<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/Preliminary Proxy Statement
/ /Definitive Proxy Statement
/ /Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ /Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Calypte Biomedical Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ /Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
CALYPTE
BIOMEDICAL CORPORATION
1440 Fourth Street
Berkeley, California 94710
____________ __, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
of Calypte Biomedical Corporation ("Calypte" or the "Company") on __________ __,
1998. The meeting will begin promptly at ____ local time, at the administrative
offices of Calypte, located at 1265 Harbor Bay Parkway, Alameda, California.
As of September 30, 1998, the Company had $3,329,000 in cash and cash
equivalents for capital expenditures. As a result, the Board of Directors of the
Company has authorized management of the Company to raise additional capital for
the Company through the sale of equity securities of the Company. Although the
Company has not entered into an agreement relating to such financing, the Board
of Directors anticipates raising additional funds through an equity private
placement which may consist of the sale of the Company's Common Stock, par value
$0.001 per share (the "Common Stock"), Preferred Stock, par value $0.001 per
share (the "Preferred Stock"), convertible debt, warrants or a combination of
the foregoing.
The Board of Directors has authorized the management of the Company to
raise up to $7 million through the sale of equity securities. Based on the
closing price of the Common Stock on __________ and since equity securities sold
in private placements are generally sold at a price which is at a discount to
market price of the Company's securities, the Board of Directors believes that
any such issuance will exceed 20% of the Company's capitalization.
The Common Stock is quoted on the Nasdaq Smallcap Market ("Nasdaq"),
and the Company is subject to the listing requirements of Nasdaq. Under Nasdaq's
listing requirements, a listed company must receive stockholder approval before
issuing equity securities equal or greater than 20% of its capitalization prior
to such issuance. The Company believes that any such financing may result in the
issuance of more than 20% of the Company's outstanding capital stock.
At the Special Meeting you will be asked to consider and vote on a
single proposal to approve the issuance of capital stock of the Company in
connection with the sale of Common Stock of the Company, the sale of Preferred
Stock, the sale of warrants to purchase Common Stock or Preferred Stock, the
sale of convertible debt or a combination of any of the foregoing (the
"Financing Proposal").
The Company's Board of Directors has unanimously approved the Financing
Proposal and unanimously recommends that you vote to approve the Financing
Proposal.
The official Notice of Special Meeting of Stockholders, Proxy Statement
relating to the action to be taken by the Company's stockholders at the Special
Meeting and a Proxy Card are included with this letter. The Proxy Statement more
fully describes the Financing Proposal.
Your vote is important. Whether or not you plan to attend the Special
Meeting of Stockholders, I urge you to complete, sign and date the enclosed
proxy card and return it in the accompanying envelope as soon as possible so
that your stock may be represented at the meeting.
Sincerely,
William A. Boeger
PRESIDENT & CHIEF EXECUTIVE OFFICER
<PAGE>
CALYPTE
BIOMEDICAL CORPORATION
1440 Fourth Street
Berkeley, California 94710
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ________ __, 1998
________ __, 1998
A Special Meeting of Stockholders (including any adjournments or
postponements thereof) (the "Special Meeting") of Calypte Biomedical
Corporation, a Delaware corporation (the "Company"), will be held at the
administrative offices of Calypte Biomedical Corporation, 1265 Harbor Bay
Parkway, Alameda, California 94502, on ________, _____________ __, 1998, at
_____ local time. At the Special Meeting, you will be asked to consider and vote
on a single proposal to approve the issuance of capital stock of the Company in
connection with the sale of Common Stock of the Company, par value $0.001 per
share (the "Common Stock"), the sale of Preferred Stock of the Company, par
value $0.001 per share (the "Preferred Stock"), the sale of warrants to purchase
Common Stock or Preferred Stock, the sale of convertible debt or a combination
of any of the foregoing (the "Financing Proposal"). The Financing Proposal is
more fully described in the accompanying Proxy Statement. No other business will
be transacted at the Special Meeting.
