SECURITIES AND EXCHANGE COMMISSION
Washington, DC
Form 10-Q
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to ________________
Commission File Number: 0-28748
CLOSURE MEDICAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 56-1959623
------------------- -------------------
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
5265 Capital Boulevard, Raleigh, North Carolina 27616
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(Address of principal executive offices) (Zip Code)
(919) 876-7800
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at November 4, 1997
----- -------------------------------
Common Stock, par value $0.01 per share 13,241,520
CLOSURE MEDICAL CORPORATION
INDEX
Page Number
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of September 30, 1997 (unaudited) and
December 31, 1996 ...................................................3
Statement of Operations (unaudited) for the three months
ended September 30, 1997 and 1996 and for the nine months ended
September 30, 1997 and 1996 .........................................4
Statement of Cash Flows (unaudited) for the nine months ended
September 30, 1997 and 1996 .........................................5
Notes to Financial Statements (unaudited)..............................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................8
PART II: OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.......................11
Item 6. Exhibits and Reports on Form 8-K ...............................12
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Closure Medical Corporation
Balance Sheet
(In thousands, except share data)
September 30, December 31,
1997 1996
(Unaudited)
---- ----
Assets
Current assets:
Cash and cash equivalents $ 9,200 $ 13,024
Short-term investments 14,359 4,627
Accounts receivable 195 67
Inventories 213 112
Prepaid expenses 449 388
-------- --------
Total current assets 24,416 18,218
-------- --------
Furniture, fixtures, and equipment 1,920 851
Less-accumulated depreciation and amortization (290) (179)
-------- --------
1,630 672
-------- --------
Long-term investments 3,108 409
-------- --------
Intangible assets, net of accumulated amortization 254 213
-------- --------
Total assets $ 29,408 $ 19,512
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,452 $ 566
Accrued expenses 534 396
Deferred revenue 2,037 2,069
Capital lease obligations 170 12
-------- --------
Total current liabilities 4,193 3,043
Capital lease obligations 871 14
-------- --------
Total liabilities 5,064 3,057
-------- --------
Stockholders' Equity:
Preferred Stock, $.01 par value, Authorized
2,000,000 shares; none issued or outstanding. -- --
Common Stock, $01 par value, Authorized
35,000,000 shares; issued and
outstanding 13,241,520 shares. 132 122
Additional paid-in capital 46,052 33,579
Accumulated deficit (21,068) (16,246)
Deferred compensation on stock options (772) (1,000)
-------- --------
Total stockholders' equity 24,344 16,455
-------- --------
Total liabilities and stockholders' equity $ 29,408 $ 19,512
======== ========
The accompanying notes are an integral part of these financial statements.
3
Closure Medical Corporation
Statement of Operations
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
Product sales $ 591 $ 106 $ 939 $ 298
License and product development revenues -- -- -- 3,500
-------- -------- -------- --------
Total revenues 591 106 939 3,798
-------- -------- -------- --------
Cost of products sold 461 119 883 292
-------- -------- -------- --------
Gross profit and license and product development revenues 130 (13) 56 3,506
-------- -------- -------- --------
Research, development and regulatory affairs expenses 870 817 2,366 2,156
Selling and administrative expenses 1,266 965 3,548 1,980
Exchange of rights with Caratec, L.L.C. -- 14,210 -- 14,210
Payments to Caratec, L.L.C. -- 5 -- 293
-------- -------- -------- --------
Total operating expenses 2,136 15,997 5,914 18,639
-------- -------- -------- --------
Loss from operations (2,006) (16,010) (5,858) (15,133)
Interest expense (18) (1) (26) (141)
Investment and interest income 397 25 1,062 72
-------- -------- -------- --------
Net loss $ (1,627) $(15,986) $ (4,822) $(15,202)
======== ======== ======== ========
Shares used in computation of net
loss per share 13,212 9,739 12,873 10,012
======== ======== ======== ========
Net loss per share $ (0.12) $ (1.64) $ (0.37) $ (1.52)
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
4
Closure Medical Corporation
Statement of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30, September 30,
1997 1996
---- ----
