<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission File Number: 0000-23721
LIFEPOINT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE #33-0539168
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10400 Trademark Street, Rancho Cucamonga, CA 91730
(Address of Principal Executive Offices) (Zip Code)
(909) 466-8047
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.
[x] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
As of July 23, 1999 - Common Stock, $.001 Par Value, 15,008,667 shares
</PAGE>
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
LIFEPOINT, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
June 30
1999
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $4,009,330
Prepaid expenses and other current assets 45,807
----------
Total current assets 4,055,137
Property and equipment, net 220,142
Patents and other assets, net 62,747
----------
$4,338,026
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 203,084
Accrued expenses 291,743
----------
Total current liabilities 494,827
Accrued Consulting - long term 148,253
----------
643,080
Commitments and contingencies (Note 4)
Stockholders' equity:
Series A 10% cumulative convertible
preferred stock, $.001 par value,
600,000 authorized, 452,375 and
557,725 outstanding at June 30,
1999 and March 31, 1999,
respectively 452
Common stock, $.001 par value;
50,000,000 shares authorized,
14,906,560 and 12,665,209 issued
and outstanding at June 30, 1999
and March 31, 1999,
respectively 14,906
Additional paid-in capital 18,869,241
Deficit accumulated in the development stage (15,189,653)
-----------
Total stockholders' equity 3,694,946
-----------
$ 4,338,026
The accompanying notes are an intregal part of the financial statements.
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
LIFEPOINT, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(Unaudited)
<S> <C> <C> <C>
Cumulative
From
For the October 8, 1992
Three Months Ended (Inception)
June 30 June 30, 1999
1999 1998
Revenues $ - $ - $ -
Costs and expenses:
Selling, general and administrative
expenses 300,664 183,409 4,368,348
Research and development 483,186 263,702 7,320,071
Depreciation and amortization 24,086 52,029 943,166
Interest expense - parent - - 95,790
Management fees - parent - - 2,089,838
Interest expense - - 119,300
Total costs and expenses from operations 807,936 499,140 14,936,513
Loss from operations (807,936) (499,140) (14,936,513)
Other income (expense): 27,697 4,663 (214,038)
Net loss $(780,239) $ (494,477) $(15,150,551)
Earnings per common share:
Weighted average common shares
outstanding 13,959,508 10,744,459
Net loss per common share $ (0.06) $ (0.05)
Earnings per common share, assuming
dilution:
Weighted average common shares
outstanding 13,959,508 10,744,459
Net loss per common share,
assuming dilution $ (0.06) $ (0.05)
</TABLE>
The accompanying notes are an integral part of the financial statements.
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
LIFEPOINT, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(Unaudited)
<S> <C> <C> <C>
Cumulative From
For the Three Months Ended October 8, 1992
June 30 (Inception) to
1999 1998 June 30, 1999
Cash flow from operating activities:
Net loss $ (780,239) $ (494,477) $(15,150,551)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 24,086 52,029 943,165
Consulting expense - - 361,160
Loss on disposal of property and equipment - - 237,976
Loss on marketable securities - - 627,512
Amortization of bond discount - - (4,855)
Changes in operating assets and liabilities:
Change in prepaid expenses and other current assets (9,925) 32,927 78,594
Change in other assets 10,057 201 (12,409)
Change in accounts payable (28,180) (40,895) 257,443
Change in accrued expenses 41,536 22,037 (76,383)
Net cash used by operating activities (742,665) (428,178) (12,738,348)
Cash flow from investing activities:
Sale of marketable securities - - 3,285,625
Purchases of marketable securities - - (3,908,281)
Purchases of property and equipment (90,938) (500) (694,501)
Proceeds from sale of property and equipment - - 80,828
Patent costs - (9,992) (56,924)
Cash used by investing activities (90,938) (10,492) (1,293,253)
Cash flow from financing activities:
Sales of common stock 63,000 - 11,309,226
Expenses of common stock offering - - (1,681,586)
Sales of preferred stock - - 6,000,000
Expenses of preferred stock offering (18,374) - (738,451)
Exercise of stock options 1,875 - 22,473
Advances on note receivable - Parent - - (1,917,057)
Collection on note receivable - Parent - - 1,634,762
Proceeds of loan payable - Parent - - 4,715,067
Payment of loan payable - Parent - - (1,299,782)
Proceeds of capital leases - - 101,572
Payments of capital leases - - (105,293)
Proceeds of brokerage loan payable - - 2,674,683
Payments of brokerage loan payable - - (2,674,683)
Net cash provided by financing activities 46,501 - 18,040,931
Increase (decrease) in cash and cash equivalents (787,102) (438,670) 4,009,330
Cash and cash equivalents - beginning of period 4,796,432 597,254 -
Cash and cash equivalents - end of period $4,009,330 $ 158,584 $ 4,009,330
Supplemental disclosure of cash information:
Cash paid for interest $ - $ - $ 192,046
Non-cash operating activities:
Value of common stock for consulting services $ - $ - $ 203,340
Non-cash investing activities:
Value of assets transferred to lessor in lieu of
payment on capital leases $ - $ - $ 71,405
Non-cash financing activities:
Value of common stock issued and additional
paid-in capital for the transfer of assets from
Parent $ - $ - $ 781,060
Value of common stock issued to Parent and
additional paid-in capital for the forgiveness
of debt $ - $ - $ 3,160,502
Value of common stock warrants issued
for consulting services $ - $ - $ 187,500
Value of common stock issued and additional
paid-in capital issued as dividends
on preferred stock conversions $ 31,433 $ - $ 36,298
Value of common stock warrants issued
for preferred stock offering $ - $ - $ 133,559
Value of preferred stock converted to
common stock $ 2,107 $ - $ 2,953
</TABLE>
The accompanying notes are an integral part of the financial statements.
