SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 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: 0-21990
OXiGENE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3679168
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
110 East 59th Street
New York, NY 10022
(Address of principal executive offices, including zip code)
(212) 421-0001
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Warrant to Purchase One Share of Common Stock
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 [ ]
As of June 30, 1996, there were 7,271,282 shares of the Registrant's Common
Stock issued and outstanding.
OXiGENE, INC.
This Quarterly Report on Form 10-Q contains historical information and
forward-looking statements. Statements looking forward in time are included in
this Form 10-Q pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. They involve known and unknown risks
and uncertainties that may cause the Company's actual results in future periods
to be materially different from any future performance suggested herein. In the
context of forward-looking information provided in this Form 10-Q and in other
reports, please refer to the discussion of risk factors detailed in, as well as
the other information contained in, the Company's filings with the Securities
and Exchange Commission during the past 12 months.
INDEX PAGE NO.
PART I. FINANCIAL INFORMATION 1
Item 1. Financial Statements 1
Consolidated Balance Sheets 2
Consolidated Statement of Operations 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION 9
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Securityholders 9
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying consolidated financial statements have been prepared
by OXiGENE, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the Company's
opinion, these financial statements contain all adjustments necessary to
present fairly the financial position of OXiGENE, Inc. as of June 30, 1996 and
December 31, 1995, the results of operations for the three-month and six-month
periods ended June 30, 1996 and June 30, 1995, and the cash flows for the six
month periods ended June 30, 1996 and June 30, 1995. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended December 31,
1995. The results of operations for the period ended June 30, 1996 are not
necessarily indicative of the results of operations and cash flows for any
subsequent interim period or for the full year.
OXiGENE, Inc.
(A development stage company)
Consolidated Balance Sheets
(All amounts in thousands)
June 30, 1996 December 31, 1995
-------------------- -----------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents 10,710 10,407
Securities available-for-sale -- 502
Prepaid expenses 80 50
Interest receivable 77 202
Other 21 19
--------------- ------------------
Total current assets 10,888 11,180
--------------- ------------------
Furniture, fixtures and equipment, at cost 73 62
Accumulated depreciation (31) (25)
--------------- ------------------
Net property and equipment 42 37
--------------- ------------------
Deposits 10 10
Total Assets 10,940 11,227
=============== ==================
Liabilities and stockholders' equity
Current Liabilities:
Accounts payable and accrued expenses:
Due to Cato Research, Ltd. 75 134
Other payables 748 536
--------------- ------------------
Total current liabilities 823 670
--------------- ------------------
Stockholders' equity Common stock $0.01 par value:
Authorized shares - 15,000,000 shares
Issued and outstanding
7,271,285 at June 30, 1996
6,823,300 at December 31, 1995 72 68
Additional paid-in capital 24,853 21,864
Common stock subscribed 98 --
Subscription receivable (98) --
Deficit accumulated during the development stage (14,811) (11,400)
Foreign currency translation adjustment 3 25
--------------- ------------------
Total stockholders' equity 10,117 10,557
--------------- ------------------
Total liabilities and stockholders' equity 10,940 11,227
=============== ===================
The accompanying notes are an integral part of this statement
OXiGENE, Inc.
(A development stage company)
Consolidated Statement of Operations
(All amounts in thousands, except per share date)
(Unaudited)
Three months ended Six months ended
------------------------------------------------------------------------
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
----------------- ----------------- ----------------- ------------------
Revenue
Interest income 125 29 254 82
Operating expenses
Research and development:
Cato Research, Ltd. 160 134 388 282
Other 1,182 478 1,968 991
Total research and development 1,342 612 2,356 1,273
General and administrative 681 233 1,309 646
----------------- ----------------- ----------------- ------------------
Total operating expenses 2,023 845 3,665 1,919
----------------- ----------------- ----------------- ------------------
Net loss 1,898) (816) (3,411) (1,837)
================= ================= ================= ==================
Net loss per common share (0.27) (0.16) (0.49) (0.36)
================= ================= ================= ==================
Weighted average number of
common shares outstanding 6,971 5,058 6,971 5,058
================= ================= ================= ==================
The accompanying notes are an integral part of this statement
OXiGENE, Inc.
