<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
/ / 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 000-21141
PHARMAPRINT INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0640125
(State or jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4 PARK PLAZA, SUITE 1900, IRVINE,
CALIFORNIA 92614
(Address of principal executive offices) (Zip code)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 655-7778
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 / /
Number of shares outstanding as of August 11, 1997: Common Stock: 11,005,202
Total number of pages: 15
<PAGE>
PHARMAPRINT INC.
INDEX
Page
FACING SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PART I. FINANCIAL INFORMATION
Item 1. Balance Sheet as of June 30, 1997 (unaudited) . . . . . . . . . . 3
Statements of Operations for the three months ended
June 30, 1996 and 1997, and for the period from inception
(September 15, 1994) through June 30, 1997 (unaudited). . . . . . 4
Statements of Cash Flows for the three months ended
June 30, 1996 and 1997, and for the period from inception
(September 15, 1994) through June 30, 1997 (unaudited) . . . . . 5
Notes to Financial Statements (unaudited) . . . . . . . . . . . . 6
Item 2. Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains "forward-looking" statements. The Company is
including this statement for the express purpose of availing itself of
protections of the safe harbor provided by the Private Securities Litigation
Reform Act of 1995 with respect to all such forward-looking statements.
Examples of forward-looking statements include, but are not limited to: (a)
projections of revenues, capital expenditures, growth, prospects, dividends,
capital structure and other financial matters; (b) statements of plans and
objectives of the Company or its management or Board of Directors; (c)
statements of future economic performance; (d) statements of assumptions
underlying other statements and statements about the Company and its business
relating to the future; and (e) any statements using the words "believes",
"anticipate," "expect," "may," "project," "intend" or similar expressions.
The Company's ability to predict projected results or the effect of
certain events on the Company's operating results is inherently uncertain.
Therefore, the Company wishes to caution each reader of this report to
carefully consider the following factors and certain other factors discussed
herein and in the Company's March 31, 1997, Annual Report on Form 10-KSB, any
or all of which have in the past and could in the future affect the ability
of the Company to achieve its anticipated results and could cause actual
results to differ materially than those discussed herein: ability to attract
partners and third parties to transact business with the Company, government
regulation and uncertainty of product approvals, ability to commercialize and
market products, results of research and development and clinical studies,
technological advances by third parties and competition, ability to obtain
and enforce patents, future capital needs of the Company, history of
operating losses, dependence upon key personnel, uncertainty regarding health
care reimbursement and reform, limited manufacturing and marketing
experience, control by existing shareholders and general economic and
business conditions.
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<PAGE>
PHARMAPRINT INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET -- JUNE 30, 1997
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . $5,846,828
Other current assets . . . . . . . . . . . . . . . . . . . . . . 343,475
----------
Total current assets. . . . . . . . . . . . . . . . . . . . . 6,190,303
EQUIPMENT, NET. . . . . . . . . . . . . . . . . . . . . . . . . . . 199,136
OTHER ASSETS, net of accumulated depreciation and
amortization of $12,720 . . . . . . . . . . . . . . . . . . . . . 147,662
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $6,537,101
----------
----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . $ 421,566
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . 182,015
----------
Total current liabilities . . . . . . . . . . . . . . . . . . 603,581
----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.001 par value - 1,000,000 shares
authorized, no shares issued or outstanding . . . . . . . . . -
Common stock, without par value -
19,000,000 shares authorized,
11,000,000 shares issued and outstanding . . . . . . . . 24,653,211
Additional paid in capital. . . . . . . . . . . . . . . . . . . 1,130,370
Deferred compensation . . . . . . . . . . . . . . . . . . . . . (4,955,212)
Deficit accumulated during the development stage. . . . . . . . (14,894,849)
----------
Total shareholders' equity . . . . . . . . . . . . . . . . . 5,933,520
----------
Total liabilities and shareholders' equity. . . . . . . . . . $6,537,101
----------
----------
The accompanying notes are an integral part of this balance sheet
