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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, 2003
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 [ ].
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). 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.)
137,712,714 shares of common stock
as of December 10, 2003
PEREGRINE PHARMACEUTICALS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 31, 2003
TABLE OF CONTENTS
THE TERMS "WE", "US", "OUR," AND "THE COMPANY" AS USED IN THIS FORM ON 10-Q
REFERS TO PEREGRINE PHARMACEUTICALS, INC. AND ITS WHOLLY-OWNED SUBSIDIARIES,
AVID BIOSERVICES, INC. AND VASCULAR TARGETING TECHNOLOGIES, INC.
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Balance Sheets at October 31, 2003 and April 30, 2003 ....... 1
Consolidated Statements of Operations for the three and six months
ended October 31, 2003 and 2002 ........................................ 3
Consolidated Statement of Stockholders' Equity for the six months
ended October 31, 2003.................................................. 4
Consolidated Statements of Cash Flows for the six months ended
October 31, 2003 and 2002............................................... 5
Notes to Consolidated Financial Statements ............................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................. 19
Company Overview ......................................................... 19
Risk Factors of Our Company .............................................. 25
Item 3. Quantitative and Qualitative Disclosures About Market Risk ............... 25
Item 4. Controls and Procedures .................................................. 25
PART II OTHER INFORMATION
Item 1. Legal Proceedings......................................................... 26
Item 2. Changes in Securities and Use of Proceeds ................................ 26
Item 3. Defaults Upon Senior Securities .......................................... 26
Item 4. Submission of Matters to a Vote of Security Holders ...................... 26
Item 5. Other Information ......................................................... 27
Item 6. Exhibits and Reports on Form 8-K........................................... 27
Signatures................................................................. 28
i
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
AT OCTOBER 31, 2003 AND APRIL 30, 2003
- ---------------------------------------------------------------------------------------------
OCTOBER 31, APRIL 30,
2003 2003
------------- -------------
UNAUDITED
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,276,000 $ 3,137,000
Trade and other receivables, net of allowance for doubtful
accounts of $62,000 (October) and $59,000 (April) 374,000 245,000
Short-term investment -- 242,000
Inventories 566,000 376,000
Prepaid expenses and other current assets 389,000 257,000
------------ ------------
Total current assets 12,605,000 4,257,000
PROPERTY:
Leasehold improvements 387,000 291,000
Laboratory equipment 2,077,000 1,936,000
Furniture, fixtures and computer equipment 706,000 724,000
------------- -------------
3,170,000 2,951,000
Less accumulated depreciation and amortization (2,266,000) (2,115,000)
------------- -------------
Property, net 904,000 836,000
OTHER ASSETS:
Note receivable, net of allowance of $1,614,000 (October) and
$1,645,000 (April) -- --
Debt issuance costs, net 23,000 176,000
Other 130,000 130,000
------------- -------------
Total other assets 153,000 306,000
------------- -------------
TOTAL ASSETS $ 13,662,000 $ 5,399,000
============= =============
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
AT OCTOBER 31, 2003 AND APRIL 30, 2003 (CONTINUED)
- ----------------------------------------------------------------------------------------------
OCTOBER 31, APRIL 30,
2003 2003
-------------- --------------
UNAUDITED
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 674,000 $ 560,000
Accrued clinical trial site fees 22,000 260,000
Accrued legal and accounting fees 239,000 194,000
Accrued royalties and license fees 127,000 149,000
Accrued payroll and related costs 388,000 314,000
Other current liabilities 281,000 300,000
Deferred revenue 492,000 531,000
-------------- --------------
Total current liabilities 2,223,000 2,308,000
CONVERTIBLE DEBT, net of discount 33,000 760,000
DEFERRED REVENUE 163,000 200,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock-$.001 par value; authorized 200,000,000 shares;
outstanding - 135,532,464 (October); 119,600,501 (April) 136,000 120,000
Additional paid-in capital 158,224,000 142,274,000
Deferred stock compensation (85,000) (257,000)
Accumulated deficit (147,032,000) (140,006,000)
-------------- --------------
Total stockholders' equity 11,243,000 2,131,000
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,662,000 $ 5,399,000
============== ==============
See accompanying notes to consolidated financial statements
2
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2003 AND 2002 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------- -------------------------------
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2003 2002 2003 2002
-------------- -------------- -------------- --------------
REVENUES:
Contract manufacturing revenue $ 839,000 $ 621,000 $ 1,192,000 $ 1,095,000
License revenue 19,000 -- 38,000 --
-------------- -------------- -------------- --------------
Total revenues 858,000 621,000 1,230,000 1,095,000
COST AND EXPENSES:
Cost of contract manufacturing 666,000 711,000 984,000 1,031,000
Research and development 1,975,000 2,097,000 3,847,000 5,449,000
Selling, general and administrative 1,109,000 813,000 2,128,000 1,523,000
-------------- -------------- -------------- --------------
Total cost and expenses 3,750,000 3,621,000 6,959,000 8,003,000
-------------- -------------- -------------- --------------
LOSS FROM OPERATIONS (2,892,000) (3,000,000) (5,729,000) (6,908,000)
-------------- -------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest and other income 64,000 81,000 149,000 139,000
Interest and other expense (87,000) (271,000) (1,446,000) (272,000)
-------------- -------------- -------------- --------------
NET LOSS $ (2,915,000) $ (3,190,000) $ (7,026,000) $ (7,041,000)
============== ============== ============== ==============
WEIGHTED AVERAGE
SHARES OUTSTANDING:
Basic and Diluted 133,873,106 117,283,070 129,303,349 113,779,139
============== ============== ============== ==============
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.02) $ (0.03) $ (0.05) $ (0.06)
============== ============== ============== ==============
See accompanying notes to consolidated financial statements
3
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL DEFERRED TOTAL
COMMON STOCK PAID-IN STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY
-------------- -------------- -------------- -------------- -------------- --------------
BALANCES - May 1, 2003 119,600,501 $ 120,000 $ 142,274,000 $ (257,000) $(140,006,000) $ 2,131,000
Common stock issued for cash
under June 6, 2003 Common Stock
Purchase Agreement, net of
issuance costs of $104,000 2,412,448 2,000 1,969,000 -- -- 1,971,000
Common stock issued for cash
under June 26, 2003 Common
Stock Purchase Agreement, net
of issuance costs of $101,000 1,599,997 2,000 1,737,000 -- -- 1,739,000
Common stock issued for cash
under option granted under June
26, 2003 Common Stock Purchase
Agreement, net of issuance
costs of $54,000 1,510,412 1,000 1,682,000 -- -- 1,683,000
Common stock issued for cash
under July 24, 2003 Common
Stock Purchase Agreement, net
of issuance costs of $13,000 2,000,000 2,000 2,885,000 -- -- 2,887,000
Common stock issued for cash
under September 18, 2003 Common
Stock Purchase Agreement, net
of issuance costs of $19,000 1,540,000 2,000 2,779,000 -- -- 2,781,000
Common stock issued upon
conversion of convertible debt 2,347,057 2,000 1,993,000 -- -- 1,995,000
Common stock issued upon exercise
of options and warrants, net of
issuance costs of $132,000 4,522,049 5,000 2,957,000 -- -- 2,962,000
Reversal of deferred stock
compensation associated with
the cancellation of unvested
options -- -- (52,000) 28,000 -- (24,000)
Stock-based compensation -- -- -- 144,000 -- 144,000
Net loss -- -- -- -- (7,026,000) (7,026,000)
-------------- -------------- -------------- -------------- -------------- --------------
BALANCES - October 31, 2003 135,532,464 $ 136,000 $ 158,224,000 $ (85,000) $(147,032,000) $ 11,243,000
