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 September 30, 1998
-------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
From the transition period from TO
------------- -------------
Commission File Number: 0-27854
BONE CARE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1527471
(State of (IRS Employer
Incorporation) Identification No.)
One Science Court
Madison, Wisconsin 53711
(Address, including zip code of
Registrant's principal executive offices)
608-236-2500
(Registrants telephone number, including area code)
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 October 30, 1998, 10,135,956 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 September 30, 1998
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial statements
Consolidated Balance Sheets
September 30, 1998, and June 30, 1998. . . . . . . . . . . . 3
Consolidated Statements of Operations
Three Months Ended September 30, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
Three Months Ended September 30, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk . 9
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . .10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Balance Sheets
- --------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------
September 30, June 30,
1998 1998
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $12,720,467 $3,484,374
Inventory 546,292 229,500
Other current assets 168,175 50,162
- --------------------------------------------------------------------------
Total current assets 13,434,934 3,764,036
Property, plant and equipment--at cost:
Leasehold improvements 72,105 72,105
Furniture and fixtures 58,417 57,122
Machinery and other equipment 540,592 490,915
- --------------------------------------------------------------------------
671,114 620,142
Less accumulated depreciation 355,504 310,054
- --------------------------------------------------------------------------
315,610 310,088
Patent fees, net of accumulated
amortization of $530,462 at
September 30,1998, and $491,462
at June 30, 1998 755,249 738,808
Excess of cost over fair value of net
assets acquired, net of accumulated
amortization of $754,770 at
September 30, 1998, and $732,408 at
June 30, 1998 605,147 627,509
Other non-current assets 65,857 372,835
- --------------------------------------------------------------------------
$15,176,797 $5,813,276
==========================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Balance Sheets
- --------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- --------------------------------------------------------------------------
September 30, June 30,
1998 1998
(Unaudited) (Audited)
- ---------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 589,666 $ 59,585
Accrued liabilities:
Accrued clinical study and
research costs 368,786 481,005
Compensation payable 71,501 32,741
Other 172,209 117,964
- ---------------------------------------------------------------------------
Total current liabilities 1,202,162 691,295
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
10,135,956 shares at September 30, 1998
and 8,808,956 at June 30, 1998 11,393,883 11,393,883
Additional paid-in capital 14,022,437 3,748,328
- ---------------------------------------------------------------------------
25,416,320 15,142,211
Accumulated deficit (11,441,685) (10,020,230)
- ---------------------------------------------------------------------------
13,974,635 5,121,981
- ---------------------------------------------------------------------------
$15,176,797 $5,813,276
===========================================================================
See accompanying notes to consolidated financial statements.
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
- --------------------------------------------------------------------------
Three months ended
September 30, September 30,
1998 1997
- ---------------------------------------------------------------------------
REVENUES $ --- $ ---
- ---------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales --- ---
Research and development 885,707 1,002,517
Selling, general and
administrative 721,537 117,300
- ----------------------------------------------------------------------------
1,607,244 1,119,817
- ----------------------------------------------------------------------------
Loss from operations (1,607,244) (1,119,817)
- ----------------------------------------------------------------------------
Interest income 185,789 111,339
- ----------------------------------------------------------------------------
NET LOSS $(1,421,455) $(1,008,478)
============================================================================
Net loss per common share - basic $ (0.15) $(0.12)
============================================================================
Weighted average number of
common shares 9,789,826 8,722,382
============================================================================
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
- -----------------------------------------------------------------------------
Three months ended
September 30, September 30,
1998 1997
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(1,421,455) $ (1,008,478)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 106,812 64,361
Changes in assets and liabilities:
Inventory (316,792) ---
Other current assets (118,013) (62,785)
Accounts payable 530,081 (49,416)
Accrued liabilities (19,214) 268,813
Other 9,408 ---
- -----------------------------------------------------------------------------
Net cash used in operating activities (1,229,173) (787,505)
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property,
plant and equipment (50,972) (44,782)
Patent fees (55,441) (55,394)
- -----------------------------------------------------------------------------
Net cash used in investing activities $(106,413) $ (100,176)
- -----------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock
options 4,175 ---
Net proceeds from issuance of
common stock 10,567,504 ---
- -----------------------------------------------------------------------------
Net cash provided by financing
activities 10,571,679 ---
- -----------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 9,236,093 (887,681)
Cash and cash equivalents at
beginning of period 3,484,374 8,531,714
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of period $12,720,467 $7,644,033
==============================================================================
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 presented herein have been
prepared by Bone Care International, Inc. (The "Company") without audit, except
for balance sheet information at June 30, 1998, 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,
1998, included in the Company's Form 10-K as filed with the Securities and
Exchange Commission on September 28, 1998.
The consolidated balance sheet as of September 30, 1998, the
consolidated statements of income for the three months ended September 30, 1998
and 1997, and the consolidated statements of cash flows for the three months
ended September 30, 1998 and 1997 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 results of operations for the three months ended September 30,
1998, are not necessarily indicative of the results to be expected for the
entire fiscal year ending June 30, 1999.
(2) COMMON STOCK
In July 1998, the Company completed a directed public offering of
1,326,000 shares of common stock at a price of $8.00 per share. The Company
received proceeds of approximately $10.568 million from the sale, net of
offering expenses. Certain directors of the Company purchased 276,000 of the
shares sold.
