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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





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FORM 10-Q





(Mark one)





|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------




FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002





OR





| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------




Commission File Number: 0-19410





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POINT THERAPEUTICS, INC.


(Exact Name of Registrant as Specified in Its Charter)





Delaware (State or Other
Jurisdiction of Incorporation or Organization)

04-3216862 (I.R.S. Employer
Identification No.)125 SUMMER STREET BOSTON,
MASSACHUSETTS (Address of Principal Executive Offices)

02110 (Zip Code)





Registrants Telephone Number, Including Area Code:


(617) 933-2130





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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
        x Yes  ̈ No





APPLICABLE ONLY TO CORPORATE ISSUERS:





As of October 31, 2002, there were 9,275,755 shares of the Registrants Common Stock, $0.01 par value per share, outstanding.





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POINT THERAPEUTICS, INC. AND SUBSIDIARIES


(A Development Stage Company)





QUARTERLY REPORT ON FORM 10-Q


INDEX





Page NumberPART 1

FINANCIAL INFORMATIONItem 1.

Financial Statements (unaudited)Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001

3Consolidated Statements of Operations for the Three and Nine-Month Periods Ended September 30, 2002 and 2001 and for the Period From Inception (September 3, 1996) Through September 30, 2002

4Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2002 and 2001 and for the Period From Inception (September 3, 1996) Through September 30, 2002

5Notes to Consolidated Financial Statements

6Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

8Item 3.

Quantitative and Qualitative Disclosures About Market Risk

13Item 4.

Controls and Procedures

13PART II.

OTHER INFORMATIONItem 1.

Legal Proceedings

14Item 4.

Submission of Matters to a Vote of Security Holders

14Item 6.

Exhibits and Reports on Form 8-K

15SIGNATURES



16







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##### Table of Contents




PART I. FINANCIAL INFORMATION





Item 1.    Financial Statements





POINT THERAPEUTICS, INC. AND SUBSIDIARIES


(A Development Stage Company)





CONSOLIDATED BALANCE SHEETS


(unaudited)





September 30, 2002


December 31, 2001AssetsCurrent assets:Cash and cash equivalents

$
14,142,569


$
5,563,344Prepaid expenses and other current assets


291,430



6,532Total current assets


14,433,999



5,569,876Office and laboratory equipment, net


291,387



81,187Total assets

$
14,725,386


$
5,651,063Liabilities and stockholders equityCurrent liabilities:Accounts payable

$
1,433,897


$
637,513Accrued professional fees


81,078



66,000Deferred merger consideration






500,000Accrued severance


41,231



168,800Other accrued liabilities


13,892



Total current liabilities


1,570,098



1,372,313Patent liability, less current portion


57,055



60,634Stockholders equity:Preferred Stock, $0.01 par value, 1,000 shares authorized; no shares issued or outstanding as of September 30, 2002 and
December 31, 2001






Common stock, $0.01 par value, 35,000,000 shares authorized, 9,376,924 shares issued and 9,275,755 shares outstanding at
September 30, 2002 and 7,386,565 shares issued and outstanding at December 31, 2001


93,769



73,866Additional paid-in capital


28,135,182



13,475,255Treasury stock, 101,169 and no shares at cost, as of September 30, 2002 and December 31, 2001, respectively


(331,936
)


Deficit accumulated during the development stage


(14,798,782
)


(9,331,005
)Total stockholders equity


13,098,233



4,218,116Total liabilities and stockholders equity

$
14,725,386


$
5,651,063





See accompanying notes




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POINT THERAPEUTICS, INC.


