<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2000 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-29839
ORAPHARMA, INC.
(Exact name of registrant as specified in its charter)
Delaware
--------
(State or other jurisdiction
of incorporation or organization)
22-3473777
----------
(I.R.S. Employer
Identification No.)
732 Louis Drive
Warminster, Pennsylvania
18974
-----
(Address of principal executive offices)
215/956-2200
------------
(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
----------
As of June 30, 2000, 13,351,349 shares of common stock were outstanding.
<PAGE>
ORAPHARMA, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited) 3
Balance Sheets - June 30, 2000 and December 31, 1999 3
Statements of Operations - Three months ended
June 30, 2000 and 1999 and Six months ended June 30, 2000
and 1999 4
Statements of Cash Flows - Six months ended
June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
Item 3 Quantitative and Qualitative Disclosures About Market Risk: 9
PART II. OTHER INFORMATION 10
Item 2. Change in Securities and Use of Proceeds 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
----------------------------
ITEM 1. Financial Statements
ORAPHARMA, INC. AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
----------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,073,803 $ 82,986,691
Prepaid expenses and other 263,944 1,207,695
Deferred offering costs 222,012
------------ ------------
Total Current Assets 13,559,759 84,194,386
FIXED ASSETS, net 957,897 993,472
INTANGIBLE ASSETS, net 194,083 716,803
------------ ------------
$14,711,739 $ 85,904,661
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt $ 192,935 $ ---
Accounts payable 452,763 432,388
Accrued expenses 1,420,468 1,211,468
------------ ------------
Total Current Liabilities 2,066,166 1,643,856
------------ ------------
LONG-TERM DEBT 288,043 ---
------------ ------------
REDEEMABLE CONVERTIBLE PREFERRED STOCK 32,974,359 ---
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $.001 per share, 50,000,000 shares
authorized, 1,039,635, and 13,351,349 issued and outstanding 1,040 13,351
Additional paid-in capital 2,789,617 111,872,492
Deferred compensation (815,393) (708,873)
Deficit accumulated during the development stage (22,592,093) (26,916,165)
------------ ------------
Total stockholders' equity (deficit) (20,616,829) 84,260,805
------------ ------------
$ 14,711,739 $ 85,904,661
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ORAPHARMA, INC. AND SUBSIDIARY
------------------------------
(a development-stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Period from
June 30, June 30, Inception
--------- -------- (August 1, 1996
through June 30,
1999 2000 1999 2000 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
Research and development $ 1,691,917 $ 1,704,106 $ 3,266,070 $ 3,749,856 $ 22,764,957
General and administrative 571,447 1,230,742 975,865 2,193,194 7,335,114
----------- ----------- ----------- ----------- ------------
Operating loss (2,263,364) (2,934,848) (4,241,935) (5,943,050) (30,100,071)
----------- ----------- ----------- ----------- ------------
INTEREST INCOME, net 166,591 1,280,606 364,880 1,618,978 3,183,906
----------- ----------- ----------- ----------- ------------
NET LOSS $(2,096,773) $(1,654,242) $(3,877,055) $(4,324,072) $(26,916,165)
=========== =========== =========== =========== ============
BASIC AND DILUTED NET LOSS PER
SHARE $ (2.91) $ (0.13) $ (5.38) $ (0.51)
=========== =========== =========== ===========
SHARED USED IN COMPUTING BASIC
AND DILUTED NET LOSS PER
SHARE 719,425 13,182,640 720,250 8,555,222
=========== =========== =========== ===========
PRO FORMA BASIC AND DILUTED
NET LOSS PER SHARE $ (0.27) $ (0.13) $ (0.50) $ (0.38)
=========== =========== =========== ===========
SHARES USED IN COMPUTING PRO
FORMA BASIC AND DILUTED NET
LOSS PER SHARE 7,723,420 13,182,640 7,724,255 11,378,754
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ORAPHARMA, INC. AND SUBSIDIARY
------------------------------
(a development-stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Period from
June 30, Inception (August
-------- 1, 1996) Through
June 30,
1999 2000 2000
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(3,877,055) $(4,324,072) $(26,916,165)
Adjustments to reconcile net loss to net cash used in
operating activities--
Depreciation and amortization 138,486 173,489 707,476
Stock based compensation expense 11,762 131,460 548,000
Common stock and warrants issued in connection
with acquisition of technology -- 61,164 835,897
Changes in operating assets and liabilities--
Prepaid expenses and other (79,746) (721,739) (985,683)
Accounts payable (652,678) (20,376) 432,386
Accrued expenses (915,716) (208,998) 789,427
