-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PO1nTmrABs3TkJM1fQkuwIwLlQC7rXH8gDm/S5JN7qLsv7pSFyt7P4mc/tUNkfmc Hx+akPoB7Cg1/OoSm0FNtg== 0000942794-00-000014.txt : 20000425 0000942794-00-000014.hdr.sgml : 20000425 ACCESSION NUMBER: 0000942794-00-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AQUILA BIOPHARMACEUTICALS INC CENTRAL INDEX KEY: 0000704292 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 043307818 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12081 FILM NUMBER: 607433 BUSINESS ADDRESS: STREET 1: 175 CROSSING BLVD STREET 2: BIOTECHNOLOGY RESEARCH PARK CITY: FRAMINGHAM STATE: MA ZIP: 01702 BUSINESS PHONE: 5087975777 MAIL ADDRESS: STREET 1: 175 CROSSING BOULEVARD CITY: FRAMINGHAM STATE: MA ZIP: 01702 FORMER COMPANY: FORMER CONFORMED NAME: CAMBRIDGE BIOTECH CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CAMBRIDGE BIOSCIENCE CORP DATE OF NAME CHANGE: 19901116 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 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, 2000, 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 Number 0-12081 AQUILA BIOPHARMACEUTICALS, INC. Exact Name of Registrant as Specified in Its Charter) Delaware 04-3307818 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 175 Crossing Boulevard, Framingham, MA 01702 (Address of Principal Executive Offices) (Zip Code) (508) 628 - 0100 (Registrant's Telephone Number, Including Area Code) - ------------------------------------------------------ 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 ____. APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes _X__ No ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of April 20, 2000 Common Stock Outstanding 8,532,071 AQUILA BIOPHARMACEUTICALS, INC. Form 10-Q, March 31, 2000 INDEX PART I - FINANCIAL INFORMATION Item 1. Unaudited Financial Statements Page Number Consolidated Balance Sheets as of March 31, 2000and December 31, 1999...............3 Consolidated Statements of Operations for the three month periods ended March 31, 2000 and 1999...........................4 Consolidated Statements of Cash Flows for the three month periods ended March 31, 2000 and 1999.............5 Notes to Interim Financial Statements.............6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ....... 8 PART II - OTHER INFORMATION........................ 10 Item 1. Legal Proceedings - None Item 6. Exhibits and Reports on Form 8-K - None SIGNATURES..........................................12 Item 1 - Financial Statements Aquila Biopharmaceuticals, Inc. Consolidated Balance Sheet (unaudited) (in thousands) Assets 3/31/00 12/31/99 Current Assets: Cash and cash equivalents $ 3,436 $ 524 Marketable securities 4,961 6,493 Receivables 1,109 637 Inventories 533 498 Prepaid expenses & other current assets 222 280 Total current assets 10,261 8,432 Investments 244 244 Property, Plant, and Equipment, Net 6,009 6,191 Patents and Purchased Technology, Net 35 47 Other Assets 832 828 Total Assets $ 17,381 $ 15,742 Liabilities & Shareholders' Equity Current Liabilities: Accounts payable $ 375 $ 554 Accrued professional fees 121 165 Other accrued expenses 1,195 884 Current maturities of long term debt 1,343 1,577 Total Current Liabilities 3,034 3,180 Deferred Revenue 150 150 Long Term Debt 2,323 2,607 Total Liabilities 5,507 5,937 Shareholders' Equity: Preferred stock, authorized: 5,000,000 shares, none issued 0 0 Common stock, par value: $.01 per share, authorized: 30,500,000 shares, issued: 8,509,465 at March 31,2000 and 7,888,446 at December 31, 1999 85 79 Treasury Stock at cost: 7,631 shares In 2000 and 1999 (34) (34) Additional paid in capital 145,345 141,802 Accumulated other comprehensive income (21) 426 Accumulated Deficit (133,501) (132,468) Total Shareholders' Equity 11,874 9,805 Total Liabilities and Shareholders' Equity $ 17,381 $ 15,742 The accompanying notes are an integral part of these unaudited statements. Aquila Biopharmaceuticals, Inc. Consolidated Statement of Operations (unaudited) (in thousands, except per share amounts) Three Months Ended March 31,2000 2000 1999 Revenue: Product sales $ 276 $ 43 Research and development 1,166 119 1,442 162 Costs and expenses: Cost of sales 246 297 Research and development 2,084 1,243 General & administrative 707 834 Total costs and expenses 3,037 2,374 Other income, net 562 68 Net Loss $(1,033) $(2,144) Unrealized holding gains on available-for-sale securities 28 11 Less: reclassification for gain included in net income (475) -- Total other comprehensive income/(loss) (447) 11 Comprehensive loss $(1,480) $(2,133) Basic and diluted loss per weighted average share: Net