SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- - - - - - - - -
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarter ended June 30, 1999
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 1-10492
EPITOPE, INC.
(Exact name of registrant as specified in its charter)
OREGON NO. 93-0779127
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8505 SW Creekside Place
Beaverton, Oregon 97008-7108
(Address of principal executive offices) (Zip code)
(503) 641-6115
(Registrant's 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 [ ]
Number of shares of Common Stock, no par value, outstanding as of June 30, 1999:
14,114,447
<PAGE>
PART I. FINANCIAL INFORMATION
PAGE NO.
--------
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1999 (unaudited) and
September 30, 1998............................................ 3
Consolidated Statements of Operations for the three months and
nine months ended June 30, 1999 and 1998 (unaudited).......... 4
Consolidated Statements of Changes in Shareholders' Equity for the
three months and nine months ended June 30, 1999 (unaudited).. 5
Consolidated Statements of Cash Flows for the nine months
ended June 30, 1999 and 1998 (unaudited)...................... 6
Condensed Notes to Consolidated Financial Statements (unaudited).. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ........................................ 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..... 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................. 12
ITEM 5. OTHER INFORMATION............................................. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 13
2
<PAGE>
EPITOPE, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, SEPTEMBER 30,
1999 1998
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents........................ $ 908,409 $ 1,164,275
Marketable securities............................ 4,514,048 4,455,044
Trade accounts receivable, net .................. 1,161,291 1,519,652
Other receivables................................ 33,262 47,818
Inventories (Note 2) ............................ 1,539,243 1,092,577
Prepaid expenses................................. 475,604 313,941
----------- ------------
8,631,857 8,593,307
Property and equipment, net..................... 1,039,909 819,095
Patents and proprietary technology, net......... 558,037 596,169
Other assets and deposits....................... 219,603 348,733
----------- ------------
$ 10,449,406 $ 10,357,304
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable................................. $ 658,488 $ 566,894
Salaries, benefits and other accrued liabilities. 1,071,913 1,516,395
----------- -----------
1,730,401 2,083,289
Commitments and contingencies.................... - -
Shareholders' equity
Contributed capital.............................. 114,061,491 111,319,573
Accumulated deficit.............................. (105,342,486) (103,045,558)
----------- -----------
8,719,005 8,274,015
----------- -----------
$ 10,449,406 $ 10,357,304
=========== ===========
3
<PAGE>
EPITOPE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
Revenues
Product sales .................................. $2,687,923 $ 2,781,944 $ 7,005,252 $ 6,476,291
Grants and contracts ........................... - 1,271 59 12,652
--------- ---------- ---------- ----------
2,687,923 2,783,215 7,005,311 6,488,943
Costs and expenses
Product costs .................................. 1,083,669 928,294 2,595,989 2,514,548
Research and development costs ................. 1,044,268 766,645 2,795,281 2,064,390
Selling, general and administrative expenses.... 1,388,778 1,414,007 4,105,205 4,104,197
--------- ---------- ---------- ----------
3,516,715 3,108,946 9,496,475 8,683,135
Loss from operations ........................... (828,792) (325,731) (2,491,164) (2,194,192)
Other income (expense), net
Interest income................................. 66,426 82,115 206,942 283,342
Interest expense................................ (431) (215) (963) (7,631)
Other, net...................................... (1,151) (16,252) (11,743) (30,840)
---------- ----------- --------- ----------
64,844 65,648 194,236 244,871
Net loss........................................ $ (763,948) $ (260,083) $(2,296,928) $ (1,949,321)
========== =========== =========== ===========
Basic and diluted net loss per share (Note 2)... $ (0.05) $ (0.02) $ (0.17) $ (0.14)
Weighted average number of shares outstanding... 14,065,991 13,544,761 13,888,087 13,494,865
</TABLE>
4
<PAGE>
EPITOPE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C> <C>
COMMON STOCK ACCUMULATED
SHARES DOLLARS DEFICIT TOTAL
BALANCES AT SEPTEMBER 30, 1998................. 13,577,319 $111,319,573 $(103,045,558) $8,274,015
Common stock issued upon
exercise of options.......................... 30,576 154,103 - 154,103
Common stock issued under Employee
Stock Purchase Plan.......................... 2,066 8,245 - 8,245
Common stock issued as matching
savings plan contributions................... 3,834 22,525 - 22,525
