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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark one)



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



FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003



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)



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|Delaware                                                       |  | 04-3216862                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|125 SUMMER STREET BOSTON, MASSACHUSETTS                        |  | 02110                               
|(Address of Principal Executive Offices)                       |  | (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



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of
1934). ̈Yes    x No



As of August 13, 2003, there were 9,275,755 shares of the Registrants Common Stock,
$0.01 par value per share, outstanding.



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##### Table of Contents

POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)



QUARTERLY REPORT ON FORM 10-Q

INDEX



|                                                                                                                                                                                   |  | PageNumber
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------
|PART I.    FINANCIAL INFORMATION                                                                                                                                                   |  |           
|                                                                                                                                                                                   | 
|Item 1.    Financial Statements (unaudited)                                                                                                                                        |  |           
|                                                                                                                                                                                   | 
|Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002                                                                                                              |  | 3         
|                                                                                                                                                                                   | 
|Consolidated Statements of Operations for the Three and Six-Month Periods Ended June 30, 2003 and 2002 and for the Period From Inception (September 3, 1996) through June 30, 2003 |  | 4         
|                                                                                                                                                                                   | 
|Consolidated Statements of Cash Flows for the Three and Six-Month Periods Ended June 30, 2003 and 2002 and for the Period From Inception (September 3, 1996) through June 30, 2003 |  | 5         
|                                                                                                                                                                                   | 
|Notes to Consolidated Financial Statements                                                                                                                                         |  | 6         
|                                                                                                                                                                                   | 
|Item 2.    
Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                  |  | 9         
|                                                                                                                                                                                   | 
|Item 3.    
Quantitative and Qualitative Disclosures About Market Risk                                                                                                             |  | 14        
|                                                                                                                                                                                   | 
|Item 4.    
Controls and Procedures                                                                                                                                                |  | 14        
|                                                                                                                                                                                   | 
|PART II.    OTHER INFORMATION                                                                                                                                                      |  |           
|                                                                                                                                                                                   | 
|Item 6.    
Exhibits and Reports on Form 8-K                                                                                                                                       |  | 15        
|                                                                                                                                                                                  
|SIGNATURES                                                                                                                                                                        



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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)



|                                                                                                                                                            |  | June 30, 2003 |             |   | December 31,2002 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ---------------- | -
|Assets                                                                                                                                                      |  |               |             |   |                  |  
|Current assets:                                                                                                                                             |  |               |             |   |                  |  
|Cash and cash equivalents                                                                                                                                   |  | $             | 7,817,600   |   |                  | $
|Prepaid expenses and other current assets                                                                                                                   |  |               | 523,832     |   |                  |  
|                                                                                                                                                            |  |               |             |   |                  |  
|Total current assets                                                                                                                                        |  |               | 8,341,432   |   |                  |  
|Office and laboratory equipment, net                                                                                                                        |  |               | 238,712     |   |                  |  
|                                                                                                                                                            |  |               |             |   |                  |  
|Total assets                                                                                                                                                |  | $             | 8,580,144   |   |                  | $
|                                                                                                                                                            |  |               |             |   |                  |  
|                                                                                                                                                            |  |              
|Liabilities and stockholders equity                                                                                                                        |  |               |             |   |                  |  
|Current liabilities:                                                                                                                                        |  |               |             |   |                  |  
|Accounts payable                                                                                                                                            |  | $             | 345,536     |   |                  | $
|Accrued expenses                                                                                                                                            |  |               | 449,776     |   |                  |  
|Accrued severance                                                                                                                                           |  |               | 37,693      |   |                  |  
|Accrued professional fees                                                                                                                                   |  |               | 70,473      |   |                  |  
|                                                                                                                                                            |  |               |             |   |                  |  
|Total current liabilities                                                                                                                                   |  |               | 903,478     |   |                  |  
|Patent liability, less current portion                                                                                                                      |  |               | 52,367      |   |                  |  
|                                                                                                                                                            |  |              
|Stockholders equity:                                                                                                                                       |  |               |             |   |                  |  
|Preferred stock, $0.01 par value, 1,000 shares authorized; no shares issued or outstandingas of June 30, 2003 and December 31,
2002                         |  |               |            |   |                  |  
|Common stock, $0.01 par value, 35,000,000 shares authorized, 9,275,755 shares issuedand 9,275,755 shares outstanding at June
30, 2003 and December 31, 2002 |  |               | 93,769      |   |                  |  
|Additional paid-in capital                                                                                                                                  |  |               | 28,169,768  |   |                  |  
|Treasury stock, 101,169 and 101,169 shares at cost, as of June 30, 2003 andDecember 31, 2002, respectively                                                  |  |               | (331,936    | ) |                  |  
|Deficit accumulated during the development stage                                                                                                            |  |               | (20,307,302 | ) |                  |  
|                                                                                                                                                            |  |               |             |   |                  |  
|Total stockholders equity                                                                                                                                  |  |               | 7,624,299   |   |                  |  
|                                                                                                                                                            |  |               |             |   |                  |  
|Total liabilities and stockholders equity                                                                                                                  |  | $             | 8,580,144   |   |                  | $
|                                                                                                                                                            |  |               |             |   |                  |  



