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 September 30, 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 0-27976.
GalaGen Inc.
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(Exact name of registrant as specified in its charter)
Delaware 41-1719104
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 Carlson Parkway, Suite 301
Minnetonka, Minnesota 55305
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(Address of principal executive offices) (Zip Code)
(952) 258-5500
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(Registrant's telephone number, including area code)
1275 Red Fox Road
Arden Hills, Minnesota 55112
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(Former name, former address and former fiscal year, if changed since last
report)
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, $.01 par value -
12,268,371 shares as of October 31, 2000.
INDEX
GALAGEN INC.
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets - September 30, 2000 and December 31, 1999......................3
Statements of Operations - Three and nine months ended
September 30, 2000 and September 30, 1999......................................4
Statements of Cash Flows - Nine months ended
September 30, 2000 and September 30, 1999......................................5
Notes to Financial Statements..................................................6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations...............................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..............................................15
SIGNATURES..............................................................................21
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS GALAGEN INC.
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
----------------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents ..................................................................... $ 800,191 $ 204,817
Available-for-sale securities ................................................................. -- 2,782,790
Accounts receivable, net of allowance of $13,136 in 2000 and $18,951 in 1999 .................. 83,801 499,606
Prepaid expenses .............................................................................. 349,801 146,023
Inventory ..................................................................................... 132,077 56,372
------------ ------------
Total current assets .......................................................................... 1,365,870 3,689,608
Property and equipment......................................................................... 702,287 687,746
Less accumulated depreciation ............................................................... (498,401) (400,301)
------------ ------------
203,886 287,445
Customer list ................................................................................. 292,500 360,000
Other intangible assets ....................................................................... 154,999 300,872
Deferred expenses ............................................................................. -- 93,750
------------ ------------
447,499 754,622
Total assets .................................................................................. $ 2,017,255 $ 4,731,675
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .............................................................................. $ 920,012 $ 273,717
Other current liabilities ..................................................................... -- 144,886
------------ ------------
Total current liabilities ....................................................................... 920,012 418,603
Commitments
Other long-term liabilities ..................................................................... 45,000 45,000
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 15,000,000
Issued and outstanding shares - none in 2000 and 1999 ...................................... -- --
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued and outstanding shares - 10,518,371 in 2000; 10,416,462 in 1999 ..................... 105,184 104,165
Additional paid-in capital .................................................................... 64,335,622 64,099,393
Accumulated deficit ........................................................................... (63,388,563) (59,935,486)
------------ ------------
Total stockholders' equity .................................................................... 1,052,243 4,268,072
------------ ------------
Total liabilities and stockholders' equity ...................................................... $ 2,017,255 $ 4,731,675
============ ============
See accompanying notes.
Note: The balance sheet at December 31, 1999 has been derived from audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
Refer to footnote three of Notes to Financial Statements.
3
GALAGEN INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------
Revenues:
Product sales..................................... $ 2,853 $ 577,613 $ 9,312 $ 1,494,392
Product licensing, development and other revenues. 101,976 319,220 366,433 594,416
------------- ------------- ------------- -------------
104,829 896,833 375,745 2,088,808
Operating expenses:
Cost of goods sold................................ 1,976 246,620 4,782 635,691
Selling, general and administrative............... 614,231 608,029 1,763,292 2,260,814
Product development............................... 627,936 656,274 1,742,329 1,381,028
Depreciation and amortization..................... 135,075 157,340 405,225 524,422
------------- ------------- ------------- -------------
1,379,218 1,668,263 3,915,628 4,801,955
------------- ------------- ------------- -------------
Operating loss..................................... (1,274,389) (771,430) (3,539,883) (2,713,147)
Interest income.................................... 17,569 35,404 86,806 131,548
Interest expense................................... - - - (10,727)
------------- ------------- ------------- --------------
Net loss........................................... $ (1,256,820) $ (736,026) $ (3,453,077) $ (2,592,326)
============== ============== ============== ==============
Net loss per share
Basic and Diluted........................... $ (0.12) $ (0.07) $ (0.33) $ (0.26)
Weighted average number of common shares outstanding
Basic and Diluted.............................. 10,518,371 10,408,535 10,493,086 9,805,215
See accompanying notes.
4
GALAGEN INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------------
2000 1999
--------------------------------
OPERATING ACTIVITIES:
Net loss............................................. $ (3,453,077) $ (2,592,326)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization....................... 405,223 548,565
Changes in operating assets and liabilities........ 637,731 (448,060)
------------- --------------
Net cash used in operating activities................ (2,410,123) (2,491,821)
-------------- --------------
INVESTING ACTIVITIES:
Payment for asset purchase........................... - (113,901)
Purchase of property, plant and equipment............ (14,541) (11,816)
Change in available-for-sale securities, net......... 2,782,790 (499,158)
------------- --------------
Net cash provided (used) by investing activities... 2,768,249 (624,875)
------------- --------------
FINANCING ACTIVITIES:
Proceeds from common stock.......................... 237,248 1,894,689
Payment for warrant repurchase...................... - (375,000)
Net payment on debt................................. - (39,096)
------------- --------------
Net cash provided by financing activities............ 237,248 1,480,593
------------- -------------
Increase (decrease) in cash.......................... 595,374 (1,636,103)
Cash and cash equivalents at beginning of period..... 204,817 4,081,733
------------- -------------
Cash and cash equivalents at end of period........... $ 800,191 $ 2,445,630
============= =============
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of convertible promissory notes, plus
related accrued interest, to common stock.......... $ - $ 217,475
See accompanying notes.
5
GALAGEN INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments (consisting
of normal, recurring accruals) considered necessary for fair presentation have
been included. Operating results for the nine months ended September 30, 2000,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. These financial statements should be read in
conjunction with the audited financial statements and accompanying notes
contained in the Annual Report of GalaGen Inc. (the "Company") on Form 10-K for
the fiscal year ended December 31, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
REVENUE RECOGNITION
Revenue from product sales is recognized at the time of shipment. Fee
revenue is recognized upon exchange for services performed or products delivered
that represent the culmination of a separate earnings process. If there are
continuing performance obligations related to the services to be provided, or
products to be delivered, then the revenue is deferred and recognized as the
services and/or products are performed and/or delivered over the term of the
arrangement.
ADOPTION OF RECENT STAFF ACCOUNTING BULLETIN
In December 1999 the Securities & Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101") "REVENUE RECOGNITION IN FINANCIAL
STATEMENTS," summarizing certain views of the SEC staff in applying generally
accepted accounting principles to revenue recognition. The SEC has delayed
the required implementation of SAB 101 until the fourth quarter of 2000 as it
considers various implementation issues. The Company continues to analyze the
effects of SAB 101 on its financial statements and will adopt it in the
fourth quarter of 2000. The Company believes it will record a cumulative
effect adjustment for the change in accounting, a one-time non cash charge to
earnings of approximately $700,000, in the fourth quarter of 2000.
