UNITED STATES
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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-23837
SurModics, Inc.
(Exact name of registrant as specified in its Charter)
MINNESOTA 41-1356149
(State of incorporation) (I.R.S. Employer Identification No.)
9924 West 74th Street
Eden Prairie, Minnesota 55344
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 829-2700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
The number of shares of the registrant's Common Stock, $.05 par value per share,
outstanding as of April 30, 2000 was 7,816,820.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SURMODICS, INC.
Condensed Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
------------------ -----------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents $2,640 $1,975
Short-term investments 10,415 3,947
Accounts receivable, net 1,360 1,433
Inventories 511 459
Prepaids and other 618 260
------------------ -----------------
Total current assets 15,544 8,074
------------------ -----------------
PROPERTY AND EQUIPMENT, net 6,879 5,275
LONG-TERM INVESTMENTS 9,246 15,917
DEFERRED TAX ASSETS 1,374 2,465
OTHER ASSETS, net 216 227
------------------ -----------------
$33,259 $31,958
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $641 $710
Accrued liabilities 1,021 1,261
Deferred revenues 160 268
------------------ -----------------
Total liabilities 1,822 2,239
------------------ -----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A Preferred stock-
$.05 par value, 150,000 shares authorized;
no shares issued or outstanding -- --
Common stock-
$.05 par value, 45,000,000 shares authorized;
7,802,805 and 7,701,921 shares issued and outstanding 390 385
Additional paid-in capital 31,904 32,009
Unearned compensation (216) (267)
Stock purchase notes receivable (38) (58)
Accumulated other comprehensive loss (287) (187)
Accumulated deficit (316) (2,163)
------------------ -----------------
Total stockholders' equity 31,437 29,719
------------------ -----------------
$33,259 $31,958
================== =================
</TABLE>
The accompanying notes are an integral part of these condensed balance sheets.
2
<PAGE>
SURMODICS, INC.
Condensed Statements of Income
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Royalties $2,503 $1,530 $4,853 $2,836
License fees 160 60 260 325
Product sales 1,188 1,160 2,422 1,790
Research and development 590 558 1,055 996
------ ------ ------ ------
Total revenues 4,441 3,308 8,590 5,947
------ ------ ------ ------
OPERATING COSTS AND EXPENSES:
Product 467 397 862 679
Research and development 1,776 1,213 3,384 2,379
Sales and marketing 354 437 732 835
General and administrative 693 670 1,255 1,198
------ ------ ------ ------
Total operating costs and expenses 3,290 2,717 6,233 5,091
------ ------ ------ ------
INCOME FROM OPERATIONS 1,151 591 2,357 856
------ ------ ------ ------
OTHER INCOME:
Investment income, net 307 260 600 530
Gain (loss) on sale of investments (11) (3) (10) 95
------ ------ ------ ------
Other income, net 296 257 590 625
------ ------ ------ ------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,447 848 2,947 1,481
INCOME TAX BENEFIT (PROVISION) (543) 257 (1,100) 549
------ ------ ------ ------
NET INCOME $904 $1,105 $1,847 $2,030
====== ====== ====== ======
NET INCOME PER SHARE:
Basic $0.12 $0.15 $0.24 $0.28
Diluted $0.11 $0.14 $0.22 $0.26
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic weighted average common shares outstanding 7,782 7,270 7,750 7,250
Dilutive effect of outstanding stock options 563 722 557 670
------ ------ ------ ------
Diluted weighted average common shares outstanding 8,345 7,992 8,307 7,920
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
3
<PAGE>
SURMODICS, INC.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-----------------------------
2000 1999
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,847 $2,030
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 485 346
Amortization of unearned compensation, net 43 30
Change in deferred rent -- (12)
Change in deferred tax 1,091 (552)
Change in assets and liabilities:
Accounts receivable 73 (371)
Inventories (52) (52)
Prepaids and other (358) (13)
Accounts payable and accrued liabilities (309) (434)
Deferred revenues (108) (66)
------------- -------------
Net cash provided by operating activities 2,712 906
------------- -------------
INVESTING ACTIVITIES:
Purchases of property and equipment, net (2,078) (758)
Purchases of available-for-sale investments (13,626) (15,434)
Sales/maturities of available-for-sale investments 13,729 14,631
Repayment of stock purchase notes receivable 20 68
------------- -------------
Net cash used in investing activities (1,955) (1,493)
------------- -------------
FINANCING ACTIVITIES:
Issuance of common stock, net (92) 408
------------- -------------
Net increase (decrease) in cash and cash equivalents 665 (179)
CASH AND CASH EQUIVALENTS:
Beginning of period 1,975 1,344
============= =============
End of period $2,640 $1,165
============= =============
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
4
<PAGE>
SURMODICS, INC.