-3-
<PAGE>
PHARMAPRINT INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS PERIOD FROM INCEPTION
ENDED JUNE 30, ENDED JUNE 30, (SEPTEMBER 15, 1994)
1996 1997 THROUGH JUNE 30, 1997)
------------- -------------- ----------------------
<S> <C> <C> <C>
REVENUES . . . . . . . . . . . . $ -- $ -- $ --
EXPENSES:
Research and development . . . 385,130 1,029,818 4,775,216
General and administrative . . 2,105,390 803,986 10,119,633
----------- ----------- ------------
2,490,520 1,833,804 14,894,849
----------- ----------- ------------
LOSS FROM OPERATIONS . . . . . . (2,490,520) (1,833,804) (14,894,849)
----------- ----------- ------------
NET LOSS . . . . . . . . . . . . $(2,490,520) $(1,833,804) $(14,894,849)
----------- ----------- ------------
----------- ----------- ------------
LOSS PER SHARE. . . . . . . . . $ (.30) $ (.16) $ (1.62)
----------- ----------- ------------
----------- ----------- ------------
WEIGHTED AVERAGE
SHARES AND EQUIVALENT
SHARES OUTSTANDING . . . . . . 8,297,103 11,223,072 9,189,739
----------- ----------- ------------
----------- ----------- ------------
The accompanying notes are an integral part of these financial statements
</TABLE>
-4-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended Period from inception
June 30, June 30, (September 15, 1994)
1996 1997 through June 30,1997
------------ ------------ ---------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss....................... $(2,490,520) $(1,833,80) $(14,894,849)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation................ - 18,931 28,119
Amortization of
discount on notes payable... 15,625 - 31,250
Stock issued for
licensing rights............ - - 315,789
Stock and options issued
for services................ 1,585,000 30,000 5,667,187
(Increase) decrease in
other current assets........ 53,000 (5,882) (343,475)
(Increase) decrease in
other non-current assets.... 8,469 (8,978) (147,662)
Increase (decrease) in
accounts payable and
accrued expenses............ 71,302 (491,015) 603,581
----------- ---------- ------------
Net cash used in operating
activities.................. (757,124) (2,290,748) (8,740,060)
----------- ---------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of equipment........ - (32,496) (227,255)
----------- ---------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance
of common stock............. 185,342 - 14,507,543
Increase in deferred
offering costs.............. (162,250) - -
Proceeds from stock
subscription receivable..... 100,000 - 306,600
Proceeds from note payable... 20,000 - 270,000
Repayment of notes payable... - - (270,000)
----------- ---------- ------------
Net cash provided by
financing activities........ 143,092 - 14,814,143
----------- ---------- ------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS....... (614,032) (2,323,244) 5,846,828
CASH AND CASH EQUIVALENTS,
beginning of period.......... 889,740 8,170,072 -
----------- ---------- ------------
CASH AND CASH EQUIVALENTS,
end of period................ $ 275,708 $ 5,846,828 $ 5,846,828
----------- ---------- ------------
----------- ---------- ------------
</TABLE>
The accompanying notes are an integral part
of these financial statements
-5-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited financial statements and related notes have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have not been presented. The
accompanying unaudited financial statements and related notes should be read
in conjunction with the financial statements and related notes included in
the PharmaPrint Inc. March 31, 1997, Annual Report on Form 10-KSB.
In the opinion of the Company, all material adjustments (consisting of normal
recurring items) considered necessary to present fairly the Company's
financial condition, results of operations, and changes in financial position
have been made. The results of operations for the three month period ended
June 30, 1997, are not necessarily indicative of the results that may be
expected for the year ending March 31, 1998.
ORGANIZATION, NARRATIVE DISCUSSION OF THE BUSINESS AND RISK FACTORS
ORGANIZATION
PharmaPrint Inc. (the "Company" or "PharmaPrint"), a development stage
company, was incorporated in the State of California in September 1994. The
Company was formed in order to complete the development and commercialization
of the research initiated by Dr. Tasneem A. Khwaja, a founder and major
shareholder of the Company, over a 20 year period at the University of
Southern California ("USC") School of Medicine.
Effective October 30, 1996, the Company changed its name from ABT Global
Pharmaceutical Corp. to PharmaPrint Inc. In April 1997, the Board of
Directors approved a resolution to change the Company's state of
incorporation from California to Delaware. Such resolution requires the
approval of shareholders, which will be requested at the August 19, 1997,
Annual Meeting of Shareholders.
