UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ___________ to _________________
Commission File Number: 0-10379
INTERFERON SCIENCES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 22-2313648
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
783 Jersey Avenue, New Brunswick, New Jersey 08901
(Address of principal executive offices) (Zip code)
(908) 249 - 3250
(Registrant's telephone number, including area code)
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 [ ]
Number of shares outstanding of each of issuer's classes of common
stock as of May 3, 1996:
Common Stock 42,448,768 shares
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INTERFERON SCIENCES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheets--March 31, 1996
and December 31, 1995 1
Consolidated Condensed Statements of Operations--Three
Months Ended March 31, 1996 and 1995 2
Consolidated Condensed Statement of Changes in
Stockholders' Equity--Three Months Ended
March 31, 1996 3
Consolidated Condensed Statements of Cash Flows--Three
Months Ended March 31, 1996 and 1995 4
Notes to Consolidated Condensed Financial Statements 5-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-13
Qualification Relating to Financial Information 14
Part II. Other Information 15
Signatures 16
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PART I. FINANCIAL INFORMATION
INTERFERON SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, December 31,
1996 1995
(Unaudited) *
ASSETS ------------ ------------
Current assets
Cash and cash equivalents $ 4,639,754 $ 7,221,108
Accounts and other receivables 24,176 47,351
Inventories 1,172,674 815,978
Receivables from NPDC and
affiliated companies, net 12,845 27,211
Prepaid expenses and other
current assets 49,822 76,000
------------ ------------
Total current assets 5,899,271 8,187,648
------------ ------------
Property, plant and equipment,
at cost 12,086,418 11,894,176
Less accumulated depreciation and
amortization (6,943,301) (6,760,181)
------------ ------------
5,143,117 5,133,995
------------ ------------
Intangible assets, net of
amortization 334,582 341,596
Other assets 266,159 289,343
------------ ------------
Total assets $ 11,643,129 $ 13,952,582
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and
accrued expenses $ 1,047,553 $ 1,125,806
------------- -------------
Total current liabilities 1,047,553 1,125,806
------------- -------------
Commitments and contingencies
Stockholders' equity
Preferred stock, par value $.01 per share;
authorized-5,000,000 shares; none issued
and outstanding
Common stock, par value $.01 per share;
authorized-55,000,000 shares; issued
and outstanding-34,448,768 shares 344,488 344,488
Capital in excess of par value 82,641,859 82,641,859
Accumulated deficit (72,390,771) (70,159,571)
------------- -------------
Total stockholders' equity 10,595,576 12,826,776
------------- -------------
Total liabilities and stockholders'
equity $ 11,643,129 $ 13,952,582
============= =============
*The condensed balance sheet as of December 31, 1995 has been
summarized from the Company's audited balance sheet as of that
date.
The accompanying notes are an integral part of these consolidated
condensed financial statements.
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INTERFERON SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
--------------------------
1996 1995
------------ -----------
Revenues
Sales
Alferon N Injection $ $ 174,710
Research products and other revenues 5,785 4,909
------------ ------------
Total revenues 5,785 179,619
------------ ------------
Costs and expenses
Cost of goods sold and excess/idle
production costs 781,541 568,095
Research and development
(net of $64,746 and $45,498
of rental income received from NPDC) 974,309 960,152
General and administrative
(includes $122,105 and $304,654
of payments to NPDC for management
fees and reimbursements of certain
salaries and operating expenses; net
of $79,548 received from NPDC for the
three months ended March 31, 1996 for
reimbursements of certain salaries) 550,170 446,392
------------ ------------
Total costs and expenses 2,306,020 1,974,639
------------ ------------
Loss from operations (2,300,235) (1,795,020)
Interest and other income 69,035 6,776
Interest expense (9,909)
------------ ------------
Net loss $(2,231,200) $(1,798,153)
============ ============
Net loss per share $ (.06) $ (.08)
============ ============
Weighted average number of
shares outstanding 34,448,768 21,199,027
The accompanying notes are an integral part of these consolidated
condensed financial statements.
