SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-17085
PEREGRINE PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-3698422
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
14272 Franklin Avenue, Suite 100, Tustin, California 92780-7017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (714) 508-6000
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED, SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. YES X NO__.
APPLICABLE ONLY TO CORPORATE ISSUERS:
(INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.)
108,529,513 shares of Common Stock
as of November 30, 2001
PEREGRINE PHARMACEUTICALS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 31, 2001
TABLE OF CONTENTS
THE TERMS "WE", "US", "OUR," AND "THE COMPANY" AS USED IN THIS FORM ON 10-Q
REFERS TO PEREGRINE PHARMACEUTICALS, INC. (FORMERLY KNOWN AS TECHNICLONE
CORPORATION) AND ITS WHOLLY-OWNED SUBSIDIARY VASCULAR TARGETING TECHNOLOGIES,
INC. (FORMERLY KNOWN AS PEREGRINE PHARMACEUTICALS, INC.).
PART I FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements .................................................................... 1
Consolidated Balance Sheets at October 31, 2001 and April 30, 2001 ...................... 1
Consolidated Statements of Operations for the three and six months ended
October 31, 2001 and 2000 ............................................................. 3
Consolidated Statement of Stockholders' Equity for the six months ended
October 31, 2001 ...................................................................... 4
Consolidated Statements of Cash Flows for the six months ended October 31,
2001 and 2000 ......................................................................... 5
Notes to Consolidated Financial Statements .............................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ............................................................................. 12
Company Overview ........................................................................ 12
Risk Factors of Our Company ............................................................. 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk .............................. 18
PART II OTHER INFORMATION
Item 1. Legal Proceedings....................................................................... 18
Item 2. Changes in Securities and Use of Proceeds .............................................. 18
Item 3. Defaults Upon Senior Securities ........................................................ 18
Item 4. Submission of Matters to a Vote of Security Holders .................................... 19
Item 5. Other Information ...................................................................... 19
Item 6. Exhibits and Reports on Form 8-K........................................................ 19
i
PART I FINANCIAL INFORMATION
----------------------------
ITEM 1. FINANCIAL STATEMENTS
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
AT OCTOBER 31, 2001 AND APRIL 30, 2001
- -------------------------------------------------------------------------------------------
OCTOBER 31, APRIL 30,
2001 2001
------------ ------------
UNAUDITED
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,481,000 $ 6,327,000
Other receivables, net of allowance of $53,000 (October)
and $54,000 (April) 28,000 46,000
Prepaid expenses and other current assets 317,000 264,000
------------ ------------
Total current assets 6,826,000 6,637,000
PROPERTY:
Leasehold improvements 235,000 208,000
Laboratory equipment 1,798,000 1,818,000
Furniture, fixtures and computer equipment 704,000 704,000
------------ ------------
2,737,000 2,730,000
Less accumulated depreciation and amortization (1,790,000) (1,613,000)
------------ ------------
Property, net 947,000 1,117,000
OTHER ASSETS:
Note receivable, net of allowance of $1,733,000 (October) and
$1,759,000 (April) - -
Other, net 130,000 146,000
------------ ------------
Total other assets 130,000 146,000
------------ ------------
TOTAL ASSETS $ 7,903,000 $ 7,900,000
============ ============
See accompanying notes to consolidated financial statements.
1
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
AT OCTOBER 31, 2001 AND APRIL 30, 2001 (CONTINUED)
- ----------------------------------------------------------------------------------------------
OCTOBER 31, APRIL 30,
2001 2001
-------------- --------------
UNAUDITED
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 576,000 $ 675,000
Accrued clinical trial site fees 491,000 268,000
Notes payable, current portion 30,000 86,000
Other current liabilities 621,000 662,000
Deferred license revenue 271,000 3,500,000
-------------- --------------
Total current liabilities 1,989,000 5,191,000
NOTES PAYABLE - 2,000
DEFERRED LICENSE REVENUE - 21,000
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Common stock-$.001 par value; authorized 150,000,000 shares;
outstanding - 102,549,513 (October); 97,288,934 (April) 103,000 97,000
Additional paid-in capital 125,957,000 120,253,000
Deferred stock compensation (1,110,000) (935,000)
Accumulated deficit (119,036,000) (116,729,000)
-------------- --------------
Total stockholders' equity 5,914,000 2,686,000
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,903,000 $ 7,900,000
============== ==============
See accompanying notes to consolidated financial statements.
2
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2001 AND 2000 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------------- -------------------------------
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2001 2000 2001 2000
-------------- -------------- -------------- --------------
LICENSE REVENUE $ 125,000 $ 156,000 $ 3,250,000 $ 260,000
OPERATING EXPENSES:
Research and development 2,775,000 2,148,000 4,815,000 3,694,000
General and administrative 490,000 740,000 957,000 1,427,000
-------------- -------------- -------------- --------------
Total operating expenses 3,265,000 2,888,000 5,772,000 5,121,000
-------------- -------------- -------------- --------------
LOSS FROM OPERATIONS (3,140,000) (2,732,000) (2,522,000) (4,861,000)
-------------- -------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest and other income 115,000 239,000 217,000 414,000
Interest expense (1,000) (74,000) (2,000) (177,000)
-------------- -------------- -------------- --------------
NET LOSS $ (3,026,000) $ (2,567,000) $ (2,307,000) $ (4,624,000)
============== ============== ============== ==============
WEIGHTED AVERAGE
SHARES OUTSTANDING:
Basic and Diluted 101,624,066 95,526,719 100,240,279 94,033,009
============== ============== ============== ==============
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.03) $ (0.03) $ (0.02) $ (0.05)
============== ============== ============== ==============
See accompanying notes to consolidated financial statements.
