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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended: December 31, 1997
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: 0-26520
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NEOPROBE CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 31-1080091
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(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
425 Metro Place North, Suite 300, Dublin, Ohio 43017-1367
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: (614) 793-7500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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(Title of Class)
Rights to Purchase Series A Junior Participating Preferred Stock
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(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of shares of Common Stock held by non-affiliates of
the Registrant on February 28, 1998 was $104,359,314.
The number of shares of Common Stock outstanding on February 28, 1998 was
22,799,555.
The following documents have been incorporated by reference into this Form
10-K:
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Document Part of Form 10-K
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Registrant's Proxy Statement for its
1998 Annual Meeting of Stockholders Part III
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Neoprobe Corporation, a Delaware corporation ("Neoprobe" or the "Company"), was
incorporated in the State of Ohio in 1983 and reincorporated in the State of
Delaware in 1988. The Company's executive offices are located at 425 Metro
Place North, Dublin, Ohio 43017-1367. The telephone number at that address is
(614) 793-7500.
Since inception, the Company has devoted substantially all of its efforts and
resources to research and clinical development of its proprietary RIGS(R)
technology (radioimmunoguided surgery). Since 1992, the Company has completed
a series of clinical trials for its lead product, RIGScan(R) CR49 (125I-CC49
monoclonal antibody), for the surgical detection of metastatic colorectal
cancer. During 1996, the Company submitted applications to European and U.S.
regulatory agencies requesting permits to begin marketing the Company's RIGS
products for the detection of metastatic colorectal cancer. Late in the fourth
quarter of 1997, the Company received requests for further information from
United States and European regulatory agencies following review of its
application. Consequently, during the first quarter of 1998, the Company
implemented a business plan to reduce operating expenses and focus on three
main business objectives: commercializing its RIGScan CR49 diagnostic product
for the surgical detection of metastatic colorectal cancer, increasing the
Company's market position in device sales for intraoperative lymphatic mapping
and other gamma guided surgery applications, and developing activated cellular
therapy products for cancer and viral diseases. The Company reduced its
domestic staff by approximately 20%, reducing its annual compensation expense
by approximately $1.6 million, and postponed research projects for earlier
stage RIGS diagnostic products which were expected to be carried out in 1998.
The RIGS Technology
Neoprobe has developed the first patented, intraoperative diagnostic tool that
enables real-time cancer detection for most solid-tumor cancers. The Company
believes that its proprietary RIGS technology enhances the surgeon's ability to
locate more precisely and excise more completely occult (hidden) tumors. The
RIGS system combines a patented hand-held radiation (gamma ray) detection
probe, radiolabeled cancer targeting agents, called RIGScan products, and a
patented surgical method for identifying and locating cancerous tissue. The
Company's proprietary targeting agents are monoclonal antibodies or peptides,
labeled with a radioactive isotope that emits low energy gamma rays. Before
surgery, a cancer patient is injected with one of the RIGScan targeting agents
which circulates throughout the patient's body and binds specifically to cancer
cell antigens or receptors. Concentrations of the targeting agent in even very
small areas of tissues are then located during surgery by Neoprobe's
gamma-detecting instrument, which emits an audible tone to direct the surgeon
to targeted tissue.
Current cancer detection techniques do not always identify all tumors present.
Existing presurgical imaging techniques often do not allow the surgeon to
distinguish clearly between cancerous and other abnormal tissue. For most
solid-tumor cancers, current intraoperative detection is limited to what the
surgeon can see and feel. The limitations of these techniques can result in
small or occult tumors being left undetected. The Company believes that the
RIGS system provides precise tumor detection information to the surgeon during
the course of surgery that can lead to improved diagnosis and staging of cancer
patients and, as a result, improved surgical outcomes.
Since 1992, more than 700 patients have participated in several phases of
clinical trials for surgical detection of primary and metastatic colorectal
cancer using the Company's lead product, RIGScan CR49. During 1995, the
Company completed a pivotal Phase III clinical trial with RIGScan CR49 for
patients with metastatic colorectal cancer. During 1996, the Company submitted
applications to the European and U.S. regulatory agencies to request permits to
begin marketing the Company's RIGS products for the detection of metastatic
colorectal cancer. In November 1997, the Company withdrew its application
from the European Agency for the Evaluation of Medicinal Products ("EMEA") as a
result of additional requests for information from the European Committee for
Proprietary Medicinal Products ("CPMP"). In addition, in December 1997, the
Center for Biologics Evaluation and Research ("CBER") of the United States Food
and Drug Administration ("FDA") completed its review of the Company's Biologics
License Application ("BLA") and determined that additional information must be
provided before it can further consider the marketing approval of the Company's
product. The Company currently intends to submit an amendment to the BLA and
resubmit the European dossier with additional information as soon as possible.
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In addition, the Company has completed testing in a separate 287-patient,
multicenter pivotal Phase III clinical trial for the surgical detection of
primary colorectal cancer. Neoprobe may incorporate data from this trial in
its resubmission to the EMEA and may file an amendment to its BLA with the FDA
for this indication. There can be no assurance that the Company's RIGS
products will be approved for marketing by the FDA or the EMEA, or that any
such products will be successfully introduced or achieve market acceptance.
See "Risk Factors -- Government Regulation."
Intraoperative Lymphatic Mapping and Other Gamma Guided Surgery Instrument
Applications
During 1997, the Company launched an enhanced gamma detector, the Neoprobe(R)
1500 Portable Radioisotope Detector, in response to an emerging new technique,
called intraoperative lymphatic mapping, for treating patients with melanoma, a
potentially deadly form of skin cancer. The procedure has been used as a
minimally invasive surgical technique for "staging" a patient's disease.
Surgeons use lymphatic mapping to help trace the lymphatic patterns in a
patient to evaluate the potential tumor drainage and metastases, or spread.
The technique does not detect cancer; it helps surgeons find the first lymph
node(s) to which tumor is likely to drain and spread. That node (sometimes
referred to as the "sentinel" node) may provide critical information about the
stage of a patient's disease.
Intraoperative lymphatic mapping begins with a patient being injected at the
site of the main tumor with a commercially available radioactive tracing agent;
e.g., filtered sulphur colloid labeled with Technetium-99m, a radioactive
element. The agent is intended to follow the same lymphatic flow as the cancer
would if it had metastasized. The surgeon may then track the agent's path with
the probe, thus following the potential avenues of metastases and identifying
lymph nodes to be biopsied for evaluation and determination of cancer spread.
Surgeons are also investigating the technique for patients with breast cancer.
Several large multicenter clinical trials began in 1997, including studies
sponsored by the U.S. Department of Defense and the National Cancer Institute.
Lymphatic mapping has become the standard of care for treating patients with
melanoma at many institutions. The Company supports this research through
training support, technical expertise and device placement. Surgeons have also
found the technique useful in staging patients with vulvar and penile cancers.
The Company will continue to work with thought leaders in the surgical
community to set up and support training courses internationally for lymphatic
mapping. Courses were held for over 350 surgeons during 1997 at such
institutions as M.D. Anderson Cancer Center, the University of Washington , the
Netherlands Cancer Institute, the University of Louisville and H. Lee Moffitt
Cancer Center and Research Institute. Additional training centers are expected
to open during 1998.
The Company is currently selling the Neoprobe 1500 instrument for lymphatic
mapping and other gamma guided surgery applications and expanding its line of
instruments to provide a variety of gamma-detecting probes for specialized uses.
The growing use of the lymphatic mapping technique by surgeons has helped
generate revenue for the Company of approximately $5 million during 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
In addition to lymphatic mapping, surgeons are using Neoprobe's device for other
gamma guided surgery applications such as locating enlarged cancerous
parathyroid gland; for intraoperative localization of osteoid osteomas, small
painful bone lesions and in surgical biopsy of suspected spread of cancer to the
bone (osseous metastases).
ACTIVATED CELLULAR THERAPY FOR CANCER AND VIRAL DISEASE
The third key focus of Neoprobe's current business activity is in developing
activated cellular ("ACT") for applications in cancer and viral disease.
Neoprobe's method for treating colorectal cancer with RIGS/ACT(TM) (RIGS
technology based activated cellular therapy) was discovered in the course of
clinical trials for its RIGScan CR49 diagnostic products. It is an
experimental form of cellular therapy that attempts to stimulate the patient's
own immune system to fight the cancer. While conducting RIGS clinical trials,
Neoprobe's researchers found that lymph nodes identified as positive by the
RIGS system contained an unusual abundance of cancer-fighting helper T cells
(CD4+ lymphocytes). These helper cells secrete chemical messages that are
important in directing the body's immune response to disease. Neoprobe's
researchers found that they could locate, remove, and proliferate the helper T
lymphocytes in the laboratory very quickly and in large numbers. Within 10 to
14 days, more than 1 billion lymphocytes can be infused into the patient with
apparently limited, mild side effects. The Company believes that except for
detection by the RIGS system, there is currently no other way to find these
special lymph
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nodes. In Company-sponsored tests, Random RIGS-negative lymph nodes were
subjected to the same process but did not show the same ability to stimulate an
immune response to the cancer.
In 1997, Neoprobe opened its first corporate Investigational New Drug
Application ("IND") for multicenter trials using RIGS/ACT in metastatic
colorectal cancer patients. These trials are based on results of an earlier
Phase I/II single-site study at The Ohio State University showing that the
therapy is feasible, appears to be safe and shows biologic activity against
tumor. Also, cell processing for the therapy appears to be faster and simpler
than processes for other cell therapy products. One study under the new IND is
a Phase I/II multicenter trial to investigate the use of RIGS/ACT in patients
with recurrent but resectable colorectal cancer. Another clinical trial under
the IND is a Phase II multicenter trial using RIGS/ACT with chemotherapy in
patients with unresectable recurrent colorectal cancer.
The Company has applied the same idea of using helper T cells from lymph nodes
to provide activated cellular therapy to stimulate the immune system of
HIV/AIDS patients. Based on promising results of a study of the technique in
cats with feline leukemia, a disease caused by a virus that is similar to human
HIV/AIDS, Neoprobe completed a pilot study at The Ohio State University with
HIV/AIDS patients. Physicians removed enlarged lymph nodes in outpatient
surgery, used the same cell processing for the helper T cells as for the
RIGS/ACT cancer patients, and reinfused the HIV/AIDS patients' own, now
activated and greatly expanded immune cells. Results of the pilot trial, to be
published in 1998, led to the opening of a Phase I trial in early 1998 at the
Miami VA Medical Center in Florida. The trial will test ACT in HIV/AIDS
patients who also have chronic active hepatitis B or C. It is the first of a
series of small studies in precisely targeted HIV/AIDS patient populations.
ACT used in HIV/AIDS patients, rather than using the RIGS system for
identifying lymph nodes, uses palpable, or enlarged, lymph nodes that
physicians can feel from outside the body. There can be no assurance that any
of the Company's products in development will be successfully developed, tested
or licensed or that any such products will gain market acceptance. See "Risk
Factors - Government Regulation."
Product Development Strategy
Neoprobe's development strategy is to commercialize products based upon
technologies that are patented or exclusively licensed by the Company for
diagnosis and treatment of patients with cancer. Neoprobe will also seek to
out-license a range of products based upon technologies that are patented or
exclusively licensed by the Company for treatment of patients with HIV/AIDS and
other viral diseases. All of Neoprobe's products in development stem directly
or indirectly from scientific studies with the Company's core RIGS surgical
diagnostic technology, which consists of cancer-specific targeting agents used
with the Company's hand-held gamma-detection device. Potential revenues from
these diagnostic products will come from sales of Neoprobe's devices and sales
of single patient doses of the injectable targeting agent. In addition, the
Company's gamma-detecting devices have been enhanced for use with commercially
available radiopharmaceuticals for intraoperative lymphatic mapping and other
gamma-guided surgery applications. The Company is further developing its
flagship RIGScan CR49 product to provide activated cellular therapy (ACT) to
treat colorectal cancer patients who may not be able to benefit from surgery
alone. Potential revenues from therapy products may come from sales of
devices, patient doses of the targeting agent, and proprietary cell processing
services. And finally, Neoprobe is developing its ACT process as a therapy for
HIV/AIDS patients, with potential revenues coming from proprietary cell
processing services.
RIGS System Targeting Agents. The drug component of each RIGS diagnostic
surgical product, called RIGScan products, is a cancer-specific monoclonal
antibody, antibody fragment, or peptide. Antibodies and antibody fragments are
proteins that can recognize and selectively attach to specific substances in
the body, called antigens. Each type of antibody recognizes and binds
specifically to a single type of antigen. The role of natural antibodies in
the body's immune system is to detect and defend the body from foreign
substances. Monoclonal antibodies ("MAbs") are antibodies produced in the
laboratory by cells that are genetically identical and, therefore, yield the
same product. MAbs have identical specificity for a single portion of the
targeted antigen molecule, such as one associated with cancer cells. Peptides,
which are much smaller molecules than monoclonal antibodies, may also be used
as targeting agents. A peptide is a compound which is derived from a protein
molecule which recognizes and binds specifically to certain sites, called
receptors, on the surface of certain cells. The targeting agents used by
Neoprobe are the proprietary products of others and have been exclusively
licensed by Neoprobe for use with the RIGS technology. See "Risk Factors -- No
Assurance of Continued Rights to Targeting Agents; Royalty Payments."
Neoprobe has global rights to various antibodies and peptides that target
cancer exclusively for use with the RIGS technology. These targeting agents
include the anti-tumor-associated glycoprotein ("TAG") monoclonal antibodies
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that were developed by the National Cancer Institute of the National Institutes
of Health ("NCI/NIH"). The TAG antibodies target a broad range of cancer
types, including colorectal, ovarian, lung, and pancreatic cancers. From that
class of antibodies, Neoprobe has selected the whole murine antibody CC49 for
its first product for colorectal cancer.
Attaching a radioisotope to a targeting agent produces a radiolabeled targeting
agent which is potentially useful for cancer detection. The gamma radiation
emanating from the radioisotope is detected by the Company's hand-held
instrument. Based on laboratory and clinical studies, Neoprobe has determined
that the preferred radiolabel for RIGS targeting agents is the radioactive
isotope iodine-125 (125I). This isotope emits low-energy radiation that the
Company believes is most effective for intraoperative tumor detection with a
hand-held probe. The low-energy radiation of 125I permits the surgeon to
identify the cancerous tissue with a level of precision not possible with
higher energy isotopes. In order to use 125I effectively, thyroid-blocking
medication is administered to block absorption of the radioactive iodine by the
patient's thyroid gland.
The RIGS technology has been used in over 1,600 surgeries during clinical
research in more than 60 medical institutions and cancer centers worldwide. The
majority of the clinical research supports the Company's work with RIGScan CR49
for colorectal cancer, and Neoprobe's current focus is on completing
commercialization of this product. During 1997, Neoprobe provided surgeons with
access to the product under emergency and compassionate use protocols and
developed a protocol for a multicenter feasibility study using the product for
adenocarcinoma cancers found in other regions of the body besides the colon and
rectum. These cancers, including stomach, ovarian, pancreatic and endometrial
cancers, represent potential opportunities for future line extension use of
RIGScan CR49.
Neoprobe also tests other targeting agents for use with the RIGS system for
surgical detection of other types of cancer because the Company believes that
the technology is ultimately applicable to all solid tumors (i.e., those that
do not originate in blood or the lymph system). However, clinical programs for
other RIGS surgical diagnostic products are on temporary hold until the RIGScan
CR49 program is complete and the product is on the market.
Early clinical testing has been completed for breast, ovarian and
neuroendocrine/neuroblastoma cancers. For breast cancer, Neoprobe has
completed early trials with two TAG antibodies, B72.3 and CC49; a peptide
"lanreotide" licensed from Biomeasure Incorporated ("Biomeasure"); and
NR-LU-10, an antibody fragment licensed from NeoRx Corporation ("NeoRx"). See
"-- License and Technology Agreements." For ovarian cancer, the Company has
completed a small trial with the CC49 TAG antibody and preclinical studies to
prepare for clinical tests with NR-LU-10. For adult neuroendocrine cancer and
for neuroblastoma, early trials have been completed with lanreotide. Neoprobe
also has long-term plans to develop RIGS diagnostic products for surgical
detection of prostate and lung cancers.
The Company believes results of these various studies to date with cancer types
other than colorectal cancer demonstrate the potential of the RIGS technology to
assist surgeons by providing immediate, additional, otherwise unavailable
information during surgery about the extent and location of a patient's cancer.
Once RIGScan CR49 receives marketing approval and is launched, testing of these
additional RIGS diagnostic products can resume, and Neoprobe will pursue the
most promising product candidates tailored for each type of cancer.
Gamma-detecting Instrumentation. Before launching the Neoprobe 1500 instrument
in 1997, the first-generation gamma-detecting probe, the Neoprobe 1000 device,
was used for RIGScan CR49 pivotal trials and other RIGS product clinical
development. The patented Neoprobe 1000 instrument consists of a hand-held
gamma-ray-detection probe and a software-driven control unit. The reusable
probe is a stainless steel tube with an angled tip for ease of maneuverability.
The detection device in the tip of the probe is a highly radiosensitive
crystal that relays a signal through a preamplifier to the control unit to
produce both a digital readout and an audible signal. The detector element
fits in a housing approximately the size of a pocket flashlight. For RIGS
applications, the audible signal threshold level is adjusted to eliminate the
sound when the probe is over normal tissue. During RIGS surgery, the surgeon
uses the probe as a diagnostic tool to evaluate tissue for presence of cancer.
The instrument gives an audible signal to indicate the presence of a
radiolabeled targeting agent concentrated in tissue. Neoprobe's
first-generation instrument received FDA 510(k) clearance for marketing as a
gamma-radiation detector in December 1986. A modified Neoprobe 1000 also
received FDA 510(k) clearance for marketing in June 1992. A second
modification to the Neoprobe 1000 received FDA 510(k) clearance in February
1995.
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The enhanced Neoprobe 1500 instrument received a 510(k) clearance for marketing
from the FDA in June 1997 and was launched in October 1997. The enhanced
instrument has several new and unique features to meet surgeons' needs. It has
an added, special sound-guided localization feature which allows the user to
customize the device for different surgical procedures, including lymphatic
mapping. It is the only device on the market which can detect all commercially
available radioisotopes, and it is the only instrument which can also be used
with Neoprobe's RIGS technology, once a RIGS product has received marketing
approval. As a result of changes in the statutes regulating the Neoprobe 1500
device, the Company will not need to submit 510(k) applications for future
modifications to the Neoprobe device.
The Company is pursuing an aggressive instrument development program to improve
functionality and ease of use and to create a family of probe components for
specialized uses, such as three reusable probe tips which are lightweight,
easily sterilized, and used with a disposable handle, and a patented
laparoscopic probe for minimally invasive surgical procedures.
Activated Cellular Therapy Products. Neoprobe's clinical development strategy
for its activated cellular therapy products in both the oncology and viral
disease arenas is to complete earlier stage pilot/Phase I/Phase II trials to
establish proof of concept for the products. With sufficient safety,
feasibility and preliminary efficacy results from a cost efficient clinical
program, Neoprobe plans to engage a corporate development and marketing partner
who will support pivotal testing and commercialization of these products.
MARKETING AND DISTRIBUTION
The Company intends to establish a strategic alliance with a partner or partners
to market RIGS surgical cancer products and RIGS/ACT products. The Company will
pursue alliances which may also provide financial support to research and
development efforts for future products. The Company is currently engaged in
discussions with medical and/or pharmaceutical companies that have established
marketing capabilities in the United States and Europe and in many developing
countries. In September 1996, the Company executed a License and
Distributorship Agreement with the United States Surgical Corporation ("USSC")
giving USSC exclusive worldwide sales and marketing rights (excluding Korea and
certain other Pacific Rim countries) for the Company's RIGS surgical cancer
detection products. Effective October 17, 1997, the Company and USSC mutually
agreed to terminate the agreement, as amended. There can be no assurance that
the Company will be able to enter into marketing agreements on terms favorable
to the Company. See "Risk Factors -- Limited Marketing Experience." Beginning in
1996, the Company began building its internal marketing capability and expertise
in the field of lymphatic mapping in order to fully capitalize on the growing
gamma-guided surgery market. The Company anticipates using its internal
marketing expertise to provide training and technical support to a partner to
hasten the partners impact.
Initial marketing efforts in the United States will be directed to the
approximately 500 teaching hospitals and cancer institutions, whose adoption of
the RIGS system may promote its general use by surgeons. These institutions
perform a large number of cancer surgeries and have historically been willing
to purchase and use new technologies. In addition, these institutions employ a
large number of influential individuals in the cancer field, whose support
could favorably influence RIGS product sales. Twenty-eight of these
institutions are or have been involved in Neoprobe's clinical studies. Neoprobe
expects that its marketing efforts will ultimately be directed to the
approximately 1,600 largest institutions in the United States (those with 200
or more beds per institution). Neoprobe also plans to develop markets for RIGS
products in Europe, focusing on similar categories of physician specialists and
institutions.
Neoprobe's success will depend upon wide acceptance of the RIGS technology as a
cancer diagnostic and treatment technology. Neoprobe must educate the medical
community on the utility and proper use of the RIGS technology. Neoprobe's
medical and scientific researchers have been educating the medical community
about the RIGS system through trade shows, symposia, articles and scientific
abstracts published in select medical journals, and other activities. Neoprobe
intends to continue these activities prior to commercialization of the first
RIGS product, with the goal of becoming the leader in the development and
commercialization of intraoperative diagnostic products to assist surgeons in
the treatment of solid-tumor cancers. Although Neoprobe will seek to establish
the RIGS method as standard surgical procedure for treatment of solid-tumor
cancers, there can be no assurance that Neoprobe's proposed products will
achieve market acceptance. See "Risk Factors -- Dependence upon Principal
Product Line; Uncertainty of Market Acceptance."
In August 1995, the Company signed a Strategic Marketing Agreement with Damon
Pharm. Ltd. ("Damon") granting exclusive marketing and distribution rights in
Korea for RIGScan products. Under the agreement, Damon is responsible for
conducting clinical trials using RIGScan products, and submitting regulatory
applications for marketing the products in Korea. The Company, in turn, provides
RIGS products at agreed upon transfer prices and receives a royalty on all sales
of products. Damon purchased 154,575 shares of Common Stock from the Company at
market-related prices. Damon also paid an option fee to the Company in October
1995 for an option to market RIGScan products in certain southeast Asian
countries. During 1996, Damon exercised the option and paid the additional
license
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fee for marketing rights in the countries of Taiwan, Thailand and Singapore.
The agreement may not be terminated except for a material breach by either
party. In February 1996, Damon obtained regulatory approval for RIGScan CR49
in South Korea.
In 1995, Neoprobe entered into distribution service agreements with Syncor
International Corporation ("Syncor") and MDS Nordion S.A. ("Nordion-Europe").
Syncor will provide distribution services for RIGScan products in North America
and certain Asian markets. The distribution services include delivery of RIGScan
products to nuclear pharmacies in the aforementioned territories. In addition,
Syncor has agreed to assist in the marketing of RIGScan products to nuclear
medicine departments and in the training of nuclear medicine physicians in the
use of RIGScan products. The agreement with Nordion-Europe covers similar
distribution services for RIGScan products in Europe, Africa, and the Middle
East. In addition, Nordion-Europe has agreed to handle final release testing of
RIGScan products in accordance with European regulatory guidelines and to
provide customer billing services for RIGScan products at Neoprobe's request.
Both Syncor and Nordion-Europe will be paid fees based upon the number of doses
of RIGScan which are delivered to hospitals in their respective distribution
territories. The Company believes that the service agreements with Syncor and
Nordion-Europe position Neoprobe to deliver RIGScan products to hospitals
through established radiopharmaceutical channels.
MANUFACTURING
Manufacture of Targeting Agents. In March 1995, Neoprobe entered into a
manufacturing and supply agreement with Gist-brocades Bio-Intermediair B.V., a
Dutch corporation ("Bio-Intermediair"), for the production of monoclonal
antibodies to use in conjunction with Neoprobe's RIGS technology. Under this
contract, Bio-Intermediair manufactures CC49 MAb for the Company in compliance
with Good Manufacturing Practices ("GMP"). The term of the agreement is three
years after regulatory approval to market a CC49 based product in the United
States or Europe and may be automatically extended for one year on each
anniversary of the agreement. The agreement may be terminated by Neoprobe or by
Bio-Intermediair upon specified notice or on a material default.
Bio-Intermediair is a provider of GMP manufacturing services, specializing in
pilot to large scale cell culture and production of biopharmaceuticals.
Bio-Intermediair has been inspected by the Dutch regulatory agency and found to
be in full compliance with European GMP, satisfying member requirements of the
Pharmaceutical Inspection Convention. This same agency certified
Bio-Intermediair and its facility to produce monoclonal antibodies, and other
biological products for human clinical applications. This certification is
accepted by the member countries of the Pharmaceutical Inspection Convention,
including most of the European countries and Australia. The FDA has also
conducted a pre-approval inspection in November 1997 in connection with the
RIGScan BLA filing. Neoprobe has been provided with a list of the observations
and has determined that there are no substantive barriers to approval of the
facility.
Neoprobe Europe AB, ("Neoprobe Europe") formerly called NEWMonoCarb AB, is
located in Lund, Sweden, and leases a facility there for the production and
purification of monoclonal antibodies. A small state-of-the-art filling
facility has been installed at Neoprobe Europe to fill vials for subsequent
radiolabeling. During 1997, Neoprobe Europe's filling operation was inspected
by the Swedish regulatory authorities and received a five year operating
certificate. This certification permits Neoprobe Europe to conduct small-scale
filling operations for CC49 on a commercial basis. In November 1997, the FDA
also conducted a pre-approval inspection of the filling facility in connection
with the RIGScan CR49 BLA filing. Neoprobe has determined that there are no
obstacles which will prevent approval of the facility. See "Risk Factors --
Limited Manufacturing Capacity and Experience."
Radiolabeling. In April 1993, Neoprobe entered into a clinical and commercial
supply agreement with MDS Nordion ("Nordion"), one of the largest suppliers in
the world of radioisotopes to nuclear medicine departments, for the
radiolabeling of Neoprobe's monoclonal antibodies with 125I for clinical trials
and commercial sale after regulatory approval to market such products has been
granted. Pursuant to this agreement, Neoprobe paid Nordion an initial cash
payment, and has made additional cash payments to support the validation of the
manufacture of RIGScan CR49. Nordion began shipping RIGScan CR49 for Neoprobe's
Phase III studies in August 1994. The term of the agreement is for a minimum of
three years after Neoprobe is granted approval to market in the United States or
Europe, subject to renewal and early termination in certain events.
Additionally, Neoprobe has agreed to purchase certain quantities of the
radiolabeled antibody throughout the term of the agreement at prices already set
or to be determined based on current information at the time of commercial
approval.
In 1994, Neoprobe (Israel) Ltd. ("Neoprobe (Israel)") was organized under the
laws of the State of Israel as a subsidiary of the Company to construct and
operate a radiolabeling facility for the Company's targeting agents. A
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Facility Agreement has been executed by the Company, Neoprobe (Israel) and
Rotem Industries Ltd. ("Rotem"), under which Rotem would manage the facility
and has a minority equity interest in Neoprobe (Israel), which it can increase
under certain circumstances. The construction of the facility has been
completed and installation of equipment is expected to be completed during the
second quarter of 1998.
Neoprobe Instruments. In August 1996, the Company entered into a Manufacturing
and Supply Agreement with RELA, Inc. of Boulder Colorado ("RELA"), a developer
and manufacturer of medical devices. Under the agreement RELA manufactured
Neoprobe 1000 instruments for the Company. During the fourth quarter of 1997,
the Company introduced the Neoprobe 1500 system. The Company continues to use
RELA for the production of the Neoprobe 1500 instrument. The Company may
decide to use a separate third party manufacturer for the next generation
Neoprobe system.
LICENSE AND TECHNOLOGY AGREEMENTS
The Dow Chemical Company. Neoprobe and The Dow Chemical Company ("Dow") are
parties to a series of agreements relating to the development and
commercialization of drug products useful in the field of gamma-guided surgery.
Under an agreement executed in 1992 (the "Primary Agreement"), Dow granted
Neoprobe a sub-license to Dow's rights to the use of certain monoclonal
antibodies (MAb), including CC49 which Dow derived from its license with
NIH/NCI. The rights granted by Dow include a worldwide exclusive license to
make, use and sell CC49 MAb for use as a RIGS technology product.
Additionally, Neoprobe was granted an option to acquire a sublicense to Dow's
rights to certain monoclonal antibodies related to CC49.
Neoprobe's sublicense of CC49 from Dow is subject to a commercial license
agreement between Dow and NCI/NIH under which NCI/NIH reserved the right to use
CC49 for government purposes. If the Dow-NCI/NIH commercial license agreement
is terminated for any reason, including a default by Dow, the Dow-NCI/NIH
commercial license agreement allows Neoprobe to apply for a license for
antibodies previously granted by Dow to Neoprobe (subject to approval and
acceptance by NCI/NIH). If the Dow-NCI/NIH commercial license agreement is
terminated, the Dow-Neoprobe agreement allows Neoprobe to either obtain a
license directly from NCI/NIH (subject to approval and acceptance by NCI/NIH)
or to terminate provisions of the Dow-Neoprobe agreement that relate to the
Dow-NCI/NIH commercial license agreement.
In May 1996, Neoprobe and Dow executed an agreement under which Dow granted
Neoprobe exclusive global rights to certain proprietary "linkers" and linker
technology. A linker is a compound which joins a radioisotope (e.g., 123 I,
125 I, and 131 I) to a monoclonal antibody or steroid. Neoprobe was granted
exclusive rights to make, use and sell radiopharmaceutical products containing
such linkers in the field of radioimmunoguided surgery (RIGS) and
radioimmunotherapy (RIT). Dow received 124,805 shares of Neoprobe Common Stock
in exchange for the rights granted to Neoprobe. According to the Company's
latest information, Dow currently holds 847,920 shares of Neoprobe Common
Stock.
The Ohio State University Research Foundation ("OSURF"). Neoprobe and The Ohio
State University ("OSU") have had a long-term relationship involving the
collaboration of OSU medical and research personnel on various clinical and
sponsored research projects. In April 1992, Neoprobe and OSURF entered into an
agreement (the "Master Agreement") under which Neoprobe was granted exclusive,
global rights to OSURF's interest in all inventions developed as a result of
research funded by Neoprobe under the Master Agreement. The Master Agreement
expired in March 1997. Since that time, each clinical study and research
project funded by Neoprobe at OSU is covered by a separate agreement containing
as an essential term, an option to Neoprobe to acquire exclusive, global rights
to any invention developed under such agreement.
Dow, OSURF and Neoprobe License Agreement. In April 1992, Dow with the consent
of OSURF, sublicensed to Neoprobe, Dow's rights to certain activated cellular
therapy technology flowing from a research agreement between Dow and OSURF
entered into in May 1991. Under Neoprobe's agreement with Dow, Neoprobe has
the right to make, use and sell products and services utilizing licensed
technology for activated cellular therapy in combination with RIGS. The
sublicense remains in effect as long as Neoprobe is not in breach of the
sublicense agreement or the Primary Agreement.
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Cira Technologies, Inc. In 1996, Neoprobe and Cira Technologies, Inc. ("Cira")
entered into a Technology Option Agreement under which Cira granted to Neoprobe
the right to acquire an exclusive, global license to make, use and sell
products and services embodying, and/or produced by the "Primary Technology."
The Primary Technology includes cell processing technology, inventions,
discoveries and patent applications directed to the preparation of a
therapeutic agent for treatment of human immunodeficiency virus in HIV infected
human patients which agent is derived from lymph nodes excised from the same
patient as the one to be treated. Provided that Neoprobe exercises the option
to acquire exclusive rights to the Primary Technology, Neoprobe also has an
option to acquire exclusive, global rights to the use of the cell processing
technology to prepare therapeutic agents for the treatment of
chronically-infected and/or autoimmune afflicted human patients. In
consideration of the options granted to it by Cira, Neoprobe agreed to fund a
Phase I study up to an amount not to exceed $500,000. Neoprobe has a period of
time after the close of the Phase I study to exercise its option to acquire a
license to the Primary Technology. The Company and Cira also cross licensed
improvements in activated cellular therapy. In addition to technology rights,
the Company obtained an option to increase its interest in Cira by 15%. The
exercise price of this option is 15% of the fair market value of Cira's
outstanding securities on the earlier of the third anniversary of a license
agreement under the Technology Option Agreement, or the commencement of a
pivotal clinical trial study, subject to a minimum of $1.95 million and a
maximum of $4.5 million.
South Florida Veteran Affairs Foundation For Research & Education, Inc.
("SFVA"). In May 1997, Neoprobe entered into a Research Agreement with SFVA
covering a clinical trial to be conducted under the direction of Dr. Nancy
Klimas. The purpose of the trial is to determine the safety and efficacy of a
therapeutic agent derived using Cira's proprietary technology for the treatment
of HIV infected patients as well as HIV infected patients cross-infected with
other chronic viral conditions; e.g., hepatitis. Under the terms of the
agreement Neoprobe is granted an option to acquire an exclusive license to any
inventions made by SFVA during the course of the clinical trial. Neoprobe's
funding of this clinical trial is the consideration for the exclusive option
granted to it by Cira.
PATENTS AND PROPRIETARY RIGHTS
Proprietary protection for Neoprobe's products is important to Neoprobe's
business. Neoprobe's policy is to seek to protect its technology by, among
other things, filing patent applications for technology that is considered
important to the development of its business. Certain aspects of Neoprobe's
RIGS technology are claimed in the United States in U.S. Patent No. 4,782,840,
which, provided that required maintenance fees are paid, expires in 2005. Under
the Patent Term Restoration Act, Neoprobe is eligible to apply for a three to
five-year patent term extension. The Company plans to apply for an extension
within 60 days of FDA marketing approval of RIGScan(R) CR49, the first RIGS
system product.