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INTERFERON SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
Total
Capital in Accumu- Stock-
Common Stock Excess of lated holders'
Shares Amount par value Deficit Equity
------ ------ ---------- -------- --------
Balance at
Dec. 31,
1995 34,448,768 $344,488 $82,641,859 $(70,159,571) $12,826,776
Net loss (2,231,200) (2,231,200)
---------------------------------------------------------------
Balance at
March 31,
1996 34,448,768 $344,488 $82,641,859 $(72,390,771) $10,595,576
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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INTERFERON SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-----------------------
1996 1995
------------ ------------
Cash flows used for operations:
Net loss $(2,231,200) $(1,798,153)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 190,776 194,015
Change in operating assets and liabilities:
Inventories (356,696) (122,432)
Consignment inventory 220,410
Receivables from NPDC and affiliated
companies 14,366
Accounts and other receivables 23,175 (172,301)
Prepaid expenses and other current
assets 26,178 (13,365)
Accounts payable and accrued expenses (78,253) 12,444
------------ ------------
Net cash used for operations (2,411,654) (1,679,382)
------------ ------------
Cash flows from investing activities:
Additions to property, plant and
equipment (113,424)
Additions to intangible and other assets (56,276) (3,348)
------------ ------------
Net cash used for investing activities (169,700) (3,348)
------------ ------------
Cash flows from financing activities:
Net proceeds from sale of common stock 1,482,500
Increase in advances from NPDC 109,766
Reduction of long-term debt (134,905)
------------ ------------
Net cash provided by financing activities 1,457,361
------------ ------------
Net decrease in cash and cash equivalents (2,581,354) (225,369)
Cash and cash equivalents at beginning
of period 7,221,108 330,617
------------ ------------
Cash and cash equivalents at end of period $ 4,639,754 $ 105,248
============ ============
Cash paid for interest expense $ $ 8,564
============ ============
Noncash investing and financing activities:
Offset of receivables in settlement of
obligation to repurchase stock $ $ 67,783
============ ============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
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INTERFERON SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Agreements with Purdue
In 1988, the Company entered into exclusive marketing and
distribution agreements with Mundipharma Pharmaceutical Company
("Mundipharma") with respect to ALFERON(R) N Injection. In 1991,
Mundipharma assigned the right to market and distribute ALFERON N
Injection in the United States to a related entity, Purdue Pharma
L.P. ("Purdue Pharma," and collectively with Mundipharma and its
other affiliates, "Purdue"), and retained the right to market and
distribute ALFERON N Injection in Canada, Western Europe, Israel,
India, Japan, and Australia. In 1993 and 1994, (i) the Company
reacquired the right to market and distribute ALFERON N Injection
in all countries other than the United States and Canada; (ii) the
Company assumed responsibility for the conduct and funding of
clinical trials to develop new indications for ALFERON N Injection;
(iii) the Company agreed to purchase for $4.00 per share 994,994
shares (the "Purdue Shares") of Common Stock of the Company held by
Purdue over a period of 19 months; and (iv) Purdue Pharma and
Mundipharma granted the Company an option (as amended, the
"Repurchase Option") to reacquire the right to market and
distribute ALFERON N Injection in the United States and Canada. In
July 1995, the Company was relieved of its obligation to repurchase
the remaining 619,994 Purdue Shares if the Repurchase Option was
not exercised.
Note 2. Inventories
Inventories, consisting of material, labor and overhead, are
classified as follows:
March 31, December 31,
1996 1995
-------------- --------------
Finished goods $ 580,200 $ 344,550
Work in process 266,610 162,567
Raw materials 325,864 308,861
------------ ------------
$ 1,172,674 $ 815,978
Inventories at March 31, 1996 and December 31, 1995 are stated
at their estimated net realizable value.
Finished goods inventory at March 31, 1996 and December 31,
1995 consisted of vials of ALFERON N Injection.
Note 3. Subsequent Events
On May 2, 1996, the Company completed the sale of 8,000,000
shares of Common Stock for an aggregate of $16,000,000 (the
"Offering"). The Company anticipates that of the estimated net
proceeds of $14,490,000, it will use an aggregate of $3,760,012 to
pay Purdue as set forth below, approximately $6,000,000 for
research, product development and clinical trials of the Company's
products, and the balance for working capital and general corporate
purposes.