loss $ (0.13) $(0.31) Weighted average number of common shares outstanding: Basic and diluted 7,980 6,998 The accompanying notes are an integral part of these unaudited statements. Aquila Biopharmaceuticals, Inc. Consolidated Statement of Cash Flows (unaudited),(in thousands) For the three months ended March 31, 2000 1999 Cash Flows From Operating Activities: Net Loss $ (1,033) $(2,144) Adjustments to reconcile net loss to net cash provided/(used) by operating activities: Depreciation and amortization 202 199 Issuance of non-employee options 15 -- Changes in assets and liabilities: Receivables (472) (78) Inventories (35) 13 Prepaid expenses and other current assets 58 129 Accounts payable and other accrued expenses 88 (511) Net cash used by operating activities (1,177) (2,392) Cash Flows From Investing Activities: Purchases of marketable securities (500) (7,000) Proceeds from maturities of marketable securities 1,575 5,017 Other noncurrent assets 6 7 Purchases of property, plant, and equipment (8) (181) Net cash provided/(used) by investing activities 1,073 (2,157) Cash Flows From Financing Activities: Payment of long-term obligations (518) (199) Issuance of common stock 3,534 21 Net cash provided/(used) by financing activities 3,016 (178) Net increase/(decrease) in cash and cash equivalents 2,912 (4,727) Cash and cash equivalents at the beginning of the year 524 5,270 Cash and cash equivalents at the end of the period $ 3,436 $ 543 The accompanying notes are an integral part of these unaudited statements. AQUILA BIOPHARMACEUTICALS, INC. NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS 1. Basis of Presentation: The accompanying interim financial statements are unaudited and have been prepared on a basis substantially consistent with the audited financial statements. Certain information and footnote disclosures normally included in the Company's annual financial statements have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. The interim financial statements, in the opinion of management, reflect all adjustments (including normal recurring accruals) necessary for a fair presentation of the results for the interim periods. Certain items have been reclassified to conform to the current period's presentation. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the fiscal year. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 1999, which are contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 2. Segment information: The Company has determined that its reportable segments are development and manufacturing. All research programs are aggregated in the development segment. Revenues from the sale of the feline leukemia vaccine, reimbursement for the cost of QS-21 material supplied to research partners, and QS-21 license fees are reported in the manufacturing segment. Financial results of segments are presented on the same accounting basis as the Company's consolidated results. There are no inter-segment activities. The Company's business is conducted entirely within the United States. Asset information by segment is not reported because Aquila does not produce such information internally. Three Months Ended March 31, 2000 1999 Development Revenue $ 43 $ 68 Net loss (2,308) (1,647) Manufacturing Revenue 1,399 94 Net income/(loss) 728 (537) Reconciling items Net income (1) 547 40 Consolidated totals Revenue 1,442 162 Net loss $ (1,033) $ (2,144) (1) 2000 includes a gain of $550,000 on the sale of an investment and $114,000 of royalty income offset by interest expense of $127,000. 1999 includes $50, 000 of royalty income, $10,000 gain on disposal of an asset, and a charge for excess facilities of $20,000. 3. Inventories: Inventories consist of the following: (000'S) 3/31/00 12/31/99 ------- -------- Finished goods $ 329 $ 157 Work-in-process 124 236 Raw materials & supplies 80 105 $ 533 $ 498 4. Earnings Per Share: The common stock equivalents of the Company consist of stock options and warrants. The Company was in a net loss position at March 31, 2000 and March 31, 1999; therefore, common stock equivalents were not used to compute diluted loss per share since the effect would have been anti-dilutive. Options to purchase 1,005,094 and 1,077,341 shares of common stock at weighted average prices of $3.44 and $3.88, respectively, were outstanding at March 31, 2000 and 1999, respectively. Warrants to purchase 60,680 shares of common stock at an exercise price of $4.12 were outstanding at March 31, 2000. 