Nevada
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36-3207413
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|||
(State or other jurisdiction of incorporation or organization)
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(IRS Employer Id. No.)
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Large accelerated filer o
Non-accelerated filer o
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Accelerated filer o
Smaller reporting company x
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PART I FINANCIAL INFORMATION
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Page
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||||
PART II OTHER INFORMATION
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|||||
Part I.
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Financial Information
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Item 1
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Financial Statements
|
PHARMOS CORPORATION
|
||||||||
Condensed Consolidated Balance Sheets (Unaudited)
|
||||||||
June 30,
2011
|
December 31,
2010
|
|||||||
Assets
|
||||||||
Cash and cash equivalents
|
$ | 2,115,349 | $ | 3,139,347 | ||||
Prepaid expenses and other current assets
|
68,212 | 46,833 | ||||||
Total current assets
|
2,183,561 | 3,186,180 | ||||||
Fixed assets, net
|
5,916 | 5,613 | ||||||
Total assets
|
$ | 2,189,477 | $ | 3,191,793 | ||||
Liabilities and Shareholders’ Equity
|
||||||||
Accounts payable
|
$ | 54,538 | $ | 67,199 | ||||
Accrued interest and expenses
|
89,653 | 103,913 | ||||||
Total current liabilities
|
144,191 | 171,112 | ||||||
Convertible debenture
|
1,000,000 | 1,000,000 | ||||||
Total liabilities
|
1,144,191 | 1,171,112 | ||||||
Shareholders’ Equity
|
||||||||
Preferred stock, $.03 par value, 1,250,000 shares authorized, none issued and outstanding
|
- | - | ||||||
Common stock, $.03 par value; 120,000,000 shares
|
||||||||
authorized, 59,732,332 and 59,585,273 issued and outstanding as of
|
||||||||
June 30, 2011 and December 31, 2010, respectively
|
1,791,970 | 1,787,558 | ||||||
Paid-in capital in excess of par
|
211,711,140 | 211,587,386 | ||||||
Accumulated deficit
|
(212,457,398 | ) | (211,353,837 | ) | ||||
Treasury stock, at cost, 2,838 shares
|
(426 | ) | (426 | ) | ||||
Total shareholders' equity
|
1,045,286 | 2,020,681 | ||||||
Total liabilities and shareholders' equity
|
$ | 2,189,477 | $ | 3,191,793 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
|
PHARMOS CORPORATION
Condensed Consolidated Statements of Operations
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Expenses
|
||||||||||||||||
Research and development
|
$ | 214,470 | $ | 103,362 | $ | 496,254 | $ | 226,358 | ||||||||
General and administrative
|
259,415 | 300,492 | 553,760 | 639,806 | ||||||||||||
Depreciation and amortization
|
671 | 185 | 1,297 | 650 | ||||||||||||
Total operating expenses
|
474,556 | 404,039 | 1,051,311 | 866,814 | ||||||||||||
Loss from operations
|
(474,556 | ) | (404,039 | ) | (1,051,311 | ) | (866,814 | ) | ||||||||
Other (expense) income
|
||||||||||||||||
Interest income
|
60 | 342 | 156 | 629 | ||||||||||||
Interest expense
|
(25,937 | ) | (27,929 | ) | (52,406 | ) | (56,303 | ) | ||||||||
Other income (expense)
|
- | (353 | ) | - | (869 | ) | ||||||||||
Other expense
|
(25,877 | ) | (27,940 | ) | (52,250 | ) | (56,543 | ) | ||||||||
Net loss
|
$ | (500,433 | ) | $ | (431,979 | ) | $ | (1,103,561 | ) | $ | (923,357 | ) | ||||
Net loss per share
|
||||||||||||||||
- basic and diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | ||||
Weighted average shares outstanding
|
||||||||||||||||
- basic and diluted
|
59,095,703 | 58,400,211 | 59,045,622 | 58,306,062 |
