UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-27854
BONE CARE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 2830 39-1527471
(State of (Primary Standard Industry (IRS Employer
Incorporation) Classification Code Number) Identification No.)
One Science Court
Madison, Wisconsin 53711
608-236-2500
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
As of January 31, 1998, 8,746,173 shares of the registrant's Common Stock,
no par value, were outstanding.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
FORM 10-Q
For the quarterly period ended December 31, 1997
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial statements
Consolidated Balance Sheets
December 31, 1997, and June 30, 1997 . . . . . . . . . . 3
Consolidated Statements of Operations
Three and Six Months Ended December 31, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
Six Months Ended December 31, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. . .10
Item 5. Other Information. . . . . . . . . . . . . . . . . . . .10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . .11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . .13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
Assets
- -------------------------------------------------------------------------------
December 31, June 30,
1997 1997
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $6,323,986 $8,531,714
Inventory 46,419 52,565
Other current assets 48,665 -
- -------------------------------------------------------------------------------
Total current assets 6,419,070 8,584,279
Property, plant and equipment--at cost:
Lab improvements 21,092 21,092
Furniture and fixtures 39,674 24,625
Machinery and other equipment 325,090 263,970
- -------------------------------------------------------------------------------
385,856 309,687
Less accumulated depreciation and amortization 246,236 226,737
- -------------------------------------------------------------------------------
139,620 82,950
Excess of cost over fair value of net assets
acquired, net of accumulated amortization
of $687,684 at December 31, 1997, and
$642,960 at June 30, 1997 672,233 716,957
Patent fees, net of accumulated amortization
of $425,462 at December 31, 1997, and $359,462
at June 30, 1997 627,497 516,270
Other non-current assets 119,095 -
- -------------------------------------------------------------------------------
$7,977,515 $9,900,456
===============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------------------
December 31, June 30,
1997 1997
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 82,763 $ 141,445
Accrued liabilities:
Accrued clinical study and
research costs 503,564 291,165
Compensation payable 35,691 15,447
Property, payroll, and other taxes 20,271 8,388
Other 33,100 24,500
- -------------------------------------------------------------------------------
Total current liabilities 675,389 480,945
Shareholders' equity:
Preferred stock--authorized 2,000,000
shares of $.001 par value; none issued - -
Common stock--authorized 28,000,000 shares
of no par value; issued and outstanding
8,722,482 shares at December 31, 1997
and 8,722,382 at June 30, 1997 11,393,883 11,393,883
Additional paid-in capital 3,556,136 3,555,925
- -------------------------------------------------------------------------------
14,950,019 14,949,808
Accumulated deficit (7,647,893) (5,530,297)
- -------------------------------------------------------------------------------
7,302,126 9,419,511
- -------------------------------------------------------------------------------
$ 7,977,515 $9,900,456
===============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
- -------------------------------------------------------------------------------
Three months ended Six months ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
- -------------------------------------------------------------------------------
REVENUES $ - $ 35,000 $ - $ 35,525
- -------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales - 30,947 - 34,732
Research and development 973,273 806,001 1,975,790 1,175,365
General and administrative 233,699 112,268 350,999 180,161
- -------------------------------------------------------------------------------
1,206,972 949,216 2,326,789 1,390,258
- -------------------------------------------------------------------------------
LOSS FROM OPERATIONS (1,206,972) (914,216) (2,326,789) (1,354,733)
INTEREST INCOME 97,854 137,858 209,193 282,373
- -------------------------------------------------------------------------------
NET LOSS $ (1,109,118) $(776,358) $(2,117,596) $(1,072,360)
===============================================================================
Net loss per common
share - basic $(0.13) $(0.09) $(0.24) $(0.12)
===============================================================================
Weighted average number of
common shares 8,722,430 8,707,382 8,722,406 8,707,382
===============================================================================
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
- -------------------------------------------------------------------------------
Six months ended
December 31, December 31,
1997 1996
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(2,117,596) $ (1,072,360)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 130,223 112,644
Changes in assets and liabilities:
Receivables - (33,906)
Inventory 6,146 -
Accounts payable (58,682) 195,953
Accrued liabilities 253,126 (198)
Other (142,746) (32,079)
- -------------------------------------------------------------------------------
Net cash used in operating activities (1,929,529) (829,946)
- -------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property,
plant and equipment (76,169) (44,354)
Patent fees (177,227) (95,470)
- -------------------------------------------------------------------------------
Net cash used in investing activities (253,396) (139,824)
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 211 -
Offering costs (25,014) -
- -------------------------------------------------------------------------------
Net cash provided by financing activities (24,803) -
- -------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (2,207,728) (969,770)
Cash and cash equivalents at beginning
of period 8,531,714 11,060,843
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 6,323,986 $ 10,091,073
===============================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The consolidated financial statements of Bone Care International, Inc.
