-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MxYRCRw8Z0RIvpsvsXzKt1O+Jsx+/QboYdruD5GHbb7zOWvbIROVWSf0ush7EL8N SPrckCxQNxoxaGWTQEilhg== 0000891618-97-004603.txt : 19971113 0000891618-97-004603.hdr.sgml : 19971113 ACCESSION NUMBER: 0000891618-97-004603 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARADIGM CORP CENTRAL INDEX KEY: 0001013238 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 943133088 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28402 FILM NUMBER: 97716016 BUSINESS ADDRESS: STREET 1: 26219 EDEN LANDING RD CITY: HAYWARD STATE: CA ZIP: 94545 BUSINESS PHONE: 5107830100 MAIL ADDRESS: STREET 1: 26219 EDEN LANDING RD CITY: HAYWARD STATE: CA ZIP: 94545 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 September 30, 1997 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 0-28402 ARADIGM CORPORATION (Exact name of registrant as specified in its charter) California 94-3133088 - ---------------------------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
26219 Eden Landing Road, Hayward, CA 94545 (Address of principal executive offices including zip code) (510) 783-0100 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, no par value 10,227,069 shares -------------------------- --------------------------------- (Class) (Outstanding at October 31, 1997) 2 ARADIGM CORPORATION INDEX PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Page No. Statements of Operations (Unaudited) Three months ended September 30, 1997 and 1996 3 Nine months ended September 30, 1997 and 1996 4 Balance Sheets September 30, 1997 (Unaudited) and December 31, 1996 5 Statements of Cash Flows (Unaudited) Nine months ended September 30, 1997 and 1996 6 Notes to Unaudited Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14 Signatures 15 Exhibits 16 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARADIGM CORPORATION STATEMENTS OF OPERATIONS (In thousands, except share and per share information)
Three months ended September 30, ----------------------------------- 1997 1996 ------------ ------------ (unaudited) Contract revenues $ 894 $ 57 Expenses: Research and development 3,483 2,123 General and administrative 1,967 711 ------------ ------------ Total expenses 5,450 2,834 ------------ ------------ Loss from operations (4,556) (2,777) Interest income 265 456 Interest expense (35) (17) ------------ ------------ Net loss $ (4,326) $ (2,338) ============ ============ Net loss per share $ (0.42) $ (0.23) ------------ ------------ Shares used in computation of net loss per share 10,212,517 10,216,820 ============ ============
See accompanying notes. 3 4 ARADIGM CORPORATION STATEMENTS OF OPERATIONS (In thousands, except share and per share information)
Nine months ended September 30, ----------------------------------- 1997 1996 ------------ ------------ (unaudited) Contract revenues $ 1,634 $ 230 Expenses: Research and development 9,281 4,912 General and administrative 4,409 2,091 ------------ ------------ Total expenses 13,690 7,003 ------------ ------------ Loss from operations (12,056) (6,773) Interest income 989 745 Interest expense (71) (40) ------------ ------------ Net loss $ (11,138) $ (6,068) ============ ============ Net loss per share $ (1.09) $ (0.93) ------------ ------------ Shares used in computation of net loss per share 10,207,750 6,518,003 ============ ============
See accompanying notes. 4 5 ARADIGM CORPORATION BALANCE SHEETS (In thousands, except share information)
September 30, December 31, 1997 1996 ------------- ------------- Assets (unaudited) Current assets: Cash and cash equivalents $ 11,341 $ 18,554 Short-term investments 4,417 6,978 Receivables 1,110 - Inventories 188 - Other current assets 677 451 ------------- ------------- Total current assets 17,733 25,983 Investments - 3,002 Property and equipment, net 3,370 1,453 Notes receivable from officers 220 220 Other assets 79 75 ------------- ------------- Total assets $ 21,402 $ 30,733 ============= ============= Liabilities and shareholders' equity Current liabilities: Accounts payable $ 561 $ 601 Accrued clinical and other studies - 899 Accrued compensation 978 280 Other accrued liabilities 654 279 Deferred revenue - 169 Current portion of capital lease obligations and equipment loans 1,324 269 ------------- ------------- Total current liabilities 3,517 2,497 Noncurrent portion of capital lease obligations and equipment loans 774 350 Commitments Shareholders' equity: Common stock, no par value, 40,000,000 shares authorized; issued and outstanding shares: September 30, 1997 - 10,227,069; December 31, 1996 49,976 49,821 - 10,214,054 Notes receivable from shareholders (422) (483) Deferred compensation (154) (308) Accumulated deficit (32,289) (21,144) ------------- ------------- Total shareholders' equity 17,111 27,886 ------------- ------------- Total liabilities and shareholders' equity $ 21,402 $ 30,733 ============= =============
See accompanying notes. 5 6 ARADIGM CORPORATION STATEMENTS OF CASH FLOWS Increase (decrease) in cash and cash equivalents (In thousands)
