<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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:
CALYPTE BIOMEDICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-3105971
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
1440 FOURTH STREET, BERKELEY, CALIFORNIA 94710
(Address of principal executive offices) (Zip Code)
(510) 526-2541
(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 registrant had 10,455,772 shares of common stock outstanding as of
November 13, 1996.
<PAGE> 2
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
<S> <C>
Consolidated Condensed Balance Sheets at
September 30, 1996 and December 31, 1995................................. 3
Consolidated Condensed Statements of Operations for the Three Months
and Nine Months Ended September 30, 1996 and 1995....................... 4
Consolidated Condensed Statements of Cash Flows for the Nine Months
Ended September 30, 1996 and 1995....................................... 5
Notes to Consolidated Condensed Financial
Statements............................................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 10
PART II. OTHER INFORMATION
Item 5. Other Information........................................................ 14
Item 6. Exhibits and Reports on Form 8-K......................................... 14
</TABLE>
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<PAGE> 3
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
9/30/96 12/31/95
(Unaudited)
----------- --------
Current assets:
<S> <C> <C>
Cash and cash equivalents .............................................. $ 10,906 $ 2,558
Accounts receivable .................................................... 99 --
Inventory .............................................................. 138 --
Other current assets ................................................... 396 756
-------- --------
Total current assets .......................................... 11,539 3,314
Property and equipment, net of accumulated depreciation of $1,964
at September 30, 1996 and $1,390 at December 31, 1995 .................. 1,908 1,854
Note receivable from officer ................................................ -- 43
Other assets ................................................................ 273 126
-------- --------
$ 13,720 $ 5,337
======== ========
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ....................................................... $ 913 1,054
Accrued expenses ....................................................... 977 644
Notes payable - current portion ........................................ 1,000 3,258
Capital lease obligations - current portion ............................ 373 260
Deferred revenue ....................................................... 622 500
-------- --------
Total current liabilities ..................................... 3,885 5,716
Deferred rent obligation .................................................... 62 87
Capital lease obligations - long-term portion ............................... 561 543
-------- --------
Total liabilities ............................................. 4,508 6,346
Mandatorily redeemable Series A preferred stock, $0.001 par value;
100,000 shares authorized, issued and outstanding; aggregate
redemption and liquidation value of $1,000 plus cumulative dividends ... 1,826 1,736
Commitments and contingencies
Stockholders' equity (deficit):
Convertible Preferred Stock ............................................ -- 7
Common Stock, $0.001 par value; 20,000,000 shares authorized;
10,454,725 and 573,899 shares issued and outstanding as of
September 30, 1996 and December 31, 1995 ........................... 10 1
Additional paid-in capital ............................................. 46,152 28,014
Deferred compensation .................................................. (355) (366)
Deficit accumulated during development stage ........................... (38,421) (30,401)
-------- --------
Total stockholders' equity (deficit) .......................... 7,386 (2,745)
======== ========
$ 13,720 $ 5,337
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
- 3 -
<PAGE> 4
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
February 18,
1988
(inception)
Three Months Ended Nine Months Ended through
September 30, September 30, September 30,
1996 1995 1996 1995 1996
------- ------- ------- ------- --------
Revenues:
<S> <C> <C> <C> <C> <C>
Product sales ............................... $ 129 $ -- $ 129 $ -- $ 129
Earned under research and development
contracts, substantially from related parties -- -- -- -- 2,390
------- ------- ------- ------- --------
Total revenue ............................. 129 -- 129 -- 2,519
------- ------- ------- ------- --------
Operating expenses:
Product costs ............................... 710 -- 710 -- 710
Research and development costs .............. 987 1,627 4,558 3,699 24,905
Purchased in-process research and
development costs ......................... -- 2,500 -- 2,500 2,500
Selling, general and administrative ......... 1,040 666 2,756 1,836 13,682
------- ------- ------- ------- --------
Total expenses ............................ 2,737 4,793 8,024 8,035 41,797
------- ------- ------- ------- --------
Loss from operations .................... (2,608) (4,793) (7,895) (8,035) (39,278)
Interest income ................................ 103 63 156 174 726
Interest expense ............................... (74) (34) (294) (69) (897)
