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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended March 31, 2000.
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 0-27976.
GalaGen Inc.
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(Exact name of registrant as specified in its charter)
Delaware 41-1719104
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1275 Red Fox Road
Arden Hills, Minnesota 55112-6943
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(Address of principal executive offices) (Zip Code)
(651) 634-4230
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock, $.01 par value -
10,509,127 shares as of May 1, 2000.
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INDEX
GALAGEN INC.
<TABLE>
<CAPTION>
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets - March 31, 2000 and December 31, 1999.............................3
Statements of Operations - Three months ended
March 31, 2000....................................................................4
Statements of Cash Flows - Three months ended
March 31, 2000....................................................................5
Notes to Financial Statements.....................................................6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations..................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................14
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........................................15
Item 6. Exhibits and Reports on Form 8-K.................................................15
SIGNATURES.................................................................................22
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS GALAGEN INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
MARCH 31, 2000 DECEMBER 31, 1999
------------------------------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................... $ 316,670 $ 204,817
Available-for-sale securities....................................................... 2,072,230 2,782,790
Accounts receivable, net of allowance of $18,188 in 2000 and $18,951 in 1999........ 90,251 499,606
Prepaid expenses.................................................................... 531,638 146,023
Inventory........................................................................... 64,526 56,372
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Total current assets.................................................................. 3,075,315 3,689,608
Property and equipment................................................................ 691,481 687,746
Less accumulated depreciation....................................................... (433,001) (400,301)
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258,480 287,445
Customer list......................................................................... 337,500 360,000
Other intangible assets............................................................... 252,248 300,872
Deferred expenses..................................................................... 62,500 93,750
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652,248 754,622
Total assets.......................................................................... $ 3,986,043 $ 4,731,675
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 434,080 $ 273,717
Other current liabilities........................................................... 130,408 144,886
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Total current liabilities............................................................. 564,488 418,603
Commitments
Other long-term liabilities........................................................... 45,000 45,000
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 15,000,000
Issued and outstanding shares - none in 2000 and 1999............................ - -
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued and outstanding shares - 10,509,127 in 2000; 10,416,462 in 1999........... 105,091 104,165
Additional paid-in capital.......................................................... 64,321,936 64,099,393
Accumulated deficit ................................................................ (61,050,472) (59,935,486)
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Total stockholders' equity.......................................................... 3,376,555 4,268,072
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Total liabilities and stockholders' equity............................................ $ 3,986,043 $ 4,731,675
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</TABLE>
See accompanying notes.
Note: The balance sheet at December 31, 1999 has been derived from audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
3
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GALAGEN INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
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2000 1999
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Revenues:
Product sales..................................... $ - $ 435,542
Product licensing revenue......................... - 100,000
Product development revenue....................... 100,928 47,991
Other revenue..................................... 45,987 -
------------- -------------
146,915 583,533
Operating expenses:
Cost of goods sold................................ - 186,861
Selling, general and administrative............... 569,139 680,690
Product development............................... 598,922 436,446
Depreciation and amortization..................... 135,075 190,415
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1,303,136 1,494,412
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Operating loss..................................... (1,156,221) (910,879)
Interest income.................................... 41,235 55,225
Interest expense................................... - (4,750)
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Net Loss........................................... $ (1,114,986) $ (860,404)
============== ==============
Net loss per share
Basic and diluted........................... $ (0.11) $ (0.10)
Weighted average number of common shares outstanding
Basic and Diluted................................ 10,451,381 8,948,841
</TABLE>
See accompanying notes.
4
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GALAGEN INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
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2000 1999
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OPERATING ACTIVITIES:
Net loss............................................. $ (1,114,986) $ (860,404)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization....................... 135,074 196,515
Changes in operating assets and liabilities......... 161,471 (344,910)
------------- --------------
Net cash used in operating activities................ (818,441) ( 1,008,799)
-------------- --------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment............ (3,735) (5,908)
Change in available-for-sale securities, net......... 710,560 -
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Net cash provided (used) by investing activities... 706,825 (5,908)
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FINANCING ACTIVITIES:
Proceeds from common stock.......................... 223,469 -
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Net cash provided by financing activities............ 223,469 -
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Increase (decrease) in cash.......................... 111,853 (1,014,707)
Cash and cash equivalents at beginning of period..... 204,817 4,081,733
------------- -------------
Cash and cash equivalents at end of period........... $ 316,670 $ 3,067,026
============= =============
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of convertible promissory notes, plus
related accrued interest, to common stock.......... $ - $ 54,100
</TABLE>
See accompanying notes.
5
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GALAGEN INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting of normal, recurring accruals) considered necessary
for fair presentation have been included. Operating results for the three
months ended March 31, 2000, are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000. These financial
statements should be read in conjunction with the audited financial
statements and accompanying notes contained in the Annual Report of GalaGen
Inc. (the "Company") on Form 10-K for the fiscal year ended December 31, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue from product sales is recognized at the time of shipment.
Fee revenue is recognized upon exchange for services performed or products
delivered that represent the culmination of a separate earnings process. If
there are continuing performance obligations related to the services to be
provided, or products to be delivered, then the revenue is deferred and
recognized as the services and/or products are performed and/or delivered
over the term of the arrangement.
ADOPTION OF RECENT STAFF ACCOUNTING BULLETIN
In December 1999 the Securities & Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101") "REVENUE RECOGNITION IN FINANCIAL
STATEMENTS," summarizing certain views of the SEC staff in applying generally
accepted accounting principles to revenue recognition. The SEC has delayed
the required implementation of SAB 101 until the second quarter of 2000 as it
considers various implementation issues. The Company continues to analyze the
effects of SAB 101 on its financial statements and will adopt it in the
second quarter of 2000. The Company believes it will record a cumulative
effect adjustment for the change in accounting, a one-time charge to earnings
of approximately $700,000, in the second quarter of 2000.
NET LOSS PER SHARE
Basic loss per share is computed by dividing the net loss by the
weighted average number of common shares outstanding for the year. Diluted
loss per share reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into
common stock and resulted in the issuance of common stock. Basic and diluted
loss per share are the same in all years presented as all common share
equivalents were antidilutive.
