SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1999.
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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 .
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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.)
1275 Red Fox Road
Arden Hills, Minnesota 55112-6943
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(Address of principal executive offices) (Zip Code)
(651) 634-4230
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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
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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
- -10,298,996 shares as of May 1, 1999.
1
INDEX
GALAGEN INC.
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets - March 31, 1999 and December 31, 1998.......................3
Statements of Operations - Three months ended
March 31, 1999..............................................................4
Statements of Cash Flows - Three months ended
March 31, 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 2. Changes in Securities and Use of Proceeds..................................15
Item 6. Exhibits and Reports on Form 8-K...........................................15
SIGNATURES...........................................................................22
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GALAGEN INC.
BALANCE SHEETS
ASSETS MARCH 31, 1999 DECEMBER 31, 1998
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(UNAUDITED)
Current assets:
Cash and cash equivalents............................................. $ 3,067,026 $ 4,081,733
Accounts receivable, net of allowance of $25,768 in 1999 ............. 265,689 314,579
Inventory............................................................. 497,128 303,150
Prepaid expenses...................................................... 164,232 197,994
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Total current assets.................................................... 3,994,075 4,897,456
Property and equipment.................................................. 677,704 671,796
Less accumulated depreciation......................................... (302,549) (270,418)
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375,155 401,378
Other assets............................................................ 672,273 774,659
Goodwill................................................................ 192,366 219,847
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864,639 994,506
Total assets............................................................ $ 5,233,869 $ 6,293,340
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 467,890 $ 641,922
Other current liabilities............................................... 290,758 336,992
Convertible debentures.................................................. 145,333 193,333
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Total current liabilities............................................... 903,981 1,172,247
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...................................... - -
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued and outstanding shares - 8,983,996 in 1999;
8,948,446 in 1998................................................. 89,840 89,484
Additional paid-in capital............................................ 62,440,036 62,386,292
Accumulated deficit .................................................. (58,199,687) (57,339,283)
Deferred compensation................................................. (45,301) (60,400)
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Total stockholders' equity............................................ 4,284,888 5,076,093
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Total liabilities and stockholders' equity.............................. $ 5,233,869 $ 6,293,340
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See accompanying notes.
Note: The balance sheet at December 31, 1998 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.
3
GALAGEN INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31
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1999 1998
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Revenues:
Product sales..................................... $ 435,542 $ 3,050
Product licensing and development revenues........ 147,991 -
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583,533 3,050
Operating expenses:
Cost of goods sold................................ 186,861 1,525
Selling, general and administrative............... 738,190 376,116
Product development............................... 378,946 520,515
Depreciation and amortization..................... 190,415 226,648
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1,494,412 1,124,804
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Operating loss..................................... (910,879) (1,121,754)
Interest income.................................... 55,225 124,549
Interest expense................................... (4,750) (219,890)
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Net loss........................................... $ (860,404) $ (1,217,095)
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Net loss per share
Basic and Diluted........................... $ (0.10) $ (0.16)
Weighted average number of common shares
outstanding
Basic and Diluted................................ 8,948,841 7,506,438
See accompanying notes.
4
GALAGEN INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31
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1999 1998
--------------------------------
OPERATING ACTIVITIES:
Net loss............................................. $ (860,404) $ (1,217,095)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization....................... 196,515 384,197
Changes in operating assets and liabilities......... (344,910) (67,387)
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Net cash used in operating activities................ (1,008,799) (900,285)
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INVESTING ACTIVITIES:
Purchase of property, plant and equipment............ (5,908) (25,122)
Change in available-for-sale securities, net......... - 1,588,063
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Net cash provided (used) by investing activities..... (5,908) 1,562,941
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FINANCING ACTIVITIES:
Proceeds from common stock........................... - 11,867
Net payment on note payable.......................... - (81,411)
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Net cash provided (used) by financing activities..... - (69,544)
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Increase (decrease) in cash.......................... (1,014,707) 593,112
Cash and cash equivalents at beginning of period..... 4,081,733 155,908
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Cash and cash equivalents at end of period........... $ 3,067,026 $ 749,020
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SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of convertible promissory notes, plus
related accrued interest, to common stock.......... $ 54,100 $ 508,161
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 three
months ended March 31, 1999, are not necessarily indicative of the results
that may be expected for the year ended December 31, 1999. 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, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEVELOPMENT STAGE
Prior to 1998 the Company was a development stage company.
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.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with
the current year presentation.
NET LOSS PER SHARE
Net loss per share is presented in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE
("Statement 128"). Under Statement 128, basic earnings per share is computed
by dividing the net loss by the weighted average number of common shares
outstanding for the year. Diluted earnings 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 earnings per share are the same
in all years presented as all potential common shares were antidilutive.
