U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee required]
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No fee required]
For the transition period from to
Commission file number 0-17032
PROTEIN DATABASES, INC.
(Name of small business issuer in its charter)
Delaware 13-3186604
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 Oakwood Road, Huntington Station, New York 11746
(Address of principle executive offices) (Zip Code)
Issuer's telephone number (516) 673-3939
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of Class)
<PAGE>
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB.
[ x ]
Issuer's revenues for its most recent fiscal year were $2,690,595.
The aggregate market value of the registrant's Common Stock held by
nonaffiliates of the registrant on March 8, 1996 was approximately
$181,717.
The number of shares of registrant's Common Stock outstanding as of
March 8, 1996 was 1,459,724.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (Check one): Yes__: No X
<PAGE>
PART I
Item 1. Description of Business.
Background
Currently, Protein Databases, Inc. ("the Company" or "PDI"), incorporated
in 1983, markets intelligent scanning densitometers that fully integrate
the Company's proprietary software with computer hardware and scanning
instrumentation manufactured by others. These systems are sold to life
science research laboratories at university, government, hospital and
industrial (biotech and pharmaceutical) institutions, in the United States
and abroad, for the analysis of biological information. The Company's
customers are researchers studying complex biological systems with a medical
focus. They attempt to understand the molecular mechanisms of changes that
occur in cells as a result of diseases, read the DNA sequence bar code to
understand gene function, and attempt to develop assays in drug discovery
programs.
INTRODUCTION AND TECHNOLOGY
Part of the revolution in biotechnology has been the scientific advances in
the ability to separate the major molecules of life: proteins, the machines
responsible for running life processes and the building blocks of life, and
DNA, the chemical unit of genes that code the master "blueprint" of life.
Genes, very complex mixtures of proteins and other molecules, are assembled
into the fundamental units of life - cells and tissues. Manifestations of
disease and inheritance can be observed by analyzing the changes in
cellular proteins and genes. Unfortunately, only a small fraction of
proteins and genes have been characterized well enough to understand their
function. Science is in the process of analyzing the characteristics of
proteins and genes that have not yet been compiled. Electrophoretic separa-
tions of proteins and DNA by electric charge (a chemical property of a
molecule) and by size (a physical property) are widely used techniques to
separate proteins and DNA to facilitate their analysis.
In many cases, these methods capture complex images of the separated
components on x-ray films, gels or special papers. These images require
further analysis to reduce the data into useful information. Because of the
complexity and high information density, this analysis can best be
accomplished with high performance software. The Company's core technology
consists of software for the computer image analysis of separated proteins
and DNA resulting from high resolution electrophoresis and other separation
methods.
PDI produces software that intergrates personal computers and computer
workstations with high performance scanners to provide customers with power-
ful image analysis and data reduction capabilities. The Company was one of
the first successfully to integrate scanners with sophisticated image
analysis software tools to supply the growing demand for image analysis
systems for the electrophoresis market.
<PAGE>
Products
The Company's major products are as follows,
SYSTEMS
420oe Densitometer: PDI invented Optically Enhanced Densitometry and the
420oe is the latest system to employ it. The 420oe is a densitometer that
has third party reference optical density and reflectance density standards
built into the instrument, thus providing assurance that the instrument is
working automatically. High data quality; 12 bit, 0-3 O.D., multiwavelength
scans solve most images. PDI made the 420oe to be versatile, to process
images from wet gels, dry gels, films, thick (up to 3mm) samples, blots,
photographs, negatives and small to larger 20x27cm images. This system is
available with all of the software described below.
The NightHawk(trademark) System: Nighthawk combines the most compact
(only 20cm across) darkroom and variable intensity UV source and optics and
software for ethidium bromide documentation. The customer can capture the
image, save to a floppy and print to a thermal printer with 5 mouse clicks
in less than 30 seconds. Whether the customer chooses Mac or PC, the
software is the same. The system utilizes the Company's ImagePrint(trade-
mark) proprietary software for quick prints or Quantity One(registered trade-
mark), described below, for saturated pixel measurements, histograms, image
labeling and rotation, comparisons, molecular weight and concentration
determinations. For more complex genetic analysis, customers use PDI's
Diversity family of software products described below.
SOFTWARE (Available for Macintosh, MS-DOS PC and UNIX(registered trademark)
computers)
Diversity One(trademark) is used by molecular biologists for RFLP
(Restriction Fragment Length Polymorphism's) analysis, DNA fingerprint
analysis and allelic frequency analysis. A DNA "fingerprint" is developed
from images of individual genetic specimens in which their DNA is fragmented
into pieces and arranged according to molecular size on a one-dimensional
gel. The program can sort the fingerprints according to genetic similarity
and create databases of 10,000 lane images. The software permits comparing a
new lane against the database of images to determine the closest match or
similarity. The software package also has all the quantitative tools found
in Quantity One(trademark).
DNA Code(registered trademark) is used for automatic DNA sequence gel
reading. It can scan, read and edit an entire x-ray film containing 4,000
readable bases in 30 minutes (displayed and read as a bar code). The sequence
may then be output in hard copy or in a computer-readable form.
PDQUEST(trademark) is used for the analysis of proteins separated by two-
dimensional gel electrophoresis. This sophisticated program permits the
analysis of 100 gels per experiment and 1000 gels per database. The program
assists in the identification of proteins and tracks certain changes in them
under experimental conditions. This enables scientists to obtain more infor-
mation than by traditional protein separation techniques and to preserve their
experimental findings in a standard computer format.
Quantity One(registered trademark) is used for the analysis of one-
dimensional gels, dot blots and slot blots - techniques virtually ubiquitous
to many life science research applications. This program can scan and analyze
in five minutes, and produce soft copy and hard copy histograms, traces and
tables.
<PAGE>
2-D(trademark) is used for simple 2-D gel analysis with no database function.
It can accommodate 16 gels per experiment.