INVENTORY
Inventories are stated at the lower of cost or market using the
first-in, first-out method. The Company periodically evaluates the need for
reserves associated with obsolete inventory. Inventory at March 31, 2000 and
December 31, 1999 consisted of the following:
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<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Raw materials ............ $ 43,443 $ 46,660
Finished goods........... 21,083 9,712
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$ 64,526 $ 56,372
================= ================
</TABLE>
RECLASSIFICATIONS
Certain items in these financial statements have been reclassified to
conform to the current period presentation.
7
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The information presented in this item contains forward-looking
statements within the meaning of the safe harbor provisions of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such
statements are subject to risks and uncertainties, including those discussed
below under "Disclosure Regarding Forward-Looking Statements" and in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999
("Form 10-K") under "Risk Factors", that could cause actual results to differ
materially from those projected. Because actual results may differ, readers
are cautioned not to place undue reliance on these forward-looking statements.
GENERAL
GalaGen's mission is to become the leading presence in foods,
beverages and dietary supplements that help enhance the immune system and to
take advantage of all of colostrum's benefits. A critical factor for success
of the Company is its immune-enhancing ingredient which has been branded
Proventra(TM) Brand Natural Immune Components ("Proventra"). Proventra is
derived from colostrum, the highly nutritious first milk from a dairy cow
after its calf is born. The primary components found in Proventra are
naturally occurring broad spectrum antibodies or specialized proteins that
enhance the body's own immune system to provide protection against harmful
micro-organisms. Additional immune-enhancing components found in Proventra
include lactoperoxidase, lactoferrin, growth factors and other substances to
bolster the body's resistance.
The Company, in conjunction with strategic partners, continues to
expand applications for its technology and is developing a portfolio of
Proventra-based products that target the needs of consumers and the
healthcare market.
In 1998, the Company entered into a collaboration and license
agreement and a manufacturing and supply agreement with Wyeth-Ayerst
Laboratories ("Wyeth-Ayerst"), a division of American Home Products
Corporation. The two companies will develop and commercialize a proprietary
ingredient with unique antibacterial properties for use in pediatric formula
and other nutritional products. The collaboration, during the research and
development phase of the product, will be funded by Wyeth-Ayerst through
payments to the Company.
In January 1999, the Company entered into a collaboration agreement
with General Nutrition Corporation, Inc. ("GNC") for product development,
manufacturing, supply and retail marketing of its Proventra. The agreement
calls for the two companies to develop and market a range of immune-enhancing
dietary supplements and nutrition formulas. The first product introduced
during the second half of 1999 was a tablet supplement called Proventra,
which is distributed through GNC and Rite-Aid Drugstores.
In March 1999, the Company entered into an agreement with Tropicana
Products, Inc., a division of PepsiCo Inc. Under this agreement, the two
companies will explore development of nutritious beverages for the
health-conscious consumer.
In March 1999, the Company also entered into a licensing and
distribution agreement with Hormel Health Labs ("HHL"), a wholly-owned
subsidiary of Hormel Foods Corporation. HHL licensed the manufacturing and
distribution rights for a new, clinically tested, cultured dairy beverage the
Company developed to improve the gastrointestinal health of patients in
hospitals and nursing homes. The product includes a patented ingredient
combination and will also incorporate the Company's Proventra.
In July 1999, the Company licensed its line of critical care
nutrition products, previously acquired from NM Holdings, Inc. ("NMI"), to
HHL. The licensing agreement granted HHL worldwide rights to manufacture,
distribute, market and sell the Company's critical care products. Under the
terms of the agreement HHL will pay royalties, subject to an annual minimum
royalty, to the Company based upon net sales of the specified products. HHL
commenced selling the Company's critical care products on a limited basis in
September 1999, and on an exclusive basis effective October 1999.
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In October 1999, the Company entered into a collaborative licensing
agreement with Novartis Consumer Health Inc. ("Novartis") whereby the Company
granted Novartis certain rights to defined Proventra technology. Also in
October, the Company and Novartis entered into a supply agreement for which
the Company will supply the Proventra ingredients.
In December 1999, the Company entered into a product development
agreement with Novartis.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
GENERAL. The net loss increased by $254,582, or 29.6%, for the three
months ended March 31, 2000 to $1,114,986 from $860,404 for the same period
in 1999. The loss increase was due primarily to decreased revenue from the
Company's critical care product line and increased product development
expense in support of the Company's consumer product programs.
REVENUES. For the three months ended March 31, 2000 revenues of
$146,915 consisted of product development and other revenues, primarily
royalty revenues on the Company's critical care product line. For the same
period in 1999 revenues of $ 583,533 consisted of approximately $436,000 in
product sales, primarily critical care nutrition product sales which were
licensed to HHL in July 1999, and approximately $148,000 from product
development revenue.
COST OF GOODS SOLD. For the three months ended March 31, 1999, the
cost of goods sold of $186,861 related primarily to the sales of critical
care nutrition products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $111,551, or 16.4%, for the three months
ended March 31, 2000 to $569,139 from $680,690 for the first quarter of 1999.
Approximately $294,000 of the decrease is due to decreased sales, marketing
and personnel expense for the Company's critical care nutrition products,
which were licensed to HHL in July 1999, offset by increased sales, marketing
and personnel expense for the consumer product programs of approximately
$182,000.
PRODUCT DEVELOPMENT EXPENSES. Expenses for product development
increased $162,476, or 37.2%, for the three months ended March 31, 2000 to
$598,922 from $436,446 for the three months ended March 31, 1999. The
increase was due to increased associated personnel and development expenses
in support of the Company's consumer product efforts.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
three months ended March 31, 2000 decreased $55,340, or 29.1%, to $135,075
from $190,415 for the same period in 1999. Approximately $77,000 of the
decrease was from decreased amortization of warrants and options issued for
services, offset by increased intangible asset amortization of approximately
$22,000.
INTEREST INCOME. Interest income for the three months ended March
31, 2000 decreased $13,990, or 25.3%, to $41,235 from $55,225 for the same
period in 1999. The decrease is primarily attributable to the decreased level
of investable funds.
INTEREST EXPENSE. For the three months ended March 31, 1999,
interest expense was due to the amortization of the value of the warrants
plus the value of the discount in connection with the convertible debentures
the Company issued in November 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities decreased by $190,358, or 18.9%,
for the three months ended March 31, 2000 to $818,441 from $1,008,799 for the
same period in 1999. Cash used in operations for the three months ended March
31, 2000 went primarily to fund operating losses. For the same period in
1999, cash used in operations went primarily to fund operating losses, as
well as repayment of current obligations and acquisition of operating
inventory.
