-----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, H23tQZUqP3iR+GvjdTqHSbSoAODn0opwUyD6vDK5O/dl4r/PX+ep3rihK1mA8IRG ucRO+wxZN2sx/ZVcLSibYA== 0000927016-99-001897.txt : 19990512 0000927016-99-001897.hdr.sgml : 19990512 ACCESSION NUMBER: 0000927016-99-001897 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990511 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: 99616940 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 MARCH 31, 1999 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 02421 (Address of Principal Executive 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 filed 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, 1999: Common Stock, par value $.01 16,555,949 shares outstanding AUTOIMMUNE INC. QUARTER ENDED MARCH 31, 1999 TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page Number Item 1 - Financial Statements Balance Sheet December 31, 1998 and March 31, 1999........................................... 2 Statement of Operations for the three months ended March 31, 1998 and 1999 and for the period from inception (September 9, 1988) through March 31, 1999...................... 3 Statement of Cash Flows for the three months ended March 31, 1998 and 1999 and for the period from inception (September 9, 1988) through March 31, 1999......................................................... 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, 1998 1999 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 4,801,000 $ 5,734,000 Marketable securities 12,727,000 8,537,000 Interest receivable 77,000 70,000 Prepaid expenses and other current assets 129,000 160,000 -------------- -------------- Total current assets 17,734,000 14,501,000 Fixed assets, net 538,000 457,000 Other assets 54,000 54,000 -------------- -------------- $ 18,326,000 $ 15,012,000 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 677,000 $ 975,000 Accrued expenses 539,000 448,000 Current portion of obligations under capital leases 193,000 121,000 -------------- -------------- Total current liabilities 1,409,000 1,544,000 -------------- -------------- Obligations under capital leases - - -------------- -------------- Commitments and contingencies -------------- -------------- Stockholders' equity: Common stock, $.01 par value; 25,000,000 shares authorized; 16,548,995 and 16,555,949 shares issued and outstanding at December 31, 1998 and March 31, 1999, respectively 166,000 166,000 Additional paid-in capital 117,551,000 117,564,000 Deficit accumulated during the development stage (100,805,000) (104,262,000) Valuation allowance for marketable securities 5,000 - -------------- -------------- Total stockholders' equity 16,917,000 13,468,000 -------------- -------------- $ 18,326,000 $ 15,012,000 ============== ==============
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 1998 1999 MARCH 31, 1999 ------------- ------------- -------------- 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 317,000 384,000 18,546,000 All other 2,544,000 2,790,000 85,896,000 General and administrative 441,000 491,000 13,730,000 ------------- ------------- -------------- Total costs and expenses 3,302,000 3,665,000 118,172,000 ------------- ------------- -------------- Interest income 456,000 209,000 11,061,000 Interest expense (2,000) (1,000) (302,000) ------------- ------------- -------------- 454,000 208,000 10,759,000 ------------- ------------- -------------- Net Loss $ (2,848,000) $ (3,457,000) $(104,258,000) ============= ============= ============== Net loss per share - basic and diluted $ (0.17) $ (0.21) ============= ============= Weighted average shares outstanding - basic and diluted 16,417,461 16,555,640 ============= =============
3 AUTOIMMUNE INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS (UNAUDITED)
PERIOD FROM INCEPTION (SEPTEMBER 9, 1988) THREE MONTHS ENDED THROUGH MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 1999 ---------------- -------------- ------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,848,000) $ (3,457,000) $ (104,258,000) 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 152,000 132,000 4,285,000 (Gain)/loss and sale/disposal of fixed assets - (5,000) 601,000 Decrease in capitalized patent costs - - 563,000 (Increase) decrease in interest receivable 100,000 7,000 (70,000) (Increase) decrease in prepaid expenses and other current expenses (241,000) (31,000) (160,000) Increase in accounts payable 418,000 298,000 975,000 Increase (decrease) in accrued expenses (138,000) (91,000) 448,000 -------------- ------------- --------------- Net cash used by operating activities (2,557,000) (3,147,000) (97,565,000) -------------- ------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of available-for-sale marketable securities (11,342,000) (3,303,000) (260,707,000) Proceeds from sale/maturity of available-for-sale marketable securities 5,609,000 7,488,000 241,159,000 Proceeds from maturity of held-to-maturity marketable securities - - 11,011,000 Proceeds from sale of equipment - 5,000 70,000 Purchase of fixed assets - (51,000) (5,288,000) Increase in patent costs - - (563,000) Increase in other assets (24,000) - (179,000) -------------- ------------- --------------- Net