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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, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20791
AMARILLO BIOSCIENCES, INC.
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(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 .
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As of March 31, 1998, there were 5,414,232 shares of the issuer's common stock
outstanding.
This report contains 13 pages.
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AMARILLO BIOSCIENCES, INC.
INDEX
<TABLE>
<S> <C> <C>
PART I: FINANCIAL INFORMATION PAGE NO.
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Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1997 and March 31, 1998 . . . . 3
Consolidated Statements of Operations - Three Months Ended March 31,
1997 and 1998 and Cumulative from June 25, 1984 (Inception) through
March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1997 and 1998 and Cumulative from June 25, 1984 (Inception)
through March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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,
1997 1998
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 879,170 $ 299,259
Marketable securities 6,007,182 6,089,092
Other current assets 70,779 57,142
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Total current assets 6,957,131 6,445,493
Property and equipment, net 125,179 125,263
Patent license, net of accumulated amortization of $73,824 and
$75,637 at December 31, 1997 and March 31, 1998, respectively 51,176 49,363
Organization cost, net of accumulated amortization of $4,962 and
$6,084 at December 31, 1997 and March 31, 1998, respectively 1,122 --
Investment in ISI common stock 114,023 93,516
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Total assets $7,248,631 $6,713,635
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 74,754 $ 166,284
Accrued interest expense 91,356 120,606
Other accrued expenses 47,958 19,324
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Total current liabilities 214,068 306,214
Notes payable to related party 2,600,000 2,600,000
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Total liabilities 2,814,068 2,906,214
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 13,392,138 13,392,138
Deficit accumulated during the development stage (9,045,415) (9,652,050)
Unrealized gain (loss) on marketable securities 33,698 13,191
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Total stockholders' equity 4,434,563 3,807,421
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Total liabilities and stockholders' equity $7,248,631 $6,713,635
========== ==========
</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
March 31, Cumulative from June
------------------------------- 25, 1984 (Inception)
1997 1998 through March 31, 1998
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<S> <C> <C> <C>
Revenues:
Contract revenues $ -- $ -- $ 9,000,000
Interferon sales -- -- 420,974
Interest income 101,068 89,811 1,207,629
Sublicense fees -- -- 113,334
Royalty income -- -- 31,544
Gain on sale of ISI stock -- -- 188,562
Other 26,000 -- 604,371
------------- ------------- -------------
127,068 89,811 11,566,414
Expenses:
Research and development
expenses 349,680 368,517 10,348,111
Selling, general, and
administrative expenses 291,788 298,679 10,106,159
Interest expense 29,625 29,250 729,194
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671,093 696,446 21,183,464
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Loss before income taxes (544,025) (606,635) (9,617,050)
Income tax expense -- -- 35,000
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Net loss $ (544,025) $ (606,635) $ (9,652,050)
============= ============= =============
Basic and diluted loss per share $ (0.10) $ (0.11)
============= =============
Weighted average shares outstanding 5,414,232 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 June
March 31, 25, 1984 (Inception)
--------------------------------- through
1997 1998 March 31, 1998
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<S> <C> <C> <C>
Net cash used in operating activities $ (685,178) $ (575,470) $(8,647,351)
----------- ----------- -----------
Net cash provided by (used in) investing
activities -- (4,441) (6,530,409)
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Net cash provided by financing activities -- -- 15,477,019
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Net increase (decrease) in cash and cash
equivalents (685,178) (579,911) 299,259
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Cash and cash equivalents at beginning
of period 2,799,297 879,170 --
----------- ----------- -----------
Cash and cash equivalents at end of
period $ 2,114,119 $ 299,259 $ 299,259
=========== =========== ===========
Supplemental Disclosure of Cash Flow
Information
Cash paid for income taxes $ -- $ -- $ 37,084
=========== =========== ===========
Cash paid for interest $ -- $ -- $ 6,466
=========== =========== ===========
</TABLE>
See accompanying notes.
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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, 1997 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, 1998 are not
necessarily indicative of the results that may be expected for the
full year ending December 31, 1998.
2. Loss per share. Loss per share is computed based on the weighted
average number of common shares outstanding.
3. Reclassification. Certain amounts have been reclassified from
selling, general and administrative expenses to research and
development expenses for the three months ended March 31, 1997. The
impact of the reclassification was approximately $91,000.
4. Comprehensive income. As of January 1, 1998, the Company adopted
Financial Accounting Standards Board Statement No. 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the
reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's
net income or shareholders' equity. Statement 130 requires unrealized
gains or losses on the Company's available-for-sale securities, which
prior to adoption were reported separately in shareholders' equity, to
be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of
Statement 130.
During the first quarter of 1998 and 1997, total comprehensive income
amounted to $627,142 and $552,025.
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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, 1997 Compared to Three Months Ended March
31, 1998.
During the three months ended March 31, 1997, the Company had total
revenues of $127,068 compared to total revenues of $89,811 during the
three months ended March 31, 1998. 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. Revenues for
the first quarter of 1998 consisted of interest income of $89,811.
During the 1997 first quarter, research and development expenses were
$349,680 as compared to $368,517 during the 1998 first quarter. The
$18,837 increase in research and development expenses in 1998 was due
to the completion of certain clinical studies and the commencement of
new clinical studies.
During 1997 and 1998, the Company incurred general and administrative
expenses of $291,788 and $298,679, respectively. There was no
significant difference reflected in 1998 compared to 1997.
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash of $299,259 and marketable
securities of $6,089,092 with accounts payable of $166,284 and other
funding commitments for clinical studies of approximately $627,000.
The Company intends to focus its development activities on the
treatment of Sjogren's syndrome, fibromyalgia, opportunistic
infections in patients who are HIV positive, myeloproliferative
diseases, hepatitis B and hepatitis C.
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 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,
the Company will need additional financing to fully fund such
development. Moreover, the Company's estimate of the amount required
to complete its 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 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.
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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,
1998.
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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 11, 1998 By: /s/ JOSEPH M. CUMMINS
-----------------------------------------
Joseph M. Cummins
President, Chief Executive Officer
and Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<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, 1998 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN ITS FORM 10-QSB
FOR THE PERIOD ENDED MARCH 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 299,259
<SECURITIES> 6,089,092
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,445,493
<PP&E> 238,603
<DEPRECIATION> 113,340
<TOTAL-ASSETS> 6,713,635
<CURRENT-LIABILITIES> 306,214
<BONDS> 2,600,000
0
0
<COMMON> 54,142
<OTHER-SE> 6,659,493
<TOTAL-LIABILITY-AND-EQUITY> 6,713,635
<SALES> 0
<TOTAL-REVENUES> 89,811
<CGS> 0
<TOTAL-COSTS> 368,517
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,250
<INCOME-PRETAX> (606,635)
<INCOME-TAX> 0
<INCOME-CONTINUING> (606,635)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (606,635)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
