-----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, QU1f81VTElXAUl7sPEUI7nmXWRz5uiw5Q5Fpk03H+ByWUWkYowNTfqV7g7l10sf7 uTDCuXRkANZSSTE45Uq6gQ== 0001017951-02-000280.txt : 20021119 0001017951-02-000280.hdr.sgml : 20021119 20021119152703 ACCESSION NUMBER: 0001017951-02-000280 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIMMUNE PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000818808 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 841044910 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22865 FILM NUMBER: 02833005 BUSINESS ADDRESS: STREET 1: 2325A RENAISSANCE DRIVE STREET 2: 2325A RENAISSANCE DRIVE CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 8186760404 MAIL ADDRESS: STREET 1: 2325A RENAISSANCE DRIVE STREET 2: 2325A RENAISSANCE DRIVE CITY: LAS VEGAS STATE: NV ZIP: 89119 FORMER COMPANY: FORMER CONFORMED NAME: MAN O WAR INC /CO/ DATE OF NAME CHANGE: 19970714 FORMER COMPANY: FORMER CONFORMED NAME: VERSAILLES CAPITAL CORP /CO DATE OF NAME CHANGE: 19970714 10QSB 1 q902.txt FORM 10-QSB DATED SEPTEMBER 30, 2002 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB [ x ] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: September 30, 2002 [ ] Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from _____________ to _______________ Commission file number: 0-22865 ------- AMERIMMUNE PHARMACEUTICALS, INC. - ------------------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in Its Charter) Colorado 84-1044910 - -------------------------------------- -------------------------------- (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 2325A Renaissance Drive, Las Vegas, Nevada 89119 - ------------------------------------------------------------------------- (Address of Principal Executive Offices) (805) 497 - 7252 - ------------------------------------------------------------------------- (Issuer's Telephone Number, Including Area Code) - ------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of November 4, 2002, 34,194,609 shares of the issuer's Common Stock, $0.05 par value per share, were outstanding. Transitional Small Business Disclosure Format (check one): Yes No X ------- ------- AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PART I FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements: Consolidated Balance Sheets - March 31, 2002 and September 30, 2002 (unaudited) . . . . . . . . . . . . . . . . . . . . .2 Consolidated Statements of Operations - for the Three Months Ended September 30, 2001 and 2002 and cumulative amounts from April 10, 1988 (date of inception) through September 30, 2002 (unaudited) . . . . . . . . . . . . . . . . . . . . .3 Consolidated Statements of Operations - for the Six Months Ended September 30, 2001 and 2002 and cumulative amounts from April 10, 1988 (date of inception) through September 30, 2002 (unaudited) . . . . . . . . . . . . . . . . . . . . .4 Consolidated Statements of Cash Flows - for the Six Months Ended September 30, 2001 and 2002 and cumulative amounts from April 10, 1988 (date of inception) through September 30, 2002 (unaudited) . . . . . . . . . . . . . . . . . . . . .5 Notes to Unaudited Consolidated Financial Statements . . . . . . . . . .7 Item 2. Management's Discussion and Analysis or Plan of Operation. . . 19 Item 3. Controls and Procedures. . . . . . . . . . . . . . . . . . . . 23 PART II OTHER INFORMATION Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 23 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . 25 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 25 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Certification of Chief Executive Officer . . . . . . . . . . . . . . . 28 Certification of Chief Financial Officer . . . . . . . . . . . . . . . 30 PART I AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS ITEM 1. FINANCIAL STATEMENTS
ASSETS MARCH 31, 2002 SEPTEMBER 30, (AUDITED) 2002 (UNAUDITED) -------------- ------------- CURRENT ASSETS Cash and cash equivalents $ 126,313 $ 4,354 Other current assets 9,152 37,734 ------------ ------------ TOTAL CURRENT ASSETS 135,465 42,088 ------------ ------------ PROPERTY AND EQUIPMENT, NET 1,350 1,104 ------------ ------------ OTHER ASSETS Deposits 3,100 200 ------------ ------------ TOTAL ASSETS $ 139,915 $ 43,392 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 23,267 $ 67,090 Note payable - 200,000 Accrued liabilities 506,833 758,007 ------------ ------------ TOTAL CURRENT LIABILITIES 530,100 1,025,097 ------------ ------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock $0.10 par value, 50,000,000 shares authorized, no shares issued or outstanding - - Common stock $0.05 par value, 100,000,000 shares authorized, 34,644,609 and 34,194,609 shares issued and outstanding on March 31, and September 30 respectively 1,732,231 1,709,731 Additional paid-in-capital 4,672,904 4,695,404 Note receivable from affiliate (71,074) - Deficit accumulated during the development stage (6,724,246) (7,386,840) ------------ ------------ TOTAL SHAREHOLDERS' DEFICIENCY (390,185) (981,705) ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY $ 139,915 $ 43,392 ============ ============
2 See accompanying notes
AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2002 AND CUMULATIVE AMOUNTS FROM APRIL 10, 1998 (Date of Inception) THROUGH SEPTEMBER 30, 2002 (unaudited) THREE MONTHS THREE MONTHS CUMULATIVE ENDED ENDED AMOUNTS FROM SEPTEMBER 30, SEPTEMBER 30, INCEPTION ------------- ------------- --------- 2001 2002 ---- ---- COSTS AND EXPENSES Research and development $ 177,207 $ 20,735 $ 2,398,880 General and administrative 203,178 115,016 5,130,027 ------------ ------------ ------------ OPERATING LOSS (380,385) (135,751) (7,528,907) OTHER INCOME (EXPENSE) Interest income 480 269 174,726 Interest expense (590) (5,111) (25,459) ------------ ------------ ------------ LOSS BEFORE PROVISION FOR INCOME TAXES (380,495) (140,593) (7,379,640) PROVISION FOR INCOME TAXES - - 7,200 ------------ ------------ ------------ NET LOSS $ (380,495) $ (140,593) $ (7,386,840) ============ ============ ============ NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.01) $ (0.00) ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED 42,298,832 34,344,609 ============ ============
See accompanying notes 3
AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2002 AND CUMULATIVE AMOUNTS FROM APRIL 10, 1998 (Date of Inception) THROUGH SEPTEMBER 30, 2002 (unaudited) SIX MONTHS SIX MONTHS CUMULATIVE ENDED ENDED AMOUNTS FROM SEPTEMBER 30, SEPTEMBER 30, INCEPTION ------------- ------------- --------- 2001 2002 ---- ---- COSTS AND EXPENSES Research and development $ 239,970 $ 74,305 $ 2,398,880 General and administrative 395,502 383,771 5,130,027 ------------ ------------ ------------ OPERATING LOSS (635,472) (458,076) (7,528,907) OTHER INCOME (EXPENSE) Interest income 6,299 4,775 174,726 Interest expense (1,524) (7,391) (25,459) ------------ ------------ ------------ LOSS BEFORE PROVISION FOR INCOME TAXES (630,697) (460,692) (7,379,640) PROVISION FOR INCOME TAXES 1,600 1,600 7,200 ------------ ------------ ------------ NET LOSS $ (632,297) $ (462,292) $ (7,386,840) ============ ============ ============ NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.01) $ (0.01) ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED 42,668,811 34,494,609 ============ ============
See accompanying notes 4
AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2002 AND CUMULATIVE AMOUNTS FROM APRIL 10, 1998 (Date of Inception) THROUGH SEPTEMBER 30, 2002 (unaudited) SIX MONTHS SIX MONTHS CUMULATIVE ENDED ENDED AMOUNTS FROM SEPTEMBER 30, SEPTEMBER 30, INCEPTION ------------- ------------- --------- 2001 2002 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (632,297) $ (462,292) $ (7,386,840) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED BY OPERATING ACTIVITIES Noncash transactions: Depreciation and amortization 5,968 246 35,443 Reserve for note receivable from affiliate 26,400 71,074 150,000 Fair value of stock and an option issued in exchange for services and trademark rights - - 814,000 Fair value of stock issued to prospective officers - - 142,500 Fair value of stock transferred to a prospective officer by a principal shareholder - - 90,000 Fair value of stock and an option transferred by a principal shareholder in exchange for services - - 452,000 Fair value of stock options issued in exchange for services - - 9,996 Modification of stock options - 383,794 Exchange of stock options to warrants for employee services - - 382,821 Changes in assets and liabilities: Other current assets 4,667 (28,581) (37,733) Deposits - 2,900 (200) Accounts payable and accrued expenses 215,936 94,694 825,097 ------------ ------------ ------------ Total adjustments 252,971 140,333 3,247,718 ------------ ------------ ------------ NET CASH USED BY OPERATING ACTIVITIES (379,326) (321,959) (4,139,122) ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment - - (36,547) Loan to an affiliate (4,245) - (150,000) ------------ ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (4,245) - (186,547) ------------ ------------ ------------
Continued on next page 5
AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2002 AND CUMULATIVE AMOUNTS FROM APRIL 10, 1998 (Date of Inception) THROUGH SEPTEMBER 30, 2002 (unaudited) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from sales of common stock and warrants 250,000 - 4,130,023 ------------ ------------ ------------ Net proceeds from loan from affiliate - 200,000 200,000 ------------ ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 250,000 200,000 4,330,023 ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (133,571) (121,959) 4,354 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, Beginning of Period 215,810 126,313 - ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, Ending of Period $ 82,239 $ 4,354 $ 4,354 ============ ============ ============
