<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 JUNE 30, 1996.
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-15006
T CELL SCIENCES, INC.
(Exact name of registrant as specified in charter)
DELAWARE NO. 13-3191702
(State of Incorporation) (I.R.S Employer Identification No.)
119 FOURTH AVENUE, NEEDHAM, MASSACHUSETTS 02194-2725
(Address of principal executive offices) (Zip code)
(617) 433-0771
(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 .
--- ---
Outstanding as of
Class August 12, 1996
----- ---------------
Common Stock, par value $.001 19,946,601
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T CELL SCIENCES, INC.
<TABLE>
TABLE OF CONTENTS
JUNE 30, 1996
<CAPTION>
Page
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<S> <C>
PART I -- FINANCIAL INFORMATION
- -------------------------------
Condensed Consolidated Balance Sheets --
June 30, 1996 and December 31, 1995.................................... 3
Condensed Consolidated Statements of Operations --
Quarters ended June 30, 1996 and 1995.................................. 4
Six Months ended June 30, 1996 and 1995................................ 5
Condensed Consolidated Statements of Cash Flows --
Six months ended June 30, 1996 and 1995................................ 6
Notes to Condensed Consolidated Financial Statements............................ 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................. 9
PART II -- OTHER INFORMATION
- ----------------------------
Item 1. Legal Proceedings...................................................... 12
Item 5. Other Information...................................................... 12
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits........................................................... 12
B. Reports on Form 8-K................................................ 12
Signatures...................................................................... 13
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
T CELL SCIENCES, INC.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
================================================================================================
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 6,726,626 $ 12,275,217
Accounts Receivable, Net 9,593 339,167
Inventories 14,600 403,293
Prepaid Expenses and Other 288,787 541,411
Current Portion Note Receivable 380,000 --
- ------------------------------------------------------------------------------------------------
Total Current Assets 7,419,606 13,559,088
- ------------------------------------------------------------------------------------------------
Property and Equipment, Net 512,842 1,172,137
Restricted Cash 850,000 850,000
Long-term Note Receivable 1,649,751 --
Other Noncurrent Assets 1,312,438 2,951,062
- ------------------------------------------------------------------------------------------------
Total Assets $ 11,744,637 $ 18,532,287
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 177,429 $ 724,944
Accrued Expenses 1,204,494 1,504,586
Deferred Revenue -- 121,083
- ------------------------------------------------------------------------------------------------
Total Current Liabilities 1,381,923 2,350,613
- ------------------------------------------------------------------------------------------------
Collaborator Advance 181,573 181,573
- ------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock, $.001 Par Value 19,966 19,905
Additional Paid-in Capital 62,728,168 62,399,255
Less: Common Treasury Shares at Cost (68,938) (80,523)
Accumulated Deficit (52,498,055) (46,338,536)
- ------------------------------------------------------------------------------------------------
Total Stockholders' Equity 10,181,141 16,000,101
- ------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 11,744,637 $ 18,532,287
================================================================================================
</TABLE>
See accompanying notes to financial statements
3
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T CELL SCIENCES, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
=======================================================================================
<S> <C> <C>
OPERATING REVENUE:
Product Development and Licensing Agreements $ 179,396 $ 547,940
Product Sales 8,725 614,154
- ---------------------------------------------------------------------------------------
Total Operating Revenue 188,121 1,162,094
- ---------------------------------------------------------------------------------------
OPERATING EXPENSE:
Cost of Product Sales 2,837 452,413
Research and Development 1,437,072 2,013,800
General and Administrative 3,072,249 987,939
Marketing and Sales 97,880 444,504
- ---------------------------------------------------------------------------------------
Total Operating Expenses 4,610,038 3,898,656
- ---------------------------------------------------------------------------------------
Operating Loss (4,421,917) (2,736,562)
Non Operating Income, Net 114,019 151,689
- ---------------------------------------------------------------------------------------
Net Loss $(4,307,898) $(2,584,873)
=======================================================================================
Net Loss Per Common Share $ (0.22) $ (0.15)
=======================================================================================
Weighted Average Common Shares Outstanding 19,938,202 17,055,686
=======================================================================================
</TABLE>
See accompanying notes to financial statements
4
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T CELL SCIENCES, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
=============================================================================================
<S> <C> <C>
OPERATING REVENUE:
Product Development and Licensing Agreements $ 270,613 $ 1,136,616
Product Sales 506,338 1,206,939
