<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
COMMISSION FILE NUMBER 000-22347
ASCENT PEDIATRICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3047405
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
187 Ballardvale Street, Suite B125, Wilmington, MA 01887
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code (978) 658-2500
None
(Former name, former address, and
former 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.
Yes X No _
Indicate number of shares outstanding of the registrant's Common Stock,
par value $.00004 per share, as of October 21, 1997: 6,891,325.
<PAGE> 2
ASCENT PEDIATRICS, INC.
TABLE OF CONTENTS
Part I. Financial Information
Page
Item 1 Condensed Financial Statements
Condensed Balance Sheets.................................................1
Condensed Statements of Operations.......................................2
Condensed Statements of Cash Flows.......................................3
Notes to Condensed Financial Statements..............................4 - 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................6 - 9
Part II. Other Information................................................9 - 10
Item 2 Changes in Securities and Use of Proceeds
Item 6 Exhibits and Reports on Form 8-K
Signature.....................................................................11
Exhibit Index.................................................................12
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ASCENT PEDIATRICS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents ................................................................. $ 19,413,439 $ 2,085,743
Accounts receivable, net .................................................................. 517,859 0
Inventory (Note 5) ........................................................................ 528,144 0
Other current assets ...................................................................... 498,732 12,312
------------ ------------
Total current assets .................................................................. 20,958,174 2,098,055
------------ ------------
Fixed assets, net .............................................................................. 476,135 163,142
Debt issue costs, net (Note 4) ................................................................. 499,032 --
Intangibles, net ............................................................................... 11,359,172 11,874
Other assets ................................................................................... 111,503 354,553
------------ ------------
Total assets .......................................................................... $ 33,404,016 $ 2,627,624
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current Liabilities:
Accounts payable .......................................................................... $ 681,646 $ 496,655
Accrued expenses(Note 3) .................................................................. 1,526,342 1,076,556
Secured note(Note 8)....................................................................... 5,500,000 0
------------ ------------
Total current liabilities ............................................................. 7,707,988 1,573,211
Subordinated secured notes (Note 4) ............................................................ 5,327,293 --
------------ ------------
Total liabilities ..................................................................... 13,035,281 1,573,211
Series D redeemable convertible preferred stock, $.00004 par value; 0 and
1,399,589 shares authorized; 1,359,522 shares issued and outstanding at
December 31, 1996 and 0 shares issued and outstanding at September 30, 1997 ............... -- 8,157,132
Series E redeemable convertible preferred stock, $.00004 par value; 0 and
1,166,667 shares authorized; 733,371 shares issued and outstanding at
December 31, 1996 and 0 shares issued and outstanding at September 30, 1997 ............... -- 4,400,226
Series F redeemable convertible preferred stock, $.00004 par value; 0 and
2,353,848 shares authorized; 811,536 shares issued and outstanding at
December 31, 1996 and 0 shares issued and outstanding at September 30, 1997 ............... -- 5,274,984
Stockholders' Equity (Deficit):
Series A convertible preferred stock, $.00004 par value; 0 and 800,000
shares authorized; 800,000 shares issued and outstanding at December
31, 1996 and 0 shares issued and outstanding at September 30, 1997 .................... -- 280,110
Series B convertible preferred stock, $.00004 par value; 0 and 399,999
shares authorized; 399,999 shares issued and outstanding at December
31, 1996 and 0 shares issued and outstanding at September 30, 1997 .................... -- 2,574,993
Preferred Stock 5,000,000 shares authorized; 0 outstanding at September 30, 1997
Common stock, $.00004 par value; 60,000,000 shares authorized; 198,155 shares issued
and outstanding at December 31, 1996 and 6,891,325 issued and outstanding at
September 30, 1997 .................................................................... 275 8
Additional paid-in capital ................................................................ 47,453,409 --
Accumulated deficit ....................................................................... (27,084,949) (19,633,040)
------------ ------------
Total stockholders' equity (deficit) .................................................. 20,368,735 (16,777,929)
------------ ------------
Total liabilities and stockholders' equity ............................................ $ 33,404,016 $ 2,627,624
============ ============
</TABLE>
See accompanying notes to financial statements.
