SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended June 30, 1998
Commission file number 0-11550
Pharmos Corporation
(Exact name of registrant as specified in its charter)
Nevada 36-3207413
(State or other jurisdiction of (IRS Employer Id. No.)
incorporation or organization)
33 Wood Avenue South, Suite 466
Iselin, NJ 08830
(Address of principal executive offices)
Registrant's telephone number, including area code: (732) 603-3526
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___.
As of August 3,1998, the Registrant had outstanding 37,270,949 shares of its
$.03 par value Common Stock.
Pharmos Corporation
(Unaudited)
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
June 30, December 31,
1998 1997
------------ ------------(Restated see Note 6)
--------------------- -------------------
Assets
Cash and cash equivalents $ 5,524,614 $ 4,423,389
Product sales and grants receivable, net 810,503 237,655
Inventory 1,785,999 1,804,627
Prepaid royalties 232,545 143,333
Prepaid expenses and other current assets 162,009 171,299
------------ ------------
Total current assets 8,515,670 6,780,303
Fixed assets, net 784,466 703,428
Prepaid royalties, net of current portion 413,414 573,334
Intangible assets, net 283,508 291,262
Other assets 74,379 73,514
------------ ------------
Total assets $ 10,071,437 $ 8,421,841
------------ ------------============ ============
Liabilities and Shareholders' Equity
Long term debt, current portion $ 24,520 $ 55,253
Accounts payable 610,988 2,576,968
Accrued expenses 794,434 809,869
Accrued wages and other compensation 556,726 401,285
Advances against future sales 1,643,967 1,000,000
------------ ------------
Total current liabilities 3,630,635 4,843,375
Advances against future sales, net of current portion 2,940,269 4,000,000
Other liabilities 100,000 100,000
------------ ------------
Total liabilities 6,670,904 8,943,375
------------ ------------
Redeemable Convertible Preferred Stock
Series C redeemable convertible preferred stock; $.03 par value,
5,000 shares authorized, 4,500 and 0 shares issued and outstanding,
respectively (liquidation preference of $4,500,000
and $0, respectively) 3,721,850 --
Shareholders' (deficit) equity
Preferred stock, $.03 par value, 1,250,000 shares authorized
Series B convertible, with a $1,000 liquidation preference,
0 and 2,755 shares outstanding,
respectively 83
Series C convertible, with a $1,000 liquidation(liquidation preference 4,500of $0 and 0 shares outstanding, respectively 135$2,755,000,
respectively) -- 83
Common stock, $.03 par value; 60,000,000 shares authorized,
37,055,886 and 34,391,638 shares issued and outstanding
(excluding $551 in 1998 and 1997, held in Treasury)
in 1998 and 1997, respectively 1,118,128 1,031,197
Paid in capital in excess of par 77,558,332 70,516,913
Accumulated deficit (75,276,062) (72,069,727)
------------ ------------
Total shareholders' (deficit) equity (deficit) 3,400,533(321,317) (521,534)
------------ ------------
Total liabilities, redeemable convertible preferred stock
and shareholders' (deficit) equity $ 10,071,437 $ 8,421,841
------------ ------------============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Pharmos Corporation
(Unaudited)
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
Three Months Ended
June 30, June 30,
1998 1997
------------ ------------
Revenues
Product sales $ 893,156 --
License fee 350,000 --
------------ ------------
$ 1,243,156 --
Cost of Goods Sold 339,852 --
------------ ------------
Gross Margin 903,304 --
Expenses
Research and development, net 1,006,915 1,626,872
Selling, general and administration 627,602 467,061
Patents 62,702 99,614
Depreciation and amortization 53,376 71,850
------------ ------------
Total operating expenses 1,750,595 2,265,397
------------ ------------
Loss from operations (847,291) (2,265,397)
Other income (expenses):
Interest income 91,583 143,827
Other income (expenses), net (3,595) (16,085)
Interest expense 3,566 --
------------ ------------
Other income, net 91,554 127,742
------------ ------------
Net loss ($ 755,737) ($ 2,137,655)
Less: Dividend embedded in convertible preferred stock ($ 52,400) ($ 1,119,164)
Preferred stock dividends ($ 62,500) ($ 68,625)
------------ ------------
Net loss applicable to common shareholders ($ 870,637) ($ 3,325,444)
============ ============
Net loss per share applicable
to common stockholders - basic and diluted ($ 0.02) ($ 0.10)
------------ ------------
Weighted average shares outstanding 36,887,559 31,671,717
------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
Pharmos Corporation
(Unaudited)
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
Six Months Ended