9
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For the three months ended March 31, the Company invested $3,735 and
$5,908, in 2000 and 1999, respectively, in office and computer equipment to
support its operations. The Company redeemed $710,560 if its
available-for-sale securities for the three months ended March 31, 2000.
Proceeds from the exercise of common stock options and warrants for
the three months ended March 31, 2000 were $223,469.
The Company anticipates that its existing resources and interest
thereon will be sufficient to satisfy its anticipated cash requirements
through approximately the first quarter of 2001. The Company's working
capital and capital requirements will depend upon numerous factors, including
revenue from product sales, revenue from licensing of technology and product
development, the progress of the Company's market research, product
development and ability to obtain partners with the appropriate
manufacturing, sales, distribution and marketing capabilities. The Company's
capital requirements also will depend on the levels of resources devoted to
the development of manufacturing capabilities, technological advances, the
status of competitive products and the ability of the Company to establish
partners or strategic alliances to provide funding to the Company for certain
manufacturing, sales, product development and marketing activities.
The Company expects to incur substantial additional marketing
expense and product development expense. Capital expenditures may be
necessary to establish additional commercial scale manufacturing facilities.
The Company will need to raise substantial additional funds for longer-term
product development, manufacturing and marketing activities that may be
required in the future. The Company's ability to continue funding its planned
operations beyond the first quarter of 2001 is dependent upon its ability to
generate product revenues or to obtain additional funds through equity or
debt financing, strategic alliances, license agreements or from other
financing sources. A lack of adequate revenues or funding could eventually
result in the insolvency or bankruptcy of the Company. At a minimum, if
adequate funds are not available, the Company may be required to delay or to
eliminate expenditures for certain of its product development efforts or to
license to third parties the rights to commercialize products or technologies
that it would otherwise seek to develop itself. Because of the Company's
significant long-term capital requirements, it may seek to raise funds when
conditions are favorable, even if the Company does not have an immediate need
for such additional capital at such time. If the Company has not raised funds
prior to when its needs for funding become immediate, the Company may be
forced to raise funds when conditions are unfavorable, which could result in
significant dilution for current stockholders.
As of March 31, 2000, the Company's net tangible assets were below
the level required by the Nasdaq Stock Market ("Nasdaq") for continued
listing on the Nasdaq National Market (the "National Market"). In order to
maintain its National Market listing, Nasdaq may ask the Company to submit a
plan for meeting the National Market net tangible asset continuing listing
requirement. The Company is working diligently to execute a plan to meet the
net tangible asset requirement and retain its National Market listing. If
Nasdaq does not accept the Company's plan, Nasdaq may take actions to remove
the Company's Common Stock from listing on the National Market. If the
Company's Common Stock were removed from listing on the National Market, the
Company intends to apply to have its Common Stock listing transferred to the
Nasdaq SmallCap Market.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q for the first quarter ended March 31, 2000 contains
certain forward looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Such forward-
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looking statements are based on the beliefs of the Company's management as
well as on assumptions made by and information currently available to the
Company at the time such statements were made. When used in this Form 10-Q,
the words "anticipate", "believe", "estimate", "expect", "intend" and similar
expressions, as they relate to the Company, are intended to identify such
forward-looking statements. Although the Company believes these statements
are reasonable, readers of this Form 10-Q should be aware that actual results
could differ materially from those projected by such forward-looking
statements as a result of the risk factors listed below and set forth in the
Company's Annual Report on Form 10-K for 1999 ("Form 10-K") under the caption
"Risk Factors." Readers of this Form 10-Q should consider carefully the
factors listed below and under the caption "Risk Factors" in the Company's
Form 10-K, as well as the other information and data contained in this Form
10-Q. The Company cautions the reader, however, that such list of factors
under the caption "Risk Factors" in the Company's Form 10-K may not be
exhaustive and that those or other factors, many of which are outside of the
Company's control, could have a material adverse effect on the Company and
its results of operations. Factors that could cause actual results to differ
include, without limitation, the Company's ability to achieve a profitable
level of operations, to generate sufficient working capital and obtain
necessary financing to meet capital requirements, loss of Nasdaq National
Listing, the Company's ability to form strategic alliances with marketing and
distribution partners, the Company's exposure to product liability claims,
delays or high costs in product developments, consumers' perception of
product safety and quality, the Company's reliance on flawed market research,
potential competitors that are larger and financially stronger, the Company's
ability to receive regulatory approval for its products and the Company's
ability to manufacture an acceptable product on a commercial scale. All
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by the cautionary
statements set forth hereunder and under the caption "Risk Factors" in the
Company's Form 10-K.
RISK FACTORS
Certain statements made above (some of which are summarized below),
are forward-looking statements that involve risks and uncertainties, and
actual results may differ. Factors that could cause actual results to differ
include those identified below.
WE MAY NOT EVER ACHIEVE A PROFITABLE LEVEL OF OPERATIONS.
Our ability to achieve profitable operations depends in large part
on:
- entering into agreements to develop products and establish markets
for those products; and
- making the transition from a research company to an operating and
marketing company.
We cannot be sure we will be successful in ever achieving either
result. We have experienced significant operating losses in each year since
our inception in 1987. We have an accumulated deficit of $61 million as of
March 31, 2000. We may continue to lose money in the future.
IF WE CANNOT OBTAIN CONTINUING FUNDING, WE MAY BE UNABLE TO
IMPLEMENT OUR BUSINESS PLANS.
If we cannot find adequate funding, we may have to delay or
eliminate some of our product development plans. We may be required to grant
licenses to others to establish markets for products or technologies that we
would otherwise seek to market ourselves.
Our cash requirements for working capital depend on numerous
factors. These factors include:
- our spending on marketing activities, including clinical marketing
trials;
- our progress in finding partners to help us develop products and
market those products;
- the willingness and ability of our partners to provide funding for
our activities;
- our spending on product development programs;
- the rate of technological advances in the production of our
products;
- our spending on facilities, equipment and personnel to make our
products; and
- the status of competitive products.
Our long-term ability to continue funding our planned operations
depends on our ability to obtain additional funds through:
- product revenues;
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- equity or debt financing;
- finding partners to help us develop products and market those
products;
- license agreements; or
- other financing sources.
