<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1999, or
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____________ to _____________.
COMMISSION FILE NO.: 0-25978
---------------
THERAPEUTIC ANTIBODIES INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 62-1212485
- ---------------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1207 17TH AVENUE SOUTH, SUITE 103
NASHVILLE, TENNESSEE 37212
- ---------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
(615) 327-1027
- ----------------------------------------
(Registrant's Telephone Number,
Including Area Code)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------ ------
As of May 17, 1999, 52,057,219 shares of the registrant's Common Stock
were outstanding.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Page
----
Condensed Consolidated Balance Sheets -- March 31, 1999
and December 31, 1998.............................................. 1
Condensed Consolidated Statements of Operations -- Three
months ended March 31, 1999 and 1998............................... 2
Consolidated Statements of Cash Flows -- Three
months ended March 31, 1999 and 1998............................... 3
Notes to Condensed Consolidated Financial Statements ................... 4
<PAGE> 3
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,497,279 $ 7,760,328
Restricted cash 136,170 419,168
Trade receivables 70,724 67,677
Value added tax receivable 294,485 326,849
Inventories 306,859 287,802
Other current assets 581,671 712,370
------------ ------------
Total current assets 4,887,188 9,574,194
Property and equipment, net 10,927,311 11,074,766
Patent and trademark costs, net 695,311 678,306
Other assets, net 81,400 94,236
------------ ------------
Total assets $ 16,591,210 $ 21,421,502
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,473,290 $ 1,755,098
Accrued interest 91,475 122,486
Current portion of notes payable 1,570,228 2,159,428
------------ ------------
Total current liabilities 3,134,993 4,037,012
Notes payable, net of current portion 4,715,579 4,744,216
Deferred revenue 325,133 342,363
Other liabilities -- 275,477
------------ ------------
Total liabilities 8,175,705 9,399,068
------------ ------------
Stockholders' equity:
Common stock - par value $.001 per share; 59,000,000 shares authorized,
52,057,219 issued and outstanding 52,057 52,057
Additional paid-in capital 87,086,104 87,074,215
Deficit accumulated during the development stage (1984-1999) (78,680,016) (75,301,311)
Other comprehensive income (loss) (42,640) 197,473
------------ ------------
Total stockholders' equity 8,415,505 12,022,434
------------ ------------
Total liabilities and stockholders' equity $ 16,591,210 $ 21,421,502
============ ============
</TABLE>
1
<PAGE> 4
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
For the For the Cumulative
Three Months Ended Development Stage
March 31, from August 10, 1984
-------------------------------- (inception) through
1999 1998 March 31, 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Sales and contract revenue $ 64,688 $ 89,691 $ 3,582,765
Licensing revenue -- 143,925 3,900,380
Interest income 64,314 86,849 2,226,362
Grant income 10,210 10,287 784,217
Foreign currency gains -- 46,476 1,785,984
Value-added tax and insurance recoveries -- -- 577,170
Other 6,931 8,214 307,819
------------ ------------ ------------
146,143 385,442 13,164,697
------------ ------------ ------------
Expenses:
Cost of sales and contract revenue 35,155 19,004 1,021,071
Research and development 2,374,625 2,565,670 55,780,300
General and administrative 317,679 981,129 17,311,513
Marketing and distribution 88,155 135,936 2,612,114
Depreciation and amortization 415,800 373,968 7,489,421
Interest 133,635 212,884 5,169,766
Foreign currency losses 159,799 -- 1,313,621
Debt conversion expense -- -- 801,597
Other -- -- 345,310
------------ ------------ ------------
3,524,848 4,288,591 91,844,713
------------ ------------ ------------
Net loss (3,378,705) (3,903,149) (78,680,016)
============ ============ ============
Redeemable preferred stock dividends -- -- (32,877)
------------ ------------ ------------
Net loss applicable to common shareholders (3,378,705) (3,903,149) (78,712,893)
Other comprehensive income (loss), before
and after tax:
Change in equity due to foreign currency
translation adjustments (240,113) 84,650 (42,640)
------------ ------------ ------------
Total comprehensive loss $ (3,618,818) $ (3,818,499) $(78,755,533)
============ ============ ============
Basic and diluted net loss per share $ (0.06) $ (0.17) $ (6.66)
============ ============ ============
