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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
OR
[ ] 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 0-19777
DUSA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-3103129
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 Upton Drive
Wilmington, Massachusetts 01887
(Address of principal executive offices)
(Zip Code)
(978) 657-7500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 month (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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
16,765,122 shares as of April 30, 2004
PART 1.
ITEM 1. FINANCIAL STATEMENTS
DUSA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2004 2003
(UNAUDITED)
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 29,365,736 $ 4,294,482
United States government securities 26,086,224 30,284,841
Accrued interest receivable 372,368 533,796
Accounts receivable 193,712 229,483
Inventory 841,481 712,831
Prepaids and other current assets 918,459 1,000,413
------------ ------------
TOTAL CURRENT ASSETS 57,777,980 37,055,846
Restricted cash 139,530 139,213
United States government securities 3,274,380 3,250,940
Property and equipment, net 4,013,294 4,251,489
------------ ------------
TOTAL ASSETS $ 65,205,184 $ 44,697,488
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 374,834 $ 859,282
Accrued payroll 343,444 796,618
Other accrued expenses 2,058,816 1,162,139
Current maturities of long-term debt 270,000 270,000
Deferred revenue 221,712 129,900
------------ ------------
TOTAL CURRENT LIABILITIES 3,268,806 3,217,939
Long-term debt, net of current 1,180,000 1,247,500
------------ ------------
TOTAL LIABILITIES $ 4,448,806 $ 4,465,439
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
SHAREHOLDERS' EQUITY
Capital Stock
Authorized: 100,000,000 shares; 40,000,000 shares designated as common
stock, no par, and 60,000,000 shares issuable in series or classes; and 40,000
junior Series A preferred shares. Issued and outstanding: 16,407,372 (2003: 13,966,247)
shares of common stock, no par. $120,503,443 $ 95,670,554
Additional paid-in capital 2,256,339 2,015,586
Accumulated deficit (63,311,435) (58,909,781)
Accumulated other comprehensive income 1,308,031 1,455,690
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 60,756,378 40,232,049
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 65,205,184 $ 44,697,488
============ ============
See the accompanying Notes to the Condensed Consolidated Financial Statements.
2
DUSA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
2004 2003
(UNAUDITED) (UNAUDITED)
------------- -------------
REVENUES
Product sales $ 1,255,685 $ 143,370
------------- -------------
TOTAL REVENUES 1,255,685 143,370
------------- -------------
OPERATING COSTS
Cost of product sales and royalties 826,005 753,304
Research and development 1,687,766 1,516,391
Marketing and sales 1,367,458 530,512
General and administrative 2,175,247 1,475,271
------------- -------------
TOTAL OPERATING COSTS 6,056,476 4,275,478
------------- -------------
LOSS FROM OPERATIONS (4,800,791) (4,132,108)
------------- -------------
OTHER INCOME
Interest income, net 399,137 566,135
------------- -------------
NET LOSS $ (4,401,654) $ (3,565,973)
============= =============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.30) $ (0.26)
============= =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 14,802,474 13,892,514
============= =============
See the accompanying Notes to the Condensed Consolidated Financial Statements.
3
DUSA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
2004 2003
(UNAUDITED) (UNAUDITED)
------------- -------------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss $ (4,401,654) $ (3,565,973)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization of premiums and accretion of discounts on U.S. government
securities available for sale, net 27,518 18,099
Depreciation and amortization expense 460,711 300,704
Issuance of common stock to consultants 240,753 -
Changes in other assets and liabilities impacting cash flows from operations:
Accrued interest receivable 161,428 139,383
Accounts receivable 35,771 (18,390)
Inventory (128,650) 54,313
Prepaids and other current assets 81,954 193,145
Accounts payable (484,448) (335,812)
Accrued payroll and other accrued expenses 443,503 (1,057,151)
Deferred revenue 91,812 14,700
Restricted cash (317) (349)
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (3,471,619) (4,257,331)
------------- -------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Proceeds from maturing United States government securities 4,000,000 3,000,000
Purchases of property and equipment (222,516) (33,224)
------------- -------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 3,777,484 2,966,776
------------- -------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Issuance of common stock 24,750,000 -
Stock offering costs (214,402) -
Proceeds from exercise of options 297,291 -
Payments of long-term debt (67,500) (67,500)
------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 24,765,389 (67,500)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25,071,254 (1,358,055)
------------- -------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,294,482 6,926,713
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,365,736 $ 5,568,658
============= =============
On March 2, 2004, the Company issued 135,000 shares of its common stock in
a private placement at $11.00 per share as commission and non-refundable
retainer to the placement agent for a total value of $1,485,000.
See the accompanying Notes to the Condensed Consolidated Financial Statements.
4
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1) BASIS OF PRESENTATION
The Condensed Consolidated Balance Sheet as of March 31, 2004, and the
Condensed Consolidated Statements of Operations and Cash Flows for the three
months ended March 31, 2004 and 2003 of DUSA Pharmaceuticals, Inc. (the
"Company" or "DUSA") have been prepared in accordance with accounting principles
generally accepted in the United States of America. These condensed consolidated
financial statements are unaudited but include all normal recurring adjustments,
which management of the Company believes to be necessary for fair presentation
of the periods presented. The results of the Company's operations for any
interim period are not necessarily indicative of the results of the Company's
operations for any other interim period or for a full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. These
condensed consolidated financial statements should be read in conjunction with
the Company's December 31, 2003 audited consolidated financial statements and
notes thereto. Certain amounts for 2003 have been reclassified to conform to the
current year presentation. Such reclassifications had no impact on the net loss
or shareholders' equity for any period presented.
2) UNITED STATES GOVERNMENT SECURITIES
The Company's United States government securities available for sale
consist of securities of the United States government and its agencies, with
current yields, as of March 31, 2004, ranging from 3.66% to 7.46% and maturity
dates ranging from April 5, 2004 to September 24, 2007.