(A Development Stage Company)





CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)





Three-months ended September
30,


Nine-months ended September
30,


Period from September 3,
1996 (date of inception) through September 30,2002


2001


2002


2001


2002RevenuesLicense revenue

$



$



$



$



$
5,000,000Sponsored research revenue


















2,400,000Total revenues


















7,400,000Operating expensesResearch and development


1,506,621



733,149



3,654,465



2,562,056



15,786,375General and administrative


759,787



340,893



1,957,671



1,208,303



7,198,735Total operating expenses


2,266,408



1,074,042



5,612,136



3,770,359



22,985,110Net loss from operations


(2,266,408
)


(1,074,042
)


(5,612,136
)


(3,770,359
)


(15,585,110
)Interest income, netInterest income


49,845



58,245



144,359



191,267



868,980Interest expense


















(82,652
)Total interest income, net


49,845



58,245



144,359



191,267



786,328Net loss

$
(2,216,563
)

$
(1,015,797
)

$
(5,467,777
)

$
(3,579,092
)

$
(14,798,782
)Basic and diluted net loss per common share

$
(0.24
)

$
(0.14
)

$
(0.62
)

$
(0.52
)Weighted average common shares for basic and diluted net loss computation


9,275,755



7,386,565



8,770,587



6,893,223





See accompanying notes




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POINT THERAPEUTICS, INC. AND SUBSIDIARIES


(A Development Stage Company)





CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited)





Nine-months ended September
30,


Period from inception (September 3, 1996) through September 30,2002


2001


2002Cash flows from operating activitiesNet loss

$
(5,467,777
)

$
(3,579,092
)

$
(14,798,782
)Adjustments to reconcile net loss to net cash used:Depreciation


38,518



21,540



121,403Issuance of compensatory stock options


12,609



17,645



152,815Common stock issued under license agreement










910,677Patent costs










75,557Accrued interest on convertible notes










82,652Changes in assets and liabilities:Prepaid expenses and other


(284,898
)


(5,381
)


(310,707
)Accounts payable and accrued liabilities


697,785



258,772



1,567,654Net cash used in operating activities


(5,003,763
)


(3,286,516
)


(12,198,731
)Cash flows from investing activitiesPurchase of office and laboratory equipment


(248,718
)


(37,862
)


(412,790
)Net cash used in investing activities


(248,718
)


(37,862
)


(412,790
)Cash flows from financing activitiesProceeds from merger between Point and HMSR Inc.


13,835,285







14,335,285Proceeds from issuance of common stock, net of costs






5,375,000



10,541,959Proceeds from issuance of convertible note










1,892,904Principal payments of patent liability


(3,579
)


(3,579
)


(16,058
)Net cash provided by financing activities


13,831,706



5,371,421



26,754,090Net increase in cash and cash equivalents


8,579,225



2,047,043



14,142,569Cash and cash equivalents, beginning of period


5,563,344



4,477,954



Cash and cash equivalents, end of period

$
14,142,569


$
6,524,997


$
14,142,569





See accompanying notes







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POINT THERAPEUTICS, INC. AND SUBSIDIARIES


(A Development Stage Company)





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)





|1. |  | Nature of the Business
|-- |  | ----------------------




Point Therapeutics, Inc. (formerly known as HMSR Inc.) (the Company) is developing small molecule drugs for the treatment of certain hematopoietic disorders and a variety of cancerous
tumors. The Companys lead product candidate, PT-100, has the potential to treat a number of different hematopoietic disorders, such as neutropenia (an abnormally low level of a type of white blood cell called a neutrophil) and anemia (an
abnormally low level of red blood cells). PT-100 is currently being tested in a Phase I/II clinical study in which cancer patients undergoing chemotherapy are given PT-100 as an adjunct therapy for the treatment of neutropenia.





