<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1997 Commission File Number: 1-12748
------------- -------
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1176514
- ----------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1111 S. Paca Street, Baltimore, MD 21230 2834
- ---------------------------------------- -------------- ---------
(Address of principal executive offices) (zip code) (SIC)
(410) 843-5000
--------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock as of June 30, 1997 and June 30, 1996:
Outstanding at Outstanding at
Class June 30, 1997 June 30, 1996
- ----- -------------- --------------
Class A Common Stock, $.01 par value........... 5,119,558 3,986,188
Class B Common Stock, $.01 par value........... -0- -0-
Page 1 of 13
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Chesapeake Biological Laboratories, Inc.
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as of
June 30, 1997 and March 31, 1997.............. 3
Consolidated Statements of Operations for
the three months ended June 30, 1997 and
1996.......................................... 4
Consolidated Statements of Changes in
Stockholders' Equity for the three months
ended June 30, 1997........................... 5
Consolidated Statements of Cash Flows
for the three months ended June 30, 1997
and 1996...................................... 6
Notes to Consolidated Financial
Statements.................................... 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.................................... 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............... 12
Signatures................................................ 13
</TABLE>
2
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
-------- ---------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 2)...................... $ 4,384,785 $ 1,432,944
Restricted cash (Note 2)................................ 350,000 350,000
Accounts receivable, net (Note 2)....................... 1,097,866 714,793
Inventories (Notes 2 and 4)............................. 476,436 760,075
Prepaid expenses........................................ 105,767 140,160
Deferred tax asset...................................... 50,540 50,540
Interest receivable..................................... 36,328 32,616
------------- -------------
Total current assets.................................. 6,501,722 3,481,128
PROPERTY AND EQUIPMENT, net (Note 2)..................... 5,695,224 4,857,664
BOND FUNDS HELD BY TRUSTEE (Notes 2 and 6)............... 3,716,655 4,682,998
DEFERRED FINANCING COSTS................................. 527,843 395,138
OTHER ASSETS............................................. 16,490 27,690
------------- -------------
Total assets.......................................... $ 16,457,934 $ 13,444,618
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses................... $ 437,193 $ 551,112
Current portion of long term debt and
capital lease obligations (Notes 5 and 6).............. 49,769 49,769
Deferred revenue (Note 2)............................... 80,812 85,887
------------- -------------
Total current liabilities............................. 567,774 686,768
LONG TERM LIABILITIES:
Long term debt and capital lease obligations, net
of current portion (Notes 5 and 6)..................... 8,540,993 8,553,985
Deferred rent (Note 5).................................. 45,073 52,590
Deferred tax liability.................................. 108,549 108,549
------------- -------------
Total liabilities..................................... 9,262,389 9,401,892
------------- -------------
COMMITMENTS AND CONTINGENCIES
(Notes 3 and 5)
STOCKHOLDERS' EQUITY:
Class A common stock, par value $.01 per share;
8,000,000 shares authorized; 5,119,558 and
4,114,558 shares issued and outstanding................. 51,195 41,145
Class B common stock, par value $.01 per share;
2,000,000 shares authorized; no shares issued
and outstanding......................................... -- --
Additional paid-in capital............................... 7,198,914 3,980,836
(Accumulated deficit) retained earnings.................. (54,564) 20,745
------------- -------------
Total stockholders' equity (Note 7)................... 7,195,545 4,042,726
------------- -------------
Total liabilities and stockholders' equity............ $ 16,457,934 $ 13,444,618
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------
1997 1996
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING REVENUE..................................................................... $ 1,716,595 $ 1,564,099
COST OF SALES......................................................................... 1,346,257 1,206,358
------------ ------------
GROSS PROFIT.......................................................................... 370,338 357,741
------------ ------------
OPERATING EXPENSES
General and administrative.......................................................... 330,212 312,505
Selling............................................................................. 126,103 112,908
Research and development............................................................ 26,703 67,907
------------ ------------
Loss before non-recurring expenses................................................ (112,680) (135,579)
------------ ------------
TERMINATED LEASE EXPENSES............................................................. 53,789 --
------------ ------------
Loss from operations.............................................................. (166,469) (135,579)
------------ ------------
OTHER INCOME (EXPENSE)
Interest income/other income........................................................ 81,709 2,074
Interest expense.................................................................... (34,778) (3,860)
------------ ------------
Total............................................................................. 46,931 (1,786)