NET LOSS PER SHARE
Basic loss per share is computed by dividing the net loss by the
weighted average number of common shares outstanding for the year. Diluted loss
per share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock and resulted in the issuance of common stock. Basic and diluted loss per
share are the same in all years presented as all common share equivalents were
antidilutive.
INVENTORY
Inventories are stated at the lower of cost or market using the
first-in, first-out method. The Company periodically evaluates the need for
reserves associated with obsolete inventory. Inventory at September 30, 2000 and
December 31, 1999 consisted of the following:
6
2000 1999
----------------- ----------------
Raw materials ............ $ 56,712 $ 46,660
Finished goods........... 75,365 9,712
----------------- ----------------
$ 132,077 $ 56,372
================= ================
RECLASSIFICATIONS
Certain items in these financial statements have been reclassified to
conform to the current period presentation.
3. SUBSEQUENT EVENTS
On October 11, 2000, the Company completed the sale of 1,750,000
newly issued shares of common stock at a price of $.80 per share to certain
investors, previous investors and their affiliates, in a private placement
and issued the investors warrants to purchase an additional 175,000 shares of
common stock at a price of $.80 per share. The aggregate proceeds of the
private placement, net of placement commission, were $1,287,500. Pursuant to
the Subscription Agreement and Investment Letter related to the private
placement, the Company filed a Registration Statement on Form S-3 on November
9, 2000 to register the resale of the shares of common stock and the shares
of common stock underlying the warrants, issued in the private placement.
7
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The information presented in this item contains forward-looking
statements within the meaning of the safe harbor provisions of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such
statements are subject to risks and uncertainties, including those discussed
below under "Risk Factors" and in the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 ("Form 10-K") under "Risk Factors", that
could cause actual results to differ materially from those projected. Because
actual results may differ, readers are cautioned not to place undue reliance
on these forward-looking statements.
GENERAL
GalaGen's mission is to become the leading presence in foods, beverages
and dietary supplements that help enhance the immune system and to take
advantage of all of colostrum's benefits. A critical factor for success of the
Company is its immune-enhancing ingredient which has been branded Proventra-TM-
Brand Natural Immune Components ("Proventra"). Proventra is derived from
colostrum, the highly nutritious first milk from a dairy cow after its calf is
born. The primary components found in Proventra are naturally occurring broad
spectrum antibodies or specialized proteins that enhance the body's own immune
system to provide protection against harmful micro-organisms. Additional
immune-enhancing components found in Proventra include lactoperoxidase,
lactoferrin, growth factors and other substances to bolster the body's
resistance.
The Company, in conjunction with strategic partners, continues to
forge alliances with major consumer products companies and to expand
applications for its technology and is developing a portfolio of
Proventra-based products that target the needs of consumers and the
healthcare market.
In 1998, the Company entered into a collaboration and license
agreement and a manufacturing and supply agreement with Wyeth-Ayerst
Laboratories ("Wyeth-Ayerst"), a division of American Home Products
Corporation. The two companies will develop and commercialize a proprietary
ingredient with unique antibacterial properties for use in pediatric formula
and other nutritional products. The collaboration, during the research and
development phase of the product, is being funded by Wyeth-Ayerst through
payments to the Company.
In January 1999, the Company entered into a collaboration agreement
with General Nutrition Corporation, Inc. ("GNC"), a leading nutritional
supplements maker and retail chain, for product development, manufacturing,
supply and retail marketing of its Proventra. The agreement calls for the two
companies to develop and market a range of immune-enhancing dietary
supplements and nutrition formulas. The first product introduced during the
second half of 1999 was a tablet supplement called Proventra, which is
distributed through GNC and Rite-Aid Drugstores.
In March 1999, the Company entered into an agreement with Tropicana
Products, Inc., the worlds number one producer of chilled orange juices, a
division of PepsiCo Inc. The two companies continue to explore development of
nutritious beverages for the health-conscious consumer, and to further study
the ingredient effectiveness in this category.
In March 1999, the Company also entered into a licensing and
distribution agreement with Hormel Health Labs ("HHL"), a wholly-owned
subsidiary of Hormel Foods Corporation. HHL licensed the manufacturing and
distribution rights for a new, clinically tested, cultured dairy beverage the
Company developed to improve the gastrointestinal health of patients in
hospitals and nursing homes. The product includes a patented ingredient
combination and also incorporates the Company's Proventra.
In July 1999, the Company licensed its line of critical care nutrition
products, previously acquired from NM Holdings, Inc. ("NMI"), to HHL. The
licensing agreement granted HHL worldwide rights to manufacture, distribute,
market and sell the Company's critical care products. Under the terms of the
agreement HHL pays royalties, subject to an annual minimum royalty, to the
Company based upon net sales of the specified products. HHL commenced selling
the Company's critical care products on a limited basis in September 1999, and
on an exclusive basis effective October 1999.
8
In October 1999, the Company entered into a collaborative licensing
agreement with Novartis Consumer Health Inc. ("Novartis"), whose parent
company Novartis AG is a global leader in consumer health, whereby the
Company granted Novartis certain rights to defined Proventra technology. Also
in October, the Company and Novartis entered into a supply agreement for
which the Company will supply the Proventra ingredients.
In December 1999, the Company entered into a product development
agreement with Novartis.
In July 2000, the Company entered into an agreement with Estee
Lauder Inc., whose upscale product lines account for about half of all U.S.
prestige cosmetic sales, to supply its colostrum-based ingredient for use in
cosmetic skin care products.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
GENERAL. The net loss increased by $520,794, or 70.8%, for the three
months ended September 30, 2000 to $1,256,820 from $736,026 for the same
period in 1999. The loss increase was due primarily to decreased revenue
from the Company's critical care product line and increased product
development expense in support of the Company's consumer product programs.
REVENUES. For the three months ended September 30, 2000 revenues of
$104,829 consisted primarily of product development revenue and royalty
revenue. For the same period in 1999, revenues of $ 896,833 consisted of
approximately $600,000 in product sales, primarily critical care nutrition
product sales which were licensed under a royalty agreement to HHL in July
1999 and approximately $297,000 from product development revenue.
COST OF GOODS SOLD. For the three months ended September 30, 2000 and
1999, the cost of goods sold of $1,976 and $246,620, respectively, related
primarily to the product sales. The decrease in cost of goods sold
corresponds with the decrease in sales due to the critical care nutritional
products being licensed to HHL in July 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $6,202, or 1.0%, for the three months ended
September 30, 2000 to $614,231 from $608,029 for the third quarter of 1999. The
slight increase is primarily due to increased sales, marketing and personnel
expense for the Company's consumer programs, offset by decreased sales,
marketing and personnel expense for the Company's critical care nutrition
products, which were licensed to HHL in July 1999.
