-----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, ADT8kciN0TSXpYYjLKJGWRUTZ9tpShPzGHBS8bSJ1eXIVyOkfr1mGUYdJYvKVchY nafRLGwxdwZHpL6lb97EKw== 0000936392-97-001510.txt : 19971117 0000936392-97-001510.hdr.sgml : 19971117 ACCESSION NUMBER: 0000936392-97-001510 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYPRESS BIOSCIENCE INC CENTRAL INDEX KEY: 0000716054 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 222389839 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12943 FILM NUMBER: 97717689 BUSINESS ADDRESS: STREET 1: 4350 EXECUTIVE DRIVE,SUITE 325 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 2062989400 MAIL ADDRESS: STREET 1: 401 QUEEN ANNE AVE NORTH CITY: SEATTLE STATE: WA ZIP: 98109 FORMER COMPANY: FORMER CONFORMED NAME: IMRE CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (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 0-12943 CYPRESS BIOSCIENCE, INC. (Exact Name of Registrant as specified in its charter) DELAWARE 22-2389839 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4350 EXECUTIVE DRIVE, SUITE 325, SAN DIEGO, CALIFORNIA 92121 (Address of principal executive offices) (zip code) (619) 452-2323 (Registrant's telephone number including area code) ---------------------------------- Indicate by check (X) 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 ----- ----- AT NOVEMBER 1, 1997, 34,636,067 SHARES OF COMMON STOCK OF THE REGISTRANT WERE OUTSTANDING. This filing, without exhibits, contains 15. 2 TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page ---- Item 1 - Condensed Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 ..................... 3 Condensed Consolidated Statements of Operations for the quarter and nine months ended September 30, 1997 and 1996............. 4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and 1996................. 5 Notes to Condensed Consolidated Financial Statements ................ 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 9 PART II - OTHER INFORMATION Item 1 - Legal Proceedings .................................................... 13 Item 6 - Exhibits and Reports on Form 8-K ..................................... 14 Signatures .................................................................... 15
2 3 CYPRESS BIOSCIENCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ (UNAUDITED) (NOTE) ASSETS Current assets: Cash and cash equivalents $ 2,544,198 $ 8,045,508 Short-term investments 1,923,076 2,890,160 Accounts receivable: Trade 371,508 344,041 Other 152,631 150,954 Inventories 787,752 973,767 Prepaid expenses 125,270 171,231 ------------- ------------ Total current assets 5,904,435 12,575,661 Property and equipment, net 2,106,621 2,351,928 Convertible debenture issuance costs, net 27,663 33,487 ============= ============ Total assets $ 8,038,719 $ 14,961,076 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 645,913 $ 999,442 Accrued compensation 331,744 485,751 Accrued liabilities 1,220,812 902,090 Current portion of capital lease obligations 6,637 27,208 ------------- ------------ Total current liabilities 2,205,106 2,414,491 Convertible debentures 400,000 400,000 Capital lease obligations, less current portion 8,843 12,020 Commitments and contingencies Stockholders' equity: Common stock, $.02 par value; authorized 60,000,000 shares; issued and outstanding, 34,636,067 and 34,573,111 shares at September 30, 1997 and December 31, 1996, respectively 692,721 691,462 Additional paid-in capital 70,205,463 70,062,301 Deferred compensation (763,086) (1,313,276) Accumulated deficit (64,710,328) (57,305,922) ------------- ------------ Total stockholders' equity 5,424,770 12,134,565 ============= ============ Total liabilities and stockholders' equity $ 8,038,719 $ 14,961,076 ============= ============
See accompanying notes. Note: The balance sheet at December 31, 1996, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles. 3 4 CYPRESS BIOSCIENCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- ---------------------------------- 1997 1996 1997 1996 -------------- -------------- -------------- -------------- Product sales $ 658,335 $ 671,816 $ 2,207,631 $ 1,277,549 Grant income 85,293 -- 179,197 -- -------------- -------------- -------------- -------------- 743,628 671,816 2,386,828 1,277,549 -------------- -------------- -------------- -------------- Costs and expenses: Production costs 354,024 377,056 1,316,045 837,192 Sales and marketing 262,754 268,417 1,015,696 429,417 Research and development 1,844,672 1,049,615 5,430,987 2,140,659 General and administrative 1,095,729 835,278 2,300,604 2,641,048 Restructuring expense -- 6,479 -- 460,090 