UNITED STATES
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 quarter ended December 31, 2002 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 0-17827
VIRAGEN INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
11-2788282 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
865 SW 78th Avenue, Suite 100, Plantation, Florida 33324
(Address of principal executive offices)
(954) 233-8377
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
As of February 10, 2003, there were 50,970,907 shares of the issuer’s common stock outstanding, par value $0.01.
VIRAGEN INTERNATIONAL, INC. AND SUBSIDIARIES
| Page | ||||
| PART I—FINANCIAL INFORMATION |
||||
| Item 1. |
Financial Statements |
|||
| 2 | ||||
| 2) Consolidated condensed balance sheets as of December 31, 2002 and June 30, 2002 |
3 | |||
| 3) Consolidated condensed statements of cash flows for the six months ended December 31, 2002 and 2001 |
4 | |||
| 5 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||
| Item 3. |
25 | |||
| Item 4. |
26 | |||
| PART II—OTHER INFORMATION |
||||
| Item 6. |
27 | |||
| 28 | ||||
| 29 | ||||
| 30 | ||||
VIRAGEN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended December 31, |
Six Months Ended December 31, |
|||||||||||||||
| 2002 |
2001 |
2002 |
2001 |
|||||||||||||
| Product sales |
$ |
126,592 |
|
$ |
461,892 |
|
$ |
471,477 |
|
$ |
461,892 |
| ||||
| Costs and expenses |
||||||||||||||||
| Cost of sales |
|
100,866 |
|
|
443,530 |
|
|
419,039 |
|
|
443,530 |
| ||||
| Research and development |
|
220,107 |
|
|
1,245,530 |
|
|
451,707 |
|
|
2,163,534 |
| ||||
| Selling, general and administrative |
|
890,494 |
|
|
668,297 |
|
|
1,739,770 |
|
|
962,490 |
| ||||
| Licensing fee |
|
— |
|
|
— |
|
|
— |
|
|
500,000 |
| ||||
| Amortization of intangible assets |
|
58,108 |
|
|
51,518 |
|
|
115,125 |
|
|
51,518 |
| ||||
| Interest and other income |
|
(57,079 |
) |
|
(22,741 |
) |
|
(92,691 |
) |
|
(49,881 |
) | ||||
| Interest expense |
|
48,819 |
|
|
45,841 |
|
|
98,538 |
|
|
46,592 |
| ||||
| Loss before income taxes |
|
(1,134,723 |
) |
|
(1,970,083 |
) |
|
(2,260,011 |
) |
|
(3,655,891 |
) | ||||
| Income tax benefit |
|
19,386 |
|
|
112 |
|
|
38,772 |
|
|
73,426 |
| ||||
| Net loss |
$ |
(1,115,337 |
) |
$ |
(1,969,971 |
) |
$ |
(2,221,239 |
) |
$ |
(3,582,465 |
) | ||||
| Loss per common share – basic and diluted |
$ |
(0.02 |
) |
$ |
(0.05 |
) |
$ |
(0.05 |
) |
$ |
(0.10 |
) | ||||
| Weighted average common shares – basic and diluted |
|
46,540,427 |
|
|
37,692,170 |
|
|
46,516,083 |
|
|
36,273,399 |
| ||||
See notes to consolidated condensed financial statements which are an integral part of these statements.
2
VIRAGEN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
| December 31, 2002 |
June 30, 2002 |
|||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ |
23,553 |
|
$ |
77,405 |
| ||
| Accounts receivable |
|
63,083 |
|
|
349,965 |
| ||
| Inventories |
|
2,839,059 |
|
|
1,866,568 |
| ||
| Prepaid expenses |
|
233,809 |
|
|
155,209 |
| ||
| Other current assets |
|
118,050 |
|
|
945,564 |
| ||
| Total current assets |
|
3,277,554 |
|
|
3,394,711 |
| ||
| Property, plant and equipment |
||||||||
| Land, building and improvements |
|
3,011,564 |
|
|
2,874,590 |
| ||
| Equipment and furniture |
|
4,455,355 |
|
|
4,203,195 |
| ||
| Construction in progress |
|
502,050 |
|
|
375,373 |
| ||
|
|
7,968,969 |
|
|
7,453,158 |
| |||
| Less accumulated depreciation |
|
(2,284,741 |
) |
|
(1,971,667 |
) | ||
|
|
5,684,228 |
|
|
5,481,491 |
| |||
| Goodwill |
|
8,887,444 |
|
|
8,460,940 |
| ||
| Developed technology, net |
|
1,785,503 |
|
|
1,765,618 |
| ||
| Other intangible assets, net |
|
— |
|
|
50,619 |
| ||
| $ |
19,634,729 |
|
$ |
19,153,379 |
| |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities |
||||||||
| Accounts payable and accrued expenses |
$ |
2,384,698 |
|
$ |
1,818,757 |
| ||
| Line of credit |
|
966,147 |
|
|
831,965 |
| ||
| Licensing fee payable |
|
— |
|
|
500,000 |
| ||
| Current portion of long-term debt |
|
122,408 |
|
|
72,374 |
| ||
| Deferred tax liability, current |
|
43,828 |
|
|
60,686 |
| ||
| Total current liabilities |
|
3,517,081 |
|
|
3,283,782 |
| ||
| Long-term debt, less current portion |
|
980,408 |
|
|
1,023,948 |
| ||
| Advances from parent |
|
6,025,634 |
|
|
4,749,982 |
| ||
| Deferred tax liability |
|
522,282 |
|
|
544,196 |
| ||
| Commitments and contingencies |
||||||||
| Stockholders’ equity |
||||||||
| Common stock, $.01 par value. Authorized 90,000,000 shares at December 31, 2002 and June 30, 2002; issued and outstanding 50,970,907 and 46,491,740 shares at December 31, 2002 and June 30, 2002, respectively |
|
509,709 |
|
|
464,917 |
| ||
| Additional paid-in capital |
|
39,709,332 |
|
|
39,216,624 |
| ||
| Accumulated deficit |
|
(33,007,546 |
) |
|
(30,786,307 |
) | ||
| Accumulated other comprehensive income |
|
1,377,829 |
|
|
656,237 |
| ||
| Total stockholders’ equity |
|
8,589,324 |
|
|
9,551,471 |
| ||
| $ |
19,634,729 |
|
$ |
19,153,379 |
| |||
See notes to consolidated condensed financial statements which are an integral part of these statements.
3
VIRAGEN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended December 31, |
||||||||
| 2002 |
2001 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net loss |
$ |
(2,221,239 |
) |
$ |
(3,582,465 |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation |
|
354,055 |
|
|
259,430 |
| ||
| Amortization of intangible assets |
|
115,125 |
|
|
51,518 |
| ||
| Loss on sale of property, plant, and equipment |
|
8,578 |
|
|
— |
| ||
| Deferred income tax benefit |
|
(38,772 |
) |
|
— |
| ||
| Increase (decrease) relating to operating activities from: |
||||||||
| Accounts receivable |
|
286,882 |
|
|
60,726 |
| ||
| Inventories |
|
(972,491 |
) |
|
204,749 |
| ||
| Prepaid expenses and other current assets |
|
748,914 |
|
|
259,856 |
| ||
| Other assets |
|
— |
|
|||||