Notes to Condensed Financial Statements
(Unaudited)
(1) Basis of Presentation:
In the opinion of management, the accompanying unaudited condensed
financial statements have been prepared in accordance with generally accepted
accounting principles and reflect all adjustments, consisting solely of normal
recurring adjustments, needed to fairly present the financial results for these
interim periods. These financial statements include some amounts that are based
on management's best estimates and judgments. These estimates may be adjusted as
more information becomes available, and any adjustment could be significant. The
results of operations for the three months and six months ended March 31, 2000
are not necessarily indicative of the results that may be expected for the
entire fiscal year.
According to the rules and regulations of the Securities and Exchange
Commission, the Company has omitted footnote disclosures that would
substantially duplicate the disclosures contained in the audited financial
statements of the Company. Read together with the disclosures below, management
believes the interim financial statements are presented fairly. However, these
unaudited condensed financial statements should be read together with the
financial statements for the year ended September 30, 1999 and footnotes thereto
included in the Company's form 10-KSB as filed with the Securities and Exchange
Commission.
(2) New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," and SFAS No. 137, "Deferral of the
Effective Date of SFAS No. 133," which establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. If certain
conditions are met, a derivative may qualify for hedge accounting. Based on
current operations, the Company anticipates that the adoption of SFAS No. 133 at
the beginning of fiscal 2001 will not have a significant impact on its results
of operations.
(3) Comprehensive Income
The components of comprehensive income for the three-month and six-month
periods are as follows:
Three months ended Six months ended
March 31, March 31,
------------------ ------------------
(dollars in thousands) 2000 1999 2000 1999
--------- -------- -------- ---------
Net income $904 $1,105 $1,847 $2,030
Other comprehensive income:
Change in unrealized loss on
available-for-sale securities (4) (117) (100) (312)
-------- -------- -------- ----------
Total comprehensive income $900 $988 $1,747 $1,718
======== ======== ======== ==========
5
<PAGE>
(4) Operating Segments
<TABLE>
<CAPTION>
Research &
(dollars in thousands) Licensing Manufacturing Development Corporate Consolidated
------------ ---------------- --------------- --------------- ---------------
Six Months Ended March 31, 2000
<S> <C> <C> <C> <C> <C>
Revenues:
PhotoLink $3,475 $1,106 $668 $ - $5,249
Diagnostic 1,638 - - - 1,638
Stabilization & other - 1,316 - - 1,316
Government - - 387 - 387
------------ ---------------- --------------- --------------- ---------------
Total Revenues 5,113 2,422 1,055 - 8,590
Expenses - 862 3,384 1,987 6,233
------------ ---------------- --------------- --------------- ---------------
Operating income (loss) 5,113 1,560 (2,329) (1,987) 2,357
Other income 590 590
Income tax provision (1,100) (1,100)
---------------
Net income $1,847
===============
Six Months Ended March 31, 1999
Revenues:
PhotoLink $1,834 $775 $492 $ - $3,101
Diagnostic 1,327 - - - 1,327
Stabilization & other - 1,015 - - 1,015
Government - - 504 - 504
------------ ---------------- --------------- --------------- ---------------
Total Revenues 3,161 1,790 996 - 5,947
Expenses - 679 2,379 2,033 5,091
------------ ---------------- --------------- --------------- ---------------
Operating income (loss) 3,161 1,111 (1,383) (2,033) 856
Other income 625 625
Income tax benefit 549 549
---------------
Net income $2,030
===============
</TABLE>
(5) 1999 Employee Stock Purchase Plan
On November 15, 1999 the Board of Directors adopted, and on January 24,
2000 shareholders approved, the Company's 1999 Employee Stock Purchase Plan (the
"Stock Purchase Plan"). The Stock Purchase Plan permits all full-time and
part-time employees (including officers) of the Company to purchase stock of the
Company. The Stock Purchase Plan does not allow an employee to purchase stock
through the Stock Purchase Plan if immediately after the grant of an option, he
or she would own stock representing 5% or more of the total combined voting
power or value of all classes of the stock of the Company. The Stock Purchase
Plan will terminate on February 28, 2010, unless the Board of Directors extends
the term of the Plan.
