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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-25571
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AXONYX INC.
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(Exact name of registrant as specified in its charter)
NEVADA 86-0883978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
825 THIRD AVENUE, 40TH FLOOR, NEW YORK, NEW YORK 10022
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(Address of principal executive offices) (Zip Code)
(212) 688-4770
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(Registrant's telephone number, including area code)
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(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 ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes__ No__
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 15,282,371 shares of common
stock as of August 10, 2000.
Transitional Small Business Disclosure Format (check one):
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AXONYX INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 2000 (unaudited) 1
Statements of Operations (unaudited) 2
Statements of Changes in Stockholders' Equity (unaudited) 3
Statements of Cash Flows (unaudited) 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Plan of Operation 6
PART II. OTHER INFORMATION 9
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AXONYX INC.
(a development stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 11,264,000 $ 5,409,000
Stock subscription receivable -- 298,000
Other 25,000 22,000
------------ ------------
Total current assets 11,289,000 5,729,000
Equipment, net 26,000 15,000
Other assets 51,000 --
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$ 11,366,000 $ 5,744,000
============ ============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 371,000 $ 353,000
Deferred revenue -- $ 104,000
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371,000 457,000
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value, 15,000,000 shares authorized; none issued
Common Stock - $.001 par value, 75,000,000 shares authorized; 15,242,370
and 13,579,076 shares issued and outstanding, respectively 15,000 13,000
Additional paid-in capital 20,306,000 11,655,000
Unearned compensation - stock/options (64,000) (29,000)
Deficit accumulated during development stage (9,262,000) (6,352,000)
------------ ------------
Total stockholders' equity 10,995,000 5,287,000
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$ 11,366,000 $ 5,744,000
============ ============
</TABLE>
See notes to the financial statements
1
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AXONYX INC.
(a development stage company)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
January 9,
1997
(inception)
Three months ended Six months ended through
June 30, June 30, June 30,
2000 1999 2000 1999 2000
------------ ------------ ------------ ------------ ------------
(restated) (restated)
<S> <C> <C> <C> <C> <C>
Revenue $ 41,000 $ 22,000 $ 104,000 $ 22,000 $ 250,000
Costs and expenses:
Research and development 693,000 194,000 1,307,000 714,000 5,142,000
General and administrative 1,450,000 504,000 1,846,000 873,000 4,557,000
------------ ------------ ------------ ------------ ------------
2,143,000 698,000 3,153,000 1,587,000 9,699,000
------------ ------------ ------------ ------------ ------------
Loss from operations (2,102,000) (676,000) (3,049,000) (1,565,000) (9,449,000)
Investment Income 97,000 9,000 139,000 18,000 187,000
------------ ------------ ------------ ------------ ------------
Net loss $ (2,005,000) $ (667,000) $ (2,910,000) $ (1,547,000) $ (9,262,000)
============ ============ ============ ============ ============
Net loss per common share $ (0.14) $ (0.05) $ (0.20) $ (0.13)
============ ============ ============ ============
Weighted average shares
basic and diluted 14,631,684 12,252,135 14,233,357 12,241,069
</TABLE>
See notes to the financial statements
2
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AXONYX INC.
