<PAGE>
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 June 30, 2000.
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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 -
10,518,371 shares as of August 4, 2000.
1
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INDEX
GALAGEN INC.
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets - June 30, 2000 and December 31, 1999...................................................3
Statements of Operations - Three and six months ended
June 30, 2000 and June 30, 1999........................................................................4
Statements of Cash Flows - Six months ended
June 30, 2000 and June 20, 1999........................................................................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 4. Submission of Matters to a Vote of Security Holders...................................................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
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................................ $ 196,395 $ 204,817
Available-for-sale securities............................................................ 1,195,238 2,782,790
Accounts receivable, net of allowance of $18,188 in 2000 and $18,951 in 1999............. 102,211 499,606
Prepaid expenses......................................................................... 445,119 146,023
Inventory................................................................................ 143,244 56,372
----------- ------------
Total current assets....................................................................... 2,082,207 3,689,608
Property and equipment..................................................................... 693,776 687,746
Less accumulated depreciation............................................................ (465,701) (400,301)
----------- ------------
228,075 287,445
Customer list.............................................................................. 315,000 360,000
Other intangible assets.................................................................... 203,624 300,872
Deferred expenses.......................................................................... 31,250 93,750
----------- ------------
549,874 754,622
----------- ------------
Total assets............................................................................... $ 2,860,156 $ 4,731,675
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 447,171 $ 273,717
Other current liabilities........................................................... 58,922 144,886
----------- ------------
Total current liabilities............................................................. 506,093 418,603
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 - 10,518,371 in 2000; 10,416,462 in 1999........... 105,184 104,165
Additional paid-in capital.......................................................... 64,335,622 64,099,393
Accumulated deficit ................................................................ (62,131,743) (59,935,486)
----------- ------------
Total stockholders' equity.......................................................... 2,309,063 4,268,072
----------- ------------
Total liabilities and stockholders' equity............................................ $ 2,860,156 $ 4,731,675
=========== ============
</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 JUNE 30 SIX MONTHS ENDED JUNE 30
--------------------------------------------------------------
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Revenues:
Product sales..................................... $ 6,459 $ 481,237 $ 6,459 $ 916,779
Product licensing, development and other revenues. 117,542 127,205 264,457 275,196
------------- ------------- ------------- -------------
124,001 608,442 270,916 1,191,975
Operating expenses:
Cost of goods sold................................ 2,806 202,210 2,806 389,071
Selling, general and administrative............... 579,922 857,095 1,149,061 1,595,285
Product development............................... 515,471 403,308 1,114,393 782,254
Depreciation and amortization..................... 135,075 176,667 270,150 367,082
------------- ------------- ------------- -------------
1,233,274 1,639,280 2,536,410 3,133,692
------------- ------------- ------------- -------------
Operating loss..................................... (1,109,273) (1,030,838) (2,265,494) (1,941,717)
Interest income.................................... 28,002 40,919 69,237 96,144
Interest expense................................... - (5,977) - (10,727)
------------- -------------- ------------- --------------
Net loss........................................... $ (1,081,271) $ (995,896) $ (2,196,257) $ (1,856,300)
============== ============== ============== ==============
Net loss per share
Basic and Diluted........................... $ (0.10)$ (0.10) $ (0.21)$ (0.20)
Weighted average number of common shares outstanding
Basic and Diluted.............................. 10,509,229 10,042,618 10,480,305 9,498,555
</TABLE>
See accompanying notes.
4
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GALAGEN INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
-------------------------------
2000 1999
--------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss............................................. $ (2,196,257) $ (1,856,300)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization....................... 270,148 391,226
Changes in operating assets and liabilities......... 98,917 (494,486)
------------- --------------
Net cash used in operating activities................ (1,827,192) ( 1,959,560)
-------------- --------------
INVESTING ACTIVITIES:
Payment for asset purchase........................... - (113,901)
Purchase of property, plant and equipment............ (6,030) (8,001)
Change in available-for-sale securities, net......... 1,587,552 (493,287)
------------- ---------------
Net cash provided (used) by investing activities... 1,581,522 (615,189)
------------- --------------
FINANCING ACTIVITIES:
Proceeds from common stock.......................... 237,248 1,912,189
Payment for warrant repurchase...................... - (375,000)
Net payment on debt................................. - (39,096)
------------- --------------
Net cash provided by financing activities............ 237,248 1,498,093
------------- -------------
Increase (decrease) in cash.......................... (8,422) (1,076,656)
Cash and cash equivalents at beginning of period..... 204,817 4,081,733
------------- -------------
Cash and cash equivalents at end of period........... $ 196,395 $ 3,005,077
============= =============
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of convertible promissory notes, plus
related accrued interest, to common stock.......... $ - $ 217,475
</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 six months ended June 30, 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 fourth 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 fourth
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 fourth 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 June 30, 2000 and
December 31, 1999 consisted of the following:
6
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<TABLE>
<CAPTION>
2000 1999
----------------- ----------------
<S> <C> <C>
Raw materials ............ $ 61,316 $ 46,660
Finished goods........... 81,928 9,712
----------------- ----------------
$ 143,244 $ 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.