Marketing and Sales
The Company sells its products in the United States and Canada directly to
customers except for a PDI personal computer based Image Analysis system that
is distributed for the Company by Fisher Scientific under a distribution
agreement that expires on December 31, 1996. The Company sells its products
in most countries in Europe, the Middle East and Africa, and ImageMaster TM
worldwide, under distribution agreements with Pharmacia Biosystems B.V.
("Pharmacia") and Pharmacia Biotech AB ("Pharmacia AB"). ImageMaster(trade-
mark) are software systems for personal computers that include modified
versions of PDI's PDQUEST(trademark) and Quantity One(registered trademark)
software packages, which are described above. The Company sells its products
in Japan under a distribution agreement with Toyobo Co. Ltd (Toyobo), and in
Taiwan and Korea with local distributors.
The market for the Company's products in Europe, Japan and countries in the
Middle East has been important, with the combined regions accounting for
approximately 52% of the Company's revenue in 1995 and approximately 66% in
1994.
In the third quarter of 1992 the Company entered into a distribution agree-
ment with Pharmacia pursuant to which Pharmacia distributes PDI's
"The Discovery Series(trademark)" image analysis software in most countries in
Europe, the Middle East and Africa. The agreement, as further amended in
October 1994 and February 1996, ends May 1, 1996. Pharmacia has no obliga-
tions to make purchases under this agreement in 1996 to maintain its
non-exclusive distribution rights.
During the second quarter of 1993 PDI commenced shipments under an exclusive
distribution agreement with Pharmacia AB pursuant to which Pharmacia AB
agreed to distribute PDI's ImageMaster(trademark) System for the personal
computer worldwide through 1997. The agreement provides for Pharmacia AB to
purchase a minimum of $1,260,000 of PDI's PC-based image analysis software in
the 1993 calendar year and $990,000 of such software in the 1994 calendar
year. However, at Pharmacia AB's request, in December 1993, the agreement was
modified to defer until 1995 Pharmacia AB's minimum purchase requirement for
the first seven months of 1994. Pharmacia AB has no further obligations to
make purchases under this agreement.
In June 1994 the Company further amended its Distribution Agreement with
Toyobo, the exclusive distributor of the Company's products in Japan and
the non-exclusive distributor of the Company's products in all other
countries in the Far East. The amendment extends the term of the agreement
to December 31, 1998.
During 1995, Pharmacia and Pharmacia AB accounted for 29% and Toyobo
accounted for 19% of the Company's total revenues. During 1994, Pharmacia
and Pharmacia AB accounted for 42% and Toyobo accounted for 23% of the
Company's total revenues. The Company is almost totally dependent upon
distributors for the sale of its products outside of the United States.
The Company is in discussions with Pharmacia with respect to new distribution
arrangements for worldwide distribution of all of its products, but there is
no assurance that the Company will be able to conclude these discussions with
Pharmacia on satisfactory terms. If the Company cannot complete satisfactory
new distribution arrangements with Pharmacia, it will be necessary for it to
enter into other distribution arrangements with one or more other distribu-
tors in order for it to sell its products in Europe, the Middle East and
Africa, and there can be no assurance that the Company will be able to
conclude the necessary distribution arrangements on satifactory terms. The
Company will be materially and adversely affected if it is unable to conclude
satisfactory distribution arrangements for those areas. See "Management's
Discussion and Analysis of Operations - Liquidity and Capital Resources."
The Company's customers may require training and support to achieve
satisfactory performance from the Company's products. Installation of a
software system and training of the user may take up to two days.
<PAGE>
Research and Development
The Company is engaged in the ongoing refinement of its Software Systems
through its research facilities. In addition, the Company from time to time
consults with scientists who advise the Company regarding its products and
the Company actively solicits and receives suggestions from its customers
regarding product improvements.
The Company's principle research and development costs for its current
products have been incurred in prior years, but the Company needs
continually to maintain and improve its products, as well as to develop new
products. During 1995 and 1994 the Company incurred Research and Develop-
ment expenses of $520,943 and $461,727, respectively, and anticipates on-
going research and development efforts. The Company may be adversely
affected if it is not able to maintain its research and development efforts
at an appropriate level.
Competition
The markets for the Company's software systems are served by a number of
companies that have financial, marketing, manufacturing and human resources
which substantially exceed those of the Company. The Company competes
directly with Bio-Rad Laboratories, Molecular Dynamics, Inc. and Bio Image
Corp., each of which sells a turnkey image analysis instrument capable of
scanning and analyzing one and two-dimensional and DNA gels.
The Company believes its systems approach to deliver total solutions is
necessary in order to enable the Company to compete in its market.
Licenses, Patents and Proprietary Information
Cold Spring Harbor Laboratory Agreement
In December 1983, the Company entered into a license agreement with CSHL
(the "License Agreement") pursuant to which CSHL granted the Company the
exclusive commercial right to use all information, technology, know-how,
inventions, computer software and improvements relating to CSHL's 2-D Gel
technology (collectively the "CSHL Technology"). Under applicable statutes
and regulations relating to technology developed under federal funding,
CSHL's rights to the CSHL Technology are subject to a retained license
to such technology by the federal government for its own use and for the
distribution of two-dimensional gel analysis software to not-for-profit
research institutions. All inventions or improvements to the Company's
products become part of the CSHL Technology, but the Company retains the
right to utilize and exploit all of the technology. Pursuant to the License
Agreement, as last amended in June 1990, the Company is obligated to pay
CSHL one-seventh of the royalties paid to the Company under the Millipore
Agreement described below. The Company has no other royalties due to CSHL.
Under the terms of the License Agreement, which expired on June 1, 1994, the
Company has a perpetual non-exclusive license to use and exploit the CSHL
Technology.
<PAGE>
Millipore Agreement
In September 1987, the Company entered into an agreement (the "Millipore
Agreement") with Millipore Corporation ("Millipore") pursuant to which
Millipore has a worldwide non-exclusive license to use certain of the
Company's technology related to the 2-D electrophoretic method of protein
separation (the "Licensed Technology") to develop and market separation
equipment (the "Licensed Products"). The Licensed Technology excludes the
computer programs and related software for the analysis of the electro-
phoretic accomplished by the 2-D electrophoretic technology.
