<PAGE>
UNITED STATES
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 March 31, 1999
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 0-24424
CIMA LABS INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1569769
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10000 Valley View Road, Eden Prairie, Minnesota 55344-9361
(Address of principal executive offices including zip code)
(612) 947-8700
(Registrant's telephone number, including area code)
____________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 periods 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 practical date.
Common Stock, $.01 Par Value 9,610,394
- ---------------------------- -------------------------------
(Class) (Outstanding at April 30, 1999)
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CIMA LABS INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
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<S> <C>
COVER PAGE 1
TABLE OF CONTENTS 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Condensed Balance Sheets as of March
31, 1999 and December 31, 1998 3
Condensed Statements of Operations
for the three-month periods ended 4
March 31, 1999 and 1998
Condensed Statements of Cash Flows
for the three-month periods ended 5
March 31, 1999 and 1998
Notes to Condensed Financial 6
Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF 7
OPERATIONS.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 10
ABOUT MARKET RISK.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 11
ITEM 2. CHANGES IN SECURITIES AND USE OF 11
PROCEEDS.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF 11
SECURITY HOLDERS.
ITEM 5. OTHER INFORMATION. 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 11
SIGNATURE 12
</TABLE>
2
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PART I.
ITEM 1. FINANCIAL STATEMENTS
CIMA LABS INC.
Condensed Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------
1999 1998
----------------------------
<S> <C> <C>
ASSETS
(note)
Cash and cash equivalents $ 1,620,082 $ 2,722,590
Accounts receivable: 1,796,089 1,654,796
Inventories, net 1,306,909 479,045
Prepaid expenses 131,329 79,866
----------------------------
Total current assets 4,854,409 4,936,297
Property, plant and equipment:
Construction in progress 347,140 72,204
Equipment 9,314,867 9,314,867
Leasehold improvements 4,757,169 4,757,169
Furniture and fixtures 604,204 604,204
----------------------------
15,023,380 14,748,444
Less accumulated depreciation (5,706,743) (5,318,107)
----------------------------
9,316,637 9,430,337
Other assets:
Lease deposits 347,496 345,146
Patents and trademarks, net 174,422 204,648
----------------------------
Total other assets 521,918 549,794
----------------------------
Total Assets $ 14,692,964 $ 14,916,428
----------------------------
----------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,412,829 $ 670,597
Accrued expenses 1,025,154 835,043
Advance royalties 134,375 459,105
Current portion of lease obligation 66,562 64,998
----------------------------
Total current liabilities 2,638,920 2,029,743
Lease obligations 213,906 231,145
----------------------------
Total liabilities 2,852,826 2,260,888
Stockholders' equity:
Convertible Preferred Stock, $0.01 par value:
Authorized shares - 5,000,000
issued and outstanding shares - none
Common Stock, $0.01 par value:
Authorized shares - 20,000,000
issued and outstanding shares: 96,104 96,104
9,610,394 March 31, 1999 and December 31, 1998
Additional paid-in capital 57,274,274 57,274,274
Accumulated losses (45,530,240) (44,714,838)
----------------------------
Total stockholders' equity 11,840,138 12,655,540
----------------------------
Total liabilities and stockholders' equity $ 14,692,964 $ 14,916,428
----------------------------
----------------------------
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed financial statements.
3
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CIMA LABS INC.
Condensed Statement of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1999 1998
--------------------------
<S> <C> <C>
REVENUES:
Net sales $ 35,000 $ 187,692
R&D fees and licensing revenue 1,644,452 981,800
--------------------------
1,679,452 1,169,492
COSTS AND EXPENSES:
Costs of goods sold 433,571 370,622
Research and product development 1,397,270 1,478,500
Selling, general and administrative 684,972 760,848
--------------------------
2,515,813 2,609,970
OTHER INCOME (EXPENSE):
Interest income, net 29,540 59,167
Other income (expense), net (8,581) 283
--------------------------
20,959 59,450
--------------------------
NET GAIN (LOSS): $ (815,402) $(1,381,028)
--------------------------
--------------------------
Net gain (loss) per share:
Basic and diluted $ (0.08) $ (0.14)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted 9,610,104 9,609,216
</TABLE>
4
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CIMA LABS INC.