Because of our significant long-term capital requirements, we may
seek to raise funds when conditions are favorable. We may do so even if we do
not have an immediate need for the capital at the time we raise it. If we
have not raised funds prior to when our needs for funding become immediate,
we may be forced to raise funds when conditions are unfavorable. This could
result in significant dilution of our current stockholders.
IF WE DO NOT ACHIEVE A PROFITABLE LEVEL OF OPERATIONS AND CANNOT
FIND FUNDING IN THE FUTURE, WE COULD EVENTUALLY BECOME INSOLVENT OR BANKRUPT.
If we do not achieve a profitable level of operations and we do not
obtain funding necessary from some source other than operations, we could
eventually deplete our cash reserves and become insolvent or bankrupt.
GALAGEN AND THE OWNERS OF SHARES OF OUR COMMON STOCK MAY HAVE
DIFFICULTY IN SELLING SHARES OF OUR COMMON STOCK IN THE FUTURE IF OUR COMMON
STOCK IS REMOVED FROM LISTING ON THE NASDAQ NATIONAL MARKET.
We must meet specific requirements for our shares to continue to be
listed on the Nasdaq National Market. As of March 31, 2000 our net tangible
assets were below the threshold for continued listing on the Nasdaq National
Market. The Nasdaq Stock Market may require us to submit a plan demonstrating
our ability to achieve sustained compliance with the National Market
continued listing requirements, including the net tangible asset requirement.
If Nasdaq does not accept our plan for meeting the National Market listing
requirements, Nasdaq may remove our Common Stock from listing on the National
Market. We cannot be sure that our Common Stock will continue to be listed on
the National Market. If our Common Stock were removed from listing on the
National Market, we intend to apply to have its listing transferred to the
Nasdaq SmallCap Market. If the listing of our Common Stock is transferred
from the National Market to the SmallCap Market, it may be more difficult for
owners of our Common Stock to sell it through brokers. Additionally, we may
have more difficulty raising funds through the sale of our Common Stock or
securities convertible into Common Stock.
If trading privileges in our Common Stock on the Nasdaq National
Market were terminated, we would be required to demonstrate compliance with
the applicable requirements for initial inclusion of a security on the Nasdaq
National Market before our Common Stock would be listed again on that
exchange. The requirements for initial inclusion are more stringent than
those for continued listing.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT EXCEED OUR
INSURANCE COVERAGE.
Our business involves exposure to potential product liability risks
that are inherent in the production, manufacture and distribution of consumer
and clinical food products that are designed to be ingested. The successful
assertion or settlement of any uninsured claim, a significant number of
insured claims or a claim exceeding our insurance coverage could have a
material adverse effect on our business and financial condition. We cannot be
sure that we will be able to obtain product liability insurance on acceptable
terms or that provides adequate protection. Furthermore, we cannot be sure
that we will be able to secure increased insurance coverage as the markets
for our products increase.
THE RELATIVELY LOW LEVEL OF TRADING IN OUR COMMON STOCK MAY MAKE IT
HIGHLY VOLATILE.
While our Common Stock has been traded on the Nasdaq National Market
since our initial public offering, the volume of shares of Common Stock
traded on that market has been relatively small. Given the small volume of
shares traded, market fluctuations may have a particularly adverse effect on
the market price of our Common Stock. We cannot be sure of the liquidity of
the market for the Common Stock or the price at which any sales may occur.
The volume of trading in our Common Stock in the future will depend upon the
number of holders of the Common Stock, the interest of securities dealers in
maintaining a market in the Common Stock and other factors beyond our
control. The market price of our Common Stock could be subject to significant
fluctuations in response to:
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- our operating results;
- the operating results of our competitors or other
biotechnology companies;
- technological developments;
- government regulations;
- the status of our proprietary rights to potential products;
- litigation;
- public safety concerns; and
- other factors.
Some of these factors are unrelated to our operating performance and
beyond our control.
IF WE RELY ON INACCURATE MARKET INFORMATION, WE COULD MAKE DECISION
THAT HAS A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL CONDITION.
Because we are currently developing our products and markets for
those products, we are particularly reliant on market data. If that data is
inaccurate, we may commit resources to product development and marketing
efforts that do not become profitable. Product development and marketing
efforts that do not become profitable may have a material adverse effect on
our business and financial condition. We have obtained market and related
data from a competitive-market analysis firm. We have not independently
verified the accuracy of that information. In any event, the methodology
typically used in compiling market and related data makes it subject to
inherent uncertainties and estimations. As a result, we cannot be sure as to
the accuracy or completeness of our market information.
INADEQUATE PROVENTRA PRODUCTION COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS AND FINANCIAL CONDITION.
Given our limited experience in manufacturing Proventra, we cannot
be sure that we will be successful in producing Proventra of acceptable
quality on a commercial scale and at acceptable costs in our manufacturing
facility. If we cannot, our business and financial condition could be
materially adversely affected. Our production of Proventra will be regulated
by the Minnesota Department of Agriculture. We believe that our current
manufacturing facility will meet the anticipated requirements for the
production of Proventra for use in consumer and clinical nutritional products
through the year 2000. Further, we believe that contract manufacturers would
be available to increase our Proventra production capacity quickly, if
required. However, until we begin producing Proventra on a commercial scale,
we cannot be sure that our production capabilities will be adequate.
FAILURE OF OUR COLLABORATIONS TO DEVELOP AND MARKET PRODUCTS
CONTAINING PROVENTRA COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND
FINANCIAL CONDITION.
We are relying on collaborations with larger more established
companies to develop and market products containing Proventra. Our
collaborators' inability to bring products to market could have a material
adverse effect on our business and financial condition. Introduction of new
products depends on our ability and our collaborators' ability to accomplish
the following:
- complete market research;
- complete product development;
- establish product manufacturing;
- initiate marketing, sales and distribution activities related to
such products; and
- provide the funding necessary to accomplish
such activities.
DELAYS OR HIGH COSTS IN PRODUCT DEVELOPMENT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL CONDITION.
If we, or our strategic partners, cannot obtain accurate marketing
data, or develop a product responsive to the needs identified by that data,
our business and financial condition could be materially adversely affected.
