10-Q 1 p1453710q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 OR [ ] 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: 0-26372 CELLEGY PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) California 82-0429727 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 349 Oyster Point Boulevard, Suite 200, South San Francisco, California 94080 (Address of principal executive offices, including zip code) (650) 616-2200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 --- --- The number of shares outstanding of the registrant's common stock at October 26, 2001 was 16,657,999. CELLEGY PHARMACEUTICALS, INC. INDEX TO FORM 10-Q Page PART I FINANCIAL INFORMATION Item 1. Financial Statements ( Unaudited ) Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000...............................3 Condensed Consolidated Statements of Operations for three and nine months ended September 30, 2001 and 2000, and the period from June 26, 1989 (inception) through September 30, 2001...................................4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and 2000, and the period from June 26, 1989 (inception) through September 30, 2001...................................5 Notes to Condensed Consolidated Financial Statements.........6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................8 Quantitative and Qualitative Disclosure of Market Risk........................................................11 PART II OTHER INFORMATION Item 1. Legal Proceedings...........................................11 Item 2. Changes in Securities and Use of Proceeds...................11 Item 3. Defaults Upon Senior Securities.............................11 Item 4. Submission of Matters to a Vote of Security Holders.........11 Item 5. Other Information...........................................11 Item 6. Exhibits and Reports on Form 8-K............................11 Signatures....................................................................12 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Cellegy Pharmaceuticals, Inc. (a development stage company) Condensed Consolidated Balance Sheets (Amounts in thousands)
September 30, December 31, 2001 2000 ------------- ------------- (Unaudited) (Note 1) Assets Current assets: Cash and cash equivalents ............................................... $ 6,479 $ 8,838 Short-term investments .................................................. 4,015 6,471 Prepaid expenses and other current assets ............................... 1,121 956 -------- -------- Total current assets ......................................................... 11,615 16,265 Restricted cash .............................................................. 614 614 Long-term investments ........................................................ 8,768 -- Property and equipment, net .................................................. 2,522 2,848 Goodwill and intangible assets ............................................... 1,267 1,532 -------- -------- Total assets ................................................................. $ 24,786 $ 21,259 ======== ======== Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities ................................ $ 801 $ 755 Accrued research fees ................................................... 312 453 Accrued compensation and related expenses ............................... 136 139 Current portion of note payable ......................................... -- 548 -------- -------- Total current liabilities .................................................... 1,249 1,895 Long-term portion of note payable ............................................ -- 334 Other long-term liabilities .................................................. 380 236 Shareholders' equity: Common stock, no par value; 25,000,000 shares authorized; 16,640,445 shares issued and outstanding at September 30, 2001 and 13,838,053 at December 31, 2000 ................................................... 85,757 69,735 Accumulated other comprehensive income (loss) ........................... 75 (29) Deficit accumulated during the development stage ........................ (62,675) (50,912) -------- -------- Total shareholders' equity .............................................. 23,157 18,794 -------- -------- Total liabilities and shareholders' equity ................................... $ 24,786 $ 21,259 ======== ======== The accompanying notes are an integral part of these condensed financial statements.
3 Cellegy Pharmaceuticals, Inc. (a development stage company) Condensed Consolidated Statements of Operations (Unaudited) (Amounts in thousands, except per share amounts)
Period from June 26, 1989 (inception) Three Months Ended Nine Months Ended through September 30, September 30, September 30, 2001 2000 2001 2000 2001 ----------- ----------- ------------ ----------- ------------- Revenues: Licensing, milestone, and development funding ............... $ -- $ -- $ -- $ -- $ 2,696 Government grants .................... -- 19 -- 91 502 Product sales ........................ 265 607 359 1,197 3,229 -------- -------- -------- -------- -------- Total revenues ............................ 265 626 359 1,288 6,427 Operating expenses: Cost of product sales ................ 63 151 73 287 824 Research and development ............. 3,455 2,577 9,989 6,730 46,807 General and administrative ........... 929 886 3,037 2,104 19,556 Acquired in-process technology ....... -- -- -- -- 3,843 -------- -------- -------- -------- -------- Total cost and expenses ................... 4,447 3,614 13,099 9,121 71,030 -------- -------- -------- -------- -------- Operating loss ............................ (4,182) (2,988) (12,740) (7,833) (64,603) Interest income (expense),and Other income, net ................ 311 (71) 936 169 3,335 -------- -------- -------- -------- -------- Net loss .................................. (3,871) (3,059) (11,804) (7,664) (61,268) Non-cash preferred dividends .............. -- -- -- -- 1,449 -------- -------- -------- -------- -------- Net loss applicable to common shareholders ......................... $ (3,871) $ (3,059) $(11,804) $ (7,664) $(62,717) ======== ======== ======== ======== ======== Basic and diluted net loss per common share ......................... $ (0.23) $ (0.25) $ (0.79) $ (0.63) ======== ======== ======== ======== Basic and diluted weighted average common shares outstanding ............ 16,638 12,258 15,036 12,134 ======== ======== ======== ======== The accompanying notes are an integral part of these condensed financial statements.
