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 Quarter ended October 31, 2000 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
(address of principal executive offices) (Zip Code)
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 November 27, 2000:
Class Number of
Shares outstanding
Common Stock, $0.001 par value 16,199,493
APHTON CORPORATION
Index
Page
Part I - Financial Information 3
Item 1. Financial Statements:
Balance Sheets-October 31, 2000 and January 31, 2000 3
Statements of Operations - Three months and nine months ended
October 31, 2000 and 1999 4
Statements of Cash Flows - Nine months ended October 31, 2000
and 1999 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II - Other Information
Item 1. Legal Proceedings 6
Item 2. Changes in Securities 6
Item 3. Defaults Upon Senior Securities 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Item 5. Other Information 6
Item 6. Exhibits and Reports on Form 8-K 6
Signature Page 6
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, 2000 and January 31, 2000 and the results of its
operations and its cash flows for the three months and nine months ended October
31, 2000 and 1999. 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, January 31,
Assets 2000 2000
Current Assets: (Unaudited)
Cash and current investments:
Cash and short-term cash investments $5,470,940 $9,920,263
Investment securities-held-to-maturity 16,276,240 6,878,097
Investment securities-trading 2,294,156 2,380,880
---------- ----------
Total cash and current investments 24,041,336 19,179,240
Other assets (including current portion of
unconditional supply commitment) 577,982 688,013
---------- ----------
Total current assets 24,619,318 19,867,253
Equipment and improvements, net 183,955 173,350
Unconditional supply commitment 7,950,031 8,151,650
----------- -----------
Total assets $32,753,304 $28,192,253
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities:
Accounts payable and other $6,233,314 $6,131,771
--------- ---------
Total current liabilities 6,233,314 6,131,771
Deferred revenue 10,000,000 10,000,000
---------- ----------
Total liabilities 16,233,314 16,131,771
========== ==========
Commitments and Contingencies
Stockholders' Equity:
Common stock, $0.001 par value -
Authorized: 30,000,000 shares
Issued and outstanding: 16,199,493 shares at
October 31, 2000 and 15,592,984 shares at
January 31, 2000 16,199 15,593
Additional paid in capital 80,292,478 64,799,784
Purchase warrants 198,900 198,900
Accumulated deficit (63,987,587) (52,953,795)
------------ ------------
Total stockholders' equity 16,519,990 12,060,482
----------- -----------
Total liabilities and stockholders' equity $32,753,304 $28,192,253
=========== ===========
APHTON CORPORATION
Statements of Operations (Unaudited)
For the three and nine months ended October 31, 2000 and 1999
Three months ended October 31, Nine months ended October 31,
Costs and expenses: 2000 1999 2000 1999
General and administrative $522,765 $407,179 $ 1,746,548 $1,107,280
Research and development 3,790,199 2,870,908 10,387,047 6,451,187
--------- --------- ---------- ---------
Total costs and expenses 4,312,964 3,278,087 12,133,595 7,558,467
--------- --------- ---------- ---------
Loss from operations 4,312,964 3,278,087 12,133,595 7,558,467
--------- --------- ---------- ---------
Other income (expense):
Dividend, interest and other 372,125 42,839 1,248,641 216,802
Unrealized gains (losses) from
investments (147,272) 266,126 (148,838) 544,695
---------- -------- --------- ---------
Net loss $(4,088,111) $(2,969,122) $(11,033,792) $(6,796,970)
=========== =========== ============ ============
Basic loss per common share $(0.25) $(0.20) $(0.69) $(0.47)
======= ====== ====== ======
Diluted loss per common share $(0.25) $(0.20) $(0.69) $(0.47)
======= ====== ====== ======
Weighted average number of
common shares outstanding 16,199,493 14,700,051 16,067,980 14,522,273
========== ========== ========== ==========
APHTON CORPORATION
Statements of Cash Flows (Unaudited)
For the nine months ended October 31, 2000 and 1999
Cash flows from operating activities: 2000 1999
Cash paid to suppliers and employees $(10,774,551) $(6,897,692)
------------- ------------
Net cash used in operating activities (10,774,551) (6,897,692)
Cash flows from investing activities:
Purchase of held to maturity securities (23,146,882) --
Proceeds from maturity of held
to maturity securities 13,000,000 --
Purchase of trading securities (62,114) (2,574,631)
Unrealized gains (losses) from investments (148,838) 544,695
Interest and dividends received 1,248,641 216,802
Capital expenditures (58,273) (34,986)
------------ ----------
Net cash used in investing activities (9,167,466) (1,848,120)
Cash flows from financing activities:
Sales of stock, net 15,492,694 11,200,000
----------- ----------
Cash received from financing activities 15,492,694 11,200,000
----------- ----------
Net increase (decrease) in cash and
short-term cash investments (4,449,323) 2,454,188
Cash and short-term cash investments:
Beginning of period 9,920,263 10,164,069
---------- ----------
End of period $5,470,940 $12,618,257
========== ===========
Reconciliation of net loss to net cash used in operating activities