Six months ended June 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$ | (1,103,561 | ) | $ | (923,357 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
1,297 | 650 | ||||||
Amortization of deferred financing fees
|
2,406 | 6,303 | ||||||
Stock based compensation
|
78,167 | 91,267 | ||||||
Interest paid in common stock
|
50,000 | 50,000 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Prepaid expenses and other current assets
|
(23,786 | ) | (62,674 | ) | ||||
Accounts payable
|
(12,661 | ) | (5,157 | ) | ||||
Accrued expenses
|
(14,260 | ) | (35,451 | ) | ||||
Accrued wages and other compensation
|
- | (195,000 | ) | |||||
Net cash used in operating activities
|
(1,022,398 | ) | (1,073,419 | ) | ||||
Cash flows from investing activities
|
||||||||
Purchases of fixed assets
|
(1,600 | ) | (1,465 | ) | ||||
Net cash used in investing activities
|
(1,600 | ) | (1,465 | ) | ||||
Net decrease in cash and cash equivalents
|
(1,023,998 | ) | (1,074,884 | ) | ||||
Cash and cash equivalents at beginning of year
|
3,139,347 | 4,629,486 | ||||||
Cash and cash equivalents at end of period
|
$ | 2,115,349 | $ | 3,554,602 | ||||
Supplemental disclosure of non-cash investing and financing activities:
|
||||||||
Common shares issued for accrued interest
|
$ | 50,000 | $ | 50,000 |
Period Ended
|
Grants Issued
|
Weighted Average Exercise Price
|
Weighted Average
Fair Value
|
||||||||||
June 30, 2011
|
1,120,000 | $ | 0.09 | $ | 0.07 | ||||||||
June 30, 2010
|
70,000 | $ | 0.08 | $ | 0.07 |
June 30,
|
|||||
2011
|
2010
|
||||
Stock options
|
4,289,312
|
3,539,754
|
|||
Convertible debenture
|
1,428,571
|
1,428,571
|
|||
Restricted stock
|
600,000
|
900,000
|
|||
Warrants
|
18,000,000
|
18,000,000
|
|||
Total potential dilutive securities not included in loss per share
|
24,317,883
|
23,868,325
|
June 30,
2011
|
December 31,
2010
|
|||||||
Working capital
|
$ | 2,039,370 | $ | 3,015,068 | ||||
Cash and cash equivalents
|
$ | 2,115,349 | $ | 3,139,347 | ||||
Convertible Debenture – due November 2012
|
$ | 1,000,000 | $ | 1,000,000 | ||||
Total
|
Less than
1 Year
|
1 - 3
Years
|
3 - 5
Years
|
Undetermined
|
||||||||||||||||
Operating leases
|
$ | 12,774 | $ | 12,774 | $ | - | $ | - | $ | - | ||||||||||
Convertible debenture
|
1,000,000 | - | 1,000,000 | - | - | |||||||||||||||
Convertible debenture interest
|
133,333 | 100,000 | 33,333 | - | - | |||||||||||||||
Total
|
$ | 1,146,107 | $ | 112,774 | $ | 1,033,333 | $ | - | $ | - |
Item 2
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
NONE
|
Item 3
|
Defaults upon Senior Securities
|
NONE
|
Item 4
|
(Removed and Reserved)
|
|
Item 5
|
Other Information
|
NONE
|
Item 6
|
Exhibits
|
|
Number
|
Exhibit
|
|
3.1
|
Restated Articles of Incorporation (Incorporated by reference to Appendix E to the Joint Proxy Statement/Prospectus included in the Form S-4 Registration Statement of the Company dated September 28, 1992 (No. 33-52398)
|
|
3.2
|
Certificate of Amendment of Restated Articles of Incorporation dated January 30, 1995 (Incorporated by reference to Annual Report on Form 10-K for the year ended December 31, 1994).
|
|
3.3
|
Certificate of Amendment of Restated Articles of Incorporation dated January 16, 1998 (Incorporated by reference to the Company’s Current Report on Form 8-K, dated February 6, 1998).
|
|
3.4
|
Certificate of Amendment of Restated Articles of Incorporation dated October 21, 1999 (Incorporated by reference to exhibit 4(e) to the Form S-3 Registration Statement of the Company filed September 28, 2000 (No. 333-46818)).
|
|
3.5
|
Certificate of Amendment of Restated Articles of Incorporation dated July 19, 2002 (Incorporated by reference to Exhibit 3 to the Company’s Report on Form 10-Q for the quarter ended June 30, 2002).
