<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission File Number: 0-21134
PROCEPT, INC.
-------------
(Exact name of registrant as specified in its charter)
Delaware 04-2893483
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
840 Memorial Drive, Cambridge, Massachusetts 02139
- -------------------------------------------- -----
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (617) 491-1100
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
--- ---
Number of shares outstanding of each of the issuer's classes of common stock, as
of latest practicable date.
Class Outstanding as of August 1, 1996
----- --------------------------------
Common Stock, $.01 par value 13,403,328
This report includes a total of 20 pages
--
Exhibit Index Appears on Page 14
<PAGE> 2
PROCEPT, INC.
<TABLE>
INDEX
-----
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 3
June 30, 1996 and December 31, 1995
Statements of Operations 4
Three months and six months ended June 30, 1996 and 1995
Statements of Cash Flows 5
Six Months ended June 30, 1996 and 1995
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
<TABLE>
PROCEPT, INC.
BALANCE SHEETS
--------------
<CAPTION>
June 30, 1996 December 31, 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,040,197 $ 565,521
Marketable securities (Note 3) 6,006,157 2,005,670
Accounts receivable, net 57,050 8,944
Prepaid expenses and other current assets 197,708 147,511
------------ ------------
Total current assets 11,301,112 2,727,646
Property and equipment, net 2,305,390 2,815,320
Restricted investment 469,000 522,000
Deferred financing charges -- 152,773
Other assets 250,975 178,920
------------ ------------
TOTAL ASSETS $ 14,326,477 $ 6,396,659
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 706,474 $ 888,700
Accrued compensation 189,120 194,115
Accrued contract research costs 591,416 417,353
Other current liabilities 190,204 366,670
Current portion of capital lease obligations 778,914 908,432
Deferred revenue 425,000 1,275,000
------------ ------------
Total current liabilities 2,881,128 4,050,270
Capital lease obligations, less current portion 274,755 634,294
Other noncurrent liabilities 289,248 273,139
Commitments and contingencies (Note 4)
Stockholders' equity (Note 2):
Common stock, par value $.01 per share; 30,000,000 and 12,000,000
shares authorized at June 30, 1996 and December 31,1995
respectively; 13,353,328 and 6,476,062 shares issued and
outstanding at June 30, 1996 and December 31, 1995,
respectively 133,533 64,761
Additional paid-in capital 54,262,657 38,882,654
Receivable from sale of stock (33,711) (42,107)
Accumulated deficit (43,475,260) (37,467,440)
Unrealized gain (loss) on securities available for sale (5,873) 1,088
----------- ------------
Total stockholders' equity 10,881,346 1,438,956
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,326,477 $ 6,396,659
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
PROCEPT, INC.
<TABLE>
STATEMENTS OF OPERATIONS
------------------------
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Research and development revenue
under collaborative arrangements $ 425,000 $ 1,000,000 $ 850,000 $ 2,000,000
----------- ----------- ----------- -----------
Research and development revenue
under collaborative arrangements
with related party 75,000 -- 150,000 28,645
Revenue from grant -- -- -- 51,600
Interest income 95,225 171,618 147,136 409,468
----------- ----------- ----------- -----------
Total revenues 595,225 1,171,618 1,147,136 2,489,713
----------- ----------- ----------- -----------
Costs and expenses:
Research and development 2,642,848 3,393,498 5,471,273 6,555,791
General and administrative 849,156 953,405 1,620,644 1,880,347
Interest expense 28,780 65,038 63,039 136,078
----------- ----------- ----------- -----------
Total costs and expenses 3,520,784 4,411,941 7,154,956 8,572,216
----------- ----------- ----------- -----------
Net loss $(2,925,559) $(3,240,323) $(6,007,820) $(6,082,503)
=========== =========== =========== ===========
Net loss per common share $ (0.26) $ (0.51) $ (0.64) $ (0.95)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 11,082,916 6,406,967 9,435,193 6,390,370
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
PROCEPT, INC.
