-----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, HByu8P6jn7qDdmFBEVM4le9E+BDJRIg80t3iM3PewF03JKBAKREMBMYKeJRX4E8A o4/QvaD+Dek5T/WhLRXhvw== 0000950135-98-001052.txt : 19980218 0000950135-98-001052.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950135-98-001052 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980217 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED MAGNETICS INC CENTRAL INDEX KEY: 0000792977 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 042742593 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14732 FILM NUMBER: 98541747 BUSINESS ADDRESS: STREET 1: 61 MOONEY ST CITY: CAMBRIDGE STATE: MA ZIP: 02138 BUSINESS PHONE: 6173543929 MAIL ADDRESS: STREET 1: 61 MOONEY ST CITY: CAMBRIDGE STATE: MA ZIP: 02138 10-Q 1 ADVANCED MAGNETICS, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934. For the quarterly period ended DECEMBER 31, 1997 ---------------------------------- OR [ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934. For the transition period from to -------------------- ------------------ Commission File #0-14732 ADVANCED MAGNETICS, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-2742593 (State or other jurisdiction (I.R.S. Employer Identification No.) of organization) 61 MOONEY STREET CAMBRIDGE, MA 02138 (Address of principal executive offices) Registrant's telephone number, including area code: 617/497-2070 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 ------------- ------------- At February 12, 1998, 6,697,401 shares of registrant's common stock (par value, $.01) were outstanding. 2 ADVANCED MAGNETICS, INC. FORM 10-Q QUARTER ENDED DECEMBER 31, 1997 PART I. FINANCIAL INFORMATION ITEM 1 -- FINANCIAL STATEMENTS Page 2 of 15 3 ADVANCED MAGNETICS, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND SEPTEMBER 30, 1997 (UNAUDITED)
ASSETS DECEMBER 31, SEPTEMBER 30, ------ ------------ ------------- 1997 1997 ---- ---- Current assets: Cash and cash equivalents ....................................... $ 13,724,695 $ 10,724,740 Marketable securities (Note B)................................... 22,025,892 27,365,765 Accounts receivable ............................................. 464,597 546,807 Inventories ..................................................... 174,330 113,178 Prepaid expenses ................................................ 581,776 224,868 --------------------- ----------------- Total current assets .......................................... 36,971,290 38,975,358 --------------------- ----------------- Property, plant and equipment: Land ............................................................ 360,000 360,000 Buildings ....................................................... 4,392,660 4,356,295 Laboratory equipment ............................................ 7,849,750 7,722,445 Furniture and fixtures .......................................... 675,728 645,299 --------------------- ----------------- 13,278,138 13,084,039 Less--accumulated depreciation and amortization ................. (7,581,434) (7,332,118) --------------------- ----------------- Net property, plant and equipment ............................... 5,696,704 5,751,921 --------------------- ----------------- Other assets .................................................... 248,902 248,902 --------------------- ----------------- Total assets ................................................. $ 42,916,896 $ 44,976,181 ===================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ................................................ $ 708,668 $ 443,925 Accrued expenses ................................................ 458,053 1,059,070 Income taxes payable ............................................ 50,128 50,128 --------------------- ----------------- Total current liabilities ..................................... 1,216,849 1,553,123 Minority interest in subsidiary ................................. 120,879 --- Stockholders' equity: Preferred stock, par value $.01 per share, authorized 2,000,000 shares; none issued ................................ --- --- Common stock, par value $.01 per share, authorized 15,000,000 shares; issued and outstanding 6,726,876 shares at December 31, 1997 and 6,740,626 shares at September 30, 1997 ................... 67,269 67,406 Additional paid-in capital ...................................... 44,107,846 44,244,558 Retained deficit ................................................ (7,775,736) (6,095,302) Net unrealized gains on marketable securities ................... 5,179,789 5,206,396 --------------------- ----------------- Total stockholders' equity .................................... 41,579,168 43,423,058 --------------------- ----------------- Total liabilities and stockholders' equity ...................... $ 42,916,896 $ 44,976,181 ===================== ================= The accompanying notes are an integral part of the financial statements.
