================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSISON
WASHINGTON, D.C. 20549
---------------------------
FORM 10-Q
---------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
---------------------------
Commission file number 0-26389
CYBEAR, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3936988
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
5000 Blue Lake Drive, Suite 200
Boca Raton, Florida 33431
(Address of principal (Zip Code)
Executive offices
(561) 999-3500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) 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 August 4, 2000, 17,787,000 shares of the Registrant's common
stock, par value $0.001 per share were issued and outstanding.
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<PAGE>
CYBEAR, INC.
INDEX TO THE FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Unaudited Consolidated Balance Sheets -
as of June 30, 2000 and December 31, 1999 3
Unaudited Consolidated Statements of Operations -
for the three and six months ended June 30, 2000 and 1999 4
Unaudited Consolidated Statements of Cash Flows -
for the six months ended June 30, 2000 and 1999 5
Notes to Unaudited Consolidated Financial Statements 6
Unaudited Pro Forma Condensed Consolidated Financial Data 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
</TABLE>
2
<PAGE>
CYBEAR, INC.
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CYBEAR, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share and per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,555 $ 11,922
Investments available-for-sale, at market value 17,443 26,072
Accounts receivable, net 760 104
Convertible notes receivable 7,000 3,000
Prepaid and other current assets 762 1,382
--------------- ---------------
Total current assets 29,520 42,480
Property and equipment, net 7,397 5,126
Intangible and other assets, net 4,135 5,462
--------------- ---------------
Total assets $ 41,052 $ 53,068
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,095 $ 2,758
Accrued liabilities 449 332
--------------- ---------------
Total current liabilities 2,544 3,090
--------------- ---------------
Commitments and contingencies (Notes 2 and 10)
Shareholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized,
none issued and outstanding -- --
Common stock, $.001 par value; 25,000,000 shares authorized,
17,774,000 and 17,654,000 shares issued and outstanding as of
June 30, 2000 and December 31, 1999, respectively 18 18
Additional paid-in capital 65,157 64,873
Accumulated deficit (26,612) (14,813)
Accumulated other comprehensive loss (55) (100)
--------------- ---------------
Total shareholders' equity 38,508 49,978
--------------- ---------------
Total liabilities and shareholders' equity $ 41,052 $ 53,068
=============== ===============
</TABLE>
The accompanying notes to unaudited consolidated financial statements are
an integral part of these unaudited consolidated balance sheets.
3
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Cybearclub LLC $ 1,109 $ -- $ 1,324 $ --
Web development, hosting and other services 124 -- 136 --
Subscription 4 27 8 27
------------ ------------ ------------ ------------
Total revenues 1,237 27 1,468 27
------------ ------------ ------------ ------------
Operating expenses:
Cost of revenues 1,088 -- 1,297 --
Network operations and operations support 1,193 665 2,208 1,423
Product development 840 620 1,788 1,146
Selling, general and administrative 2,115 1,531 4,809 2,881
Depreciation and amortization 773 349 1,322 540
Merger costs 53 -- 885 --
Other non-recurring charges 870 -- 2,022 --
------------ ------------ ------------ ------------
Total operating expenses 6,932 3,165 14,331 5,990
------------ ------------ ------------ ------------
Loss from operations (5,695) (3,138) (12,863) (5,963)
Other income (expense):
Interest income 505 49 1,064 50
Interest expense on advances from Andrx Corporation -- (125) -- (216)
------------ ------------ ------------ ------------
Loss before income taxes (5,190) (3,214) (11,799) (6,129)
Income tax benefit -- 1,424 -- 2,824
------------ ------------ ------------ ------------
Net loss $ (5,190) $ (1,790) $ (11,799) $ (3,305)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.29) $ (0.13) $ (0.67) $ (0.25)
============ ============ ============ ============
Basic and diluted weighted average shares
of common stock outstanding 17,773,600 13,579,000 17,738,600 13,425,100
============ ============ ============ ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements are
an integral part of these unaudited consolidated statements.
4
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (11,799) $ (3,305)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation and amortization 1,322 540
Other non-cash charges 889 --
Changes in operating assets and liabilities:
Accounts receivable, net (656) (25)
Prepaid and other assets 435 (451)
Accounts payable and accrued liabilities (46) (5)
--------------- ---------------
Net cash used in operating activities (9,855) (3,246)
--------------- ---------------
Cash flows from investing activities:
Proceeds from sales of investments available-for-sale, net 8,674 --
Funding of convertible note receivable (4,000) --
Purchases of property and equipment (3,389) (1,567)
Product development costs (81) (173)
--------------- ---------------
Net cash provided by (used in) investing activities 1,204 (1,740)
--------------- ---------------
Cash flows from financing activities:
Proceeds from exercises of stock options 284 --
Proceeds from issuance of shares of common stock -- 50,788
Advances from Andrx Corporation, net of Andrx's utilization
of Cybear's income tax attributes -- 5,101
--------------- ---------------
Net cash provided by financing activities 284 55,889
--------------- ---------------
Net (decrease) increase in cash and cash equivalents (8,367) 50,903
Cash and cash equivalents, beginning of period 11,922 4
--------------- ---------------
Cash and cash equivalents, end of period $ 3,555 $ 50,907
=============== ===============
Supplemental disclosure of non-cash activities:
Conversion of advances from Andrx into shares of common stock $ -- $ 7,446
=============== ===============
</TABLE>
The accompanying notes to unaudited consolidated financial statements are
an integral part of these unaudited consolidated statements.
