ITEM 2. PROPERTIES.
The Company leases an aggregate of approximately 40,000 square feet of laboratory, manufacturing, technical and administrative space in Columbia, Maryland, 6,000 square feet of which is currently being subleased. The Company's lease expires in 2004, but the Company has an option to extend the lease through 2009 at the expiration of the initial lease.
The Company produces oils rich in DHA and ARA at its fermentation facility located in Winchester, Kentucky, using its proprietary technology. The facility is located on eight acres and occupies approximately 30,000 square feet holding two 140,000 liter and one 90,000 liter production fermentation vessels and supporting equipment. In addition, the Company has an oil processing plant at the Winchester facility which was put into production in 1997. The oil processing plant occupies approximately 6,000 square feet.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were voted upon during the fourth quarter of 1997.
- 15 - PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information set forth under the caption "Price Range of Common Stock" and "Stock Description and Form 10-K" on the inside back cover of the Company's Annual Report to Stockholders for the fiscal year ended October 31, 1997, is included herein as Exhibit 13.01, and those portions are incorporated by reference into Part II of this report. Martek has not declared any cash dividends during the two-year period ending October 31, 1997.
During fiscal 1997, 67,500 shares of common stock were issued by Martek upon exercise of options held by American Technology Investments, Inc. The date of these stock option exercises and the respective option exercise prices are set forth below.
These shares were issued by Martek in reliance on the exemption contained in rule 701 under the Securities Act of 1933, as amended.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth under the caption "Selected Financial Data" on page 6 of the Company's Annual Report to Stockholders for the fiscal year ended October 31, 1997, is included herein as Exhibit 13.01, and that portion of the annual report is incorporated by reference into Part II of this Report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 7 through 9 of the Company's Annual Report to Stockholders for the fiscal year ended October 31, 1997, is included herein as Exhibit 13.01, and that portion is incorporated by reference into Part II of this Report.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's 1997 Financial Statements and Report of Independent Auditors by Ernst & Young LLP set forth on pages 12 through 20 of the Company's Annual Report to Stockholders for the fiscal year ended October 31, 1997, is included herein as Exhibit 13.01, and those portions are incorporated by reference into Part II of this Report.
- 16 - ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
- 17 - PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information concerning the Company's directors contained under the captions "Nominees for Election as a Director For Terms Expiring in 2001" and "Directors Continuing in Office" and, with regard to Item 405 of Regulation S-K, the information contained under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's 1998 Proxy Statement is hereby incorporated herein by reference.
The executive officers and key employees of the Company are as follows:
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Henry Linsert, Jr. joined Martek as Chairman of the Board in 1988 and became Chief Executive Officer in 1989. From 1987 to 1988 he was primarily engaged as President of American Technology Investments Corp. ("ATI"), a consulting company specializing in the development and financing of early stage companies in the Mid-Atlantic area. He was President and Chief Executive Officer of Suburban Capital Corporation, a venture capital subsidiary of Sovran Financial Corporation (now NationsBank), from 1983 to 1987. Prior to 1983, Mr. Linsert was Vice President of Inverness Capital Corporation, a small business investment company, and Vice President of First Virginia Bank. He also served as a Captain in the U.S. Marine Corps and as an artillery officer in Vietnam. He received an M.A. in economics from George Washington University and a B.A. from Duke University.
Dr. Richard J. Radmer, a founder of Martek, has served since 1985 as a director, President and Chief Scientific Officer of the Company. Prior to 1985, he worked for 17 years at Martin Marietta Corp. where he headed the Biosciences Department which performed research to develop new products from microalgae, among other activities. He has served as an Adjunct Associate Professor and Associate Member of the Graduate Faculty at the University of Maryland. Dr. Radmer received a Ph.D. in biology, an M.S. in botany and a B.S. in biochemistry from the University of Chicago. He completed his Ph.D. studies while in residence at Harvard University.