Accumulated other comprehensive income consists of net unrealized gains on
United States government securities available for sale, which is reported as
part of shareholders' equity in the Condensed Consolidated Balance Sheets.
3) INVENTORY
Inventory consisted of the following:
MARCH 31, DECEMBER 31,
2004 2003
(UNAUDITED)
----------- ------------
Finished goods $ 326,663 $ 582,382
Work in process 359,914 -
Raw materials 154,904 130,449
----------- ------------
$ 841,481 $ 712,831
=========== ============
5
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4) OTHER ACCRUED EXPENSES
Other accrued expenses consisted of the following:
MARCH 31, DECEMBER 31,
2004 2003
(UNAUDITED)
----------- ------------
Accrued research and development costs $ 197,264 $ 184,912
Accrued marketing and sales costs 172,887 113,020
Accrued product related costs 242,431 144,826
Accrued legal and other professional fees 1,074,403 359,747
Accrued employee benefits 214,969 189,051
Other accrued expenses 156,862 170,583
----------- ------------
$ 2,058,816 $ 1,162,139
=========== ============
5) SHAREHOLDERS' EQUITY
On February 27, 2004, the Company completed a private placement of
2,250,000 shares of its common stock at a purchase price of $11.00 per share,
resulting in gross proceeds of $24,750,000. The closing date of the private
placement was March 2, 2004. The Company also granted the investors the right to
purchase up to an aggregate of an additional 337,500 shares of common stock at
$11.00 per share. These additional investment rights were exercised on April 14,
2004, resulting in additional gross proceeds of $3,712,500. The offering costs
incurred during the period ended March 31, 2004 in connection with the placement
were $1,699,402 of which $1,485,000 consisted of the placement agent's
commission and non-refundable retainer paid in the form of 135,000 shares of
common stock, calculated at the offering price. The Company also issued 20,250
shares to the placement agent as additional commission and non-refundable
retainer with respect to the exercise of the additional investment rights.
On March 18, 2004, the Company granted a total of 30,000 fully vested
options to three consultants on its Medical Advisory Board as compensation for
services. These options were valued at approximately $240,753 in accordance with
the fair value-based method as required by SFAS No. 123, "Accounting for
Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation, Transition and Disclosure," and Emerging Issues Task
Force ("EITF") No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services," and recorded as part of research and development costs in the
Condensed Consolidated Statement of Operations.
6
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6) ACCOUNTING FOR STOCK BASED COMPENSATION
SFAS No. 123, as amended by SFAS No. 148, addresses the financial
accounting and reporting standards for stock or other equity-based compensation
arrangements. The Company has elected to continue to use the intrinsic
value-based method to account for employee stock option awards under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and to provide disclosures based on the fair value method
in the Notes to the Consolidated Financial Statements as permitted by SFAS No.
123, as amended by SFAS No. 148. Under the intrinsic value method, compensation
expense, if any, is recognized for the difference between the strike price of
the option and the fair value of the underlying common stock as of a measurement
date. The measurement date is the time when both the number of shares and the
strike price is known. Stock or other equity-based compensation for
non-employees must be accounted for under the fair value-based method as
required by SFAS No. 123, as amended by SFAS No. 148, EITF No. 96-18, and other
related interpretations. Under this method, the equity-based instrument is
valued at either the fair value of the consideration received or the equity
instrument issued on the measurement date, which is generally the grant date.
The resulting compensation cost is recognized and charged to operations over the
service period, which is generally the vesting period.
As described above, the Company uses the intrinsic value method to measure
compensation expense associated with grants of stock options to employees. Had
the Company used the fair value method to measure compensation, the Company's
pro forma net loss, and pro forma net loss per share for the three months ending
March 31, 2004 and 2003 would have been as follows:
2004 2003
(UNAUDITED) (UNAUDITED)
------------- ------------
NET LOSS
As reported $ (4,401,654) $ (3,565,973)
Effect on net loss if fair value method had been used (717,145) (587,209)
------------- ------------
Proforma $ (5,118,799) $ (4,153,182)
============= ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE
As reported $ (0.30) $ (0.26)
Effect on net loss per common share if fair value method
had been used (0.05) (0.04)
------------- ------------
Proforma $ (0.35) $ (0.30)
============= ============
7) BASIC AND DILUTED NET LOSS PER SHARE
Basic net loss per common share is based on the weighted average number of
shares outstanding during each period. Stock options, warrants and rights are
not included in the
7
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
computation of the weighted average number of shares outstanding for dilutive
net loss per common share during each of the periods presented in the Statements
of Operations, as the effect would be antidilutive. For the three months ended
March 31, 2004, and 2003, stock options, warrants and rights totaling
approximately 3,396,000 and 2,661,000 shares, respectively, have been excluded
from the computation of diluted net loss per share.
8) COMPREHENSIVE LOSS
For the three months ended March 31, 2004 and 2003, comprehensive loss
consisted of the following:
2004 2003
(UNAUDITED) (UNAUDITED)
------------- -------------
NET LOSS $ (4,401,654) $ (3,565,973)
Change in net unrealized gains on United
States securities available for sale (147,659) (246,998)
------------- -------------
COMPREHENSIVE LOSS $ (4,549,313) $ (3,812,971)
============= =============
10) COMMITMENTS AND CONTINGENCIES
Legal Matters - On April 12, 2002, the Company received notice that one of
the patents licensed to the Company by PARTEQ Research & Development
Innovations, the technology transfer arm of Queen's University at Kingston,
Ontario was being challenged by PhotoCure ASA. PhotoCure ASA has filed a lawsuit
in Australia alleging that Australian Patent No. 624985, which is one of the
patents relating to the Company's 5-aminolevulinic acid technology, is invalid.
