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 June 30, 1996.
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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.)
4001 Lexington Ave. North
Arden Hills, Minnesota 55126
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(Address of principal executive offices) (Zip Code)
(612) 481-2105
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(Registrant's telephone number, including area code)
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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--
7,129,377 shares as of July 26, 1996.
INDEX
GalaGen Inc.
(A Development Stage Company)
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets - June 30, 1996 and December 31, 1995...................3
Statements of Operations - Three month periods ended
June 30, 1996 and June 30, 1995, six month periods ended
June 30, 1996 and June 30, 1995, and for the period
November 17, 1987 (inception) through June 30, 1996....................5
Statements of Cash Flows - Six months ended
June 30, 1996 and June 30, 1995 and for the period
November 17, 1987 (inception) through June 30, 1996....................6
Notes to Financial Statements..........................................7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations......................10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................13
SIGNATURES....................................................................15
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GalaGen Inc.
(A Development Stage Company)
Balance Sheets
June 30, 1996 December 31, 1995
----------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,075,598 $ 509,339
Available-for-sale securities 6,460,894 -
Prepaid and deferred expenses 30,859 81,703
------------- -------------
Total current assets 15,567,351 591,042
Property, plant, & equipment: 379,993 230,484
Less accumulated depreciation (169,811) (149,783)
------------- -------------
Net property, plant, and equipment 210,182 80,701
Deferred financing expenses - 146,487
------------- -------------
Total assets $ 15,777,533 $ 818,230
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Accounts payable and accrued expenses 667,021 1,623,949
------------- -------------
Total current liabilities 667,021 1,623,949
Convertible promissory notes, net of
discount - 8,198,900
Other long-term liabilities 45,000 698,404
Shareholders' equity(deficiency):
Series A Preferred Stock, $.01 par value: - 25,000
Authorized shares - 2,500,000
Issued and outstanding shares - 0 -
June 30, 1996
Series B Preferred Stock, $.01 par value: - 12,347
Authorized shares - 1,300,000
Issued and outstanding shares - 0 -
June 30, 1996
Series C Preferred Stock, $.01 par value: - 5,510
Authorized shares - 551,000
Issued and outstanding shares - 0 -
June 30, 1996
Series E Preferred Stock, $.01 par value: - 3,385
Authorized shares - 5,000,000
Issued and outstanding shares - 0 -
June 30, 1996
Series F-1 Preferred Stock, $.01 par value: - 171
Authorized shares - 34,287
Issued and outstanding shares - 0 -
June 30, 1996
Preferred Stock, $.01 par value: - -
Authorized shares - 15,000,000 pro forma
Issued and outstanding shares - none
Common stock, $.01 par value: 71,294 19,521
Authorized shares - 40,000,000
Issued and outstanding shares
- 7,129,377 - June 30, 1996
Additional paid-in capital 59,125,877 23,812,106
Accumulated deficit (43,105,721) (32,400,329)
Deferred compensation (1,010,701) (1,180,734)
Unrealized gain/(loss) on available-for-
sale securities (15,237) -
------------- -------------
Total shareholders' equity (deficiency) $ 15,065,512 $ (9,703,023)
------------- -------------
Total liabilities and shareholders' equity
(deficiency) $ 15,777,533 $ 818,230
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------------- -------------
3
SEE ACCOMPANYING NOTES
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
4
GalaGen Inc.