The Company was originally incorporated in December 1993 as a Delaware corporation under the name Hemacor Inc.
The Company changed its name to HemaSure Inc. in February of 1994. From 1994 to May 2001, the Company developed and supplied innovative blood filtration technologies. On May 29, 2001, the Company sold substantially all of its assets and liabilities
with the exception of cash, marketable securities and certain corporate assets and liabilities and changed its name to HMSR Inc. (HMSR).





|2. |  | Merger between Point Massachusetts and HMSR Inc.
|-- |  | ------------------------------------------------




On November 15, 2001, HMSR and PT Acquisition Corp., a wholly-owned subsidiary of HMSR formed for the purpose of consummating a merger transaction, entered
into the Agreement and Plan of Merger (Merger Agreement) with Point Therapeutics, Inc., a privately-held Massachusetts corporation (Point Massachusetts). At that time, HMSR paid Point Massachusetts a $500,000 lock-up fee. The
lock-up fee was included when determining the final stock conversion ratio between Point Massachusetts and HMSR, as described below.





On March 15, 2002, HMSR stockholders approved a 1-for-10 reverse split of HMSRs common stock and a name change from HMSR Inc. to Point Therapeutics, Inc. The stockholders of Point Massachusetts
also approved on March 15, 2002 the Merger Agreement previously entered into by both parties. In accordance with the terms of the Merger Agreement, immediately prior to the effective time of the merger, and after taking into account the 1-for-10
reverse split with respect to HMSRs common stock prior to the merger, each share of Point Massachusetts common stock outstanding immediately prior to the effective time of the merger (including all shares of Point Massachusetts preferred stock
converted prior to the effective time) was converted into the right to receive 4.16168 shares of the HMSRs common stock. This ratio also took into account the $500,000 HMSR deposit paid on November 15, 2001. In addition, all outstanding
options and warrants of Point Massachusetts were converted at the same conversion rate of 4.16168.





As a result of the merger, HMSR acquired all of the outstanding shares of Point Massachusetts capital stock. For accounting purposes, the acquisition has been treated as the acquisition of HMSR by Point Massachusetts with Point
Massachusetts as the acquiror. The historical financial statements of the Company presented prior to March 15, 2002 are those of Point Massachusetts. Point Massachusetts capital structure has been restated to reflect all stock issuances as if
the merger had taken place prior to all periods presented. In addition, if the merger with HMSR had occurred at the beginning of the periods presented, the effect of the inclusion of HMSRs operating results on the financial statements
presented would not be material.




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|3. |  | Significant Accounting Policies
|-- |  | -------------------------------




Unaudited Interim Financial Statements





The
accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable Securities and Exchange Commission (SEC) regulations for interim
financial information. These financial statements are unaudited and, in the opinion of management, include all adjustments necessary to present fairly the balance sheets, statements of operations, and statements of cash flows for the periods
presented in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to SEC rules and regulations. It is presumed that users of this interim financial information have read or have access to the audited financial statements and footnote disclosure of Point
Therapeutics Massachusetts, Inc. for the year ended December 31, 2001, contained in a Form 8-K filed with the Securities and Exchange Commission on May 25, 2002. Operating results for the quarter ended September 30, 2002 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2002.





Use of Estimates





The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.





Reclassifications





Certain amounts in 2001 have been reclassified to conform to the 2002 presentation.





Net Loss Per Share





Basic and diluted net loss per common share
amounts are presented in conformity with Statement of Financial Accounting Standards No. (SFAS) 128, Earnings per Share, for all periods presented. In accordance with SFAS 128, basic and diluted net loss per common share
amounts have been computed using the weighted-average number of shares of common stock outstanding for the three and nine-month periods ended September 30, 2002 and 2001. Potentially dilutive securities, consisting of stock options and warrants,
have been excluded from the diluted earnings per share calculations since their effect is antidilutive.





|4. |  | New Accounting Standards  In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS 141, Business Combinations and
SFAS 142, Goodwill and Other Intangible Assets. SFAS 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as
assets apart from goodwill. SFAS 142 requires that rateable amortization of goodwill be replaced with periodic tests of the goodwills impairment and that certain intangible assets other than goodwill be amortized over their useful lives. SFAS
141 is effective for all business combinations initiated after June 30, 2001. The provisions of SFAS 142 are effective for fiscal years beginning after December 15, 2001. The Company accounted for the merger on March 15, 2002 as prescribed by SFAS
No. 141 and SFAS No. 142.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




In August 2001, the FASB issued SFAS 143,
Accounting for Asset Retirement Obligations, which provides the accounting requirements for retirement obligations associated with tangible long-lived assets. This Statement requires entities to record the fair value of a liability for
an asset retirement obligation in the period in which it is incurred. This Statement is effective for the Companys 2003 fiscal year, and early adoption is permitted. The adoption of SFAS 143 will have no impact on the Companys financial
statements.




