<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
- -----
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
- -----
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
COMMISSION FILE NO. 0-21972
_________________________________
INNOVIR LABORATORIES, INC.
(Exact name of Registrant as specified in its Charter)
_________________________________
DELAWARE 13-3536290
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
510 EAST 73RD STREET, NEW YORK, NEW YORK 10021
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 249-1100
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
The number of shares of Registrant's common stock outstanding on November
5, 1998 was 53,279,502.
_________________________________
<PAGE>
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
<S> <C>
Consolidated Balance Sheets at September 30, 1998 (unaudited)
and December 31, 1997.............................. 3
Consolidated Statements of Operations (unaudited) for the
three months and nine months ended September 30, 1998
and 1997, and for the period from January 6, 1995
(inception) through September 30, 1998............. 4
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) (unaudited) for the nine months ended September
30, 1998........................................... 5
Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 1998 and 1997, and for
the period from January 6, 1995 (inception) through
September 30, 1998................................. 6
Notes to Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 14
Item 6. Exhibits and Reports on Form 8-K............................ 14
SIGNATURES. ............................................................ 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1998 December 31,
(unaudited) 1997
-------------------- -------------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 1,037,000 $ 2,159,000
Prepaid expenses and other current assets 174,000 184,000
-------------------- -------------------
Total current assets 1,211,000 2,343,000
Fixed assets less accumulated depreciation and amortization 870,000 2,345,000
Goodwill, net -- 826,000
Other assets 229,000 220,000
-------------------- -------------------
Total assets $ 2,310,000 $ 5,734,000
==================== ===================
LIABILITIES:
Current liabilities:
Accounts payable and accrued expenses $ 852,000 $ 1,274,000
Capital lease current portion 243,000 382,000
Term note payable 129,000 130,000
-------------------- -------------------
Total current liabilities 1,224,000 1,786,000
Amount due to VIMRX Pharmaceuticals Inc. 156,000 838,000
Term note payable 66,000 96,000
Capital leases 140,000 289,000
-------------------- -------------------
Total liabilities 1,586,000 3,009,000
-------------------- -------------------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.06; 15,000,000 shares authorized
Class B Convertible Preferred Stock; 2,500,000 shares designated;
280,000 shares issued and outstanding at September 30, 1998 and
December 31, 1997 17,000 17,000
Common stock, par value $.013; 70,000,000 shares authorized;
53,279,502 shares issued and outstanding at September 30, 1998;
34,830,925 shares issued and outstanding at December 31, 1997 692,000 453,000
Additional paid-in capital 39,955,000 34,036,000
Cumulative translation adjustment 36,000 (40,000)
Deficit accumulated during the development stage (39,976,000) (31,741,000)
-------------------- -------------------
Total stockholders' equity 724,000 2,725,000
-------------------- -------------------
Total liabilities and stockholders' equity $ 2,310,000 $ 5,734,000
==================== ===================
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE>
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three and Nine months Ended September 30, 1998
<TABLE>
<CAPTION>
Period
January 6, 1995
Three months ended September 30, Nine months ended September 30, (Inception)
-------------------------------------- -------------------------------------- through
1998 1997 1998 1997 September 30, 1998
------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Research and development $ 1,073,000 $ 1,377,000 $ 4,447,000 $ 4,711,000 $ 14,227,000
Purchased in process research and
development -- -- -- -- 17,374,000
General and administrative 585,000 745,000 1,519,000 2,267,000 5,968,000
Closure of facilities and related
costs 1,930,000 -- 1,930,000 -- 1,930,000
Amortization of Goodwill 103,000 103,000 309,000 309,000 721,000
------------------ ------------------ ------------------ ------------------ ------------------
3,691,000 2,225,000 8,205,000 7,287,000 $ 40,220,000
------------------ ------------------ ------------------ ------------------ ------------------
Other (income) expenses:
Interest income (14,000) (22,000) (28,000) (153,000) (177,000)
Interest expense 13,000 37,000 85,000 122,000 239,000
Other-net (9,000) 7,000 (27,000) 22,000 (306,000)
------------------ ------------------ ------------------ ------------------ ------------------
(10,000) 22,000 30,000 (9,000) (244,000)
------------------ ------------------ ------------------ ------------------ ------------------
Net (loss) $ (3,681,000) $ (2,247,000) $ (8,235,000) $ (7,278,000) $ 39,976,000
================== ================== ================== ================== ==================
Loss-per-share data:
Basic loss per share $ (0.07) $ (0.08) $ (0.20) $ (0.34)
------------------ ------------------ ------------------ ------------------
Weighted average number of
common shares outstanding 51,189,478 28,055,938 41,663,444 21,374,889
