UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 21, 2003
MANHATTAN PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 000-27282 36-3898269
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
787 Seventh Avenue, 48th Floor
New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 554-4525
(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to an Agreement and Plan of Merger dated as of December 17,
2002 (the "Merger Agreement"), by and among Manhattan Pharmaceuticals, Inc.,
formerly known as Atlantic Technology Ventures, Inc. (the "Registrant"),
Manhattan Pharmaceuticals, Inc., a Delaware corporation ("MP"), and Manhattan
Pharmaceuticals Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of the Registrant ("Merger Sub"), Merger Sub merged with and into MP,
with MP remaining as the surviving company (the "Merger"). The Merger was
effective as of February 21, 2003.
In accordance with the terms of the Merger Agreement, each outstanding
share of MP common stock automatically converted into the right to receive
approximately 12.7 shares of the Registrant's common stock. At the time of the
Merger there were 7,352,633 shares of MP common stock outstanding, requiring the
Registrant to issue approximately 93,449,584 shares of its common stock to the
former stockholders of MP. Accordingly, after giving effect to the Merger, the
conversion of the Series A Preferred Stock and the exchange of warrants, the
Registrant has 116,811,980 shares of common stock outstanding. In addition,
immediately prior to the effective time of the Merger, there were outstanding
options and warrants to purchase an aggregate of 864,280 shares of MP common
stock, which as a result of the Merger, now represent the right to purchase an
aggregate of 10,984,719 shares of the Registrant's common stock.
David M. Tanen, a member of the Registrant's board of directors since
January 2002, was also a director of MP since its inception in August 2001. Mr.
Tanen abstained from all board actions of either the Registrant or MP relating
to approval of the Merger Agreement. Mr. Tanen is also an employee of Paramount
Capital, Inc. (together with its affiliated entities, "Paramount"), an entity
wholly-owned by Dr. Lindsay A. Rosenwald. Immediately prior the completion of
the Merger, Dr. Rosenwald beneficially owned approximately 28 percent of the
Registrant's common stock and approximately 14 percent of MP's common stock.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The financial statements of Manhattan Research Development,
Inc. are included in this report beginning at page F-1, below.
(b) Pro Forma Financial Information.
Pro forma financial information is included in this report
beginning at page F-13 below.
(c) Exhibits
2.1 Agreement and Plan of Merger dated December 17, 2002
by and among the Registrant, Manhattan Research
Development, Inc. (f/k/a Manhattan Pharmaceuticals,
Inc.) and Manhattan Pharmaceuticals Acquisition
Corp.*
23.1 Consent of J. H. Cohn LLP
23.2 Consent of Weinberg & Company, P.A.
---------------
* Previously filed.
2
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
MANHATTAN PHARMACEUTICALS, INC.
Date: May 9, 2003 By: /s/ Nicholas J. Rossettos
-----------------------------------
Nicholas J. Rossettos
Chief Financial Officer
3
Index
PAGE
----
Report of J. H. Cohn LLP.................................................................................. F-2
Report of Weinberg & Company, P.A......................................................................... F-3
Balance Sheets as of December 31, 2002 and 2001........................................................... F-4
Statements of Operations for the Year Ended December 31, 2002 and Periods from August 6, 2001
(Date of Inception) to December 31, 2001 and 2002.................................................... F-5
Statement of Changes in Stockholders' Equity (Deficiency) for the Year Ended December 31, 2002
and Periods from August 6, 2001 (Date of Inception) to December 31, 2001 and 2002.................... F-6
Statements of Cash Flows for the Year Ended December 31, 2002 and Periods from August 6, 2001
(Date of Inception) to December 31, 2001 and 2002.................................................... F-7
Notes to Financial Statements............................................................................. F-8
Introduction to the Unaudited Pro Forma Condensed Combined Financial Statements........................... F-13
Unaudited Pro Forma Condensed Combined Balance Sheet...................................................... F-14
Unaudited Pro Forma Condensed Combined Statement of Operations............................................ F-15
Notes to Unaudited Pro Forma Condensed Combined Financial Statements...................................... F-16
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Manhattan Research Development, Inc.
We have audited the accompanying balance sheet of MANHATTAN RESEARCH
DEVELOPMENT, INC. (formerly Manhattan Pharmaceuticals, Inc.) (a development
stage company) as of December 31, 2002, and the related statements of
operations, changes in stockholders' equity (deficiency) and cash flows for the
year then ended and for the period from January 1, 2002 to December 31, 2002 as
related to the period from August 6, 2001 (date of inception) to December 31,
2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Manhattan Research Development,
Inc. as of December 31, 2002, and its results of operations and cash flows for
the year then ended and for the period from January 1, 2002 to December 31, 2002
as related to the period from August 6, 2001 (date of inception) to December 31,
2002, in conformity with accounting principles generally accepted in the United
States of America.
