
|
|
|
Shares
issued in connection with Series A Preferred Stock private
placement
|
||||||||||||||||
|
|
||||||||||||||||
|
Allied
Diesel Service, Inc. Employee Profit Sharing Plan
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Alfonse
M. D'Amato Defined Benefit Plan
|
|
|
8,835
|
|
|
0
|
|
|
8,835
|
|
|
0
|
|
|
—
|
|
|
Andrew
Grossman D/C Profit Sharing Plan
|
|
|
25,887
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Anthony
Argyrides IRA
|
|
|
3,872
|
|
|
0
|
|
|
1,664
|
|
|
2,208
|
|
|
—
|
|
|
Anthony
Polak "S"
|
|
|
181,670(2)
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Anthony
Polak IRA
|
|
|
181,670(2)
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Artero
Inc.
|
|
|
132,500
|
|
|
0
|
|
|
58,310
|
|
|
0
|
|
|
*
|
|
|
Artero
Profit Sharing Plan
|
|
|
27,900
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Asher
Family Trust
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
Autobuy
Inc.
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Barbara
Coffee
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Barbara
Scharf
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Bill
McCurtain
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Brapo
Associates
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Bruce
Gomberg
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Catharina
Polak Trust
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Catherine
Hicks
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Charles
Harris
|
|
|
97,180
|
|
|
0
|
|
|
97,180
|
|
|
0
|
|
|
—
|
|
|
Charles
Re Profit Sharing Plan
|
|
|
26,287
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Daniel
Berkowitz IRA
|
|
|
24,790
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
David
Lasco
|
|
|
4,372
|
|
|
0
|
|
|
4,372
|
|
|
0
|
|
|
—
|
|
S-9
|
Name
|
|
Shares
beneficially owned before offering |
Number
of outstanding
shares offered by selling stockholder |
Number
of
shares offered by selling stockholder issued upon conversion of Series A stock |
Number
of shares
offered by selling stockholder issuable upon exercise of warrants |
Percentage
beneficial ownership after offering |
||||||||||
|
David
Minkoff
|
|
3,872
|
|
|
0
|
|
|
1,664
|
|
|
2,208
|
|
|
—
|
|
|
|
David
Phipps
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
David
Swerdloff IRA
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Davis
& Barbara Gaynes
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Dean
M. Erickson '79 Irrevocable Trust
|
|
6,184
|
|
|
0
|
|
|
6,184
|
|
|
0
|
|
|
—
|
|
|
|
Domanco
Ventura Capital
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Drew
Netter IRA
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Edgar
& Kim Massabni
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Edward
Lewitt
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Elias
Sayour Foundation
|
|
25,942
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
|
Elizabeth
Genzer Trust
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Elliot
& Ronald Fatoullah
|
|
25,617
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
|
Emeric
R. Holderith
|
|
9,720
|
|
|
0
|
|
|
9,720
|
|
|
0
|
|
|
—
|
|
|
|
Equity
Interest Inc.
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Far
Ventures
|
|
32,893
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
|
Florence
E. Luvera
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Frederick
Polak
|
|
25,090
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
|
Gary
Stadtmauer
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Girish
C. Sham
|
|
4,290
|
|
|
0
|
|
|
4,290
|
|
|
0
|
|
|
—
|
|
|
|
Harari
Family LLC
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Howard
Tooter
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Jack
Polak
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Jerry
& Lilli Weinger
|
|
97,180
|
|
|
0
|
|
|
97,180
|
|
|
0
|
|
|
—
|
|
|
|
Joan
Grillo
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
John
Gross IRA
|
|
24,885
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
|
Jon
Rubin Trust
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Jonathan
Rothchild
|
|
134,300
|
|
|
0
|
|
|
87,460
|
|
|
0
|
|
|
*
|
|
|
|
Jonathan
Young IRA
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
|
Joseph
& Dorothy Papp
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Joseph
Cavanagh
|
|
97,180
|
|
|
0
|
|
|
97,180
|
|
|
0
|
|
|
—
|
|
|
|
Judith
T. Huff Revocable Trust (B. Jerry Huff & Judith Huff
Trustees)
|
|
884
|
|
|
0
|
|
|
884
|
|
|
0
|
|
|
—
|
|
|
|
Kevin
Clarke IRA
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Kim
Cirelli
|
|
2,209
|
|
|
0
|
|
|
2,209
|
|
|
0
|
|
|
—
|
|
|
|
Landing
Wholesale Group Defined
|
|
1,332
|
|
|
0
|
|
|
1,332
|
|
|
0
|
|
|
—
|
|
|
|
Larry
& Rebecca Warner
|
|
11,660
|
|
|
0
|
|
|
11,660
|
|
|
0
|
|
|
—
|
|
|
|
Lee
Pearlmutter Trust
|
|
9,7200
|
|
|
0
|
|
|
9,720
|
|
|
0
|
|
|
—
|
|
|
|
Leonard
Greenbaum
|
|
20,333
|
|
|
0
|
|
|
9,290
|
|
|
11,043
|
|
|
—
|
|
|
|
Leslie
& Sybil Rosenberg
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Mark
Engelbert
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Margrit
Polak "S"
|
|
24,630
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
|
Mark
Children's Trust
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Maura
Kelly
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Michael
& Lorraine Gelardi
|
|
25,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
|
Michael
Berlinger
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
Michael
Stone
|
|
3,318
|
|
|
0
|
|
|
3,318
|
|
|
0
|
|
|
—
|
|
|
|
Michele
Tarica
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
|
MRC
Computer Profit Sharing Plan
|
|
24,590
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
|
Murray
& Claire Stadtmauer
|
|
24,590
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
S-10
| Name |
Shares
beneficially owned before offering
|
Number
of outstanding shares offered by selling stockholder
|
Number
of shares offered by selling stockholder issued upon conversion
of Series
A stock
|
Number
of shares offered by selling stockholder issuable upon exercise
of
warrants
|
Percentage
beneficial ownership after offering
|
|||||||||||
|
Nancy
Lane
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Nanette
Grossman
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Norton
& Joan Hight
|
|
|
24,690
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Paul
McMillman & Susan Herzog
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Penny
Chin
|
|
|
7,290
|
|
|
0
|
|
|
7,290
|
|
|
0
|
|
|
—
|
|
|
Peter
Guardino IRA
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Philip
Wasserman
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Randall
Hight
|
|
|
48,710
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
*
|
|
|
Richard
Kent CON IRA
|
|
|
32,180
|
|
|
0
|
|
|
32,180
|
|
|
0
|
|
|
—
|
|
|
Richard
Wallace
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
RL
Capital Partners
|
|
|
233,040
|
|
|
0
|
|
|
233,040
|
|
|
0
|
|
|
*
|
|
|
Robert
Nash
|
|
|
1,100
|
|
|
0
|
|
|
1,100
|
|
|
0
|
|
|
—
|
|
|
Robert
Rosenberg
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Robert
Shapiro IRA
|
|
|
24,390
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Fiserve
Securities A/C/F Roger R. Marks IRA
|
|
|
24,687
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Rolanda
Mendelle
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Ronald
Lazar
|
|
|
80,127
|
|
|
0
|
|
|
18,290
|
|
|
61,837
|
|
|
*
|
|
|
Ronald
Lazar IRA
|
|
|
78,282
|
|
|
0
|
|
|
72,880
|
|
|
0
|
|
|
*
|
|
|
Royal
Pool
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Scott
& Charlotte Kaiden
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Sheila
Fligel
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Siegfried
Mangels
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Millennium
Capital Investments
|
|
|
6,636
|
|
|
0
|
|
|
6,636
|
|
|
0
|
|
|
—
|
|
|
Steve
Roman
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Surinvest,
Inc.
