<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<CAPTION>
(MARK ONE)
<S> <C>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from -------------- to --------------
</TABLE>
Commission file number 0-28328
UROCOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2117882
(State of incorporation) (IRS Employer Identification No.)
800 RESEARCH PARKWAY, OKLAHOMA 73104
CITY, OK
(Address of principal executive (zip code)
offices)
(405) 290-4000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
The number of shares of issuer's Common Stock, $.01 par value, outstanding
on October 31, 1996 was 10,017,748 shares.
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<PAGE>
UROCOR, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Balance Sheets as of September 30, 1996 and December 31, 1995............................... 3
Statements of Operations for the three months and nine months ended September 30, 1996 and
1995....................................................................................... 4
Statements of Cash Flows for the nine months ended September 30, 1996 and 1995.............. 5
Notes to Unaudited Interim Financial Statements -- September 30, 1996....................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS...................................................................... 7-9
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS........................................................................... 10
ITEM 2. CHANGES IN SECURITIES....................................................................... 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................................................. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................... 10
ITEM 5. OTHER INFORMATION........................................................................... 10-12
Cautionary Statements....................................................................... 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................ 12
Signatures................................................................................................. 13
Exhibits 11.1 Statement Re Computation of Per Share Earnings........................................ 14
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UROCOR, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents......................................................... $22,252,710 $ 3,125,296
Short-term marketable investments................................................. 4,002,594 --
Accounts receivable, net of allowance for doubtful accounts of $782,149 in 1996
and $982,046 in 1995............................................................ 6,438,068 4,405,100
Prepaid expenses.................................................................. 795,908 421,648
Laboratory supplies, at average cost.............................................. 586,552 234,145
Other current assets.............................................................. 342,508 119,862
------------- -------------
Total current assets............................................................ 34,418,340 8,306,051
------------- -------------
LONG-TERM MARKETABLE INVESTMENTS.................................................... 7,988,710 --
PROPERTY AND EQUIPMENT, net......................................................... 3,131,116 2,443,737
INTANGIBLE AND OTHER ASSETS, net.................................................... 1,932,932 1,743,722
------------- -------------
Total assets.................................................................... $47,471,098 $ 12,493,510
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................................. $ 728,751 $ 553,489
Accrued compensation.............................................................. 598,380 873,590
Other accrued liabilities......................................................... 141,366 114,862
Current installments of obligations under capital leases.......................... 715,222 860,088
------------- -------------
Total current liabilities....................................................... 2,183,719 2,402,029
LINE OF CREDIT, long-term........................................................... -- 700,000
OBLIGATIONS UNDER CAPITAL LEASES, net of current installments....................... 813,532 966,485
------------- -------------
Total liabilities............................................................... 2,997,251 4,068,514
------------- -------------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.01 par value -- authorized 6,000,000 shares at
September 30, 1996 and 10,132,791 shares at December 31, 1995; issued in series;
no shares outstanding at September 30, 1996 and 5,706,395 shares outstanding at
December 31, 1995............................................................... -- 57,064
Class A stock, $.01 par value -- no shares authorized at September 30, 1996 and
590,674 shares at December 31, 1995; no shares issued and outstanding at
September 30, 1996 and 513,093 shares issued and outstanding at December 31,
1995............................................................................ -- 5,131
Class B stock, $.01 par value -- authorized, issued and outstanding shares; no
shares at September 30, 1996 and 66,666 shares at December 31, 1995............. -- 667
Common stock, $.01 par value, authorized 20,000,000 shares at September 30, 1996
and 8,700,000 shares at December 31, 1995; 10,017,048 shares issued and
outstanding at September 30, 1996 and 69,188 shares issued and outstanding at
December 31, 1995............................................................... 100,170 692
Additional paid-in capital........................................................ 57,395,323 22,716,005
Accumulated deficit............................................................... (13,021,646) (14,354,563)
------------- -------------
Total stockholders' equity...................................................... 44,473,847 8,424,996
------------- -------------
Total liabilities and stockholders' equity $47,471,098 $ 12,493,510
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
UROCOR, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ------------------------------
1996 1995 1996 1995
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUE............................................ $ 6,475,839 $ 4,784,061 $ 18,832,561 $ 14,226,863
OPERATING EXPENSES:
Direct cost of services and products............. 2,575,929 1,849,183 7,104,132 5,256,878
Selling, general and administrative expenses..... 3,158,679 2,275,927 9,124,414 6,872,575
