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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997
Commission File Number 1-12584
----------------------------
SHEFFIELD PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT IN ITS CHARTER)
Delaware 13-3808303
(State of Incorporation) (IRS Employer Identification No.)
30 Rockefeller Plaza, Suite 4515
New York, New York 10112
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 957-6600
Indicate by check 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 _____
The number of shares outstanding of the issuer's Common Stock is
11,988,274 shares of Common Stock as of June 30, 1997.
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SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a Development stage enterprise)
INDEX
Page
PART I. Financial Information
ITEM 1. Financial Statements.
Consolidated Balance Sheets - 1
June 30, 1997 and December 31,
1996.
Consolidated Statements of 2
Operations for the three and
six months ended June 30, 1997
and 1996 and for the period
from October 17, 1986
(inception) to June 30, 1997.
Consolidated Statements of Cash 3
Flows for the three and six
months ended June 30, 1997 and
1996 and for the period from
October 17, 1986 (inception) to
June 30, 1997.
Notes to Consolidated Financial 4
Statements.
ITEM 2. Management's Discussion and 6
Analysis of Financial Condition
and Results of Operations.
PART II. Other Information.
ITEM 2. Changes in Securities. 10
ITEM 4. Submission of Matters to a Vote 11
of Security-Holders.
ITEM 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
Consolidated Balance Sheets
June 30, December 31,
1997 1996
------------ -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 539,287 $ 1,979,871
Marketable securities 174,407 460,768
Prepaid expenses and other current assets 104,420 43,975
------------ ------------
Total current assets 818,114 2,484,614
------------ ------------
Property and equipment:
Laboratory equipment 185,852 185,852
Office equipment 82,243 89,019
Leasehold improvements 61,390 61,390
------------ ------------
329,485 336,261
Less accumulated depreciation and amortization 189,162 162,007
------------ ------------
Net property and equipment 140,323 174,254
------------ ------------
Segregated cash 75,000 75,000
Other assets 39,416 40,016
------------ ------------
Total assets $ 1,072,853 $ 2,773,884
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable and accrued liabilities $ 504,870 $ 446,965
Sponsored research payable 331,634 580,157
Stock dividends payable 83,301 --
Capital lease obligation-current portion 25,694 23,719
------------ ------------
Total current liabilities 945,499 1,050,841
Capital lease obligation - non-current portion 11,790 27,206
Cumulative convertible redeemable preferred stock, $.01 par value. Authorized,
3,000,000 shares; issued and outstanding, 35,700 and 0 shares, at
June 30, 1997 and December 31, 1996, respectively 357 --
Additional paid-in capital associated with cumulative convertible
redeemable preferred stock 3,211,779 --
Stockholders' equity (net capital deficiency):
Common stock, $.01 par value. Authorized, 50,000,000 and 30,000,000
shares at June 30, 1997 and December 31, 1996, respectively;
issued and outstanding, 11,988,274 and 11,388,274
shares at June 30, 1997 and December 31, 1996, respectively 119,883 113,883
Notes receivable in connection with sale of stock (110,000) (110,000)
Additional paid-in capital 29,955,576 28,319,838
Unrealized loss on marketable securities (300,593) (39,232)
Deficit accumulated during development stage (32,761,438) (26,588,652)
------------ ------------
(3,096,572) 1,695,837
------------ ------------
Total liabilities and stockholders' equity (net capital deficiency) $ 1,072,853 $ 2,773,884
============ ============
1
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 1997 AND 1996 AND FOR THE PERIOD