----------- ----------- ------------
Net cash used in operating activities (5,374,947) (4,909,072) (24,588,662)
----------- ----------- ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures (137,149) (181,784) (1,584,112)
Expenditures for intangible assets -- (550,000) (809,639)
----------- ----------- ------------
Net cash used in investing activities (137,149) (731,784) (2,393,751)
----------- ----------- ------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Proceeds from issuance of notes payable -- -- 915,000
Proceeds from sale of preferred stock, net of expenses -- -- 33,730,563
Proceeds from the sale of common stock and exercise of
stock options and warrants 250,677 76,034,722 76,038,541
Proceeds from PA Opportunity Grant 200,000 -- 200,000
Repayment of notes payable (96,467) (480,978) (915,000)
----------- ----------- ------------
Net cash provided by financing activities 354,210 75,553,744 109,969,104
----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,157,886) 69,912,888 82,986,691
CASH AND CASH EQUIVALENTS, beginning of period 19,236,084 13,073,803 --
----------- ----------- ------------
CASH AND CASH EQUIVALENTS, end of period $14,078,198 $82,986,691 $ 82,986,691
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ORAPHARMA, INC. AND SUBSIDIARY
------------------------------
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The unaudited consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In management's opinion, the accompanying consolidated financial
statements have been prepared on a basis consistent with the audited financial
statements and contain adjustments, which are of a normal and recurring nature,
necessary to present fairly the Company's financial position and results of
operations. Interim financial results are not necessarily indicative of results
anticipated for the full year. These unaudited consolidated financial statements
should be read in conjunction with the Company's 1999 audited financial
statements and footnotes included in the Company's Registration Statement on
Form S-1 (File No. 333-93881).
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of expenses incurred during the reporting period. Actual
results could differ from those estimates.
2. Net Loss Per Common Share
The Company has presented basic and diluted net loss per share pursuant to the
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per
Share," and the Securities and Exchange Commission Staff Accounting Bulletin No.
98. In accordance with SFAS 128, basic and diluted net loss per share has been
computed using the weighted-average number of shares of common stock outstanding
during the period, less shares subject to repurchase. Pro forma basic and
diluted net loss per common share, as presented in the statements of operations,
gives effect to the conversion of the redeemable convertible preferred stock,
which automatically converted to common stock upon the closing of the Company's
initial public offering, from the original date of issuance.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------- --------
1999 2000 1999 2000
---- ----- ---- ----
<S> <C> <C> <C> <C>
Net Loss $(2,096,773) $(1,654,242) $(3,877,055) $(4,324,072)
=========== =========== =========== ===========
Basic and diluted:
Weighted-average shares of common stock outstanding 957,038 13,310,762 957,038 8,699,404
Less: weighted average shares subject to repurchase (237,613) (128,122) (236,788) (144,182)
----------- ----------- ----------- -----------
Weighted-average shares used in computing basic and
diluted net loss per share 719,425 13,182,640 720,250 8,555,222
=========== =========== =========== ===========
Basic and diluted net loss per share $ (2.91) $ (0.13) $ (5.38) $ (0.51)
=========== =========== =========== ===========
Pro forma:
Shares used above 719,425 13,182,640 720,250 8,555,222
Pro forma adjustment to reflect the weighted average
effect of assumed conversion of redeemable convertible
preferred stock 7,004,005 -- 7,004,005 2,823,532
----------- ----------- ----------- -----------
Shares used in computing pro forma basic and diluted
net loss per share 7,723,430 13,182,640 7,724,255 11,378,754
=========== =========== =========== ===========
Pro forma basic and diluted net loss per share $ (0.27) $ (0.13) $ (0.50) $ (0.38)
=========== =========== =========== ===========
</TABLE>
We have excluded all outstanding redeemable convertible preferred stock,
outstanding stock options and warrants, and shares subject to repurchase from
the calculation of basic and diluted loss per common share because all such
securities are antidilutive for all applicable periods presented. The pro forma
calculations exclude outstanding stock options and warrants, and shares subject
to repurchase as they are antidilutive.
