SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended April 30, 1998 Commission File Number 0-19122
APHTON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-3640931
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
444 Brickell Avenue, Suite 51-507 33131-2492
Miami, Florida (Zip Code)
(address of principal executive offices)
Registrant's telephone number, including area code (305) 374-7338
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 14 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 __
The number of shares of Common Stock outstanding as of the close of
business on April 30, 1998:
Class Number of
Shares outstanding
Common Stock, $0.001 par value 14,191,217
APHTON CORPORATION
Index
Page
Part I - Financial Information 3
Item 1. Financial Statements:
Balance Sheets - April 30, 1998 and January 31, 1998 3
Statements of Operations - Three months ended
April 30, 1998 and 1997 4
Statements of Stockholders' Equity - Three months ended
April 30, 1998 and the nine months ended January 31, 1998 4
Statements of Cash Flows - Three months ended April 30, 1998
and 1997 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II - Other Information
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signature Page 8
APHTON CORPORATION
Part I - Financial Information
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the financial statements
include all adjustments necessary to present fairly the financial position of
the Company as of April 30, 1998 and January 31, 1998 and the results of its
operations and its cash flows for the three months ended April 30, 1998 and
1997. It is suggested that these financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K.
APHTON CORPORATION
Balance Sheets - April 30, 1998 and January 31, 1998
April 30, January 31,
1998 1998
Assets
Current Assets:
Cash and short-term cash investments $12,216,527 $14,226,000
Other assets (including current portion of
unconditional supply commitment) 185,187 205,454
Total current assets 12,401,714 14,431,454
Equipment and improvements, at cost,
net of accumulated depreciation
and amortization 182,218 197,736
Unconditional supply commitment 8,951,000 8,951,000
Total assets $21,534,932 $23,580,190
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities:
Accounts payable and other $2,539,513 $2,273,072
Total current liabilities 2,539,513 2,273,072
Deferred revenue 10,000,000 10,000,000
Total liabilities 12,539,513 12,273,072
Commitment
Stockholders' Equity:
Common stock, $0.001 par value -
Authorized: 30,000,000 shares
Issued and outstanding: 14,191,217 shares at
April 30, and January 31, 1998 14,191 14,191
Additional paid in capital 42,955,207 42,955,207
Purchase warrants 341,404 341,404
Accumulated deficit (34,315,383) (32,003,684)
Total stockholders' equity 8,995,419 11,307,118
Total liabilities and
stockholders' equity $21,534,932 $23,580,190
APHTON CORPORATION
Statements of operations
for the three months ended April 30, 1998 and 1997
Three Months Ended
April 30,
1998 1997
Revenue:
Dividend, interest and other income $153,315 $63,801
Total 153,315 63,801
Costs and Expenses:
Research and development expense 2,224,891 1,363,187
General and administrative expense 240,123 125,981
Non-cash interest expense of
convertible security ____ - 15,342
Total costs and expenses 2,465,014 1,504,510
Net loss $(2,311,699) $(1,440,709)
Basic loss per common share $(0.16) $(0.11)
Diluted loss per common share $(0.16) $(0.11)
Weighted average number of common
shares outstanding 14,191,217 12,913,149
Statements of stockholders' equity
for the three months ended April 30, 1998
and for the nine months ended January 31, 1998
Common Stock Additional
Paid in Purchase Accumulated
Shares Amount Capital Warrants Deficit Total
Balance,
May 1, 1998 12,913,149 $26,665,091 $1,097,560 $147,004 $(25,399,140)$2,510,515
Sale of
stock, net 715,000 10,000,000 - - - 10,000,000
Issuance of
purchase warrants
for services - - - 198,900 - 198,900
Exercise of purchase
warrants 4,000 5,500 - (4,500) - 1,000
Transfer between
equity accounts
resulting from a
change in the par
value of the stock (41,857,647)41,857,647 - - -
Conversion of
convertible