(A development stage company)
Consolidated Statements of Cash Flows
(All amounts in thousands)
(Unaudited)
Six months ended
-----------------------------------
June 30, 1996 June 30, 1995
-------------------- --------------
Operating activities
Net Loss (3,411) (1,837)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation 6 4
Amortization of debt securities -- 9
Compensation related to issuance of warrants,
options and stock appreciation rights 1,008 --
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 93 138
Accounts payable and accrued expenses 375 (52)
-------------------- --------------
Net cash used in operating activities (1,929) (1,738)
-------------------- --------------
Financing activities
Proceeds from issuance of common stock, net 1,710 --
Other capital contribution 53
--------------------- -------------
Net cash provided by financing activities 1,763 --
Investing activities
Proceeds from sale of securities available-for-sale 502 848
Purchase of furniture, fixture and equipment (11) (18)
-------------------- --------------
Net cash used in investing activities 491 830
Effect of exchange rate on changes in cash (22)
Net increase (decrease) in cash and cash equivalents 303 (908)
Cash and cash equivalents at beginning of period 10,407 1,194
Cash and cash equivalents at end of period 10,710 286
The accompanying notes are an integral part of this statement
OXiGENE, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six-month
period ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended December 31,
1995.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with a
maturity of three months or less when purchased to be cash equivalents.
Net Loss Per Share
Net loss per share is based upon the Company's aggregate net loss
divided by the weighted average number of shares of Common Stock outstanding
during the respective periods. All options and warrants were antidilutive and,
accordingly, excluded from the calculation of weighted average shares.
2. Principles of Consolidation
At the end of 1994, the Company established a wholly-owned operating
subsidiary in Sweden, OXiGENE (Europe) AB. This subsidiary manages and controls
the Company's research and development work, and monitors the European clinical
trials. The consolidated financial statements include the accounts of the
Company and OXiGENE Europe AB, effective January 1, 1995.
Intercompany balances and transactions have been eliminated.
3. Stockholder's Equity
During the six-month period ended June 30, 1996, the Company issued
397,982 shares of Common Stock upon exercise of previously granted warrants.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Description of Business
OXiGENE is a development stage pharmaceutical company engaged
primarily in developing products designed to enhance traditional treatments for
cancer, aging, and autoimmune diseases. Currently under development are (1)
therapeutics that inhibit the ability of cancer cells to repair their DNA
structure after damage produced by radiation or chemotherapy; (2)
chemopreventive agents that stimulate DNA repair to strengthen the body's
immune system; and (3) diagnostics that measure DNA activity to determine
immune function and status. Since its inception in February, 1988, the Company
has devoted substantially all of its efforts and resources to research and
development conducted on its own behalf and through collaborations with
clinical institutions, primarily the University of Lund, Sweden. The Company
has generated a cumulative net loss of $14,811,000 for the period from its
inception through June 30, 1996. The Company expects to incur additional
operating losses in the year ending December 31, 1996, and for several years
thereafter, principally as a result of its continuing anticipated research and
development and clinical trials expenditures. The major source of the Company's
working capital has been the proceeds of private and public equity financings.
Most recently, in the summer of 1995, the Company completed a private placement
of approximately $10,000,000, before expenses. As of June 30, 1996, the Company
had no long-term debt or loans payable. Since its inception, the Company has
had no licensing or other fee income, and does not anticipate any such income
for the foreseeable future.