Weighted average shares used in computing
basic and diluted net loss per share 52,057,219 23,252,825 11,812,837
============ ============ ============
</TABLE>
2
<PAGE> 5
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the For the Cumulative
Three Months Ended Development Stage
March 31, from August 10, 1984
---------------------------- (inception) through
1999 1998 March 31, 1999
------------ ----------- --------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net loss $(3,378,705) $(3,903,149) $(78,680,016)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 415,800 373,968 7,489,421
Disposal of property and equipment -- -- 1,206,566
Foreign currency (gain) loss 159,799 (46,476) (472,363)
Warrant expense -- -- 486,913
Stock-based compensation expense 11,889 27,186 722,417
Debt conversion expense -- -- 801,597
Changes in:
Restricted cash 282,998 -- (136,170)
Trade receivable 18,683 412,803 (135,322)
Inventories (19,056) 19,234 (192,685)
Other current assets 119,735 91,512 (589,527)
Accounts payable and accrued expenses (266,771) (72,889) 1,620,432
Accrued interest (32,623) (14,641) 830,351
Deferred revenue (10,208) 23,548 818
Other (271,027) -- (281,639)
----------- ----------- ------------
Net cash used in operating activities (2,969,486) (3,088,904) (67,329,207)
----------- ----------- ------------
Cash flows from investing activities:
Purchase of property and equipment (408,686) (133,701) (15,682,036)
Patent and trademark costs (27,189) (15,651) (787,843)
Purchase of short-term investments -- -- (13,933,294)
Maturity of short-term investments -- 1,497,240 13,933,294
Other -- -- 69,750
----------- ----------- ------------
Net cash provided by (used in) investing activities (435,875) 1,347,888 (16,400,129)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from notes payable -- -- 20,450,244
Payments on notes payable (653,824) (306,487) (10,177,718)
Proceeds from line of credit -- -- 3,371,278
Payments on line of credit -- (43,836) (3,371,278)
Proceeds from convertible debt, net -- -- 9,655,000
Payments on convertible debt -- -- (4,320,325)
Proceeds from issuance of stock, net -- -- 71,719,109
Proceeds from issuance of warrants -- -- 65,000
Other -- -- (149,467)
----------- ----------- ------------
Net cash (used in) provided by financing activities (653,824) (350,323) 87,241,843
----------- ----------- ------------
Effect of exchange rate changes on cash and cash equivalents (203,864) (21,246) (15,228)
----------- ----------- ------------
Net (decrease) increase in cash and cash equivalents (4,263,049) (2,112,585) 3,497,279
Cash and cash equivalents, beginning of period 7,760,328 4,915,077 --
----------- ----------- ------------
Cash and cash equivalents, end of period $ 3,497,279 $ 2,802,492 $ 3,497,279
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim condensed consolidated financial statements are
unaudited, but include all adjustments (consisting of normal recurring accruals)
which are, in the opinion of management, necessary for a fair statement of the
results for such periods.
The unaudited interim consolidated financial statements should be read in
conjunction with the audited December 31, 1998 consolidated financial statements
of Therapeutic Antibodies Inc. (the "Company"). The December 31, 1998 condensed
consolidated balance sheet data was derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles.
The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the full year ending December 31, 1999.
4
<PAGE> 7
NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board issued Statement of
Position (SOP) No. 98-1 "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use" ("SOP No. 98-1") and Statement of Position No.
98-5 "Reporting on the Costs of Start-Up Activities" ("SOP No. 98-5"). The
Company has adopted SOP No. 98-1 and SOP No. 98-5 in the first quarter of 1999
as required. However, the adoption has not had a significant impact on the
Company's financial position and results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
In general, SFAS No. 133 requires that all derivatives be recognized as either
assets or liabilities in the balance sheet at their face value, and sets forth
the manner in which gains or losses thereon are to be recorded. The treatment of
such gains and losses is dependent upon the type of exposure, if any, for which
the derivative is designated as a hedge. This statement is effective for periods
beginning after June 15, 1999. Management is currently assessing the impact of
adopting SFAS No. 133, but does not anticipate a significant impact on the
Company's financial position or results of operations.
