<PAGE>
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, 1999.
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 13,198,130
Class Outstanding at May 6, 1999
<PAGE>
ANESTA CORP.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Balance Sheets -
March 31, 1999 (unaudited) and December 31, 1998 2
Statements of Operations and Comprehensive Loss -
for the three months ended March 31, 1999 and
1998 (unaudited) and the period from inception (August 1, 1985)
to March 31, 1999 (unaudited) 3
Statements of Cash Flows -
for the three months ended March 31, 1999 and 1998 (unaudited)
and the period from inception (August 1, 1985) to
March 31, 1999 (unaudited) 4
Notes to Financial Statements (unaudited) 6
Management's Discussion and Analysis of
Financial Condition and Results
of Operations 10
PART II. OTHER INFORMATION 13
SIGNATURES 14
1
<PAGE>
ANESTA CORP.
(A Development Stage Company)
BALANCE SHEETS
-----------
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,130,443 $ 55,889,226
Current portion of certificate of deposit 255,000 255,000
Marketable debt securities,
available-for-sale 53,844,713 24,661,040
Accounts receivable 58,438 276,476
Prepaid expenses and other current assets 674,216 194,802
------------ ------------
Total current assets 77,962,810 81,276,544
------------ ------------
Property and equipment, at cost:
Furniture and equipment 960,271 947,598
Leasehold improvements 2,346,027 2,330,136
Accumulated depreciation (1,223,964) (1,151,126)
------------ ------------
2,082,334 2,126,608
------------ ------------
Other assets:
Certificate of deposit 1,530,000 1,530,000
Other assets 198,229 196,202
------------ ------------
1,728,229 1,726,202
------------ ------------
Total assets $ 81,773,373 $ 85,129,354
============ =============
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
------------ -------------
(Unaudited)
Current liabilities:
Accounts payable $ 174,306 $ 1,478,521
Accrued liabilities:
Accrued compensation 422,629 1,117,909
Other 167,617 236,783
Current portion of notes payable 250,000 250,000
------------ -------------
Total current liabilities 1,014,552 3,083,213
Unearned revenues 1,311,898 526,796
Notes payable 1,500,000 1,500,000
------------ -------------
Total liabilities 3,826,450 5,110,009
------------ -------------
Stockholders' equity:
Common stock, par value, $.001 per share;
Authorized: 15,000,000 shares;
Issued: 13,160,033 in 1999 and
13,054,934 in 1998 13,160 13,055
Additional paid-in capital 129,520,671 128,634,691
Deficit accumulated during the development
stage (51,568,710) (48,679,075)
Accumulated other comprehensive income (loss) (18,198) 50,674
------------ -------------
Total stockholders' equity 77,946,923 80,019,345
------------ -------------
Total liabilities and stockholders'
equity $ 81,773,373 $ 85,129,354
============ =============
</TABLE>
The accompanying notes are an integral
part of the financial statements
2
<PAGE>
ANESTA CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
--------
<TABLE>
<CAPTION>
Three months ended
---------------------------- Period from inception
March 31, March 31, (August 1, 1985) to
1999 1998 March 31, 1999
------------ ------------ ----------------------
<S> <C> <C> <C>
Revenues:
Product sales $ 33,108 $ 38,786 $ 600,822
Royalty revenue 980 1,150 117,764
Revenues from contract research/license
agreements 171,148 10,625,783
------------ ------------ ------------
Total revenues 205,236 39,936 11,344,369
------------ ------------ ------------
Operating costs and expenses:
Cost of goods sold 9,194 10,897 182,769
Royalties 1,022 1,198 14,349
Research and development 2,206,640 1,916,050 41,569,029
Depreciation and amortization 73,050 76,717 1,466,442
Marketing, general and administrative 1,794,279 1,405,453 26,105,623
------------ ------------ ------------
Total costs and expenses 4,084,185 3,410,315 69,338,212
------------ ------------ ------------
Loss from operations (3,878,949) (3,370,379) (57,993,843)
Non operating income (expense):
Interest income 1,021,817 422,220 8,692,510
Interest expense (26,075) (43,648) (661,382)
Other (28) (541) (47,403)
------------ ------------ ------------
Loss before provision for income
taxes, extraordinary item and
cumulative effect of change in
accounting (2,883,235) (2,992,348) (50,010,118)
Provision for income taxes (6,400) (866) (47,957)
------------ ------------ ------------
Loss before extraordinary item and
cumulative effect of change in
accounting (2,889,635) (2,993,214) (50,058,075)
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 (2,889,635) (2,993,214) (51,076,826)
------------
Other comprehensive loss:
Foreign currency translation adjustment (7,765) 7,839
Unrealized loss on marketable debt
securities, available-for-sale (61,107) (13,190) (26,037)
------------ ------------ ------------
Total other comprehensive loss (68,872) (13,190) (18,198)
------------ ------------ ------------
