<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
AMENDMENT NO. 1
TO
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED).
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ______________ TO _______________
Commission File Number 33-90516
NEOPHARM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0327886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 CORPORATE NORTH
SUITE 215
BANNOCKBURN, ILLINOIS 60015
(Address Of Principal Executive Offices) (Zip Code)
(847) 295-8678
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of class
Common Stock, $.0002145 Par Value
Title of class
Warrants to Purchase Shares of Common Stock, $.0002145 Par Value
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of the Registrant's common stock held by
non-affiliates of the registrant, par value $.0002145 per share, (based on the
closing price of such shares on the American Stock Exchange on March 16, 1998)
was $16,178,211. As of March 16, 1998 there were 8,195,810 shares of Common
Stock outstanding.
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This Amendment No. 1 of the Form 10-K is being filed by NeoPharm, Inc. to
provide the information required to be presented in Part III, Item 11
"Executive Compensation", Item 12 "Security Ownership of Certain Beneficial
Owners and Management" and Item 13 "Certain Relationships and Related
Transactions".
ITEM 11. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation of Executive Officers. The
following table sets forth certain summary compensation information for the
fiscal year ended December 31, 1997, for services rendered by the chief
executive officer and for each executive officer of the Company who received
more than $100,000 in salary and bonus in 1997 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
----------------------------------------------------- ---------------------------------
ANNUAL OTHER
NAME AND COMPENSATION ANNUAL RESTRICTED STOCK
PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) COMPENSATION AWARDS($) OPTIONS(#)
- ------------------------- ----------- --------- --------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William C. Govier, 1997 $138,600 $0 $0 $0 0
Chief Executive Officer 1996 121,000 39,600 0 0 50,000(2)
and President(1) 1995 0 0 0 0 0
Aquilur Rahman, 1997 $167,000 $51,000 $0 $0 0
Chief Scientific Officer 1996 144,100 45,000 0 0 50,000(2)
1995 0 0 0 0 0
</TABLE>
- -----------------------------
(1) Dr. Govier resigned as President, Chief Executive Officer and a Director
of the Company effective January 18, 1998. Effective March 16, 1998,
Mr. James M. Hussey succeeded Dr. Govier as President and Chief Executive
Officer and was appointed to fill the vacancy in the Board of Directors
created by Dr. Govier's departure.
(2) The stock option became exercisable for 25% of the covered shares on
August 13, 1997 and will become exercisable with respect to an additional
25% on each anniversary of such date thereafter until exercisable in full.
Exercisability may be accelerated in the event of a "change of control."
<PAGE> 3
OPTION GRANTS IN LAST FISCAL YEAR
No options to purchase shares of Common Stock were granted to the Named
Executive Officers during the fiscal year ended December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR, AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to stock options
exercised during the fiscal year ended December 31, 1997, and the value at
December 31, 1997, of unexercised stock options held by the Named Executive
Officers:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY AT
OPTIONS AT FISCAL YEAR- FISCAL YEAR-END*
SHARES ACQUIRED VALUE END EXERCISABLE/ EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME # $ # $
- ---- --- ----- -------- --------
<S> <C> <C> <C> <C>
William C. Govier 0 0 12,500/37,500 N/A*
Aquilur Rahman 0 0 12,500/37,500 N/A*
</TABLE>
- ----------------
* Represents the fair market value at December 31, 1997, of the Common
Stock underlying the options minus the exercise price. As of December 31,
1997, the fair market value of the underlying common stock was less than
the option exercise price for all options held by the Named Executive
Officers.
<PAGE> 4
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of shares of the Common Stock as of March 31, 1998 by (i) all those
known by the Company to be beneficial owners of more than 5% of its outstanding
Common Stock, (ii) each director of the Company and each nominee for director,
(iii) each of the executive officers named in the Summary Compensation Table
and (iv) all Executives, directors and nominees for director as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name Beneficial Ownership Class (1)
- ---- -------------------- ----------
<S> <C> <C>
John N. Kapoor 2,112,909(2) 24.24%
EJ Financial Enterprises, Inc.
225 East Deerpath
Suite 250
Lake Forest, IL 60045
John N. Kapoor 1994-A 1,550,453(3) 17.79%
Annuity Trust
225 East Deerpath
Suite 250
Lake Forest, IL 60045
Aquilur Rahman 878,040 10.07%
100 Corporate North
Suite 215
Bannockburn, IL 60015
Anatoly Dritschilo 245,949 2.82%
100 Corporate North
Suite 215
Bannockburn, IL 60015
James M. Hussey 0 *
100 Corporate North
Suite 215
Bannockburn, IL 60015
Erick E. Hanson 0 *
100 Corporate North, Suite 212
Bannockburn, IL 60015
William C. Govier 245,634(4) 2.82%
225 E. Deerpath
Suite 250
Lake Forest, IL 60045
All officers and directors as a group
(8 persons) 5,337,591(5) 61.24%
</TABLE>
_____________________________________
* Indicates ownership of less than 1%.
