<PAGE> 1
SOMATOGEN, INC.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the quarterly period ended
December 31, 1996.
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
0-19423
SOMATOGEN, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-0991858
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2545 Central Ave., Boulder, CO 80301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 440-9988
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.001 par value
(Title of Class)
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 / /
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock $.001 par value 20,794,190
Class Outstanding at February 7, 1997
Somatogen, the Somatogen logo and Optro(TM) are trademarks of the
Company. All other brand names or trademarks appearing in this 10-Q
are the property of their respective holders.
<PAGE> 2
SOMATOGEN, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Consolidated Balance Sheet -
December 31, 1996 and June 30, 1996.................. 3-4
Consolidated Statement of Operations-
for the three and six-month periods ended December 31,
1996 and 1995 and the period from July 10, 1985
(inception) to December 31, 1996..................... 5
Consolidated Statement of Cash Flows -
for the six-month periods ended December 31, 1996 and
1995 and the period from July 10, 1985 (inception) to
December 31, 1996.................................... 6-7
Notes to Consolidated Financial Statements................ 8-9
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................. 10-14
PART II. OTHER INFORMATION............................... 15-16
SIGNATURES.................................................. 17
<PAGE> 3
SOMATOGEN, INC.
(A Corporation in the Development Stage)
PART I Financial Information
CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS December 31, June 30,
1996 1996
----------- ----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................ $17,156 $29,541
Short-term investments............................ 27,985 24,735
Receivable from Lilly............................. 1,432 1,852
Other receivables................................. 661 1,013
Prepaid expenses and other current assets......... 333 444
------- -------
Total current assets........................ 47,567 57,585
Property and equipment, at cost, net of
accumulated depreciation and amortization....... 4,110 4,042
Assets held for sale.................................. 6,210 6,446
Other assets, net..................................... 1,263 1,088
------- -------
$59,150 $69,161
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 1,160 $ 1,826
Accrued payroll................................... 743 801
Payable to Lilly.................................. 1,433 2,454
Other accrued liabilities......................... 660 606
Current portion of capital lease obligations...... 8 159
------- -------
Total current liabilities..................... 4,004 5,846
Capital lease obligations, less current portion....... 7 11
------- -------
Total liabilities..................................... 4,011 5,857
------- -------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 4
SOMATOGEN, INC.
(A Corporation in the Development Stage)
PART I Financial Information
CONSOLIDATED BALANCE SHEET (continued)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
----------- ----------
(unaudited)
<S> <C> <C>
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares
authorized at December 31, 1996,
no shares issued or outstanding............... -- --
Common stock, $.001 par value; 35,000,000 shares
authorized, 20,753,288 and 20,684,970 shares
issued and outstanding at December 31, 1996
and June 30, 1996, respectively............... 21 21
Additional paid-in capital........................ 205,033 204,518
Deficit accumulated during the development stage.. (149,689) (140,948)
Deferred compensation related to grant of options. (226) (287)
-------- --------
Total stockholders' equity.................... 55,139 63,304
-------- --------
$ 59,150 $ 69,161
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 5
SOMATOGEN, INC.
(A Corporation in the Development Stage)
PART I Financial Information
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three-months ended Six-months ended Period From
December 31, December 31, July 10, 1995
-------------------- ---------------- (inception) to
1996 1995 1996 1995 December 31, 1996
---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Technology disclosure and license fees... $ -- $ -- $ -- $ -- $ 4,904
Research and development grants
and contracts........................ -- -- -- -- 1,684
---------- --------- -------- -------- ----------
Total revenue.................... -- -- -- -- 6,588
---------- --------- -------- -------- ----------
Operating expenses:
Research and development................. 5,320 4,752 10,201 9,360 111,453
Reimbursements from Lilly................ (1,315) (1,208) (2,984) (2,533) (13,156)
Reimbursements to Lilly.................. 195 640 1,035 640 4,385
---------- --------- -------- -------- ----------
Research and development, net............ 4,200 4,184 8,252 7,467 102,682
General, administrative and marketing.... 799 1,049 1,809 1,986 29,576
Writedown of manufacturing
facility assets...................... -- -- -- -- 29,194
---------- --------- --------- -------- ----------
Total operating expenses......... 4,999 5,233 10,061 9,453 161,452
---------- --------- --------- -------- ----------
Operating loss........................... (4,999) (5,233) (10,061) (9,453) (154,864)
Interest and other income, net........... 635 1,094 1,320 1,694 10,093
---------- --------- --------- -------- ----------
Loss from continuing operations.......... (4,364) (4,139) (8,741) (7,759) (144,771)
Discontinued operations:
Loss from operations of subsidiary....... -- -- -- -- (1,225)
Gain on sale of subsidiary............... -- -- -- -- 300
---------- --------- --------- -------- ----------
Net loss................................. $ (4,364) $ (4,139) $ (8,741) $ (7,759) $(145,696)
========== ========= ========= ======== ==========
Net loss per share....................... $ (0.21) $ (0.20) $ (0.42) $ (0.40)
========== ========= ========= ========
Shares used in calculating
per share data 20,727,000 20,278,000 20,715,000 19,503,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 6
SOMATOGEN, INC.