Cash flows from operating activities:
Net loss $ (4,822) $(15,202)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Amortization expense 8 8
Depreciation expense 113 41
Amortization of deferred compensation on stock options 228 424
Exchange of rights with Caratec, L.L.C. -- 14,210
Net loss on disposals of fixed assets 4 12
Net loss on disposals of intangibles 50 --
Change in accounts receivable (128) 232
Change in inventories (101) (36)
Change in prepaid expenses (61) (400)
Change in accounts payable and accrued expenses 1,024 622
Change in deferred revenue (32) 1,497
Change in accrued payable to Caratec, L.L.C. -- (190)
Change in accrued interest due to Sharpoint
Development Corporation -- 138
-------- --------
Net cash provided (used) by operating activities (3,717) 1,356
-------- --------
Cash flows from investing activities:
Additions to furniture, fixtures and equipment (1,075) (332)
Additions to intangible assets (99) (41)
Purchases of investments (28,999) --
Proceeds from the sale of investments 16,568 --
-------- --------
Net cash used by investing activities (13,605) (373)
-------- --------
Cash flows from financing activities:
Proceeds from notes payable to Sharpoint
Development Corporation -- 440
Net proceeds from sale of common stock 12,483 17,958
Proceeds from capital lease obligation 1,066 --
Payments under capital lease obligation (51) (9)
-------- --------
Net cash provided by financing activities 13,498 18,389
-------- --------
Increase (decrease) in cash and cash equivalents (3,824) 19,372
Cash and cash equivalents at beginning of period 13,024 20
-------- --------
Cash and cash equivalents at end of period $ 9,200 $ 19,392
======== ========
Non-Cash Transactions:
On March 29, 1996, notes payable of $10,502 and related accrued interest of $980
was converted to partners' capital.
The accompanying notes are an integral part of these financial statements.
5
Closure Medical Corporation
Notes to Financial Statements
(Unaudited)
1. Organization and Operations
Closure Medical Corporation ("Closure" or the "Company"), formerly named
Tri-Point Medical Corporation, develops, commercializes and manufactures medical
tissue cohesive products based on its proprietary cyanoacrylate technology
utilized for human and veterinary wound closure. The Company was incorporated in
Delaware on February 20, 1996. From May 10, 1990 to February 29, 1996, the
business of the Company was conducted by Tri-Point Medical L. P. (the
"Partnership"). On March 1, 1996, substantially all of the assets and
liabilities of the Partnership, except for the indebtedness to Sharpoint
Development Corporation ("Sharpoint"), the Partnership's general partner, were
transferred to the Company in exchange for one share of Common Stock. On the
effective date of the Company's initial public offering, September 25, 1996,
obligations of and interests in the Partnership were contributed to the Company
in exchange for an aggregate of 9,600,000 shares of Common Stock.
In April 1997, the Company completed its follow-on public offering. An aggregate
of 1,725,000 shares (including the over-allotment option) were sold at $12.875
per share, of which 1,025,000 shares were sold by the Company and 700,000 shares
were sold by a shareholder, generating net proceeds to the Company of
approximately $12,020,000.
2. Significant Accounting Policies
The significant accounting policies followed by the Company for interim
financial reporting are consistent with the accounting policies followed for
annual financial reporting, except with respect to the recognition of royalty
revenue from the Company's marketing partner, Ethicon, Inc. ("Ethicon") as
discussed below. These unaudited financial statements have been prepared in
accordance with Rule 10-01 of Regulation S-X, and in management's opinion, all
adjustments of a normal recurring nature necessary for a fair presentation have
been included. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1996 included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
The Company recognizes revenue for sales of Dermabond to its marketing partner,
Ethicon, at an agreed-upon amount per unit at the time the products are shipped.
Thirty days after the end of each calendar quarter, Ethicon provides a summary
of its sales of Dermabond, and at that time the Company recognizes the effect of
both an additional royalty and any purchase price adjustment to its previously
recognized sales revenue.
The results of operations for the three and nine month periods ended September
30, 1997 are not necessarily indicative of the results to be expected for the
full year ending December 31, 1997.
