-----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, HG35mdPAyCCYD8MssaD0ZSDSLuv97zudgCFQDXehG4OpWLBdV5kVKi9jzBkkRQfa rRZ3/SHVMDzVKVzGQQcaHw== 0000927016-97-001325.txt : 19970512 0000927016-97-001325.hdr.sgml : 19970512 ACCESSION NUMBER: 0000927016-97-001325 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOIMMUNE INC CENTRAL INDEX KEY: 0000879106 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 133489062 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20948 FILM NUMBER: 97599227 BUSINESS ADDRESS: STREET 1: 128 SPRING ST CITY: LEXINGTON STATE: MA ZIP: 02173 BUSINESS PHONE: 6178600710 MAIL ADDRESS: STREET 1: 128 SPRING STREET CITY: LEXINGTON STATE: MA ZIP: 02173 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarter Ended March 31, 1997 Commission File No. 0-20948 ------- AUTOIMMUNE INC. (Exact Name of Registrant as Specified in its Charter) Delaware 13-348-9062 (State of Incorporation) (I.R.S. Employer Identification No.) 128 Spring Street, Lexington, MA 02173 (Address of Principal Executive Offices) (617) 860-0710 (Registrant's Telephone No., including Area Code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------------- ------------- Number of shares outstanding of the registrant's Common Stock as of April 30, 1997: Common Stock, par value $.01 16,389,243 shares outstanding AUTOIMMUNE INC. QUARTER ENDED MARCH 31, 1997 TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page Number Item 1 - Financial Statements Balance Sheet December 31, 1996 and March 31, 1997..................................... 2 Statement of Operations for the three months ended March 31, 1996 and 1997 and for the period from inception (September 9, 1988) through March 31, 1997................ 3 Statement of Cash Flows for the three months ended March 31, 1996 and 1997 and for the period from inception (September 9, 1988) through March 31, 1997................................................... 4 Notes to the Unaudited Financial Statements....................................... 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 7 PART II - OTHER INFORMATION Item 6(b) - Reports on Form 8-K............................................................ 9 Signatures................................................................................. 10
1 AUTOIMMUNE INC. (A development stage company) BALANCE SHEET (Unaudited)
December 31, March 31, 1996 1997 ------------------- ------------------ ASSETS Current assets: Cash and cash equivalents $ 6,432,000 $ 9,470,000 Marketable securities 42,878,000 33,916,000 Interest receivable 141,000 191,000 Prepaid expenses and other current assets 496,000 417,000 ------------------- ------------------ Total current assets 49,947,000 43,994,000 Fixed assets, net 2,485,000 2,213,000 Other assets 30,000 30,000 ------------------- ------------------ $ 52,462,000 $ 46,237,000 =================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,997,000 $ 4,513,000 Accrued expenses 782,000 812,000 Current portion of obligations under capital leases 715,000 667,000 ------------------- ------------------ Total current liabilities 4,494,000 5,992,000 ------------------- ------------------ Obligations under capital leases 627,000 489,000 ------------------- ------------------ Commitments and contingencies ------------------- ------------------ Stockholders' equity: Common stock, $.01 par value; 25,000,000 shares authorized; 16,358,045 and 16,389,243 shares issued and outstanding at December 31, 1996 and March 31, 1997, respectively 164,000 164,000 Additional paid-in capital 117,238,000 117,322,000 Deficit accumulated during the development stage (70,095,000) (77,720,000) Valuation allowance for marketable securities 34,000 (10,000) ------------------- ------------------ 47,341,000 39,756,000 ------------------- ------------------ $ 52,462,000 $ 46,237,000 =================== ===================
2 AUTOIMMUNE INC. (A development stage company) STATEMENT OF OPERATIONS (Unaudited)