June 30, June 30,
1998 1997
------------ ------------
Revenues
Product sales $ 893,156 --
License fee 350,000 --
------------ ------------
$ 1,243,156 --
Cost of Goods Sold 339,852 --
------------ ------------
Gross Margin 903,304 --
Expenses
Research and development, net 2,062,452 2,952,687
Selling, general and administration 1,160,475 1,531,360
Patents 112,332 132,002
Depreciation and amortization 103,715 142,420
------------ ------------
Total operating expenses 3,438,974 4,758,469
------------ ------------
Loss from operations (2,535,670) (4,758,469)
Other income (expenses):
Interest income 197,657 186,389
Other income (expenses), net 10,769 (1,591)
Interest expense (6,416) --
------------ ------------
Other income, net 202,010 184,798
------------ ------------
Net loss ($ 2,333,660) ($ 4,573,671)
Less: Dividend embedded in convertible preferred stock ($ 642,648) ($ 1,275,274)
Preferred stock dividends ($ 168,899) ($ 86,875)
------------ ------------
Net loss applicable to common shareholders ($ 3,145,207) ($ 5,935,820)
============ ============
Net loss per share applicable
to common stockholders - basic and diluted ($ 0.09) ($ 0.19)
------------ ------------
Weighted average shares outstanding 36,222,174 31,344,772
------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
Pharmos Corporation
(Unaudited)
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
Six Months Ended
June 30, June 30,
1998 1997
----------- -----------
Cash flows from operating activities
Net loss ($2,333,660) ($4,573,671)
----------- -----------
Adjustments to reconcile net loss to net
cash flow used in operating activities
Depreciation and amortization 103,715 142,420
Changes in operating assets and liabilities
Inventory 18,628
Product sales and grants receivable (572,848)
Prepaid expenses and other current assets 9,290 60,059
Advanced royalties 70,708 (143,333)
Other assets (865)
Accounts payable (1,965,979) (92,404)
Accrued expenses (15,435) 733,177
Accrued wages 155,441
----------- -----------
Total adjustments (2,197,345) 699,919
----------- -----------
Net cash flows used in operating activities (4,531,005) (3,873,752)
-----------
Cash flows from investing activities
Purchases of fixed assets, net (177,000) (42,656)
----------- -----------
Net cash flows used in investing activities (177,000) (42,656)
----------- -----------
Cash flows from financing activities
Proceeds from issuance of common stock
and exercise of warrants, net 1,620,438 67,500
Proceeds from issuance of preferred stock, net 4,635,289 5,740,000
Advances against future sales, net (415,764) 1,000,000
Increase (decrease) in loans payable (30,733) (45,835)
----------- -----------
Net cash flows provided by financing activities 5,809,230 6,761,665
----------- -----------
Net increase (decrease) in cash and cash equivalents 1,101,225 2,845,257
Cash and cash equivalents at beginning of year 4,423,389 5,132,906
----------- -----------
Cash and cash equivalents at end of period $ 5,524,614 $ 7,978,163
----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accrual adjustments, considered necessary for a fair
presentation have been included. Operating results for the six month period
ended June 30, 1998, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998.
1. The Company
Pharmos Corporation (the "Company") is a bio-pharmaceutical company incorporated
under the laws of the State of Nevada and is engaged in the design and
development of novel pharmaceutical products in various fields including: site
specific drugs for ophthalmic indications, neuroprotective agents for treatment
of central nervous system ("CNS") disorders, systemic drugs designed to avoid
CNS related side effects, and emulsion-based products for topical and systemic
applications. The Company uses a variety of patented and proprietary
technologies to improve the efficacy and/or safety of drugs. Some of the
Company's compounds are being actively marketed while others are in various
stages of development, from preclinical to advanced clinical trials. On March 9,
1998, the Company received approval for three separate New Drug Applications
("NDA") from the U.S. Food and Drug Administration ("FDA"). These approvals were
for Lotemax(TM) and Alrex(TM). Lotemax received two approvals, one for the
treatment of several ocular inflammatory indications, including uveitis and the
other for post-operative inflammation. Alrex has been approved for the treatment
of seasonal allergic conjunctivitis. In conjunction with its development
efforts, the Company has also undertaken research and development contracts in
the past and has sold fine chemicals to the pharmaceutical research community.
