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UNITED STATES
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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER: 000-30111
LEXICON GENETICS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0474169
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
4000 RESEARCH FOREST DRIVE
THE WOODLANDS, TEXAS 77381
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES AND ZIP CODE)
(281) 364-0100
(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 No X
--- ---
As of May 2, 2000, 47,520,118 shares of the registrant's common stock, par
value $0.001 per share, were outstanding.
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LEXICON GENETICS INCORPORATED
TABLE OF CONTENTS
<TABLE>
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - December 31, 1999 and March 31, 2000 ................................................3
Statements of Operations - Three Months Ended March 31, 1999 and 2000.................................4
Statements of Cash Flows - Three Months Ended March 31, 1999 and 2000.................................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............................................12
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.............................................................13
Item 4. Submission of Matters to a Vote of Security Holders...................................................13
Item 6. Exhibits and Reports on Form 8-K......................................................................14
SIGNATURES ....................................................................................................15
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEXICON GENETICS INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER
2000 31, 1999
--------------- ---------------
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................. $ 1,703,215 $ 2,025,585
Marketable securities ................................................. 6,926,617 7,130,848
Accounts receivable ................................................... 1,553,541 3,391,648
Prepaid expenses and other ............................................ 59,275 76,257
------------ ------------
Total current assets ............................................... 10,242,648 12,624,338
Property, plant and equipment ........................................... 12,926,884 12,476,021
Accumulated depreciation ................................................ (3,640,214) (3,087,397)
------------ ------------
9,286,670 9,388,624
Deferred offering costs ................................................. 1,102,779 --
Other assets, net ....................................................... 287,734 281,605
------------ ------------
Total assets ....................................................... $ 20,919,831 $ 22,294,567
============ ============
LIABILITIES, REDEEMABLE CONVERTIBLE SERIES A PREFERRED STOCK, AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities .............................. $ 1,970,222 $ 1,192,276
Current portion of related party note payable ......................... 200,000 200,004
Current portion of long-term debt ..................................... 879,611 874,174
Current portion of capital lease obligations .......................... 78,081 127,119
Deferred revenue ...................................................... 7,656,668 8,209,574
------------ ------------
Total current liabilities .......................................... 10,784,582 10,603,147
Capital lease obligations, net of current portion ....................... 4,111 6,279
Related party note payable, net of current portion ...................... 666,667 716,663
Long-term debt, net of current portion .................................. 2,637,783 2,854,365
------------ ------------
Total liabilities .................................................. 14,093,143 14,180,454
Commitments and contingencies
Redeemable convertible Series A preferred stock, $.01 par value,
10,000,000 shares authorized 4,244,664 and 4,244,664 shares
issued and outstanding, respectively; aggregate liquidation
preference of $31,834,980 at March 31, 2000 ........................... 30,184,090 30,050,236
Stockholders' equity (deficit):
Common stock, $.001 par value, 120,000,000 shares
authorized, 24,786,126 and 24,540,201 shares issued and
outstanding, respectively .......................................... 24,786 24,540
Additional paid-in capital .............................................. 68,430,728 7,863,392
Deferred stock compensation ............................................. (49,486,184) (915,422)
Accumulated deficit ..................................................... (42,326,732) (28,908,633)
------------ ------------
Total stockholders' equity (deficit) ............................... (23,357,402) (21,936,123)
------------ ------------
Total liabilities and stockholders' equity (deficit) ............... $ 20,919,831 $ 22,294,567
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LEXICON GENETICS INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
2000 1999
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Revenues:
Subscription and license fees ............................. $ 1,623,478 $ 287,240
Collaborative research .................................... 1,644,758 438,810
Reagents .................................................. 70,673 69,648
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Total revenues ........................................... 3,338,909 795,698
Operating expenses:
Research and development .................................. 3,567,936 3,058,994
General and administrative ................................ 1,298,857 674,737
Stock based compensation .................................. 11,908,308 --
------------ ------------
Total operating expenses ................................. 16,775,101 3,733,731
------------ ------------
Loss from operations ....................................... (13,436,192) (2,938,033)