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In October 2001, the FASB issued SFAS 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which excludes from the definition of long-lived assets goodwill and other intangibles that are not amortized in accordance with SFAS 142. SFAS 144 requires that long-lived assets to be disposed
of by sale be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. SFAS 144 also expands the reporting of discontinued operations to include components of
an entity that have been or will be disposed of rather than limiting such discontinuance to a segment of a business. This Statement is effective for the Companys 2002 fiscal year, and early adoption is permitted. The adoption of SFAS 144 has
no impact on the Companys financial statements.





In June 2002, the FASB issued SFAS 146,
Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The principal difference between SFAS 146 and Issue 94-3 relates to SFAS 146s requirements for
recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a
liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entitys commitment to an exit plan. A fundamental conclusion reached by the FASB in this Statement is that an entitys commitment to a plan, by
itself, does not create an obligation that meets the definition of a liability. Therefore, this Statement eliminates the definition and requirements for recognition of exit costs in Issue 94-3. This Statement also establishes that fair value is the
objective for initial measurement of the liability. This Statement is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of SFAS 146 has no impact on the
Companys financial statements.





|Item  2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
|-------- |  | ---------------------------------------

FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Cautionary Factors with Respect to Forward-Looking Statements





Readers are cautioned that certain statements contained in this Managements Discussion and Analysis of
Financial Condition and Results of Operations that are not related to historical results are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. This information includes statements on the
prospects for our drug development activities and results of operations based on our current expectations, such as statements regarding certain milestones with respect to our clinical program and our product candidates. Forward-looking statements
are statements that are not historical facts, and can be identified by, among other things, the use of forward-looking language, such as believe, expect, may, will, should,
seeks, plans, schedule to, anticipates or intends or the negative of those terms, or other variations of those terms of comparable language, or by discussions of strategy or intentions. A
number of important factors could cause actual results to differ materially from those projected or suggested in the forward looking statement, including, but not limited to, the ability of the Company to (i) successfully develop products, (ii)
obtain the necessary governmental approvals, (iii) effectively commercialize any products developed before its competitors and (iv) obtain and enforce intellectual property rights, as well as the risk factors described in the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2001 as filed with the Securities and Exchange Commission on April 1, 2002 and from time to time in the Companys other reports filed with the Securities and Exchange Commission.




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Overview





OperationsPoint Therapeutics, Inc. (the Company) is developing small molecule drugs for the treatment of certain hematopoietic disorders and a variety of cancerous tumors. The
Companys lead product candidate, PT-100, has the potential to treat a number of different hematopoietic disorders, such as neutropenia (an abnormally low level of a type of white blood cell called a neutrophil) and anemia (an abnormally low
level of red blood cells). PT-100 is currently being evaluated in a Phase I/II clinical study where cancer patients undergoing chemotherapy are treated with PT-100 as an adjunct therapy for the treatment of neutropenia. The Company is also
developing PT-100 as a potential therapy to inhibit the growth of certain cancerous tumors. This program is currently in late-stage preclinical development.





To date, the Company has generated no revenues from product sales and has depended upon equity financings, interest payments on invested funds, and collaboration payments received from pharmaceutical
companies to provide the working capital required to pursue its intended business activities. The Company has a net accumulated deficit of $14,799,000 through September 30, 2002. The accumulated deficit has resulted principally from the
Companys efforts to develop drug candidates and the associated administrative costs required to support these efforts. The Company expects to incur significant additional operating losses over the next several years due to its ongoing
developmental and clinical efforts. The Companys potential for future profitability is dependent on its ability to effectively develop its current pharmaceutical product candidate, PT-100, and to license and develop new pharmaceutical
compounds.