Page 3 of 15 4 ADVANCED MAGNETICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
FIRST QUARTER ENDED DECEMBER 31, -------------------------------- 1997 1996 ---- ---- Revenues: License fees......................................................... $ --- $ 5,500,000 Royalties............................................................ 370,000 125,000 Product sales........................................................ 4,560 666,462 Interest, dividends and net gains and losses on sales of securities.................................. 992,013 746,446 ------------------------------------------------ Total revenues.................................................. 1,366,573 7,037,908 ------------------------------------------------ Cost and expenses: Cost of product sales................................................ 5,805 143,196 Research and development expenses.................................... 2,251,626 2,296,576 Selling, general and administrative expenses........................................................... 862,874 321,183 ------------------------------------------------ Total costs and expenses........................................ 3,120,305 2,760,955 ------------------------------------------------ Income (loss) before provision for income taxes and minority interest in subsidiary.......................... (1,753,732) 4,276,953 Provision for income taxes........................................... --- --- ------------------------------------------------ Income (loss) before minority interest in subsidiary......................................................... (1,753,732) 4,276,953 Minority interest in subsidiary......................................... 73,298 --- ------------------------------------------------ Net income (loss)....................................................... $ (1,680,434) $ 4,276,953 ================================================ ------------------------------------------------ Basic and diluted income (loss) per share............................... $ (0.25) $ 0.63 ------------------------------------------------ Weighted average number of common and common equivalent shares....................................... 6,734,589 6,833,175 ================================================
The accompanying notes are an integral part of the financial statements. Page 4 of 15 5 ADVANCED MAGNETICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE QUARTERS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
First Quarter Ended December 31, -------------------------------------------- 1997 1996 ---- ---- Cash flows from operating activities: Cash received from customers........................................ $ 493,205 $ 5,750,755 Cash paid to suppliers and employees................................ (3,474,377) (1,939,082) Dividends and interest received..................................... 225,279 251,229 -------------------------------------------- Net cash provided by (used in) operating activities................. (2,755,893) 4,062,902 --------------------- ------------------- Cash flows from investing activities: Purchase of securities.............................................. (3,114,620) (4,329,087) Proceeds from sales of marketable securities........................ 4,201,416 2,676,288 Proceeds from notes and bonds maturing.............................. 5,000,000 --- Capital expenditures................................................ (194,099) (64,281) --------------------- ------------------- Net cash provided by (used in) investing activities................. 5,892,697 (1,717,080) --------------------- ------------------- Cash flows from financing activities: Proceeds from issuances of common stock............................. 19,500 (12) Purchase of Treasury Stock.......................................... (156,349) (311,203) --------------------- ------------------- Net cash provided by (used in) financing activities................. (136,849) (311,215) --------------------- ------------------- Net increase (decrease) in cash and cash equivalents................ 2,999,955 2,034,607 Cash and cash equivalents at beginning of the quarter............... 10,724,740 10,805,842 --------------------- ------------------- Cash and cash equivalents at end of the quarter..................... $ 13,724,695 $ 12,840,449 ===================== ===================
The accompanying notes are an integral part of the financial statements. Page 5 of 15 6 ADVANCED MAGNETICS, INC. RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED (USED IN) BY OPERATING ACTIVITIES FOR THE QUARTERS ENDED DECEMBER 31, 1997 and 1996 (UNAUDITED)
First Quarter Ended December 31, -------------------------------- 1997 1996 ---- ---- Net income (loss)................................................................... $ (1,680,434) $ 4,276,953 ------------ ------------- Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Non-cash reduction in value of investment in subsidiary............................. 194,177 --- Minority interest in subsidiary..................................................... (73.298) --- Depreciation and amortization....................................................... 249,316 271,365 (Increase) decrease in accounts receivable.......................................... 82,210 (681,026) (Increase) decrease in prepaid expenses............................................. (356,908) (136,912) (Increase) decrease in inventories.................................................. (61,152) 132,649 Increase (decrease) in accounts payable and accrued expenses....................... (336,274) 554,770 Net realized (gains) losses on sales of marketable securities....................... (767,030) (346,001) Accretion of U.S. Treasury Notes discount........................................... (6,500) (8,896) ------------ ------------- Total adjustments................................................................... (1,075,459) (214,051) ------------ ------------- Net cash provided by (used in) operating activities................................. $ (2,755,893) $ 4,062,902 ============ ============= The accompanying notes are an integral part of the financial statements.
