<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 December 31, 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 February 9, 1999 - Common Stock, $.001 Par Value, 15,618,847 shares
</PAGE>
<PAGE>
LIFEPOINT, INC.
(a Development Stage Enterprise)
BALANCE SHEET
December 31
1999
ASSETS
Current assets:
Cash and cash equivalents $ 1,952,651
Prepaid expenses and other current assets 92,020
--------------
Total current assets 2,044,671
Property and equipment, net 404,040
Patents and other assets, net 85,196
--------------
$ 2,533,907
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 128,166
Accrued expenses 258,522
Capital Lease -Short Term 101,386
--------------
Total current liabilities 488,074
Capital Lease - Long Term 124,496
Accrued Consulting - Long Term 148,253
--------------
760,823
Commitments and contingencies (Note 4)
Stockholders' equity:
Series A 10% Cumulative Convertible
Preferred Stock, $.001 par value,
600,000 shares authorized, 427,375
outstanding at December 31, 1999 427
Common stock, $.001 par value; 50,000,000
shares authorized, 15,417,537 shares
issued and outstanding at December 31, 1999 15,417
Additional paid-in capital 18,851,962
Deficit accumulated in the development stage (17,094,722)
--------------
Total stockholders' equity 1,773,084
--------------
$ 2,533,907
==============
The accompanying notes are an integral part of the financial statements.
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
LIFEPOINT, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(Unaudited)
<S> <C> <C> <C>
Cumulative
For the For the From
Three Months Nine Months October 8, 1992
Ended Ended (Inception) to
December 31, December 31, December 31
1999 1998 1999 1998 1999
Revenues $ - $ - $ - $ - $ -
Costs and Expenses:
General and Administrative Expenses 352,026 536,557 1,041,896 1,194,048 5,109,580
Research and Development 617,697 259,924 1,660,591 818,117 8,497,476
Depreciation and Amortization 24,211 25,250 72,382 129,428 991,462
Interest Expense - Parent - - - - 95,790
Management Fees - Parent - - - - 2,089,838
Interest Expense - - - - 119,300
Total Costs and Expenses 993,934 821,731 2,774,869 2,141,593 16,903,446
Loss from Operations (993,934) (821,731) (2,774,869) (2,141,593) (16,903,446)
Other Income/(Expense) 36,789 4,851 108,749 28,647 (132,986)
Net Loss $(957,145) $(816,880) $(2,666,120) $(2,112,946) $(17,036,432)
Earnings per Common Share:
Weighted Average Common Shares
Outstanding 15,208,721 11,731,031 14,727,280 11,395,289
Net Loss Per Common Share $ (0.06) $ (0.07) $ (0.18) $ (0.19)
Earnings per Common Share,
Assuming Dilution:
Weighted Average Common Shares
Outstanding 15,208,721 11,731,031 14,727,280 11,395,289
Net Loss Per Common Share,
Assuming Dilution $ (0.06) $ (0.07) $ (0.18) $ (0.19)
</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>
Cumulative
From
October 8, 1992
For the Nine Months Ended (Inception) to
December 31 December 31
1999 1998 1999
------------ ------------ ---------------
Cash flow from
operating activities:
Net loss $(2,666,120) $(2,112,946) $(17,036,432)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 72,382 129,428 991,461
Consulting expense - 311,800 361,160
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 (56,138) 50,650 32,381
Change in other assets (12,391) (7,432) (34,857)
Change in accounts payable (103,098) 111,236 182,525
Change in accrued expenses 8,315 243,212 (109,604)
----------- ----------- -------------
Net cash used by operating
activities (2,757,050) (1,274,052) (14,752,733)
----------- ----------- -------------
Cash flow from investing activities:
Sale of marketable securities - - 3,285,625
Purchases of marketable securities - - (3,908,281)
Purchases of property and equipment (97,250) (13,197) (700,813)
Proceeds from sale of property and
equipment - - 80,828
Patent costs - (7,693) (56,924)
------------ ------------ -------------
Cash used by investing activities (97,250) (20,890) (1,299,565)
------------ ------------ -------------
Cash flow from financing activities:
Sales of common stock 63,000 1,025,000 11,309,226
Expenses of common stock offering (35,982) (5,736) (1,717,568)
Sales of preferred stock - - 6,000,000
Expenses of preferred stock offering (18,374) - (738,451)
Exercise of stock options 1,875 1,015 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 10,519 1,020,279 18,004,949
------------ ------------ -------------
Increase (decrease) in cash and cash
equivalents (2,843,781) (274,663) 1,952,651
Cash and cash equivalents -
beginning of period 4,796,432 597,254 -
------------ ------------ -------------
Cash and cash equivalents -
end of period $ 1,952,651 $ 322,591 $ 1,952,651
============ ============ =============
Supplemental disclosure of cash information:
Cash paid for interest $ 17,105 $ - $ 209,151
============ ============ =============
Non-cash operating activities:
Value of common stock for
consulting services $ - $ 53,340 $ 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 $ - $ 348,460 $ 187,500
============ ============ =============
Value of common stock issued and
additional paid-in capital issued
as dividends on preferred stock