Comprehensive loss $ (2,958,507) $ (3,006,404) $(51,095,024)
------------ ------------ ------------
Basic and diluted loss per common share--
Net loss per common share $ (0.22) $ (0.31)
------------ ------------
Weighted average shares outstanding 13,121,837 9,569,815
------------ ------------
</TABLE>
The accompanying notes are an integral
part of the financial statements
3
<PAGE>
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) to
1999 1998 March 31, 1999
-------------- ------------ -----------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,889,635) $ (2,993,214) $ (51,076,826)
Adjustments to reconcile net loss to net
cash used in operating activities:
Cumulative effect of change in accounting 1,041,047
Depreciation and amortization 73,050 76,717 1,466,442
Debt conversion expense 101,330
Interest converted to equity 94,104
Compensatory stock options and stock 3,539
Loss on retirement of assets 28 586 78,474
Increase (decrease) due to changes in:
Accounts receivable 218,038 19,436 (58,438)
Prepaid expenses and other current assets (479,414) 2,749 (674,216)
Other assets (2,027) (31,435) (200,807)
Accounts payable (987,796) (247,918) 174,306
Accrued liabilities (764,446) (67,072) 590,246
Unearned revenues 785,102 1,311,898
------------- ------------- -------------
Net cash used in operating activities (4,047,100) (3,240,151) (47,148,901)
------------- ------------- -------------
Cash flows from investing activities:
Capital expenditures (28,829) (87,396) (3,352,394)
Proceeds from sale of assets 25 50 11,921
Costs associated with license agreements (1,109,533)
Advances to employees (1,650)
Purchase of treasury bills (1,174,419)
Proceeds from maturity of treasury bills 1,174,419
Purchase of marketable debt securities,
available-for-sale (36,354,319) (5,976,772) (117,661,985)
Maturities of marketable debt securities,
available-for-sale 7,109,539 6,220,443 63,772,831
Purchase of certificate of deposit (2,346,000)
Proceeds from maturity of certificate of
deposit 561,000
------------- ------------- -------------
Net cash provided by (used in)
investing activities (29,273,584) 156,325 (60,125,810)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 3,337,700
Principal payments on notes payable (587,500)
Principal payments on obligations under
capital leases (194,488)
Net proceeds from issuance of common stock 569,666 65,916 127,512,265
Collections on notes receivable from
issuance of common stock 65,000
Proceeds from issuance of preferred stock 756,222
Dividends paid on preferred stock (491,884)
------------- ------------- -------------
Net cash provided by financing
activities 569,666 65,916 130,397,315
------------- ------------- -------------
Effect of exchange rate changes on cash (7,765) 7,839
------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents (32,758,783) (3,017,910) 23,130,443
Cash and cash equivalents at beginning of
period 55,889,226 9,760,765
------------- ------------- -------------
Cash and cash equivalents at end of period $ 23,130,443 $ 6,742,855 $ 23,130,443
------------- ------------- -------------
</TABLE>
- Continued -
The accompanying notes are an integral
part of the financial statements.
4
<PAGE>
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) to
1999 1998 March 31, 1999
------------ ------------- -----------------------
<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>
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, 1999, the results of its operations
for the three months ended March 31, 1999 and 1998 and for the period from
inception (August 1, 1985) to March 31, 1999, and its cash flows for the
three months ended March 31, 1999 and 1998 and for the period from
inception (August 1, 1985) to March 31, 1999. 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, 1998.
Net Loss Per Share
------------------
Basic and diluted earnings per share are computed in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per
------------
Share (EPS). Basic EPS excludes dilution and is computed by dividing
-----
income available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution from securities or contracts to issue common stock.
Common equivalent shares are excluded from the computation of diluted EPS
when their effect is antidilutive. As of March 31, 1999, options to
purchase 1,399,305 shares of common stock at prices between $5.25 and
$25.1875 per share were outstanding. As of March 31, 1998, options to
purchase 1,317,444 shares of common stock at prices between $1.00 and
$19.25 were outstanding. None of these options were included in the
computation of diluted loss per share because the effect would have been
antidilutive.
2. Cash, Cash Equivalents and Marketable Debt Securities:
-----------------------------------------------------
At March 31, 1999, the Company maintained a majority of its cash, 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, 1999
and 1998 is related solely to state income taxes.
