SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the Fiscal Year Ended: March 31, 1994
Commission File No. 33-40848-A
SPECTRUM PHARMACEUTICAL CORPORATION
(Exact name of Registrant as specified in its charter)
Florida 65-026047
(State of Incorporation) (IRS Employer Identification No.)
36 Valley View
Irvine, California 92612
(address of principal executive office)
Registrant's Telephone No. including area code: (949) 856-1277
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 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 ( ) No (X)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. (X)
Registrant's revenues for its most recent fiscal year were: None.
As of March 31, 1994 the aggregate market value of the Registrant's common
stock, computed by reference to the average bid and asked prices of such stock
on that date or the date of the last trades in that month, held by
non-affiliates of the Registrant was approximately $402,395.As of March 31,
1994, the Registrant had 4,296,165 shares of its Common Stock ($0.001 par value)
issued and outstanding.
Transitional Small Business Disclosure Format Yes ( ) No (X).
1
<PAGE>
Item 1. Business.
GENERAL
- -------
Spectrum Pharmaceutical Corporation (herein the "Company") is primarily engaged
in the development of pharmaceutical products incorporating the compound
procaine hydrochloride intended for use in the treatment of tinnitus, certain
symptoms of Alzheimer's Disease and cocaine addiction. The Company is in the
development stage and has had no revenues to date. The Company has received a
U.S. Patent covering its products for the foregoing conditions.
The Company believes that it has developed pharmaceutical products, which will
result in effective treatment of certain diseases. However, the safety and
efficacy of such products have not been established by formal clinical studies
and the Company must obtain substantial working capital in order to undertake
such studies.
Marketing of the Company's pharmaceutical products is governed by the U.S. Food
and Drug Administration (the "FDA") and comparable agencies in foreign
countries. To date no applications have been filed by the Company with the FDA
or any other agency with respect to any products. Accordingly, it is not
anticipated that the Company will receive revenues from the commercial sale of
its products in the U.S. for at least three years after receipt of sufficient
capital to undertake studies of the safety and efficacy of its proposed
products.
The Company's general business strategy is to attempt to enter into licensing or
joint development agreements with established pharmaceutical companies which
will participate in the clinical evaluation and regulatory approval processes
and will market and distribute commercial products for the treatment of
Alzheimer's Disease and cocaine addiction. The Company intends to manufacture
and market, either itself or through subcontractors, its product for the
treatment of tinnitus.
The Company was incorporated on May 29, 1990 as Interamerican Pharmaceutical
Corporation under the laws of the State of Florida. The Company changed its name
to Spectrum Pharmaceutical Corporation in April 1991. Its principal executive
offices are located at 36 Valley View, Irvine, California 92612, and its
telephone number at that address is (949) 856-1277.
PROCAINE HYDROCHLORIDE
- ----------------------
Procaine hydrochloride, the active ingredient of the Company's products, has
found wide application as a local anesthetic under the brand name Novocain. So
many other uses for the compound have been found that in 1953 it was written,
"Seldom if ever in the history of pharmacology and therapeutics has a single
chemical or drug been found to possess as many diverse uses as have been
discovered for procaine". Weatherby, J.H., Uses of Procaine for Purposes Other
than the Production of Local Anesthesia, Virginia Medical Monthly, Vol. 80, page
253 (May 1953).
However, several factors contributed to the current lack of interest in procaine
by the major pharmaceutical companies, including (1) the patent protection for
injectable (liquid) procaine has lapsed; and (2) its presence in the body is of
short duration due to its being highly water soluble and therefore metabolizes
quickly in the human body. The Company believes it has overcome both of these
problems. It has acquired a proprietary method by which through complex forming,
the pharmacological life of procaine is extended many times over the
administration of procaine hydrochloride in injectable form. Furthermore, the
Company owns U.S. Patent No. 4,956,391, issued in September 1990 entitled
"Protected Complex of Procaine for the Treatment of Symptoms of Tinnitus,
Alzheimer's Disease and Narcotics Addiction".
