U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2001
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 333-34765
Ixion Biotechnology, Inc..
(Exact Name of Small Business Issuer as Specified in Its Charter)
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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: 904-418-1428
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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 October 31, 2001 was 7,184,297.
Ixion Biotechnology, Inc
Index to Form 10QSB
Part 1 - Financial Information Page
Item 1. Financial Statements (unaudited)
Condensed Balance Sheet - September 30, 2001.........................2
Condensed Statements of Operations - Three Months and Nine
Months Ended September 30, 2001 and 2000.............................3
Condensed Statements of Cash Flows - Nine Months Ended
September 30, 2001...................................................5
Notes to Condensed Financial Statements..............................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations or Plan of Operation..........................9
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds............................16
Item 6. Exhibits and Reports on Form 8-K....................................16
Signatures...................................................................17
Exhibit Index................................................................17
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheet
September 30, 2001
Unaudited
Assets
Current Assets:
Cash and cash equivalents $ 3,518,456
Accounts receivable 36,014
Prepaid expenses 41,226
Other current assets 500
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Total current assets 3,596,196
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Property and Equipment, net 359,575
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Other Assets:
Patents and patents pending, net 426,230
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Total other assets 426,230
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Total Assets $ 4,382,001
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Liabilities and Stockholder' Equity
Current Liabilities:
Accounts payable $ 57,584
Current portion of notes payable 176,679
Accrued expenses 272,454
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Total current liabilities 506,505
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Long-Term Liabilities:
Liability under research agreement 42,317
Deferred rent, including accrued interest 28,018
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Total long-term liabilities 70,335
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Total liabilities 576,840
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Commitments (Note 4)
Stockholders' Equity:
Common stock, $.01 par value; authorized 20,000,000, issued and
outstanding 7,169,196 shares at September 30 71,692
Additional paid-in capital 11,745,657
Accumulated deficit (7,682,150)
Less unearned compensation (330,040)
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Total stockholders' equity 3,805,161
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Total Liabilities and Stockholders' Equity $ 4,382,001
================
See accompanying notes to condensed financial statements
F-1
Condensed Statements of Operations
Three Months Ended
September 30,
__2001__ __2000__
Unaudited
Revenues:
Income from research grants $ 45,430 $ 104,494
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Total revenues 45,430 104,494
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Expenses:
Operating, general and administrative 267,593 216,428
Research and development 620,652 411,182
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Total expenses 888,245 627,610
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Other Income (Expense):
Interest expense (19,723) (18,827)
Interest income 27,740 40,396
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Total other income (expense) 8,017 21,569
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Net Loss. (834,798) $ (501,547)
============ ============
Basic and Diluted Net Loss per Share $ (0.12) $ (0.08)
============ ============
Weighted Average Common Shares 6,887,711 6,270,051
============ ============
See accompanying notes to condensed financial statements
F-2
Condensed Statements of Operations
Nine Months Ended
September,
2001 2000
----- ----
Unaudited
Revenues:
Income under research agreement $ 3,913 $ 2,450
Income from research grants 233,202 231,632
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Total revenues 237,115 234,082
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Expenses:
Operating, general and administrative 691,099 457,154
Research and development 1,772,133 790,892
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Total expenses 2,463,232 1,248,046
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Other Income (Expense):
Interest expense (59,556) (106,304)
Interest income 70,258 44,027
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Total other income (expense) 10,702 (62,277)
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Net Loss. $ (2,215,415) $ (1,076,241)
============== =============
Basic and Diluted Net Loss per Share $ (0.32) $ (0.23)
============== =============
Weighted Average Common Shares 6,870,592 4,765,754