Page 6 of 15 7 ADVANCED MAGNETICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 A. Summary of Accounting Policies. Founded in November 1981, Advanced Magnetics, Inc., a Delaware corporation (the "Company"), is a biopharmaceutical company engaged in the development and manufacture of compounds utilizing the Company's core proprietary colloidal superparamagnetic particle technology for magnetic resonance imaging ("MRI") and for polysaccharide directed drug delivery systems. The initial products developed by the Company are diagnostic imaging agents for use in conjunction with MRI to aid in the diagnosis of cancer and other diseases In October 1997, the Company acquired approximately 80.7% of the issued and outstanding capital stock of Kalisto Biologicals, Inc. ("Kalisto"). The consolidated balance sheet of the Company as of December 31, 1997 and the consolidated statement of operations and cash flows for the quarter then ended include the accounts of Kalisto. All significant intercompany balances and transactions have been eliminated. These financial statements are unaudited and in the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been recorded. Such adjustments consisted only of normal recurring items. Certain amounts in the fiscal 1997 financial statement have been reclassified to conform with the fiscal 1998 presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The fiscal year-end balance sheet data was derived from audited financial statements, but does not include disclosures required by generally accepted accounting principles. It is suggested that these interim financial statements be read in conjunction with the Company's most recent Form 10-K and Annual Report as of September 30, 1997. In October 1997, the Company acquired approximately 80.7% of the issued and outstanding capital stock of Kalisto Biologicals, Inc. ("Kalisto"), an early-stage company that intends to develop, manufacture and market veterinary and food testing systems and products. B. Marketable Securities. The cost and market value of the marketable securities portfolio are as follows:
December 31, 1997 September 30, 1997 --------------------------------------------- ------------------------------------------- Cost Fair Value Cost Fair Value ---- ---------- ---- ---------- U. S. government securities Due in one year or less $ --- $ --- $ 5,000,000 $ 4,998,900 Due after one through five years 7,438,569 7,450,800 7,438,569 7,429,650 Preferred stock 6,615,628 10,139,867 2,604,711 3,092,335 Common Stock 2,791,906 4,435,225 7,116,089 11,844,880 ---------------- ---------------- ---------------- ---------------- $ 16,846,103 $ 22,025,892 $ 22,159,369 $ 27,365,765 ================ ================ ================ ================
Page 7 of 15 8 C. Income Taxes. There was no income tax provision for the first fiscal quarter ended December 31, 1997 and 1996 due to an operating loss in the quarter ended December 31, 1997 and the availability of a net loss carry forwards in the quarter ended December 31, 1996. D. Earnings (loss) per share. Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128 (SFAS 128) "Earnings per Share" which requires disclosure of Basic Earnings per Common Share and Diluted Earnings per Common Share for all periods presented. Adoption of this statement has not affected the amounts presented in any period. The weighted average common and common equivalent shares used in the computation of basic and diluted earnings per share is presented below. As a result of a net loss in the quarter ended December 31, 1997, common stock equivalents are not included in the calculation of weighted average shares since their effect would be antidilutive.
December 31 --------------------------------------------- 1997 1996 ------------------ ------------------- Weighted average number of shares issued and outstanding 6,743,589 6,742,358 Common stock equivalents --- 90,817 ----------------- ------------------ As adjusted 6,743,589 6,833,175 ================= ==================
E. Legal Proceedings. The Company and certain of its officers were sued in an action in the United States District Court for the District of Massachusetts on September 3, 1992. The plaintiff, a former consultant to the Company, claims that he was incorrectly omitted as an inventor or joint inventor on certain of the Company's patents and on pending applications, and seeks injunctive relief and unspecified monetary damages. The plaintiff filed a related case in the Superior Court of the Commonwealth of Massachusetts. The Superior Court has dismissed some of the claims on summary judgment. While the final outcome of these actions cannot be determined, the Company believes that the plaintiff's claims are without merit and intends to defend the actions vigorously. The Company filed suit on October 7, 1997 against Sanofi Winthrop, Inc. and Sanofi SA (collectively, "Defendants") in the Superior Court of the Commonwealth of Massachusetts. The Company claims that the Defendants tortiously interfered with a license, supply and marketing agreement (the "Agreement"), and seeks unspecified monetary damages. In addition, the Company seeks a declaration that the Defendants do not have any rights under the Agreement and that the Company has not breached the Agreement. Sanofi Winthrop, Inc. filed counterclaims against the Company on February 4, 1998 seeking compensatory damages of $11,500,000 and multiple damages