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. 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
6
<PAGE>
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
----------------
4. Revolving/Term Promissory Note Agreements, Continued
-----------------------------------------
Company entered into an 8 year term note for an additional $800,000, for a
total of $2.3 million. The agreements provide for a constant interest rate
of "160 basis points" above the financial institution's certificate of
deposit rate (5.60% at March 31, 1999). As of March 31, 1999 three payments
totaling $550,000 had been made leaving a balance of $1,750,000. Annual
payments in the amount of $250,000 will be made on approximately July 15
for the next 7 years beginning on July 15, 1999. As of March 31, 1999,
borrowings under the agreement are collateralized by a certificate of
deposit in the amount of $1,785,000, which is maintained in a bank in Salt
Lake City, Utah.
5. Collaborative Relationships:
---------------------------
Effective August 31, 1995, the Company entered into an amendment to a
prior agreement between Abbott International (A.I.) and the Company to
provide the Company the right to terminate or cause to become nonexclusive
A.I.'s license rights to OT-fentanyl products in one or more countries in
the world except the U.S. The amendment also eliminated $100,000 of the
$450,000 unearned advance royalty obligation, which amount was recognized
as royalty revenue during the year ended December 31, 1995. In January
1998, the Company exercised its right to terminate A.I.'s license rights to
OT-fentanyl products in all countries in the world except the U.S. As the
Company receives payments related to international partnering for OT-
fentanyl products, the Company is obligated to make certain payments to
A.I. until the remaining $350,000 has been fully repaid, at which time such
payments to A.I. will cease. As of March 31, 1999, the Company had made
payments of $166,250, leaving a balance of $183,750 owed to A.I.
On January 28, 1998, the Company announced the signing of an exclusive
agreement with Grupo Ferrer for the marketing, sales and distribution of
Anesta's OT-fentanyl product line, including Actiq, in Spain and Portugal.
Under terms of the agreement, Grupo Ferrer made a payment to the Company in
1998, a portion of which will be recognized as revenue in future years over
the term of the agreement. The OT-fentanyl product line will be
manufactured for Grupo Ferrer by Anesta, however, the Company does not
believe commercial manufacturing will begin before December 31, 1999.
Grupo Ferrer is a leading private Spanish pharmaceutical company.
On June 4, 1998, the Company announced the signing of an exclusive
agreement with Laboratoire L. Lafon (Lafon) for the marketing, sales and
distribution of Anesta's OT-fentanyl product line, including Actiq, in
France. Under terms of the agreement, Lafon made payments to the Company in
1998, a portion of which will be recognized as revenue in future years over
the term of the agreement. The OT-fentanyl product line will be
manufactured for Lafon by Anesta, however, the Company does not believe
commercial manufacturing will begin before December 31, 1999. Lafon is a
leading private French pharmaceutical company.
On February 23, 1999, the Company announced the signing of an option
agreement with Novartis involving the Company's proprietary Oral
Transmucosal System (OTS) for drug delivery. Under terms of the agreement,
Novartis made a payment to the Company in 1999, which will be recognized as
revenue over the term of the agreement. Novartis and the Company will
assess the world wide commercial opportunity of potential products which
combine the OTS with undisclosed compounds, with the goal of entering into
an exclusive licensing agreement.
7
<PAGE>
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
----------------
6. Subsequent Events:
-----------------
On May 6, 1999, the Company announced the signing of an exclusive agreement
with Swedish Orphan AB for the marketing, sales and distribution of
Anesta's OT-fentanyl product line, including Actiq, for Scandinavia
(Denmark, Finland, Iceland, Norway, and Sweden). Under terms of the
agreement, Swedish Orphan made a payment to the Company which will be
recognized as revenue in a future quarter. The OT-fentanyl product line
will be manufactured for Swedish Orphan by Anesta, however, the Company
does not believe commercial manufacturing will begin before December 31,
1999.