CC49, the monoclonal antibody used in RIGScan CR49 is covered by U.S. Patent
No. 5,512,442 (assigned to the United States of America). By virtue of the
Company's license with Dow, Neoprobe has the exclusive right to make, use, and
sell the patented monoclonal antibody for use in radioimmunoguided surgery.
Neoprobe holds numerous United States and foreign patents and patent
applications covering portable, hand-held, gamma-radiation detection devices
and device components; e.g., gamma-radiation detection probes. The Company
continues to develop new and improved device products for use in intraoperative
lymphatic mapping and gamma-guided surgery. United States and foreign patent
applications will be filed on new devices and device improvements as they are
made.
Neoprobe is licensed to patent applications owned by OSURF covering the use of
activated cellular therapy to treat certain cancers and to patent applications
owned by Cira covering the use of activated cellular therapy to treat HIV
infected patients. The timing of issuance of the U.S. patents cannot be
predicted. However, once issued, the U.S. patents will be important additions
to the patent estate owned or controlled by the Company.
The patent position of biotechnology firms, including Neoprobe, generally is
highly uncertain and involves complex legal and factual questions. To date, a
consistent and predictable application of United States patent laws regarding
the grant and interpretation of patent claims in the area of biotechnology has
not evolved. Moreover, the technology
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applicable to Neoprobe's monoclonal antibody products is developing rapidly.
Patents have been issued to other pharmaceutical, biotechnology, and
biopharmaceutical companies in the same area of technology as that used by
Neoprobe. In addition, potential competitors may have filed applications for,
or may have been issued patents or may obtain additional patents and
proprietary rights relating to, products or processes in the same area of
technology as that used by Neoprobe. The scope and validity of these patents
and applications, the extent to which Neoprobe may be required to obtain
licenses thereunder or under other proprietary rights, and the cost and
availability of licenses are uncertain. There can be no assurance that
Neoprobe's patent applications will result in additional patents being issued
or that any of Neoprobe's patents will afford protection against competitors
with similar technology; nor can there be any assurance that any of Neoprobe's
patents will not be designed around by others or that others will not obtain
patents that Neoprobe would need to license or design around. See "Risk Factors
- -- Patents, Proprietary Technology and Trade Secrets."
Neoprobe also relies upon unpatented trade secrets. No assurance can be given
that others will not independently develop substantially equivalent proprietary
information and techniques, or otherwise gain access to Neoprobe's trade
secrets, or disclose such technology, or that Neoprobe can meaningfully protect
its rights to its unpatented trade secrets. Neoprobe requires its employees,
consultants and advisers to execute a confidentiality agreement upon the
commencement of an employment or consulting relationship with Neoprobe. The
agreement provides that all confidential information developed or made known to
the individual during the course of the relationship will be kept confidential
and not disclosed to third parties except in specified circumstances. In the
case of employees, the agreements provide that all inventions conceived by the
individual will be the exclusive property of Neoprobe. There can be no
assurance, however, that these agreements will provide meaningful protection
for Neoprobe's trade secrets in the event of an unauthorized use or disclosure
of such information.
GOVERNMENT REGULATION
The production and marketing of Neoprobe's products and its research and
development activities are subject to detailed and substantive regulation by
governmental authorities in the United States and other countries. In the
United States, drugs, biologic products, and medical devices are regulated by
the FDA. The Federal Food, Drug, and Cosmetic Act (the "FDC Act"), the Public
Health Services Act (the "PHS Act"), the respective regulations promulgated
thereunder, and other federal and state statutes and regulations, govern, among
other things, clinical testing, manufacture, labeling, packaging, marketing,
distribution and record keeping in order to ensure that the Company's products
are safe and effective for their intended use. Noncompliance with applicable
requirements can result in fines, civil penalties, injunctions, suspensions or
loss of regulatory approvals, recall or seizure of the Company's products,
operating restrictions, import detentions, government refusal to approve
product export applications, 510(k)s, PMAs, or BLAs and to allow the Company to
enter into supply contracts, and criminal prosecution. The FDA also has the
authority to revoke previously granted licenses. See "Risk Factors --
Government Regulation."
The Company's biologic products will require a regulatory license to market by
the FDA and by comparable agencies in foreign countries. The process of
obtaining regulatory licenses and approvals is costly and time consuming, and
the Company has encountered and may continue to encounter delays in the
completion of testing for certain proposed products. Future delays could result
from, among other things, slower than expected patient enrollment rates,
difficulties in analyzing data from clinical trials or in validating
manufacturing processes, changes in regulatory requirements, a longer than
expected regulatory review process, possible additional analysis and
reconciliation of any perceived differences between data generated in Phase I/II
and Phase II clinical trials and data generated in Phase III clinical trials or
if additional clinical trials are deemed necessary. Certain members of
management and significant employees and consultants have had substantial
experience in conducting and supervising clinical trials for other
pharmaceutical and biomedical companies. However, prior to 1996, the Company had
not previously submitted a BLA to the FDA or a dossier to European regulatory
agencies for approval of a license to market its products. Even after FDA
approval of applicable licenses, use of the Company's products could reveal side
effects that, if serious, could result in suspension of existing licenses and
delays in obtaining licenses in other jurisdictions. See "Risk Factors --
Government Regulation."
The steps required before a biologic agent may be marketed in the United States
include (i) preclinical laboratory and animal testing; (ii) submission to the
FDA of an Investigational New Drug ("IND") application, which must become
effective before human clinical trials may commence; (iii) adequate and well
controlled human clinical trials to establish the safety and efficacy of the
biologic for its intended use; (iv) submission of a BLA to the FDA; and (v) FDA
approval of these applications.
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In May 1996, the FDA promulgated the BLAfor well-characterized biotechnology
products subject to licensure under the PHS Act. This new ruling and the Food
and Drug Administration Modernization Act of 1997 ("FDAMA") have eliminated the
requirement for each manufacturer to hold both the Product License Application
("PLA") and Establishment License Application ("ELA") and have combined these
licenses into a BLA. In addition to reviewing information submitted in the BLA,
each manufacturing facility must undergo a pre-approval inspection by the FDA to
assess its suitability and compliance with GMP and periodic inspections
thereafter. Once approved, any significant changes in the manufacturing
process, equipment, facilities or product specifications must be pre-approved by
the FDA and may require additional clinical data to validate the changes prior
to allowing their implementation.
Pre-clinical tests include laboratory and animal studies to assess product
characteristics and the potential safety and utility of each product. The
results of the preclinical tests are submitted to the FDA as part of an IND
application and are reviewed by the FDA prior to the commencement of human
clinical trials. Unless the FDA objects to an IND application, the application
will become effective 30 days following its receipt by the FDA. There can be no
assurance that submission of an IND application will result in FDA allowing the
commencement of Neoprobe's clinical trials.
The Company's clinical trials involve the administration of the investigational
radiolabeled targeting agent to volunteer cancer patients under the supervision
of a qualified principal investigator. These clinical trials are conducted in
accordance with protocols that detail the objectives of the study, the
parameters to be used to monitor safety, and the efficacy criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND
application. Further, each clinical study must be conducted under the auspices
of an independent institutional review board ("IRB") at the institution at
which the study will be conducted. The IRB will consider, among other things,
ethical factors, the safety of human subjects, and the possible liability of
the institution.
Clinical trials are typically conducted in three sequential phases but the
phases may overlap. In Phase I, the targeting agent is initially introduced
into human subjects (15-50) and is tested for safety (adverse effects), dosage,
distribution, and metabolism. Phase II involves studies in a limited population
of patients (50-200) affiliated with a specific disease (i) to determine the
preliminary efficacy of the drug for specific, targeted indications; (ii) to
determine optimal dosage; and (iii) to identify possible adverse effects and
safety risks. When a product is found to be effective and has an acceptable
safety profile in Phase II studies, Phase III trials are undertaken to evaluate
further clinical efficacy and to test further for safety within an expanded
patient population (200-2,000 or more) at geographically dispersed clinical
study sites. Before conducting Phase III trials, the FDA must approve
Neoprobe's methodology and research goals, which are summarized in a protocol
submitted by Neoprobe for FDA consideration. There can be no assurance that the
FDA will approve any protocol submitted by Neoprobe in the future or that a
Phase III trial will meet FDA data integrity, Good Clinical Practice ("GCP"),
or protocol compliance requirements. A Phase III trial must be conducted in
compliance with the protocol and GCP regulations to have the requisite data
integrity to be accepted by FDA as evidence of safety and effectiveness.
Neoprobe or the FDA may suspend clinical trials at any time if it is concluded
that the patients are being exposed to an unacceptable health risk, or because
of a study design or implementation error. Such suspension may have a material
adverse effect on the Company's business, financial condition and results of
operations.
The pivotal Phase III clinical studies, on which the FDA bases its evaluation
of the safety, efficacy and potency of a biologic product, must be performed
using products produced at the manufacturing facilities which are seeking the
BLAs. Any significant changes in the conduct of the clinical study, in the
manufacturing process or in the facilities during the Phase III clinical trials
or after FDA approval likely will require additional clinical studies before
they are approved.
The results of the preclinical studies, clinical studies, and other required
information are submitted to the FDA in the form of a BLA for approval of the
marketing and commercial shipment of the biologic. Neoprobe must pay half the
user fee at submission of the BLA (approximately $110,000) and the outstanding
amount at the end of the 12-month review cycle. The FDA may refuse to file the
BLA and require additional testing before filing the BLA. This and other user
fees, though not insubstantial sums, are an insignificant fraction of the cost
of developing, testing, seeking and, if successful, obtaining FDA approval of a
BLA. The testing and approval process is likely to require substantial time and
effort, and there can be no assurance that any approval will be granted on a
timely basis, if at all. The FDA may deny a BLA if applicable regulatory
criteria are not satisfied, require additional testing or information, or
require postmarket testing and surveillance to monitor the safety or efficacy
of Neoprobe's products. Notwithstanding the submission of such data, the FDA
may ultimately decide that the application does not satisfy its
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regulatory criteria for approval. Finally, product approvals may be withdrawn
if compliance with regulatory standards is not maintained or if a problem
occurs following initial marketing.
The process of completing clinical testing usually takes a number of years and
requires the expenditure of substantial resources. Additionally, the length of
time it takes for the FDA to evaluate an application for marketing approval
varies considerably, as does the amount of preclinical and clinical data
required to demonstrate the safety and efficacy of a specific product. The FDA
may require additional clinical studies which will take the Company several
years to perform. The FDA now takes a minimum of one year to review biologic
applications after filing under the user fee policy. Twelve months after the
BLA is received by the FDA, Neoprobe should receive an action letter either
approving the BLA, or not approving it and citing deficiencies that must be
addressed. No further action will be taken by the FDA until Neoprobe fully
responds to the issues in the letter. The length of the review period may vary
widely depending upon the nature and indications of the proposed product and
whether the FDA has any further questions or requests any additional data.
Also, the FDA will require postmarketing reporting and surveillance programs to
monitor the side effects of the products. Some of Neoprobe's products may be
eligible for accelerated BLA consideration. The FDA may expedite an approval
for treatment of a serious and life-threatening disease, if the drug or
biologic provides a benefit over existing treatment and meets certain testing
objectives. Postmarketing studies would be required and the FDA could restrict
distribution of a product receiving accelerated approval to market. There can
be no assurance that any of Neoprobe's potential products will be approved by
the FDA or approved on a timely or accelerated basis or that any approvals
received will not subsequently be revoked or modified. In addition, future
regulations and changes in FDA policies could affect Neoprobe's operations or
impose additional requirements before products are approved.
Neoprobe submitted a dossier to the European regulatory agencies in May 1996,
and a BLA to the FDA in December 1996, for its RIGS product for the detection of
metastatic colorectal cancer. In November 1997, Neoprobe Corporation
voluntarily withdrew its European Marketing Authorization Application after a
decision by the Committee for Proprietary Medicinal Products (CPMP) determined
that there was insufficient data to support the clinical utility of the product;
additional information has been requested. In December 1997, the FDA issued an
action letter to Neoprobe stating that the BLA is "not approvable at this time"
and requested a formal response to the deficiencies listed in the letter. This
additional information will be submitted in the form of a BLA Amendment. Once a
BLA Amendment has been submitted, the FDA has 90 days to review the amendment
and issue their action. There is no assurance that the clinical data collected
in the Company's Phase III pivotal clinical trials will be sufficient to support
FDA approval of a license for RGIScan CR49, or that the FDA will not require
additional information and data, including additional clinical studies after
reviewing the BLA Amendment. Failure to obtain a BLA and to commence marketing
RIGScan CR49 on a timely basis would have an adverse effect on the Company's
business, financial condition and results of operations, including but not
limited to, jeopardizing the Company's rights under certain of its current or
contemplated contractual arrangements for the supply of necessary components of
its RIGS system products.
The FDA strictly controls the marketing of any approved biologic product through
marketing surveillance and review of all labeling, promotional materials and
press releases. Among conditions for BLA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
to GMP, which must be followed at all times. In complying with standards set
forth in these regulations, Neoprobe must continue to expend time, funds, and
effort to ensure full compliance. If Neoprobe wishes to modify or change its
manufacturing process or facility it must seek approval to do so through an
amendment to its BLA which may require additional clinical testing.
Even after initial FDA approval has been obtained, further studies may be
required to provide additional data on safety and further studies will be
required to gain approval for the use of a product as a treatment for a
clinical indication other than that for which the product was initially tested.
Also, the FDA may require post-marketing testing and surveillance programs to
monitor the product's effects. Undesirable side effects resulting from the use
of pharmaceutical products may prevent or limit the further marketing of the
products.
Neoprobe applied to the FDA to clarify regulatory jurisdiction over the
Company's combination RIGS instrument/targeting agent products. The FDA's
response was to appoint jurisdiction over the Company's marketing submissions
to the center which evaluates the targeting agent. The Company may now submit a
BLA (in the case of a biologic such as CC49) or New Drug Application ("NDA")
(in the case of a peptide such as lanreotide which is considered a drug),
obviating the need for a second separate submission for the instrument. This
decision streamlines the review process for the Company's RIGS products by
requiring marketing submission to a single FDA evaluation center, the CBER and
Center for Drug Evaluation and Research ("CDER").
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In addition to regulations enforced by the FDA, the manufacture, distribution
and use of Neoprobe's products are also subject to regulation by the Nuclear
Regulatory Commission, the Department of Transportation and other federal and
state, and local government authorities. Neoprobe and/or its manufacturer of
the radiolabeled antibodies must obtain a specific license from the Nuclear
Regulatory Commission to manufacture and distribute radiolabeled antibodies as
well as comply with all applicable regulations. Neoprobe must also comply with
Department of Transportation regulations on the labeling and packaging
requirements for shipment of radiolabeled antibodies to licensed clinics, and
must comply with federal, state and local governmental laws regarding the
disposal of radioactive waste. There can be no assurances that the Company will
obtain all necessary licenses and permits and be able to comply with all
applicable laws, the failure of which would have a materially adverse effect on
the Company's business, financial condition and results of operations.
Before marketing its products in Western Europe, Neoprobe will be required to
receive the approval of the European Council or European Commission and the
appropriate governmental agencies in each of the respective countries. For
marketing outside the United States, Neoprobe is also subject to foreign
regulatory requirements governing human clinical trials, pharmaceutical sales
and marketing approval of its products. Whether or not FDA approval has been
obtained, approval of a product by comparable regulatory authorities of foreign
countries must be obtained prior to commencement of manufacturing or marketing
of the product in those countries. The requirements governing the conduct of
clinical trials, product licensing, pricing, and reimbursement vary widely from
country to country; however, foreign procedures are similar to those required
by the FDA. Neoprobe intends, to the extent possible, to rely on foreign
distributors of its products to manage and obtain regulatory approval for those
products.
Instrument Products. The FDA classifies medical devices into one of three
classes -- class I, II, or III. This classification is based on the controls
necessary to reasonably ensure the safety and effectiveness of the device.
Class I devices are those whose safety and effectiveness can reasonably be
ensured through general controls, such as labeling, premarket notification (the
"510(k)" process), and adherence to FDA-mandated quality system requirements
("QSR"). Class II devices are those whose safety and effectiveness can
reasonably be ensured through general and special controls, such as performance
standards, postmarket surveillance, patient registries, and FDA guidelines.
Class III devices are devices that must receive pre-market approval by the FDA
to ensure their safety and effectiveness. They are generally life-sustaining,
life-supporting, or implantable devices, and also include devices that are not
substantially equivalent to a legally marketed class I or II product or to a
class III device for which PMAs have not been called.
If a manufacturer or distributor of medical devices can establish to the FDA's
satisfaction that a new device is "substantially equivalent" to a legally
marketed reserved class I or class II medical device or to a class III device
for which the FDA has not required pre-market approval, the manufacturer or
distributor may market the device after clearance of a 510(k) notice. In the
510(k) submission, a manufacturer or distributor makes a claim of substantial
equivalence, which the FDA may require to be supported by various types of
information, including clinical data showing that the device is as safe and
effective for its intended use as the legally marketed predicate device.
Following submission of the 510(k), the manufacturer or distributor may not
place the new device into commercial distribution until an order is issued by
the FDA finding the new device to be substantially equivalent to a legally
marketed predicate device. Congress, under FDAMA, has directed the FDA to
complete reviews of 510(k) applications within 90 days. However, the process
may take longer for some filings. The FDA may agree with the manufacturer or
distributor that the new device is substantially equivalent to another legally
marketed device, and allow the new device to be marketed in the United States.
The FDA may, however, determine that the new device is not substantially
equivalent and require the Company to submit further information, such as
additional clinical test data, before it is able to make a determination
regarding substantial equivalence, which can substantially delay the market
introduction of the product. For a device that is cleared through the 510(k)
process, modifications or enhancements that could significantly affect the
safety or effectiveness of the device or that constitute a major change to the
intended use of the device will require a new 510(k) submission.
A premarket approval application ("PMA") must be filed if a proposed device is
not substantially equivalent to a legally marketed reserved class I or class II
device, or if it is a class III device for which the FDA has called for PMAs.
The PMA process is much more expensive, uncertain and lengthy than the 510(k)
process. A number of devices for which PMA approval has been sought by other
companies has never been approved for marketing. A PMA application must be
supported by valid scientific evidence which typically includes extensive
testing and manufacturing information, including preclinical and clinical trial
data, to demonstrate the safety and effectiveness of the device.
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FDA review and approval of a PMA may take up to 180 days and possibly longer,
and typically includes review by an outside advisory panel of experts.
Further, if a company wishes to propose modifications to the product subsequent
to FDA clearance, including changes in indications or other significant
modifications to labeling, or modifications to the manufacturing process, or if
a company wishes to change its manufacturing facility, a new PMA application or
supplement must be submitted to the FDA for review and approval.
The Neoprobe 1000 instrument received 510(k) clearance in December 1986, and
modified versions received 510(k) clearance in June 1992 and February 1995. In
February 1998, the FDA reclassified "nuclear uptake detectors" as being exempt
from the 510(k) (premarket notification) process. Neoprobe must continue to
manufacture the devices under QSR and maintain appropriate technical files;
however, Neoprobe will not need to submit 510(k) applications for modifications
to the Neoprobe device. The FDA has indicated that the Company must obtain PMA
approval to market its laparoscopic probe, which currently is undergoing
preclinical animal testing. The Company intends to seek permission from the FDA
for a clinical trial to evaluate a laparoscopic version of the RIGS system.
There can be no assurance that the FDA would grant permission for such a trial,
or that the trial would proceed in a timely fashion, if at all. It is uncertain
whether the FDA would require PMA approval or 510(k) clearance for the
Company's other proposed RIGS instrument products. In addition, any PMA or
510(k) submission for a proposed instrument for use with a RIGS targeting agent
may be required to be submitted to CBER or CDER as a combination product, as
described above.
The FDA also requires that Neoprobe's instrument products be manufactured in
compliance with the QSR regulations which governs the procedures, processes,
controls, and documentation used in manufacturing Neoprobe's products. The FDA
ensures QSR compliance through periodic facility inspections. Accordingly,
manufacturers must commit ongoing substantial resources to maintaining a high
level of compliance with QSR. In addition, Neoprobe's promotional and
educational activities regarding its diagnostic instrument products must comply
with evolving FDA policies and regulations regarding acceptable device product
promotion practices.
There can be no assurance that Neoprobe will receive marketing clearance for
any of its future products or that its clinical data or its manufacturing
facilities will continue to satisfy FDA regulatory requirements. In addition,
the manufacture, sale and use of Neoprobe's products are also subject to
regulation by other federal entities, such as the Occupational Safety and
Health Agency, the Nuclear Regulatory Commission and the Environmental
Protection Agency, and by various state agencies. Federal and state regulations
regarding the manufacture, sale, and use of Neoprobe's products are subject to
future change, which changes could have a material adverse effect on Neoprobe's
business, financial condition, and results of operations. Promotion and
advertising of the products are limited to indications for which FDA clearance
has been obtained, and there can be no assurance that the FDA will find that
all claims made for Neoprobe products are cleared or exempt claims.
RIGS/ACT. RIGS/ACT will be regulated by a new FDA division specifically
established to review and approve cellular and gene therapies. This newly
created division within the Center for Biologics Evaluation and Research will
require IND and BLA applications similar to biologics. However, since these are
new therapies, the FDA has had limited experience and continues to develop
guidance in this therapy product area. To date, all cellular and gene therapies
are in the investigational stage. None of the therapies has yet reached the
commercial clearance phase of FDA review. Accordingly, no precedents have been
established. There can be no assurance that the FDA's lack of experience in
this area will not cause additional delays or that Neoprobe will be successful
in meeting all evolving regulatory requirements. The Company has completed
Phase I/II feasibility studies of RIGS/ACT and initiated a Phase II study to
further assess the safety and potential effectiveness of RIGS/ACT. Although
the Company intends, based upon the results of this study, to seek to begin a
pivotal clinical trial of RIGS/ACT for a colorectal cancer indication, there
can be no assurance that the FDA will grant permission for such a trial, that
the trial will proceed in a timely fashion, if at all, or that the outcome will
support the submission of a BLA.
Manufacturing. In addition to obtaining FDA approval for each product, each
manufacturing establishment for biological products must be inspected and
approved by the FDA prior to approval of the BLA to market the product. Among
the conditions for such approval is the requirement that the prospective
manufacturer's quality control and manufacturing procedures conform to the
FDA's GMP regulations, which must be followed at all times. In complying with
standards set forth in these regulations, manufacturers must continue to expend
time, money, and effort in the area of production and quality control to ensure
full compliance. In October and November 1997, the FDA conducted pre-market
inspections at Neoprobe's manufacturing sites in Lund, Sweden, and Groningen,
The Netherlands. A Form 483 (List of Observations) was issued to both
facilities after the completion of the inspections. Response to all
observations listed on the Form 483's have been sent to the FDA and the
Company believes they will be successfully resolved and will not be a barrier
to approval.
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COMPETITION
Neoprobe faces competition from biotechnology, pharmaceutical and chemical
companies as well as from universities and other non-profit research
organizations in the field of cancer diagnostics and treatment. Many emerging
biotechnology companies have corporate partnership arrangements with large,
established companies to support the research, development and
commercialization of products that may be competitive with those of Neoprobe.
In addition, a number of large established companies are developing proprietary
technologies or have enhanced their capabilities by entering into arrangements
with or acquiring companies with proprietary antibody technology or other
technologies applicable to the detection or treatment of cancer. Many of
Neoprobe's existing or potential competitors have substantially greater
financial, research and development, regulatory, marketing and production
resources than those of Neoprobe. In addition, certain of these companies have
extensive experience in preclinical testing and human clinical trials. Other
companies may develop and introduce products and processes competitive with or
superior to those of Neoprobe. Further, the development by others of new cancer
diagnostic or treatment methods not based on monoclonal antibodies,
improvements in monoclonal antibody technology, or the development of a cure or
vaccine for cancer could render Neoprobe's technology and products under
development noncompetitive or obsolete. See "Risk Factors -- Competition" and
"-- Risk of Technological Obsolescence."
For Neoprobe's products, an important factor in competition may be the timing
of market introduction of its products or those of its competitors products.
Accordingly, the relative speed with which Neoprobe can develop products,
complete the clinical trials and approval processes and supply commercial
quantities of the products to the market will be an important competitive
factor. Neoprobe believes that the RIGS system will offer a cancer diagnostic
and treatment alternative or complementary method to currently available and
reasonably foreseeable developing technologies in many cases. Neoprobe expects
that competition among products approved for sale will be based, among other
things, on product efficacy, safety, reliability, availability, price and
patent position.
Neoprobe believes that, given currently available technologies, the principal
sources of competition likely to be faced by its proposed products will be
preoperative diagnostic techniques such as Computed Tomographic ("CT") scans,
Magnetic Resonance Imaging ("MRI") and immunoscintigraphy. Both CT and MRI are
widely available and used by a large number of physicians. However, neither of
those technologies can distinguish malignant from non-malignant tissue. Several
of Neoprobe's principal competitors are biotechnology-based companies that are
developing products for immunoscintigraphy. The antibody products developed by
these companies use high-energy gamma-emitting isotopes, as compared to the
much lower energy gamma-emitting isotope used by Neoprobe. These companies have
received approval or filed marketing applications for colorectal, ovarian,
small cell lung, melanoma and breast cancer external imaging products. Although
immunoscintigraphy can distinguish malignant from non-malignant tissue, none of
the external imaging technologies is effective in consistently identifying
tumors smaller than one centimeter or in precisely locating the site of a
tumor. Such technologies only indicate that cancer may be present within a
general area. Radiolabeled antibody products for use with immunoscintigraphy
for recurrent colorectal cancer patients have already been approved by
regulatory authorities in Europe and the United States. While Neoprobe views
immunoscintigraphy to be complementary to the RIGS technology because
immunoscintigraphy involves a preoperative diagnostic procedure, some
physicians may choose to use the preoperative information provided by
immunoscintigraphy in lieu of obtaining the information provided by the
intraoperative RIGS technology. If a significant number of physicians choose to
use immunoscintigraphy or another diagnostic procedure in lieu of the RIGS
technology, Neoprobe's ability to generate commercial revenues, if any, could
be adversely affected.
The Company is aware of companies that have developed technology which
harnesses light to treat cancer cells called photodynamic therapy. This
technology uses agents that target cancer and make the diseased cells
vulnerable to laser or other light sources . The Food and Drug Administration
recently approved one photosensitizer called Photofrin developed by QLT
Phototherapeutics Inc. for the treatment of advanced esophageal cancer and
early lung cancer. The Company is aware that this technology is being tested
in clinical studies for other forms of cancer. The drawback to phototdynamic
therapy is that the effectiveness may be limited to only relatively shallow
tumors. Therefore, the Company does not believe that this technology will
replace surgery as the primary method for treating most solid tumor cancers.
The Company believes that ultrasound imaging technology is the only other
intraoperative technology, which may be capable of detecting tumors during
surgery The ultrasound imaging technology is currently approved for use in the
United States and is used by surgeons for the detection of tumors, but is
limited to almost exclusively detecting tumors in the liver.
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EMPLOYEES
As of March 6, 1998, Neoprobe, including Neoprobe Europe and Neoprobe (Israel),
had 91 full-time and seven part-time employees. Eleven employees hold Ph.D.
degrees and four hold M.D. degrees. Neoprobe considers its relations with its
employees to be satisfactory.
RISK FACTORS
The discussion in this Report contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ significantly
from the prospects discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Government Regulation
The Company's biologic products will require a regulatory license to market by
the FDA and by comparable agencies in foreign countries. Various federal, state
and foreign statutes also govern or influence the manufacture, safety, labeling,
storage, record keeping and marketing of such products. The process of obtaining
regulatory licenses and approvals is costly, time consuming, and prone to
unexpected delay. The Company has encountered and may continue to encounter
delays in the completion of testing or in the application process for certain
proposed products. Future delays could result from, among other things, a longer
than expected regulatory review process, and possible additional analysis and
reconciliation of any perceived differences between data generated in Phase I/II
and Phase II clinical trials and data generated in Phase III clinical trials,
slower than expected patient enrollment rates, difficulties in analyzing data
from clinical trials or in validating manufacturing processes and changes in
regulatory requirements. Certain members of management and significant employees
and consultants have had substantial experience in conducting and supervising
clinical trials for other pharmaceutical and biomedical companies. However,
prior to 1996, the Company had not submitted a BLA to the FDA or a dossier to
European regulatory agencies for approval of a license to market its products.
There can be no assurance that clinical data collected in the Company's pivotal
Phase III trials will be sufficient to support approval of licenses for the
Company's products or that the FDA or European regulatory agencies will not
require additional information and data, including additional clinical studies,
or refuse to file the application for substantive review. Failure to obtain
these licenses and to commence commercial marketing on a timely basis could
jeopardize the Company's rights under certain of its current or contemplated
contractual arrangements for the supply of necessary components of its RIGS
system products and would have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, foreign and
domestic approvals, if granted, may include significant limitations on uses of
the products. Further, even if such regulatory approval is obtained, use of the
Company's products could reveal side effects that, if serious, could result in
suspension of existing licenses and delays in obtaining licenses in other
jurisdictions. A marketed product, manufacturer and manufacturing facilities are
subject to continual review and periodic inspections, and later discovery of
previously unknown problems with a product, manufacturer or facility may result
in restrictions on such product or manufacturer, including withdrawal of the
product from the market. Noncompliance with applicable governmental requirements
can result in import detentions, fines, civil penalties, injunctions,
suspensions or loss of regulatory approvals, recall or seizure of the Company's
products, operating restrictions, government refusal to approve product export
applications or to allow the Company to enter into supply contracts, and
criminal prosecution. Additional governmental regulation may be established
which could prevent or delay regulatory approval of the Company's products. Any
delays or failure to receive required approvals or limiting conditions on
approvals could materially adversely affect the Company's business, operating
results and financial condition. See "-- Government Regulation."
In addition to regulations enforced by the FDA, the manufacture, distribution
and use of Neoprobe's products are also subject to regulation by the Nuclear
Regulatory Commission, the Department of Transportation and other federal,
state and local government authorities. Neoprobe and/or its manufacturer of the
radiolabeled antibodies must obtain a specific license from the Nuclear
Regulatory Commission to manufacture and distribute radiolabeled antibodies as
well as comply with all applicable regulations. Neoprobe must also comply with
Department of Transportation regulations on the labeling and packaging
requirements for shipment of radiolabeled antibodies to licensed clinics, and
must comply with federal, state and local governmental laws regarding the
disposal of radioactive waste. There can be no assurance that the Company will
be able to obtain all necessary licenses and permits and be able to comply with
all applicable laws. The failure to obtain such licenses and permits or to
comply with applicable laws would have a materially adverse effect on the
Company's business, financial condition and results of operations.
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Development Stage Company; No Commercialized Products
The Company is still in the development stage and has not received approval to
market any of its products for the detection of cancer, except in the Republic
of South Korea. However, the Company has received clearance to market the
Neoprobe 1500 instrument for use as a radioisotope detector only for use with
approved radiopharmaceuticals, none of which currently are Neoprobe's products.
To date, the Company has completed a Phase III clinical trial with the
Company's lead product, RIGScan CR49, for the surgical detection of metastatic
and recurrent colorectal cancer in both the United States and Europe. The
Company filed marketing applications for this product with regulatory agencies
in Europe in May 1996 and with the FDA in December 1996. In November 1997,
the Company withdrew its application from the EMEA as a result of additional
requests for information from the CPMP. In addition, in December 1997, the
FDA's CBER completed its review of data submitted by the Company for it's
product and determined that additional information must be provided before it
can further consider the approval of the Company's product. Enrollment of
patients in a separate Phase III clinical study for primary colorectal cancer
has been completed in the United States and in Europe. Substantial clinical and
statistical analysis of the data collected from the clinical trials of this
product and substantial clinical trials of the Company's other products must be
completed before submissions can be made to appropriate regulatory authorities.
Such analysis and trials require substantial financial and management resources
and could require more time than is currently estimated. There can be no
assurance that the Company will be able to conclude successfully the clinical
tests or development of any of its proposed products within the Company's
expected time frame and budget, if at all, or that the Company's products will
prove to be safe and effective in clinical trials. There also can be no
assurance that the Company will be able to obtain governmental approval for the
commercial marketing and sale of any of its proposed products. If the Company
is unable to conclude successfully the clinical tests or if the RIGS system
does not prove to be safe and effective, or if the Company does not obtain
governmental approval or is otherwise unable to commercialize the RIGS system
successfully, the Company's business, financial condition and results of
operations will be materially adversely affected and could result in the
cessation of the Company's business. See"--Clinical Research."