INVENTORY
Inventories are stated at the lower of cost or market using the
first-in, first-out method. The Company evaluates the need for reserves
associated with obsolete inventory as needed. Inventory at March 31, 1999 and
December 31, 1998 consisted of the following:
1999 1998
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Finished goods .................... $318,786 $235,155
Raw materials and supplies ........ 178,342 67,995
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$497,128 $303,150
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6
3. CONVERTIBLE DEBENTURES
In November 1997, the Company raised $1,500,000 through the private
placement sale of 6% convertible debentures (the "Debentures") to three
institutional investors pursuant to Regulation D under the Securities Act of
1933. The principal and interest of the Debentures can be converted into
shares of the Company's common stock at 82.5% of the lowest closing bid price
of the Company's common stock three days prior to conversion. One-third of
the Debentures can convert to common stock upon the effective date of
registration, one-third after five months from the closing date and the
remaining one-third twelve months after the closing date or nine months if
the price of the common stock does not average at least $2.50 per share in
the eighth month after closing. An aggregate maximum of 1,400,000 discounted
shares of common stock (the "Discounted Shares") can be issued upon the
conversion of the Debentures, with each investor owning at any given time a
maximum of 4.99% of the then issued and outstanding shares of common stock.
If there remains any unconverted principal and accrued interest due to all
the Discounted Shares being issued, the Company has the obligation to repay
the investors, in the aggregate, a maximum principal of $500,000. The
Debentures automatically convert into the Discounted Shares eighteen months
from the closing date. Five-year warrants were issued to the investors to
purchase, in the aggregate, 200,000 shares of common stock at 110% of the
market value of the common stock on the closing date. The value of the
warrants plus the value of the discount of the Discounted Shares was
$500,182, which the Company is amortizing to interest expense over the term
of the Debentures. A deferred expense was recorded for $144,467, which
represents costs associated with closing the Debentures. These deferred
expenses are being amortized until the Debentures are converted into
Discounted Shares. In 1999 and 1998, $50,000 and $1,300,000 of Debenture
principal plus accrued interest was converted into 35,550 shares and
1,260,073 shares of common stock, respectively. The net carrying value of the
Debentures approximates fair market value. In connection with this private
placement, the Company has reserved 1,400,000 shares of common stock for
issuance for the Discounted Shares and 200,000 shares of common stock for
issuance for the warrants.
4. OPERATING LEASE
In June 1997, the Company established a note payable for
approximately $1,319,000 for fixed assets with Transamerica Business Credit
Corporation ("Transamerica"). In June 1998, the Company converted the note
payable into an operating lease. At the time of the conversion the net book
value of the associated assets approximated the note payable balance. Terms
of the operating lease include monthly payments through May 2001 of
approximately $36,000 with a final payment of $165,000 in June 2001. The
operating lease is secured by the Company's property and equipment.
Transamerica received a warrant for 40,000 shares of common stock exercisable
at $2.50 per share as part of the June 1997 transaction. The warrant was
valued at approximately $79,000 and was amortized to interest expense over
the term of the note payable.
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 21E of
the Securities Exchange Act of 1934, as amended. Such statements are subject
to risks and uncertainties, including those discussed under "Risk Factors"
below, 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. Certain
forward-looking statements are indicated below by an asterisk.
GENERAL
GalaGen's mission is to become the leading presence in foods, beverages
and dietary supplements that help enhance the immune system. To accomplish
this mission, the Company is focusing its efforts on channels that demand
immune-enhancing benefits in certain segments of the consumer food and
beverage products market and in certain segments of the clinical nutrition
products markets. A critical factor for success of the Company is its
immune-enhancing ingredient which is derived from colostrum, the highly
nutritious first milk from a dairy cow after its calf is born, which has been
branded Proventra-TM- Brand Natural Immune Components ("Proventra"). *The
primary immune-enhancing components of Proventra are antibodies, which are
proteins that enhance the body's immune system to protect against harmful
pathogens. Secondary immune-enhancing components of Proventra providing
further disease resistance are proteins, such as lactoferrin, as well as
multiple vitamins and minerals. The Company, in conjunction with strategic
partners, continues 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 October 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, will be funded by Wyeth-Ayerst through
payments to the Company.
In December 1998, the Company acquired a developed line of critical
care enteral nutrition products and formulas from Nutrition Medical, Inc.
("NMI"). These products are being sold to the hospital and home healthcare
industries. The Company is researching ways in which to incorporate certain
of its immune-enhancing ingredients into selected products acquired from NMI
to provide additional proprietary protection and added benefits that are not
currently available in that market segment.
