-----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, IpIgH4BlwPZYusu1PV68oIm9BSwaUV31PeZQsxa5NZOvej+QdnPQOLDSA88ijnID dBSEUxonqyykxBdfI0Mzfw== 0000950115-00-000703.txt : 20000516 0000950115-00-000703.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950115-00-000703 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEOSE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000877902 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 133549286 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27718 FILM NUMBER: 631095 BUSINESS ADDRESS: STREET 1: 102 WITMER RD CITY: HORSHAM STATE: PA ZIP: 19044 BUSINESS PHONE: 2154415890 MAIL ADDRESS: STREET 1: 102 WITMER ROAD CITY: HORSHAM STATE: PA ZIP: 19044 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000. 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: 0-27718 NEOSE TECHNOLOGIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 13-3549286 ---------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 102 Witmer Road Horsham, Pennsylvania 19044 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (215) 441-5890 ---------------------------------------------------- (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: 13,897,300 shares of common stock, $.01 par value, were outstanding as of April 30, 2000. NEOSE TECHNOLOGIES, INC. (a development-stage company) INDEX -----
Page ---- PART I. FINANCIAL INFORMATION: ---------------------- Item 1. Financial Statements Consolidated Balance Sheets (unaudited) at December 31, 1999 and March 31, 2000.......3 Consolidated Statements of Operations (unaudited) for the three months ended March 31, 1999 and 2000, and for the period from inception through March 31, 2000.....4 Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 1999 and 2000, and for the period from inception through March 31, 2000.....5 Notes to Unaudited Consolidated Financial Statements..................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................................................8 Item 3. Quantitative and Qualitative Disclosure About Market Risk.........................12 PART II. OTHER INFORMATION: ------------------ Item 2. Changes in Securities and Use of Proceeds.........................................12 Item 6. Exhibits and Reports on Form 8-K..................................................12 SIGNATURES.....................................................................................13 - ----------
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements NEOSE TECHNOLOGIES, INC. (a development-stage company) CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands, except per share amounts)
December 31, 1999 March 31, 2000 ----------------- -------------- Assets Current assets: Cash and cash equivalents $ 10,365 $ 84,457 Marketable securities 22,870 14,749 Accounts Receivable -- 2,020 Restricted funds 2,285 2,052 Prepaid expenses and other current assets 118 385 -------- -------- Total current assets 35,638 103,663 Property and equipment, net 13,366 13,473 Acquired technology (See Note 4) 3,235 3,623 -------- -------- Total assets $ 52,239 $120,759 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 1,000 $ 1,000 Accounts payable 237 150 Accrued expenses 2,112 2,171 Deferred revenue 805 514 -------- -------- Total current liabilities 4,154 3,835 Long-term debt 7,300 7,300 -------- -------- Total liabilities 11,454 11,135 -------- -------- Stockholders' equity: Preferred stock, $.01 par value, 5,000 shares authorized, none issued -- -- Common stock, $.01 par value, 30,000 shares authorized; 11,434 and 13,897 shares issued and outstanding 114 139 Additional paid-in capital 101,013 172,417 Deferred compensation (530) (1,294) Deficit accumulated during the development-stage (59,812) (61,638) -------- -------- Total stockholders' equity 40,785 109,624 -------- -------- Total liabilities and stockholders' equity $ 52,239 $120,759 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 3 NEOSE TECHNOLOGIES, INC. (a development-stage company) CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share amounts)
Three months ended Period from March 31, inception --------------------- (January 17, 1989) 1999 2000 to March 31, 2000 ------- ------- ------------------ Revenue from collaborative agreements $ 125 $ 1,947 $ 8,714 Operating expenses: Research and development 2,471 2,893 54,446 General and administrative 1,003 1,280 22,513 ------- ------- -------- Total operating expenses 3,474 4,173 76,959 ------- ------- -------- Operating loss (3,349) (2,226) (68,245) Interest income 384 519 9,374 Interest expense (107) (119) (2,767) ------- ------- -------- Net loss $(3,072) $(1,826) $(61,638) ======= ======= ======== Basic and diluted net loss per share $ (0.31) $ (0.15) ======= ======= Basic and diluted weighted-average shares outstanding 9,860 11,880 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 4 NEOSE TECHNOLOGIES, INC. (a development-stage company) CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Three months ended Period from March 31, inception ----------------------- (January 17, 1989) 1999 2000 to March 31, 2000 -------- -------- ------------------ Cash flows from operating activities: Net loss $ (3,072) $ (1,826) $ (61,638) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 404 737 8,114 Common stock issued for non-cash and other charges -- -- 35 Changes in operating assets and liabilities: Accounts receivable -- (2,020) (2,020) Prepaid expenses and other (225) (267) (385) Accounts payable 55 (87) 150 Accrued expenses 241 59 1,489 Deferred revenue -- (291) 514 -------- -------- --------- Net cash used in operating activities (2,597) (3,695) (53,741) -------- -------- --------- Cash flows from investing activities: Purchases