============= ============= ============= ============= ============= =============
See accompanying notes to consolidated financial statements
4
PEREGRINE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 AND 2002 (UNAUDITED)
- -----------------------------------------------------------------------------------------------
SIX MONTHS ENDED OCTOBER 31,
2003 2002
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,026,000) $ (7,041,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 180,000 186,000
Stock-based compensation 120,000 283,000
Amortization of discount on convertible debt and debt
issuance costs 1,421,000 208,000
Gain on sale of property -- (1,000)
Changes in operating assets and liabilities:
Trade and other receivables (129,000) (389,000)
Short-term investment 242,000 --
Inventories (190,000) (578,000)
Prepaid expenses and other current assets (132,000) (143,000)
Accounts payable 114,000 (395,000)
Deferred revenue (76,000) 668,000
Accrued clinical trial site fees (238,000) (130,000)
Other accrued expenses and current liabilities 78,000 (21,000)
------------- -------------
Net cash used in operating activities (5,636,000) (7,353,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisitions (248,000) (173,000)
Proceeds from sale of property -- 11,000
Decrease in other assets -- 4,000
------------- -------------
Net cash used in investing activities (248,000) (158,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of issuance
costs of $423,000 14,023,000 4,719,000
Proceeds from issuance of convertible debt, net of issuance
costs of $363,000 -- 3,387,000
Principal payments on notes payable -- (42,000)
------------- -------------
Net cash provided by financing activities 14,023,000 8,064,000
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,139,000 553,000
CASH AND CASH EQUIVALENTS, beginning of period 3,137,000 6,072,000
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 11,276,000 $ 6,625,000
============= =============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property acquired in exchange for note payable $ -- $ 82,000
============= =============
See accompanying notes to consolidated financial statements
5
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Peregrine Pharmaceuticals, Inc. ("Peregrine") and its wholly-owned
subsidiaries, Avid Bioservices, Inc. ("Avid"), and Vascular Targeting
Technologies, Inc. (collectively the "Company"). All intercompany balances and
transactions have been eliminated.
As of October 31, 2003, the Company had $11,276,000 in cash and cash
equivalents on hand. The Company has expended substantial funds on the
development of its product candidates and for clinical trials and it has
incurred negative cash flows from operations for the majority of its years since
inception. The Company expects negative cash flows from operations to continue
until it is able to generate sufficient revenue from the contract manufacturing
services provided by Avid and/or from the sale and/or licensing of its products
under development.
Revenues earned by Avid during the six months ended October 31, 2003
amounted to $1,192,000. The Company expects that Avid will continue to generate
revenues which should lower consolidated cash flows used in operations, although
the Company expects those near term revenues will be insufficient to cover
consolidated cash flows used in operations. As such, the Company will continue
to raise additional capital to provide for its operations, including the
anticipated development and clinical trial costs of Cotara(TM), the anticipated
development costs associated with Vasopermeation Enhancement Agents ("VEA's")
and Vascular Targeting Agents ("VTA's"), and the potential expansion of the
Company's manufacturing capabilities.
Assuming the Company does not raise any additional capital from
financing activities or from the sale or licensing of its technologies, the
Company believes it has sufficient cash on hand to meet its obligations on a
timely basis through at least the next twelve months.
In addition to equity financing, the Company is actively exploring
various other sources of cash by leveraging its various assets. The transactions
being explored by the Company for its technologies include licensing, partnering
or the sale of Cotara(TM), Oncolym(R), or various portions of its VTA and VEA
technologies that it does not plan on developing internally.
In addition to the potential licensing, partnering or sale of the
Company's technologies to raise capital, the Company is also exploring a
possible strategic transaction related to its subsidiary, Avid. In this regard,
the Company is exploring the possibility of partnering, or a complete sale of
Avid as a means of raising additional capital. The Company has not classified
the related assets as held for sale in accordance with Statement of Financial
Accounting Standards No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED ASSETS, since the Company is strictly exploring the possibility of a
partnering or sale arrangement and the partnering or sale of the asset is not
currently probable under Statement of Financial Accounting Standards No. 5,
ACCOUNTING FOR CONTINGENCIES.
6
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
There can be no assurances that the Company will be successful in
raising sufficient capital on terms acceptable to it, or at all (from either
debt, equity or the licensing, partnering or sale of technology assets and/or
the sale of all or a portion of Avid), or that sufficient additional revenues
will be generated from Avid or under potential licensing agreements to sustain
its operations beyond the next twelve months.
The accompanying interim consolidated financial statements are
unaudited; however they 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,
2003, and the consolidated results of its operations and its consolidated cash
flows for the six-month periods ended October 31, 2003 and 2002. Although the
Company believes that the disclosures in the financial statements are adequate
to make the information presented herein 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, 2003, which was filed with the Securities and Exchange
Commission on July 29, 2003. 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid,
short-term investments with an initial maturity of three months or less to be
cash equivalents.
SHORT-TERM INVESTMENTS - The Company classifies its short-term
investments as trading securities under the requirements of Statement of
Financial Accounting Standards No. 115 ("SFAS No. 115"), ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES. SFAS No. 115 considers trading
securities as securities that are bought with the intention of being sold in the
near term for the general purpose of realizing profits. Trading securities are
recorded at fair market value and gains and losses on trading securities are
included in interest and other income in the accompanying consolidated financial
statements.
INVENTORIES - Inventories are stated at the lower of cost or market and
primarily includes raw materials, direct labor and overhead costs associated
with the services provided by our wholly-owned subsidiary, Avid. Inventories
consist of the following at October 31, 2003 and April 30, 2003:
OCTOBER 31, APRIL 30,
2003 2003
------------- -------------
Raw materials $ 187,000 $ 205,000
Work-in-process 379,000 171,000
------------- -------------
Total Inventories $ 566,000 $ 376,000
============= =============
7
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
CONCENTRATIONS OF CREDIT RISK - The majority of trade and other
receivables are from customers in the United States, Europe and Israel. Most
contracts require up-front payments and installment payments as the contract
progresses. The Company performs periodic credit evaluations of its ongoing
customers and generally does not require collateral, but can terminate the
contract if a material default occurs. Reserves are maintained for potential
credit losses, and such losses have been minimal and within management's
estimates.
DEFERRED REVENUE - Deferred revenue primarily consists of up-front
contract fees and installment payments received prior to the recognition of
revenues under contract manufacturing and development agreements and up-front
license fees received under technology license agreements. Deferred revenue is
generally recognized once the service has been provided, all obligations have
been met and/or upon shipment of the product to the customer.