5
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(in thousands, except for share and per share amounts)
(1) GENERAL
In the opinion of management, the accompanying unaudited consolidated
financial statements have been prepared by Cybear, Inc. ("Cybear" or the
"Company"), an approximately 72% owned subsidiary of Andrx Corporation ("Andrx")
as of June 30, 2000, pursuant to the rules and regulations of the United States
Securities and Exchange Commission ("SEC"). Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to those rules and regulations. However,
management believes that the disclosures contained herein are adequate to make
the information presented not misleading. The unaudited consolidated financial
statements reflect, in the opinion of management, all material adjustments
(which include only normal recurring adjustments) necessary to present fairly
the Company's unaudited financial position and results of operations. The
unaudited consolidated results of operations for the three and six months ended
June 30, 2000, and cash flows for the six months ended June 30, 2000, are not
necessarily indicative of the results of operations or cash flows which may be
expected for the remainder of 2000. The unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes for the year ended December 31, 1999, included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.
Certain prior period amounts have been reclassified to conform to the
current period presentation.
(2) REORGANIZATION PLAN
In March 2000, Andrx and Cybear announced that they executed a
definitive Agreement and Plan of Merger and Reorganization (the
"Reorganization") with respect to their previously announced tracking stock
reorganization plan. This plan, which was recommended to the Cybear Board of
Directors by its special committee and approved by the Boards of both Cybear and
Andrx, will create a new class of Andrx common stock to separately track the
performance of Cybear ("Cybear Group Common"). The Reorganization will be
submitted to Andrx and Cybear shareholders for approval at the Cybear special
meeting of shareholders and Andrx annual meeting of shareholders scheduled for
September 5, 2000. If approved, the Reorganization contemplates the creation of
Andrx Corporation, a new holding company under Delaware law ("Andrx
Corporation"). A wholly-owned subsidiary of Andrx Corporation would merge with
and into Andrx, with Andrx surviving the merger and another wholly owned
subsidiary of Andrx Corporation would merge with and into Cybear with Cybear
surviving the merger. The Reorganization will become effective on the date and
time that the certificate of merger is filed with the Delaware and Florida
Secretaries of State or such other date and time specified in the certificate of
merger.
In connection with the proposed tracking stock reorganization plan, the
Company incurred merger costs of $53 and $885 in the three and six months ended
June 30, 2000, respectively. The Company expects to incur total merger costs of
up to approximately $1,500 in connection with the proposed tracking stock
reorganization plan. These costs are charged to expense as incurred.
Unaudited pro forma condensed consolidated financial data giving pro
forma effect to the Reorganization are presented on pages 11 to 17 of this
Quarterly Report on Form 10-Q.
6
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(in thousands, except for share and per share amounts)
(3) RELATED PARTY TRANSACTIONS
In September 1999, Cybear commenced a venture with Andrx, Cybearclub
LLC (the "Joint Venture" or " Cybearclub"), to distribute healthcare products to
physician offices on orders placed through the Internet. Capital contributions
to, distributions from and net income or loss generated by Cybearclub are
allocated in proportion to Cybear and Andrx's interest in the joint venture.
Such interests are 55% to Cybear and 45% to Andrx. Cybearclub is managed by and
under the direction of a management committee comprised of five members. Three
members are appointed by Cybear and two members are appointed by Andrx. Based on
its majority ownership and majority representation on the management committee
of Cybearclub, the Company controls Cybearclub and, accordingly, consolidates
the accounts of Cybearclub.
Andrx purchases products from outside vendors and charges Cybearclub
for the products sold by Cybearclub. Andrx also charges Cybearclub for services
that include the purchasing, warehousing and distribution of the products to the
physician offices. Such services are charged under an arm's length agreement.
For the three and six months ended June 30, 2000, Andrx charged Cybear $59 and
$81, respectively, for the services it provided.
The Company and Andrx have a corporate services agreement whereby Andrx
provides the Company with various management services. For the three and six
months ended June 30, 2000 and 1999, the Company incurred amounts for these
services based upon mutually agreed upon allocation methods. Management believes
that the amounts incurred for these services approximate fair market value.
Costs for such services were $30 for both the three months ended June 30, 2000
and 1999, respectively, and $60 for both the six months ended June 30, 2000 and
1999, respectively.
Accounts payable in the accompanying consolidated balance sheets as of
June 30, 2000 and December 31, 1999, include $782 and $59, respectively, payable
to Andrx for the purchase of the products sold by Cybearclub and services
provided by Andrx.
(4) CONVERTIBLE NOTES RECEIVABLE
In March 2000, Cybear entered into a software license agreement and a
development service agreement with AHT Corporation ("AHT") whereby, among other
things, Cybear obtained non-exclusive licenses to two AHT software applications
for $1,000 and whereby Cybear agreed to develop a software application for AHT
and receive $950 for such services. These agreements are being accounted on a
net basis and the resulting net cash outflow of $50 is included in property and
equipment and accounts payable in the accompanying consolidated balance sheet as
of June 30, 2000. Accordingly, no revenue will be recorded in connection with
entering into the development service agreement. The net cash outflow will be
amortized over three years.
7
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(in thousands, except for share and per share amounts)
In connection with these agreements, upon receipt of $4,000 from
Cybear, AHT issued to Cybear a one-year convertible promissory note (the "AHT
Note") in the amount of $4,000 bearing interest at the rate of 10%. At its
option, Cybear may convert the AHT Note into shares of AHT common stock at a
conversion price of the lower of $4.34 per share or 80% of the average market
price for the 30 trading days immediately preceding the conversion date provided
that Cybear cannot acquire upon conversion more than 1,913,550 shares of AHT
common stock. In addition, in the event of default by AHT, Cybear shall be
granted a perpetual license to the software applications, including the source
code to the software applications. The Company has recorded the AHT Note at its
cost. In addition, AHT granted Cybear a warrant (the "AHT Warrant") to purchase
300,000 shares of its common stock. The AHT Warrant has an exercise price of
$4.34 per share and expires five years from the grant date. As of June 30, 2000,
the closing sale price of AHT's common stock on the Nasdaq Stock Market was
$2.00.