1
<PAGE> 4
ASCENT PEDIATRICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Product revenue ............................. $ 932,650 -- $ 932,650 --
Cost of sales ............................... 320,667 -- 320,667 --
----------- ----------- ----------- -----------
Gross margin ................................ 611,983 -- 611,983 --
Costs and expenses:
Selling, general and administrative
expenses ........................... 2,151,687 702,692 4,503,199 1,629,740
Research and development expenses ...... 992,370 1,012,404 3,457,893 2,256,980
----------- ----------- ----------- -----------
Total expenses ......................... 3,144,057 1,715,096 7,961,092 3,886,720
----------- ----------- ----------- -----------
Loss from operations ............... (2,532,074) (1,715,096) (7,349,109) (3,886,720)
Interest income ............................. 285,599 20,597 526,656 60,064
Interest expense ............................ (507,944) -- (833,033) --
Gain on sale of fixed assets -- -- 9,242 --
----------- ----------- ----------- -----------
Net loss ........................... (2,754,419) (1,694,499) (7,646,244) (3,826,656)
Accretion to redemption value
of preferred stock ..................... -- -- 247,361 --
----------- ----------- ----------- -----------
Net loss to common stockholders .... $(2,754,419) $(1,694,499) $(7,893,605) $(3,826,656)
=========== =========== =========== ===========
Net loss per common share ................... $ (0.40) $ (1.68) $ (2.27) $ (3.80)
=========== =========== =========== ===========
Weighted average shares outstanding ......... 6,891,085 1,007,218 3,483,072 1,007,133
=========== =========== =========== ===========
</TABLE>
see accompanying notes to financial statements.
2
<PAGE> 5
ASCENT PEDIATRICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows for operating activities:
Net loss ............................................... $ (7,646,244) $ (3,826,656)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization ...................... 1,153,273 37,126
Gain on sale of fixed assets ....................... (9,242) --
Changes in operating assets and liabilities:
Accounts receivable .............................. (517,859) --
Inventory ........................................ (528,144) (79,998)
Other current assets ............................. (486,420) (11,102)
Deferred charges ................................. 40,240 (25,000)
Accounts payable ................................. 184,991 (71,566)
Accrued expenses ................................. 449,786 297,906
Other non-current assets ......................... (47,192) --
------------ ------------
Net cash used for operating activities ........ (7,406,811) (3,679,290)
------------ ------------
Cash flows used for investing activities:
Purchase of property and equipment ..................... (418,332) (32,824)
Proceeds from sale of fixed assets ..................... 38,050 --
Payments related to acquisition ........................ (5,743,998) --
------------ ------------
Net cash used for investing activities ........ (6,124,280) (32,824)
------------ ------------
Cash flows from financing activities:
Proceeds from sale of common stock, net
of issuance costs .................................... 17,532,508 --
Proceeds from sale of preferred stock, net
of issuance costs .................................... 6,922,319 2,615,931
Proceeds from issuance of debt and related warrants .... 7,000,000 --
Debt issue costs ....................................... (596,040) --
Proceeds from exercise of warrants ..................... -- 4,800
------------ ------------
Net cash provided by financing activities ..... 30,858,787 2,620,731
------------ ------------
Net increase in cash and cash equivalents ................... 17,327,696 (1,091,383)
Cash and cash equivalents, beginning of period .............. 2,085,743 2,538,047
------------ ------------
Cash and cash equivalents, end of period .................... $ 19,413,439 $ 1,446,664
============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
ASCENT PEDIATRICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Ascent Pediatrics, Inc. (the "Company"), formerly Ascent Pharmaceuticals,
Inc., incorporated in Delaware on March 16, 1989, is a drug development
and marketing company focused exclusively on the pediatric market. Since
its inception, until July 9, 1997, the Company has operated as a
development stage enterprise devoting substantially all of its efforts to
establishing a new business and to carrying on development activities. On
July 10, 1997, the Company closed the acquisition of the Feverall line of
acetaminophen rectal suppositories from Upsher-Smith Laboratories, Inc.