<TABLE>
STATEMENTS OF CASH FLOWS
------------------------
<CAPTION>
Six Months Ended June 30,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(6,007,820) $(6,082,503)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 607,562 478,842
Loss on sale/leaseback -- 3,270
Gain on sale of marketable securities (1,359) --
Changes in operating assets and liabilities:
Accounts receivable (48,106) --
Prepaid expense and other current assets (50,197) 2,015
Other assets 2,945 (6,055)
Accounts payable (182,226) (414,085)
Accrued compensation (4,995) (7,495)
Accrued contract research 174,063 (152,472)
Other current liabilities (60,615) 35,699
Other noncurrent liabilities 16,108 39,492
Note payable (115,851) --
Deferred revenue (850,000) (2,000,000)
----------- -----------
Net cash used in operating activities (6,520,491) (8,103,292)
----------- -----------
Cash flows from investing activities:
Capital expenditures (101,510) (357,501)
Proceeds from maturity of marketable securities -- 2,000,000
Proceeds from sale of marketable securities 2,004,070 --
Purchase of marketable securities (6,989,032) --
Decrease in marketable securities 982,751 --
Proceeds from sale/leaseback of equipment -- 116,784
Other investing activities (75,000) --
(Increase) decrease in restricted investments 53,000 (85,000)
----------- -----------
Net cash provided by (used in)
investing activities (4,125,721) 1,674,283
----------- -----------
Cash flows from financing activities:
Principal payments on capital lease obligations (489,057) (533,442)
Proceeds from issuance of common stock 5,135,714 77,361
Proceeds from private placement of stock 10,403,289 --
Proceeds from employee stock purchase plan 70,722 --
Proceeds from sale of common stock warrants 220 --
----------- -----------
Net cash provided by (used in)
financing activities 15,120,888 (456,081)
----------- -----------
Net change in cash and cash equivalents 4,474,676 (6,885,090)
Cash and cash equivalents at beginning of period 565,521 7,449,746
----------- -----------
Cash and cash equivalents at end of period $ 5,040,197 $ 564,656
=========== ===========
Supplemental disclosures and non-cash transactions:
Interest paid $ 71,252 $ 136,821
=========== ===========
Property and equipment acquired under capital leases -- $ 1,266,772
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
PROCEPT, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
Plan of Operations
- ------------------
Since its inception the Company has generated no revenue from product sales. The
Company has not been profitable since inception and has incurred an accumulated
deficit of approximately $43,475,000 through June 30, 1996. Losses have resulted
principally from costs incurred in research and development activities related
to the Company's efforts to develop drug candidates and from the associated
administrative costs. The Company expects to incur significant additional
operating losses over the next several years and expects cumulative losses to
increase substantially due to continuing research and development efforts,
preclinical and clinical testing and development of marketing, sales and
production capabilities.
Because of its continuing losses from operations, the Company will be required
to obtain additional funds in the short term to satisfy its ongoing capital
needs and to continue operations. Although management continues to pursue
additional funding arrangements and/or strategic partnering there can be no
assurance that additional funding will be available from any of these sources
or, if available, will be available on acceptable or affordable terms. If the
Company is unable to obtain financing on acceptable terms in order to maintain
operations through the next fiscal year, it could be forced to curtail or
discontinue its operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The accompanying financial statements for the three month and six month periods
ended June 30, 1996 and 1995 are unaudited and have been prepared by the Company
in accordance with generally accepted accounting principles. The interim
financial statements, in the opinion of management, reflect all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the results for the interim periods ended June 30, 1996 and 1995. The results
of operations for the interim periods are not necessarily indicative of the
results of operations to be expected for the fiscal year. These interim
financial statements should be read in conjunction with the audited financial
statements for the year ended December 31, 1995, which are contained in the
Company's 1995 Annual Report on Form 10-K.
