-----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, BDqbP4yTBesBx3vyQRuTFbrfbG7waKcQr2pPYxG+m+THrLJEMT25L7sdNc/SB0ue fpx4EkWYAIWmT7RjAmgFmg== 0001144204-04-007578.txt : 20040525 0001144204-04-007578.hdr.sgml : 20040525 20040524173302 ACCESSION NUMBER: 0001144204-04-007578 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040525 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: 04827880 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 form10qsb.txt 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, 2004 ------------------------------------------------ [ ] 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) 4134 Business Park Drive, Amarillo, Texas 79110 - ------------------------------------------------------------------------------- (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, 2004 there were 11,527,834 shares of the issuer's common stock outstanding. 1 AMARILLO BIOSCIENCES, INC. INDEX
PAGE NO. PART I: FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheet - March 31, 2004....................... 3 Consolidated Statements of Operations - Three Months Ended March 31, 2004 and March 31, 2003................................. 4 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2004 and 2003.............................. 5 Notes to Consolidated Financial Statements........................ 6 Management's Discussion and Analysis of Financial Condition and ITEM 2. Results of Operations............................................. 7 ITEM 3. Controls and Procedures........................................... 7 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 Sheet March 31, 2004 Assets Current assets: Cash $ 4,973 Other current assets 11,924 Total current assets 16,897 Equipment, net 1,777 Patents, net of accumulated amortization of $156,516 153,099 ------------ Total assets $ 171,773 ============ Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 169,936 Accrued interest expense 378,727 Accrued payroll 98,993 Other accrued expenses 5,452 Notes payable, including notes payable to stockholder 2,103,500 ------------ Total current liabilities 2,756,608 ------------ Total liabilities 2,756,608 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 - 11,527,834 115,278 Additional paid-in capital 19,352,876 Accumulated deficit (22,052,989) ------------ Total stockholders' deficit (2,584,835) ------------ Total liabilities and stockholders' deficit $ 171,773 ============ 3 Amarillo Biosciences, Inc. and Subsidiaries Consolidated Statements of Operations Three Months ended March 31, 2004 2003 ---------------------------- Revenues: Dietary supplement sales $ 3,560 $ 4,806 Interferon sales -- 10,000 Federal research grants -- 6,586 Gain on sale of building, equipment 2,663 34,790 Other 36 4,505 ------------ ------------ 6,259 60,687 ------------ ------------ Expenses: Cost of sales 1,810 -- Research and development expenses 46,981 40,292 Selling, general and administrative expenses 74,563 37,187 Interest expense 23,892 22,554 ------------ ------------ 147,246 100,033 ------------ ------------ Net loss $ (140,987 $ (39,346) ============ ============ Basic and diluted net loss per share $ (0.012) $ (0.004) ============ ============ Weighted average shares outstanding 11,465,203 8,994,072 ============ ============ 4 Amarillo Biosciences, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows
Three months ended March 31, ---------------------- 2004 2003 --------- --------- Net cash used in operating activities $ (57,217) $ (69,362) Cash provided by (used in) investing activities (2,405) 119,836 --------- --------- Cash from financing activities: Proceeds from issuance of common stock 40,890 -- Proceeds from notes payable 10,000 45,000 Repayments of notes payable -- (80,990) --------- --------- Net cash provided by (used in) financing activities 50,890 (35,990) --------- --------- Net increase (decrease) in cash (6,327) 14,484 --------- --------- Cash at beginning of period 11,300 100 --------- --------- Cash at end of period $ 4,973 $ 14,584 ========= ========= Supplemental Disclosure of Cash Flow Information Cash paid for interest $ 2,051 $ 1,768 ========= ========= Non Cash Disclosure Stock issued for debt $ (10,500) $ -- --------- ---------
5 Amarillo Biosciences, Inc. and Subsidiaries 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, 2003 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, 2004 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2004. 2. Stock based compensation. The Company accounts for its employee stock-based compensation plans under Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. No options were granted to purchase common stock in the three months ended March 31, 2004, and 12,000 options were granted in the three months ending March 31, 2003 with an exercise price of $0.44 per share with a 5 year term. The following table illustrates the effect on net loss and net loss per share if Amarillo had applied the fair value provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation. Three Months Ended March 31, 2004 2003 ----------- -------- Net loss, as reported $ (135,545) $(39,346) Less: stock based compensation determined under fair value based method -- (4,969) ----------- -------- Pro forma net loss $ (135,545) $(44,315) Basic and diluted net loss per share As reported $ (0.01) (0.01) =========== ======== Pro forma $ (0.01) (0.01) =========== ======== 6 3. Loss per share. Loss per share is computed based on the weighted average number of common shares outstanding. 4. Financial Condition. The Company's viability is dependent upon successful commercialization of products resulting from its research and product development activities. The Company plans on working with commercial development partners in the United States and in other parts of the world to provide the necessary sales, marketing and distribution infrastructure to successfully commercialize the interferon alpha product for both human and animal applications. The Company's products will require significant additional development, laboratory and clinical testing and investment prior to the Company obtaining regulatory approval to commercially market its product(s). Accordingly, for at least the next few years, the Company will continue to incur research and development and general and administrative expenses and may not generate sufficient revenues from product sales to support its operations. