<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 June 30, 1998
[ ] 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
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(Address of principal executive offices)
(301) 590-0129
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(Issuer's telephone number)
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(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.
22,188,641 shares of Antex Biologics Inc. common stock, $.01 par value, were
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outstanding as of July 31, 1998.
--------------------------------
Transitional Small Business Disclosure Format (check one):
Yes No X
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ANTEX BIOLOGICS INC.
FORM 10-QSB
QUARTER ENDED JUNE 30, 1998
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1997 and
June 30, 1998 (Unaudited) 3
Consolidated Statements of Operations (Unaudited) for the
three months ended June 30, 1997 and 1998 4
Consolidated Statements of Operations (Unaudited) for the
six months ended June 30, 1997 and 1998 and the period
August 3, 1991 (inception) to June 30, 1998 5
Consolidated Statements of Cash Flows (Unaudited) for the
six months ended June 30, 1997 and 1998 and
the period August 3, 1991 (inception) to June 30, 1998 6-7
Notes to Consolidated Financial Statements 8-11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11-14
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibits 17
</TABLE>
2
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Antex Biologics Inc.
(a development stage enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
---- ----
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,697,156 $ 5,285,311
Accounts and other receivables 712,906 395,679
Prepaid expenses and deposits 272,917 144,492
---------- ---------
Total current assets 6,682,979 5,825,482
Property and equipment, net 446,861 551,606
Deferred compensation trust 229,405 229,405
--------- ---------
$ 7,359,245 $ 6,606,493
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 531,345 $ 288,701
Deferred research and development revenue 554,152 553,311
-------- -------
Total current liabilities 1,085,497 842,012
Deferred gain on equipment 106,983 91,700
Deferred compensation 229,405 229,405
Excess of fair value over cost of net assets acquired, net
of accumulated amortization of $181,180 and $195,298 101,173 87,055
Other 19,647 6,861
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; 22,480,304 and 22,188,641
shares issued and outstanding 224,803 221,886
Additional paid-in capital 17,752,839 17,755,756
Deficit accumulated during the development stage (12,161,102) (12,628,182)
---------- ----------
Total stockholders' equity 5,816,540 5,349,460
---------- ---------
$ 7,359,245 $ 6,606,493
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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Antex Biologics Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30
-------------
1997 1998
---- ----
<S> <C> <C>
Revenues $ 903,629 $ 1,166,254
----------- -----------
Expenses:
Research and development 700,253 1,161,640
General and administrative 313,411 275,245
-------- --------
Total expenses 1,013,664 1,436,885
----------- -----------
Loss from operations (110,035) (270,631)
Interest income 73,351 64,561
----------- -----------
Net loss $ (36,684) $ (206,070)
=========== ===========
Net loss per share, basic and diluted $ - $(.01)
==== =====
Weighted average shares oustanding,
basic and diluted 22,188,016 22,188,641
========== ==========
</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>
SIX MONTHS
ENDED JUNE 30 AUGUST 3,
------------- 1991
(INCEPTION)
1997 1998 TO
---- ---- JUNE 30, 1998
-------------
<S> <C> <C> <C>
Revenues $ 2,200,477 $ 2,245,749 $ 11,700,647
----------- ----------- ------------
Expenses:
Research and development 1,675,866 2,205,558 15,464,309
General and administrative 897,111 639,871 9,237,929
--------- --------- ---------
Total expenses 2,572,977 2,845,429 24,702,238
--------- --------- ----------
Loss from operations (372,500) (599,680) (13,001,591)
Other income (expense):
Interest income 159,682 132,600 1,081,766
Interest expense (10,123) - (708,357)
----------- --------- -----------
Net loss $ (222,941) $ (467,080) $(12,628,182)
============ ============ ============
Net loss per share,
basic and diluted $(.01) $(.02)
====== ======
Weighted average shares
outstanding, basic and diluted 22,188,016 22,188,641
========== ==========
</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>
SIX MONTHS
ENDED JUNE 30 AUGUST 3, 1991
--------------------- (INCEPTION)
TO
1997 1998 JUNE 30, 1998
---- ---- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (222,941) $ (467,080) $(12,628,182)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization of
property and equipment, net of
amortization of deferred gain on
sale/leaseback and equipment 37,474 46,070 242,935
Amortization of deferred credits (26,904) (26,904) (368,864)
Expense recorded on issuance of
common stock and vesting of
options - - 531,134
Changes in operating assets
and liabilities:
Accounts and other receivables (161,424) 317,227 (395,679)
Prepaid expenses and deposits (88,234) 128,425 (28,250)
Accounts payable and accrued
expenses 4,488 (242,644) (143,879)
Deferred research and development 90,510 (841) 522,745
Due from affiliate - - 420,448
----------- ----------- -----------
Net cash used in operating activities (367,031) (245,747) (11,847,592)
----------- ----------- ------------