3
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL DEFERRED TOTAL
COMMON STOCK PAID-IN STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY
-------------- -------------- -------------- -------------- -------------- --------------
BALANCES - May 1, 2001 97,288,934 $ 97,000 $ 120,253,000 $ (935,000) $(116,729,000) $ 2,686,000
Common stock issued upon
exercise of options and warrants 177,697 - 60,000 - - 60,000
Common stock issued for cash
under Equity Line 5,039,203 6,000 5,031,000 - - 5,037,000
Common stock issued upon
exercise of Equity Line warrants 43,679 - - - - -
Deferred stock compensation - - 613,000 (613,000) - -
Stock-based compensation - - - 438,000 - 438,000
Net loss - - - - (2,307,000) (2,307,000)
-------------- -------------- -------------- -------------- -------------- --------------
BALANCES - October 31, 2001 102,549,513 $ 103,000 $ 125,957,000 $ (1,110,000) $(119,036,000) $ 5,914,000
============== ============== ============== ============== ============== ==============
See accompanying notes to consolidated financial statements.
4
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001 AND 2000 (UNAUDITED)
- -----------------------------------------------------------------------------------------------
SIX MONTHS ENDED OCTOBER 31,
2001 2000
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,307,000) $ (4,624,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 222,000 158,000
Stock-based compensation 438,000 654,000
Amortization of clinical trial services prepaid in stock - 779,000
Gain on sale of property (17,000) -
Changes in operating assets and liabilities:
Other receivables 18,000 (135,000)
Prepaid expenses and other current assets (37,000) (1,015,000)
Accounts payable (99,000) (91,000)
Deferred license revenue (3,250,000) 740,000
Accrued clinical trial site fees 223,000 125,000
Other accrued expenses and current liabilities (41,000) (340,000)
------------- -------------
Net cash used in operating activities (4,850,000) (3,749,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisitions (102,000) (155,000)
Proceeds from sale of property 67,000 -
Purchase of short-term investments - (6,124,000)
Transfer funds to restricted cash - (250,000)
Increase in other assets - (30,000)
------------- -------------
Net cash used in investing activities (35,000) (6,559,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 5,097,000 12,114,000
Principal payments on notes payable (58,000) (2,055,000)
------------- -------------
Net cash provided by financing activities 5,039,000 10,059,000
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 154,000 $ (249,000)
CASH AND CASH EQUIVALENTS, beginning of period 6,327,000 4,131,000
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 6,481,000 $ 3,882,000
============= =============
SUPPLEMENTAL INFORMATION:
Interest paid $ 2,000 $ 342,000
============= =============
See accompanying notes to consolidated financial statements.
5
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001 (UNAUDITED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The accompanying consolidated financial
statements include the accounts of Peregrine Pharmaceuticals, Inc. (the
"Company") and its wholly-owned subsidiary, Vascular Targeting Technologies,
Inc. All intercompany balances and transactions have been eliminated.
On November 16, 2001, the Company received gross proceeds of $5,750,000
under a public shelf offering (Footnote 5), which increased its cash balance to
$11,543,000 as of November 30, 2001. The Company has expended substantial funds
on the development of product candidates and for clinical trials. As a result,
the Company has incurred negative cash flows from operations since inception and
expects negative cash flows from operations to continue until the Company is
able to generate sufficient revenue from the sale and/or licensing of its
products. Although the Company has sufficient cash on hand to meet its
obligations on a timely basis for at least the next twelve months, the Company
will continue to require additional funding to sustain its research and
development efforts, provide for current and future clinical trials, establish
contract manufacturing and product commercialization capabilities, and continue
operations until the Company is able to generate sufficient revenue from the
sale and/or licensing of its product candidates. The Company plans to obtain
required financing through one or more methods including, obtaining additional
equity or debt financing and negotiating additional licensing or collaboration
agreements with other companies.
The accompanying unaudited consolidated financial statements contain
all adjustments (consisting of only normal recurring adjustments) which, in the
opinion of management, are necessary to present fairly the consolidated
financial position of the Company at October 31, 2001, and the consolidated
results of its operations and its consolidated cash flows for the six months
ended October 31, 2001 and 2000. Although the Company believes that the
disclosures in the financial statements are adequate to make the information
presented not misleading, certain information and footnote disclosures normally
included in the consolidated financial statements have been condensed or omitted
pursuant to Article 10 of Regulation S-X of the Securities Exchange Act of 1934.
The consolidated financial statements included herein should be read in
conjunction with the consolidated financial statements of the Company, included
in the Company's Annual Report on Form 10-K for the year ended April 30, 2001,
which was filed with the Securities and Exchange Commission on July 27, 2001.
Results of operations for the interim periods covered by this Quarterly Report
may not necessarily be indicative of results of operations for the full fiscal
year.
RECLASSIFICATION. Certain reclassifications were made to the prior
period balances to conform them to the current period presentation.
6
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
BASIC AND DILUTIVE NET LOSS PER COMMON SHARE. Basic and dilutive net
loss per common share is calculated in accordance with Statement of Financial
Accounting Standards No. 128 EARNINGS PER SHARE. Basic net loss per common share
is computed by dividing the net loss by the weighted average number of common
shares outstanding during the period and excludes the dilutive effects of
options and warrants. Diluted net loss per common share is computed by dividing
the net loss by the sum of the weighted average number of common shares
outstanding during the period plus the potential dilutive effects of options and
warrants outstanding during the period. Potentially dilutive common shares
consist of stock options and warrants using the treasury stock method but are
excluded if their effect is antidilutive. Stock options and warrants to purchase
up to 19,248,000 and 17,963,000 shares of the Company's common stock were
outstanding at October 31, 2001 and 2000, respectively. Stock options and
warrants outstanding were not included in the computation of diluted loss per
common share because their effect was antidulitive as the Company incurred
losses in all periods presented.
