<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: JUNE 30, 1999 Commission File No. 0-19193
CAMBRIDGE NEUROSCIENCE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3319074
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
ONE KENDALL SQUARE, BUILDING 700
CAMBRIDGE, MA 02139
-----------------------------------------------------------
(Address of principal executive offices including zip code)
617-225-0600
----------------------------------------------------
(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
---
At July 31, 1999, 18,135,964 shares of Common Stock, par value $.001 per share,
were issued and outstanding.
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CAMBRIDGE NEUROSCIENCE, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION NUMBER
- ------------------------------ ------
ITEM 1 - FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets
At June 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 1999 and 1998 4 - 5
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 7 - 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 - 14
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 14
PART II - OTHER INFORMATION
- ---------------------------
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
2
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CAMBRIDGE NEUROSCIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
June 30, December 31,
1999 1998
--------- ------------
ASSETS (Unaudited) (Note)
Current Assets
Cash and cash equivalents $ 3,771 $ 4,863
Marketable securities 7,042 7,037
Receivables from collaboration agreements 174 2,080
Prepaid expenses and other current assets 1,314 1,260
--------- ---------
Total Current Assets 12,301 15,240
Equipment, Furniture and Fixtures, net 290 377
--------- ---------
Total Assets $ 12,591 $ 15,617
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 719 $ 1,637
Research and development advances -- 250
--------- ---------
Total Current Liabilities 719 1,887
Stockholders' Equity
Preferred stock, par value $.01, 10,000
shares authorized; none issued -- --
Common stock, par value $.001, 30,000
shares authorized; 18,136 shares issued
and outstanding at June 30, 1999;
18,085 at December 31, 1998 18 18
Additional paid-in capital 120,119 120,088
Accumulated deficit (108,265) (106,376)
--------- ---------
Total Stockholders' Equity 11,872 13,730
--------- ---------
Total Liabilities and Stockholders' Equity $ 12,591 $ 15,617
========= =========
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 principals for complete
financial statements.
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
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CAMBRIDGE NEUROSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three months ended June 30,
---------------------------
1999 1998
------- -------
Revenues
Research and development $ 490 $ 250
Operating expenses
Research and development 1,195 1,585
General and administrative 314 426
------- -------
1,509 2,011
------- -------
Loss from operations (1,019) (1,761)
Interest income 136 265
------- -------
Net loss $ (883) $(1,496)
======= =======
Basic and diluted net loss per share $ (0.05) $ (0.08)
======= =======
Shares used in computing basic and diluted
net loss per share 18,100 17,924
======= =======
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
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CAMBRIDGE NEUROSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Six months ended June 30,
-------------------------
1999 1998
------- -------
Revenues
Research and development $ 872 $ 551
Operating expenses
Research and development 2,434 3,917
General and administrative 633 939
Restructuring cost -- 921
------- -------
3,067 5,777
------- -------
Loss from operations (2,195) (5,226)
Interest income 306 786
------- -------
Net loss $(1,889) $(4,440)
======= =======
Basic and diluted net loss per share $ (0.10) $ (0.25)
======= =======
Shares used in computing basic and diluted
net loss per share 18,100 17,907
======= =======
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
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CAMBRIDGE NEUROSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended June 30,
-------------------------
1999 1998
------- --------
Operating Activities
Net loss $(1,889) $ (4,440)
Items not requiring cash:
Depreciation and amortization 96 185
Common stock issued pursuant to an
employee benefit plan -- 103
------- --------
(1,793) (4,152)
Changes in current assets and liabilities:
Receivables from collaboration agreements 1,906
Prepaid expenses and other current assets (54) 511
Accounts payable and accrued expenses (918) (1,290)
Research and development advances (250) (250)
------- --------
684 (1,029)
------- --------
Cash used for operating activities (1,109) (5,181)
Investing Activities
Purchases of marketable securities (3,782) (8,996)
Sales of marketable securities 3,777 30,539
Purchase of equipment, furniture and
fixtures, net of disposals (9) (11)
------- --------
Cash (used for) provided by investing
activities (14) 21,532
Financing Activities
Sale of common stock 31 38
Dividend -- (17,907)
------- --------
Cash provided by (used for) financing
activities 31 (17,869)
Net Increase in Cash and Cash Equivalents (1,092) (1,518)
Cash and Cash Equivalents at beginning of period 4,863 12,020
------- --------
Cash and Cash Equivalents at end of period $ 3,771 $ 10,502
======= ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
6
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CAMBRIDGE NEUROSCIENCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements as
of June 30, 1999 and for the three and six month periods ended June 30, 1999 and
1998 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q. 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, the accompanying consolidated
financial statements include all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial position,
results of operations and cash flows for the periods presented. The results of
operations for the interim period ended June 30, 1999 are not necessarily
indicative of the results expected for the full fiscal year.
The condensed consolidated financial statements presented as of December
31, 1998 are derived from the audited consolidated financial statements and
footnotes included in the Company's Annual Report on Form 10-K (file number
0-19193).
Cambridge NeuroScience, Inc. (the "Company") is a biopharmaceutical company
engaged in the discovery and development of proprietary pharmaceuticals to
prevent or treat severe disorders of, or injuries to, the nervous system.