of property and equipment (96) (466) (18,197) Proceeds from sale-leaseback of equipment -- -- 1,382 Purchases of marketable securities (24,593) (14,623) (154,408) Proceeds from sales of marketable securities 5,930 -- 11,467 Proceeds from maturities of and other changes in marketable securities 15,975 22,744 128,192 Purchase of acquired technology (3,300) (500) (4,050) Restricted cash related to acquired technology (1,500) 500 (1,000) -------- -------- --------- Net cash provided by (used in) investing activities (7,584) 7,655 (36,614) -------- -------- --------- Cash flows from financing activities: Proceeds from issuance of debt -- -- 11,955 Repayment of debt (6) -- (4,952) Restricted cash related to debt (155) (267) (981) Proceeds from issuance of preferred stock, net -- -- 29,497 Proceeds from issuance of common stock, net 4,080 -- 18,277 Proceeds from public offerings, net -- 68,540 118,006 Proceeds from exercise of stock options and warrants 184 1,859 3,082 Dividends paid -- -- (72) -------- -------- --------- Net cash provided by financing activities 4,103 70,132 174,812 -------- -------- --------- Net increase (decrease) in cash and cash equivalents (6,078) 74,092 84,457 Cash and cash equivalents, beginning of period 9,484 10,365 -- -------- -------- --------- Cash and cash equivalents, end of period $ 3,406 $ 84,457 $ 84,457 ======== ======== ========= Supplemental disclosure of cash flow information: Cash paid for interest $ 111 $ 121 $ 2,659 ======== ======== ========= Non-cash financing activities: Issuance of common stock for dividends $ -- $ -- $ 90 ======== ======== ========= Issuance of common stock to employees in lieu of cash compensation $ -- $ -- $ 44 ======== ======== =========
The accompanying notes are an integral part of these consolidated financial statements. 5 NEOSE TECHNOLOGIES, INC. (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation We have used generally accepted accounting principles for interim financial information to prepare unaudited consolidated financial statements: o As of March 31, 2000; o For the three months ended March 31, 1999 and 2000; and o For the period from inception (January 17, 1989) to March 31, 2000. Our consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In our opinion, the unaudited information includes all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. You should not base your estimate of our results of operations for 2000 solely on our results of operations for the three months ended March 31, 2000. You should read these consolidated financial statements in combination with: o The other Notes in this section; o "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing in the following section; and o The Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 1999. 2. Sale of Common Stock In March, 2000, we offered and sold 2.3 million shares of our common stock at a public offering price of $32.00 per share. Our net proceeds from the offering after the payment of placement fees and offering expenses were approximately $68.6 million. 3. Agreement with Bristol-Myers Squibb Company In 1998, we entered into an agreement with Bristol-Myers Squibb Company to develop proprietary technologies that enable cGMP processes for the manufacture of two gangliosides (complex carbohydrate structures attached to a lipid) for use as the active pharmaceutical ingredients in two cancer vaccines being developed by Bristol-Myers. During the three months ended March 31, 2000, we recorded revenues of $1.6 million from Bristol-Myers. In May 2000, we announced the expansion of our collaboration with Bristol-Myers to provide additional proprietary process development services. 6 4. Acquisition of Intellectual Property from Cytel On March 26, 1999, we acquired the carbohydrate manufacturing patents, licenses, and other intellectual property of Cytel Corporation. We paid $3.5 million in cash to Cytel and an additional $1.5 million in cash into escrow, the release of which is conditioned on the satisfaction, prior to September 26, 2000, by Epimmune, Inc., Cytel's successor corporation, of certain matters relating to the acquired patents and licenses. In March 2000, we transferred $500,000 from escrow to Epimmune. We have recorded the remaining $1.0 million in escrow as Restricted Cash on our March 31, 2000 Consolidated Balance Sheet. Any cash remaining in the escrow account on September 26, 2000 will be returned to us and will be available for general corporate purposes. Because the acquired intellectual property consists of core technology with alternative future uses, we have capitalized $3.3 million of the amount paid to Cytel and the $500,000 transferred from escrow to Epimmune as Acquired Technology. We charged $200,000 of the $3.5 million paid to Cytel to expenses in our Consolidated Statement of Operations in 1998. The Acquired Technology balance will be amortized to our Consolidated Statement of Operations over eight years, which we estimate to be the useful life of the technology. During the three months ended March 31, 2000, we recorded amortization expense of $112,000 relating to the acquired technology. 5. Net Loss Per Share Basic and diluted net loss per share are presented in conformity with Statement of Financial Accounting Standards No. 128, "Earnings per Share." Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution from the exercise or conversion of securities into common stock. For the three months ended March 31, 1999 and 2000, the effects of the exercise of outstanding stock options and warrants were antidilutive; accordingly, they were excluded from the calculation of diluted earnings per share. 