Nine months ended September 30, ----------------------------- 1997 1996 --------- --------- (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (11,138) $ (6,068) Adjustments to reconcile net loss to cash used in operating activities Depreciation and amortization 472 265 Amortization of deferred compensation 154 135 Changes in assets and liabilities Receivables (1,110) 260 Inventories and other current assets (414) (269) Other assets (4) (7) Accounts payable (40) 1,040 Accrued liabilities 174 284 Deferred revenue (169) (230) --------- --------- Cash used in operating activities (12,075) (4,590) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (2,132) (373) Purchases of investments (19,163) (123,874) Proceeds from maturities of investments 24,719 117,608 --------- --------- Cash (used in) provided by investing activities 3,424 (6,639) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock, net 164 24,609 Proceeds from repayment of shareholder notes 52 - Notes receivable from officers - (21) Proceeds from notes payable 1,437 - Payments on lease obligations and notes payable (215) (212) --------- --------- Cash provided by financing activities 1,438 24,376 --------- --------- Net (decrease) increase in cash and cash (7,213) 13,147 equivalents Cash and cash equivalents at beginning of period 18,554 12,117 --------- --------- Cash and cash equivalents at end of period $ 11,341 $ 25,264 ========= ========= SUPPLEMENTAL INVESTING AND FINANCING ACTIVITIES Common stock issued in exchange for notes receivable $ - $ 287 Common stock repurchased upon cancellation of notes receivable $ 9 $ - Acquisition of equipment under capital leases $ 257 $ 330
See accompanying notes. 6 7 ARADIGM CORPORATION NOTES TO THE UNAUDITED FINANCIAL STATEMENTS September 30, 1997 1. Summary of Significant Accounting Policies Organization and Description of Business Aradigm Corporation (the "Company") was incorporated in the State of California on January 30, 1991. Through June 30, 1997, prior to the signing of the Company's collaborative agreement with SmithKline Beecham, the Company was in the development stage. Since inception, Aradigm has been engaged in the development and commercialization of non-invasive pulmonary drug delivery systems. The Company expects continuing losses over the next several years as development efforts continue. Management plans to continue to finance the Company primarily through issuances of equity securities, research and development contract revenue, capital lease financing, and in the longer term, revenue from product sales. If the financing arrangements contemplated by management are not consummated, the Company may have to seek other sources of capital or reevaluate operating plans. Basis of Presentation The financial information at September 30, 1997 and for the three- and nine-month periods ended September 30, 1997 and 1996 is unaudited but includes all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for fair presentation of the financial position at such date and the operating results and cash flows for those periods. Results for the interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 1996, included in the Company's Form 10-K filed with the SEC on March 28, 1997. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash Equivalents and Investments The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company places its cash and cash equivalents in money market funds, commercial paper and corporate master notes. The Company's short-term investments consist of corporate notes with maturities ranging from three to twelve months. The Company classifies its investments as available-for-sale. Available-for-sale investments are recorded at fair value with unrealized gains and losses reported in the statement of shareholders' equity. Fair values of investments are based on quoted market prices, where available. Realized gains and losses, which have been immaterial to date, are included in interest and other income and are derived using the specific identification method for determining the cost of investments sold. Dividend and interest income is recognized when earned. Revenue Recognition Contract revenues consist of revenue from collaboration agreements and feasibility studies. The Company recognizes revenue ratably under the agreements as costs are incurred. Deferred revenue represents the portion of research payments received that has not been earned. In accordance with contract terms, up-front and milestone payments from collaborative research agreements are considered reimbursements for costs incurred under the agreements and, accordingly, are generally deferred when received and recognized as revenue based on actual efforts expended over the remaining terms of the agreements. Non-refundable signing or license fee payments that are not dependent on future performance under collaborative 7 8 agreements are recognized as revenue when received. Costs of contract revenue approximate such revenue and are included in research and development expenses. Net Loss Per Share Net loss per share is computed using the weighted average number of shares of common stock outstanding. Common equivalent shares from stock options and warrants are excluded from the computation as their effect is antidilutive, except that, pursuant to the Securities and Exchange Commission Staff