Limited Revenues; Continuing Net Losses; Accumulated Deficit
The Company's limited history of operations, the nature of its business, and
the governmental approval process make the prediction of future operating
results difficult and highly unreliable. The Company's business, therefore,
must be evaluated in light of the risks, expenses, delays and complications
normally encountered by development-stage companies in the highly competitive,
highly regulated biomedical industry, which is characterized by a high rate of
failure. Since its inception in 1983, the Company has been primarily engaged in
research and development of the RIGS technology. The Company has experienced
significant operating losses in each year since inception, and had an
accumulated deficit of approximately $87.4 million as of December 31, 1997. For
the years ended December 31, 1995, 1996 and 1997, the Company's net losses were
$10.8 million, $21 million, and $23.2 million, respectively. The Company
expects operating losses to continue as research and development and clinical
trial efforts continue, and until the Company receives marketing approval for
its first biologic product. The Company's ability to achieve profitable
operations is dependent upon obtaining regulatory approval of its products and
making the transition to a revenue generating company. There can be no
assurance that the Company will ever achieve a profitable level of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Future Capital Needs; Uncertainty of Capital Funding
To date, the Company's capital requirements have been significant. The Company
has depended on the proceeds of sales of its securities and other financing
vehicles to continue clinical testing of its proposed products and to fund its
working capital requirements. The Company believes that the funds it has on
hand, coupled with cash anticipated to be generated through implementation of
certain operating strategies, will be adequate to satisfy its cash needs
through the end of 1999. Obtaining approvals to market is costly and time
consuming and the Company may require significant funds in addition to its
current cash resources to sustain its operations and to obtain regulatory
approval to commercialize any of its proposed products. No assurance can be
given that the necessary additional financing will be available to the Company
on acceptable terms, if at all, or that would not result in further dilution to
the holders of the Company's equity securities. The Company's ability to raise
additional financing may be dependent on many factors beyond the Company's
control, including the state of capital markets, the development or prospects
for development of competitive technology by others, and the rate of progress
of the Company's clinical trials. If additional funding is unavailable to the
Company when needed, the Company will be required to curtail significantly one
or more of its research and development programs and the Company's business and
financial
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<PAGE> 18
condition will be materially adversely affected. See "Item 6. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
Patents, Proprietary Technology and Trade Secrets
The Company's success depends, in part, on its ability to secure patent
protection and maintain trade secret protection, and on its ability to operate
without infringing on the patents of third parties. The Company holds 15
United States patents, including U.S. Patent No. 4,782,840, which relates to
the RIGS system surgical method and holds one additional patent jointly with
OSURF. The Company has filed applications for certain additional United States
and foreign patents. There can be no assurance, however, that the patents for
which the Company has applied will be issued to the Company. Moreover, the
Company believes that some of the technology it develops will not be patentable
in certain foreign markets. There can be no assurance that any of the Company's
patents or patent applications will not be challenged, invalidated, or
circumvented in the future. In addition, there can be no assurance that
competitors, many of which have substantially more resources than the Company
and have made substantial investments in competing technologies, will not seek
to apply for and obtain patents that will prevent, limit, or interfere with the
Company's ability to make, use, or sell its products either in the United
States or internationally. Furthermore, the patent positions of biotechnology
firms, including the Company, are highly uncertain and involve complex legal
and factual questions. To date, a consistent and predictable application of
United States patent laws regarding the grant and interpretation of patent
claims in the area of biotechnology has not evolved. Due to these
uncertainties, the probability of challenges, invalidations, and circumventions
is higher than in technologically and legally stable fields.
Patent applications in the United States are maintained in secrecy until
patents issue, and patent applications in foreign countries are maintained in
secrecy for a period after filing. Publications of discoveries in the
scientific or patent literature tend to lag behind actual discoveries and the
filing of related patent applications. Patents issued and patent applications
filed relating to medical devices are numerous and there can be no assurance
that current and potential competitors and other third parties have not filed
or will not file in the future applications for, or have not received or in the
future will not receive, patents or obtain additional proprietary rights
relating to products or processes used or proposed to be used by the Company.
The Company also relies upon trade secrets, technical know-how, and continuing
technological innovation to develop and maintain its competitive position. The
Company typically requires its employees, consultants, and advisors to execute
confidentiality and assignment of inventions agreements in connection with
their employment, consulting, or advisory relationships with the Company. There
can be no assurance, however, that these agreements will not be breached or
that the Company will have adequate remedies for any breach. Further, there
also can be no assurance that others will not gain access to the Company's
trade secret information or independently develop or acquire the same or
equivalent trade secret information. Certain of the research activities
relating to the development of antibody technology that may be components of
the Company's proposed RIGS system technology products were conducted by
agencies of the United States government. When the United States government
participates in research activities, it retains certain rights that include the
right to use the technologies for governmental purposes under a royalty-free
license, as well as rights to use and disclose technical data and computer
software that could preclude the Company from asserting trade secret rights in
that data and software.
The Company has not been notified by any third party that the Company's
products and procedures infringe any valid, enforceable claim of any patent
owned by others. Any such claim, however, whether with or without merit, could
be time-consuming and expensive to respond to and could divert the Company's
technical and management personnel. The Company may become involved in
litigation to defend against claims of infringement made by others, to enforce
patents issued to the Company, or to protect trade secrets of the Company. If
any relevant claims of third-party patents are upheld as valid and enforceable
in any litigation or administrative proceeding against the Company, it could be
prevented from practicing the subject matter claimed in such patents, or would
be required to obtain licenses from such patent owners, or to redesign its
products and processes to avoid infringement. There can be no assurance that
the Company will be able to obtain acceptable licenses or rights, if at all, to
other patents which the Company deems necessary for its operations.
Accordingly, an adverse determination in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent the Company
from manufacturing and selling its products, which would have a material
adverse effect on the Company's business, financial condition, and results of
operations. The Company intends to vigorously protect and defend its
intellectual property. Costly and time-consuming litigation brought by the
Company may be necessary to enforce patents issued to the Company, to protect
trade secrets or know-how owned by the Company, or to determine the
enforceability, scope, and validity of the proprietary rights of others. See
"-- Patents and Proprietary Rights" and "-- Competition."
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Limited Marketing Experience
The Company has limited experience in sales, marketing or distribution of any of
its products. In order to commercialize its products, the Company may need to
enter into one or more agreements providing for the marketing of the RIGS
products by third parties. Although the Company has engaged in discussions with
third parties, no agreements are in force related to the marketing of RIGS
products in North America or Europe, and there can be no assurance that the
Company will be able to enter into marketing agreements on terms favorable to
the Company.
In September 1996, the Company executed a License and Distributorship Agreement
("Agreement") with the United States Surgical Corporation ("USSC"). Effective
October 17, 1997, the Company and USSC agreed to terminate the Agreement, as
amended. In connection with the termination, after receipt of payment, the
Company agreed to pay USSC net commissions on orders received prior to the
effective date of the termination and to continue to warranty and service
devices sold under the terms of the Agreement. The parties have also agreed to
discharge and release the other from all remaining claims and financial
obligations relating to the Agreement, including license fees.
If the Company is unable to secure one or more agreements with
third parties for the marketing of its proposed products, the Company will have
to perform such marketing function itself, a function which the Company has not
undertaken in the past. There can be no assurance that the Company could
market its products successfully in the future. In such event, the Company's
business, operating results and financial condition could be materially
adversely affected.
Limited Manufacturing Capacity and Experience
To date, the Company's manufacturing activities have consisted primarily of
manufacturing limited quantities of products for use in clinical trials. In
order to achieve financially self sustaining operations, the Company must
manufacture its RIGS products, including targeting agents, in commercial
quantities at an acceptable cost. If the Company scales up manufacturing its
products, there can be no assurance that the Company will not encounter
difficulties such as problems involving product yields, quality control and
assurance, supplies of components, and shortages of qualified personnel.
Moreover, in order to assemble, complete, package and distribute its RIGS
products in commercial quantities, the Company will have to maintain a current
GMP facility to manufacture its products or engage independent contractors to
manufacture such products. The GMP facility will have to adhere to GMP
regulations and to guidelines enforced by the FDA and other regulatory agencies
through their facilities inspection programs. If such an inspection by the FDA
or another regulatory agency results in a requirement for additional
modifications to the facility, the Company's ability to manufacture its
products could be adversely affected. There can be no assurance that the
Company will be able to engage independent contractors or develop and maintain
a GMP facility at a cost acceptable to the Company. See "-- Manufacturing."
The Company uses or relies on certain components and services used in its
devices that are provided by sole source suppliers. Although the Company has
identified primary and alternative vendors, the qualification of additional or
replacement vendors for certain components or services is a lengthy process.
Any significant supply interruption would have a material adverse effect on the
Company's ability to manufacture its products and, therefore, a material
adverse effect on its business, financial condition, and results of operations.
The Company expects to manufacture its products based on forecasted product
orders. Lead times for materials and components ordered by the Company vary
significantly, and depend on factors such as the business practices of the
specific supplier, contract terms, and general demand for a component at a
given time. Certain components used in the Company's products have long lead
times. As a result, there is a risk of excess or inadequate inventory if orders
do not match forecasts.
Dependence upon Principal Product Line; Uncertainty of Market Acceptance
The Company's future success is dependent upon obtaining regulatory approvals
to market, and achieving market acceptance of, the Company's proposed RIGS
products, which represent the Company's principal proposed product line. There
can be no assurance that the Company will receive approval to market any of its
RIGS products from the appropriate regulatory authorities. Moreover, achieving
market acceptance for the RIGS products, if approved, will require significant
efforts and expenditures to create awareness and demand for the RIGS products
by surgeons, nuclear medicine departments of hospitals, oncologists and,
possibly, cancer patients. Widespread use of the Company's RIGS products would
require the training of numerous physicians, and the time required to complete
such training could result in a delay or dampening of market acceptance. There
can be no assurance that the Company's initial proposed commercial products,
RIGS products for colorectal cancer, or any other proposed products will become
standard surgical procedure or even generally accepted medical practice, or
that the Company will achieve any market penetration. In addition, purchase
decisions are greatly influenced by health care administrators who are subject
to increasing pressures to reduce costs. Healthcare administrators must
determine that the Company's products are cost-effective alternatives to
current means of tumor detection. The failure to obtain governmental approvals
or achieve significant market acceptance for such products would have a
materially adverse effect on the Company's business, financial condition and
results of operations. See "-- Marketing and Distribution ."
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No Assurance of Continued Rights to Targeting Agents; Royalty Payments
Targeting agents, such as monoclonal antibodies or peptides which are able to
bind specifically to tumor antigens or receptors, are essential to the
Company's technology and the Company's ultimate success. The targeting agents
used by the Company in its research and clinical studies and as components of
its proposed RIGS products are the patented or proprietary technology of
others. The Company must purchase the rights to those targeting agents or must
obtain rights to use them through license agreements with their owners. There
can be no assurance that such arrangements will continue or that they will
continue on terms acceptable to the Company. Furthermore, license agreements
typically impose obligations to diligently develop commercial products and to
pay royalties on those products. Failure to perform such obligations may lead
to the termination of such license agreements. Loss of the Company's rights to
targeting agents for any reason (including, in the case where the Company is a
sublicensee of the targeting agents, a breach by a sublicensor under its
agreement with the owner of a targeting agent) or the inability to obtain
necessary rights on acceptable terms could have a material adverse effect on
the Company's business, financial condition and results of operations.
Moreover, there can be no assurance that improved targeting agents will not be
developed by other entities for which the Company will be required to seek
additional license arrangements. If such licenses cannot be readily obtained,
the Company could encounter delays in product market introductions or could
find that the development, manufacture or sale of products requiring such
licenses could be foreclosed, which could have a material adverse impact on the
Company's business, operating results and financial condition. Upon
commercialization of the Company's products, the Company will be required to
make royalty payments pursuant to its existing and contemplated license
agreements which could adversely impact the Company's operating results. See
"-- License and Technology Agreements."
Competition
The biotechnology industry is characterized by intense competition. Many
companies, research institutes and universities are working in a number of
pharmaceutical or biotechnology disciplines similar to the Company's field of
interest. In addition, many companies are engaged in the development of or
currently offer products which may be or are competitive with the Company's
proposed products. Most of these entities have substantially greater financial,
technical, manufacturing, marketing, distribution or other resources than the
Company. Competing tumor detection technologies include CT, MRI and, more
recently, immunoscintigraphy. The Company may compete against a number of these
companies including: Cytogen Corp., Immunomedics Inc. and NeoRx Corp. One or
more of these or other companies could also design and develop products that
compete directly with the Company's products, in which case the Company would
face intense competition. Such competition could have a material, adverse
effect on the Company's business, financial condition and results of
operations. The Company is aware that other research and testing is being
conducted in Western Europe in connection with the use of radiolabeled
targeting agents and radiation-detection probes. There can be no assurance that
one or more of these or other companies will not develop technologies that are
more effective or less costly than the Company's products, or that would
otherwise render the Company's products and technology non-competitive or
obsolete. Such technologies would have a material adverse effect on the
Company's business, financial condition and results of operations.
Any product developed by the Company that gains regulatory approval will have
to compete for market acceptance and market share. An important factor in such
competition may be the timing of market introduction of competitive products.
Accordingly, the relative speed with which the Company can develop products,
complete clinical testing and regulatory approval processes, gain reimbursement
acceptance and supply commercial quantities of the product to the market is
expected to be an important competitive factor. In addition, the Company
believes that the primary competitive factors in the market for tumor detection
products are safety, efficacy, ease of delivery, reliability, innovation and
price. The Company also believes that physician relationships and customer
support are important competitive factors. There can be no assurance that the
Company can achieve or maintain a competitive position or that the Company's
intraoperative detection products for the treatment of cancer will be
introduced or marketed in a timely fashion or that any such products will
achieve significant market acceptance. In such event, the Company's business,
operating results and financial condition could be materially adversely
affected. See "-- Competition."
Limited Third Party Reimbursement
The Company's products will be marketed to hospitals and other users that bill
various third party payers, including government programs, such as federal
Medicare and state Medicaid, and private insurance plans, for the health care
services provided to their patients. Third party payers carefully review and
are increasingly challenging the prices charged for medical products and
services. Although the Company intends to establish the prices for its products
according to criteria believed to be acceptable to third party payers, there
can be no assurance that such payers will
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not deny reimbursement on the basis that the Company's products are not in
accordance with established payer policies regarding cost effective treatment
methods, or on some other basis. There can be no assurance that the Company
would be able to provide economic and medical data to overcome any third party
payer objections.
In foreign markets, reimbursement is obtained from a variety of sources,
including governmental authorities, private health insurance plans, and labor
unions. In most foreign countries, there are also private insurance systems
that may offer payments for alternative therapies. Although not as prevalent as
in the United States, health maintenance organizations are emerging in certain
European countries. The Company may need to seek international reimbursement
approvals, although there can be no assurance that any such approvals will be
obtained in a timely manner or at all. Failure to receive international
reimbursement approvals could have an adverse effect on market acceptance of
the Company's products in the international markets in which such approvals are
sought.
There can be no assurance, as to either United States or foreign markets, that
third party reimbursement and coverage of newly approved products will be
available or adequate, that current reimbursement policies of third party
payers will not be decreased in the future or that future legislation,
regulation, or reimbursement policies of third party payers will not otherwise
adversely affect the demand for the Company's products or its ability to sell
its products on a profitable basis. If third party payer coverage or
reimbursement is unavailable or inadequate, the Company's business, financial
condition, and results of operations could be materially adversely affected.
See "-- Marketing and Distribution."
Risk of Technological Obsolescence
The medical device industry is characterized by rapid and significant
technological change. There can be no assurance that third parties will not
succeed in developing or marketing technologies and products that are more
effective than those developed or marketed by the Company or that would render
the Company's technology and products obsolete or noncompetitive. Additionally,
new surgical procedures and medications could be developed that replace or
reduce the importance of current procedures that use the Company's products.
Accordingly, the Company's success will depend in part on its ability to
respond quickly to medical and technological changes through the development
and introduction of new products. Product development involves a high degree of
risk and there can be no assurance that the Company's new product development
efforts will result in any commercially successful products. In such event, the
Company's business, operating results and financial condition could be
materially adversely affected. See "-- Competition."
Possible Volatility of Stock Price
The market price of the shares of Common Stock of the Company, like that of the
securities of many other biotechnology companies, has been and is likely to
continue to be highly volatile. For example, the closing price for shares of
the Company's Common Stock for the last two years has been as high as $22 and
as low as $4.00. Factors such as the results of preclinical and clinical trials
by the Company or its competitors, other evidence of the safety and efficacy of
the Company's or competitors' products, announcements of technological
innovations or new commercial products by the Company or its competitors,
changes in securities analysts' estimates or recommendations, governmental
regulation, developments in patent or other proprietary rights of the Company
or its competitors, and fluctuations in the Company's operating results may
have a significant effect on the market price of the Common Stock. In addition,
the stock market has experienced and continues to experience extreme price and
volume fluctuations which have affected the market price of many biotechnology
companies and which have often been unrelated to the operating performance of
these companies. These broad market fluctuations, as well as general economic
and political conditions, may adversely affect the market price of the Common
Stock. The Company has more than 22.7 million shares of Common Stock
outstanding, almost all of which are freely tradable. See "Item 5. Market for
Common Equity and Related Stockholders Matters."
Anti-Takeover Provisions; Blank Check Preferred Stock
The Company has adopted a stockholder rights plan. Certain provisions of the
stockholder rights plan and certain of the Company's charter provisions and
applicable corporate laws could be used to hinder or delay a takeover bid for
the Company. Such provisions may inhibit takeover bids and decrease the chance
of stockholders realizing a premium over market price for their Common Stock as
a result of a takeover. The Company's Certificate of Incorporation authorizes
the issuance of "blank check" preferred stock with such designations, rights,
preferences and restrictions as may be determined from time to time by the
Board of Directors, 500,000 shares of which have been designated as Series A
Junior Participating Preferred Stock and reserved for issuance pursuant to the
Company's stockholder rights plan. If the Company issues Preferred Stock, the
issuance could be used to thwart a takeover bid and may have a dilutive effect
upon the Company's common stockholders.
Product Liability
The testing, marketing and sale of the Company's proposed products could expose
the Company to liability claims. The Company currently has product liability
insurance which, the Company believes, is adequate for its current activities
There can be no assurance, however, that the Company will be able to continue to
obtain such additional insurance at a reasonable cost, if at all, or that such
insurance would be sufficient to cover any liabilities resulting from any
product liability claims or that the Company will have funds available to pay
any claims over the limits of its insurance. Either an underinsured or an
uninsured claim could have a material adverse effect on the Company's business,
operating results and financial condition.
20
<PAGE> 22
Dependence on Key Personnel; Ability to Attract New Personnel; Possible
Conflicts of Interest
John L. Ridihalgh and David C. Bupp are key employees of the Company and the
loss of the services of either one of them could substantially delay the
achievement of the Company's goals. The Company carries "key man" life
insurance with a death benefit of $1.0 million on each of them. The Company has
entered into employment agreements with each of these individuals pursuant to
which, among other things, these individuals have agreed not to compete with
the Company for specified periods. The Company's success is dependent on its
ability to attract and retain additional technical and management personnel
with expertise in several technical and scientific disciplines and experience
in the regulatory approval process. The competition for qualified personnel in
the biomedical industry is intense and, accordingly, there can be no assurance
that the Company will be successful in hiring or retaining the requisite
personnel. In addition, the Company will rely on certain of its non-employee
directors and members of its Scientific Advisory Board to assist the Company in
formulating and pursuing its research and commercialization strategy. These
directors and members of the Scientific Advisory Board are and will be employed
by entities other than the Company and may serve as directors of or have a
commitment to or consulting or advisory contracts with other entities,
including potential competitors of the Company. Although the Company has
confidentiality agreements with these directors and with each member of its
Scientific Advisory Board, conflicts of interest may arise between those
persons and the Company, which conflicts may not necessarily be resolved in
favor of the Company. See "Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act."
Need to Manage a Changing Business
In order to compete effectively against current and future competitors,
complete clinical trials in progress, prepare additional products for clinical
trials, and develop future products, the Company believes that it must continue
to expand its operations, particularly in the areas of research and
development, manufacturing and marketing. If the Company were to experience
significant growth in the future, such growth would likely result in new and
increased responsibilities for management personnel and place significant
strain upon the Company's management, operating and financial systems and
resources. To accommodate such growth and compete effectively, the Company must
continue to implement and improve information systems, procedures and controls,
and to expand, train, motivate, and manage its work force. The Company's future
success will depend to a significant extent on the ability of its current and
future management personnel to operate effectively. There can be no assurance
that the Company's personnel, systems, procedures and controls will be adequate
to support the Company's future operations. Any failure to implement and
improve the Company's operational, financial, and management systems or to
expand, train, motivate or manage employees could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "-- Dependence on Key Personnel; Ability to Attract New
Personnel; Possible Conflicts of Interest" and "Item 9. Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act."
No Dividends
The Company has never paid dividends on its Common Stock. The Company intends
to retain any future earnings to finance its growth. Accordingly, any potential
investor who anticipates the need for current dividends from its investment
should not purchase any of the Common Stock offered hereby. See "Item 5. Market
for Common Equity and Related Stockholders Matters."
ITEM 2. DESCRIPTION OF PROPERTY
21
<PAGE> 23
The Company currently leases its office at 425 Metro Place North, Dublin, Ohio.
The Company executed a lease agreement, commencing on January 1, 1997 and
ending in May 2003, with the landlord of these facilities for approximately
31,400 square feet. The lease provides for a base rent of approximately
$20,750 in the first year of the lease and increases to $26,350 in the last
year of the lease. The Company must also pay a portion of the building
operating and real estate taxes of the building. Neoprobe believes these
facilities are in good condition and will be adequate for its needs for the
foreseeable future.
Neoprobe's wholly-owned subsidiary, Neoprobe Europe currently leases office and
production facilities in Lund, Sweden, which occupy approximately 16,500 square
feet. The lease is for a term of approximately five years commencing July 1,
1996 and provides for a base rent of approximately $32,000 per month (subject
to annual increases based on the Swedish consumer price index). The lease is
automatically extended for an additional period of five years each unless
notice of termination is given 18 months before the end of the lease. Neoprobe
believes these facilities are in good condition and will be adequate for its
needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
In June 1996 a lawsuit against the Registrant was terminated by dismissal. The
Registrant was named as an additional party defendant in the In Re Blech
Securities litigation pending in the United States District Court for the
Southern District of New York before Judge Robert Sweet in March 1995. The
plaintiffs were eight named individuals who were alleged to be representatives
of a class of securities purchasers. The defendants included David Blech, who
was a principal stockholder of the Registrant until September 1994, Mark
Germain, who was a director of the Registrant until September 1994, D. Blech &
Co., a registered broker-dealer owned by Mr. Blech, trustees of certain trusts
established by Mr. Blech, Bear Stearns & Co., Baird Patrick & Co., Parag Saxena
and Chancellor Capital Corp., as well as the Registrant and 10 other
corporations of which Mr. Blech was a principal stockholder (the "Corporate
Defendants"). The complaint alleged that David Blech and D. Blech & Co.
conducted a scheme intended to artificially inflate the prices of securities
issued by corporations Mr. Blech controlled; that Mr. Blech, D. Blech & Co. and
corporations controlled by Mr. Blech gave or sold cheap stock to fund managers
in order to induce them to participate in this scheme; and that David Blech,
his trusts, D. Blech & Co., Baird Patrick, Bear Stearns, the Corporate
Defendants and unnamed other persons engaged in sham transactions, including
"round trip" sales, for the purpose of artificially inflating trading volumes
and securities of corporations controlled by Mr. Blech and maintaining their
trading prices. The complaint alleged that David Blech was the controlling
person and Mark Germain was a director of the Corporate Defendants and that the
knowledge and participation of Messrs. Blech and Germain in the alleged scheme
were the responsibility of the Corporate Defendants. The complaint also alleged
that the Corporate Defendants actively engaged in the alleged scheme and
benefited from it. The complaint further alleged that all of the defendants
engaged in a conspiracy to manipulate the market and failed to disclose
truthful information about the true value of securities issued by corporations
controlled by Mr. Blech. The complaint alleged violations of Securities and
Exchange Commission Rule 10b-5 and common law fraud by all defendants,
violations of the Racketeer Influenced Corrupt Organizations Act (RICO) by
defendants other than the Corporate Defendants and liability under Securities
Exchange Act 20(a), as the liability of controlling persons, by Messrs. Blech
and Germain and D. Blech & Co., Baird Patrick and Bear Stearns. The amount of
damages requested was not specified in the complaint. In June 1996, Judge Sweet
dismissed the allegations against the Registrant and the other Corporate
Defendants because the plaintiffs had failed to identify the alleged fraudulent
acts of the Registrant and the other Corporate Defendants with the specificity
required by federal law. The dismissal terminated the action against the
Registrant without any findings of liability against Registrant in July 1996.
The Judge's order can still be appealed, and the time for appeal will not begin
to run until a final judgment has been entered in the entire multi-party
proceeding .
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<S> <C> <C>
The executive officers of the Company and their ages and positions are as follows:
Name Age Position
- ---------------------------- ----------------- -----------------------------------------------------------------------
</TABLE>
22
<PAGE> 24
<TABLE>
<S> <C> <C>
Matthew F. Bowman 47 Senior Vice President, Operations and Marketing
David C. Bupp 49 President, Chief Executive Officer and Director
Patricia A. Coburn 53 Vice President, General Counsel
Louis Cosentino 44 Vice President, ILM Sales and Marketing
J. Kenneth Poggenburg, Jr., Ph.D. 64 Vice President - Operations
John L. Ridihalgh, Ph.D. 57 Chairman of the Board, Chief Scientific Officer
and Director
John Schroepfer 38 Vice President, Finance and Administration
Trudie L. Seeger, Ph.D. 43 Vice President, Regulatory Affairs
Lauren V. Vitek, M.D., Ph.D. 44 Vice President, Clinical Research and Medical Director
</TABLE>
Matthew F. Bowman has served as Senior Vice President, Operations and Marketing
of the Company since February 1998. From June 1996 until February 1998, Mr.
Bowman served as Vice President, Therapeutics of the Company. Prior to his
employment with the Company, Mr. Bowman was employed by Pharmacia Inc.
("Pharmacia"), where he served as Vice President of the Therapeutic Products
Division from 1995 to 1996 and as Senior Director, Therapeutics, from 1993 to
1995. From 1988 to 1993, Mr. Bowman was employed by Adria Laboratories, Inc.
("Adria") where, in 1993, he served as Senior Director, New Business Development
and Licensing, from 1990 to 1992, he served as Director, New Business
Development and Licensing, and, from 1988 to 1990, he served as Associate
Director, New Business Development. Mr. Bowman has a B.A. degree in Political
Science from The Citadel.
David C. Bupp has served as President and a director of the Company since
August 1992 and as Chief Executive Officer since February 1998. From August
1992 until February 1998, Mr. Bupp served as Chief Operating Officer of the
Company. From August 1992 to May 1993, Mr. Bupp served as Treasurer of the
Company. In addition to the foregoing positions, from December 1991 to August
1992, he was Acting President, Executive Vice President, Chief Operating
Officer and Treasurer, and from December 1989 to December 1991, he was Vice
President, Finance and Chief Financial Officer. From 1982 to December 1989, Mr.
Bupp was Senior Vice President, Regional Manager for AmeriTrust Company
National Association, a nationally chartered bank holding company, where he was
in charge of commercial banking operations throughout Central Ohio. Mr. Bupp
has a B.A. degree in Economics from Ohio Wesleyan University. Mr. Bupp
completed a course of study at Stonier Graduate School of Banking.
Patricia A. Coburn has served as Vice President, General Counsel of the Company
since February 1998. From August 1996 until February 1998, Ms. Coburn served as
Legal Counsel of the Company. Prior to her employment with the Company, Ms.
Coburn was employed by Pharmacia from 1994 until May 1996 where she served as
Assistant General Counsel. From September 1986 until 1994, Ms. Coburn was
employed by Adria where she served as Director, Intellectual Property until 1994
when Adria was acquired by Pharmacia. Ms. Coburn received a B.S. degree from the
University of Cincinnati in 1969 and a J.D. from the university of Toledo in
1977.
Louis Cosentino has served as Vice President, ILM Sales and Marketing of the
Company since February 1998. Mr. Cosentino served as Vice President, Marketing
and Corporate Development of the Company from January 1996 until February 1998.
From 1976 through 1995, Mr. Cosentino was employed by Johnson & Johnson, Inc.
From 1992 through 1995, he served as Vice President, Advanced Concepts and
Technology of Ethicon Endo-Surgery, Inc., an affiliate of Johnson & Johnson,
and from 1991 through 1993 he served as Director of New Business at Ethicon
Endo-Surgery. Mr. Cosentino has B.A. and M.B.A. degrees from Farleigh Dickinson
University .
J. Kenneth Poggenburg, Ph.D., was named Vice President, Operations of the
Company in March 1994. From January 1984 to February 1994, Dr. Poggenburg
served as Director of Research and Development for Hybritech Incorporated. From
1981 to 1984, Dr. Poggenburg was Director of Research and Development at
American Home Products, Analytic Products Division. Dr. Poggenburg has a B.S.
degree in Chemistry from the College of the Holy Cross and a Ph.D. degree in
Nuclear Chemistry from the University of California, Berkeley. Mr. Poggenburg's
employment with the Company will end in April, 1998. Mr. Poggenburg has agreed
to provide consulting services to the Company until April, 1999.
23
<PAGE> 25
John L. Ridihalgh, Ph.D., has served as a director of the Company and Chairman
of the Board since 1988 and as Chief Scientific Officer since February 1998. He
was President of the Company from 1984 to November 1991. Dr. Ridihalgh served
as Chief Executive Officer of the Company from 1984 to November 1991 and
resumed the position from June 1992 until February 1998. From November 1991 to
June 1992, Dr. Ridihalgh served as a consultant to the Company. From 1968 to
1974, Dr. Ridihalgh was a research scientist at Battelle Memorial Institute in
Columbus, Ohio. He founded a consulting firm to the nuclear industry in 1974
and a manufacturer of long-distance telephone network access devices in 1981.
He is also the founder of a medical instrument development company and an
animal vaccine company which has licensed a number of vaccines for veterinary
use. Dr. Ridihalgh has a B.S. degree in Mathematics and a Ph.D. degree in
Nuclear Engineering, both from Iowa State University.
John Schroepfer has served as Vice President, Finance and Administration of the
Company since May 1993. From November 1991 to May 1993, Mr. Schroepfer served
as Controller of the Company, and was Chief Accounting Officer of the Company
from August 1992 to May 1993. From March 1989 to November 1991, he was the
Senior Accountant for the Company. From May 1986 to March 1989, Mr. Schroepfer
was employed by Coopers & Lybrand. Mr. Schroepfer has a B.S./B.A. degree in
Accounting from The Ohio State University and is a Certified Public Accountant.
Trudie L. Seeger, Ph.D., has served as Vice President, Regulatory Affairs of
the Company since May 1993. From May 1991 to May 1993, Dr. Seeger was Director
of Regulatory Affairs and Clinical Research for the Company, and from February
1990 to March 1991, she was the Associate Director of Regulatory Affairs for
the Company. From June 1988 to September 1989, Dr. Seeger was Senior Clinical
Research Associate at Bristol Myers, and from January 1984 to June 1988, she
was a clinical research associate at Bristol Myers. From September 1989 to
January 1990, Dr. Seeger was Associate Director, Clinical Research, at
Schering-Plough. Dr. Seeger has a B.S. degree in Biology from D'Youville
College (magna cum laude) and an M.S. degree in Physical Science and a Ph.D.
degree in Experimental Pathology (with a research emphasis in Immunology) from
the State University of New York at Buffalo. Ms. Seeger's employment with the
Company will end in April, 1998. Ms. Seeger has agreed to provide consulting
services to the Company until April, 1999.
Lauren V. Vitek, M.D., Ph.D., has served as Vice President, Clinical Research
and Medical Director of the Company since February 1998. Dr. Vitek served as
Medical Director, Therapeutics of the Company from January 1997 until February
1998. Dr. Vitek served as Associate Director, Oncology of Pharmacia from 1994
until April 1996 and served as Director, Oncology of Pharmacia from May 1996
until January 1997. From March 1993 until 1994, Dr. Vitek was employed by Adria
where she served as Associate Director, Oncology until Adria was acquired by
Pharmacia. Dr. Vitek received a B.S. degree in 1975, a Ph.D. degree in 1980 and
an M.D. degree in 1982, all from Loyola University.
24
<PAGE> 26
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company trades on The Nasdaq Stock Market under the
trading symbol "NEOP". The prices set forth below reflect the high and low sale
prices for shares of Common Stock during the last two fiscal years as reported
by The Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ---
<S> <C> <C>
Fiscal Year 1996
First Quarter $23.25 $13.38
Second Quarter 19.88 14.00
Third Quarter 19.25 8.88
Fourth Quarter 18.13 11.38
Fiscal Year 1997
First Quarter $18.25 $12.88
Second Quarter 16.00 12.25
Third Quarter 15.00 10.50
Fourth Quarter 14.44 5.50
</TABLE>
As of March 12, 1998, the Registrant had approximately 616 holders of Common
Stock of record.
The Company has not paid any dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company intends
to retain any earnings to finance the growth of its business. There can be no
assurance that the Company will ever pay cash dividends.
Recent Sales of Unregistered Securities
The following sets forth certain information regarding the sale of equity
securities of the Company during the period covered by this Report that were
not registered under the Securities Act of 1933 other than unregistered sales
made in reliance on Regulation S.
In March 1997 the Company issued 1,672 shares of common stock to the trustees
of its 401(k) employee benefit plan without registration. Such issuance is
exempt from registration under the Act under Section 3(a)(2). The Plan is a
pension, profit sharing or stock bonus plan that is qualified under Section 401
of the Internal Revenue Code. The assets of the Plan are held in a single trust
fund for the benefit of the employees of the Company which does not hold assets
for the benefit of the employees of any other employer. All of the
contributions to the plan from employees of Neoprobe have been invested in
assets other than Common Stock. All of the Common Stock held by the plan has
been contributed to the plan by the Company as a matching contribution and has
been less in value at the time it was contributed to the plan than the employee
contributions which it matches.