NARRATIVE DESCRIPTION OF THE BUSINESS
The Company develops and manufactures pharmaceutical versions of herbal
medicines to be used in the treatment of various maladies. The Company's
technology for standardizing the manufacture of herbal medicines into
pharmaceuticals is marketed as the PharmaPrint-TM- process. The
PharmaPrint-TM- process provides the tools necessary: (1) to identify,
quantify and control the bioactive components of an herbal compound;
(2) to determine the level of effectiveness of each component versus a
specific assay; and (3) to determine if these components are present
in precise quantity in a given manufactured herbal batch. The Company
also believes that the PharmaPrint-TM- process, together with the
results of toxicology testing and clinical trials, will
-6-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
provide the information necessary to seek patent protection and United States
Food and Drug Administration ("FDA") approval for each pharmaceutical version
of the herbal medicine. Further, the Company believes that the
PharmaPrint-TM- process is the only method currently available for developing
acceptable and approvable pharmaceutical versions of herbal medicines.
However, there can be no assurance that other acceptable methods will not be
developed or that the PharmaPrint-TM-process will be successful in developing
acceptable or approvable pharmaceutical versions of herbal medicines. The
initial science underlying this technology was developed in the laboratories
of the USC School of Medicine by Dr. Khwaja.
The Company believes there is a significant market for the use of the
PharmaPrint-TM- process. The market opportunities include developing
pharmaceuticals from herbal medicines for the Company's own account, in joint
venture arrangements with other companies and on a contract basis for other
companies for a fee and a royalty on sales. The Company expects the products
it develops to be distributed in the United States and foreign markets. The
contract services that the Company seeks to provide to others for developing
pharmaceuticals from herbal medicines includes developing the PharmaPrint-TM-
of an herbal medicine, applying for patents, toxicology testing, preparing
and filing Investigational New Drug ("IND") applications, conducting FDA
regulated clinical trials and preparing and filing New Drug Applications
("NDA") for the pharmaceutical versions of such herbal medicines. In that
regard, the Company has obtained two letters of intent from foreign producers
of herbal medicines to develop pharmaceutical versions of three herbal
medicines in a joint venture arrangement. However, there can be no assurance
that either letter of intent will lead to a formal agreement or that the
Company will otherwise be able to successfully market its PharmaPrint-TM-
process.
The Company also is pursuing opportunities to develop herbal medicines to
be sold in the United States as dietary supplements pursuant to The Dietary
Supplements and Health Education Act ("DSHEA") of 1994. If these development
efforts are successful, the Company intends to sell such products in the
dietary supplement market while it attempts to obtain FDA approval.
DEVELOPMENT STAGE COMPANY AND RISK FACTORS
PharmaPrint is considered to be a development stage company. Since
inception (September 15, 1994), the Company has been primarily engaged in
research, filing for and securing patent protection, product development and
raising capital.
The Company, as a development stage enterprise, has yet to generate
revenues and has no assurance of future revenues. There can be no assurance
that the Company will obtain FDA approval or be able to successfully market
its PharmaPrint-TM- process. Even if the Company's marketing efforts with
third parties are successful, the Company may to continue to incur operating
losses over the next several years and would therefore require additional
financing to fund its operations. The Company's future capital requirements
will depend on many factors,
-7-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
including but not limited to the Company's ability to successfully market its
PharmaPrint-TM- process to third parties, overall product development costs
including the cost of toxicology testing and clinical trials, the length of
time required to obtain FDA approval, if any, competing technological and
market developments, changes in existing collaborative relationships, sales
and marketing arrangements and the costs of establishing subcontracts for
research and development. Additionally, no assurance can be given that
additional capital, if needed, will be available when required or upon terms
acceptable to the Company.
To achieve profitable operations, the Company alone or with others, must
successfully develop, introduce and market products. No assurance can be
given that the Company's development efforts will be successfully completed,
that required regulatory approvals will be obtained, or that any product, if
introduced, will be successfully marketed or obtain customer acceptance.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
LOSS PER SHARE
Loss per share is computed based on the weighted average number of shares
outstanding for the period. Common equivalent shares are excluded from the
computation as their effect is antidilutive, except that, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common and
common equivalent shares (stock options, warrants and preferred stock) issued
during the period commencing 12 months prior to the initial filing of the
Company's initial public offering (the "Offering") at prices below the
public offering price have been included in the calculation as if they were
outstanding for all periods presented (using the treasury stock method).