As a consequence of this action, Queen's University assigned the Australian
patent to the Company so that DUSA could participate directly in this
litigation. The Company filed a response setting forth its defenses, and a
related countersuit alleging that certain activities of PhotoCure and its
marketing partner, Galderma S.A., infringe the patent. The final hearing in the
Federal Court of Australia was held in April 2004, and a decision is expected in
late 2004. Each party has the right to appeal within approximately one month
following the judge's decision.
In December 2003, the Company was served with a complaint filed in the
State of Michigan Circuit Court for the County of Oakland alleging that DUSA's
BLU-U(R) caused the plaintiff to suffer a seizure during the performance of her
duties as an office assistant. The complaint names Berlex Laboratories, Inc., a
subsidiary of the Company's former marketing partner, as another defendant. The
case has been removed to the U.S. District Court for the Eastern District of
Michigan Southern
8
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Division. The damages are unspecified. The Company has filed its answer denying
the claims, and Berlex has requested indemnification from the Company under the
terms of the Company's former agreement with Schering AG, Berlex's parent. While
it is not possible to predict or determine the outcome of this action, the
Company believes that the costs associated with all such matters will not have a
material adverse effect on its consolidated financial position or liquidity but
could possibly be material to the consolidated results of operations in any one
period to the extent costs are not covered by DUSA's insurance.
11) THIRD-PARTY CANADIAN DISTRIBUTION AGREEMENT
On March 31, 2004, DUSA signed an exclusive marketing and distribution
agreement for Canada with Coherent-AMT Inc. ("Coherent"), a leading Canadian
medical device and laser distribution company. Coherent began marketing the
BLU-U(R) for moderate inflammatory acne immediately, and the Company expects
Coherent to market the Kerastick(R) later in 2004 following receipt of the
applicable regulatory approval from Health Canada. The agreement has a
three-year term, which can be automatically renewed for additional one-year
terms, unless either party notifies the other party prior to a term expiration
that it does not intend to renew the agreement. In addition, either party may
terminate the agreement earlier, on certain terms, or in the event that the
other party shall have materially breached any of its obligations in the
agreement.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
DUSA is a pharmaceutical company engaged primarily in the research,
development, and marketing of a drug named 5-aminolevulinic acid, or ALA, which
is used in combination with appropriate light devices in order to detect or
treat a variety of medical conditions. The trademark for our brand of ALA is
Levulan(R). When Levulan(R) is used and followed with exposure to light to
produce a therapeutic effect, the technology is called photodynamic therapy, or
PDT. When Levulan(R) is used and followed with exposure to light to detect
medical conditions, the technology is called photodetection, or PD. Our
products, which were launched in September 2000 in the United States, are
Levulan(R) 20% topical solution using our Kerastick(R) brand applicator, and our
BLU-U(R) brand light unit. Our products are used together to provide PDT for the
treatment of non-hyperkeratotic actinic keratoses, or AKs, of the face or scalp.
In addition, we received market clearance from the United States Food and Drug
Administration ("FDA") in September 2003 to market the BLU-U(R) without
Levulan(R) for the treatment of moderate inflammatory acne vulgaris.
In February 2004, we commenced commercial production of the Levulan(R)
Kerastick(R) at our Wilmington manufacturing facility. The initial commercial
product from the Wilmington facility became available for distribution early in
the second quarter of 2004. As of March 31, 2004, we had 16,908 Kerastick(R)
units in inventory. This inventory was produced in 2002 by our former
third-party manufacturer to meet product demand during the execution of our
project to complete construction and gain FDA approval of our new manufacturing
facility. Although we have adequate inventory to meet short-term demand, the
start of production at this time is intended to insure that we will have an
adequate supply of inventory to meet the increasing market demand throughout
2004 and beyond. Initial production planning is based on the anticipated near
term demand for the Kerastick(R). The plant has the capacity to make over one
million Kerastick(R) units annually.
On February 27, 2004, DUSA entered into definitive agreements with certain
institutional and other accredited investors for the private placement of
2,250,000 shares of our common stock at a purchase price of $11.00 per share
resulting in gross proceeds to DUSA of $24,750,000. The closing date of the
private placement was March 2, 2004. DUSA also issued Additional Investment
Rights providing the investors with the right to purchase up to an aggregate of
an additional 337,500 shares of common stock at $11.00 per share. All of the
Additional Investment Rights were exercised on April 14, 2004. The offering
costs incurred during the period in connection with the placement were
$1,699,402 of which $1,485,000 consisted of the placement agent's commission and
non-refundable retainer, which was paid in the form of 135,000 shares of common
stock calculated at the offering price. An additional 20,250 shares were issued
to the placement agent with respect to the
10
exercise by the investors of the Additional Investment Rights. DUSA will use the
proceeds from the sale of the securities to expand its sales force and for
general working capital purposes, including research and development activities.
On February 24, 2004, DUSA reacquired the rights to the aminolevulinic
acid (Levulan(R)) technology for Canada held by Draxis Health Inc. ("Draxis"),
DUSA's former parent. These rights were initially assigned to Draxis in 1991 at
the time of the original licensing of the patents underlying our Levulan(R) PDT
platform from PARTEQ Research and Development Innovations, the licensing arm of
Queen's University, Kingston, Ontario. DUSA and Draxis terminated the assignment
and DUSA agreed to pay to Draxis an upfront fee and a royalty on sales of the
Levulan(R) Kerastick(R) in Canada over a five year term. In addition, on March
31, 2004 DUSA signed an exclusive marketing and distribution agreement for
Canada with Coherent-AMT, a leading Canadian medical device and laser
distribution company. Coherent-AMT began marketing the BLU-U(R) for moderate
inflammatory acne immediately, and we expect Coherent-AMT to market
the Kerastick(R) later in 2004 following receipt of the applicable regulatory
approval from Health Canada.