- ---------------------------------------------------------------------------------------------
Total Operating Revenue 776,951 2,343,555
- ---------------------------------------------------------------------------------------------
OPERATING EXPENSE:
Cost of Product Sales 351,172 941,663
Research and Development 2,928,109 3,993,600
General and Administrative 3,936,027 2,047,311
Marketing and Sales 282,907 737,380
- ---------------------------------------------------------------------------------------------
Total Operating Expenses 7,498,215 7,719,954
- ---------------------------------------------------------------------------------------------
Operating Loss (6,721,264) (5,376,399)
Non Operating Income, Net 561,745 381,065
- ---------------------------------------------------------------------------------------------
Net Loss $(6,159,519) $(4,995,334)
=============================================================================================
Net Loss Per Common Share $ (0.31) $ (0.29)
=============================================================================================
Weighted Average Common Shares Outstanding 19,923,790 17,054,953
=============================================================================================
</TABLE>
See accompanying notes to financial statements
5
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T CELL SCIENCES, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
JUNE 30, JUNE 30,
Increase (Decrease) in Cash & Cash Equivalents 1996 1995
===========================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(6,159,519) $(4,995,334)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 280,873 291,026
Gain on Sale of Research Products and Operations of
T Cell Diagnostics, Inc. (309,753) --
Severance agreement stock option vesting acceleration 170,288 --
Write-off of capitalized patent costs 1,751,626 --
Decrease of collaborator advance -- (318,427)
Net Change in Current Assets and Current Liabilities (1,058,327) (461,194)
- -------------------------------------------------------------------------------------------
Net Cash Used by Operating Activities (5,324,812) (5,483,929)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (11,567) (6,945)
Sale/Disposal of Fixed Assets -- 106,961
Increase in Patents and Trademarks (318,318) (359,186)
Redemption of Short Term Investments -- 8,539,666
Other Noncurrent Assets (64,164) --
- -------------------------------------------------------------------------------------------
Net Cash Provided by Investing Activities (394,049) 8,280,496
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Exercise of Stock Options 158,685 7,124
Sale of Stock 11,585 16,739
- -------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 170,270 23,863
- -------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (5,548,591) 2,820,430
Cash and Cash Equivalents at Beginning of Period 12,275,217 7,644,653
- -------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 6,726,626 $10,465,083
===========================================================================================
</TABLE>
See accompanying notes to financial statements
6
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T CELL SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(1) NATURE OF BUSINESS
------------------
T Cell Sciences, Inc. (the "Company"), is a biopharmaceutical company
engaged in the discovery and development of innovative drugs targeting the
immune and inflammatory systems. The Company was incorporated in the State of
Delaware on December 9, 1983. T Cell Diagnostics, Inc. ("TCD"), a wholly-owned
subsidiary of the Company, was formed in 1991 to capitalize on the sales of
diagnostic and research products emanating from the Company's proprietary
technology. On March 5, 1996 the Company sold the research products and
operations of TCD to Endogen, Inc. while retaining the TRAx[Registered
Trademark] diagnostic franchise.
The condensed consolidated financial statements include the accounts of
T Cell Sciences, Inc. and its wholly owned subsidiary, T Cell Diagnostics, Inc.
All intercompany transactions have been eliminated.
(2) INTERIM FINANCIAL STATEMENTS
----------------------------
The accompanying condensed consolidated financial statements for the
three and six month periods ended June 30, 1996 and 1995 include the
consolidated accounts of the Company, and have been prepared in accordance with
generally accepted accounting principles and with the instructions to Form 10-Q
and article 10 of Regulation S-X. In the opinion of management, the information
contained herein reflects all adjustments, consisting solely of normal recurring
adjustments, that are necessary to present fairly the financial positions at
June 30, 1996 and December 31, 1995, the results of operations for the three and
six month periods ended June 30, 1996 and 1995, and the cash flows for the six
month periods ended June 30 30, 1996 and 1995. The results of operations for the
three and six month periods ended June 30, 1996 is not necessarily indicative of
results for any future interim period or for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, although the Company believes that the disclosures
included are adequate to make the information presented not misleading. The
condensed consolidated financial statements and the notes included herein should
be read in conjunction with footnotes contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
(3) EQUIPMENT OPERATING LEASE
-------------------------
In August 1994, the Company entered into a lease agreement to with a
five-year term lease up to $2,000,000 of equipment. The lease agreement requires
that the Company maintain certain restrictive covenants determined at the end of
each fiscal quarter, including a cash, cash equivalents and short-term
investments balance of not less than $10,000,000 and certain financial ratios.
