<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period to
---------- ----------
Commission file number 0-20988
-------------------------------
ANTEX BIOLOGICS INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
Delaware 52-1563899
- ---------------------------------------------- -------------------------------------------------
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
</TABLE>
300 Professional Drive, Gaithersburg, MD 20879
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(301) 590-0129
- -------------------------------------------------------------------------------
(Issuer's telephone number)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE USERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
22,480,304 shares of Antex Biologics Inc. common stock, $.01 par value, were
outstanding as of October 30, 1997.
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE> 2
ANTEX BIOLOGICS INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1996 and
September 30, 1997 (Unaudited) 3
Consolidated Statements of Operations (Unaudited) for the
three months ended September 30, 1996 and 1997 4
Consolidated Statements of Operations (Unaudited) for the
nine months ended September 30, 1996 and 1997 and the period
August 3, 1991 (inception) to September 30, 1997 5
Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended September 30, 1996 and 1997 and
the period August 3, 1991 (inception) to September 30, 1997 6-7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis 10-12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibits 15-23
</TABLE>
2
<PAGE> 3
Antex Biologics Inc.
(a development stage enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
---- ----
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,918,836 $ 6,320,795
Restricted cash 300,000 -
Accounts and other receivables 95,668 169,273
Prepaid expenses and deposits 247,717 520,776
---------- ---------
Total current assets 7,562,221 7,010,844
Property and equipment, net 537,113 259,891
Prepaid expenses 151,667 -
Deferred compensation trust 191,189 191,189
--------- ---------
$ 8,442,190 $ 7,461,924
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 272,119 $ 521,697
Deferred research and development revenue 744,198 699,792
Deferred gain on sale and leaseback 349,857 -
Obligation under capitalized lease 451,412 -
--------- -----------
Total current liabilities 1,817,586 1,221,489
Deferred compensation 191,189 191,189
Excess of fair value over cost of net assets acquired, net
of accumulated amortization of $152,944 and $174,121 129,409 108,232
Other 45,219 26,040
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; none outstanding - -
Common stock, $.01 par value; 95,000,000 shares
authorized; 22,479,679 shares issued and
outstanding 224,797 224,797
Additional paid-in capital 17,752,416 17,752,416
Deficit accumulated during the development stage (11,718,426) (12,062,239)
---------- ----------
Total stockholders' equity 6,258,787 5,914,974
---------- ---------
$ 8,442,190 $ 7,461,924
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
Antex Biologics Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER 30
------------------
1996 1997
---- ----
<S> <C> <C>
Revenues $ 623,646 $ 965,331
------------ -----------
Expenses:
Research and development 549,762 801,228
General and administrative 295,394 364,799
-------- --------
Total expenses 845,156 1,166,027
-------- -----------
Loss from operations (221,510) (200,696)
Other income (expense):
Interest income 89,450 79,824
Interest expense (25,491) -
------- --------
Net loss $ (157,551) $ (120,872)
=========== ============
Net loss per share $(.01) $(.01)
====== ======
Shares used in per share calculations 19,767,840 22,188,016
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
Antex Biologics Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
------------------ AUGUST 3,
1991
1996 1997 (INCEPTION)
---- ---- TO
SEPTEMBER 30, 1997
------------------
<S> <C> <C> <C>
Revenues $ 3,098,069 $ 3,165,808 $ 7,864,994
----------- ----------- -----------
Expenses:
Research and development 1,600,511 2,477,094 11,876,729
General and administrative 930,951 1,261,910 8,216,779
--------- --------- ---------
Total expenses 2,531,462 3,739,004 20,093,508
--------- --------- ----------
Income (loss) from operations 566,607 (573,196) (12,228,514)
Other income (expense):
Interest income 139,722 239,506 874,632
Interest expense (95,089) (10,123) (708,357)
----------- ----------- ------------
Net income (loss) $ 611,240 $ (343,813) $(12,062,239)
=========== ============ ============
Net income (loss) per share $.03 $(.02)
==== ======
Shares and common share
equivalents used in per share
calculations 24,663,210 22,188,016