|
|
3.6
|
Certificate of Amendment of Restated Articles of Incorporation dated July 7, 2004 (Incorporated by reference to Exhibit 3.1 to the Company’s Report on Form 10-Q for the quarter ended June 30, 2004).
|
|
3.7
|
Certificate of Amendment to Articles of Incorporation dated September 23, 2005 (Incorporated by reference to exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).
|
|
3.8
|
Certificate of Amendment to Articles of Incorporation dated August 5, 2009 (Incorporated by reference to exhibit 3.8 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).
|
|
3.9
|
Amended and Restated By-Laws (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007).
|
|
31.1
|
Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15(d)-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15(d)-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.1
|
The following financial information from Pharmos Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2011, and December 31, 2010, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011, and June 30, 2010, (iii) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011, and June 30, 2010 and (iv) Notes to Condensed Consolidated Financial Statements.
|
PHARMOS CORPORATION
|
||||
Date: August 8, 2011
|
||||
by:
|
/s/ S. Colin Neill
|
|||
S. Colin Neill
|
||||
President, Chief Financial Officer, Secretary & Treasurer
|
||||
(Principal Accounting and Financial Officer)
|
By: /s/ Robert F. Johnston
|
By: /s/ S. Colin Neill
|
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Condensed Consolidated Balance Sheets | Â | Â |
Preferred stock, par value | $ 0.03 | $ 0.03 |
Preferred stock, authorized | 1,250,000 | 1,250,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $ 0.03 | $ 0.03 |
Common stock, authorized | 120,000,000 | 120,000,000 |
Common stock, issued | 59,732,332 | 59,585,273 |
Common stock, outstanding | 59,732,332 | 59,585,273 |
Treasury stock, shares | 2,838 | 2,838 |
Condensed Consolidated Statements Of Operations (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Expenses | Â | Â | Â | Â |
Research and development | $ 214,470 | $ 103,362 | $ 496,254 | $ 226,358 |
General and administrative | 259,415 | 300,492 | 553,760 | 639,806 |
Depreciation and amortization | 671 | 185 | 1,297 | 650 |
Total operating expenses | 474,556 | 404,039 | 1,051,311 | 866,814 |
Loss from operations | (474,556) | (404,039) | (1,051,311) | (866,814) |
Other (expense) income | Â | Â | Â | Â |
Interest income | 60 | 342 | 156 | 629 |
Interest expense | (25,937) | (27,929) | (52,406) | (56,303) |
Other income (expense) | Â | (353) | Â | (869) |
Other expense | (25,877) | (27,940) | (52,250) | (56,543) |
Net loss | $ (500,433) | $ (431,979) | $ (1,103,561) | $ (923,357) |
Net loss per share | Â | Â | Â | Â |
- basic and diluted | $ (0.01) | $ (0.01) | $ (0.02) | $ (0.02) |
Weighted average shares outstanding | Â | Â | Â | Â |
- basic and diluted | 59,095,703 | 58,400,211 | 59,045,622 | 58,306,062 |
Document And Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 08, 2011
|
|
Document And Entity Information | Â | Â |
Document Type | 10-Q | Â |
Amendment Flag | false | Â |
Document Period End Date | Jun. 30, 2011 | |
Document Fiscal Period Focus | Q2 | Â |
Document Fiscal Year Focus | 2011 | Â |
Entity Registrant Name | PHARMOS CORP | Â |
Entity Central Index Key | 0000713275 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Entity Common Stock, Shares Outstanding | Â | 59,879,391 |
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Common Stock Transactions
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Common Stock Transactions | Â |
Common Stock Transactions | 6. Common Stock Transactions
On May 11, 2009, Robert Johnston, the Executive Chairman, was awarded 1,200,000 shares of restricted stock. 300,000 of such shares became vested and free from a risk of forfeiture on the first anniversary of the date hereof, and the remaining 900,000 shares become vested and free from a risk of forfeiture in quarterly increments over a three-year period commencing on the first anniversary of the grant date. Over the four year period, a total of $264,000 will be recorded as compensation expense. In the first six months of 2011, the Company expensed $33,000 for Mr. Johnston's restricted stock.
