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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 March 31, 1999
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 April 13, 1999 was 2,514,014.
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Ixion Biotechnology, Inc.
Index to Form 10-QSB
Part I. - Financial Information Page
Item 1. Financial Statements (unaudited)
Condensed Balance Sheet - March 31, 1999. . . . . . . . . . . . . . . . . . 2
Condensed Statements of Operations - Three Months Ended
March 31, 1999 and 1998 and for the period March 25, 1993
(Date of Inception) through March 31, 1999. . . . . . . . . . . . . . . . . 3
Condensed Statements of Cash Flows - Three Months Ended
March 31, 1999 and 1998 and for the period March 25, 1993
(Date of Inception) through March 31, 1999. . . . . . . . . . . . . . . . . 4
Notes to Condensed Financial Statements.... . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . 7
Part II. - Other Information
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . .13
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Part I. Financial Information
Item 1. Financial Statements
Balance Sheet
March 31, 1999
Unaudited
Assets
Current Assets:
Cash and cash equivalents $ 20,123
Accounts receivable 1,916
Prepaid expenses 1,717
Other current assets 500
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Total current assets 24,256
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Property and Equipment, net 55,888
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Other Assets:
Patents and patents pending, net 289,582
Other 5,344
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Total other assets 294,926
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Total Assets $ 375,070
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Liabilities and Capital Deficiency
Current Liabilities:
Accounts payable $ 58,083
Bridge loans payable to officers 415,000
Current portion of notes payable 12,408
Accrued expenses 46,722
Interest payable 19,411
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Total current liabilities 551,624
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Long-Term Liabilities:
Notes payable 649,121
Liability under research agreement 42,317
Deferred rent, including accrued interest 35,878
Deferred fees and salaries, including accrued interest 783,858
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Total long-term liabilities 1,511,174
Total liabilities 2,062,798
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Capital Deficiency:
Common stock, $.01 par value; authorized 4,000,000, issued and
outstanding 2,514,014 shares at March 31 25,140
Common stock warrants outstanding 35,494
Additional paid-in capital 1,625,142
Deficit accumulated during the development stage (3,129,630)
Less unearned compensation (243,874)
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Total capital deficiency (1,687,728)
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Total Liabilities and Capital Deficiency $ 375,070
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See accompanying notes to condensed financial statements
Statements of Operations
For the Period
March 25, 1993
Three Months Ended (Date of inception)
March 31, through
1999 1998 March 31, 1999
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Unaudited Unaudited
Revenues:
Income under research agreement $ 0 $ 0 $ 275,001
Income from SBIR Grant 0 0 91,650
Interest income 48 146 23,480
Other income 445 981 18,250
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Total revenues 493 1,127 408,381
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Expenses:
Operating, general and administrative 89,001 118,884 1,557,508
Research and development 110,354 87,562 1,621,091
Interest 37,170 28,390 359,412
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Total expenses 236,525 234,836 3,538,011
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Net Loss $(236,032) $233,709) $ (3,129,630)
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Net Loss per Share (Basic) $ (0.09) $ (0.10)
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Weighted Average Common Shares 2,513,991 2,460,070
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See accompanying notes to condensed financial statements
Statements of Cash Flows
For the Period
March 25, 1993
Three Months (Date of inception)
Ended March 31 through
1999 1998 March 31, 1999
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Unaudited Unaudited
Cash Flows from Operating Activities:
Net loss $ (236,032) $ (233,709) $ (3,129,630)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 5,200 3,104 43,055
Amortization 774 713 7,774
Amortization of debt discount 14,292 14,292 147,684
Stock warrants issued under license agreement - - 20,465
Stock options/warrants issued for consulting services - - 30,000
Stock compensation 40,725 23,840 424,928
Decrease (increase) in prepaid expenses and
other current assets (641) 421 (2,042)
Decrease (increase) in accounts receivable - - (1,916)
Increase (decrease) in liability under
research agreement - - 42,317
Increase (decrease) in accounts payable and
accrued expenses 11,049 7,405 106,414
