-----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, CXE6+6p5TGF4A+EKUcCGp8SLf+hekClrGgY+Xxs8eczaGUJG0nlU9zM332hZ9NrA Ei/3UjYUfvZ6rsYO+yhMbA== 0000950134-99-009923.txt : 19991115 0000950134-99-009923.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950134-99-009923 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99749887 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 10QSB FOR QUARTER ENDING SEPTEMBER 30, 1999 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, 1999 ------------------------------------------------- [ ] 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, 1999, there were 6,360,326 shares of the issuer's common stock outstanding. This report contains 12 pages. 1 2 AMARILLO BIOSCIENCES, INC. INDEX
PART I: FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements (unaudited) Consolidated Balance Sheets - December 31, 1998 and September 30, 1999................................................... 3 Consolidated Statements of Operations - Three Months and Nine Months Ended September 30, 1998 and 1999 and Cumulative from June 25, 1984 (Inception) through September 30, 1999................................................... 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1998 and 1999 and Cumulative from June 25, 1984 (Inception) through September 30, 1999............ 5 Notes to Consolidated Financial Statements........................... 6 Item 2. Management's Plan of Operation....................................... 8 PART II: OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds............................ 10 Item 5. Other Information.................................................... 10 Item 6. Exhibits and Reports on Form 8-K..................................... 11 Signatures ..................................................................... 12
2 3 AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) CONSOLIDATED BALANCE SHEETS (unaudited)
December 31, September 30, 1998 1999 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 4,776,328 $ 1,769,660 Other current assets 43,415 53,571 ------------ ------------ Total current assets 4,819,743 1,823,231 Property and equipment, net 116,761 110,112 Patent license, net of accumulated amortization of $81,177 and $86,676 at December 31, 1998 and September 30, 1999, respectively 43,823 38,324 Investment in ISI common stock 5,735 738 ------------ ------------ Total assets $ 4,986,062 $ 1,972,405 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 88,920 $ 520,798 Accrued interest expense 208,356 3,637 Other accrued expenses 20,722 23,026 ------------ ------------ Total current liabilities 317,998 547,461 Notes payable to related party 2,600,000 1,000,000 ------------ ------------ Total liabilities 2,917,998 1,547,461 STOCKHOLDERS' EQUITY: Common stock, $.01 par value: Authorized shares - 10,000,000 Issued shares - 5,414,232 at December 31, 1998 and 6,360,326 at September 30, 1999 54,142 63,603 Additional paid-in capital 13,392,138 16,220,203 Deficit accumulated during the development stage (11,378,216) (15,858,862) ------------ ------------ Total stockholders' equity 2,068,064 424,944 ------------ ------------ Total liabilities and stockholders' equity $ 4,986,062 $ 1,972,405 ============ ============
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, 1998 1999 1998 1999 1999 ------------ ------------ ------------ ------------ ------------ Revenues: Contract revenues $ -- $ -- $ -- $ -- $ 9,000,000 Interferon sales -- -- -- -- 420,974 Interest income 68,494 19,492 235,969 96,130 1,510,767 Sublicense fees -- -- -- -- 113,334 Royalty income -- -- -- -- 31,544 Gain on sale of ISI stock -- -- -- -- 113,972 Other -- -- -- -- 604,431 ------------ ------------ ------------ ------------ ------------ 68,494 19,492 235,969 96,130 11,795,022 Expenses: Research and development expenses 341,998 1,299,344 1,062,409 3,536,743 14,889,187 Selling, general, and administrative expenses 235,600 267,807 794,591 1,007,226 11,879,946 Interest expense 29,250 3,637 87,750 32,807 849,751 ------------ ------------ ------------ ------------ ------------ 606,848 1,570,788 1,944,750 4,576,776 27,618,884 ------------ ------------ ------------ ------------ ------------ Loss before income taxes (538,354) (1,551,296) (1,708,781) (4,480,646) (15,823,862) Income tax expense -- -- -- -- 35,000 ------------ ------------ ------------ ------------ ------------ Net loss $ (538,354) $ (1,551,296) $ (1,708,781) $ (4,480,646) $(15,858,862) ============ ============ ============ ============ ============ Net loss per share $ (0.10) $ (0.24) $ (0.32) $ (0.74) ============ ============ ============ ============ Weighted average shares outstanding 5,414,232 6,360,326 5,414,232 6,044,961 ============ ============ ============ ============
