FORM 10-QSB
UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
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 number 0-23280
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(exact name of small business issuer as specified in its charter)
Delaware 94-3049219
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
1387 Marina Way South
Richmond, California 94804
(Address of principal executive offices)
(510) 215-8000
(Registrant's telephone number, including area code)
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 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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of the common stock, as of the latest practical date.
Common Stock, $.001 Par Value -6,533,495- shares as of December 31, 1996
Transitional Small Business Disclosure format Yes [ ] No [X]
<PAGE>
INDEX
NEUROBIOLOGICAL TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Condensed Balance Sheets - - December 31, 1996 and June 30, 1996
Condensed Statements of Operations - - Three and six months ended
December 31, 1996 and 1995; Period from August 27, 1987 (inception)
through December 31, 1996
Condensed Statements of Cash Flows - - Six months ended December 31,
1996 and 1995; Period from August 27, 1987 (inception) through December
31, 1996
Notes to Condensed Financial Statements - - December 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
December 31, June 30,
1996 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,537,521 $ 4,602,815
Short-term investments 3,601,001 4,642,153
Prepaid expenses and other 171,401 337,422
------------ ------------
Total current assets 7,309,923 9,582,390
Long-term investments -- 1,515,490
Property and equipment, net 200,269 229,267
Patents and licenses, net 32,606 65,216
------------ ------------
$ 7,542,798 $ 11,392,363
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 535,044 $ 893,152
Stockholders' equity:
Common stock, $.001 par value, 25,000,000 shares
authorized, 6,533,495 outstanding at December 31,
1996 and 6,512,485 at June 30, 1996 6,533 6,512
Paid-in capital 29,339,152 29,296,034
Deficit accumulated during development stage (22,337,931) (18,803,335)
------------ ------------
Total stockholders' equity 7,007,754 10,499,211
------------ ------------
$ 7,542,798 $ 11,392,363
============ ============
<FN>
See accompanying notes
</FN>
</TABLE>
<PAGE>
<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Period from
August 27, 1987
Three months ended December 31, Six months ended December 31, (inception)
----------------------------------------------------------------- through
1996 1995 1996 1995 December 31, 1996
------------ ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
REVENUES
Interest income $ 113,379 $ 106,792 $ 251,785 $ 233,378 $ 1,876,648
Grant income -- -- -- -- 49,900
------------ ------------ ------------ ------------ ------------
Total revenue 113,379 106,792 251,785 233,378 1,926,548
EXPENSES
Research and development 1,318,118 930,158 2,749,960 1,754,982 17,535,191
General and administrative 595,944 331,605 1,036,421 605,642 6,729,288
------------ ------------ ------------ ------------ ------------
Total expenses 1,914,062 1,261,763 3,786,381 2,360,624 24,264,479
------------ ------------ ------------ ------------ ------------
NET LOSS $ (1,800,683) $ (1,154,971) $ (3,534,596) $ (2,127,246) $(22,337,931)
============ ============ ============ ============ ============
NET LOSS PER SHARE $ (0.28) $ (0.29) $ (0.54) $ (0.54)
============ ============ ============ ============
Shares used in net loss
per share calculation 6,524,820 3,951,467 6,520,152 3,949,800
============ ============ ============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six months ended Period from
December 31, August 27, 1987
---------------------------------- (inception) through
1996 1995 December 31, 1996
------------ ------------ ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (3,534,596) $ (2,127,246) $(22,337,931)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 65,750 59,775 410,989
Issuance of common stock and warrants
for license rights and services -- -- 99,275
Changes in assets and liabilities:
Prepaid expenses and other 166,021 (118,538) (171,401)
Accounts payable and accrued expenses (358,108) (132,217) 535,044
------------ ------------ ------------
Net cash used in
operating activities (3,660,933) (2,318,226) (21,464,024)
INVESTING ACTIVITIES:
Purchase of investments (978,643) (1,506,365) (33,355,598)
Sale of investments 3,535,285 3,991,361 29,754,597
Purchases of property and equipment (4,142) (39,209) (360,802)
Additions to patents and licenses -- -- (283,062)
------------ ------------ ------------
Net cash (used in) provided by
investing activities 2,552,500 2,445,787 (4,244,865)
FINANCING ACTIVITIES:
Proceeds of short-term borrowings -- -- 235,000
Issuance of common stock 43,139 24,783 22,019,328
Issuance of preferred stock -- -- 6,992,082
------------ ------------ ------------
Net cash provided by
financing activities 43,139 24,783 29,246,410
Increase (decrease) in cash and
cash equivalents (1,065,294) 152,344 3,537,521
Cash and equivalents at beginning of period 4,602,815 2,181,880 --
------------ ------------ ------------
Cash and equivalents at end of period $ 3,537,521 $ 2,334,224 $ 3,537,521
============ ============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
( A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
December 31, 1996
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three and six month periods ended
December 31, 1996 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1997. For further information, refer to the
financial statements and footnotes thereto included in the Company's Form 10-KSB
for the fiscal year ended June 30, 1996.
