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 June 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 (I.R.S. Employer Identification No.)
of incorporation or organization)
One SW Columbia Street, 97258
Suite 1105, Portland, Oregon (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code: 503-227-0554
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
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 11,033,481
(Class) (Outstanding at August 4, 1997)
Transitional Small Business Disclosure Format (check one): Yes___ No __X__
ANTIVIRALS INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets - June 30, 1997 and December 31, 1996 2
Statements of Operations - Three and Six Months Ended
June 30, 1997 and 1996 and from July 22, 1980 (Inception)
to June 30, 1997 3
Statements of Cash Flows - Six Months Ended June 30, 1997
and 1996 and from July 22, 1980 (Inception) to June 30, 1997 4
Notes to Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 6
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
SIGNATURES 9
1
ANTIVIRALS INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
June 30, December 31,
1997 1996
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 17,555,893 $3,011,229
Short-term investments - available for sale - 30,000
Other current assets 29,018 28,255
------------- -------------
Total Current Assets 17,584,911 3,069,484
Property and Equipment, net of accumulated
depreciation and amortization of $2,102,731
and $1,858,359 362,769 531,652
Patent Costs, net of accumulated amortization of
$188,813 and $168,000 559,986 474,806
Deferred Offering Costs - 143,110
Other Assets 29,847 29,847
------------- -------------
Total Assets $ 18,537,513 $4,248,899
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 524,877 $ 153,202
Accrued payroll 360,478 169,609
Deferred payments 7,996 7,996
------------- -------------
Total Current Liabilities 893,351 330,807
Common Stock Subject to Recission, $.0001 par
value, 1,292,973 issued and outstanding 3,121,965 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; 9,486,790 and 7,486,790
issued and outstanding 817 749
Additional paid-in capital 28,804,954 13,220,861
Deficit accumulated during the development
stage (14,283,574) (12,425,483)
------------- -------------
Total Shareholders' Equity 14,522,197 796,127
------------- -------------
Total Liabilities and Shareholders' Equity $ 18,537,513 $4,248,899
------------- -------------
------------- -------------
The accompanying notes are an integral part of these balance sheets.
2
ANTIVIRALS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
July 22, 1980
Three months ended June 30, Six months ended June 30, (Inception) to
1997 1996 1997 1996 June 30, 1997
----------- ----------- ------------ ----------- -------------
Revenues, from grants and research contracts $ 3,754 $ - $ 3,754 $ - $ 693,251
Operating expenses:
Research and development 921,930 442,581 1,373,653 792,146 10,385,227
General and administrative 410,112 146,844 580,140 222,165 5,129,722
----------- ----------- ------------ ----------- -------------
1,332,042 589,425 1,953,793 1,014,311 15,514,949
Other Income:
Interest income 62,893 7,700 91,948 81,589 441,374
Realized gain on sale of short-term investments
- - - 96,750 96,750
----------- ----------- ------------ ----------- -------------
62,893 7,700 91,948 178,339 538,124
----------- ----------- ------------ ----------- -------------
Net loss $(1,265,395) $ (581,725) $ (1,858,091) $ (835,972) $(14,283,574)
----------- ----------- ------------ ----------- -------------
----------- ----------- ------------ ----------- -------------
Net loss per share $ (0.13) $ (0.07) $ (0.20) $ (0.11)
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Shares used in per share calculations 9,387,998 8,085,263 9,085,566 7,760,112
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
The accompanying notes are an integral part of these statemetns.
3
ANTIVIRALS INC.