We have primarily devoted our resources to fund research and development
in order to advance the Levulan(R) PDT/PD technology platform and, as a result,
we have experienced significant operating losses. As of March 31, 2004, we had
an accumulated deficit of approximately $63,311,000. Achieving our goal of
becoming a profitable operating company is dependent upon acceptance of our
therapy by the medical and consumer constituencies, and our ability to develop
new products.
During 2003, DUSA implemented new sales, marketing, physician education,
and development strategies, including the October 2003 launch of our initial
sales force. These marketing and sales activities have resulted in significant
additional expenses; however, the impact on sales has been positive.
Kerastick(R) unit sales to end-users were 12,054 for the three months ended
March 31, 2004, compared to 1,842 in the comparable 2003 period. Although the
costs related to the addition of our sales force and related marketing
activities are currently greater than the gross profit generated from the
increased sales, we are encouraged with the initial increase in sales. We have
continued our efforts to penetrate the market through expanding our sales
coverage in key geographic locations, have increased the size of our direct
sales force from 8 total representatives as of March 31, 2004, to 14 as of May
3, 2004 and have plans to increase the number to 16 by the end of June 2004. We
expect to continue to incur operating losses until sales of our products
increase substantially. At this time, our core objectives include focusing on
increasing sales in the United States, conducting clinical trials to treat acne
vulgaris and photodamaged skin which, if successful, could lead to additional
regulatory approvals, and seeking a partner to help develop and market
Levulan(R) PDT for the treatment of dysplasia in patients with Barrett's
esophagus. In addition, we continue to support independent investigator trials
to advance research in the use and applicability of Levulan(R) PDT for other
indications in dermatology.
11
We have continued to support efforts to improve reimbursement levels to
physicians. Some physicians have suggested that current reimbursement levels do
not fully reflect the required efforts to routinely employ our therapy in their
practices. We believe that this issue has affected the economic competitiveness
of our products with other AK therapies and has hindered the adoption of our
therapy. In addition, we continue to work to educate the major private insurance
carriers such that they will approve our therapy for coverage. As of March 31,
2004, several major private insurers have approved coverage for our AK therapy.
We believe that due to these efforts, along with our education and marketing
programs, more widespread adoption by the medical community should occur over
time. In addition, we are aware that some physicians have been using Levulan(R)
with the BLU-U(R) and with light devices manufactured by other companies for
uses other than our FDA-approved use. While we are not permitted to market our
products for so-called "off-label" uses, these activities are positively
affecting the sales of our products.
We have been encouraged by the positive response from many physicians and
patients who have used our therapy, but we recognize that we have to continue to
demonstrate the clinical value of our unique therapy, and the related product
benefits as compared to other well-established conventional therapies, in order
for the medical community to accept our products on a large scale. While our
financial position is strong, we cannot predict when product sales may offset
the costs associated with these efforts.
As of March 31, 2004, our staff included 51 full-time employees and 2
part-time employees as compared to 50 full-time employees and 1 part-time
employee at the end of 2003. These include marketing and sales, production,
maintenance, customer support, and financial operations personnel, as well as
those who support research and development programs for dermatology and internal
indications. We expect to increase our staff in 2004 as we focus on sales,
marketing activities and customer support associated with our AK products, and
research and development programs for dermatology and internal indications.
CRITICAL ACCOUNTING POLICIES
Our accounting policies are disclosed in Note 2 to the Notes to the
Consolidated Financial Statements in our Annual Report on Form 10-K for the year
ended December 31, 2003. Since all of these accounting policies do not require
management to make difficult, subjective or complex judgments or estimates, they
are not all considered critical accounting policies. We have discussed these
policies and the underlying estimates used in applying these accounting policies
with our audit committee. We consider the following policies and estimates to be
critical to our financial statements.
12
REVENUE RECOGNITION - Revenues on product sales are recognized when persuasive
evidence of an arrangement exists, the price is fixed and final, delivery has
occurred, and there is reasonableness of collection. Research revenue generally
compensates us for a portion of agreed-upon research and development expenses
and is recognized as revenue at the time the research and development activities
are performed under the terms of the related agreements and when no future
performance obligations existed. Milestone or other up-front payments are
typically recorded as deferred revenue upon receipt and recognized as income on
a straight-line basis over the term of an agreement. Product sales made through
distributors who have a general right of return of product have been recorded as
deferred revenue until the product is sold by our distributors to the end user.
Although we make every effort to assure the reasonableness of our estimates,
significant unanticipated changes in our estimates due to business, economic, or
industry events could have a material impact on our results of operations. We
recognized no research or milestone revenues in the three months ended March 31,
2004 and 2003.
INVENTORY - Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventories are continually
reviewed for slow moving, obsolete and excess items. Inventory items identified
as slow-moving are evaluated to determine if an adjustment is required.
Additionally, our industry is characterized by regular technological
developments that could result in obsolete inventory. Although we make every
effort to assure the reasonableness of our estimates, any significant
unanticipated changes in demand, technological development, or significant
changes to our business model could have a significant impact on the value of
our inventory and our results of operations. We use sales projections to
estimate the appropriate level of inventory that should remain on the
Consolidated Balance Sheet. Management believes that the level of remaining
inventory is reasonable in light of our current sales forecasts.
VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS - We review long-lived
assets for impairment whenever events or changes in business circumstances
indicate that the carrying amount of assets may not be fully recoverable or that
the useful lives of these assets are no longer appropriate. Factors that we
consider important which could trigger an impairment review include significant
changes relative to: (i) projected future operating results; (ii) the use of the
assets or the strategy for the overall business; (iii) business collaborations;
and (iv) industry, business, or economic trends and developments. Each
impairment test is based on a comparison of the undiscounted cash flow to the
recorded value of the asset. If it is determined that the carrying value of
long-lived or intangible assets may not be recoverable based upon the existence
of one or more of the above indicators of impairment, the asset is written down
to its estimated fair value on a discounted cash flow basis. At March 31, 2004,
our total property, plant and equipment had a carrying value of $4,013,000,
including $2,082,000 associated with our manufacturing facility, which received
FDA approval in July 2003 and began inventory production in February 2004. We
had no intangible assets recorded as of March 31, 2004.