------------ ------------
Loss before benefit from income taxes............................................. (119,538) (137,365)
BENEFIT FROM INCOME TAXES (Note 2).................................................... (44,229) (50,825)
------------ ------------
NET LOSS.............................................................................. $ (75,309) $ (86,540)
------------ ------------
------------ ------------
PER COMMON AND EQUIVALENT SHARE....................................................... $ (0 .017) $ (0.022)
------------ ------------
------------ ------------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING...................... 4,318,390 3,980,007
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE QUARTER ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Retained
Additional Earnings
Paid-In (Accumulated
Shares Par Value Capital Deficit) Total
---------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, March 31, 1997..................... 4,114,558 $ 41,145 $ 3,980,836 $ 20,745 $ 4,042,726
Issuance of shares pursuant to follow-on
public offering........................... 1,000,000 10,000 3,208,753 -- 3,218,753
Issuance of shares pursuant to exercise of
stock options............................. 5,000 50 9,325 -- 9,375
Net income.................................. -- -- -- (75,309) (75,309)
---------- ----------- -------------- ------------ ------------
BALANCE, June 30, 1997...................... 5,119,558 $ 51,195 $ 7,198,914 $ (54,564) $ 7,195,545
---------- ----------- -------------- ------------ ------------
---------- ----------- -------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................. $ (75,309) $ (86,540)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization........................................................ 92,286 90,377
Deferred income taxes................................................................ -- (50,825)
(Increase) decrease in accounts receivable........................................... (383,073) 50,520
Decrease in inventories.............................................................. 283,639 127,104
Decrease (increase) in prepaid expenses.............................................. 34,393 (11,836)
Increase in interest receivable...................................................... (3,712) --
Increase in other assets............................................................. (32,527) --
Decrease in accounts payable and accrued expenses.................................... (113,919) (37,126)
Decrease in deferred revenue......................................................... (5,075) (112,810)
Decrease in deferred rent............................................................ (7,517) (7,517)
----------- -----------
Net cash used in operating activities.............................................. (210,814) (38,653)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................................................... (1,018,824) (107,096)
Decrease in bond funds held by Trustee............................................... 966,343 --
----------- -----------
Net cash used in investing activities.............................................. (52,481) (107,096)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term borrowings.................................................. -- 1,391
Repayments of long term debt......................................................... (5,605) (5,604)
Repayments of capital lease obligations.............................................. (7,387) (7,277)
Net proceeds from sale of stock...................................................... 3,228,128 5,000
----------- -----------
Net cash provided by (used in) financing activities................................ 3,215,136 (6,490)
----------- -----------
Increase (decrease) in cash and cash equivalents..................................... 2,951,841 (152,239)
CASH AND CASH EQUIVALENTS, beginning of period......................................... 1,432,944 240,583
----------- -----------
CASH AND CASH EQUIVALENTS, end of period............................................... $ 4,384,785 $ 88,344
----------- -----------
----------- -----------
CASH PAID DURING THE PERIOD FOR:
Interest............................................................................. $ 20,445 $ 3,860
----------- -----------
----------- -----------
Income taxes......................................................................... $ -- $ --
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Chesapeake Biological Laboratories, Inc. ("CBL" or "the Company") is an
established provider of pharmaceutical and biopharmaceutical product development
and production services on a contract basis for a broad range of customers, from
major international pharmaceutical firms to emerging biotechnology companies.
Since 1990, CBL has provided its product development services to more than 80
pharmaceutical and biotechnology companies and has contributed to the
development and production of more than 100 therapeutic products intended for
human clinical trials. Customers contract with the Company to produce
development stage products for use in Food and Drug Administration ("FDA")
clinical trials and to produce and manufacture FDA approved products for
commercial sale. The Company's business depends, in part, on strict government
regulation of the drug development process, especially in the United States.
CBL's production facility operates under the current Good Manufacturing
Practices ("cGMP") established and regulated by the FDA.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
CBL and its wholly-owned subsidiary, CBL Development Corp.
ACCOUNTS RECEIVABLE
Accounts receivable are stated net of allowances for doubtful accounts of
$14,800 and $10,300 as of June 30, 1997 and March 31, 1997, respectively.
