SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period Ended September 30, 1999.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition Period From . ------------ to --------------.
COMMISSION FILE NUMBER: 0-22373
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VAXCEL, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 58-2027283
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
268 WEST 400 SOUTH, SUITE 300 84101
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(Address of principal executive office) (Zip Code)
(801)575-8073
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(Issuer's telephone number)
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 XX NO
The number of outstanding shares of the issuer's common stock, $0.001
par value (the only class of voting stock), as of November 9, 1999 was
10,994,656.
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TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
Condensed Balance Sheets as of September 30, 1999 and
December 31, 1998...................................................4
Condensed Statements of Operations
for Three and Nine Month Periods Ended September 30, 1999 and 1998..5
Condensed Statements of Cash Flows
or the Nine Month Periods Ended September 30, 1999 and 1998.........6
Notes to Condensed Financial Statements.............................7,8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...........9
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................10
SIGNATURES....................................................................11
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PART I
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Vaxcel Inc., a Delaware
corporation, and its subsidiaries and predecessors unless otherwise indicated.
Consolidated, unaudited, condensed interim financial statements including a
balance sheet for the Company as of the quarter ended September 30, 1999 and
statements of operations, statements of shareholders equity and statements of
cash flows for the interim period up to the date of such balance sheet and the
comparable period of the preceding year are attached hereto as Pages 4 through 8
and are incorporated herein by this reference.
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<TABLE>
<CAPTION>
VAXCEL, INC.
UNAUDITED CONDENSED BALANCE SHEET
September 30, December 31,
1999 1998
--------------------- --------------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 10,535 $ 2,900
Accounts receivable - 5,808
Note receivable (related party) 68,646 300,000
Other - 5,308
--------------------- --------------------
Total current assets 79,181 314,016
Property and equipment, net - 6,597
Other Assets:
Acquired developed technology and other
intangibles, net - 600,000
Other - 55,674
--------------------- --------------------
Total other assets - 655,674
--------------------- --------------------
TOTAL ASSETS $ 79,181 $ 976,287
===================== ====================
--------------------- --------------------
LIABILITIES AND STOCK HOLDERS' EQUITY
Current Liabilities:
Accounts payable $ - $ 221,885
Accrued liabilities - 214,483
Amounts due to affiliate - 181,758
--------------------- --------------------
Total current liabilities - 618,126
Stockholders' equity
Preferred stock ($.001 par value, 2,000,000
shares authorized; no share issued and
outstanding - -
Common stock ($.001 par value 30,000,000
shares authorized; 10,994,656 shares issued
and outstanding September 30, 1999 and
December 31, 1998 10,995 10,995
Additional paid in capital 12,485,767 12,485,767
Accumulated Deficit (12,417,581) (12,138,601)
--------------------- --------------------
Total stockholders' equity 79,181 358,161
--------------------- --------------------
TOTAL LIABILITIES AND EQUITY $ 79,181 $ 976,287
===================== ====================
</TABLE>
See notes to financial statements.
4
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<TABLE>
<CAPTION>
VAXCEL, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
REVENUE
Collaborative and grant income $ - $ 36,294 $ 20,000 $ 153,839
License fees - 75,000 - 75,000
Investment income 3,821 1,428 121,121 11,786
--------------- ------------ -------------- ---------------
Total Revenue 3,821 112,722 141,121 240,625
EXPENSES
Research and development
Transactions with affiliates - - - 21,015
Other - 130,195 4,985 669,924
Selling, general and administrative
Transactions with affiliates 13,000 27,942 54,000 80,442
Other 20,399 209,858 356,939 652,008
Interest expense - - 4,177 -
--------------- ------------ -------------- ---------------
Total Expenses 33,399 367,995 420,101 1,423,389
--------------- ------------ -------------- ---------------
NET LOSS $ (29,578) $ (255,273) $ (278,980) $ (1,182,764)
--------------- ------------ -------------- ---------------
BASIC AND DILUTED LOSS PER
COMMON SHARE $ 0.00 $ (0.02) $ (0.03) $ (0.11)
--------------- ------------ -------------- --------------
BASIC AND DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 10,994,656 10,994,656 10,994,656 10,997,663
=============== ============ ============== ==============
</TABLE>
See notes to financial statements.