("Upsher-Smith"), pursuant to an Asset Purchase Agreement dated as of
March 25, 1997 (the "Asset Purchase Agreement") between the Company and
Upsher-Smith and commenced sales of the Feverall line of products.
2. BASIS OF PRESENTATION
The accompanying financial statements are unaudited and have been prepared
by the Company in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The interim
financial statements include, in the opinion of management, all
adjustments (consisting of normal and recurring adjustments) that are
necessary for a fair presentation of the results for the interim periods
ended September 30, 1997 and 1996. The results for the interim periods
presented are not necessarily indicative of results to be expected in the
full fiscal year.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31,
1996 included in the Company's Registration Statement on Form S-1 (No.
333-23319) as filed with the Securities and Exchange Commission on March
14, 1997, as amended.
3. ACCRUED EXPENSES
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
Accrued expenses consisted of the following:
<S> <C> <C>
Compensation expenses ............ $ 160,083 $ 109,268
Clinical study expenses .......... 236,000 156,134
Advertising expenses ............. 0 364,692
Product development expenses ..... 310,096 0
Other ............................ 820,163 446,462
---------- ----------
$1,526,342 $1,076,556
</TABLE>
4
<PAGE> 7
4. WARRANTS RELATED TO SUBORDINATED SECURED NOTES
In connection with the Company's issuance of subordinated secured notes on
January 31, 1997 and June 4, 1997, the Company issued warrants exercisable
for 224,429 and 554,839 shares of Common Stock, respectively. The fair
market value of the warrants issued on January 31, 1997 was recorded as a
discount of $836,994 to the subordinated secured notes issued on such
date. Consequently, such subordinated secured notes were recorded at
$1,163,006. Similarly, the fair market value of the warrants (as of
January 31, 1997) issued on June 4, 1997 was recorded at a discount of
$1,668,746 to the subordinated secured notes issued on such date.
Consequently, such subordinated secured notes were recorded at $3,331,254.
Accordingly, approximately $2,506,000 of accretion will be charged to
interest expense, in addition to the stated interest rates, over the term
of the notes. For the quarter and year to date ended September 30, 1997,
the accretion charges were $507,944 and $833,033, respectively. The
Company recorded $596,040 toward issuance costs related to these notes and
will be amortized over the term of the note.
5. INVENTORIES
Inventories are stated at the lower of cost or market using the first in,
first out (FIFO) method and consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Raw materials .......................... $329,549 $ 0
Finished goods ......................... 198,595 0
------------- ------------
$528,144 $ 0
</TABLE>
6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Statement Presentation
On May 27, 1997, the Company effected a 0.85-for-one reverse stock split
of its Common Stock and increased the number of authorized shares of
Common Stock to 60,000,000. Accordingly, all share and per share amounts
have been adjusted to reflect the reverse stock split as though it had
occurred at the beginning of the initial period presented.
Historical Net Loss Per Common Share
The net loss per common share is computed based upon the weighted average
number of common shares and common equivalent shares outstanding after
certain adjustments described below. Common equivalent shares consist of
common stock options and warrants where the effect of their inclusion
would be dilutive. In accordance with Securities and Exchange Commission
Staff Accounting Bulletin No. 83, all common and common equivalent shares
issued during the 12 month period prior to the initial filing date of the
Company's Registration Statement on Form S-1 relating to its initial
public offering of shares of Common Stock have been included in the
calculation as if they were outstanding for all periods prior to the
initial public offering, using the treasury stock method. Accretion of
redeemable preferred stock is included as an increase to net loss
attributable to common stockholders.
