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 September 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 November 12, 1996
-----
Common Stock, par value $.001 24,965,416
1
<PAGE>
T CELL SCIENCES, INC.
Table of Contents
September 30, 1996
Page
Part I -- Financial Information
Condensed Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations --
Quarters ended September 30, 1996 and 1995 4
Nine months ended September 30, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows --
Nine months ended September 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
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
T CELL SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $14,363,002 $12,275,217
Accounts Receivable, Net 15,668 339,167
Inventories 7,400 403,293
Prepaid Expenses and Other 330,051 541,411
Current Portion Note Receivable 400,596 --
- -------------------------------------------------------------------------------
Total Current Assets 15,116,717 13,559,088
- -------------------------------------------------------------------------------
Property and Equipment, Net 464,854 1,172,137
Restricted Cash 850,000 850,000
Long-term Note Receivable 1,402,085 --
Other Noncurrent Assets 1,423,218 2,951,062
- -------------------------------------------------------------------------------
Total Assets $19,256,874 $18,532,287
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 122,142 $ 724,944
Accrued Expenses 978,470 1,504,586
Deferred Revenue -- 121,083
- -------------------------------------------------------------------------------
Total Current Liabilities 1,100,612 2,350,613
- -------------------------------------------------------------------------------
Collaborator Advance 181,573 181,573
- -------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock, $.001 Par Value 24,966 19,905
Additional Paid-in Capital 72,791,819 62,399,255
Less: Common Treasury Shares at Cost (68,938) (80,523)
Accumulated Deficit (54,773,158) (46,338,536)
- -------------------------------------------------------------------------------
Total Stockholders' Equity 17,974,689 16,000,101
- -------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $19,256,874 $18,532,287
===============================================================================
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
T CELL SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
OPERATING REVENUE:
Product Development and Licensing Agreements $ 1,187 $ 192,812
Product Sales 9,125 569,205
- -------------------------------------------------------------------------------
Total Operating Revenue 10,312 762,017
- -------------------------------------------------------------------------------
OPERATING EXPENSE:
Cost of Product Sales 6,072 462,967
Research and Development 1,520,799 2,000,878
General and Administrative 821,561 1,037,399
Marketing and Sales 108,746 470,838
- -------------------------------------------------------------------------------
Total Operating Expenses 2,457,178 3,972,082
- -------------------------------------------------------------------------------
Operating Loss (2,446,866) (3,210,065)
Non-Operating Income, Net 171,763 104,951
- -------------------------------------------------------------------------------
Net Loss $(2,275,103) $(3,105,114)
================================================================================
Net Loss Per Common Share $ (0.10) $ (0.18)
================================================================================
Weighted Average Common Shares Outstanding 21,921,938 17,087,800
================================================================================
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
T CELL SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
OPERATING REVENUE:
Product Development and Licensing Agreements $ 271,800 $ 1,329,428
Product Sales 515,463 1,776,144
- -------------------------------------------------------------------------------
Total Operating Revenue 787,263 3,105,572
- -------------------------------------------------------------------------------
OPERATING EXPENSE:
Cost of Product Sales 357,244 1,404,630
Research and Development 4,448,908 5,994,478
General and Administrative 4,757,588 3,084,710
Marketing and Sales 391,653 1,208,218
- -------------------------------------------------------------------------------
Total Operating Expenses 9,955,393 11,692,036
- -------------------------------------------------------------------------------
Operating Loss (9,168,130) (8,586,464)
Non-Operating Income, Net 733,508 486,016
- -------------------------------------------------------------------------------
Net Loss $(8,434,622) $(8,100,448)
===============================================================================
Net Loss Per Common Share $ (0.41) $ (0.47)
===============================================================================
Weighted Average Common Shares Outstanding 20,594,701 17,066,026
===============================================================================
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
T CELL SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
