- -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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)