RECENT ACCOUNTING PRONOUNCEMENTS. Effective May 1, 2001, the Company
adopted Statement of Financial Accounting Standards No.133 ("SFAS No. 133"),
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments imbedded in other contracts, and for
hedging activities. It requires an entity to recognize all derivatives as either
assets or liabilities in the statements of financial position and measure those
instruments at fair value. The adoption of SFAS No. 133 had no impact on the
Company's consolidated financial position and results of operations.
In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141 ("SFAS No. 141"), BUSINESS
COMBINATIONS and No. 142 ("SFAS No. 142"), GOODWILL AND OTHER INTANGIBLE ASSETS.
These standards change the accounting for business combinations by, among other
things, prohibiting the prospective use of pooling-of-interests accounting and
requiring companies to stop amortizing goodwill and certain intangible assets
with an indefinite useful life created by business combinations accounted for
using the purchase method of accounting. Instead, goodwill and intangible assets
deemed to have an indefinite useful life will be subject to an annual review for
impairment. The new standards will generally be effective May 1, 2002 and for
purchase business combinations consummated after June 30, 2001. The Company
believes that adopting SFAS No. 141 and SFAS No. 142 will not have a material
impact on its consolidated financial position and results of operations.
In August 2001, The Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 143 ("SFAS No. 143"), ASSET
RETIREMENT OBLIGATIONS. SFAS No. 143 requires entities to record the fair value
of a liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes the
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. The standard is
effective for fiscal years beginning after June 15, 2002. The Company believes
that adopting SFAS No.143 will not have a material impact on its consolidated
financial position and results of operations.
7
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
In October 2001, The Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 144 ("SFAS No. 144"),
ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. SFAS No. 144
replaces SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND
FOR LONG-LIVED ASSETS TO BE DISPOSED OF. The primary objectives of SFAS No. 144
were to develop one accounting model, based on the framework established in SFAS
No. 121, for long-lived assets to be disposed of by sale and to address
significant implementation issues. SFAS No. 144 requires that all long-lived
assets, including discontinued operations, be measured at the lower of carrying
amount or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. The standard is effective for fiscal
years beginning after December 15, 2001. The Company believes that adopting SFAS
No. 144 will not have a material impact on its consolidated financial position
and results of operations.
2. NOTE RECEIVABLE
During December 1998, the Company completed the sale and subsequent
leaseback of its two facilities and recorded an initial note receivable from the
buyer of $1,925,000. In accordance with the related lease agreement, if the
Company is in default under the lease agreement, including but not limited to,
filing a petition for bankruptcy or failure to pay the basic rent within five
(5) days of being due, the note receivable shall be deemed to be immediately
satisfied in full and the buyer shall have no further obligation to the Company
for such note receivable. Although the Company has made all payments under the
lease agreement and has not filed for protection under the laws of bankruptcy,
during the quarter ended October 31, 1999, the Company did not have sufficient
cash on hand to meet its obligations on a timely basis and was operating at
significantly reduced levels. In addition, at that time, if the Company could
not raise additional cash by December 31, 1999, the Company would have had to
file for protection under the laws of bankruptcy. Due to the uncertainty of the
Company's ability to pay its lease obligations on a timely basis, the Company
established a 100% reserve for the note receivable in the amount of $1,887,000
as of October 31, 1999. The Company reduces the reserve as payments are received
and records the reduction as Interest and other income in the accompanying
consolidated statement of operations. Due to the uncertainty of the Company's
capital resources beyond the next twelve (12) months and its ability to pay its
lease obligation beyond the next twelve (12) months, the carrying value of the
note receivable approximates its fair value at October 31, 2001. The Company has
received all payments through November 2001. The following represents a
rollforward of the allowance of the Company's note receivable for the six months
ended October 31, 2001:
Allowance for note receivable, May 1, 2001 $ 1,813,000
Principal payments received (27,000)
---------------
Allowance for note receivable, October 31, 2001 $ 1,786,000
===============
8
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
3. LICENSING
During September 1995, the Company entered into an agreement with
Cancer Therapeutics, Inc. whereby the Company granted to Cancer Therapeutics,
Inc. the exclusive right to sublicense TNT to a major pharmaceutical company
solely in the People's Republic of China for a period of 10 years, subject to
the major pharmaceutical company obtaining product approval within 36 months. In
exchange for this right, the major pharmaceutical company would be required to
fund not less than $3,000,000 for research and development expenses of Cancer
Therapeutics related to Tumor Necrosis Therapy ("TNT") and the Company would
retain exclusive rights to all research, product development and data outside of
the People's Republic of China. The technology was then sublicensed to Shanghai
Brilliance Pharmaceuticals, Inc. ("Brilliance"). In addition, the Company is
entitled to receive 50% of all revenues received by Cancer Therapeutics with
respect to its sublicensing of TNT to Brilliance. Cancer Therapeutics has the
right to 20% of the distributed profits from Brilliance. During March 2001, the
Company extended the exclusive licensing period granted to Cancer Therapeutics,
which now expires on December 31, 2016. Dr. Clive Taylor, a member of the
Company's Board of Directors, owns 26% of Cancer Therapeutics and is an officer
and director of Cancer Therapeutics. Dr. Taylor has abstained from voting at
meetings of the Company's board of directors on any matters relating to Cancer
Therapeutics or Brilliance. Through October 31, 2001, Cancer Therapeutics has
not derived any revenues from its agreement with Brilliance.