================== ================== ================== ==================
Diluted loss per share $ (0.07) $ (0.08) $ (0.20) $ (0.34)
------------------ ------------------ ------------------ ------------------
Weighted average number of shares
of common stock and diluted
equivalent shares outstanding 51,189,478 28,055,938 41,663,444 21,374,889
================== ================== ================== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE>
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
For the Nine months Ended September 30, 1998
<TABLE>
<CAPTION>
Deficit
Convertible Class B Accumulated
Preferred Stock Common Stock Additional Cumulative During the
-------------------------------------------------- Paid-in Translation Development
Shares Amount Shares Amount Capital Adjustment Stage
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 280,000 $17,000 34,831,000 $453,000 $34,036,000 $(40,000) $(31,741,000)
Sale of common stock 18,448,000 239,000 5,919,000
Cumulative translation
adjustment 76,000
Net loss (8,235,000)
---------------------------------------------------------------------------------------------------
Balance at September 30, 1998 280,000 $17,000 53,279,000 $692,000 $39,955,000 $ 36,000 $(39,976,000)
===================================================================================================
TOTAL
--------------
<C>
Balance at December 31, 1997 $2,725,000
Sale of common stock 6,158,000
Cumulative translation
adjustment 76,000
Net loss (8,235,000)
--------------
Balance at September 30, 1998 $ 724,000
==============
</TABLE>
5
<PAGE>
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Period
January 6, 1995
Nine months ended (Inception)
September 30, Through
--------------------------------- September 30,
1998 1997 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ (8,235,000) $ (7,278,000) $ (39,976,000)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Depreciation 696,000 451,000 1,641,000
Amortization of goodwill 309,000 309,000 721,000
Purchased in process research and development -- -- 17,374,000
Amortization of unearned compensation -- 181,000 466,000
Closure of facilities and related cost 1,930,000 -- 1,930,000
Non-cash compensation -- 59,000 85,000
Changes in operating assets and liabilities:
Decrease (increase) in other current assets 19,000 140,000 (28,000)
Decrease in other assets (6,000) 6,000 (7,000)
Decrease in accounts payable and accrued expenses (1,037,000) (267,000) (494,000)
-------------- -------------- --------------
Net cash (used in) operating activities (6,324,000) (6,399,000) (18,288,000)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (32,000) (587,000) (1,350,000)
Cash acquired in acquisitions -- -- 3,532,000
-------------- -------------- --------------
Net cash provided by (used in) investing activities (32,000) (587,000) 2,182,000
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock 6,158,000 2,014,000 10,184,000
Advances and contributed capital from VIMRX Pharmaceuticals
Inc. (682,000) 670,000 7,556,000
Costs incurred in connection with issuance of equity
securities -- (24,000) (24,000)
Repayment of capital leases (253,000) (275,000) (643,000)
-------------- -------------- --------------
Net cash provided by financing activities 5,223,000 2,385,000 17,073,000
-------------- -------------- --------------
Effect of exchange rate changes on cash 11,000 (36,000) 70,000
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents (1,122,000) (4,637,000) 1,037,000
Cash and cash equivalents at beginning of period 2,159,000 6,412,000 --
-------------- -------------- --------------
Cash and cash equivalents at end of period $ 1,037,000 $ 1,775,000 $ 1,037,000
============== ============== ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 83,000 $ 122,000 $ 212,000
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements
6
<PAGE>
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The consolidated financial statements of Innovir Laboratories, Inc. and
Subsidiaries (the "Company") reflect all adjustments, consisting only of
normal recurring accruals, which are, in the opinion of the Company's
management, necessary for a fair presentation of the Company's results of
operations for the respective periods presented. Operating results for any
interim period are not necessarily indicative of results for a full year.
These notes do not include all the information required by generally
accepted accounting principles. The interim consolidated financial
statements should be read in conjunction with the audited financial
statements included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
(2) Contingencies: The Company may be considered to be in violation of the
terms of its office and laboratory sublease by not obtaining the required
approval from the owner of the property prior to the consummation of the
transactions with VIMRX whereby VIMRX acquired a majority holding in
Innovir Laboratories, Inc. ("Innovir") and Innovir acquired all of the
issued and outstanding shares of VIMRX Holdings, Ltd. ("VHL"), a wholly
owned subsidiary of VIMRX, in December 1996. In addition, the owner of the
property has alleged, and the Company's sublandlord disputes, that the
sublandlord may also be in breach of its lease with the owner of the
property. If the sublandlord is evicted, the Company would lose its right
to occupy its current space. While the Company believes these matters may
be resolved without a materially adverse effect on the Company's business
or financial position, no assurance can be given as to the ultimate
outcome.