Other income ................................... 3 1 15 8 85
------- ------- ------- ------- --------
Loss before income taxes and
extraordinary item .................... (2,576) (4,763) (8,018) (7,922) (39,364)
Income taxes ................................... -- -- (2) (2) (63)
------- ------- ------- ------- --------
Loss before extraordinary item .......... (2,576) (4,763) (8,020) (7,924) (39,427)
Extraordinary gain on debt extinguishment ...... -- -- -- -- 485
------- ------- ------- ------- --------
Net loss .............................. (2,576) (4,763) (8,020) (7,924) (38,942)
Less dividend on mandatorily redeemable
Series A preferred stock ..................... (30) (30) (90) (90) (826)
------- ------- ------- ------- --------
Net loss attributable to common stockholders ... $(2,606) $(4,793) $(8,110) $(8,014) $(39,768)
======= ======= ======= ======= ========
Net loss per share attributable to common
stockholders ................................. $ (0.27) $ (0.69) $ (1.00) $ (1.16)
======= ======= ======= ========
Weighted average shares used to compute
net loss per share attributable to common
stockholders ................................. 9,723 6,934 8,113 6,934
======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
- 4 -
<PAGE> 5
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
February18,
1988
(inception)
Nine Months Ended September 30, through
------------------------------- September 30,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................... $ (8,020) $(7,924) $(38,941)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ...................... 574 328 2,391
Loss on sale or disposal of equipment .............. -- 74 115
Extraordinary gain on debt extinguishment .......... -- -- (485)
Amortization of deferred compensation .............. 178 106 379
Compensation paid by stock issuance ................ -- -- 47
Forgiveness of note receivable from officer ........ 43 42 85
Purchased in-process research and development costs -- 2,500 2,500
Changes in operating assets and liabilities:
Accounts receivable ............................ (99) -- (99)
Inventory ...................................... (138) -- (138)
Other current assets ........................... 360 (99) (157)
Organizational costs ........................... -- -- (123)
Other assets ................................... (147) (21) (596)
Accounts payable, accrued expenses and deferred
revenue ................................... 315 58 2,415
Deferred rent obligation ....................... (26) (3) 61
Note payable in exchange for expenses paid on
behalf of the Company ..................... -- -- 192
-------- ------- --------
Net cash used in operating activities ... (6,960) (4,939) (32,354)
-------- ------- --------
Cash flows from investing activities:
Proceeds from disposition of equipment ................. -- -- 25
Purchase of equipment, net ............................. (257) (238) (2,534)
Investment in Pepgen Corporation ....................... -- (1,000) (1,000)
-------- ------- --------
Net cash used in investing activities ... (257) (1,238) (3,509)
-------- ------- --------
Cash flows from financing activities:
Proceeds from sale of stock ............................ 20,187 4,445 48,466
Expenses paid related to sale of stock ................. (2,124) (139) (2,994)
Prepaid license fee .................................... -- -- 500
Principal payments on notes payable .................... (2,259) (22) (3,176)
Principal payments on capital lease obligations ........ (239) (91) (406)
Proceeds from notes payable ............................ -- -- 2,692
Capital contributions .................................. -- -- 76
Joint ventures' capital contributions .................. -- -- 1,611
-------- ------- --------
Net cash provided by financing activities 15,565 4,193 46,769
-------- ------- --------
Net (decrease) increase in cash and cash equivalents ...... 8,348 (1,984) 10,906
Cash and cash equivalents at beginning of period .......... 2,558 4,478 --
-------- ------- --------
Cash and cash equivalents at end of period ................ $ 10,906 $ 2,494 $ 10,906
======== ======= ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
- 5 -
<PAGE> 6
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
February 18,
1988
(inception)
Nine Months Ended September 30, through
------------------------------- September 30,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosure of cash flow activities:
Cash paid for interest .......................................... $275 $ 69 $ 753
Cash paid for income taxes ...................................... 2 2 62
Supplemental disclosure of noncash activities:
Acquisition of equipment through obligations under capital leases 370 345 1,339
Accrued liabilities converted to notes payable .................. -- -- 363
Accrued liabilities converted to common stock ................... -- -- 39
Notes payable converted to common stock ......................... -- -- 459
Notes payable converted to Series B convertible preferred stock . -- -- 50
Notes payable issued upon investment in Pepgen Corporation ...... -- 1,000 1,000
Options issued upon investment in Pepgen Corporation ............ -- 500 500
Dividend on mandatorily redeemable Series A preferred stock ..... 90 90 826
Deferred compensation attributable to stock grants .............. 168 448 735
</TABLE>
See accompanying notes to consolidated condensed financial statements.