The Company's administrative offices are located in Iselin, New Jersey and
conducts operations through its wholly owned subsidiary, Pharmos, Ltd., in
Rehovot, Israel.
2. Liquidity and Business Risks
While the Company has generated revenue through the sale of its approved
products in the market, it has incurred operating losses since inception. At
June 30, 1998, the Company has an accumulated deficit of $75,276,062
(unaudited). This deficit is primarily the result of costs incurred in research
and development and from general and administrative expenses. The Company had
funded its operations through the use of cash obtained principally from third
party financing. Management believes that cash and cash equivalents of $5.5
million as of June 30, 1998, combined with anticipated cash inflows, including
revenues expected to be derived from sales of Lotemax and Alrex will be
sufficient to support operations through the first quarter of 1999. The
Company's success depends upon many factors that are beyond the Company's
immediate control, including market acceptance of Lotemax and Alrex,
competition, and the ability to obtain additional financing. The Company is
continuing to actively pursue various funding options, including equity
offerings, strategic corporate alliances, business combinations and the
establishment of research and development partnerships to obtain the additional
financing necessary to complete the development of its product candidates and
bring them to commercial markets. There can be no assurance that Lotemax or
Alrex will achieve market acceptance or that the Company will be successful in
obtaining additional financing or commercializing its product candidates.
3. Significant Accounting Policies
Revenue
Revenue from license fees and royalties are recognized when earned in accordance
with the underlying agreements. Sales revenue is recognized upon shipment of
products.
Inventories
Inventories consist of loteprednol etabonate, the compound used in the Company's
products, Lotemax and Alrex, and is stated at the lower of cost or market with
cost determined on a weighted average basis.
Reclassifications
Certain amounts for 1997 have been reclassified to conform to the fiscal 1998
presentation. Such reclassifications did not have an impact on the Company's
financial position or results of operations.
Recent Accounting Standards
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130")
On June 30, 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130. This statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statement. SFAS No. 130 requires that
an enterprise (a) classify items of other comprehensive income by their nature
in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of a statement of financial position.
This statement is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The adoption of SFAS No. 130 did not have a
material impact on the Company.
Statement of Financial Accounting Standards No. 131, "Disclosure about Segments
of an Enterprise" ("SFAS 131")
In June of 1997, the FASB issued SFAS No. 131. This statement requires that
public business enterprises report certain information about operating segments
in complete sets of financial statements of the enterprise and in condensed
financial statements of interim periods to shareholders. It also requires that
enterprises report certain information about their products and services, the
geographic areas in which they operate and their major customers. This statement
is effective for fiscal years beginning after December 15, 1997. The adoption
did not have a significant impact on the Company.
4. Collaborative Agreements
In June 1995, the Company entered into a marketing agreement (the "Marketing
Agreement") with Bausch & Lomb Pharmaceuticals, Inc. ("Bausch & Lomb") to market
Lotemax, on an exclusive basis in the United States following receipt of FDA
approval. The Marketing Agreement also covers the Company's two other
loteprednol etabonate-based products, Alrex and a combination of loteprednol
etabonate and the anti-infective tobramycin ("LE-T"). Under the Marketing
Agreement, Bausch & Lomb will purchase the active drug substance (loteprednol
etabonate) from the Company. Through June 30, 1998, Bausch & Lomb have provided
the Company with $5 million in cash advances against future sales. An additional
$1million is due upon the receipt of regulatory approval for LE-T in the United
States. Bausch & Lomb will be entitled to credits against future purchases or
sales of the active drug substance based on the advances made, until all the
advances have been repaid. The Company may be obligated to repay such advances
if it is unable to supply Bausch & Lomb with certain specified quantities of the
active drug substance. The portion of advances expected to be recouped by Bausch
and Lomb over the upcoming twelve month period, based on management's estimate
of product sales to Bausch & Lomb in 1998 and 1999, has been presented as a
current liability in the accompanying balance sheet at June 30, 1998 and
December 31, 1997.