25
<PAGE> 27
ITEM 6. SELECTED FINANCIAL DATA
The following summary financial data are derived from consolidated financial
statements of the Company which have been audited by the Company's independent
public accountants. These data are qualified in their entirety by, and should
be read in conjunction with, the Company's Consolidated Financial Statements
and Notes thereto included herein.
<TABLE>
<CAPTION>
November 16, 1983
(Date of
Inception to
(Amounts in thousands, except per share data) Years ended December 31, December 31,
------------------------------------------------------------
1993 1994 1995 1996 1997 1997
-------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Sales $35 $933 $960 $1,171 $5,128 $9,187
Gross Profit 27 345 454 494 3,552 5,483
Research and development expenses 5,915 6,761 7,829 16,083 19,657 64,556
Marketing and selling expenses 1,532 4,307 5,838
General and administrative expenses 2,374 4,313 4,148 6,222 6,853 31,080
-------- --------- --------- --------- --------- --------
Loss from operations 8,262 10,730 11,523 23,342 27,265 95,991
Other income (expense) 284 175 764 2,373 4,018 8,269
-------- --------- --------- --------- --------- --------
Net loss $(7,978) $(10,555) $(10,759) $(20,969) $(23,247) $(87,363)
======== ========= ========= ========= ========= ========
Net loss per common share from
continuing operations (basic and diluted)(1) $(1.13) $(1.18) $(0.73) $(1.06) $(1.02)
======== ========= ========= ========= =========
Shares used in computing net
loss per common share(1) 7,039 8,926 14,726 19,743 22,735
======== ========= ========= ========= =========
<CAPTION>
As of December 31,
------------------------------------------------------------
1993 1994 1995 1996 1997
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets 12,571 7,839 24,145 63,873 41,573
Long-term obligations 110 300 1,182 1,009 2,069
Accumulated deficit (21,833) (32,387) (43,147) (64,116) (87,363)
</TABLE>
- -------------
(1) Net loss per common share is based on the weighted average number of common
shares outstanding during the year. The loss per share for all periods
presented excludes the number of common shares issuable upon the conversion
of preferred stock and the number of shares issuable upon exercise of
outstanding stock options and warrants since such inclusion would be
anti-dilutive.
ITEM 7. 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 1998 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 $120 million. As of December 31, 1997, the
Company had cash, cash equivalents, and available-for-sale securities of $24.6
million. To date, 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. During the first quarter of
1998, the Company implemented a business plan to reduce operating expenses and
focus on three main business activities: commercializing the Company's first
RIGS(R) system (radioimmunoguided surgery) product, called RIGScan(R) CR49 (125
I - CC49 monoclonal antibody) for the surgical detection of metastatic
colorectal cancer, increasing the Company's market position in gamma guided
surgery applications, and developing activated cellular therapy products for
cancer and viral diseases. The Company reduced its domestic staff and annual
compensation expense by approximately $1 million (approximately 20%) and
postponed certain research projects which were expected to be carried out in
1998.
The RIGS system integrates radiolabeled targeting agents and radiation
detection instruments. The Company is developing both the radiolabeled
targeting agents and radiation-detection instrument components of the RIGS
technology. Prior to 1996, the Company completed testing in a pivotal Phase III
clinical trial for the detection of metastatic colorectal cancer. In addition,
the Company has completed testing in a separate pivotal Phase III clinical
trial for the detection of primary colorectal cancer. The Company must obtain
regulatory approval to market its products before commercial revenue can be
generated. During 1996, the Company submitted applications to the European
regulatory agencies and to the United States Food and Drug Administration
("FDA") to request permits to begin marketing and selling the Company's RIGS
products for the detection of metastatic colorectal cancer. In November 1997,
the Company withdrew its application from the EMEA as a result of additional
requests for information from the CPMP. In addition, in December 1997, the
FDA's CBER, completed its review of data submitted by the Company for its
product and determined that additional information must be provided before it
can further consider the approval of the Company's product. The Company
intends to submit an amendment to the
26
<PAGE> 28
BLA and resubmit the European dossier with additional information as soon as
the information requests can be clarified and the appropriate responses
compiled.
In October 1997, the Company launched the Neoprobe(R) 1500 Portable
Radioisotope Detector in response to an emerging new surgical technique called
lymphatic mapping for treating patients with melanoma, a potentially deadly
form of skin cancer. Lymphatic mapping represents a less invasive surgical
technique then existing techniques for staging cancer or determining whether
the cancer has spread to the lymph nodes. Surgeons are using the lymphatic
mapping technique for treating patients with melanoma and investigating its use
in patients with breast cancer as well. The Company is currently selling the
Neoprobe 1500 Portable Radioisotope Detector for the lymphatic mapping
application and expanding its line of instruments to provide a variety of
gamma-detecting probes for specialized uses. The Company recorded revenue of
$5 million during 1997 predominantly related to the lymphatic mapping
technique.
The Company is also studying the safety and efficacy of certain therapy
products. In 1997, Neoprobe opened an IND application for clinical studies with
RIGS/ACT(TM) (RIGS technology based activated cellular therapy) for colorectal
cancer. One study is a Phase I/II multicenter trial using RIGS/ACT in patients
with recurrent, operable colorectal cancer. A second study is a Phase II
multicenter trial using RIGS/ACT with chemotherapy in patients with recurrent
but inoperable colorectal cancer. The Company has also funded a Phase I study
to determine the safety and feasibility of using RIGS/ACT to help boost the
immune system of patients with HIV/AIDS. In addition, the Company is funding a
Phase I study to investigate the use of activated cellular therapy with
patients coinfected with HIV/AIDS and chronic active hepatitis B or C.
For the period from inception to December 31, 1997, the Company has incurred
cumulative net losses of approximately $87.4 million. The Company does not
currently have a RIGS product approved for commercial sale in any major market
and does not anticipate commercial sales of sufficient volume to generate
positive cash flow until 2000, 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
and commercialization of its products. The amount of funds and length of time
required to complete such testing will depend upon the outcome of regulatory
reviews. The regulatory bodies may require more testing than is anticipated 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.
The Company's research and development activities and operating costs have been
funded principally with cash generated from the issuance of common stock. 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 November 1992 and December 1993, the Company issued a
total of 2,330,000 Class E Redeemable Common Stock Purchase Warrants ("Class E
Warrants"). During 1996, the Company received proceeds from the exercise of
Class E Warrants of approximately $15 million.
Research and development expenses during 1997 were $19.7 million, or 64% of
operating expenses for the period. Marketing and selling expenses were $4.3
million or 14% of operating expenses during the period and general and
administrative expenses were $6.9 million, or 22% of operating expenses for
the period. The Company anticipates that 1998 total operating expenses will
decrease over 1997 levels. The Company expects research and development and
general and administrative expenses to decrease from 1997. However, the
Company also expects marketing and selling expenses to increase slightly from
1997 levels. The Company currently anticipates that approximately $12.0 million
in cash will be used to finance operating activities during 1998.
During 1998, the Company intends to focus on responding to regulatory issues
raised by the U.S. FDA and European regulatory authorities and improving
manufacturing processes for the production of RIGScan CR49. The Company
intends to submit an amendment to the BLA and resubmit the European dossier
with additional information. The Company cannot predict when marketing
approvals will be received. However, when the Company receives permission from
the regulatory authorities to begin marketing its products and begins
generating revenue from the sale of its products, additional costs for
marketing and distribution will be incurred. The Company has executed various
agreements with third parties that supplement the technical and business
capabilities of the Company. The Company is generally obligated to such parties
to pay royalties or commissions upon commercial sale of the related product.
The Company's estimate of its allocation of cash resources is based on the
current state
27
<PAGE> 29
of its business operations, its 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 marketing and
distribution, regulatory licensing and research and development, and to
reallocation among categories and to new categories. The Company may need to
supplement its funding sources from time to time.
Neoprobe Europe is a wholly-owned subsidiary of the Company, located in Lund,
Sweden, where it operates a biologics manufacturing and purification facility.
The Company uses the facility to prepare the CC49 monoclonal antibody produced
by Bio-Intermediair BV for final radiolabeling. The Company advanced funds to
Neoprobe Europe during 1997 to cover operating and capital expenditures of
approximately $2 million. The Company anticipates advancing $1.25 million
during 1998 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, the private arm of the Israeli atomic
energy authority owning the balance and managing the facility. In 1994,
Neoprobe (Israel) received notification from the state of Israel's Finance
Committee (the "Committee") that its initial financial program had been
approved for the construction and operation of a radiolabeling facility near
Dimona, Israel. During the third quarter of 1997, Neoprobe (Israel) was
notified that the Committee had approved a $5.2 million increase in the
approved program. The total amount of the approved program is now $9.9
million. Neoprobe (Israel) is entitled to receive grants of 25% of its
investment and a government guarantee of 75% to 85% of the principal balance of
bank loans taken to build and operate the facility. On August 10, 1995, the
Company and Neoprobe (Israel) raised $1.1 million for Neoprobe (Israel) through
the issuance of convertible debentures. These convertible debentures were
converted into 200,000 shares of Common Stock of Neoprobe Corporation in 1996.
During 1997, costs associated with construction and preparation of the facility
were financed primarily with funds advanced by the Company as a result of
delays in funding from the government sponsored program. The Company advanced
Neoprobe (Israel) funds during 1997 to cover capital expenditures of
approximately $1.8 million and operating expenses of approximately $2 million.
In February 1998, the Company received loan proceeds of approximately $1.9
million under the government sponsored program. The Company expects to receive
approximately $3.2 million in loan and grant proceeds under the approved
program during 1998. The Company does not anticipate advancing any significant
amount of funds to Neoprobe (Israel) during 1998.
At December 31, 1997, the Company had U.S. net operating tax loss carryforwards
of approximately $75.8 million to offset future taxable income through 2012.
Additionally, the Company has U.S. tax credit carryforwards of approximately
$2.2 million available to reduce future income tax liability through 2012.
Under Section 382 of the Internal Revenue Code of 1986, as amended, use of
prior tax 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 tax loss carryforwards and tax credit carryforwards are subject to
the limitations described by Section 382. The Company's international
subsidiaries also have net operating tax loss carryforwards in their respective
foreign jurisdictions.
The Company has performed a preliminary assessment of the year 2000 issue as it
relates to the Company's information systems and vendor supplied application
software. Based on these assessments, management does not anticipate any
significant impact on the Company as a result of implications associated with
that issue.
RESULTS OF OPERATIONS
Since inception, the Company has dedicated substantially all of its resources to
research and development of its RIGS system for the intraoperative diagnosis and
treatment of cancer. Until the appropriate regulatory approvals are received,
the Company is limited in its ability to generate revenue. In September 1996,
the Company executed a License and Distributorship Agreement with USSC
giving USSC exclusive worldwide sales and marketing rights (excluding Korea and
certain other Pacific Rim countries) for the Company's RIGS surgical cancer
detection products. Effective October 17, 1997, the Company and USSC mutually
agreed to terminate the Agreement, as amended. During 1997, the Company
generated sales of Neoprobe 1000 and 1500 systems of $5 million.
28
<PAGE> 30
Years ended 1997, 1996 and 1995.
Revenue and Other Income
The Company had net sales of approximately $5.1 million in 1997 compared to
$1.2 million in 1996. Net sales included instrument sales of $5 million and
blood serology products of $125,000 in 1997. In 1996, net sales included
instrument sales of $780,000 and blood serology products of $391,000.
Instrument sales increased as a result of the introduction of the Neoprobe 1500
system and the continuing growth of the lymphatic mapping technique. Sales of
serology products at Neoprobe Europe continued to decrease as a result of the
Company's efforts to develop the long-term production capacity for targeting
agents. Other income during 1997 was $4 million and consisted of interest
income of $2.2 million and miscellaneous income of $2 million representing
recognition of income of a license fee received from USSC net of interest and
other expenses. During 1996, other income was $2.4 million and represented
primarily interest income earned during the period. During the period ended
December 31, 1995, the Company had net sales of $960,000 consisting of
instrument sales of approximately $157,000 and blood serology products of
$803,000. Instrument sales increased in 1996 over 1995 levels as a result of
the emergence of lymphatic mapping as a technique for treating patients with
melanoma. Other income for 1995 was approximately $764,000 and consisted
primarily of interest income.
Research and Development Expenses
Research and development expenses increased during 1997 to $19.7 million from
$16.1 million in 1996. The increase is a result of a substantial increase in
instrument development and design and in manufacturing validation activities
during 1997. Clinical trial costs decreased during the year as clinical trial
activity related to RIGScan CR49 declined following the submission of
applications to regulatory bodies for marketing approval. The decline in costs
related to RIGScan CR49 was partly offset by an increase in costs related to
the development of activated cellular therapy technology during the period.
Research and development expenses also increased during 1996 to $16.1 million
from $7.8 million in 1995. During 1996, the Company filed marketing
applications for regulatory approvals in Europe and in the U.S. The 1996
expenses reflect the costs associated with activities required by regulatory
authorities for product approval. The activities included validating the
Company's manufacturing processes and conducting audits of clinical trial data.
In addition, during the period the Company continued its product development
activities for the detection of other cancers and its activated cellular
therapy program. The increase in research and development expenses was the
result of increases in wages and benefits, contracted services and clinical
trials. Wages and benefits increased primarily from hiring additional research
and development staff and for non-cash compensation expense related to stock
options which vested after reaching certain milestones. Additional staff was
added during the year to support development of future RIGS diagnostic products
and RIGS/ACT products. 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. Clinical
trial costs increased over the previous period primarily from clinical studies
associated with RIGS/ACT products and costs associated with the development of
the Biologic License Application and the European marketing application.
Marketing and Selling Expenses
During 1997, marketing and selling expenses increased by $2.8 million over the
previous year. The increase was directly related to increased instrument sales
during the year. The Company was obligated to pay a commission to USSC for
devices sold during the period for which the Agreement was in place. In
addition, the Company hired additional marketing staff during the period to
support the lymphatic mapping business. The increase in marketing expenses in
1996 from 1995 is the result of development of an internal sales and marketing
department to support the anticipated launch of the Company's first RIGS
product and the growing ILM market.
General and Administrative Expenses
During 1997, general and administrative expenses increased to $6.9 million from
$6.2 million in 1996. The increase was primarily a result of growth in staff
and increased costs for rent, leases, taxes and other expenses. Other expenses
increased primarily as a result of greater travel and insurance costs.
General and administrative expenses increased during 1996 to $6.2 million from
$4.1 million in 1995. The increase in 1996 was primarily a result of increased
wages and benefits and miscellaneous expenses. Wages and benefits increased as
a result of additional personnel hired in 1996 and non-cash expenses for stock
option vesting. Miscellaneous expenses increased in 1996 primarily from
increases in insurance, rent and taxes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This Item does not yet apply to the Registrant.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company, and the related notes, together with
the report of Coopers & Lybrand L.L.P. dated February 20, 1998, are set forth
at pages [F-1 through F-18] attached hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
29
<PAGE> 31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the Registrant's directors will be set forth at
"ELECTION OF DIRECTORS in the Registrant's Proxy Statement for its 1998 Annual
Meeting of Shareholders (the "1998 Proxy Statement") which information is
incorporated herein by reference. Information required by this Item concerning
compliance with Section 16(a) of the Exchange Act will be set forth at "SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" in the 1998 Proxy Statement
which information is incorporated herein by reference. Information regarding the
Registrant's executive officers is set forth in PART I of this report at
"Supplemental Item. Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be set forth at
"COMPENSATION OF MANAGEMENT" in the 1998 Proxy Statement which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will be set forth at "SECURITY
OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS"
in the 1998 Proxy Statement which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item will be set forth at "CERTAIN
TRANSACTIONS" in the 1998 Proxy Statement which information is incorporated
herein by reference.
30
<PAGE> 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) LIST OF EXHIBITS AND FINANCIAL STATEMENTS FILED AS PART OF THIS
REPORT
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1. Complete 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 (the "June 1996 Form 8-K"); 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 June 1996
Form 8-K).
(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. Rights Agreement dated as of July 18, 1995 between
the Registrant and Continental Stock Transfer & Trust
Company (incorporated by reference to Exhibit 1 to the
registration statement on Form 8-A, Commission File
No. 0-26520).
(10) MATERIAL CONTRACTS (*indicates management contract or
compensatory plan or arrangement).
10.1.1.--10.1.22. Reserved
10.1.23. Brokers' Warrants for the purchase of shares
of Common Stock dated June 30, 1995 issued
to officers of Sunrise Financial Corporation
(incorporated by reference to Exhibit
10.1.23 to Registrant's Quarterly Report on
Form 10-QSB for the quarter ending June 30,
1995; Commission No. 0-26520 (the "2nd
Quarter 1995 Form 10-QSB")). This exhibit is
one of six substantially identical
instruments and is accompanied by a schedule
identifying the other documents omitted and
setting forth the material details in which
such documents differ from the one that is
filed therewith.
10.1.24. Reserved.
10.1.25. Rights Agreement between the Registrant and
Continental Stock Transfer & Trust Company
dated as of July 18, 1995 (see Exhibit 4.3).
10.1.26.--10.1.30. Reserved.
31
<PAGE> 33
10.2.1.-- 10.2.14. Reserved.
10.2.15. Option Agreements between the Registrant and
David C. Bupp (incorporated by reference to
Exhibit 10.7 to the Registrant's
registration statement on Form S-1; No.
33-51446 (the "Form S-1")).*
10.2.16.--10.2.17. Reserved.
10.2.18. Non-Qualified Stock Option Agreement dated
May 3, 1993 between the Registrant and David
C. Bupp (incorporated by reference to
Exhibit 10.50 to the Registrant's Quarterly
Report on Form 10--QSB for the quarterly
period ended June 30, 1993; Commission File
No. 0-26520 (the "2nd Quarter 1993 Form
10-QSB")).*
10.2.19.--10.2.20. Reserved.
10.2.21. Non-Qualified Stock Option Agreement dated
May 3, 1993 between the Registrant and John
L. Ridihalgh (incorporated by reference to
Exhibit 10.53 to the 2nd Quarter 1993 Form
10-QSB).*
10.2.22. Reserved.
10.2.23. Non-Qualified Stock Option Agreement dated
February 28, 1992 and amended and restated
June 3, 1993 between the Registrant and
David C. Bupp (incorporated by reference to
Exhibit 99.5 to Registrant's report on Form
8-K dated January 21, 1994; Commission File
No. 0-26520 (the "January 1994 Form 8-K")).*
10.2.24. Non-Qualified Stock Option Agreement dated
July 1, 1990 and amended and restated June
3, 1993 between the Registrant and David C.
Bupp (incorporated by reference to Exhibit
99.6 to the January 1994 Form 8-K).*
10.2.25. Non-Qualified Stock Option Agreement dated
June 1, 1992 and amended and restated June
3, 1993 between the Registrant and John L.
Ridihalgh (incorporated by reference to
Exhibit 99.7 to the January 1994 Form 8-K).*
10.2.26. Amended and Restated Stock Option and
Restricted Stock Purchase Plan dated March
3, 1994 (incorporated by reference to
Exhibit 10.2.26 to Registrant's annual
report on Form 10-KSB for the year ending
December 31, 1993; Commission File No.
0-26520 (the "1993 Form 10-KSB")).*
10.2.27.--10.2.28. Reserved.
10.2.29. Non-Qualified Stock Option Agreement dated
February 16, 1995 between the Registrant and
John L. Ridihalgh (incorporated by reference
to Exhibit 10.2.29 to the 1994 Form
10-KSB).*
10.2.30. Non-Qualified Stock Option Agreement dated
February 16, 1995 between the Registrant and
David C. Bupp (incorporated by reference to
Exhibit 10.2.30 to the 1994 Form 10-KSB).*
10.2.31. Employment Agreement dated as of January 1,
1996 between the Registrant and John L.
Ridihalgh (incorporated by reference to
Exhibit 10.2.31 to the Registrant's
Quarterly Report on Form 10-QSB for the
quarterly period ended June 30, 1996;
Commission File No. 0-26520 (the "2nd
Quarter 1996 Form 10-QSB")).*
10.2.32. Employment Agreement dated as of January 1,
1996 between the Registrant and David C.
Bupp (incorporated by reference to Exhibit
10.2.32 to the 2nd Quarter 1996 Form
10-QSB).*
32
<PAGE> 34
10.2.33 Reserved.
10.2.34. Restricted Stock Purchase Agreement dated
June 5, 1996 between the Registrant and John
L. Ridihalgh (incorporated by reference to
Exhibit 10.2.32 to the Registrant's Annual
Report on Form 10-KSB for the year ending
December 31, 1997 (the "1997 Form 10-KSB");
Commission File No. 0-26520).*
10.2.35. Restricted Stock Purchase Agreement dated
June 5, 1996 between the Registrant and
David C. Bupp (incorporated by reference to
Exhibit 10.2.35 to the 1997 Form 10-KSB).*
10.2.36. Restricted Stock Purchase Agreement dated
November 25, 1996 between the Registrant and
Joseph R. Bianchine, as amended January 2,
1997 (incorporated by reference to Exhibit
10.2.36 to the 1997 Form 10-KSB).*
10.2.37. 1996 Stock Incentive Plan dated January 18,
1996 as amended March 13, 1997.*
10.2.38. Non-Qualified Stock Option Agreement dated
January 18, 1996 between the Registrant and
John L. Ridihalgh.*
10.2.39. Non-Qualified Stock Option Agreement dated
January 18, 1996 between the Registrant and
David C. Bupp.*
10.2.40. Non-Qualified Stock Option Agreement dated
February 3, 1997 between the Registrant and
John L. Ridihalgh.*
10.2.41. Non-Qualified Stock Option Agreement dated
February 3, 1997 between the Registrant and
David C. Bupp.*
10.3.1. Technology Transfer Agreement dated July 29,
1992 between the Registrant and The Dow
Chemical Corporation (incorporated by
reference to Exhibit 10.10 to the Form S-1,
confidential portions of which were omitted
and filed separately with the Commission
subject to an order granting confidential
treatment).
10.3.2.--10.3.7. Reserved.
10.3.8. Supplemental Agreement dated July 19, 1985
between the Registrant and The Ohio State
Uni versity, acting on behalf of the State
of Ohio (incorporated by reference to
Exhibit 10.17 to the Form S-1, confidential
portions of which were omitted and filed
separately with the Commission subject to an
order granting confidential treatment).
10.3.9. Task Order Agreement for Sponsored Clinical
Research dated May 15, 1992, between the
Registrant and The Ohio State University
Research Foundation (incorporated by
reference to Exhibit
33
<PAGE> 35
10.18 to the Form S-1, confidential portions
of which were omitted and filed separately
with the Commission subject to an order
granting confidential treatment).
10.3.10. License Agreement dated July 23, 1992
between the Registrant and The Ohio State
University Research Foundation (incorporated
by reference to Exhibit 10.19 to the Form
S-1, confidential portions of which were
omitted and filed separately with the
Commission subject to an order granting
confidential treatment).
10.3.11. License Agreement dated July 23, 1992
between the Registrant and The Ohio State
University Research Foundation (incorporated
by reference to Exhibit 10.20 to the Form
S-1, confidential portions of which were
omitted and filed separately with the
Commission subject to an order granting
confidential treatment).
10.3.12.--10.3.15. Reserved.
10.3.16. Drug Manufacture Agreement dated April 6,
1993 between the Registrant and Nordion
Interna tional Inc. (incorporated by
reference to Exhibit 10.55 to the 2nd
Quarter 1993 Form 10-QSB, confidential
portions of which were omitted and filed
separately with the Commission subject to an
order granting confidential treatment).
34
<PAGE> 36
10.3.17.-10.3.28. Reserved.
10.3.29. Manufacturing and Supply Agreement dated
February 20, 1995 between the Registrant and
Bio-Intermediair, B.V. (incorporated by
reference to Exhibit 10.3.29 to the 1994
Form 10-KSB).
10.3.30. Facility Agreement dated July 17, 1995 among
Registrant, Neoprobe (Israel) Ltd., and
Rotem Industries, Ltd. (incorporated by
reference to Exhibit 10.3.30 to Registrant's
Quarterly Report on Form 10-QSB for the
quarter ending September 30, 1995,
Commission File No. 0-26520 (the "3rd
Quarter 1995 Form 10-QSB"), confidential
portions of which were omitted and filed
separately with the Commission subject to an
order granting confidential treatment).
10.3.31. Cooperative Research and Development
Agreement between Registrant and National
Cancer Institute (incorporated by reference
to Exhibit 10.3.31 to the 3rd Quarter 1995
Form 10-QSB).
10.3.32. First Amendment to Facility Agreement dated
July 17, 1995 among Registrant, Neoprobe
(Israel), Ltd. and Rotem Industries, Ltd
(incorporated by reference to Exhibit
10.3.32 to the Registrant's Annual Report on
Form 10-KSB for the year ending December 31,
1995; Commission File No. 0-26520 (the "1995
Form 10-KSB")).
10.3.33. Investment Agreement dated January 31, 1996
between the Registrant and XTL
Biopharmaceuticals, Ltd. (incorporated by
reference to Exhibit 10.3.33 to the
Registrant's Quarterly Report on Form 10-QSB
for the quarterly period ended March 31,
1996; Commission File No. 0-26520 (the "1st
Quarter 1996 Form 10-QSB")).
10.3.34 $1,500,000 5% Convertible Subordinated
Debenture Due February 13, 1998 of XTL
Biopharmaceuticals, Ltd. issued to
Registrant on February 13, 1996
(incorporated by reference to Exhibit
10.3.34 to the 1st Quarter 1996 Form
10-QSB).
10.3.35 Investors' Rights Agreement dated February
5, 1996 between Registrant and XTL
Biopharmaceuticals, Ltd. (incorporated by
reference to Exhibit 10.3.35 to the 1st
Quarter 1996 Form 10-QSB).
10.3.36 Warrant to purchase Class A Common Shares of
XTL Biopharmaceuticals, Ltd. issued to
Registrant on February 13, 1996
(incorporated by reference to Exhibit
10.3.36 to the 1st Quarter 1996 Form
10-QSB).
10.3.37 Research and Development Agreement dated
February 13, 1996 between Registrant and XTL
Biopharmaceuticals, Ltd. (incorporated by
reference to Exhibit 10.3.37 to the 1st
Quarter 1996 Form 10-QSB, confidential
portions of which were omitted and filed
separately with the Commission subject to an
order granting confidential treatment).
10.3.38 Sublicense Agreement dated February 13, 1996
between Registrant and XTL
Biopharmaceuticals, Ltd. (incorporated by
reference to Exhibit 10.3.38 to the 1st
Quarter 1996 Form 10-QSB, confidential
portions of which were omitted and filed
separately with the Commission subject to an
order granting confidential treatment).
10.3.39 Reserved.
10.3.40 Subscription and Option Agreement dated
March 14, 1996 between Registrant and Cira
Technologies Inc. (incorporated by reference
to Exhibit 10.3.40 to the 1st Quarter 1996
Form 10-QSB)
10.3.41.-10.3.43. Reserved.
35
<PAGE> 37
10.3.44 Technology Option Agreement dated as of
March 14, 1996 between Cira Technologies,
Inc. and Registrant (incorporated by
reference to Exhibit 10.3.44 to the 2nd
Quarter 1996 Form 10-QSB, confidential
portions of which were omitted and filed
separately with the Commission subject to an
order granting confidential treatment).
10.3.45 License dated May 1, 1996 between Registrant
and The Dow Chemical Company (incorporated
by reference to Exhibit 10.3.45 to the 2nd
Quarter 1996 Form 10-QSB).
10.3.46 License Agreement dated May 1, 1996 between
Registrant and The Dow Chemical Company
(incorporated by reference to Exhibit
10.3.46 to the 2nd Quarter 1996 Form 10-QSB,
confidential portions of which were omitted
and filed separately with the Commission
subject to an order granting confidential
treatment).
10.4.1.--10.4.15. Reserved.
10.4.16. Project Management Agreement dated May 17,
1995 between Neoprobe (Israel) Ltd. and
BARAN Project Construction Ltd.
(incorporated by reference to Exhibit
10.4.16 to the 2nd Quarter 1995 Form
10-QSB).
10.4.17. Strategic Marketing Agreement dated August
30, 1995 between Registrant and Damon Pharm
Ltd. (incorporated by reference to Exhibit
10.4.17 to the 3rd Quarter 1995 Form 10-QSB,
confidential portions of which were omitted
and filed separately with the Commission
subject to an order granting confidential
treatment).
10.4.18. Exclusive Distribution Agreement dated
September 25, 1995 between Registrant and
Syncor International Corporation
(incorporated by reference to Exhibit
10.4.18 to the 3rd Quarter 1995 Form 10-QSB,
confidential portions of which were omitted
and filed separately with the Commission
subject to an order granting confidential
treatment).
10.4.19. Exclusive Distribution Service Agreement
dated November 30, 1995 between Registrant
and Nordion Europe S.A. (incorporated by
reference to Exhibit 10.4.19 to the 1995
Form 10-KSB, confidential portions of which
were omitted and filed separately with the
Commission subject to an order granting
confidential treatment).
10.4.20. License and Distribution Agreement dated
September 18, 1996 between Registrant and
United States Surgical Corporation
(incorporated by reference to Exhibit
10.4.20 to the Registrant's Quarterly Report
on Form 10-QSB, as amended by amendment no.
1 on Form 10-QSB/A, for the quarter ended
September 30, 1996; Commission File No.
0-26520, confidential portions of which were
omitted and filed separately with the
Commission subject to an order granting
confidential treatment).
10.4.21. First Amendment to the License and
Distribution Agreement dated May 14, 1997
between Registrant and United States
Surgical Corporation (incorporated by
reference to Exhibit 10.4.21 to the
Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997;
36
<PAGE> 38
Commission File No. 0-26520, which was filed pursuant to
Rule 24b-2 under which the Registrant has requested
confidential treatment of certain portions of this
Exhibit).
(11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS.
11.1. Computation of Net Loss Per Share.
(21) SUBSIDIARIES OF THE REGISTRANT.
21.1. Subsidiaries of the Registrant.
(23) CONSENT OF EXPERTS AND COUNSEL.23.1
23.1 Consent of Coopers & Lybrand L.L.P.
(24) POWERS OF ATTORNEY.
24.1. Powers of Attorney.
24.2. Certified resolution of the Registrant's Board of
Directors authorizing officers and directors
signing on behalf of the Company to sign pursuant
to a power of attorney.
(B) REPORTS ON FORM 8-K.