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
Antex Biologics Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30 AUGUST 3, 1991
-------------------------- (INCEPTION)
TO
1996 1997 SEPTEMBER 30, 1997
---- ---- ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 611,240 $ (343,813) $(12,062,239)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization of
property and equipment, net of
amortization of deferred gain on
sale/leaseback 32,885 54,892 171,069
Amortization of deferred credits (40,356) (40,356) (328,509)
Expense recorded on issuance of
common stock and vesting of
options - - 531,134
Changes in operating assets
and liabilities:
Accounts and other receivables 54,361 (73,605) (169,273)
Prepaid expenses and deposits (272,729) (121,392) (404,534)
Accounts payable and accrued
expenses 42,240 249,578 89,117
Deferred research and development 1,205,411 (44,406) 699,792
Deferred option payment (250,000) - -
Due from BioCarb AB - - 420,448
----------- ----------- -----------
Net cash provided by (used in)
operating activities 1,383,052 (319,102) (11,052,995)
--------- ----------- ------------
INVESTING ACTIVITIES
Purchase of property and equipment (141,772) (127,527) (430,960)
Decrease in restricted cash - 300,000 -
--------- --------- ---------
Net cash provided by (used in) investing
activities (141,772) 172,473 (430,960)
---------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
(Continued)
6
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Antex Biologics Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30 AUGUST 3, 1991
-------------------------- (INCEPTION)
TO
1996 1997 SEPTEMBER 30,1997
---- ---- -----------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net proceeds from sales of common stock and
warrants and the exchange option $ 983,873 $ - $11,606,170
Net proceeds from exercise of
warrants and stock options 4,822,805 - 4,861,719
Proceeds from sale and leaseback
agreement - - 2,164,792
Principal repayments on sale and
leaseback agreement (443,148) (451,412) (2,164,792)
Proceeds from issuance of notes payable - - 500,000
Proceeds from sale of preferred stock - - 400,189
---------- --------- -----------
Net cash provided by (used in)
financing activities 5,363,530 (451,412) 17,368,078
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents 6,604,810 (598,041) 5,884,123
Cash and cash equivalents at
beginning of period 903,951 6,918,836 436,672
---------- --------- ----------
Cash and cash equivalents at
end of period $7,508,761 $6,320,795 $6,320,795
========== ========== ==========
SUPPLEMENTAL CASH FLOWS DISCLOSURES:
Notes payable and accrued interest
converted to preferred stock $ - $ - $ 509,109
========== ========== ==========
Sale and leaseback of property and
equipment $ - $ - $2,099,175
========== ========== ==========
Deferred compensation $ - $ - $ 191,189
========== ========== ==========
Interest paid $ 95,089 $ 10,123 $ 699,248
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
Antex Biologics Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997
(UNAUDITED)
1. GENERAL
The Company commenced operations on August 3, 1991 and has been in the
development stage since its formation. The Company's strategy has been to
focus on two primary proprietary platform technologies with the goal of
developing new products to prevent and treat infectious diseases and their
related disorders.
The Consolidated Balance Sheet as of September 30, 1997, and the
Consolidated Statements of Operations for the three-month and nine-month
periods ended September 30, 1996 and 1997 and for the period August 3, 1991
(inception) to September 30, 1997, and the Consolidated Statements of Cash
Flows for the nine-month periods ended September 30, 1996 and 1997 and for the
period August 3, 1991 (inception) to September 30, 1997 have been prepared
without audit. However, such financial statements reflect all adjustments
(consisting solely of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the consolidated financial
position of Antex Biologics Inc. and its subsidiary at September 30, 1997, and
the consolidated results of their operations and their cash flows for the
periods referred to above.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements should
be read in conjunction with the financial statements and notes thereto for the
fiscal year ended December 31, 1996 included in the Company's Annual Report on
Form 10-KSB.
Certain reclassifications were made to the 1996 financial statements to
conform to the 1997 presentation.
The results of operations for the period ended September 30, 1997 are not
necessarily indicative of the operating results anticipated for the fiscal year
ending December 31, 1997.