Net loss $(11,033,792) $(6,796,970)
Adjustments to reconcile net
loss to net cash used in operating
Depreciation and amortization 47,668 57,192
Unrealized losses (gains) from investments 148,838 (544,695)
(Decrease) increase in accrued employee benefits (148,838) 544,695
Changes in -
Other assets 110,030 (220,347)
Accounts payable and other 101,543 62,433
------- -------
Net cash used in operating activities: $(10,774,551) $(6,897,692)
============= ============
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three and Nine Months Ended October 31, 2000 and 1999
General
Aphton Corporation is a biopharmaceutical company in late-stage, pivotal Phase
III clinical trials. Aphton is developing products using its innovative
vaccine-like technology for neutralizing, and removing from circulation,
hormones that participate in gastrointestinal system and reproductive system
diseases, both cancer and non-cancer. Aphton is also developing products for
neutralizing hormones to prevent pregnancy. Aphton has strategic alliances with
Aventis Pasteur (NYSE: AVE) SmithKline Beecham PLC (NYSE: SBH), Schering Plough
Animal Health (NYSE: SGP) 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
The net loss for the three and nine months ended October 31, 2000 and 1999 was
the same as the comprehensive loss for those periods. During the three months
ended October 31, 2000, the Company reported a net loss of $4,088,111. During
this period the Company had no contract revenues. Investment earnings on cash
for the quarter was $372,125 which represented a 769% increase over investment
earnings of $42,839 during the quarter ended October 31, 1999 due to higher
average cash and investment balances. Total research and development
expenditures for the quarter was $3,790,199, which was approximately 34% more
than research and development expenditures for the quarter ended October 31,
1999. For the nine months ended October 31, 2000, research and development
expenditures increased 62% to $10,387,047 when compared to the nine months ended
October 31, 1999. This planned increase relates to Aphton's expanded clinical
trials programs.
Results
While noting that Aphton's primary focus during the quarter ending October 31,
2000 has been on initiating expanding and continuing clinical trials, and
expanding both Phase II and Phase III clinical trials in the US and Europe,
Aphton's supporting activities may be summarized by reviewing our News Releases
(see www.aphton.com) as follows: August 3, 2000 (Aphton successfully completed
the opposition period in the European Patent Office without any opposition filed
against Aphton's basic European Patent 0741744 to neutralize a key hormone
involved in prostate cancer); August 30, 2000 (Aphton appoints clinical trials
and regulatory affairs Director for North America); September 25, 2000 (Aphton
presents clinical data on its prostate cancer vaccine at CaP Cure Annual
Scientific Retreat); October 17, 2000 (the central role for gastrin in the
growth and spread of gastrointestinal cancers, in addition to the scientific
basis for Aphton's vaccine in the treatment of gastrointestinal cancers, was
validated by clinicians and scientists in peer reviewed journals); and December
8, 2000 (Aphton to commence colorectal cancer trial in US with patients who have
failed approved chemotherapy; Aphton plans to file for a "fast track" marketing
approval when a sufficient number of such "chemo-refractive" patients respond to
the treatment).
Other
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards for derivative instruments
and hedging activities. SFAS No. 133 requires recognition of all derivative
instruments in the statement of financial position as either assets or
liabilities and the measurement of derivative instruments at fair value. In June
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133."
The original effective date for SFAS No. 133 was for all fiscal years beginning
after June 15, 1999. As a result of the issuance of SFAS No. 137, the effective
date for SFAS No. 133 is for all fiscal quarters of all fiscal years beginning
after June 15, 2000. The adoption of SFAS No. 133, as amended by SFAS No. 137,
is not expected to have a material effect on the financial statements.
The Company has had no adverse impact from the year 2000 ("Y2K") issue and 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
commercial paper and 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 finance technology and
product development, manufacturing and clinical trials.
On April 12, 2000, the Company announced that it had received gross proceeds of
$16.2 million from the closing of a private financing with several international
biotechnology/healthcare funds. The company issued 491,509 shares of common
stock at a price of $33.00 per share. There were no warrants or options included
with this private placement.
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 2002. 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 the quarter
ended October 31, 2000.
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 12, 2000 By: /s/ Frederick W. Jacobs
--------------------------------
Frederick W. Jacobs, Vice President,
Treasurer and Chief Accounting Officer
