<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _______TO________
COMMISSION FILE NUMBER: 0-26520
NEOPROBE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-1080091
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
425 METRO PLACE NORTH, SUITE 300, DUBLIN, OHIO 43017
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 614.793.7500
Indicate by check 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___
26,265,103 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
(Number of shares of issuer's common equity outstanding as of the close
of business on November 3, 2000)
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEOPROBE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
------------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $3,270,861 $ 4,882,537
Accounts receivable, net 1,076,754 453,406
Inventory 453,321 1,134,427
Prepaid expenses and other 49,933 674,165
------------------- ------------------
Total current assets 4,850,869 7,144,535
------------------- ------------------
Investment in affiliates - 1,500,000
Property and equipment 2,200,623 2,167,245
Less accumulated depreciation and amortization 1,320,138 1,264,299
------------------- ------------------
880,485 902,946
------------------- ------------------
Intangible assets, net 771,308 775,088
------------------- ------------------
Total assets $6,502,662 $10,322,569
=================== ==================
</TABLE>
CONTINUED
2
<PAGE> 3
NEOPROBE CORPORATION
BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
------------------ ------------------
<S> <C> <C>
Current liabilities:
Line of credit $ - $ 480,000
Notes payable to finance company - 154,626
Capital lease obligations, current 11,000 87,007
Accrued liabilities 691,182 1,365,649
Accounts payable 322,403 759,961
Deferred license revenue, current 800,000 800,000
Obligation to preferred stockholder, current - 2,500,000
------------------ ------------------
Total current liabilities 1,824,585 6,147,243
------------------ ------------------
Capital lease obligations 35,903 68,809
Deferred license revenue 2,400,000 3,000,000
Obligation to preferred stockholder - 1,245,536
------------------ ------------------
Total liabilities 4,260,488 10,461,588
------------------ ------------------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock; $.001 par value; 5,000,000 shares authorized at September
30, 2000 and December 31,1999; none issued and outstanding (500,000 shares
designated as Series A, $.001 par value, at September 30, 2000 and
and December 31, 1999; none outstanding) - -
Common stock; $.001 par value; 50,000,000 shares
authorized; 26,264,103 shares issued and
outstanding at September 30, 2000; 23,046,644
shares issued and outstanding at December 31, 1999 26,264 23,047
Additional paid-in capital 120,668,639 119,407,204
Accumulated deficit (118,452,729) (119,569,270)
------------------ ------------------
Total stockholders' equity (deficit) 2,242,174 (139,019)
------------------ ------------------
Total liabilities and stockholders' equity (deficit) $ 6,502,662 $ 10,322,569
================== ==================
</TABLE>
See accompanying notes to the financial statements
3
<PAGE> 4
NEOPROBE CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------- -------------------------------------
2000 1999 2000 1999
----------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Net sales $2,124,991 $ 1,400,785 $6,242,461 $5,226,406
License revenue 200,000 - 650,000 -
----------------- ---------------- --------------- -----------------
Total revenues 2,324,991 1,400,785 6,892,461 5,226,406
----------------- ---------------- --------------- -----------------
Cost of goods sold 1,230,742 468,553 3,512,767 1,745,476
----------------- ---------------- --------------- -----------------
Gross profit 1,094,249 932,232 3,379,694 3,480,930
----------------- ---------------- --------------- -----------------
Operating expenses:
Research and development 60,266 77,807 435,620 892,103
Marketing and selling 42,397 1,623,874 205,373 3,881,296
General and administrative 557,330 1,077,589 1,794,222 2,893,814
Losses related to subsidiaries in liquidation - - - 475,231
----------------- ---------------- --------------- -----------------
Total operating expenses 659,993 2,779,270 2,435,215 8,142,444
----------------- ---------------- --------------- -----------------
Income (loss) from operations 434,256 (1,847,038) 944,479 (4,661,514)
----------------- ---------------- --------------- -----------------
Other income (expenses):
Interest income 53,573 15,916 141,999 63,906
Interest expense (4,468) (25,838) (20,435) (68,783)
Other 47,025 176,139 76,794 247,380
----------------- ---------------- --------------- -----------------
Total other income (expenses) 96,130 166,217 198,358 242,503
----------------- ---------------- --------------- -----------------
Net income (loss) before income taxes 530,386 (1,680,821) 1,142,837 (4,419,011)
Income taxes 26,296 - 26,296 -
----------------- ---------------- --------------- -----------------
Net income (loss) 504,090 (1,680,821) 1,116,541 (4,419,011)
----------------- ---------------- --------------- -----------------
Conversion discount on preferred stock - - - 1,795,775
Accretion to potential redemption value - 1,804,225 - 1,804,225
Preferred stock dividend requirements - 51,786 - 108,036
Loss on retirement of preferred stock - - 764,668 -
----------------- ---------------- --------------- -----------------
Income (loss) attributable to
common stockholders $504,090 $ (3,536,832) $351,873 $ (8,127,047)
================= ================ =============== =================
Income (loss) per common share:
Basic $ 0.02 $ (0.15) $ 0.01 $ (0.35)
Diluted $ 0.02 $ (0.15) $ 0.01 $ (0.35)
Weighted average shares outstanding:
Basic 25,855,341 23,044,405 25,628,355 22,988,908
Diluted 26,075,393 23,044,405 26,655,256 22,988,908
</TABLE>
See accompanying notes to the financial statements
4
<PAGE> 5
NEOPROBE CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------------
2000 1999
------------------- ------------------
<S> <C> <C>
Net cash provided by operating activities $ 232,231 $ 368,300