Under the Millipore Agreement, Millipore paid to the Company a total of
$500,000 during 1987 and 1988 for the Licensed Technology. Beginning in 1989,
Millipore was required to pay the Company a royalty based on net sales of
any Licensed Products. The royalty decreases from 7% to 3% of sales as
certain cumulative thresholds of sales are achieved. The royalty terminates
when cumulative net sales reach $100 million, or September 15, 1997, whichever
is earlier. In 1995 and 1994, Millipore paid royalties of $63,321 and $96,536,
respectively, pursuant to the Millipore Agreement.
Employees
The Company has 19 full-time employees, of which one holds a Ph.D. degree
and seven hold masters degrees in science or computer-related fields.
The Company is not a party to any collective bargaining agreement and
considers its relations with its employees to be good.
Item 2. Description of Properties.
The Company currently leases 6,500 square feet in Huntington Station,
New York, for office, conference and computer systems space. The lease,
as extended, expires on November 14, 1996 and provides for rental payments
in 1996 of $75,000, plus certain expenses. These facilities are considered
to be adequate for the Company's present and currently anticipated
requirements.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The following table provides information concerning the high and low bid
prices per share for the Company's common stock in the over-the-counter
market for each of the calendar quarters in the period from January 1, 1994
through December 31, 1995 as reported by the National Quotation Bureau.
Such bids reflect interdealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
1995 Low High
Quarter Ended Bid Bid
March 31, 1995 $.13 $.50
June 30, 1995 .25 .50
September 30, 1995 .25 .375
December 31, 1995 .06 .375
1994 Low High
Quarter Ended Bid Bid
March 31, 1994 $.25 $1.50
June 30, 1994 .13 1.25
September 30, 1994 .13 .50
December 31, 1994 .13 .25
The Company has not paid any dividends on its Common Stock and no cash
dividends are contemplated for the foreseeable future. As of December 31,
1995, there were 846 holders of record of the Companys' Common Stock.
Item 6. Management's Discussion and Analysis of Operations.
Liquidity and Capital Resources
In the third quarter of 1992 the Company entered into a distribution agree-
ment with Pharmacia pursuant to which Pharmacia distributes PDI's "The
Discovery Series TM" image analysis software in most countries in Europe,
the Middle East and Africa. The agreement, as further amended in October
1994 and February 1996, ends May 1, 1996. Pharmacia has no obligations to
make purchases under this agreement in 1996 to maintain its non-exclusive
distribution rights.
During the second quarter of 1993 PDI commenced shipments under an
exclusive distribution agreement with Pharmacia AB pursuant to which
Pharmacia AB agreed to distribute PDI's ImageMaster TM System for the
personal computer worldwide through 1997. The agreement provides for
Pharmacia AB to purchase a minimum of $1,260,000 of PDI's PC-based image
analysis software in the 1993 calendar year and $990,000 of such software
in the 1994 calendar year. However, at Pharmacia AB's request, in
December 1993, the agreement was modified to defer until 1995 Pharmacia
AB's minimum purchase requirement for the first seven months of 1994.
Pharmacia AB has no further obligations to make purchases under this agree-
ment.
<PAGE>
In June 1994 the Company further amended its Distribution Agreement with
Toyobo, the exclusive distributor of the Company's products in Japan and
the non-exclusive distributor of the Company's products in all other
countries in the Far East. The amendment extends the term of the agreement
to December 31, 1998.
As a result of the resumption of Pharmacia AB's purchases of the Company's
software products, the Company operated profitably in each of the three
quarters ended September 30, 1995, reporting net income of $121,605 for the
nine months ended September 30, 1995. However, as a result of the completion
of Pharmacia AB's software purchase requirements during the third quarter of
1995, the Company operated unprofitably in the forth quarter of 1995.
Management currently believes that, the Company will have adequate funds to
sustain its operations in 1996. However, the Company is almost totally
dependent upon distributors for the sale of its products outside of the
United States. Pharmacia and Pharmacia AB accounted for 29% and 42% and
Toyobo accounted for 19% and 23%, respectively, of the Company's total
revenues in 1995 and 1994, respectively. If the Company is unable to
complete new distribution arrangements with Pharmacia on satisfactory terms
and does not conclude one or more suitable alternative distribution arrange-
ments for its products in Europe, the Middle East and Africa, the Company's
sales in 1996 will be materially and adversely affected and it is unlikely
that the Company will be profitable.
The Company had no material commitments for capital equipment additions at
December 31, 1995.
Revenues
The Company generates revenues primarily by selling software systems and,
to a lesser extent, from contract research and development, royalties and
other income sources.
Software systems revenues include revenues from the sale of the Company's
proprietary software, Original Equipment Manufacturers (OEM) equipment,
software maintenance and software updates. Software systems revenues include
sales of OEM equipment that cost $377,803 and $874,787 in 1995 and 1994,
respectively. The Company obtains its principal OEM equipment from a
limited number of suppliers. If the Company were unable to continue to
obtain the equipment on reasonable terms from its current suppliers, or from
alternate sources, the Company would be materially and adversely affected.
Excluding the costs of OEM equipment, the Company's Software systems revenues
increased 1% in 1995, primarily due to an increase in the number of systems
sold in North America and to an increase in the number of products sold under
the Company's distribution agreements with Pharmacia and Pharmacia AB de-
scribed above.
Contract, royalty and other revenues include fees received for software
development totaling $299,000 in 1995 as compared with $237,000 of such fees
in 1994. Contracts, royalties and other revenues also include royalties of
$63,321 and $96,536 received from Millipore Corporation in 1995 and 1994,
respectively.
<PAGE>
Expenses
The increase in the Company's general and administration expenses in the year
ended December 31, 1995 from the prior year was primarily attributable to
higher professional and Board of Directors' fees.
