SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 11, 1998
ORPHAN MEDICAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Minnesota 0-24760 41-1784594
(State or other jurisdiction of (Commission file number) (I.R.S. employer identification
incorporation) number)
Suite 475,
13911 Ridgedale Drive,
Minnetonka, MN 55305 (612) 513-6900
(Address of principal executive offices) (zip code) (Registrant's telephone number,
including area code)
</TABLE>
Not Applicable
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
<PAGE>
Item 5. Other Events.
On July 23, 1998 (the "First Issuance Date"), the Company completed the
sale to UBS Capital II LLC ("UBS Capital") of a private placement of $7.5
million of Senior Convertible Preferred Stock (the "Preferred Shares"). The
private placement agreement also gives UBS Capital the right to invest up to an
additional $4.5 million within 90 days of the First Issuance Date. The Preferred
Shares are convertible, at the option of the holders, into shares of the
Company's Common Stock at a per share price equal to the lesser of $11.78 or
110% of the average last sale price of the 20 trading days prior to October 21,
1998. There is a minimum conversion price of $8.50 per share. The Preferred
Shares have anti-dilution and change of control protection, and bear a dividend
of 7.5% per annum, payable semi annually, which during the first two years may
be paid either in cash or by issuing additional Preferred Shares. In the third
year and thereafter, the dividend may be paid either in cash or by issuing
Common Stock valued at the then current market price. Ten years from the First
Issuance Date (July 23, 2008), the Company must elect to either (1) require the
conversion of all unconverted Preferred Shares into Common Stock upon the
payment by the Company, in cash or by issuing Common Stock, of a $3.0 million
conversion fee, which is subject to adjustment, or (2) redeem for cash the
holder's unconverted Preferred Shares for $1,000 per share plus accrued
dividends. An affiliate of UBS Capital will be paid on closing a four percent
arrangement fee based on amounts invested. UBS Capital is entitled to designate
an individual to serve on the Company's Board of Directors.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Orphan Medical, Inc. - Unaudited Balance Sheet
The unaudited balance sheet as of July 31, 1998 reflects the impact to
the Company's capital structure for the issuance of 7,500 shares of Senior
Convertible Preferred Stock on July 23, 1998 from which the Company received
funds totaling approximately $7,125,000, net of estimated offering costs of
$375,000. In addition, the Company estimates it will pay approximately $75,000
in additional offering costs in subsequent months, which will be accounted for
as a reduction to additional paid in capital.
The balance sheet does not include all of the information, footnotes
and adjustments (consisting of normal, recurring accruals) required by generally
accepted accounting principles for complete financial statements. The balance
sheet should be read in conjunction with the Company's Annual Report on Form
10-K and its Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission for the periods ended December 31, 1997 and June 30, 1998,
respectively.
<PAGE>
BALANCE SHEETS
ORPHAN MEDICAL, INC.
(A Development Stage Company)
UNAUDITED
<TABLE>
<CAPTION>
July 31,
1998
(Unaudited)
----------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,059,832
Available-for-sale securities 6,055,303
Accounts receivable, less allowance for doubtful accounts of $20,376 509,637
Other receivables 18,439
Inventories 265,895
Prepaid expenses 70,024
----------------
Total current assets 10,979,130
Property and equipment:
Property and equipment 534,007
Accumulated depreciation (212,652)
----------------
321,355
----------------
Total assets $ 11,300,485
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Chronimed Inc. obligation - current portion $ 1,137,857
Accounts payable and accrued expenses 2,537,689
Accrued payroll and related taxes 52,732
----------------
Total current liabilities 3,728,278
Non current liabilities:
Chromined Inc. obligation -
Commitments
Shareholders' equity:
Senior Convertible Preferred Stock, $.01 par value; 14,400 shares
authorized; 7,500 shares issued and outstanding 75
Common Stock, $.01 par value; 25,000,000 shares authorized;
6,249,718 shares issued and outstanding 62,497
Additional paid-in capital 37,999,876
Deficit accumulated during the development stage (30,488,063)
----------------
7,574,385
Unrealized gain (loss) on available-for-sale securities (2,178)
----------------
Total shareholders' equity 7,572,207
----------------
Total liabilities and shareholders' equity $ 11,300,485
================
</TABLE>
<PAGE>
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 hereunto duly authorized.
Date: September 11, 1998 ORPHAN MEDICAL, INC.
/s/ John H. Bullion
John H. Bullion
Chief Executive Officer