PRODUCT DEVELOPMENT EXPENSES. Expenses for product development
decreased $28,338, or 4.3%, for the three months ended September 30, 2000 to
$627,936 from $656,274 for the three months ended September 30, 1999. The
decrease was primarily due to decreased expenses in support of the Company's
clinical product efforts.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
three months ended September 30, 2000 decreased $22,265, or 14.2%, to $135,075
from $157,340 for the same period in 1999. The decrease was primarily due to
decreased amortization of warrants and options issued for services.
INTEREST INCOME. Interest income for the three months ended September
30, 2000 decreased $17,835, or 50.4%, to $17,569 from $35,404 for the same
period in 1999. The decrease is primarily attributable to the decreased level of
investable funds.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
GENERAL. The net loss increased by $860,751, or 33.2%, for the nine
months ended September 30, 2000 to $3,453,077 from $2,592,326 for the same
period in 1999. The loss increase was due primarily to decreased revenue from
the Company's critical care product line and increased product development
expense in support of the Company's consumer product programs.
REVENUES. For the nine months ended September 30, 2000, revenues of
$375,745 consisted primarily of product development revenue and royalty revenue.
For the same period in 1999, revenues of $2,088,808 consisted of approximately
$1,343,000 of critical care nutrition product sales which were licensed to HHL
in July 1999, approximately $594,000 from product development revenue and
approximately $151,000 from consumer product sales.
COST OF GOODS SOLD. For the nine months ended September 30, 2000 and
1999, the cost of goods sold of $4,782 and $635,691, respectively,
was related to the product sales. The decrease in cost of goods sold
corresponds with the decrease in sales due to the critical care nutritional
products being licensed to HHL in July 1999.
9
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $497,522, or 22.0%, for the nine months ended
September 30, 2000 to $1,763,292 from $2,260,814 for the first nine months of
1999. Approximately $795,000 of the decrease is due to decreased sales,
marketing and personnel expense related to the Company's critical care nutrition
products which were licensed to HHL in July 1999, offset by increased expenses
of approximately $297,000 associated with the consumer product programs.
PRODUCT DEVELOPMENT EXPENSES. Expenses for product development
increased $361,301, or 26.2%, for the nine months ended September 30, 2000 to
$1,742,329 from $1,381,028 for the same period in 1999. The increase was due
to increased associated personnel and development expenses for continuing
research in support of the Company's consumer product efforts.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
nine months ended September 30, 2000 decreased $119,197, or 22.7%, to $405,225
from $524,422 for the same period in 1999. The decrease was primarily due to
decreased amortization of warrants and options issued for services, offset by
increased intangible asset amortization.
INTEREST INCOME. Interest income for the nine months ended September
30, 2000 decreased $44,742, or 34.0%, to $86,806 from $131,548 for the same
period in 1999. The decrease was primarily attributable to the decreased level
of invested funds.
INTEREST EXPENSE. Interest expense for the nine months ended September
30, 1999 was $10,727, and resulted from the amortization of the value of the
warrants plus the value of the discount in connection with the Company's
convertible debentures, which were fully redeemed by May 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities decreased by $81,698, or 3.3%, for
the nine months ended September 30, 2000 to $2,410,123 from $2,491,821 for the
same period in 1999. Cash used in operations for the nine months ended September
30, 2000 went primarily to fund operating losses. For the same period in 1999,
cash used in operations went primarily to fund operating losses, as well as
repayment of current obligations and acquisition of operating inventory.
For the nine months ended September 30, the Company invested $14,541
and $11,816, in 2000 and 1999, respectively, in computer and manufacturing
equipment to support its operations. The Company sold $2,782,790 of its
available-for-sale securities for the nine months ended September 30, 2000, and
invested $499,158 in available-for-sale securities for the same period in 1999.
For the nine months ended September 30, 1999 the Company invested $113,901 in
purchased product development technology relating to an asset purchase agreement
with Marketing Ventures of America, Inc., of which the Chief Executive Officer
of the Company is a 100% shareholder.
Proceeds from the exercise of common stock options and warrants for the
nine months ended September 30, 2000 were $237,248. For the nine months ended
September 30, 1999 proceeds from the sale of common stock and the exercise of
common stock options and warrants were $1,894,689. The Company repurchased
warrants for $375,000 and repaid debt of $39,096 during the nine months ended
September 30, 1999.
During the third quarter of 2000 the Company relocated its
administrative headquarters, per the request of its previous landlord Land
O'Lakes, Inc. The Company signed a four year lease with terms substantially
the same as its previous terms.
On October 11, 2000, the Company completed the sale of 1,750,000
shares of common stock at a price of $.80 per share to certain investors,
previous investors and their affiliates, in a private placement and issued
the investors warrants to purchase an additional 175,000 shares of common
stock at a price of $.80 per share. The aggregate proceeds of the private
placement, net of placement commission, were $1,287,500. Pursuant to the
Subscription Agreement and Investment Letter related to the private
placement, the Company filed a Registration Statement on Form S-3 on
November 9, 2000 to register the resale of the shares of common stock, and
the shares of common stock underlying the warrants, issued in the private
placement.
The Company anticipates that its existing resources and interest
thereon will be sufficient to satisfy its anticipated cash requirements to
approximately the second quarter of 2001. The Company's working capital and
capital requirements will depend upon numerous factors, including revenue from
product sales, revenue from licensing of technology and product development, the
progress of the Company's market research, product development and ability to
obtain partners with the appropriate manufacturing, sales, distribution and
marketing capabilities. The Company's capital requirements also will depend on
the levels of resources devoted to the development of manufacturing
capabilities, technological advances, the status of competitive products and the
ability of the Company to establish partners or strategic alliances to provide
funding to the Company for certain manufacturing, sales, product development and
marketing activities.
The Company expects to incur substantial additional marketing expense
and product development expense. Capital expenditures may be necessary to
establish additional commercial scale manufacturing facilities. The
10
Company will need to raise substantial additional funds for longer-term product
development, manufacturing and marketing activities that may be required in the
future. The Company's ability to continue funding its planned operations is
dependent upon its ability to generate product revenues or to obtain additional
funds through equity or debt financing, strategic alliances, license agreements
or from other financing sources. A lack of adequate revenues or funding could
eventually result in the insolvency or bankruptcy of the Company. At a minimum,
if adequate funds are not available, the Company may be required to delay or to
eliminate expenditures for certain of its product development efforts or to
license to third parties the rights to commercialize products or technologies
that it would otherwise seek to develop itself. Because of the Company's
significant long-term capital requirements, it may seek to raise funds when
conditions are favorable, even if the Company does not have an immediate need
for such additional capital at such time. If the Company has not raised funds
prior to when its needs for funding become immediate, the Company may be forced
to raise funds when conditions are unfavorable, which could result in
significant dilution for current stockholders.
