-----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, MGAgXYiK2reZuA/DJi3JItsgG/7gkrBFUsXFWsl+gWF9qSFEz6jJ7btCxMkiL3lY HnNzDhWceLv5mUhdslcx2Q== /in/edgar/work/20000814/0000950135-00-004007/0000950135-00-004007.txt : 20000921 0000950135-00-004007.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950135-00-004007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANTIGENICS INC /DE/ CENTRAL INDEX KEY: 0001098972 STANDARD INDUSTRIAL CLASSIFICATION: [2836 ] IRS NUMBER: 061562417 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-29089 FILM NUMBER: 697781 BUSINESS ADDRESS: STREET 1: 630 FIFTH AVENUE SUITE 2170 CITY: NEW YORK STATE: NY ZIP: 10111 BUSINESS PHONE: 2123324774 MAIL ADDRESS: STREET 1: 630 FIFTH AVENUE SUITE 2170 CITY: NEW YORK STATE: NY ZIP: 10111 10-Q 1 e10-q.txt ANTIGENICS INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended June 30, 2000 Commission File No. 000-29089 ANTIGENICS INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE 06-1562417 (State of Incorporation) (I.R.S. Employer Identification Number) 630 FIFTH STREET, SUITE 2100, NEW YORK, NEW YORK, 10111 (Address of Principal Executive Offices) (212) 332-4774 (Registrant's Telephone Number, including Area Code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [_] Number of shares outstanding of the registrant's Common Stock as of August 7, 2000: Common Stock, par value $.01 24,795,751 shares outstanding 2 ANTIGENICS INC. QUARTER ENDED JUNE 30, 2000 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ---- Item 1 - Unaudited Financial Statements Balance Sheets (Unaudited) December 31, 1999 and June 30, 2000........................ 1 Statements of Operations (Unaudited) For the Three and Six Months ended June 30, 1999 and 2000, and for the period from March 31, 1994 (date of inception) to June 30, 2000........................................... 2 Statements of Stockholders' Equity (Unaudited) For the Six Months ended June 30, 2000 and for the period from March 31, 1994 (date of inception) to June 30, 2000.............................................. 3 Statements of Cash Flows (Unaudited) For the Three and Six Months ended June 30, 1999 and 2000 and for the period from March 31, 1994 (date of inception) to June 30, 2000........................................... 4 Notes to Unaudited Financial Statements.......................... 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............... 8 Item 3 - Quantitative and Qualitative Disclosures About Market Risk................................................. 11 PART II - OTHER INFORMATION Item 1 - Legal Proceedings............................................. 12 Item 2 - Use of Proceeds from Registered Securities.................... 12 Item 3 - Defaults Upon Senior Securities............................... 12 Item 4 - Submission of Matters to a Vote of Security Holders........... 12 Item 5 - Other Information............................................. 13 Item 6(a) - Exhibits................................................... 13 Item 6(b) - Reports on Form 8-K........................................ 13 Signatures ............................................................ 14 3 PART I - FINANCIAL INFORMATION Item 1 - Unaudited Financial Statements ANTIGENICS INC. (a development stage company) Balance Sheets December 31, 1999 and June 30, 2000
JUNE 30, DECEMBER 31, 2000 1999 (UNAUDITED) ------------ ------------- ASSETS Cash and cash equivalents $ 46,417,942 105,140,814 Prepaid expenses 103,204 454,755 Deferred public offering costs 559,417 -- Due from related party 240 -- Other assets 591,134 625,394 ------------ ------------- Total current assets 47,671,937 106,220,963 Plant and equipment, net 8,034,598 8,228,701 Other assets 297,646 741,086 ------------ ------------- Total assets $ 56,004,181 115,190,750 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 424,673 1,024,310 Accrued liabilities 933,440 867,712 Due to related party -- 12,349 Current portion, long-term debt 812,702 873,711 ------------ ------------- Total current liabilities 2,170,815 2,778,082 Long-term debt 2,155,005 1,702,084 Commitments and contingencies Stockholders' Equity: Preferred stock, par value $0.01 per share; 1,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, par value $0.01 per share; 100,000,000 shares authorized; 20,715,942 and 24,795,146 shares issued and outstanding at December 31, 1999 and June 30, 2000, respectively 207,159 247,951 Additional paid-in capital 89,747,036 158,666,170 Deferred compensation (659,081) (1,377,678) Deficit accumulated during development stage (37,616,753) (46,825,859) ------------ ------------- Total stockholders' equity 51,678,361 110,710,584 ------------ ------------- Total liabilities and stockholders' equity $ 56,004,181 $ 115,190,750 ============ =============
See accompanying notes to unaudited financial statements. 1 4 ANTIGENICS INC. (a development stage company) Statements of Operations For the three and six months ended June 30, 1999 and 2000, and for the period from March 31, 1994 (date of inception) to June 30, 2000 (unaudited)
MARCH 31, 1994 (date of Three months ended June 30, Six months ended June 30, inception) to 1999 2000 1999 2000 June 30, 2000 ------------ ------------ ------------ ------------ ------------- Revenue $ -- -- -- -- -- Expenses: Research and development: Related party (8,250) (13,365) (16,500) (26,633) (99,263) Other (2,305,554) (3,807,389) (4,796,163) (7,161,988) (29,603,812) ------------ ------------ ------------ ------------ ------------ (2,313,804) (3,820,754) (4,812,663) (7,188,621) (29,703,075) General and administrative: Related party (63,552) (82,065) (107,779) (157,250) (1,426,805) Other (1,107,707) (2,127,251) (2,332,365) (3,753,936) (18,374,242) ------------ ------------ ------------ ------------ ------------ (1,171,259) (2,209,316) (2,440,144) (3,911,186) (19,801,047) Depreciation and amortization (260,213) (360,255) (339,574) (720,048) (2,421,806) ------------ ------------ ------------ ------------ ------------ Operating loss (3,745,276) (6,390,325) (7,592,381) (11,819,855) (51,925,928) Other income/(expense): Non-operating income -- -- -- -- 259,988 Interest expense (49,579) (98,956) (85,211) (204,737) (496,134) Interest income 207,816 1,643,371 460,441 2,815,486 5,336,215 ------------ ------------ ------------ ------------ ------------ Net loss $ (3,587,039) (4,845,910) (7,217,151) (9,209,106) (46,825,859) ============ ============ ============ ============ ============ Net loss per share, basic and diluted $ (0.20) (0.20) (0.40) (0.39) ============ ============ ============ ============ Weighted average number of shares outstanding, basic and diluted 17,906,228 24,777,185 17,904,433 23,884,054 ============ ============ ============ ============
See accompanying notes to unaudited financial statements. 2 5 ANTIGENICS INC. (a development stage company) Statements of Stockholders' Equity For the six months ended June 30, 2000 and the period from March 31, 1994 (date of inception) to June 30, 2000 (unaudited)
COMMON STOCK --------------------------------- ADDITIONAL SUBSCRIPTION PAID- NOTES NUMBER OF SHARES PAR VALUE IN CAPITAL RECEIVABLE ---------------- --------- ---------- ---------- Balance at March 31, 1994 -- $ -- -- -- Net loss -- -- -- -- Issuance of common stock to founders during 1994, for cash, $.03 per share 11,216,590 112,166 287,844 -- ----------- ----------- ------------ ----------- Balance at December 31, 1994 11,216,590 112,166 287,844 -- Net loss -- -- -- -- Issuance of common stock in connection with the recapitalization in December 1995, $1.45 per share 1,032,202 10,322 1,489,678 (150,000) Grant of common stock 1,513,896 15,139 2,184,861 -- ----------- ----------- ------------ ----------- Balance at December 31, 1995 13,762,688 137,627 3,962,383 (150,000) Net loss -- -- -- -- Deferred compensation on stock options -- -- 781,200 -- Grant and recognition of stock options -- -- 1,116,815 -- Payment of subscription notes receivable -- -- -- 150,000 Issuance of common stock in private placement from March 13, 1996 to December 31, 1996, $6.50 per share 1,636,383 16,364 10,583,636 (250,000) ----------- ----------- ------------ ----------- Balance at December 31, 1996 15,399,071 153,991 16,444,034 (250,000) Net loss -- -- -- -- Payment of subscription notes receivable -- -- -- 250,000 Deferred compensation on stock options -- -- 144,004 -- Grant and recognition of stock options -- -- 62,815 -- Issuance of common stock in private placement from September 8, 1997 to December 31, 1997, $11.17 per share 660,953 6,609 7,378,391 -- ----------- ----------- ------------ ----------- Balance at December 31, 1997 16,060,024 160,600 24,029,244 -- Net loss -- -- -- -- Deferred compensation on stock options -- -- 493,701 -- Grant and recognition of stock options -- -- 838,654 -- Exercise of stock options 38,536 385 249,615 -- Issuance of common stock in private placement from January 1, 1998 to December 31, 1998, $11.17 per share 1,797,063 17,971 20,059,014 (2,102,000) ----------- ----------- ------------ ----------- Balance at December 31, 1998 17,895,623 178,956 45,670,228 (2,102,000) Net loss -- -- -- -- Payment of subscription notes receivable -- -- -- 2,102,000 Deferred compensation on stock options -- -- 354,009 -- Grant and recognition of stock options -- -- 4,718,582 -- Exercise of stock options 1,720 17 83 -- Issuance of common stock in private placement in January 1999, $11.17 per share 9,806 98 109,902 -- Issuance of common stock and warrants in private placement on November 31, 1999, $13.96 per share (net of issuance costs of $293,000) 2,808,793 28,088 38,894,232 -- ----------- ----------- ------------ ----------- Balance at December 31, 1999 20,715,942 207,159 89,747,036 -- Net loss -- -- -- -- Deferred compensation on stock options -- -- 976,714 -- Grant and recognition of stock options and warrants -- -- 1,427,578 -- Exercise of stock options and warrants 54,204 542 325,931 -- Issuance of common stock in IPO on February 9, 2000, $18 per share (net of issuance costs of $6,220,839) 4,025,000 40,250 66,188,911 -- ----------- ----------- ------------ ----------- Balance at June 30, 2000 24,795,146 $ 247,951 158,666,170 -- =========== =========== ============ ===========
