-----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, LchwA1N+s4sFP2M6M+yuV3jpQ9yk+QU94gQDKTYNaWa2Kcalouakn17tPPdLZdiX Lx2THLRVhaK+JqiM2Lqyfg== /in/edgar/work/20000808/0000950133-00-003254/0000950133-00-003254.txt : 20000921 0000950133-00-003254.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950133-00-003254 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASTECH PHARMACEUTICAL CO INC CENTRAL INDEX KEY: 0000737207 STANDARD INDUSTRIAL CLASSIFICATION: [2834 ] IRS NUMBER: 112658569 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13789 FILM NUMBER: 687749 BUSINESS ADDRESS: STREET 1: 45 DAVIDS DR CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 6312730101 MAIL ADDRESS: STREET 1: 45 DAVIDS DRIVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 10-Q 1 e10-q.txt FORM 10-Q 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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 NUMBER 0-13789 NASTECH PHARMACEUTICAL COMPANY INC. (Exact name of registrant as specified in its charter) DELAWARE 11-2658569 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 45 DAVIDS DRIVE, HAUPPAUGE, NEW YORK 11788 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (631) 273-0101 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Stock, $.006 par value Nasdaq National Market 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
DATE CLASS SHARES OUTSTANDING 06/30/00 Common stock - $.006 par value 6,200,485
=============================================================================== 2 NASTECH PHARMACEUTICAL COMPANY INC. TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Page Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999.....................................1 Statements of Operations for the six months and three months ended June 30, 2000 (unaudited) and 1999 (unaudited).........................................................................................2 Statements of Stockholders' Equity for the six months ended June 30, 2000 (unaudited) and the year ended December 31,1999..............................................................................3 Statements of Cash Flows for the six months ended June 30, 2000 (unaudited) and 1999 (unaudited).........4 Notes to Financial Statements ...........................................................................5 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................6 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...............................................7 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS........................................................................................8 ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS................................................................8 ITEM 3 - DEFAULTS UPON SENIOR SECURITIES..........................................................................8 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................................8 ITEM 5 - OTHER INFORMATION........................................................................................8 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.........................................................................8 SIGNATURES...............................................................................................9
- i - 3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS NASTECH PHARMACEUTICAL COMPANY INC. BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 2000 1999 ------------- --------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents.......................................... $9,654 $10,652 Short-term investments........................................... --- 3,986 Accounts receivable................................................ 7 25 Royalties and fees receivable...................................... 682 1,011 Inventories........................................................ 237 279 Prepaid expenses and sundry assets................................. 159 533 ------- ------- Total current assets........................................ 10,739 16,486 ------- ------- Property and equipment................................................ 5,138 4,666 Less: Accumulated depreciation and amortization.................... 1,346 986 ------- ------- Property and equipment, net................................. 3,792 3,680 ------- ------- Other assets.......................................................... 49 33 ------- ------- Total assets................................................ $14,580 $20,199 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................................... $1,058 $2,059 Royalties payable.................................................. 270 664 Accrued expenses and sundry liabilities............................ 1,061 851 ------- ------- Total current liabilities................................... 2,389 3,574 ------- ------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; authorized: 100,000 shares; issued and outstanding: none --- --- Common stock, $0.006 par value; authorized: 25,000,000 shares; issued: 6,277,485 shares at June 30, 2000 and 6,267,485 shares at December 31, 1999, respectively............................. 38 38 Additional paid-in capital......................................... 37,042 37,050 Accumulated deficit................................................ (24,738) (20,312) ------- ------- 12,342 16,776 Less: Treasury stock, at cost, 77,000 shares................... 151 151 ------- ------- Total stockholders' equity................................ 12,191 16,625 ------- ------- Total liabilities and stockholders' equity................ $14,580 $20,199 ======= =======