Statement of Financial Accounting Standards No. 128, "Accounting for Earnings
Per Share" ("EPS") ("SFAS 128"), was issued in February 1997. SFAS 128
establishes and simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15, "Earnings Per Share," and makes them
comparable to international EPS standards. SFAS 128 is effective for financial
statements for fiscal years ending after December 15, 1997, including interim
periods. Closure believes that the adoption of SFAS 128 will not have a material
impact on the Company's financial position or results of operations.
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), was issued in June 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. SFAS 130 is effective for financial
statements for fiscal years beginning after December 31, 1997. The Company
believes that the adoption of SFAS 130 will not have a material impact on the
Company's financial position or results of operations.
6
3. Taxes
No federal or state income tax provision has been provided for income tax
purposes, as the Company does not expect to have a tax liability for the year
ending December 31, 1997. Additionally, the deferred tax asset that might be
recorded as a result of net operating losses under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," has been offset by
a related valuation allowance because realization of the asset is not likely.
Accordingly, no benefit has been recorded.
4. Inventories
Inventories included the following:
September 30, December 31,
1997 1996
---- ----
(In thousands)
Packaging $ 37 $ 25
Raw materials 36 23
Work-in-process 95 25
Finished goods 45 39
--------- ---------
$ 213 $ 112
--------- ---------
5. Net Loss Per Share
Net loss per share is computed using the weighted average number of common and
common equivalent shares outstanding during the periods. Common equivalent
shares consist of stock options using the treasury stock method. Common
equivalent shares from stock options are excluded from the computation if their
effect is antidilutive.
6. Stockholders' Equity
On March 29, 1996, the Partnership's long-term debt and accrued interest held by
Sharpoint was contributed to the Partnership as $11,483,000 of partners'
capital. On September 25, 1996, the effective date of the Company's initial
public offering, obligations of and interests in the Partnership were
contributed to the Company in exchange for an aggregate of 9,600,000 shares of
Common Stock. Included in this exchange was the contribution by Caratec, L.L.C.
("Caratec"), a limited partner of the Partnership, of its right to receive
various payments from the Partnership and its limited partnership interest for
1,776,250 shares of Common Stock. The transaction with Caratec resulted in a
non-cash expense of $14,210,000, which equaled the difference between the value
of Common Stock issued to Caratec and its basis in the Partnership. The
resulting charge to accumulated deficit was offset by a credit to additional
paid-in capital.
7. Contingencies
In March 1997, the Company was served with a complaint filed in the Superior
Court Department of the Trial Court of the Commonwealth of Massachusetts
alleging personal injury as a result of negligence by the Company in the design,
testing and distribution of Avacryl, an n-butyl cyanoacrylate used in a medical
procedure in 1993 as part of a clinical trial conducted by the Company pursuant
to an Investigational Device Exemption. The Company's insurer has assumed the
defense of this lawsuit and has informed the Company that the Plaintiff has
orally agreed to accept $40,000 in settlement of all claims against Closure, of
which amount the Company is liable for a $10,000 deductible. The Company
believes the final outcome and its potential exposure in this case will not have
a material adverse effect on the Company's financial position or results of
operations.
7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included in Part I--Item 1 of this Form
10-Q and the audited financial statements and notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations for the
year ended December 31, 1996 contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
This report contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. These forward-looking
statements include statements regarding the Company's development, growth and
expansion plans and the sufficiency of the Company's liquidity and capital. Such
statements are based on management's current expectations and are subject to a
number of uncertainties and risks that could cause actual results to differ
materially from those described in the forward-looking statements. Factors that
may cause such a difference include, but are not limited to, the early stage of
commercialization of the Company's products, the need for regulatory approval
and effects of governmental regulation, technological uncertainties, dependence
on marketing partners and dependence on patents and trade secrets, as well as
those described under "Factors Affecting the Company's Business, Operating
Results and Financial Condition" in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 filed with the Securities and Exchange
Commission.