2. STRATEGIC ALLIANCE
On May 7, 1996, the Company executed definitive agreements with
SmithKline Beecham Corporation and SmithKline Beecham Biologicals
Manufacturing s.a. ("SmithKline"), effective March 1, 1996, which established
a corporate joint venture, MicroCarb Human Vaccines Inc.("MCHV"), to develop
and commercialize human bacterial vaccines utilizing the Company's proprietary
technologies. The agreements provide for the following: a payment of
$3,000,000 to the Company in connection with SmithKline's acquisition of a
26.25% equity interest in MCHV; a payment of $2,400,000 to the Company to fund
research and development for the first year; additional committed research and
8
<PAGE> 9
development funding of $2,600,000 through February 28, 1998 with SmithKline
having the option to fund future years; two separate options granted to
SmithKline expiring October 1, 1997 and 1998, respectively, to acquire from the
Company additional equity interests in MCHV; an exchange option granted by the
Company to SmithKline enabling SmithKline to convert its equity interest in
MCHV for up to 4,793,685 shares of the Company's common stock, under specified
conditions; and a warrant granted by the Company to SmithKline enabling
SmithKline to acquire up to 7,682,637 shares of the Company's common stock,
under specified conditions, and only to the extent that stipulated options and
warrants previously granted by the Company and outstanding as of the date of
the establishment of the strategic alliance are exercised. The agreements also
provide for SmithKline to make milestone payments and pay royalties to the
MCHV; and for SmithKline to reimburse the Company for expenses the Company
incurs for agreed upon production lots of vaccines for clinical trials, the
conduct of agreed upon clinical trials, and the agreed upon prosecution and
maintenance of the Company's patents and patent applications. As further
stipulated in the agreements, SmithKline will be responsible for conducting
additional clinical trials, manufacturing, and sales and distribution.
Revenue related to the human bacterial vaccine research and development
provided in connection with the strategic alliance has been recognized to the
extent of expenses incurred. Amounts received but unearned have been deferred.
Additional expenses that qualify as reimbursables due from SmithKline pursuant
to the provisions of the agreements, have been recognized as revenue.
For the three months and nine months ended September 30, 1997, the
Company recognized revenue related to human bacterial vaccine research and
development and qualifying reimbursable expenses of $854,137 and $2,843,141,
respectively. For the three months and nine months ended September 30, 1996,
revenue related to the strategic alliance of $604,441 and $3,078,864,
respectively, was recognized.
3. PROPERTY AND EQUIPMENT
Effective February 28, 1997, the Company prepaid the remaining
outstanding principal balance arising from the sale and leaseback agreement
entered into in August 1993 and reacquired the related assets.
4. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per
Share, effective for financial statements for both interim and annual periods
ending after December 15, 1997. SFAS 128 replaces the existing presentation
and calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. The adoption of SFAS 128 is not expected to have a
material effect on the Company's earnings per share.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company commenced operations in August 1991.
Effective March 1, 1996, the Company executed definitive agreements with
SmithKline Beecham Corporation and SmithKline Beecham Biologicals
Manufacturing s.a. ("SmithKline"), establishing a corporate joint venture,
MicroCarb Human Vaccines Inc. ("MCHV"), to develop and commercialize human
bacterial vaccines utilizing the Company's proprietary technologies (see Note 2
to the unaudited financial statements).
The strategic alliance with SmithKline is consistent with one aspect of
the Company's overall strategy which, since its inception, has been to
establish strategic partnerships and to focus on researching technologies with
the goal of developing new products to prevent and treat infectious diseases
and their related disorders. The Company is operating as a development stage
enterprise.
RESULTS OF OPERATIONS
Revenues for the third quarter of 1997 included human bacterial vaccine
research and development support of $784,915 and reimbursable expenses incurred
of $69,220, pursuant to the strategic alliance with SmithKline. The Company
also earned $111,196 from Small Business Innovation Research grants. Revenues
for the nine months ended September 30, 1997 totalled $3,165,808, consisting of
human bacterial vaccine research and development support of $2,022,156,
reimbursable expenses incurred of $820,985, and grant revenue of $322,667.
Revenues for the third quarter of 1996 included human bacterial vaccine
research and development support of $515,372 and reimbursable expenses incurred
of $86,089, and grant revenue of $19,205. Revenues for the nine months ended
September 30, 1996 totalled $3,098,069 consisting of $1,669,752 from the sale
of the equity interest in the joint venture to SmithKline, human bacterial
vaccine research and development support of $1,194,589, reimbursable expenses
incurred of $214,523, and grant revenue of $19,205.