Increase in deferred fees and salaries 64,580 59,453 757,306
Increase in deferred rent 13,783 3,637 35,878
Increase in interest payable 6,590 - 39,788
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Net cash used in operating activities (79,680) (120,844) (1,477,979)
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Cash Flows from Investing Activities:
Purchase of property and equipment - - (44,294)
Organization Costs - - (436)
Payments for patents and patents pending (113) (3,671) (284,228)
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Net cash used in investing activities (113) (3,671) (328,958)
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Cash Flows from Financing Activities:
Proceeds from issuance of subordinated notes
payable to related parties 90,000 - 445,307
Proceeds from issuance of convertible notes payable - - 787,270
Proceeds from issuance of common stock 1,000 145,500 756,900
Principal reductions in notes payable (4,897) (2,692) (28,842)
Payment of deferred offering costs (4,821) (38,145) (121,382)
Payment of loan costs - - (12,194)
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Net cash provided by (used in)
financing activities 81,282 104,663 1,827,059
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Net Increase (Decrease) In Cash and Cash Equivalents 1,490 (19,852) 20,123
Cash and Cash Equivalents at Beginning of Period 18,633 44,443 -
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Cash and Cash Equivalents at End of Period $ 20,123 $ 24,591 $ 20,123
See accompanying notes to condensed financial statements
Notes to Condensed Financial Statements
Three Month Period Ended March 31, 1999
1. Basis Of Presentation
The accompanying unaudited condensed financial statements for the three
months ended March 31, 1998 and 1999, and for the period March 25, 1993
(date of inception) through March 31, 1999, 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, 1998 financial statements and related notes
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998. In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the Company's
financial position, results of operations, and cash flows for the periods
presented. The results of operations for the interim period ended
March 31, 1999 are not necessarily indicative of the results to be expected
for the full year.
2. Income Taxes
The components of the Company's net deferred tax asset and the tax effects of
the primary temporary differences giving rise to the Company's deferred tax
asset are as follows as of March 31, 1999:
Deferred compensation $ 310,000
Net operating loss carry forward 926,000
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Deferred tax asset 1,236,000
Valuation allowance $ (1,236,000)
Net deferred tax asset $ 0
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3. Stockholder's Equity
In December, 1997, the Company commenced the public offering of up to 400,000
Units of newly-issued securities for an aggregate of $4,000,000. Each Unit
consists of one share of common stock, $0.01 par value, and a .25 Charitable
Benefit Warrants. Each whole Charitable Benefit Warrant entitles the holder
to purchase one share of the Common Stock at a price of $20.00 per share.
The Company had received proceeds of $344,200 through March 31, 1999. The
offering, which is currently suspended, will continue until all Units have
been sold or until December 10, 1999, unless sooner terminated or extended.
If the proceeds from the offering and the Q-Med AB investment described below
in Note 6 prove to be insufficient, then the Company would be required to
obtain additional funds through equity or debt financing, strategic alliances
with corporate partners, or through other sources.
There can be no assurance that the Company will be successful in obtaining
the required financing. Under current circumstances, the Company's ability
to continue as a going concern depends upon either completing the Q-Med
transaction or obtaining additional funds through other sources.
Offering costs of $121,382 have been offset against the proceeds of the
offering through March 31, 1999.
4. Related Party Transactions
The Chairman and Chief Executive Officer and the President of the Company
have agreed to extend the Company financing in the form of bridge loans.
Interest on the bridge loans from officers is at 8% but can be reset
annually, at the election of either party, to the prime rate in effect on
January 1 of any given year, plus 3%. Under these agreements, the Company
borrowed a total of $415,000, which was still outstanding at March 31, 1999
and is due on demand.
5. Subsequent Events
On April 16, 1999, the Company executed an agreement in principal with
Q-Med AB,a Swedish company whose headquarters are in Uppsala, Sweden. Under
the agreement, Q-Med will purchase not less than three million shares of the
Company's common stock, in exchange for
* $6,000,000 in cash,
* a royalty-free license to Q-Med's non-animal, stabilized
hyaluronic acid technology for use as an encapsulation
material for transplantable islets, and
* the redemption of up to $571,670 of the Company's
Convertible Unsecured Notes which note holders elect not
to convert in August 2001.
