<PAGE> 1
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 Commission File No.
MARCH 31, 1997 0-26770
------------------ -------------------
NOVAVAX, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2816046
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8320 GUILFORD ROAD, COLUMBIA, MD 21046
-------------------------------- -----------
(Address of principal executive offices) (Zip code)
(301) 854-3900
- --------------------------------------------------------------------------------
Registrant's telephone number, 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
----- -----
The number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Shares Outstanding at April 30, 1997
11,888,507
<PAGE> 2
NOVAVAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Total revenues $ - $ -
Cost and expenses:
General and administrative $ 642,253 $ 435,739
Research and development 601,623 826,073
----------- -----------
Total costs and expenses (1,243,876) (1,261,812)
Interest income 34,254 50,630
Net loss $(1,209,622) $(1,211,182)
=========== ===========
Net loss per common share $ (.11) $ (.12)
====== ======
Weighted average number of common
shares outstanding 10,889,546 9,942,936
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
1
<PAGE> 3
NOVAVAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,841,069 $ 2,481,258
Marketable securities - 500,820
Prepaid expenses and
other current assets 103,048 171,027
----------- -----------
Total current assets 6,944,117 3,153,105
----------- -----------
Property and equipment - cost 1,413,440 1,383,123
Accumulated depreciation (444,531) (405,212)
----------- -----------
968,909 977,911
----------- -----------
Patent costs, net of accumulated
amortization of $458,600 and
$430,057 in 1997 and 1996,
respectively 1,500,593 1,484,880
Other assets 77,177 96,056
----------- -----------
Total assets $ 9,490,796 $ 5,721,952
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital lease obligations $ 10,744 $ 10,744
Accounts payable 269,217 367,754
Accrued payroll 85,633 196,593
Payable to former parent - 6,176
----------- -----------
Total current liabilities 365,594 581,267
----------- -----------
Capital lease obligations,
less current maturities 21,056 23,607
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value,
2,000,000 shares authorized - -
Common stock, $.01 par value,
30,000,000 shares authorized,
11,888,507 and 10,660,710 shares
issued and outstanding in 1997 and
1996, respectively 118,885 106,607
Additional paid-in capital 37,449,900 32,409,899
Accumulated deficit (28,005,786) (26,796,164)
Deferred compensation on stock
options granted (458,853) (603,264)
------------ -----------
Total stockholders' equity 9,104,146 5,117,078
------------ -----------
Total liabilities and
stockholders' equity $ 9,490,796 $ 5,721,952
============ ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
<PAGE> 4
NOVAVAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,209,622) $(1,211,182)
Reconciliation of net loss to net cash
used by operating activities:
Non-cash compensation expense 144,411 352,661
Depreciation and amortization 67,862 72,668
Issuance of stock to 401(k) plan 2,499 -
Changes in operating assets and liabilities:
Prepaid and other assets 96,858 27,393
Payable to/receivable from former parent (6,176) 42,783
Accounts payable and accrued expenses (209,497) (27,380)
----------- -----------
Net cash used by operating activities (1,113,665) (743,057)
----------- -----------
Cash flows from investing activities:
Proceeds from the sale of marketable securities 500,820 -
Capital expenditures (30,317) -
Deferred patent costs (44,256) (74,718)
----------- -----------
Net cash provided (used) by investing activities 426,247 (74,718)
----------- -----------
Cash flows from financing activities:
Payment of capital lease obligations (2,551) -
Proceeds from the private placement of
common stock, net 5,002,718 -
Proceeds from exercise of common
stock options 47,062 70,120
----------- -----------
Net cash provided by financing activities 5,047,229 70,120
----------- -----------
Net change in cash and cash equivalents 4,359,811 (747,655)
Cash and cash equivalents at beginning of year 2,481,258 4,634,236
----------- -----------
Cash and cash equivalents at March 31, 1997 and 1996 $ 6,841,069 $ 3,886,581
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE> 5
NOVAVAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Novavax its wholly-owned subsidiaries Micro-Pak, Inc. and Micro Vesicular
Systems, Inc., and Lipovax, Inc. All significant intercompany accounts and
transactions have been eliminated. These statements have been prepared by
Novavax, Inc. without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission, and reflect all adjustments which, in the
opinion of management, are necessary for a fair statement of the results for
the interim periods presented. All such adjustments are of a normal recurring
nature.
