<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM ______ TO______
COMMISSION FILE NUMBER: 0-26520
NEOPROBE CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 31-1080091
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
425 METRO PLACE NORTH, SUITE 400, DUBLIN, OHIO 43017
(Address of principal executive offices)
614-793-7500
(Issuer's telephone number, including area code)
This Amendment No. 2 is being filed for the purpose of amending items 1 and 2
of Part I and refiling Exhibits 11.1 and 27.1.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $10,032,973 $27,094,865
Available-for-sale securities 7,279,659 14,542,600
Stock subscriptions receivable 1,262,513 0
Accounts receivable:
Trade 176,434 179,203
Related parties 7,896 1,925
Inventory 473,004 551,328
Prepaid expenses and other current assets 784,016 1,802,204
----------- -----------
Total current assets 20,016,495 44,172,125
----------- -----------
Advances to related companies 0 1,500,078
Property and equipment, at cost, net of accumulated
depreciation and amortization 3,565,272 5,269,742
Intangible assets, net of accumulated amortization 523,249 2,071,904
Other assets 40,314 51,261
----------- -----------
Total assets $24,145,330 $53,065,110
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 3
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 1,558,916 $ 1,753,141
Related parties 25,838 160,935
Accrued expenses 957,049 978,476
Deferred revenue 0 2,000,000
Notes payable to finance company 128,487 0
Current portion of long-term debt 0 550,000
Capital lease obligation, current 244,348 124,992
------------ -------------
Total current liabilities 2,914,638 5,567,544
------------ -------------
Long term debt 1,100,000 1,012,915
Capital lease obligation 82,043 13,749
------------ -------------
Total liabilities 4,096,681 6,594,208
------------ -------------
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.001 par value; 5,000,000 shares
authorized at December 31, 1995 and September 30,
1996; none outstanding (500,000 shares designated as
Series A,$.001 par value, at September 30, 1996; none
outstanding) -- --
Common stock; $.001 par value; 50,000,000 shares authorized;
17,534,800 and 20,252,606 shares issued; 17,334,800 and
20,152,606 shares outstanding at December 31, 1995
and September 30, 1996, respectively 17,335 20,153
Additional paid-in capital 62,964,787 103,653,971
Deficit accumulated during development stage (43,146,860) (57,322,742)
Unrealized gain (loss) on available-for-sale securities 46,480 (55,332)
Cumulative foreign currency translation adjustment 166,907 174,852
------------ -------------
Total stockholders' equity 20,048,649 46,470,902
------------ -------------
Total liabilities and stockholders' equity $ 24,145,330 $ 53,065,110
============ =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NOVEMBER 16,
1983
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER 30,
1995 1996 1995 1996 1996
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 145,774 $ 232,269 $ 696,782 $ 588,085 $ 3,475,896
Cost of goods sold 85,685 102,039 408,582 332,013 1,783,537
----------- ----------- ----------- ------------ ------------
Gross profit 60,089 130,230 288,200 256,072 1,692,359
----------- ----------- ----------- ------------ ------------
Operating expenses:
Research and development expenses:
Wages and benefits 691,727 1,984,433 2,172,505 3,823,685 12,994,643
Contracted services 444,948 1,298,614 1,034,086 2,624,510 5,161,957
Clinical trials 493,228 1,153,120 1,761,286 3,808,796 18,641,988
Other 176,666 159,356 495,451 664,912 2,939,888
----------- ----------- ----------- ------------ ------------
Total research and development 1,806,569 4,595,523 5,463,328 10,921,903 39,738,476
----------- ----------- ----------- ------------ ------------
General and administrative expenses:
Wages and benefits 217,091 1,280,647 704,825 1,997,339 7,236,534
Contracted services 102,077 142,330 237,278 440,956 2,592,940
Professional services 128,637 65,952 361,117 404,719 3,117,810
Depreciation and amortization 135,490 193,610 406,505 497,186 2,037,788
Other 402,369 694,104 1,160,882 1,797,922 8,157,401
----------- ----------- ----------- ------------ ------------
Total general and administrative 985,664 2,376,643 2,870,607 5,138,122 23,142,473
----------- ----------- ----------- ------------ ------------
Loss from operations (2,732,144) (6,841,936) (8,045,735) (15,803,953) (61,188,590)
----------- ----------- ----------- ------------ ------------
Other income (expense):
Interest income 231,541 658,797 380,273 1,462,120 3,048,160
Interest expense (9,871) (26,644) (50,296) (47,931) (470,535)
Gain (loss) on foreign currency
transactions (2,848) (16,903) 1,647 (35,305) (36,509)
Other income (expense) (2,773) (379) 173,666 249,187 1,245,379
Minority interest 0 0 0 0 79,353
----------- ----------- ----------- ------------ ------------
Total other income 216,049 614,871 505,290 1,628,071 3,865,848
----------- ----------- ----------- ------------ ------------
Net loss $(2,516,095) $(6,227,065) $(7,540,445) $(14,175,882) $(57,322,742)
=========== =========== =========== ============ ============
Earnings per share data:
Net loss per share of common stock $ (0.16) $ (0.31) $ (0.54) $ (0.74)
