-----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, RIxixgT05WXzucqhoJGhBWKVgAam6MJTl2HAQxdvMijQElBDvFFbwh4+df3ocle1 eeeQCpa/ZMSblotvhUWYHw== 0000950135-98-004742.txt : 19980817 0000950135-98-004742.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950135-98-004742 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIRUS RESEARCH INSTITUTE INC CENTRAL INDEX KEY: 0000902010 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 223098869 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20711 FILM NUMBER: 98687538 BUSINESS ADDRESS: STREET 1: 61 MOULTON ST CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6178646232 MAIL ADDRESS: STREET 1: 61 MOULTON ST CITY: CAMBRIDGE STATE: MA ZIP: 02138 10-Q 1 VIRUS RESEARCH INSTITUTE 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 1998 - -------------------------------------------------------------------------------- or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to - -------------------------------------------------------------------------------- Commission File number 0-20711 - -------------------------------------------------------------------------------- VIRUS RESEARCH INSTITUTE, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 22-3098869 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 61 Moulton Street, Cambridge, MA 02138 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (617) 864-6232 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, address and fiscal year, if changed since last report) 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. (X) Yes ( ) No As of July 31, 1998, there were 9,045,217 shares of Common Stock outstanding. 2 VIRUS RESEARCH INSTITUTE, INC. INDEX PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements: Balance Sheets as of June 30, 1998 and December 31, 1997..............................................3 Statements of Operations for the Three Months Ended June 30, 1998 and 1997, for the Six Months Ended June 30, 1998 and 1997, and for the Period from Inception through June 30, 1998................4 Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997, and for the period from Inception through June 30, 1998................5 Notes to Financial Statements ...................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................7 PART II - OTHER INFORMATION Item 1. Legal Proceedings.................................................14 Item 2. Changes in Securities.............................................14 Item 3. Defaults upon Senior Securities...................................14 Item 4. Submission of Matters to a Vote of Security Holders...............14 Item 5. Other Information.................................................15 Item 6. Exhibits and Reports on Form 8-K..................................15 SIGNATURES ..................................................................16 (2) 3 VIRUS RESEARCH INSTITUTE, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS
JUNE 30, DECEMBER 31, 1998 1997 ------------ ------------ Current assets: Cash and cash equivalents $ 5,039,879 $ 2,488,963 Marketable securities 10,369,111 15,968,923 Contract receivable 0 1,000,000 Interest receivable 144,316 352,186 Prepaid expenses 542,051 273,224 Other current assets 36,694 42,616 ------------ ------------ Total current assets 16,132,051 20,125,912 Noncurrent assets: Leasehold improvements and equipment (net of accumulated depreciation and amortization of $2,596,446 at June 30, 1998 and $2,416,568 at December 31, 1997) 784,847 715,234 Other assets 34,473 37,193 ------------ ------------ Total noncurrent assets 819,320 752,427 ------------ ------------ Total assets $ 16,951,371 $ 20,878,339 ============ ============ Current liabilities: Accounts payable $ 140,047 $ 24,769 Accrued consulting and research fees 1,213,145 709,295 Accrued employee benefits 121,636 91,636 Accrued legal 204,707 192,453 Other accrued expenses 298,500 377,987 Current portion of lease obligation payable 21,852 72,352 ------------ ------------ Total current liabilities 1,999,887 1,468,492 Stockholders' equity: Preferred stock -- $.001 par value; 5,000,000 shares authorized, none issued -- -- Common stock -- $.001 par value; 30,000,000 shares authorized; 9,044,992 shares issued at June 30, 1998 and 8,928,314 shares issued at December 31, 1997 9,045 8,928 Additional paid-in capital 52,025,302 51,930,441 Deficit accumulated during the development stage (37,082,863) (32,529,522) ------------ ------------ Total stockholders' equity 14,951,484 19,409,847 ------------ ------------ Total liabilities and stockholders' equity $ 16,951,371 $ 20,878,339 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS (3) 4 VIRUS RESEARCH INSTITUTE, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED CUMULATIVE JUNE 30, JUNE 30, SINCE INCEPTION 1998 1997 1998 1997 (1991) - ----------------------------------------------------------------------------------------------------------------------------------- REVENUE: Licensing and option revenue $ 0 $ 250,000 $ 51,111 $ 250,000 $ 6,946,667 Research and development revenue 0 387,491 0 774,982 4,165,180 Interest income 238,089 