No current report on Form 8-K was filed by the Registrant during the
fourth quarter of fiscal 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 30, 1998
NEOPROBE CORPORATION
(the "Registrant")
By: /s/ DAVID C. BUPP
----------------------------
David C. Bupp, President and
Chief Executive Officer
37
<PAGE> 39
Pursuant to the requirements of the Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/DAVID C. BUPP Director, President and Chief March 30, 1998
- -------------------------------------
David C. Bupp Executive Officer
(principal executive officer)
/s/JOHN SCHROEPFER* Vice President, Finance and March 30, 1998
- ------------------------------------- Administration
John Schroepfer (principal financial officer)
/s/MELVIN D. BOOTH* Director March 30, 1998
- -------------------------------------
Melvin D. Booth
/s/JOHN S. CHRISTIE* Director March 30, 1998
- -------------------------------------
John S. Christie
/s/C. MICHAEL HAZARD* Director March 30, 1998
- -------------------------------------
C. Michael Hazard
/s/JULIUS R. KREVANS* Director March 30, 1998
- -------------------------------------
Julius R. Krevans
/s/MICHAEL P. MOORE* Director March 30, 1998
- -------------------------------------
Michael P. Moore
/s/JOHN L. RIDIHALGH* Director March 30, 1998
- -------------------------------------
John L. Ridihalgh
/s/J. FRANK WHITLEY, JR.* Director March 30, 1998
- -------------------------------------
J. Frank Whitley, Jr.
/s/JAMES F. ZID* Director March 30, 1998
- -------------------------------------
James F. Zid
*By: /s/ DAVID C. BUPP
-------------------------------------------
David C. Bupp, Attorney-in-fact
</TABLE>
38
<PAGE> 40
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
NEOPROBE CORPORATION
-----------------------
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED:
DECEMBER 31, 1997
-----------------------
FINANCIAL STATEMENTS
-----------------------
================================================================================
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders of
Neoprobe Corporation
We have audited the accompanying consolidated balance sheets of Neoprobe
Corporation and Subsidiaries (A Development Stage Company) as of December 31,
1996 and 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1995,
1996, and 1997, and for the period from November 16, 1983 (date of inception) to
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Neoprobe
Corporation and Subsidiaries (A Development Stage Company) as of December 31,
1996 and 1997, and the consolidated results of their operations and their cash
flows for the years ended December 31, 1995, 1996, and 1997, and for the period
from November 16, 1983 (date of inception) to December 31, 1997, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Columbus, Ohio
February 20, 1998
F-1
<PAGE> 42
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1997
<TABLE>
<CAPTION>
ASSETS 1996 1997
-------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $30,168,412 $9,921,025
Available-for-sale securities 19,748,819 14,672,496
Accounts receivable, net 1,240,474 793,376
Inventory 216,272 413,024
Prepaid expenses 1,605,897 1,211,598
Note receivable 1,500,000
Other current assets 683,649 789,780
-------------- ---------------
Total current assets 53,663,523 29,301,299
-------------- ---------------
Note receivable 1,500,000
Property and equipment at cost:
Equipment 7,053,392 9,264,222
Construction in progress 1,226,966 3,757,133
-------------- ---------------
8,280,358 13,021,355
-------------- ---------------
Less accumulated depreciation and amortization (1,831,997) (2,596,459)
-------------- ---------------
6,448,361 10,424,896
-------------- ---------------
Intangible assets, net of accumulated amortization of $84,750
and $97,992 respectively 2,130,335 1,715,834
Other assets 130,949 131,375
-------------- ---------------
Total assets $63,873,168 $41,573,404
============== ===============
</TABLE>
CONTINUED
F-2
<PAGE> 43
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1997
--------------- ---------------
<S> <C> <C>
Current liabilities:
Accounts payable:
Trade $ 2,368,357 $ 3,791,922
Related parties 36,298 56,250
Accrued expenses 2,951,430 2,743,293
Deferred revenue 2,000,000 0
Notes payable to finance company 155,091 202,615
Capital lease obligation, current 76,161 156,140
--------------- ---------------
Total current liabilities 7,587,337 6,950,220
--------------- ---------------
Long term debt 1,000,687 1,813,437
Capital lease obligation 8,096 255,355
--------------- ---------------
Total liabilities 8,596,120 9,019,012
--------------- ---------------
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.001 par value; 5,000,000 shares
authorized at December 31, 1996 and 1997; none
outstanding (500,000 shares designated as Series A,
$.001 par value, at December 31, 1996 and 1997; none
outstanding)
Common stock; $.001 par value; 50,000,000 shares
authorized; 22,586,527 shares issued and
outstanding at December 31, 1996;
22,763,430 shares issued and outstanding at
December 31, 1997 22,587 22,763
Additional paid in capital 119,293,862 120,034,876
Deficit accumulated during the development stage (64,116,003) (87,362,531)
Unrealized gain on available for sale securities (29,859) (9,290)
Cumulative foreign currency translation adjustment 106,461 (131,426)
--------------- ---------------
Total stockholders' equity 55,277,048 32,554,392
--------------- ---------------
Total liabilities and stockholders' equity $ 63,873,168 $ 41,573,404
=============== ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-3
<PAGE> 44
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
November 16,
1983 (Date of
Years Ended December 31, Inception) to
-------------------------------------------------------------- December 31,
1995 1996 1997 1997
---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 959,984 $ 1,171,186 $ 5,127,917 $ 9,186,914
Cost of goods sold 505,998 676,773 1,575,699 3,703,996
---------------- ---------------- ----------------- -----------------
Gross profit 453,986 494,413 3,552,218 5,482,918
---------------- ---------------- ----------------- -----------------
Operating expenses:
Total research and development 7,829,476 16,082,761 19,656,804 64,556,138
Total marketing and selling 0 1,531,589 4,306,717 5,838,306
Total general and administrative 4,147,841 6,221,981 6,853,283 31,079,615
---------------- ---------------- ----------------- -----------------
Total operating expenses 11,977,317 23,836,331 30,816,804 101,474,059
---------------- ---------------- ----------------- -----------------
Loss from operations: (11,523,331) (23,341,918) (27,264,586) (95,991,141)
---------------- ---------------- ----------------- -----------------
Other income (expenses):
Interest income 603,275 2,179,345 2,156,795 5,922,180
Interest expense (121,463) (83,436) (61,445) (567,485)
Other 282,144 276,866 1,922,708 3,273,915
---------------- ---------------- ----------------- -----------------
Total other income: 763,956 2,372,775 4,018,058 8,628,610
---------------- ---------------- ----------------- -----------------
Net loss $(10,759,375) $(20,969,143) $(23,246,528) $(87,362,531)
================ ================ ================= =================
Net loss per common share
(basic and diluted) $(0.73) $(1.06) $(1.02)
================ ================ =================
Weighted average number of shares
outstanding during the year 14,725,687 19,743,649 22,734,642
================ ================ =================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
<PAGE> 45
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NOVEMBER
16, 1983
(DATE OF
INCEPTION)
YEARS ENDED DECEMBER 31, TO
----------------------------------------------------- DECEMBER 31,
1995 1996 1997 1997
--------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(10,759,375) $(20,969,143) $(23,246,528) $(87,362,531)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 551,992 652,623 896,522 3,104,840
Loss on disposal of assets 9,099 10,199 164,068 223,126
Reissuance of treasury stock to 401(k) plan 20,450
Minority interest (79,353)
Non-cash expenditures for research and
development 500,000 500,000 1,000,000
Compensation expense under restricted stock
and stock option plans 1,683,750 1,683,750
Change in operating assets and liabilities:
Accounts receivable 396,725 (1,002,799) 446,066 (717,150)
Inventory 64,757 248,734 (199,335) 12,370
Prepaid expenses and other (252,076) (566,291) 465,764 (769,916)
Accounts payable 19,981 905,883 1,404,095 3,713,720
Accrued expenses 740,579 1,996,641 (133,131) 2,807,100
Deferred revenue 2,000,000 (2,000,000) 0
--------------- -------------- -------------- -------------
Net cash used in operating activities (9,228,318) (14,540,403) (21,702,479) (76,363,594)
Cash flows from investing activities:
Purchases of available-for-sale securities (16,564,908) (50,061,144) (13,489,774) (108,163,190)
Proceeds from sales of available-for-sale 1,243,431 27,607,495 1,884,610 47,874,262
securities
Maturities of available-for-sale securities 10,763,965 9,982,000 16,739,201 45,703,943
Purchase of property and equipment (1,434,524) (3,616,297) (4,689,681) (11,208,598)
Patents and organization costs (132,416) (126,209) (197,873) (988,052)
Other (78) (48,980)
--------------- -------------- -------------- -------------
Net cash (used in) provided by investing (6,124,452) (16,214,233) 246,483 (26,830,615)
activities
Cash flows from financing activities:
Proceeds from notes payable 1,243,696 180,242 3,271,822
Proceeds from issuance of common stock, net 23,995,737 50,117,201 716,769 102,535,690
Payment of notes payable (137,109) (153,638) (177,042) (3,006,170)
Proceeds under capital leases 481,545
Payments under capital leases (212,199) (241,390) (125,202) (771,351)
Proceeds from issuance of preferred stock 8,845,879
Treasury stock purchases (25,000)
Proceeds from bank loan 1,000,687 812,750 1,813,437
--------------- -------------- -------------- -------------
Net cash provided by financing activities 24,890,125 50,903,102 1,227,275 113,145,852
Effect of exchange rate changes on cash (5,157) (13,027) (18,666) (30,618)
--------------- -------------- -------------- -------------
Net increase (decrease) in cash and cash
equivalents 9,532,198 20,135,439 (20,247,387) 9,921,025
Cash and cash equivalents, beginning of 500,775 10,032,973 30,168,412
period
--------------- -------------- -------------- -------------
Cash and cash equivalents, end of period $ 10,032,973 $30,168,412 $ 9,921,025 $ 9,921,025
=============== ============== ============== =============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
<PAGE> 46
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
-------------------------- ------------------------- Paid-in
Shares Amount Shares Amount Capital
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, November 16, 1983
(inception):
Sale of common stock ($.002-$784 per
share), net of cost 3,649,174 $ 3,649 $8,662,413
Payment for stock purchase option 65,000
Issued at $6 per share for
converting debt to equity 76,817 77 460,913
Conversion of common stock
to preferred stock (270,896) (271) 541,792 $2,123,824 (2,123,553)
Sale of preferred stock at 484,849 2,000,002
$4.12 per share
Repurchased shares at $6 (4,166)
per share
Reissued to 401(k) plan at 5,228 1 2,025
$6 per share
Conversion of preferred
stock to common stock 1,715,205 1,715 (1,026,641) (4,123,826) 10,967,988
Issued to an employee for services 1,750 2 6,998
Sale of common stock and warrants
in connection with IPO (1,725,000
units at $6 per unit), net of costs 1,725,000 1,725 8,177,959
Issued to employees at par value 80,000 80
Exercise of employee stock
options at $2 per share 9,200 9 18,391
Sale of common stock and
warrants (550,000 units
at $12 per unit), net of costs 1,100,000 1,100 5,828,636
Issued in connection with acquisitions 205,063 205 1,169,356
Exercise of stock warrants
($3.75 - $6.00 per share 12,140 12 50,065
Sale of common stock at
$2.27 per shares, net of costs 2,000,000 2,000 4,426,825
Exercise of warrants for common stock
at $.001 per share in exchange for
$550 (par value) and cancellation of
other warrants of offsetting value 550,000 550
Foreign currency translation adjustment
Net loss since inception to
December 31, 1994
----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Deficit Cumulative Gain
Accumulated Foreign (Loss) on
During the Currency Available-
Development Translation Treasury for-Sale
Stage Adjustment Stock Securities Total
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, November 16, 1983
(inception):
Sale of common stock ($.002-$784 per
share), net of cost $ 8,666,062
Payment for stock purchase option 65,000
Issued at $6 per share for
converting debt to equity 460,990
Conversion of common stock
to preferred stock
Sale of preferred stock at
$4.12 per share 2,000,002
Repurchased shares at $6
per share $ (25,000) (25,000)
Reissued to 401(k) plan at
$6 per share 25,000 27,026
Conversion of preferred
stock to common stock 6,845,877
Issued to an employee for services 7,000
Sale of common stock and warrants
in connection with IPO (1,725,000
units at $6 per unit), net of costs 8,179,684
Issued to employees at par value 80
Exercise of employee stock
options at $2 per share 18,400
Sale of common stock and
warrants (550,000 units
at $12 per unit), net of costs 5,829,736
Issued in connection with acquisitions 1,169,561
Exercise of stock warrants
($3.75 - $6.00 per share 50,077
Sale of common stock at
$2.27 per shares, net of costs 4,428,825
Exercise of warrants for common stock
at $.001 per share in exchange for
$550 (par value) and cancellation of
other warrants of offsetting value 550
Foreign currency translation adjustment $94,012 94,012
Net loss since inception to
December 31, 1994 $(32,387,485) (32,387,485)
------------ ----------- ----------- ----------- -----------
</TABLE>
CONTINUED
F-6
<PAGE> 47
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
-------------------------- -------------------------- Paid-in
Shares Amount Shares Amount Capital
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 10,854,515 $10,854 0 $0 $37,713,016
Issued to 401(k) plan 3,253 3 13,065
Exercise of stock
warrants ($3.75 to 549,712 550 2,492,750
$6.00 per share)
Exercise of employee
stock options ($2 to $6 97,745 98 328,486
per share)
Sale of common stock at
$2.27 per share, net of 3,000,000 3,000 5,914,171
costs
Exercise of unit purchase
option by underwriter
at $2.22 per share, net 450,000 450 994,073
of costs
Sale of common stock at
$5.50 per share, net of 1,650,000 1,650 8,287,902
costs
Sale of common stock at
$10.50 per share, net 575,000 575 5,696,782
of costs
Issued in connection with
investments by
marketing partner
($9.03 to $15.97 per 154,575 155 1,524,542
share), net of costs
Foreign currency
translation adjustment
Unrealized gain on
available-for-sale
securities
Net loss
----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Deficit Cumulative Gain
Accumulated Foreign (Loss) on
During the Currency Available-
Development Translation Treasury for-Sale
Stage Adjustment Stock Securities Total
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $(32,387,485) $94,012 $0 $5,430,397
Issued to 401(k) plan 13,068
Exercise of stock
warrants ($3.75 to 2,493,300
$6.00 per share)
Exercise of employee
stock options ($2 to $6 328,584
per share)
Sale of common stock at
$2.27 per share, net of 5,917,171
costs
Exercise of unit purchase
option by underwriter
at $2.22 per share, net 994,523
of costs
Sale of common stock at
$5.50 per share, net of 8,289,552
costs
Sale of common stock at
$10.50 per share, net 5,697,357
of costs
Issued in connection with
investments by
marketing partner
($9.03 to $15.97 per 1,524,697
share), net of costs
Foreign currency
translation adjustment 72,895 72,895
Unrealized gain on
available-for-sale $46,480 46,480
securities
Net loss (10,759,375) (10,759,375)
------------ ----------- ----------- ----------- -----------
</TABLE>
CONTINUED
F-7
<PAGE> 48
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
-------------------------- --------------------------- Paid-in
Shares Amount Shares Amount Capital
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 17,334,800 $17,335 0 $ 0 $62,964,787
Exercise of employee
stock options at $2 to
$6 per share 132,075 132 553,139
Exercise of stock
warrants at $3.32 to
$12.60 per share 2,904,421 2,905 18,165,986
Issued to 401(k) plan at
$3.46 5,426 5 18,792
Issued to employee in
exchange for services 10,000 10 121,240
Sale of common stock at
$18.50 per share, net
of costs 1,750,000 1,750 30,190,777
Issued in exchange for
technology licenses at
$16.03 per share 124,805 125 1,999,875
Issued in exchange for
note receivable and
development activities
at $20.25 per share 125,000 125 2,531,125
Issued in conversion of
debentures at $5.93 per
share 200,000 200 1,185,641
Vesting of compensatory
employee options 1,562,500
Foreign currency
translation adjustment
Unrealized loss on
available-for-sale
securities
Net loss
----------- ----------- ----------- ------------ ------------
Balance, December 31, 1996 22,586,527 22,587 0 0 119,293,862
Exercise of employee
stock options at $2.50
to $15.75 per share 85,510 85 361,500
Issued to 401(k) plan at
$14.61 1,672 2 24,422
Exercise of stock
warrants at $3.32 to
$6.05 per share 89,721 89 355,092
Foreign currency
translation adjustment
Unrealized gain on
available-for-sale
securities
Net loss
----------- ----------- ----------- ------------ ------------
Balance, December 31, 1997 22,763,430 $22,763 0 $ 0 $120,034,876
=========== =========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Deficit Cumulative Gain
Accumulated Foreign (Loss) on
During the Currency Available-
Development Translation Treasury for-Sale
Stage Adjustment Stock Securities Total
------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $(43,146,860) $166,907 $ 0 $ 46,480 $20,048,649
Exercise of employee
stock options at $2 to
$6 per share 553,271
Exercise of stock
warrants at $3.32 to
$12.60 per share 18,168,891
Issued to 401(k) plan at
$3.46 18,797
Issued to employee in
exchange for services 121,250
Sale of common stock at
$18.50 per share, net
of costs 30,192,527
Issued in exchange for
technology licenses at
$16.03 per share 2,000,000
Issued in exchange for
note receivable and
development activities
at $20.25 per share 2,531,250
Issued in conversion of
debentures at $5.93 per
share 1,185,841
Vesting of compensatory
employee options 1,562,500
Foreign currency
translation adjustment (60,446) (60,446)
Unrealized loss on
available-for-sale (76,339) (76,339)
securities
Net loss (20,969,143) (20,969,143)
------------ ---------- ---------- ----------- -----------
Balance, December 31, 1996 (64,116,003) 106,461 0 (29,859) 55,277,048
Exercise of employee
stock options at $2.50
to $15.75 per share 361,585
Issued to 401(k) plan at
$14.61 24,424
Exercise of stock
warrants at $3.32 to
$6.05 per share 355,181
Foreign currency
translation adjustment (237,887) (237,887)
Unrealized gain on
available-for-sale 20,569 20,569
securities
Net loss
(23,246,528) (23,246,528)
------------ ---------- ---------- ----------- -----------
Balance, December 31, 1997 $(87,362,531) $(131,426) $ 0 $ (9,290) $32,554,392
============ ========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-8
<PAGE> 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. ORGANIZATION AND NATURE OF OPERATIONS: Neoprobe Corporation ("the
Company"), a Delaware corporation, 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. No
significant revenues will be derived from the commercial marketing of
the Company's RIGS(R) products until after the necessary government
approvals are obtained. Expenses incurred have been primarily for
research and development activities and administration, resulting in an
accumulated deficit of approximately $87 million. The Company is
dependent on the proceeds of its securities and other financing
vehicles to continue the commercial development of its proposed
products.
b. BASIS OF PRESENTATION: The consolidated financial statements of the
Company include the accounts of the Company and its majority-owned
subsidiaries. Investments in joint ventures and in 20% to 50% owned
affiliates are to be accounted for on the equity method. Investments in
less than 20% owned affiliates are accounted for on the cost method.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
c. FOREIGN CURRENCY TRANSLATION: In accordance with Statement of Financial
Accounting Standards (SFAS) No. 52, Foreign Currency Translation,
assets and liabilities denominated in foreign currencies are translated
at current exchange rates in effect at the balance sheet dates, and
revenues and expenses are translated at the average monthly exchange
rate. The differences resulting from such translations, as compared to
the equity of subsidiaries which is translated at historical rates, are
included in cumulative foreign currency translation adjustments, a
separate component of stockholders' equity.
d. CASH AND CASH EQUIVALENTS: For purposes of the statements of cash
flows, cash and cash equivalents consist of demand deposits, money
market funds, highly liquid debt instruments and certificates of
deposit with original maturities of three months or less.
e. AVAILABLE-FOR-SALE SECURITIES: Information related to amortized cost
and fair value of available-for-sale securities, utilizing the specific
identification method, at December 31, 1996 and 1997 is provided below:
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED
1996 COST LOSSES FAIR VALUE
---- ----------------- -------------- ---------------
<S> <C> <C> <C>
Mortgage-backed U.S. Government securities $ 1,141,528 $(20,663) $ 1,120,865
Corporate debt securities 18,637,150 (9,196) 18,627,954
================= ============== ===============
$19,778,678 $(29,859) $19,748,819
================= ============== ===============
1997
----
Mortgage-backed U.S. Government securities $ 993,214 $ (6,508) $ 986,706
Corporate debt securities 13,688,572 (2,782) 13,685,790
================= ============== ===============
$14,681,786 $ (9,290) $14,672,496
================= ============== ===============
</TABLE>
The fair value of available-for-sale debt securities at December 31,
1996 and 1997, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities as, under an existing
investment agreement, the Company has the ability and intent to hold
all securities for short-term working capital purposes.
F-9
<PAGE> 50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AMORTIZED
1996 COST FAIR VALUE
---- ---------------- -----------------
<S> <C> <C>
Due one year or less $15,483,515 $15,498,661
Due after one year through five
years 4,295,163 4,250,158
================ =================
$19,778,678 $19,748,819
================ =================
1997
----
Due one year or less $11,278,897 $11,282,535
Due after one year through five
years 3,402,889 3,389,961
================ =================
$14,681,786 $14,672,496
================ =================
</TABLE>
f. INVENTORY: The components of inventory at December 31, 1996 and 1997,
are as follows:
<TABLE>
<CAPTION>
1996 1997
-------------- ------------
<S> <C> <C>
Materials and component parts $ 51,264 $ 36,890
Work in process 94,389 145,234
Finished goods 70,619 230,900
-------------- ------------
$216,272 $413,024
============== ============
</TABLE>
All components of inventory are valued at the lower of cost (first-in,
first-out) or market.
g. PROPERTY AND EQUIPMENT: Depreciation is computed using the
straight-line method over the estimated useful lives of the depreciable
assets ranging from 3 to 20 years. Maintenance and repairs are charged
to expense as incurred, while renewals and improvements are
capitalized. Equipment includes $571,563 and $518,507 of equipment
under capital leases and accumulated amortization of $393,384 and
$119,432 at December 31, 1996 and 1997, respectively.
h. INTANGIBLE ASSETS: Intangible assets consist primarily of the cost of
patents and acquired technology licenses. Patent costs are amortized on
a straight-line basis over the remaining lives of the patents. Patent
application costs are deferred pending the outcome of patent
applications. Costs associated with unsuccessful patent applications
and abandoned intellectual property are expensed when determined to be
worthless. The Company evaluates the potential alternative uses of
intangible assets, as well as the recoverability of the carrying values
of intangible assets on a recurring basis.
i. SALES REVENUE: The Company has derived revenues from the sale of blood
group serology products and from sales of its radiation detection
instruments. These sale transactions are independent of the clinical
testing agreements and are not contingent upon the completion or
results of clinical testing. The Company recognizes sales revenue when
the product is shipped. For the year ended December 31, 1996,
approximately $328,000 of net sales were concentrated between two
customers.
j. RESEARCH AND DEVELOPMENT COSTS: All costs related to research and
development are expensed as incurred.
k. INCOME TAXES: The Company accounts for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109, deferred
tax assets and liabilities are recognized based on temporary
differences between the financial statement and tax basis of assets and
liabilities using current statutory tax rates. SFAS No. 109 also
requires a valuation allowance against net deferred tax assets if,
based on the available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized.
F-10
<PAGE> 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
l. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
m. NET LOSS PER COMMON SHARE: In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 establishes
standards for computing and presenting earnings per share ("EPS") and
replaces the presentation of primary EPS with a presentation of basic
EPS and diluted EPS. There are no differences in basic and diluted EPS
for the Company related to any of the years presented. The net loss per
common share for all periods presented excludes the number of common
shares issuable on exercise of outstanding stock options and warrants
into the Company's common stock since such inclusion would be
antidilutive.
n. IMPACT OF ACCOUNTING STANDARDS: In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income
in a full set of general purpose financial statements. The Company will
be required to adopt this statement as of January 1, 1998. If the
Company had adopted this statement as of January 1, 1996, comprehensive
loss for the years ended December 31, 1996 and 1997 would have been
$21,105,928 and $23,463,846, respectively.
o. RECLASSIFICATIONS: Certain amounts have been reclassified to conform
with the 1997 presentation.
2. ACCOUNTS RECEIVABLE:
Accounts receivable at December 31, 1996 and 1997, net of allowance
for doubtful accounts of $0 and $130,660, respectively, consist of
the following:
<TABLE>
<CAPTION>
1996 1997
--------------- --------------
<S> <C> <C>
Trade $ 856,682 $ 769,578
Related Parties 28,771 0
Other 355,021 23,798
=============== ==============
$1,240,474 $793,376
=============== ==============
</TABLE>
3. NOTE RECEIVABLE:
At December 31, 1996 and 1997, note receivable represents a convertible
debenture from XTL Biopharmaceuticals Ltd. ("XTL") held by the Company
related to an Investment Research and Development Agreement (Note 11). The
debenture was due on February 13, 1998 and bore interest at 5%, payable
annually. On January 30, 1998, the Company exercised its option to convert
the debentures into 443,690 shares of Class A Common stock of XTL.
4. ACCRUED EXPENSES:
Accrued expenses at December 31, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
---------------- --------------
<S> <C> <C>
Royalties $ 46,628 $ 171,570
Compensation 1,223,160 578,683
Taxes 36,712 34,061
Inventory purchases 204,666
Contracted Services & Other 1,644,930 1,754,313
================ ==============
$2,951,430 $2,743,293
================ ==============
</TABLE>
F-11
<PAGE> 52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT:
Neoprobe (Israel), a 95%-owned subsidiary of the Company, is in the process
of constructing a radiolabeling facility near Dimona, Israel, for use in
future operations of the Company. Construction of the facility is being
partially financed under an investment program approved by the state of
Israel's Finance committee (the "Committee"). During the third quarter of
1997, Neoprobe (Israel) was notified that the Committee had approved a $5.2
million increase in the approved investment, bringing the total approved
investment to $9.9 million. Under the approved program, Neoprobe (Israel)
is entitled to government grants and government loan guarantees equal to a
percentage of the total loan taken for the construction and operation of
the facility. Amounts received under the agreement are collateralized by
certain property obtained through the use of proceeds received. As of
December 31, 1997, Neoprobe (Israel) has received $1.8 million and $875,000
in the form of loans and grants, respectively. 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 U.S. dollar,
or approximately 7% at December 31, 1997. 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 $66,037,
$334,540, $575,703, $403,443 and $162,280 become due in 1998 through 2002,
respectively, and $271,434 in 2003 and beyond.
6. INCOME TAXES:
As of December 31, 1997, the Company's net deferred tax assets in the U.S.
were approximately $25.9 million related principally to net operating loss
carryforwards of approximately $75.8 million available to offset future
taxable income, if any, through 2012 and tax credit carryforwards of
approximately $2.2 million (principally research and development) available
to reduce future income tax liability after utilization of tax loss
carryforwards, if any, through 2012. Due to the uncertainty surrounding the
realization of these favorable tax attributes in future tax returns, all of
the net deferred tax assets have been fully offset by a valuation
allowance.
Under Section 382 of the Internal Revenue Code of 1986, as amended, the
utilization of U.S. net operating loss carryforwards may be limited under
the change in stock ownership rules of the Internal Revenue Code. As a
result of ownership changes which occurred in September 1994 and March
1989, the Company's net operating loss carryforwards and tax credit
carryforwards are subject to these limitations.
In general, it is the intention of the Company to reinvest the earnings of
non-U.S. subsidiaries in those operations. At December 31, 1997, the
Company's international subsidiaries have net operating loss carryforwards
of approximately $6.3 million available to offset future statutory income
in those jurisdictions. As both subsidiaries are currently in loss
positions, no amounts have been estimated to be remitted; accordingly, no
amounts have been provided for income tax consequences related to
international subsidiaries. Utilization of net operating losses within
foreign jurisdictions may also be subject to statutory limitation should
changes in ownership of subsidiaries occur in future years.
7. EQUITY:
a. COMMON STOCK:
The Company's research and development activities and operating costs
have been funded principally with cash generated from the issuance of
common stock. 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 November 1992 and December 1993, the Company issued a total of
2,330,000 Class E Redeemable Common Stock Purchase Warrants ("Class E
Warrants"). The Class E Warrants were exercisable over a three-year
period beginning November 10, 1993 and expiring on November 12, 1996.
During 1996, the Company received proceeds from the exercise of Class E
Warrants of approximately $15.0 million.
F-12
<PAGE> 53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During 1996 and 1997, total cash generated from public offerings and
private placements of common stock is as follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Public offerings, including exercise of warrants $47,988,930 $355,092
Private placements and exercise of options 2,128,271 361,500
----------- --------
$50,117,201 $716,592
=========== ========
</TABLE>
b. STOCK OPTIONS:
At December 31, 1997, the Company has two stock-based compensation
plans which are described below. The Company applies APB Opinion No. 25
and related interpretations in accounting for its plans. Accordingly,
no compensation cost has been recognized related to fixed options
granted under the plans. Had compensation cost for the Company's two
stock-based compensation plans been determined based on the fair value
at the grant dates for awards under those plans, consistent with FASB
Statement No. 123, the Company's net loss per share would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996 1997
----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net loss As reported $(10,759,375) $(20,969,143) $(23,246,528)
Pro forma $(11,319,278) $(22,017,227) $(25,273,241)
Net loss per common As reported $ (0.73) $ (1.06) $ (1.02)
share (basic and diluted)
Pro Forma $ (0.77) $ (1.06) $ (1.11)
</TABLE>
Under the Amended and Restated Stock Option and Restricted Stock
Purchase Plan (the "Amended Plan"), and under the 1996 Stock Incentive
Plan (the "1996 Plan"), which was adopted by the Board of Directors on
January 18, 1996, the Company may grant incentive stock options,
nonqualified stock options, and restricted stock awards to full-time
employees, and nonqualified stock options and restricted awards may be
granted to consultants and agents of the Company. Total shares
authorized under each plan are 2 million shares and 1.5 million shares,
respectively. Under both plans, the exercise price of each option
equals the market price of the Company's stock on the date of the
grant.
Options granted under the Amended Plan generally vest on a monthly
basis over two to four years. Options granted under the 1996 Plan
generally vest on an annual basis over three years. However,
approximately 400,000 options and 50,000 options have been granted
under the Amended Plan and the 1996 Plan, respectively, which vest
based on the achievement of specific goals.
Outstanding options under the plans, if not exercised, generally expire
ten years from their date of grant or on the date of an optionee's
separation from employment with the Company, except for those options
granted in conjunction with employment agreements, which will expire
ten years from their date of grant or two years after cessation of the
optionee's employment, whichever occurs first.
The fair value of each option grant was estimated on the date of the
grant using the Black-Scholes option-pricing model with the following
assumptions for 1995, 1996, and 1997, respectively: average risk-free
interest rates of 7.4%, 5.7%, and 6.4%; expected average lives of three
and four years; no dividend rate for any year; and volatility of 181%
for 1995 and 1996 and 72% for 1997.
F-13
<PAGE> 54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of the Company's stock option plans as of
December 31, 1995, 1996, and 1997, and changes during the years ended
on those dates is presented below:
<TABLE>
<CAPTION>
1995 1996 1997
--------------------------- -------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
----------- ----------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 1,211,300 $ 3.29 1,723,543 $ 2.93 2,002,138 $ 5.60
Granted 680,780 $ 2.64 457,700 $15.38 427,900 $13.50
Forfeited (70,792) $ 5.68 (47,030) $ 6.92 (150,425) $13.90
Exercised (97,745) $ 3.36 (132,075) $ 4.19 (85,510) $ 4.25
----------- ---------- -----------
Outstanding at
end of year 1,723,543 $ 2.93 2,002,138 $ 5.60 2,194,103 $ 7.81
=========== ========== ===========
Options
exercisable
at end of year 931,762 1,265,893 1,369,557
</TABLE>
Included in outstanding options as of December 31, 1997 are 319,997
options exercisable at a weighted-average price of $4.02 per share
which vest on the meeting of certain Company achievements.
The following table summarizes information about the Company's stock
options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- -------------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE AT DECEMBER EXERCISE
EXERCISE PRICES 1997 LIFE PRICE 31, 1997 PRICE
------------------ ---------------- ------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
$2.00 - $3.00 640,938 6.34 Years $ 2.56 350,772 $ 2.62
$3.88 - $5.75 51,625 4.47 Years $ 4.63 51,625 $ 4.63
$6.00 - $6.00 736,140 5.46 Years $ 6.00 732,808 $ 6.00
$6.50 - $17.75 765,400 8.64 Years $14.15 234,352 $14.15
---------------- ------------- ------------ --------------- ------------
$2.00 - $17.75 2,194,103 6.80 Years $ 7.81 1,369,557 $ 6.48
================ ===============
</TABLE>
c. STOCK WARRANTS:
At December 31, 1997, there are approximately 67,922 warrants
outstanding to purchase common stock of the Company. The warrants are
exercisable at prices ranging from $3.00 to $17.92 per share with a
weighted average exercise price per share of $6.34. The warrants expire
on various dates from 1999 through 2000.
d. COMMON STOCK RESERVED:
Shares of authorized common stock have been reserved for the exercise
of all options and warrants outstanding.
8. SHAREHOLDER RIGHTS PLAN:
During July 1995, the Company's Board of Directors adopted a Shareholder
Rights Plan. Under the plan, one "Right" is to be distributed for each
share of common stock held by shareholders on the close of business on
August 28, 1995. The Rights are exercisable only if a person and its
affiliate commences a tender offer or exchange offer for 15% or more of the
common stock, or if there is a public announcement that a person and its
affiliate has acquired beneficial ownership of 15% or more of the common
stock, and if the Company does not redeem the Rights during the specified
redemption
F-14
<PAGE> 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
period. Initially, each Right, upon becoming exercisable, would entitle the
holder to purchase from the Company one unit consisting of 1/100th of a
share of Series A Junior Participating Preferred Stock at an exercise price
of $35 (which is subject to adjustment). Once the Rights become
exercisable, if any person, including its affiliate, acquires 15% or more
of the common stock of the Company, each Right other than the Rights held
by the acquiring person and its affiliate becomes right to acquire common
stock having a value equal to two times the exercise price of the Right.
The Company is entitled to redeem the Rights for $0.01 per Right at any
time prior to the expiration of the redemption period. The Shareholder
Rights Plan and the Rights will expire on August 28, 2005.
9. INTERNATIONAL OPERATIONS:
The following information relates to Neoprobe Europe AB (Sweden) and
Neoprobe (Israel) Ltd., the Company's international subsidiaries:
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- ---------------------
<S> <C> <C> <C>
Net sales $ 800,000 $ 390,000 $ 140,000
Loss from operations 1,680,000 3,560,000 2,950,000
Identifiable assets 3,290,000 5,500,000 9,550,000
</TABLE>
10. RELATED-PARTY TRANSACTIONS:
A partner of a law firm which provides various legal services to the
Company, including patent and trademark filings and prosecuting patent and
trademark applications, is an officer and former director of the Company.
Costs incurred related to services performed and patent maintenance fees
paid by this firm approximated $201,000, $201,000, and $302,000 for the
years ended December 31, 1995, 1996, and 1997, respectively, and $1,815,000
for the period November 16, 1983 (inception) through December 31, 1997. The
Company owed this law firm approximately $12,500 and $21,800 at December
31, 1996 and 1997, respectively.
11. AGREEMENTS:
a. RESEARCH AND DEVELOPMENT:
Under a research and development agreement between the Company, The
Ohio State University, and the Department of Development of the State
of Ohio, the Company must pay the State of Ohio periodic royalties
calculated as a percentage of net sales of products utilizing the
results of the sponsored research, a sharing of proceeds received from
the sale of technology, and a portion of the royalties collected from
any license the Company may grant. The Company has an option to
terminate its royalty obligation following completion of the research
period by making a termination payment to the State of Ohio.
b. LICENSE AND TECHNOLOGY AGREEMENTS:
In July 1992, the Company entered into a revised agreement with The Dow
Chemical Company (Dow) for an exclusive global commercial sublicense to
a specific antibody for use in RIGS system products subject to the
approval of the National Cancer Institute of the National Institutes of
Health (NCI/NIH). The NCI/NIH approved the sublicense arrangement in
1993. The agreement provides that the Company will pay Dow royalties on
RIGS surgical system antibody product revenues. In October 1995, the
Company entered an exclusive worldwide license agreement with Dow for
use of its iodination technology. Under this agreement, the Company
must pay royalties to Dow on net sales of radiolabeled targeting agents
produced with Dow's iodination technology. The license lasts through
the life of any patent covering this process. A retired officer of Dow
is a director of the Company.