The accompanying notes
are an integral part of these consolidated financial statements.



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POINT THERAPEUTICS, INC.

(A Development Stage Company)



CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                                         |  | Three-months ended June 30, |            |   | Six-months ended June 30, |   |            | Period fromSeptember 3, 1996(date of inception)through June 30, | 
|------------------------------------------------------------------------ |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | --------------------------------------------------------------- | 
|                                                                         |  | 2003                        |            |   | 2002                      |   |            | 2003                                                            | 
|REVENUES:                                                                |  |                             |            |   |                           |   |            |                                                                 | 
|License revenue                                                          |  | $                           |           |   |                           | $ |           |                                                                 | 
|Sponsored research revenue                                               |  |                             |           |   |                           |   |           |                                                                 | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 
|Total revenues                                                           |  |                             |           |   |                           |   |           |                                                                 | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 
|                                                                         |  |                             |            |   |                          
|OPERATING EXPENSES:                                                      |  |                             |            |   |                           |   |            |                                                                 | 
|Research and development                                                 |  |                             | 1,142,267  |   |                           |   | 1,224,173  |                                                                 | 
|General and administrative                                               |  |                             | 511,217    |   |                           |   | 502,811    |                                                                 | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 
|Total operating expenses                                                 |  |                             | 1,653,484  |   |                           |   | 1,726,984  |                                                                 | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 
|Net loss from operations                                                 |  |                             | (1,653,484 | ) |                           |   | (1,726,984 | )                                                               | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 
|                                                                         |  |                             |            |   |                          
|INTEREST INCOME, NET:                                                    |  |                             |            |   |                           |   |            |                                                                 | 
|Interest income                                                          |  |                             | 17,373     |   |                           |   | 64,691     |                                                                 | 
|Interest expense                                                         |  |                             |           |   |                           |   |           |                                                                 | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 
|Total interest income, net                                               |  |                             | 17,373     |   |                           |   | 64,691     |                                                                 | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 
|NET LOSS                                                                 |  | $                           | (1,636,111 | ) |                           | $ | (1,662,293 | )                                                               | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 
|BASIC AND DILUTED NET LOSS PERCOMMON SHARE                               |  | $                           | (0.18      | ) |                           | $ | (0.18      | )                                                               | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 
|WEIGHTED AVERAGE COMMON SHARESFOR BASIC AND DILUTED NET LOSS COMPUTATION |  |                             | 9,275,755  |   |                           |   | 9,275,755  |                                                                 | 
|                                                                         |  |                             |            |   |                           |   |            |                                                                 | 



The accompanying notes
are an integral part of these consolidated financial statements.



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POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)



CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                     |  | Six-months ended June 30, |            |   | Period frominception (September 3,1996) throughJune 30, |  
|---------------------------------------------------- |  | ------------------------- | ---------- | - | ------------------------------------------------------- | -
|                                                     |  | 2003                      |            |   | 2002                                                    |  
|CASH FLOWS FROM OPERATING ACTIVITIES                 |  |                           |            |   |                                                         |  
|Net loss                                             |  | $                         | (3,497,712 | ) |                                                         | $
|                                                     |  |                           |           
|Adjustments to reconcile net loss to net cash used:  |  |                           |            |   |                                                         |  
|Depreciation                                         |  |                           | 44,004     |   |                                                         |  
|Issuance of compensatory stock options               |  |                           | 26,795     |   |                                                         |  
|Common stock issued under license agreement          |  |                           |           |   |                                                         |  
|Patent costs                                         |  |                           |           |   |                                                         |  
|Accrued interest on convertible notes                |  |                           |           |   |                                                         |  
|Changes in assets and liabilities:                   |  |                           |            |   |                                                         |  
|Prepaid expenses and other                           |  |                           | (250,138   | ) |                                                         |  
|Accounts payable and accrued liabilities             |  |                           | (496,825   | ) |                                                         |  
|                                                     |  |                           |            |   |                                                         |  
|Net cash used in operating activities                |  |                           | (4,173,876 | ) |                                                         |  
|                                                     |  |                           |           
|CASH FLOWS FROM INVESTING ACTIVITIES                 |  |                           |            |   |                                                         |  
|Purchase of office and laboratory equipment          |  |                           | (9,331     | ) |                                                         |  
|                                                     |  |                           |            |   |                                                         |  
|Net cash used in investing activities                |  |                           | (9,331     | ) |                                                         |  
|                                                     |  |                           |           
|CASH FLOWS FROM FINANCING ACTIVITIES                 |  |                           |            |   |                                                         |  
|Proceeds from merger between Point and HMSR Inc.     |  |                           |           |   |                                                         |  
|Proceeds from issuance of common stock, net of costs |  |                           |           |   |                                                         |  
|Proceeds from issuance of convertible note           |  |                           |           |   |                                                         |  
|Principal payments of patent liability               |  |                           | (4,688     | ) |                                                         |  
|                                                     |  |                           |            |   |                                                         |  
|Net cash provided by (used in) financing activities  |  |                           | (4,688     | ) |                                                         |  
|                                                     |  |                           |            |   |                                                         |  
|Net increase (decrease) in cash and cash equivalents |  |                           | (4,187,895 | ) |                                                         |  
|Cash and cash equivalents, beginning of period       |  |                           | 12,005,495 |   |                                                         |  
|                                                     |  |                           |            |   |                                                         |  
|Cash and cash equivalents, end of period             |  | $                         | 7,817,600  |   |                                                         | $
|                                                     |  |                           |            |   |                                                         |  



The accompanying notes
are an integral part of these consolidated financial statements.



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POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2003

(unaudited)



1.    Nature of the Business



Point Therapeutics, Inc. (the Company or Point) is a Boston-based biopharmaceutical company developing small molecule drugs for the treatment of a variety of cancerous tumors and certain
hematopoietic disorders. Points lead product candidate, PT-100, has the potential to inhibit the growth of certain cancerous tumors. Point is currently testing PT-100 in combination with Rituxan® for safety and efficacy in a Phase 1/2 human clinical study in patients with
hematologic malignancies, such as non-Hodgkins lymphoma and chronic lymphocytic leukemia. Point is also developing PT-100 as a potential therapy for the treatment of hematopoietic disorders caused by chemotherapy treatments. Point is currently
evaluating PT-100 in a human clinical study in which cancer patients undergoing chemotherapy are treated with PT-100 for 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 28, 2001, the Company sold substantially all of its non-cash assets to Whatman Biosciences, Inc. a Massachusetts
corporation and a subsidiary of Whatman Plc (Whatman), a leader in separations technology. The Company changed its name from Hemasure, Inc. to HMSR Inc. upon the sale to Whatman. From May 2001 until the merger on March 15, 2002
(described below) with Point Massachusetts, the Companys operations consisted primarily of investigating various strategic business combinations.



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 (the 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.



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



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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 for the year ended December 31, 2002, contained in a Form 10-K/A filed with the Securities and Exchange Commission on April 30, 2003. Operating results for the quarter ended June 30, 2003 are not
necessarily indicative of the results that may be expected for the year ending December 31, 2003.



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.



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 six-month periods ended June 30, 2003 and 2002. Potentially dilutive securities,
consisting of stock options and warrants, have been excluded from the diluted earnings per share calculations since their effect is antidilutive.



Stock-Based Compensation



The Company has elected to follow Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB No.
25), in accounting for its stock based employee compensation plans using the intrinsic value method, rather than the alternative fair value accounting method provided for under SFAS No. 123, Accounting for Stock Based Compensation (SFAS
No. 123), as SFAS No. 123 requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB No. 25, when the exercise price of options granted to employees under these plans equals the
market price of the underlying stock on the date of grant, no compensation expense is required.