2
<PAGE>
The following sets forth information regarding initial product development of
the Company:
Tinnitus
- --------
Tinnitus is an auditory condition characterized by a continuous or intermittent
ringing, buzzing or roaring sensation that the patient hears in one or both
ears. It ranges from a small nuisance for most people to a cacophony for others
that can dominate life and make it hard to sleep, understand conversations or
concentrate on work. According to the April 1989 publication of the U.S. Food
and Drug Administration, FDA Consumer, researchers estimate that 36 million
Americans have tinnitus and the condition is severe enough in 7.2 million that
they have sought medical help, although medical professionals who treat tinnitus
say that these figures may be low with some estimates indicating that as many as
5.3% of the population suffers from severe tinnitus. It is estimated that the
rest of the industrialized world experiences tinnitus symptoms at similar
levels. The cause has not been determined but appears to be related in part to
exposure to noise and age-related changes in the body.
In the 1930s, it was observed that intravenous injection of Novocaine gave
temporary relief from tinnitus symptoms. However, due to the rapid dissipation
of procaine hydrochloride when injected into the body, its use as a therapeutic
agent for the treatment of tinnitus was impractical until the development of a
complex that allows an extension of the pharmacological effectiveness of
procaine hydrochloride.
The Company believes that its complex of procaine hydrochloride will prove safe
and effective for the treatment of the symptoms of tinnitus. There is no
assurance at this time as to when clinical testing in this area could begin.
Until such clinical testing, there can be no assurance that the Company's
product is safe and effective.
Anti-Cocaine Formula
- --------------------
Cocaine, a powerful central nervous system stimulant, is currently being widely
abused. Chronic use can lead to violent antisocial behavior as well as result in
weight loss, deterioration of the nervous system and digestive system. A
preliminary investigation indicates that procaine hydrochloride can be used to
suppress the stimulative effect of cocaine by binding with certain receptor
cells in the brain and thereby block the effect of cocaine. The Company has
discussed the potential use of its product in additional therapy with a drug
treatment coalition. There is no assurance at this time as to when clinical
testing in this area could begin. Until such clinical testing, there can be no
assurance that the Company's product is safe and effective.
Alzheimer's Disease
- -------------------
Alzheimer's Disease is an incurable degenerative disease of the brain in which
the core symptom is memory loss. Other associated symptoms include impairment in
language, abstract reasoning and visual spatial abilities. Personality changes
are common and psychiatric symptoms, including depression, delusions, and
hallucinations, may also occur. It is estimated that Alzheimer's Disease affects
more than 2 million persons over the age of 65 in the United States.
3
<PAGE>
Procaine hydrochloride has been reported as being effective against the memory
loss exhibited by Alzheimer's patients. Accordingly, the Company plans to
investigate the efficacy of its product in treating the memory loss associated
with Alzheimer's disease. The Company is attempting to interest major
pharmaceutical companies in sponsoring investigations in this area and has
provided certain information to established pharmaceutical companies under
Non-Disclosure Agreements. The Company is attempting to develop its product into
a form that can be utilized once a week, in injectable form, by combining it
with a liposome vehicle for the treatment of Alzheimer's Disease symptoms. This
could be of benefit because Alzheimer's patients are difficult to medicate.
However, there can be no assurance that the Company will be successful in
developing a once-a-week injectable version of its product. There are presently
no arrangements for clinical testing and there is no assurance as to when
clinical testing in this area could begin. Until such clinical testing, there
can be no assurance that the Company's product is safe and effective.
PLAN OF OPERATIONS
- ------------------
The Company is pursuing the following general business strategy with regards to
the foregoing products. With regards to the Alzheimer's and cocaine addiction
products, the Company will attempt to enter into licensing or joint venture
arrangements with established pharmaceutical companies to participate in
clinical evaluation, regulatory approval and commercial distribution. The
Company anticipates that the licensees or joint venturers will undertake to
perform all or a portion of the necessary regulatory testing and to obtain the
necessary regulatory approval to permit sale of such products. It is anticipated
that the licensing or joint venture arrangements will generally provide that the
Company will manufacture, either itself or through subcontractors, all or a
major portion of the products. The Company is currently engaged in discussions
with a number of international pharmaceutical companies. However, to date, no
agreements have been reached and there is no assurance that any such
negotiations or discussions will result in a licensing or joint venture
agreement.
The Company presently intends to directly market its tinnitus product in the
United States since the prescribing physicians, generally ear, nose and throat
specialists, may be easily identified. In addition, tinnitus sufferers are
represented by a major advocacy group, the American Tinnitus Association. While
it is anticipated that manufacturing would be done through subcontractors, the
Company has not yet made arrangements for manufacture of its tinnitus product.