2. BASIC AND DILUTED NET LOSS PER SHARE
Net loss per share is based on the weighted-average number of common shares
outstanding during each of the periods presented. Due to the fact that the
Company continues to be in a net loss position, common equivalent shares from
stock options are excluded as their effect is antidilutive.
3. RESEARCH AND DEVELOPMENT REVENUE
The Company recognizes research and development revenue as earned and such
revenue represents reimbursement of the Company's expenditures pursuant to the
terms of its collaboration and license agreements and government grants.
Research and development revenue meets the criteria of being earned when all of
the following have occurred: all obligations of the Company relating to the
revenue have been met; cash received or receivable is not refundable
irrespective of whether the research efforts are successful; and the Company is
not obligated to meet future milestones. Revenue from government grants is
recorded as earned based on the performance requirements of each respective
grant. Expenses relating to collaboration and license agreements and to the
performance of government grants are recorded as research and development
expenses. Cash received in advance of research and development performed
pursuant to the Company's research and development agreements is designated as
research and development advances and is included in current liabilities.
In November 1996, the Company entered into a collaboration agreement with
Allergan, Inc. ("Allergan") for the development of treatments for ophthalmic
disorders, including glaucoma. Pursuant to this agreement, Allergan is providing
$3.0 million in research funding over a three year period through November 1999.
In December 1998, the Company entered into a collaborative agreement with
Bayer AG ("Bayer") for the development of recombinant human Glial Growth Factor
2 ("GGF2") for the treatment of neurodegenerative diseases such as multiple
sclerosis. The Company received an upfront licensing fee
7
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CAMBRIDGE NEUROSCIENCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
of $1.0 million and will receive an additional $1.0 million in reimbursements
for research expenses incurred relating to a research protocol covered by the
agreement. As of June 30, 1999, the Company has received $777,000 of this
research reimbursement.
4. NEW ACCOUNTING PRINCIPLE
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"),
which is effective for fiscal years beginning after June 15, 2000. The Company
believes the adoption of this new accounting standard will not have a
significant effect on its financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
Revenues
Research and development revenues in the three months ended June 30, 1999
increased by $240,000 compared to the same quarter of 1998. This increase was
due to revenue earned under the collaboration with Bayer, which was entered into
in December 1998. Total revenue in the second quarter of 1999 was comprised of
the Bayer revenue and $250,000 under the Allergan collaboration. The Allergan
revenue is comparable with the amount earned in the second quarter of last year.
Operating Expenses
Total operating expenses in the three months ended June 30, 1999 decreased
by $502,000 compared to the same period in 1998, a decrease of 25%. This was
primarily due to a restructuring implemented in the first half of 1998 to focus
resources on programs funded by collaborative partners. The restructuring
resulted in reduced payroll, facilities and external research costs. During the
second quarter of 1999, the Company averaged 17 full-time employees,
approximately 29% lower than a year ago.
Research and development expenses decreased by $390,000, and general and
administrative expenses decreased by $112,000 as compared to last year's second
quarter. These decreases were a result of the restructuring described above and
attrition.
Interest Income
Interest income for the quarter ended June 30, 1999 was lower by $129,000
than that in the same period in 1998, as a result of lower cash, cash
equivalents and marketable securities available for investment, due primarily to
a dividend payment of $17.9 million to shareholders in April 1998 and cash used
for operating purposes.
8
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CAMBRIDGE NEUROSCIENCE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Net Loss Per Share
For the quarter ended June 30, 1999, the Company's net loss and net loss
per share were approximately 40% lower than in the same period last year, as a
result of higher research and development revenue and lower operating expenses,
both as described earlier.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Revenues
In the six months ended June 30, 1999, the Company's research and
development revenues increased by $321,000 as compared to the same period in
1998, an increase of 58%. This increase was due to revenue earned under the
Bayer collaboration totaling $372,000 during the first six months of 1999.
Revenues in the first half of 1999 and 1998 included $500,000 under the Allergan
collaboration. During the first half of last year, the Company also had a Small
Business Innovation Research Grant, accounting for $50,000 in revenue.
Operating Expenses
In the first half of 1999, the Company's total operating expenses decreased
by $2.7 million, or 47% as compared to the same period of last year. Research
and development expenses decreased by $1.5 million or 38%, and general and
administrative expenses decreased by $306,000 or 33% as compared to the same
period of last year. These decreases were attributable primarily to lower
payroll, facilities and external research costs as a result of a restructuring
program implemented during the first half of 1998. In addition the 1998 period
included $921,000 of restructuring charges relating to severance costs.
Interest Income
Interest income decreased by $480,000, or 61%, compared to the same period
in 1998. This decrease was a result of the decrease in cash available for
investment following the payment of a dividend totaling $17.9 million in April
1998 and cash used for operating activities.
Net Loss Per Share
In the first half of 1999, the Company's net loss per share was 60% lower
than that of a year ago. This decrease in net loss per share was the result of
higher research and development revenues and lower operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had cash, cash equivalents and marketable
securities of $10.8 million, compared to $11.9 million at December 31, 1998, a
decrease of $1.1 million. The decrease was the result primarily of net cash used
for operating activities.