(A Corporation in the Development Stage)
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In thousands - unaudited)
<TABLE>
<CAPTION>
Period from
Six-months ended July 10, 1985
December 31, (inception) to
1996 1995 December 31, 1996
---- ---- ------------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss............................................... $ (8,741) $ (7,759) $(145,696)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization...................... 814 1,096 15,581
Writedown of manufacturing facility assets......... -- -- 29,194
Other, net 201 218 1,163
Changes in assets and liabilities:
Receivables........................................ 772 (1,135) (1,931)
Prepaid expenses and other current assets.......... 111 194 (308)
Accounts payable and accrued liabilities........... (1,688) 894 4,147
Other, net......................................... -- (6) 328
-------- -------- --------
Net cash used in operating activities............ (8,531) (6,498) (97,522)
-------- -------- --------
Cash flows provided by (used in) investing activities:
Purchase of short-term investments..................... (27,982) (35,804) (276,943)
Proceeds from sale of short-term investments........... 24,732 15,376 248,958
Purchases of property and equipment.................... (831) (969) (23,086)
Proceeds from sale of property and equipment........... 244 421 3,022
Additions to construction-in-progress.................. -- -- (18,956)
Other ....................... (234) (91) (9,120)
-------- -------- ---------
Net cash (used in)
investing activities............................. (4,071) (21,067) (76,125)
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 7
SOMATOGEN, INC.
(A Corporation in the Development Stage)
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands - unaudited)
<TABLE>
<CAPTION>
Period from
Six-months ended July 10, 1985
December 31, (inception) to
1996 1995 December 31, 1996
---- ---- -----------------
<S> <C> <C> <C>
Cash flows provided by (used in) financing activities:
Payments of capital lease obligations and long-
term debt ......................................... (158) (620) (10,452)
Net proceeds from issuance of stock and warrants....... 375 33,049 197,736
Other.................................................. -- -- 3,519
------- ------- -------
Net cash provided by financing activities.............. 217 32,429 190,803
------- ------- -------
Net increase (decrease) in cash and cash equivalent........ (12,385) 4,864 17,156
Cash and cash equivalents at beginning of period........... 29,541 26,376 --
------- ------- -------
Cash and cash equivalents at end of period................. $17,156 $31,240 $17,156
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest................................. $ 12 $ 73 $ 2,392
Capital lease obligations incurred for purchase
of property and equipment.......................... -- -- 5,318
Equipment deposits transferred to net
property, plant and equipment...................... -- -- 3,423
Net property, plant and equipment transferred
to assets held for sale............................ -- -- 9,541
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 8
SOMATOGEN, INC.
(A Corporation in the Development Stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
Note 1--STATEMENT OF ACCOUNTING PRESENTATION
In the opinion of the Company, the accompanying unaudited
consolidated financial statements include all adjustments (consisting
only of normal recurring accruals) necessary to fairly state the
Company's consolidated financial position as of December 31, 1996 and
the consolidated results of operations and of cash flows for the three
and six-month periods ended December 31, 1996 and 1995, and for the
period from July 10, 1985 (inception) to December 31, 1996. The
accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1996.
The information set forth in the accompanying consolidated balance
sheet as of June 30, 1996, has been derived from the audited
consolidated balance sheet included in the Company's Annual Report on
Form 10-K for the year ended June 30, 1996.