-1- 4 NASTECH PHARMACEUTICAL COMPANY INC. STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, ------------------------- --------------------------- 2000 1999 2000 1999 ------------ ------------ ------------- ------------ Revenues: Product sales............... $ 209 $ 170 $ 125 $ 137 License fee and royalty income ...... 1,488 2,339 690 987 Interest income...................... 366 575 165 277 ------------ ------------ ------------- ------------ Total revenues................... 2,063 3,084 980 1,401 ------------ ------------ ------------- ------------ Costs and expenses: Cost of product sales................ 163 139 94 113 Research and development............. 4,132 4,547 2,004 1,529 Royalties............................ 608 772 263 441 Sales and marketing.................. 484 447 224 339 General and administrative........... 1,102 832 647 397 ------------ ------------ ------------- ------------ Total costs and expenses......... 6,489 6,737 3,232 2,819 ------------ ------------ ------------- ------------ Net loss................................ $ (4,426) $ (3,653) $ (2,252) $ (1,418) ============ ============ ============= ============ Net loss per common share-basic and diluted ............................ $ ( .71) $ (.57) $ ( .36) $ (.22) ============ ============ ============= ============ Average shares outstanding-basic .... and diluted 6,194 6,381 6,199 6,381 ============ ============ ============= ============
See accompanying notes to financial statements. -2- 5 NASTECH PHARMACEUTICAL COMPANY INC. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ADDITIONAL TOTAL ------------------------ PAID-IN ACCUMULATED TREASURY STOCKHOLDERS' SHARES AMOUNT CAPITAL DEFICIT STOCK EQUITY ----------- ------------ ---------- ------------ ----------- ------------ BALANCE, DECEMBER 31, 1998............. 6,376,915 $ 38 $ 37,426 $ (11,962) --- $ 25,502 Redemption of shares in connection with (110,736) --- (395) --- --- (395) reverse/forward stock split............. Shares issued in connection with 5,000 --- 19 --- --- 19 exercise of stock options............. Acquisition of treasury stock........... --- --- --- --- (151) (151) Fractional shares redeemed in connection with reverse stock split (3,694) --- --- --- --- Net loss year ended December 31, 1999 --- --- --- (8,350) --- (8,350) ---------- ----------- ---------- ----------- ---------- ---------- BALANCE, DECEMBER 31, 1999.............. 6,267,485 $ 38 $ 37,050 $ (20,312) $ (151) $ 16,625 Costs related to equity financing....... --- --- (75) --- --- (75) Compensation related to stock options... --- --- 34 --- --- 34 Shares issued in connection with exercise of stock options............... 10,000 --- 33 --- --- 33 Net loss six months ended June 30, 2000 (unaudited)........................ --- --- --- $ (4,426) --- $ (4,426) ---------- ----------- ---------- ----------- ---------- ---------- BALANCE, JUNE 30, 2000 (UNAUDITED)...... 6,277,485 $ 38 $ 37,042 $ (24,738) $ (151) $ 12,191 ========== =========== ========== =========== ========== ==========
See accompanying notes to financial statements. -3- 6 NASTECH PHARMACEUTICAL COMPANY INC. STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, -------------------------------- 2000 1999 -------------- ---------------- OPERATING ACTIVITIES: Net loss...................................................................... $ (4,426) $ (3,653) Adjustments to reconcile net loss to net cash used in operating activities: Compensation related to stock options....................................... 34 --- Depreciation and amortization............................................... 360 198 Changes in assets and liabilities: Accounts and other receivables.............................................. 347 1,067 Inventories................................................................. 42 19 Prepaid expenses and sundry assets.......................................... 358 (13) Accounts payable............................................................ (1,001) 195 Royalties payable........................................................... (394) (156) Accrued expenses and sundry liabilities..................................... 210 (31) -------------- ------------ Net cash used in operating activities............................................. (4,470) (2,374) -------------- ------------ INVESTING ACTIVITIES: Property and equipment......................................................... (472) (749) Short-term investments-redemptions............................................. 3,986 --- -------------- ------------ Net cash provided by (used in) investing activities............................... 3,514 (749) -------------- ------------ FINANCING ACTIVITIES: Costs related to equity financing............................................. (75) --- Exercise of stock options..................................................... 33 19 -------------- ------------ Net cash (used in) provided by financing activities............................... (42) 19 -------------- ------------ Net decrease in cash and cash equivalents......................................... (998) (3,104) Cash and cash equivalents--beginning.............................................. 10,652 23,515 -------------- ------------ Cash and cash equivalents--ending................................................. $9,654 $20,411 ============== ============