DEFICIT ACCUMULATED DURING DEFERRED DEVELOPMENT COMPENSATION STAGE TOTAL ----------- ----------- ------------ Balance at March 31, 1994 -- -- -- Net loss -- (183,440) (183,440) Issuance of common stock to founders during 1994, for cash, $.03 per share -- -- 400,010 ----------- ----------- ------------ Balance at December 31, 1994 -- (183,440) 216,570 Net loss -- (3,226,579) (3,226,579) Issuance of common stock in connection with the recapitalization in December 1995, $1.45 per share -- -- 1,350,000 Grant of common stock -- -- 2,200,000 ----------- ----------- ------------ Balance at December 31, 1995 -- (3,410,019) 539,991 Net loss -- (3,345,898) (3,345,898) Deferred compensation on stock options (781,200) -- -- Grant and recognition of stock options 347,200 -- 1,464,015 Payment of subscription notes receivable -- -- 150,000 Issuance of common stock in private placement from March 13, 1996 to December 31, 1996, $6.50 per share -- -- 10,350,000 ----------- ----------- ------------ Balance at December 31, 1996 (434,000) (6,755,917) 9,158,108 Net loss -- (3,832,527) (3,832,527) Payment of subscription notes receivable -- -- 250,000 Deferred compensation on stock options (144,004) -- -- Grant and recognition of stock options 188,373 -- 251,188 Issuance of common stock in private placement from September 8, 1997 to December 31, 1997, $11.17 per share -- -- 7,385,000 ----------- ----------- ------------ Balance at December 31, 1997 (389,631) (10,588,444) 13,211,769 Net loss -- (8,904,032) (8,904,032) Deferred compensation on stock options (493,701) -- -- Grant and recognition of stock options 269,787 -- 1,108,441 Exercise of stock options -- -- 250,000 Issuance of common stock in private placement from January 1, 1998 to December 31, 1998, $11.17 per share -- -- 17,974,985 ----------- ----------- ------------ Balance at December 31, 1998 (613,545) (19,492,476) 23,641,163 Net loss -- (18,124,277) (18,124,277) Payment of subscription notes receivable -- -- 2,102,000 Deferred compensation on stock options (354,009) -- -- Grant and recognition of stock options 308,473 -- 5,027,055 Exercise of stock options -- -- 100 Issuance of common stock in private placement in January 1999, $11.17 per share -- -- 110,000 Issuance of common stock and warrants in private placement on November 31, 1999, $13.96 per share (net of issuance costs of $293,000) -- -- 38,922,320 ----------- ----------- ------------ Balance at December 31, 1999 (659,081) (37,616,753) 51,678,361 Net loss -- (9,209,106) (9,209,106) Deferred compensation on stock options (976,714) -- -- Grant and recognition of stock options and warrants 258,117 -- 1,685,695 Exercise of stock options and warrants -- -- 326,473 Issuance of common stock in IPO on February 9, 2000, $18 per share (net of issuance costs of $6,220,839) -- -- 66,229,161 ----------- ----------- ------------ Balance at June 30, 2000 (1,377,678) (46,825,859) 110,710,584 =========== =========== ============
See accompanying notes to unaudited financial statements. 3 6 ANTIGENICS INC. (a development stage company) Statements of Cash Flows For the six months ended June 30, 1999 and 2000 and for the period from March 31, 1994 (date of inception) to June 30, 2000 (unaudited)
MARCH 31, 1994 (DATE OF JUNE 30, INCEPTION) TO ----------------------------- JUNE 30, 1999 2000 2000 ------------ ------------ ------------ Cash flows from operating activities: Net loss $ (7,217,151) (9,209,106) (46,825,859) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 339,574 720,048 2,421,806 Stock options, warrants and Predecessor Company stock options 1,585,160 1,685,695 9,536,394 Common stock grant -- -- 2,200,000 Changes in operating assets and liabilities: Other assets (87,202) (177,700) (1,066,480) Prepaid assets 63,758 (351,551) (454,755) Organization costs -- -- (32,934) Accounts payable (455,362) 599,637 1,024,310 Accrued liabilities (4,668) (65,728) 867,712 Due to/from related party, net 35,783 12,589 12,349 ------------ ------------ ------------ Net cash used in operating activities (5,740,108) (6,786,116) (32,317,457) ------------ ------------ ------------ Cash flows from investing activities: Purchase of plant and equipment (3,787,561) (914,151) (10,649,515) Investments -- (300,000) (300,000) Proceeds from the sale of plant and equipment -- -- 31,942 ------------ ------------ ------------ Net cash used in investing activities (3,787,561) (1,214,151) (10,917,573) ------------ ------------ ------------ Cash flows from financing activities: Net proceeds from sale of equity 110,000 66,788,578 145,223,476 Subscriptions receivable 2,102,000 -- -- Exercise of stock options and warrants -- 326,473 576,573 Proceeds from long-term debt 1,019,636 -- 3,480,542 Payments of long-term debt (140,885) (391,912) (904,747) ------------ ------------ ------------ Net cash provided by financing activities 3,090,751 66,723,139 148,375,844 ------------ ------------ ------------ Net (decrease) increase in cash and cash equivalents (6,436,918) 58,722,872 105,140,814 Cash and cash equivalents at beginning of period 22,168,049 46,417,942 -- ------------ ------------ ------------ Cash and cash equivalents at end of period $ 15,731,131 105,140,814 105,140,814 ============ ============ ============ Supplemental cash flow information: Interest paid $ 85,211 204,737 496,134 ============ ============ ============
See accompanying notes to unaudited financial statements. 4 7 ANTIGENICS INC. (a development stage company) NOTES TO UNAUDITED FINANCIAL STATEMENTS June 30, 2000 NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements of Antigenics Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete annual financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 1999 included in our registration statement on Form S-1 filed with the Securities and Exchange Commission on May 25, 2000. NOTE B - INITIAL PUBLIC OFFERING On February 9, 2000, we completed an initial public offering (the "IPO") of 4,025,000 shares of common stock at $18 per share. We received $72,450,000 before deduction of offering expenses of approximately $6,221,000. Concurrent with the completion of the IPO, we were converted from a limited liability company to a corporation. All members of the limited liability company exchanged their respective member interests for shares of common stock in the corporation. The financial statements have been retroactively adjusted to reflect the conversion from a limited liability company to a corporation and the exchange of each unit of members' equity into 172.0336 shares of common stock. NOTE C - INCOME TAXES Prior to converting to a corporation, as a limited liability company, no federal, state or local income taxes were levied on the company. Each member of the limited liability company was individually responsible for reporting their share of the company's net income or loss on their personal tax returns. As a result, we will not be able to offset future taxable income, if any, against losses incurred prior to the conversion to a corporation. Income taxes are accounted for under the asset and liability method. Beginning 5 8 February 9, 2000, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are recorded when they more likely than not are able to be realized. Given our history of incurring operating losses, management believes that it is more likely than not that any deferred tax assets, net of deferred tax liabilities, will not be realized. Therefore, there is no income tax benefit in the accompanying financial statements because of a loss before income taxes and the need to recognize a valuation allowance on net deferred tax assets. NOTE D - EARNINGS PER SHARE Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," requires the calculation and presentation of "Basic" and "Diluted" earnings per share. Basic earnings per share is calculated by dividing net loss by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by dividing net loss by the weighted average common shares outstanding plus the dilutive effect of outstanding stock options and stock warrants. Because we report a net loss, diluted earnings per share is the same as basic earnings per share because the effect of outstanding stock options and stock warrants being added to weighted average shares outstanding would reduce the net loss per share. Therefore, outstanding stock options and stock warrants are not included in the calculation. NOTE E - STOCK-BASED COMPENSATION PLANS EMPLOYEE STOCK PURCHASE PLAN In connection with the IPO, the board of directors approved an employee stock purchase plan. The stockholders, at the May 2000 stockholders' meeting, approved the plan. Under the plan, employees may purchase shares of common stock at a discount from fair market value. There are 300,000 shares of common stock (subject