On September 3, 2010, Steven Leventer Ph.D., board member, was awarded 350,000 shares of non-qualified stock options. One-third of the options shall be exercisable as of the date hereof, one-third of the options shall be exercisable as of the first anniversary of the date hereof and one-third of the options shall be exercisable as of the second anniversary of the date hereof. In the first six months of 2011, the Company expensed $5,844 for Dr. Leventer's stock options.
In the first quarter of 2011, the Company elected to pay the interest on its 10% Convertible Debentures due November 2012 incurred through the sixth interest payment date, January 15, 2011, in common stock to the remaining debenture holder. The dollar amount of interest incurred from July 15, 2010 to January 15, 2011 to be paid in stock amounted to $50,000 which, converted at $0.34 per share, resulted in an aggregate of 147,059 shares issued to the debenture holder.
As of June 30, 2011, the Company had reserved 4,289,312 common stock shares for outstanding stock options. The Company has outstanding warrants exercisable for 18,000,000 shares of common stock. The exercise price of the warrants, which have a five-year term and expire on April 21, 2014, is $0.12 per share. |
Significant Accounting Policies
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies | Â | ||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies | 2. Significant Accounting Policies
Basis of consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Pharmos Ltd. and Vela Pharmaceuticals. All significant intercompany balances and transactions are eliminated in consolidation. Vela Acquisition Corp. is dormant and was used as the vehicle to acquire Vela Pharmaceuticals Inc. in October 2006. The Israel operations, including research and development activities, ceased effective October 31, 2008 and the Company completed its voluntary liquidation in May 2010.
Cash and Cash Equivalents
Cash and Cash Equivalents as of June 30, 2011 consist primarily of a money market fund invested in short term government obligations.
Concentration of Credit Risk
Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents. The Company maintains its cash and cash equivalent balances with a high quality financial institution who invests the Company's funds in Government short-term instruments. Consequently the Company believes that such funds are subject to minimal credit risk.
Grants
The costs and expenses of research and development activities are partially funded by grants the Company received. The grants are deducted from research and development expenses at the time such grants are received. There were no grants received in the three or six month periods ended June 30, 2011 and 2010, respectively.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities, if any, are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled and any change in tax rates is recognized in the results of operations in the period that includes the enactment date.
The Company follows the guidance for Accounting for Uncertainty in Income Taxes which prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. Pharmos conducts business in the US and as a result, files US and New Jersey income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities. At present, there are no ongoing audits or unresolved disputes with the various tax authorities that the Company files with and there are no tax uncertainties as of June 30, 2011 and December 31, 2010.
Fair value of financial instruments
The carrying amounts of the Company's financial instruments, including cash and cash equivalents, other assets, accounts payable and accrued liabilities approximate fair value due to their short term maturities.
The Company has estimated the fair value of the $1,000,000 outstanding convertible debenture due November 1, 2012 to be approximately $638,000 at June 30, 2011. In determining the fair value the Company used level 3 inputs (unobservable) and a discount rate of 35%. Management used a discount rate they believe was most relevant given the business risks and because they have been unable to raise third party financing during the past several years.
Equity based compensation
During the six months ended June 30, 2011 and 2010, the Company recognized equity based compensation expense of $78,167 and $91,267, respectively, for restricted stock and stock options. As of June 30, 2011, the total compensation costs related to non-vested stock options not yet recognized is $155,358 which will be recognized over the next three and half years. Also, the Executive Chairman of the Board non-vested restricted stock not yet recognized is $121,000 which will be recognized over the next two years.
During the six months ended June 30, 2011 and 2010, executive and outside directors of the Company were granted stock options under the Pharmos 2000 and 2009 Stock Option Plan per the table below:
Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-04, Fair Value Measurement (Topic 820). This ASU is intended to create consistency between U.S. GAAP and International Financial Reporting Standards on the definition of fair value and on the guidance on how to measure fair value and on what to disclose about fair value measurements. This ASU will be effective for financial statements issued for fiscal periods beginning after December 15, 2011, with early adoption prohibited for public entities. The Company is currently evaluating the impact ASU 2011-04 will have on its consolidated financial statements.