(A Development Stage Company)
Statements of Operations (Unaudited)
Period from
For the Three Months Ended For the Six Months Ended November 17, 1987
-------------------------- ------------------------ (inception) to
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995 June 30, 1996
-------------------------------------------------------------------------------
Revenues:
Product sales $ - $ - $ - $ - $ 1,449,593
Product royalties - - - - 62,747
Research and development revenues - - - 100,000 396,350
---------- ---------- ---------- ---------- ------------
- - - 100,000 1,908,690
Operating costs and expenses:
Cost of goods sold - - - - 3,468,711
Research and development 1,088,862 1,010,539 1,785,721 2,269,165 19,723,637
General and administrative 437,419 401,673 912,670 703,025 13,071,906
---------- ---------- ---------- ---------- ------------
Operating loss (1,526,281) (1,412,212) (2,698,391) (2,872,190) (34,355,564)
Interest income 202,865 1,236 207,945 4,174 359,749
Interest expense (613,899) (116,515) (918,102) (214,435) (2,418,483)
---------- ---------- ---------- ---------- ------------
Net loss before extraordinary gain (1,937,315) (1,527,491) (3,408,548) (3,082,451) (36,414,298)
Extraordinary gain on extinguishment
of debt - - - - 605,421
---------- ---------- ---------- ---------- ------------
Net loss for the period and deficit
accumulated during the development stage (1,937,315) (1,527,491) (3,408,548) (3,082,451) (35,808,877)
Less preferred stock dividends (7,296,844) - (7,296,844) - (7,296,844)
---------- ---------- ---------- ---------- ------------
Net loss applicable to common shareholders $(9,234,159) $(1,527,491) $(10,705,392) $(3,082,451) $(43,105,721)
---------- ---------- ---------- ---------- ------------
---------- ---------- ---------- ---------- ------------
Net loss per share applicable to common shareholders:
Primary $ (1.30) $ (.76) $ (1.75) $ (1.52) $ (26.65)
Fully diluted $ (1.30) $ (.33) $ (1.75) $ (.67) $ (18.59)
Weighted average number of common shares outstanding:
Primary 7,129,263 2,021,857 6,105,442 2,021,752 1,617,617
Fully diluted 7,129,263 4,593,793 6,105,442 4,616,826 2,318,910
SEE ACCOMPANYING NOTES
5
GalaGen Inc.
(A Development Stage Company)
Statements of Cash Flows (Unaudited)
Period from
For the Six Months Ended November 17, 1987
------------------------ (inception) to
June 30, 1996 June 30, 1995 June 30, 1996
-----------------------------------------------------------
OPERATING ACTIVITIES:
Net loss $(10,705,392) $ (3,082,451) $(43,105,721)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 213,157 48,448 1,734,306
Preferred stock dividend 7,296,844 - 7,296,844
Interest expense 768,064 - 768,064
Extraordinary gain - - (605,421)
Equity issued for services - 311,078 3,115,224
Changes in operating assets and liabilities (1,457,226) 1,567,936 612,034
------------ ------------ ------------
Net cash used in operating activities $ (3,884,553) $ (1,154,989) $(30,184,670)
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchase of plant, property and equipment, net (149,509) (21,097) (2,136,039)
Purchase of available-for-sale securities (29,044,635) - (29,044,635)
Sale and maturities of available-for-sale securities 22,583,741 - 22,583,741
------------ ------------ ------------
Net cash from investing activities $ (6,610,403) $ (21,097) $ (8,596,933)
FINANCING ACTIVITIES:
Proceeds from equity offering 19,067,619 125,197 32,745,185
Proceeds from notes 500,000 700,000 15,618,420
Payment of notes, including interest (506,404) (506,404)
------------ ------------ ------------
Net cash used in financing activities $ 19,061,215 $ 825,197 $ 47,857,201
------------ ------------ ------------
Increase (decrease) in cash 8,566,259 (350,889) 9,075,598
Cash and cash equivalents at beginning of period 509,339 430,153 -
------------ ------------ ------------
Cash and cash equivalents at end of period $ 9,075,598 $ 79,264 $ 9,075,598
------------ ------------ ------------
------------ ------------ ------------
SCHEDULE OF NON CASH INVESTING AND FINANCING
ACTIVITIES:
Deferred compensation for employee options - - 1,657,000
Value of convertible debt warrants - 9,333 114,333
Conversion of convertible promissory notes plus
related accrued interest, net of financing costs 9,469,075 9,469,075
SEE ACCOMPANYING NOTES.
6
GalaGen Inc. (A Development Stage Company)
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 six month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended
December 31, 1996. These financial statements should be read in
conjunction with the audited financial statements and accompanying notes
for the fiscal year ended December 31, 1995, contained in the Company's
Prospectus dated March 27, 1996.
2. CASH AND CASH EQUIVALENTS
Cash equivalents include short-term highly liquid investments
purchased at cost, which approximates market, with original maturities
of three months or less.