REVENUE RECOGNITION - The Company currently derives revenues primarily
from licensing agreements associated with Peregrine's technologies under
development and from contract manufacturing services provided by Avid.
The Company recognizes revenues pursuant to Staff Accounting Bulletin
No. 101 ("SAB No. 101"), REVENUE RECOGNITION. The bulletin draws on existing
accounting rules and provides specific guidance on how those accounting rules
should be applied. Revenue is generally realized or realizable and earned when
(i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or
services have been rendered, (iii) the seller's price to the buyer is fixed or
determinable, and (iv) collectibility is reasonably assured.
Revenues associated with licensing agreements primarily consist of
nonrefundable up-front license fees and milestone payments. Revenues under
licensing agreements are recognized based on the performance requirements of the
agreement. Nonrefundable up-front license fees received under license
agreements, whereby continued performance or future obligations are considered
inconsequential to the relevant licensed technology, are generally recognized as
revenue upon delivery of the technology. Nonrefundable up-front license fees,
whereby ongoing involvement or performance obligations exist, are generally
recorded as deferred revenue and generally recognized as revenue over the term
of the performance obligation or relevant agreement. Under some license
agreements, the obligation period may not be contractually defined. Under these
circumstances, the Company exercises judgment in estimating the period of time
over which certain deliverables will be provided to enable the licensee to
practice the license.
Contract manufacturing revenues are generally recognized once the
service has been provided and/or upon shipment of the product to the customer.
The Company also records a provision for estimated contract losses, if any, in
the period in which they are determined.
8
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
In July 2000, the Emerging Issues Task Force ("EITF") released Issue
99-19 ("EITF 99-19"), REPORTING REVENUE GROSS AS A PRINCIPAL VERSUS NET AS AN
AGENT. EITF 99-19 summarized the EITF's views on when revenue should be recorded
at the gross amount billed to a customer because it has earned revenue from the
sale of goods or services, or the net amount retained (the amount billed to the
customer less the amount paid to a supplier) because it has earned a fee or
commission. In addition, the EITF released Issue 00-10 ("EITF 00-10"),
ACCOUNTING FOR SHIPPING AND HANDLING FEES AND COSTS, and Issue 01-14 ("EITF
01-14"), INCOME STATEMENT CHARACTERIZATION OF REIMBURSEMENTS RECEIVED FOR
"OUT-OF-POCKET" EXPENSES INCURRED. EITF 00-10 summarized the EITF's views on how
the seller of goods should classify in the income statement amounts billed to a
customer for shipping and handling and the costs associated with shipping and
handling. EITF 01-14 summarized the EITF's views on when the reimbursement of
out-of-pocket expenses should be characterized as revenue or as a reduction of
expenses incurred. The Company's revenue recognition policies are in compliance
with EITF 99-19, EITF 00-10 and EITF 01-14 whereby the Company records revenue
for the gross amount billed to customers (the cost of raw materials, supplies,
and shipping, plus the related handling mark-up fee) and records the cost of the
amounts billed as cost of sales as the Company acts as a principal in these
transactions.
RESEARCH AND DEVELOPMENT - Research and development costs are charged
to expense when incurred in accordance with Statement of Financial Accounting
Standards No. 2, ACCOUNTING FOR RESEARCH AND DEVELOPMENT COSTS. Research and
development expenses primarily include (i) payroll and related costs associated
with research and development personnel, (ii) costs related to clinical and
pre-clinical testing of the Company's technologies under development, (iii) the
costs to manufacture the product candidates, including raw materials and
supplies, (iv) expenses for research and services rendered under outside
contracts, including sponsored research funding, and (v) facilities expenses.
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, warrants and convertible instruments. 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, warrants, and convertible debt outstanding during the
period. Potentially dilutive common shares consist of stock options and warrants
calculated in accordance with the treasury stock method, but are excluded if
their effect is antidilutive. The potential dilutive effect of convertible debt
was calculated using the if-converted method assuming the conversion of the
convertible debt as of the earliest period reported or at the date of issuance,
if later. Because the impact of options, warrants, and other convertible
instruments are antidilutive, there was no difference between basic and diluted
loss per share amounts for the three and six months ended October 31, 2003 and
October 31, 2002. The Company has excluded the dilutive effect of the following
shares issuable upon the exercise of options, warrants, and convertible debt
outstanding during the period because their effect was antidilutive since the
Company reported a net loss in the periods presented:
9
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Common stock equivalent shares
assuming issuance of shares
represented by outstanding
stock options and warrants
utilizing the treasury stock
method 10,927,926 1,986,519 10,174,146 4,680,013
Common stock equivalent shares
assuming issuance of shares
upon conversion of convertible
debt utilizing the if-converted
method 493,608 3,980,179 951,188 1,990,090
----------- ----------- ----------- -----------
Total 11,421,534 5,966,698 11,125,334 6,670,103
=========== =========== =========== ===========
Weighted average outstanding options and warrants to purchase up to
7,111,931 and 7,743,116 shares of common stock for the three and six months
ended October 31, 2003, respectively, were also excluded from the calculation of
diluted earnings per common share because their exercise prices were greater
than the average market price during the period.
Weighted average outstanding options and warrants to purchase up to
24,158,950 and 15,455,772 shares of common stock for the three and six months
ended October 31, 2002, respectively, were also excluded from the calculation of
diluted earnings per common share because their exercise prices were greater
than the average market price during the period.
From November 1, 2003 through December 10, 2003, the Company received
gross proceeds of $4,409,000 in exchange for the issuance of 2,160,000 shares of
its common stock (Note 10), which numbers have been excluded from basic and
dilutive net loss per common share for the three and six months ended October
31, 2003.
STOCK-BASED COMPENSATION - In December 2002, the FASB issued Statement
of Financial Accounting Standards No. 148 ("SFAS No. 148"), ACCOUNTING FOR
STOCK-BASED COMPENSATION-TRANSITION AND DISCLOSURE, which the Company adopted on
February 1, 2003. SFAS No. 148 amends SFAS No. 123 ("SFAS No. 123"), ACCOUNTING
FOR STOCK-BASED COMPENSATION, and provides alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
The Company has not adopted a method under SFAS No. 148 to expense
stock options but rather continues to apply the provisions of SFAS No. 123. As
SFAS No. 123 permits, the Company elected to continue accounting for its
employee stock options in accordance with Accounting Principles Board Opinion
No. 25 ("APB No. 25"), ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES and related
Interpretations. APB No. 25 requires compensation expense to be recognized for
stock options when the market price of the underlying stock exceeds the exercise
price of the stock option on the date of the grant.