The Company's marketing and sales expenses increased in the year ended
December 31, 1995 from the prior year principally as a result of higher
promotional and travel expenses.
The increase in the Company's research and development expenses in the year
ended December 31, 1995 from the prior year was primarily attributable to
higher salary related expenses, including an increase of one employee in the
department. The Company's principal research and development costs for its
current products have been incurred in prior years, but the Company needs
continually to maintain and improve its products, as well as to develop new
products, and anticipates ongoing research and development efforts.
Item 7. Financial Statements.
_____________________________
See page F-1 for Protein Databases, Inc. Index to Consolidated Financial
Statements.
Item 8. Changes in and Disagreements with Accountants on Accounting and
_______________________________________________________________________
Financial Disclosure.
_____________________
None
<PAGE>
PART III
Item 9. Directors, Executive Officers , Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The directors and executive officers of the Company are as follows:
Name Age Position
Ronald R. Hahn 51 Chairman of the Board of Directors
Stephen H. Blose 46 President, Chief Executive Officer
and Director
Joel A. Fontaine 51 Director
Alan P. Chodosh 42 Vice President of Finance and Secretary
Jon D. Randall 43 Vice President of Research and Development
Paul J. Collins 40 Vice President of Sales and Marketing
Directors are elected for a one-year term and until a successor is duly
elected and qualified. Officers are elected by the Board of Directors and
hold office at the pleasure of the Board until their successors are chosen
and qualified. The Company currently has no employment agreements with any
of its officers.
Ronald R. Hahn is currently a partner of Early Stage Enterprises, a venture
capital organization located in Princeton, New Jersey. In addition, he has
been a partner of Princeton / Montrose Partners since 1981. He became a
Director of the Company in April 1985 and Chairman of the Board of Directors
in October 1989.
Stephen H. Blose was appointed President (interim until January 20, 1989)
and a Director of the Company effective April 26, 1988. From January 1985
to April 1988, he served as a Vice President of the Company and was engaged
in market development and sales of the Company's products in the United
States and Europe. From 1978 to 1985, he was a senior research scientist
at Cold Spring Harbor Laboratory. He has Ph.D. and V.M.D. degrees from the
University of Pennsylvania.
Joel A. Fontaine was appointed a Director of the Company on August 22, 1995.
He has been President of Suprex Corporation, a manufacturer of analytical
instruments, since January 1988. In addition, from 1968 through 1987, Mr.
Fontaine held various positions with Fisher Scientific Company, including
General Manager of Fisher Medical in 1986 through 1987. He is also a director
of the Analytical Instrument Association.
Alan P. Chodosh became Corporate Controller of the Company in June 1986, was
appointed Vice President - Corporate Controller and Secretary on August 5,
1987 and was appointed Vice President of Finance effective September 1, 1988.
He is a certified public accountant.
Jon D. Randall has been Director of Computer Systems since joining the
Company in June 1985 and was appointed Vice President of Research and
Development effective September 1, 1988. He has an M.S. in electrical
engineering from Stanford University and a B.S. degree from Massachusetts
Institute of Technology.
<PAGE>
Paul J. Collins had been director of Marketing since joining the Company in
February 1988 and was appointed Vice President of Sales and Marketing
effective September 1, 1988. From January 1982 until joining the Company,
he held various positions with Pharmacia LKB Biotechnology, Inc., including
Product Group Manager for electrophoresis and process chromatography.
Mr. Collins has a B.A. degree in Biology from the University of Massachusetts
and a M.A. degree in Plant Biochemistry from Boston University.
There are no family relationships between any director or executive officer
of the Company.
Item 10. Executive Compensation.
________________________________
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------
Annual Compensation Awards
------------------- ------
Securities All Other
Underlying Options / Compensation
SAR/s (#) ($)
------------------- ------------
None None
Name and Principal Position
Year Salary ($)Bonus
---- ------ --------
Stephen H. Blose 1995 $133,650 $0
President and CEO 1994 $127,400 $10,000
1993 $122,400 $30,000
Jon D. Randall 1995 $120,500 $0
V.P. of Research 1994 $115,000 $10,000
and Development 1993 $110,000 $22,000
Alan P. Chodosh 1995 $110,000 $0
V.P. of Finance 1994 $105,000 $10,000
1993 $100,000 $20,000
Paul J. Collins 1995 $107,400 $0
1994 $102,400 $10,000
1993 $97,400 $19,000
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
___________________________________________________
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-money
Options/SAR's Options/SAR's
at FY-End (#) at FY-End ($)
Shares Acquired Value Exercisable / Excersiable /
ON Exercise (#) Realized ($) Unexercisable Unexercisable
--------------- ------------ ------------- -------------
Stephen H. Blose
Options Options
132,500/0 $8,496/$0
Jon D. Randall
Options Options
112,500/0 $5,882/$0
Alan P. Chodosh
Options Options
112,500/0 $5,882/$0
Paul J. Collins
Options Options
112,500/0 $5,882/$0
During 1995, Mr. Ronald R. Hahn received compensation of $36,000 as Chairman
of the Board of Directors and Mr. Joel A. Fontaine received compensation of
$4,500 as a director pursuant to an agreement under which he receives
directors' fees of $500 per month and $1,500 for each Board Meeting he
attends. Directors are reimbursed for reasonable out-of-pocket expenses
incurred in connection with the Company's business.
In addition, pursuant to the Company's outside Directors' 1993 Stock Option
Plan, on August 22, 1995 Mr. Fontaine was granted, subject to stockholder
approval, a Stock Option to purchase for $.69 per share 5,000 shares of
common stock, which option expires on August 21, 2005.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------
The following table sets forth, as of December 31, 1995, the ownership of the
Company's common stock by (i) each person who is known by the Company to own
beneficially more than five (5%) of the Company's common stock, (ii) each of
the Company's directors and executive officers, and (iii) all directors and
executive officers of the Company as a group. The stockholders listed in the
table have sole voting and investment powers with respect to the shares
indicated.