Bausch & Lomb also collaborates in the development of products by making
available amounts up to 50% of the Phase III clinical trial costs. The Company
has retained certain conditional co-marketing rights to all of the products
covered by the Marketing Agreement.
As part of its September, 1997 agreement with the University of Florida Research
Foundation, the Company received a non-recurring license fee of $350,000 during
the quarter ended June 30,1998 in exchange for the transfer of certain drug
technology.
5. Common and Preferred Stock Transactions
In January 1998, the shareholders of the Company approved the increase in the
number of authorized shares of common stock from 50,000,000 to 60,000,000 and
adopted the 1997 Incentive and Non-Qualified Stock Option Plan, which has
reserved for issuance up to 600,000 shares of common stock upon the exercise of
stock options to be granted to employees, directors, consultants and other key
personnel.
In May 1998, the Company, under provisions of the 1997 Incentive and
Non-Qualified Stock Option Plan, issued options to employees, directors,
consultants and other key personnel for the purchase of 500,000 shares of common
stock. The options are exercisable over a ten-year period and will expire on May
18, 2008. The options will vest in four annual installments of 25% each on May
18, 1999,2000,2001 and 2002, respectively. The options are exercisable at a
strike price of $2.781 per share, which represents the closing market value of
the common stock on the date the options were awarded.
On February 4, 1998, the Company completed a private placement with
institutional investors of Series C Redeemable Convertible Preferred Stock and
warrants to purchase 650,000 shares of common stock, generating gross proceeds
of $5 million. The preferred stock carries a 5% premium payable in common stock,
and is convertible into common shares of the Company 60 days subsequent to the
date of issuance. For the period ending 180 days after the date of issuance, the
conversion price is 90% of the average of the low trade prices of the Common
Stock for the five consecutive trading days ending on the day immediately prior
to the conversion date (the "Variable Conversion Price"). Following such period,
the conversion price is the lower of the Variable Conversion Price and 120% of
the average of the closing bid prices of the Common Stock for the trading days
beginning on the date which is 151 days, and ending on the date which is 180
days, following the date of issuance. Until converted into common stock, the
preferred stock has no voting rights. The warrants issued to the investor and
the finders are exercisable at prices ranging from $2.28 to $2.67 per share,
commencing one year after the closing for four and five year periods. Under
certain circumstances the holders of the Series C convertible preferred stock
may require the Company to redeem the outstanding shares of the Series C
convertible preferred stock.
During the first quarter of 1998, the Company issued 1,704,978 shares of its
common stock upon conversion
of 2,755 shares of the Company's Series B Convertible Preferred Stock. The
shares were issued with conversion prices ranging from $1.41 per share to $1.78
per share. The Company also issued 34,904 shares of common stock in payment of
dividends of the Series B Convertible Preferred stock. As of the date of such
issuances, these dividends were valued at $68,624.
During the second quarter of 1998, the Company also issued 215,063 shares of
common stock upon conversion of 500 shares of its Series C Convertible Preferred
Stock.
During the first half of 1998, the Company issued 942,728 shares of its common
stock upon the exercise of warrants, and received consideration of $1,620,439.
As of June 30, 1998, cumulative dividends in arrears on the Company's
outstanding Series C convertible preferred stock are $100,275. The dividends are
payable in common stock of the Company.
In connection with the issuances of the Series A, B and C convertible preferred
stock, the Company was required to recognize, in the EPS calculation, the value
of the conversion discount as a dividend to the preferred stockholders. The
dividend has been recognized in the EPS calculation on a pro rata basis over the
period beginning with issuance to the date that conversion can occur. During the
quarter ended June 30, 1998, the Company recorded a preferred stock dividend of
$52,400 ($1,119,164 for the quarter ended June 30, 1997) on the outstanding
shares of convertible preferred stock in connection with the conversion
discount.
