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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-19410
________________________
POINT THERAPEUTICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 04-3216862
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
125 SUMMER STREET
BOSTON, MASSACHUSETTS 02110
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 933-2130
________________________
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[x] Yes [_] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of July 31, 2002, there were 9,275,755 shares of the Registrant's Common
Stock, $0.01 par value per share, outstanding.
POINT THERAPEUTICS, INC. AND SUBSIDIARIES
(A Development Stage Company)
QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of June 30, 2002 and
December 31, 2001 3
Consolidated Statements of Operations for the Three and Six-Month
Periods Ended June 30, 2002 and 2001 and for the Period From
Inception (September 3, 1996) Through June 30, 2002 4
Consolidated Statements of Cash Flows for the Six-Month
Periods Ended June 30, 2002 and 2001 and for the Period
From Inception (September 3, 1996) Through June 30, 2002 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
POINT THERAPEUTICS, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, December 31,
2002 2001
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 15,986,144 $ 5,563,344
Prepaid expenses and other current assets 363,430 6,532
-------------- --------------
Total current assets 16,349,574 5,569,876
Office and laboratory equipment, net 290,525 81,187
-------------- --------------
Total assets $ 16,640,099 $ 5,651,063
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,008,258 $ 637,513
Accrued professional fees 140,578 66,000
Deferred merger consideration - 500,000
Accrued severance 78,154 168,800
Other accrued liabilities 46,825 -
-------------- --------------
Total current liabilities 1,273,815 1,372,313
Patent liability, less current portion 57,055 60,634
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000 shares authorized; no
shares issued or outstanding as of June 30, 2002 and
December 31, 2001 - -
Common stock, $0.01 par value, 35,000,000 shares authorized,
9,376,924 shares issued and 9,275,755 shares outstanding at
June 30, 2002 and 7,386,565 shares issued and outstanding at
December 31, 2001 93,769 73,866
Additional paid-in capital 28,129,615 13,475,255
Treasury stock, 101,169 and no shares at cost, as of June 30, 2002
and December 31, 2001, respectively (331,936) -
Deficit accumulated during the development stage (12,582,219) (9,331,005)
-------------- --------------
Total stockholders' equity 15,309,229 4,218,116
-------------- --------------
Total liabilities and stockholders' equity $ 16,640,099 $ 5,651,063
============== ==============
See accompanying notes
3
POINT THERAPEUTICS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Period from
September 3, 1996
Three months ended Six months ended (date of inception)
June 30, June 30, through June 30,
--------------- ------------- --------------- --------------- -------------------
2002 2001 2002 2001 2002
--------------- ------------- --------------- --------------- -------------------
REVENUES:
License revenue $ - $ - $ - $ - $ 5,000,000
Sponsored research revenue - - - - 2,400,000
--------------- ------------- --------------- --------------- -------------------
Total revenues - - - - 7,400,000
--------------- ------------- --------------- --------------- -------------------
OPERATING EXPENSES:
Research and development 1,224,173 1,062,817 2,147,844 1,828,907 14,279,754
General and administrative 502,811 410,940 1,197,884 867,410 6,438,948
--------------- ------------- --------------- --------------- -------------------
Total operating expenses 1,726,984 1,473,757 3,345,728 2,696,317 20,718,702
--------------- ------------- --------------- --------------- -------------------
Net loss from operations (1,726,984) (1,473,757) (3,345,728) (2,696,317) (13,318,702)
--------------- ------------- --------------- --------------- -------------------
INTEREST INCOME, NET:
Interest income 64,691 77,846 94,514 133,022 819,135
Interest expense - - - - (82,652)
--------------- ------------- --------------- --------------- -------------------
Total interest income, net 64,691 77,846 94,514 133,022 736,483
