<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 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 0-19975
BIOCIRCUITS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-3088884
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1324 CHESAPEAKE TERRACE
SUNNYVALE, CALIFORNIA 94089
(Address of principal executive offices) (Zip Code)
(408) 745-1961
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- ----
At April 30, 1998, Registrant had 6,984,548 shares of Common Stock issued and
outstanding.
<PAGE>
BIOCIRCUITS CORPORATION
INDEX
<TABLE>
<S> <C>
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements and Notes
Condensed balance sheets (unaudited) - March 31, 1998 and
December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed statements of operations (unaudited) - three months ended
March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed statements of cash flows (unaudited) - three months ended
March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Financial Statements (unaudited) . . . . . . . . . . 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . 8
PART II: OTHER INFORMATION
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOCIRCUITS CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
ASSETS (Note)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 303 $ 1,421
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264 312
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715 1,048
Prepaid inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482 496
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . 137 181
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 113
-------- -------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,026 3,571
Property and equipment, net of accumulated depreciation and
amortization of $1,880 ($2,092 in 1997) . . . . . . . . . . . . . . . . . . . . . . . 1,111 1,208
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 263
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 39
-------- -------
$ 3,314 $ 5,081
-------- -------
-------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 636 $ 512
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 84
Accrued compensation and related expenses . . . . . . . . . . . . . . . . . . . . . . 61 81
Current portion of capital lease obligations. . . . . . . . . . . . . . . . . . . . . 38 51
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825 728
Long-term portion of capital lease obligations . . . . . . . . . . . . . . . . . . . . . . 13 21
Stockholders' equity:
Preferred stock, $0.001 par value, 40,000,000 shares authorized, issuable
in series: Series A convertible, 30,000,000 shares designated,
11,216,829 shares issued and outstanding (11,226,829 shares
outstanding at December 31, 1997), aggregate liquidation preference
of $.55 per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,313 9,313
Common stock, $0.001 par value, 70,000,000 shares authorized,
6,984,548 shares issued and outstanding (6,983,548 shares issued
and outstanding at December 31, 1997). . . . . . . . . . . . . . . . . . . . . . . 55,594 55,620
Accumulated Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62,390) (60,555)
Deferred compensation and other . . . . . . . . . . . . . . . . . . . . . . . . . . . (41) (46)
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,476 4,332
-------- --------
$ 3,314 $ 5,081
-------- --------
-------- --------
</TABLE>
Note: Derived from the audited balance sheet at December 31, 1997.
See accompanying notes
3
<PAGE>
BIOCIRCUITS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
---------- ------------
<S> <C> <C>
REVENUES:
Product Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 354 $ 234
OPERATING COSTS AND EXPENSES:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615 1,034
Research and development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,022 1,480
Sales, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . 566 1,316
-------- -------
2,203 3,830
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,849) (3,596)
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 64
Interest and other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (16)
-------- -------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,835) $(3,548)
-------- -------
-------- -------
Basic and diluted net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.26) $ (1.03)
-------- -------
-------- -------
Shares used in computing basic and
diluted net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,984 3,437
-------- -------
-------- -------
</TABLE>
See accompanying notes.
4
<PAGE>
BIOCIRCUITS CORPORATION
CONDENSED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
---------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,835) $ (3,548)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . (207) 95
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 122
Changes in:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 (56)
Prepaid Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 112
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333 (297)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 158
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 (150)
-------- ---------
Net cash used in operating activities. . . . . . . . . . . . . . . . . . . . . (1,493) (3,564)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 (133)
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 (598)
-------- ---------
Net cash provided by (used in) investing activities.. . . . . . . . . . . . . . . 421 (731)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net of issuance costs . . . . . . . . . . . . . . . . . . . (26) -
Payments on long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . (20) (56)
-------- ---------
Net cash provided by (used in) financing activities.. . . . . . . . . . . . . . . (46) (56)
-------- ---------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . (1,118) (4,351)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . 1,421 4,944
-------- ---------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 303 $ 593
-------- ---------
-------- ---------
</TABLE>
See accompanying notes
5
<PAGE>
BIOCIRCUITS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. NATURE OF BUSINESS AND FINANCING
Effective May 18, 1998, the Company terminated all employees and
ceased all ordinary business operations. The Company intends to
immediately proceed with the orderly liquidation and/or sale of its
assets for the benefit of its creditors and shareholders.