5
<PAGE> 8
Subsequent to the first quarter, due to the closing of the initial public
offering in the second quarter, cheap stock has been excluded from the
calculation of weighted average common and common equivalent shares
outstanding. The historical amounts have been modified from a prior
presentation due to the elimination of certain anti-dilutive securities
from the calculation of weighted average common and common equivalent
shares outstanding. Net loss per common and common equivalent shares for
the three months and six months ended June 30, 1997 were $0.97 and $2.89,
respectively. The weighted average number of common and common equivalent
shares outstanding for the three and six months ended June 30, 1997 was
2,551,040 and 1,779,065, respectively.
Recent Pronouncements
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
("FAS 128"). FAS 128 specifies the computation, presentation and
disclosure requirements for earnings per share. FAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods, and earlier application is not permitted. FAS
128 requires restatement of all prior-period earnings-per-share data
presented after the effective date. The adoption of FAS 128 is not
expected to have a material impact on the Company's Earnings Per Share
calculation.
7. PUBLIC OFFERING
In June 1997, the Company completed its initial public offering of
2,240,000 shares of Common Stock, raising approximately $17.5 million of
net proceeds, after deducting offering costs. A significant portion of
these proceeds was invested in one money market mutual fund. Concurrent
with the closing of the initial public offering, all 5,208,657 shares of
Series A, Series B, Series D, Series E and Series F Convertible Preferred
Stock were converted into 4,440,564 shares of Common Stock.
8. On July 10, 1997, the Company closed the acquisition of the Feverall
line of acetaminophen rectal suppositories from Upsher-Smith Laboratories,
Inc. The purchase price was $11,721,265. The Company paid $6,221,265 of
such amount in cash (including a $250,000 deposit that the Company
previously paid to Upsher-Smith) and issued Upsher-Smith a promissory note
for the balance, $5,500,000. The promissory note matures on February 28,
1998, and does not bear interest and is secured by all the assets acquired
by the Company from Upsher-Smith. The assets acquired by the Company
consist of the Feverall acetaminophen rectal suppository product line and
certain related assets, including the Feverall trademark and the Feverall
Sprinkle Caps powder and Acetaminophen Uniserts suppository product lines.
A significant portion of these payments will be allocated toward
trademarks, goodwill and other intangibles which will be amortized over 20
years on a straight line basis.
The following pro forma information combines the results of operations of
the Company and Feverall Product Line as if the purchase of the Feverall
Product Line occurred on January 1, 1997 for the nine months ended
September 30, 1997 information and as if the purchase of the Feverall
Product Line occurred on January 1, 1996 for the nine months ended
September 30, 1996 information. These pro forma information were prepared
after giving effect to certain adjustments, including amortization of
intangible assets and certain incremental expenses the Company would have
incurred if the acquisition had occurred on those dates. The pro forma
information is shown for comparative purposes only and does not reflect
the synergys expected to result from the integration of the Feverall
Product Line into the Company's business.
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
September 30 September 30
1997 1996
(Pro forma) (Pro forma)
<S> <C> <C>
Revenues $ 2,419,000 $ 2,908,000
Operating loss (7,738,000) (3,790,000)
Net loss (8,036,000) (3,730,000)
Loss per share $ (2.31) $ (3.70)
</TABLE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company is a drug development and marketing company focused exclusively on
the pediatric market. The Company commenced operations in March 1989 and prior
to the quarter ended September 30, 1997 had been engaged primarily in developing
its products and products candidates and in organizational efforts, including
recruiting scientific and management personnel and raising capital. The Company
introduced its first product, Feverall, during the quarter ended September 30,
1997 and expects to introduce two additional products in the fourth quarter
ended December 31, 1997.
