GalaGen Reports Fourth Quarter and Year-End Results

Apr 02, 2001, 01:00 ET from GalaGen Inc.

    MINNEAPOLIS, April 2 /PRNewswire/ --
     GalaGen Inc. (OTC Bulletin Board:   GGEN), maker of Proventra(TM) brand
 immune-enhancing food ingredients, today reported a net loss of $815,424 or
 $.07 per diluted share, on revenues of $433,191 for the fourth quarter ended
 December 31, 2000.  In the comparable 1999 period, the company reported a net
 loss of $3,877 on revenues of $1,092,470.
     For the year ended December 31, 2000, the company reported a net loss of
 $4,920,143, or $.45 per diluted share, on revenues of $889,294.  The net loss
 for 2000 includes the cumulative effect of a change in the company's method of
 accounting for recognition of revenue in accordance with Securities and
 Exchange Commission Staff Accounting Bulletin (SAB) No. 101, "Revenue
 Recognition in Financial Statements."  This change resulted in a one-time,
 non-cash charge to income of approximately $732,000 or $.07 per share.  In
 1999, the company reported a net loss of $2,596,203, or $.26 per share, on
 revenues of $3,181,278.
     The company's Annual Report on Form 10-K for the year ended
 December 31, 2000, filed with the Securities and Exchange Commission, includes
 an explanatory paragraph in the report from its independent auditors regarding
 the company's ability to continue as a going concern.  The report notes that
 the company has experienced recurring operating losses and is dependent on
 raising additional capital to continue its operations.
     Henry J. Cardello, GalaGen's president and chief executive officer, said
 GalaGen continues to work on financing the business to enable the company to
 pursue its strategies for bringing to market functional food, nutraceutical
 and critical care products incorporating Proventra's immune-enhancing
 capabilities.  "While there can be no assurance that a financing transaction
 will occur, we believe that a financing transaction can be completed in a
 timely manner to meet continuing cash flow requirements.  Once the financing
 is complete, we will continue our efforts to build awareness of Proventra's
 immune-enhancing capabilities, validate with human studies our product's
 unique properties and work with partners in the food, beverage, pharmaceutical
 and critical care industries to bring products incorporating Proventra to
 market," said Cardello.
     The company said the decline in revenues in 2000 resulted primarily from a
 change in the company's distribution method for its critical-care products.
 In August 1999, the company licensed the production and sale of its
 critical-care products to Hormel HealthLabs, a wholly owned subsidiary of
 Hormel Foods Corporation.  "Through this licensing arrangement, we receive
 royalty revenue and benefit from the distribution reach and customer
 relationships Hormel HealthLabs enjoys in the critical-care market, while
 reducing our costs to produce and market these products," said Cardello.  "In
 November, Hormel HealthLabs reported record sales of the critical-care
 products licensed from us, affirming the value of this approach."
     Cardello said the company's net loss in 2000 resulted from decreases in
 product sales and licensing revenues and increases in product development
 expenses, particularly for emerging consumer products opportunities.  "We
 learned last year that consumer products companies want more validation of
 Proventra's immune-enhancing capabilities for use in developing and marketing
 products incorporating this ingredient.  As a result, some of our partnership
 and licensing arrangements have been slower to produce meaningful revenues
 than we had initially hoped," said Cardello.
     "In 2001, we will be focusing on making our technologies a better fit for
 the needs of our current and potential future partners, while continuing to
 work with our current partners on development projects," said Cardello.  "Our
 efforts will include building awareness of Proventra, validating Proventra's
 immune-enhancing and other benefits and achieving the necessary third-party
 certification that Proventra is a 'safe' ingredient in foods, beverages and
 related products."
     Cardello said GalaGen remains distinguished in the functional foods and
 nutraceutical marketplaces on the basis of Proventra's ability to benefit a
 variety of conditions and to be used in multiple food, beverage, supplement
 and critical-care products.  "Long term, we expect to benefit from our
 patent-protected technologies, proprietary manufacturing processes, access to
 colostrum and proven ability to forge alliances with leaders in the food,
 beverage and supplement categories."
 
