<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _____________
COMMISSION FILE NUMBER 0-20096
GLIATECH INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1587242
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
23420 COMMERCE PARK ROAD
CLEVELAND, OHIO 44122
(Address of principal executive offices) (Zip Code)
(216) 831-3200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---- ----
The number of shares outstanding of the registrant's Common Stock, $0.01 par
value per share, as of November 7, 1997 was 7,365,023 shares.
<PAGE> 2
GLIATECH INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1 Financial Statements:
Consolidated Balance Sheets - 1
December 31, 1996 and September 30, 1997 (unaudited)
Consolidated Statements of Operations -
for the three months and nine months ended September 30, 1996
and 1997 and for the period from inception of operations
(August 31, 1988) through September 30, 1997 (unaudited) 2
Consolidated Statements of Cash Flows -
for the nine months ended September 30, 1996
and 1997 and for the period from inception
of operations (August 31, 1988) through
September 30, 1997 (unaudited) 3
Notes to Consolidated Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial Condition 5-9
and Results of Operations
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 10
Item 2 Changes in Securities and Use of Proceeds 10-11
Item 6 Exhibits and Reports on Form 8-K 11
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLIATECH INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,120,547 $ 8,850,334
Short-term investments 8,875,222 3,666,557
Accounts receivable 331,157 446,205
Government grants receivable 7,290 174,551
Inventory at cost 387,118 267,528
Prepaid expenses and other 277,276 223,993
------------ ------------
Total current assets 18,998,610 13,629,168
Property and equipment, net 1,129,671 1,263,023
Other assets, net 675,959 635,691
------------ ------------
TOTAL ASSETS $ 20,804,240 $ 15,527,882
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other accrued expenses 1,369,583 1,769,490
Accrued compensation 204,328 112,499
Accrued clinical trial costs 796,861 790,572
Deferred research contract revenue 806,359 67,859
------------ ------------
Total current liabilities 3,177,131 2,740,420
Stockholders' equity:
Common stock 73,201 73,630
Additional paid-in capital 51,007,673 51,297,693
Deficit accumulated during the development stage (33,453,765) (38,583,861)
------------ ------------
Total stockholders' equity 17,627,109 12,787,462
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 20,804,240 $ 15,527,882
============ ============
</TABLE>
See notes to consolidated financial statements
1
<PAGE> 4
GLIATECH INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS PERIOD FROM
(unaudited) INCEPTION OF
OPERATIONS
(AUGUST 31, 1988)
THREE MONTHS ENDED NINE MONTHS ENDED THROUGH
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30,
1996 1997 1996 1997 1997
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Product sales $ 280,336 $ 402,250 $ 562,532 $ 1,084,230 $ 2,253,735
Research contracts and licensing fees 712,995 738,500 2,141,865 2,215,500 8,204,719
Government grants 39,976 100,682 120,223 251,704 1,342,086
----------- ----------- ----------- ----------- ------------
Total revenues 1,033,307 1,241,432 2,824,620 3,551,434 11,800,540
OPERATING COSTS AND EXPENSES
Cost of products sold 98,697 151,658 218,165 415,362 937,333
Research and development 1,463,606 1,554,147 4,367,883 5,380,556 32,426,628
Selling, general and administrative 870,190 1,135,136 3,114,948 3,325,467 17,504,562
Depreciation and amortization 47,342 74,140 107,688 207,439 1,652,228
----------- ----------- ----------- ----------- ------------
Total operating cost and expenses 2,479,835 2,915,081 7,808,684 9,328,824 52,520,751
----------- ----------- ----------- ----------- ------------
Loss from operations (1,446,528) (1,673,649) (4,984,064) (5,777,390) (40,720,211)
Interest Income, net 272,894 193,303 853,311 647,294 3,075,372
----------- ----------- ----------- ----------- ------------
NET LOSS ($1,173,634) ($1,480,346) ($4,130,753) ($5,130,096) ($37,644,839)
=========== =========== =========== =========== ============
Net loss per common share ($0.16) ($0.20) ($0.56) ($0.70)
=========== =========== =========== ===========
Shares used for purposes of computing
net loss per common share 7,316,849 7,358,148 7,311,173 7,347,430
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
GLIATECH INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION OF
OPERATIONS
(AUGUST 31, 1988)
NINE MONTHS ENDED THROUGH
------------------------------ JUNE 30,
1996 1997 1997