As of October 2, 2000, the Company's Common Stock has been moved
from listing on the Nasdaq National Market, to listing on the Nasdaq SmallCap
Market under a conditional, temporary exception to the net tangible assets
requirement for listing on the SmallCap Market. The net tangible asset
exception requires that on or before January 2, 2001 the Company must make a
public filing with the Securities and Exchange Commission and Nasdaq showing
that the Company had net tangible assets of at least $3.8 million based on
the balance sheet at November 30, 2000 as adjusted for any significant events
or transactions occurring on or before the filing date. The Company was also
granted temporary exception from the $1.00 per share minimum bid price
requirement for listing on the SmallCap Market. The temporary minimum bid
price exception applies for up to 90 days from the date on which the bid
price for a share of the Company's common stock closed below $1.00. During
the 90 day exception period the closing bid price for the Company's common
stock must reach at least $1.00 per share and thereafter the closing bid
price must remain at not less than $1.00 per share for a minimum of ten
consecutive trading days.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q for the third quarter ended September 30, 2000
contains certain forward looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. Such
forward-looking statements are based on the beliefs of the Company's
management as well as on assumptions made by and information currently
available to the Company at the time such statements were made. When used in
this Form 10-Q, the words "anticipate", "believe", "estimate", "expect",
"intend" and similar expressions, as they relate to the Company, are intended
to identify such forward-looking statements. Although the Company believes
these statements are reasonable, readers of this Form 10-Q should be aware
that actual results could differ materially from those projected by such
forward-looking statements as a result of the risk factors listed below and
set forth in the Company's Annual Report on Form 10-K for 1999 ("Form 10-K")
under the caption "Risk Factors." Readers of this Form 10-Q should consider
carefully the factors listed below and under the caption "Risk Factors" in
the Company's Form 10-K, as well as the other information and data contained
in this Form 10-Q. The Company cautions the reader, however, that such list
of factors under the caption "Risk Factors" in the Company's Form 10-K may
not be exhaustive and that those or other factors, many of which are outside
of the Company's control, could have a material adverse effect on the Company
and its results of operations. Factors that could cause actual results to
differ include, without limitation, the Company's ability to achieve a
profitable level of operations, to generate sufficient working capital and
obtain necessary financing to meet capital requirements, loss of Nasdaq
Listing, the Company's ability to form strategic alliances with marketing and
distribution partners, the Company's exposure to product liability claims,
delays or high costs in product developments, consumers' perception of
product safety and quality, the Company's reliance on flawed market research,
potential competitors that are larger and financially stronger, the Company's
ability to receive regulatory approval for its products and the Company's
ability to manufacture an acceptable product on a commercial scale. All
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by the cautionary
statements set forth hereunder and under the caption "Risk Factors" in the
Company's Form 10-K.
RISK FACTORS
Certain statements made above (some of which are summarized below), are
forward-looking statements that involve risks and uncertainties, and actual
results may differ. Factors that could cause actual results to differ include
those identified below. As used below "we" and "our" mean the Company and the
Company's, respectively.
11
WE MAY NOT EVER ACHIEVE A PROFITABLE LEVEL OF OPERATIONS.
Our ability to achieve profitable operations depends in large part on:
- entering into agreements to develop products and establish
markets for those products; and
- making the transition from a research company to an operating
and marketing company.
We cannot be sure we will be successful in ever achieving either
result. We have experienced significant operating losses in each year since our
inception in 1987. We have an accumulated deficit of $63 million as of September
30, 2000. We may continue to lose money in the future.
GALAGEN AND THE OWNERS OF SHARES OF OUR COMMON STOCK MAY HAVE
DIFFICULTY IN SELLING OUR COMMON STOCK IN THE FUTURE IF OUR COMMON STOCK IS
REMOVED FROM LISTING ON THE NASDAQ SMALLCAP MARKET.
Our common stock is listed on the Nasdaq SmallCap Market under a
conditional, temporary exception to the net tangible assets requirement for
listing on the SmallCap Market. If we do not meet the conditions related to the
exception, our common stock will be removed from listing on the SmallCap Market
and the trading price for our common stock may fall. The net tangible asset
exception requires that on or before January 2, 2001 we must make a public
filing with the Securities and Exchange Commission and Nasdaq showing that we
had net tangible assets of at least $3.8 million based on our balance sheet at
November 30, 2000 as adjusted for any significant events or transactions
occurring on or before the filing date. We have also been granted temporary
exception from the $1.00 per share minimum bid price requirement for listing on
the SmallCap Market. The temporary minimum bid price exception applies for up to
90 days from the date on which the bid price for a share of our common stock
closed below $1.00. During the 90 day exception period the closing bid price for
our common stock must reach at least $1.00 per share and thereafter the closing
bid price must remain at not less than $1.00 per share for a minimum of ten
consecutive trading days. If we do not meet the conditions related to either of
the Nasdaq SmallCap listing requirement exceptions, our common stock will be
removed from listing on the Nasdaq SmallCap Market.
We cannot be sure that our common stock will continue to be listed on
the SmallCap Market. It may be more difficult for owners of our common stock to
sell shares if our common stock is not listed on the Nasdaq SmallCap Market.
Also, we may have more difficulty raising funds through the sale of our common
stock or securities convertible into common stock if our common stock is not
listed on the Nasdaq SmallCap Market. We would be required to demonstrate
compliance with the applicable requirements for initial inclusion of a security
on the Nasdaq SmallCap Market before our common stock would be listed again on
that exchange. The requirements for initial inclusion are more stringent than
those for continued listing.
IF WE CANNOT OBTAIN CONTINUING FUNDING, WE MAY BE UNABLE TO IMPLEMENT
OUR BUSINESS PLANS.
We are actively seeking additional financial resources from a
variety of potential sources. If we cannot find adequate funding, we may have
to delay or eliminate some of our product development plans. We may be
required to grant licenses to others to establish markets for products or
technologies that we would otherwise seek to market ourselves.
We currently expect that our financial resources will be sufficient
to sustain our operations to the second quarter of 2001. However, our actual
requirements for financial resources depend on numerous factors. These
factors include:
- our spending on marketing activities, including clinical
marketing trials;
- our progress in finding partners to help us develop products
and market those products;
- the willingness and ability of our partners to provide funding
for our activities;
- our spending on product development programs;
- the rate of technological advances in the production of our
products;
- our spending on facilities, equipment and personnel to make
our products; and
- the status of competitive products.
Our long-term ability to continue funding our planned operations
depends on our ability to obtain additional funds through:
- product revenues;
- equity or debt financing;
12
- finding partners to help us develop products and market those
products;
- license agreements; or
- other financing sources.
Because of our significant long-term capital requirements, we may seek
to raise funds when conditions are favorable. We may do so even if we do not
have an immediate need for the capital at the time we raise it. If we have not
raised funds prior to when our needs for funding become immediate, we may be
forced to raise funds when conditions are unfavorable. This could result in
significant dilution of our current stockholders.