Interim results are not necessarily indicative of the
results for the full year.
Note 2.-- STRATEGIC ALLIANCE AND RESEARCH AND DEVELOPMENT ARRANGEMENT
In June 1994, Somatogen entered into a global strategic
alliance with Eli Lilly and Company ("Lilly") whereby Lilly is co-
developing Optro (the "Lilly Alliance") and in September 1995,
Somatogen and Lilly agreed to amend certain terms of the Lilly
Alliance. Under the terms of the Lilly Alliance, Lilly is responsible
for establishing manufacturing facilities to supply Optro for Phase
III clinical trials and for global commercialization. In North
America, the Company's expanded Phase II and Phase III trials for
Optro will be performed in conjunction with Lilly's clinical and
research groups, and Lilly and Somatogen will co-promote the
product, splitting the development costs and sharing equally in
the profits. Outside North America, except in Scandinavia, Lilly
will be responsible for clinical development of Optro and related
costs, and will have exclusive marketing rights. Lilly will pay
Somatogen a royalty on product sales outside North America. Lilly
has invested $30,000,000 in exchange for Somatogen Common Stock.
<PAGE> 9
SOMATOGEN, INC.
The Lilly Alliance originally contemplated a March 1996 determination
date at which Lilly would have made a decision whether to proceed with
the clinical development and commercialization of Optro. The
September 1995 amendment to the Lilly Alliance accelerated $7,000,000
of the $10,000,000 equity investment which Lilly would have made at
such determination date. Pursuant to the amendment, Lilly made such
$7,000,000 equity investment in October 1995. In addition, the
amendment eliminated the March 1996 determination date and combined
all remaining milestone equity investments into a single $7,000,000
milestone equity investment to be made if the joint Somatogen-Lilly
steering committee for the alliance determines that certain conditions
have been met. The amendment also modified the termination provisions
of the alliance, which provide for payment of certain financial
consideration by Lilly to Somatogen in the event that the alliance is
terminated under certain circumstances. Pharmacia & Upjohn, Inc. has
the marketing rights to Optro in Scandinavia under its 1991 agreement
with Somatogen.
In accordance with the terms of the Lilly Alliance,
Somatogen and Lilly share certain clinical development costs and
effective January 1, 1996, Somatogen and Lilly began to share certain
process improvement costs. Expense reimbursements from Lilly and
payable to Lilly are disclosed as a separate component of research and
development on the Consolidated Statement of Operations.
Note 3.-- NET LOSS PER SHARE
Net loss per share is computed using the weighted average
number of shares of common stock outstanding. Common equivalent
shares from stock options and warrants are excluded from the
computation as their effect is antidilutive.
<PAGE> 10
SOMATOGEN, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Except for the historical information contained herein, the
following discussion contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ
materially from those discussed here. Factors that could cause or
contribute to such differences include, but are not limited to, those
discussed in this section, those discussed in the Company's Form 10-K
for the year ended June 30, 1996, and those discussed in the Company's
Prospectus dated October 13, 1995.
RESULTS OF OPERATIONS
Revenue
The Company did not recognize any revenue for the three or six-
month periods ended December 31, 1996 or 1995.
Operating Expenses
Total operating expenses decreased by 4% to $4,999,000 during
the quarter ended December 31, 1996 from $5,233,000 for the comparable
period in the previous fiscal year. For the six-month period ended
December 31, 1996, total operating expenses increased by 6% to
$10,061,000 from $9,453,000 for the comparable period in the previous
fiscal year.
Net research and development expense for the quarter ended
December 31, 1996 increased to $4,200,000 from $4,184,000 for the
comparable period in the previous fiscal year. The Company's net
research and development expense increased by 11% for the six-month
period ended December 31, 1996 to $8,252,000 from $7,467,000 for the
comparable period in fiscal 1996. The Company expects net research
and development expenses to increase during the foreseeable future
compared to the levels incurred during the three and six-month periods
ended December 31, 1996.
Excluding Lilly reimbursements, research and development
expense for the quarter ended December 31, 1996 increased by 12% to
$5,320,000 from $4,752,000 for the comparable period in the previous
fiscal year. For the six-month period ended December 31, 1996,
research and development expense increased by 9% to $10,201,000 from
$9,360,000 for the comparable period in the previous fiscal year.