------------ ------------ ------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss ($ 4,130,754) ($ 5,130,096) ($37,644,839)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 110,112 207,439 1,652,228
Patent Cost Write-off 90,000 150,000 609,074
Loss on disposal of equipment 0 0 102,000
Compensation from issuance of stock and stock options 17,493 0 286,609
Changes in operating assets and liabilities:
Accounts receivable (153,793) (115,048) (446,205)
Inventory 13,947 119,590 (267,528)
Government grants receivable and other assets (68,613) (113,978) (408,543)
Accounts payable and other accrued expenses (316,846) 399,907 1,762,819
Deferred contract research revenue (211,236) (738,500) 67,859
Other liabilities 667,641 (57,294) 1,346,502
------------ ------------ ------------
Net cash used in operating activities (3,982,049) (5,277,980) (32,940,024)
INVESTING ACTIVITIES
Sale (purchase) of investments, net 1,777,948 5,208,665 (3,666,557)
Payment for patent rights and trademarks (67,113) (125,178) (1,310,923)
Payment of organization costs 0 0 (139,779)
Purchase of property and equipment (619,891) (325,345) (2,306,345)
------------ ------------ ------------
Net cash provided by (used in) investing activities 1,090,944 4,758,142 (7,423,604)
FINANCING ACTIVITIES
Payment of demand note from bank (400,000) 0 0
Principal payments on capital lease obligations 0 0 (565,601)
Proceeds from sale and leaseback 0 0 75,131
Proceeds from issuance of Preferred Stock, net 0 0 28,976,554
Proceeds from issuance of Common Stock, net (21,954) 0 19,817,280
Proceeds from exercise of stock options 91,313 249,625 410,597
Proceeds from exercise of warrants 0 0 500,001
------------ ------------ ------------
Net cash (used in) provided by financing activities (330,641) 249,625 49,213,962
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents (3,221,746) (270,213) 8,850,334
Cash and cash equivalents at beginning of period 20,780,360 9,120,547 0
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,558,614 $ 8,850,334 $ 8,850,334
============ ============ ============
</TABLE>
3
<PAGE> 6
GLIATECH INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
1997 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. These financial statements should be read in
conjunction with the consolidated financial statements and footnotes thereto
included in the Annual Report on Form 10-K of Gliatech Inc. for the fiscal year
ended December 31, 1996 filed with the Securities and Exchange Commission.
Note 2. Net Loss Per Share
Net loss per common share, for the three and nine months ended September 30,
1997 and 1996, is based on the weighted average number of common shares
outstanding. Common equivalent shares relating to stock options and warrants are
excluded as their effect is anti-dilutive.
Note 3. Adoption of SFAS No. 128
In February 1997, Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share", was issued. SFAS No. 128 establishes standards for
computing and presenting earnings per share. The Company must adopt SFAS No. 128
for the year-ending 1997 and believes the effect of the adoption will not be
material
4
<PAGE> 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since commencing operations in 1988, the Company has been a development stage
company. The Company is developing and commercializing the ADCON(R) family of
products to inhibit excessive scarring and adhesions after surgery. Based on
European pivotal clinical stud-Ad other compliance efforts and submission of
data, the Company obtained regulatory clearance to affix CE Marking on
ADCON(R)-L and ADCON(R)-T/N, thereby allowing ADCON(R)-L and ADCON(R)-T/N to be
marketed in the 15 European Union countries for lumbar disc surgery and tendon
and peripheral nerve surgeries, respectively. The Company has entered into
distribution agreements with independent distributors for ADCON(R)-L and
ADCON(R)-T/N in Argentina, Australia, Austria, Belgium, Canada, Egypt, France,
Germany, Greece, Iceland, Israel, Italy, Korea, The Netherlands, New Zealand,
the Republic of South Africa, Scandinavia, Singapore, Spain, Switzerland and the
United Kingdom. In addition, the Company is pursuing the development of drug
candidates for the treatment of certain nervous system disorders, including
Alzheimer's Disease. Since inception, the Company's revenues have been derived
primarily from contract research payments from a research contract with Janssen
Pharmaceutica, N.V. of Belgium ("Janssen"), a wholly-owned subsidiary of Johnson
& Johnson, to collaborate on the discovery and development of compounds to slow
the progression of Alzheimer's Disease (the "Janssen Agreement"). The Company
has also received revenues from product sales of ADCON(R)-L and ADCON(R)-T/N and
from various government grants awarded to the Company.
