<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934. For the quarterly period ended March 31, 1997.
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
0-23160
ANESTA CORP.
(Exact name of registrant as specified in its charter)
Delaware 87-0424798
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4745 Wiley Post Way
Plaza 6, Suite 650
Salt Lake City, UT 84116
(801) 595-1405
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.001 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 $.001 par value 9,481,120
Class Outstanding at May 8, 1997
<PAGE> 2
ANESTA CORP.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C>
Balance Sheets -
March 31, 1997 (unaudited) and December 31, 1996 2
Statements of Operations -
for the three months ended March 31, 1997 and
1996 (unaudited) and the period from inception (August 1, 1985)
to March 31, 1997 (unaudited) 3
Statements of Cash Flows -
for the three months ended March 31, 1997 and 1996 (unaudited)
and the period from inception (August 1, 1985) to
March 31, 1997 (unaudited) 4
Notes to Financial Statements (unaudited) 6
Management's Discussion and Analysis of
Financial Condition and Results
of Operations 9
PART II. OTHER INFORMATION 11
SIGNATURES 12
</TABLE>
1
<PAGE> 3
ANESTA CORP.
(A Development Stage Company)
BALANCE SHEETS
-----------
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,569,254 $ 22,807,608
Current portion of
certificate of deposit 255,000 153,000
Marketable debt securities,
available-for-sale 17,254,722 17,173,950
Accounts receivable 112,770 485,648
Prepaid expenses and other
current assets 428,592 291,983
------------ ------------
Total current assets 38,620,338 40,912,189
------------ ------------
Property and equipment, at cost:
Furniture and equipment 860,267 847,521
Leasehold improvements 1,476,743 1,476,743
Accumulated depreciation (676,419) (617,058)
------------ ------------
1,660,591 1,707,206
------------ ------------
Other assets:
Certificate of deposit 1,938,000 1,224,000
Other assets 144,157 115,474
------------ ------------
2,082,157 1,339,474
------------ ------------
Total assets $ 42,363,086 $ 43,958,869
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current
liabilities:
Accounts payable $ 1,031,612 $ 518,965
Accrued
liabilities
Accrued compensation 275,319 332,020
Accrued research and development costs 200,000 200,000
Other 69,835 92,503
Current portion of notes payable 250,000 150,000
------------ ------------
Total current liabilities 1,826,766 1,293,488
Unearned advance royalty
revenues 350,000 350,000
Notes payable 1,900,000 1,200,000
------------ ------------
Total liabilities 4,076,766 2,843,488
------------ ------------
Stockholders' equity:
Common stock, par value, $.001 per share; Authorized:
15,000,000 shares; Issued: 9,478,942
in 1997 and 9,440,129 in 1996 9,479 9,440
Additional paid-in capital 61,573,210 61,531,623
Deficit accumulated during the
development stage (23,253,093) (20,413,153)
Treasury stock (345 shares), at cost (4,226) (4,226)
Notes receivable from issuance of common stock (7,000) (7,000)
Unrealized loss on marketable debt securities,
available-for-sale (32,050) (1,303)
------------ ------------
Total stockholders' equity 38,286,320 41,115,381
------------ ------------
Total liabilities and stockholders' equity $ 42,363,086 $ 43,958,869
============ ============
</TABLE>
The accompanying notes are an integral
part of the financial statements.
2
<PAGE> 4
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
--------
<TABLE>
<CAPTION>
Three months ended
---------------------------- Period from
inception
March 31, March 31, (August 1, 1985)
1997 1996 March 31, 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Product sales $ 24,231 $ 19,583 $ 214,662
Royalty revenue 717 572 106,308
Revenues from contract research 375,000 9,978,931
----------- ----------- ------------
Total revenues 24,948 395,155 10,299,901
----------- ----------- ------------
Operating costs and expenses:
Cost of goods sold 7,023 6,054 74,712
Royalties 748 605 8,248
Research and development 1,816,452 1,794,575 24,662,214
Depreciation and amortization 59,559 59,988 887,115
Marketing, general and administrative 1,533,005 611,477 10,890,576
----------- ----------- ------------
Total costs and expenses 3,416,787 2,472,699 36,522,865
----------- ----------- ------------
Loss from operations (3,391,839) (2,077,544) (26,222,964)
Non operating income (expense):
Interest income 602,263 308,054 4,946,620
Interest expense (19,266) (26,013) (372,250)
Other (30,288) 6 (69,649)
----------- ----------- ------------
Loss before provision for income
taxes, extraordinary item and cumulative
effect of accounting change (2,839,130) (1,795,497) (21,718,243)
Provision for income taxes (810) (100) (24,215)
----------- ----------- ------------
Loss before extraordinary item and
cumulative effect of change in accounting (2,839,940) (1,795,597) (21,742,458)
Extraordinary item - reduction of income
taxes arising from carryforward of prior
years' operating losses 22,296
Cumulative effect of change in accounting (1,041,047)
----------- ----------- ------------
Net loss $(2,839,940) $(1,795,597) $(22,761,209)
----------- ----------- ------------
Loss per common share amounts --
Loss before extraordinary item and cumulative
effect of change in accounting $ (0.30) $ (0.25)
Net loss per common share $ (0.30) $ (0.25)
------------ ------------
Shares used in computing net
loss per common share 9,462,242 7,220,909
------------ ------------
</TABLE>
The accompanying notes are an integral
part of the financial statements.
