UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11550
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Pharmos Corporation |
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(Exact name of registrant as specified in its charter) |
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Nevada |
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36-3207413 |
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(State or other jurisdiction of |
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(IRS Employer Id. No.) |
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99 Wood Avenue South, Suite 311 |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (732) 452-9556
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. Yes x No o.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o.
As of May 4, 2005 the Registrant had outstanding 95,137,076 shares of its $.03 par value Common Stock.
Part I. Financial
Information
Item 1 Financial Statements
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Pharmos
Corporation |
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Consolidated
Balance Sheets |
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March 31, |
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December
31, |
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Assets |
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Cash and cash equivalents |
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$ |
54,323,340 |
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$ |
49,014,530 |
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|
|
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Restricted cash |
|
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— |
|
|
4,846,155 |
|
|
|
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Research and development grants receivable |
|
|
565,680 |
|
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1,537,782 |
|
|
|
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Debt issuance costs |
|
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— |
|
|
45,648 |
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|
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Prepaid expenses and other current assets |
|
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1,058,269 |
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262,810 |
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Total
current assets |
|
|
55,947,289 |
|
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55,706,925 |
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Fixed assets, net |
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895,029 |
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|
987,451 |
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Restricted cash |
|
|
140,181 |
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|
139,594 |
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Severance pay funded |
|
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833,730 |
|
|
811,926 |
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|
|
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Other assets |
|
|
18,946 |
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18,946 |
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Total
assets |
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$ |
57,835,175 |
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$ |
57,664,842 |
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Liabilities
and Shareholders’ Equity |
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Accounts payable |
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$ |
961,852 |
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$ |
2,462,162 |
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|
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Accrued expenses |
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671,637 |
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1,155,413 |
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|
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Warrant liability |
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67,024 |
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297,955 |
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|
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Accrued wages and other compensation |
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920,859 |
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|
756,488 |
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Convertible debentures, net |
|
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— |
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4,765,540 |
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Total
current liabilities |
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2,621,372 |
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9,437,558 |
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Other liability |
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61,471 |
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|
39,412 |
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Severance pay |
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|
1,189,037 |
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1,197,039 |
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Total
liabilities |
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3,871,880 |
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10,674,009 |
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Commitments and contingencies |
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Shareholders’
equity |
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Preferred stock, $.03 par value, 1,250,000 shares
authorized, none issued and outstanding |
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— |
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— |
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Common stock, $.03 par value; 150,000,000 shares authorized,
95,137,076 and 95,137,076 issued, in 2005 and 2004, respectively. |
|
|
2,854,112 |
|
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2,854,112 |
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|
|
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Deferred compensation |
|
|
(1,407,431 |
) |
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(1,701,122 |
) |
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Paid in capital |
|
|
188,811,199 |
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|
188,809,955 |
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|
|
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Accumulated deficit |
|
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(136,294,159 |
) |
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(142,971,686 |
) |
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Treasury stock, at cost, 14,189 shares in 2005 and
2004, respectively |
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(426 |
) |
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(426 |
) |
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Total
shareholders’ equity |
|
|
53,963,295 |
|
|
46,990,833 |
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Total
liabilities and shareholders’ equity |
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$ |
57,835,175 |
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$ |
57,664,842 |
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The accompanying notes are an integral part of these consolidated financial statements.
2
|
Pharmos
Corporation |
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Three Months Ended March 31, |
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2005 |
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2004 |
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Expenses |
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Research and development, gross |
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$ |
2,504,639 |
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$ |
4,117,186 |
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Grants |
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(19,576 |
) |
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(816,256 |
) |
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Research and development, net of grants |
|
|
2,485,063 |
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3,300,930 |
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|
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(exclusive of depreciation and amortization shown
separately below) |
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|
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General and administrative |
|
|
1,794,711 |
|
|
1,037,711 |
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(exclusive of depreciation and amortization shown
separately below) |
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Depreciation and amortization |
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|
114,925 |
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|
149,794 |
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Total operating expenses |
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4,394,699 |
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4,488,435 |
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Loss
from operations |
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|
(4,394,699 |
) |
|
(4,488,435 |
) |
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Other
income (expense) |
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Bausch & Lomb milestone payment, net |
|
|
10,725,688 |
|
|
— |
|
|
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Interest income |
|
|
269,496 |
|
|
163,947 |
|
|
|
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Interest expense |
|
|
(160,546 |
) |
|
(1,443,939 |
) |
|
|
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Derivative gain (loss) |
|
|
230,931 |
|
|
(167,083 |
) |
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Other income (expense), net |
|
|
6,657 |
|
|
(5,291 |
) |
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Other
income (expense), net |
|
|
11,072,226 |
|
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(1,452,366 |
) |
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Net
income (loss) |
|
$ |
6,677,527 |
|
$ |
(5,940,801 |
) |
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Net
income (loss) per share |
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- basic |
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$ |
.07 |
|
$ |
(.07 |
) |
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- diluted |
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$ |
.07 |
|
$ |
(.07 |
) |
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Weighted
average shares outstanding |
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- basic |
|
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94,972,887 |
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87,522,955 |
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- diluted |
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95,703,064 |
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87,522,955 |
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The accompanying notes are an integral part of these consolidated financial statements.
