[TYPE] 10QSB/A
[DOCUMENT-COUNT] 1
[SROS] NASD
[FILER]
[CIK] 0000908401
[CCC] bk@22222
[PERIOD] 03/31/96
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-21995
(Exact name of small business issuer as specified in its charter)
GLYKO BIOMEDICAL LTD.
(State of other jurisdiction of incorporation or organization) Canada
(I.R.S. Employer Identification No.) 68-0230537
(address of principal executive offices) 81 Digital Drive, Novato,
California 94949
(Registrant's telephone number, including area code) (415) 382-6653
(Former name, former address and former fiscal year, if changed since last
report)
Not Applicable
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 _____ No _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 14,567,944 common shares
outstanding as of April 26, 1996.
</PAGE>
<PAGE>
GLYKO BIOMEDICAL LTD.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements. Page
Consolidated Balance Sheets as of
March 31, 1996 and December 31, 1995 1
Consolidated Statements of Operations for the
three months ended March 31, 1996 and 1995 2
Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
ITEM 2.
Management's Discussion and Analysis of
Financial Conditions and Results of Operations 5
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 10
ITEM 2. Changes in Securities 10
ITEM 3. Defaults upon Senior Securities 10
ITEM 4. Submission of Matter to a Vote of Security Holders 10
ITEM 5. Other Information 10
ITEM 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</PAGE>
<PAGE>
PART I.
ITEM 1. Financial Statements
<TABLE>
GLYKO BIOMEDICAL LTD.
CONSOLIDATED BALANCE SHEETS
(unaudited, in U.S. dollars)
<CAPTION>
March 31, December 31,
1996 1995
________ ________
<S> <C> <C>
Assets
Current Assets
Cash $ 287,081 $ 620,720
Trade receivables 235,048 356,806
Inventories 120,213 108,518
Other current assets 10,965 5,132
________ ________
Total current assets 653,307 1,091,176
Property, plant & equipment, net 97,545 112,169
Other assets 2,200 2,239
________ ________
Total assets $ 753,052 $ 1,205,584
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 130,511 122,375
Accrued liabilties 163,678 221,424
Deferred revenue 75,225 174,386
Payable to stockholder 219,811 219,811
_______ _______
Total current liabilties 589,225 737,996
Deferred facilities costs 215,106 166,535
Deferred rent 73,077 76,590
_______ _______
Total liabilities 877,408 981,121
Stockholder's equity (deficit):
Common stock, no par value, unlimited shares
authorized, 14,567,944 shares issued and
outstanding 11,304,356 11,304,356
Common stock warrants1 278,085 278,085
Accumulated deficit (11,706,797) (11,357,978)
_________ __________
Total stockholder's equity (deficit) (124,356) 224,463
_________ __________
Total liabilities and
stockholder's equity (deficit) $ 753,052 $ 1,205,584
========= ==========
</TABLE>
</PAGE>
<PAGE>
<TABLE>
GLYKO BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in U.S. dollars)
<CAPTION>
Three Months Ended March 31,
1996 1995
__________ ___________
<S> <C> <C>
Revenues:
Sales of products and services $ 404,951 $ 206,528
Other revenues 38,090 100,000
__________ ___________
Total revenues 443,041 306,528
Expenses:
Cost of products and services 146,630 85,179
Research and development 277,421 275,187
Selling, general and administrative 375,242 330,873
___________ ____________
799,293 691,239
___________ ____________
Loss from operations (356,252) (384,711)
Interest income 3,645 340
Other income and expense 3,788 (6,197)
____________ ____________
Net loss $ (348,819) $ (390,568)
============ ============
Net loss per common share $ (0.02) $ (0.04)
============= ============
Weighted average number of shares
used in computing per share amounts 14,567,944 9,781,522
============= ============
</TABLE>
</PAGE>
<PAGE>
<TABLE>
GLYKO BIOMEDICAL LTD.CONSOLIDATED STATEMENTS OF CASH FLOWS
(unnaudited, in U.S. dollars)
<CAPTION>
Three months ended March 31,
_________________________
1996 1995
__________ ___________
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (348,819) $ (390,568)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amotization 17,332 24,651
Interest accrued on bridge loan -- 4,623
Change in assets and liabilities:
Trade receivables 121,758 205,259
Inventories (11,695) (34,112)
Other current assets (5,794) (58,016)
Accounts payable 8,136 63,653
Accrued liabilities and deferred rent (56,147) 27,920
Deferred revenue (99,161 --
Payable to stockholder -- --
Deferred compensation -- 75,970
Deferred facilities costs 48,571 65,706
_____________ ___________
Total adjustments 23,000 375,654
_____________ ___________
Net cash used in operating activities (325,819) (14,914)
Cash flows from investing activities:
Capital expenditures (2,708) --
_____________ ___________
Net cash used in investing activities (2,708 --
Cash flows from financing activities:
Repayments on capital lease obligations (5,112) (4,481)
_____________ ___________
Net cash used in financing activities (5,112) (4,481)
_____________ ___________
Net decrease in cash (333,639) (19,395)
Cash and cash equivalents,
beginning of period 620,720 79,294
_____________ ___________
Cash and cash equivalents, end of period $ 287,081 $ 59,899
============ ===========
</TABLE>
</PAGE>
<PAGE>
GLYKO BIOMEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements and related footnotes
have been prepared in conformity with U.S. generally accepted accounting
principles using U.S. dollars. The consolidated financial statements
include the accounts of the Company and its subsidiary, Glyko, Inc.