Debt conversion expense -- -- -- 183,688 -------------- -------------- -------------- -------------- 3,557,179 2,536,845 10,063,332 6,692,094 -------------- -------------- -------------- -------------- Loss from operations (2,813,551) (1,865,029) (7,676,504) (5,414,545) Other income (expense): Interest income 91,021 95,277 296,186 343,632 Interest expense (7,813) (12,237) (24,088) (45,835) -------------- -------------- -------------- -------------- 83,208 83,040 272,098 297,797 -------------- -------------- -------------- -------------- Net loss $ (2,730,343) $ (1,781,989) $ (7,404,406) $ (5,116,748) ============== ============== ============== ============== Net loss per share $ (0.08) $ (0.06) $ (0.21) $ (0.19) ============== ============== ============== ============== Shares used in computing net loss per share 34,630,850 28,760,966 34,592,569 27,649,052 ============== ============== ============== ==============
See accompanying notes. 4 5 CYPRESS BIOSCIENCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 1997 1996 -------------- -------------- OPERATING ACTIVITIES Net loss $ (7,404,406) $ (5,116,748) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 352,482 132,647 Amortization of deferred compensation 542,970 337,651 Debt conversion expense -- 183,688 Loss (gain) on disposal of property and equipment 1,094 (11,110) Common stock issued to 401(k) plan 88,597 57,935 Common stock issued for services and expenses -- 29,203 Accounts receivable allowance -- 29,145 Changes in operating assets and liabilities, net 39,562 (2,067,897) -------------- -------------- Net cash used by operating activities (6,379,701) (6,425,486) INVESTING ACTIVITIES Purchase of equipment (105,630) (842,243) Proceeds from sale of fixed assets 3,185 36,735 Short-term investments 967,084 -- -------------- -------------- Net cash provided by (used by) investing activities 864,639 (805,508) FINANCING ACTIVITIES Net proceeds from issuance of common stock 37,500 12,099,380 Proceeds from issuance of convertible debentures -- 500,000 Payment of notes payable and capital lease obligation (23,748) (18,706) Debt issuance costs -- (71,919) -------------- -------------- Net cash provided by financing activities 13,752 12,508,755 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (5,501,310) 5,277,761 Cash and cash equivalents at beginning of period 8,045,508 1,009,878 ============== ============== Cash and cash equivalents at end of period $ 2,544,198 $ 6,287,639 ============== ============== SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Stock issued for debt conversion $ -- $ 2,351,607 ============== ==============
See accompanying notes. 5 6 CYPRESS BIOSCIENCE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. FORMATION AND BUSINESS OF THE COMPANY The accompanying consolidated financial statements have been prepared by Cypress Bioscience, Inc. (the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the SEC. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of the Company's management, all adjustments necessary for a fair presentation of the accompanying unaudited financial statements are reflected herein. All such adjustments are normal and recurring in nature. Interim results are not necessarily indicative of results for the full year. For more complete financial information, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's 1996 Annual Report on Form 10-K filed with the SEC. The Company researches, develops, manufactures and markets medical devices and therapeutics for the treatment of certain types of immune system disorders and is engaged in the development of novel therapeutic agents for the treatment of blood platelet disorders. The Company's first product, the PROSORBA(R) column, a medical device, treats a patient's defective immune system so that it can more effectively respond to certain diseases. Through its acquisition of PRP, Inc. in November 1996, the Company acquired rights to Cyplex(TM) platelet alternative, previously known as Infusible Platelet Membranes ("IPM"), which is positioned to become an alternative to traditional platelet transfusions. The Company commenced business activities in January 1982. The U.S. Food and Drug Administration ("FDA") approved the PROSORBA(R) column for commercial sale in December 1987 for the treatment of patients with Idiopathic Thrombocytopenic Purpura ("ITP"), an immune-mediated bleeding disorder. The Company continues to devote most of its efforts to obtaining FDA marketing approval for the use of the PROSORBA(R) column for the treatment of additional autoimmune diseases as well as to the continued development of Cyplex(TM) platelet alternative. The Company is currently conducting a Phase III pivotal clinical trial using the PROSORBA(R) column for therapy for rheumatoid arthritis as a follow-on to a pilot clinical trial completed in September 1995. Clinical trials for certain platelet disorders are being planned for 1998. 6 7 2. INVENTORIES Inventories are comprised of the following:
