U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
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, 1997
-------------
[ ] 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 July 31, 1997 is: 8,639,226 shares of common stock, $.01 par
value.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
Restated
--------------------------------------------------
June 30,
1997 December 31,
(Unaudited) 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,352,877 $ 3,788,369
Short-term investments 329,200 4,628,446
Other current assets 90,745 106,635
------------------------ ------------------------
Total current assets 4,772,822 8,523,450
Property and equipment, net 933,461 712,806
Security deposits 34,894 41,301
Research contract prepayment 416,945 603,208
------------------------ ------------------------
Total assets $ 6,158,122 $ 9,880,765
------------------------ ------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Obligation under capital lease - current 164,417 91,476
Accounts payable and accrued expenses 1,722,154 494,127
------------------------ ------------------------
Total current liabilities 1,886,571 585,603
Obligation under capital lease - long term 305,029 223,190
------------------------ ------------------------
Total Liabilities 2,191,600 808,793
------------------------ ------------------------
Shareholders' equity
Convertible preferred stock, $0.01 par value, authorized: 5,000,000 shares;
issued and outstanding: 1997- 979,374 shares 1996 - 1,107,028 shares 9,794 11,070
Common stock, $0.01 par value, authorized: 35,000,000 shares;
issued and outstanding: 1997- 8,489,226 shares 1996 - 8,017,961shares 84,892 80,178
Additional paid-in-capital 38,677,954 38,349,072
Deferred compensation (89,444) (106,760)
Accumulated deficit (34,716,674) (29,261,588)
------------------------ ------------------------
3,966,522 9,071,972
------------------------ ------------------------
Total liabilities and shareholders' equity $ 6,158,122 $ 9,880,765
======================== ========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
Restated
--------------------------------------------------------------------------------------
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,
------------------------------ -------------------------------------------------------
1997 1996 1997 1996 1997
(Unaudited) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Contract research grants $ 8,481 $ - $ 48,221 $ - $ 100,000
------------------------------ -----------------------------------------------------
Operating expenses:
Research and development 2,872,857 1,423,736 4,394,636 3,045,947 13,502,925
General and administrative 491,058 458,408 982,592 886,139 5,180,988
Purchased research and development - - - - 4,481,405
Amortization of finance charges - - - - 345,439
Interest Income (78,795) (94,505) (178,029) (142,195) (700,066)
Interest Expense 10,744 2,457 21,802 4,885 77,249
------------------------------ -----------------------------------------------------
Net Loss $(3,287,383) $ (1,790,096) $(5,172,780) $ (3,794,776) $ (22,787,940)
------------------------------ -----------------------------------------------------
Preferred stock dividends and accretion $ (282,306) $(11,371,523) $ (282,306) $(11,371,523) $ (11,909,710)
------------------------------ -----------------------------------------------------
Loss applicable to common shareholders $(3,569,689) $(13,161,619) $(5,455,086) $(15,166,299) $ (34,697,650)
============================== =====================================================
Basic and diluted loss applicable to common
shareholders per share $ (0.41) $ (1.68) $ (0.63) $ (1.94)
------------------------------ -----------------------------------------------------
Weighted average common stock and
common stock equivalents outstanding 8,758,708 7,844,796 8,629,302 7,833,594
------------------------------ -----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
Restated
----------------------------------------------------
Convertible
Preferred Stock Common Stock
----------------------------------------------------
Shares Amount Shares Amount
----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued for cash - July 1994 0 $0 2,693,244 $26,932
Common stock issued for services -
August 1994 159,304 1,593
Net loss
----------------------------------------------------
Balance - December 31, 1994 0 0 2,852,548 28,525
----------------------------------------------------
Stock options issued for compensation -
February 1995
Reverse acquisition of MelaRx
Pharmaceuticals, Inc. - April 1995 2,000,000 20,000
Shares repurchased pursuant to
employment agreements - April 1995 (274,859) (2,749)
Private placement of common stock -