6. Comprehensive Loss Our comprehensive loss for the three months ended March 31, 1999 and 2000 was approximately $3.1 million and $1.8 million, respectively. Comprehensive loss is comprised of net loss and other comprehensive income or loss. Our only source of other comprehensive income or loss is unrealized gains and losses on our marketable securities that are classified as available-for-sale. 7. Reclassifications Certain prior year amounts have been reclassified to conform with our current year presentation. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION ACT OF 1995: This report and the documents incorporated by reference herein contain "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. When used in this report and the documents incorporated herein by reference, the words "anticipate," "believe," "estimate," and similar expressions are generally intended to identify forward-looking statements. These forward-looking statements include, among others, the statements in Management's Discussion and Analysis about our: o expectations for increases in operating expenses; o expectations for increases in research and development and general and administrative expenses in order to develop new products and manufacture commercial quantities of products; o expectations for the development, manufacturing, and approval of new products; o expectations for incurring additional capital expenditures to expand our manufacturing capabilities; o expectations for generating revenue or becoming profitable on a sustained basis; o ability to enter into additional marketing agreements and the ability of our existing marketing partners to commercialize products incorporating our technologies; o estimate of the sufficiency of our existing cash and cash equivalents and investments to finance our operating and capital requirements; o expected losses; and o expectations for future capital requirements. Our actual results could differ materially from those results expressed in, or implied by, these forward-looking statements. Potential risks and uncertainties that could affect our actual results include the following: o our ability to commercialize any of our products or technologies; o our ability to maintain our existing collaborative arrangements and enter into new collaborative arrangements; o our ability to develop commercial-scale manufacturing facilities; o our ability to protect our proprietary products, know-how, and manufacturing processes; o unanticipated cash requirements to support current operations or research and development; o the timing and extent of funding requirements for the joint venture's activities; o our ability to attract and retain key personnel; and o general economic conditions. 8 These and other risks and uncertainties that could affect our actual results are discussed in greater detail in this report and in our other filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance, or achievements. We do not assume responsibility for the accuracy and completeness of the forward-looking statements. We do not intend to update any of the forward-looking statements after the date of this report to conform them to actual results. You should read this section in combination with the Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 1999, included in our Annual Report on Form 10-K and in our 1999 Annual Report to Stockholders. Overview We are a leading developer of proprietary technologies for the synthesis and manufacture of complex carbohydrates. Our proprietary enzymatic technology platform enables the rapid and cost-effective synthesis of a wide range of complex carbohydrates in commercial quantities. We use our broad, enabling technology to produce complex carbohydrates for pharmaceutical, biotechnology, nutritional, and consumer product applications. Due to their structural complexity, complex carbohydrates have been difficult and expensive to produce, and their commercial development has been significantly limited. We have incurred operating losses each year. As of March 31, 2000, we had an accumulated deficit of approximately $62 million. We expect additional losses for some time as we expand research and development efforts, expand manufacturing scale-up activities, and begin sales and marketing activities. Results of Operations Revenues Revenues from collaborative agreements for the three months ended March 31, 2000 increased to $1,947,000 from $125,000 for the corresponding period in 1999. Revenues for the 2000 period were received under our agreements with Bristol-Myers Squibb Company and Wyeth Nutritionals International, a division of American Home Products. Operating Expenses Research and development expenses for the three months ended March 31, 2000 increased to $2,893,000 from $2,471,000 for the corresponding period in 1999. The increase during the 2000 period was primarily attributable to additional services rendered under our current research and development agreement with Bristol-Myers Squibb, amortization of the acquired technology from Cytel, and the compensation expense associated with stock options granted to our Scientific Advisory Board. General and administrative expenses for the three months ended March 31, 2000 increased to $1,280,000 from $1,003,000 for the corresponding period in 1999. The increase during the 2000 period was primarily attributable to the hiring of additional business development and administrative 9 personnel, and the compensation expense associated with stock options granted to our outside consultants. Interest Income and Expense Interest income for the three months ended March 31, 2000 increased to $519,000 from $384,000 for the corresponding period in 1999. The increase was due to higher average cash and marketable securities balances during the 2000 period. Interest expense for