Net loss per share
Net loss per share is computed using the weighted average number of common stock
outstanding. Common equivalent shares from stock options and warrants are
excluded from the computation because their effect is anti-dilutive.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Neurobiological Technologies, Inc. ("NTI" or the "Company") is a
biopharmaceutical Company identifying and developing potential therapeutic
products based on advances in neuroscience research. NTI's strategy is to
in-license drug candidates that target major medical needs, have shown clear
evidence of preclinical efficacy and safety, and appear to have a clear path
through clinical testing and regulatory approval. NTI's experienced management
team then focuses on the drug development and clinical testing necessary to
bring its drug candidates to commercialization.
The Company is currently advancing three product candidates through
human clinical trials. NTI is developing Corticotropin-Releasing Factor ("CRF"),
a human peptide for reduction of edema in patients with brain tumors. The
Company was previously developing CRF for the treatment of the inflammation
associated with rheumatoid arthritis, but has discontinued development for this
indication at this time due to clinical trial results showing a lack of
significant effect. NTI is also developing Dynorphin A, a natural analgesic
peptide, for use with morphine in managing severe pain. NTI is also developing
Memantine, an orally available NMDA receptor antagonist, which has potential as
a neuroprotective agent. Memantine is initially being developed for treatment of
neuropathic pain and AIDS dementia. Significant additional preclinical testing
and clinical testing will be required prior to submission of any regulatory
application for the commercial use of these products. There can be no assurance
that future clinical trials will demonstrate an adequate level of safety or
efficacy for commercialization.
Since 1987 when the Company was founded, NTI has applied substantially
all of its resources to its research and development programs. The Company is a
development stage company, has not received any revenue from the sale of
products, and does not anticipate receiving revenue from the sale of products in
the near future. The Company has incurred losses since its inception and expects
to incur substantial, increasing losses over the next several years due to
ongoing and planned research and development efforts.
Results of Operations
The Company's research and development expenses increased to $1,318,000
in the second fiscal quarter ended December 31, 1996 from $930,000 in the same
quarter of the prior year. The increase was primarily due to higher clinical
trial expenses and supporting activities, including toxicology studies, as well
as an increase in research expenses associated with the Company's
neuroprotection research program during the second quarter of the current year,
as compared to the same quarter of the prior year.
<PAGE>
General and administrative expenses increased to $596,000 in the fiscal
quarter ended December 31, 1996 from $332,000 in the quarter ended December 31,
1995. The increase was primarily due to higher expenditures related to business
development activities during the quarter ended December 31, 1996 as compared to
the same quarter of the prior year. Investment income increased to $113,000 in
the quarter ended December 31, 1996 from $107,000 in the same quarter of the
prior year primarily due to changes in average cash balances.
The Company's research and development expenses increased to $2,750,000
in the six month period ended December 31, 1996 from $1,755,000 in the same
period of the prior year. The Company's general and administrative expenses
increased to $1,036,000 in the six month period ended December 31, 1996 from
$606,000 in the six month period ended December 31, 1995. Investment income
increased to $252,000 in the six month period ended December 31, 1996 from
$233,000 in the same period of the prior year. Income and expenses increased in
the six month period ended December 31, 1996 from the same period in the prior
year primarily for the same reasons as discussed above.