At September 30, 1995 the Company's cash, cash equivalents and short-term
investments balance was below the minimum covenant requirement. In accordance
with the lease agreement, in November 1995, the Company pledged as collateral to
the lessor the cash amount outstanding on the lease. In March 1996, the Company
repaid approximately $980,000 of the outstanding total obligation under the
lease in conjunction with the sale of the research products and operations of
TCD. At June 30, 1996, the Company had approximately $850,000 outstanding on the
lease.
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(4) LITIGATION
----------
In December 1994, the Company filed a lawsuit in the Superior Court of
Massachusetts against the landlord of its former Cambridge, Massachusetts
headquarters, to recover the damages incurred by the Company resulting from the
evacuation of the building, due to air quality problems which caused skin and
respiratory irritation to a significant number of employees. The landlord
defendant has filed counterclaims, alleging the Company has breached its lease
obligations. The landlord's mortgagor has filed claims against the Company for
payment of the same rent alleged to be owed. The Company believes at this time
that it will prevail on the merits of the lawsuits and is vigorously defending
the claims brought against it. Due to the pre-trial stage of the lawsuits, a
range of potential losses, which the Company believes are unlikely, can not be
estimated at this time. Accordingly, no accrual has been made in the financial
statements relative to any potential effects on the Company's future operating
results. The Company's insurance carrier is reimbursing the Company for certain
legal expenses associated with the counterclaims, under a reservation of rights,
but has filed a motion for summary judgment seeking a determination of
noncoverage. The Company has filed a motion to strike the insurer's motion for
summary judgment on the grounds that it was not timely filed.
(5) DISPOSITION OF ASSETS
---------------------
On March 5, 1996, the Company sold the research products and operations
of TCD to Endogen, Inc. ("Endogen") for a purchase price of approximately
$2,900,000. The sale did not include the TRAx product franchise and related
assets. The purchase price was paid in the form of a convertible subordinated
note in the principal amount of $1,900,000, due in ten semi-annual installments
commencing September 1, 1996 with interest receivable thereon at the rate of 7%
per annum. The outstanding principal of the note is convertible at any time at
the option of the Company into shares of common stock of Endogen. Endogen also
paid the Company approximately $528,000 in cash and provided a $452,000 short
term note receivable to fund the Company's purchase of certain property and
equipment outstanding under an operating lease. These assets were transferred to
Endogen upon closing of the sale. The short term note receivable was
subsequently collected on March 27, 1996.
(6) WRITE-OFF OF CAPITALIZED PATENT COSTS
-------------------------------------
During the second quarter of 1996, as part of the Company's
realignment of certain of its operations, the Company suspended internal
funding of the research and development of its T Cell antigen receptor program
pending completion of negotiations to transfer certain of its patent and
license rights related to such technology to Astra AB ("Astra"). In June 1996,
as a result of these negotiations and in accordance with Statement of
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, the Company evaluated and
subsequently wrote off approximately $1,752,000 of capitalized patent costs
relating to its T Cell antigen receptor program.
(7) SEVERANCE AGREEMENT CHARGE
--------------------------
On May 29, 1996 the Company announced changes in it senior management.
As part of the reorganization, the Company recorded a $425,000 charge to
earnings resulting from a severance agreement with the Company's former
President and Chief Executive Officer. The charge included a $255,000 severance
payment and a non-cash charge of approximately $170,000 relating to the
acceleration of certain stock option vesting rights.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
OVERVIEW
In an effort to focus its business operations on its therapeutic drug
programs, the Company recently realigned certain of its operations. On March 5,
1996, the Company sold the operations and research product line of its wholly
owned subsidiary TCD, excluding the TRAx product franchise and related assets,
to Endogen for a purchase price of approximately $2,900,000. While the Company
will continue the development of its TRAx product franchise, its present plan is
to defer filing a 510(k) application with the FDA for clearance to market TRAx
CD8 in the United States while it focuses on establishing a partnership for
international distribution of its TRAx technology. Furthering its focus toward
the development of proprietary therapeutic products, the Company reorganized its
senior management in June 1996, with the appointment of Una S. Ryan Ph. D., its
Chief Scientific Officer, to the position of President and Chief Operating
Officer, and its Chairman James D. Grant, as Chief Executive Officer. The
Company also appointed Norman W. Gorin as Chief Financial Officer.