3. Stockholders' Equity
In February 2000, we effected a 1 for 2 reverse stock split of all outstanding
common and preferred stock and increased the number of authorized shares of
common stock to 50,000,000. All references in the accompanying financial
statements to the number of shares and per share amounts have been retroactively
restated to reflect the reverse stock split.
On March 9, 2000 we completed our initial public offering ("IPO") and sold
4,000,000 shares of our common stock to the public at $18.00 per share. Net
proceeds to the Company after underwriting commission and expenses were
approximately $66 million. On April 7, 2000 we sold an additional 600,000 shares
of common stock to cover underwriter over-allotments and received net proceeds
of approximately $10 million.
Following completion of our IPO, all of the outstanding shares of Series A,B,C
and D redeemable convertible preferred stock were converted into 7,557,100
shares of common stock.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations as well as information contained elsewhere in this Report
contains forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
include statements about the following:
. establishing a sales and marketing force, including related hiring and
training activities: the product launch of ARESTIN(TM):
. our intentions regarding international collaborations: anticipated
operating losses and capital expenditures: our product development efforts
for ARESTIN(TM)and our other product candidates: and
. the status of our regulatory process for ARESTIN(TM).
When used in this Report, we intend the words "may," "believe," "anticipate,"
"planned," "expect," "require," "intend," "assume" and similar words to identify
"forward-looking statements." Our forward-looking statements involve
uncertainties and other factors that may cause our actual results, performance
or achievements, to be far different from that suggested by our forward-looking
statements. You should not place undue reliance on our forward-looking
statements. We do not intend to update any of these factors or to publicly
announce the results of any revisions to any of these forward-looking
statements.
OVERVIEW OF ORAPHARMA'S FINANCIAL PERFORMANCE
Background
We have devoted substantially all of our resources since we began operations in
August 1996 to the research and development of locally delivered pharmaceutical
products for oral healthcare. Some programs are based on our core technology
which we license from American Home Products. Additional programs are based on
technology which we licensed from others. With respect to our new product
candidates other than ARESTIN(TM), that was previously referred to as MPTS, we
have formed relationships to capitalize on our core technology and expand our
expertise in formulation and development. We cannot accurately estimate either
the cost of these development activities or the time when the costs will be
incurred; and we are unable to predict with any certainly if they will become
commercial products.
We are a development stage pharmaceutical company and have not generated
revenues from product sales. We have not been profitable and since inception
have incurred a cumulative net loss of approximately $ 26.9 million through June
30, 2000. These losses have resulted principally from costs incurred in research
and development activities, including phase 3 clinical trials of our lead
product candidate, ARESTIN(TM) and general and administrative expenses. We
expect to incur additional operating losses until such time as we generate
sufficient revenue to offset expenses. Research and development costs relating
to new product candidates will continue to increase. We also expect
manufacturing, sales and marketing costs to increase as we prepare for product
launch of ARESTIN(TM).
In October 1999 we completed phase 3 clinical trials for ARESTIN(TM) for the
treatment of periodontitis. We filed a New Drug Application (NDA) for
ARESTIN(TM) with the United States Food and Drug Administration(FDA) on February
17, 2000. The FDA accepted the NDA for review on April 21, 2000 and we are
awaiting the results. Most of our revenue for the foreseeable future will depend
on our ability to receive regulatory approval for, and successfully market,
ARESTIN(TM). Assuming we obtain FDA approval, we intend to sell ARESTIN(TM) in
the United States by deploying a sales and marketing force of 50 to 75 persons,
and expect to begin hiring and training activities in late 2000. In
international markets, we intend to rely on strategic relationships to market
and sell ARESTIN(TM) rather than establish our own sales force.