September 30, 1997 December 31, 1996 ------------------ ----------------- Raw materials and components $ 220,017 $ 214,632 Work in process 433,455 700,815 Finished goods 134,280 58,320 ------------------ ----------------- $ 787,752 $ 973,767 ================== =================
3. PER SHARE INFORMATION The computation of net loss per share is based on the weighted average number of shares of common stock outstanding for each period. Common stock equivalents related to options, warrants and convertible debentures have not been considered in the calculation of net loss per share inasmuch as their effect would have been antidilutive. 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 basic earnings per share, the dilutive effect of stock options will be excluded. The adoption of Statement No. 128 will not have any effect as the Company had incurred losses for the quarters presented. 4. COMMITMENTS AND CONTINGENCIES The Company has settled a patent infringement claim filed against the Company on February 6, 1997, in the United States District Court for the Western District of Washington alleging that the manufacture, use and sale of the Company's PROSORBA(R) column infringes a patent issued to Dr. Meir Strahilevitz (the "Strahilevitz Patent"). Pursuant to the terms of the settlement, the Company was granted a nonexclusive license permitting the Company to use the Strahilevitz Patent in connection with the manufacture, use and sale of its PROSORBA(R) column for the treatment of Idiopathic Thrombocytopenic Purpura ("ITP") and Rheumatoid Arthritis. In exchange for such license, the Company has agreed to pay Dr. Strahilevitz a license fee and royalty payments during the life of the Strahilevitz Patent. The settlement of the claim did not and will not have a material impact on the Company's business, financial position or results of operations. 7 8 5. RESTRUCTURING EXPENSE The Company has incurred approximately $1.3 million of capital expenditures through September 30, 1997 in connection with the consolidation of its two Washington manufacturing facilities. That consolidation was completed in April 1997 with the Company receiving FDA GMP approval of the facility. 6. SUBSEQUENT EVENT In October 1997, the Company sold approximately 3,851,000 shares of common stock for $1.50 per share in a private placement. The shares were registered for resale under the Securities Act of 1933, as amended in November 1997. The net proceeds to the Company were approximately $5,550,000, or $1.44 per share, after total costs of approximately $227,000. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for the historical information contained herein, the following discussion contains forward-looking statements within the meaning of Section 21E of the Exchange Act that involve risks and uncertainties. The Company's actual results could differ materially from those discussed below and elsewhere in this Report. Factors that could cause or contribute to such differences include, without limitation, those discussed in this section, as well as other sections of this report, and those discussed in the Company's Form 10-K for the year ended December 31, 1996. RESULTS OF OPERATIONS Revenues associated with shipments of the Company's PROSORBA(R) column were $658,000 and $2.2 million, respectively, for the quarter and nine months ended September 30, 1997, compared to $672,000 and $1.3 million for the same periods, respectively, in 1996. The significant increase in sales for the nine months ended September 30, 1997 is a result of the Company regaining from Baxter Healthcare Corporation ("Baxter") the distribution rights to the PROSORBA(R) column in May 1996 and initiating direct sales and marketing efforts thereafter. Although the Company's direct sales and marketing efforts have proven more effective than those under the Baxter distribution agreement, idiopathic thrombocytopenic purpura ("ITP") remains a small, niche market. In 1996, the Company initiated a Phase IV marketing study for use of the PROSORBA(R) column in the treatment of ITP in an effort to generate more rigorous clinical data than has been available to date. The Company believes that such data is a prerequisite for increasing the usage of the PROSORBA(R) column in the