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities - 443,729
Maturities of available-for-sale securities - 4,467
Proceeds from sale of investment in affiliate 1,500,000 -
Purchases of property and equipment (132,876) (67,065)
Proceeds from sales of property and equipment 102,516 23,439
Patent costs (19,726) (21,195)
------------------- ------------------
Net cash provided by investing activities 1,449,914 383,375
------------------- ------------------
Cash flows from financing activities:
Proceeds from issuance of preferred stock
and warrants, net - 2,818,065
Settlement of obligation to preferred stockholder (2,500,000) -
Proceeds from issuance of common stock 34,078 145
Payments of deferred offering costs (33,275) -
Proceeds from line of credit - 480,000
Payments under line of credit (480,000) (1,000,000)
Payments under notes payable (154,626) (242,163)
Payments under capital leases (159,998) (74,378)
------------------- ------------------
Net cash (used in) provided by financing activities (3,293,821) 1,981,669
------------------- ------------------
Effect of exchange rate changes on cash - (4,926)
------------------- ------------------
Net (decrease) increase in cash and cash equivalents (1,611,676) 2,728,418
Cash and cash equivalents, beginning of period 4,882,537 1,061,936
------------------- ------------------
Cash and cash equivalents, end of period $ 3,270,861 $3,790,354
=================== ==================
</TABLE>
See accompanying notes to the financial statements
5
<PAGE> 6
1. BASIS OF PRESENTATION:
The information presented for September 30, 2000 and 1999, and for the
periods then ended is unaudited, but includes all adjustments (which
consist only of normal recurring adjustments) which the management of
Neoprobe Corporation (the "Company") believes to be necessary for the
fair presentation of results for the periods presented. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The results for
the interim period are not necessarily indicative of results to be
expected for the year. The financial statements should be read in
conjunction with the Company's audited financial statements for the
year ended December 31, 1999, which were included as part of the
Company's Annual Report on Form 10-K/A. Certain 1999 amounts have been
reclassified to conform with the 2000 presentation.
2. COMPREHENSIVE INCOME (LOSS):
Due to the Company's net operating loss carryforward position, there
are no income tax effects on comprehensive income components for any of
the periods presented.
Other comprehensive income (loss) consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
-------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net income (loss) $504,090 $(1,680,821) $1,116,541 $(4,419,011)
Foreign currency translation adjustment - (11,134) - (12,338)
Unrealized losses on securities - - - (219)
-------- ----------- ---------- -----------
Other comprehensive income (loss) $504,090 $(1,691,955) $1,116,541 $(4,431,568)
======== =========== ========== ===========
</TABLE>
3. EARNINGS PER SHARE:
Basic earnings per share is calculated using the weighted average
number of common shares outstanding during the periods. Diluted
earnings per share is calculated using the weighted average number of
common shares outstanding during the periods, adjusted for the effects
of convertible securities, options and warrants, if dilutive.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------------------- -------------------------------
BASIC DILUTED BASIC DILUTED
EARNINGS EARNINGS PER EARNINGS EARNINGS
PER SHARE SHARE PER SHARE PER SHARE
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Outstanding shares 26,264,103 26,264,103 26,264,103 26,264,103
Effect of weighting changes
in outstanding shares (18,762) (18,762) (245,748) (245,748)
Contingent shares (390,000) (390,000) (390,000) (390,000)
Stock options - 215,599 - 356,820
Warrants - 4,453 - 670,081
------------- -------------- ------------- -------------
Adjusted shares 25,855,341 26,075,393 25,628,355 26,655,256
============= ============== ============= =============
</TABLE>
Due to net losses incurred during the three-month and nine-month
periods ended September 30, 1999, common equivalent shares are
considered anti-dilutive for these periods and are therefore not
presented.
6
<PAGE> 7
The following table summarizes options to purchase common stock of the
Company which were outstanding during the third quarter and first nine
months of 2000, but which were not included in the computation of
diluted income (loss) per share because their effect was anti-dilutive.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------------------------------ ---------------------------------------------
EXERCISE OPTIONS EXERCISE OPTIONS
PRICE OUTSTANDING PRICE OUTSTANDING
---------------------- ---------------- --------------------- -----------------
<S> <C> <C> <C>
$ 0.75 - $ 2.50 583,011 $ 1.03 - $ 2.50 602,288
$ 3.00 - $ 6.00 270,570 $ 3.00 - $ 6.00 406,819
$ 13.38 - $ 15.75 93,696 $ 13.38 - $ 17.44 131,604
---------------- -----------------
947,277 1,140,711
================ =================
</TABLE>
4. INVENTORY:
The components of inventory are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------------ ----------------
<S> <C> <C>
Materials and component parts $ 182,382 $ 104,441
Finished goods 270,939 1,029,986
------------------ ----------------
$ 453,321 $1,134,427
================== ================
</TABLE>
5. LINE OF CREDIT:
The Company's $500,000 line of credit with a bank expired under its
amended terms on August 31, 2000. (See also Note 9.)
6. EQUITY:
a. REDEEMABLE PREFERRED STOCK: During the first quarter of 1999, the
Company completed the private placement of 30,000 shares of 5%
Series B convertible preferred stock (the "Series B") for gross
proceeds of $3 million ($2.8 million, net of certain placement
costs), 2.9 million Class L warrants to purchase common stock of
the Company at an initial exercise price of $1.03 per share, and
issued Unit Purchase Options ("UPOs") entitling the placement agent
to purchase approximately 150,000 shares of common stock in the
Company.