INVESTING ACTIVITIES
Purchase of property and equipment (35,424) (166,098) (672,276)
Decrease in restricted cash 300,000 - -
-------- ---------- ---------
Net cash provided by (used in) investing
activities 264,576 (166,098) (672,272)
--------- ---------- ---------
</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>
SIX MONTHS
ENDED JUNE 30 AUGUST 3, 1991
------------------------- (INCEPTION)
TO
1997 1998 JUNE 30, 1998
---- ---- -------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net proceeds from sales of common stock
and warrants and the exchange option $ - $ - $ 11,606,170
Net proceeds from exercise of
warrants and stock options - - 4,862,148
Proceeds from sale and leaseback
agreement - - 2,164,792
Principal repayments on sale and
leaseback agreement (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 (451,412) - 17,368,507
------------ -------------- ------------
Net increase (decrease) in cash and
cash equivalents (553,867) (411,845) 4,848,639
Cash and cash equivalents at
beginning of period 6,918,836 5,697,156 436,672
------------ -------------- ------------
Cash and cash equivalents at
end of period $ 6,364,969 $ 5,285,311 $ 5,285,311
============ ============== ============
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
============ ============== ============
Capitalized equipment $ - $ - $ 152,832
============ ============== ============
Deferred compensation $ - $ - $ 229,405
============ ============== ============
Interest paid $ 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 SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED)
1. GENERAL
Antex Biologics Inc. (the "Company") is a biopharmaceutical company
committed to improving health by developing new products to prevent and treat
infectious diseases and related disorders. With respect to its human bacterial
vaccine research and development, the Company currently has a strategic alliance
with SmithKline Beecham and technology license agreements with Pasteur Merieux
Connaught and the United States Navy.
The Consolidated Balance Sheet as of June 30, 1998, and the Consolidated
Statements of Operations for the three-month and six-month periods ended June
30, 1997 and 1998 and for the period August 3, 1991 (inception) to June 30,
1998, and the Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 1997 and 1998 and for the period August 3, 1991 (inception) to
June 30, 1998 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 subsidiaries at June 30, 1998, 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, 1997 included in the Company's Annual Report on
Form 10-KSB.
Certain reclassifications were made to the 1997 financial statements to
conform to the 1998 presentation.
The results of operations for the period ended June 30, 1998 are not
necessarily indicative of the operating results anticipated for the fiscal year
ending December 31, 1998.
Since inception, the Company's revenues have been generated solely in
support of its research and development activities and as of June 30, 1998, the
Company's research and products are not sufficiently developed to enable the
Company to generate sufficient revenues on an ongoing basis. As a result, the
Company is considered to be in the development stage.
8
<PAGE> 9
2. STRATEGIC ALLIANCE
Effective March 1996, the Company executed definitive agreements with
SmithKline Beecham Corporation and SmithKline Beecham Biologicals Manufacturing
s.a. ("SmithKline") 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; payments totalling
$2,400,000 and $2,600,000 to the Company to fund research and development for
the first and second years, respectively, with SmithKline having the option to
fund future years; an option granted to SmithKline, expiring October 1, 1998, to
acquire from the Company an additional equity interest 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 currently enabling SmithKline to acquire up to 5,761,978 shares of
the Company's common stock, under specified conditions, and only to the extent
that stipulated options and warrants previously granted 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 MCHV; and for SmithKline to reimburse the Company for expenses the
Company incurs for agreed upon production of vaccine material 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 actual 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 six months ended June 30, 1998, the Company
recognized revenue related to human bacterial vaccine research and development
and qualifying reimbursable expenses of $1,116,190 and $2,086,717, respectively.
For the three months and six months ended June 30, 1997, revenue of $775,642 and
$1,989,004, respectively, was recognized.
3. EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128 ("SFAS 128"), Earnings per Share. Basic earnings per share is computed
by dividing net income (loss) available to common shareholders by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed by dividing net income (loss) available to common
shareholders by the weighted average number of common shares outstanding after
giving effect to all dilutive potential common
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<PAGE> 10
shares that were outstanding during the period. The Company did not have any
dilutive potential common shares during the three-month and six-month periods
ended June 30, 1997 and 1998. Earnings per share for the three-month and
six-month periods ended June 30, 1997 did not require restatement to conform to
SFAS 128.