Stockholders of record on October 26, 1998 will be eligible to vote at
the Special Meeting. Only stockholders of record at the close of business on
such date will be entitled to notice of and to vote at the Special Meeting. The
Financing Proposal requires the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock having voting power present at the
Special Meeting. To ensure your representation at the Special Meeting, you are
urged to mark, sign, date and return the enclosed proxy as promptly as possible
in the envelope enclosed for that purpose. If you attend the meeting, you may
vote in person even if you return a proxy.
By order of the Board of Directors,
John J. DiPietro
SECRETARY
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND
RETURN THE PROXY CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
CALYPTE
BIOMEDICAL CORPORATION
1440 Fourth Street
Berkeley, California 94710
-----------------------
PROXY STATEMENT
-----------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors (the "Board") of Calypte
Biomedical Corporation ("Calypte" or the "Company") for the Special Meeting of
Stockholders (the "Special Meeting"), and any postponements or adjournments
thereof, to be held at the administrative offices of Calypte, 1265 Harbor Bay
Parkway, Alameda, California 94502, on ______, ________ __, 1998, at _____ local
time.
INFORMATION CONCERNING SOLICITATION AND VOTING
The close of business on October 26, 1998 has been fixed as the record
date (the "Record Date") for determining the holders of shares of Common Stock
of the Company, par value $.001 per share (the "Common Stock"), entitled to
notice of and to vote at the Special Meeting. As of the close of business on the
Record Date, the Company had __________ shares of Common Stock outstanding and
entitled to vote at the Special Meeting. The holders of a majority of voting
power of the Common Stock issued and outstanding and entitled to vote, present
in person or represented by proxy, shall constitute a quorum at the Special
Meeting except as otherwise provided by statute. Each holder of Common Stock on
the Record Date is entitled to one vote for each share of Common Stock held by
such stockholder, and stockholders shall not be entitled to cumulate their votes
with respect to any matter submitted to a vote of the stockholders.
Shares represented by proxies that reflect abstentions or broker
non-votes will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. Abstentions as to a particular
proposal will have the same effect as votes against such proposal. Broker
non-votes, however, will be treated as unvoted for purposes of determining
approval of such proposal and will not be counted as votes for or against such
proposal.
The Company intends that this Proxy Statement and the accompanying form
of proxy, which is being solicited by the Company, will be first sent or given
to stockholders on or about ________________ _____, 1998.
Every stockholder shall have the right to vote whether in person or by
one or more agents authorized by a written proxy signed by the person and filed
with the secretary of the Company. The shares represented by the proxies
received, properly dated and executed, and not revoked will be voted at the
Special Meeting. A proxy may be revoked at any time before it is exercised by
delivering to the Company a written notice of revocation or a duly executed
proxy bearing a later date or by attending the Special Meeting and voting in
person.
The shares represented by all valid proxies received will be voted in
the manner specified on the proxies. Where specific choices are not indicated,
the shares represented by all valid proxies received will be voted for the
proposed issuance of capital stock of the Company in connection with the sale of
Common Stock, the sale of Preferred Stock of the Company, par value $0.001 per
share (the "Preferred Stock"), the sale of warrants to purchase Common Stock or
Preferred Stock, the sale of convertible debt or the combination of any of the
foregoing (the "Financing Proposal").
The approval of the Financing Proposal requires the affirmative vote of
a majority of the stockholders voting on the Financing Proposal either in person
or by proxy.
