<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended DECEMBER 31, 1997
Commission file number 000-21215
PROGENITOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1344193
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
4040 CAMPBELL AVENUE
MENLO PARK, CA 94025
(650) 617-0880
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
CLASS OUTSTANDING AT JANUARY 16, 1998
Common Stock, $.001 par value 13,461,973 shares
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PROGENITOR, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets --
December 31, 1997 and September 30, 1997 3
Consolidated Statements of Operations -- Three months
ended December 31, 1997 and December 31, 1996, and May 8, 1992
(Date of Inception) to December 31, 1997 4
Consolidated Statements of Cash Flows -- Three months
ended December 31, 1997 and December 31, 1996 and May 8, 1992
(Date of Inception) to December 31, 1997 5
Notes to the Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION 12
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------ -------------
1997 1997
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $15,235,692 $19,673,252
Accounts receivable 129,699 129,699
Prepaid expenses and other current assets 542,615 421,411
----------- -----------
Total current assets 15,908,006 20,224,362
----------- -----------
Property and equipment, net 2,076,507 1,918,961
Notes receivable-employees, net 289,583 480,208
Intangible assets, net 884,500 961,390
----------- -----------
Total assets $ 19,158,596 $ 23,584,921
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 621,548 $ 1,792,827
Accrued liabilities 3,760,161 4,148,372
Capital lease obligations, current 807,819 761,929
----------- -----------
Total current liabilities 5,189,528 6,703,128
----------- -----------
Capital lease obligations, non-current 835,070 941,696
Stockholders' equity:
Preferred stock -- --
Common stock 13,417 13,405
Stock subscription promissory note receivable (500,000) (1,000,000)
Additional paid-in capital 79,655,969 79,650,550
Deficit accumulated during development stage (66,035,388) (62,723,858)
----------- -----------
Total stockholders' equity 13,133,998 15,940,097
----------- -----------
Total liabilities and stockholders' equity $19,158,596 $23,584,921
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
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PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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<TABLE>
<CAPTION>
MAY 8, 1992
(DATE OF
THREE MONTHS ENDED INCEPTION) TO
DECEMBER 31, DECEMBER 31,
1997 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
Revenues $ 129,699 $ 675,505 $ 5,425,100
Operating expenses:
Research and development 2,661,482 1,066,143 24,229,027
Write-off of acquired in-process
research and development -- -- 21,092,000
General and administrative 964,660 444,383 9,631,601
Nonrecurring expenses -- -- 1,506,563
----------- ----------- ------------
Total operating expenses 3,626,142 1,510,526 56,459,191
----------- ----------- ------------
Loss from operations (3,496,443) (835,021) (51,034,091)
Nonrecurring expense -- -- (973,525)
Interest and other income 233,688 -- 488,980
Interest expense -- related party -- (110,716) (1,940,030)
Interest expense -- other (48,775) (9,440) (293,241)
----------- ----------- ------------
Net loss $(3,311,530) $ (955,177) $(53,751,907)
=========== =========== ============
Net loss per common share:
Basic and diluted $ (.25) $ (.33)
=========== ============
Shares used in computing
Net loss per common share:
Basic and diluted 13,410,591 2,885,904
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
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PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, MAY 8, 1992 (DATE
--------------------------- OF INCEPTION) TO
1997 1996 DECEMBER 31, 1997
----------- ----------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(3,311,530) $ (955,177) $(53,751,907)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 314,926 73,662 2,185,221
Gain on sale of equipment -- -- (23,247)
Noncash expense for anti-dilution stock
issuances -- -- 763,143
Write-off of acquired in-process research
and development -- -- 21,092,000
Changes in operating assets and liabilities:
Accounts receivable -- (500,000) (129,699)
Prepaid expenses and other current assets (121,204) (89,860) (292,790)
Notes receivable-employees, net 190,625 (50,000) (220,833)
Accounts payable (1,171,279) (47,601) (1,993,384)
Accrued liabilities (388,211) 127,798 2,049,465
Accrued interest-related party -- 110,736 1,912,141
------------ ------------ ------------
Cash used in operating activities (4,486,673) (1,330,442) (28,409,890)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (395,582) (294,178) (2,806,487)
Proceeds from sale of equipment -- -- 54,000
Advances under convertible bridge promissory
note -- -- (3,769,519)
Cash paid in purchase of Mercator -- -- (762,937)