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
Susan
Zverin
|
|
|
24,690
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Teddy
Chasanoff
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Tim
Moi
|
|
|
10,604
|
|
|
0
|
|
|
9,720
|
|
|
884
|
|
|
—
|
|
|
William
& Deborah Hicks
|
|
|
884
|
|
|
0
|
|
|
884
|
|
|
0
|
|
|
—
|
|
|
William
H. Peterson Living Trust
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
William
Liange
|
|
|
1,665
|
|
|
0
|
|
|
1,665
|
|
|
0
|
|
|
—
|
|
|
Wolfe
F. Model
|
|
|
24,687
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Albert
Fried, Jr.
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
Alexander
Pomper
|
|
|
3,318
|
|
|
0
|
|
|
3,318
|
|
|
0
|
|
|
—
|
|
|
Alfred
J. Sollami
|
|
|
53,540
|
|
|
0
|
|
|
53,450
|
|
|
0
|
|
|
—
|
|
|
Balanced
Invesment LLC
|
|
|
348,028
|
|
|
0
|
|
|
242,940
|
|
|
0
|
|
|
*
|
|
|
Benito
Bucay
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Bruno
Widmer
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Cooper
A. McIntosh, MD
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
David
Jaroslawicz
|
|
|
6,572
|
|
|
0
|
|
|
6,572
|
|
|
0
|
|
|
—
|
|
|
David
J. Bershad
|
|
|
72,880
|
|
|
0
|
|
|
72,880
|
|
|
0
|
|
|
—
|
|
|
David
W. Ruttenberg
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
E
& M RP Trust
|
|
|
145,770
|
|
|
0
|
|
|
145,770
|
|
|
0
|
|
|
—
|
|
|
Eugenia
VI Venture Holdings, Ltd.
|
|
|
485,890
|
|
|
0
|
|
|
485,890
|
|
|
0
|
|
|
—
|
|
|
Gary
Strauss
|
|
|
120,062
|
|
|
0
|
|
|
64,140
|
|
|
0
|
|
|
—
|
|
|
Hahn
Family Grandchildrens Trust
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
Harry
& Susan Newton
|
|
|
99,180
|
|
|
0
|
|
|
97,180
|
|
|
0
|
|
|
*
|
|
|
Howard
Gittis
|
|
|
97,180
|
|
|
0
|
|
|
97,180
|
|
|
0
|
|
|
—
|
|
|
Isaac
& Ivette Dabah 2002 Trust
|
|
|
97,180
|
|
|
0
|
|
|
97,180
|
|
|
0
|
|
|
—
|
|
S-11
|
Name
|
|
|
Shares
beneficially
owned before
offering
|
|
Number
of outstanding
shares
offered by selling
stockholder
|
|
|
Number
of shares offered by selling stockholder issued upon conversion
of Series
A stock
|
|
|
Number
of shares offered by selling stockholder issuable upon exercise
of
warrants
|
|
|
Percentage
beneficial
ownership after
offering
|
|
|
James
Daly
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
J.
Jay Lobell
|
|
|
97,180
|
|
|
0
|
|
|
97,180
|
|
|
0
|
|
|
—
|
|
|
Jose
& Magdalena Sanchez-Padilla
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Joseph
Hickey
|
|
|
97,180
|
|
|
0
|
|
|
97,180
|
|
|
0
|
|
|
—
|
|
|
Joseph
Natiello
|
|
|
97,180
|
|
|
0
|
|
|
97,180
|
|
|
0
|
|
|
—
|
|
|
Joseph
Vale
|
|
|
194,350
|
|
|
0
|
|
|
194,350
|
|
|
0
|
|
|
—
|
|
|
Keys
Foundation
|
|
|
583,060
|
|
|
0
|
|
|
583,060
|
|
|
0
|
|
|
—
|
|
|
Rosenwald
2000 Family Trust
|
|
|
8,918,354
|
|
|
0
|
|
|
242,940
|
|
|
0
|
|
|
21.4
|
|
|
Larry
& Shirley Kessel
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Lindsay
A. Rosenwald, M.D.(3)
|
|
|
5,331,639
|
|
|
0
|
|
|
243,220
|
|
|
0
|
|
|
13.0
|
|
|
Marc
Florin IRA
|
|
|
3,318
|
|
|
0
|
|
|
3,318
|
|
|
0
|
|
|
—
|
|
|
Mario
Pasquel & Begona Miranda
|
|
|
29,150
|
|
|
0
|
|
|
29,150
|
|
|
0
|
|
|
—
|
|
|
Mega
International Corp.