On September 6, 2001, the Company entered into a development agreement
for TNT in the People's Republic of China with Medipharm Biotech, Co., Ltd. of
Shanghai, China (formerly known as Shanghai Brilliance Pharmaceuticals). Under
the terms of the agreement, Peregrine will provide product development services
to prepare TNT for commercial scale production. In addition, the Company will
provide contract manufacturing services to Medipharm Biotech, Co., Ltd. pending
Chinese State Drug Administration marketing approval of TNT in the People's
Republic of China and authorization of the Company as a contract manufacturer.
During August 2001, the Company entered into two exclusive worldwide
licenses for two new pre-clinical compounds from the University of Texas
Southwestern Medical Center. These two new compounds, classified as "naked"
(non-conjugated) Vascular Targeting Agents, add to Peregrine's anti-cancer
platform technologies in the anti-angiogenesis and vascular targeting agent
fields. Under the license agreements, the Company will pay an up-front fee,
milestone payments based on development progress, plus a royalty on net sales.
4. STOCKHOLDERS' EQUITY
During June 1998, the Company secured access to a Common Stock Equity
Line ("Equity Line") with two institutional investors, as amended on June 2,
2000 (the Amendment). Under the amended terms of the Equity Line, the Company
may, in its sole discretion, and subject to certain restrictions, periodically
sell shares of the Company's common stock until all common shares previously
registered under the Equity Line have been exhausted. During September 2001, the
Company issued all available shares under the Equity Line and therefore, the
Equity Line was immediately terminated. In addition, at the time of each Put,
the investors were issued warrants, which are immediately exercisable on a
cashless basis only and expire through December 31, 2005, to purchase up to 15%
of the amount of common stock issued to the investors at the same price as the
shares of common stock sold in the Put. As of October 31, 2001, there were
1,508,863 warrants outstanding to purchase up to 1,508,863 shares of the
Company's common stock under the Equity Line.
9
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
In accordance with Emerging Issues Task Force Issue No. 96-13,
ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS, contracts that require a
company to deliver shares as part of a physical settlement should be measured at
the estimated fair value on the date of the initial Put. The Equity Line solely
requires settlement to be made with shares of the Company's common stock. As
such, the Company had an independent appraisal performed to determine the
estimated fair market value of the various financial instruments included in the
Equity Line and recorded the related financial instruments as reclassifications
between equity categories. Reclassifications were made for the estimated fair
market value of the warrants issued and estimated Commitment Warrants to be
issued under the Equity Line of $1,140,000 and the estimated fair market value
of the reset provision of the Equity Line of $400,000 as additional
consideration and have been included in the accompanying consolidated financial
statements. The above recorded amounts were offset by $700,000 related to the
restrictive nature of the common stock issued under the initial Put in June 1998
and the estimated fair market value of the Equity Line Put option of $840,000.
During January 2001, the Emerging Issues Task Force ("EITF") issued
EITF No. 00-19, ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO, AND
POTENTIALLY SETTLED IN, THE COMPANY'S OWN STOCK which reached a consensus on the
application of EITF No. 96-13. In accordance with EITF No. 00-19, the Equity
Line contract remains recorded as permanent equity and recorded at fair value as
of the date of the transaction. EITF No. 00-19 is effective for all transactions
entered into after September 20, 2000. As of October 31, 2001, EITF No. 00-19
had no impact on the Company's consolidated financial position and results of
operations.
During the six months ended October 31, 2001, the Company received
gross proceeds of $5,526,000, in exchange for 4,581,094 shares of common stock
and warrants to purchase up to 687,161 shares of common stock, issued to two
institutional investors under the Equity Line. In connection with the Equity
Line draws during the six months ended October 31, 2001, the Company (i) issued
458,109 shares of common stock, (ii) issued warrants to purchase up to 45,809
shares of common stock, and (iii) paid cash commissions of $387,000, to Dunwoody
Brokerage Services, Inc., as placement agent fees. Mr. Eric Swartz, a member of
the Board of Directors, maintains a contractual right to 50% of the placement
agent fees paid under the Equity Line. The Equity Line was consummated in June
1998 when Mr. Swartz had no Board affiliation with the Company.
In addition, during the six months ended October 31, 2001, 105,109
warrants issued under the Equity Line were exercised on a cashless basis in
exchange for 43,679 shares of the Company's common stock.
10
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
5. SUBSEQUENT EVENTS
During November 2001, the Company received $5,750,000 under a Common
Stock Purchase Agreement in exchange for 5,750,000 shares of its common stock
and warrants to purchase up to 1,725,000 shares of common stock at an exercise
price of $1.00 per share. The warrants can be exercised on a cash basis only.
Mr. Eric Swartz, a Director of the Company, invested $500,000 of the total
amount in exchange for 500,000 shares of the Company's common stock and warrants
to purchase up to 150,000 shares of common stock at an exercise price of $1.00.
In connection with the offering, the Company paid a fee to the placement agent
equal to five percent (5%) of the number of shares issued to certain of the
investors, or 200,000 shares. All shares and warrants issued in connection with
this offering were sold pursuant to the Company's shelf registration statement
on Form S-3, File Number 333-71086.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
Except for historical information contained herein, this Quarterly
Report on Form 10-Q contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. In light of the important factors that can materially affect results,
including those set forth elsewhere in this Form 10-Q, the inclusion of
forward-looking information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved. When used in this Form 10-Q, the words "may," "should," "plans,"
"believe," "anticipate," "estimate," "expect," their opposites and similar
expressions are intended to identify forward-looking statements. The Company
cautions readers that such statements are not guarantees of future performance
or events and are subject to a number of factors that may tend to influence the
accuracy of the statements.