September 30, September 30,
Increase (Decrease) in Cash & Cash Equivalents 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $(8,434,622) $(8,100,448)
Adjustments to Reconcile Net Loss to
Net Cash used by Operating Activities:
Depreciation and Amortization 373,025 402,172
Gain on Sale of Research Products and
Operations of T Cell Diagnostics, Inc. (282,980) --
Severance agreement stock option
vesting acceleration 170,288 --
Write-off of capitalized patent costs 1,751,626 --
Decrease in collaborator advance -- (318,427)
Net change in Current Assets and
Current Liabilities (1,379,776) (779,880)
- -------------------------------------------------------------------------------
Net Cash Used by Operating Activities (7,802,439) (8,796,583)
Cash Flows From Investing Activities:
Acquisition of Property and Equipment (26,882) (686,783)
Sale of Fixed Assets, Net -- 108,059
Other Noncurrent Assets (522,113) (755,540)
Payment Received on Note Receivable 200,297 --
Redemption of Short Term Investments -- 8,539,666
- -------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (348,698) 7,205,402
Cash Flows From Financing Activities:
Proceeds from Sale of Stock 11,585 16,739
Proceeds from Exercise of Stock Options 158,685 160,685
Proceeds from Issuance of Common Stock 10,068,652 --
- -------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 10,238,922 177,424
- -------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 2,087,785 (1,413,757)
Cash and Cash Equivalents at Beginning of Period 12,275,217 7,644,653
- -------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $14,363,002 $ 6,230,896
===============================================================================
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
T CELL SCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
September 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(R) 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 nine month periods ended September 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
September 30, 1996 and December 31, 1995, the results of operations for the
three and nine month periods ended September 30, 1996 and 1995, and the cash
flows for the nine month periods ended September 30, 1996 and 1995. The results
of operations for the three and nine month periods ended September 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 with a five-year
term to 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
September 30, 1996 $850,000 is pledged as collateral in accordance with the
terms of the operating lease.
7
<PAGE>
(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. The Court has ordered a limited trial on certain
factual issues to begin on November 18, 1996. The limited trial will not,
however, resolve any of the ultimate disputes between the parties. No date has
been set for trial on liability or damages. Due to the current stage of the
lawsuits, a range of potential losses, which the Company believes are unlikely,
cannot 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 an opposition to the
insurer's motion for summary judgment. The Company has not been notified of any
determination as of November 12, 1996.
(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 subject to final purchase price adjustments. 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 principal
amount of the convertible subordinated note was subsequently increased to
$2,002,978 to reflect the final purchase price adjustment. 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.
(8) Issuance of Common Stock
On August 26, 1996, the Company completed a public offering of 5,000,000
shares of newly issued common stock. Net proceeds from the offering were
approximately $10,069,000 after deducting all associated expenses.
8
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
In an effort to strengthen the Company's financial position and to provide
additional resources to focus on the discovery and development of innovative
drugs targeting the immune and inflammatory systems, the Company successfully
completed a public offering of 5,000,000 shares of its common stock in August
1996. The public stock offering yielded net proceeds of $10,069,000 which the
Company anticipates using to fund ongoing clinical trials for its lead
therapeutic program, research and development programs for its other product
candidates, and for general working capital requirements. 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 adult respiratory
distress syndrome. In July 1996, the Company initiated a Phase I/II clinical
trial to prevent reperfusion injury in patients receiving lung transplants. The
Company is also engaged in the discovery and development of T cell activation
inhibitors for the prevention of transplant rejection and autoimmune diseases,
and a vaccine for the management of atherosclerosis. In September 1996 the
Company was awarded a $100,000 Phase I Small Business Innovation Research grant
from the National Institute of Health. The grant will contribute to the
Company's program for the development of a vaccine for the management of
atherosclerosis.