conversions $ 50,114 $ - $ 54,978
============ ============ =============
Value of common stock warrants
issued for preferred stock offering $ - $ - $ 133,559
============ ============ =============
Value of preferred stock converted
to common stock $ 2,607 $ - $ 3,453
============ ============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements
</PAGE>
<PAGE>
LIFEPOINT, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 December 31, 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 has established a $500,000 revolving line of credit agreement
($500,000 available at December 31, 1999) with City National Bank of Beverly
Hills, California. 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 continues to pursue parallel paths to secure additional funding
including strategic partnering, additional private placements, and a possible
public offering. In December 1999, the Company initiated a private placement
pursuant to Regulation D under the Securities Act to seek to raise the
estimated $4.5 million needed to launch its saliva based product. 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
manufacturing and marketing of its product on a timely basis. 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:
December 31,
1999
------------
Furniture and Fixtures $ 578,035
Test Equipment 425,768
Leasehold Improvements 245,991
------------
1,249,794
Less: Accumulated Depreciation 845,754
------------
$ 404,040
============
The Company has financed the acquisition of $165,862 and $249,562 in the
property and equipment through capital leases during the three and nine month
periods ending December 31, 1999, respectively.
</PAGE>
<PAGE>
LIFEPOINT, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(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 October 1997.
In April 1999, the Company and the United States Navy ("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 in addition to the urine
application. 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.
On July 14, 1999 the Company entered into an equipment lease financing
agreement with FirstCorp of Portland, Oregon. The agreement allows for a
credit line of $300,000 ($74,000 available at December 31, 1999) for the
purchase of capital equipment, with a minimum takedown size of $50,000 and a
soft cost allowance of up to 20%. The term of each takedown lease is thirty
months with an end of lease purchase option at not more than 10% of original
equipment cost.
NOTE 5 - Stockholders' Equity
During the quarter ended December 31, 1999, the Company issued 400,000 shares
of Common Stock to holders who elected to convert their shares of the Series
A 10% Cumulative Convertible Preferred Stock (the "Series A Preferred Stock").
In addition, 8,841 shares of Common Stock were issued as dividends on the
converted shares.
During the quarter ended December 31, 1999, stock options were granted to
thirteen employees to purchase 389,000 shares of the Common Stock at exercise
prices ranging from $1.67 to $1.87 per share. As of December 31, 1999, there
were outstanding, under the stock option plan, incentive stock options and
non-qualified stock options to purchase an aggregate of 1,446,500 shares held
by a total of 23 employees and 3 directors.
On October 10, 1999, after over four months of due diligence, the Compensation
Committee granted to Ms. Linda Masterson, President and Chief Executive
Officer, five Common Stock purchase warrants, each to purchase 500,000 shares
of the Common Stock at $1.72 per share, which exercise price was the average
of the high bid and low asked prices of the Common Stock during the prior 20
trading days. Thomas J. Foley, Senior Vice President Research and
Development, was also granted two Common Stock purchase warrants on
October 10, 1999, each to purchase 250,000 shares of the Common Stock at
$1.72. Each warrant will not become exercisable unless the Company achieves
a specified performance goal before a specified date and will expire five
years from the date the warrant becomes exercisable. As of December 31, 1999,
there were warrants outstanding to purchase 5,662,314 shares of the Common
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 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 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 is anticipated to begin not
earlier than the fourth 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 fourth 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, 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, the last of which is described in the succeeding paragraph.
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 Jonathan J. Pallin, a director of the Company) 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 prototype for the testing product for drugs of abuse and alcohol
and that the prototype will be completed not earlier than the second quarter
of 2000. 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 prototype instrument, will require an additional funding of
approximately $4,500,000, beyond the $6,000,000 raised in January 1999, and
that the product will not be launched earlier than the fourth quarter of 2000.