6
<PAGE>
(6) Stockholders' Equity
On January 24, 2000 shareholders approved an amendment to the Articles
of Incorporation to eliminate all references in the Articles to a class of
Convertible Preferred Stock, shares of which were automatically converted as
part of the Company's initial public offering in 1998.
Additionally, the Amendment increased the total number of authorized
shares of the Company to 50,000,000 consisting of 45,000,000 shares of Common
Stock, $0.05 par value per share, 150,000 of Series A Preferred Stock, $.05 par
value per share, and 4,850,000 undesignated shares.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
SurModics is a leading provider of surface modification solutions to
medical device manufacturers. The Company's revenues are derived from four
primary sources: fees from licensing its patented technology to customers;
royalties received from licensees; the sale of photoreactive chemical compounds
to licensees and stabilization products to the diagnostics industry; and
research and development fees generated on projects for commercial customers and
pursuant to government grants.
Results of Operations
Three Months Ended March 31, 2000 and 1999
Revenues. The Company's revenues were $4.4 million for the second
quarter of fiscal 2000, an increase of $1.1 million, or 34%, over the same
period of fiscal 1999. The revenue components were as follows (in thousands):
<TABLE>
<CAPTION>
$ Increase % Increase
2000 1999 (Decrease) (Decrease)
---- ---- ----------- ----------
<S> <C> <C> <C> <C>
PhotoLink revenue:
Royalties $1,571 $814 $757 93%
License fees 160 60 100 167%
Reagent chemical sales 501 530 (29) (5%)
Commercial development 396 283 113 40%
--- --- ---
Total PhotoLink revenue 2,628 1,687 941 56%
Other revenue:
Diagnostic royalties 933 716 217 30%
Stabilization & other products 686 630 56 9%
Government research 194 275 (81) (29%)
--- --- ----
Total revenues $4,441 $3,308 $1,133 34%
====== ====== ======
</TABLE>
Second quarter revenue growth of 34% was primarily a result of a 56%
increase in PhotoLink-related revenue. The 93% growth in PhotoLink royalties was
due mostly to increased sales of coated products sold by the Company's
licensees. During the quarter, approximately 82% of the PhotoLink royalties
received were earned royalties based on the clients' sale of coated products.
The remaining royalties were minimum payments made to SurModics prior to a
medical device reaching the market. There were no additional license agreements
signed during the second quarter. The $160,000 of license revenue was due to
progress payments on PhotoLink license agreements signed in previous periods.
The Company has license agreements with 46 companies covering over 100 different
products.
The 5% decrease in reagent chemical sales (those chemicals used by
licensees in the PhotoLink coating process) was partially due to the reduction
of sales to a single client as a result of collaborative efforts to improve
processing efficiencies. While sales to this client continued to represent more
than half of the reagents sold during the quarter, reagent sales to all other
customers increased 22% over the same period last year.
Commercial development revenue increased 40% due mostly to a large
development project for a single client. While this project is continuing, the
level of effort is expected to revert back to a more normal level. Therefore,
commercial development revenue may decrease in the third quarter. The 30%
8
<PAGE>
increase in diagnostic royalty revenue contributed to the majority of revenue
growth outside of PhotoLink. These royalties were impacted by a one-time spurt
in sales. It is anticipated that the diagnostic royalties will be lower than
historical levels over the next several quarters until certain manufacturing
issues of a licensee are resolved.
