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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 10-Q
 
x        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2002
OR
 
¨        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the transition period from                          to                         
 
Commission File Number 000-31719
 
 
POZEN Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
  
62-1657552
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
1414 Raleigh Road
Suite 400
Chapel Hill, North Carolina 27517
(Address of principal executive offices, including zip code)
 
(919) 913-1030
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x  Yes        ¨  No
 
The number of shares outstanding of the registrant’s common stock as of October 25, 2002 was 28,128,039.

Table of Contents
POZEN Inc.
(A Development Stage Company)
FORM 10-Q
 
For the Three and Nine Months Ended September 30, 2002
 
INDEX
 
PART I.
   
FINANCIAL INFORMATION
   
Page
Item 1.
   
Financial Statements (unaudited)
     
       
1
       
2
       
3
       
4
Item 2.
      
5
Item 3.
      
13
Item 4.
      
13
PART II.
   
OTHER INFORMATION
     
Item 6.
      
14
  
15
  
18

i

Table of Contents
PART I.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
POZEN Inc.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
 
    
September 30,
2002
     
December 31,
2001
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
55,675,859
 
   
$
73,958,724
 
Prepaid expenses
   
 
65,531
 
   
 
67,498
 
Other current assets
   
 
8,000
 
   
 
8,688
 
    
  
Total current assets
   
 
55,749,390
 
   
 
74,034,910
 
Equipment, net of accumulated depreciation
   
 
442,999
 
   
 
109,014
 
    
  
Total assets
   
$
56,192,389
 
   
$
74,143,924
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
259,638
 
   
$
194,138
 
Accrued expenses
   
 
1,798,816
 
   
 
3,328,881
 
    
  
Total current liabilities
   
 
2,058,454
 
   
 
3,523,019
 
Common stock, $0.001 par value, 90,000,000 shares authorized;
28,128,039 and 27,969,435 shares issued and outstanding at
September 30, 2002 and December 31, 2001, respectively
   
 
28,128
 
   
 
27,969
 
Additional paid-in capital
   
 
143,756,198
 
   
 
143,512,559
 
Common stock warrants
   
 
260,999
 
   
 
310,808
 
Deferred compensation
   
 
(1,231,385
)
   
 
(3,429,376
)
Deficit accumulated during the development stage
   
 
(88,680,005
)
   
 
(69,801,055
)
    
  
Total stockholders’ equity
   
 
54,133,935
 
   
 
70,620,905
 
    
  
Total liabilities and stockholders’ equity
   
$
56,192,389
 
   
$
74,143,924
 
    
  
 
See accompanying Notes to Financial Statements.

1

Table of Contents
POZEN Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
 
    
Three Months Ended September 30,
     
Nine Months Ended September 30,
     
Period From
Inception
(September 26,
1996) Through
September 30,
  
    
2002
     
2001
     
2002
     
2001
     
2002
  
Operating expenses:
                                             
General and administrative
   
$
1,454,558
 
   
$
1,465,360
 
   
$
4,895,463
 
   
$
4,554,486
 
   
$
21,077,655
 
Research and development
   
 
4,024,353
 
   
 
4,059,084
 
   
 
14,827,078
 
   
 
12,110,853
 
   
 
73,002,330
 
    
  
  
  
  
Total operating expenses
   
 
5,478,911
 
   
 
5,524,444
 
   
 
19,722,541
 
   
 
16,665,339
 
   
 
94,079,985
 
Interest income, net
   
 
244,982
 
   
 
718,458
 
   
 
843,591
 
   
 
2,916,975
 
   
 
6,334,457
 
    
  
  
  
  
Net loss
   
 
(5,233,929
)
   
 
(4,805,986
)
   
 
(18,878,950
)
   
 
(13,748,364
)
   
 
(87,745,528
)
    
  
  
  
  
Non-cash preferred stock charge
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
27,617,105
 
Preferred stock dividends
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
934,478
 
    
  
  
  
  
Net loss attributable to common stockholders
   
$
(5,233,929
)
   
$
(4,805,986
)
   
$
(18,878,950
)
   
$
(13,748,364
)
   
$
(116,297,111
)
    
  
  
  
  
Basic and diluted net loss per common share
   
$
(0.19
)
   
$
(0.17
)
   
$
(0.67
)
   
$
(0.49
)
         
    
  
  
  
        
Shares used in computing basic and diluted net loss per common share
   
 
28,100,495
 
   
 
27,964,435
 
   
 
28,072,252
 
   
 
27,906,237
 
         
    
  
  
  
        
 
See accompanying Notes to Financial Statements.

2

Table of Contents
POZEN Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
 
    
Nine Months Ended September 30,
     
Period from Inception
(September 26, 1996)
Through September 30,
  
    
2002
     
2001
     
2002
  
Operating activities
                           
Net loss
   
$
(18,878,950
)
   
$
(13,748,364
)
   
$
(87,745,527
)
Adjustments to reconcile net loss to net
cash used in operating activities:
                           
Depreciation
   
 
83,089
 
   
 
60,997
 
   
 
365,345
 
Loss on disposal of equipment
   
 
—  
 
   
 
23,193
 
   
 
24,769
 
Amortization of deferred compensation
   
 
2,197,991
 
   
 
2,374,499
 
   
 
9,655,063
 
Noncash financing charge
   
 
—  
 
   
 
—  
 
   
 
450,000
 
Changes in operating assets and liabilities:
                           
Prepaid expenses, accrued interest receivable, and other assets
   
 
2,655
 
   
 
171,072
 
   
 
(73,531
)
Accounts payable and accrued expenses
   
 
(1,464,565
)
   
 
(1,034,597
)
   
 
2,058,454
 
    
  
  
Net cash used in operating activities
   
 
(18,059,780
)
   
 
(12,153,200
)
   
 
(75,265,427
)
Investment activities
                           
Purchase of equipment
   
 
(417,074
)
   
 
(96,496
)
   
 
(833,113
)
    
  
  
Net cash used in investing activities
   
 
(417,074
)
   
 
(96,496
)
   
 
(833,113
)
    
  
  
Financing activities
                           
Proceeds from issuance of preferred stock
   
 
—  
 
   
 
—
 
   
 
48,651,850
 
Proceeds from issuance of common stock
   
 
193,989
 
   
 
107,444
 
   
 
79,280,534
 
Proceeds from notes payable
   
 
—  
 
   
 
—  
 
   
 
3,000,000
 
Proceeds from stockholders’ receivables
   
 
—  
 
   
 
—  
 
   
 
1,004,310
 
Payment of dividends
   
 
—  
 
   
 
—  
 
   
 
(162,295
)
    
  
  
Net cash provided by financing activities
   
 
193,989
 
   
 
107,444
 
   
 
131,774,399
 
    
  
  
Net (decrease) increase in cash and cash equivalents
   
 
(18,282,865
)
   
 
(12,142,252
)
   
 
55,675,859
 
Cash and cash equivalents at beginning of period
   
 
73,958,724
 
   
 
92,350,583
 
   
 
—  
 
    
  
  
Cash and cash equivalents at end of period
   
$
55,675,859
 
   
$
80,208,331
 
   
$
55,675,859
 
    
  
  
Supplemental schedule of cash flow information
                           
Cash paid for interest
   
$
—  
 
   
$
—  
 
   
$
186,576
 
    
  
  
Supplemental schedule of noncash investing
and financing activities
                           
Conversion of notes payable to preferred stock
   
$
—  
 
   
$
—  
 
   
$
3,000,000