In January 1999, the Company entered into a collaboration agreement
with General Nutrition Corporation, Inc. 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.
In March 1999, the Company entered into an agreement with Tropicana
Products, Inc., a division of PepsiCo Inc. Under this agreement, the two
companies will explore development of nutritious beverages for the
health-conscious consumer.
In March 1999, the Company also entered into a licensing and
distribution agreement with American Institutional Products, Inc. ("AIP"), a
wholly-owned subsidiary of Hormel Foods Corporation. AIP 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 will also incorporate the Company's Proventra.
8
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
GENERAL. The net loss applicable to common stockholders decreased by
$356,691, or 29.3%, for the three months ended March 31, 1999 to $860,404
from $1,217,095 for the same period in 1998. The decrease was due primarily
to increased revenue from the Company's critical care product line, increased
product licensing and development revenues and decreased product development
and personnel expense due to the discontinuation of the pharmaceutical
program, offset by increased selling, marketing and general and
administrative expense in support of the consumer and clinical nutrition
product programs.
REVENUES. For the three months ended March 31, 1999 revenues
consisted of approximately $436,000 in product sales and approximately
$148,000 from product development and licensing revenues. For the three
months ended March 31, 1998 revenues consisted of $3,050 from product sales.
COST OF GOODS SOLD. For the three months ended March 31, 1999 and
1998 the cost of goods sold of $186,861 and $1,525 related to the product
sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $362,074, or 96.3%, for the three months
ended March 31, 1999 to $738,190 from $376,116 for the first quarter of 1998.
Approximately $342,000 of the increase is due to increased sales, marketing
and personnel expense for the Company's consumer and critical care nutrition
products and approximately $20,000 of the increase is due to operating lease
expenses associated with the Company's June 1998 note payable conversion (See
Note 4 in Notes to the Financial Statements).
PRODUCT DEVELOPMENT EXPENSES. Expenses for product development
decreased $141,569, or 27.2%, for the three months ended March 31, 1999 to
$378,946 from $520,515 for the three months ended March 31, 1998. Associated
personnel expense decreased approximately $148,300, expenses related to the
clinical and consumer development programs decreased approximately $48,800
and expenses related to the terminated pharmaceutical program decreased
approximately $34,000. These decreases were offset by increased operating
lease expense from the conversion of the Company's note payable in June 1998
of approximately $89,100 (See Note 4 in Notes to the Financial Statements).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
three months ended March 31, 1999 decreased $36,233, or 16%, to $190,415 from
$226,648 for the same period in 1998. Approximately $76,000 of the decrease
was from decreased depreciation expense due to the Company`s operating lease
conversion (see Note 4 in Notes to the Financial Statements), approximately
$31,000 of the decrease was from decreased deferred compensation amortization
primarily a result of cancelled options and approximately $11,000 was due to
decreased deferred expense amortization. These decreases were offset by
increased intangible asset amortization of approximately $50,000 and
increased amortization of warrants issued for services of approximately
$32,000.
INTEREST INCOME. Interest income for the three months ended March
31, 1999 decreased $69,324, or 55.7%, to $55,225 from $124,549 for the same
period in 1998. The decrease is primarily attributable to the decreased level
of investable funds.
INTEREST EXPENSE. Interest expense decreased $215,140, or 97.8%, for
the three months ended March 31, 1999 to $4,750 from $219,890 for the three
months ended March 31, 1998. Interest expense for the first quarter of 1999
was due to the amortization of the value of the warrants plus the value of
the discount in connection with the convertible debentures the Company issued
in November 1997 (see Note 3 in Notes to the Financial Statements). For the
period ended March 31, 1998, interest expense consisted of approximately
$169,000 of amortization of the value of the warrants plus the value of the
discount in connection with the Company's convertible debentures and
approximately $51,000 of interest expense associated with the Company's note
payable (see Note 4 of Notes to the Financial Statements).
9
LIQUIDITY AND CAPITAL RESOURCES
The Company was incorporated in March 1992. On July 24, 1992, Procor
was merged with and into the Company (the "Procor-GalaGen Merger"). At the
time of the Procor-GalaGen Merger, Procor was a wholly-owned subsidiary of
Land O'Lakes. Since the Company's inception through March 31, 1999,
investments in the Company have totaled approximately $53.4 million,
including approximately $7.1 million of inter-company obligations payable to
Land O'Lakes which were forgiven and recorded as contributed capital at the
time of the Procor-GalaGen Merger, $17.9 million from the Company's initial
public offering (the "Offering") (after deducting underwriting discounts and
offering expenses) and approximately $28.4 million from private placements of
equity and convertible debt and from conversion of accrued interest on such
debt and the exercise of stock options and warrants. The Company has invested
funds received in the Offering and these private placements in
investment-grade, interest-bearing obligations.