--------------- ------------- --------------- --------------- -------------------
NET LOSS $ (1,662,293) $ (1,395,911) $ (3,251,214) $ (2,563,295) $ (12,582,219)
=============== ============= =============== =============== ===================
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.18) $ (0.19) $ (0.38) $ (0.39)
=============== ============= =============== ===============
WEIGHTED AVERAGE COMMON SHARES FOR
BASIC AND DILUTED NET LOSS
COMPUTATION 9,275,755 7,295,671 8,513,816 6,642,464
=============== ============= =============== ===============
See accompanying notes
4
POINT THERAPEUTICS, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Period from
inception
(September 3,
Six-months ended 1996) through
June 30, June 30,
-------------------------------- ---------------
2002 2001 2002
-------------- ------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,251,214) $ (2,563,295) $ (12,582,219)
Adjustments to reconcile net loss to net cash used:
Depreciation 22,485 12,066 105,370
Issuance of compensatory stock options 7,042 12,368 147,248
Common stock issued under license agreement - - 910,677
Patent costs - - 75,557
Accrued interest on convertible notes - - 82,652
Changes in assets and liabilities:
Prepaid expenses and other (356,898) (10,280) (382,707)
Accounts payable and accrued liabilities 401,502 195,446 1,271,371
-------------- ------------- ---------------
Net cash used in operating activities (3,177,083) (2,353,695) (10,372,051)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of office and laboratory equipment (231,823) (35,755) (395,895)
-------------- ------------- ---------------
Net cash used in investing activities (231,823) (35,755) (395,895)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from merger between Point and HMSR Inc. 13,835,285 - 14,335,285
Proceeds from issuance of common stock, net of costs - 5,375,000 10,541,959
Proceeds from issuance of convertible note - - 1,892,904
Principal payments of patent liability (3,579) (3,579) (16,058)
-------------- ------------- ---------------
Net cash provided by financing activities 13,831,706 5,371,421 26,754,090
-------------- ------------- ---------------
Net increase in cash and cash equivalents 10,422,800 2,981,971 15,986,144
Cash and cash equivalents, beginning of period 5,563,344 4,477,954 -
-------------- ------------- ---------------
Cash and cash equivalents, end of period $ 15,986,144 $ 7,459,925 $ 15,986,144
============== ============= ===============
See accompanying notes
5
POINT THERAPEUTICS, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Nature of the Business
Point Therapeutics, Inc. (formerly known as HMSR Inc.) (the "Company") is
developing small molecule drugs for the treatment of certain
hematopoietic disorders and a variety of cancerous tumors. The Company's
lead product candidate, PT-100, has the potential to treat a number of
different hematopoietic disorders, such as neutropenia (an abnormally low
level of a type of white blood cell called neutrophil) and anemia (an
abnormally low level of red blood cells). PT-100 is currently being
tested in a Phase I/II clinical study in which cancer patients undergoing
chemotherapy are given PT-100 as an adjunct therapy for the treatment of
neutropenia.
The Company was originally incorporated in December 1993 as a Delaware
corporation under the name Hemacor Inc. The Company changed its name to
HemaSure Inc. in February of 1994. From 1994 to May 2001, the Company
developed and supplied innovative blood filtration technologies. On May
29, 2001, the Company sold substantially all of its assets and
liabilities with the exception of cash, marketable securities and certain
corporate assets and liabilities and changed its name to HMSR Inc.
("HMSR").
2. Merger between Point Massachusetts and HMSR Inc.
On November 15, 2001, HMSR and PT Acquisition Corp., a wholly-owned
subsidiary of HMSR formed for the purpose of consummating a merger
transaction, entered into the Agreement and Plan of Merger ("Merger
Agreement") with Point Therapeutics, Inc., a privately held Massachusetts
corporation ("Point Massachusetts"). At that time, HMSR paid Point
Massachusetts a $500,000 lock-up fee. The lock-up fee was included when
determining the final stock conversion ratio between Point Massachusetts
and HMSR, as described below.