NOTE 3 - BASIC AND DILUTED EARNINGS PER COMMON SHARE
The basic and diluted loss per common share calculation was based on Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128").
The calculations are based upon the weighted average number of shares of common
stock outstanding during each period as disclosed in the consolidated statements
of operations and comprehensive loss. Common equivalent shares from stock
options, warrants and other dilutive securities totaling 3,944,641 at March 31,
1999, and 2,779,334 at March 31, 1998 are excluded from the computations as
their effect is antidilutive.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of Therapeutic Antibodies Inc. (the "Company") should be
read in conjunction with the condensed consolidated financial statements and
notes thereto. Statements made in this Quarterly Report on Form 10-Q which are
not historical fact are forward-looking statements. In addition, the Company,
through its senior management, from time to time makes forward-looking public
statements concerning its expected future operations and performance and other
developments. Such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995 and
are necessarily estimates reflecting the Company's best judgment based on
current information and involve a number of risks and uncertainties, and there
can be no assurance that other factors will not affect the accuracy of such
forward-looking statements. While it is impossible to identify all such factors,
factors which could cause actual results to differ materially from those
estimated by the Company include those but are not limited to, changes in the
regulation of the pharmaceutical industry or in pharmaceutical product testing
or approval standards, both in the United States and internationally,
competitive pressures on the pharmaceutical industry and the Company's response
thereto, the results of clinical tests of the Company's products currently in
development, the receipt of FDA and other regulatory approvals of the Company's
products, the ability of the Company's competitors to develop and manufacture
products that compete with the Company's products, the Company's ability to
appropriately address the Year 2000 issue, general conditions in the economy and
capital markets, and other factors which may be identified from time to time in
the Company's Securities and Exchange Commission filings and other public
announcements. These and other factors are described in more detail in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operation - Business Risks," which factors are incorporated by
reference herein.
GENERAL
Since its inception, the Company has been in the development stage,
devoting its efforts and resources to drug discovery and development programs
relating to the development of highly purified, polyclonal antibodies for the
treatment of disease. The Company's revenues have been primarily derived from
licensing agreements with corporate partners, contract agreements, product
sales, grant income, and interest income. The Company has incurred net losses
each year since its inception and the Company expects to continue to incur
operating losses during at least the next year due to continued spending on
research, product development and the requirements for process development,
preclinical and clinical testing, regulatory affairs, initial manufacturing
activities and administration. To fund these activities, the Company will
continue to evaluate opportunities to raise further funding which will be
required to carry out the current business plan.
The Company conducts its operations from its headquarters in the United
States and through subsidiaries located in the United Kingdom and Australia.
RECENT DEVELOPMENTS
In April 1999, the Company received the results of its Phase IIb
clinical study of its CytoTAb(R) product for use in the treatment of severe
sepsis syndrome. The results of the 81-patient study revealed statistically
significant improvements in important clinical outcomes, including reductions in
the amount of time that patients spent on assisted ventilation and in intensive
care units. The Company is seeking a pharmaceutical partner to enable further
development of CytoTAb(R) for this and other indications.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
The Company's total revenues for the first quarter of 1999 decreased by
62% to $146,000 from $385,000 for the same period in 1998. No licensing revenue
was earned during the quarter ended March 31, 1999 compared to $144,000 earned
during the first quarter of 1998. In addition, there was a $46,000 foreign
currency gain during the three months ended March 31, 1998. Sales and contract
revenue decreased 28% during the three months ended March 31, 1999 to $65,000
from $90,000 during the same period in 1998. The
6
<PAGE> 9
first quarter sales of ViperaTAb(R) were delayed to the second quarter of 1999
pending approval of the facilities inspection which was received in April 1999.
Interest income during the first quarter of 1999 was $64,000, a decrease of 26%
from $87,000 in the first quarter of 1998 reflecting the investment of cash
reserves in more liquid thus lower yielding instruments in 1999.