Cash used in operating activities increased by $108,514, or 12.1%,
for the three months ended March 31, 1999 to $1,008,799 from $900,285 for the
same period in 1998. Cash used in operations for the three months ended March
31, 1999 went primarily to fund operating losses, as well as repayment of
current obligations and operating inventory. Cash used in operations for the
same period in 1998 went primarily to fund operating losses.
For the three months ended March 31, 1999, the Company invested
$5,908 in office and computer equipment to support its operations. For the
same period in 1998, the Company redeemed $1,588,063 of its
available-for-sale securities and invested $25,122 in equipment related to
the Company's pilot plant manufacturing facility.
In April 1999, the Company completed the sale of newly issued common
stock that resulted in $1,972,500 of private placement funding. The stock was
sold at $1.50 per share. There were no warrants associated with the
investment. Also in April 1999, the Company repurchased three warrants that
were initially granted to Chiron Corporation in March 1995. The repurchase
price was $375,000.
The Company anticipates that its existing resources and interest
thereon will be sufficient to satisfy its anticipated cash requirements
through approximately the second quarter of 2000.* The Company's working
capital and capital requirements will depend upon numerous factors, including
revenue from product sales, 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 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 beyond the second quarter of 2000 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.*
YEAR 2000 ISSUES
The Company began the process of assessing its risks associated with
Year 2000 date conversion in 1998. This assessment included three main areas:
10
- the business hardware and software applications, mainly certain
accounting applications and the office network, the Company's
Information Technology ("IT") and
- manufacturing facilities and
- external third party business partners or suppliers.
Prior to the asset acquisition of NMI's critical care nutrition
products, the Company completed its preliminary assessment and concluded that
the Year 2000 risk was focused mainly in the area of its business computer
hardware and computer software applications. Subsequent to the NMI asset
purchase, the Company has undertaken a reassessment and has determined that
the exposure associated with non-compliant external business partners and
suppliers has significantly increased. The assessment has been completed for
the IT and manufacturing facilities and is in process for the third party
partners and suppliers with an estimated completion in mid 1999.
The Company has addressed these issues by:
- installing new network server hardware and software,
specifically for its accounting applications and office
network. This remediation process was completed with total
costs of approximately $60,000. The manufacturers of the
hardware and software have stated that these products are Year
2000 compliant. In planning for the worst case scenarios, the
Company has addressed this issue in its plan. The Company
believes that its hardware and software systems for its
business will be operational for Year 2000, but it may
experience isolated incidences of non-compliance. The testing
of the newly installed hardware and software, along with the
Company's older hardware and software, is anticipated to
conclude by mid 1999; and
- identifying its key business partners and suppliers,
particularly relating to its critical care nutrition business,
and assessing their readiness for Year 2000 to mitigate the
risk to the Company if they are not Year 2000 compliant. The
Company has its critical care nutrition products manufactured
by third parties. If certain vendors, including these critical
care product manufacturers, are unable to deliver product on a
timely basis due to their own Year 2000 issues, the Company
anticipates that there will be other companies who will be able
to deliver such product on a timely basis. Upon completion of
this assessment, the Company will determine what contingency
plans are needed. The Company also recognizes the risks from
other key suppliers if utilities, communications, banking and
government are not ready for Year 2000, but does not believe
the Company will be materially adversely impacted.
The Company's manufacturing facility, completed and operational in
mid-1997, has been Year 2000 compliant since inception and no further work is
considered necessary. The most reasonably likely worst case scenario would be
the inability of the Company to have its critical care nutrition products
manufactured and distributed on a timely basis which could result in
significantly decreased revenues. The Company is currently in the process of
developing its contingency plans for each of its three main areas and should
have them completed in mid-1999.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q for the first quarter ended March 31, 1999 contains
certain forward looking statements within the meaning of 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
1998 ("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
11
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
National 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, including those indicated by an
asterisk (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.
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 more than
$58 million as of March 31, 1999. We may continue to lose money in the
future.
IF WE CANNOT OBTAIN CONTINUING FUNDING, WE MAY BE UNABLE TO
IMPLEMENT OUR BUSINESS PLANS.
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.
Our cash requirements for working capital 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;
- 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.
12
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 necessary funding from some source other than operations, we could
eventually deplete our cash reserves and become insolvent or bankrupt.
IF WE RELY ON INACCURATE MARKET INFORMATION, WE COULD MAKE DECISIONS
THAT HAVE 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.