INVENTORIES
Inventories consist of raw materials, work-in-process and finished goods
which are stated at the lower of cost or market, determined under the first-in,
first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Equipment is depreciated using the straight-line method over estimated useful
lives of three to ten years. The building is depreciated over an estimated
useful life of thirty years. Leasehold improvements are amortized over the term
of the lease.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include amounts invested in securities with
maturities of six months or less which are readily convertible to known amounts
of cash. Included in restricted cash are Company funds of $350,000 which are
being held by the Bond Trustee as collateral for the Company's obligations under
the Letter of Credit and Reimbursement Agreement with First Union National Bank
of North Carolina (see Notes 6 and 7).
REVENUE RECOGNITION
The Company recognizes income when product is shipped or the service has
been provided to the customer. Deferred revenues represent deposits normally
required of customers with development products.
7
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES
Deferred income taxes are computed using the liability method, which
provides that deferred tax assets and liabilities are recorded based on the
differences between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
PER SHARE INFORMATION
Per share information is based on the weighted average number of shares of
common and common equivalent shares outstanding. The Company uses the treasury
stock method to calculate the dilutive effect of outstanding options at period
end based on the Company's stock price on the Nasdaq National Market.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could significantly differ from those
estimates.
3. CONCENTRATIONS OF CREDIT RISK/SIGNIFICANT CUSTOMERS:
The Company's customers span the range of the pharmaceutical and medical
device industries. For most customers, the Company requires an up-front payment
on orders. There are some recurring customers, however, for which CBL has waived
that practice.
The contract manufacturing agreement between the Company and Allergan Botox,
Ltd. ("Allergan") for the production of VitraxTM originally expired in February
1997. Subsequent to year-end, an agreement was reached between CBL and Allergan
which calls for the production of VitraxTM through December 31, 1997, on
modified terms using active ingredients supplied by Allergan, rather than active
ingredients manufactured by CBL. In addition, Allergan has been relieved of any
obligation to purchase VitraxTM exclusively from the Company.
4. INVENTORIES:
Inventories consist of the following:
June 30, March 31,
1997 1997
---------- ----------
Raw materials.................. $ 255,433 $ 324,417
Work-in-process................ 220,039 433,454
Finished goods................. 964 2,204
---------- ----------
$ 476,436 $ 760,075
---------- ----------
---------- ----------
5. LEASES:
In December 1993, the Company entered into a non-cancelable operating lease
agreement for what was then a second facility in Owings Mills, Maryland to house
its corporate offices, warehousing, shipping and receiving functions. The lease
terms had provided for an initial expiration date of December 31, 1998. However,
as of June 1, 1997, the Company negotiated termination of the Owings Mills
facility lease, effective June 1, 1997, in exchange for a termination fee of
$30,200 paid by the Company, resulting in net savings to the Company of
approximately $200,000 over the remaining initial term of the lease. The rent
8
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LEASES: (CONTINUED)
expense to the Company under the lease agreement was $25,089 and $35,477 for the
3 months ended June 30, 1997 and June 30, 1996, respectively.
The Company's Seton Business Park facility will be primarily used for
production and is occupied under a non-cancelable operating lease agreement with
an initial six and one-half year term, expiring December 31, 1998 and two
renewal terms of two years each. Related rental payments for the 3 months ended
June 30, 1997 and 1996, were $59,142 and $57,922, respectively. The operating
lease agreement for the Seton Business Park facility contains terms which
feature reduced rental payments in the early years and accelerated payments
toward the end of the lease term. For financial reporting purposes, rental
expense represents an average of the minimum annual rental payments over the
initial six and one-half year term. On an annual basis, this expense is
approximately $192,000.
During previous years, the Company entered into several non-cancelable
capital lease obligations for various pieces of laboratory equipment and
furniture that expire during fiscal year 1999. In addition, in fiscal year 1997,
the Company entered into several operating leases that expire during fiscal year
2001.
6. LONG TERM DEBT:
In November 1996, the Company completed the acquisition of an approximately
70,000 square foot building on 3.48 acres in Baltimore, Maryland, which the
Company is now in the process of renovating to provide CBL with office,
warehouse and pharmaceutical manufacturing space. The Company is actively
seeking opportunities and customer contracts to utilize these expanded
capabilities. The purchase and renovation costs were financed with a $7,000,000
Economic Development Bond issued by the Maryland Industrial Development
Financing Authority, and a $1,500,000 loan from the Mayor and City Council of
Baltimore City by and through the Department of Housing and Community
Development. The loan from the City of Baltimore has an interest rate which is
fixed at 6.5%. The bonds are variable rate, tax-exempt and may be converted to a
fixed rate.
