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Securities and Exchange Commission
WASHINGTON DC 20549
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FORM 10-QSB
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Quarterly Report under Section 13 of the Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File No. 0-27282
JUNE 30, 1996
ATLANTIC PHARMACEUTICALS, INC.
142 Cypress Point Road
Half Moon Bay, California 94019
Telephone (415)726-1327
Incorporated in Delaware IRS ID # 36-3898269
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 last 90 days:
Yes [ x ] No [ ]
2,663,720 shares of common stock, $.001 par value are outstanding on June
30, 1996
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Atlantic Pharmaceuticals , Inc. and Subsidiaries
Part One - Financial Information Page
Item1 - Financial Statements (unaudited)
Consolidated Balance Sheets
as of June 30, 1996 and December 31, 1995. 1
Consolidated Statements of Operations for the three months ended
June 30, 1996 and 1995 for the six months ended June 30, 1996 and 1995
and the period from July 13, 1993(inception) to June 30, 1996. 2
Consolidated Statements of Cash Flows
for the six months ended June 30, 1996 and 1995
and the period from July 13, 1993(inception) to June 30, 1996. 3
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations 5
Part Two - Other Information
Item 6 - Exhibits and Report on Form 8-K 7
ATLANTIC PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
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Assets 30-Jun-96 31-Dec-95
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(Unaudited)
Current assets:
Cash and cash equivalents $ 2,795,311 5,044,632
Prepaid expenses 36,000 48,000
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Total current assets 2,831,311 5,092,632
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Furniture and equipment, net of accumulated depreciation
of $48,271 and $26,728 at June 30,1996 and December 31,
1995, respectively. 85,632 55,791
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$ 2,916,943 5,148,423
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Liabilities and Stockholders' Equity
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Current liabilities:
Accrued expenses $ 377,195 800,383
Accrued interest - 115,011
Demand notes payable - 125,000
Note payable - 75,000
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Total current liabilities 377,195 1,115,394
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Stockholders' equity
Preferred stock, $.001 par value. Authorized 50,000,000 shares;
none issued and outstanding - -
Common stock $.001 par value. Authorized 80,000,000 shares;
2,663,720 shares issued and outstanding
at June 30, 1996 and December 31,1995, respectively 2,664 2,664
Common stock subscribed. 182 shares
at June 30,1996 and December 31,1995. - -
Additional paid -in capital 9,043,875 9,043,875
Deficit accumulated during development stage (6,388,649)(4,880,968)
Deferred compensation (117,600) (132,000)
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2,540,290 4,033,571
Less common stock subscriptions receivable (218) (218)
Less treasury stock, at cost (324) (324)
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Total stockholders' equity 2,539,748 4,033,029
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$ 2,916,943 5,148,423
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See accompanying notes to consolidated financial statements.
Page 1
ATLANTIC PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Operations (Unaudited)
Three months ended June 30, 1996 and 1995 , the six months ended June 30, 1996
and 1995 and the period from July 13, 1993 (inception) to June 30, 1996.
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Three Months Ended Six Months Ended
------------------ ------------------ Cumulative
June 30, June 30, June 30, June 30, from July13,
1996 1995 1996 1995 1993 (inception) to
---- ---- ---- ---- June 30,1996
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Costs and expenses:
Research and development $ 248,061 115,657 487,313 216,607 1,113,855
License fees - - - 12,500 163,500
General and administrative 531,952 369,005 1,109,869 620,806 4,582,786
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Total operating expenses 780,013 484,662 1,597,182 849,913 5,860,141
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Other expense (income):
Interest income (37,300) - (89,501) - (97,067)
Interest expense - 51,848 - 91,873 625,575
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Total other expense (income) (37,300) 51,848 (89,501) 91,873 528,508
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Net loss $ (742,713) (536,510) (1,507,681) (941,786) (6,388,649)
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Net loss per share $ (0.28) (93.50) (0.57) (195.19) (13.08)
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Shares used in calculation
of net loss per share 2,663,720 5,738 2,663,720 4,825 488,392
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See accompanying notes to consolidated financial statements.
Page 2
ATLANTIC PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30, 1996 and 1995 and the period from July 13, 1993
(inception) to June 30, 1996
Cumulative from
13-Jul-93
Six Months Ended (inception) to
June 30, June 30, June, 30
1996 1995 1996
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Cash flows from operating activities:
Net loss $(1,507,681) (941,786) (6,388,649)
Adjustments to reconcile net loss to net
cash used in operating activities:
Compensation expense relating to
stock options 14,400 -- 91,182
Discount on notes payable
bridge financing -- -- 300,000
Depreciation 21,543 3,841 48,271
Changes in assets and liabilities:
Increase (decrease) in prepaid expenses 12,000 (29,750) (36,000)
Increase (decrease) in accrued expenses (423,188) (75,401) 255,496
Increase (decrease) in accrued interest (115,011) 91,873 294,004
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Net cash used in operating activities (1,997,937) (951,223) (5,435,696)
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Net cash used in investing activities - acquisition
of furniture and equipment (51,384) -- (133,904)
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Cash flows from financing activities:
Proceeds from issuance of demand notes payable -- 885,000 2,395,000
Repayment of demand notes payable (125,000) -- (125,000)
Proceeds from the issuance of notes payable -
bridge financing -- -- 1,200,000
Proceeds of issuance of warrants -- -- 300,000
Repayment of notes payable - bridge financing (75,000) -- (1,500,000)
Repurchase of common stock -- (99) (324)
Proceeds from the issuance of common stock -- 3,923 6,095,235
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Net cash provided by (used in) financing activities (200,000) 888,824 8,364,911
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Net increase (decrease) in cash and cash equivalents (2,249,321) (62,399) 2,795,311
Cash and cash equivalents at beginning of period 5,044,632 110,884 --
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Cash and cash equivalents at end of period $ 2,795,311 48,485 2,795,311
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Supplemental disclosure of noncash financing activities:
Issuance of common stock in exchange for
common stock subscriptions $ -- -- 7,027
Conversion of demand notes payable and the
related accrued interest to common stock -- -- 2,442,304
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See accompanying notes to consolidated financial statements.