April 1995 76,349 763
Warrants issued with bridge notes -
April 1995
Initial public offering of units of one common share,
one Class A warrant and one Class B warrant at
$4.00 per unit - August 1995 and September 1995 2,875,000 28,750
Issuance of common stock 1,250 13
Receipts from sale of unit purchase option
Net loss
----------------------------------------------------
Balance at December 31, 1995 0 0 7,530,288 75,302
----------------------------------------------------
Issuance of Class A convertible preferred stock 1,250,000 12,500
Conversion of Class A convertible preferred stock (164,970) (1,650) 458,255 4,582
Issuance of common stock 29,418 294
Class A convertible preferred stock dividend 21,998 220
Compensation associated with stock option grants
Amortization of deferred compensation
Net loss
----------------------------------------------------
Balance at December 31, 1996 1,107,028 $11,070 8,017,961 $80,178
----------------------------------------------------
Conversion of Class A convertible preferred stock (151,567) (1,515) 421,027 4,211
Compensation associated with stock options grants
Exercise of warrants 238 3
Exercise of stock options 50,000 500
Class A convertible preferred stock dividend 23,913 239
Amortization of deferred compensation
Net loss
----------------------------------------------------
Balance at June 30, 1997 (Unaudited) 979,374 $9,794 8,489,226 $84,892
----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Restated
--------------------------------------------------------------------------
Total
Additional Deferred Accumulated Stockholders'
Paid-in Capital Compensation Deficit Equity
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued for cash - July 1994 $0 $0 ($19,877) $7,055
Common stock issued for services -
August 1994 (1,176) 417
Net loss (475,946) (475,946)
--------------------------------------------------------------------------
Balance - December 31, 1994 0 0 (496,999) (468,474)
--------------------------------------------------------------------------
Stock options issued for compensation -
February 1995 540,000 540,000
Reverse acquisition of MelaRx
Pharmaceuticals, Inc. - April 1995 4,300,000 4,320,000
Shares repurchased pursuant to
employment agreements - April 1995 2,029 (720)
Private placement of common stock -
April 1995 205,237 206,000
Warrants issued with bridge notes -
April 1995 200,000 200,000
Initial public offering of units of one common share,
one Class A warrant and one Class B warrant at
$4.00 per unit - August 1995 and September 1995 9,667,460 9,696,210
Issuance of common stock 488 501
Receipts from sale of unit purchase option 250 250
Net loss (9,530,535) (9,530,535)
--------------------------------------------------------------------------
Balance at December 31, 1995 14,913,435 0 (10,025,505) 4,963,232
--------------------------------------------------------------------------
Issuance of Class A convertible preferred stock 22,890,075 (11,371,523) 11,531,052
Conversion of Class A convertible preferred stock (2,932) 0
Issuance of common stock 102,426 102,720
Class A convertible preferred stock dividend 255,661 (255,881) 0
Compensation associated with stock option grants 190,407 (190,407) 0
Amortization of deferred compensation 83,647 83,647
Net loss (7,608,679) (7,608,679)
--------------------------------------------------------------------------
Balance at December 31, 1996 $38,349,072 ($106,760) ($29,261,588) $9,071,972
--------------------------------------------------------------------------
Conversion of Class A convertible preferred stock (2,696) 0
Compensation associated with stock options grants 30,017 30,017
Exercise of warrants (6) (3)
Exercise of stock options 19,500 20,000
Class A convertible preferred stock dividend 282,067 (282,306) 0
Amortization of deferred compensation 17,316 17,316
Net loss (5,172,780) (5,172,780)
--------------------------------------------------------------------------
Balance at June 30, 1997 (Unaudited) $38,677,954 ($89,444) ($34,716,674) $3,966,522
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
Restated
---------------------------------------------------------
For the period
from May 1, 1994
For the Six Months (inception) through
Ended June 30, June 30,
---------------------------------------------------------
1997 1996 1997
(Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from operating activities:
Net loss $ (5,172,780) $ (3,794,776) $ (22,787,940)
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 132,297 45,991 283,757
(Increase) in other current assets 15,890 16,675 (89,759)
(Increase) in other assets 192,670 11,134 (450,124)
Increase in accounts payable and
accrued expense 1,228,027 259,345 1,687,622
