-----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, LZV/pewE2U0w5aUNrnLpf6q/bemcLGNqoAtFtykt1xtYqNVij/ZjabLXxX/vmdg8 nZmLJKreBFhfhYoyqt68JA== 0000943403-02-000006.txt : 20020515 0000943403-02-000006.hdr.sgml : 20020515 20020515153906 ACCESSION NUMBER: 0000943403-02-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IXION BIOTECHNOLOGY INC CENTRAL INDEX KEY: 0000943403 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 593174033 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 333-34765 FILM NUMBER: 02651890 BUSINESS ADDRESS: STREET 1: 13709 PROGRESS BLVD STREET 2: BOX 13 CITY: ALACHUA STATE: FL ZIP: 32615 BUSINESS PHONE: 9044181428 MAIL ADDRESS: STREET 1: 13709 PROGRESS BLVD STREET 2: BOX 13 CITY: ALACHUA STATE: FL ZIP: 32615 10QSB 1 ix10qsb3312002.txt IXION 10QSB 1ST QUARTER 2002 ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934 For the transition period from to ------------- Commission file number: 333-34765 Ixion Biotechnology, Inc. (Exact Name of Small Business Issuer as Specified in Its Charter) ------------- Delaware 59-3174033 (State of incorporation) (I.R.S. Employer Identification No.) 13709 Progress Blvd., Box 13 Alachua, FL 32615 (Address of principal executive offices) Registrant's telephone number: 386-418-1428 ------------- 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 of the registrant's common stock, par value $0.01 per share, outstanding as of April 30, 2002 was 7,218,177. ================================================================================ Ixion Biotechnology, Inc Index to Form 10QSB Part I - Financial Information Page Item 1. Financial Statements (unaudited) Condensed Balance Sheet - March 31, 2002.................................................................2 Condensed Statements of Operations - Three Months Ended March 31, 2002 and 2001..................................................................................3 Condensed Statements of Cash Flows - Three Months Ended March 31, 2002 and 2001..................................................................................4 Notes to Condensed Financial Statements..................................................................5 Item 2. Management's Discussion and Analysis or Plan of Operations...............................................9 Part II - Other Information Item 2. Changes in Securities and Use of Proceeds................................................................14 Item 6. Exhibits and Reports on Form 8-K........................................................................14 Signatures.......................................................................................................15 Exhibit Index....................................................................................................15
Part I. Financial Information Item 1. Financial Statements Ixion Biotechnology, Inc. Condensed Balance Sheet March 31, 2002 Unaudited Assets Current Assets: Cash and cash equivalents $ 615,161 Short-term investments 1,422,875 Accounts receivable, net 59,079 Prepaid expenses 64,720 Other current assets 2,750 ---------------- Total current assets 2,164,585 ---------------- Property and equipment, net 353,350 ---------------- Other Assets: Patents and patents pending, net 464,849 ---------------- Total Assets $ 2,982,784 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 180,686 Note payable, current portion 6,000 Accrued expenses 155,953 --------------- Total current liabilities 342,639 =============== Long-Term Liabilities: Liability under research agreement 42,317 Note payable 24,000 Deferred rent, including accrued interest 29,508 ---------------- Total long-term liabilities 95,825 ---------------- Total liabilities 438,464 ---------------- Commitments (Note 5) Stockholders' Equity: Common stock, $.01 par value; authorized 20,000,000, issued and outstanding 7,218,177 shares 72,182 Additional paid-in capital 11,931,041 Accumulated deficit (9,106,781) Less unearned compensation (352,122) ---------------- Total stockholders' equity 2,544,320 ---------------- Total Liabilities and Stockholders' Equity $ 2,982,784 ================
See accompanying notes to condensed financial statements 2 Ixion Biotechnology, Inc. Condensed Statements of Operations ........... ........... Three Months Ended ........... March 31, ... 2002 2001 ..... Unaudited Revenues: Income under research agreement $ 0 $ 3,913 Income from research grants 53,361 136,793 ----------------- ---------------- Total revenues 53,361 140,706 ----------------- ---------------- Expenses: Operating, general and administrative 210,004 207,915 Research and development 508,098 547,233 ----------------- ---------------- .......Total operating expenses 718,102 755,148 ----------------- ---------------- Other income (expense): Interest expense (184) (19,968) Interest income 12,381 26,988 ----------------- ---------------- ....Other income, net 12,197 7,020 ----------------- ---------------- Net Loss. $ (652,544) $ (607,422) ================= ================ Basic and diluted net loss per share $ (0.09) $ (0.09) ================= ================ Weighted average common shares - basic and diluted 7,190,926 6,861,791 ================= ================