=========== =========== =========== ============
Shares used in computing net loss $16,056,164 20,052,371 13,978,644 19,073,230
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE> 5
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NOVEMBER 16,
1983
NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, TO SEPTEMBER 30,
1995 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net cash used in operating activities $ (6,563,334) $ (9,311,480) $(49,432,192)
Cash flows from investing activities:
Purchases of available-for-sale securities (14,228,134) (41,872,229) (86,484,501)
Proceeds from sale of available-for-sale securities 1,211,778 27,559,047 45,941,204
Maturities of available-for-sale securities 7,263,965 6,982,000 25,964,742
Other (832,727) (2,231,233) (5,846,725)
------------ ------------ ------------
Net cash used in investing activities (6,585,118) (9,562,415) (20,425,280)
------------ ------------ ------------
Cash flows from financing activities:
Issuance of common stock, net 22,513,414 35,250,767 86,952,487
Other 828,492 696,558 10,010,313
------------ ------------ ------------
Net cash provided by financing activities 23,341,906 35,947,325 96,962,800
------------ ------------ ------------
Effect of exchange rate changes on cash (3,040) (11,538) (10,463)
------------ ------------ ------------
Net increase in cash and cash equivalents 10,190,414 17,061,892 27,094,865
Cash and cash equivalents at beginning of period 500,775 10,032,973 0
------------ ------------ ------------
Cash and cash equivalents at end of period $ 10,691,189 $ 27,094,865 $ 27,094,865
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE> 6
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The information presented for September 30, 1995 and 1996, and for the
periods then ended is unaudited, but includes all adjustments (which consist
only of normal recurring adjustments) which the Company's management
believes to be necessary for the fair presentation of results for the
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
the rules and regulations of the Securities and Exchange Commission. The
results for the interim period are not necessarily indicative of results to
be expected for the year. The financial statements should be read in
conjunction with the Company's audited financial statements for the year
ended December 31, 1995, which were included as part of the Company's Annual
Report on Form 10-KSB (file no. 0-20676).
The Company is a development stage enterprise engaged in the development and
commercialization of technologies for the diagnosis and treatment of
cancers. There can be no assurance that the Company will be able to
commercialize its proposed products. There can also be no assurance that
adequate financing will be available when needed or on terms attractive to
the Company.
The Company has filed this Form 10-QSB Amendment No. 2 and restated the
Company's financial statements for the three and nine month periods ending
September 30, 1996, as a result of deferring the recognition of $2 million
of income. (See Note 6)
2. INVENTORY
The components of inventory are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------- --------
<S> <C> <C>
Materials and component parts $101,886 $194,409
Work-in-process 107,786 137,283
Finished goods 263,332 219,636
-------- --------
$473,004 $551,328
======== ========
</TABLE>
3. LONG-TERM DEBT
In 1995, Neoprobe (Israel) Ltd. ("Neoprobe (Israel)"), a subsidiary of the
Company, and the Company issued convertible debentures in the amount of
$1,100,000 due February 10, 1997. The debentures are convertible into
preferred shares of Neoprobe (Israel) or into shares of the Company's
common stock at a conversion price of $5.50 per share. The interest rate on
the debentures is at three percentage points above the 12-month LIBOR rate.
In March 1996, debentures in the amount of $550,000 were converted
into 100,000 shares of the Company's common stock. In addition, in November
1996, the remaining debentures in the amount of $550,000 were converted
into 100,000 shares of the Company's common stock. In addition, in
November 1996, the remaining debentures in the amount of $550,000 were
converted into 100,000 shares of the Company's common stock.
In 1995, the Company entered into an agreement with the Ministry of Finance
and the Office of the Chief Scientist in Israel to provide up to $2.5
million in the form of Israeli-government guaranteed non-recourse loans and
research grants to Neoprobe (Israel). Amounts received under the agreement
are secured by certain property obtained through the use of proceeds
received. As of September 30, 1996, Neoprobe (Israel) has received
approximately $1 million in loans and $68,000 in the form of grants. Amounts
received as loans bear interest at the LIBOR rate plus a specified
percentage based on the exchange rate differential between the Israeli
shekel and the US dollar. Principal payments are due at various dates based
on the date of each respective loan draw. Based on loan draws received to
date, principal amounts of approximately $14,000, $200,000, $440,000,
$270,000, and $33,000 become due in 1998 through 2002, respectively.
