SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 11-K
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
_____________________________
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1999
or
[_] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from_________to________
Commission File No. 0-27150
A. Full Title of the Plan
PATHOGENESIS CORPORATION 401(k) PROFIT SHARING PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
PathoGenesis Corporation
201 Elliott Avenue West
Seattle, WA 98119
1
REQUIRED INFORMATION
Financial Statements and Exhibit
Item (4) (a) Independent Auditors' Report
Financial Statements:
Statements of Net Assets Available for Benefits as of December
31, 1999 and 1998
Statement of Changes in Net Assets Available for Benefits for the
Year ended December 31, 1999
Notes to Financial Statements
Schedule 1-Schedule of Assets Held for Investment Purposes as of
December 31, 1999
(b) Exhibit 23:
Consent of Independent Certified Public Accountants
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this annual report to be signed by the undersigned on
their behalf hereunto duly authorized.
PATHOGENESIS CORPORATION 401(k) PROFIT SHARING PLAN
By: PathoGenesis Corporation
Plan Administrator
Date: June 27, 2000 /s/ Alan R. Meyer
------------- --------------------------------------
Alan R. Meyer
Executive Vice President and
Chief Financial Officer
2
INDEX OF FINANCIAL STATEMENTS AND EXHIBIT
Sequentially
Item Description Numbered Page
- ---- --------------------------------- -------------
4 (a) Independent Auditors' Report 4
Financial Statements:
Statements of Net Assets Available for Benefits 5
as of December 31, 1999 and 1998
Statement of Changes in Net Assets Available 6
for Benefits for the Year ended December 31, 1999
Notes to Financial Statements 7-9
Schedule 1-Schedule of Assets Held 10
for Investment Purposes as of December 31, 1999
(b) Exhibit 23:
Consent of Independent Certified Public Accountants 11
3
Independent Auditors' Report
Plan Administrator
PathoGenesis Corporation 401(k) Profit Sharing Plan:
We have audited the accompanying statements of net assets available for benefits
of PathoGenesis Corporation 401(k) Profit Sharing Plan (Plan) as of December 31,
1999 and 1998, and the related statement of changes in net assets available for
benefits for the year ended December 31, 1999. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the year ended December 31, 1999, in conformity with generally accepted
accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes at December 31, 1999 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
KPMG LLP
Seattle, Washington
June 19, 2000
4
PathoGenesis Corporation 401(k) Profit Sharing Plan
Statements of Net Assets Available for Benefits
December 31,
--------------------------
1999 1998
---- ----
Assets
Investments, at fair value:
Shares of registered investment companies:
Fidelity Spartan Money Market Fund $ 80,922 106,053
Fidelity Investment Grade Bond Fund 68,795 94,149
Fidelity Asset Manager Fund 195,489 124,247
Fidelity Balanced Fund 215,151 183,944
Fidelity Spartan Market Index Fund 837,861 559,508
Fidelity Disciplined Equity Fund 882,306 582,650
Fidelity International Growth & Income Fund 428,366 248,705
Fidelity Magellan Fund 862,694 596,206
Fidelity Contrafund 946,320 659,761
Fidelity Blue Chip Growth Fund 1,098,595 624,374
PathoGenesis Common Stock 705,736 310,339
Participant notes receivable 40,520 70,025
--------------------------
Total investments 6,362,755 4,159,961
--------------------------
Net assets available for benefits $6,362,755 4,159,961
--------------------------
The accompanying notes are an integral part of these financial statements.
5
PathoGenesis Corporation 401(k) Profit Sharing Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended
December 31, 1999
-----------------------
Additions
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments:
Shares of registered investment companies $ 550,849
PathoGenesis Common Stock 29,991
Interest 4,843
Dividends 453,715
----------
1,039,398
Participant contributions 1,364,216
Employer contributions 122,251
----------
Total additions 2,525,865
----------
Deductions
Deductions from net assets attributed
to benefits paid to participants 323,071
----------
Net increase 2,202,794
Net assets available for benefits:
Beginning of year 4,159,961
----------
End of year $6,362,755
----------
The accompanying notes are an integral part of these financial statements.
6
PathoGenesis Corporation 401(k) Profit Sharing Plan
Notes to Financial Statements
(1) Description of Plan
The following description of the PathoGenesis Corporation ("Company")
401(k) Profit Sharing Plan ("Plan") provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
General
The Plan is a defined contribution plan covering all full-time and part-
time employees of the Company who are U.S. citizens or permanent residents
and who are age eighteen or older. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Each year, participants may contribute up to 20 percent of pretax annual
compensation, as defined by the Plan. Participants may also contribute
amounts representing distributions from other qualified defined benefit or
contribution plans. The Company may make matching and/or profit sharing
contributions at the discretion of the Company's board of directors.
Contributions are subject to certain limitations.
Participants direct the investment of their contributions into various
investment options offered by the Plan. The Plan currently offers ten
mutual funds and PathoGenesis Corporation common stock as investment
options for participants. Participants may change their investment options
daily.