10
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
The Company utilizes the guidelines in APB No. 25 for measurement of
stock-based transactions for employees and, accordingly no compensation expense
has been recognized for the options in the accompanying consolidated financial
statements for the three and six months ended October 31, 2003 and October 31,
2002. Had the Company used a fair value model for measurement of stock-based
transactions for employees under SFAS No. 123 and amortized the expense over the
vesting period, pro forma information would be as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------- -------------------------------
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2003 2002 2003 2002
-------------- -------------- -------------- --------------
Net loss, as reported $ (2,915,000) $ (3,190,000) $ (7,026,000) $ (7,041,000)
Stock-based employee
compensation cost that would
have been included in the
determination of net loss if the
fair value based method had
been applied to all awards (245,000) (824,000) (454,000) (1,290,000)
-------------- -------------- -------------- --------------
Pro forma net loss as if the
fair value based method had
been applied to all awards $ (3,160,000) $ (4,014,000) $ (7,480,000) $ (8,331,000)
============== ============== ============== ==============
Basic and diluted net loss
per share, as reported $ (0.02) $ (0.03) $ (0.05) $ (0.06)
============== ============== ============== ==============
Basic and diluted net loss
per share, pro forma $ (0.02) $ (0.03) $ (0.06) $ (0.07)
============== ============== ============== ==============
Stock-based compensation expense recorded during each of the three and
six months ended October 31, 2003 and October 31, 2002 primarily relates to
stock option grants made to consultants and has been measured utilizing the
Black-Scholes option valuation model. Stock-based compensation expense recorded
during the three and six months ended October 31, 2003 amounted to $43,000 and
$120,000, respectively. Stock-based compensation expense recorded during the
three and six months ended October 31, 2002 amounted to $132,000 and $283,000,
respectively. Stock-based compensation expense is being amortized over the
estimated period of service or related vesting period.
RECENT ACCOUNTING PRONOUNCEMENTS. In August 2001, the Financial
Accounting Standards Board (the "FASB") issued Statement 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 adopted SFAS No.143 on May 1,
2003, which had no material impact on its consolidated financial position and
results of operations.
11
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
In January 2003, the FASB issued Interpretation No. 46 ("FIN No. 46"),
CONSOLIDATION OF VARIABLE INTEREST ENTITIES, an Interpretation of Accounting
Principles Board No. 50. FIN No. 46 requires certain variable interest entities
to be consolidated by the primary beneficiary of the entity if the equity
investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN No. 46 is effective for all new variable interest entities
created or acquired after January 31, 2003. For variable interest entities
created or acquired prior to February 1, 2003, the provisions of FIN No. 46 are
required to be adopted in periods ending after December 15, 2003. The adoption
of FIN No. 46 is not expected to have a material impact on the Company's
consolidated financial position and results of operations.
In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150, ("SFAS No. 150"), ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The Company adopted SFAS No. 150 on August
1, 2003, which had no material impact on its consolidated financial position and
results of operations.
3. SHORT-TERM INVESTMENT
During March 2003, the Company received 61,653 shares of SuperGen, Inc.
common stock under a license agreement with SuperGen, Inc. dated February 13,
2001. The Company accounts for its short-term investment at fair value as
trading securities in accordance with SFAS No. 115. The cost basis of the common
stock was $200,000. During the quarter ended July 31, 2003, the Company sold all
61,653 shares of common stock of SuperGen, Inc. for gross proceeds of $271,000.
The realized gain of $71,000 related to the short-term investment is included in
interest and other income in the accompanying consolidated financial statements
for the six months ended October 31, 2003.
4. 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 defaults 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
12
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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 may 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 statements of operations. Due to the
uncertainty of the Company's capital resources beyond the next twelve months,
the carrying value of the note receivable approximates its fair value at October
31, 2003. The Company has received all payments through December 2003.
The following represents a rollforward of the allowance of the
Company's note receivable for the six months ended October 31, 2003:
Allowance balance, April 30, 2003 $ 1,705,000
Principal payments received (29,000)
-------------
Allowance balance, October 31, 2003 $ 1,676,000
=============
5. CONVERTIBLE DEBT
On August 9, 2002, the Company entered into a private placement with
four investors under a Securities Purchase Agreement ("Debt SPA"), whereby the
Company issued Convertible Debentures ("Debenture") for gross proceeds of
$3,750,000. The Debenture earns interest at a rate of 6% per annum payable in
cash semi-annually each June 30th and December 31st, and mature in August 2005.
Under the terms of the Debenture, the principal amount is convertible, at the
option of the holder, into a number of shares of common stock of the Company
calculated by dividing the unpaid principal amount of the Debenture by the
initial conversion price of $0.85 per share ("Conversion Price"). If the Company
enters into any financing transaction before March 9, 2004 at a per share price
less than the Conversion Price, the Conversion Price will be reset to the lower
price for all outstanding Debentures. If the Company defaults under the
provisions of the Debt SPA, as defined in the agreement, which includes but is
not limited to, the default of an interest payment, the principal amount of the
Debenture becomes immediately due and payable.
In accordance with EITF 00-27, APPLICATION OF ISSUE NO. 98-5 TO CERTAIN
CONVERTIBLE INSTRUMENTS, the Company initially recorded its convertible debt net
of discount of (i) the relative fair value of the warrants issued in the amount
of $1,321,000 and (ii) the intrinsic value of the embedded conversion feature in
the amount of $1,143,000. The relative fair value of the warrants was determined
in accordance with the Black-Scholes valuation model based on the warrant terms.
The debt discount associated with unconverted debentures and warrants are
amortized as non-cash interest expense on a straight-line basis over the term of
the Debenture and related warrants, which approximates the effective interest
method, and the amortization is recorded as interest and other expense in the
accompanying consolidated statements of operations. Upon conversion of any
debentures and/or warrants, the entire unamortized debt discount remaining at
the date of conversion that is associated with the converted debentures and/or
warrants are immediately recognized as interest and other expense in the
accompanying consolidated financial statements. During the three and six months
ended October 31, 2003, the Company recognized $68,000 and $1,268,000,
respectively, in non-cash interest expense associated with
13
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
the conversion of convertible debt and related warrants, which amount was
included in interest and other expense in the accompanying consolidated
statements of operations. From August 9, 2002 (date of issuance) through October
31, 2002, the Company recognized $181,000 in non-cash interest expense
associated with the convertible debt and related warrants, which amount was
included in interest and other expense in the accompanying consolidated
statements of operations
The convertible debt balance, net of discount, of $33,000 at October
31, 2003, was calculated as follows:
Principal Balance of Convertible Debt
-------------------------------------
Convertible Debentures, April 30, 2003 $ 2,395,000
Conversions, six months ended October 31, 2003 (1,995,000)
--------------
Convertible Debentures, October 31, 2003 400,000
--------------
Discount on Convertible Debt
----------------------------
Convertible debt discount, April 30, 2003 1,635,000
Discount amortized, six months ended October 31, 2003 (1,268,000)
--------------
Convertible debt discount, October 31, 2003 367,000
--------------
Convertible debt, net of discount, October 31, 2003 $ 33,000
==============
During the six months ended October 31, 2003, debenture holders elected
to convert an aggregate principal amount of $1,995,000 of the outstanding
convertible debt in exchange for 2,347,057 shares of common stock at the
conversion price of $0.85 per share.
Under the Debt SPA, each Debenture holder was granted a detachable
warrant equal to 75% of the quotient obtained by dividing the principal amount
of the Debentures by the Conversion Price or an aggregate of 3,308,827 warrants.
The detachable warrants have a 4-year term with an exercise price of $0.75 per
share (Note 9).