Subsequent Events
In the third quarter of 2011, the Company elected to pay the interest on its 10% Convertible Debentures due November 2012 incurred through the seventh interest payment date, July 15, 2011, in common stock to the remaining debenture holder. The dollar amount of interest incurred from January 15, 2011 to July 15, 2011 to be paid in stock amounted to $50,000 which, converted at $0.34 per share, resulted in an aggregate of 147,059 shares issued to the debenture holder. |
Basis Of Presentation, Liquidity And Business Risks
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Basis Of Presentation, Liquidity And Business Risks | Â |
Basis Of Presentation, Liquidity And Business Risks | Basis of Presentation, Liquidity and Business Risks
The accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accrual adjustments, considered necessary for a fair statement have been included. Operating results and cash flows for the six month period ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. The December 31, 2010 condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America and included in the Form 10-K filing.
At June 30, 2011, the Company had approximately $2.1 million in cash and cash equivalents. Management believes that the current cash and cash equivalents, totaling $2.1 million as of June 30, 2011, will be sufficient to support our currently planned continuing operations through at least March 31, 2012. However, the Company's ability to continue as a going concern is largely dependent upon achieving a collaboration with a pharmaceutical partner or raising additional capital to advance its lead compounds, Dextofisopam, for the treatment of IBS, and Levotofisopam, for the treatment of gout. The Company has in the past pursued various funding and financing options; however management believes that future funding or financing options may be challenging because of the current environment.
The Company does not currently have the finances and resources to conduct large clinical trials for its most advanced compound, Dextofisopam and continues to seek a partner. Meanwhile, the Company is pursuing the development of Levotofisopam for the treatment of Gout and will incur preclinical and clinical trial costs. The Company expects to have sufficient cash resources to fund the development of Levotofisopam through completion of the proof-of-concept trial. The Company intends to partner Levotofisopam upon successful completion of a proof-of-concept clinical trial. Should this not occur, the Company may be unable to continue operations, including repayment of the outstanding convertible debenture, unless additional capital can be obtained. As such these factors raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from this uncertainty. |
Convertible Debentures
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6 Months Ended |
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Jun. 30, 2011
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Convertible Debentures | Â |
Convertible Debentures | 3. Convertible Debentures
On January 3, 2008, Pharmos Corporation completed a private placement of its 10% Convertible Debentures due November 2012. At the closing the Company issued $4,000,000 principal amount of the Debentures, at par, and received gross proceeds in the same amount. The purchasers consisted of certain existing investors in the Company, namely Venrock Associates (which is affiliated with Anthony B. Evnin), New Enterprise Associates (which is affiliated with Charles W. Newhall, III), Lloyd I. Miller, III and Robert F. Johnston.
The Debentures mature the earlier of November 1, 2012 or the sale of the Company. The Debentures, together with all accrued and unpaid interest thereon, may be repaid, without premium or penalty, commencing on November 1, 2011. Starting on November 1, 2009 (or earlier sale of the Company), any outstanding Debenture may be converted into common shares at the option of the holder. The conversion price is fixed equal to $0.70 per share. The Debentures bear interest at the rate of 10% per annum, payable semi-annually either in cash or common stock of the Company at the option of the Company, provided that an effective registration statement is in effect.
On April 21, 2009, Venrock Associates (which is affiliated with Anthony B. Evnin, a Director of the Company), New Enterprise Associates (which is affiliated with Charles W. Newhall, III, a Director of the Company) and Robert F. Johnston, the Company's Executive Chairman of the Board of Directors, agreed to convert as of such date the Company's 10% Convertible Debentures due November 1, 2012 held by them, comprising an aggregate of $3,000,000 in principal amount, at a conversion price of $0.275 per share. An aggregate of 11,145,570 shares was issued upon conversion of the principal and accrued but unpaid interest on the debentures.
A registration statement covering the resale of the shares underlying the debenture held by Lloyd I. Miller, III, was declared effective in February 2011. |
Acquisition Of Vela Pharmaceuticals, Inc.