4 Cellegy Pharmaceuticals, Inc. (a development stage company) Condensed Consolidated Statements of Cash Flows (Unaudited) (Amounts in thousands)
Period from June 26, 1989 (inception) through Nine Months Ended September 30, September 30, ---------------------------------------- 2001 2000 2001 ----------------- ----------------- ----------------- Net Loss ..................................................... $(11,804) $ (7,664) $(61,268) Operating activities Net cash used in operating activities ........................ (10,477) (6,785) (52,185) Investing activities Purchase of property and equipment ........................... (76) (54) (4,030) Purchases of investments ..................................... (16,896) -- (87,996) Sales and maturities of investments .......................... 10,584 10,327 75,190 Purchases of Quay, net of cash acquired ...................... -- (369) (369) -------- -------- -------- Net cash (used in) provided by investing activities .......... (6,388) 9,904 (17,205) Financing activities Proceeds from notes payable .................................. -- -- 8,047 Repayment of notes payable ................................... (882) (1,664) (6,610) Other long-term liabilities .................................. -- -- (614) Net proceeds from issuance of common stock ................... 15,388 361 63,368 Issuance of convertible preferred stock, net of issuance costs -- -- 11,758 Deferred financing costs ..................................... -- -- (80) -------- -------- -------- Net cash provided by (used in) financing activities .......... 14,506 (1,303) 75,869 -------- -------- -------- Net increase (decrease) in cash and cash equivalents ......... (2,359) 1,816 6,479 Cash and cash equivalents, beginning of period ............... 8,838 804 -- -------- -------- -------- Cash and cash equivalents, end of period ..................... $ 6,479 $ 2,620 $ 6,479 ======== ======== ======== The accompanying notes are an integral part of these condensed financial statements.
5 Cellegy Pharmaceuticals, Inc. (a development stage company) Notes to Condensed Consolidated Financial Statements Note 1. - Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared by Cellegy in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation of all periods presented and operating results for the nine and three months ended September 30, 2001 may not necessarily be indicative of the results to be expected for any other interim period or for the full year. The balance sheet at December 31, 2000 has been derived from the audited financial consolidated statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in Cellegy's Annual Report on Form 10-K for the year ended December 31, 2000. Note 2. - Recent Accounting Pronouncements In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141"). SFAS 141 establishes new standards for accounting and reporting for business combinations and will require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), which establishes new standards for goodwill and other intangible assets, including the elimination of goodwill amortization, to be replaced with the periodic evaluation of goodwill for impairment. SFAS 142 is effective for fiscal years ending after December 15, 2001, but any goodwill and intangible assets resulting from a business combination after July 1, 2001 will be accounted for under SFAS 142. Goodwill from business combinations prior to July 1, 2001 will continue to be amortized prior to the adoption of SFAS 142. 6 Cellegy will adopt SFAS 142 on January 1, 2002. Upon the adoption of SFAS 142, we will evaluate our existing goodwill and intangible assets from business combinations completed before July 1, 2001 and make any necessary reclassifications in order to comply with the new criteria in SFAS 142 for recognition of intangible assets. At September 30, 2001, Cellegy has goodwill and intangible assets of $1.3 million subject to SFAS 141 and SFAS 142. Amortization expense for goodwill and intangible assets amounted to $0.5 million for the nine months ended September 30, 2001. Application of the nonamortization provisions of SFAS 142 is expected to result in a decrease in operating losses of $97,000 per year. During 2002, Cellegy will perform the first of the required impairments test of goodwill as of January 1, 2002 and has not yet determined what the effect of these tests will be on our earnings and financial position. Note 3. - Comprehensive Income Accumulated other comprehensive income (loss) presented on the accompanying balance sheet consists of the accumulated net unrealized gain (loss) on available-for-sale investments and foreign currency transaction. Total comprehensive loss for nine months ended September 30, 2001 was $11,700,000 compared with $7,635,000 for the nine months ended September 30, 2000. Total comprehensive loss for the three months ended September 30, 2001 and 2000 were $3,728,000 and $3,042,000, respectively. Note 4. - Segment Reporting Cellegy has two business segments: pharmaceuticals and cosmeceuticals. The pharmaceuticals segment includes primarily research and development expenses for potential prescription products to be marketed directly by us or through corporate partners. Current pharmaceutical revenues consist primarily of Rectogesic(TM) (nitroglycerin ointment) sales in Australia. The cosmeceutical business segment primarily includes development expenses for non-prescription skin care products. Cellegy is currently incurring development expenses and receiving all of its cosmeceutical sales from one customer, Gryphon Development, Inc. ("Gryphon"), which is selling products exclusively in the United States through a major specialty retailer. The following table contains information (amounts in thousands) regarding revenues and operating income (losses) for each business segment for the three and nine months ended September 30, 2001 and 2000, respectively.