The Company initiated efforts during the first half of 1996 to refocus its
business operations on the development of proprietary therapeutic products. On
March 5, 1996, the Company sold the operations and research product line of its
wholly owned subsidiary TCD to Endogen, Inc. while retaining the TRAx product
franchise and related assets. In June 1996, the Company reorganized its senior
management with the appointment of Una S. Ryan, Ph. D., its Chief Scientific
Officer, to the position of President and Chief Operating Officer. Dr. Ryan was
subsequently appointed to the position of Chief Executive Officer in August
1996. 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 and the development of its TRAx technology. In the
first half of 1996, the Company suspended internal funding of the research and
development of its T cell receptor therapeutic programs and wrote off certain
related capitalized patent costs pending the conclusion of ongoing negotiations
with Astra to transfer certain of its rights to the technology. The Company has
also deferred 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
the TRAx technology.
Results of Operations
Quarter Ended September 30, 1996 Compared To Quarter Ended September 30,
1995 -- The Company reported a consolidated net loss of $2,275,000 or $.10 per
share for the quarter ended September 30, 1996, compared with a net loss of
$3,105,000 or $.18 per share for the quarter ended September 30, 1995. The
$830,000 decrease in net loss was primarily due to a $1,515,000 decrease in
operating expenses partially offset by a $752,000 decrease in operating revenue.
These decreases are primarily due to the sale of the research products and
operations of TCD to Endogen on March 5, 1996 combined with staff reductions and
implementation of discretionary spending controls across all functional areas.
9
<PAGE>
Operating revenue for the quarter ended September 30, 1996 reflects the
discontinuation of product development revenue from Astra, the Company's
collaborative partner, and a decrease in product sales. In accordance with its
agreement with Astra, the Company will not receive additional research and
development revenue funding. Product sales revenue was $9,000 for the quarter
ended September 30, 1996 compared to $569,000 for the same period last year. The
decrease in product sales for the quarter ended September 30, 1996 is
attributable to the sale of the research products and operations of TCD to
Endogen.
Research and development expenses were $1,521,000 for the quarter ended
September 30, 1996 compared to $2,001,000 for the same period last year. The
decrease is primarily due to the sale of the research products and operations of
TCD on March 5, 1996.
General and administrative expenses decreased $215,000 to $822,000 for the
quarter ended September 30, 1996 from $1,037,000 for the comparable period last
year. The decrease is mainly attributable to the sale of the research products
and operations of TCD and discretionary spending controls across all functional
areas.
Marketing and sales expenses decreased 76.9% to $109,000 for the quarter
ended September 30, 1996 compared to $471,000 for the quarter ended September
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 $172,000 for the quarter ended September 30, 1996
reflects an 89% increase in interest income for the quarter ended September 30,
1996 compared with $105,000 for the quarter ended September 30, 1995. The
increase in interest income is primarily the result of higher cash balances
during the quarter ended September 30, 1996 compared to the same period last
year.
Nine months Ended September 30, 1996 Compared To Nine months Ended
September 30, 1995 -- For the nine months ended September 30, 1996, the Company
reported a consolidated net loss of $8,435,000 or $.41 per share, compared with
a net loss of $8,100,000 or $.47 per share for the nine months ended September
30, 1995. The increased loss for the nine months ended September 30, 1996
compared to the same period last year was primarily due to a $1,752,000
write-off of certain capitalized patent costs relating to the Company's T cell
antigen receptor program, a $425,000 charge resulting from a severance agreement
with Company's former President and Chief Executive Officer and lower product
development revenue from Astra.
Product development revenue decreased 79.6% or $1,058,000 for the nine
months ended September 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 nine months ended September 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 nine months ended September 30, 1996
decreased 71.0% to $515,000 compared to $1,776,000 for the comparable period
last year. The decrease in product sales for the nine months ended September 30,
1996 is attributable to the sale of the research products and operations of TCD
to 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 research product sales
for the first two months of the year only, compared with nine months last year.
The Company does not anticipate having additional research product sales in the
foreseeable future.
10
<PAGE>
For the nine months ended September 30, 1996, research and development
expenses were $4,449,000 compared to $5,994,000 for the same period last year.
The decrease is primarily attributable to the sale of the research products and
operations of TCD on March 5, 1996.