6
<PAGE> 7
4. STOCK OPTIONS
In January 1996, the Compensation Committee granted options to certain
directors, officers, and employees of the Company under the Neoprobe
Corporation Incentive Stock Option and Restricted Stock Purchase Plan, (the
"Plan") for 295,200 shares of common stock, exerciseable at $15.75 per
share, 50,000 shares vesting upon the meeting of certain milestones.
Currently, the Company has 1,889,162 options outstanding under the Plan,
and 1,107,616 options have vested as of September 30, 1996. Concurrent with
the execution of a worldwide marketing agreement in September 1996 (Note
6), approximately 100,000 options granted to certain key executives became
vested resulting in compensation expense of $1,562,500.
In May 1996, the Company's stockholders approved the 1996 Stock
Incentive Plan (the "1996 Plan") whereby directors, employees, and
consultants may be awarded options to purchase unrestricted common stock
or rights to purchase restricted stock of the Company. The aggregate number
of shares of common stock in respect of which awards may be granted may not
exceed 1,500,000. Through September 1996, the Company has awarded 112,500
options under the 1996 Plan. None of the options granted under the 1996
Plan have vested as of September 30, 1996.
5. EQUITY
In April 1996, the Company completed the sale of 1,750,000 shares of common
stock in a public secondary offering at an offering price to the public of
$18.50 Proceeds to the Company from this offering, net of the underwriters'
discount, was approximately $30.5 million.
During May 1996, in exchange for exclusive licenses to certain technology,
the Company issued 124,805 shares of common stock to The Dow Chemical
Company ("Dow" Note 6).
During June 1996, Enzon, Inc. ("Enzon") exercised warrants to purchase
50,000 shares and 100,000 shares of common stock of the Company at prices of
$6.30 per share and $12.60 per share, respectively, which had been granted
under the Amendment to the License Agreement and Development Agreement (See
Note 6).
6. AGREEMENTS
In February 1996, the Company and XTL Biopharmaceuticals Ltd. ("XTL")
executed a series of agreements, including an Investment Agreement and a
Research and Development Agreement whereby XTL will perform specific
research activities using XTL's proprietary technology for the development
of future products for the Company. The Company purchased $1.5 million of
convertible debentures of XTL, convertible into approximately a 15% equity
interest in XTL as of the date of purchase. The Company also acquired a
warrant affording Neoprobe the option to purchase an additional 10% equity
interest in XTL. Neoprobe issued 125,000 shares of common stock to XTL in
exchange for the convertible debentures, warrant, and product development
activities.
In March 1996, the Company and Enzon executed an Amendment to the
License Agreement and Development Agreement. Pursuant to the Amendment, a
Development Agreement executed between the parties on August 15, 1992 has
been terminated in all respects. The License Agreement gives the Company
the exclusive global use in its RIGS system certain proteins produced by
Enzon's patented technology and an option to nonexclusive global licenses
for certain other products.
In March 1996, the Company executed a Subscription and Option Agreement
with Cira Technologies, Inc. ("Cira"), under which the Company received a
10% equity interest in Cira and an option to increase its interest in Cira
by 15%. The exercise price for the option shall be 15% of the fair market
value of Cira's outstanding securities on the earlier of (a) the third
anniversary date of the license agreement, or (b) the commencement of a
pivotal clinical trial study. The option price is subject to a minimum
of $1.95 million and a maximum of $4.5 million. Currently, the Company's
Chairman and CEO is a director of and a principal shareholder in Cira.
Additionally, a partner of a law firm, who is a director of the Company
which provides various legal services to the Company, is a principal
shareholder of Cira. The Company and Cira also entered into an agreement
under which it will provide financial, clinical, and technical support to
Cira for Cira to conduct a clinical study using Cira's technology, and the
Company will have an option to acquire an exclusive global license for
Cira's technology. The Company's financial commitment for this clinical
study will not exceed $500,000, and the Company has the right to terminate
the agreement upon review of interim results of the clinical study.