The Company has also entered into an interest rate agreement with First
Union National Bank of North Carolina to reduce the potential impact of the
variable interest rates on the bonds. This agreement results in a maximum
interest rate on the bonds of 5.51%, and relates to $6 million of the
outstanding bonds. The agreement became effective in November 1996 and will
expire in November 2003.
The principal portion of the Bonds, and the accrued interest thereon, is
payable from monies drawn under a direct pay Letter of Credit issued by First
Union National Bank of North Carolina (the "Bank"), in amounts up to $7,280,000.
Interest is payable quarterly, commencing February 1, 1997, and principal
portions of the bonds are subject to redemption, in part, commencing November
1998, in accordance The Company's other long term debt as of June 30, 1997,
consists of loans for a truck and various equipment. The truck loan bears
interest at 6.9% and is repayable through December 8, 1998, in equal monthly
installments. The equipment loan bears interest at 8.5% and is repayable through
April 1, 1999 in variable monthly installments.
7. STOCK OFFERING
On June 11, 1997, the Company entered into an Underwriting Agreement with
Ferris, Baker Watts, Incorporated, pursuant to which Ferris, Baker Watts,
Incorporated agreed to underwrite, on a firm commitment basis, the offering and
sale of 1,000,000 shares covered by the Registration Statement. On June 16,
1997, the initial closing occurred pursuant to the Underwriting Agreement and
the Company sold to the Underwriter 1,000,000 shares of Class A Common Stock in
exchange for net proceeds (after
9
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCK OFFERING: (CONTINUED)
Underwriter's commissions and Underwriter's expense allowance and other
expenses) of approximately $3.2 million.
8. NEW ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" ("SFAS 128"). SFAS 128 simplifies the standards for
computing earnings per share ("EPS") previously found in APB Opinion No. 15,
"Earnings per Share". It replaces the presentation of primary EPS with a
presentation of basic EPS and requires a reconciliation of the numerator and
denominator of the diluted EPS calculation. Basic EPS excludes dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS is
computed similarly to fully diluted EPS pursuant to APB Opinion No. 15. SFAS 128
is effective for fiscal years ending after December 15, 1997, and early adoption
is not permitted. When adopted, it will require restatement of prior years' EPS.
Adoption at June 30, 1997 would not have had an impact on EPS for the quarter.
10
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The management discussion below should be read in conjunction with the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997.
Three months ended June 30, 1997 and 1996:
Operating revenue was $1,717,000 for the quarter compared to $1,564,000
for the comparable quarter last year. The increase was attributable in large
part to revenues from new customers and was achieved despite a decrease in
sales of Vitrax-TM- to Allergan. The contract manufacturing agreement for the
manufacture of Vitrax-TM- for Allergan had expired in February 1997, but in
April 1997, an agreement was reached between CBL and Allergan which calls for
extension of the agreement until December 31, 1997 on modified terms
providing for the production of Vitrax-TM- using active ingredient supplied by
Allergan, rather than active ingredient manufactured by CBL. Since Allergan
plans to manufacture Vitrax-TM- at its own facility in Ireland, the extension
relieves Allergan of any obligation to purchase Vitrax-TM- exclusively from CBL.
Gross profit on sales was $370,000 for the quarter, compared to $358,000 for
the comparable quarter last year, or 22% and 23% of operating revenues,
respectively. Gross profits were adversely affected by expenses of $98,000
related to the build-out of the Camden Industrial Park facility. This facility
is not revenue-generating at present, while build-out, designed to handle larger
scale production for Phase III clinical trials and commercial production,
continues.
Sales and general and administrative expenses increased $85,000, including
non-recurring costs of approximately $54,000 for the current quarter compared to
the same quarter last year. The non-recurring costs are the expenses incurred
after the relocation to the new facility, plus the lease termination fee in the
amount of $30,200 paid by the Company in order to terminate the lease on the
Company's former Owings Mills, Maryland facility. This lease termination will
result in a net savings to the Company of approximately $200,000 over the
remaining term of the lease.
The operating loss before non-recurring cost was $113,000 for the quarter
compared to a $136,000 operating loss for the same quarter last year.
Other income was $47,000 for the current quarter compared to a $2,000
expense for the comparable quarter last year. Interest income resulting from
CBL's improved cash balance and interest on the MIDFA bond proceeds held in
escrow were the primary reasons for the income.