These increases are primarily a result of increased product
development expenditures.
<PAGE> 11
SOMATOGEN, INC.
For the quarter ended December 31, 1996, reimbursements from
Lilly increased by 9% to $1,315,000 from $1,208,000 for the comparable
period in the previous fiscal year. For the six-month period ended
December 31, 1996, reimbursements from Lilly increased by 18% to
$2,984,000 from $2,533,000 for the comparable period in the previous
fiscal year. The increases in reimbursements from Lilly are primarily
the result of the September 1995 amendment to the Lilly Alliance, which
provided that certain process development expenditures would be
reimbursable beginning January 1, 1996.
Reimbursements to Lilly for the quarter ended December 31, 1996
decreased by 70% to $195,000 from $640,000 for the comparable period
in the previous fiscal year. For the six-month period ended December
31, 1996, reimbursements to Lilly increased by 62% to $1,035,000 from
$640,000 for the comparable period of the previous fiscal year. The
decrease in reimbursements to Lilly for the quarter ended December 31,
1996 compared to the comparable quarter in the previous fiscal year
resulted from favorable adjustments made to estimated obligations to
Lilly which were recorded in the current quarter. The increase in
reimbursements to Lilly for the six-month period ended December 31,
1996 compared to the comparable period of the previous year was a
result of sharing certain process development expenditures which began
January 1, 1996, partially offset by favorable adjustments related
to estimated Lilly obligations, which were recorded during the six-month
period ended December 31, 1996. Reimbursements attributable to the
Lilly Alliance may vary significantly from quarter to quarter and year
to year.
General, administrative and marketing expense decreased 24% to
$799,000 for the quarter ended December 31, 1996 from $1,049,000 for
the comparable quarter in the previous fiscal year. For the six-month
period ended December 31, 1996, general, administrative and marketing
expense decreased 9% to $1,809,000 from $1,986,000 for the comparable
period in fiscal 1996. These decreases are primarily due to a
decrease in commercial development expenditures.
<PAGE> 12
SOMATOGEN, INC.
Interest and Other Income, Net
Interest and other income decreased to $635,000 for the quarter
ended December 31, 1996 from $1,094,000 for the quarter ended
December 31, 1995 and to $1,320,000 for the six-month period ended
December 31, 1996 from $1,694,000 for the comparable period in fiscal
1996. The decrease in interest and other income for the three and
six-month periods ended December 31, 1996, as compared to the
comparable periods of the previous year, is primarily a result of
decreased average investment balances coupled with a decrease in other
income. Interest expense for the three and six-month periods ended
December 31, 1996 and 1995 was primarily associated with equipment
leasing arrangements.
Net Loss
The net loss for the quarter ended December 31, 1996 was
$4,364,000 (or $0.21 per share) compared to $4,139,000 (or $0.20 per
share) for the same period in fiscal 1996. For the six-month periods
ended December 31, 1996 and 1995, the net loss totaled $8,741,000 (or
$0.42 per share) and $7,759,000 (or $0.40 per share), respectively.
LIQUIDITY AND CAPITAL RESOURCES
Somatogen's operations to date have consumed substantial
amounts of cash. It is expected that negative cash flow from
operations will increase during the remainder of fiscal 1997 and in
future years from the level experienced during the three and six-month
periods ended December 31, 1996. Such increase is expected as preclinical
and clinical studies of new products are undertaken, as clinical trials
for Optro increase in scope and as additional product and process
improvement costs are incurred. Somatogen will need to raise
significant additional funds in order to fund the Company's future
operations and capital expenditures prior to commercialization of the
Company's products.
The Company has relied primarily on public and private
offerings of equity and cost sharing and equity investments pursuant
to the Lilly Alliance to fund its operations and upon equipment
leasing arrangements to finance the acquisition of capital equipment
for the Company's laboratory and pilot manufacturing facilities.
<PAGE> 13
SOMATOGEN, INC.
At December 31, 1996 the Company had cash, cash equivalents
and short-term investments of $45,141,000. The Company's cash, cash
equivalents and short-term investments decreased approximately
$9,135,000 during the six-month period ended December 31, 1996. This
decrease is primarily a result of the use of cash for operations.
The Company believes that capital resources existing at December 31,
1996 will be adequate to meet its needs through fiscal 1998.
