SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 30, 2001.
[ ] 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
0-25133
PHARMANETICS, INC.
(Exact Name of Registrant as Specified in its Charter)
North Carolina 56-2098302
(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation or organization)
9401 Globe Center Drive, Suite 140
Morrisville, North Carolina 27560
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code 919-582-2600
5301 Departure Drive, Raleigh North Carolina 27616
(Former Address of Principal Executive Office)
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 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 as of August 6, 2001
Common Stock, no par value 9,376,073
PHARMANETICS, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2001
(unaudited) and December 31, 2000 3
Consolidated Statements of Operations for
the Three Months and Six Months ended June 30, 2001 and 2000
(unaudited) 4
Consolidated Statements of Cash Flows for the Six Months
ended June 30, 2001 and 2000 (unaudited) 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 2. Change in Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
PHARMANETICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
JUNE 30, DECEMBER 31,
2001 2000
---- ----
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 18,461 $ 5,344
Short term investments, held-to-maturity -- 3,904
Short term investments, trading 91 --
Accounts and other receivables 887 301
Inventories 1,878 1,286
Other current assets 202 218
-------- --------
Total current assets 21,519 11,053
Property and equipment, net 8,762 6,424
Patents and intellectual property, net 546 536
Other noncurrent assets 381 301
-------- --------
Total assets $ 31,208 $ 18,314
======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK, CONTINGENTLY
REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 398 $ 958
Accrued expenses 695 649
Deferred revenue, current portion 1,232 232
Current portion of long term debt and capital lease obligations 32 861
-------- --------
Total current liabilities 2,357 2,700
Noncurrent liabilities:
Deferred revenue, less current portion 781 896
Long term debt and capital lease obligations, less current portion 84 36
-------- --------
Total noncurrent liabilities 865 932
-------- --------
Total liabilities 3,222 3,632
Series A convertible redeemable preferred stock, no par value; authorized
120,000 shares; 97,500 shares issued and outstanding at June 30, 2001 and
December 31, 2000, respectively (aggregate liquidation value at June 30, 2001 of $9,750,000) 8,102 8,102
Contingently redeemable common shares 2,161 --
Shareholders' equity:
Common stock, no par value; authorized 40,000,000 shares; 9,341,493 and
7,851,225 issued and outstanding at June 30, 2001 and
December 31, 2000, respectively 62,557 47,028
Accumulated deficit (44,834) (40,448)
-------- --------
Total shareholders' equity 17,723 6,580
-------- --------
Total liabilities, redeemable preferred stock, contigently redeemable
common stock and shareholders' equity $ 31,208 $ 18,314
======== ========
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
3
PHARMANETICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30
2001 2000 2001 2000
---- ---- ---- ----
Net sales $ 1,322 $ 1,377 $ 2,124 $ 2,866
Cost of goods sold 1,112 973 1,858 1,891
---------- ---------- ---------- ----------
Gross profit 210 404 266 975
---------- ---------- ---------- ----------
Operating expenses:
General and administrative 1,351 864 2,226 1,594
Sales and marketing 364 345 592 563
Research and development 931 853 1,750 1,628
---------- ---------- ---------- ----------
Total operating expenses 2,646 2,062 4,568 3,785
---------- ---------- ---------- ----------
Operating loss (2,436) (1,658) (4,302) (2,810)
---------- ---------- ---------- ----------
Other income (expense):
Interest expense (40) (54) (67) (115)
Interest income 130 211 210 322
Loss on trading securities (4) - (2) -
Grant/royalty income 12 19 12 19
Development income 50 212 100 283
Other expense (45) - (45) -
---------- ---------- ---------- ----------
Total other income 103 388 208 509
---------- ---------- ---------- ----------
Net and comprehensive loss (2,333) (1,270) (4,094) (2,301)
Dividends on preferred stock 144 179 291 250
Amortization of beneficial conversion feature of
Series A convertible preferred stock - 598 - 975
---------- ---------- ---------- ----------
Net loss applicable to common shareholders ($2,477) ($2,047) ($4,385) ($3,526)
========== ========== ========== ==========
Basic and diluted net loss per common
share ($0.28) ($0.27) ($0.53) ($0.47)
========== ========== ========== ==========
Average weighted common shares outstanding 8,846,101 7,544,019 8,351,631 7,535,664
========== ========== ========== ==========
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
4
PHARMANETICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
SIX MONTHS ENDED
June 30 June 30
2001 2000
---- ----
Cash flows from operating activities:
Net loss ($4,094) ($2,301)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on sale of assets 49 -
Depreciation 555 492
Amortization of intangible and other assets 91 59
Amortization of discount on investment (31) (121)
Provision for inventory obsolescence 75 59
Change in assets and liabilities:
Accounts receivable (586) 29
Inventories (667) (99)
