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 July 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
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 September 1, 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 - July 31, 2000 and January 31, 2000 3
Statements of Operations - Three months and six months ended
July 31, 2000 and 1999 4
Statements of Cash Flows - Six months ended July 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 July 31, 2000 and January 31, 2000 and the results of its
operations and its cash flows for the three months and six months ended July 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
July 31, January 31,
Assets 2000 2000
Current Assets: (Unaudited)
Cash and current investments:
Cash and short-term cash investments $6,031,391 $9,920,263
Investment securities-held-to-maturity 19,416,550 6,878,097
Investment securities-trading 2,514,639 2,380,880
Total cash and current investments 27,962,580 19,179,240
Other assets (including current portion of
unconditional supply commitment) 650,322 688,013
---------- ----------
Total current assets 28,612,902 19,867,253
Equipment and improvements, net 146,868 173,350
Unconditional supply commitment 8,031,650 8,151,650
---------- ----------
Total assets $36,791,420 $28,192,253
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities:
Accounts payable and other $6,183,319 $6,131,771
Total current liabilities 6,183,319 6,131,771
Deferred revenue 10,000,000 10,000,000
---------- ----------
Total liabilities 16,183,319 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 July 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 (59,899,476) (52,953,795)
------------ ------------
Total stockholders' equity 20,608,101 12,060,482
---------- ----------
Total liabilities and stockholders' equity $36,791,420 $28,192,253
=========== ===========
APHTON CORPORATION
Statements of Operations (Unaudited)
For the three and six months ended July 31, 2000 and 1999
Three months ended July 31, Six months ended July 31,
2000 1999 2000 1999
Costs and expenses:
General and administrative $683,309 $378,881 $1,223,783 $700,101
Research and development 3,647,340 2,316,700 6,596,848 3,768,784
--------- --------- --------- ---------
Total costs and expenses 4,330,649 2,695,581 7,820,631 4,468,885
--------- --------- --------- ---------
Loss from operations 4,330,649 2,695,581 7,820,631 4,468,885
Other income (expense):
Dividend, interest
and other income 546,612 70,976 876,516 173,963
Unrealized gains (losses)
from investments 79,002 303,601 (1,566) 467,074
-------- -------- --------- --------
Net loss $(3,705,035)$(2,321,004)$(6,945,681)$(3,827,848)
=========== =========== =========== ============
Basic loss per common share $(0.23) $(0.16) $(0.43) $(0.27)
======= ======= ======= =======
Diluted loss per common share $(0.23) $(0.16) $(0.43) $(0.27)
======= ======= ======= =======
Weighted average number of
common shares outstanding 16,199,493 14,433,384 16,002,223 14,433,384
========== ========== ========== ==========
APHTON CORPORATION
Statements of Cash Flows (Unaudited)
For the six months ended July 31, 2000 and 1999
Cash flows from operating activities: 2000 1999
Cash paid to suppliers and employees $(7,709,276) $(4,066,985)
------------ -----------
Net cash used in operating activities (7,709,276) (4,066,985)
Cash flows from investing activities:
Purchase of held to maturity securities (25,919,378) --
Proceeds from maturity of held to
maturity securities 13,500,000 --
Purchase of trading securities (129,425) --
Interest and dividends received 876,516 173,963
Capital expenditures -- (34,986)
---------- ---------
Net cash used in investing activities (11,672,287) 138,977
Cash flows from financing activities:
Sales of stock, net 15,492,694 --
---------- ---------
Cash received from financing activities 15,492,694 --
---------- ---------
Net decrease in cash and short-term
cash investments (3,888,869) (3,928,008)
Cash and short-term cash investments:
Beginning of period 9,920,263 10,164,069
---------- ----------
End of period $6,031,394 $6,236,061
========== ==========
Reconciliation of net loss to net cash used in operating activities
Net loss $(6,945,676) $(3,827,848)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 28,011 37,791
Net increase in investment securities-trading (133,759) --
Unrealized losses (gains) from investments 1,566 (467,074)
(Decrease) increase in accrued employee benefits (1,566) 467,074
Changes in -
Other assets 37,691 (239,940)
Accounts payable and other 51,548 136,975
-------- ---------
Net cash used in operating activities: $(6,962,185) $(3,893,022)
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Three and Six Months Ended July 31, 2000 and 1999
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 Aventis
Pasteur (formerly 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 three months ended July 31, 2000, the Company reported a net loss of
$3,705,035. During this period the Company had no contract revenues. Investment
earnings on cash for the quarter was $546,612 which represented a 780% increase
over investment earnings of $70,976 during the quarter ended July 31, 1999 due
to higher average cash and investment balances. Total research and development
expenditures for the quarter was $3,647,340 which was approximately 57% more
than research and development expenditures for the quarter ended July 31, 1999.
For the six months ended July 31, 2000, research and development expenditures
increased 75% to $6,596,843 when compared to the six months ended July 31, 1999.
This planned increase relates to Aphton's expanded clinical trials programs.
Results
While noting that Aphton's primary focus during the quarter ended July 31,
2000 has been on initiating 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:
May 25, 2000 (In addition to presenting basic medical science findings
relating to cancers of the gastrointestinal system, Aphton scientists and
collaborating researchers from the UK presented data on the effectiveness
of Aphton's anti-gastrin immunogen in clinical trials at the annual meeting
of the American Gastroenterological Association (AGA) in San Diego, CA.);
May 31, 2000 (Georges Hibon, former Chairman and CEO of Pasteur Merieux
Connaught N.A. was elected to Aphton's Board of Directors.); July 13, 2000
(Aphton was added to Russell Equity Indexes); and 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).
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.
On January 14, 2000, the Company announced that it had received $5.5 million
from a leading investment banking firm through the exercise of 350,000 warrants
issued in prior years. The new Aphton common shares were purchased at an average
price of $15.714 per share through the exercise of these warrants.
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 was one report on Form 8-K filed during the quarter
ended July 31, 2000. On May 19, 2000 the Company filed a
report on Form 8-K, reporting under Item 4 thereof, a
Change in Registrant's Certifying Accountant.
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 12, 2000 By: /s/ Frederick W. Jacobs
------------------------------------
Frederick W. Jacobs, Vice President,
Treasurer and Chief Accounting Officer