Total expenses for the quarter ended March 31, 1999 decreased by 18% to
$3,525,000 from $4,289,000 for the same period in 1998 due to the Company's cost
cutting measures, particularly in the areas of research and development and
general and administrative expenses. Research and development expenses during
the same periods decreased by 7% to $2,375,000 from $2,566,000 due to
discontinuation of certain research and clinical projects that were determined
not to meet the Company's goal of near-term commercial success.
General and administrative expenses for the quarter ended March 31,
1999 decreased by 68% to $318,000 from $981,000 for the quarter ended March 31,
1998. This decrease reflects the Company's efforts to reduce costs and downsize
the corporate structure.
Marketing and distribution expenses decreased for the three months
ended March 31, 1999 by 35% to $88,000 from $136,000 for the three months ended
March 31, 1998, The decrease is due to reductions in consulting, travel and
product distribution activity related to product sales during 1999.
Depreciation and amortization expense for the quarter ended March 31,
1999 increased by 11% to $416,000 from $374,000 for the quarter ended March 31,
1998, as a result of added capital expenditures since March 31, 1998.
Interest expense in the three months ending March 31, 1999, decreased
by 37% to $134,000 from $213,000 in the three months ending March 31, 1998 as a
result of the Company's reduction of debt obligations from $8,267,000 at March
31, 1998 to $6,286,000 at March 31, 1999.
The Company's net loss for the quarter ended March 31, 1999, was
$3,379,000 compared to a net loss of $3,903,000 for the quarter ended March 31,
1998.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has been in the development stage,
devoting its efforts and resources to drug discovery and development programs.
Capital resources have been used for the establishment and expansion of
production facilities, for product research and development activities, for
clinical testing and to meet the Company's overall increased working capital
requirements. Management does not expect revenues from product sales to be a
significant source of funding until additional products receive regulatory
approval. Although the Company anticipates the launch of its CroTAb(R) antivenom
product following FDA approval in 1999, revenues from sales of CroTAb(R) are not
expected to be significant in 1999. Future capital requirements will depend on
numerous factors including, but not limited to, the progress of the Company's
research programs and clinical trials, the development of regulatory
submissions, the receipt of FDA approval of CroTAb(R), the commercial viability
of the Company's products, the ability to attract collaborative partners with
sales, distribution and marketing capabilities, and the terms of any new
licensing arrangements.
At March 31, 1999, the Company had cash and cash equivalents totaling
$3,633,000. The Company must raise additional financing by mid-1999 to fund
operations. The Company is currently pursuing several financing alternatives and
is engaged in late stage discussions with a strategic partner that may lead to a
business combination on a share exchange basis at a value that approximates the
current market value of the Company. The Company has also entered into
discussions with third parties relating to sales of additional debt or equity
7
<PAGE> 10
securities, the disposal of certain non-core investments and additional product
licensing or collaboration arrangements. There can be no assurance that the
Company will obtain the required financing and, if none of these financing
alternatives are successfully implemented, the Company will not have sufficient
funds to continue operations. The Company believes that in the absence of
additional financing, it will have to take action to protect the Company from
its creditors through formal insolvency proceedings, or pursue alternative
courses of action which may result in there being negligible remaining
shareholder value.
The Company's net cash used in operating activities during the three
months ended March 31, 1999, totaled $2,969,000, a decrease of 4% from the three
months ended March 31, 1998. Capital expenditures increased 206% to $409,000 in
the first three months of 1999 from $134,000 in the first three months of 1998
due to the purchase of replacement purification equipment for CroTAb(R). The
Company anticipates that total capital expenditures for 1999 will be
approximately $1,900,000. During the remainder of 1999, the Company intends to
replace certain equipment at its production facilities in Wales and Australia to
attain greater efficiencies in the production process as well as continue needed
upkeep of existing equipment.
On April 30, 1999, the Company repaid the outstanding balance of an
$800,000 term loan, plus accrued interest, to Equitas, L.P. The loan bore
interest at an annual rate of 11.5%.