- 6 -
<PAGE> 7
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(1) THE COMPANY AND BASIS OF PRESENTATION
Calypte Biomedical Corporation (the "Company") was incorporated on November 11,
1989 and is a development stage enterprise. The Company's primary activities
have been to obtain funding, to perform research and development and to obtain
approval for its urine-based diagnostic tests.
The accompanying unaudited consolidated condensed financial statements have been
prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC), and reflect all adjustments (consisting of normal
recurring adjustments) which, in the opinion of management, are necessary for a
fair presentation of the Company's financial position as of September 30, 1996
and the results of its operations for the three and nine months ended September
30, 1996 and 1995 and its cash flows for the nine months ended September 30,
1996 and 1995. Interim results are not necessarily indicative of the results to
be expected for the full year. This information should be read in conjunction
with the Company's audited consolidated financial statements for each of the
years in the three year period ended December 31, 1995 included in the
Prospectus contained in Amendment No. 3 to the Registration Statement on Form
S-1 filed with the SEC on July 26, 1996, and amended by the Prospectus
Supplement filed with the SEC on August 7, 1996.
Certain information in footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted pursuant to the rules and regulations of the SEC.
The data disclosed in these notes to consolidated financial statements for these
periods is unaudited.
(2) SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the results of
operations of the Company and its wholly owned subsidiary, Calypte, Inc. and
Calypte Biomedical Company (the Joint Venture). All significant intercompany
accounts and transactions have been eliminated in consolidation.
The Company accounts for its 49% interest in Pepgen Corporation (Pepgen) under
the equity method.
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Except as noted below, net loss per share attributable to common stockholders is
computed using the weighted average number of shares of common stock
outstanding. Common equivalent shares from stock options and warrants are
excluded from the computation as their effect is antidilutive, except that,
pursuant to the SEC Staff Accounting Bulletin No. 83, common stock issued for
consideration below the Company's $6.00 per share Initial Public Offering (IPO)
price and warrants exercised, warrants granted and stock options granted with
exercise prices below the IPO price during the 12-month period preceding May 20,
1996, the date of the initial filing of the Registration Statement, even when
antidilutive, have been included in the calculation of common equivalent shares
for periods prior to April 1, 1996, using the treasury stock method based on the
$6.00 per share IPO price, as if they were outstanding for all periods
presented.
Furthermore, common equivalent shares from convertible preferred stock that were
converted upon the completion of the Company's IPO are included using the "as if
converted" method.
- 7 -
<PAGE> 8
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1996 and 1995
(3) INVENTORIES
Inventories are stated at the lower of cost or market and the cost is determined
using the first-in, first-out method. Inventories as of September 30, 1996 and
December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
9/30/96 12/31/95
(in thousands) (in thousands)
<S> <C> <C>
Raw Materials $ 62 $ -
Work-in-Process 76 -
Finished Goods - -
---------- ---------
Total Inventory $ 138 -
========== =========
</TABLE>
(4) INITIAL PUBLIC OFFERING
On July 31, 1996, the Company completed an IPO of 2,300,000 shares of its Common
Stock at $6.00 per share. The Company received proceeds of $12,834,000 after
deducting underwriters' discounts and commissions. Total additional expenses
associated with the IPO were approximately $930,000, resulting in estimated net
proceeds of $11,904,000.
On August 8, 1996, underwriters' exercised an over-allotment option to purchase
an additional 236,259 shares of the Company's Common Stock at $6.00 per share.
Proceeds of approximately $1,318,000 after deducting underwriters' discounts and
commissions were received on August 13, 1996.
(5) NOTES PAYABLE
In July 1996, the Company extended the due date of the line of credit from July
5, 1996 to August 5, 1996. In connection with the extension, the Company made a
$250,000 principal payment in July 1996 and the available line of credit was
reduced to $1,250,000. On August 5, 1996, the Company paid the remaining balance
of $1,250,000 from a portion of the proceeds from the IPO.
In addition, in August 1996, the Company made a principal payment of $247,843 to
a former related party for an outstanding note payable.
(6) FDA APPROVAL OF HIV-1 URINE EIA TEST
On August 6, 1996, the Company received a product license and an establishment
license from the FDA to manufacture and sell in interstate and foreign commerce
the Company's urine-based HIV-1 screening test for use in professional
laboratory settings.