See accompanying notes 6 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 1. BUSINESS AND BASIS OF PRESENTATION BUSINESS AND ORGANIZATION Amerimmune Pharmaceuticals, Inc. (the "Company"), formerly named Versailles Capital Corporation, is a Colorado Corporation incorporated on December 31, 1986. From 1991 through February 22, 1999, the Company was inactive aside from seeking a business combination candidate. British Lion Medical, Inc. ("British Lion") was incorporated in California in August 1997 and commenced operations on April 10, 1998. British Lion was engaged in the pharmaceutical research business with the primary purpose of developing Cytolin(R), a drug designed to protect the immune system, especially in patients suffering from Human Immunodeficiency Virus ("HIV"). On February 17, 1999, the Company, British Lion and Amerimmune, Inc. ("AI"), a newly organized, wholly owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement on February 23, 1999, each share of British Lion's issued and outstanding no par value common stock (5,853,500 shares) was exchanged for 7.133978 newly issued shares (41,758,740 shares) of the Company's $0.05 par value per share common stock. After the exchange, former British Lion shareholders acquired approximately 97% of the issued and outstanding voting shares of the Company and the Company acquired all of the issued and outstanding shares of British Lion through a merger of British Lion with and into AI, with AI as the surviving legal entity (the "Transaction"). Prior to the Transaction, the Company had nominal assets and liabilities. Unless otherwise noted, all references to the number of shares of common stock in these financial statements are based upon the equivalent post-exchange number of shares of the Company's common stock. For financial reporting purposes, the Transaction has been accounted for as a reverse acquisition whereby British Lion is deemed to have acquired the Company. Since this was a reverse acquisition, the legal acquiror, the Company, continued in existence as the legal entity whose shares represent the outstanding common stock of the combined entities. The acquisition has been accounted for as a recapitalization of British Lion based upon historical cost. The recapitalization was given retroactive effect. In connection with the Transaction, the Company succeeded to the business of British Lion and became engaged in the pharmaceutical research business with the primary purpose of developing Cytolin(R). The Company has assumed the obligations of British Lion including all outstanding stock options and warrants to purchase shares of British Lion's common stock and has issued equivalent shares of the Company common stock under the same terms and conditions. 7 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) On August 6, 1999, the shareholders of the Company adopted an amendment to the Company's articles of incorporation to change the name of the Company to Amerimmune Pharmaceuticals, Inc. from Versailles Capital Corporation. BASIS OF PRESENTATION AND MANAGEMENT PLAN As described in the Form 8-K filed on November 15, 2002, the Company believes that an accrual of research and development expenses in the approximate amount of $200,000 should have been made as of March 31, 2002. The Company intends to file an amendment to its Form 10-KSB for the fiscal year ended March 31, 2002. Because the Company is in the process of determining the appropriate periods to which the charge belongs, and since our 10-KSB for the year ended March 31, 2002, has not been modified as of the filing of this September 30, 2002 10-QSB, the accrual has been reflected in the accompanying financial statements of the Company in the following manner. The entire amount of approximately $200,000 is included in Accrued Liabilities in the September 30, 2002 Balance Sheet, but no accrual is included in the March 31, 2002 Balance Sheet, (the March 31, 2002 balance sheet will be adjusted when the amended 10-KSB for the year ended March 31, 2002 is filed). The entire amount of approximately $200,000 is included as Research and Development expenses in the Statement of Operations for Cumulative Amounts From Inception through September 30, 2002, but not in the Statements of Operations for the Three and Six Month periods Ended September 30, 2001 and 2002. The entire amount of approximately $200,000 is included in Accounts Payable and Accrued Expenses in the Statement of Cash Flows for Cumulative Amounts From Inception through September 30, 2002, but not in the Statements of Cash Flows for the Six Month periods Ended September 30, 2001 and 2002. The Statement of Operations amounts for the year ended March 31, 2002 and the interim periods in fiscal 2002, and the interim periods in fiscal 2001, will be adjusted when the periods to which the approximately $200,000 adjustment have been determined. This will be done in the footnotes to the amended March 31, 2002 10-KSB upon its filing. Except as discussed above, the accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and with the instructions to Form 10-QSB on the basis of a going concern. Certain notes and other information have been condensed or omitted from the unaudited interim financial statements presented in this report. Accordingly, they do not include all of the information and footnotes required by accounting principals generally accepted in the United States for complete financial statements. In the opinion of management, the unaudited financial statements reflect all adjustments considered necessary for a fair presentation. The results of operations for the six months ended September 30, 2002 are 8 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the period ended March 31, 2002 as filed with the Securities and Exchange Commission. All significant intercompany balances and transactions have been eliminated in consolidation. The Company is a development stage pharmaceutical research company and has not generated any revenues from operations for the period from April 10, 1998 (the date that British Lion commenced operations) through September 30, 2002. The Company has devoted substantially all of its resources to the acquisition of a license, research and development of Cytolin(R), and expenses related to the startup of its business. The Company has been unprofitable since inception and expects to incur substantial additional operating losses for the next twelve months, as well as for the next few years, as it increases expenditures on its research and development activities and allocates significant and increasing resources to clinical testing, marketing and other activities. The Company commenced a tolerability study for Cytolin(R) after a clinical protocol was sanctioned by the Food and Drug Administration ("FDA") and the bulk drug has been manufactured, tested, packaged, and released for clinical use. The Company has completed the submission of related manufacturing records to the FDA. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company estimates that it will require significant additional funding over the next three years to continue operations and to successfully complete the FDA approval process for its products. The Company believes that additional funds will be needed to fund operations after November 30, 2002. The Company has established plans designed to increase the capitalization of the Company and is seeking additional capital that will provide funds needed to increase the internal growth of the Company in order to fully implement its business plans. There can be no assurances that such additional capital will be available to the Company on favorable terms, if at all. The failure of the Company to obtain additional funding if and when required would have a material adverse effect on the Company's ability to fulfill its business plan, continue its operations and meet its financial commitments. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. 9 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. At September 30, 2002, substantially all cash and cash equivalents were on deposit with one financial institution. PROPERTY AND EQUIPMENT Office furniture and equipment is recorded at cost. Depreciation commences as assets are placed in service and is computed on a straight-line method over their estimated useful lives of three years. Leasehold improvements are recorded at cost and amortized over the three-year term of the lease. RESEARCH AND DEVELOPMENT Research and development costs are expensed as incurred. Payments related to the acquisition of technology rights, for which development work is in-process, are expensed and considered a component of research and development costs. ACCOUNTING FOR STOCK BASED COMPENSATION The Company's employee stock option plan is accounted for under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25") which requires the recognition of expense when the option price is less than the fair value of the stock at the date of grant. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123"). 10 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) NET LOSS PER SHARE Loss per share is presented in accordance with the provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), and the Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 98 ("SAB 98"). Basic earnings per share excludes dilution for common stock equivalents and is computed by dividing income or loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted and resulted in the issuance of common stock. Pursuant to SAB 98, common stock issued for nominal consideration is required to be included in the calculation of basic and diluted earnings per share, as if they were outstanding for all periods presented. In accordance with the SAB 98 requirements, 21,936,981 of the founder's shares are considered to be nominal issuances and have been considered outstanding for all of the periods ended since March 31, 1999. All outstanding stock options and warrants have been excluded from the calculation of diluted loss per share, because the assumed conversion of such instruments is antidilutive. COMPREHENSIVE INCOME Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. To date, the Company has not had any transactions that are required to be reported in comprehensive income. SEGMENT INFORMATION The Company has determined that it does not have separately reportable operating segments in accordance with Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information". FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of cash, cash equivalents and marketable securities is assumed to be fair market value because of the liquidity of these instruments. Accounts payable and accrued expenses approximate fair value because of the short term nature of these instruments. 