The reconciliation of net loss and net loss per share, as reported, to pro forma net loss and net loss per share giving effect to employee stock-based
compensation accounted for using the fair value accounting method, is as follows:



|                                                                                                                                                                                                            |  | Three-Months Ended June 30, |            |   | Six-Months Ended June 30, |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | -
|                                                                                                                                                                                                            |  | 2003                        |            |   | 2002                      |  
|Net loss, as reported                                                                                                                                                                                       |  | $                           | (1,636,111 | ) |                           | $
|                                                                                                                                                                                                            |  |                             |            |  
|Deduct: Stock compensation cost as computed under APB No. 25                                                                                                                                                |  |                             | 18,638     |   |                           |  
|Add: Stock based employee compensation cost, net of related Tax effects, that would have been included in the determination of net
loss as reported if the fair value method had been applied to all awards |  |                             | (98,152    | ) |                           |  
|                                                                                                                                                                                                            |  |                             |            |   |                           |  
|Pro forma net loss                                                                                                                                                                                          |  | $                           | (1,715,625 | ) |                           | $
|                                                                                                                                                                                                            |  |                             |            |   |                           |  
|Diluted net loss per share, as reported                                                                                                                                                                     |  | $                           | (0.18      | ) |                           | $
|                                                                                                                                                                                                            |  |                             |            |   |                           |  
|Diluted net loss per share, pro forma                                                                                                                                                                       |  | $                           | (0.18      | ) |                           | $
|                                                                                                                                                                                                            |  |                             |            |   |                           |  



The weighted-average
per share fair value of options granted during the three months ended June 30, 2003 and 2002 was $0.53 and $0.98, respectively. The weighted average per share fair value of options granted during the six months ended June 30, 2003 and 2002 was $0.54
and $1.59 respectively.



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The fair value of stock options and common shares issued pursuant to the stock option and stock purchase
plans at the date of grant were estimated using the Black-Scholes model with the following weighted-average assumptions:



|                      |  | 2003 |   |  | 2002 |  
|--------------------- |  | ---- | - |  | ---- | -
|Expected life (years) |  | 4.0  |   |  | 4.0  |  
|Interest rate         |  | 3.50 | % |  | 4.69 | %
|Volatility            |  | .93  |   |  | .93  |  



4.    License
Revenue



On March 5, 2003, Whatman sold the non-cash
assets it had previously purchased from Hemasure to Pall Corporation. In connection with that sale, the ongoing patent litigation among Pall Corporation, Whatman and the Company was settled, and the litigation was dismissed, with prejudice, in the
United States District Court in the Eastern District of New York and in the District of Colorado. From March 15, 2002, the effective date of the merger of the Company and Point Massachusetts, through March 5, 2003, the effective date of the sale of
the Whatman assets to Pall Corporation, $96,150 of net royalties was accrued and is payable to the Company. As of June 30, 2003, the Company has recognized $96,150 of license revenue and the related accounts receivable.



5.    New Accounting Standards



In January 2003, the Financial Accounting Standards Board (FASB)
issued FIN 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. The primary objective of the Interpretation is to provide guidance on the identification of, and financial reporting for, entities over which
control is achieved through means other than voting rights. Such entities are known as variable-interest entities (VIEs). Although the FASBs initial focus was on special-purpose entities (SPEs), the final guidance applies to a wide range of
entities. FIN 46 applies to new entities that are created after the effective date, as well as applies to existing entities. The FIN is effective to preexisting entities as of the beginning of the first interim period beginning after June 15, 2003,
and to any new entities beginning February 1, 2003. Once effective, FIN 46 will be the guidance that determines (1) whether consolidation is required under the controlling financial interest model of Accounting Research Bulletin No. 51
(ARB 51), Consolidated Financial Statements, or other existing authoritative guidance, or, alternatively, (2) whether the variable-interest model under FIN 46 should be used to account for existing and new entities. The Company does not expect FIN
46 to have a material impact on the consolidated financial statements.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Management does not anticipate that the adoption of SFAS No. 150 will have a material effect on the Companys
results of operations or financial position.



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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/A for the fiscal year ended December 31,
2002 as filed with the Securities and Exchange Commission on April 30, 2003 and from time to time in the Companys other reports filed with the Securities and Exchange Commission.