to adjustment for stock splits and similar capital changes) reserved for issuance under the purchase plan. The purchase plan is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended. Rights to purchase common stock under the purchase plan are granted at the discretion of the compensation committee, which determines the frequency and duration of individual offerings under the plan and the dates when stock may be purchased. Eligible employees participate voluntarily and may withdraw from any offering at any time before stock is purchased. Participation terminates automatically upon termination of employment. The purchase price per share of common stock in an offering is 85% of the lesser of its fair value at the beginning of the offering 6 9 period or on the applicable exercise date and may be paid through payroll deductions, periodic lump sum payments or a combination of both. The plan terminates on November 15, 2009. As of June 30, 2000, no shares of common stock have been issued under the purchase plan. EQUITY INCENTIVE PLAN In connection with the IPO, the board of directors approved an employee equity incentive plan. Our equity incentive plan authorizes the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified stock options for the purchase of an aggregate of 4,800,000 shares of common stock (subject to adjustment for stock splits and similar capital changes) to employees and, in the case of non-qualified stock options, to outside advisors and directors of Antigenics. The board of directors has appointed the compensation committee to administer the equity plan. The ability to grant incentive stock options to employees and directors was approved by the stockholders at the May 2000 stockholders' meeting. During the six months ended June 30, 2000, we granted approximately 233,000 non-qualified stock options to employees and directors with exercise prices at or below the fair value of the underlying shares at the date of grant and approximately 212,000 incentive stock options. These options were granted at a weighted average exercise price of $12.06 per share. In addition, we granted approximately 91,000 non-qualified stock options to outside advisors of which approximately 62,000 options vested immediately and the remainder vest over periods up to five years. These options were granted at a weighted average exercise price of $12.84 per share. Approximately 46,000 options were forfeited during the six months ended June 30, 2000 with a weighted average exercise price of $6.85 per share. We recorded a charge to operations related to the grants of options to employees and directors for the three months ended June 30, 1999 and 2000, of approximately $79,000 and $130,000, respectively, and $156,000 and $258,000 for the six months ended June 30, 1999 and 2000, respectively. For the three months ended June 30, 1999 and 2000, the charge to operations related to options granted and earned by outside advisors totaled approximately $393,000 and $685,000, respectively, and $1,429,000 and $1,427,000 for the six months ended June 30, 1999 and 2000, respectively. NOTE F - COMMITMENTS AND RELATED PARTY TRANSACTIONS On February 11, 2000, we entered into a research agreement with The University of Texas M.D. Anderson Cancer Center ("MDA") to conduct clinical studies. We are required to pay MDA a total of approximately $358,000 for the clinical study of approximately 35 patients. The first installment was paid upon signing the agreement. On May 16, 2000, we entered into another research agreement with MDA to conduct clinical studies. We are required to pay MDA $273,611 over the next year in 3 installments. On May 18, 2000, we committed $3,000,000 to become a limited partner in a limited partnership which will invest principally in companies that apply genomic technologies and information in their offerings of products and services or that are engaged in research and development and efforts involving genomic technologies with a view to developing such products and services. Contributions to the limited partnership are made as authorized by the general partner. As of June 30, 2000, we have invested $300,000 and have included this amount in non-current other assets. We account for this investment under the cost method. The general partner of the limited partnership is AGTC Partners, L.P. and NewcoGen Group Inc. is the general partner of AGTC Partners, L.P. Noubar Afeyan, Ph.D., who is one of our directors, is the president of NewcoGen Group Inc. and is also a principal of the limited partnership. In addition, Garo H. Armen, Ph.D., our chief executive officer and one of our directors, is a director of NewcoGen Group, Inc. 7 10 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Since our inception in March 1994, our activities have primarily been associated with the development of our heat shock protein technology and our lead immunotherapeutic, Oncophage(R). Our business activities have included: - product research and development; - intellectual property prosecution. - establishing manufacturing capabilities; - manufacturing immunotherapeutics for clinical trials; and - regulatory and clinical affairs. We have incurred significant losses since our inception because we have not generated any revenues. As of June 30, 2000, we had an accumulated deficit of approximately $46,826,000. We expect to continue to incur net losses over the next several years as we complete our Oncophage clinical trials, apply for regulatory approvals, continue development of our technology and expand our operations. We have been dependent on equity and debt financings to fund our business activities. Our financial results may vary depending on many factors, including: - the progress of Oncophage in the regulatory process; - the acceleration of our other immunotherapeutic candidates into preclinical and clinical trials; - our investment in manufacturing process development and in manufacturing capacity for Oncophage and other product candidates; - development of a sales and marketing staff and initial sales activities if Oncophage is approved for commercialization; and - the progress of our other research and development efforts. HISTORICAL RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1999 8 11 Revenue: We generated no revenue during the three months ended June 30, 2000 or during the three months ended June 30, 1999. Research and Development: Research and development expense increased 65.1% to $3,821,000 for the three months ended June 30, 2000 from $2,314,000 for the three months ended June 30, 1999. The increase was primarily due to the increase in our staff to support our expanded research and development activities, which increased costs by $814,000, an increase in the non-cash charge for options granted to and earned by outside advisors, directors and employees from $192,000 for the three months ended June 30, 1999 to $403,000 for the three months ended June 30, 2000, an increase in costs associated with operating our manufacturing and research facility of $188,000 and other ongoing development activities that increased costs by $294,000. Research and development expenses consist primarily of compensation for our employees and outside advisors conducting research and development work, costs associated with our sponsored research at the University of Connecticut, costs associated with the operation of our manufacturing and laboratory facility and the costs to support our Oncophage clinical trials. General and Administrative: General and administrative expenses increased 88.6% to $2,209,000 for the three months ended June 30, 2000 from $1,171,000 for the three months ended June 30, 1999. The increase was primarily due to the growth in the number of our employees to support our expanded business operations that increased costs by $184,000, increased costs related to operating as a public company of $337,000, and the increase in the non-cash charge for options granted to and earned by outside advisors, directors and employees to $414,000 for the three months ended June 30, 2000 from $279,000 for the three months ended June 30, 1999. General and administrative expenses consisted primarily of personnel compensation, office expenses and professional fees. Depreciation and Amortization: Depreciation and amortization expense increased 38.5% to $360,000 for the three months ended June 30, 2000 from $260,000 for the three months ended June 30, 1999. This increase was due principally to the depreciation expense of our new 30,225 square foot manufacturing and laboratory facility and related equipment placed in service during the second quarter of 1999. Interest Income: Interest income increased 689.9% to $1,643,000 for the three months ended June 30, 2000 from $208,000 for the three months ended June 30, 1999. This increase was principally attributable to a higher average cash and cash equivalents balance during the three months ended June 30, 2000 as compared to the three months ended June 30, 1999 as a result of net proceeds of $38,922,000 from a private equity financing completed in November 1999 and $66,229,000 from our initial public offering completed in February 2000. Interest expense: Interest expense increased 98% to $99,000 for the three months ended June 30, 2000 from $50,000 for the three months ended June 30, 1999 due to the increased borrowings under a credit facility to partially fund the construction of our manufacturing and laboratory facility. SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999 