-----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, TuD1YaU4ViWoMTsH9uZpSDOCHPQSXzq6PBxysqU/WDKXzQKGy0cM5EtWbtmsehqD bAcaWp8x0E6e/q9Ar4flBQ== 0000950134-03-008211.txt : 20030515 0000950134-03-008211.hdr.sgml : 20030515 20030515165803 ACCESSION NUMBER: 0000950134-03-008211 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 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: 333-04413 FILM NUMBER: 03705918 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 d06107e10qsb.txt FORM 10-QSB 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 MARCH 31, 2003 ---------------------- [ ] 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, Texas 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 March 31, 2003 there were 8,994,072 shares of the issuer's common stock outstanding. AMARILLO BIOSCIENCES, INC. INDEX
PAGE NO. -------- PART I: FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheet - March 31, 2003 ....................................... 3 Consolidated Statements of Operations - Three Months Ended March 31, 2003 and March 31, 2002 ................................................. 4 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2003 and 2002 .............................................. 5 Notes to Consolidated Financial Statements ........................................ 6 ITEM 2. Management's Plan of Operations ................................................... 6 ITEM 3. Controls and Procedures ........................................................... 9 PART II: OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K .................................................. 10 Signatures ............................................................................................. 11
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Amarillo Biosciences, Inc. and Subsidiaries Consolidated Balance Sheets March 31, 2003 ASSETS Current assets: Cash $ 14,584 Other current assets 3,443 ------------ Total current assets 18,027 Property and equipment, net 1,616 Patents, net of accumulated amortization of $134,412 162,723 ------------ Total assets $ 182,366 ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 865,080 Accrued interest expense 287,137 Accrued payroll expense 46,542 Other accrued expense (537) ------------ Total current liabilities 1,198,222 Notes payable to stockholders 2,090,000 ------------ Total liabilities 3,288,222 Commitments and contingencies Stockholders' 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 - 8,994,072 89,941 Additional paid-in capital 18,923,182 Accumulated deficit (22,118,979) ------------ Total stockholders' deficit (3,105,856) ------------ Total liabilities and stockholders' deficit $ 182,366 ============
3 Amarillo Biosciences, Inc. and Subsidiaries Consolidated Statements of Operations
THREE MONTHS ENDED MARCH 31, 2003 2002 ------------ ------------ Revenues: Dietary supplement sales $ 4,806 $ 561 Interferon sales 10,000 -- Interest income -- 1,090 Federal research grants 6,586 8,360 Gain on sale of building and equipment 34,790 -- Other 4,505 1,766 ------------ ------------ 60,687 11,777 Expenses: Research and development expenses 40,292 179,765 Selling, general and administrative expenses 37,187 47,425 Interest expense 22,554 23,826 ------------ ------------ 100,033 251,016 ------------ ------------ Net loss $ (39,346) $ (239,239) ============ ============ Basic and diluted net loss per share $ (0.004) $ (0.03) ============ ============ Weighted average shares outstanding 8,994,072 8,843,912 ============ ============
4 Amarillo Biosciences, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows
Three months ended March 31, -------------------------- 2003 2002 ---------- ---------- Net cash used in operating activities $ (69,362) $ (337,415) ---------- ---------- Cash provided by (used in) investing activities 119,836 (5,381) ---------- ---------- Cash from financing activities: Proceeds from notes payable 45,000 -- Repayments of notes payable (80,990) (1,397) Issuance of common stock -- 500,000 ---------- ---------- Net cash provided by (used in) financing activities (35,990) 498,603 ---------- ---------- Net increase (decrease) in cash and cash equivalents 14,484 155,807 ---------- ---------- Cash and cash equivalents at beginning of period 100 68,318 ---------- ---------- Cash and cash equivalents at end of period $ 14,584 $ 224,125 ========== ========== Supplemental Disclosure of Cash Flow Information Cash paid for income taxes $ -- $ -- ========== ========== Cash paid for interest $ 1,768 $ 2,171 ========== ==========