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 pilot plant
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. We believe that our current
manufacturing facility will meet the anticipated requirements for the
production of Proventra for use in consumer and clinical nutritional products
through the year 2000. Further, we believe that contract manufacturers
would be available to increase our Proventra production capacity quickly, if
required. However, until we begin producing Proventra on a commercial scale,
we cannot be sure that our production capabilities will be adequate
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 or our
collaborators' inability to bring products to market could have a material
adverse effect on our business and financial condition. We anticipate that
products containing Proventra will be introduced in particular markets in the
last half of 1999 through collaborations we have established with other
companies. However, introduction of these products to test markets on
schedule depends on our ability and our collaborators' ability to accomplish
the following:
- finalize market research;
- finalize product development;
- establish product manufacturing;
- initiate marketing, sales and distribution activities related
to our products; and
- provide the funding necessary to accomplish these 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 obtain accurate marketing
data or develop a product responsive to the needs identified by that data,
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 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.
13
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company has issued the following equity securities pursuant to
exemptions from registration under the Securities Act of 1933, as amended
(the "Securities Act"). All such sales were made in reliance upon the
exemptions from registration provided under Sections 3(b) and 4(2) of the
Securities Act.
In April 1999, the Company raised $1,972,500 through the private
placement sale of 1,015,000 shares of common stock to Lombard Odier & Cie,
200,000 shares of common stock to Winston R. Wallin, 50,000 shares of common
stock to H. L. Severance, 35,000 shares of common stock to H. L. Severance,
Inc. Profit Sharing Plan and Trust and 15,000 shares of common stock to H. L.
Severance, Inc. Pension Plan and Trust. The shares of common stock were
issued at $1.50 per share.
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 Common Stock of Incorporated By
the Company, issued in connection with the sale of Convertible Reference
Promissory Notes.(1)
4.7-4.10 Intentionally left blank.
4.11 Warrant to purchase 18,250 shares of Common Stock of the Company Incorporated By
issued to IAI Investment Funds VI, Inc. (IAI Emerging Growth Fund), Reference
dated January 30, 1996.(1)
4.12 Warrant to purchase 6,250 shares of Common Stock of the Company Incorporated By
issued to IAI Investment Funds IV, Inc. (IAI Regional Fund), dated Reference
January 30, 1996.(1)
4.13 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to John Pappajohn, dated February 2, 1996.(1) Reference
4.14 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Edgewater Private Equity Fund, L.P., dated February 2, Reference
1996.(1)
4.15 Warrant to purchase 10,000 shares of Common Stock of the Company Incorporated By
issued to Joseph Giamenco, dated February 2, 1996.(1) Reference
15
EXHIBIT NO. DESCRIPTION METHOD OF FILING
- ----------- ----------- ----------------
4.16 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Gus A. Chafoulias, dated February 2, 1996.(1) Reference
4.17 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to JIBS Equities, dated February 2, 1996.(1) Reference
4.18 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Land O'Lakes, Inc., dated February 2, 1996.(1) Reference
4.19 6% Convertible Debenture Purchase Agreement dated November 18, 1997 Incorporated By
among the Company and the Purchasers named therein.(8) Reference
4.20 Registration Rights Agreement dated November 18, 1997 among the Incorporated By
Company and the Holders named therein.(9) Reference
4.21 6% Convertible Debenture due May 18, 1999 issued to CPR (USA) Inc. Incorporated By
dated November 18, 1997.(10) Reference
4.22 6% Convertible Debenture due May 18, 1999 issued to Libertyview Incorporated By
Plus Fund dated November 18, 1997.(11) Reference
4.23 6% Convertible Debenture due May 18, 1999 issued to Libertyview Incorporated By
