-----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, QpPujtuDXA8jB6HbQt9RtmwwATCxplgb7Cwqas6PdqIc1tQov8fx4eMxhyCh8r8X t66g3sfZU7ewdq9T8LTkpQ== 0000950120-96-000258.txt : 19961118 0000950120-96-000258.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950120-96-000258 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INITIAL ACQUISITION CORP CENTRAL INDEX KEY: 0000899394 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 133197002 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24672 FILM NUMBER: 96664257 BUSINESS ADDRESS: STREET 1: 810 SEVENTH AVE 27TH FLR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2123332620 MAIL ADDRESS: STREET 1: 810 SEVENTH AVE STREET 2: 27TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 10-Q 1 3RD QUARTER FORM 10-Q OF INITIAL ACQUISITION CORP. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended September 30, 1996...Commission File Number 0-24672 INITIAL ACQUISITION CORP. (Exact name of Registrant as specified in its charter) Delaware 13-3197002 ----------------------------------------------------------------- (State of other jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 810 Seventh Avenue, 27th Floor, New York, NY 10019 ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 333-2620 ----------------------------------------------------------------- ---------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and 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 ----------- ---------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 30, 1996 ------------------------ --------------------------------- Common Stock, par value 833,250 shares $.01 per share INITIAL ACQUISITION CORP. (A CORPORATION IN THE DEVELOPMENTAL STAGE) INDEX Page Number ----------- PART I FINANCIAL INFORMATION Item 1. Financial Statements STATEMENTS OF OPERATIONS - Three Months Ended September 30, 1996 and September 30, 1995 and Nine Months ended September 30, 1996 and September 30, 1995 Period January 1, 1993 to September 30, 1996 1 BALANCE SHEETS - September 30, 1996 and December 31, 1995 2 STATEMENT OF STOCKHOLDERS' EQUITY - Nine Months Ended September 30, 1996 3 STATEMENTS OF CASH FLOWS - Nine Months ended September 30, 1996 and September 30, 1995 Period January 1, 1993 to September 30, 1996 4 Notes to Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 7 None INITIAL ACQUISITION CORP. (A CORPORATION IN THE DEVELOPMENTAL STAGE) STATEMENTS OF OPERATIONS 3 Months 3 Months 9 Months Ended Sept. Ended Sept. Ended Sept. 30, 1995 30, 1996 30, 1995 ---------- ---------- --------- Interest Income 87,333 88,042 123,228 General and administrative 10,272 (94,088) 15,405 Provision for taxes -- (12,500) -- ---------- ---------- ---------- Net (loss) income 77,061 (18,546) 107,823 ========== ========== ========== Earnings per share $ 0.09 $ (0.02) $ 0.20 ======== ======== ======== Weighted average common shares outstanding 833,250 833,250 533,250 ========== ========= ========= 9 Months Period Ended January 1, Sept. 30, 1993 Sept. 1996 30, 1996 ----------- ---------- Interest income 264,986 $489,291 General and administrative (132,152) (218,120) --------- ---------- Provision for taxes 100,684 $187,021 ========== ========== Earnings per share $ 0.12 ========== Weighted average 833,250 common shares ========== outstanding See accompanying notes to financial statements 1 INITIAL ACQUISITION CORP. (A CORPORATION IN THE DEVELOPMENT STAGE) BALANCE SHEETS September 30, December 31, 1996 1995 ----------- ------------ ASSETS Current Assets: Cash and cash equivalents $ 202,165 $ 305,171 Investment in U.S. Treasury Bills 6,469,000 6,213,588 ---------- ---------- Other Assets: Deferred Acquisition Costs 21,099 - ---------- --------- Total $6,692,264 $6,518,759 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accrued expenses $ 78,311 $ 37,640 Income taxes payable 84,150 52,000 Preferred stock, $.01 par value-shares authorized authorized 5,000; none issued -- -- Common stock, subject to possible redemption, 89,940 shares at conversion value 969,703 932,316 Common stock, $.01 par value- shares authorized 10,000,000; issued and outstanding 833,250 (which includes 89,940 shares subject to possible conversion) respectively 7,434 7,434 Additional paid-in capital 5,436,065 5,436,065 Earnings accumulated during development stage 116,601 53,304 ---------- --------- Total $6,692,264 $6,518,759 ========== ========== See accompanying notes to financial statements 2 INITIAL ACQUISITION CORP. (A CORPORATION IN THE DEVELOPMENT STAGE) STATEMENTS OF COMMON STOCK, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, PREFERRED STOCK, ADDITIONAL