|
|
|
29,150
|
|
|
0
|
|
|
29,150
|
|
|
0
|
|
|
—
|
|
|
Michael
H. Schwartz Profit Sharing Plan
|
|
|
3,317
|
|
|
0
|
|
|
3,317
|
|
|
0
|
|
|
—
|
|
|
PCC
Tagi (Series K) LLC
|
|
|
952,270
|
|
|
0
|
|
|
952,270
|
|
|
0
|
|
|
—
|
|
|
Perceptive
Life Sciences Master Fund, Ltd
|
|
|
49,766
|
|
|
0
|
|
|
49,766
|
|
|
0
|
|
|
—
|
|
|
Quogue
Capital, LLC
|
|
|
6,636
|
|
|
0
|
|
|
6,636
|
|
|
0
|
|
|
—
|
|
|
Regen
Capital II(4)
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
Rene
Dominguez
|
|
|
14,580
|
|
|
0
|
|
|
14,580
|
|
|
0
|
|
|
—
|
|
|
Richard
Molinsky
|
|
|
3,318
|
|
|
0
|
|
|
3,318
|
|
|
0
|
|
|
—
|
|
|
Robert
J. Leaf
|
|
|
33,318
|
|
|
0
|
|
|
33,318
|
|
|
0
|
|
|
—
|
|
|
Roberto
Segovia
|
|
|
26,636
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
*
|
|
|
Roger
& Margaret Coleman
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
Roger
Lipton
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
Scott
A. Katzmann
|
|
|
106,890
|
|
|
0
|
|
|
106,890
|
|
|
0
|
|
|
—
|
|
|
Scott
Whitaker
|
|
|
24,290
|
|
|
0
|
|
|
24,290
|
|
|
0
|
|
|
—
|
|
|
Simon
Family Trust dtd 1/21/83
|
|
|
1,100
|
|
|
0
|
|
|
1,100
|
|
|
0
|
|
|
—
|
|
|
Steven
M. Oliveira 1998 Charitable
|
|
|
4,422
|
|
|
0
|
|
|
4,422
|
|
|
0
|
|
|
—
|
|
|
The
Alfred J. Anzalone Family Limited
|
|
|
48,590
|
|
|
0
|
|
|
48,590
|
|
|
0
|
|
|
—
|
|
|
Tis
Prager
|
|
|
72,880
|
|
|
0
|
|
|
72,880
|
|
|
0
|
|
|
—
|
|
|
Tokenhouse
Trading PTE Ltd.
|
|
|
193,036
|
|
|
0
|
|
|
96,131
|
|
|
0
|
|
|
*
|
|
|
Vitel
Ventures Corporation
|
|
|
22,086
|
|
|
0
|
|
|
22,086
|
|
|
0
|
|
|
—
|
|
|
Winton
Capital Holdings Ltd.
|
|
|
16,568
|
|
|
0
|
|
|
16,568
|
|
|
0
|
|
|
—
|
|
|
ZWD
Investments, LLC
|
|
|
485,890
|
|
|
0
|
|
|
485,890
|
|
|
0
|
|
|
—
|
|
|
David
Fresne
|
|
|
20,320
|
|
|
0
|
|
|
0
|
|
|
20,320
|
|
|
—
|
|
|
Kevin
Cannon
|
|
|
17,667
|
|
|
0
|
|
|
0
|
|
|
17,667
|
|
|
—
|
|
|
Eric
Foster
|
|
|
2,208
|
|
|
0
|
|
|
0
|
|
|
2,208
|
|
|
—
|
|
|
Anthony
Polak
|
|
|
181,670(3)
|
|
|
0
|
|
|
0
|
|
|
132,495
|
|
|
*
|
|
|
Isaiah
Edwards
|
|
|
6,625
|
|
|
0
|
|
|
0
|
|
|
6,625
|
|
|
—
|
|
|
Rod
Dudley
|
|
|
4,417
|
|
|
0
|
|
|
0
|
|
|
4,417
|
|
|
—
|
|
|
Robin
Arias
|
|
|
4,417
|
|
|
0
|
|
|
0
|
|
|
4,417
|
|
|
—
|
|
|
Daniel
D’Amato
|
|
|
20,540
|
|
|
0
|
|
|
0
|
|
|
20,540
|
|
|
—
|
|
|
Joe
Jaigobind
|
|
|
17,668
|
|
|
0
|
|
|
0
|
|
|
17,668
|
|
|
—
|
|
|
Chirag
Choudrey
|
|
|
2,208
|
|
|
0
|
|
|
0
|
|
|
2,208
|
|
|
—
|
|
|
Joe
Richman
|
|
|
3,268
|
|
|
0
|
|
|
0
|
|
|
3,268
|
|
|
—
|
|
|
Paramount
Capital, Inc. (3)
|
|
|
935,941
|
|
|
0
|
|
|
0
|
|
|
599,077
|
|
|
—
|
|
|
Subtotal:
|
|
|
|
|
|
0
|
|
|
8,153,367
|
|
|
909,090
|
|
|
|
|
S-12
| Name |
Shares
beneficially owned before offering
|
Number
of outstanding shares offered by selling
stockholder
|
Number
of shares offered by selling stockholder issued upon conversion
of Series
A stock
|
Number
of shares offered by selling stockholder issuable upon exercise
of
warrants
|
Percentage
beneficial ownership after offering
|
|||||||||||
|
Shares
issued in connection with January 2003 offering by Manhattan
Research
Development, Inc.