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 1998 1999 Sept. 30, 1999 ------------ ------------ ------------ Net cash used in operating activities $ (1,541,335) $ (4,000,538) $(14,171,375) ------------ ------------ ------------ Net cash provided by (used in) investing activities 5,997,617 (6,130) (535,984) ------------ ------------ ------------ Net cash provided by financing activities -- 1,000,000 16,477,019 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 4,456,282 (3,006,668) 1,769,660 ------------ ------------ ------------ Cash and cash equivalents at beginning of period 879,170 4,776,328 -- ------------ ------------ ------------ Cash and cash equivalents at end of period $ 5,335,452 $ 1,769,660 $ 1,769,660 ============ ============ ============ 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, are unaudited (except for the December 31, 1998 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, 1999 are not necessarily indicative of the results that may be expected for the full year ending December 31, 1999. 2. Loss per share. Loss per share is computed based on the weighted average number of common shares outstanding. 3. Effective July 22, 1999, Hayashibara Biochemical Laboratories, Inc. agreed to loan Amarillo Biosciences, Inc. $3 million to be advanced in three installments as follows: $1 million by August 31, 1999; $1 million by November 30, 1999; and $1 million by February 29, 2000. The annual interest rate on unpaid principal from the date of each respective advance is 4 1/2%, with accrued interest being payable at the time of redemption of the note. The note is payable on or before July 22, 2004, or on or before the expiration of one (1) year after approval of the product by the U.S. Food and Drug Administration, whichever occurs first. Effective April 2, 1999, by agreement between the Company and Hayashibara Biochemical Laboratories (HBL), two promissory notes dated September 25, 1996 and September 16, 1997, issued by the Company to HBL for loans, were converted into common stock of the Company. The amount converted included principal of $2.6 million, and accrued interest at $237,526. The total number of shares of common stock of the Company issued to HBL in consideration for the cancellation of said notes was 946,094 shares, at $2.9992 per share. The share price was determined by the average of the high and low price weighted by volume for the ten trading days prior to April 2, 1999. The shares are "restricted stock" within the meaning of Rule 144 promulgated under the U.S. Securities Act of 1933, and must be held for one year before they can be sold under such rule. As a consequence of the conversion, HBL's ownership of the Company increased from 22.8%, to 34.3%. 4. On September 30, 1999, Amarillo Biosciences, Inc. (the "Company") entered into an Agreement to Convert Debt with Hayashibara Biochemical Laboratories, Inc. ("HBL") regarding the note payable to HBL in the principal amount of $1,000,000 described above. 6 7 Pursuant to this agreement, HBL will cancel the note on October 15, 1999 in exchange for common stock of the Company. The two additional $1.0 million advances which will be converted to equity purchases will occur on or before November 30, 1999 and February 29, 2000. The shares which have been or will be issued to Hayashibara Biochemical Laboratories, Inc. are "restricted stock" within the meaning of Rule 144 promulgated under the U.S. Securities Act of 1933. 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 $11,378,216 at December 31, 1998 to $15,858,862 at September 30, 1999. 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 twelve 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 budgeted approximately $4.2 million for expenditure during the next twelve months on research and development, inclusive of amounts to be expended on the Company's Phase III Sjogren's syndrome clinical trial. 