Interest income ............................................ 127,842 226,115
Interest expense ........................................... 109,749 30,622
------------ ------------
Net loss ................................................... $(13,418,099) $ (2,742,540)
Accretion on redeemable convertible preferred stock ........ (133,854) (133,855)
------------ ------------
Net loss attributable to common stockholders ............... $(13,551,953) $ (2,876,395)
============ ============
Net loss per common share, basic and diluted ............... $ (0.55) $ (0.12)
Shares used in computing net loss per common
share, basic and diluted .................................. 24,613,012 24,522,327
Pro forma net loss per common share, basic and diluted ..... $ (0.36) $ (0.08)
Shares used in computing pro forma net loss per common
share, basic and diluted .................................. 37,347,004 37,256,319
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LEXICON GENETICS INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
2000 1999
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Cash flows from operating activities:
Net loss...................................................................... $(13,418,099) $ (2,742,540)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation................................................................ 552,817 366,159
Amortization of deferred stock compensation................................. 11,908,308 --
Changes in operating assets and liabilities:
Decrease in accounts receivable............................................ 1,838,107 1,018,527
(Increase) decrease in prepaid expenses.................................... 16,982 (61,021)
(Increase) decrease in other assets........................................ (6,129) 29,220
Increase (decrease) in accounts payable and accrued liabilities............ 777,946 (590,016)
Decrease in deferred revenue............................................... (552,906) (456,084)
------------ ------------
Net cash provided by (used in) operating activities....................... 1,117,026 (2,435,755)
Cash flows from investing activities:
Purchases of property and equipment........................................... (450,863) (2,061,963)
Purchase of marketable securities............................................. (3,403,902) --
Sale of marketable securities................................................. 3,608,133 16,400,158
------------ ------------
Net cash provided by (used in) investing activities....................... (246,632) 14,338,195
Cash flows from financing activities:
Principal payments of capital lease obligations............................... (51,206) (87,619)
Proceeds from issuance of common stock........................................ 222,366 --
Deferred offering costs ...................................................... (1,102,779) --
Repayment of debt borrowings.................................................. (261,145) --
------------ ------------
Net cash used in financing activities..................................... (1,192,764) (87,619)
------------ ------------
Net increase in cash and cash equivalents...................................... (322,370) 11,814,821
Cash and cash equivalents at beginning of period .............................. 2,025,585 3,022,201
Cash and cash equivalents at end of period .................................... ------------ ------------
$ 1,703,215 $ 14,837,022
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest......................................................... $ 109,749 $ 30,622
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LEXICON GENETICS INCORPORATED
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 and pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
For further information, refer to the financial statements and footnotes
thereto for the year ended December 31, 1999, included in Lexicon's Registration
Statement on Form S-1 (Registration No. 333-96469) as filed with the SEC and the
prospectus dated April 7, 2000 included therein.
2. NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares
of common stock outstanding. Shares associated with stock options and warrants
and the convertible preferred stock are not included because they are
antidilutive.
Pro forma net loss per share is computed using the weighted average number
of common shares outstanding, including pro forma effects of the automatic
conversion of outstanding redeemable convertible preferred stock into shares of
Lexicon's common stock effective upon the closing of Lexicon's initial public
offering (refer to Note 4) as if such conversion occurred on the date of
original issuance.
3. DEFERRED STOCK COMPENSATION
During January and February 2000, Lexicon issued options to purchase an
aggregate of 3,495,900 shares of common stock to certain employees and
consultants. Lexicon recorded deferred compensation totaling approximately $60.5
million for options granted in the first quarter of 2000. Deferred stock
compensation represents the difference between the exercise price of stock
options and the fair value of Lexicon's common stock at the date of grant.
Deferred stock compensation is amortized over the vesting periods of the
individual stock options for which it is recorded. For the three months ended
March 31, 2000, Lexicon amortized $11.9 million of deferred stock compensation.
If employees and consultants continue to vest in accordance with their
individual stock options, Lexicon expects to record amortization expense for
deferred stock compensation as follows: $9.7 million during the nine months
ended December 31, 2000, $12.9 million during 2001, $12.9 million during 2002,
$12.9 million during 2003 and $1.1 million during 2004. The amount of stock
based compensation expense to be recorded in future
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periods may decrease if unvested options for which deferred stock compensation
expense has been recorded are subsequently canceled.