The Company has been served with a complaint in the United States
Bankruptcy Court for the Southern District of New York by the Trustee for
the Liquidation of the Business of A.R. Baron & Co., Inc. The complaint
alleges that when the now defunct A.R. Baron repaid to Innovir a loan of
$400,000 in February 1996, that it constituted a preference and fraudulent
conveyance. The Trustee is seeking return of the funds, together with
interest thereon. Innovir intends to contest the allegations in the
complaint vigorously.
(3) The Company's common stock has been delisted from the NASDAQ SmallCap
Market as a result of failing to maintain a common stock closing price
greater than or equal to $1.00 per share. The common stock is now eligible
for trading on the NASDAQ OTC Bulletin Board.
7
<PAGE>
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
(4) Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". This
Statement requires that all items recognized under accounting standards as
components of comprehensive earnings be reported in an annual financial
statement that is displayed with the same prominence as other annual
financial statements. This Statement also requires that an entity classify
items of other comprehensive earnings by their nature in an annual
financial statement. For example, other comprehensive earnings may include
foreign currency translation adjustments, minimum pension liability
adjustments and unrealized gains and losses on marketable securities
classified as available-for-sale. Annual financial statements for prior
periods will be reclassified, as required. The Company's total
comprehensive earnings were as follows.
<TABLE>
<CAPTION>
Nine months Ended September 30,
----------------------------------------------------------
1998 1997
----------------------- -----------------------
<S> <C> <C>
Net Loss $8,235,000 $7,278,000
Foreign currency translation (76,000) (36,000)
----------------------- -----------------------
Comprehensive loss $8,159,000 $7,242,000
======================= =======================
</TABLE>
In 1997, the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share". Adoption of this Statement, which requires
restatement of previously reported amounts, had no impact on prior year loss
per share. Basic loss per share is calculated by dividing loss by the
weighted average number of common shares outstanding during the period. For
diluted loss per share, net loss is divided by the weighted average number
of common and potentially diluted shares outstanding during the period.
Potentially dilutive common shares consist of stock options and warrants
using the treasury stock method, but are excluded if their effect is
antidilutive.
(5) Closure of Facilities and Related Costs. The Company has begun closing
research and development operations (New York, Gottingen, Germany and
Cambridge, England) to reduce operating expenses. The Company's
headquarters and core technology will move to the offices of its' majority
owner, VIMRX Pharmaceuticals Inc. in Wilmington, Delaware.
The Company continues to seek partners, investors or purchasers for its
core oligozyme technology including the lead EGS, the FRS/GSFRS, the
RILON(TM) technology and related research technologies.
8
<PAGE>
The restructuring of the Company has caused related expenses to be
recorded, made up of severance costs, the write off of the remaining
goodwill and the write down of certain fixed assets held for sale.
As the closedown of the research and development facilities progresses,
other costs may be identified which will cause additional restructuring
expenses to be recorded.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
This report contains forward-looking statements which involve risks and
uncertainties. Such statements are subject to certain factors which may
cause the Company's plans to differ. Factors that may cause such
differences include, but are not limited to, the progress of the
Company's research and development programs, the Company's ability to
obtain additional funds, the Company's ability to compete successfully,
the Company's ability to attract and retain qualified personnel, the
Company's ability to successfully enter into collaborations with third
parties, the Company's ability to enter into and progress in clinical
trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in obtaining and enforcing patents and any necessary
licenses, the Company's ability to establish development and
commercialization relationships, the cost of manufacturing, and those
other risks discussed under the heading Risk Factors included in the
Company's Form 10-K Annual Report.
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto contained herein and the
Company's Annual Report on Form 10-K for the year ended December 31,
1997.
Background
On December 23, 1996, Innovir, VIMRX and certain stockholders of Innovir
("The Aries Funds") consummated a transaction (the "Transaction")
whereby VIMRX acquired 68% of the outstanding stock of Innovir and
Innovir acquired all of the issued and outstanding shares of VHL, a
wholly-owned subsidiary of VIMRX. Innovir's acquisition of VHL and
VIMRX's partial acquisition of Innovir have been accounted for as a
purchase in accordance with APB Opinion No. 16, Business Combinations
and Emerging Issues Task Force Issue No. 90-13, Accounting for
Simultaneous Common Control Mergers ("EITF No. 90-13"). The application
of APB No. 16 and EITF No. 90-13 requires that the Transaction be
accounted for as a reverse acquisition and accordingly, for accounting
purposes, (i) VHL is deemed to be the acquirer and surviving entity,
(ii) because Innovir is deemed to be the legal acquirer, VHL's historic
capital accounts have been retroactively restated (recapitalized) to
reflect Innovir's capital accounts and the equivalent number of shares
received by VIMRX in the Transaction, (iii) Innovir has fair valued its
assets and liabilities to the extent acquired by VIMRX (68%) and (iv)
the assets and liabilities of VHL are carried at VHL's historic cost.