Overview
Since its inception in May 1990, the Company has been developing,
commercializing and manufacturing medical tissue cohesive products for use in
wound closure in humans and animals. The Company's products are based on its
proprietary cyanoacrylate technology and a substantial portion of the Company's
historical expenses has consisted of research and development and clinical trial
expenses. Through September 25, 1996, the effective date of the Company's
initial public offering, the Company had funded its operations with cash
borrowed from Sharpoint Development Corporation ("Sharpoint"), sales of
Octyldent(R) and Nexaband(R) products, and license and product development
revenues from marketing partners. On September 30, 1996, the Company completed
its initial public offering, issuing 2,550,000 shares of Common Stock and
generating net proceeds of approximately $17,926,000. On April 2, 1997, the
Company completed its follow-on public offering, issuing 1,025,000 shares of
Common Stock and generating net proceeds of approximately $12,020,000.
The Company has been unprofitable since its inception and has incurred net
losses in each year, including a net loss of approximately $16,814,000 for the
year ended December 31, 1996, or $2,604,000 excluding a one-time non-cash charge
of $14,210,000 (see Note 6 to Notes to Financial Statements in Item 1 of this
Form 10-Q). The Company anticipates that its recurring operating expenses will
increase for the next several years, as it expects its research and development
expenses to increase in order to develop new products and fund additional
clinical trials. The Company also expects to incur additional capital
expenditures to expand its manufacturing capabilities. The Company expects to
continue to incur a loss in 1997 and may incur losses in subsequent years,
although the amount of future net losses and time required by the Company to
reach profitability are highly uncertain. The Company's ability to generate
significant revenue and become profitable will depend on its success in
commercializing Dermabond(TM), the trade name selected by Ethicon, Inc.
("Ethicon") and referred to as TraumaSeal(TM) in previous filings, including the
receipt of all regulatory clearances and approvals, expanding its manufacturing
capabilities, developing new products and entering into additional marketing
agreements and on the ability of its marketing partners to commercialize
successfully products incorporating the Company's technologies. No assurance can
be given that the Company will generate significant revenue or become profitable
on a sustained basis, if at all.
Results of Operations
Total revenues were $591,000 for the three months ended September 30, 1997,
compared to $106,000 for the three months ended September 30, 1996. For the nine
months ended September 30, 1997, total revenues were $939,000 compared to
$3,798,000 for the same period in 1996. Revenues from product
8
sales for the nine months ended September 30, 1997 were $939,000, compared to
$298,000 for the same period in 1996. License and product development revenues
were $0 for the nine months ended September 30, 1997, compared to $3,500,000 for
the same period in 1996. In March 1996, the Company received $3,500,000 in
license and product development revenues under the supply and distribution
agreement for Dermabond(TM) entered into with Ethicon. The increase in 1997
product sales was primarily a result of increased sales volume of Octyldent(R),
Nexaband(R) and Dermabond(TM).
Cost of products sold were $461,000 for the three months ended September 30,
1997, compared to $119,000 for the three months ended September 30, 1996, an
increase of 287%. Cost of products sold as a percentage of product sales
decreased to 78% in the three months ended September 30, 1997, compared to 112%
during the same period of 1996. For the nine months ended September 30, 1997,
cost of products sold were $883,000 compared to $292,000 for the same period of
1996. Cost of products sold as a percentage of product sales decreased to 94% in
the nine months ended September 30, 1997, compared to 98% during the same period
of 1996. The increase in cost of products sold was primarily a result of
increased sales volume of Octyldent(R), Nexaband(R) and Dermabond(TM). The
decrease in cost of products sold as a percentage of product sales was primarily
a result of the fixed portion of cost of products sold being allocated over this
increased sales volume.
Operating expenses were $2,137,000 for the three months ended September 30,
1997, compared to $15,997,000 for the three months ended September 30, 1996, a
decrease of 87%. For the nine months ended September 30, 1997 and September 30,
1996, operating expenses were $5,914,000 and $18,638,000, respectively. Included
in operating expenses during the three and nine months ended September 30, 1996
was a one-time non-cash charge of $14,210,000 related the exchange by Caratec,
L.L.C. ("Caratec"), a former limited partner of the Company's
former predecessor, Tri-Point Medical L. P. (the "Partnership"), of its
right to receive various payments from the Partnership and its limited
partnership interest for Common Stock of the Company. Excluding the
exchange with Caratec, total operating expenses increased by $350,000
and $1,486,000 for the three and nine months ended September 30,
1997, respectively, versus comparable periods of 1996. These increases
are primarily due to increased staffing, as well as the additional
administrative costs associated with supporting a public company, such as
directors' and officers' liability insurance, investor relations and
amortization of deferred compensation related to employee and director stock
options.