The Company has in the past developed and produced both therapeutic and
diagnostic products, including the development of T cell receptor therapeutics
in collaboration with Astra. The Company has recently suspended internal funding
of the research and development of its T cell receptor therapeutic programs
pending the conclusion of negotiations with Astra to transfer certain of its
rights to the technology. In conjunction with these developments, the Company
has written off certain capitalized patent costs related to the T cell receptor
technology, incurring a $1,752,000 charge to earnings.
The Company is now focusing its resources on the discovery and
development of innovative drugs targeting the immune and inflammatory systems.
The Company's lead therapeutic program is focused on developing compounds that
inhibit complement activation which is part of the body's immune defense system.
In January 1996, the Company initiated a Phase II clinical trial for the
evaluation of the Company's lead therapeutic compound, TP10, in patients with
ARDS. In July 1996, the Company initiated a Phase I/II clinical trial to prevent
reperfusion injury in patients receiving lung transplants.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996 COMPARED TO QUARTER ENDED JUNE 30, 1995 --
The Company reported a consolidated net loss of $4,308,000 or $.22 per share for
the quarter ended June 30, 1996, compared with a net loss of $2,585,000 or $.15
per share for the quarter ended June 30, 1995. The increase in net loss was
primarily due to a $1,752,000 write-off of certain capitalized patent costs
combined with a $425,000 charge resulting from a severance agreement with its
former President and Chief Executive Officer in June 1996. In addition, revenue
decreased $974,000 for the quarter ended June 30, 1996 compared to the quarter
ended June 30, 1995 primarily due to lower product sales as a result of the sale
of the research products and operations of the Company's diagnostic division in
March 1996. Excluding the write-off of certain capitalized patent costs and the
charge relating to the severance agreement, the net loss for the quarter
decreased 17.6% or $454,000 for the quarter compared to the same period last
year. This decrease was primarily due to the sale of the research products and
operations combined with staff reductions and implementation of discretionary
spending controls across all functional areas in the second half of 1995.
Product development revenue decreased 67.3% or $369,000 to $179,000 for
the quarter ended June 30, 1996 compared to the same quarter last year. The
decrease for the quarter ended June 30, 1996 was primarily the result of
anticipated lower revenue from Astra, the Company's collaborative partner. In
accordance with its agreement with Astra, the Company will not receive
additional research and development revenue funding. Included in product
development revenue is a $100,000 non-refundable execution fee
9
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from CytoTherapeutics, Inc. In May 1996 the Company granted CytoTherapeutics a
worldwide non-exclusive license to the Company's technology and patent rights
relating to Complement Receptor 1 for a series of milestone payments and
royalties. Product sales revenue was $9,000 for the quarter ended June 30, 1996
compared to $614,000 for the same period last year, and cost of product sales
decreased $450,000 to $3,000 for the quarter compared to last year. The
decrease in product sales and cost of product sales for the quarter ended June
30, 1996 is attributable to the sale of the research products and operations of
TCD to Endogen.
Research and development expenses were $1,437,000 for the quarter ended
June 30, 1996 compared to $2,014,000 for the same period last year. The decrease
is primarily attributable to the restructuring program implemented in the second
half of 1995 which further focused the Company on priority projects, combined
with the sale of the research products and operations of TCD on March 5, 1996.
General and administrative expenses increased $2,084,000 to $3,072,000
for the quarter ended June 30, 1996 from $988,000 for the comparable period
last year. The increase is due to the $425,000 charge resulting from a
severance agreement with its former President and Chief Executive Officer in
June 1996 and the write-off of certain capitalized patent costs of $1,752,000.
Excluding the charge from the senior management reorganization and the
write-down of the capitalized patent costs, general and administrative expenses
decreased $93,000 or 9.4% for the quarter compared to last year. The decrease
is mainly attributable to staff reductions combined with discretionary spending
controls across all functional areas.
Marketing and sales expenses decreased 78.0% to $98,000 for the quarter
ended June 30, 1996 compared to $445,000 for the quarter ended June 30, 1995.