(the "Company") presented herein, without audit except for balance sheet
information at June 30, 1997, have been prepared pursuant to the rules of the
Securities and Exchange Commission for quarterly reports on Form 10-Q and do
not include all of the information and note disclosures required by generally
accepted accounting principles for annual financial statements. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended June 30, 1997, included in the
Company's Form 10-K as filed with the Securities and Exchange Commission on
September 30, 1997.
The consolidated balance sheet as of December 31, 1997, the consolidated
statements of operations for the three and six months ended December 31, 1997,
and 1996, and the consolidated statements of cash flows for the six months
ended December 31, 1997 and 1996, are unaudited but, in the opinion of
management, include all adjustments (consisting of normal, recurring
adjustments) necessary for a fair presentation of results for these interim
periods. The Company has reclassified the presentation of certain prior year
information to conform with the current presentation format.
The results of operations for the interim periods ended December 31, 1997,
are not necessarily indicative of the results to be expected for the entire
fiscal year ending June 30, 1998.
(2) CAPITAL STRUCTURE
On October 10, 1997, the Company declared a 2-for-1 stock split in the
form of a stock dividend to shareholders of record on October 27, 1997. The
dividend was paid November 14, 1997. Accordingly, all common share and per
share data in the accompanying financial statement have been adjusted to give
effect to the stock split.
(3) NET LOSS PER SHARE
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128 "Earnings per Share" (SFAS No. 128), in February
1997. The Company adopted SFAS No. 128 effective with financial statements
issued for periods ended December 31, 1997. Although SFAS No.128 requires
restatement of prior period per share data, such restatement resulted in no
effect to the Company's previously reported per share data. Diluted per share
data is not presented as the effect of potentially issuable common shares would
be antidilutive.
Item 2. Management Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------
of Operations
-------------
Results of Operations
- ---------------------
Research and development expenses increased to $973,273 in the three
months ended December 31, 1997, from $806,001 in the three months ended
December 31, 1996, and to $1,975,790 in the six months ended December 31, 1997,
from $1,175,365 in the six months ended December 31, 1996. The increase is
primarily due to higher expenditures for clinical trials of one-alpha D2 for
treating secondary hyperparathyroidism associated with end-stage renal disease.
General and administrative expenses increased by $121,431 to $233,699 in
the three months ended December 31, 1997, from $112,268 in the three months
ended December 31, 1996. General and administrative expenses increased
$170,838 to $350,999 in the six months ended December 31, 1997, from $180,161
in the six months ended December 31, 1996. Such increases were incurred to
support expanded research and development activities.
Interest income decreased to $97,854 in the three months ended December
31, 1997, from $137,858 in the three months ended December 31, 1996, and to
$209,193 in the six months ended December 31, 1997, from $282,373 in the six
months ended December 31, 1996. These decreases were due to lower invested
cash balances.
The Company reported a net loss of $1,109,118 and $776,358 for the three
months ended December 31, 1997 and 1996, respectively. The reported net loss
for the six months ended December 31, 1997 and 1996 was $2,117,596 and
$1,072,360, respectively. The increases in net losses are attributable to
increased expenses associated with expanded research and development
activities.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents were $6,323,986 and $8,531,714 at December 31,
1997, and June 30, 1997, respectively. The decrease is primarily due to
expenditures related to research and development activities, including clinical
trials of one-alpha D2 and pre-clinical development of other D-hormones.
The Company believes current levels of cash and cash equivalents are
adequate to finance the Company's operations through the end of calendar 1998.
After that time, the Company will require substantial funds for its research
and development programs, preclinical and clinical testing, operating expenses,
regulatory processes and manufacturing and marketing programs. The Company's
capital requirements will depend on numerous factors, including the progress of
its research and development programs; the progress of preclinical and
clinical testing; the time and cost involved in obtaining regulatory approvals;
the cost of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights; competing technological and market
developments; changes and developments in the Company's existing licensing
relationships and the terms of any new collaborative, licensing, co-promotion
or distribution arrangements that the Company may establish; the progress of
commercialization and marketing activities; the cost of manufacturing
preclinical and clinical products; and other factors not within the Company's
control.
The Company filed a registration statement on January 8, 1998, with the
Securities and Exchange Commission relating to a proposed public offering of
3,000,000 shares of common stock (3,450,000 if the proposed underwriters'
over-allotment option is exercised). There is no assurance that the proposed
public offering will be completed or additional financing will be available on
acceptable terms.
