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 July 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 August 31, 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 - July 31, 1999 and January 31, 1999 3
Statements of Operations - Three months and six months ended
July 31, 1999 and 1998 4
Statements of Cash Flows - Six months ended July 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 July 31, 1999 and January 31, 1999 and the results of its
operations and its cash flows for the three and six months ended July 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 - July 31, 1999 and January 31, 1999
July 31, January 31,
1999 1999
Assets
Current Assets:
Cash and short-term cash investments $6,236,061 $10,164,069
Other assets (including current portion of
unconditional supply commitment) 709,751 469,811
_________ __________
Total current assets 6,945,812 10,633,880
Equipment and improvements, at cost,
net of accumulated depreciation and amortization 212,794 215,599
Unconditional supply commitment 8,650,000 8,650,000
___________ ___________
Total assets $15,808,606 $19,499,479
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities:
Accounts payable and other $3,084,926 $2,947,951
_________ _________
Total current liabilities 3,084,926 2,947,951
Deferred revenue 10,000,000 10,000,000
__________ __________
Total liabilities 13,084,926 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 July 31, 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 (45,588,347) (41,760,499)
____________ ____________
Total stockholders' equity 2,723,680 6,551,528
____________ ____________
Total liabilities and stockholders' equity $15,808,606 $19,499,479
=========== ===========
APHTON CORPORATION
Statements of operations for the three and six months ended
July 31, 1999 and 1998
Three Months Ended Six Months Ended
July 31, July 31,
Revenue: 1999 1998 1999 1998
Dividend, interest
and other income $70,976 $134,825 $173,963 $288,140
______ _______ _______ _______
Total 70,976 134,825 173,963 288,140
______ _______ _______ _______
Costs and Expenses:
General and administrative
expense 378,881 345,888 700,101 586,011
Research and development
expense 2,013,099 2,235,344 3,301,710 4,460,235
_________ _________ _________ _________
Total costs and expenses 2,391,980 2,581,232 4,001,811 5,046,246
Net loss $(2,321,004) $(2,446,407) $(3,827,848) $(4,758,106)
============ ============ ============ ===========
Per share data:
Basic loss per common share $(0.16) $(0.17) $(0.27) $(0.33)
======= ======= ======= =======
Diluted loss per common share $(0.16) $(0.17) $(0.27) $(0.33)
======= ======= ======= =======
Weighted average number of
common shares outstanding 14,433,384 14,270,506 14,433,384 14,230,861
========== ========== ========== ==========
APHTON CORPORATION
Statements of cash flows for the six months ended July 31, 1999 and 1998
Increase (decrease) in cash and short-term cash investments
Six Months Ended July 31,
1999 1998
Net cash used in operating activities $(3,893,022) $(4,352,205)
Net cash provided from financing activities - 5,000,175
Net cash used in investing activities (34,986) (49,021)
__________ ___________
Net increase (decrease) in cash and
short-term cash investments (3,928,008) 598,949
Cash and short-term cash investments:
Beginning of period 10,164,069 14,226,000
__________ __________
End of period $6,236,061 $14,824,949
========== ==========
Reconciliation of net loss to net cash used in operating activities
Net loss $(3,827,848) $(4,758,106)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 37,791 31,207
Changes in-
Increase in other assets (239,940) (112,663)
Increase in accounts payable and other 136,975 487,357
_________ _________
Net cash used in operating activities $(3,893,022) $(4,352,205)
=========== ===========
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 July 31, 1999, the Company's total costs and expenses
decreased from $2,581,232 to $2,391,980 for the three months ended July 31, 1999
when compared to the corresponding period of the prior year. Research and
development costs decreased from $2,235,344 for the quarter ended July 31, 1998
to $2,013,099 for the quarter ended July 31, 1999. The research and development
costs for the quarter ended July 31, 1999 represented a $403,268 increase over
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. In addition,
Aphton has initiated the process to file with the FDA for approval to conduct
clinical trials in the US.
Recent Studies
See Aphton's Form 10-Q for Quarter ended April 30, 1999, filed in June, 1999,
for two key papers presented in May, 1999 at the American Gastroenterological
Association (AGA) annual meeting.
Strategic Alliances - See Fiscal 1999 Form 10-K. In accord with this, Aphton is
proceeding with discussions regarding product development, clinical trials and
marketing in territories outside of North America and Europe for treating
gastrointestinal system cancers in humans.
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. 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 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 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. See Fiscal 1999 Form 10-K for further discussion of available equity
funds from SmithKline Beecham at the option of Aphton.
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: September 10, 1999 By: /s/ Frederick W. Jacobs
-------------------------
Frederick W. Jacobs
Treasurer and Chief Accounting Officer
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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 six months ended July 31,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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