------------ ------------ ------------
Cash used in investing activities (395,582) (294,178) (7,284,943)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from note payable-related party -- 1,862,575 20,555,003
Proceeds from convertible debenture-related
party -- -- 436,740
Proceeds from bridge loan -- related party -- -- 3,665,029
Proceeds from issuance of stock, net 5,431 -- 25,000,610
Proceeds from payments received on stock
subscription note 500,000 -- 500,000
Proceeds from capital lease financings -- -- 1,694,371
Principal payments on capital lease financings (60,736) (62,826) (921,228)
------------ ------------ ------------
Cash provided by financing activities 444,695 1,799,749 50,930,525
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents (4,437,560) 175,129 15,235,692
Cash and cash equivalents, beginning of period 19,673,252 22,315 --
------------ ------------ ------------
Cash and cash equivalents, end of period $ 15,235,692 $ 197,444 $ 15,235,692
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
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PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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1. Basis of Presentation
The unaudited condensed consolidated financial statements included
herein have been prepared by Progenitor, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim information and pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows of the Company. The consolidated financial
statements included herein should be read in conjunction with the audited
consolidated financial statements and the notes thereto included in the
Company's Form 10-K for the fiscal year ended September 30, 1997. Results for
the interim period are not necessarily indicative of the results for any other
interim period or for the full fiscal year.
2. Recent Accounting Pronouncements
In June 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS 130 is effective for fiscal years beginning after
December 15, 1997, and reclassification of financial statements for earlier
periods provided for comparative purposes is required. SFAS 130 is not expected
to have a material impact on the Company's financial position, results of
operations or cash flows.
In June 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," (SFAS 131). SFAS 131 establishes standards
for the way that public business enterprises report financial information about
operating segments in annual financial statements and requires operating
segments in interim financial reports issued to shareholders. SFAS 131 is
effective for financial statements for periods beginning after December 15,
1997, and restatement of comparative information for earlier years is required.
However, SFAS 131 is not required to be applied to interim financial statements
in the initial year of application. SFAS 131 will not have a material impact on
the Company's financial position, results of operations or cash flows.
3. Net Loss per Share
Financial Accounting Standards Board Statement No. 128, "Earnings Per
Share" (SFAS 128), specifies the computation, presentation, and disclosure
requirements for net loss per share and became effective for the quarter ended
December 31, 1997. Accordingly, net loss per share for the three month period
ended December 31, 1997 has been computed in accordance with SFAS 128 and all
prior period net loss per share data presented has been restated to conform with
SSFAS 128.
In February 1998, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 98 (SAB No. 98) which supercedes SAB No. 83, and
addresses earnings per share. The Company has determined no incremental shares
should be included in accordance with SAB No. 98.
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The computation of net loss per share is based on the weighted average
number of common shares outstanding during the period. Common stock options and
warrants have not been included in the computation since their inclusion would
be antidilutive.
4. Stock Subscription Promissory Note Receivable
In December 1997, Amgen Inc. paid $500,000 of the outstanding balance of
its stock subscription promissory note receivable by the Company, in accordance
with the terms of the note. The remainder of the note is scheduled to be repaid
in December 1998.
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PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
The following discussion is intended to assist in the understanding and
assessment of significant changes and trends related to the results of
operations and financial condition of Progenitor, Inc., ("Progenitor" or the
"Company"). This discussion and analysis should be read in conjunction with the
Company's Unaudited Condensed Consolidated Financial Statements and Notes
thereto included herein, and with the Consolidated Financial Statements and
Notes thereto included in the Company's Form 10-K for the fiscal year ended
September 30, 1997.