13
STOCK-BASED COMPENSATION - We have elected to continue to use the
intrinsic value-based method to account for employee stock option awards under
the provisions of Accounting Principles Board Opinion No. 25, and to provide
disclosures based on the fair value method in the Notes to the Consolidated
Financial Statements as permitted by Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock Compensation," as amended by SFAS No.
148, "Accounting for Stock-Based Compensation, Transition and Disclosure". Stock
or other equity-based compensation for non-employees is accounted for under the
fair value-based method as required by SFAS No. 123 and Emerging Issues Task
Force ("EITF") No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services" and other related interpretations. Under this method, the equity-based
instrument is valued at either the fair value of the consideration received or
the equity instrument issued on the date of grant. The resulting compensation
cost is recognized and charged to operations over the service period, which, in
the case of stock options, is generally the vesting period. As we utilize stock
and stock options as one means of compensating employees, consultants, and
others, a change in accounting for stock-based compensation could, under certain
circumstances, result in an adverse material effect on our results of
operations, but would not affect cash flows.
RESULTS OF OPERATIONS - THREE MONTHS ENDING MARCH 31, 2004 VERSUS MARCH 31, 2003
REVENUES - Total revenues for the three months ended March 31, 2004 were
$1,256,000 as compared to $143,000 in 2003, and were comprised of the following:
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
---------------------------------
INCREASE/
PRODUCT SALES REVENUES 2004 2003 (DECREASE)
---------- --------- ----------
Direct Kerastick(R) sales to physicians $ 896,000 $ 143,000 $ 753,000
BLU-U(R) sales to physicians 360,000 - 360,000
---------- --------- ----------
Total product sales $1,256,000 $ 143,000 $1,113,000
========== ========= ==========
The increase in 2004 product sales reflects Kerastick(R) sales to
end-users of 12,054 for the three months ended March 31, 2004 as compared to
1,842 in the comparable 2003 period, and an increase in the BLU-U(R) units
placed in physician's offices to 534 units as of March 31, 2004, up from 406
units at December 31, 2003. The increase of both Kerastick(R) and BLU-U(R) sales
is a result of the efforts of our sales force which we launched in October 2003,
and includes sales generated at dermatology conferences including the American
Academy of Dermatology ("AAD") annual meeting in February 2004, which is the
largest and most important dermatology conference each year. In addition, the
increase in BLU-U(R)
14
placements is caused, in part by our ability to sell the BLU-U(R) to physicians
as a stand alone device for the treatment of moderate inflammatory acne
vulgaris. Although the level of Kerastick(R) sales to end-users for 2004 is
higher than those in the prior year, Kerastick(R) sales must continue to
increase significantly in order for DUSA to become profitable. Sales through
April also showed a continuing positive trend, due in part to our participation
at the American Society of Laser Medicine and Surgery ("ASLMS") annual meeting.
We are in the process of increasing our sales force's geographic and numeric
reach, and we will continue to participate in medical conferences throughout
the year, but we do not expect to generate the same level of sales activities
from smaller conferences as we did at the AAD annual meeting. Therefore, sales
increases during the rest of the year are not expected to remain at the same
level of percentage increases that we have experienced during the last two
quarters. See "Results of Operations-Marketing and Sales Costs".
COST OF PRODUCT SALES AND ROYALTIES - Cost of product sales and royalties
for the three months ended March 31, 2004 were $826,000 as compared to $753,000
in 2003. A summary of the components of cost of product sales and royalties is
provided below:
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
--------- --------- ---------
INCREASE/
COST OF PRODUCT SALES AND ROYALTIES 2004 2003 (DECREASE)
--------- --------- ----------
Product costs including internal costs (e.g. customer service,
quality assurance, purchasing, depreciation, amortization and
other product support operations) assigned to support products
(1) $ 395,000 $ 654,000 $ (259,000)
Direct Kerastick(R) product costs 233,000 36,000 197,000
Costs incurred to ship, install and service the BLU-U(R) in
physicians offices (2) 162,000 46,000 116,000
Royalty and supply fees (3) 36,000 17,000 19,000
--------- --------- ----------
Total cost of product sales and royalties $ 826,000 $ 753,000 $ 73,000
========= ========= ==========
1) The decrease in product costs for 2004 primarily reflects the
capitalization of labor and overhead associated with the start of
Kerastick(R) production, these costs were expensed in the prior year as
underutilization due to the absence of production.
2) Although there were direct BLU-U(R) product sales in 2004, there were no
related direct BLU-U(R) product costs as these units had a zero book value
due to inventory impairment charges recorded during 2002.
3) Royalty and supply fees are paid to our licensor, PARTEQ Research and
Development Innovations, the licensing arm of Queen's University,
Kingston, Ontario.
RESEARCH AND DEVELOPMENT COSTS - Research and development costs for the
three months ended March 31, 2004 were $1,688,000 as compared to $1,516,000 for
2003. This increase in 2004 was primarily due to compensation of $241,000
recorded for 30,000 fully vested stock options issued to three consultants for
services. The increase was partly offset by lower third-party expenditures for
our FDA mandated Phase IV clinical study of the long-term efficacy of our
marketed product. This
15
study was completed in late 2003 and we incurred only limited costs to file the
final report with the FDA in 2004. We have concentrated our dermatology
development program on indications that use our approved Kerastick(R). Based on
market research that was completed in 2003, we have moved forward with our Phase
II clinical studies for use of Levulan(R) PDT in photodamaged skin and moderate
to severe acne vulgaris. The Phase II study for moderate to severe acne is
planned to be proposed to the FDA by mid 2004 and expect to begin the acne study
later in 2004. We plan to initiate the photodamaged skin study during the second
quarter of 2004 based on the Investigational New Drug, or IND, application which
has been cleared by the FDA. We expect to incur research and development costs
of approximately $6,500,000 to $7,500,000 during 2004 due primarily to
initiating these studies.