In December 1998, the Company and Bayer entered into an agreement whereby
Bayer licensed the development and manufacturing rights to GGF2 for the
treatment of multiple sclerosis and peripheral neuropathies. In exchange, the
Company received a $1.0 million license fee in January 1999, and will
9
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CAMBRIDGE NEUROSCIENCE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
receive up to $1.0 million for reimbursement of costs under a research protocol
covered by the agreement. Through June 30, 1999, the Company has received
$777,000 of this $1.0 million and anticipates receiving the remaining $223,000
during the balance of 1999. The Company may also receive up to $24.0 million in
milestone payments. However, there can be no assurance as to when or if any
milestones will be achieved. Under terms of the agreement, Bayer is responsible
for the manufacture and development of GGF2, and all costs associated therewith.
Bayer may terminate this agreement at any time upon 120 days written notice.
Pursuant to a collaborative agreement with Allergan, the Company is to
receive a total of $3.0 million in research funding, $1.0 million per year,
through November 1999. Through June 30, 1999, the Company has received $2.6
million of the total $3.0 million, and expects to receive the remaining $400,000
during the second half of 1999. Under this agreement, Allergan is responsible
for the development of potential products and will bear all associated costs.
The collaboration also provides that the Company may receive up to an additional
$18.5 million upon the achievement of certain milestones. However, there can be
no assurance as to when or if these milestones will be achieved. Allergan may
terminate this agreement upon six months prior written notice.
In December 1996, the Company formed a subsidiary, Cambridge NeuroScience
Partners, Inc. ("CNPI"), to pursue the development of treatments for Alzheimer's
disease and other neurological disorders. CNPI entered into a collaboration
agreement with the J. David Gladstone Institutes ("Gladstone"). Pursuant to this
collaboration, Gladstone is conducting a research program over a three year
period for which CNPI is providing $1.25 million in funding per year through
December 1999. The Company owns 80% of the outstanding stock of CNPI and has
guaranteed CNPI's obligations with respect to its collaboration with Gladstone.
To date, the minority shareholders have not made equity investments in CNPI. As
a result, the entire net loss of CNPI has been attributed to the Company.
During the first quarter of 1999, the Company and two outside stroke
research groups designed a new phase III clinical trial for aptiganel, the
Company's lead stroke candidate, focused on a subset of the stroke patient
population. In addition, the two outside stroke researchers collaborated on a
grant application to the National Institutes of Health to fund this new phase
III study. Based on preliminary feedback received by the outside researchers,
the grant will not be funded. As a result, the Company is continuing to explore
other funding opportunities for the further development of aptiganel. Further
development of aptiganel may require substantial expenditures by the Company,
and require the Company to reduce spending on its other research programs. There
can be no assurance that further development of aptiganel will occur or that
funding for such development will be available or sufficient to complete such
development.
The Company is continuing to evaluate alternatives for maximizing
shareholder value, which may include the sale of some or all of the Company's
technology and other assets or a merger with another company.
The Company believes that its cash, cash equivalents and marketable
securities as of June 30, 1999 will be sufficient to maintain operations through
2000.
10
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CAMBRIDGE NEUROSCIENCE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
YEAR 2000 PROBLEM
The Company is aware of the issues that many computer systems will face as
the year 2000 approaches. These issues are the result of computer programs
having been written using two digits rather than four digits to define the
applicable year. Computer hardware and software that have time-sensitive
operating data may recognize a date of "00" as the year 1900 rather than the
year 2000, resulting in system failures or miscalculations.
State of Readiness
The following paragraphs describe the Company's state of readiness relating
to the year 2000 issue, including the Company's formal plan for addressing the
issue, a review of progress made to date, and the estimated dates for completion
of each phase of the plan.
The phrase "In-house Systems" will be used in the discussion, and is
defined as the Company's: i.) computer hardware and software, ii.)
computer-aided laboratory equipment, and iii.) computer-aided office equipment,
including telephones and security systems. All of these items were purchased
from third-party manufacturers or suppliers. The Company has no internally
manufactured or developed computers or computer-related hardware or software.
The Company's evaluation of the year 2000 issue covers both: i.) In-house
Systems, and ii.) service providers. The Company's plan with respect to its
In-house Systems is comprised of three phases: inventory and assessment;
remediation; and testing and implementation.
Inventory and Assessment:
The inventory and assessment phase of this process involves the
identification of all of the Company's In-house Systems and determining which of
them may be impacted by the year 2000 problem and require repair, upgrade or
replacement. This entails performing initial tests of each component of hardware
and software and/or asking manufacturers of such components whether their
systems are currently year 2000 compliant or whether they require modification
to become compliant.
As of June 30, 1999, the Company had completed approximately 95% of its
inventory and assessment. The Company has completed the inventory and assessment
of its personal and network computers, its general operating software, its
accounting and administrative software, and its computer-aided office equipment
and systems. The Company has completed an inventory and has essentially
completed the assessment of its laboratory equipment, and is awaiting feedback
from manufacturers on two pieces of laboratory equipment. The inventory and
assessment of all systems is expected to be completed by August 15, 1999.