On November 12, 1999, the Company entered into a binding letter
agreement to retire the 30,000 outstanding shares of Series B
preferred stock, and to cancel the related 2.9 million Class L
warrants, the UPOs and the financial advisory agreement with the
Series B placement agent. The letter agreement committed the Series
B holders to surrender the Series B shares and Class L warrants and
for the placement agent to surrender the UPOs and cancel the
financial advisory agreement as well as to grant the Company
general releases from potential litigation associated with the
transaction. In exchange for the retirement of the Series B
preferred shares and surrendering the Class L warrants and UPOs,
the Company agreed to pay the Series B holders a total of $2.5
million and issue the Series B holders 3 million shares of common
stock and warrants to purchase 3 million shares of common stock
with an exercise price of $0.74 per share. However, at December 31,
1999, final definitive agreements had not been signed. Therefore,
at December 31, 1999, the Company reclassified its obligations to
the Series B
7
<PAGE> 8
holders to reflect the $2.5 million payable in cash as a current
liability and the remaining book value of the Series B, including
dividends payable, as a long-term liability.
During January 2000, the Company executed a definitive settlement
agreement with terms consistent with the letter agreement, paid the
Series B holders the $2.5 million, and issued the related stock and
warrants. The transaction has been reported in the Company's first
quarter 2000 financial statements and was measured based on the
market price of the Company's common stock as of the execution of
the definitive agreement on January 20, 2000 (i.e., $0.59 per
share). As a result, the Company reflected a loss on the retirement
of the preferred shares of $765,000 (approximately $0.03 per share)
below net income and in its calculation of loss per share during
the first quarter of 2000. This amount represents the value of the
cash given up plus the market value of the stock issued and the
estimated market value of the warrants issued as valued on January
20, 2000 less the previously recorded book value of the Series B
preferred stock and warrants. In addition, the long-term liability
at December 31, 1999 was reclassified during the first quarter of
2000 to additional paid-in capital as a result of the definitive
settlement.
b. STOCK OPTIONS: During the first quarter of 2000, the Board of
Directors granted options to employees and certain directors of
the Company for 690,000 shares of common stock, exercisable at
$0.50 per share, vesting over three years. As of September 30,
2000, the Company has 1.7 million options outstanding under two
stock option plans. Of the outstanding options, 663,000 options
are exercisable as of September 30, 2000, at an average exercise
price of $4.93 per share.
c. RESTRICTED STOCK: On March 22, 2000, the Board of Directors
granted a total of 170,000 shares of restricted common stock to
officers of the Company under the 1996 Stock Incentive Plan. All
of the Company's 390,000 outstanding restricted shares vest on a
change of control of the Company as defined in the specific grant
agreements. As a result, the Company has not recorded any
deferred compensation due to the inability to assess the
probability of the vesting event.
7. SEGMENTS AND SUBSIDIARIES INFORMATION:
a. SEGMENTS: The Company owns or has rights to intellectual property
involving three primary areas of cancer diagnosis and treatment
including: hand-held gamma detection instruments currently used
primarily in the application of Intraoperative Lymphatic Mapping
("ILM"), diagnostic radiopharmaceutical technology to be used in
the Company's proprietary RIGS process, and Activated Cellular
Therapy ("ACT"). During 1998, the Company's business plan
suspended ongoing research activities related to RIGS and ACT to
allow the Company to focus primarily on the hand-held gamma
detection instruments while efforts are carried out to find
partners or licensing parties to fund future RIGS and ACT
research and development. The Company generated $50,000 in
revenue during the first quarter of 2000 under an option
agreement to license its RIGS technology, but incurred no direct
RIGS expenses during that period. The Company did not generate
any revenue related to RIGS during the first nine months of 1999,
but did incur $475,000 in overhead and interest expenses during
that period related to the RIGS segment. The Company had no
revenue or expenses in either the first nine months of 2000 or
1999 related to its ACT initiative. All other revenue and costs
included in the Company's financial statements for the nine-month
periods ended September 30, 2000 and September 30, 1999 relate
primarily to the Company's ILM initiative.
b. SUBSIDIARIES: The Company's suspended RIGS initiative included
the operations of the Company's two majority-owned international
subsidiaries, Neoprobe Europe and Neoprobe Israel. Neoprobe
Europe was acquired in 1993 primarily to perform a portion of the
manufacturing process of the monoclonal antibody used in the
first RIGS product to be used for colorectal cancer, RIGScan
CR49. Neoprobe Israel was founded to radiolabel RIGScan CR49.
Neoprobe Europe and Neoprobe Israel also both performed limited
research and development activities related to the Company's RIGS
process on behalf of the U.S. parent company. Under SFAS No. 131,
neither subsidiary is considered a segment. During 1998, the
Company initiated steps to liquidate both Neoprobe Europe and
Neoprobe Israel as a result of the suspension of RIGS research
and development activities. At December 31, 1999, both
subsidiaries were deconsolidated due to statutory liquidation or
receivership activities then underway.
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<PAGE> 9
8. AGREEMENTS:
a. PLEXUS MANUFACTURING AND SUPPLY AGREEMENT: In March 2000, the
Company entered into a manufacturing and supply agreement with
Plexus for the exclusive manufacture of the Company's 14mm probe
and neo2000 control unit. The original term of the agreement
expires on December 31, 2003 but may be extended for an additional
year given six months notice prior to December 31, 2003. The
Company has the right to terminate the agreement upon six months
written notice. The agreement may be terminated by either party in
the event of material breach or insolvency, or by the Company in
the event of failure to supply. The Company may also have the
covered product manufactured by other suppliers in the event of
failure to supply or if the Company is able to secure another
source of supply with significantly more favorable pricing terms
than those offered by Plexus. The agreement calls for the Company
to deliver rolling 12-month product forecasts to Plexus and to
place purchase orders 60 days prior to requested delivery in
accordance with the forecast. In the event the agreement is
terminated by Neoprobe or if Plexus ceases to be the exclusive
supplier of the covered products, the Company is required to
purchase all finished components on hand at Plexus plus raw
materials not able to be restocked with suppliers.