Accounting Bulletins, common and common equivalent shares issued at prices below the Company's June 20, 1996 initial public offering price during the 12-month period prior to the offering have been included in the calculation as if they were outstanding for all periods through the offering (using the treasury stock method and the initial public offering price). As described above, the antidilutive effect of certain stock options is included in the calculation of loss per share for all periods through June 20, 1996, but is excluded from the calculation after that date. Pro forma per share data is provided to show the calculation on a consistent basis for 1997 and 1996. It has been computed as described above, but includes the retroactive effect from the date of issuance of the conversion of convertible preferred stock to common shares upon the closing of the Company's initial public offering. Pro forma per share information calculated on the above basis is as follows:
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ------------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ----------- Pro forma net loss per share $ (0.42) $ (0.23) $ (1.09) $ (0.69) ========== ========== ========== =========== Shares used in computation of pro forma net loss per share 10,212,517 10,216,820 10,207,750 8,853,648 ========== ========== ========== ===========
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. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is not expected to result in a change in net loss per share for the periods ended September 30, 1997 and September 30, 1996. Collaborative Agreements In December 1996, the Company entered into a feasibility agreement with a pharmaceutical company to determine the feasibility of using the Company's AERx(TM) Pulmonary Drug Delivery System for the delivery of a specified drug. The agreement provides for a $169,500 research and development payment and a $237,500 payment upon acceptance by the pharmaceutical company of certain specified deliverables. Under this agreement, total revenues of $407,000 were recognized in 1997. Subsequent Events In September 1997, the Company entered into a product development and commercialization agreement with SmithKline Beecham covering use of the AERx Pain Management System for the delivery of opiates and opioids. The Company and SmithKline Beecham will collaborate on the development of the products within this field. Under the terms of this agreement, SmithKline Beecham has been granted worldwide sales and marketing rights to the AERx Pain Management System for use with such analgesics, and Aradigm retains all manufacturing rights. If this system receives regulatory approval, the Company expects to sell devices and drug packets to SmithKline Beecham and to receive royalties on sales by SmithKline Beecham. 8 9 Pursuant to the SmithKline Beecham agreement, the Company could receive approximately $30 million in milestone and product development payments and $10 million in equity investments if and when the first product from the collaboration is commercialized. In October 1997, the Company received $14 million from SmithKline Beecham under the agreement, of which $5 million resulted from the sale of shares of Aradigm Common Stock. Additional milestone and product development payments will be paid if Aradigm and SmithKline Beecham decide to jointly develop additional AERx products which incorporate other opiates or opioids. Through September 30, 1997, the Company has recognized total contract revenue of $617,000 under this agreement. 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion below contains forward-looking statements that are based on the beliefs of the Company's management, as well as assumptions made by, and information currently available to, the Company's management. The Company's future results, performance or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements as a result of certain factors, including, but not limited to, those discussed in this section as well as in the section entitled "Risk Factors" and elsewhere in the Company's Form 10-K filed with the Securities and Exchange Commission on March 28, 1997. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revision to these forward-looking statements which may be made to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. OVERVIEW Since its inception in 1991, Aradigm has been engaged in the development of pulmonary drug delivery systems. As of September 30, 1997, the Company had an accumulated deficit of $32.3 million. The Company has been unprofitable since inception and expects to incur additional operating losses over at least the next several years as the Company's research and development efforts, preclinical and clinical testing activities and manufacturing scale-up efforts expand and as the Company plans and builds its late-stage clinical and early commercial production capabilities. To date, Aradigm has not sold any products and does not anticipate receiving significant revenue from products in 1997. The sources of working capital have been equity financing, financing of equipment acquisitions, interest earned on investments of cash and revenues from