5. Contingencies: The Company received a letter from CBC in February 1999 alleging that the Company must indemnify CBC under a Master Acquisition Agreement among the Company, CBC, and bioMerieux, Inc. for potential losses from the termination of CBC's rights under a license agreement. The Company has not received any further communication from CBC and upon review does not feel that adverse settlement of this matter would have a material effect on its financial position or results of operations. 6. Accounting Pronouncement: In December 1999, the United States Securities and Exchange Commission issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides the staff's views in applying generally accepted accounting principles to selected revenue recognition issues, as well as examples of how the staff applies revenue recognition guidance to specific circumstances. Accordingly, in the second quarter of 2000 Aquila will change its accounting for initial license fees. Through the first quarter of 2000 revenue was recognized when the agreement was reached and no contingent factors were present. Under the new guidance of SAB 101, revenue will be deferred and recognized ratably over the appropriate life. In the second quarter of 2000, a cumulative adjustment will be recorded retroactive to January 1, 2000 to create deferred revenue that will be recognized over future years. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three months ended March 31, 2000 compared to three months ended March 31, 1999: Revenue Total revenues were $1.4 million for the three months ended March 31, 2000 compared to $0.2 million in the same period in 1999. First quarter 2000 product sales were $276,000 compared to $43,000 the same period one year ago. The primary reason for the higher revenues was an increase in shipments to our marketing partner, Virbac S.A., and a price increase. First quarter research and development revenues were $1.2 million compared to $0.1 million for the same period in 1999. The reasons for the quarter-to-quarter increase were a milestone fee payment totaling $0.5 million, higher quantities of QS-21 supplied to our corporate partners for use in their clinical programs and an increase in the reimbursable cost of QS-21, which accounted for $229,000 of the revenue increase. Costs and Expenses For the first quarter of 2000, cost of sales was 89% of product sales. For the first quarter of 1999, costs of sales exceeded sales revenue because we were finishing the fit-out and validating the new facilities, during which time no product was produced for sale. First quarter 2000 research and development spending increased by 68% from one year ago to $2.1 million. The increase was due to higher outside costs associated with the mastitis clinical trials and a payment in connection to the issuance of a mastitis patent. Spending for clinical trials is expected to decrease for the remainder of the year upon the completion of the pivotal licensing trials for the Company's bovine mastitis product in the second quarter of 2000. In the first quarter of 2000, spending on the tuberculosis program acquired from VacTex was $177,000 compared to $217,000 in the first quarter of 1999. Our future spending on this program may fluctuate based on the progress of the research and the availability of funding and resources. General and administrative expenses were reduced by 15% from one year ago due to lower staffing levels and legal fees. Other Income, Net First quarter 2000 other income was $0.6 million compared to $0.1 million for the same period in 1999. The reasons for the increase were a gain of $0.5 million on the sale of 11,250 shares of Progenics Pharmaceuticals common stock and higher royalty income. Liquidity, Capital Resources and Business Outlook Total cash, cash equivalents and marketable securities were $8.4 million at March 31, 2000 compared to $7.0 million at December 31, 1999. During the first three months of 2000, operating activities used cash of $1.2 million primarily due to the net loss of $1.0 million. Investing activities provided cash of $1.1 million primarily due to $1.0 million of net proceeds from sale of marketable securities. Financing activities provided cash of $3.0 million, due to $3.5 million of proceeds received from the sale of 500,000 shares of common stock to the State of Wisconsin Investment Board and option exercises by employees offset by payment of long term obligations. As of March 31, 2000, we had a balance of $3.4 million under our loan agreement with Transamerica Business Credit Corporation and owed $0.3 million for the $1.3 million of debentures issued in connection with the acquisition of VacTex, Inc. Aquila management expects that available cash and marketable securities, and cash