Revenue: We generated no revenue during the six months ended June 30, 2000 or during the six months ended June 30, 1999. Research and Development: Research and development expense increased 49.4% to $7,189,000 for the six months ended June 30, 2000 from $4,813,000 for the six months ended June 30, 1999. The increase was primarily due to the increase in our staff to support our expanded research and development activities, which increased costs by $1,513,000, an increase in the non-cash charge for options granted and earned by outside advisors, directors and employees from $771,000 for the six months ended June 30, 1999 to $843,000 for the six months ended June 30, 2000, an increase in costs associated with operating our manufacturing and research facility of $459,000 and other ongoing development activities that increased costs by $332,000. Research and development expenses consist primarily of compensation for our employees and outside advisors conducting research and development work, costs associated with our 9 12 sponsored research at the University of Connecticut, costs associated with the operation of our manufacturing and laboratory facility and the costs to support our Oncophage clinical trials. General and Administrative: General and administrative expenses increased 60.3% to $3,911,000 for the six months ended June 30, 2000 from $2,440,000 for the six months ended June 30, 1999. The increase was primarily due to the growth in the number of our employees to support our expanded business operations that increased costs by $547,000, increased costs related to operating as a public company of $372,000, and the increase in the non-cash charge for options granted and earned by outside advisors, directors and employees to $843,000 for the six months ended June 30, 2000 from $814,000 for the six months ended June 30, 1999. General and administrative expenses consisted primarily of personnel compensation, office expenses and professional fees. Depreciation and Amortization: Depreciation and amortization expense increased 111.76% to $720,000 for the six months ended June 30, 2000 from $340,000 for the six months ended June 30, 1999. This increase was due to the depreciation expense of our new 30,225 square foot manufacturing and laboratory facility and related equipment placed in service during the second quarter of 1999. Interest Income: Interest income increased 512% to $2,815,000 for the six months ended June 30, 2000 from $460,000 for the six months ended June 30, 1999. This increase was principally attributable to a higher average cash and cash equivalents balance during the six months ended June 30, 2000 as compared to the six months ended June 30, 1999 as a result of net proceeds of $38,922,000 from a private equity financing completed in November 1999 and $66,229,000 from our initial public offering completed in February 2000. Interest expense: Interest expense increased 141.2% to $205,000 for the six months ended June 30, 2000 from $85,000 for the six months ended June 30, 1999 due to the increased borrowings under a credit facility to partially fund the construction of our manufacturing and laboratory facility. The Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements reflecting management's current expectations regarding our future performance. These expectations are based on certain assumptions regarding the timing of our clinical trials, the efficacy of products, the availability of capital and other factors relating to our growth. These expectations may not materialize if product development efforts are delayed or suspended or if other assumptions prove incorrect. These factors are more fully discussed in our registration statement on Form S-1 filed with the Securities and Exchange Commission on May 25, 2000. LIQUIDITY AND CAPITAL RESOURCES We have incurred annual operating losses since inception, and at June 30, 2000, we had incurred an accumulated deficit of $46,826,000. Since our inception, we have financed our operations primarily through the sale of equity, interest income earned on cash and cash equivalent balances and debt provided through a credit line secured by some of our manufacturing and laboratory assets. Most recently, we have completed an initial public offering that raised net proceeds of $66,229,000. From our inception through June 30, 2000, we raised aggregate net proceeds of $145,800,000 through the sale of equity and the exercise of stock options and warrants, and borrowed $3,481,000 under our $5,000,000 credit facility. We expect that we will fund our capital expenditures and growing operations over the next two years with current working capital. We may, however, raise money in the capital markets. Our future capital requirements include, but are not limited to, supporting our Oncophage clinical trial efforts and continuing our other research and development programs. Satisfying our long-term liquidity needs will require the successful commercialization of Oncophage or other products and may require additional capital. Our cash and cash equivalents at June 30, 2000 were $105,141,000, an increase of $58,723,000 from December 31, 1999. During the six months ended June 30, 2000, we used cash primarily to finance operations, including our Oncophage clinical trials. Net cash used in operating activities for the six months ended June 30, 1999 and 2000 was $5,740,000 and $6,786,000. The increase resulted from the increase in the activity of our Oncophage clinical trials and general expansion of our operations. Net cash used in investing activities for the six months ended June 30, 1999 and 2000 was $3,788,000 and $1,214,000. The investments were primarily for the purchase of equipment, furniture and fixtures, and in 1999 the construction of our manufacturing and laboratory facility, which was primarily completed during the second quarter of 1999. During 1999, we partially financed our new manufacturing and laboratory facility in Woburn, Massachusetts through the $5,000,000 credit facility discussed below and available cash balances. During the second quarter of 2000, for investment and strategic purposes we invested $300,000 to become a limited partner in a limited partnership 10 13 which will invest principally in companies that apply genomic technologies and information in their offerings of products and services or that are engaged in research and development and efforts involving genomic technologies with a view to developing such products and services. Our total commitment to this limited partnership is $3,000,000 with contributions made as authorized by the general partner. Net cash provided by financing activities was $3,091,000 and $66,723,000 for the six months ended June 30, 1999 and 2000. Since inception, our primary source of financing has been from equity investments. During the six months ended June 30, 1999 and 2000, sales of equity and, in 2000, exercises of stock options and warrants, totaled approximately $2,212,000 and $67,115,000. At June 30, 2000, we had outstanding $2,576,000 under our credit facility, which was used to finance the construction of our manufacturing and laboratory facility and to purchase related equipment. Loans that were drawn down on the credit facility are secured by specific assets, including leasehold improvements, which they finance. OTHER In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting or Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133, as amended, will be effective for our fiscal year beginning January 1, 2001. The adoption of SFAS No. 133 is not expected to have a material effect on our financial position or results of operations. In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation" (FIN 44). FIN 44 provides guidance on the accounting for stock-based compensation grants to employees and directors. The Interpretation will be applied prospectively beginning July 1, 2000. The adoption of FIN 44 is not expected to have a material effect on our financial position or results of operations. Item 3 - Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, we are exposed to fluctuations in interest rates as we seek debt financing to make capital expenditures. We do not employ specific strategies, such as the use of derivative instruments or hedging, to manage our interest rate exposures. There has been no change since the fiscal year ended December 31, 1999 with respect to our interest rate exposures or our approach toward those exposures. Further, we do not expect our market risk exposures to change in the near term. 11 14 PART II - OTHER INFORMATION Item 1 - None Item 2 - Use of Proceeds from Registered Securities On February 3, 2000 the Securities and Exchange Commission declared our registration statement on Form S-1 (File No. 333-91747) effective in connection with the initial public offering of 4,025,000 shares of our common stock. U.S. Bancorp Piper Jaffray Inc. and FleetBoston Robertson Stephens Inc. served as managing underwriters of the offering. On February 9, 2000, we sold 4,025,000 shares of our common stock (including the underwriters' overallotment option) at $18 per share to the underwriters. We received net proceeds from the initial public offering of approximately $66,229,000 reflecting gross proceeds of $72,450,000 net of underwriter commissions of approximately $5,071,500 and other offering costs of approximately $1,149,500. We have used the following net offering proceeds as of June 30, 2000: approximately $855,000 for fixed asset additions, $300,000 for investments, $329,000 for debt obligations and $5,332,000 for operations. The offering has terminated with the sale of all of the securities that were registered. Item 3 - None Item 4 - Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders held on May 18, 2000, our stockholders voted as follows: Number of Number of Votes For Votes Withheld --------- -------------- (a) Proposal to elect the following nominees as directors: Gamil de Chadarevian 19,475,727 2,222 Edward Brodsky 19,475,727 2,222 Martin Taylor 19,475,727 2,222 Each nominee received a plurality of the votes cast by the stockholders entitled to vote thereon and, therefore, Gamil de Chadarevian, Edward Brodsky and Martin Taylor were re-elected to the Board of Directors. In addition, the terms in office of Garo H. Armen, Ph.D., Pramod Srivastava, Ph.D., Donald Panoz, Noubar Afeyan, Ph.D. and Tom Dechaene continued after the meeting. (b) Proposal to approve the 1999 Equity Incentive Plan: Total Votes For the Proposal 16,979,638 Total Votes Against the Proposal 724,921 Abstentions 6,521 The proposal received the affirmative vote of a majority of the shares of common stock present or represented at the meeting and entitled to vote thereon and, therefore, was adopted. 