In addition to historical information, the following management's
discussion and analysis includes certain forward-looking statements regarding
events and financial trends which may affect the Company's future operating
results and financial position. These forward-looking statements include but are
not limited to statements regarding: future sources of revenue; uncertainty of
product development; uncertainty of additional funding; and liquidity and
capital resources. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
The forward-looking statements included herein are also subject to a
number of other risks and uncertainties that could cause the Company's actual
results and financial position to differ materially from those anticipated in
the forward-looking statements. Such risks and uncertainties include, but are
not limited to: uncertainties relating to the technological approaches of the
Company; history of operating losses and anticipation of future losses;
uncertainty of product development; need for additional capital and uncertainty
of additional funding; dependence on collaborators and licensees; intense
competition and rapid technological change; uncertainty of patents and
proprietary rights; management of growth, and risks of acquiring new
technologies; uncertainties related to clinical trials; government regulation
and uncertainty of obtaining regulatory approval; dependence on key personnel;
dependence on research collaborators and scientific advisors; control of the
Company by, and potential conflicts of interest with, Interneuron; uncertainty
of health care reform measures and third-party reimbursement; risk of product
liability; no assurance of an active trading market and potential volatility of
trading prices; possible delisting from the Nasdaq National Market and market
illiquidity; redemption of Warrants; current prospectus required to exercise the
Warrants; anti-takeover considerations; hazardous and radioactive materials and
environmental matters; and the absence of dividends. Due to the foregoing
factors, it is possible that in some future period the Company's results of
operations may be below the expectations of public market analysts and
investors. These and other risks and uncertainties related to the Company's
business are described in detail in the Company's Form 10-K for the fiscal year
ended September 30, 1997 under the caption "Factors That May Affect Future
Financial Results."
OVERVIEW
A development stage company, Progenitor was incorporated in February
1992 and commenced operations in May 1992. Progenitor has devoted substantially
all of its resources since inception to research and development programs. To
date, all of Progenitor's revenues have resulted from payments from
collaborators and licensees and a grant from the U.S. Department of Commerce's
National Institute of Standards and
8
<PAGE> 9
Technology Advanced Technology Program ("ATP") that was awarded to Progenitor in
November 1994. Royalties, payments from collaborators, license fees, payments
under governmental grants and investment income, in each case, if any, are
expected to be the only sources of revenue for the foreseeable future. Certain
payments under collaborative and license arrangements are contingent upon the
Company meeting certain milestones. Payments under collaborative or licensing
arrangements, if any, will be subject to significant fluctuation in both timing
and amount, and therefore the Company's results of operations for any period may
not be comparable to the results of operations for any other period. The Company
has not yet received any royalties or other revenues from the sale of products
or services and does not expect to receive significant revenues from sales of
products for the next several years, if at all. As of December 31, 1997,
Progenitor had total stockholders' equity of $13.1 million, including an
accumulated deficit of $66.0 million.
Significant discovery, research and development efforts will be required
prior to the time any of the Company's gene discoveries may lead to product
candidates or result in products that may be brought to the market, if at all.
Products, if any, resulting from the Company's research and development programs
are not expected to be commercially available for a number of years, if at all,
even if any are successfully developed and proven safe and effective.
Significant additional research and development efforts and extensive
preclinical studies and clinical trials will be required prior to submission of
any regulatory application for commercial use.
RESULTS OF OPERATIONS
The Company recognized ATP grant revenue of $129,699 in the quarter
ended December 31, 1997. In the quarter ended December 31, 1996 revenue totaled
$675,505, and included a $500,000 milestone payment from Chiron and $175,505 of
ATP grant revenue. The Company's ATP grant is scheduled to expire in May 1998.