In April 1996, the Company entered into an agreement with
Purdue, conditioned upon the sale of at least 5,000,000 shares of
Common Stock in the Offering, to reacquire the remaining marketing
and distributuion rights from Purdue Pharma and Mundipharma for
$3,260,962 in cash, subject to minor adjustment. In connection with
the agreement, (i) Purdue Pharma agreed to provide, during the
first year after the reacquisition, certain distribution services
to the Company with respect to 24,000 vials of ALFERON N Injection
at an aggregate cost of $240,000, (ii) Purdue Pharma agreed to
provide during the second year after the reacquisition, if
requested by the Company, certain distribution services to the
Company with respect to up to 30,000 vials of ALFERON N Injection
at a cost of $15 per vial, and (iii) the Company agreed to purchase
from Purdue Pharma all vials of ALFERON N Injection and all other
assets of Purdue Pharma used exclusively in its ALFERON N Injection
business at an aggregate cost of $259,050 in cash, subject to minor
adjustment. In addition, at the time of entering into the
agreement, Purdue sold its remaining 619,994 Purdue Shares. Upon
completion of the Offering, the Company applied $3,760,012 of the
net proceeds to reacquire such marketing rights, pay for the first
year's distribution services, and purchase such vials and other
assets. The $3,313,705 cost of reacquisition of distribution rights
from Purdue will be charged to expense in the second quarter of
1996.
The Company believes that the reacquisition of marketing
rights from Purdue will provide it with greater financial
flexibility and control over the distribution of ALFERON N
Injection. After reacquiring the marketing rights from Purdue, the
Company intends to focus its marketing efforts in the United States
on making additional sales to existing customers. While the Company
does not expect to immediately form a sales force, it will consider
doing so based upon sales experience and any approvals obtained for
new indications.
In April 1996, the Company entered into a supply and
distribution agreement (the "Cell Pharm Agreement") with Cell Pharm
GmbH ("Cell Pharm"). Cell Pharm, headquartered in Hanover, Germany,
is a privately-owned pharmaceutical company primarily involved in
the distribution and manufacture of products for cancer treatment
and other uses. The Cell Pharm Agreement, which terminates on June
30, 2001, unless renewed, grants Cell Pharm rights to distribute,
promote, and sell ALFERON N Injection in Germany. The Cell Pharm
Agreement provides that the Company will supply Cell Pharm with
ALFERON N Injection at specified prices, and obligates Cell Pharm
to purchase specified minimum amounts in each annual period. In
addition, Cell Pharm is required to pay the Company 50% of the
incremental revenue Cell Pharm receives as a result of selling the
ALFERON N Injection at a price higher than a specified price. Cell
Pharm is required to maintain an active and efficient sales and
customer service organization with adequately trained personnel for
marketing and selling the ALFERON N Injection. Cell Pharm
represents to the Company that it has obtained, and Cell Pharm
agrees to maintain in effect, all registrations, approvals, and
consents from governments in Germany as are necessary to permit or
facilitate the lawful handling, promotion, and resale of ALFERON N
Injection in Germany. Cell Pharm has informed the Company that it
intends to market ALFERON N Injection under the trade name
Cellferon(R), pursuant to Cell Pharm's existing regulatory approval
to market Cellferon in Germany for the treatment of hairy cell
leukemia and for the treatment of patients who develop antibodies
against recombinant alpha interferons.
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INTERFERON SCIENCES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Liquidity
As of May 9, 1996, the Company had an aggregate of $14,200,000
in cash and cash equivalents. Until utilized, such cash and cash
equivalents are being invested principally in short-term interest-
bearing investments.
The Company requires substantial funds to conduct research and
development and preclinical and clinical testing and to market its
products. The Company anticipates that its future capital
requirements will increase as a result of the repurchase of certain
marketing rights from Purdue. For the three months ended March 31,
1996 and the years ended December 31, 1995, 1994, and 1993, the
cash utilized by the Company's operations was approximately $2.4
million, $7.1 million, $7.8 million, and $7.8 million,
respectively. The Company's future capital requirements will depend
on many factors, including: continued scientific progress in its
drug development programs; the magnitude of these programs;
progress with preclinical testing and clinical trials; the time and
costs involved in obtaining regulatory approvals; the costs
involved in filing, prosecuting, and enforcing patent claims;
competing technologies and market developments; changes in its
existing research relationships; the ability of the Company to
establish collaborative arrangements; and effective
commercialization activities and arrangements.
Management believes that the cash currently available will be
sufficient to enable the Company to continue operations for
approximately 24 months, although no assurance can be given in this
regard. To fund the Company's operations beyond such period, the
Company will require additional funding, whether from financial
markets or collaborative or other arrangements with corporate
partners or from other sources, which may not be available when
needed or on terms acceptable to the Company. Insufficient funds
will require the Company to delay, scale back, or eliminate certain
or all of its research and development programs or to license third
parties to commercialize products or technologies that the Company
would otherwise seek to develop itself or to shut down or curtail
its manufacturing facility.