debt 559,068 5,201,247 - - - 5,201,247
Net loss _______ _________ __________ ______ (6,604,544)(6,604,544)
Balance,
January 31,
1998 14,191,217 14,191 42,955,207 341,404 (32,003,684)11,307,118
__________ ______ __________ _______ ___________ __________
Net loss - - - - (2,311,699)(2,311,699)
__________ ______ __________ _______ ___________ __________
Balance,
April 30,
1998 14,191,217 $14,191$42,955,207 $341,404 $(34,315,383)$8,995,419
========== ======= ========== ======= ========== =========
APHTON CORPORATION
Statements of cash flows for the three months ended April 30, 1998 and 1997
Increase (decrease) in cash and short-term cash investments
Three Months Ended April 30,
1998 1997
Net cash used in operating activities $(2,009,473) $(540,048)
Net cash provided from non-operating activities - 5,000,000
Net change in cash and short-term
cash investments (2,009,473) 4,459,952
Cash and short-term cash investments:
Beginning of year 14,226,000 4,385,787
End of period $12,216,527 $8,845,739
Reconciliation of net loss to net cash
used in operating activities
Net loss $(2,311,699) $(1,440,709)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 15,518 24,793
Changes in-
Cash receipt treated as deferred revenue -- 1,000,000
Decrease (increase) in other assets 20,267 (262,581)
Increase in accounts payable 266,441 138,449
Net cash used in operating activities $(2,009,473) $(540,048)
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
General
Aphton Corporation is a biopharmaceutical company developing products using its
innovative therapeutic vaccine technology for neutralizing hormones that
participate in gastrointestinal system and reproductive system cancer and
non-cancer diseases; and the prevention of pregnancy. Aphton has strategic
alliances with Pasteur Merieux Connaught (Rhone-Poulenc Group), Schering Plough
Animal Health and the World Health Organization (WHO). Aphton's Web page,
describing the company, its technology, products, strategic alliances, news
releases and reports of independent research analysts, can be visited at:
www.aphton.com.
Results and Status
Survival
In January of 1998, Aphton announced increased survival results, which were
statistically significant, from a comparative analysis of its Phase I/II
clinical trials in which Aphton's anti-gastrin therapeutic vaccine
Gastrimmune(TM) was administered to patients with end-stage colorectal cancer
("advanced" Dukes D). The study was carried out at the Queens Medical Center,
University of Nottingham, UK. See Aphton's 10-K for the nine months ended
January 31, 1998 and news release dated January 22, 1998 for further details
describing this comparative analysis.
Results: The patients immunized with Gastrimmune(TM) had a median survival of
338 days vs. 184 days for the comparative placebo group. The increased survival
in the Gastrimmune(TM) group was statistically significant both by univariate
analysis, with p=0.046 and by multivariate analysis, with p=0.026. Aphton's
Chief Medical Officer spoke for the Company when he said: "These statistically
significant survival results with Gastrimmune(TM), in such terminally ill
patients, are very encouraging."
Aphton's Phase III trial program encompasses the above gastrointestinal system
cancers. Since all of these are stimulated by gastrin, Aphton could and did
select stomach cancer as the first indication for which regulatory approval will
be sought, because: (a) survival time, the "end point," is short relative to
colon cancer (the patients selected in Phase I/II); (b) trial costs are
relatively low; (c) there is no current effective therapy; (d) the number of
patients, worldwide, is in the millions.
Aphton is also preparing for additional Phase III clinical trials with
Gastrimmune(TM), because of the above-mentioned, though unexpected, increased
survival results with such advanced, terminally ill, cancer patients. Those
under active consideration include colorectal cancer (both Duke's stage D and
Duke's stages B, C); and pancreatic cancer. The timing and degree of
aggressiveness in these additional programs will, of course, be based on funding
considerations, in addition to commercial and humanitarian objectives.