The transaction is contingent on the execution of a mutually satisfactory
stock purchase agreement and the successful completion of additional
financing by Q-Med, on or before July 15, 1999. Q-Med advanced $300,000 on
April 16, 1999, upon execution of the agreement in principle, which will be
converted into approximately 150,000 newly-issued shares of Ixion common
stock at the closing or upon termination of the transaction. At the closing,
on or before September 1, 1999, Q-Med will pay $3 million in exchange for
1.5 million newly-issued shares of common stock and a warrant to purchase an
additional 1.35 million shares for $2.7 million on September 1, 2000. Upon
the exercise of the warrant in 2000, Q-Med would own approximately 50% of the
Company.
Item 2. Management's Discussion and Analysis or Plan of Operations
The following discussion and analysis should be read in conjunction with
the Condensed Financial Statements and the related Notes thereto included
elsewhere in this report. This report contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ significantly
from the results discussed in the forward-looking statements. These and
additional risk factors are identified in our annual report to the Securities
and Exchange Commission filed on forms 10-KSB and in other SEC filings.
Overview
Ixion is a development stage, biotechnology company. We are in the
development stage because we are devoting substantially all of our efforts to
establishing our business, and our planned principal operations have not
commenced.
Since we were founded in March of 1993, we have principally been doing
research and development, securing patent protection, and raising capital.
We have not received any revenues from the sale of products. In June 1998,
we reached an agreement in principle with the University of Florida Diagnostic
Referral Laboratories for them to provide a service to physicians using our
molecular diagnostic test, the XEntrIx TM Oxalobacter formigenes Monitor.
We have received no revenue to date under this agreement. Provided the
Diagnostic Referral Laboratories markets the service and provided doctors
accept the test as useful, we may receive revenue from this test during 1999.
However we do not expect any of our other product candidates to be commercially
available for at least several years. From inception through March 31, 1999,
we incurred cumulative losses of $3,093,328. These losses were due primarily to
expenditures on general and administrative activities, research and development,
patent preparation and prosecution, and interest charges.
We expect to continue to incur substantial research and development costs
resulting from
* ongoing research and development programs,
* manufacturing of products for use in clinical trials and
preclinical and clinical testing of our products.
We also expect that general and administrative costs, including
* amortization of patents,
* legal and regulatory costs necessary to support
preclinical development and clinical trials,
* SEC reporting costs, and
* the creation of a marketing and sales organization, if
warranted,
will increase in the future, assuming we can finance the increased requirements.
Accordingly, we expect to incur operating losses for the foreseeable future.
We have only a limited operating history upon which you can base an
evaluation of our prospects. You should consider the risks, expenses, and
difficulties encountered by companies at an early stage of development when
evaluating our prospects. To address these risks, we must, among other things,
* successfully develop and commercialize our products,
* secure all necessary proprietary rights,
* respond to competitive developments, and
* continue to attract, retain and motivate qualified persons.
There can be no assurance that we will be successful in addressing these
risks.
Our operating expenses will depend on several factors, including the level
of research and development expenses and our success in raising capital.
Research and development expenses will depend on the progress and results of
our product development efforts, which we cannot predict. We may sometimes be
able to control the timing of development expenses in part by accelerating or
decelerating preclinical testing and clinical trial activities. As a result of
these factors, we believe that period-to-period comparisons in the future are
not necessarily meaningful and you should not rely on them as an indication of
future performance. Due to all of the foregoing factors, it is possible that
our operating results will be below the expectations of market analysts, if any,
and investors. In such event, the prevailing market price, if any, of our common
stock would likely be materially adversely affected.