On March 15, 2002, HMSR stockholders approved a 1-for-10 reverse split of
HMSR's common stock and a name change from HMSR Inc. to Point
Therapeutics, Inc. The stockholders of Point Massachusetts also approved
on March 15, 2002 the Merger Agreement previously entered into by both
parties. In accordance with the terms of the Merger Agreement,
immediately prior to the effective time of the merger, and after taking
into account the 1-for-10 reverse split with respect to HMSR's common
stock prior to the merger, each share of Point Massachusetts common stock
outstanding immediately prior to the effective time of the merger
(including all shares of Point Massachusetts preferred stock converted
prior to the effective time) was converted into the right to receive
4.16168 shares of the HMSR's common stock. This ratio also took into
account the $500,000 HMSR deposit paid on November 15, 2001. In addition,
all outstanding options and warrants of Point Massachusetts were
converted at the same conversion rate of 4.16168.
As a result of the merger, HMSR acquired all of the outstanding shares of
Point Massachusetts capital stock. For accounting purposes, the
acquisition has been treated as the acquisition of HMSR by Point
Massachusetts with Point Massachusetts as the acquiror. The historical
financial statements of the Company presented prior to March 15, 2002 are
those of Point Massachusetts. Point Massachusetts' capital structure has
been restated to reflect all stock issuances as if the merger had taken
place prior to all periods presented. In addition, if the merger with
HMSR had occurred at the beginning of the periods presented, the effect
of the inclusion of HMSR's operating results on the financial statements
presented would not be material.
6
3. Significant Accounting Policies
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States and applicable Securities and Exchange Commission
("SEC") regulations for interim financial information. These financial
statements are unaudited and, in the opinion of management, include all
adjustments necessary to present fairly the balance sheets, statements of
operations, and statements of cash flows for the periods presented in
accordance with accounting principles generally accepted in the United
States. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted
pursuant to SEC rules and regulations. It is presumed that users of this
interim financial information have read or have access to the audited
financial statements and footnote disclosure of Point Therapeutics
Massachusetts, Inc. for the year ended December 31, 2001, contained in a
Form 8-K filed with the Securities and Exchange Commission on May 25,
2002. Operating results for the quarter ended June 30, 2002 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2002.
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.
Reclassifications
Certain amounts in 2001 have been reclassified to conform to the 2002
presentation.
Net Loss Per Share
Basic and diluted net loss per common share amounts are presented in
conformity with Statement of Financial Accounting Standards No. ("SFAS")
128, "Earnings per Share", for all periods presented. In accordance with
SFAS 128, basic and diluted net loss per common share amounts have been
computed using the weighted-average number of shares of common stock
outstanding for the three and six-month periods ended June 30, 2002 and
2001. Potentially dilutive securities, consisting of stock options and
warrants, have been excluded from the diluted earnings per share
calculations since their effect is antidilutive.
4. New Accounting Standards - In July 2001, the Financial Accounting
Standards Board ("FASB") issued SFAS 141, "Business Combinations" and
SFAS 142, "Goodwill and Other Intangible Assets". SFAS 141 requires that
all business combinations be accounted for under the purchase method only
and that certain acquired intangible assets in a business combination be
recognized as assets apart from goodwill. SFAS 142 requires that rateable
amortization of goodwill be replaced with periodic tests of the
goodwill's impairment and that certain intangible assets other than
goodwill be amortized over their useful lives. SFAS 141 is effective for
all business combinations initiated after June 30, 2001. The provisions
of SFAS 142 are effective for fiscal years beginning after December 15,
2001. The Company accounted for the merger on March 15, 2002 as
prescribed by SFAS No. 141 and SFAS No. 142.
In August 2001, the FASB issued SFAS 143, "Accounting for Asset
Retirement Obligations", which provides the accounting requirements for
retirement obligations associated with tangible long-lived assets. This
Statement requires entities to record the fair value of a liability for
an asset retirement obligation in the period in which it is incurred.
This Statement is effective for the Company's 2003 fiscal year, and early
adoption is permitted. The adoption of SFAS 143 will have no impact on
the Company's financial statements.