In connection with the convertible debentures issued on August 9, 2002,
the Company incurred approximately $363,000 in debt issuance costs, including
placement agent fees of $318,000, which are being amortized on a straight-line
basis over the life of the Debentures, which approximates the effective interest
method. Upon conversion of any debentures, the unamortized debt issuance costs
remaining at the date of conversion which were allocated to the converted
debentures is immediately recognized as non-cash interest expense. During the
three and six months ended October 31, 2003, the Company expensed $13,000 and
$153,000, respectively, in debt issuance costs included in interest and other
expense in the accompanying consolidated statements of operations. At October
31, 2003, the unamortized balance of debt issuance costs of $23,000 was included
in other assets in the accompanying consolidated financial statements.
14
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
6. LICENSING
During December 2002, the Company granted the exclusive rights for the
development of diagnostic and imaging agents in the field of oncology to
Schering A.G. under its Vascular Targeting Agent ("VTA") technology. Under the
terms of the agreement, the Company received an up-front payment of $300,000, of
which, $237,000 was included in deferred revenue at October 31, 2003, in
accordance with SAB No. 101. Deferred license revenue is amortized over the
estimated term of the remaining obligations as stated in the agreement. In
addition, the Company could also receive future milestone payments and a royalty
on net sales, as defined in the agreement. Under the same agreement, the Company
granted Schering A.G. an option to obtain certain non-exclusive rights to the
VTA technology with predetermined up-front fees and milestone payments as
defined in the agreement.
7. SEGMENT REPORTING
The Company's business is organized into two reportable operating
segments (i) Peregrine, the parent company, is engaged in the research and
development of cancer therapeutics and cancer diagnostics through a series of
proprietary platform technologies using monoclonal antibodies, and (ii) Avid, is
engaged in providing contract manufacturing and development of biologics to
biopharmaceutical and biotechnology businesses.
The Company primarily evaluates the performance of its segments based
on net revenues and gross profit or loss. The Company has no intersegment
revenues and does not segregate assets at the segment level as such information
is not used by management.
Net revenues and gross profit information for the Company's segments
for the three months ended October 31, 2003 and 2002 consisted of the following:
THREE MONTHS ENDED OCTOBER 31,
-----------------------------
2003 2002
------------- -------------
NET REVENUES:
Research and development of cancer therapeutics $ 19,000 $ --
Contract manufacturing and development of biologics 839,000 621,000
------------- -------------
Total net revenues $ 858,000 $ 621,000
============= =============
GROSS PROFIT (LOSS):
Research and development of cancer therapeutics $ 19,000 $ --
Contract manufacturing and development of biologics 173,000 (90,000)
------------- -------------
Total gross profit (loss) $ 192,000 $ (90,000)
============= =============
For the three months ended October 31, 2003, one customer located in
the U.S. accounted for 76% of reported net revenues and one customer located in
Israel accounted for 18% of reported net revenues.
For the three months ended October 31, 2002, one customer located in
the U.S. accounted for 68% of reported net revenues and one customer located in
the Europe accounted for 31% of reported net revenues.
15
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
Net revenues and gross profit information for the Company's segments
for the six months ended October 31, 2003 and 2002 consisted of the following:
SIX MONTHS ENDED OCTOBER 31,
-----------------------------
2003 2002
------------- -------------
NET REVENUES:
Research and development of cancer therapeutics $ 38,000 $ --
Contract manufacturing and development of biologics 1,192,000 1,095,000
------------- -------------
Total net revenues $ 1,230,000 $ 1,095,000
============= =============
GROSS PROFIT:
Research and development of cancer therapeutics $ 38,000 $ --
Contract manufacturing and development of biologics 208,000 64,000
------------- -------------
Total gross profit $ 246,000 $ 64,000
============= =============
For the six months ended October 31, 2003, one customer located in the
U.S. accounted for 58% of reported net revenues and one customer located in
Israel accounted for 32% of reported net revenues.
For the six months ended October 31, 2002, one customer located in the
U.S. accounted for 41% of reported net revenues and one customer located in
Europe accounted for 57% of reported net revenues.
8. STOCKHOLDERS' EQUITY
FINANCING UNDER SHELF REGISTRATION STATEMENT ON FORM S-3, FILE NUMBER 333-71086
On November 14, 2001, the Company filed a registration statement on
Form S-3, File Number 333-71086 (the "November 2001 Shelf") which was declared
effective by the Securities and Exchange Commission, allowing the Company to
issue, from time to time, in one or more offerings, (i) up to 10,000,000 shares
of its common stock, and (ii) warrants to purchase up to 2,000,000 shares of its
common stock.
On June 6, 2003, the Company received gross proceeds of $355,000 under
a Common Stock Purchase Agreement in exchange for approximately 412,445 shares
of its common stock. In connection with the offering, the Company paid a fee to
the placement agent equal to five percent (5%) of the gross proceeds, or
$18,000. As of October 31, 2003, 87,555 shares of common stock were available
for issuance under the November 2001 Shelf. All warrants were issued under the
November 2001 Shelf as of October 31, 2003.
FINANCING UNDER SHELF REGISTRATION STATEMENT ON FORM S-3, FILE NUMBER 333-103965
On March 21, 2003, the Company filed a registration statement on Form
S-3, File Number 333-103965 which was declared effective by the Securities and
Exchange Commission, allowing the Company to issue, from time to time, in one or
more offerings, up to 10,000,000 shares of its common stock ("March 2003
Shelf").
16
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
On June 6, 2003, the Company received gross proceeds of $1,720,000
under a Common Stock Purchase Agreement in exchange for 2,000,003 shares of its
common stock and warrants to purchase up to 150,000 shares of common stock at an
exercise price of $0.86 per share ("June 6, 2003 Financing"). The warrants have
a four year term and are exercisable at an exercise price of $0.86 per share.
The fair value of the warrants were recorded as a cost of equity based on a
Black-Scholes valuation model after considering the terms in the related warrant
agreement. The warrants were issued under the November 2001 Shelf. In connection
with the offering, the Company paid a fee to the placement agent equal to five
percent (5%) of the gross proceeds, or $86,000.
On June 26, 2003, the Company received gross proceeds of $1,840,000
under a Common Stock Purchase Agreement in exchange for 1,599,997 shares of its
common stock ("June 26, 2003 Financing"). Under the same arrangement, the
Company granted the investors a six-month option to purchase up to 1,599,997
additional shares of common stock from the Company under the same terms as this
offering. The fair value of the option was recorded as a cost of equity based on
a Black-Scholes valuation model after considering terms in the related
agreement. In connection with the offering, the Company paid a fee to the
placement agent equal to five percent (5%) of the gross proceeds, or $92,000.
During the six months ended October 31, 2003, investors elected to purchase
1,510,412 shares of the Company's common stock under the six-month option in
exchange for gross proceeds of $1,737,000. As of December 10, 2003, 89,585
shares of the Company's common stock were reserved for issuance under the
six-month option.
On July 24, 2003, the Company entered into a Common Stock Purchase
Agreement with one institutional investor whereby the Company agreed to sell
from time to time, at the Company's option, up to an aggregate of 2,000,000
shares of the Company's common stock at the per share price of $1.45 ("July 24,
2003 Financing"). As of October 31, 2003, the Company sold and issued all
2,000,000 shares of its common stock under the July 24, 2003 Financing to the
institutional investor for gross proceeds of $2,900,000. The Company paid no
commissions in connection with this offering.