COMPETITION
- -----------
Many companies, including large pharmaceutical, chemical and biotechnology firms
with financial resources and research and development staffs and facilities
substantially greater than those of the Company are engaged in researching and
developing products to be used in the treatment of the disorders for which it is
anticipated that the Company's products may be used. The industry is
characterized by rapid technological advances and competitors may develop their
products more rapidly and/or such products may be more effective than those
under development by the Company. In addition, competitors may be able to
complete the regulatory approval process sooner, and therefore market their
product earlier, than the Company. Further, other companies' products now in use
or under development may perform by other means the same functions as the
Company's proposed products. These competitive products may have advantages over
the Company's products such as greater acceptance by the medical community or
fewer side effects.
4
<PAGE>
PATENTS
- -------
The Company considers the protection of the discoveries in connection with its
products important to its business. In September 1990 the Company was granted
U.S. Patent No. 4,954,391 entitled "Protected Complex of Procaine for the
Treatment of Symptoms of Narcotics Addiction, Tinnitus and Alzheimer's Disease"
which patent has been assigned to the Company.
GOVERNMENTAL REGULATION
- -----------------------
The marketing of pharmaceutical products requires the approval of the FDA and
comparable agencies in foreign countries. The FDA has established guidelines and
safety standards that apply to the preclinical evaluation, clinical testing,
manufacture and marketing of pharmaceutical products. The Process of obtaining
FDA approval for a new therapeutic product (drug) may take several years and
often involves the expenditure of substantial resources. The steps required
before such a product can be produced and marketed for human use include
preclinical studies, the filing of an Investigational New Drug ("IND")
application, human clinical trials and the approval of a New Drug Application
("NDA")
Preclinical studies are conducted in the laboratory and in animal model systems
to gain preliminary information on the drug's efficacy and to identify major
safety problems. The results of these studies are submitted to the FDA as part
of the IND application before approval can be obtained for the commencement of
testing in humans.
The human clinical testing program involves three phases. Phase I studies are
conducted on volunteers or, in certain cases of antitumor agents, on patients
with terminal disease, to determine the maximum tolerated doses and any side
effects of the product. Phase II studies are conducted on a small number of
patients having a specific disease to determine the product's efficacy and the
most effective doses and schedules of administration. Phase III involves
wide-scale studies on patients with the same disease in order to provide
comparison with currently available drugs or biologics.
Data from Phase I, II and III trials are submitted in an NDA. The NDA involves
considerable data collection, verification and analysis, as well as the
preparation of summaries of the manufacturing and testing processes, preclinical
studies and clinical trials. The FDA must approve the NDA before the drug may be
marketed. To date no applications have been filed by the Company with the FDA or
any other agency with respect to any products. Accordingly, there can be no
assurance that the Company's proposed products will be approved for marketing.
The manufacturing process and operation of the subcontractor's manufacturing
facility will be subject to rigorous regulation, including the need to comply
with Federal Good Manufacturing Practice Regulations. The Company's business is
also subject to regulation under the Occupational Safety and Health Act, the
Environmental Protection Act, the Nuclear Energy and Radiation Control Act,
Toxic Substance Control Act and the Resource Conservation and Recovery Act.
Employees
- ---------
As of March 31, 1994 the Company had one employee, its President.
Item 2. Properties. None.
-----------
5
<PAGE>
Item 3. Legal Proceedings.
------------------
The Company and its President are defendants in a case begun by Linda Johnson in
August 1992 in the 15th Judicial Circuit Court for Pal m Beach County, Florida,
seeking damages for the alleged improperly divesting Johnson of her interest in
the Company. Johnson was an original partner with Dr. Howard Wertheim and Dr.
Alfred Sapse in a partnership that was a predecessor to the Company. That
partnership was terminated in 1990 and this case arises out of a dispute
concerning what Johnson was entitled to receive as a result of that termination.
Item 4. Submission of Matters to a Vote of Security Holders. None.
----------------------------------------------------
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
-----------------------------------------------------------------
Matters.
--------
Set forth below is the range of high and low bid quotations for the Common Stock
for the periods indicated, as reported by the National Quotation Bureau, Inc.
These over-the-counter market quotations reflect inter-dealer prices without
retail markup, markdown or commissions and do not necessarily represent actual
transactions. The Company's Common Stock is listed on the NASD OTC Bulletin
Board under the symbol SPCP.