Overview



Point Therapeutics, Inc. (the Company or Point) is a Boston-based biopharmaceutical company developing small molecule drugs for
the treatment of a variety of cancerous tumors and certain hematopoietic disorders. Points lead product candidate, PT-100, has the potential to inhibit the growth of certain cancerous tumors. Point is currently testing PT-100 in combination
with Rituxan® for safety and efficacy in a Phase
1/2 human clinical study in patients with hematologic malignancies, such as non-Hodgkins lymphoma and chronic lymphocytic leukemia. Point is also developing PT-100 as a potential therapy for the treatment of hematopoietic disorders caused by
chemotherapy treatments. Point is currently evaluating PT-100 in a human clinical study in which cancer patients undergoing chemotherapy are treated with PT-100 for neutropenia.



Besides the anti-tumor and hematopoeitic applications described above, the Company is also exploring a number of different
applications for PT-100 and its clinical analogues on a pre-clinical basis. In addition, the Company from time to time evaluates new technology opportunities to broaden its portfolio of potential products, including in-licensing opportunities,
collaboration arrangements as well as more expansive corporate relationships, such as mergers and acquisitions.



To date, the Company has generated no revenues from product sales and has depended upon equity financings, interest earned 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 $20,307,000 through June 30, 2003. 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 28, 2001, the Company sold substantially all of its non-cash assets to Whatman. The Company changed its name from Hemasure, Inc. to HMSR Inc. upon the sale to Whatman. From May 2001 until the merger on March 15, 2002 (described
below) with Point Massachusetts, the Companys operations consisted primarily of investigating various strategic business combinations.



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 (the 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, the Companys stockholders approved a 1-for-10 reverse split of the Companys common stock and a name change of the Company
from HMSR Inc. to Point Therapeutics, Inc. The stockholders of Point Massachusetts also approved on



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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 the Company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 Companys common
stock. This ratio also took into account the $500,000 HMSR Inc. lock-up fee 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, the Company acquired all of the outstanding shares
of Point Massachusetts capital stock. For accounting purposes, the acquisition has been treated as the acquisition of HMSR Inc. 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 Inc. had occurred at the beginning of the periods presented, the effect of the inclusion of HMSR Inc. operating results on the financial statements presented would not be material.



Critical Accounting Policies and Significant Judgments and Estimates



Critical accounting policies



In December of 2001, the Securities and Exchange Commission
(SEC) requested that all registrants list their most critical accounting policies in Managements Discussion and Analysis of Financial Condition and Results of Operations. The SEC indicated that a critical
accounting policy is one which is both important to the portrayal of our financial condition and results and requires managements most difficult, subjective or complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain. Our significant accounting policies are fully described in Note 3 to our consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q.



Revenue recognition



Revenue is deemed earned when all of the following have occurred: all obligations of the Company relating to the revenue
have been met and the earning process is complete; the monies received or receivable are not refundable, irrespective of research results; and there are neither future obligations nor future milestones to be met by the Company with respect to such
revenue incurred.



Revenues from corporate collaborations are
earned based upon research expenses incurred and milestones achieved. Non-refundable payments upon initiation of contracts are deferred and amortized over the period which the company is obligated to participate on a continuing and substantial basis
in the research and development activities outlined in each contract. Amounts received in advance of reimbursable expenses are recorded as deferred revenue until the related expenses are incurred. Milestone payments are recognized as revenue in the
period in which the parties agree that the milestone has been achieved.



The Company generated no revenues during the three-months ended June 30, 2003. For the six-months ended June 30, 2003, the Company recognized $96,000 of license revenue related to royalties payable to Point as successor to HMSR following
the merger. Royalty revenue is recognized upon the sale of the related products, provided the royalty amounts are fixed or determinable and collection of the related receivable is reasonably assured.



Clinical trial accrual



The Company accrues the estimated cost of patient recruitment and related supporting functions for its clinical trial as
patients are enrolled in the trial. These costs consist primarily of payments made to the clinical centers, investigators and patients for participating in the Companys clinical trial. As actual or expected costs become known, they may differ
from estimated costs previously accrued for and this clinical trial accrual would be adjusted accordingly.



Significant judgments and estimates



The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires that we make estimates and assumptions that affect the reported
amounts and disclosure of certain assets and liabilities at our balance sheet date. Such estimates include the carrying value of property and equipment and the value of certain liabilities. Actual results may differ from such estimates.



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Results of Operations



Three-months Ended June 30, 2003 and June 30, 2002



Revenues



The Company recorded no revenues in the three-month periods ended June 30, 2003 or June 30, 2002.