On September 18, 2003, the Company entered into a Common Stock Purchase
Agreement with one institutional investor whereby the Company agreed to sell
from time to time, at the Company's option, up to an aggregate of 2,800,000
shares of the Company's common stock at predetermined per share prices based
upon the average closing price of its common stock for the prior three trading
days ("September 18, 2003 Financing"). During the quarter ended October 31,
2003, the Company issued 1,540,000 shares of its common stock to the
institutional investor in exchange for gross proceeds of $2,800,000. During
November 2003, the Company received gross proceeds of $2,492,000 in exchange for
the issuance of the remaining 1,260,000 shares of the Company's common stock
under the September 18, 2003 Financing. The Company paid no commissions in
connection with this offering.
As of December 10, 2003, 89,588 shares of common stock were available
and reserved for issuance under the March 2003 Shelf.
17
PEREGRINE PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2003 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
FINANCING UNDER SHELF REGISTRATION STATEMENT ON FORM S-3, FILE NUMBER 333-109982
On October 24, 2003, the Company filed a registration statement on Form
S-3, File Number 333-109982 which was declared effective by the Securities and
Exchange Commission on November 5, 2003, allowing the Company to issue, from
time to time, in one or more offerings, up to 12,000,000 shares of its common
stock ("October 2003 Shelf"). As of October 31, 2003, all 12,000,000 shares of
common stock were available for issuance under the October 2003 Shelf.
On November 17, 2003, the Company entered into a Common Stock Purchase
Agreement with one institutional investor whereby the Company agreed to sell
from time to time, at the Company's option, up to an aggregate of 2,000,000
shares of the Company's common stock at predetermined per share prices based
upon the average closing price of its common stock for the prior three trading
days ("November 17, 2003 Financing"). From November 1, 2003 to December 10,
2003, the Company received aggregate gross proceeds of $1,917,000 in exchange
for the issuance of 900,000 shares of its common stock to the institutional
investor. As of December 10, 2003, 1,100,000 shares of common stock were
available for issuance under the November 17, 2003 Financing. The Company paid
no commissions in connection with this offering.
As of December 10, 2003, 11,100,000 shares of common stock were
available for issuance under the October 2003 Shelf.
9. OPTIONS AND WARRANTS
During the six months ended October 31, 2003, the Company received net
proceeds of $441,000 upon the exercise of 766,157 options. As of October 31,
2003, options to purchase 11,811,325 shares of the Company's common stock were
issued and outstanding.
During the six months ended October 31, 2003, the Company received net
proceeds of $2,521,000 upon the exercise of 3,780,512 warrants on a combined
cash and cashless basis in exchange for the issuance of 3,755,892 shares of the
Company's common stock, including the 2,244,120 warrants exercised under the
Debt SPA (Note 5). As of October 31, 2003, warrants to purchase 16,309,207 were
issued and outstanding.
10. SUBSEQUENT EVENTS
From November 1, 2003 through December 10, 2003, the Company received
gross proceeds of $4,409,000 in exchange for 2,160,000 shares of its common
stock under the following transactions:
During November 2003, the Company received gross proceeds of $2,492,000
under the September 18, 2003 Financing in exchange for 1,260,000 shares
of its common stock at various predetermined purchase prices per share
pursuant to the terms of the Common Stock Purchase Agreement (Note 8).
From November 1, 2003 to December 10, 2003, the Company received gross
proceeds of $1,917,000 under the November 17, 2003 Financing in
exchange for 900,000 shares of its common stock at a predetermined
purchase price of $2.13 per share (Note 8).
18
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 the Company's
financial position and results of operations for the three and six months ended
October 31, 2003 compared to the same period in the prior 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 the
Company's Annual Report on Form 10-K for the year ended April 30, 2003, which
was filed with the Securities and Exchange Commission on July 29, 2003. 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
biotechnology company engaged in the research and development and
commercialization of cancer therapeutics and cancer diagnostics through a series
of proprietary platform technologies using monoclonal antibodies.
In January 2002, we formed our wholly-owned subsidiary, Avid
Bioservices, Inc. ("Avid"), to provide an array of contract manufacturing
services, including contract manufacturing of antibodies and proteins, cell
culture development, process development, and testing of biologics for
biopharmaceutical and biotechnology companies under current Good Manufacturing
Practices. Avid's manufacturing facility is located in Tustin, California,
adjacent to our offices.
Our business is now organized into two reportable operating segments:
(i) Peregrine, the parent company, is engaged in the research and development of
therapeutics primarily in the area of cancer through a series of proprietary
platform technologies using monoclonal antibodies, and (ii) Avid, is engaged in
providing contract manufacturing and development of biologics to
biopharmaceutical and biotechnology businesses.
Peregrine's main focus is on the development of its 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 molecule that humans and other animals create in response to
disease. In pre-clinical and/or clinical studies, some of Peregrine's collateral
targeting antibodies have been shown to directly inhibit solid tumor growth. The
collateral targeting antibodies can also be used to deliver therapeutic agents
that kill cancerous tumor cells. We currently have exclusive rights to over 80
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"). Our first TNT-based product,
Cotara(TM), is currently in a Phase I clinical study at Stanford University
Medical Center primarily for the treatment of colorectal cancer. In addition,
during February 2003, we received protocol approval from the U.S. Food and Drug
Administration ("FDA") to initiate a registration clinical study using
Cotara(TM) for the treatment of brain cancer. We do not anticipate initiating
the approved registration clinical study without a development or funding
partner for the Cotara(TM) program.
19
Our VTA and VEA technologies are currently in preclinical development.
Peregrine is currently focused on VTA development activities associated with one
of its anti-phospholipid antibody clinical candidates. Peregrine expects to file
an Investigational New Drug application for the compound in calendar 2004.
RESULTS OF OPERATIONS
NET LOSS:
- ---------
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------------------------------- ---------------------------------------------
2003 2002 $ CHANGE 2003 2002 $ CHANGE
----------- ----------- ------------- ------------- ----------- ------------
(in thousands)
NET LOSS ($ 2,915) ($ 3,190) ($ 275) ($ 7,026) ($ 7,041) ($ 15)
The decrease in our reported net loss of $275,000 for the three months
ended October 31, 2003 compared to the same period in the prior year is due to
an increase in total revenues of $237,000 combined with a decrease in interest
and other expense of $184,000. These amounts were offset by an increase in total
cost and expenses of $129,000 and a $17,000 decrease in interest and other
income.
The decrease in our reported net loss of $15,000 for the six months
ended October 31, 2003 compared to the same period in the prior year is due to
an increase in total revenues of $135,000, an increase in interest and other
income of $10,000 and a decrease in total cost and expenses of $1,044,000. These
amounts were offset by an increase in interest and other expense of $1,174,000
primarily related to the non-cash interest expense associated with the
amortization of the convertible debt discount and debt issuance costs related to
the conversions of convertible debt during the quarter ended July 31, 2003.