(3) NET LOSS PER SHARE
Basic loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period. 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 decreased to $885,707 in the three
months ended September 30, 1998 from $1,002,517 in the three months ended
September 30, 1997. The decrease was due to the completion, in February 1998,
of clinical trials for Hectorol(trademarked) as treatment for secondary
hyperparathyroidism associated with end stage renal disease, and reduced
spending on synthesis research related to Hectorol(trademarked). These
decreases were offset, in part, by increased regulatory costs incurred in
preparation for the commercialization of Hectorol(trademarked).
Selling, general and administrative expenses increased $604,237 to
$721,537 in the three months ended September 30, 1998 from $117,300 in the
three months ended September 30, 1997. Of the increase, approximately $368,000
was attributable to pre-marketing activities relating to the potential launch
of Hectorol(trademarked). The remainder of the increase of approximately
$236,000 related to expenses incurred for expanded regulatory, sales and
marketing efforts supporting the upcoming commercial launch of
Hectorol(trademarked).
The Company expects total costs and expenses to continue increasing in the
future due principally to the advancement and expansion of its clinical
development programs and the costs associated with the successful
commercialization of Hectorol(trademarked).
Interest income increased $74,450 to $185,789 in the three months ended
September 30, 1998 from $111,339 in the three months ended September 30, 1997.
The increase was due to higher average cash balances during a portion of the
period ended September 30, 1998. The increased cash balances resulted from the
net proceeds from the common stock offering completed during July 1998.
Liquidity and Capital Resources
- -------------------------------
In July 1998, the company completed a directed public offering of
1,326,000 shares of common stock at a price of $8.00 per share. During the
three months ended September 30, 1998, the Company received proceeds of
approximately $10.568 million from the sale, net of offering expenses. Prior to
June 30, 1998, approximately $298,000 of offering expenses were incurred.
Certain directors of the Company purchased 276,000 of the shares sold.
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
believes that the current level of cash and cash equivalents should be
sufficient to fund its operations through at least the end of the current
fiscal year.
During the three months ended September 30, 1998, cash and cash
equivalents increased $9,236,093 to $12,720,467. During the three months ended
September 30, 1997, cash and cash equivalents decreased $887,681 to $7,644,033.
The increase in the period ended September 30, 1998 was primarily due to the
receipt of net proceeds of $10,567,504 from the July 1998 common stock
offering. During the three months ended September 30, 1998 and 1997, cash used
in operating and investing activities aggregated $1,335,586 and $887,681,
respectively. Of the $447,905 increase, $316,792 was due to
Hectorol(trademarked)inventory production activities commenced in 1998.
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
transactions occurring prior to January 1, 2000 from those occurring after
December 31, 1999, 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.
It is possible that third parties such as suppliers or contract research
institutions may have noncompliant computer systems or programs which may not
interface properly with the Company's computer systems or which may otherwise
result in a disruption of the Company's operations.
The Company currently anticipates that the expenses and capital
expenditures associated with its year 2000 compliance program will not have a
material effect on its financial position or results of operations. Although
the Company believes that it will be able to achieve year 2000 compliance
through its efforts, there can be no assurance that these efforts will be
successful. The Company could be adversely affected if it or third parties fail
to successfully achieve year 2000 compliance. In particular, a disruption to
the Company's commercialization efforts for Hectorol could have a material
effect on the Company's financial position or results or operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company believes that presently it does not have a substantive
disclosure with respect to quantitative and qualitative disclosures about
market risk. As the Company's operations expand, the Company will consider such
disclosures.
PART II - OTHER INFORMATION
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Item 1. Legal Proceedings
The Company may be a defendant from time to time in actions
arising out of its ordinary course of business operations. The
Company believes that none of the matters in which it is currently
involved, either Individually or in the aggregate, is material to the
Company.
Item 2. Changes in Securities and Use of Proceeds
In connection with a directed public offering of 1,326,000
shares of common stock (the "Offering") in 1998, the Company filed a
Registration Statement on Form S-1, SEC File No. 333-43923
("Registration Statement"), which was declared effective by the
Commission on July 22, 1998. The net proceeds from the Offering to
the Company after total expenses was $10,270,000.
The Company has not used any of the net proceeds from the
Offering. All net proceeds have been invested in short-term,
investment grade, interest-bearing financial instruments. The
use of proceeds from the Offering does not represent a material
change in the use of proceeds described in the prospectus
which is part of the Registration Statement.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
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. 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 other things, no assurance of successful product development,
technological risks, uncertainty of regulatory approvals, regulatory policies
in the United States and other countries, availability of additional financing,
reimbursement policies of public and private health care payors, developments
in patents and other proprietary rights, competition from existing therapies
and from new therapies, and market and general economic factors. Refer to Part
I, Item 1 of the Company's Annual Report on Form 10-K for the year ended June
30, 1998 for a description of such factors.
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 September 30, 1998.
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: November 12, 1998 /s/ Charles W. Bishop
- ------------------------ -------------------------
Charles W. Bishop
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1998 /s/ Dale W. Gutman
- ------------------------ --------------------
Dale W. Gutman
Vice President - Finance
(Principal Financial and
Accounting Officer)
BONE CARE INTERNATIONAL, INC., AND SUBSIDIARY
Exhibit Index
For the Quarterly Period Ended September 30, 1998
No. Description Page
- --- ----------- ----
11 Statement Regarding Computation of Loss 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
September 30, September 30,
1998 1997
------------ ------------
Net loss $ (1,421,455) $ (1,008,478)
============= ============
Weighted average number of
common shares 9,789,826 8,722,382
============= ============
Net loss per common
share - basic $ (0.15) $ (0.12)
============= ============
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<LEGEND> This schedule contains summary financial information
extracted from Form 10-Q for the three months ended
September 30, 1998, and is qualified in its entirety
by reference to such financial statements.
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