Compensation expense for
stock option grants.......................... - 77,242 - 77,242
Net loss for the quarter....................... - - (699,978) (699,978)
---------- ----------- ------------ ----------
BALANCES AT DECEMBER 31, 1998 (UNAUDITED)...... 13,613,795 $111,581,688 $(103,745,536) $7,836,152
Common stock issued upon
exercise of options.......................... 436,944 2,016,440 - 2,016,440
Common stock issued as matching
savings plan contributions................... 3,832 19,160 - 19,160
Compensation expense for
stock option grants.......................... - 80,070 - 80,070
Net loss for the quarter....................... - - (833,002) (833,002)
---------- ----------- ------------- ----------
BALANCES AT MARCH 31, 1999 (UNAUDITED)......... 14,054,571 $113,697,358 $(104,578,538) $9,118,820
Common stock issued upon
exercise of options.......................... 37,755 182,092 - 182,092
Common stock issued as compensation............ 6,413 29,996 - 29,996
Common stock issued under Employee
Stock Purchase Plan.......................... 13,463 50,650 - 50,650
Common stock issued as matching
savings plan contributions................... 2,245 13,189 - 13,189
Compensation expense for
stock option grants.......................... - 88,206 - 88,206
Net loss for the quarter....................... - - (763,948) (763,948)
---------- ----------- ------------- ----------
BALANCES AT JUNE 30, 1999 (UNAUDITED).......... 14,114,447 $114,061,491 $(105,342,486) $8,719,005
========== ============= ============= =========
</TABLE>
5
<PAGE>
EPITOPE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<S> <C> <C>
NINE MONTHS ENDED
JUNE 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .............................................................. $(2,296,928) $ (1,949,321)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization ......................................... 476,598 510,367
Loss on disposition of assets.......................................... 12,818 33,320
Common stock issued as compensation for services....................... 54,874 80,548
Compensation expense for stock option grants and
deferred salary increases .......................................... 245,518 257,893
Decrease (increase) in accounts receivable and other receivables ...... 372,917 (238,605)
(Increase) decrease in inventories .................................... (446,666) 232,434
Increase in prepaid expenses .......................................... (17,617) (428,604)
Decrease in accounts payable and accrued liabilities .................. (352,888) (67,000)
Other, net ............................................................ - (8,620)
----------- ------------
Net cash used by operating activities.................................. (1,951,374) (1,577,588)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in marketable securities ................................... (8,053,210) (12,112,837)
Proceeds from sale of marketable securities ........................... 7,994,206 14,265,656
Additions to property and equipment ................................... (552,412) (87,678)
Proceeds from sale of property and equipment........................... - 37,629
Expenditures for patents and proprietary technology ................... (119,692) (114,025)
(Investment in) earnings from affiliated companies..................... (14,910) 9,760
----------- -----------
Net cash (used) provided by investing activities....................... (746,018) 1,998,505
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock ................................ 2,441,526 371,795
Advances in connection with spin-off .................................. - (2,129,291)
---------- ------------
Net cash provided (used) by financing activities....................... 2,441,526 (1,757,496)
Net decrease in cash and cash equivalents ............................. (255,866) (1,336,579)
Cash and cash equivalents at beginning of period ...................... 1,164,275 1,934,480
---------- -----------
Cash and cash equivalents at end of period............................. $ 908,409 $ 597,901
========== ============
</TABLE>
6
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 THE COMPANY
Epitope, Inc. (Epitope or the Company), is an Oregon corporation incorporated in
1981. Epitope develops, manufactures and markets medical devices and diagnostic
products utilizing its proprietary oral fluid technologies for sale to public
and private sector customers worldwide. The Company's primary focus is on the
detection of HIV antibodies, with emphasis in the U.S. life insurance and global
public health markets, and on the use of oral fluid testing for the detection of
drugs of abuse and other analytes. Epitope's lead product, the patented
OraSure(R) device, is used to collect an oral fluid specimen that is used for
diagnostic purposes. Epitope also manufactures and markets HIV-1 Western blot
confirmatory test kits used to confirm positive results of initial screening
tests for HIV-1 infection.
