<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended SEPTEMBER 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _________ to
___________
Commission File Number: 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 Number)
1111 S. PACA STREET, BALTIMORE, MARYLAND 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 Registrant's classes of common
stock, as of November 3, 2000: Class A Common Stock, $.01 per share - 5,892,405
shares
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CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 2000 and March 31, 2000 ..................................... 3
Consolidated Statements of Earnings
for the three and six months ended September 30, 2000 and 1999............. 4
Consolidated Statement of Changes in Stockholders' Equity
for the six months ended September 30, 2000 ............................... 5
Consolidated Statements of Cash Flows
for the six months ended September 30, 2000 and 1999....................... 6
Notes to Consolidated Financial Statements................................. 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 11-12
Item 3. Quantitative and Qualitative Disclosures About Market Risk............... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................ 12
Item 6. Exhibits and Reports on Form 8-K......................................... 12
SIGNATURES.......................................................................... 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
2000 2000
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 17,209 $ 595,140
Restricted cash 175,000 350,000
Accounts receivable, net of allowances 3,100,918 1,832,047
Inventories 1,464,117 1,636,598
Prepaid expenses 234,604 360,579
Deferred tax asset 668,748 668,748
------------- -------------
TOTAL CURRENT ASSETS 5,660,596 5,443,112
PROPERTY, PLANT AND EQUIPMENT, NET 10,282,680 10,179,913
DEFERRED TAX ASSET 826,704 1,233,965
DEFERRED FINANCING COSTS AND OTHER ASSETS 343,920 353,827
------------- -------------
TOTAL ASSETS $ 17,113,900 $ 17,210,817
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,293,460 $ 1,232,133
Current portion of long term debt 728,214 725,018
Current portion of capital lease obligations 17,948 17,072
Current portion of accrued restructuring costs 392,491 591,644
Deferred revenue 865,159 1,179,736
------------- -------------
TOTAL CURRENT LIABILITIES 3,297,272 3,745,603
LONG TERM LIABILITIES
Long term debt, net of current portion 6,503,268 6,839,257
Capital lease obligations, net of current portion 55,331 64,529
Accrued restructuring, net of current portion 25,893 37,479
------------- -------------
TOTAL LIABILITIES 9,881,764 10,686,868
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A-1 convertible preferred stock, par value $.01 per share; liquidation
preference $1,480,121, 6% cumulative dividends, accruing, beginning May
31, 2000, 15,510 shares authorized,
14,511 outstanding 145 145
Class A common stock, par value $.01 per share; 14,984,490
shares authorized; 5,892,405 and 5,677,781 shares
issued and outstanding 58,924 56,778
Additional paid-in capital 10,930,815 10,338,049
Subscriptions receivable (443,762) ---
Accumulated deficit (3,313,986) (3,871,023)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 7,232,136 6,523,949
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,113,900 $ 17,210,817
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated balance sheets.
3
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 5,322,339 $ 2,614,284 $ 8,089,702 $ 5,063,478
Cost of sales 3,672,811 1,826,453 5,690,960 3,590,219
---------- ---------- ---------- ----------
GROSS PROFIT 1,649,528 787,831 2,398,742 1,473,259
OPERATING EXPENSES:
General and administrative 371,293 400,018 727,279 702,886
Selling 204,709 126,467 396,942 267,399
---------- ---------- ---------- ----------
PROFIT FROM OPERATIONS 1,073,526 261,346 1,274,521 502,974
---------- ---------- ---------- ----------
Interest expense (153,601) (147,877) (304,759) (302,697)
Interest income and other, net 16,852 29,861 23,557 54,830
---------- ---------- ---------- ----------
INCOME BEFORE TAXES 936,777 143,330 993,319 255,107
Provision for taxes 385,224 --- 407,261 ---
---------- ---------- ---------- ----------
NET INCOME $ 551,553 $ 143,330 $ 586,058 $ 255,107
========== ========== ========== ==========
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 529,788 $ 143,330 $ 557,037 $ (261,893)
========== ========== ========== ==========
INCOME (LOSS) PER COMMON SHARE:
Basic
Net income (loss) available to common stockholders $ 0.09 $ 0.03 $ 0.10 $ (0.05)
========== ========== ========== ==========
Diluted
Net income (loss) available to common stockholders $ 0.07 $ 0.02 $ 0.08 $ (0.05)
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 5,849,604 5,590,351 5,763,756 5,580,412
========== ========== ========== ==========
Diluted 7,122,893 6,419,988 6,935,869 5,580,412
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated statements.
