-----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, PKhvSJzH2a9rETtu51GRKPlwJVOKNqiB5N7Ypgc+feFwKkljC35/DfpiGyL4XgVh z1Q6iW1wiB5KvVsFSTWDIg== 0000927016-98-002872.txt : 19980806 0000927016-98-002872.hdr.sgml : 19980806 ACCESSION NUMBER: 0000927016-98-002872 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980805 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: SEC FILE NUMBER: 000-20948 FILM NUMBER: 98677208 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 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED JUNE 30, 1998 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 Execution Offices) (781) 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 July 31, 1998: Common Stock, par value $.01 16,493,986 shares outstanding AUTOIMMUNE INC. QUARTER ENDED JUNE 30, 1998 TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page Number Item 1 - Financial Statements Balance Sheet December 31, 1997 and June 30, 1998..................................... 2 Statement of Operations for the three months ended June 30, 1997 and 1998, the six months ended June 30, 1997 and 1998 and for the period from inception (September 9, 1998) through June 30, 1998................ 3 Statement of Cash Flows for the six months ended June 30, 1997 and 1998 and for the period from inception (September 9, 1988) through June 30, 1998................................................... 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 4 - Submission of Matters to a Vote of Security Holders............................. 9 Item 5 - Other Information............................................................... 9 Item 6(b) - Reports on Form 8-K.......................................................... 9 Signatures............................................................................... 11
1 AUTOIMMUNE INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET (UNAUDITED)
DECEMBER 31, JUNE 30, 1997 1998 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 13,833,000 $ 5,757,000 Marketable securities 16,192,000 17,721,000 Interest receivable 240,000 233,000 Prepaid expenses and other current assets 143,000 664,000 ------------- ------------- Total current assets 30,408,000 24,375,000 Fixed assets, net 1,060,000 809,000 Other assets 30,000 54,000 ------------- ------------- $ 31,498,000 $ 25,238,000 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 476,000 $ 1,125,000 Accrued expenses 664,000 492,000 Current portion of obligations under capital leases 285,000 287,000 ------------- ------------- Total current liabilities 1,425,000 1,904,000 ------------- ------------- Obligations under capital leases 193,000 48,000 ------------- ------------- Commitments and contingencies ------------- ------------- Stockholders' equity: Common stock, $.01 par value; 25,000,000 shares authorized; 16,392,896 and 16,493,986 shares issued and outstanding at December 31, 1997 and June 30, 1998, respectively 164,000 165,000 Additional paid-in capital 117,330,000 117,465,000 Deficit accumulated during the development stage (87,620,000) (94,349,000) Valuation allowance for marketable securities 6,000 5,000 ------------- ------------- 29,880,000 23,286,000 ------------- ------------- $ 31,498,000 $ 25,238,000 ============= =============
2 AUTOIMMUNE INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS (UNAUDITED)
Period from inception Three months ended Six months ended (September 9, 1988) June 30, June 30, June 30, June 30, through 1997 1998 1997 1998 June 30, 1998 ------------ ----------- ------------- ------------- ------------------- 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 567,000 284,000 1,072,000 601,000 17,449,000 All other 8,248,000 3,547,000 15,225,000 6,091,000 77,701,000 General and administrative 698,000 400,000 1,453,000 841,000 12,368,000 ------------ ----------- ------------- ------------- ------------------- Total costs and expenses 9,513,000 4,231,000 17,750,000 7,533,000 107,518,000 ------------ ----------- ------------- ------------- ------------------- Interest income 565,000 352,000 1,202,000 808,000 10,316,000 Interest expense (24,000) (2,000) (49,000) (4,000) (298,000) ------------ ----------- ------------- ------------- ------------------- 541,000 350,000 1,153,000 804,000 10,018,000 ------------ ----------- ------------- ------------- ------------------- Net loss $ (8,972,000) $ 3,881,000 $ (16,597,000) $ (6,729,000) $ (94,345,000) ============ =========== ============= ============= =================== Net loss per share-basic and diluted $ (0.55) $ (0.24) $ (1.01) $ (0.41) ============ =========== ============= ============= Weighted average common shares outstanding-basic and diluted 16,389,243 16,493,986 16,379,529 16,455,935 ============ =========== ============= =============