In the third quarter and first nine months of 1997, research and
development expenses increased 45.7% and 54.8%, respectively, in comparison to
the comparable periods in 1996. These increases were due to increased efforts
and expenditures for additional personnel resulting directly from the increase
in activities attributable to the strategic alliance with SmithKline, and to
costs incurred in the conducting of clinical trials.
General and administrative expenses increased 23.5% in the third quarter
of 1997 and 35.6% in the first nine months of 1997 in comparison to the
comparable periods in 1996. The increases were attributable primarily to the
fees incurred in connection with overseas patent application filings, such fees
being reimbursable to the Company pursuant to the provisions of the strategic
alliance with SmithKline, and to increases in legal fees and public relations
activities. These increases were offset in part by the decrease resulting from
the nonrecurring bonuses awarded to executive officers in the second quarter of
1996.
10
<PAGE> 11
The increase in interest income for the first nine months of 1997
reflects the improved cash position of the Company in comparison to the
comparable period in 1996.
In February 1997, the Company paid off the remaining balance of the
obligation arising from the sale/leaseback agreement, thereby eliminating the
related future interest payments.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the Company's entry into the strategic alliance with
SmithKline, in 1996 the Company received $3,000,000 from the sale to SmithKline
of a 26.25% equity interest in MCHV, and $2,400,000, representing the first
year's funding for research and development of human bacterial vaccines. In
addition, the Company is reimbursed by SmithKline on an ongoing basis for
expenses that it incurs in connection with the agreed upon production of lots
of vaccines for clinical trials, the conduct of agreed upon clinical trials,
and the agreed upon prosecution and maintenance of the Company's patents and
patent applications.
As a result of exercises and following a notice of redemption by the
Company, all of the Company's outstanding Class B warrants were exercised in
1996, resulting in gross proceeds of $5,072,000. Fees associated with the
exercise of the warrants were approximately $211,000.
MCHV continues to assess to which human bacterial vaccine research
projects resources will be allocated. The Company anticipates that its
research and development expenses related to human bacterial vaccines will
continue to be substantial for the foreseeable future and anticipates that
substantial funding will be provided through the strategic alliance with
SmithKline. The Company also plans to utilize a portion of its available
resources to pursue other research and development activities with the goal of
researching therapeutics and evaluating non-human vaccine applications. To
totally fund these research and development activities and general and
administrative expenses, the Company will be required to rely on its current
assets and future financings.
For 1997, the Company currently anticipates that it will increase its
total personnel by a minimum of five from a 1996 year end total of 20.
As a development stage company, the Company's operating activities have
been limited primarily to research and development involving its
proprietary technologies, and accordingly, have generated limited revenues.
The Company is scheduled to receive a total of $2,600,000 in 1997 in research
and development payments from SmithKline covering the period March 1, 1997 to
February 28, 1998, of which $1,950,000 has been received through September 30,
1997. Additionally, the costs incurred by the Company associated with the
conduct of a Phase II clinical trial for Campylobacter jejuni and a Phase I
clinical trial for Helicobacter pylori, the production of vaccine lots, and the
prosecution of the Company's patents and patent applications are reimbursable by
SmithKline. SmithKline's first option to increase its ownership in MCHV, at a
cost of $1,000,000, expired on October 1, 1997. Research currently being
performed by the Company under a Phase II Small Business Innovation Research
grant from The National Institutes of Health pertaining to the Company's vaccine
for Chlamydia
11
<PAGE> 12
trachomatis, is anticipated to generate approximately $370,000 in payments in
1997. The Company is also scheduled to receive a milestone payment from
Pasteur Merieux Connaught of $150,000 in 1997.