The amount of time it will take us, together with our strategic partners, to
develop consumer and clinical nutrition products and the associated costs of
developing those products depends on, among other things, the results of our
market research for consumer and clinical products. It also depends on our
discussions with certain end users or purchasers of the potential products.
Market research and discussions may give us indications of potential
customers, what types of products they may desire and what clinical
information is necessary for effective
13
<PAGE>
marketing and sales.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk is unlikely to have a material adverse
effect on the Company's business, results of operations or financial
condition.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In the three months ended March 31, 2000 the Company issued an
aggregate of 90,165 shares of Common Stock upon the exercise of outstanding
warrants and received aggregate exercise proceeds of $218,235. The shares of
common stock were issued in reliance upon the exemption from registration
provided under Section 4(2) of the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A.) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
<S> <C> <C>
3.1 Intentionally left blank.
3.2 Restated Certificate of Incorporation of the Company.(3) Incorporated By
Reference
3.3 Intentionally left blank.
3.4 Restated Bylaws of the Company.(1) Incorporated By
Reference
4.1 Specimen Common Stock Certificate.(1) Incorporated By
Reference
4.2-4.5 Intentionally left blank.
4.6 Form of Common Stock Warrant to purchase shares of Common Stock of Incorporated By
the Company, issued in connection with the sale of Convertible Reference
Promissory Notes.(1)
4.7-4.10 Intentionally left blank.
4.11 Warrant to purchase 18,250 shares of Common Stock of the Company Incorporated By
issued to IAI Investment Funds VI, Inc. (IAI Emerging Growth Fund), Reference
dated January 30, 1996.(1)
4.12 Warrant to purchase 6,250 shares of Common Stock of the Company Incorporated By
issued to IAI Investment Funds IV, Inc. (IAI Regional Fund), dated Reference
January 30, 1996.(1)
4.13 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to John Pappajohn, dated February 2, 1996.(1) Reference
4.14 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Edgewater Private Equity Fund, L.P., dated February 2, Reference
1996.(1)
4.15 Warrant to purchase 10,000 shares of Common Stock of the Company Incorporated By
issued to Joseph Giamenco, dated February 2, 1996.(1) Reference
4.16 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Gus A. Chafoulias, dated February 2, 1996.(1) Reference
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
<S> <C> <C>
4.17 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to JIBS Equities, dated February 2, 1996.(1) Reference
4.18 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Land O'Lakes, Inc., dated February 2, 1996.(1) Reference
4.19 6% Convertible Debenture Purchase Agreement dated November 18, 1997 Incorporated By
among the Company and the Purchasers named therein.(8) Reference
4.20 Registration Rights Agreement dated November 18, 1997 among the Incorporated By
Company and the Holders named therein.(9) Reference
4.21-4.23 Intentionally left blank.
4.24 Stock Purchase Warrant issued to CPR (USA) Inc. dated November 18, Incorporated By
1997.(13) Reference
4.25 Stock Purchase Warrant issued to Libertyview Plus Fund dated Incorporated By
November 18, 1997.(14) Reference
4.26 Stock Purchase Warrant issued to Libertyview Fund, LLC dated Incorporated By
November 18, 1997.(15) Reference
4.27 Intentionally left blank.
4.28 Warrant issued to CLARCO Holdings dated as of December 1,1997.(17) Incorporated By
Reference
4.29 Intentionally left blank.
4.30 Warrant issued to Henry J. Cardello dated as of April 13, 1998. (20) Incorporated By
Reference
4.31 Warrant issued to Henry J. Cardello dated as of April 30, 1998. (20) Incorporated By
Reference
4.32 Warrant issued to Henry J. Cardello dated as of June 19, 1998. (20) Incorporated By
Reference
4.33 Warrant issued to William Young and Rebecca Young dated as of Incorporated By
August 12, 1998.(24) Reference
4.34 Warrant issued to Henry J. Cardello dated as of September 30, Incorporated By
1998.(24) Reference
4.35 Warrant issued to American Home Products Corporation dated as of Incorporated By
October 15, 1998.(24) Reference
4.36 Form of Registration Rights Agreement dated April 20, 1999.(25) Incorporated By
Reference
4.37 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(Lombard Odier & Cie).(26) Reference
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
<S> <C> <C>
4.38 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. Leigh Severance).(27) Reference
4.39 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. L. Severance, Inc. Profit Sharing Plan and Trust).(28) Reference
4.40 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. L. Severance, Inc. Pension Plan and Trust).(29) Reference
4.41 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(Winston R. Wallin).(30) Reference
#10.1 License Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
#10.2 Royalty Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
10.3 Intentionally left blank.
10.4 Master Services Agreement between the Company and Land O'Lakes Incorporated By
dated May 7, 1992.(1) Reference
*10.5 GalaGen Inc. 1992 Stock Plan, as amended. (5) Incorporated By
Reference
10.6-10.7 Intentionally left blank.
#10.8 License and Collaboration Agreement between the Company and Chiron Incorporated By
Corporation dated March 20, 1995.(1) Reference
*10.9 GalaGen Inc. Employee Stock Purchase Plan, as amended. (2) Incorporated By
Reference
10.10-10.11 Intentionally left blank.
10.12 Master Equipment Lease between the Company and Cargill Leasing Incorporated By
Corporation, dated June 6, 1996. (2) Reference
10.13 Agreement for Progress Payments between the Company and Cargill Incorporated By
Leasing Corporation, dated June 6, 1996. (2) Reference
10.14 Agreement for Lease between the Company and Land O'Lakes, dated Incorporated By
June 3, 1996. (2) Reference
10.15-10.18 Intentionally left blank.