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
DEFICIT
NUMBER ADDITIONAL DURING TOTAL
OF PAID-IN DEFERRED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION STAGE EQUITY
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1999 13,579,076 $ 13,000 $ 11,655,000 $ (29,000) $ (6,352,000) $ 5,287,000
Issuance of common stock
and warrants- net 666,000 1,000 3,729,000 3,730,000
Stock Options granted 233,000 (233,000) --
Shares issued/issuable to New
York University and scientists 12,294 138,000 138,000
Exercise of warrants/options 985,000 1,000 3,618,000 3,619,000
Amortization 198,000 198,000
Issuance of stock options for
consulting services 933,000 933,000
Net Loss -- -- -- -- (2,910,000) (2,910,000)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE - JUNE 30, 2000 15,242,370 $ 15,000 $ 20,306,000 $ (64,000) $ (9,262,000) $ 10,995,000
============ ============ ============ ============ ============ ============
</TABLE>
See notes to the financial statements
3
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AXONYX INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
January 9,
1997
(inception)
Six months ended through
June 30, June 30,
2000 1999 2000
------------ ------------ ------------
(restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (2,910,000) $ (1,547,000) $ (9,262,000)
Adjustments to reconcile net loss to cash used in
operating activities:
Amortization of unearned compensation 1,131,000 812,000 1,619,000
Cost of services paid with common stock 138,000 19,000 3,201,000
Depreciation 2,000 1,000 5,000
Changes in:
other assets (54,000) (23,000) (72,000)
accrued expenses and other current liabilities (86,000) 239,000 371,000
------------ ------------ ------------
Net cash used in operating activities (1,779,000) (499,000) (4,138,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (13,000) (9,000) (31,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable 200,000
Net proceeds from issuance of common stock and warrants 7,647,000 958,000 15,285,000
Cost of merger -- -- (52,000)
------------ ------------ ------------
Net cash provided by financing activities 7,647,000 958,000 15,433,000
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,855,000 450,000 11,264,000
Cash and cash equivalents at beginning of period 5,409,000 1,558,000 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,264,000 $ 2,008,000 $ 11,264,000
============ ============ ============
</TABLE>
See notes to the financial statements
4
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AXONYX INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(1) FINANCIAL STATEMENT PRESENTATION
The unaudited financial statements of Axonyx Inc. (the "Company") herein have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC") and, in the opinion of management, reflect all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the Company's financial position at June 30, 2000 and the results of
operations for the interim periods presented. Certain information and
footnote disclosure normally included in the financial statements, prepared
in accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations. However,
management believes that the disclosures are adequate to make the information
presented not misleading. These financial statements and notes thereto should
be read in conjunction with the financial statements and the notes thereto
for the year ended December 31, 1999 included in the Company's Form 10-KSB
filing. The results for the interim periods are not necessarily indicative of
the results for the full fiscal year.
(2) EXERCISE OF RIGHT TO LICENSE BY ARES SERONO
On May 2, 2000 Ares Serono International, S.A. ("Ares Serono") informed Axonyx
that Ares Serono is exercising its right to license certain of Axonyx's patent
rights under the Development Agreement and Right to License signed with Axonyx
in May of 1999. The Company and Ares Serono are currently negotiating the final
terms of a licensing agreement. Under the Development Agreement Ares Serono
undertook research on Axonyx's Amyloid Inhibitory Peptides ("AIPs") and Prion
Inhibitory Peptides ("PIPs") technology for a one year term, with a right to
sublicense Axonyx's patent rights to the AIPs and the PIPs. Under the proposed
licensing agreement currently being negotiated, Ares Serono would continue the
research and development of the AIP and PIP technologies initiated during the
term of the Development Agreement. Within 30 days of signing a license agreement
with Axonyx, Ares Serono is obligated to pay Axonyx a nonrefundable,
noncreditable license fee of $1.5 million.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS,
OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED IN OR INCORPORATED BY
REFERENCE INTO THIS FORM 10-QSB, ARE FORWARD-LOOKING STATEMENTS. IN ADDITION,
WHEN USED IN THIS DOCUMENT, THE WORDS "ANTICIPATE," "ESTIMATE," "PROJECT," AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND
ASSUMPTIONS INCLUDING THOSE RISKS DESCRIBED IN THE COMPANY'S REPORT ON THIS FORM
10-QSB AND IN OTHER PUBLIC FILINGS. SHOULD ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT,
ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE ANTICIPATED, ESTIMATED OR
PROJECTED. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS INCLUDED IN SUCH
FORWARD-LOOKING STATEMENTS ARE REASONABLE, THE COMPANY CANNOT GIVE ANY
ASSURANCES THAT THESE EXPECTATIONS WILL PROVE TO BE CORRECT.