The decrease in marketing and sales expenses is primarily due to the sale of the
research products and operations of TCD in March 1996, combined with the
December 1995 exclusive sales and distribution contract with Diamedix
Corporation for the TRAx CD4 and CD8 microtiter plate format products in the
United States.
Non-operating income of $114,000 for the quarter ended June 30, 1996
reflects interest income which decreased 24.8% for the quarter ended June 30,
1996 compared with $152,000 for the quarter ended June 30, 1995. The decrease in
interest income is primarily the result of lower cash balances during the
quarter ended June 30, 1996 compared to the same period last year.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30,
1995. For the six months ended June 30, 1996, the Company reported a
consolidated net loss of $6,160,000 or $.31 per share, compared with a net loss
of $4,995,000 or $.29 per share for the six months ended June 30, 1995. The
increased loss for the six months ended June 30, 1996 compared to the same
period last year was primarily due to the $1,752,000 write-off of certain
capitalized patent costs, a $425,000 charge resulting from a severance agreement
with Company's former President and Chief Executive Officer, lower product
development revenue from Astra and lower product sales resulting from the sale
of the research products and operations of the Company's diagnostic division in
March 1996.
Product development revenue decreased 76.2% or $866,000 for the six
months ended June 30, 1996 compared to the same period last year. The decrease
reflected the anticipated lower revenue from Astra. In accordance with its
agreement with Astra, the Company will not receive additional research and
development revenue funding. For the six months ended June 30, 1996, product
development included a $100,000 non-refundable execution fee associated with an
agreement granting CytoTherapeutics, Inc. a worldwide, nonexclusive license to
the Company's technology and patent rights relating to Complement Receptor 1 for
a series of milestone payments and royalties.
Product sales revenue for the six months ended June 30, 1996 decreased
58.1% to $506,000 compared to $1,207,000 for the comparable period last year.
The decrease in product sales for the six months ended June 30, 1996 is
attributable to the sale of the research products and operations of TCD to
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Endogen, partially offset by an increase in TRAx product sales. As a result of
the sale of the research products and operations of TCD to Endogen, the
Company's product sales revenue for the period included product sales for the
first two months of the year only, compared with six months last year. The
Company does not anticipate having additional research product sales in the
foreseeable future.
For the six months ended June 30, 1996, research and development
expenses were $2,928,000 compared to $3,994,000 for the same period last year.
The decrease is primarily attributable to the restructuring program implemented
in the second half of 1995 which further focused the Company on priority
projects combined with the sale of the research products and operations of TCD
on March 5, 1996. In January 1996, the Company announced the start of a Phase
IIa clinical trial evaluating the use of TP10 in Patients with ARDS.
General and administrative expenses increased to $3,936,000 for the six
months ended June 30, 1996 from $2,047,000 for the comparable period last year.
Excluding the $425,000 charge resulting from the severance agreement with the
Company's former President and Chief Executive Officer in June 1996 and the
$1,752,000 write-off of capitalized patent costs, general and administrative
costs decreased 14.1% or $288,000 for the six months compared to last year. The
decrease is mainly attributable to staff reductions combined with the
implementation of discretionary spending controls across all functional areas.
Non-operating income of $562,000 for the six months ended June 30, 1996
includes a gain of $310,000 recognized from the sale of the research products
and operations to Endogen. Interest income decreased 33.9% to $252,000 for the
six months ended June 30, 1996 compared with $381,000 for the six months ended
June 30, 1995. The decrease in interest income is primarily the result of lower
cash balances during the six months ended June 30, 1996 compared to the same
period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents at June 30, 1996 decreased
$5,548,000 to $6,727,000 from $12,275,000 at December 31, 1995. The decrease is
primarily due to the net operating loss of $6,160,000 for the six months ended
June 30, 1996 adjusted for the non-cash write-off of capitalized patent costs of
$1,752,000. Cash used in operations was $5,325,000 for the six months ended June
30, 1996 compared to $5,484,000 for the six months ended June 30, 1995. The
$159,000 decrease in cash used is primarily due to a $832,000 decrease in net
operating loss, adjusted for the write-off of capitalized patent costs and a
charge resulting from a severance agreement with the Company's former President
and Chief Executive Officer.