FROM OCTOBER 17, 1986 (INCEPTION) TO JUNE 30, 1997
(UNAUDITED)
October 17, 1986
Three months ended Six months ended (inception) to
June 30, June 30, June 30,
--------------------------- ---------------------------- -------------
1997 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
Revenues:
Sub-license revenue $ -- $ -- $ -- $ -- $ 510,000
Interest income 21,747 52,724 39,972 69,239 436,885
------------ ------------ ------------ ------------ ------------
Total revenue
21,747 52,724 39,972 69,239 946,885
Expenses:
Acquisition of R & D in-process
technology 1,650,000 -- 1,650,000 -- 1,650,000
Research and development 786,165 924,439 2,724,202 2,164,230 18,247,399
General and administrative 1,004,892 783,675 1,750,489 1,214,223 13,645,181
Interest 2,089 2,567 4,768 4,396 125,231
------------ ------------ ------------ ------------ ------------
Total expenses 3,443,147 1,710,681 6,129,459 3,382,849 33,667,811
------------ ------------ ------------ ------------ ------------
Loss before extraordinary item (3,421,400) (1,657,957) (6,089,487) (3,313,610) (32,720,926)
Extraordinary item -- -- -- -- 42,787
------------ ------------ ------------ ------------ ------------
Net loss $ (3,421,400) $ (1,657,957) $ (6,089,487) $ (3,313,610) $(32,678,139)
============ ============ ============ ============ ============
Loss per share of common stock:
Loss before extraordinary item $ (0.29) $ (0.15) $ (0.52) $ (0.32) $ (7.12)
Extraordinary item -- -- -- -- 0.01
------------ ------------ ------------ ------------ ------------
Net loss $ (0.29) $ (0.15) $ (0.52) $ (0.32) $ (7.11)
============ ============ ============ ============ ============
Weighted average common shares outstanding 11,823,439 10,873,102 11,607,059 10,264,818 4,598,365
============ ============ ============ ============ ============
2
See accompanying notes to unaudited consolidated financial statements
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
Consolidated Statements of Cash Flows
For the three and six months ended June 30, 1997 and 1996 and for the period
from October 17, 1986 (inception) to June 30, 1997
(Unaudited)
October 17, 1986
Three months ended Six months ended (inception) to
June 30, June 30, June 30,
-------------------------- -------------------------- ------------
1997 1996 1997 1996 1997
----------- ----------- ----------- ----------- ------------
Cash outflows from development stage activities and
extraordinary gain:
Loss before extraordinary item $(3,421,399) $(1,657,957) $(6,089,487) $(3,313,610) $(32,720,926)
Extraordinary gain on extinguishment of debt -- -- -- -- 42,787
----------- ----------- ----------- ----------- ------------
Net loss (3,421,399) (1,657,957) (6,089,487) (3,313,610) (32,678,139)
Adjustments to reconcile net loss to net cash used by
development stage activities:
Issuance of common stock, stock
options/warrants for services -- -- -- -- 1,541,003
Non-cash interest expense -- -- -- -- 50,000
Issuance of common stock for license -- -- -- -- 5,216
Non-cash acquisition of R & D in process
technology 1,650,000 -- 1,650,000 -- 1,650,000
Transfer of securities for services 25,000 -- 25,000 -- 25,000
Securities acquired under sub-license agreement -- -- -- -- (500,000)
Issuance of common stock for intellectual
property rights -- -- -- -- 866,250
Amortization of organizational and debt
issuance costs -- -- -- -- 77,834
Depreciation 13,126 17,835 25,785 36,372 167,329
Amortization 5,116 -- 10,232 -- 30,695
Increase in debt issuance and organizational
costs -- -- -- -- (77,834)
Decrease (increase) in prepaid expenses and
other current assets (75,451) (22,266) (60,445) 69,418 (163,461)
Decrease (increase) in other assets -- (33,696) 600 (150,416) 19,625
Increase (decrease) in accounts payable,
accrued liabilities 172,305 72,960 57,905 46,384 (72,200)
Increase (decrease) in sponsored