Interest expense was $18,000 for the three months ended September 30, 1997,
compared to $1,000 for the three months ended September 30, 1996. For the nine
months ended September 30, 1997 and September 30, 1996, interest expense was
$26,000 and $141,000, respectively. This decrease primarily was a result of the
long-term debt, including accrued interest, of the Partnership held by Sharpoint
being contributed to the Partnership as $11,483,000 of partners' capital as of
March 29, 1996. On September 25, 1996, this partners' capital was exchanged for
shares of Common Stock of the Company.
Investment and interest income was $397,000 for the three months ended September
30, 1997, compared to $25,000 for the same period of 1996. For the nine months
ended September 30, 1997 and September 30, 1996, investment and interest income
was $1,062,000 and $72,000, respectively. These increases resulted from interest
earned from higher average cash and investment balances resulting from the
Company's receipt of net proceeds of its initial and follow-on public offerings
in September 1996 and April 1997, respectively.
Liquidity and Capital Resources
The Company's cash and cash equivalents and short-term investments totaled
$23,559,000 at September 30, 1997, compared to $17,651,000 at December 31, 1996.
On April 2, 1997, the Company completed its follow-on offering of 1,725,000
shares of Common Stock, of which 1,025,000 shares were sold by the Company
generating net proceeds to the Company of approximately $12,020,000. On
September 30, 1996, the Company completed its initial public offering of
3,000,000 shares of Common Stock, of which 2,550,000 shares were sold by the
Company, generating net proceeds to the Company of approximately $17,926,000. In
March 1996, the Company received $4,500,000 related to the supply and
distribution
9
agreement for Dermabond(TM) entered into with Ethicon. Since September 1996,
Ethicon has advanced the Company approximately $1,000,000 for direct costs
incurred in connection with clinical studies of Dermabond(TM), which have been
classified as deferred revenue and will be credited against future royalties
expected to be paid by Ethicon.
Cash used by operating activities was $3,717,000 for the nine months ended
September 30, 1997, compared to cash provided by operating activities of
$1,356,000 during the same period of 1996, primarily due to the receipt of
$4,500,000 under the supply and distribution agreement for Dermabond(TM) in
March 1996.
Cash used for investing activities was $13,605,000 and $373,000 for the nine
months ended September 30, 1997 and 1996, respectively. For the nine months
ended September 30, 1997, cash was used to purchase investments, acquire capital
equipment and to obtain and establish patents. During the same period of 1996,
cash was used primarily to acquire capital equipment.
Cash provided by financing activities was $13,498,000 and $18,389,000 for the
nine months ended September 30, 1997 and 1996, respectively. The Company's
primary financing activity during the nine months ended September 30, 1997 was
the Company's follow-on offering, on April 2, of 1,725,000 shares of Common
Stock, of which 1,025,000 shares were sold by the Company generating net
proceeds to the Company of approximately $12,020,000. During the nine months
ended September 30, 1996, the Company's primary financing was the Company's
initial public offering, on September 25, of 3,000,000 shares of Common Stock,
of which 2,550,000 shares were sold by the Company generating net proceeds of
approximately $17,926,000. In January 1997, the Company entered into a five-year
capital lease covering laboratory and scientific equipment and computers.
Monthly rent obligation under the lease is equal to 2.19 percent of the total
equipment cost outstanding up to $1,500,000. As of September 30, 1997, the
Company had borrowed approximately $1,066,000 under this capital lease.