Research and development expenses ("R&D") increased to $2.7 million in
the quarter ended December 31, 1997 from $1.1 million in the quarter ended
December 31, 1996, or 150%, primarily as a result of increased staffing and
research activity due to the acquisition of Mercator. The Company expects R&D
expenses in the remainder of fiscal 1998 to continue to exceed 1997 levels as a
result of the Mercator acquisition, and further expects R&D expenses to continue
to increase in future periods, as research programs proliferate, expand or
mature depending on the availability of capital.
General and administrative expenses increased to $964,660 from $444,383,
or 117%, over the comparable period in the prior year due to higher headcount
resulting from the Mercator acquisition, as well as incremental corporate
expenses incurred as a result of operating as a publicly held company. The
Company expects general and administrative expenses to continue to increase in
the future, depending on the level of R&D spending.
There was no related party interest expense in the quarter ended
December 31, 1997 because the promissory note payable to Interneuron was
contributed as capital in August 1997. Such expense was equal to $110,716 in the
quarter ended December 31, 1996. Other interest expense increased to $48,775 in
the quarter ended December 31, 1997, from $9,440 in the quarter ended December
31, 1996 due to the Company's assumption of Mercator's capital lease
obligations. During the quarter ended December 31, 1997 the Company recorded
$233,688 of interest and other income primarily from interest earned on cash
balances.
The net loss increased to $3.3 million in the quarter ended December 31,
1997 from $955,177 in the quarter ended December 31, 1996, primarily due to
increased operating expenses as well as lower revenue.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company had cash and cash equivalents of
$15.2 million. Cash and cash equivalents decreased $4.4 million in the quarter
ended December 31, 1997 primarily due to the net loss of $3.3 million and a $1.6
million decrease in accrued liabilities and accounts payable. The decrease in
accrued liabilities and accounts payable largely resulted from the payment of
Offering and merger related liabilities that were outstanding at the end of the
1997 fiscal year.
The Company expects negative cash flow from operations to continue for
the foreseeable future. The Company will require substantial additional funds to
continue research and development, conduct preclinical studies and clinical
trials, conduct activities relating to commercialization of rights it has
retained in collaborative or license agreements, if any, and expand
administrative capabilities. The Company estimates that, at its planned rate of
spending, it's existing cash and cash equivalents will be sufficient to meet its
funding requirements for at least the next twelve months. In order to achieve
this result, however, the Company will need to closely manage the rate of
expenditures for all of its research programs. Although the Company anticipates
that its existing cash balances will be sufficient to meet its funding
requirements for its primary research programs for at least the next twelve
months, the Company may be required to curtail the expansion of, or to reduce
the level of expenditures for, certain of its other research programs, in the
future or to seek corporate collaborations with respect to such programs at an
earlier stage than would be required if the Company had greater financial
resources or to obtain other funding. There can be no assurance that any such
corporate collaboration will be obtained on terms favorable to the Company or at
all or that any such funding will be available on terms favorable to the Company
or at all. In addition, there can be no assurance that the Company's assumptions
regarding its future levels of expenditures and operating losses will prove
accurate.
The Company's future funding requirements will depend on many factors,
including any expansion or acceleration of the Company's research and
development programs; the results of research and development, preclinical
studies and clinical trials conducted by the Company or its collaborative
partners or licensees, if any; the acquisition and licensing of products and
technologies or businesses, if any; the Company's ability to establish and
maintain corporate relationships and academic collaborations; the Company's
ability to manage growth; competing technological and market developments; the
time and costs involved in filing, prosecuting, defending and enforcing patent
and intellectual property claims; the receipt of licensing or milestone fees
from any current or future collaborative and licensing arrangements, if
established; the continued funding of governmental research grants; the timing
of regulatory approvals, if any; and other factors. To the extent undertaken by
the Company, the time and costs involved in conducting preclinical studies and
clinical trials, seeking regulatory approvals, and scaling-up manufacturing and
commercialization activities also would increase the Company's funding
requirements.