See accompanying notes to financial statements. -4- 7 NASTECH PHARMACEUTICAL COMPANY INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 -- GENERAL The accompanying financial information should be read in conjunction with the audited financial statements, including the notes thereto, as of and for the year ended December 31, 1999, included in the Company's 1999 annual report filed on Form 10-K. The information furnished in this report reflects all adjustments (consisting of only normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. NOTE 2 -- NET LOSS PER COMMON SHARE Basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the periods. The diluted loss per common share presented excludes the common stock equivalents (stock options and warrants), since such inclusion in the computation would be antidilutive. Employee stock options that are in-the-money totaling 265,050 at June 30, 2000 were not included in the net loss per share calculation because their effect would have been anti-dilutive. NOTE 3 -- INCOME TAXES At June 30, 2000, the Company has available net operating loss carryforwards for federal and state income tax reporting purposes of approximately $23.5 million and has available research and development credit carryforwards for federal income tax reporting purposes of approximately $1 million which are available to offset future taxable income, if any. These carryforwards expire beginning in 2000 through 2019. A valuation allowance has been applied to offset the respective deferred tax assets in recognition of the uncertainty that such tax benefits will be realized. In addition, the Company's ability to use such net operating loss and research and development credit carryforwards is limited by change of control provisions under Section 382 of the Internal Revenue Code. NOTE 4 -- CONTINGENCIES During the second quarter, the Company received correspondence from the FDA that indicates the probable requirement for the Company to conduct additional safety studies in certain patient populations for its intranasal scopolamine product. The execution of an additional safety study was agreed to by the Company in an April 2000 meeting with the FDA. Subsequently, the Company has requested further clarification from the FDA concerning the scope of such studies and has postponed proceeding with additional clinical trials pending the outcome of its discussions with the FDA. NOTE 5 -- MANAGEMENT In May 2000 the Company's President and Chief Executive Officer died. Pending the appointment of a successor, the Company's Executive Committee assumed the responsibilities associated with the executive position in accordance with the Company's management succession plan. The Company has incurred approximately $284,000 of contractual obligations payable to the estate of the deceased CEO, including $34,000 as a result of accelerating the vesting of certain stock options, and classified this amount in general and administrative expenses. NOTE 6 -- SUBSEQUENT EVENT -- EQUITY FINANCING AGREEMENT In July 2000, the Company obtained an equity line of credit pursuant to which the Company has the option, at its discretion, to issue during a 3-year term up to 1.2 million shares of its common stock to a private investor at prices that are discounted from the fair market value on the date of issuance. In connection with the signing of the agreement the Company issued 50,000 warrants to purchase the Company's common stock at a factor of 1.20 applied to the fair market value on the date of grant and another 50,000 warrants may be issued in conjunction with the issuance of common stock related to future utilization of the equity line of credit. -5- 8 ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for historical information contained herein, the statements in this Item are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that reflect the Company's intentions, expectations or beliefs concerning future events. The accompanying information should be read in conjunction with the Company's 1999 annual report filed on Form 10K. RESULTS OF OPERATIONS Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999 Revenues decreased by $1 million, or 33%, to $2.1 million primarily as a result of the discontinuance of milestone payments on intranasal scopolamine. Total revenues from Schwarz Pharma on Nascobal(R) were $432,000 compared to $339,000 in 1999. No milestone payments on scopolamine were received in the current six months as compared to $500,000 in 1999. Royalty income received from BMS on sales of Stadol(R)NS(TM) decreased $329,000, or 21%, to $1,250,000. Total