4. SUBSEQUENT EVENT - INITIAL PUBLIC OFFERING AND CONVERSION OF PREFERRED
STOCK
In April 2000, Lexicon completed an initial public offering of 10,000,000
newly-issued shares of its common stock at a price of $22.00 per share. Lexicon
received $203.6 million in cash, net of underwriting discounts, commissions and
other offering costs.
Simultaneously with the closing of the initial public offering, the
4,244,664 shares of Redeemable Convertible Series A Preferred Stock outstanding
at March 31, 2000 were automatically converted into 12,733,992 shares of common
stock.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We are a genomics company using gene trapping technology to discover
thousands of genes and to expand our OmniBank library of tens of thousands of
knockout mouse clones for drug discovery. We derive substantially all of our
revenues from subscriptions to our databases, collaborations for the development
and, in some cases, analysis of knockout mice and from government grants. To
date, we have generated a substantial portion of our revenues from a limited
number of sources.
Since our inception, we have incurred significant losses and, as of March
31, 2000, we had an accumulated deficit of $42.3 million. Our losses have
resulted principally from costs incurred in research and development, general
and administrative costs associated with our operations, and non-cash stock
based compensation expenses associated with stock options granted to employees
and consultants prior to the closing of our initial public offering in April
2000. Research and development expenses consist primarily of salaries and
related personnel costs, material costs, legal expenses resulting from
intellectual property prosecution and other expenses related to the generation
of our Human Gene Trap(TM) database, OmniBank database and library and the
development of knockout mice. We expense our research and development costs as
they are incurred. General and administrative expenses consist primarily of
salaries and related expenses for executive, finance and other administrative
personnel, professional fees and other corporate expenses including business
development and general legal activities. In connection with the expansion of
our Human Gene Trap database, OmniBank database and library and functional
genomics research efforts, we expect to incur increasing research and
development and general and administrative costs. As a result, we will need to
generate significantly higher revenues to achieve profitability. Deferred stock
compensation represents the difference between the exercise price of stock
options and the fair value of our common stock at the date of grant. Deferred
stock compensation is amortized over the vesting periods of the individual stock
options for which it is recorded.
Our quarterly operating results will depend upon many factors, including
expiration of research contracts with collaborators or government research
grants, the success rate of our discovery efforts leading to milestones and
royalties, the timing and willingness of collaborators to commercialize products
which would result in royalties, general and industry-specific economic
conditions which may affect research and development expenditures and the timing
and content of information released by the Human Genome Project. As a
consequence, our quarterly operating results have fluctuated in the past and are
likely to do so in the future.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 and 2000
Revenues. Total revenues increased 320% to $3.3 million in the three months
ended March 31, 2000 from $796,000 in the corresponding period in 1999. Of the
$2.5 million increase, $1.3 million was derived from increased database
subscription and license fees and $1.2 million was derived from increased fees
for the development of knockout mice.
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Research and Development Expenses. Research and development expenses
increased 17% to $3.6 million in the three months ended March 31, 2000 from $3.1
million in the corresponding period in 1999. The increase of $510,000 was
attributable to continued growth of research and development activities,
primarily related to increased personnel costs to support the generation of our
Human Gene Trap database, OmniBank database and library and the development of
knockout mice.
General and Administrative Expenses. General and administrative expenses
increased 92% to $1.3 million in the three months ended March 31, 2000 from
$675,000 in the corresponding period in 1999. The increase of $624,000 was due
to primarily to additional personnel costs for business development and finance
and administration.
Stock Based Compensation Expense. For the three months ended March 31,
2000, we amortized $11.9 million of deferred compensation related to options
granted to employees and certain consultants. We did not record any stock based
compensation expense in the corresponding period in 1999. If employees and
consultants continue to vest in accordance with their individual stock options,
we expect to record amortization expense for deferred compensation as follows:
$9.7 million during the nine months ended December 31, 2000, $12.9 million
during 2001, $12.9 million during 2002, $12.9 million during 2003 and $1.1
million during 2004. The amount of stock based compensation expense to be
recorded in future periods may decrease if unvested options for which stock
based compensation expense has been recorded are subsequently canceled.