as a result of the Company's alleged breach of the Agreement. While the final outcome of these claims and counterclaims cannot be determined, the Company will pursue its claims vigorously, and believes that the Sanofi Winthrop, Inc. counterclaims are without merit and intends to defend them vigorously. Page 8 of 15 9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This document contains forward looking statements. Any statements contained herein that do not describe historical facts are forward looking statements. The forward looking statements contained herein are based on current expectations, but are subject to a number of risks and uncertainties. The facts that could cause actual results to differ materially from current expectations include the following: the ability to successfully market Feridex I.V. and GastroMARK, the timing and result of FDA action, delays in arrangements with clinical investigations, uncertainties relating to results of the clinical trials of Combidex and other product candidates, the Company's dependence on its corporate partners, the Company's ability to obtain future financing, uncertainties relating to patents and proprietary rights, the ability of the Company to compete successfully in the future and the risks identified in the Company's Securities and Exchange Commission filings, including but not limited to its Form 10-K for the year ended September 30, 1997. OVERVIEW Since its inception in November 1981, Advanced Magnetics, Inc. ("Advanced Magnetics" or the "Company") has focused its efforts on developing applications of its core magnetic particle technology. This has led to the development of magnetic resonance imaging (MRI) contrast agents as well as polysaccharide technology for targeted delivery of antiviral therapeutics. The Company has funded its operations with cash from license fees from corporate partners, royalties, sales of its products, fees from contract research performed for third parties, the proceeds of financings and income earned on invested cash. The Company's success in the market for diagnostic and therapeutic products will depend, in part, on the Company's ability to: successfully develop, test, produce and market its products; obtain necessary governmental approvals in a timely manner; attract and maintain key employees; and successfully respond to technological changes in its marketplace. The Company's operating results may continue to vary significantly from quarter to quarter or from year to year depending on a number of factors, including: the timing of payments from corporate partners and research grants; the introduction of new products by the Company; the timing and size of orders from the Company's customers; and the acceptance of the Company's products. The Company's current planned expense levels are based in part upon expectations as to future revenue. Consequently, profits may vary significantly from quarter to quarter or year to year based on the timing of revenue. Revenue or profits in any period will not necessarily be indicative of results in subsequent periods and there can be no assurance that the Company will be profitable or that revenue growth will be achieved in the future. In October 1997, the Company acquired approximately 80.7% of the issued and outstanding capital stock of Kalisto Biologicals, Inc. ("Kalisto"), an early-stage company that intends to develop, manufacture and market veterinary and food testing systems and products. The Company's results of operations reflect the operations of Kalisto for the period from the date of acquisiton until December 31, 1997. Page 9 of 15 10 RESULTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 31, 1997 AS COMPARED TO THE QUARTER ENDED DECEMBER 31, 1996. REVENUES Revenues for the fiscal quarter ended December 31, 1997 were $1,366,573 compared to $7,037,908 for the fiscal quarter ended December 31, 1996. There were no license fee revenues for the fiscal quarter ended December 31, 1997. License fee revenues for the fiscal quarter ended December 31, 1996 were $5,500,000. On September 3, 1996, the Company and Berlex Laboratories, Inc. ("Berlex") announced that the United States Food and Drug Administration ("FDA") granted marketing approval for Feridex I.V. The Company received a $5,000,000 milestone payment from Berlex on October 15, 1996 as a result of Berlex's market launch of Feridex I.V. in the United States. The Company also received approval for GastroMARK(TM) on December 6, 1996. As a result of this action, the Company received a milestone payment of $500,000 from its U.S. marketing partner, Mallinckrodt Medical, Inc. Royalties for the fiscal quarter ended December 31, 1997 of $370,000 were related primarily to the product launch of Feridex I.V. in Japan. Royalties for the fiscal quarter ended December 31, 1996 were $125,000 relating mainly to the product launch of Feridex I.V. in the United States by Berlex. There were product sales of $4,560 in the fiscal quarter ended December 31, 1997, related primarily to the initial sales by the Company's recently acquired subsidiary, Kalisto. Product sales for the fiscal quarter ended December 31, 1996 were $666,462, reflecting the sale of product to Berlex for the launch of Feridex I.V. in the United States. Interest, dividends and gains and (losses) on sales of securities resulted in revenues of $992,013 in the fiscal quarter ended December 31, 1997 compared to $746,446 for the fiscal quarter ended December 31, 1996. Interest, dividends and net gains (losses) on sales of securities consisted of the following:
First Quarter Ended December 31, -------------------------------------------------------- 1997 1996 ---- ---- Interest income $ 201,093 $ 312,971 Dividend income 23,890 87,474 Net gains on sales of securities 767,030 346,001 ------------------------ ----------------------- Total $ 992,013 $ 746,446 ======================== =======================
Interest income for the fiscal quarter ended December 31, 1997 was $111,878 less than the fiscal quarter ended December 31, 1996, primarily due to the maturity of United States Treasury Notes. Dividend income of $23,890 for the quarter ended December 31, 1997 was $63,584 less than the $87,474 for the fiscal quarter ended December 31, 1996. The decrease was primarily due to the timing of dividends during the fiscal quarter ended December 31, 1997. There were net gains on sales of securities of $767,030 for the fiscal quarter ended December 31, 1997 compared to net gains on sales of securities of $346,001 for the fiscal quarter ended December 31, 1996. The increase is due to the appreciation in value of certain securities. Page 10 of 15 11 COSTS AND EXPENSES The cost of product sales for the fiscal quarter ended December 31, 1997 was $5,805. The cost of product sales for the fiscal quarter ended December 31, 1996 was $143,196. The cost of product sales for the fiscal quarter ended December 31, 1997 relates to Kalisto products as there were no other product sales. The cost of product sales for the fiscal quarter ended December 31, 1996 relates to sale of the Company's Feridex I.V. product. Research and development expenses for the fiscal quarter ended December 31, 1997 were $2,251,626 compared to $2,296,576 for the fiscal quarter ended December 31, 1996. The decrease was primarily the result of a $400,000 one-time milestone payment to a licensor during the quarter ended December 31, 1996, offset by research activities related to Kalisto during the fiscal quarter ended December 31, 1997. Selling, general and administrative expenses for the fiscal quarter ended December 31, 1997 were $862,874, an increase of $541,691 from $321,183 for the fiscal year ended December 31, 1996. The increase was primarily due to several factors, including the inclusion of Kalisto expenses for the first time during the fiscal quarter ended December 31, 1997. Kalisto had costs of approximately $320,000 which included a one-time sales and marketing fee of $150,000, while Advanced Magnetics incurred costs of approximately $100,000 by attending the Radiological Society of North America convention for the first time. INCOME TAXES There was no income tax provision for the fiscal quarter ended December 31, 1997 because of a net operating loss. There was no income tax provision for the fiscal quarter ended December 31, 1996 due to the estimated net operating loss carry-forward. EARNINGS In the fiscal quarter ended December 31, 1997, the Company recorded a net loss of ($1,680,434) or ($0.25) per share. In the fiscal quarter ended December 31, 1996, the Company recorded a net income of $4,276,953 or $0.63 per share. Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128 (SFAS 128) "Earnings per Share" which requires disclosure of Basic Earnings per Common Share and Diluted Earnings per Common Share for all periods presented. Adoption of this statement has not affected the amounts presented in any period. Page 11 of 15 12 LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, the Company's cash and cash equivalents totaled $13,724,695, representing an increase of $2,999,955 from September 30, 1997. In addition, the Company had marketable securities of $22,025,892 at December 31, 1997 as compared to $27,365,765 on September 30, 1997. Net cash used in operating activities was $2,755,892 in the fiscal quarter ended December 31, 1997 compared to net cash provided by operating activities of $4,062,902 in the fiscal quarter ended December 31, 1996. The decrease in cash provided by operating activities was primarily due to the increase in amounts paid to vendors and licensors during the quarter ended December 31, 1997, and the reduction of $5,500,000 in license fees received during the quarter ended December 31, 1996. Cash generated by investing activities in the fiscal quarter ended December 31, 1997 was $5,892,696 compared with cash used by investing activities of $1,717,080 for the fiscal quarter ended December 31, 1996. Cash provided by investing activities in the fiscal quarter ended December 31, 1997 included $4,201,416 from the sale of marketable securities and the maturity of $5,000,000 in U.S. Government notes. Offsetting these proceeds was the purchase of marketable securities of $3,114,620, in the fiscal quarter ended December 31, 1997. Cash used in financing activities during the fiscal quarter ended December 31, 1997 was $136,849. The Company sold $19,500 in common stock, while also repurchasing 16,800 shares of the Company's common stock on the open market for $156,349. This compares with cash used in financing activities of $311,215 for the fiscal quarter ended December 31, 1996, principally as a result of the purchase of 20,000 shares of the Company's common stock on the open market for $311,203. In November 1997, the Board of Directors authorized the purchase of up to an additional 