6
<PAGE> 7
2. STOCKHOLDERS' EQUITY
--------------------
On May 17, 1996, the Company completed a self-managed private placement of
Units. Each Unit consisted of one (1) share of the Company's Common Stock and
one (1) callable warrant to purchase one (1) share of the Company's Common
Stock. The Company received proceeds of $10,954,079 for the issuance of
4,482,519 Units. The Company incurred additional costs in the amount of $550,789
related to this financing which were charged to additional paid-in capital in
1996.
On February 14, 1996, the Company closed on a follow-on public offering. The
Company received proceeds of $4,920,373 (net of underwriting discount and
underwriter's offering expenses) for the issuance of 2,200,000 shares of Common
Stock. The Company incurred additional costs in the amount of $304,882 related
to this financing which were charged to additional paid-in capital in 1996.
On March 27, 1996, the underwriter in the follow-on offering partially exercised
its over allotment option related to the follow-on offering and on March 27,
1996 the Company issued and sold 150,000 shares of the Company's common stock.
This transaction resulted in net proceeds to the Company of $343,125.
3. MARKETABLE SECURITIES
---------------------
The marketable securities of the Company, consisting of U.S. Government Agencies
and Corporate Obligations, have been classified as available for sale in
accordance with SFAS No. 115. Realized gains and losses on dispositions are
determined on the specific identification method and are reflected in the
statement of operations. Net unrealized gains and losses are recorded directly
in a separate stockholders' equity account, except those losses that are deemed
to be other than temporary, which losses, if any, are reflected in the statement
of operations. Fair values are estimated based upon quoted market prices. The
amortized cost of debt securities is adjusted for the amortization of premiums
and accretion of discounts to maturity. Such amortization and interest and
interest are included in interest income.
The realized gains for the marketable securities for the six months ended June
30, 1996 were $1,359. There were no realized gains or losses for the six months
ended June 30, 1995. The realized gains and losses for the marketable securities
for the twelve months ended December 31, 1995 were immaterial. The contractual
maturities of all securities available for sale at June 30, 1996 ranged from 4
to 7 months.
7
<PAGE> 8
<TABLE>
The following table presents the amortized cost, fair value and unrealized
holding gains and losses of the marketable securities for the six months ended
June 30, 1996 and 1995 and the year ended December 31, 1995.
<CAPTION>
1996
----------------------------------------------------------------------------------------
June 30, 1996
Amortized Unrealized
Cost Fair Value Holding Losses
--------- ---------- --------------
<S> <C> <C> <C>
Marketable Securities:
U.S. Government Agencies: 6,012,030 6,006,157 (5,873)
--------- --------- ------
6,012,030 6,006,157 (5,873)
========= ========= ======
1995
----------------------------------------------------------------------------------------
December 31, 1995
Amortized Unrealized
Cost Fair Value Holding Gains
--------- ---------- -------------
Marketable Securities:
Corporate Obligations: 2,004,582 2,005,670 1,088
--------- --------- -------
2,004,582 2,005,670 1,088
========= ========= =======
June 30, 1995
Amortized Unrealized
Cost Fair Value Holding Gains
--------- ---------- -------------
Marketable Securities:
Corporate Obligations: 2,014,877 2,014,940 63
--------- --------- -------
U.S. Treasuries: 3,975,906 3,978,140 2,234
--------- --------- -------
5,990,783 5,993,080 2,297
========= ========= =======
</TABLE>
8
<PAGE> 9
4. RESEARCH COLLABORATIONS
-----------------------
Effective as of September 1, 1995, the Company's sponsored research agreement
with Sandoz Pharma Ltd. was amended to focus the research program on compounds
targeting CD4 and its ligand and to limit the research program with respect to
compounds that bind to CD2 and its ligand to certain screening activities being
conducted by Sandoz through the end of 1995. In connection with this amendment,
the research and license fees due for the third year of the research program
were reduced from $5 million to $2.2 million. Procept remains eligible to
receive $12 million in milestone payments as compounds discovered in these
research programs progress through clinical development. Procept recorded
$425,000 in revenue in the three month period ended June 30, 1996 under the
terms of this agreement.