RECLASSIFICATIONS
Certain reclassifications were made to prior period amounts, enabling them
to conform to current period presentation.
-8-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
4. OTHER ASSETS
In December 1996, the Company amended a Personal Services Agreement with
Dimension Memory, Inc. ("Dimension") and Robert J. Burgess. The amended
agreement provided for the immediate payment by the Company of all amounts
due under the Personal Services Agreement in exchange for Dimension agreeing
to provide additional services to the Company. As a result of this
Agreement, in December 1996 the Company paid and deferred an amount to
Dimension of $312,000. This amount will amortize ratably over the term of
the original service agreement (through December 1998). The unamortized
amount, $228,000 at June 30, 1997, has been recorded in other current assets
in the accompanying balance sheet.
5. EQUIPMENT
Equipment is stated at cost and consisted of the following at June 30,
1997:
Equipment...................... $ 141,926
Furniture...................... 85,409
Less accumulated depreciation.. (28,199)
--------
Equipment, net................. $ 199,136
--------
--------
Depreciation is provided using the straight-line method over the
estimated useful life for equipment of three years and furniture for five
years.
6. SHAREHOLDER'S EQUITY
SHAREHOLDERS AGREEMENT
The Company entered into a shareholders agreement (the "Shareholders
Agreement") in March 1996, with Elliot P. Friedman, the Company's Chief
Executive Officer, Tasneem Khwaja, the Company's then Chairman, and certain
individuals and entities. Pursuant to the Shareholders Agreement: (1) Dr.
Khwaja contributed 1,336,978 shares of common stock to the Company as a
capital contribution; (2) the Company issued 624,270 shares of common stock
to D-RAM Industries PTY Ltd. ("D-RAM"), as nominee of Robert J. Burgess for
consulting services; and (3) the Company granted stock options to purchase
712,708 shares of common stock at a price of $0.96 per share to Mr. Friedman.
In May 1996, the Shareholders' Agreement was revised and the stock options
to purchase 712,708 shares of common stock granted to Mr. Friedman were
canceled and the Company issued 712,708 shares of common stock to Mr.
Friedman.
The common stock issued to Mr. Friedman and to D-RAM were subject to
forfeiture if the Company did not raise a minimum amount of proceeds in the
Offering prior to August 16, 1997, as defined. In addition, the common stock
issued to Mr. Friedman is subject to forfeiture on August 20, 2001, unless
prior to that date: (1) the Company received approval of the FDA for the
-9-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
public sale of any pharmaceutical product; (2) the Company consummated a
merger or other transaction or the Company sold substantially all of its
assets; (3) the Company generated net pretax earnings of $0.50 per share for
two consecutive years, as defined; or (4) certain shares of common stock of
each of Mr. Friedman and Dr. Khwaja, the sale of which is restricted until
August 14, 2001 pursuant to a lock-up agreement with the underwriter of the
Offering, are released from such lock-up agreement.
In August 1996, due to the successful completion of the Offering, the
conditions placed upon the common stock issued to D-RAM were met and thus the
Company recorded $3,000,000 of compensation expense in the accompanying
statement of operations for the period from inception (September 15, 1994)
through June 30, 1997, based upon the estimated fair market value of the stock
at the time the conditions were met.
Due to the remaining significant uncertainties related to the conditions
attached to the common stock issued to Mr. Friedman, the Company has deferred
recording compensation expense until the period that the required events occur.
Compensation expense will be based upon the fair value of the Company's common
stock at that time. Based upon the fair value of the common stock on June 30,
1997, such compensation expense would approximate $4,810,000 and has been
recorded as deferred compensation in the accompanying balance sheet.
WARRANTS
At March 31, 1997, the underwriter of the Company's Offering had a
warrant outstanding for the purchase of 300,000 shares of common stock at a
purchase price of $8.25 per share. The warrant is exercisable through August
2001. In May 1997, the underwriter agreed that any shares of common stock
purchased pursuant to the warrant would not be sold for an additional year
(until August 20, 1998) and the Company agreed to reduce the purchase price
of the warrant to $5.50 per share.