(7) SUBSEQUENT EVENTS
WESTERN BLOT CONFIRMATORY TEST
In October 1996, the Company received notification that the FDA will require
additional data before it will approve an amendment to Cambridge Biotech
Corporation's product license application for its HIV-1 Western Blot Kit to
allow use of the Western Blot Kit as a confirmatory test with the Company's
HIV-1 urine screening assay.
-8-
<PAGE> 9
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
PEPGEN NOTE PAYABLE
In October 1996, the Company paid the $1,000,000 balance on a note payable to
Pepgen Corporation. The note payable to Pepgen is related to the Company's
September 1995 investment in Pepgen.
EXPENSE REDUCTION PROGRAM
In October 1996, the Company implemented an expense reduction program, including
a significant reduction in its work force. Employee termination costs associated
with the expense reduction program were not material.
LEASELINE
In October 1996, the Company entered into an equipment lease line of credit for
$1,000,000 expiring on December 31, 1996. Lease payments under the line of
credit are based on the total delivered equipment cost multiplied by a monthly
note factor of approximately 3.3% (approximate effective interest rate of 17% -
19% at September 30, 1996).
-9-
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for historical information contained herein, the following contains
forward-looking information that is subject to certain risks and uncertainties.
The Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, set forth in
the "Risk Factors" section included in the Prospectus contained in Amendment No.
3 to the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission (SEC) on July 26, 1996, and amended by the Prospectus
Supplement filed with the SEC on August 7, 1996 (the "Prospectus"). The
following discussion should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in the
Prospectus.
OVERVIEW
Since commencement of operations in 1988, Calypte Biomedical Corporation ("the
Company" or "Calypte") has reported its results as a development stage company,
engaged in research, development and commercialization of its products. The
Company's efforts have been primarily focused on developing and obtaining
approval for its urine-based diagnostic tests for sexually transmitted diseases.
In August 1996, the Company received a product license and an establishment
license from the FDA to manufacture and sell in interstate and foreign commerce
the Company's urine-based HIV-1 screening test for use in professional
laboratory settings. In October 1996, Calypte received notification that the FDA
will require additional data before it will approve an amendment to Cambridge
Biotech Corporation's product license application for its HIV-1 Western Blot Kit
to allow use of the Western Blot Kit as a confirmatory test with Calypte's HIV-1
urine screening assay.
The Company has a limited history of operations and has experienced significant
operating losses since inception. As of September 30, 1996, the Company had an
accumulated deficit of $38.4 million. The Company expects operating losses to
continue as it initiates marketing and sales activities and additional research
and development. The Company's marketing strategy is to use distributors,
focused direct selling and marketing partners to penetrate certain targeted
domestic markets. The Company plans to maintain a small direct sales force to
sell the Company's urine-based HIV-1 test to 12 major laboratories serving the
life insurance, military, immigration and criminal justice markets. Other U.S.
and all international markets will be penetrated utilizing diagnostic product
distributors.
RESULTS OF OPERATIONS
The following represents selected financial data:
<TABLE>
<CAPTION>
(in thousands)
----------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenue $ 129 $ -- $ 129 $ --
------- ------- ------- -------
Operating expenses:
Product costs 710 -- 710 --
Research and development 987 1,627 4,558 3,699
Purchased in-process research & development -- 2,500 -- 2,500
Selling, general and administrative 1,040 666 2,756 1,836
------- ------- ------- -------
Total expenses 2,737 4,793 8,024 8,035
------- ------- ------- -------
Loss from operations (2,608) (4,793) (7,895) (8,035)
Interest income (expense) and other income .. 32 30 (123) 113
------- ------- ------- -------
Loss before income taxes $(2,576) $(4,763) $(8,018) $(7,922)
======= ======= ======= =======
</TABLE>
- 10 -
<PAGE> 11
Three Months Ended September 30, 1996 and 1995
In the third quarter of 1996, Calypte made its first shipments of its
urine-based HIV-1 screening test. Revenues from Calypte's HIV-1 screening test
totaled $129,000 for the third quarter. The HIV-1 screening test margin was
negative during the quarter due to the overhead expense incurred in relation to
the number of units produced.
Research and development expense, consisting primarily of research,
manufacturing and quality assurance personnel and materials related to the
development of the urine-based HIV-1 test, decreased 39% to $1.0 million for the
three months ended September 30, 1996 from $1.6 million for the three months
ended September 30, 1995. The decrease was principally due to the
reclassification of expense from research and development to product costs and
inventory due to FDA approval of the Company's HIV-1 screening test.