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald
Halla
|
|
|
79,014
|
|
|
71,080
|
|
|
0
|
|
|
7,934
|
|
|
—
|
|
|
John
O. Dunkin
|
|
|
7,934
|
|
|
0
|
|
|
0
|
|
|
7,934
|
|
|
—
|
|
|
Rauls
Family Limited Partnership
|
|
|
474,142
|
|
|
426,481
|
|
|
0
|
|
|
47,661
|
|
|
—
|
|
|
Richard
Addeo
|
|
|
31,211
|
|
|
0
|
|
|
0
|
|
|
31,211
|
|
|
—
|
|
|
Barry
J. Lind Revocable Trust
|
|
|
28,831
|
|
|
0
|
|
|
0
|
|
|
28,831
|
|
|
—
|
|
|
John
G. Pollock
|
|
|
1,861
|
|
|
0
|
|
|
0
|
|
|
1,861
|
|
|
—
|
|
|
Michael
O’Brien
|
|
|
1,738
|
|
|
0
|
|
|
0
|
|
|
1,738
|
|
|
—
|
|
|
Thomas
& Tasha Worden
|
|
|
1,636
|
|
|
0
|
|
|
0
|
|
|
1,636
|
|
|
—
|
|
|
Arturo
Filipe
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Wayne
Adams
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Joan
& Robert Johnsen
|
|
|
39,512
|
|
|
35,540
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Jerrold
F. Rosenbaum
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Walter
Lukens
|
|
|
1,738
|
|
|
0
|
|
|
0
|
|
|
1,738
|
|
|
—
|
|
|
Robert
Edgley
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
David
O. Lind
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Arno
D. Hausmann
|
|
|
1,636
|
|
|
0
|
|
|
0
|
|
|
1,636
|
|
|
—
|
|
|
Frank
T. Donaldson
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Gat
Lee
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Vetter
Builders, Inc.
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Joseph
P. Metz
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Ronald
Cowan
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Peter
& Barbara Freyburger
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Isaac
Dweck
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Derek
Soliday
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Kenneth
Hornik
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Andrew
Gamba
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
David
M. Cikanek Revocable Living Trust
dtd
9/8/2000
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Lester
Krasno
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Ronald
Bartsch
|
|
|
43,689
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
JC
Investments
|
|
|
63,548
|
|
|
0
|
|
|
0
|
|
|
63,548
|
|
|
—
|
|
|
Stanley
& Lynn Sides
|
|
|
987
|
|
|
0
|
|
|
0
|
|
|
987
|
|
|
—
|
|
|
Med-Tec
Investors
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Kevin
Klier
|
|
|
23,689
|
|
|
19,717
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Louis
Cerbone
|
|
|
43,689
|
|
|
39,717
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Paul
Martin
|
|
|
6,355
|
|
|
0
|
|
|
0
|
|
|
6,355
|
|
|
—
|
|
|
William
S. Tyrell
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Richard
Pollak
|
|
|
41,942
|
|
|
38,129
|
|
|
0
|
|
|
3,813
|
|
|
—
|
|
|
Theresa
Incagnoli
|
|
|
27,961
|
|
|
25,419
|
|
|
0
|
|
|
2,542
|
|
|
—
|
|
|
R.J.
Burkhalter
|
|
|
2,314
|
|
|
725
|
|
|
0
|
|
|
1,589
|
|
|
—
|
|
|
Roger
& Mary Bradshaw
|
|
|
1,589
|
|
|
0
|
|
|
0
|
|
|
1,589
|
|
|
—
|
|
|
S.
Alan Lisenby
|
|
|
15,887
|
|
|
0
|
|
|
0
|
|
|
15,887
|
|
|
—
|
|
|
David
& Nancy Pudelsky
|
|
|
3,972
|
|
|
0
|
|
|
0
|
|
|
3,972
|
|
|
—
|
|
|
Gary
Strauss
|
|
|
120,062
|
|
|
50,838
|
|
|
0
|
|
|
5,084
|
|
|
—
|
|
|
Michael
Mullen
|
|
|
509,205
|
|
|
0
|
|
|
0
|
|
|
509,205
|
|
|
—
|
|
|
Patricia
Sorbara
|
|
|
325,304
|
|
|
0
|
|
|
0
|
|
|
325,304
|
|
|
—
|
|
|
Michelle
Markowitz
|
|
|
325,304
|
|
|
0
|
|
|
0
|
|
|
325,304
|
|
|
—
|
|
|
Robert
Petrozzo
|
|
|
30,339
|
|
|
0
|
|
|
0
|
|
|
30,339
|
|
|
—
|
|
S-13
| Name |
Shares
beneficially owned before offering
|
Number
of outstanding shares offered by selling
stockholder
|
Number
of shares offered by selling stockholder issued upon conversion
of Series
A stock
|
Number
of shares offered by selling stockholder issuable upon exercise
of
warrants
|
Percentage
beneficial ownership after offering
|
|||||||||||
|
Vito
Balsamo
|
|
|
70,322
|
|
|
0
|
|
|
0
|
|
|
70,322
|
|
|
—
|
|
|
Michael
Tripodi
|
|
|
18,578
|
|
|
0
|
|
|
0
|
|
|
18,578
|
|
|
—
|
|
|
Fabio
Migliacci
|
|
|
25,419
|
|
|
0
|
|
|
0
|
|
|
25,419
|
|
|
—
|
|
|
Charles
M. Raspa
|
|
|
8,736
|
|
|
0
|
|
|
0
|
|
|
8,736
|
|
|
—
|
|
|
Kris
Destefano
|
|
|
15,887
|
|
|
0
|
|
|
0
|
|
|
15,887
|
|
|
—
|
|
|
Alexandra
Milazzo
|
|
|
6,011
|
|
|
0
|
|
|
0
|
|
|
6,011
|
|
|
—
|
|
|
Ross
Insera
|
|
|
5,887
|
|
|
0
|
|
|
0
|
|
|
5,887
|
|
|
—
|
|
|
Kevin
Brody
|
|
|
5,573
|
|
|
0
|
|
|
0
|
|
|
5,573
|
|
|
—
|
|
|
Leonard
Inserra
|
|
|
5,887
|
|
|
0
|
|
|
0
|
|
|
5,887
|
|
|
—
|
|
|
Ryan
Reed
|
|
|
4,713
|
|
|
0
|
|
|
0
|
|
|
4,713
|
|
|
—
|
|
|
Jeff
Blake Woolf
|
|
|
4,963
|
|
|
0
|
|
|
0
|
|
|
4,963
|
|
|
—
|
|
|
Scott
Tierney
|
|
|
4,263
|
|
|
0
|
|
|
0
|
|
|
4,263
|
|
|
—
|
|
|
Drew
Tranchina
|
|
|
7,943
|
|
|
0
|
|
|
0
|
|
|
7,943
|
|
|
—
|
|
|
Alex
Elejade
|
|