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our financial statements and the notes thereto which appear elsewhere in this report. The results shown herein are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements based on current expectations, which involve uncertainties. Actual results and the timing of events could differ materially from the forward-looking statements as a result of a number of factors. Readers should also carefully review factors set forth in other reports or documents that we file from time to time with the Securities and Exchange Commission. In first quarter, the Company completed private equity financing by selling restricted stock at a discount to 10 investors. The net proceeds to the Company were approximately $46,981. During the first quarter of 2004, ABI worked in five areas to improve the Company. These are the areas 1) funding, 2) agroterrorism, 3) publishing, 4) partner discussions and 5) sales. Agroterrorism. Dr. Joseph Cummins met with scientists, livestock producers and elected officials to argue for alternatives to the government's plans to slaughter livestock if diseases are introduced by terrorists. On February 12, 2004, Dr. Joseph Cummins participated in an agroterrorism seminar held at the Texas A&M Research and Extension Center in Amarillo, Texas. Working with Dr. Albert Paszek of Cargill, a manuscript entitled "Interferon Alpha in the Feed to Control Foot-and-Mouth Disease" was prepared for submission to the 57th Reciprocal Meat Conference in Lexington, KY in June. Dr. Cummins met with members of the staff of US Senator Cornyn to discuss agroterrorism. Members of the Emergency Management team in Amarillo and the Randall County Judge met with Dr. Cummins to hear his concerns that the livestock in the Texas Panhandle are completely vulnerable to an attack with foot-and-mouth disease virus. 7 Publishing. A manuscript entitled "Orally Administered Interferon Alpha has Systemic Effects" was submitted and accepted by the American Journal of Veterinary Research. Publishing this information, ABI believes, will help the Company gain recognition for our technology. Partner/License Discussions. Because approval for oral interferon in animal health is expected in a "first world country," and because this approval will result in a Certificate of Free Sale (CFS), discussions have begun with multi-national animal health companies who have an interest in the CFS. Nutraceutical Product. Natrol has discontinued the sale of anhydrous crystalline maltose (ACM) under their brand name Dry Mouth Relief (DMR). ABI has been in contact with the former distributors of DMR and expects our own sales to replace those of DMR. 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 2004. 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. Results of Operations: Revenues. During the three-month period ended March 31, 2004 $3,560 from product sales was generated compared to revenues from product sales for the three-month period ended March 31, 2003, of $14,806, a decrease of $11,246 or approximately 76%. There have been no sales of interferon products in 2004, this accounts for the decrease in product sales. Selling, General and Administrative Expenses. Selling, General and Administrative expenses of $74,563 were incurred for the three-month period ended March 31, 2004, compared to $37,187 for the three-month period ended March 31, 2003, an increase of $3,376. There was $4,656 in non-cash expenses in recognition of restricted stock issued to cover services provided by consultants in lieu of cash. Non-Cash Consulting Activities. During the three-month period ended March 31, 2004, the Board of Directors authorized the issuance of shares of restricted common stock to a consultant in lieu of cash payments. Based upon the common stock trading price at the times of issuance, and FASB rules, a non-cash consulting expense of $4,656 was recorded for the issuance of these shares during the three-month period ended March 31, 2004. 8 Net Income (Loss). As a result of the above, in the three-month period ended March 31, 2004, the Company's Net Loss was ($140,987) compared to a Net Loss for the three- month period ended March 31, 2003 of ($39,346). This increased loss is primarily due to lower revenues in 2004. Liquidity Needs: At March 31, 2004, the Company had available cash of approximately $5,000, and had a working capital deficit of approximately ($2,739,711). Assuming there is no decrease in current accounts payable, and accounting for various one-time expenses, the Company's negative cash flow is approximately $39,000 per month. 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 2004 Plan. 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 9 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 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, 2004. 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 24, 2004 By: /s/ Joseph M. Cummins --------------------------------------- Joseph M. Cummins President, Chief Executive Officer and Chief Financial Officer 11 EX-31.1 2 ex-31_1.txt EXHIBIT 31.1 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 24, 2004 /s/ Joseph M. Cummins --------------------------------------------- Name: Joseph M. Cummins Title: President, Chief Executive Officer and Chief Financial Officer EX-32.1 3 ex-32_1.txt EXHIBIT 32.1 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, 2004 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 24, 2004 /s/ Joseph M. Cummins --------------------------------------------- Name: Joseph M. Cummins Title: President, Chief Executive Officer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----