1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/ / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1996
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 0-17085
TECHNICLONE INTERNATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3698422
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
14282 FRANKLIN AVENUE, TUSTIN, CALIFORNIA 92780
(Address of principal executive offices) (Zip Code)
(714) 838-0500
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed, since last report)
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 Section 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 / / 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.
21,042,409 shares of Common Stock
as of August 15, 1996
Page 1 of 16 pages
2
ITEM 1 - FINANCIAL STATEMENTS
The following financial statements required to be provided by this Item
1 and Rule 10.01 of Regulation S-X are filed herewith, at the respective pages
indicated on this Quarterly Report, Form 10-Q:
Page
Balance Sheets at April 30, 1996 and July 31, 1996 (unaudited) ....................9, 10
Statements of Operations for the periods from May 1, 1995 to
July 31, 1995 and from May 1, 1996 to July 31, 1996;
(unaudited) ...................................................................... 11
Statement of Stockholders' Equity for the period from April 30, 1996
through July 31, 1996 (unaudited)................................................. 12
Statements of Cash Flows for the periods May 1, 1995 to July 31, 1995
and from May 1, 1996 to July 31, 1996 (unaudited).................................13, 14
Notes to Financial Statements..................................................... 15
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q includes certain forward-looking
statements, the realization of which may be impacted by certain important
factors discussed in "Additional Factors that May Affect Future Results".
The financial statements set forth in this Form 10-Q have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
financial statements set forth in this Form 10-Q, the Company experienced losses
in fiscal 1995 and 1994 and has an accumulated deficit at July 31, 1996.
Management has restructured certain of its license agreements to provide it with
greater control over the development and clinical trials of its antibodies. If
the Company is able to achieve certain goals in relation to these antibodies, it
will receive certain additional financing pursuant to the terms of an existing
license agreement. Historically, the Company has relied on third party and
investor funds to fund its operations and clinical trials, and management
expects that additional funds will be required in the future. There can be no
assurances that this funding will be received. If the Company does not receive
additional funding, it will be forced to scale back operations and it could have
a material adverse effect on the Company. The Company's continuation as a going
concern is dependent on its ability to generate sufficient cash flow to meet its
obligations on a timely basis, to obtain additional financing as may be required
and, ultimately to attain successful operations. During the year ended April 30,
1996, the Company received significant funding through the issuance of preferred
stock and a foreign distribution agreement which has resulted in cash balances
of $6,986,750 as of July 31, 1996. Management believes that the cash and cash
equivalents and short-term investments of $6,986,750 as of July 31, 1996 are
sufficient to support the Company's estimated operations and other cash needs
through at least July 31, 1997.
2
3
RESULTS OF OPERATIONS
The Company's net loss of $948,264 for the quarter ended July 31, 1996
represents an increase of $433,162 in comparison to the net loss of $515,102 for
the prior year quarter ended July 31, 1995. This increase in the net loss for
the quarter ended July 31, 1996 is primarily attributable to a $519,453 increase
in total costs and expenses partially offset by a $86,291 increase in total
revenues.
Revenues for the quarter ended July 31, 1996 increased $86,291,
compared to the same prior year period ended July 31, 1995. This increase
resulted from a $86,291 increase in interest income in comparison to the same
prior year period ended July 31, 1995. Interest and other income increased
during the current year as the level of idle cash funds available for investment
has increased in comparison to the prior year. Management expects interest and
other income to increase during the remainder of the current year in comparison
to the prior year due to the increase in cash and short term investments from
the closing of the issuance of the Class B Convertible Preferred Stock in
December 1995 and from a distribution agreement consummated in February 1996.
Management expects revenues from the sales and licensing of antibodies to
increase slightly during the remainder of the fiscal year ending April 30, 1997
as the Company ships its LYM-1 antibody for use in the Phase III clinical
trials.
The Company's total costs and expenses increased $519,453 during the
quarter ended July 31, 1996, in comparison to the same prior year period ended
July 31, 1995. This increase resulted from a $314,066 increase in research and
development expenses, a $186,831 increase in general and administrative
expenses, and an $18,556 increase in interest expense in comparison to the prior
year quarter ended July 31, 1995. Research and development expenses increased
$314,066 for the quarter ended July 31, 1996 in comparison to the same prior
year period. The increase in research and development expenses resulted from the
Company's activities during the current year in preparing for and starting the
Phase III clinical trials of the LYM-1 antibody and from the Company's
activities in preparing for Phase I clinical trials of the TNT antibody
technologies which are expected to commence in early 1997. The Company expects
significant research and development expenses in the future as clinical trial
activities continue.