In July 2000, AHT announced it had entered into a merger agreement with
BioShield Technologies, Inc. ("BioShield") whereby AHT would become a wholly
owned subsidiary of BioShield. If the merger is consummated, Cybear has the
right to redeem the AHT Note at a 20% premium of the principal then outstanding.
The merger is subject to various conditions and shareholders' approval and,
accordingly, there can be no assurance that the merger agreement will be
consummated and that Cybear will exercise its redemption right.
(5) REVENUE RECOGNITION
Cybearclub LLC is a venture between Cybear and Andrx to distribute
healthcare products to physician offices on orders placed through the Internet
(see Note 3). The Cybearclub LLC revenues are earned when the products have been
received by the customer. Provisions for returns, pricing adjustments and other
adjustments related to Cybearclub's revenues are provided in the same period the
related revenues are recorded. Web development, hosting and subscription
revenues are earned when the Company's services are provided. Historically, the
Company entered into certain agreements with medical organizations to provide
the Company's subscription services to the organizations' members in exchange
for various consulting services. Certain of these agreements resulted in a net
cash outflow. Subscription services earned under agreements resulting in net
cash outflows were recorded as a reduction of the amounts expensed for the
consulting services received. As of June 30, 2000, the Company does not have any
outstanding subscription services agreements resulting in net cash outflows.
Cost of revenues consists of the costs of the products purchased for
resale by Cybearclub, as well as fulfillment costs (see Note 3). Cost of
revenues are recorded in the same period the related revenues are recorded.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101
("SAB 101") which summarizes certain of the staff's view in applying generally
accepted accounting principles to revenue recognition in financial statements.
The effective date of SAB 101 for the Company is the quarter ending December 31,
2000. The Company continues to evaluate the impact of the provisions that SAB
101 will have on revenue recognition in future periods. Based on the Company's
initial evaluation, Cybear believes SAB 101 will not have a material impact on
its future results of operations.
8
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(in thousands, except for share and per share amounts)
(6) OTHER NON-RECURRING CHARGES
For the three months ended June 30, 2000, the Company recorded other
non-recurring charges of $870 representing costs incurred to resolve a dispute
over performance under an agreement and to terminate such agreement. For the six
months ended June 30, 2000, Cybear recorded other non-recurring charges of
$2,022 representing severance costs, impairment charges to certain assets and
costs incurred to resolve a dispute and to terminate agreements. Certain of
these other non-recurring charges pertained to an agreement whereby the Company
had future monthly contractual obligations through June 2001, totaling
approximately $2,300. In March 2000, the Company disputed the third party's
performance under the agreement. In June 2000, the Company and the third party
resolved their dispute, agreed to terminate the agreement, and released each
other from any continuing obligations, other than certain mutual indemnification
obligations, upon payment by Cybear of $870 of the remaining $2,300 due from
Cybear under the agreement.
(7) INCOME TAXES
Through the completion of its public offering in June 1999, Cybear's
results of operations for tax purposes were included in the consolidated income
tax return of Andrx, since Andrx owned at least 80% of the common stock of
Cybear. Cybear and Andrx have a tax allocation agreement pursuant to which
Federal income tax liabilities or benefits are allocated to Cybear as if Cybear
had filed a separate income tax return when Cybear's taxable results are
included in the consolidated income tax return of Andrx. Upon completion of the
public offering in June 1999, Andrx's ownership in Cybear was reduced below 80%.
Consequently, thereafter Cybear files its income tax returns separately.
For the three and six months ended June 30, 2000, Cybear did not record
any income tax benefit as Andrx's ownership in Cybear was below 80% and Cybear
generated net operating loss carryforwards. Under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes",
Cybear has provided a valuation allowance to reserve against 100% of its net
deferred tax assets due to its history of net losses. For the three and six
months ended June 30, 1999, as Andrx utilized Cybear's income tax benefits,
Cybear recorded $1,424 and $2,824, respectively, in income tax benefit. These
income tax benefits reflect the reimbursement from Andrx for the utilization of
Cybear's income tax attributes pursuant to the tax allocation agreement.
(8) NET LOSS PER SHARE
For all periods presented, basic and diluted net loss per share is
based on the weighted average number of shares of common stock outstanding.
Since the effect of common stock equivalents was antidilutive, all such
equivalents were excluded in the computation of diluted net loss per share.
9
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(in thousands, except for share and per share amounts)
(9) COMPREHENSIVE LOSS
The components of the Company's comprehensive loss are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------- --------------- ---------------- ---------------
2000 1999 2000 1999
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net loss $ (5,190) $ (1,790) $ (11,799) $ (3,305)
Unrealized gain on investments
available-for-sale 24 - 45 -
-------------- --------------- ---------------- ---------------
Comprehensive loss $ (5,166) $ (1,790) $ (11,754) $ (3,305)
============== =============== ================ ===============
</TABLE>
(10) LITIGATION
In June 2000, Cybear received a claim from Nicebid.com for damages
allegedly incurred by Nicebid.com as a result of alleged breaches of the
Internet Commerce Contract between Nicebid.com and Telegraph Consulting
Corporation ("TCC"), which was acquired by Cybear in 1999. Nicebid.com alleges
that the damages it incurred are in excess of $5,000. Cybear is currently
evaluating the claim for liability and the damages allegedly incurred and
believes there are meritorious defenses which it intends to assert.
