SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly ended April 30, 1999 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 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
-- --
The number of shares of Common Stock outstanding as of the close of
business on June 1, 1999:
Class Number of
Shares outstanding
Common Stock, $0.001 par value 14,433,384
APHTON CORPORATION
Index
Page
Part I - Financial Information 3
Item 1. Financial Statements:
Balance Sheets - April 30, 1999 and January 31, 1999 3
Statements of Operations - Three months ended
April 30, 1999 and 1998 4
Statements of Cash Flows - Three months ended April 30, 1999
and 1998 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II - Other Information
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 7
Signature Page 7
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, 1999 and January 31, 1999 and the results of its
operations and its cash flows for the three months ended April 30, 1999 and
1998. 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, 1999 and January 31, 1999
April 30, January 31,
1999 1999
Assets
Current Assets:
Cash and short-term cash investments $8,454,043 $10,164,069
Other assets (including current portion of
unconditional supply commitment) 371,276 469,811
Total current assets 8,825,319 10,633,880
Equipment and improvements, at cost,
net of accumulated depreciation
and amortization 218,632 215,599
Unconditional supply commitment 8,650,000 8,650,000
Total assets $17,693,951 $19,499,479
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities:
Accounts payable and other $2,649,267 $2,947,951
Total current liabilities 2,649,267 2,947,951
Deferred revenue 10,000,000 10,000,000
Total liabilities 12,649,267 12,947,951
Commitment
Stockholders' Equity:
Common stock, $0.001 par value -
Authorized: 30,000,000 shares
Issued and outstanding: 14,433,384 shares at
April 30, and January 31, 1999 14,434 14,434
Additional paid in capital 47,960,689 47,960,689
Purchase warrants 336,904 336,904
Accumulated deficit (43,267,343) (41,760,499)
Total stockholders' equity 5,044,684 6,551,528
Total liabilities and stockholders' equity $17,693,951 $19,499,479
APHTON CORPORATION
Statements of operations
for the three months ended April 30, 1999 and 1998
Three Months Ended April 30,
1999 1998
Revenue:
Dividend, interest and other income $102,987 $153,315
Total 102,987 153,315
Costs and Expenses:
General and administrative expense 321,220 240,123
Research and development expense 1,288,611 2,224,891
Total costs and expenses 1,609,831 2,465,014
Net loss $(1,506,844) $(2,311,699)
Per share data:
Basic loss per common share $(0.10) $(0.16)
Diluted loss per common share $(0.10) $(0.16)
Weighted average number of common
shares outstanding 14,433,384 14,191,217
APHTON CORPORATION
Statements of cash flows for the three months ended April 30, 1999 and 1998
Decrease in cash and short-term cash investments
Three Months Ended April 30,
1999 1998
Net cash used in operating activities $(1,688,350) $(2,009,473)
Cash flows from investing activities:
Capital expenditures (21,676) -
_______ ______
Cash used in investing activities (21,676) -
Decrease in cash and short-term
cash investments (1,710,026) (2,009,473)
Cash and short-term cash investments:
Beginning of period 10,164,069 14,226,000
End of period $8,454,043 $12,216,527
Reconciliation of net loss to net cash used in operating activities
Net loss $(1,506,844) $(2,311,699)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 18,643 15,518
Changes in-
Decrease in other assets 98,535 20,267
Increase (decrease) in accounts payable (298,684) 266,441
Net cash used in operating activities $(1,688,350) $(2,009,473)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
Aphton Corporation is a biopharmaceutical company developing products using its
innovative vaccine-like 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), SmithKline Beecham, Schering-Plough
Animal Health and the World Health Organization (WHO). Aphton's Web page,
describing the company, its technology, products, strategic alliances and news
releases, can be visited at: www.aphton.com.
Results of Operations
During the quarter ending April 30, 1999, the Company's strategic partners
assumed research and development costs on certain products that were previously
incurred by the Company, as described below. As a result, the Company's total
costs and expenses decreased from $2,465,014 to $1,609,831 for the three months
ended April 30, 1999 when compared to the corresponding period of the prior
year. Research and development costs decreased from $2,224,891 for the quarter
ended April 30, 1998 to $1,288,611 for the quarter ended April 30, 1999. The
Company's future research and development expenditures 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.
Results and Status
Clinical Results
Safety / Dose Ranging - See Aphton's Web page and Fiscal 1999 Form 10-K for
previously announced results and on-going studies.
Survival - See Aphton's Web page and Fiscal 1999 Form 10-K for previously
announced results.
Phase III Clinical Trial Programs - See Aphton's Web page and Fiscal 1999 Form
10-K for previously announced human trials which are under way.
Recent Studies
In May 1999, at the American Gastroenterological Association (AGA) annual
meeting, scientists from the UK presented two key papers which resulted from
collaborative studies with Aphton scientists. The first study showed that
Aphton's anti-gastrin immunogen inhibits, in vivo, both of the major hormonal
pathways, namely the endocrine and autocrine pathways, that fuel stomach
(gastric) cancer. The second study showed that gastrin receptors are expressed
in the early stages of development of colon cancer (as in gastric cancer) and
that elevated levels of gastrin that are induced by the proton-pump inhibitor
omeprazole enhance the growth of colonic adenomas. See Aphton's Web page under
News Releases for more details.
Strategic Alliances - See Aphton's Web page and Fiscal 1999 Form 10-K for
further discussions.
Year 2000
Many computer programs were written to use only two digits to identify the year.
Thus, a computer program could read the digits "00" as the year 2000 or as the
year 1900. In addition, microprocessors embedded in many operating facilities
such as communication systems may cause equipment malfunctions because of the
year 2000 date change. Failure by third parties upon which the Company relies
(or by the Company) to address the year 2000 issue could cause material loss to
the Company. Management has completed the awareness and assessment phase of a
comprehensive program to address the year 2000 issue. The Company utilizes
standard "off-the-shelf" software and will implement any necessary vendor
upgrades and modifications to assure continued functionality. At present,
management does not expect that material incremental costs will be incurred in
the aggregate or in any single future year.
The Company has also begun to assess the year 2000 compliance efforts of
external parties upon which the Company relies. The Company is developing
contingency plans for addressing any material failure to deal with the year 2000
date change that will address the Company's exposure to year 2000 noncompliance
by third parties.
Even though the Company's planned software and hardware modifications and system
upgrades should adequately address year 2000 issues, there can be no assurance
that unforeseen difficulties will not arise. There is no assurance that the
failure of any external party to resolve its year 2000 issues would not have a
material adverse effect on the Company.
Other Issues
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.
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, and available capital sources, would
enable it to maintain its currently planned operations into the year 2001. 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. See Fiscal 1999 Form 10-K for further discussion of available funds
from SmithKline Beecham strategic alliance.
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 were no reports on Form 8-K filed during the quarter
ended April 30, 1999.
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 11, 1999 By: /s/ Frederick W. Jacobs
--------------------------------
Frederick W. Jacobs
Treasurer and Chief Accounting Officer
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<LEGEND>
This schedule contains summary financial information extracted from the
Annual Report on Form 10-K for the year ended January 31, 1999 and the Quarterly
Report on Form 10-Q for the quarter and three months ended April 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
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