3
<PAGE> 5
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
--------
<TABLE>
<CAPTION>
Three months ended Period from
---------------------------- inception
March 31, March 31, (August 1, 1985)
1997 1996 March 31, 1997
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,839,940) $(1,795,597) $(22,761,209)
Adjustments to reconcile net loss to
net cash used in operating activities
Cumulative effect of accounting change 1,041,047
Depreciation and amortization 59,559 59,988 887,115
Debt conversion expense 101,330
Interest converted to equity 94,104
Compensatory stock options and stock 3,539
(Gain) on retirement of assets 30,288 92,666
Increase (decrease) due to changes in:
Accounts receivable 372,878 (14,101) (112,770)
Prepaid expenses and other current assets (136,609) (139,169) (428,592)
Other assets (28,683) 1,229 (146,734)
Accounts payable 512,647 44,514 1,031,612
Accrued liabilities (79,369) (175,232) 545,154
Unearned advance royalty revenues 350,000
------------ ----------- ------------
Net cash used in operating activities (2,109,229) (2,018,368) (19,302,738)
------------ ----------- ------------
Cash flows from investing activities:
Capital expenditures (12,944) (19,784) (2,333,532)
Proceeds from sale of assets 25 10,250
Costs associated with license agreements (1,109,533)
Advances to employees (1,650)
Purchase of marketable debt
securities, available-for-sale (2,150,372) (2,053,485) (41,777,907)
Proceeds from sale of marketable debt
securities, available-for-sale 2,008,540 2,497,501 24,442,418
Purchase of treasury bills (1,174,419)
Proceeds from maturity of treasury bills 1,174,419
Purchase of certificate of deposit (816,000) (2,346,000)
Proceeds from maturity of certificate of deposit 153,000
------------ ----------- ------------
Net cash provided by (used in) investing activities (970,751) 424,232 (22,962,954)
------------ ----------- ------------
Cash flows from financing activities:
Principal payments on notes payable (187,500)
Proceeds from issuance of notes payable 800,000 3,337,700
Principal payments on obligations under capital leases (6,089) (194,488)
Proceeds from issuance of common stock 41,626 41,063 59,833,999
Collections on notes receivable from
issuance of common stock 58,000
Proceeds from issuance of preferred stock 756,222
Deferred offering costs (277,103)
Dividends paid on preferred stock (491,884)
------------ ----------- ------------
Net cash provided by financing activities 841,626 34,974 62,834,946
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents (2,238,354) (1,559,162) 20,569,254
Cash and cash equivalents at beginning of period 22,807,608 3,540,147
------------ ----------- ------------
Cash and cash equivalents at end of period $ 20,569,254 $ 1,980,985 $ 20,569,254
============ =========== ============
</TABLE>
- Continued -
The accompanying notes are an integral
part of the financial statements.
4
<PAGE> 6
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
--------
<TABLE>
<CAPTION>
Three months ended Period from
---------------------------- inception
March 31, March 31, (August 1, 1985)
1997 1996 March 31, 1997
----------- ----------- ------------
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
The Company issued stock and stock
options for:
Purchase of additional license agreement $ 5,400
Notes receivable 71,000
The Company purchased leasehold improvements
using accounts payable 251,507
The Company entered into various capital lease
arrangements 204,610
The Company received stock as payment of a
note receivable 4,226
</TABLE>
The accompanying notes are an integral
part of the financial statements.
