<PAGE> 1
United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20791
AMARILLO BIOSCIENCES, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
TEXAS 75-1974352
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(State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
800 West Ninth, Amarillo, TX 79101
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(Address of principal executive offices) (Zip Code)
806-376-1741 FAX 806-376-9301
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(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 .
---- ---
As of March 31, 1997, there were 5,414,232 shares of the issuer's common stock
outstanding.
This report contains 12 pages.
1
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AMARILLO BIOSCIENCES, INC.
INDEX
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE NO.
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<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1996 and March 31, 1997 . 3
Consolidated Statements of Operations - Three Months Ended March 31, 4
1996 and 1997 and Cumulative from June 25, 1984 (Inception) through
March 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Condensed Consolidated Statements of Cash Flows - Three Months Ended 5
March 31, 1996 and 1997 and Cumulative from June 25, 1984 (Inception)
through March 31, 1997 . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Results of Operations and 7
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . .
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
2
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AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,799,297 $ 2,114,119
Marketable securities 5,984,370 5,984,370
Prepaid expenses 107,535 86,326
Other current assets -- 76,305
----------- ------------
Total current assets 8,891,202 8,261,120
Property and equipment, net 144,507 139,207
Patent license, net of accumulated amortization of $66,471 and 58,529 56,716
$68,284 at December 31, 1996 and March 31, 1997, respectively
Organization cost, net of accumulated amortization of $4,667 and 330 198
$4,799 at December 31, 1996 and March 31, 1997, respectively
Investment in ISI common stock 471,500 463,500
----------- ------------
Total assets $ 9,566,068 $ 8,920,741
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 138,298 $ 61,055
Accrued interest expense 273,296 302,921
Other accrued expenses 65,357 19,673
----------- ------------
Total current liabilities 476,951 383,649
Notes payable to related party 2,300,000 2,300,000
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Total liabilities 2,776,951 2,683,649
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value:
Authorized shares - 10,000,000
Issued shares - 5,414,232 54,142 54,142
Additional paid-in capital 13,312,638 13,312,638
Deficit accumulated during the development stage (6,574,163) (7,118,188)
Unrealized loss on marketable securities (3,500) (11,500)
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Total stockholders' equity 6,789,117 6,237,092
----------- ------------
Total liabilities and stockholders' equity $ 9,566,068 $ 8,920,741
=========== ============
</TABLE>
See accompanying notes.
3
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AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Cumulative from
March 31, June 25,1984
-------------------------- (Inception) through
1996 1997 March 31, 1997
---------- ---------- -------------------
<S> <C> <C> <C>
Revenues:
Contract revenues $ 402,574 $ -- $ 9,000,000
Interferon sales 2,000 -- 420,578
Interest income 11,154 101,068 807,186
Sublicense fees -- -- 113,334
Royalty income -- -- 31,544
Other -- 26,000 578,371
---------- ---------- ------------
415,728 127,068 10,951,013
Expenses:
Research and development
expenses 134,209 258,325 7,353,555
Selling, general, and
administrative expenses 238,712 383,143 10,069,137
Interest expense 30,000 29,625 611,509
---------- ---------- ------------
402,921 671,093 18,034,201
---------- ---------- ------------
Income (loss) before income taxes 12,807 (544,025) (7,083,188)
Income tax expense -- -- (35,000)
---------- ---------- ------------
Net income (loss) $ 12,807 $ (544,025) $ (7,118,188)
========== ========== ============
Income (loss) per share $ -- $ (.10)
========== ==========
Weighted average shares outstanding 3,035,232 5,414,232
========== ==========
</TABLE>
See accompanying notes.
4
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AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended Cumulative from
March 31, June 25,1984
-------------------------- (Inception) through
1996 1997 March 31, 1997
---------- ---------- -------------------
<S> <C> <C> <C>
Net cash used in operating activities $ (381,780) $ (685,178) $ (6,042,806)
---------- ---------- ------------
Net cash provided by (used in) investing
activities (2,467) -- (7,020,094)
---------- ---------- ------------
Net cash provided by financing activities -- -- 15,177,019
---------- ---------- ------------
Net increase (decrease) in cash and cash
equivalents (384,247) (685,178) 2,114,119
---------- ---------- ------------
Cash and cash equivalents at beginning
of period 1,108,527 2,799,297 --
---------- ---------- ------------
Cash and cash equivalents at end of
period $ 724,280 $2,114,119 $ 2,114,119
========== ========== ============
Supplemental Disclosure of Cash Flow
Information
Cash paid for income taxes $ -- $ -- $ 37,084
========== ========== ============
Cash paid for interest $ -- $ -- $ 6,466
========== ========== ============
</TABLE>
See accompanying notes.