FINANCIAL CONDITION AND LIQUIDITY
On June 30, 1997, CBL had cash and cash equivalents of $4,385,000 compared
to $1,433,000 at March 31, 1997. These balances do not include $350,000 held as
collateral for the Company's obligations under the Letter of Credit and
Reimbursement Agreement with First Union National Bank of North Carolina,
pursuant to which a letter of credit was issued as credit enhancement for bonds
issued by the Maryland Industrial Development Financing Authority. The proceeds
of these bonds were and are being used by the Company to finance a portion of
the purchase price and the renovation and equipping of the Camden Industrial
Park facility. In addition, and not included in the above sums, $3,717,000 was
held at June 30, 1997, by the Bond Trustee, under the Trust Indenture, entered
into in connection with the bond financing. These funds are held by the Trustee
pending disbursement, subject and pursuant to the terms of the financing
documents, to defray the continuing costs of renovation and equipping of the
Camden Industrial Park facility. The Company continues to maintain a $750,000
Revolving Line of Credit from the First Union National Bank of Maryland, under
which there was no outstanding balance at June 30, 1997.
The major reason for the cash balance increase was the completion by the
Company of a follow-on public offering of Class A Common Stock. On April 25,
1997, the Company filed a Registration Statement on Form S-2 (No. 333-25903),
with the United States Securities and Exchange Commission, pursuant to the
Securities Act of
11
<PAGE>
1933, as amended, with respect to the offering and sale by the Company of
1,000,000 shares of its Class A Common Stock, together with another 150,000
shares to cover over-allotments. On June 11, 1997, the Company entered into
an Underwriting Agreement with Ferris, Baker Watts, Incorporated, pursuant to
which Ferris, Baker Watts, Incorporated agreed to underwrite, on a firm
commitment basis, the offering and sale of 1,000,000 shares covered by the
Registration Statement. On June 16, 1997, the initial closing occurred
pursuant to the Underwriting Agreement and the Company sold to the
Underwriter 1,000,000 shares of Class A Common Stock in exchange for net
proceeds (after Underwriter's commissions and Underwriter's expense allowance
and other expenses) of approximately $3.2 million. The proceeds of the
offering will be used by the Company for working capital and other general
corporate purposes to fund the Company's continued growth.
STATEMENTS REGARDING FORWARD-LOOKING DISCLOSURE
Certain information contained in this Report includes forward-looking
statements which can be identified by the use of forward-looking terminology
such as "may", "will", "expect", "should", "believes", "anticipates", "intends",
or words of similar import. These statements may involve risks and uncertainties
that could cause actual results to differ materially from those described in the
statements. These risks and uncertainties include (without limitation) general
economic and business conditions, changes in business strategy or development
plans, and others. Given these uncertainties, the reader is cautioned not to
place undo reliance on such forward-looking statements.
Part II. Other Information
Item 1. Legal Proceedings.
None
Item 5. Other Information
On July 8, 1997, a closing occurred in connection with the partial
exercise by the Underwriter of its overallotment option, resulting in
additional net proceeds (after Underwriter's commission and expense
allowance) to the Company in the amount of $121,000.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
None
b. Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
quarter for which this report is filed.
12
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHESAPEAKE BIOLOGICAL
LABORATORIES, INC.
---------------------------------
Registrant
DATE: August 12, 1997 By: /s/ John C. Weiss, III
----------------- -----------------------------
John C. Weiss, III
President
DATE: August 12, 1997 By: /s/ Thomas C. Mendelsohn
----------------- -----------------------------
Thomas C. Mendelsohn
Secretary
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,735
<SECURITIES> 0
<RECEIVABLES> 1,113
<ALLOWANCES> 15
<INVENTORY> 476
<CURRENT-ASSETS> 6,502
<PP&E> 7,648
<DEPRECIATION> 1,953
<TOTAL-ASSETS> 16,458
<CURRENT-LIABILITIES> 568
<BONDS> 8,500
0
0
<COMMON> 7,250
<OTHER-SE> (55)
<TOTAL-LIABILITY-AND-EQUITY> 16,458
<SALES> 1,717
<TOTAL-REVENUES> 1,717
<CGS> 1,346
<TOTAL-COSTS> 1,883
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> (47)
<INCOME-PRETAX> (119)
<INCOME-TAX> (44)
<INCOME-CONTINUING> (75)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (75)
<EPS-PRIMARY> (.017)
<EPS-DILUTED> (.017)
</TABLE>
