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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from ____to____
Commission file number 0-22613
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ANTIVIRALS INC
(Exact name of registrant as specified in its charter)
Oregon 93-07972223
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One SW Columbia Street, Suite 1105, Portland, Oregon 97258
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 503-227-0554
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Check whether the issuer (1) 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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock without par value 11,091,623
(Class) (Outstanding at November 6, 1997)
Transitional Small Business Disclosure Format (check one): Yes No X
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ANTIVIRALS INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION Page
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Item 1. Financial Statements
Balance Sheets - September 30, 1997 and December 31, 1996 2
Statements of Operations - Three and Nine Months Ended
September 30, 1997 and 1996 and from July 22, 1980
(Inception) to September 30, 1997 3
Statements of Cash Flows - Nine Months Ended September 30,
1997 and 1996 and from July 22, 1980 (Inception) to
September 30, 1997 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 6
PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
ANTIVIRALS INC.
(A Development Stage Company)
BALANCE SHEETS
September 30, December 31,
1997 1996
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $18,458,290 $ 3,011,229
Short-term investments - available for sale - 30,000
Other current assets 37,009 28,255
----------- -------------
Total Current Assets 18,495,299 3,069,484
Property and Equipment, net of accumulated
depreciation and amortization of
$2,219,215 and $1,858,359 357,376 531,652
Patent Costs, net of accumulated amortization of
$203,813 and $168,000 551,637 474,806
Deferred Offering Costs - 143,110
Other Assets 29,847 29,847
----------- -------------
Total Assets $19,434,159 $ 4,248,899
----------- -------------
----------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 526,042 $ 153,202
Accrued payroll 286,484 169,609
Deferred payments 7,996 7,996
----------- -------------
Total Current Liabilities 820,522 330,807
Common Stock Subject to Recission, $.0001 par
value, zero and 1,292,973 issued and outstanding - 3,121,965
Shareholders' Equity:
Preferred Stock, $.0001 par value, 2,000,000
shares authorized; none issued and outstanding - -
Common stock, $.0001 par value, 50,000,000
shares authorized; 11,033,481 and 7,486,790
issued and outstanding 954 749
Additional paid-in capital 33,840,891 13,220,861
Deficit accumulated during the development stage (15,228,208) (12,425,483)
----------- -------------
Total Shareholders' Equity 18,613,637 796,127
----------- -------------
Total Liabilities and Shareholders' Equity $19,434,159 $ 4,248,899
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----------- -------------
The accompanying notes are an integral part of these balance sheets.
2
ANTIVIRALS INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Three months ended September 30, Nine months ended September 30, July 22, 1980
------------------------------- ------------------------------ (Inception) to
1997 1996 1997 1996 September 30, 1997
------- ------- ------- ------- ------------------
Revenues, from grants and research
contracts $ 5,345 $ 16,827 $ 9,100 $ 16,827 $ 698,597
Operating expenses:
Research and development 748,550 385,011 2,122,203 1,177,157 11,133,777
General and administrative 294,418 216,924 874,558 439,089 5,424,140
----------- ---------- ----------- ---------- -------------
1,042,968 601,935 2,996,761 1,616,246 16,557,917
Other income (expense):
Interest income 212,612 6,114 304,560 87,703 653,986
Interest expense (119,624) - (119,624) - (119,624)
Realized gain on sale of
short-term investments - - - 96,750 96,750
----------- ---------- ----------- ---------- -------------
92,988 6,114 184,936 184,453 631,112
----------- ---------- ----------- ---------- -------------
Net loss $ (944,635) $ (578,994) $(2,802,725) $(1,414,966) $(15,228,208)
----------- ---------- ----------- ---------- -------------
----------- ---------- ----------- ---------- -------------
Net loss per share $ (0.09) $ (0.06) $ (0.29) $ (0.18)
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Shares used in per share calculations 11,012,743 8,959,358 9,735,018 8,051,477
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
The accompanying notes are an integral part of these statements.