10
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The unaudited pro forma condensed consolidated balance sheet as of June
30, 2000 and the unaudited pro forma condensed consolidated statements of
operations for the six months ended June 30, 2000 and for the year ended
December 31, 1999, give pro forma effect to the corporate reorganization plan
(the "Reorganization") which will create a new class of Andrx Corporation common
stock, Cybear Group Common Stock, to separately track the performance of Cybear.
In connection with the Reorganization, Andrx Corporation will acquire
all of the publicly traded shares of common stock of Cybear in what the parties
anticipate will be a tax-free reorganization. Cybear's public shareholders
currently own approximately 4.9 million shares, or 27.6%, of the common shares
of Cybear as of June 30, 2000 and those shareholders will receive one share of
Cybear Group Common Stock for every Cybear common stock they currently own. In
the Reorganization, the number of Cybear shares held by Andrx will be reduced
from 12.9 million shares to 10.8 million shares so as to provide the equivalent
of a 20% increase in shares held by the non-Andrx shareholders of Cybear. Upon
completion of the Reorganization, the non-Andrx shareholders of Cybear will own
approximately 31.2% of the Cybear Group Common Stock following the closing of
the transaction. Pursuant to the Reorganization, each Andrx common share will be
converted into (i) one share of Andrx Group Common and (ii) approximately .1492
shares of Cybear Group Common Stock. Upon completion of the Reorganization, (i)
Cybear will be a wholly owned subsidiary of Andrx Corporation with 100% of its
value publicly traded in the form of Cybear Group Common Stock; (ii) current
Cybear public shareholders will own approximately 31.2% of the Cybear Group
Common Stock; and (iii) current Andrx shareholders will own 100% of the Andrx
Group Common Stock and approximately 68.8% of the Cybear Group Common Stock. The
preceding share ownership and percentages exclude the potential exercise by
Edward E. Goldman, M.D., Cybear's Chief Executive Officer, of an outstanding
warrant to acquire approximately 525,000 shares of Cybear common stock currently
owned by Andrx.
The unaudited pro forma condensed consolidated balance sheet gives
effect to the Reorganization as if it occurred as of June 30, 2000. The
unaudited pro forma condensed consolidated statements of operations give effect
to the Reorganization as if it occurred at the beginning of each period
presented.
As a result of the Reorganization, Cybear will be a wholly owned
subsidiary of Andrx Corporation and its common stock will become a separate
class of Andrx Corporation common stock, Cybear Group Common Stock, representing
the equity interest and businesses of the Cybear Group. The equity interests and
businesses of Andrx Corporation and its subsidiaries other than the Cybear Group
will become another separate class of Andrx Corporation common stock, Andrx
Group Common Stock.
Accordingly, under the Reorganization, the Cybear Group and the Andrx
Group will present separate financial statements relating to their respective
class of Andrx Corporation common stock.
Cybear Group financial statements will include basic and diluted
earnings (loss) per share based on the group's operating results and based on
the Cybear Group Common basic and diluted shares outstanding. In connection with
the Reorganization, Cybear and the other members of the Andrx consolidated group
will enter into, among other things, a Federal and state tax sharing agreement.
The financial statements of Andrx Group and Cybear Group will utilize the
separate company method of accounting for purposes of allocating Federal and
state consolidated tax liabilities among group members. Under the terms of the
tax sharing agreement, a member of the group will be entitled to its income tax
benefits in the year generated to the extent that the member can utilize such
tax benefits in the year generated. To the extent the member cannot utilize its
income tax benefits in the year generated, the member will not be compensated in
that year by other members of the Andrx consolidated group for any utilization
of those benefits. Instead, if and when a member leaves the group, Andrx
Corporation may elect to reimburse that member for any unreimbursed income tax
benefits utilized. That reimbursement will take the form of a capital investment
by Andrx Corporation, for which it will receive stock. In the case of any
"tracking stock" members, such as the Cybear Group, the stock received by Andrx
Corporation shall be in the form of tracking designated shares. In addition, if
any member of the group
11
<PAGE>
causes another member to become subject to state tax in a state where it would
otherwise not be taxed on a separate company basis, the member causing the tax
liability shall be fully responsible for the state tax of the other member.
For financial statement purposes, at such time as the Cybear Group
achieves profitability, if ever, or is otherwise able to recognize its tax
benefits under accounting principles generally accepted in the United States,
the Cybear Group will recognize the benefit of its accumulated income tax
benefits accumulated since June 23, 1999 (which had previously been utilized by
the Andrx Group prior to that date) in its statement of operations with a
corresponding decrease to its shareholders' equity (i.e., effectively accounted
for as a non-cash dividend).
The unaudited pro forma condensed consolidated financial data are
provided for informational purposes only and are not necessarily indicative of
our results of operations or financial position had the transaction assumed
therein occurred, nor are they necessarily indicative of the results of
operations that may be expected to occur in the future. Consummation of the
transaction is subject to various conditions, including approval by shareholders
of Andrx and Cybear and accordingly, no assurance can be given that this
transaction will be consummated. Furthermore, the unaudited pro forma condensed
consolidated financial data are based upon assumptions that Cybear believes are
reasonable and should be read in conjunction with the unaudited consolidated
financial statements and the accompanying notes thereto included elsewhere in
this Form 10-Q and the consolidated financial statements and accompanying notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
12
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Pro Forma Cybear
Cybear Adjustments Group
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,555 $ - $ 3,555
Investments available-for-sale, at market value 17,443 - 17,443
Accounts receivable, net 760 - 760
Convertible notes receivable 7,000 - 7,000
Prepaid and other current assets 762 - 762
-------------- -------------- --------------
Total current assets 29,520 - 29,520
Property and equipment, net 7,397 - 7,397
Intangible and other assets, net 4,135 2,700 (2) 23,894
17,059 (3)
-------------- -------------- --------------
Total assets $ 41,052 $ 19,759 $ 60,811
============== ============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,095 $ 615 (1) $ 2,710
Accrued liabilities 449 - 449
-------------- -------------- --------------
Total current liabilities 2,544 615 3,159
Total shareholders' equity 38,508 (615)(1) 57,652
2,700 (2)
17,059 (3)
-------------- -------------- --------------
Total liabilities and shareholders' equity $ 41,052 $ 19,759 $ 60,811
============== ============== ==============
</TABLE>
The accompanying notes to the unaudited pro forma condensed consolidated balance
sheet are an integral part of this balance sheet.