6. Restatements
The Company is restating its quarterly financial statements on Form 10-Q/A for
the three months ended June 30, 1998. The restatement is a result of the
reclassification of the Series C redeemable convertible preferred stock. The
statements as originally filed reflected the Series C redeemable convertible
preferred stock within the Shareholders' Equity caption of the balance sheet.
The statements, as restated, reclassify the Series C redeemable convertible
preferred stock outside of the Shareholders' equity caption due to its
redemption features. There was no impact to the Company's statement of
operations due to this restatement.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Quarters ended June 30, 1998 and 1997
During the quarter ended June 30, 1998, the Company reported revenues from sale
of product for the first time. Product sales commenced in May,1998, and revenue
totaled $893,156 for the quarter ($0 for the quarter ended June 30, 1997).
Additionally, the Company recorded license income of $350,000 for the quarter
ended June 30, 1998 ($0 for the quarter ended June 30, 1997). The license income
was generated from a non-recurring payment received by the Company in exchange
for the transfer of certain drug technology.
Cost of goods sold for the quarter ended June 30, 1998 totaled $339,852 ($0 for
the quarter ended June 30, 1997). Cost of goods sold includes a higher than
anticipated level of direct production costs incurred in the initial stages of
commercial production.
As part of the Company's efforts to achieve market recognition and acceptance
for its FDA approved products, the Company's marketing partner, Bausch & Lomb,
distributed large numbers of product samples to its customers. These samples
were in addition to the drug product sold by Bausch & Lomb to its customers.
Management believes that the distribution of samples in the initial ramp-up
phase of product introduction may have an adverse short-term impact on the level
of future sales of these drug products.
Total operating expenses decreased $514,800 or 23%, from $2,265,396 in 1997 to
$1,750,596 in 1998. The net decrease in operating expenses is primarily due to a
decrease in research and development expenses, which was partially offset by an
increase in selling, general and administrative expenses.
Net research and development expenses decreased by $619,957 or 38%, from
$1,626,872 in 1997 to $1,006,915 in 1998. The decrease in R&D expense is
primarily due to the closure of the company's R&D facilities in Florida in the
fourth quarter of 1997, and a lower than anticipated level of research and
development expenditure in the Company's Israel facility.
Patent expenses decreased by $36,912 or 37%, from $99,614 in 1997 to $62,702 in
1998. This decrease is due in part to management's decision not to renew its
patent protection on certain patents owned by a third party.
Selling, general and administrative expenses increased by $160,541 or 34 %, from
$467,061 in 1997 to $627,602 in 1998. The increase is primarily due to costs
incurred in connection with the FDA approval and marketing of Lotemax and Alrex.
In March 1998, the Company, together with Bausch & Lomb Pharmaceuticals, Inc.,
announced the receipt of approval from the Food and Drug Administration (FDA) to
manufacture and market Lotemax and Alrex.
Depreciation and amortization expenses decreased by $18,474, or 26%, from
$71,850 in 1997 to $53,376 in 1998, reflecting reduced depreciation expense
relating to the Alachua, Florida operation.
Other income, net, decreased by $36,188, or 28%, from $127,742 in 1997 to
$91,554 in 1998. Interest income decreased as a result of lower average cash
balances.
Six months ended June 30, 1998 and June 30, 1997
During the six months ended June 30, 1998, the Company reported revenues from
sale of product for the first time. Product sales commenced in May,1998, and
revenue totaled $893,156 for the period ($0 for the period ended June 30, 1997).
Additionally, the Company recorded license income of $350,000 for the six month
ended June 30, 1998 ($0 for the six months ended June 30, 1997). The license
income was generated from a non-recurring payment received by the Company in
exchange for the transfer of certain drug technology.
Cost of goods sold for the six months ended June 30, 1998 totaled $339,852 ($0
for the six months ended June 30, 1997). Cost of goods sold includes a higher
than anticipated level of direct production costs incurred in the initial stages
of commercial production.
As part of the Company's efforts to achieve market recognition and acceptance
for its FDA approved products, the Company's marketing partner, Bausch & Lomb,
distributed large numbers of product samples to its customers. These samples
were in addition to the drug product sold by Bausch & Lomb to its customers.