Other assets (121) (41)
Accounts payable and accrued expenses (514) 585
Deferred revenue 884 -
-------- --------
Net cash used in operating activities (4,359) (1,338)
-------- --------
Cash flows from investing activities:
Payments for purchase of property and equipment (2,872) (630)
Costs incurred to obtain patents and intangibles (43) (4)
Proceeds from maturities of investments 3,935 1,500
Purchases of investments (90) (10,534)
-------- --------
Net cash provided by (used in) investing activities 930 (9,668)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt and capital lease
obligations (853) (366)
Proceeds from issuance of common stock, net of offering costs 17,360 -
Proceeds from exercise of stock options 39 39
Proceeds from Series A preferred stock offering, net of
offering costs - 11,229
-------- --------
Net cash provided by financing activities 16,546 10,902
-------- --------
Net increase (decrease) in cash and cash equivalents 13,117 (104)
Cash and cash equivalents at beginning of period 5,344 3,661
-------- --------
Cash and cash equivalents at end of period $ 18,461 $ 3,557
======== ========
Supplemental disclosure of noncash investing and financing activities:
Preferred stock issuance costs $ - $ 62
Preferred stock dividends paid with common shares $ 291 $ 250
Purchase of property and equipment through capital lease $ 72 $ -
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
5
PHARMANETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Organization and Basis of Presentation
PharmaNetics, Inc. (the "Company") is a holding company incorporated in July
1998 as the parent company of Cardiovascular Diagnostics, Inc. ("CVDI"). CVDI
was incorporated in November 1985 and develops, manufactures and markets rapid
turnaround diagnostics to assess blood clot formation and dissolution. CVDI
develops tests based on its proprietary dry chemistry diagnostic test system,
known as the Thrombolytic Assessment System ("TAS"), to provide rapid and
accurate evaluation of hemostasis at the point of patient care. The consolidated
financial statements included herein as of any date other than December 31 have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Financial information as
of December 31 has been derived from the audited financial statements of the
Company, but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management, the accompanying unaudited
consolidated financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the consolidated
financial position, results of operations and cash flows of the Company. For
further information regarding the Company's accounting policies, refer to the
Consolidated Financial Statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000. Results for the
interim period are not necessarily indicative of the results for any other
interim period or for the full fiscal year.
Note 2. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents.
Note 3. Investments
The Company makes investments in accordance with its investment policy which
seeks to minimize the possibility of loss. Investments with original maturities
at date of purchase beyond three months and which mature at or less than twelve
months from the balance sheet date are classified as current. Investments are
accounted for in accordance with Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Investments held-to-maturity at December 31, 2000 consisted of United States
government agency obligations and corporate bonds. Trading investments at June
30, 2001 consisted of marketable equity securities. These securities are
classified as trading securities as the Company may hold these securities for
only a short period of time.
Note 4. Inventory
Inventories consisted of the following (in thousands):
June 30, 2001 December 31, 2000
------------- -----------------
Raw materials $1,496 $1,132
Finished goods 382 154
------ ------
$1,878 $1,286
====== ======
Note 5. Loss Per Common Share
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share" ("EPS"), the Company is required to present both basic and
diluted EPS on the face of the Statement of Operations. Basic EPS excludes
dilution and is computed by dividing income (loss) attributable to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted EPS is the same as basic EPS for the Company's quarters ended
June 30, 2001 and 2000, because, for loss periods, potential common shares (such
as options) are not included in computing diluted EPS since the effect would be
antidilutive. The number of potential common shares (options, warrants and
convertible preferred stock) as of June 30, 2001 totaled 2,603,175.
6
Note 6. Preferred Stock
During the first quarter of 2000, the Company completed a private placement of
120,000 shares of Series A convertible preferred stock ("Series A"), resulting
in net proceeds of $11,219,621. The Company also issued five-year warrants to
acquire 240,000 shares of common stock at $10.00 per share. Approximately
$1,275,000 of the net proceeds was allocated to the warrants based on their
relative fair value. The Series A has a dividend of 6% payable quarterly in cash
or in shares of common stock at the option of the Company. For the quarter ended
June 30, 2001 and the year ended December 31, 2000, the Series A dividend was
paid by issuing 13,708 and 40,065 shares of common stock, respectively.