</PAGE>
<PAGE>
LIFEPOINT, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 1 - Basis of Presentation
In the opinion of LifePoint, Inc. (the "Company"), the accompanying unaudited
financial statements reflect all adjustments (which include only normal
recurring adjustments except as disclosed below) necessary to present fairly
the financial position, results of operations and cash flows for the periods
presented. Results of operations for interim periods are not necessarily
indicative of the results of operations for a full year due to external
factors which are beyond the control of the Company. This Report should be
read in conjunction with the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1999 (the "Annual Report").
NOTE 2. - Continuing Operations and Liquidity
The Company has historically incurred recurring operating losses due to the
fact that it is still a development stage enterprise incurring research and
development expenses and deriving no revenues and has experienced an ongoing
deficiency in working capital. The Company financed its operations during the
quarter ended June 30, 1999 from the private placements of both common and
preferred stock completed in the fiscal year ended March 31, 1999, with
resulting gross proceeds of $7,025,000. As a result, management believes
that the Company has sufficient cash on hand to sustain operations through
March 31, 2000.
The Company continues to pursue parallel paths to secure additional funding
including strategic partnering, additional private placements, and a possible
public offering. There can be no assurance that any of these additional
sources of financing will be available and, in such event, the Company would
not be able to complete the development, manufacturing and marketing of its
product on a timely basis. The Company will require additional capital to
continue the research, development and ultimate manufacture and marketing of
its product past prototype phase. Recovery of the Company's assets is
dependent upon future events, including completion of the development program
and ultimately achieving profitable operations. The outcome of these events
is undeterminable.
NOTE 3 - Property and Equipment
Property and equipment is summarized as follows:
June 30,
1999
Furniture and Fixtures $ 348,390
Test Equipment 425,768
Leasehold Improvements 245,991
----------
1,020,149
Less: Accumulated Depreciation 800,007
----------
$ 220,142
</PAGE>
<PAGE>
LIFEPOINT, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
NOTE 4 - Commitments and Contingencies
Substance Abuse Technologies, Inc. ("SAT"), the former parent of the
Company, and the Department of the Navy on January 24, 1992 had entered into
a ten-year agreement granting SAT a partial exclusive patent license to
products for drug testing in the United States and certain foreign countries.
This license was transferred from SAT to the Company effective with the sale of
SAT's majority ownership of the Common Stock . In April 1999, the Company
and the USN completed negotiations for an expansion of the License Agreement.
The new terms expand the field-of-use from drugs of abuse and anabolic steroids
on urine samples to include all possible diagnostic uses for saliva and urine.
In addition, the royalty rate has been reduced to 3% on the technology-related
portion of the disposable cassette sales and 1% on instrument sales from the
previous 10% on all the Company's product sales. The minimum royalty payment
has been reduced to $50,000 in 2001 (anticipated first year of product sales)
and $100,000 a year thereafter versus the previous $100,000 per year. The
Company is further developing the USN-developed technology for application
in its own proprietary test system.
NOTE 5 - Stockholders' Equity
During the quarter ended June 30, 1999, the Company issued 2,107,000
shares of common stock to holders who elected to convert their shares of the
Series A 10% cumulative convertible preferred stock. In addition, 21,601
shares of common stock were issued as dividends on the converted shares.