The Company will need to raise substantial additional capital to fund
operations. The Company intends to seek additional funding through public or
private equity or debt financing and collaborative arrangements. There can be no
assurance that additional financing will be available when needed, or that, if
available, such financing will be available on terms acceptable to the Company.
If additional funds are raised by issuing equity securities, dilution to
existing stockholders will result. In addition, in the event that additional
funds are obtained through collaborative or license arrangements, such
arrangements may require the Company to relinquish rights to certain of its
technologies or potential products that it would otherwise seek to develop or
commercialize itself.
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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS 130 is effective for fiscal years beginning after
December 15, 1997, and reclassification of financial statements for earlier
periods provided for comparative purposes is required. SFAS 130 is not expected
to have a material impact on the Company's financial position, results of
operations or cash flows.
In June 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," (SFAS 131). SFAS 131 establishes standards
for the way that public business enterprises report financial information about
operating segments in annual financial statements and requires operating
segments in interim financial reports issued to shareholders. SFAS 131 is
effective for financial statements for periods beginning after December 15,
1997, and restatement of comparative information for earlier years is required.
However, SFAS 131 is not required to be applied to interim financial statements
in the initial year of application. SFAS 131 will not have a material impact on
the Company's financial position, results of operations or cash flows.
IMPACT OF THE YEAR 2000 ISSUE
The Company has begun the process of evaluating the impact of the Year
2000 problem and expects to complete such evaluation during fiscal 1998. The
Year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. The Company cannot quantify the potential costs associated with
the Year 2000 problem at this time. Although the Company does not currently
expect that the impact of this computer program flaw will be material, there can
be no assurance that the Company will not discover Year 2000 problems with
respect to the Company's computer systems in the course of its evaluation
process that would have a material adverse effect on the business, financial
condition or results of operations of the Company. In addition, the Year 2000
problem may impact other entities with which the Company transacts business, and
there can be no assurance that such impact will not have a material adverse
effect on the business, financial condition or results of operations of the
Company.
11
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PART II. OTHER INFORMATION
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Item 1. LEGAL PROCEEDINGS
The Company is not currently a party to any litigation that could have
a material adverse effect on its business, financial condition or results of
operations. However, from time to time the Company may be threatened with, or
named as a defendant in, lawsuits, including administrative claims and lawsuits
brought by employees or former employees.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(d) Use of Proceeds
As described above in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company has completed the Offering.
The following information relates to the use of proceeds of the Offering:
(1) Effective Date of Registration Statement and Commission File Number.
The Company's Registration Statement on Form S-1, File No. 333-05369 (the
"Registration Statement"), relating to the Offering, became effective on August
6, 1997.
(2) Offering Date. The initial closing date of the Offering was August
12, 1997. A subsequent closing in connection with the partial exercise by the
Underwriters of the Offering of their over-allotment option occurred on
September 10, 1997.
(3) Managing Underwriters. Lehman Brothers Inc.
(4) Securities Registered and Proposed Aggregate Offering Price. The
Company registered a total of 3,162,500 Units, each Unit consisting of one share
of Common Stock ("Unit Share") and one Warrant, and 3,162,500 shares of Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares"). The
proposed maximum aggregate offering price was $37,950,000 for the Units and
$56,925,000 for the Warrant Shares.
(5) Securities Sold. A total of 2,875,000 Units were sold pursuant to
the Offering. This consisted of 2,750,000 Units sold on August 12, 1997 upon the
initial closing of the Offering, and 125,000 Units sold on September 10, 1997
pursuant to the partial exercise, at the request of Lehman Brothers Inc. as
managing underwriter, of the over-allotment option granted to the Underwriters.
None of the Warrants had been exercised as of February 9, 1998, and consequently
no Warrant Shares had been sold. The Company intends to maintain the
effectiveness of the Registration Statement to the extent required by the terms
of the Warrants with respect to the 2,875,000 Warrant Shares issuable upon
exercise of the Warrants actually sold.