The expense of printing and mailing proxy materials will be borne by
the Company. In addition to the solicitation of proxies by mail, solicitations
may be made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. The Company may also hire a proxy
solicitation firm to assist the Company in soliciting proxies for the Special
Meeting and pay such proxy solicitation firm compensation consisting of between
approximately $5,000 to $10,000. The Company will request brokers and nominees
who hold stock in their names to furnish proxy material to beneficial owners of
the shares and will reimburse such brokers and nominees for their reasonable
expenses incurred in forwarding solicitation material to such beneficial owners.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to the Company with
respect to the beneficial ownership of its Common Stock as of July 31, 1998 for
(i) all persons known by the Company to own beneficially more than 5% of its
outstanding Common Stock, (ii) each of the Company's directors, (iii) the
Company's Chief Executive Officer and each of the other executive officers of
the Company who earned at least $100,000 in salary and bonus from his employment
with the Company during fiscal 1997 and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
-------------------
5% STOCKHOLDERS, DIRECTORS AND OFFICERS (1) OWNED % OF TOTAL
- ------------------------------------------- ----- ----------
<S> <C> <C>
Otsuka Pharmaceutical Co., Ltd. (2)
463-10 Kagsuno
Kawauchi-cho
Tokoshima Japan 1,293,147 9.63%
Zafar Randawa, Ph.D. (2) 1,293,147 9.63
H&Q Healthcare Investors
50 Rowes Wharf-4th Floor
Boston, MA 02110 833,993 6.21
William A. Boeger (3) 858,682 6.18
Howard B. Urnovitz, Ph.D. (4) 436,200 3.19
John DiPietro (5) 67,347 *
David Collins (6) 62,249 *
Mark Novitch, M.D. (7) 30,000 *
Julius Krevans, M.D. (8) 15,000 *
Paul Freiman (9) 12,500 *
John P. Davis 0 0.00
All directors and executive officers as a group (9 persons) 2,775,125 19.38%
</TABLE>
- ------------------------------
* Represents beneficial ownership of less than 1%.
(1) To the Company's knowledge, except as set forth in the footnotes to this
table and subject to applicable community property laws, each person named
in this table has sole voting and investment power with respect to the
shares set forth opposite such person's name. Except as otherwise
indicated, the address of each of the persons in this table is as follows:
c/o Calypte Biomedical Corporation, 1440 Fourth Street, Berkeley,
California 94710.
(2) Dr. Randawa is a director of the Company and an affiliate of Otsuka
Pharmaceutical Co., Ltd.
(3) Includes 154,276 shares subject to options exercisable within 60 days owned
by entities affiliated with Quest Ventures of which Mr. Boeger is a
partner. Also includes 325,000 shares subject to options exercisable within
60 days owned by Mr. Boeger.
(4) Includes 266,000 shares subject to options exercisable within 60 days.
(5) Includes 59,999 shares subject to options exercisable within 60 days.
(6) Includes 47,249 shares subject to options exercisable within 60 days.
(7) Includes 26,000 shares subject to options exercisable within 60 days.
(8) Includes 6,000 shares subject to options exercisable within 60 days.
(9) Includes 12,500 shares subject to options exercisable within 60 days.
2
<PAGE>
UNAUDITED FINANCIAL DATA
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 (the "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 June 30, 1998 and the results of its operations for the three and
six months ended June 30, 1998 and 1997 and its cash flows for the six months
ended June 30, 1998 and 1997. 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, 1997 included in
Form 10-K filed with the SEC on March 25, 1998.
3
<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
6/30/98 12/31/97
------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................... $ 4,222 $ 10,820
Securities available for sale................ 1,873 --
Accounts receivable.......................... 232 133
Inventories.................................. 603 161
Notes receivable - officers and employees.... 319 239
Note receivable - related party.............. 300 --
Other current assets......................... 155 150
----------- ------------
Total current assets..................... 7,704 11,503
Property and equipment, net of accumulated
depreciation of $3,083 at June 30, 1998 and
$2,824 at December 31, 1997.................. 1,140 1,219
Other assets...................................... 212 228
----------- ------------
$ 9,056 $ 12,950
----------- ------------
----------- ------------
</TABLE>
4
<PAGE>
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
6/30/98 12/31/97
--------------- ---------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable............................. $ 635 $ 610
Accrued expenses............................. 781 912
Capital lease obligations - current portion.. 413 479
Deferred revenue............................. 500 585
----------- ------------
Total current liabilities........... 2,329 2,586
Deferred rent obligation.......................... 34 37
Capital lease obligations - long-term portion..... 118 282
----------- ------------
Total liabilities................... 2,481 2,905
Mandatorily redeemable Series A preferred stock,
$0.001 par value; no shares authorized, 100,000
issued and outstanding; aggregate
redemption and liquidation value of $1,000
plus cumulative dividends....................