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6 Months Ended |
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Jun. 30, 2011
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Acquisition Of Vela Pharmaceuticals, Inc. | Â |
Acquisition Of Vela Pharmaceuticals, Inc. | 4. Acquisition of Vela Pharmaceuticals, Inc.
In 2006, the Company acquired Vela Pharmaceuticals, Inc. ("Vela"), which had a Phase II product candidate, Dextofisopam, in development to treat IBS. The Company has dedicated substantial resources to complete clinical development of this product candidate. The Vela acquisition also included additional compounds in preclinical and/or clinical development for neuropathic pain, inflammation and sexual dysfunction. The Company issued 6.5 million shares of common stock and paid $6 million to Vela shareholders at closing. The Agreement also includes additional performance-based milestone payments to the Vela stockholders related to the development of Dextofisopam, aggregating up to an additional $5 million in cash and the issuance of up to an additional 9,250,000 shares of Pharmos common stock. None of the milestone conditions were met at December 31, 2010 and June 30, 2011 except for a $1.0 million milestone payment made by Pharmos due upon the study's commencement which was paid in 2008.
The remaining milestones are as follows:
· $1 million cash: Final patient enrolled in Phase 2b trial (1) · $2 million + 2 million shares: NDA submission · $2 million cash +2.25 million shares: FDA approval · 1 million shares: Approval to market in Europe or Japan · 4 million shares: $100 million sales of Dextofisopam, when and if approved, in any 12-month period
(1) The milestone was reached when the final patient was enrolled in the Dextofisopam Phase 2b trial and was recognized in the first quarter of 2009 as all probability criteria were met. The milestone had two components, a cash portion of $1,000,000 and a share portion of 2,000,000 shares valued at $180,000. The total charge in the first quarter was $1,180,000. The shares were issued in November 2009 under the terms of the Amendment #3 to the agreement and plan of merger. Under that amendment the payment of the cash portion was deferred until such time as 1) the Company successfully entered into a strategic collaboration or licensing agreement with a third party for the development of Dextofisopam resulting in an upfront cash fee of at least $10 million, and 2) payment of the cash milestone would still leave the Company with one year's operating cash.
The results of the Phase 2b trial were announced in September 2009 and reported that while there was clearly drug activity, the trial did not achieve its primary endpoint. Under the terms of the Vela acquisition agreement as amended, the 2 million shares were issued on November 2, 2009. The cash portion that was expensed in Q1 2009 was reversed in Q4 2009 since it is not deemed probable that the amended terms would be achieved. Since the trial results were not successful, no other milestones have been achieved. |
Net Loss Per Common Share
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Jun. 30, 2011
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Net Loss Per Common Share | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Common Share | 5. Net Loss Per Common Share
Basic and diluted net loss per common share was computed by dividing the net loss for the period by the weighted average number of shares of common stock issued and outstanding. For the periods ending June 30, 2011 and 2010, other potential common stock has been excluded from the calculation of diluted net loss per common share, as their inclusion would be anti-dilutive.
The following table sets forth the number of potential shares of common stock that have been excluded from diluted loss per share since inclusion would have been anti-dilutive.
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The Company
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6 Months Ended |
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Jun. 30, 2011
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The Company | Â |
The Company | 1. The Company
Pharmos Corporation (the Company or Pharmos) is a biopharmaceutical company that discovers and develops novel therapeutics to treat a range of diseases of the nervous system, including disorders of the brain-gut axis (e.g., Irritable Bowel Syndrome), with a focus on pain/inflammation, and autoimmune disorders.
Pharmos owns the rights to both R and S Tofisopam through two US issued composition of matter patents. These are the two enantiomers of racemic tofisopam that has been used safely outside the United States for over 30 years. Dextofisopam is the R enantiomer and is being developed for the treatment of irritable bowel syndrome (IBS) and as described below has completed clinical testing through Phase 2b. It is a large unmet medical need but Pharmos does not have the financial resources to fund large IBS trials and therefore seeks a pharmaceutical company as a partner. Levotofisopam is the S enantiomer and is being developed as a treatment for gout.
The Company's operations in Israel were closed effective October 2008 and the Company has been actively seeking to sell and license the CB2 selective agonist program that had been developed in Israel.
Gout: Levotofisopam (S-Tofisopam) for treatment of Gout.