(A Devlopment Stage Company)
STATEMENTS OF CASH FLOWS
For the Period
July 22, 1980
Six months ended June 30, (Inception) to
1997 1996 June 30, 1997
-------------- ------------ ---------------
Cash flows from operating activities:
Net loss $ (1,858,091) $ (835,972) $ (14,283,574)
Adjustments to reconcile net loss to net cash flows
used in operating activities:
Depreciation and amortization 265,032 258,331 2,326,470
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 (763) (10,733) (29,018)
Other assets - - (45,191)
Net increase in accounts payable, accrued payroll
and deferred payments 562,544 (88,391) 897,114
-------------- ------------ ---------------
Net cash used in operating activities (932,476) (773,515) (10,379,542)
Cash flows from investing activities:
Proceeds from sale or redemption of short-term investments 30,000 210,665 247,750
Purchase of property and equipment (75,489) (656) (2,488,845)
Patent costs (105,840) (25,038) (748,799)
-------------- ------------ ---------------
Net cash provided by (used in) investing activities (151,329) 184,971 (2,989,894)
Cash flows from financing activities:
Proceeds from sale of common stock, warrants, and
partnership units 15,480,354 1,217,780 31,016,966
Proceeds from exercise of warrants 5,005 - 5,005
Withdrawal of partnership net assets - - (176,642)
Issuance of convertible debt - - 80,000
Deferred offering costs 143,110 - -
-------------- ------------ ---------------
Net cash provided by financing activities 15,628,469 1,217,780 30,925,329
Increase in cash and cash equivalents 14,544,664 629,236 17,555,893
Cash and cash equivalents:
Beginning of period 3,011,229 680,892 -
-------------- ------------ ---------------
End of period $ 17,555,893 $ 1,310,128 $ 17,555,893
-------------- ------------ ---------------
-------------- ------------ ---------------
The accompnaying notes are an ingtegral part of these statments.
4
ANTIVIRALS INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the three and six-month periods
ended June 30, 1997 and 1996 and the financial information as of June 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 AntiViral's 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 Opinion 15. This statement
establishes a different method of computing net income per share than is
currently required under the provisions of Accounting Principles Board
Opinion No. 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. SUBSEQUENT EVENTS
Subsequent to June 30, 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.
Also subsequent to June 30, 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
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 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 June 30,
1997, the Company's accumulated deficit was $14,283,574.
RESULTS OF OPERATIONS
Operating expenses increased to $1,332,042 in the second quarter of 1997 from
$589,425 in the second quarter of 1996 and to $1,953,793 for the six months
ended June 30, 1997 from $1,014,311 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.
Other income increased to $62,893 for the three month period ended June 30,
1997 from $7,700 in the comparable period of 1996 due to increased interest
earning cash balances in 1997 from proceeds from a third quarter 1996 private
placement and the Company's initial public offering in June 1997. Other
income declined, however, to $91,948 for the six months ended June 30, 1997
from $178,339 for the six months ended June 30, 1996 due to other income
generated in the first quarter of 1996 from the sale of short-term
investments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $17,555,893 at June 30, 1997,
compared with $3,011,229 at December 31, 1996. The increase of $14,544,664
was primarily due to net proceeds of $15,480,354 from the Company's initial
public offering effective June 3, 1997, offset by $932,476 used in operations
and $151,329 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 $524,877 at June 30,
1997, primarily due to the accrual of costs associated with the Company's
initial public offering.
6
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.
Subsequent to June 30, 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.
Also subsequent to June 30, 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.
The Company does not expect to raise additional funds in order to satisfy its
cash requirements over the next twelve months.
7
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) On April 15, 1997, the Company sold an aggregate of 17,767 shares of Common
Stock for an aggregate purchase price of $5,005 to two people pursuant to
the exercise of warrants in reliance on Rule 701 promulgated under the
Securities Act of 1933.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 3, 1997, the shareholders of the Company took the following action:
1. The shareholders elected the nine nominees for director to the Board of
Directors of the Company. The nine directors elected, along with the
voting results are as follows:
Name No. of Shares Voting For No. of Shares Withheld Voting
---- ------------------------ -----------------------------
John A. Beaulieu 5,964,212 101,167
Denis R. Burger, Ph.D. 3,558,522 2,506,857
Nick Bunick 5,841,975 223,404
Donald R. Johnson, Ph.D. 5,959,141 106,238
James E. Reinmuth, Ph.D. 5,965,312 100,067
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.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the quarter ended
June 30, 1997.
8
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: August 7, 1997 ANTIVIRALS, INC.
By: /s/ Denis R. Burger, P.h.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)
5
6-MOS
DEC-31-1997
JAN-01-1997
JUN-30-1997
17,555,893
0
0
0
0
17,584,911
2,465,500
2,102,731
18,537,513
893,351
0
0
0
3,122,782
14,521,380
18,537,513
0
3,754
0
0
1,953,793
0
0
(1,858,091)
0
(1,858,091)
0
0
0
(1,858,091)
(0.20)
(0.20)