Thomas C. Fisher joined Martek in 1991 and was named Senior Vice President of Operations in 1992 after 18 years with Merck & Co., Inc. ("Merck") and Dupont-Merck. Mr. Fisher's latest position was Vice President for Technical Operations at Dupont-Merck, and in that capacity he was responsible for world-wide pharmaceutical production, quality control and engineering. During his tenure at Merck, Mr. Fisher was Director of Biological Manufacturing and held management positions in sterile operations, development and quality control. Mr. Fisher received an M.S. in genetics from West Virginia University and a B.S. in biology from Waynesburg College.
- 18 - Jerome C. Keller joined Martek in September 1997 as Senior Vice President of Sales and Marketing. Prior to joining Martek, Mr. Keller had been consulting after spending a 25-year career at Merck, most recently as Vice President of Sales from 1986 to 1993. In this position, he was responsible for all U.S. sales operations, including the direction of a support staff of 4,500 personnel and a sales volume of $4.2 billion. Some of the products introduced under Mr. Keller included Pepcid, Mefoxin, Primaxin, Vasotec, Mevocor, Zocor, Proscor and Prilosec. Mr. Keller has a B.S. degree from Duquesne University and an M.S. degree from the University of Pittsburgh.
Steve Dubin joined Martek in 1992 as Chief Financial Officer, Secretary and Treasurer, and from 1988 to the time he joined Martek on a full-time basis, Mr. Dubin consulted with Martek on financial and accounting matters. In 1993, Mr. Dubin also assumed the duties of General Counsel of the Company. Prior to joining Martek, Mr. Dubin was Chief Financial Officer of the J.L. Wickham Co., Inc., a machine tool company, from 1987 to 1992. From 1986 to 1991, Mr. Dubin was active as Vice President of ATI, a consulting company of which Mr. Dubin is a co-founder, specializing in the development and financing of early stage companies in the Mid-Atlantic area. Prior to 1986, he served as Vice President of Suburban Capital Corporation, a venture capital subsidiary of Sovran Financial Corporation (now NationsBank), where he participated in the original financing of the Company. Mr. Dubin also held a variety of financial management positions with Suburban Bank. Mr. Dubin is a Certified Public Accountant and an attorney. He received his J.D. from the National Law Center, George Washington University and his B.S. in accounting from the University of Maryland.
Dr. David J. Kyle, a founder of Martek, is currently Senior Vice President, Head of Research and Development. Prior to joining Martek in 1985, Dr. Kyle was a research scientist in the Biosciences Department at Martin Marietta Corp. from 1984 to 1985. He has been a post-doctoral fellow at Michigan State University and a visiting scientist at the Centre d'Etudes Nucleaires of Saclay, France, and the Institute of Physical and Chemical Research, Tokyo, Japan. Dr. Kyle received a Ph.D. in physiology and biochemistry from the University of Alberta, and a B.S. degree in biology from the University of Victoria.
Dr. Paul W. Behrens, a founder of Martek, has served as Director of Physiology since 1985 and is responsible for the Company's microalgal-screening activity and microalgal-physiology expertise. Prior to joining Martek, Dr. Behrens was a research scientist in the Biosciences Department at Martin Marietta Laboratories from 1983 to 1985. He received a Ph.D. in physiology and biochemistry and an M.S. in biology from the University of Maryland. He also received a B.A. in biology from The Johns Hopkins University.
Dr. Jonathan Miles Brown, who is overseeing the development of Martek's Stable Isotope products, joined Martek in September 1991 following a period as a consultant with British Biotechnology Ltd. Prior thereto, he was Research and Development Manager for Oxford Virology plc from 1987 to 1990 where his responsibilities included market research, preparation of all marketing documents and protection of intellectual property. Dr. Brown received his Ph.D. from the University of London where he developed the first synthetic process for the unambiguous synthesis of long chain oligoribonucleotides. He is a Chartered Chemist and Member of the Royal Society of Chemistry.
Paul J. Kelley joined Martek in April 1997 as Vice President of Manufacturing at the Company's Winchester, Kentucky production plant. Prior to joining Martek, Mr. Kelley spent four years as the Plant Manager of a Biotechnology plant in the Pharmaceutical Division of Bayer. Prior to 1993, Mr. Kelley held several other positions at Bayer, including Production Manager of a plant in West Germany from 1989 to 1991. Prior to working for Bayer, Mr. Kelley was the Plant Manager of a facility in the Biotechnology Division of Miles, Inc. from 1983 to 1989. Mr. Kelley received an M.B.A. from Rutgers Graduate School of Business and a B.S.C.E. from the New Jersey Institute of Technology.