3
|
Pharmos
Corporation |
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Three Months Ended March 31, |
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2005 |
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2004 |
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Cash flows from operating activities |
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Net income (loss) |
|
$ |
6,677,527 |
|
$ |
(5,940,801 |
) |
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|
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Adjustments to reconcile net income (loss) loss to
net |
|
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Cash used in operating activities: |
|
|
|
|
|
|
|
|
|
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Depreciation and amortization |
|
|
114,925 |
|
|
149,794 |
|
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|
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Interest expense on convertible debentures converted
into common stock |
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|
— |
|
|
10,555 |
|
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Provision for severance pay |
|
|
(8,002 |
) |
|
3,235 |
|
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Change in the value of warrants |
|
|
(230,931 |
) |
|
167,083 |
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|
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Amortization of debt discount and issuance costs |
|
|
126,256 |
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1,239,639 |
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Amortization of stock options issuances below fair
market value |
|
|
17,952 |
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|
18,032 |
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Option expense – consultant compensation |
|
|
1,244 |
|
|
8,823 |
|
|
|
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Amortization of restricted shares issuance |
|
|
275,739 |
|
|
— |
|
|
|
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Income from Bausch & Lomb milestone payment, net |
|
|
(10,725,688 |
) |
|
|
|
|
|
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Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Research and development grants receivable |
|
|
972,102 |
|
|
(537,279 |
) |
|
|
|
Prepaid expenses and other current assets |
|
|
(795,459 |
) |
|
114,208 |
|
|
|
|
Severance pay funding |
|
|
(21,804 |
) |
|
8,503 |
|
|
|
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Other assets |
|
|
— |
|
|
1,643 |
|
|
|
|
Accounts payable |
|
|
(1,500,310 |
) |
|
(785,816 |
) |
|
|
|
Accrued expenses |
|
|
(483,776 |
) |
|
108,634 |
|
|
|
|
Accrued wages and other compensation |
|
|
164,371 |
|
|
(503,027 |
) |
|
|
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Other liabilities |
|
|
22,059 |
|
|
— |
|
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|
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|
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||
|
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Net cash used in operating activities |
|
|
(5,393,795 |
) |
|
(5,936,774 |
) |
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Cash flows from investing activities |
|
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|
|
|
|
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||
|
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Purchases of fixed assets |
|
|
(22,503 |
) |
|
(52,953 |
) |
|
|
|
Proceeds from Bausch & Lomb milestone payment |
|
|
12,275,000 |
|
|
— |
|
|
|
|
Royalty payment and grant reimbursement related to
Bausch & Lomb milestone payment |
|
|
(1,549,312 |
) |
|
— |
|
|
|
|
Decrease in restricted cash |
|
|
4,845,568 |
|
|
26,232 |
|
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Net cash provided by (used in) investing activities |
|
|
15,548,753 |
|
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(26,721 |
) |
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Cash flows from financing activities |
|
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|
|
|
|
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||
|
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Proceeds from issuance of common stock and exercise
of options and warrants, net of issuance costs |
|
|
— |
|
|
4,566,673 |
|
|
|
|
Repayment of convertible debentures |
|
|
(4,846,148 |
) |
|
(1,384,616 |
) |
|
|
|
|
|
|
|
|
|
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||
|
|
|
|
|
|
|
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||
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Net cash (used in) provided by financing activities |
|
|
(4,846,148 |
) |
|
3,182,057 |
|
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|
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|
|
|
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|
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|
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|
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||
|
Net increase (decrease) in cash and cash equivalents |
|
|
5,308,810 |
|
|
(2,781,438 |
) |
||
|
|
|
|
|
|
|
|
|
||
|
Cash and cash equivalents at beginning of year |
|
|
49,014,530 |
|
|
49,292,641 |
|
||
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