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
SHARES PAR VALUE SHARES PAR VALUE PAID-IN CAPITAL
------ --------- ------ --------- ---------------
BALANCE, MARCH 31, 2000 14,511 $ 145 5,677,781 $ 56,778 $10,338,049
Deferred compensations expense -- -- -- -- 67,312
Issuance of shares pursuant to
exercise of stock options -- -- 39,624 396 89,704
Issuance of common stock -- -- 175,000 1,750 435,750
Accrued interest on subscriptions receivable -- -- -- -- --
Dividend payable on preferred stock -- -- -- -- --
Net income -- -- -- -- --
BALANCE, SEPTEMBER 30, 2000 14,511 $ 145 5,892,405 $ 58,924 $10,930,815
====== ======= ========= =========== ===========
<CAPTION>
TOTAL
SUBSCRIPTIONS ACCUMULATED STOCKHOLDERS'
RECEIVABLE DEFICIT EQUITY
---------- ------- ------
<S> <C> <C> <C>
BALANCE, MARCH 31, 2000 $ -- $(3,871,023) $ 6,523,949
Deferred compensations expense -- -- 67,312
Issuance of shares pursuant to
exercise of stock options -- -- 90,100
Issuance of common stock (437,500) -- --
Accrued interest on subscriptions receivable (6,262) -- (6,262)
Dividend payable on preferred stock -- (29,021) (29,021)
Net income -- 586,058 586,058
BALANCE, SEPTEMBER 30, 2000 $ (443,762) $(3,313,986) $ 7,232,136
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated statements.
5
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
-------------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 586,058 $ 255,107
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 328,497 327,847
Deferred financing costs 9,907 2,404
Non-cash compensation expense 67,312 27,600
Deferred income taxes 407,261 --
Increase in accounts receivable (1,268,871) (376,712)
Decrease (increase) in inventories 172,481 (544,087)
Decrease in prepaid expenses and other assets 25,475 151,612
Decrease in accounts payable and accrued expenses 26,044 134,159
Decrease in accrued restructuring costs (210,739) (222,801)
(Decrease) increase in deferred revenue (314,577) 293,171
---------- ----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (171,152) 48,300
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (330,764) (166,182)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (330,764) (166,182)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short term borrowings, net -- (644,445)
Repayments of long term debt (332,793) (329,611)
Repayments of capital lease obligations (8,322) (8,303)
Release of restricted cash 175,000 --
Net proceeds from exercise of stock options and sale of stock 90,100 1,843,035
---------- ----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (76,015) 860,676
---------- ----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (577,931) 742,794
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 595,140 410,595
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 17,209 $ 1,153,389
========== ==========
CASH PAID DURING THE PERIOD FOR:
Interest $ 289,497 $ 302,697
========== ==========
Income taxes $ -- $ --
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated statements.
6
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. ORGANIZATION
Chesapeake Biological Laboratories, Inc. ("CBL" or the "Company") is a
provider of pharmaceutical and biopharmaceutical parenteral 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 parenteral
product development services to more than 100 pharmaceutical and
biotechnology companies and has contributed to the development and
production of more than 125 therapeutic products intended for human
clinical trials. Customers contract with the Company for services to
produce development stage products for use in U.S. Food and Drug
Administration ("FDA") clinical trials and to produce and manufacture FDA
approved parenteral 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 facilities
operate under the current Good Manufacturing Practices ("cGMP") established
and regulated by the FDA.
The Company's operations are treated as one operating segment,
pharmaceutical and biopharmaceutical product development and production
services, as it only reports profit and loss information on an aggregate
basis to operating management of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of
Chesapeake Biological Laboratories, Inc. and its wholly owned subsidiary
(the "Company"). The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information. The consolidated
balance sheet as of September 30, 2000, consolidated statements of earnings
for the three and six months ended September 30, 2000 and 1999 and the
consolidated statements of cash flows for the six months ended September
30, 2000 and 1999 are unaudited, but include all adjustments (consisting of
normal recurring adjustments) which the Company considers necessary for a
fair presentation of the financial position, operating results and cash
flows for the periods presented. Although the Company believes that the
disclosures in these financial statements are adequate to make the
information presented not misleading, certain information and footnote
information normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission.
Results for any interim period are not necessarily indicative of results
for any future interim period or for the entire year. The accompanying
unaudited consolidated financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended March 31, 2000.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include amounts held in bank accounts and amounts
invested in accounts with an original maturity of three months or less,
which are readily convertible to known amounts of cash. Included in
restricted cash are Company funds of $175,000 and $350,000, at September
30, 2000 and March 31, 2000, respectively. These funds 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.
7
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (CONTINUED)
ACCOUNTS RECEIVABLE
Accounts receivable are stated net of allowance for doubtful accounts of
$55,000 and $75,000 at September 30, 2000 and March 31, 2000, respectively.