b. NURIGS OPTION AGREEMENT: During the first quarter of 2000, the
Company entered into an option agreement for the development of its
initial RIGS compound, RIGScan CR. The option agreement is with a
newly-formed development entity, NuRigs, Ltd. ("NuRigs"). Based in
Tel Aviv, Israel, NuRigs has been organized for the express purpose
of developing a second-generation humanized RIGScan CR antibody
fragment. The Company recognized $50,000 in milestone revenue
during the first quarter of 2000 based upon written notification
from NuRigs of its intention to proceed with preliminary clinical
evaluation of the second-generation RIGScan CR product. During
September 2000, NuRigs and the Company agreed to extend the term of
the option for one year to December 31, 2001 in exchange for
$100,000 in additional option fees to be paid in four equal
quarterly installments beginning December 31, 2000. The option
agreement calls for Neoprobe to receive, with the execution of a
definitive agreement, a license fee of up to $900,000 and a product
royalty of approximately 5 percent on NuRigs' commercial sales of
the product. The Company and NuRigs expect to begin negotiating a
definitive license agreement that may be completed during 2001, at
the earliest. However, there can be no assurance that a definitive
license agreement will be completed, on terms consistent with the
option agreement, or at all. Under the terms of the option, NuRigs
will assume all clinical and other development costs for RIGScan
CR.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained in this Management Discussion and Analysis of Financial
Condition and Results of Operations and other parts of this Report that are not
purely historical or which might be considered an opinion or projection
concerning the Company or its business, whether express or implied, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements may include statements about the
Company's plans and strategies for future financial performance new and existing
products and technologies and markets for the Company's products which involve
risks and uncertainties. The words "believe," "expect," "anticipate,"
"estimate," "project," and similar expressions identify forward-looking
statements that speak only as the date hereof. The Company assumes no obligation
to update any such forward looking statements. Investors are cautioned that the
Company's actual results in 2000 and future periods may
9
<PAGE> 10
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, limited revenues, continuing net losses, accumulated
deficit, future capital needs, uncertainty of capital funding, dependence on
exclusive distributor, competition, limited marketing experience, limited
manufacturing experience, dependence on principal product line, uncertainty of
market acceptance, patents, proprietary technology and trade secrets, government
regulation, risk of technological obsolescence, limited third party
reimbursement, product liability, need to manage a changing business, possible
volatility of stock, anti-takeover provisions, dependence on key personnel, and
no dividends.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities. Through September 30, 2000, the Company's activities have
resulted in an accumulated deficit of $118 million. Substantially all of the
Company's efforts and resources through early 1999 were devoted to research and
clinical development of innovative systems for the intraoperative diagnosis and
treatment of cancers. To date, the Company's activities have been financed
primarily through the public and private sale of equity securities. Prior to
1999, the Company's research and development efforts were principally related to
the Company's proprietary RIGS system. Efforts since early 1997 also included
activities related to development of the Company's ACT process and ILM products.
Beginning in the first half of 1998, due primarily to feedback received from
regulatory authorities in the U.S. and Europe related to the Company's
applications for marketing approval for its RIGScan CR49 product, the Company
began a series of changes to its business plan. Since that time, the Company has
continued to modify its business plan to one that is primarily focused on the
continued development of the Company's ILM business. During 1999, the Company
continued the operating expense reduction efforts started in 1998 and has
substantially eliminated any non-ILM-related research and development
activities.
To further support the Company's goal of achieving operating profitability, the
Company entered into a multi-year distribution agreement with Ethicon
Endo-Surgery, Inc. ("EES"), a Johnson & Johnson company, effective October 1,
1999. As a result of activities under the agreement, the Company achieved
operating profitability of $1.1 million through the first nine months of 2000
and expects to be profitable for the fourth quarter of 2000 and for the year.
However, there can be no assurances that the Company will achieve the volume of
sales anticipated in connection with the agreement, or if achieved, that the
margin on such sales will be adequate to achieve operating profitability in the
near term, or at all.
During the first quarter of 2000, the Company entered into an option agreement
for the development of its initial RIGS compound, RIGScan CR. The option
agreement is with a newly-formed development entity, NuRigs, Ltd. ("NuRigs").
Based in Tel Aviv, Israel, NuRigs has been organized for the express purpose of
developing a second-generation humanized RIGScan CR antibody fragment. The
Company recognized $50,000 in milestone revenue during the first quarter of 2000
based upon written notification from NuRigs of its intention to proceed with
preliminary clinical evaluation of the second-generation RIGScan CR product. The
option agreement calls for Neoprobe to receive, with the execution of a
definitive agreement, a license fee of $900,000 and a product royalty of
approximately 5 percent on NuRigs' commercial sales of the product. During
September 2000, NuRigs and the Company agreed to extend the term of the option
for one year to December 31, 2001 in exchange for $100,000 in additional option
fees to be paid in four equal quarterly installments beginning December 31,
2000. The Company and NuRigs expect to begin negotiating a definitive license
agreement that may be completed in 2001, at the earliest. However, there can be
no assurance that a definitive license agreement will be completed on terms
consistent with the option agreement, or at all. Under the terms of the option,
NuRigs will assume all clinical and other development costs for RIGScan CR.
During the third quarter, NuRigs received a response to its regulatory
submission to commence clinical evaluation of the humanized version of RIGScan
CR. The regulatory agencies have requested additional preclinical testing of the
humanized version of RIGScan CR before authorizing the commencement of patient
studies. NuRigs expects amended regulatory submissions will be made during the
first quarter of 2001 and the clinical studies will be authorized shortly
thereafter.