costs and expenses decreased by $248,000 or 4%, to $6.5 million in 2000. The details of the decrease follow: Research and development expense decreased by $415,000, or 9%, to $4.1 million primarily as a result of a reduction in the Company's clinical program for intranasal scopolamine, offset by increased costs associated with a new research and development facility, personnel costs and multiple development programs. Royalties expense decreased by $164,000, or 21%, to $608,000 as a result of the decrease in sales of Stadol NS by BMS and the related royalty payable to the University of Kentucky Research Foundation (UKRF) under a separate agreement between the Company and UKRF. Royalties expense increases or decreases approximately in proportion to royalty income associated with Stadol NS. As a percentage of total revenues, sales and marketing and general and administrative expenses increased to 77% in 2000 as compared to 41% in 1999 as a result of the decline in revenues. Additionally, general and administrative expense increased $270,000 principally as a result of the $284,000 of compensation expense incurred in conjunction with the contractual obligations with the estate of the deceased CEO. Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999 Revenues decreased by $421,000 or 30%, to $980,000 primarily as a result of a decline in royalty income from BMS on sales of Stadol NS. Total revenues from Schwarz Pharma on Nascobal(R) were $249,000 compared to $215,000 in 1999. Royalty income received from BMS on sales of Stadol NS, based upon a preliminary report received from BMS, decreased $342,000, or 38%, to $559,000. Total costs and expenses increased by $413,000 or 15%, to $3.2 million in 2000. The details of the increase follow: Research and development expense increased by $475,000, or 31%, to $2.0 million primarily as a result of increased costs associated with a new research and development facility, personnel costs and multiple development programs. Royalties expense decreased by $178,000, or 40%, to $263,000 as a result of the decrease in sales of Stadol NS by BMS and the related royalty payable to the University of Kentucky Research Foundation (UKRF) under a separate agreement between the Company and UKRF. Royalties expense increases or decreases approximately in proportion to royalty income associated with Stadol NS. As a percentage of total revenues, sales and marketing and general and administrative expenses increased to -6- 9 89% in 2000 as compared to 53% in 1999 as a result of the decline in revenues. Additionally, general and administrative expense increased $250,000 principally as a result of the $284,000 of compensation expense incurred in conjunction with the contractual obligations with the estate of the deceased CEO. LIQUIDITY AND CAPITAL RESOURCES At June 30, 2000, the Company's liquidity included cash and cash equivalents of $9.7 million compared to $14.6 million of cash and cash equivalents and short-term investments at December 31, 1999. Account, royalties and fee receivables at June 30, 2000 consist principally of receivables pursuant to the BMS and Schwarz Pharma agreements. At June 30, 2000, the Company had working capital of $8.4 million. Management anticipates that it may require an additional infusion of capital in year 2000 in order to provide adequate funds for the Company's anticipated needs, including working capital. In connection therewith the Company entered into an equity financing agreement in July 2000. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable. -7- 10 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS The Company knows of no material litigation or proceedings, pending or threatened, to which the Company is or may become a party. ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS In June 2000, the shareholders of the Company approved the following proposals: 1) Election of seven (7) directors, each to hold office for a term of one (1) year or until their respective successors have been duly elected or appointed; and 2) Appointment of KPMG LLP as the Company's independent auditors for the year ending December 31, 2000. ITEM 5 - OTHER INFORMATION On May 1, 2000, the Company's President and Chief Executive Officer, Vincent D. Romeo, Ph.D., died. The responsibilities associated with his position have been assumed by the Company's Executive Committee in accordance with the Company's succession plan. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K In July 2000, the Company filed a Form 8-K in connection with new financing of an equity line of credit. -8- 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized, in Hauppauge, State of New York, on August 7, 2000. NASTECH PHARMACEUTICAL COMPANY INC. By: /s/ Bruce R. Thaw --------------------------- Bruce R. Thaw Director Member of Executive Committee By: /s/ Andrew Zinzi --------------------------- Andrew Zinzi Chief Financial Officer (Principal Financial and Accounting Officer) -9- EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 9,654 0 689 0 237 10,739 5,138 1,346 14,580 2,389 0 0 0 38 12,153 14,580 209 2,063 163 0 6,326 0 0 (4,426) 0 0 0 0 0 (4,426) (.71) (.71)
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