Under the terms of its agreement with Somatogen, Lilly has made
equity investments in Somatogen totaling $30,000,000. The agreement
provides for Lilly to make an additional $7,000,000 milestone equity
investment if the joint Somatogen-Lilly steering committee determines
that certain conditions have been met. Furthermore, the agreement
provides that Lilly will be responsible for providing manufacturing
facilities to supply Optro for Phase III clinical trials and global
commercialization thus eliminating the need for Somatogen to build
commercial scale manufacturing facilities for Optro, which the Company
estimates would have cost more than $150,000,000.
In September 1992, the Company commenced construction of a
clinical manufacturing facility. The Company had also acquired land
for, and begun the design of, a larger commercial manufacturing
facility. In conjunction with entering into the Lilly Alliance, an
evaluation of the Company's future manufacturing requirements was
completed and construction of the clinical manufacturing facility was
discontinued. During the fourth quarter of fiscal 1994, the Company
recognized a non-recurring charge, which was principally non-cash,
associated with the writedown of its clinical and commercial
manufacturing assets of $29,200,000. The components of the charge
included approximately $21,000,000 for the clinical manufacturing
facility, $6,000,000 for related manufacturing equipment and
$2,200,000 for engineering design costs for the proposed commercial
manufacturing facility.
Land and building related to manufacturing facilities and the
related manufacturing equipment aggregating $6,210,000 are classified
in Somatogen's balance sheet as assets held for sale. During the
three-month period ended December 31, 1996, the Company realized $235,000
in proceeds from the sale of assets held for sale. The Company believes
the aggregate carrying value of all assets held for sale approximates
the assets' net realizable value; however, the Company continues to
monitor estimated realizable values on a quarterly basis. There can
be no assurances that the Company will realize the aggregate carrying
value of assets held for sale. Proceeds from such asset sales are
being used for general corporate purposes.
<PAGE> 14
SOMATOGEN, INC.
The Company historically has leased a significant portion of
the equipment used in its laboratory and pilot manufacturing
facilities. As of December 31, 1996, the Company had outstanding
capital lease obligations of $15,000. Additionally, the Company had
aggregate future operating lease obligations of approximately
$1,056,000 at December 31, 1996. In January 1997, the Company and the
Company's landlord agreed to extend certain facility leases for
periods of up to four years. Incremental future lease obligations
associated with those lease extensions aggregated $2,310,000. The
Company spent $831,000 during the six-month period ended December 31,
1996 for the purchase of capital equipment and leasehold improvements.
The Company's near-term operating requirements include
increased research and development expenditures, including costs
related to clinical trials and new product development and
manufacturing. The Company's capital spending program includes
purchases of additional equipment for its research and development
laboratories and pilot manufacturing facility. In subsequent fiscal
years, the Company's operating requirements are expected to include
continuing increases in research and development funding to cover the
costs of manufacturing process improvements, expanded clinical trials
and new product development, as well as general, administrative,
marketing and distribution expenses.
In order to meet its long-term financing requirements, the
Company may pursue a number of financing alternatives, including public
and/or private offerings of securities and additional strategic
alliances. However, there can be no assurance that the Company will
be able to raise additional financing from any of such sources, or
that any additional funding which may become available to the Company
will be on acceptable terms. The Company's ability to raise
additional financing may be dependent on many factors beyond the
Company's control, including the state of the capital markets and the
rate of progress of the Company's clinical trials. Any additional
financing that the Company may be able to obtain could result in
substantial dilution to existing stockholders. If adequate funds are
not available, the Company will be required to significantly curtail
operations. Any such action could impact the Company's research and
development programs, including the Company's clinical trial program.
Any of these events could adversely affect the Company's ability to
commercialize its products.
Cash requirements for the Company may vary materially from
those now planned due to results of research and development, results
of clinical testing, changes in focus and direction of the Company's
research and development programs, manufacturing processes,
competitive and technological advances, the FDA regulatory process,
changes in the Company's marketing and distribution strategy,
potential acquisitions or collaborative agreements and other factors.
<Page 15>
SOMATOGEN, INC.
