<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 December 31, 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 December 31, 1997 and December 31 1996:
<TABLE>
<CAPTION>
Outstanding at Outstanding at
Class December 31, 1997 December 31, 1996
----- ------------------ -----------------
<S> <C> <C>
Class A common Stock, $.01 Par Value 5,216,450 4,111,188
Class B Common Stock, $.01 Par Value................... -0- -0-
</TABLE>
Page 1 of 13
<PAGE>
Chesapeake Biological Laboratories, Inc.
Table of Contents
Part I. Financial Information
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of
December 31, 1997 and March 31, 1997.......................... 3
Consolidated Statements of Operations
for the three months and nine months ended
December 31, 1997 and 1996..................................... 4
Consolidated Statement of Changes in
Stockholders' Equity for the nine months ended
December 31, 1997.............................................. 5
Consolidated Statements of Cash Flows for the
nine months ended December 31, 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>
December 31, March 31,
1997 1997
------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 2)............................... $ 3,596,506 $ 1,432,944
Restricted cash (Note 2)......................................... 350,000 350,000
Accounts receivable, net (Note 2)................................ 1,096,182 714,793
Inventories (Notes 2 and 4)...................................... 494,681 760,075
Prepaid expenses................................................. 552,382 140,160
Deferred tax asset............................................... 50,540 50,540
Interest receivable.............................................. 31,869 32,616
------------- -------------
Total current assets........................................... 6,172,160 3,481,128
PROPERTY AND EQUIPMENT, net (NOTE 2)............................... 8,570,312 4,857,664
BOND FUNDS HELD BY TRUSTEE (NOTE 6)................................ 1,011,491 4,682,998
DEFERRED FINANCING COSTS........................................... 655,602 395,138
OTHER ASSETS....................................................... 16,490 27,690
------------- -------------
Total Assets..................................................... $ 16,426,055 $ 13,444,618
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses........................... $ 280,133 $ 551,112
Current portion of long term debt and capital lease
obligations (Notes 5 and 6).................................... 94,769 49,769
Deferred revenue (Note 2)....................................... 62,137 85,887
------------- -------------
Total current liabilities..................................... 437,039 686,768
------------- -------------
------------- -------------
LONG TERM LIABILITIES:
Long term debt and capital lease obligations, net of current
portion (Notes 5 and 6)..................................... 8,619,919 8,553,985
Deferred rent (Note 5)......................................... 30,040 52,590
Deferred tax liability......................................... 108,549 108,549
------------- -------------
Total liabilities............................................ 9,195,547 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; 5,216,450 and
4,114,558 shares issued and outstanding..................... 52,164 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.................................... 7,291,886 3,980,836
(Accumulated deficit) retained earnings....................... (113,542) 20,745
-------------- -------------
Total stockholders' equity (Note 7)......................... 7,230,508 4,042,726
------------- -------------
Total liabilities and stockholders' equity.................. $ 16,426,055 $ 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 Nine Months Ended
December 31, December 31,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUE........................................ $ 1,720,225 $ 1,836,779 $ 5,182,085 $ 6,416,203
COST OF SALES............................................ 1,196,199 1,091,431 3,870,573 4,218,315
------------ ------------ ------------ ------------
GROSS PROFIT............................................. 524,026 745,348 1,311,512 2,197,888
------------ ------------ ------------ ------------
OPERATING EXPENSES
General and administrative............................. 348,828 357,464 1,047,382 1,045,577
Selling................................................ 201,757 100,481 495,816 311,713
Research and development............................... 11,848 2,588 51,587 108,477
------------ ------------ ------------ ------------
(Loss) income before non-recurring expenses.......... (38,407) 284,815 (283,273) 732,121
------------ ------------ ------------ ------------
TERMINATED LEASE EXPENSES................................ -- -- 53,789 --
------------ ------------ ------------ ------------
(Loss) income from operations........................ (38,407) 284,815 (337,062) 732,121
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income/other income........................... 74,449 7,423 274,462 10,261
Interest expense/other expense......................... (77,600) (13,063) (150,554) (22,283)
------------ ------------ ------------ ------------
Total................................................ (3,151) (5,640) 123,908 (12,022)
------------ ------------ ------------ ------------
(Loss) income before benefit from/(provision for)
income taxes....................................... (41,558) 279,175 (213,154) 720,099
BENEFIT FROM/(PROVISION FOR) INCOME TAXES (Note 2)....... 15,376 (103,294) 78,867 (266,436)
------------ ------------ ------------ ------------
NET (LOSS) INCOME........................................ $ (26,182) $ 175,881 $ (134,287) $ 453,663
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET (LOSS) INCOME PER COMMON AND COMMON EQUIVALENT