Purchased in-process research and development costs of $2.5 million were
incurred in 1995; no such costs were incurred in 1996. The 1995 costs were
attributable solely to the Company's investment in Pepgen Corporation and the
resulting write-off of research and development in process acquired. Pepgen is a
research and development company engaged primarily in the development of
therapeutic compounds.
Selling, general and administrative expenses, consisting primarily of personnel,
outside consultants, facility operating leases and related expenses, increased
56% to $1.0 million for the three months ended September 30, 1996 from $666,000
for the three months ended September 30, 1995. The increase was primarily due to
personnel additions, forgiveness of the note receivable from officer, relocation
costs and other related expenses.
Interest income (expense) and other income, consisting primarily of interest
earned on cash and cash equivalents, interest paid on equipment lease financing
and interest paid or accrued on outstanding notes payable, increased $2,000 to
$32,000 for the three months ended September 30, 1996 from $30,000 for the three
months ended September 30, 1995. The increase was primarily due to interest on
the proceeds from the sale of stock offset by interest expense on the Company's
notes payable and capital leases.
Nine Months Ended September 30, 1996 and 1995
In the third quarter of 1996, Calypte made its first shipments of its
urine-based HIV-1 screening test. Revenues from Calypte's HIV-1 screening test
totaled $129,000 for the third quarter. The HIV-1 screening test margin was
negative during the nine months due to the overhead expense incurred in relation
to the number of units produced.
Research and development expense increased 23% to $4.6 million for the nine
months ended September 30, 1996 from $3.7 million for the nine months ended
September 30, 1995. The increase was principally due to additional personnel,
facility and material costs required for increased research and product
development activity partially offset by the reclassification of expense from
research and development to product costs and inventory due to FDA approval of
the Company's HIV-1 screening test.
Purchased in-process research and development costs of $2.5 million were
incurred in 1995; no such costs were incurred in 1996. The 1995 costs were
attributable solely to the Company's investment in Pepgen Corporation and the
resulting write-off of research and development in process acquired.
Selling, general and administrative expenses increased 50% to $2.8 million for
the nine months ended September 30, 1996 from $1.8 million for the nine months
ended September 30, 1995. The increase was primarily due to personnel additions,
forgiveness of the note receivable from officer, relocation costs and other
related expenses.
- 11 -
<PAGE> 12
Interest income (expense) and other income decreased $236,000 to ($123,000) for
the nine months ended September 30, 1996 from $113,000 for the nine months ended
September 30, 1995. The decrease was primarily due to interest payments on the
Company's bank line of credit and interest accrued on the note payable to
Pepgen, and lower interest income as a result of lower cash balances.
LIQUIDITY AND CAPITAL RESOURCES
Financing Activities
The Company has financed operations from inception primarily through the private
placement of preferred stock and, to a lesser extent, from payments related to
research and development agreements, a bank line of credit, equipment lease
financings and borrowings from notes payable. Since inception through September
30, 1996, the Company has received approximately $33.9 million in net proceeds
from private placements of the Company's equity securities and $13.2 million in
its Initial Public Offering (IPO). In addition, approximately $1.3 million was
borrowed by the Company through equipment lease financings, of which
approximately $934,000 was outstanding as of September 30, 1996, and $2.4
million was received from research and development agreements.
In December 1995, the Company executed a $2.0 million line of credit with a bank
which was due in March 1996. In March 1996 the Company signed an amendment to
the agreement, whereby the Company agreed to repay $500,000 on the line of
credit and the due date was extended to July 1996. In April, the Company repaid
the $500,000 and the line of credit was reduced to $1.5 million. In July, the
Company repaid an additional $250,000 and the line of credit was reduced to
$1.25 million and the due date was extended to August 1996. In August 1996, the
Company paid the remaining balance of $1.25 million. In addition, in August
1996, the Company repaid a note payable to a former related party for $248,000.
On July 31, 1996, the Company completed its IPO of 2,300,000 shares of its
Common Stock at $6.00 per share. After deducting underwriters' discounts and
commissions and additional expenses associated with the IPO, the Company
received net proceeds of $11.9 million. Part of the proceeds was used to pay the
bank line of credit, the note payable to a former related party discussed above
and the Pepgen note payable of $1 million. The Pepgen note payable was paid in
October 1996. On August 8, 1996, the underwriter's exercised its over-allotment
option to purchase an additional 236,259 shares of the Company's Common Stock at
$6.00 per share. The Company received net proceeds of $1.3 million from the
over-allotment exercise.