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 $900,000 for personnel expenses during the next twelve months, including salaries, payroll taxes, directors' and officers' general liability insurance, and group life, health, and liability insurance. CONSULTING AND PROFESSIONAL (EXCEPT LEGAL AND ACCOUNTING): The Company has budgeted approximately $150,000 for expenditure on professional consultants in the next 12 months. Consulting fees are expected to be paid to the Company's scientific advisory board; to certain directors who perform specific consulting tasks at the Company's request; and to a number of 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 $180,000 during the next 12 months. Almost 40% 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 during the next 12 months. The Company will maintain Ernst & Young as its auditors. 8 9 LIQUIDITY NEEDS: The principal budget items discussed above, along with other miscellaneous costs and expenses, will cause the Company to expend approximately $5.9 million during the next twelve months including the substantial expense of the Company's Phase III Sjogren's syndrome trial. At September 30, 1999, the Company had available cash of $1,769,660 and an additional $2 million loan commitment from Hayashibara Biochemical Laboratories, payable in $1 million increments on or before November 30, 1999; and February 29, 2000. The Company has sufficient funds to complete the first portion of the Sjogren's syndrome clinical trial, Study A. The results from this study are expected to be available in April, 2000. The Company believes that one or more corporate partnership agreements will be executed shortly thereafter. Such agreements could include a combination of license fees, milestone payments, and royalty payments. 9 10 PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. The effective date of the Company's first registration statement, filed on Form SB-2 under the Securities Act of 1993 (File No. 333-4413) was May 23, 1996. The class of securities registered was common stock. The offering commenced on August 7, 1996. Total number of shares of common stock offered was 2,000,000 shares. The initial public offering resulted in gross proceeds of $10,000,000. The Company incurred expenses of approximately $1,320,000, of which $300,000 represented underwriting discounts and commissions. The net offering proceeds to issuer was $8,680,000. The Company has used $4,930,361 of the net proceeds from the offering for research and development, and $1,000,000 for the repayment of indebtedness to Hayashibara Biochemical Laboratories. The remainder of the net offering proceeds $3,749,639(1), has been used for working capital and general corporate purposes. The use of proceeds does not represent a change from that described in the prospectus. 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 has appealed this decision to the Nasdaq Listing and Hearing Review Council. The Company's common stock is currently traded on the Over the Counter Bulletin Board. ITEM 5. OTHER INFORMATION. On September 30, 1999, Amarillo Biosciences, Inc. (the "Company") entered into an Agreement to Convert Debt with Hayashibara Biochemical Laboratories, Inc. ("HBL") regarding the note payable to HBL in the principal amount of $1,000,000 described above. Pursuant to this agreement, HBL will cancel the note on October 15, 1999 in exchange for common stock of the Company. The two additional $1.0 million advances which will be converted to equity purchases will occur on or before November 30, 1999 and February 29, 2000. The shares which have been or will be issued to Hayashibara Biochemical Laboratories, Inc. are "restricted stock" within the meaning of Rule 144 promulgated under the U.S. Securities Act of 1933. - ---------- (1) Included in this amount are payments of $112,550 for consulting fees to Dr. Stephen Chen, a Director of the Company. 10 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. EXHIBIT 27. Financial Data Schedule A report on Form 8-K, dated September 30, 1999, relating to the Agreement to Convert Debt between Amarillo Biosciences, Inc. and Hayashibara Biochemical Laboratories, Inc., was filed on October 1, 1999. 11 12 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, 1999 By: /s/ JOSEPH M. CUMMINS ------------------------------------ Joseph M. Cummins President, Chief Executive Officer and Chief Financial Officer 13 INDEX TO EXHIBITS
EXHIBIT NO. 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, 1999 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THIS FORM 10-QSB FOR PERIOD ENDED SEPTEMBER 30, 1999. 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1,769,660 0 0 0 0 1,823,231 250,508 140,396 1,972,405 1,547,461 0 0 0 63,603 361,341 1,972,405 0 96,130 0 3,536,743 1,007,226 0 32,807 (4,480,646) 0 0 0 0 0 (4,480,646) (.74) (.74)
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