5
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AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation. The accompanying consolidated financial
statements, which should be read in conjunction with the consolidated
financial statements and footnotes included in the Company's Form
10-KSB, are unaudited (except for the December 31, 1996 consolidated
balance sheet which was derived from the Company's audited financial
statements), but have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary
for a fair presentation have been included.
Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the
full year ending December 31, 1997.
2. Loss per share. Loss per share is computed based on the weighted
average number of common shares outstanding.
During March 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share". This statement currently has
no effect on the computation of loss per share as the Company is in a
net loss position and the potential dilutive effect of common stock
equivalents is not considered in the computation.
3. Initial public offering. On August 13, 1996, the Company completed
its initial public offering of 2,000,000 shares of its common stock.
Net proceeds to the Company were approximately $8,072,000. On August
29, 1996, the underwriter exercised its option to acquire an
additional 300,000 shares of common stock with net proceeds to the
Company of $1,305,000.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to Three Months
----------------------------------------------------------
Ended March 31, 1997.
--------------------
During the three months ended March 31, 1996, the Company had
total revenues of $415,728 compared to total revenues of
$127,068 during the three months ended March 31, 1997.
Revenues for 1996 consisted primarily of interest income of
$11,154 and contract revenues in the amount of $402,574.
During the first quarter of 1997, the Company received a
$26,000 partial payment for the preparation of a research
agreement and business plan for a foreign country. Other 1997
revenues consisted of interest income of $101,068. The
approximately $90,000 increase in interest income in 1997
compared to 1996 is due to the increased investment of funds
resulting from the Company's initial public offering (IPO)
completed in August 1996.
During the 1996 first quarter, research and development
expenses were $134,209 as compared to $258,325 during the 1997
first quarter. The $124,116 increase in R&D expenses in 1997
was due to the commencement of new clinical studies.
During 1996 and 1997, the Company incurred general and
administrative expenses of $238,712 and $383,143,
respectively. The $144,431 increase in 1997 was due primarily
to additional expenses resulting from the Company becoming a
publicly held company. These expenses consisted primarily of
legal and audit fees, public relations and investor relations
fees, and additional insurance coverage.
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had cash of $2,114,119 and
marketable securities of $5,984,370 with accounts payable of
$61,055 and other funding commitments for clinical studies of
approximately $1.7 million.
The Company intends to focus its development activities on the
treatment of Sjogrens syndrome, oral mucositis in cancer
patients, and hepatitis B and C ("Primary Development
Projects").
The Company anticipates, based on its currently proposed plans
and assumptions relating to its operations (including
assumptions regarding the progress of its research and
development and the timing and costs associated with its
Primary Development Projects), that the Company's existing
capital resources will be sufficient to satisfy the Company's
estimated cash requirements for at least the next 21 months.
Unless the Company generates significant revenues during such
period, which the Company believes is unlikely, the Company
will need additional financing to fully fund such development.
Moreover, the Company's estimate of the amount required to
complete its Primary Development Projects may prove to be
inaccurate. The Company has no current arrangements with
respect to, or sources of, additional financing and it is not
anticipated that any of the officers, directors or
shareholders of the Company will provide any portion of the
Company's future financing requirements. There can be no
assurance that, when needed, additional financing will be
available to the Company on commercially reasonable terms, or
at all. In the event that the Company's plans change, its
assumptions change or prove inaccurate, or if the remaining
net proceeds of the Company's recent public offering, together
with other capital resources, otherwise prove to be
insufficient to fund operations, the Company could be required
to seek additional financing sooner than currently
anticipated. Any inability to obtain additional financing
when needed would have a material adverse effect on the
Company, including requiring the Company to significantly
curtail or possibly cease its operations.
8
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27. Financial Data Schedule
No reports on Form 8-K were filed during the quarter ended
March 31, 1997.
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMARILLO BIOSCIENCES, INC.
Date: May 8, 1997 By: /s/ JOSEPH M. CUMMINS
--------------------------------
Joseph M. Cummins
President and
Chief Executive Officer
Date: May 8, 1997 By: /s/ CHARLES H. HUGHES
--------------------------------
Charles H. Hughes
Executive Vice President and
Chief Financial Officer
(Chief Accounting Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN ITS FORM 10-QSB
FOR THE PERIOD ENDED MARCH 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,114,119
<SECURITIES> 5,984,370
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,261,120
<PP&E> 265,080
<DEPRECIATION> 125,873
<TOTAL-ASSETS> 8,920,741
<CURRENT-LIABILITIES> 383,649
<BONDS> 2,300,000
0
0
<COMMON> 54,142
<OTHER-SE> 6,182,950
<TOTAL-LIABILITY-AND-EQUITY> 8,920,741
<SALES> 0
<TOTAL-REVENUES> 127,068
<CGS> 0
<TOTAL-COSTS> 258,325
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,625
<INCOME-PRETAX> (544,025)
<INCOME-TAX> 0
<INCOME-CONTINUING> (544,025)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (544,025)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