Quarter Ended High Bid Low Bid
- ------------- -------- -------
June 30, 1992 $2.62 $0.10
September 30, 1992 $0.50 $0.25
December 31, 1992 $1.00 $0.62
March 31, 1993 $1.25 $0.75
June 30, 1993 $1.00 $0.62
September 30, 1993 $0.75 $0.62
December 31, 1993 $0.75 $0.62
March 31, 1994 $0.62 $0.38
On March 31, 1994 the reported high bid price for the Common Stock was $0.38 and
the lowest offer price was $0.62. As of March 31, 1994 there were 289 holders of
record of the Company's common stock.
The Company has not paid any dividends and intends to retain all future profits,
when earned, for use by the Company in its operations.
Item 6. Management's Discussion and Analysis of the Financial Condition and
-------------------------------------------------------------------
Results of Operation.
---------------------
The Company is still in the developmental stage and has not yet begun sale of
any product. The Company will require substantial working capital in order to
undertake the scientific studies necessary to apply for FDA approval for its
products. Substantially all activities of the Company are geared towards raising
capital for this purpose and the Company has not yet secured working capital in
sufficient amounts to enable it to undertake such studies. Accordingly, there
can be no assurance that the Company will be able to successfully complete the
transition from a development stage company to an operating company.
6
<PAGE>
Item 7. Financial Statements and Supplementary Data.
--------------------------------------------
The required financial statements are included in this document beginning at
page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosures.
----------------------
The accounting firm of Grant-Schwartz Associates, CPAs, the independent auditors
of the Company for the fiscal year ended March 31, 1993, was dismissed effective
April 19, 1999. During the fiscal years ended March 31, 1993 and 1992 and the
interim period subsequent to March 31, 1993, there have been no disagreements
with Grant-Schwartz Associates, CPAs on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure or any
reportable events. Grant-Schwartz Associates, CPAs' report on the financial
statements for the fiscal year ended March 31, 1993 contained a going concern
qualification and was not otherwise qualified or modified as to uncertainty,
audit scope or accounting principles.
The Company engaged the accounting firm of S.W. Hatfield, CPA as independent
auditors for the Company, effective as of April 19, 1999 for the fiscal years
ended March 31, 1994, 1995, 1996, 1997, 1998 and 1999 and subsequent periods.
The engagement of S.W. Hatfield, CPA was approved by the Company's board of
directors. During the fiscal years ended March 31, 1994, 1995, 1996, 1997, 1998
and 1999 and the interim period subsequent to March 31, 1993 and prior to April
19, 1999, there were no consultations with S.W. Hatfield, CPA on any matter of
accounting principles to a specific transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's financial
statements.
PART III
Item 9. Directors and Executive Officers of the Registrant.
---------------------------------------------------
The directors and executive officers of the Company as of March 31, 1994 are as
follows:
Howard I. Wertheim, D.M.D. President, Treasurer and Director
Eugene H. Man Secretary and Director
Howard I. Wertheim , D.M.D., (born 1934) has been President and a Director of
the Company since May 1990. Until 1995 he devoted his full time to the Company.
From 1958 until 1968 he practiced dentistry. In 1968 he entered the business
world as an investment developer. He was the general partner of 14 limited
partnerships from 1970 to 1978. He served as President of each of the following
businesses for the time periods indicated:
Professional Enterprises, Ltd., a real estate investment firm, from June 1970 to
December 1982; Hobar Property Management Co. from June 1970 to December 1982;
American Sportswear Co., a sportswear manufacturer, from January 1979 to
November 1983; Omni Financial Investment Corp., an investment firm, from January
1985 to October 1989; Brickell Associates, a financial firm, from January 1985
to November 1989.
7
<PAGE>
Eugene Man is President of the Center for Health Technologies in Miami, Florida
and a Professor of Chemistry at the University of Miami, Florida. He has been
Secretary and a Director of the Company since March 1992.
Item 10. Executive Compensation.
-----------------------
There follows a statement regarding the cash compensation paid or
accrued during the fiscal year ended March 31, 1994 for the Company's President,
Dr. Howard Wertheim, who was the only officer or director receiving any
compensation from the Company.