Since VHL is deemed to be the surviving entity, the statement of
operations includes the operations of VHL for the period from January 6,
1995 (inception). The operations of Innovir are included only since the
date of acquisition, i.e., from December 23, 1996. For accounting
purposes, VHL assumed the name of Innovir Laboratories, Inc. and
Subsidiaries, and, for purposes of this Quarterly Report, all references
to the "Company" shall mean the consolidated entity consisting of
Innovir, VHL and subsidiaries.
10
<PAGE>
On February 11, 1997, Innovir elected to change its fiscal year end date
from September 30 to December 31 of each year, effective January 1,
1997. This change was made to conform Innovir's fiscal year end date
with that of VHL.
In May, 1998 the Company announced a strategic refocusing to conserve
limited capital resources. Since that strategic refocusing, the Company
has begun the process of closing its two European operations in
Gottingen, Germany and Cambridge, England. In October 1998, the Company
began closing its New York operations to further reduce operating
expenses.
RESULTS OF OPERATIONS
Since its inception, substantially all of the Company's resources have
been applied to research and development, patents and licensing and
other general and administrative matters. The Company has no
commercially viable therapeutic products and does not anticipate having
any for several years. The Company is developing technology to be used
as a research tool to facilitate determination of gene function and to
validate drug targets. The Company has had no operating revenues to date
and has sustained net losses since its inception. The Company expects
losses to continue for the foreseeable future. The Company is engaged in
a significant restructuring of the operations of the Company (see Note 5
to the Consolidated Financial Statements).
Three Month Period Ended September 30, 1998 vs. September 30, 1997
Research and development expenses decreased by $304,000 or 22%
principally due to decreased wages resulting from cutbacks in
operations.
General and administrative expenses decreased $160,000 or 21% due to a
decrease in insurance, salaries and amortization of options and warrant
expenses, offset by an increase in legal expenses related to patent
prosecution.
The one time charge for closure of facilities and related costs are
severance costs and the write-down of fixed assets and goodwill related
to the closure of research and development operations in the United
States and Europe.
The goodwill was recorded in the transaction with VIMRX described under
"Background" above. The remaining goodwill has been written off in
connection with the restructuring.
Interest income decreased $8,000 or 36% due principally to the decrease
in the average cash balance for the three month period ended September
30, 1998 as compared to the same period in 1997.
11
<PAGE>
Interest expense decreased due to the paydown of equipment leases.
Nine Month Period Ended September 30, 1998 vs. September 30, 1997
Research and development expenses decreased by $264,000 or 6% due to
recent cutbacks in research and development operations.
General and administrative expenses decreased by $748,000 or 33% due to
decreases in salaries, benefits, insurance, professional fees,
amortization of options and warrants and various other expenses as a
result of cost cutting measures.
Interest income decreased $125,000 or 82% due principally to the
decrease in the average cash balance for the comparable periods.
Interest expense decreased due to the paydown of equipment leases.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had cash and cash equivalents of
$1,037,000 as compared to $2,159,000 at December 31, 1997. The Company
had negative working capital of $13,000 at September 30, 1998 as
compared to working capital of $557,000 at December 31, 1997. The
decrease in cash and working capital positions resulted principally from
cash used in operations ($8,235,000), purchases of equipment ($32,000),
pay down of capital leases ($253,000) and paydown of advances and
contributed capital from VIMRX ($682,000) offset by sales of common
stock (approximately $6,158,000).
Pursuant to an agreement, dated December 31, 1997, between the Company
and VIMRX (the "VIMRX Agreement"), the Company sold to VIMRX an
aggregate of 19,555,480 shares of the Company's Common Stock for an
aggregate purchase price of $7,000,000. In addition, the Company issued
to VIMRX a warrant to purchase 1,000,000 shares of Common Stock at an
exercise price per share of $0.394. All obligations under the VIMRX
agreement have been fulfilled.
On June 30, 1998, Innovir sold 3,973,533 shares of Common Stock at the
closing market price for $1,158,947 of advances and payables to VIMRX.
On August 12, 1998, the Company's Class A and B warrants expired
according to the terms of the warrant agreements.