The Company believes that existing cash and cash equivalents and investments,
including the proceeds from its initial public offering and follow-on offering
in April 1997, will be sufficient to finance its capital requirements for at
least 18 months. The Company's future capital requirements, however, will depend
on numerous factors, including (i) the progress of its research and product
development programs, including clinical studies, (ii) the effectiveness of
product commercialization activities and marketing agreements, including the
development and progress of sales and marketing efforts and manufacturing
operations, (iii) the ability of the Company to maintain existing marketing
agreements and establish and maintain new marketing agreements, (iv) the costs
involved in preparing, filing, prosecuting, defending and enforcing intellectual
property rights and complying with regulatory requirements, (v) the effect of
competing technological and market developments and (vi) general economic
conditions. If the Company's currently available funds and internally generated
cash flow are not sufficient to satisfy its financing needs, the Company will be
required to seek additional funding through bank borrowings and additional
public or private sales of its securities, including equity securities, or
through other arrangements with marketing partners. Other than the Company's
equipment financing line of credit, the Company has no credit facility or other
committed sources of capital. There can be no assurance that additional funds,
if required, will be available to the Company on favorable terms, if at all.
10
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
The Company's Registration Statement on Form S-1 (Registration No. 333-5425)
(the "Registration Statement") for the Company's initial public offering of
3,000,000 shares of Common Stock of the Company (the "Offering") was declared
effective by the Securities and Exchange Commission on September 25, 1996 and
the Offering was completed on September 30, 1996. Lehman Brothers Inc. and Sands
Brothers & Co., Ltd. were managing underwriters of the Offering, pursuant to
which the Company sold 2,550,000 shares of Common Stock at $8.00 per share (for
an aggregate offering price of $20,400,000) and a selling stockholder sold
450,000 shares of Common Stock at $8.00 per share (for an aggregate offering
price of $3,600,000). Total expenses of the Offering paid by the Company were
approximately $2,474,000, comprised of underwriting discounts and commissions of
approximately $1,428,000 and other offering expenses of approximately
$1,046,000. Such underwriting discounts and commissions and other expenses paid
by the Company do not include any direct or indirect payments to directors,
officers, any associates of the foregoing, affiliates of the Company or persons
owning ten percent or more of the Common Stock of the Company. The net proceeds
to the Company from the Offering were approximately $17,926,000.
For the period beginning on the effective date of the Registration Statement on
September 25, 1996 through September 30, 1997, reasonable estimates of the uses
of proceeds from the Offering are as follows:
(millions)
--------
Working capital $2.6
Research and development and regulatory affairs 3.4(a)
Capital expenditures .3(b)
Obtain and protect patents .1
----
Total $6.4
Of the above uses of proceeds attributed to working capital, approximately
$111,000 represented direct payments to directors for annual board compensation
and meeting fees and expenses and approximately $1,031,000 represented payments
to officers of the Company for compensation. Included in the payments to
directors was approximately $38,000 to two individuals beneficially owning ten
percent or more of the Common Stock of the Company. Additionally, reflected in
working capital is approximately $120,000 paid to a consultant who provides
services to the Company.
Temporary investments during this period have consisted primarily of corporate
and municipal bonds and money market funds. The Company invested all of the net
proceeds, approximately $18 million, upon the completion of the Offering and
such amount has been reduced as the expenditures described above have been
incurred. As of September 30, 1997, the Company had approximately $17.5 in
short-term and long-term investments, which amount also includes proceeds of the
Company's follow-on offering in April 1997.
(a) Regulatory affairs expenses primarily consist of clinical trials expenses.
(b) Of the Company's capital expenditures of approximately $1.3 million for
this period, approximately $1 million has been financed through a capital
lease agreement (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources"
included in Item 1 of Part I of this Form 10-Q).
11
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
11 Computation of pro forma net income (loss) per share (see Note
5 to Notes to Financial Statements in Item 1 of this Form
10-Q).
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLOSURE MEDICAL CORPORATION
Date: November 14, 1997 By: \s\ Robert V. Toni
-------------------------------------
Robert V. Toni
President and Chief Executive Officer
Date: November 14, 1997 By: \s\ J. Blount Swain
-------------------------------------
J. Blount Swain
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description
11 Computation of Pro Forma Net Income (Loss) Per Share.
27 Financial Data Schedule.