2,036 1,976
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000
shares authorized; no shares issued and
outstanding................................ -- --
Common Stock, $0.001 par value; 20,000,000
shares authorized; 13,414,073 and
13,198,781 shares issued and outstanding
as of June 30, 1998 and December 31, 1997,
respectively............................... 13 13
Additional paid-in capital................... 56,958 56,847
Deferred compensation........................ (335) (496)
Accumulated deficit.......................... (52,097) (48,295)
----------- ------------
Total stockholders' equity.......... 4,539 8,069
----------- ------------
----------- ------------
$ 9,056 $ 12,950
----------- ------------
----------- ------------
</TABLE>
5
<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended Six Months Ended
June 30, 1998 June 30,
------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Product sales ............................................. $ 296 $ 117 $ 537 $ 132
-------- -------- -------- --------
Total revenue ........................................... 296 117 537 132
-------- -------- -------- --------
Operating expenses:
Product costs ............................................. 560 684 1,049 1,218
Research and development costs ............................ 938 984 1,728 2,142
Selling, general and administrative costs ................. 1,078 593 1,763 1,186
-------- -------- -------- --------
Total expenses .......................................... 2,576 2,261 4,540 4,546
-------- -------- -------- --------
Loss from operations .................................... (2,280) (2,144) (4,003) (4,414)
Interest income, interest expense and other income
86 21 203 52
-------- -------- -------- --------
Loss before income taxes .................................. (2,194) (2,123) (3,800) (4,362)
Income taxes
(2) (2) (2) (2)
-------- -------- -------- --------
Net loss .................................................. (2,196) (2,125) (3,802) (4,364)
Less dividends on mandatorily redeemable Series A preferred
stock ..................................................... (30) (30) (60) (60)
-------- -------- -------- --------
Net loss attributable to common stockholders .................. $ (2,226) $ (2,155) $ (3,862) $ (4,424)
-------- -------- -------- --------
-------- -------- -------- --------
Net loss per share attributable to common stockholders
(basic and diluted) ....................................... $ (0.17) $ (0.21) $ (0.29) $ (0.42)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average shares used to compute net loss per share
attributable to common stockholders (basic and diluted) .. 13,412 10,477 13,395 10,471
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
6
<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................. $ (3,802) $ (4,364)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................ 259 368
Amortization of deferred compensation .................... 211 94
Forgiveness of note receivable from officer .............. 41 --
Changes in operating assets and liabilities:
Accounts receivable .................................... (99) (56)
Inventory .............................................. (442) 66
Other current assets ................................... (5) (158)
Other assets ........................................... 16 35
Accounts payable, accrued expenses and deferred
revenue ............................................ (191) 138
Deferred rent obligation ............................... (3) (15)
-------- --------
Net cash used in operating activities .............. (4,015) (3,892)
-------- --------
Cash flows from investing activities:
Purchase of equipment, net ............................... (180) (75)
Notes receivable from officers ........................... (121) (150)
Loan to Pepgen ........................................... (300) --
Purchase of securities available for sale ................ (1,873) --
-------- --------
Net cash used in investing activities ......... (2,474) (225)
-------- --------
Cash flows from financing activities:
Proceeds from sale of stock .............................. 121 24
Principal payments on capital lease obligations .......... (230) (255)
Proceeds from notes payable .............................. -- 500
-------- --------
Net cash (used in) provided by financing
activities ................................. (109) 269
-------- --------
Net decrease in cash and cash equivalents ..................... (6,598) (3,848)
Cash and cash equivalents at beginning of period .............. 10,820 7,924
-------- --------
Cash and cash equivalents at end of period .................... $ 4,222 $ 4,076
-------- --------
-------- --------
Supplemental disclosure of cash flow activities:
Cash paid for interest ................................... $ 67 $ 103
Cash paid for income taxes ............................... 2 2
Supplemental disclosure of noncash activities:
Dividends on mandatorily redeemable Series A preferred
stock .................................................. 60 60
Deferred compensation attributable to stock grants ....... 50 37
</TABLE>
7
<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(UNAUDITED)
(1) THE COMPANY AND BASIS OF PRESENTATION
The Company was incorporated on November 11, 1989. The Company's
primary activities are to sell its FDA-approved urine EIA screening test,
perform research and development on new products and obtain FDA approval for its
urine-based diagnostic tests. Prior to March 31, 1998, the Company was
considered a development stage enterprise. On June 1, 1998, the Company
announced that the U.S. Food and Drug Administration licensed the urine HIV-1
Western Blot test that confirms the presence of antibodies to Human
Immunodeficiency Virus Type I (HIV-1) in urine samples. The new test is used on
samples that are repeatedly reactive in the Company's HIV-1 urine antibody
screening test. The new test completes the only available urine-based HIV test
system. Accordingly, the Company ceased being a development stage enterprise.