Each share of the Series A is convertible into ten shares of common stock at
$10.00 per share. The Series A is convertible at the option of the holder at any
time or may be redeemed at the option of the Company upon the occurrence of any
of the following events: (a) the common stock closes at or above $20.00 per
share for 20 consecutive trading days, (b) a completion by the Company of a
follow-on public offering of at least $10 million at a per share price of at
least $15.00, (c) the acquisition of the Company by another entity by means of a
transaction that results in the transfer of 50% or more of the outstanding
voting power of the Company, (d) a sale of all or substantially all of the
Company's assets, or (e) at any time after February 28, 2004.
The holders of the Series A have a liquidation preference of $100 per share plus
any accrued but unpaid dividends then held, such amounts subject to certain
adjustments. The liquidation preference is payable upon a change in control of
the Company, thus the Series A is carried in the mezzanine section of the
balance sheet. The holders also have the right to vote together with the common
stock on an as-if-converted basis.
On the date of issuance of the Series A, the effective conversion price of the
Series A was at a discount to the price of the common stock into which the
Series A is convertible. In accordance with EITF 98-5, "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios", this discount totaled $3,003,590 and was recorded
as a preferred stock dividend during 2000.
Note 7. Common Stock
In April 2001, Bayer Diagnostics, the Company's distributor, purchased 1,450,000
shares of common stock of the Company at $12 per share for $17.4 million. This
investment increased Bayer's ownership percentage in the Company from
approximately 7% to 19.9%. The Company and Bayer entered into an amended
distribution agreement to replace the previous distribution agreement between
the parties entered into during 1998.
The 2001 common stock purchase agreement with Bayer contains a provision that,
upon the occurrence of a "change in control", as defined in the agreement, the
Company may be required to compensate Bayer, in cash or shares of common stock,
for any difference between per share prices originally paid by Bayer and the
amount received by the Company's shareholders. In accordance with the
implementation requirements of recently issued and adopted Emerging Issues Task
Force Abstract No. 00-19, the Company has transferred to temporary equity an
amount equal to the "change in control" payment called for by the purchase
agreement. Under the new accounting guidelines, this temporary transfer is
required only for those reporting periods in which the price per share paid by
Bayer is in excess of the fair market value of a common share, as measured by
reference to the NASDAQ National Market.
Note 8. Deferred Revenue
In 2000, the Company began recognizing revenue in accordance with SEC Staff
Accounting Bulletin No. 101. Under SAB 101, payments received under
collaboration agreements are deferred and recognized as income over the period
of the respective agreements. During 2001 and 2000, the Company received
payments as part of collaboration agreements with other entities. Revenue
recognized related to collaboration agreements for the quarters ended June 30,
2001 and 2000 were $550,000 and $71,000, respectively.
Note 9. Significant Customers
During the quarters ended June 30, 2001 and 2000, the Company had sales to one
customer totaling $795,832 and $957,921, respectively. At June 30, 2001 and
December 31, 2000, outstanding receivables from that customer totaled 68% and
92%, respectively, of total receivables.
Note 10. Recent Accounting Pronouncements
On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS Nos.
141 and 142 will change the accounting for business combinations and goodwill in
two significant ways. First, SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
Use of the pooling-of-interests
7
method is prohibited. Second, SFAS No. 142 changes the accounting for goodwill
from an amortization method to an impairment-only approach. Thus, amortization
of goodwill, including goodwill recorded in past business transactions, will
cease upon adoption of SFAS No. 142, which for companies with calendar year
ends, will be January 1, 2002. We do not anticipate that these standards will
have any material impact on the Company's financial condition, results of
operations or cash flows.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements. Our actual results might differ
materially from those projected in the forward-looking statements due to any
number of factors, including those set forth below under "--Factors That May
Affect Future Results". Additional information concerning factors that could
cause actual results to materially differ from those in the forward-looking
statements is contained in our other SEC filings, copies of which are available
upon request to us.
The following discussion should be read in connection with the unaudited
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
report. Unless the context indicates otherwise, all references to us include our
wholly-owned subsidiary, Cardiovascular Diagnostics, Inc., or CVDI.
CVDI develops, markets and manufactures a Thrombolytic Assessment System, or
TAS, consisting of a compact, portable analyzer and disposable test cards which
are inserted into the analyzer to perform a variety of hemostasis tests. In
August 1998, CVDI signed a global distribution agreement with Chiron
Diagnostics, which is now a part of the diagnostics division of the Bayer
Corporation ("Bayer"), to distribute CVDI's PT, aPTT, HMT, and LHMT test cards
in North America and certain South American, European and Asian countries. At
that time, we received an equity investment of $6 million. This distribution
agreement was replaced by an amended distribution agreement in April 2001, at
which time Bayer invested $17.4 million in exchange for 1,450,000 shares of our
common stock.