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of stockholders, which was
held on October 31, 1996, the Company's stockholders elected
the following seven persons as directors, each to serve until
the next annual meeting of stockholders or until his
successor is elected and qualified: Andre de Bruin, Bernadine
Healy, Carlos A. Ferrer, Gene I. Miller, George B. Rathmann,
Jack W. Schuler and Ralph Snyderman.
The following votes were cast by the stockholders with
respect to the election of directors named in the
Proxy Statement:
<TABLE>
<CAPTION>
Shares Shares Voted
Director Voted For Against/Withheld
-------- --------- ----------------
<S> <C> <C>
Andre de Bruin 17,710,789 1,291,199
Bernadine Healy 18,598,554 403,434
Carlos A. Ferrer 18,593,721 408,267
Gene I. Miller 18,290,824 711,164
George B. Rathmann 17,714,269 1,287,719
Jack W. Schuler 18,293,653 708,335
Ralph Snyderman 18,280,241 721,747
</TABLE>
The stockholders also approved an amendment to the Company's
Stock Option Plan, increasing the aggregate number of shares
of common stock authorized for issuance under such plan by
1,000,000 shares. Voting in favor were 16,788,341, opposed
were 1,847,889, abstaining were 98,283 and broker non-votes
were zero.
<Page 16>
SOMATOGEN, INC.
PART II. OTHER INFORMATION (continued)
The stockholders also ratified the selection of Price
Waterhouse LLP as the Company's independent accountants for
the fiscal year ending June 30, 1997. Voting in favor were
18,893,676, opposed were 68,191, abstaining were 40,121 and
broker non-votes were zero.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.69 - Lease Extension Agreement dated January 21, 1997
with 2545 Central Avenue Partnership ("Central") for 2545
Central Avenue, Boulder, Colorado.
10.70 - Lease Extension Agreement dated January 21, 1997
with Central for 2590 Central Avenue, Boulder, Colorado.
10.71 - Lease Extension Agreement dated January 21, 1997
with Central for 5797 Central Avenue, Boulder, Colorado.
27 - Financial Data Schedule (submitted only to SEC in
electronic format).
b) Reports on Form 8-K
None
<PAGE> 17
SOMATOGEN, INC.
SIGNATURES
The financial information furnished herein has not been audited
by independent auditors; however, in the opinion of management all
adjustments necessary for a fair presentation for the three and six-
month periods ended December 31, 1996 and 1995, have been included.
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.
Date: February 13, 1997 SOMATOGEN, INC.
Andre de Bruin
-------------------------
Chairman of the Board,
President and Chief Executive
Officer (Authorized Signatory)
Timothy D. Hoogheem
-------------------------
Senior Vice President of Finance
and Administration, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Conrad A. McCarty
-------------------------
Corporate Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31,
1996 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX-
MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 17,156
<SECURITIES> 27,985
<RECEIVABLES> 2,093
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47,567
<PP&E> 17,738
<DEPRECIATION> 13,628
<TOTAL-ASSETS> 59,150
<CURRENT-LIABILITIES> 4,004
<BONDS> 7
<COMMON> 21
0
0
<OTHER-SE> 55,118
<TOTAL-LIABILITY-AND-EQUITY> 59,150
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<TOTAL-REVENUES> 0
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<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> (8,741)
<INCOME-TAX> 0
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</TABLE>
AMENDMENT TO LEASE AGREEMENT
(Modification of terms and rents)
The purpose of this Amendment, dated January 21, 1997, is to modify
the terms of the Lease as noted, between 2545 Central Avenue
Partnership, "LESSOR," and Somatogen, Inc., "LESSEE," for The Premises
located at 2545 Central Avenue, Boulder, CO.
This Amendment modifies the term of the Lease Agreement, dated
February 14, 1995, as referenced in Paragraph 2 and all other written
Agreements, and provides for the rent schedule Paragraph 31 and terms
to be modified.
The Lessor hereby leases the Premises to the Lessee, and the Lessee
hereby leases the Premises from the Lessor, for a term commencing at
12:01 A.M. on the 1st day of March, 1997 and ending at 11:59 P.M. on
the 28th day of February, 2000, unless sooner terminated as herein set
forth. The Lessee agrees to pay Lessor as rent for the premises
according to the terms of the RENT SCHEDULE below:
March 1, 1997 through February 28, 1998 $19,913.00 per month
March 1, 1998 through February 28, 1999 $20,709.00 per month
March 1, 1999 through February 28, 2000 $21,538.00 per month
All other terms and conditions of the original Lease, all Amendments
and all other written agreements are to remain in full force and
effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals this date and year above written.