On June 20, 1992 the Company entered into an employment contract with
Dr. Wertheim to serve as its President and Chief Executive Officer for seven
years. This contract requires an annual base salary, as specified to use the
contract's anniversary dates as follows:
June 1, 1992 to May 31, 1993 $ 85,000
June 1, 1993 to May 31, 1994 $105,000
June 1, 1994 to May 31, 1995 $115,000
June 1, 1995 to May 31, 1996 $125,000
June 1, 1996 to May 31, 1997 $135,000
June 1, 1997 to May 31, 1998 $145,000
June 1, 1998 to May 31, 1999 $155,000
Additionally, this contract provides for discretionary bonuses, paid vacation
and sick leave time, use of a Company automobile or reimbursement for the use of
a personal automobile and various normal insurance coverage for life and health
coverages.
Pursuant to his employment ocntract Dr. Wertheim was entitled to receive
$100,000 for the fiscal year that ended March 31, 1994.
Item 11. Security Ownership by Certain Beneficial Owners and Management.
---------------------------------------------------------------
The following table set forth, as of March 31, 1994, the beneficial ownership of
the Company's common stock by: (i) persons who own of record or are know to own,
beneficially, more than 5% of the Company's common stock; (ii) each director or
officer of the Company; and (iii) all directors and officers as a group.
8
<PAGE>
Name and Address Number of Shares Percentage of Outstanding
Common Stock
- --------------------------------------------------------------------------------
Dr. Howard I. Wertheim 2,317,634(A) 53.9%
36 Valley View
Irvine CA 92612
Dr. Alfred Sapse 1,168,741 27.2%
3505 Spencer Street
Las Vegas NV 89109
Eugene Man 5,000 Less than 1%
C/o the University of Miami
Miami, Florida
Officers and Directors 2,322,634 54.1%
As a Group (2 persons)
(A) 1,000,000 shares of the Company's common stock was issued to Dr. Wertheim on
July 19, 1993 in exchange for his agreement to cancel the Company's past due
obligations under his employment contract dated June 20, 1992.
Item 12. Certain Relationships and Related Transactions. None.
-----------------------------------------------
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
----------------------------------------------------------------
(A)Index to financial statements that are filed as part of this report:
Report of Independent Certified Accountants F-3
Balance Sheets as of March 31, 1994 and 1993 F-4
Statements of Operations and Comprehensive Income
for the years ended March 31, 1994 and 1993 and for the
period May 29, 1990 (date of inception) to March 31 1994 F-5
Statement of Changes in Stockholders' Equity
for the period from May 29, 1990 (date of inception)
to March 31, 1994 F-6
Statements of Cash Flows for the years ended
March 31, 1994 and 1993 and for the period from
May 29, 1990 (date of inception) to March 31, 1994 F-8
Index to Financial Statements F-9
(B) Reports on Form 8-K: None.
9
<PAGE>
(C) Exhibits.
The following exhibits are incorporated by reference to the Company's
Registration Statement on Form S-18 (File No. 33-40848-A) effective July 25,
1991.
Exhibit No. Description
- ----------- -----------
2.0 Articles of Incorporation of the Registrant
2.1 Bylaws of the Registrant
2.5 Articles of Amendment to Articles of Incorporation
The following exhibits are incorporated by reference to the Company's Form 10-K
for the fiscal year ending March 31, 1992:
Exhibit No. Description
- ----------- -----------
10.7 Partnership Agreement dated May 22, 1990
10.8 Employment Agreement with Howard I. Wertheim dated
June 20, 1992
11.0 U.S. Patent No. 4,956,391
The following exhibits are filed herewith: None.