We have also been following patients who completed Phase I/II studies in
the treatment of high-grade and low-grade dysplasia associated with Barrett's
esophagus. In preparation for new Phase II clinical trials, we are planning to
carry out a small single-center pilot Phase II clinical trial using DUSA's new
proprietary endoscopic light delivery device for the treatment of high-grade
dysplasia associated with Barrett's Esophagus. However, currently, we do not
plan to fund other Phase II or III clinical trials for this indication on our
own. Therefore, we are seeking a strategic partner to join in the development,
marketing, and distribution of our treatment for Barrett's esophagus dysplasia.
There can be no assurance that we will be able to consummate any collaboration
on terms acceptable to us.
MARKETING AND SALES COSTS - Marketing and sales costs for the three months
ended March 31, 2004 were $1,367,000 as compared to $531,000 for 2003. This
increase is mainly attributable to the hiring of an Associate Vice President of
Sales in August 2003, the launch of our direct sales force in October 2003, and
related marketing and sales activities. As of March 31, 2004, our sales force
was comprised of 8 direct representatives and various independent
representatives in key target markets. We anticipate that the level of marketing
and sales expenses and related support functions will continue to increase in
2004 as we seek to expand our sales capacity as a result of the initial success
of our sales initiatives. Subsequent to the end of the current quarter, we hired
6 additional representatives bringing our total number of representatives to 14
as of May 3, 2004 and are planning to increase the total number of direct
representatives to approximately 16 by the end of June 2004.
GENERAL AND ADMINISTRATIVE COSTS - General and administrative costs for
the three months ended March 31, 2004 increased to $2,175,000 as compared to
$1,475,000 for 2003. This increase is mainly attributable to higher legal
expenses of $1,199,000 incurred in 2004 as compared to $684,000 in 2003, due
primarily to patent litigation costs. It is expected that legal expenses will
remain at elevated levels until the patent dispute is resolved.
In April 2002, we received a copy of a notice issued by PhotoCure ASA to
Queen's University at Kingston, Ontario, alleging that Australian Patent No.
624985, which is one of the
16
patents licensed by PARTEQ to us, relating to ALA technology, is invalid. As a
consequence of this action, Queen's University assigned the Australian patent to
us so that we could participate directly in this litigation. We filed an answer
setting forth our defenses and a related countersuit alleging that certain
activities of PhotoCure and its marketing partner, Galderma S.A., infringe the
patent. The final hearing in the Federal Court of Australia was held in April
2004, and we expect that the judge's decision will be rendered in late 2004. We
are unable to predict the outcome at this time. However, should PhotoCure
prevail in either part of the case, i.e. the judge finds that the patent is
invalid, or if valid, if PhotoCure's product does not infringe the patent,
PhotoCure will be able to market its product in Australia. Each party has the
right to appeal within approximately one month of the judge's decision.
In December 2003, the Company was served with a complaint filed in the
State of Michigan Circuit Court for the County of Oakland alleging that DUSA's
BLU-U(R) caused the plaintiff to suffer a seizure during the performance of her
duties as an office assistant. The complaint names Berlex Laboratories, Inc., a
subsidiary of our former marketing partner, as another defendant. The damages
are unspecified. The case has been removed to the U.S. District Court, Eastern
District of Michigan, Southern Division. The Company has filed its answer
denying the claims. Berlex has requested indemnification from the Company under
the terms of the Company's former agreement with Schering AG, Berlex's parent.
While it is not possible to predict or determine the outcome of this action, the
Company believes that the costs associated with all such matters will not have a
material adverse effect on its consolidated financial position or liquidity but
could possibly be material to the consolidated results of operations in any one
period to the extent costs are not covered by DUSA's insurance.
OTHER INCOME, NET - Other income for the three months ended March 31, 2004
decreased to $399,000, as compared to $566,000 in 2003. This decrease was
attributable to a reduction in our average investable cash balances during 2003
and early 2004, as we used cash to support our operating activities. With the
addition of the proceeds from the private placement in March 2004, interest
income will initially increase and then may decline, dependent on interest rates
and as our investable cash balances are used to support our operating
activities. During the three months ended March 31, 2004, we incurred interest
expense of $11,000 on borrowings associated with the construction of our new
Kerastick(R) manufacturing facility as compared to $17,000 in 2003, which was
capitalized in property and equipment in the Condensed Consolidated Balance
Sheet as of March 31, 2003.
NET LOSSES - The Company incurred a net loss of $4,402,000, or $0.30 per
share, for the three months ended March 31, 2004, as compared to a net loss of
$3,566,000 or $0.26 per share for the comparable period in 2003. This increase
is due in part to a higher level of legal and marketing and sales expenses
offset, in part, by an increase in product sales. Net losses are expected to
continue
17
until end-user sales offset the cost of launching our sales force and marketing
initiatives, and the costs for other business support functions.
LIQUIDITY AND CAPITAL RESOURCES
We are in a strong cash position to continue to fund increased Levulan(R)
PDT sales and marketing expenses and our current research and development
activities for our Levulan(R) PDT/PD platform. At March 31, 2004, we had
approximately $58,866,000 of total cash resources comprised of $29,366,000 of
cash and cash equivalents, United States government securities totaling
$29,361,000, and restricted cash of $140,000. All of our United States
government securities are classified as available for sale. As of March 31,
2004, these securities had yields ranging from 3.66% to 7.46% and maturity dates
ranging from April 5, 2004 to September 24, 2007.