============== =============
See accompanying notes to condensed financial statements
F-3
Condensed Statements of Cash Flows
Nine Months
Ended September 30,
2001 2000
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Unaudited
Cash Flows from Operating Activities:
Net loss $ (2,215,415) $ (1,076,241)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 71,305 29,853
Amortization 8,923 14,726
Amortization of debt discount 38,107 42,876
Stock, options issued for consulting services 3,780 4,340
Stock compensation 50,476 109,839
Decrease (increase) in prepaid expenses and
other current assets 7,347 (73,902)
Decrease (increase) in accounts receivable (34,734) 27,465
Increase (decrease) in deferred revenue (1,281) 34,885
Increase in accounts payable and
accrued expenses 125,039 9,751
Increase in deferred fees and salaries - 726
Increase in deferred rent 2,111 1,264
Decrease in interest payable (2,007) (35,314)
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Net cash used in operating activities (1,846,349) (909,734)
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Cash Flows from Investing Activities:
Purchase of property and equipment (122,717) (149,336)
Transfer to restricted cash - (48,000)
Payments for patents and patents pending (19,044) (36,705)
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Net cash used in investing activities (141,761) (234,041)
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Cash Flows from Financing Activities:
Proceeds from (repayments of) loans from officers - (312,399)
Proceeds from issuanceof note payable - 48,000
Proceeds from issuance of common stock - 3,966,337
Payments of loan costs - (6,716)
Principal reductions in notes payable (7,015) (1,180)
Payment of deferred offering costs - (820)
Proceeds from collection of note receivable
from shareholder 3,353,303 -
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Net cash provided by
financing activities 3,346,288 3,693,222
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Net Increase In Cash and Cash Equivalents 1,358,178 2,549,447
Cash and Cash Equivalents at Beginning of Period 2,160,278 22,361
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Cash and Equivalents at End of Period $ 3,518,456 $ 2,571,808
=========== ===========
See accompanying notes to condensed financial statements
F-4
Notes to Condensed Financial Statements
Nine Month Period Ended September 30, 2001 and 2000
1. Basis Of Presentation:
The accompanying unaudited condensed financial statements for the nine
months ended September 30, 2001 and 2000, 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, 2000 financial statements and
related notes included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2000. In the opinion of the Company, the
accompanying unaudited condensed financial statements contain all
adjustments, consisting only of normal recurring accruals, for a fair
statement of the Company's financial position, results of operations, and
cash flows for the periods presented. The results of operations for the
interim period ended September 30, 2001 are not necessarily indicative of
the results to be expected for the full year.
2. Significant Accounting Policies
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting
for Derivative Investments and Hedging Activities" which establishes
accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. SFAS No. 133, as extended by SFAS No.
137 and amended by SFAS No. 138, was effective for Ixion on January 1,
2001. Historically, Ixion has not entered into derivatives contracts to
hedge existing risks or for speculative purposes. Accordingly, adoption of
SFAS No. 133 had no effect on its financial position or results of
operations.
In June 2001 the FASB issued SFAS No. 141 "Business Combinations" and SFAS
No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141 requires
business combinations initiated after June 30, 2001 to be accounted for
using the purchase method of accounting, and broadens the criteria for
recording intangible assets separate from goodwill. Recorded goodwill and
intangibles will be evaluated against this new criteria and may result in
certain intangibles being subsumed into goodwill, or alternatively, amounts
initially recorded as goodwill may be separately identified and recognized
apart from goodwill. 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 each statement which apply
to goodwill and intangible assets acquired prior to June 30, 2001 will be
adopted by the Company on January 1, 2002. The Company does not expect the
adoption of these statements to have material effect on its financial
statements.
In August 2001 the Financial Accounting Standards Board (FASB) issued SFAS
No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets".
SFAS No. 144 addresses accounting and reporting for the impairment and
disposal of long-lived assets disposed of after December 15, 2001. SFAS No.
144 supersedes SFAS No. 121 and the accounting and reporting provisions of
Accounting Principals Board (APB) Opinion No. 30, and amends Accounting
Research Bulletin (ARB) No. 51 to eliminate the exception to consolidation
for a subsidiary. SFAS No. 144 establishes a single accounting model for
long-lived assets to be disposed of by sale. The Company does not expect
the adoption of this statement to have material effect on its financial
statements.