General and administrative expenses increased $186,831 for the quarter
ended July 31, 1996 in comparison to the same period of the prior year. This
increase in current year expenses has resulted primarily from the addition of
administration personnel and from expanded public relations activities. Interest
expense increased $18,556 during the quarter ended July 31, 1996 in comparison
to the same period of the prior year due to a higher level of interest bearing
debt outstanding during the current year as a result of a $1,020,000 real estate
mortgage loan originated in April 1996 in connection with the Company's purchase
of its existing facility. The Company believes that general and administrative
costs will increase during the remainder of the current fiscal year due to the
continued addition of personnel, the expansion of public relations activities,
and the legal and printing costs associated with the Company's September 27,
1996 shareholders' meeting.
The Company has begun Phase III testing in multi-center clinical trials
of the LYM-1 antibody in late stage non-Hodgkins lymphoma patients. The clinical
trials are being sponsored by Alpha Therapeutic Corporation, a wholly owned
subsidiary of Green Cross of Japan. The clinical trials are being held at
participating medical centers including M.D. Anderson, The Cleveland Clinic,
Cornell University (N.Y.C.), George Washington University and University of
Cincinnati. Following the completion of the clinical trials the Company expects
to file an application with the FDA to market LYM-1 in the United States.
3
4
On February 5, 1996,the Company entered into an agreement with
Cambridge Antibody Technology, Ltd. ("CAT") to develop and market a new class of
products for cancer therapy and diagnosis. The Agreement provides that the
Company and CAT will develop a monoclonal antibody based upon CAT's patented
technology for producing fully human monoclonal antibodies and the Company's
Tumor Necrosis Technologies ("TNT"). The Agreement provides that equity in the
joint venture and costs associated with the development of the product would be
shared equally between the Company and CAT. The Company would retain exclusive
world-wide manufacturing rights. It is anticipated that the joint venture would
conduct clinical trials of TNT in both the United States and Europe.
On February 29, 1996 the Company entered into a Distribution Agreement
with Biotechnology Development, Ltd. ("BTD"), a limited partnership controlled
by a member of the Board of Directors of the Company and a major shareholder of
the Company. Pursuant to the Distribution Agreement, BTD acquired the marketing
rights for the LYM-1 antibody technology for certain European countries and
other geographic areas not covered by the Company's existing license agreement
with Alpha Therapeutic Corporation. BTD paid the Company $3,000,000 for these
marketing rights. Under the terms of the Distribution Agreement, the Company
retains all manufacturing rights to LYM-1 and will supply LYM-1 to BTD at preset
prices. Additionally, the Company has the option under an Option Agreement to
repurchase the marketing rights to LYM-1 for a thirty month period. The
repurchase price, if repurchase is elected by the Company at its sole
discretion, includes a combination of cash, stock options and royalty payments
to be made to BTD, the amount of which depends on when the repurchase option is
elected by the Company.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1996, the Company had $6,986,750 in cash and short term
investments and working capital of $6,388,541 compared to $8,078,201 in cash and
short term investments and working capital of $7,460,514 at April 30, 1996.
CAPITAL COMMITMENTS
During the remainder of the year ending April 30, 1997 the Company
expects to acquire significant additional assets including an additional
building and additional building improvements, furniture, fixtures and equipment
to expand operations.
As of July 31, 1996, the Company had commitments to spend approximately
$600,000 on building improvements, furniture, and fixtures in connection with
the construction of office facilities in the unimproved portion of the existing
building which was purchased in April 1996. Also, as of July 31, 1996, the
Company had commitments to spend approximately $200,000 on additional laboratory
and production equipment to expand antibody production capabilities.