On May 2, 1996, the Company completed the sale of 8,000,000
shares of Common Stock for an aggregate of $16,000,000. Of the
estimated net proceeds of $14,490,000, the Company has used an
aggregate of $3,760,012 to pay Purdue and anticipates that it will
use approximately $6,000,000 for research, product development and
clinical trials of the Company's products and the balance for
working capital and general corporate purposes.
In August and September 1995, the Company completed the sale
of 12,000,000 shares of Common Stock for an aggregate of
$14,400,000 (the "August/September Offering"). Of the $12,494,000
of net proceeds from the August/September Offering, the Company has
used $1,870,000 to repay indebtedness to certain principal
stockholders and anticipates that it will use approximately
$7,000,000 for research, product development, and clinical trials
of the Company's products and the balance for working capital and
general corporate purposes.
Between May and August 1995, three principal stockholders of
the Company loaned the Company an aggregate of $1,870,000. Such
loans bore interest at prime plus 2% and were repaid with a portion
of the proceeds of the August/September Offering.
In April 1995, Amarillo Cell Culture Company, Incorporated and
its licensee agreed to purchase an aggregate of $750,000 of Common
Stock at $2.00 per share, all of which cash was received during the
second quarter of 1995.
In the first quarter of 1995, the Company concluded an
agreement with Fujimoto Diagnostics, Inc. ("Fujimoto"), a
pharmaceutical company located in Osaka, Japan, for the
commercialization of the Company's ALFERON N Injection and ALFERON
N Gel in Japan. In connection with the agreement, Fujimoto
purchased $1,500,000 of Common Stock at $1.45 per share (the then
market price), all of which cash was received during the first
quarter of 1995, and agreed to purchase an additional $500,000 of
Common Stock on February 6, 1996 at the then market price. Such
additional $500,000 of Common Stock has to date not been purchased.
Fujimoto has advised the Company that, to date, it has incurred
higher than anticipated development expenses, and that it has
determined that there may be greater difficulties in obtaining
Japanese regulatory approval than originally anticipated. Fujimoto
has therefore requested that the Company renegotiate such
investment agreement and the related commercialization agreement.
The Company intends to meet with Fujimoto to consider its request.
During January 1994, Purdue ordered 45,000 vials of ALFERON
N Injection at an agreed upon price, which were shipped between
June 1994 and November 1995. In June 1995, the Company received
purchase orders from Purdue totalling 22,744 vials of ALFERON N
Injection, of which 4,431 vials were shipped in November 1995. The
balance of the order was cancelled when the Company reacquired the
marketing rights for ALFERON N Injection in the United States and
Canada from Purdue. Purdue has informed the Company that during
the quarter ended March 31, 1996 and the years ended December 31,
1995 and 1994, it sold approximately 4,100 vials, 23,900 vials and
25,000 vials, respectively, and distributed as free samples
approximately 70 vials, 400 vials and 2,000 vials, respectively, of
ALFERON N Injection from its inventory.
In January 1994, the Company amended its marketing and
distribution agreements with Purdue. Pursuant to such amended
agreements, the Company assumed sole responsibility to conduct and
fund clinical trials required to obtain FDA approval for additional
indications for ALFERON N Injection. Prior to these amendments,
Purdue was responsible for the payment of the costs of such
clinical trials. The Company anticipates that the expansion of its
research and development efforts and clinical trial activities and
its assuming responsibility for the conduct and funding thereof
will increase operating expenses. The Company anticipates that its
future capital requirements will increase even more as a result of
the reacquisition of marketing rights from Purdue. The Company
intends to seek to enter into joint ventures or other arrangements
with strategic partners who agree to bear all or part of such
expenses.