The Company was originally incorporated in December 1993 as a Delaware corporation under the name
Hemacor Inc. The Company changed its name to HemaSure Inc. in February of 1994. From 1994 to May 2001, the Company developed and supplied innovative blood filtration technologies. On May 29, 2001 the Company sold substantially all of its assets and
liabilities with the exception of cash, marketable securities and certain corporate assets and liabilities and changed its name to HMSR Inc.





On November 15, 2001, HMSR and PT Acquisition Corp., a wholly-owned subsidiary of HMSR formed for the purpose of consummating a merger transaction, entered into the Agreement and Plan of Merger
(Merger Agreement) with Point Therapeutics, Inc., a privately held Massachusetts corporation (Point Massachusetts). At that time, HMSR paid Point Massachusetts a $500,000 lock-up fee. The lock-up fee was included when
determining the final stock conversion ratio between Point Massachusetts and HMSR, as described below.





On March
15, 2002, HMSR stockholders approved a 1-for-10 reverse split of HMSRs common stock and a name change from HMSR Inc. to Point Therapeutics, Inc. The stockholders of Point Massachusetts also approved on March 15, 2002 the Merger Agreement
previously entered into by both parties. In accordance with the terms of the Merger Agreement, immediately prior to the effective time of the merger, and after taking into account the 1-for-10 reverse split with respect to HMSRs common stock
prior to the merger, each share of Point Massachusetts common stock outstanding immediately prior to the effective time of the merger (including all shares of Point Massachusetts preferred stock converted prior to the effective time) was converted
into the right to receive 4.16168 shares of the HMSRs common stock. This ratio also took into account the $500,000 HMSR deposit paid on November 15, 2001. In addition, all outstanding options and warrants of Point Massachusetts were converted
at the same conversion rate of 4.16168.





As a result of the merger, HMSR acquired all of the outstanding shares of
Point Massachusetts capital stock. For accounting purposes, the acquisition has been treated as the acquisition of HMSR by Point Massachusetts with Point Massachusetts as the acquiror. The historical financial statements of the Company presented
prior to March 15, 2002 are those of Point Massachusetts. Point Massachusetts capital structure has been restated to reflect all stock issuances as if the merger had taken place prior to all periods presented. In addition, if the merger with
HMSR had occurred at the beginning of the periods presented, the effect of the inclusion of HMSRs operating results on the financial statements presented would not be material.




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Results of Operations





Three-months Ended September 30, 2002 and September 30, 2001





Revenues





The Company generated no revenues during the quarters ended September 30, 2002 and September 30, 2001.





Operating expenses





Research and development expenses increased 105.6% to $1,507,000 for the three-month period ended September 30, 2002 from $733,000 for the three-month period ended September 30, 2001. The increase was primarily due to costs
associated with the ongoing PT-100 clinical program and preclinical research and development efforts in the Companys hematopoietic and anti-tumor programs.





Since inception, the Company has incurred $15,786,000 in expenses on research and development activities. Almost all of the Companys research and development efforts have been focused on the
pre-clinical and clinical development of PT-100 for hematopoietic disorders and for the treatment of cancer. The Company has no other material research and development programs and thus the $15,786,000 disclosed for research and development in the
Companys financial statements has primarily been directed towards developing PT-100. PT-100 is currently in early-stage clinical trials for its first indication, to treat neutropenia, and in late stage preclinical development to study
PT-100s ability to inhibit the growth of certain cancerous tumors. The Company cannot predict whether the results of further testing will be successful or will result in FDA approvals. Thus, due to the uncertainties inherent in clinical
testing and the regulatory process, the Company is not able to estimate at this time when PT-100 may be commercially available for any application, if at all, nor the costs associated with completing the clinical trial process.