PAID-IN CAPITAL AND EARNINGS ACCUMULATED DURING THE DEVELOPMENT STAGE Common Stock subject to Common Stock possible redemption ------------------ ------------------- Shares Amount Shares Amount ------ ------ ------ ------- Balance at December 31, 1995 743,310 $7,434 89,940 932,316 Net Income -- -- -- -- Accretion to redemption value of common stock -- -- -- 37,387 ------- ------ ------ -------- Balance at September 30, 1996 743,310 $7,434 89,940 $969,703 ======= ====== ====== ======== Earnings (deficit) accumulated Additional during the paid-in development capital stage ---------- ----------- Balance at December 31, 1995 $5,436,065 $ 53,304 Net Income 100,684 Accretion to redemption -- (37,387) value of common stock ---------- -------- $5,436,065 $116,601 Balance at September 30, 1996 ========== ======== See accompanying notes to financial statements 3 INITIAL ACQUISITION CORP. (A CORPORATION IN THE DEVELOPMENT STAGE) STATEMENTS OF CASH FLOWS 9 Months Ended 9 Months Ended Sept. 30, 1996 Sept. 30, 1995 -------------- -------------- Cash flows from operating activities: Net income $ 100,684 $ 30,762 Adjustments to reconcile net income to net cash used in operating activities: Accrued interest income (255,412) (117,666) Change in assets and liabilities: Accrued expenses 40,671 2,500 Income taxes payable 32,105 (6,000) Deferred acquisition costs (21,099) - ---------- ---------- Net cash used in operating activites (103,006) (13,343) ---------- ---------- Cash flows from investing activities: Purchase of US Treasury Bills (6,412,283) (5,999,218) Proceeds from US Treasury Bills 6,412,000 - ---------- ---------- Net Cash used in Investing Activities (-) (5,999,218) ---------- ---------- Cash flows from financing activities: Proceeds from sale of common stock - 6,260,457 Net proceeds from public offering - 63,043 ---------- ---------- Net cash provided by financing activities - 6,323,500 ---------- ---------- Net increase (decrease) in cash and cash equivalents (103,006) 310,939 Cash and cash equivalents, beginning of period 305,171 11,096 ---------- ---------- Cash and cash equivalents, end of year $ 202,165 $ 322,035 ========== ========== Period January 1, 1993 To Sept. 30, 1996 ---------------------- Cash flows from operating activities: Net income $ 187,021 Adjustments to reconcile net income to net cash used in operating activities: Accrued interest income (469,782) Change in assets and liabilities: Accrued expenses 78,311 Income taxes payable 84,150 Deferred acquisition costs (21,099) ---------- Net cash used in operating activites (141,399) ---------- Cash flows from investing activities: Purchase of US Treasury Bills (12,411,501) Proceeds from US Treasury Bills 6,412,283 ---------- Net Cash used in Investing Activities (5,999,218) ---------- Cash flows from financing activities: Proceeds from sale of common stock 6,260,457 Net proceeds from public offering 82,325 ---------- Net cash provided by financing activities 6,342,782 ---------- Net increase (decrease) in cash and cash equivalents 202,165 Cash and cash equivalents, beginning of period - ---------- Cash and cash equivalents, end of year $ 202,165 ========== See accompanying notes to financial statements 4 INITIAL ACQUISITION CORP. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The financial statements are presented in accordance with the requirements of Form 10-Q and Regulation 210 of S-X and consequently do not include all of the disclosures normally made in an annual Form 10-K filing. Accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and footnotes therein included within the Company's Annual Report on Form 10-K for the year ended December 31, 1995. The financial information has been prepared in accordance with the Company's customary accounting practices and has not been audited. In the opinion of management, the information presents all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature. The foregoing interim results are not necessarily indicative of the results of operations to be expected for a full year. 2. INVESTMENTS The Company has invested the majority of the proceeds from the initial public offering in United States Treasury Bills. These treasury bills, which were purchased at a discount, are presented at their accreted cost. The treasury bills matured in October 1996 and were reinvested in treasury bills to mature November 14, 1996. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Initial Acquisition Corp. (the "Company") is a "blank check" or "blind pool" company which was formed on November 18, 1992 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination (a "Business Combination") with an operating business (a "Target Business"). The business objective of the Company is to effect a Business Combination with a Target Business which the Company believes has significant growth potential. To date, the Company has not effected a Business Combination. On May 23 1995 (the "Closing Date"), the Company consummated its initial public offering (the "Offering") of (a) 600,000 units (the "Units"), each Unit consisting of (i) one share of common stock, $.01 par value per share (the "Common Stock"), and (ii) one Class A Common Stock Purchase Warrant (the "Class A Warrants") entitling the holder thereof to purchase one share of Common Stock, and (b) 240,000 Redeemable Class B Unit Purchase Warrants (the "Class B Warrants"), each such Class B Warrant entitling the holder thereof to purchase one Unit. On the Closing Date, the Registrant received net proceeds of $6,330,680 (the "Net Proceeds"), after giving effect to the payment of all underwriting discounts, the underwriters' non-accountable expense allowance and offering expenses. Pursuant to the terms of the Offering, $6 million of the Net Proceeds, representing an amount equal to the gross proceeds from the sale of the Units, was placed in escrow with The Chase Manhattan Bank, N.A., subject to release in accordance with the terms of the Offering. These Net Proceeds have been invested in United States Treasury Bills and Commercial Paper. Subsequent Event: ---------------- On November 1, 1996, the Company and Hollis-Eden, Inc., a Delaware corporation ("Hollis-Eden"), entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which, among other things, the Company will acquire Hollis-Eden through the merger of Hollis-Eden with and into the Company (the "Merger"), with the Company being the surviving corporation to the Merger. Hollis-Eden is a Portland, Oregon based bio- pharmaceutical company engaged in the development and commercialization of safe and cost effective therapeutic/preventative agents for the treatment of viral and immune disorders. Pursuant to the Merger Agreement, which is subject to the satisfaction of certain closing conditions, including the approval by stockholders of the Company and Hollis-Eden and satisfactory completion of due diligence by the Company, each outstanding share of Hollis-Eden common stock will be exchanged for one share of surviving corporation common stock and each outstanding warrant or option to acquire Hollis-Eden Common Stock will be converted into warrants and options, as the case may be, to acquire surviving corporation common stock. As a result of the Merger, and based upon the capitalization of Hollis-Eden, the surviving corporation will issue 4,911,004 shares of common stock and options and warrants to acquire an additional 2,229,650 6 shares of common stock. Upon completion of the Merger, the surviving corporation will change its name to Hollis-Eden Pharmaceuticals, Inc. The Merger Agreement further provides that each stockholder of the Company who possesses the right to have his stock redeemed in lieu of participating in the Merger shall be entitled to receive additional shares of surviving corporation common stock twenty-four months after the consummation of the Merger if the average public trading price for the surviving corporation does not equal or exceed $20 per share for a specified period of time within such twenty-four month period. Hollis-Eden has advised the Company that Hollis-Eden believes that its initial drug discovery, INACTIVIN(TM), presents the potential for a safe, efficacious and cost-effective strategy in the treatment of HIV/AIDS. Hollis-Eden has further advised the Company that Hollis-Eden expects to enter PHASE II trials with the Food and Drug Administration on INACTIVIN(TM) upon the consummation of the Merger. Part II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (b) None. 7 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INITIAL ACQUISITION CORP. By: /s/ Salvatore J. Zizza --------------------------- Salvatore J. Zizza Chairman of the Board, President, Chief Executive Officer and Principal Financial Officer Dated: November 8, 1996 8 EXHIBIT INDEX Exhibit Description ------- ----------- 27 Financial Data Schedule EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS OF OPERATIONS, BALANCE SHEETS, STATEMENTS OF STOCKHOLDERS' EQUITY AND STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 SEP-30-1996 202,165 6,469,000 0 0 0 6,671,165 0 0 6,692,264 162,461 0 0 0 7,434 6,522,369 6,692,264 0 0 0 0 (132,152) 0 0 132,834 (32,165) 0 0 0 0 100,684 .12 .12
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