Product costs. The Company's product costs were $467,000 for the second
quarter of fiscal 2000, an increase of $70,000, or 18%, over the same period of
fiscal 1999. Overall product margins decreased to 61% in the second quarter of
fiscal 2000 from 66% in the same period of fiscal 1999. The margin decline was
primarily due to the scrapping of several production lots that failed to meet
quality standards in the second quarter. It is expected that margins will return
to recent levels in the third quarter.
Research and development expenses. Research and development expenses
were $1.8 million for the second quarter of fiscal 2000, an increase of
$563,000, or 46%, over the same period of fiscal 1999. The change was primarily
due to compensation and benefits associated with technical personnel added by
the Company over the last year, increased patent and legal fees, and supplies
cost to equip the newly completed laboratory space.
Sales and marketing expenses. Sales and marketing expenses were
$354,000 for the second quarter of fiscal 2000, an $83,000 or 19% decrease from
the same period of fiscal 1999. Increased promotional expenses were more than
offset by decreased compensation and benefit costs due to open positions. The
company is currently attempting to fill these open positions.
General and administrative expenses. General and administrative
expenses were $693,000 for the second quarter of fiscal 2000, an increase of
$23,000, or 3%, over the same period of fiscal 1999. The increase was the result
of higher compensation and benefit costs and offset by lower outside consulting
costs.
Income from operations. The Company's income from operations was $1.2
million for the second quarter of fiscal 2000, an increase of $560,000, or 95%,
over the same period of fiscal 1999.
Other income, net. The Company's other income was $296,000 for the
second quarter of fiscal 2000, an increase of $39,000, or 15%, over the same
period of fiscal 1999. The increase is due to higher investment balances in the
current period.
Income tax expense. The Company's income tax provision was $543,000 for
the second quarter of fiscal 2000 versus a $257,000 income tax benefit recorded
in the same period of fiscal 1999. Net income for the second quarter of fiscal
1999 included the reversal of income tax valuation reserves of approximately
$571,000 reducing the Company's tax provision at statutory rates to a net credit
of $257,000. Excluding the effect of the reversal of income tax valuation
reserves, the Company's net income and diluted income per share would have been
as follows on a proforma basis:
Proforma
Three Months Ended March 31,
2000 1999
---- ----
Net income before provision for income taxes $1,447,000 $848,000
Income tax provision (543,000) (314,000)
--------- ---------
Net income $ 904,000 $534,000
========= =========
Diluted net income per share $0.11 $0.07
===== =====
9
<PAGE>
Other comprehensive loss. The Company's other comprehensive loss was
$4,000 for the second quarter of fiscal 2000. This loss was due to a reduction
in the market value of the Company's long-term investments available-for-sale
due to increases in interest rates. As of March 31, 2000, the Company had a net
$287,000 unrealized loss related to those investments.
Six Months Ended March 31, 2000 and 1999
Revenues. The Company's revenues were $8.6 million for the first six
months of fiscal 2000, an increase of $2.6 million, or 44%, over the same period
of fiscal 1999. The revenue components were as follows (in thousands):
<TABLE>
<CAPTION>
$ Increase % Increase
2000 1999 (Decrease) (Decrease)
---- ---- ----------- -----------
<S> <C> <C> <C> <C>
PhotoLink revenue:
Royalties $3,215 $1,509 $1,706 113%
License fees 260 325 (65) (20%)
Reagent chemical sales 1,106 775 331 43%
Commercial development 668 492 176 36%
--- --- ---
Total PhotoLink revenue 5,249 3,101 2,148 69%
Other revenue:
Diagnostic royalties 1,638 1,327 311 23%
Stabilization & other products 1,316 1,015 301 30%
Government research 387 504 (117) (23%)
--- --- -----
Total revenues $8,590 $5,947 $2,643 44%
====== ====== ======
</TABLE>
The overall revenue growth of 44% for the first six months was
distributed across several operating segments but resulted primarily from a 69%
increase in PhotoLink-related revenue. The 113% growth in PhotoLink royalties
was due primarily to increased sales of coated products sold by the Company's
licensees. In addition, the first quarter royalties included a one-time royalty
payment of $225,000 from a client as the result of a license renegotiation.