See accompanying notes to condensed financial statements 3 Ixion Biotechnology, Inc. Condensed Statements of Cash Flows ........... ........... Three Months ........... Ended March 31, ........... __2002__ __2001__ Unaudited Cash Flows from Operating Activities: Net loss $ (652,544) $ (607,422) Adjustments to reconcile net loss to net cash used in operating activities: ...........Depreciation 25,592 21,510 ...........Amortization 1,346 3,807 ...........Amortization of debt discount - 14,290 ...........Stock, options and warrants issued for consulting services 1,260 1,260 ...........Stock compensation expense 57,727 37,245 ...........Decrease (increase) in prepaid expenses and ........... other current assets 3,914 11,928 ...........Decrease (increase) in accounts receivable and other assets 12,119 (27,346) Decrease in deferred revenue - (1,281) ...........Increase (decrease) in accounts payable and ........... accrued expenses 105,739 109,445 ...........Decrease in liability under funded research program (187,000) - ...........Increase in deferred rent - 703 ...........Increase (decrease) in interest payable 788 (7,731) -------------- --------------- Net cash used in operating activities (631,059) (443,592) -------------- --------------- Cash Flows from Investing Activities: Purchase of property and equipment (32,097) (23,551) Payments for patents and patents pending (12,993) - Redemption of short-term investments 300,000 - -------------- -------------- Net cash provided by (used in) investing activities 254,910 (23,551) -------------- -------------- Cash Flows from Financing Activities: Proceeds from (principal reductions in) notes payable 30,000 (780) -------------- -------------- Net cash provided by (used in) financing activities 30,000 (780) -------------- -------------- Net Decrease In Cash and Cash Equivalents (346,149) (467,923) Cash and Cash Equivalents at Beginning of Period 961,310 2,160,278 -------------- -------------- Cash and Cash Equivalents at End of Period $ 615,161 $ 1,692,355 ============== =============
See accompanying notes to condensed financial statements 4 Ixion Biotechnology, Inc. Notes to Condensed Financial Statements Three Month Period Ended March 31, 2002 and 2001 1. Basis Of Presentation: The accompanying unaudited condensed financial statements for the three months ended March 31, 2002 and 2001, respectively have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. These interim financial statements should be read in conjunction with the December 31, 2001 financial statements and related notes included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. In the opinion of the Company, the accompanying unaudited condensed financial statements contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company's financial position, results of operations, and cash flows for the periods presented. The results of operations for the interim period ended March 31, 2002 are not necessarily indicative of the results to be expected for the full year. The accompanying financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company incurred a net loss of $652,544 for the quarter ended March 31, 2002, and as of March 31, 2002, had a total accumulated deficit of $9,106,781. The Company had deficit cash from operations of approximately $631,059 and $443,592 for the first quarter of 2002 and 2001, respectively. The $3,353,300 received from Qvestor in July 2001 is being used to fund continuing operations and the planned expansion of the Company. The Company expects to incur additional operating losses for the next several years and will require additional financing to continue its development and commercialization of products. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. Management plans to seek significant additional equity investment from institutional investors commencing in the second quarter of 2002. If additional financing is not available, management believes that the cash on hand and cash flows from operations including additional SBIR grants, during 2002, should be sufficient to meet its cash requirements in the coming year. If the funds available to the Company are not sufficient, management believes that it can take certain actions such as undertaking certain expense reduction actions to mitigate the impact. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining financing on terms acceptable to the Company or at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Recent Accounting Pronouncement In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 requires the use of a non-amortization approach to account for purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain intangibles will not be amortized into results of operations, but instead would be reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. The provisions of SFAS No. 142 were effective for the Company beginning on January 1, 2002 and implementation did not have a material effect on its results of operations or financial position. In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations". The 5 statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and teh associated asset retirement costs. The provisions of SFAS No. 143 were 1. Basis Of Presentation - Continued: Recent Accounting Pronouncements - Continued effective for the Company beginning January 1, 2002 and implementation did not have a material effect on the Company's results of operations or financial position. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS No. 121 "Accountinf for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", and the accounting and reporting provisions of Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". The provisions of SFAS No. 144 were effective for the Company beginning January 1, 2002 and implementation did not have a material effect on its results of operations or financial position. On April 30, 2002 the FASB Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". This statement eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect and eliminates an inconsistency between the accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Generally, Statement No. 145 is effective for transactions occurring after May 15, 2002. The adoption of the standard will have no impact to the Company. 2. Notes Payable: In September 1996, the Company completed the private placement of $787,270 in Convertible Unsecured Notes due in 2001. During 2001, $650,262 of the outstanding notes were converted into 288,936 shares of common stock and $128,608 was repaid by the Company. In February and March, 2002, documentation relating to conversion of the remaining $8,400 of the Variable Notes was completed and 4,000 shares of common stock were issued. On March 5, 2002, the Company signed a note for $30,000 with its bank, the funds of which are collateralized by newly-purchased office equipment. The terms of the loan require sixty equal monthly payments of principal plus 7% interest. 3. Income Taxes: The components of the Company's net deferred tax asset and the tax effects of the primary temporary differences giving rise to the Company's deferred tax asset are as follows as of March 31, 2002: Net operating loss carryforward $3,600,000 ---------------- Deferred tax asset 3,600,000 Valuation Allowance (3,600,000) ---------------- 6 Net deferred tax asset $ - ================ 4. Stockholders' Equity: Common Stock Warrants On February 10, 2002 warrants to purchase 3,000 shares of common stock at an exercise of price of $5.00 per share expired, unexercised. 4. Stockholders' Equity - Continued: Common Stock Warrants - Continued Common stock warrants outstanding at March 31, 2002 are as follows: Number Exercise Price Expiration Date 3000 $5.00 October 23, 2002 Stock Options On February 15, 2002 the Company granted ten-year incentive stock options under the 1994 Stock Option Plan to purchase 5,000 shares of Common Stock at an exercise price of $4.00 per share to an officer of the Company, in connection with an employment package. On March 19, 2002 the Company granted ten-year incentive stock options under the 1994 Stock Option Plan to purchase 500 shares of Common Stock at an exercise price of $4.00 per share to an employee of the Company. The options vest at a rate of 20% per year. Also, on March 19, 2002 the Company granted ten-year incentive stock options under the 1994 Stock Option Plan to purchase 21,000 shares of Common Stock at an exercise price of $4.20 per share to employees of the Company. The options vest at a rate of 20% per year. Stock Compensation Plan At March 31, 2002 a total of 237,783 shares had been granted under the stock compensation plan. Compensation expense recognized in connection with such awards under the stock compensation plan for the quarters ended March 31, 2002 and 2001 was $57,727 and $37,245, respectively. Total unearned compensation related to stock compensation plan awards was $352,124 at March 31, 2002 and will be recognized as expense over future periods of service. 5. Commitments: 7 Lease In April 2002, the Company signed a lease modification to increase its rental space to 12,221 square feet and includes an extension of its current term through October 31, 2005. Future minimum annual rental payments under this lease are approximately $173,000. 6. Segment Data: As a result of certain organizational changes, the Company has divided it's business into two core units, oxalate control and stem cell/diabetes. These changes result in the identification of two reportable business segments under the requirements of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, commencing with the quarter ended March 31, 2002. Ixion's two core business units are: ss. Oxalate Control: therapies for Primary Hyperoxaluria (an "orphan" disease), recurrent kidney stones, and other oxalate-related conditions, based on our proprietary use of unique oxalate-degrading bacteria; and 6. Segment Data - Continued: ss. Stem Cell / Diabetes: somatic cellular therapies to treat diabetes, based on selecting, proliferating, and directing the differentiation of adult stem cells into insulin-producing islet preparations for transplantation The following table sets forth selected income statement data for the quarters ended March 31, 2002 and 2001 (restated to reflect the revised segments)and selected asset items as of March 31, 2002 for each segment: Oxalate Control Stem Cell/Diabetes G&A Total --------------------------- ---------------------------- --------------------------- ------------------------------- 2002 2001 2002 2001 2002 2001 2002 2001 ------------- ------------- ------------- -------------- -------------- ------------ ----------------- ------------- Grant Revenues $ 53,361 $ 61,483 $ - $ 79,223 $ - $ - $ 53,361 $ 140,706 Expenses 238,919 243,626 269,179 303,607 197,807 200,895 705,905 748,128 ------------- ------------- ------------- -------------- -------------- ------------ ----------------- ------------- Net Loss $ (185,558) $(182,143) $(269,179) $ (224,384) $ (197,807) $(200,895) $ (652,544) $ (607,422) ============= ============= ============= ============== ============== ============ ================= ============= Segment Assets $ 442,884 $ 364,318 $ 2,175,582 $ 2,982,784 ============= ============= ============== =================