Given the consolidating hospital market and pricing pressures, our strategy has
evolved towards becoming more focused on the development of theranostic tests
for drugs, some which have narrow ranges between over- and under-dosage.
Theranostics is an emerging new field of medicine that enables physicians to
therapeutically manage coagulation parameters of their patients in the treatment
of angina, myocardial infarction (heart attack), stroke, and pulmonary and
arterial emboli. The Company's flexible technology platform is the primary
driver of existing collaborations with a number of major pharmaceutical
companies, including Aventis Pharmaceuticals and Knoll BASF, to develop
theranostic tests for specific compounds and disease indications being targeted
by these corporations. These and other future collaborations for theranostic
tests also may further demand for our analyzers and routine anticoagulant tests.
We believe that rapid diagnostic capabilities improve patient care and turnover,
and that there is a market trend to obtain diagnostic information faster in
order to effect therapy sooner. We also believe that these trends should allow
us to obtain higher pricing for these theranostic tests. Our development efforts
will continue to focus on expanding our menu of tests to monitor developmental
drugs where rapid therapeutic intervention is needed.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2001 VS JUNE 30, 2000
Net sales for the quarter ended June 30, 2001 were $1,322,000 compared to
$1,377,000 in the same period in 2000. Revenues decreased mainly due to lower
quantities of routine test cards and analyzers sold to Bayer during the second
quarter of 2001. The decreased routine test cards were partially offset by
higher revenues from specialty card revenue. The specialty card revenue in 2001
was mainly attributable to a $1.5 million payment from AstraZeneca of which
$500,000 was recognized as revenue in the second quarter of 2001. The remainder
of this payment will be recognized as revenue in the second half of the year.
Cost of goods sold for the quarter ended June 30, 2001 was $1,112,000 compared
to $973,000 in the same period in 2000. This increase was principally due to
higher manufacturing costs during the second quarter of 2001 associated with
our move to a new facility. Thus, the resulting gross profit for the 2001 period
was lower than the second quarter of 2000 as a result of the decreased sales
volume and the noted manufacturing cost increases.
Total operating expenses for the quarter ended June 30, 2001 were $2,646,000
compared to $2,062,000 in the second quarter of 2000. General and administrative
expenses were higher in the second quarter of 2001 compared to the same period
in 2000 due to facility relocation costs and technology infrastructure costs
that did not occur in the comparable period in 2000, and also because of
budgeted increased personnel costs. Sales and marketing expenses increased
slightly from 2000 primarily due to training materials expense during the second
quarter of 2001 that did not occur in 2000. Research and development expenses
increased mainly due to budgeted
8
increases in payroll costs.
Other income (expense) for the quarter ended June 30, 2001, which is composed of
interest income, interest expense, royalty income and development income, was a
net other income of $103,000 compared to a net other income of $388,000 in the
second quarter ended June 30, 2000. Interest income decreased as a result of
lower interest rates and lower average cash and investment balances during the
quarter compared to 2000 as the Bayer investment was not received until May
2001. In addition, development income decreased during the second quarter of
2001 as income was recognized during the second quarter of 2000 related to a
collaborative development agreement with Bayer which ended during 2000.
SIX MONTHS ENDED JUNE 30, 2001 VS JUNE 30, 2000
Net sales for the six months ended June 30, 2001 were $2,124,000 compared to
$2,866,000 for the same period in 2000. This decrease was mainly due to
decreased revenue from the sale of analyzers and controls to our distributor in
2001 compared to 2000. This decrease was partially offset by increased
specialty card revenue related to the payment from AstraZeneca in the second
quarter of 2001.
Cost of goods sold for the six months ended June 30, 2001 was $1,858,000
compared to $1,891,000 for the same period in 2000. Cost of goods sold decreased
in 2001 as a result of the lower sales volume, but this decrease was partially
offset by increased manufacturing costs associated with the Company's move to a
new facility. The gross profit percentage decreased compared to the prior year
as a result of these cost increases and lower sales volume.
Total operating expenses for the six months ended June 30, 2001 were $4,568,000
compared to $3,785,000 for the same period in 2000. This increase is primarily
the result of facility relocation costs, technology infrastructure costs,
increased research costs related to on-going development projects and budgeted
payroll increases in administration and research.