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
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Basic net loss per share attributable to common stockholders has been
computed using the weighted average number of common shares outstanding during
each period presented. Diluted net loss per share attributable to common
stockholders has been computed using the weighted average number of common
shares and all dilutive potential common shares outstanding during each period
presented. For the three and six months ended June 30, 1998 and 1997, the number
of shares used in the calculation of all net loss per share amounts did not
include common stock equivalents relating to outstanding stock options as they
were antidilutive.
(3) INVENTORIES
Inventories are stated at the lower of cost or market and the cost is
determined using the first-in, first-out method. Inventory as of June 30, 1998
and December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
6/30/98 12/31/97
(in thousands) (in thousands)
<S> <C> <C>
Raw Materials $ 269 $ 53
Work-in-Process 81 103
Finished Goods 253 5
------------ -------------
Total Inventory $ 603 $ 161
------------ -------------
------------ -------------
</TABLE>
8
<PAGE>
(4) NOTES RECEIVABLE - OFFICERS AND EMPLOYEES
During May 1998, the loan to Dr. Urnovitz related to a Technology
Rights Agreement was increased from $165,000 to $265,000 subject to the same
terms of the initial loan agreement. The Technology Rights Agreement gives the
Company the first right of refusal for an exclusive, worldwide license to
practice, make or have made, use, sell, distribute and license to other any
invention or discovery made by Dr. Urnovitz in exchange for a one-time cash
payment and the payment of royalties.
(5) NOTE RECEIVABLE - RELATED PARTY
During January 1998, the Company loaned Pepgen Corporation, a related
party of the Company, $250,000 at an effective interest rate of 10%. During June
1998, the Company loaned Pepgen an additional $50,000 under the same terms of
the initial loan agreement, increasing the total amount due from Pepgen to
$300,000. Subsequent to June 1998, the Company extended the due date on the loan
to December 31, 1998.
(6) SUBSEQUENT EVENT
In July 1998, the loan to Dr. Urnovitz related to a Technology Rights
Agreement was increased from $265,000 to $315,000 subject to the same terms of
the initial loan agreement.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that relate to future plans, events or
performance are forward-looking statements which involve risks and
uncertainties. Actual results, events or performance may differ materially from
those anticipated in these forward-looking statements as a result of a variety
of factors. The Company undertakes no obligation to publicly update these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
OVERVIEW
The Company's efforts are primarily focused on selling, 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 U.S. Food and Drug Administration (the "FDA") to
manufacture and sell the Company's urine-based HIV-1 screening test for use in
professional laboratory settings. In June 1998, the Company announced that the
FDA had licensed the urine HIV-1 Western Blot test that confirms the presence of
antibodies to HIV-1 in urine samples. The new test is used on samples that are
repeatedly reactive in the Company's HIV-1 urine antibody screening test. The
new test completes the only available urine-based HIV test system. There can be
no assurance that Calypte will have significant revenues from sales of the HIV-1
urine screening assay or the confirmatory test.
The Company expects operating losses to continue as it continues its
marketing and sales activities for its first FDA-approved product and conducts
additional research and development for subsequent products. The Company's
marketing strategy is to use distributors and focused direct selling and
marketing partners to penetrate certain targeted domestic markets. The Company
plans to maintain a small direct sales force to market the Company's urine-based
HIV-1 test to major laboratories serving the life insurance, military,
immigration and criminal justice markets. Other U.S. and international markets
will be targeted utilizing diagnostic product distributors. The Company has
limited experience in manufacturing, marketing or selling its products in
commercial quantities. There can be no assurance that the Company's products
will be successfully commercialized or that the Company will achieve significant
product revenues. In addition, there can be no assurance that the Company will
achieve or sustain profitability in the future.