5
<PAGE> 7
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
-----------
1. Significant Accounting Policies:
In the opinion of management, the accompanying financial statements
contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position of Anesta Corp. (a
development stage company) (the Company) as of March 31, 1997, and the
results of its operations for the three months ended March 31, 1997
and 1996 and for the period from inception (August 1, 1985) to March
31, 1997, and its cash flows for the three months ended March 31, 1997
and 1996 and for the period from inception (August 1, 1985) to March
31, 1997. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year
period.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
Company's Annual Report on Form 10-K for the period ended December 31,
1996.
Net Loss Per Share
Net loss per common share is computed using the weighted average
number of common and common equivalent shares outstanding during each
period. Common stock equivalents consist of convertible preferred
stock, common stock options and warrants. Common equivalent shares are
excluded from the computation when their effect is antidilutive. Net
loss per common share for the period from inception to March 31, 1997
has not been presented as such information is not considered to be
relevant or meaningful.
2. Cash and Cash Equivalents and Marketable Debt Securities:
At March 31, 1997, the Company maintained a majority of its cash and
cash equivalents and marketable debt securities in two banks in San
Francisco, California.
3. Income Taxes:
The provision for income taxes for the three months ended March 31,
1997 and 1996 is related solely to state income taxes.
6
<PAGE> 8
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
-----------
4. Revolving/Term Promissory Note Agreements:
On January 11, 1995, the Company entered into a revolving/term
promissory note in the amount of $1.5 million and on May 15, 1995, the
term of the revolving promissory note ended and the Company entered
into a 10 year term note in the amount of $1.5 million. Additionally,
on March 20, 1997 the Company entered into a 8 year term note for an
additional $800,000. The agreements provide for a constant interest
rate of "160 basis points" above the financial institution's
certificate of deposit rate (5.25% at March 31, 1997). The first
payment of $150,000 was made on July 15, 1996 leaving a balance of
$2,150,000. The second payment of $150,000 will be made on July 15,
1997 and thereafter, payments of $250,000 will be made on
approximately July 15 of the next 8 years. Borrowings under the
agreement are collateralized by a certificate of deposit in the amount
of $2,193,000, which is maintained in a bank in Salt Lake City, Utah.
5. Funding Agreements:
Effective September 8, 1995, the Company entered into a 1996 funding
agreement with Abbott Laboratories Hospital Products Division
(Abbott), under which Abbott provided $1,500,000 of funding to further
the clinical development of Actiq(TM) to treat cancer-related pain
(the "Actiq Cancer Pain Program"). Under the agreement, the Company
provided additional funding required for this program during the year
ended December 31, 1996 and completed certain program milestones.
7
<PAGE> 9
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
---------
6. Stockholders' Equity:
The table below presents the activity in stockholders' equity
from January 1, 1997 to March 31, 1997:
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
----------------------------------- DURING THE TREASURY STOCK
PAID-IN DEVELOPMENT --------------------
SHARES AMOUNT CAPITAL STAGE SHARES AMOUNT
--------- ------ ----------- ------------ --------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 9,440,129 $9,440 $61,531,623 $(20,413,153) 345 $(4,226)
Exercise of stock options in
Feb. 1997 (at $.80 per share) 28,563 28 22,822
Exercise of stock options in
Mar. 1997 (at $.80 per share) 500 1 399
Exercise of stock options in
Mar. 1997 (at $1.00 per share) 8,250 8 8,242
Exercise of stock options in
Mar. 1997 (at $6.75 per share) 1,500 2 10,124
Net change in unrealized loss on
marketable debt securities,
available-for-sale
Net loss (2,839,940)
--------- ------ ----------- ------------ --------- -------
Balance at March 31, 1997 9,478,942 $9,479 $61,573,210 $(23,253,093) 345 $(4,226)
--------- ------ ----------- ------------ --------- -------
<CAPTION>
UNREALIZED
NOTES LOSS ON
RECEIVABLE MARKETABLE DEBT
FROM ISSUANCE SECURITIES,
OF COMMON AVAILABLE-FOR-
STOCK SALE TOTAL
------------ --------------- -----------
<S> <C> <C> <C>
Balance at January 1, 1997 $(7,000) $(1,303) $41,115,381
Exercise of stock options in
Feb. 1997 (at $.80 per share) 22,850
Exercise of stock options in
Mar. 1997 (at $.80 per share) 400
Exercise of stock options in
Mar. 1997 (at $1.00 per share) 8,250
Exercise of stock options in
Mar. 1997 (at $6.75 per share) 10,126
Net change in unrealized loss on
marketable debt securities,
available-for-sale (30,747) (30,747)
Net loss (2,839,940)
------------ ----------- -----------
Balance at March 31, 1997 $(7,000) $(32,050) $38,286,320
------------ ----------- -----------
</TABLE>
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors discussed in this section.