Remediation:
Remediation entails repairing, upgrading or replacing equipment or software
that is not compliant. Based on the results of the inventory and assessment,
approximately half of the Company's laboratory equipment needed repair or
modification. The majority of the Company's personal and network computers and
operating systems also required minor repair or upgrade in order to become
compliant, as did certain of the Company's office equipment and administrative
software. Remediation of all personal
11
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CAMBRIDGE NEUROSCIENCE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
and network computers and operating systems has been completed. Remediation of
non-compliant laboratory equipment, office systems, and administrative software
is approximately 90% complete, and is scheduled to be completed by August 31,
1999.
Testing and Implementation:
This will include testing all repaired, replaced and new In-house Systems
to determine that they are working properly and adequately address the year 2000
issues identified. All personal and network computers and operating systems have
been tested and are deemed compliant. The Company expects to complete this phase
of its year 2000 plan and have all systems fully operational by September 1999.
Third-Party Service Providers:
The Company's major service providers that may be impacted by the year 2000
issue are as follows: i.) banks and financial institutions, ii.) administrative
services such as transfer agent and payroll agent, iii.) utility services such
as electricity, heat, water and telephone, and iv.) external research and
development services.
To evaluate the readiness of its third-party service providers, the Company
has contacted and reviewed written literature from each provider to ascertain
whether the services they provide are at risk of being non-compliant, whether
the providers are addressing this issue and what their plans are for resolving
any issues. To date, the Company has completed the assessment of approximately
90% of its third-party service providers, but is still awaiting letters of
compliance from some. The Company is monitoring the progress of each service
provider. The identification of alternative vendors of services is being
considered in the course of this process and in the development and
implementation of a contingency plan.
Costs
The Company does not expect to incur material costs to evaluate and resolve
any year 2000 problems. The Company may contract with outside consultants at
various times during this process to ensure the timely completion of the
project. The Company expects to upgrade or replace certain systems supporting
the administrative functions and facilities and may have to replace some of the
software or equipment used in its research operations. Based on information
available at this time, the Company estimates that it will spend between $25,000
and $50,000 to complete the process of resolving the year 2000 problem. These
expenditures will be funded from existing cash resources and will not have a
material impact on the amount of funds available for other operating purposes.
The Company has not incurred material outside costs to date related to
repairing, upgrading or replacing equipment to become compliant. The actual
costs to be incurred by the Company will depend on a number of factors which
cannot be accurately predicted, including the availability and cost of
consultants and the extent and difficulty of the remediation and other work to
be done.
Risks
In the event that no further progress is made on the remediation of any
year 2000 problems, the Company may experience interruptions in the processing
of certain data generated by the Company's research activities. The Company is
aware of certain pieces of computer-aided research and discovery
12
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CAMBRIDGE NEUROSCIENCE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
equipment that are not compliant, which could cause the Company to revert to
manual laboratory testing procedures and/or outsourcing for these services.
The Company expects to have completed all phases of this project before the
end of 1999 and does not believe that the existence of significant unresolved
year 2000 problems will result in the prolonged and material interruption of its
daily operations, including the conduct of its research and development
activities. However, there can be no assurance that the Company will complete
the remediation of any year 2000 problems on a timely basis or that any
unresolved problems would not have an adverse impact on the Company's ability to
continue operations and fulfill its obligations pursuant to research and
development collaboration agreements.
The Company has certain relationships with third parties, including utility
providers, financial institutions, vendors and other service providers. The
Company believes that with the exception of its utility providers, its
relationships with vendors and service providers are not exclusive or material.
Consequently, the Company believes that, in the event of a failure on the part
of these third parties to become year 2000 compliant on a timely basis, the
Company would be able to continue to maintain operations, including the conduct
of most of its research and development activities, utilizing alternative
vendors where necessary. An interruption of the Company's utility services could
materially affect the Company's research, development and administrative
operations until such time that those utility services are resumed. There can be
no assurance that any third-party service provider engaged by the Company will
achieve year 2000 compliance on a timely basis, or that any lack of compliance
on the part of such provider will not materially affect the Company's
operations. The identification of alternative vendors of services and supplies
will be considered in the course of this process and in the development and
implementation of a contingency plan.
Contingency plan
The Company has developed a contingency plan to address what it believes is
the major risk associated with the year 2000 problem, the failure of electrical
power to the Company's facility. In regards thereto, the Company has developed
an emergency response plan to ensure the Company's In-house systems are
safeguarded against data loss or malfunction and that any freezers containing
key research material do not fail. The Company has an emergency generator
powered by natural gas which will be available should there be a temporary
electrical power outage. As long as any potential electrical power outage is
temporary, the Company's operations should not be materially affected. If the
outage is other than temporary, in all likelihood the Company will be unable to
resume research activities until such power is restored.
The Company is in the process of establishing contingency plans to identify
alternative research testing methods, recordkeeping and third-party services in
the event of other potential year 2000 problems. The Company expects to have
established this plan, to the extent deemed necessary, before the end of 1999.
The Company does not believe that inflation has had a material impact on
its results of operations.