339,816 502,064 672,596 3,025,453 ----------------------------------------------------------------------------------------- TOTAL REVENUE 238,089 977,307 553,175 1,697,578 14,137,300 EXPENSES: Research and development 1,788,199 1,672,085 3,642,038 3,372,561 35,208,573 General and administrative 596,604 634,833 1,260,253 1,346,851 12,569,250 Depreciation 87,915 98,140 179,878 228,747 2,698,794 Interest expense 11,112 17,010 24,347 34,995 743,546 ----------------------------------------------------------------------------------------- TOTAL EXPENSES 2,483,830 2,422,068 5,106,516 4,983,154 51,220,163 ----------------------------------------------------------------------------------------- NET LOSS ($2,245,741) ($1,444,761) ($4,553,341) ($3,285,576) ($37,082,863) ======================================================================================== Basic and diluted net loss per share ($ 0.25) ($ 0.16) ($ 0.51) ($ 0.37) ===================================================================== Shares used in computing basic and diluted net loss per common share 9,024,296 8,892,995 8,983,987 8,877,493
SEE NOTES TO FINANCIAL STATEMENTS (4) 5 VIRUS RESEARCH INSTITUTE, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED CUMULATIVE JUNE 30, SINCE INCEPTION 1998 1997 (1991) --------------------------------------------------- Cash flows from operating activities: Net Loss ($4,553,341) ($ 3,285,576) ($37,082,863) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 179,878 232,743 2,749,320 Conversion of accrued interest to preferred stock 0 0 58,373 Changes in operating assets and liabilities: Contract receivable 1,000,000 0 0 Increase in prepaid expenses and other assets (52,315) (486,493) (634,408) Increase (decrease) in accounts payable and accrued expenses 581,894 (18,305) 1,978,034 Increase in deferred revenue 0 150,000 0 --------------------------------------------------- Net cash used in operating activities (2,843,884) (3,407,631) (32,931,544) Cash flows from investing activities: Purchases (redemptions) of marketable securities, net 5,599,812 (7,537,770) (10,369,111) Capital expenditures (249,491) (177,968) (3,398,738) Other 0 0 (46,182) --------------------------------------------------- Net cash provided by (used in) investing activities 5,350,321 (7,715,738) (13,814,031) Cash flows from financing activities: Proceeds from notes payable 0 0 7,973,668 Sale and leaseback related to capital acquisitions 0 0 751,311 Principal payments on lease obligations (50,499) (75,525) (889,764) Sale of common stock 94,978 20,602 27,808,181 Sale of preferred stock 0 0 19,258,613 Offering costs 0 0 (3,112,941) Founders' shares reacquired 0 0 (846) Purchase of treasury stock 0 0 (2,768) --------------------------------------------------- Net cash provided by (used in) financing activities 44,479 (54,923) 51,785,454 Net increase (decrease) in cash and cash equivalents 2,550,916 (11,178,292) 5,039,879 Cash and cash equivalents, beginning of period 2,488,963 15,209,180 0 --------------------------------------------------- Cash and cash equivalents, end of period $ 5,039,879 $ 4,030,888 $ 5,039,879 =================================================== Supplemental disclosure of cash flow information: Interest paid during the period $ 7,793 $ 15,775 $ 265,986
SEE NOTES TO FINANCIAL STATEMENTS (5) 6 VIRUS RESEARCH INSTITUTE, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (1) FINANCIAL STATEMENT PRESENTATION The unaudited financial statements of Virus Research Institute, Inc. (the "Company") herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the results of operations for the interim periods presented. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principals have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading. These financial statements and the notes thereto should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. The results for the interim period presented are not necessarily indicative of the results for the full fiscal year. (2) NET LOSS PER COMMON SHARE During 1997, the Company adopted Statement of Financial Accounting Standard No. 128, "Earnings per Share" requiring certain changes in the calculation of per share results. As the Company has reported net losses from operations in the years presented, the computation for basic and diluted earnings per share is identical. (3) RECENT DEVELOPMENTS On May 12, 1998, the Company announced that it has signed a definitive merger agreement with T Cell Sciences, Inc. (T Cell) whereby the Company will be acquired by T Cell. Under the terms of the merger agreement, which is subject to shareholder and regulatory approval, T Cell will issue 1.55 shares of its common stock and 0.2 warrants for each share of the Company's common stock. Each warrant represents the right to purchase one share of T Cell's common stock for $6.00 per share and will expire five years from the closing date. It is anticipated that a significant portion of the purchase price will be written off as in-process technology. T Cell is a biopharmaceutical company engaged in the discovery and development of innovative drugs using novel