The interim consolidated financial statements included herein are unaudited;
however, in the opinion of the Company, the interim data include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results of operations for the interim periods. These
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's 1998 Annual
Report on Form 10-K. Results of operations for the periods ended June 30, 1999
are not necessarily indicative of the results of operations expected for the
full fiscal year.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The accompanying financial statements include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
<TABLE>
<S> <C> <C>
Inventories. Inventory components are summarized as follows: JUNE 30, SEPTEMBER 30,
1999 1998
(Unaudited)
Raw materials................................................. $ 256,468 $ 238,916
Work-in-process .............................................. 531,149 627,503
Finished goods ............................................... 751,626 211,703
Supplies ..................................................... - 14,455
--------- ---------
$1,539,243 $1,092,577
========= =========
</TABLE>
Net Loss Per Share. Basic loss per share has been computed using the weighted
average number of shares of common stock outstanding. Diluted per share income
or loss includes the weighted average potential common stock outstanding during
the period when the effect is dilutive. Potential common stock consists of the
number of shares issuable upon exercise of outstanding warrants and options less
the number of shares assumed to have been purchased for the treasury with the
proceeds from such exercise. Basic and diluted net loss per share are the same
for the comparable periods ended June 30, 1999 and 1998.
Shares of potential common stock that were not included in the calculation of
diluted loss per share as they were anti-dilutive are as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
Number of Shares.......... 354,567 372,865 446,762 473,151
======= ======= ======= =======
Statement of Cash Flows. Cash paid for interest approximated interest expense in
the quarters ended June 30, 1999 and 1998. No cash was paid for income taxes in
fiscal 1999 or 1998. Compensation expense related to the issuance of
compensatory equity securities, which also represents non-cash transactions,
amounted to $245,518 and $257,893 for the nine months ended June 30, 1999 and
1998, respectively.
7
<PAGE>
Management Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
relating to assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could vary from these
estimates.
Comprehensive Income. Effective for fiscal year 1999, the Company adopted
Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income" (SFAS No. 130). The adoption of SFAS No. 130 has no impact on the
financial statements for any periods presented as the Company has no items of
other comprehensive income.
NOTE 3 SEGMENT INFORMATION - SFAS NO. 131
Effective for fiscal year 1999, the Company adopted Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131). The adoption of SFAS No. 131 is not
expected to have a material impact on the results of operations or shareholders'
equity for any periods presented. See Note 1 for a description of the Company's
business.
Geographic Areas. The Company's products are sold principally in the United
States, Canada, Asia and Latin America. Distribution to Epitope's primary
Canadian customer was taken over in 1999 by one of the Company's U.S. insurance
laboratory customers, and is no longer shown as a direct sale to Canada.