*10.19 GalaGen Inc. Annual Short Term Incentive Cash Compensation Plan. (4) Incorporated By
Reference
*10.20 GalaGen Inc. Annual Long Term Incentive Stock Option Compensation Incorporated By
Plan. (4) Reference
*10.21 GalaGen Inc. 1997 Incentive Plan. (6) Incorporated By
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
<S> <C> <C>
Reference
10.22 Master Loan and Security Agreement with TransAmerica Business Incorporated By
Credit Corporation dated June 8, 1997. (7) Reference
10.23 Amended and Restated License Agreement between the Company and Land Incorporated By
O'Lakes dated March 11, 1998. (19) Reference
#10.24 License Agreement between the Company and Metagenics, Inc. dated Incorporated By
April 7, 1998. (20) Reference
10.25 Intentionally left blank.
10.26 Asset Purchase Agreement between the Company and Nutrition Medical, Incorporated By
Inc., dated September 1, 1998.(21) Reference
10.27 Intentionally left blank.
10.28 Asset Purchase Agreement Amendment 1 between the Company and Incorporated By
Nutrition Medical, Inc., dated October 28, 1998.(22) Reference
10.29 Asset Purchase Agreement Amendment 2 between the Company and Incorporated By
Nutrition Medical, Inc., dated December 23, 1998.(23) Reference
#10.30 Collaboration and License Agreement between the Company and Incorporated By
American Home Products Corporation acting through its Wyeth-Ayerst Reference
Laboratories Division, dated October 15, 1998. (24)
#10.31 Manufacturing and Supply Agreement between the Company and American Incorporated By
Home Products Corporation acting through its Wyeth-Ayerst Reference
Laboratories Division dated October 15, 1998.(24)
#10.32 Product Development Collaboration, Manufacturing and Supply, and Incorporated By
Retail Marketing Agreement between the Company and General Reference
Nutrition Corporation, dated December 22, 1998.(24)
*10.33 Letter agreement with Henry J. Cardello, dated January 1, 1999.(31) Incorporated By
Reference
10.34 Repurchase Agreement by and between GalaGen Inc. and Chiron Incorporated By
Corporation, dated April 1, 1999.(31) Reference
#10.35 Licensing and Distribution Agreement by and between GalaGen Inc. Incorporated By
and American Institutional Products, Inc., dated March 15, 1999.(31) Reference
*10.36 Letter agreement with Frank L. Kuhar, dated June 3, 1999 (32). Incorporated By
Reference
10.37 Licensing and distribution agreement between GalaGen Inc. and Incorporated By
American Institutional Products, Inc., dated July 15, 1999 (32). Reference
##10.38 Licensing Agreement by and between GalaGen Inc. and Novartis Incorporated By
Consumer Health, Inc., dated October 25, 1999 (33). Reference
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
<S> <C> <C>
##10.39 Supply Agreement by and between GalaGen Inc. and Novartis Consumer Incorporated By
Health, Inc., dated October 25, 1999 (33). Reference
##10.40 Development Agreement by and between GalaGen Inc. and Novartis Incorporated By
Consumer Health, Inc., dated December 17, 1999 (33). Reference
27.1 Financial Data Schedule for the period ended March 31, 2000. Electronic
Transmission
</TABLE>
(1) Incorporated herein by reference to the same numbered Exhibit to
the Company's Registration Statement on Form S-1 (Registration
No. 333-1032).
(2) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1996 (File No. 0-27976).
(3) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1996 (File No. 0-27976).
(4) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1996 (File No. 0-27976).
(5) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997 (File No. 0-27976).
(6) Incorporated herein by reference to Appendix A to the Company's
1997 Definitive Proxy Statement on Schedule 14A (File
No. 0-27976).
(7) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997 (File No. 0-27976).
(8) Incorporated herein by reference to Exhibit No. 4.4 to the
Company's Registration Statement on Form S-3 (Registration
No. 333-41151).
(9) Incorporated herein by reference to Exhibit No. 4.5 to the
Company's Registration Statement on Form S-3
(Registration No. 333-41151).
(10) Intentionally not used.
(11) Intentionally not used.
(12) Intentionally not used.
(13) Incorporated herein by reference to Exhibit No. 4.9 to the
Company's Registration Statement on Form S-3 (Registration
No. 333-41151).
(14) Incorporated herein by reference to Exhibit No. 4.10 to the
Company's Registration Statement on Form S-3(Registration
No. 333-41151).
(15) Incorporated herein by reference to Exhibit No. 4.11 to the
Company's Registration Statement on Form S-3 (Registration
No. 333-41151).
(16) Intentionally not used.
19
<PAGE>
(17) Incorporated herein by reference to Exhibit No. 4.13 to
Amendment No. 1 to the Company's Registration Statement on
Form S-3 (Registration No. 333-41151).
(18) Intentionally not used.
(19) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1997 (File No. 0-27976).
(20) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998 (File No. 0-27976).
(21) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1998 (File No. 0-27976).
(22) Incorporated herein by reference to Exhibit No. 2.2 to the
Company's Report on Form 8-K, dated December 23, 1998 (File
No. 0-27976).
(23) Incorporated herein by reference to Exhibit No. 2.3 to the
Company's Report on Form 8-K, dated December 23, 1998 (File
No. 0-27976).
(24) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1998 (File No. 0-27976).
(25) Incorporated herein by reference to Exhibit No. 4.5 to
Amendment No. 2 to the Company's Registration Statement on
Form S-3/A (Registration No. 333-71883).
(26) Incorporated herein by reference to Exhibit No. 4.6 to
Amendment No. 2 to the Company's Registration Statement on
Form S-3/A (Registration No. 333-71883).
(27) Incorporated herein by reference to Exhibit No. 4.7 to
Amendment No. 2 to the Company's Registration Statement on
Form S-3/A (Registration No. 333-71883).
(28) Incorporated herein by reference to Exhibit No. 4.8 to Amendment
No. 2 to the Company's Registration Statement on Form S-3/A
(Registration No. 333-71883).
(29) Incorporated herein by reference to Exhibit No. 4.9 to
Amendment No. 2 to the Company's Registration Statement on Form
S-3/A (Registration No. 333-71883).
(30) Incorporated herein by reference to Exhibit No. 4.10 to
Amendment No. 2 to the Company's Registration Statement on Form
S-3/A (Registration No. 333-71883).
(31) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1999 (File No. 0-27976).
(32) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 0-27976).
(33) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1999 (File No. 0-27976).
* Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-K.
# Contains portions for which confidential treatment has been
granted to the Company.
## Contains portions for which confidential treatment has been
requested by the Company.
20
<PAGE>
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 2000.
21
<PAGE>
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.
GALAGEN INC.
(Registrant)
Date: May 15, 2000 By: /s/ Henry J. Cardello
---------------------
Henry J. Cardello,
Chief Executive Officer
Date: May 15, 2000 By: /s/ Franklin L. Kuhar
---------------------
Franklin L. Kuhar,
Vice President, Chief Financial Officer,
Secretary (Principal Financial Officer
and Principal Accounting Officer)
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
<S> <C> <C>
3.1 Intentionally left blank.
3.2 Restated Certificate of Incorporation of the Company.(3) Incorporated By
Reference
3.3 Intentionally left blank.
3.4 Restated Bylaws of the Company.(1) Incorporated By
Reference
4.1 Specimen Common Stock Certificate.(1) Incorporated By
Reference
4.2-4.5 Intentionally left blank.