During the period, approximately 84% of the PhotoLink royalties received were
earned royalties based on the clients' sale of coated products. The remaining
royalties were minimum payments made to SurModics prior to a medical device
reaching the market.
The 43% increase in reagent chemical sales was due to growing
production of PhotoLink-coated devices by SurModics' clients. SurModics signed
five new PhotoLink license agreements during the first six months. The fees from
these agreements, in addition to progress payments made on previously executed
license agreements resulted in $260,000, a 20% decrease from the $325,000
recorded on the seven license agreements signed in the same period last year.
Stabilization and other product sales increased 30% from the same period in
fiscal 1999. This rate of growth is not expected to continue since stabilization
sales have leveled out over the last few quarters.
Product costs. The Company's product costs were $862,000 for the first
six months of fiscal 2000, an increase of $183,000, or 27%, over the same period
of fiscal 1999. Overall product margins increased to 64% in the first six months
of fiscal 2000 from 62% in the same period of fiscal 1999. The continued margin
improvement was the result of efficiencies achieved in manufacturing reagent
chemicals and stabilization products based on increased production volumes.
10
<PAGE>
Research and development expenses. Research and development expenses
were $3.4 million for the first six months of fiscal 2000, an increase of $1.0
million, or 42%, over the same period of fiscal 1999. The change was primarily
due to compensation and benefits associated with technical personnel added by
the Company over the last year, increased patent and legal fees, and supplies
cost to equip the newly completed laboratory space.
Sales and marketing expenses. Sales and marketing expenses were
$732,000 for the first six months of fiscal 2000, a $103,000 or 12% decrease
from the same period of fiscal 1999. Increased promotional expenses were more
than offset by decreased compensation and benefit costs due to open positions.
General and administrative expenses. General and administrative
expenses were $1.3 million for the first half of fiscal 2000, an increase of
$57,000, or 5%, over the same period of fiscal 1999. The increase was primarily
the result of higher compensation and benefit costs.
Income from operations. The Company's income from operations was $2.4
million for the first six months of fiscal 2000, an increase of $1.5 million, or
175%, over the same period of fiscal 1999.
Other income, net. The Company's other income was $590,000 for the
first half of fiscal 2000, a decrease of $35,000, or 6%, over the same period of
fiscal 1999. An increase in investment income in the current period was offset
by a decrease in realized gains on the sale of investments. The first half of
fiscal 1999 included a $95,000 realized gain from the sale of investments.
Income tax expense. The Company's income tax provision was $1.1 million
for the first six months of fiscal 2000 versus a $549,000 income tax benefit
recorded in the same period of fiscal 1999. Net income for the first half of
fiscal 1999 included the reversal of income tax valuation reserves of
approximately $1,062,000 reducing the Company's tax provision at statutory rates
to a net credit of $549,000. Excluding the effect of the reversal of income tax
valuation reserves, the Company's net income and diluted income per share would
have been as follows on a proforma basis:
Proforma
Six Months Ended March 31,
--------------------------
2000 1999
---- ----
Net income before provision for income taxes $2,947,000 $1,481,000
Income tax provision (1,100,000) (513,000)
----------- ----------
Net income $1,847,000 $ 968,000
========== =========
Diluted net income per share $0.22 $0.12
===== =====
Other comprehensive loss. The Company's other comprehensive loss was
$100,000 for the first six months of fiscal 2000. This loss was due to a
reduction in the market value of the Company's long-term investments
available-for-sale due to increases in interest rates. As of March 31, 1999, the
Company had a net $287,000 unrealized loss related to those investments.
Liquidity and Capital Resources
As of March 31, 2000, the Company had working capital of $13.7 million
and cash, cash equivalents and investments totaling $22.3 million. The Company's
investments principally consist of U.S. government agency obligations and
investment grade, interest-bearing corporate debt securities with varying
maturity dates, the majority of which are one year or less. The Company
11
<PAGE>
generated positive cash flows from operating activities of $2.7 million in the
first six months, which was an increase of 199% for the same period of last
year, primarily due to the change in the deferred tax asset as described above.
