-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O4vYtF7J47N4PLBtvYvRcVUbfi/bZrJr4BFzV92uWKKbZfpsWockmhrZW75MnMh7 F0gxLiIX2lWoPDRj9kNp4Q== 0000950134-00-006242.txt : 20020722 0000950134-00-006242.hdr.sgml : 20020722 20000803092000 ACCESSION NUMBER: 0000950134-00-006242 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000803 DATE AS OF CHANGE: 20020722 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMARILLO BIOSCIENCES INC CENTRAL INDEX KEY: 0001014763 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 751974352 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-20791 FILM NUMBER: 00684932 BUSINESS ADDRESS: STREET 1: 800 W 9TH AVE CITY: AMARILLO STATE: TX ZIP: 79101-3206 BUSINESS PHONE: 8063761741 MAIL ADDRESS: STREET 1: AMARILLO BIOSCIENCES INC STREET 2: 800 W 9TH AVE CITY: AMARILLO STATE: TX ZIP: 79101-3206 10QSB 1 e10qsb.txt FORM 10QSB FOR QUARTER ENDING JUNE 30, 2000 1 United States SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 2000 ------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-20791 AMARILLO BIOSCIENCES, INC. - -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) TEXAS 75-1974352 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 800 West Ninth, Amarillo, TX 79101 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 806-376-1741 FAX 806-376-9301 - -------------------------------------------------------------------------------- (Issuer's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- As of June 30, 2000 there were 7,807,357 shares of the issuer's common stock outstanding. 1 2 AMARILLO BIOSCIENCES, INC. INDEX
PART I: FINANCIAL INFORMATION PAGE NO. -------- ITEM 1. Financial Statements Consolidated Balance Sheets - December 31, 1999 and June 30, 2000 .................................................... 3 Consolidated Statements of Operations - Three Months and Six Months Ended June 30, 1999 and 2000 and Cumulative from June 25, 1984 (Inception) through June 30, 2000 ........ 4 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1999 and 2000 and Cumulative from June 25, 1984 (Inception) through June 30, 2000 ............. 5 Notes to Consolidated Financial Statements .................. 6 ITEM 2. Management's Plan of Operations ............................. 8 PART II: OTHER INFORMATION ITEM 2. Changes in Securities and Use of Proceeds ................... 10 ITEM 5. Other Information ........................................... 11 ITEM 6. Exhibits and Reports on Form 8-K ............................ 12 Signatures ................................................................ 13
2 3 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30, 1999 2000 ------------ ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,302,343 $ 1,377,180 Inventory 48,639 48,639 Other current assets 32,137 27,812 ------------ ------------ Total current assets 1,383,119 1,453,631 Property and equipment, net 105,799 99,552 Patents, net of accumulated amortization of $89,806 and $99,547 at December 31, 1999 and June 30, 2000 (unaudited), respectively 73,495 85,957 ------------ ------------ Total assets $ 1,562,413 $ 1,639,140 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 521,199 $ 1,183,026 Accrued interest 3,526 40,981 Other accrued expenses 82,198 28,794 ------------ ------------ Total current liabilities 609,923 1,252,802 Notes payable to related party 1,000,000 2,000,000 ------------ ------------ Total liabilities 1,609,923 3,252,801 STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock, $.01 par value: Authorized shares - 10,000,000 Issued shares - none Common stock, $.01 par value: Authorized shares - 20,000,000 Issued shares - 7,807,357 74,722 78,074 Additional paid-in capital 17,374,570 18,307,511 Deficit accumulated during the development stage (17,496,802) (19,999,246) ------------ ------------ Total stockholders' equity (47,510) (1,613,661) ------------ ------------ Total liabilities and stockholders' equity $ 1,562,413 $ 1,639,140 ============ ============
See accompanying notes. 3 4 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Cumulative from June 25, 1984 Three months ended Six months ended (Inception) June 30, June 30, through ------------------------------ ------------------------------ June 30, 1999 2000 1999 2000 2000 ------------ ------------ ------------ ------------ ------------ Revenues: Contract revenues $ -- $ -- $ -- $ -- $ 9,000,000 Interferon sales -- -- -- -- 420,974 Interest income 27,951 17,093 76,638 29,389 1,555,394 Sublicense fees -- -- -- -- 113,334 Royalty income -- -- -- -- 31,544 Gain on sale of ISI stock -- -- -- 5,209 113,446 Other -- 1,430 -- 1,530 608,361 ------------ ------------ ------------ ------------ ------------ 27,951 18,523 76,638 36,128 11,843,053 Expenses: Research