The following discussion and analysis should be read in conjunction with
the financial statements of the Company and the notes thereto appearing in Part
I Item 1.
Axonyx Inc. ("Axonyx" or the "Company") is engaged in the business of
identifying and acquiring novel post-discovery central nervous system (CNS) drug
candidates to advance through clinical development towards regulatory approval.
The Company is engaged in the business of acquiring patent rights and developing
CNS pharmaceutical compounds and diagnostics with significant potential market
impact. The Company has acquired worldwide exclusive patent rights to three main
classes of therapeutic compounds designed for the treatment of Alzheimer's
Disease (AD), Moderate Cognitive Impairment (MCI), and related diseases. The
Company licensed these patent rights from New York University (NYU) and, via a
sublicense, from the National Institutes of Health\National Institute on Aging
(NIA) (the "Licensors") and has ongoing research and development relationships
with both Licensors.
The Company's current business strategy is to pursue three different types
of products for the treatment of AD, one for prion-related diseases, and a
diagnostic test for AD. The AD- targeted approaches include: (1) Phenserine, an
analog of physostigmine and a potent inhibitor of acetylcholinesterase, (2)
Phenethylcymserine, an inhibitor of butyrylcholinesterase and an inhibitor of
the formation of amyloid plaques, and (3) compounds called Amyloid Inhibitory
Peptides (AIPs) which may prevent and reverse the formation of amyloid plaques
in AD and in diseases of peripheral amyloidosis. The Company is also conducting
research on compounds called Prion Inhibitory Peptides (PIPs) designed for the
diagnosis and treatment of prion diseases such as Bovine Spongiform
Encephalopathy (also known as "Mad Cow Disease") and the human form of the
disease, Creutzfeldt-Jakob Disease, new variant. In the area of diagnostics, the
6
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Company has entered into an agreement with the University of Melbourne
(Australia) for collaborative research on the development of a diagnostic test
for AD.
Axonyx's plan is to: (1) identify, acquire and exploit rights to new
technologies and compounds relating to AD and other neurological disorders; (2)
enhance the value of those assets through further research and clinical testing;
(3) perform clinical studies towards regulatory approval and market its drugs
and diagnostic tests through profitable licensing agreements with major
pharmaceutical companies; and (4) work to develop other promising compounds
in-house and in collaboration with third parties such as its current Licensors
at NYU and the NIA, and through corporate joint ventures with companies such as
Ares Serono International, S.A., a subsidiary of which signed a Development
Agreement and Right to License Agreement with Axonyx in May 1999. Axonyx intends
to develop other corporate partnerships with established and well capitalized
pharmaceutical companies for the clinical development of its compounds and for
their production, commercialization and marketing. The Company expects to derive
its revenues from patent sub-licensing fees, royalties from pharmaceutical
sales, appropriate milestone payments, and research and development contracts.
In May 1999, the Company entered into a Development Agreement and Right to
License with a wholly owned subsidiary of Ares Serono International, S.A., a
Swiss pharmaceutical company ("Ares Serono"). Under the agreement Ares Serono is
undertaking research on the AIPs and PIPs for a one year term, with a right to
sublicense Axonyx's patent rights to the AIPs and the PIPs. In addition to
pursuing significant new research on the AIPs and PIPs, Ares Serono paid Axonyx
an up front fee for the right to sublicense. On May 2, 2000 Ares Serono informed
Axonyx that Ares Serono is exercising its right to license under the Development
Agreement and the two companies are currently negotiating the final terms of a
licensing agreement. Under the proposed licensing agreement Ares Serono would
continue the research and development of the AIP & PIP technologies initiated
during the term of the Development Agreement. Any patent rights or know-how
developed by Ares Serono arising out of the conduct of the research shall
revert to Axonyx if the parties do not sign a licensing agreement. If the
Company signs a licensing agreement with Ares Serono, the Company will
receive a $1.5 million fee within thirty days. There can be no assurance that
additional revenues from patent licensing or research and development
contracts will be generated in fiscal year 2000.