4. REVERSE STOCK SPLIT
On June 9, 1998, the stockholders approved resolutions authorizing the
Board of Directors, at its discretion, to effect by amendment of the Certificate
of Incorporation, prior to the next Annual Shareholders Meeting, a reverse stock
split in the range of one-for-four to one-for-ten. The following table presents
the pro-forma effect that a reverse stock split would have on loss per share for
the quarters and six-month periods ended June 30, 1997 and 1998:
<TABLE>
<CAPTION>
Prior to After
Reverse Stock Split Reverse Stock Split
------------------- -------------------
1 for 10 1 for 4
-------- -------
<S> <C> <C>
Net loss for the quarter ended
June 30, 1997 $36,684 $36,684
Net loss per share for the quarter ended
June 30, 1997 $-- $.02 $.01
Net loss for the quarter ended
June 30, 1998 $206,070 $206,070
Net loss per share for the quarter ended
June 30, 1998 $.01 $.09 $.04
Net loss for the six months ended
June 30, 1997 $222,941 $222,941
Net loss per share for the six months
ended June 30, 1997 $.01 $.10 $.04
Net loss for the six months ended
June 30, 1998 $467,080 $467,080
Net loss per share for the six months
ended June 30, 1998 $.02 $.21 $.08
</TABLE>
5. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS
130 requires additional reporting requirements with respect to certain changes
in assets and liabilities that previously were not to be reported as results of
operations for the period. For the three-month and six-month periods ended June
30, 1997 and 1998, the Company did not have any components of comprehensive
income.
10
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6. NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued two new standards.
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), Disclosures
about Segments of an Enterprise and Related Information, which became effective
for years beginning after December 15, 1997, requires financial and descriptive
information with respect to "operating segments" of an entity based on the way
management disaggregates the entity for making internal operating decisions. The
Company will begin making the disclosures required by SFAS 131 with financial
statements for the year ending December 31, 1998.
SFAS 133, Accounting for Derivative Instruments and Hedging Activities,
which becomes effective for years beginning after June 15, 1999, requires that
every derivative instrument be recorded in the balance sheet as either as asset
or liability measured at its fair value. The statement requires that changes in
the derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. The Company believes that the effect of adoption of
SFAS 133 will not be material.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company commenced operations in 1991.
In 1996, the Company executed definitive agreements with SmithKline
which established 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 related
disorders. The Company is operating as a development stage enterprise.
RESULTS OF OPERATIONS
Revenues for the second quarter of 1998 totalled $1,166,254 and include
the recognition of human bacterial vaccine research and development support of
$807,631 and reimbursable expenses incurred of $308,559 pursuant to the
strategic alliance with SmithKline. The Company also earned $50,064 from a Small
Business Innovation Research ("SBIR") grant. Revenues for the six months ended
June 30, 1998 totalled $2,245,749 and consisted of $1,587,641 of human bacterial
vaccine research and development support and reimbursable expenses incurred of
$499,076 in connection with the strategic alliance, and $159,032 from a SBIR
grant.
Revenues for the second quarter of 1997 totalled $903,629 and included
human bacterial vaccine research and development support of $630,556 and
reimbursable expenses
11
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incurred of $145,086 pursuant to the strategic alliance with SmithKline. The
Company also earned $127,987 from SBIR grants. Revenues for the six months ended
June 30, 1997 totalled $2,200,477 and consisted of human bacterial vaccine
research and development support of $1,237,240, reimbursable expenses incurred
of $751,764, and grant revenue of $211,473.
Research and development expenses increased $461,387, or 65.9%, to
$1,161,640 for the second quarter of 1998 in comparison to $700,253 for the
comparable period in 1997, and increased $529,692, or 31.6%, to $2,205,558 for
the six months ended June 30, 1998 in comparison to $1,675,866 for the six
months ended June 30, 1997. The increase for the six-month period is
attributable to increased expenditures, including the cost of additional
personnel, resulting directly from the increase in activities related to the
strategic alliance with SmithKline and to the field of therapeutics. The
increase in the second quarter of 1998 is due also to clinical trial costs
incurred that are reimbursable by SmithKline.
General and administrative expenses decreased $38,166, or 12.2%, to
$275,245 for the second quarter of 1998 in comparison to $313,411 for the
comparable period in 1997, and decreased $257,240, or 28.7%, to $639,871 for the
six months ended June 30, 1998 in comparison to $897,111 for the six months
ended June 30, 1997. The decreases are attributable primarily to the
nonrecurrence of the fees incurred in 1997 in connection with overseas patent
application filings.
The decreases in interest income in the second quarter and first six
months of 1998 in comparison to the comparable periods in 1997 reflect the
decrease in cash available for investing.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the Company's strategic alliance with SmithKline, the
Company received $2,600,000 of annual funding for research and development of
human bacterial vaccines in 1997. In addition, the Company is reimbursed by
SmithKline for expenses that it incurs in connection with the agreed upon
production of vaccine material 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 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 approximately $3,200,000 in 1998 in research and
development payments from SmithKline covering the period March 1, 1998 to
February 28, 1999, of which $1,586,800 had been received as of June 30, 1998.
