U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to _______________
Commission file number 0-26534
-------
VION PHARMACEUTICALS, INC.
--------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3671221
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4 Science Park, New Haven, CT 06511
-----------------------------------
(Address of Principal Executive Offices)
(203) 498-4210
--------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 outstanding of the issuer's sole class of common
equity, as of June 30, 1999 is: 15,567,243 shares of common stock, $.01 par
value.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
BALANCE SHEET
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
--------------- ---------------
June 30, December 31,
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (includes $14,848 restricted - 1999) $ 4,505,895 $ 3,821,234
Short-term investments (includes $1,129,886 restricted) - 2,594,497
Accounts receivable 1,309,541 1,251,618
Other current assets 64,503 107,198
--------------- ---------------
Total current assets 5,879,939 7,774,547
Property and equipment, net 829,982 1,026,184
Security deposits 58,566 51,347
Research contract prepayments 416,945 416,945
--------------- ---------------
Total assets $ 7,185,432 $ 9,269,023
--------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Obligation under capital leases - current 235,795 291,668
Accounts payable and accrued expenses 2,642,285 2,437,682
--------------- ---------------
Total current liabilities 2,878,080 2,729,350
Obligation under capital leases - long term 83,230 180,960
--------------- ---------------
Total Liabilities $ 2,961,310 $ 2,910,310
Redeemable Preferred Stock:
5% convertible preferred stock Series 1998, $0.01 par value, authorized:
15,000 shares; issued and outstanding: 5,000 shares 5,012,709 4,854,505
(redemption value $5,250,000 in 1999 and $5,125,000 in 1998)
Shareholders' equity
Preferred stock, $0.01 par value - 5,000,000 shares authorized consisting of:
Class A convertible preferred stock, $0.01 par value, authorized:
3,500,000 shares; issued and outstanding:493,902 in 1999 and 616,656 in 1998
(liquidation preference $4,939,020 in 1999; $6,167,000 in 1998) 4,940 6,167
Common stock, $0.01 par value, authorized: 35,000,000 shares;
issued: 15,577,022 in 1999 and 13,953,046 in 1998 155,770 139,530
Additional paid-in-capital 56,195,006 52,024,648
Deferred compensation (20,180) (37,496)
Accumulated deficit (57,074,617) (50,628,641)
Treasury Stock (9,779 shares at cost in 1999) (49,506) -
--------------- ---------------
(788,587) 1,504,208
--------------- ---------------
Total liabilities and shareholders' equity $ 7,185,432 $ 9,269,023
=============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
Page 2
<PAGE>
STATEMENT OF OPERATIONS
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
For The Period
From May 1, 1994
Three Months Ended Six Months Ended (Inception) through
June 30, June 30, June 30, June 30, June 30,
------------------------------- -------------------------------------------------
1999 1998 1999 1998 1999
(Unaudited) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Contract research grants $ 102,230 $ 109,199 $ 164,176 $ 109,199 $ 572,963
Research support 855,570 147,599 1,115,038 422,441 3,985,152
Technology license revenues - - 50,000 - 4,050,000
------------- ------------- ------------- ------------- -------------
Total revenues 957,800 256,798 1,329,214 531,640 8,608,115
Operating expenses:
Research and development 3,976,273 2,097,510 6,324,074 4,371,032 33,817,250
General and administrative 695,729 459,067 1,200,330 1,090,776 10,241,156
Nonrecurring collaboration
restructuring fee - - - - 600,000
Purchased research and development - - - - 4,481,405
Amortization of finance charges - - - - 345,439
Interest Income (66,989) (106,191) (127,355) (249,065) (1,533,543)
Interest Expense 9,166 15,712 20,773 34,417 181,439
------------- ------------- ------------- ------------- -------------
Net Loss $(3,656,379) $(2,209,300) $(6,088,608) $(4,715,520) $(39,525,031)
------------- ------------- ------------- ------------- -------------
Preferred Dividends and Accretion $ (276,495) $(2,045,322) $ (357,368) $(2,675,786) $(17,530,562)
------------- ------------- ------------- ------------- -------------
Loss applicable to Common Shareholders $(3,932,874) $(4,254,622) $(6,445,976) $(7,391,306) $(57,055,593)
------------- ------------- ------------- -------------- -------------
Basic and diluted loss applicable to
common shareholders per share $ (0.26) $ (0.40) $ (0.44) $ (0.72)
------------- ------------- ------------- ------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
Page 3
<PAGE>
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Vion Pharmaceuticals, Inc.
( A Development Stage Company) Class A Class B
Convertible Convertible
Preferred Stock Preferred Stock Common Stock
----------------- --------------- -----------------
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 1,107,028 $11,070 0 $0 8,017,961 $80,178
- -----------------------------------------------------------------------------------------------------
Conversion of Class A convertible
preferred stock (396,988) (3,970) 1,102,757 11,028
Class A convertible preferred
stock dividend 47,592 476
Issuance of Class B convertible
preferred stock 4,850 49
Conversion of Class B convertible
preferred stock (258) (3) 64,642 647
Accretion of dividend payable on
Class B convertible preferred
stock
Extension/reissuance of underwriter
warrants
Exercise of warrants 238 3
Issuance of common stock 598,336 5,983
Exercise of stock options 50,000 500
Compensation associated with stock
option grants
Amortization of deferred compensation
Net loss
- -----------------------------------------------------------------------------------------------------
Balance at December 31, 1997 757,632 $7,576 4,592 $46 9,833,934 $98,339
- -----------------------------------------------------------------------------------------------------
Conversion of Class B convertible
preferred stock (4,592) (46) 1,205,178 12,052
Accretion of dividend payable on
Class B convertible preferred
stock
Premium on Conversion dividend on
Class B convertible preferred
stock 585,898 5,859
Conversion of Class A convertible
preferred stock (174,981) (1,749) 486,062 4,860
Class A convertible preferred
stock dividend 34,005 340
Discount on Series 1998 convertible
preferred stock
Series 1998 convertible preferred
stock accretion
Common stock issued in exchange
for cancellation of outstanding
warrants 1,792,952 17,929
Exercise of stock options 32,750 328
Exercise of warrants 16,272 163
Compensation associated with stock
option grants
Amortization of deferred compensation
Net loss
- -----------------------------------------------------------------------------------------------------
Balance at December 31, 1998 616,656 $6,167 0 $0 13,953,046 $139,530
- -----------------------------------------------------------------------------------------------------
Conversion of Class A convertible
preferred stock (136,744) (1,367) 379,851 3,799
Class A convertible preferred
stock dividend 13,990 140
Series 1998 convertible preferred
stock accretion
Common stock issued in exchange
for cancellation of outstanding
warrants 102 1
Exercise of stock options 323,812 3,238
Exercise of warrants 26,296 263
Issuance of common stock 893,915 8,939
Amortization of deferred compensation
Net loss
- -----------------------------------------------------------------------------------------------------
Balance at June 30, 1999 493,902 $4,940 0 $0 15,577,022 $155,770
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CONT.)
