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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 Quarterly Period Ended March 31, 1995
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 0-11094
RIBI IMMUNOCHEM RESEARCH, INC.
(Exact name of registrant as specified in its charter)
Delaware 81-0394349
------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
553 Old Corvallis Road, Hamilton, MT 59840
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (406) 363-6214
-------------
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 / /
As of April 30, 1995, there were 18,871,593 shares of common
stock outstanding.
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<TABLE>
RIBI IMMUNOCHEM RESEARCH, INC.
INDEX
<CAPTION>
Page Number
<S> <C>
PART I. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements:
Condensed Balance Sheets
March 31, 1995 (Unaudited)
and December 31, 1994 . . . . . . . . . . . . . . . . 4
Condensed Statements of Operations
Three months ended March 31,
1995 and 1994 (Unaudited) . . . . . . . . . . . . . . 5
Condensed Statements of Cash Flows
Three months ended March 31,
1995 and 1994 (Unaudited) . . . . . . . . . . . . . . 6
Notes to Condensed Financial Statements
(Unaudited) . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . .11
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . .11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . .11
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . .12
</TABLE>
<PAGE> 2
RIBI IMMUNOCHEM RESEARCH, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed balance sheet as of March 31, 1995, the
condensed statements of operations and the condensed statements
of cash flows for the three-month periods ended March 31, 1994
and 1995, have been prepared by the Company, without audit. In
the opinion of management, all adjustments necessary to present
fairly the financial position, results of operations and changes
in cash flows as of and for the periods indicated have been made.
Certain reclassifications have been made to the prior year
financial statements to conform to the 1995 presentation.
It is suggested that the accompanying condensed financial
statements be read in conjunction with the audited financial
statements and the notes thereto included in the Company's 1994
Annual Report to Stockholders and Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.
The results of operations for the three month period ending
March 31, 1995, are not necessarily indicative of results
expected for the full year 1995.
<PAGE> 3
<TABLE>
RIBI IMMUNOCHEM RESEARCH, INC.
CONDENSED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1995 1994
----------- -----------
(Unaudited)
Assets
------
<S> <C> <C>
Current assets:
Cash and short-term deposits $ 438,664 713,637
Held-to-maturity investment securities 6,872,067 6,659,930
Trade accounts receivable 159,423 140,660
Inventories 537,599 678,294
Other current assets 255,871 290,329
---------- ----------
Total current assets 8,263,624 8,482,850
Available-for-sale investment securities 4,710,870 8,092,159
Held-to-maturity investment securities 12,182,383 10,500,819
Property, plant and equipment, net 11,551,095 11,225,938
Other assets, net 510,598 522,114
---------- ----------
$37,218,570 38,823,880
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 309,640 459,600
Accrued liabilities 560,806 838,399
Deferred revenue 247,862 187,500
---------- ----------
Total current liabilities 1,118,308 1,485,499
---------- ----------
Stockholders' equity
Preferred stock - -
Common stock 18,871 18,872
Additional paid-in capital 62,384,039 62,376,989
Unrealized investment losses (142,782) (327,791)
Accumulated deficit (26,159,866) (24,729,689)
---------- ----------
Total stockholders' equity 36,100,262 37,338,381
---------- ----------
$37,218,570 38,823,880
========== ==========
</TABLE>
[FN]
See accompanying notes.
<PAGE> 4
<TABLE>
RIBI IMMUNOCHEM RESEARCH, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
-------------------
1995 1994
---- ----
<S> <C> <C>
Revenues:
Sales $ 237,950 173,235
Contracts and licenses 414,638 795,560
Investment income 270,028 358,122
Other, net 1,580 725
---------- ----------
Total revenues 924,196 1,327,642
---------- ----------
Costs and expenses:
Purchases and production costs 274,201 67,986
Research and development 1,278,767 1,251,509
Selling, general and administrative 646,434 493,072
Depreciation and amortization 154,972 109,283
---------- ----------
Total costs and expenses 2,354,374 1,921,850
---------- ----------
Net loss $(1,430,178) (594,208)
========== ==========
Net loss per common share $ (.08) (.03)
========== ==========
Average number of shares outstanding 18,871,272 18,004,831
</TABLE>
[FN]
See accompanying notes.