The following discussion is included to describe our financial position
and results of operations for the three and six months ended October 31, 2001
compared to the same periods in the prior fiscal year. The consolidated
financial statements and notes thereto contain detailed information that should
be referred to in conjunction with this discussion. In addition, the
consolidated financial statements included herein should be read in conjunction
with the consolidated financial statements of the Company, included in our
Annual Report on Form 10-K for the year ended April 30, 2001, which was filed
with the Securities and Exchange Commission on July 27, 2001. Results of
operations for the interim periods covered by this Quarterly Report may not
necessarily be indicative of results of operations for the full fiscal year.
COMPANY OVERVIEW. Peregrine Pharmaceuticals, Inc., located in Tustin,
California, is a biopharmaceutical company engaged in the development and
commercialization of cancer therapeutics and cancer diagnostics through a series
of patented technologies.
Our main focus is on the development of our collateral targeting agent
technologies. Collateral targeting agents typically use antibodies that bind to
or target components found in or on most solid tumors. An antibody is a
naturally occurring molecule that humans and other animals create in response to
disease. In pre-clinical and/or clinical studies, these antibodies are capable
of targeting and delivering therapeutic killing agents that kill cancerous tumor
cells. We currently have exclusive rights to over 40 issued U.S. and foreign
patents protecting various aspects of our technology and have additional pending
patent applications that we believe will further strengthen our patent position.
Our three collateral targeting technologies are known as Tumor Necrosis Therapy
("TNT"), Vascular Targeting Agents ("VTA's") and Vasopermeation Enhancement
Agents ("VEA's"), and are discussed in greater detail in our Form 10-K for the
year ended April 30, 2001, which was filed with the Securities and Exchange
Commission on July 27, 2001.
In addition to collateral targeting agents, we have a direct
tumor-targeting agent, Oncolym(R), for the treatment of non-Hodgkin's B-cell
lymphoma. The Oncolym(R) antibody is linked to a radioactive iodine molecule and
the combined agent is injected into the blood stream of the lymphoma patient
where it recognizes and binds to the cancerous lymphoma tumor sites, thereby
delivering the radioactive isotope directly to the tumor site.
RESULTS OF OPERATIONS.
THREE MONTHS ENDED OCTOBER 31, 2001 AND 2000
NET LOSS. Our reported net loss of $3,026,000 for the quarter ended
October 31, 2001 represents an increase of $459,000 (or 17%) compared to a net
loss of $2,567,000 for the quarter ended October 31, 2000. The increase in net
loss for the quarter ended October 31, 2001 is due to a decrease in license
revenue of $31,000 (due to a lower unamortized deferred license revenue balance
in the current quarter) combined with a $377,000 increase in total operating
expenses and a $124,000 decrease in interest and other income. These amounts
were offset by a $73,000 decrease in interest expense.
12
TOTAL OPERATING EXPENSES. The current quarter increase in our total
operating expenses of $377,000 is due to an increase in research and development
expenses of $627,000 offset by a decrease in general and administrative expenses
of $250,000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
include internal salary expenses, contracted clinical trial fees, building lease
and facility expenses, contract research expenses, sponsored research expenses
paid to two universities, material and supplies for the research and
manufacturing laboratories, patent legal fees, stock-based compensation expense,
utilities and other general research costs. The current quarter increase in
research and development expenses of $627,000 is primarily due to an increase in
the following expenses:
i) CLINICAL TRIAL PROGRAM EXPENSES. We are currently supporting six
clinical trial studies and have a planned Phase III clinical trial
compared with two clinical studies in the same period of the prior
year. Our current clinical trial program is as follows:
DEVELOPMENT STATUS (TRIAL START DATE) CANCER INDICATION
---------------------------------------------------------------------------------------------------------
1. U.S. multi-center Phase II trial using intratumoral administration of Malignant Glioma (Brain
Cotara(TM) (December 1998). Cancer)
2. Phase I trial using intravenous administration of Cotara(TM) (October Colorectal Cancer
2000).
3. Phase I trial using intravenous administration of Cotara(TM) (April Soft Tissue Sarcoma
2001).
4. Phase I trial using intravenous administration Cotara(TM) (April 2001). Pancreatic or Biliary Cancer
5. Phase I Study of Cotara(TM) after Radiofrequency Ablation of Hepatic Liver or Hepatic Cancer
Cancer (April 2001)
6. Phase I Study of Oncolym(R) for the treatment of previously treated non-Hodgkin's Lymphoma
diffuse large B-cell lymphoma (June 2001)
In addition, we have incurred additional expenses during the
current quarter associated with a planned Phase III clinical trial
using Cotara(TM) for the treatment of brain cancer. The current quarter
increase in clinical trial expenses was off-set by a current quarter
decrease in the Oncolym(R) clinical trial expenses, which were
allocated to us in the prior year quarter from Schering A.G., our
previous licensing partner for Oncolym(R).
ii) PRE-CLINICAL DEVELOPMENT EXPENSES. In addition to our expanded
clinical trial program, we have incurred an increase in expenses
associated with our pre-clinical development of our two other platform
technologies: Vasopermeation Enhancement Agents ("VEA's") and naked
(non-conjugated) Vascular Targeting Agents ("nVTA's"). We have
increased our sponsored research funding with the University of
Southern California and the University of Texas Southwestern Medical
Center for the development of our VEA and nVTA technologies compared to
the same period in the prior year. Also, we have incurred increased
expenses associated with patent legal fees primarily related to our
nVTA platform technology.
iii) CONTRACT MANUFACTURING OF BIOLOGICS EXPENSES. Moreover, we have
incurred an increase in manufacturing facility expenses compared to the
same period in the prior year, as we prepare our facility for
manufacturing biologics for other companies.