<TABLE>
<CAPTION>
Vion Pharmaceuticals, Inc.
( A Development Stage Company)
Additional Total
Paid-in Deferred Accumulated Treasury Stockholders'
Capital Compensation Deficit Stock Equity
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $38,349,072 ($106,760) ($29,261,588) $0 9,071,972
- ------------------------------------------------------------------------------------------------------------------
Conversion of Class A convertible
preferred stock (7,058) (0)
Class A convertible preferred
stock dividend 623,038 (623,514) 0
Issuance of Class B convertible
preferred stock 4,851,662 (369,861) 4,481,850
Conversion of Class B convertible
preferred stock (644) 0
Accretion of dividend payable on
Class B convertible preferred
stock 138,365 (138,365) 0
Extension/reissuance of underwriter
warrants 168,249 168,249
Exercise of warrants (6) (3)
Issuance of common stock 3,463,818 3,469,801
Exercise of stock options 19,500 20,000
Compensation associated with stock
option grants 55,643 55,643
Amortization of deferred compensation 34,632 34,632
Net loss (5,343,594) (5,343,594)
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $47,661,639 ($72,128) ($35,736,922) $0 11,958,550
- ------------------------------------------------------------------------------------------------------------------
Conversion of Class B convertible
preferred stock (12,006) 0
Accretion of dividend payable on
Class B convertible preferred
stock 286,776 (286,776) 0
Premium on Conversion dividend on
Class B convertible preferred
stock 2,043,532 (2,049,391) 0
Conversion of Class A convertible
preferred stock (3,111) 0
Class A convertible preferred
stock dividend 329,206 (329,546) 0
Discount on Series 1998 convertible
preferred stock 1,597,218 (1,597,218) 0
Series 1998 convertible preferred
stock accretion 0 (151,119) (151,119)
Common stock issued in exchange
for cancellation of outstanding
warrants 8,441,442
(8,502,064) (42,693)
Exercise of stock options 119,854 120,182
Exercise of warrants 10,910 11,073
Compensation associated with stock
option grants 51,252 51,252
Amortization of deferred compensation 34,632 34,632
Net loss (10,477,669) (10,477,669)
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 $52,024,648 ($37,496) ($50,628,641) $0 1,504,208
- ------------------------------------------------------------------------------------------------------------------
Conversion of Class A convertible
preferred stock (2,432) 0
Class A convertible preferred
stock dividend 199,024 (199,164) 0
Series 1998 convertible preferred
stock accretion (158,204) (158,204)
Common stock issued in exchange
for cancellation of outstanding
warrants 473 474
Exercise of stock options 49,268 (49,506) 3,000
Exercise of warrants (263) 0
Issuance of common stock 3,924,288 3,933,227
Amortization of deferred compensation 17,316 17,316
Net loss (6,088,608) (6,088,608)
- ------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 $56,195,006 ($20,180) ($57,074,617) ($49,506) (788,587)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
Page 4
<PAGE>
STATEMENT OF CASH FLOWS
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
For the period
from May 1, 1994
For the Six Months (inception) through
Ended June 30, June 30,
-------------------------------- --------------
1999 1998 1999
(Unaudited) (Unaudited)
- ---------------------------------------------------------------------------------------------- --------------
<S> <C> <C> <C>
Cash Flows from operating activities:
Net loss $ (6,088,608) $ (4,715,520) $(39,525,031)
Adjustments to reconcile net loss to
cash flows used in operating activities
Purchased research and development - - 4,481,405
Amortization of financing costs - - 345,439
Depreciation and amortization 248,950 245,936 1,200,932
(Increase) Decrease in other current assets (15,228) 604,850 (1,373,058)
(Increase) Decrease in other assets (7,219) (4,200) (473,796)
Increase (Decrease) in accounts payable and
accrued expense 204,603 22,306 2,607,753
Accretion on Class B preferred stock - - -
Extension/reissuance of placement agent warrants - - 168,249
Stock issued for services - - 600,417
Stock options issued for compensation 17,316 42,942 817,122
-------------- -------------- --------------
Net cash (used in) operating activities (5,640,186) (3,803,686) (31,150,568)
-------------- -------------- --------------
Cash flows used for investing activities:
Purchase of marketable securities - - (24,707,588)
Maturities of marketable securities 2,594,497 3,124,725 24,707,588
Cash portion of MelaRx acquisition - - 4,061
Acquisition of fixed assets (52,748) (54,808) (1,086,481)
-------------- -------------- --------------
Net cash provided by (used in)
investing activities 2,541,749 3,069,917 (1,082,420)
-------------- -------------- --------------
Cash flows provided by financing activities:
Initial public offering - - 9,696,210
Net proceeds from issuance of common stock 3,936,701 (39,189) 7,220,267
Net proceeds from issuance of preferred stock - 4,738,796 20,716,288
Repurchase of common stock - - (720)
Net proceeds from bridge financing - - 1,704,269
Repayments of bridge financing - - (2,000,000)
Advances from stockholders - - 250,000
Repayments to stockholders - - (250,000)
Exercise of warrants - 4,730 11,070
Receipts from sale of unit purchase option - - 250
Repayment of equipment capital lease (153,603) (150,139) (608,751)
-------------- -------------- --------------
Net cash provided by (used in)
financing activities 3,783,098 4,554,198 36,738,883
-------------- -------------- --------------
Net increase in cash 684,661 3,820,429 4,505,895
Cash and cash equivalents at beginning of period 3,821,234 3,890,621 0
-------------- -------------- --------------
Cash and cash equivalents at end of period $ 4,505,895 $ 7,711,050 $ 4,505,895
============== ============== ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
Page 5
<PAGE>
VION PHARMACEUTICALS, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Note A) - The Company:
-----------
Vion Pharmaceuticals, Inc. (the "Company") is a development stage
biopharmaceutical company engaged in the research, development and
commercialization of cancer treatment technologies. The Company, formerly
OncoRx, Inc., was incorporated in May 1993 and began operations on May 1, 1994.