Research and development......................... 540,156 540,120 1,832,469 1,638,453
------------- ------------- -------------- --------------
Total operating expenses....................... 6,274,764 4,665,230 18,061,015 13,767,906
------------- ------------- -------------- --------------
Income from operations........................... 201,075 118,831 771,546 458,957
OTHER INCOME (EXPENSE):
Interest income.................................. 494,796 39,186 732,147 79,786
Interest expense................................. (60,890) (79,414) (170,782) (237,818)
------------- ------------- -------------- --------------
Total other income (expense)................... 433,906 (40,228) 561,365 (158,032)
------------- ------------- -------------- --------------
Income before income taxes......................... 634,981 78,603 1,332,911 300,925
Income taxes....................................... -- -- -- --
------------- ------------- -------------- --------------
NET INCOME......................................... $ 634,981 $ 78,603 $ 1,332,911 $ 300,925
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
NET INCOME PER SHARE............................... $ .06 $ .01 $ .14 $ .04
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
SHARES USED IN COMPUTING NET INCOME PER SHARE...... 11,189,263 7,272,154 9,391,369 7,032,556
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
UROCOR, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $ 1,332,911 $ 300,925
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization.................................................. 808,019 639,920
Stock option compensation expense.............................................. 97,071 --
Other.......................................................................... (1,186) 351
Changes in assets and liabilities:
Increase in accounts receivable.............................................. (2,032,968) (1,193,264)
Increase in prepaid expense.................................................. (374,260) (163,268)
(Increase) decrease in laboratory supplies................................... (352,407) 78,620
Increase in other current assets............................................. (222,646) (23,279)
Increase in accounts payable................................................. 175,262 43,883
Increase in accrued liabilities.............................................. 26,504 33,534
Decrease in accrued compensation............................................. (275,210) (245,557)
-------------- -------------
Net cash used in operating activities...................................... (818,910) (528,135)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities (purchases) of short-term marketable investments.................... (4,002,594) --
Purchases of long-term marketable investments.................................. (7,988,710) --
Capital expenditures........................................................... (1,493,305) (871,320)
Proceeds from capital leases................................................... 385,511 697,018
Intangible and other assets.................................................... (192,646) (654,968)
-------------- -------------
Net cash used in investing activities...................................... (13,291,744) (829,270)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from stock issuances................................................ 34,603,514 3,997,800
Proceeds from exercise of stock options.......................................... 15,350 5,250
Principal payments under capital lease obligations and other indebtedness........ (680,796) (485,967)
Proceeds from line of credit..................................................... 600,000 500,000
Payments on line of credit....................................................... (1,300,000) (1,000,000)
-------------- -------------
Net cash provided by financing activities.................................. 33,238,068 3,017,083
-------------- -------------
Net increase in cash and cash equivalents.......................................... 19,127,414 1,659,678
CASH AND CASH EQUIVALENTS, beginning of year....................................... 3,125,296 1,822,925
-------------- -------------
CASH AND CASH EQUIVALENTS, end of period........................................... $ 22,252,710 $ 3,482,603
-------------- -------------
-------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest......................................................... $ 150,852 $ 207,554
Cash paid for income taxes..................................................... 48,000 18,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
UROCOR, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
NOTE 1 -- BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring items) considered necessary for a fair presentation have been
included. These interim financial statements should be read in conjunction with
the financial statements and notes included in the Company's Form S-1
Registration Statement filed on April 3, 1996, as amended, and included in the
Company's final prospectus dated May 16, 1996 related thereto.
Operating results for the nine-month period ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the full year
ended December 31, 1996.
NOTE 2 -- NET INCOME PER SHARE:
Net income per common share and common share equivalents has been computed
based upon the weighted average number of common shares and common share
equivalents outstanding during each period. Common share equivalents recognize
the potential dilutive effects of the conversion of Preferred, Class A and Class
B Stock to Common Stock and the impact of outstanding options and warrants to
acquire Common Stock using the treasury stock method and the Company's estimate
of the fair value of common stock during each period. Pursuant to the rules of
the Securities and Exchange Commission, common and common share equivalent
shares issued in the 12 months prior to the Company's initial public offering,
have been included in the computation of common and common equivalent shares as
if they were outstanding for all prior periods presented.
NOTE 3 -- INITIAL PUBLIC OFFERING:
The Company's initial public offering was consummated on May 22, 1996,
pursuant to which the Company sold a total of 3,450,000 common shares at an
offering price to the public of $11 per share. The net proceeds to the Company
were approximately $34,600,000 after deducting expenses and underwriting
discount. All outstanding shares of the Company's Preferred Stock, Class A Stock
and Class B Stock were automatically converted into shares of Common Stock
immediately prior to the closing of the offering.