3. INVESTMENTS
Investments in debt securities with a remaining maturity of more
than 90 days at the date of purchase are classified as marketable
securities. Management determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as of
each balance sheet date. Debt securities are classified as available-
for-sale as of June 30, 1996. The Company considers the net unrealized
gain (loss) on these investments to be temporary, and as such has
recorded it through shareholders' equity. The amortized cost and
estimated market value of investments are as follows:
Amortized Cost Gross Gross Estimated
Unrealized Gains Unrealized Losses Market Value
----------------------------------------------------------------------------
As of June 30, 1996
Commercial paper $ 967,272 $ 0 $ 0 $ 967,272
U.S. Government agency securities 990,539 0 (126) 990,413
U.S. Treasury securities 2,487,372 0 0 2,487,372
Investment grade debt securities 2,030,948 0 (15,111) 2,015,837
---------------- ---------------- ---------------- ----------------
$ 6,476,131 $ 0 $ (15,237) $ 6,460,894
The amortized cost and estimated market value of investments by contractual maturity are as follows:
Amortized Cost Gross Gross Estimated
Unrealized Gains Unrealized Losses Market Value
----------------------------------------------------------------------------
As of June 30, 1996
Due in one year or less $ 4,445,183 $ 0 $ (126) $ 4,445,057
Due after one year through two years 2,030,948 0 (15,111) 2,015,837
---------------- ---------------- ---------------- ----------------
$ 6,476,131 $ 0 $ (15,237) $ 6,460,894
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation
and amortization are provided for on the straight line method. At June
30, 1996 construction in progress consisted of leasehold improvements in
connection with the Company's pilot plant manufacturing facility (see
Note 5 of Notes to Financial Statements below). At June 30, 1996,
property and equipment consisted of the following:
Furniture, fixtures and equipment $ 250,929
Construction in progress 129,064
---------
379,993
Less accumulated depreciation (169,811)
---------
$ 210,182
7
5. COMMITMENTS
During June 1996 the Company entered into a series of leasing
agreements with Cargill Leasing Corporation ("Cargill") which includes a
Commitment Letter, Master Equipment Lease and an Agreement for Progress
Payments (the "Agreements"). The Agreements provide that the Company
may purchase up to $1,100,000 of manufacturing equipment for the
Company's pilot plant facility through lease take-downs from Cargill.
The lease take-down at June 30, 1996 was apprioximately $111,000. The
Company expects that the lease take-downs will end in September 1996 at
which time full lease payments will commence for a period of seven
years with the Company's option to extend for an additional 12 months.
Interest upon commencement of full lease payments will be computed on a
weighted average of LIBOR and the rate on five year U.S Treasury Notes.
Prior to the commencement of full lease payments, the Company is
required to make interest payments at prime plus 2% on the lease take-
down. The lease is guaranteed by Land O' Lakes, Inc. This lease will
be structured as an operating lease in accordance with FASB 13.
During June 1996, the Company entered into a five year lease
agreement with Land O' Lakes, Inc. for specified space within the Land
O' Lakes facility in connection with the Company's pilot plant
manufacturing facility. The lease calls for annual payments of
approximately $86,000 and can be extended for additional one year
periods at the option of the Company.
6. LINE OF CREDIT
In January 1996, the Company entered into a $2.7 million line of
credit agreement with a commercial bank, which expired with the closing
of the Company's initial public offering (the "Offering") on April 1,
1996. Loans under this line of credit were to be guaranteed by six
parties and the guarantee was collateralized by letters of credit posted
by them in the aggregate amount of $2.7 million. In consideration for
the guarantees and letters of credit posted by these parties, the
Company issued warrants to purchase an initial aggregate of 162,014
shares of common stock at an exercise price equal to 70% of the Offering
price, or $7.00 per share.
In connection with this transaction, each of John Pappajohn and
Land O'Lakes, Inc., guaranteed $500,000 of the $2.7 million line of
credit, and in exchange received a warrant to purchase 30,003 shares of
common stock at $7.00 per share. John Pappajohn is a director and
shareholder of the Company. Land O'Lakes, Inc. is a shareholder and has
a representative serving on the board of directors of the Company.
In January 1996, the Company issued two convertible promissory
notes for $375,000 and $125,000 to two investment funds controlled by
Investment Advisers, Inc., which is a shareholder and has a
representative serving on the board of directors of the Company. The
notes became due on completion of the Offering. The notes were
convertible into Series E Preferred Stock at the option of the holder.