In April 1995, the Company merged into OncoRx Research Corp., a
previously unaffiliated company ("Research"). The shareholders of the Company
were issued shares of common and preferred stock of MelaRx Pharmaceuticals Inc.
("MelaRx"), the 100% owner of Research, in exchange for all of the outstanding
shares of the Company. The stockholders of the Company were issued 2,654,038
common and 23,859 preferred shares of MelaRx in exchange for 2,000,000 shares of
common stock of the Company valued at $2.16 per share (fair value). In August
1995, the Company completed an initial public offering resulting in net proceeds
to the Company of approximately $9,696,000.
As the shareholders of the Company, which was renamed OncoRx, Inc.
after the merger, obtained a majority interest in the merged company, for
accounting purposes the Company is treated as the acquirer. Therefore, the
transaction is recorded as a purchase in the Company's financial statements
which include the results of operations of the Company from inception and MelaRx
from the date of acquisition. The excess of cost over the fair value of MelaRx's
net tangible assets, $4,481,405, was treated as purchased research and
development and expensed immediately.
The accompanying financial statements are prepared assuming the Company
will continue as a going concern; however, at its current and planned rate of
spending, the Company's cash, cash equivalents and short-term investments are
not sufficient to allow it to continue operations through the 1999 calendar
year. The Company requires other sources of capital in order to meet such
budgeted expenditures and to continue its operations throughout the year. The
Company is seeking to enter into significant strategic partnerships with
pharmaceutical companies for the development of its core technologies, through
which it would anticipate receiving some of the revenues and financing required
to continue operations beyond the year end. The Company is seeking to raise
funds through additional means, including (1) private and public sale of its
securities; (2) spin-off, refinancing, or partial sale or disposition of its
rights to certain of its non-core technologies; and (3) equipment lease
financing.
Failure to obtain such financing will require the Company to delay,
renegotiate, or omit payment on its outside research funding commitments causing
it to substantially curtail its operations, resulting in a material adverse
effect on the Company. The financial statements do not include any adjustments
to reflect the possible future effect on the recoverability and classification
of assets or the amounts or classification of liabilities that may result from
the outcome of this uncertainty.
Page 6
<PAGE>
(Note B) - Basis of Presentation:
---------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. 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 accruals) considered
necessary for a fair presentation have been included. Operating results for the
three-month and six-month periods ended June 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999. For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report for the fiscal year ended
December 31, 1998 on Form 10-KSB/A Amendment No. 1 (File No. 0-26534).
(Note C) - Shareholders' Equity
--------------------
On April 20, 1995, 2,000,000 shares of common stock valued at $2.16 per
share were issued in conjunction with the merger with MelaRx (see Note 1).
Shortly prior to the consummation of the Merger, the Company issued 76,349
shares of common stock for net proceeds of $206,000 after deducting placement
fees of $14,000.
On August 17, 1995 and September 6, 1995, the Company completed an IPO
of 2,875,000 units, consisting of an aggregate of 2,875,000 shares of common
stock, 2,875,000 redeemable Class A Warrants and 2,875,000 redeemable Class B
Warrants at a price of $4.00 per unit. Each Class A Warrant entitles the holder
to purchase one share of common stock and one Class B Warrant. Each Class B
Warrant entitles the holder to purchase one share of common stock. These
warrants are exercisable through August 13, 2000. The net proceeds to the
Company of the IPO were approximately $9,696,000 before repayment of the bridge
financing noted below.
In conjunction with the Company's IPO, the Company granted the
underwriter an option, exercisable until August 14, 2000, to purchase up to
250,000 units at $5.20 per unit, subject to adjustment.
Commencing with its IPO, and including the gross proceeds therefrom,
the Company has raised a gross amount of $37,850,000 to date, through the
issuance of common and preferred stock.
Private Placement of Class A Convertible Preferred Stock
- --------------------------------------------------------
On May 22, 1996, the Company completed a private placement of 1,250,000
shares of Class A Convertible Preferred Stock, at $10.00 per share, resulting in
net proceeds to the Company of $11,531,052. Each share of Class A Preferred
Stock is immediately convertible into 2.777777 shares of the Company's common
stock and is entitled to vote on all matters on an "as if" converted basis. The
Company recorded an imputed one-time non-cash dividend of approximately $11.4
million as a result of the difference between the conversion price and the
quoted market price of the Company's common stock as of the date of issuance as
required by the Financial Accounting Standards Board Emerging Issues Task Force
D-60 "Accounting for the Issuance of Convertible Preferred Stock and Debt
Securities with a Nondetachable Conversion Feature" (EITF D-60). The $11.4
million has been recognized as a charge against accumulated deficit with a
corresponding increase in additional paid-in capital. The imputed non-cash
dividend has been included in the dividend requirement on Preferred Stock and
the loss applicable to common shareholders. In connection with the foregoing
transaction, the Company also issued to the placement agent warrants,
exercisable over a five year period,
Page 7
<PAGE>
to purchase an aggregate of 546,875 shares of the Company's common stock at
prices ranging from $3.96 to $12.00. The shares of Class A Preferred Stock pay
semi-annual dividends of 5% per annum, payable in additional shares of Class A
Preferred Stock, which are immediately convertible into common stock of the
Company. The Company has recorded non-cash dividends as a charge against the
accumulated deficit and a credit to additional paid-in capital based on the
quoted market price of the common stock as of the date of the issuance of the
preferred dividends of $623,514 in 1997, $329,546 in 1998 and $199,164 in 1999.