Condensed Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1999 1998
--------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (815,402) $(1,381,028)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 417,920 403,081
Changes in operating assets and liabilities:
Accounts receivable (141,293) 1,053,809
Inventories (827,863) 217,371
Prepaid expenses (51,463) (25,881)
Accounts payable 742,234 50,159
Accrued expenses (201,296) 34,513
Advance royalties 66,675 (30,000)
--------------------------
NET CASH USED IN OPERATING ACTIVITIES (810,488) 322,024
--------------------------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (290,610) (294,076)
Proceeds from maturities of short term investments -- 1,973,184
Patents and trademarks 941 (23,184)
--------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (289,669) 1,655,924
--------------------------
--------------------------
FINANCING ACTIVITIES
Proceeds from issuance of common stock - 5,700
--------------------------
Net Cash Used In Financing Activities - 5,700
--------------------------
Increase (decrease) in cash and cash equivalents (1,100,157) 1,983,648
Cash and cash equivalents at beginning of period 2,722,590 1,145,760
--------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,622,433 $ 3,129,408
--------------------------
--------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of equipment pursuant to equipment loan and capital
lease obligation - 275,347
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
CIMA LABS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three-month period ended March 31, 1999 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1999. For
further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1998.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or
fair market value.
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ------------
<S> <C> <C>
Raw materials $1,153,275 $479,045
Work in process 3,236 -
Finished products 150,398 -
---------- --------
$1,306,909 $479,045
---------- --------
---------- --------
</TABLE>
NOTE C - NET LOSS PER SHARE
The Company has adopted Financial Accounting Standards Board Statement
No. 128, EARNINGS PER SHARE. This statement replaces previously reported
primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary EPS, basic EPS excludes any dilutive effect of
options, warrants and convertible securities. Diluted earnings per share is
very similar to previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented to conform
with Statement 128 requirements.
6
<PAGE>
ITEM 2. 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. WHEN USED HEREIN, THE WORDS "ANTICIPATE," "BELIEVE,"
"EXPECT," "ESTIMATE" AND SIMILAR EXPRESSIONS AS THEY RELATE TO THE COMPANY OR
ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THE COMPANY'S ABILITY TO RAISE ADDITIONAL CAPITAL TO CONTINUE
TO FUND ITS OPERATIONS, THE SUCCESS OF THE COMPANY IN MANUFACTURING THE
COMPANY'S TECHNOLOGIES, AND IN COMMERCIALIZING ITS NEW DRUG DELIVERY
PROGRAMS, THE COMPANY'S ABILITY TO SIGN ADDITIONAL COLLABORATIVE ARRANGEMENTS
WITH PHARMACEUTICAL COMPANIES, AND THE COMPANY'S RELIANCE ON ITS KEY
PERSONNEL AND COLLABORATIVE PARTNERS, AS WELL AS THOSE DISCUSSED IN "BUSINESS
RISKS" BELOW.
GENERAL
CIMA LABS INC., ("CIMA" or the "Company") was founded in 1986, and
focused initially on contract manufacturing liquid effervescent products. In
September 1992, patent claims were allowed on the Company's
OraSolv-Registered Trademark-technology. Following the issuance of the
OraSolv patent, CIMA changed its focus and emerged as a drug delivery company
offering technologies in the fast-dissolve and oral transmucosal areas.
OraSolv and DuraSolv-TM-, the Company's premier fast-dissolve technologies,
are oral dosage formulations incorporating microencapsulated active drug
ingredients into tablets which dissolve quickly in the mouth without chewing
or water which effectively mask the taste of the medication being delivered.
OraSolv's and DuraSolv's fast-dissolving capability may enable patients in
certain age groups or those with a variety of conditions that limit their
ability to swallow conventional tablets to receive medication in a more
convenient dosage form. In addition, OraSolv and DuraSolv can provide more
accurate administration of doses than liquid or suspension formulations as no
measuring is required. Additional drug delivery technologies are also under
development by the Company.
In early-1997 the Company recorded its first commercial sales using the
Company's OraSolv technology. In 1998, another over-the-counter product for
a second partner was launched using the OraSolv technology. The Company
anticipates that the first prescription pharmaceutical product using the
OraSolv technology will be launched by one of its partners later in 1999.
Prior to this, the Company's revenues had been from sales using the Company's
AutoLution (a liquid effervescent) technology, license fees paid by corporate
partners in consideration of the transfer of rights under collaborative
agreements, and product development fees paid by corporate partners to fund
the Company's research efforts for products developed under such agreements.