Results of Operations
Three Months Ended March 31, 1999 and 1998
Total revenues decreased by 56% from $1,127 in the first quarter of 1998 to
$493 in the first quarter of 1999 mainly as a result of the decline in other
income resulting from a reduction in consulting provided by us. We expect income
to increase in 1999 as a result of the award of a research contract under the
Small Business Technology Transfer ("STTR") Program which will provide
approximately $40,000 of income in 1999.
Operating, general and administrative expenses decreased 25% from $118,884
in the first quarter of 1998 to $89,001 in the equivalent period of 1999. These
decreased expenses reflect decreased personnel and legal fees in the first
quarter of 1999 compared to the first quarter of 1998. The Company expects its
general and administrative expense to increase during the remainder of 1999 as
a result of an increase in the scale of operations resulting from the pending
Q-Med transaction, an increase in amortization of capitalized patent costs as
new patents are issued, continued amortization of capitalized debt issue costs,
and legal and accounting expenses resulting from filings with the Securities
and Exchange Commission under the Securities Exchange Act of 1934.
Research and development expenditures consist primarily of payroll-related
expenses of research and development personnel, laboratory supplies, animal
supplies, laboratory rent, depreciation on laboratory equipment, development
activities, payments for sponsored research, and payments to scientific and
regulatory consultants. Research and development expenses increased 26% from
$87,562 in the first quarter of 1998 to $110,354 in the first quarter of 1999,
mainly due to increased rent, utilities, and interest charges on the purchase
of lab equipment, offset to some degree by a reduction of personnel (and
accompanying reduction in lab supplies), and a reduction in preclinical
expenses. The Company anticipates that its research and development expenses
will increase during the remainder of 1999 as a result of an increase in the
scale of operations resulting from the pending Q-Med transaction and as a result
of the receipt of the STTR grant referred to above.
Interest expense increased 31% from $28,390 in the first quarter of 1998
to $37,170 in the first quarter of 1999 due primarily to interest on bridge
loans from officers, and the compounding of interest on deferred fees and
salaries, including deferred interest, payable to related parties. Interest
expense will continue to increase during 1999, as a result of the continued
compounding of interest on deferred fees and salaries accounts and loans we
have received and expect to receive.
Liquidity and Capital Resources
In December, 1997, we commenced the public offering of 400,000 Units of
newly issued securities, for an aggregate of $4,000,000. Each Unit consists of
one share of common stock and .1/4 of a Charitable Benefit Warrant. Each whole
Charitable Benefit Warrant entitles someone to purchase one share of common
stock at a price of $20.00 per share. Ixion is directly (except in Florida where
sales must be made through a broker) making the offering in ten states,
primarily over the Internet. There is no minimum number of Units to be sold in
the offering, and all funds received have gone and will go immediately to us.
On December 10, 1998, we extended the offering through the earliest of:
* the sale of all Units,
* December 10, 1999, or
* the date we decide to close the offering.
In addition, we have reduced the size of the offering from 400,000 Units to
150,000 Units, including the 34,420 Units we sold to date.
In connection with the contemplated transaction with Q-Med AB, described
below, we have temporarily suspended the offering until at least June 15, 1999.
Depending on the completion of the Q-Med transaction, we may withdraw the
offering in the future.
In February, 1999, we received notice that the NIH had awarded us a
$100,000 Phase I grant under the Small Business Technology Transfer Program for
research in our oxalate technology. We will subcontract approximately $60,000
to the University of California, Irvine, but the remaining $40,000 will be
available during 1999 to support oxalate research at Ixion. We have several
other grants pending.
During 1998, our development activities were funded primarily by the
proceeds from the offering and bridge loans from the Chairman and Chief
Executive Officer and the President. The bridge loans total $415,000 at
March 31, 1999. Interest on the bridge loans from officers is currently at 8%
but can be reset annually, at the election of either party, to the prime rate
in effect on January 1 of any given year, plus 3%. We have no agreement with
the officers to advance further funds, however, the officers have continued to
fund operating requirements voluntarily to meet working capital needs. Although
additional bridge loans may not be necessary during 1999 because of the Q-Med
transaction, we can not assure you that, should such loans be necessary, the
officers will continue to voluntarily fund them. We do not have any bank
financing arrangements. Our long-term indebtedness consists primarily of
deferred fees and salaries payable to related individuals and our unsecured
convertible notes.