applications of immunology to prevent and treat cardiovascular, pulmonary and immune disorders. Consummation of the merger is subject to the fulfillment of certain conditions, including approval of the merger by the Company's stockholders, approval of the issuance of T Cell's common stock and warrants by its stockholders and listing of the shares of T Cell's common stock issuable in connection with the merger or upon exercise of T Cell's warrant's on the Nasdaq National Market. It is expected that the consummation of the merger will occur as soon as practicable after the satisfaction of all such conditions. T Cell has filed a Registration Statement on Form S-4 covering the shares of T Cell's common stock to be issued in connection with the merger. (6) 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the financial condition and results of operations of the Company for the three and six months ended June 30, 1998 and 1997 should be read in conjunction with the accompanying unaudited financial statements and the related notes thereto. This report may contain certain forward looking statements which involve risks and uncertainties. Such statements are made in reliance upon safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain factors which may cause the Company's plans and results to differ significantly from the plans and results discussed in forward looking statements. Factors that may cause such differences include, but are not limited to: (i) the scope and results of preclinical and clinical testing, including the progress and results of the Phase II rotavirus clinical trial; (ii) the progress of the Company's research and development programs, including further development of Therapore(TM) and the Adjumer(TM) delivery system; (iii) changes in existing and potential relationships with corporate collaborators; (iv) the Company's ability to compete successfully with larger companies; (v) risks of failure inherent in product development based on new technologies and novel delivery systems; (vi) the Company's ability to attract and retain qualified personnel; (vii) the time and costs of obtaining regulatory approvals, patents, proprietary rights and licenses; (viii) the ability of the Company to establish development and commercialization capacities or relationships; (ix) the costs of manufacturing; (x) the Company's ability to secure future funding; and (xi) consummation of the proposed merger with T Cell. OVERVIEW Virus Research Institute, Inc. (the "Company") is engaged in the discovery and development of systems for the delivery of vaccines and immunotherapeutics, and improved and novel vaccines for adults and children. The Company is developing a portfolio of proprietary vaccine delivery systems designed to improve the efficacy, lower the cost of administration and improve patient compliance for a variety of vaccine products. The Company and its collaborators currently are applying the Company's vaccine delivery systems to develop vaccines for the prevention of influenza, Lyme disease, respiratory syncytial virus (RSV), and H. pylori infections. The Company has entered into long-term collaboration agreements with Pasteur Merieux Connaught (7) 8 (PMC), Pasteur Merieux-OraVax (PM-O) and CSL, Ltd. pursuant to which they may utilize the Company's vaccine delivery systems in developing a number of vaccines. During 1997, the Company entered into a collaboration with SmithKline Beecham (SB) for the development and commercialization of the Company's oral rotavirus vaccine. The Company is also developing its own proprietary vaccine, utilizing antigens licensed exclusively by the Company, for the virus causing genital herpes, HSV2. In addition, the Company has acquired the exclusive license to Therapore(TM), a novel delivery system for the delivery of immunotherapeutics for chronic viral infections and cancers. The Company is in the development stage and has devoted substantially all of its resources to the research and development of its vaccine and immunotherapeutic delivery systems and vaccine candidates and general and administrative expenses. Through June 30, 1998 the Company has not generated any revenue from product sales, but has received an aggregate of $14,137,000 in revenues from licensing and option agreements, research and development agreements and grants, and interest income. There can be no assurance that the Company will receive such revenue in the future. The Company has realized losses in every year since inception, principally as a result of expenditures incurred in its research and development programs. The Company expects to continue to incur significant operating losses over the next several years due primarily to expanded research and development efforts, preclinical and clinical testing of its product candidates, investment in new technologies, investment in production capabilities for certain product candidates and expenditures for commercialization activities. The Company's results of operations may vary significantly from quarter to quarter and year to year due to the timing of license and milestone payments, development