Equity Financings
We have financed our operations primarily with the net proceeds generated from
the issuance of common and redeemable convertible preferred stock. From our
inception in August 1996 through December 31, 1999, we received net proceeds of
approximately $33 million from the sale of redeemable convertible preferred
stock.
On March 9, 2000 we sold 4,000,000 shares of common stock in connection with our
initial public offering and received net proceeds of approximately $66 million.
On April 7, 2000, we sold an additional 600,000 shares to cover underwriters'
over-allotments and received net proceeds of approximately $10 million.
At the effective date of the initial public offering on March 9, 2000, all
outstanding shares of series A,B,C and D preferred stock automatically converted
into an aggregate of 7,557,100 shares of common stock.
Milestone Payments, Royalties and License Fees
In April 2000, we paid American Home Products (AHP) a milestone payment of
$500,000 based on the FDA acceptance of our NDA for review. A second milestone
payment of $2.5 million is due to AHP if and when we receive FDA Approval of
ARESTIN(TM) for the treatment of periodontitis. We also paid AHP $250,000 and
issued them 110,000 shares of our common stock at the time we entered into our
license agreement in February 1997. Our license agreement with AHP also requires
us to pay royalties on sales of ARESTIN(TM) and other products that are covered
by the AHP patents or developed using the AHP technology.
In April 2000, we paid Gary R. Jernberg, DDS a milestone payment of $50,000
based on the FDA acceptance of our NDA for review. A second milestone payment of
$100,000 is due to Dr. Jernberg if and when we receive FDA approval of
ARESTIN(TM) for the treatment of periodontitis. We are also required to pay
royalties on sales of ARESTIN(TM) to Dr. Jernberg, a holder of three U.S.
patents, and to Technical Development and Investments, Est., relating to
technology previously licensed by AHP to this third party. Royalties payable to
these parties can be fully credited against up to 50% of the royalties payable
under our agreement with AHP.
7
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999.
Research and Development Expenses.
----------------------------------
Research and development expenses were approximately $1.7 million for both the
three months ended June 30, 2000 and 1999. Increased spending for scale up
activities associated with the production of ARESTIN(TM), our lead product
candidate, was partially off set by reduced spending for phase 3 clinical trials
and new product development.
General and Administrative Expenses.
------------------------------------
General and administrative expenses increased to approximately $1.2 million for
the three months ended June 30, 2000 compared to $571,000 in the same period in
1999, an increase of 115%. This increase of $659,000 was primarily due to market
research activities associated with ARESTIN(TM) and to a lesser extent higher
personnel costs and professional expenses.
Net Interest Income (Expense).
------------------------------
Interest income for the three months ended June 30, 2000 and 1999 was
approximately $1.3 million and $180,000 respectively. This 613% increase of
approximately $1.1 million was attributable to higher levels of cash and cash
equivalents available for investment in 2000 and higher interest rates. The
greater availability of cash and cash equivalents was due to the initial public
offering of our common stock on March 9, 2000 and the overallotment sale on
April 7, 2000. Interest expense for the same periods was $0.00 and $13,000
respectively and represented interest paid on an equipment financing facility.
Net Loss.
---------
The net loss was approximately $1.7 million for the three months ended June 30,
2000 compared to approximately $2.1 million for the same period in 1999, a
decrease of 21%. The decrease reflected reduced spending for phase 3 clinical
trials and new product development plus increased interest income. These
beneficial developments were off set by increased spending for the production
scale up and marketing launch of ARESTIN(TM).
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999.
Research and Development Expenses.