flows from research contracts, product sales, and borrowings will be sufficient to finance planned operations and capital requirements for the next fifteen months. The bovine mastitis program, if successful and approved by the USDA in the second half of 2000, will require additional working capital and capital investment to support market introduction. Our ability to fund long- term operations is dependent on several factors, including our ability to attract funding through additional public and private financing or by establishing corporate partnerships and collaborative agreements. There can be no assurance that such additional funding can be obtained on acceptable terms. Aquila's revenues and expenses vary from quarter to quarter and will continue to vary in the future. Future revenues depend primarily upon the success of Aquila's efforts to license its proprietary technology and enter into cost sharing programs, and its ability to market its products currently undergoing development or clinical trials. Aquila's expenses fluctuate primarily due to clinical trials, which take from six months to two years, and require varying degrees of financial support. Revenues or operating results in any period will not necessarily be indicative of results in subsequent period. Aquila's discussions as to management's plans and objectives for Aquila's business after the date hereof are forward looking statements that involve a number of risks and uncertainties. Actual results may differ materially from those projected by Aquila. The following factors, among others, could effect the Company's actual results: general economic conditions; risks in product and technology development; delays and difficulties in the regulatory approval process; difficulties in obtaining raw materials and supplies for the Company's products; failure of corporate partners to commercialize successfully products using the Company's technology; competition from other companies; the cost of acquiring additional technology; failure to obtain the funding necessary for the company's planned activities; and other risks identified in this Form 10Q and in Aquila's other Securities and Exchange Commission filings and the exhibits thereto. Accounting Pronouncement In December 1999, the United States Securities and Exchange Commission issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides the staff's views in applying generally accepted accounting principles to selected revenue recognition issues, as well as examples of how the staff applies revenue recognition guidance to specific circumstances. Accordingly, in the second quarter of 2000 Aquila will change its accounting for initial license fees. Through the first quarter of 2000 revenue was recognized when the agreement was reached and no contingent factors were present. Under the new guidance of SAB 101, revenue will be deferred and recognized ratably over the appropriate life. In the second quarter of 2000, a cumulative adjustment will be recorded retroactive to January 1, 2000 to create deferred revenue that will be recognized over future years. PART II - OTHER INFORMATION Item 1: Legal Proceedings The Company received a letter from CBC in February 1999 alleging that the Company must indemnify CBC under a Master Acquisition Agreement among the Company, CBC, and bioMerieux, Inc. for potential losses from the termination of CBC's rights under a license agreement. The Company has not had any further communication from CBC and upon review does not feel that adverse settlement of this matter would have a material effect on its financial position or results of operations. Item 6. Exhibits and Reports of Form 8-K Exhibits 27. Financial Data Schedule Reports on Form 8-K 1. None filed in the first quarter of 2000. - -------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the duly caused this report to be signed on its behalf by undersigned thereunto duly authorized. AQUILA BIOPHARMACEUTICALS, INC. Date: April 24, 2000 /s/ Alison Taunton-Rigby Alison Taunton-Rigby President and Chief Executive Officer /s/ James L. Warren James L. Warren Vice President Finance, Chief Financial Officer and Treasurer EX-27 2
5 This schedule contains summary financial information extracted from the unaudited Consolidated Balance Sheets, Statement of Operations and Statement of Cash Flows and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-2000 MAR-31-2000 3,436 4,961 1,109 0 533 10,261 8,960 2,952 17,381 3,034 3,666 0 0 85 11,788 17,381 276 1,142 246 2,331 707 0 154 (1,033) 0 (1,033) 0 0 0 (1,033) (0.13) (0.13)
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