The financial statements referred to above have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1, 2 and 10 to
the financial statements, the Company, which has suffered recurring losses from
operations, completed a merger on February 21, 2003 with Manhattan
Pharmaceuticals, Inc., which has also suffered recurring losses from operations.
The combined Company will have limited financial resources. Such matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 2. The
financial statements referred to above do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ J.H. Cohn LLP
Roseland, New Jersey
February 14, 2003, except for Notes 1, 2 and 10 which are as of February 21,
2003
F-2
REPORT OF WEINBERG & COMPANY
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Manhattan Pharmaceuticals, Inc.
(A development stage company)
We have audited the accompanying balance sheet of Manhattan Pharmaceuticals,
Inc. (a development stage company) as of December 31, 2001 and the related
statements of operations, changes in stockholders' deficiency and cash flows for
the period from August 6, 2001 (inception) to December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Manhattan Pharmaceuticals, Inc. as
of December 31, 2001, and the results of its operations and its cash flows for
the period from August 6, 2001 (inception) to December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has a net loss from operations of $56,796
since inception, a negative cash flow from operating activities of $27,500 since
inception, a working capital deficiency of $56,796 and a stockholders'
deficiency of $56,796. These matters raise substantial doubt about the Company's
ability to continue as a going concern. Management's plan in regards to these
matters is also described in Note 9. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ WEINBERG & COMPANY, P.A.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
November 1, 2002
F-3
MANHATTAN RESEARCH DEVELOPMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
ASSETS 2002 2001
------------ ------------
Current assets - cash $ 1,721,123 $ --
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ 164,899
Accrued expenses 15,973 $ 29,296
Note payable to bank 600,000
Notes payable to stockholder 206,000 27,500
Due affiliate 96,328
------------ ------------
Total liabilities 1,083,200 56,796
------------ ------------
Commitments
Stockholders' equity (deficiency):
Common stock, $.001 par value; 10,000,000 shares
authorized; 6,197,250 and 4,000,000 shares issued
and outstanding 6,197 4,000
Additional paid-in capital 1,763,710
Unearned consulting costs (37,868)
Deficit accumulated during the development stage (1,094,116) (56,796)
Subscription receivable (4,000)
------------ ------------
Total stockholders' equity (deficiency) 637,923 (56,796)
------------ ------------
Totals $ 1,721,123 $ --
============ ============
See Notes to Financial Statements.
F-4
MANHATTAN RESEARCH DEVELOPMENT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002 AND PERIODS FROM
AUGUST 6, 2001 (DATE OF INCEPTION)
TO DECEMBER 31, 2001 AND 2002
August 6, 2001
Year Ended to December 31,
December 31, ----------------------------
2002 2001 2002
------------ ------------ ------------
Revenue $ -- $ -- $ --
------------ ------------ ------------
Operating expenses:
Selling, general and administrative expenses 348,021 1,560 349,581
Research and development expenses 670,161 55,236 725,397
------------ ------------ ------------
Totals 1,018,182 56,796 1,074,978
------------ ------------ ------------
Loss from operations (1,018,182) (56,796) (1,074,978)
Interest expense 19,138 19,138
------------ ------------ ------------
Net loss $ (1,037,320) $ (56,796) $ (1,094,116)
============ ============ ============
See Notes to Financial Statements.
F-5
MANHATTAN RESEARCH DEVELOPMENT, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
YEAR ENDED DECEMBER 31, 2002 AND PERIODS FROM
AUGUST 6, 2001 (DATE OF INCEPTION)
TO DECEMBER 31, 2001 AND 2002
Common Stock Additional Unearned
------------------------- Paid-in Consulting
Shares Amount Capital Costs
----------- ---------- ------------ ------------
Stock issued at $.001 per share for subscription
receivable 4,000,000 $ 4,000
Net loss
----------- ----------
Balance, December 31, 2001 4,000,000 4,000
Proceeds from subscription receivable
Stock issued at $.001 per share for license
rights 1,000,000 1,000
Stock options issued for consulting services $ 60,589 $ (60,589)
Amortization of unearned consulting
costs 22,721
Sales of common stock at $1.60 per share
through private placement, net of
expenses of $211,281 1,197,250 1,197 1,703,121
Net loss
--------- ------------ ------------ ------------
Balance, December 31, 2002 6,197,250 $ 6,197 $ 1,763,710 $ (37,868)
=========== ========= ============ ============
Deficit
Accumulated
During
the Develop-
Subscription ment
Receivable Stage Total
------------ ------------- ----------
Stock issued at $.001 per share for subscription
receivable $ (4,000)
Net loss $ (56,796) $ (56,796)
------------ ------------- ----------
Balance, December 31, 2001 (4,000) (56,796) (56,796)
Proceeds from subscription receivable 4,000 4,000
Stock issued at $.001 per share for license
rights 1,000
Stock options issued for consulting services
Amortization of unearned consulting
costs 22,721
Sales of common stock at $1.60 per share
through private placement, net of
expenses of $211,281 1,704,318
Net loss (1,037,320) (1,037,320)
------------ ------------- ----------
Balance, December 31, 2002 $ -- $ (1,094,116) $ 637,923
============ ============= ==========
See Notes to Financial Statements.