On September 11, 1996, the Company entered into a Purchase Agreement
for Real Property and Escrow Instructions dated as of September 11, 1996 with TR
KOLL TUSTIN TECH CORP. ("Koll"). Under the terms of the agreement, the Company
agreed to purchase from Koll land and a building located at 14272 Franklin
Avenue, Tustin, California 92780 for the purchase price of $1,524,663. This
24,201 square foot building is adjacent to the Company's existing building which
was purchased in April 1996. The building to be purchased is partially occupied
by tenants under the terms of leasing arrangements and the balance of the
building, consisting of approximately 5,000 square feet, will be occupied by the
Company over the next six months to support expanded in-house research and
development operations. The Company retains the option to terminate the tenant
leases at the end of a two year period if needed to expand its antibody
production capabilities. The Company expects to make a down payment of
approximately $500,000 towards the building purchase
4
5
and to finance the balance under the terms of a mortgage loan currently being
negotiated. The closing of the transaction is expected to take place on or
before October 15, 1996.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
FUTURE OPERATING RESULTS. Future operating results may be impacted by a
number of factors that could cause actual results to differ materially from
those stated herein. These factors include worldwide economic and political
conditions, industry specific factors, the Company's ability to maintain access
to external financing sources and its financial liquidity, the Company's ability
to timely develop and produce commercially viable products at competitive
prices, the availability and cost of components of those products, and the
Company's ability to manage expense levels.
NEED FOR ADDITIONAL CAPITAL. At July 31, 1996, the Company had
$6,986,750 in cash and short term investments which management believes is
sufficient to support the Company's estimated operations and other cash needs
through at least July 31, 1997. As of July 31, 1996, the Company had significant
commitments for expenditures for building improvements, equipment, furniture and
fixtures. The Company has continued to experience negative cash flows since its
inception and expects the negative cash flow to continue for the foreseeable
future. The Company expects that the monthly negative cash flow will increase as
a result of increased activities with the Phase III clinical trials for LYM-1
and the significantly increased research and development with the Company's
other products, including Tumor Necrosis Therapy ("TNT"). As a result of the
increased expenditure of funds, the Company believes that it will be necessary
for the Company to raise additional capital to sustain research and development
and provide for future clinical trials. The Company must raise additional equity
funds in order to continue its operations until it is able to generate
sufficient additional revenue from the sale and licensing of its products. There
can be no assurance that the Company will be successful in raising such funds on
terms acceptable to it or at all, or that sufficient additional capital will be
raised to research and develop the Company's additional products. The Company is
discussing the possibility of raising additional funds with several investment
banking firms, but as of July 31, 1996, the Company had not entered into any
firm commitments for additional funds. If the initial results from the Phase III
clinical trials of LYM-1 are poor, the results may have a material adverse
effect upon the Company's ability to raise additional capital, which would
affect the Company's ability to continue a full-scale research and development
effort for its antibody technologies. The Company's future success is highly
dependent upon its continued access to sources of financing which it believes
are necessary for the continued growth of the Company. In the event the Company
is unable to maintain access to its existing financing sources, or obtain other
sources of financing there would be a material adverse effect on the Company's
business, financial position and results of operations.
COMPETITION. The biotechnology industry is intensely competitive and
changing rapidly. Substantially all of the Company's existing competitors have
larger technical staffs, more established and larger research budgets and
significantly greater financial resources than the Company. There can be no
assurance that these competitors will not be able to expend resources to develop
their products prior to the Company's product being granted approval for
marketing by the U.S. Food and Drug Administration. There can be no assurance
that the Company will be able to compete successfully or that competition will
not have a material adverse effect on the Company's results of operation.
TECHNOLOGY. The Company's future success will depend significantly upon
its ability to develop and test workable products which the Company will seek
FDA approval to market to certain defined groups. A significant risk remains as
to the technological, performance and commercial success of the Company's
technology and products. The products currently under development by the Company
will require significant additional laboratory and clinical testing and
investment over the
5
6
foreseeable future. The significant research, development, and testing
activities, together with resultant increases in associated expenses, are
expected to result in operating losses for the foreseeable future. Although the
Company is optimistic that it will be able to successfully complete development
of one or more of its products, there can be no assurance that the Company's
research and development activities will be successfully completed; that any
proposed products will prove to be effective in clinical trials; that the
Company will be able to obtain all necessary governmental clearances and
approvals to market its products; that such proposed products will prove to be
commercially viable or successfully marketed; or that the Company will ever
achieve significant revenues or profitable operations. In addition, the Company
may encounter unanticipated problems, including development, manufacturing,
distribution and marketing difficulties. The failure to adequately address such
difficulties could have a material adverse effect on the Company's prospects.