<PAGE> 5
<TABLE>
RIBI IMMUNOCHEM RESEARCH, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
-------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,430,178) (594,208)
Adjustments to reconcile net loss to
cash used by operating activities:
Depreciation and amortization 154,972 109,283
Common stock issued in payment
of expenses 1,750 4,787
Compensation relating to stock options 5,000 (7,750)
Asset sales and abandoned patents 9,907 -
Changes in operating assets and
liabilities 66,111 (179,563)
---------- ----------
Net cash used by operating
activities (1,192,438) (667,451)
---------- ----------
Cash flows from investing activities:
Capital expenditures (813,652) (509,074)
Payments for other assets (8,132) (800)
Proceeds from maturities of held-to-
maturity investment securities 1,654,073 1,737,212
Proceeds from sale of available-for
sale investment securities 3,663,207 -
Purchases of available-for-sale
investment securities (96,909) (94,636)
Purchases of held-to-maturity
investment securities (3,481,422) (7,858,140)
---------- ----------
Net cash provided (used) by
investing activities 917,165 (6,725,438)
---------- ----------
Cash flows from financing activities:
Collections and interest on notes
receivable - common stock, net - 577,900
Proceeds from exercise of warrants - 5,819,002
Proceeds from exercise of options 300 469,143
Other - (124)
---------- ----------
Net cash provided by financing
activities 300 6,865,921
---------- ----------
Net change in cash and short-term
deposits (274,973) (526,968)
Cash and short-term deposits at beginning
of period 713,637 1,721,490
---------- ----------
Cash and short-term deposits at end
of period $ 438,664 1,194,522
========== ==========
</TABLE>
[FN]
See accompanying notes.
<PAGE> 6
<TABLE>
RIBI IMMUNOCHEM RESEARCH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Inventories
-----------
Inventories are as follows:
<CAPTION>
March 31, December 31,
1995 1994
----------- -------------
(Unaudited)
<S> <C> <C>
Raw materials $ 72,419 58,231
Work in process 295,681 468,711
Finished goods 169,499 151,352
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$ 537,599 678,294
======= =======
</TABLE>
2. Commitments and Contingencies
-----------------------------
The Company, the National Institutes of Health ("NIH") and
the Bitterroot Valley Sanitary Landfill ("Landfill") were
notified by the Montana Department of Health and Environmental
Sciences ("MDHES") in March of 1991 that they had been identified
as potentially responsible parties ("PRPs") and as such are
jointly and severally liable for groundwater contamination
located at and near the site of the Landfill in Ravalli County,
Montana. The Company's involvement arises out of waste materials
which it deposited at the Landfill from 1982 to 1985 which the
Landfill had permits to receive. The Company may be required to
reimburse the State of Montana and/or the other PRPs for remedial
action costs and may be subject to penalties, the extent of which
are not known at this time. Tests were conducted pursuant to a
sample and analysis plan agreed to by the MDHES and PRPs to
define further the area of possible contamination and whether and
how the contamination is moving through the ground. The tests
completed in March 1993 showed the continued presence of certain
contaminants in the groundwater and defined the area affected. A
plan was submitted in May 1993 which was later approved by the
MDHES that outlined the additional studies that will be required
to identify and remove the main source of contamination and
proposed a ground water monitoring program. The NIH voluntarily
initiated an interim remediation plan approved by the MDHES to
remove and decontaminate the believed source of the contamination
and, if necessary, treat the aquifers which tests have shown
contain contaminants. Removal and decontamination of the
contaminated soil at and around the disposal site has been
completed. Treatment of the groundwater in the proximity of the
disposal site continues utilizing carbon filtering
<PAGE> 7
and air sparging, and it is anticipated such treatment will
continue through 1995 and possibly longer. The MDHES has also
conducted a "Risk Assessment" and issued a "Draft Final
Feasibility Study" in October 1994 that discussed possible final
remediation alternatives. The possible alternatives range in
projected costs from zero for no further action, to $20 million
for very conservative remediation measures. Some possible
remedies were estimated to cost $1.4 million, $4.1 million and
$4.8 million, respectively. The NIH, which has taken the lead and
incurred substantially all of the remediation costs, has
represented publicly that it would continue to work with the
MDHES towards an acceptable final remediation plan. It is
anticipated the MDHES will render a decision regarding which
alternative it will require by mid-1995. In 1993, the NIH stated
that as of that time, it had incurred costs and anticipated
future interim remediation costs which could total $2 million or
more. Because of the uncertainties in the cost of further
remediation and whether the NIH will seek partial reimbursement
from the other PRPs, it is not possible at this time to determine
the potential liability of the Company as a PRP.