F-6
MANHATTAN RESEARCH DEVELOPMENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2002 AND PERIODS FROM
AUGUST 6, 2001 (DATE OF INCEPTION)
TO DECEMBER 31, 2001 AND 2002
August 6, 2001
to December 31,
Year Ended -------------------------------
December 31, 2002 2001 2002
------------------ -------------- --------------
Operating activities:
Net loss $ (1,037,320) $ (56,796) $ (1,094,116)
Adjustments to reconcile net loss to net
cash used in operating activities:
Common stock issued for license rights 1,000 1,000
Amortization of unearned consulting
services 22,721 22,721
Changes in operating assets and
liabilities:
Accounts payable 164,899 164,899
Accrued expenses (13,323) 29,296 15,973
Due affiliate 96,328 96,328
------------------ -------------- --------------
Net cash used in operating
activities (765,695) (27,500) (793,195)
------------------ -------------- --------------
Financing activities:
Proceeds from issuance of notes payable to
stockholders 206,000 27,500 233,500
Repayments of notes payable to stockholders (27,500) (27,500)
Proceeds from issuance of note payable to
bank 600,000 600,000
Proceeds from subscription receivable 4,000 4,000
Proceeds from sale of common stock, net 1,704,318 1,704,318
------------------ -------------- --------------
Net cash provided by financing
activities 2,486,818 27,500 2,514,318
------------------ -------------- --------------
Net increase in cash 1,721,123 -- 1,721,123
Cash, beginning of period -- -- --
------------------ -------------- --------------
Cash, end of period $ 1,721,123 $ -- $ 1,721,123
================== ============== ==============
Supplemental disclosure of cash flow data:
Interest paid $ 15,665 $ 15,665
================== ==============
Supplemental schedule of noncash investing and financing activities:
Stock options issued for consulting services $ 60,589 $ 60,589
================== ==============
See Notes to Financial Statements.
F-7
MANHATTAN RESEARCH DEVELOPMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BUSINESS:
Manhattan Research Development, Inc. (the "Company" or "Manhattan
Research") was incorporated on August 6, 2001 under the laws of
the State of Delaware. The Company's name was changed from
Manhattan Pharmaceuticals, Inc. to Manhattan Research
Development, Inc. on February 21, 2003. The Company is a
development stage biopharmaceutical company that holds an
exclusive world-wide, royalty-free license to certain
intellectual property (the "Property") owned by Oleoyl-Estrone
Developments, SL ("OED") of Barcelona, Spain (the "University").
Oleoyl-Estrone is an orally administered small molecule that has
been shown to cause significant weight loss in preclinical animal
studies regardless of dietary modifications.
On February 21, 2003, Manhattan Pharmaceuticals, Inc. (formerly
known as "Atlantic Technology Ventures, Inc.") ("Manhattan
Pharmaceuticals") completed a reverse acquisition of the Company.
Manhattan Pharmaceuticals is a publicly-held company. The Company
was privately-held until the merger. The merger was effected
pursuant to an Agreement and Plan of Merger dated December 17,
2002 (the "Merger Agreement") by and among the Company, Manhattan
Pharmaceuticals and Manhattan Pharmaceuticals Acquisition Corp.
("MPAC") which was a wholly-owned subsidiary of Manhattan
Pharmaceuticals. In accordance with the terms of the Merger
Agreement, MPAC merged with and into the Company, with the
Company remaining as the surviving corporation and a wholly-owned
subsidiary of Manhattan Pharmaceuticals. Pursuant to the Merger
Agreement, upon the effective time of the merger, the outstanding
shares of common stock of the Company automatically converted
into an aggregate of 93,449,584 shares of common stock of
Manhattan Pharmaceuticals, which represented 80% of the
outstanding voting stock of Manhattan Pharmaceuticals after
giving effect to the merger. In addition, immediately prior to
the merger the Company had outstanding options and warrants to
purchase an aggregate of 864,280 shares of its common stock,
which, in accordance with the terms of the merger, automatically
converted into options and warrants to purchase an aggregate of
10,984,719 shares of the common stock of Manhattan
Pharmaceuticals. Since the stockholders of the Company received
the majority of the voting shares of Manhattan Pharmaceuticals,
the merger will be accounted for as a reverse acquisition whereby
the Company will be the accounting acquirer (legal acquiree) and
Manhattan Pharmaceuticals will be the accounting acquiree (legal
acquirer) as further explained in Note 10.