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent
Title of Class Owner Owner of Class (1)
- -------------- ---------- ---------- ------------
Common Stock Princeton/Montrose2 730,545 50.05%
Partners
243 North Highway 101
Suite 13
Solana Beach, CA 92076
Common Stock Ronald R. Hahn3 0 -
243 North Highway 101
Suite 13
Solana Beach, CA 92076
Common Stock Joel A. Fontaine 0 -
405 Oakwood Road
Hunt. Sta., NY 11746
Common Stock Stephen H. Blose4 134,813 8.47%
405 Oakwood Road
Hunt. Sta., NY 11746
Common Stock Jon D. Randall5 112,500 7.16%
405 Oakwood Road
Hunt. Sta., NY 11746
Common Stock Alan P. Chodosh5 112,500 7.16%
405 Oakwood Road
Hunt. Sta., NY 11746
Common Stock Paul J. Collins5 112,500 7.16%
405 Oakwood Road
Hunt. Sta., NY 11746
Common Stock All directors and officers 0 24.48%
as a group (6 persons) 6
- -----------------------------
<PAGE>
(1) The percentages are calculated on the basis of 1,459,724 shares of
Common Stock outstanding as of December 31, 1995. For the purpose of
calculating the percentage of shares of the Company's Common Stock owned
by any person, shares issuable upon the exercise of stock options held by
such person are deemed outstanding if they are exercisable within 60 days
of December 31, 1995, but such shares are not deemed outstanding for the
purpose of calculating the percentage of Commmon Stock owned by any other
person.
(2) Princeton/Montrose Partners is controlled by its general partners,
Ronald R. Hahn, Chairman of the Company, and Donald R. Stroben, an
individual unrelated to the Company. Mr. Hahn disclaims any beneficial
ownership in the shares of Common Stock owned by Princeton/Montrose
Partners.
(3) Does not include shares of Common Stock held by Princeton/Montrose
Partners (see Note 2 above).
(4) Includes 132,500 shares of Common Stock issuable upon the exercise of
stock options.
(5) Consist of 112,500 shares of Common Stock issued upon the exercise of
stock opitons.
(6) Includes an aggregate of 470,000 shares of Common Stock issuable upon
the exercise of outstanding stock options (see Notes 4 and 5 above).
Excludes the shares of Common Stock owned by Princeton/Montrose Partners
(see Note 2 above).
Mr. Fontaine was elected a director of the Company on August 22, 1995;
he filed a report on Form 3 reporting his beneficial ownership of shares
of Common Stock late, on March 16, 1996.
Item 12. Certain Relationships and Related Transactions.
- --------------------------------------------------------
None.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) Exhibits
Exhibit
Number Description of Exhibits
3.2(i) - Third Restated Certificate of Incorporation of the
Registrant as filed in Delaware on July 15, 1988*
3.2(ii) - Certificate of Amendment of Certificate of Incorporation of
the Registrant as filed in Delaware on October 16, 1992*****
3.4 - Amended and Restated By-laws effective July 15, 1988*
4.1(ii) - Specimen Certificate for shares of Common Stock of the
Registrant dated October 16,1992*****
10.1(i) - Exclusive Know-How License Agreement between the
Registrant and Cold Spring Harbor Laboratory dated
December 1, 1983 ("Exclusive Know-How License")*
10.1(ii) - Letter Amendment dated December 24, 1986 to Exclusive
Know-How License*
10.1(iii) - Letter Amendment dated March 6, 1987 to Exclusive Know-How
License*
10.1(iv) - Letter Amendment dated April 30, 1990 to Exclusive Know-
How License****
10.1(v) - Letter Amendment dated June 9, 1988 to Exclusive Know-How
License*
10.2 - Agreement dated September 15, 1987 between the Company and
Millipore Corporation*
10.3 - Lease dated April 15, 1993 between the Registrant and
Estate of Herbert Budin for office space******
10.4 - 1992 Stock Incentive Plan of the Registrant*****
10.6 - Database License Agreement dated August 26, 1987 between
the Registrant and Cold Spring Harbor Laboratory*
10.8 - Proprietary Information & Invention Agreement between the
Registrant and Charles DeLisi*
10.9 - Form Software License Agreement of the Registrant*
10.10 - 1993 Outside Directors' Stock Option Plan of the
Registrant******
27 - Financial Data Schedule
* Filed as exhibits to Registration Statement No. 33-22694-NY filed on
June 21, 1988.
** Filed as exhibits to Form 10-K for 1988 on March 22, 1989.
*** Filed as exhibits to Form 8-K dated September 21, 1990.
**** Filed as exhibits to Form 10-K for 1990 on March 15, 1991.
***** Filed as exhibits to Form 10-K for 1992 on March 29, 1993.
****** Filed as exhibits to Form 10-K for 1993 on March 28, 1994.
(b) Reports on Form 8-K
- -----------------------
The Company did not file any current reports on Form 8-K during the
fourth quarter of the year ended December 31, 1995.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
Registrant has caused this report to be signed on its behalf by the under-
signed, thereunto duly authorized, on the 20th day of March 1996.
PROTEIN DATABASES, INC.
By: S/Stephen H. Blose
----------------------------------------
Stephen H. Blose, President and Director
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Signature Title Date
S/Ronald R. Hahn Chairman of the Board of March 20, 1996
---------------- Directors
Ronald R. Hahn
S/Stephen H. Blose President and Director March 20, 1996
------------------ (Chief Executive Officer)
Stephen H. Blose
S/Alan P. Chodosh Vice President - Finance March 20, 1996
------------------ (Principal Financial and
Alan P. Chodosh Accounting Officer)
S/Joel A. Fontaine Director March 20, 1996
-------------------
Joel A. Fontaine
<PAGE>
Protein Databases, Inc. and Subsidiary
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Certified Public Accountants F-2
Financial Statements
Consolidated Balance Sheets F-3
Consolidated Statements of Earnings F-5
Consolidated Statement of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Protein Databases, Inc.