7
In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets", which excludes from the definition of
long-lived assets goodwill and other intangibles that are not amortized
in accordance with SFAS 142. SFAS 144 requires that long-lived assets to
be disposed of by sale be measured at the lower of carrying amount or
fair value less cost to sell, whether reported in continuing operations
or in discontinued operations. SFAS 144 also expands the reporting of
discontinued operations to include components of an entity that have been
or will be disposed of rather than limiting such discontinuance to a
segment of a business. This Statement is effective for the Company's 2002
fiscal year, and early adoption is permitted. The adoption of SFAS 144
has no impact on the Company's financial statements.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The principal
difference between SFAS 146 and Issue 94-3 relates to SFAS 146's
requirements for recognition of a liability for a cost associated with an
exit or disposal activity. SFAS 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. Under Issue 94-3, a liability for an exit cost as
generally defined in Issue 94-3 was recognized at the date of an entity's
commitment to an exit plan. A fundamental conclusion reached by the FASB
in this Statement is that an entity's commitment to a plan, by itself,
does not create an obligation that meets the definition of a liability.
Therefore, this Statement eliminates the definition and requirements for
recognition of exit costs in Issue 94-3. This Statement also establishes
that fair value is the objective for initial measurement of the
liability. This Statement is effective for exit or disposal activities
that are initiated after December 31, 2002, with early application
encouraged. The adoption of SFAS 146 has no impact on the Company's
financial statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Factors with Respect to Forward-Looking Statements
Readers are cautioned that certain statements contained in this Management's
Discussion and Analysis of Financial Condition and Results of Operations that
are not related to historical results are "forward-looking" statements as
defined in the Private Securities Litigation Reform Act of 1995. This
information includes statements on the prospects for our drug development
activities and results of operations based on our current expectations, such as
statements regarding certain milestones with respect to our clinical program and
our product candidates. Forward-looking statements are statements that are not
historical facts, and can be identified by, among other things, the use of
forward-looking language, such as "believe," "expect," "may," "will," "should,"
"seeks," "plans," "schedule to," "anticipates" or "intends" or the negative of
those terms, or other variations of those terms of comparable language, or by
discussions of strategy or intentions. A number of important factors could cause
actual results to differ materially from those projected or suggested in the
forward looking statement, including, but not limited to, the ability of the
Company to (i) successfully develop products, (ii) obtain the necessary
governmental approvals, (iii) effectively commercialize any products developed
before its competitors and (iv) obtain and enforce intellectual property rights,
as well as the risk factors described in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2001 as filed with the Securities
and Exchange Commission on April 1, 2002 and from time to time in the Company's
other reports filed with the Securities and Exchange Commission.
8
Overview
Operations - Point Therapeutics, Inc. (the "Company") is developing small
molecule drugs for the treatment of certain hematopoietic disorders and a
variety of cancerous tumors. The Company's lead product candidate, PT-100, has
the potential to treat a number of different hematopoietic disorders, such as
neutropenia (an abnormally low level of a type of white blood cell called a
neutrophil) and anemia (an abnormally low level of red blood cells). PT-100 is
currently being evaluated in a Phase I/II clinical study where cancer patients
undergoing chemotherapy are treated with PT-100 as an adjunct therapy for the
treatment of neutropenia. The Company is also developing PT-100 as a potential
therapy to inhibit the growth of certain cancerous tumors. This program is
currently in late-stage preclinical development.
To date, the Company has generated no revenues from product sales and has
depended upon equity financings, interest payments on invested funds, and
collaboration payments received from pharmaceutical companies to provide the
working capital required to pursue its intended business activities. The Company
has a net accumulated deficit of $12,582,000 through June 30, 2002. The
accumulated deficit has resulted principally from the Company's efforts to
develop drug candidates and the associated administrative costs required to
support these efforts. The Company expects to incur significant additional
operating losses over the next several years due to its ongoing developmental
and clinical efforts. The Company's potential for future profitability is
dependent on its ability to effectively develop its current pharmaceutical
compound, PT-100, and to license and develop new compounds.
The Company was originally incorporated in December 1993 as a Delaware
corporation under the name Hemacor Inc. The Company changed its name to HemaSure
Inc. in February of 1994. From 1994 to May 2001, the Company developed and
supplied innovative blood filtration technologies. On May 29, 2001 the Company
sold substantially all of its assets and liabilities with the exception of cash,
marketable securities and certain corporate assets and liabilities and changed
its name to HMSR Inc.
