<PAGE>
Form 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
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 0-24320
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NAPRO BIOTHERAPEUTICS, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1187753
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification
No.)
6304 Spine Road, Unit A, Boulder, Colorado 80301
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
(303) 530-3891
- --------------------------------------------------------------------------------
(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
----- -----
The number of shares outstanding of each of the issuer's classes of common stock
as of the latest practicable date:
Class Outstanding at March 31, 1996
----- -----------------------------
Common Stock, $.0075 par value 8,529,932
Non-voting Common Stock, $.0075 par value 400,000
TOTAL number of pages in document -10
--
Exhibit Index located on page - ____
<PAGE>
NAPRO BIOTHERAPEUTICS, INC. AND SUBSIDIARIES
--------------------------------------------
TABLE OF CONTENTS
-----------------
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets as of March 31,1996,
and December 31, 1995 2
Consolidated Statements of Operations for the
three months ended March 31, 1996 and 1995 3
Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
8
ITEM 2. CHANGES IN SECURITIES 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS 8
ITEM 5. OTHER INFORMATION 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
SIGNATURES 9
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NAPRO BIOTHERAPEUTICS, INC. AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,922,895 $ 7,133,390
Securities held to maturity 667,000 667,000
Accounts receivable 459,700 325,814
Inventory 1,447,549 1,211,959
Prepaid expenses and other 329,239 310,451
------------ ------------
Total current assets 7,826,383 9,648,614
Property and equipment, net 1,801,034 1,782,164
Restricted Cash 177,399 123,750
Receivables from related parties 24,738 18,487
Other assets 376,383 380,335
------------ ------------
Total assets $ 10,205,937 $ 11,953,350
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable $ 625,958 $ 662,726
Payroll and payroll taxes 328,283 338,032
Capital lease obligations -- current portion 94,753 105,454
Notes payable -- current portion 46,488 38,801
Deferred revenue -- 51,431
------------ ------------
Total current liabilities 1,095,482 1,196,444
Capital lease obligations long term 411,352 298,811
Notes payable -- long term 1,158,333 1,150,000
Compensation due to officers and directors 169,358 169,358
------------ ------------
Total long-term liabilities 1,739,043 1,618,169
------------ ------------
Total liabilities 2,834,525 2,814,613
Minority interest in consolidated subsidiary 3,715,139 3,715,139
Stockholders' equity
Preferred stock, $0.01 par value:
Authorized shares -- 2,000,000: Issued and outstanding
shares -- 125,000 in 1996 and 125,000 1995 125 125
Non-voting Common stock, $.0075 par value:
Authorized shares -- 1,000,000: Issued and
outstanding 400,000 in 1996 and 1995 3,000 3,000
Common stock, $.0075 par value:
Authorized-- 19,000,000: Issued
shares --8,529,932 in 1996 and 8,525,265 in 1995 63,973 63,939
Additional paid-in capital 26,681,313 26,675,099
Unearned compensation (7,356) (9,426)
Notes receivable from stockholders (940,694) (924,789)
Deficit (20,459,541) (18,699,803)
Treasury stock at cost -- 144,788 shares (1,684,547) (1,684,547)
------------ ------------
Total stockholders' equity 3,656,273 5,423,598
------------ ------------
Total liabilities and stockholders' equity $ 10,205,937 $ 11,953,350
============ ============
</TABLE>
See accompanying notes
2
<PAGE>
NAPRO BIOTHERAPEUTICS, INC, AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
----------- ----------
<S> <C> <C>
REVENUES:
Sales $ 690,830 $1,148,181
EXPENSES:
Research, development and cost of products sold 1,786,137 1,343,389
General and administrative 703,513 450,803
----------- ----------
2,489,650 1,794,192
----------- ----------
Operating loss (1,798,820) (646,011)
OTHER INCOME/(EXPENSE):
Interest income 100,135 49,126
Interest and other expense (61,053) (40,059)
----------- ----------
Net loss $(1,759,738) $( 636,944)
=========== ==========
Loss per common share $(0.21) $(0.08)
=========== ==========
Weighted average shares outstanding 8,526,620 7,713,443
=========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
NAPRO BIOTHERAPEUTICS, INC. AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,759,738) $ (636,944)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 115,769 83,945
Compensation for common stock and options 2,070 5,296
Loss on disposal of property and equipment 15,249 --
Changes in operating assets and liabilities:
Accounts receivable (133,886) (1,273,181)
Inventory (235,590) 291,790
Prepaid expenses, deposits and other (24,419) 647,624
Accounts payable (52,199) 56,280
Accrued liabilities (25,654) 19,845
Deferred revenues (36,000) (468,816)
----------- -----------
Net cash used by operating activities (2,134,398) (1,274,161)
INVESTING ACTIVITIES
Additions to property and equipment (138,221) (145,343)
Transfer of restricted cash (53,649) --
Proceeds from sale of short-term investments -- 503,450
----------- -----------
Net cash provided (used) by investing activities (191,870) 358,107
FINANCING ACTIVITIES
Proceeds from debt financing leases and notes payable 207,435 556,567
Payments on debt financing leases and notes payable (97,910) (57,777)
Proceeds from sale of common stock 6,248 --
---------- ---------
Net cash provided by financing activities 115,773 498,790
---------- ---------
Net decrease in cash and cash equivalents (2,210,495) (417,264)
Cash and cash equivalents at beginning of period 7,133,390 892,146
----------- -----------
Cash and cash equivalents at end of period $ 4,922,895 $ 474,882
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
NAPRO BIOTHERAPEUTICS, INC. AND SUBSIDIARIES
--------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
MARCH 31, 1996
==============
(UNAUDITED)
===========
1. Basis of Presentation
The accompanying unaudited consolidated 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. Operating results for the period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the financial statements
and footnotes thereto for the year ended December 31, 1995.
2. Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS No. 121"),
which requires impairment losses to be recorded on long-lived assets used in
operations when indications of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The Company adopted SFAS No. 121 on January 1, 1996. Based on
current circumstances, SFAS No. 121 did not have a significant impact on the
financial statements.
3. Inventories March 31, December 31,
1996 1995
----------- ----------
Raw materials $ 819,918 $ 286,617
Work-in-process 289,066 432,898
Finished goods 338,565 492,444
----------- ----------
$ 1,447,549 $1,211,959
=========== ==========
4. Cash Flow Supplemental Disclosures
Three Months Ended March 31,
----------------------------
1996 1995
----------- ----------
Interest paid $ 40,611 $ 35,278
Noncash transactions:
Notes and related interest receivable 15,905 9,424
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis provide information which the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere herein as well as with the financial statements,
notes thereto and the related management's discussion and analysis of financial
condition and results of operations included in its Annual Report on Form 10-K
for the year ended December 31, 1995.
Background
- ----------
Through December 31, 1994, the Company was in the development stage and had
devoted the majority of its efforts to the development and implementation of its
proprietary extraction, isolation and purification ("EIP/TM/") technology for
producing paclitaxel (referred to in some scientific and medical literature as
"taxol")/1/. Although the majority of the Company's production of paclitaxel
(referred to herein as "NBT Paclitaxel") continues to be limited to small scale
production largely for use in clinical trials and for research and development
purposes, NaPro's strategic marketing and development partner in Australia, F.H.
Faulding & Co., Ltd. ("Faulding"), received approval to market and began
commercial sales of its formulation of the Company's paclitaxel in January 1995.
In 1995, the Company received its first significant revenues from the commercial
sales of its product; therefore, it has discontinued reporting as a development
stage company commencing with its financial statements as of January 1, 1995.
The Company anticipates the operating losses will continue until such time, if
ever, as the Company is able to generate sufficient revenues to support its
operations.
Results of Operations
- ---------------------
Three months ended March 31, 1996 compared to the three months ended March 31,
1995
Revenues for the three months ended March 31, 1996 were $691,000 representing
a decrease of $457,000 from the three months ended March 31, 1995. The decrease
related primarily to the timing of product shipments. Shipments to Faulding and
Baker Norton Pharmaceuticals, a subsidiary of IVAX Corporation ("IVAX"), may
vary significantly on a quarter to quarter basis depending on a number of
factors, including the timing and size of any clinical trials conducted by
either company. This quarter to quarter variability will continue until stable
commercial demand has been established for the product in one of the Company's
major markets.
Research and development and cost of products sold expenses for the three
months ended March 31, 1996 were $1,786,000 representing an increase of $443,000
from the three months ended March 31, 1995. The increase was due primarily from
an increase in process development and research expenses, as well as higher
production costs. This increase was offset by a decrease of $269,000 in the
amortization of prepaid plantation costs. A significant portion of the cost to
produce paclitaxel, much of which is being used for clinical research by the
Company's strategic marketing and development partners, is being expensed as
process development until the process to be used to extract the product has been
more firmly established.
- ---------------
/1/ TAXOL(R) is a registered trademark of Bristol-Myers Squibb Company for an
anti-cancer pharmaceutical preparation containing paclitaxel.
6
<PAGE>
General and administrative expenses for the three months ended March 31, 1996
were $704,000, an increase of $253,000 from the three months ended March 31,
1995. The increase is primarily attributable to an increase in facility costs
and an increase in administrative and support staff.
Interest income for the three months ended March 31, 1996 was $100,000,
representing an increase of $51,000 from the three months ended March 31, 1995.
The increase is attributable to increased cash balances associated with the
completion of the Company's private placement completed in 1995. Interest
income is expected to increase and become a more significant portion of
operations as a result of completion of a proposed public offering in 1996.
Interest and other expenses for the three months ended March 31, 1996 were
$61,000, representing an increase of $21,000 from the three months ended March
31, 1995. The increase was the result of borrowings under equipment financing
leases which were put in place in the fourth quarter of 1995. Interest expense
is expected to increase as borrowings on the equipment lease line of credit are
expected to increase from approximately $300,000 at December 31, 1995 to an
expected value of approximately $1.5 million at June 30, 1996.