10
<PAGE>
RESULTS OF OPERATIONS
The following represents selected financial data:
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenue...................................... $ 296 $ 117 $ 537 $ 132
--------- ---------- ----------- ---------
Operating expenses:
Product costs................................ 560 684 1,049 1,218
Research and development..................... 938 984 1,728 2,142
Selling, general and administrative.......... 1,078 593 1,763 1,186
--------- ---------- ---------- ---------
Total expenses............................ 2,576 2,261 4,540 4,546
--------- ---------- ---------- ---------
Loss from operations......................... (2,280) (2,144) (4,003) (4,414)
Interest income, interest expense and other
income........................................... 86 21 203 52
Loss before income taxes..................... $ (2,194) $ (2,123) $ (3,800) $ (4,362)
--------- ---------- ----------- ---------
--------- ---------- ----------- ---------
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
In the second quarter of 1998, revenue increased $179,000 to $296,000
from $117,000 in the prior year's comparable period due to an increase in sales
made primarily to laboratories for research and evaluation purposes.
Product costs decreased 18% to $560,000 for the three months ended June
30, 1998 from $684,000 for the three months ended June 30, 1997. Product costs
during the three months ended June 30, 1997 were higher because a greater
quantity of product produced was expensed since it was not retained as saleable
inventory. During the three months ended June 30, 1998, a greater quantity of
product was valued as inventory (raw materials and finished goods) in
anticipation of FDA approval of the confirmatory test for Calypte's HIV-1 urine
screening test.
Research and development expenses decreased 5% to $938,000 for the
three months ended June 30, 1998 from $984,000 in the corresponding period of
the prior year. The decrease was principally due to clinical investigations
performed in the second quarter of 1997 for the additional data requested by the
FDA in October, 1996 and the reduction in the use of regulatory consultants
offset by research funding made to outside organizations.
Selling, general and administrative expenses increased $485,000 or 82%
to $1.1 million for the three months ended June 30, 1998 from $593,000 for the
three months ended June 30, 1997. The increase was primarily related to the
increase in the use of consultants related to various projects and increased
marketing efforts related to the Company's HIV-1 urine screening test.
Interest income, interest expense and other income increased $65,000 to
$86,000 for the three months ended June 30, 1998 from $21,000 for the three
months ended June 30, 1997. The increase was primarily due to the interest
earned from Private Placement proceeds and the decrease in interest paid for
capital leases.
11
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SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Revenue increased $405,000 to $537,000 for the six month period ended
June 30, 1998 as compared to $132,000 in the corresponding period of the prior
year due to an increase in sales made primarily to laboratories for research and
evaluation purposes.
Product costs decreased $169,000 to $1.0 million for the six month
period ended June 30, 1998 from $1.2 million for the six months ended June 30,
1997. Product costs during the six months ended June 30, 1997 were higher
because a greater quantity of product produced was expensed since it was not
retained as salable inventory. During the six months ended June 30, 1998, a
greater quantity of product was valued as inventory (raw materials and finished
goods) in anticipation of FDA approval of the confirmatory test for Calypte's
HIV-1 urine screening test.
Research and development expenses decreased 19% to $1.7 million for the
six months ended June 30, 1998 from $2.1 million in the corresponding period of
the prior year. The decrease was principally due to clinical investigations
performed in 1997 for the additional data requested by the FDA in October, 1996
and the reduction in the use of regulatory consultants offset by research
funding made to outside organizations.
Selling, general and administrative expenses increased $577,000 or 49%
to $1.8 million for the six months ended June 30, 1998 from $1.2 million for the
six months ended June 30, 1997. The increase was primarily related to the
increase in the use of consultants related to various projects and increased
marketing efforts related to the Company's HIV-1 urine screening test.