cash provided (used) by investing activities (5,757,000) 4,139,000 (14,497,000) -------------- ------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale-leaseback of fixed assets - - 2,872,000 Payments on obligations under capital leases (71,000) (72,000) (2,751,000) 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 136,000 13,000 105,164,000 Proceeds from issuance of convertible notes payable - - 2,200,000 -------------- ------------- --------------- Net cash provided (used) by financing activities 65,000 (59,000) 117,796,000 -------------- ------------- --------------- Net increase (decrease) in cash and cash equivalents (8,249,000) 933,000 5,734,000 Cash and cash equivalents, beginning of period 13,833,000 4,801,000 - -------------- ------------- --------------- Cash and cash equivalents, end of period $ 5,584,000 $ 5,734,000 $ 5,734,000 ============== ============= ===============
4 AUTOIMMUNE INC. NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. INTERIM FINANCIAL DATA The interim financial data as of March 31, 1999 and for the three month periods ended March 31, 1998 and 1999, and for the period from inception (September 9, 1988) through March 31, 1999 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, 1998 including 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, 1998 and March 31, 1999:
DECEMBER 31, MARCH 31, 1998 1999 ------------ ----------- Money market $ 924,000 $ 795,000 U.S. Government debt securities 2,441,000 4,651,000 ----------- ----------- $ 3,365,000 $ 5,446,000 =========== ===========
The following is a summary of available-for-sale marketable securities held by the Company at December 31, 1998 and March 31, 1999 which are carried at fair market value:
MATURITY FAIR UNREALIZED UNREALIZED AMORTIZED TERM VALUE GAINS LOSSES COST ------------- ------------ ---------- ---------- ------------ DECEMBER 31, 1998 U.S. Government debt securities within 1 year $ 12,727,000 $ 6,000 $ (1,000) $ 12,722,000 ============ ========== ========== ============ MARCH 31, 1999 U.S. Government debt securities within 1 year $ 8,537,000 $ - $ - $ 8,537,000 ============ ========== ========== ============
All of the Company's marketable securities are classified as current at December 31, 1998 and March 31, 1999 as these funds are highly liquid and are available to meet working capital needs and to fund current operations. Gross realized gains and losses on sales of marketable securities for the three month periods ended March 31, 1998 and March 31, 1999 were not significant. 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 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) 1998 1999 -------------- --------------- -------------- Laboratory equipment 2 - 5 $ 1,394,000 $ 1,376,000 Office and computer equipment 4 - 5 434,000 434,000 Leasehold improvements 2 - 7 461,000 461,000 --------------- -------------- 2,289,000 2,271,000 Less - accumulated depreciation and amortization 1,751,000 1,814,000 --------------- -------------- $ 538,000 $ 457,000 =============== ==============
In the first quarter of 1999, a fixed asset with a cost of $70,000 and accumulated depreciation of $70,000 was sold for $5,000. 4. ACCRUED EXPENSES Accrued expenses consist of the following:
DECEMBER 31, MARCH 31, 1998 1999 ------------ --------- Accrued employee costs $ 322,000 $ 282,000 Accrued professional fees 217,000 166,000 ------------ --------- $ 539,000 $ 448,000 ============ =========
5. COMPREHENSIVE INCOME In the first quarter of 1998, the Company adopted SFAS No. 130, Reporting Comprehensive Income. This statement requires disclosure of comprehensive income and its components in interim and annual reports. 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. Comprehensive loss for the three month periods ended March 31, 1998 and 1999 was $2,851,000 and $3,462,000, respectively. Net unrealized loss on marketable securities is comprised of the following:
THREE MONTHS ENDED MARCH 31, 1998 1999 -------- -------- Unrealized holding gain (loss) arising during the period $ (1,000) $ (2,000) Reclassification adjustment for (gain) loss included in net income (2,000) (3,000) -------- -------- Net unrealized gain (loss) on marketable securities $ (3,000) $ (5,000) ======== ========
6 AUTOIMMUNE INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW Since its inception through March 31, 1999, the Company has incurred ongoing losses from operations and has cumulative losses as of March 31, 1999 totaling $104,258,000. To date, the Company has not recorded any revenues from the sale of products. Revenues recorded through March 31, 1999 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, 1998 AND 1999 Research and development expenses were $2,861,000 and $3,174,000 for the three month periods ended March 31, 1998 and 1999, respectively. The increase is due to increased research and clinical trial activity levels. General and administrative expenses were $441,000 and $491,000 for the three month periods ended March 31, 1998 and 1999, respectively. The increase in general and administrative expenses is due primarily to increased personnel costs and