We have audited the accompanying consolidated balance sheets of Protein Data-
bases, Inc. and Subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Protein
Databases, Inc. and Subsidiary as of December 31, 1995 and 1994 and the
consolidated results of their operations and their consolidated cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Melville, New York
February 7, 1996
F-2
<PAGE>
Protein Databases, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1995 1994
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 778,718 $ 622,895
Accounts receivable 421,492 792,766
Inventory 64,688 48,432
Prepaid expenses 13,287 10,934
---------- ----------
Total current assets 1,278,185 1,475,027
PROPERTY AND EQUIPMENT
Computer and office equipment 751,645 636,155
Furniture and fixtures 119,889 115,224
Equipment under capital leases 23,870 23,870
Leasehold improvements 36,922 36,922
---------- ----------
932,326 812,171
Less accumulated depreciation and amortization
(including $23,870 of capitalized lease
amortization) (662,446) (591,428)
---------- -----------
269,880 220,743
OTHER ASSETS 13,520 13,000
---------- -----------
$1,561,585 $1,708,770
---------- -----------
---------- -----------
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Protein Databases, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS (continued)
December 31,
LIABILITIES AND STOCKHOLDERS' equity 1995 1994
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 159,537 $ 223,770
Accrued expenses 42,462 113,164
Unearned revenue 29,691 81,153
---------- -----------
Total current liabilities 231,690 418,087
---------- -----------
COMMITMENTS
STOCKHOLDERS' equity
Common stock - $.01 par value; authorized,
10,000,000 shares; outstanding, 1,459,724
and 1,459,741 shares in 1995 and 1994
respectively 14,597 14,597
Additional paid-in capital 8,519,636 8,485,886
Accumulated deficit (7,204,338) (7,209,800)
----------- ----------
1,329,895 1,290,683
----------- -----------
$ 1,561,585 $ 1,708,770
----------- -----------
----------- -----------
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Protein Databases, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF EARNINGS
Year ended December 31,
1995 1994
----------- ----------
Revenue
Software systems $ 2,280,919 $ 2,756,307
Contract, royalty and other 409,676 364,162
----------- ----------
2,690,595 3,120,469
----------- ----------
Expenses
Cost of sales 660,812 1,167,836
General and administrative 629,392 586,664
Marketing and sales 873,986 746,200
Research and development 520,943 461,727
----------- ----------
2,685,133 2,962,427
----------- ----------
Earnings before income taxes 5,462 158,042
Income taxes 3,000
----------- -----------
NET EARNINGS $ 5,462 $ 155,042
----------- -----------
----------- -----------
Net earnings per common share $.00 $.09
---- ----
---- ----
Weighted average number of common shares and
equivalents outstanding 1,640,034 1,721,899
----------- ----------
----------- ----------
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Protein Databases, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1995 and 1994
Additional
_C_o_m_m_o_n_ S_t_o_c_k_ paid-in Accumulated Stockholders'
Shares Amount capital deficit equity
------ ------ ---------- ----------- ------------
Balance at January 1, 1994
1,459,991 $14,599 $8,249,634 $(7,364,842) $ 899,391
Compensatory stock options
issued to employees
236,250 236,250
Fractional share adjustment
from 1992 reverse stock
split
(250) (2) 2
Net earnings _________ _________ ________ 155,042 155,042
----------- ----------
Balance at December 31, 1994
1,459,741 14,597 8,485,886 (7,209,800) 1,290,683
Compensatory stock options
issued to employees 33,750 33,750
Fractional share adjustment
from 1992 reverse stock
split
(17)
Net earnings 5,462 5,462
--------- -------- ---------- ----------- ---------
Balance at December 31, 1995
1,459,724 $14,597 $8,519,636 $(7,204,338) $1,329,895
--------- -------- ---------- ------------ ----------
--------- -------- ---------- ------------ ----------
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
Protein Databases, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1995 1994
---------- ----------
Cash flows from operating activities
Net earnings $ 5,462 $ 155,042
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities
Depreciation and amortization 73,790 70,455
Changes in operating assets and liabilities
Accounts receivable 371,274 (23,749)
Inventory (16,256) 87,125
Prepaid expenses (2,353) (6,234)
Accounts payable and accrued expenses (101,185) (145,349)
Unearned revenue (51,462) (153,401)
Other assets (520) -
---------- ----------
Net cash provided by (used in)
operating activities 278,750 (16,111)
---------- ----------
Cash flows from investing activities
Capital expenditures (134,014) (108,876)
Proceeds from disposition of
property and equipment 11,087 18,045
---------- ----------
Net cash used in investing activities (122,927) (90,831)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 155,823 (106,942)
Cash and cash equivalents at beginning of year 622,895 729,837
---------- ----------
Cash and cash equivalents at end of year $ 778,718 $ 622,895
---------- ----------
---------- ----------
Supplemental disclosures of cash
flow information:
Cash paid during the year for
Interest $ - $ -
---------- ----------
---------- ----------
Income taxes $ - $ 2,834
---------- ----------
---------- ----------
Noncash financing activity
Issuance of stock options and cancellation
of stock appreciation rights $ 33,750 $ 236,250
---------- -----------
---------- -----------
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Protein Databases, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - NATURE OF OPERATIONS AND BUSINESS DEVELOPMENTS
Protein Databases, Inc. (the "Company"), incorporated in 1983, markets
intelligent scanning densitometers that integrate the Company's proprietary
software with computer hardware and scanning instrumentation manufactured by
others. These systems are sold to life science research laboratories at
university, government, hospital and industrial (biotech and pharmaceutical)
institutions, in the United States and abroad, for the analysis of biological
information. The Company's customers are researchers studying complex
biological systems with a medical focus. They attempt to understand the
molecular mechanisms of changes that occur in cells as a result of diseases,
read the DNA sequence bar code to understand gene function and attempt to
develop assays in drug discovery programs.