Period from inception Three months ended (September 9, 1988) March 31, March 31, through 1996 1997 March 31, 1997 --------------------- ------------------ ---------------------- Revenue: Option fees $ - $ - $ 2,200,000 Research and development revenue under collaborative agreements - - 955,000 --------------------- -------------------- ---------------------- Total revenue - - 3,155,000 --------------------- -------------------- ---------------------- Costs and expenses: Research and development: Related party 534,000 505,000 15,473,000 Other 3,766,000 6,977,000 63,161,000 General and administrative 599,000 755,000 10,068,000 --------------------- -------------------- ---------------------- Total costs and expenses 4,899,000 8,237,000 88,702,000 --------------------- -------------------- ---------------------- Interest income 796,000 637,000 8,082,000 Interest expense (11,000) (25,000) (251,000) --------------------- -------------------- ---------------------- 785,000 612,000 7,831,000 --------------------- -------------------- ---------------------- Net loss $ (4,114,000) $ (7,625,000) $ (77,716,000) ===================== ==================== ====================== Net loss per share $ (0.25) $ (0.47) ===================== ==================== Weighted average shares outstanding 16,282,623 16,369,709 ===================== ====================
3 AUTOIMMUNE INC. (A devlopment stage company) STATEMENT OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents (Unaudited)
Period from inception (September 9, 1988) Three months ended through March 31, 1996 March 31, 1997 March 31, 1997 -------------- -------------- ------------------- Cash flows from operating activities: Net loss $ (4,114,000) $ (7,625,000) $ (77,716,000) Adjustment to reconcile net loss to net cash used by operating activities: Interest expense related to demand notes converted into Series A mandatorily redeemable covertible preferred stock - - 48,000 Patent costs paid with junior convertible preferred and common stock - - 3,000 Depreciation and amortization 207,000 295,000 2,921,000 Decrease in capitalized patent costs - - 563,000 Increase in interest receivable (141,000) (50,000) (191,000) (Increase) decrease in prepaid expenses (131,000) 79,000 (417,000) Increase (decrease) in accounts payable (157,000) 1,516,000 4,513,000 Increase in accrued expenses 34,000 30,000 812,000 ---------------- ---------------- ----------------- Net cash used by operating activities (4,302,000) (5,755,000) (69,464,000) ---------------- ---------------- ----------------- Cash flows from investing activities: Purchase of available-for-sale marketable securities (14,146,000) (8,928,000) (211,862,000) Proceeds from sale/maturity of available-for-sale marketable - 17,846,000 166,925,000 securities Proceeds from maturity of held-to-maturity marketable - - 11,011,000 securities Purchase of fixed assets (131,000) (23,000) (5,009,000) Increase in patent costs - - (563,000) Increase in other assets - - (155,000) ---------------- ---------------- ----------------- Net cash provided (used) by investing activities (14,277,000) 8,895,000 (39,653,000) ---------------- ---------------- ----------------- Cash flows from financing activities: Proceeds from sale-leaseback of fixed assets 480,000 - 2,872,000 Payments on obligations under capital leases (127,000) (186,000) (1,716,000) Net proceeds from issuance of mandatorily redeemable convertible preferred stock - - 10,011,000 Proceeds from bridge notes - - 300,000 Proceeds from issuance of common stock 12,000 84,000 104,920,000 Proceeds from issuance of convertible notes payable - - 2,200,000 ---------------- ---------------- ----------------- Net cash provided (used) by financing activities 365,000 (102,000) 118,587,000 ---------------- ---------------- ----------------- Net increase (decrease) in cash and cash equivalents (18,214,000) 3,038,000 9,470,000 Cash and cash equivalents, beginning of period 29,087,000 6,432,000 - ---------------- ---------------- ----------------- Cash and cash equivalents, end of period $ 10,873,000 $ 9,470,000 $ 9,470,000 ================ ================ =================
4 AUTOIMMUNE INC. NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. Interim Financial Data The interim financial data as of March 31, 1997 and for the three month periods ended March 31, 1996 and 1997, and for the period from inception (September 9, 1988) through March 31, 1997 are unaudited; however, in the opinion of the Company, these interim data include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the results for these interim periods. These financial statements should be read in conjunction with the financial statements and the notes thereto for the period ended December 31, 1996 included in the Company's Form 10-K. Results for interim periods are not necessarily indicative of results for the entire year. 2. Cash Equivalents and Marketable Securities The following is a summary of cash equivalents held by the Company. Cash equivalents are carried at fair market value, which approximated amortized cost at December 31, 1996 and March 31, 1997:
December 31, March 31, 1996 1997 --------------- ---------------- Money market $ 2,299,000 $ 1,591,000 U.S. Government debt securities 3,993,000 7,741,000 --------------- ---------------- $ 6,292,000 $ 9,332,000 =============== ================
The following is a summary of available-for-sale marketable securities held by the Company at December 31, 1996 and March 31, 1997 which are carried at fair market value:
Maturity Fair Unrealized Unrealized Amortized term value gains losses cost --------------------- ---------------- ----------------- --------------- ---------------- December 31, 1996 U.S. Government debt securities within 1 year $ 32,842,000 $ 16,000 $ (6,000) $ 32,832,000 U.S. Government debt securities between 1-5 years 10,036,000 24,000 - 10,012,000 ---------------- ----------------- --------------- ---------------- $ 42,878,000 $ 40,000 $ (6,000) $ 42,844,000 ================ ================= =============== ================ Maturity Fair Unrealized Unrealized Amortized term value gains losses cost --------------------- ---------------- ----------------- --------------- ---------------- March 31, 1997 U.S. Government debt securities within 1 year $ 5,010,000 $ 9,000 - $ 5,001,000 U.S. Government debt securities between 1-5 years 28,906,000 3,000 $ (22,000) 28,925,000 ---------------- ----------------- --------------- ---------------- $ 33,916,000 $ 12,000 $ (22,000) $ 33,926,000 ================ ================= =============== ================
Marketable securities which were purchased and sold in periods prior to adoption of FAS 115 on January 1, 1994 other than held-to-maturity marketable securities, are included in the category available-for-sale marketable securities in the "period from inception" column of the statement of cash flows. 5 AUTOIMMUNE INC. NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 3. Fixed Assets Fixed assets consist of the following:
Estimated useful life December 31, March 31, (years) 1996 1997 -------------------- -------------------- ----------------- Laboratory equipment 4 - 5 $ 3,181,000 $ 3,211,000 Office and computer equipment 4 - 5 667,000 685,000 Leasehold improvements 5 - 7 1,058,000 1,058,000 -------------------- ----------------- 4,906,000 4,954,000 Less-accumulated depreciation and amortization 2,421,000 2,741,000 -------------------- ----------------- $ 2,485,000 $ 2,213,000 ==================== ================= 4. Accrued Expenses Accrued expenses consist of the following: December 31, March 31, 1996 1997 -------------------- ----------------- Accrued employee costs $ 552,000 $ 581,000 Accrued professional fees 230,000 231,000 -------------------- ----------------- $ 782,000 $ 812,000 ==================== =================
5. New Accounting Pronouncement In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." This Statement establishes and simplifies standards for computing and presenting earnings per share. SFAS 128 will be effective for the year ended December 31, 1997. SFAS 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. As the Company has historically reported net losses, earnings per share as computed under the provision SFAS 128 is not expected to differ from the earnings per share amounts previously reported by the Company. 6. Subsequent Event In April 1997, the Company announced the disappointing preliminary results of its Phase III trial for Myloral, its product for multiple sclerosis. Based on these results, the Company also announced a corporate downsizing by eliminating 23 positions directly related to the Myloral program. The Company expects to record a charge during the second quarter of 1997 of approximately $800,000 relating primarily to employee severance costs and costs associated with terminating Myloral manufacturing and clinical trial functions. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Overview Since its inception through March 31, 1997, the Company has incurred ongoing losses from operations and has cumulative losses as of March 31, 1997 totaling $77,716,000. To date, the Company has not recorded any revenues from the sale of products. Revenues recorded through March 31, 1997 were earned in connection with contract research and the granting of certain short-term rights. The Company expects to remain in the development stage for the foreseeable future and accordingly, expects to continue to incur substantial losses. Three Month Periods Ended March 31, 1996 and 1997 Research and development expenses were $4,300,000 and $7,482,000 for the three month periods ended March 31, 1996 and 1997, respectively. The