expenditures and other factors. NEW DEVELOPMENTS Results from the Company's Phase I/II clinical trial of its rotavirus vaccine candidate became available during 1997. Rotavirus infections are a major cause of acute diarrhea and dehydration in infants. The clinical trial was a double-blinded, placebo controlled study designed to define the optimal vaccine dose and optimal age for immunization. The results demonstrated that the vaccine was generally well tolerated in younger infants and elicited broad immune responses in all infants. Based on these findings and the results of an earlier Phase I study, the Company initiated a Phase II efficacy study during the second quarter of 1997. This trial, which was (8) 9 conducted at four U.S. medical centers, was designed to examine the vaccine's ability to prevent rotavirus disease and to further study the safety of the vaccine. A total of 215 infants were enrolled in the study and were immunized with the vaccine. On August 13, 1998, the Company announced the results of this Phase II efficacy study. The results showed that approximately 90 percent of the vaccinated infants were protected from rotavirus disease. Examination of the safety data revealed only mild transient symptoms in a small number of infants. During 1997, the Company established a collaboration with SB to develop and commercialize the Company's rotavirus vaccine. Under the terms of the agreement, SB will assume responsibility for and fund all subsequent clinical and other development activities. The Company will be entitled to receive milestone payments and royalties on vaccine sales under the agreement which grants SB exclusive worldwide marketing rights to the rotavirus vaccine. Based on the results of an earlier Phase I clinical trial, the Company's collaborator, PMC, conducted a Phase II safety and immunogenicity clinical trial of an Adjumer(TM)-formulated influenza vaccine during 1997. In the Phase I study conducted in France, 48 young and 41 elderly adults were given single injections of either the vaccine formulated with Adjumer(TM) or the same vaccine without Adjumer(TM). A total of 430 elderly adults participated in the Phase II study, which was conducted in Peru. Preliminary results of the Phase II clinical trial confirmed that the Adjumer(TM)-formulated vaccine was well tolerated. However, results of the Phase II study appear to be inconsistent in certain respects with Phase I results. The degree of improvement in immune responses elicited by the Adjumer(TM) influenza vaccine was less in comparison to the control group than was elicited in the Phase I study. At the same time, certain control group results appear to be significantly higher in the Phase II than in the Phase I clinical trial. The Company and PMC are currently analyzing and assessing the results of the Phase II study to determine the appropriate next steps to take with the clinical development of the product. The Adjumer(TM) research and development program with PMC, which encompasses a number of additional vaccine products, continues. During 1997, the Company was granted an exclusive worldwide license by Harvard University to Therapore(TM), a novel immunotherapeutic delivery system. Therapore(TM) will initially be evaluated in therapies to deliver products for the treatment of chronic viral infections and cancers. Under the terms of the agreement, the Company will be obligated to pay license fees, milestone payments and royalties to Harvard. In March 1998, the Company received a non-exclusive license from The (9) 10 National Institutes of Health to certain intellectual property related to the Therapore(TM) system. In January 1998, the Company entered into a license agreement with Heska Corporation (Heska) to collaborate on the development and commercialization of a number of Heska's animal health vaccines through the use of Adjumer(TM). Under the terms of the agreement, based on progress in development, the Company will be entitled to receive license fees, milestone payments and royalties. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997 Total revenue declined by $739,000 to $238,000 for the three months ended June 30, 1998 from $977,000 for the same period in 1997. Licensing and option revenue for the three months ended June 30, 1997 consisted of a $250,000 payment received in conjunction with a licensing agreement with PM-O. Research and development revenue for the second quarter of 1997 consisted of revenue associated with agreements with PMC and Chiron. No licensing and option revenue or research and development revenue was recorded during the second quarter of 1998. Interest income declined by $102,000 to $238,000 for the second quarter in 1998 from $340,000 in the 1997 quarter due to a reduction in cash, cash equivalents and investments. The Company's total expenses increased by $62,000 to $2,484,000 for the three months ended June 30, 1998 from $2,422,000 in 1997. The increase is attributable to a $116,000 increase in research and development expenses from $1,672,000 in 1997 to $1,788,000 in the first quarter of 1998. The increase was primarily attributable to