12 15 (c) To approve the 1999 Employee Stock Purchase Plan: Total Votes For the Proposal 17,670,687 Total Votes Against the Proposal 38,062 Abstentions 2,331 The proposal received the affirmative vote of a majority of the shares of common stock present or represented at the meeting and entitled to vote thereon and, therefore, was adopted. Item 5 - None Item 6(a) - Exhibits: Exhibits Description -------- ----------- 10.1 Subscription Agreement dated May 18, 2000 between Antigenics and Applied Genomic Technology Capital Fund, L.P. 27 Financial Data Schedule. Item 6(b) - Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which this report is filed. 13 16 ANTIGENICS INC. SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ANTIGENICS INC. Date: August 14, 2000 /s/ Garo H. Armen ------------------------------------- Garo H. Armen President and Chief Executive Officer (Principal Accounting Officer) 14 17 ANTIGENICS INC. EXHIBIT INDEX EXHIBIT NO. DESCRIPTION ----------- ----------- 10.1 Subscription Agreement dated May 18, 2000 between Antigenics and Applied Genomic Technology Capital Fund, L.P. 27 Financial Data Schedule EX-10.1 2 ex10-1.txt SUBSCRIPTION AGREEMENT 1 Exhibit 10.1 SUBSCRIPTION AGREEMENT FOR LIMITED PARTNERSHIP INTEREST IN APPLIED GENOMIC TECHNOLOGY CAPITAL FUND, L.P. 2 IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION, OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. EXCEPT AS OTHERWISE PROVIDED IN THE LIMITED PARTNERSHIP AGREEMENT FOR APPLIED GENOMIC TECHNOLOGY CAPITAL FUND, L.P. (THE "PARTNERSHIP"), A LIMITED PARTNER MAY NOT SELL, ASSIGN, TRANSFER, PLEDGE OR OTHERWISE DISPOSE OF ALL OR ANY PART OF ITS INTEREST IN THE PARTNERSHIP UNLESS THE GENERAL PARTNER (AS DEFINED HEREIN) HAS CONSENTED THERETO. FOR FLORIDA RESIDENTS ONLY: - -------------------------- THE SECURITIES BEING OFFERED HAVE NOT BEEN REGISTERED WITH THE FLORIDA DIVISION OF SECURITIES. IF SALES ARE MADE TO FIVE OR MORE FLORIDA PURCHASERS, EACH SALE IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER OR WITHIN THREE DAYS AFTER AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. FOR NON-U.S. RESIDENTS: - ---------------------- NO ACTION HAS BEEN, OR WILL BE, TAKEN TO COMPLY WITH THE SECURITIES LAWS OF ANY JURISDICTION OUTSIDE THE UNITED STATES OF AMERICA (THE "U.S."). IT IS THE RESPONSIBILITY OF ANY PERSON WISHING TO PURCHASE A LIMITED PARTNERSHIP INTEREST TO SATISFY HIMSELF AS TO FULL OBSERVANCE OF THE LAWS OF ANY RELEVANT TERRITORY OUTSIDE THE U.S. IN CONNECTION WITH ANY SUCH PURCHASE, INCLUDING OBTAINING ANY REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR OBSERVING ANY OTHER APPLICABLE FORMALITIES. i 3 Investor Name: Antigenics Inc. APPLIED GENOMIC TECHNOLOGY CAPITAL FUND, L.P. SUBSCRIPTION AGREEMENT Date: May 18, 2000 To: Applied Genomic Technology Capital Fund, L.P. (the "Partnership") c/o NewcoGen Group 150 CambridgePark Drive Cambridge, MA 02140 Dear Sir or Madam: Reference is made to the Limited Partnership Agreement of the Partnership (the "Partnership Agreement") heretofore furnished to the undersigned with respect to the offering of Limited Partnership Interests in the Partnership (such Agreement, together with the other offering materials provided to the undersigned subscribing investor (the "Investor") being sometimes herein collectively called the "Offering Materials"). Capitalized terms used, but not defined, herein shall have the respective meanings given them in the Offering Materials. The Investor hereby agrees as follows: 1. SUBSCRIPTION FOR A LIMITED PARTNERSHIP INTEREST. (a) PURCHASE OF INTERESTS. Subject to the terms and conditions set forth in this Subscription Agreement and in the Partnership Agreement, the Investor agrees (i) to purchase from the Partnership the Limited Partnership Interest (the "Interest") in the Partnership in the amount set forth on the signature page below (except to the extent that a lesser Interest has been accepted by the General Partner pursuant to Section 9) at a purchase price equal to 100% of such Interest, payable in the manner and at the times provided in the Partnership Agreement, (ii) to become a party to the Partnership Agreement and (iii) to become a Limited Partner of the Partnership. In the event that the General Partner elects pursuant to Section 2.3 of the Partnership Agreement to form a Parallel Fund this Subscription Agreement, may, with the consent of the Investor, be deemed a subscription for an Interest in the Parallel Partnership and all references herein to the "Partnership" and the "Partnership Agreement" shall be deemed references to the Parallel Fund and to the limited partnership agreement of the Parallel Fund, respectively. (b) ACCESS. It is understood that all materials pertaining to this investment have been made available for inspection by the Investor and representatives of the Investor and that the books and records of the Partnership will be available, upon reasonable notice, for inspection by Limited Partners during normal business hours at its principal office in accordance with the Partnership Agreement. 2. REPRESENTATIONS OF THE INVESTOR. The Investor hereby represents and warrants to the Partnership and to the General Partner as follows: 4 (a) SUITABILITY. THE INVESTOR HAS READ CAREFULLY AND UNDERSTANDS THE OFFERING MATERIALS AND HAS CONSULTED ITS OWN ATTORNEY, ACCOUNTANT OR INVESTMENT ADVISER WITH RESPECT TO THE INVESTMENT CONTEMPLATED HEREBY AND ITS SUITABILITY FOR THE INVESTOR. ANY SPECIFIC ACKNOWLEDGMENT SET FORTH BELOW WITH RESPECT TO ANY STATEMENT CONTAINED IN THE OFFERING MATERIALS SHALL NOT BE DEEMED TO LIMIT THE GENERALITY OF THIS REPRESENTATION AND WARRANTY. (b) OPPORTUNITY TO VERIFY INFORMATION. The Investor acknowledges that representatives of the Partnership have made available to the Investor, during the course of this transaction and prior to the purchase of any Interests, the opportunity to ask questions of and receive answers from them concerning the terms and conditions of the offering described in the Offering Materials, and to obtain any additional information necessary to verify the information contained in the Offering Materials or otherwise relative to the proposed activities of the Partnership or to otherwise evaluate the merits and risks of an investment in the Interest. (c) PURCHASE FOR INVESTMENT. The Investor understands and agrees: (i) that the Investor must bear the economic risk of its investment until the termination of the Partnership; (ii) that the Interest has not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and, therefore, cannot be resold or otherwise disposed of unless it is subsequently registered under the Securities Act or unless an exemption from such registration is available; (iii) that the Partnership is not being registered as an "investment company" as the term "investment company" is defined in Section 3(a) of the U.S. Investment Company Act of 1940, as amended; (iv) that the Investor is purchasing the Interest for its own account and without a view towards distribution thereof; (v) that the Investor shall not resell or otherwise dispose of all or any part of the Interest purchased by the Investor, except as permitted by law, including, without limitation, any and all applicable provisions of the Partnership Agreement and any regulations under the Securities Act; (vi) that the transfer of the Interest and the substitution of another Limited Partner for the Investor are restricted by the terms of the Partnership Agreement; (vii) that the Partnership does not have any intention of registering the Partnership as an "investment company" under the Investment Company Act or of registering the Interest under the Securities Act or of supplying the information which may be necessary to enable the Investor to sell the Interest, except upon a request in compliance with Rule 1 44A(d)(4)(i) under the Securities Act; (viii) that neither the General Partner nor its partners nor any other person or entity selected by the General Partner to act as agent or adviser of the Partnership with respect to managing the affairs of the Partnership will be registered as an investment adviser under the Investment Advisers Act of 1940, as amended; and (ix) that Rule 144 under the Securities Act may not be available