LESSOR: 2545 Central Avenue Partnership
BY: /s/ Larry F. Frey
-------------------------------
LESSEE: Somatogen, Inc.
BY: /s/ Timothy D. Hoogheem
-------------------------------
ITS: Senior Vice President of Finance,
and Administration, CFO and Treasurer
AMENDMENT TO LEASE AGREEMENT
(Modification of terms and rents)
The purpose of this Amendment, dated January 21, 1997, is to modify
the terms of the Lease as noted, between 2545 Central Avenue
Partnership, "LESSOR," and Somatogen, Inc., "LESSEE," for The Premises
located at 2590 Central Avenue, Boulder, CO.
This Amendment modifies the term of the Lease Agreement, dated
February, 14, 1995, as referenced in Paragraph 2 and all other written
Agreements, and provides for the rent schedule Paragraph 31 and terms
to be modified.
The Lessor hereby leases the Premises to the Lessee, and the Lessee
hereby leases the Premises from the Lessor, for a term commencing at
12:01 A.M. on the 1st day of November, 1997 and ending at 11:59 P.M.
on the 31st day of October, 2001, unless sooner terminated as herein
set forth. The Lessee agrees to pay Lessor as rent for the premises
according to the terms of the RENT SCHEDULE below:
November 1, 1997 through October 31, 1998 $18,894.00 per month
November 1, 1998 through October 31, 1999 $19,649.00 per month
November 1, 1999 through October 31, 2000 $20,435.00 per month
November 1, 2000 through October 31, 2001 $21,253.00 per month
Lessee agrees, at the request of the Lessor, to remove all equipment
and improvements Lessee has made or added to the Premises.
Additionally, Lessee agrees to make all the necessary repairs to the
Premises in connection with the removal of equipment and improvements,
in a workmanlike manner.
All other terms and conditions of the original Lease, all Amendments
and all other written agreements are to remain in full force and
effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals this date and year above written.
LESSOR: 2545 Central Avenue Partnership
BY: /s/ Larry F. Frey
-------------------------------
LESSEE: Somatogen, Inc.
BY: /s/ Timothy D. Hoogheem
-------------------------------
ITS: Senior Vice President of Finance,
and Administration, CFO and Treasurer
AMENDMENT TO LEASE AGREEMENT
(Modification of terms and rents)
The purpose of this Amendment, dated January 21, 1997, is to modify
the terms of the Lease as noted, between 2545 Central Avenue
Partnership, "LESSOR," and Somatogen, Inc., "LESSEE," for The Premises
located at 5797 Central Avenue, Boulder, CO.
This Amendment modifies the term of the Lease Agreement, dated
February 14, 1995, as referenced in Paragraph 2 and all other written
Agreements, and provides for the rent schedule Paragraph 31 and terms
to be modified.
The Lessor hereby leases the Premises to the Lessee, and the Lessee
hereby leases the Premises from the Lessor, for a term commencing at
12:01 A.M. on the 1st day of May, 1997, and ending at 11:59 P.M. on
the 30th day of April, 2000, unless sooner terminated as herein set
forth. The Lessee agrees to pay Lessor as rent for the premises
according to the terms of the RENT SCHEDULE below:
May 1, 1997 through April 30, 1998 $14,835.00 per month
May 1, 1998 through April 30, 1999 $15,428.00 per month
May 1, 1999 through April 30, 2000 $16,046.00 per month
Lessee agrees, at the request of the Lessor, to remove all equipment
and improvements Lessee has made or added to the Premises.
Additionally, Lessee agrees to make all the necessary repairs to the
Premises in connection with the removal of equipment and improvements,
in a workmanlike manner.
All other terms and conditions of the original Lease, all Amendments
and all other written agreements are to remain in full force and
effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals this date and year above written.
LESSOR: 2545 Central Avenue Partnership
BY: /s/ Larry F. Frey
-------------------------------
LESSEE: Somatogen, Inc.
BY: /s/ Timothy D. Hoogheem
-------------------------------
ITS: Senior Vice President of Finance,
and Administration, CFO and Treasurer