General and administrative expenses increased 122.9% to $760,000 for the three-month period ended September 30, 2002 from
$341,000 for the three-month period ended September 30, 2001. The increase was primarily due to an increase in needed internal support and external costs associated with the Company becoming a public entity as a result of the recently completed
merger between Point Massachusetts and HMSR and the hiring of a consulting group to assist the Company in developing an optimal commercialization strategy for PT-100.





Interest income, net





Interest income, net for the
three-month period ended September 30, 2002 was $50,000 compared to $58,000 for the same period in 2001, a decrease of $8,000 or 13.8%. The decrease in interest income for the three-month period resulted from lower interest rates earned on the
invested cash balance in 2002 as compared to the same period in 2001, offset in part by a higher invested cash balance compared to the same period in 2001.





Net loss





As a result of the foregoing, the Company incurred a net loss of
$2,217,000, or $0.24 per share, for the three-month period ended September 30, 2002 compared to a net loss of $1,016,000, or $0.14 per share, for the three-month period ended September 30, 2001.




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##### Table of Contents




Nine-months Ended September 30, 2002 and September 30, 2001





Revenues





The
Company generated no revenues during the nine-month periods ended September 30, 2002 and September 30, 2001.





Operating expenses





Research and development expenses increased 42.6% to $3,654,000 for the nine-month period ended September 30,
2002 from $2,562,000 for the nine-month period ended September 30, 2001. The increase was primarily due to costs associated with the ongoing PT-100 clinical program and preclinical research and development efforts in the Companys hematopoietic
and anti-tumor programs.





General and administrative expenses increased 62.1% to $1,958,000 for the nine-month
period ended September 30, 2002 from $1,208,000 for the nine-month period ended September 30, 2001. The increase was primarily due to professional fees incurred in consummating the merger between Point Massachusetts and HMSR, the increase in needed
internal support and external expenses associated with the Company becoming a public entity, the hiring of a consulting group to assist the Company in developing an optimal commercialization strategy for PT-100, and expenses related to moving the
Companys administrative offices earlier this year.





Interest income, net





Interest income, net for the nine-month period ended September 30, 2002 was $144,000 compared to $191,000 for the same period in 2001, a
decrease of $47,000 or 24.6%. The decrease in interest income for the nine-month period resulted from lower interest rates earned on the invested cash balance in 2002 as compared to the same period in 2001, offset in part by a higher invested cash
balance as compared to the same period in 2001.





Net loss





As a result of the foregoing, the Company incurred a net loss of $5,468,000, or $0.62 per share, for the nine-month period ended September 30, 2002 compared to a net loss
of $3,579,000, or $0.52 per share, for the nine-month period ended September 30, 2001.





Liquidity and Capital Resources





The Company has financed its operations since inception principally through private placements of equity
securities and collaboration payments received from pharmaceutical companies. Since the Companys inception in September 1996, the Company has raised approximately $12,500,000, net of costs of raising capital, in private equity financings and
$7,400,000 from licensing and sponsored research collaborations with pharmaceutical companies. In addition, the Company received $14,335,000 as a result of the recently completed merger between Point Massachusetts and HMSR, including a $500,000
lock-up fee received upon the signing of the Merger Agreement. The Company has also received $869,000 from interest earned in invested cash balances.





At September 30, 2002, the Companys cash and cash equivalents increased $8,579,000 as compared to December 31, 2001. The increase was primarily due to proceeds totaling $13,835,000 received as a
result of the recently completed merger between Point Massachusetts and HMSR. Offsetting the inflow of cash was $5,004,000 used in operations for the nine-month period ended September 30, 2002, primarily to fund the clinical program for PT-100 and
other research and development initiatives as well as to fund costs incurred in connection with the merger with HMSR. The Company also increased its investment in office and laboratory equipment by $249,000 from December 31, 2001 to $413,000 at
September 30, 2002. The increase resulted from purchases of laboratory equipment, computers and other capital equipment. The Company currently plans to spend approximately $25,000 during the remainder of 2002 on office and laboratory equipment.