The Financial Accounting Standards Board (FASB) issued several new
pronouncements in 1997, including SFAS No. 130, "Reporting Comprehensive
Income"; and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 states that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS No. 131 requires disclosures regarding segments
of an enterprise and related information that reflects the different types of
business activities in which the enterprise engages and the different economic
environments in which it operates. The adoption of these standards during the
Company's fiscal year ended January 31, 1999 is not expected to have a material
effect on the Company's financial statements. In January 1998, the FASB also
issued SFAS No. 132, "Employers' Disclosure About Pensions and Other
Postretirement Benefits" which is not applicable to the Company since the
Company does not provide such benefits.
The Company is aware of the issues associated with the programming code in
existing digital computer systems as the year 2000 approaches. The "year 2000"
problem is pervasive and complex, extending beyond purely computational
considerations, to control systems, as well. Virtually every computer, or
computer-chip driven operation will be affected in some way by the rollover of
the two digit year value to 00. The issue is whether computer systems will
properly recognize date sensitive information when the year changes to 2000.
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail. Management plans to implement any necessary
vendor upgrades and modifications to assure continued functionality with respect
to the widely discussed software problems associated with the year 2000. At
present, management does not expect that material incremental costs will be
incurred in the aggregate or in any single future year.
Inflation and changing prices have not had a significant effect on continuing
operations and are not expected to have any material effect in the foreseeable
future. Dividend, interest and other income were primarily derived from
money-market accounts.
Liquidity and Capital Resources
The Company had financed its operations since inception through the sale of its
equity securities and, to a lesser extent, operating revenues from R&D limited
partnerships to conduct research and development. These funds provided the
Company with the resources to acquire staff, construct its research and
development facility, acquire capital equipment and to finance technology and
product development, manufacturing and clinical trials. In April 1997, the
Company issued a $5,000,000 7% senior redeemable convertible debenture. During
the nine months ended January 31, 1998 the debenture and related interest was
converted into 559,068 shares of the Company's common stock.
The Company anticipates that its existing capital resources which are composed
primarily of cash and short-term cash investments, including the proceeds of its
private placements and interest thereon, would enable it to maintain its
currently planned operations into the year 2000. The Company's working capital
and capital requirements will depend upon numerous factors, including the
following: the progress of the Company's research and development program,
preclinical testing and clinical trials; the timing and cost of obtaining
regulatory approvals; the levels of resources that the Company devotes to
product development, manufacturing and marketing capabilities; technological
advances; competition; and collaborative arrangements or strategic alliances
with other drug companies, including the further development, manufacturing and
marketing of certain of the Company's products and the ability of the Company to
obtain funds from such strategic alliances or from other sources.
PART II - Other information
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in Securities. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable.
Item 5. Other Information. Not applicable.
Item 6. Exhibits and Report on Form 8-K.
a. Exhibit Numbers
27.1 Financial Data Schedule
b. There was a report on Form 8-K filed during this quarter which
announced the Company's change in state of incorporation from
California to Delaware and the change in the Company's year
end from April 30 to January 31.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
Aphton Corporation
Date: June 12, 1998 By: /s/ Frederick W. Jacobs
----------------------
Frederick W. Jacobs
Chief Accounting Officer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1 Article 5 Financial Data Schedule
This schedule contains summary financial information extracted from the Annual
Report on Form 10-K for the nine months ended January 31, 1998 and the Quarterly
Report on Form 10-Q for the quarter ended April 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
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<PERIOD-START> FEB-1-1998
<PERIOD-END> APR-30-1998
<CASH> 12,217
<SECURITIES> 0
<RECEIVABLES> 8,951
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,402
<PP&E> 889
<DEPRECIATION> (707)
<TOTAL-ASSETS> 21,535
<CURRENT-LIABILITIES> 2,540
<BONDS> 0
0
0
<COMMON> (14)
<OTHER-SE> (43,297)
<TOTAL-LIABILITY-AND-EQUITY> (21,535)
<SALES> 0
<TOTAL-REVENUES> 153
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<OTHER-EXPENSES> 2,465
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<INCOME-PRETAX> (2,312)
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