General and administrative expenses increased to $4,758,000 for the nine
months ended September 30, 1996 from $3,085,000 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 16.3% or $504,000 for the nine months compared to last year. The
decrease is mainly attributable to staff reductions combined with discretionary
spending controls across all functional areas.
Non-operating income of $734,000 for the nine months ended September 30,
1996 includes a gain of $283,000 recognized from the sale of the research
products and operations of TCD to Endogen. Interest income decreased 7.3% to
$451,000 for the nine months ended September 30, 1996 compared with $486,000 for
the nine months ended September 30, 1995. The decrease in interest income is
primarily the result of lower cash balances during the nine months ended
September 30, 1996 compared to the same period last year.
Liquidity and Capital Resources
The Company's cash and cash equivalents at September 30, 1996 increased
$2,088,000 to $14,363,000 from $12,275,000 at December 31, 1995. The increase is
primarily due the $10,069,000 net proceeds from the public offering of 5,000,000
shares of the Company's common stock, $.001 par value. The increase was
partially offset by the operating loss of $9,168,000 for the nine months
ended September 30, 1996 adjusted for the non-cash write-off of capitalized
patent costs of $1,752,000. Cash used in operations was $7,802,000 for the nine
months ended September 30, 1996 compared to $8,797,000 for the nine months ended
September 30, 1995. The $995,000 decrease in cash used is primarily due to a
$1,340,000 decrease in 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, and was partially
offset by a decrease in certain accrued liabilities.
The Company received a convertible subordinated note receivable in the
principal amount of $2,002,978 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.
On August 26, 1996, the Company completed a public offering of 5,000,000
shares of its common stock at a price of $2.1875. Net proceeds from the offering
were $10,069,000. The Company believes its current cash and cash equivalents
will be adequate to meet the Company's cash requirements for operations through
1997. The Company is considering alternative sources of funding and capital such
as through partnering and financing opportunities.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Statements contained herein that are not historical facts may be
forward-looking statements that are subject to a variety of risks and
uncertainties. There are a number of important factors that could cause
11
<PAGE>
the actual results to differ materially from those expressed in any
forward-looking statements made by the Company. These factors include, but are
not limited to: (i) the Company's ability to successfully complete product
research and development, including pre-clinical and clinical studies, and
commercialization; (ii) the Company's ability to obtain substantial additional
funding; (iii) the Company's ability to obtain required governmental approvals;
(iv) the Company's ability to attract manufacturing, sales, distribution and
marketing partners; and (v) the Company's ability to develop and commercialize
its products before its competitors.
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:
On August 27, 1996 the Company announced a public offering of 5.0 million
shares of common stock offered by the Company at $2.1875 per share. The offering
was managed by Genesis Merchant Group Securities as exclusive selling agent. The
offering yielded proceeds of approximately $10.1 million, net of offering costs.
The Company announced on September 16, 1996 that it had been awarded a
$100,000 Phase I Small Business Innovation Research grant from the National
Institute of Health. The grant will provide funds for the development of a
transgenic rat atherosclerosis model which will contribute to the Company's
program to develop a cholesterol ester transfer protein vaccine to reduce the
risk of atherosclerosis.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
None
B. Reports on Form 8-K
None
12
<PAGE>
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 Nine Months
ended September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 14,363,002
<SECURITIES> 0
<RECEIVABLES> 15,668
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,116,717
<PP&E> 2,917,645
<DEPRECIATION> (2,452,791)
<TOTAL-ASSETS> 19,256,874
<CURRENT-LIABILITIES> 1,100,612
<BONDS> 0
0
0
<COMMON> 24,966
<OTHER-SE> 17,949,723
<TOTAL-LIABILITY-AND-EQUITY> 19,256,874
<SALES> 515,463
<TOTAL-REVENUES> 787,263
<CGS> 357,244
<TOTAL-COSTS> 9,955,393
<OTHER-EXPENSES> (282,980)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (450,528)
<INCOME-PRETAX> (8,434,622)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,434,622)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,434,622)
<EPS-PRIMARY> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
