-----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, B1lFIQOCKlpsCSkzcOFDVuhTjCuU0qtalrQokFjZzixNadsRCId077CwlJ/itffx q8X5f+MvODqPfkTup/F7AQ== 0000950134-96-004809.txt : 19960913 0000950134-96-004809.hdr.sgml : 19960913 ACCESSION NUMBER: 0000950134-96-004809 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960912 SROS: NASD 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: 96629052 BUSINESS ADDRESS: STREET 1: 800 W 9TH AVE CITY: AMARILLO STATE: TX ZIP: 79101-3206 BUSINESS PHONE: 8063761741 10QSB 1 FORM 10-QSB FOR QUARTER ENDED JUNE 30, 1996 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, 1996 -------------------------------------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 333-4413 AMARILLO BIOSCIENCES, INC. - -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) TEXAS 75-1974352 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization Identification No.) 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 No X --- --- As of August 29, 1996, there were 5,414,232 shares of the issuer's common stock outstanding. This report contains 13 pages. 2 AMARILLO BIOSCIENCES, INC. INDEX
PART I: FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements Consolidated Balance Sheets December 31, 1995 and June 30, 1996 . . . . . . . . . . . . 3 Consolidated Statements of Operations - Three Months and Six Months Ended June 30, 1995 and 1996 and Cumulative from June 25, 1984 (Inception) through June 30, 1996 . . . . . . . . . . . . . 4 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1995 and 1996 and Cumulative from June 25, 1984 (Inception) through June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements . . . . . . . . 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . . . . . . . 7 PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 10 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2 3 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) CONSOLIDATED BALANCE SHEETS
December 31, June 30, 1995 1996 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 1,108,527 $ 1,237,369 Prepaid expenses 26,395 15,635 ----------- ----------- Total current assets 1,134,922 1,253,004 Property and equipment, net 114,593 111,160 Patent license, net of accumulated amortization of 65,882 62,226 $59,118 and $62,774 at December 31, 1995 and June 30, 1996, respectively Organization cost, net of accumulated amortization of 663 330 $6,335 and $6,667 at December 31, 1995 and June 30, 1996, respectively Deferred charge -- 264,193 Investment in ISI common stock 475,000 505,000 ----------- ----------- Total assets $ 1,791,060 $ 2,195,913 =========== =========== LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Deferred contract revenues $ 417,140 $ -- Accounts payable 148,274 65,555 Accrued interest expense 453,699 515,366 Accrued restricted stock grants 114,844 134,531 Other accrued expenses 19,000 20,040 ----------- ----------- Total current liabilities 1,152,957 735,492 Notes payable to related party 2,000,000 3,000,000 ----------- ----------- Total liabilities 3,152,957 3,735,492 ----------- ----------- Shareholders' deficit: Common stock, $.01 par value: Authorized shares - 10,000,000 Issued shares - 3,048,672 and 3,035,232 in 1995 and 30,487 30,352 1996, respectively Additional paid-in capital 3,589,591 3,563,726 Deficit accumulated during the development stage (4,955,975) (5,163,657) Unrealized gain on marketable securities -- 30,000 Treasury stock - 13,440 shares, at cost (26,000) -- ----------- ----------- Total shareholders' deficit (1,361,897) (1,539,579) ----------- ----------- Total liabilities and shareholders' deficit $ 1,791,060 $ 2,195,913 =========== ===========
See accompanying notes. 3 4 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative from June 25, 1984 (Inception) Three months ended Six months ended through June 30, June 30, June 30, 1995 1996 1995 1996 1996 ----------------------------------------------------------------------------- Revenues: Contract revenues $ (109,253) $ 14,566 $ 509,013 $ 417,140 $9,000,000 Interferon sales -- 4,805 -- 6,805 420,578 Interest income 39,396 8,941 68,199 20,095 529,371 Sublicense fees 50,000 -- 50,000 -- 108,334 Royalty income -- -- -- -- 31,544 Other 500,000 -- 500,000 -- 509,371 ----------------------------------------------------------------------------- 480,143 28,312 1,127,212 444,040 10,599,198 Expenses: Research and development expenses 212,185 120,236 460,163 254,445 6,705,307 Selling, general, and administrative expenses 355,531 96,898 799,556 335,610 8,505,060 Interest expense 30,000 31,667 60,000 61,667 517,488 ----------------------------------------------------------------------------- 597,716 248,801 1,319,719 651,722 15,727,855 ----------------------------------------------------------------------------- Loss before income taxes (117,573) (220,489) (192,507) (207,682) (5,128,657) Income tax expense -- -- -- -- 35,000 ----------------------------------------------------------------------------- Net loss $ (117,573) $ (220,489) $ (192,507) $ (207,682) $(5,163,657) ============================================================================= Loss per share $ (.04) $ (.07) $ (.06) $ (.07) ============================================================================= Weighted average shares outstanding 3,035,232 3,035,232 3,033,431 3,035,232 =============================================================================
