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, 2004
| ¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File No. 000-32877
PRO-PHARMACEUTICALS, INC.
| Nevada | 04-3562325 | |
| (State or other jurisdiction of incorporation) |
(I.R.S. Employer Identification No.) | |
| 189 Wells Avenue, Newton, Massachusetts | 02459 | |
| (Address of principal executive offices) | (Zip Code) | |
(617) 559-0033
(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. YES x NO ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES ¨ NO x
The number of shares outstanding of the registrant’s common stock as of November 11, 2004 was 27,315,411.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2004
| PAGE | ||||
| PART I – FINANCIAL INFORMATION | ||||
| ITEM 1. |
Unaudited Condensed Consolidated Financial Statements | |||
| Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| Notes to Unaudited Condensed Consolidated Financial Statements |
6 | |||
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 | ||
| ITEM 3. |
Quantitative and Qualitative Disclosures About Market Risk | 17 | ||
| ITEM 4. |
Controls and Procedures | 17 | ||
| PART II – OTHER INFORMATION | ||||
| ITEM 1. |
Legal Proceedings | 17 | ||
| ITEM 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 18 | ||
| ITEM 6. |
Exhibits | 18 | ||
| 18 | ||||
Our website address is www.pro-pharmaceuticals.com.
2
(A Development-Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share data)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 12,454 | $ | 7,608 | ||||
| Prepaid expenses and other current assets |
68 | 88 | ||||||
| Total current assets |
12,522 | 7,696 | ||||||
| PROPERTY AND EQUIPMENT - NET |
93 | 144 | ||||||
| INTANGIBLE ASSETS - NET |
186 | 135 | ||||||
| DEPOSITS AND OTHER ASSETS |
27 | 27 | ||||||
| TOTAL ASSETS |
$ | 12,828 | $ | 8,002 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 340 | $ | 144 | ||||
| Accounts payable - related party |
— | 22 | ||||||
| Accrued expenses |
267 | 212 | ||||||
| Total current liabilities |
607 | 378 | ||||||
| CONTINGENCIES (Note 5) |
||||||||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Common stock, $0.001 par value; 100,000,000 shares authorized, 27,315,411 and 24,079,300 shares of common stock issued and outstanding at September 30, 2004 and December 31, 2003, respectively; Undesignated shares, $.01 par value; 10,000,000 and 5,000,000 shares authorized at September 30, 2004 and December 31, 2003, respectively; none issued and outstanding |
27 | 24 | ||||||
| Additional paid-in capital |
29,924 | 20,376 | ||||||
| Deferred compensation |
(2 | ) | (70 | ) | ||||
| Deficit accumulated during the development stage |
(17,728 | ) | (12,706 | ) | ||||
| Total stockholders’ equity |
12,221 | 7,624 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 12,828 | $ | 8,002 | ||||
See notes to unaudited condensed consolidated financial statements.
3
(A Development-Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003, AND CUMULATIVE PERIOD
FROM INCEPTION (JULY 10, 2000) TO SEPTEMBER 30, 2004
(In thousands, except share and per share data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
Cumulative Period 2004 |
||||||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||||||
| OPERATING EXPENSES: (a) |
||||||||||||||||||||
| Research and development |
$ | 666 | $ | 454 | $ | 2,039 | $ | 1,256 | $ | 6,467 | ||||||||||
| General and administrative |
1,133 | 946 | 3,070 | 2,083 | 9,221 | |||||||||||||||
| Total operating expenses |
(1,799 | ) | (1,400 | ) | (5,109 | ) | (3,339 | ) | (15,688 | ) | ||||||||||
| INTEREST AND OTHER INCOME |
36 | 18 | 87 | 37 | 206 | |||||||||||||||
| INTEREST AND OTHER EXPENSES: |
||||||||||||||||||||
| Amortization of debt discount on convertible notes |
— | — | — | — | 1,258 | |||||||||||||||
| Debt conversion expense |
— | — | — | — | 503 | |||||||||||||||
| Interest expense on convertible notes |
— | — | — | — | 485 | |||||||||||||||
| Total interest and other expenses |
— | — | — | — | (2,246 | ) | ||||||||||||||
| NET LOSS |
$ | (1,763 | ) | $ | (1,382 | ) | $ | (5,022 | ) | $ | (3,302 | ) | $ | (17,728 | ) | |||||
| NET LOSS PER SHARE - BASIC AND DILUTED |
$ | (0.07 | ) | $ | (0.06 | ) | $ | (0.20 | ) | $ | (0.16 | ) | ||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED |
26,380,628 | 22,343,154 | 25,229,248 | 21,010,099 | ||||||||||||||||
(a) The following summarizes the allocation of the stock-based compensation charge: |
| |||||||||||||||||||
| Research and development |
$ | 1 | $ | — | $ | 7 | $ | — | $ | 142 | ||||||||||
| General and administrative |
— | 163 | 117 | 247 | 853 | |||||||||||||||
| Total |
$ | 1 | $ | 163 | $ | 124 | $ | 247 | $ | 995 | ||||||||||
See notes to unaudited condensed consolidated financial statements.
4
(A Development-Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003, AND CUMULATIVE PERIOD
FROM INCEPTION (JULY 10, 2000) TO SEPTEMBER 30, 2004
(In thousands)
| Nine Months Ended September 30, |
Cumulative Period 2004 |
|||||||||||
| 2004 |
2003 |
|||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
| Net loss |
$ | (5,022 | ) | $ | (3,302 | ) | $ | (17,728 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
| Depreciation and amortization |
63 | 59 | 209 | |||||||||
| Stock-based compensation expense |
124 | 247 | 995 | |||||||||
| Amortization of deferred extension costs through interest expense |
— | — | 168 | |||||||||
| Settlement of accrued interest through issuance of common stock |
— | — | 10 | |||||||||
| Amortization of debt discount on convertible notes |
— | — | 1,258 | |||||||||
| Writeoff of intangible assets |
— | — | 107 | |||||||||
| Debt conversion expense |
— | — | 503 | |||||||||
| Interest expense related to issuance of warrants to purchase common stock |
— | — | 236 | |||||||||
| Changes in current assets and liabilities: |
||||||||||||
| Prepaid expenses and other current assets |
21 | 26 | (64 | ) | ||||||||
| Deposits and other assets |
— | — | (27 | ) | ||||||||
| Accounts payable and accrued expenses |
228 | 36 | 724 | |||||||||
| Net cash used in operating activities |
(4,586 | ) | (2,934 | ) | (13,609 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
| Purchases of property and equipment |
— | (39 | ) | (272 | ) | |||||||
| Increase in patent costs and other assets |
(64 | ) | (48 | ) | (215 | ) | ||||||
| Net cash used in investing activities |
(64 | ) | (87 | ) | (487 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
| Net proceeds from issuance of common stock and warrants |
9,496 | 5,888 | 25,307 | |||||||||
| Net proceeds from issuance of convertible notes payable |
— | — | 1,320 | |||||||||
| Repayment of convertible notes payable |
— | — | (86 | ) | ||||||||
| Proceeds from shareholder advances |
— | — | 9 | |||||||||
| Net cash provided by financing activities |
9,496 | 5,888 | 26,550 | |||||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
4,846 | 2,867 | 12,454 | |||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
7,608 | 1,921 | — | |||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 12,454 | $ | 4,788 | $ | 12,454 | ||||||
| SUPPLEMENTAL DISCLOSURE – Cash paid for interest |
$ | — | $ | — | $ | 19 | ||||||
| NONCASH FINANCING ACTIVITIES |
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