F-5
3. Stockholders' Equity
Stock Options
On January 3, 2001, the Company granted ten-year incentive stock options
under the 1994 Stock Option Plan to purchase 40,000 shares of Common Stock
at an exercise price of $4.00 per share to an officer of the company, in
connection with his hiring package. The options vest at a rate of 20% per
year.
On April 1, 2001 the Company granted ten-year stock options under the 1994
Stock Option Plan, to purchase 17,500 shares of Common Stock at an exercise
price of $4.00 per share to members of the Company's Scientific Advisory
Board. The options vest at a rate of 25% per quarter. The fair value of
these options, based on a Black-Scholes option-pricing model, are included
in unearned compensation, to be expensed as they vest.
On July 14, 2001, under the Stock Option Plan, the Audit and Benefits
Committee awarded options to purchase 65,350 shares at an exercise price of
$4.00 per share to officers, employees and members of the board of
directors.
Stock Compensation Plan
On July 14, 2001, under the Stock Compensation Plan, the Audit and Benefits
Committee awarded 10,000 shares of restricted common stock to members of
the board of directors, 18,000 shares to members of the Company's
Scientific Advisory Board, and 1,600 shares to officers and employees. In
connection with these stock grants, the Company recognized stock
compensation expense of $13,600 through September 30, 2001 and has unearned
compensation of $104,800 to be recognized as expense over future periods of
service.
The Q-Med Transaction
On July 11, 2001, the Company received the final payment of $3,353,303 due
from Q-Med, under the July 2000 stock purchase agreement.
4. Commitments:
Lease
In April 2001, the Company increased its rental space to approximately
11,500 square feet., which increases the minimum expected payments for 2001
to approximately $167,000. The lease amendment expires October 31, 2002 and
minimum expected payments for 2002, through October 31, 2002 are
approximately $150,000.
5. Notes Payable:
The Company's $787,270 in convertible unsecured notes scheduled to mature
on August 31, 2001 were extended through September 28, 2001, at which time
$610,370 in unpaid principal had been converted into 277,175 shares of
common stock based on their original conversion terms. Of the remaining
balance of $176,900 not converted into common stock at September 30, 2001,
the Company expects to repay $150,100 in October 2001, .with the remaining
$26,800 to be assumed by the Company's majority shareholder and other
qualified purchasers.
F-6
Special Note Regarding Forward-Looking Statements
We intend that the forward-looking statements contained in this report be
covered by the safe-harbor provisions of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Act of 1934. 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, statements under Part I, Item 2, Management's
Discussion and Analysis, contain forward-looking statements. Where, in any
forward-looking statement, Ixion expresses an expectation or belief as to future
results or events, our 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
0 changes in the costs of such activities from current estimates;
o the results of our research and development programs;
o the results of clinical studies;
o the timing of regulatory submissions;
o technological advances;
o determinations as to commercial potential; and
o the status of competitive products.
The estimates in our research and development plan are based on the current
expectations of our management team. Expectations may change due to a large
number of potential events, including unanticipated future developments.
The following factors, which could cause actual results or events to differ
materially from those anticipated, include, but are not limited to: general
economic, financial and business conditions; 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.
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 forms
10-KSB and in other SEC filings.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations or Plan of Operations.
The following discussion and analysis should be read in conjunction with
the unaudited Condensed Financial Statements and the related Notes thereto
included elsewhere in this report.