Liquidity and Capital Resources
- -------------------------------
The Company's capital requirements have been and will continue to be
significant. At March 31, 1996, the Company had working capital of $6,731,000.
This compared to a working capital balance of $2,421,000 as of March 31, 1995.
To date the Company has been dependent primarily on net proceeds of the IPO of
approximately $7.4 million, on private placements of its equity securities
aggregating approximately $18.9 million ( including proceeds of approximately
$10.2 million during 1995), and on loans and advances from its stockholders and
strategic business partners to fund its capital requirements.
The balance of cash and cash equivalents was $4,923,000 at March 31, 1996
representing a decrease of $2,210,000 from the balance on December 31, 1995.
During the first three months of 1996, cash provided by financing activities
totaled $116,000, while the cash used by operating and investing activities
totaled $2,134,000 and $192,000, respectively. In addition to cash and cash
equivalents, there were securities held to maturity totaling $667,000 due to
mature in June 1996.
During the first three months of 1996, inventories increased by $236,000.
This increase was due primarily to the harvest of biomass at the Company's
plantation. The amount of product held as finished goods equivalents in work-
in-process inventories as well as finished goods inventories are dependent on a
number of factors, including the shipping requirements of Faulding and IVAX and
the Company's production planning to meet those needs. Inventory balances may
vary significantly during product development and launch periods. The Company
plans to make significant biomass investments during 1996.
The Company expended $138,000 for capital projects during the first
quarter of 1996. The Company expended $1,209,000 and $575,000,
respectively, during 1995 and 1994, for capital projects. These expenditures
were primarily made to build the Canadian pilot-scale manufacturing facility and
for expansion and improvements to the Boulder laboratories and facilities. In
1996, the Company expects to invest $3.0 million to $4.0 million from the
proceeds of a proposed public offering in plant and equipment, primarily to
expand its plantation and upgrade its current domestic and foreign manufacturing
capabilities, as well as to begin construction of a new large-scale commercial
EIP/TM/ manufacturing facility which is expected to be completed in 1997.
The Company anticipates that its existing capital resources, together with
revenues from ongoing sales of NBT Paclitaxel, the proceeds from a proposed
offering and the proceeds from certain warrants which expire in February 1998,
including the interest earned thereon, will be adequate to fund operations and
capital expenditures until operating revenues are sufficient to finance
operations. If the proposed offering does not occur, however, the Company's
existing capital resources, together with ongoing sales of NBT Paclitaxel, will
not be adquate to fund such operations and capital expenditures. In such event,
the Company will need to seek additional financing, of which there can be no
assurance the Company will be able to obtain on acceptable terms, if at all. The
amount and timing of expenditures will depend upon numerous factors, including
the progress of the Company's research and development programs, the magnitude
and scope of these activities, the cost of preparing, filing, prosecuting,
maintaining and enforcing patent claims and other intellectual property rights,
competing technological and marketing development, changes in or terminations of
existing strategic partnerships, the establishment of additional strategic
relationships and the cost of manufacturing scale-up. In the event of
unanticipated future capital requirements, the Company may seek to raise
additional capital. The Company may seek additional long-term financing to fund
capital expenditures should such financing become available on terms accepted to
the Company.
7
<PAGE>
PART II-OTHER INFORMATION
1 LEGAL PROCEEDINGS:
-----------------
None.
2 CHANGES IN SECURITIES
---------------------
None
3 DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None
4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None
5 OTHER INFORMATION
-----------------
None
6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
None
8
<PAGE>
NAPRO BIOTHERAPEUTICS, INC.
---------------------------
MARCH 31, 1996
--------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
NAPRO BIOTHERAPEUTICS, INC.
DATE: May 14, 1996 By: /s/ Sterling K. Ainsworth
------------ -------------------------------------------
Sterling K. Ainsworth
President and Chief Executive Officer
(Principal Executive Officer)
DATE: May 14, 1996 By: /s/ Gordon Link
------------ --------------------------------------------
Gordon Link
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,922,895
<SECURITIES> 667,000
<RECEIVABLES> 459,700
<ALLOWANCES> 0
<INVENTORY> 1,447,549
<CURRENT-ASSETS> 7,826,383
<PP&E> 2,625,629
<DEPRECIATION> 824,595
<TOTAL-ASSETS> 10,205,937
<CURRENT-LIABILITIES> 1,095,482
<BONDS> 1,569,685
0
125
<COMMON> 66,973
<OTHER-SE> 3,589,175
<TOTAL-LIABILITY-AND-EQUITY> 10,205,937
<SALES> 690,830
<TOTAL-REVENUES> 790,965
<CGS> 0
<TOTAL-COSTS> 2,489,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,053
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,759,738)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> 0
</TABLE>