Operating expenses



Research and development expenses decreased 6.7% to $1,142,000 for the three-month period ended June 30, 2003 from
$1,224,000 for the three-month period ended June 30, 2002. The decrease was primarily due to external costs incurred for Points preclinical program in the three-month period ended June 30, 2002 offset in part by increased clinical costs
incurred during the three-month period ended June 30, 2003.



Since inception, the Company has incurred $19,992,000 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 $19,992,000 disclosed for research and development in the Companys financial statements has
primarily been directed towards developing PT-100. PT-100 is currently being tested in combination with Rituxan® for safety and efficacy in a Phase 1/2 human clinical study in patients with hematologic malignancies, such as non-Hodgkins lymphoma and chronic lymphocytic leukemia. The Company
is also developing PT-100 as a potential therapy for the treatment of hematopoietic disorders caused by chemotherapy treatments. The Company is currently evaluating PT-100 in a human clinical study in which cancer patients undergoing chemotherapy
are treated with PT-100 for neutropenia. 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 slightly by 1.6% to $511,000
for the three-month period ended June 30, 2003 from $503,000 for the three-month period ended June 30, 2002.



Interest income, net



Interest income, net for the three-month period ended June 30, 2003 was $17,000 compared to $65,000 for the same period in 2002, a decrease of $48,000 or 73.9%. The decrease in interest income for the three-month period resulted from lower
interest rates earned and a lower average invested cash balance in 2003 as compared to the same period in 2002.



Net loss



As a result of the foregoing, the Company incurred a net loss of $1,636,000, or $0.18 per share, for the three-month period ended June 30, 2003 compared
to a net loss of $1,662,000, or $0.18 per share, for the three-month period ended June 30, 2002.



Six-months Ended June 30, 2003 and June 30, 2002



Revenues



The Company
recorded license revenue in the six-months ended June 30, 2003 totaling $96,000, representing royalties payable to Point as successor to HMSR following the merger. The Company recorded no revenues during the six-months ended June 30, 2002.



Operating expenses



Research and development expenses increased 22.4% to $2,629,000 for the
six-month period ended June 30, 2003 from $2,148,000 for the six-month period ended June 30, 2002. The increase was primarily due to increased internal and external costs incurred during the six-months ended June 30, 2003 related to Points
current clinical program offset somewhat by external preclinical program costs incurred during the six-month period ended June 30, 2002.



General and administrative expenses decreased 15.9% to $1,007,000 for the six-month period ended June 30, 2003 from $1,198,000 for the six-month period
ended June 30, 2002. The decrease was primarily due to costs incurred with the merger with HMSR Inc. which occurred in the first quarter of 2002 offset in part by increased costs incurred during the six-months ended June 30, 2003 associated with
supporting the public reporting requirements of the Company.



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Interest income, net



Interest income, net for the six-month period ended June 30, 2003 was $42,000 compared to $95,000 for the same period in 2002, a decrease of $53,000 or
55.8%. The decrease in interest income for the six-month period resulted from lower interest rates earned and a lower average invested cash balance in 2003 as compared to the same period in 2002.



Net loss



As a result of the foregoing, the Company incurred a net loss of $3,498,000, or $0.38 per share, for the six-month period
ended June 30, 2003 compared to a net loss of $3,251,000, or $0.38 per share, for the six-month period ended June 30, 2002.



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 $7,500,000 from licensing and sponsored research
collaborations with pharmaceutical companies. In addition, the Company received $14,335,000 as a result of the 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 $949,000 from interest earned in invested cash balances.



At June 30, 2003, the Companys cash and cash equivalents decreased $4,188,000 as compared to December 31, 2002. The decrease was primarily due to $4,175,000 used in operations for the six-month period ended June
30, 2003, primarily to fund the clinical program for PT-100 and other research and development initiatives. The Company also increased its investment in office and laboratory equipment by $9,000 from December 31, 2002 to $422,000 at June 30, 2003.
The increase resulted from purchases of computers and furniture. The Company currently plans to spend approximately $50,000 during the remainder of 2003 on office and laboratory equipment.



At June 30, 2003, the Company had $7,818,000 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 into the first quarter of 2004. The Company is currently considering all strategic options
in order to ensure the continued funding of its operations including, but not limited to, raising additional funds through corporate partnerships, the sale of securities in both public and private offerings as the markets allow and merger and
acquisition activities and consolidations.