On February 27, 2004, DUSA completed a private placement of 2,250,000
shares of our common stock at a purchase price of $11.00 per share resulting in
gross proceeds of $24,750,000. DUSA also granted the investors the right to
purchase up to an aggregate of an additional 337,500 shares of common stock at
$11.00 per share. These additional investment rights were exercised on April 14,
2004, resulting in additional proceeds of $3,712,500. The offering costs
incurred during the period in connection with the placement were $1,699,402 of
which $1,485,000 consists of the placement agent's commission and non-refundable
retainer paid in the form of 135,000 shares of common stock calculated at the
offering price.
As of March 31, 2004, working capital (total current assets minus total
current liabilities) was $54,509,000 as compared to $33,838,000 as of December
31, 2003. Total current assets increased $20,722,000 in 2004 due primarily to
the gross proceeds received from the private placement of $24,750,000, offset,
in part, by the use of $3,472,000 of cash and cash equivalents to support our
operating activities.
As of March 31, 2004 we had inventory of $841,000, representing finished
goods of $326,000, work in process of $360,000 and raw materials of $155,000, as
compared to $713,000 as of December 31, 2003 representing finished goods of
$582,000, and raw materials of $130,000. Also, as of March 31, 2004, we had net
property, plant and equipment of $4,013,000, as compared to $4,251,000 as of
December 31, 2003, representing construction costs associated with our
manufacturing facility, commercial light units in the field, and other property,
plant and equipment.
As of March 31, 2004, we had accounts receivable of $194,000 as compared
to $229,000 as of December 31, 2003, representing net sales associated with
Kerastick(R) and BLU-U(R) product sales.
As of March 31, 2004, we had current liabilities of $3,269,000, as
compared to $3,218,000 as of December 31, 2003. In May 2002, we entered into a
secured term loan promissory note ("Note")
18
with Citizens Bank of Massachusetts to fund the construction of our
manufacturing facility and borrowed $1,900,000. The Note currently bears
interest at a 360-day LIBOR-based rate of 2.755% through June 30, 2004. Based on
the terms of the Note, at June 30th of each year DUSA can either continue to
choose a LIBOR-based rate at that time, execute a one-time conversion to a fixed
rate loan, or repay the loan balance. Approximately $3,000,000 of our United
States government securities are pledged as collateral to secure the loan. As of
March 31, 2004, the total outstanding loan balance is $1,450,000, of which
$270,000 is current.
We believe that we have sufficient capital resources to proceed with our
current programs for Levulan(R) PDT, and to fund operations and capital
expenditures for the foreseeable future. We have invested our funds in liquid
investments, so that we will have ready access to these cash reserves, as
needed, for the funding of development plans on a short-term and long-term
basis.
We anticipate that the level of marketing and sales expenses and related
support functions will continue to increase in 2004 as we seek to expand our
sales coverage as a result of the initial success of our sales initiatives. We
may also seek to expand or enhance our business by using resources to acquire by
license, purchase or other arrangements, businesses, new technologies, or
products, especially in PDT-related areas. For 2004, we are focusing primarily
on increasing the sales of the Levulan(R) Kerastick(R) and the BLU-U(R),
initiating Phase II studies for use of Levulan(R) PDT in photodamaged skin and
acne using our Kerastick(R), and on seeking a partner to join in the
development, marketing, and distribution of our treatment for Barrett's
esophagus dysplasia. Full development and testing of all potential indications
would require additional funding.
DUSA has no off-balance sheet financing arrangements other than its
operating leases.
CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS
There have been no material changes to our contractual obligations and
other commercial commitments from those presented in our Annual Report on Form
10-K for the year ended December 31, 2003.
INFLATION
Although inflation rates have been comparatively low in recent years,
inflation is expected to apply upward pressure on our operating costs. We have
included an inflation factor in our cost estimates. However, the overall net
effect of inflation on our operations is expected to be minimal.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We hold fixed income United States government securities that are subject
to interest rate market risks. However, we do not believe that the risk is
material as we make our investments in relatively short-term instruments and we
strive to match the maturity dates of these instruments to our cash flow needs.
A ten percent decline in the average yield of these instruments would not have a
material effect on our results of operations or cash flows.
We currently have exposure to interest rate risk under a secured term loan
promissory note which we issued to fund the construction of our manufacturing
facility. Interest on this loan is at a LIBOR-based rate, and calls for an
annual renewal on June 30th of each year through June 30, 2009 to either the
applicable LIBOR-based rate or a one-time conversion to a fixed rate loan. The
current loan rate of 2.755% is based on a LIBOR-based rate plus 175 basis points
at the time of renewal. Our exposure to interest rate risk due to changes in
LIBOR is not expected to be material.
ITEM 4. CONTROLS AND PROCEDURES
We carried out an evaluation, under the direction of our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of March 31, 2004.
There have been no changes in our internal control over financial
reporting that occurred during the quarter ended March 31, 2004 that have
materially affected, or are reasonably likely to materially affect, DUSA's
internal control over financial reporting.
FORWARD-LOOKING STATEMENTS
This report, including the Management's Discussion and Analysis, contains
various "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 which represent our expectations or beliefs concerning
future events, including, but not limited to statements regarding management's
goal of becoming profitable, beliefs regarding adoption of our therapy,
expectations for continuing operating losses, intention to focus on increasing
sales and to insure adequate supply of inventory, use of proceeds from the
private placement, expectation for the timing of Kerastick(R) sales in Canada,
plans for conducting development programs with respect to photodamaged skin and
acne, and seeking a partner, expectations of increasing staff and marketing and
sales expenses, effects of unanticipated changes in estimates and forecasts,
belief regarding inventory level, factors which could trigger impairment review,
effect of an accounting change for stock-based compensation and intentions
regarding disclosures
20
thereof, beliefs concerning the effect of improved reimbursement (or failure to
achieve it) and our education and marketing programs, continued participation at
medical conferences and potential sales activities, intentions to evaluate and
pursue licensing and acquisition opportunities, expectations regarding funding
of Barrett's esophagus, development of a sales team, and levels of legal
expenses, requirements of cash resources, and potential impact on conversion of
government securities, need for additional funds for development, levels of
interest income and net losses, and sufficiency of our capital resources,
expectations regarding other accounting pronouncements, inflation, market risks
and controls and procedures. These forward-looking statements are further
qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements. These factors include,
without limitation, changing market and regulatory conditions, actual clinical
results of our trials, the impact of competitive products and pricing, the
timely development, FDA approval, and market acceptance of our products,
reliance on third parties for the production and manufacture of our products,
the maintenance of our patent portfolio and ability to obtain competitive levels
of reimbursement by third-party payors, and other risks noted in our SEC filings
from time to time, including our Form 10-K for the period ending December 31,
2003, none of which can be assured.