In January 1996, Procept entered into a Sponsored Research Agreement with
VacTex, Inc. ("VacTex"), an entity created by a group of executives and
scientists from leading biotechnology companies and academic institutions to
provide research services relating to the development of novel vaccines based on
discoveries licensed from the Brigham and Women's Hospital and Harvard Medical
School. These discoveries shed light on a previously unknown aspect of
immunology, the CD1 system of lipid antigen presentation. Under the Sponsored
Research Agreement, Procept will conduct specified research tasks on behalf of
VacTex for which Procept will receive a combination of cash and equity in VacTex
based on the number of full-time equivalent employees of Procept engaged in the
research, but subject to maximum cash and stock limits. Procept recorded $75,000
in revenue in the three month period ended June 30, 1996 under terms of this
agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
RESULTS OF OPERATIONS
Since its inception, the Company has generated no revenues from product sales.
The Company is dependent upon research and development collaborations, equity
financing and interest on invested funds to provide the working capital required
to pursue its intended business activities. The Company has incurred an
accumulated deficit of approximately $43,475,000 through June 30, 1996. Losses
have resulted principally from costs incurred in research and development
activities related to the Company's efforts to develop drug candidates and from
the associated administrative costs. The Company expects to incur significant
additional operating losses over the next several years and expects cumulative
losses to increase substantially due to continuing research and development
efforts, preclinical and clinical testing and development of marketing, sales
and production capabilities.
9
<PAGE> 10
Three Months Ended June 30, 1996 and 1995
The Company's total revenues decreased to $595,000 in the second quarter of 1996
from $1,172,000 during the same period of 1995, principally as a result of an
amendment to the Sandoz Agreement. In the second quarter of 1996, revenues
consisted of $425,000 earned under the Sandoz Agreement, $75,000 earned under
the VacTex Agreement and $95,000 in interest earned on invested funds. In 1995,
second quarter revenues consisted of $1,000,000 earned under the Sandoz
Agreement and $172,000 in interest earned on invested funds.
The Company's total operating expenses decreased to $3,521,000 in the second
quarter of 1996, from $4,412,000 during the same period in 1995. Research and
development expenses decreased 22% to $2,643,000 in the second quarter of 1996
from $3,393,000 in the second quarter of 1995. This expense decrease was due
primarily to a decrease in personnel in the Company's research and development
organization and their related research costs from the second quarter of 1995 to
the same period in 1996. The 11% decrease in general and administrative expenses
during the second quarter of 1996 to $849,000 from $953,000 in the second
quarter of 1995 reflects a decrease in administrative personnel as well as a
lowering of most general and administrative expenses due to cost control
measures. Interest expense decreased to $29,000 in the second quarter of 1996
from $65,000 in the second quarter of 1995 as a result of the increase in
principal payments and the completion of several contracts under the Company's
lease financing arrangements.
Six months ended June 30, 1996 and 1995
The Company's first half 1996 total revenues decreased to $1,147,000 from
$2,490,000 during the same period of 1995, principally as a result of a decrease
in research revenue from the Sandoz Agreement. In the first half of 1996,
revenues consisted of $850,000 earned under the Sandoz Agreement, $150,000
earned under the VacTex Agreement and $147,000 in interest earned on invested
funds. In the first half of 1995, revenues consisted of $2,000,000 earned under
the Sandoz Agreement, $29,000 earned under a Research Collaboration and License
Agreement with Bristol-Myers Squibb, $52,000 in grant revenue and $409,000 in
interest earned on invested funds.