Two landowners in the vicinity of the Landfill have filed
civil suits seeking unspecified damages for alleged diminished
value of land, possible health hazards and loss of domestic water
source. The suit names the PRPs, including the Company, the NIH
and the Landfill, as well as unknown individuals and corporations
which may be discovered to have contributed to the injuries
alleged. The Company has been served with and has filed answers
to these suits. The Company has denied any liability. It is not
possible at this time to predict whether additional civil suits
will be filed, the outcome of the pending suits or the potential
financial impact on the Company of adverse decisions.
As of March 31, 1995, the Company has accrued a reserve of
approximately $172,000 primarily to cover billed and potential
legal, consulting and MDHES reimbursement costs associated with
the Company as a PRP and the civil suites. During 1994 the
Company received $125,000 in insurance proceeds from one
insurance company, which is in rehabilitation, in a one-time
settlement of any claims associated with the Landfill issues. At
least some of the future costs included in the defense of the
civil suits are expected to be covered by other insurance
proceeds, none of which have been accrued. Costs charged against
earnings (before any insurance proceeds) during the first
quarters of 1995 and 1994 were $21,063 and $3,593, respectively.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
-------
Since its inception in 1981, the Company has been engaged
primarily in the research and development of immunostimulants for
use in preventing and treating human diseases. To date, the
Company has received limited revenues from commercial sales and
sales of clinical supplies. The Company has incurred net losses
in each year since its inception and expects to incur additional
losses for at least the next few years. At March 31, 1995, the
Company's accumulated deficit was approximately $26,160,000.
The Company's results of operations can vary significantly
from quarter to quarter and depend, among other factors, on costs
related to the progress of clinical trials conducted by the
Company and, to a lesser extent, on revenues and costs associated
with manufacturing. To date, research and development expenses,
together with manufacturing costs, have exceeded product and
other revenues in all periods.
The Company is not able to estimate with certainty the
amount of cash and working capital which may be needed for
operations. Such requirements typically vary depending upon the
results of basic research and clinical trials, the time and
expense required for governmental approval of products, and
competitive and technical developments, most of which are beyond
management's control. There is no assurance that the Company will
be able to obtain the necessary funding in sufficient amounts or
at the appropriate time for its planned activities. In the event
the Company may require additional funding, it might not be able
to proceed as rapidly as it would like, if at all, with the
development and commercialization of its products, which would
have a material adverse effect on its future financial condition
and results of operations.
Results of Operations
---------------------
During the first quarter of 1995 the Company incurred a net
loss of $1,430,000 compared to a net loss of $594,000 in the
first quarter of 1994. The greater net loss reflects lower total
revenues and added expenses related to process start-up and
equipment testing in the Company's newly expanded manufacturing
facility.
Revenues were lower in the first quarter of 1995 compared to
the same period in 1994 because of contract and license revenue
and investment income which decreased $381,000 and $88,000,
respectively. Lower contract and license fees result from the
signing of agreements in the first quarter of 1994 which were
retroactive to April 1993, causing the recognition of retroactive
revenue during the first quarter of 1994. Investment income was
<PAGE> 9
down primarily because of an investment portfolio restructuring
and conversion of some of the Company's "available-for-sale"
investments to "held-to-maturity" investments thereby increasing
the future yield and reducing the interest rate risk on
approximately $3,000,000 of investments.
Somewhat offsetting decreases in other revenues was a
$65,000 increase in sales resulting mainly from increased custom
adjuvant sales. At the same time, purchases and production costs
increased $206,000. The increase in production costs reflects the
Company's start-up and equipment testing of its new manufacturing
plant completed late in 1994. Start-up and testing are expected
to be complete by the middle of 1995, but manufacturing costs
could remain somewhat higher than in past years until plant
throughput increases to nearer plant capacity.