In order to fully fund its operations over the longer term, the Company
will continue to seek additional financing. The Company has no lines of
credit. In seeking additional funding, the Company continues to examine a
range of possible transactions, including: additional strategic alliances; the
exercise of the unit purchase option issued to the Placement Agent in
connection with the 1995 private placement; possible increases in research and
development funding by SmithKline; the exercise by SmithKline of its second
option to increase its equity in MCHV at a cost of $1,000,000; and the exercise
by SmithKline of its warrant to the extent that it becomes exercisable. In the
case of the unit purchase option, it is anticipated that exercises will only
occur when the market price of the common stock sustains a level such that their
exercise is economically justified. Additional public offerings and private
placements, and the filing of additional applications for Small Business
Innovation Research grants are also possible sources of funds. However, there is
no assurance that additional funds will be available from these or any other
sources or, if available, as to the terms on which such funds can be obtained.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements contained herein that are not historical facts may be forward-looking
statements that are subject to a variety of risks and uncertainties. There
are a number of important factors that could cause actual results to differ
materially from those expressed in any forward-looking statements made by the
Company. These factors include, but are not limited to: (i) Company's ability
to successfully complete product research and development, including preclinical
and clinical studies and commercialization; (ii) the Company's ability to obtain
required governmental approvals; (iii) the Company's ability to attract and/or
maintain manufacturing, sales, distribution and marketing partners; and (iv) the
Company's ability to develop and commercialize its products before its
competitors.
12
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
10.5 Employment Agreement dated as of October 1, 1997 by and between
the Company and Theresa M. Smith
11.1 Statement Re: Computation of Per Share Loss - Three Months Ended
September 30, 1996 and 1997
11.2 Statement Re: Computation of Per Share Income (Loss) - Nine Months
Ended September 30, 1996 and 1997
27.1 Financial Data Schedule
</TABLE>
REPORTS ON FORM 8-K
None
13
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ANTEX BIOLOGICS INC.
---------------------------------------
(Registrant)
Date: November 6, 1997 /s/V. M. ESPOSITO
---------------------------------------
V. M. Esposito, President and
Chief Executive Officer
(Principal Executive Officer)
Date: November 6, 1997 /s/GREGORY C. ZAKARIAN
---------------------------------------
Gregory C. Zakarian, Vice President,
and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
14
<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT
ANTEX BIOLOGICS INC.
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of October 1,
1997 is entered into by Antex Biologics Inc., a Delaware corporation with its
principal place of business at 300 Professional Drive, Gaithersburg, Maryland
20879 (the "Company"), and Theresa M. Smith, Esq., residing at 15308 Walker
Branch Court, Laurel, Maryland 20707 (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to employ the Employee, and the
Employee desires to be employed by the Company;
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
Employee, and the Employee hereby accepts employment with the Company, upon the
terms set forth in this Agreement, for the period commencing on October 1, 1997
(the "Commencement Date") and ending on September 30, 2000 (such period, as it
may be extended, the "Employment Period"), unless sooner terminated in
accordance with the provisions of Section 4 hereof. Upon the third anniversary
of the Commencement Date and upon every third anniversary of the Commencement
Date thereafter, the term of the Employment Period shall be extended
automatically for three (3) additional years unless, at least six months prior
to such anniversary, the Company shall have delivered to the Employee or, at
least six (6) months prior to such anniversary, the Employee shall have
delivered to the Company, written notice that the term of the Employee's
employment hereunder will not be extended.
2. Title; Capacity. The Employee shall serve as Vice President,
Corporate Development or in such other position as the Company or its Board of
Directors (the "Board") may determine from time to time. The Employee shall be
based at the Company's headquarters in Gaithersburg, Maryland, or such place or
places in the continental United States as the Board shall determine. The
Employee shall be subject to the supervision of, and shall have such authority
as is delegated to him by, the Board or such officer of the Company as may be
designated by the Board.
15
<PAGE> 2
The Employee hereby accepts such employment and agrees to undertake
the duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Employee agrees to devote his entire business
time, attention and energies to the business and interests of the Company
during the Employment Period. He shall not engage in any other business
activity, except as may be approved by the Company. The Employee agrees to
abide by the rules, regulations, instructions, personnel practices and policies
of the Company and any changes therein which may be adopted from time to time
by the Company. The Employee acknowledges receipt of copies of all such rules
and policies committed to writing as of the date of this Agreement.
