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 the quarterly period ended October 31, 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)
90 SW Eighth Street 33130
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 December 9, 1999:
Class Number of
Shares outstanding
Common Stock, $0.001 par value 15,235,384
APHTON CORPORATION
Index
Page
Part I - Financial Information 3
Item 1. Financial Statements:
Balance Sheets - October 31, 1999 and January 31, 1999 3
Statements of Operations - Three months and nine months ended
October 31, 1999 and 1998 4
Statements of Cash Flows - Nine months ended October 31, 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 October 31, 1999 and January 31, 1999 and the results of its
operations and its cash flows for the three and nine months ended October 31,
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 - October 31, 1999 and January 31, 1999
October 31, January 31,
1999 1999
Assets
Current Assets:
Cash and short-term cash investments $14,431,391 $10,164,069
Other assets (including current portion of
unconditional supply commitment) 690,158 469,811
---------- ----------
Total current assets 15,121,549 10,633,880
Equipment and improvements, at cost,
net of accumulated depreciation and amortization 193,393 215,599
Unconditional supply commitment 8,650,000 8,650,000
---------- ----------
Total assets $23,964,942 $19,499,479
========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities:
Accounts payable and other $3,010,384 $2,947,951
---------- ----------
Total current liabilities 3,010,384 2,947,951
Deferred revenue 10,000,000 10,000,000
---------- ----------
Total liabilities 13,010,384 12,947,951
Commitment
Stockholders' Equity:
Common stock, $0.001 par value -
Authorized: 30,000,000 shares
Issued and outstanding: 15,233,384 shares
at October 31, 1999 and 14,433,384 shares
at January 31, 1999 15,234 14,434
Additional paid in capital 59,159,889 47,960,689
Purchase warrants 336,904 336,904
Accumulated deficit (48,557,469) (41,760,499)
---------- ----------
Total stockholders' equity 10,954,558 6,551,528
---------- ----------
Total liabilities and stockholders' equity $23,964,942 $19,499,479
========== ===========
APHTON CORPORATION
Statements of operations for the three and nine months
ended October 31, 1999 and 1998
Three Months Ended Nine Months Ended
October 31, October 31,
Revenue: 1999 1998 1999 1998
Dividend, interest and
other income $42,839 $152,933 $216,802 $441,073
------- -------- -------- --------
Total 42,839 152,933 216,802 441,073
Costs and Expenses:
General and
administrative expense 407,179 425,653 1,107,280 1,011,664
Research and
development expense 2,604,782 2,026,636 5,906,492 6,486,871
--------- --------- --------- ---------
Total costs and expenses 3,011,961 2,452,289 7,013,772 7,498,535
--------- --------- --------- ---------
Net loss $(2,969,122) $(2,299,356) $(6,796,970) $(7,057,462)
=========== =========== =========== ===========
Per share data:
Basic loss per common share $(0.20) $(0.16) $(0.47) $(0.49)
=========== =========== =========== ===========
Diluted loss per common share $(0.20) $(0.16) $(0.47) $(0.49)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 14,700,051 14,431,117 14,522,273 14,297,613
=========== =========== =========== ===========
APHTON CORPORATION
Statements of cash flows for the nine months ended October 31, 1999 and 1998
Increase (decrease) in cash and short-term cash investments
Nine Months Ended October 31,
1999 1998
Net cash used in operating activities $(6,897,692) $(6,799,077)
Net cash provided from financing
activities-issuance of common stock 11,200,000 5,000,675
Net cash used in investing activities (34,986) (89,858)
----------- ----------
Net increase (decrease) in cash and
short-term cash investments 4,267,322 (1,888,260)
Cash and short-term cash investments:
Beginning of period 10,164,069 14,226,000
---------- ----------
End of period $14,431,391 $12,337,740
========== ==========
Reconciliation of net loss to net cash used in operating activities
Net loss $(6,796,970) $(7,057,462)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 57,192 61,248
Changes in-
Increase in other assets (220,347) (406,642)
Increase in accounts payable and other 62,433 603,779
----------- -----------
Net cash used in operating activities $(6,897,692) $(6,799,077)
=========== ===========
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 October 31, 1999, the Company's total costs and
expenses increased from $2,452,289 to $3,011,961 for the three months ended
October 31, 1999 when compared to the corresponding period of the prior year.
Research and development costs increased from $2,026,636 for the quarter ended
October 31, 1998 to $2,604,782 for the quarter ended October 31, 1999. However,
the research and development costs for the nine months ended October 31, 1999
decreased $580,379 from $6,486,871 for the nine months ended October 31, 1998 to
$5,906,492 for the nine months ended October 31, 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.
US Clinical Trial Programs - On December 7, 1999 Aphton announced that it filed
an Investigational New Drug (IND) application with the US FDA to treat
late-stage gastric cancer patients with its anti-gastrin therapy. (See Aphton's
Web page.)
Recent Studies
On November 11, 1999 Aphton announced that during the three day Third
International Conference on Gastrin, Aphton and collaborating scientists
presented new research findings from six studies. These findings support
Aphton's anti-gastrin therapy for gastrointestinal cancers. (See Aphton's Web
page.)
Financing
On October 13, 1999, Aphton announced a private placement of 800,000 shares of
common stock, at $14 per share, for $11.2 million dollars with an undisclosed
institutional investor. (See Aphton's Web page.)
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 has implemented any necessary vendor
upgrades and modifications to assure continued functionality. All existing
systems have been successfully tested. At present, management does not expect
that material incremental costs will be incurred in the aggregate or in any
single future year.
The Company is assessing the year 2000 compliance efforts of external parties
upon which the Company relies. The Company has developed 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 has 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 a 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.
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 this quarter.
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: December 9, 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 nine month fiscal period ended January 31, 1998 and
the Quarterly Report on Form 10-Q for the quarter and nine months ended July 31,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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