In connection with the amendments to the agreements with
Purdue, the Company agreed to purchase an aggregate of 994,994
shares of its Common Stock for $3,979,976 ($4.00 per share) from
Purdue over a period of 19 months. The Company purchased 62,500 of
such shares of Common Stock for $250,000 in January 1994 and was
obligated to purchase an additional 250,000 shares of Common Stock
for $1,000,000 in 1994. In 1994, the Company and Purdue agreed to
offset $700,000 owed to the Company by Purdue, for the purchase of
ALFERON N Injection during 1994, against the Company's obligation
to purchase $1,000,000 of Common Stock from Purdue in 1994. As of
December 31, 1994, $300,000 of this obligation to Purdue had not
been paid and was reflected as a current liability on the balance
sheet. In addition, as of March 31, 1995, the Company had an
additional $67,783 of offsets based upon additional sales of
ALFERON N Injection by Purdue leaving $232,217 of this obligation
outstanding as of such date. In April 1995, the Company was
required to purchase 62,500 shares of Common Stock for $250,000 and
on August 31, 1995 was obligated to purchase 619,994 shares of
Common Stock for $2,479,976. As of July 31, 1995, the Company had
generated sufficient additional offsets based upon additional sales
of ALFERON N Injection to and by Purdue to repay the $232,217 owed
to Purdue as of March 31, 1995 and to pay $200,843 of the $250,000
owed to Purdue for the April 1995 stock repurchase. In July 1995,
the Company entered into a further amendment to the agreements with
Purdue, which became effective upon the sale on August 22, 1995 of
more than the minimum number of shares of Common Stock in the
August/September Offering, pursuant to which the balance owed to
Purdue for the April 1995 stock repurchase (which had been reduced
by further offsets) was forgiven and the Company obtained an
option, exercisable until December 31, 1996, to reacquire the
remaining marketing and distribution rights from Purdue. If the
option were not exercised, the Company would no longer have the
obligation to repurchase the 619,994 shares.
In April 1996, the Company entered into an agreement with
Purdue, conditioned upon the sale of at least 5,000,000 shares of
Common Stock in the Offering, to reacquire the remaining marketing
and distribution rights from Purdue Pharma and Mundipharma for
$3,260,962 in cash, subject to minor adjustment. In connection with
the agreement (i) Purdue Pharma agreed to provide during the first
year after the reacquisition certain distribution services to the
Company with respect to 24,000 vials of ALFERON N Injection at an
aggregate cost of $240,000, (ii) Purdue Pharma agreed to provide
during the second year after the reacquisition, if requested by the
Company, certain distribution services to the Company with respect
to up to 30,000 vials of ALFERON N Injection at a cost of $15 per
vial, and (iii) the Company agreed to purchase from Purdue Pharma
all vials of ALFERON N Injection and all other assets of Purdue
Pharma used exclusively in its ALFERON N Injection business at an
aggregate cost of $259,050 in cash, subject to minor adjustment. In
addition, at the time of entering into the agreement, Purdue sold
its remaining 619,994 shares of Common Stock. Upon completion of
the Offering, the Company applied $3,760,012 of the net proceeds to
reacquire such marketing rights, pay for the first year's
distribution services, and purchase such vials and other assets.
The $3,313,705 cost of reacquisition of distribution rights from
Purdue will be charged to expense in the second quarter of 1996.
The Company believes that the reacquisition of marketing
rights from Purdue will provide it with greater financial
flexibility and control over the distribution of ALFERON N
Injection. After reacquiring the marketing rights from Purdue, the
Company intends to focus its marketing efforts in the United States
on making additional sales to existing customers. While the Company
does not expect to immediately form a sales force, it will consider
doing so based upon sales experience and any approvals obtained for
new indictions.
Results of Operations
For the three months ended March 31, 1996, the Company's
revenues of $5,785 were derived from sales of research products.
Revenues of $179,619 for the three months ended March 31, 1995
included $174,710 from the sale of ALFERON N Injection and the
balance from sales of research products. Cost of goods sold and
excess/idle production costs totalled $781,541 and $568,095 for the
three months ended March 31, 1996 and 1995, respectively. The
inventory which was sold during the three months ended March 31,
1995 had been written down to its net realizable value. Since the
facility was operating during the three months ended March 31, 1996
and 1995, excess/idle production costs primarily represented
current production costs in excess of the estimated net realizable
value of the inventory produced.
Research and development expenses during the three months
ended March 31, 1996 of $974,309 increased by $14,157 from $960,152
for the same period in 1995. The Company received $64,746 and
$45,498 during the three months ended March 31, 1996 and 1995,
respectively, as rental income from National Patent Development
Corporation ("NPDC") for the use of a portion of the Company's
facilities, which offset research and development expenses.