Management believes that the distribution of samples in the initial ramp-up
phase of product introduction may have an adverse short-term impact on the level
of future sales of these drug products.
Total operating expenses decreased $1,319,495 or 28%, from $4,758,469 in 1997 to
$3,438,974 in 1998. The net decrease in operating expenses is primarily due to
decreases in both research and development expenses and selling, general and
administrative expenses.
Net research and development expenses decreased by $890,235 or 30%, from
$2,952,687 in 1997 to $2,062,452 in 1998. The decrease in R&D expense is
primarily due to the closure of the company's R&D facilities in Florida in the
fourth quarter of 1997, and a lower than anticipated level of research and
development expenditure in the Company's Israel facility.
Patent expenses decreased by $19,670 or 15%, from $132,002 in 1997 to $112,332
in 1998. This decrease is due in part to management's decision not to renew its
patent protection on certain patents owned by a third party.
Selling, general and administrative expenses decreased by $370,885 or 24 %, from
$1,531,360 in 1997 to $1,160,475 in 1998. The decrease is primarily due to costs
incurred by the Company during the first half of 1997 under marketing agreements
to supply Bausch & Lomb with certain specified quantities of loteprednol
etabonate ("LE"). Certain quantities of LE, totaling $569,981, were purchased
during the first half of 1997 for use in testing, manufacturing and various
marketing activities, and were charged to results of operations in 1997. In
March 1998, the Company, together with Bausch & Lomb Pharmaceuticals, Inc.,
announced the receipt of approval from the Food and Drug Administration (FDA) to
manufacture and market Lotemax and Alrex.
Depreciation and amortization expenses decreased by $38,705 or 27%, from
$142,420 in 1997 to $103,715 in
1998, reflecting reduced depreciation expense relating to the Alachua, Florida
operation.
Liquidity and Capital Resources
While the Company has generated revenue through the sale of its approved
products in the market, it has incurred operating losses since inception. The
Company has financed its operations with public and private offerings of
securities, advances and other funding pursuant to marketing and co-development
agreements with Bausch and Lomb, research contracts, license fees, royalties and
sales, and interest income.
The Company has working capital of $4.9 million, including cash and cash
equivalents of $5.5 million, as of June 30, 1998. On February 4, 1998 the
Company completed a $5 million private placement of convertible preferred stock
and warrants. Management believes that existing cash and cash equivalents,
combined with proceeds generated from sales of Lotemax and Alrex by Bausch &
Lomb together with additional cash inflows from investment income and R&D grants
will be sufficient to support operations through the first quarter of 1999. The
Company will continue to actively pursue various funding options, including
additional equity offerings, strategic corporate alliances, business
combinations and the establishment of product related research and development
limited partnerships, to obtain the additional financing required to continue
the development of its products and bring them to commercial markets. The
Company's success depends upon many factors that are beyond the Company's
immediate control, including market acceptance of Lotemax and Alrex,
competition, and the ability to obtain financing. There can be no assurance that
Lotemax or Alrex will achieve market acceptance or that the Company will be
successful in obtaining additional financing or commercializing product
candidates.
Pursuant to the U.S. Marketing Agreement with Bausch & Lomb the Company has
received cumulative advances of $5 million from Bausch & Lomb as of June 30,
1998. Bausch & Lomb will be entitled to recoup the advances by way of credits
from future sales of Lotemax, Alrex and line extension products. The Company may
be obligated to repay such advances if it is unable to supply Bausch & Lomb with
certain specified quantities of the active drug substance.
Part II
Other Information
Item 1 Legal Proceedings NONE
Item 2 Changes in Securities NONE
Item 3 Defaults upon Senior Securities NONE
Item 4 Submission of Matters to Vote of Security Holders NONE
Item 5 Other Information NONE
Item 6 Exhibits and Reports on Form 8-K NONE
SIGNATURE PAGE
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.
PHARMOS CORPORATION
Dated: August 3,November 4, 1998 by: /s/ Robert W. Cook
----------------------------------------------------
Robert W. Cook
Vice President - Finance and Chief
Financial Officer