The non-cash dividend has been included in the dividend requirement on Preferred
Stock and the loss applicable to common shareholders. The issue contains a
provision for a 15% one time dividend payable in additional Class A Preferred
Stock if the Company redeems the issue within 3 years. In the event that the
closing bid price of the Company's common stock exceeds $10.3125 for 20 trading
days in any 30 trading day period, the Company can redeem the Class A Preferred
Stock at the issue price plus all declared and unpaid dividends thereon. If all
of the 493,902 outstanding shares of the Company's Class A Preferred Stock were
thusly redeemed, their redemption value would be $4,939,020. The issuance of the
Class A Preferred Stock at closing also triggered certain antidilution
adjustment provisions of the Company's outstanding warrants, resulting in the
issuance of additional warrants. The Company cannot pay cash dividends on common
stock without the consent of a majority of holders of the class A Preferred
Stock.
Private Placement of Class B Convertible Preferred Stock:
- ---------------------------------------------------------
On August 20, 1997, the Company completed a private placement of 4,850
shares of non-voting Class B Convertible Preferred Stock, at $1,000 per share,
resulting in net proceeds to the Company of $4,481,450. Shares of Class B
Preferred Stock are convertible into shares of common stock including an
accretion of 8% per annum. For the three and six-month periods ended June 30,
1998 the Class B accretion totaled $142,386 and $263,548, respectively. Shares
of the Class B Preferred Stock were also be eligible, under certain
circumstances, to receive dividends paid in Class C Preferred Stock. The Class C
Preferred Stock was convertible into shares of common stock at the average
closing bid price of the Company's common stock for thirty consecutive business
days ending on the private placement closing date and was not entitled to
dividends. Conversions of Class B preferred Stock in the three and six month
periods ended June 30, 1998 resulted in additional dividends of Class C
preferred stock representing 21,386 and 177,036 shares of common stock valued at
$101,707 and $611,009, respectively. These dividends and the Class B accretion
were recorded as a charge against accumulated deficit, with a corresponding
increase to additional paid-in capital for the period ending June 30, 1998.
These dividends and accretion have been included in the dividend requirement on
Preferred Stock and the loss applicable to common shareholders. On August 11,
1998, the Company reached agreement with each of the holders of its Class B
Preferred Stock that the holders would convert all of the outstanding shares of
Class B Preferred Stock into an aggregate of 867,806 shares of common stock.
Private Placement of 5% Convertible Preferred Stock Series 1998
- ---------------------------------------------------------------
On June 30, 1998, the Company completed a private placement of 5,000
shares of non-voting 5% Redeemable Convertible Preferred Stock Series 1998
("Series 1998 Preferred Stock"). The Series 1998 Preferred Stock was issued at
$1,000 per share, resulting in net proceeds to the Company of $4,703,386. The
shares of Series 1998 Preferred Stock accrue dividends of 5% per annum payable
in-kind. Each share of Series 1998 Preferred Stock is convertible into common
stock based on the formula of issued price plus accrued dividends divided by
$3.60. Dividends other than non-cash dividends paid in-kind with respect to
other classes or series of preferred stock require consent of two-thirds
majority interest of the holders of Series 1998 Preferred Stock. The
Page 8
<PAGE>
Series 1998 Preferred Stock is mandatorily redeemable at $1,000 per share plus
dividends on June 30, 2003. In connection with the sale of the Series 1998
Preferred Stock, the Company imputed a one-time non-cash dividend of
approximately $1.6 million as a result of the difference between the conversion
price and the quoted market price of the Company's common stock at the date of
issuance as required by EITF D-60. Such amount was recognized upon issuance of
the Series 1998 Preferred Stock as a charge against the accumulated deficit with
a corresponding increase to additional paid-in capital. The imputed non-cash
dividend has been included in the dividend requirement on Preferred Stock and
the loss applicable to common shareholders. The dividend requirement on
Preferred Stock also reflects the amortization of the costs of completing the
offering and the accretion of the 5% per annum dividend. The issuance of the
Series 1998 Preferred Stock at closing also triggered certain antidilution
adjustment provisions of the Company's outstanding warrants, resulting in the
issuance of additional warrants (see Note E).
Private Placement of Common Stock - April 1999
- ----------------------------------------------
In April 1999, the Company consummated a private placement of the
Company's common stock. Pursuant to the private placement, the Company issued
893,915 shares of common tock at a price of approximately $4.47 per share (the
"Purchase Price"), for aggregate proceeds of approximately $4,000,000.
Subject to certain exceptions, if at any time during the twelve-month
period following the closing of the private placement, the Company issues or
agrees to issue any common stock at a price per share which is less than the
Purchase Price, or if the Company issues or agrees to issue any rights, options,
warrants or other securities which are directly or indirectly convertible into
or exchangeable for common stock for a consideration per share of common stock
deliverable upon conversion or exchange of such rights, options, warrants or
other securities which is less than the Purchase Price (any such new issuance
price per share being referred to as the "New Issue Price"), then the Company
shall immediately thereafter issue to the investors in the private placement, on
a pro rata basis, additional registered, listed shares of common stock such that
the total number of shares of common stock issued pursuant to the private
placement will equal at least $4,000,000 divided by the New Issue Price. The
foregoing provisions will cease to be effective after the date, if any, upon
which the Company completes a private placement or public offering of its common
stock at a price per share in excess of the Purchase Price and also resulting in
gross proceeds equal to or greater than $11,000,000.