See accompanying notes. 4 5 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulative from June 25, 1984 (Inception) through Six months ended June 30, June 30, 1995 1996 1996 -------------------------------------------------------- Net cash used in operating activities $ (743,068) $ (868,691) $ (4,271,951) ---------- ---------- ------------ Net cash used in investing activities (140,453) (2,467) (989,997) ---------- ---------- ------------ Net cash provided by financing activities 74,100 1,000,000 6,499,317 ---------- ---------- ------------ Net increase (decrease) in cash and cash equivalents (809,421) 128,842 1,237,369 Cash and cash equivalents at beginning of period 964,005 1,108,527 -- ---------- ---------- ------------ Cash and cash equivalents at end of period $ 154,584 $1,237,369 $ 1,237,369 ========== ========== ============ Supplemental Disclosure of Cash Flow Information Cash paid for income taxes $ -- $ -- $ 37,084 ========== ========== ============
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 SB-2, are unaudited (except for the December 31, 1995 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, 1996 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 1996. 2. Loss per share. Loss per share is computed based on the weighted average number of common shares outstanding. 3. Notes payable. On each of May 31, 1996 and June 28, 1996, the Company borrowed $500,000 from a related party. These notes bear interest at 4% and are payable in full out of the proceeds of the Company's initial public offering. On August 13, 1996, in connection with the closing of the initial public offering, the $1,000,000 of notes payable were paid in full. 4. Initial public offering. On August 13, 1996, the Company completed its initial public offering of 2,000,000 shares of its common stock. Net proceeds to the Company were approximately $8,075,000. On August 29, 1996, the underwriter exercised their option to acquire an additional 300,000 shares of common stock with net proceeds to the Company of $1,305,000. 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995. During the three months ended June 30, 1995, the Company had total revenues of $480,143 compared to total revenues of $28,312 during the three months ended June 30, 1996. In 1995, $550,000 of the revenues were received in connection with the settlement of a patent infringement action brought by the Company in New Zealand. Of the total settlement amount, $50,000 was in exchange for the grant by the Company of a sublicense of the technology that was the subject of the lawsuit and $500,000 was a reimbursement of research and development costs incurred by the Company. Other revenues for 1995 consisted of interest income of $39,396 and negative deferred contract revenues in the amount of $109,253. Had the Company not received the $500,000 payment toward research and development costs from the settlement, deferred contract revenue of $500,000 would have been recognized as contract revenue in the 1995 second quarter. During the 1996 second quarter, the remaining deferred contract revenues of $14,566 were recorded as earned. Other 1996 revenues consisted of interest income of $8,941 and interferon sales of $4,805. During the 1995 quarter, research and development expenses were $212,185 as compared to $120,236 during the 1996 quarter. The decrease of $91,949 in 1996 was the result of certain clinical studies being completed in 1995. During 1995 and 1996, the Company incurred general and administrative expenses of $355,531 and $96,898, respectively. The 1995 second quarter expenses were $258,633 more than the 1996 second quarter due primarily to litigation expense of $156,891 paid in 1995 and public offering expenses of $73,611 expensed in the first quarter of 1996. This $73,611 along with additional offering expenses accrued in the second quarter of 1996 was recorded as a deferred charge in the second quarter of 1996. 