-----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, OXZTbQlFPkR4sAKLU5H6Bg0wxDXmnBgcMg4cW5Su5GMi9phmJffhmMGTftuZ603T OVHP/y12gZWFFHyEGUxYAQ== 0000950134-98-008783.txt : 19981116 0000950134-98-008783.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950134-98-008783 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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: SEC FILE NUMBER: 000-20791 FILM NUMBER: 98745882 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 FORM 10-QSB FOR QUARTER ENDED SEPTEMBER 30, 1998 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 SEPTEMBER 30, 1998 ---------------------------------------- [ ] 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 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 X . No . As of September 30, 1998, there were 5,414,232 shares of the issuer's common stock outstanding. This report contains 13 pages. 1 2 AMARILLO BIOSCIENCES, INC. INDEX
PART I: FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements (unaudited) Consolidated Balance Sheets - December 31, 1997 and September 30, 1998.......................................................... 3 Consolidated Statements of Operations - Three Months and Nine Months Ended September 30, 1997 and 1998 and Cumulative from June 25, 1984 (Inception) through September 30, 1998.......................................................... 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1997 and 1998 and Cumulative from June 25, 1984 (Inception) through September 30, 1998................... 5 Notes to Consolidated Financial Statements.................................. 6 Item 2. Update to Management's 1998 Plan of Operation............................... 7 Liquidity and Capital Resources............................................. 8 PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K............................................ 9 Signatures ............................................................................ 10
2 3 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) CONSOLIDATED BALANCE SHEETS (unaudited)
December 31, September 30, 1997 1998 ------------------ ------------------ ASSETS Current assets: Cash and cash equivalents $ 879,170 $ 5,335,452 Marketable securities 6,007,182 -- Other current assets 70,779 51,368 ------------------ ------------------ Total current assets 6,957,131 5,386,820 Property and equipment, net 125,179 120,621 Patent license, net of accumulated amortization of $73,824 and $79,323 at December 31, 1997 and September 30, 1998, respectively 51,176 45,677 Organization cost, net of accumulated amortization of $4,962 and $6,084 at December 31, 1997 and September 30, 1998, respectively 1,122 -- Investment in ISI common stock 114,023 8,203 ------------------ ------------------ Total assets $ 7,248,631 $ 5,561,321 ================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 74,754 $ 143,192 Accrued interest expense 91,356 179,106 Other accrued expenses 47,958 19,061 ------------------ ------------------ Total current liabilities 214,068 341,359 Notes payable to related party 2,600,000 2,600,000 ------------------ ------------------ Total liabilities 2,814,068 2,941,359 STOCKHOLDERS' EQUITY: Common stock, $.01 par value: Authorized shares - 10,000,000 Issued shares - 5,414,232 54,142 54,142 Additional paid-in capital 13,392,138 13,392,138 Deficit accumulated during the development stage (9,045,415) (10,754,196) Other comprehensive income (loss) 33,698 (72,122) ------------------ ------------------ Total stockholders' equity 4,434,563 2,619,962 ------------------ ------------------ Total liabilities and stockholders' equity $ 7,248,631 $ 5,561,321 ================== ==================
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 Nine months ended (Inception) September 30, September 30, through ------------------------ ------------------------- September 30, 1997 1998 1997 1998 1998 ------------------------------------------------------------------------------------ Revenues: Contract revenues $ -- $ -- $ -- $ -- $ 9,000,000 Interferon sales 402 -- 402 -- 420,974 Interest income 101,821 68,494 323,491 235,969 1,353,787 Sublicense fees -- -- -- -- 113,334 Royalty income -- -- -- -- 31,544 Gain on sale of ISI stock -- -- -- -- 188,562 Other 26,000 -- 52,000 -- 604,371 ------------------------------------------------------------------------------------ 128,223 68,494 375,893 235,969 11,712,572 Expenses: Research and development expenses 341,015 341,998 1,057,350 1,062,409 11,042,003 Selling, general, and administrative expenses 397,018 235,600 973,007 794,591 10,602,071 Interest expense 29,625 29,250 88,875 87,750 787,694 ------------------------------------------------------------------------------------ 767,658 606,848 2,119,232 1,944,750 22,431,768 ------------------------------------------------------------------------------------ Loss before income taxes (639,435) (538,354) (1,743,339) (1,708,781) (10,719,196) Income tax expense -- -- -- 35,000 ------------------------------------------------------------------------------------ Net loss $ (639,435) $ (538,354) $ (1,743,339) $ (1,708,781) $(10,754,196) ==================================================================================== Net loss per share $ (0.12) $ (0.10) $ (0.32) $ (0.32) ================================================================== Weighted average shares outstanding 5,414,232 5,414,232 5,414,232 5,414,232 ==================================================================
See accompanying notes. 4 5 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine months ended Cumulative from September 30, June 25,1984 ------------------------------- (Inception) through 1997 1998 Sept. 30, 1998 -------------- ------------- ---------------------- Net cash used in operating activities $ (2,019,952) $ (1,541,335) $ (9,613,216) ------------ ------------ ------------ Net cash provided by (used in) investing activities 6,870 5,997,617 (528,351) ------------ ------------ ------------ Net cash provided by financing activities -- -- 15,477,019 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents (2,013,082) 4,456,282 5,335,452 ------------ ------------ ------------ Cash and cash equivalents at beginning of period 2,799,297 879,170 -- ------------ ------------ ------------ Cash and cash equivalents at end of period $ 786,215 $ 5,335,452 $ 5,335,452 ============ ============ ============ Supplemental Disclosure of Cash Flow Information Cash paid for income taxes $ -- $ -- $ 37,084 ============ ============ ============ $ -- $ -- $ 6,466 Cash paid for interest