On November 15, 2001, HMSR and PT Acquisition Corp., a wholly-owned subsidiary
of HMSR formed for the purpose of consummating a merger transaction, entered
into the Agreement and Plan of Merger ("Merger Agreement") with Point
Therapeutics, Inc., a privately held Massachusetts corporation ("Point
Massachusetts"). At that time, HMSR paid Point Massachusetts a $500,000 lock-up
fee. The lock-up fee was included when determining the final stock conversion
ratio between Point Massachusetts and HMSR, as described below.
On March 15, 2002, HMSR stockholders approved a 1-for-10 reverse split of HMSR's
common stock and a name change from HMSR Inc. to Point Therapeutics, Inc. The
stockholders of Point Massachusetts also approved on March 15, 2002 the Merger
Agreement previously entered into by both parties. In accordance with the terms
of the Merger Agreement, immediately prior to the effective time of the merger,
and after taking into account the 1-for-10 reverse split with respect to HMSR's
common stock prior to the merger, each share of Point Massachusetts common stock
outstanding immediately prior to the effective time of the merger (including all
shares of Point Massachusetts preferred stock converted prior to the effective
time) was converted into the right to receive 4.16168 shares of the HMSR's
common stock. This ratio also took into account the $500,000 HMSR deposit paid
on November 15, 2001. In addition, all outstanding options and warrants of Point
Massachusetts were converted at the same conversion rate of 4.16168.
As a result of the merger, HMSR acquired all of the outstanding shares of Point
Massachusetts capital stock. For accounting purposes, the acquisition has been
treated as the acquisition of HMSR by Point Massachusetts with Point
Massachusetts as the acquiror. The historical financial statements of the
Company presented prior to March 15, 2002 are those of Point Massachusetts.
Point Massachusetts' capital structure has been restated to reflect all stock
issuances as if the merger had taken place prior to all periods presented. In
addition, if the merger with HMSR had occurred at the beginning of the periods
presented, the effect of the inclusion of HMSR's operating results on the
financial statements presented would not be material.
9
Results of Operations
Three-Months Ended June 30, 2002 and June 30, 2001
Revenues
The Company generated no revenues during the quarters ended June 30, 2002 and
June 30, 2001.
Operating Expenses
Research and development expenses increased 15.2% to $1,224,000 for the
three-month period ended June 30, 2002 from $1,063,000 for the three-month
period ended June 30, 2001. The increase was primarily due to research and
development efforts related to the Company's hematopoietic and anti-tumor
programs.
Since inception, the Company has incurred $14,280,000 on research and
development activities. Almost all of the Company's research and development
efforts have been focused on the pre-clinical and clinical development of PT-100
for hematopoietic disorders and for the treatment of cancer. The Company has no
other material research and development programs and thus the $14,280,000
disclosed for research and development in the Company's financial statements has
primarily been directed towards developing PT-100. PT-100 is currently in
early-stage clinical trials for its first indication, to treat neutropenia. The
Company cannot predict whether the results of further testing will be successful
or will result in FDA approval. Thus, due to the uncertainties inherent in
clinical testing and the regulatory process, the Company is not able to estimate
at this time when PT-100 may be commercially available for any application, if
at all, nor the costs associated with completing the clinical trial process.
General and administrative expenses increased 22.4% to $503,000 for the
three-month period ended June 30, 2002 from $411,000 for the three-month period
ended June 30, 2001. The increase was primarily due to an increase in needed
internal support and external costs associated with the Company becoming a
public entity as a result of the recently completed merger between Point
Massachusetts and HMSR and the expenses related to the recent move of the
Company's administrative offices.
Interest Income, Net
Interest income, net for the three-month period ended June 30, 2002 was $65,000
compared to $78,000 for the same period in 2001, a decrease of $13,000 or 16.7%.