----------------------------------
Research and development expenses increased to approximately $3.7 million for
the six months ended June 30, 2000 compared to approximately $3.3 million in the
same period in 1999, an increase of 15%. This increase of $484,000 was primarily
due to costs of new product development and the scale up activities associated
with the production of ARESTIN(TM) that were partially off set by a reduction in
phase 3 clinical trial expenses.
General and Administrative Expenses.
------------------------------------
General and administrative expenses increased to approximately $2.2 million for
the six months ended June 30, 2000 compared to $976,000 in the same period in
1999, an increase of 125%. This increase of approximately $1.2 million was
primarily due to the marketing preparation for the launch of ARESTIN(TM). The
costs also included international collaboration, and to a lesser extent, higher
personnel costs and professional expenses.
Net Interest Income (Expense).
------------------------------
Interest income for the six months ended June 30, 2000 and 1999 was
approximately $1.6 million and $393,000 respectively. This 315% increase of
approximately $1.2 million was attributable to higher levels of cash and cash
equivalents available for investment in 2000 and higher interest rates. The
greater availability of cash and cash equivalents was due to the initial public
offering of our common stock on March 9, 2000 and the overallotment sale on
April 7, 2000. Interest expense for the same periods was $9,000 and $28,000
respectively and represented interest paid on an equipment financing facility.
Net Loss.
---------
The net loss was approximately $4.3 million for the six months ended June 30,
2000 compared to approximately $3.9 million for the same period in 1999, an
increase of 12%. The increase reflects increases in research and development,
and general and administrative expenses, offset by the increase in interest
income.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, we had cash and cash equivalents of approximately $83.0
million, an increase of approximately $69.9 million from December 31 1999. On
March 9, 2000, we sold 4,000,000 shares of common stock in the initial public
offering and raised net proceeds of approximately $66.0 million. On April 7,
2000, we sold an additional 600,000 shares of common stock to cover underwriter
over-allotments and received net proceeds of approximately $10.0 million. As of
June 30, 2000, all of the proceeds from the sale of these shares has been
invested in short term, investment-grade, interest-bearing securities.
During the six months ended June 30, 2000, the net cash used in operating
activities was approximately $4.9 million. This represents the net loss for the
period, adjusted for certain non-cash expenses, and changes in other operating
assets and liabilities as set forth in the statements of cash flows.
Net cash used in investing activities for the six months ended June 30, 2000 was
$732,000. The cash was used for milestone payments on our licensing agreements
plus the acquisition of laboratory and computer equipment.
We anticipate that our capital expenditures will be approximately $2.7 million
for the year ending December 31, 2000, although we have no firm commitments to
spend this amount. Approximately $1.8 million represents laboratory and
production equipment for which we have committed to purchase approximately $1.6
million as of June 30, 2000. The balance is represented by planned expenditures
for computer equipment and software, leasehold improvements and furniture.
8
<PAGE>
Net cash proceeds from financing activities for the six months ended June 30,
2000 was approximately $76.0 million from the sale of 4,600,000 shares of common
stock.
In June 1999, we increased our credit facility with a bank from $750,000 to
$1,750,000. The facility was used to finance purchases of equipment, software
and leasehold improvements through June 30, 2000. Borrowings under this facility
did bear interest at the prime rate plus 0.75%. In the six months ended June 30,
2000, we repaid the outstanding balance of $480,978. This credit facility
expired on June 30, 2000 and was not renewed.
We lease our corporate and research and development facilities under an
operating lease expiring on September 30, 2003. We have two 5 year renewal
options subject to the landlord's determination of the fair rental value for
each renewal term. We have also entered into operating lease agreements for
various office equipment. The terms of these lease agreements range from 18 to
65 months. Current minimum annual payments under these leases total $189,652 per
year.
We believe that our current cash position and expected interest income will be
sufficient to fund our operations and capital expenditures through 2001. Our
operating expenses and capital expenditures will increase due to the
manufacturing scale up and market launch of ARESTIN(TM) in the second half of
2001. Research and development expenditures, including clinical studies, are
expected to continue at high levels as we develop new product candidates. The
initiation of commercial manufacturing will require the purchase of production
equipment and the hiring of additional staff to coordinate raw material
suppliers and manage contract manufacturing services at multiple locations.