During 1998, the Company received milestone payments of $1,500,000
under the Altana Agreement as a result of the FDA's acceptance of the Company's
PLA and ELA for CroTAb(R). The Company is entitled to receive additional
payments under the agreement based on achievement of certain milestones relating
to CroTAb(R) and the Company's DigiTAb(R) and TriTAb(R) products. The Company
anticipates receiving additional payments under the agreement of $2,000,000 in
1999 based on FDA approval of CroTAb(R) and progression of the DigiTAb(R) and
TriTAb(R) regulatory filings with the FDA.
In May 1998, the Company entered into an agreement with G. D. Searle &
Co. ("Searle") for the identification, development and commercialization of a
new antibody based drug designed to titrate the effects of Searle's new
xemilofiban and orbofiban anticoagulent products. Searle anticipated that it
would pay the Company up to $8,000,000 over the term of the agreement for
research and development and product supplies based on achieving certain
milestones. The Company received its first milestone payment of $1,000,000 upon
execution of the agreement in May 1998. In January 1999, however, Searle made
the decision to cease development of its xemilofiban and orbofiban projects and
exercised its right to terminate its agreement with the Company.
8
<PAGE> 11
On November 9, 1998, the Company completed a $19,500,000 capital
refinancing involving the issuance of 28,690,561 new shares of the Company's
Common Stock on the London Stock Exchange at $.68 per share (the "1998
Placing"). The 1998 Placing included the private placement of 21,300,000 new
shares of Common Stock and the conversion of all outstanding shares of the
Company's Series A Convertible Redeemable Preferred Stock and $2,900,000 of
principal and interest on the Company's 15% Subordinary Promissory Notes (the
"1998 Notes") and certain other loan notes into a total of 7,390,561 shares of
the Company's Common Stock. Of the approximately $12,600,000 in cash raised in
the private placement, net of expenses, $1,730,000 was used to repay the
outstanding balance of principal and interest on the 1998 Notes. The remaining
proceeds were and continue to be used to fund the ongoing development of the
Company's products.
In April 1998, the Company received a loan of $162,000 from the
Department of Primary Industries and Resources of the South Australian
Government to be used for the construction of transportable buildings at the
Company's Australian facility. Principal on the loan is payable in 20 equal
semi-annual installments, together with interest accrued thereon, beginning
October 1998 through April 2008. The interest rate on the loan is currently 6.5%
annually and is variable at the discretion of the Minister for Primary
Industries.
In June 1998, the Company received the final installment on a loan from
the Department of Industry and Trade ("DIT") of the South Australian Government.
In April 1996, the DIT agreed to loan the Company up to $62,000 based upon the
number of local citizens employed by the Company through April 1998. At March
31, 1999, the Company had borrowed a total of $50,000. This loan does not bear
interest and becomes due in full on April 29, 2006.
YEAR 2000 READINESS
General
The Company utilizes management information systems and software
technology that may be affected by Year 2000 issues. During 1998, the Company
implemented a plan (the "Y2K project") to ensure that its systems would be Year
2000 compliant. The Y2K project is addressing the issue of Programmable Logic
Controllers (PLC) and computer programs being able to distinguish between dates
in the 20th century and dates in the 21st century. The Y2K project is expected
to make all of the Company's business systems Year 2000 compliant, or they will
be retired.
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Y2K Project
The Company's Y2K project is divided into five phases. The project
phases are: 1) compile an inventory of all equipment; 2) assign priorities to
the equipment identified as being at risk for Year 2000; 3) assess the Year 2000
compliance of items identified as being significant to the operational
activities of the Company; 4) repair or replace material items that are
determined not to be Year 2000 compliant; and 5) test and validate material
items. A task force has been established to carry out these tasks which includes
subgroups at each of the Company's four locations, Nashville, USA; Adelaide,
Australia; London, UK; and Llandysul, UK.
As of March 31, 1999, the Company had completed the inventory and
priority assignment phases (phases 1 and 2) for each location.
The assessment of Year 2000 compliance (phase 3) includes the
identification and prioritization of critical external suppliers. The Company
will undertake a detailed evaluation of critical suppliers by communicating with
them about their commitment, plans and progress in addressing their Year 2000
issues. Detailed plans for this evaluation of material items and suppliers are
in place and have been initiated. The assessment of critical suppliers was
approximately 50% complete at the end of the first quarter of 1999. Phase 3 is
due for completion by mid-1999.