Approximately 42% of the Company's total revenues through March 31, 1999 have
been generated from development work and sales of AutoLution products. The
Company does not anticipate that it will manufacture liquid effervescent
products, and has not recognized any revenues from such products since 1995.
Since 1995, approximately $15,402,000 of revenue has been generated primarily
from three major sources: product development fees (approximately 49% of the
total) for work primarily related to OraSolv and DuraSolv products, and to a
lesser extent sales (approximately 24%) related to OraSolv products and
licensing revenues (approximately 24%) related to OraSolv and DuraSolv
products. In addition to revenue from the above sources, the Company has
funded operations from private and public sales of equity securities,
realizing net proceeds of approximately $26,000,000 from private sales of
equity securities and $16,400,000 and $12,000,000 from the Company's July
1994 initial public offering and May 1996 public offering of its Common
Stock, respectively. At March 31, 1999 the Company had 9,610,394 shares of
its Common Stock outstanding.
The Company's ability to generate revenues is dependent upon its ability
to develop new, innovative drug delivery technologies and to enter into and
be successful in collaborative arrangements with pharmaceutical and other
healthcare companies for the development and manufacture of OraSolv and
DuraSolv products, and products based on such new technologies to be marketed
by these corporate partners. The Company is highly dependent upon the
efforts of the corporate partners to successfully market OraSolv and DuraSolv
products. Although the Company believes these partners have and will have an
economic motivation to market these products vigorously, the amount and
timing of resources to be devoted to marketing are not within the control of
the Company. These partners independently could make material marketing and
other commercialization decisions which could adversely affect the Company's
future revenues. Moreover, certain of the Company's products are seasonal in
nature and the Company's revenues could vary materially from quarter to
quarter depending on which of such products, if any, are then being marketed.
The Company expects that losses will continue through at least 1999,
even though CIMA expects to be generating sales revenue from manufacturing
OraSolv products, licensing arrangements, and product development fees
related to the Company's technologies. At March 31, 1999, the Company had
accumulated net losses of approximately $45,530,000. Research and
development expenses are expected to show a moderate increase as CIMA
investigates new drug technologies, including the possibility of utilizing
sublingual systems, and to support our partner's product development
programs. As CIMA has geared up production for the upcoming Novartis
Triaminic-Registered Trademark- Softchews-Registered Trademark- national
launch, the Company hired additional operations personal to meet their
initial orders. Manufacturing infrastructure fixed costs should not need to
increase materially as there is production capacity to meet short-term
production needs.
7
<PAGE>
The Company has substantially completed the assessment of the impact
that the Year 2000 date conversion may have on its internal systems and
software, including information technology ("IT") and non-IT, or embedded
technology systems. The Company believes its risks relating to Year 2000
issues in its systems to be very low, as its IT systems are relatively small
and predominately new and its software consists entirely of "off the shelf"
packages for which Year 2000 compliant upgrades are available and have
largely already been implemented.
The Company has designated an individual to oversee Year 2000
compliance. It is their responsibility, by the end of the first-half of 1999,
to ensure that all software packages have been converted or replaced, if
necessary, to be free of Year 2000 problems. The Company has spent, to date,
approximately $7,000 on software upgrades and expects the total expenditures
for such upgrades to be less than $15,000. The Company is substantially
complete in replacing or reallocating hardware that may present Year 2000
concerns, and estimates the total cost of any such replacement to be less
than $15,000. A review performed by an outside consultant has indicated that
the risks related to the Company's internal systems is immaterial as far as
Year 2000 compliance is concerned.
The Company is in the process of determining if its corporate partners
and major suppliers have appropriate plans to remediate Year 2000 issues. To
date, none of the parties has indicated significant concerns about their
ability to do so. However, a substantial negative impact of Year 2000 issues
on one of the Company's few large corporate partners or major suppliers that
would affect their ability to do business could have a material adverse
effect on the operations and financial condition of the Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
The Company's results of operations for the quarter ended March 31, 1999
reflect the progress and continued emphasis of developing products using
CIMA's technologies for our corporate partners. Product sales decreased to
$35,000 in the first quarter of 1999 from $188,000 in the first quarter of
1998. The products that the Company are currently manufacturing for its
partner are seasonal in nature and cause minimal sales to be recorded in the
first quarter. Product development fees and licensing revenues increased to
$1,645,000 in the quarter ended March 31, 1999 from $982,000 for the same
period in 1998. This increase is mostly attributable to product development
fees from Zeneca and Organon for work on their respective prescription
product projects, and also from Novartis Consumer Health for further
development work performed for a non-prescription product. The 1998 revenues
represent fees for similar projects but more weighted toward development fees
for non-prescription products. So long as the Company has relatively few
agreements with corporate partners, product development fees and licensing
revenues will tend to fluctuate on a quarter-to-quarter basis.