8
<PAGE>
ANESTA CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
---------
7. Stockholders' Equity:
--------------------
The table below presents the activity in stockholders' equity
from January 1, 1999 to March 31, 1999:
<TABLE>
<CAPTION>
Common Stock Deficit
-------------------------------------------------- Accumulated Accumulated
Additional During the Other
Paid-in Development Comprehensive
Shares Amount Capital Stage Income (loss) Total
-------------- -------------- ---------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 13,054,934 $ 13,055 $128,634,691 $ (48,679,075) $ 50,674 $ 80,019,345
Exercise of stock options in
Jan. 1999 for cash
(at $8.00 to $16.50 per share) 41,991 42 511,610 511,652
Exercise of stock options in
Feb. 1999 for cash
(at $5.25 to $14.125 per share) 11,629 12 80,940 80,952
Exercise of stock options in
Mar. 1999 for cash and stock
(at $5.25 to $14.125 per share) 51,479 51 293,430 293,481
Net loss (2,889,635) (2,889,635)
Other comprehensive loss (68,872) (68,872)
---------- -------- ------------ ------------- --------- ------------
Balance at March 31, 1999 13,160,033 $ 13,160 $129,520,671 $ (51,568,710) $ (18,198) $ 77,946,923
---------- -------- ------------ ------------- --------- ------------
</TABLE>
9
<PAGE>
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. Additional risks and uncertainties are
described in the Company's most recently filed Annual Report on Form 10-K for
the fiscal year ended December 31, 1998.
Results of Operations
Revenues.
Total revenues increased by $165,300 or 413.9% for the three months ended March
31, 1999 as compared to the corresponding period in 1998. The increase is
primarily a result of a new option agreement with Novartis involving the
Company's proprietary OTS for drug delivery. (See Note 5 to Financial
Statements).
On November 4, 1998 the FDA cleared Actiq for marketing. It is indicated only
for the management of breakthrough cancer pain in patients with malignancies who
are already receiving and who are tolerant to opioid therapy. Actiq was
launched on March 31, 1999. Under the Company's agreements with Abbott
Laboratories (Abbott), Abbott manufactures Anesta's OT-fentanyl product line
(Fentanyl Oralet 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 $290,600 or 15.2% for the three
months ended March 31, 1999 as compared to the corresponding period in 1998.
The increase is due to higher expenditures in 1999 related to additional
research and development programs, increased number of personnel, and continuing
support for Actiq. The Company expects that its research and development
expenses will increase in the future as a result of increased expenses related
to the hiring of additional personnel, preclinical studies, clinical trials,
product development, manufacturing process development and clinical
manufacturing activities.
Depreciation and amortization expense decreased by $3,700 or 4.8% for the three
months ended March 31, 1999 as compared to the corresponding period in 1998.
The decrease is due to a larger number of fully depreciated assets for the three
months ended March 31, 1999 as compared to the corresponding period in 1998.
Marketing, general and administrative expenses increased by $388,800 or 27.7%
for the three months ended March 31, 1999 as compared to the corresponding
period in 1998. The increase in marketing, general and administrative expenses
is due primarily to higher expenditures for personnel, corporate development
activities, European operations, marketing research, and Actiq market launch
preparation activities. The Company expects that its marketing, general and
administrative expenses will increase in the future as a result of the increased
support required for marketing research, Actiq market launch activities,
European operations and corporate development activities.
Non Operating Income (Expense).
Interest income increased by $599,600 or 142.0% for the three months ended March
31, 1999 as compared to the corresponding period in 1998. The increase is
primarily due to invested net proceeds of $64,478,400 from the Company's public
offering in December 1998.
10
<PAGE>
Interest expense decreased by $17,600 or 40.3% for the three months ended March
31, 1999 as compared to the corresponding period in 1998. The decrease is
primarily due to lower borrowings under the term note as a result of the related
payments thereon (See Note 4 to Financial Statements).
Income Taxes.
The provision for income taxes in 1999 and 1998 relates solely to state income
taxes. The Company recognized no tax benefit from its losses in those years.
Net Loss.
As a result of the increase in total revenues, the increase in research and
development activities, the increase in marketing, general and administrative
expenses, the increase in interest income and other factors discussed above, the
net loss for the three months ended March 31, 1999 was $2,889,635 or $0.22 per
share as compared to $2,993,214 or $0.31 per share for the same period in 1998.
Liquidity and Capital Resources
As of March 31, 1999, the Company had cash and cash equivalents totaling
$23,130,400, $1,785,000 in a certificate of deposit used as collateral for a
revolving/term loan (See Note 4 to Financial Statements) and $53,844,700 in
marketable debt securities which are available for sale. Thus cash, cash
equivalents, certificate of deposit and marketable debt securities totaled
$78,760,100 as of March 31, 1999. 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 $4,047,100 for the three months
ended March 31, 1999 compared to $3,240,200 for the corresponding period in
1998. The increase in cash used in the period is a direct result of higher
working capital requirements in 1999.
During the three months ended March 31, 1999, the Company made capital
expenditures of approximately $28,800 as compared to capital expenditures of
$87,400 during the corresponding period in 1998. During the three months ended
March 31, 1999, the Company made net purchases of marketable debt securities of
$29,244,800. This compares to a net decrease in marketable debt securities of
$243,700 during the corresponding period in 1998.