RESULTS OF OPERATIONS
For the three and nine month periods ended September 30, 1997 and 1996
REVENUES
Total revenues increased approximately 20.1 percent to $1,241,432 in the third
quarter of 1997 from $1,033,307 in the third quarter of 1996 and 25.7 percent to
$3,551,434 in the first nine months of 1997 from $2,824,620 in the first nine
months of 1996. The increase in total revenues in both periods was primarily the
result of a 43.5 percent increase in product sales to $402,250 in the third
quarter of 1997 from $280,336 in the third quarter of 1996 and a 92.7 percent
increase in product sales to $1,084,230 in the first nine months of 1997 from
$562,532 in the first nine months of 1996. These increases in product sales
primarily resulted from sales of Gliatech's ADCON(R)-L and ADCON(R)-T/N products
in certain European countries, as well as other international countries. In
addition, contract research revenues increased slightly by 3.6 percent to
$738,500 in the third quarter of 1997 from $712,995 in the third quarter of 1996
and 3.4 percent to $2,215,500 in the first nine months of 1997 from $2,141,865
in the first nine months of 1996. These contract revenues were from Gliatech's
research contract with Janssen.
5
<PAGE> 8
The Company's government-funded grant revenues increased approximately 151.9
percent to $100,682 in the third quarter of 1997 from $39,976 in the third
quarter of 1996 and 109.4 percent to $251,704 in the first nine months of 1997
from $120,223 in the first nine months of 1996. These increases were the result
of a higher level of government funded revenues primarily due to the two year
award in February of 1997 of a Phase II Small Business Innovation Research
Program grant from the National Institute of Neurological Disorders and Stroke,
for research evaluating histamine H3 receptor antagonists to treat Attention
Deficit Hyperactive Disorders (ADHD).
EXPENSES
Total operating expenses were $2,915,081 in the third quarter of 1997, compared
to $2,479,835 in the third quarter of 1996 and $9,328,824 in the first nine
months of 1997 compared to $7,808,684 in the first nine months of 1996. Cost of
products sold increased in the third quarter of 1997 to $151,658 compared to
$98,697 in the third quarter of 1996 and increased as a percentage of product
sales in the third quarter of 1997 to 37.7 percent from 35.2 percent in the
second quarter of 1996. This increase was primarily due to slightly less
efficient absorption of manufacturing overhead costs as a result of slightly
smaller actual production volumes than had been anticipated for 1997. Cost of
products sold increased in the first nine months of 1997 to $415,362 compared to
$218,165 in the first nine months of 1996 but decreased as a percentage of
product sales in the first nine months of 1997 to 38.3 percent from 38.8 percent
in the first nine months of 1996. This percentage decrease was primarily due to
higher cost of products sold in the first quarter of 1996, which included costs
associated with the start-up of manufacturing processes with the contract
manufacturer for ADCON(R)-L and ADCON(R)-T/N.
Research and development expenses increased 6.2 percent to $1,554,147 in the
third quarter of 1997 from $1,463,606 in the third quarter of 1996 and increased
23.2 percent to $5,380,556 in the first nine months of 1997 from $4,367,883 in
the first nine months of 1996. The increase in the first nine months was
primarily due to: (i) increased research contract expenses and purchases of
materials for preclinical and animal toxicology studies for the lead compound
which is being developed by Gliatech for the treatment of ADHD; (ii) increased
costs associated with the U.S. clinical trial of ADCON(R)-L; and (iii) increased
costs associated with preclinical development of ADCON(R)-P for use in
pelvic/gynecological surgeries.