On October 1, 1999 Axonyx Inc. signed a Sponsored Research Agreement with
the University of Melbourne (Australia). Under the Agreement, Axonyx commits to
fund a research project at the University of Melbourne to develop a diagnostic
test for Alzheimer's Disease. Axonyx undertakes to fund this research for a
three year period for approximately $60,000 per year. Each party will own the
resulting intellectual property as tenants in common in equal shares. Axonyx
also undertakes to pay the expenses associated with the filing and prosecution
of any patent applications covering the intellectual property resulting from the
research project. In addition, the University of Melbourne granted Axonyx an
option to acquire an exclusive worldwide license to the intellectual property or
patent resulting from the research project, and to an existing patent
application covering an Alzheimer's Disease diagnostic test on basic licensing
terms outlined in the Sponsored Research Agreement.
7
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RESULTS OF OPERATIONS
For the three months and six months ended June 30, 2000, the Company
realized revenue in the amount of $41,000 and $104,000, respectively in
connection with the Development Agreement and Right to License with Ares
Serono, as compared with the three months and six months ended June 30, 1999
in the amount of $22,000. The increase is due to the recognition of
additional revenue in connection with the agreement with Ares Serono.
For the three months ended June 30, 2000 the Company incurred a loss from
operations of $2,102,000 compared to a loss from operations of $676,000 for the
three months ended June 30, 1999. The Company incurred a loss from operations of
$3,049,000 for the six months ended June 30, 2000 compared to a loss from
operations of $1,565,000 for the six months ended June 30, 1999. The increase is
due to additional research and development activities to fund ongoing Phase I
clinical trials for Phenserine and an increase in general and administrative
expenses due to new office space and the hiring of new personnel. The Company
expects to incur additional losses for the foreseeable future.
For the three months ended June 30, 2000 the Company incurred research and
development costs of $693,000 compared to $194,000 for the three months ended
June 30, 1999. The Company incurred research and development costs of $1,307,000
for the six months ended June 30, 2000 as compared to $714,000 for the six
months ended June 30, 1999. The increase is due primarily to the hiring of the
Vice President for Product Development, an increase in research activities,
offset by a decrease in charges associated with the issuance of common shares to
New York University and certain scientists.
For the three months ended June 30, 2000 the Company incurred general and
administrative costs of $1,450,000 compared to $504,000 for the three months
ended June 30, 1999. The Company incurred general and administrative costs of
$1,846,000 for the six months ended June 30, 2000 as compared to $873,000 for
the six months ended June 30, 1999. The increase is due to a charge of
$976,000 related to options granted to consultants, the hiring of employees
and an overall increase in costs associated with patent support, investor
relations and marketing the Company's research and development activities.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, the Company had $11,264,000 in cash and cash
equivalents. The Company does not have any available lines of credit. Since
inception the Company has financed its operations through loans from a
shareholder, licensing revenues, and from private placements of equity
securities.
The Company estimates that it currently has sufficient capital resources to
meet its budgetary needs through June 2001. In the past four months the Company
has received $3,712,250 total gross proceeds from the exercise of warrants as
well as $37,500 gross proceeds from the exercise of options. However, there can
be no assurance that the Company will generate sufficient revenues, if any, to
fund its operations beyond June 2001, or that any potential financings through
bank borrowings, debt or equity offerings, or otherwise, will be available on
acceptable terms or at all.
8
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 3, 2000 the Company filed a registration statement on Form SB-2 to
register 1,060,000 shares of common stock, of which 1,005,000 shares were
issuable upon exercise of common stock purchase warrants at $3.75 per share. Of
the remaining 55,000 shares covered by the Form SB-2, 25,000 shares were held by
warrant holders who had exercised their warrants prior to the filing of the Form
SB-2 and 30,000 shares were held by a shareholder who acquired the shares upon
the exercise of options at a price of $1.25 per share on April 27, 2000. The
registration statement became effective on May 23, 2000.