TOTAL REVENUES:
- ---------------
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------------------------------- ---------------------------------------------
2003 2002 $ CHANGE 2003 2002 $ CHANGE
----------- ----------- ------------- ------------- ----------- ------------
(in thousands)
TOTAL REVENUES $ 858 $ 621 $ 237 $ 1,230 $ 1,095 $ 135
The increase in total revenues of $237,000 during the three months
ended October 31, 2003 compared to the same period in the prior year is due to
an increase in contract manufacturing revenue of $218,000 combined with an
increase in license revenue of $19,000.
The increase in total revenues of $135,000 during the six months ended
October 31, 2003 compared to the same period in the prior year is due to an
increase in contract manufacturing revenue of $97,000 combined with an increase
in license revenue of $38,000.
The increase in contract manufacturing revenue of $218,000 and $97,000
during the three and six months ended October 31, 2003, respectively, compared
to the same periods in the prior year is primarily due to the completion and
delivery of two production lots of clinical product to one customer during the
quarter ended October 31, 2003 by our wholly-owned subsidiary, Avid Bioservices,
Inc. ("Avid"). We expect contract manufacturing revenue to increase during the
remainder of the current fiscal year based on the anticipated completion of
projects under our current contract manufacturing agreements and the additional
contracts Avid entered into subsequent to the current quarter. In addition to
our current contract manufacturing agreements, Avid currently has numerous
outstanding project proposals with various potential customers, however, we
cannot estimate nor can we determine the likelihood that we will be successful
in converting any of these proposals into definitive agreements during the
remainder of the current fiscal year.
20
The increase in license revenue of $19,000 and $38,000 during the three
and six months ended October 31, 2003, respectively, compared to the same
periods in the prior year is due to the amortization of deferred license revenue
associated with the up-front license fee of $300,000 received under a license
agreement we entered into with Schering A.G. during fiscal year 2003. Although
we are in various pre-contract stages of licensing discussions with third
parties for our technologies under development, we cannot estimate nor can we
determine the likelihood that we will be successful in entering into any
definitive license agreements during the remainder of the current fiscal year.
TOTAL COST AND EXPENSES:
- ------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------------------------------- ---------------------------------------------
2003 2002 $ CHANGE 2003 2002 $ CHANGE
----------- ----------- ------------- ------------- ----------- ------------
(in thousands)
TOTAL COST AND
EXPENSES $ 3,750 $ 3,621 $ 129 $ 6,959 $ 8,003 ($ 1,044)
The increase in total cost and expenses of $129,000 during the three
months ended October 31, 2003 compared to the same prior year period is due to
an increase in selling, general and administrative expenses of $296,000 offset
by a decrease in research and development expenses of $122,000 and decrease in
the cost of contract manufacturing of $45,000.
The decrease in total cost and expenses of $1,044,000 during the six
months ended October 31, 2003 compared to the same prior year period is due to a
decrease in research and development expenses of $1,602,000 combined with a
decrease in the cost of contract manufacturing of $47,000. These amounts were
offset by a $605,000 increase in selling, general and administrative expenses.
RESEARCH AND DEVELOPMENT EXPENSES:
- ----------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------------------------------- ---------------------------------------------
2003 2002 $ CHANGE 2003 2002 $ CHANGE
----------- ----------- ------------- ------------- ----------- ------------
(in thousands)
RESEARCH AND
DEVELOPMENT $ 1,975 $ 2,097 ($ 122) $ 3,847 $ 5,449 ($ 1,602)
The decrease in research and development expenses of $122,000 during
the three months ended October 31, 2003 compared to the same period in the prior
year was primarily due to a decrease in clinical trial program expenses
associated with the treatment of colorectal and brain cancer patients using
Cotara(TM). The decrease in clinical trial program expenses was offset by an
increase in patent legal fees and drug development expenses associated with the
pre-clinical development of our Vascular Targeting Agent Technologies.
The decrease in research and development expenses of $1,602,000 during
the six months ended October 31, 2003 compared to the same period in the prior
year was primarily due to a decrease in clinical trial program expenses and the
allocation of labor and overhead expenses to cost of sales and inventories in
relation to contract manufacturing services provided by Avid to outside
customers. The reduction in clinical trial expenses is related to our focused
efforts on licensing our products under development during the current six-month
period ended October 31, 2003.
21
The following represents the research and development expenses ("R&D
Expenses") we have incurred by each major platform technology under development:
R&D EXPENSES- R&D EXPENSES-
PLATFORM TECHNOLOGY QUARTER ENDED MAY 1, 1998 TO
UNDER DEVELOPMENT OCTOBER 31, 2003 OCTOBER 31, 2003
---------------------------- ---------------- ----------------
TNT development (Cotara(TM)) $ 703,000 $ 24,878,000
VEA development 209,000 3,932,000
VTA development 1,043,000 7,213,000
Oncolym(R)development 20,000 13,249,000
---------------- ----------------
Total research and development $ 1,975,000 $ 49,272,000
================ ================
From inception to April 1998, we have expensed $20,898,000 on research
and development of our product candidates, with the costs primarily being
closely split between the TNT and Oncolym(R) technologies. 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 years 1995 and
1997, respectively.
Looking beyond the next twelve months, it is extremely difficult for us
to reasonably estimate all future research and development costs associated with
each of our technologies due to the number of unknowns and uncertainties
associated with pre-clinical and clinical trial development. These unknown
variables and uncertainties include, but are not limited to:
o The uncertainty of our capital resources to fund research,
development and clinical studies beyond the current fiscal year;
o The uncertainty of future costs associated with our pre-clinical
candidates, Vasopermeation Enhancement Agents and 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
any current or future study. Any delays in clinical trials could
significantly increase the cost of the study and would extend the
estimated completion dates.
o The uncertainty of terms related to potential future partnering or
licensing arrangements; 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.
We or our potential partners 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.
22
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 or our potential partners may experience
difficulties and delays in obtaining necessary governmental clearances and
approvals to market our products, and we or our potential partners may not be
able to obtain all necessary governmental clearances and approvals to market our
products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
- ---------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------------------------------ --------------------------------------------
2003 2002 $ CHANGE 2003 2002 $ CHANGE
----------- ----------- ------------ ------------ ----------- ------------
(in thousands)
SELLING, GENERAL AND
ADMINISTRATIVE $ 1,109 $ 813 $ 296 $ 2,128 $ 1,523 $ 605
The increase in selling, general and administrative expenses of
$296,000 and $605,000 during the three and six months ended October 31, 2003,
respectively, compared to the same periods in the prior year is primarily due to
an increase in director fees associated with increased oversight
responsibilities mandated by the Sarbanes-Oxley Act of 2002. Prior to the
current fiscal year, directors did not receive any cash compensation other than
the reimbursement of expenses. The increase in selling, general and
administrative expenses was further supplemented by an increase in consulting
and business development activities associated with Avid and our efforts to
license our technologies under development combined with an increase in salary
and related expenses.
INTEREST AND OTHER EXPENSE:
- ---------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------------------------------- ---------------------------------------------
2003 2002 $ CHANGE 2003 2002 $ CHANGE
----------- ----------- ------------- ------------- ----------- ------------
(in thousands)
INTEREST AND OTHER
EXPENSE $ 87 $ 271 ($ 184) $ 1,446 $ 272 $ 1,174
The decrease in interest and other expense of $184,000 during the three
months ended October 31, 2003 compared to the same period in the prior year is
primarily due to a decrease in interest expense associated with the convertible
debt issued in August 2002 as a result of a lower average convertible debt
balance during the current quarter compared to the prior year.