Interest Income and Interest Expense. Interest income decreased 43% to
$128,000 in the three months ended March 31, 2000 from $226,000 in the
corresponding period in 1999. This decrease resulted from a declining cash and
investment balance due to cash used in operating activities. Interest expense
increased 258% to $110,000 in the three months ended March 31, 2000 from $30,000
in the corresponding period in 1999. This increase resulted from higher debt
obligation balances in the first quarter of 2000.
Net Loss and Net Loss Per Common Share. Net loss increased to $13.4 million
in the three months ended March 31, 2000 from $2.7 million in the corresponding
period in 1999. Net loss per share increased to $0.55 in the three months ended
March 31, 2000 from $0.12 in the corresponding period in 1999. These increases
resulted from a $11.9 million charge for stock based compensation in the three
months ended March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations from inception primarily through private
sales of common and preferred stock, contract and milestone payments to us under
our database subscription and collaboration agreements and equipment financing
arrangements. As of March 31, 2000, we had received net proceeds of $36.9
million from issuances of common and preferred stock. In addition, from our
inception through March 31, 2000, we received $17.7 million in cash payments
from database subscription and license fees, fees for the development of
knockout mice, sales of products related to the generation of knockout mice and
government grants, of which $11.6 million had been recognized as revenues
through March 31, 2000. On April 6, 2000, we signed an underwriting agreement
with J.P. Morgan Securities, Inc., Credit Suisse First Boston Corporation, CIBC
World Markets Corp. and Punk, Ziegel & Company, L.P., as representatives of the
underwriters named therein, for the initial public offering of 10,000,000 shares
of our common stock at an initial public offering price of $22.00 per share. We
received net proceeds of $203.6 million from the offering after deducting
underwriting discounts and estimated offering expenses.
As of March 31, 2000, we had $8.6 million in cash, cash equivalents and
marketable securities, as compared to $9.2 million as of December 31, 1999.
After giving pro forma effect to the initial public
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offering and our receipt of the net proceeds from the offering, we had $212.2
million in cash, cash equivalents and marketable securities as of March 31,
2000. We provided $1.1 million from operations in the three months ended March
31, 2000. This consisted of the net loss for the period of $13.4 million offset
by non-cash charges of $11.9 million related to compensation expense, $553,000
related to depreciation expense and a net decrease in other working capital
accounts of $2.1 million. We used $247,000 in investing activities for the three
months ended March 31, 2000, which resulted from purchases of property and
equipment. Net cash used in investing activities for the three months ended
March 31, 2000 of 1.2 million, resulted from deferred offering costs associated
with Lexicon's initial public offering in April 2000.
In June 1999, we entered into a $5.0 million financing arrangement for the
purchase of property and equipment. As of March 31, 2000, we had drawn down
approximately $4.2 million and had $832,000 remaining available under this
arrangement. As of March 31, 2000, $3.5 million of this amount remained
outstanding under this arrangement and was secured by the equipment financed.
This facility accrues interest at a weighted-average rate of approximately 11.7%
and is due in monthly installments through 2003. In addition, as of March 31,
2000, we had $82,000 in capitalized lease obligations outstanding compared to
$133,000 at December 31, 1999.
Our capital requirements depend on numerous factors, including our ability
to obtain database subscription and collaboration agreements and government
grants, the amount and timing of payments under such agreements and grants, the
level and timing of our research and development expenditures, market acceptance
of our products, the resources we devote to developing and supporting our
products and other factors. We expect to devote substantial capital resources to
continue our research and development efforts, to expand our support and product
development activities, and for other general corporate activities. We believe
that our current cash balances, together with the net proceeds of this offering
and revenues to be derived from subscriptions to our databases, collaborations
for the development and, in some cases, analysis of knockout mice and government
grants, will be sufficient to fund our operations for at least the next several
years. During or after this period, if cash generated by operations is
insufficient to satisfy our liquidity requirements, we may need to sell
additional equity or debt securities or obtain additional credit arrangements.
Additional financing may not be available on terms acceptable to us or at all.
The sale of additional equity or convertible debt securities may result in
additional dilution to our stockholders.
IMPACT OF INFLATION
The effect of inflation and changing prices on our operations was not
significant during the periods presented.