Results of Operations
Three Months Ended September 30, 2001 and 2000
-----------------------------------------------------------------
Summary of Operations - Three Months Ended September 30,
------------------------------------------------------------------
2001 2000 % change
------------------------------------------------------------------
Revenues $45,430 $104,494 -57%
Operating Expenses: $888,245 $627,610 42%
Other Expense (Income) ($8,017) ($21,569) -63%
-----------------------------------------
Loss: ($834,798) ($501,547) 66%
------------------------------------------------------------------
Total revenues decreased $59,064 from the third quarter of 2000 to the
third quarter of 2001 mainly as a result of the expiration of funding under
three National Institutes of Health ("NIH") Phase I 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 revenue to increase slightly for the rest of 2001 because of the
commencement of funding in October, 2001 under:
o A two-year NIH Phase II Small Business Technology Transfer ("STTR")
grant entitled "Enteric Elimination and Degradation of Oxalic Acid'
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" for a total of approximately
$783,000.
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G&A Expenses - 3rd Qtr 2001 vs. 3rd Qtr 2000
-----------------------------------------------------------------
QTD 2001 QTD 2000 Percent Change
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Personnel-related 141,794 132,518 7.00%
Professional fees 40,474 25,122 61.11%
Capital raising 22,508 125 17978.68%
Directors fees 14,132 7,640 84.97%
Other G&A 48,687 51,024 -4.58%
-------------------------------------
Total G&A 267,594 216,428 23.64%
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Operating, general, and administrative expenses increased almost 24% from
$216,428 in the third quarter of 2000 to $267,593 in the third quarter of 2001.
These increased expenses reflect an increase in the scale of operations,
including:
o increased personnel and related expenses;
o increased professional fees, including accounting and legal expenses;
o slightly increased director's fees;
o increased capital-raising activities; and
o support of increased research activities;
offset somewhat by a reduction in other miscellaneous operating expenses.
We expect our operating, general and administrative expenses to continue to
increase for the rest of 2001 as a result of increased research activities
resulting in a need for increased personnel and other administrative support.
Research and development expenditures consist primarily of:
o payroll-related expenses of research and development personnel;
o laboratory and animal supplies;
o laboratory rent and associated utilities;
o depreciation on laboratory equipment;
o development activities;
o payments made for sponsored research;
o clinical and pre-clinical expenses;
o scientific advisors fees;
o regulatory consultants fees; and
o amortization of capitalized patent costs.
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Comparison of R&D Expenses - 3nrd Quarter 2001 vs. 3rd Quarter 2000
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QTD 2001 QTD 2000 Percent Change
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Personnel-related 180,185 141,565 27.28%
Lab & Animal 149,161 46,065 223.80%
Consultants & Subcontracts 101,983 113,497 -10.14%
Clinical/Pre-clinical 28,166 0 -
Rent & Utilities 44,090 32,057 37.54%
Regulatory & quality 37,087 0 -
Scientific Advisors 31,200 40,350 -22.68%
Other R&D 48,780 37,648 29.57%
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Total R&D 620,652 411,182 50.94%
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Research and development expenses increased 51% from $411,182 for the third
quarter of 2000 to $620,652 for the third quarter of 2001. These increased
expenses reflect an increase in the scale of operations, including:
o increased laboratory personnel and related payroll expenses;
o increased laboratory-related supplies and expenses;
o increased clinical and pre-clinical activities;
o increased fees to regulatory consultants; and
o an increase in other miscellaneous expenses related to research and
development;
offset somewhat by a decrease in fees to outside consultants, subcontractors and
scientific advisors.
Our research and development expenses will continue to increase in 2001 due to
an increase in the scale of operations as a result of the receipt of the
research grants referred to above, and as a result of preparations for an
Innovative New Drug Application (IND) meeting with the Food and Drug
Administration ("FDA") scheduled for November 2001.
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Interest Income & Expense - 3rd Qtr 2001 vs. 3rd Qtr 2000
-----------------------------------------------------------------
QTD 2001 QTD 2000 Percent Change
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Interest Income 27,741 40,396 -31.33%
Interest Expense 19,724 18,827 4.77%
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Interest expense increased only slightly from $18,827 in the third quarter
of 2000 to $19,723 in the third quarter of 2001. Interest expense should decline
further in the last quarter of 2001 as a result of the maturity of our
convertible unsecured notes in September 2001.