research payable (840,676) 170,061 (248,523) 187,598 908,704
Increase in deferred license fee -- 100,000 -- 100,000 --
----------- ----------- ----------- ----------- ------------
Net cash used by development stage
activities (2,471,979) (1,353,063) (4,628,933) (3,024,254) (28,149,978)
----------- ----------- ----------- ----------- ------------
Cash flows from investing activities:
Acquisition of laboratory and office equipment (2,087) (3,502) (2,087) (47,816) (265,896)
Increase in segregated cash -- -- -- -- (75,000)
Increase in notes receivable in connection with
sale of stock -- -- -- -- (240,000)
Payments of notes receivable -- -- -- -- 130,000
Acquisition of Camelot Pharmacal, L.L.C. (net) (8,259) -- (8,259) -- (8,259)
----------- ----------- ----------- ----------- ------------
Net cash used by investing activities (10,346) (3,502) (10,346) (47,816) (459,155)
----------- ----------- ----------- ----------- ------------
Cash flows from financing activities:
Principal payments under capital lease (5,891) (7,549) (13,441) (13,040) (34,969)
Conversion of convertible, subordinated notes -- -- -- -- 749,976
Proceeds from issuance of debt -- -- -- -- 550,000
Proceeds from issuance of common stock -- -- -- -- 13,268,035
Proceeds from issuance of cumulative
convertible redeemable preferred stock -- -- 3,212,136 -- 3,212,136
Proceeds from exercise of stock options -- -- -- 137,175 1,337,677
Proceeds from exercise of warrants -- 4,480,106 -- 6,246,109 10,064,481
----------- ----------- ----------- ----------- ------------
Net cash and cash equivalents provided by
financing activities (5,891) 4,472,557 3,198,695 6,370,244 29,147,336
----------- ----------- ----------- ----------- ------------
Net increase in cash and cash equivalents (2,488,216) 3,115,992 (1,440,584) 3,298,174 538,203
Cash and cash equivalents at beginning of period 3,027,503 2,042,759 1,979,871 1,860,577 1,084
----------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end of period $ 539,287 $ 5,158,751 $ 539,287 $ 5,158,751 $ 539,287
=========== =========== =========== =========== ============
Noncash investing and financing activities:
Common stock, stock options and warrants
issued for services $ -- $ -- $ -- $ -- $ 1,541,003
Common stock issued for license -- -- -- -- 5,216
Common stock issued for intellectual
property rights -- -- -- -- 866,250
Common stock issued to retire debt -- -- -- -- 600,000
Securities acquired under sub-license agreement -- -- -- -- 500,000
Transfer of securities for services 25,000 -- 25,000 -- 25,000
Acquisition of R & D in-process technology 1,650,000 -- 1,650,000 -- 1,650,000
Unrealized depreciation of investments 20,178 -- 261,361 -- 300,593
Equipment acquired under capital lease -- -- -- 72,453 72,453
Notes payable converted to common stock -- -- -- -- 749,976
=========== =========== =========== =========== ============
Supplemental disclosure of cash flow information:
Interest paid $ 2,089 $ 2,567 $ 4,768 $ 4,396 $ 125,231
=========== =========== =========== =========== ============
3
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated balance sheets as of June 30, 1997 and
December 31, 1996 and the accompanying consolidated statements of
operations and cash flows for the three and six months ended June 30, 1997
and 1996 and for the period from October 17, 1986 (inception) to June 30,
1997, have been prepared by Sheffield Pharmaceuticals, Inc. (the
"Company"), without audit. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary to present fairly
the financial position, results of operations, and cash flows at June 30,
1997 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's annual report on
Form 10-KSB for the year ended December 31, 1996. The results of operations
for the three and six months ended June 30, 1997 and 1996 are not
necessarily indicative of the operating results for the full years.