(Note D) - Warrant Exchange Offer
----------------------
On May 19, 1998, the Company commenced an offer to exchange each
outstanding Class A Warrant, at the option of the holder, for either (A) 0.438
shares of the Company's common stock or (B) 0.254 shares of common stock and
$0.66 in cash. The Company simultaneously offered to exchange each outstanding
Class B Warrant, at the holder's option, for either (A) 0.212 shares of common
stock or (B) 0.123 shares of common stock and $0.32 in cash. The Exchange Offer
was not conditioned upon the exchange of a minimum number of Class A Warrants or
Class B Warrants. As a result of the Exchange Offer 3,209,806 Class A Warrants
and 1,881,835 Class B Warrants were exchanged for 1,395,027 and 397,925 shares
of the Company's common stock and $39,007 and $3,686 in cash, respectively.
(Note E) - Antidilution Adjustment
-----------------------
As a result of the sale on May 22, 1996 of 1,250,000 shares of Class A
Convertible Preferred Stock, an adjustment was made to the exercise price of
Page 9
<PAGE>
the Class A Warrants and the Class B Warrants and there was a corresponding
distribution of additional Class A Warrants and Class B Warrants. Specifically,
on July 12, 1996 (the "Payment Date") each holder of a Class A Warrant at the
close of business on July 3, 1996 (the "Record Date") was issued an additional
0.1 Class A Warrant and the exercise price of the Class A Warrants was reduced
from $5.20 to $4.73. In addition, on the Payment Date each holder of a Class B
Warrant on the close of business on the Record Date was issued an additional 0.1
Class B Warrant and the exercise price of the Class B Warrants was reduced from
$7.00 to $6.37.
Subsequently, as a result of the sale on June 30, 1998 of 5,000 shares
of Series 1998 Preferred Stock, an additional adjustment was made to the
exercise price of the Class A Warrants and the Class B Warrants with a
corresponding distribution of additional Class A Warrants and Class B Warrants.
Specifically, on September 8, 1998 (the "Payment Date") each holder of a Class A
Warrant at the close of business on August 26, 1998 (the "Record Date") received
an additional 0.02 (2 per 100 outstanding) Class A Warrants and the exercise
price of the Class A Warrants was reduced from $4.73 to $4.63. In addition, on
the Payment Date each holder of a Class B Warrant on the close of business on
the Record Date received an additional 0.02 (2 per 100 outstanding) Class B
Warrants and the exercise price of the Class B Warrants was reduced from $6.37
to $6.23.
(Note F) - Research and License Agreements
-------------------------------
Boehringer Ingelheim Agreement
- ------------------------------
On November 24, 1997, the Company and Boehringer Ingelheim
International GmbH of Germany ("BI") entered into an exclusive worldwide
licensing agreement for the development and marketing of Promycin(R)
(porfiromycin), an anticancer cell therapeutic. The agreement provides the
Company with exclusive co-promotion rights to Promycin in the United States and
Canada. BI will have exclusive worldwide rights to market and sell Promycin
outside the United States and Canada. The Company is responsible for the
manufacturing and supply of Promycin worldwide.
In exchange for these rights, the Company received $4,000,000 in
technology access fees and net proceeds of $2,869,801 from the sale of 448,336
shares of common stock at a premium to the then current market price. BI has
also reimbursed the Company for certain initial development costs to date and
will share in future worldwide development costs.
The Company has cash equivalents and short-term investments of
$4,505,895 at June 30, 1999. This balance includes $14,848 of restricted
investments for future Promycin development expenses from the original
$4,000,000 received in 1997 from BI. The Company recorded $1,115,038 of
reimbursed Promycin development expenses as revenue during the first six months
of 1999.
Covance Agreement:
- ------------------
During the quarter ended June 30, 1997, the Company entered into a
Clinical Development Agreement (the "Agreement") with Covance Clinical Research
Unit Ltd. and Covance Inc. ("Covance"). Pursuant to the Agreement, the Company
is contracting to Covance the selection and management of clinical sites and the
preparation of clinical trial reports arising from clinical trials performed by
Covance regarding the Company's product candidate Promycin for the inclusion in
a regulatory submission. The Company has incurred estimated and actual expenses
of $1,578,822 for the six months ended June 30, 1999 under this agreement which
has been expensed as incurred as research and
Page 10
<PAGE>
development. Included in the company's total current liabilities at June 30,
1999 are payables to Covance Development Service Corporation for $1,760,034.
(Note G) - Per Share Data
--------------
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
-------------------- -------------------- -------------------- --------------------
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
- ---------------------------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Numerator:
- ---------------------------------------- -------------------- -------------------- -------------------- --------------------
Net loss ($3,656,379) ($2,209,300) ($6,088,608) ($4,715,520)
- ---------------------------------------- -------------------- -------------------- -------------------- --------------------
Preferred dividends and accretion (276,495) (2,045,322) (357,368) (2,675,786)
- ---------------------------------------- -------------------- -------------------- -------------------- --------------------
Numerator for basic and diluted
loss applicable to common
shareholders per share ($3,932,874) ($4,254,622) ($6,445,976) ($7,391,306)
- ---------------------------------------- -------------------- -------------------- -------------------- --------------------
Denominator:
- ---------------------------------------- -------------------- -------------------- -------------------- --------------------
Denominator for basic and diluted
loss applicable to common 14,895,158 10,612,282 14,567,169 10,251,896
shareholders per share
- ---------------------------------------- -------------------- -------------------- -------------------- --------------------
Basic and diluted loss applicable to ($0.26) ($0.40) ($0.44) ($0.72)
common shareholders per share
- ---------------------------------------- -------------------- -------------------- -------------------- --------------------
</TABLE>
For additional disclosures regarding warrants and Class A, B and Series 1998
Convertible Preferred Stock, see Note C, D, E and F. These potentially dilutive
securities were not included in diluted loss per share applicable to common
shareholders as the effect would be antidilutive. Under the Financial Accounting
Standards Board Statement No. 128, which the Company has adopted, the dilutive
effect of stock options has been excluded.