7
<PAGE> 8
In May 1996, the Company executed two License Agreements with Dow, whereby
the Company was granted exclusive licenses to several technologies covered
by patents held by Dow. In exchange, the Company issued Dow 124,805 shares
of common stock during the second quarter, valued at $2 million. In
addition, the Company agreed to make lump sum payments to Dow following
marketing approval of certain initial products and on achieving certain
sales milestones. Dow would also be paid royalties based on continuing net
sales. The initial cost of the license agreements was recorded as an
intangible asset as of June 30, 1996. During the third quarter of 1996, the
Company completed a preliminary evaluation of the various technologies
covered by the License Agreement. Based on this evaluation, management
determined that $500,000 should be recorded as research and development
expenses in the third quarter related to projects under current development.
The Company evaluates the recoverability of carrying values of intangible
assets on a recurring basis. Management believes that no significant
impairment of the intangible assets associated with the License Agreement
has occurred.
In September 1996, the Company executed a marketing license agreement (the
"Agreement") with United States Surgical Corporation ("USSC") giving USSC
exclusive sales and marketing rights (excluding North and South Korea,
Singapore, Malaysia, Taiwan and Thailand) for the Company's RIGS surgical
cancer detection products. USSC will also provide training for surgeons and
professional education for RIGS products worldwide. The initial term of the
Agreement is from the date of execution until five years from the later of
the U.S. or European regulatory approval date, and is renewable for two
successive five-year periods.
Upon execution of the Agreement, the Company received a $2 million payment
which was included in the Company's Statement of Operations during the
third quarter as other income. In this Amendment to the Form 10-QSB for the
three and nine month periods ended September 30, 1996, the Company is
reflecting the payment as deferred revenue in the Company's financial
statements due to the termination right in the Agreement under which the
Company would be required to refund the payment if certain conditions are
not met. The effect of this restatement was to increase the net loss for
the three and nine month periods ended September 30, 1996, by $2 million
and to increase the accumulated deficit for the period ended September 30,
1996 by $2 million. For the three month period ended September 30, 1996,
the Company's previously reported net loss and net loss per share were
$4,227,065 and $0.21 respectively. The restated net loss and net loss per
share for the same three month period ended September 30, 1996 is
$6,227,065 and $0.31 per share. For the nine month period ended September
30, 1996, the Company's previously reported net loss and net loss per share
were $12,175,882 and $0.64 respectively. The restated net loss and net loss
per share for the same nine month period ended September 30, 1996 is
$14,175,882 and $0.74 per share. The Company's accumulated deficit for the
period ended September 30, 1996 was $55.3 million and after the restatement
is $57.3 million.
In addition to the $2 million received by the Company, USSC agreed to pay
an additional $3.5 million upon receiving notification of marketing
approval in the U.S. and Europe. The Company must pay USSC a commission
on all RIGS-related product sales. USSC will make payments to the Company
based on commissions collected from RIGS product sales to fund research and
development on future RIGS products. In addition, USSC will pay royalties
to the Company for sales of RIGS disposable cancer detection products.
7. SUBSEQUENT EVENT:
In November 1992 and December 1993, the Company issued approximately 2.3
million Class E Redeemable Common Stock Purchase Warrants ("Class E
Warrants"). These Class E Warrants were exercisable over a three-year
period, beginning November 10, 1993 and expiring on November 12, 1996.
During October and November 1996, approximately 2,262,000 Class E Warrants
were exercised, and the Company received proceeds of approximately $14.7
million.
8
<PAGE> 9
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this Report contain forward-looking statements
that involve risks and uncertainties. The Company's actual results in 1996 and
future periods may differ significantly from the prospects discussed in the
forward-looking statements.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private and public offerings of its equity securities, from which it has raised
gross proceeds of approximately $102 million. The Company has devoted
substantially all of its efforts and resources to research and clinical
development of innovative systems for the intraoperative diagnosis and treatment
of cancers. The RIGS system integrates radiolabeled targeting agents and a
radiation detection instrument. The Company is developing both the radiolabeled
targeting agents and radiation-detection instrument components of the RIGS
technology. The Company has completed testing in pivotal Phase III clinical
trials in both the U.S. and Europe for the detection of metastatic colorectal
cancer. In addition, the Company has completed testing in a separate Phase III
clinical trial for primary colorectal cancer. However, the Company must obtain
regulatory approval to market its products before commercial revenue can be
generated. During July 1996, European regulatory agencies announced they had
agreed to review a dossier (i.e., marketing application) submitted by the
Company related to its RIGS product for the detection of metastatic colorectal
cancer. The Company plans to submit a similar Biologic License Application
("BLA") to the U.S. Food and Drug Administration ("FDA") during the fourth
quarter of 1996. In addition, the Company is studying the safety and efficacy of
RIGS products for the detection of other solid tumor cancer types, and the
safety and efficacy of certain cancer therapy products (RIGS/ACT) for colorectal
cancer. There can be no assurance that the Company's RIGS products will be
approved for marketing by the FDA or any foreign government agency, or that any
such products will be successfully introduced or achieve market acceptance.