13
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000
(in thousands, except for share and per share amounts)
(1) Reflects the additional estimated fees and expenses of $615 to be
incurred by Cybear in connection with the Reorganization charged to
shareholders' equity. As the effect of the costs is non-recurring, it
has not been included in the unaudited pro forma condensed consolidated
statements of operations.
(2) Reflects the estimated fees and expenses of $2,700 incurred by Andrx
Group with respect to the acquisition of the historical minority
interest which was allocated to the Cybear Group goodwill.
(3) Reflects the effects of the Reorganization, as follows:
<TABLE>
<CAPTION>
Adjusted
Shares Shares
Outstanding Reorganization Outstanding
at 6/30/2000 Elimination at 6/30/2000
-----------------------------------------------------
<S> <C> <C> <C>
Andrx ownership of Cybear 12,877,000 (2,058,700) 10,818,300
Minority ownership of Cybear 4,897,000 - 4,897,000
-----------------------------------------------------
Total Cybear shares outstanding 17,774,000 (2,058,700) 15,715,300
===================
Times assumed per share price $ 5.00 $ 5.65
----------------- -----------------
Total Cybear market capitalization $ 88,870 $ 88,870
================= =================
Minority ownership of Cybear 4,897,000
Times adjusted market price $ 5.65
-----------------
Purchase price of minority interest acquired 27,668
Less: minority interest historical basis (10,609)
-----------------
Goodwill - Purchase price of minority interest in excess of its historical basis 17,059
Goodwill - Andrx Group estimated fees and expenses (see Note 2) 2,700
-----------------
Total goodwill allocated to Cybear Group $ 19,759
=================
</TABLE>
For purposes of the unaudited pro forma condensed consolidated balance
sheet and statements of operations, the market price of Cybear, Inc
common stock was assumed to be $5.00 per share, which was adjusted to
$5.65 per share resulting from the elimination of 2,058,700 Cybear
shares due to the exchange rate included in the Reorganization. As
provided under the terms of the Reorganization, the shares eliminated
in the Reorganization are calculated including the potential exercise
by Edward E. Goldman, M.D., Cybear's Chief Executive Officer, of an
outstanding warrant to acquire approximately 525,000 shares of Cybear
common stock currently owned by Andrx. In connection with the
repurchase of the historical Cybear minority interest, the resulting
goodwill of $19,759 was allocated to the Cybear Group financial
statements. The actual amount of goodwill will be determined based on
Cybear common stock price as of the closing of the transaction. An
increase or decrease of $1.00 in Cybear common stock price will result
in an increase or decrease of approximately $5,500 to the goodwill and
therefore in an increase or decrease of approximately $550 to the
annual goodwill amortization.
14
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(in thousands, except for share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Historical Pro Forma Cybear
Cybear Adjustments (5) Group
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 1,468 $ -- $ 1,468
------------ ------------ ------------
Operating expenses:
Cost of revenues 1,297 -- 1,297
Network operations and operations support 2,208 -- 2,208
Product development 1,788 -- 1,788
Selling, general and administrative 4,809 -- 4,809
Depreciation and amortization 1,322 988 (3) 2,310
Merger costs 885 (885)(1) --
Other non-recurring charges 2,022 -- 2,022
------------ ------------ ------------
Total operating expenses 14,331 103 14,434
------------ ------------ ------------
Loss from operations (12,863) (103) (12,966)
Other income (expense):
Interest income 1,064 -- 1,064
------------ ------------ ------------
Net loss $ (11,799) $ (103) $ (11,902)
============ ============ ============
Basic and diluted net loss per share $ (0.67) $ (0.76)
============ ============
Basic and diluted weighted average shares
of common stock outstanding 17,738,600 (2,058,700)(4) 15,679,900
============ ============ ============
</TABLE>
The accompanying notes to the unaudited pro forma condensed consolidated
financial data are an integral part of this statement.
15
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(in thousands, except for share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Historical Pro Forma Cybear
Cybear Adjustments (5) Group
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 270 $ -- $ 270
------------ ------------ ------------
Operating expenses:
Cost of revenues 77 -- 77
Network operations and operations support 2,972 -- 2,972
Product development 3,058 -- 3,058
Selling, general and administrative 7,271 -- 7,271
Depreciation and amortization 1,556 1,976 (3) 3,532
------------ ------------ ------------
Total operating expenses 14,934 1,976 16,910
------------ ------------ ------------
Loss from operations (14,664) (1,976) (16,640)
Other income (expense):
Interest income 1,282 -- 1,282
Interest expense on due to Andrx (216) -- (216)
------------ ------------ ------------
Loss before income taxes (13,598) (1,976) (15,574)
Income tax benefit 2,824 (2,824)(2) --
------------ ------------ ------------
Net loss $ (10,774) $ (4,800) $ (15,574)
============ ============ ============
Basic and diluted net loss per share $ (0.70) $ (1.16)
============ ============
Basic and diluted weighted average shares
of common stock outstanding 15,470,000 (2,058,700)(4) 13,411,300
============ ============ ============
</TABLE>
The accompanying notes to the unaudited pro forma condensed consolidated
financial data are an integral part of this statement.