11 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 3. COMMITMENTS AND CONTINGENCIES TERMINATION, SALE AND SHAREHOLDER AGREEMENT CONDITIONAL LICENSE AGREEMENT Allen D. Allen ("Allen") is the present owner of all United States patent and foreign patent rights to Cytolin(R) and the associated technology and know-how ("the "Technology"). In 1994, Allen granted CytoDyn of New Mexico, Inc. ("CytoDyn"), of which Allen owns a substantial majority of the voting stock, an exclusive, worldwide license to use the patent rights and technology. In addition, CytoDyn obtained a trademark name for Cytolin(R). In August 1998, Allen and CytoDyn entered into a Termination, Sale and Shareholder Agreement ("the Purchase Agreement") with Three R Associates, Inc. ("Three R"), a corporation affiliated with the Company through its ownership by three of the Company's former directors and/or officers. Pursuant to the terms of the Purchase Agreement, CytoDyn agreed to relinquish the exclusive license to use the technology and patents previously granted to it by Allen in exchange for 4,280,387 shares of the Company's common stock. In addition, Allen agreed to sell all United States Patent rights, foreign patent rights, and all technological know-how underlying the product, Cytolin(R), to Three R in exchange for $1,350,000, payable monthly over a fifteen year period. Payments to Allen commenced and the Company assumed the obligation to Allen, as part of the Patent and Trademark License Agreement discussed below, upon completion of the Transaction. In September 1999, Allen and CytoDyn delivered written notice to the Company that they believed the Termination, Sale and Shareholder Agreement, dated August 1, 1998 was void and not enforceable due to fraudulent inducement by Three R and other, unspecified reasons. Allen and CytoDyn demanded that Three R and its owners surrender any and all stock in the Company, which was obtained pursuant to such Agreement. In February 2000, the Company entered into a Conditional License Agreement with Allen and CytoDyn which is designed to preserve the Company's rights to the technology in the event that the technology that is the subject of both the Termination, Sale and Shareholder Agreement between Three R, Allen, and CytoDyn, and the 12 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) License Agreement, in the event that Three R's rights to such technology reverted to or were acquired by Allen and CytoDyn. The Conditional License Agreement further stipulates that any and all Company stock, awarded or returned to Allen or CytoDyn as a result of the dispute between Allen, CytoDyn and Three R, be returned immediately to the Company. In consideration for entering into the Conditional License Agreement the Company advanced CytoDyn an additional $50,000 pursuant to the terms of a Loan Agreement which was previously entered into whereby the Company loaned CytoDyn $100,000 (See Note 4). In May 2001, the dispute between Allen, CytoDyn and Three R was settled. As a result of the settlement, Allen and CytoDyn acquired 9,778,604 shares of the Company's common stock from Three R and all of Three R's rights, title, and interest in, to and under the License Agreement and the Termination, Sale and Shareholder Agreement were claimed by Allen and CytoDyn to have been assigned to Allen and CytoDyn. Allen and CytoDyn claimed that as a result of the settlement, the Conditional License Agreement became operative. If operative, the terms of the Conditional License Agreement obligate the Company to pay Allen and CytoDyn as successor Licensor pursuant to the terms of the License Agreement. In September 2001, the Company, Allen and CytoDyn entered into an agreement whereby Allen and CytoDyn transferred the 9,778,604 shares of the Company's common stock received from Three R, to the Company for cancellation, and the Company paid $40,000 to Allen and CytoDyn for settlement of any claims for payment of fees and costs incurred with acquiring the shares from Three R. CONSULTING AGREEMENT - RESEARCH AND DEVELOPMENT In August of 1998, Allen entered into a consulting agreement with Three R whereby Allen agreed to provide the Company with any new and additional similar technologies, if any, for a period of fifteen years in exchange for a consulting fee of $10,000 per year. Payments under the consulting agreement commenced subsequent to the completion of the Transaction, and the Company assumed the obligation to Allen upon completion of the Transaction, as part of the License agreement. Effective February 23, 2000, the Company can terminate the consulting agreement with one year's notice. PATENT AND TRADEMARK LICENSE AGREEMENT In October 1998, the Company entered into a Patent and Trademark License Agreement ("the License Agreement") with Three R. The Company was granted an irrevocable, exclusive, worldwide license to use all present and future patent rights, know-how and background technology of Three R relating to Cytolin(R), which Three R had previously obtained from Allen and CytoDyn. In addition, the License Agreement granted the Company a sublicense to the trademark name, Cytolin(R). The License Agreement was consummated simultaneously with the Transaction. 13 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) The Company issued 21,936,981 shares of its common stock to Three R upon execution of the Agreement, and the Company also assumed Three R's obligations to pay Allen under the agreements discussed above between Three R and Allen. Under the terms of the Purchase Agreement discussed above, the Company was obligated to pay Allen, at a minimum, $180,000 in scheduled monthly installments through February 23, 2001. The Company has the option to terminate the payments due Allen after the minimum amounts are paid. If the Company elects to terminate the payment in excess of the minimum due, it would abandon the rights acquired through the Purchase agreement. In May 2001, the dispute between Allen, Cytodyn and Three R was settled. As a result of the settlement, all of Three R's rights, title, and interest in, to and under the License agreement may have been assigned to Allen and Cytodyn. If so, pursuant to the terms of the Conditional License Agreement, the Company is obligated to pay Allen and Cytodyn as successor Licensor pursuant to the terms of the License Agreement. CONDITIONAL LICENSE AGREEMENT In September 1999, Allen and CytoDyn delivered written notice to the Company that they believed that the Purchase Agreement is void and is not enforceable due to fraudulent inducement by Three R and other, unspecified reasons. Allen and CytoDyn have demanded that Three R and its owners surrender any and all stock in the Company, which was obtained pursuant to the Purchase Agreement. In February 2000, the Company entered into a Conditional License Agreement with Allen and CytoDyn which is designed to preserve the Company's rights to the technology in the event that the technology that is the subject of both the Purchase Agreement and the License Agreement reverted to, or was acquired by Allen or Cytodyn. In consideration for entering into the Conditional License Agreement, the Company advanced CytoDyn an additional $50,000 pursuant to the terms of a Loan Agreement which was previously entered into whereby the Company loaned CytoDyn $100,000. (See Note 4). At March 31, 2002, the note receivable of $150,000, which is collateralized by shares of the Company's stock, plus accrued interest was classified as a reduction of shareholders' equity. As of September 30, 2002, the Company has written off the note receivable and accrued interest receivable as it was deemed to be uncollectible, and 450,000 shares of the Company, that represented the collateral for the loan were cancelled. In May 2001, the dispute between Allen, Cytodyn and Three R was settled. As a result of the settlement, all of Three R's rights, title, and interest in, to and under the License agreement may have been assigned to Allen and Cytodyn. If so, pursuant to the terms of the Conditional License Agreement, the Company is obligated to pay Allen and Cytodyn as successor Licensor pursuant to the terms of the License Agreement. 