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<TABLE>
<CAPTION>
VAXCEL, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30
1999 1998
---- ----
CASH FLOWS FROM OPERATION ACTIVITIES
<S> <C> <C>
Net loss $ (278,980) $ (1,182,764)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization 6,597 218,691
Net change in assets and liabilities 436,816 186,830
------------------ ------------------
Total adjustments 443,413 405,521
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES $ 164,433 $ (777,243)
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
Capital expenditures and retirements, net 56,655
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from CytRx - 100,000
Loan repayment to CytRx (156,798) -
------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ (156,798) $ 100,000
------------------ ------------------
NET INCREASE (DECREASE) IN CASH EQUIVALENTS 7,635 (620,588)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 2,900 (690,636)
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,535 $ 70,048
================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for interest $ 4,177 $ -
</TABLE>
See notes to financial statements.
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VAXCEL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1. UNAUDITED CONDENSED FINANCIAL STATEMENTS.
The accompanying financial statements at September 30, 1999 and for the three
month and nine month periods ended September 30, 1999 and 1998 are unaudited,
but include all adjustments, consisting of normal recurring entries, which the
Company's management believes to be necessary for a fair presentation of the
periods presented. Interim results are not necessarily indicative of results for
a full year. The financial statements should be read in conjunction with the
Company's audited financial statements for the year ended December 31, 1998
contained in its Annual Report on Form 10-K/A.
NOTE 2. DESCRIPTION OF BUSINESS.
Vaxcel, Inc. (Vaxcel or the Company) was formed on January 6, 1993 as a
wholly-owned subsidiary of CytRx Corporation (CytRx). In May 1997, Vaxcel
completed a merger with Zynaxis, Inc. (Zynaxis), resulting in the issuance of an
aggregate of 12.5% of its outstanding (post-merger) shares of common stock to
the former shareholders of Zynaxis. Vaxcel has historically engaged in the
development and commercialization of vaccine adjuvants and delivery systems and
a novel vaccine for the treatment of cancer.
However, in the second quarter of 1999 Vaxcel sold all the rights to its
technologies for cash and discontinued all of its operations. In addition, CytRx
terminated its license of Optivax to Vaxcel, resulting in the assignment to
CytRx of Vaxcel's rights and obligations under its license agreement to Corixa
Corporation. Vaxcel continues to hold rights to develop and commercialize a
certain cancer antigen under a license agreement from University College London,
but no longer has any employees or other ability to develop its technologies
further without assistance. The Company's current management has no prior
experience in developing such cancer antigens. Accordingly, the Company has no
plans to continue to develop and commercialize the cancer antigen. However,
management may try to sell its rights in the cancer antigen or acquire a company
in the biomedical field that could make use of the right's Vaxcel holds in the
cancer antigen.
The Company during the third quarter of 1999 settled all of its liabilities from
the proceeds it collected from the sale of the technologies its held. The
Company is now a shell company with no operations whose purpose will be to find
suitable operations through a merger or acquisition.
NOTE 2. CHANGE OF CONTROL.
ON JUNE 2, 1999, A-Z PROFESSIONAL CONSULTANTS, INC., A UTAH CORPORATION ("A-Z"),
entered into a Stock Acquisition Agreement ("Agreement") with CytRx . Pursuant
to the Agreement A-Z purchased Nine Million Six Hundred Twenty-Five Thousand
(9,625,000) shares of the common stock of the Company from CytRx for two Hundred
fifty Thousand Dollars ($250,000) plus a cash payment equal to Eight-Seven point
Five percent (87.5%) of the net liquid assets of the Company as reflected on its
financial statement as of June 2, 1999. A-Z used funds from its working capital
to purchase the 9,625,000 shares of the Company's common stock and a loan from
the Company in the amount of $68,646. The 9,625,000 shares of the Company's
common stock is equivalent to approximately 87.5% of the Company's issued and
outstanding shares of its common stock. Consequently, A-Z has a majority
interest in the Company's shares of common stock. By
7
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virtue of A-Z's purchase of the 9,625,000 shares of the Company's common stock,
A-Z has effective control of the Company. The purchase of the majority interest
in the Company was consummated on September 9, 1999.