<TABLE>
<S> <C> <C> <C> <C>
REVENUES IDENTIFIABLE ASSETS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 1998 1999 1998
United States..................... $6,740,534 $5,812,643 $10,449,406 $10,357,304
Canada............................ 5,500 410,025 - -
Asia.............................. 215,175 195,441 - -
Latin America..................... 5,703 206,027 - -
Europe............................ 36,340 32,155 - -
Other............................. 2,000 - - -
--------- --------- ---------- ----------
$7,005,252 $6,476,291 $10,449,406 $10,357,304
========= ========= ========== ==========
</TABLE>
Customer Concentration. In the third quarter of fiscal 1999, four customers
accounted for over 72 percent of product revenues as compared to 54 percent for
the same quarter of fiscal 1998, primarily due to the rebound in sales to the
life insurance market this quarter. The Company believes that its relationship
with each of these customers is strong and believes that they will continue to
purchase comparable volumes of the Company's products. There can be no
assurance, however, that sales to these customers will not decrease or that
these customers will not choose to replace the Company's products with those of
competitors. The loss of any of these customers, or a significant decrease in
the volume of products purchased by them, would have a material adverse effect
on the Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Statements below regarding future events or performance are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The Company's actual results could be quite different from those
expressed or implied by the forward-looking statements. Statements in this Form
10-Q about future sales levels or other future events or performance are
forward-looking statements. Factors that could affect results include the extent
of future use of oral fluid testing and OraSure(R) in the insurance industry or
in other key U.S. and international markets; loss or impairment of sources of
capital; ability of the Company to develop product distribution channels; the
ability of the Company to develop new products; development of competing
products; changes in federal or state law or regulations; uncertainties related
to suppliers' and customers' ability to achieve year 2000 compliance; and loss
of key personnel. These and other factors are discussed more fully in the
Company's Annual Report on Form 10-K in Items 1 and 7 and under "Year 2000
Readiness" below. Although forward-looking statements help to provide complete
information about the Company, readers should keep in mind that forward-looking
statements are much less reliable than historical information. Readers are
cautioned not to place undue reliance on the forward-looking statements.
RESULTS OF OPERATIONS
The table below shows the amount (in thousands) and percentage of Epitope's
total revenue contributed by each of its principal products and by grants and
contracts.
<TABLE>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30 (IN THOUSANDS, EXCEPT %) 1999 1998
DOLLARS PERCENT DOLLARS PERCENT
Product Sales
Oral specimen collection devices.......................... $2,196 82% $2,133 77%
Western blot HIV confirmatory tests....................... 479 18 602 22
Other product sales....................................... 13 - 47 1
------ --- ----- ---
2,688 100% 2,782 100%
Grants and contracts...................................... - - 1 -
------ --- ----- ---
$2,688 100% $2,783 100%
===== === ===== ===
NINE MONTHS ENDED JUNE 30 (IN THOUSANDS, EXCEPT %) 1999 1998
DOLLARS PERCENT DOLLARS PERCENT
Product sales
Oral specimen collection device........................ $5,201 74% $4,789 74%
Western blot HIV confirmatory test..................... 1,644 24 1,542 24
Other product sales.................................... 160 2 145 2
----- --- ------ ---
7,005 100 6,476 100
Grants and contracts...................................... - - 13 -
----- --- ----- ---
$7,005 100% $6,489 100%
===== === ===== ===
</TABLE>
Revenues. Total product sales decreased by $94,000 or 3 percent in the current
quarter as compared to the third quarter of fiscal 1998, and increased by
$529,000 or 8 percent in the comparable nine-month period. The 1999 third
quarter decrease was primarily a result of the timing of orders for the Western
blot HIV confirmatory test.
OraSure device and Other product sales into public health markets in the quarter
ended June 30, 1999 totaled $672,000 or 25 percent of product sales as compared
to $930,000 or 33 percent in the same period of fiscal 1998, and $1.68 million
or 24 percent of product sales as compared to $1.74 million or 27 percent in the
comparable nine-month periods. Sales into life insurance testing markets in the
third quarter of fiscal 1999 were $1,510,000 or 56 percent of total product
sales for the period as compared to $966,000 or 35 percent in the third quarter
of fiscal 1998, and $3.4 million or 49 percent of product sales as compared to
$2.7 million or 42 percent in the comparable nine-month periods. Sales into
international markets in the current quarter were $28,000 or 1 percent of
product sales as compared to $227,000 or 8 percent of product sales in the same
quarter of fiscal 1998, and $259,000 or 4 percent of product sales as compared
to $312,000 or 5 percent in the comparable nine-month periods. See Note 3 to the
Consolidated Financial Statements.