14 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) In June 2001, the Company received notice of a claim from CytoDyn and Allen that, pursuant to the Conditional License Agreement among them, the Company has breached an alleged obligation under the Conditional License Agreement to allow them to inspect the Company's manufacturing processes. In June 2002, the Company received a claim from Cytodyn and Allen asserting that: (1) Amerimmune no longer has rights to the technology pursuant to the Patent and Trademark License Agreement with Three R; (2) the only rights Amerimmune has to the technology result from the Conditional License Agreement; and (3) Amerimmune has breached the Conditional License Agreement by failing to pay for the costs of patent applications in Europe and other expenses allegedly incurred by Mr. Allen as a result of Amerimmune's alleged actions or inactions, and by not allowing Mr. Allen to inspect Amerimmune's manufacturing processes. The Company has disputed CytoDyn's and Mr. Allen's allegation that it has no rights to the technology from the Patent and Trademark License agreement with Three R, Mr. Allen's alleged inspection rights and his allegations regarding the consequences of the Company's decision not to pursue or pay the costs of certain European patent applications as well as his assertions regarding the Company's alleged failure to pay certain fees and expenses. In the event that Mr. Allen and CytoDyn are successful in any efforts to terminate the Conditional License Agreement, the License Agreement, with Three R and/or any other rights of the Company to utilize the technology that is the subject of such agreement, the Company's business, financial position and prospects would be materially and adversely affected. MANAGEMENT AGREEMENT In October 1998, the Company entered into a three year management agreement for $585,000 per year with Western Center for Clinical Studies, Inc. ("WCCS"), a corporation that is wholly-owned by three of the Company's former officers and directors. The agreement was scheduled to expire on February 23, 2002. The management agreement provided for services by WCCS to the Company for the purpose of assisting the Company in obtaining FDA approval to market Cytolin(R) for commercial use. In November 1999, the Company notified WCCS of its rescission of this agreement based upon the Company's belief that WCCS made certain fraudulent misrepresentations to the Company and had breached its performance under the management agreement. The Company is evaluating remedies to collect all amounts paid to WCCS in conjunction with this agreement. In September 2000, Rex Lewis, O.B. Parrish, Kimberlie Cerrone, Wellington Ewen and Pam Kapustay, each a current or former officer and/or director of the Company, were served with a Complaint filed in August 2000 in the Superior Court of California for Los Angeles County (Case No. BC 235312). The Company was not named as a defendant. The Complaint alleges causes of action against the defendants for libel and slander, intentional infliction of emotional distress, interference with contract, and unfair 15 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) business practices. It seeks compensatory damages in the amount of $20 million and punitive damages and injunctive relief. The allegations of the Complaint involve acts relating to: (1) the Company's cancellation in November 1999, of the Management Agreement with plaintiff WCCS, and (2) the cancellation and rescission of a technology licensing agreement by co-defendant CytoDyn. The Complaint alleges that certain Company officers and directors (as well as officers and directors of CytoDyn) made libelous and slanderous statements about the background and competency of certain plaintiffs, who are officers and shareholders of WCCS. It alleges that these statements caused the Company to cancel its Management Agreement with WCCS and CytoDyn to cancel its technology licensing agreement with plaintiff Three R. In May 2001, Three R, WCCS, Allen and Cytodyn settled their claims among them. (See "Purchase Agreement" above.) The Company and the defendants have retained counsel to defend Mr. Lewis, Mr. Parrish, Ms. Cerrone and Ms. Kapustay and will indemnify them for fees and expenses incurred in their defense. The Company has also requested coverage for the acts alleged in the Complaint from two insurance companies under two different policies. The Company has been informed that the defendants intend to vigorously contest the allegations of the Complaint. To the extent that the costs of the defense and any damages resulting from the Action are not covered by insurance and the Company is required to pay such amounts, the Company's financial condition could be materially adversely affected. The matter has been ordered to arbitration, which has not yet commenced. OFFICER EMPLOYMENT AGREEMENT On January 3, 2001, Rex H. Lewis' employment agreement was effective. The Company has accrued $70,000 representing the pro rata portion of the compensation applicable to the year ended March 31, 2000, $180,000 in fiscal 2002 and 2001 applicable to the respective years ended March 31, and $90,000 applicable to the six months ended September 30, 2002. Additionally, the Company issued 6,380,357 stock options to Mr. Lewis, at an exercise price of $0.22, which would have expired 10 years from the date of grant. The options that were issued to Mr. Lewis were non-qualified options and were not granted under the 1998 Omnibus Stock Incentive Plan. In November 2001, the Company entered into an agreement with Mr. Lewis whereby he agreed to cancel the existing options in exchange for a warrant to purchase up to 6,380,357 shares of the Company's common stock at an exercise price of $0.22. In December 2001, Mr. Lewis assigned the warrant to Maya LLC. (See Item 4 Related Party Transactions.) 16 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) 4. RELATED PARTY TRANSACTIONS During the period from inception (April 10, 1998) through March 31, 2000, the Company incurred expenses of $442,575 as a result of services performed by an affiliate, WCCS, on behalf of the Company. In fiscal 1999, the Company advanced $219,375 to WCCS to commence certain services in connection with the development of Cytolin(R) to be performed over a three year period beginning when the management agreement between the parties became effective. In November 1999, the Company notified WCCS of its rescission of this agreement and expensed the remaining prepaid management fees. The Company is evaluating remedies to collect all amounts paid to WCCS in conjunction with this agreement. See Note 3 and Part II Item 1 for a discussion of a Complaint filed against current or former officers and/or directors of the Company related to the rescission of this agreement. During the period from inception (April 10, 1998) through September 30, 2002, the Company paid consulting fees of $126,577 to Allen for providing scientific expertise regarding the development of Cytolin(R) and $348,771 pursuant to the Patent and Trademark License Agreement. During the period from inception (April 10, 1998) through March 31, 2000, the Company incurred legal expenses of $10,000 for an attorney who is also a director of the Company. During June 1999, the Company loaned CytoDyn $100,000 to facilitate payment by CytoDyn of certain legal and office expenses and to facilitate repayment to the Company by CytoDyn of previous advances. In February 2000, the Company loaned CytoDyn an additional $50,000 under the same terms and conditions as the original loan, as consideration for entering into the Conditional License Agreement (see Note 3). The loans bear interest at a rate of 8% per annum and are due, together with accrued interest, on or before February 23, 2001. The loans are secured by 450,000 shares of Company common stock which are owned by CytoDyn. As of September 30, 2002 this note was deemed to be uncollectible, and the 450,000 shares of the Company which served as collateral were cancelled. In July 2001, the Company entered into a Warrant Purchase Agreement ("Warrant Agreement") with Maya LLC ("Maya"), a limited liability company of which Rex H. Lewis, the Company's president and chief executive officer is the manager. The Warrant Agreement stipulates that Maya would purchase an initial warrant for $125,000 and would be entitled to purchase additional warrants in up to three separate closings of no less than $125,000 per closing during the 12-month period ending in July 2002. Each warrant has an exercise price of $0.20 per share of common stock, and expires 10 years from the date of issuance of the warrant. The number of shares of common stock underlying each warrant has been calculated using a valuation by an independent valuation consultant and it has been determined that each warrant to purchase one share of common stock had a value of $0.02. 17 AMERIMMUNE PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) As of September 30, 2002, Maya had purchased $500,000 of warrants pursuant to the Warrant Agreement, and accordingly, warrants to purchase an aggregate of 25,000,000 shares of common stock of the Company have been issued to Maya. In February 2002, Maya exercised its right to purchase 1,380,357 shares of the Company's common stock at an exercise price of $0.20 per share for a total price of $276,071. In November 2001, the Company entered into an agreement with Lewis whereby he agreed to cancel options which were granted to him as part of his initial employment agreement (See "Officer Employment Agreement" above) in exchange for a warrant to purchase up to 6,380,357 shares of the Company's common stock at an exercise price of $0.22. In December 2001, Lewis assigned the warrant to Maya. As of September 30, 2002, none of these warrants have been exercised. A non-cash general and administrative expense of $382,821 was recorded as a result of this exchange in the quarter ended December 31, 2001. In June 2002, the Company borrowed $200,000 from Maya, secured by a promissory note. The loan is for six months with an interest rate of 10%. The lender may elect to accept payment of principal and interest in common stock of the Company, instead of cash, at a price of $0.10 per share. In October 2002, the Company borrowed $100,000 from Maya, secured by a promissory note. The loan is for two months with an interest rate of 10%. The lender may elect to accept payment of principal and interest in common stock of the Company, instead of cash, at a price of $0.10 per share. In November 2002, the Company borrowed $100,000 from Maya, secured by a promissory note. The loan is for two months with an interest rate of 10%. The lender may elect to accept payment of principal and interest in common stock of the Company, instead of cash, at a price of $0.10 per share. 18 PART I ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Some of the statements made in this Form 10-QSB and the documents incorporated herein by reference that are not historical facts, such as anticipated results of clinical trials, may constitute "forward-looking statements," which forward looking statements are made pursuant to the safe harbor provisions in the federal securities laws. These statements often can be identified by the use of terms such as "may," "will," "expect," "anticipate," "estimate," "should", "could", "experts", "plans", "believes", "predicts", "potential", or "continue," or the negative thereof. Such forward-looking statements speak only as of the date made. Forward-looking statements are subject to risks, uncertainties and other factors beyond the control of the Company that could cause actual results, levels of activity, performance, achievements, and events to differ materially from historical results of operations, levels of activity, performance, achievements, and events and any future results, levels of activity, performance, achievements and events implied by such forward-looking statements. Reference is made to the Company's Annual Report on Form 10-K for a discussion of these various risk factors and uncertainties. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, achievements, or events. Moreover, neither the Company nor any other person assumes responsibility for the accuracy or completeness of such statements. The Company disclaims any obligation to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events. PLAN OF OPERATION The Company (for purposes of this section, the term the "Company" includes the predecessor entity to its current operations, British Lion) is a development stage pharmaceutical research company and has not generated any revenues from operations for the period from April 10, 1998 (the date that British Lion commenced operations) through September 30, 2002. The Company is engaged in the pharmaceutical research business with the primary purpose of developing drugs designed to protect the immune system, especially in patients suffering from Human Immunodeficiency Virus (HIV). The Company believes that drugs being developed by the Company may be important for the growing number of patients who have not been receiving treatment, for those who are on multi-drug therapy, and for those who have become resistant to drugs currently used to treat the HIV/AIDS virus. The Company intends to seek governmental approval from the Food and Drug Administration ("FDA") for drugs developed by the Company, including Cytolin(R). To date, the Company has devoted substantially all of its resources to the acquisition of a license, research and development of Cytolin(R), and expenses related to the startup of its business. The Company has been unprofitable since inception and expects to incur substantial additional operating losses for the next twelve months, as well as for the next few years, as it increases expenditures on research and development and allocates significant and increasing resources to clinical testing, marketing and other activities. In November and December 1998, the Company sold 1,426,790 shares of its common stock (at approximately $0.21 per share), for gross proceeds of $300,000, to certain accredited 19 investors in a private placement. In December 1998, the Company began a second private placement of common stock to accredited investors, which was completed on February 22, 1999. The second private placement was made on a minimum/maximum "best efforts" basis. The Company raised the maximum amount of gross proceeds of $3,210,000 (7,633,364 common shares at approximately $0.42 per share) and paid cash offering expenses of $159,698. Net cash proceeds from the private placement aggregated $3,050,302. In July 2001, the Company entered into a Warrant Purchase Agreement with Maya (See Note 4) and as of June 30, 2002, Maya had purchased $500,000 in warrants pursuant to the Warrant Agreement and in February of 2002, Maya exercised its right under the Warrant Agreement to purchase 1,380,357 shares of the Company's common stock at an exercise price of $.20 per share which resulted in total proceeds to the Company of $276,071. In October and November 2002, the Company borrowed a total of $200,000 from Maya (See Note 4). The Company believes that the funds received in these private placements and transactions will enable it to satisfy its cash requirements without the need to raise additional funds before November 30, 2002. The Company has commenced a tolerability study for Cytolin(R) after a clinical protocol was sanctioned by the FDA and the bulk drug was manufactured, tested, packaged, and released for clinical use. The Company has completed the submission of related manufacturing records to the FDA. The Company estimates that it will require significant additional funding over the next three years in order to continue operations and to successfully complete the development, testing and FDA approval process for its drugs(R). The Company believes that additional funds will be needed to fund operations after November 30, 2002. There can be no assurances that such additional capital will be available to the Company on favorable terms, if at all. The failure of the Company to obtain additional funding if and when required would have a material adverse effect on the Company's ability to fulfill its business plan, continue its operations and meet its financial commitments. RESULTS OF OPERATIONS For the three months ended September 30, 2002 the Company incurred $20,735 in research and development expenses, $115,016 in general and administrative expenses and paid $4,842 in interest expense net of interest income, resulting in a net loss of $140,593. The expenses incurred during this period relate primarily to continuation of research activities, regulatory and administrative expenses. The decline in expenses for the three months ended September 30, 2002 when compared to three months ended September 30, 2001 is primarily due to a reduction of funds available to fund such expenditures. For the three months ended September 30, 2001 the Company incurred $177,207 in research and development expenses, $203,178 in general and administrative expenses and paid $110 in interest expense net of interest income, resulting in a net loss of $380,495. The expenses incurred during this period relate primarily to commencement of research activities, regulatory and administrative expenses. See Note 1, "Basis of Presentation and Management Plan" for a discussion of certain adjustments to prior period financial statements relating to the accrual of certain research and development expenses. 20 For the six months ended September 30, 2002 the Company incurred $74,305 in research and development expenses, $383,771 in general and administrative expenses and paid $2,616 in interest expense net of interest income, resulting in a net loss of $462,292. The expenses incurred during this period relate primarily to continuation of research activities, regulatory and administrative expenses. The decline in expenses for the six months ended September 30, 2002 when compared to the six months ended September 30, 2001 is primarily due to a reduction of funds available to fund such expenditures. For the six months ended September 30, 2001 the Company incurred $239,970 in research and development expenses, $395,502 in general and administrative expense and earned $3,175 in interest income net of taxes and interest expense, resulting in a net loss of $632,297. The expenses incurred during this period relate primarily to commencement of research activities, regulatory and administrative expenses. See Note 1, "Basis of Presentation and Management Plan" for a discussion of certain adjustments to prior period financial statements relating to the accrual of certain research and development expenses. From April 10, 1998 (date of inception) to September 30, 2002, the Company incurred $2,398,880 in research and development expenses, $5,130,027 in general and administrative expenses and earned $142,087 in interest income net of taxes and interest expense, resulting in a net loss of $7,386,840. The expenses incurred during inception to September 30, 2002 relate primarily to commencement of business operations, research activities, purchase of license, stock compensation, regulatory, and administrative expenses. The Company's activities to date are not as broad in depth or scope as the activities it must undertake in the future, and the Company's historical operations and financial information are not indicative of its future operating results or financial condition or its ability to operate profitably as a commercial enterprise if and when it succeeds in bringing any product to market. As described in the Form 8-K filed on November 15, 2002, the Company believes that an accrual of research and development expenses in the approximate amount of $200,000 should have been made as of March 31, 2002. The Company intends to file an amendment to its Form 10-KSB for the fiscal year ended March 31, 2002. The Company is in the process of determining the appropriate periods to which the charge belongs. In the interim, the discussion of the Company's Results of Operations for the three and six month periods ended September 30, 2001 and 2002 do not reflect such accruals. However, the entire amount of approximately $200,000 is included as Research and Development expenses in the Statement of Operations for Cumulative Amounts From Inception through September 30, 2002 in the accompanying financial statements. See page 8, "Basis of Presentation and Management Plan" for full discussion of this issue. 