as a basis for exemption from registration of any Interest. The Investor understands that there is no public or other market for the Interest, and it is not anticipated that such a market will ever develop. The Investor further understands that for the foregoing reasons, an Investor will be required to retain ownership of the Interest and bear the economic risk of this investment for an indefinite period of time. (d) FULL CONTRIBUTION. The Investor understands that, except as otherwise provided in the Partnership Agreement, the Investor may not make less than the full amount of any required capital contribution, and that default provisions with respect thereto, pursuant to which the Investor may lose a material portion of its investment in the Partnership, are contained in the Partnership Agreement. (e) ACCREDITED INVESTOR AND QUALIFIED PURCHASER STATUS. One or more of the categories set forth in EXHIBIT 1 and EXHIBIT 2 hereto correctly and in all respects describes the Investor, and 5 the Investor has so indicated by signing on the blank line or lines following a category on each such Exhibit which so describes it. (f) NO NEED FOR LIQUIDITY. The Investor has no need for liquidity in connection with its purchase of the Interest, and is able to bear the risk of loss of its entire investment in the Interest. (g) INVESTMENT OBJECTIVES. The purchase of the Interest by the Investor is consistent with the general investment objectives of the Investor. (h) SECURITIES LAWS. The Investor received the Offering Materials and first learned of the Partnership in the state listed as the address of the Investor set forth on the Investor's signature page hereto, and intends that the state securities laws of that state alone shall govern this transaction. (i) INVESTMENT COMPANY ACT REPRESENTATIONS. If the Investor is a corporation, trust, partnership or other organization: (1) The Investor was not, or will not be, formed or "recapitalized" (as defined below) for the specific purpose of acquiring the Interest; (2) The Investor's stockholders, partners or other beneficial owners have no individual discretion as to their participation or non-participation in the Interest and will have no individual discretion as to their participation or non-participation in particular investments made by the Partnership; (3) The Investor has not and will not invest more than 40% of its "committed capital" (as defined below) in any single entity, including the Partnership, which is excluded from the definition of "investment company" solely by reason of Section 3(c)(l) of the Investment Company Act; and (4) If the Investor is contributing 10% or more of the total capital to be contributed by the Limited Partners to the Partnership, either (i) all of the outstanding securities (other than short-term paper) of such Investor are beneficially owned by one natural person, or (ii) such Investor is not an "investment company" under Section 3(a) of the Investment Company Act or an entity which would be an "investment company" but for the exception provided for in Section 3(c)(l) or Section 3(c)(7) of the Investment Company Act. For purposes of this Section 2(i), the following definitions shall apply: "Committed capital" includes all amounts which have been contributed to the Investor by its shareholders, partners or other equity holders plus all amounts which such persons remain obligated to contribute to it. The term "recapitalized" shall include new investments made in the Investor solely for the purpose of financing its acquisition of the Interest and not made pursuant to a prior financial commitment. (j) POWER AND AUTHORITY; NO CONFLICTS. If the Investor is a corporation, trust, partnership or other organization: (i) it has the requisite power and authority to execute and deliver this Subscription Agreement and the Partnership Agreement; (ii) the person signing the Subscription Agreement on behalf of the Investor has been duly authorized to execute this Subscription Agreement and the Partnership Agreement; and (iii) such execution and delivery does not violate, or conflict with, the terms of any material agreement or instrument to which the Investor is a party or by which it is bound. This Subscription Agreement has been duly executed by the Investor and constitutes, and the Partnership 6 Agreement, when the Investor is admitted as a Limited Partner, will constitute, a valid and legally binding agreement of the Investor. (k) KNOWLEDGE AND EXPERIENCE. The Investor and its purchaser representative (if any) currently have, and (unless the Investor has a purchaser representative) the Investor had immediately prior to receipt of any offer regarding the Partnership, such knowledge and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the Partnership. (l) PURCHASER REPRESENTATIVE. If the Investor has utilized a purchaser representative, the Investor has previously given the Partnership notice in writing of such fact, specifying that such representative would be acting as the Investor's "purchaser representative" as defined in Rule 501(h) of Regulation D under the Securities Act. (m) NO VIEW TO TAX BENEFITS. The Investor is not acquiring the Interest with a view to realizing any benefits under United States federal income tax laws, and no representations have been made to the Investor that any such benefits will be available as a result of the Investor's acquisition, ownership or disposition of the Interest. (n) PUBLICLY TRADED PARTNERSHIP. The following representations are included with the intention of enabling the Partnership to qualify for the benefit of a "safe harbor" under Treasury Regulations from treatment of the Partnership as an entity subject to corporate income tax. Either: (1) The Investor is not a partnership, grantor trust, or Subchapter S corporation for federal income tax purposes, or (2) The Investor is a partnership, grantor trust, or Subchapter S corporation, but (i) at no time during the term of the Partnership will 65% or more of the value of any beneficial owner's direct or indirect interest in the Investor be attributable to the Investor's interests in the Partnership, (ii) less than 65% of the value of the Investor is attributable to the Investor's interests in the Partnership, and (iii) permitting the Partnership to satisfy the 100-partner limitation set forth in Section l.7704-I(h)(1)(ii) of the Treasury Regulations is not a principal purpose of any beneficial owner of the Investor in investing in the Partnership through the Investor. If the Investor is unable to make either of such representations, the Investor hereby agrees to provide the General Partner, prior to the effective date of the purchase of the Interest, with evidence (including opinions of counsel) satisfactory in form and substance to the General Partner relating to the status of the Partnership under Section 7704 of the Code. (o) NO BORROWINGS. The Investor has not borrowed any portion of its contribution to the Partnership, either directly or indirectly, from the Partnership, the General Partner, or any affiliate of the foregoing. (p) PARTNERSHIP COUNSEL DOES NOT REPRESENT INVESTORS. The Investor understands and acknowledges that Testa, Hurwitz & Thibeault, LLP represents only the Partnership and the General Partner, and not the Investor, in connection with the formation of the Partnership. 3. CAPITAL CONTRIBUTIONS. Subject to the terms and conditions of the Partnership Agreement, the initial capital contribution for the purchase of the Investor's Interest shall take place on such date and at 7 such place, as shall be selected by the General Partner upon 10 Business Days' prior written notice to the Investor in accordance with Article 6 of the Partnership Agreement. 4. AGREEMENTS WITH OTHER LIMITED PARTNERS. The Partnership represents that each other Limited Partner has or will execute and deliver a subscription agreement substantially identical to this Subscription Agreement (except as to the amount of the Interest to be purchased), in which each such other Limited Partner agrees to subscribe for and purchase an interest from the Partnership and makes the same representations and warranties as are made by the Investor in Section 2 hereof, only with changes that are appropriate to reflect the legal form of such Limited Partner. The purchases of the Interests by the Investor and the other Limited Partners are to be separate purchases from the Partnership and the sales of the Interests to the Investor and the other Limited Partners are to be separate sales by the Partnership. This Subscription Agreement and such other subscription agreements are sometimes collectively referred to herein as the "Subscription Agreements." 5. CONDITIONS TO CLOSING. The Investor's obligation to purchase the Interest at the closing is subject to the fulfillment prior to or at the closing, of each of the following conditions: 5.1. MINIMUM SUBSCRIPTIONS. The Partnership (together with any Parallel Funds) shall have received aggregate capital commitments, including the capital commitment of the General Partner, of at least $70,000,000 within sixty (60) days of May 11, 2000. 5.2. SALE OF INTERESTS. The Investor shall have been duly admitted to the Partnership as a Limited Partner. 