All significant intercompany accounts and transactions have been
eliminated. The balance sheet as of March 31, 1996 and the related
statements of operations and cash flows for the periods ended March 31,
1996 and 1995 are unaudited but have been prepared on substantially the
same basis as the annual audited financial statements. In the opinion
of the Company, the unaudited consolidated financial statements reflect
all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the consolidated financial
position, operating results and cash flows for those periods presented.
The unaudited results for the period ended March 31, 1996 are not
necessarily indicative of results to be expected for the entire year.
The accompanying financial statements should be read in conjunction
with the annual report on form 10-KSB for the fiscal year ended
December 31, 1995.
Product sales
At times, the Company has received payment in advance for future product
shipments. Such payments are classified as deferred revenue on the
accompanying Balance Sheet. Upon shipment of products revenue is recognized
and the corresponding liability (deferred revenue) is reduced.
In the first quarter of 1996, net revenues to one distributor were 20
percent of total net revenues.
Loss per Common Share
Loss per common share is computed using the weighted average number of shares
outstanding during each period presented.
2. Termination of Millipore marketing agreement
Through 1993 and the first quarter of 1994 the Company sold its products
directly and through sales to Millipore Corporation, ("Millipore") for
resale. During this time Millipore held marketing rights to Glyko products
under the terms of a distribution agreement between Millipore and the
Company. In April 1994 Millipore and the Company agreed to terminate the
distribution agreement. In exchange for relinquishing marketing rights to
Glyko products, Millipore will receive 500,000 shares of Glyko common
stock for costs related to the termination of the distribution agreement.
This amount represents the estimated fair market value, at April 1994, of
stock to be issued to Millipore as a result of the termination of the
distribution agreement.
</PAGE>
<PAGE>
3. Stockholder's Equity
In the second quarter of 1995, the Company closed a private equity placement
offering (the Financing). Investors participating in the Financing purchased
units which consisted of one share of common stock and one warrant to
purchase one share of common stock. The Company issued units in exchange
for cash, and also in exchange for the settlement of certain outstanding
liabilities. The units were priced at C$0.80 with an exercise price on the
warrant of C$0.90. The Company established a balance sheet value for the
common stock warrants by subtracting the discounted fair market value for one
share of the Company's common stock from the price of one unit.
The common stock warrants expire in 2000. The Financing raised approximately
$2.78 million, consisting of approximately $2.36 million in cash and $420,000
for the settlement of a stockholder/director bridge loan, common stock issued
for financing services and certain other liabilities.
ITEM 2.
GLYKO BIOMEDICAL LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview:
The following discussion and analysis of financial condition and results of
operations contains certain forward looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
the results anticipated in these forward looking statements.
Glyko Biomedical Ltd. is a Canadian company which holds all of the capital
stock of Glyko, Inc. The following discussion and the accompanying
consolidated financial statements include the accounts of Glyko Biomedical
Ltd. and Glyko, Inc. presented on a consolidated basis. Since its inception
in October 1990, Glyko has been engaged in the research and development of
new techniques to test carbohydrates for research, diagnostic and
pharmaceutical purposes. The Company has developed products which include a
an imaging system, software and chemical testing kits. The Company is
cintinuing to develop additional kits for use with the imaging system,
and is also developing medical diagnostic products. In November 1995, the
Company received clearance from the United States Food and Drug
Administration to market its first medical diagnostic product, the Urinary
Carbohydrate Analysis Test Kit for Lysosomal disorders. The Company has
incurred a net loss in each period since its inception and expects to
continue to incur losses at least through 1996. For the period from its
inception to March 31, 1996, the Company has incurred cumulative losses of
$11,707,000.