the three months ended March 31, 2000 increased to $119,000 from $107,000 for the corresponding period in 1999. The increase was due to higher interest rates, offset by lower average loan balances outstanding during the 2000 period. Net Loss Our net loss for the three months ended March 31, 1999 decreased to $1,826,000, or $0.15 per share, from $3,072,000, or $0.31 per share, for the corresponding period in 1999. Liquidity and Capital Resources We have incurred losses each year since our inception. As of March 31, 2000, we had a deficit accumulated during the development stage of approximately $62 million. We have financed our operations through private and public offerings of our securities and revenues from our collaborative agreements. We had $99.2 million in cash and marketable securities as of March 31, 2000, compared to $33.2 million in cash and marketable securities as of December 31, 1999. The increase was primarily attributable to our public offering of 2.3 million shares of common stock in March 2000. Under the terms of our joint venture with McNeil Specialty, we may be required to make additional capital contributions to fund capital expenditures. If the joint venture builds additional production facilities, and we wish to maintain our 50% ownership in the joint venture, we are required to contribute half of such expenditures, up to a maximum contribution of $8.85 million. However, we may elect to contribute as little as $1.85 million of the cost of the facilities, so long as our aggregate capital contributions are at least 15% of the joint venture's aggregate capital contributions. In this case, McNeil Specialty will fund the remainder of our half of the joint venture's capital expenditures, and our ownership percentage will be proportionately reduced. We have an option, expiring in September 2006, to return to 50% ownership in the joint venture by reimbursing McNeil Specialty for this amount. In addition, until the joint venture is profitable, McNeil Specialty is required to fund, as a non-recourse, no-interest loan, all of the joint venture's aggregate capital expenditures in excess of an agreed upon amount, and all of the joint venture's operating losses. These loans would be repayable by the joint venture to McNeil Specialty over seven years, and in the event of any dissolution of the joint venture would be payable to McNeil Specialty before any distribution of assets to us. We will account for our investment in the joint venture under the equity method, under which we will recognize our share of earnings and losses of the joint venture. We will record our share of the losses of the joint venture, however, only to the extent of our actual or committed investment in the joint venture. 10 In 1997, we issued, through the Montgomery County (Pennsylvania) Industrial Development Authority, $9.4 million of taxable and tax-exempt bonds. The bonds were issued to finance the purchase of our previously leased building and the construction of a pilot-scale manufacturing facility within our building. The bonds are supported by a AA-rated letter of credit, and a reimbursement agreement between our bank and the letter of credit issuer. The interest rate on the bonds will vary weekly, depending on market rates for AA-rated taxable and tax-exempt obligations, respectively. As of March 31, 2000, the effective, blended interest rate was 7.4% per annum, including letter-of-credit and other fees. To provide credit support for this arrangement, we have given a first mortgage on the land, building, improvements, and certain machinery and equipment to our bank. In addition, we have agreed to maintain at least $20 million of cash and short-term investments. If we fail to comply with this covenant, we are required to deposit with the lender cash collateral up to, but not more than, the unpaid balance of the loan, which as of March 31, 2000 was $8.3 million. During the quarter ended March 31, 2000, we purchased approximately $466,000 of property, equipment, and building improvements. We expect that our existing cash and short-term investments will be adequate to fund our operations through at least 2001, although changes in our collaborative relationships or our business, whether or not initiated by us, may cause us to deplete our cash and short-term investments sooner than the above estimate. The timing and amount of our future capital requirements and the adequacy of available funds will depend on many factors, including if or when any products manufactured using our technology are commercialized. 11 Item 3. Quantitative and Qualitative Disclosure About Market Risk We do not hold any investments in market risk sensitive instruments. Accordingly, we believe that we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments. PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. In March, 2000, we offered and sold 2.3 million shares of our common stock at a public offering price of $32.00 per share. Our net proceeds from the offering after the payment of placement fees and offering expenses were approximately $68.6 million. Item 6. Exhibits and Reports on Form 8-K. (a) List of Exhibits: 27 Financial Data Schedule. (b) Reports on Form 8-K. None. 12 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. NEOSE TECHNOLOGIES, INC. Date: May 15, 2000 By: /s/ P. Sherrill Neff -------------------------------------- P. Sherrill Neff President, Chief Operating Officer and Chief Financial Officer EX-27 2 FDS --
5 Financial Data Schedule 3-MOS DEC-31-2000 MAR-31-2000 84,457 14,749 2,020 0 0 103,663 19,465 5,992 120,759 3,835 7,300 0 0 139 109,485 120,759 0 1,947 0 0 4,173 0 519 (1,826) 0 (1,826) 0 0 0 (1,826) (.15) (.15)
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