Sales and marketing activities will require the hiring and training of
approximately 50 to 75 sales and marketing persons in late 2000 and early 2001.
We also intend to hire additional research and development, clinical research
and administrative staff.
INCOME TAXES
As of December 31, 1999, we had approximately $20.5 million and $670,000 of net
operating loss and research and development credit carryforwards, respectively,
for federal income tax purposes, which expire on various dates beginning in
2011. These amounts reflect differences in the treatment of expenses for tax
reporting and financial reporting. As of December 31, 1999, we had capitalized
approximately $1.2 million of research and development expenses for federal
income tax purposes. The Tax Reform Act of 1986, as amended, contains certain
provisions that may limit our ability to utilize net operating loss and tax
credit carryforwards in any given year or if there is an ownership change. Any
future ownership change, such as described in Section 382 of the Internal
Revenue Code, may limit the utilization of net operating loss and tax credit
carryforwards.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company believes that it is not subject to a material impact to its
financial position or results of operations, relating to market risk.
9
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
d) On March 9, 2000, the Company consummated its initial public offering (the
"Offering") of its common stock, no par value (the "Common Stock") based on the
registration statement relating to this offering (File No. 333-93881) which was
declared effective on that date. Robertson Stephens, U. S. Bancorp Piper Jaffray
and Gerard Klauer Mattison & Co., Inc. were the managing underwriters of the
Offering. The Offering terminated on April 7, 2000 upon the sale of the 600,000
shares subject to the underwriters' over-allotment option. The number of shares
registered, the aggregate price of the offering amount registered, the amount
sold and the aggregate offering price of the amount sold by the Company in the
Offering were as follows:
<TABLE>
<CAPTION>
Shares Aggregate Aggregate
Registered Price Registered Amount Sold Price Sold
---------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Primary Offering 4,000,000 $72,000,000 4,000,000 $72,000,000
Overallotment Offering 600,000 10,800,000 600,000 10,800,000
</TABLE>
The Company incurred the following expenses with respect to the Offering during
the period March 9, 2000 through March 31, 2000, none of which were direct or
indirect payments to directors, officers, general partners of the Company or
their associates or to persons owning 10% or more of any class of equity
securities of the Company or to affiliates of the Company:
<TABLE>
<CAPTION>
Underwriting
Discounts Underwriter's
and Commissions Finders' Fees Expenses Other Expenses Total Expenses
--------------- ------------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Primary Offering $5,040,000 $0 $0 $ 967,702 $6,007,702
Overallotment Offering 756,000 0 0 52,552 808,552
---------- -- -- ---------- ----------
$5,796,000 $1,020,254 $6,816,254
</TABLE>
The net offering proceeds to the Company, from the primary offering, after
deducting the foregoing discounts, commissions, fees and expenses were
$75,983,746. An estimate of how these proceeds were used by the Company during
the period March 9, 2000 through June 30, 2000 is as follows:
Construction of plant, building and facilities $0
Purchase and installation of machinery and equipment 0
Purchases of real estate 0
Acquisition of other businesses 0
Repayment of indebtedness 0
Temporary investments (money market account) $75,983,746
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
11
<PAGE>
SIGNATURE
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.
Date: August 11, 2000 /s/ Michael D. Kishbauch
----- --------------- ------------------------------------------
Michael D. Kishbauch
President and Chief Executive Officer
(Principal Executive Officer
and Duly Authorized Signatory)
Date: August 11, 2000 /s/ James A. Ratigan
----- --------------- ------------------------------------------
James A. Ratigan
Executive Vice President, Chief Financial
Officer and Secretary (Principal Financial
Officer and Duly Authorized Signatory)
Date: August 11, 2000 /s/ Robert D. Haddow
----- --------------- ------------------------------------------
Robert D. Haddow
Controller (Principal Accounting Officer
and Duly Authorized Signatory)
12