     About GalaGen Inc.
     GalaGen, based in Minnesota, is a nutritional ingredients company that
 uses its proprietary science and technology to develop colostrum applications
 for its customers.  The company is recognized as a leader in functional foods
 innovation and for leading the development of industry standards for
 substantiating product claims.  GalaGen broadens the distribution of its
 products through the formation of strategic alliances, which currently include
 companies such as Novartis, GNC, Hormel HealthLabs, Estee Lauder and
 Wyeth-Ayerst.  Its first brand, Proventra(TM), is currently on the market as a
 consumer-products ingredient and as a nutritional supplement.
 
     Except for historical information, matters discussed in this press release
 are forward-looking statements that involve risks and uncertainties,
 including, but not limited to, risks associated with negotiation and funding
 of financing transactions, entering new markets, consumer acceptance,
 regulation of nutritional products including infant formula and dietary
 supplements, competitive pressures, and other important factors detailed in
 the Company's annual report on Form 10-K for fiscal 2000 filed with the
 Securities and Exchange Commission.
 
 
                                  GALAGEN INC.
 
                             SUMMARY FINANCIAL DATA
 
                            STATEMENTS OF OPERATIONS
 
                                 (unaudited)                 (audited)
                             Three Months Ended              Year Ended
                          December 31   December 31   December 31   December 31
                             2000          1999           2000         1999
     Revenues              $433,191     $1,092,470      $889,294    $3,181,278
     Operating costs and
      expenses:
       Cost of goods sold       (59)        67,915         4,723       703,606
       Selling, general
        and administrative  592,553        508,497     2,355,845     2,941,811
       Product development  559,803        409,990     2,302,132     1,618,518
       Depreciation and
        amortization        114,985        154,699       520,210       679,121
 
     Operating loss        (834,091)       (48,631)   (4,293,616)   (2,761,778)
 
     Interest income         19,769         44,754       106,575       176,302
     Interest expense        (1,102)            --        (1,102)      (10,727)
     Net loss before
      accounting change   $(815,424)       $(3,877)  $(4,188,143)  $(2,596,203)
 
     Cumulative effect of
      change in
      accounting principle       --             --      (732,000)           --
 
     Net loss             $(815,424)       $(3,877)  $(4,920,143)  $(2,596,203)
 
     Net loss per share,
      basic and diluted
       Net loss before
        accounting change    $(0.07)          $(--)       $(0.38)       $(0.26)
       Cumulative effect
        of change in
        accounting principle     --             --         (0.07)           --
 
     Net loss per share      $(0.07)          $(--)       $(0.45)       $(0.26)
 
     Weighted average
      number of common
      shares outstanding 12,078,231     10,408,621    10,926,376     9,957,306
 
 
                               BALANCE SHEET DATA
 
                                                      (audited)
                                                     December 31
                                                         2000
     Assets:
       Cash & cash equivalents                         $826,943
       Accounts receivable, net of allowance            554,760
       Inventory                                        224,746
       Other current assets                             206,886
       Total current assets                           1,813,335
 
       Property and equipment, net                      324,602
       Customer list                                    270,000
       Other intangible assets                          106,373
       Restricted cash                                   77,679
       Deferred expenses                                 18,000
     Total assets                                    $2,609,989
 
     Liabilities and stockholders' equity:
       Accounts payable                                $949,872
       Development contract advance                      89,275
       Current portion of deferred revenue              107,140
       Current portion of capital lease obligation       34,584
       Accrued expenses                                  32,364
       Total current liabilities                      1,213,235
 
       Capital lease obligations                         34,104
       Deferred revenue                                 517,716
       Other long-term liabilities                       45,000
     Total Long-Term Liabilities                        596,820
 
     Total liabilities                                1,810,055
     Total stockholders' equity                         799,934
     Total liabilities and stockholders' equity      $2,609,989
 