Segment assets include specifically identifiable fixed assets, capitalized patent costs and receivables. Segment asset information not available for 2001. Total assets at March 31, 2002 are not significantly different from the prior year. 8 Special Note Regarding Forward-Looking Statements This quarterly report on Form 10-QSB of Ixion Biotechnology, Inc. for the quarter ended March 31, 2002 contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements which, by definition, involve risks and uncertainties. In particular, without limitation, statements under Part I, Item 2, Management's Discussion and Analysis or Plan of operations, contain forward-looking statements. Where, in any forward-looking statement, Ixion expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Statements regarding our research and development plans also constitute forward-looking statements. Actual research and development activities may vary significantly from the current plans depending on numerous factors including o changes in the costs of such activities from current estimates, o the results of the programs, o the results of clinical studies referred to above, o the timing of regulatory submissions, technological advances, o determinations as to commercial potential, and o the status of competitive products. All of the above estimates are based on the current expectations of our management team, which may change in the future due to a large number of potential events, including unanticipated future developments. The following factors are factors that could cause actual results or events to differ materially from those anticipated, and include, but are not limited to: general economic, financial and business conditions; labor difficulties; competition for customers in the biotechnology and pharmaceutical industries; the costs of research and development of chemical compounds and products; and changes in and compliance with governmental regulations. Item 2. Management's Discussion and Analysis or Plan of Operations The following discussion and analysis should be read in conjunction with the Condensed Financial Statements and the related Notes thereto included elsewhere in this report. This report contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements. These and additional risk factors are identified in our annual report to the Securities and Exchange Commission filed on Form 10-KSB and in other SEC filings. Results of Operations Three Months Ended March 31, 2002 and 2001 ------------------------------------------------------------------------- Summary of Operations - Three Months Ended March 31, ------------------------------------------------------------------------- Percent 2002 2001 Change -------------------------------- -------------- ------------- ----------- Revenues $53,361 $140,706 -62.08% Operating Expenses ($718,102) ($755,148) -4.91% Other Income, net $12,197 $7,020 73.75% -------------- ------------- ----------- Net Loss ($652,544) ($607,422) 7.43% -------------------------------- -------------- ------------- -----------
9 Total revenues decreased approximately 62% from $140,706 in the first quarter of 2001 to $53,361 in the first quarter of 2002 mainly as a result of the delay of funding under new NIH grants and completion of the following three research contracts: o "Islets from Islet Progenitor/Stem Cells for Implantation"; o "Oxalobacter Formigenes Diagnostic Kit Development"; and o "Coating of Urinary Protheses to Prevent Encrustation"; We expect revenues to begin to increase in the second quarter of 2002 due to: o the commencement of funding under: o A two-year NIH Phase II Small Business Technology Transfer ("STTR") grant entitled "Enteric Elimination and Degradation of Oxalic Acid" (awarded in 2001) for a total of approximately $500,000; o A two-year NIH Phase II Small Business Innovative Research ("SBIR") grant entitled "Digestion of Food Oxalate" (awarded in 2001) for a total of approximately $783,000; and o A six-month NIH Phase I SBIR grant entitled "Differentiating Bone Marrow Stem Cells To Cure Diabetes" for $99,000. [GRAPHIC OMITTED] Comparison of G&A Expenses of Q1 2002 vs. Q1 2001 2002 2001 Personnel-related 105,312.84 106,072.36 Capital Raising 27,324.59 2,272.16 Office & Supplies 14,791.42 9,575.34 Other G&A 62,575.21 89,994.69 Operating, general and administrative expenses increased slightly from $207,915 in the first quarter of 2001 to $210,004 in the first quarter of 2002. The increased expenses reflect: o increased capital raising efforts; o increased supplies related to increased laboratory personnel; and o increased miscellaneous general and administrative expenses; offset, somewhat, by a reduction in personnel-related and other administrative expenses. As we continue to expand our research and development activities and commence with clinical trials in the second quarter of 2002, we expect our general and administrative expenses will continue to increase reflecting a concurrent demand for increased administrative support. 