In connection with these notes, the Company issued warrants to purchase
30,003 shares which are identical to the line of credit warrants
described above. The notes have been repaid.
7. REVERSE STOCK SPLIT
On January 19, 1996, the Board approved a reverse stock split of
3.6923-for-1 for the Company's outstanding common stock. The Company's
shareholders approved this reverse stock split in March 1996. All
information in the financial statements with respect to the common stock
and to the conversion prices and ratios of all the preferred stock have
been adjusted to reflect this change. The reverse stock split had no
effect on the numbers of shares of preferred stock issued and
outstanding (as opposed to the conversion prices of all the preferred
stock and the numbers of shares of common stock into which the preferred
stock will convert).
8. INITIAL PUBLIC OFFERING
GalaGen Inc. consummated the Offering on April 1, 1996, which
consisted of 2,000,000 shares of common stock at a $10 per share price
to the public. All of the Company's preferred stock mandatorily
converted into common stock immediately prior to the closing of the
Offering. Series A Preferred Stock converted on a 1-for-1 basis, Series
B Preferred Stock converted on a 1.625-for-1 basis, Series C Preferred
Stock converted on a 1.667-for-1 basis. The terms of the Series D,
Series E and Series F-1 Preferred Stock provided that the conversion
prices of such stock be automatically adjusted to reflect the lower of
their effective conversion price at the time of closing or 70% of the
initial public offering price in the Offering. The $7,296,844 value of
the additional shares received due to such adjustments by the holders of
Convertible Promissory Notes (which converted into Series D Preferred
Stock) and the Series E and Series F-1 Preferred Stock upon conversion,
based
8
on a conversion price of 70% of the Offering price of $10 per share, was
recorded in the second quarter of 1996 as a preferred stock dividend and
an increase to the net loss to arrive at net loss available to holders
of common stock in the calculation of net loss per share in the second
quarter.
Additionally, the 192,017 common stock warrants issued for
consideration for the guarantee of the Company's $2,700,000 line of
credit and for the $375,000 and $125,000 promissory notes described
above in Note 6 provide that the exercise price be equal to 70% of the
Offering price. The difference between the Offering price and exercise
price multiplied by the number of warrants, plus the intrinsic value of
the warrants was $768,064. Of that amount, $160,000 was recorded in the
first quarter of 1996 as interest expense, and $608,064 was recorded as
interest expense in the second quarter of 1996.
9. LOSS PER SHARE
The primary loss per share is based on the weighted average common
shares outstanding during the period. The fully diluted loss per share
assumes the conversion of preferred shares outstanding prior to the
initial public offering to common shares as of the beginning of the
period. The loss per share for periods prior to April 1, 1996, the
closing date of the Offering, also gives effect to the requirements of
Staff Accounting Bulletin No. 83 (SAB 83).
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
GalaGen Inc. is developing oral therapeutics that target
life-threatening and infectious diseases such as those caused by
antibiotic-resistant and emerging pathogens. The Company's naturally
derived immunotherapeutics are comprised of concentrated
pathogen-specific polyclonal antibodies which the Company produces in
concentrated form using its proprietary immunization technology. The
Company's products in development address serious gastrointestinal
infections complicating AIDS, cancer and antibiotic therapy, as well as
peptic ulcer disease. GalaGen's lead product in development, Sporidin-G,
is a polyclonal antibody product with specificity for Cryptosporidium
parvum, a parasite which causes chronic, life-threatening diarrhea in
AIDS and other immunocompromised patients.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
GENERAL. The net loss before preferred stock dividends of
$1,937,315 for the three months ended June 30, 1996 is greater than the
net loss of $1,527,491 for the three months ended June 30, 1995.
Historical spending levels are not indicative of future spending levels
because the Company is entering a period of rapid growth in product
development activity, which is planned to include substantial increases
in costs relating to personnel, research and development activity,
small-scale manufacturing facilities and accelerated clinical trial
activity. For these reasons, the Company believes its expenses and
losses will increase dramatically before any material product revenues
are generated.