3
ANTIVIRALS INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Period
July 22, 1980
Nine months ended September 30, (Inception) to
1997 1996 September 30, 1997
------- ------- ------------------
Cash flows from operating activities:
Net loss $(2,802,725) $(1,414,966) $(15,228,208)
Adjustments to reconcile net loss to net cash flows
used in operating activities:
Depreciation and amortization 348,543 387,435 2,398,400
Loss on disposal of assets 265 - 265
Realized gain on sale of short-term investments -
available for sale - (96,750) (96,750)
Compensation expense on issuance of common
stock and partnership units - - 182,392
Compensation expense on issuance of options and
warrants to purchase common stock or partnership units 98,802 - 661,155
Conversion of interest accrued to common stock - - 7,860
(Increase) decrease in:
Other current assets (8,754) (5,314) (37,009)
Other assets - - (29,847)
Net increase in accounts payable, accrued payroll
and deferred payments 489,715 (52,441) 820,522
------------ ------------ -------------
Net cash used in operating activities (1,874,154) (1,182,036) (11,321,220)
Cash flows from investing activities:
Proceeds from sale or redemption of short-term investments 30,000 182,750 247,750
Purchase of property and equipment (138,872) (41,992) (2,552,228)
Patent costs (112,491) (53,189) (755,450)
------------ ------------ -------------
Net cash provided by (used in) investing activities (221,363) 87,569 (3,059,928)
Cash flows from financing activities:
Proceeds from sale of common stock, warrants, and
partnership units, net of offering costs 17,688,263 4,028,299 33,224,875
Buyback of common stock pursuant to rescission offering (288,795) - (288,795)
Withdrawal of partnership net assets - - (176,642)
Issuance of convertible debt - - 80,000
Deferred offering costs 143,110 - -
------------ ------------ -------------
Net cash provided by financing activities 17,542,578 4,028,299 32,839,438
Increase in cash and cash equivalents 15,447,061 2,933,832 18,458,290
Cash and cash equivalents:
Beginning of period 3,011,229 680,892 -
------------ ------------ -------------
End of period $18,458,290 $ 3,614,724 $18,458,290
------------ ------------ -------------
------------ ------------ -------------
The accompanying notes are an integral part of these statements.
4
ANTIVIRALS INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the three and nine-month
periods ended September 30, 1997 and 1996 and the financial information as of
September 30, 1997 is unaudited; however, such information reflects all
adjustments consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods. The
financial information as of December 31, 1996 is derived from AntiVirals
Inc.'s (the Company's) Registration Statement of Form SB-2 dated June 3,
1997. The interim financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's
Registration Statement on Form SB-2 and prospectus, dated June 3, 1997. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
NOTE 2. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued Statement 128,
EARNINGS PER SHARE ("SFAS 128"), superseding Accounting Principles Board
Opinion No. 15 ("APB 15"). SFAS 128 establishes a different method of
computing net income per share than is currently required under the
provisions of APB 15. Under SFAS 128, the Company will be required to present
both basic net income per share and diluted net income per share. SFAS 128 is
required to be adopted for periods ending after December 15, 1997. As the
Company has recorded losses for all periods presented, SFAS 128 has no effect
on as reported loss per share amounts.
NOTE 3. EXERCISE OF OVER-ALLOTMENT OPTION
In July 1997, the Company's Underwriters exercised their over-allotment
option and purchased 300,000 additional units at $9 per unit, the initial
public offering price, with each unit consisting of one share of common stock
and a warrant to purchase one share of common stock for $13.50. Net proceeds
of $2,478,600 were received by the Company.
NOTE 4. RESCISSION OFFERING
In July 1997, the Company completed its rescission offering to certain
shareholders. In this offering, the Company repurchased 64,049 shares of its
common stock for payments totaling $408,419, which included interest expense
of $119,624.
NOTE 5. SUBSEQUENT EVENT
On November 6, 1997, the Company announced it had signed a letter of intent
to acquire ImmunoTherapy Corporation, a biopharmaceutical company, for $24
million in stock and warrants. Subject to the companies reaching a
definitive agreement, the transaction will be accounted for as a purchase
with substantially all of the purchase price written off as in process
research and development.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING INFORMATION
The Financial Statements and Notes thereto should be read in conjunction with
the following discussion. The discussion in this Form 10-QSB contains
certain forward-looking statements that involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations and
intentions. The cautionary statements made in this discussion should be read
as being applicable to all related forward-looking statements wherever they
appear in this filing. The Company's actual results could differ materially
from those contained in the forward-looking statements depending on various
factors, including, but not limited to, the results of research and
development efforts, the results of pre-clinical and clinical testing, the
effect of regulation by the FDA and other agencies, the impact of competitive
products, product development, commercialization and technological
difficulties and those risks discussed in "Risk Factors" included in the
Company's Prospectus dated June 3, 1997, as well as those discussed elsewhere
in this filing.