At March 31, 1999, we had $20,123 in cash and cash equivalents. 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. On April 20, 1999, we received $300,000 in the form of a
convertible loan from Q-Med pursuant to the Q-Med transaction described below.
On January 1, 1996, we purchased laboratory equipment pursuant to a chattel
mortgage agreement in the amount of $32,309. The agreement calls for monthly
payments of $897, commencing August 1, 1996. At March 31, 1999, $3,590 in
principal remains outstanding under this agreement.
In connection with a sponsored research agreement with Genetics Institute,
Inc. which was concluded during 1997, some patent-related expenses were
reimbursed by Genetics Institute. We may be contractually obligated to repay
these reimbursed expenses in installments over a 36 month period upon a notice
to or by Genetics Institute to the effect that their option to negotiate for a
license to our technology, contained in the sponsored research agreement has
expired. We have not given such notice, and, accordingly, reimbursement has not
commenced. We have accrued $42,317 as a long term liability pending final
notice under the agreement.
Through March 31, 1999, we have paid offering-related expenses of $121,382
which have been applied against the proceeds of the public offering.
We expect further offering-related expenses to be modest.
On October 8, 1998, upon the expiration of our lease at the Biotechnology
Development Institute, we moved to comparable rental facilities across the
street from our former location. The new lease is for increased space and rent
and for a three-year term, with two one-year renewal options. We expect that
annual payments under the new lease (including repayment of funds provided by
lessor for tenant improvements and an emergency generator) will be approximately
$84,000 per year. We will continue to have access, as a graduate affiliate, to
the Biotechnology Development Institute's specialized facilities, centralized
equipment, and core laboratories. Relocation has not materially affected our
research and development operations; however, we incurred relocation expenses
and have been obliged to purchase or lease laboratory and office furnishings
and equipment in the amount of approximately $55,000. We expect to purchase or
lease additional lab equipment in the amount of approximately $30,000 in the
future.
We have incurred negative cash flows from operations since our inception.
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
* the completion of the Q-Med transaction described below
* the success of the continuing public offering of our
securities (in the event of a failure of the Q-Med
transaction),
* the successful commercialization of the XEntrIx
( Oxalobacter formigenes Monitor (our new diagnostic test)
and IxC1-62/47 (our lead therapeutic compound),
* progress in our product development efforts,
* the magnitude and scope of development efforts,
* progress with preclinical studies and clinical trials,
* the cost of contract manufacturing and research
organizations,
* cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights,
* competing technological and market developments, and
* the development of strategic alliances for the development
and marketing of our products.
The Q-Med Transaction
On April 16, 1999, we reached agreement in principle with Q-Med AB, a
biotechnology company based in Uppsala, Sweden. Under the agreement, Q-Med will
purchase not less than three million shares of Ixion common stock, in exchange
for
* $6,000,000 in cash,
* a royalty-free license to Q-Med's non-animal, stabilized
hyaluronic acid technology for use as an encapsulation
material for our transplantable islets, and
* the redemption of up to $571,670 of our Convertible
Unsecured Notes which note holders elect not to convert in
August 2001.
The transaction is contingent on the approval by boards of both
companies, execution of a mutually satisfactory stock purchase agreement, and
the successful completion of additional financing by Q-Med, on or before July
15, 1999. Q-Med advanced $300,000 upon execution of the agreement in principle,
which will be converted into approximately 150,000 newly-issued shares of Ixion
common stock at the closing or upon termination of the transaction. At the
closing, on or before September 1, 1999, Q-Med will pay $3 million in exchange
for 1.5 million newly-issued shares of common stock and a warrant to purchase
an additional 1.35 million shares for $2.7 million on September 1, 2000. Upon
the exercise of the warrant in 2000, Q-Med would own approximately 50% of Ixion,
which could amount to a change of control at that time. Bengt (Agerup, Ph.D.,
majority stockholder in Q-Med and its Managing Director, will join the Ixion
board at the closing.