Manhattan Pharmaceuticals is engaged in the business of
developing and commercializing early-stage technologies,
particularly biomedical and pharmaceutical technologies. During
2002, Manhattan Pharmaceuticals had rights to technologies
relating to three different drug candidates with potential
application in the areas of cataract, anti-inflammatory and
anti-microbial treatments. However, management of the combined
Company intends to initially focus after the merger on the
development and commercialization of the technologies owned or
licensed by the Company.
NOTE 2 - LIQUIDITY:
The Company reported a net loss of $1,037,320 for the year ended
December 31, 2002. The net loss from August 6, 2001 (date of
inception) to December 31, 2002 amounted to $1,094,116. As
discussed in Notes 1 and 10, the Company and Manhattan
Pharmaceuticals completed their reverse acquisition on February
21, 2003. Manhattan Pharmaceuticals has also suffered recurring
losses from its operations. Based on the resources available to
the Company and Manhattan Pharmaceuticals at December 31, 2002,
management believes that the combined Company will continue to
incur net losses through at least December 31, 2003 and will need
additional equity or debt financing or will need to generate
revenues through the licensing of its products or by entering
F-8
into strategic alliances to be able to sustain its operations
until it can achieve profitability, if ever. These matters raise
substantial doubt about the Company's ability to continue as a
going concern.
The combined Company's ability to continue its operations will
depend on its ability to raise additional funds through various
potential sources such as equity and debt financing,
collaborative agreements and strategic alliances, and its ability
to realize the full potential of its technology in development.
Additional funds are currently not available on acceptable terms
and may not become available. There can be no assurance that any
additional funding that the combined Company obtains will be
sufficient to meet the combined Company's needs in the short- and
long-term. Through December 31, 2002, a significant portion of
the financing obtained by the Company and Manhattan
Pharmaceuticals has been through private placements of common
stock, preferred stock and warrants, the issuance of common stock
for stock options and warrants exercised and debt financing.
Until and unless the combined Company's operations generate
significant revenues, the combined Company will attempt to
continue to fund operations from cash on hand and through the
sources of capital previously described. From November 2002
through February 20, 2003, the combined Company has raised
$2,747,600 from financing activities.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of estimates:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires management to make estimates and
assumptions that affect certain reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.
Research and development expenses:
Research and development expenses are expensed as incurred.
Income taxes:
The Company accounts for income taxes pursuant to the asset
and liability method which requires deferred income tax assets
and liabilities to be computed for temporary differences
between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts
in the future based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected
to be realized. The income tax provision is the tax payable or
refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
Stock-based compensation:
Options, warrants and stock awards issued to nonemployees and
consultants are recorded at their fair value as determined in
accordance with Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," and 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 recognized as expense over the
related vesting period.
NOTE 4 - NOTE PAYABLE TO BANK:
At December 31, 2002, the Company had a $600,000 note payable to
a bank with an annual interest rate of 3.23% due on January 5,
2003. The note is collateralized by a stockholder's personal
investment account of $600,000.
F-9
In January 2003, the Company made a partial repayment of
principal in the amount of $400,000. The remaining principal
balance was repaid on March 5, 2003 without any penalty.
NOTE 5 - NOTES PAYABLE TO STOCKHOLDER:
At December 31, 2002 and 2001, the Company had issued unsecured
notes payable totaling $206,000 and $27,500, respectively, to a
stockholder. The notes bear interest at 5% and became due on
demand when the Company received $1,000,000 from the sale of
equity securities.
NOTE 6 - DUE AFFILIATE:
On July 1, 2002, the Company entered into an office services
agreement (the "Services Agreement") with a company owned by a
principal stockholder of the Company. Pursuant to the Services
Agreement, which expires on July 1, 2003, the Company pays
$15,000 per month for the use of office space and management
services. For the year ended December 31, 2002, the Company was
charged $90,000, which is included in selling, general and
administrative expenses.