treatment of ITP. Increased competition for patients from other ITP studies has caused enrollment to date in this study to be below original expectations. The increased competition and delay in enrollment has caused the Company to re-evaluate its potential ability to complete the study in a timely and cost effective manner. In light of the more promising opportunities in the rheumatoid arthritis market, as discussed below, the Company has therefore determined that continued investment in the ITP market is not the best use of its resources. As a result, the ITP trial will be terminated during the fourth quarter of 1997. Lack of data from that study will make it difficult to effect any appreciable increase in sales above their current levels until the Company obtains, if and when it does, FDA approval for sale of the PROSORBA(R) column in rheumatoid arthritis. The Company hopes to obtain such approval by mid to late 1999, however, there can be no assurance that such approval will be obtained in the time expected, if at all. Consolidated operating expenses increased to $3.6 million and $10.1 million for the quarter and nine months ended September 30, 1997, respectively, from $2.5 million and $6.7 million for the same periods in 1996. This increase reflects a significant expansion in the Company's research and development activities, offset, in part, by a reduction in general and administrative expenses. 9 10 During the first half of 1996, production was impacted by both the termination of the Baxter distribution agreement and the consolidation of the Company's manufacturing facilities undertaken in connection with the Company's restructuring. There were very few PROSORBA(R) columns shipped during the first four months of 1996 as the Company did not resume direct shipments to domestic customers until May 1996. Production costs of $354,000 and $1.3 million for the quarter and nine months ended September 30, 1997, respectively, and of $377,000 and $837,000 for the corresponding periods of 1996, respectively, reflect this unusual activity. Sales and marketing expenses of $263,000 and $268,000 for the quarters ended September 30, 1997 and 1996, respectively, remained relatively flat. The significant increase in such expenses to $1.0 million for the nine months ended September 30, 1997, from $429,000 for the same period of 1996, is related to the $930,000 increase in sales during the first three quarters of the year resulting from the Company's initiation of direct sales and marketing efforts. For the quarter and nine months ended September 30, 1997, research and development expenses were approximately $1.8 million and $5.4 million, respectively. For the same periods in 1996, such expenses were $1.0 million and $2.1 million, respectively. The significant increase in 1997 is attributable to the Company's efforts to establish a stronger scientific base for its products. The majority of these efforts are directed to the Company's ongoing controlled clinical trial for use of the PROSORBA(R) column in rheumatoid arthritis. The Company expects further increases in research and development expenses in future periods as the aforementioned trial continues and with the expected launch of a Phase II efficacy trial for Cyplex(TM) platelet alternative, previously known as Infusible Platelet Membranes ("IPM"), scheduled to begin in 1998. In July 1997, the Company announced that an independent Data Safety and Monitoring Board ("DSMB") reviewing the interim data from its pivotal trial of the PROSORBA(R) column in rheumatoid arthritis ("RA") recommended that the trial be continued. The DSMB had earlier been instructed by the Company to recommend either the continuation or cessation of the trial based upon pre-determined stopping rules, including an efficacy threshold and safety profile of the treatment. Based upon the DSMB's recommendation, Company management, who remain blinded to the data, will continue the trial of its novel rheumatoid arthritis therapy. In the RA trial, patients undergo 12 weekly PROSORBA(R) column treatments, followed by 12 weeks of observation. Each treatment entails a two-hour plasmapheresis procedure, either with the PROSORBA(R) column or a control procedure of plasmapheresis alone. During this 24-week period, the patient is removed from all other RA-specific therapy. At week 20, the patient's health is assessed based on the criteria recently adopted by the American College of Rheumatology ("ACR") and compared to their pre-treatment baseline. The ACR criteria are a set of measures including patient and physician assessments of disease activity that have been