IF WE DO NOT ACHIEVE A PROFITABLE LEVEL OF OPERATIONS AND CANNOT FIND
FUNDING IN THE FUTURE, WE COULD EVENTUALLY BECOME INSOLVENT OR BANKRUPT.
If we do not achieve a profitable level of operations and we do not
obtain funding necessary from some source other than operations, we could
eventually deplete our cash reserves and become insolvent or bankrupt.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT EXCEED OUR INSURANCE
COVERAGE.
Our business involves exposure to potential product liability risks
that are inherent in the production, manufacture and distribution of consumer
and clinical food products that are designed to be ingested. The successful
assertion or settlement of any uninsured claim, a significant number of insured
claims or a claim exceeding our insurance coverage could have a material adverse
effect on our business and financial condition. We cannot be sure that we will
be able to obtain product liability insurance on acceptable terms or that
provides adequate protection. Furthermore, we cannot be sure that we will be
able to secure increased insurance coverage as the markets for our products
increase.
THE RELATIVELY LOW LEVEL OF TRADING IN OUR COMMON STOCK MAY MAKE IT
HIGHLY VOLATILE.
While our Common Stock has been traded on the Nasdaq National Market
since our initial public offering, the volume of shares of Common Stock traded
on that market has been relatively small. Given the small volume of shares
traded, market fluctuations may have a particularly adverse effect on the market
price of our Common Stock. We cannot be sure of the liquidity of the market for
the Common Stock or the price at which any sales may occur. The volume of
trading in our Common Stock in the future will depend upon the number of holders
of the Common Stock, the interest of securities dealers in maintaining a market
in the Common Stock and other factors beyond our control. The market price of
our Common Stock could be subject to significant fluctuations in response to:
- our operating results;
- the operating results of our competitors or other
biotechnology companies;
- technological developments;
- government regulations;
- the status of our proprietary rights to potential products;
- litigation;
- public safety concerns; and
- other factors.
Some of these factors are unrelated to our operating performance and
beyond our control.
IF WE RELY ON INACCURATE MARKET INFORMATION, WE COULD MAKE DECISION
THAT HAS A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL CONDITION.
Because we are currently developing our products and markets for those
products, we are particularly reliant on market data. If that data is
inaccurate, we may commit resources to product development and marketing efforts
that do not become profitable. Product development and marketing efforts that do
not become profitable may have a material adverse effect on our business and
financial condition. We have obtained market and related data from a
competitive-market analysis firm. We have not independently verified the
accuracy of that information. In any event, the methodology typically used in
compiling market and related data makes it subject to inherent uncertainties and
estimations. As a result, we cannot be sure as to the accuracy or completeness
of our market information.
13
INADEQUATE PROVENTRA PRODUCTION COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS AND FINANCIAL CONDITION.
Given our limited experience in manufacturing Proventra, we cannot
be sure that we will be successful in producing Proventra of acceptable
quality on a commercial scale and at acceptable costs in our manufacturing
facility. If we cannot, our business and financial condition could be
materially adversely affected. Our production of Proventra will be regulated
by the Minnesota Department of Agriculture. Compliance with regulatory
requirements may affect our ability to produce Proventra in commercial
quantities.
FAILURE OF OUR COLLABORATIONS TO DEVELOP AND MARKET PRODUCTS CONTAINING
PROVENTRA COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL
CONDITION.
We are relying on collaborations with larger more established companies
to develop and market products containing Proventra. Our collaborators'
inability to bring products to market could have a material adverse effect on
our business and financial condition. Introduction of new products depends on
our ability and our collaborators' ability to accomplish the following:
- complete market research;
- complete product development;
- establish product manufacturing;
- initiate marketing, sales and distribution activities related
to such products; and
- provide the funding necessary to accomplish such activities.
DELAYS OR HIGH COSTS IN PRODUCT DEVELOPMENT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL CONDITION.
If we, or our strategic partners, cannot develop a product
responsive to the needs identified by a particular market, our business and
financial condition could be materially adversely affected. The amount of
time it will take us, together with our strategic partners, to develop
consumer and clinical nutrition products and the associated costs of
developing those products depends on, among other things, the results of our
market research for consumer and clinical products. It also depends on our
discussions with certain end users or purchasers of the potential products.
Market research and discussions may give us indications of potential
customers, what types of products they may desire and what clinical
information is necessary for effective marketing and sales.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk is unlikely to have a material adverse effect
on the Company's business, results of operations or financial condition.
14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a.) EXHIBITS
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
3.1 Intentionally left blank.
3.2 Restated Certificate of Incorporation of the Company.(3) Incorporated By
Reference
3.3 Intentionally left blank.
3.4 Restated Bylaws of the Company.(1) Incorporated By
Reference
4.1 Specimen Common Stock Certificate.(1) Incorporated By
Reference
4.2-4.5 Intentionally left blank.
4.6 Form of Common Stock Warrant to purchase shares of Incorporated By
Common Stock of the Company, issued in connection with Reference
the sale of Convertible Promissory Notes.(1)
4.7-4.10 Intentionally left blank.
4.11 Warrant to purchase 18,250 shares of Common Stock of Incorporated By
the Company issued to IAI Investment Funds VI, Inc. Reference
(IAI Emerging Growth Fund), dated January 30, 1996.(1)
4.12 Warrant to purchase 6,250 shares of Common Stock of the Incorporated By
Company issued to IAI Investment Funds IV, Inc. (IAI Reference
Regional Fund), dated January 30, 1996.(1)
4.13 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to John Pappajohn, dated February 2, Reference
1996.(1)
4.14 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to Edgewater Private Equity Fund, Reference
L.P., dated February 2, 1996.(1)
4.15 Warrant to purchase 10,000 shares of Common Stock of Incorporated By
the Company issued to Joseph Giamenco, dated February Reference
2, 1996.(1)
4.16 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to Gus A. Chafoulias, dated February Reference
2, 1996.(1)
4.17 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to JIBS Equities, dated February 2, Reference
1996.(1)
4.18 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to Land O'Lakes, Inc., dated Reference
February 2, 1996.(1)
4.19 6% Convertible Debenture Purchase Agreement dated Incorporated By
November 18, 1997 among the Company and the Purchasers Reference
named therein.(8)
15
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
4.20 Registration Rights Agreement dated November 18, 1997 Incorporated By
among the Company and the Holders named therein.(9) Reference
4.21-4.23 Intentionally left blank.