Stock issued for services - - 417
Stock options issued for compensation 47,333 - 670,980
---------------------------------------------------------
Net cash (used in) operating activities (3,556,563) (3,461,631) (15,858,203)
---------------------------------------------------------
Cash flows used for investing activities:
Purchase of marketable securities (1,139,610) (5,913,259) (15,227,056)
Maturities of marketable securities 5,438,856 - 14,897,856
Cash portion of MelaRx acquisition - - 4,061
Acquisition of fixed assets (119,747) (188,911) (633,069)
---------------------------------------------------------
Net cash provided by (used in) investing activities 4,179,499 (6,102,170) (958,208)
---------------------------------------------------------
Cash flows provided by financing activities:
Initial public offering - - 9,696,210
Net proceeds from issuance of common stock 20,000 520 336,276
Net proceeds from issuance of preferred stock - 11,590,662 11,531,052
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 (3) - (3)
Receipts from sale of unit purchase option - - 250
Repayment of equipment capital lease (78,425) (7,428) (98,046)
---------------------------------------------------------
Net cash provided by (used in) financing activities (58,428) 11,583,754 21,169,288
---------------------------------------------------------
Net increase in cash 564,508 2,019,953 4,352,877
Cash and cash equivalents at beginning of period 3,788,369 2,350,933 -
---------------------------------------------------------
Cash and cash equivalents at end of period $ 4,352,877 $ 4,370,886 $ 4,352,877
=========================================================
</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., formerly OncoRx, Inc., (the "Company") was
incorporated in May 1993 and began operations on May 1, 1994. The Company is in
the development stage and is principally devoted to the research and development
of therapeutic products for the treatment of cancer and cancer related
disorders.
On April 20, 1995, the Company merged into OncoRx Research Corp., a
wholly-owned subsidiary of MelaRx Pharmaceuticals Inc. (MelaRx), which was
renamed OncoRx, Inc. after the merger (the "Merger"). 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 ("IPO") resulting in net proceeds to the Company of approximately
$9,696,000. In April 1996 the Company changed its name to Vion Pharmaceuticals,
Inc.
As the shareholders of the Company obtained a majority interest in the
merged company for accounting purposes, the Company is treated as the acquirer.
Therefore, the Merger 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.
(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, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. 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, 1996 on Form 10-KSB (File No. 0-26534).
Page 6
<PAGE>
(Note C) - Stock Option Plan:
-----------------
Through December 31, 1996, options to purchase an aggregate of 896,750
shares had been granted under the Company's Amended and Restated 1993 Stock
Option Plan (the "Plan"). On January 29, 1997, the Board of Directors adopted,
subject to stockholder approval, an amendment to the Plan increasing the number
of shares which may be issued under the Plan from 1,000,000 to 1,500,000. The
amendment to the Plan was approved by the stockholders at the Company's annual
meeting on April 16, 1997.
(Note D) - 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 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, 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 $11,371,523 in 1996 and $282,306 in 1997. The dividends
have 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. The issue also contains a provision for a
special dividend after 2 years under certain conditions if the Company's common
stock price falls below the conversion price of the Class A Preferred Stock.
Under certain circumstances relating to the Company's common stock closing bid
price, the Company can redeem the Class A Preferred Stock at the issue price
plus all declared and unpaid dividends thereon. If all of the 979,374
outstanding shares of the Company's Class A Preferred Stock as of June 30, 1997
were thusly redeemed, their
Page 7
<PAGE>
redemption value would be $9,793,740. 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.
(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, and pursuant the Warrant Agreement governing the
rights of the Class A Warrants and the Class B Warrants, an adjustment was made
to the exercise price of 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 Warrants 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 Warrants and the exercise price of the Class B
Warrants was reduced from $7.00 to $6.37.