research and feasibility agreements and development contracts. RESULTS OF OPERATIONS Three and Nine Months Ended September 30, 1997 and 1996 Contract Revenue. Contract revenue for the three-month period ended September 30, 1997 increased to $894,000 from $57,000 for the same period in 1996. Contract revenue for the nine-month period ended September 30, 1997 increased to $1.6 million from $230,000 for the same period in 1996. The increase in revenue was due primarily to the development and commercialization agreement that was executed with SmithKline Beecham in September 1997 to develop and commercialize a pulmonary delivery system for providing breakthrough pain relief using opiates and opioids. Under the terms of the agreement, Aradigm could receive up to approximately $30 million in milestone and development payments if and when the first product is commercialized. Additional milestone and development payments would be paid if SmithKline Beecham and Aradigm decide to develop additional opiates and opioids for delivery with the AERx Pain Management System. In exchange, SmithKline Beecham will have exclusive worldwide commercial rights to the AERx Pain Management System for use with opiates and opioids. Aradigm will be the manufacturer of all the products covered by the agreement and will also receive royalties on net sales. Costs associated with research and development activities attributable to the agreement are expected to approximate the revenue recognized. Contract revenues are expected to fluctuate from year to year and future contract revenues cannot be predicted accurately. Contract revenues depend in part upon future success in obtaining new collaborative agreements, timely completion of feasibility studies, the continuation of existing collaborations and achievement of milestones under current and future agreements. Nevertheless, the Company expects higher contract revenues in 1998 as it continues its activities under collaborative development agreements. Research and Development Expenses. Research and development expenses for the three-month period ended September 30, 1997 increased to $3.5 million from $2.1 million for the same period in 1996. 10 11 Research and development expenses for the nine-month period ended September 30, 1997 increased to $9.3 million from $4.9 million for the same period in 1996. The increase was attributable primarily to hiring of additional scientific personnel and expenses associated with the expansion of research and development efforts on the AERx and SmartMist systems. These expenses represent proprietary research expenses as well as the costs related to contract research revenue and include salaries and benefits of scientific and development personnel, laboratory supplies, consulting services and the expenses associated with the development of manufacturing processes. The Company expects research and development spending to increase significantly over the next few years as the Company continues to expand its research and development activities to support current and potential future collaborations and initiates commercial manufacturing of the AERx system. General and Administrative Expenses. General and administrative expenses for the three-month period ended September 30, 1997 increased to $2.0 million from $711,000 for the same period in 1996. General and administrative expenses for the nine-month period ended September 30, 1997 increased to $4.4 million from $2.1 million for the same period in 1996. The increase was attributable primarily to support of the Company's increased research efforts including facilities expense, administrative staffing, business development and marketing activities. The Company expects to incur greater general and administrative expenses in the future as it expands its operations, increases its efforts to develop collaborative relationships with corporate partners and expands its SmartMist marketing effort. Interest Income. Interest income for the three-month period ended September 30, 1997 decreased to $265,000 from $456,000 for the same period in 1996. Average cash and investment balances, and interest income earned thereon, were higher during the three-month period ending September 1996 which included the proceeds from the sale of common shares in the Company's June 1996 initial public offering. Interest income for the nine-month period ended September 30, 1997 increased to $989,000 from $745,000 for the same period in 1996 as a result of higher average cash and investment balances for the nine-month period ending September 1997. Interest Expense. Interest expense for the three-month period ended September 30, 1997 increased to $35,000 from $17,000 for the same period in 1996. Interest expense for the nine-month period ended September 30, 1997 increased to $71,000 from $40,000 for the same period in 1996. These increases resulted from higher outstanding capital lease and equipment loan balances under the Company's equipment lines of credit. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations since inception primarily through private placements and public offerings of its capital stock, proceeds from financings of equipment acquisitions, contract research revenue and interest earned on investments. As of September 30, 1997, the Company had received approximately $49.1 million in net proceeds from sales of its capital stock. The Company also has a $5.0 million equipment line of credit, of which approximately $3.6 million remains available for purchases through September 1998. As of September 30, 1997, the Company had cash, cash equivalents and investments of approximately $15.8 million. In October 1997, the Company received from SmithKline Beecham a $9.0 million milestone payment and a $5.0 million equity investment. Pursuant to the terms of a stock purchase agreement, the Company also has the right to receive, at its discretion and subject to certain limitations, an additional $5.0 million equity investment from SmithKline Beecham. As of October 31, 1997, the Company had cash, cash equivalents and investments of approximately $28.5 million. Net cash used in operating activities in the nine months ending September 30, 1997, was $12.1 million compared to $4.6 million in 1996. The increase resulted primarily from the increase in the net loss of $5.1 million, net decreases in accrued liabilities and increases in current assets. Net cash provided by investing activities in the nine months ending September 30, 1997, was $3.4 million compared to $6.6 million used in 1996. The increase resulted primarily from cash receipts from the maturity of investments partially offset by expenditures made for capital equipment. 11 12 Net cash provided by financing activities in the nine months ending September 30, 1997 of $1.4 million resulted primarily from the receipt of proceeds from equipment loans and issuances of common stock partially offset by repayment of capital lease obligations. Net cash provided by financing activities in the nine months ending September 30, 1996 of $24.4 million was due primarily to the receipt of net proceeds from the Company's initial public offering. The development of the Company's technology and proposed products will require a commitment of substantial funds to conduct the costly and time-consuming research and preclinical and clinical testing activities necessary to develop and refine such technology and proposed products and to bring any such products to market. The Company's future capital requirements will depend on many factors, including continued progress in the research and development of the Company's technology and drug delivery systems, the ability of the Company to establish and maintain favorable collaborative arrangements with others, progress with preclinical studies and clinical trials, the time and costs involved in obtaining regulatory approvals, the cost of development and the rate of scale-up of the Company's production technologies, the cost involved in preparing, filing, prosecuting maintaining and enforcing patent claims and the need to acquire licenses or other rights to new technology. The Company anticipates that its existing capital resources, anticipated payments from its existing corporate partnership with SmithKline Beecham and projected interest income will enable the Company to maintain current and planned operations through 1998. However, there can be no assurance that the Company will not need to raise substantial additional capital to fund its operations prior to such time. There can be no assurance that additional financing will be available on acceptable terms or at all. The Company's cash requirements, however, may vary materially from those now planned because of results of research and development efforts, including capital expenditures and funding preclinical and clinical trials, manufacturing scale-up in connection with the commercialization of the SmartMist system, and manufacturing capacity for preclinical, clinical and full scale manufacturing requirements of the AERx system. The Company may seek additional funding through collaborations or through public or private equity or debt financings. However, there cannot be any assurance that additional financing can be obtained on acceptable terms, or at all. If additional funds are raised by issuing equity securities, dilution to shareholders may result. If adequate funds are not available, the Company may be required to delay, to reduce the scope of, or to eliminate one or more of its research and development programs, or to obtain funds through arrangements with collaborative partners or other sources that may require the Company to relinquish rights to certain of its technologies or products that the Company would not otherwise relinquish. 