7. COMMITMENTS AND CONTINGENCIES
The Company leases its corporate headquarters under an operating lease that
expires in December 1998. Future minimum lease payments under this lease as of
June 30, 1997, are approximately $121,000 payable through March 31, 1998, and
$129,000 payable for fiscal year 1999. Rent expense for the three months ended
June 30, 1997 totaled approximately $39,000.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
GENERAL
PharmaPrint Inc., a development stage company, was incorporated in the
State of California in September 1994. Effective October 30, 1996, the
Company changed its name from ABT Global Pharmaceutical Corp. to PharmaPrint
Inc. In April 1997, the Board of Directors approved a resolution to change
the Company's state of incorporation from California to Delaware. Such
resolution requires the approval of shareholders, which will be requested at
the August 19, 1997, Annual Meeting of Shareholders.
PRODUCT RESEARCH AND DEVELOPMENT
The Company develops and manufactures pharmaceutical versions of herbal
medicines to be used in the treatment of various maladies. The Company's
technology for standardizing the manufacture of herbal medicines into
pharmaceuticals is marketed as the PharmaPrint-TM- process. The
PharmaPrint-TM-process provides the tools necessary: (1) to identify,
quantify and control the bioactive components of an herbal compound; (2) to
determine the level of effectiveness of each component versus a specific
assay; and (3) to determine if these components are present in precise
quantity in a given manufactured herbal batch. The Company also believes
that the PharmaPrint-TM- process, together with the results of toxicology
testing and clinical trials, will provide the information necessary to seek
patent protection and FDA approval for each pharmaceutical version of the
herbal medicine. Further, the Company believes that the PharmaPrint-TM-
process is the only method currently available for developing acceptable and
approvable pharmaceutical versions of herbal medicines. However, there can
be no assurance that other acceptable methods will not be developed or that
the PharmaPrint-TM- process will be successful in developing acceptable or
approvable pharmaceutical versions of herbal medicines. The initial science
underlying this technology was developed in the laboratories of the USC
School of Medicine by Dr. Tasneem A. Khwaja.
The Company believes there is a significant market for the use of the
PharmaPrint-TM- process. The market opportunities include developing
pharmaceuticals from herbal medicines for the Company's own account, in joint
venture arrangements with other companies and on a contract basis for other
companies for a fee and a royalty on sales. The Company expects the products
it develops to be distributed in the United States and foreign markets. The
contract services that the Company seeks to provide to others for developing
pharmaceuticals from herbal medicines includes developing the PharmaPrint-TM-
of an herbal medicine, applying for patents, toxicology testing, preparing
and filing IND applications, conducting FDA regulated clinical trials and
preparing and filing NDAs for the pharmaceutical versions of such herbal
medicines. In that regard, the Company has obtained two letters of intent
from foreign producers of herbal medicines to develop pharmaceutical versions
of three herbal medicines in a joint venture arrangement. However, there can
be no assurance that either letter of intent will lead to a formal agreement
or that the Company will otherwise be able to successfully market its
PharmaPrint-TM-process.
-11-
<PAGE>
The Company also is pursuing opportunities to develop herbal medicines to
be sold in the United States as dietary supplements pursuant to DSHEA. If
these development efforts are successful, the Company intends to sell such
products in the dietary supplement market while it attempts to obtain FDA
approval.
In its efforts to develop a pipeline of products, the Company has begun
development of pharmaceutical versions of 11 herbal medicines. Many of these
herbal medicines have long histories of human use and demonstrated clinical
effectiveness. Additionally, most of these herbal medicines are currently
sold in the United States as dietary supplements pursuant to DSHEA. The
Company has completed developing the PharmaPrint-TM- of saw palmetto, St.
John's wort, and mistletoe, used to treat the symptoms associated with
prostate enlargement, mild to moderate depression and immunosuppression,
respectively. The Company recently commenced applying the PharmaPrint-TM-
process to the following herbal medicines: bilberry, milk thistle, echinacea,
valerian, ginger, agnus castus, black cohosh and garlic.