9
<PAGE>
Sales of the Company's Western blot HIV confirmatory test decreased by $123,000
or 24 percent in the current quarter as compared to the third quarter of fiscal
1998, and increased by $101,000 or 7 percent in the comparable nine-month
period.
Fourth quarter sales are anticipated to increase over the same quarter in fiscal
year 1998 based on the timing of anticipated shipments to certain international
customers. Expectations for future sales are based primarily on forecasts
provided to the Company by individual customers rather than firm orders, as many
of the customers in the public health and international markets do not have
contractual purchasing arrangements with the Company.
The Company has not received grant or contract revenue since the first quarter
of fiscal 1999. Grant applications for additional research funding continue to
be pursued.
Gross Margin on product sales was 60 percent in the third quarter of fiscal 1999
compared to 67 percent in the comparable period of fiscal 1998, and 63 percent
and 61 percent, respectively in the comparable nine-month periods. The decline
in gross margin for the current quarter is due to a change in production volumes
and product mix as the Company reduced production levels of OraSure during the
quarter.
Research and Development Expenses. Research and development expenses increased
by $278,000 or 36 percent in the current quarter as compared to last year's
third quarter, and by $731,000 or 35 percent in the comparable nine-month
period. This increase was primarily related to the investment in the development
and pilot production of the new OraQuick(R) rapid assay device. R&D expenses for
the fourth quarter of fiscal 1999 are anticipated to be higher than the 1998
level. If and when funding for additional R&D projects can be obtained from
potential new partners or from research grants, R&D spending may also increase.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the third quarter of fiscal 1999 decreased by
$25,000 or 2 percent as compared to last year's third quarter, and increased by
$1,000 or 0.2 percent in the comparable nine-month period. The decrease in the
third quarter of fiscal 1999 was primarily a result of continued expense
control.
Year 2000 Readiness. The Company has completed nearly all of its planned systems
upgrades and replacements (as part of a regular ongoing upgrade program) during
the first nine months of fiscal 1999. Upgrades and replacement systems have all
been certified Year 2000 (Y2K) compliant. Responses to inquiries or other
sources of information regarding Y2K compliance have been received from
substantially all vendors, suppliers, and customers, the interruption of whose
businesses would have a material effect on the Company. Development of a
detailed, systematic contingency plan is expected to be completed by September
30, 1999. The Company has not incurred any material costs to date and does not
anticipate incurring any material costs to resolve issues relating to the Y2K
problem internally. Such costs will be funded by available cash and cash
equivalents.
At the current time, the Company anticipates that all essential products and
internal systems and equipment are now, or will be timely made, Y2K compliant.
This belief is based on the progress to date and the assessed degree of
difficulty associated with the remaining phases to achieve Y2K readiness, the
representations made by vendors and, where possible, by testing. Significant
uncertainty exists, however, concerning the effects of the Y2K problem,
primarily with regards to assurances (or lack thereof) made by the Company's key
or significant vendors, suppliers, and customers. In addition, Epitope has not
investigated Y2K compliance of third parties that are either not critical or
significant to the Company's operations or are not currently vendors, suppliers,
or customers of the Company. Any failure of the Company or its vendors,
suppliers, customers, or any third party governmental or business entities to be
Y2K compliant could materially affect the business, results of operations,
financial conditions and prospects of Epitope, the impact of which cannot be
quantified at this time.
This section captioned "Year 2000 Readiness" as well as other statements in this
report relating to Y2K issues are "Year 2000 Readiness Disclosures" pursuant to
the Year 2000 Information and Readiness Disclosure Act.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
(IN THOUSANDS) 6/30/99 9/30/98
Cash and cash equivalents.............. $ 908 $ 1,164
Marketable securities.................. 4,514 4,455
Working capital........................ 6,901 6,510
Net cash used in operating activities decreased by $621,000 or 182 percent in
the current quarter as compared to the third quarter of fiscal 1998, and by
$374,000 or 24 percent in the comparable nine-month period. The total of cash
and cash equivalents plus marketable securities decreased by $197,000 since
September 30, 1998. During the quarter spending increased for manufacturing
process improvements to increase capacity for current products and for continued
development of the new OraQuick(R) device.