Fund, LLC dated November 18, 1997.(12) Reference
4.24 Stock Purchase Warrant issued to CPR (USA) Inc. dated November 18, Incorporated By
1997.(13) Reference
4.25 Stock Purchase Warrant issued to Libertyview Plus Fund dated Incorporated By
November 18, 1997.(14) Reference
4.26 Stock Purchase Warrant issued to Libertyview Fund, LLC dated Incorporated By
November 18, 1997.(15) Reference
4.27 Warrant issued to CLARCO Holdings dated as of December 1, 1997.(16) Incorporated By
Reference
4.28 Warrant issued to CLARCO Holdings dated as of December 1, 1997.(17) Incorporated By
Reference
4.29 Intentionally left blank.
4.30 Warrant issued to Henry J. Cardello dated as of April 13, 1998.(20) Incorporated By
Reference
4.31 Warrant issued to Henry J. Cardello dated as of April 30, 1998.(20) Incorporated By
Reference
4.32 Warrant issued to Henry J. Cardello dated as of June 19, 1998.(20) Incorporated By
Reference
4.33 Warrant issued to William Young and Rebecca Young dated as of Incorporated By
August 12, 1998.(24) Reference
16
EXHIBIT NO. DESCRIPTION METHOD OF FILING
- ----------- ----------- ----------------
4.34 Warrant issued to Henry J. Cardello dated as of September 30, Incorporated By
1998.(24) Reference
4.35 Warrant issued to American Home Products Corporation dated as of Incorporated By
October 15, 1998.(24) Reference
4.36 Form of Registration Rights Agreement dated April 20, 1999.(25) Incorporated By
Reference
4.37 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(Lombard Odier & Cie).(26) Reference
4.38 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. Leigh Severance).(27) Reference
4.39 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. L. Severance, Inc. Profit Sharing Plan and Trust).(28) Reference
4.40 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. L. Severance, Inc. Pension Plan and Trust).(29) Reference
4.41 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(Winston R. Wallin).(30) Reference
#10.1 License Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
#10.2 Royalty Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
#10.3 Supply Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
10.4 Master Services Agreement between the Company and Land O'Lakes Incorporated By
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 and Chiron Incorporated By
Corporation dated March 20, 1995.(1) Reference
*10.9 GalaGen Inc. Employee Stock Purchase Plan, as amended.(2) Incorporated By
Reference
10.10-10.11 Intentionally left blank.
10.12 Master Equipment Lease between the Company and Cargill Leasing Incorporated By
Corporation, dated June 6, 1996.(2) Reference
10.13 Agreement for Progress Payments between the Company and Cargill Incorporated By
Leasing Corporation, dated June 6, 1996.(2) Reference
17
EXHIBIT NO. DESCRIPTION METHOD OF FILING
- ----------- ----------- ----------------
10.14 Agreement for Lease between the Company and Land O'Lakes, dated Incorporated By
June 3, 1996.(2) Reference
10.15-10.18 Intentionally left blank.
*10.19 GalaGen Inc. Annual Short Term Incentive Cash Compensation Plan.(4) Incorporated By
Reference
*10.20 GalaGen Inc. Annual Long Term Incentive Stock Option Compensation Incorporated By
Plan.(4) Reference
*10.21 GalaGen Inc. 1997 Incentive Plan.(6) Incorporated By
Reference
10.22 Master Loan and Security Agreement with TransAmerica Business Incorporated By
Credit Corporation dated June 8, 1997.(7) Reference
10.23 Amended and Restated License Agreement between the Company and Land Incorporated By
O'Lakes dated March 11, 1998.(19) Reference
#10.24 License Agreement between the Company and Metagenics, Inc. dated Incorporated By
April 7, 1998.(20) Reference
10.25 Marketing Agreement between the Company and Nutrition Medical, Incorporated By
Inc., dated September 1, 1998.(21) Reference
10.26 Asset Purchase Agreement between the Company and Nutrition Medical, Incorporated By
Inc., dated September 1, 1998.(21) Reference
10.27 Intentionally left blank.
10.28 Asset Purchase Agreement Amendment 1 between the Company and Incorporated By
Nutrition Medical, Inc., dated October 28, 1998.(22) Reference
10.29 Asset Purchase Agreement Amendment 2 between the Company and Incorporated By
Nutrition Medical, Inc., dated December 23, 1998.(23) Reference
#10.30 Collaboration and License Agreement between the Company and Incorporated By
American Home Products Corporation acting through its Wyeth-Ayerst Reference
Laboratories Division, dated October 15, 1998.(24)
#10.31 Manufacturing and Supply Agreement between the Company and American Incorporated By
Home Products Corporation acting through its Wyeth-Ayerst Reference
Laboratories Division dated October 15, 1998.(24)
#10.32 Product Development Collaboration, Manufacturing and Supply, and Incorporated By
Retail Marketing Agreement between the Company and General Reference
Nutrition Corporation, dated December 22, 1998.(24)
*10.33 Letter agreement with Henry J. Cardello, dated January 1, 1999. Electronic
Transmission
10.34 Repurchase Agreement by and between GalaGen Inc. and Chiron Electronic
Corporation, dated April 1, 1999. Transmission
18
EXHIBIT NO. DESCRIPTION METHOD OF FILING
- ----------- ----------- ----------------
##10.35 Licensing and Distribution Agreement by and between GalaGen Inc. Electronic
and American Institutional Products, Inc., dated March 15, 1999. Transmission
27.1 Financial Data Schedule for the quarter ended March 31, 1999. Electronic
Transmission
27.2 Restated Financial Data Schedule for Quarter ended March 31, Incorporated By
1996.(19) Reference
(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) Incorporated herein by reference to Exhibit No. 4.6 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(11) Incorporated herein by reference to Exhibit No. 4.7 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(12) Incorporated herein by reference to Exhibit No. 4.8 to the
Company's Registration Statement on Form S-3 (Registration No.