NOTE 7 - LICENSE AND CONSULTING AGREEMENTS:
On February 15, 2002, the Company entered into a License
Agreement (the "License Agreement") with OED. Under the terms of
the License Agreement, OED granted to the Company a world-wide
license to make, use, lease and sell the products incorporating
the Property (see Note 1). OED also granted to the Company the
right to sublicense to third parties the Property or aspects of
the Property with the prior written consent of OED. OED retains
an irrevocable, nonexclusive, royalty-free right to use the
Property solely for its internal, noncommercial use. The License
Agreement shall terminate automatically upon the date of the last
to expire patent contained in the Property or upon the Company's
bankruptcy. OED may terminate the License Agreement in the event
of a material breach by the Company that is not cured within the
notice period. The Company may terminate the License Agreement
for any reason upon 60 days notice.
Under the License Agreement, the Company agreed to pay to OED
certain licensing fees which are being expensed as they are
incurred. Through December 31, 2002, the Company paid $175,000 in
licensing fees which is included in research and development
expense. In addition, pursuant to the License Agreement, the
Company issued 1,000,000 shares of its common stock to OED. The
Company valued these shares at their then estimated fair value of
$1,000.
In connection with the License Agreement, the Company has agreed
to future milestone payments to OED as follows:
(i) $250,000 upon the treatment of the first patient in a
Phase I clinical trial under a Company-sponsored
investigational new drug application ("IND"); (ii) $250,000
upon the treatment of the first patient in a Phase II clinical
trial under a Company-sponsored IND; (iii) $750,000 upon the
first successful completion of a Company-sponsored Phase II
clinical trial under a Company-sponsored IND; (iv) $2,000,000
upon the first successful completion of a Company-sponsored
Phase III clinical trial under a Company sponsored IND; and
(v) $6,000,000 upon the first final approval of the first new
drug application for the first licensed product by the United
States Food and Drug Administration.
In addition to the License Agreement, the Company entered into a
consulting agreement with OED. The agreement became effective in
February 2002, at a fee of $6,250 per month, and will terminate
when the License Agreement terminates. The fees associated with
the consulting agreement are expensed as incurred. OED agreed to
serve as a member of the Company's Scientific Advisory
F-10
Board and to render consultative and advisory services to the
Company. Such services include research, development and clinical
testing of the Company's technology as well as the reporting of
the findings of such tests, assistance in the filing of patent
applications and oversight and direction of efforts in regards to
personnel for clinical development.
NOTE 8 - INCOME TAXES:
The estimated tax effects of significant temporary differences
and carryforwards that gave rise to net deferred income tax
assets as of December 31, 2002 and 2001 are as follows:
2002 2001
---------- ----------
Net deferred tax assets:
Net operating loss carryforwards $ 417,000 $ 22,000
Research and experimentation credit
carryforwards 26,000
Stock options granted to consultants 24,000
---------- ----------
467,000 22,000
Less valuation allowance (467,000) (22,000)
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
Since realization of the benefits from the temporary differences
is not considered by management to be more likely than not, a
full valuation allowance has been provided to reduce deferred tax
assets to zero. The valuation allowance increased by $445,000 and
$22,000 during the year ended December 31, 2002 and the period
from August 6, 2001 (date of inception) to December 31, 2001,
respectively.
At December 31, 2002, the Company has net operating loss
carryforwards of approximately $1,044,000 for Federal and state
tax purposes which expire through 2022. At December 31, 2002, the
Company also has research and experimentation credit
carryforwards of approximately $26,000 for Federal and state tax
purposes which expire through 2022 for Federal purposes and until
fully utilized for state purposes.
For Federal and state tax purposes, the Company's net operating
loss and tax credit carryforwards may be subject to certain
limitations on annual utilization attributable to equity
transactions that result in changes in ownership, as defined by
the Tax Reform Act of 1986.
NOTE 9 - STOCKHOLDERS' EQUITY (DEFICIENCY):
The Company issued 4,000,000 shares of common stock to 38
investors during December 2001 for subscriptions receivable of
$4,000 or $.001 per share. During 2002, the Company received the
$4,000.
In August 2002, the Company entered into one-year agreements with
four consultants and issued a total of 40,000 options to these
consultants to purchase 40,000 shares of the Company's common
stock at an exercise price of $.01 per share expiring in August
2007. The Company valued these options at $60,589 and is
amortizing the expense through August 2003. Therefore, the
Company has expensed $22,721 in 2002 and has deferred $37,868.
During 2002, no options were exercised.
During 2002, the Company commenced a private placement and sold
1,197,250 shares of common stock at $1.60 per share and received
proceeds of $1,704,318, net of expenses of $211,181. Each
F-11
investor received warrants equal to 10% of the number of shares
of common stock purchased and, accordingly, the Company issued
119,275 warrants in 2002 in connection with the private
placement. Each warrant has an exercise price of $1.60 per share
and expires in 2007.