The Company's total operating expenses decreased to $7,155,000 in the first half
of 1996 from $8,572,000 during the same period in 1995. Research and development
expenses decreased 17% to $5,471,000 in the first half of 1996 from $6,556,000
in the first half of 1995. This expense decrease was due primarily to a decrease
in personnel in the Company's research and development organization and their
related research costs from the second quarter of 1995 to the same period in
1996. The 14% decrease in general and administrative expenses during the first
half of 1996 to $1,621,000 from $1,880,000 in the first half of 1995 reflects a
decrease in administrative personnel as well as a lowering of most general and
administrative expenses due to cost control measures. Interest expense decreased
to $63,000 in the first half of 1996 from $136,000 in the first half of 1995 as
a result of the increase in principal payments and the completion of several
contracts under the Company's lease financing arrangements.
10
<PAGE> 11
FINANCIAL CONDITION
At June 30, 1996, the Company's aggregate cash, cash equivalents and marketable
securities were $11,046,000 a net increase of $8,475,000 since December 31,
1995. The increase in cash is primarily attributable to the completion of the
Company's private placement in May 1996 resulting in proceeds of $10,954,000 and
follow-on public offering of $5,116,000 offset by $6,368,000 used in operations,
principally to fund research and development activities, expenditures for
property and equipment of $102,000 and principal payments on capital lease
obligations of $489,000.
The Company expects that its current funds, in conjunction with the net proceeds
from its Private Placement and follow-on public offering and interest income
will be sufficient to fund Procept's financial needs into the second quarter of
1997. Although management continues to pursue additional funding arrangements,
no assurance can be given that such financing will be available to the Company.
If the Company is unable to enter into an additional corporate collaboration(s)
that produce revenue for the Company, or secure additional financing, the
Company's financial condition will be materially adversely affected.
The Company's expectations regarding the sufficiency of its sources of cash over
future periods is a forward-looking statement. The sufficiency of such resources
will be affected by numerous factors including the rate of planned and unplanned
expenditures by the Company and the timing of achievement of various milestones
in the Company's research and development programs.
The Company's working capital and other cash needs will depend heavily on the
success of the Company's clinical trials. Success in early stage clinical trials
would lead to an increase in working capital requirements. The Company's actual
cash requirements may vary materially from those now planned because of results
of research and development, clinical trials, product testing, relationships
with strategic partners, changes in the focus and direction of the Company's
research and development programs, competitive and technological advances, the
process of obtaining United States Food and Drug Administration or other
regulatory approvals and other factors.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
<TABLE>
The Company held its annual meeting of stockholders on Thursday May 16, 1996.
The following tabulates the results of the proposals submitted to a vote of the
stockholders:
<CAPTION>
Votes Cast Abstentions and
Votes Cast For Against or Withheld Broker Non-Votes
-------------- ------------------- ----------------
<S> <C> <C> <C>
1) Election of Directors
Nancy S. Amer 6,521,435 246,403 0
James H. Cavanaugh, Ph.D. 6,521,435 246,403 0
Stanley C. Erck 6,521,435 246,403 0
Zola P. Horovitz, Ph.D. 6,521,435 246,403 0
Max Link, Ph.D. 6,521,435 246,403 0
Ellis L. Reinherz, MD.. 6,521,435 246,403 0
2) Proposal to amend the Company's
1989 Stock Plan to increase the
number of shares of Common Stock
covered by the plan by 250,000 shares 6,107,680 507,447 38,211
3) Proposal to amend the Company's
Certificate of Incorporation to
increase the number of authorized
shares of Common Stock from
12,000,000 to 30,000,000 shares 6,180,615 444,912 27,811
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits.
---------
3.1 Restated Certificate of Incorporation of the Company,
as amended by Certificate of Amendment dated May 17,
1996. Filed herewith.
27 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K.
--------------------
Current Report dated May 17, 1996 filed with the Securities
and Exchange Commission on May 28, 1996 relating to the
Company's private placement of Units.
12
<PAGE> 13
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.
PROCEPT, INC.