RESEARCH AND DEVELOPMENT EXPENSES. Expenses for research and
development increased to $1,088,862 for the three months ended June 30,
1996 from $1,010,539 for the three months ended June 30, 1995. The
increase of $78,323 was due primarily to increased spending on clinical
trials and research and development personnel expense partially offset
by decreased expenses associated with the Company's transgenics program,
which was terminated in May 1995. The Company expects research and
development expenses to increase as the Company's clinical trials
activity accelerates, particularly expenses associated with the
development of SPORIDIN-G, the Company's lead product in development
aimed at treating C. parvum.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased to $437,419 for the three months ended June 30, 1996
from $401,673 for the three months ended June 30, 1995. The increase of
$35,746 was due to increases during the 1996 period in deferred
compensation, outside services and expenses associated with additional
staffing.
INTEREST INCOME AND EXPENSE. Interest income increased to
$202,865 for the three months ended June 30, 1996 from $1,236 for
the three months ended June 30, 1995. This increase is
attributable to the Company's increased level of investable funds which
resulted from the Offering. Interest expense increased to $613,899
for the three months ended June 30, 1996 from $116,515 for the
three months ended June 30, 1995. The $497,384 increase was due
primarily to the value of warrants issued to guarantors of a line
of credit and to the purchasers of two promissory notes (see Note 6
of Notes to Financial Statements), offset by decreased Convertible
Promissory Note interest expense due to the conversion of such
notes into common stock upon the Offering.
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT. The extraordinary
gain on extinguishment of debt of $605,421 in 1995 related to certain
debt reduction settlements regarding the Company's terminated
transgenics program.
PREFERRED STOCK DIVIDENDS. The preferred stock dividends of
$7,296,844 for the three months ended June 30, 1996 is a result of the
value of the additional shares issued to holders of the Series D,
Series E and Series F-1 Preferred Stock upon conversion to common stock
(see Note 8 of Notes to Financial Statements).
10
SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
GENERAL. The net loss before preferred stock dividends of
$3,408,548 for the six months ended June 30, 1996 is greater than the
net loss of $3,082,451 for the three months ended June 30, 1995.
Historical spending levels are not indicative of future spending levels
because the Company is entering a period of rapid growth in product
development activity, which is planned to include substantial increases
in costs relating to personnel, research and development activity,
small-scale manufacturing facilities and accelerated clinical trial
activity. For these reasons, the Company believes its expenses and
losses will increase dramatically before any material product revenues
are generated.
RESEARCH AND DEVELOPMENT EXPENSES. Expenses for research and
development decreased to $1,785,721 for the six months ended June 30,
1996 from $2,269,165 for the six months ended June 30, 1995. The
decrease of $483,444 was due primarily to a onetime $300,000 license fee
paid by the Company in March 1995 and the lack of activity during the six
months ended June 30, 1996 in the Company's transgenics program, which
was terminated in May 1995.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased to $912,670 for the six months ended June 30, 1996
from $703,025 for the six months ended June 30, 1995. The increase of
$209,645 was due to increases during the 1996 period in deferred
compensation, outside services, and expenses associated with additional
staffing.
INTEREST INCOME AND EXPENSE. Interest income increased to
$207,945 for the six months ended June 30, 1996 from $4,174 for the six
months ended June 30, 1995, This increase is attributable to the
Company's increased level of investable funds which resulted from the
Offering. Interest expense increased to $918,102 for the six months ended
June 30, 1996 from $214,435 for the six months ended June 30, 1995. The
$703,667 increase was due primarily to the value of warrants issued to
guarantors of a line of credit and to the purchasers of additional
Convertible Promissory Notes, offset by decreased Convertible
Promissory Note interest expense due to the conversion of such notes
into common stock.
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT. The extraordinary
gain on extinguishment of debt of $605,421 in 1995 related to certain
debt reduction settlements regarding the Company's terminated
transgenics program.
PREFERRED STOCK DIVIDENDS. The preferred stock dividends of
$7,296,844 for the six months ended June 30, 1996 is a result of the
value of the additional shares issued to holders of the Series D, Series
E and Series F-1 Preferred Stock upon conversion to common stock (see
Note 8 of Notes to Financial Statements) .
LIQUIDITY AND CAPITAL RESOURCES
Proceeds from the Company's Offering totalled $17.9 million
(after payment of related offering costs of approximately $1.4 million
for underwriting fees and $0.7 million for associated offering expenses).
The Company anticipates that these resources and interest thereon will
enable it to fund its operating expenses and capital requirements as
currently planned through approximately the end of the third quarter
of 1997.