- 19 - Ivan Rubin, former Vice President of Business Planning, Development, and Research for Merck, joined Martek in October 1997 as Director of Business Development and Strategic Planning. Prior to joining Martek, Mr. Rubin spent 25 years at Merck developing the strategies to position them as the leader in the pharmaceutical industry. Since leaving Merck in 1993, Mr. Rubin has been the President of Beta Associates, a consulting firm specializing in strategic planning and business development in the health care industry. Mr. Rubin is also on the Board of Directors of Covalent Group, a clinical research company for the Pharmaceutical and Biotechnology industries. Mr. Rubin received a B.A. from the University of Buffalo and an M.B.A. from Hofstra University.
- 20 - ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is hereby incorporated by reference from the information to be contained under the caption "Compensation" in the Company's 1998 Proxy Statement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is hereby incorporated by reference from the information to be contained under the caption "Beneficial Ownership of Common Stock" in the Company's 1998 Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
- 21 - PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
The following Financial Statements of the Company and Report of Independent Accountants set forth on the pages indicated in the Company's Annual Report to Stockholders for the year ended October 31, 1997 are included in Exhibit 13.01 to this report and are incorporated into Item 8 of this Report:
Balance Sheets as of October 31, 1997 and 1996
Statements of Operations for the Years Ended October 31, 1997, 1996 and 1995
Statements of Stockholders' Equity for the Years Ended October 31, 1997, 1996 and 1995
Statements of Cash Flows for the Years Ended October 31, 1997, 1996 and 1995
Notes to Financial Statements
Report of Independent Auditors
(a)(2) Financial Statement Schedules
Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
(a)(3) Exhibits
3.01 Revised Restated Certificate of Incorporation of Registrant. 3.02 Amendment to the Restated Certificate of Incorporation, effective March 14, 1995 (filed as Exhibit 3.1 to the Company's Registration Statement on Form S-3, File No. 33-89760, filed March 15, 1995, and incorporated by reference herein). 3.03 Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (filed as Exhibit 4 to the Company's Form 8-K, File No. 0-22354, filed January 29, 1996, and incorporated by reference herein). 3.04 Amended By-Laws of Registrant. 3.05 Amendment to By-Laws, effective March 14, 1995 (filed as Exhibit 3.2 to the Company's Registration Statement on Form S-3, File No. 33-89760, filed March 15, 1995, and incorporated by reference herein). 4.01 Specimen Stock Certificate for Common Stock. 4.02 Common Stock and Warrant Purchase Agreements, dated May 19, June 1, June 6, and June 8, 1995, by and among the Company and the Selling Stockholders (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-3, File No. 33-93580, filed June 16, 1995, and incorporated by reference herein).
- 22 -
- 23 -
- ------------------------- * Confidential treatment was granted by the Securities and Exchange Commission for certain portions of these agreements. The confidential portions were filed separately with the Commission.
** Filed herewith. Unless otherwise noted, all other Exhibits are incorporated by reference as an Exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-68522).
(b) Reports on Form 8-K
None
- 24 - SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on January 29, 1998.
MARTEK BIOSCIENCES CORPORATION
By /s/ Henry Linsert, Jr. ------------------------------------- Henry Linsert, Jr. Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Henry Linsert, Jr. and Steve Dubin, and each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and his name, place and stead in any and all capacities, to sign the report and any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney's-in-fact and agents, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirement of the Securities Exchange Act of 1934, this Report has been signed by the following persons in the capacities and on the date indicated.
- 25 -
- 26 - EXHIBIT INDEX
- 27 -
- ------------------------- * Confidential treatment was granted by the Securities and Exchange Commission for certain portions of these agreements. The confidential portions were filed separately with the Commission.
** Filed herewith. Unless otherwise noted, all other Exhibits are incorporated by reference as an Exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-68522).
- 28 -