Interest income, interest expense and other income increased $151,000
to $203,000 for the six months ended June 30, 1998 from $52,000 for the six
months ended June 30, 1997. The increase was primarily due to the interest
earned from Private Placement proceeds and the decrease in interest paid for
capital leases.
LIQUIDITY AND CAPITAL RESOURCES
FINANCING ACTIVITIES
The Company has financed operations primarily through the private
placement of preferred stock and common stock, the Company's Initial Public
Offering (the "IPO") of common 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.
During 1996, the Company completed its IPO of 2,536,259 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 $13.2 million.
In October 1997, the Company completed a private placement of 2,600,999
shares of its Common Stock at $4.25 per share. The Company received net proceeds
of approximately $10.2 million after deducting placement agent commissions and
additional expenses associated with the private placement.
Although the Company believes current cash will be sufficient to meet
the Company's operating expenses and capital requirements through December 31,
1998, the Company's future liquidity and capital requirements will depend on a
number of factors, including market acceptance of its products, regulatory
actions by the FDA and other international regulatory bodies, and intellectual
property protection.
There can be no assurance that the Company's products will be
successfully commercialized or that the Company will achieve significant product
revenue. In addition, there can be no assurance that the Company will achieve or
sustain profitability in the future. 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>
OPERATING ACTIVITIES
For the six months ended June 30, 1998 and June 30, 1997, the Company's
cash used in operations was $4.0 million and $3.9 million, respectively. The
cash used in operations was primarily for inventory, marketing the complete
urine-based HIV-1 testing system, funding research and development,
manufacturing, selling, general and administrative expenses of the Company.
13
<PAGE>
FINANCING PROPOSAL
The Board unanimously adopted, subject to stockholder approval, the
Financing Proposal and is requesting stockholder approval of the Financing
Proposal.
DESCRIPTION OF THE PROPOSAL
As of September 30, 1998 the Company had $3,329,000 in cash and cash
equivalents for capital expenditures. As a result, the Board of Directors of the
Company has authorized management of the Company to raise additional capital for
the Company through the sale of equity securities of the Company. The Company
believes it is prudent to raise approximately $5 to $7 million through the sale
of equity securities of the Company. Although the Company has not entered into
an agreement relating to such financing, the Board of Directors anticipates
raising funds through an equity private placement which may consist of the sale
of the Company's Common Stock, Preferred Stock, convertible debt, warrants or a
combination of the foregoing.
The Board of Directors has authorized the management of the Company to
raise up to $7 million through the sale of equity securities. Based on the
closing price of the Common Stock on __________ ___, 1998 and since equity
securities sold in private placements are generally sold at a price which is at
a discount to market price of the Company's securities, the Board of Directors
believes that any such issuance will exceed 20% of the Company's capitalization.
The Common Stock is quoted on the Nasdaq Smallcap Market ("Nasdaq"),
and the Company is subject to the listing requirements of Nasdaq. Under Nasdaq's
listing requirements, a listed company must receive stockholder approval before
issuing equity securities equal or greater than 20% of its capitalization prior
to such issuance. The Company believes that any such financing may result in the
issuance of more than 20% of the Company's outstanding capital stock.
Upon obtaining stockholder approval of the Financing Proposal, the vote
of security holders will not be solicited to approve the method of the issuance.
APPROVAL REQUIRED
Approval of the Financing Proposal requires the affirmative vote of a
majority of the stockholders voting on the Financing Proposal either in person
or by proxy.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSED FINANCING PROPOSAL. PROXIES
SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A DIFFERENT
CHOICE IN THEIR PROXIES.
DESCRIPTION OF CAPITAL STOCK
GENERAL
In connection with the Financing Proposal, the Company may issue up to
$7 million in the aggregate of Common Stock, Preferred Stock, convertible debt
or warrants to purchase Common Stock or Preferred Stock or any combination of
the foregoing, each on terms to be determined at the time of sale. The
convertible debt may be exchangeable or convertible into shares of Common Stock
or Preferred Stock. The Preferred Stock may also be exchangeable for and/or
convertible into shares of Common Stock or another series of Preferred Stock.
14
<PAGE>
COMMON STOCK
The Company has authority to issue 30,000,000 shares of Common Stock.