The Company plans to reduce expenditures to minimal amounts to maintain
the Company. As September 30, 1998, the Company had cash and cash
equivalents of
12
<PAGE>
approximately $1,037,000 which is expected to last until the end of the
year. The Company continues to explore strategic alternatives including
the sale of all or substantially all the stock or assets of the Company,
the sale, licensing or spinning off of certain of the Company's
technologies, the merger of the Company with another entity, or other
alternative restructuring. In addition, the Company is seeking to enter
into collaborative or other arrangements with corporate sources which
may provide sources of financing. There can be no assurance that any of
these strategic alternatives, collaborative or other arrangements, or
additional financing can be consummated obtained on terms reasonable to
the Company, if at all.
YEAR 2000 ISSUES
The Company will be relying on VIMRX's computer systems after
restructuring is completed at or around the end of 1998. The Company has
been advised by VIMRX that:
VIMRX is aware of and has addressed many of the "Year 2000" issues
associated with both information technology ("IT") and non-IT systems
which could cause problems and network failures should the systems fail
to recognize year designations after 1999.
VIMRX has reviewed its own computer, communication, software and
operating systems and is satisfied they are Year 2000 compliant.
Furthermore, VIMRX has taken proactive measures to ensure the systems
are Year 2000 compliant by upgrading all server and workstation
operating systems. All system servers and workstations' BIOS have been
reprogrammed and are Year 2000 compliant. (The BIOS is responsible for
starting the computer by providing a basic set of instructions. It
performs all the tasks which need to be done at start-up time).
VIMRX has upgraded all productivity, communication and accounting
software to meet Year 2000 compliance. VIMRX has tested the accounting
systems with the Year 2000 date and feels confident that they are
compliant.
VIMRX will plan system-wide testing in the first quarter of 1999. Any
system failures will be addressed at that time. VIMRX feels its Year
2000 risks are very minimal. VIMRX has spent approximately $710,000 to
upgrade its systems which brought the Company into year 2000 readiness.
Direct costs related to the review of year 2000 issues have been
immaterial.
VIMRX will continue to contact critical suppliers, collaborators,
partners and vendors to determine if their operations, as they relate to
VIMRX, are Year 2000 compliant.
Although VIMRX will take all practical measures to prevent problems
related with the Year 2000 programming problem, such problems and
failures may occur which could seriously affect VIMRX's progress.
Because of the unprecedented nature of such problems, the extent of the
effect on VIMRX's progress cannot be certain.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On July 2, 1998, an action was commenced against the Company in the United
States Bankruptcy Court for the Southern District of New York entitled James W.
Giddens, Trustee for the Liquidation of the Business of A.R. Baron & Co., Inc.
v. Innovir Laboratories, Inc. The complaint alleges that when the now defunct A.
R. Baron repaid to the Company a loan of $400,000 in February 1996, it
constituted a preference and fraudulent conveyance. The Trustee is seeking
return of the funds, together with interest thereon. In August 1998, the Company
answered the complaint. The Company intends to contest the allegations in the
complaint vigorously.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
---------
27 Financial Data Schedule.
(b) Reports on Form 8-K:
-------------------
During the quarter for which this report is filed, the Company filed a current
report on Form 8-K, dated October 14, 1998 as filed on October 21, 1998,
regarding the Company's decision to close its New York operations to further
reduce expenses; no financial statements were filed in connection with such
report.
All other Items of this report are inapplicable.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
November 13, 1998
Innovir Laboratories, Inc.
By: /s/ THOMAS R. SHARPE
----------------------------------------------------
Name: Thomas R. Sharpe, Ph.D.
Title: President and Chief Executive Officer
(Principal executive officer)
By: /s/ Francis M. O'Connell
----------------------------------------------------
Name: Francis M. O'Connell
Title: Chief Financial Officer
(Principal financial and accounting officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> $1,037,000 $1,775,000
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 174,000 1,837,000
<PP&E> 4,488,000 4,370,000
<DEPRECIATION> 3,618,000 1,729,000
<TOTAL-ASSETS> 2,310,000 5,649,000
<CURRENT-LIABILITIES> 1,224,000 1,579,000
<BONDS> 0 0
0 0
17,000 538,000
<COMMON> 692,000 235,000
<OTHER-SE> 15,000 2,970,000
<TOTAL-LIABILITY-AND-EQUITY> 2,310,000 6,022,000
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 8,205,000 7,156,000
<OTHER-EXPENSES> (55,000) 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 85,000 122,000
<INCOME-PRETAX> (8,235,000) (7,278,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,235,000) (7,278,000)
<EPS-PRIMARY> (0.20) (0.34)
<EPS-DILUTED> (0.20) (0.34)
</TABLE>