|
7,943
|
|
|
0
|
|
|
0
|
|
|
7,943
|
|
|
—
|
|
|
Peter
Orthos
|
|
|
3,706
|
|
|
0
|
|
|
0
|
|
|
3,706
|
|
|
—
|
|
|
Anthony
Stephen Mundy
|
|
|
3,195
|
|
|
0
|
|
|
0
|
|
|
3,195
|
|
|
—
|
|
|
Harry
Mucovic
|
|
|
2,038
|
|
|
0
|
|
|
0
|
|
|
2,038
|
|
|
—
|
|
|
Lawrence
Helbringer
|
|
|
3,970
|
|
|
0
|
|
|
0
|
|
|
3,970
|
|
|
—
|
|
|
Michael
Gordon
|
|
|
1,629
|
|
|
0
|
|
|
0
|
|
|
1,629
|
|
|
—
|
|
|
Subtotal:
|
|
|
|
|
|
707,646
|
|
|
0
|
|
|
1,715,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances
to consultants and advisors
|
||||||||||||||||
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley
Heshka
|
|
|
25,419
|
|
|
0
|
|
|
0
|
|
|
25,419
|
|
|
—
|
|
|
Louis
Arrone
|
|
|
25,419
|
|
|
0
|
|
|
0
|
|
|
25,419
|
|
|
—
|
|
|
Joseph
Vaselli
|
|
|
25,419
|
|
|
0
|
|
|
0
|
|
|
25,419
|
|
|
—
|
|
|
Larry
Jameson
|
|
|
25,419
|
|
|
0
|
|
|
0
|
|
|
25,419
|
|
|
—
|
|
|
Subtotal:
|
|
|
|
|
|
0
|
|
|
0
|
|
|
101,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
3,986,148
|
|
|
8,153,367
|
|
|
3,062,982
|
|
|
|
|
_________
|
*
|
Less
than 1%.
|
| (1) |
Includes
1,818,182 shares held by Atlas Fund, LLC, of which Mr. Gottlieb
has voting
and investment power.
|
| (2) |
Includes:
(i) 24,290 shares issuable upon conversion of Series A Preferred
Stock
held in the name of Anthony Polak IRA, (ii) 24,290 shares issuable
upon
conversion of Series A Preferred Stock held in the name of Anthony
Polak
“S” and (iii) 132,495 shares issuable upon exercise of a
warrant.
|
| (3) |
Dr.
Rosenwald is the sole shareholder of Paramount BioCapital, Inc.
(formerly
Paramount Capital, Inc.). Timothy McInerney and Michael Weiser,
directors
of our company, are employees of Paramount BioCapital or its
affiliates.
Joshua Kazam and David Tanen were directors of our company until
their
resignations in September 2005.
|
| (4) |
Neil
Herskowitz, a director of our company, is a principal of Regen
Capital
II.
|
S-14
|
Page
|
|
|
Unaudited
Interim Financial Statements:
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2005 and December
31,
2004
|
F-2
|
|
Condensed
Consolidated Statements of Operations for the Three and Nine Months
Ended
September 30, 2005 and the cumulative period from August 6, 2001
(date of
inception) to September 30, 2005
|
F-3
|
|
Condensed
Consolidated Statement of Changes in Stockholders’ Equity (Deficiency) for
the period from August 6, 2001 (date of inception) to September
30,
2005
|
F-4
|
|
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended
September
30, 2005 and the cumulative period from August 6, 2001 (date of
inception)
to September 30, 2005
|
F-5
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
F-6
|
F-1
|
MANHATTAN
PHARMACEUTICALS, INC. AND SUBSIDIARIES
|
|||||||||||
|
(A
Development Stage Company)
|
|||||||||||
|
Condensed
Consolidated Balance Sheets
|
|||||||||||
|
(Unaudited)
|
|
September
30,
|
December
31,
|
||||||
|
Assets
|
2005
|
2004
|
|||||
|
Current
assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
11,868,808
|
$
|
905,656
|
|||
|
Short-term
investments, available for sale, at market
|
1,009,793
|
4,514,216
|
|||||
|
Prepaid
expenses
|
20,178
|
40,126
|
|||||
|
Total
current assets
|
12,898,779
|
5,459,998
|
|||||
|
Property
and equipment, net
|
104,001
|
119,017
|
|||||
|
Other
assets
|
70,506
|
70,506
|
|||||
|
Total
assets
|
$
|
13,073,286
|
$
|
5,649,521
|
|||
|
Liabilities
and Stockholders’ Equity
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
1,713,516
|
$
|
1,143,603
|
|||
|
Accrued
expenses
|
95,179
|
52,102
|
|||||
|
Total
liabilities
|
1,808,695
|
1,195,705
|
|||||
|
Commitments
and Contingencies
|
|||||||
|
Stockholders’
equity:
|
|||||||
|
Series
A convertible preferred stock, $.001 par value.
|
|||||||
|
Authorized
1,500,000 shares; 0 and 854,373 shares issued and
|
|||||||
|
outstanding
at September 30, 2005 and December 31, 2004, respectively
|
|||||||
|
(liquidation
preference aggregating $0 and $8,973,730 at
|
|||||||
|
September
30, 2005 and December 31, 2004, respectively)
|
—
|
854
|
|||||
|
Common
stock, $.001 par value. Authorized 150,000,000 shares;
|
|||||||
|
59,415,257
and 28,309,187 shares issued and outstanding
|
|||||||
|
at
September 30, 2005 and December 31, 2004, respectively
|
59,415
|
28,309
|
|||||
|
Additional
paid-in capital
|
41,932,542
|
18,083,208
|
|||||
|
Deficit
accumulated during development stage
|
(30,881,083
|
)
|
(13,955,035
|
)
|
|||
|
Dividends
payable in shares
|
150,756
|
303,411
|
|||||
|
Accumulated
other comprehensive income
|
2,961
|
13,237
|
|||||
|
Unearned
consulting services
|
—
|
(20,168
|
)
|
||||
|
Total
stockholders’ equity
|
11,264,591
|
4,453,816
|
|||||
|
Total
liabilities and stockholders' equity
|
$
|
13,073,286
|
$
|
5,649,521
|
|||
|
See
accompanying notes to unaudited condensed consolidated financial
statements.