The decrease in interest income for the three-month period resulted from lower
interest rates in 2002 as compared to the same period in 2001 offset in part by
a higher invested cash balance compared to the same period in 2001.
Net Loss
As a result of the foregoing, the Company incurred a net loss of $1,662,000 or
$0.18 per share for the three-month period ended June 30, 2002 compared to a net
loss of $1,396,000 or $0.19 per share for the three-month period ended June 30,
2001.
Six-Months Ended June 30, 2002 and June 30, 2001
Revenues
The Company generated no revenues during the six-month periods ended June 30,
2002 and June 30, 2001.
10
Operating Expenses
Research and development expenses increased 17.4% to $2,148,000 for the
six-month period ended June 30, 2002 from $1,829,000 for the six-month period
ended June 30, 2001. The increase was primarily due to research and development
efforts related to the Company's hematopoietic and anti-tumor programs.
General and administrative expenses increased 38.1% to $1,198,000 for the
six-month period ended June 30, 2002 from $867,000 for the six-month period
ended June 30, 2001. The increase was primarily due to professional fees
incurred in consummating the merger between Point Massachusetts and HMSR, the
increase in needed internal support and external expenses associated with the
Company becoming a public entity and the expenses related to the recent move of
the Company's administrative offices.
Interest Income, Net
Interest income, net for the six-month period ended June 30, 2002 was $95,000
compared to $133,000 for the same period in 2001, a decrease of $38,000 or
28.6%. The decrease in interest income for the six-month period resulted from
lower interest rates in 2002 as compared to the same period in 2001 offset in
part by a higher invested cash balance as compared to the same period in 2001.
Net Loss
As a result of the foregoing, the Company incurred a net loss of $3,251,000 or
$0.38 per share for the six-month period ended June 30, 2002 compared to a net
loss of $2,563,000 or $0.39 per share for the six-month period ended June 30,
2001.
Liquidity and Capital Resources
The Company has financed its operations since inception principally through
private placements of equity securities and collaboration payments received from
pharmaceutical companies. Since the Company's inception in September 1996, the
Company has raised approximately $12,500,000, net of costs of raising capital,
in private equity financings and $7,400,000 from licensing and sponsored
research collaborations with pharmaceutical companies. In addition, the Company
received $14,335,000 as a result of the recently completed merger between Point
Massachusetts and HMSR, including a $500,000 lock-up fee received upon the
signing of the Merger Agreement. The Company has also received $819,000 from
interest earned in invested cash balances.
At June 30, 2002, the Company's cash and cash equivalents increased $10,423,000
as compared to December 31, 2001. The increase was primarily due to proceeds
totaling $13,835,000 received as a result of the recently completed merger
between Point Massachusetts and HMSR. Offsetting the inflow of cash was
$3,177,000 used in operations for the six-month period ended June 30, 2002,
primarily to fund the clinical program for PT-100 and other research and
development initiatives as well as to fund costs incurred in connection with the
merger with HMSR. The Company also increased its investment in office and
laboratory equipment by $232,000 to $396,000 at June 30, 2002 from $164,000 at
December 31, 2001. The increase resulted from purchases of laboratory equipment,
computers and other capital equipment. The Company currently plans to spend
approximately $50,000 during the remainder of 2002 on office and laboratory
equipment.
At June 30, 2002, the Company had $15,986,000 in cash and cash equivalents. The
Company currently anticipates that its existing capital resources and interest
to be received should enable it to maintain current and planned operations
through 2003.
The Company's expectations regarding its rate of spending and the sufficiency of
its cash resources over future periods are forward-looking statements. The
Company's funding requirements are expected to increase over
11
the next several years as the Company continues with the clinical development of
PT-100 and initiates human clinical trials for additional clinical indications
for PT-100 and additional product candidates. The rate of spending and
sufficiency of such resources will be affected by numerous factors including the
success of the Company's clinical trials and the rate of acquisition of new
products and technologies. Success in early-stage clinical trials or acquisition
of new products and technologies would lead to an increase in working capital
requirements. The Company's actual cash requirements may vary materially from
those now planned because of the results of research and development, clinical
trials, product testing, relationships with strategic partners, acquisition of
new products and technologies, changes in the focus and direction of the
Company's research and development programs, competitive and technological
advances, the process of obtaining United States Food and Drug Administration or
other regulatory approvals and other factors.