(1) Based on 8,195,810 shares of Common Stock outstanding as of March 31,
1998, plus 519,817 shares subject to warrant and options that are
considered to be beneficially owned by the persons listed. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (the "Commission") and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants exercisable or convertible within 60 days
are deemed outstanding for computing the percentage of the person or group
holding such options or warrants.
<PAGE> 5
(2) Includes 1,511,624 shares held by the John N. Kapoor Trust, dtd 9/20/89
(the "JNK Trust"), of which Dr. Kapoor is the sole trustee and sole
beneficiary. The address of the Trust is 225 East Deerpath, Suite 250,
Lake Forest, Illinois 60045. The Trust also owns Warrants to purchase
287,004 shares of Common Stock, which are assumed to have been exercised
for purposes of disclosing the ownership indicated. The amount shown also
includes 300,000 shares which are held by the John N. Kapoor Charitable
Trust (the "Charitable Trust") of which Dr. Kapoor and his spouse are
co-trustees. Dr. Kapoor disclaims beneficial ownership of the shares held
by the Charitable Trust.
(3) The sole trustee of the John N. Kapoor 1994-A Annuity Trust (the "Annuity
Trust") is Editha Kapoor, Dr. Kapoor's spouse, who also serves as trustee
for four trusts which have been established for their children (the
"Childrens' Trusts") and which collectively own 310,848 shares and as
co-trustee with Dr. Kapoor of the Charitable Trust. The shares held by
the Childrens' Trusts and the Charitable Trust are not included in the
reported shares.
(4) Dr. Govier resigned as President, Chief Executive Officer and Director
effective January 18, 1998.
(5) Does not include shares held by family members or trusts established for
family members of officers and directors as to which shares such officers
and directors do not have or share voting or investment power and as to
which they have disclaimed beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND OTHER RELATED TRANSACTIONS
In November, 1997 the Company relocated its principal corporate office to
space subleased from Option Care, Inc. Mr. Hanson, a director of the Company,
is President, CEO and a Director of Option Care. In addition, Dr. Kapoor,
Chairman of the Company's Board of Directors, is a director and principal
shareholder of Option Care. The sublease was negotiated at arms length and the
Company believes the terms are fair.
On July 1, 1994, the Company entered into a Consulting Agreement with EJ
Financial Enterprises, Inc. ("EJ Financial"). The Consulting Agreement
provides that the Company will pay EJ Financial $125,000 per year (paid
quarterly) for certain business and financial services, including having
certain officers of EJ Financial serve as officers of the Company. Dr. John
Kapoor, the Company's Chairman of the Board is the president and a director of
EJ Financial. Dr. Mahendra Shah, Vice President of the Company, is also a Vice
President of EJ Financial. The Company believes that the charges provided for
in the Agreement are reasonable and reflect the cost of the services provided.
These charges reflect the increased need for EJ Financial's services in
connection with operation of NeoPharm as a publicly-held company. Unless
terminated by the parties, the management services agreement with EJ Financial
automatically renews in June of each year for a one year term.
In connection with the Company's initial public offering, the Company
adopted a policy whereby any further transactions between the Company and its
officers, directors, principal stockholders and any affiliates of the foregoing
persons will be on terms no less favorable to the Company than could reasonably
be obtained in arm's length transactions with independent third parties, and
that any such transactions also be approved by a majority of the Company's
disinterested outside directors.
<PAGE> 6
SIGNATURES
Pursuant to the requirements of Section 13(d) or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to
report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 30th day of April, 1998.
NEOPHARM, INC.
By: /s/ James M. Hussey
--------------------------------------
James M. Hussey
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN N. KAPOOR
- ------------------ Director, Chairman of the Board April 30, 1998
John N. Kapoor
/s/ AQUILUR RAHMAN
- ------------------ Director, Chief Scientific Officer April 30, 1998
Aquilur Rahman
/s/ ANATOLY DRITSCHILO
- ---------------------- Director April 30, 1998
Anatoly Dritschilo
Director, President, and Chief
/s/ JAMES M. HUSSEY Executive Officer (Principal
- ------------------- Executive Officer) April 30, 1998
James M. Hussey
/s/ ERICK E. HANSON
- ------------------- Director April 30, 1998
Erick E. Hanson
Chief Financial Officer
/s/ DAVID E. RIGGS (Principal Officer and Principal
- ------------------ Accounting Officer) April 30, 1998
David E. Riggs
</TABLE>