Three months ended September 30, Nine months ended September 30, 2001 2000 2001 2000 Revenues: Pharmaceuticals $ 63 $ 57 $ 157 $ 141 Cosmeceuticals 202 569 202 1,147 -------- -------- -------- -------- $ 265 $ 626 $ 359 $ 1,288 ======== ======== ======== ======== Operating Income (Loss) Pharmaceuticals $ (3,804) $ (3,363) $(11,990) $ (8,524) Cosmeceuticals (378) 375 (750) 691 -------- -------- -------- -------- $ (4,182) $ (2,988) $(12,740) $ (7,833) ======== ======== ======== ======== ================================================================================================================
7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This Quarterly Report on Form 10-Q includes forward-looking statements. Words such as "believes," "anticipates," "expects," "intends" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These statements concern matters that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further, we undertake no obligation to revise any statements in order to reflect events or circumstances that may arise after the date of this report. Actual events or results may differ materially from those discussed in this Quarterly Report. Cellegy Pharmaceuticals, Inc., a specialty biopharmaceutical company incorporated in California in 1989, is engaged in the development of prescription drugs and high performance skin care products. We are developing several prescription drugs, including Anogesic(R), a nitroglycerin-based product for the treatment of anal fissures and hemorrhoids and two transdermal testosterone gel products, Tostrex(TM), for the treatment of male hypogonadism, a condition that affects men, generally above the age of forty, and Tostrelle(TM), for the treatment of sexual dysfunction in menopausal women. We have developed a line of anti-wrinkling cosmeceutical products which we believe will address the skin care needs of an aging population. General In September 1998, we began initial shipments and product sales of C79 Intensive Moisturizing formulation to Gryphon Development Inc., the product development arm of a major specialty retailer. C79 is an ingredient in a line of healing hand creams sold at most of the specialty retailer's stores in the United States. In June 2000, we acquired all assets of Quay Pharmaceuticals Pty Ltd, an Australian pharmaceutical company producing Rectogesic(TM) (nitroglycerin ointment), a drug similar to Anogesic. The acquired assets consisted of Quay's inventory, other tangible assets, and purchased technology. The aggregate value of the purchase price of $1,835,000 included an aggregate value of 169,224 shares of our common stock paid to Quay with an estimated value of $977,000, warrants to purchase 171,146 shares of common stock with an estimated value of $489,000, and cash payments of $369,000. The purchase price was allocated to net tangible assets of $97,000, purchased technology of $770,000, and goodwill of $968,000 based on their estimated fair values on the acquisition date. Purchased technology and goodwill are being amortized over three and ten years, respectively. The operations in Australia are conducted by a wholly owned subsidiary, Cellegy Australia Pty Ltd. The amortization of technology and goodwill associated with the acquisition was $88,000 for the third quarter and will be the same amount for the remaining quarter of 2001. In October 2000, Cellegy completed a private placement of 1.5 million shares of our common stock, resulting in $11.6 million of gross proceeds to Cellegy. Participants in the financing included the following institutional investors: investors affiliated with the Tisch family, Capital Research and Management and Framlington. In June 2001, Cellegy completed a private placement of 2.7 million shares of our common stock, resulting in $15.4 million of gross proceeds to Cellegy. Participants in the financing included current investors affiliated with the Tisch family and GMT Capital Corporation, as well as new institutional investors namely, OrbiMed Advisors, SAFECO Asset Management, First Manhattan Co., JALAA Equities and Knott Partners. In August 2001, Cellegy announced an agreement with Ventiv Integrated Solutions, a division of Ventiv Health Inc., to commercialize Cellegy's lead product, Anogesic, in the United States. Under the agreement, Ventiv Integrated Solutions ("VIS") will deliver integrated marketing and sales solutions, including training and recruiting a dedicated sales force which Cellegy will jointly manage. VIS will provide Cellegy with up to $10 million for the initial commercialization of Anogesic under a funding arrangement covering the first 18-24 months of the agreement. VIS will be repaid the initial funding it provides Cellegy once revenues are generated during the early part of the six-year agreement, and will receive royalties 8 towards the end of the six-year term, if certain performance criteria are achieved. Cellegy does not expect this agreement to have a material impact on its financial position or results of operations during the remainder of the year ending December 31, 2001. Results of Operations Revenues. Cellegy had revenues of $359,000 and $1,288,000 for the nine months ended September 30, 2001 and 2000, respectively. During the nine months ended September 30, 2001, revenues consisted