7 8 Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995 During the six months ended June 30, 1996, the Company had total revenues of $444,040 compared to total revenues of $1,127,212 during the six months ended June 30, 1995. Revenues for 1996 consisted of interest income of $20,095 and deferred contract revenues recognized in the amount of $417,013 based on research and development and administrative costs incurred. In 1995, $550,000 of the revenues were received in connection with the settlement of a patent infringement action brought by the Company in New Zealand. Of the total settlement amount, $50,000 was in exchange for the grant by the Company of a sublicense of the technology that was the subject of the lawsuit and $500,000 was a reimbursement of research and development cost incurred by the Company. Had the Company not received the $500,000 payment toward research and development costs from the settlement, the remaining balance of deferred contract revenue ($417,140) would have been recognized as contract revenue in 1995. During 1995, deferred contract revenues of $509,013 were recorded as earned based on research and development and administrative costs incurred. Other 1995 revenues consisted of interest income of $68,199. During 1996, research and development expenses were $254,445 as compared to $460,163 during 1995. The decrease of $205,718 in 1996 was the result of certain clinical studies being completed in 1995. During 1996 and 1995, the Company incurred general and administrative expenses of $335,610 and $799,556, respectively. The 1995 general and administrative expenses exceeded 1996 by $463,946 due primarily to litigation expense in 1995 of $260,628 and approximately $109,000 more in salary costs for 1995 as more personnel were employed. 8 9 LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company had cash of $1,237,369 with accounts payable of $65,555 and other funding commitments for clinical studies of approximately $36,000. The Company borrowed from Hayashibara Biochemical Laboratories, Inc. (HBL) an additional $500,000 in May 1996 and $500,000 in June 1996. Such additional loans bear interest at the rate of 4% per annum and were paid in full simultaneously with the consummation of the Company's initial public offering on August 13, 1996. The Company anticipates, based on its currently proposed plans and assumptions relating to its operations (including assumptions regarding the progress of its research and development and the timing and costs associated with the Primary Development Projects), that the net proceeds of the initial public offering (approximately $9,380,000) together with the Company's existing capital resources, will be sufficient to satisfy the Company's estimated cash requirements for at least 24 months. The Company estimates that an aggregate of $11,100,000 will be needed over approximately the next three years to complete its Primary Development Projects. Such an amount is in excess of the net proceeds of the offering and the existing capital of the Company. Therefore, unless the Company generates significant revenues during such period, which the Company believes is unlikely, the Company will need additional financing to fully fund such development. Moreover, the Company's estimate of the amount required to complete its Primary Development Projects may prove to be inaccurate. The Company has no current arrangements with respect to, or sources of, additional financing and it is not anticipated that any of the officers, directors or shareholders of the Company (including HBL) will provide any portion of the Company's future financing requirements. There can be no assurance that, when needed, additional financing will be available to the Company on commercially reasonable terms, or at all. In the event that the Company's plans change, its assumptions change or prove inaccurate, or if the net proceeds of the initial public offering, together with other capital resources, otherwise prove to be insufficient to fund operations, the Company could be required to seek additional financing sooner than currently anticipated. Any inability to obtain additional financing when needed would have a material adverse effect on the Company, including requiring the Company to significantly curtail or possibly cease its operations. 9 10 PART II - OTHER INFORMATION 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, 1996. 10 11 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: September , 1996 By: ----- ----------------------------------- Joseph M. Cummins President and Chief Executive Officer Date: September , 1996 By: ----- ----------------------------------- Charles H. Hughes Financial Vice President and Chief Financial Officer (Chief Accounting Officer) 11 12 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 - Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND THE CONSOLIDATED STATEMENT OF OPERATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF FORM SB-2 FILED EFFECTIVE ON AUGUST 7, 1996. 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1,237,369 0 0 0 0 1,253,004 219,352 108,192 2,195,913 735,492 3,000,000 3,594,078 0 0 (5,133,657) 2,195,913 6,805 444,040 0 590,055 0 0 61,667 (207,682) 0 (207,682) 0 0 0 (207,682) (.07) (.07)
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