UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File Number: 1-12362
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)
1205 South Dupont Street, Ontario, CA 91761
(Address of Principal Executive Offices) (Zip Code)
(909) 418-3000
(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 24, 2000 - Common Stock, $.001 Par Value, 30,164,601 shares
</PAGE>
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
LIFEPOINT, INC.
(a development stage enterprise)
BALANCE SHEET
June 30, March 31,
2000 2000
(Unaudited)
----------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 8,004,197 $ 9,483,624
Prepaid expenses and other
current assets 120,109 102,633
----------- -----------
Total current assets 8,124,306 9,586,257
Property and equipment, net 480,733 401,309
Patents and other assets, net 146,775 93,830
----------- -----------
$ 8,751,814 $10,081,396
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 184,933 $ 274,902
Accrued expenses 322,949 425,481
Capital lease, short-term 101,386 101,386
----------- -----------
Total current liabilities 609,268 801,769
Capital lease, long-term 83,178 104,955
----------- -----------
692,446 906,724
Commitments and contingencies (Note 4)
Stockholders' equity:
Common stock, $.001 par value;
50,000,000 shares authorized,
30,046,201 and 29,769,501
issued and outstanding at
June 30, 2000 and March 31,
2000, respectively 30,046 29,769
Additional paid-in capital 29,501,623 29,145,385
Notes receivable - stockholders (1,141,310) (1,116,875)
Deficit accumulated in the
development stage (20,330,991) (18,883,607)
----------- -----------
Total stockholders' equity 8,059,368 9,174,672
----------- -----------
$ 8,751,814 $10,081,396
=========== ===========
The accompanying notes are an integral part of the financial statements.
</PAGE>
<PAGE>
LIFEPOINT, INC.
(a development stage enterprise)
STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative From
For the October 8, 1992
Three Months Ended (Inception)
June 30 to
2000 1999 June 30, 2000
Revenues $ - $ - $ -
Costs and expenses:
Selling, general and
administrative expenses 450,885 300,664 6,036,344
Research and development 1,097,424 483,186 10,382,795
Depreciation and amortization 45,000 24,086 1,063,772
Interest expense - parent - - 95,790
Management fees - parent - - 2,089,838
----------- ---------- -----------
Total costs and expenses
from operations 1,593,309 807,936 19,668,539
----------- ---------- -----------
Loss from operations (1,593,309) (807,936) (19,668,539)
----------- ---------- -----------
Other income (expense):
Interest income (expense), net 145,925 27,697 638,905
Loss on disposal of property
and equipment - - (212,501)
Loss on sale of marketable
securities - - (627,512)
Interest income - parent - - 102,167
----------- ---------- -----------
Total other income (expense) 145,925 27,697 (98,941)
----------- ---------- -----------
Net loss $(1,447,384) $ (780,239) $(19,767,480)
=========== ========== ===========
Earnings per common share:
Weighted average common shares
outstanding 29,884,639 13,959,508
=========== ===========
Net loss per common share $ (0.05) $ (0.06)
=========== ===========
Earnings per common share, assuming
dilution:
Weighted average common shares
Outstanding 29,884,639 13,959,508
=========== ===========
Net loss per common share,
assuming dilution $ (0.05) $ (0.06)
=========== ===========
The accompanying notes are an integral part of the financial statements.
</PAGE>
<PAGE>
LIFEPOINT, INC.