(Note H) - Small Business Innovation Research Grants
-----------------------------------------
On February 27, 1998 and April 22, 1998, the Company was awarded a
Small Business Innovation Research ("SBIR") grant from the National Cancer
Institute for the Reduced Toxicity of Tumor-Targeted Salmonella and the
Inhibitors of Ribonucleotide Reductase ("IRR") programs, respectively. The
awards were for reimbursable direct costs of up to $100,000 and $373,565,
respectively, and expired on August 31, 1998 and April 30, 1999. The Company
recognized $100,000 and $316,068 of revenue on these two grants, respectively,
for reimbursement of expenses incurred for the duration of the grants through
June 30, 1999. An automatic extension was granted on the IRR grant to utilize
the amount remaining on the IRR grant. In addition to the extension, a new
twelve-month IRR grant was approved on April 7, 1999 for $374,764. As of June
30, 1999 the Company recognized $56,894 in revenues from this new grant.
(Note I) - Subsequent Events
-----------------
On July 27, 1999, the Company filed a registration statement with the
Securities and Exchange Commission on Form S-1 relating to a proposed public
offering for the sale of 3,600,000 shares of the Company's common stock, plus an
additional 540,000 shares of common stock if the underwriter exercises its
Page 11
<PAGE>
over-allotment option in full. At an assumed offering price of $5.375 per share
and after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company, the net proceeds to the company would
be approximately $17.37 million, or $20.07 million if the underwriter exercises
its over-allotment option in full.
Page 12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS - CAUTIONARY FACTORS
Statements included in this Form 10-QSB which are not historical in
nature are forward-looking statements made pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements regarding our future business prospects, plans,
objectives, expectations and intentions are subject to certain risks,
uncertainties and other factors that could cause actual results to differ
materially from those projected or suggested in the forward-looking statements,
including, but not limited to: the inability to raise additional capital, the
possibility that any or all of the our products or procedures are found to be
ineffective or unsafe, the possibility that third parties hold proprietary
rights that preclude us from marketing our products, and the possibility that
third parties will market a product equivalent or superior to our product
candidates.
OVERVIEW
We are a development stage biopharmaceutical company. Our activities to
date have consisted primarily of research and product development sponsored by
us pursuant to two separate license agreements with Yale University, negotiating
and obtaining other collaborative agreements, recruiting management and other
personnel, securing our facilities and raising equity and debt financing. Our
revenues consist of research grants, technology license fees and reimbursements
for research expenses. We have generated minimal revenues from product sales and
have incurred substantial operating losses from our activities.
Our plan of operations for the next 18 months includes the following
elements:
o Continue to develop and conduct internal research and development
capabilities with respect to our core technologies and other product
candidates which we may identify;
o Conduct Phase III clinical studies of Promycin in the United States and
Europe for treatment of head and neck cancer;
o Conduct Phase I clinical studies of Triapine in the United States for
safety and efficacy;
o File investigational new drug application(s) with the FDA and conduct Phase
I clinical studies in the United States and Europe for the safety and
selective tumor accumulation of several bacterial constructs using our
TAPET delivery system;
o Continue to support research and development being performed at Yale
University and by other collaborators; and
o Continue to seek collaborative partnerships, joint ventures, co-promotional
agreements or other arrangements with third parties.
Page 13
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1998
Revenues. Revenues increased approximately 270% from $256,798 for the
three months ended June 30, 1998 to $957,800 for the three months ended June 30,
1999. This change was primarily due to increased revenues from reimbursed
development costs under our collaboration agreement with BI totaling $855,570
for the three months ended June 30, 1999.
Research and Development. Research and development expenses increased
slightly more than 90% from $2,097,510 for the three months ended June 30, 1998
to $3,976,273 for the three months ended June 30, 1999 reflecting expenses
related to patient accumulation for the Promycin head and neck Phase III trial,
and expenses of TAPET preclinical development. We expect research and
development expenses to continue to increase in the future related to the
Promycin Phase III clinical trial and commencement of a TAPET Phase I clinical
trial.
General and Administrative. General and administrative expenses
increased 52% from $459,067 for the three months ended June 30, 1998 to $695,729
for the three months ended June 30, 1999. This increase was due to higher
consulting fees and management bonuses for the three months ended June 30, 1999.
Interest Income and Expense. Interest income on invested funds
decreased 37% from $106,191 for the three months ended June 30, 1998 to $66,989
for the three months ended June 30, 1999. This decrease reflects the average
invested balances of each period. Interest expense decreased from $15,712 for
the three months ended June 30, 1998 to $9,166 for the three months ended June
30, 1999.
Preferred Dividends and Accretion. Preferred stock dividends and
accretion decreased from $2,045,322 for the three months ended June 30, 1998 to
$276,495 for the three months ended June 30, 1999. The amounts included
primarily represent our recording of non-cash dividends related to the issuance
of our Series 1998 Redeemable Convertible Preferred Stock in 1998. The amounts
for the three months ended June 30, 1998 also include additional dividend
requirements equal to the excess of the fair value of the common stock issued
upon conversion over the fair value of the common stock issuable pursuant to the
original conversion terms of the Class B Convertible Preferred Stock.