of $202,000 in Gryphon Sales and $157,000 in Rectogesic sales in Australia. For the nine months of last year, revenues consisted of $1,147,000 in product sales to Gryphon, $50,000 in Rectogesic sales, and $91,000 in development funding associated with a Small Business Innovation Research ("SBIR") grant from the National Institutes of Health. Cellegy had revenues of $265,000 and $626,000 for the three months ended September 30, 2001 and 2000, respectively. During the three months ended September 30, 2001, revenue consisted of $202,000 in product sales to Gryphon and $63,000 in Rectogesic sales in Australia. For the same period last year, revenues consisted of $569,000 in product sales to Gyphon, $38,000 in Rectogesic sales and $19,000 in SBIR grant funding. Based on orders received from Gryphon, we expect sales to increase during the fourth quarter compared with the third quarter sales. Research and Development Expenses. Research and development expenses were $9,989,000 for the nine months ended September 30, 2001, compared with $6,730,000 for the same period last year. During the three months ended September 30, 2001 and 2000, research and development spending was $3,455,000 and $2,577,000, respectively. The increases for both periods in 2001 were due primarily to costs associated with the recently completed Phase III clinical trial for Anogesic, the NDA filing for Anogesic, the costs, including user fees, associated with regulatory filings for Anogesic (United States) and Rectogesic (United Kingdom), the on-going Phase III clinical trial for Tostrex, the Phase I/II trial for Tostrelle, as well as higher non-cash compensation charges relating to certain stock option and warrant grants. Research and development expenses are expected to remain at approximately their current levels for the next two quarters due primarily to the completion of the Tostrex Phase III clinical study, the costs of supplementing our NDA filing for Anogesic and preparing and filing the NDA for Tostrex. General and Administrative Expenses. General and administrative expenses were $3,037,000 for the nine months ended September 30, 2001, compared with $2,104,000 for the same period last year. For the three months ended September 30, 2001 and 2000, general and administrative expenses were $929,000 and $886,000, respectively. The increases for both periods in 2001 were primarily due to corporate development expenses, consulting and marketing expenses primarily in Australia. General and administrative expenses are expected to remain at approximately the third quarter's level during the remainder of 2001. Interest Income (Expense), and Other Income, Net. Cellegy earned net interest and other income of $936,000 and $169,000 for the nine months ended September 30, 2001 and 2000, respectively. For the three months ended September 30, 2001, we earned net interest and other income of $311,000 compared with a net expense of $71,000 for the same period in 2000. The increases in earned net interest and other income this year were due primarily to rental income associated with the sublease of a portion of Cellegy's corporate offices and no interest expenses resulting from the payoff of a loan late last year. Net Loss. The net loss applicable to shareholders was $11,804,000 or $0.79 per share for the nine months ended September 30, 2001 based on 15,036,000 weighted average shares outstanding, compared with a net loss applicable to shareholders of $7,664,000 or $0.63 per share for the same period last year when 12,134,000 weighted average shares were outstanding. For the three months ended September 30, 2001, the net loss applicable to shareholders was $3,871,000 or $0.23 per share based on 16,638,000 weighted average shares outstanding, compared with a net loss applicable to shareholders of $3,059,000 or $0.25 per share when 12,258,000 weighted average shares were outstanding for the same period in 2000. Liquidity and Capital Resources Cellegy has experienced net losses and negative cash flow from operations each year since its inception. Through September 30, 2001, we have incurred an accumulated deficit of $62.7 million and have consumed cash from operations of 9 $52.2 million. Our equity financings included $6.4 million in net proceeds from our initial public offering in August 1995, $6.8 million in net proceeds from a preferred stock financing in April 1996, $3.8 million in net proceeds from a private placement of common stock in July 1997, $13.8 million in net proceeds from a secondary public offering of common stock in November 1997, $10.0 million in net proceeds from a private placement of common stock in July 1999, $11.6 million in net proceeds from a private placement in October 2000 and $15.4 million in gross proceeds from a private placement of common stock in June 2001. Our cash and cash equivalents and investments were $19.9 million at September 30, 2001, compared with $15.9 million at December 31, 2000. The increase in cash and investments was principally due to cash raised during the recent financing. Since inception, Cellegy has incurred significant losses and expects to incur substantial additional development costs. Our operations have and will continue to use substantial amounts of cash. We have no current source of significant ongoing