4.24 Stock Purchase Warrant issued to CPR (USA) Inc. dated Incorporated By
November 18, 1997.(13) Reference
4.25 Stock Purchase Warrant issued to Libertyview Plus Fund Incorporated By
dated November 18, 1997.(14) Reference
4.26 Stock Purchase Warrant issued to Libertyview Fund, LLC Incorporated By
dated November 18, 1997.(15) Reference
4.27 Intentionally left blank.
4.28 Warrant issued to CLARCO Holdings dated as of December 1, Incorporated By
1997.(17) Reference
4.29 Intentionally left blank.
4.30 Warrant issued to Henry J. Cardello dated as of April 13, Incorporated By
1998. (20) Reference
4.31 Warrant issued to Henry J. Cardello dated as of April 30, Incorporated By
1998. (20) Reference
4.32 Warrant issued to Henry J. Cardello dated as of June 19, Incorporated By
1998. (20) Reference
4.33 Warrant issued to William Young and Rebecca Young dated Incorporated By
as of August 12, 1998.(24) Reference
4.34 Warrant issued to Henry J. Cardello dated as of Incorporated By
September 30, 1998.(24) Reference
4.35 Warrant issued to American Home Products Corporation Incorporated By
dated as of October 15, 1998.(24) Reference
4.36 Form of Registration Rights Agreement dated April 20, Incorporated By
1999.(25) Reference
4.37 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (Lombard Odier & Cie).(26) Reference
4.38 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (H. Leigh Severance).(27) Reference
4.39 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (H. L. Severance, Inc. Profit Sharing Reference
Plan and Trust).(28)
4.40 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (H. L. Severance, Inc. Pension Plan and Reference
Trust).(29)
4.41 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (Winston R. Wallin).(30) Reference
16
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
4.42 Warrant issued to Carlson Real Estate Company, Inc. Electronic
dated as of July 6, 2000. Transmission
4.43 Subscription Agreement and Investment Letter dated Incorporated By
October 11, 2000. (34) Reference
#10.1 License Agreement between the Company and Land O'Lakes Incorporated By
dated May 7, 1992.(1) Reference
#10.2 Royalty Agreement between the Company and Land O'Lakes Incorporated By
dated May 7, 1992.(1) Reference
10.3 Intentionally left blank.
10.4 Master Services Agreement between the Company and Land Incorporated By
O'Lakes dated May 7, 1992.(1) Reference
*10.5 GalaGen Inc. 1992 Stock Plan, as amended. (5) Incorporated By
Reference
10.6-10.7 Intentionally left blank.
#10.8 License and Collaboration Agreement between the Company Incorporated By
and Chiron Corporation dated March 20, 1995.(1) Reference
*10.9 GalaGen Inc. Employee Stock Purchase Plan, as amended. Incorporated By
(2) Reference
10.10-10.11 Intentionally left blank.
10.12 Master Equipment Lease between the Company and Cargill Incorporated By
Leasing Corporation, dated June 6, 1996. (2) Reference
10.13 Agreement for Progress Payments between the Company and Incorporated By
Cargill Leasing Corporation, dated June 6, 1996. (2) Reference
10.14 Agreement for Lease between the Company and Land Incorporated By
O'Lakes, dated June 3, 1996. (2) Reference
10.15-10.18 Intentionally left blank.
*10.19 GalaGen Inc. Annual Short Term Incentive Cash Incorporated By
Compensation Plan. (4) Reference
*10.20 GalaGen Inc. Annual Long Term Incentive Stock Option Incorporated By
Compensation Plan. (4) Reference
*10.21 GalaGen Inc. 1997 Incentive Plan. (6) Incorporated By
Reference
10.22 Master Loan and Security Agreement with TransAmerica Incorporated By
Business Credit Corporation dated June 8, 1997. (7) Reference
10.23 Amended and Restated License Agreement between the Incorporated By
Company and Land O'Lakes dated March 11, 1998. (19) Reference
#10.24 License Agreement between the Company and Metagenics, Incorporated By
Inc.
17
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
dated April 7, 1998. (20) Reference
10.25 Intentionally left blank.
10.26 Asset Purchase Agreement between the Company and Incorporated By
Nutrition Medical, Inc., dated September 1, 1998.(21) Reference
10.27 Intentionally left blank.
10.28 Asset Purchase Agreement Amendment 1 between the Incorporated By
Company and Nutrition Medical, Inc., dated October 28, Reference
1998.(22)
10.29 Asset Purchase Agreement Amendment 2 between the Incorporated By
Company and Nutrition Medical, Inc., dated December 23, Reference
1998.(23)
#10.30 Collaboration and License Agreement between the Company Incorporated By
and American Home Products Corporation acting through Reference
its Wyeth-Ayerst Laboratories Division, dated October
15, 1998. (24)
#10.31 Manufacturing and Supply Agreement between the Company Incorporated By
and American Home Products Corporation acting through Reference
its Wyeth-Ayerst Laboratories Division dated October
15, 1998.(24)
#10.32 Product Development Collaboration, Manufacturing and Incorporated By
Supply, and Retail Marketing Agreement between the Reference
Company and General Nutrition Corporation, dated
December 22, 1998.(24)
*10.33 Letter agreement with Henry J. Cardello, dated January Incorporated By
1, 1999.(31) Reference
10.34 Repurchase Agreement by and between GalaGen Inc. and Incorporated By
Chiron Corporation, dated April 1, 1999.(31) Reference
#10.35 Licensing and Distribution Agreement by and between Incorporated By
GalaGen Inc. and American Institutional Products, Inc., Reference
dated March 15, 1999.(31)
*10.36 Letter agreement with Frank L. Kuhar, dated June 3, Incorporated By
1999 (32). Reference
10.37 Licensing and distribution agreement between GalaGen Incorporated By
Inc. and American Institutional Products, Inc., dated Reference
July 15, 1999 (32).
10.38 Licensing Agreement by and between GalaGen Inc. and Incorporated By
Novartis Consumer Health, Inc., dated October 25, 1999 Reference
(33).
10.39 Supply Agreement by and between GalaGen Inc. and Incorporated By
Novartis Consumer Health, Inc., dated October 25, 1999 Reference
(33).
10.40 Development Agreement by and between GalaGen Inc. and Incorporated By
Novartis Consumer Health, Inc., dated December 17, 1999 Reference
(33).
10.41 Office lease agreement between Carlson Real Estate Electronic
Company, Inc. and GalaGen Inc., dated July 6, 2000. Transmission
##10.42 Supply Agreement by and between GalaGen Inc. and Electronic
Estee Lauder, Inc., dated July 20, 2000. Transmission
18
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
27.1 Financial Data Schedule for the period ended September Electronic
30, 2000. Transmission
(1) Incorporated herein by reference to the same numbered Exhibit to
the Company's Registration Statement on Form S-1 (Registration
No. 333-1032).
(2) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1996 (File No. 0-27976).
(3) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1996 (File No. 0-27976).
(4) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1996 (File No. 0-27976).
(5) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997 (File No. 0-27976).
(6) Incorporated herein by reference to Appendix A to the Company's
1997 Definitive Proxy Statement on Schedule 14A (File No.
0-27976).
(7) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997 (File No. 0-27976).
(8) Incorporated herein by reference to Exhibit No. 4.4 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(9) Incorporated herein by reference to Exhibit No. 4.5 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(10) Intentionally not used.