10 [GRAPHIC OMITTED] Comparison of R&D expenses Q1 2002 vs. Q1 2001 2002 2001 Personnel-related 222,056.09 157,972.66 Consultants & Subs 40,137.22 136,520.35 Supplies and animal costs 67,376.41 141,083.86 Rent & Utilities 52,299.78 30,890.28 Regulatory & Quality 32,027.78 4,000.00 Scientific Advisors 33,533.34 12,833.34 Other misc R&D 60,667.39 63,932.66 Research and development expenditures consist primarily of: o payroll-related expenses of research and development personnel; o laboratory and animal maintenance and supplies; o laboratory rent and associated utilities; o depreciation on laboratory equipment; o development activities; o clinical and pre-clinical expenses; o payments made for sponsored research; o scientific advisors fees; o regulatory consultants fees; o interest on the purchase of laboratory equipment; and o amortization of capitalized patent costs. Research and development expenses decreased 7% from $547,233 in the first quarter of 2001 to $508,098 in the first quarter of 2002. The decreased expenses reflect: o decreased laboratory-related supplies and animal expenses; o decreased consultants and subcontractors fees; and o a decrease in other miscellaneous laboratory expenses; offset, somewhat, by an increase in laboratory personnel, increased laboratory space and rent, an increase in regulatory and quality activities and expenses, and an increase in scientific advisors' fees. We expect our research and development expenses to increase in 2002 due to an increase in the scale of operations, the addition of regulatory and quality assurance personnel, the planned commencement of clinical trials, and the receipt of the research grants referred to above. 11 [GRAPHIC OMITTED] Comparison of Interest Expense and Income Q1 2002 vs. Q1 2001 2002 2001 Interest Expense 183.63 19,967.78 Interest Income 12,380.78 26,987.55 Interest expense decreased over 99% from $19,968 in the first quarter of 2001 to $184 in the first quarter of 2002 due primarily to the re-payment of the officers' bridge loans and the conversion of deferred administrative fees and salaries in mid 2000 and the maturity of $787,720 of our convertible unsecured notes in September 2001. Interest expense should increase in future quarters of fiscal 2002 under financing arrangements made during the first quarter of 2002 for the purchase of office and laboratory equipment. Interest income decreased 54% from $26,988 in the first quarter of 2001 to $12,381 in the first quarter of 2002, due to a decrease in overall interest rates and a decreased cash balance in excess of operating needs. Interest income should continue to decrease in 2002 as we utilize our cash resources. Liquidity and Capital Resources For the first quarter of 2002, we had deficit cash flows from operations of $631,059 compared to deficit cash flows of $443,592 in the first quarter of 2001. The increased use of cash relates to the increased scale of operations without increased revenues. We expect annual lease expense to increase to a minimum of $173,000 for 2002 as a result of additions to our rented facilities and an increase in rental rates. During the first quarter of 2002, we entered into financing arrangements for the purchase of office equipment with aggregate principal amounts of $30,000. These obligations will be repaid in sixty equal monthly payments of principal plus a 7% interest rate. At March 31, 2002, we have $615,161 in cash and cash equivalents and $1,422,875 in short-term investments,for a total of $2,038,036 compared to $1,692,355 in cash and short-term investments at March 31, 2001. Until required for operations, our policy is to invest any excess cash reserves in bank deposits, money market funds, certificates of deposit, commercial paper, corporate notes, U.S. government instruments and other investment-grade quality instruments A summary of grant funds received from the National Institutes of Health during the first quarter of 2002 follows o In September, 2001 NIH awarded us a two-year Phase II STTR grant, for $500,000 entitled "Enteric Elimination and Degradation of Oxalic Acid". Approximately $15,000 in revenues were utilized under this grant in the first quarter of 2002. 12 o Also, in September, 2001 NIH awarded us a two-year Phase II SBIR grant entitled "Digestion of Food Oxalate" for a total of approximately $783,000. Approximately $38,000 in revenues were utilized under this grant in the first quarter of 2002. o In March 2002, the NIH awarded us a six-month Phase I SBIR grant for $100,000 entitled "Differentiating Bone Marrow Stem Cells to Cure Diabetes." We may begin utilizing funds under this grant during the second quarter of 2002. o We have other grant applications pending. The Company incurred a net loss of $652,544 for the quarter ended March 31, 2002, and as of March 31, 2002, had a total accumulated deficit of $9,106,781. The Company had deficit cash from operations of $631,059 and $443,592 for the first quarter of 2002 and 2001, respectively. The $3,353,300 received from Qvestor in July 2001 is being used to fund continuing operations and the planned expansion of the Company. The Company expects to incur additional operating losses for the next several years will require additional financing to continue its development and commercialization of products. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. Management plans to seek significant additional equity investment from institutional investors commencing in the second quarter of 2002. If additional financing is not available, management believes that the cash on hand and cash flows from operations including additional SBIR grants, during 2002, should be sufficient to meet its cash requirements in the coming year. If the funds available to the Company are not sufficient, management believes that it can take certain actions such as undertaking certain expense reduction actions to mitigate the impact. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining financing on terms acceptable to the Company or at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Recent Accounting Pronouncements In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 requires the use of a non-amortization approach to account for purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain intangibles will not be amortized into results of operations, but instead would be reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. The provisions of SFAS No. 142 were effective for the Company beginning on January 1, 2002 and implementation did not have a material effect on its results of operations or financial position. In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations". The statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and teh associated asset retirement costs. The provisions of SFAS No. 143 were effective for the Company beginning January 1, 2002 and implementation did not have a material effect on the Company's results of operations or financial position. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long Lived Assets". SFAS No. 144 supersedes SFAS No. 121 "Accountinf for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", and the accounting and reporting provisions of Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". The provisions of SFAS No. 144 were effective for the Company beginning January 1, 2002 and implementation did not have a material effect on its results of operations or financial position. 13 On April 30, 2002 the FASB Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". This statement eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect and eliminates an inconsistency between the accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Generally, Statement No. 145 is effective for transactions occurring after May 15, 2002. The adoption of the standard will have no impact to the Company. Contractual Obligations and Commercial Commitments As of March 31, 2002, the Company's contractual obligations and commercial commitments are limited to: o An operating lease agreement with minimum annual future rent of approximately $173,000 that runs through October 31, 2005; and o A debt obligation on purchased equipment of $30,000 with payments that extend through March 5, 2007. Part II - Other Information Item 2. Changes in Securities and Use of Proceeds Unregistered Sales of Securities Set forth below is information as to securities sold by Ixion during the quarter ended March 31, 2002 that were not registered under the Securities Act of 1933 (the "Act"). No underwriters were involved in any of the sales, so there were no underwriting discounts or commissions. All outstanding securities are deemed to be restricted securities for the purposes of the Act. All certificates representing our issued and outstanding restricted securities have been properly-legended and we have issued "stop transfer" instructions to our transfer agent with respect to such securities, which legends and stop transfer instructions are presently in effect unless such securities have been registered under the Act or have been transferred pursuant to an appropriate exemption from the registration provisions of the Act. Restricted shares of common stock have been issued to employees under our Stock Compensation Plan as follows: On March 19, 2002, 28,700 shares to employees in aggregate, valued at $120,540 (a portion of which is unearned compensation) or $4.20 per share. We issued the above securities without registration in reliance upon the exemption provided by Section 4(2) of the Act as a transaction to a limited number of sophisticated investors which did not involve a public offering, general solicitation, or general advertisement and the exemption provided by Rule 701 promulgated under the Act. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Description Page (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession None 14 (3) Articles of Incorporation None (4) Instruments defining the Rights of Security Holders None (9) Voting Trust Agreement (11) Statement re: Computation of Per Share Earnings None (15) Letter re: Unaudited Interim Financial Information None (18) Letter re: Change in Accounting Principles None (19) Report Furnished to Security Holders None (22) Published Report re: Matters Submitted to Vote of Security Holders None (23) Consents of Experts and Counsel None (24) Power of Attorney None (99) Additional Exhibits None *Filed herewith (b) Reports on Form 8-K None 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. Ixion Biotechnology, Inc. Dated: May 2, 2002 By: /s/ Weaver H. Gaines Weaver H. Gaines Chairman and Chief Executive Officer Dated: May 2, 2001 By: /s/ Kimberly A. Ramsey Kimberly A. Ramsey Vice President and Controller (Principal Accounting Officer) Exhibit Index Exhibit Description Page (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession None (3) Articles of Incorporation None (4) Instruments defining the Rights of Security Holders None (10.45) Consulting Agreement with Dr. Ammon B. Peck, dated March 6, 2000 (11) Statement re: Computation of Per Share Earnings None (15) Letter re: Unaudited Interim Financial Information None (18) Letter re: Change in Accounting Principles None (19) Report Furnished to Security Holders None Published Report re: Matters Submitted to Vote of (22) Security Holders None (23) Consents of Experts and Counsel None (24) Power of Attorney None (99) Additional Exhibits None
*Filed herewith 15 -----END PRIVACY-ENHANCED MESSAGE-----