Results of Operations - Six Months Ended June 30, 1996 and 1995
During the six months ended June 30, 1996 and 1995, the Company
had no income, except for interest income of approximately $254,000 and $82,000
for those respective periods. The increase in interest income is attributable
primarily to the increase in cash and cash equivalents as a result of the
completion of a $10 million (before expenses) private placement in the summer
of 1995. The operating expenses for those periods were approximately $3,665,000
and $1,919,000, respectively. The research and development expenses for the
same periods were approximately $2,356,000 and $1,273,000, respectively, and
the general and administrative expenses were approximately $1,309,000 and
$646,000, respectively. The increase in reported research and development
expenses was attributable to a charge for financial reporting purposes of
approximately $1,007,000. This charge was recorded because the market value per
share of Common Stock on June 30, 1996 ($25.50) exceeded the exercise price of
stock appreciation rights previously granted by the Company to certain clinical
investigators and consultants. Without giving effect to such charge, research
and development expenses increased by approximately $76,000, compared to the
comparable 1995 period. Generally, the Company makes payments to its clinical
investigators if and when certain predetermined milestones in its clinical
trials are reached, rather than on a fixed quarterly or monthly basis. As a
result of the foregoing and the existence of outstanding stock appreciation
rights, research and development expenses have fluctuated, and are expected to
continue to fluctuate, from quarter to quarter. General and administrative
expenses increased primarily as a result of an increase in the Company's
activities, mostly in Sweden.
Liquidity and Capital Resources
The company has experienced net losses and negative cash flow from
operations each year since its inception and, as of June 30, 1996, the Company
had a cumulative deficit of $14,811,000. To date, the Company has financed its
operations primarily through the proceeds of private and public equity
financings. The Company has attempted to contain costs and reduce cash outflow
by maintaining low overhead costs, using consultants as required and utilizing
facilities available at the University of Lund, Sweden, for research and
development.
At December 31, 1995, the Company had approximately $10,909,000 in
cash and cash equivalents and marketable securities available for sale. In the
first quarter of 1996, the Company disposed of its marketable securities. The
proceeds from this disposition were mostly used to finance operations during
the three months ended March 31, 1996. In the quarter ended June 30, 1996, an
aggregate of 240,100 options and warrants were exercised, with proceeds to the
Company of $1,427,285. A portion of these proceeds was used to finance
operations during the three months ended June 30, 1996. The Company had cash
and cash equivalents of approximately $10,710,000 at June 30, 1996, compared to
approximately $10,407,000 at March 31, 1996.
The Company expects to incur additional expenses which will
probably result in significant losses over the next several years as it
continues to expand its research and development activities and undertakes the
clinical trials required to bring its products to the marketplace.
The Company's policy is to maintain a relatively small number of
executives and to rely as much as possible on outside services for its clinical
research, clinical trials and administration. The Company maintains small
executive offices in New York and in Lund, Sweden, both of which are subleased.
Further, the Company contemplates subleasing new laboratory space in the New
York metropolitan area that will complement research activities with those at
the Lund facility. The Company contracts with Cato Research, Ltd., Durham,
North Carolina, for the coordination of the Company's clinical trials and
retention of its clinical files. The Company pays the University of Lund,
Sweden and other hospitals, where applicable, on a per patient basis for
conducting its clinical trials.
The Company's working capital and capital requirements may,
however, vary materially from those now planned due to numerous factors
including, but not limited to, the progress of the Company's research and
development programs, the results of preclinical testing and clinical trials,
the timing and costs involved in obtaining regulatory approvals, the level of
resources that the Company will devote to the development of its manufacturing,
marketing and sales capabilities, technological advances, the approval of
pending patent applications and the status of collaborative agreements with
other companies to provide funding and services to the Company to support or
defray some of or all of the costs associated with any of or all these
activities. The Company anticipates that its cash and cash equivalents will be
sufficient to complete the perquisite clinical trials prior to regulatory
approval for its current compounds, Sensamide(TM) and Neu-Sensamide(TM). A
collaborative agreement with a third party to complete development of these or
other products or bring products to market will be sought during 1996 and
thereafter. There can be no assurance that the Company's cash and cash
equivalents will be sufficient to attain clinical trials milestones or that a
third party collaboration can be realized or that additional financing, if
required, will be available on acceptable terms, if at all. The Company had no
material commitments for capital expenditures as of June 30, 1996.