costs associated with the rotavirus Phase II clinical trial and to increased costs related to the Therapore(TM) research effort. General and administrative expenses declined by $38,000 to $597,000 for the three months ended June 30, 1998 from $635,000 for the 1997 quarter due to reduced investor relations costs and corporate taxes. Depreciation expense declined $10,000 to $88,000 in the quarter ended June 30, 1998 from $98,000 in the 1997 quarter as a result of the full depreciation of various equipment and leasehold improvements. Interest and other expense declined slightly, by $6,000, to $11,000 in the 1998 quarter from $17,000 in 1997. (10) 11 SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997 Total revenue for the Company declined $1,145,000 from $1,698,000 for the six months ended June 30, 1997 to $553,000 for the same period in 1998. Licensing and option revenue declined $199,000 from $250,000, which represented a payment in conjunction with a licensing agreement with PM-O, for the 1997 period to $51,000 for the six months ended June 30, 1998. Research and development revenue of $775,000 for the year to date period ended June 30, 1997 consisted of research support funding received pursuant to agreements with PMC and Chiron. No research and development revenue was earned during the six months ended June 30, 1998. Expenses increased $123,000 to $5,106,000 for the six months ended June 30, 1998 from $4,983,000 in 1997. The increase is attributable to an increase of $270,000 in research and development expenses, from $3,372,000 for 1997 to $3,642,000 for the 1998 six month period. The increase is primarily the result of the cost of conducting the Phase II rotavirus clinical trial and an increase in sponsored research and other costs associated with the Therapore(TM) research program. General and administrative expenses declined $87,000 to $1,260,000 for the six months ended June 30, 1998 from $1,347,000 for the same period in 1997 principally due to a reduction in various corporate taxes. Depreciation expense declined $49,000 to $180,000 in 1998 from $229,000 in 1997 due to the full depreciation of various equipment. Interest expense declined slightly, by $11,000, from $35,000 in 1997 to $24,000 in 1998. LIQUIDITY AND CAPITAL RESOURCES From inception (February 11, 1991) through June 30, 1998, the Company's cash expenditures have exceeded revenues. The Company's operations have been funded principally through the sale of equity, loans from stockholders, equipment lease financing and payments under licensing, option and research and development agreements. Net cash used by the Company's operations since inception was $32,932,000, primarily to fund research and development efforts and general and administrative expenses. Since inception the Company has incurred $3,399,000 in capital expenditures, primarily for leasehold improvements and equipment for the Company's laboratories. During the six months ended June 30, 1998 the Company incurred $249,000 in (11) 12 capital expenditures primarily on expenditures required for the polyphosphazene manufacturing process and for the Therapore(TM) research effort. The Company anticipates incurring approximately $400,000 in capital expenditures during 1998, primarily on equipment necessary for the polyphosphazene manufacturing process. From inception through June 30, 1998, the Company raised net proceeds of approximately $51,924,000 through the sale of equity securities. Included in this amount are net proceeds of $24,743,000 from the Company's initial public offering in 1996 and the conversion to common stock of an aggregate of $7,974,000 in notes payable to certain stockholders. In addition, from inception the Company has funded $751,000 of capital expenditures through sale and leaseback transactions. The Company has undertaken an assessment of the cost and impact on operations of addressing the Year 2000 issue in connection with its computer systems. As a result of such assessment, the Company believes that all of its major software will be Year 2000 compliant and the Company does not believe the Year 2000 issue will have a material impact on its business, operations or financial condition. The Company is in the process of soliciting its major suppliers and service providers to ascertain their Year 2000 status. The following discussion is applicable to the Company prior to the T Cell merger. The Company expects to incur substantial additional costs, including those related to research and development activities, preclinical studies, clinical trials, obtaining regulatory approvals, process scale up and manufacture, and the expansion of its facilities. The Company anticipates that its existing funds, which include the proceeds from its initial public offering and interest earned thereon, should be sufficient to fund its operating and capital requirements as currently planned for at least the next twelve months. However, the Company's cash requirements may vary materially from those now planned, due to many factors, including, but not limited to, the progress of the Company's research and development