revenues or capital beyond existing cash and investments, current Rectogesic product sales in Australia and C79 moisturizer sales to Gryphon. Our future expenditures and capital requirements depend on numerous factors including, without limitation, the progress and focus of our research and development programs, the progress and results of pre-clinical and clinical testing, the time and costs involved in obtaining regulatory approvals, the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, competing technological and market developments, changes to our existing research relationships, our ability to establish collaborative arrangements, the initiation of commercialization activities, the purchase of capital equipment and the availability of other financing. As a result of the above, we will require additional funds to finance operations and may seek private or public equity investments and future collaborative arrangements with third parties to meet such needs. There is no assurance that such funding will be available for us to finance our operations on acceptable terms, if at all. Insufficient funding may require us to delay, reduce or eliminate some or all of our research and development activities, planned clinical trials and administrative programs. We believe that available cash resources and the interest thereon will be adequate to satisfy our capital needs through at least December 31, 2002. Factors That May Affect Future Operating Results This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in this report or contemplated by any forward-looking statement. Factors that might cause such a difference include, but are not limited to, completion of clinical trials, particularly Tostrex, the timing of planned regulatory filings for Anogesic and Tostrex, the applicability of drug and cosmetic laws and regulations to Cellegy's products, the need for additional funds and the validity of our patent coverage, and the issuance of future patents pending or patents applied for. There are currently two oppositions filed with the European Patent Office opposing Cellegy's Anogesic patent in Europe that was granted to Cellegy in September 2000. We have a history of losses and we have never operated profitably and, given our planned level of operating expenses, we expect to continue to incur losses for at least the next few years. We have not generated any significant revenues from royalties or licensing of our technologies, and we expect that it will take several years for our major prescription products to be approved in the larger pharmaceutical markets; our clinical trial results are very difficult to predict in advance, and failure of one or more clinical trials could adversely affect our business and stock price; the type and scope of patent coverage we have may limit the commercial success of our products; our product sales strategy involving the VIS agreement in the United States and corporate partners overseas is highly uncertain with no new partnership agreements finalized; we are subject to regulation by regulatory authorities including the FDA, which could delay or prevent marketing of our products; our prospects for obtaining additional financing, if required, are uncertain and failure to obtain needed financing could affect our ability to develop or market products; we have limited sales and marketing experience; we have not manufactured products before and we are dependent on a limited number of critical suppliers; we have very limited staffing and will continue to be dependent upon key employees; we are subject to the risk of product liability lawsuits; and our stock price could be volatile for many reasons. The factors discussed in Cellegy's reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2000, in particular under the caption "Factors That May Affect Future Operating Results," should be carefully considered when evaluating our business and prospects. 10 Item 3. Quantitative and Qualitative Disclosure About Market Risk We invest our excess cash in short-term, investment grade, fixed income securities under an investment policy. All of our investments are classified as available-for-sale and 25% of our securities will mature by the end of 2001. We believe that potential near-term losses in future earnings, fair values or cash flows related to our investment portfolio will not be significant. PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K On August 10, 2001, we announced a six-year agreement with Ventiv Integrated Solutions to assist in commercializing our lead product Anogesic in the United States. On October 2, 2001, we announced our preliminary analysis of results of our Phase III clinical trial conducted with Anogesic for the treatment of anal fissures. We intend to submit the results of the trial as an amendment to the NDA that we submitted to the U.S. Food and Drug Administration in June of 2001. 11 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. CELLEGY PHARMACEUTICALS, INC. Date: November 1, 2001 /s/ K. Michael Forrest --------------------------------------------------- K. Michael Forrest Chairman, CEO and President Date: November 1, 2001 /s/ A. Richard Juelis --------------------------------------------------- A. Richard Juelis Vice President, Finance and Chief Financial Officer 12