 

SOURCE GalaGen Inc.
    MINNEAPOLIS, April 2 /PRNewswire/ --
     GalaGen Inc. (OTC Bulletin Board:   GGEN), maker of Proventra(TM) brand
 immune-enhancing food ingredients, today reported a net loss of $815,424 or
 $.07 per diluted share, on revenues of $433,191 for the fourth quarter ended
 December 31, 2000.  In the comparable 1999 period, the company reported a net
 loss of $3,877 on revenues of $1,092,470.
     For the year ended December 31, 2000, the company reported a net loss of
 $4,920,143, or $.45 per diluted share, on revenues of $889,294.  The net loss
 for 2000 includes the cumulative effect of a change in the company's method of
 accounting for recognition of revenue in accordance with Securities and
 Exchange Commission Staff Accounting Bulletin (SAB) No. 101, "Revenue
 Recognition in Financial Statements."  This change resulted in a one-time,
 non-cash charge to income of approximately $732,000 or $.07 per share.  In
 1999, the company reported a net loss of $2,596,203, or $.26 per share, on
 revenues of $3,181,278.
     The company's Annual Report on Form 10-K for the year ended
 December 31, 2000, filed with the Securities and Exchange Commission, includes
 an explanatory paragraph in the report from its independent auditors regarding
 the company's ability to continue as a going concern.  The report notes that
 the company has experienced recurring operating losses and is dependent on
 raising additional capital to continue its operations.
     Henry J. Cardello, GalaGen's president and chief executive officer, said
 GalaGen continues to work on financing the business to enable the company to
 pursue its strategies for bringing to market functional food, nutraceutical
 and critical care products incorporating Proventra's immune-enhancing
 capabilities.  "While there can be no assurance that a financing transaction
 will occur, we believe that a financing transaction can be completed in a
 timely manner to meet continuing cash flow requirements.  Once the financing
 is complete, we will continue our efforts to build awareness of Proventra's
 immune-enhancing capabilities, validate with human studies our product's
 unique properties and work with partners in the food, beverage, pharmaceutical
 and critical care industries to bring products incorporating Proventra to
 market," said Cardello.
     The company said the decline in revenues in 2000 resulted primarily from a
 change in the company's distribution method for its critical-care products.
 In August 1999, the company licensed the production and sale of its
 critical-care products to Hormel HealthLabs, a wholly owned subsidiary of
 Hormel Foods Corporation.  "Through this licensing arrangement, we receive
 royalty revenue and benefit from the distribution reach and customer
 relationships Hormel HealthLabs enjoys in the critical-care market, while
 reducing our costs to produce and market these products," said Cardello.  "In
 November, Hormel HealthLabs reported record sales of the critical-care
 products licensed from us, affirming the value of this approach."
     Cardello said the company's net loss in 2000 resulted from decreases in
 product sales and licensing revenues and increases in product development
 expenses, particularly for emerging consumer products opportunities.  "We
 learned last year that consumer products companies want more validation of
 Proventra's immune-enhancing capabilities for use in developing and marketing
 products incorporating this ingredient.  As a result, some of our partnership
 and licensing arrangements have been slower to produce meaningful revenues
 than we had initially hoped," said Cardello.
     "In 2001, we will be focusing on making our technologies a better fit for
 the needs of our current and potential future partners, while continuing to
 work with our current partners on development projects," said Cardello.  "Our
 efforts will include building awareness of Proventra, validating Proventra's
 immune-enhancing and other benefits and achieving the necessary third-party
 certification that Proventra is a 'safe' ingredient in foods, beverages and
 related products."
     Cardello said GalaGen remains distinguished in the functional foods and
 nutraceutical marketplaces on the basis of Proventra's ability to benefit a
 variety of conditions and to be used in multiple food, beverage, supplement
 and critical-care products.  "Long term, we expect to benefit from our
 patent-protected technologies, proprietary manufacturing processes, access to
 colostrum and proven ability to forge alliances with leaders in the food,
 beverage and supplement categories."
 