DISCLOSURE ABOUT MARKET RISK
Our exposure to market risk is confined to our cash and cash equivalents
which have maturities of less than three months. We maintain an investment
portfolio which consists of U.S. Government debt obligations and investment
grade commercial paper that mature one to twelve months after December 31, 1999,
which we believe are subject to limited credit risk. We currently do not hedge
interest rate exposure. Because of the short-term maturities of our investments,
we do not believe that an increase in market rates would have any negative
impact on the realized value of our investment portfolio.
We have operated primarily in the United States and all sales to date have
been made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.
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FACTORS AFFECTING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1993, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
words "anticipate," "believe," "expect," "estimate," "project" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the following:
Risks Related to Our Business
o we have a history of net losses, and we expect to continue to incur
net losses and may not achieve or maintain profitability
o we are an early-stage company with an unproven business strategy
o we may need additional capital in the future and, if it is not
available, we will have to curtail or cease operations
o we face substantial competition in the discovery of the DNA sequences
of genes and their functions and in our drug discovery and product
development efforts
o we rely heavily on collaborators to develop and commercialize products
based on genes that we identify as promising candidates for
development as drug targets
o any cancellation by or conflicts with our collaborators could harm our
business
o we have no experience in developing and commercializing products on
our own
o if we lose our key personnel or are unable to attract and retain
additional personnel, we may be unable to pursue collaborations or
develop our own products
o we may encounter difficulties in managing our growth, which could
increase our losses
o because our entire OmniBank(R)mouse clone library is located at a
single facility, the occurrence of a disaster could significantly
disrupt our business
Risks Related to Our Industry
o our ability to patent our discoveries is uncertain because patent laws
and their interpretation are highly uncertain and subject to change
o our patent applications may not result in enforceable patent rights
o if other companies and institutions obtain patents claiming the
functional uses of genes and gene products based upon gene sequence
information and predictions of gene function, we may be unable to
obtain patents for our discoveries of biological function in knockout
mice
o if our potential products conflict with patents that competitors,
universities or others have obtained, then we may be unable to
commercialize those products
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o issued patents may not fully protect our discoveries, and our
competitors may be able to commercialize products similar to those
covered by our issued patents
o our rights to the use of technologies licensed by third parties are
not within our control
o we may be unable to protect our trade secrets
o we and our collaborators are subject to extensive and uncertain
government regulatory requirements, which could increase our operating
costs or adversely affect our ability to obtain government approval of
products based on genes that we identify in a timely manner or at all
o security risks in electronic commerce or unfavorable internet
regulation may deter future use of our products and services
o we use hazardous chemicals and radioactive and biological materials in
our business; any disputes relating to improper handling, storage or
disposal of these materials could be time consuming and costly
o we may be sued for product liability
o public perception of ethical and social issues may limit or discourage
the use of our technologies, which could reduce our revenues
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, our actual results may vary materially
from those anticipated, believed, expected, estimated or projected. For
additional discussion of these risks, uncertainties and assumptions, see "Risk
Factors" included in the our initial public offering prospectus dated April 7,
2000 and contained in our Registration Statement on Form S-1 (Registration No.
333-96469) filed under the Securities Act of 1933, as amended.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Disclosure about Market Risk" under "Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations for quantitative
and qualitative disclosures about market risk.
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PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The effective date of the Registration Statement on Form S-1 (Registration
No. 333-96469) filed under the Securities Act of 1933, as amended, relating to
the initial public offering of our common stock was April 6, 2000. On the same
date, we signed an underwriting agreement with J.P. Morgan Securities, Inc.,
Credit Suisse First Boston Corporation, CIBC World Markets Corp. and Punk,
Ziegel & Company, L.P., the managing underwriters for the initial public
offering and the representatives of the underwriters named in the underwriting
agreement, for the initial public offering of 10,000,000 shares of our common
stock at an initial public offering price of $22.00 per share. The offering
commenced on April 7, 2000 and was closed on April 12, 2000. The initial public
offering resulted in gross proceeds of $220.0 million. We received net proceeds
of $203.6 million after deducting underwriting discounts of $15.4 million and
estimated offering expenses of $1.0 million.
Concurrently with the closing of the initial public offering, the 4,244,664
outstanding shares of our Series A Preferred Stock were automatically converted
into 12,733,992 shares of common stock. As a result, we no longer have any
outstanding preferred stock.