During January and February 2003, the Company sold an additional
520,000 shares of common stock at $1.60 per share and 52,000
warrants through the private placement and received net proceeds
of approximately $832,000.
In addition, in connection with the private placement, the
Company issued to Joseph Stevens & Co., Inc., a NASD-member
broker-dealer, warrants to purchase 652,555 shares of the
Company's common stock that are exercisable at $1.60 per share
and expire in 2008.
NOTE 10- MERGER:
Pursuant to the Merger Agreement (see Note 1), on February 21,
2003, the effective time of the merger, the outstanding shares of
common stock of the Company automatically converted into an
aggregate of 93,449,584 shares of common stock of Manhattan
Pharmaceuticals, which represented 80% of the outstanding voting
stock of Manhattan Pharmaceuticals after giving effect to the
merger. In addition, immediately prior to the merger the Company
had outstanding options and warrants to purchase an aggregate of
864,280 shares of its common stock, which, in accordance with the
terms of the merger, automatically converted into options and
warrants to purchase an aggregate of 10,984,719 shares of the
common stock of Manhattan Pharmaceuticals. Since the stockholders
of the Company received the majority of the voting shares of
Manhattan Pharmaceuticals, the merger will be accounted for as a
reverse acquisition whereby the Company will be the accounting
acquirer (legal acquiree) and Manhattan Pharmaceuticals will be
the accounting acquiree (legal acquirer). Based on the five day
average price of the common stock of Manhattan Pharmaceuticals of
$0.10 per share as of February 21, 2003, the Company's purchase
price for the acquisition of Manhattan Pharmaceuticals
approximates $2,336,000, which represents 20 percent of the
market value of the combined Company's post-merger total
outstanding shares of 116,811,980. Based on the preliminary
information currently available, the Company expects to recognize
patents and licenses for substantially all of the purchase price.
Upon completion of formal purchase price allocation there may be
a decrease in the amount assigned to intangible assets and a
corresponding increase in in-process research and development.
* * *
F-12
INTRODUCTION TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
On February 21, 2003, Manhattan Pharmaceuticals, Inc. (formerly known
as "Atlantic Technology Ventures, Inc.") (Manhattan Pharmaceuticals or the
"Company") completed a reverse acquisition of privately-held Manhattan Research
Development, Inc., (formerly Manhattan Pharmaceuticals, Inc.) (Manhattan
Research) a Delaware corporation. The merger was effected pursuant to an
Agreement and Plan of Merger dated December 17, 2002 (the "Merger Agreement") by
and among the Company, Manhattan Research and Manhattan Pharmaceuticals
Acquisition Corp, the Company's wholly-owned subsidiary ("MPAC"). In accordance
with the terms of the Merger Agreement, MPAC merged with and into Manhattan
Research, with Manhattan Research remaining as the surviving corporation and a
wholly-owned subsidiary of the Company. Pursuant to the Merger Agreement, upon
the effective time of the merger, the outstanding shares of common stock of
Manhattan Research automatically converted into an aggregate of 93,449,584
shares of the Company's common stock, which represented 80 percent of the
Company's outstanding voting stock after giving effect to the merger. In
addition, immediately prior to the merger Manhattan Research had outstanding
options and warrants to purchase an aggregate of 864,280 shares of its common
stock, which, in accordance with the terms of the merger, automatically
converted into options and warrants to purchase an aggregate of 10,984,719
shares of the Company's common stock. Since the stockholders of Manhattan
Research received the majority of the voting shares of the Company, the merger
is being accounted for as a reverse acquisition whereby Manhattan Research will
be the accounting acquirer (legal acquiree) and the Company will be the
accounting acquiree (legal acquirer). Based on the five day average price of the
Company's common stock of $0.10 per share, the purchase price approximates
$2,336,000, which represents 20 percent of the combined Company's post-merger
total outstanding shares of 116,811,980. In connection with the merger, the
Company changed its name from "Atlantic Technology Ventures, Inc." to "Manhattan
Pharmaceuticals, Inc." Based on the preliminary information currently available,
Manhattan Research expects to recognize patents and licenses for substantially
all of the purchase price. Upon completion of a formal purchase price allocation
there may be a decrease in the amount assigned to intangible assets and a
corresponding increase in in-process research and development.
The Unaudited Pro Forma Condensed Combined Statement of Operations
combines the historical consolidated statements of operations of the Company and
Manhattan Research giving effect to the merger as if it had been consummated on
January 1, 2002. The Unaudited Pro Forma Condensed Combined Balance Sheet
combines the historical consolidated balance sheet of the Company and the
historical consolidated balance sheet of Manhattan Research, giving effect to
the merger as if it had been consummated on December 31, 2002.