Tax Matters
As of December 31, 1995, the Company had, for Federal income tax
purposes, net operating loss carryforwards of approximately $10,672,000.
Pursuant to the Tax Reform Act of 1986, annual utilization of the Company's net
operating loss carryforwards may be limited if a cumulative change in ownership
of the Company's stock of more than 50% (within the meaning of the Internal
Revenue Code) occurs within any three-year period. The Company has made no
determination concerning whether there has been such a cumulative change in
ownership and it is possible that such a change in ownership may be deemed to
have occurred following the Company's initial public offering, which was
completed in October, 1993, and/or the private placement of 1,666,700 shares of
Common Stock, which was completed in July 1995.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings pending or, to the Company's best
knowledge, threatened against the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On June 14, 1996, the Company held its Annual Meeting of
Stockholders (the "Meeting") in Stockholm, Sweden. At the Meeting, all nominees
for director, Professor Marvin Caruthers, Michael Ionata, Dr. Bjorn Nordenvall,
Dr. Ronald W. Pero and Dr. Claus M0ller, were elected. There were 5,545,251 (or
96.2%) votes cast in favor, and 221,700 (or 3.8%) votes cast against the
election of each of the aforementioned nominees for director.
The Company's stockholders ratified the appointment of Ernst &
Young LLP as the Company's independent auditors for the year ending December
31, 1996, with 5,750,141 votes (or 99.7%) cast in favor, 16,310 votes against,
and 500 abstentions.
The Company's stockholders were also asked to approve (1) an
amendment to the Company's Amended and Restated Stock Incentive Plan, (2) the
OXiGENE, Inc. 1996 Stock Incentive Plan, (3) the terms of indemnification
agreements between the Company and its directors, executive officers and key
employees, and (4) an amendment to the Company's Amended and Restated
Certificate of Incorporation, increasing the number of authorized shares of
Common Stock from 15 million shares to 60 million shares. Each of these
proposals was approved by a majority of the shares present at the Meeting,
either in person or by proxy, and entitled to vote, except for the proposal
regarding an amendment to the Company's Amended and Restated Certificate of
Incorporation, which was approved by a majority of the Company's issued and
outstanding shares of Common Stock. The following table sets forth the votes
cast for each of the foregoing proposals:
Votes "FOR" Votes "AGAINST" Abstentions Non-votes
----------- --------------- ----------- ---------
Amendment to Amended and Restated 3,759,259 24,960* 5,000* 1,977,732
Stock Incentive Plan** (65.2%) (34.2%)
OXiGENE, Inc. 1996 Stock Incentive 3,653,814 159,560 4,700* 1,948,877
Plan** (63.4%) (2.8%) (33.8%)
Indemnification Agreements** 3,815,918 60,510 695,000 1,205,523
(66.2%) (1.0%) (12.1%) (20.9%)
Amendment to Amended and Restated 4,392,523 171,010 4,700* 1,198,718
Certificate of Incorporation*** (62.5%) (2.4%) (17.1%)
- ----------------------
Numbers do not add up to 100% due to rounding.
* Represents less than 1%.
** Percentage calculated on basis of number of shares present at the Meeting,
either in person or by proxy, and entitled to vote.
*** Percentage calculated on basis of number of shares of Common Stock issued
and outstanding.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibit is filed as part of this Quarterly
Report on Form 10-Q:
27.1 Financial Data Schedule
99.1 Press Release, dated June 14, 1996, with respect to
the election of OXiGENE's new board of directors
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the second quarter
of 1996.
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.
OXiGENE, INC.
Date: August 12, 1996 /s/ Bjorn Nordenvall
--------------------------------------- --------------------
Bjorn Nordenvall
President and Chief
Executive Officer
OXiGENE, INC.
Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended June 30, 1996
Exhibits
Exhibit
Number Description
27.1 Financial data schedule.
99.1 Press release dated June 14, 1996.