The discussion contained in this section as well as elsewhere in this
Quarterly Report on Form 10-Q may contain forward-looking statements based on
the current expectations of the Company's management. The Company cautions
readers that there can be no assurance that the actual results or
13
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CAMBRIDGE NEUROSCIENCE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
business conditions will not differ materially from those projected or suggested
in the forward-looking statements as a result of various factors, including, but
not limited to, the following: uncertainties relating to the Company's product
candidates; uncertainties as to the Company's ability to continue operations and
achieve profitability; the early stage of development of all of the Company's
product candidates; the Company's reliance on current and prospective
collaborative partners to supply funds for research and development and to
commercialize its products; technical risks associated with the development of
new products; the competitive environment of the biotechnology and
pharmaceutical industries, and the Company's ability to resolve potential year
2000 problems on a timely basis. Readers are cautioned not to place undue
reliance on these forward-looking statements which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements which may be made to reflect
events or circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information required by Item 3 is not provided as the disclosure
requirements are not applicable to the Company pursuant to Item 305(e) of
Regulation S-K.
14
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CAMBRIDGE NEUROSCIENCE, INC.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's Annual Meeting of stockholders held on Wednesday, June 3,
1999, the following individuals were elected directors of the Company:
<TABLE>
<CAPTION>
Votes
--------------------------------------------------------- ---------------------
Nominees For Against Abstentions Broker Non-Votes
-------- --- ------- ----------- ----------------
<S> <C> <C> <C> <C>
Nancy S. Amer 12,045,440 123,971 0 2,840,671
Burkhard Blank 11,971,990 197,421 0 2,840,671
Ira A. Jackson 11,954,618 214,793 0 2,840,671
Joseph B. Martin 11,776,580 392,831 0 2,840,671
Paul C. O'Brien 11,765,358 404,053 0 2,840,671
Harry W. Wilcox, III 11,984,140 185,271 0 2,840,671
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and restated Bylaws of the Company as of June 4, 1999
27.1 Financial Data Schedule for the interim year-to-date period ended
June 30, 1999 (for electronic filing only)
(b) Reports on Form 8-K
None.
15
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CAMBRIDGE NEUROSCIENCE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMBRIDGE NEUROSCIENCE, INC.
Date August 10, 1999 /s/ Harry W. Wilcox, III
------------------------ --------------------------------------
Harry W. Wilcox, III
President and Chief Executive Officer
(Principal Executive Officer;
Acting Principal Financial Officer)
Date August 10, 1999 /s/ Glenn A. Shane
------------------------ --------------------------------------
Glenn A. Shane
(Principal Accounting Officer)
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CAMBRIDGE NEUROSCIENCE, INC.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3.1 Amended and restated Bylaws of the Company as of June 4, 1999
27.1 Financial Data Schedule for the interim year-to-date period
ended June 30, 1999 (for electronic filing only)
17
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Exhibit 3.1
CAMBRIDGE NEUROSCIENCE, INC.
AMENDED AND RESTATED BYLAWS
JUNE 4, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C> <C> <C>
ARTICLE I - OFFICES ..........................................................................................1
Section 1. REGISTERED OFFICE........................................................................1
Section 2. OTHER OFFICES............................................................................1
ARTICLE II - STOCKHOLDERS.....................................................................................1
Section 1. ANNUAL MEETINGS..........................................................................1
Section 2. SPECIAL MEETINGS.........................................................................1
Section 3. NOTICE OF MEETINGS.......................................................................1
Section 4. ADJOURNMENTS.............................................................................2
Section 5. QUORUM...................................................................................2
Section 6. ORGANIZATION.............................................................................2
Section 7. VOTING; PROXIES..........................................................................2
Section 8. FIXING DATE OF DETERMINATION OF STOCKHOLDERS OF RECORD...................................3
Section 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE....................................................3
Section 10. REGISTERED STOCKHOLDERS..................................................................3
SECTION 11. STOCKHOLDER PROPOSALS....................................................................3
ARTICLE III - DIRECTORS ......................................................................................6
Section 1. NUMBER; ELECTION; TENURE AND QUALIFICATION...............................................6
Section 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS................................................6
Section 3. GENERAL POWERS...........................................................................6
Section 4. LOCATION OF MEETINGS.....................................................................6
Section 5. FIRST MEETING OF NEWLY ELECTED BOARD OF DIRECTORS........................................6
Section 6. REGULAR MEETINGS.........................................................................7
Section 7. SPECIAL MEETINGS.........................................................................7
Section 8. QUORUM...................................................................................7
Section 9. ACTION WITHOUT MEETING...................................................................7
Section 10. MEETINGS BY MEANS OF CONFERENCE TELEPHONE................................................7
Section 11. DESIGNATION AND GENERAL POWERS OF COMMITTEES.............................................7
Section 12. MINUTES OF COMMITTEE MEETINGS............................................................8
Section 13. COMPENSATION.............................................................................8
Section 14. REMOVAL..................................................................................8
ARTICLE IV - NOTICES .........................................................................................8
Section 1. NOTICES..................................................................................8
Section 2. WAIVER OF NOTICE.........................................................................8
ARTICLE V - OFFICERS .........................................................................................9
Section 1. TITLES; CHAIRMAN OF THE BOARD............................................................9
Section 2. ELECTION OF PRESIDENT, SECRETARY AND TREASURER...........................................9
Section 3. OTHER OFFICERS AND AGENTS................................................................9
Section 4. SALARIES.................................................................................9
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Section 5. TENURE; REMOVAL; VACANCIES...............................................................9
Section 6. PRESIDENT; GENERAL POWERS................................................................9
Section 7. PRESIDENT'S POWER TO EXECUTE CONTRACTS UNDER SEAL.......................................10
Section 8. VICE PRESIDENTS.........................................................................10
Section 9. SECRETARY...............................................................................10
Section 10. ASSISTANT SECRETARY.....................................................................10
Section 11. TREASURER; GENERAL POWERS...............................................................10
Section 12. DISBURSEMENT OF FUNDS...................................................................10
Section 13. SURETY BOND.............................................................................11
Section 14. ASSISTANT TREASURER.....................................................................11
ARTICLE VI - CERTIFICATES OF STOCK...........................................................................11
Section 1. CERTIFICATES OF STOCK...................................................................11
Section 2. SIGNATURES..............................................................................11
Section 3. LOST CERTIFICATES.......................................................................11
Section 4. TRANSFER OF STOCK.......................................................................12
ARTICLE VII - GENERAL PROVISIONS.............................................................................12
Section 1. DIVIDENDS...............................................................................12
Section 2. RESERVES................................................................................12
Section 3. ANNUAL STATEMENT........................................................................12
Section 4. CHECKS..................................................................................12
Section 5. FISCAL YEAR.............................................................................12
Section 6. CORPORATE SEAL..........................................................................12
Section 7. INDEMNIFICATION.........................................................................12
ARTICLE VIII - AMENDMENTS....................................................................................12
Section 1. AMENDMENTS..............................................................................12
</TABLE>
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CAMBRIDGE NEUROSCIENCE, INC.