21 CAPITAL RESOURCES AND LIQUIDITY From the commencement of operations on April 10, 1998 to September 30, 2002, the Company had no operating revenues and incurred net losses of $7,386,840. At September 30, 2002, the Company had negative net working capital of $983,009. The Company requires significant capital to conduct the research and development and preclinical and clinical testing of its drugs. Management of the Company does not expect to generate revenue from operations within the next year and there can be no assurances that the Company will ever generate significant revenue. The Company believes that additional funds will be needed to fund operations after November 30, 2002. Recently, the Company has been dependent upon financing from Maya LLC, an affiliate of Rex Lewis, an executive officer, director and significant stockholder of the Company. There can be no assurance that Mr. Lewis or Maya LLC will be willing to continue to finance the Company's operations and there can be no assurance that any other source of additional capital will be available to the Company on favorable terms, if at all. The failure of the Company to obtain additional funding if and when required would have a material adverse effect on the Company's ability to fulfill its business plan, continue its operations and meet its financial commitments. In October 1998, the Company entered into a Patent and Trademark License Agreement (the "Agreement") with Three R. The Company was granted an irrevocable, exclusive, worldwide license to use all present and future patent rights, knowledge and background technology owned by Three R relating to the product, Cytolin(R). In addition, the Agreement granted the Company a sublicense to the trademark Cytolin(R). The Agreement was consummated simultaneously with the Company's acquisition of British Lion. The Company issued 21,936,981 shares of its common stock at $.001 per share to Three R upon execution of the Agreement, and the Company also agreed to assume Three R's obligations to pay Allen $1,350,000, payable monthly over a fifteen year period, and fees of $10,000 per year for consulting services under the agreements discussed above between Three R and Mr. Allen. See Note 3 to Unaudited Consolidated Financial Statements contained in Item 1. of Part I of this Form 10-QSB for a description of these Agreements and certain potential disputes. The Company could abandon its patent rights with no further obligations after minimum payments aggregating $180,000 to Allen, with one year's notice. Effect of Inflation and Foreign Currency Exchange - ------------------------------------------------- The Company has not experienced material unfavorable effects on its results of operations due to currency exchange fluctuations with any foreign suppliers or material unfavorable effects upon its results of operations as a result of domestic inflation. Plant, Equipment and Employees - ------------------------------ As of this time, the Company does not expect to make any purchases of significant plant, facilities or equipment and does not foresee a significant change in the number of employees. 22 ITEM 3. CONTROLS AND PROCEDURES (a) Under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), within 90 days of the filing date of this report. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective, except as follows: The Chief Executive Officer and Chief Financial Officer have concluded that there were certain material deficiencies in controls over the capture and recognition of research and development expenses. This deficiency resulted in a material misstatement of the Company's expenses and related accrued liabilities for the year ended March 31, 2002, and prior periods, which misstatement was not detected until the current quarter ended September 30, 2002. We have taken corrective action to ensure that such expenses are captured and timely recognized in the future. (b) There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses), except as noted above, in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above. PART II ITEM 1. LEGAL PROCEEDINGS While the Company is not a party to any pending legal proceedings which management believes are not routine and incidental to its business or which are material, the Company may in the future be a party to legal proceedings and may be potentially affected by certain pending litigation to which it is not a party. See Note 3 to Unaudited Consolidated Financial Statements of this Form 10-QSB for a discussion of certain potential disputes. In September 2000, Rex Lewis, O.B. Parrish, Kimberlie Cerrone, Wellington Ewen and Pamela Kapustay, each a current or former officer and/or director of the Company, were served with a Complaint filed in August 2000 in the Superior Court of California for Los Angeles County (Case No. BC 235312). The Company was not named as a defendant. The Complaint alleges causes of action against the defendants for libel and slander, intentional infliction of emotional distress, interference with contract, and unfair business practices. It seeks compensatory damages in the amount of $20 million and punitive damages and injunctive relief. The allegations of the Complaint involve acts relating to: (1) the Company's cancellation in November 1999, of a Management Agreement with plaintiff WCCS, and (2) the cancellation and rescission of a technology licensing agreement by co-defendant CytoDyn. The Complaint alleges that certain Company officers and directors (as well as officers and directors 23 of CytoDyn) made libelous and slanderous statements about the background and competency of certain plaintiffs, who are officers and shareholders of WCCS. It alleges that these statements caused the Company to cancel its Management Agreement with WCCS and CytoDyn to cancel its technology licensing agreement with plaintiff Three R. The Company and the defendants have retained counsel to defend Mr. Lewis, Mr. Parrish, Ms. Cerrone and Ms. Kapustay, and will indemnify them for fees and expenses incurred in their defense. The Company has also requested coverage for the acts alleged in the Complaint from two insurance companies under two different policies. The Company has been informed that the defendants intend to vigorously contest the allegations of the Complaint. To the extent that the costs of the defense and any damages resulting from the Action are not covered by insurance and the Company is required to pay such amounts, the Company's financial condition could be materially adversely affected. The matter has been ordered to arbitration which has not yet commenced. In June 2001, the Company received notice of a claim from CytoDyn and Allen that, pursuant to the Conditional License Agreement among them, the Company has breached an alleged obligation under the Conditional License Agreement to allow them to inspect the Company's manufacturing processes. In June 2002, the Company received a claim from Cytodyn and Allen asserting that: (1) Amerimmune no longer has rights to the technology pursuant to the Patent and Trademark License Agreement with Three R; (2) the only rights Amerimmune has to the technology result from the Conditional License Agreement; and (3) Amerimmune has breached the Conditional License Agreement by failing to pay for the costs of patent applications in Europe and other expenses allegedly incurred by Mr. Allen as a result of Amerimmune's alleged actions or inactions, and by not allowing Mr. Allen to inspect Amerimmune's manufacturing processes. The Company has disputed CytoDyn's and Mr. Allen's allegation that it has no rights to the technology from the Patent and Trademark License agreement with Three R, Mr. Allen's alleged inspection rights and his allegations regarding the consequences of the Company's decision not to pursue or pay the costs of certain European patent applications as well as his assertions regarding the Company's alleged failure to pay certain fees and expenses. In the event that Mr. Allen and CytoDyn are successful in any efforts to terminate the Conditional License Agreement, the License Agreement, with Three R and/or any other rights of the Company to utilize the technology that is the subject of such agreement, the Company's business, financial position and prospects would be materially and adversely affected. The Company has received a claim from Symbion Research International, Inc. (Symbion) that the Company allegedly owes approximately $360,000 for work performed on clinical trials. The Company is disputing the amount owed and Symbion has threatened litigation. The Company is currently discussing the possibility of resolving the matter by means of arbitration with Symbion. A portion of the claim relates to services performed by Symbion for research and development for periods through March 31, 2002. The Company believes that an accrual of expenses in the approximate amount of $200,000 should have been made as of March 31, 2002 and the Company intends to file an amendment to its Form 10-KSB for the fiscal year ended 24 March 31, 2002. It has not yet been determined by the Company the impact of the adjustment on the net loss for the fiscal year ended March 31, 2002, or for any interim period in fiscal 2002, or for any prior periods. The Company is in the process of determining the appropriate periods to which the charge belongs. ITEM 2. CHANGES IN SECURITIES In August 2002, 450,000 shares of the Company's stock were cancelled. These shares had been pledged by Cytodyn as collateral for a loan from the Company and were subsequently forfeited by Cytodyn when the loan was deemed uncollectible. In June, October and November 2002, the Company borrowed a total of $400,000 from Maya LLC, secured by a promissory note. The lender may elect to accept payment of principal and interest in common stock of the Company, instead of cash, at a price of $0.10 per share (Note 4). ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -------- 3.1 Amended and Restated Articles of Incorporation.(1) 3.2 Amended and Restated By-Laws.(1) 3.3 Articles of Merger, as filed with the Colorado Secretary of State on February 23, 1999.(2) 3.4 Articles of Amendment to the Articles of Incorporation.(3) 10.1 Patent and Trademark License Agreement between British Lion Medical, Inc. and Three R Associates, Inc., dated October 24, 1998.(2) 10.2 Termination, Sale and Shareholder Agreement by and among Three R Associates, Inc., Allen D. Allen and CytoDyn( of New Mexico, Inc., dated August 1, 1998. (2) 10.3 Management Agreement between British Lion Medical, Inc. and WCCS, Inc., dated October 24, 1998. (2) 10.4 Subscription, Share Restriction and Proxy Agreement between British Lion Medical, Inc. and Allen D. Allen, dated October 23, 1998. (2) 10.5 Versailles Capital Corporation 1998 Omnibus Stock Incentive Plan as amended and restated through February 23, 1999.(4) 10.6 Conditional License Agreement between Allen D. Allen, CytoDyn of New Mexico, Inc. and Amerimmune, Inc., dated February 24, 2000.(5) 25 10.7 Warrant Purchase Agreement between Amerimmune Pharmaceuticals, Inc. and Maya LLC (a limited liability company of which Rex H. Lewis, the Company's president and chief executive officer, is the manager), dated July 13, 2001.