The Company was incorporated on October 17, 1986, under the Canada Business
Corporations Act. The Company's wholly-owned subsidiary, U-Tech Medical
Corporation ("U-Tech") was incorporated in the state of Texas on January
13, 1992 and has been substantially inactive for two years as of June 30,
1997. On July 30, 1997 U-Tech was dissolved. On January 10, 1996, Ion
Pharmaceuticals, Inc., a Delaware corporation ("Ion"), was formed as a
wholly-owned subsidiary of the Company. At that time, Ion acquired the
Company's rights with respect to its anti-proliferative technology. On
April 17, 1997, CP Pharmaceuticals, Inc. ("CP") was formed for the purpose
of acquiring Camelot Pharmacal, L.L.C., which acquisition was consummated
on April 25, 1997. Unless the context requires otherwise, Sheffield, U-Tech
, Ion and CP are referred to as "the Company". The Company commenced its
biotechnology operations in the United States in January 1992 under new
management and Sheffield became domesticated as a Wyoming corporation in
May 1992. At the Annual Meeting of shareholders of the Company held on
January 26, 1995, the Company's shareholders approved the proposal to
reincorporate the Company in Delaware, which was effected on June 13, 1995.
All significant intercompany transactions are eliminated in consolidation.
At the Annual Meeting of shareholders of the Company held on June 26, 1997,
the Company's shareholders approved the proposal to change the name of the
Company from "Sheffield Medical Technologies Inc." to "Sheffield
Pharmaceuticals, Inc."
The Company is in the development stage and as such has been principally
engaged in licensing and research efforts. The Company has generated
minimal operating revenue and requires additional capital, which the
Company intends to obtain through equity and debt offerings to continue to
operate its business. The Company's ability to meet its obligations as they
become due and to continue as a going concern must be considered in light
of the expenses, difficulties and delays frequently encountered in starting
a new business, particularly since the Company will focus on research,
development and unproven technology which may require a lengthy period of
time and substantial expenditures to complete. Even if the Company is able
to successfully develop new products or technologies, there can be no
assurance the Company will generate sufficient revenues from the sale or
licensing of such products and technologies to be profitable. Management
believes that the Company's ability to meet its obligations as they become
due and to continue as a going concern through December 1997 are dependent
upon obtaining additional financing.
4
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
2. NET LOSS PER COMMON SHARE
Net loss per common share is based on net loss for the relevant period
divided by the weighted average number of shares issued and outstanding
during the period. Stock options, common stock issuable upon conversion of
warrants and common stock issuable upon the conversion of cumulative
convertible redeemable preferred stock are not reflected as their effect
would be antidilutive for both primary and fully diluted earnings per share
computations.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, EARNINGS PER SHARE, which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. The impact of Statement 128 on the calculation of primary and
fully diluted earnings per share is not expected to be material.
3. SUPPLY AND LICENSE AGREEMENTS
In March 1997, the Company exercised its option and entered into exclusive
supply and license agreements for the world-wide rights to the multi-dose
inhaler technology (MSI) of Siemens A.G. The agreements call for Siemens to
be the exclusive supplier of the MSI system, a hand-held, portable
pulmonary delivery system. The Company paid a licensing fee of $1.1 million
in April 1997 to Siemens pursuant to its agreements and is required to make
additional payments to Siemens of DM 2.0 million on January 1, 1998 and
1999.
4. ACQUISITION
On April 25, 1997, the Company acquired Camelot Pharmacal, L.L.C., of St.
Louis, Missouri, a privately held emerging pharmaceutical company. The
members of Camelot's management team have been appointed officers of the
Company and Loren G. Peterson, a principal of Camelot, has been named Chief
Executive Officer of the Company and has joined the Company's Board of
Directors. Consideration for this transaction was 600,000 shares of Company
common stock. In addition, the members of the Camelot management team have
been granted options to acquire 1.2 million common shares exercisable at
market price as of the date of grant.
5
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company, being a development stage enterprise, has incurred a net loss in
each of the fiscal years since its inception and has had to rely on outside
sources of funds to maintain its liquidity. Substantial operating losses are
expected to be incurred for the next several years as the Company expends its
resources for product acquisition, research and development and preclinical and
clinical testing.