Additionally, the annual accretion of dividends related to the issuance is
included in the amounts described above. Loss applicable to common shareholders
decreased from $4,254,622 to $3,932,874 as a result of the net loss and the
effects of the preferred dividends and accretion.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998
Revenues. Revenues increased approximately 150% from $531,640 for the
six months ended June 30, 1998 to $1,329,214 for the six months ended June 30,
1999. This was due to increased revenues from reimbursed development costs under
our collaboration agreement with BI totaling $1,115,038 for the six months ended
June 30, 1999. In addition, reimbursements of expenses from SBIR grants on TAPET
and Triapine increased from $109,199 for the six months ended June 30, 1998 to
$164,176 for the six months ended June 30, 1999.
Research and Development. Research and development expenses increased
approximately 45% from $4,371,032 for the six months ended June 30, 1998 to
$6,324,074 for the six months ended June 30, 1999 related to patient
Page 14
<PAGE>
accumulation for the Promycin head and neck Phase III trial, and expenses of
TAPET preclinical development.
General and Administrative. General and administrative expenses
increased 10% from $1,090,776 for the six months ended June 30, 1998 to
$1,200,330 for the six months ended June 30, 1999. This was primarily due to
increased consulting fees.
Interest Income and Expense. Interest income on invested funds
decreased 49% from $249,065 for the six months ended June 30, 1998 to $127,355
for the six months ended June 30, 1999. This decrease reflects the average
invested balances of each period. Interest expense decreased from $34,417 for
the six months ended June 30, 1998 to $20,773 for the six months ended June 30,
1999.
Preferred Dividends and Accretion. Preferred stock dividends and
accretion decreased from $2,675,786 for the six months ended June 30, 1998 to
$357,368 for the six months ended June 30, 1999. The amounts included primarily
represent our recording of non-cash dividends related to the issuance of our
Series 1998 Redeemable Convertible Preferred Stock in 1998. The amounts for the
six months ended June 30, 1998 also include additional dividend requirements
equal to the excess of the fair value of the common stock issued upon conversion
over the fair value of the common stock issuable pursuant to the original
conversion terms of the Class B Convertible Preferred Stock. The Class B
Convertible Preferred Stock was entirely converted into common stock in August,
1998 so none of the dividend requirements related to this issue affect the six
month period ending June 30, 1999. Additionally, the annual accretion of
dividends related to the issuance of the Series 1998 Redeemable Convertible
Preferred Stock is included in the amounts described above. Loss applicable to
common shareholders decreased from $7,391,306 to $6,445,976 as a result of the
net loss and the effects of the preferred dividends and accretion.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, we had working capital of $3,001,859. In April 1999,
we consummated a private placement of our common stock. Pursuant to the private
placement, we issued 893,915 shares of common stock at a price of approximately
$4.47 per share, for aggregate proceeds of approximately $4,000,000.
On July 27, 1999, we filed a registration statement with the Securities
and Exchange Commission on Form S-1 relating to a proposed public offering for
the sale of 3,600,000 shares of the our common stock, plus an additional 540,000
shares of common stock if the underwriter exercises its over-allotment option in
full. At an assumed offering price of $5.375 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us, the net proceeds would be approximately $17.37 million, or $20.07 million
if the underwriter exercises its over-allotment option in full.
We currently estimate that revenues and the remaining net proceeds of
our private placement in April, 1999, reimbursed cost sharing from the agreement
with BI and our existing cash and equivalents will be sufficient to fund our
planned operations for approximately the next 5 months. We expect to incur
substantial expenditures for research and development expenses. During the next
12 months, we plan to hire seven additional employees. Failure to obtain new
financing may require us to delay, renegotiate, or omit payment on our outside
research funding commitments causing us to substantially curtail our operations
after that point, resulting in a material adverse effect on us. However, we
believe that the net proceeds from the proposed public offering of
Page 15
<PAGE>
our common stock, together with existing cash and cash equivalents and
short-term investments will be sufficient to meet our anticipated cash needs for
working capital and capital expenditures for at least the next 18 months. We
cannot assure you that the proposed public offering will be successfully
completed.
We have 1,071,232 Class A Warrants outstanding and 1,308,722 Class B
Warrants outstanding. Subject to adjustment, each Class A Warrant entitles the
holder to purchase, at an exercise price of $4.63, and each Class B Warrant
entitles the holder to purchase, at an exercise price of $6.23, one share of
common stock. In addition, the exercise of a Class A Warrant entitles the holder
to one Class B Warrant. The warrants are exercisable at any time after issuance
through August 13, 2000. The warrants are subject to redemption by us for $.05
per warrant, upon 30 days' written notice, if the average closing bid price of
the common stock exceeds $7.30 per share with respect to the Class A Warrants
and $9.80 per share with respect to the Class B Warrants for a 30 consecutive
business day period ending within 15 days of the date of the notice of
redemption. If all such warrants are exercised, we will receive proceeds, net of
any fees, of $18,797,631. However, the common stock is not currently trading,
and may not trade, at the level that will trigger redemption of either class of
warrants.
In the event of delays or unexpected problems in product development,
cost overruns, or other unanticipated expenses commonly associated with a
company in an early stage of development, we will require additional funds
sooner. In addition, we will need substantial additional financing beyond 2000
to fund further research and development and our working capital requirements.
As of June 30, 1999 we estimate that the amount required to fund operations for
the next twelve months is approximately $15,858,000, of which approximately
$3,030,000 is subject to reimbursement under the terms of the BI collaboration
agreement. However, our cash requirements may vary materially from those now
planned because of the results of research and development, results of product
testing, relationships with strategic partners, changes in focus and direction
of our research and development programs, competitive and technological
advances, the regulatory process in the United States and abroad and other
factors.
We received an opinion from our auditors for the fiscal year ended
December 31, 1998 expressing substantial doubt as to our ability to continue as
a going concern as a result of our recurring operating losses and need for
substantial amounts of additional funding to continue our operations.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue refers to potential problems with computer systems
or any equipment with computer chips or software that use dates where the date
has been stored as just two digits (e.g., 97 for 1997). On January 1, 2000, any
clock or date recording mechanism incorporating date sensitive software which
uses only two digits to represent the year may recognize a date using 00 as the
Year 1900 rather than the Year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including, among other things,
a temporary inability to process transactions, perform laboratory analyses, or
engage in similar business activities.