The Company has no
off-balance sheet arrangements as of June 30, 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 January 2003, the Financial
Accounting Standards Board (FASB) issued FIN 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. The primary objective of the Interpretation is to provide guidance on the identification of, and
financial reporting for, entities over which control is achieved through means other than voting rights. Such entities are known as variable-interest entities (VIEs). Although the FASBs initial focus was on special-purpose entities (SPEs), the
final guidance applies to a wide range of entities. FIN 46 applies to new entities that are created after the effective date, as well as applies to existing entities. The FIN is effective to preexisting entities as of the beginning of the first
interim period beginning after June 15, 2003, and to any new entities beginning February 1, 2003. Once effective, FIN 46 will be the guidance that determines (1) whether consolidation is required under the controlling financial interest
model of Accounting Research Bulletin No. 51 (ARB 51), Consolidated Financial Statements, or other existing authoritative guidance, or, alternatively, (2) whether the variable-interest model under FIN 46 should be used to account for existing and
new entities. The Company does not expect FIN 46 to have a material impact on the consolidated financial statements.



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In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify
a financial instrument that is within its scope as a liability. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after
June 15, 2003. Management does not anticipate that the adoption of SFAS No. 150 will have a material effect on the Companys results of operations or financial position.



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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



(a)    Evaluation of disclosure controls and procedures. The Companys chief executive officer and chief financial officer, after evaluating the effectiveness of the Companys
disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date (the Evaluation Date) within 90 days before the filing date of this quarterly report, have
concluded that as of the Evaluation Date, the Companys disclosure controls and procedures were adequate and designed to ensure that material information relating to the Company and its consolidated subsidiary would be made known to them by
others within those entities.



(b)    Changes in internal controls. There were no significant changes in the Companys internal controls or to the Companys knowledge, in other factors that could significantly affect the Companys
internal controls and procedures subsequent to the Evaluation Date.



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PART II.    OTHER INFORMATION



Item 6.    Exhibits and Reports on Form 8-K



(a)    Exhibits



|ExhibitNumber |  | Description                                                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|31.1          |  | Certification of Donald R. Kiepert, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 13, 2003.              
|31.2          |  | Certification of Richard N. Small pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 13, 2003.                    
|32.1          |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
|32.2          |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002, filed herewith. 



(b)    Reports on Form 8-K



The
Company filed the following Report on Form 8-K during the second quarter of 2003 and through August 13, 2003:



|Date of Report |  | Reported                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|May 23, 2003   |  | Current Report on Form 8-K to report, pursuant to Item 5 (Other Events) that the Company has issued a Press release on May 22, 2003, announcing that a study investigating its lead
product candidate, the small molecule PT-100, has been published as a First Edition paper in Blood Online.                                                                                                                                                             
|May 29, 2003   |  | Current Report on Form 8-K to report, pursuant to Item 5 (Other Events) that the Company has issued a press release on May 28, 2003 announcing that its lead product candidate
PT-100 demonstrated an improvement in severe neutropenia associated with chemotherapy according to clinical trial results to date.                                                                                                                                          
|June 2, 2003   |  | Current Report on Form 8-K to report, pursuant to Item 9 (Regulation FD Disclosure) that the Company has issued a press release on June 2, 2003 announcing the presentation of
results from a study of its lead product candidate PT-100, demonstrating immunostimulatory effects and tumor growth suppression in mice. The results were presented in abstract form at the 2003 annual meeting of the American Society of Clinical
Oncology in Chicago, IL.
|July 8, 2003   |  | Current Report on Form 8-K to report, pursuant to Item 5 (Other Events) that the Company has issued a press release on July 8, 2003 announcing the enrollment of the first patient
in Phase 1/2 trial investigating combination therapy of PT-100 and Rituxan (R).                                                                                                                                                                                         
|August 8, 2003 |  | Current Report on Form 8-K to report, pursuant to Item 12 (Results of Operations and Financial Condition), that the Company had issued a press release on August 7, 2003 announcing
the Companys financial results for the second quarter ended June 30, 2003.                                                                                                                                                                                            



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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: August 13, 2003 |  |  |  | By:                     
|                      |  |  |  |                         





|                      |  |  |  | POINT THERAPEUTICS, INC.
|--------------------- |  |  |  | ------------------------
|                      |  |  | 
|Date: August 13, 2003 |  |  |  | By:                     
|                      |  |  |  |                         



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