Research and development expenditures were fairly level in
the first quarter of 1995 compared to the first quarter of 1994.
The Company expects research and development expenditures to be
higher for the year 1995 than they were for the year 1994 as
additional toxicology studies are conducted and an additional
clinical trial may be started testing MELACINE melanoma
theraccine in conjunction with interferon-alpha in the treatment
of patients with late-stage melanoma.
Selling, general and administrative expenses increased
approximately $153,000 in the first quarter of 1995 compared with
the same period in 1994. The increase is mainly a result of the
addition of a corporate development group in mid-1994 and to a
lesser extent, added costs needed to support the expanded
manufacturing plant.
Financial Condition
-------------------
During the first quarter of 1995 the Company used $1,192,000
in operations, approximately $525,000 more than was used in the
first quarter of 1994. The increased cash burn in the first
quarter of 1995 reflects a greater net loss, reduced accrued
liabilities payable for the Company's plant expansion and greater
accrued interest on investments. Such amounts were partially
offset by reduced inventories, greater depreciation expense and a
decrease in amounts accrued but not received for license fees in
the first quarter of 1994. The Company expects cash flows used in
operations for the year 1995 to exceed those in the year 1994 as
research expenditures are expected to increase over the remainder
of the year.
During 1994 the Company constructed and equipped a new
manufacturing plant which, the Company believes, will enable it
to meet its anticipated manufacturing and other facility
requirements for the foreseeable future. The plant is in the
process of start-up
<PAGE> 10
and testing which should be completed late in the first half of
1995.
As of March 31, 1995, the Company had cash, short-term
deposits, short-term investments and long-term investments
totalling $24,204,000 which it believes is enough to meet its
objectives through 1998.
The Company, The National Institutes of Health ("NIH") and
the Bitterroot Valley Sanitary Landfill ("Landfill") were
notified by the Montana Department of Health and Environmental
Sciences ("MDHES") in March of 1991 that they had been identified
as potentially responsible parties ("PRPs") for groundwater
contamination located at and near the site of the Landfill in
Ravalli County, Montana. Additionally, two landowners in the
vicinity of the Landfill have filed civil suits seeking
unspecified damages for alleged diminished value of land,
possible health hazards and loss of domestic water source. As of
March 31, 1995, the Company has accrued reserves of $172,000
primarily to cover billed and potential legal, consulting and
MDHES reimbursement costs associated with the Company as a PRP
and the civil suits. At least some costs related to the civil
suits have been or are expected to be covered by insurance.
However, the Company is unable to determine its potential
liability with respect to the Landfill at this time. See Note 2
of the Notes to Condensed Financial Statements for a discussion of
contingencies.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) See Note 2 of the Notes to Condensed Financial
Statements for a discussion of the Company's
involvement as a PRP and a defendant in a civil suit
relating to the Bitterroot Valley Sanitary Landfill.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule - for electronic filing only
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended March 31, 1995.
<PAGE> 11
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
RIBI IMMUNOCHEM RESEARCH, INC.
------------------------------------
(Registrant)
May 10, 1995 By Vern D. Child
-------------------------------------
Vern D. Child, Vice President-Finance
and Treasurer (duly authorized officer
and principal financial and accounting
officer)
<PAGE> 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED BALANCE SHEET AT MARCH 31, 1995 AND THE CONDENSED STATEMENTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 438,664
<SECURITIES> 6,872,067
<RECEIVABLES> 159,423
<ALLOWANCES> 0
<INVENTORY> 537,599
<CURRENT-ASSETS> 8,263,624
<PP&E> 14,767,427
<DEPRECIATION> 3,216,332
<TOTAL-ASSETS> 37,218,570
<CURRENT-LIABILITIES> 1,118,308
<BONDS> 0
<COMMON> 18,871
0
0
<OTHER-SE> 36,081,391
<TOTAL-LIABILITY-AND-EQUITY> 37,218,570
<SALES> 237,950
<TOTAL-REVENUES> 924,196
<CGS> 274,201
<TOTAL-COSTS> 274,201
<OTHER-EXPENSES> 1,433,739
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,430,178)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,430,178)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,430,178)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