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Accounting Standards No. ("SFAS") 141, "Business Combinations" and SFAS 142,
"Goodwill and Other Intangible Assets". SFAS 141 requires that all business
combinations be accounted for under the purchase method only and that certain
acquired intangible assets in a business combination be recognized as assets
apart from goodwill. SFAS 142 requires that rateable amortization of goodwill be
replaced with periodic tests of the goodwill's impairment and that certain
intangible assets other than goodwill be amortized over their useful lives. SFAS
141 is effective for all business combinations initiated after June 30, 2001.
The provisions of SFAS 142 are effective for fiscal years beginning after
December 15, 2001. The Company accounted for the merger on March 15, 2002 as
prescribed by SFAS No. 141 and SFAS No. 142.
In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations", which provides the accounting requirements for retirement
obligations associated with tangible long-lived assets. This Statement requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. This Statement is effective
for the Company's 2003 fiscal year, and early adoption is permitted. The
adoption of SFAS 143 will have no impact on the Company's financial statements.
In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", which excludes from the definition of long-lived
assets goodwill and other intangibles that are not amortized in accordance with
SFAS 142. SFAS 144 requires that long-lived assets to be disposed of by sale be
measured at the lower of carrying amount or fair value less cost to sell,
whether reported in continuing operations or in discontinued operations. SFAS
144 also expands the reporting of discontinued operations to include components
of an entity that have been or will be disposed of rather than limiting such
discontinuance to a segment of a business. This Statement is effective for the
Company's 2002 fiscal year, and early adoption is permitted. The adoption of
SFAS 144 has no impact on the Company's financial statements.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities". SFAS 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)." The principal difference between SFAS 146 and Issue 94-3
relates to SFAS 146's requirements for recognition of a liability for a cost
associated with an exit or disposal activity. SFAS 146 requires that a liability
for a cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under Issue 94-3, a liability for an exit cost as
generally defined in Issue 94-3 was recognized at the date of an entity's
commitment to an exit plan. A fundamental conclusion reached by the FASB in this
Statement is that an entity's commitment to a plan, by itself, does not create
an obligation that meets the definition of a liability. Therefore, this
Statement eliminates the definition and requirements for recognition of exit
costs in Issue 94-3. This Statement also establishes that fair value is the
objective for initial measurement of the liability. This Statement is effective
for exit or disposal activities that are initiated after December 31, 2002, with
early application encouraged. The adoption of SFAS 146 has no impact on the
Company's financial statements.
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Item 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's proceeds from private placements and the merger have been invested
in money market funds that invest primarily in short-term, highly-rated
investments, including U.S. Government securities, commercial paper and
certificates of deposit guaranteed by banks. The Company's current policies do
not use interest rate derivative instruments to manage exposure to interest rate
changes. Because of the short-term maturities of the Company's investments, it
does not believe that a decrease in market rates would have a significant
negative impact on the value of it's investment portfolio. Declines in interest
rates will, however, reduce the Company's interest income while increases in
interest rates will increase the Company's interest income.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
10.01 Employment Agreement dated May 28, 2002 between the
Company and Michael P. Duffy, filed herewith.
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, filed herewith.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, filed herewith.
(b) Report on Form 8-K
On May 25, 2002, the Company filed Amendment No. 1 to
the Current Report on Form 8-K filed March 28, 2002
to file the financial statements of the business
acquired and the pro forma financial statements
required by Item 7.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed
on its behalf by the undersigned, thereunto duly authorized.
POINT THERAPEUTICS, INC.
Date: August 8, 2002 By: /s/ Donald R. Kiepert, Jr.
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Donald R. Kiepert, Jr.
Chief Executive Officer
Date: August 8, 2002 By: /s/ Richard N. Small
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Richard N. Small
Chief Financial Officer
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