|
F-2
|
(A
Development Stage Company)
|
|||||||||||||||||||||
|
Condensed
Consolidated Statements of Operations
|
|||||||||||||||||||||
|
(Unaudited)
|
|
Cumulative
|
||||||||||||||||
|
period
from
|
||||||||||||||||
|
August
6, 2001
|
||||||||||||||||
|
(inception)
to
|
||||||||||||||||
|
Three
Months ended September 30,
|
Nine
Months ended September 30,
|
September
30,
|
||||||||||||||
|
2005
|
2004
|
2005
|
2004
|
2005
|
||||||||||||
|
Revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Research
and development
|
1,370,733
|
1,678,939
|
3,292,008
|
2,907,173
|
9,894,442
|
|||||||||||
|
General
and administrative
|
490,894
|
562,752
|
1,537,298
|
1,443,745
|
5,662,788
|
|||||||||||
|
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
|
1,861,627
|
2,241,691
|
16,717,113
|
4,350,918
|
29,907,145
|
|||||||||||
|
Operating
loss
|
(1,861,627
|
)
|
(2,241,691
|
)
|
(16,717,113
|
)
|
(4,350,918
|
)
|
(29,907,145
|
)
|
||||||
|
Other
(income) expense:
|
||||||||||||||||
|
Interest
and other income
|
(49,137
|
)
|
(47,614
|
)
|
(117,484
|
)
|
(128,705
|
)
|
(309,173
|
)
|
||||||
|
Interest
expense
|
—
|
—
|
—
|
—
|
23,893
|
|||||||||||
|
Realized
gain on sale of marketable equity securities
|
—
|
—
|
—
|
(71,182
|
)
|
(71,182
|
)
|
|||||||||
|
Total
other income
|
(49,137
|
)
|
(47,614
|
)
|
(117,484
|
)
|
(199,887
|
)
|
(356,462
|
)
|
||||||
|
Net
loss
|
(1,812,490
|
)
|
(2,194,077
|
)
|
(16,599,629
|
)
|
(4,151,031
|
)
|
(29,550,683
|
)
|
||||||
|
Preferred
stock dividends (including imputed amounts)
|
(75,018
|
)
|
(102,273
|
)
|
(326,419
|
)
|
(495,078
|
)
|
(1,330,400
|
)
|
||||||
|
Net
loss applicable to common shares
|
$
|
(1,887,508
|
)
|
$
|
(2,296,350
|
)
|
$
|
(16,926,048
|
)
|
$
|
(4,646,109
|
)
|
$
|
(30,881,083
|
)
|
|
|
Net
loss per common share:
|
||||||||||||||||
|
Basic
and diluted
|
$
|
(0.04
|
)
|
$
|
(0.09
|
)
|
$
|
(0.44
|
)
|
$
|
(0.17
|
)
|
||||
|
Weighted
average shares of common
stock outstanding: |
||||||||||||||||
|
Basic
and diluted
|
44,667,025
|
26,866,155
|
38,174,238
|
26,585,823
|
||||||||||||
|
See
accompanying notes to unaudited condensed consolidated financial
statements.
|
F-3
|
(A
Development Stage Company)
|
||||||||||||||||||||||||||||||||||
|
Condensed
Consolidated Statement of Stockholders' Equity
(Deficiency)
|
||||||||||||||||||||||||||||||||||
|
(Unaudited)
|
|
Deficit
|
Dividends
|
Total
|
||||||||||||||||||||||||||||||||
|
Series
A
|
accumulated
|
payable
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
|
—
|
—
|
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
|
|||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||
|
Common
stock issued through private placement at $1.11 and $1.15 per
share, net
of expenses
|
—
|
—
|
11,917,680
|
11,918
|
12,257,686
|
—
|
—
|
—
|
—
|
—
|
12,269,604
|
|||||||||||||||||||||||
|
Exercise
of stock options
|
—
|
—
|
32,400
|
33
|
32,367
|
—
|
—
|
—
|
—
|
—
|
32,400
|
|||||||||||||||||||||||
|
Exercise
of warrants
|
—
|
—
|
278,080
|
277
|
68,214
|
—
|
—
|
—
|
—
|
—
|
68,491
|
|||||||||||||||||||||||
|
Conversion
of preferred stock to common stock
|
(896,154
|
)
|
(896
|
)
|
8,146,858
|
8,147
|
(7,251
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||
|
Preferred
stock dividends paid by issuance of shares
|
41,781
|
42
|
—
|
—
|
477,736
|
—
|
—
|
(479,074
|
)
|
—
|
—
|
(1,296
|
)
|
|||||||||||||||||||||
|
Preferred
stock dividend accrued
|
—
|
—
|
—
|
—
|
—
|
—
|
(326,419
|
)
|
326,419
|
—
|
—
|
—
|
||||||||||||||||||||||
|
Stock
based compensation
|
—
|
—
|
—
|
—
|
28,054
|
—
|
—
|
—
|
—
|
20,168
|
48,222
|
|||||||||||||||||||||||
|
Reversal
of unrealized gain on short-term investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(10,276
|
)
|
—
|
(10,276
|
)
|
|||||||||||||||||||||
|
Costs
associated with private placement
|
—
|
—
|
—
|
—
|
(49,725
|
)
|
—
|
—
|
—
|
—
|
—
|
(49,725
|
)
|
|||||||||||||||||||||
|
Stock
issued in connection with acquisition of Tarpan Therapeutics,
Inc.
|
—
|
—
|
10,731,052
|
10,731
|
11,042,253
|
—
|
—
|
—
|
—
|
—
|
11,052,984
|
|||||||||||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(16,599,629
|
)
|
—
|
—
|
—
|
(16,599,629
|
)
|
|||||||||||||||||||||
|
Balance
at September 30, 2005
|
—
|
$
|
—
|
59,415,257
|
$
|
59,415
|
$
|
41,932,542
|
$
|
—
|
$
|
(30,881,083
|
)
|
$
|
150,756
|
$
|
2,961
|
$
|
—
|
$
|
11,264,591
|
|||||||||||||
|
See
accompanying notes to unaudited condensed consolidated financial
statements.