For the period from inception to September 30, 1996, the Company has incurred
cumulative net losses of approximately $57.3 million. The Company does not
currently have a RIGS product approved for commercial sale, and does not
anticipate commercial sales of sufficient volume to generate positive cash flow
until 1998, at the earliest. The Company has incurred, and will continue to
incur, substantial expenditures for research and development activities related
to bringing its products to the commercial market. The Company intends to devote
significant additional funds to clinical testing, manufacturing validation, and
other activities required for regulatory review of RIGS products. The amount
required to complete such testing will depend upon the outcome of regulatory
reviews. The regulatory bodies may require more testing than is currently
planned by the Company. There can be no assurance that the Company's RIGS
products will be approved for marketing by the FDA or any foreign government
agency, or that any such products will be successfully introduced or achieve
market acceptance.
As of September 30, 1996, the Company has cash, cash equivalents, and
available-for-sale securities of $41.6 million. In April 1996, the Company
completed the sale of 1,750,000 shares of common stock at a price of $18.50 per
share in a secondary offering. Gross proceeds from this offering were $32.4
million and proceeds net of underwriting discounts were $30.5 million.
In September 1996, the Company received a $2 million license payment after
executing a marketing agreement with USSC. This payment is included in the
Company's cash and cash equivalents and as deferred revenue. If the Company does
not receive U.S. and Europe regulatory approvals for the RIGS system within 24
months from the execution date and if USSC terminates the Agreement pursuant to
certain provisions in the Agreement during this period, the Company must refund
the license payment to USSC.
In 1996, regulatory activities related to the RIGScan CR49 product continued to
increase as the Company submitted an application to begin marketing a colorectal
product in Europe and prepared to submit a similar application in the United
States. Consolidated research and development expenses during the third quarter
of 1996 were approximately $4.6 million, or 66% of total operating expenses for
the period. Consolidated general and administrative expenses were
9
<PAGE> 10
approximately $2.4 million, or 34% of total operating expenses for the period.
For the nine months ended September 30, 1996, research and development expenses
were $10.9 million, or 68% of total operating expenses, and general and
administrative expenses were $5.1 million, or 32% of total operating expenses.
(New) MonoCarb AB ("MonoCarb") is a wholly-owned subsidiary of the Company,
located in Lund, Sweden, where it operates a biological manufacturing and
purification facility. The Company intends to use the production capability of
MonoCarb to produce future RIGScan products. MonoCarb purchased and installed
vial filling equipment during 1995. This equipment will be used to prepare the
CC49 monoclonal antibody produced by Bio-Intermediair BV for final
radiolabeling. The Company advanced MonoCarb funds during the first three
quarters of 1996 to cover capital expenditures of approximately $523,000 and
operating expenses of approximately $815,000. The Company anticipates advancing
an additional $325,000 during the fourth quarter of 1996 to cover operating and
capital expenditures.
In 1994, the Company formed Neoprobe (Israel) to construct and operate a
radiolabeling facility for the Company's targeting agents. The Company owns 95
percent of Neoprobe (Israel), with Rotem Industries Ltd., the private arm of the
Israeli atomic energy authority ("Rotem") owning the balance and managing the
facility. In January 1995, the Company completed negotiations with the Ministry
of Finance and the Office of the Chief Scientist in Israel to provide up to $2.5
million in the form of Israeli-government guaranteed non-recourse loans and
research grants to Neoprobe (Israel). On August 10, 1995, the Company and
Neoprobe (Israel) raised $1.1 million for Neoprobe (Israel) through the issuance
of convertible debentures. During 1996, $550,000 of these convertible debentures
were converted into 100,000 shares of Common Stock of Neoprobe Corporation.
Costs associated with construction of the facility and operations at Neoprobe
(Israel) during 1996 will be financed primarily with government grants and loans
guaranteed by the Israeli government.
The Company anticipates that 1996 research and development expenses and general
and administrative expenses will increase significantly over 1995 expenditures.