333-41151).
(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).
19
(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) Incorporated herein by reference to Exhibit No. 4.12 to
Amendment No. 1 to the Company's Registration Statement on
Form S-3 (Registration No. 333-41151).
(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).
* 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 of which confidential treatment has been
applied for by the Company.
(b) REPORTS ON FORM 8-K
20
1. The Company filed a report on Form 8-K, dated December 23, 1998 and
filed on January 6, 1999, relating to the purchase of certain critical
care enteral products, related inventory and certain fixed assets from
Nutrition Medical, Inc.
2. The Company filed a report on Form 8-K, dated and filed February 5,
1999, updating the risk factors of the Company.
21
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: May 17, 1999 By: /s/ Robert A. Hoerr
------------------------------------
Robert A. Hoerr,
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: May 17, 1999 By: /s/ Henry J. Cardello
------------------------------------
Henry J. Cardello
President and Treasurer
(Principal Financial and Accounting
Officer)
22
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 Common Stock of Incorporated By
the Company, issued in connection with the sale of Convertible Reference
Promissory Notes.(1)
4.7-4.10 Intentionally left blank.
4.11 Warrant to purchase 18,250 shares of Common Stock of the Company Incorporated By
issued to IAI Investment Funds VI, Inc. (IAI Emerging Growth Fund), Reference
dated January 30, 1996.(1)
4.12 Warrant to purchase 6,250 shares of Common Stock of the Company Incorporated By
issued to IAI Investment Funds IV, Inc. (IAI Regional Fund), dated Reference
January 30, 1996.(1)
4.13 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to John Pappajohn, dated February 2, 1996.(1) Reference
4.14 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Edgewater Private Equity Fund, L.P., dated February 2, Reference
1996.(1)
4.15 Warrant to purchase 10,000 shares of Common Stock of the Company Incorporated By
issued to Joseph Giamenco, dated February 2, 1996.(1) Reference
4.16 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Gus A. Chafoulias, dated February 2, 1996.(1) Reference
4.17 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to JIBS Equities, dated February 2, 1996.(1) Reference
4.18 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Land O'Lakes, Inc., dated February 2, 1996.(1) Reference
4.19 6% Convertible Debenture Purchase Agreement dated November 18, 1997 Incorporated By
among the Company and the Purchasers named therein.(8) Reference
EXHIBIT NO. DESCRIPTION METHOD OF FILING
- ----------- ----------- ----------------
4.20 Registration Rights Agreement dated November 18, 1997 among the Incorporated By
Company and the Holders named therein.(9) Reference
4.21 6% Convertible Debenture due May 18, 1999 issued to CPR (USA) Inc. Incorporated By
dated November 18, 1997.(10) Reference
4.22 6% Convertible Debenture due May 18, 1999 issued to Libertyview Incorporated By
Plus Fund dated November 18, 1997.(11) Reference
4.23 6% Convertible Debenture due May 18, 1999 issued to Libertyview Incorporated By
Fund, LLC dated November 18, 1997.(12) Reference
4.24 Stock Purchase Warrant issued to CPR (USA) Inc. dated November 18, Incorporated By
1997.(13) Reference
4.25 Stock Purchase Warrant issued to Libertyview Plus Fund dated Incorporated By
November 18, 1997.(14) Reference
4.26 Stock Purchase Warrant issued to Libertyview Fund, LLC dated Incorporated By
November 18, 1997.(15) Reference
4.27 Warrant issued to CLARCO Holdings dated as of December 1,1997.(16) Incorporated By
Reference
4.28 Warrant issued to CLARCO Holdings dated as of December 1,1997.(17) Incorporated By
Reference
4.29 Intentionally left blank.
4.30 Warrant issued to Henry J. Cardello dated as of April 13, 1998.(20) Incorporated By
Reference
4.31 Warrant issued to Henry J. Cardello dated as of April 30, 1998.(20) Incorporated By
Reference
4.32 Warrant issued to Henry J. Cardello dated as of June 19, 1998.(20) Incorporated By
Reference
4.33 Warrant issued to William Young and Rebecca Young dated as of Incorporated By
August 12, 1998.(24) Reference
4.34 Warrant issued to Henry J. Cardello dated as of September 30, Incorporated By
1998.(24) Reference
4.35 Warrant issued to American Home Products Corporation dated as of Incorporated By
October 15, 1998.(24) Reference
4.36 Form of Registration Rights Agreement dated April 20, 1999.(25) Incorporated By
Reference
4.37 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(Lombard Odier & Cie).(26) Reference
4.38 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. Leigh Severance).(27) Reference
EXHIBIT NO. DESCRIPTION METHOD OF FILING
- ----------- ----------- ----------------
4.39 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. L. Severance, Inc. Profit Sharing Plan and Trust).(28) Reference
4.40 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. L. Severance, Inc. Pension Plan and Trust).(29) Reference
4.41 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(Winston R. Wallin).(30) Reference
#10.1 License Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
#10.2 Royalty Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
#10.3 Supply Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
10.4 Master Services Agreement between the Company and Land O'Lakes Incorporated By
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 and Chiron Incorporated By
Corporation dated March 20, 1995.(1) Reference
*10.9 GalaGen Inc. Employee Stock Purchase Plan, as amended.(2) Incorporated By
Reference
10.10-10.11 Intentionally left blank.