As a development stage company without significant revenues, the Company has
financed its technology development activities and operations primarily through
public and private offerings of securities, from which it has raised an
aggregate of approximately $28.4 million through June 30, 1997. On February 28,
1997, the Company completed a private offering of 35,000 shares of its 7% Series
A Cumulative Convertible Redeemable Preferred Stock, which raised total gross
proceeds of $3.5 million. The proceeds of this offering are to be used to fund
research and development, patent prosecution and for working capital and general
corporate purposes. Such proceeds may also be used for the possible acquisition
of rights in new technologies in the Company's ordinary course of business. The
Company's operating results have fluctuated significantly during each quarter
since its inception, and the Company anticipates that such fluctuations, largely
attributable to varying sponsored research and development commitments and
expenditures, will continue into the foreseeable future.
The Company continues to conduct scientific research, clinical trials,
development, and intellectual property protection. During the three months ended
June 30, 1997, the Company funded $786,165 for research and development on its
projects. During the succeeding 12-month period, approximately $8.3 million in
additional funding is projected to be incurred on clinical and laboratory
research and development. Of this estimated funding of $8.3 million,
approximately $7,500,000 is expected to be applied to the MSI, $675,000 to the
Ion Pharmaceuticals Technologies, $25,000 to the HIV/AIDS Vaccines, $40,000 to
the UGIF Technology-Prostate Cancer, and $60,000 to the Membrane Attack Complex
(MAC)/Complement Technology.
In addition to clinical and laboratory research development, the Company expects
to incur ongoing costs in connection with its intellectual property protection
and patent prosecution, which costs are expected to approximate $100,000 over
the next 12 months.
6
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
REVENUES AND EXPENSES
Revenues:
From inception through the period ended June 30, 1997, the Company has earned
sub-license revenue of $510,000 primarily from the sub-license agreement for its
liposome-CD4 technology.
From inception through the period ended June 30, 1997, the Company has earned
interest income of $436,885 and an extraordinary item from gain on early
extinguishment of debt of $42,787. The Company's ability to generate material
revenues is contingent on the successful commercialization its technologies and
other technologies which it may acquire, followed by the successful marketing
and commercialization of such technologies through licenses, joint ventures or
other arrangements.
Interest income for the three months ended June 30, 1997 was $21,747 compared to
$52,724 for the same period ended June 30, 1996. The decrease in interest earned
is attributable to a decrease of cash invested in short-term investments Except
for the sub-license revenue mentioned above, interest income represented all of
the Company's income in each of the prior periods.
Operating Expenses:
From inception through the period ended June 30, 1997, the Company incurred
$33,667,811 of operating expenses. Of the total operating expenses for that
period, $18,247,399 were costs of research and development for the Company's
technologies and $1,650,000 for the acquisition of R & D in-process technology.
The remainder of expenses for the same period were incurred principally as
consulting costs, costs of management, legal and other professional fees and
expenses relating to the Company's technologies, and for its completed and
proposed financing plans. Research and development costs are expected to remain
high as the Company implements later-stage research projects of its technologies
and such costs will continue to be expensed for financial reporting purposes.
Operating expenses for the three months ended June 30, 1997, were $3,443,146
compared to $1,710,681 for the same period ended June 30, 1996. The increase in
operating expenses was primarily due to the acquisition of R & D in-process
technology, in the amount of $1,650,000, as a result of the acquisition of
Camelot Pharmacal, L.L.C. in April 1997. The increase in general and
administrative expenses was primarily due to increased salary expense as a
result of the additions to the Company's management team and higher professional
fees. The major items included in general and administrative expenses for the
three months ended June 30, 1997, were (i) salaries of $320,174 which increased
by $111,669 as compared to 1996, primarily due to the increase in management and
staff, (ii) professional fees of $262,005 or $167,061 higher than the same
period in 1996, primarily due to increased patent and financing activities,
(iii) consulting fees of $131,952 or $29,996 higher than 1996 and (iv) other
expenses of $290,761.