REGULATION. The Company's products are subject to extensive government
regulation in the United States by federal, state and local agencies including
the Food and Drug Administration. The process of obtaining and maintaining FDA
and other required regulatory approvals for the Company's products is lengthy,
expensive and uncertain. There can be no assurance that the Company can obtain
FDA or other regulatory approval for the marketing of its products or that
changes in existing regulations or the adoption of new regulations will not
occur which will adversely affect the Company.
EARTHQUAKE RISKS. The Company's corporate headquarters facility, at
which the majority of its research and development activities are conducted, is
located near major earthquake faults which have experienced earthquakes in the
past. The Company does not carry earthquake insurance on its facility due to its
prohibitive cost. In the event of a major earthquake or other disaster affecting
the Company's facilities, the operations and operating results of the Company
could be adversely affected.
STOCK PRICE FLUCTUATIONS AND LIMITED TRADING VOLUME. The Company's
participation in the highly competitive biotechnology industry often results in
significant volatility in the Company's common stock price. Also, at times there
is a limited trading volume in the Company's stock. This volatility in the stock
price and limited trading volume are significant risks investors should
consider.
FORWARD LOOKING STATEMENTS. This Quarterly Report on Form 10-Q contains
certain forward-looking statements that are based on current expectations. In
light of the important factors that can materially affect results, including
those set forth above and elsewhere in this Form 10-Q, the inclusion of
forward-looking information herein should not be regarded as a representation by
the Company or any other person that the objectives or plans of the Company will
be achieved. The Company may encounter competitive, technological, financial and
business challenges making it more difficult than expected to continue to
develop, market and manufacture its products; competitive conditions within the
industry may change adversely; upon development of the Company's products,
demand for the Company's products may weaken; the market may not accept the
Company's products; the Company may be unable to retain existing key management
personnel; the Company's forecasts may not accurately anticipate market demand;
and there may be other material adverse changes in the Company's operations or
business. Certain important factors affecting the forward looking statements
made herein include, but are not limited to (i) accurately forecasting capital
expenditures, and (ii) obtaining new sources of external financing prior to the
expiration of existing support arrangements or capital. Assumptions relating to
budgeting, marketing, product development and other management decisions are
subjective in many respects and thus susceptible to interpretations and periodic
revisions based on actual experience and business developments, the impact of
which may cause the Company to alter its capital expenditure or other budgets,
which may in turn affect the Company's financial position and results of
operations.
6
7
PART II
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Report on Form 8-K.
(a) Exhibits:
Exhibit Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K: None
7
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.
TECHNICLONE INTERNATIONAL CORPORATION
By: /ss/ Lon H. Stone
------------------------------------------
By: /ss/ William V. Moding
------------------------------------------
Dated: September 13, 1996
8
9
TECHNICLONE INTERNATIONAL CORPORATION
BALANCE SHEETS
April 30, July 31,
1996 1996
----------- -----------
(Unaudited)
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 4,179,313 $ 6,986,750
Short-term investments................................. 3,898,888 --
Accounts receivable, net............................... 95,146 19,578
Inventories, net....................................... 93,921 180,880
Prepaid expenses and other current assets.............. 17,294 9,194
----------- -----------
Total current assets................................... 8,284,562 7,196,402
----------- -----------
PROPERTY:
Land................................................... 525,255 525,255
Building and improvements.............................. 1,298,416 1,391,472
Laboratory equipment................................... 1,139,663 1,218,433
Furniture and fixtures................................. 78,155 95,759
----------- -----------
Total.................................................. 3,041,489 3,230,919
----------- -----------
Less accumulated depreciation
and amortization..................................... (722,436) (784,395)
------------ -----------
Property--net........................................... 2,319,053 2,446,524
----------- -----------
OTHER ASSETS:
Patents, net........................................... 166,585 164,933
Other.................................................. 5,557 5,557
----------- -----------
Total other assets..................................... 172,142 170,490
----------- -----------
TOTAL.................................................. $10,775,757 $ 9,813,416
=========== ===========
See accompanying notes to financial statements.