The Company has incurred net losses since its inception and expects to incur
additional operating losses at least through the next fiscal year as it
continues its product development programs, establishes a sales and marketing
organization and introduces products to the market. The Company expects
cumulative losses to increase over this period. The Company has incurred a
deficit accumulated since inception through September 30, 1997 of $27,084,949.
Results of Operations
Three and Nine Months Ended September 30, 1997 Compared with Three and Nine
Months Ended September 30, 1996.
6
<PAGE> 9
Revenue. The Company had revenue of $933,000 for the three and nine months
ended September 30, 1997, compared with no revenue in the comparable prior year
periods. The revenue was the result of the acquisition and subsequent marketing
of the Company's first product, Feverall.
Cost of Sales. Cost of sales was $321,000 for the three and nine months ended
September 30, 1997. The cost of sales was primarily attributable to the
manufacturing cost associated with the marketing of the Feverall product.
Selling, General and Administrative Expenses. The Company incurred selling,
general and administrative expenses for the three and nine months ended
September 30, 1997 of $2,152,000 and $4,503,000, respectively, or an increase of
$1,449,000 and $2,873,000, respectively, over the comparable prior year periods.
Selling expenses increased in the three and nine months ended September 30, 1997
by $1,146,000 and $2,021,000, respectively, primarily a result of (i) increased
personnel expenses as the Company assembled sales and marketing personnel for
the anticipated introduction of its products in the second half of 1997 and (ii)
increases in advertising and promotional activities in anticipation of such
product introductions. General and administrative expenses increased in the
three and nine months ended September 30, 1997 by $302,000 and $852,000,
respectively, primarily as a result of additional staffing expenses resulting
from the Company's increased infrastructure relating to the anticipated product
introductions and amortization expenses of intangible assets related to the
Feverall acquisition.
Research and Development The Company incurred research and development
expenses for the three and nine months ended September 30, 1997 of $992,000 and
$3,458,000, respectively, or a decrease of $20,000 from the comparable prior
year quarter ended September 30, 1996 and an increase of $1,201,000 over the
comparable prior year nine months ended September 30, 1996. The increase for the
nine month period ended September 30, 1997 primarily reflected increased third
party manufacturing and development expenditures relating to the Company's twice
a day liquid controlled release bronchodilator, Pediavent, and increased
expenses for clinical trials relating to the Company's acetaminophen
controlled-release product.
Interest The Company had interest income of $286,000 and $527,000 for the
three and nine months ended September 30, 1997, respectively, or an increase of
$265,000 and $467,000, respectively, over the comparable prior year periods. The
increases were primarily attributable to increases in funds available for
investment by the Company resulting from the Company's initial public offering
of Common Stock, the sale of Series F Convertible Preferred Stock and the
issuance of subordinated secured notes. The Company had interest expense of
$508,000 and $833,000 for the three and nine months ended September 30, 1997,
respectively. The interest expense reflected the accretion of the subordinated
secured notes to their maturity amounts.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily from
private sales of preferred stock, the private sale of subordinated secured notes
and related common stock purchase warrants and an initial public offering of
shares of Common Stock. In addition, on July 10, 1997, the Company began
shipment of Feverall, its first product. As of September 30, 1997, the Company
had raised approximately $27,132,000 (net of issuance costs) from the sales of
preferred stock, approximately $6.6 million (net of issuance costs) from the
issuance of subordinated secured notes and related warrants and approximately
$17.5 million (net of issuance costs) from the initial public offering of
2,240,000 shares of Common Stock.
7
<PAGE> 10
In January 1997, the Company issued $2,000,000 of subordinated secured notes,
resulting in net proceeds to the Company of $1,790,000 which was recorded as a
liability of $1,163,000 with $837,000 to be accreted as interest expense over
the term of the notes. In May 1997, the Company issued an additional $5,000,000
of subordinated secured notes, resulting in net proceeds to the Company of
$4,616,000, which was recorded as a liability of $3,331,000 with $1,669,000 to
be accreted as interest expense over the term of the notes. The notes amortize
in eight equal quarterly principal installments and require quarterly interest
payments on the unpaid principal balance, with the first quarterly payment of
principal and interest due December 4, 1997. The notes are collateralized by a
lien on all of the Company's assets, prohibit the payment of dividends by the
Company and, subject to certain exceptions (including for up to $6,000,000 of
senior secured bank financing and $5,500,000 of secured purchase money financing
in connection with the acquisition of the Feverall product line), prohibit the
incurrence of additional indebtedness.
