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 March 31, 1997
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 outstanding as of March
31, 1997
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 - - March 31, 1997 and June 30, 1996
Condensed Statements of Operations - - Three and nine months ended March
31, 1997 and 1996; Period from August 27, 1987 (inception) through March
31, 1997
Condensed Statements of Cash Flows - - Nine months ended March 31, 1997
and 1996; Period from August 27, 1987 (inception) through March 31, 1997
Notes to Condensed Financial Statements - - March 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED BALANCE SHEETS
(Unaudited)
March 31, June 30,
1997 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,449,783 $ 4,602,815
Short-term investments 3,040,328 4,642,153
Prepaid expenses and other 255,103 337,422
------------ ------------
Total current assets 5,745,214 9,582,390
Long-term investments -- 1,515,490
Property and equipment, net 200,072 229,267
Patents and licenses, net 16,301 65,216
------------ ------------
$ 5,961,587 $ 11,392,363
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 670,222 $ 893,152
Stockholders' equity:
Common stock, $.001 par value,
25,000,000 shares
authorized, 6,533,495
outstanding at March 31, 1997
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 (24,054,320) (18,803,335)
------------ ------------
Total stockholders' equity 5,291,365 10,499,211
------------ ------------
$ 5,961,587 $ 11,392,363
============ ============
See accompanying notes.
<PAGE>
<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Period from
Three months ended Nine months ended August 27, 1987
March 31, March 31, (inception)
---------------------------- ---------------------------- through
1997 1996 1997 1996 March 31, 1997
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
REVENUES
Interest income $ 89,056 $ 116,072 $ 340,841 $ 349,450 $ 1,965,704
Grant income -- -- -- -- 49,900
------------ ------------ ------------ ------------ ------------
Total revenue 89,056 116,072 340,841 349,450 2,015,604
EXPENSES
Research and development 1,272,211 1,032,343 4,022,171 2,787,325 18,807,402
General and administrative 533,234 415,197 1,569,655 1,020,839 7,262,522
------------ ------------ ------------ ------------ ------------
Total expenses 1,805,445 1,447,540 5,591,826 3,808,164 26,069,924
------------ ------------ ------------ ------------ ------------
NET LOSS $ (1,716,389) $ (1,331,468) $ (5,250,985) $ (3,458,714) $(24,054,320)
============ ============ ============ ============ ============
NET LOSS PER SHARE $ (0.26) $ (0.24) $ (0.80) $ (0.77)
============ ============ ============ ============
Shares used in net loss
per share calculation 6,533,495 5,536,333 6,524,600 4,478,644
============ ============ ============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine months ended Period from
March 31, August 27, 1987
---------------------------- (inception) through
1997 1996 March 31, 1997
---- ---- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (5,250,985) $ (3,458,714) $(24,054,320)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 99,701 90,986 444,940
Issuance of common stock and warrants
for license rights and services -- -- 99,275
Changes in assets and liabilities:
Prepaid expenses and other 82,319 (241,169) (255,103)
Accounts payable and accrued expenses (222,930) (17,084) 670,222
------------ ------------ ------------
Net cash used by operating activities (5,291,895) (3,625,981) (23,094,986)
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchase of investments (1,441,150) (10,741,851) (33,818,105)
Sale of investments 4,558,465 8,082,248 30,777,777
Purchases of property and equipment (21,591) (66,625) (378,251)
Additions to patents and licenses -- -- (283,062)
------------ ------------ ------------
Net cash (used in) provided by
investing activities 3,095,724 (2,726,228) (3,701,641)
FINANCING ACTIVITIES:
Proceeds of short-term borrowings -- -- 235,000
Issuance of common stock 43,139 7,168,061 22,019,328
Issuance of preferred stock -- -- 6,992,082
------------ ------------ ------------
Net cash provided by financing activities 43,139 7,168,061 29,246,410
Increase (decrease) in cash and
cash equivalents (2,153,032) 815,852 2,449,783
Cash and equivalents at beginning of period 4,602,815 2,181,880 --
------------ ------------ ------------
Cash and equivalents at end of period $ 2,449,783 $ 2,997,732 $ 2,449,783
============ ============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1997
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 nine month periods ended
March 31, 1997 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 antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. The Company does
not expect this change to have an impact on the earnings per share.
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 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.
<PAGE>
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 cerebral edema, which is being evaluated in
patients with brain tumors. NTI has licensed Dynorphin A, a natural analgesic
peptide which is being evaluated 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 a majority 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 due to ongoing and planned research and
development efforts.
RESULTS OF OPERATIONS
The Company's research and development expenses increased to
approximately $1,272,000 in the three months ended March 31, 1997 from
approximately $1,032,000 in the same period 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 third
quarter of the current year as compared to the same period of the prior year.
General and administrative expenses increased to approximately $533,000 in the
three months ended March 31, 1997 from $415,000 in the three months ended March
31, 1996. The increase was primarily due to higher expenditures related to
business development activities in the three months ended March 31, 1997 as
compared to the same period of the prior year. Investment income decreased to
$89,000 in the three months ended March 31, 1997 from $116,000 in the same
period of the prior year primarily due to changes in average cash balances.
The Company's research and development expenses increased to $4,022,000 in the
nine month period ended March 31, 1997 from $2,787,000 in the same period of the
prior year. The Company's general and administrative expenses increased to
$1,570,000 in the nine month period ended March 31, 1997 from $1,021,000 in the
nine month period ended March 31, 1996. Investment income decreased to $341,000
in the nine month period ended March 31, 1997 from $349,000 in the same period
of the prior year. Income and expense changes in the nine month period ended
March 31, 1997 from the same period of the prior year were primarily for the
same reasons as discussed above.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company expects its cash requirements to increase significantly in
future periods. Future cash requirements will depend on numerous factors,
including: the in-licensing of potential drug candidates; the progress on
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 March 31, 1997, 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 $5.5 million as of March 31, 1997 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.
SUBSEQUENT EVENT
On May 8, 1997, the Board of Directors of NTI elected Paul E. Freiman as chief
executive officer and president of the Company. Dr. Jeffrey S. Price, who has
resigned from the positions of CEO and president, remains with the Company as
executive vice-president.
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 ability to raise capital, properly
design, implement, and complete planned trials, meet regulatory requirements,
demonstrate safety and efficacy for its product candidates, 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 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27: Financial Data Schedule for the period ended March 31, 1997.
Reports: The Company did not file any reports on Form 8-K during the three
months ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and 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: May 9, 1997 /s/ Jeffrey S. Price
--------------------
Jeffrey S. Price, Ph.D.
Executive Vice-President
Dated: May 9, 1997 /s/ Shawn K. Johnson
--------------------
Shawn K. Johnson
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM
BALANCE SHEET AND INCOME STATEMENTS
DATED 3/31/97 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 2,449,783
<SECURITIES> 3,040,328
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,745,214
<PP&E> 378,251
<DEPRECIATION> 178,179
<TOTAL-ASSETS> 5,961,587
<CURRENT-LIABILITIES> 670,222
<BONDS> 0
<COMMON> 29,345,685
0
0
<OTHER-SE> (24,054,320)
<TOTAL-LIABILITY-AND-EQUITY> 5,961,587
<SALES> 0
<TOTAL-REVENUES> 340,841
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,591,826
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,250,985)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,250,985)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,250,985)
<EPS-PRIMARY> (0.80)
<EPS-DILUTED> (0.80)
</TABLE>