(Registrant)
Date: August 1, 1996 by: /s/ Michael J. Higgins
----------------------
Michael J. Higgins
Vice President, Finance
Chief Financial Officer
(Principal Accounting Officer)
13
<PAGE> 14
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit Page
Number Description Number
- ------ ----------- ------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Company 15
as amended by Certificate of Amendment dated
May 17, 1996.
27 Financial Data Schedule 20
</TABLE>
14
<PAGE> 1
RESTATED CERTIFICATE OF INCORPORATION
EXHIBIT 3.1
OF
PROCEPT, INC.
INCORPORATED PURSUANT TO AN ORIGINAL CERTIFICATE OF INCORPORATION
FILED WITH THE SECRETARY OF STATE ON MAY 8, 1992,
HERETOFORE AMENDED AND RESTATED BY A RESTATED CERTIFICATE OF INCORPORATION
FILED WITH THE SECRETARY OF STATE ON JANUARY 5, 1993 AND FURTHER AMENDED BY A
CERTIFICATE OF
AMENDMENT FILED WITH THE SECRETARY OF STATE ON MARCH 19, 1993.
-------------------------------------------------------------
The undersigned, for the purpose of amending and restating the Restated
Certificate of Incorporation of Procept, Inc. (the "Corporation") under the laws
of the State of Delaware, hereby certifies as follows:
FIRST. The name of the Corporation is Procept, Inc.
SECOND. The address of the Corporation's registered office in the State
of Delaware is 32 Loockerman Square, Suite L-100, City of Dover, County of Kent,
State of Delaware. The name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
THIRD. The nature of the business or purposes to be conducted or
promoted are:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
In general, to possess and exercise all the powers and privileges
granted by the General Corporation Law of Delaware or by any other law of
Delaware or by this Restated Certificate of Incorporation, together with any
powers incidental thereto, so far as such powers and privileges are necessary or
convenient to the conduct, promotion or attainment of the business or purposes
of the Corporation.
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is Twelve Million (12,000,000) shares of Common Stock
with a par value of $0.01 per share.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. The Board of Directors is expressly authorized to exercise all
powers granted to the Directors by law except insofar as such powers are limited
or denied herein or in the by-laws of the Corporation. In furtherance of such
powers, the Board of Directors shall have the right to make, alter or repeal the
by-laws of the Corporation.
SEVENTH. Meetings of Stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation
may be kept outside the
- 15 -
<PAGE> 2
State of Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the by-laws of the Corporation. Elections of
Directors need not be by written ballot unless the by-laws of the Corporation
shall so provide.
EIGHTH. The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as amended
from time to time, indemnify each person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was, or has agreed to become, a director or officer of
the Corporation, or is or was serving, or has agreed to serve, at the request of
the Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom.
Indemnification may include payment by the Corporation of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of any undertaking by the person indemnified
to repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article, which undertaking may be
accepted without reference to the financial ability of such person to make such
repayments.
The Corporation shall not indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person unless the initiation thereof was approved by the Board of Directors
of the Corporation.
The indemnification rights provided in this Article (i) shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any law, agreement or vote of stockholders or disinterested directors or
otherwise, and (ii) shall inure to the benefit of the heirs, executors and
administrators of such persons. The Corporation may, to the extent authorized
from time to time by its Board of Directors, grant indemnification rights to
other employees or agents of the Corporation or other persons serving the
Corporation and such rights may be equivalent to, or greater or less than, those
set forth in this Article.
NINTH. No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to authorize a further limitation or elimination of the liability of
directors or officers, then the liability of a director or officer of the
Corporation shall, in addition to the limitation on personal liability provided
herein, be
- 16 -
<PAGE> 3
limited or eliminated to the fullest extent permitted by the Delaware General
Corporation Law, as from time to time amended. No amendment to or repeal of this
Article Ninth shall apply to or have any effect on the liability or alleged
liability of any director or officer of the Corporation for or with respect to
any acts or omissions of such director or officer occurring prior to such
amendment or repeal.