specifically developed for use in clinical trials of new therapies for rheumatoid arthritis. Approximately 250 patients were originally scheduled to be enrolled in 12 leading arthritis centers around the United States. The DSMB reviewed the interim results from the first 63 patients and recommended that the trial be continued, indicating that the Company was on track 10 11 to attain its targeted 20% differential response rate. The DSMB also recommended that the next interim analysis be conducted when 90 patients have completed the protocol and that at that time a total of 120 to 130 patients be enrolled. The Company estimates that this will occur in January 1998. FDA approval for this indication would expand the use of the PROSORBA(R) column to the treatment of RA, an estimated $2 billion market. The Company set the 20% differential response rate for continuation of the RA trial after extensive analysis of the literature and discussion with its advisors as to what outcomes could lead to a significant product both from a clinical and commercial perspective. The 20% differential response rate was viewed by the Company and its clinical advisors as an aggressive threshold for product performance, and is consistent with the original assumptions used in designing the trial. Although the Company remains blinded to the distribution of the treated patients into the two groups, namely placebo and treatment, they were encouraged by the fact that, as anticipated, 11 of the 63 patients included in the interim analysis had responded. General and administrative expenses were $1.1 million and $2.3 million for the quarter and nine months ended September 30, 1997, respectively. For the comparable periods in 1996, such expenses were $835,000 and $2.6 million, respectively. A decline in spending in both 1997 and 1996 was offset by non-recurring expenses in both years. In 1996 there were non-recurring expenses associated with the hiring of the Company's new Chief Executive Officer, and President and Chief Operating Officer, both of who joined the Company in December 1995, and severance payments paid to the Company's former Chief Scientific Officer in connection with his resignation in March 1996. Bonuses paid in the third quarter of 1997 to the Company's Chief Executive Officer, and President and Chief Operating Officer, in connection with the Company achieving certain milestones, were also non-recurring. Interest expense of $8,000 and $24,000 for the quarter and nine months ended September 30, 1997, respectively, compares to interest expense of $12,000 and $46,000 for the same periods, respectively, in 1996. The decline in interest expense relates to the September 1995 and March 1996 conversions of the majority of the Company's outstanding 7% Convertible Debentures. In January 1996, the Company notified approximately twenty employees, which was slightly greater than half of its work force, that their positions were being eliminated immediately as part of the restructuring. Such positions were from all departments of the Company. Costs related to these elimination's were approximately $460,000 and were recorded as a restructuring expense in the nine months ended September 30, 1996. The Company recorded a non-cash expense of $184,000 as debt conversion expense in the nine months ended September 30, 1996. Such expense represented the fair market value of the increased number of shares issued by the Company under the terms of an exchange offering to holders of the Company's 7% Convertible Debentures to exchange one share of common stock of the Company for each $2.25 of outstanding principal (including any accrued and unpaid interest on such principal) of the 7% Convertible Debentures. Outstanding principal of $845,000 11 12 was tendered for exchange, leaving an outstanding principal balance of $400,000 as of both September 30, 1997 and September 30, 1996. The increase in total operating expenses was only partially offset by the increase in revenues, thereby resulting in a net loss of approximately $2.7 million and $7.4 million for the quarter and nine monthsended September 30, 1997, respectively, compared to a net loss of approximately $1.8 million and $5.1 million for the same periods in 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital as of September 30, 1997 was $3.7 million, compared to $10.2 million at December 31, 1996. The decrease in working capital is attributable to the net loss for the nine months ended September 30, 1997. In October 1997, the Company sold approximately 3,851,000 shares of common stock for $1.50 per share in a private placement. The shares were