Cash used in operations were $3,884,553 and $1,154,989 for
the six months ended June 30, 1996 and 1995, respectively. Cash
used in operations went primarily to fund operating losses. The
increase of $2,729,564 was due primarily to repayment of certain
obligations. The Company invested a net amount of $6,460,894 in
available-for-sale debt securities (see Note 3 of Notes to
Financial Statements) for the six months ended June 30, 1996 and
invested $149,509 and $21,097 for the six months ended June 30,
1996 and 1995, respectively, in computer equipment used to support
Company operations.
The Company expects to incur substantial additional research and
development and other costs, including costs related to clinical
studies, as well as capital expenditures necessary to establish
commercial scale cGMP manufacturing facilities. The Company will need to
raise substantial additional funds for longer term product development,
manufacturing and marketing activities it plans to undertake in the
future. The Company's ability to continue funding its planned operations
beyond the third quarter of 1997 is dependent upon its ability to obtain
additional funds through equity or debt financing, strategic alliances,
license agreements or from other financing sources. A lack of adequate
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
11
commercialize products or technologies that the Company 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 it does not have an immediate need for such
additional capital at such time.
Except for the historical information contained herein, matters
discussed in this Management's Discussion and Analysis of Financial
Condition and Results of Operations are forward-looking statements that
involve risks and uncertainties, and actual results may be materially
different. Factors that could cause actual results to differ include:
levels of resources devoted by the Company to the development of its
manufacturing and marketing capabilities, risks generally associated
with construction of manufacturing facilities, the ability of the
Company to make technological advances, the status of competitive
products, the ability of the Company to establish strategic alliances to
provide research and development funding to the Company and other risk
factors listed in the Company's Prospectus dated March 27, 1996.
12
Item 6. Exhibits and Reports on Form 8-K.
(a) EXHIBITS
Exhibit Description
------- -----------
3.2 Restated Certificate of Incorporation of the
Company.(1)
3.4 Restated Bylaws of the Company.(1)
4.1 Specimen Common Stock Certificate.(1)
4.2 Warrant to purchase 13,541 shares of common stock
of the Company issued to Piper Jaffray Inc., dated
January 26, 1993.(1)
4.3 Warrant to purchase 20,312 shares of common stock
of the Company issued to Gus A. Chafoulias, dated
October 12, 1993.(1)
4.4 Warrant to purchase 20,312 shares of common stock
of the Company issued to John Pappajohn, dated
October 12, 1993.(1)
4.5 Warrant to purchase 9,479 shares of common stock
of the Company issued to Cato Holding Company,
dated June 21, 1994.(1)
4.6 Form of Common Stock Warrant to purchase shares of
common stock of the Company, issued in connection
with the sale of Convertible Promissory Notes.(1)
4.7 Warrant to purchase 17,144 shares of Series F-1
Convertible Preferred Stock of the Company issued
to Chiron Corporation, dated March 29, 1995.(1)
4.8 Warrant to purchase 42,856 shares of Series F-2
Convertible Preferred Stock of the Company issued
to Chiron Corporation, dated March 29, 1995.(1)
4.9 Warrant to purchase 60,000 shares of Series F-3
Convertible Preferred Stock of the Company issued
to Chiron Corporation, dated March 29, 1995.(1)
4.10 Warrant to purchase 80,000 shares of Series F-3
Convertible Preferred Stock of the Company issued
to Chiron Corporation, dated March 29, 1995.(1)
4.11 Warrant to purchase 18,750 shares of common stock