Biocircuits Corporation (the "Company") was incorporated in
Delaware on March 7, 1989. Through May 18, 1998, the Company was
engaged in developing and commercializing new immunodiagnostic
testing systems.
The Company's first sale and shipment of its IOS system occurred in
March 1996. The Company has incurred a loss in each period since
its inception. At March 31, 1998, the Company's accumulated
deficit was $62.4 million.
At the end of April 1998, the Company had consumed all available
funds and continued operations into mid May 1998 upon the receipt
of a $125,000 short term bridge financing secured by the Company's
assets. Such funds were available from a potential partner and
were provided to keep the Company operating while negotiations with
the potential partner were in process. Upon the failure of these
negotiations on May 18, 1998, the Company announced that it had
been unable to secure additional financing or to arrange a sale or
merger and had insufficient funds to continue operations as a going
concern.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
3. EARNINGS PER SHARE
Due to the Company's net loss in all periods presented, net loss
per share includes only weighted average shares outstanding. All
earnings per share amounts for all periods have been presented in
accordance with FASB 128 requirements.
If the Company had been in a net income position, diluted earnings
per share would have been presented separately and would have
included the effect of outstanding stock options and warrants,
calculated using the treasury stock method, and outstanding
preferred stock, on an as-if converted basis.
The following is supplemental basic and diluted pro forma earnings
per share, calculated giving
6
<PAGE>
effect to the conversion of the outstanding convertible preferred
stock on an as if converted basis. Such shares are excluded from
earnings per share as reported, as they are anti-dilutive (in
thousands, except share and per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net loss to common shareholders as reported. . . . . . . . . . . . . . . . . . $(1,835) $(3,548)
------- -------
------- -------
Shares used in computing basic and diluted net loss
per share as reported.. . . . . . . . . . . . . . . . . . . . . . . . . . 6,984 3,437
Adjustment to include outstanding convertible preferred
stock previously excluded as it is anti-dilutive. . . . . . . . . . . . . 1,121 1,245
------- -------
Shares used in computing pro forma basic and
diluted net loss per share. . . . . . . . . . . . . . . . . . . . . . . . 8,105 4,682
------- -------
------- -------
Pro forma basic and diluted net loss per share.. . . . . . . . . . . . . . . . $ (0.23) $ (0.76)
------- -------
------- -------
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
On May 19, 1998, Biocircuits-Registered Trademark- Corporation announced
that the Company had been unable to secure additional financing or to arrange
a sale or merger and had insufficient funds to continue operations as a going
concern. Effective May 18, 1998, the Company terminated all employees and
ceased all ordinary business operations. The Company intends to immediately
proceed with the orderly liquidation and/or sale of its assets for the
benefit of its creditors and shareholders.
Biocircuits was founded in 1989 to develop new immunodiagnostic testing
systems. Immunodiagnostic tests, or "assays," are performed on samples of
bodily fluids to diagnose a variety of infectious diseases and other
conditions, such as endocrine dysfunctions, and to conduct therapeutic drug
monitoring. Immunodiagnostic tests utilize biological reagents, such as
antibodies, and an instrument to detect the presence of a substance of
interest, or "analyte," such as a virus or hormone.
The Company has incurred a loss in each period since its inception. At March
31, 1998, the Company's accumulated deficit was $62.4 million. The Company
expects that currently available funds will be used primarily for the costs
of terminating its business operations.
RESULTS OF OPERATIONS - THREE MONTH PERIODS ENDING MARCH 31, 1998 AND
MARCH 31, 1997
Revenue in the first quarter of 1998 totaled $354,000, an increase of
$120,000 or 51% from the $234,000 reported in the first quarter of 1997.
Total operating costs and expenses decreased from $3,830,000 in the first
quarter of 1997 to $2,203,000 in the first quarter of 1998, a decrease of
$1,627,000 or 42%.