16
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND THE YEAR ENDED DECEMBER 31, 1999
(in thousands, except for share and per share amounts)
(1) For the six months ended June 30, 2000, reflects the elimination of
fees and expenses of $885 incurred by Cybear in connection with the
Reorganization. As the effect of the costs is non-recurring, they have
been eliminated in the unaudited pro forma condensed consolidated
statement of operations for the six months ended June 30, 2000.
(2) For the year ended December 31, 1999, reflects the elimination of
Cybear's historical $2,824 income tax benefit which would not have been
used by Cybear Group on a separate income tax return basis as required
by the new tax sharing agreement between Cybear and Andrx and would
have been included in the tax allocation to Andrx Group pursuant to the
Reorganization.
(3) Reflects the amortization of goodwill totaling $19,759, consisting of
$17,059 representing the excess of the purchase price of $27,668 offset
by historical minority interest of $10,609 and Andrx Group's estimated
Reorganization transaction costs and expenses of $2,700 incurred by
Andrx (see unaudited pro forma condensed consolidated balance sheet
Note 2). Such goodwill is amortized on a straight line basis over an
estimated life of ten years.
(4) Reflects the number of Cybear shares held by Andrx that were eliminated
as a result of the Reorganization (see unaudited pro forma condensed
consolidated balance sheet Note 3).
(5) Certain results of the Reorganization referred to in Note 1 to the
unaudited pro forma condensed consolidated balance sheet have been
excluded from the unaudited pro forma condensed consolidated statements
of operations due to their non-recurring nature.
17
<PAGE>
CYBEAR, INC.
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Cybear, Inc. and subsidiaries ("Cybear" or the "Company") cautions
readers that certain important factors may affect the Company's actual results
and could cause such results to differ materially from any forward-looking
statements which may be deemed to have been made in this report or which are
otherwise made by or on behalf of the Company. For this purpose, any statements
contained in this Report that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"intend", "could", "would", "estimate" or "continue" or the negative other
variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors which may affect the Company's results
include, but are not limited to, our limited operating history and substantial
operating losses, availability of capital resources, ability to effectively
compete, economic conditions, unanticipated difficulties in product development,
ability to gain market acceptance and market share, ability to manage growth,
Andrx's ability to provide services to the Company, Internet security risks and
uncertainty relating to the evolution of the Internet as a medium for commerce,
dependence on third party content providers, dependence on our key personnel,
ability to protect our intellectual property and the impact of future government
regulation on our business. The Company is also subject to other risks detailed
herein or detailed from time to time in this Report and the Company's filings
with the United States Securities and Exchange Commission (the "SEC").
Introduction
Cybear, a Delaware corporation, was incorporated on February 5, 1997
and is an approximately 72% owned subsidiary of Andrx Corporation ("Andrx").
Cybear is an information technology company using the Internet to attempt to
improve the efficiency of administrative and communications tasks of managing
patient care. Cybear provides access to the Internet and the Cybear product line
through its own ISP system, delivering productivity applications to health care
providers.
In March 1999, Cybear introduced its first product, its Physician
Practice Portal, which is designed to address the communications and operational
needs of physicians. Cybear's future products may include Internet-based
productivity software applications and communication networks for other
constituents of the healthcare community. During the three months ended June 30,
1999, Cybear emerged from the development stage for financial reporting
purposes.
In September 1999, Cybear commenced a venture with Andrx, Cybearclub
LLC (the "Joint Venture" or " Cybearclub"), to distribute healthcare products to
physician offices on orders placed through the Internet.
In March 2000, Andrx and Cybear announced that they executed a
definitive Agreement and Plan of Merger and Reorganization (the
"Reorganization") with respect to their previously announced tracking stock
reorganization plan. This plan, which was recommended to the Cybear Board of
Directors by its special committee and approved by the Boards of both Cybear and
Andrx, will create a new class of Andrx common stock to separately track the
performance of Cybear ("Cybear Group Common"). The Reorganization will be
submitted to Andrx and Cybear shareholders for approval at the Cybear special
meeting of shareholders and Andrx annual meeting of shareholders scheduled for
September 5, 2000. If approved, the Reorganization contemplates the creation of
Andrx Corporation, a new holding company under Delaware law ("Andrx
Corporation"). A wholly-owned subsidiary of Andrx Corporation would merge with
and into Andrx, with Andrx surviving the merger and another wholly owned
subsidiary of Andrx Corporation would
18
<PAGE>
merge with and into Cybear with Cybear surviving the merger. The reorganization
will become effective on the date and time that the certificate of merger is
filed with the Delaware and Florida Secretaries of State or such other date and
time specified in the certificate of merger.
Cybear has incurred net operating losses and negative cash flows from
operating activities since its inception. As of June 30, 2000, Cybear had an
accumulated deficit of approximately $26.6 million. In addition, Cybear intends
to continue to incur significant expenses in product development, network
operations, customer support, sales and marketing and administrative areas. As a
result, Cybear expects to continue to incur substantial operating losses for the
foreseeable future, and may never achieve or sustain profitability.
Results Of Operations
Three months ended June 30, 2000 ("2000 Quarter"), as compared to three months
ended June 30, 1999 ("1999 Quarter").
Cybear generated $1.2 million in revenues for the 2000 Quarter compared
to $27,000 in the 1999 Quarter. Revenues for the 2000 Quarter includes $1.1
million from Cybearclub, the Company's venture with Andrx to distribute
healthcare products to physician offices on orders placed through the Internet,
$124,000 from web development, hosting and other services and $4,000 from
subscription services. Cybear did not have any revenues from Cybearclub in the
1999 Quarter as Cybearclub commenced its operations in September 1999. In the
1999 Quarter, Cybear generated $27,000 in revenues from subscription services.
Cybear had $1.1 million in cost of revenues for the 2000 Quarter. Cost
of revenues for the 2000 Quarter consists of the costs of the products purchased
for resale by Cybearclub, as well as fulfillment costs. Such products are
purchased from Andrx.