13
iv) STOCK-BASED COMPENSATION EXPENSE. The current quarter increase was
further supplemented by an increase in stock-based compensation expense
associated with the fair value of options granted to non-employee
consultants who are assisting us with the development of our platform
technologies.
The following represents the expenses incurred by each major research
and development ("R&D") project.
R&D EXPENSES- R&D EXPENSES-
QUARTER ENDED MAY 1, 1998 TO
R&D PROJECT OCTOBER 31, 2001 OCTOBER 31, 2001
-------------------------------- ---------------- ---------------
TNT development (Cotara(TM)) $ 1,709,000 $ 14,268,000
VEA development 317,000 1,691,000
nVTA and VTA development 411,000 2,034,000
Oncolym(R)development 338,000 12,166,000
---------------- ---------------
Total R&D expenses $ 2,775,000 $ 30,159,000
================ ===============
From inception of the Company through April 30, 1998, we have expensed
$20,898,000 on research and development of our product candidates, with the
costs primarily being closely split between TNT development and Oncolym(R)
development. In addition to the above costs, we have expensed an aggregate of
$32,004,000 for the acquisition of our TNT and VTA technologies, which were
acquired during fiscal year 1995 and 1997, respectively.
We have expended substantial funds on the research, development and
clinical trials of our product candidates, including our planned Phase III
clinical trial for the treatment of brain cancer and we expect to incur
significant additional research and development costs in the foreseeable future
until we are able to generate sufficient revenue from the sale and/or licensing
of our products. Although we have sufficient cash on hand to meet our
obligations on a timely basis through the next twelve (12) months, we will
continue to require additional funding to sustain our research and development
efforts, provide for additional clinical trials, expand our manufacturing and
product commercialization capabilities, and continue our operations. Although we
expect research and development expenses to increase over the foreseeable future
as we fund our expanded clinical trial program and our pre-clinical and product
development efforts, we have the ability to control our spending rate and
development plans based on our available capital resources.
It is extremely difficult for us to reasonably estimate any future
research and development costs due to the number of unknowns and uncertainties
associated with pre-clinical and clinical trial development. These unknowns and
uncertainties include, but are not limited to:
o The uncertainty of future costs associated with our pre-clinical
candidates, Vasopermeation Enhancement Agents, and naked Vascular
Targeting Agents, which costs are dependent on the success of
pre-clinical development. We are uncertain whether or not these
product candidates will be successful and we are uncertain whether
or not we will incur any additional costs beyond pre-clinical
development;
o The uncertainty of future clinical trial results;
o The uncertainty of the number of patients to be treated in any
clinical trial;
o The uncertainty of the Food and Drug Administration allowing our
studies to move forward from Phase I clinical studies to Phase II
and Phase III clinical studies;
o The uncertainty of the rate at which patients are enrolled into
our studies. Any delays in clinical trials could significantly
increase the cost of the study and would extend the estimated
completion dates;
o The uncertainty of our capital resources to fund these studies
beyond the next twelve months; and
o The uncertainty of protocol changes and modifications in the
design of our clinical trial studies, which may increase or
decrease our future costs.
14
We will need to do additional development and clinical testing prior to
seeking any regulatory approval for commercialization of our product candidates
as all of our products are in clinical and pre-clinical development. Testing,
manufacturing, commercialization, advertising, promotion, exporting and
marketing, among other things, of our proposed products are subject to extensive
regulation by governmental authorities in the United States and other countries.
The testing and approval process requires substantial time, effort and financial
resources, and we cannot guarantee that any approval will be granted on a timely
basis, if at all. Companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in conducting advanced human clinical trials,
even after obtaining promising results in earlier trials. Furthermore, the
United States Food and Drug Administration may suspend clinical trials at any
time on various grounds, including a finding that the subjects or patients are
being exposed to an unacceptable health risk. Even if regulatory approval of a
product is granted, such approval may entail limitations on the indicated uses
for which it may be marketed. Accordingly, we may experience difficulties and
delays in obtaining necessary governmental clearances and approvals to market
our products, and we may not be able to obtain all necessary governmental
clearances and approvals to market our products.
GENERAL AND ADMINISTRATIVE EXPENSES. The decrease in our general and
administrative expenses of $250,000 during the quarter ended October 31, 2001
compared to the same period in the prior year resulted primarily from a decrease
in stock-based compensation expense associated with the amortization of the fair
value of warrants granted in prior years which were fully amortized as of April
30, 2001. In addition, the current period decrease in expenses was supplemented
by a decrease in legal fees combined with a decrease in annual shareholder
meeting expenses due to a reduction in printing and distribution costs of annual
meeting materials. The above decreases were offset by an increase in public
relation expenses associated with our media relations program and an increase in
directors and officers insurance due to the insurance market conditions.
INTEREST AND OTHER INCOME. The decrease in our interest and other
income of $124,000 during the quarter ended October 31, 2001 compared to the
same period in the prior year is primarily due to a decrease in interest income
as a result of lower interest rates combined with a decrease in our average cash
balance on hand during the three months ended October 31, 2001 compared to the
same period in the prior year.