5.3. REPRESENTATIONS AND WARRANTIES. The Partnership and the General Partner shall represent and warrant to the Investor that, at the time of the closing: (a) ORGANIZATION AND STANDING OF THE PARTNERSHIP. The Partnership is duly and validly organized and validly existing as a limited partnership under the laws of the State of Delaware and has all requisite power and authority under the Partnership Agreement, its Certificate of Limited Partnership and such laws to enter into and carry out the terms of the Subscription Agreements, to conduct its activities as described in the Partnership Agreement, to admit partners to the Partnership and to issue and sell Interests in the Partnership. The General Partner is duly and validly organized and validly existing as a limited partnership under the laws of the State of Delaware and has all requisite power and authority under its limited partnership agreement, certificate of limited partnership and such laws to conduct its activities and to enter into and perform the Partnership Agreement. (b) COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Partnership nor the General Partner is in violation of any term of its respective partnership agreement or other governing documents or the Subscription Agreements, and neither the Partnership nor the General Partner is in violation of any term of any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, statute, rule or regulation applicable to it resulting in any material adverse change in the business, prospects, condition, affairs or operations of the Partnership or in any material liability on the part of the Partnership or the General Partner. The execution and delivery of the Partnership Agreement and the Subscription Agreements do not result in the violation of, constitute a default under, or conflict with, any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, statute, rule or regulation applicable to 8 the Partnership or the General Partner, or result in the creation of any mortgage, lien, encumbrance or charge upon any of the properties or assets of the Partnership or the General Partner. (c) GOVERNMENTAL AND REGULATORY APPROVAL. Neither the execution and delivery of the Subscription Agreements, nor the offer or sale of the Interests, requires any consent, approval or authorization from, or filing, registration or qualification with, any federal, state or local governmental or regulatory authority (including, without limitation, registration under the Securities Act), on the part of the Partnership or the General Partner, except for (i) the filing of the Certificate of Limited Partnership as provided in the Partnership Agreement, (ii) the requisite organizational filings of the General Partner and (iii) compliance by the Partnership and the General Partner with the requirements of any applicable state securities ("Blue Sky") laws. (d) LITIGATION. There are no actions, proceedings or investigations pending or threatened which have a substantial possibility of resulting in any material adverse change in the business, prospects, condition, affairs or operations of the Partnership or in any material liability on the part of the Partnership or the General Partner. (e) DISCLOSURE. Neither the Offering Materials nor this Subscription Agreement furnished to any Limited Partner by or on behalf of the General Partner or the Partnership in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which they are or were made. The Investor understands and acknowledges that his or its investment in the Partnership shall be subject to the terms and conditions of this Subscription Agreement and the Partnership Agreement in such final forms as shall be executed by the parties thereto, and as the same may be amended from time to time in accordance with their respective terms. (f) PARTNERSHIP LIABILITIES. Except as set forth in the Offering Materials or as otherwise disclosed to the Investor, the Partnership has not engaged in any material transactions and does not have any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise (including, without limitation, liabilities as guarantor or otherwise with respect to obligations of others) and whether due or to become due (other than liabilities and obligations arising out of the offering under the Offering Materials and the transactions described therein, including expenses of the offering, legal and accounting fees, and travel and travel-related expenses). (g) SALE OF THE INTERESTS. All action required to be taken by the General Partner and the Partnership as a condition to the sale of the Interest purchased by the Investor has been taken, such Interest will represent a duly and validly issued limited partnership interest in the Partnership and the Investor will be a Limited Partner of the Partnership entitled to all the benefits, and subject to all the obligations, of a Limited Partner under the Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act. (h) CERTIFICATE OF LIMITED PARTNERSHIP. The Certificate of Limited Partnership of the Partnership has been duly filed for record with the Secretary of State of Delaware. (i) INVESTMENT COMPANY ACT STATUS. Based in part upon the representations of the Investors contained in the Subscription Agreements, the Partnership is not required to be registered as an 9 Investment Company within the meaning of the Investment Company Act, after giving effect to the transactions contemplated in the Offering Materials. 5.4. PERFORMANCE OF THE PARTNERSHIP AND THE GENERAL PARTNER. The Partnership and the General Partner shall have performed and complied with all agreements and conditions required by this Subscription Agreement and the Partnership Agreement to be performed or complied with by them prior to or at the closing and there shall exist no condition or event which constitutes a default under the Partnership Agreement or the Subscription Agreement or which with notice or lapse of time, or both, would constitute such a default. 5.5. COMPLIANCE CERTIFICATE. The Partnership and the General Partner shall have executed and delivered to the Investor a certificate certifying the fulfillment of the conditions specified in Sections 5.1, 5.2, 5.3 and 5.4. 5.6. OPINION OF COUNSEL FOR THE PARTNERSHIP AND THE GENERAL PARTNER. The Investor shall have received an opinion, dated the closing date, from Testa, Hurwitz & Thibeault, LLP, counsel to the Partnership and the General Partner, satisfactory in substance and form to the Investor, with respect to the due formation of the Partnership, limited liability of the Limited Partners and compliance with the Securities Act. 5.7. TERMINATION OF OBLIGATIONS. If at the closing the General Partner fails to tender to the Investor the documents specified herein which are required to be delivered to the Investor at the closing or if at the closing any of the conditions specified in this Section 5 shall not have been fulfilled, the Investor shall, at its election, be relieved of all further obligations under this Subscription Agreement. 6. DELIVERY OF CLOSING DOCUMENTS. As soon as practicable following the Closing, the General Partner will deliver to the Investor a composite conformed copy of the Partnership Agreement and a counterpart of this Subscription Agreement, executed by the Investor and the General Partner. 7. EXPENSES. Each party hereto will pay its own expenses relating to this Subscription Agreement and the purchase of the Investor's Interest in the Partnership hereunder. 8. AMENDMENTS. Neither this Subscription Agreement nor any term hereof may be changed, waived, discharged or terminated except with the written consent of the Investor and the General Partner. 9. REJECTION OF SUBSCRIPTION. The Investor acknowledges that the subscription for the Interest contained herein may be reduced or rejected by the General Partner of the Partnership in its sole discretion at any time prior to the closing. 10. ADDITIONAL INVESTOR INFORMATION; INDEMNITY. The Investor understands that the information provided herein (including Exhibit 1 and Exhibit 2 hereto) will be relied upon by the Partnership and the General Partner for the purpose of determining the eligibility of the Investor to purchase Interests in the Partnership. The Investor agrees to provide, if requested, any additional information that may reasonably be required to determine the eligibility of the Investor to purchase Interests in the Partnership. The Investor agrees to indemnify and hold harmless the Partnership, the General Partner, any Affiliate of the Partnership or the General Partner, and any director, officer, employee, or agent of any such party against any loss, damage, or liability due to or arising out of a breach of any representation, warranty or agreement of the Investor contained in this Subscription Agreement (including Exhibit 1 and Exhibit 2 10 hereto) or in any other documents provided by the Investor to the Partnership or the General Partner in connection with the Investor's investment in the Interest. 11. GENERAL. This Agreement (i) shall be binding upon the Investor and the legal representatives, successors and assigns of the Investor, (ii) shall survive the admission of the Investor as a Limited Partner of the Partnership, (iii) shall not be assignable by the Investor without the written consent of the General Partner and (iv) shall, if the Investor consists of more than one person, be the joint and several obligation of all such persons. Two or more duplicate originals of this Agreement may be executed by the undersigned and accepted by the Partnership, each of which shall be an original, but all of which together shall constitute one and the same instrument. Upon request, the General Partner agrees to provide the Investor, or any proposed transferee of an Investor, with information concerning the Partnership of the nature described in Rule 144A(d)(4)(i) under the Securities Act for purposes of complying with the requirements of said Rule 144A. This Agreement shall be governed by the laws of the State of Delaware. Any term or provision of this Subscription Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Subscription Agreement or affecting the validity or enforceability of any of the terms or provisions of this Subscription Agreement in any other jurisdiction. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [INVESTORS MUST COMPLETE THE FOLLOWING SIGNATURE PAGE AND EXHIBITS 1 AND 2] 11 The foregoing Subscription Agreement is hereby accepted by the undersigned as of the date set forth below: APPLIED GENOMIC TECHNOLOGY CAPITAL FUND, L.P. By: AGTC Partners, L.P. General Partner (For itself and for the Partnership) By: NewcoGen Group Inc. Its General Partner By: /s/ Noubar B. Afeyan ----------------------------------------- Noubar B. Afeyan, President Date of Acceptance: May 18, 2000 12 LIMITED PARTNER SIGNATURE PAGE IN WITNESS WHEREOF, the undersigned has executed (his Agreement for the purchase of a limited partnership interest in Applied Genomic Technology Capital Fund, LP. (the "Partnership"). This page constitutes the signature page for each of (i) the Subscription Agreement for the purchase of the Interest in the Partnership in the amount set forth, and (ii) the Limited Partnership Agreement of the Partnership in which the undersigned shall be admitted as a Limited Partner of the Partnership. Upon acceptance below by the General Partner, the undersigned shall be admitted as a Limited Partner of the Partnership and hereby authorizes this signature page to be attached to a counterpart of the Limited Partnership Agreement executed by the General Partner. Subscription Antigenics Inc. ---------------------------------------- Amount of Interest Purchased: (Print or type Name of Investor) $ 3,000,000 [Sign Here]: ---------------------------------- Social Security or By: /s/ Garo Armen Federal Tax Identification No.: ------------------------------------ (Title, if applicable) 06-1562417 -------------- - ------------------------------ Typed or printed name arid Preferred address for receiving address of Investor: communications (Do not complete if already listed on prior column): Antigenics Inc. - ------------------------------------ ---------------------------------------- 630 Fifth Avenue, New York, NY 10111 - ------------------------------------ ---------------------------------------- Type of Entity (e.g. individual, corporation, estate, trust, partnership, exempt organization, nominee, custodian): Telecopier No.: 212-332-4778 Corporation --------------------- ---------------------------------------- Employee benefit plan: Yes No X NASD member or related person: Yes No X --- --- -- --- ACKNOWLEDGMENT OF SIGNATURE STATE/COUNTRY OF NEW YORK ) ) COUNTY/PROVINCE OF NEW YORK ) On this 4th day of May, 2000, before me personally came Garo Armen, known to me to be the CHIEF ESECUTIVE OFFICER of the Limited Partner named above, or the individual so named above, and made oath 13 that lie or she executed the above instrument as his or her own free act and deed, and iii the capacity therein stated, as the authorized representative of the person or entity set Forth above, or in any individual capacity. [NOTARIAL SEAL] /s/ Ma Naomi Sui Hong ------------------------------------------ Notary Public My commission expires: June 12, 2001 14 EXHIBIT 1 The Investor hereby represents and warrants, pursuant to Section 2(e) of the attached Subscription Agreement, that he, she or it is correctly and in all respects described by the category or categories set forth below directly under which the Investor has signed his, her or its name. [SIGN BELOW THE CATEGORY OR CATEGORIES WHICH DESCRIBES YOU] 1. The Investor is a natural person whose net worth, either individually or jointly with such person's spouse, at the time of his purchase, exceeds $1,000,000. ---------------- 2. The Investor is a natural person who had individual income in excess of $200,000, or joint income with that person's spouse in excess of $300,000, in 1998 and 1999 and reasonably expects to reach the same income level in 2000. ---------------- 3. The Investor is a corporation, partnership or other organization described in Section 501(c)(3) of the Internal Revenue Code, or Massachusetts or similar business trust, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000. /s/ Garo Armen ----------------- 4. The Investor is an entity which falls within one of the following categories of accredited investors set forth in Rule 501(a) of Regulation D under the Securities Act ("Regulation D"): (a) A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or a fiduciary capacity. ---------------- (b) A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934. ---------------- 15 (c) An insurance company as defined in Section 2(13) of the Securities Act. ---------------- (d) An investment company registered under the Investment Company Act of 1940 or as a business development company as defined in Section 2(a)(48) of that Act. ---------------- (e) A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958. ---------------- (f) Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such a plan has total assets in excess of $5,000,000. ---------------- (g) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940. ---------------- (h) An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(2 1) of such act, which is either a bank, savings and loan association, insurance company or registered investment adviser or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors. ---------------- (i) A trust, with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring the securities offered, whose purpose is directed by a sophisticated person as described in Rule 506(b)(2){ii) of Regulation D. ---------------- 5. The Investor is an entity in which all of the equity owners are accredited investors and described in one or more of the categories set forth in paragraphs 1 through 4 above. ---------------- 16 EXHIBIT 2 The Investor hereby represents and warrants, pursuant to Section 2(e) of the attached Subscription Agreement, that he, she or it is correctly and in all respects described by the category or categories set forth below directly under which the Investor has signed his, her or its name. (SIGN BELOW THE CATEGORY OR CATEGORIES WHICH DESCRIBES YOU] QUALIFIED PURCHASER STATUS A. The Investor is a "qualified purchaser" as defined in Section 2(a)(51)(A) of the Investment Company Act: 1. The Investor is a natural person who owns not less than $5,000,000 in investments.(1) ---------------- 2. The Investor is a company that owns not less than $5,000,000 in investments1 that is owned directly or indirectly by or for two (2) or more natural persons who are related as siblings or spouse (including former spouses), or direct lineal descendants by birth, adoption, spouses of such persons, the estates of such persons, or foundations, charitable organizations or trusts established by or for the benefit of such persons. ---------------- 3. The Investor is a trust not covered by clause (2) above that was not formed for the purpose of acquiring the securities offered, as to which the trustee or other person authorized to make decisions with respect to the trust, and each settlor or other person who has contributed assets to the trust is a person described in clauses (I), (2) above or (4) below. ---------------- 4. The Investor is either (x) a person(2), acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis not Less than $25,000,000 in investments or (y) a qualified institutional buyer (as defined in paragraph (a) of Rule 144A ---------------- (1) For definition of investments", see Rule 2a5 1-I promulgated under the Investment Company Act. (2) If such person is a company that, but for the exceptions provided for in paragraph (1) or (7) of Section 3(c) of the Investment Company Act, would be an investment company (an "excepted investment company"), all beneficial owners of its outstanding securities (other than short-term paper), determined in accordance with Section 3(c)(1)(A) on the Investment Company Act, that acquired such securities on or before April 30, 1996 (as "pre-amendment beneficial owners"), and all pre--amendment beneficial owners of the outstanding securities (other than short-term paper) of any excepted investment company that, directly or indirectly owns any outstanding securities of such excepted investment company, have consented to its treatment as a qualified purchaser. See Rule 2a51-2(e). 17 promulgated under the Securities Act) meeting the requirements of Rule 2a5 1-1(g) promulgated under the Investment Company Act. ---------------- 5. The Investor is a company all of the securities of which are beneficially owned by "qualified purchasers." ---------------- B. The Investor is not a "qualified purchaser" as described in any of the above categories. ---------------- EX-27 3 ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 2000 UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. U.S. DOLLARS 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 105,140,814 0 0 0 0 106,220,963 10,306,406 2,077,705 115,190,750 2,778,082 0 0 0 247,951 110,462,633 115,190,750 0 0 0 0 11,819,855 0 204,737 (9,209,106) 0 (9,209,106) 0 0 0 (9,209,106) (0.39) (0.39)
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