(a Development Stage Enterprise)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Unaudited)
<S> <C> <C> <C>
For the Three Cumulative From
Months Ended October 8, 1992
June 30 (Inception) to
2000 1999 June 30, 2000
-------------- ------------- --------------
Cash flow from operating activities:
Net loss $ (1,447,384) $ (780,239) $ (19,767,480)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 45,000 24,086 1,063,772
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 (17,476) (9,925) 4,291
Change in other assets (51,054) 10,057 (84,075)
Change in accounts payable (89,969) (28,180) 239,292
Change in accrued expenses (11,552) 41,536 (102,449)
-------------- ------------- --------------
Net cash used by operating activities (1,572,435) (742,665) (17,424,856)
-------------- ------------- --------------
Cash flow from investing activities:
Sale of marketable securities - - 3,285,625
Purchases of marketable securities - - (3,908,281)
Purchases of property and equipment (124,424) (90,938) (818,812)
Proceeds from sale of property and
equipment - - 80,828
Patent costs (1,891) - (72,708)
-------------- ------------- --------------
Cash used by investing activities (126,315) (90,938) (1,433,348)
-------------- ------------- --------------
Cash flow from financing activities:
Sales of common stock - 63,000 20,446,226
Expenses of common stock offering - - (2,286,292)
Sales of preferred stock - - 6,000,000
Expenses of preferred stock offering - (18,374) (738,451)
Exercise of stock options 14,760 1,875 50,110
Exercise of warrants 226,340 - 330,440
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 (21,777) - (174,194)
Proceeds of brokerage loan payable - - 2,674,683
Payments of brokerage loan payable - - (2,674,683)
-------------- ------------- --------------
Net cash provided by financing
activities 219,323 46,501 26,862,401
-------------- ------------- --------------
Increase (decrease) in cash and
cash equivalents (1,479,427) (787,102) 8,004,197
Cash and cash equivalents - beginning
of period 9,483,624 4,796,432 -
-------------- ------------- --------------
Cash and cash equivalents - end
of period $ 8,004,197 $ 4,009,330 $ 8,004,197
============== ============= ==============
Supplemental disclosure of cash information:
Cash paid for interest $ 8,172 $ - $ 227,732
============== ============= ==============
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 $ 552,110
============== ============= ==============
Value of common stock warrants
issued for preferred stock offering $ - $ - $ 133,559
============== ============= ==============
Value of preferred stock converted
to common stock $ - $ 2,107 $ 12,000
============== ============= ==============
Value of common stock warrants
converted to common stock in
exchange for note $ - $ - $ 1,060,000
============== ============= ==============
Value of common stock options
converted to common stock in
exchange for note $ 24,435 $ - $ 81,310
============== ============= ==============
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, 2000
(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 that are beyond the control of the Company. This Report should be
read in conjunction with the Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 2000 (the "Annual Report").
NOTE 2. - Continuing Operations and Liquidity
During the period from October 8, 1992 (inception) through June 30, 2000, the
Company has realized no revenues and has accumulated losses of $19,767,480.
Recovery of the Company's assets is dependent upon future events, including
commercialization of the Company's product and ultimately achieving profitable
operations. The outcome of these events is indeterminable.
The Company had established a $500,000 revolving line of credit agreement with
City National Bank of Beverly Hills, California. The Company chose not to renew
this note in June 2000 upon expiration. On July 14, 1999 the Company entered
into an equipment lease financing agreement for $300,000 with FirstCorp of
Portland, Oregon which is discussed further in Note 4.
The Company successfully completed a private placement of units, each
consisting of shares of the Company's Common Stock, $.001 par value (the
"Common Stock"), and a Common Stock purchase warrant, in the fiscal year
ended March 31, 2000, resulting in net proceeds of $8,577,000. As a result,
management believes that the Company has sufficient cash on hand at June 30,
2000 to finish the product commercialization, build a manufacturing facility,
generate field trials and pilot studies and initiate marketing. Management
estimates that it will take $5.8 million to reach the market post prototype
(which was completed on May 15, 2000.) The proceeds from the last private
placement, in management's opinion, will provide working capital for several
quarters after the commencement of marketing. The Company continues to pursue
parallel paths to secure additional funding including strategic partnering and
capital leasing companies to help offset the cash required to establish a
manufacturing facility. There can be no assurance that any of these additional
sources of funding will be available and, in such event, the Company may not
be able to complete the development, manufacturing and marketing of its
product on a timely basis.
NOTE 3 - Property and Equipment
Property and equipment is summarized as follows:
June 30, March 31,
2000 2000
Furniture and Fixtures $ 708,730 $ 601,743
Test Equipment 425,768 425,768
Leasehold Improvements 263,428 245,991
---------- ----------
1,397,926 1,273,502
Less: Accumulated Depreciation 917,193 872,193
---------- ----------
$ 480,733 $ 401,309
========== ==========
</PAGE>
<PAGE>
LIFEPOINT, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
NOTE 4 - Commitments and Contingencies
Lease Commitments
LifePoint has entered into a lease agreement commencing October 1, 1997 and,
extended by an amendment, terminating on March 31, 2002, for the research
facilities in Rancho Cucamonga, California. In addition to rent of $72,000
per year for fiscal years ending March 31, 2000 through March 31, 2002,
LifePoint will pay for real estate taxes and other occupancy costs. Rent
expense for the fiscal years ended March 31, 2000 and 1999 was $72,000, and
$69,000, respectively.