On September 17, 1999, pursuant to a Shareholder Consent To Action Without A
Meeting the Company's Chief Executive Officer and President, Mark J. Newman, was
removed and Richard Surber was appointted as President and Director of the
Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had current assets of $79,181 and total
assets of $79,181, as compared to $314,016 and $976,287, respectively, at
December 31, 1998. At September 30, 1999 the Company had net working capital of
$79,181.
The Company has discontinued its operations. The Company is a public shell
entity whose purpose will be to merger or acquire operations. Until such time as
the Company acquire or mergers with an operating company, the Company will
maintain is reporting status with the Securities and Exchange Commission. The
capital necessary to prepare the necessary disclosure documents will be provided
by A-Z and the efforts of the Company's current president and director Richard
Surber. The Company may issue its securities to pay certain expenses to
consultants and it officers and director for their effort in maintaining the
corporate status of the Company and finding operations for the Company. No
formal agreements have been entered into at this time regarding such
compensation.
The Company during the third quarter of 1999 satisfied all of its liabilities
from the proceeds obtained from the sale of certain technologies.
RESULTS OF OPERATIONS
The Company recorded net losses of $29,578 and $278,980 for the three and nine
month periods ended September 30, 1999, as compared to $255,273 and $1,182,764
for the same periods in 1998.
Collaborative and grant income was $0 and $20,000 for the three month and nine
month periods ended September 30, 1999, as compared to $36,294 and $153,839 for
the same periods in 1998. During the first quarter of 1999, Vaxcel recorded
license fees of $20,000 related to payments by Innovax to extend their option
period for evaluating certain of the Company's technologies. The amounts
recorded during 1998 relate to certain research funding arrangements with a
third party and Small Business Innovative Research (SBIR) grants to Vaxcel from
the National Institutes of Health, which ended during 1998.
Research and development expenditures were $0 and $4,985 for the three month and
nine month periods ended September 30, 1999, as compared to $130,195 and
$690,939 for the same periods in 1998. The Company is not currently actively
developing any of its technologies.
8
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General and administrative expenses were $33,399 and $410,939 for the three
month and nine month periods ended September 30, 1999, as compared to $237,800
and $732,450 for the same periods in 1998. Routine general and administrative
expenses have declined from 1998 because the Company discontinued operations.
YEAR 2000 ISSUE
The term "Year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software have historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000's" from dates in the "1900's." These problems
may also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field.
Substantially all of the Company's business systems and services are provided by
Hudson Consulting Group, Inc., ("Hudson"). Hudson is a consulting company run by
the President of the Company, Richard D. Surber. Hudson has developed and
implemented a comprehensive plan to become Year 2000 ready by the beginning of
the fourth quarter 1999. Hudson has already ordered and installed the necessary
software and hardware to fully upgraded its computer systems to be Year 2000
compliant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no changes in the Company's assessment of its market risk from
that disclosed in its Form 10-K for the year ended December 31, 1998.
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PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
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27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K: The Company filed a Form 8-K on September
15, 1999 reporting a change of control.
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behold by the
undersigned thereunto duly authorized.
VAXCEL, INC.
/s/ NOVEMBER 9, 1999
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Richard Surber
President and Director
/s/ NOVEMBER 9, 1999
-----------------------
Wayne Newton
Controller
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE
COMPANY'S SEPTEMBER 30, 1999, QUARTERLY REPORT ON FORM 10-QSB AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029802
<NAME> Vaxcel,Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Sep-30-1999
<EXCHANGE-RATE> 1
<CASH> 10,535
<SECURITIES> 0
<RECEIVABLES> 68,646
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 79,181
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,181
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 10,995
<OTHER-SE> 68,186
<TOTAL-LIABILITY-AND-EQUITY> 79,181
<SALES> 0
<TOTAL-REVENUES> 141,121
<CGS> 0
<TOTAL-COSTS> 415,924
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,177
<INCOME-PRETAX> (278,980)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (278,980)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