Cost of goods sold increased to $434,000 from $371,000 for the same
period in 1998. The increase is attributable to certain non-recurring
start-up costs for the forthcoming commercial production for one of our
corporate partners. Research and development expenses decreased 6% to
$1,397,000 for the three months ended March 31, 1999 from $1,479,000 in the
corresponding prior period. The decrease is primarily due to timing of
expenses for work being performed on internally developed new technologies.
Selling, general and administrative expenses decreased to $685,000 for the
three-month period ended March 31, 1999 from $761,000 for the three-month
period ended March 31, 1998. The decrease in selling, general and
administrative expenses was primarily due to the reduction in legal expenses
and outside consulting fees. Net interest income decreased from $59,000 for
the three-months ended March 31, 1998 to $29,000 for the same period in 1999.
Net interest income is dependent on the cash position of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date primarily through
private and public sales of its equity securities and revenues from supply
agreements. Through March 31, 1999, CIMA had received net offering proceeds
from such private and public sales of approximately $57,300,000 and had net
sales from manufacturing and supply agreements of approximately $17,500,000,
and other revenues that include licensing revenue, product development and
milestone fees of $15,415,000. Among other things, these funds were used to
purchase approximately $16,000,000 of capital equipment, including
approximately $7,500,000 in the last two quarters of 1994 in connection with
completing the Company's manufacturing facility.
Cash and cash equivalents were approximately $1,620,000 at March 31,
1999, a decrease of $1,103,000 from $2,723,000 at the period ended December
31, 1998. The majority of the decrease can be attributable the purchase of
raw material, approximately $675,000, for the forthcoming production for our
corporate partners.
8
<PAGE>
The Company's long-term capital requirements will depend upon numerous
factors, including the status of the Company's collaborative arrangements
with corporate partners, the progress of the Company's research and
development programs and receipt of revenues from the collaborative
agreements, sales of the Company's products, and the need to expand
production capacity. The Company believes that its currently available funds
together with revenues from operations, and a bank line of credit should be
sufficient to meet its anticipated needs through 1999. Thereafter, or sooner
if conditions make it necessary, the Company will need to raise additional
funds through public or private financings, including equity financing which
may be dilutive to shareholders and/or through research and development
relationships with suitable potential corporate partners. There can be no
assurance that the Company will be able to raise additional funds if its
capital resources are exhausted, or that funds will be available on terms
attractive to the Company.
The Company has not generated taxable income through March 31, 1999. At
December 31, 1998, the net operating losses available to offset taxable
income were approximately $45,700,000. Because the Company has experienced
ownership changes, pursuant to Internal Revenue Code regulations, future
utilization of the operating loss carryforwards will be limited in any one
fiscal year. The carryforwards expire beginning in 2001. As a result of the
annual limitation, a portion of these carryforwards may expire before
ultimately becoming available to reduce potential federal income tax
liabilities.
BUSINESS RISKS
The Company began commercial production of its first product in CIMA's
OraSolv dosage form in 1997 and must be evaluated in light of the
uncertainties and complications present for any company that has just
recently begun to derive product revenues and, in particular, a company in
the pharmaceutical industry. The Company has accumulated net losses of
$45,530,000 from inception through March 31, 1999. Losses have resulted
principally from costs incurred in research and development of the Company's
technologies, supporting the manufacturing facility, and from general and
administrative costs. These costs have exceeded the Company's revenues. The
Company expects to continue to incur losses at least through the remainder of
1999. There can be no assurance that the Company will ever generate
substantial revenue or achieve profitability.
The Company believes that its currently available funds, together with
any license fees, product development fees and sales revenue anticipated to
be received in the future, may not meet its needs through 1999. It is
anticipated that in the first half of 1999, the Company may need to raise
additional funds. The Company is considering numerous types of financing.