Network operations and operations support costs were $1.2 million in
the 2000 Quarter compared to $665,000 in the 1999 Quarter. The increase in
network operations and operations support costs for the 2000 Quarter related
primarily to the expansion of the network operations and operations support
infrastructure.
Product development costs were $840,000 for the 2000 Quarter compared
to $620,000 for the 1999 Quarter. The increase in the product development costs
for the 2000 Quarter reflects the progress and expansion of Cybear's product
development activities.
Selling, general and administrative expenses were $2.1 million for the
2000 Quarter compared to $1.5 million for the 1999 Quarter. The increase in
sales and marketing expenses for the 2000 Quarter related primarily to the
expansion of the selling, marketing and administrative infrastructure.
Depreciation and amortization expense was $773,000 for the 2000 Quarter
compared to $349,000 for the 1999 Quarter. The increase in depreciation and
amortization for the 2000 Quarter resulted primarily from Cybear's purchases of
computer hardware and software used in its network operations center and the
development of its products, leasehold improvements related to its corporate
headquarters and network operations center. In addition, the depreciation and
amortization expense includes amortization expense of $98,000 of the $3.9
million goodwill related to the acquisition of Telegraph Consulting Corporation
("TCC") on September 17, 1999.
19
<PAGE>
Merger costs were $53,000 for the 2000 Quarter. Merger costs consist of
costs associated with the pending merger with Andrx under a tracking stock
reorganization plan, primarily investment banking and legal fees. The Company
expects to incur total merger costs of up to approximately $1.5 million in
connection with the pending merger. These costs are charged to expense as
incurred.
Other non-recurring charges were $870,000 for the 2000 Quarter. These
charges consist of a cash payment incurred to resolve a dispute over performance
under an agreement and to terminate such agreement. In March 2000, the Company
disputed the third party's performance under the agreement. In June 2000, the
Company and the third party resolved their dispute, agreed to terminate the
agreement, and released each other from any continuing obligations, other than
certain mutual indemnification obligations, upon payment by Cybear of $870,000
of the remaining $2.3 million due from Cybear under the agreement.
Cybear had interest income of $505,000 in the 2000 Quarter and $49,000
in the 1999 Quarter. The interest income in the 2000 Quarter resulted primarily
from the investment of the net proceeds generated from the June 1999 public
offering in money market funds and investment grade interest bearing securities
and from Cybear's convertible notes receivable.
Interest expense of $125,000 in the 1999 Quarter represented interest
on the due to Andrx under the credit agreement between the two companies to fund
Cybear's operations. Upon completion of the public offering in June 1999, Andrx
converted its advances due from Cybear, net of the reimbursement for income tax
attributes, to Cybear's capital in exchange for 465,387 shares of Cybear common
stock at the public offering price of $16.00 per share.
Through the completion of its public offering in June 1999, Cybear's
results of operations for tax purposes were included in the consolidated income
tax return of Andrx, since Andrx owned at least 80% of the common stock of
Cybear. Cybear and Andrx have a tax allocation agreement pursuant to which
Federal income tax liabilities or benefits are allocated to Cybear as if Cybear
had filed a separate income tax return when Cybear's taxable results are
included in the consolidated income tax return of Andrx. Upon completion of the
public offering in June 1999, Andrx's ownership in Cybear was reduced below 80%.
Consequently, thereafter Cybear files its income tax returns separately.
For the 2000 Quarter, Cybear did not record any income tax benefit as
Andrx's ownership in Cybear was below 80% and Cybear generated net operating
loss carryforwards. Under the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", Cybear has provided a
valuation allowance to reserve against 100% of its net deferred tax assets due
to its history of net losses. For 1999 Quarter, as Andrx utilized Cybear's
income tax benefit, Cybear recorded $1.4 million in income tax benefit. The
income tax benefit reflects the reimbursement from Andrx for the utilization of
Cybear's income tax attributes pursuant to the tax allocation agreement.
Six months ended June 30, 2000 ("2000 Period"), as compared to six months ended
June 30, 1999 ("1999 Period").
Cybear generated $1.5 million in revenues for the 2000 Period compared
to $27,000 in the 1999 Period. Revenues for the 2000 Period includes $1.3
million from Cybearclub, the Company's venture with Andrx, $136,000 from web
development, hosting and other services and $8,000 from subscription services.
Cybear did not have any revenues from Cybearclub in the 1999 Period as
Cybearclub commenced its operations in September 1999. In the 1999 Period,
Cybear generated $27,000 in revenues from subscription services.
Cybear had $1.3 million in cost of revenues for the 2000 Period.
20
<PAGE>
Network operations and operations support costs were $2.2 million in
the 2000 Period compared to $1.4 million in the 1999 Period. The increase in
network operations and operations support costs for the 2000 Period related
primarily to the expansion of the network operations and operations support
infrastructure.
Product development costs were $1.8 million for the 2000 Period
compared to $1.1 million for the 1999 Period. The increase in the product
development costs for the 2000 Period reflects the progress and expansion of
Cybear's product development activities.
Selling, general and administrative expenses were $4.8 million for the
2000 Period compared to $2.9 million for the 1999 Period. The increase in sales
and marketing expenses for the 2000 Period related primarily to the expansion of
the selling, marketing and administrative infrastructure.