increase is due to the advancement of clinical trial activity. Marketing, general and administrative expenses were $599,000 and $755,000 for the three month periods ended March 31, 1996 and 1997, respectively. The increase in general and administrative expense is due primarily to increased personnel costs and corporate activity. Net interest income was $785,000 and $612,000 for the three month periods ended March 31, 1996 and 1997 respectively. The decrease is due to a lower balance of cash available for investment. The net loss was $4,114,000 and $7,625,000 for the three month periods ended March 31, 1996 and 1997, respectively. The change reflects the continued increase in research and development activity levels. The net loss per share increased from $0.25 for the three months ended March 31, 1996 to $0.47 for the three months ended March 31, 1997. Liquidity and Capital Resources The Company's needs for funds have increased from period to period as it has increased the scope of its research and development activities. Since inception, the Company has funded these needs almost entirely through sales of its equity securities. The Company's working capital and capital requirements will depend on numerous factors, including the progress of the Company's research and development activities, the level of resources that the Company devotes to the development, clinical, regulatory and marketing aspects of its products, the extent to which it proceeds, if at all, by means of collaborative relationships with pharmaceutical companies and its competitive environment. Based upon its current plans, the Company believes that current cash and marketable securities and the interest earned from the investment thereof, will be sufficient to meet the Company's operating expenses and capital requirements through the filing of the Company's Product License Application for its lead product. The Company intends to seek additional funding through public or private equity or debt financings, collaborative arrangements with pharmaceutical companies or from other sources. If adequate funds are not available, the Company will have to reduce certain areas of research, product development, manufacturing or marketing activity, or otherwise modify its business strategy, and its business will be materially adversely affected. 7 In order to preserve principal and maintain liquidity, the Company's funds are invested in U.S. Treasury obligations and other short-term instruments. As of March 31, 1997, the Company's cash and cash equivalents and marketable securities totaled $43,386,000. Current liabilities at March 31, 1997 were $5,992,000. In April 1997, the Company announced the disappointing preliminary results of its Phase III trial for Myloral, its product for multiple sclerosis. Based on these results, the Company also announced a corporate downsizing by eliminating 23 positions directly related to the Myloral program. Corporate resources will be directed toward the clinical development of Colloral, its product for rheumatoid arthritis. The Company expects to record a charge during the second quarter of 1997 of approximately $800,000 relating primarily to employee severance costs and costs associated with terminating Myloral manufacturing and clinical trial functions. New Accounting Pronouncement In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." This Statement establishes and simplifies standards for computing and presenting earnings per share. SFAS 128 will be effective for the year ended December 31, 1997. SFAS 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. The Company expects that basic and diluted earnings per share will not be materially different from the current computation and presentation. 8 AUTOIMMUNE INC. PART II - OTHER INFORMATION Item 6(b) - REPORTS ON FORM 8-K No reports on Form 8-K have been filed during the quarter for which this report is filed. 9 AUTOIMMUNE INC. SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AUTOIMMUNE INC. /s/ Robert C. Bishop Date: May 9, 1997 ------------------------------------- Robert C. Bishop President and Chief Executive Officer /s/ Michael W. Rogers ------------------------------------- Michael W. Rogers Vice President, Chief Financial Officer and Treasurer 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 9,470,000 33,916,000 191,000 0 0 43,994,000 4,954,000 (2,741,000) 46,237,000 5,992,000 0 0 0 117,486,000 (77,730,000) 46,237,000 0 0 0 8,237,000 0 0 25,000 0 0 0 0 0 0 (7,625,000) (0.47) 0
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