You should read this information in conjunction with the:
o accompanying notes to the Unaudited Pro Forma Condensed
Combined Financial Statements;
o separate historical financial statements of the Company as of
and for the year ended December 31, 2002 and for the period
from July 13, 1993 (inception) to December 31, 2002 included
in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2002;
o separate historical financial statements of Manhattan Research
as of and for the year ended December 31, 2002 and for the
period ended December 31, 2001, which are included in this
document.
We present the unaudited pro forma condensed combined financial
information for informational purposes only. The pro forma information is not
necessarily indicative of what our financial position or results of operations
actually would have been had we completed the merger on December 31, 2002 or on
January 1, 2002. In addition, the unaudited pro forma condensed combined
financial information does not purport to project the future financial position
or operating results of the combined company.
We prepared the unaudited pro forma condensed combined financial
information using the purchase method of accounting with Manhattan Research
treated as the acquirer. Accordingly, Manhattan Research's cost to acquire the
Company will be allocated to the assets acquired and liabilities assumed based
upon their estimated fair values as of the date of acquisition. The allocation
is dependent upon certain valuations and other studies that have not progressed
to a stage where there is sufficient information to make a definitive
allocation. Accordingly, the purchase price allocation pro forma adjustments are
preliminary and have been made solely for the purpose of providing unaudited pro
forma condensed combined financial information.
F-13
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Development Stage Companies)
As of December 31, 2002
MANHATTAN
MANHATTAN RESEARCH PRO FORMA PRO FORMA
ASSETS PHARMACEUTICALS, INC. DEVELOPMENT, INC. ADJUSTMENTS COMBINED
--------------------- ------------------ ------------ ------------
Current assets:
Cash and cash equivalents $ 116,291 $ 1,721,123 $ (92,845)(d) $ 1,744,569
Prepaid expenses 58,630 -- -- 58,630
Deferred consulting expense -- -- -- --
------------------ ------------------ ------------ ------------
Total current assets 174,921 1,721,123 (92,845) 1,803,199
Property and equipment, net 55,881 -- (42,262)(e) 13,619
Other assets 19,938 -- -- 19,938
Intangible assets -- -- 2,471,346 2,471,346
------------------ ------------------ ------------ ------------
Total assets $ 250,740 $ 1,721,123 $ 2,336,239 $ 4,308,102
================== ================== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable and accrued expenses $ 577,732 $ 180,872 $ -- $ 758,604
Note and interest payable -- 600,000 -- 600,000
Due to stockholder -- 206,000 -- 206,000
Due to affiliate -- 96,328 -- 96,328
------------------ ------------------ ------------ ------------
Total current liabilities $ 577,732 1,083,200 -- 1,660,932
================== ================== ============ ============
Stockholders' equity (deficiency):
Preferred stock 379 -- (379)(a) --
Preferred warrants 520,263 -- (520,263)(a) --
Common Stock 16,990 6,197 93,625 (b) 116,812
Deferred consulting expense (37,868) (37,868)
Additional paid-in capital 27,410,717 1,763,710 (25,512,085)(f) 3,662,342
Deficit accumulated during development stage (28,275,341) (1,094,116) 28,275,341 (c) (1,094,116)
------------------ ------------------ ------------ ------------
(326,992) 637,923 2,336,239 2,647,170
================== ================== ============ ============
Total liabilities and stockholders'
equity (deficiency) $ 250,740 $ 1,721,123 $ 2,336,239 $ 4,308,102
================== ================== ============ ============
See accompanying notes to unaudited pro forma condensed combined
financial statements.
F-14
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(Development Stage Companies)
For the year ended December 31, 2002
MANHATTAN
MANHATTAN RESEARCH PRO FORMA PRO FORMA
PHARMACEUTICALS,INC DEVELOPMENT, INC. ADJUSTMENTS COMBINED
------------------- ------------------ ------------- -------------
License Revenue $ 500,000 $ -- $ -- $ 500,000
------------------- ------------------ ------------- -------------
Costs and expenses:
Research and development 539,752 670,161 -- 1,209,913
Consulting Fees, relating to stock warrants (5,845) -- -- (5,845)
Amortization of intangibles -- -- 247,135(g) 247,135
General and administrative 1,519,008 348,021 -- 1,867,029
------------------- ------------------ ------------- -------------
Total operating expenses 2,052,915 1,018,182 247,135 3,318,232
------------------- ------------------ ------------- -------------
Operating loss (1,552,915) (1,018,182) (247,135) (2,818,232)
------------------- ------------------ ------------- -------------
Other (income) expense:
Loss on disposition of assets 5,232 -- -- 5,232
Interest expense -- 19,138 -- 19,138
(Other) (11,212) -- -- (11,212)
------------------- ------------------ ------------- -------------
Total other (income) expense (5,980) 19,138 -- 13,158
------------------- ------------------ ------------- -------------
Net loss $ (1,546,935) $ (1,037,320) $ (247,135) (2,831,390)
Preferred stock dividend issued in
preferred shares 65,760 -- -- 65,760
------------------- ------------------ ------------- -------------
Net loss applicable to common shares $ (1,612,695) $ (1,037,320) $ (247,135) $ (2,897,150)
=================== ================== ============= =============
Net loss per common share:
Basic and diluted $ (0.02)
=============
Weighted average shares of common stock outstanding:
Basic and diluted $ 116,811,980
=============
See accompanying notes to unaudited pro forma condensed combined
financial statements.