9
10
TECHNICLONE INTERNATIONAL CORPORATION
BALANCE SHEETS
April 30, July 31,
1996 1996
------------ ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
CURRENT LIABILITIES:
Accounts payable................................................. $ 230,144 $ 212,996
Accrued legal and accounting fees
(primarily to a related party)................................. 99,495 89,256
Accrued payroll and related costs................................ 88,791 66,423
Accrued license termination fee.................................. 100,000 100,000
Accrued royalties................................................ 61,667 81,667
Accrued interest................................................. -- 8,303
Reserve for contract losses...................................... 173,563 173,563
Current portion of long-term debt 32,968 33,758
Other current liabilities........................................ 37,420 41,895
------------ ------------
Total current liabilities........................................ 824,048 807,861
------------ ------------
LONG TERM DEBT - MORTGAGE LOAN ................................. 987,032 981,142
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred Stock--$1.00 par value (authorized,
100,000 shares; Class B Convertible Preferred
Stock, outstanding, 6,800 shares at April 30, 1996
and 4,150 shares at July 31, 1996)
(liquidation preference of $4,393,315
at July 31, 1996).............................................. 6,800 4,150
Common Stock--no par value (authorized,
30,000,000 shares; outstanding, 20,048,014
shares at April 30, 1996 and 20,955,762
shares at July 31, 1996)....................................... 21,133,968 23,448,608
Additional paid-in capital ...................................... 6,061,171 3,757,181
Accumulated deficit.............................................. (17,760,680) (18,708,944)
----------- ------------
Total............................................................ 9,441,259 8,500,995
Less notes receivable from sale of common stock.................. (476,582) (476,582)
------------ ------------
Net stockholders' equity......................................... 8,964,677 8,024,413
------------ ------------
TOTAL............................................................ $ 10,775,757 $ 9,813,416
============ ============
See accompanying notes to financial statements.
10
11
TECHNICLONE INTERNATIONAL CORPORATION
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
JULY 31, JULY 31,
1995 1996
--------- -------
(Unaudited) (Unaudited)
REVENUES:
Net sales......................................... $ -- $ --
Licensing fees.................................... --
Interest income................................... 11 86,302
----------- -----------
Total revenues.................................... 11 86,302
----------- -----------
COSTS AND EXPENSES:
Cost of sales..................................... -- --
Research and development.......................... 264,056 578,122
General and administrative:
Unrelated entities....................... 213,352 376,215
Affiliates............................... 31,287 55,255
Interest.......................................... 6,418 24,974
----------- -----------
Total costs and expenses.......................... 515,113 1,034,566
----------- -----------
NET LOSS.......................................... $ (515,102) $ (948,264)
============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING...................................... 16,930,811 20,686,817
=========== ===========
LOSS PER COMMON SHARE............................. $ (.03) $ (.05)
============ ===========
See accompanying notes to financial statements.
11
12
TECHNICLONE INTERNATIONAL CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
NOTES
RECEIVABLE
ADDITIONAL ACCUMU- FROM
PREFERRED STOCK COMMON STOCK PAID-IN LATED SALE OF
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT STOCK TOTAL
------ ------ ---------- ----------- ----------- ------------ --------- -----------
BALANCE AT
April 30, 1996................ 6,800 $ 6,800 20,048,014 $21,133,968 $ 6,061,171 $(17,760,680) $(476,582) $8,964,677
Common stock issued
upon exercise of stock
options (unaudited)........... 8,000 8,000 8,000
Common Stock issued
upon conversion of Class B
Convertible Preferred Stock
(unaudited)................... (2,650) (2,650) 899,748 2,306,640 (2,303,990) --
Net loss
(unaudited)................... (948,264) (948,264)
BALANCE AT
JULY 31,1996 ----- ------- ---------- ----------- ----------- ------------ --------- -----------
(unaudited)................... 4,150 $ 4,150 20,955,762 $23,448,608 $ 3,757,181 $(18,708,944) $(476,582) $ 8,024,413
===== ======= ========== =========== =========== ============ ========= ===========
See accompanying notes to financial statements.