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At September 30, 2002, the Company had $14,143,000 in cash and cash equivalents.
The Company currently anticipates that its existing capital resources and interest to be received should enable it to maintain current and planned operations through 2003.





The Companys expectations regarding its rate of spending and the sufficiency of its cash resources over future periods are forward-looking statements. The
Companys funding requirements are expected to increase over the next several years as the Company continues with the clinical development of PT-100 and initiates human clinical trials for additional clinical indications for PT-100 and
additional product candidates. The rate of spending and sufficiency of such resources will be affected by numerous factors including the success of the Companys clinical trials and the rate of acquisition of new products and technologies.
Success in early-stage clinical trials or acquisition of new products and technologies would lead to an increase in working capital requirements. The Companys actual cash requirements may vary materially from those now planned because of the
results of research and development, clinical trials, product testing, relationships with strategic partners, acquisition of new products and technologies, changes in the focus and direction of the Companys research and development programs,
competitive and technological advances, the process of obtaining United States Food and Drug Administration or other regulatory approvals and other factors.





|New |  | Accounting Pronouncements
|--- |  | -------------------------




In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Accounting Standards No. (SFAS) 141, Business Combinations and SFAS 142,
Goodwill and Other Intangible Assets. SFAS 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart
from goodwill. SFAS 142 requires that rateable amortization of goodwill be replaced with periodic tests of the goodwills impairment and that certain intangible assets other than goodwill be amortized over their useful lives. SFAS 141 is
effective for all business combinations initiated after June 30, 2001. The provisions of SFAS 142 are effective for fiscal years beginning after December 15, 2001. The Company accounted for the merger on March 15, 2002 as prescribed by SFAS No. 141
and SFAS No. 142.





In August 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations, which provides the accounting requirements for retirement obligations associated with tangible long-lived assets. This Statement requires entities to record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred. This Statement is effective for the Companys 2003 fiscal year, and early adoption is permitted. The adoption of SFAS 143 will have no impact on the Companys financial statements.





In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which excludes from
the definition of long-lived assets goodwill and other intangibles that are not amortized in accordance with SFAS 142. SFAS 144 requires that long-lived assets to be disposed of by sale be measured at the lower of carrying amount or fair value less
cost to sell, whether reported in continuing operations or in discontinued operations. SFAS 144 also expands the reporting of discontinued operations to include components of an entity that have been or will be disposed of rather than limiting such
discontinuance to a segment of a business. This Statement is effective for the Companys 2002 fiscal year, and early adoption is permitted. The adoption of SFAS 144 has no impact on the Companys financial statements.





In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146
addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). The principal difference between SFAS 146 and Issue 94-3 relates to SFAS 146s requirements for recognition of a liability for a cost associated with an exit or disposal activity.
SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of
an entitys commitment to an exit plan. A fundamental conclusion reached by the FASB in this Statement is that an entitys commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore,
this Statement eliminates the definition and requirements for recognition of exit costs in Issue 94-3. This Statement also establishes that fair value is the objective for initial measurement of the liability. This Statement is effective for exit or
disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of SFAS 146 has no impact on the Companys financial statements.




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Item 3.    
QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





The Companys proceeds
from private placements and the merger have been invested in money market funds that invest primarily in short-term, highly-rated investments, including U.S. Government securities, commercial paper and certificates of deposit guaranteed by banks.
The Companys current policies do not use interest rate derivative instruments to manage exposure to interest rate changes. Because of the short-term maturities of the Companys investments, it does not believe that a decrease in market
rates would have a significant negative impact on the value of its investment portfolio. Declines in interest rates will, however, reduce the Companys interest income while increases in interest rates will increase the Companys interest
income.