INVENTORIES
Inventories consist of raw materials, work-in-process and finished goods,
which are stated at the lower of cost or market. Finished goods represent
materials filled and labor incurred for filled vials and relate to services
completed and invoiced to the customer. When the vials are labeled and the
product is shipped, inventory is relieved. Cost is determined using the
first-in, first-out (FIFO) method.
REVENUE RECOGNITION
The Company recognizes revenue for its product development services once
the services have been provided to the customer. CBL also provides
commercial production services of parenteral and other sterile product
presentations and recognizes revenue when a product has been shipped or
when the terms of the agreement with the customer are completed.
Deferred revenue represents deposits normally required of customers with
development products and revenue for services performed for finished goods
deferred until product shipment.
Deferred revenue at September 30, 2000 relating to filling services
completed with the related units not shipped of commercial product totaled
$0.3 million. Related costs of $0.1 million were classified as finished
goods in inventory. During the three months ended September 30, 2000, $1.1
million in deferred revenue was recognized as revenue when the units were
shipped.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' financial
statements to conform with the current year presentation.
3. INVENTORIES
Inventories consisted of the following at:
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 MARCH 31, 2000
------------------ --------------
<S> <C> <C>
Raw materials $ 792,040 $ 718,338
Work-in-process 559,470 440,980
Finished goods 112,607 477,280
---------- ----------
$1,464,117 $1,636,598
========== ==========
</TABLE>
4. LONG TERM DEBT
Under the documentation applicable to the bond financing, the Company is
obligated to maintain certain financial ratios and balances, including a
minimum tangible net worth, a liability to net worth ratio, an EBITDA ratio
and current ratio, all as defined and established in the applicable
documents.
8
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (CONTINUED)
As of September 30, 2000 and March 31, 2000, the Company was in compliance
with all of its covenants.
5. STOCKHOLDERS' EQUITY
In July 2000, the Company executed stock purchase agreements with
Messrs. Rice and Botek in connection with their new employment
agreements. Messrs. Rice and Botek purchased 100,000 restricted shares
and 75,000 restricted shares, respectively, subject to forfeiture, under
the Company's Fifth Stock Incentive Plan, for $2.50 per share, the fair
market value on the date of agreement. Messrs. Rice and Botek each
signed a 50% full recourse and a 50% limited recourse promissory note to
the Company for the purchase price for the shares. The shares to which
the Company's repurchase right lapses first, are those shares that would
be used to pay the full recourse portion of the applicable note. These
notes carry an interest rate of 6.53% and are due on May 31, 2002. This
transaction along with the accrued interest earned on the note with
Messrs. Rice and Botek was recorded as a subscription receivable in the
consolidated statement of stockholders' equity.
6. EARNINGS PER SHARE
Earnings per common share is computed by dividing net income available to
common stockholders by the weighted-average number of common shares
outstanding. Earnings per common share, assuming dilution, is computed
based on the weighted-average number of common shares outstanding after
consideration of the dilutive effect of stock options and the assumed
conversion of the preferred stock at the stated rate.
The computations of earnings per common share and earnings per common
share, assuming dilution, for the six months ended September 30, 2000 and
September 30, 1999, are as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Weighted average number of common shares 5,763,756 5,580,412
Diluted effect of preferred shares and warrants 665,749 --
Diluted effect of outstanding stock options 506,364 --
--------- ---------
Weighted average number of common and common
equivalent shares outstanding 6,935,869 5,580,412
Net income $586,058 $255,107
Beneficial conversion feature -- (517,000)
Preferred stock dividend payable 29,021 --
--------- ---------
Net income (loss) available to common stockholders $557,037 $(261,893)
========= =========
Basic earnings per share:
Net income (loss) available to common stockholders $ 0.10 $ (0.05)
========= =========
Diluted earnings per share:
Net income (loss) available to common stockholders $ 0.08 $ (0.05)
========= =========
</TABLE>
9
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (CONTINUED)
7. RESTRUCTURING CHARGES
In the fourth quarter of fiscal year 1999, the Company implemented a
realignment of management, a workforce reduction and decided to close its
Seton experimental facility and consolidate its operation into the new
Camden facility. The workforce reduction resulted in the termination of
full time and temporary employees. This action in addition to other
non-personnel cost reductions resulted in a restructuring charge of $1.2
million in fiscal 1999. The realignment and the workforce reduction
resulted in a charge of $693,000 in fiscal year 1999 and $548,000 was
provided for the closing of the Seton facility.
Expenses totaling $210,739 of the restructuring were charged against the
accrual for the six months ended September 30, 2000. Of the remaining
accrual balance of $418,384, $392,491 is classified in current liabilities
as accrued restructuring and is expected to be paid over the next 12
months, with the remaining balance of $25,893 recorded as a non-current
liability.