SIGNATURE
- ---------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SPECTRUM PHARMACEUTIAL CORPORATION
BY /S/ Howard I. Wertheim
-----------------------------------------
Howard I. Wertheim, President
and sole Director
(Principal Executive Officer
and Principal Financial Officer)
Dated: May 26, 1999
10
<PAGE>
SPECTRUM
PHARMACEUTICAL
CORPORATION
(a development stage company)
Financial Statements
and
Auditor's Report
March 31, 1994 and 1993
S. W. HATFIELD, CPA
certified public accountants
Use our past to assist your future sm
<PAGE>
SPECTRUM PHARMACEUTICAL CORPORATION
CONTENTS
Page
----
Report of Independent Certified Public Accountants 3
Financial Statements
Balance Sheets as of March 31, 1994 and 1993 4
Statements of Operations
for the years ended March 31, 1994 and 1993
and for the period May 29, 1990 (date of inception)
to March 31, 1994 5
Statement of Changes in Stockholders' Equity
for the period from May 29, 1990 (date of inception)
to March 31, 1994 6
Statements of Cash Flows
for the years ended March 31, 1994 and 1993
and for the period May 29, 1990 (date of inception)
to March 31, 1994 8
Notes to Financial Statements 9
<PAGE>
S. W. HATFIELD, CPA
certified public accountant
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Spectrum Pharmaceutical Corporation
We have audited the accompanying balance sheets of Spectrum Pharmaceutical
Corporation (a Florida corporation and a development stage company) as of March
31, 1994 and the related statements of operations, changes in stockholders'
equity and cash flows for the year then ended and for the period from May 29,
1990 (date of inception) through March 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
The financial statements as of and for the year ended March 31, 1993 were
audited by other auditors and they expressed a qualified opinion related to
going concern issues, as discussed below and in Note A to the accompanying
financial statements, in their report dated June 4, 1993. The other auditors
have not performed any auditing procedures since June 4, 1993.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Spectrum Pharmaceutical
Corporation (a development stage company) as of March 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the two years then
ended and for the period from May 29, 1990 (date of inception) through March 31,
1994, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon significant shareholders to provide sufficient working
capital to maintain the integrity of the corporate entity. These circumstances
create substantial doubt about the Company's ability to continue as a going
concern and are discussed in Note A. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
S. W. HATFIELD, CPA
Dallas, Texas
May 14, 1999
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM PHARMACEUTICAL CORPORATION
(a development stage company)
BALANCE SHEETS
March 31, 1994 and 1993
March 31, March 31,
1994 1993
--------- ---------
ASSETS
------
<S> <C> <C>
Current Assets
Cash $ -- $ 135
Prepaid expenses -- 5,000
--------- ---------
Total current assets -- 5,135
--------- ---------
Property and Equipment
Office furniture and equipment 3,487 3,487
Accumulated depreciation (1,160) (660)
--------- ---------
Net property and equipment 2,327 2,827
--------- ---------
Other Assets
Organization costs, net of accumulated
amortization of $19,631 and $11,235, respectively 22,341 30,737
Patents 20,000 20,000
--------- ---------
Total other assets 42,341 50,737
--------- ---------
Total Assets $ 44,668 $ 58,699
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable - trade $ 112,495 $ 101,394
Due to officer/shareholder 110,037 139,894
Other 20,950 20,950
--------- ---------
Total current liabilities 243,482 262,238
--------- ---------
Commitments and contingencies
Stockholders' Equity Common stock - $0.001 par value
25,000,000 shares authorized
4,296,165 and 3,036,165 shares
issued and outstanding 4,296 3,036
Additional paid-in capital 557,704 354,245
Deficit accumulated in the development stage (760,814) (560,820)
--------- ---------
Total stockholders' equity (198,814) (203,539)
--------- ---------
Total Liabilities and Stockholders' Equity $ 44,668 $ 58,699
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
Years ended March 31, 1994 and 1993 and
Period from May 29, 1990 (date of inception) through March 31, 1994
Period from
May 29, 1990
(date of inception)
Year ended Year ended through
March 31, March 31, March 31,
1994 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
----------- ----------- -----------
Expenses
General and administrative expenses
Compensation 100,000 85,000 240,000
Other operating expenses 91,098 96,130 500,023
Depreciation 500 500 1,160
Amortization of organization costs 8,396 8,396 19,631
----------- ----------- -----------
Total expenses 199,994 190,026 760,814
----------- ----------- -----------
Net Loss $ (199,994) $ (190,026) $ (760,814)
=========== =========== ===========
Net loss per weighted-average share
of common stock outstanding $ (0.05) $ (0.07) $ (0.24)
=========== =========== ===========
Weighted-average number of shares
of common stock outstanding 3,780,302 2,839,332 3,150,898
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Period from May 29, 1990 (date of inception) through March 31, 1994