|
F-4
|
(A
Development Stage Company)
|
|||||||||||||||||
|
Condensed
Consolidated Statements of Cash Flows
|
|||||||||||||||||
|
(Unaudited)
|
|
Cumulative
|
||||||||||
|
period
from
|
||||||||||
|
August
6, 2001
|
||||||||||
|
(inception)
to
|
||||||||||
|
Nine
months ended September 30,
|
September
30,
|
|||||||||
|
2005
|
2004
|
2005
|
||||||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
loss
|
$
|
(16,599,629
|
)
|
$
|
(4,151,031
|
)
|
$
|
(29,550,683
|
)
|
|
|
Adjustments
to reconcile net loss to
|
||||||||||
|
net
cash used in operating activities:
|
||||||||||
|
Common
stock issued for license rights
|
—
|
—
|
1,000
|
|||||||
|
Stock
based compensation
|
48,222
|
70,560
|
209,611
|
|||||||
|
Warrants
issued for consulting services
|
—
|
—
|
4,590
|
|||||||
|
Amortization
of intangible assets
|
—
|
—
|
145,162
|
|||||||
|
Gain
on sale of marketable equity securities
|
—
|
(71,182
|
)
|
(71,182
|
)
|
|||||
|
Depreciation
|
40,233
|
15,806
|
73,793
|
|||||||
|
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
in prepaid expenses
|
19,948
|
2,291
|
38,067
|
|||||||
|
Increase
in other assets
|
—
|
(70,506
|
)
|
(70,506
|
)
|
|||||
|
Increase
in accounts payable
|
543,862
|
838,019
|
1,363,730
|
|||||||
|
Increase
(decrease) in accrued expenses
|
43,077
|
(329,200
|
)
|
(445,142
|
)
|
|||||
|
Net
cash used in operating activities
|
(4,182,664
|
)
|
(3,695,243
|
)
|
(14,117,829
|
)
|
||||
|
Cash
flows from investing activities:
|
||||||||||
|
Purchase
of property and equipment
|
(23,180
|
)
|
(131,298
|
)
|
(168,074
|
)
|
||||
|
Cash
paid in connection with acquisitions
|
—
|
—
|
(32,808
|
)
|
||||||
|
Purchase
of short-term investments
|
—
|
—
|
(5,000,979
|
)
|
||||||
|
Proceeds
from sale of short-term investments
|
3,494,147
|
431,089
|
4,425,236
|
|||||||
|
Proceeds
from sale of license
|
—
|
—
|
200,001
|
|||||||
|
Cash
acquired in acquisition
|
6,777
|
—
|
6,777
|
|||||||
|
Net
cash provided by (used in) investing activities
|
3,477,744
|
299,791
|
(569,847
|
)
|
||||||
|
Cash
flows from financing activities:
|
||||||||||
|
Proceeds
from issuances of notes payable to stockholders
|
—
|
—
|
233,500
|
|||||||
|
Repayments
of notes payable to stockholders
|
(651,402
|
)
|
—
|
(884,902
|
)
|
|||||
|
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
|
)
|
(1,290
|
)
|
(2,286
|
)
|
||||
|
Proceeds
from sale of common stock, net
|
12,269,604
|
3,361,718
|
18,078,730
|
|||||||
|
Costs
associated with private placement
|
(49,725
|
)
|
—
|
(49,725
|
)
|
|||||
|
Proceeds
from sale of preferred stock, net
|
—
|
—
|
9,046,176
|
|||||||
|
Proceeds
from exercise of stock options
|
32,400
|
30,100
|
62,500
|
|||||||
|
Proceeds
from exercise of warrants
|
68,491
|
—
|
68,491
|
|||||||
|
Net
cash provided by financing activities
|
11,668,072
|
3,390,528
|
26,556,484
|
|||||||
|
Net
increase (decrease) in cash and cash equivalents
|
10,963,152
|
(4,924
|
)
|
11,868,808
|
||||||
|
Cash
and cash equivalents at beginning of period
|
905,656
|
7,413,803
|
—
|
|||||||
|
Cash
and cash equivalents at end of period
|
$
|
11,868,808
|
$
|
7,408,879
|
$
|
11,868,808
|
||||
|
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
|
$
|
312,954
|
$
|
120,968
|
$
|
494,511
|
||||
|
Preferred
stock dividends accrued
|
326,419
|
495,078
|
912,218
|
|||||||
|
Conversion
of preferred stock to common stock
|
829
|
—
|
1,000
|
|||||||
|
Preferred
stock dividends paid by issuance of shares
|
477,736
|
—
|
759,134
|
|||||||
|
Issuance
of common stock for acquisitions
|
11,052,984
|
—
|
13,389,226
|
|||||||
|
Marketable
equity securities received in connection with
|
||||||||||
|
sale
of license
|
—
|
—
|
359,907
|
|||||||
|
Net
liabilities assumed in business combination
|
(675,416
|
)
|
—
|
(675,416
|
)
|
|||||
|
See
accompanying notes to unaudited condensed consolidated financial
statements.
|
F-5
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
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 in the Prospectus. The condensed consolidated balance sheet as of
December 31, 2004 has been derived from the audited consolidated financial
statements included in the Prospectus.
(2) LIQUIDITY
The
Company reported a net loss of $16,599,629 and negative cash flows from
operating activities of $4,182,664 for the nine months ended September 30,
2005.
The net loss from date of inception, August 6, 2001, to September 30, 2005
amounts to $29,550,683.
Management
believes that the Company will continue to incur net losses through at least
September 30, 2006 and for the foreseeable future. Based on the resources
of the
Company available at September 30, 2005, management believes that the Company
will need additional equity or debt financing or will need to generate revenues
during 2006 through licensing of its products or entering into strategic
alliances to be able to sustain its operations beyond 2006 and that
it will
need additional financing thereafter until it can achieve profitability,
if
ever.
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 September 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.