Because the initial public offering occurred after March 31, 2000, we had
not used any of the net proceeds from the offering through the end of the period
covered by this report on Form 10-Q. We expect that our use of proceeds from the
offering will conform to the intended use of proceeds as described in our
initial public offering prospectus dated April 7, 2000.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our annual meeting of stockholders was held on March 15, 2000 to consider
and vote upon the following proposals:
(1) Election of Directors. The following individuals were nominated and
elected as directors, with the following numbers of shares voted for
and withheld for each director:
<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD
- ---------------- --- --------
<S> <C> <C>
William A. McMinn 10,841,682 0
Arthur T. Sands, M.D., Ph.D. 10,841,682 0
Stephen J. Banks 10,841,682 0
Gordon A. Cain 10,841,682 0
Patricia M. Cloherty 10,841,682 0
Paul Haycock, M.D. 10,841,682 0
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C> <C>
(2) Approval of our Restated Charter 10,841,682 0 0
(3) Approval of our 2000 Equity Incentive Plan 10,441,682 400,000 0
(4) Approval of our 2000 Non-Employee
Directors' Stock Option Plan 10,441,682 400,000 0
(5) Appointment of Arthur Andersen LLP
as our independent public accountants for
the fiscal year ending December 31, 2000 10,841,682 0 0
</TABLE>
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
3.1 -- Restated Certificate of Incorporation (filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (Registration No.
333-96469) and incorporated by reference herein).
3.2 -- Restated Bylaws (filed as Exhibit 3.2 to the Company's Registration
Statement on Form S-1 (Registration No. 333-96469) and incorporated by
reference herein).
10.1 -- Employment Agreement with James R. Piggott, Ph.D. (filed as Exhibit
10.2 to the Company's Registration Statement on Form S-1 (Registration
No. 333-96469) and incorporated by reference herein).
10.2 -- Employment Agreement with Brian P. Zambrowicz, Ph.D. (filed as Exhibit
10.4 to the Company's Registration Statement on Form S-1 (Registration
No. 333-96469) and incorporated by reference herein).
10.3 -- Employment Agreement with Julia P. Gregory (filed as Exhibit 10.5 to
the Company's Registration Statement on Form S-1 (Registration No.
333-96469) and incorporated by reference herein).
10.4 -- 2000 Equity Incentive Plan (filed as Exhibit 10.8 to the Company's
Registration Statement on Form S-1 (Registration No. 333-96469) and
incorporated by reference herein).
10.5 -- 2000 Non-Employee Directors' Stock Option Plan (filed as Exhibit 10.9
to the Company's Registration Statement on Form S-1 (Registration No.
333-96469) and incorporated by reference herein).
27.1 -- Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K:
None.
14
<PAGE> 15
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
thereunto duly authorized.
<TABLE>
<CAPTION>
LEXICON GENETICS INCORPORATED
<S> <C> <C> <C>
Date: May 5, 2000 By: /s/ ARTHUR T. SANDS
-------------------------
Arthur T. Sands, M.D., Ph.D.
President and Chief Executive Officer
Date: May 5, 2000 By: /s/ JULIA P. GREGORY
--------------------------
Julia P. Gregory
Executive Vice President and
Chief Financial Officer
</TABLE>
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
27.1 -- Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001062822
<NAME> LEXICON GENETICS INCORPORATED
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,703,215
<SECURITIES> 6,926,617
<RECEIVABLES> 1,553,541
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,242,648
<PP&E> 12,926,884
<DEPRECIATION> (3,640,214)
<TOTAL-ASSETS> 20,919,831
<CURRENT-LIABILITIES> 10,784,582
<BONDS> 0
30,184,090
0
<COMMON> 24,786
<OTHER-SE> (23,382,188)
<TOTAL-LIABILITY-AND-EQUITY> 20,919,831
<SALES> 0
<TOTAL-REVENUES> 3,338,909
<CGS> 0
<TOTAL-COSTS> 16,775,101
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109,749
<INCOME-PRETAX> (13,551,953)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,551,953)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,551,953)
<EPS-BASIC> (.55)
<EPS-DILUTED> (.55)
</TABLE>