Other income (expense) for the six months ended June 30, 2001 decreased by
$301,000 over the prior year due to decreased interest income as a result of
lower interest rates and average cash and investment balances. Development
income also decreased because a collaboration agreement with Bayer that
generated income the first six months of 2000 was terminated prior to 2001.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, we had cash and cash equivalents of $18.5 million and working
capital of $19.2 million, as compared to $9.2 million and $8.4 million,
respectively, at December 31, 2000. During the quarter ended June 30, 2001, we
used cash in operating activities of $4.4 million. The use of cash was primarily
due to funding our net operating loss, increased receivable and inventory
balances and decreased payables. These outflows were somewhat offset by inflows
from amounts that were deferred to subsequent periods. Investing activities
mainly consisted of purchasing fixed assets, consisting mainly of equipment and
improvements for our new facility. Financing activities included the elimination
of our remaining debt with Transamerica Business and a significant equity
financing with Bayer Diagnostics, our distributor, who invested $17.4 million
in exchange for 1,450,000 shares of our common stock at $12 per share. This
increased Bayer's ownership percentage from approximately 7% to 19.9%. We plan
to use the proceeds to fund our operations and to fund development and marketing
of new specialty test cards.
We expect to incur additional operating losses during the remainder of 2001. Our
working capital requirements will depend on many factors, primarily the volume
of future orders of TAS products from our distributor, Bayer Diagnostics. In
addition, we expect to incur costs associated with clinical trials for
development of new test cards. We may acquire other products, technologies or
businesses that complement our existing and planned products, although we
currently have no understanding, commitment or agreement with respect to any
such acquisitions. Management believes that our existing capital resources and
cash flows from operations, including that from our distribution agreement with
Bayer Diagnostics, will be adequate to satisfy our planned capital and
operational requirements.
FACTORS THAT MAY AFFECT FUTURE RESULTS
A number of uncertainties exist that may affect the Company's future operating
results and stock price, including risks associated with development of new
tests, particularly specialty tests that rely on development, regulatory
approval, commercialization and market acceptance of collaborators' new drugs;
market acceptance of TAS; the Company's continuing losses and the resulting
potential need for additional capital in the future; managed care and continuing
market consolidation, which may result in price pressure, particularly on
routine tests; and FDA regulations and other regulatory guidelines affecting the
Company and/or its collaborators. The market price of the common stock could be
subject to significant fluctuations in response to variations in the Company's
quarterly operating results as well as other factors which may be unrelated to
the Company's performance. The stock market in recent years has experienced
extreme price and volume fluctuations that often have been unrelated or
disproportionate to the operating performance of and announcements concerning
public companies. Such broad fluctuations may adversely affect the market price
of the Company's common stock. Securities of issuers having relatively limited
capitalization or securities recently issued in an initial public offering are
particularly susceptible to volatility based on short-term trading strategies of
certain investors.
9
PART II. OTHER INFORMATION
Item 2. Changes in Securities
During the quarter ended June 30, 2001, the Company issued the following
unregistered securities: 1,450,000 shares of Common Stock in a private placement
to Bayer Diagnostics Corporation for an aggregate of $17,400,000 in cash. No
underwriters were used or commissions paid in connection with this transaction.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on May 16, 2001. The
following is a description of the matters voted upon at the meeting and the
numbers of affirmative votes and negative votes cast with respect to each
matter.
(a) The following persons were elected to the Company's Board of Directors. The
votes for, against (withheld) and abstentions were as follows:
Nominee Votes For Votes Withheld Votes Abstained
------- --------- -------------- ---------------
John P. Funkhouser 7,689,080 26,593 0
William A. Hawkins 7,692,980 23,053 0
John K. Pirotte 7,697,480 18,553 0
Stephen R. Puckett 7,697,480 18,553 0
Philip R. Tracy 7,697,480 18,553 0
Frances L. Tuttle 7,695,980 20,053 0
James B. Farinholt Jr. 7,695,980 20,053 0
(b) The shareholders ratified the appointment of PricewaterhouseCoopers LLP as
the independent auditors of the Company for the year ending December 31,
2001 with 7,711,623 shares voting for, 4,285 shares voting against and 125
shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
The Company filed a report on Form 8-K on April 27, 2001 disclosing the terms of
an Amended and Restated Distribution Agreement and Stock Purchase Agreement with
Bayer Corporation relating to its $17,400,000 investment in the Company.
10
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.
PHARMANETICS, INC.
Date: August 13, 2001 By: /s/ James McGowan
----------------------------
James McGowan
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Paul Storey
----------------------------
Paul Storey
Director of Finance/Treasurer
(Principal Accounting Officer)
11