Liquidity and Capital Resources
The Company expects its cash requirements to vary in future periods
depending on numerous factors, including: the in-licensing of potential drug
candidates; the progress of development programs; the time and costs involved in
seeking to obtain regulatory approval, the ability of the Company to establish
collaborative arrangements; product commercialization activities; and the
acquisition of manufacturing or laboratory facilities. Since the Company uses
qualified third-party contractors to conduct preclinical studies and clinical
trials, the Company does not anticipate incurring significant capital
expenditures during fiscal 1997. Over the same period, the number of employees
of the Company is not expected to grow significantly from current levels.
From inception through December 31, 1996, the Company has raised a
total of $29.2 million in net proceeds from the sale of common and preferred
stock.
The Company believes that its available cash, cash equivalents and
investments of $7.1 million as of December 31, 1996 are adequate to fund its
operations through the quarterly period ending December 31, 1997. The Company
will need to raise substantial additional capital to fund subsequent operations.
The Company intends to seek such funding through public or private financings,
arrangements with corporate partners, or from other sources. The Company may
seek to raise additional funds whenever market conditions permit. However there
can be no assurance that funding will be available on favorable terms from any
of these sources, if at all. If such funding is unavailable, the Company will be
required to consider the license or sale of certain of its assets and
technology, delay or curtailment of its development programs, reductions in
workforce and other restructuring alternatives, including discontinuing
operations or liquidation.
<PAGE>
Note: Except for the historical information contained herein, the matters
discussed in this quarterly report are forward looking statements that involve
risks and uncertainties, including the Company's ability to raise capital to
fund operations, properly design, implement, and complete planned trials, meet
regulatory requirements, demonstrate safety and efficacy for its products,
manage third party contractors, and avoid infringement of third party
proprietary rights, as well as other risks detailed from time to time in the
Company's Securities and Exchange Commission filings. Actual results may differ
materially from those projected. These forward looking statements represent the
Company's judgment as of the date of this release. The Company disclaims,
however, any intent or obligation to update these forward looking statements.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 14, 1996, the Company held its Annual Meeting of Stockholders. The
following matters were voted on at the Annual Meeting of Stockholders.
(1) The following six directors were elected:
Votes For Withheld
--------- ---------
Jeffrey S. Price, Ph.D. 5,713,933 10,784
Abraham E. Cohen 5,710,167 14,550
Enoch Callaway, M.D. 5,707,433 17,284
Theodore L. Eliot, Jr. 5,702,767 21,950
Lawrence G. Mohr 5,710,767 13,950
John B. Stuppin 5,710,317 14,400
(2) The amendment and restatement of the Employee Stock Purchase Plan of
Neurobiological Technologies, Inc. was ratified: For 5,512,893; Against 83,050;
Abstain 23,421.
(3) The selection of Ernst & Young LLP as the independent auditors of the
Company for the current year was ratified: For 5,718,142; Against 2,475; Abstain
4,100.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports: The Company did not file any reports on Form 8-K during the three
months ended December 31, 1996.
Exhibit 27: Financial Data Schedule for the period ended December 31, 1996.
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.
NEUROBIOLOGICAL TECHNOLOGIES, INC.
Dated: February 11, 1996 /s/ Jeffrey S. Price
--------------------
Jeffrey S. Price, Ph.D.
President and Chief Executive Officer
Dated: February 11, 1996 /s/ Shawn K. Johnson
--------------------
Shawn K. Johnson
Director of Finance, Principal Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM
BALANCE SHEET AND INCOME STATEMENTS
DATED 12/31/96 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000918112
<NAME> PACIFIC FINANCIAL PRINTING
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,537,521
<SECURITIES> 3,601,001
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,309,923
<PP&E> 360,801
<DEPRECIATION> 160,532
<TOTAL-ASSETS> 7,542,798
<CURRENT-LIABILITIES> 535,044
<BONDS> 0
<COMMON> 29,345,685
0
0
<OTHER-SE> (22,337,931)
<TOTAL-LIABILITY-AND-EQUITY> 7,542,798
<SALES> 0
<TOTAL-REVENUES> 251,785
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,786,381
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,534,596)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,534,596)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,534,596)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> (0.54)
</TABLE>