(Note F) - Continuation of Research and Licensing Agreement:
------------------------------------------------
The Company has agreed to an extension of a research agreement with The
Regents of the University of California on behalf of the Berkeley Campus
("Berkeley"). The extension continues from March 1, 1997 through July 15, 1997
at a total level of funding of $97,000.
Pursuant to an agreement with Berkeley providing for an option to
obtain licenses for certain inventions resulting from the research, the Company
has entered into negotiations to license some of these inventions, and is
negotiating to obtain options to license others.
(Note G) - 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(R) (porfiromycin) for
the inclusion in a regulatory submission. The Company has accrued for $1,323,442
of expenses incurred under the Agreement as of June 30, 1997. During the twelve
months ending December 31, 1997, the Company estimates it will make payments of
$2,800,000 to Covance under the Agreement.
(Note H) Subsequent Events:
-----------------
Effective July 24,1997, the Company and Yale University (Yale) amended
certain licensing agreements between the parties pursuant to which, Yale agreed
to reduce certain amounts payable under such agreements. As a result, the
Company issued 150,000 shares of common stock to Yale.
Page 8
<PAGE>
(Note I) - Restatement of Financial Information:
------------------------------------
While preparing financial statements for the quarter ended September
30, 1998, the Company determined that its previously issued financial statements
were not in full compliance with applicable FASB initiatives and accounting
rules. The Company is amending this Form 10-QSB for the quarter ended June 30,
1997 to reflect adjustments recorded for the following transactions.
The Class A Preferred Stock requires semi-annual dividends of 5% per
annum payable in additional shares of Class A Preferred Stock. Since this
dividend is immediately convertible into common stock of the Company, the
Company has retroactively recorded non-cash dividends as a charge against
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
$282,306 in June 1997. The imputed non-cash dividend has been included in the
dividend requirement on Preferred Stock and the loss applicable to common
shareholders in the appropriate periods. The Company originally recorded these
dividends based on the par value of the preferred stock issued.
ITEM 2. PLAN OF OPERATIONS.
General
- -------
The Company is a development stage biopharmaceutical company. Its
activities to date have consisted primarily of research and development
sponsored by it pursuant to two separate license agreements with Yale
University, negotiating and obtaining other collaborative agreements, recruiting
management and other personnel, securing its facilities and raising equity and
debt financing. The Company has not generated any material revenues and has
incurred substantial operating losses from its activities.
The Company intends to use a substantial portion of the net proceeds of
its May, 1996 private financing to fund its plan of operations, which includes
the following elements for the next 12 months:
o Continue to develop internal research and development
capabilities and conduct research and development with respect to
the Company's core technologies and other product candidates
which may be identified by the Company. The Company expects to
incur substantial expenditures for research and development
expenses. In addition, the Company expects to purchase or lease
laboratory and office equipment worth approximately $480,000 and
enter into a sale and leaseback of approximately $385,000 of
laboratory equipment. During the next twelve months, the Company
does not plan to hire any additional employees.
o Conduct Phase III clinical studies in the U.S. and Europe of
Promycin for treatment of cancer of the head and neck.
Page 9
<PAGE>
o Continue to support research and development being performed at
Yale University and by other collaborators and seek additional
collaborative agreements.
o Seek to acquire, generally through in-licensing, oncology-related
products that can be marketed without significant additional
development activities.
The Company currently estimates that the remaining net proceeds of its
private placement in May, 1996 and its existing cash and equivalents will be
sufficient to fund its planned operations for approximately the next 4 months.
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, the Company will require additional funds. In
addition, the Company will need substantial additional financing, beyond this
period to fund further research and development and the Company's working
capital requirements. As of June 30, 1997 the amount required to fund operations
for the next twelve months is estimated at approximately $15,700,000. However,
the Company's cash requirements may vary materially from those now planned
because of results of research and development, results of product testing,
relationships with strategic partners, changes in focus and direction of the
Company's research and development programs, competitive and technological
advances, the regulatory process in the United States and abroad and other
factors.