Interest income decreased 31% from $40,396 in the third quarter of 2000 to
$27,740 in the third quarter of 2001, due to a greatly decreased interest rate
for the investment of cash flow in excess of operating needs. Interest income
should continue to decrease slightly in 2001 primarily due to expected further
reductions in interest rates before the end of the year.
Nine Months Ended September 30, 2001 and 2000
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Summary of Operations - Nine Months Ended September 30,
-----------------------------------------------------------------------------
2001 2000 % change
-----------------------------------------------------------------------------
Revenues $237,115 $234,082 1%
Operating Expenses: $2,463,232 $1,248,046 97%
Other Expense (Income) ($10,702) $62,277 -117%
-------------------------------------------------
Net Loss: 2,215,415) ($1,076,241) 106%
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Total revenues increased slightly from $234,082 for the first nine months
of 2000 to $237,115 for the first nine months of 2001 mainly as a result of the
following:
o Four active NIH research contracts:
0 "Islets from Islet Progenitor/Stem Cells for Implantation", and
o "M3 Receptor: Diagnostic Marker for Sjogren's Syndrome"
"Oxalobacter Formigenes Diagnostic Kit Development"
0 "Coating of Urinary Protheses to Prevent Encrustation"
We expect revenue to increase slightly during the fourth quarter of 2001
because of 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"
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" for a total of
approximately $783,000.
- ------------------------------------------------------------------------------
G&A Expenses - nine months 2001 vs. 1st nine months 2000
- ------------------------------------------------------------------------------
2001 2000 Percent Change
- ------------------------------------------------------------------------------
Personnel-related 395,092 246,800 60.09%
Professional fees 80,000 51,461 55.46%
Office & supplies 38,968 27,495 41.73%
Rent & utilities 21,213 13,937 52.21%
Capital-raising 48,424 935 5076.71%
Other G&A 107,402 116,526 -7.83%
--------------------------------------------
Total G&A 691,099 457,154 51.17%
- ------------------------------------------------------------------------------
Operating, general, and administrative expenses increased 51% from $457,154
for the nine months ended September 30, 2000 to $691,099 for the nine months
ended September 30, 2001. These increased expenses reflect an increase in the
scale of operations, including:
o increased personnel and related payroll expenses;
o increased professional fees, including legal and accounting;
o increased supplies;
o increased rent and utilities usage as a result of additional
office space;
o increased capital-raising activities;
o support of increased research activities;
offset somewhat by a decrease in other miscellaneous administrative expenses.
We expect our operating, general and administrative expenses to continue to
increase throughout the rest of 2001 as a result of increased research
activities resulting in a need for increased administrative activities.
Research and development expenditures consist primarily of:
o payroll-related expenses of research and development personnel;
o laboratory and animal supplies;
o laboratory rent and associated utilities;
o depreciation on laboratory equipment;
o research and development activities;
o payments for sponsored research;
o scientific advisors fees;
o regulatory consultants fees;
o interest on the purchase of laboratory equipment and deferred
laboratory rent; and
o amortization of capitalized patent costs.
- ------------------------------------------------------------------------------
R&D Expenses - Nine Months ended 9/30/01 9/30/00
- ------------------------------------------------------------------------------
YTD 2001 YTD 2000 Percent Change
- ------------------------------------------------------------------------------
Personnel-related 491,4 21 258,488 90.11%
Lab & animal 444,021 100,484 341.88%
Consultants & subcontracts 385,047 230,669 66.93%
Clinical/pre-clincical 99,684 0 #DIV/0!
Rent & utilities 113,290 71,958 57.44%
Regulatory & quality 37,087 0 #DIV/0!