RESULTS OF OPERATIONS
Revenues.
Total revenues decreased by $370,200 or 93.7% for the three months ended March
31, 1997 as compared to the corresponding period in 1996. The decrease is
primarily a result of the completion of funding by Abbott in 1996 under a
collaborative agreement. Substantially all revenues in the period ended March
31, 1996 were from development funding under collaborative agreement with
Abbott relating to the Actiq cancer pain program.
Under the Company's agreements with Abbott, Abbott manufactures Anesta's
OT-fentanyl product line (Fentanyl Oralet(R) and Actiq) and sells these
products to the Company at a price which reflects Abbott's cost of
manufacturing. The Company then sells the products to Abbott at a price related
to Abbott's selling price which results in a gross profit to the Company
ranging from approximately 40-70%. In addition, the Company is entitled to
receive a royalty on OT-fentanyl product sales by Abbott.
Operating Expenses.
Research and development expenses increased by $21,900 or 1.2% for the three
months ended March 31, 1997 as compared to the corresponding period in 1996.
The increase in research and development expenses is due to higher expenditures
for new product development and other expenditures for product development,
including clinical trials. The Company expects that its research and
development expenses will grow significantly during the remainder of 1997 as a
result of increased expenses related to the hiring of additional personnel,
preclinical studies, clinical trials, product development and manufacturing
process development activities.
Depreciation expense decreased by $400 or 0.7% for the three months ended March
31, 1997 as compared to the corresponding period in 1996.
Marketing, general and administrative expenses increased by $921,500 or 151%
for the three months ended March 31, 1997 as compared to the corresponding
period in 1996. The increase in marketing, general and administrative expenses
is due primarily to higher expenditures for personnel, corporate development
activities, marketing research, Actiq pre-marketing activities, and equipment
leasing. The Company expects that its marketing, general and administrative
expenses will increase significantly during 1997 as a result of the increased
support required for marketing research, Actiq pre-launch market development
activities, patent and corporate development activities.
Non Operating Income (Expense).
Interest income increased by $263,900 for the three months ended March 31, 1997
as compared to the corresponding period in 1996. The increase is primarily due
to invested net proceeds of $27,858,225 from the Company's secondary offering
completed in June 1996.
Interest expense decreased by $6,700 for the three months ended March 31, 1997
as compared to the corresponding period in 1996. The decrease is primarily due
to a lower balance of capital lease obligations.
9
<PAGE> 11
Accounting Change.
Effective January 1, 1995, the Company changed its method of accounting for
external legal costs related to patents. Prior to the change, the Company
capitalized these costs and amortized them over the term of the related patent.
Under the new method, these costs are expensed as incurred.
Net Loss.
As a result of the increase in research and development, marketing, general and
administrative activities and other factors discussed above, the net loss for
the three months ended March 31, 1997 was $2,839,900 or $0.30 per share as
compared to $1,795,600 or $0.25 per share for the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
In June 1996 the Company realized net proceeds of $27,858,225 through the
issuance of common stock in a secondary offering. As of March 31, 1997, the
Company had cash and cash equivalents totaling $20,569,300, $2,193,000 in a
certificate of deposit used as collateral for a revolving/term loan (See Note 4
to Financial Statements) and $17,254,700 in marketable debt securities which
are available for sale. Thus cash, cash equivalents, certificate of deposit and
marketable debt securities totaled $40,016,976 as of March 31, 1997. Cash in
excess of immediate requirements is invested according to the Company's
investment policy, which provides guidelines with regard to liquidity and
return, and, wherever possible, seeks to minimize the potential effects of
concentration of credit risk.
The Company used cash in operating activities of $2,139,500 for the three
months ended March 31, 1997 compared to $2,018,400 for the corresponding period
in 1996. The increase in cash used in the period is a direct result of the
increase in research and development and marketing, general and administrative
activities discussed above.