250,000 shares of the Company's common stock on the open market, from time to time, at prevailing market prices. Capital expenditures in the fiscal quarter ended December 31, 1997 were $194,099 compared to $64,281 in the fiscal quarter ended December 31, 1996, reflecting the Company's efforts to upgrade existing equipment and the research activities of Kalisto. Management believes that funds for future needs can be generated from existing cash balances, cash generated from investing activities and cash generated from operations. In addition, the Company will consider from time to time various financing alternatives that may seek to raise additional capital through equity or debt financing or to enter into corporate partnering arrangements. There can be no assurance, however, that funding will be available on terms acceptable to the Company, if at all. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The FASB recently issued Statement No 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement requires changes in comprehensive income to be shown in a financial statement that is displayed with the same prominence as other financial statements. While not mandating a specific financial statement format, SFAS 130 requires that an amount representing total comprehensive income be reported. SFAS 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods is required for comparative purposes. The Company believes the implementation of SFAS 130 may have a material impact on results of operations. The FASB also issued Statement No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information". This Statement, which supersedes Statement No. 14, "Financial Reporting for Segments of a Business Enterprise," changes the way public companies report information about segments. SFAS 131, which is based on the management approach to segment reporting, includes requirements to report segment information quarterly and entity-wide disclosures about products and services, major customers, and the material countries in which the entity holds assets and reports revenues. SFAS 131 is effective for periods beginning after December 15, 1997. Restatement for earlier years is required for comparative purposes unless impracticable. In addition, SFAS 131 need not be applied to interim periods in the initial year, however, in subsequent years, interim period information must be presented on a comparative basis. The Company is currently evaluating this Statement and its effect on financial statement disclosures. Page 12 of 15 13 ITEM 3 - LEGAL PROCEEDINGS. The Company filed suit on October 7, 1997 against Sanofi Winthrop, Inc. and Sanofi SA (collectively, "Defendants") in the Superior Court of the Commonwealth of Massachusetts. The Company claims that the Defendants tortiously interfered with a license, supply and marketing agreement (the "Agreement"), and seeks unspecified monetary damages. In addition, the Company seeks a declaration that the Defendants do not have any rights under the Agreement and that the Company has not breached the Agreement. Sanofi Winthrop, Inc. filed counterclaims against the Company on February 4, 1998 seeking compensatory damages of $11,500,000 and multiple damages as a result of the Company's alleged breach of the Agreement. While the final outcome of these claims and counterclaims cannot be determined, the Company will pursue its claims vigorously, and believes that the Sanofi Winthrop, Inc. counterclaims are without merit and intends to defend them vigorously. Page 13 of 15 14 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibit 11 Statement re: Computation of per share earnings Exhibit 27.1 Financial Data Schedule (EDGAR filing only) The Company did not file any current reports on Form 8-K during the quarter ended December 31, 1997. Page 14 of 15 15 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 thereunto duly authorized. ADVANCED MAGNETICS, INC. Date By /s/ Jerome Goldstein ---------------------------- -------------------------------- Jerome Goldstein, President, Treasurer and Chairman of the Board of Directors Date By /s/ James A. Matheson ---------------------------- -------------------------------- James A. Matheson, Vice President and Principal Accounting Officer Page 15 of 15 EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 ADVANCED MAGNETICS, INC. Exhibit 11 - Statement re: Computation of Per Share Earnings Attached to and made part of Part II of Form 10-Q for the Three-Month Periods Ended December 31, 1997 and 1996 (unaudited)
December 31 ---------------------------------------------- 1997 1996 ------------------- ------------------- Weighted average number of shares issued and outstanding 6,743,589 6,742,358 Common stock equivalents --- 90,817 ------------------ ------------------ As adjusted 6,743,589 6,833,175 ================== ==================
As a result of a net loss in the quarter ended December 31, 1997, common stock equivalents are not included in the calculation of weighted average shares when their effect would be antidilutive. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) FORM 10-Q, DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 13,724,695 22,025,892 464,597 0 174,330 36,971,138 13,278,138 7,581,434 42,916,896 1,216,849 0 0 0 67,269 0 42,916,896 4,560 1,366,573 5,805 3,120,305 0 0 0 (1,753,732) 0 0 0 73,298 0 (1,680,434) (0.25) (0.25)
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