The Three Month Periods Ended March 31, 1996 and March 31, 1995
Total Revenues for the first quarter of 1996 were $443,000 and consisted of
sales of products and services of $405,000 and other revenues of $38,000.
Sales of consumable products were responsible for more than half of all sales
of products and services. Remaining sales of products and services consisted
of sales of imaging equipment and analytical service fees earned. Other
revenues consisted principally of grant fees earned.
</PAGE>
<PAGE>
Total revenues for the first quarter of 1995 were $307,000 and consisted of
sales of products and services of $207,000 and development and supply
agreement fee revenue of $100,000. Sales of imaging systems were responsible
for more than half of all sales of products and services. Remaining sales of
products and services consisted of sales of consumable products and fees for
custom analytic services. In the first quarter of 1995 the Company entered
into a Development and Supply Agreement (the Agreement) with a life sciences
products supplies company. Under the Agreement, Glyko will provide its
product line of FACE( analytical imagers and reagents to be marketed under
under that company's label.
The increase in total revenues in the first quarter of 1996 compared to the
same period in 1995 was principally due to increased sales volumes of
consumable products. The Company expects sales of consumable products as a
percentage of total revenues to continue to increase. Sales volumes of
imaging equipment and fees for analytical services were both higher in 1996.
Prices for both products and services were slightly higher in 1996. Other
revenues were lower in 1996. Grant fee revenues earned in the first quarter
of 1996 partially offset the effect of supply agreement fee revenue of
$100,000 earned in 1995 but not duplicated in 1996.
Cost of goods and services was $147,000 in the first quarter of 1996 and
$85,000 in the same period of the prior year. These costs reflect
manufacturing costs associated with increased sales of products and services.
Margins were higher in the first quarter of 1996 on sales of products and
services compared to the same period last year, primarily as a result of
increased sales volumes of higher margin consumable products. As the Company
is in the early stages of product sales and manufacturing, product margins
have fluctuated between periods and are not necessarily indicative of future
margins.
Research and development expenses were $277,000 for the first quarter of 1996
compared to $275,000 for the same period in 1995. Consultancy and other
costs relating to development of a second generation imaging system were
higher in 1996. Payroll costs were slightly higher reflecting salary
increases to staff. These higher expenses were almost completely offset by
higher charges of research and development expense to cost of products and
services in 1995. These charges resulted from increased sales and service
volumes and represented the value of research and development staff time and
overhead devoted to the manufacture of products and to the performance of
custom and contract analytical services.
Selling, general and administrative expenses were $375,000 in the first
quarter of 1996 compared to $331,000 in the same period in 1995, an increase
of $44,000. Payroll costs were slightly higher in 1996 due primarily to
increased headcount in the sales and marketing group. Travel expenses and
marketing consultancy costs were also higher in 1996. These increased
expenses were partially offset by lower investor relations costs in 1996 as
expenses related to the financing completed in the second quarter of 1995
were not duplicated in 1996.
Liquidity and Capital Resources
In the first quarter of 1996 total cash used in operations, investing
activities and financing activities was $334,000, resulting in a cash balance
at March 31, 1996 of $287,000. Net cash used in the first quarter of 1996
reflected the net loss for the period. Cash generated by collections on
accounts receivable and by deferral of payments for facilities costs was
offset by the effect of sales made against deferred (prepaid) revenues and by
payments of accrued liabilities.
</PAGE
</PAGE>
In the second quarter of 1995, the Company closed a private equity placement
offering (the 1995 Financing). Investors participating in the 1995 Financing
purchased units which consisted of one share of common stock and one warrant
to purchase one share of common stock. The Company issued units in exchange
for cash, and also in exchange for the settlement of certain outstanding
liabilities. The units were priced at C$0.80 with an exercise price on the
warrant of C$0.90. The 1995 Financing raised approximately $2.78 million,
consisting of approximately $2.36 million in cash and $420,000 for the
settlement of a stockholder/director bridge loan, common stock issued for
financing services and certain other liabilities.