Our exposure to potential risks from the Year 2000 issue involves
information technology, or IT, systems, scientific instrumentation, and
laboratory facilities. We have hired an information systems administrator and
have inventoried all of the software and hardware embedded in our laboratory and
facilities equipment employed in our research and development programs to
ascertain our Year 2000 compliance. We have not completed our assessment of our
internal information systems to determine the extent of any Year 2000
Page 16
<PAGE>
problem. However, based on an initial review, we do not currently believe that
we have material exposure to the Year 2000 Issue with respect to our own
information systems, since our existing systems correctly define the Year 2000
or are expected to correctly define Year 2000 by December 31, 1999. In addition,
we have not completed our assessment of our scientific instrumentation, and
laboratory facilities to determine the extent of any Year 2000 problem. However,
we maintain service agreements covering our critical instrumentation and
laboratory environmental equipment. Accordingly, to the extent that these
service agreements are enforceable, we do not believe that the Year 2000
presents a material exposure with regard to our critical instrumentation and
laboratory environmental equipment.
We have purchased Year 2000 upgrades to several software programs,
including our accounting programs, the cost of which has not been material. To
date, we have spent approximately $4,000 with respect to our Year 2000
assessment and estimate that our costs to complete our assessment, as well as
any corrective measures, will be approximately $26,000. We do not expect to
reach profitability on an operating basis before 2000 and therefore expect to
fund all such costs from funds we have raised or expect to raise in various
financings.
We believe we will complete our review and implement contingency plans
to deal with the Year 2000 issue in a timely manner. In the event that we do not
implement adequate plans, our operations could be affected in several adverse
ways. Failure of a scientific instrument or laboratory facility could result,
among other things, in the loss of experiments that would take weeks to set up
and repeat. These delays in the progress of research could have an adverse
impact on our stock price and on our ability to raise capital, and the cost of
repeating lost experiments cannot reasonably be estimated at this time. In
addition, research delays could occur due to the impact of Year 2000 problems at
major vendors, government research funding agencies, or development partners.
We believe we maintain adequate data backup to computers used in our
information systems and scientific instrumentation. We currently do not have a
contingency plan in the event that we or any of our key suppliers and vendors is
unable to become Year 2000 compliant. We will develop a contingency plan if we
determine we or any of our key vendors or suppliers is not likely to achieve our
compliance objectives.
Page 17
<PAGE>
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company held on June 17,
1999, three proposals were voted upon by the Company's stockholders. A brief
description of each proposal voted upon at the Annual Meeting and the number of
votes cast for, against and the number of abstentions to each proposal are set
forth below.
A vote was taken at the Annual Meeting for the election of eight
Directors of the Company to hold office until the next annual Meeting of
Stockholders of the Company and until their respective successors shall have
been duly elected. The aggregate number of votes cast by holders of common stock
and Class A Convertible Preferred Stock voted in person or by proxy for each
nominee were as follows:
PROPOSAL 1 For Authority Withheld
(Election of Nominee From Nominee
Directors) ------- ------------
William R. Miller 12,643,642 87,486
Alan Kessman 12,643,642 87,486
Alan C. Sartorelli, Ph.D. 12,643,642 87,486
Michel C. Bergerac 12,643,642 87,486
Frank T. Cary 12,643,642 87,486
James L. Ferguson 12,643,642 87,486
Michael C. Kent 12,643,642 87,486
Walter Wriston 12,643,642 87,486
A vote was taken at the Annual Meeting on the proposal to amend the
Amended and Restated 1993 Stock Option Plan the increase the number of shares
which may be issued thereunder. The aggregate numbers of shares of common stock
and Class A Convertible Preferred Stock in person or by proxy which: (a) voted
for, (b) voted against, (c) abstained or (d) broker non-votes on such proposal
were as follows:
PROPOSAL 2 Broker
(Stock Option Plan) For Against Abstain Non-Votes
--- ------- ------- ---------
3,650,050 575,706 81,000 8,424,372
Page 18
<PAGE>
A vote was taken at the Annual Meeting on the proposal to ratify the
appointment of Ernst & Young LLP as auditors for the Company for the fiscal year
ending December 31, 1999. The aggregate number of votes cast by holders of
common stock and Class A Convertible Preferred Stock in person or by proxy
which: (a) voted for, (b) voted against or (c) abstained on such proposal were
as follows:
PROPOSAL 3 For Against Abstain
(Accountants) --- ------- -------
12,671,525 30,067 29,536
The foregoing proposals are described more fully in the Company's
definitive proxy statement dated May 17, 1999, filed with the Securities and
Exchange Commission pursuant to Section 14(a) of the Securities Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
--------
None
(b) Reports on Form 8-K.
-------------------
On April 28, 1999, the Company filed a Current Report on Form
8-K with the Commission regarding two press releases relating
to a private placement of the Company's common stock.
Page 19
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VION PHARMACEUTICALS, INC.
(Registrant)
By: /s/ Thomas E. Klein
------------------------------
Thomas E. Klein
Vice President - Finance
(Duly authorized signatory and
Chief Financial Officer)
Date: August 13, 1999
Page 20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,505,895
<SECURITIES> 0
<RECEIVABLES> 1,309,541
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,879,939
<PP&E> 829,982
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,185,432
<CURRENT-LIABILITIES> 1,599,656
<BONDS> 0
5,012,709
4,940
<COMMON> 155,770
<OTHER-SE> (949,297)
<TOTAL-LIABILITY-AND-EQUITY> 7,185,432
<SALES> 0
<TOTAL-REVENUES> 1,329,214
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,524,404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,773
<INCOME-PRETAX> (6,088,608)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,088,608)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,088,608)
<EPS-BASIC> (0.44)
<EPS-DILUTED> (0.44)
</TABLE>