8
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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.
In July 2000, the Company entered into an agreement with Estee Lauder
Inc. to supply its colostrum-based ingredient for use in cosmetic skin care
products.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
GENERAL. The net loss increased by $85,375, or 8.6%, for the three
months ended June 30, 2000 to $1,081,271 from $995,896 for the same period in
1999.
REVENUES. For the three months ended June 30, 2000 revenues of $124,001
consisted primarily of product development revenue and royalty revenue, on the
Company's critical care product line. For the same period in 1999 revenues of $
608,442 consisted of approximately $481,000 in product sales, primarily critical
care nutrition product sales which were licensed to HHL in July 1999, and
approximately $127,000 from product development revenue.
COST OF GOODS SOLD. For the three months ended June 30, 2000 and 1999,
the cost of goods sold of $2,806 and $202,210, respectively, related primarily
to the product sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $277,173, or 32.3%, for the three months ended
June 30, 2000 to $579,922 from $857,905 for the first quarter of 1999. The
decrease is primarily due to decreased sales, marketing and personnel expense
for the Company's critical care nutrition products, which were licensed to HHL
in July 1999.
PRODUCT DEVELOPMENT EXPENSES. Expenses for product development
increased $112,163, or 27.8%, for the three months ended June 30, 2000 to
$515,471 from $403,308 for the three months ended June 30, 1999. The increase
was due to increased expenses in support of the Company's consumer product
efforts.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
three months ended June 30, 2000 decreased $41,592, or 23.5%, to $135,075 from
$176,667 for the same period in 1999. The decrease was primarily due to
decreased amortization of warrants and options issued for services.
INTEREST INCOME. Interest income for the three months ended June 30,
2000 decreased $12,917, or 31.6%, to $28,002 from $40,919 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 June 30, 1999, interest
expense of $5,977 was due to the amortization of the value of the warrants plus
the value of the discount in connection with the convertible debentures, which
were fully redeemed by May 1999.
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
GENERAL. The net loss increased by $339,957, or 18.3%, for the six
months ended June 30, 2000 to $2,196,257 from $1,856,300 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 six months ended June 30, 2000, revenues of $270,916
consisted primarily of product development revenue and royalty revenue. For the
same period in 1999, revenues of $1,191,975 consisted of
9
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approximately $917,000 of critical care nutrition product sales which were
licensed to HHL in July 1999, and approximately $275,000 from product
development revenue.
COST OF GOODS SOLD. For the six months ended June 30, 2000 and 1999,
the cost of goods sold of approximately $3,000 and $389,000, respectively, was
related to the product sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $446,224, or 28.0%, for the six months ended
June 30, 2000 to $1,149,061 from $1,595,285 for the first six months of 1999.
Approximately $575,000 of the decrease is due to decreased sales, marketing and
personnel expense related to the Company's critical care nutrition products
which were licensed to HHL in July 1999, offset by increased expenses of
approximately $129,000 associated with the consumer product programs.
PRODUCT DEVELOPMENT EXPENSES. Expenses for product development
increased $332,139, or 42.5%, for the six months ended June 30, 2000 to
$1,114,393 from $782,254 for the same period in 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
six months ended June 30, 2000 decreased $96,932, or 26.4%, to $270,150 from
$367,082 for the same period in 1999. The decrease was primarily due to
decreased amortization of warrants and options issued for services of
approximately $130,000, offset by increased intangible asset amortization of
approximately $33,000.
INTEREST INCOME. Interest income for the six months ended June 30, 2000
decreased $26,907, or 28.0%, to $69,237 from $96,144 for the same period in
1999. The decrease was primarily attributable to the decreased level of invested
funds.