The Company received a convertible subordinated note receivable in the
principal amount of $1,900,000 in connection with the sale of the research
products and operations of TCD to Endogen. Payments are due in ten semi-annual
installments commencing September 1, 1996 with interest receivable thereon at
the rate of 7% per annum. The outstanding principal amount of the note is
convertible at any time at the option of the Company into shares of common stock
of Endogen.
The Company has no long-term debt. During 1994, the Company entered
into an operating lease agreement with a five year term to lease up to $2
million of equipment. The lease arrangement requires that the Company maintain
certain restrictive financial covenants, determined at the end of each fiscal
quarter. At September 30, 1995 the Company's cash, cash equivalents and
short-term investment balances were below the minimum covenant requirement. In
November 1995, in accordance with the lease agreement, the Company pledged as
collateral cash equal to the amount outstanding on the lease. At June 30, 1996,
the Company had approximately $850,000 outstanding on the lease.
The Company believes its current cash and cash equivalents combined
with anticipated net cash provided by operations will be adequate to meet the
Company's cash requirements for operations through 1996. The Company filed a
Registration Statement with the Securities and Exchange Commission on
July 23, 1996.
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relating to the public offering of up to 5,000,000 shares of its common stock.
If all 5,000,000 shares of Common Stock offered are sold at the public
offering price of $2.9375 assumed in the Registration Statement, the Company
anticipates that it will have sufficient cash to fund its operations through
the end of 1997. The Company is considering alternative sources of funding and
capital such as through partnering and financing opportunities.
Certain of the statements set forth above and elsewhere in this Prospectus,
including statements regarding anticipated revenue, expenses and cash
projections, are forward-looking and are based upon the Company's current belief
about further activities and events. Actual results may differ materially from
anticipated results.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
-----------------
No material changes since the Company's annual report on Form 10-K for
the year ended December 31, 1995.
ITEM 5. OTHER INFORMATION:
-----------------
The Company announced on July 2, 1996 that it has been issued a U.S.
patent for the proprietary technology and testing kits used in the TRAx product
line, including TRAx CD4, a diagnostic product used to measure the number of
CD4 cells in blood. The TRAx CD4 test kit represents the first diagnostic
product utilizing this technology providing laboratories with a cost efficient
alternative to flow cytometry.
On July 23, 1996, the Company filed a Registration Statement with the
Securities and Exchange Commission relating to a public offering by the Company
of up to 5,000,000 shares of its common stock.
On August 1, 1996, the Company announced the start of patient
enrollment in a Phase I/II clinical trial evaluating the use of the Company's
lead complement inhibitor, TP10, in patients with reperfusion injury following
lung transplant surgery. The objectives of the trial are to determine the safety
and pharmacokinetics of TP10 in patients following lung transplant surgery, and
to determine the ability of TP10 to reduce reperfusion injury and improve lung
function in patients following lung transplant surgery.
The Company announced on August 13, 1996 that Dr. Una S. Ryan has been
appointed Chief Executive Officer in addition to her current position as
President of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
A. EXHIBITS
None
B. REPORTS ON FORM 8-K
The Company reported on Form 8-K, dated June 3, 1996, the changes in
its senior management with the appointment of Dr. Una Ryan as President and
Chief Operating Officer. Mr. James D. Grant, Chairman of the Board of the
Company, assumed the position of Chief Executive Officer.
12
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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.
T CELL SCIENCES, INC.
BY: /s/ Norman W. Gorin
-------------------------------
Norman W. Gorin
Vice President, Finance
and Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS OF T CELL SCIENCES, INC. FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 6,726,626
<SECURITIES> 0
<RECEIVABLES> 9,593
<ALLOWANCES> 0
<INVENTORY> 14,600
<CURRENT-ASSETS> 7,419,606
<PP&E> 2,902,331
<DEPRECIATION> (2,389,489)
<TOTAL-ASSETS> 11,744,637
<CURRENT-LIABILITIES> 1,381,923
<BONDS> 0
<COMMON> 19,966
0
0
<OTHER-SE> 10,161,175
<TOTAL-LIABILITY-AND-EQUITY> 11,744,637
<SALES> 506,338
<TOTAL-REVENUES> 776,951
<CGS> 351,172
<TOTAL-COSTS> 7,147,043
<OTHER-EXPENSES> (309,753)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (251,992)
<INCOME-PRETAX> (6,159,519)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,159,519)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,159,519)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