and development expenses 450,355 931,060 2,131,399 1,873,211 17,958,020 Selling, general, and administrative expenses 521,090 326,268 845,419 627,906 12,956,698 Interest expense 321 22,439 29,170 37,455 892,581 ------------ ------------ ------------ ------------ ------------ 971,766 1,279,767 3,005,988 2,538,572 31,807,299 ------------ ------------ ------------ ------------ ------------ Loss before income taxes (943,815) (1,261,244) (2,929,350) (2,502,444) (19,964,246) Income tax expense -- -- -- -- 35,000 ------------ ------------ ------------ ------------ ------------ Net loss $ (943,815) $ (1,261,244) $ (2,929,350) $ (2,502,444) $(19,999,246) ============ ============ ============ ============ ============ Basic and diluted loss per share $ (0.15) $ (0.16) $ (0.50) $ (0.33) ============ ============ ============ ============ Weighted average shares outstanding 6,349,929 7,771,445 5,884,665 7,621,801 ============ ============ ============ ============
See accompanying notes. 4 5 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six months ended Cumulative from June 30, June 25, 1984 ------------------------------ (Inception) through 1999 2000 June 30, 2000 ------------ ------------ -------------------- Net cash used in operating activities $ (2,901,136) $ (1,737,172) $(17,580,574) Net cash provided by (used in) investing activities (6,130) 5,209 (569,077) Net cash provided by financing activities -- 1,806,800 19,526,831 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents (2,907,266) 74,837 1,377,180 Cash and cash equivalents at beginning of period 4,776,328 1,302,343 -- Cash and cash equivalents at end of period $ 1,869,062 $ 1,377,180 $ 1,377,180 ============ ============ ============ Supplemental Disclosure of Cash Flow Information Cash paid for income taxes $ -- $ -- $ 37,084 ============ ============ ============ Cash paid for interest $ -- $ -- $ 6,466 ============ ============ ============
See accompanying notes. 5 6 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation. The accompanying consolidated financial statements, which should be read in conjunction with the consolidated financial statements and footnotes included in the Company's Form 10-KSB for the year ended December 31, 1999 filed with the Securities and Exchange Commission, are unaudited (except for the December 31, 1999 consolidated balance sheet which was derived from the Company's audited financial statements), but have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2000. 2. Loss per share. Loss per share is computed based on the weighted average number of common shares outstanding. 3. On December 29, 1999 405,932 options were granted to employees of the Company, including 300,000 granted to Joseph Cummins, President and CEO. Such options are exercisable at a price of $.875 per share, being the fair market value of the Company's stock on December 29, 1999, the date of grant. All of such options granted to employees were granted in consideration of the employees' agreement to relinquish salary during 2000, on the basis of two options granted for every $1.00 of salary voluntarily relinquished, with the amount of such relinquished salary being reflected in the Option Agreement signed with each employee, such options to vest monthly beginning in January, 2000, and to expire December 29, 2004. The Company recorded compensation expense in the amount of $64,746 during the first quarter of 2000 and $64,746 during the second quarter of 2000 in regard to these options. This amount represents the difference between the exercise price and the fair market value of the stock on the date of the salary reduction commitment by each of the employees, amortized over the 12 month vesting period. To date, a total of 19,200 options have been exercised by employees, as is more fully explained in Part II, Item 2. 6 7 On April 15, 2000 the Company completed a private placement. The Company sold 316,000 unregistered shares of its voting common stock at a price of $2.50 per share, generating $790,000 in cash. In addition, the investment package included five year warrants allowing each investor the right to purchase 20% more stock, or a total of 63,200 more shares than originally subscribed at a 25% increase in price per share, and an additional 20% more stock, or a total of 63,200 more shares than that originally subscribed at a 50% increase in price per share. Proceeds from the private placement are being used to fund the Phase III clinical trial in primary Sjogren's syndrome and to fund the general operating expenses of the Company. 