programs, the scope and results of preclinical and clinical testing, changes in existing and potential relationships with corporate collaborators, the time and cost in obtaining regulatory approvals, the costs involved in obtaining and enforcing patents, proprietary rights and any necessary licenses, the ability of the Company to establish development and commercialization capacities or relationships, the costs of manufacturing and other factors. In the future, the Company may need to raise substantial additional funds through further financing, including public or private equity offerings and collaborations with corporate partners. There can (12) 13 be no assurance that funds will be available on terms acceptable to the Company, if at all. If adequate funds are not available, the Company may be required to delay, scale back, or eliminate certain of its product development programs or to license to others the right to commercialize products or technologies the Company would otherwise seek to develop and commercialize itself, any of which could have a material adverse effect on the Company. (13) 14 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds Item 2 (d) Use of Proceeds from the Company's Initial Public Offering (the "IPO") (1) Effective date of Registration Statement on Form S-1: June 5, 1996; Commission file number: 333-3378. (4) (vii) The Company's use of proceeds from its IPO, as reported in its Annual Report on Form 10-K for the year ended December 31, 1997, is updated as follows: Purchase and installation of machinery and equipment: $659,000 Repayment of indebtedness: $1,000,000 Working Capital: $13,142,000 Temporary investments (money market account and short-term instruments): $9,942,000 Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders The Company held its 1998 Annual Meeting of Stockholders on May 7, 1998. At the meeting, the following six directors were elected by stockholders to serve until the 1999 Annual Meeting: Vote For Vote Withheld -------- ------------- Robert J. Hennessey 7,188,632 2,079 Frederick W. Kyle 7,188,632 2,079 John W. Littlechild 7,188,632 2,079 Alan Mendelson 7,188,632 2,079 William A. Packer 7,188,632 2,079 J. Barrie Ward 7,188,632 2,079 At the record date of March 19, 1998, there were 8,979,029 shares of common stock outstanding and entitled to vote. More than 4,489,515 shares, constituting a quorum, were represented at the Meeting either in person or by proxy. (14) 15 Item 5. Other Information On May 12, 1998, the Company entered into a definitive merger agreement with T Cell Sciences, Inc. (T Cell) whereby the Company will be acquired by T Cell. Under the terms of the merger agreement, which is subject to shareholder and regulatory approval, T Cell will issue 1.55 shares of its common stock and 0.2 warrants for each share of the Company's common stock. Each warrant represents the right to purchase one share of T Cell's common stock for $6.00 per share and will expire five years from the closing date. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11.1 Statement regarding computation of earnings per share 27.1 Financial Data Schedule (b) No reports on Form 8-K were filed by the Company during the quarter ended June 30, 1998. (15) 16 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. Dated: August 13, 1998 VIRUS RESEARCH INSTITUTE, INC. a Delaware Corporation (Registrant) By: /s/ J. Barrie Ward ------------------------------------- J. Barrie Ward Chief Executive Officer By: /s/ William A. Packer ------------------------------------- William A. Packer President, Chief Financial Officer (16) EX-11 2 COMPUTAION OF EARNINGS PER SHARE 1 ITEM 6 EXHIBIT 11.1 STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE VIRUS RESEARCH INSTITUTE, INC. (A DEVELOPMENT STAGE COMPANY) COMPUTATION OF NET LOSS PER COMMON SHARE
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1998 1997 1998 1997 --------------------------------------------------------------------- Net loss ($2,245,741) ($1,444,761) ($4,553,341) ($3,285,576) Shares used in computing net loss per common share: Weighted average common stock outstanding during the period 9,024,296 8,892,995 8,983,987 8,877,493 Common stock equivalents (1) N/A N/A N/A N/A -------------------------------------------------------------------- Weighted average common shares outstanding 9,024,296 8,892,995 8,983,987 8,877,493 Net loss per common share ($ 0.25) ($ 0.16) ($ 0.51) ($ 0.37) ====================================================================
(1) No common stock equivalents have been included in the three and six months ended June 30, 1998 and June 30, 1997 as their effect would be antidilutive. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VIRUS RESEARCH INSTITUTE 1998 SECOND QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K 12/31/97. U.S. DOLLARS 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1 5,039,879 10,369,111 0 0 0 16,132,051 3,381,293 2,596,446 16,951,371 1,999,887 0 0 0 9,045 14,942,439 16,951,371 0 553,175 0 0 5,106,516 0 0 (4,553,341) 0 (4,553,341) 0 0 0 (4,553,341) (0.51) (0.51)
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