SHARE.................................................. $ (.005) $ .042 $ (.027) $ .110
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING............................................ 5,216,259 4,160,423 4,906,366 4,120,335
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
4
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<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.......................................... 1,034,793 10,348 3,276,693 -- 3,287,041
Issuance of shares pursuant to exercise of stock
options........................................... 67,099 671 34,357 -- 35,028
Net income.......................................... -- -- -- (134,287) (134,287)
---------- ----------- -------------- ------------ ------------
BALANCE, December 31, 1997.......................... 5,216,450 $ 52,164 7,291,886 $ (113,542) $ 7,230,508
---------- ----------- -------------- ------------ ------------
---------- ----------- -------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
5
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
----------------------------
1997 1996
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................................... $ (134,287) $ 453,663
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization................................... 258,766 268,554
Deferred income taxes........................................... -- 62,050
Increase in accounts receivable................................. (381,389) (49,803)
Decrease in inventories......................................... 265,394 323,509
Increase in prepaid expenses.................................... (412,222) (54,614)
Decrease in interest receivable................................. 747 --
Decrease in other assets........................................ 11,590 --
Decrease in refundable income taxes............................. -- 55,000
(Decrease) increase in accounts payable and accrued expenses.... (270,979) 130,965
(Decrease) increase in deferred revenue......................... (23,750) 23,057
Decrease in deferred rent....................................... (22,550) (22,550)
------------- -------------
Net cash (used in) provided by operating activities............ (708,680) 1,189,831
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............................... (4,232,268) (2,733,477)
Decrease (increase) in bond funds held by Trustee................ 3,671,507 (5,353,901)
------------- -------------
Net cash used in investing activities.......................... (560,761) (8,087,378)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long term debt..................................... (16,814) (16,814)
Repayments of capital lease obligations.......................... (22,252) (21,908)
Net proceeds from sale of stock.................................. 3,322,069 5,000
Payment of debt issuance costs................................... -- (372,227)
Proceeds from long-term note and bond............................ 150,000 8,500,000
------------- -------------
Net cash provided by financing activities...................... 3,433,003 8,094,051
------------- -------------
Increase in cash and cash equivalents.............................. 2,163,562 1,196,504
CASH AND CASH EQUIVALENTS,
beginning of period.............................................. 1,432,944 240,583
------------- -------------
CASH AND CASH EQUIVALENTS,
end of period.................................................... $ 3,596,506 $ 1,437,087
------------- -------------
------------- -------------
CASH PAID DURING THE PERIOD FOR:
Interest......................................................... $ 133,225 $ 22,283
------------- -------------
------------- -------------
Income taxes..................................................... $ 1,300 $ 7,773
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
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
$14,300 and $10,300 as of December 31, 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 three 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 First Union National Bank of North Carolina as
collateral for the Company's obligations under the Letter of Credit and
Reimbursement Agreement with First Union National Bank of North Carolina (see
Note 6).
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
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
during the period. No dilution is included for periods with a net loss.
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 the fiscal year ended March 31, 1997, an
agreement was reached between CBL and Allergan which called 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:
DECEMBER 31, MARCH 31,
1997 1997
------------ ----------
Raw materials............................ $ 334,892 $ 324,417
Work-in-process.......................... 159,789 433,454
Finished goods........................... -- 2,204
------------ ----------
$ 494,681 $ 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,
8
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Leases, continued:
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 term of the lease. The rent expense to the
Company under the lease agreement was $25,089 and $108,466 for the nine
months ended December 31, 1997 and December 31, 1996, respectively.
The Company's Seton Business Park facility is 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 nine
months ended December 31, 1997 and 1996, were $177,426 and $175,642,
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 years
1997 and 1998, the Company entered into several operating leases that expire
during fiscal year 2003.
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 with a schedule set forth in the
bonds. The Maturity Date is August 1, 2018. The loan from the City of
Baltimore requires interest only payments for the first two years, and
monthly principal and interest payments due thereafter through November 2016.