Year 2000 Compliance
- --------------------
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. To distinguish 21st
century from 20th century dates, these date code fields must be able to accept
four-digit entries. The Company has reviewed its existing financial and other
business information systems and believes that its computer systems will be
able to manage and manipulate all material data involving the transition from
1999 to 2000 without functional or data abnormality and without inaccurate
results related to such data.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
Not applicable.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The 1997 Annual Meeting of Shareholders ("Annual Meeting") of
the Company was held on November 19, 1997. The total number of
shares of the Company's common stock, no par value per share,
outstanding as of October 10, 1997, the record date of the
Annual Meeting, was 4,361,191. Management of the Company
solicited proxies pursuant to Section 14 of the Securities
Exchange Act of 1934, as amended, and Regulation 14A
promulgated thereunder for the Annual Meeting. Two directors,
Robert A. Beckman and Charles W. Bishop, Ph.D., were elected to
serve until the 2000 Annual Meeting of Shareholders. The
directors were elected by a vote of 3,724,170 votes "FOR";
102,057 votes "AGAINST"; and no votes "WITHHELD AUTHORITY".
Amendment of the Company's Restated Articles of Incorporation
to increase the authorized number of shares of Common Stock
from 14,000,000 to 28,000,000 and to increase the authorized
number of shares of Preferred Stock from 1,000,000 to 2,000,000
was approved. The amendment was approved by a vote of 3,058,202
votes "FOR"; 60,051 votes "AGAINST"; and 5,355 votes "ABSTAIN".
The Company's 1996 Stock Option Plan (the "Plan") was approved.
The Plan was approved by a vote of 2,636,474 votes "FOR";
489,391 votes "AGAINST"; and 11,924 votes "ABSTAIN". The
selection of KPMG Peat Marwick LLP as the Company's independent
auditors was also approved. Th selection was approved by a
vote of 3,800,930 votes "FOR"; 103,957 votes "AGAINST"; and
3,712 votes "ABSTAIN".
Item 5. Other Information
-----------------
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995:
Certain statements in this filing, and elsewhere (such as
in other filings by the Company with the Securities and
Exchange Commission, press releases, presentations by the
Company or its management and oral statements) constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Litigation Reform
Act"). Such forward-looking statements involve known and
unknown risks, uncertainties, and other factors which may cause
the actual results, performance or achievements of the Company
to be materially different from any future results, performance,
or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the Company's
early stage of development, the Company's dependence on its
ability to obtain regulatory approval of one-alpha D2, the
uncertainty of the Company's future profitability, the
uncertainty of regulatory approvals of any drugs developed by
the Company, the uncertainty of the Company's patent positions
and proprietary rights, the uncertainty related to pricing and
reimbursement of the Company's products, the intense competition
in pharmaceutical and biotechnology industries, the Company's
potential need for additional partners or collaborators, the
Company's future capital needs and uncertainty of additional
financing, the Company's limited manufacturing capabilities, and
lack of sales and marketing experience.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits furnished:
(11) Statement Re: Computation of Loss Per Share
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1997.
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.
BONE CARE INTERNATIONAL, INC.
(Registrant)
Date: February 16, 1998 /s/ Charles W. Bishop
Charles W. Bishop
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 16, 1998 /s/ Dale W. Gutman
Dale W. Gutman
Vice President of Finance
(Principal Financial and
Accounting Officer)
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Exhibit Index
For the Quarterly Period Ended December 31, 1997
No. Description Page
- -- ----------- ----
11 Statement Regarding Computation of Earnings Per Share . . . . . . 14
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . 15
Exhibit 11
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Statement Regarding Computation of Loss Per Share
(Unaudited)
Three months ended Six Months ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
----------- ------------ ------------ ------------
Net loss $ (1,109,118) $ (776,358) $ (2,117,596) $ (1,072,360)
============ =========== ============ ============
Weighted average number
of common shares 8,722,430 8,707,382 8,722,406 8,707,382
============ =========== ============ ============
Net loss per common
share - basic $ (0.13) $ (0.09) $ (0.24) $ (0.12)
============ =========== ============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from Form 10-Q for the three months ended
December 31, 1997, and is qualified in its entirety by
reference to such financial statements.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 6,324
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<CURRENT-ASSETS> 6,419
<PP&E> 385
<DEPRECIATION> 246
<TOTAL-ASSETS> 7,976
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<COMMON> 11,394
0
0
<OTHER-SE> (4,092)
<TOTAL-LIABILITY-AND-EQUITY> 7,976
<SALES> 0
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<CGS> 0
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<INCOME-PRETAX> (2,118)
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<INCOME-CONTINUING> (2,118)
<DISCONTINUED> 0
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