Page 3
Atlantic Pharmaceuticals, Inc. and Subsidiaries
(a development stage company)
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1996 and 1995
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(1) BASIS OF PRESENTATION
The accompanying financial statements have been prepared in
accordance with Generally Accepted Accounting Principles for interim financial
statements. In the opinion of management, the accompanying financial
statements reflect all adjustments, consisting of only normal recurring
adjustments, considered necessary for fair presentation. Operating results are
not necessarily indicative of results that may be expected for the year ended
December 31, 1996. These financial statements should be read in conjunction
with the Company's 10 - KSB for the year ended Deecember 31, 1995. Accordingly,
they do not include all information and footnotes required by Generally
Accpeted Accounting Principles for complete financial statements.
(2) STOCK OPTIONS
In July 1995 the Company established the 1995 Stock Option Plan which
provides for the granting of up to 650,000 options to purchase stock to
officers, directors, employees, and consultants.
As of December 31, 1995, 403,402 options were available for future
issuance under the Company's 1995 Stock Option Plan. On January 15, 1996 the
Company granted options to purchase an aggregate of 315,000 shares of common
stock exercisable for seven years at an exercise price of $5.81 per share.
Such options shall vest and be exercisabe ratably during the four year period
commencing January 15, 1997. No options have been exercised or are exercisable
as of June 30, 1996.
4
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion of the results of operations and financial
condition should be read in conjunction with the Company's Annual Report on
Form 10 - KSB for the year ended December 31, 1995.
Results of Operations for the quarter ended June 30, 1996
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For the second quarter ended June 30, 1996 research and development
expense increased by 114% over the similar period in 1995, primarily due to
increased research and development activities.
For the second quarter of 1996 general and administrative expense
increased by 44% over the second quarter of 1995 as a result of additional
public relations expense and other general and administrative expenses.
For the second quarter of 1996 there was no interest expense compared
with $51,848 in the second quarter of 1995, as all interest bearing debt was
fully paid at the beginning of 1996 with proceeds from the initial public
offering (IPO). For the second quarter of 1996 interest income was $37,300
compared to no interest income in the second quarter of 1995, as cash was
available during the second quarter of 1996 due to proceeds received from the
Company's IPO.
Result of Operatins for the six month period ended June 30, 1996
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For the period ended June 30, 1996 research and development expense
increased by 125% over the similar period in 1995, primarily due to increased
research and development activities.
For the period ended June 30, 1996 general and administrative expense
increased by 79% over the similar period of 1995 as a result of additional
public relations expense and other general and administrative expenses.
For the period ended June 30, 1996 there was no interest expense
compared with $91,873 in the similar period of 1995, as all interest bearing
debt was fully paid at the beginning of 1996 with proceeds from the initial
public offering (IPO). For the period ended June 30, 1996 interest income was
$89,501 compared to no interest income in the similar period of 1995, as cash
was available during the six months ended June 30, 1996 due to proceeds received
5
from the Company's IPO.
Liquidity and Capital Resources
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The Company has incurred an accumulated deficit of approximately
$6,388,648 since inception and expects to continue to incur additional losses
through the year ending December 31, 1996.
The Company anticipates that its current resources will be sufficient
to finance the Company's currently anticipated needs for operating and capital
expenditures for at least nine months. In addition, the Company will attempt to
generate additional captial through a combination of collaborative agreements,
strategic alliances and equity and debt financings. However, no assurance can
be provided that additional capital will be obtained through these sources. If
the Company is not able to obtain continued financing, the Company may cease
operation and in all likelihood all the Company's security holders will lose
their entire investment.
The Company's working capital requirements will depend upon numerous
factors, including progress of the Company's research and development programs;
preclinical and clinical testing; timing and cost of obtaining regulatory
approvals; levels of resources that the Company devotes to the development of
manufacturing and marketing capabilities; technological advances; status of
competitors; and ability of the Company to establish collaborative arrangements
with other organizations.
6
Part Two - Other Information
Item 5. Other information
Optex Ophthalmologics Inc., a subsidiary of Atlantic Pharmaceuticals Inc.
received a grant from the National Eye Institute in the amount of $100,000. The
grant became effective April 15, 1996 and will be paid over six months period
starting July 1, 1996.
Item 6. Exhibits and reports on form 8-K
a. No new exhibits for the second quarter
b. Form 8-K Reports
No form 8-K reports were filed during the second quarter.
7
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf.
Atlantic Pharmaceuticals, Inc.
June 30, 1996
/s/ Jon D. Lindjord
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Jon D. Lindjord
Chief Executive Officer and President
/s/ Shimshon Mizrachi
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Shimshon Mizrachi
Chief Financial Officer
Principal Accounting and Financial Officer
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