These include establishing a line of credit with a financial institution
and/or public or private financing, including equity financing which may be
dilutive to shareholders, debt financing with a potential partner that may
include product development projects. There can be no assurance that the
Company will be able to raise additional funds if its capital resources are
exhausted, or that funds will be available on terms attractive to the Company.
The Company is dependent upon its ability to enter into and perform
under collaborative arrangements with pharmaceutical companies for the
development and commercialization of its products and technologies. Failure
of these partners to market the Company's products successfully could have a
material adverse effect on the Company's financial condition and results of
operations. The Company's revenues are also dependent upon ultimate consumer
acceptance of the Company's technologies as an alternative to conventional
oral dosage forms. The Company expects that products using its technologies
will be priced slightly higher than conventional swallow or chewable tablets.
Although the Company believes that its consumer research, and a competitors
launch of a fast-dissolve product has been encouraging, there can be no
assurance that market acceptance for the Company's OraSolv products and/or
its new drug delivery technologies will ever develop or be sustained.
The Company began manufacturing OraSolv products in commercial
quantities in February 1997. Commercial sales have been made and revenue has
been recognized from sales of OraSolv products. To achieve future desired
levels of production, the Company may be required to increase its
manufacturing capabilities. There can be no assurance that manufacturing can
be scaled-up in a timely manner to allow production in sufficient quantities
to meet the needs of the Company's corporate partners. Furthermore, the
Company has only one manufacturing line and one facility capable of
manufacturing products. If this production line and/or facility becomes
damaged or becomes incapable of manufacturing products due to natural
disaster, governmental regulatory issues or otherwise, the Company would have
no other means of producing OraSolv products.
The Company intends to increase its research and development
expenditures to enhance its current technologies, and to pursue internal
proprietary drug delivery technologies. Even if these technologies appear
promising during various stages of development, they may not reach the
commercialization stage for a number of reasons. Such reasons include the
possibilities of not finding a partner to market the technology in their
product, of being difficult to manufacture on a large scale or be
uneconomical to market.
9
<PAGE>
The fast-dissolve drug delivery field is fairly new and rapidly evolving
and it is expected to continue to undergo improvements and rapid
technological changes. There can be no assurances that current or new
competitors will not succeed in developing technologies and products that are
more effective than any which are developed by the Company or which could
render the Company's technologies and products non-competitive or that any
technology developed by the Company will be preferred to any existing or
newly developed technologies.
The foregoing risks reflect the Company's stage of development and the
nature of the Company's industry. The Company is also subject to a range of
additional risks, including competition, uncertainties regarding the effects
of healthcare reform on the pharmaceutical industry, including pressures
exerted on the prices charged for pharmaceutical products and uncertainties
regarding protection of patents and proprietary rights, all of which may have
a material adverse effect on the Company's business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's operations are not currently subject to market risks for
interest rates, foreign currency exchange rates, commodity prices or other
market price risks of a material nature.
10
<PAGE>
CIMA LABS INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has instituted an opposition proceeding in the European Patent
Office, and has requested that the United States Patent and Trademark Office
declare an interference proceeding, each of which has been reported in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1998.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Item Description
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<S> <C>
10.17 Real Property Lease, Amendment No. 8, dated September 23,
1998, between Principal Life Insurance Company and the
Company.
27 Financial Data Schedule.
</TABLE>
11
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CIMA LABS INC.
Date: May 13, 1999 By: /s/ John M. Siebert, Ph.D.
------------ -----------------------------------
John M. Siebert, Ph.D.
President & Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 1999 By: /s/ Keith P. Salenger
------------ -----------------------------------
Keith P. Salenger
Vice President, Finance and
Chief Financial Officer
(Principal Financial
and Accounting Officer)
12
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EXHIBIT INDEX
<TABLE>
<CAPTION>
No. of Exhibit Description
- -------------- -----------
<S> <C>
10.17 Real Property Lease, Amendment No. 8, dated September 23,
1998, between Principal Life Insurance Company and the
Company.
27 Financial Data Schedule.
</TABLE>
13
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AMENDMENT NO. 8 TO LEASE
THIS AMENDMENT made this 23rd day of SEPTEMBER, 1998, between PRINCIPAL LIFE
INSURANCE COMPANY, AN IOWA CORPORATION, F/K/A PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY, as Landlord, and CIMA LABS, INC., A DELAWARE CORPORATION, as Tenant.