As of October 26, 1998, there were approximately ________ shares of Common Stock
issued and outstanding. Holders of Common Stock are entitled to one vote per
share on all matters to be voted on by stockholders, including the election of
directors. Stockholders are not entitled to cumulative voting rights. Subject to
the preferences that may be applicable to any outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board in its discretion from funds legally available
therefor. Holders of Common Stock have no preemptive rights and have no rights
to convert their Common Stock into any other securities. The outstanding shares
of Common Stock are, and any Common Stock which will be outstanding should the
Board determine to issue Common Stock in connection with the Financing Proposal
will be, validly, issued, fully paid and nonassessable.
PREFERRED STOCK
The Company has authority to issue up to 5,000,000 shares of Preferred
Stock. As of October 26, 1998, there were no shares of Preferred Stock
outstanding. Under the Company's Restated Certificate of Incorporation, the
Board has authority to cause the Company to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to determine the rights, preferences,
privileges and restrictions of the Preferred Stock, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences
and the number of shares constituting any series or the designation of such
series, without any further vote or action by the stockholders. If the Board
exercises its authority to issue Preferred Stock, such issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change of
control of the Company without further action by the stockholders and could
adversely affect the rights and powers, including voting rights, of the holders
of Common Stock. In certain circumstances, this could have the effect of
decreasing the market price of Common Stock. The Preferred Stock which will be
outstanding should the Board determine to issue Preferred Stock in connection
with the Financing Proposal will be, validly, issued, fully paid and
nonassessable.
OTHER MATTERS
INDEPENDENT AUDITORS
Representatives from KPMG Peat Marwick LLP are expected to be at the
Special Meeting and to be available to respond to appropriate questions. Such
representatives will have the opportunity to make a statement if they desire to
do so and to respond to appropriate questions raised during the meeting.
STOCKHOLDER PROPOSALS FOR 1999
Under the rules of the SEC, stockholder proposals submitted for next
year's Proxy Statement must be received by the Company no later than the close
of business on May 17, 1999, to be considered. Proposals should be addressed
to John J. DiPietro, Secretary, Calypte Biomedical Corporation, 1440 Fourth
Street, Berkeley, California 94710.
OTHER INFORMATION
The only business to be conducted and acted upon at the Special Meeting
is the approval of the Financing Proposal.
15
<PAGE>
INCORPORATION OF DOCUMENT BY REFERENCE
The following document previously filed with the SEC by the Company
pursuant to the Securities Exchange Act of 1934, as amended, is incorporated
herein by reference in this Proxy Statement:
The Company's 1997 Annual Report provided to the stockholders of the
Company together with this Proxy Statement.
By order of the Board of Directors,
John J. DiPietro
SECRETARY
Berkeley, California
___________, 1998
<PAGE>
CALYPTE BIOMEDICAL CORPORATION
1440 FOURTH STREET
BERKELEY, CALIFORNIA 94710
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLIAM A. BOEGER and JOHN J. DiPIETRO, and
each of them, with full power of substitution, as the proxy or proxies of the
undersigned to vote all shares of Common Stock of Calypte Biomedical Corporation
which the undersigned is entitled to vote at the special meeting of stockholders
of Calypte Biomedical Corporation to be held at 1265 Harbor Bay Parkway,
Alameda, California 94502 on______________,________, at _______ local time, and
at any adjournments or postponements thereof, with all powers that the
undersigned would have if personally present thereat:
(CONTINUED ON OTHER SIDE)
<PAGE>
This proxy when properly executed will be voted in the /X/ Please mark your
manner directed herein by the undersigned stockholder. votes as this
(IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE FINANCING PROPOSAL.)
Financing Proposal. Proposal to approve FOR AGAINST ABSTAIN
the issuance of capital stock of Calypte / / / / / /
Biomedical Corporation. The Board of
Directors recommends a vote FOR.
Dated: , 1998
------------------------------
-------------------------------------------
Signature of Stockholder
-------------------------------------------
Signature if held jointly
Please sign exactly as name appears above.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
Corporation, please sign in full
corporate name by President or other
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