For the years ended December 31, 1995 and 1994, a substantial portion of
the Company's revenues include amounts earned pursuant to distribution
agreements with two foreign distributors (see Note B-2). The distribution
agreements require the distributors to purchase a defined minimum amount of
products from the Company. As of December 31, 1995, one of these
distributors has no further commitments to purchase the Company's products.
Management is currently in discussion with this distributor and is also in
discussions with other potential distributors of the Company's products;
however, there are no assurances that these discussions will result in the
Company entering into a distribution agreement. Management currently believes
that, while the Company will have adequate funds to sustain its operations in
1996, failure to enter into a distribution agreement on satisfactory terms
will have a material adverse effect on the Company.
Software systems revenue includes revenue from the sale of the Company's
proprietary software, Original Equipment Manufacturers ("OEM") equipment,
software maintenance and software updates. The Company obtains its principal
OEM equipment from a limited number of suppliers. If the Company were unable
to obtain the equipment on reasonable terms from its current suppliers, or
from alternate sources, the Company would be adversely affected.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its inactive wholly-owned subsidiary, Protein Databases Europe, Ltd. ("PDE").
All intercompany transactions have been eliminated in consolidation.
F-8
<PAGE>
Protein Databases, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1994
NOTE B (continued)
2. Revenue
Software systems revenues are generally recognized at the time of shipment of
such systems. Contract revenues are recognized as services are performed.
Revenues from software maintenance agreements are deferred and recognized
ratably over the lives of the respective agreements.
The Company is almost totally dependent upon distributors for the sale of its
products outside of the United States (see Note A). For the year ended
December 31, 1995, one foreign distributor accounted for 29% and another
foreign distributor accounted for 19% of the Company's total revenues. At
December 31, 1995, amounts due from such distributors represented 5% and 27%
of accounts receivable, respectively. For the year ended December 31, 1994,
one distributor accounted for 42% and another distributor accounted for 23% of
the Company's total revenues. At December 31, 1994, amounts due from such
distributors represented 45% and 30% of accounts receivable respectively.
For the years ended December 31, 1995 and 1994, "Contract, royalty and other"
revenue of $63,321 and $96,536, respectively, was received from Millipore
Corporation ("Millipore") pursuant to the terms of the License Agreement,
dated September 15, 1987. The Company granted to Millipore the worldwide
license to use certain specified two-dimensional gel technology.
Export sales were approximately $1,390,000 and $2,058,000 in 1995 and 1994,
respectively.
3. Research and Development
Company-sponsored research and development costs related to both present and
future products are expensed currently. Included in "Contract, royalty and
other" revenue for the years ended December 31, 1995 and 1994 are $299,000
and $237,000 respectively of fees earned with respect to research and
development projects undertaken on behalf of customers.
4. Inventory
Inventory consisting of merchandise held for sale is stated at the lower of
cost or market; cost is determined using the first-in, first-out method.
F-9
<PAGE>
Protein Databases, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1994
NOTE B (continued)
5. Depreciation and Amortization
Depreciation and amortization of property and equipment are computed by the
straight-line method over estimated useful lives of 5 years or the duration
of the lease, whichever is shorter.
6. Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
7. Income Taxes
Deferred income taxes are recognized for temporary differences between the
financial statement and income tax bases of assets and liabilities and loss
carryforwards for which income tax benefits are expected to be realized in
future years. A valuation allowance has been established to offset the
deferred tax assets as it is more likely than not that such deferred tax
assets will not be realized. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date.
8. Net Earnings Per Common Share
Net earnings per common share are based upon the weighted average number of
common and common equivalent shares outstanding during each year. In 1995
and 1994, common equivalent shares consist of additional shares that would be
outstanding assuming the exercise of dilutive outstanding stock options,
warrants and stock appreciation rights.
9. Statements of Cash Flows
For purposes of the accompanying consolidated statements of cash flows, the
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
F-10
<PAGE>
Protein Databases, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1994
NOTE B (continued)
10. Accounting Pronouncements Not Yet Adopted
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation," is required to be adopted in 1996 and allows
for a choice of the method of accounting used for stock-based compensation.
Entities may use the "intrinsic value" method currently based on APB 25 or the
new "fair value" method contained in SFAS 123. The Company intends to adopt
SFAS 123 in 1996 by continuing to account for stock-based compensation under
APB 25. As required by SFAS 123, the pro forma effects on net income and
earnings per share will be determined as if the fair value based method had
been applied and disclosed in the notes to the financial statements.
NOTE C - INCOME TAXES
As of December 31, 1995, the Company had approximately $6,850,000 of net
operating loss carryforwards ("NOLs") for Federal income tax purposes
available to reduce future taxable income. As a result of the Tax Reform Act
of 1986, provisions of the Internal Revenue Code were substantially modified
to limit the availability of NOLs and other tax benefits that arose prior to
certain cumulative changes in a corporation's stock ownership. Under these
revised provisions, the Company's use of its NOLs is limited because the
Company is deemed to have undergone an ownership change, as a result of the
public issuance of its common stock in the year ended December 1988. As a
result of this change in ownership, approximately $700,000 of the NOLs are
presently unavailable for use, thereby reducing the above NOLs to $6,150,000.
The NOLs not subject to limitation at present are approximately $3,720,000 at
December 31, 1995. The balance of the available NOLs subject to limitation
of $3,130,000 will become available each year through the year 2003 at an
annual amount of approximately $325,000. NOLs that are limited in any year
as a consequence of the annual limitations may be carried forward for future
use, subject to the other rules regarding the utilization of NOLs.
In addition, subsequent ownership changes may further limit the use of the
Company's NOLs.
The net operating loss carryforwards expire as follows:
F-11
<PAGE>
Protein Databases, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1994
NOTE C (continued)
Not subject to limitation
2000 $1,103,000
2003 828,000
2004 1,175,000
2005 592,000
2006 22,000
----------
3,720,000
----------
Subject to limitation
2001 1,418,000
2002 1,029,000
2003 683,000
----------
3,130,000
----------
Total net operating loss carryforwards $6,850,000
----------
----------
Federal income tax credits of approximately $26,000 and $163,000 for invest-
ment tax credits and research and development credits, respectively, are
available to reduce future Federal taxes payable, subject to similar
limitations.