During the fourth quarter of 1996, the Company will continue to focus on
validating its manufacturing processes for the production of RIGS products and
completing the compilation of the applications for colorectal cancer for
submission in the United States. A significant portion of the increased general
and administrative expenses will be associated with marketing activities in
preparation for the commercial launch of the first RIGS product. Currently the
Company anticipates that total consolidated operating expenses for 1996 will be
approximately $21.4 million. It is anticipated that research and development
expenses for the year will be approximately $14.5 million and general and
administrative expenses will be approximately $6.9 million. The Company's
estimate of its allocation of cash resources is based on the current state of
its business operations and current business plan and current industry and
economic conditions, and is subject to revisions due to a variety of factors
including without limitation, additional expenses related to regulatory
licensing and research and development, and to reallocation among categories and
to new categories. Neoprobe may need to supplement its funding sources from time
to time.
At December 31, 1995, the Company had net operating loss carryforwards of
approximately $39.2 million to offset future taxable income through 2010.
Additionally, the Company has tax credit carryforwards of approximately $1.6
million available to reduce future income tax liability through 2010. Under
Section 382 of the Internal Revenue Code of 1986, as amended, use of prior net
operating loss carryforwards is limited after an ownership change. As a result
of ownership changes which occurred in March 1989 and in September 1994, the
Company's net operating tax loss carryforwards and tax credit carryforwards are
subject to the limitations described by Section 382.
In November 1992 and December 1993, the Company issued a total of approximately
2.3 million Class E Redeemable Common Stock Purchase Warrants ("Class E
Warrants"). These warrants are exercisable over a three-year period beginning
November 10, 1993 and expiring on November 12, 1996. The Class E Warrants
entitle the holder to purchase one share of Common Stock for $6.50 per share.
During October and November 1996, approximately 2,262,000 Class E Warrants were
exercised and the Company received proceeds of approximately $14.7 million.
(See Note 7.)
10
<PAGE> 11
RESULTS OF OPERATIONS
From inception through 1993, the Company's revenue had been primarily from the
sale of radiation detection instruments to clinical and collaborative sites and
interest earned on investments. MonoCarb generated sales of serology products of
approximately $850,000 and $803,000 during the years ended December 31, 1994 and
1995, respectively. All remaining sales during these periods were from the sale
of instruments.
Three months ended September 30, 1995 and 1996. For the three-month period ended
September 30, 1996, the Company had net sales of $232,269 consisting of sales of
blood serology products by MonoCarb of $75,669 and sales of radiation-detection
instruments of $156,600. Interest income was $658,797 for the period. The
increase in interest income over the same quarter of the prior year is due to
the increase in cash, cash equivalents and available-for-sale securities. For
the three-month period ended September 30, 1995, the Company had net sales of
$145,774 consisting of sales by MonoCarb of blood serology products of $130,274
and sales of radiation-detection instruments of $15,500. Interest income
generated during the period was $231,541. During the period there were no sales
of radiation-detection instruments to investigational sites or under clinical
trial agreements.
Research and development expenses increased from $1.8 million in 1995 to $4.6
million in 1996. These expenses reflect the costs associated with conducting
clinical trials, including patient enrollment, training, compliance with all
regulatory concerns of the FDA and European regulatory authorities and
manufacturing validation testing of the Company's production facilities. Also
included in these expenses are other costs such as consulting services of
experts and product development costs including technology licenses acquired for
internal development. The increase in research and development expenses from
1995 to 1996 is the result of an increase in wages and benefits from $691,727 in
1995 to $2.0 million in 1996 and an increase in clinical trial expenses from
$493,228 in 1995 to $1.2 million in 1996. Contracted services also increased
from $444,948 in 1995 to $1,298,614 in 1996. Wages and benefits increased
primarily from an increase in the research and development staff and a $781,250
non-cash compensation expense related to stock options which vested after the
execution of the marketing agreement with United States Surgical Corporation.
The increase in clinical trials was primarily due to activities associated with
the development of the Company's marketing license application. Contracted
services increased primarily due to consulting services related to manufacturing
validation and testing and to a non-cash expense of $500,000 for technology
licenses acquired for internal development. The Company expects certain of these
expenses to continue to increase during the fourth quarter of 1996.
General and administrative expenses increased from $1.0 million in 1995 to $2.4
million in 1996. These expenses reflect the activities associated with business
development and corporate administration. The increase in general and
administrative expenses during the third quarter from 1995 to 1996 is primarily
from wages and benefits, and other expenses. Wages and benefits increased
primarily as a result of additional sales and marketing staff added during the
period and a $781,250 non-cash compensation expense related to stock options
which vested after the execution of the marketing agreement with United States
Surgical Corporation. Other expense increased during the quarter primarily from
an increase in travel, expenses associated with developing corporate brochures,
travel and taxes.