W I T N E S S E T H
WHEREAS, by the Lease Agreement dated JULY 2, 1987, Landlord leased to Tenant
the premises located at 7325 ASPEN LANE NORTH, BROOKLYN PARK, MINNESOTA, as more
particularly described in the Lease, herein called the Leased Premises; and
WHEREAS, Landlord and Tenant amended the Lease (Amendment #1) on the 29th day of
July, 1987; and
WHEREAS, Landlord and Tenant amended the Lease (Amendment #2) on the 1st day of
September, 1987; and
WHEREAS, Landlord and Tenant amended the Lease (Amendment #3) on the 12th day of
May, 1988; and,
WHEREAS, Landlord and Tenant amended the Lease (Amendment #4) on the 25th day of
July, 1998; and,
WHEREAS, Landlord and Tenant amended the Lease (Amendment #5) on the 22nd day of
November, 1989; and,
WHEREAS, Landlord and Tenant amended the Lease (Amendment #6) on the 22nd day of
November, 1991; and,
WHEREAS, Landlord and Tenant amended the Lease (Amendment #7) on the 21st day of
August, 1995; and,
WHEREAS, Landlord and Tenant desire to amend the Lease as provided below.
NOW THEREFORE, Landlord and Tenant agrees as follows:
1. The term of the Lease shall be extended for three (3) years, commencing
October 1, 1998, and expiring on September 30, 2001.
2. Commencing October 1, 1998 and continuing through September 30, 2001,
Tenant shall pay the following Base Rent for Tenant's Premises:
<TABLE>
<CAPTION>
Annual Monthly
------ -------
<S> <C> <C>
October 1, 1998 - September 30, 2001 $151,392.00 $12,616.00
</TABLE>
In addition, Tenant shall pay its pro-rata share of Operating Expenses
which are estimated to be $2.85 per square foot ($7,600.00 per month) in
1998.
3. Section 3G of the Lease is hereby deleted in its entirety and replaced
with the following:
Holding Over. Tenant will, at the termination of this Lease by lapse of
time or otherwise, yield up immediate possession to Landlord. If Tenant
retains possession of the Premises or any part thereof after such
termination, such holding over constitutes a month-to-month tenancy,
upon the terms and conditions set forth in this Lease provided, however,
that the monthly Rent shall, in addition to all other sums which are to
be paid by Tenant hereunder, whether or not as additional Rent, be equal
to one and one half (1.5) times the Rent being paid monthly to Landlord
under this Lease. Tenant shall also pay to Landlord all damages
sustained by Landlord resulting from retention of possession by Tenant,
including the loss of any proposed subsequent tenant for any portion of
the Premises. The provisions of this paragraph shall not constitute a
waiver by Landlord of any right of re-entry as herein set forth; nor
shall receipt of any Rent or any other act in apparent affirmance of the
tenancy operate as a waiver of the right to terminate this Lease for a
breach of any of the terms, covenant, or obligations herein on Tenant's
part to be performed.
14
<PAGE>
Except as hereinabove amended, this Lease shall remain in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, Landlord and Tenant respectively have duly signed and
sealed these presents as of the day and year first above written.
TENANT: LANDLORD:
CIMA LABS INC. Principal Life Insurance Company,
a Delaware corporation an Iowa corporation
By:________________________________ By:__________________________________
Its:_______________________________ Its:_________________________________
Date:______________________________ Date:________________________________
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,620,082
<SECURITIES> 0
<RECEIVABLES> 1,796,089
<ALLOWANCES> 0
<INVENTORY> 1,306,909
<CURRENT-ASSETS> 4,854,409
<PP&E> 15,023,380
<DEPRECIATION> 5,706,743
<TOTAL-ASSETS> 14,692,964
<CURRENT-LIABILITIES> 2,638,920
<BONDS> 0
0
0
<COMMON> 96,104
<OTHER-SE> 57,274,274
<TOTAL-LIABILITY-AND-EQUITY> 14,692,964
<SALES> 35,000
<TOTAL-REVENUES> 1,679,452
<CGS> 433,571
<TOTAL-COSTS> 2,515,813
<OTHER-EXPENSES> (8,581)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,540
<INCOME-PRETAX> (815,402)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (815,402)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