Q-Med, a growing, profitable Swedish company, develops, manufactures
and sells natural, specialized medical implants. All of Q-Med's products are
constructed using a proprietary form of non-animal, stabilized hyaluronic acid.
Hyaluronic acid is a natural polysaccharide, first isolated in 1934. Its main
function in the body is to lubricate moveable parts like joints and muscles and
to transport substances to and within cells. The majority of Q-Med's revenues
are accounted for by Restylane(r) for the filling out of lips, facial wrinkles,
and facial folds.
We must close the Q-Med transaction to meet our planned operating
requirements through December 31, 1999. Failing that, we must successfully
complete the suspended public offering. Shortfalls in the proceeds of the
public offering to date have forced a curtailment in our operations to adjust
to reduced resources. In the event our plans change or our assumptions change
or prove to be inaccurate or we fail to close the Q-Med transaction or the
proceeds of the offering continue to be insufficient to fund operations at the
planned level (due to further unanticipated expenses, delays, problems or
otherwise), we will require additional financing. We will be required to
obtain additional funds in any event through equity or debt financing,
strategic alliances with corporate partners and others, mergers or the sale of
substantially all our assets, or through other sources in order to bring our
products through regulatory approval to commercialization. The terms and prices
of any equity or debt financings or corporate combination may be significantly
more favorable to new investors than those of the Units sold in the offering,
resulting in significant dilution to current investors. We do not have any
material committed sources of additional financing. We can not 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 further 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.
Product Research and Development Plan
Our plan of operation for 1999 consists primarily of research and
development and related activities, resources permitting, including:
* further research into the biology of islet and islet stem
cell growth and differentiation, aimed at developing cell
lines of functioning islets for transplantation into
diabetic patients;
* further research into identifying and characterizing novel
growth factors associated with islets to discover factors
important in islet cell differentiation and possible
regulation of diabetes and to identify stem cell markers
to which we hope to produce monoclonal antibodies useful
in stem cell isolation
* research into differential gene expression studies on
differentiated islet cells;
* further research into encapsulation materials for
transplantation of islets;
* further preclinical development of a quantitative version
of our molecular diagnostic test, the XEntrIx
( Oxalobacter formigenes Monitor,
* further preclinical development of our oxalate therapeutic
compound, IxC1-62/47;
* continuing the prosecution and filing of patent
applications; and
* hiring additional employees.
Our actual research and development and related activities may vary
significantly from current plans depending on numerous factors, including
changes in the costs of such activities from current estimates, the results of
our research and development programs, the results of clinical studies, the
timing of regulatory submissions, technological advances, determinations as to
commercial potential, the status of competitive products, and, most important,
our success in raising capital. The focus and direction of our operations will
also be dependent upon the establishment of collaborative arrangements with
other companies, and other factors.
We can not assure you that we will be able to commercialize our
technologies or that profitability will ever be achieved. We expect that our
operating results will fluctuate significantly from quarter to quarter in the
future and will depend on a number of factors, most of which are outside our
control.
Year 2000 Compliance
Many computer systems and computer chips embedded in equipment are unable
to tell the difference between the year 1900 and the year 2000. This is known
as the Year 2000 issue. Many businesses are at risk for possible miscalculations
or systems failures as a result of their computers, software, or equipment's
not being Year 2000 compliant.
Our assessment of Year 2000 compliance issues is not complete.
Software and Computers. Our computers all run Windows operating systems
which are or will be Year 2000 compliant according to our tests and information
received from Microsoft. We have been assured by the vendors that our office
applications programs are Year 2000 compliant. We have been also been assured
by the vendor that our finance and accounting software, our only
mission-critical software, is Year 2000 compliant.
Equipment. Most of our laboratory equipment does not use a computer or
embedded chip. Our policy is that all equipment that we purchase must be Year
2000 compliant. Our assessment of our laboratory equipment is not complete.