Effective April 1, 1999, the Company began discretionary contributions of
50 percent of the first 3 percent of compensation that a participant
contributes to the Plan. These matching contributions totaled $122,251 in
1999. All employer contributions are invested in PathoGenesis Corporation
common stock.
Participant Accounts
Each participant's account is credited with the participant's contribution
and allocations of (a) the Company's contributions and (b) Plan earnings.
Allocations are based on participant earnings or account balances, as
defined. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested account.
Vesting and Forfeitures
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in the Company's discretionary contribution
portion of their accounts plus actual earnings thereon is based on years of
continuous service. Participants vest ratably over the first four years of
credited service.
Forfeited nonvested accounts reduce the amount of matching contributions
required for the Plan year. Forfeitures of $2,840 were used to reduce
employer contributions in 1999.
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Participant Notes Receivable
Participants may borrow from their fund account a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50 percent of their account
balance. Loan terms range from 1 to 5 years or up to 15 years for the
purchase of a primary residence. The loans are secured by the balance in
the participant's account and bear interest at the prime rate at the time
of the loan request. Interest rates at December 31, 1999 range from 7.75
percent to 8.5 percent. Principal and interest is paid ratably through
monthly payroll deductions. Participants are limited to two outstanding
loans at any point in time.
Payment of Benefits
Participants are eligible to receive distributions upon termination of
employment, upon becoming permanently disabled, upon retirement, or upon
request for a hardship withdrawal prior to termination. A participant may
defer payment up to age 70 1/2 or elect to receive a lump-sum amount or
rollover equal to the value of the participant's vested interest in his or
her account.
(2) Summary of Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method
of accounting.
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 reported amounts of assets, liabilities and
changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value based on quoted market
prices. Participant notes receivable are valued at cost which approximates
fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
Payment of Benefits
Benefits are recorded when paid.
Plan Expenses
Administrative expenses of the Plan are paid directly by the Company.
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Recent Pronouncement
In September 1999, the American Institute of Certified Public Accountants
issued Statement of Position 99-3, Accounting for and Reporting of Certain
Defined Contribution Plan Investments and Other Disclosure Matters, (SOP99-
3). SOP 99-3 simplifies the disclosure for certain investments and is
effective for plan years ending after December 15, 1999. The Plan adopted
SOP 99-3 during the Plan year ended December 31, 1999. Accordingly,
information previously required to be disclosed about participant-directed
fund investment programs is not presented in these financial statements.
(3) Nonparticipant-Directed Investment
Since Company contributions are invested solely in PathoGenesis Corporation
common stock, a portion of this investment option is nonparticipant-
directed. Information about the net assets and the significant components
of the changes in net assets relating to the nonparticipant-directed
investment in PathoGenesis Corporation common stock is as follows:
Year Ended
December 31, 1999
-----------------
Net assets at beginning of year $ --
Changes in net assets:
Employer contributions 122,251
Net appreciation 47,962
Transfers to participant-directed investments (3,601)
---------
Net assets at end of year $ 166,612
=========
(4) Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, participants will become 100%
vested in any Company contributions and earnings thereon.
(5) Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated April 11, 1995, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code (IRC).
The Plan has been amended since receiving the determination letter.
However, the Plan administrator and the Plan's tax counsel believe that the
Plan is designed and is currently being operated in compliance with the
applicable requirements of the IRC.
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Schedule 1
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PathoGenesis Corporation 401(k) Profit Sharing Plan
Schedule of Assets Held for Investment Purposes
December 31, 1999
Identity of issue, borrower, Description of investment, including maturity date, Current
lessor or similar party rate of interest, collateral, par or maturity value value
- -------------------------------------------------------------------------------------------------------
Fidelity Investments Spartan Money Market Fund, 80,922 shares $ 80,922
Fidelity Investments Investment Grade Bond Fund, 9,985 shares 68,795
Fidelity Investments Asset Manager Fund, 10,636 shares 195,489
Fidelity Investments Balanced Fund, 14,007 shares 215,151
Fidelity Investments Spartan Market Index Fund, 8,305 shares 837,861
Fidelity Investments Disciplined Equity Fund, 28,919 shares 882,306
Fidelity Investments International Growth & Income Fund, 14,231 shares 428,366
Fidelity Investments Magellan Fund, 6,314 shares 862,694
Fidelity Investments Contrafund, 15,767 shares 946,320
Fidelity Investments Blue Chip Growth Fund, 18,276 shares 1,098,595
* PathoGenesis Corporation Participant-Directed Common Stock, 25,145 shares 539,124
* PathoGenesis Corporation Nonparticipant-Directed Common Stock, 7,764 shares 166,612
(cost of $119,312)
Participant notes receivable Interest at 7.75% to 8.5% 40,520
* Party-in-interest of the Plan as defined by Section 3(14) of ERISA.
10