The table below indicates (i) the Company's direct research and development
expenses by project for the six months ended June 30, 1997 and from the
Company's inception to June 30, 1997, (ii) the Company's current estimate by
project of committed and/or anticipated funding requirements after June 30, 1997
and (iii) revenues received to date by project.
7
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
Direct Research and Development Expenses
(in dollars)
Three months Committed and/or
ended Inception to anticipated R & D Revenue
R & D Projects 6/30/97 6/30/97 funding after 6/30/97 received
- ------------------------------------------------------------------------------------------------------------------------------------
Multi-Dose Inhaler (MSI) 171,201 1,445,926 15,256,074 0
Ion Pharmaceuticals, Inc. 267,016 4,599,183 671,690 10,000
Technologies
RBC-CD4 Electroinsertion 6,736 6,254,185 0 0
Technology
Lipsome-CD4 Technology 0 2,322,322 0 500,000
HIV/AIDS Vaccine 100,000 1,199,118 25,000 0
UGIF Technology 60,018 163,419 40,000 0
Membrane Attack Complex 60,936 304,682 80,000 0
(MAC)/Complement
LIQUIDITY AND CAPITAL RESOURCES
On February 28, 1997, the Company completed a private offering of 35,000 shares
of its 7% Series A Cumulative Convertible Redeemable Preferred Stock, which
raised total gross proceeds of $3.5 million. The proceeds of this offering are
being used to fund research and development, patent prosecution and for working
capital and general corporate purposes. Such proceeds may also be used for the
possible acquisition of rights in new technologies in the Company's ordinary
course of business.
In March 1997, the Company exercised its option and entered into exclusive
supply and license agreements for the world-wide rights to Siemens' multi-dose
inhaler (MSI). The agreements call for Siemens to be the exclusive supplier of
the MSI system, a hand-held, portable pulmonary drug delivery system. The
Company paid Siemens a license fee of $1.1 million in April 1997 pursuant to the
agreements and is required to make additional payments of DM 2.0 million on
January 1, 1998 and 1999.
The Company has historically financed its operations through public offerings
and private placements of its securities. In addition to the potential
commercialization of its technologies, the Company plans to seek additional
funds through bridge loans, security financings, joint ventures or other
commercial arrangements to obtain necessary working capital. It is not uncommon,
for instance, for a third-party commercial partner to enter into a license
agreement with a technology development company, on the merits of successful
research relating to a given technology, which would yield up-front royalty
advances to such company before market-ready products are developed. It is also
not uncommon for a third-party commercial partner to enter into an agreement
with a development company whereby a third party will contribute funds in
support of the research and operating needs of such development companies in
consideration for rights related to the technologies.
The Company's ability to continue its operations as planned will be dependent on
the Company's ability to obtain additional funds, particularly through the
public offering and/or private placement of its securities. The Company is
currently involved in negotiations with interested parties over the terms of
proposed financings. However, there can be no assurance that any such financings
will actually be consummated. In the event that proposed financings are not
completed, there can be no assurance that other sources of capital may become
available in amounts and upon terms acceptable to the Company. The failure by
the Company to obtain such funds will require the Company to significantly
reduce or delay its funding of current technology development projects (which
may result in the Company's loss of rights in the related technologies) and
delay the making of commitments for future projects.
8
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE INTENDED TO BE COVERED BY
THE SAFE HARBORS CREATED HEREBY. ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS
AND UNCERTAINTY, INCLUDING WITHOUT LIMITATION, THE SUCCESSFUL DEVELOPMENT AND
LICENSING OF THE COMPANY'S TECHNOLOGIES AND THE SUCCESSFUL COMPLETION OF PLANNED
FINANCINGS. ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THE
ASSUMPTIONS COULD BE INACCURATE, AND THEREFORE, THERE CAN BE NO ASSURANCE THAT
THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT WILL PROVE TO BE
ACCURATE. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE
FORWARD-LOOKING STATEMENTS INCLUDED HEREIN, THE INCLUSION OF SUCH INFORMATION
SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON
THAT THE OBJECTIVES AND PLANS OF THE COMPANY WILL BE ACHIEVED.