Accounts receivable increased significantly at September 30, 2000 from December
31, 1999 due primarily to the timing of sales to EES during the third quarter of
2000 versus the fourth quarter of 1999. Inventory levels declined at September
30, 2000 as compared to December 31, 1999. Inventory at December 31, 1999
included approximately $640,000 of demonstrator units the Company had
repurchased from KOL BioMedical Instruments, Inc. ("KOL"), in accordance with
the termination of a marketing agreement with KOL, that were purchased by EES
related to entering the distribution agreement. The Company expects receivable
levels to fluctuate in 2000 depending on the timing of
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<PAGE> 11
purchases by EES. Inventory is expected to remain relatively constant except for
slight increases as the Company periodically builds safety stock to safeguard
against supply interruptions.
At September 30, 2000, the Company's balance sheet does not reflect any
obligations of Neoprobe Israel. However, it is possible, in the event any
proceeds of the liquidation of Neoprobe Israel do not fully satisfy the
outstanding obligations of Neoprobe Israel, that creditors could seek to pursue
claims directly against the Company under a judicial doctrine generally referred
to as "piercing the corporate veil." In the event the Creditors were successful
in making a claim under this judicial doctrine, the Company may be required to
pay the Creditors some or all of the amounts owed by Neoprobe Israel. Payment of
such an amount would severely deplete the Company's cash, and the Company might
not be able to continue operations without seeking Creditor relief. However,
Management believes that the prospect that Creditors would prevail if such
claims were brought against the Company is remote. As such, no provision for
such a contingent loss has been recorded in the Company's financial statements
at September 30, 2000.
Investing Activities. The Company's investing activities during the first nine
months of 2000 involved primarily the sale of its equity interest in XTL
Biopharmaceuticals Ltd. ("XTL") for $1.5 million. The Company's investing
activities during the first nine months of 1999 involved primarily the sale of
certain available-for-sale securities to fund operations.
Financing Activities. On February 16, 1999, the Company executed a Purchase
Agreement (the "Purchase Agreement") to complete the private placement of 30,000
shares of 5% Series B convertible preferred stock (the "Series B") for gross
proceeds of $3 million ($2.8 million, net). The Series B were issued with a $100
per share stated value and were convertible into common stock of the Company. In
connection with the private placement, the Company also issued 2.9 million Class
L warrants to purchase common stock of the Company at an initial exercise price
of $1.03 per share. The Series B paid a 5% annual dividend payable in cash or
common stock. The Series B were convertible at variable prices based on the
market price of the Company's common stock, subject to a conversion price floor
of $0.55. The Class L warrants were also subject to variable exercise prices,
subject to an exercise price floor of $0.62. Holders of the Series B had certain
liquidation preferences over other shareholders under certain provisions as
defined in the Purchase Agreement and had the right to cast the same number of
votes as if the owner had converted on the record date. Pursuant to the private
placement, the Company entered into a financial advisory agreement with the
placement agent providing the agent with Unit Purchase Options ("UPOs")
entitling the placement agent to purchase approximately 150,000 shares of common
stock in the Company. Under certain conditions, the Company would have been
obligated to redeem outstanding shares of Series B for $120 per share (i.e., a
total of $3.6 million) such as the delisting of the Company's common stock from
the Nasdaq Stock Market as occurred on July 27, 1999 and other conditions
outlined in the Purchase Agreement.
The Series B were recorded by the Company during the first quarter of 1999 at
the amount of gross proceeds less the costs of the financing and the fair value
of the warrants and classified as mezzanine financing above the stockholders'
equity section on the Company's interim balance sheets for 1999. The calculated
conversion price at February 16, 1999, the first available conversion date, was
$1.03 per share. In accordance with the FASB's Emerging Issues Task Force Topic
D-60, the difference between the initial conversion price and the closing market
price on February 16, 1999 of $1.81 resulted in an implied incremental yield to
Series B holders of approximately $1.8 million that is reflected as conversion
discount in the Company's loss per share calculation for the first quarter of
1999.
On November 12, 1999, the Company entered into a binding letter agreement to
retire the 30,000 outstanding shares of Series B preferred stock, the related
2.9 million Class L warrants and the Unit Purchase Options ("UPOs") and to
cancel the financial advisory agreement with the placement agent for the Series
B. The letter agreement committed the Series B holders to surrender the Series B
shares and Class L warrants and for the placement agent to surrender the UPOs
and cancel the financial advisory agreement as well as to grant the Company
general releases from potential litigation associated with the transaction. In
exchange for the retirement of the Series B preferred shares and surrendering
the Class L warrants and UPOs, the Company agreed to pay the Series B holders a
total of $2.5 million and issue the Series B holders 3 million shares of common
stock and 3 million warrants to purchase common stock with an exercise price of
$0.74 per share. However, at December 31, 1999, final definitive agreements had
not been signed. Therefore, at December 31, 1999, the Company reclassified its
obligations to the Series B holders to reflect the $2.5 million payable in cash
as a current liability and the remaining book value of the Series B, including
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<PAGE> 12
dividends payable, as a long-term liability. In January 2000, the Company
executed a definitive settlement agreement with terms consistent with the letter
of intent, paid the Series B holders the $2.5 million, and issued the related
stock and warrants. The Company reported a loss on the retirement of the
preferred shares of $765,000 (approximately $0.03 per share) below net income
during the first quarter of 2000. This amount represents the value of the cash
given up plus the market value of the stock and warrants issued as valued on
January 20, 2000 less the previously recorded book value of the Series B
preferred stock and warrants.