of the Company issued to IAI Investment Funds VI,
Inc. (IAI Emerging Growth Fund), dated January 30,
1996.(1)
4.12 Warrant to purchase 6,250 shares of common stock
of the Company issued to IAI Investment Funds IV,
Inc. (IAI Regional Fund), dated January 30,
1996.(1)
4.13 Warrant to purchase 25,000 shares of common stock
of the Company issued to John Pappajohn, dated
February 2, 1996.(1)
4.14 Warrant to purchase 25,000 shares of common stock
of the Company issued to Edgewater Private Equity
Fund, L.P., dated February 2, 1996.(1)
4.15 Warrant to purchase 10,000 shares of common stock
of the Company issued to Joseph Giamenco, dated
February 2, 1996.(1)
4.16 Warrant to purchase 25,000 shares of common stock
of the Company issued to Gus A. Chafoulias, dated
February 2, 1996.(1)
4.17 Warrant to purchase 25,000 shares of common stock
of the Company issued to JIBS Equities, dated
February 2, 1996.(1)
4.18 Warrant to purchase 25,000 shares of common stock
of the Company issued to Land O'Lakes, Inc., dated
February 2, 1996.(1)
13
Exhibit Description
------- -----------
4.19 Bridge Note (Promissory Note Convertible into
Series E Convertible Preferred Stock) payable to
IAI Investment Funds VI, Inc. (IAI Emerging Growth
Fund), in the amount of $375,000 dated January 30,
1996.(1)
4.20 Bridge Note (Promissory Note Convertible into
Series E Convertible Preferred Stock) payable to
IAI Investment Funds IV, Inc. (IAI Regional Fund),
in the amount of $125,000 dated January 30,
1996.(1)
10.1 License Agreement between the Company and Land
O'Lakes dated May 7, 1992.(1)
10.2 Royalty Agreement between the Company and Land
O'Lakes dated May 7, 1992.(1)
10.3 Supply Agreement between the Company and Land
O'Lakes dated May 7, 1992.(1)
10.4 Master Services Agreement between the Company and
Land O'Lakes dated May 7, 1992.(1)
10.5 GalaGen Inc. 1992 Stock Plan.(1)
10.7 Stock and Warrant Purchase Agreement between the
Company and Chiron Corporation dated March 20,
1995.(1)
10.8 License and Collaboration Agreement between the
Company and Chiron Corporation dated March 20,
1995.(1)
10.9 GalaGen Inc. Employee Stock Purchase Plan., as
amended
10.10 Credit Agreement between the Company and Norwest
Bank Minnesota, N.A., dated as of January 24,
1996.(1)
10.11 Committment Letter between the Company and Cargill
Leasing Corporation, dated June 5, 1996
10.12 Master Equipment Lease between the Company and
Cargill Leasing Corporation, dated June 6, 1996
10.13 Agreement for Progress Payments between the
Company and Cargill Leasing Corporation, dated
June 6, 1996
10.14 Agreement for Lease between the Company and Land
O'Lakes, dated June 3, 1996
11.1 Statement re: computation of per share earnings
(loss)
27 Financial Data Schedule
------------------------
(1) Incorporated herein by reference to the same numbered
Exhibit to the Company's Registration Statement on Form S-1
(Registration No. 333-1032).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
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: August , 1996 By: /s/ Robert A. Hoerr
---- -------------------
Robert A. Hoerr,
President and Chief Executive Officer
(Principal Executive Officer)
Date: August , 1996 By: /s/ Gregg A. Waldon
---- -------------------
Gregg A. Waldon,
Vice President, Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting
Officer)
15
EXHIBIT INDEX
Method of
Exhibit Description Filing
------- ----------- ---------
3.2 Restated Certificate of Incorpor- Incorporated
ation of the Company.(1) By Reference
3.4 Restated Bylaws of the Company.(1) Incorporated
By Reference
4.1 Specimen Common Stock Certificate.(1) Incorporated
By Reference
4.2 Warrant to purchase 13,541 shares of Incorporated
common stock of the Company issued By Reference
to Piper Jaffray Inc., dated January
26, 1993.(1)
4.3 Warrant to purchase 20,312 shares of Incorporated
common stock of the Company issued to By Reference
Gus A. Chafoulias, dated October 12,
1993.