Initially, the Company used its PharmaPrint-TM- process to develop, on a
proprietary basis, a pharmaceutical-grade therapeutic mixture for treating
the immunesystems of HIV patients. This mixture, known as T4GEN, was derived
from the VISCUM ALBUM plant (mistletoe). T4GEN is derived from the same
VISCUM ALBUM plant as an herbal medicine that has indicated an effect on the
immune system of CD4 cell stabilization in FDA sanctioned Phase I and Phase
II clinical trials conducted in Berlin, Germany involving 50 HIV positive
patients.
In June 1997, the Company completed Phase I clinical trials for T4GEN in
the United Kingdom. This initial clinical trial focused on the safety of
T4GEN. Pending review of the data regarding this clinical trial and other
business priorities, the Company anticipates commencing Phase II clinical
trials in either Zimbabwe or Thailand.
The Company submitted its IND application for a pharmaceutical derived
from the saw palmetto berry with the FDA in July 1997. Although no assurance
can be given that such IND application will be allowed by the FDA, if the
application is allowed as submitted, the Company expects to commence Phase II
clinical trials in the United States in September 1997. The Company also
anticipates performing animal toxicology studies concurrent with such
clinical trials.
The Company also intends to submit an IND application for St. John's wort
during the Fall of 1997. If such application is allowed in the form that the
Company expects to submit it, the Company expects a similar development cycle
as with its saw palmetto product.
To achieve profitable operations, the Company alone or with others, must
successfully develop, introduce and market products. No assurance can be
given that the Company's development efforts will be successfully completed,
that required regulatory approvals will be obtained, or that any product, if
introduced, will be successfully marketed or obtain customer acceptance.
-12-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through the sale of
equity securities. From inception (September 15, 1994) through May 1996, the
Company had raised an aggregate net amount of approximately $2,100,000
through private sales of equity securities. In August 1996, the Company
completed an initial public offering of 3,000,000 shares of its common stock
at $5.00 per share, raising net proceeds of approximately $12,705,000.
During the three months ended June 30, 1997, the Company purchased
approximately $32,000 of equipment and furniture. Computer equipment and
office furniture comprised the majority of such capital expenditures. The
Company anticipates that it will purchase an additional $100,000 of equipment
and furniture in the next 12 months.
During the three months ended June 30, 1997, the Company increased its
staff of full-time employees and consultants from 12 to 15. During fiscal
1998, the Company expects to increase its staff by adding an additional seven
employees.
The Company has incurred net operating losses since its inception and
expects substantial net operating losses in the near term as it continues its
research and development efforts. The Company will incur additional net
operating losses until such time as product or service sales can generate
sufficient revenue to fund continuing operations. The Company's ability to
generate revenues are dependent upon many factors including its ability to
develop, introduce and market products and obtain regulatory approvals.
The proceeds of the initial public offering and cash flows from
operations, if any, are expected to be sufficient to meet the Company's
working capital requirements for the next 12 months. However, no assurance
can be given that there will be no change in the Company's operations that
would consume available resources more rapidly than anticipated. The Company
will need substantial funds to support its long term product development
programs. The Company has no established bank financing arrangement and it
is unlikely that the Company will establish a bank financing arrangement in
the foreseeable future. The Company's future capital requirements will
depend on many factors, including continued scientific progress in its
research and development programs, progress with toxicology testing and
clinical trials, the time and cost involved in obtaining regulatory
approvals, patent costs, competing technological and market developments,
changes in existing collaborative relationships, the Company's ability to
establish development, sales and marketing arrangements and the cost of
establishing manufacturing capabilities. To the extent that the Company's
capital resources are insufficient to meet its operating requirements, the
Company will seek additional funds through equity or debt financings,
collaborative or other arrangements with corporate partners, licensees and
others. The Company has no current arrangements with respect to, or sources
of, such additional financing, and the Company does not anticipate that
existing shareholders will provide any portion of the Company's future
financing requirements, if any. Additionally, no assurance can be given that
additional financing will be available when needed or upon terms acceptable
to the Company.
-13-
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHARMAPRINT INC.
Registrant
Date: August 14, 1997 /s/ JAMES R. WODACH
---------------------------
James R. Wodach
Senior Vice President and
Chief Financial Officer
-15-
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