8. SUBSEQUENT EVENT
On October 30, 2000, the Company announced a definitive merger agreement
with Cangene Corporation, under which Cangene will acquire Chesapeake
Biological Laboratories in an all-cash tender offer for $4.60 per share,
or approximately $42 million including including assumption of Chesapeake
Biological Laboratories' outstanding debt of $7.2 million.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Management's discussion below should be read in conjunction with the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 2000.
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Operating revenues for the three months ended September 30, 2000 increased 104%
to $5,322,000 from $2,614,000 for the three months ended September 30, 1999.
Operating revenues for the six months ended September 30, 2000 increased 60% to
$8,090,000 from $5,063,000 for the six months ended September 30, 1999. These
revenues for the three and six month periods ended September 30, 2000 were
generated by 57 customers. Revenues for the three months ended September 30,
2000 include $1,135,000 of previously deferred revenue related to filling
services provided and invoiced in prior periods but which were not recognized as
revenue until the product was shipped. Although commercial revenues increased
during the period, the Company's revenues continue to be primarily
non-commercial. These customers have chosen the Company for current
developmental work due to the Company's ability to provide long-term commercial
scale volume after product approval by the FDA.
Gross margin for the three and six months ended September 30, 2000 was
$1,650,000 and $2,399,000 respectively, compared to $788,000 and $1,473,000 in
the prior year. Gross margin as a percentage of revenues did not increase
significantly due to a shift in sales mix toward commercial products, which have
a higher material cost. Other factors affecting gross margin percentage were an
increase in the number of permanent and temporary staff plus overtime, required
to support the increased revenues related to a launch of a customer's new
commercial product.
General and administrative expenses decreased 7% to $371,000 for the three
months ended September 30, 2000 and increased 3% to $727,000 for the six months
ended September 30, 2000 as compared to the prior year periods. The decrease in
expenses and the increase in revenue resulted in general and administrative
expenses decreasing to 7% of revenues for the three months ended September 30,
2000 compared to 15% in the prior year period. For the six months ended
September 30, 2000 general and administrative expenses as a percentage of
revenues were 9% versus 14% for the comparable six month period of the previous
year. Sales and marketing costs increased $78,000 to $205,000 for the three
months ended September 30, 2000. For the six months ended September 30, 2000,
sales and marketing costs increased $130,000 to $397,000 as compared to the six
months ended September 30, 1999. Sales and marketing expenses have increased
primarily due to the addition of sales personnel and additional sales incentive
program costs associated with the sales volume increases.
As a result of the revenue increases and cost reductions, operating income, was
$1,074,000 for the three months ended September 30, 2000 and $1,275,000 for the
six months ended September 30, 2000, as compared to $261,000 and $503,000,
respectively, for the comparable prior year periods.
Interest expense was relatively consistent at $154,000 for the three months
ended September 30, 2000 and $305,000 for the six months ended September 30,
2000 as compared to $148,000 and $303,000, respectively, for the three and six
month periods in the prior year.
Income before taxes was $937,000 and $993,000 for the three and six months ended
September 30, 2000, respectively, compared to $143,000 and $255,000 for the
comparable three and six month periods, in the previous fiscal year. The Company
recorded a provision for income taxes of $385,000 and $407,000 for the three and
six months ended September 30, 2000 , although due to a net operating loss
carryforward, taxes will not be paid. Due to the net operating losses generated
during the fiscal year ended March 31, 1999, no tax liability was accrued
related to the income for the period ended September 30, 2000.
11
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
On September 30, 2000, CBL had cash and cash equivalents of $17,000 compared to
$595,000 at March 31, 2000. These balances do not include $175,000 at September
30, 2000 and $350,000 at March 31, 2000 held as collateral for the Company's
obligation 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 used by the
Company to finance a portion of the purchase price, renovation and equipping of
the Camden production facility.
The Company continues to maintain a $750,000 Revolving Line of Credit from First
Union National Bank of Maryland. There was no outstanding balance as of
September 30, 2000 or as of March 31, 2000.
The $578,000 decrease in the cash position during the six months ended September
30, 2000 was the result of several factors, but primarily related to the growth
in the accounts receivable levels needed to support the significant increases in
operating revenues. Management believes that based on the current financial
position, its operating plan will generate sufficient cash resources to meet its
cash needs through at least April 2001. However, there can be no assurance this
will occur. The Company was in compliance with all bank loan covenants at
September 30, 2000.
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, as outlined in Item 1 of the Company's March 31, 2000 Form 10-K
that could cause actual results to differ materially from those described in the
statements. The 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 to place
undo reliance on such forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the reported market risks since March 31,
2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not presently a party to any material litigation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
By: /s/THOMAS P. RICE By: /s/ JOHN T. JANSSEN
------------------------ ---------------------------
Thomas P. Rice John T. Janssen
President and Chief Executive Treasurer and Chief Financial
Officer Officer
November 13, 2000
13