(6) 10.8 Exchange Agreement and Warrant to Purchase Shares of Common Stock between Amerimmune Pharmaceuticals, Inc. and Rex H. Lewis dated November 15, 2001.(7) 10.9 Greenery Executive Suites Lease between Amerimmune Pharmaceuticals, Inc. and Greenery Executive Suites dated January 30, 2002. 16.0 Letter on change in certifying accountant. (8) 99.1 Certification for Rex Lewis, Chief Executive Officer of Amerimmune Pharmaceuticals, Inc. 99.2 Certification for Kenneth Collins, Chief Financial Officer of Amerimmune Pharmaceuticals, Inc. 99.3 Promissory Note between Amerimmune Pharmaceuticals, Inc. and Maya LLC dated October 1, 2002. 99.4 Promissory Note between Amerimmune Pharmaceuticals, Inc. and Maya LLC dated November 1, 2002. - ------------------------------------------------------------------------- (1) Incorporated by reference to the Registrant's Registration Statement on Form 10-SB, Registration No. 0-22865, as filed with the Commission on July 22, 1997, and amended on Form 10-SB/A-1, filed with the Commission on February 25, 1998. (2) Incorporated by reference from the like numbered exhibits filed with the Registrant's Current Report on Form 8-K, as amended, dated March 10, 1999. (3) Incorporated by reference from the Registrant's September 30, 1999 Form 10-QSB, dated November 12, 1999. (4) Incorporated by reference from the Registrant's March 31, 1999 Form 10-KSB. (5) Incorporated by reference from the Registrant's March 31, 2000 Form 10-KSB. (6) Incorporated by reference from the Registrant's June 30, 2001 Form 10-QSB. (7) Incorporated by reference from the Registrant's December 31, 2001 Form 10-QSB. (8) Incorporated by reference from the like numbered exhibit filed with the Registrant's Current Report on Form 8-K, dated March 29, 1999. 26 (b) Reports on Form 8-K ------------------- On November 15, 2002, the Company filed a Current Report on Form 8-K describing an upcoming restatement of Form 10-KSB for the fiscal year ended 3-31-02. SIGNATURES ---------- In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERIMMUNE PHARMACEUTICALS, INC. Signatures Title Date - ---------- ----- ---- Chairman of the Board /s/ O.B Parrish and Director November 19, 2002 - --------------- O.B Parrish /s/ Kenneth M. Collins Chief Financial Officer November 19, 2002 - ---------------------- Kenneth M. Collins 27 CERTIFICATIONS -------------- I, Rex Lewis, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Amerimmune Pharmaceuticals, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report in being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 28 b) any fraud, whether or not material, that involves management or other employees who have a significant roles in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 19, 2002 /s/ REX LEWIS ------------------------ Rex Lewis Chief Executive Officer 29 CERTIFICATIONS -------------- I, Kenneth M. Collins, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Amerimmune Pharmaceuticals, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report in being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 30 b) any fraud, whether or not material, that involves management or other employees who have a significant roles in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 19, 2002 /s/ KENNETH M. COLLINS ------------------------ Kenneth M. Collins Chief Financial Officer 31 EX-99.1 3 exh99-1.txt CERTIFICATION FOR REX LEWIS, CEO OF AMERIMMUNE PHARMACEUTICALS, INC. EXHIBIT 99.1 AMERIMMUNE PHARMACEUTICALS, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Amerimmune Pharmaceuticals, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Rex Lewis, the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Subsection 1350, as adopted pursuant to Subsection 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ REX LEWIS --------------------------- Rex Lewis Chief Executive Officer November 19, 2002 EX-99.2 4 exh99-2.txt CERTIFICATION FOR KENNETH COLLINS, CFO OF AMERIMMUNE PHARMACEUTICALS, INC. EXHIBIT 99.2 AMERIMMUNE PHARMACEUTICALS, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Amerimmune Pharmaceuticals, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kenneth Collins, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Subsection 1350, as adopted pursuant to Subsection 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ KENNETH COLLINS --------------------------- Kenneth Collins Chief Financial Officer November 19, 2002 EX-99.3 5 exh99-3.txt PROMISSORY NOTE WITH MAYA LLC DATED OCTOBER 1, 2002 EXHIBIT 99.3 AMERIMMUNE PHARMACEUTICALS INC. PROMISSORY NOTE $100,000 October 1, 2002 1. PROMISE TO PAY. FOR VALUE RECEIVED, Amerimmune Pharmaceuticals Inc. ("Borrower") promises to pay Maya LLC ("Lender"), or order, in lawful money of the United States of America in immediately available funds, the principal amount of One Hundred Thousand Dollars ($100,000) ("Principal Amount") or so much as may be outstanding, together with interest on the unpaid outstanding principal balance from the date of this note, until paid, at the rate of ten percent (10%) per annum until this note is repaid in full or maturity, whichever occurs first. The entire indebtedness evidenced by this note shall be due and payable on November 30, 2002 ("Maturity Date"); unless, at the Lender's option, the Conversion provision described hereunder is exercised. Interest on this note is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, times the outstanding principal balance, times the actual number of days the principal balance is outstanding. At no time shall the interest rate hereunder exceed the legal rate of interest permitted to be charged by law. In the event any law precludes Lender from charging the interest rate otherwise permitted hereunder, the rate of interest hereunder for the period during which such rate is unlawful shall be the highest rate permitted by law. The rate of interest hereunder shall immediately increase to the rate permitted hereunder as soon as permitted by law. Any interest that would otherwise have become due but for the application of any law shall, to the extent legally permitted, be paid to Lender at the time for payment of the Principal Amount, so that the interest otherwise due to Lender hereunder, but not permitted by law, shall be fully paid to Lender by maturity. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. 2. CONVERSION RIGHTS. At any time, Holder may elect, in lieu of accepting the payment of this Note in cash, to have all (but not less than all) of the principal and interest then outstanding on this Note applied to the purchase of shares of Common Stock of the Company at the Conversion Price hereinafter defined, all shares to be fully paid and non-assessable when issued. To elect to convert this Note to shares, Holder shall give written notice thereof to the Company at any time prior to the Maturity Date or, upon the Company's tender of all principal and interest outstanding on the Note. 3. CONVERSION SHARES. If Holder duly elects to convert this Note to Common Stock, the number of shares purchasable in lieu of receiving all principal and interest outstanding on the Note shall be determined by dividing $100,000 plus interest by $0.10/share. The Conversion Price shall be adjusted appropriately in the event of a stock dividend, stock split or reclassification of shares to reflect and account for any resultant change in the value of individual outstanding shares. Page 1 4. PREPAYMENT. Borrower may prepay this Note at any time in whole or in part without penalty. Upon each such prepayment, Borrower shall also pay all accrued interest on the unpaid principal amount. 5. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due; (b) Borrower breaks any promise Borrower has made to Lender, or Borrower fails to perform promptly at the time and strictly in the manner provided in this note or any agreement related to this note, or in any other agreement or loan Borrower has with Lender; (c) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect; (d) A receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws; or (e) Any creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest. 6. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this note and all accrued unpaid interest immediately due, without notice, and then Borrower must pay that amount. Upon default hereunder, at the option of Lender, all amounts then unpaid hereunder shall bear interest from the date of default until such default is cured at a default rate equal to five percent (5%) above the interest rate set forth above and shall be immediately due and payable. Lender may hire or pay someone else to help collect this note if Borrower does not pay. Borrower also must pay Lender the costs incurred in connection with such collection. This includes, subject to any limits under applicable law, Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. 7. PRESENTMENT. Presentment, notice of dishonor, and protest are hereby waived by all makers, sureties, guarantors, and endorsers hereof. This note shall be the joint and several obligation of all makers, sureties, guarantors, and endorsers, and shall be binding upon them and their guarantors and endorsers, and shall be binding upon them and their successors and assigns. Every person at any time liable for the debt evidenced by this note consents that the Lender or holder may modify the terms of payment or any part of the whole at any time at the request of any person now or hereafter liable for payment. 