During the quarter ended June 30, 1999, stock options were granted to
thirteen employees (including one officer) to purchase 242,500 shares of the
common stock at $1.12 to $1.81 per share. On April 16, 1999, the Board of
Directors approved a compensation plan for outside directors which stated
that each non-employee, non-consultant director shall receive as compensation
a grant of an option pursuant to the stock option plan and each grant shall be
for the right to purchase 15,000 shares of the common stock on an annual basis.
Options to purchase 30,000 shares of the common stock at $1.81 per share were
granted to two directors of the Company under the new approved compensation
plan during the quarter ended June 30, 1999. As of June 30, 1999, there were
outstanding, under the stock option plan, incentive stock options to purchase
an aggregate of 1,047,500 shares held by a total of 19 employees and 2
directors.
During the quarter ended June 30, 1999, the Company issued warrants to
two outside parties to purchase an aggregate of 51,320 shares of the common
stock at prices ranging from $1.41 to $1.97 per share as payment for services.
As of June 30, 1999, there were warrants outstanding to purchase 2,516,501
shares of the Company's stock.
</PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
The Company is a late development stage company developing a unique
product - the first product that will provide immediate, on-site diagnostic
results without the need to take blood or urine. The Company is focused on
the commercialization of the flow immunosensor technology licensed from the
United States Navy (the "USN"). This proprietary technology, when used in
conjunction with saliva as a non-invasive test specimen using the Company's
proprietary collection technology, will allow the Company to develop a broadly
applicable non-invasive, rapid, on-site diagnostic test system. The product
can be used for rapid diagnostic testing for screening (cardiovascular disease,
osteoporosis, cancer), rapid testing (heart attack, drug overdose) and
therapeutic drug monitoring in non-medical environments such as the workplace,
home health care, ambulances, pharmacies, and law enforcement. The first
product under development is for the simultaneous detection of drugs of abuse
and alcohol. The market potential for this product is estimated to be $750
million, and growing to over $1 billion by 2002. Marketing is anticipated to
begin by the third quarter of 2000.
Liquidity and Capital Resources.
The Company is a development stage enterprise with no earnings history.
Since its inception, the Company has devoted substantially all of its resources
to research and development and has experienced an ongoing deficiency in
working capital. The Company does not anticipate generating revenue from
product sales until the third quarter of 2000 at the earliest. Because the
Company has not produced any revenues as a result of its being a development
stage company, it has been dependent, ever since gaining its independence from
its former parent SAT in October 1997, on the net proceeds derived from three
private placements pursuant to Regulation D under the Securities Act to fund
its operations, as described in the succeeding three paragraphs.
On November 21 and December 10, 1997, the Company closed as to the
sales of an aggregate of 3,200,000 shares of the common stock at $.50 per
share and the Company realized $1,600,000 in gross proceeds. There were no
underwriting discounts or commissions allowed or paid pursuant to the private
placement. A finder's fee of $160,000 was paid to Jonathan J. Pallin who, on
October 31, 1997, was elected as the Chairman of the Board and a director of
the Company.
On July 23 and August 26, 1998, the Company closed as to the sales of
an aggregate of 1,025,000 shares of the common stock at $1.00 per share and
the Company realized $1,025,000 in gross proceeds. There were no underwriting
discounts or commissions paid related to the private placement. However, a
Warrant expiring December 13, 2003 to purchase 50,000 shares of the common
stock at $1.08 was granted to an unaffiliated person for his assistance in
completing $500,000 of this offering.
On January 21, 1999, the Company closed as to the sale of 600,000
shares of the Series A preferred stock at $10.00 per share and the Company
realized $6,000,000 in gross proceeds. Finders' fees were paid to various
consultants and bankers for their assistance in helping the Company to complete
this private placement consisting of an aggregate of $592,078 in cash fees
(including $420,451 to Mr. Pallin) and Warrants expiring January 20, 2004 to
purchase an aggregate of 404,725 shares of the common stock (net of a
cancellation) at $2.41 per share.
Management believes that, with the net proceeds from the private
placement described in the preceding paragraph, the Company has sufficient
funds to complete the pre-production instrument for the testing product for
drugs of abuse and alcohol and that the pre-production instrument will be
completed not earlier than the first quarter of 2000. There can be no
assurance that management's estimate as to costs and timing will be correct.
Any delays may further increase the Company's costs of development.
Management's latest estimate is that completion of the development and
launching of a saliva based drugs of abuse and alcohol testing product, after
the pre-production instrument, will require additional funding of approximately
$7,000,000, beyond the recently raised $6,000,000, and that the product will
not be launched earlier than the third quarter of 2000.