During the three months ended March 31, 1997, the Company made capital
expenditures of approximately $12,900, as compared to capital expenditures of
$19,800 during the corresponding period in 1996.
During the three months ended March 31, 1997, the Company realized cash
proceeds of $41,600 relating to the exercise of stock options as compared to
$41,100 during the corresponding period in 1996.
During the three months ended March 31, 1997, the Company made no principal
payments on capital lease obligations as compared to $6,100 for the
corresponding period in 1996.
The Company expects to continue to incur substantial expenses related to the
continuation and expansion of research and development, including clinical
trials, and increased marketing, general and administrative activities over at
least the next several years. The Company anticipates that the existing cash,
cash equivalents and marketable debt securities, and interest earned thereon
provides adequate working capital through 1999.
The Company's working capital requirements may change depending on numerous
factors, including the following; the progress of the Company's research and
development programs, the results of clinical studies, the number and nature of
individual products and new indications the Company pursues in clinical
studies, the timing of regulatory approvals, technological advances,
determinations as to the commercial potential of the Company's products, the
status of competitive products, the establishment of collaborative
relationships with other companies and other factors.
10
<PAGE> 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
(10.22) Modification Agreement by and between First Security
Bank, NA and the Company dated as of March 20, 1997.
(27) Financial Data Schedule
b) Reports on Form 8-K.
None.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 12, 1997 ANESTA CORP.
By: /s/ William C. Moeller
-----------------------------------
William C. Moeller, Chief
Executive Officer and
Treasurer
(Authorized Signatory and
Principal Financial Officer)
By: /s/ Roger P. Evans
-----------------------------------
Roger P. Evans, Controller
(Principal Accounting Officer)
12
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
(10.22) - Modification Agreement by and between First Security Bank, NA
and the Company dated as of March 20, 1997.
(27) - Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.22
FIRST ASSIGNMENT OF TIME CERTIFICATE OF
SECURITY DEPOSITS, OTHER INSTRUMENT, OR
BANK DEPOSIT ACCOUNT
LOAN NO.: 0000187-9001
------------
March 20, 1997
--------------
DATE
FOR VALUE RECEIVED, Anesta Corp.
------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER(S)
DO(ES) HEREBY SELL, ASSIGN, AND TRANSFER THE FOLLOWING AT:
First Security Bank, N.A.
- ----------------------------------
NAME OF DEPOSIT INSTITUTION
TIME DEPOSIT ACCOUNT NUMBER: MATURITY DATE:
--------------------- -------------
SAVINGS ACCOUNT NUMBER:
---------------------------------------------------------
CERTIFICATE OR OTHER INSTRUMENT NUMBER: 051-999-2660390 DATED: 03/19/97
--------------- --------
MATURITY DATE: 07/15/97
--------
AMOUNT SIGNED: $816,000.00
TOGETHER WITH ALL RENEWALS, ROLLOVERS, REPLACEMENTS, AND EXCHANGES THEREOF
TO FIRST SECURITY BANK N.A. ("ASSIGNEE") FOR THE FOLLOWING PURPOSE: to secure a
loan evidenced by a Promissory Note dated January 11, 1995, executed by Anesta
Corp. , AND HEREBY IRREVOCABLY CONSTITUTE AND APPOINT FIRST SECURITY BANK, N.A.
ATTORNEY TO TRANSFER TO ASSIGNEE'S EXCLUSIVE CONTROL SAID CERTIFICATE, OTHER
INSTRUMENT, OR DEPOSIT ACCOUNT ON THE RECORDS OF THE ISSUING BANK OR OTHER
ISSUING AUTHORITY.
Anesta Corp.
/s/ Thomas B. King
- -------------------------------------
Thomas B. King, President
/s/ Roger P. Evans
- -------------------------------------
Roger P. Evans, Controller
<PAGE> 2
ATTACHMENT TO MODIFICATION AGREEMENT
DATED March 3, 1997
MODIFICATIONS TO LOAN DOCUMENTS
The Loan Documents shall be amended as follows:
In addition to the terms and conditions of the loan, Borrower agrees to the
following:
If First Security has not received the full amount of any payment by
the end of fifteen (15) calendar days after the date due, including the
balance due at maturity, Borrower will pay a late charge to First
Security in the amount of five percent (5%) of the overdue payment
of principal and interest or $1,000.00, whichever is less. Borrower
hereby agrees to pay the late charge promptly, but only once on each
late payment.