     About GalaGen Inc.
     GalaGen, based in Minnesota, is a nutritional ingredients company that
 uses its proprietary science and technology to develop colostrum applications
 for its customers.  The company is recognized as a leader in functional foods
 innovation and for leading the development of industry standards for
 substantiating product claims.  GalaGen broadens the distribution of its
 products through the formation of strategic alliances, which currently include
 companies such as Novartis, GNC, Hormel HealthLabs, Estee Lauder and
 Wyeth-Ayerst.  Its first brand, Proventra(TM), is currently on the market as a
 consumer-products ingredient and as a nutritional supplement.
 
     Except for historical information, matters discussed in this press release
 are forward-looking statements that involve risks and uncertainties,
 including, but not limited to, risks associated with negotiation and funding
 of financing transactions, entering new markets, consumer acceptance,
 regulation of nutritional products including infant formula and dietary
 supplements, competitive pressures, and other important factors detailed in
 the Company's annual report on Form 10-K for fiscal 2000 filed with the
 Securities and Exchange Commission.
 
 
                                  GALAGEN INC.
 
                             SUMMARY FINANCIAL DATA
 
                            STATEMENTS OF OPERATIONS
 
                                 (unaudited)                 (audited)
                             Three Months Ended              Year Ended
                          December 31   December 31   December 31   December 31
                             2000          1999           2000         1999
     Revenues              $433,191     $1,092,470      $889,294    $3,181,278
     Operating costs and
      expenses:
       Cost of goods sold       (59)        67,915         4,723       703,606
       Selling, general
        and administrative  592,553        508,497     2,355,845     2,941,811
       Product development  559,803        409,990     2,302,132     1,618,518
       Depreciation and
        amortization        114,985        154,699       520,210       679,121
 
     Operating loss        (834,091)       (48,631)   (4,293,616)   (2,761,778)
 
     Interest income         19,769         44,754       106,575       176,302
     Interest expense        (1,102)            --        (1,102)      (10,727)
     Net loss before
      accounting change   $(815,424)       $(3,877)  $(4,188,143)  $(2,596,203)
 
     Cumulative effect of
      change in
      accounting principle       --             --      (732,000)           --
 
     Net loss             $(815,424)       $(3,877)  $(4,920,143)  $(2,596,203)
 
     Net loss per share,
      basic and diluted
       Net loss before
        accounting change    $(0.07)          $(--)       $(0.38)       $(0.26)
       Cumulative effect
        of change in
        accounting principle     --             --         (0.07)           --
 
     Net loss per share      $(0.07)          $(--)       $(0.45)       $(0.26)
 
     Weighted average
      number of common
      shares outstanding 12,078,231     10,408,621    10,926,376     9,957,306
 
 
                               BALANCE SHEET DATA
 
                                                      (audited)
                                                     December 31
                                                         2000
     Assets:
       Cash & cash equivalents                         $826,943
       Accounts receivable, net of allowance            554,760
       Inventory                                        224,746
       Other current assets                             206,886
       Total current assets                           1,813,335
 
       Property and equipment, net                      324,602
       Customer list                                    270,000
       Other intangible assets                          106,373
       Restricted cash                                   77,679
       Deferred expenses                                 18,000
     Total assets                                    $2,609,989
 
     Liabilities and stockholders' equity:
       Accounts payable                                $949,872
       Development contract advance                      89,275
       Current portion of deferred revenue              107,140
       Current portion of capital lease obligation       34,584
       Accrued expenses                                  32,364
       Total current liabilities                      1,213,235
 
       Capital lease obligations                         34,104
       Deferred revenue                                 517,716
       Other long-term liabilities                       45,000
     Total Long-Term Liabilities                        596,820
 
     Total liabilities                                1,810,055
     Total stockholders' equity                         799,934
     Total liabilities and stockholders' equity      $2,609,989
 
 SOURCE  GalaGen Inc.