* * * * *
B Y L A W S
ARTICLE I - OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the City of
Dover, County of Kent, State of Delaware.
Section 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II - STOCKHOLDERS
Section 1. ANNUAL MEETINGS. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on such date and at such hour and
place as the directors or an officer designated by the directors may determine.
If the annual meeting is not held on the date designated therefor, the directors
shall cause the meeting to be held as soon thereafter as convenient.
Section 2. SPECIAL MEETINGS. Special meetings of stockholders for any
purpose or purposes may be held at any date, time and place within or without
the State of Delaware upon the call of the Chairman of the Board, if any, or the
Board of Directors, or by the Secretary or any other officer upon the written
request of one or more stockholders holding of record at least a majority of the
outstanding shares of stock of the corporation entitled to vote at such meeting.
Such written request shall state the purpose or purposes of the proposed
meeting. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the call of the
meeting.
Section 3. NOTICE OF MEETINGS. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting. Unless
otherwise provided by law, the written notice of any meeting shall be given not
less than ten nor more than fifty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such notice shall be
deemed to be given when deposited in the mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
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Section 4. ADJOURNMENTS. Any meeting of stockholders, annual or special,
may adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 5. QUORUM. At each meeting of stockholders, except where otherwise
provided by law or the certificate of incorporation or these by-laws, the
holders of a majority of the outstanding shares of stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum. In the
absence of a quorum, the holders of a majority of the shares present may adjourn
the meeting from time to time in the manner provided in Article II, SECTION 4 of
these by-laws until a quorum shall attend. Shares of its own stock belonging to
this corporation, or to another corporation if a majority of the shares entitled
to vote in the election of directors of such other corporation is held, directly
or indirectly, by this corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of any corporation to vote stock, including but not limited to
its own stock, held by it in a fiduciary capacity.
Section 6. ORGANIZATION. Meetings of stockholders shall be presided over by
the Chairman of the Board, if any, or in his absence by the Vice Chairman of the
Board, if any, or in his absence by the President, or in his absence by a Vice
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 7. VOTING; PROXIES. Each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote for each share of stock
held by him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the corporation. Voting at meetings of
stockholders need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon present in person or by proxy at such
meeting shall so determine. At all meetings of stockholders for the election of
directors a plurality of the votes cast shall be sufficient to elect. All other
elections and
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questions shall, unless otherwise provided by law or by the certificate of
incorporation or these by-laws, be decided by the vote of the holders of the
majority of the shares of stock entitled to vote thereon present in person or by
proxy at the meeting.
Section 8. FIXING DATE OF DETERMINATION OF STOCKHOLDERS OF RECORD. In order
that the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty days
prior to any action. If no record date is fixed: (1) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, the close of business on the day
next preceding the day on which the meeting is held; (2) the record date for
determining stockholders for any other purpose shall be the close of business on
the day on which the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. The stock ledger
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list of stockholders or the books of the corporation, or
to vote in person or by proxy at any meeting of stockholders.