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, 1997, are unaudited (except for the December 31, 1997 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 nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the full year ending December 31, 1998. 2. Loss per share. Loss per share is computed based on the weighted average number of common shares outstanding. 3. Reclassification. For comparison purposes with 1998, certain amounts have been reclassified from selling, general and administrative expenses to research and development expenses for the nine months ended September 30, 1997. The impact of the reclassification was $130,308. 4. Comprehensive income. As of January 1, 1998, the Company adopted Financial Accounting Standards Board Statement No. 130 (Statement 130), Reporting Comprehensive Income. Statement 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement has no impact on the Company's results of operations or shareholders' equity. Statement 130 requires unrealized gains or losses on the Company's available-for-sale securities, which prior to adoption are reported separately in shareholders' equity, to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of Statement 130. For the three months ended September 30, 1998 and 1997, total comprehensive loss amounted to ($545,323) and ($639,435). For the nine months ended September 30, 1998 and 1997, total comprehensive loss amounted to ($1,814,601) and ($1,589,839). 5. Subsequent Event. On November 5, 1998, the Company confirmed by letter its intention to enter into an agreement with Agritek Bio Ingredients Corporation ("Agritek"), under which Agritek would expend $250,000 over the course of one (1) year for clinical studies in at least two (2) animal health indications. Depending upon Agritek's evaluation of the results of those studies, Agritek would then make an election to either purchase seventy percent (70%) of the voting common stock of the Company's animal health subsidiary, Vanguard Biosciences, Inc. ("Vanguard"); or, in lieu of acquiring the stock of Vanguard, to receive $250,000 worth of the Company's common stock, priced at its market value on the date of such election. If Agritek elects to purchase seventy percent (70%) of Vanguard, the purchase price will be at least $500,000, and no more than $2,000,000, with the actual price being contingent upon the speed with which regulatory approval to market two animal health products in the US is obtained. 6 7 ITEM 2. UPDATE TO MANAGEMENT'S 1998 PLAN OF OPERATION RESEARCH A confirmatory Phase 2 clinical trial continues in subjects with fibromyalgia syndrome (FMS). A market analysis estimated that 7.5 million Americans suffer from FMS. Our confirmatory Phase 2 trial in 120 subjects represents a significant step in the Company's strategy to develop a FDA approved treatment. As of now, there are no products approved in the US for FMS; currently patients are treated with pain relieving drugs and antidepressants which are approved for other indications. Our clinical trials in human immunodeficiency virus (HIV) positive subjects with oral warts (University of California San Francisco) continues. Our study in subjects who are HIV positive with dry mouth (University of Mississippi) was completed; some improvement in oral comfort and increased salivation was noted. Nineteen subjects were screened and 12 were enrolled; of those, only 5 completed the study but the data are useful in a patent application. The study in myelofibrotic disease subjects was completed. Ten subjects were enrolled with agnogenic myeloid metaplasia and 9 completed the course of therapy; 0 of 5 evaluable subjects had a response for hemoglobin improvement, 4 with high hemoglobin maintained their hemoglobin and 2 of 9 evaluable subjects had at least a partial response for both hepatomegaly. One of 6 subjects with primary thrombocytopenia had a positive response and 3 of 7 subjects with polycythemia vera had at least a partial response. Overall, there were some positive responses. However, because other areas of research look more promising, and because the principal investigator died of a heart attack, the Company does not contemplate further R&D in this area. The start of the Phase 3 clinical trial on Sjogren's syndrome was delayed while the FDA considered protocol changes. Progress in understanding the basic mechanism of action of oral interferon alpha continued in the third quarter of 1998. A study of topical interferon alpha in dogs and cats continued in the third quarter of 1998. Our hepatitis C study in Canada continues. A new R&D director, Dr. Phil Fox, agreed to a contract and will join the company January 1, 1999. Dr. Fox has a research career spanning 23 years at the National Institutes of Health, National Institute of Dental Research in Bethesda, Maryland, serving most recently as clinical director of the Intramural Research Program. 7 8 LIQUIDITY AND CAPITAL RESOURCES At September 30, 1998, the Company had cash of $5,335,452 with accounts payable of $143,192 and other funding commitments for clinical studies of approximately $944,449. 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 its development projects), that the Company's existing capital resources will be sufficient to satisfy the Company's estimated cash requirements for at least the next 12 months. The Company intends to continue to focus its development activities on the treatment of Sjogren's syndrome, fibromyalgia, opportunistic infections in patients who are HIV positive and hepatitis C, and in addition, is considering the commencement of research into myeloproliferative diseases and hepatitis B. Unless the Company generates significant revenues during such period, the Company will need additional financing to fully fund such development. Moreover, the Company's estimate of the amount required to complete its 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 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 Company's existing cash as of September 30, 1998 otherwise proves 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. 8 9 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 September 30, 1998. 9 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: November 11, 1998 By: /s/ JOSEPH M. CUMMINS -------------------------------- Joseph M. Cummins President, Chief Executive Officer and Chief Financial Officer 11 EXHIBIT INDEX 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 SEPTEMBER 30, 1998 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THIS FORM 10QSB FOR PERIOD ENDED SEPTEMBER 30, 1998. 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 5,335,452 0 0 0 0 5,386,820 243,728 123,107 5,561,321 341,359 2,600,000 0 0 54,142 2,565,820 5,561,321 0 235,969 0 1,062,409 794,591 0 87,750 (1,708,781) 0 (1,708,781) 0 0 0 (1,708,781) (.32) (.32)
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