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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-22613
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ANTIVIRALS INC.
(Exact name of registrant as specified in its charter)
Oregon 93-07972223
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One SW Columbia Street, Suite 1105, Portland, Oregon 97258
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 503-227-0554
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Check whether the issuer (1) 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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock without par value 11,166,434
(Class) (Outstanding at May 1, 1998)
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Transitional Small Business Disclosure Format (check one): Yes No X
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ANTIVIRALS INC.
FORM 10-QSB
INDEX
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<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1998 and December 31, 1997 2
Statements of Operations - Three Months Ended March 31,
1998 and 1997 and from July 22, 1980 (Inception)
to March 31, 1998 3
Statements of Cash Flows - Three Months Ended March 31, 1998
and 1997 and from July 22, 1980 (Inception) to March 31, 1998 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
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1
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<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 15,790,550 $ 17,638,936
Other current assets 549,260 19,042
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Total Current Assets 16,339,810 17,657,978
Property and Equipment, net of accumulated
depreciation and amortization of $2,301,158
and $2,262,755 403,660 438,820
Patent Costs, net of accumulated amortization of
$233,773 and $218,773 560,825 553,063
Deferred Acquisition Costs 192,201 102,506
Other Assets 29,847 29,847
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Total Assets $ 17,526,343 $ 18,782,214
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 302,189 $ 219,083
Accrued liabilities 179,247 245,369
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Total Current Liabilities 481,436 464,452
Shareholders' Equity:
Preferred Stock, $.0001 par value, 2,000,000
shares authorized; none issued and outstanding - -
Common stock, $.0001 par value, 50,000,000
shares authorized; 11,158,951 and 11,125,617
issued and outstanding 1,116 1,113
Additional paid-in capital 34,510,122 34,358,122
Deficit accumulated during the development stage (17,466,331) (16,041,473)
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Total Shareholders' Equity 17,044,907 18,317,762
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Total Liabilities and Shareholders' Equity $ 17,526,343 $ 18,782,214
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</TABLE>
2
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<TABLE>
<CAPTION>
Three months ended
------------------------------- July 22, 1980
March 31, March 31, (Inception) to
1998 1997 March 31, 1998
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<S> <C> <C> <C>
Revenues, from grants and research contracts $ 5,650 $ - $ 709,492
Operating expenses:
Research and development 1,294,264 451,723 13,043,010
General and administrative 306,965 170,028 6,138,761
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1,601,229 621,751 19,181,771
Other Income:
Interest income, net 170,721 29,055 909,198
Realized gain on sale of short-term investments - - 96,750
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170,721 29,055 1,005,948
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Net loss $ (1,424,858) $ (592,696) $ (17,466,331)
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Net loss per share - basic and diluted $ (0.13) $ (0.07)
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Weighted average number of common shares
outstanding for computing basic and diluted
earnings per share 11,147,840 8,233,548
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<CAPTION>
For the Period
Three months ended March 31, July 22, 1980
---------------------------------- (Inception) to
1998 1997 March 31, 1998
---------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,424,858) $ (592,696) $ (17,466,331)
Adjustments to reconcile net loss to net cash
flows used in operating activities:
Depreciation and amortization 56,673 132,016 2,573,780
Realized gain on sale of short-term
investments - available for sale - - (96,750)
Compensation expense on issuance of common stock
and partnership units - - 182,392
Compensation expense on issuance of options and
warrants to purchase common stock or
partnership units - - 562,353
Conversion of interest accrued to common stock - - 7,860
(Increase) decrease in:
Other current assets (530,218) - (549,260)
Other assets - - (29,847)
Net increase in accounts payable and
accrued liabilities 16,984 43,280 481,436
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Net cash used in operating activities (1,881,419) (417,400) (14,334,367)
Cash flows from investing activities:
Proceeds from sale or redemption of short-term - 30,000 247,750
investments
Purchase of property and equipment (6,513) (55,337) (2,743,667)
Patent costs (22,762) (23,649) (794,598)
Deferred acquisition costs (89,695) - (192,201)
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Net cash used in investing activities (118,970) (48,986) (3,482,716)
Cash flows from financing activities:
Proceeds from sale of common stock, warrants, and
partnership units, net of offering costs, and
exercise of options 152,003 (239,492) 33,993,070
Buyback of common stock pursuant to rescission - - (288,795)
offering
Withdrawal of partnership net assets - - (176,642)
Issuance of convertible debt - - 80,000
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Net cash provided by (used in) financing 152,003 (239,492) 33,607,633
activities
Increase (decrease) in cash and cash equivalents (1,848,386) (705,878) 15,790,550
Cash and cash equivalents:
Beginning of period 17,638,936 3,011,229 -
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End of period $ 15,790,550 $ 2,305,351 $ 15,790,550
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</TABLE>
4
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ANTIVIRALS INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the three-month periods ended
March 31, 1998 and 1997 and the financial information as of March 31, 1998 is
unaudited; however, such information reflects all adjustments consisting only
of normal recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods. The financial information
as of December 31, 1997 is derived from AntiVirals Inc.'s (the Company's)
Form 10-KSB. The interim financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
Form 10-KSB. The results of operations for the interim periods presented are
not necessarily indicative of the results to be expected for the full year.