(6) Aggregate Gross Proceeds, Expenses and Aggregate Net Proceeds. The
sale of the 2,875,000 Units generated aggregate gross proceeds of $20,125,000,
consisting of $15,453,125 from the sale of the Unit Shares (at a price of $5.375
per share) and $4,671,875 from the sale of the Warrants (at a price of $1.625
per Warrant). The aggregate net proceeds to the Company from the sale of the
2,875,000 Units were approximately $17,200,000, after deducting underwriting
discounts and commissions of approximately $1,200,000 and estimated expenses of
the Offering of approximately $1,700,000 payable by the Company. The Company
also received $4,500,000 in cash and a $1,000,000 promissory note from the sale
of the Amgen Shares ($500,000 of which was repaid by Amgen in December 1997),
and approximately $67,000 in cash from the sale of 25,000 shares of Common Stock
to The Ohio University Foundation, pursuant to a stock purchase right.
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(7) Use of Proceeds. Through December 31, 1997, the Company used
$8,649,000 of the net proceeds of the Offering, together with the cash proceeds
received from the sale of the Amgen Shares and the sale of 25,000 shares of
Common Stock to The Ohio University Foundation, for research and development and
$1,423,000 of such proceeds for administration. In addition, the Company used a
portion of such net proceeds as follows: (i) approximately $579,000 to pay
expenses relating to employee benefit and retention plans relating to the
Acquisition; (ii) approximately $1,583,000 legal, accounting and other costs
incurred in the Acquisition and related Form S-4 registration statement; (iii)
approximately $345,000 to facilitate employee relocation, to Mercator's facility
in California; and (iv) approximately $307,000 for other costs such as benefit
costs, the consolidation of operations, the elimination of duplicate systems and
facilities, and other integration costs. The Company anticipates using the
balance of such net proceeds primarily for research and development, and also
for the expansion or upgrade of facilities for the acquisition of equipment and
for working capital and other general corporate purposes. The Company also may
use such proceeds for other purposes, including the acquisition of technology
rights, products, equipment, businesses or assets of other companies. At
December 31, 1997, the Company had approximately $14,271,000 of such proceeds
remaining, held in cash and cash equivalents.
The amounts actually expended for each purpose, including the allocation
of funding among the Company's research programs, will depend on numerous
factors, including any expansion or acceleration and the breadth of the
Company's research and development programs; the results of research and
development, preclinical studies and clinical trials conducted by the Company or
its collaborative partners or licensees, if any; the acquisition and licensing
of products and technologies or businesses, if any; the Company's ability to
establish and maintain corporate relationships and academic collaborations; the
Company's ability to manage growth; competing technological and market
developments; the time and costs involved in filing, prosecuting, defending and
enforcing patent and intellectual property claims; the receipt of licensing or
milestone fees from any current or future collaborative and license
arrangements, if established; the continued funding of governmental research
grants; the timing of regulatory approvals; and other factors.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT INDEX
Exhibit No. Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
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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.
PROGENITOR, INC.
February 17, 1998
- ----------------- /s/ Mark N.K. Bagnall
Date ----------------------------------------
Mark N.K. Bagnall
Vice President, Finance
and Chief Financial
Officer
14
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27.1 Financial Data Schedule
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 15,235,692
<SECURITIES> 0
<RECEIVABLES> 129,699
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,908,006
<PP&E> 3,563,438
<DEPRECIATION> (1,486,931)
<TOTAL-ASSETS> 19,158,596
<CURRENT-LIABILITIES> 5,189,528
<BONDS> 0
0
0
<COMMON> 13,417
<OTHER-SE> 13,120,581
<TOTAL-LIABILITY-AND-EQUITY> 19,158,596
<SALES> 0
<TOTAL-REVENUES> 129,699
<CGS> 0
<TOTAL-COSTS> 3,626,142
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,775
<INCOME-PRETAX> (3,311,530)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,311,530)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,311,530)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