Operational Outlook. The Company's only approved products are instruments and
related products used in gamma guided surgery. The Company does not currently
have a RIGS drug or ACT product approved for commercial sale in any major
market. The Company entered into a distribution agreement (the "Agreement") with
EES effective October 1, 1999, for an initial five-year term with options to
extend for two successive two-year terms. Under the Agreement, the Company will
manufacture and sell its ILM products (the "Products") exclusively to EES who
will distribute the Products globally. EES agreed to purchase minimum quantities
of the Company's Products over the first three years of the term of the
Agreement and to reimburse the Company for certain research and development
costs and a portion of the Company's warranty costs. The Company is obligated to
continue certain product maintenance activities and to provide ongoing
regulatory support for the Products. As a result of entering the Agreement, the
Company expects to achieve operating profitability on an annual basis in the
near term. However, there can be no assurance that the Company will achieve the
volume of sales anticipated in connection with the Agreement, or if achieved,
that the margin on such sales will be adequate to achieve operating
profitability on either an interim or annual basis in the near term, or at all.
Under the Agreement, EES received a secondary worldwide paid-up license (the
"License") to the Company's ILM intellectual property to make and sell other
products that may be developed using the Company's ILM intellectual property.
The term of the License is the same as that of the Agreement. EES paid the
Company a non-refundable license fee of $4 million. The Company is recognizing
the license fee as revenue ratably over the five-year initial term of the
Agreement. If the Agreement is terminated by the Company as a result of a
material breach by EES, EES would be required to pay the Company a royalty on
all products developed and sold by EES using the Company's ILM intellectual
property. In addition, the Company is entitled to a royalty on any ILM product
commercialized by EES that does not infringe any of the Company's existing
intellectual property.
The Company has entered into an option agreement with NuRigs, Ltd. ("NuRigs"), a
Tel Aviv, Israel entity, interested in commercializing a second-generation
antibody for use in colorectal cancer surgery. During the first half of 2000,
NuRigs personnel met with regulatory agencies to prepare for the commencement of
human clinical evaluation of the second-generation humanized RIGScan CR agent.
In the third quarter, the regulatory agencies advised NuRigs that they required
additional preclinical testing of the RIGScan CR agent before authorizing the
human clinical studies. As a result of the regulatory requirements, NuRigs
requested an extension of the option agreement. NuRigs and the Company agreed to
extend the term of the option for one year to December 31, 2001 in exchange for
additional option fees to be paid in four equal quarterly installments of
$25,000 each beginning December 31, 2000. At this time, the Company has not
reached definitive agreement with NuRigs that would ensure the continued
development of the RIGS process. In addition, should NuRigs ultimately decide to
exercise its license option and reach an agreement satisfactory to the Company,
the Company believes that the likely timeframe required for the continued
development, regulatory approval and commercialization of a RIGS product would
take a minimum of four to five years before the Company would receive any
significant product-related royalties. However, there can be no assurance that
the Company will be able to complete definitive license agreements with NuRigs
for the RIGS technology, on terms acceptable to the Company, or at all.
During the third quarter of 2000, the Company and the University of California,
San Diego ("UCSD") modified the option agreement involving a lymphatic targeting
agent developed by researchers at UCSD. UCSD researchers have been meeting with
the FDA to gain
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<PAGE> 13
clearance to begin human clinical evaluation of the agent. In the second and
third quarter, the Company completed preclinical studies of the agent to support
the UCSD researchers' FDA submissions. The Company expects to begin human
clinical evaluation of the UCSD lymphatic agent in the first quarter of 2001.
To date, a partner for ACT has not been identified or secured. Until definitive
agreements with development partners are reached and the appropriate regulatory
approvals are received, the Company is limited in its ability to generate
revenue from RIGS or ACT. The Company therefore intends to continue to focus on
further development of the ILM market in conjunction with its distribution
partner, EES.
As of September 30, 2000, the Company had cash and cash equivalents of $3.3
million. The Company expects to generate positive cash flow from operations in
the near term as a result of the Agreement with EES. However, there can be no
assurances that the Company will achieve the volume of sales anticipated in
connection with the Agreement, or if achieved that the margin on such sales will
be adequate to produce positive operating cash flow. The Company expects to
continue to experience cost savings during 2000 as a result of the transfer of
marketing responsibilities for the Company's ILM products to EES. In January
2000, the Company sold its investment in XTL for $1.5 million. The Company
believes its September 30, 2000 cash balances and sources of future cash flow
are adequate for the Company to continue operating for the foreseeable future.
However, if the Company does not receive adequate funds from operations, it may
need to further modify its business plan and seek other financing alternatives.
Such alternatives may include asset dispositions that could force the Company to
further change its business plan.
The Company has, from time to time, been approached by entities interested in
acquiring some or all of the assets of the Company. The Company has, as
appropriate, engaged in discussions with certain of these entities; however,
such discussions to this point have been only preliminary in nature and none has
resulted in a definitive transaction for further consideration. The Company
anticipates that it may continue to be approached by such entities. At such time
as a definitive transaction is proposed, if any, it will be considered by
management and the Board of Directors, and if necessary, referred to the
shareholders of the Company for their consideration. However, there can be no
assurances that such a transaction will be proposed, or if proposed, that the
terms would be acceptable to the Company or its shareholders.
At December 31, 1999, the Company had U.S. net operating tax loss carryforwards
and tax credit carryforwards of approximately $93.3 million and $4.9 million,
respectively, available to offset or reduce future income tax liability, if any,
through 2019. However, under Sections 382 and 383 of the Internal Revenue Code
of 1986, as amended, use of prior tax loss and credit carryforwards may be
limited after an ownership change. As a result of ownership changes as defined
by Sections 382 and 383, which have occurred at various points in the Company's
history, management believes utilization of the Company's tax loss carryforwards
and tax credit carryforwards may be limited.
Impact of Recent Accounting Pronouncements. In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities.