Phase 4, the repair and replacement of equipment and application
software that is not Year 2000 compliant, includes conversion, where available
from the supplier, or replacement. The testing phase will be undertaken as the
hardware and software is converted or replaced.
During 1998, the Y2K task force determined that the accounting software
used in Australia is not Year 2000 compliant. The software vendor released an
upgrade during the first quarter of 1999 that is Year 2000 compliant. This
upgrade will be installed at the Company's Australian facilities during the
third quarter of 1999. In addition, TAb has identified a possible risk to Year
2000 compliance posed by some of the PLC or embedded systems controlling the air
handling units at each of the production sites (Wales and Australia). The extent
of this risk and the optimal solution are currently being researched. The task
force has also determined that the sheep planning aid software that is used in
Australia is non-compliant. The software will require major code modification to
achieve compliance with a cost estimated to be $7,200.
All phases of the Y2K project are expected to be complete before the
end of 1999. The phases are concurrent rather than consecutive; therefore, more
than one phase may be in progress at the same time.
Costs
The total estimated cost associated with the required modifications to
become Year 2000 compliant is not expected to be material to the Company's
financial position. The total capital cost is estimated to be no more than
$150,000. This figure may vary depending on the cost of the replacements needed
after completion of the assessment phase of the Y2K project. The total operating
cost incurred to date attributable to staff time and effort devoted to the Y2K
project to date is $60,000. The estimated future operating cost of completing
the project is $60,000.
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Risks
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of normal business activities or operations. Due
to the inherent uncertainty when dealing with the Year 2000 issues, and from the
uncertainty of the Year 2000 readiness of suppliers, the Company is unable at
this time to determine whether or not any Year 2000 failures will have a
material effect on the Company, its operations or its financial condition. This
Year 2000 project is expected to significantly reduce the level of uncertainty
about any Year 2000 problem posed to the Company by its compliance, or by the
compliance of its material suppliers. The Company believes that with the
implementation and completion of its Year 2000 project as scheduled the
possibility of significant interruptions of normal operations should be minimal.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133"). In general, SFAS No. 133 requires that all derivatives be recognized as
either assets or liabilities in the balance sheet at their face value, and sets
forth the manner in which gains or losses thereon are to be recorded. The
treatment of such gains and losses is dependent upon the type of exposure, if
any, for which the derivative is designated as a hedge. This statement is
effective for periods beginning after June 15, 1999. Management is currently
assessing the impact of adopting SFAS No. 133, but does not anticipate a
significant impact on the Company's financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three months ended March 31, 1999, there were no material
changes to the quantitative and qualitative disclosures about market risks
presented in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description of Exhibits
- ------ -----------------------
3.1 Amended and Restated Certificate of Incorporation of Therapeutic
Antibodies Inc.(1)
3.2 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of Therapeutic Antibodies Inc., filed May 13, 1998.(2)
3.3 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of Therapeutic Antibodies Inc., filed November 6,
1998.(3)
3.4 Amended and Restated Bylaws of Therapeutic Antibodies Inc.(1)
27.1 Financial Data Schedule (SEC use only)
- --------------------
(1) Incorporated by reference to appendices filed with the Company's Proxy
Statement relating to the Special Meeting of Shareholders held on
July 5, 1996.
(2) Incorporated by reference to exhibits filed with the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1998.
(3) Incorporated by reference to exhibits filed with the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1998.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on February 2, 1999 relating to
the termination of a development agreement with G.D. Searle & Co. ("Searle")
following Searle's decision to cease development of its xemilofiban and
orbofiban projects.
12
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be filed on its behalf by the
undersigned thereunto duly authorized.
Date: May 17, 1999 /s/ Andrew J. Heath, M.D., Ph.D.
------------------------------------------
Andrew J. Heath, M.D., Ph.D.
Chief Executive Officer (Interim Principal
Financial and Accounting Officer)
13
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