Approximately $2.0 million of cash was used for investing activities during the
first six months compared to $1.5 million last year. The significant change in
investing activities between years was the construction of additional laboratory
and office space that was completed in December 1999. The total cost of the
additional space was approximately $1.0 million. Finally, a net $92,000 was
utilized in financing activities due to the exercise of stock options, net of
stock swaps during the first six months of the year.
As of March 31, 2000, the Company had no debt, nor did it have any
credit agreements. The Company believes that its existing capital resources will
be adequate to fund the Company's operations into the foreseeable future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company maintains an investment portfolio in accordance with its
investment policy. The primary objectives of the Company's investment policy are
to preserve principal, maintain proper liquidity to meet operating needs and
maximize yields. The Company's investment policy requires investments with
high-credit-quality issuers and limits the amount of credit exposure to any one
issuer.
The Company's investments principally consist of U.S. government and
government agency obligations and investment grade, interest-bearing corporate
debt securities with varying maturity dates, the majority of which are three
years or less. All of the Company's cash equivalents and marketable securities
are classified as available-for-sale securities.
The securities held in the Company's investment portfolio are subject
to interest rate risk. Changes in interest rates affect the fair market value of
the available-for-sale securities. The Company has determined that a
hypothetical ten percent increase in interest rates would result in an
approximate $150,000 decrease in the fair value of the Company's
available-for-sale securities as of March 31, 2000, but would have no material
impact on the results of operations or cash flows. SurModics does not use
derivative instruments in its investment portfolio.
Forward Looking Statements
The statements contained in this quarterly report relating to future
revenue growth and expense levels are based on current expectations and involve
a number of risks and uncertainties. These statements are forward looking and
are made pursuant to the safe harbor provisions of the Private Securities Reform
Act of 1995. The following factors could cause royalty revenue to materially and
adversely differ from that anticipated: the ability of the Company's licensees
to successfully gain regulatory approval for, market and sell products
incorporating the Company's technology; the amount and timing of resources
devoted by the Company's licensees to market and sell products incorporating the
Company's technology; the Company's ability to attract new licensees and to
enter into agreements for additional applications with existing licensees; the
Company's ability to maintain a competitive position in the development of
technologies and products in its areas of focus; and business and general
economic conditions.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
Use of Proceeds for the period ending March 31, 1999.
(1) Effective Date: March 3, 1998
SEC File Number: 333-43217
(2) Offering Date: March 3, 1998
(4)(i) The offering has terminated; all securities registered were sold.
(4)(ii) Managing Underwriter: John G. Kinnard and Company,
Incorporated
(4)(iii) Title of Securities: Common Stock
(4)(iv) Amount Registered: 2,300,000
Aggregate Offering Price: $17,250,000
Amount Sold: 2,300,000
Aggregate Offering Price Sold: $17,250,000
(4)(v) Underwriting Discount and Commissions $ 1,293,750
Other Expenses $ 435,148
Total Expenses $ 1,728,898
All the above items represented direct or indirect payments to others.
(4)(vi) Net Offering Proceeds $15,521,102
(4)(vii) Use of Net Offering Proceeds:
Research and development $ 1,772,000
Sales and marketing $ 1,173,000
Property and equipment upgrades $ 7,180,000
Patent protection $ 143,000
Working capital and general
corporate purposes $ 852,000
Administration $ 124,000
Money market funds $ 4,277,102
All the above items represented direct or indirect payments to others.
13
<PAGE>
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - 27 Financial Data Schedule
(b) Reports on Form 8-K - None
14
<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.
SurModics, Inc.
May 15, 2000
By: /s/ Stephen C. Hathaway
Stephen C. Hathaway
Vice President & CFO
(Principal Financial Officer)
15
<PAGE>
Exhibit Index
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 2,640
<SECURITIES> 10,415
<RECEIVABLES> 1,400
<ALLOWANCES> 40
<INVENTORY> 511
<CURRENT-ASSETS> 15,544
<PP&E> 11,388
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0
0
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</TABLE>