Nine months ended September 30, 1995 and 1996. During the nine-month period
ended September 30, 1996, the Company had net sales of $588,085 consisting of
sales of radiation-detection instruments of $219,700 and blood serology products
of $368,385. Interest income was $1,462,120 for the nine-month period. Other
income included approximately $230,000 related to fees from a potential
marketing partner for continuation of their option to market the Company's
product in parts of Asia. During the same period in 1995, the Company had net
sales of approximately $696,782 and interest income of $380,273. Product revenue
was primarily from the sale of blood group serology products by MonoCarb and
interest income was from the investment of the net proceeds from the Company's
financing activities. The increase in interest income in 1996 over the same
period of the prior year is due to the increase in cash, cash equivalents and
available-for-sale securities available for investment. There were no sales of
radiation-detection instruments to investigational sites nor under clinical
trial agreements for either period.
11
<PAGE> 12
Research and development expenses increased from $5.5 million during the first
nine months of 1995 to $10.9 million during the same period of 1996. These
expenses reflect the costs associated with conducting clinical trials, including
patient enrollment, training, compliance with all regulatory concerns of the FDA
and European regulatory authorities and manufacturing validation testing of the
Company's production facilities. Also included in these expenses are other costs
such as consulting services of experts and product development costs including
technology licenses acquired for internal development. The increase in research
and development expenses was the result of increases in wages and benefits from
$2.2 million in 1995 to $3.8 million in 1996 and clinical trials which increased
from $1.8 million to $3.8 million in 1996. Contracted services also increased
from $1.0 million in 1995 to $2.6 million in 1996. Wages and benefits increased
primarily from an increase in research and development staff and a $781,250
non-cash compensation expense related to stock options which vested after the
execution of the marketing agreement with United States Surgical Corporation.
Clinical trials increased over the previous period primarily from studies
associated with activated cellular therapy and costs associated with the
development of the Biologic License Application and the European marketing
application. Contracted services increased primarily due to costs related to
manufacturing validation and testing and to a non-cash expense of $500,000 from
technology licenses acquired for internal development. The Company anticipates
that certain of these costs will continue to increase through the end of 1996.
General and administrative expenses increased from $2.9 million during the first
nine months of 1995 to $5.1 million during the same period of 1996. The 1996
increase was primarily a result of increased wages and benefits and other
expenses. Wages and benefits increased primarily as a result of additional sales
and marketing staff added during the period and a $781,250 non-cash compensation
expense related to stock options which vested after the execution of the
marketing agreement with United States Surgical Corporation. Other expense
increased primarily related to developing corporate brochures, recruiting,
travel and taxes.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST OF EXHIBITS AND FINANCIAL STATEMENTS INCORPORATED BY REFERENCE
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1. Restated Certificate of Incorporation of Neoprobe Corporation,
as corrected February 18, 1994 and as amended June 27, 1994,
July 25, 1995 and June 3, 1996 (incorporated by reference to
Exhibit 99.2 to the Registrant's Current Report on Form 8-K
dated June 20, 1996; Commission File No. 0-26520).
3.2 Amended and Restated By-Laws dated July 21, 1993 (as amended
July 18, 1995 and May 30, 1996) (incorporated by reference to
Exhibit 99.4 to the Registrant's Current Report on Form 8-K
dated June 20, 1996; Commission File No. 0-26520).
(4) INSTRUMENTS DEFINING THE RIGHTS OF HOLDERS, INCLUDING
INDENTURES
4.1. See Articles FOUR, FIVE, SIX and SEVEN of the Restated
Certificate of Incorporation of the Registrant (see Exhibit
3.1).
4.2. See Articles II and VI and Section 2 of Article III and Section
4 of Article VII of the Amended and Restated By-Laws of the
Registrant (see Exhibit 3.2).
4.3 Specimen of Class E Redeemable Common Stock Purchase Warrant
certificate (incorporated by reference to Exhibit 4.9 to the
registration statement on Form S-1; No. 33-51446).
4.4 Warrant Agreement dated November 10, 1992 between Registrant
and Continental Stock Transfer & Trust Company (incorporated by
reference to Exhibit 4.4 to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1992;
Commission File No. 0-26520).
4.5. Supplemental Warrant Agreement dated November 12, 1993 between
the Registrant and Continental Stock Transfer & Trust Company
(incorporated by reference to Exhibit 4.5 of registration
statement on Form S-3; No. 33-72658).
4.6. Rights Agreement dated as of July 18, 1995 between the
Registrant and Continental Stock Transfer & Trust Company
(incorporated by reference to Exhibit 1 of the registration
statement on Form 8-A; Commission File No. 0-26520).
(10) MATERIAL CONTRACTS.
10.1.1. - 10.1.26. Reserved.
10.2.1. - 10.2.3. Reserved.