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted pursuant to such rules and regulations, although
the Company believes the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements 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 year ended
December 31, 1996.
2. Net Loss Per Common Share
Net loss per share of common stock is computed by dividing net loss by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the three month periods ended March 31, 1997 and March 31,
1996, respectively. Options and warrants granted subsequent to December 12,
1995, (the "Distribution Date") the date on which the Company's former parent,
IGI, Inc., distributed its majority interest in Novavax to the IGI stockholders
(the "Distribution") are antidilutive and therefore have not been included in
shares outstanding.
4
<PAGE> 6
NOVAVAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Transactions with Former Parent
Under a Transition Services Agreement, established at the time of the
Distribution, IGI continued to provide certain administrative services to
Novavax, including services relating to human resources, purchasing and
accounting, data processing and payroll services from the Distribution until
June 30, 1996. Novavax paid IGI a fee for all services provided by IGI
employees, based on IGI's costs. For the period ended March 31, 1996, $145,464
of such costs were incurred.
4. Income Taxes
Novavax has recorded no net provision for income taxes in the accompanying
financial statements due to the existence of net operating losses.
5
<PAGE> 7
NOVAVAX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following discussion may contain "forward-looking" statements, as that
term is defined by (i) the Private Securities Litigation Reform Act of 1995
(the "Reform Act") and (ii) in releases made by the Securities and Exchange
Commission from time to time. Such statements should be read in conjunction
with the cautionary factors described in Exhibit 99 attached to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 and
incorporated into this discussion by this reference and the consolidated
financial statements and related notes. The Company's future operating results
may be affected by various trends and factors that are beyond the Company's
control. These include among other factors, changes in general economic
conditions, rapid or unexpected changes in technologies and uncertain business
conditions that affect the pharmaceutical and vaccine industries. Accordingly,
past results and trends should not be used by investors to anticipate future
results or trends.
RESULTS OF OPERATIONS
The Company has incurred net losses since its inception from the
development of its technologies to human pharmaceuticals, vaccines and vaccine
adjuvants. Novavax expects the losses to increase in the near-term as it
conducts additional human clinical trials and seeks regulatory approval for its
product candidates. The Company also expects to continue to incur substantial
operating losses over the extensive time period required to develop the
Company's products, or until such time as revenues, to offset the losses, are
sufficient to fund its continuing operations.
6
<PAGE> 8
NOVAVAX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
Three months ended March 31, 1997 compared to 1996
The net loss of $1,209,622 for the first quarter ended March 31, 1997, was
virtually unchanged from the net loss of $1,211,182 in the first quarter ended
March 31, 1996.
General and administrative expenses were $642,253 for the three months
ended March 1997 compared to $435,739 incurred in the first three months of
1996. Increased staffing in administration and accounting in the latter part
of 1996, including the addition of a Chief Financial Officer and a Chief
Executive Officer, was a significant part of the variance between the first
quarter 1996 and the first quarter 1997. Additional non-recurring charges
together with an increase in the non-cash compensation expense related to
non-employee options and warrants granted during 1996, also contributed to the
$206,514 increase.
Research and development expenses were $601,623 and $826,073 for the three
months ended March 31, 1997 and 1996, respectively. The decrease in these
expenses was a direct result of the non-cash charges related to the
below-market priced stock options issued at the time of the Distribution, of
$116,717 in the first quarter 1997, compared to $352,500 in the first quarter
1996. Expenses exclusive of these totaled $484,906 and $473,573 for the
periods ended March 31, 1997 and 1996, respectively.