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
PART II: OTHER INFORMATION
Item 2. CHANGES IN SECURITIES.
The following unregistered securities were issued by the
Company during the quarter ended June 30, 1997:
Number of Shares
Sold/Issued
/Subject to
Description Options or Offering/Exercise
Date of Sale/Issuance of Securities Issued Warrants Price Per Share ($) Purchaser or Class
--------------------- -------------------- -------- ------------------- ------------------
April - June 1997 Common Stock Options 220,000 2 11/16 - 3 Advisors
April 25, 1997 Common Stock 600,000 2 3/4 Officers of the
Company
April 25, 1997 Common Stock Options 50,000 2 3/4 Issuance to Directors
pursuant to 1996 Directors
Stock Option Plan
June 1997 Common Stock Options 300,000 2 3/4 - 4 1/2 Issuance to employees
pursuant to 1993 Stock Option
Plan
April 25, 1997 Common Stock Options 1,200,000 2 3/4 Issuance to employees
pursuant to 1993 Stock Option
Plan
The issuance of these securities is claimed to be exempt from
registration pursuant to Section 4 (2) of the Securities Act of
1933, as amended, as transactions by an issuer not involving a
public offering. There were no underwriting discounts or commissions
paid in connection with the issuance of any of these securities.
10
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
An annual Meeting of Stockholders was held on June 26, 1997. All
management's nominees for director, as listed in the Proxy Statement
for the Annual Meeting, were elected. Listed below are the matters
voted on by stockholders and the number of votes cast at the Annual
Meeting:
(a) ELECTION OF FIVE MEMBERS OF THE BOARD OF DIRECTORS.
Voted Votes Broker Non-Votes
Name Voted for Against Withheld and Abstentions
Douglas R. Eger 9,164,375 0 1,237,364 0
Loren G. Peterson 10,072,889 0 328,850 0
Thomas M. Fitzgerald 10,072,890 0 328,849 0
John M. Bailey 10,071,890 0 329,849 0
Digby W. Barrios 10,070,990 0 330,749 0
(b) APPROVAL OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK;
Voted For: 10,021,014
Voted Against: 333,666
Voted Abstained: 47,059
Broker Non-Votes 0
(c) APPROVAL OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
CHANGE THE NAME OF THE COMPANY FROM "SHEFFIELD MEDICAL TECHNOLOGIES INC."
TO "SHEFFIELD PHARMACEUTICALS, INC."
Voted For: 10,314,220
Voted Against: 75,610
Voted Abstained: 11,909
Broker Non-Votes 0
(d) APPROVAL OF CERTAIN AMENDMENTS TO THE COMPANY'S 1993 STOCK OPTION PLAN.
Voted For: 3,284,922
Voted Against: 867,539
Voted Abstained: 49,659
Broker Non-Votes 6,199,619
(e) RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
Voted For: 10,317,481
Voted Against: 43,849
Voted Abstained: 40,409
Broker Non-Votes 0
11
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
NO. DESCRIPTION
3.1 Certificate of Incorporation of the Company, as amended
3.2 By-laws of the Company, as amended
27 Financial Data Schedule
No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1997
12
SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
(a development stage enterprise)
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHEFFIELD PHARMACEUTICALS, INC.
Dated: August 14, 1997 /S/ LOREN G. PETERSON
----------------------
Loren G. Peterson
Chief Executive Officer
Dated: August 14, 1997 /S/ GEORGE LOMBARDI
-------------------
George Lombardi
Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)