Having successfully consummated three private placements pursuant to
Regulation D under the Securities Act since November 1997, the Company
initiated in December 1999 a private placement to seek to raise the additional
necessary financing. There can be no assurance that management's estimate as
to costs and timing will be correct. Any delays may increase the Company's
costs of development, manufacture and marketing of the product.
The Company has continued 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
currently anticipates that these partnering agreements may not be completed
until the Company has at least completed development of the prototype
instrument. Accordingly, there can be no certainty as to when the Company
can complete such an agreement, if at all.
Management has announced the establishment of two financing arrangements which
will help the Company to conserve cash. On July 2, 1999, the Company
established a $500,000 revolving line of credit agreement ($500,000 available
at December 31,1999) with City National Bank of Beverly Hills, California.
The line of credit is secured by funds and securities in the Company's SEI
Liquidity Management account at City National Bank. The interest rate on the
revolving line of credit is variable and set at the prime rate as declared
from time to time by City National Bank. The revolving line of credit will
renew annually in June, and does not require guarantors nor annual fees.
Additionally, the Company entered into an equipment lease financing agreement
with FirstCorp of Portland, Oregon totaling $300,000.
If all of the common stock purchase warrants to purchase an aggregate of
5,662,314 shares of the Common Stock which are outstanding on December 31,
1999 were subsequently exercised, the Company would realize $7,643,410 in
gross proceeds. If all of the options to purchase an aggregate of 1,446,500
shares outstanding on December 31, 1999 were subsequently exercised, the
Company would realize $1,550,695 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 December 31, 1999. Accordingly, management believes that
the Company cannot rely on these exercises as a source of financing.
</PAGE>
<PAGE>
Results of Operations
Three Months Ended December 31, 1999 vs. December 31, 1998
During the quarter ended December 31, 1999, the Company spent $617,697 on
research and development and an additional $352,026 on general and
administrative expenses, as compared with $259,924 and $536,557, respectively,
during the three months ended December 31, 1998. The increase of $357,773, or
137.6%, in research and development expenses in the 1999 period was due to
increases in staffing and related research materials. Staffing levels in
research and development have nearly tripled over the same period in 1998.
General and administrative expenses decreased $184,531, or 34.4%, during the
quarter ended December 31, 1999. General and administrative expenses for the
three months ended December 31, 1998 included certain non-recurring
administrative costs associated with the private placement which closed in
January 1999.
From inception on October 8, 1992 to December 31, 1999, the Company has spent
$8,497,476 on research and development and $5,109,580 on general and
administrative expenses. Management fees paid to SAT aggregated $2,089,838
during such period.
Nine Months Ended December 31, 1999 vs. December 31, 1998
Research and development expense during the nine months ended December 31,
1999 was $1,660,591, up 103%, or $842,474, from $818,117 for the same period
in 1998. The increase in research and development is primarily as a result of
increased staffing, from 8 employees in 1998 to 19 employees for the same
period in 1999, and related materials. General and administrative expenses
during the nine months ended December 31, 1999 were $1,041,896 down 12.7%, or
$152,152, from $1,194,048 for the same period in 1998. General and
administrative expenses in 1998 were higher due to certain non-recurring
administrative costs associated with the private placement which closed in
January 1999.
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
On October 19, 1999, the Company filed with the Securities and
Exchange Commission a Current Report on Form 8K related to the
Company's press release, also dated October 19, 1999, regarding
the Company's reduced requirement for funding and to announce the
engagement of an investment banker.
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: February 15, 2000 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 December 31,
1999, and is qualified in its entirety by reference to such financial
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 1952651
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2044671
<PP&E> 1249794
<DEPRECIATION> 845754
<TOTAL-ASSETS> 2533907
<CURRENT-LIABILITIES> 488074
<BONDS> 0
0
427
<COMMON> 15417
<OTHER-SE> 1757240
<TOTAL-LIABILITY-AND-EQUITY> 2533907
<SALES> 0
<TOTAL-REVENUES> 36789
<CGS> 0
<TOTAL-COSTS> 976829
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17105
<INCOME-PRETAX> (957145)
<INCOME-TAX> (957145)
<INCOME-CONTINUING> (957145)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (957145)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