In April 1993, the Company entered into a long-term clinical and
commercial supply agreement with Nordion International Inc. (Nordion)
for the radiolabeling of the Company's monoclonal antibody for clinical
trials and commercial sale. The agreement will remain in force for a
minimum of three years after the Company is granted
F-15
<PAGE> 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
approval to market in the U.S. or Europe. The Company agreed to
purchase certain quantities of the radiolabeled antibody throughout
the term of the agreement at prices already set or to be determined
based on current information at the time of commercial approval. The
Company incurred costs of approximately $350,000, $1.3 million, and
$1.1 million for the years ended December 31, 1995, 1996, and 1997,
respectively, and $3.6 million since execution of the agreement
through December 31, 1997.
In July 1995, the Company entered into an agreement with Neoprobe
(Israel) and Rotem Industries Ltd. (Rotem) which amended and superseded
a similar agreement dated April 1994 for Rotem's assistance in the
construction and operation of a radiolabeling facility for the
Company's targeting agents. In consideration for their assistance,
Rotem received a 5% equity interest in Neoprobe (Israel) and a monthly
retainer until the facility is complete. Once the radiolabeling
facility is complete, Rotem will be paid a management fee based on the
volume of production. Rotem has the option to acquire an additional 5%
equity interest in Neoprobe (Israel) during the period from July 1,
1996 to June 30, 1998 at a purchase price to be determined later. If
this option is not exercised and if certain sales levels have not been
met by the end of 1999, Rotem has the right to receive an additional 4%
equity interest. Rotem is guaranteed a 5% equity interest in Neoprobe
(Israel) until such time as the contributed equity investment by the
Company exceeds $2 million and the expenditures on the facility exceed
$8,000,000 or the annual units shipped exceed 50,000.
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 shares
of common stock of XTL. The Company also acquired a warrant affording
Neoprobe the option to purchase an additional equity interest in XTL.
Neoprobe issued 125,000 shares of common stock to XTL in exchange for
the convertible debentures, a three-year warrant, and (approximately $1
million) product development activities.
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 Company's chairman is a director and shareholder of
Cira. The Company and Cira also entered into an agreement under which
the Company will provide financial, clinical, and technical support 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. The
Company has incurred expenses of approximately $125,000 and $239,000
for the years ended December 31, 1996 and 1997, respectively, under
this agreement.
In May 1996, the Company executed two license agreements with Dow,
whereby the Company was granted an exclusive license to technology
(including the right to sublicense) covered by patents held by Dow. In
exchange, the Company issued Dow 124,805 shares of common stock valued
at $2 million. The Company agreed to make payments to Dow following
achievement of certain development and commercial milestones by the
Company. In addition, if the Company sublicenses the technology, the
Company must pay Dow a certain percentage of all payments received by
the Company. During 1997, the Company determined that due to specific
clinical development achievements of competing technology, $500,000 of
the cost of this technology should be expensed as research and
development costs. At December 31, 1996 and 1997, approximately $1.5
million and $1 million, respectively, are included in intangible assets
related to this technology representing assets with alternative future
uses.
In September 1996, the Company executed a License and Distributorship
Agreement ("Agreement") with the United States Surgical Corporation
("USSC"). Effective October 17, 1997, the Company and USSC agreed
to terminate the Agreement, as amended. In connection with the
termination, after receipt of payment, the Company agreed to pay USSC
net commissions on orders received prior to the effective date of the
termination and to continue to warranty and service devices sold under
the terms of the Agreement. The parties have also agreed to discharge
and release the other from all remaining claims and financial
obligations relating to the Agreement, including license fees. The
Company had also received $2 million from USSC on execution of the
Agreement in 1996 and recognized this amount as income in the fourth
quarter of 1997 concurrent with the termination of the Agreement.
F-16
<PAGE> 57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
c. EMPLOYMENT:
The Company has employment agreements through December 31, 1998 with
two of its executive officers which provide for restricted stock
purchase agreements. The agreements provide that the officers can
purchase up to an aggregate of 80,000 shares of the Company's common
stock at par value subject to vesting provisions. Vesting of the shares
does not commence unless there is a change in control of the Company.
The unvested portion of the restricted shares will be forfeited no
later than June 4, 2006. The Company has not recognized any expense
under the agreement due to the contingent nature of the vesting
provision and the risk of forfeiture.
12. LEASES:
The Company leases certain office and manufacturing equipment under capital
leases which expire on various dates through 2002. In December 1996, the
Company entered into a seventy-seven month lease agreement for office
space, commencing April 1, 1997. In September 1996, the Company entered
into an operating lease agreement for Neoprobe Europe's manufacturing
facility, which will terminate in August 2004.
The future minimum lease payments for the years ending December 31 are
as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------------- ----------------
<S> <C> <C>
1998 $168,884 $ 562,224
1999 106,787 567,225
2000 91,301 570,582
2001 56,590 571,596
2002 14,148 580,604
--------------- ----------------
437,710 $2,852,231
================
Less amount representing
interest 26,215
---------------
Present value of net minimum
lease payments $411,495
===============
</TABLE>
Total rental expense under operating leases was approximately $492,000,
$621,000, and $850,000 for the years ended December 31, 1995, 1996, and
1997, respectively, and $3 million for the period November 16, 1983
(inception) to December 31, 1997.
13. EMPLOYEE BENEFIT PLAN:
The Company maintains an employee benefit plan under Section 401(k) of the
Internal Revenue Code. The plan allows employees to make contributions and
the Company may, but is not obligated to, match a portion of the employee's
contribution with the Company's common stock, up to a defined maximum. The
Company recorded expenses of $18,700, $19,500, and $57,300 related to
common stock to be contributed to the plan in 1995, 1996, and 1997,
respectively, and $128,700 for the period November 16, 1983 (inception)
through December 31, 1997.
14. SUPPLEMENTAL DISCLOSURE FOR STATEMENTS OF CASH FLOWS:
The Company paid interest, net of amounts capitalized, aggregating $37,182,
$35,917, and $62,653 for the years ended December 31, 1995, 1996, and 1997,
respectively, and $430,056 for the period November 16, 1983 (inception)
through December 31, 1997.
F-17
<PAGE> 58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During 1995, the Company completed a strategic marketing agreement related
to certain Asian markets for an additional investment of $700,000, of which
$200,013 was included in subscriptions receivable as of December 31, 1995.
The Company also received subscription agreements with other parties for
the exercise of 200,000 warrants for which $1,062,500 is recorded as
subscriptions receivable at December 31, 1995.
During 1996, the Company issued common stock valued at a total of $5.7
million in exchange for license rights, convertible debentures, warrants,
and product development activities. The Company also incurred capital
lease obligations of approximately $29,000 and $455,000 in 1995 and 1997,
respectively, to finance equipment.
15. CONTINGENCIES:
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the financial position of the Company.
F-18
<PAGE> 59
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
NEOPROBE CORPORATION
-----------------------
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED:
DECEMBER 31, 1997
-----------------------
EXHIBITS
-----------------------
================================================================================
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER OF PAGES PAGE IN MANUALLY
NUMBER DESCRIPTION IN ORIGINAL DOCUMENT+ SIGNED ORIGINAL
<S> <C> <C> <C>
3.1. Complete Restated Certificate of Incorporation of
Neoprobe Corporation, as corrected and as amended 9 *
----
3.2. Amended and Restated By-Laws, as amended 15 *
-----
4.1. See Articles FOUR, FIVE, SIX and SEVEN of the
Restated Certificate of Incorporation of Registrant 3 *
----
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 13 *
-----
4.3. Rights Agreement dated as of July 18, 1995 between
the Registrant and Continental Stock Transfer & Trust
Company. 47 *
-----
10.1.1.-10.1.22. Reserved
10.1.23. Brokers' Warrants for the purchase of shares of Common
Stock dated June 30, 1995 issued to officers of Sunrise
Financial Corporation. This exhibit is one of six
substantially identical instruments and is accompanied by
a schedule identifying the other documents omitted and
setting forth the material details in which such
documents differ from the one that is filed therewith. 10 *
-----
10.1.24. Reserved
10.1.25. Rights Agreement between the Registrant and
Continental Stock Transfer & Trust Company dated as
of July 18, 1995. 47 *
-----
10.1.26.-10.1.30. Reserved 18 *
-----
</TABLE>
- -------------------
+ The Registrant will furnish a copy of any exhibit to a beneficial owner of its
securities or to any person from whom a proxy was solicited in connection with
the Registrant's most recent Annual Meeting of Stockholders upon the payment of
a fee of fifty cents ($.50) a page.
* Incorporated by reference.
<PAGE> 61
<TABLE>
<S> <C> <C> <C>
10.2.1.-10.2.14. Reserved
10.2.15. Option Agreements between the Registrant and David
C. Bupp 17 *
-----
10.2.16.-10.2.17. Reserved
10.2.18. Non-Qualified Stock Option Agreement dated May 3,
1993 between the Registrant and David C. Bupp 4 *
-----
10.2.19.-10.2.20. Reserved
10.2.21. Non-Qualified Stock Option Agreement dated May 3,
1993 between the Registrant and John L. Ridihalgh 4 *
-----
10.2.22. Reserved
10.2.23. Non-Qualified Stock Option Agreement dated
February 28, 1992 and amended and restated June 3,
1993 between the Registrant and David C. Bupp 4 *
-----
10.2.24. Non-Qualified Stock Option Agreement dated July 1,
1990 and amended and restated June 3, 1993 between
the Registrant and David C. Bupp 4 *
-----
10.2.25. Non-Qualified Stock Option Agreement dated June 1,
1992 and amended and restated June 3, 1993 between
the Registrant and John L. Ridihalgh 4 *
-----
10.2.26. Amended and Restated Stock Option and Restricted
Stock Purchase Plan dated March 3, 1994 11 *
-----
10.2.27.-10.2.28. Reserved
10.2.29. Non-Qualified Stock Option Agreement dated February 16,
1995 between the Registrant and John L.
Ridihalgh 3 *
-----
10.2.30. Non-Qualified Stock Option Agreement dated
February 16, 1995 between the Registrant and
David C. Bupp 3 *
-----
10.2.31. Employment Agreement dated as of January 1, 1996
between the Registrant and John L. Ridihalgh 7 *
-----
10.2.32. Employment Agreement dated as of January 1, 1996
between the Registrant and David C. Bupp 12 *
-----
10.2.33. Reserved
</TABLE>
- -------------------
+ The Registrant will furnish a copy of any exhibit to a beneficial owner of its
securities or to any person from whom a proxy was solicited in connection with
the Registrant's most recent Annual Meeting of Stockholders upon the payment of
a fee of fifty cents ($.50) a page.
* Incorporated by reference.
<PAGE> 62
<TABLE>
<S> <C> <C> <C>
10.2.34. Restricted Stock Purchase Agreement dated June 5,
1996 between the Registrant and John L. Ridihalgh 4 *
-----
10.2.35. Restricted Stock Purchase Agreement dated June 5,
1996 between the Registrant and David C. Bupp 4 *
-----
10.2.36. Restricted Stock Purchase Agreement dated as of
November 25, 1996 between the Registrant and Joseph
R. Bianchine, as amended January 2, 1997 4 *
-----
10.2.37. 1996 Stock Incentive Plan dated January 18, 1996 as
amended March 13, 1997 21
-----
10.2.38. Non-Qualified Stock Option Agreement dated January
18, 1996 between the Registrant and John L. Ridihalgh 3
-----
10.2.39. Non-Qualified Stock Option Agreement dated January
18, 1996 between the Registrant and David C. Bupp 3
-----
10.2.40. Non-Qualified Stock Option Agreement dated
February 3, 1997 between the Registrant and John L.
Ridihalgh 3
-----
10.2.41. Non-Qualified Stock Option Agreement dated
February 3, 1997 between the Registrant and David C.
Bupp 3
-----
10.3.1. Technology Transfer Agreement dated July 29, 1992 between
the Registrant and The Dow Chemical Corporation (subject
to an order granting portions
thereof confidential treatment) 15 *
-----
10.3.2.-10.3.7. Reserved
10.3.8. Supplemental Agreement dated July 19, 1985 between the
Registrant and The Ohio State University, acting on
behalf of the State of Ohio (subject to an order
granting portions thereof confidential treatment) 10 *
-----
</TABLE>
- -------------------
+ The Registrant will furnish a copy of any exhibit to a beneficial owner of its
securities or to any person from whom a proxy was solicited in connection with
the Registrant's most recent Annual Meeting of Stockholders upon the payment of
a fee of fifty cents ($.50) a page.
* Incorporated by reference.
<PAGE> 63
<TABLE>
<S> <C> <C> <C>
10.3.9. Task Order Agreement for Sponsored Clinical Research
dated May 15, 1992, between the Registrant and The Ohio
State University Research Foundation (subject to an order
granting portions thereof
confidential treatment) 7 *
-----
10.3.10. License Agreement dated July 23, 1992 between the
Registrant and The Ohio State University Research
Foundation (subject to an order granting portions
thereof confidential treatment) 8 *
-----
10.3.11. License Agreement dated July 23, 1992 between the
Registrant and The Ohio State University Research
Foundation (subject to an order granting portions
thereof confidential treatment) 8 *
-----
10.3.12.-10.3.15. Reserved
10.3.16. Drug Manufacture Agreement dated April 6, 1993
between the Registrant and Nordion International Inc.
(subject to an order granting portions thereof
confidential treatment) 14 *
-----
10.3.17.-10.3.28. Reserved
</TABLE>
- -------------------
+ The Registrant will furnish a copy of any exhibit to a beneficial owner of its
securities or to any person from whom a proxy was solicited in connection with
the Registrant's most recent Annual Meeting of Stockholders upon the payment of
a fee of fifty cents ($.50) a page.
* Incorporated by reference.
<PAGE> 64
<TABLE>
<S> <C> <C> <C>
10.3.29. Manufacturing and Supply Agreement dated
February 20, 1995 between the Registrant and
Bio-Intermediair, B.V. 10 *
-----
10.3.30. Facility Agreement dated July 17, 1995 among
Registrant, Neoprobe (Israel) Ltd., and Rotem
Industries, Ltd. (subject to an order granting portions
thereof confidential treatment) 12 *
-----
10.3.31. Cooperative Research and Development Agreement
between Registrant and National Cancer Institute 67 *
-----
10.3.32. First Amendment to Facility Agreement dated July 17,
1995 among Registrant, Neoprobe (Israel), Ltd. and
Rotem Industries, Ltd. 1 *
-----
10.3.33. Investment Agreement dated January 31, 1996
between the Registrant and XTL Biopharmaceuticals, Ltd. 88 *
-----
10.3.34. $1,500,000 5% Convertible Subordinated Debenture
Due February 13, 1998 of XTL Biopharmaceuticals,
Ltd. issued to Registrant on February 13, 1996. 13 *
-----
10.3.35. Investors' Rights Agreement dated February 5, 1996
between Registrant and XTL Biopharmaceuticals, Ltd 19 *
-----
10.3.36. Warrant to purchase Class A Common Shares of XTL
Biopharmaceuticals, Ltd. issued to Registrant on
February 13, 1996 11 *
-----
10.3.37. Research and Development Agreement dated
February 13, 1996 between Registrant and XTL
Biopharmaceuticals, Ltd. (subject to an order granting
portions thereof confidential treatment) 14 *
-----
10.3.38. Sublicense Agreement dated February 13, 1996
between Registrant and XTL Biopharmaceuticals, Ltd.
(subject to an order granting portions thereof
confidential treatment) 8 *
-----
10.3.39. Reserved.
</TABLE>
- -------------------
+ The Registrant will furnish a copy of any exhibit to a beneficial owner of its
securities or to any person from whom a proxy was solicited in connection with
the Registrant's most recent Annual Meeting of Stockholders upon the payment of
a fee of fifty cents ($.50) a page.
* Incorporated by reference.
<PAGE> 65
<TABLE>
<S> <C> <C> <C>
10.3.40. Subscription and Option Agreement dated March 14,
1996 between Registrant and Cira Technologies Inc. 19 *
-----
10.3.41.-10.3.43. Reserved.
10.3.44. Technology Option Agreement dated as of March 14,
1996 between Cira Technologies, Inc. and
Registrant(subject to an order granting portions thereof
confidential treatment) 12 *
-----
10.3.45. License dated May 1, 1996 between Registrant and
The Dow Chemical Company 9 *
-----
10.3.46. License Agreement dated May 1, 1996 between Registrant
and The Dow Chemical Company(subject to an order granting
portions thereof confidential treatment) 27 *
-----
10.4.1.-10.4.15. Reserved
10.4.16. Project Management Agreement dated May 17, 1995
between Neoprobe (Israel) Ltd. and BARAN Project
Construction Ltd. 6 *
-----
10.4.17. Strategic Marketing Agreement dated August 30, 1995
between Registrant and Damon Pharm Ltd. (subject to
an order granting portions thereof confidential
treatment) 31 *
-----
10.4.18. Exclusive Distribution Agreement dated September 25,
1995 between Registrant and Syncor International
Corporation (subject to an order granting portions
thereof confidential treatment) 8 *
-----
10.4.19. Exclusive Distribution Services Agreement dated
November 30, 1995 between Registrant and Nordion
Europe S.A. (subject to an order granting portions
thereof confidential treatment) 20 *
-----
</TABLE>
- -------------------
+ The Registrant will furnish a copy of any exhibit to a beneficial owner of its
securities or to any person from whom a proxy was solicited in connection with
the Registrant's most recent Annual Meeting of Stockholders upon the payment of
a fee of fifty cents ($.50) a page.
* Incorporated by reference.
<PAGE> 66
<TABLE>
<S> <C> <C> <C>
10.4.20. License and Distribution Agreement dated September 18,
1996 between Registrant and United States Surgical
Corporation (subject to an order granting
portions thereof confidential treatment) 67 *
-----
10.4.21. First Amendment to the License and Distribution Agreement
dated May 14, 1997 between Registrant and United States
Surgical Corporation (filed pursuant to Rule 24b-2 under
which the Registrant has requested confidential treatment
of certain portions of
this Exhibit) 6 *
-----
11.1. Computation of Net Loss Per Share 1
-----
21.1. Subsidiaries of Registrant 1
-----
23.1. Consent of Coopers & Lybrand L.L.P. 1
-----
24.1. Powers of Attorney 9
-----
24.2. Certified resolution of the Registrant's Board of
Directors authorizing officers and directors signing on
behalf of the Company to sign pursuant to a power of
attorney 1
-----
</TABLE>
- -------------------
+ The Registrant will furnish a copy of any exhibit to a beneficial owner of its
securities or to any person from whom a proxy was solicited in connection with
the Registrant's most recent Annual Meeting of Stockholders upon the payment of
a fee of fifty cents ($.50) a page.
* Incorporated by reference.
<PAGE> 1
Exhibit 10.2.37
NEOPROBE CORPORATION
1996 STOCK INCENTIVE PLAN
----------------------
January 18, 1996
----------------------
Amended March 13, 1997
----------------------
P R E A M B L E :
1. Neoprobe Corporation, a Delaware corporation ("Neoprobe" or the
"Company") by means of this 1996 Stock Incentive Plan (the "Plan"), desires to
attract and retain capable directors, employees and consultants and to provide
them with long term incentives to continue their services to the Company, to
maximize the value of the Company to its stockholders and to acquire a
continuing ownership interest in the Company.
2. The Company has determined that the foregoing objectives will be
promoted by granting Awards (as hereinafter defined) under this Plan to certain
directors and employees of and consultants to the Company and its subsidiaries,
if any, pursuant to this Plan.
T E R M S :
Article 1. Definitions.
Section 1.1. General. Certain words and phrases used in this Plan shall
have the meanings given to them below in this section:
"Award" means a grant of Options or Unrestricted Stock or the right to
purchase Restricted Stock under the Plan.
"Board of Directors" means the board of directors of Neoprobe.
"Change in Control" means (a) the acquisition by any person (defined for
the purposes of this definition to mean any person within the meaning of Section
13(d) of the Exchange Act), other than Neoprobe or an employee benefit plan
created by the Board of Directors for the benefit of its Employees, either
directly or indirectly, of the beneficial ownership (determined under Rule 13d-3
of the Regulations promulgated by the SEC under Section 13(d) of the Exchange
Act) of securities issued by Neoprobe having fifteen percent (15%) or more of
the voting power of all the voting securities issued by Neoprobe in the election
of Directors at the next meeting of the holders of voting securities to be held
for such purpose; (b) the election of a majority of the Directors elected at any
meeting of the holders of voting securities of Neoprobe who are persons who were
not
<PAGE> 2
nominated for such election by the Board of Directors or a duly constituted
committee of the Board of Directors having authority in such matters; (c) the
approval by the stockholders of Neoprobe of a merger or consolidation with
another person, other than a merger or consolidation in which the holders of
Neoprobe's voting securities issued and outstanding immediately before such
merger or consolidation continue to hold voting securities in the surviving or
resulting corporation (in the same relative proportions to each other as existed
before such event) comprising eighty percent (80%) or more of the voting power
for all purposes of the surviving or resulting corporation; or (d) the approval
by the stockholders of Neoprobe of a transfer of substantially all of the assets
of Neoprobe to another person other than a transfer to a transferee, eighty
percent (80%) or more of the voting power of which is owned or controlled by
Neoprobe or by the holders of Neoprobe's voting securities issued and
outstanding immediately before such transfer in the same relative proportions to
each other as existed before such event.
"Code" means the Internal Revenue Code of 1986 and the regulations
thereunder, as now in effect or hereafter amended.
"Committee" means the Committee of the Board of Directors that administers
the Plan under Section 2.1 below.
"Common Stock" means the common stock, par value $.001 per share, of the
Company.
"Consultant" means any person who provides services to the Company or any
Subsidiary (other than in connection with the offer or sale of securities of the
Company or any Subsidiary in a capital raising transaction), who is neither an
Employee nor a Director and who is a consultant or an adviser to the Company or
any Subsidiary within the meaning of General Instruction A.1. to Form S-8
promulgated by the SEC under the Securities Act of 1933.
"Date of Grant" means the date an Award is first granted.
"Director" means a member of the Board of Directors.
"Effective Date" means the date this Plan is first adopted by the Board of
Directors.
"Employee" means any common law employee of Neoprobe or any Subsidiary of
Neoprobe.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exercise Price" means, with respect to an Option, the amount of
consideration that must be delivered to the Company in order to purchase a
single Share thereunder.
"Fair Market Value of a Share" means the amount determined to be the fair
market value of a single Share by the Committee based upon the trading price of
the Shares, their offering price in public and private offerings by the Company
and such other factors as it deems relevant. In the absence of such a
determination, the Fair Market Value of a Share shall be deemed to be (a) if the
Shares are listed or admitted to trading on a national securities exchange or
the Nasdaq National Market, the per Share closing price regular way on the
principal national securities exchange or the Nasdaq National Market on which
the Shares are listed or admitted to trading on the day prior to the date of
determination or, if no closing price can be determined for the date of
determination, the most recent date for which such price can reasonably be
ascertained, or (b) if the Shares are not listed or admitted to trading on a
national securities exchange or the Nasdaq National Market, the mean between the
representative bid and asked per Share prices in the over-the-counter market at
the closing of the day prior to the date of determination or the most recent
such bid and asked prices then available, as reported by NASDAQ or if the Shares
are not then quoted by NASDAQ as furnished by any market maker selected from
time to time by Neoprobe for that purpose.
"Grantee" means any Participant to whom an Award has been granted.
"Holder" means any Grantee who holds a valid Award and any heir or legal
representative to whom such Grantee's Award has been transferred by will or the
laws of descent and distribution.
-2-
<PAGE> 3
"Incentive Stock Option" or "ISO" means an Option intended to comply with
the terms and conditions set forth in Section 422 of the Code.
"Meeting Date" means the date of the first regular meeting of the Board
of Directors in each fiscal year of the Company. For 1997, the Meeting Date
shall be deemed to be March 13, 1997.
"Nonqualified Option" means a Stock Option other than an Incentive Stock
Option.
"Officer" means an officer of the Company as defined in 17 C.F.R. ss.
240.16a-1(f) as now in effect or hereafter amended.
"Option" or "Stock Option" means a right granted under Article 5 or 6 of
the Plan to a Participant to purchase a stated number of Shares.
"Option Agreement" means an agreement evidencing an Option substantially
in the form of Exhibit A or Exhibit B hereto.
"Parent" means a parent of a given corporation as such term is defined in
Section 424(e) of the Code.
"Participant" means a person who is eligible to receive and has received
an Award under the Plan.
"Plan" means this Plan as it may be amended or restated from time to time.
"Restricted Stock" means Shares purchased under Article 7 of the Plan that
are subject to restrictions on transfer and risks of forfeiture under the Plan.
"Restricted Stock Purchase Agreement" means a Restricted Stock Purchase
Agreement in the form of Exhibit C attached hereto.
"Rule 16b-3" means Rule 16b-3 (17 C.F.R. ss. 240.16b-3) promulgated under
Section 16(b) of the Exchange Act as now in effect or hereafter amended.
"SEC" means the Securities and Exchange Commission.
"Shares" means shares of Common Stock.
"Subsidiary" means a subsidiary of a given corporation as such term is
defined in Section 424(f) of the Code.
"Ten Percent Stockholder" means a person who owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary of the Company. Ownership shall
for the purposes of the previous sentence be determined under the rules set
forth in Section 424 of the Code.
"Termination without cause" means a termination of the employment or
consulting relationship of a Grantee that is not for cause and is not occasioned
by the resignation, death or disability of the Grantee.
"Unrestricted Stock" means Shares granted to a Grantee under Article 9 of
the Plan.
Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles.
Section 1.3. Effect of Definitions. The definitions set forth in Section
1.1 above shall apply equally to the singular, plural, adjectival, adverbial and
other forms of any of the words and phrases defined regardless of whether they
are capitalized.
Article 2. Administration.
Section 2.1. Committee. The Plan shall be administered by a committee of the
Board of Directors consisting of two or more Directors, each of whom is a
"Non--Employee Director" as described in paragraph (b)(3) of Rule 16b-3 and is
an "outside director" as described in Code Section 162(m) and the regulations
thereunder (the "Committee"). Unless the Board of Directors designates another
of its committees to administer the Plan, the Plan shall be administered by a
committee consisting of those members of the Compensation Committee of the Board
of Directors who are disinterested persons and are outside directors, but, if
the Compensation Committee is abolished or its membership does not contain two
persons who do comply with the requirements of the first sentence of this
Section 2.1, the Board of Directors shall either reconstitute the Compensation
-3-
<PAGE> 4
Committee in compliance with or create another Committee that complies with the
requirements of the first sentence of this Section 2.1 to administer the Plan.
The Committee may be referred to as the Stock Option Committee.
Section 2.2. Authority. Subject to the express provisions of the Plan and
in addition to the powers granted by other sections of the Plan, the Committee
has the authority, in its discretion, to: (a) determine the Participants, grant
Awards and determine their timing, pricing and amount; (b) define, prescribe,
amend and rescind rules, regulations, procedures, terms and conditions relating
to the Plan; (c) make all other determinations necessary or advisable for
administering the Plan, including, but not limited to, interpreting the Plan,
correcting defects, reconciling inconsistencies and resolving ambiguities; (d)
review and resolve all claims of Employees, Grantees and Participants; and (e)
delegate to the Officers the authority to select Grantees under Article 5 (other
than Officers) and grant Awards to such Grantees having terms and in aggregate
amounts determined by the Committee. The actions and determinations of the
Committee on matters related to the Plan shall be conclusive and binding upon
the Company and all Employees, Grantees and Participants.
Article 3. Shares.
Section 3.1. Number. The aggregate number of Shares in respect of which
Awards may be granted under the Plan shall not exceed one million five hundred
thousand (1,500,000), which number of Shares is hereby reserved for issuance
under the Plan out of the authorized but unissued Shares.
Section 3.2. Cancellations. If any Awards granted under the Plan are
canceled, terminate or expire for any reason without having been exercised in
full, the Shares related to the unexercised portion of an Award shall be
available again for the purposes of the Plan. If any Shares purchased under the
Plan are forfeited for any reason, the Shares shall be available again for
purposes of the Plan.
Section 3.3. Anti-Dilution.
(a) If the Shares are split or if a dividend of Shares is paid on
the Shares, the number of Shares for which each then outstanding Award is
exercisable or which is then Restricted Stock and the number of Shares as to
which Awards may be granted under this Plan shall be increased automatically by
the ratio between the number of Shares outstanding immediately after such event
and the number of Shares outstanding immediately before such event and the
Exercise Price thereof shall be decreased automatically by the same ratio, and
if the Shares are combined into a lesser number of Shares, the number of Shares
for which each then outstanding Award is exercisable or which is then Restricted
Stock and the number of Shares as to which Awards may be granted under the Plan
shall be decreased automatically by such ratio and the Exercise Price thereof
shall be increased automatically by such ratio.
(b) In the event of any other change in the Shares, through
recapitalization, merger, consolidation or exchange of shares or otherwise,
there shall automatically be substituted for each Share subject to an
unexercised Award or which is then Restricted Stock and each Share available for
additional grants of Awards, the number and kind of shares or other securities
into which each outstanding Share was changed, and the Exercise Price shall be
increased or decreased proportionally so that the aggregate Exercise Price for
the securities subject to each Award shall remain the same as immediately before
such event; and the Committee may make such further equitable adjustments in the
Plan and the then outstanding Awards and Restricted Stock Purchase Agreements as
it deems necessary and appropriate including, but not limited to, changing the
number of Shares reserved under the Plan or covered by outstanding Awards, the
Exercise Price of outstanding Awards and Restricted Stock Purchase Agreements
and the vesting conditions of outstanding Awards and Restricted Stock Purchase
Agreements.
Section 3.4. Source. Except as otherwise determined by the Board of
Directors, the Shares issued under the Plan shall be authorized but unissued
Shares. However, Shares which are to be delivered under the Plan may be obtained
by the Company from its treasury, by purchases on the open market or from
private sources, or by issuing authorized but unissued Shares. The proceeds of
the exercise of any Award shall be general corporate funds of the Company. No
Shares may be sold under any Option or
-4-
<PAGE> 5
Restricted Stock Purchase Agreement for less than the par value thereof. No
fractional Shares shall be issued or sold under the Plan nor will any cash
payment be made in lieu of fractional Shares.
Section 3.5. Rights of a Stockholder. Except as otherwise provided in any
Restricted Stock Purchase Agreement, no Grantee or other person claiming under
or through any Grantee shall have any right, title or interest in or to any
Shares allocated or reserved under the Plan or subject to any Award except as to
such Shares, if any, for which certificates representing such Shares have been
issued to such Grantee.
Section 3.6. Securities Laws. No Award shall be exercised nor shall any
Shares or other securities be issued or transferred pursuant to an Award unless
and until all applicable requirements imposed by federal and state securities
laws and by any stock exchanges upon which the Shares may be listed, have been
fully complied with. As a condition precedent to the exercise of an Award or the
issuance of Shares pursuant to the grant or exercise of an Award, the Company
may require the Grantee to take any reasonable action to meet such requirements
including providing undertakings as to the investment intent of the Grantee,
accepting transfer restrictions on the Shares issuable thereunder and providing
opinions of counsel, in form and substance acceptable to the Company, as to the
availability of exemptions from such requirements.
Article 4. Eligibility.
Section 4.1. Article 5. Only Employees and Consultants who are not members
of the Committee, shall be eligible to receive Options under Article 5 below.
Section 4.2. Article 6. Only Directors who are not Employees, shall be
eligible to receive Options under the provisions of Article 6 below.
Section 4.3. Article 7. Only Officers shall be eligible to purchase
Restricted Stock under Article 7 below.
Section 4.4. Article 8. Only Employees and Consultants who are not members
of the Committee shall be eligible to receive Unrestricted Stock under Article 8
below.
Article 5. Stock Options.
Section 5.1. Determinations. The Committee shall determine which eligible
Employees or Consultants shall be granted Options, the number of Shares for
which the Options may be exercised, the times when they shall receive them and
the terms and conditions of individual Option grants (which need not be
identical); provided, however, that the maximum number of Shares with respect to
which Options may be granted during any fiscal year of the Company to any
Employee shall be five hundred thousand (500,000). The Committee may delegate
the authority granted to it in this Section 5.1 pursuant to clause (e) of
Section 2.2 above.
Section 5.2. Exercise Price. The Committee shall determine the Exercise
Price of each Option at the time that it is granted, but in no event shall the
Exercise Price of an Option be less than the Fair Market Value of a Share on the
Date of Grant. If no express determination of the Exercise Price of an Option is
made by the Committee, the Exercise Price thereof is equal to the Fair Market
Value of a Share on the Date of Grant.
Section 5.3. Term. Subject to the rule set forth in the next sentence, the
Committee shall determine the term during which an Option is exercisable at the
time that it is granted. No Option shall be exercisable after the expiration of
ten (10) years from the Date of Grant. If no express determination of the times
when Options are exercisable is made by the Committee:
(a) each Option shall vest and first become exercisable as to one
third (1/3) of the Shares originally subject to the Option (subject to the rule
set forth in Section 5.4(c) below) on each anniversary of the Date of Grant
provided the Grantee thereof has been an Employee or a Consultant, as the case
may be, continuously during the time beginning on the Date of Grant and ending
on the date when such portion of the Option first becomes exercisable; and
(b) each Option shall lapse and cease to be exercisable upon the
earliest of (i) the expiration of ten (10) years from the Date of Grant, (ii)
subject to
-5-
<PAGE> 6
the rule set forth in Section 5.4(d) below, nine (9) months after the Grantee
ceases to be an Employee or Consultant because of his death or disability, (iii)
ninety (90) days after the Grantee's employment with or services to the Company
or any Subsidiary are terminated by the Company or such Subsidiary without
cause, or (iv) immediately upon termination of the Grantee's employment with or
services to the Company or any Subsidiary by the Company or any Subsidiary for
cause or by the Grantee's resignation.