</PAGE>
<PAGE>
Since October 1997, management had been pursuing parallel paths for
long-term financing venture capital, strategic partnering, a public offering
and/or a private placement for all or part of the required funding. Management
had initially believed that one likely source for the additional funding would
have been an investment by a venture capital investor or investors; however,
management does not currently believe that an investment in the Company by a
venture capital investor to be a likely source of funding at this time.
Management has also been exploring the possibility of obtaining a
strategic partner(s) for the Company. To this end, the Company had an
agreement with Burrill & Company ("Burrill"), a San Francisco-based merchant
bank focused exclusively on servicing life science companies. The agreement
with Burrill was terminated on May 7, 1999. The Company continues to pursue
strategic partnering through the Venture Merchant Group. Several large
pharmaceutical and diagnostic corporations have expressed initial interest
in partnering with the Company. Management anticipates that one or more
partnering agreements may be completed prior to the end of this fiscal year.
Management has also pursued the possibility of an underwritten public
offering and has received expressions of interest from several well-known small
national and large regional firms. At least one firm has offered to conduct a
public offering late 1999 or early 2000. There can be no assurance that stock
market conditions would be receptive to a public offering by the Company at
that time. In addition, competitive conditions in the substance abuse testing
industry at that time may make the Company less attractive to potential public
investors.
Having successfully consummated three private placements pursuant to
Regulation D under the Securities Act since November 1997, the Company may
seek to raise the additional required financing through this method. As with
a public offering, there can be no assurance that potential investors would be
receptive to a private placement by the Company at that time, either because of
general stock market conditions or conditions generally in the substance abuse
technology industry. There can be no assurance that the Company will be
successful in securing additional financing, whether through a strategic
partner, a public offering or a private placement.
If all of the Warrants to purchase an aggregate of 2,516,501 shares of
the common stock which are outstanding on June 30, 1999 were subsequently
exercised, the Company would realize $2,325,725 in gross proceeds. If all of
the Options to purchase an aggregate of 1,047,500 shares outstanding on
June 30, 1999 were subsequently exercised, the Company would realize $865,610
in gross proceeds. However, there can be no certainty as to when and if any of
these securities may be exercised, especially as to the Options and a Warrant
which were not all currently exercisable as of June 30, 1999. Accordingly,
management believes that the Company cannot rely on these exercises as a
source of financing.
Results of Operations
Three Months Ended June 30, 1999 vs. June 30, 1998
During the quarter ended June 30, 1999, the Company spent $483,186 on
research and development and an additional $300,664 on general and
administrative expenses, as compared with $263,702 and $183,409, respectively,
during the quarter ended June 30, 1998. The increase of $219,484, or 83%, in
research and development expenditures in the 1999 period was due to the
addition of five chemists and five engineering employees, nearly tripling the
staff in the same period for 1998. General and administrative expenses
increased $117,255, or 64%, as a result of initiation of market research,
registration costs associated with the January private placement and the
Company's focus on strategic partnering and financing.
From inception on October 8, 1992 to June 30, 1999, the Company has
spent $7,320,071 on research and development and $4,368,348 on general and
administrative expenses. Management fees paid to SAT aggregated an additional
$2,089,838 during such period.
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which involve risk
and uncertainties. Such forward-looking statements reflect management's
current views that the necessary financing will be available, when needed,
to complete the research and development program, that the product will be
developed at the contemplated cost and within the projected timetable, that,
during the interim period before the Company begins marketing, competitors
will not begin to market a competitive saliva-based testing product and that
the other risks described in the Annual Report and other filings by the Company
with the Securities and Exchange Commission will not materially adversely
affect the Company's operations. Because there can be no assurance that
management's expectations will be realized, actual results may differ.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
</PAGE>
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned therein to be duly authorized.
LIFEPOINT, INC.
(Registrant)
Date: August 13, 1999 By /s/ Michele A. Clark
Michele A. Clark
Controller and Chief Accounting
Officer
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet and related Statements of Operations of LifePoint, Inc. as of June 30,
1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-2000
<PERIOD-END> JUN-30-1999
<CASH> 4,009,330
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,055,137
<PP&E> 1,020,149
<DEPRECIATION> 800,007
<TOTAL-ASSETS> 4,338,026
<CURRENT-LIABILITIES> 494,827
<BONDS> 0
0
452
<COMMON> 14,906
<OTHER-SE> 3,679,588
<TOTAL-LIABILITY-AND-EQUITY> 4,338,026
<SALES> 0
<TOTAL-REVENUES> 27,697
<CGS> 0
<TOTAL-COSTS> 506,068
<OTHER-EXPENSES> 301,869
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (780,239)
<INCOME-TAX> 0
<INCOME-CONTINUING> (780,239)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (780,239)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