Deprec & amort 73,090 43,947 66.31%
Scientific advisors 71,567 52,350 36.71%
Other R&D 56,927 32,996 72.53%
---------------------------------------------
Total R&D 1,772,133 790,892 124.07%
- ------------------------------------------------------------------------------
Research and development expenses increased 124% from $790,892 for the nine
months ended September 30, 2000 to $1,772,133 for the nine months ended
September 30, 2001. These increased expenses reflect an increase in the scale of
operations, including
o increased laboratory personnel and related payroll expenses;
o increased laboratory-related supplies and animal expenses;
o increased regulatory consultant's fees due to scale-up of operations;
o increased pre-clinical and clinical activities;
o increased laboratory rent and associated utilities due to increased
space;
o increased amortization of patents;
o increased depreciation on laboratory equipment;
o increased scientific advisors fees; and
o an increase in other miscellaneous research and development activities.
Our research and development expenses will continue to increase throughout
the fourth quarter of 2001 due to an increase in the scale of operations as we
prepare for our pre-IND meeting with the FDA.
- ------------------------------------------------------------------------------
Interest Income & Expense - Nine months ended 9/30/01 vs. 9/30/00
- ------------------------------------------------------------------------------
YTD 2001 YTD 2000 Percent Change
Interest Income 70,258 44,027 59.58%
Interest Expense 59,556 106,304 -43.98%
- ------------------------------------------------------------------------------
Interest expense decreased 44% from $106,304 for the nine months ended
September 30, 2000 to $59,556 for the nine months ended September 30, 2001 due
primarily to the re-payment of the officer's bridge loans and the conversion of
deferred administrative fees and salaries in mid-2001. Interest expense should
decline further in 2001 as a result of the maturity of unsecured subordinated
notes in September 2001.
Interest income increased almost 60% from $44,027 for the nine months ended
September 30, 2000 to $70,258 for the nine months ended September 30, 2001.
Interest income should continue to decrease slightly in 2001 primarily due to
expected further reductions in interest rates before the end of the year.
Liquidity and Capital Resources
Operations during the first nine months of 2001 have been funded primarily
from the funds provided from the equity investments by Q-Med, AB ("Q-Med"), our
majority shareholder, and funds from NIH grants. We do not have any material
bank financing arrangements.
On July 11, 2001, we received the remaining $3,353,303 which was called for
in our agreement with Q-Med, for the prior issuance of stock. This agreement
also gave Q-Med the right of first refusal to offer to redeem, at the maturity
date on August 31, 2001, from all holders electing not to convert, up to
$787,270 in face amount of our convertible unsecured notes.
In September 1996, the Company completed the private placement of $787,270
in convertible unsecured notes due August 2001. The due date for conversion was
extended through September 28, 2001 at which time, $610,370 had been converted
into 277,175 shares of common stock. Q-Med and other interested parties have
committed to purchasing $26,800 of these notes, leaving $150,100 to be paid by
the Company.
A summarization of the grant funds received from NIH under which we
received payments during the first nine months of 2001, and pending NIH grants
follows:
o In September 1999 we received an award of $200,000 (covering a 23-month
period) from the NIH to support our diabetes research entitled "Islets
from Islet Progenitor/Stem Cells for Implantation". We subcontracted
$25,000 under this grant, and have utilized the entire remaining balance
of approximately $43,000 in 2001.
o In September 2000 we were awarded another NIH SBIR award for research
entitled "M3 Receptor: Diagnostic Marker for Sjogren's Syndrome". We
subcontracted about $45,000 to the University of Florida and drew on the
rest of the funds available through the expiration of the grant in the
first quarter of 2001.
o Also in September, 2000, we awarded another NIH SBIR grant for $99,958
and entitled "Coating of Urinary Protheses to Prevent Encrustation".
We drew on the remaining funds available through September of 2001.
o Also in September, 2000, we were awarded another NIH SBIR grant, for
$99,958 and entitled "Oxalobactor Formigenes Diagnostic Kit
Development". We drew on the remaining funds available through
September of 2001.
o In September, 2001 NIH awarded us a Phase II STTR grant, for $500,000
and entitled "Enteric Elimination and Degradation of Oxalic Acid".