Deficit
accumulated
Additional during the
Common Stock paid-in development
------------
Shares Amount capital stage Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Issuance of stock at formation
on May 29, 1990 at $0.0001 par 5,443,185 $ 544 $ 24,184 $ -- $ 24,728
---------- ---------- ---------- ---------- ----------
Balances at March 31, 1991 5,443,185 544 24,184 -- 24,728
Effect of April 25, 1991 reverse
stock split and change in par
value to $0.001 par (3,559,952) 1,339 (1,339) -- --
Effect of June 5, 1991 forward
stock split 950,000 950 (950) -- --
---------- ---------- ---------- ---------- ----------
Balances at March 31, 1991,
as restated 2,833,233 2,833 21,895 -- 24,728
Common stock issued for services 122,858 123 230,227 -- 230,350
Exercise of warrants for
purchase of common stock 32,832 33 105,483 -- 105,516
less underwriting costs -- -- (63,019) -- (63,019)
Net loss for the year -- -- -- (370,794) (370,794)
---------- ---------- ---------- ---------- ----------
Balances at March 31, 1992 2,988,923 2,989 294,586 (370,794) (73,219)
Exercise of warrants for
purchase of common stock 47,242 47 59,659 -- 59,706
Net loss for the year -- -- -- (190,026) (190,026)
---------- ---------- ---------- ---------- ----------
Balances at March 31, 1993 3,036,165 3,036 354,245 (560,820) (203,539)
Common stock issued for
Payment of executive
compensation 1,000,000 1,000 162,119 -- 163,119
Payment of services 260,000 260 41,340 -- 41,600
Net loss for the year -- -- -- (199,994) (199,994)
---------- ---------- ---------- ---------- ----------
Balances at March 31, 1994 4,296,165 $ 4,296 $ 557,704 $ (760,814) $ (198,814)
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
Years ended March 31, 1994 and 1993 and
Period from May 29, 1990 (date of inception) through March 31, 1994
Period from
May 29, 1990
(date of inception)
Year ended Year ended through
March 31, March 31, March 31,
1994 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $(199,994) $(190,026) $(760,814)
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation 500 500 1,160
Amortization of organization costs 8,396 8,396 19,631
Services and executive compensation
paid with common stock 204,719 -- 435,069
(Increase) Decrease in
Prepaid expenses 5,000 -- --
Organization costs and other -- 10,099 (41,972)
Increase (Decrease) in
Accounts payable and other liabilities 11,101 26,394 133,445
Due to shareholder/officer (29,857) 61,350 110,037
--------- --------- ---------
Net cash used in operating activities (135) (83,287) (103,444)
--------- --------- ---------
Cash Flows from Investing Activities
Purchase of office furniture and equipment -- -- (3,487)
Cash paid for patent development -- -- (20,000)
--------- --------- ---------
Net cash used in investing activities -- -- (23,487)
--------- --------- ---------
Cash Flows from Financing Activities
Sale of common stock -- 59,706 189,950
Change in deferred offering costs -- 15,000 --
Cash paid for underwriting costs -- -- (63,019)
--------- --------- ---------
Net cash used in financing activities -- 74,706 126,931
--------- --------- ---------
Increase (Decrease) in Cash (135) (8,581) --
Cash at beginning of period 135 8,716 --
--------- --------- ---------
Cash at end of period $ -- $ 135 $ --
========= ========= =========
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ -- $ --
========= ========= =========
Income taxes paid for the period $ -- $ -- $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
SPECTRUM PHARMACEUTICAL CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
Note A - Organization and Description of Business
Spectrum Pharmaceutical Corporation (Company) was incorporated on May 29, 1990
as Interamerican Pharmaceutical Corporation under the laws of the State of
Florida. The Company changed its name to Spectrum Pharmaceutical Corporation in
April 1991. The Company was originally formed to engage in the development and
marketing of certain products utilizing the chemical compound procaine
hydrochloride for the treatment of tinnitus, certain symptoms of Alzheimer's
Disease and cocaine addiction. The Company received a patent covering its
products for the specifically named conditions and diseases.
The Company has generated no operating revenues from inception and has incurred
cumulative operating losses of approximately $761,000. Accordingly, the Company
is considered to be in the development stage. Accordingly, the Company is fully
dependent upon management and/or significant stockholders to provide sufficient
working capital to preserve the integrity of the corporate entity during this
phase. It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Property and equipment
----------------------
Property and equipment are recorded at historical cost. These costs are
depreciated over the estimated useful lives of the individual assets using
the straight-line method.
Gains and losses from disposition of property and equipment are recognized
as incurred and are included in operations.
3. Organization costs
------------------
Costs related to the organization of the Company have been capitalized and
are being amortized over a five year period using the straight-line method.