On February 3, 1997 and February 28, 1997, the Company raised an aggregate of
$6,957,000 of net proceeds from private sales of shares of Series F Convertible
Preferred Stock.
On June 4, 1997, the Company completed its initial public offering of 2,000,000
shares of Common Stock, raising approximately $15.5 million of net proceeds. In
addition, on June 26, 1997, the underwriters of the Company's initial public
offering exercised an over allotment option and purchased as additional 240,000
share of Common Stock, resulting in net proceeds to the Company of approximately
$2.0 million.
On July 10, 1997, the Company closed the acquisition of the Feverall line of
acetaminophen rectal suppositories from Upsher-Smith Laboratories, Inc. The
purchase price was $11,721,265. The Company paid $6,221,265 of such amount in
cash (including a $250,000 deposit that the Company previously paid to
Upsher-Smith) and issued a promissory note for the balance. The promissory note
matures on February 28, 1998, does not bear interest and is secured by all the
assets acquired by the Company from Upsher-Smith. The assets acquired by the
Company consist of the Feverall acetaminophen rectal suppository product line
and certain related assets, including the Feverall trademark and the Feverall
Sprinkle Caps powder and Acetaminophen Uniserts suppository product lines. A
significant portion of these payments will be allocated toward trademarks,
goodwill and other intangibles which will be amortized over 20 years on a
straight line basis.
Through September 30, 1997, the Company applied the proceeds from the sales of
preferred stock, subordinated secured notes, its initial public offering and
revenues to fund losses of $27,084,949 and the investment of $799,974 in
property and equipment. As of September 30, 1997, the Company had cash and cash
equivalents of $19,413,439.
The Company's future capital requirements will depend on many factors, including
continued progress in its product development programs, the magnitude of these
programs, the results of pre-clinical studies and clinical trials, the time and
cost involved in obtaining regulatory approvals, the costs involved in filing,
prosecuting, enforcing and defending patent claims, competing technological and
market developments, the ability of the Company to maintain and, in the future,
expand its sales and marketing capability and product development, manufacturing
and marketing relationships, and the costs and success of commercialization
activities and arrangements, particularly the level of product sales. The
Company's business strategy requires a significant commitment of funds to
conduct clinical testing of potential products, to pursue regulatory approval of
such products and maintain sales and marketing capabilities and manufacturing
relationships necessary to bring such products to market.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("FAS 128"). FAS 128
specifies the computation, presentation and disclosure requirements for earnings
per share. FAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods, and earlier
application is not permitted. FAS 128 requires restatement of all prior-period
earnings-per-share data presented after the effective date. The adoption of FAS
128 is not expected to have a material impact on the Company's Earnings Per
Share calculation.
8
<PAGE> 11
The Company has no committed external sources of capital. As a result of the
Company's accelerated forth quarter 1997 hiring of a 64 person sales force
consisting of 46 full-time and 18 flex-time persons rather than the initially
scheduled 36 person sales force consisting of 6 full-time and 30 flex-time
persons, the Company expects that the amount of cash used by the Company in
future periods will exceed previously budgeted amounts. Accordingly, the Company
anticipates that it will require additional capital from external sources in the
second half of 1998. The Company is currently in negotiations with a number of
potential sources of financing to obtain additional funding. No assurance can be
given that external sources will be available, or, if available, that it will be
available in acceptable terms. In addition, any one or more of the factors
described in the previous paragraph might accelerate the Company's use of its
existing capital resources or otherwise increase its capital requirements.