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 and 245 of the Delaware General
Corporation Law by written consent in accordance with Section 228 of the
Delaware General Corporation Law. Prompt notice of such written consent has been
given as provided in Section 228 of the Delaware General Corporation Law.
Signed this 17th day of February, 1994.
/s/ Stanley C. Erck
-------------------------------
Stanley C. Erck, President
Attest:
/s/ Peter Wirth
- -----------------------------------
Peter Wirth, Secretary
- 17 -
<PAGE> 4
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND REGISTERED OFFICE
Procept, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
The present registered agent of the corporation is The Prentice-Hall
Corporation System, Inc. and the present registered office of the corporation is
in the county of Kent.
The Board of Directors of Procept, Inc. adopted the following
resolution on the 16th day of April, 1996.
RESOLVED: That, pursuant to Section 133 of the Delaware General
Corporation Law, the registered office of the Company in the
State of Delaware be and it hereby is changed from the
present address in the County of Kent, to Corporation Trust
Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, and the authorization of the present
registered agent of the Company be and the same hereby is
withdrawn, and the Corporation Trust Company shall be and
hereby is constituted and appointed the registered agent of
the Company at the address of its registered office.
IN WITNESS WHEREOF, Procept, Inc. has caused this statement to be
signed by Michael J. Higgins, its Vice President, Finance and Chief Financial
Officer, this 7th day of May, 1996.
/s/ Michael J. Higgins
---------------------------------
Michael J. Higgins
Vice President, Finance and Chief
Financial Officer
- 18 -
<PAGE> 5
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
PROCEPT, INC.
It is hereby certified that:
1. The name of the corporation is Procept, Inc. (the
"Corporation").
2. The Corporation's Certificate of Incorporation, as heretofore
amended and restated is hereby amended by deleting Article
FOURTH thereof in its entirety and substituting the following:
"FOURTH: The total number of shares of stock which the Corporation has
authority to issue is 30,000,000 shares of Common Stock with a par value of
$0.01 per share."
3. The amendments set forth herein were adopted by the
stockholders of the Corporation holding a majority of the
outstanding shares of Common Stock at the annual meeting of
stockholders in accordance with Section 242 of the General
Corporation Law of the State of Delaware.
Signed and attested to on May 17, 1996.
/s/ Stanley C. Erck
------------------------------
Stanley C. Erck, President and
ATTEST: Chief Executive Officer
/s/ Lynnette C. Fallon
- ------------------------
Lynnette C. Fallon,
Assistant Secretary
- 19 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AT JUNE 30, 1996 AND THE STATEMENT OF OPERATIONS FOR THE THREE MONTHS AND
SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-1-1996 JAN-1-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 5,040,197 5,040,197
<SECURITIES> 6,006,157 6,006,157
<RECEIVABLES> 57,050 57,050
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,301,112 11,301,112
<PP&E> 5,508,530 5,508,530
<DEPRECIATION> 3,203,140 3,203,140
<TOTAL-ASSETS> 14,326,477 14,326,477
<CURRENT-LIABILITIES> 2,881,128 2,881,128
<BONDS> 0 0
<COMMON> 133,533 133,533
0 0
0 0
<OTHER-SE> 10,747,813 10,747,813
<TOTAL-LIABILITY-AND-EQUITY> 14,326,477 14,326,477
<SALES> 0 0
<TOTAL-REVENUES> 595,225 1,147,136
<CGS> 0 0
<TOTAL-COSTS> 3,492,004 7,091,917
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 28,780 63,039
<INCOME-PRETAX> (2,925,559) (6,007,820)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,925,559) (6,007,820)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,925,559) (6,007,820)
<EPS-PRIMARY> (0.26) (0.64)
<EPS-DILUTED> (0.26) (0.64)
</TABLE>