Item 4.    
CONTROLS AND PROCEDURES





Within the 90 days prior to the date of this Form 10-Q, the
Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief Executive Officer along with the Companys Chief Financial Officer, of the effectiveness of
the design and operation of the Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Companys Chief Executive Officer along with the Companys Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys
periodic Securities and Exchange Commission filings. Subsequent to the date of that evaluation, there have been no significant changes in the Companys internal controls or in other factors which could significantly affect internal controls,
nor were any corrective actions required with regard to significant deficiencies and material weaknesses.







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PART II  OTHER INFORMATION





Item 1.    
LEGAL PROCEEDINGS





The Company remains involved in litigation with Pall Corporation
("Pall") in connection with HMSR's r\LS filter, which is no longer made or sold by the Company (the "Pall Litigation"). On September 3, 2002, Pall served an Amended Consolidated Complaint in the United States District Court for the District of
Colorado alleging, among other things, that HMSR's r\LS filters infringed certain claims of Pall's U.S. Patent Numbers 5,863,436 (the "'436 Patent") and 6,086,770 (the "'770 Patent"). Pall also alleged claims of tortious interference and unfair
competition against the Company. Pall also made additional allegations of patent infringement against Whatman HemaSure, Inc. (purchaser of substantially all of HMSR's business and operations; hereinafter "Whatman"), Whatman plc (the ultimate parent
company of Whatman), Whatman International (a related company to Whatman and Whatman plc), and Filtertek, Inc. (a subcontract manufacturer to HMSR).





On October 16, 2002, the Company responded to Pall's Amended Consolidated Complaint denying Pall's allegations and submitted a counterclaim alleging that Pall's '436 and '770 Patents are invalid, not
infringed and unenforceable. On November 5, 2002, Pall denied the allegations of noninfringement, invalidity and unenforceability. The litigation is proceeding.





The Company believes, based upon its review of these matters, that a properly informed court should conclude that the manufacture, use and/or sale by HMSR or its customers of the r\LS System did not
infringe any valid enforceable claim of the '436 and '770 Patents. However, there can be no assurance that the Company will prevail in the Pall Litigation. Pursuant to an agreement between the Company and Whatman, Whatman assumed any and all
obligations and liabilities of the Company relating to the Pall Litigation. However, any damages and certain settlement amounts incurred by Whatman in connection with the Pall Litigation may be offset by Whatman against any royalties owed by Whatman
to the Company under the terms of a certain royalty agreement between Whatman and the Company, and thus may reduce the amount of royalties that the Company may collect under the terms of that royalty agreement.





Item 4.    
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





The Annual Meeting of Stockholders
was held on July 9, 2002. The holders of more than a majority of the shares entitled to vote were represented at the meeting in person or by proxy, constituting a quorum. At the meeting, the following matters were voted upon by the stockholders,
receiving the number of affirmative and withheld or negative (withheld) votes set forth below each matter.





1. To consider and act upon a proposal to elect five directors for a term ending at the next annual meeting and until each such directors successor is duly elected and qualified:





For

WithheldDonald R. Kiepert, Jr.

7,454,233

7,550Timothy J. Barberich

7,454,233

7,550Thomas M. Claflin, II

7,454,233

7,550Daniel T. Roble

7,454,233

7,550William J. Whelan, Jr.

7,454,233

7,550





2. To consider and act upon a proposal to ratify the selection of
Ernst & Young LLP as the Companys independent public accountants for the year ending December 31, 2002:





For

Against

Abstain7,460,283

2,950

550




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Item 6.    
Exhibits and Reports on Form 8-K





|(a) |  | Exhibits
|--- |  | --------




Exhibit Number

Description99.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.99.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.99.3

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.99.4

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.


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SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.





POINT THERAPEUTICS, INC.Date: November 14, 2002

By:

/s/    DONALD R. KIEPERT, JR. Donald R. Kiepert, Jr. Chief Executive OfficerDate: November 14, 2002

By:

/s/    RICHARD N. SMALL Richard N. Small Chief Financial Officer




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