We will begin drawing on these funds in November, 2001.
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. We will begin drawing on these funds in November, 2001.
o We also have other grant applications pending.
At September 30, 2001 we have $3,158,456 in cash and cash equivalents,
compared with $2,571,808 at September 30, 2000. 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.
We expect annual lease expenses to be approximately $167,000 for 2001. We
will continue to have a need to purchase additional laboratory equipment and
estimate that we will need to purchase at least $100,000 of capital laboratory
equipment during the remainder of 2001.
We had negative cash flows from operations in the first nine months of 2001
of $1,846,349 as compared to $909,734 in the first nine months of 2000. Cash
increased, in total for the first nine months of 2001 by $1,358,178 due
primarily to collection of amounts owed on prior stock issuances, while we had
an increase in cash of $2,549,447 during the nine months ended September 2000.
We have spent and expect to continue to spend substantial funds to complete our
planned product development efforts, commence clinical trials, and diversify our
technology. Our future capital requirements and the adequacy of available funds
will depend on numerous factors, including
o the successful commercialization of oxalate products;
o the successful commercialization of our islet replacement therapy
products;
o progress in our product development efforts;
o the magnitude and scope of development efforts;
o progress with preclinical studies and clinical trials;
o the cost of contract manufacturing and research organizations;
o cost of filing, prosecuting, defending, and enforcing patent claims
and other intellectual property rights;
o competing technological and market developments;
o the state of the United States economy; and
o the development of strategic alliances for the development and
marketing of our products.
We will continue to be required to obtain additional funds through equity
or debt financing, strategic alliances with corporate partners and others,
mergers or the sale of substantially all of our assets, or through other sources
in order to bring our drug and device products through regulatory approval to
commercialization. We do not have any material committed sources of additional
financing. We cannot assure you that additional funding, consolidation, or
alliance, if necessary, will be available on acceptable terms, if at all. If
adequate funds are not available, we may be required to delay, scale-back, or
eliminate certain aspects of our operations or attempt to obtain funds through
arrangements with collaborative partners or others that may require us to
relinquish rights to certain of our technologies, product candidates, products,
or potential markets. If adequate funds are not available, our business,
financial condition, and results of operations will be materially and adversely
affected.
We expect that our existing funds and research grants will be sufficient to
fund our operations through 2002. We have the ability to scale-back operations,
as necessary, in order to extend the use of operating cash. There can be no
assurance that any additional financing required in the future will be available
on acceptable terms, if at all.
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds
Set forth below is information as to securities sold by Ixion during the
quarter ended September 30, 2001 which 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
resulting from the following sales are deemed to be restricted securities for
the purposes of the Act. All certificates representing such issued and
outstanding restricted securities of the Company have been properly legended and
the Company has issued "stop transfer" instructions to it's 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
Securities Act or have been transferred pursuant to an appropriate exemption
from the registration provisions of the Securities Act.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibits marked by asterisk(s) are included with this Report; other exhibits
have been incorporated by reference to other documents filed by us with the SEC.
(a) Exhibits
Exhibit Description Page
(2) Acquisition, Reorganization, Arrangement,
Liquidation or Succession None
(4) Instruments defining the Rights of Security Holders None
(10) Material Contracts None
(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
(23) Consents of Experts and Counsel None
(24) Power of Attorney None
(99) Additional Exhibits None
*Filed herewith
(b) Reports on Form 8-K
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: November 5 2001 By: /s/ Weaver H. Gaines
---------------------
Weaver H. Gaines
Chairman and Chief Executive Officer
Chief Financial Officer
Dated: November 5, 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
(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
(23) Consents of Experts and Counsel None
(24) Power of Attorney None
(99) Additional Exhibits None
*Filed herewith