(11) Intentionally not used.
(12) Intentionally not used.
(13) Incorporated herein by reference to Exhibit No. 4.9 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(14) Incorporated herein by reference to Exhibit No. 4.10 to the
Company's Registration Statement on Form S-3(Registration No.
333-41151).
(15) Incorporated herein by reference to Exhibit No. 4.11 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(16) Intentionally not used.
(17) Incorporated herein by reference to Exhibit No. 4.13 to Amendment
No. 1 to the Company's Registration Statement on Form S-3
(Registration No. 333-41151).
(18) Intentionally not used.
(19) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1997 (File No. 0-27976).
19
(20) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998 (File No. 0-27976).
(21) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1998 (File No. 0-27976).
(22) Incorporated herein by reference to Exhibit No. 2.2 to the
Company's Report on Form 8-K, dated December 23, 1998 (File No.
0-27976).
(23) Incorporated herein by reference to Exhibit No. 2.3 to the
Company's Report on Form 8-K, dated December 23, 1998 (File No.
0-27976).
(24) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1998 (File No. 0-27976).
(25) Incorporated herein by reference to Exhibit No. 4.5 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(26) Incorporated herein by reference to Exhibit No. 4.6 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(27) Incorporated herein by reference to Exhibit No. 4.7 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(28) Incorporated herein by reference to Exhibit No. 4.8 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(29) Incorporated herein by reference to Exhibit No. 4.9 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(30) Incorporated herein by reference to Exhibit No. 4.10 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(31) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1999 (File No. 0-27976).
(32) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 0-27976).
(33) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1999 (File No. 0-27976).
(34) Incorporated herein by reference to Exhibit No. 99 to the
Company's Report on Form 8-K, dated October 13, 2000 (File No.
0-27976).
* Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-K.
# Contains portions for which confidential treatment has been
granted to the Company.
## Contains portions for which confidential treatment has been
requested by the Company.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
20
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.
GalaGen Inc.
(Registrant)
Date: November 14, 2000 By: /s/ Henry J. Cardello
---------------------------------------
Henry J. Cardello,
Chief Executive Officer
Date: November 14, 2000 By: /s/ Franklin L. Kuhar
---------------------------------------
Franklin L. Kuhar,
Vice President, Chief Financial Officer,
Secretary
(Principal Financial Officer and
Principal Accounting Officer)
21
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
3.1 Intentionally left blank.
3.2 Restated Certificate of Incorporation of the Company.(3) Incorporated By
Reference
3.3 Intentionally left blank.
3.4 Restated Bylaws of the Company.(1) Incorporated By
Reference
4.1 Specimen Common Stock Certificate.(1) Incorporated By
Reference
4.2-4.5 Intentionally left blank.
4.6 Form of Common Stock Warrant to purchase shares of Incorporated By
Common Stock of the Company, issued in connection with Reference
the sale of Convertible Promissory Notes.(1)
4.7-4.10 Intentionally left blank.
4.11 Warrant to purchase 18,250 shares of Common Stock of Incorporated By
the Company issued to IAI Investment Funds VI, Inc. Reference
(IAI Emerging Growth Fund), dated January 30, 1996.(1)
4.12 Warrant to purchase 6,250 shares of Common Stock of the Incorporated By
Company issued to IAI Investment Funds IV, Inc. (IAI Reference
Regional Fund), dated January 30, 1996.(1)
4.13 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to John Pappajohn, dated February 2, Reference
1996.(1)
4.14 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to Edgewater Private Equity Fund, Reference
L.P., dated February 2, 1996.(1)
4.15 Warrant to purchase 10,000 shares of Common Stock of Incorporated By
the Company issued to Joseph Giamenco, dated February Reference
2, 1996.(1)
4.16 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to Gus A. Chafoulias, dated February Reference
2, 1996.(1)
4.17 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to JIBS Equities, dated February 2, Reference
1996.(1)
4.18 Warrant to purchase 25,000 shares of Common Stock of Incorporated By
the Company issued to Land O'Lakes, Inc., dated Reference
February 2, 1996.(1)
4.19 6% Convertible Debenture Purchase Agreement dated Incorporated By
November 18, 1997 among the Company and the Purchasers Reference
named therein.(8)
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
4.20 Registration Rights Agreement dated November 18, 1997 Incorporated By
among the Company and the Holders named therein.(9) Reference
4.21-4.23 Intentionally left blank.
4.24 Stock Purchase Warrant issued to CPR (USA) Inc. dated Incorporated By
November 18, 1997.(13) Reference
4.25 Stock Purchase Warrant issued to Libertyview Plus Fund Incorporated By
dated November 18, 1997.(14) Reference
4.26 Stock Purchase Warrant issued to Libertyview Fund, LLC Incorporated By
dated November 18, 1997.(15) Reference
4.27 Intentionally left blank.
4.28 Warrant issued to CLARCO Holdings dated as of December 1, Incorporated By
1997.(17) Reference
4.29 Intentionally left blank.
4.30 Warrant issued to Henry J. Cardello dated as of April 13, Incorporated By
1998. (20) Reference
4.31 Warrant issued to Henry J. Cardello dated as of April 30, Incorporated By
1998. (20) Reference
4.32 Warrant issued to Henry J. Cardello dated as of June 19, Incorporated By
1998. (20) Reference
4.33 Warrant issued to William Young and Rebecca Young dated Incorporated By
as of August 12, 1998.(24) Reference
4.34 Warrant issued to Henry J. Cardello dated as of Incorporated By
September 30, 1998.(24) Reference
4.35 Warrant issued to American Home Products Corporation Incorporated By
dated as of October 15, 1998.(24) Reference
4.36 Form of Registration Rights Agreement dated April 20, Incorporated By
1999.(25) Reference
4.37 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (Lombard Odier & Cie).(26) Reference
4.38 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (H. Leigh Severance).(27) Reference
4.39 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (H. L. Severance, Inc. Profit Sharing Reference
Plan and Trust).(28)
4.40 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (H. L. Severance, Inc. Pension Plan and Reference
Trust).(29)
4.41 Subscription Agreement and Investment Letter dated Incorporated By
April 20, 1999 (Winston R. Wallin).(30) Reference
4.42 Warrant issued to Carlson Real Estate Company, Inc. Electronic
dated as of
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
July 6, 2000. Transmission
4.43 Subscription Agreement and Investment Letter dated Incorporated By
October 11, 2000. (34) Reference
#10.1 License Agreement between the Company and Land O'Lakes Incorporated By
dated May 7, 1992.(1) Reference
#10.2 Royalty Agreement between the Company and Land O'Lakes Incorporated By
dated May 7, 1992.(1) Reference
10.3 Intentionally left blank.
10.4 Master Services Agreement between the Company and Land Incorporated By
O'Lakes dated May 7, 1992.(1) Reference
*10.5 GalaGen Inc. 1992 Stock Plan, as amended. (5) Incorporated By
Reference
10.6-10.7 Intentionally left blank.