12
13
TECHNICLONE INTERNATIONAL CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
JULY 31, JULY 31,
1995 1996
--------- ---------
(Unaudited) (Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss.............................................. $(515,102) $ (948,264)
Adjustments to reconcile net
loss to net cash used
by operating activities:
Depreciation and amortization...................... 47,514 69,786
Common stock issued
for services...................................... 57,100 --
Changes in operating assets and liabilities:
Decrease in accounts receivable.................... 2,378 75,568
(Increase) in inventory............................ (2,475) (86,959)
Decrease in prepaid expenses....................... -- 8,100
Increase (Decrease) in accounts payable............ 82,515 (17,148)
Increase in accrued and
other current liabilities......................... 95,769 171
--------- ----------
Net cash used by operating activities................. (232,301) (898,746)
--------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of short-term investments.......... -- 3,898,888
Property acquisitions................................. (18,434) (189,430)
Patent costs capitalized.............................. (35,275) (6,175)
--------- ----------
Net cash (used) provided by investing activities...... (53,709) 3,703,283
--------- ----------
[Continued on next page]
See accompanying notes to financial statements.
13
14
TECHNICLONE INTERNATIONAL CORPORATION
STATEMENTS OF CASH FLOWS
[Continued from previous page]
THREE MONTHS ENDED
JULY 31, JULY 31,
1995 1996
---------- ----------
(Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on short-
and long-term borrowings..................................... $ -- $ (5,100)
Proceeds from sale of common stock............................. 298,150 8,000
-------- ----------
Net cash provided by financing activities...................... 298,150 2,900
-------- ----------
INCREASE IN CASH............................................... 12,140 2,807,437
CASH AT BEGINNING OF PERIOD.................................... 35,642 4,179,313
-------- ----------
CASH AT END OF PERIOD.......................................... $ 47,782 $6,986,750
======== ==========
SUPPLEMENTAL INFORMATION:
Interest paid.................................................. $ 1,248 $ 16,671
======== ==========
Income taxes paid.............................................. $ 800 $ 800
======== ==========
See accompanying notes to financial statements.
14
15
TECHNICLONE INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) The accompanying unaudited financial statements contain all adjustments
(consisting of only normal recurring adjustments) which, in the opinion of
management, are necessary to present fairly the financial position of the
Company at July 31, 1996, and the results of its operations and its cash
flows for the three month periods ended July 31, 1996 and 1995. Certain
information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to rules and
regulations of the Securities and Exchange Commission although the Company
believes that the disclosures in the financial statements are adequate to
make the information presented not misleading. The financial statements
included herein should be read in conjunction with the financial
statements of the Company, included in the Company's Annual Report on Form
10-K for the year ended April 30, 1996, filed with the Securities and
Exchange Commission on July 26, 1996.
(2) Going Concern -- The accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. As shown
in the financial statements, the Company experienced losses in fiscal 1995
and 1994 and has an accumulated deficit at July 31, 1996. Management has
restructured certain of its license agreements to provide it with greater
control over the development and clinical trials of its antibodies. If the
Company is able to achieve certain goals in relation to these antibodies,
it will receive certain additional financing pursuant to the terms of an
existing license agreement. Historically, the Company has relied on third
party and investor funds to fund its operations and clinical trials, and
management expects that additional funds will be required in the future.
There can be no assurances that this funding will be received. If the
Company does not receive additional funding, it will be forced to scale
back operations and it could have a material adverse effect on the
Company. The Company's continuation as a going concern is dependent on its
ability to generate sufficient cash flow to meet its obligations on a
timely basis, to obtain additional financing as may be required and,
ultimately to attain successful operations. During the year ended April
30, 1996, the Company received significant funding through the issuance of
preferred stock and a foreign distribution agreement which has resulted in
cash balances of $6,986,750 as of July 31, 1996. Management believes that
the cash and cash equivalents and short-term investments of $6,986,750 as
of July 31, 1996 are sufficient to support the Company's estimated
operations and other cash needs through at least July 31, 1997.
(3) Results of operations for the interim periods covered by this Report may
not necessarily be indicative of results of operations for the full fiscal
year.
15
5
0000704562
TECHNICLONE INTERNATIONAL CORPORATION
1,000
U.S. DOLLARS
3-MOS
APR-30-1997
MAY-01-1996
JUL-31-1996
1,000
6,987
0
195
175
181
7,196
3,231
784
9,813
808
0
0
4
23,449
(15,429)
9,813
0
86
0
1,035
0
0
25
(948)
0
(948)
0
0
0
(948)
(.05)
(.05)