Depreciation and amortization expense was $1.3 million for the 2000
Period compared to $540,000 for the 1999 Period. The increase in depreciation
and amortization for the 2000 Period resulted primarily from Cybear's purchases
of property and equipment. In addition, the depreciation and amortization
expense includes amortization expense of $197,000 related to the acquisition of
TCC on September 17, 1999.
Merger costs were $885,000 for the 2000 Period. Merger costs consist of
costs associated with the pending merger with Andrx under a tracking stock
reorganization plan.
Other non-recurring charges were $2.0 million for the 2000 Period.
These charges consist of severance costs, impairment charges to certain assets
and costs incurred to resolve a dispute and terminate certain agreements.
Cybear had interest income of $1.1 million in the 2000 Period and
$50,000 in the 1999 Period. The interest income in the 2000 Period resulted
primarily from the investments of the net proceeds generated from the June 1999
public offering and from Cybear's convertible notes receivable.
Interest expense of $216,000 in the 1999 Period represented interest on
the due to Andrx under the credit agreement between the two companies to fund
Cybear's operations.
For the 2000 Period, Cybear did not record any income tax benefit as
Andrx's ownership in Cybear was below 80% and Cybear generated net operating
loss carryforwards. Under the provisions of SFAS No. 109, Cybear has provided a
valuation allowance to reserve against 100% of its net deferred tax assets due
to its history of net losses. For the 1999 Period, as Andrx utilized Cybear's
income tax benefit, Cybear recorded $2.8 million in income tax benefit. The
income tax benefit reflects the reimbursement from Andrx for the utilization of
Cybear's income tax attributes pursuant to the tax allocation agreement.
Liquidity and Capital Resources
As of June 30, 2000, Cybear had $21.0 million in cash, cash equivalents
and investments available-for-sale and $27.0 million of working capital.
Net cash used in operating activities was $9.9 million for the 2000
Period compared to $3.2 million for the 1999 Period. The increase in net cash
used in operating activities in the 2000 Period, as compared to the 1999 Period
is primarily due to Cybear incurring a net loss of $11.8 million in the 2000
Period as compared to a net loss of $3.3 million in the 1999 Period, offset by
an increase in depreciation and amortization expense in the 2000 Period, as
compared to the 1999 Period and other non-cash charges in the 2000 Period. The
other non-cash charges result primarily from impairment charges to certain
assets.
21
<PAGE>
Net cash provided by investing activities was $1.2 million in the 2000
Period, as compared to net cash used in investing activities of $1.7 million in
the 1999 Period. In the 2000 Period, Cybear received proceeds of $8.7 million
from sales of investments available-for-sale and funded a $4.0 million one-year
convertible promissory note from AHT Corporation. Cybear also purchased $3.4
million in property and equipment consisting mainly of computer hardware and
software used in its network operations center and the development of its
products. In the 1999 Period, Cybear purchased $1.6 million of property and
equipment consisting mainly of computer hardware and software used in its
network operations center and in its product development activities, leasehold
improvements related to its corporate headquarters and network operations center
and furniture for its corporate headquarters.
Net cash provided by financing activities was $284,000 for the 2000
Period compared to $55.9 million for the 1999 Period. In the 2000 Period, net
cash provided by financing activities consisted of proceeds generated from the
exercises of stock options. In the 1999 Period, net cash provided by financing
activities consisted of $50.8 million in net proceeds generated from the public
offering of 3,450,000 shares of common stock of the Company and advances from
Andrx to fund Cybear's operations, net of the reimbursement from Andrx for the
utilization of Cybear's income tax attributes pursuant to the tax allocation
agreement.
From time to time, Cybear may be involved in litigation relating to
claims arising out of its operations in the normal course of business. In June
2000, Cybear received a claim from Nicebid.com for damages allegedly incurred by
Nicebid.com as a result of alleged breaches of the Internet Commerce Contract
between Nicebid.com and TCC which was acquired by Cybear in 1999. Nicebid.com
alleges that the damages it incurred are in excess of $5 million. Cybear is
currently evaluating the claim for liability and the damages allegedly incurred
and believes there are meritorious defenses which it intends to assert. Cybear
is not currently a party to any legal proceeding or aware of any other claim,
the adverse outcome of which, individually or in the aggregate, could reasonably
be expected to have a material adverse effect on Cybear's business, operating
results and financial condition.
Cybear believes that its existing capital resources will be sufficient
to enable it to meet its anticipated working capital and capital expenditure
requirements for the next 12 months. Cybear expects negative cash flows and net
losses to continue for the foreseeable future and certain modifications of its
business plan being considered may further increase its working capital and
capital expenditure requirements. Whether or not the business plan is modified,
Cybear may need to raise additional capital through public or private debt or
equity financing or through funding from Andrx, and has no agreements or
arrangements with respect to raising that capital, including with Andrx.
Additional funding, whether obtained through public or private debt or equity
financing, may not be available when required or may not be available on terms
favorable to Cybear, if at all. If additional financing is not available, Cybear
may be required to further modify its business plan or to delay, scale back or
eliminate some or all of its product development and deployment programs.
22
<PAGE>
CYBEAR, INC.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 10 to the "Notes to Unaudited Consolidated Financial
Statements" included in Part 1 Item 1 of this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
23
<PAGE>
CYBEAR, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereonto
duly authorized.
By: /s/ Edward E. Goldman
--------------------------------
Edward E. Goldman, M.D.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Timothy E. Nolan
--------------------------------
Timothy E. Nolan
President and Chief Operating Officer
By: /s/ Claude Bertrand
--------------------------------
Claude Bertrand
Vice President Finance and Controller
(Principal Financial and Accounting Officer)
August 14, 2000
24
<PAGE>
Exhibit Index
Exhibit No. Exhibit Description
----------- -------------------
27.1 Financial Data Schedule