The provision for income taxes is summarized as follows.
1995 1994
------ ------
Federal $ - -
State - $3,000
------ ------
$ - $3,000
------ ------
------ ------
The actual income tax expense differs from the Federal statutory rate
as follows:
1995 1994
------------------ -----------------
Amount % Amount %
------ ----- ------ -----
Federal statutory rate $2,000 34.0% $54,000 34.0%
State income taxes, net of
Federal income tax benefit ______ _____ 6,000 4.0
------- -----
2,000 34.0 60,000 38.0
F-12
<PAGE>
Protein Databases, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1994
NOTE C (continued)
1995 1994
------------------- ---------------------
Amount % Amount %
------ ------ --------- ------
Benefit of Federal $(2,000) (34.0)% $(57,000) (36.1)%
and state net operating -------- ------- --------- ------
loss carryuforward
$ - -% $ 3,000 1.9%
-------- ------- --------- ------
-------- ------- --------- ------
Deferred income taxes reflect the impact of "temporary differences" between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. Deferred tax assets
(liabilities) are comprised of the following at December 31:
1995 1994
---------- ----------
Deferred tax assets
Net operating loss carryforwards $2,224,000 $2,231,000
Compensation 97,000 85,000
---------- ----------
Gross deferred tax assets 2,231,000 2,316,000
---------- ----------
Deferred tax liabilities
Depreciation (9,000) (9,000)
---------- -----------
Gross deferred tax liabilities (9,000) (9,000)
---------- -----------
Net deferred tax assets before
valuation allowance 2,312,000 2,307,000
---------- ----------
Valuation allowance (2,312,000) (2,307,000)
---------- ----------
Net deferred tax assets $ - $ -
---------- ----------
---------- ----------
NOTE D - COMMITMENTS
The Company is obligated under a noncancelable operating lease for the rental
of 6,500 square feet of office space. The lease expires November 14, 1996,
with the Company negotiating the renewal of such lease. Minimum future
rentals at December 31, 1995 aggregate approximately $75,000 through
November 1996. Rent expense for 1995 and 1994 aggregated approximately
$83,000 and $77,000, respectively.
F-13
<PAGE>
Protein Databases, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1994
NOTE D (continued)
In addition, the Company is obligated to pay Cold Spring Harbor Laboratory
("CSHL") one-seventh of the royalty on net sales earned by the Company under
its agreement with Millipore pursuant to the Exclusive Know-How License
Agreement, as amended, with CSHL. Royalty expense for 1995 and 1994 was
approximately $9,000 and $14,000, respectively.
NOTE E - STOCKHOLDERS' EQUITY
1. Stock Options
The 1992 Stock Incentive Plan (the "Plan") provides for the granting to key
employees (including officers and directors) and other individuals, as
defined in the Plan, of nonqualified stock options, incentive stock options
and restricted stock. Pursuant to the Plan, the Company may grant stock
options or issue restricted stock aggregating 540,000 shares of the Company's
common stock. Unless the applicable Plan agreement provides otherwise,
options become exercisable over a four-year period from the date of grant and
generally expire ten years from such date of grant.
The Outside Directors' 1993 Stock Option Plan (the "Directors' Plan")
provides for the granting of options to persons who are members of the Board
of Directors and not employees of the Company. Pursuant to the Directors'
Plan, new eligible directors shall be granted options to purchase 5,000
shares of the Company's common stock, which options become exercisable
(subject to stockholder approval) over a two-year period from the date of
grant and expire ten years from such date of grant.
Information with respect to the option plans is summarized as follows:
Options Option
for shares price
---------- ------------
Outstanding at January 1, 1994 255,500 $.1193 - .75
Granted 290,000 .25 - .50
-------
Outstanding at December 31, 1994 545,500 .1193 - .75
Granted 5,000 .69
Expired (5,000) .75
-------
Outstanding at December 31, 1995 545,500 .1193 - .75
-------
Options exercisable at December 31, 1995 530,500 .1193 - .50
-------
-------
F-14
<PAGE>
Protein Databases, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1994
NOTE E (continued)
2. Stock Appreciation Rights
The Company previously granted stock appreciation rights to the officers of
the Company entitling them to receive from the Company a payment, in cash or
in shares of common stock, at the discretion of the Company's Stock Option
Committee, equal to the appreciation in the fair market value of 270,000
shares of common stock in excess of $.25 per share. In April 1994, the stock
appreciation rights were cancelled and 270,000 nonqualified stock options
with an exercise price of $.25 per share were issued. The nonqualified
stock options vest 50% upon issuance and 25% on each of October 1, 1994 and
1995. The Company recorded compensation expense relating to the stock
appreciation rights and nonqualified stock options of approximately $34,000
and $40,000 for 1995 and 1994, respectively.
3. Warrants
During 1994, the Company issued to its Chairman a warrant to purchase 5,000
shares of common stock. The warrant is exercisable at $.50 per share and
expires ten years from the date of grant.
F-15
<PAGE>
INDEX TO EXHIBITS
27- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM PROTEIN DATABASES, INC'S DECEMBER 31,
1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 778,718
<SECURITIES> 0
<RECEIVABLES> 421,492
<ALLOWANCES> 0
<INVENTORY> 64,688
<CURRENT-ASSETS> 1,278,185
<PP&E> 932,326
<DEPRECIATION> (662,446)
<TOTAL-ASSETS> 1,561,585
<CURRENT-LIABILITIES> 231,690
<BONDS> 0
0
0
<COMMON> 14,597
<OTHER-SE> 1,315,298
<TOTAL-LIABILITY-AND-EQUITY> 1,561,585
<SALES> 2,690,595
<TOTAL-REVENUES> 2,690,595
<CGS> 660,812
<TOTAL-COSTS> 2,685,133
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,462
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,462
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