registered for resale under the Securities Act of 1933, as amended in November 1997. The net proceeds to the Company were approximately $5,550,000, or $1.44 per share, after costs of approximately $227,000. These proceeds, combined with existing resources, should be sufficient to complete the Company's Phase III pivotal trial in rheumatoid arthritis. The Company expects to incur operating losses until it can obtain marketing approval from the FDA for additional disease indications for the PROSORBA(R) column, or obtain FDA approval for Cyplex(TM) platelet alternative. A clinical trial is currently being conducted using the PROSORBA(R) column for RA therapy to obtain the necessary clinical data to apply to the FDA to obtain marketing approval. The Company expects to perform a second interim analysis for this trial in January 1998. There can be no assurance that the Company will be able to obtain FDA approval to market the PROSORBA(R) column for disease indications other than ITP or that sales of the PROSORBA(R) column will increase significantly, if at all. In addition, there can be no assurance that the interim data regarding the use of the PROSORBA(R) column for the treatment of RA will continue to be favorable or that the Company will be able to apply to or obtain approval from the FDA with respect to the use of the PROSORBA(R) column for the treatment of RA. During 1996, the Company implemented a restructuring plan which included consolidating its manufacturing facilities to one location in the state of Washington and moving all other operations of the Company to San Diego, California. The Company has incurred approximately $1.3 million of capital expenditures through September 30, 1997 to consolidate its two Washington manufacturing facilities. In April 1997, the Company's Redmond, Washington facility successfully completed the FDA GMP re-approval process, signifying the successful completion of the consolidation. The Company believes that its existing cash, including the October 1997 sale of common stock, and proceeds from sales of the PROSORBA(R) column will provide the resources necessary to fund operations, including clinical trials, through 1998. 12 13 PART II Item 1 - Legal Proceedings Reference is made to the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Item 4 - Submissions of Matters to a Vote of Security Holders (a) The Annual Meeting of Stockholders (the "Annual Meeting") of the Company was held on October 15, 1997. (b) Jay D. Kranzler, Ph.D., M.D., and Richard M. Crooks were each elected as directors to serve until the 2000 annual meeting, or until such directors' earlier death, resignation or removal. The Company's Board of Directors is comprised of those individuals elected this year and the following directors completing the following terms: Debby Jo Blank, M.D. and Philip J. O'Reilly whose terms expire in 1999; Jack Vaughn whose term expires in 1998. (c) The following sets forth a brief description of each matter voted upon at the annual Meeting and the results of the voting on each such matter: (1) For the election of the nominees as directors:
Withheld Authority For or Against ------------------ ------------------ Jay D. Kranzler, Ph.D., M.D 23,224,022 288,470 Richard M. Crooks 23,230,497 281,995
(2) To approve a form of Indemnity Agreement and to authorize the Company to enter into individual Indemnity Agreements with each of its directors and executive officers. For Against Abstained Non-votes --------------------- -------------------- -------------------- --------------------- 18,984,453 740,312 240,528 3,547,199
(3) To ratify the selection of Ernst & Young LLP as the Company's independent auditors for its fiscal year ending December 31, 1997: For Against Abstained Non-votes --------------------- -------------------- -------------------- --------------------- 23,104,105 250,460 157,927 -
13 14 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits 27. Financial Data Schedule (b) Reports on Form 8-K None 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Cypress Bioscience, Inc. Date: November 14, 1997 /s/ Jay D. Kranzler ------------------------------ ----------------------------------- Jay D. Kranzler, M.D., Ph.D. Chief Executive Officer, Chief Scientific Officer and Vice Chairman of the Board (Principal Executive Officer and Principal Financial Officer) 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JUL-01-1997 SEP-30-1997 2,544 1,923 725 200 788 5,905 3,127 1,021 8,039 2,205 400 69,813 0 0 322 8,039 658 835 354 3,203 0 0 8 (2,730) 0 (2,730) 0 0 0 (2,730) (0.08) (0.08)
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