3. Compensation and Benefits.
3.1 Salary. The Company shall pay the Employee, in
semi-monthly installments on the 15th and month-end or on the last working day
of such month, an annual base salary (the "Annual Base Salary") of One Hundred
Twenty-Eight Thousand Dollars ($128,000) for the period commencing on the
Commencement Date. Thereafter, upon each anniversary of the Commencement Date
(including the first anniversary thereof), following an annual review by the
Board, the Board may adjust the Employee's Annual Base Salary as it determines
in its sole discretion; provided, however, that the Board of Directors shall
not reduce the Annual Base Salary.
3.2 Fringe Benefits. The Employee shall be entitled to
participate in all bonus, stock option, benefit and insurance programs that the
Company establishes and makes available to its employees, if any, to the extent
that Employee's position, tenure, salary, age, health and other qualifications
make him eligible to participate.
The Employee shall be entitled to twenty (20) days paid vacation per year, to
be taken at such times as may be approved by the Board or its designee.
3.3 Reimbursement of Expenses. The Company shall reimburse
the Employee for all reasonable travel, entertainment and other expenses
incurred or paid by the Employee in connection with, or related to, the
performance of his duties, responsibilities or services under this Agreement,
upon presentation by the Employee of documentation, expense statements,
vouchers and/or such other supporting information as the Company may request;
provided, however, that the amount available for such travel, entertainment and
other expenses may be fixed in advance by the Board.
3.4 Bonus. The Employer shall, subject to approval of the
Board, pay to the Employee an appropriate bonus (the "Bonus") with respect to
each completed year of employment. The Bonus shall be paid to Employee in one
lump sum on or prior to January 31 of each year for the one-year period of
employment, or portion thereof, ending on the preceding December 31.
4. Employment Termination. The employment of the Employee by the
Company pursuant to this Agreement shall terminate upon the occurrence of any
of the following:
16
<PAGE> 3
4.1 Expiration of the Employment Period in accordance with
Section 1 hereof and if the term is not extended in accordance with Section 1
hereof, then the provisions of Section 4.4 hereof shall apply;
4.2 At the election of the Company, for cause, immediately
upon written notice by the Company to the Employee. For the purposes of this
Section 4.2, cause for termination shall be deemed to exist upon (a) a good
faith finding by the Company of failure of the Employee to perform his assigned
duties for the Company, dishonesty, gross negligence or misconduct, or (b) the
conviction of the Employee of, or the entry of a pleading of guilty or nolo
contendere by the Employee to, any crime involving moral turpitude or any
felony;
4.3 Upon the death or sixty (60) days after the disability of
the Employee. As used in this Agreement, the term "disability" shall mean the
inability of the Employee, due to a physical or mental disability, for a period
of ninety (90) days, whether or not consecutive, during any three hundred sixty
(360)-day period to perform the services contemplated under this Agreement. A
determination of disability shall be made by a physician satisfactory to both
the Employee and the Company, provided that if the Employee and the Company do
not agree on a physician, the Employee and the Company shall each select a
physician and these two together shall select a third physician, whose
determination as to disability shall be binding on all parties;
4.4 At the election of the Company, upon not less than six
(6) months' prior written notice of termination to the Employee. At the option
of the Company and in lieu of such notice, the Company may pay to Employee an
amount equal to (i) six (6) months' salary computed on the basis of the then
current Annual Base Salary plus (ii) any bonus to which Employee is entitled.
If the Company elects to pay such amount in lieu of notice it shall, at the
expense of the Company, continue Employee's participation in all benefits
programs including but not limited to medical, dental and life insurance
programs provided by the Company to the Employee under Section 3.2 hereof on
the date on which such amount is paid (the "Payment Date") until a date six (6)
months after the Payment Date. In the event Employee's termination is related
to a "change of control" and occurs within one (1) year of such change of
control the notice or salary in lieu of notice and participation in the
benefits program will be for twelve (12) months. In the event that Employee
commences employment or self-employment during the period the Company is making
payments then the salary payment maybe reduced by the amount the Employee
receives through employment or self-employment and the benefits will terminate
on the date Employee becomes eligible to participate in the benefits program
pursuant to employment or self-employment. The exercise of stock options and
any modifications to the exercise period will be in accordance with the
Company's Amended and Restated Stock Option Plan.
4.5 At the election of the Employee, upon not less than six
(6) months prior written notice of termination to the Company.