3 AUTOIMMUNE INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (UNAUDITED)
PERIOD FROM INCEPTION (SEPTEMBER 9, 1988) SIX MONTHS ENDED THROUGH JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1998 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (16,597,000) $ (6,729,000) $ (94,345,000) Adjustment to reconcile net loss to net cash used by operating activities: Interest expense related to demand notes converted into Series A mandatorily redeemable convertible preferred stock - - 48,000 Patent costs paid with junior convertible preferred and common stock - - 3,000 Depreciation and amortization 589,000 296,000 3,882,000 Loss on sale/disposal of fixed assets - 2,000 606,000 Decrease in capitalized patent costs - - 563,000 (Increase) decrease in interest receivable 64,000 7,000 (233,000) (Increase) decrease in prepaid expenses 241,000 (521,000) (664,000) Increase in accounts payable 1,046,000 649,000 1,125,000 Increase (decrease) in accrued expenses 2,287,000 (172,000) 492,000 --------------- -------------- --------------- Net cash used by operating activities (12,370,000) (6,468,000) (88,523,000) --------------- -------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of available-for-sale marketable securities (16,613,000) (11,256,000) (244,782,000) Proceeds from sale/maturity of available-for-sale marketable securities 29,161,000 9,726,000 216,055,000 Proceeds from maturity of held-to-maturity marketable securities - - 11,011,000 Proceeds from sale of equipment - 1,000 65,000 Purchase of fixed assets (25,000) (48,000) (5,237,000) Increase in patent costs - - (563,000) Increase in other assets - (24,000) (179,000) --------------- -------------- --------------- Net cash provided (used) by investing activities 12,523,000 (1,601,000) (23,630,000) --------------- -------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale-leaseback of fixed assets - - 2,872,000 Payments on obligations under capital leases (375,000) (143,000) (2,537,000) 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 84,000 136,000 105,064,000 Proceeds from issuance of convertible notes payable - - 2,200,000 --------------- -------------- --------------- Net cash provided (used) by financing activities (291,000) (7,000) 117,910,000 --------------- -------------- --------------- Net increase (decrease) in cash and cash equivalents (138,000) (8,076,000) 5,757,000 Cash and cash equivalents, beginning of period 6,432,000 13,833,000 - --------------- -------------- --------------- Cash and cash equivalents, end of period $ 6,294,000 $ 5,757,000 $ 5,757,000 =============== ============== ===============
4 AUTOIMMUNE INC. NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. INTERIM FINANCIAL DATA The interim financial data as of June 30, 1998, for the three month periods ended June 30, 1997 and 1998, for the six month periods ended June 30, 1997 and 1998, and for the period from inception (September 9, 1998) through June 30, 1998 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, 1997 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, 1997 and June 30, 1998:
DECEMBER 31, JUNE 30, 1997 1998 ------------------- ---------------- Money market $ 71,000 $ 1,571,000 U.S. Government debt securities 12,391,000 3,362,000 ------------------- ---------------- $12,462,000 $ 4,933,000 =================== ================
The following is a summary of available-for-sale marketable securities held by the Company at December 31, 1997 and June 30, 1998 which are carried at fair market value:
MATURITY FAIR UNREALIZED UNREALIZED AMORTIZED TERM VALUE GAINS LOSSES COST -------------------- --------------- --------------- ---------------- ----------------- DECEMBER 31, 1997 U.S. Government debt securities within 1 year $ 10,935,000 $ 5,000 $ (1,000) $ 10,931,000 U.S. Government debt securities between 1-5 years 5,257,000 2,000 - 5,255,000 --------------- --------------- ----------------- ------------------ $ 16,192,000 $ 7,000 $ (1,000) $ 16,186,000 =============== =============== ================= ================== MATURITY FAIR UNREALIZED UNREALIZED AMORTIZED TERM VALUE GAINS LOSSES COST -------------------- --------------- --------------- ---------------- ----------------- JUNE 30, 1998 U.S. Government debt securities within 1 year $ 14,463,000 $ 2,000 $ - $ 14,461,000 U.S. Government debt securities between 1-5 years 3,258,000 3,000 - 3,255,000 --------------- --------------- ----------------- ------------------ $ 17,721,000 $ 5,000 $ - $ 17,716,000 =============== =============== ================= ==================