On April 26, 2000, the Company entered into a lease agreement for
administrative offices and a manufacturing facility commencing May 1, 2000
and terminating on July 31, 2005. In addition to rent of $226,000 per year,
LifePoint will pay for real estate taxes and other occupancy costs. The
Company may elect to terminate the lease at the end of four years and has two
2-year renewal options. The lease also allows for rent abatement in three of
the first twelve months as tenant improvement allowance in addition to the
$30,000 paid by the lessor.
The Company leases certain equipment under noncancelable lease arrangements.
These operating leases expire in various dates through 2002 and may be renewed
for up to 12 months. Furniture, fixtures and equipment includes $253,466 of
assets acquired under capital leases as of June 30, 2000.
Significant Contracts
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 October 1997.
In April 1999, the Company and the United States Navy ("USN") completed
negotiations for an expansion of the License Agreement. The license expires
with the expiration of the patent in February 2010. 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 in addition to the urine
application. 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.
</PAGE>
<PAGE>
LIFEPOINT, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
NOTE 5 - Stockholders' Equity
During the quarter ended June 30, 2000, stock options were granted to eight
employees to purchase 134,000 shares of the Common Stock at $6.56 per share.
On January 21, 2000, the Board of Directors modified the Director's
compensation arrangements previously authorized on April 16, 1999. As
authorized, each non-employee, non-consultant director shall receive as
compensation annual fees and an annual grant of an option pursuant to a stock
option plan for the right to purchase 10,000 shares of the Common Stock. The
initial option grant to new non-employee, non-consultant directors shall be
for the right to purchase 15,000 shares of the Common Stock. Under the revised
compensation arrangements, during the quarter ended June 30, 2000, annual
option grants to purchase 20,000 shares of the Common Stock at $3.22 per
share were granted to two continuing directors of the Company and grants to
purchase 30,000 shares of the Common Stock at $6.56 per share were granted to
two new directors of the Company. The Company has not granted any new stock
options to consultants. During fiscal 2000, two current members of the
Company's Scientific Advisory Board ("SAB"), received an option to purchase
10,000 shares each at $2.83, and similar options will be granted to any future
member of the Scientific Advisory Board. As of June 30, 2000, there were
outstanding, under the stock option plan, stock options to purchase an
aggregate of 1,693,296 shares held by a total of 27 employees, 2 SAB members
and 4 directors.
During the quarter ended June 30, 2000, the Company issued no warrants to
outside parties. As of June 30, 2000, there were warrants outstanding to
purchase 9,308,063 shares of the Company's stock, including the warrants
issued as part of the March 2000 unit offering which raised $9.2 million
gross proceeds for the Company.
</PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
LifePoint, Inc. is a late development stage company designing a unique product
that will provide immediate, on-site diagnostic results without the need to
take blood or urine. LifePoint is focused on the commercialization of the
flow immunosensor technology licensed from the USN. This patented technology,
when used in conjunction with LifePoint's own patented and proprietary
technologies on collecting and processing saliva as a non-invasive test
specimen, will allow LifePoint to develop a broadly applicable non-invasive,
rapid, on-site diagnostic test system. The LifePointT Test System could be
used for rapid diagnostic testing, for screening, 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 to the non-medical markets is
anticipated to begin early in the first quarter 2001.
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 first quarter of 2001 at the earliest.
There can be no assurance as to when the Company will achieve profitability,
if at all.
Because the Company has not produced any revenues as a result of its being a
development stage company, it has been dependent, since gaining its
independence from SAT in October 1997, on the net proceeds derived from four
private placements pursuant to Regulation D under the Securities Act to fund
its operations. The succeeding three paragraphs describe the private placements
in Fiscal 1999 and 2000.
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 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.