OVERVIEW
From its inception in July 1980, the Company has devoted its resources
primarily to fund its research and development efforts. The Company has been
unprofitable since inception and, other than limited interest and grant
revenue, has had no material revenues from the sale of products or other
sources, and does not expect material revenues for at least the next 12
months. The Company expects to continue to incur losses for the foreseeable
future as it expands its research and development efforts. As of September
30, 1997, the Company's accumulated deficit was $15,228,208.
RESULTS OF OPERATIONS
Operating expenses increased to $1,042,968 in the third quarter of 1997 from
$601,935 in the third quarter of 1997 and to $2,996,761 for the nine months
ended September 30, 1997 from $1,616,246 for the comparable period of 1996
due to increases in research and development staffing and expenses associated
with outside collaborations, regulatory affairs, and pre-clinical testing of
the Company's technologies.
Interest income increased to $212,612 and $304,560, respectively, for the
three and nine month periods ended September 30, 1997 from $6,114 and $87,703
in the comparable periods of 1996 due to increased interest earning cash
balances in 1997 from proceeds from a third quarter 1996 private placement,
the Company's initial public offering in June 1997 and the sale of additional
shares in the exercise of the underwriters' over-allotment option in July
1997. Interest expense increased to $119,624 for both the three and nine
month periods ended September 30, 1997 from zero for the comparable periods
of 1996 reflecting interest paid to shareholders who participated in the
Company's rescission offering, which was completed in July 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $18,458,290 at September 30,
1997, compared with $3,011,229 at December 31, 1996. The increase of
$15,447,061 was primarily due to net proceeds of $17,688,263 from the
Company's initial public offering
6
effective June 3, 1997 and from the exercise of the underwriters'
over-allotment option in July 1997, offset by $1,874,154 used in operations,
$288,795 used to repurchase shares pursuant to the Company's rescission
offering and $221,363 used for investing activities which consist primarily
of purchases of property and equipment and patent related costs. Accounts
payable increased from $153,202 at December 31, 1996 to $526,042 at September
30, 1997, primarily due to the accrual of costs associated with the Company's
initial public offering.
The Company's future expenditures and capital requirements will depend on
numerous factors including, without limitation, the progress of its research
and development programs, the progress of its pre-clinical and clinical
trials, the time and costs involved in obtaining regulatory approvals, the
cost of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights, competing technological and market
developments, the ability of the Company to establish collaborative
arrangements and the terms of any such arrangements, and the costs associated
with commercialization of its products. The Company's cash requirements are
expected to increase significantly each year as it expands its activities and
operations. There can be no assurance, however, that the Company will ever
be able to generate product revenues or achieve or sustain profitability.
The Company does not expect to raise additional funds in order to satisfy its
cash requirements over the next twelve months.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibit filed as a part of this report is listed below and this list
constitutes the exhibit index.
EXHIBIT NO.
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27 Financial Data Schedule
(b) Reports on Form 8-K
On July 9, 1997, the Company filed the following current report on Form 8-K
under Item 5. Other Events:
Date of Report Topic
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July 3, 1997 Exercise of underwriters' over-allotment
option and completion of rescission offering.
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 7, 1997 ANTIVIRALS INC.
By: /s/ DENIS R. BURGER, Ph.D.
---------------------------------
Denis R. Burger, Ph.D.
Chief Executive Officer and Director
(Principal Executive Officer)
By: /s/ ALAN P. TIMMINS
---------------------------------
Alan P. Timmins
Chief Operating Officer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
8
5
9-MOS
DEC-31-1997
JAN-01-1997
SEP-30-1997
18,458,290
0
0
0
0
18,495,299
2,460,107
2,102,731
19,434,159
820,522
0
0
0
954
18,612,683
19,434,159
0
9,100
0
0
2,996,761
0
119,624
(2,802,725)
0
(2,802,725)
0
0
0
(2,802,725)
(0.29)
(0.29)