General and administrative expenses for the three months ended
March 31, 1996 were $550,170 as compared to $446,392 for the same
period in 1995. The increase of $103,778 was principally due to
increases in payroll and other expenses. NPDC provides certain
administrative services for which the Company paid NPDC $30,000 for
each of the three month periods ended March 31, 1996 and 1995. In
addition, for the three months ended March 31, 1996 and 1995, the
Company reimbursed NPDC $48,750 and $62,499, respectively, for
expenses paid by NPDC on behalf of the Company. During the three
months ended March 31, 1995, NPDC provided to the Company, at its
estimated cost, certain personnel which the Company used in its
operations. For the three months ended March 31, 1995, payments to
NPDC for the services provided to the Company by NPDC personnel
amounted to $212,155. Commencing January 1, 1996, most of the NPDC
personnel who had been providing a portion of their time to the
Company became employees of the Company and are now providing a
portion of their time to NPDC at the Company's estimated cost. For
the three months ended March 31, 1996, receipts from NPDC for the
services provided to NPDC by Company personnel amounted to $79,548
and payments to NPDC for the services provided to the Company by
NPDC personnel amounted to $43,355.
Interest and other income for the three months ended March 31,
1996 was $69,035 as compared to $6,776 for the same period in 1995.
The increase of $62,259 was due to more funds available for
investment in the current period.
Interest expense for the three months ended March 31, 1996 and
1995 was zero and $9,909, respectively. The decrease was due to
the absence of interest bearing debt during the 1996 period.
As a result of the foregoing, the Company incurred net losses
of $2,231,200 and $1,798,153 for the three months ended March 31,
1996 and 1995, respectively.
Recent Tax and Accounting Developments
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." Statement 121 requires the Company to estimate the
future cash flows expected to result from the use and eventual
disposition of its property, plant and equipment, and if the sum of
such cash flows is less than the carrying amount of these assets,
to recognize an impairment loss to the extent, if any, that the
carrying amount of the assets exceeds their fair values. The
Company believes that, although it has a current period operating
loss and a history of operating losses, expected future cash flows
derived from these assets will be at least equal to their carrying
values, and that no impairment loss will be indicated. The Company
bases this assessment both upon expected future product revenues
and upon the fact that it completed a major manufacturing facility
expansion and purchase of manufacturing equipment in 1991, the cost
of which constitutes a major portion of the carrying value of its
property, plant and equipment. The Company believes that this
expanded facility will be suitable for a number of years without
significant repairs.
In December 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), effective for years beginning after December 15,
1995. Under SFAS 123, the Company may elect either a "fair value"
based method or the current "intrinsic value" based method of
accounting prescribed by APB No. 25, "Accounting for Stock Issued
to Employees," for its stock-based compensation arrangements. Under
the "intrinsic value" based method, the Company will be required to
disclose in the footnotes to the consolidated financial statements
net income and earnings per share computed under the "fair value"
based method. The Company has elected to continue accounting for
stock-based compensation arrangements using the "intrinsic value"
based method; therefore, the adoption of SFAS 123 will not impact
the Company's results of operations or financial condition.
Forward-Looking Statements
This report contains certain forward-looking statements
reflecting management's current views with respect to future events
and financial performance. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking
statements, including, but not limited to, uncertainty of obtaining
additional funding for the Company; uncertainty of obtaining United
States regulatory approvals for the Company's products under
development and foreign regulatory approvals for the Company's FDA-
approved product and products under development and, if such
approvals are obtained, uncertainty of the successful commercial
development of such products; substantial competition from
companies with substantially greater resources than the Company in
the Company's present and potential businesses; no guaranteed
source of required materials for the Company's products; dependence
on certain distributors to market the Company's products; potential
adverse side effects from the use of the Company's products;
potential patent infringement claims against the Company; possible
inability of the Company to protect its technology; uncertainty of
pharmaceutical pricing; substantial royalty obligations payable by
the Company; limited marketing and production experience of the
Company; risk of product liability; and risk of loss of key
management personnel, all of which are difficult to predict and
many of which are beyond control of the Company.
<PAGE>
<PAGE>
INTERFERON SCIENCES, INC. AND SUBSIDIARY
QUALIFICATION RELATING TO FINANCIAL INFORMATION
MARCH 31, 1996
The financial information included herein is unaudited. Such
information, however, reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair statement of the results for the
interim periods. The results for interim periods are not
necessarily indicative of results to be expected for the year.
<PAGE>
<PAGE>
INTERFERON SCIENCES, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the period
ended March 31, 1996.
<PAGE>
<PAGE>
INTERFERON SCIENCES, INC.
MARCH 31, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed in
its behalf by the undersigned thereunto duly authorized.
INTERFERON SCIENCES, INC.
DATE: May 14, 1996 By: /s/ Lawrence M. Gordon
Lawrence M. Gordon
Chief Executive Officer
DATE: May 14, 1996 By: /s/ Donald W. Anderson
Donald W. Anderson
Controller
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