<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR QUARTER ENDED JUNE 30, 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 33-90516
--------
NEOPHARM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 51-0327886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
225 East Deerpath
Suite 250
Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
(847) 295-8678
(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
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 .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report:
Title of each class Number of shares outstanding
- -------------------------------------------------- ----------------------------
Common Stock ($.000429 par value) 4,032,634
Warrants to purchase shares of Common Stock
($.000429 par value) 837,067
<PAGE> 2
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
Page Number
PART I. Financial Information
ITEM 1. Financial Statements
Balance Sheets 3
Statement of Operations 4
Statement of Cash Flows 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. Other Information 8
SIGNATURE PAGE 9
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.............................. $5,197,639 $ 671
Equipment and Furniture:
Equipment.............................................. 23,515 18,745
Furniture.............................................. 12,989 10,587
Less accumulated depreciation.......................... (22,493) (20,548)
---------- ----------
Total equipment and furniture, net................. 14,011 8,784
---------- ----------
Deferred offering costs................................. -- 486,436
---------- ----------
Total assets....................................... $5,211,650 $ 495,891
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities:
Interest payable to principal stockholder............. $ -- $ 545,379
Obligations under research agreements................. -- 34,447
Due to related parties................................ -- 337,740
Professional fees..................................... 264,950 325,277
Other................................................. 14,833 106,788
Current portion of loan payable to principal
stockholder.......................................... -- 1,196,445
Line of credit with bank............................... -- 2,007,652
---------- ----------
Total current liabilities.......................... 279,783 4,553,728
---------- ----------
Long-term obligations:
Loan payable to principal stockholder, net of
current portion........................................ -- 303,555
---------- ----------
Stockholders' equity (deficit):
Common stock, $.000429 par value;
15,000,000 shares authorized 4,032,634 and 2,350,000
shares issued and outstanding, respectively........... 1,730 1,008
Additional paid-in capital............................. 5,623,879 108,491
Deficit accumulated during the development stage....... (693,742) (4,470,891)
---------- ----------
Total stockholders' equity (deficit)............... 4,931,867 (4,361,392)
---------- ----------
Total liabilities and stockholders'
equity (deficit).................................. $5,211,650 $ 495,891
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 4
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
INCEPTION
THREE MONTHS ENDED SIX MONTHS ENDED (JUNE 15, 1990)
JUNE 30, JUNE 30, THROUGH JUNE 30,
1996 1995 1996 1995 1996
---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Interest Income....... $ 63,813 $ -- $ 112,701 $ -- $ 112,701
Expenses:
Research and
development......... 164,215 188,126 387,679 466,760 3,350,887
General and
administration...... 191,218 53,478 371,400 140,020 1,190,842
Interest expense..... -- 84,793 47,364 164,704 735,605
---------- ---------- ---------- ---------- -----------
Total expenses... 355,433 326,397 806,443 771,484 5,277,334
---------- ---------- ---------- ---------- -----------
Net loss.............. $ (291,620) $ (326,397) $ (693,742) $ (771,484) $(5,164,633)
========== ========== ========== ========== ===========
Net loss per share.... $ (0.07) $ (0.14) $ (0.19) $ (0.33)
========== ========== ========== ==========
Weighted average
number of common
equivalent shares
outstanding........... 4,025,134 2,350,000 3,745,279 2,348,446
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
INCEPTION
(JUNE 15, 1990)
JUNE 30, JUNE 30, THROUGH
1996 1995 JUNE 30, 1996
----------- --------- ---------------
<S> <C> <C> <C>
Cash flows used in operating
activities:
Net loss................................ $ (693,742) $(771,484) $(5,164,633)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization.......... 1,945 4,001 34,292
Gain on disposal of equipment
and furniture......................... -- -- (408)
Services contributed (non-cash)
by related party (Note 7)............. -- -- 101,042
Interest converted to stock 523,385 -- 523,385
Changes in assets and liabilities:
(Increase) decrease in other
assets................................. 486,436 (179,883) (11,100)
(Decrease) Increase in accounts
payable and accrued liabilities........ (1,069,848) 215,360 279,783
----------- --------- -----------
Net cash used in operating
activities......................... (751,824) (732,006) (4,237,639)
----------- --------- -----------
Cash flows used in investing
activities:
Purchase of equipment and
furniture.............................. (7,172) (583) (37,605)
Proceeds from disposal of
equipment and furniture................ -- -- 810
----------- --------- -----------
Net cash used in investing
activities......................... (7,172) (583) (36,795)
----------- --------- -----------
Cash flows from financing
activities:
Proceeds from loan payable to
principal stockholder.................. -- -- 1,500,000
Advance on line of credit............... 107,000 725,000 2,114,652
Reduction in line of credit (2,114,652) -- (2,114,652)
Proceeds from issuance of common
stock.................................. 7,963,616 8 7,972,073
----------- --------- -----------
Net cash provided by
financing activities............... 5,955,964 725,008 9,472,073
----------- --------- -----------
Net increase (decrease) in cash.......... 5,196,968 (7,581) 5,197,639
Cash, beginning of period................ 671 9,205 --
----------- --------- -----------
Cash, end of period...................... $ 5,197,639 $ 1,624 $ 5,197,639
=========== ========= ===========
Supplemental disclosure of cash paid
for:
Interest................................. 84,585 42,076 212,222
Income taxes............................. -- -- --
=========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1
The financial information herein is unaudited, other than the Balance Sheet at
December 31, 1995, which is derived from the audited financial statements.
In the opinion of the Company, the accompanying unaudited interim financial
statements contain all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Company's financial position as of June 30,
1996, the results of operations for the three and six months ended June 30,
1996 and 1995 and changes in cash flows for the six month periods ended June
30, 1996 and 1995.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these financial statements
be read in conjunction with the financial statements and notes included in the
Company's 1995 annual report on Form 10-K filed with the Securities and
Exchange Commission.