With respect to equipment made available to us as a result of our
affiliation with the Biotechnology Development Institute, we have requested a
statement of compliance.
Suppliers. We are contacting key suppliers regarding their Year 2000
compliance in order to determine if there might be any effect on our operations.
In general, our suppliers (primarily scientific reagent and disposable
equipment vendors), have developed or are in the process of developing plans to
address Year 2000 issues. We will continue to monitor and evaluate the
progress of our suppliers.
In general our review of the potential consequences of Year 2000 compliance
issues on us leads us to believe that those issues will prove to be immaterial
to our business, operations, and financial condition. Accordingly, we do not
have contingency plans and have no plans to develop any unless our further
assessment indicates one is necessary. No material expenses have been incurred
to date, and none are anticipated.
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds
In 1997, the Company registered 400,000 newly-issued Units of its
securities for direct sale on Form SB-2 at a price of $10.00 per Unit. The
registration statement, Commission Registration No. 333-334765, was declared
effective on December 10, 1997 and Post-Effective Amendment No. 1 was declared
effective on March 19, 1998. On December 10, 1998, the Company extended the
offering, and thereafter filed Post-Effective Amendment No. 2 to reduce the
number of Units being registered to 150,000 Units (including the Units already
sold), for an aggregate offering price of $1,500,000. Each Unit consists of
one share of common stock, $0.01 par value, and .25 Charitable Benefit Warrant.
There is no minimum number of Units to be sold in the offering, and all funds
received will go immediately to the Company. The offering has not terminated
and is not scheduled to terminate until the earliest of: the sale of all Units,
December 10, 1999, or the date on which the Company decides to close the
offering; however, the offering is currently suspended pending the completion
of the Q-Med transaction described elsewhere in this report. The securities are
being sold directly by the Company (except when sales are to Florida residents,
in which case sales must be made through Unified Management Corporation, a
Florida-registered broker dealer).
As of March 31, 1999, a total of 34,420 Units at an aggregate price of
$344,200 have been sold. From the effective date of the offering to
March 31, 1999, $200 in expenses and $1,854 in commissions have been paid to
Unified Management Company as broker and there have been no finders' fees.
Other offering related expenses through March 31, 1998, amounted to $121,382,
all of which have been offset against proceeds. No payments were made to
directors, officers, general partners of the Company, or to their associates in
connection with the offering.
Net offering proceeds as of March 31, 1999 amounted to $228,818. The net
proceeds were used entirely to fund the operations of the Company as reflected
in the financial statements included elsewhere in this report. The use of
proceeds still to be received from the offering is not expected to vary
materially from the use of proceeds described in the amended registration
statement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description Page
(2) Plan of 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
(22) Published Report re: Matters Submitted to Vote of
Security Holders None
(23) Consents of Experts and Counsel None
(24) Power of Attorney None
(27) Financial Data Schedule
(99) Additional Exhibits None
(b) Reports on Form 8-K
The Company filed a Form 8-K on April 30, 1999 in connection with the
execution of an agreement in principal with Q-Med AB, pursuant to which Q-Med
could acquire up to 50% of the common stock of the Company which could lead to
a change in control of the Company.
------------
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Ixion Biotechnology, Inc.
Dated: May 13, 1999 By: /s/ Weaver H. Gaines
------------------------
Weaver H. Gaines
Chairman and Chief Executive Officer
Dated: May 13, 1999 By: /s/ David C. Peck
------------------------
David C. Peck
President and Chief Financial Officer
(Principal Financial Officer
Dated: May 13, 1999 By: /s/ Kimberly A. Ramsey
------------------------
Kimberly A. Ramsey
Controller (Principal Accounting Officer)
Exhibit Index
Exhibit Description Page
(3) Plan of 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) Published Report re: Matters Submitted to Vote of
Security Holders None
(23) Consents of Experts and Counsel None
(24) Power of Attorney None
(28) Financial Data Schedule
(99) Additional Exhibits None