SFAS No. 133 was originally required to be adopted in years beginning after June
15, 1999; however, SFAS No. 137 deferred the effective date to fiscal quarters
of fiscal years beginning after June 15, 2000. The Company expects to adopt SFAS
No. 133 and a second related amendment, SFAS No. 138 effective January 1, 2001.
The Statement will require companies to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through income. If a derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of the derivative will either be offset against
the change in fair value of the hedge asset, liability or firm commitment
through earnings, or recognized in other comprehensive income until the hedge
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company
anticipates that the adoption of this Statement will have no impact on its
results of operations or financial position.
On December 31, 1999, the SEC staff issued Staff Accounting Bulletin ("SAB") No.
101, Revenue Recognition in Financial Statements. SAB 101 was also amended by
SAB 101A and SAB 101B. SAB 101, SAB 101A and SAB
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<PAGE> 14
101B summarize certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. SAB 101
adds new major Topic 13, "Revenue Recognition" and Topic 13:A, "Views on
Selected Revenue Recognition Issues" to the Staff Accounting Bulletin Series.
The Company adopted SAB 101 during the second quarter of 2000. The adoption of
this SAB had no material impact on the Company's results of operations or
financial position.
RESULTS OF OPERATIONS
Revenue for the first nine months of 2000 increased $1.7 million or 32% to $6.9
million from $5.2 million for the same period in 1999. Research and development
expenses during the first nine months of 2000 were $436,000 or 18% of operating
expenses. Marketing and selling expenses were $205,000 or 8% of operating
expenses, and general and administrative expenses were $1.8 million or 74% of
operating expenses. Overall, operating expenses for the first nine months of
2000 decreased $5.7 million or 70% over the same period in 1999. The Company
anticipates that total operating expenses for the remainder of 2000 will also
decrease from 1999 levels. The Company expects research and development and
general and administrative expenses to decrease slightly for the remainder of
2000 as compared to 1999 levels as a result of cost containment measures
implemented during 1999 and research and development reimbursement provided by
EES. Marketing expenses, as a percentage of sales, decreased to 3% of sales for
the first nine months of 2000 from 74% of sales for the same period in 1999. The
Company expects marketing and selling expenses for the remainder of 2000 to
continue to decrease from 1999 levels.
Three months ended September 30, 2000 and 1999
Revenues and Margins. Net product sales increased $724,000 or 52% to $2.1
million during the third quarter of 2000 from $1.4 million during the same
period in 1999. Sales during both periods were comprised almost entirely of
sales of the Company's hand-held gamma detection instruments. Gross margins
decreased to 42% of net sales for the third quarter of 2000 from 67% of net
sales for the same period in 1999. The decrease in gross margins is primarily
the result of the change in the type of sales made by the Company related to
entering the distribution agreement with EES at the end of September 1999. Under
the terms of this agreement, the Company's instrument products are sold to EES
at a wholesale transfer price. Prior to entering the EES agreement, the Company
sold its instrument products directly to end customers at retail prices during
the third quarter of 1999. The cost to manufacture the Company's products did
not change significantly from 1999 to 2000. The effect of the decrease in gross
margins on profitability is offset by the decline in marketing expenses
discussed below. Revenues in the third quarter of 2000 also included $200,000
from the pro-rata recognition of license fees related to the distribution
agreement with EES.
Research and Development Expenses. Research and development expenses decreased
$18,000 or 23% to $60,000 during the third quarter of 2000 from $78,000 during
the same period in 1999. The decrease is primarily due to the reimbursement of
certain research and development expenses associated with the Company's
distribution agreement with EES.
Marketing and Selling Expenses. Marketing and selling expenses decreased
$881,000 or 95% to $42,000 during the third quarter of 2000 from $924,000 during
the same period in 1999, excluding a one-time $700,000 charge related to
termination of the Company's agreement with KOL. Marketing and selling expenses,
as a percentage of sales, decreased to 2% of sales for the third quarter of 2000
from 66% of sales for the same period in 1999. These results reflect lower
internal marketing headcount and out-of-pocket expense levels during the third
quarter of 2000 as compared to the same period in 1999 as well as elimination of
marketing partner commissions over the same periods, due to entering the
distribution agreement with EES.
General and Administrative Expenses. General and administrative expenses
decreased $520,000 or 48% to $557,000 during the third quarter of 2000 from $1.1
million during the same period in 1999. The decrease was primarily a result of
reductions in overhead costs such as professional services, space costs, taxes
and insurance.
Other Income. Other income decreased $70,000 to $96,000 during the third quarter
of 2000 from $166,000 during the same period in 1999. Other income during the
third quarter of 2000 consisted primarily of interest income and gains on the
sale of certain property and equipment. Other income during the third quarter of
1999 consisted
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<PAGE> 15
primarily of one-time gains from the settlement of certain previously recorded
liabilities at less than their original face value. The Company's interest
income increased due to overall average levels of cash and investments during
the third quarter of 2000 as compared to the same period in 1999.
Nine months ended September 30, 2000 and 1999
Revenues and Margins. Net product sales increased $1.0 million or 19% to $6.2
million during the first nine months of 2000 from $5.2 million during the same
period in 1999. Sales during both periods were comprised almost entirely of
sales of the Company's hand-held gamma detection instruments. Gross margins
decreased to 44% of net sales for the first nine months of 2000 from 67% of net
sales for the same period in 1999. The decrease in gross margins is primarily
the result of the change in the type of sales made by the Company related to
entering the distribution agreement with EES at the end of September 1999. Under
the terms of this agreement, the Company's instrument products are sold to EES
at a wholesale transfer price. Prior to entering the EES agreement, the Company
sold its instrument products directly to end customers at retail prices during
the first nine months of 1999. The cost to manufacture the Company's products
did not change significantly from 1999 to 2000. The effect of the decrease in
gross margins on profitability is offset by the decline in marketing expenses
discussed below. Revenues in the first nine months of 2000 also included
$600,000 from the pro-rata recognition of license fees related to the
distribution agreement with EES and $50,000 from the recognition of milestone
fees related to the NuRigs option agreement to license certain of the Company's
RIGS products.