Selling, general and administrative expenses increased 30.4 percent to
$1,135,136 in the third quarter of 1997, compared to $870,190 in the third
quarter of 1996 and increased 6.8 percent to $3,325,467 in the first nine months
of 1997 from $3,114,948 in the first nine months of 1996. The increase in
selling, general and administrative expenses for the third quarter and the first
nine months of 1997 was primarily due to increases in expenses resulting from
Gliatech's sales and marketing efforts for ADCON(R)-L and ADCON(R)-T/N in
certain European markets and other selected international countries outside of
Europe. Also, affecting period-to-period comparability were one-time expenses
recorded in the second quarter of 1996 of approximately $500,000 associated
6
<PAGE> 9
with the filing of a registration statement with the Securities and Exchange
Commission on Form S-1 for an offering of Gliatech's common stock. Gliatech
subsequently withdrew the registration statement due to market conditions.
INTEREST INCOME
Net interest income decreased to $193,303 in the third quarter of 1997 from
$272,894 in the third quarter of 1996 and decreased to $647,294 for the first
nine months of 1997 from $853,311 for the first nine months of 1996. The
decrease in both periods was due to lower cash balances during the first nine
months of 1997 as compared to the first nine months of 1996.
NET LOSS
Gliatech's net loss increased 26.1 percent to $1,480,346 in the third quarter of
1997, compared to $1,173,634 in the third quarter of 1996 and increased 24.2
percent to $5,130,096 for the first nine months of 1997 from $4,130,753 for the
first nine months of 1996. The increase in net loss in both periods is a result
of increased total expenses, which was slightly offset by increased revenues as
discussed above. The net loss per share was $0.20 in the third quarter of 1997,
compared to $0.16 in the third quarter of 1996 and $0.70 in the first nine
months of 1997, compared to $0.56 in the first nine months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company received net proceeds, after deducting expenses of the offering, of
approximately $19,647,000 from its initial public offering in which the Company
sold 2,300,000 shares of Common Stock at an initial public offering price of
$9.50 per share in October 1995. Prior to the public offering, the Company had
financed its operations primarily through the private placement of its equity
securities and to a lesser extent through federally sponsored research grants
and research contract and licensing fees. Since its inception, the Company has
received $49,293,835 in net proceeds from equity financings. In addition, from
its inception through September 30, 1997, the Company has recognized revenue of
$8,204,719 from its research collaboration agreement with Janssen, $2,253,735
from product sales and $1,342,086 from several federally sponsored research
grants. The Company also has established a $1,500,000 unsecured line of credit
with a bank. As of September 30, 1997, the Company had no borrowings against the
line of credit.
In order to preserve principal and maintain liquidity, the Company's funds are
invested in commercial paper and other short-term investments. As of September
30, 1997 and December 31, 1996, the Company's cash and cash equivalents and
short-term investments totaled $12,516,891 and $17,995,769, respectively.
7
<PAGE> 10
In 1996, the Company received revenues from two Phase I Small Business
Innovation Research (SBIR) grants for up to $100,000 each from the National
Institute of Neurological Disorders and Stroke (NINDS) division of the National
Institute of Heath (NIH) relating to the development of histamine H3 receptor
agents. In addition , in February 1997, the Company was awarded a Phase II SBIR
Program grant from the NINDS for research evaluating histamine H3 receptor
antagonists to treat Attention Deficit Hyperactive Disorders. The grant has a
two-year term and may provide as much as $750,000 in funding. If the Company is
successful in other Phase I research, additional Phase II awards may be sought
for funding to aid in further development of pharmaceutical compounds; however,
there is no assurance that such Phase I research will be successful or that
additional funding will be obtained.
The Company anticipates that a substantial portion of the remaining proceeds of
its initial public offering will be used to fund clinical trials of ADCON(R)-L,
ADCON(R)-T/N and ADCON(R)-P, which is designed for use in pelvic and
gynecological surgeries, in the U.S. and the marketing efforts for sales of the
ADCON(R) products. In addition, the Company anticipates that these proceeds will
be used to fund continued development of additional ADCON(R) products, for the
research and development of products relating to its Cognition Modulation
program and for working capital and general corporate purposes . The Company's
future liquidity and capital requirements will depend on many factors,
including, but not limited to, the commercial potential of its ADCON(R) family
of products, the timing of regulatory approvals, the timing and results of
preclinical testing and clinical studies, the progress of the Company's research
and development programs and the ability of the Company to establish and
maintain collaborative arrangements with others for the purpose of funding
certain research and development programs. The Company believes that its current
cash position and other financial resources will enable it to conduct its
current and planned operations through at least fiscal 1998.