Net interest income of $34,254 was recorded in the three months ended
March 31, 1997 compared with net interest income of $50,630 in the three months
ended March 31, 1996 due to lower than average cash balances during the first
quarter 1997 prior to the receipt of the $5,002,718, net of transaction costs,
for the sale of 1,200,000 common shares and warrants to purchase an additional
1,200,000 common shares to Anaconda Opportunity Fund, L.P.
Liquidity and Capital Resources
Novavax's capital requirements depend on numerous factors, including
but not limited to the progress of its research and development programs, the
progress of preclinical and clinical testing, the time and costs involved in
obtaining regulatory approvals, the costs of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights, competing
technological and market developments, and changes in Novavax's development of
commercialization activities and arrangements. In less than one year the
Company has moved three product candidates into clinical trials. This rapid
evolution prompted the need for expansion in late 1996. Further expansion
necessary to establish commercial-scale manufacturing capabilities and the
future purchases of capital equipment are subject to the Company's ability to
raise funds through equity financing, or collaborative arrangements with
corporate partners.
7
<PAGE> 9
NOVAVAX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)
The Company used $1,113,665 of its cash resources to fund the activities
of its research and development programs, costs associated with obtaining
regulatory approvals and preclinical and clinical testing. In addition to the
proceeds of $47,062 received from the exercise of stock options, Novavax
received $5,002,718, net of all transaction costs, from the sale of 1,200,000
common shares and warrants to purchase an additional 1,200,000 common shares
that were privately placed with Anaconda Opportunity Fund, L.P. in March 1997.
Cash and cash equivalents on March 31, 1997 totaled $6,841,069. Novavax
estimates that existing cash resources will be sufficient to finance its
operations at its current level of development activity for approximately 18 to
20 months.
Past spending levels are not necessarily indicative of future spending.
Future expenditures for product development, especially relating to outside
testing and human clinical trials, are discretionary and, accordingly, can be
adjusted to available cash. Moreover, the Company will seek to establish one
or more collaborations with industry partners to defray the costs of clinical
trials and other related activities. Novavax will also seek to obtain
additional funds through public or private equity or debt financings,
collaborative arrangements with pharmaceutical companies or from other sources.
There can be no assurance that additional funding or bank financing will be
available at all or on acceptable terms to permit successful commercialization
of Novavax or Novavax's technology and products. If adequate funds are not
available, Novavax may be required to significantly delay, reduce the scope of
or eliminate one or more of its research or development programs, or seek
alternative measures including arrangements with collaborative partners or
others that may require Novavax to relinquish rights to certain of its
technologies, product candidates or products.
New Account Pronouncement
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
which is effective for years ending after December 15, 1997. The impact of
this statement on loss per share amounts is not material for the periods
presented.
8
<PAGE> 10
NOVAVAX, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 - Computation of Net loss Per Common Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
9
<PAGE> 11
NOVAVAX, INC. AND SUBSIDIARIES
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.
NOVAVAX, INC.
(Registrant)
Date: May 9, 1997
By: /s/ ELAINE T. BENNETT
---------------------------
Elaine T. Bennett
Vice President
(Principal Financial
and Accounting Officer)
10
<PAGE> 1
EXHIBIT 11
NOVAVAX, INC. AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------
1997 1996
-------- --------
<S> <C> <C>
Net loss $(1,209,622) $(1,211,182)
============ ============
Weighted average of common
shares outstanding 10,889,546 9,942,936
============ ============
Net loss per common
share outstanding $(.11) $(.12)
===== =====
</TABLE>
Common stock equivalents were not included in the above as they are
antidilutive.
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 6,841,069
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,944,117
<PP&E> 1,413,440
<DEPRECIATION> (444,531)
<TOTAL-ASSETS> 9,490,796
<CURRENT-LIABILITIES> 365,594
<BONDS> 0
0
0
<COMMON> 118,885
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,104,146
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,243,876
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,209,622)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,209,622)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,209,622)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