#10.8 License and Collaboration Agreement between the Company Incorporated By
and Chiron Corporation dated March 20, 1995.(1) Reference
*10.9 GalaGen Inc. Employee Stock Purchase Plan, as amended. Incorporated By
(2) Reference
10.10-10.11 Intentionally left blank.
10.12 Master Equipment Lease between the Company and Cargill Incorporated By
Leasing Corporation, dated June 6, 1996. (2) Reference
10.13 Agreement for Progress Payments between the Company and Incorporated By
Cargill Leasing Corporation, dated June 6, 1996. (2) Reference
10.14 Agreement for Lease between the Company and Land Incorporated By
O'Lakes, dated June 3, 1996. (2) Reference
10.15-10.18 Intentionally left blank.
*10.19 GalaGen Inc. Annual Short Term Incentive Cash Incorporated By
Compensation Plan. (4) Reference
*10.20 GalaGen Inc. Annual Long Term Incentive Stock Option Incorporated By
Compensation Plan. (4) Reference
*10.21 GalaGen Inc. 1997 Incentive Plan. (6) Incorporated By
Reference
10.22 Master Loan and Security Agreement with TransAmerica Incorporated By
Business Credit Corporation dated June 8, 1997. (7) Reference
10.23 Amended and Restated License Agreement between the Incorporated By
Company and Land O'Lakes dated March 11, 1998. (19) Reference
#10.24 License Agreement between the Company and Metagenics, Incorporated By
Inc. dated April 7, 1998. (20) Reference
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
10.25 Intentionally left blank.
10.26 Asset Purchase Agreement between the Company and Incorporated By
Nutrition Medical, Inc., dated September 1, 1998.(21) Reference
10.27 Intentionally left blank.
10.28 Asset Purchase Agreement Amendment 1 between the Incorporated By
Company and Nutrition Medical, Inc., dated October 28, Reference
1998.(22)
10.29 Asset Purchase Agreement Amendment 2 between the Incorporated By
Company and Nutrition Medical, Inc., dated December 23, Reference
1998.(23)
#10.30 Collaboration and License Agreement between the Company Incorporated By
and American Home Products Corporation acting through Reference
its Wyeth-Ayerst Laboratories Division, dated October
15, 1998. (24)
#10.31 Manufacturing and Supply Agreement between the Company Incorporated By
and American Home Products Corporation acting through Reference
its Wyeth-Ayerst Laboratories Division dated October
15, 1998.(24)
#10.32 Product Development Collaboration, Manufacturing and Incorporated By
Supply, and Retail Marketing Agreement between the Reference
Company and General Nutrition Corporation, dated
December 22, 1998.(24)
*10.33 Letter agreement with Henry J. Cardello, dated January Incorporated By
1, 1999.(31) Reference
10.34 Repurchase Agreement by and between GalaGen Inc. and Incorporated By
Chiron Corporation, dated April 1, 1999.(31) Reference
#10.35 Licensing and Distribution Agreement by and between Incorporated By
GalaGen Inc. and American Institutional Products, Inc., Reference
dated March 15, 1999.(31)
*10.36 Letter agreement with Frank L. Kuhar, dated June 3, Incorporated By
1999 (32). Reference
10.37 Licensing and distribution agreement between GalaGen Incorporated By
Inc. and American Institutional Products, Inc., dated Reference
July 15, 1999 (32).
10.38 Licensing Agreement by and between GalaGen Inc. and Incorporated By
Novartis Consumer Health, Inc., dated October 25, 1999 Reference
(33).
10.39 Supply Agreement by and between GalaGen Inc. and Incorporated By
Novartis Consumer Health, Inc., dated October 25, 1999 Reference
(33).
10.40 Development Agreement by and between GalaGen Inc. and Incorporated By
Novartis Consumer Health, Inc., dated December 17, 1999 Reference
(33).
10.41 Office lease agreement between Carlson Real Estate Electronic
Company, Inc. and GalaGen Inc., dated July 6, 2000. Transmission
##10.42 Supply Agreement by and between GalaGen Inc. and Electronic
Estee Lauder, Inc., dated July 20, 2000. Transmission
27.1 Financial Data Schedule for the period ended September Electronic
30, 2000.
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
Transmission
(1) Incorporated herein by reference to the same numbered Exhibit to
the Company's Registration Statement on Form S-1 (Registration
No. 333-1032).
(2) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1996 (File No. 0-27976).
(3) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1996 (File No. 0-27976).
(4) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1996 (File No. 0-27976).
(5) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997 (File No. 0-27976).
(6) Incorporated herein by reference to Appendix A to the Company's
1997 Definitive Proxy Statement on Schedule 14A (File No.
0-27976).
(7) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997 (File No. 0-27976).
(8) Incorporated herein by reference to Exhibit No. 4.4 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(9) Incorporated herein by reference to Exhibit No. 4.5 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(10) Intentionally not used.
(11) Intentionally not used.
(12) Intentionally not used.
(13) Incorporated herein by reference to Exhibit No. 4.9 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(14) Incorporated herein by reference to Exhibit No. 4.10 to the
Company's Registration Statement on Form S-3(Registration No.
333-41151).
(15) Incorporated herein by reference to Exhibit No. 4.11 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(16) Intentionally not used.
(17) Incorporated herein by reference to Exhibit No. 4.13 to Amendment
No. 1 to the Company's Registration Statement on Form S-3
(Registration No. 333-41151).
(18) Intentionally not used.
(19) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1997 (File No. 0-27976).
(20) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998 (File No. 0-27976).
(21) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1998 (File No. 0-27976).
(22) Incorporated herein by reference to Exhibit No. 2.2 to the
Company's Report on Form 8-K, dated December 23, 1998 (File No.
0-27976).
(23) Incorporated herein by reference to Exhibit No. 2.3 to the
Company's Report on Form 8-K, dated December 23, 1998 (File No.
0-27976).
(24) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1998 (File No. 0-27976).
(25) Incorporated herein by reference to Exhibit No. 4.5 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(26) Incorporated herein by reference to Exhibit No. 4.6 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(27) Incorporated herein by reference to Exhibit No. 4.7 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(28) Incorporated herein by reference to Exhibit No. 4.8 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(29) Incorporated herein by reference to Exhibit No. 4.9 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(30) Incorporated herein by reference to Exhibit No. 4.10 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(31) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1999 (File No. 0-27976).
(32) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 0-27976).
(33) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1999 (File No. 0-27976).
(34) Incorporated herein by reference to Exhibit No. 99 to the
Company's Report on Form 8-K, dated October 13, 2000 (File No.
0-27976).
* Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-K.
# Contains portions for which confidential treatment has been
granted to the Company.
## Contains portions for which confidential treatment has been
requested by the Company.