Proceeds from the sale of marketable securities represented the primary sources
of funds for meeting the Company's requirements for operations, working capital
and business expansion in the current quarter. The Company also received
$190,000 during the quarter and $2,360,000 during the nine-month period from the
issuance of common stock pursuant to option exercises and under the employee
stock purchase plan.
The Company anticipates that it will continue to need funds to support ongoing
research and development projects, to provide additional manufacturing capacity,
and to increase working capital to support growth. The Company believes that its
operating liquidity requirements for the foreseeable future can be met by
existing resources. The Company may also receive funds through the exercise of
outstanding stock options and warrants as well as research grants. However,
there are no assurances that additional funding from these sources will be
available.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company does not hold material amounts of derivative financial instruments,
other financial instruments, or derivative commodity instruments, and
accordingly has no material market risk to report under this item.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A&W Settlement. On May 7, 1999, the Company entered into a settlement agreement
with Andrew and Williamson Sales, Co. (A&W) regarding the action filed by the
Company against A&W in Oregon state court (Multnomah County Circuit Court Civ.
No. 9810-07537) for breaching the 1997 settlement agreement between the
companies. Under the settlement agreement, A&W agreed to reimburse most of the
Company's costs of bringing the Oregon action and of defending an action brought
by A&W against former Company officers, which has been dismissed. A&W has paid
the amount required by the settlement agreement and the Company has obtained
dismissal of its action against A&W. Information about the proceedings was
previously reported in the Company's Quarterly Reports on Form 10-Q for the
quarters ended December 31, 1998 and March 31, 1999.
ITEM 5. OTHER INFORMATION
On May 13, 1999 Epitope announced that its OraSure oral specimen collection
device will be used for drugs-of-abuse testing under an agreement recently
signed by STC Technologies, Inc. and LabOne, Inc. (Nasdaq: LABS). STC has
contracted with LabOne to provide oral fluid analysis for STC's Intercept(TM)
Drugs of Abuse product line in the North American worksite testing market for
the NIDA 5 panel (THC, Opiates, Cocaine, PCP and Amphetamines/Methamphetamines).
Drug testing is being used in many companies because maintaining a drug-free
work environment can significantly improve safety and productivity, while
reducing absenteeism and theft. Currently, the most common means to test for
substance abuse involves collecting urine or blood samples, both of which can be
considered invasive or inconvenient. The availability of the Intercept Drugs of
Abuse oral fluid test is intended to allow administrators to test for impairment
on demand, eliminate scheduling costs, and streamline the testing process. It is
intended to also allow for illicit drug use testing to be performed using oral
fluid rather than blood or urine. Pilot programs in key markets are expected to
begin in the fourth quarter, with a broad market launch planned for the first
quarter of calendar year 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits are listed on the attached exhibit index following the signature page
of this report.
(b) Reports on Form 8-K
None.
12
<PAGE>
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.
EPITOPE, INC.
August 12, 1999 /S/ CHARLES E. BERGERON
- -------------------- -------------------------
Date Charles E. Bergeron
Chief Financial Officer
(Principal Financial Officer)
August 12, 1999 /S/ THEODORE R. GWIN
- -------------------- -------------------------
Date Theodore R. Gwin
Controller
(Principal Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
27. Financial Data Schedule
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements included herein and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<PERIOD-TYPE> 9-MOS
<CASH> 908,409
<SECURITIES> 4,514,048
<RECEIVABLES> 1,271,105
<ALLOWANCES> 76,552
<INVENTORY> 1,539,243
<CURRENT-ASSETS> 8,631,857
<PP&E> 5,790,525
<DEPRECIATION> 4,750,616
<TOTAL-ASSETS> 10,449,406
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0
0
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<EPS-BASIC> (0.17)
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</TABLE>