Marketable securities which were purchased and sold in periods prior to adoption of Statement of Financial Accounting Standards (SFAS) No. 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 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 3. FIXED ASSETS Fixed assets consist of the following:
ESTIMATED USEFUL LIFE DECEMBER 31, JUNE 30, (YEARS) 1997 1998 ----------------- ----------------- ----------------- Laboratory equipment 2 - 5 $ 1,359,000 $ 1,394,000 Office and computer equipment 4 - 5 425,000 434,000 Leasehold improvements 5 - 7 461,000 461,000 ----------------- ----------------- 2,245,000 2,289,000 Less-accumulated depreciation and amortization 1,185,000 1,480,000 ----------------- ----------------- $ 1,060,000 $ 809.000 ================= =================
4. ACCRUED EXPENSES Accrued expenses consist of the following:
DECEMBER 31, JUNE 30, 1997 1998 ----------------- ----------------- Accrued employee costs $ 289,000 $ 259,000 Accrued professional fees 204,000 143,000 Accrued restructuring costs 146,000 65,000 Other 25,000 25,000 ----------------- ----------------- $ 664,000 $ 492,000 ================= =================
5. 1998 STOCK OPTION PLAN On May 28, 1998 the Company's shareholders approved the 1998 stock option plan. This plan provides for the granting of incentive stock options and non-qualified stock options to employees and other individuals performing services on behalf of the Company. The number of shares of common stock of the Company reserved for issuance with the terms of the 1998 Stock Option Plan is 1,300,000. 6. COMMITMENTS AND CONTINGENCIES In July 1998, the Company terminated its sublease relationship with its subtenant. The Company was concurrently released from its lease obligation for the same facilities, resulting in no impact upon the Company's future net minimum operation lease commitments. 7. NEW ACCOUNTING PRONOUNCEMENT In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 130 (SFAS 130), "Reporting Comprehensive Income." This Statement requires disclosure of comprehensive income and its components and is effective for the year ended December 31, 1998. Comprehensive income includes all changes in stockholders' equity during a period except those resulting from investments by stockholders and distributions to stockholders. Accordingly, the components of comprehensive income include net income and unrealized gains and losses on available-for-sale securities. For the three months ended June 30, 1997 and 1998, unrealized gains on available-for-sale securities amounted to $25,000 and $2,000, respectively. For the six months ended June 30, 1997 and 1998, unrealized losses on available-for-sale securities amounted to $19,000 and $1,000, respectively. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION RESULTS OF OPERATIONS OVERVIEW Since its inception through June 30, 1998, the Company has incurred ongoing losses from operations and has cumulative losses as of June 30, 1998 totaling $94,345,000. To date, the Company has not recorded any revenues from the sale of products. Revenues recorded through June 30, 1998 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. The sections of "Management's Discussion and Analysis of Financial Condition and Results of Operations" captioned "Overview" and "Liquidity and Capital Resources" contain forward-looking statements which involve risks and uncertainties. What may occur in the future may differ significantly from what is discussed in the forward-looking statements due to a number of important factors, including, but not limited to, the developmental stage of the Company's products and uncertainties of clinical trial results and regulatory approval; the Company's capital requirements, history of operating losses and lack of product revenue and its limited manufacturing and marketing experience; and the risks of technological change and competition. These factors are more fully discussed in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission in the section captioned "Business - Factors to be Considered". The discussion in the Annual Report on Form 10-K is hereby incorporated by reference into this Quarterly Report. THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1998 Research and development expenses were $8,815,000 and $3,831,000 for the three month periods ended June 30, 1997 and 1998, respectively. Research and development expenses were $16,297,000 and $6,692,000 for the six month periods ended June 30, 1997 and 1998 respectively. The decrease is due to reduced research and clinical trial activity and restructuring costs recorded in the second quarter of 1997. General and administrative expenses were $698,000 and $400,000 for the three month periods ended June 30, 1997 and 