7 8 ITEM 2. MANAGEMENT'S PLAN OF OPERATIONS Amarillo Biosciences, Inc. is a development stage company which is conducting research and development activities focused on biologics for the treatment of human and animal diseases. The Company has not commenced any significant product commercialization and, until such time as it does, will not generate significant product revenues. The Company's accumulated deficit has continued to grow, from $17,496,802 at December 31, 1999 to $19,999,246 at June 30, 2000. Operating losses are expected to continue for the foreseeable future and until such time as the Company is able to attain sales levels sufficient to support its operations. During the next 12 months the Company will continue its research and development activities, as well as the activities necessary to develop commercial partnerships and licenses. The Company's expenditure of financial resources during this period will fall principally into five broad categories, as follows: Research and Development; Personnel; Consulting and Professional (other than legal and accounting); Legal and Accounting; and Liquidity Needs. The Company's expectations and goals with respect to these categories are addressed separately below, by category: RESEARCH AND DEVELOPMENT: Until it achieves commercial product sales, the Company's business is research and development, and this is the area where the Company's principal efforts will be expended during the next 12 months. The Company has reduced its budget to $1.3 million to be spent on research and development during the next 12 months, inclusive of amounts to be expended on the Company's Phase III Sjogren's syndrome clinical trials. PERSONNEL: In addition to its intellectual property, the Company's principal assets are its personnel. The Company has been successful in controlling its personnel costs, both by maintaining its principal location in Amarillo, Texas, and by ensuring maximum efficiency and utilization of existing personnel. The Company has budgeted approximately $560,000 for personnel expenses during the next 12 months, including salaries, payroll taxes, directors' and officers' general liability insurance, group health and liability insurance. CONSULTING AND PROFESSIONAL (EXCEPT LEGAL AND ACCOUNTING): The Company has budgeted approximately $90,000 for expenditure on professional consultants in the next 12 months. Consulting fees are expected to be paid to certain independent consultants, in connection with the operation of the Company. The Company will continue to use the services of consultants to complement the Company's small full-time staff, where such is a more efficient utilization of the Company's resources. LEGAL AND ACCOUNTING: Although the Company is not involved in litigation, it has budgeted legal expenses of approximately $135,000 during the next 12 months. Almost 20% of the Company's legal expenditures will be for preparation and filing of patents and for maintenance of existing patents in a number of countries. Other legal expenses will be related to compliance with laws and regulations affecting public companies, licensing and contracting, and general corporate matters. The Company does not presently have an in-house legal staff, nor does it intend to put such a staff in place within the near term. The Company expects to continue Ernst & Young as its auditors. 8 9 PUBLIC RELATIONS, INVESTOR RELATIONS AND SHAREHOLDER RELATIONS: The Company has budgeted approximately $30,000 for public relations, investor relations and shareholder relations during the next 12 months. The Company has also budgeted sufficient amounts to maintain its comprehensive web site (www.amarbio.com). LIQUIDITY NEEDS: The principal budget items discussed above, along with other miscellaneous costs and expenses, will cause the Company to expend approximately $2.4 million during the next 12 months including the substantial expense of the Company's Phase III Sjogren's syndrome clinical trials. At June 30, 2000 the Company had available cash of $1,377,180. Proceeds from a private placement which closed in April generated cash in the amount of $790,000. The Company will need to raise additional funds to continue operations during the next 12 months. If the Company is not successful in raising additional funds, it will need to significantly curtail clinical trial expenditures and to reduce staff and administrative expenses and may be forced to cease operations. 9 10 PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. The Company's common stock was delisted from the Nasdaq SmallCap Stock Market on October 12, 1999 because the Company did not have sufficient net tangible assets to meet the applicable Nasdaq maintenance criteria. The Company's common stock is currently traded on the Over the Counter Bulletin Board. The Company completed a private placement of its voting common stock in April, 2000, raising an aggregate of $790,000, as follows:
NUMBER OF PRICE PER DATE SHARES SOLD SHARE April 6, 2000 80,000 $2.50 April 7, 2000 86,000 $2.50 April 7, 2000 40,000 $2.50 April 7, 2000 40,000 $2.50 April 9, 2000 40,000 $2.50 April 10, 2000 20,000 $2.50 April 11, 2000 10,000 $2.50 Total 316,000
There was no principal underwriter for the offering. The offering was limited to accredited investors within the meaning of Section 4(6) of the Securities Act of 1933 (the "Act"), and within the meaning of Regulation D, promulgated under the Act. The offering was not registered, in reliance upon the exemptions afforded by Section 4(6) of the Act, and Rule 506 of Regulation D, promulgated under the Act, and a notice on Form D was timely filed with the Securities and Exchange Commission. The total offering price of the securities sold was $790,000, there were no underwriting discounts, and no commissions were paid. In addition to the shares purchased, set forth above, the package for each investor included 5 year warrants granting to the investor the right to purchase additional shares of stock in the amount of 20% of the shares initially purchased, at a price of $3.125 per share, and additional shares, in the amount of 20% of the shares initially purchased, at a price of $3.75 per share. 10 11 ITEM 5. OTHER INFORMATION CLINICAL TRIAL RESULTS: On April 7, 2000 the Company announced the results from the first of its double-blinded, placebo-controlled Phase III studies in primary Sjogren's syndrome. These results demonstrated an improvement in unstimulated whole saliva (UWS) production in those patients receiving the 150 International Units of interferon alpha (IFN"). This increase correlated strongly with subjective improvements in oral dryness, throat dryness and nasal dryness, as determined by visual analog scale. Measurements of stimulated whole saliva and subjective oral dryness had been designated the primary end points of the study. When an intent-to-treat analysis was used to analyze these data, the results were not significant. Because of the importance of UWS measurement, the Company plans to focus on this measure in its second, ongoing Phase III study. The Company intends to revise the primary end point of the study to be the change in UWS, but will continue to measure all end points. NATURAL PRODUCTS: In May, 2000 the Company announced that it will enter the natural product or nutraceutical market place. A nutraceutical is a specially formulated food product (not a drug) designed to promote long term health and/or reduce the risk of chronic disease. The Food and Drug Administration (FDA) regulates the composition and labeling of nutraceutical type products. Vanguard Biosciences, Inc., a wholly owned subsidiary, will oversee the introduction of products into this market. The first product will be a nutritional supplement which has been shown in clinical trials to alleviate the symptoms of dry mouth. This product will be sold, using the brand name Salive, for which a trademark application has been filed. Two groups have been retained to provide assistance for entrance into the natural products market place. These include the American Institute for Biosocial and Medical Research of Puyallup, Washington and Wilke Resources of Kansas City, Missouri, which was selected as the exclusive North American agent for Vanguard's natural product business. PPD DEVELOPMENT, INC.: On July 5, 2000, Veldona USA, Inc. (Veldona), a wholly owned subsidiary, received notice from PPD Development, Inc. (PPD) that it was immediately terminating the Master Services Agreement between the companies. This Agreement delineated the services provided by PPD relating to the Sjogren's syndrome clinical trial. The Company plans to continue the clinical trial and will use company employees to perform the work previously conducted by PPD. 11 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. EXHIBIT 27. Financial Data Schedule No reports on Form 8-K were filed during the quarter ended June 30, 2000. 12 13 SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMARILLO BIOSCIENCES, INC. Date: August 1, 2000 By: /s/ JOSEPH M. CUMMINS ------------------------------------ Joseph M. Cummins President, Chief Executive Officer and Chief Financial Officer 13 14 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule
EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THIS FORM 10-QSB FOR PERIOD ENDED JUNE 30, 2000. 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1,377,180 0 0 0 48,639 1,453,631 250,508 150,956 1,639,140 1,252,802 2,000,000 0 0 78,074 (1,691,735) (1,639,140) 0 36,128 0 1,873,211 627,906 0 37,455 (2,502,444) 0 (2,502,444) 0 0 0 (2,502,444) (.33) (.33)
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