As
described in Note 6, the Company recently completed a private placement offering
of units consisting of shares of its 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, respectively.
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.
F-6
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
30, 2005
The
terms
of the Company’s Series A Preferred Stock, which was originally issued in
November 2003, provided for its automatic conversion upon the Company’s
completion of a financing that results in gross proceeds to of at least $10
million at a pre-money valuation of the Company of at least $30 million.
Accordingly, as a result of the August 26, 2005 closing of the Company’s private
placement discussed above, all of the remaining outstanding shares of the
Company’s Series A Preferred Stock automatically converted into shares of the
Company’s 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).
(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 12,754,038
and 16,161,738 as of September 30, 2005 and 2004, respectively.
(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. On August 29, 2005, the Company granted
a
consultant options to purchase an aggregate of 250,000 shares of common stock
under the Company’s 2003 Stock Option Plan at an exercise price of $1.50 per
share. All shares subject to these options, with the exception of the options
granted on August 29, 2005, 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 shares subject
to
the options granted on August 29, 2005 vest as follows: 25,000 options vest
immediately; 50,000 upon reaching a share price goal of $2.50; 75,000 upon
reaching a share price goal of $3.50; and 100,000 upon reaching a share price
goal of $5.00.
F-7
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
30, 2005
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 Statement
of Financial Accounting Standards No. 123 (“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.
|
Three
months ended
|
Nine
months ended
|
||||||||||||
|
September
30,
|
September
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
loss applicable to common shares, as reported
|
$
|
(1,887,508
|
)
|
$
|
(2,296,350
|
)
|
$
|
(16,926,048
|
)
|
$
|
(4,646,109
|
)
|
|
|
Deduct:
Total
stock-based employee
|
|||||||||||||
|
compensation
expense determined
|
|||||||||||||
|
under
fair value method
|
(393,305
|
)
|
(432,923
|
)
|
(954,524
|
)
|
(997,211
|
)
|
|||||
|
Net
loss applicable to common shares, pro forma
|
$
|
(2,280,813
|
)
|
$
|
(2,729,273
|
)
|
$
|
(17,880,572
|
)
|
$
|
(5,643,320
|
)
|
|
|
Net
loss per common share - basic
|
|||||||||||||
|
As
reported
|
$
|
(0.04
|
)
|
$
|
(0.09
|
)
|
$
|
(0.44
|
)
|
$
|
(0.17
|
)
|
|
|
Pro
forma
|
(0.05
|
)
|
(0.10
|
)
|
(0.47
|
)
|
(0.21
|
)
|
|||||
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.
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 nine months ended September 30, 2005:
dividend yield of 0%; expected volatility of 69%; risk-free interest rate
of
4.1%; and expected lives of five years. The following assumptions were used
for
the grants in the nine months ended September 30, 2004: dividend yield of
0%;
expected volatility of 82%; risk-free interest rate of 3.2%; and expected
lives
of eight years. The following weighted average assumptions were used for
the
grants in the three months ended September 30, 2005: dividend yield of 0%;
expected volatility of 69%; risk-free interest rate of 4.1%; and expected
lives
of five years. The following weighted average assumptions were used for the
grants in the three months ended September 30, 2004: dividend yield of 0%;
expected volatility of 73.6%; risk-free interest rate of 2.0%; and expected
lives of five years.
F-8
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
30, 2005
(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 was payable
at
such time as the Company raised at least $5 million in new financing. The
Notes
were repaid as a result of the sale of units in August 2005 (see Note
6).
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
were
members of the Company’s board of directors at the time of the transaction,
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.
Upon
completion of the Merger, Douglas Abel, formerly chief executive officer
of
Tarpan, was appointed President and Chief Executive Officer and director
of the
Company. As contemplated by the merger agreement, the Company entered into
an
employment agreement dated April 1, 2005 with Mr. Abel. The employment 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, which condition was satisfied in August
2005. 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.
F-9
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
30, 2005
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
nine months ended September 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 allocation 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
assumed:
|
||||
|
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 unaudited pro forma
information does not necessarily reflect the results of operations that would
have occurred had the entities been a single company during these
periods.
F-10
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
30, 2005
|
Three
months ended
|
Nine
months ended
|
||||||||||||
|
September
30,
|
September
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
loss
|
$
|
(1,812,490
|
)
|
$
|
(2,200,061
|
)
|
$
|
(16,726,890
|
)
|
$
|
(16,350,524
|
)
|
|
|
Weighted
average number of common shares outstanding
|
44,667,025
|
37,597,207
|
41,724,954
|
37,316,875
|
|||||||||
|
Loss
per common share - basic and fully diluted
|
$
|
(0.04
|
)
|
$
|
(0.06
|
)
|
$
|
(0.40
|
)
|
$
|
(0.44
|
)
|
|
(6) PRIVATE
PLACEMENT OF COMMON SHARES
The
Company recently completed a private placement offering of units consisting
of
shares of its 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, respectively. 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. (“Paramount”) an affiliate of a
significant stockholder of the Company, 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 exercisable at a price
of
$1.49 per share. After deduction of these selling commissions and expenses,
the
Company realized aggregate net proceeds from its August 2005 private placement
of approximately $12.3 million. Timothy McInerney and Dr. Michael Weiser,
each a
director of the Company, are employees of Paramount BioCapital,
Inc.
The
terms
of the Company’s Series A Preferred Stock, which was originally issued in
November 2003, provided for its automatic conversion upon the Company’s
completion of a financing that resulted in gross proceeds of at least $10
million and a “pre-money valuation” of the Company of at least $30 million.
Accordingly, as a result of the August 26, 2005 closing of the Company’s private
placement discussed above, all of the remaining outstanding shares of the
Company’s Series A Preferred Stock automatically converted into shares of the
Company’s 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).
F-11
MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September
30, 2005
(7) SUBSEQUENT
EVENTS
On
October 21, 2005, the Company issued 675,675 shares of common stock to Cato
BioVentures, an affiliate of Cato Research, Inc., in exchange for forgiveness
of
$750,000 of accounts payable owed by the Company to Cato Research, Inc. The
transaction was completed on the same terms as the private placement
described earlier which closed on August 26, 2005.
F-12