10.12 Master Equipment Lease between the Company and Cargill Leasing Incorporated By
Corporation, dated June 6, 1996.(2) Reference
10.13 Agreement for Progress Payments between the Company and Cargill Incorporated By
Leasing Corporation, dated June 6, 1996.(2) Reference
10.14 Agreement for Lease between the Company and Land O'Lakes, dated Incorporated By
June 3, 1996.(2) Reference
10.15-10.18 Intentionally left blank.
*10.19 GalaGen Inc. Annual Short Term Incentive Cash Compensation Plan.(4) Incorporated By
Reference
*10.20 GalaGen Inc. Annual Long Term Incentive Stock Option Compensation Incorporated By
Plan.(4) Reference
*10.21 GalaGen Inc. 1997 Incentive Plan.(6) Incorporated By
Reference
EXHIBIT NO. DESCRIPTION METHOD OF FILING
- ----------- ----------- ----------------
10.22 Master Loan and Security Agreement with TransAmerica Business Incorporated By
Credit Corporation dated June 8, 1997.(7) Reference
10.23 Amended and Restated License Agreement between the Company and Land Incorporated By
O'Lakes dated March 11, 1998.(19) Reference
#10.24 License Agreement between the Company and Metagenics, Inc. dated Incorporated By
April 7, 1998.(20) Reference
10.25 Marketing Agreement between the Company and Nutrition Medical, Incorporated By
Inc., dated September 1, 1998.(21) Reference
10.26 Asset Purchase Agreement between the Company and Nutrition Medical, Incorporated By
Inc., dated September 1, 1998.(21) Reference
10.27 Intentionally left blank.
10.28 Asset Purchase Agreement Amendment 1 between the Company and Incorporated By
Nutrition Medical, Inc., dated October 28, 1998.(22) Reference
10.29 Asset Purchase Agreement Amendment 2 between the Company and Incorporated By
Nutrition Medical, Inc., dated December 23, 1998.(23) Reference
#10.30 Collaboration and License Agreement between the Company and Incorporated By
American Home Products Corporation acting through its Wyeth-Ayerst Reference
Laboratories Division, dated October 15, 1998.(24)
#10.31 Manufacturing and Supply Agreement between the Company and American Incorporated By
Home Products Corporation acting through its Wyeth-Ayerst Reference
Laboratories Division dated October 15, 1998.(24)
#10.32 Product Development Collaboration,Manufacturing and Supply, and Incorporated By
Retail Marketing Agreement between the Company and General Reference
Nutrition Corporation, dated December 22, 1998.(24)
*10.33 Letter agreement with Henry J. Cardello, dated January 1, 1999. Electronic
Transmission
10.34 Repurchase Agreement by and between GalaGen Inc. and Chiron Electronic
Corporation, dated April 1, 1999. Transmission
##10.35 Licensing and Distribution Agreement by and between GalaGen Inc. Electronic
and American Institutional Products, Inc., dated March 15, 1999. Transmission
27.1 Financial Data Schedule for the quarter ended March 31, 1999. Electronic
Transmission
27.2 Restated Financial Data Schedule for Quarter ended March 31, Incorporated By
1996.(19) Reference
(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) Incorporated herein by reference to Exhibit No. 4.6 to the Company's
Registration Statement on Form S-3 (Registration No. 333-41151).
(11) Incorporated herein by reference to Exhibit No. 4.7 to the Company's
Registration Statement on Form S-3 (Registration No. 333-41151).
(12) Incorporated herein by reference to Exhibit No. 4.8 to the Company's
Registration Statement on Form S-3 (Registration No. 333-41151).
(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) Incorporated herein by reference to Exhibit No. 4.12 to Amendment No.
1 to the Company's Registration Statement on Form S-3 (Registration
No. 333-41151).
(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.
(31) 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).
(32) 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).
(33) 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).
(34) 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).
(35) 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).
(36) 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).
(37) 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).
(38) 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).
(39) 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).
(40) 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).
(41) 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).
(42) 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).
* 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 of which confidential treatment has been applied for
by the Company.