Research and Development Expenses. Research and development expenses decreased
$456,000 or 51% to $436,000 during the first nine months of 2000 from $892,000
during the same period in 1999. The decrease is primarily due to the
reimbursement of certain research and development expenses associated with the
Company's distribution agreement with EES. Research and development expenses
during the first nine months of 2000 included approximately $40,000 in
non-recurring severance costs and $150,000 in unreimbursed costs for development
of products launched in fiscal year 2000.
Marketing and Selling Expenses. Marketing and selling expenses decreased $3.0
million or 94% to $205,000 during the first nine months of 2000 from $3.2
million during the same period in 1999, excluding a one-time $700,000 charge
related to termination of the Company's agreement with KOL. Marketing and
selling expenses, as a percentage of sales, decreased to 3% of sales for the
first nine months of 2000 from 61% of sales for the same period in 1999. These
results reflect lower internal marketing headcount and out-of-pocket expense
levels during the first nine months of 2000 as compared to the same period in
1999 as well as elimination of marketing partner commissions over the same
periods, due to entering the distribution agreement with EES. The first nine
months of 2000 also included approximately $40,000 in non-recurring severance
charges related to the separation of marketing personnel.
General and Administrative Expenses. General and administrative expenses
decreased $1.1 million or 38% to $1.8 million during the first nine months of
2000 from $2.9 million during the same period in 1999. The decrease was
primarily a result of reductions in overhead costs such as professional
services, space costs, taxes and insurance.
Losses Related to Subsidiaries in Liquidation. The Company incurred certain
charges during the first nine months of 1999 related to interest and other
overhead costs incurred during the wind-down process of subsidiaries in
liquidation. No such charges were incurred in the first nine months of 2000.
Other Income. Other income decreased $44,000 or 18% to $198,000 during the first
nine months of 2000 from $243,000 during the same period in 1999. Other income
during the first nine months of 2000 consisted primarily of interest income and
gains on the sale of certain property and equipment. Other income during the
first nine months of 1999 consisted primarily of gains from the settlement of
certain previously recorded liabilities at less than their original face value.
The Company's interest income increased due to overall average levels of cash
and investments during the first nine months of 2000 as compared to the same
period in 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not currently use derivative financial instruments, such as
interest rate swaps, to manage its exposure to changes in interest rates for its
debt instruments or investment securities. As of September 30, 2000 and December
31, 1999, the Company had outstanding debt instruments of $47,000 and $790,000,
respectively. Outstanding debt consisted primarily of a variable rate line of
credit and fixed rate financing instruments, with average interest rates of 13%
and 8% at September 30, 2000 and December 31, 1999, respectively. At September
30, 2000 and December 31, 1999, the fair market values of the Company's debt
instruments approximated their carrying values. A hypothetical 100-basis point
change in interest rates would not have a material effect on cash flows, income
or market values.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On February 16, 1999, the Registrant executed a purchase agreement to complete
the private placement of 30,000 shares of 5% Series B redeemable convertible
preferred stock (the "Series B"). The Series B were issued with a $100 per share
stated value and were convertible into common stock of the Registrant at the
option of the Series B holders. In connection with the private placement, the
Registrant also issued 2.9 million Class L warrants to purchase common stock of
the Registrant at an initial exercise price of $1.03 per share and the
Registrant entered into a financial advisory agreement with the placement agent
providing the agent with Unit Purchase Options ("UPOs") entitling the placement
agent to purchase approximately 150,000 shares of common stock in the
Registrant.
On January 20, 2000, the Registrant executed a definitive Settlement Agreement
with the Series B holders to retire the 30,000 shares of Series B preferred
stock issued in February 1999. In addition to retiring the preferred shares, the
Series B holders returned the Class L warrants issued in connection with the
Series B and the placement agent returned the UPOs. In exchange for the
retirement of the Series B preferred shares and surrendering the Class L
warrants and UPOs, the Registrant paid the Series B holders $2.5 million and
issued to the Series B Holders 3 million shares of common stock of the
Registrant and 3 million warrants to purchase common stock of the Registrant
with an exercise price of $0.74 per share.
On May 9, 2000, the Registrant filed a Certificate of Elimination with the
Secretary of State of the State of Delaware to remove all reference to the
Series B from the Registrant's Restated Certificate of Incorporation.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST OF EXHIBITS
11. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Exhibit 11.1
Computation of Income (Loss) Per Share.
Page 20 in the manually signed original.
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27. FINANCIAL DATA SCHEDULE
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information
only).
(b) REPORTS ON FORM 8-K.
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NEOPROBE CORPORATION
(the Registrant)
Dated: November 13, 2000
By: /s/ David C. Bupp
---------------------------------------
David C. Bupp
President and Chief Executive Officer
(duly authorized officer; principal executive officer)
By: /s/ Brent L. Larson
---------------------------------------
Brent L. Larson
Vice President, Finance and Chief Financial Officer
(principal financial and accounting officer)
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--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------
NEOPROBE CORPORATION
----------------------------------------
FORM 10-Q QUARTERLY REPORT
FOR THE FISCAL QUARTER ENDED:
SEPTEMBER 30, 2000
----------------------------------------
EXHIBITS
-----------------------------------------
--------------------------------------------------------------------------------
<PAGE> 19
INDEX
EXHIBIT 11.1
Computation of Income (Loss) Per Share.
EXHIBIT 27.1
Financial Data Schedule (submitted electronically for SEC
information only).