21
PART II- OTHER INFORMATION
Items 1, and 3 through 5.
None.
Item 2. Changes in Securities and Use of Proceeds.
i) February 2004 Private Placement - On February 27, 2004, DUSA entered
into definitive agreements with certain new and existing
institutional and other accredited investors for the private
placement of 2,250,000 shares of our common stock at a purchase
price of $11.00 per share resulting in gross proceeds to DUSA of
$24,750,000. DUSA granted the investors the right to purchase up to
an aggregate of an additional 337,500 shares of common stock at
$11.00 per share which were exercised on April 14, 2004. The
offering costs incurred during the period in connection with the
placement were $1,699,402 of which $1,485,000 consists of the
placement agent's commission and non-refundable retainer paid in the
form of 135,000 shares of common stock calculated at the offering
price. The Company also issued 20,250 shares to the placement agent
as additional commission in connection with the Additional
Investment Rights.
DUSA will use the proceeds from the sale of the securities to expand
its sales force and for general working capital purposes, including
research and development activities.
Item 6. Exhibits and Reports on Form 8-K.
i) Exhibits
a) Exhibit 10(a) - License, Promotion, Distribution and Supply
Agreement dated March 31, 2004 between the Company and
Coherent-AMT Inc., portions of which have been omitted
pursuant to a request for confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934.
b) Exhibit 31(a) - Rule 13a-14(a)/15d-14(a) Certification of the
Chief Executive Officer.
c) Exhibit 31(b) - Rule 13a-14(a)/15d-14(a) Certification of the
Chief Financial Officer.
d) Exhibit 32(a) - Certification of the Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002; and
e) Exhibit 32(b) - Certification of the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
22
f) Exhibit 99(a) - Press Release dated May 4, 2004
ii) Forms 8-K
a) Form 8-K, dated and filed January 15, 2004, reporting preliminary Q4
2003 end-user Levulan(R) Kerastick(R) net sales to physicians from
the Company's distributors and the promotion of Peter Chakoutis,
DUSA's Controller, to Vice President and Chief Financial Officer and
the promotion of Richard Christopher to the new position of Vice
President, Financial Planning and Business Analysis, both effective
January 1, 2004.
b) Form 8-K, dated February 2, 2004 and filed February 3, 2004,
submitting a slide presentation which formed the basis of a
presentation given on February 2, 2004 by DUSA's President and Chief
Executive Officer, Dr. D. Geoffrey Shulman, to various potential
investors and reporting that DUSA was served with a complaint filed
on December 4, 2003, in the State of Michigan Circuit Court for the
County of Oakland.
c) Form 8-K, dated February 12, 2004 and filed February 13, 2004,
reporting DUSA's activities at the American Academy of Dermatology
meeting in Washington, D.C. on February 6 -11, 2004.
d) Form 8-K, dated February 16, 2004 and filed February 17, 2004,
announcing the presentation at the Roth Capital Partners 16th Annual
Growth Stock Conference, by DUSA's President and Chief Executive
Officer, Dr. D. Geoffrey Shulman.
e) Form 8-K, dated February 20, 2004 and filed February 20, 2004,
noting that during a presentation by the Company's President and
Chief Executive Officer on February 19, 2004, at the Roth Capital
Conference, several inadvertent disclosures were orally made as
follows: (i) DUSA had a net loss of $15,000,000 and a cash and
government securities balance of $36,000,000 as of December 31,
2003; and (ii) DUSA planned to hire additional direct sales
representatives to its sales force.
f) Form 8-K, dated February 26, 2004 and filed February 27, 2004,
reporting the commencement of commercial production of the
Levulan(R) Kerastick(R) at the Company's Wilmington manufacturing
facility; DUSA's reacquisition of Canadian product rights; and its
decision to expand its direct sales force.
g) Form 8-K, dated February 27, 2004 and filed on March 1, 2004,
reporting definitive agreements with certain new and existing
institutional and other accredited investors for the private
placement of 2,250,000 shares of common stock, and the right to
purchase up to an aggregate of an additional 337,500 shares.
h) Form 8-K, dated February 27, 2004 and filed on March 2, 2004, noting
receipt of all proceeds due as a result of the private placement
announced on February 27, 2004.
23
SIGNATURES
Pursuant to the requirements 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.
DUSA Pharmaceuticals, Inc.
By: /s/ D. Geoffrey Shulman
-----------------------------
D. Geoffrey Shulman
President and Chief Executive Officer
(principal executive officer)
Date: May 4, 2004 By: /s/ Peter M. Chakoutis
------------------------------
Peter M. Chakoutis
Vice President and Chief Financial Officer
(principal financial officer) and Controller
(principal accounting officer)
24
Exhibit Index
10(a) License, Promotion, Distribution and Supply Agreement dated March 31,
2004 between the Company and Coherent-AMT Inc., portions of which have
been omitted pursuant to a request for confidential treatment pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934.
31(a) Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.
31(b) Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
32(a) Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002; and
32(b) Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99(a) Press Release dated May 4, 2004