4.6 Form of Common Stock Warrant to purchase shares of Common Stock of Incorporated By
the Company, issued in connection with the sale of Convertible Reference
Promissory Notes.(1)
4.7-4.10 Intentionally left blank.
4.11 Warrant to purchase 18,250 shares of Common Stock of the Company Incorporated By
issued to IAI Investment Funds VI, Inc. (IAI Emerging Growth Fund), Reference
dated January 30, 1996.(1)
4.12 Warrant to purchase 6,250 shares of Common Stock of the Company Incorporated By
issued to IAI Investment Funds IV, Inc. (IAI Regional Fund), dated Reference
January 30, 1996.(1)
4.13 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to John Pappajohn, dated February 2, 1996.(1) Reference
4.14 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Edgewater Private Equity Fund, L.P., dated February 2, Reference
1996.(1)
4.15 Warrant to purchase 10,000 shares of Common Stock of the Company Incorporated By
issued to Joseph Giamenco, dated February 2, 1996.(1) Reference
4.16 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Gus A. Chafoulias, dated February 2, 1996.(1) Reference
4.17 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to JIBS Equities, dated February 2, 1996.(1) Reference
4.18 Warrant to purchase 25,000 shares of Common Stock of the Company Incorporated By
issued to Land O'Lakes, Inc., dated February 2, 1996.(1) Reference
4.19 6% Convertible Debenture Purchase Agreement dated November 18, 1997 Incorporated By
among the Company and the Purchasers named therein.(8) Reference
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
<S> <C> <C>
4.20 Registration Rights Agreement dated November 18, 1997 among the Incorporated By
Company and the Holders named therein.(9) Reference
4.21-4.23 Intentionally left blank.
4.24 Stock Purchase Warrant issued to CPR (USA) Inc. dated November 18, Incorporated By
1997.(13) Reference
4.25 Stock Purchase Warrant issued to Libertyview Plus Fund dated Incorporated By
November 18, 1997.(14) Reference
4.26 Stock Purchase Warrant issued to Libertyview Fund, LLC dated Incorporated By
November 18, 1997.(15) Reference
4.27 Intentionally left blank.
4.28 Warrant issued to CLARCO Holdings dated as of December 1,1997.(17) Incorporated By
Reference
4.29 Intentionally left blank.
4.30 Warrant issued to Henry J. Cardello dated as of April 13, 1998. (20) Incorporated By
Reference
4.31 Warrant issued to Henry J. Cardello dated as of April 30, 1998. (20) Incorporated By
Reference
4.32 Warrant issued to Henry J. Cardello dated as of June 19, 1998. (20) Incorporated By
Reference
4.33 Warrant issued to William Young and Rebecca Young dated as of Incorporated By
August 12, 1998.(24) Reference
4.34 Warrant issued to Henry J. Cardello dated as of September 30, Incorporated By
1998.(24) Reference
4.35 Warrant issued to American Home Products Corporation dated as of Incorporated By
October 15, 1998.(24) Reference
4.36 Form of Registration Rights Agreement dated April 20, 1999.(25) Incorporated By
Reference
4.37 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(Lombard Odier & Cie).(26) Reference
4.38 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. Leigh Severance).(27) Reference
4.39 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. L. Severance, Inc. Profit Sharing Plan and Trust).(28) Reference
4.40 Subscription Agreement and Investment Letter dated April 20, 1999 Incorporated By
(H. L. Severance, Inc. Pension Plan and Trust).(29) Reference
4.41 Subscription Agreement and Investment Letter dated April 20, Incorporated By
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
<S> <C> <C>
1999 (Winston R. Wallin).(30) Reference
#10.1 License Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
#10.2 Royalty Agreement between the Company and Land O'Lakes dated May 7, Incorporated By
1992.(1) Reference
10.3 Intentionally left blank.
10.4 Master Services Agreement between the Company and Land O'Lakes Incorporated By
dated May 7, 1992.(1) Reference
*10.5 GalaGen Inc. 1992 Stock Plan, as amended. (5) Incorporated By
Reference
10.6-10.7 Intentionally left blank.
#10.8 License and Collaboration Agreement between the Company and Chiron Incorporated By
Corporation dated March 20, 1995.(1) Reference
*10.9 GalaGen Inc. Employee Stock Purchase Plan, as amended. (2) Incorporated By
Reference
10.10-10.11 Intentionally left blank.
10.12 Master Equipment Lease between the Company and Cargill Leasing Incorporated By
Corporation, dated June 6, 1996. (2) Reference
10.13 Agreement for Progress Payments between the Company and Cargill Incorporated By
Leasing Corporation, dated June 6, 1996. (2) Reference
10.14 Agreement for Lease between the Company and Land O'Lakes, dated Incorporated By
June 3, 1996. (2) Reference
10.15-10.18 Intentionally left blank.
*10.19 GalaGen Inc. Annual Short Term Incentive Cash Compensation Plan. (4) Incorporated By
Reference
*10.20 GalaGen Inc. Annual Long Term Incentive Stock Option Compensation Incorporated By
Plan. (4) Reference
*10.21 GalaGen Inc. 1997 Incentive Plan. (6) Incorporated By
Reference
10.22 Master Loan and Security Agreement with TransAmerica Business Incorporated By
Credit Corporation dated June 8, 1997. (7) Reference
10.23 Amended and Restated License Agreement between the Company and Land Incorporated By
O'Lakes dated March 11, 1998. (19) Reference
#10.24 License Agreement between the Company and Metagenics, Inc. dated Incorporated By