During the three months ended March 31, 1999, the Company realized cash proceeds
of $569,700 relating to the exercise of stock options. During the three months
ended March 31, 1998 the Company realized cash proceeds of $65,900 relating to
the exercise of stock options.
The Company's future capital requirements could be substantial and will depend
on, and could increase as a result of, many factors, including progress of the
Company's research and development programs; the results and costs of
preclinical and clinical testing of the Company's products, if developed; the
time and costs involved in obtaining regulatory approvals; the costs involved in
filing patents; the time and costs involved in developing and maintaining
collaborative research relationships; the costs associated with potential
commercialization of its products; and administrative and legal costs. The
Company believes that existing capital resources will be sufficient to meet the
Company's capital needs through at least the end of 2000.
The Company believes that it is prudent to monitor existing cash balances in
order to fund the activities which the Company believes are necessary to
continue its growth. Therefore, the Company periodically evaluates market
conditions and various financing alternatives for obtaining funds to augment
existing cash balances.
11
<PAGE>
Year 2000 Compliance.
Many currently installed computer systems are unable to distinguish between the
year 1900 and the year 2000. This is commonly known as the Year 2000 (Y2K)
issue. As a result, business entities are at risk for possible miscalculations
or systems failures causing disruptions in their business operations.
The Company utilizes management information systems and software technology that
may be affected by Y2K issues throughout its business. The Company considers its
finance and accounting, clinical database, and laboratory data acquisition and
analysis software mission critical. The Company's information systems group is
finishing the assessment phase and beginning the remediation and testing phases
to ensure those systems, along with additional internal and external systems,
continue to meet its requirements. To date, one software system has been
identified which is not Y2K compliant and needs to be upgraded. The Company
believes that the cost of this upgrade will be less than $10,000. The Company
continually upgrades its software in the ordinary course of business, thereby
helping meet its Y2K requirements. The Company believes that the costs
associated with purchasing or upgrading other specific software systems to meet
the requirements of Y2K will be minimal. The Company's information systems group
continues to review non-information technology systems to determine the extent
of any changes that may be necessary and believes that there will be minimal
changes needed. As a result of the Company's growth, its phone system, which is
not Y2K compliant, needs to be replaced in order to provide adequate access for
the Company's requirements. The Company is in the process of reviewing proposals
for a replacement system which will be capable of meeting Company's
telecommunications needs, as well as being Y2K compliant. The Company believes
all Y2K testing, internal reviews and updates, including the replacement
telephone system, can be completed by June 30, 1999.
The Company has contacted key suppliers and customers regarding their Y2K
compliance to determine any impact on operations. In general, the suppliers and
customers have developed or are in the process of developing plans to address
Y2K issues. The Company will continue to monitor and evaluate the progress of
its suppliers and customers on this critical matter. Because of the availability
of alternative suppliers and the diversity of the Company's customer base, the
Company believes that any failure of any management information systems or
software technology at any supplier or customer which has not responded to the
Company's inquiries regarding Y2K compliance will have a material adverse effect
on the Company.
Based on the progress the Company has made in addressing its Y2K issues and the
Company's plan and timeline to complete its compliance program, the Company does
not foresee significant risks associated with its Y2K compliance at this time.
As of March 31, 1999, the Company has spent less than $10,000 on assessment and
remediation association with the Y2K issue. However, the Company will continue
to discuss Y2K compliance issues with its key suppliers and customers in an
effort to minimize any potential Y2K compliance impact. Because the Company's
plan is to address its Y2K issues prior to being affected by them, it has not
developed a comprehensive contingency plan. However, if the Company identifies
significant risks related to its Y2K compliance or its progress deviates from
the anticipated timeline, the Company will develop contingency plans as deemed
necessary at that time.
Other Matters.
The Company has reviewed all other recently issued, but not yet adopted,
accounting standards in order to determine their effects, if any, on the results
of operations or financial position of the Company. Based on that review, the
Company believes that none of these pronouncements will have a significant
effect on current or future earnings or operations.
12
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
(27) Financial Data Schedule
b) Reports on Form 8-K.
None.
13
<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.
Date: May 17, 1999 ANESTA CORP.
By: /s/ Thomas B. King
------------------------------
Thomas B. King, President and
Chief Executive Officer
(Authorized Signatory)
By: /s/ Roger P. Evans
------------------------------
Roger P. Evans, Vice President-
Finance and Administration
(Principal Accounting Officer)
14
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