8. NOTICE. Any notice to Borrower provided for in this note shall be given by mailing such notice by certified mail addressed to Borrower at the Borrower's principal place of business, 920 Hampshire Road, Ste. A-40, Westlake Village, CA 91361 or to such other address as Borrower may designate by notice to the note holder. Any notice to the Lender shall be given by mailing such notice by certified mail, return receipt requested, to the Lender at 2325-A Renaissance Drive, Las Vegas, NV 89119, or at such other address as may have been designated by notice to Borrower. Page 2 9. GOVERNING LAW. This note shall be governed by and construed in accordance with the laws of the State of Nevada and the applicable laws of the United States of America. This note has been entered into in Las Vegas, Nevada, and it shall be performable for all purposes in Las Vegas, Nevada. Any action or proceeding against Borrower under or in connection with this note may be brought in any state or federal court in Las Vegas, Nevada. The Borrower hereby irrevocably (i) submits to the exclusive jurisdiction of such courts, and (ii) waives any objection it may now or hereafter have as to the venue of any such action or proceeding brought in any such court or that any such court is an inconvenient forum. Borrower agrees that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified above. Nothing herein or in the Stock Pledge Agreement shall affect the right of Lender to serve process in any other manner permitted by law or shall limit the right of Lender to bring any action or proceeding against Borrower or with respect to any of its property in courts in other jurisdictions. Any action or proceeding by Borrower against Lender shall be brought only in a court located in Las Vegas, Nevada. 10. GENERAL PROVISIONS. Lender may delay or forego enforcing any of its rights or remedies under this note without losing them. The acceptance of any payment hereunder that is less than payment of all amounts then due and payable shall not constitute a waiver of any of the rights or options of Lender or of the exercise of those rights and options at the time of such acceptance or at any subsequent time. Borrower and any other person who signs, guarantees or endorses this note, to the extent allowed by law, waive presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this note, and unless otherwise expressly stated in writing, no party who signs this note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew, extend (repeatedly and for any length of time) or modify this loan, or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. BORROWER: AMERIMMUNE PHARMACEUTICALS INC. By /s/ O.D. PARISH ------------------------- O.D. Parish Its__________________________ Chairman PAGE 3 EX-99.4 6 exh99-4.txt PROMISSORY NOTE WITH MAYA LLC DATED NOVEMBER 1, 2002 EXHIBIT 99.4 AMERIMMUNE PHARMACEUTICALS INC. PROMISSORY NOTE $100,000 November 1, 2002 1. PROMISE TO PAY. FOR VALUE RECEIVED, Amerimmune Pharmaceuticals Inc. ("Borrower") promises to pay Maya LLC ("Lender"), or order, in lawful money of the United States of America in immediately available funds, the principal amount of One Hundred Thousand Dollars ($100,000) ("Principal Amount") or so much as may be outstanding, together with interest on the unpaid outstanding principal balance from the date of this note, until paid, at the rate of ten percent (10%) per annum until this note is repaid in full or maturity, whichever occurs first. The entire indebtedness evidenced by this note shall be due and payable on November 30, 2002 ("Maturity Date"); unless, at the Lender's option, the Conversion provision described hereunder is exercised. Interest on this note is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, times the outstanding principal balance, times the actual number of days the principal balance is outstanding. At no time shall the interest rate hereunder exceed the legal rate of interest permitted to be charged by law. In the event any law precludes Lender from charging the interest rate otherwise permitted hereunder, the rate of interest hereunder for the period during which such rate is unlawful shall be the highest rate permitted by law. The rate of interest hereunder shall immediately increase to the rate permitted hereunder as soon as permitted by law. Any interest that would otherwise have become due but for the application of any law shall, to the extent legally permitted, be paid to Lender at the time for payment of the Principal Amount, so that the interest otherwise due to Lender hereunder, but not permitted by law, shall be fully paid to Lender by maturity. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. 2. CONVERSION RIGHTS. At any time, Holder may elect, in lieu of accepting the payment of this Note in cash, to have all (but not less than all) of the principal and interest then outstanding on this Note applied to the purchase of shares of Common Stock of the Company at the Conversion Price hereinafter defined, all shares to be fully paid and non-assessable when issued. To elect to convert this Note to shares, Holder shall give written notice thereof to the Company at any time prior to the Maturity Date or, upon the Company's tender of all principal and interest outstanding on the Note. 3. CONVERSION SHARES. If Holder duly elects to convert this Note to Common Stock, the number of shares purchasable in lieu of receiving all principal and interest outstanding on the Note shall be determined by dividing $100,000 plus interest by $0.10/share. The Conversion Price shall be adjusted appropriately in the event of a stock dividend, stock split or reclassification of shares to reflect and account for any resultant change in the value of individual outstanding shares. Page 1 4. PREPAYMENT. Borrower may prepay this Note at any time in whole or in part without penalty. Upon each such prepayment, Borrower shall also pay all accrued interest on the unpaid principal amount. 5. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due; (b) Borrower breaks any promise Borrower has made to Lender, or Borrower fails to perform promptly at the time and strictly in the manner provided in this note or any agreement related to this note, or in any other agreement or loan Borrower has with Lender; (c) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect; (d) A receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws; or (e) Any creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest. 6. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this note and all accrued unpaid interest immediately due, without notice, and then Borrower must pay that amount. Upon default hereunder, at the option of Lender, all amounts then unpaid hereunder shall bear interest from the date of default until such default is cured at a default rate equal to five percent (5%) above the interest rate set forth above and shall be immediately due and payable. Lender may hire or pay someone else to help collect this note if Borrower does not pay. Borrower also must pay Lender the costs incurred in connection with such collection. This includes, subject to any limits under applicable law, Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. 7. PRESENTMENT. Presentment, notice of dishonor, and protest are hereby waived by all makers, sureties, guarantors, and endorsers hereof. This note shall be the joint and several obligation of all makers, sureties, guarantors, and endorsers, and shall be binding upon them and their guarantors and endorsers, and shall be binding upon them and their successors and assigns. Every person at any time liable for the debt evidenced by this note consents that the Lender or holder may modify the terms of payment or any part of the whole at any time at the request of any person now or hereafter liable for payment. 8. NOTICE. Any notice to Borrower provided for in this note shall be given by mailing such notice by certified mail addressed to Borrower at the Borrower's principal place of business, 920 Hampshire Road, Ste. A-40, Westlake Village, CA 91361 or to such other address as Borrower may designate by notice to the note holder. Any notice to the Lender shall be given by mailing such notice by certified mail, return receipt requested, to the Lender at 2325-A Renaissance Drive, Las Vegas, NV 89119, or at such other address as may have been designated by notice to Borrower. Page 2 9. GOVERNING LAW. This note shall be governed by and construed in accordance with the laws of the State of Nevada and the applicable laws of the United States of America. This note has been entered into in Las Vegas, Nevada, and it shall be performable for all purposes in Las Vegas, Nevada. Any action or proceeding against Borrower under or in connection with this note may be brought in any state or federal court in Las Vegas, Nevada. The Borrower hereby irrevocably (i) submits to the exclusive jurisdiction of such courts, and (ii) waives any objection it may now or hereafter have as to the venue of any such action or proceeding brought in any such court or that any such court is an inconvenient forum. Borrower agrees that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified above. Nothing herein or in the Stock Pledge Agreement shall affect the right of Lender to serve process in any other manner permitted by law or shall limit the right of Lender to bring any action or proceeding against Borrower or with respect to any of its property in courts in other jurisdictions. Any action or proceeding by Borrower against Lender shall be brought only in a court located in Las Vegas, Nevada. 10. GENERAL PROVISIONS. Lender may delay or forego enforcing any of its rights or remedies under this note without losing them. The acceptance of any payment hereunder that is less than payment of all amounts then due and payable shall not constitute a waiver of any of the rights or options of Lender or of the exercise of those rights and options at the time of such acceptance or at any subsequent time. Borrower and any other person who signs, guarantees or endorses this note, to the extent allowed by law, waive presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this note, and unless otherwise expressly stated in writing, no party who signs this note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew, extend (repeatedly and for any length of time) or modify this loan, or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. BORROWER: AMERIMMUNE PHARMACEUTICALS INC. By /s/ O.B. Parish ------------------------- O.B. Parish Its__________________________ Chairman Page 3 -----END PRIVACY-ENHANCED MESSAGE-----