1998, respectively. General administrative expenses were $1,453,000 and $841,000 for the six month periods ended June 30, 1997 and 1998, respectively. The decrease in general and administrative expenses is due primarily to decreased personnel costs and corporate activity. Net interest income was $541,000 and $350,000 for the three month periods ended June 30, 1997 and 1998, respectively. Net interest income was $1,153,000 and $804,000 for the six month periods ended June 30, 1997 and 1998, respectively. The decrease is due to a lower balance of cash available for investment. The net loss was $8,972,000 and $3,881,000 for the three month periods ended June 30, 1997 and 1998, respectively. The net loss was $16,597,000 and $6,729,000 for the six months ended June 30, 1997 and 1998, respectively. The change reflects a decrease in personnel costs, research and clinical trial activity and restructuring costs recorded in the second quarter of 1997. The net loss per share decreased from $0.55 for the three months ended June 30, 1997 to $0.24 for the three months ended June 30, 1998. The net loss per share decreased from $1.01 for the six months ended June 30, 1997 to $0.41 for the six months ended June 30, 1998. 7 LIQUIDITY AND CAPITAL RESOURCES The Company's needs for funds have historically increased from period to period as it had increased the scope of its research and development activities, although its current needs have been reduced as a result of the restructuring which occurred in the first half of 1997. 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 Phase III clinical program of Colloral. At the appropriate time, 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 necessary but 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. 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 June 30, 1998, the Company's cash and cash equivalents and marketable securities totaled $23,478,000. Current liabilities at June 30, 1998 were $1,904,000. 8 AUTOIMMUNE INC. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The following matters were approved at AutoImmune's annual meeting of shareholders on May 28, 1998: a) Election of the following Board of Directors:
Votes ----------------------- For Against ----------------------- Barry Weinberg 13,681,904 1,731,519 Hugh A. D'Andrade 15,275,990 137,433 Robert C. Bishop 15,289,310 124,113 Allan R. Ferguson 15,274,990 138,433 R. John Fletcher 15,275,990 137,433 Henri A. Termeer 15,288,590 124,833
b) Approval of the AutoImmune 1998 Stock Option Plan
Votes ------------------------------------ Broker Non- For Against Votes ------------------------------------ 6,986,395 2,320,433 6,083,155
Item 5. Other Information The By-laws of the Company specify when a stockholder must submit nominations for director or proposals for consideration at a stockholders' meeting in order for those nominations or proposals to be considered at the meeting. In order for the nominations or proposals to be considered at a stockholders' meeting, the stockholder making them must have given timely notice in writing to the Secretary of the Company. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive office of the Company, 128 Spring Street, Lexington, MA 02173, not less than 60 days nor more than 90 days prior to the meeting; except that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received no later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary concerning nominations for director shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Company's books, of such stockholder and (ii) the class and number of shares of the Company which are beneficially owned by such Stockholder. 9 A stockholder's notice to the Secretary with respect to other proposals shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the Company's books, of the stockholder proposing such business, (c) the class and number of shares of the Company which are beneficially owned by the stockholder and (d) any material interest in the stockholder in such business. 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. 10 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. Date: August 5, 1998 /s/ Robert C. Bishop --------------------------------------- Robert C. Bishop President and Chief Executive Officer /s/ Heather A. Ellerkamp --------------------------------------- Heather A. Ellerkamp Director of Finance and Treasurer 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 5,757,000 17,721,000 233,000 0 0 24,375,000 2,289,000 (1,480,000) 25,238,000 1,904,000 0 0 0 117,630,000 (94,344,000) 23,286,000 0 0 0 4,231,000 0 0 2,000 0 0 0 0 0 0 (3,881,000) (0.24) (0.24)
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