17
<PAGE> 4
5. Effect of Termination.
5.1 Termination for Cause or at Election of Either Party. In
the event the Employee's employment is terminated for cause pursuant to Section
4.2 hereof, or at the election of the Employee pursuant to Section 4.5 hereof,
the Company shall pay to the Employee the compensation and benefits otherwise
payable to him under Section 3 hereof through the last day of his actual
employment by the Company.
5.2 Termination for Death or Disability. If the Employee's
employment is terminated by death or because of disability pursuant to Section
4.3 hereof, the Company shall pay to the estate of the Employee or to the
Employee, as the case may be, the compensation which would otherwise be payable
to the Employee up to the end of the month in which the termination of his
employment because of death or disability occurs.
5.3 Survival. The provisions of Sections 6 and 7 hereof
shall survive the termination of this Agreement.
6. Non-Competition.
(a) During the Employment Period and for a period of two (2)
years after the termination or expiration thereof, the Employee will not
directly or indirectly:
(i) as an individual proprietor, partner, stockholder,
officer, employee, director, joint venturer, investor, lender, or in any other
capacity whatsoever (other than as the holder of not more than one percent (1%)
of the total outstanding sock of a publicly held company), engage in the
business of developing, producing, marketing or selling products of the kind or
type developed or being developed, produced, marketed or sold by the Company
while the Employee was employed by the Company; or
(ii) recruit, solicit, or induce, or attempt to induce, any
employee or employees of the Company to terminate their employment with, or
otherwise cease their relationship with, the Company; or
(iii) solicit, divert or take away, or attempt to divert
or to take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
(b) If any restriction set forth in this Section 6 is found
by any court of competent jurisdiction to be unenforceable because it extends
for too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which it
may be enforceable.
(c) The restrictions contained in this Section 6 are
necessary for the protection of the business and goodwill of the Company and
are considered by the
18
<PAGE> 5
Employee to be reasonable for such purpose. The Employee agrees that any
breach of this Section 6 will cause the Company substantial and irrevocable
damage and therefore, in the event of any such breach, in addition to such
other remedies which may be available, the Company shall have the right to seek
specific performance and injunctive relief.
7. Proprietary Information and Development.
7.1 Proprietary Information.
(a) Employee agrees that all information and know-how,
whether or not in writing, or a private, secret or confidential nature
concerning the Company's business or financial affairs (collectively,
"Proprietary Information") is and shall be the exclusive property of the
Company. By way of illustration, but not limitation, Proprietary Information
may include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, research data, clinical
data, financial data, personnel data, computer programs, and customer and
supplier lists. Employee will not disclose any Proprietary Information to
others outside the Company or use the same for any unauthorized purposes
without written approval by an officer of the Company, either during or after
his employment, unless and until such Proprietary Information has become public
knowledge without fault by the Employee.
(b) Employee agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, laboratory notebooks, program
listings, or other written, photographic, or other tangible material containing
Proprietary Information, whether created by the Employee or others, which shall
come into his custody or possession, shall be and are the exclusive property of
the Company to be used by the Employee only in the performance of his duties
for the Company.
(c) Employee agrees that his obligation not to disclose or
use information, know-how and records of the types set forth in paragraphs (a)
and (b) above, also extends to such types of information, know-how, records and
tangible property of customers of the Company or suppliers to the Company or
other third parties who may have disclosed or entrusted the same to the Company
or to the Employee in the course of the Company's business.
7.2 Developments.
(a) Employee will make full and prompt disclosure to the
Company of all inventions, improvements, discoveries, methods, developments,
software, and works of authorship, whether patentable or not, which are
created, made, conceived or reduced to practice by the Employee or under his
direction or jointly with others during his employment by the Company, whether
or not during normal working hours or on the premises of the Company (all of
which are collectively referred to in this Agreement as "Developments").
(b) Employee agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his right,
title and interest in and to all
19
<PAGE> 6
Developments and all related patents, patent applications, copyrights and
copyright applications. However, this Section 7.2(b) shall not apply to
Developments which do not related to the present or planned business or
research and development of the Company and which are made and conceived by the
Employee not during normal working hours, not on the Company's premises and not
using the Company's tools, devices, equipment or Proprietary Information.
(c) Employee agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. Employee shall
sign all papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignment of priority
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development.