INTEREST EXPENSE. Interest expense for the six months ended June 30,
1999 was $10,727, and resulted from the amortization of the value of the
warrants plus the value of the discount in connection with the Company's
convertible debentures, which were fully redeemed by May 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities decreased by $132,368, or 6.75%, for
the six months ended June 30, 2000 to $1,827,192 from $1,959,560 for the same
period in 1999. Cash used in operations for the six months ended June 30, 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.
For the six months ended June 30, the Company invested $6,030 and
$8,001, in 2000 and 1999, respectively, in computer and manufacturing equipment
to support its operations. The Company redeemed $1,587,552 0f its
available-for-sale securities for the six months ended June 30, 2000, and
invested $493,287 in available-for-sale securities for the same period in 1999.
For the six months ended June 30, 1999 the Company invested $113,901 in
purchased product development technology relating to an asset purchase agreement
with Marketing Ventures of America, Inc., of which the Chief Executive Officer
of the Company is a 100% shareholder.
Proceeds from the exercise of common stock options and warrants for the
six months ended June 30, 2000 were $237,248. For the six months ended June 30,
1999 proceeds from the sale of common stock and the exercise of common stock
options and warrants were $1,912,189. The Company repurchased warrants for
$375,000 and repaid debt of $39,096 during the six months ended June 30, 1999.
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
10
<PAGE>
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 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.
At June 30, 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"). Based on the Company's net
tangible assets, the administrative staff of Nasdaq has recommended that the
Company's Common Stock be removed from listing on the National Market. The
Company has appealed the staff recommendation to a Nasdaq Listing Qualifications
Panel. There will be no change in the Company's listing on the National Market
pending the outcome of that appeal, which will be heard on August 31, 2000. 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 second quarter ended June 30, 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-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
11
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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 $62 million as of June 30,
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;
- 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. At June 30, 2000 our net tangible assets
were below the threshold for continued listing on the Nasdaq National Market.
Based on the Company's net tangible assets, the administrative staff of Nasdaq
has recommended that the Company's Common Stock be removed from listing on the
National Market. The Company has appealed the staff recommendation to a Nasdaq
Listing Qualifications Panel. There will be no change in the Company's listing
on the National Market pending the outcome of that appeal, which will be heard
on August 31, 2000. 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
12
<PAGE>
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:
- 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
13
<PAGE>
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 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's 1999 Annual Meeting of Stockholders held on May 23,
2000, the stockholders approved the following:
(a) the election of directors to serve until their successors are duly
elected. Each nominated director was elected as follows:
<TABLE>
<CAPTION>
Director-Nominee Votes For Votes Withheld
---------------- --------- --------------
<S> <C> <C>
Robert A. Hoerr, M.D., Ph.D. 7,671,529 20,187
Helmut B. Breuer 7,671,529 20,187
Henry J. Cardello 7,671,529 20,187
Austen S. Cargill II, Ph.D. 7,671,529 20,187
Ronald O. Ostby 7,671,529 20,187
Winston R. Wallin 7,670,029 21,687
</TABLE>
(b) a proposal to ratify the appointment of Ernst & Young LLP to serve
as independent public accountants of the Company for the year
ending December 31, 2000. The proposal received 7,657,265 votes
for, and 4,975 votes against, ratification. There were 29,476
abstentions and 0 broker non-votes.
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 Incorporated By
Common Stock of the Company, issued in connection with Reference
the sale of Convertible 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)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- -----------------
<S> <C> <C>
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 Incorporated By
the Company issued to Edgewater Private Equity Fund, Reference
L.P., dated February 2, 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
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
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- -----------------
<S> <C> <C>
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, 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
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- -----------------
<S> <C> <C>
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
License Agreement between the Company and Metagenics, Inc. dated Incorporated By
#10.24 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
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION METHOD OF FILING
----------- ----------- -----------------
<S> <C> <C>
#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 June 30, 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.
19
<PAGE>
(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).
(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).
20
<PAGE>
(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.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended June
30, 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: August 14, 2000 By: /s/ Henry J. Cardello
----------------------------------------
Henry J. Cardello,
Chief Executive Officer
Date: August 14, 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 Incorporated By
Common Stock of the Company, issued in connection with Reference
the sale of Convertible 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 Incorporated By
the Company issued to Edgewater Private Equity Fund, Reference
L.P., dated February 2, 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
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
License Agreement between the Company and Metagenics, Inc. dated Incorporated By
#10.24 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 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 June 30, 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.