Management believes the proceeds of the 1995 Financing will allow the Company
to maintain liquidity through the second quarter of 1996. The Company will
then require additional funding. Such funding may come from one or more of a
variety of sources including, but not limited to, equity investment, issuance
of debt securities, licensing and marketing agreements, and collaborative
research agreements with strategic partners. There can be no assurance that
such funding will be obtained. If such funding is not obtained, operations
will be materially adversely affected. The Company's report of Independent
Public Accountants for the year ended December 31, 1995 contains a going
concern qualification reflecting both the necessity and the uncertainty of
future funding. See "Risk Factors - Future Capital Requirements."
In the longer term management plans to realize profitability through
increased revenues. However, future revenues must increase significantly to
fulfill management's expectation of future liquidity. There can be no
assurance that sales will increase significantly in the remainder of 1996 or
in future years. The Company will continue to seek additional funding
through licensing and marketing agreements and collaborative research
agreements with strategic partners. However, there can be no assurance that
funding will be obtained.
In 1996, management expects spending on the analytical business to remain
consistent with or below 1995 levels. The Company is not committed to make
any significant capital expenditures. In the event that the Company enters
into funded collaborative research arrangements, spending levels will
increase to conduct such funded research.
RISK FACTORS
Future Capital Requirements - Uncertainty of Future Funding
The Company believes that its available cash will allow it to fund planned
operations through the second quarter of 1996. The Company's Report of
Independent Public Accountants for the year ended December 31, 1995 contains
a going concern qualification reflecting both the necessity and the
uncertainty of future funding. Such funding may come individually or
collectively from equity or debt placements, licensing and marketing
agreements or by collaborative research agreements with strategic partners.
Additional funds may be raised through the issuance of securities or other
financing arrangements on terms and at prices that might have the effect of
diluting the holdings of then existing stockholders. No assurance can be
given that additional financing will be available or, if available, that it
will be on terms acceptable to the Company or its stockholders. If adequate
funding is not obtained, operations will be materially adversely affected.
The Company will delay or eliminate expenditures in respect of certain
products under development such as additional analytical kits and diagnostic
tests in the event sufficient funding is unavailable. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources".
</PAGE>
<PAGE>
History of Operating Losses - Uncertainty of Future Profitability
The Company commenced its research activities in December 1990 and first
recorded revenues in December 1992. While sales increased in 1994 and 1995,
the Company has not yet made a net annual operating profit. There is no
assurance that sales will increase in future quarters. The accumulated
deficit as of March 31, 1996 was approximately $11.7 million. The Company
anticipates that operating losses will continue at least through 1996.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Diagnostic Products - No Prior Commercial Manufacturing or Marketing
The Company has recently begun to market its first diagnostic product, the
Urinary Carbohydrate Analysis Kit. In order to manufacture its diagnostic
products in commercial quantities and to market products independently, the
Company will need to expand its production and marketing capabilities and/or
establish arrangements with third parties having the capacity for such
manufacturing or marketing. Anticipated operating revenues will not be
sufficient to expand manufacturing and marketing capabilities for diagnostic
products currently under development. There can be no assurance that the
Company will be able to successfully market or manufacture its diagnostic
products. To the extent that the Company arranges with third parties to
manufacture or market any diagnostic products, the commercial success of such
products may depend upon the efforts of those third parties.
Early Stage of Diagnostic Product Development
Only one of the Company's diagnostic products has been approved for
commercial sale, the Urinary Carbohydrate Analysis Kit. See "Diagnostic
Products - Lysosomal Storage Diseases". Potential products currently under
development by the Company will require significant additional development,
and some must undergo several phases of clinical testing and will likely
require significant further investment prior to their final
commercialization. Anticipated operating revenues will not be sufficient to
facilitate significant further development of diagnostic products. There can
be no assurance that any of the Company's products under development, either
now or in the future, will be successfully developed, prove to be effective
in clinical trials, receive required regulatory approvals, be capable of
being produced in commercial quantities at reasonable costs, or be
successfully marketed.