5 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED 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, 2002 filed with the Securities and Exchange Commission, are unaudited, but have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States 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 three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003. 2. Loss per share. Loss per share is computed based on the weighted average number of common shares outstanding. 3. Recent Accounting Pronouncements. In December 2002, the FASB issued Statements of Financial Accounting Standards No. 148 "Accounting for Stock-Based Compensation----Transition and Disclosure----an amendment of FASB Statement No. 123", This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The adoption of SFAS 148 is not expected to have a material effect on the Company's financial position or results of its operations. There is no pro forma disclosure as of March 31, 2003 since all options are fully vested as of 12/31/02. ITEM 2. MANAGEMENT'S PLAN OF OPERATIONS The Company's Management has developed a Plan of Operations for 2003. The Company continues to engage in research and development activities focused on developing 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 $22,080,000 at December 31, 2002 to $22,119,000 at March 31, 6 2003. 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. As of March 31, 2003, the Company had current assets of $18,027, including cash in the amount of $14,584. The Company will need to raise additional capital in order to implement its plan of 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 and to continue nutraceutical sales. 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 Public Relations, Investor Relations and Shareholder Relations. The Company's expectations and goals with respect to these categories are addressed separately below, by category. REVENUES FROM SALES OF DIETARY SUPPLEMENT: The Company had sales of anhydrous crystalline maltose (ACM), marketed locally as Maxisal(R), generating $4,806 in the first quarter of 2003. REVENUES FROM INTERFERON SALES: There were $10,000 of interferon sales in the first quarter of 2003. RESEARCH AND DEVELOPMENT: Until it achieves commercial product sales, the Company's business is research and development, and this is the area in which the Company's principal efforts will be expended during 2003. The Company has budgeted approximately $296,389 for expenditure for the balance of the year on research and development, the expenditure of this amount will be subject to raising additional funds. The Company expended $40,292 in the first quarter of 2003 for specific research and development, projects; such amount does not include general administrative costs, or expenditures described under other categories below. 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 $275,489 for personnel expenses during 2003, including salaries, payroll taxes, and group health, insurance. The projected amount does not include adding employees. Also, in lieu of cash compensation, the Company may issue stock options or other equity instruments to selected employees in fiscal 2003. The Company expended $68,067 for personnel in the first quarter of 2003. At the present time, the President and CEO of the Company, Joseph M. Cummins, is also serving as the Company's Chief Financial Officer (CFO). 7 CONSULTING AND PROFESSIONAL (EXCEPT LEGAL AND ACCOUNTING): The Company has budgeted approximately $12,000 for expenditure on professional consultants in 2003. Consulting fees are expected to be paid to a number of independent consultants in connection with the operation of the Company and to certain directors who perform specific consulting tasks at the Company's request. 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. The Company expended $227 in the first quarter of 2003 for consulting and professional fees. LEGAL AND ACCOUNTING: Although the Company is not involved in litigation, it has budgeted legal expenses of approximately $100,000 in 2003. Approximately 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 in 2003. The Company has budgeted $18,000 for accounting expense in 2003 and expects to use Malone & Bailey, PLLC as its independent auditors. The Company incurred $4,992 for legal and $6,000 for accounting fees in the first quarter of 2003. PUBLIC RELATIONS, INVESTOR RELATIONS AND SHAREHOLDER RELATIONS: The Company has budgeted approximately $5,000 for public relations, investor relations and shareholder relations during 2003. The Company has also budgeted sufficient amounts to maintain its comprehensive web site (www.amarbio.com). LIQUIDITY NEEDS: At March 31, 2003, the Company had available cash of approximately $14,584, and had a working capital deficit of approximately $1,180,195. The Company's continued losses and lack of liquidity indicate that the Company may not be able to continue as a going concern for a reasonable period of time. The Company's ability to continue as a going concern is dependent upon several factors including, but not limited to, the Company's ability to generate sufficient cash flows to meet its obligations on a timely basis, obtain additional financing and continue to obtain supplies and services from its vendors. The Company will need to raise additional funds in order to fully execute its 2003 Plan. The Company is presently negotiating with human health and animal health commercial development partners in various regions of the world including the United States, Canada, Europe and the Middle East. The Company believes that one or more of these agreements will be executed during 2003. These agreements