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations - Six Months Ended June 30, 1996 vs. Six Months Ended
June 30, 1995
Revenue, consisting of interest and dividend income for the six months ended
June 30, 1996 was $112,701. Interest and dividend income was earned on the
investment of the net proceeds from the Company's initial public offering of
common stock, completed January 30, 1996. No revenue was recorded for the six
months ended June 30, 1995, as the Company had no surplus cash balances.
Research and development expenses decreased by 17% or $79,081 for the six month
period ended June 30, 1996 compared to the six month period ended June 30,
1995. The decrease is due to the completion of the Company's obligation to
fund certain university supportive research relating to the liposome
development program.
General and administration expenses increased 165% or $231,380 for the six
month period ended June 30, 1996 compared to the six month period ended June
30, 1995, primarily due to salaries paid to employees and officers of the
Company in 1996. Prior to the completion of the initial public offering,
officers of the Company were not paid salaries.
Interest expense decreased by 71% or 117,340 for the six month period ended
June 30, 1996 compared to the six month period ended June 30, 1995 as proceeds
from the initial public offering were used to repay principal and interest due
on the Company's outstanding line-of-credit. In addition, a loan by the
Chairman of the Company was converted into common stock at the initial public
offering price. Both the line-of-credit and loan from the Chairman were
outstanding in the six month period ended June 30, 1995.
The net loss for the six month period ended June 30, 1996 decreased by 10% or
$77,742 compared to the six month period ended June, 30, 1995. The Company
expects losses to continue as planned product development continues.
Results of Operations - Three Months Ended June 30, 1996 vs. Three Months Ended
June 30, 1995
Revenue, consisting of interest and dividend income for the three months ended
June 30, 1996 was $63,813. Interest and dividend income was earned on the
investment of the net proceeds from the Company's initial public offering of
common stock, completed January 30, 1996. No revenue was recorded for the
three months ended June 30, 1995, as the Company had no surplus cash balances.
Research and development expenses decreased by 13% or $23,911 for the three
month period ended June 30, 1996 compared to the three month period ended June
30, 1995. The decrease is due to the completion of the Company's obligation to
fund certain university supportive research relating to the liposome
development program.
General and administration expenses increased 258% or $137,740 for the three
month period ended June 30, 1996 compared to the three month period ended June
30, 1995, primarily due to salaries paid to employees and officers of the
Company in 1996. Prior to the completion of the initial public offering,
officers of the Company were not paid salaries.
Interest expense decreased by 100% or 84,793 for the three month period ended
June 30, 1996 compared to the three month period ended June 30, 1995 as
proceeds from the initial public offering were used to repay principal and
interest due on the Company's outstanding line-of-credit. In addition, a loan
by the Chairman of the Company was converted into common stock at the initial
public offering price. Both the line-of-credit and loan from the Chairman were
outstanding in the three month period ended June 30, 1995.
<PAGE> 8
The net loss for the three month period ended June 30, 1996 decreased by 11% or
$34,777 compared to the three month period ended June, 30, 1995. The Company
expects losses to continue as planned product development continues.
Liquidity and Capital Resources
Cash expenditures have exceeded revenues since the Company's inception.
Operations have principally been funded through a loan from the Company's
Chairman, a bank line-of-credit and since January 1996, the initial public
offering of common stock. The Company expects to incur additional expenses,
resulting in potentially significant losses, as it continues and expands its
research and development activities and undertakes additional clinical trials
of compounds obtained under proprietary licenses. The Company also expects to
incur substantial administrative and commercialization expenditures in the
future as it seeks FDA approval of drugs under development and initiates
marketing activities.
At June 30, 1996, the Company's cash and cash equivalents were $5,197,639
compared to $671 at December 31, 1995. This increase was a direct result of
completing the initial public offering of common stock in January, which
generated approximately $7.9 million, net of underwriter's discounts and
related offering costs. After closing the initial public offering, the Company
paid accrued consulting fees, legal and accounting costs related to the public
offering, and as was previously mentioned, repaid the outstanding
line-of-credit.
The Company plans to finance its needs principally from its existing capital
resources and interest thereon, and to the extent available, through
collaborative agreements with corporate partners and future public and private
financing. The Company's long-term capital requirements and the adequacy of
its available funds will depend upon many factors, including results of
research and development, results of product testing, relationships with
potential partnerships and collaborations, and the FDA regulatory process.
Additional funding may not be available when needed or on terms acceptable to
the Company. Insufficient funds my require the Company to delay, scale-back or
eliminate certain of its research and development programs or to license third
parties to commercialize products or technologies that the Company would
otherwise undertake itself.
<PAGE> 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote
of Security-Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits None
(b) Reports on Form 8-K None
<PAGE> 10
SIGNATURE PAGE
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.
NEOPHARM, INC.
By: /s/ David E. Riggs
---------------------------------
David E. Riggs,,
Chief Financial Officer
and authorized officer
Date: August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000942788
<NAME> NEOPHARM, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,197,639
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,197,639
<PP&E> 36,504
<DEPRECIATION> 22,493
<TOTAL-ASSETS> 5,211,650
<CURRENT-LIABILITIES> 279,783
<BONDS> 0
0
0
<COMMON> 1,730
<OTHER-SE> 4,930,137
<TOTAL-LIABILITY-AND-EQUITY> 5,211,650
<SALES> 0
<TOTAL-REVENUES> 63,813
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 355,433
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (291,620)
<INCOME-TAX> 0
<INCOME-CONTINUING> (291,620)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (291,620)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> 0
</TABLE>