The Company anticipates that it will augment its cash balance through financing
transactions, government grants and further corporate alliances. No assurances
can be given that adequate levels of additional funding can be obtained on
favorable terms, if at all.
A complaint was filed by the Company on September 8, 1997 in the United States
District Court Northern District of Ohio, Eastern Division ("Court") against Dr.
Jerry Silver and Case Western Reserve University, requesting the Court to
confirm that there was no error in the omission of Dr. Silver as a named
inventor of Gliatech's United States Patent No. 5,605,938. The complaint was
filed in response to repeated statements to Gliatech and the general public made
by Dr. Silver and Case Western Reserve University alleging that the inventorship
of the patent was in error since Dr. Silver was not named. The complaint does
not seek monetary damages.
Certain statements in this Quarterly Report on Form 10-Q constitute
"forward-looking statements"within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results of the Company to be different from expectations expressed or implied
8
<PAGE> 11
by such forward-looking statements. Such factors include but are not limited
to, the commercial uncertainty of market acceptance of the Company's products,
uncertainty of final results from the completed U.S. clinical study for
ADCON(R)-L, delays in product development of ADCON(R) products, the ability of
the Company to establish and maintain collaborative arrangements with others for
the purpose of funding certain research and development programs, the
potential market size for ADCON(R) products, ability to renew research
collaborations, the productivity of distributors of the ADCON(R) products and
the uncertainty regarding regulatory approvals, including the timing and content
of decisions made by the FDA, and uncertainty of future profitability.
9
<PAGE> 12
PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
A complaint was filed by the Company on September 8, 1997 in the United States
District Court Northern District of Ohio, Eastern Division ("Court") against Dr.
Jerry Silver and Case Western Reserve University, requesting the Court to
confirm that there was no error in the omission of Dr. Silver as a named
inventor of Gliatech's United States Patent No. 5,605,938. The complaint was
filed in response to repeated statements to Gliatech and the general public made
by Dr. Silver and Case Western Reserve University alleging that the inventorship
of the patent was in error since Dr. Silver was not named. The complaint does
not seek monetary damages.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
(b) Rights
On July 1, 1997, the Board of Directors of the Company adopted a Rights
Agreement providing that one right ( a "Right") shall be attached to each share
of the commons stock, par value $.01 per share, of the Company (the "Common
Stock"). The description and terms of the Rights are set forth in the Rights
Agreement (the "Rights Agreement"), dated as of July 1, 1997, between the
Company and American Stock Transfer & Title Company, as Rights Agent.
Under the Rights Agreement, the Rights will initially trade together with Common
Stock and will not be exercisable. In the absence of further action by the Board
of Directors of the Company, the Rights generally will become exercisable and
allow the holder to acquire Common Stock at a discounted price if a person or
group acquires 15 percent or more of the outstanding shares of Common Stock.
Rights held by persons who exceed the applicable threshold will be void. Under
certain circumstances, the Rights will entitle the holder to buy shares in an
acquiring entity at a discounted price.
The Rights Agreement also includes an exchange option. In general, after the
Rights become exercisable, the Board of Directors may, at its option, effect an
exchange of part or all of the Rights - - other than Rights that have become
void - for shares of Common Stock. Under this option, the Company would issue
one share of Common Stock for each Right, subject to adjustment in certain
circumstances.
The Company's Board of Directors may, at its option, redeem all Rights for $.01
per Right, generally at any time prior to the Rights becoming exercisable. The
Rights will expire July 11, 2007, unless earlier redeemed, exchanged or amended
by the Board of Directors.