corporate activity. Net interest income was $454,000 and $208,000 for the three month periods ended March 31, 1998 and 1999, respectively. The decrease is due to a lower balance of cash available for investment. The net loss was $2,848,000 and $3,457,000 for the three month periods ended March 31, 1998 and 1999, respectively. The change reflects an increase in personnel costs, research and clinical trial activity levels. The net loss per share increased from $0.17 for the three months ended March 31, 1998 to $0.21 for the three months ended March 31, 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's needs for funds have historically fluctuated from period to period as it has increased or decreased 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 by means of collaborative relationships with pharmaceutical companies and its competitive environment. 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 additional 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. 7 AUTOIMMUNE INC 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, 1999, the Company's cash and cash equivalents and marketable securities totaled $14,271,000. Current liabilities at March 31, 1999 were $1,544,000. YEAR 2000 PREPAREDNESS The Company's management has completed its review of Year 2000 issues and believes that Year 2000 issues will not have a material effect on the Company's business, results of operations or financial condition. The major functions of the Company that utilize computers and could be susceptible to Year 2000 issues are manufacturing, clinical data and analysis, financial and general office. The scope of the Year 2000 issues for each of these functions is described below. Manufacturing. The Company's internal bulk manufacturing process is a mechanical process. Neither the process nor the raw materials used in the process are expected to be affected by Year 2000 issues. The Company maintains data relating to its manufacturing processes on databases using standard software packages that are Year 2000 compliant. It also maintains all data in hard copy format. The Company has been upgrading its hardware systems used to maintain manufacturing data as system requirements have changed and these upgrades have included Year 2000 solutions. The Company anticipates that its hardware systems will be fully upgraded and Year 2000 compliant before December 31, 1999. The Company uses outside vendors to perform filling, labeling and distribution services in connection with its manufacturing process. The Company maintains data relating to such services both in hard copy format and on databases. The vendor that the Company anticipates using for these services has represented that it will be Year 2000 compliant before December 31, 1999. In any event, hard copy records can be used and will meet the Company's requirements. Clinical Data and Analysis. The firm AutoImmune has contracted with to manage and analyze clinical data has represented to the Company that it is Year 2000 compliant. In addition, the data that the Company intends to submit to the FDA will be based on patient activity occurring prior to January 1, 2000 and is in a format that can be accessed with standard programs. Financial. The Company has been upgrading its financial systems as its requirements have changed and these upgrades have included Year 2000 solutions. The final component is expected to be upgraded in the second quarter of 1999 and will be Year 2000 compliant. These upgrades would have occurred regardless of Year 2000 concerns. General Office. The Company's office computers have been updated as the Company's requirements have increased. As a result, almost all are Year 2000 compliant. The Company's network and phone systems require Year 2000 software upgrades that are scheduled for installation in the last quarter of 1999. The estimated cost of these upgrades is $20,000. Impact of Year 2000. The Company's exposure to Year 2000 is limited by the nature of its operations. The Company is not electronically dependent on its vendors. Its software packages, other than its network and phone systems packages, are standard and the Company's hardware is already Year 2000 compliant or is scheduled to be upgraded before December 31, 1999. These upgrades to the Company's hardware systems would have occurred regardless of the Year 2000. In the worst case scenario, the Company could easily revert to using hard copies. This scenario would be more time consuming, but would not be expected to result in revenue losses or liability to third parties. 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. Date: May 11, 1999 /s/ Robert C. Bishop ---------------------------------------- Robert C. Bishop President and Chief Executive Officer /s/ Heather A. Ellerkamp ---------------------------------------- Heather A. Ellerkamp Director of Finance and Treasurer 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-1-1999 MAR-31-1999 5,734,000 8,537,000 70,000 0 0 160,000 2,271,000 (1,814,000) 15,012,000 1,544,000 0 0 0 117,730,000 (104,262,000) 13,468,000 0 0 0 3,665,000 1,000 0 0 0 0 0 0 0 0 (3,457,000) 0 (0.21)
-----END PRIVACY-ENHANCED MESSAGE-----