The increase in interest and other expense of $1,174,000 during the six
months ended October 31, 2003 compared to the same period in the prior year is
primarily due to an increase in non-cash interest expense associated with the
amortization of the convertible debt discount and debt issuance costs related to
the conversions of convertible debt primarily during the quarter ended July 31,
2003.
23
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 2003, we had $11,276,000 in cash and cash equivalents.
From November 1, 2003 through December 10, 2003, we raised an additional
$4,409,000 in gross proceeds in exchange for 2,160,000 shares of our common
stock (as further explained in our notes to the consolidated financial
statements contained herein). As of December 10, 2003, we had $14,321,000 in
cash and cash equivalents. Since inception, we have generally financed our
operations primarily through the sale of our common stock and issuance of
convertible debt, which has been supplemented with payments received from
various licensing collaborations and through the revenues generated by Avid.
During the six months ended October 31, 2003, cash used in operating
activities decreased $1,717,000 to $5,636,000 compared to $7,353,000 for the six
months ended October 31, 2002. Net cash used in investing activities increased
$90,000 to $248,000 for the six months ended October 31, 2003 compared to
$158,000 for the six months ended October 31, 2002. Net cash provided by
financing activities increased $5,959,000 to $14,023,000 for the six months
ended October 31, 2003 compared to net cash provided of $8,064,000 for the same
prior year period. The increase in net cash provided by financing activities was
due to $14,023,000 in net proceeds received from the sale of our common stock
and the exercise of options and warrants during the six months ended October 31,
2003.
We have expended substantial funds on the development of our product
candidates and for clinical trials and we have incurred negative cash flows from
operations for the majority of our years since inception. We expect negative
cash flows from operations to continue until we are able to generate sufficient
revenue from the contract manufacturing services provided by Avid and/or from
the licensing of Peregrine's products under development.
Revenues earned by Avid during the six months ended October 31, 2003
amounted to $1,192,000. We expect that Avid will continue to generate revenues
which should lower consolidated cash flows used in operations, although we
expect those near term revenues will be insufficient to cover consolidated cash
flows used in operations. As such, we will continue to need to raise additional
capital to provide for our operations, including the anticipated development and
clinical costs of Cotara(TM), the anticipated development costs associated with
Vasopermeation Enhancement Agents ("VEA's") and Vascular Targeting Agents
("VTA's"), and the potential expansion of Avid's manufacturing capabilities.
Assuming we do not raise any additional capital from financing
activities or from the sale or licensing of our technologies, and further
assuming that Avid does not generate any additional revenues beyond our current
active contracts, we believe we have sufficient cash on hand to meet our
obligations on a timely basis for at least the next twelve months.
In addition to equity financing, we are actively exploring various
other sources of cash by leveraging our many assets. The transactions being
explored include licensing, partnering or the sale of Cotara(TM) and Oncolym(R),
divesting all radiopharmaceutical based technologies, including Oncolym(R),
Cotara(TM), and radiopharmaceutical uses of our VTA's, and licensing or
partnering our various VEA and VTA based technology uses.
In addition to licensing, partnering or the divestiture of some of our
technologies to raise capital, we are also exploring a possible strategic
transaction related to our subsidiary, Avid Bioservices, Inc. In this regard, we
are exploring the possibility to partner or a complete sale of Avid as a means
of raising additional capital.
24
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.
COMMITMENTS
At October 31, 2003, we had no material capital commitments, although
we have significant obligations under license agreements 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
detailed discussion regarding our industry and business risk factors can be
found in our Annual Report on Form 10-K for the year ended April 30, 2003, as
filed with the Securities and Exchange Commission on July 29, 2003.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Changes in United States interest rates would affect the interest
earned on the Company's cash and cash equivalents. Based on the Company's
overall interest rate exposure at October 31, 2003, a near-term change in
interest rates, based on historical movements, would not materially affect the
fair value of interest rate sensitive instruments. The Company's debt
instruments have fixed interest rates and terms and, therefore, a significant
change in interest rates would not have a material adverse effect on the
Company's financial position or results of operations.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that are designed to ensure that information
required to be disclosed in its reports filed under the Securities Exchange Act
of 1934, as amended, is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to our management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
25
The Company carried out an evaluation, under the supervision and with
the participation of management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of its
disclosure controls and procedures as of October 31, 2003, the end of the period
covered by this Quarterly Report. Based on that evaluation, the Company's Chief
Executive Officer and Chief Financial Officer concluded that its disclosure
controls and procedures were effective at the reasonable assurance level as of
October 31, 2003.
There have been no changes in the Company's internal control over
financial reporting, during the quarter ended October 31, 2003, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal controls over financial reporting.
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, 2003 through October 31, 2003 involving issuance
and sales of the Company's securities that were not registered under the
Securities Act of 1933, as amended (the "Securities Act").
On August 13, 2003, a debenture holder elected to convert $150,000 of
the outstanding convertible debt in exchange for 176,471 shares of common stock
at the conversion price of $0.85 per share. The convertible debentures were
issued in conjunction with a Securities Purchase Agreement ("SPA") entered into
during August 2002.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
We held our annual meeting of stockholders' on October 14, 2003. The
following represents the matters voted upon and the results of the voting.
AGAINST OR
ROUTINE MATTERS FOR WITHHELD
---------------- ----------------
1) Election of Directors:
Carlton M. Johnson 112,095,845 2,837,604
Steven W. King 113,082,658 1,850,791
Eric S. Swartz 112,686,169 2,247,280
Clive R. Taylor, M.D., Ph.D. 113,630,343 1,303,106
26
AGAINST OR
ROUTINE MATTERS FOR WITHHELD
---------------- ----------------
2) To ratify the appointment of Ernst &
Young LLP as independent auditors of
the Company for the fiscal year ending
April 30, 2004. 114,494,450 438,997
3) To approve an amendment to the
Company's Certificate of Incorporation
to increase the number of authorized
shares of the Company's common stock
by 25,000,000 shares. 110,109,290 4,824,158
4) To approve the adoption of the
Company's 2003 Stock Incentive Plan 24,684,217 7,011,953
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K.
(a) Exhibits:
3.1 Amended and Restated Bylaws of Peregrine Pharmaceuticals,
Inc.
3.5 Certificate of Amendment to Certificate of Incorporation
of Peregrine Pharmaceucticals, Inc. to increase the number
of authorized shares of the Company's common stock to
200,000,000 million.
10.91 Common Stock Purchase Agreement dated September 18, 2003
between Registrant and one institutional investor.
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
(b) Reports on Form 8-K: None.
27
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/ Steven W. King
--------------------------------------
Steven W. King
President & Chief Executive Officer
/s/ Paul J. Lytle
--------------------------------------
Paul J. Lytle
Chief Financial Officer
(signed both as an
officer duly authorized to sign on
behalf of the Registrant and principal
financial officer and chief accounting
officer)
28