Section 10. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
Section 11. STOCKHOLDER PROPOSALS.(A)(1) For nominations or other business
to be properly brought before an annual meeting by a stockholder or for
nominations to be properly brought before a special meeting, (i) the stockholder
must have given timely notice thereof in
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writing to the Secretary of the corporation, (ii) in the case of other business
to be brought before an annual meeting, such other business must otherwise be a
proper matter for stockholder action, (iii) if the stockholder, or the
beneficial owner on whose behalf any such proposal or nomination is made, has
provided the corporation with a Solicitation Notice, as that term is defined
below in this paragraph (A)(1) relating thereto, such stockholder or beneficial
owner must, in the case of a proposal, have delivered a proxy statement and form
of proxy to holders of at least the percentage of the corporation's voting
shares required under applicable law to carry any such proposal, or in the case
of a nomination or nominations, have delivered a proxy statement and form of
proxy to holders of at least a percentage of the corporation's voting shares
reasonably believed by such stockholder or beneficial owner to be sufficient to
elect the nominee or nominees proposed to be nominated by such stockholder, and
must, in either case, have included with the proxy statement the Solicitation
Notice and (iv) if no Solicitation Notice relating thereto has been timely
provided pursuant to this Section, the stockholder or beneficial holder
proposing such business or nomination must not have solicited a number of
proxies sufficient to have required the delivery of such a Solicitation Notice
under this Section. To be timely, a stockholder's notice pertaining to an annual
meeting shall be delivered to the Secretary at the principal executive offices
of the corporation not later than the close of business on the forty-fifth
(45th) day nor earlier than the close of business on the seventy-fifth (75th)
day prior to the first anniversary of the preceding year's mailing date for
stockholder proxy materials; provided, however, that in the event that the date
of the annual meeting is more than thirty (30) days before or more than sixty
(60) days after the date of the annual meeting in the preceding year, or if an
annual meeting was not held in the preceding year, notice by the stockholder to
be timely must be so delivered by the later of (a) the close of business on the
ninetieth (90th) day prior to date of such stockholders' meeting or (b) the
close of business on the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made by the corporation. The
stockholder's notice shall set forth: (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case,
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); (b)
as to any other business that the stockholder proposes to bring before an annual
meeting, a brief description of the business desired to be brought before the
annual meeting, the reasons for conducting such business at the annual meeting
and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; (c) as to the
stockholder giving the notice, (i) the name and address of such stockholder, as
it appears on the corporation's books, (ii) the class and number of shares of
the corporation that are owned beneficially and held of record by such
stockholder and such beneficial owner; and (d) whether either such stockholder
or the beneficial owner intends to deliver a proxy statement and form of proxy
to holders of, in the case of a proposal, at least the percentage of the
corporation's voting shares required under applicable law to carry the proposal
or, in the case of a nomination or nominations, to holders of at least a
percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect such nominee or
nominees (an affirmative statement of such intent, a
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"Solicitation Notice"). A stockholder shall also comply with all applicable
requirements of the Exchange Act of 1934 (or any successor provision), and the
rules and regulations thereunder with respect to the matters set forth in these
bylaws. Nothing in this Section 11 shall be deemed to affect any rights of the
stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
(2) Notwithstanding anything in the second sentence of paragraph (A)(1) of
this Section to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the corporation is increased and there is
no public announcement by the corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least
fifty-five (55) days prior to the first anniversary of the preceding year's
mailing date for stockholder proxy materials (or, if the annual meeting is held
more than thirty (30) days before or sixty (60) days after the date of the
annual meeting in the preceding year, or if an annual meeting was not held in
the preceding year, at least one hundred (100) days prior to the date of such
stockholders' meeting,) a stockholder's notice required by this Section shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall have been delivered to the
Secretary at the principal executive office of the corporation not later than
the close of business on the tenth (10th) day following the day on which such
public announcement is first made by the corporation.
(3) In the event the corporation calls a special meeting of stockholders
for the purpose of electing one or more directors to the Board of Directors, any
such stockholder may nominate a person or persons (as the case may be), for
election to such position(s) as specified in the corporation's notice of
meeting, if the stockholder's notice required by paragraph (A)(1) of this
Section shall be delivered to the Secretary at the principal executive offices
of the corporation by the later of (a) the close of business on the ninetieth
(90th) day prior to such special meeting or (b) the close of business on the
tenth (10th) day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(B) GENERAL.
(1) Only such persons who are nominated in accordance with the procedures
set forth in this Section shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section. Except as otherwise provided by law or these bylaws, the chairman of
the meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made or proposed, as
the case may be, in accordance with the procedures set forth in this Section
and, if any proposed nomination or business is not in compliance herewith, to
declare that such defective proposal or nomination shall be disregarded.
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(2) For purposes of this Section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
ARTICLE III - DIRECTORS
Section 1. NUMBER; ELECTION; TENURE AND QUALIFICATION. The number of
directors shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this Article
III, and each director elected shall hold office until his successor is elected
and qualified. Directors need not be stockholders.
Section 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
Section 3. GENERAL POWERS. The business of the corporation shall be managed
by or under the direction of its Board of Directors, which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these bylaws directed or
required to be exercised or done by the stockholders.
Section 4. LOCATION OF MEETINGS. The Board of Directors of the corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 5. FIRST MEETING OF NEWLY ELECTED BOARD OF DIRECTORS. The first
meeting of each newly elected Board of Directors shall be held at such time and
place as shall be fixed by the vote of the stockholders at the annual meeting,
and notice of such meeting shall not be necessary to the newly elected directors
in order legally to constitute the meeting, provided a quorum shall be present.
In the event of the failure of the stockholders to fix the time or place of such
first meeting of the newly elected Board of Directors, or in the event such
meeting is not held at the time and place so fixed by the stockholders, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors, or
as shall be specified in a written waiver signed by all of the directors.
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Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held without notice at such time and at such place as shall from time to time
be determined by the Board.
Section 7. SPECIAL MEETINGS. Special meetings of the Board may be called by
the President, either personally or by mail or by telegram; special meetings
shall be called by the President or Secretary in like manner on the written
request of two directors unless the Board consists of only one director; in
which case special meetings shall be called by the President or Secretary in
like manner on the written request of the sole director.