Where both an Incentive and a Nonqualified Option are granted, the number
of Shares which become exercisable under clause (a) of the previous sentence at
any time shall be calculated on the basis of the total of the Shares subject to
both Options and the Options shall become exercisable as to that number of
Shares first under the Incentive Stock Option and then under the Nonqualified
Option, unless the rule set forth in Section 5.4(c) below would defer the
exercisability of such Incentive Stock Option, in which case such Nonqualified
Options shall become exercisable first. Notwithstanding the terms of any Option,
the preceding sentence and Section 5.4, all Options that have not previously
been exercised nor lapsed and ceased to be exercisable shall vest and become
exercisable upon the occurrence of any Change in Control if the Grantee is an
Employee or Consultant at time of the Change in Control.
Section 5.4. Incentive Stock Options.
(a) The Committee shall determine whether any Option is an Incentive
Stock Option or a Nonqualified Option at the time that it is granted, and if no
express determination is made by the Committee, all Options granted to
Participants who are Employees and who are not Ten Percent Stockholders are
Incentive Stock Options and all Options granted to Ten Percent Stockholders or
Consultants are Nonqualified Options.
(b) If the Committee grants Incentive Stock Options, they shall be
on such terms and conditions as may be necessary to render them "incentive stock
options" pursuant to Section 422 of the Code.
(c) The aggregate Fair Market Value of the Shares, determined as of
the time the Option is granted, which first become exercisable under all
Incentive Stock Options granted under this Plan or any other plan of the Company
or any Parent or Subsidiary of the Company, shall not exceed one hundred
thousand dollars ($100,000) during any calendar year and if the foregoing limit
would be exceeded in any given calendar year by the terms of any Incentive Stock
Option granted hereunder, the exercisability of such portion of such Option as
would exceed such limit shall be deferred to the first day of the next calendar
year and if such excess involves more than one Option, the exercisability of the
most recently granted Option shall be deferred first.
(d) If the employment of a Participant, who holds an ISO, with the
Company is terminated because of a "disability" (within the meaning of Section
22(e)(3) of the Code), the unexercised portion of his ISO may only be exercised
within six (6) months after the date on which his employment was terminated, and
only to the extent that such Participant could have otherwise exercised such ISO
as of the date of termination. If a Participant, who holds an ISO, dies while he
is employed by the Company (or within six (6) months after termination of his
employment by reason of a disability or within one (1) month after termination
of his employment without cause), the unexercised portion of his ISO at the time
of his death may only be exercised within six (6) months after the date of his
death, and only to the extent that he could have otherwise exercised such ISO at
the time of his death. In such event, such ISO may be exercised by the executor
or administrator of his estate or by any Holder.
(e) No Ten Percent Stockholder shall be granted an Incentive Stock
Option, unless at the time such Incentive Stock Option is granted, the Exercise
Price thereof is at least one hundred ten percent (110%) of the Fair Market
Value of a Share on the Date of Grant and the Incentive Stock Option by its
terms is not exercisable after the expiration of five (5) years from the Date of
Grant.
(f) If a Grantee exercises an Incentive Stock Option and disposes of
any of the Shares received by such Grantee as a result of such exercise within
two (2) years from the Date of Grant or within one (1) year after the transfer
of such Shares to such Grantee upon such exercise, such Grantee shall notify the
Company of such disposition and the consideration
-6-
<PAGE> 7
received as a result thereof and pay or provide for the withholding taxes on
such disposition as required by Section 9.4 below.
(g) An Option that is designated as a Nonqualified Option under this
Plan shall not be treated as an "incentive stock option" as such term is defined
in Section 422(b) of the Code.
Section 5.5. Exercise. An Option shall be exercised by the delivery of the
Option Agreement therefor with the notice of exercise attached thereto properly
completed and duly executed by the Holder named therein to the Treasurer of the
Company, together with the aggregate Exercise Price for the number of Shares as
to which the Option is being exercised, after the Option has become exercisable
and before it has ceased to be exercisable. An Option may be exercised as to
less than all of the Shares purchasable thereunder, but not for a fractional
share. No Option may be exercised as to less than one hundred (100) Shares
unless it is exercised as to all of the Shares then available thereunder. If an
Option is exercised as to less than all of the Shares purchasable thereunder, a
new duly executed Option Agreement reflecting the decreased number of Shares
exercisable under such Option, but otherwise of the same tenor, shall be
returned to the Holder. The Committee may, in its sole discretion, and upon such
terms and conditions as it shall determine at or after the Date of Grant, permit
the Exercise Price to be paid in cash, by the tender to the Company of Shares
owned by the Holder or by a combination thereof. If the Committee does not make
such determination, the Exercise Price shall be paid in cash. If any portion of
the Exercise Price of an Option is payable in cash, it may be paid by (a)
delivery of a certified or cashier's check payable to the order of the Company
in such amount, (b) wire transfer of immediately available funds to a bank
account designated by the Company, or (c) reduction of a debt of the Company to
the Holder. If any portion of the Exercise Price of an Option is payable in
Shares it may be paid by delivery of certificates representing a number of
Shares having a total Fair Market Value on the date of delivery equal to or
greater than the required amount, duly endorsed for transfer with all signatures
guaranteed by a bank or a member of the National Association of Securities
Dealers with a medallion guarantee. If more Shares than are necessary to pay
such Exercise Price based on their Fair Market Value on the date of first
delivery to the Company are delivered to the Company, it shall return to the
Holder a certificate for the balance of the whole number of Shares and a check
payable to the order of the Holder for any fraction of a Share. Shares may not
be delivered to the Company as payment for the exercise of an Option, if such
Shares have been owned by the Holder (together with his decedent or testator)
for less than six (6) months or if the disposition of such Shares would require
the giving of a notice under Section 5.4(f) above. Promptly after an Option is
properly exercised, the Company shall issue to the Grantee a certificate
representing the Shares purchased thereunder.
Section 5.6. Option Agreement. Promptly after the Date of Grant, Neoprobe
shall duly execute and deliver to the Grantee an Option Agreement setting forth
the terms of the Option. Option Agreements are not negotiable instruments or
securities (as such term is defined in Article 8 of the Uniform Commercial
Code). Lost and destroyed Option Agreements may be replaced without bond.
Section 5.7. New Hires. A person to whom the Company is offering
employment may be granted a Nonqualified Option under this Article 5, but any
such grant shall lapse if the person does not subsequently become an Employee
pursuant to such offer.
Section 5.8. Acceleration. Notwithstanding anything else in the Plan, the
Committee may, in its sole discretion, at any time or from time to time
thereafter, accelerate the time at which any Options become exercisable or waive
any provisions of the Plan relating to the manner of payment or procedures for
the exercise of any Option. Any such acceleration may be made effective (a) with
respect to one or more or all Grantees, (b) with respect to some or all of the
Shares subject to an Option of any Grantee or (c) for a period of time ending at
or before the expiration date of any Option.
Article 6. Directors' Stock Options.
Section 6.1. Grant. On each Meeting Date (beginning with the Meeting Date
in 1997), an Option to purchase five thousand (5,000) Shares or such lesser
number as remain available for granting under Article 3 above shall be
automatically granted to each
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<PAGE> 8
Director who is eligible to receive Options under Section 4.2 above and who
attended at least seventy five per cent (75%) of the total number of meetings of
the Board of Directors (and committees thereof of which he is a member) during
the most recently ended fiscal year of the Company. The Board of Directors may,
by a resolution adopted on or before a Meeting Date uniformly applying to all
eligible Directors, increase or decrease the number of Shares subject to the
Option granted under this Section 6.1 on the Meeting Date on which such
resolution is adopted and thereafter.
Section 6.2. Exercise Price. The Exercise Price of an Option shall be
equal to the Fair Market Value of a Share on the Date of Grant.
Section 6.3. Term. (a) Each Option shall vest and first become exercisable
as to thirty-three and one-third percent (33-1/3%) of the Shares originally
subject to the Option on each Meeting Date which is held more than six (6)
months after the Date of Grant if the Grantee is a Director at the time of the
adjournment of the meeting of the Board of Directors held on such Meeting Date;
and (b) each Option shall lapse and cease to be exercisable upon the earliest of
(i) the expiration of ten (10) years from the Date of Grant, (ii) nine (9)
months after the Grantee ceases to be a Director because of his death or
disability, (iii) immediately upon resignation by the Grantee as a Director, or
(iv) thirty (30) days after the Grantee ceases to be a Director for any reason
other than his death, disability or resignation. Notwithstanding the foregoing,
all Options that have not previously been exercised nor lapsed and ceased to be
exercisable shall vest and become exercisable upon the occurrence of any Change
in Control if the Grantee is a Director at time of the Change in Control.
Section 6.4. Not Incentive Stock Options. An Option under this Article
6 shall not be treated as an Incentive Stock Option.
Section 6.5. Exercise. An Option shall be exercised by the delivery of the
Option Agreement therefor with the notice of exercise attached thereto properly
completed and duly executed by the Grantee named therein to the Treasurer of the
Company, together with the aggregate Exercise Price for the number of Shares as
to which the Option is being exercised, after the Option has become exercisable
and before it has ceased to be exercisable. An Option may be exercised as to
less than all of the Shares purchasable thereunder but not for a fractional
Share. No Option may be exercised as to less than one hundred (100) Shares
unless it is exercised as to all of the Shares then available thereunder. If an
Option is exercised as to less than all of the Shares purchasable thereunder, a
new duly executed Option Agreement reflecting the decreased number of Shares
exercisable under such Option, but otherwise of the same tenor, shall be
returned to the Grantee. The Exercise Price shall be paid in cash by (a)
delivery of a certified or cashier's check payable to the order of the Company
in such amount, (b) wire transfer of immediately available funds to a bank
account designated by the Company, or (c) reduction of a debt of the Company to
the Grantee. Promptly after an Option is properly exercised, the Company shall
issue to the Grantee a certificate representing the Shares purchased thereunder.
Section 6.6. Option Agreement. Promptly after the Date of Grant, Neoprobe
shall duly execute and deliver to the Grantee an Option Agreement setting forth
the terms of the Option. Option Agreements are neither negotiable instruments
nor securities (as such term is defined in Article 8 of the Uniform Commercial
Code). Lost and destroyed Option Agreements may be replaced without bond.
Article 7. Restricted Stock.
Section 7.1. Determinations. The Committee shall determine which
Participants may purchase Restricted Stock, the number of shares of Restricted
Stock each Grantee may purchase, the times when they may purchase Restricted
Stock, the vesting and forfeiture provisions of the Restricted Stock and the
purchase price of the Restricted Stock; provided, however, that the maximum
number of shares of Restricted Stock which may be sold during any fiscal year of
the Company to any Employee shall be one hundred thousand (100,000), and that
the vesting parameters so prescribed shall include (a) the attainment of a
preestablished performance goal that satisfies the requirements of Section
162(m) of the Code and the regulations thereunder and (b) the Committee's
certification in writing of such attainment, whether incorporated in the minutes
of the Committee
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<PAGE> 9
or otherwise. Notwithstanding the terms of any Award granted under this
Section 7, all shares of Restricted Stock that have not previously been
forfeited shall vest fully and become transferable upon the occurrence of any
Change in Control.
Section 7.2. Agreements. Once the Committee has made the determinations
required by Section 7.1 above with respect to any Grantee, the appropriate
officers of the Company shall enter into a Restricted Stock Purchase Agreement
with the Grantee setting forth the terms determined by the Committee. No Holder
shall have any right to purchase Restricted Stock, hold Restricted Stock, or
exercise any rights as a stockholder of the Company unless and until such Holder
has executed and delivered an appropriately completed form of Restricted Stock
Purchase Agreement to the Company and the Company has delivered a counterpart
thereof, executed by an appropriate officer of the Company, to the Holder.
Restricted Stock Purchase Agreements are neither negotiable instruments nor
securities (as such term is defined in Article 8 of the Uniform Commercial
Code). Lost and destroyed Restricted Stock Purchase Agreements may be replaced
without bond.
Article 8. Unrestricted Stock.
The Committee may grant Awards of Unrestricted Stock in consideration for
services rendered by a Participant if such services are deemed by the Committee
to have a value to the Company in excess of the par value of the Shares so
awarded; provided, however, that the maximum number of shares of Unrestricted
Stock which may be granted during any fiscal year of the Company to any
Participant shall be twenty five thousand (25,000). The Committee shall
determine which Participants will receive Unrestricted Stock, the number of
shares of Unrestricted Stock each Grantee will receive, the times when each
Grantee shall receive Unrestricted Stock, and the terms and conditions of
individual Unrestricted Stock Awards (which need not be identical). Promptly
after the grant of an Award of Unrestricted Stock, the Company shall issue to
the Grantee a certificate representing the Shares received thereunder. A person
to whom the Company is offering employment may be granted Unrestricted Stock
under this Article 8, but any such grant shall lapse if the person does not
subsequently become an Employee pursuant to such offer.
Article 9. Provisions Applicable to all Types of Awards.
Section 9.1. Surrender and Exchange. The Committee may permit the
voluntary surrender of all or a portion of any Award to be conditioned upon the
granting to the Participant of a new Award for the same or a different number of
Shares as the Award surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Award to such Participant. Subject to
the provisions of the Plan, such new Award shall be exercisable at the price,
during the period and on such other terms and conditions as are specified by the
Committee at the time the new Award is granted. Upon surrender, the Award
surrendered shall be canceled and the Shares previously subject to it shall be
available for the grant of other Awards.
Section 9.2. Corporate Mergers and Acquisitions. The Committee may grant
Awards having terms and conditions which vary from those specified in the Plan
if such Awards are granted in substitution for, or in connection with the
assumption of, existing awards granted by another business entity and assumed or
otherwise agreed to be provided for by Neoprobe pursuant to or by reason of a
transaction involving a merger or consolidation of or acquisition of
substantially all of the assets or stock of another business entity that is not
a Subsidiary of Neoprobe prior to such acquisition, with or by Neoprobe or its
Subsidiaries.
Section 9.3. Actions by Committee After Grant. The Committee shall,
subject to the written consent of the Grantee where the action impairs or
adversely alters the rights of the Grantee, have the right at any time and from
time to time after the Date of Grant of any Award to modify the terms of any
Award.
Section 9.4. Withholding. The Company shall have the right to withhold
from any payments due under any Award or due to any Grantee from the Company as
compensation or otherwise the amounts of any federal, state or local withholding
taxes not paid by the Grantee at the time of the exercise or vesting of any
Award or upon a disposition of Shares
-9-
<PAGE> 10
received upon the exercise of an Incentive Stock Option. If cash payments
sufficient to allow for withholding of taxes are not made at the time of
exercise or vesting of an Award, the Grantee exercising such Award shall pay to
Neoprobe an amount equal to the withholding required to be made less the
withholding otherwise made in cash or, if allowed by the Committee in its
discretion and pursuant to rules adopted by the Committee consistent with
Section 5.5 above, Shares previously owned by the Grantee. The Company may make
such other provisions as it deems appropriate to withhold any taxes the Company
determines are required to be withheld in connection with the exercise of any
Award or upon a disqualifying disposition of Shares received upon the exercise
of an Incentive Stock Option, including, but not limited to, the withholding of
Shares from an Award upon such terms and conditions as the Committee may
provide. The Company may require the Participant to satisfy any relevant
withholding requirements before issuing Shares or delivering any Award to the
Participant.
Section 9.5. Disability. If a Grantee who is an Employee with or
Consultant to the Company is absent from work with the Company because of a
physical or mental disability, for purposes of the Plan, such Grantee will not
be considered to have ended his employment with the Company while he has that
disability, unless he resigns or the Committee decides otherwise. If a Grantee
who is a Director is absent from meetings of the Board of Directors because of a
physical or mental disability, for purposes of the Plan, such Grantee will not
be considered to have ended his service with the Board of Directors while he has
that disability, unless he resigns or is not re-elected by the stockholders.
Article 9. General Provisions.
Section 9.1. No Right to Employment. Nothing in the Plan or any Award or
any instrument executed pursuant to the Plan will confer upon any Participant
any right to continue to be employed by or provide services to the Company or
affect the right of the Company to terminate the employment of any Participant
or its other relationship with any Participant. Nothing in the Plan or any Award
or any instrument executed pursuant to Article 6 of the Plan will confer upon
any Participant any right to continue to be a Director of the Company or affect
the right of the stockholders to terminate the directorship of any Participant.
Section 9.2. Limited Liability. The liability of the Company under this
Plan or in connection with any exercise of any Award is limited to the
obligations expressly set forth in the Plan and in the grant of any Award, and
no term or provision of this Plan nor of any Award shall be construed to impose
any duty, obligation or liability on the Company not expressly set forth in the
Plan or any grant of any Award.
Section 9.3. Assumption of Awards. Upon the dissolution or liquidation of
the Company, or upon a reorganization, merger or consolidation of the Company
with one or more corporations as a result of which the Company is not the
surviving corporation, or upon a sale of substantially all the assets of the
Company to another corporation, any Awards outstanding theretofore granted or
sold hereunder must be assumed by the surviving or purchasing corporation, with
appropriate adjustments as to the number and kind of shares and price.
Section 9.4. No Transfer. No Award or other benefit under the Plan may be
sold, pledged or otherwise transferred other than by will or the laws of descent
and distribution; and no Award may be exercised during the life of the
Participant to whom it was granted except by such Participant.
Section 9.5. Expenses. All costs and expenses incurred in connection with
the administration of the Plan including any excise tax imposed upon the
transfer of Shares pursuant to the exercise of an Award shall be borne by the
Company.
Section 9.6. Notices. Notices and other communications required or
permitted to be made under the Plan shall be in writing and shall be deemed to
have been duly given if personally delivered or if sent by first class mail
addressed (a) if to a Grantee, at his residence address set forth in the records
of the Company or (b) if to the Company, to its President at its principal
executive office.
Section 9.7. Third Parties. Nothing herein expressed or implied is
intended or shall be construed
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<PAGE> 11
to give any person other than the Grantees any rights or remedies under this
Plan.
Section 9.8. Saturdays, Sundays and Holidays. Where this Plan authorizes
or requires a payment or performance on a Saturday, Sunday or public holiday,
such payment or performance shall be deemed to be timely if made on the next
succeeding business day; provided, however, that this Section 9.8 shall not be
construed to extend the ten (10) year period referred to in Section 5.3 or the
five (5) year period referred to in Section 5.4(e) above.
Section 9.9. Rules of Construction. The captions and section numbers
appearing in this Plan are inserted only as a matter of convenience. They do not
define, limit or describe the scope or intent of the provisions of this Plan. In
this Plan words in the singular number include the plural, and in the plural
include the singular; and words of the masculine gender include the feminine and
the neuter, and when the sense so indicates words of the neuter gender may refer
to any gender.
Section 9.10. Governing Law. The validity, terms, performance and
enforcement of this Plan shall be governed by laws of the State of Delaware that
are applicable to agreements negotiated, executed, delivered and performed
solely in the State of Delaware.
Section 9.11. Effective Date of the Plan. The Plan shall become effective
upon its approval by the affirmative vote of the holders of a majority of the
outstanding Shares present, or represented, and entitled to vote at a meeting of
the stockholders of Neoprobe. Awards may be granted by the Committee before such
approval, but all Awards so granted shall be conditioned on such approval and
shall be void if such approval is not given within twelve (12) months after the
Effective Date. All Options granted under paragraph (a) of Section 6.1 above
shall be conditioned on such approval and shall be void if such approval is not
given within twelve (12) months after the Effective Date.
Section 9.12. Amendment and Termination. No Award shall be granted under
the Plan more than ten (10) years after the Effective Date. The Board of
Directors may at any time terminate the Plan, or make such amendment of the Plan
as it may deem advisable; provided, however, that no amendment shall be
effective without the approval of the stockholders of the Company by the
affirmative vote of the holders of a majority of the outstanding Shares present,
or represented, and entitled to vote at a meeting of stockholders duly held, if
it would
(a) materially increase the benefits accruing to Participants under
the Plan;
(b) materially increase the number of Shares which may be issued
under the Plan; or
(c) materially modify the requirements as to eligibility for
participation in the Plan;
and, further, provided, however, that no amendment or termination of the Plan
shall be effective to alter or impair the rights of a Grantee under any Award
made before the adoption of such amendment or termination by the Board of
Directors, without the written consent of such Grantee. No termination or
amendment of this Plan or any Award nor waiver of any right or requirement under
this Plan or any Award shall be binding on the Company unless it is in a writing
duly entered into its records and executed by a duly authorized Officer.
-11-
<PAGE> 12
Exhibit A
NEOPROBE CORPORATION
Suite 400
425 Metro Place North
Dublin, Ohio 43017-1367
<<Date of Grant>>
<<Name of Grantee>>
<<Street>>
<<City, State, Zip>>
Congratulations. You have been granted a Stock Option under Neoprobe's
1996 Stock Incentive Plan (the "Plan") on the following terms:
1. Number of Shares. The number of Shares of Common Stock of Neoprobe
Corporation that you may purchase under this Option is:<<Number>>
2. Exercise Price. The exercise price to purchase Shares under this Option
is: $<<Price>> per Share.
3. Vesting. One third (1/3) of the Shares originally subject to this
Option will vest and become exercisable on each anniversary of the <<Date
of Grant>> if you have been an [Employee][Consultant] of the Company
continuously from the date of this Agreement shown above through the date
when such portion of the Option vests[ subject to the special rule
referred to in paragraph 5 below].
4. Lapse. This Option will lapse and cease to be exercisable upon the
earliest of:
(i) the expiration of 10 years from the date of this Agreement
shown above,
(ii) [9][6] months after you cease to be an [Employee][Consultant]
because of your death or disability,
(iii) 90 days after your [employment with][services to] Neoprobe or
any Subsidiary [is][are] terminated by Neoprobe or such
Subsidiary without cause, or
(iv) immediately upon termination of your [employment
with][services to] Neoprobe or any Subsidiary by Neoprobe or
any Subsidiary for cause or by your resignation.
5. Taxation. This Option is [an Incentive Stock Option][a Nonqualified
Option].[ Because this Option is an Incentive Stock Option vesting of a
portion of this Option or of other Incentive Stock Options held by you may
be deferred under a special rule set forth in Section 5.4 (c) of the Plan.
If you exercise this Option and dispose of any of the Shares received by
you as a result of such exercise within two years from the date above or
within one year after the transfer of such Shares to you upon such
exercise, you must notify Neoprobe of such disposition and the amount
received as a result thereof and pay or provide for the withholding taxes
on such disposition.] [You will have taxable income upon the exercise of
this Option. At that time, you must pay to Neoprobe an amount equal to the
required federal, state, and local tax withholding less any withholding
otherwise made from your salary or bonus. You must satisfy any relevant
withholding requirements before Neoprobe issues Shares to you.]
6. Exercise. This Option may be exercised by the delivery of this
Agreement with the notice of exercise attached hereto properly completed
and signed by you to the Treasurer of the Company, together with the
aggregate Exercise Price for the number of Shares as to which the Option
is being exercised, after the Option has become exercisable and before it
has ceased to be exercisable. The Exercise Price must be paid in cash by
-1-
<PAGE> 13
(a) delivery of a certified or cashier's check payable to the order of
Neoprobe in such amount, (b) wire transfer of immediately available funds
to a bank account designated by Neoprobe, or (c) reduction of a debt of
Neoprobe to you. This Option may be exercised as to less than all of the
Shares purchasable hereunder, but not for a fractional share, nor may it
be exercised as to less than one hundred (100) Shares unless it is
exercised as to all of the Shares then available hereunder. If this Option
is exercised as to less than all of the Shares purchasable hereunder, a
new duly executed Option Agreement reflecting the decreased number of
Shares exercisable under such Option, but otherwise of the same tenor,
will be returned to you.
7. No Transfer. This Option may not be sold, pledged nor otherwise
transferred other than by will or the laws of descent and distribution;
and it may only be exercised during your lifetime by you. This Agreement
is neither a negotiable instrument nor a security (as such term is defined
in Article 8 of the Uniform Commercial Code).
8. Not An Employment Agreement. This Agreement is not an employment
agreement and nothing contained herein gives you any right to continue to
be employed by or provide services to Neoprobe or affects the right of
Neoprobe to terminate your employment or other relationship with you.
9. Plan Controls. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 5 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or
phrases defined in the Plan have the same meanings in this Agreement.
Neoprobe will provide you with a copy of the Plan promptly upon your
written or oral request made to its Vice President--Finance and
Administration.
10. Miscellaneous. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Delaware.
Please acknowledge your acceptance of this Agreement by signing the
enclosed copy in the space provided below and returning it promptly to Neoprobe.
NEOPROBE CORPORATION
By:
-----------------------------------
<<Name of Officer>>, <<Title>>
Accepted and Agreed to as of
the date first set forth above:
- --------------------------------------
<<Name of Grantee>>
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<PAGE> 14
OPTION EXERCISE FORM
The undersigned hereby exercises the right to purchase
_____________________________________ shares of Common Stock of Neoprobe
Corporation pursuant to the Option Agreement dated <<Date of Grant>> under the
Neoprobe Corporation 1996 Stock Incentive Plan.
Date:
----------------------------------
------------------------------------
<<Name of Grantee>>
- ---------------------------------------
Sign and complete this Option Exercise Form and deliver it to:
Neoprobe Corporation
Att'n: Treasurer
425 Metro Place North
Suite 400
Dublin, Ohio 43017-1367
together with the option price in cash by (a) delivery of a certified or
cashier's check payable to the order of Neoprobe in such amount, (b) wire
transfer of immediately available funds to a bank account designated by
Neoprobe, or (c) reduction of a debt of Neoprobe to you.
-3-
<PAGE> 15
Exhibit B
NEOPROBE CORPORATION
Suite 400
425 Metro Place North
Dublin, Ohio 43017-1367
<<Date of Grant>>
<<Name of Grantee>>
<<Street>>
<<City, State, Zip>>
Congratulations. You have been granted a Stock Option under Neoprobe's
Stock Option and Restricted Stock Purchase Plan (the "Plan") on the following
terms:
1. Number of Shares. The number of Shares of Common Stock of Neoprobe
Corporation that you may purchase under this Option is five thousand
(5,000).
2. Exercise Price. The exercise price to purchase Shares under this Option
is: $<<Price>> per Share.
3. Vesting. Thirty-three and one-third percent (33-1/3%) of the Shares
originally subject to this Option will vest and become exercisable on each
Meeting Date which is held more than six months after the date of this
Agreement shown above if you are a Director at the time of the adjournment
of the meeting of stockholders held on such Meeting Date.
4. Lapse. This Option will lapse and cease to be exercisable upon the
earliest of:
(i) the expiration of 10 years from the date of this Agreement
shown above,
(ii) 9 months after you cease to be a Director because of your
death or disability,
(iii) immediately upon your resignation as a Director, or
(iv) 30 days after you cease to be a Director for any reason other
than your death, disability or resignation.
5. Taxation. This Option is a Nonqualified Option. You will have taxable
income upon the exercise of this Option.
6. Exercise. This Option may be exercised by the delivery of this
Agreement with the notice of exercise attached hereto properly completed
and signed by you to the Treasurer of the Company, together with the
aggregate Exercise Price for the number of Shares as to which the Option
is being exercised, after the Option has become exercisable and before it
has ceased to be exercisable. The Exercise Price must be paid in cash by
(a) delivery of a certified or cashier's check payable to the order of
Neoprobe in such amount, (b) wire transfer of immediately available funds
to a bank account designated by Neoprobe, or (c) reduction of a debt of
Neoprobe to you. This Option may be exercised as to less than all of the
Shares purchasable hereunder, but not for a fractional share, nor may it
be exercised as to less than one hundred (100) Shares unless it is
exercised as to all of the Shares then available hereunder. If this Option
is exercised as to less than all of the Shares purchasable hereunder, a
new duly executed Option Agreement reflecting the decreased number of
Shares exercisable under such Option, but otherwise of the same tenor,
will be returned to you.
7. No Transfer. This Option may not be sold, pledged nor otherwise
transferred other than by will or the laws of descent and distribution;
and it may only be exercised during your lifetime by you. This Agreement
is
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<PAGE> 16
neither a negotiable instrument nor a security (as such term is defined in
Article 8 of the Uniform Commercial Code).
8. Not An Employment Agreement. This Agreement is not an employment
agreement and nothing contained herein gives you any right to continue to
be a Director of the Company or affect the right of the stockholders to
terminate your directorship.
9. Plan Controls. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 6 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or
phrases defined in the Plan have the same meanings in this Agreement.
Neoprobe will provide you with a copy of the Plan promptly upon your
written or oral request made to its Vice President--Finance and
Administration.
10. Miscellaneous. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Delaware.
Please acknowledge your acceptance of this Agreement by signing the
enclosed copy in the space provided below and returning it promptly to Neoprobe.
NEOPROBE CORPORATION
By:
-------------------------------------
<<Name of Officer>>, <<Title>>
Accepted and Agreed to as of
the date first set forth above:
- -----------------------------------
<<Name of Grantee>>
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<PAGE> 17
OPTION EXERCISE FORM
The undersigned hereby exercises the right to purchase
_____________________________________ shares of Common Stock of Neoprobe
Corporation pursuant to the Option Agreement dated <<Date of Grant>> under the
Neoprobe Corporation Stock Option and Restricted Stock Purchase Plan.
Date:
----------------------------------
------------------------------------
<<Name of Grantee>>
- ---------------------------------------
Sign and complete this Option Exercise Form and deliver it to:
Neoprobe Corporation
Att'n: Treasurer
425 Metro Place North
Suite 400
Dublin, Ohio 43017-1367
together with the option price in cash by (a) delivery of a certified or
cashier's check payable to the order of Neoprobe in such amount, (b) wire
transfer of immediately available funds to a bank account designated by
Neoprobe, or (c) reduction of a debt of Neoprobe to you.
-6-
<PAGE> 18
Exhibit C
Restricted Stock Purchase Agreement
Neoprobe Corporation
Suite 400
425 Metro Place North
Dublin, Ohio 43017-1367
<<Date of Grant>>
<<Name of Grantee>>
<<Street>>
<<City, State, Zip>>
Congratulations. You (the "Executive") have been granted a right to
purchase Restricted Stock under the Company's 1996 Stock Incentive Plan (the
"Plan") on the following terms:
1. Purchase and Sale.
(a) On the terms and subject to the conditions set forth in this
Agreement, the Executive hereby subscribes for and agrees to purchase __________
shares of Common Stock (the "Restricted Stock") for and in consideration of a
payment to the Company by the Executive of ________________ per share.
Concurrently with the execution of this Agreement, the Executive has delivered
to the Company his check drawn on sufficient funds and payable to the order of
the Company in the amount of $__________ , receipt of which is acknowledged by
the Company. The Executive agrees to deliver to the Secretary of the Company the
certificates representing the Restricted Stock together with stock powers duly
endorsed in blank promptly upon receipt thereof from the transfer agent of the
Company.
(b) The fair market value of Common Stock is demonstrated by the
closing price on the _____________________ of such securities on the business
day before the date first set forth above which was $________. The Executive and
the Company intend that the transactions provided for in this Agreement will be
governed by the provisions of Section 83(a) of the Internal Revenue Code of
1986.
2. Transfer Restrictions.
(a) In consideration of the difference between the purchase price of
the Restricted Stock set forth in Section 1 above and its fair market value
without the restrictions and risk of forfeiture set forth herein, the Executive
agrees that, unless and until any of the Restricted Stock vests and becomes
transferable as provided in Section 4 below, the Executive may neither transfer,
sell, assign nor pledge any of the Restricted Stock.
(b) This paragraph may be deleted if Shares issuable under the Plan
are registered. The Executive understands the Restricted Stock has neither been
registered under the Securities Act of 1933 nor under any applicable state
securities law on the ground that the sale provided for in this Agreement and
the issuance of securities hereunder are exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) thereof, but the Company's
reliance on such exemption is predicated on the Executive's representations set
forth herein and that in order to obtain such exemption, the transfer of such
securities is restricted by this paragraph and the legend set forth below. The
Executive represents and warrants to the Company that he or she is purchasing
the Restricted Stock for his or her own account and not for other persons and
for investment and not with a view to the distribution of any of the Restricted
Stock. The Executive will not offer for sale, sell or otherwise transfer any
Restricted Stock, even after it
-7-
<PAGE> 19
has vested and has become transferable under Section 4 below, unless such
securities have been registered under the Securities Act of 1933 and under
applicable state securities laws or such securities or their offer, sale or
transfer are exempt from such registration and the Company has received an
opinion of counsel, in form and substance reasonably satisfactory to the
Company, to that effect.
(c) Any certificate representing any Restricted Stock issued
hereunder shall bear the following legend:
THE TRANSFER OF THESE SECURITIES IS RESTRICTED BY, AND SUCH
SECURITIES ARE SUBJECT TO A RISK OF FORFEITURE, UNDER A RESTRICTED
STOCK PURCHASE AGREEMENT BETWEEN THE REGISTERED OWNER HEREOF AND THE
ISSUER DATED __________, 199_. The remainder of this paragraph may
be deleted if Shares issuable under the Plan are registered. THESE
SECURITIES HAVE NEITHER BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 NOR UNDER ANY APPLICABLE STATE SECURITIES LAW. THESE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS
THEY ARE REGISTERED UNDER THE SECURITIES ACT OF 1933 AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THEY OR SUCH OFFER, SALE OR
TRANSFER ARE EXEMPT FROM SUCH REGISTRATION AND THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY IN FORM AND SUBSTANCE, TO THAT EFFECT.