The Rights will have certain anti-takeover effects. The Rights are designed to
protect and maximize the value of the outstanding equity interests in the
Company in the event of an unsolicited attempt by an acquirer to take over the
Company in a manner or on terms not approved by the Board of Directors. The
Rights will cause substantial dilution to any person or group that attempts to
acquire the Company without the approval of the Company's Board of Directors.
As a result, the overall effect of the Rights may be to render more difficult
or discourage any attempt to acquire the Company, even if such acquisition may
be favorable to the interests of the Company's stockholders. Because the Board
of Directors can redeem the Rights or approve certain offers, the Rights should
not interfere with a merger or other business combination approved by the Board
of Directors of the Company.
10
<PAGE> 13
(d) Change in Use of Proceeds
The Company registered 2,300,000 shares of Common Stock in connection
with its initial public offering on a Registration Statement on Form
S-1, which went effective on October 18, 1995. The data below reflects
the use of proceeds from such offering to the date of this Quarterly
Report on Form 10-Q. All such proceeds were directly or indirectly paid
to others pursuant to Rule 701(f)(4)(vii):
<TABLE>
<CAPTION>
<S> <C>
Construction........................................................0
Machinery and Equipment.............................................0
Real Estate.........................................................0
Acquisition.........................................................0
Repayment of debt...................................................0
Working Capital..............................................$505,300
Temporary Investments (specify):
Commercial Paper..................................$8,498,000
Corporate Bonds...................................$3,664,000
Other Short-Term Investments........................$355,000
Other:
Clinical Trials...................................$1,849,600
Research and Development..........................$3,276,000
Sales and Marketing...............................$1,499,100
</TABLE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Rights Agreement, dated as of July 1, 1997, by and
between the Company and American Stock Transfer &
Trust Company, as Rights Agent, incorporated herein by
reference to Exhibit 1 of the Company's Current Report
on Form 8-K as filed on July 2, 1997 (File No.
0-20096).
11.1 Statement regarding computation of per-share net loss
27.1 Financial data schedule
(b) Reports on Form 8-K
On July 2, 1997, the Company filed a Current Report on Form 8-K
in connection with the adoption of the Rights Agreement.
11
<PAGE> 14
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.
Date: November 14, 1997 GLIATECH INC.
By: /s/ Rodney E. Dausch
---------------------------------------
Rodney E. Dausch
Vice President, Chief Financial Officer
and Secretary
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
12
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page Number
- ----------- ---------------------- -----------
4.1 Rights Agreement, dated as of July 1, 1997, by and
between the Company and American Stock Transfer &
Trust Company, as Rights Agent, incorporated herein by
reference to Exhibit 1 of the Company's Current Report
on Form 8-K as filed on July 2, 1997 (File No.
0-20096).
11.1 Statement Regarding Computation of Per-Share Net Loss 14
27.1 Financial Data Schedule 15
13
<PAGE> 1
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER-SHARE NET LOSS
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1996 1997 1996 1997
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING 7,316,849 7,358,148 7,331,173 7,347,430
NET EFFECT OF ANTI-DILUTIVE STOCK AND STOCK
OPTIONS AND WARRANTS 0 0 0 0
---------------------------- ----------------------------
TOTAL 7,316,849 7,358,148 7,331,173 7,347,430
============================ ============================
NET LOSS ($1,173,634) ($1,480,346) ($4,130,753) ($5,130,096)
============================ ============================
PER-SHARE AMOUNT ($ 0.16) ($ 0.20) ($ 0.56) ($ 0.70)
============================ ============================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLIATECH
INC'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,850
<SECURITIES> 3,667
<RECEIVABLES> 483
<ALLOWANCES> 37
<INVENTORY> 268
<CURRENT-ASSETS> 13,629
<PP&E> 2,657
<DEPRECIATION> 1,394
<TOTAL-ASSETS> 15,528
<CURRENT-LIABILITIES> 2,740
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 12,713
<TOTAL-LIABILITY-AND-EQUITY> 15,528
<SALES> 1,084
<TOTAL-REVENUES> 3,551
<CGS> 415
<TOTAL-COSTS> 415
<OTHER-EXPENSES> 8,914
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,130)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,130)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,130)
<EPS-PRIMARY> (0.70)
<EPS-DILUTED> 0
</TABLE>