In addition to any late charges that may be assessed as herein
provided, the outstanding balance of this Note after a default in
payment of principal and/or interest or any part thereof, including but
not limited to a default in making the final payment due at maturity,
or a default as defined in any Loan agreement, any document securing
this Note, or any other document executed in connection with this Note,
shall accrue interest from the date of the default at the rate equal to
four (4) percentage points per annum in excess of the interest rate
charged if this Note were not in default. If First Security shall waive
in writing or permit a cure of such default, the interest rate shall
revert to the non-default rate from and after such waiver or completion
of such cure.
All other terms and conditions shall remain unchanged.
<PAGE> 3
FIRST MODIFICATION AGREEMENT
SECURITY
BANK LOAN NO.: 0000187-9001
First Security Bank, N.A. ("First Security") has extended credit (the
"Loan") to the undersigned (individually and collectively "Borrower") pursuant
to a promissory note dated January 11, 1995 (the "Note") in the stated
principle amount of $1,500,000.00 . The loan is: [check one box]
[ ] unsecured.
[x] secured by security agreements, trust deeds, mortgages, lien
instruments, and/or other collateral documents ( the "Collateral
Documents").
If neither of the boxes is checked, the Loan shall be deemed to be secured.
The note and any loan agreements, guaranties, subordinations, Collateral
Documents, and other instruments and documents executed in connection
therewith, together with any previous modifications to any of these instruments
or documents, shall be referred to as the "Loan Documents."
Borrower has requested certain modifications to the Loan Documents and
First Security is willing to grant such modifications on the following terms
and conditions:
1. Provided that all conditions stated herein are satisfied, the terms of
the Loan Documents are hereby modified as follows: [check the applicable
box(es)]
MODIFICATIONS TO THE TERMS OF THE NOTE:
[ ] The MATURITY DATE of the note is extended to _________________________
[ ] The INTEREST RATE under the Note is modified effective _______________,
to be ________________________________________________________________
_________________________________________________ per annum. A
variable interest rate based upon the prime rate shall be adjusted
with each change in the prime rate. The following definition applies to
interest rate based on First Security's prime rate.
First Security's "prime rate" is its announced rate of interest used as
a reference point from which it may calculate the cost of credit to
customers. It is subject to change from time to time. First Security
may make loans bearing interest above, at, or below its prime rate.
[x] The PRINCIPAL AMOUNT available under the Note is being changed as
follows: [check one]
[ ] The Note's stated principal amount is being changed to $_________,
representing the maximum outstanding principal permitted under the
Note (any principal amount outstanding in excess of this new
maximum must be paid on the Note as a condition precedent to this
Agreement).
<PAGE> 4
[x] First Security agrees to loan up to an additional $800,000.00
over the current principal outstanding on the Note, which is
$1,350,000.00 as of the date of this Agreement.
This Agreement does not constitute a repayment or extinguishment of the
Note, but only a modification thereof.
[x] The REPAYMENT TERMS of the Note are modified as follows: One payment
of principal in the amount of $150,000.00 due July 15,1997, thereafter,
equal installments of principal in the amount of $250,000.00 each
beginning July 15,1998 and continuing ANNUALLY thereafter until July
15, 2005. Accrued interest on this Note shall be paid MONTHLY,
beginning April 15, 1997 and continuing on the 15th day of each month
thereafter. The entire balance of outstanding principal and accrued but
unpaid interest shall be due and payable on July 15, 2005.
OTHER MODIFICATIONS TO THE LOAN DOCUMENTS:
[x] The LOAN DOCUMENTS shall be amended as follows:A First Security Bank
Certificate of Deposit Account #051-999-2660390, in the amount of
$816,000.00, in the name of Anesta Corp., dated 3/19/97 shall be added
as security on this Loan. A late charge and default rate as set forth
in the attachment hereto are added to the terms of the Note. The
Pledged Assets Schedule to Commercial Credit and Security Agreement,
Section 1 shall be amended to read: All Certificates of Deposit of
Borrower issued by First Security as such certificates may be
identified by an Assignment of Time Certificate of Deposit, Other
Instrument, or Deposit Account.
2. As preconditions to the terms of this Agreement, Borrower shall
complete or provide the following: [if none, type N/A in subsection 2.1]
2.1 N/A
2.2 N/A
3. As an additional precondition to the terms of this Agreement, Borrower
shall pay or shall have paid all reasonable fees, costs, and expenses, of
whatever kind of nature, incurred by First Security in connection with this
Agreement, including but not limited to attorney's fees, lien search fees,
title reports and policies, and recording and filing fees.