INTEREST EXPENSE. The decrease in our interest expense of $73,000
during the quarter ended October 31, 2001 compared to the same period in the
prior year is primarily due to the lower average outstanding note payable
balance during the three months ended October 31, 2001. During the prior year
quarter ended October 2000, we made principal payments of $2,000,000 on a
$3,300,000 note payable to Biotechnology Development Ltd. ("BTD"). BTD is a
limited partnership controlled by Mr. Edward J. Legere, our President, Chief
Executive Officer and a member of the Board of Directors.
SIX MONTHS ENDED OCTOBER 31, 2001 AND 2000
NET LOSS. Our net loss of approximately $2,307,000 for the six months
ended October 31, 2001 represents a decrease in net loss of $2,317,000 compared
to a net loss of approximately $4,624,000 for the six months ended October 31,
2000. The decrease in net loss for the six months ended October 31, 2001 is due
to an increase in license revenue of $2,990,000 combined with a $175,000
decrease in interest expense. These amounts were offset by an increase in total
operating expenses of $651,000 and a decrease in interest and other income of
$197,000.
15
LICENSE REVENUE. The increase in our license revenue of $2,990,000
during the six months ended October 31, 2001 compared to the same period in the
prior year resulted primarily from the recognition of a $3,000,000 up-front
licensing payment received from Schering A.G. in March 1999. During June 2001,
we recognized deferred license revenue of $3,000,000 when we assumed the
Oncolym(R) licensing rights from Schering A.G. and met all obligations under the
agreement.
TOTAL OPERATING EXPENSES. Our total operating expenses increased
$651,000 during the six months ended October 31, 2001 compared to the same
period in the prior year. The increase in total operating expenses is due to an
increase in research and development expenses of $1,121,000 offset by a decrease
in general and administrative expenses of $470,000.
RESEARCH AND DEVELOPMENT EXPENSES. The increase in our research and
development expenses of $1,121,000 during the six months ended October 31, 2001
compared to the same period in the prior year is primarily due to an increase in
clinical trial expenses associated with the expansion of our clinical trial
program from two clinical trial studies in the prior year period to six clinical
trial studies in the current six-month period. These clinical trial expenses
were off-set by a decrease in the Oncolym(R) clinical trial expenses during the
six months ended October 31, 2001, which were allocated to us from Schering
A.G., our previous licensing partner for Oncolym(R). During June 2001, we
assumed all Oncolym(R) rights previously licensed to Schering A.G.
In addition to our clinical trial program, the current six-month period
increase in research and development expenses was supplemented by an increase in
pre-clinical development costs and patent legal fees associated with our VEA and
nVTA platform technologies combined with an increase in manufacturing facility
expenses as we upgrade and prepare our facility to manufacture biologics for
other companies.
The current six-month increase in research and development expenses was
further supplemented by an increase in stock-based compensation expense
associated with the fair value of options granted to non-employee consultants
who are assisting us with the development of our platform technologies.
GENERAL AND ADMINISTRATIVE EXPENSES. The decrease in our general and
administrative expenses of $470,000 during the six months ended October 31, 2001
compared to the same period in the prior year resulted primarily from a decrease
in stock-based compensation expense associated with the amortization of the fair
value of warrants granted in prior years which were fully amortized as of April
30, 2001. In addition, the current period decrease in expenses was supplemented
by a decrease in legal fees combined with a decrease in annual shareholder
meeting expenses due to a reduction in printing and distribution costs of annual
meeting materials. The above decreases in general and administrative expenses
were offset by an increase in public relation expenses and travel expenses
associated with our President and CEO's ongoing road show.
INTEREST AND OTHER INCOME. The decrease in our interest and other
income of $197,000 during the six months ended October 31, 2001 compared to the
same period in the prior year is primarily due to a decrease in interest income
as a result of lower interest rates combined with a decrease in our average cash
balance on hand during the six months ended October 31, 2001 compared to the
same period in the prior year.
INTEREST EXPENSE. The decrease in our interest expense of $175,000 for
the six months ended October 31, 2001 compared to the same period in the prior
year is primarily due to a lower average outstanding note payable balance during
the six months ended October 31, 2001. During the same period in the prior year,
we made principal payments of $2,000,000 on a $3,300,000 note payable to
Biotechnology Development Ltd. ("BTD"). BTD is a limited partnership controlled
by Mr. Edward J. Legere, our President, Chief Executive Officer and a member of
the Board of Directors.
16
LIQUIDITY AND CAPITAL RESOURCES. As of November 30, 2001, we had
$11,543,000 in cash and cash equivalents. We have financed our operations
primarily through the sale of our common stock, which has been supplemented with
payments received from various licensing deals. During the six months ended
October 31, 2001, we received net proceeds of $5,097,000 primarily from the sale
of our common stock under the Equity Line. In addition, during November 2001, we
sold shares pursuant to our shelf registration statement on Form S-3, File
Number 333-71086 and received proceeds of $5,750,000 under a Common Stock
Purchase Agreement.
We have experienced negative cash flows from operations since our
inception and we expect the negative cash flows from operations to continue for
the foreseeable future. We expect operating expenditures related to clinical
trials to increase in the future as our clinical trial activity increases and
scale-up for clinical trial production and radiolabeling continues. As a result
of increased activities in connection with the clinical trials for Cotara(TM)
and Oncolym(R), and the development costs associated with Vasopermeation
Enhancement Agents ("VEA's") and naked (non-conjugted) Vascular Targeting Agents
("nVTA's"), we expect that the monthly negative cash flow will continue.