The Company's other long term debt as of December 31, 1997, consists of a
note payable and of loans for a truck and various equipment. The note bears
interest of 10.0% and is repayable through October 1, 1999. 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.
9
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 of Class A Common Stock of the Company to be
issued pursuant to a Registration Statement on Form S-2 (No. 333-25903) filed
with the United States Securities and Exchange Commission. 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 expense
allowance, and other expenses) of approximately $3.2 million.
On July 8, 1997, a second closing occurred in connection with the partial
exercise by the Underwriter of the overallotment option pursuant to the
Underwriting Agreement, resulting in additional net proceeds (after
Underwriter's commission and expense allowance) to the Company in the amount
of $121,000.
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 primary 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 December 31, 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 and nine months ended December 31, 1997 and 1996:
Operating revenue was $1,720,000 for the quarter and $5,182,000 for the
nine months ended December 31, 1997, compared to $1,837,000 and $6,416,000
for the comparable periods last year. The decreases were attributable to a
decrease in sales of VitraxTM to Allergan from the prior year by $576,000 for
the quarter and $2,300,000 for the nine month period. The contract
manufacturing agreement for the manufacture by the Company of VitraxTM for
Allergan had expired in February 1997, but in April 1997, an agreement was
reached between CBL and Allergan which called for extension of the agreement
until December 31, 1997, and on December 31, 1997 that agreement expired. The
decrease in sales of VitraxTM was offset, in large part, by a 36% increase in
other sales for the quarter and a 33% increase in other sales for the nine
month period ended December 31, 1997.
Gross profit on sales was $524,000 for the three month period, and
$1,312,000 for the nine month period ended December 31, 1997, compared to
$745,000 and $2,198,000, respectively, for the same periods last year. The
decrease in gross profit for the quarter and nine month period was due
primarily to the reduction in Allergan revenues and, to a lesser extent, the
indirect overhead expenses related to the build-out of the Camden Industrial
Park facility.
Selling, general and administrative expenses of $562,000 for the three
month period ended December 31, 1997, increased $102,000 when compared to the
same period last year, and increased $129,000 to $1,595,000 for the nine
month period ended December 31, 1997, as compared to the same period last
year. The increase in these costs are primarily due to an increase in the
Company's marketing effort, including a new advertising campaign and
increased attendance at trade shows.
Other income was up significantly for the nine month period ended
December 31, 1997, compared to the same period last year. This income is
mainly comprised of interest income on an increased operating cash balance
and on the $3,300,000 raised from the June 1997, public offering. In
addition, interest is generated on the unused portion of the MIDFA bonds,
which is partially offset by the interest expense on the bonds.
As a result of the sales decrease to Allergan and increased marketing
costs, there was a net loss for the quarter of $26,000 compared to a net
profit of $176,000 for the comparable quarter last year and a net loss for
the nine months of $134,000 versus a $454,000 profit for the comparable prior
year period.
Financial Condition and Liquidity
On December 31, 1997, CBL had cash and cash equivalents of $3,597,000
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, $1,011,000 was held at December 31, 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 pay 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 December 31, 1997.
11
<PAGE>
The increase in cash and cash equivalents was primarily due to 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 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
expense allowances, and other expenses) of approximately $3.2 million. On
July 8, 1997, an additional 34,793 shares were sold to the Underwriter in
exchange for net proceeds of approximately $121,000. 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.
Part II. Other Information
Item 1. Legal Proceedings.
None
Item 5. Other Information
None
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: By:
--------------------------------
John C. Weiss, III
President
DATE: By:
--------------------------------
Thomas C. Mendelsohn
Secretary
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,947
<SECURITIES> 0
<RECEIVABLES> 1,110
<ALLOWANCES> 14
<INVENTORY> 495
<CURRENT-ASSETS> 6,172
<PP&E> 10,607
<DEPRECIATION> 2,037
<TOTAL-ASSETS> 16,426
<CURRENT-LIABILITIES> 437
<BONDS> 8,500
0
0
<COMMON> 7,344
<OTHER-SE> (114)
<TOTAL-LIABILITY-AND-EQUITY> 16,426
<SALES> 5,182
<TOTAL-REVENUES> 5,216
<CGS> 3,871
<TOTAL-COSTS> 5,519
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</TABLE>