10.3.1. - 10.3.46. Reserved.
10.4.1. - 10.4.19. Reserved.
10.4.20.License and Distribution Agreement dated September 18, 1996
between Registrant and United States Surgical Corporation
(filed pursuant to Rule 24b-2 under which the Registrant has
requested confidential treatment of certain portions of this
exhibit ).*
13
<PAGE> 14
(11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS.
11.1. Computation of Net Loss Per Share.
(27) FINANCIAL DATA SCHEDULE.
27.1. Financial Data Schedule (submitted electronically for SEC
information only).
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the current period.
- ----------------------
* Previously filed.
14
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this amendment to be signed on its behalf by the undersigned, thereunto duly
authorized.
NEOPROBE CORPORATION
(Registrant)
By: /s/David C. Bupp
David C. Bupp, President and Chief
Operating Officer
Dated: February 27, 1997
By: /s/John Schroepfer
John Schroepfer, Vice President
Finance & Administration
(Principal Financial and Accounting
Officer)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE IN MANUALLY
NUMBER DESCRIPTION SIGNED ORIGINAL
<S> <C>
3.1 Restated Certificate of Incorporation of Neoprobe Corporation,
as corrected February 18, 1994 and as amended June 27, 1994,
July 25, 1995 and June 3, 1996 *
3.2 Amended and Restated By-Laws dated July 21, 1993 (as
amended July 18, 1995 and May 30, 1996) *
4.1. See Articles FOUR, FIVE, SIX and SEVEN of the Restated *
Certificate of Incorporation of Registrant
4.2. See Articles II and VI and Section 2 of Article III and Section 4
of Article VII of the Amended and Restated By-Laws of
Registrant *
4.3. Specimen of Class E Redeemable Common Stock Purchase
Warrant *
4.4. Warrant Agreement dated November 10, 1992 *
4.5. Supplemental Warrant Agreement dated November 12, 1993 *
4.6. Rights Agreement between the Registrant and Continental Stock *
Transfer & Trust Company dated July 18, 1995
10.1.1.- Reserved.
10.1.26.
10.2.1.- Reserved.
10.2.33.
10.3.1.- Reserved.
10.3.46.
10.4.1.- Reserved
10.4.19.
10.4.20. License and Distribution Agreement dated September 18, 1996
between Registrant and United States Surgical Corporation **
(filed pursuant to Rule 24b-2 under which the Registrant has
requested confidential treatment of certain portions of
this exhibit).
11.1. Computation of Net Loss Per Share
27.1. Financial Data Schedule (submitted electronically for SEC
information only).
</TABLE>
- ---------------
*Incorporated by reference.
**Previously filed.
16
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 11.1
NEOPROBE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1996 1995 1996
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net Loss ($2,516,095) ($6,227,065) ($7,540,445) ($14,175,882)
Weighted average number of shares outstanding:
Weighted average common shares
outstanding beginning of period 15,979,199 19,957,125 10,854,515 17,334,800
Weighted average common shares
issued during period 76,965 95,246 3,124,129 1,738,430
----------- ----------- ----------- ------------
Weighted average number of shares
outstanding used in computing
primary net loss per share 16,056,164 20,052,371 13,978,644 19,073,230
=========== =========== =========== ============
Weighted average number of shares
used in computing fully diluted
net loss per share 16,056,164 20,052,371 13,978,644 19,073,230
=========== =========== =========== ============
Earnings (Net Loss) Per Share:
Primary ($0.16) ($0.31) ($0.54) ($0.74)
=========== =========== =========== ============
Fully diluted ($0.16) ($0.31) ($0.54) ($0.74)
=========== =========== =========== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 27,094,865
<SECURITIES> 14,542,600
<RECEIVABLES> 181,128
<ALLOWANCES> 0
<INVENTORY> 551,328
<CURRENT-ASSETS> 1,802,204
<PP&E> 5,269,742
<DEPRECIATION> 0
<TOTAL-ASSETS> 53,065,110
<CURRENT-LIABILITIES> 5,567,544
<BONDS> 1,026,664
0
0
<COMMON> 20,153
<OTHER-SE> 46,450,749
<TOTAL-LIABILITY-AND-EQUITY> 53,065,110
<SALES> 588,085
<TOTAL-REVENUES> 588,085
<CGS> 332,013
<TOTAL-COSTS> 332,013
<OTHER-EXPENSES> 10,921,903
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,931
<INCOME-PRETAX> (14,175,882)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,175,882)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,175,882)
<EPS-PRIMARY> (.74)
<EPS-DILUTED> (.74)
</TABLE>