Cost of sales expenses decreased from $1,034,000 in the first quarter of 1997
to $615,000 in the first quarter of 1998, a decrease $419,000 or 41%. The
decrease in cost of sales results primarily from a reduction in force, which
occurred in early April 1997, and in the first quarter 1997, the Company
recorded a $124,000 one-time charge relating to the issuance of warrants to
an instrument supplier.
Research and development expenses decreased from $1,480,000 in the first
quarter of 1997 to $1,022,000 in the first quarter of 1998, a decrease of
$458,000 or 31%. This decrease was due primarily to a reduction in force,
which occurred in early April 1997.
Sales, general and administrative expenses decreased from $1,316,000 in the
first quarter of 1997 to $566,000 in the first quarter of 1998, a decrease of
$750,000 or 57%. This decrease was due primarily to the reduction in force
which occurred in early April 1997 and the termination of sales and marketing
efforts resulting from the Becton Agreement.
Interest income decreased from $64,000 in the first quarter of 1997 to
$17,000 in the first quarter of 1998, a decrease of $47,000 or 73%. The
decrease was due to decreased cash balances from ongoing operating losses and
funding of working capital. Interest and other expense decreased from
$16,000 in the first quarter of 1997 to $3,000 in the first quarter of 1998,
a decrease of $13,000 or 81%. Interest expense is incurred on the Company's
capital leases related to its property and equipment.
Net loss decreased from $3,548,000 or $1.03 per share in the first quarter of
1997 to $1,835,000 or
8
<PAGE>
$0.26 per share in the first quarter of 1998, a decrease of $1,713,000 or 48%.
LIQUIDITY AND CAPITAL RESOURCES
At the end of April 1998, the Company had consumed all available funds and
continued operations into mid May 1998 upon the receipt of a $125,000 short
term bridge financing secured by the Company's assets. Such funds were
available from a potential partner and were provided to keep the Company
operating while negotiations with the potential partner were in process.
Upon the failure of these negotiations on May 18, 1998, the Company announced
that it had been unable to secure additional financing or to arrange a sale
or merger and had insufficient funds to continue operations as a going
concern. Effective May 18, 1998, the Company terminated all employees and
ceased all ordinary business operations. The Company intends to immediately
proceed with the orderly liquidation and/or sale of its assets for the
benefit of its creditors and shareholders.
The Company historically had financed its operations primarily through sales
of common and preferred stock, interest income on the cash balances available
after such financings, long term debt and capital asset lease financings.
Since its inception through March 31, 1998, the Company raised a total of
approximately $64.1 million in the sale of common and preferred stock.
The Company's cash and cash equivalents and short-term investments were $0.3
million as of March 31, 1998, compared to $1.4 million at the end of 1997.
The decrease was due primarily to operating losses in the first quarter 1998.
The Company failed to meet the Nasdaq net tangible assets listing
requirements at the end of the first quarter of 1998. Due to the Company's
failure of raising additional equity funds or to arrange a sale or merger,
the Company will not be in compliance with the Nasdaq listing requirements on
a pro forma basis and Nasdaq has initiated delisting procedures for the
Company's common stock.
9
<PAGE>
BIOCIRCUITS CORPORATION
PART II: OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27.1 Financial Data Schedule
b) Reports on Form 8-K
Form 8-K filed May 20, 1998.
10
<PAGE>
BIOCIRCUITS CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOCIRCUITS CORPORATION
Date: May 20, 1998
By: /s/ John Kaiser
---------------------------
John Kaiser
President and Chief Executive Officer
By: /s/ James Welch
---------------------------
James Welch
Vice President and Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1998
FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,421
<SECURITIES> 0
<RECEIVABLES> 358
<ALLOWANCES> (94)
<INVENTORY> 715
<CURRENT-ASSETS> 2,026
<PP&E> 2,991
<DEPRECIATION> (1,880)
<TOTAL-ASSETS> 3,314
<CURRENT-LIABILITIES> 825
<BONDS> 0
0
9,313
<COMMON> 55,594
<OTHER-SE> (62,431)
<TOTAL-LIABILITY-AND-EQUITY> 2,476
<SALES> 354
<TOTAL-REVENUES> 354
<CGS> 615
<TOTAL-COSTS> 615
<OTHER-EXPENSES> 1,022
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> (1,835)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,835)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,835)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