NOTE 2. EARNINGS PER SHARE
Beginning December 31, 1997, basic earnings per share (EPS) and diluted EPS
are computed using the methods prescribed by Statement of Financial
Accounting Standard No. 128, EARNINGS PER SHARE (SFAS 128). Basic EPS is
calculated using the weighted average number of common shares outstanding for
the period and diluted EPS is computed using the weighted average number of
common shares and dilutive common equivalent shares outstanding. Prior
period amounts have been restated to conform with the presentation
requirements of SFAS 128. Given that the Company is in a loss position,
there is no difference between basic EPS and diluted EPS since the common
stock equivalents would be antidilutive. This restatement to conform with
the presentation requirements of SFAS 128 resulted in no change to previously
reported numbers.
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998 1997
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<S> <C> <C>
Net loss $(1,424,858) $(592,696)
Weighted average number of shares of
common stock and common stock equivalents
outstanding:
Weighted average number of common shares
outstanding for computing basic earnings
per share 11,147,840 8,233,548
Dilutive effect of warrants and stock
options after application of the treasury
stock method * *
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Weighted average number of common shares
outstanding for computing diluted earnings
per share 11,147,840 8,233,548
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Net loss per share - basic and diluted $(0.13) $(0.07)
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</TABLE>
5
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* The following common stock equivalents are excluded from earnings per
share calculation as their effect would have been antidilutive:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998 1997
- ---------------------------------------------- -------------- ------------
<S> <C> <C>
Warrants and stock options 4,593,497 1,584,606
</TABLE>
NOTE 3. OTHER CURRENT ASSETS
The balance in other current assets consists primarily of advances to
ImmunoTherapy Corporation in anticipation of completing the acquisition
thereof.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING INFORMATION
The Financial Statements and Notes thereto should be read in conjunction with
the following discussion. The discussion in this Form 10-QSB contains
certain forward-looking statements that involve risks and uncertainties,
including, but not limited to, the results of research and development
efforts, the results of pre-clinical and clinical testing, the effect of
regulation by FDA and other agencies, the impact of competitive products,
product development, commercialization and technological difficulties, and
other risks detailed in the Company's Securities and Exchange Commission
filings.
OVERVIEW
From its inception in July 1980, the Company has devoted its resources
primarily to fund its research and development efforts. The Company has been
unprofitable since inception and, other than limited interest and grant
revenue, has had no material revenues from the sale of products or other
sources, and does not expect material revenues for at least the next 12
months. The Company expects to continue to incur losses for the foreseeable
future as it expands its research and development efforts. As of March 31,
1998, the Company's accumulated deficit was $17,466,331.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1997 COMPARED WITH QUARTER ENDED MARCH 31, 1998.
Operating expenses increased from $621,751 in 1997 to $1,601,229 in 1998 due
to increases in research and development staffing and increased expenses
associated with outside collaborations and pre-clinical testing of the
Company's technologies. Additionally, increased general and administrative
costs were incurred to support the research expansion, and to broaden the
Company's investor and public relations efforts due to its change in status
to a public company in mid-1997. Net interest income increased from $29,055
in 1997 to $170,721 in 1998 due to earnings on increased cash balances, which
consisted of proceeds from the initial public offerings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $15,790,550 at March 31, 1998,
compared with $17,638,936 at December 31, 1997. The decrease of $1,848,386
was primarily due to increases in research and development staffing and
increased expenses associated with outside collaborations and pre-clinical
testing of the Company's technologies. Additionally, increased general and
administrative costs were incurred to support the research expansion, to
broaden the Company's investor and public relations efforts due to its change
in status to a public company in mid-1997, and to advance funding to
ImmunoTherapy Corporation as part of its acquisition thereof.
The Company's future expenditures and capital requirements will depend on
numerous factors, including without limitation, the progress of its research
and development programs, the progress of its pre-clinical and clinical
trials, the time and costs involved in
7
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obtaining regulatory approvals, the cost of filing, prosecuting, defending
and enforcing any patent claims and other intellectual property rights,
competing technological and market developments, the ability of the Company
to establish collaborative arrangements and the terms of any such
arrangements, and the costs associated with commercialization of its
products. The Company's cash requirements are expected to continue to
increase significantly each year as it expands its activities and operations.
There can be no assurance, however, that the Company will ever be able to
generate product revenues or achieve or sustain profitability.
The Company expects that its cash requirements over the next twelve months
will be satisfied by existing cash resources.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibit filed as a part of this report is listed below and this list
constitutes the exhibit index.
EXHIBIT NO.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the quarter ended
March 31, 1998.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 1998 ANTIVIRALS INC.
By: /s/ DENIS R. BURGER, Ph.D.
------------------------------
Denis R. Burger, Ph.D.
President, Chief Executive Officer
and Director
(Principal Executive Officer)
By: /s/ ALAN P. TIMMINS
------------------------------
Alan P. Timmins
Chief Operating Officer,
Chief Financial Officer and Director
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 15,790,550
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,339,810
<PP&E> 2,704,818
<DEPRECIATION> 2,301,158
<TOTAL-ASSETS> 17,526,343
<CURRENT-LIABILITIES> 481,436
<BONDS> 0
0
0
<COMMON> 1,116
<OTHER-SE> 17,043,791
<TOTAL-LIABILITY-AND-EQUITY> 17,526,343
<SALES> 0
<TOTAL-REVENUES> 5,650
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,601,229
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,424,858)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,424,858)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,424,858)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
