<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1996 Commission File Number 26898
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
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:
Common Stock, $0.000429 par value 4,023,134
------------------------------------- -----------------------------------
(Title of class) (Number of shares outstanding)
Warrants to purchase shares of Common
Stock, $0.000429 par value 837,067
------------------------------------- -----------------------------------
(Title of class) (Number of shares outstanding)
<PAGE> 2
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART 1. Financial Information
ITEM 1. Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 7
Part II. Other Information 8
SIGNATURE PAGE 9
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $5,474,868 $ 671
---------- ----------
Equipment and Furniture:
Equipment............................................................... 22,526 18,745
Furniture............................................................... 10,587 10,587
Less accumulated depreciation........................................... (21,993) (20,548)
---------- ----------
Total equipment and furniture, net.................................. 11,120 8,784
Deferred offering costs................................................. --- 486,436
---------- ----------
Total assets........................................................ $5,485,988 $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..................................................... 284,692 325,277
Other................................................................. 23,603 106,788
Current portion of loan payable to principal
stockholder........................................................... --- 1,196,445
Line of credit with bank................................................ --- 2,007,652
---------- ----------
Total current liabilities........................................... 308,295 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;
4,023,134 and 2,637,004 shares issued and outstanding,
respectively.......................................................... 1,725 1,008
Additional paid-in capital.............................................. 5,578,090 108,491
Deficit accumulated during the development stage........................ (402,122) (4,470,891)
---------- ----------
Total stockholders' equity (deficit)................................ 5,177,693 (4,361,392)
---------- ----------
Total liabilities and stockholders'
equity (deficit).................................................. $5,485,988 $495,891
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
INCEPTION
(JUNE 15, 1990)
THROUGH
MARCH 31, MARCH 31, MARCH 31,
1996 1995 1996
--------- ----------- ---------------
<S> <C> <C> <C>
Revenue:
Interest income.................. $ 48,888 $ -- $ 48,888
Expenses:
Research and development......... 223,464 278,634 3,186,672
General and administrative....... 180,182 86,542 999,624
Interest expense ................ 47,364 79,911 735,605
---------- ----------- -----------
Total expenses .................. 451,010 445,087 4,921,901
---------- ----------- -----------
Net loss ........................ $ (402,122) $ (445,087) $(4,873,013)
========== =========== ===========
Net loss per share............... $ (0.12) $ (0.19)
========== ===========
Weighted average number of common
equivalent shares outstanding.... 3,465,422 2,346,891
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
INCEPTION
(JUNE 15, 1990)
MARCH 31, MARCH 31, THROUGH
1996 1995 MARCH 31, 1996
------------ ------------ --------------------
<S> <C> <C> <C>
Cash flows used in operating
activities:
Net loss............................ $ (402,122) $ (445,087) $(4,873,013)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization....... 1,445 2,001 32,792
Gain on disposal of equipment
and furniture..................... -- -- (408)
Services contributed (non-cash)
by related party ................. -- -- 101,042
Interest payable converted to stock
(non-cash)........................ 523,385 523,385
(Increase) decrease in other
assets.......................... 486,436 (135,247) (11,100)
(Decrease) increase in accounts
payable and accrued liabilities. (1,041,336) 172,961 308,296
---------- ----------- -----------
Net cash used in operating
activities................. (432,192) (405,372) (3,919,006)
---------- ----------- -----------
Cash flows used in investing
activities:
Purchase of equipment and
furniture......................... (3,781) (583) (34,215)
Proceeds from disposal of
equipment and furniture........... -- -- 810
---------- ----------- -----------
Net cash used in investing
activities.................. (3,781) (583) (33,405)
---------- ----------- -----------
Cash flows from financing
activities:
Proceeds from loan payable to
principal stockholder............. -- -- 1,500,000
Advance on line of credit........... 107,000 415,000 2,114,652
Reduction in line of credit......... (2,114,652) -- (2,114,652)
Proceeds from issuance of common
stock, net of deferred
offering costs.................... 7,917,822 8 7,926,279
---------- ----------- -----------
Net cash provided by
financing activities........ 5,910,170 415,008 9,426,279
---------- ----------- -----------
Net increase (decrease) in cash....... 5,474,197 9,053 5,474,868
Cash and cash equivalents, beginning
of period........................... 671 9,205 --
---------- ----------- -----------
Cash and cash equivalents, end of
period.............................. $ 5,474,868 $ 18,258 $ 5,474,868
=========== =========== ===========
Supplemental disclosure of cash paid
for:
Interest.............................. 84,585 16,384 212,222
Income taxes.......................... -- -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(unaudited)
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 March 31,
1996, the results of operations for the three months ended March 31, 1996 and
1995 and changes in cash flows for the three month periods ended March 31, 1996
and 1995.
On January 30, 1996 the Company completed a public offering of newly issued
1,350,000 shares of common stock and 675,000 warrants for proceeds of
approximately $8,435,000 net of expenses. On March 8, 1996 the Company issued
36,130 shares of common stock and 18,565 warrants related to the underwriter's
over-allotment option for proceeds of approximately $267,000, net of expenses.
The Company plans to use the proceeds for research and development, repayment
of bank debt, sales and marketing, working capital and general corporate
purposes (including payment of certain interest accrued on the Chairman's
loan).
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.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations - Three Months Ended March 31, 1996 vs. Three Months
Ended March 31, 1995
Revenue, consisting of interest income for the three months ended March 31,
1996 (the "Fiscal 1996 Period") was $48,888. Interest 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 March 31, 1995 (the "Fiscal 1995 Period"), as the Company
had no surplus cash balances.
Research and development expenses decreased by 20% or $55,170 for the
Fiscal 1996 Period compared to the Fiscal 1995 Period due to completion of the
Company's obligation to fund certain university-based supportive research
relating to the liposome development program.
General and administration expenses increased 108% or $93,640 for the Fiscal
1996 Period compared to the Fiscal 1995 Period primarily due to salaries paid
to employees and officers of the Company in 1996. Prior to completion of the
initial public offering, officers of the Company were not paid salaries.
Interest expense decreased by 41% or $32,547 for the Fiscal 1996 Period
compared to the Fiscal 1995 period, 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 Fiscal 1995
Period.
The net loss for the Fiscal 1996 Period decreased by 10% or $42,965 compared to
the Fiscal 1995 Period. 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 March 31, 1996, the Company's cash and cash equivalents were $5,474,868
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, future public and private
financings. 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 may 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.
7
<PAGE> 8
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 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
8
<PAGE> 9
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
Date: May 15, 1996
9
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000942788
<NAME> NEOPHARM, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,474,868
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,474,868
<PP&E> 33,113
<DEPRECIATION> 21,993
<TOTAL-ASSETS> 5,485,988
<CURRENT-LIABILITIES> 308,295
<BONDS> 0
0
0
<COMMON> 1,725
<OTHER-SE> 5,175,968
<TOTAL-LIABILITY-AND-EQUITY> 5,485,988
<SALES> 0
<TOTAL-REVENUES> 48,888
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 403,646
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,364
<INCOME-PRETAX> (402,122)
<INCOME-TAX> 0
<INCOME-CONTINUING> (402,122)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (402,122)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
</TABLE>