PART II - OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with the initial public offering (the "Offering") of shares of
Common Stock of the Company, the Company's Registration Statement on Form S-1,
Commission File No. 333-23319 (the "Registration Statement"), was declared
effective by the Securities and Exchange Commission on May 29, 1997. In the
Offering, which commenced on May 30, 1997, and was completed on June 26, 1997,
the Company issued and sold an aggregate of 2,240,000 shares of Common Stock,
including 240,000 shares issued pursuant to the partial exercise of an
overallotment option to purchase 300,000 shares of Common Stock granted by the
Company to the underwriters of the Offering. The managing underwriters of the
Offering were Cowen & Company, Volpe Brown Whelan & Company, LLC, and Adams,
Harkness & Hill, Inc.
In connection with the Offering, the Company registered an aggregate of
2,300,000 shares of Common Stock pursuant to the Registration Statement, with an
aggregate offering price of $20,700,000. In the Offering, the Company issued and
sold 2,240,000 shares of Common Stock, with an aggregate offering price of
$20,160,000, and paid an aggregate of $2,627,492 in total expenses, which
consisted of $1,411,200 in underwriting discounts and commissions, $3,492 in
expenses paid to or for the underwriters and an aggregate of $1,212,800 in
accounting, legal, printing and other expenses. None of these expenses was paid,
directly or indirectly, to directors, officers, general partners of the Company
or their associates, persons owning ten percent or more of any class of equity
securities of the Company or affiliates of the Company. The net Offering
proceeds to the Company, after deducting total expenses of the Offering, was
$17,532,508.
From May 29, 1997 through September 30, 1997, the Company used the net Offering
proceeds in the following manner:
<TABLE>
<CAPTION>
Direct or indirect Direct or indirect
payments to directors, payments to others
officers, general
partners of the Company
or their associates; to
persons owning ten
percent or more of any
class of equity
securities of the
Company; and to
affiliates of the Company
------------------------- ------------------
<S> <C> <C>
Construction of plant, $0 $0
building and facilities
Purchase and installation $0 $104,000
of machinery and equipment
Purchase of real estate $0 $0
Acquisition of other $0 $5,971,000
business(es)
Working capital $0 $833,000
Temporary investment $0 $0
(specify)
Other purposes (specify) $0 $0
</TABLE>
9
<PAGE> 12
The Company's use of the net Offering proceeds in the period from May 29, 1997
through September 30, 1997 does not represent a material change in the use of
proceeds described in the Registration Statement.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits. See exhibit index on page 12
(b) Reports on Form 8-K. None
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASCENT PEDIATRICS, INC.
Date: November 14, 1997 By /s/ JOHN G. BERNARDI
-------------------------------------------
John G. Bernardi, Vice President- Finance
and Treasurer (Principal Financial Officer)
11
<PAGE> 14
EXHIBIT INDEX
Exhibit Numbers Description Page
27 Financial Data Schedule
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 19,413,439
<SECURITIES> 0
<RECEIVABLES> 567,859
<ALLOWANCES> 50,000
<INVENTORY> 528,144
<CURRENT-ASSETS> 20,958,174
<PP&E> 661,213
<DEPRECIATION> 185,078
<TOTAL-ASSETS> 33,404,016
<CURRENT-LIABILITIES> 7,707,988
<BONDS> 0
0
0
<COMMON> 275
<OTHER-SE> 20,368,460
<TOTAL-LIABILITY-AND-EQUITY> 33,404,016
<SALES> 932,650
<TOTAL-REVENUES> 932,650
<CGS> 320,667
<TOTAL-COSTS> 320,66792
<OTHER-EXPENSES> 7,961,092
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 833,033
<INCOME-PRETAX> 7,349,109
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,349,109
<EPS-PRIMARY> (2.27)
<EPS-DILUTED> (2.27)
</TABLE>