In October 1996, the Company entered into an equipment lease line of credit for
$1.0 million expiring on December 31, 1996. Lease payments under the line of
credit are based on the total delivered equipment cost multiplied by a monthly
note factor of approximately 3.3% (approximate effective interest rate of 17% -
19% as of September 30, 1996).
Although the Company believes net proceeds from the IPO, together with current
cash, will be sufficient to meet the Company's operating expenses and capital
requirements for at least the next twelve months, the Company's future liquidity
and capital requirements will depend on numerous factors, including regulatory
actions by the FDA and other international regulatory bodies, market acceptance
of its products, and intellectual property protection. There can be no assurance
that the Company will not be required to raise additional capital or that such
capital will be available on acceptable terms, if at all.
- 12 -
<PAGE> 13
Operating Activities
For the nine months ended September 30, 1996 and September 30, 1995, the
Company's cash used in operations was $7.0 million and $4.9 million,
respectively. The cash used in operations was primarily to fund research and
development expenses related to the urine-based HIV-1 test along with selling,
general and administrative expenses of the Company.
In October 1996, the Company implemented an expense reduction program, including
a significant reduction in its workforce. Employee termination costs associated
with the expense reduction program were not material.
- 13 -
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On October 10, 1996, Calypte announced that the FDA will require
additional data before it will approve an amendment to Cambridge
Biotech Corporation's (CBC) product license application for CBC's
HIV-1 Western Blot Kit to allow use of the Western Blot Kit as a
confirmatory test with Calypte's HIV-1 urine screening assay. The
Calypte HIV-1 urine screening assay was approved by the FDA on
August 6, 1996.
On October 14, 1996, Calypte announced that it had implemented an
expense reduction program, including a significant reduction in
its workforce.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 11 - Computation of Loss Per Share
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K - None
- 14 -
<PAGE> 15
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.
CALYPTE BIOMEDICAL CORPORATION
(Registrant)
Date: November 13, 1996 By: /s/ John J. DiPietro
-----------------------
John J. DiPietro
Vice President - Finance, Chief Financial Officer
and Secretary (Principal Accounting Officer)
<PAGE> 16
EXHIBIT INDEX
Exhibit Description
Exhibit 11 Computation of Loss Per Share
Exhibit 27 Financial Data Schedule
<PAGE> 1
Exhibit 11 COMPUTATION OF LOSS PER SHARE (in thousands except per shares
amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net loss attributable to common
stockholders $(2,606) $(4,793) $(8,110) $(8,014)
======= ======= ======= =======
Weighted average shares used to
compute net loss per share
Weighted average number of
shares outstanding:
Convertible Preferred Stock 1,991 5,706 4,918 5,706
Common Stock 7,732 569 2,976 569
Number of common equivalents
as a result of warrants granted
using the treasury stock method
in accordance with Staff
Accounting Bulletin 83 185 62 185
Number of common equivalents
as a results of stock options granted
using the treasury stock method
in accordance with Staff
Accounting Bulletin 83 474 157 474
------- ------- ------- -------
Total 9,723 6,934 8,113 6,934
======= ======= ======= =======
Net loss per shares attributable
to common stockholders $ (0.27) $ (0.69) $ (1.00) $ (1.16)
======= ======= ======= =======
</TABLE>
The calculations for all periods shown include the shares and warrants of
convertible preferred stock as if they had converted to common stock on their
respective original dates of issuance, because such shares automatically
converted to common stock upon the closing of the initial public offering of the
Company's common stock.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 10,906
<SECURITIES> 0
<RECEIVABLES> 99
<ALLOWANCES> 0
<INVENTORY> 138
<CURRENT-ASSETS> 11,539
<PP&E> 3,872
<DEPRECIATION> (1,964)
<TOTAL-ASSETS> 13,720
<CURRENT-LIABILITIES> 3,885
<BONDS> 561
1,826
0
<COMMON> 10
<OTHER-SE> 7,376
<TOTAL-LIABILITY-AND-EQUITY> 13,720
<SALES> 129
<TOTAL-REVENUES> 129
<CGS> (710)
<TOTAL-COSTS> (710)
<OTHER-EXPENSES> (7,314)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (294)
<INCOME-PRETAX> (8,018)
<INCOME-TAX> (2)
<INCOME-CONTINUING> (8,020)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,020)
<EPS-PRIMARY> (1.00)
<EPS-DILUTED> 0
</TABLE>