Section 8. QUORUM. At all meetings of the Board, a majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. ACTION WITHOUT MEETING. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 10. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise
restricted by the certificate of incorporation or these bylaws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or any committee, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at the meeting.
Section 11. DESIGNATION AND GENERAL POWERS OF COMMITTEES. The Board of
Directors may, by resolution passed by a majority of the whole Board, designate
one or more committees, each committee to consist of one or more of the
directors of the corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent disqualified
member at any meeting of the committee.
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
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agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders dissolution of the corporation or a
revocation of a dissolution, amending the bylaws of the corporation; and, unless
the resolution or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 13. COMPENSATION. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 14. REMOVAL. Unless otherwise restricted by the certificate of
incorporation or bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV - NOTICES
Section 1. NOTICES. Whenever, under the provisions of the statute or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the statutes or of the certificate of incorporation or
of these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V - OFFICERS
Section 1. TITLES; CHAIRMAN OF THE BOARD. The officers of the corporation
shall be chosen by the Board of Directors and shall be a President, a Secretary
and a Treasurer. The Board of
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Directors may also choose a Chairman, one or more Vice-Presidents, and one or
more Assistant Secretaries and Assistant Treasurers. If a Chairman of the Board
of Directors is chosen, he shall, unless the board of Directors determines
otherwise, be the chief Executive Officer of the corporation. The Chief
Executive Officer shall preside at all meetings of the Board of Directors and of
the stockholders at which he is present, shall have general supervision and
control of the business of the corporation and shall have such other powers and
duties as may be assigned to him from time to time by the Board of Directors and
as prescribed by these bylaws. During all times when a Chairman may be serving,
in the absence of the Chairman or in the event of his inability or refusal to
act, the President shall serve as his alternate as chairman of meetings. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 2. ELECTION OF PRESIDENT, SECRETARY AND TREASURER. The Board of
Directors at its first meeting after each annual meeting of stockholders shall
choose a President, a Secretary and a Treasurer.
Section 3. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint
such other officers and agents as its shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. SALARIES. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5. TENURE; REMOVAL; VACANCIES. The officers of the corporation
shall hold office until their successors are chosen and qualify. Any officer
elected or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the corporation shall be filled by the Board of Directors.
Section 6. PRESIDENT; GENERAL POWERS. Subject to the provisions of Section
1 of Article V, the President shall be the Chief Executive Officer of the
corporation. If, pursuant to Section 1 of ARTICLE V, a Chairman of the Board of
Directors is the Chief Executive Officer, the President shall be the Chief
Operating Officer of the corporation and shall have such powers as the directors
may designate from time to time or as prescribed by these bylaws and perform
such duties as the Chief Executive Officer may designate from time to time.
Section 7. PRESIDENT'S POWER TO EXECUTE CONTRACTS UNDER SEAL. The Chief
Executive Officer or the President shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation.
9
<PAGE> 13
Section 8. VICE PRESIDENTS. In the absence of the President or in the event
of his inability or refusal to act, the Vice-President (or in the event there be
more than one Vice-President, the Vice-Presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice-Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 9. SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and, when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. ASSISTANT SECRETARY. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 11. TREASURER; GENERAL POWERS. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors.
Section 12. DISBURSEMENT OF FUNDS. The Treasurer shall disburse the funds
of the corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the president and the Board
of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all his transactions as Treasurer and of the financial
condition of the corporation.
Section 13. SURETY BOND. If required by the Board of Directors, the
Treasurer shall give the corporation a bond (which shall be renewed every six
years) in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death, resignation,
10
<PAGE> 14
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
Section 14. ASSISTANT TREASURER. The Assistant Treasurer, or if there shall
be more than one, the Assistant Treasurers in the order determined by the Board
of Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE VI - CERTIFICATES OF STOCK
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the corporation
shall be entitled to have a certificate, signed by, or in the name of the
corporation by, the Chairman or Vice-Chairman of the Board of Directors, or the
President or a Vice-President and the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Section 2. SIGNATURES. Any of or all the signatures on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall cease to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. TRANSFER OF STOCK. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
ARTICLE VII - GENERAL PROVISIONS
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<PAGE> 15
Section 1. DIVIDENDS. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. RESERVES. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 3. ANNUAL STATEMENT. The Board of Directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
Section 4. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 5. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
Section 6. CORPORATE SEAL. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 7. INDEMNIFICATION. The corporation shall indemnify its officers,
directors, employees and agents to the extent permitted by the General
Corporation Law of Delaware.
ARTICLE VIII - AMENDMENTS
Section 1. AMENDMENTS. These bylaws may be altered, amended or repealed or
new bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate of incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q 6/30/99
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 3,771
<SECURITIES> 7,042
<RECEIVABLES> 174
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,301
<PP&E> 290
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,591
<CURRENT-LIABILITIES> 719
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 11,854
<TOTAL-LIABILITY-AND-EQUITY> 12,591
<SALES> 0
<TOTAL-REVENUES> 490
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (883)
<INCOME-TAX> 0
<INCOME-CONTINUING> (883)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (883)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