Although we expect research and development expenses to increase over the
foreseeable future as we fund our expanded clinical trial program and our
pre-clinical and product development efforts, we have the ability to control our
spending rate and development plans based on our available capital resources.
Without obtaining additional financing or entering into additional licensing
arrangements for our other product candidates, we believe that we have
sufficient cash on hand to meet our obligations on a timely basis for at least
the next twelve months.
We plan to obtain the necessary financing through one or more methods
through either equity or debt financing and through negotiating additional
licensing or collaboration agreements for our platform technologies. We
currently have the ability to raise additional capital through the issuance of
equity under our shelf registration statement, File Number 333-71086. Under our
shelf registration statement, we have the ability to issue up to 4,050,000
additional common shares, which have been registered on Form S-3. There can be
no assurances that we will be successful in raising such funds on terms
acceptable to us, or at all, or that sufficient additional capital will be
raised to complete the research, development, and clinical testing of our
product candidates.
The development of our conjugated Vascular Targeting Agent ("VTA")
technology will be funded primarily by Oxigene, Inc. under a joint venture
agreement we entered into during May 2000, whereby Oxigene, Inc. will be funding
up to $20,000,000 in development costs. From inception of the agreement through
October 31, 2001, Oxigene, Inc. has funded approximately $1,665,000 in
development expenses under the joint venture.
COMMITMENTS. At October 31, 2001, we had no material capital
commitments, although we have significant obligations which are contingent on
clinical trial development milestones.
RISK FACTORS OF OUR COMPANY
The biotechnology industry includes many risks and challenges. Our
challenges may include, but are not limited to: uncertainties associated with
completing pre-clinical and clinical trials for our technologies; the
significant costs to develop our products as all of our products are currently
in development, pre-clinical studies or clinical trials and no revenue has been
generated from commercial product sales; obtaining additional financing to
support our operations and the development of our products; obtaining regulatory
approval for our technologies; complying with governmental regulations
applicable to our business; obtaining the raw materials necessary in the
development of such compounds; consummating collaborative arrangements with
corporate partners for product development; achieving milestones under
collaborative arrangements with corporate partners; developing the capacity to
manufacture, market and sell our products, either directly or indirectly with
collaborative partners; developing market demand for and acceptance of such
products; competing effectively with other pharmaceutical and biotechnological
products; attracting and retaining key personnel; protecting proprietary rights;
accurately forecasting operating and capital expenditures, other capital
commitments, or clinical trial costs and general economic conditions. A more
detail discussion regarding our industry and business risk factors can be found
in the Company's Annual Report on Form 10-K for the year ended April 30, 2001,
as filed with the Securities and Exchange Commission on July 27, 2001.
17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
Changes in United States interest rates would affect the interest
earned on our cash and cash equivalents. Based on our overall interest rate
exposure at October 31, 2001, a near-term change in interest rates, based on
historical movements, would not materially affect the fair value of our interest
rate sensitive instruments. Our debt instruments have fixed interest rates and
terms and therefore, a significant change in interest rates would not have a
material adverse effect on our financial position or results of operations.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None.
- ------- ------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
- ------- ------------------------------------------
The following is a summary of transactions by the Company during the
quarterly period of August 1, 2001 through October 31, 2001 involving issuance
and sales of the Company's securities that were not registered under the
Securities Act of 1933, as amended (the "Securities Act").
During October 31, 2001, the Company issued 19,287 shares of common
stock to one institutional investor upon the cashless exercise of 39,453
warrants under the Equity Line.
On various dates during the quarter ended October 31, 2001, the Company
issued an aggregate of 2,446,612 shares of the Company's common stock to the two
institutional investors and the placement agent under the Equity Line, for an
aggregate purchase price of $2,526,000, pursuant to an Equity Line draw and also
issued warrants to the two institutional investors and placement agent to
purchase up to 355,868 shares of common stock, which warrants are immediately
exercisable on a cashless basis only and expire through December 31, 2005.
The issuances of the securities of the Company in the above
transactions were deemed to be exempt from registration under the Securities Act
by virtue of Section 4(2) thereof or Regulation D promulgated thereunder, as a
transaction by an issuer not involving a public offering. The recipient of such
securities either received adequate information about the Company or had access,
through employment or other relationships with the Company, to such information.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
- ------- --------------------------------
18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
We held our annual meeting of stockholders' on October 24, 2001. The
directors elected at the meeting were Carlton M. Johnson, Edward J. Legere, Eric
S. Swartz, and Clive R. Taylor, M.D. Ph.D. The following represents matters
voted upon and the results of the voting:
AGAINST OR
FOR WITHHELD
---------------- -----------
1) Election of Directors:
Carlton M. Johnson 88,430,671 555,895
Edward J. Legere 88,446,966 539,600
Eric S. Swartz 88,403,297 583,269
Clive R. Taylor, M.D., Ph.D. 88,452,228 534,338
2) To ratify the appointment of Ernst
& Young LLP as independent auditors
of the Company for the fiscal year
ending April 30, 2002.
88,632,248 354,318
ITEM 5. OTHER INFORMATION. None.
- ------- ------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------- ---------------------------------
(a) Exhibits: None.
(b) Reports on Form 8-K: None.
19
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.
PEREGRINE PHARMACEUTICALS, INC.
By: /s/ Edward J. Legere
-----------------------------------------------
Edward J. Legere
President & Chief Executive Officer
and Director
/s/ Paul J. Lytle
-----------------------------------------------
Paul J. Lytle
Vice President,
Finance & Accounting
(signed both as an officer duly authorized to
sign on behalf of the Registrant and principal
financial officer and chief accounting officer)
20