F-15
(1) DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
On February 21, 2003, Manhattan Pharmaceuticals, Inc. (formerly known
as "Atlantic Technology Ventures, Inc.") (Manhattan Pharmaceuticals or the
"Company") completed a reverse acquisition of privately-held Manhattan Research
Development, Inc., (formerly Manhattan Pharmaceuticals, Inc.) (Manhattan
Research) a Delaware corporation. The merger was effected pursuant to an
Agreement and Plan of Merger dated December 17, 2002 (the "Merger Agreement") by
and among the Company, Manhattan Research and Manhattan Pharmaceuticals
Acquisition Corp, the Company's wholly-owned subsidiary ("MPAC"). In accordance
with the terms of the Merger Agreement, MPAC merged with and into Manhattan
Research, with Manhattan Research remaining as the surviving corporation and a
wholly-owned subsidiary of the Company. Pursuant to the Merger Agreement, upon
the effective time of the merger, the outstanding shares of common stock of
Manhattan Research automatically converted into an aggregate of 93,449,584
shares of the Company's common stock, which represented 80 percent of the
Company's outstanding voting stock after giving effect to the merger. In
addition, immediately prior to the merger Manhattan Research had outstanding
options and warrants to purchase an aggregate of 864,280 shares of its common
stock, which, in accordance with the terms of the merger, automatically
converted into options and warrants to purchase an aggregate of 10,984,719
shares of the Company's common stock. Since the stockholders of Manhattan
Research received the majority of the voting shares of the Company, the merger
is being accounted for as a reverse acquisition whereby Manhattan Research will
be the accounting acquirer (legal acquiree) and the Company will be the
accounting acquiree (legal acquirer). Based on the five day average price of the
Company's common stock of $0.10 per share, the purchase price approximates
$2,336,000, which represents 20 percent of the combined Company's post-merger
total outstanding shares of 116,811,980. In connection with the merger, the
Company changed its name from "Atlantic Technology Ventures, Inc." to "Manhattan
Pharmaceuticals, Inc." Based on the preliminary information currently available,
Manhattan Research expects to recognize patents and licenses for substantially
all of the purchase price. We recognize that if a final valuation, which is
expected to be completed within three to six months from the completion of the
merger, derives different amounts from our preliminary estimate, we will adjust
the combined condensed financial statements. Upon completion of a formal
purchase price allocation there may be a decrease in the amount assigned to
intangible assets and a corresponding increase in in-process research and
development.
The merger will be accounted for as a purchase by Manhattan Research
under accounting principles generally accepted in the United States of America.
Under the purchase method of accounting, the assets and liabilities of the
Company will be recorded as of the acquisition date, at their respective fair
values, and combined with those of Manhattan Research. The reported financial
condition and results of operations of Manhattan Research after completion of
the merger will reflect these values, but will not be restated retroactively to
reflect the historical financial position or results of operations of the
Company.
(2) Pro Forma Adjustments
(a) To reflect conversion of preferred stock and preferred warrants to
common stock.
(b) To reflect issuance of 93,449,584 shares to the common shareholders of
Manhattan Research and the conversion of the Company's preferred stock
and preferred warrants and the exchange of certain common stock
warrants in connection with the merger.
(c) To eliminate deficit accumulated during development stage of the
Company.
(d) To reflect estimated merger expenses.
(e) To reflect the fair value of property and equipment.
(f) To eliminate historical paid in capital of the Company and to reflect
issuance of new common shares in connection with the merger.
(g) To reflect amortization of intangible assets acquired with an assumed
useful life of 10 years.
F-16
EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated December 17, 2002 by and among the
Registrant, Manhattan Research Development, Inc. (f/k/a Manhattan
Pharmaceuticals, Inc.) and Manhattan Pharmaceuticals Acquisition Corp.*
23.1 Consent of J. H. Cohn LLP
23.2 Consent of Weinberg & Company, P.A.
---------------
* Previously filed.