April 7, 1998. (20) Reference
10.25 Intentionally left blank.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- ----------------
<S> <C> <C>
10.26 Asset Purchase Agreement between the Company and Nutrition Medical, Incorporated By
Inc., dated September 1, 1998.(21) Reference
10.27 Intentionally left blank.
10.28 Asset Purchase Agreement Amendment 1 between the Company and Incorporated By
Nutrition Medical, Inc., dated October 28, 1998.(22) Reference
10.29 Asset Purchase Agreement Amendment 2 between the Company and Incorporated By
Nutrition Medical, Inc., dated December 23, 1998.(23) Reference
#10.30 Collaboration and License Agreement between the Company and Incorporated By
American Home Products Corporation acting through its Wyeth-Ayerst Reference
Laboratories Division, dated October 15, 1998. (24)
#10.31 Manufacturing and Supply Agreement between the Company and American Incorporated By
Home Products Corporation acting through its Wyeth-Ayerst Reference
Laboratories Division dated October 15, 1998.(24)
#10.32 Product Development Collaboration, Manufacturing and Supply, and Incorporated By
Retail Marketing Agreement between the Company and General Reference
Nutrition Corporation, dated December 22, 1998.(24)
*10.33 Letter agreement with Henry J. Cardello, dated January 1, 1999.(31) Incorporated By
Reference
10.34 Repurchase Agreement by and between GalaGen Inc. and Chiron Incorporated By
Corporation, dated April 1, 1999.(31) Reference
#10.35 Licensing and Distribution Agreement by and between GalaGen Inc. Incorporated By
and American Institutional Products, Inc., dated March 15, 1999.(31) Reference
*10.36 Letter agreement with Frank L. Kuhar, dated June 3, 1999 (32). Incorporated By
Reference
10.37 Licensing and distribution agreement between GalaGen Inc. and Incorporated By
American Institutional Products, Inc., dated July 15, 1999 (32). Reference
##10.38 Licensing Agreement by and between GalaGen Inc. and Novartis Incorporated By
Consumer Health, Inc., dated October 25, 1999 (33). Reference
##10.39 Supply Agreement by and between GalaGen Inc. and Novartis Consumer Incorporated By
Health, Inc., dated October 25, 1999 (33). Reference
##10.40 Development Agreement by and between GalaGen Inc. and Novartis Incorporated By
Consumer Health, Inc., dated December 17, 1999 (33). Reference
27.1 Financial Data Schedule for the period ended March 31, 2000. Electronic
Transmission
</TABLE>
(1) Incorporated herein by reference to the same numbered Exhibit to
the Company's Registration Statement on Form S-1 (Registration
No. 333-1032).
<PAGE>
(2) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1996 (File No. 0-27976).
(3) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1996 (File No. 0-27976).
(4) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1996 (File No. 0-27976).
(5) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997 (File No. 0-27976).
(6) Incorporated herein by reference to Appendix A to the Company's
1997 Definitive Proxy Statement on Schedule 14A (File No.
0-27976).
(7) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997 (File No. 0-27976).
(8) Incorporated herein by reference to Exhibit No. 4.4 to the
Company's Registration Statement on Form S-3 (Registration
No. 333-41151).
(9) Incorporated herein by reference to Exhibit No. 4.5 to the
Company's Registration Statement on Form S-3 (Registration
No. 333-41151).
(10) Intentionally not used.
(11) Intentionally not used.
(12) Intentionally not used.
(13) Incorporated herein by reference to Exhibit No. 4.9 to the
Company's Registration Statement on Form S-3 (Registration
No. 333-41151).
(14) Incorporated herein by reference to Exhibit No. 4.10 to the
Company's Registration Statement on Form S-3(Registration
No. 333-41151).
(15) Incorporated herein by reference to Exhibit No. 4.11 to the
Company's Registration Statement on Form S-3 (Registration
No. 333-41151).
(16) Intentionally not used.
(17) Incorporated herein by reference to Exhibit No. 4.13 to
Amendment No. 1 to the Company's Registration Statement on
Form S-3 (Registration No. 333-41151).
(18) Intentionally not used.
(19) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1997 (File No. 0-27976).
(20) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998 (File No. 0-27976).
(21) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1998 (File No. 0-27976).
(22) Incorporated herein by reference to Exhibit No. 2.2 to the
Company's Report on Form 8-K, dated December 23, 1998 (File
No. 0-27976).
<PAGE>
(23) Incorporated herein by reference to Exhibit No. 2.3 to the
Company's Report on Form 8-K, dated December 23, 1998 (File
No. 0-27976).
(24) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1998 (File No. 0-27976).
(25) Incorporated herein by reference to Exhibit No. 4.5 to
Amendment No. 2 to the Company's Registration Statement on
Form S-3/A (Registration No. 333-71883).
(26) Incorporated herein by reference to Exhibit No. 4.6 to
Amendment No. 2 to the Company's Registration Statement on
Form S-3/A (Registration No. 333-71883).
(27) Incorporated herein by reference to Exhibit No. 4.7 to
Amendment No. 2 to the Company's Registration Statement on
Form S-3/A (Registration No. 333-71883).
(28) Incorporated herein by reference to Exhibit No. 4.8 to
Amendment No. 2 to the Company's Registration Statement on
Form S-3/A (Registration No. 333-71883).
(29) Incorporated herein by reference to Exhibit No. 4.9 to
Amendment No. 2 to the Company's Registration Statement on
Form S-3/A (Registration No. 333-71883).
(30) Incorporated herein by reference to Exhibit No. 4.10 to
Amendment No. 2 to the Company's Registration Statement on
Form S-3/A (Registration No. 333-71883).
(31) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1999 (File No. 0-27976).
(32) Incorporated herein by reference to the same numbered Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 0-27976).
(33) Incorporated herein by reference to the same numbered Exhibit to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1999 (File No. 0-27976).
* Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-K.
# Contains portions for which confidential treatment has been
granted to the Company.
## Contains portions for which confidential treatment has been
requested by the Company.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THREE MONTHS
ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 316,670
<SECURITIES> 2,072,230
<RECEIVABLES> 108,439
<ALLOWANCES> 18,188
<INVENTORY> 64,526
<CURRENT-ASSETS> 3,075,315
<PP&E> 691,481
<DEPRECIATION> 433,801
<TOTAL-ASSETS> 3,986,043
<CURRENT-LIABILITIES> 564,488
<BONDS> 0
0
0
<COMMON> 105,091
<OTHER-SE> 3,271,464
<TOTAL-LIABILITY-AND-EQUITY> 3,986,043
<SALES> 0
<TOTAL-REVENUES> 146,915
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,303,136
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,114,986)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,114,986)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,114,986)
<EPS-BASIC> (.11)
<EPS-DILUTED> (.11)
</TABLE>