4. It is the intention and agreement of Borrower and First Security that:
(I) all collateral security in which First Security has acquired a security
interest or other lien pursuant to the Loan Documents shall continue to serve
as collateral security for payment and performance of all the obligations of
the Borrower under the Loan Documents, and (ii) all agreements,
representations, warranties, and covenants contained in the Loan Documents are
hereby reaffirmed in full by the Borrower except as specifically modified by
this Agreement.
5. Borrower hereby acknowledges that: (I) the Loan Documents are in full
force and effect, as modified by this Agreement, and (ii) by entering into this
Agreement, First Security does not waive any existing default or any default
hereafter occurring or become obligated to waive any condition or obligation
under the Loan Documents.
<PAGE> 5
6. Borrower hereby acknowledges that Borrower has no claim, demand,
lawsuit, cause of action, claim for relief, remedy, or defense against
enforcement of the Loan Documents that could be asserted against First
Security, its affiliates, directors, officers, employees, or agents, whether
known or unknown, for acts, failures to act (whether such act or failure to act
is intentional or negligent), representations, commitments, statements and
warranties, including without limitation any such conduct arising out of or in
any way connected with the Loan Documents. Notwithstanding the foregoing,
Borrower hereby waives, releases, and relinquishes any and all claims, demands,
lawsuits, causes of action, claims for relief, remedies, or defenses against
enforcement of the Loan Documents that could be asserted against First
Security, its affiliates, directors, officers, employees, or agents, whether
known or unknown.
7. In addition to this Agreement, the Loan Documents, and any additional
documents that this Agreement requires, this finance transaction may include
other written closing documentation such as resolutions, waivers, certificates,
financing statements, filings, statements, closing or escrow instructions, loan
purpose statements, and other documents that First Security may customarily use
in such transactions. Such documents are incorporated herein by this reference.
All the documents to which this paragraph makes reference express, embody, and
represent the final expression of the agreement between First Security and
Borrower, the terms and conditions of which cannot hereafter be contradicted by
any oral understanding ( if any ) not reduced to writing and identified above.
Effective as of March 20, 1997
FIRST SECURITY:
First Security Bank, N.A.
/s/ Steven M. Kohler
- -------------------------------------
Steven M. Kohler, Vice President
BORROWER:
Anesta Corp., a Delaware corporation
/s/ Thomas B. King /s/ Roger P. Evans
- ------------------------------------- ----------------------------------
Thomas B. King, President Roger P. Evans, Controller
<PAGE> 6
FIRST ACCOUNT NUMBER:0519992660390
SECURITY
BANK NEGOTIABLE CERTIFICATE OF DEPOSIT
Issued at (office) Main @ First South - 051
------------------------
City and State Salt Lake City, UT
------------------------
This is to certify that ***Anesta Corp*** herein called Registered Owner(s) has
deposited in this Bank the sum of Eight Hundred Sixteen Thousand-----------
dollars payable at the issuing office to the Registered Owner(s) upon
presentation and surrender of this certificate properly endorsed on (maturity
date) 07-15-97. The interest rate is 5.00 % with an annual percentage yield of
5.12%. The annual percentage yield was calculated, using the terms you
requested, with the interest compound N/A, paid Monthly, by depositing to
Checking #060-00119-51. This deposit is a First Security Bank Negotiable
Certificate of Deposit which is subject to the terms and conditions set forth
below. Substantial penalty for redemption prior to maturity.
/s/ Dawn Carroll
---------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
ACCOUNT CONDITIONS
o The interest rate and annual percentage yield on this account will remain
fixed until maturity.
o The term of this account may range from fourteen (14) days to five (5)
years. The specific term you have chosen is disclosed on your Negotiable
Certificate of Deposit.
o This account will not automatically renew at maturity for an additional
like term. If you do not renew the account, your deposit will be placed in
a non interest earning account. No interest will be paid after final
maturity.
o Additional deposits to this account are not permitted.
o To determine the annual percentage yield we assume the interest will
remain on deposit until maturity. A withdrawal will reduce earnings.