7.3 Other Agreements. Employee hereby represents that he is
not bound by the terms of any agreement with any previous employer or other
party to refrain from using or disclosing any trade secret or confidential or
proprietary information in the course of his employment with the Company or to
refrain from competing, directly or indirectly, with the business of such
previous employer or any other party. Employee further represents that his
performance of all terms of this Agreement and as an employee of the Company
does not and will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by him in confidence or in trust prior
to his employment with the Company.
8. Prior Agreements. This Agreement supersedes an Employment
Agreement dated as of August 9, 1996 by and between the Employer and Employee
(the "Prior Agreement") and, as of the date hereof, the Prior Agreement shall
be of no further force and effect.
9. Notices. All notices required or permitted under this
Agreement shall be in writing and shall be deemed effective upon personal
delivery or upon deposit in the United States Post Office, by registered or
certified mail, postage prepaid, addressed to the other party at the address
shown above, or at such other address or addresses as either party shall
designate to the other in accordance with this Section 9.
10. Pronouns. Whenever the context may require, any pronouns used
in this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.
11. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of this
Agreement.
12. Amendment. This Agreement may be amended or modified only by
a written instrument executed by both the Company and the Employee.
20
<PAGE> 7
13. Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Maryland.
14. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged to which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
15. Miscellaneous.
15.1 No delay or omission by the Company in exercising any
right under this Agreement shall operate as a waiver of that or any other
right. A waiver or consent given by the Company on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion.
15.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit of affect the scope
or substance of any section of this Agreement.
15.3 In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability
of the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year set forth above.
ANTEX BIOLOGICS INC.
by /s/V. M. Esposito, Ph.D.
-----------------------------
V. M. Esposito, Ph.D.
President and CEO
Chairman of the Board of Directors
Employee
/s/Theresa M. Smith, Esq.
--------------------------------
Theresa M. Smith, Esq.
21
<PAGE> 1
Exhibit 11.1
STATEMENT RE: COMPUTATION OF PER SHARE LOSS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER 30,
-------------------
1996 1997
---- ----
<S> <C> <C>
Net loss $ (157,551) $ (120,872)
========= =========
Weighted average shares of common stock
outstanding 20,059,503 22,479,679
Escrowed shares (291,663) (291,663)
--------- ---------
Net shares of common stock used in net
loss per share calculations 19,767,840 22,188,016
========== ==========
Net loss per share $ (.01) $ (.01)
======= =======
</TABLE>
22
<PAGE> 1
Exhibit 11.2
STATEMENT RE: COMPUTATION OF PER SHARE INCOME (LOSS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1996 1997
---- ----
<S> <C> <C>
Net income (loss) $ 611,240 $ (343,813)
Reduction of interest expense 95,089 -
Interest income 87,632 -
----------- -----------
Net income (loss) applicable to common
stock and common stock equivalents $ 793,961 $ (343,813)
=========== ============
Weighted average shares of common stock
outstanding 15,179,098 22,479,679
Escrowed shares (291,663) (291,663)
Weighted average effect of common stock
equivalents 9,775,775 -
--------- ----------
Net shares of common stock and common
stock equivalents used in net income
(loss) per share calculations 24,663,210 22,188,016
========== ==========
Net income (loss) per share $ .03 $(.02)
======== ========
</TABLE>
23
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,320,795
<SECURITIES> 0
<RECEIVABLES> 169,273
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,010,844
<PP&E> 2,530,136
<DEPRECIATION> 2,270,245
<TOTAL-ASSETS> 7,461,924
<CURRENT-LIABILITIES> 1,221,489
<BONDS> 0
0
0
<COMMON> 224,797
<OTHER-SE> 5,690,177
<TOTAL-LIABILITY-AND-EQUITY> 7,461,924
<SALES> 0
<TOTAL-REVENUES> 3,165,808
<CGS> 0
<TOTAL-COSTS> 3,739,004
<OTHER-EXPENSES> (239,506)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,123
<INCOME-PRETAX> (343,813)
<INCOME-TAX> 0
<INCOME-CONTINUING> (343,813)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (343,813)
<EPS-PRIMARY> $(.02)
<EPS-DILUTED> 0
</TABLE>