12 13 PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Use of Proceeds (1) The effective date of the Company's registration statement filed on Form S-1 (SEC file number 0-28402) (the "Registration Statement") for which the following information is being disclosed is June 20, 1996. (2) The Company's initial public offering pursuant to the above-referenced registration statement commenced on June 20, 1996 (the "Offering"). (3) The Offering did not terminate before any securities were sold. (4) (i) The Offering has not terminated. (iii) The managing underwriters were Cowen & Company, CIBC Oppenheimer Corp. and Invemed Associates, Inc. (iv) The Offering was for Common Stock of the Company. (v) Pursuant to the Offering, the Company registered and sold 2,500,000 shares of Common Stock with an aggregate offering price of the amount registered and sold of $27,500,000. (vi) Following are the amount of expenses incurred (a) from the effective date of the Registration Statement to the ending period of the reporting period and (b) for the Registrant's account in connection with the issuance and distribution of the Common Stock pursuant to the Offering: Underwriting discounts and commissions $1,925,000 Finders' Fees None Expenses paid to or for underwriters None Other expenses 983,412 ---------- Total expenses $2,908,412 (vi) The net offering proceeds to the Company, after deducting the total expenses above, were $24,591,588. (vii) Following are the uses, including amounts, of the net offering proceeds from the effective date of the Registration Statement to the ending period of the reporting period: Employee wages and benefits $8,287,072 Office space and utilities 1,880,770 Scientific supplies and equipment 1,878,770 Travel and conferences 934,984 Clinical trials and contracts 4,224,484 Professional services 1,906,043 Temporary investments: Commercial paper 5,479,301 Other purposes None 13 14 All of the foregoing uses were direct or indirect payment to others. (vii) The use of proceeds described in (vii) above does not represent a material change in the use of proceeds described in the prospectus. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 10.1(1) Stock Purchase Agreement, September 30, 1997, between the Company and SmithKline Beecham. 10.2(1) Product Development and Commercialization Agreement, dated September 30, 1997, between the Company and SmithKline Beecham. 11.1 Statement Regarding Computation of Net Loss Per Share 27.1 Financial Data Schedule (b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K on or about November 7, 1997. On September 30, 1997, the Company entered into a Product Development and Commercialization Agreement (the "Agreement") with SmithKline Beecham PLC ("SmithKline") for the purpose of developing and commercializing a pulmonary drug delivery system for providing immediate pain relief using opiates and opioids. In connection with the Agreement, the Company entered into a Stock Purchase Agreement with SmithKline, pursuant to which the Company sold and issued 405,064 shares of the Company's Common Stock to SmithKline at an aggregate purchase price of $5,000,008.75. (1) Incorporated by reference to the indicated exhibit in the Company's Current Report on Form 8-K filed on or about November 7, 1997. 14 15 SIGNATURE 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. Dated: November 10, 1997 ARADIGM CORPORATION (Registrant) -------------------------------------------- Mark A. Olbert Vice President, Finance and Administration and Chief Financial Officer 15 16 ARADIGM CORPORATION FORM 10-Q INDEX TO EXHIBITS Exhibit Number Description - -------------- ----------- 10.1(1) Stock Purchase Agreement, September 30, 1997, between the Company and SmithKline Beecham. 10.2(1) Product Development and Commercialization Agreement, dated September 30, 1997, between the Company and SmithKline Beecham. 11.1 Statement Regarding Computation of Net Loss Per Share 27.1 Financial Data Schedule (1) Incorporated by reference to the indicated exhibit in the Company's Current Report on Form 8-K filed on or about November 7, 1997. 16 EX-11.1 2 STATEMENT RE COMPUTATION OF NET LOSS PER SHARE 1 EXHIBIT 11.1 ARADIGM CORPORATION STATEMENT REGARDING COMPUTATION OF NET LOSS PER SHARE (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------- ----------------------------- 1997 1996 1997 1996 ------------- ------------- ------------- ----------- Net loss $ (4,326) $ (2,338) $ (11,138) $ (6,068) Shares used in computation of net loss per share: Weighted average Common shares outstanding 10,212,517 10,216,820 10,207,750 4,726,033 Shares related to SAB Nos. 55, 64, and 83 - - - 1,791,970 ------------- ------------- ------------- ----------- Shares used in computing net loss per share 10,212,517 10,216,820 10,207,750 6,518,003 ------------- ------------- ------------- ----------- Net loss per share $ (0.42) $ (0.23) $ (1.09) $ (0.93) ============= ============= ============= =========== Shares used in computation of pro forma net loss per share: Shares used in computing net loss per share 10,212,517 10,216,820 10,207,750 6,518,003 Adjustment to reflect effect of assumed conversion of preferred stock from date of issuance - - - 2,335,645 Shares used in computing pro forma net loss ------------- ------------- ------------- ----------- per share 10,212,517 10,216,820 10,207,750 8,853,648 ------------- ------------- ------------- ----------- Pro forma net loss per share $ (0.42) $ (0.23) $ (1.09) $ (0.69) ============= ============= ============= ===========
17 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JUL-01-1997 SEP-30-1997 11,341 4,417 1,110 0 188 17,733 3,370 0 21,402 3,517 0 0 0 49,976 576 21,402 0 894 0 0 5,450 0 35 (4,326) 0 (4,326) 0 0 0 (4,326) (.42) (.42)
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