could generally include provisions for the commercial partner to pay ABI a technology access fee, could include payments for a portion of the clinical trial expenses, could include payment obligations to ABI upon the accomplishment of certain defined tasks and/or could provide for payments relating to the future sales of commercial product. These agreements could be an important source of funds for ABI. However, there can be no assurance that the Company will be successful in obtaining additional funding from either human health and animal health commercial development partners or private investors. If the Company is not successful in raising additional funds, it will need to significantly curtail clinical trial expenditures and to further reduce staff and administrative expenses and may be forced to cease operations. 8 FORWARD-LOOKING STATEMENTS Certain statements made in this Plan of Operations and elsewhere in this report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance, achievements, costs or expenses and may contain words such as "believe," "anticipate," "expect," "estimate," "project," "budget," or words or phrases of similar meaning. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties are detailed from time to time in reports filed by the Company with the Securities and Exchange Commission, including Forms 8-K, 10-QSB and 10-KSB and include among others the following: promulgation and implementation of regulations by the U.S. Food and Drug Administration ("FDA"); promulgation and implementation of regulations by foreign governmental instrumentalities with functions similar to those of the FDA; costs of research and development and clinical trials, including without limitation, costs of clinical supplies, packaging and inserts, patient recruitment, trial monitoring, trial evaluation and publication; and possible difficulties in enrolling a sufficient number of qualified patients for certain clinical trials. The Company is also dependent upon a broad range of general economic and financial risks, such as possible increases in the costs of employing and/or retaining qualified personnel and consultants and possible inflation which might affect the Company's ability to remain within its budget forecasts. The principal uncertainties to which the Company is presently subject are its inability to ensure that the results of trials performed by the Company will be sufficiently favorable to ensure eventual regulatory approval for commercial sales, its inability to accurately budget at this time the possible costs associated with hiring and retaining of additional personnel, uncertainties regarding the terms and timing of one or more commercial partner agreements and its ability to continue as a going concern. The risks cited here are not exhaustive. Other sections of this report may include additional factors which could adversely impact the Company's business and future prospects. Moreover, the Company is engaged in a very competitive and rapidly changing industry. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company's business, or the extent to which any factor or combination of factors may cause actual results to differ materially from those projected in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual future events. ITEM 3. CONTROLS AND PROCEDURES Based on the evaluation conducted by Dr. Joseph M. Cummins, both the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as of a date within 90 days of the filing date of this quarterly report ("Evaluation Date"), of the effectiveness of the Company's disclosure controls and procedures, Dr. Joseph M. Cummins concluded that, as of the Evaluation Date, (1) there were no significant deficiencies or material 9 weaknesses in the Company's disclosure controls and procedures, (2) there were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the Evaluation Date and (3) no corrective actions were required to be taken. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the quarter ended March 31, 2003. 10 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: May 15, 2003 By: /s/ Joseph M. Cummins -------------------------------------- Joseph M. Cummins President, Chief Executive Officer and Chief Financial Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Amarillo Biosciences, Inc. on Form 10-QSB for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. Date: May 15, 2003 By: /s/ Joseph M. Cummins -------------------------------------- Joseph M. Cummins President, Chief Executive Officer and Chief Financial Officer FORM OF CERTIFICATION PURSUANT TO RULE 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED CERTIFICATION I, Joseph M. Cummins, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Amarillo Biosciences, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. As the registrant's certifying officer I have disclosed, based on the most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ Joseph M. Cummins ----------------------------------------- Name: Joseph M. Cummins Title: President, Chief Executive Officer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----