The Company received an opinion from its auditors for the fiscal year
ended December 31, 1996, expressing substantial doubt as to its ability to
continue as a going concern. The Company intends to address the immediate need
for additional capital by raising funds through a private placement of its
securities, although the Company expects to require additional financing to fund
its longer-term activities and may require additional capital for acquisitions
and new development projects.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1997, the Company had working capital of $2,886,251. The
Company's principal sources of funds through June 30, 1997 have been $11,531,052
net proceeds from private financing through issuance of 1,250,000 Class A
convertible preferred stock; $9,696,210 from its initial public offering, and
$5,478,280 in net proceeds from private placements of common stock in 1992 and
1993 by its predecessor, MelaRx Pharmaceuticals Inc.
The Company used the proceeds of its initial public offering to repay a
previous bridge financing and used the remaining funds and the proceeds of its
sale of convertible preferred stock to implement its business plan, which
includes hiring of additional personnel; capital expenditures for the purchase
of equipment, principally for laboratory facilities; costs of research and
development; payment of license fees due under sponsored research agreements;
and grants to Yale University to fund certain research, including research in
Dr. Yung-Chi Cheng's laboratory. During the twelve months ending December 31,
1997, the Company will be required to make payments of an aggregate of
Page 10
<PAGE>
$1,205,000 to Yale University and the University of California, Berkeley, under
sponsored research and license agreements.
The Company requires substantial new revenues and 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 one or more
significant strategic partnerships with pharmaceutical companies for the
development of its core technologies, through which it would anticipate
receiving some of the substantial revenues and financing. The Company has
entered into discussions with several major pharmaceutical companies concerning
such a strategic alliance, but there can be no assurance that the Company will
be successful in achieving such an alliance, nor can the Company predict what
funds might be available to it if it can achieve such an alliance. The Company
is also seeking to raise funds through additional means, including (1) private
placements and recapitalization 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. No assurance can be given that
the Company will be successful in arranging financing through any of these
alternatives.
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.
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. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact of Statement
128 on the calculation of basic and dilutive earnings per share for the quarter
and six month periods ended June 30, 1997 and June 30, 1996 is not expected to
be material.
Page 11
<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 April 16,
1997, 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 ten
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:
For Withheld
--- --------
William R. Miller 5,589,203 305,364
John A. Spears 5,589,203 305,364
Alan C. Sartorelli Ph.D. 5,589,203 305,364
Michel C. Bergerac 5,589,203 305,364
Frank T. Cary 5,589,203 305,364
A. E. Cohen 5,589,203 305,364
James L. Ferguson 5,589,203 305,364
Michael C. Kent 5,589,203 305,364
E. Donald Shapiro 5,589,203 305,364
Walter Wriston 5,589,203 305,364
A vote was taken at the Annual Meeting on the proposal to amend the
Amended and Restated 1993 Stock Option Plan to increase the number of shares
which may be issued thereunder. 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:
For Against Abstained
--- ------- ---------
4,163,685 471,366 9,865
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, 1997. 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:
For Against Abstained
--- ------- ---------
Page 12
<PAGE>
5,878,927 2,900 12,740
The foregoing proposals are described more fully in the Company's
definitive proxy statement dated March 7, 1997, 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.
--------
10.01 Clinical Development Agreement between Vion
Pharmaceuticals, Inc., Covance Clinical Research Unit Ltd. and
Covance Inc. Confidential treatment has been requested for
portions of this exhibit.(1)
27. Article 5 Financial Data Schedule (Restated) for second
quarter 1997.
(b) Reports on Form 8-K.
-------------------
None
- -----------------
(1) Previously filed.
Page 13
<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: May 14, 1999
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,352,877
<SECURITIES> 329,200
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,772,822
<PP&E> 933,461
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,158,122
<CURRENT-LIABILITIES> 1,886,571
<BONDS> 0
0
9,794
<COMMON> 84,892
<OTHER-SE> 3,871,836
<TOTAL-LIABILITY-AND-EQUITY> 6,158,122
<SALES> 0
<TOTAL-REVENUES> 48,221
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,377,228
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,802
<INCOME-PRETAX> (5,172,780)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,172,780)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,172,780)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