F-8
<PAGE>
SPECTRUM PHARMACEUTICAL CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Note B - Summary of Significant Accounting Policies - Continued
4. Patents
-------
In September 1990, the Company was assigned U. S. Patent No. 4,954,391
entitled "Protected Complex of Procaine for the Treatment of Symptoms from
Narcotics Addiction, Tinnitus and Alzheimer's Disease". The patent is
stated at cost and will be amortized over the remaining life of the patent
starting in the first period in which commercial production of the patented
products begins.
5. Deferred offering costs
-----------------------
Deferred public offering costs represent accounting, legal and underwriting
costs incurred by the Company pertaining to an anticipated future public
offering of the Company's common stock. The costs will be charged against
additional paid-in capital (deducted from stock proceeds) upon completion
of the public offering, or charged to expense if the offering is not
completed. During Fiscal 1993, all capitalized deferred costs were expensed
to operations.
6. Loss per share
--------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and/or warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and/or warrants
at either the beginning of the respective period presented or the date of
issuance, whichever is later. As of March 31, 1994 and 1993, the Company
has no items which would be considered to be dilutive.
Note C - Due to Shareholder/Officer
The Company's chief executive officer, who is also a significant shareholder,
has advanced certain funds to the Company, paid certain expenses of the Company
directly and is employed under the terms of an employment contract. The amounts
presented in the accompanying financial statements reflect the aggregate sum of
all funds advanced and accrued, but unpaid, compensation under the terms of the
employment agreement. These amounts are non-interest bearing and are due upon
demand.
Note D - Common Stock Transactions
In July 1993, the Company issued 1,000,000 of unregistered, restricted common
stock to its chief executive officer and shareholder in payment of approximately
$163,000 in advances and accrued, but unpaid, compensation through March 31,
1993.
F-9
<PAGE>
SPECTRUM PHARMACEUTICAL CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Note D - Common Stock Transactions - Continued
At various times during Fiscal 1994, the Company issued an aggregate 260,000
shares of unregistered, restricted common stock to an individual and a law firm
as compensation for professional services. These transactions were recorded
using an estimated fair value of approximately $0.16 per share, or $41,600 in
the aggregate, which approximates the value of the services provided and the
equivalent valuation on the shares issued to satisfy the payment of accrued
executive compensation and repayment of officer advances as discussed in the
preceding paragraph.
During Fiscal 1993, the Company issued approximately 47,242 shares of common
stock upon the exercise of outstanding warrants, prior to the call and
cancellation of all outstanding warrants on November 20, 1992. These
transactions generated approximately $59,700 in cash proceeds to the Company.
Note E - Contingencies
On June 1, 1992, the Company entered into an Employment Contract (Contract) with
an individual to serve as the Company's President. The Contract requires a
annual base salary, as specified to use the Contract's anniversary dates, as
follows:
June 1, 1992 to May 31, 1993 $ 85,000
June 1, 1993 to May 31, 1994 105,000
June 1, 1994 to May 31, 1995 115,000
June 1, 1995 to May 31, 1996 125,000
June 1, 1996 to May 31, 1997 135,000
June 1, 1997 to May 31, 1998 145,000
June 1, 1998 to May 31, 1999 155,000
Additionally, the Contract provides for discretionary bonuses, paid vacation and
sick leave time, use of a Company automobile or reimbursement for the use of a
personal automobile and various normal insurance coverage for life and health
coverages.
The Company and its President are defendants in a case initiated in August 1992
in Circuit Court for the 15th Judicial Circuit for Palm Beach County, Florida
seeking damages related to the termination of a partnership which was the
predecessor to the Company. In February 1999, this litigation was authorized to
be settled by the Company's Board of Directors through the transference of the
patent assigned to the Company to the plaintiff.
F-10
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000875579
<NAME> Spectrum Pharmaceutical Corporation
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1994
<PERIOD-START> APR-01-1993
<PERIOD-END> MAR-31-1994
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3487
<DEPRECIATION> 1160
<TOTAL-ASSETS> 44668
<CURRENT-LIABILITIES> 243482
<BONDS> 0
0
0
<COMMON> 4296
<OTHER-SE> (203110)
<TOTAL-LIABILITY-AND-EQUITY> 44668
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 199994
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (199994)
<INCOME-TAX> 0
<INCOME-CONTINUING> (199994)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (199994)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