Technology and Competition
The primary competitive factors in biotechnology are the ability to create
and maintain scientifically advanced technology, to attract and maintain
personnel, and to have available adequate financial resources to maintain the
Company through its research, development and commercialization of technology
stages. The technology on which the Company's business is based uses
laboratory methods of electrophoresis and bioseparation. Nevertheless there
is a technical risk associated with reducing-to-practice the economical or
practical way to separate human materials for clinical diagnosis, or that it
will be able to devise specific reagents required to obtain a needed
reaction. Other companies may develop basic carbohydrate technology which
directly competes for the carbohydrate diagnostic market. Furthermore,
conventional diagnostic technology (such as enzyme or radioactive
immunoassay) may accomplish new breakthroughs in analyzing carbohydrates
(which so far has been difficult). Additionally, other newer technologies
such as nucleic acid hybridization may become competitive and erode the
Company's potential shares of diagnostic markets.
</PAGE>
<PAGE>
Competition in bioinstrumentation is intense. Many companies, universities,
and research organizations are engaged in the research and development of
products in the areas being developed by the Company. Many of these have
financial, technical, manufacturing and marketing resources greater than
those of the Company. Several major research instrument companies have
undertaken recently to establish capabilities in carbohydrate technology and
may apply such technology for essentially the same purpose as the Company.
As a result carbohydrate technology will become an area of more intense
competition. In order to compete successfully the Company must expand its
efforts to develop new products and uses for its current products in research
and diagnosis. There can be no assurance that the Company will be able to do
so effectively.
Patents and Proprietary Technology
The Company's success will depend in part on its ability to obtain patents,
protect trade secrets and not infringe the patents of others. The Company
has been issued patents as well as filed applications for U.S. and foreign
patents and has exclusive licenses to patents or patent applications of
others. The Company intends in the future to apply for patents in various
jurisdictions for inventions forming part of its technology. No assurance
can be given that patent applications will result in the issue or that, if
issued, patents obtained by the Company will confer on the Company a
preferred position with respect to the technology or products claimed.
There can be no assurance that others will not independently develop products
similar to the Company's, duplicate the Company's products or design around
the Company's patents. In addition the Company may be required to obtain
licenses to others' patents. No assurance can be given that such licenses
can be obtained on terms acceptable to the Company. These factors could cause
the Company to encounter delays in product market introductions or adversely
affect the Company's development or sale of products requiring licenses from
third parties. The Company's products and technologies could be subject to
claims of infringement by others. Patent conflicts and litigation can be
expensive, and could have a material adverse effect on the Company's results
of operations.
Product Liability and Lack of Insurance
The Company is subject to the risk of exposure to product liability claims in
the event that the use of its technology results in adverse effects during
testing or commercial sale. The Company currently does not maintain product
liability insurance. There can be no assurance that the Company will be able
to obtain product liability insurance coverage at economically reasonable
rates, or that such insurance will provide adequate coverage against all
possible claims.
Uncertainty of Regulatory Approval
The Company's diagnostics products will require regulatory approval by
government agencies. This includes pre-clinical and clinical testing and
approval processes in the U.S. and other countries. Compliance can take
several years and require substantial expenditures. There can be no
assurance that difficulties or excessive costs will not be encountered by the
Company in this process or that required approvals will be obtained. The
Company will not be able to market its diagnostic products until required
approvals have been obtained.
</PAGE>
<PAGE>
Dependence on Key Personnel
The Company's success will depend in large part upon its ability to attract
and retain highly qualified scientific and management personnel. The Company
faces competition for such personnel from other companies, academic
institutions, government entities and other organizations. The Company
depends on its key management, including John Klock, John Dorson, and
Christopher Starr, and the departure of any of such persons could have a
material adverse effect on the Company. The Company maintains key person
life insurance on Dr. Klock.
</PAGE>
<PAGE>
PART II.
ITEM 1. Legal Proceedings. None
ITEM 2. Changes in Securities: None
ITEM 3. Defaults upon Senior Securities. None.
ITEM 4. Submission of Matter to a Vote of Security Holders. None
ITEM 5. Other Information. None.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this report
None.
(b) Reports on Form 8K
No reports were filed on Form 8-K during the three months ended March 31, 1996.
</PAGE>
<PAGE>
SIGNATURES
March 31, 1996
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.
Glyko Biomedical Ltd.
Date: May 10, 1996 By: \s\ John C. Klock John C. Klock, M.D.
President and Chief Executive
Officer
Date: May 10, 1996 By: \s\ John F. Hamilton John F. Hamilton
Vice President, Finance and
Administration and Chief
Financial Officer
</PAGE>