<PAGE> 7
o Interest begins to accrue for the deposit of non-cash items (for example,
checks) no later than the business day credit is received under the
applicable availability schedule established by the Federal Reserve
pursuant to the Expedited Funds Availability Act and Regulation CC.
o We use the daily balance method to calculate the interest on this
account. This method applies a daily periodic rate to the principal in the
account each day.
o The Federal Deposit Insurance Corporation (FDIC) is a government agency
organized to insure deposits. Your basic insured amount is $100,000.
Deposits maintained in different categories of legal ownership are
separately insured. It is therefore possible for you to have more than
$100,000 insurance coverage in a single institution if the funds are owned
and deposited in different categories. Your insurance limit is applied to
the combined total amount you hold within each ownership category. Refer
to the FDIC publication Your Insured Deposit for details.
o This account is a Time Deposit subject to all applicable rules and
regulations of the Board of Governors of the Federal Reserve System and of
First Security Bank.
o This account is payable only to the registered account owner(s) upon
surrender of your Negotiable Certificate of Deposit, properly endorsed, to
the issuing office.
o If this account is owned by multiple original payees (i.e. joint owners)
consisting of two or more natural persons, they shall hold the account
with right of survivorship. The deposit (together with interest) is
payable to any one of them during their joint lives. Each owner, acting
alone, can withdraw or transfer funds from this account or can effectively
terminate this account by withdrawing all or substantially all of the
funds and depositing the same in a new account which omits the name of one
of the owners. Upon the death of any of the owners, all of the right,
title and interest to this account shall vest absolutely in the survivor
or survivors, subject to all applicable tax statutes and regulations. Each
of such persons shall be the agent of the other to give or receive any
notice provided for herein or to take any other action pertaining to this
account.
o If this account is opened with the added conditions of "payable on death"
("POD") to one or more persons, ownership of this account shall in the POD
payee or payees only upon the death of all of the original payees and
shall be otherwise governed by applicable statutes.
o If funds are withdrawn from this account before maturity, Federal Reserve
regulations require an early withdrawal penalty, unless the withdrawal is
due to death or incompetency of an owner. The penalty is at the interest
rate being paid at the time of withdrawal and applies regardless of the
length of time the funds have remained on deposit. The penalty is in terms
of interest on the amount withdrawn and may require reduction in the
principal sum of the account. The penalty for the early withdrawal of
funds is as follows:
Accounts with maturities of:
Seven to 31 days All interest earned to date of withdrawal, or all
interest that could have been earned for one-
half the maturity period, whichever is greater.
<PAGE> 8
32 days to 12 months One month's interest earned or that could have
been earned.
More than 12 months Three months' interest earned or that could have
been earned.
o We reserve the right to change any of the terms and conditions of this
account provided we so notify you in writing at least thirty (30) advance.
o Interest checks, if applicable, and notices relative to this account will
be mailed to your last known address.
o We are required by Federal law to obtain your Taxpayer Identification
Number (TIN) upon opening this account. A TIN can be Social Security
Number or an Employer Identification Number. If you do not provide us with
a TIN and certify under penalty or perjury that the TIN is correct you may
be subject to certain penalties as well as backup withholding of any
interest earned on this account at the rate of thirty-one (31) percent.
o We reserve the right not to open this account if you do not provide a TIN
certified to be correct. If you are applying for a TIN, the account will
be opened if you so certify on form W-9. In such cases, we must apply
backup withholding on earnings on your account until the TIN is provided.
We reserve the right to close this account if your TIN is not provided
within sixty (60) days after account opening.
o You are also required at the time you open the account to certify that
you are not subject to backup withholding. If you do not so certify the
required to withhold tax from the earnings on your account at the rate of
thirty-one (31) percent.
<PAGE> 9
FIRST
SECURITY COLLATERAL RECEIPT
BANK
DATE: March 20, 1997 RECEIPT NUMBER: 107115
------------------ ------
NAME: Anesta Corp.
---------------------------------------------------------------------------
ADDRESS:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING DESCRIBED COLLATERAL AS SECURITY TO NOTE OF $_____________________
DATED: DUE:
------------------------------- -------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF COLLATERAL:
A First Security Bank certificate of deposit account #051-999-26603-90 in the
amount of $816,000.00, in the name of Anesta Corp., dated 3/19/97
- --------------------------------------------------------------------------------
FIRST SECURITY BANK, N.A.
----
BY: /s/ Steven M. Kohler
---------------------------------------
Steven M. Kohler, Vice President
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