Levotofisopam is the S-enantiomer of the racemic mixture RS-tofisopam, a well-tolerated, effective, nonsedating agent used outside the United States for the treatment of a variety of disorders associated with stress or autonomic instability.
The Company has submitted an Investigational New Drug (IND) application to the FDA and received clearance to conduct human clinical trials, subject to first confirming the safety of the dose planned to be used in a proof-of-concept study in Gout patients. To confirm the safety of the planned dose, the Company is currently conducting a non-human primate toxicology study. Upon successful completion of the preclinical trial, the Company plans to conduct a proof-of concept clinical trial in the US in gout patients using Levotofisopam. This trial follows two ex-US Phase 1 clinical studies that were completed by Vela Pharmaceuticals (merged with Pharmos in October 2006). In these studies, conducted in healthy volunteers in the United Kingdom and The Netherlands, Levotofisopam treatment was generally well tolerated and was associated with a large and rapid reduction in mean uric acid values.
The lowering of uric acid is believed to be a key treatment in gout patients. The precise mechanism by which Levotofisopam lowers uric acid is unknown. However, unlike allopurinol, a drug commonly used to treat gout patients, Levotofisopam does not inhibit xanthine oxidase. Available data indicate that the predominant mechanism of the serum-urate lowering effect of levotofisopam in humans is through uricosuric activity rather than inhibition of urate synthesis. A precondition leading in some cases to gout is hyperuricemia, which leads to increased pools of insoluable urate. Chronic hyperuricemia can lead to destructive gouty arthritis, formation of kidney stones, urate nephropathy, and /or tophi (crystal aggregates), which can produce grotesque malformations of the hands, feet, or other portions of the body. Hyperuricemia is caused either by an overproduction of or, more usually (80-90% of cases), underexcretion of uric acid, the metabolic product of purine metabolism.
IBS –D: Dextofisopam for Irritable Bowel Syndrome.
The Company's most advanced product is Dextofisopam for the treatment of irritable bowel syndrome (IBS). IBS is a chronic and sometimes debilitating condition that affects roughly 10%-15% of U.S. adults and is two to three times more prevalent in women than in men. With an absence of safe and effective therapies, Dextofisopam's novel non-serotonergic activity holds the potential for a unique and innovative treatment approach to IBS with diarrhea predominant and alternating patients.
Dextofisopam has completed a statistically significant Phase 2a trial (N=141, p=0.033) and a Phase 2b trial ( N=324) which did not meet the primary endpoint of overall adequate relief. Although the primary efficacy variable (% of weeks responding for adequate overall relief of IBS symptoms) did not reach statistical significance, the percentage responding for the Dextofisopam 200 mg group was higher than that observed for the Phase 2a trial. However, the placebo response rate was also higher than expected compared to the Phase 2a placebo response.
This result was similarly demonstrated across all other secondary efficacy variables associated with the adequate overall relief question. In all cases except in the first month, the response rates for the Dextofisopam 200 mg group were essentially the same as or in most cases better than the response rates observed for the Phase 2a trial. Also, secondary response variables of adequate relief of abdominal pain and discomfort and overall IBS symptoms ratings showed statistical significance and trends favoring the Dextofisopam 200 mg group compared to placebo.
The Company's strategy is to seek a pharmaceutical partner with the appropriate GI clinical and scientific expertise for further development of Dextofisopam.
The CB2 selective receptor agonist program
Pharmos' cannabinoid research was geared toward development of selective and specific CB2 receptor agonists. By activating CB2 receptors, CB2 agonists inhibit autoimmune and inflammatory processes, and are likely to be useful for treating pain, autoimmune, inflammatory and degenerative disorders.Although progress has been made, the early stage of this work and resource limitations have resulted in termination of these programs. Pharmos' strategy is to sell or out license the technology developed around the cannabinoid research. Pharmos had developed these compounds in preclinical testing for neuropathic pain.
Substantial development work was conducted on the CB2 selective agonist program in Israel from 2002 through 2008. The Company expended approximately $15 million on this development program and these assets are available for sale or licensing. During the quarter the Company continued to engage in discussions on the possible licensing and or sale of the CB2 program. |