Additionally, the costs incurred by the Company associated with the conduct of
an ongoing Phase I clinical trial for Helicobacter pylori and agreed upon
clinical trials for Campylobacter jejuni, the agreed upon production of vaccine
material, and the prosecution of the Company's patents and patent applications
are reimbursable by SmithKline. SmithKline's option to increase its ownership in
MCHV, at a cost of
12
<PAGE> 13
$1,000,000, expires on October 1, 1998. The Company is also scheduled to receive
a milestone payment from Pasteur Merieux Connaught of $500,000 in December 1998.
During 1998, MCHV continued 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
sufficient funding will be provided through the strategic alliance with
SmithKline. The Company is utilizing a portion of its available resources to
pursue other research and development activities in the field of therapeutics.
To 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 1998, the Company currently anticipates that it will increase its
total employees and contract personnel by approximately three from a 1997 year
end total of 30.
The Company currently is in discussions regarding an extension of its
facility lease and an expansion of its existing space. Financing for the
expansion and any related renovations would be provided by the landlord. It is
anticipated that funds required in excess of the amount provided by the landlord
will be obtained through equipment financing and/or by utilizing the current
assets of the Company.
In order to fully fund its future operations, 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; possible increases in
research and development funding by SmithKline; and the exercise by SmithKline
of its warrant to the extent that it becomes exercisable. Additional public
offerings and private placements, and the filing of additional applications for
SBIR 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, that the terms on which such funds can be obtained will be acceptable
to the Company.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued two new standards.
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), Disclosures
about Segments of an Enterprise and Related Information, which became effective
for years beginning after December 15, 1997, requires financial and descriptive
information with respect to "operating segments" of an entity based on the way
management disaggregates the entity for making internal operating decisions. The
Company will begin making the disclosures required by SFAS 131 with financial
statements for the year ending December 31, 1998.
SFAS 133, Accounting for Derivative Instruments and Hedging Activities,
which becomes effective for years beginning after June 15, 1999, requires that
every derivative instrument be recorded in the balance sheet as either as asset
or liability measured at its fair value. The statement requires that changes in
the derivative's fair value be recognized in earnings
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<PAGE> 14
unless specific hedge accounting criteria are met. The Company believes that the
effect of adoption of SFAS 133 will not be material.
YEAR 2000 DISCLOSURE
The Company has analyzed its computer systems and related applications
to assess the expected impact of the Year 2000 date recognition issue on these
systems and applications. Management does not anticipate that the costs
associated with the Year 2000 issue will have a material adverse affect on the
financial condition or results of operations of the Company.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 9, 1998, the Company held its Annual Meeting of Stockholders.
Three matters were voted on at the meeting:
1. Election to the Board of Directors of the Company's nominees:
Charles J. Coulter V. M. Esposito
------------------ --------------
For 18,480,412 18,541,909
Against 578,757 517,260
The directors not elected at the Annual Meeting whose tenure
continued after the Annual Meeting are:
Bruce E. Elmblad and Donald G. Stark
2. Approval of Amendment to Certificate of Incorporation
authorizing the Board of Directors to effect a reverse stock
split within a range of one-to-four to one-to-ten:
For 16,038,582
Against 2,923,687
Abstain 96,900
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3. Ratification of PricewaterhouseCoopers LLP as the Company's
Independent Accountants:
For 18,692,979
Against 304,490
Abstain 61,700
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
Exhibit
No. Description
- ------- -----------
10.4 Employment Agreement dated as of May 1, 1998 by and between the Company
and Gregory C. Zakarian
27.1 Financial Data Schedule
REPORTS ON FORM 8-K
None
15
<PAGE> 16
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: August 12, 1998 /s/V. M. Esposito
-------------------------------------
V. M. Esposito, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 12, 1998 /s/Gregory C. Zakarian
-------------------------------------
Gregory C. Zakarian, Vice President,
and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
16
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
ANTEX BIOLOGICS INC.
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of May 1, 1998 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 Gregory C. Zakarian, residing at 6633 Shalestone Court, Clifton,
Virginia 20124 (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 May 1, 1998 (the
"Commencement Date") and ending on April 30, 2001 (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 twelve (12) 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 and
Chief Financial Officer 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 and is
reasonable and acceptable to the Employee. 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.
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
17
<PAGE> 2
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 which approval shall not be unreasonably withheld. 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 Fifty Thousand
Dollars ($150,000) 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:
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;
<PAGE> 3
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 ninety (90) 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 twelve (12)
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) twelve (12) 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 twelve (12) 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 as a result
of a change of control 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.
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.
<PAGE> 4
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 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.
<PAGE> 5
(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 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,
<PAGE> 6
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 May 1, 1995 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.
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.
<PAGE> 7
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/Gregory C. Zakarian
-------------------------------------
Gregory C. Zakarian
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