On February 29 and March 14, 2000, the Company closed as to the sales at
$5,000 per Unit of an aggregate of 1,840 units, each unit consisting of 2,500
shares of the Common Stock and an Investor Warrant expiring February 28 or
March 13, 2005 to purchase 2,500 shares of the Common Stock at $3.00 per
share. The Investor Warrants may not be exercised prior to September 14, 2000
and the shares included in the Units are restricted securities for at least
one year. The Company realized $9,200,000 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
$604,706 in cash fees and Finder's Warrants expiring March 13, 2005 to purchase
an aggregate of 273,075 shares of the Common Stock at $3.00 per share.
Management believes that, with the net proceeds from the private placement
described in the preceding paragraph, the Company has sufficient funds to
finish the product development, build a manufacturing facility, generate
field trials and pilot studies and initiate marketing. Management estimates
that it will take $5.8 million after prototype (which was completed May 1,
2000) to reach the market with its product. The proceeds from the last
private placement should provide working capital for several quarters post
revenue. 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.
The Company has qualified for $3 million in capital equipment financing with
FINOVA Capital Corporation, a capital leasing company, to fund the equipment
required for the manufacture of the LifePoint(TM) Test System. Management
anticipates finalizing the agreement not later than August 31, 2000 and will
provide full details in the Company's report on Form 10-Q for the quarter
ending September 30, 2000 to be filed on or before November 14, 2000.
The Company continues to pursue strategic partnering through the Venture
Merchant Group. Several large corporations have expressed initial interest
in partnering with the Company. Management anticipates that one or more
partnering agreements may be completed prior to the fourth quarter of 2000.
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. However, to date the Company has generally not
attracted large institutional investors, although lately there has been an
increase in such interest and, unless this interest in the Common Stock
further develops, this fact may adversely affect any future public offering.
In addition, there can be no assurance that stock market conditions later in
2000 or early in 2001 would be receptive to a public offering by the Company,
especially in view of the volatility in the market generally in 2000. 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 four private placements pursuant to Regulation
D under the Securities Act since November 1997, the Company may seek to raise
additional 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 when the Company seeks to sell, either because of
general stock market conditions or conditions generally in the substance
abuse testing industry.
There can be no assurance that the Company will be successful in securing
additional financing, whether through a capital leasing firm, a strategic
partner, a public offering or a private placement.
If all of the Warrants to purchase an aggregate of 9,308,063 shares of the
Common Stock which were outstanding on June 30, 2000 were subsequently
exercised, the Company would realize $20,942,177 in gross proceeds. If all
of the Options pursuant to the Stock Option Plan to purchase an aggregate of
1,693,296 shares outstanding on June 30, 2000 were subsequently exercised,
the Company would realize $3,314,070 in gross proceeds. However, there can
be no certainty as to when or if any of these securities will be exercised,
especially as to the Options and certain of the Warrants that were not all
currently exercisable as of June 30, 2000. Accordingly, management believes
that the Company cannot rely on these exercises as a source of financing.
Results of Operations
Three Months Ended June 30, 2000 vs. June 30, 1999
During the quarter ended June 30, 2000, the Company spent $1,097,424 on
research and development and an additional $450,885 on general and
administrative expenses, as compared with $483,186 and $300,664, respectively,
during the quarter ended June 30, 1999. The increase of $614,238, or 127%, in
research and development expenditures in 2000 is directly attributable to
finalizing the prototype of the LifePoint Test System on May 15, 2000 and
beginning the commercialization phase of the product. Staffing in research
and development increased from 18 during the quarter ended June 30, 1999 to
35, or 94%, for the same period in 2000. General and administrative expenses
increased $150,221, or 50%, as a result of increased staffing with the
addition of a Vice-President of Marketing and Sales, as well as a Director of
Human Resources. Additional expenses in marketing are a result of
accelerating pre-marketing and lobbying efforts through attendance at
tradeshows, presentation of technical papers and working with various
governmental agencies to set standards for the approval of a saliva-based
evidential instrument.
From inception on October 8, 1992 to June 30, 2000, the Company has spent
$10,382,795 on research and development and $6,036,344 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
commercialized 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 14, 2000 By /s/ Michele A. Clark
Michele A. Clark
Controller and Chief
Accounting Officer
</PAGE>
</TABLE>