4.4 Warrant to purchase 20,312 shares of Incorporated
common stock of the Company issued to By Reference
John Pappajohn, dated October 12,
1993.(1)
4.5 Warrant to purchase 9,479 shares of Incorporated
common stock of the Company issued to By Reference
Cato Holding Company, dated June 21,
1994.(1)
4.6 Form of Common Stock Warrant to Incorporated
purchase shares of common stock of the By Reference
Company, issued in connection with the
sale of Convertible Promissory Notes.(1)
4.7 Warrant to purchase 17,144 shares of Incorporated
Series F-1 Convertible Preferred Stock By Reference
of the Company issued to Chiron
Corporation, dated March 29, 1995.(1)
4.8 Warrant to purchase 42,856 shares of Incorporated
Series F-2 Convertible Preferred Stock By Reference
of the Company issued to Chiron
Corporation, dated March 29, 1995.(1)
4.9 Warrant to purchase 60,000 shares of Incorporated
Series F-3 Convertible Preferred Stock By Reference
of the Company issued to Chiron
Corporation, dated March 29, 1995.(1)
4.10 Warrant to purchase 80,000 shares of Incorporated
Series F-3 Convertible Preferred Stock By Reference
of the Company issued to Chiron
Corporation, dated March 29, 1995.(1)
4.11 Warrant to purchase 18,250 shares of Incorporated
common stock of the Company issued to By Reference
IAI Investment Funds VI, Inc. (IAI
Emerging Growth Fund), dated January
30, 1996.(1)
4.12 Warrant to purchase 6.250 shares of Incorporated
common stock of the Company issued By Reference
to IAI Investment Funds IV, Inc.
(IAI Regional Fund), dated January 30,
1996.(1)
4.13 Warrant to purchase 25,000 shares of Incorporated
common stock of the Company issued to By Reference
John Pappajohn, dated February 2,
1996.(1)
4.14 Warrant to purchase 25,000 shares of Incorporated
common stock of the Company issued to By Reference
Edgewater Private Equity Fund, L.P.,
dated February 2, 1996.(1)
4.15 Warrant to purchase 10,000 shares of Incorporated
common stock of the Company issued to By Reference
Joseph Giamenco, dated February 2,
1996.
4.16 Warrant to purchase 25,000 shares of Incorporated
common stock of the Company
Method of
Exhibit Description Filing
------- ----------- ---------
issued to Gus A. Chafoulias, dated By Reference
February 2, 1996.(1)
4.17 Warrant to purchase 25,000 shares of Incorporated
common stock of the Company issued to By Reference
JIBS Equities, dated February 2,
1996.(1)
4.18 Warrant to purchase 25,000 shares of Incorporated
common stock of the Company issued to By Reference
Land O'Lakes, Inc., dated February 2,
1996.(1)
4.19 Bridge Note (Promissory Note Convert- Incorporated
ible into Series E Convertible Prefer- By Reference
red Stock) payable to IAI Investment
Funds VI, Inc. (IAI Emerging Growth
Fund), in the amount of $375,000 dated
January 30, 1996.(1)
4.20 Bridge Note (Promissory Note Convert- Incorporated
ible into Series E Convertible Prefer- By Reference
red Stock) payable to IAI Investment
Funds IV, Inc. (IAI Regional Fund),
in the amount of $125,000 dated January
30, 1996.(1)
10.1 License Agreement between the Company Incorporated
and Land O'Lakes dated May 7, 1992.(1) By Reference
10.2 Royalty Agreement between the Company Incorporated
and Land O'Lakes dated May 7, 1992.(1) By Reference
10.3 Supply Agreement between the Company Incorporated
and Land O'Lakes dated May 7, 1992.(1) By Reference
10.4 Master Services Agreement between the Incorporated
Company and Land O'Lakes dated May 7, By Reference
1992.(1)
10.5 GalaGen Inc. 1992 Stock Plan.(1)
10.7 Stock and Warrant Purchase Agreement Incorporated
between the Company and Chiron By Reference
Corporation dated March 20, 1995.(1)
10.8 License and Collaboration Agreement Incorporated
between the Company and Chiron By Reference
Corporation dated March 20, 1995.(1)
10.9 GalaGen Inc. Employee Stock Purchase Electronic
Plan, as amended Transmission
10.10 Credit Agreement between the Company Incorporated
and Norwest Bank Minnesota, N.A., By Reference
dated as of January 24, 1996.(1)
10.11 Committment Letter between the Company Electronic
and Cargill Leasing Corporation, dated Transmission
June 5, 1996
10.12 Master Equipment Lease between the Electronic
Company and Cargill Leasing Corporation, Transmission
dated June 6, 1996.
10.13 Agreement for Progress Payments between Electronic
the Company and Cargill Leasing Transmission
Corporation, dated June 6, 1996.
10.14 Agreement for Lease between the Company Electronic
and Land O'Lakes, dated June 3, 1996. Transmission
11.1 Statement re: computation of per share Electronic
earnings (loss). Transmission
27 Financial Data Schedule. Electronic
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).