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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, 1999
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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 [ ].
As of March 31, 1999 there were 5,414,232 shares of the issuer's common stock
outstanding.
This report contains 12 pages.
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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, 1998 and March
31, 1999........................................................... 3
Consolidated Statements of Operations - Three Months
Ended March 31, 1998 and 1999 and Cumulative from June
25, 1984 (Inception) through March 31, 1999........................ 4
Condensed Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1998 and 1999 and Cumulative
from June 25, 1984 (Inception) through March 31, 1999.............. 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................................... 8
Signatures ................................................................... 9
</TABLE>
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AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,776,328 $ 3,855,571
Other current assets 43,415 46,268
------------ ------------
Total current assets 4,819,743 3,901,839
Property and equipment, net 116,761 118,691
Patent license, net of accumulated amortization of $81,177 and
$82,990 at December 31, 1998 and March 31, 1999, respectively 43,823 42,010
Investment in ISI common stock 5,735 5,735
------------ ------------
Total assets $ 4,986,062 $ 4,068,275
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 88,920 $ 1,128,546
Accrued interest 208,356 237,205
Other accrued liabilities 20,722 19,995
------------ ------------
Total current liabilities 317,998 1,385,746
Notes payable to related party 2,600,000 2,600,000
------------ ------------
Total liabilities 2,917,998 3,985,746
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 (11,378,216) (13,363,751)
------------ ------------
Total stockholders' equity 2,068,064 82,529
------------ ------------
Total liabilities and stockholders' equity $ 4,986,062 $ 4,068,275
============ ============
</TABLE>
See accompanying notes.
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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) through
1998 1999 March 31, 1999
------------ ------------ -------------------
<S> <C> <C> <C>
Revenues:
Contract revenues $ -- $ -- $ 9,000,000
Interferon sales -- -- 420,974
Interest income 89,811 48,687 1,463,324
Sublicense fees -- -- 113,334
Royalty income -- -- 31,544
Gain on ISI stock -- -- 113,972
Other -- -- 604,431
------------ ------------ ------------
89,811 48,687 11,747,579
Expenses:
Research and development
expenses 368,517 1,681,044 13,033,488
Selling, general, and
administrative expenses 298,679 324,329 11,197,049
Interest expense 29,250 28,849 845,793
------------ ------------ ------------
696,446 2,034,222 25,076,330
------------ ------------ ------------
Loss before income taxes (606,635) (1,985,535) (13,328,751)
Income tax expense -- -- 35,000
------------ ------------ ------------
Net loss $ (606,635) $ (1,985,535) $(13,363,751)
============ ============ ============
Basic and diluted loss per share $ (0.11) $ (0.37)
============ ============
Weighted average shares outstanding 5,414,232 5,414,232
============ ============
</TABLE>
See accompanying notes.
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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
March 31, from June
25,1984
------------------------------ (Inception)
through
March 31,
1998 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net cash used in operating activities $ (575,470) $ (914,627) $(11,085,464)
------------ ------------ ------------
Net cash used in investing activities (4,441) (6,130) (535,984)
------------ ------------ ------------
Net cash provided by financing activities -- -- 15,477,019
Net increase (decrease) in cash and cash
equivalents (579,911) (920,757) 3,855,571
------------ ------------ ------------
Cash and cash equivalents at beginning
of period 879,170 4,776,328 --
------------ ------------ ------------
Cash and cash equivalents at end of
period $ 299,259 $ 3,855,571 $ 3,855,571
============ ============ ============
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, 1998 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, 1999 are not
necessarily indicative of the results that may be expected for the full
year ending December 31, 1999.
2. Loss per share. Loss per share is computed based on the weighted
average number of common shares outstanding.
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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, 1998 Compared to Three Months
Ended March 31, 1999.
In the first quarter of 1999 research and development expenses
increased significantly to $1,681,044 compared to $368,517 for
the first quarter of 1998. This increase was due primarily to
the Phase 3 trial in progress for Sjogren's syndrome. Other
research and development expenses were incurred for a Phase 2
clinical trial for fibromyalgia syndrome.
Salary expense totalled $206,938 for the quarter ending March
31, 1999 including $159,000 allocated to research and
development. For the first quarter of 1998 salary expense was
$93,522 including $87,000 allocated to research and
development. This increase was due to filling three new
positions in the Company. These were a chief operating
officer/vice president of business development, director of
marketing and director of research and development.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999 the Company had cash balances of $3,855,571
with accounts payable of $1,128,546. Research studies in
Sjogren's syndrome and fibromyalgia syndrome represented
$1,095,840 of the accounts payable. Of this amount, $753,840
was paid in the first week of April.
The Company will need to raise additional funds to complete
the Sjogren's syndrome Phase 3 clinical trial. If these funds
are not obtained in the second quarter of this year the study
will be halted along with a reduction in staff and
administrative expenses. Management believes that based on the
Company's ability to curtail clinical trial expense and to
reduce staff and administrative expenses, available funds are
sufficient to meet anticipated cash requirements for the
remainder of 1999.
Discussions are presently underway to raise additional funds,
and the Company is also considering the possibility of a
strategic alliance with another biotech company.
SUBSEQUENT EVENTS
On April 2, 1999 the Company entered into an agreement whereby
two Promissory Notes totalling $2,600,000 plus accrued
interest of $237,526 owed to Hayashibara Biochemical
Laboratories ("Hayashibara") was converted into common stock.
The total number of shares issued to Hayashibara was 946,094
raising its total shares owned to 34.3% of the 6.36 million
shares outstanding. Prior to the conversion, total shares
outstanding were 5.41 million of which Hayashibara owned
22.8%. The value of the shares issued was based on the
weighted average sales price of the common stock for the ten
days prior to April 2nd and amounted to $2.9992 per share.
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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, 1999.
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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 14, 1999 By: /s/ JOSEPH M. CUMMINS
-------------------------------------------
Joseph M. Cummins
President, Chief Executive Officer
and Chief Financial Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit 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, 1999 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THIS FORM 10-QSB
FOR PERIOD ENDED MARCH 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,855,571
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,901,839
<PP&E> 250,507
<DEPRECIATION> 131,817
<TOTAL-ASSETS> 4,068,275
<CURRENT-LIABILITIES> 1,385,747
<BONDS> 2,600,000
0
0
<COMMON> 54,142
<OTHER-SE> 28,386
<TOTAL-LIABILITY-AND-EQUITY> 4,068,275
<SALES> 0
<TOTAL-REVENUES> 48,687
<CGS> 0
<TOTAL-COSTS> 1,681,044
<OTHER-EXPENSES> 324,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,849
<INCOME-PRETAX> (1,985,535)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,985,535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,985,535)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
</TABLE>