3. Forfeiture. The Executive will forfeit any portion of the Restricted
Stock purchased under this Agreement that has not vested and become transferable
on the earliest of:
(a) the expiration of 10 years from the date of this Agreement,
(b) nine months after Executive ceases to be an Employee because
of Executive's death or disability,
(c) 90 days after the termination without cause of Executive's
employment with the Employer, or
(d) immediately upon termination of Executive's employment with
the Employer by the Employer for cause or by Executive's
resignation.
Upon the occurrence of such forfeiture all of the right, title and interest in
and to any shares of Restricted Stock which has been forfeited shall be
terminated and the Company shall cause the certificates representing the
forfeited shares to be canceled or transferred free and clear of all
restrictions to its treasury and the Company shall pay to the Executive
____________ per share for each share so forfeited.
4. Vesting Provisions.
(a) A portion of the Restricted Stock that has not previously been
forfeited under Section 3 above shall vest and become transferable if and when
the Company attains (and the Committee certifies in its minutes or another
writing the attainment of) a preestablished performance goal that satisfies the
requirements of Section 162(m) of the Code and the regulations thereunder as
follows: [* Insert vesting formula based on one or more business criteria that
apply to the individual Executive, a business unit or the Company as a whole.
Such business criteria may include one or a combination of stock price, total
stockholder return, earnings per share or return on equity. Other business
criteria may be statistics relating to economic performance including revenue,
operating expenses, or earnings before interest, taxes, depreciation and
amortization; or the business criteria may be the achievement of a
non-statistical goal such as the introduction, testing or licensing of a new
product, licensing or acquiring assets or rights, entering into a joint venture
or strategic alliance, or a change in control of the Company or another merger
or acquisition. *].
-8-
<PAGE> 20
(b) When any portion of the Restricted Stock vests and becomes
transferable, the Company shall promptly deliver a certificate (free of all
adverse claims and transfer restrictions other than the restriction imposed by
paragraph (b) of Section 2 above) representing the number of shares constituting
the vested and transferable portion of the Restricted Stock to the Executive at
his or her address given above and such shares shall no longer be deemed to be
Restricted Stock subject to the terms and conditions of this Agreement other
than paragraph (b) of Section 2 above.
5. Rights; Stock Dividends. Except for the restrictions on transfer set
forth in Section 2 and the possibility of forfeiture set forth in Section 3,
upon the issuance of a certificate representing shares of Restricted Stock, the
Executive will have all other rights in such shares, including the right to vote
such shares and receive dividends other than dividends on or distributions of
shares of any class of stock issued by the Company which dividends or
distributions shall be delivered to the Company under the same restrictions on
transfer and possibility of forfeitures as the shares of Restricted Stock from
which they derive. Upon the occurrence of such a dividend or distribution the
dollar amounts set forth in Paragraph (a) of Section 4 shall be appropriately
adjusted by the Committee.
6. Taxation. Both you and we intend that the transactions provided for in
this Agreement will be governed by the provisions of Section 83(a) of the
Internal Revenue Code of 1986. You will have taxable income upon the vesting of
Restricted Stock. At that time, you must pay to the Company an amount equal to
the required federal, state, and local tax withholding less any withholding
otherwise made from your salary or bonus. You must satisfy any relevant
withholding requirements before the Company issues Shares to you.
7. Not An Employment Agreement. This Agreement is not an employment
agreement and nothing contained herein gives you any right to continue to be
employed by or provide services to the Company or affects the right of the
Company to terminate your employment or other relationship with you.
8. Plan Controls. This Agreement is a Restricted Stock Purchase Agreement
(as such term is defined in the Plan) under Article 7 of the Plan. The terms of
this Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or phrases
defined in the Plan have the same meanings in this Agreement. The Company will
provide you with a copy of the Plan promptly upon your written or oral request
made to its Treasurer.
9. Miscellaneous. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This Agreement
may not be amended or terminated except by a writing signed by the party against
whom any such amendment or termination is sought. If any one or more provisions
of this Agreement shall be found to be illegal or unenforceable in any respect,
the validity and enforceability of the remaining provisions hereof shall not in
any way be affected or impaired thereby. This Agreement shall be governed by the
laws of the State of Delaware.
-9-
<PAGE> 21
Please acknowledge your acceptance of this Agreement by signing the
enclosed copy in the space provided below and returning it promptly to the
Company.
NEOPROBE CORPORATION
By:
--------------------------------------
<<Name of Officer>>, <<Title>>
Accepted and Agreed to as of
the date first set forth above:
- ------------------------------------
<<Name of Grantee>>
-10-
<PAGE> 1
Exhibit 10.2.38
NEOPROBE CORPORATION
425 Metro Place North Ste. 400
Dublin, Ohio 43017-1367
January 18, 1996
John L. Ridihalgh, Ph.D.
2112 Iuka Avenue
Columbus, OH 43201
Congratulations. You have been granted a Stock Option under Neoprobe
Corporation's Stock Option and Restricted Stock Purchase Plan (the "Plan") on
the following terms:
1. NUMBER OF SHARES. The number of Shares of Common Stock of Neoprobe
Corporation that you may purchase under this Option is: 20,000
2. EXERCISE PRICE. The exercise price to purchase Shares under this Option
is $15.75 per Share.
3. VESTING. One-third (1/3) of the shares originally subject to this Option
will vest and become exercisable on the last day of each calendar year
following the grant date above (first vesting period is December 31, 1996)
if you have been an Employee of the Company continuously from the date of
this Agreement shown above through the date when such portion of the Option
vests.
4. LAPSE. This Option will lapse and cease to be exercisable upon the
earliest of:
(i) the expiration of 10 years from the date of this Agreement shown
above,
(ii) 9 months after you cease to be an Employee because of your death
or disability,
(iii) 90 days after your employment with Neoprobe Corporation or any
Subsidiary is terminated by Neoprobe or such Subsidiary without
cause, or
(iv) immediately upon termination of your employment with Neoprobe
Corporation or any Subsidiary by Neoprobe or any Subsidiary for
cause or by your resignation.
5. TAXATION. This Option is a Nonqualified Option. You will have taxable
income upon the exercise of this Option. At that time, you must pay to
Neoprobe an amount equal to the required federal, state, and local tax
withholding less any withholding otherwise made from your salary or bonus.
You must satisfy any relevant withholding requirements before Neoprobe
issues Shares to you.
6. EXERCISE. This Option may be exercised by the delivery of this Agreement
with the notice of exercise attached hereto properly completed and signed
by you to the Treasurer of the Company, together with the aggregate
Exercise Price for the number of Shares as to which the Option is being
exercised, after the Option has become exercisable and before it has ceased
to be exercisable. The Exercise Price must be paid in cash by (a) delivery
of a certified or cashier's check payable to the order of Neoprobe
Corporation in such amount, (b) wire transfer of immediately available
funds to a bank account designated by Neoprobe, or (C) reduction of a debt
of Neoprobe to you. This Option may be exercised as to less than all of the
Shares purchasable hereunder, but not for a fractional share, nor may it be
exercised as to less than one hundred (100) Shares unless it is exercised
as to all of the Shares then available hereunder. If this Option is
exercised as to less than all of the Shares purchasable hereunder, a new
duly executed Option Agreement reflecting the decreased number of Shares
exercisable under such Option, but otherwise of the same tenor, will be
returned to you.
7. NO TRANSFER. This Option may not be sold, pledged nor otherwise
transferred other than by will or the laws of descent and distribution; and
it may only be exercised during your lifetime by you. This Agreement is
neither a negotiable instrument nor a security (as such term is defined in
Article 8 of the Uniform Commercial Code).
<PAGE> 2
8. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment
agreement and nothing contained herein gives you any right to continue to
be employed by or provide services to Neoprobe Corporation or affects the
right of Neoprobe to terminate your employment or other relationship with
you.
9. PLAN CONTROLS. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 5 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or phrases
defined in the Plan have the same meanings in this Agreement. Neoprobe will
provide you with a copy of the Plan promptly upon your written or oral
request made to its Vice President, Finance and Administration.
10. MISCELLANEOUS. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Delaware.
Please acknowledge your acceptance of this Agreement by signing the enclosed
copy in the space provided below and returning it promptly to Neoprobe
Corporation
NEOPROBE CORPORATION
By: /s/ DAVID C. BUPP
---------------------------
David C. Bupp, President
Date: June 10, 1996
--------------------------
Accepted and Agreed to as of the date first set forth above:
/s/ JOHN L. RIDIHALGH
- ------------------------
John L. Ridihalgh, Ph.D.
Date: 6/20/96
------------------
2
<PAGE> 3
OPTION EXERCISE FORM
The undersigned hereby exercised the right to purchase _____________ shares of
Common Stock of Neoprobe Corporation pursuant to the Option Agreement dated
January 18, 1996 under the Neoprobe Corporation Stock Option and Restricted
Stock Purchase Plan.
Date:
------------------------
- -----------------------------
John L. Ridihalgh, Ph.D.
Sign and complete this Option Exercise Form and deliver it to:
Neoprobe Corporation
Att'n: Treasurer
425 Metro Place North
Suite 400
Dublin, Ohio 43017-1367
together with the option price in cash by (a) delivery of a certified or
cashier's check payable to the order of Neoprobe in such amount, (b) wire
transfer of immediately available funds to a bank account designated by
Neoprobe, or reduction of a debt of Neoprobe to you.
Approved by Neoprobe Corporation:
- -----------------------------
<PAGE> 1
Exhibit 10.2.39
NEOPROBE CORPORATION
425 METRO PLACE NORTH STE. 400
DUBLIN, OHIO 43017-1367
January 18, 1996
David C. Bupp
5747 Rushwood Drive
Dublin, OH 43017
Congratulations. You have been granted a Stock Option under Neoprobe
Corporation's Stock Option and Restricted Stock Purchase Plan (the "Plan") on
the following terms:
1. NUMBER OF SHARES. The number of Shares of Common Stock of Neoprobe
Corporation that you may purchase under this Option is: 20,000
2. EXERCISE PRICE. The exercise price to purchase Shares under this Option
is: $15.75 per Share.
3. VESTING. Thirty-three and one-third (33 1/3) of the shares originally
subject to this Option will vest and become exercisable on the last day of
each calendar year following the grant date above (first vesting period is
December 31, 1996) if you have been an Employee of the Company continuously
from the date of this Agreement shown above through the date when such
portion of the Option vests.
4. LAPSE. This Option will lapse and cease to be exercisable upon the
earliest of:
(i) the expiration of 10 years from the date of this Agreement shown
above,
(ii) 9 months after you cease to be an Employee because of your death
or disability,
(iii) 90 days after your employment with Neoprobe Corporation or any
Subsidiary is terminated by Neoprobe or such Subsidiary without
cause, or
(iv) immediately upon termination of your employment with Neoprobe
Corporation or any Subsidiary by Neoprobe or any Subsidiary for
cause or by your resignation.
5. TAXATION. This Option is a Nonqualified Option. You will have taxable
income upon the exercise of this Option. At that time, you must pay to
Neoprobe an amount equal to the required federal, state, and local tax
withholding less any withholding otherwise made from your salary or bonus.
You must satisfy any relevant withholding requirements before Neoprobe
issues Shares to you.
6. EXERCISE. This Option may be exercised by the delivery of this Agreement
with the notice of exercise attached hereto properly completed and signed
by you to the Treasurer of the Company, together with the aggregate
Exercise Price for the number of Shares as to which the Option is being
exercised, after the Option has become exercisable and before it has ceased
to be exercisable. The Exercise Price must be paid in cash by (a) delivery
of a certified or cashier's check payable to the order of Neoprobe
Corporation in such amount, (b) wire transfer of immediately available
funds to a bank account designated by Neoprobe, or (C) reduction of a debt
of Neoprobe to you. This Option may be exercised as to less than all of the
Shares purchasable hereunder, but not for a fractional share, nor may it be
exercised as to less than one hundred (100) Shares unless it is exercised
as to all of the Shares then available hereunder. If this Option is
exercised as to less than all of the Shares purchasable hereunder, a new
duly executed Option Agreement reflecting the decreased number of Shares
exercisable under such Option, but otherwise of the same tenor, will be
returned to you.
7. NO TRANSFER. This Option may not be sold, pledged nor otherwise
transferred other than by will or the laws of descent and distribution; and
it may only be exercised during your lifetime by you. This Agreement is
neither a negotiable instrument nor a security (as such term is defined in
Article 8 of the Uniform Commercial Code).
<PAGE> 2
8. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment
agreement and nothing contained herein gives you any right to continue to
be employed by or provide services to Neoprobe Corporation or affects the
right of Neoprobe to terminate your employment or other relationship with
you.
9. PLAN CONTROLS. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 5 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or phrases
defined in the Plan have the same meanings in this Agreement. Neoprobe will
provide you with a copy of the Plan promptly upon your written or oral
request made to its Vice President, Finance and Administration.
10. MISCELLANEOUS. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Delaware.
Please acknowledge your acceptance of this Agreement by signing the enclosed
copy in the space provided below and returning it promptly to Neoprobe
Corporation.
NEOPROBE CORPORATION
By: /s/ DAVID C. BUPP
----------------------------
David C. Bupp, President
Date: June 10, 1996
----------------------------
Accepted and Agreed to as of the date first set forth above:
/s/ DAVID C. BUPP
- -----------------------------
David C. Bupp
Date: 6/10/96
-----------------------
2
<PAGE> 3
OPTION EXERCISE FORM
The undersigned hereby exercises the right to purchase __________ shares of
Common Stock of Neoprobe Corporation pursuant to the Option Agreement dated
January 18, 1996 under the Neoprobe Corporation Stock Option and Restricted
Stock Purchase Plan.
Date:
------------------------
- -----------------------------
David C. Bupp
Sign and complete this Option Exercise Form and deliver it to:
Neoprobe Corporation
Att'n: Treasurer
425 Metro Place North
Suite 400
Dublin, Ohio 43017-1367
together with the option price in cash by (a) delivery of a certified or
cashier's check payable to the order of Neoprobe in such amount, (b) wire
transfer of immediately available funds to a bank account designated by
Neoprobe, or reduction of the debt of Neoprobe to you.
Approved by Neoprobe Corporation:
- -----------------------------
<PAGE> 1
10.2.40
NEOPROBE CORPORATION
425 METRO PLACE NORTH SUITE 400
DUBLIN, OHIO 43017-1367
February 3, 1997
John L. Ridihalgh, Ph.D.
2112 Iuka Avenue
Columbus, OH 43201
Congratulations. You have been granted a Stock Option under Neoprobe's 1996
Stock Incentive Plan (the "Plan") on the following terms:
1. NUMBER OF SHARES. The number of Shares of Common Stock of Neoprobe
Corporation that you may purchase under this Option is: 27,000
2. EXERCISE PRICE. The exercise price to purchase Shares under this Option
is: $13-3/8 per Share.
3. VESTING. One third (1/3) of the Shares originally subject to this Option
will vest and become exercisable on each anniversary of the date of grant
(February 3, 1997) if you have been an Employee of the Company continuously
from the date of this Agreement shown above through the date when such
portion of the Option.
4. LAPSE. This Option will lapse and cease to be exercisable upon the
earliest of:
(i) the expiration of 10 years from the date of this Agreement shown
above,
(ii) 9 months after you cease to be an Employee because of your death
or disability,
(iii) 90 days after your employment with Neoprobe or any Subsidiary is
terminated by Neoprobe or such Subsidiary without cause, or
(iv) immediately upon termination of your employment with Neoprobe or
any Subsidiary by Neoprobe or any Subsidiary for cause or by
your resignation.
5. TAXATION. This Option is a Nonqualified Option. You will have taxable
income upon the exercise of this Option. At that time, you must pay to
Neoprobe an amount equal to the required federal, state, and local tax
withholding less any withholding otherwise made from your salary or bonus.
You must satisfy any relevant withholding requirements before Neoprobe
issues Shares to you.
6. EXERCISE. This Option may be exercised by the delivery of this Agreement
with the notice of exercise attached hereto properly completed and signed
by you to the Treasurer of the Company, together with the aggregate
Exercise Price for the number of Shares as to which the Option is being
exercised, after the Option has become exercisable and before it has ceased
to be exercisable. The Exercise Price must be paid in cash by (a) delivery
of a certified or cashier's check payable to the order of Neoprobe in such
amount, (b) wire transfer of immediately available funds to a bank account
designated by Neoprobe, or (c) reduction of a debt of Neoprobe to you. This
Option may be exercised as to less than all of the Shares purchasable
hereunder, but not for a fractional share, nor may it be exercised as to
less than one hundred (100) Shares unless it is exercised as to all of the
Shares then available hereunder. If this Option is exercised as to less
than all of the Shares purchasable hereunder, a new duly executed Option
Agreement reflecting the decreased number of Shares exercisable under such
Option, but otherwise of the same tenor, will be returned to you.
7. NO TRANSFER. This Option may not be sold, pledged nor otherwise
transferred other than by will or the laws of descent and distribution; and
it may only be exercised during your lifetime by you. This Agreement is
neither a negotiable instrument nor a security (as such term is defined in
Article 8 of the Uniform Commercial Code).
<PAGE> 2
8. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment
agreement and nothing contained herein gives you any right to continue to
be employed by or provide services to Neoprobe or affects the right of
Neoprobe to terminate your employment or other relationship with you.
9. PLAN CONTROLS. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 5 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or phrases
defined in the Plan have the same meanings in this Agreement. Neoprobe will
provide you with a copy of the Plan promptly upon your written or oral
request made to its Vice President--Finance and Administration.
10. MISCELLANEOUS. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Delaware.
Please acknowledge your acceptance of this Agreement by signing the enclosed
copy in the space provided below and returning it promptly to Neoprobe.
NEOPROBE CORPORATION
By: /s/ DAVID C. BUPP
--------------------------------
David C. Bupp
President, COO
Accepted and Agreed to as of the date first set forth above:
/s/ JOHN L. RIDIHALGH
- ----------------------------
John L. Ridihalgh, Ph.D.
2
<PAGE> 3
OPTION EXERCISE FORM
The undersigned hereby exercises the right to purchase __________ shares of
Common Stock of Neoprobe Corporation pursuant to the Option Agreement dated
February 3, 1997 under the Neoprobe Corporation 1996 Stock Incentive Plan.
Date:
-----------------------------
--------------------------------
John L. Ridihalgh, Ph.D.
- ----------------------------------
Sign and complete this Option Exercise Form and deliver it to:
Neoprobe Corporation
Attn: Treasurer
425 Metro Place North
Suite 400
Dublin, Ohio 43017-1367
together with the option price in cash by (a) delivery of a certified or
cashier's check payable to the order of Neoprobe in such amount, (b) wire
transfer of immediately available funds to a bank account designated by
Neoprobe, or (c) reduction of a debt of Neoprobe to you.
<PAGE> 1
Exhibit 10.2.41
NEOPROBE CORPORATION
425 Metro Place North Suite 400
Dublin, Ohio 43017-1367
February 3, 1997
David C. Bupp
5747 Rushwood Drive
Dublin, OH 43017
Congratulations. You have been granted a Stock Option under Neoprobe's 1996
Stock Incentive Plan (the "Plan") on the following terms:
1. NUMBER OF SHARES. The number of Shares of Common Stock of Neoprobe
Corporation that you may purchase under this Option is: 25,600
2. EXERCISE PRICE. The exercise price to purchase Shares under this Option
is: $13-3/8 per Share.
3. VESTING. One third (1/3) of the Shares originally subject to this Option
will vest and become exercisable on each anniversary of the date of grant
(February 3, 1997) if you have been an Employee of the Company continuously
from the date of this Agreement shown above through the date when such
portion of the Option.
4. LAPSE. This Option will lapse and cease to be exercisable upon the
earliest of:
(i) the expiration of 10 years from the date of this Agreement shown
above,
(ii) 9 months after you cease to be an Employee because of your death
or disability,
(iii) 90 days after your employment with Neoprobe or any Subsidiary is
terminated by Neoprobe or such Subsidiary without cause, or
(iv) immediately upon termination of your employment with Neoprobe or
any Subsidiary by Neoprobe or any Subsidiary for cause or by
your resignation.
5. TAXATION. This Option is a Nonqualified Option. You will have taxable
income upon the exercise of this Option. At that time, you must pay to
Neoprobe an amount equal to the required federal, state, and local tax
withholding less any withholding otherwise made from your salary or bonus.
You must satisfy any relevant withholding requirements before Neoprobe
issues Shares to you.
6. EXERCISE. This Option may be exercised by the delivery of this Agreement
with the notice of exercise attached hereto properly completed and signed
by you to the Treasurer of the Company, together with the aggregate
Exercise Price for the number of Shares as to which the Option is being
exercised, after the Option has become exercisable and before it has ceased
to be exercisable. The Exercise Price must be paid in cash by (a) delivery
of a certified or cashier's check payable to the order of Neoprobe in such
amount, (b) wire transfer of immediately available funds to a bank account
designated by Neoprobe, or (c) reduction of a debt of Neoprobe to you. This
Option may be exercised as to less than all of the Shares purchasable
hereunder, but not for a fractional share, nor may it be exercised as to
less than one hundred (100) Shares unless it is exercised as to all of the
Shares then available hereunder. If this Option is exercised as to less
than all of the Shares purchasable hereunder, a new duly executed Option
Agreement reflecting the decreased number of Shares exercisable under such
Option, but otherwise of the same tenor, will be returned to you.
7. NO TRANSFER. This Option may not be sold, pledged nor otherwise
transferred other than by will of the laws of descent and distribution; and
it may only be exercised during your lifetime by you. This Agreement is
neither a negotiable instrument nor a security (as such term is defined in
Article 8 of the Uniform Commercial Code).
<PAGE> 2
8. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment
agreement and nothing contained herein gives you any right to continue to
be employed by or provide services to Neoprobe or affects the right of
Neoprobe to terminate your employment or other relationship with you.
9. PLAN CONTROLS. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 5 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or phrases
defined in the Plan have the same meanings in this Agreement. Neoprobe will
provide you with a copy of the Plan promptly upon your written or oral
request made it its Vice President--Finance and Administration.
10. MISCELLANEOUS. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Delaware.
Please acknowledge your acceptance of this Agreement by signing the enclosed
copy in the space provided below and returning it promptly to Neoprobe.
NEOPROBE CORPORATION
By: /s/ JOHN L. RIDIHALGH
-------------------------------
John L. Ridihalgh, Ph.D.
CEO, Chairman of the Board
Accepted and Agreed to as of the date first set forth above:
/s/ DAVID C. BUPP
- -----------------------------
David C. Bupp
2
<PAGE> 3
OPTION EXERCISE FORM
The undersigned hereby exercises the right to purchase __________ shares of
Common Stock of Neoprobe Corporation pursuant to the Option Agreement dated
February 3, 1997 under the Neoprobe Corporation 1996 Stock Incentive Plan.
Date:
-----------------------------
-----------------------------
David C. Bupp
- ----------------------------------
Sign and complete this Option Exercise Form and deliver it to:
Neoprobe Corporation
Attn: Treasurer
425 Metro Place North
Suite 400
Dublin, Ohio 43017-1367
together with the option price in cash by (a) delivery of a certified or
cashier's check payable to the order of Neoprobe in such amount, (b) wire
transfer of immediately available funds to a bank account designated by
Neoprobe, or (c) reduction of a debt of Neoprobe to you.
<PAGE> 1
Exhibit 11.1
NEOPROBE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Year Ended
December 31,
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net Loss ($10,759,375) ($20,969,143) ($23,246,528)
Weighted average number of
shares outstanding:
Weighted average common shares
outstanding beginning of period 10,854,515 16,966,814 22,586,527
Weighted average common shares
issued during period 3,871,172 2,776,835 148,115
-----------------------------------------------------
Weighted average number of shares outstanding
used in computing basic net loss per share 14,725,687 19,743,649 22,734,642
=====================================================
Weighted average number of shares used in
computing fully diluted net loss per share 14,725,687 19,743,649 22,734,642
=====================================================
Earnings (Net Loss) Per Share:
Basic ($0.73) ($1.06) ($1.02)
=====================================================
Fully diluted ($0.73) ($1.06) ($1.02)
=====================================================
</TABLE>
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF REGISTRANT
NewMonoCarb, A.B., a Swedish corporation
Neoprobe (Israel), Ltd., an Israeli limited liability company
Neoprobe-Peptor JV - L.L.C.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Neoprobe Corporation and Subsidiaries (A Development Stage Company) listed below
of our report dated February 20, 1998, on our audits of the consolidated balance
sheets of Neoprobe Corporation and Subsidiaries (A Development Stage Company) as
of December 31, 1996 and 1997, and the related consolidated operations,
stockholders' equity, and cash flows for the years ended December 31, 1995, 1996
and 1997, and for the period from November 16, 1983 (date of inception) to
December 31, 1997, which report is included in this Annual Report on Form 10-K.
Form S-3 File No. 33-72700
Form S-3 File No. 33-73622
Form SB-2 File No. 33-86000
Form S-3 File No. 33-93438
Form S-3 File No. 33-93858
Form S-3 File No. 333-15989
Form S-8 File No. 33-70074
Form S-8 File No. 33-81410
Form S-8 File No. 333-05143
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
March 30, 1998
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
The undersigned who is a director or officer of Neoprobe Corporation, a Delaware
Corporation (the "Company");
Does hereby constitute and appoint John L. Ridihalgh and David C. Bupp to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the annual report
of the Company on Form 10-K and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such Annual
Report, and generally to act for and in the name of the undersigned with respect
to such filings as fully as could the undersigned if then personally present and
acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred upon
him herein shall be exercised and the terms and conditions of any instrument,
certificate or document which may be executed by him pursuant to this
instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the state of ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 26th day of
January, 1998.
/S/ MELVIN D. BOOTH
----------------------------------
Melvin D. Booth
<PAGE> 2
POWER OF ATTORNEY
The undersigned who is a director or officer of Neoprobe Corporation, a Delaware
corporation (the "Company");
Does hereby constitute and appoint John L. Ridihalgh and David C. Bupp to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-K and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such Annual
Report, and generally to act for and in the name of the undersigned with respect
to such filings as fully as could the undersigned if then personally present and
acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred upon
him herein shall be exercised and the terms and conditions of any instrument,
certificate or document which may be executed by him pursuant to this
instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this ____ day of
_____________, 1998.
/s/ JOHN S. CHRISTIE
------------------------------------
John S. Christie
<PAGE> 3
POWER OF ATTORNEY
The undersigned who is a director or officer of Neoprobe Corporation, a Delaware
corporation (the "Company");
Does hereby constitute and appoint John L. Ridihalgh and David C. Bupp to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-K and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such Annual
Report, and generally to act for and in the name of the undersigned with respect
to such filings as fully as could the undersigned if then personally present and
acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred upon
him herein shall be exercised and the terms and conditions of any instrument,
certificate or document which may be executed by him pursuant to this
instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 27th day of
January, 1998.
/s/ C. MICHAEL HAZARD
-----------------------------------
C. Michael Hazard
<PAGE> 4
POWER OF ATTORNEY
The undersigned who is a director or officer of Neoprobe Corporation, a Delaware
corporation (the "Company");
Does hereby constitute and appoint John L. Ridihalgh and David C. Bupp to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-K and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such Annual
Report, and generally to act for and in the name of the undersigned with respect
to such filings as fully as could the undersigned if then personally present and
acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred upon
him herein shall be exercised and the terms and conditions of any instrument,
certificate or document which may be executed by him pursuant to this
instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 26th day of
January, 1998.
/s/ JULIUS R. KREVANS
----------------------------------------
Dr. Julius R. Krevans
<PAGE> 5
POWER OF ATTORNEY
The undersigned who is a director or officer of Neoprobe Corporation, a Delaware
corporation (the "Company");
Does hereby constitute and appoint John L. Ridihalgh and David C. Bupp to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-K and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such Annual
Report, and generally to act for and in the name of the undersigned with respect
to such filings as fully as could the undersigned if then personally present and
acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred upon
him herein shall be exercised and the terms and conditions of any instrument,
certificate or document which may be executed by him pursuant to this
instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 29th day of
January, 1998.
/s/ MICHAEL P. MOORE
----------------------------------------
Dr. Michael P. Moore
<PAGE> 6
POWER OF ATTORNEY
The undersigned who is a director or officer of Neoprobe Corporation, a Delaware
corporation (the "Company");
Does hereby constitute and appoint John L. Ridihalgh and David C. Bupp to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-K and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such Annual
Report, and generally to act for and in the name of the undersigned with respect
to such filings as fully as could the undersigned if then personally present and
acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred upon
him herein shall be exercised and the terms and conditions of any instrument,
certificate or document which may be executed by him pursuant to this
instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 26th day of
January, 1998.
/s/ JOHN SCHROEPFER
---------------------------------------
John Schroepfer
<PAGE> 7
POWER OF ATTORNEY
The undersigned who is a director or officer of Neoprobe Corporation, a Delaware
corporation (the "Company");
Does hereby constitute and appoint David C. Bupp to be his agent and
attorney-in-fact;
With the power to act fully hereunder and with full power of substitution to act
in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-K and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other documents which he
shall deem necessary or proper in connection with the filing of such Annual
Report, and generally to act for and in the name of the undersigned with respect
to such filings as fully as could the undersigned if then personally present and
acting.
The agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred upon
him herein shall be exercised and the terms and conditions of any instrument,
certificate or document which may be executed by him pursuant to this
instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this _______ day of
__________ , 1998.
/s/ JOHN L. RIDIHALGH
----------------------------------------
John L. Ridihalgh
<PAGE> 8
POWER OF ATTORNEY
The undersigned who is a director or officer of Neoprobe Corporation, a Delaware
corporation (the "Company");
Does hereby constitute and appoint John L. Ridihalgh and David C. Bupp to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-K and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such Annual
Report, and generally to act for and in the name of the undersigned with respect
to such filings as fully as could the undersigned if then personally present and
acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred upon
him herein shall be exercised and the terms and conditions of any instrument,
certificate or document which may be executed by him pursuant to this
instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 27th day of
January, 1998.
/s/ J. FRANK WHITLEY, JR.
-----------------------------------
J. Frank Whitley, Jr.
<PAGE> 9
POWER OF ATTORNEY
The undersigned who is a director or officer of Neoprobe Corporation, a Delaware
corporation (the "Company");
Does hereby constitute and appoint John L. Ridihalgh and David C. Bupp to be his
agents and attorneys-in-fact;
Each with the power to act fully hereunder without the other and with full power
of substitution to act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report
of the Company on Form 10-K and any amendments or supplements to such Annual
Report; and
To execute and deliver any instruments, certificates or other documents which
they shall deem necessary or proper in connection with the filing of such Annual
Report, and generally to act for and in the name of the undersigned with respect
to such filings as fully as could the undersigned if then personally present and
acting.
Each agent named above is hereby empowered to determine in his discretion the
times when, the purposes for, and the names in which, any power conferred upon
him herein shall be exercised and the terms and conditions of any instrument,
certificate or document which may be executed by him pursuant to this
instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed
by those laws of the State of Ohio that apply to instruments negotiated,
executed, delivered and performed solely within the State of Ohio.
This Power of Attorney may be executed in any number of counterparts, each of
which shall have the same effect as if it were the original instrument and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 2nd day of
February, 1998.
/s/ JAMES F. ZID
-------------------------------
James F. Zid
<PAGE> 1
Exhibit 24.2
SECRETARY'S CERTIFICATE
I, Jerry K. Mueller, Jr., certify that I am the duly elected, qualified and
acting Secretary of Neoprobe Corporation, a Delaware corporation (the
"Corporation"), that I am authorized and empowered to execute this Certificate
on behalf of the Corporation with respect to its Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 and further certify that the following
is a true, complete and correct copy of a resolution adopted by the Board of
Directors of the Corporation on January 22, 1998, which resolution remains in
full force and effect as of the date of this certificate:
RESOLVED, that each representative, officer or director who may be
required to execute the Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 and any amendment thereof be,
and each of them hereby is, authorized to execute a Power of Attorney
appointing John L. Ridihalgh and David C. Bupp as his true and lawful
attorney and agent to execute in his name, place and stead (in any
capacity) the Annual Report on Form 10-K and any amendments thereto,
and all instruments necessary or in connection therewith, and to file
the same with the Commission, each of which attorney and agent shall
have the power to do and perform in the name of and on behalf of each
said representative, officer and director, or both, as the case may be,
every act whatsoever necessary or advisable to be done in the premises
as fully and to all intents and purposes as such representative,
officer or director might or could do in person.
IN WITNESS WHEREOF, I have hereunto set my hand as of March 25, 1998.
/s/ JERRY K. MUELLER, JR.
-------------------------------------
Jerry K. Mueller, Jr., Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810509
<NAME> NEOPROBE CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,921,025
<SECURITIES> 14,672,496
<RECEIVABLES> 924,036
<ALLOWANCES> 130,660
<INVENTORY> 413,024
<CURRENT-ASSETS> 29,301,299
<PP&E> 13,021,355
<DEPRECIATION> 2,596,459
<TOTAL-ASSETS> 41,573,404
<CURRENT-LIABILITIES> 3,791,922
<BONDS> 2,068,792
0
0
<COMMON> 22,763
<OTHER-SE> 32,531,629
<TOTAL-LIABILITY-AND-EQUITY> 41,573,404
<SALES> 5,127,917
<TOTAL-REVENUES> 5,127,917
<CGS> 1,575,699
<TOTAL-COSTS> 1,575,699
<OTHER-EXPENSES> 19,656,804
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,445
<INCOME-PRETAX> (23,246,528)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,246,528)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,246,528)
<EPS-PRIMARY> (1.02)
<EPS-DILUTED> (1.02)
</TABLE>