On May 5, 2000, the Company notified the holders of warrants to purchase
1,005,000 shares of common stock that the Company was calling the warrants for
exercise. Under the call provision of the warrants the Company has the right to
call the warrants for exercise if the average closing bid price for the
Company's common stock is equal to or greater than $7.50 for any consecutive
period of thirty days. The warrants were issued in a private placement of units
in 1998 and are exercisable at $3.75 per share. The shares underlying the
warrants are covered by a registration statement on Form SB-2 filed by the
Company on May 3, 2000. An aggregate of 990,000 shares of common stock were
issued to warrant holders, out of which 25,000 were issued to warrant holders
who exercised prior to the call and 965,000 were issued to warrant holders
during the call period. Gross proceeds of $3,712,250 were received by the
Company from exercise of the warrants.
On June 22, 2000, Axonyx issued 400 shares of common stock and warrants to
purchase 200 shares of common stock to a firm that is not an affiliate of the
Company, pursuant to a Finder's Agreement in relation to the private placement
offering undertaken by the Company in November 1999. Each warrant entitles the
holder to purchase one share at a price of $11.00 until its expiration on August
1, 2004. The issuance of the securities was exempt from the registration
requirements of the Securities Act pursuant to the exemption set forth in
Section 4(2).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Axonyx Inc. held its 2000 Annual Meeting of Stockholders on June 14, 2000.
At the meeting each of the five incumbent directors of the Company were
re-elected and an additional director, Abraham E. Cohen, who was nominated by
the Company, was elected to the Board of Directors. Each of Albert D. Angel,
Abraham E. Cohen, Michael R. Espey, Michael Strage, and Christopher Wetherhill
received 9,070,764 votes for and 2,900 abstentions. Marvin S. Hausman, M.D.
received 9,070,664 votes for and 2,900 abstentions. The appointment of Richard
A. Eisner & Co., LLP, independent certified accountants, as the Company's
auditors was ratified. The ratification of the auditors was approved by a vote
of 9,073,014 votes for, 1,108 votes against and 3,050 abstentions. The
stockholders approved an amendment to the Company's Restated Articles of
Incorporation to increase the authorized shares which the Company shall have the
authority to issue from thirty million (30,000,000) to ninety million
(90,000,000), of which the number of shares of common stock the Company would be
authorized to issue would increase from twenty five million (25,000,000) shares
to seventy five million (75,000,000) shares and the number of shares of
preferred stock the Company would be authorized to issue would increase
9
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from five million (5,000,000) shares to fifteen million (15,000,000) shares. The
amendment of the Restated Articles of Incorporation was approved by a vote of
8,405,500 votes for, 5,750 votes against and 1,000 abstentions. The
stockholders approved the adoption of the Axonyx Inc. 2000 Stock Option Plan
pursuant to which the Company may issue options to purchase up to 2,000,000
shares to employees, directors, officers, consultants and advisors of the
Company. The adoption of the Axonyx 2000 Stock Option Plan was approved by a
vote of 8,407,050 votes for, 4,100 votes against and 1,000 abstentions.
Pursuant to the approval of the stockholders at the Annual Meeting, the
Restated Articles of Incorporation were amended consistently with the approved
amendment above on June 27, 2000.
10
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
The following exhibits are filed as part of this report:
3.0(i) Restated Articles of Incorporation
27.1 Financial Data Schedule
(b) Reports on 8-K
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AXONYX INC.
By: /s/ MARVIN S. HAUSMAN, M.D.
-------------------------------------
Marvin S. Hausman, M.D.
President and Chief Executive Officer
By: /s/ MICHAEL M. STRAGE
-------------------------------------
Michael M. Strage
Treasurer and Principal Financial and
Accounting Officer
11
