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 MARCH 31, 2003
OR
o
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 (State or other jurisdiction of incorporation or organization) |
11-2788282 (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 o
As of May 12, 2003, there were 50,970,907 shares of the issuer’s common stock outstanding, par value $0.01.
VIRAGEN INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
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| PART I |
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FINANCIAL INFORMATION |
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| Item 1. |
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Financial Statements |
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1) Consolidated condensed statements of operations for the three and nine months ended March 31, 2003 and 2002 (unaudited) |
2 |
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2) Consolidated condensed balance sheets as of March 31, 2003 (unaudited) and June 30, 2002 |
3 |
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3) Consolidated condensed statements of cash flows for the nine months ended March 31, 2003 and 2002 (unaudited) |
4 |
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4) Notes to consolidated condensed financial statements (unaudited) |
5 |
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| Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
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| Item 3. |
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28 | |
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| Item 4. |
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29 | |
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| PART II |
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30 | |
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| Item 1. |
Legal Proceedings | 30 | |
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| Item 6. |
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31 |
| 32 | |
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| 33 | |
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| 34 |
VIRAGEN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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2003 |
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2002 |
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2003 |
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2002 |
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| Product sales |
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$ |
48,140 |
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$ |
415,935 |
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$ |
519,617 |
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$ |
877,827 |
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| Costs and expenses |
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| Cost of sales |
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324,178 |
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253,643 |
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743,217 |
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697,173 |
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| Research and development |
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198,568 |
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1,039,454 |
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650,275 |
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3,202,988 |
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| Selling, general and administrative |
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852,137 |
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539,278 |
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2,591,907 |
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1,501,768 |
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| Licensing fee |
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— |
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— |
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— |
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500,000 |
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| Amortization of intangible assets |
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33,703 |
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51,517 |
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148,828 |
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103,035 |
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| Interest and other income |
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(12,306 |
) |
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(10,587 |
) |
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(104,997 |
) |
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(60,468 |
) |
| Interest expense |
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45,871 |
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19,810 |
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144,409 |
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66,402 |
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| Loss before income taxes |
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(1,394,011 |
) |
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(1,477,180 |
) |
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(3,654,022 |
) |
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(5,133,071 |
) |
| Income tax benefit (expense) |
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10,957 |
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(361 |
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49,729 |
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73,065 |
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| Net loss |
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$ |
(1,383,054 |
) |
$ |
(1,477,541 |
) |
$ |
(3,604,293 |
) |
$ |
(5,060,006 |
) |
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| Loss per common share - basic and diluted |
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$ |
(0.03 |
) |
$ |
(0.03 |
) |
$ |
(0.08 |
) |
$ |
(0.13 |
) |
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| Weighted average common shares - basic and diluted |
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50,970,907 |
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45,025,145 |
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47,979,347 |
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39,148,060 |
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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
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March 31, |
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June 30, |
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(Unaudited) |
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| ASSETS |
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| Current assets |
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| Cash and cash equivalents |
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$ |
40,554 |
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$ |
77,405 |
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| Accounts receivable |
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37,056 |
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349,965 |
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| Inventories |
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3,160,118 |
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1,866,568 |
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| Prepaid expenses |
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360,095 |
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155,209 |
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| Other current assets |
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90,678 |
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945,564 |
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| Total current assets |
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3,688,501 |
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3,394,711 |
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| Property, plant and equipment |
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| Land, building and improvements |
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2,989,488 |
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2,874,590 |
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| Equipment and furniture |
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4,421,717 |
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4,203,195 |
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| Construction in progress |
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532,236 |
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375,373 |
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7,943,441 |
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7,453,158 |
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| Less accumulated depreciation |
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(2,430,357 |
) |
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(1,971,667 |
) |
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5,513,084 |
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5,481,491 |
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| Goodwill |
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9,110,407 |
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8,460,940 |
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| Developed technology, net |
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1,794,872 |
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1,765,618 |
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| Other intangible assets, net |
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— |
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50,619 |
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$ |
20,106,864 |
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$ |
19,153,379 |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities |
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| Accounts payable and accrued expenses |
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$ |
2,910,779 |
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$ |
1,818,757 |
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| Line of credit |
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1,002,749 |
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831,965 |
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| Licensing fee payable |
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— |
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500,000 |
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| Current portion of long-term debt |
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136,033 |
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72,374 |
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| Deferred tax liability, current |
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43,828 |
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60,686 |
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| Total current liabilities |
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4,093,389 |
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3,283,782 |
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| Long-term debt, less current portion |
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968,064 |
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1,023,948 |
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| Advances from parent |
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7,084,646 |
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4,749,982 |
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| Deferred tax liability |
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511,325 |
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544,196 |
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| Commitments and contingencies |
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| Stockholders’ equity |
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| Common stock, $.01 par value. Authorized 90,000,000 shares at March 31, 2003 and June 30, 2002; issued and outstanding 50,970,907 and 46,491,740 shares at March 31, 2003 and June 30, 2002, respectively |
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509,709 |
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464,917 |
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| Additional paid-in capital |
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39,709,332 |
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39,216,624 |
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| Accumulated deficit |
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(34,390,600 |
) |
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(30,786,307 |
) |
| Accumulated other comprehensive income |
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1,620,999 |
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656,237 |
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| Total stockholders’ equity |
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7,449,440 |
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9,551,471 |
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$ |
20,106,864 |
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$ |
19,153,379 |
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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)
|
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Nine Months Ended |
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2003 |
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2002 |
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| OPERATING ACTIVITIES |
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| Net loss |
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$ |
(3,604,293 |
) |
$ |
(5,060,006 |
) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation |
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529,158 |
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400,531 |
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| Amortization of intangible assets |
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148,828 |
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103,035 |
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| Loss on sale of property, plant, and equipment |
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8,578 |
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— |
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| Deferred income taxes |
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(49,729 |
) |
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— |
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| Increase (decrease) relating to operating activities from: |
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| Accounts receivable |
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312,909 |
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132,866 |
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| Inventories |
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(1,293,550 |
) |
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(183,109 |
) |
| Prepaid expenses and other current assets |
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650,000 |
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305,730 |
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| Other assets |
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— |
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20,154 |
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| Accounts payable and accrued expenses |
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1,129,522 |
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(521,057 |
) |
| Licensing fee payable |
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— |
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500,000 |
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| Net cash used in operating activities |
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(2,168,577 |
) |
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(4,301,856 |
) |
| INVESTING ACTIVITIES |
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| Additions to property, plant and equipment, net |
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(335,191 |
) |
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(225,636 |
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| Acquisition of ViraNative, net of cash acquired |
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— |
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(202,428 |
) |
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| Net cash used in investing activities |
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(335,191 |
) |
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(428,064 |
) |
| FINANCING ACTIVITIES |
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