NOTE 4 -- INVESTMENTS:
Pursuant to the Company's investment policy, idle and excess funds are
invested in high grade, fixed income securities generally for no more than two
years. These securities are classified as Available-for-Sale as of September 30,
1996. The Company considers any net unrealized gain or loss on these investments
to be temporary, and reflects such gains or losses as a component of
stockholders' equity. As of September 30, 1996, there was not a material net
unrealized gain or loss on these investments.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's expectations with respect to future results of operations that
may be embodied in oral and written forward-looking statements, including any
forward-looking statements that may be contained in this Quarterly Report on
Form 10-Q, are subject to risks and uncertainties that must be considered when
evaluating the likelihood of the Company's realization of such expectations. The
Company's actual results could differ materially. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in Item 5 of Part II of this Report.
OVERVIEW
UroCor provides a broad range of diagnostic services for the clinical
management of certain urological cancers and diseases. The Company's goal is to
complement its diagnostic services with therapeutic products and information
services in order to become an integrated disease management company serving the
urology market. The Company has established four business groups,
UroDiagnostics, UroSciences, UroTherapeutics and Disease Management Information
Systems, to serve the needs of urologists and managed care organizations for the
diagnostic, prognostic and therapeutic care of patients throughout the entire
course of their diseases.
The Company currently derives substantially all of its revenue from
diagnostic products and services that its UroDiagnostics Group provides to the
urology market to assist in the diagnosis, prognosis and management of prostate
cancer, bladder cancer and kidney stones disease. The Company recognizes revenue
when products are sold or services are rendered. The Company typically bills
various third-party payors for its products and services, including governmental
programs such as Medicare, private insurance and managed care plans, as well as
individual patients. For the nine months ended September 30, 1996, approximately
52%, 35%, 8% and 5% of the Company's revenue was attributable to Medicare,
private insurance and managed care, individual patients, and physicians and
hospitals, respectively.
RESULTS OF OPERATIONS
REVENUE. Revenue increased 35.4%, from $4.8 million in the three months
ended September 30, 1995 to $6.5 million in the three months ended September 30,
1996, and increased 32.4%, from $14.2 million in the first nine months of 1995
to $18.8 million in the first nine months of 1996. These increases resulted from
an increase in case volume of 91.4% and 68.5% for the three- and nine-month
periods, respectively, over the same periods in the prior year due primarily to
expansion of the Company's client base, increased utilization of the Company's
diagnostic products and services by existing clients and the introduction of the
Company's new kidney stone product line in February 1996. Case volume increased
at a higher rate than revenue primarily due to the shift in product and price
mix resulting from the introduction of the kidney stone product line and an
increase in serum based tests, each of which generally has average selling
prices below those of most of the Company's other products.
DIRECT COST OF SERVICES AND PRODUCTS. Direct cost of services and products
increased 39.3%, from $1.8 million in the three months ended September 30, 1995
to $2.6 million in the three months ended September 30, 1996, and increased
35.1%, from $5.3 million in the first nine months of 1995 to $7.1 million in the
first nine months of 1996. These increases were due principally to higher
personnel costs, and supply and distribution costs resulting from increased case
volume. As a percentage of revenue, direct expenses increased to 39.8% for the
three months ended September 30, 1996 from 38.7% for the three months ended
September 30, 1995, and increased to 37.7% of revenue for the first nine months
of 1996 from 37.0% for the first nine months of 1995. These increases are due
principally to the continued growth of the Company's new kidney stone product
line which was introduced in
7
<PAGE>
early 1996 and an increase in serum based tests, with each of these products
having lower profit margins than those of most of the Company's other products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 38.8%, from $2.3 million in the three months
ended September 30, 1995 to $3.2 million in the three months ended September 30,
1996, and increased 32.8%, from $6.9 million in the first nine months of 1995 to
$9.1 million in the first nine months of 1996. These increases were due
principally to increases in personnel costs related to marketing, sales staff
and information services personnel, as well as increases in insurance, taxes,
and professional services related to becoming a public company and increases in
promotional expenses related to new product introduction. As a percentage of
revenue, selling, general and administrative expenses increased to 48.8% for the
three months ended September 30, 1996 from 47.6% for the three months ended
September 30, 1995, and increased to 48.5% of revenue for the first nine months
of 1996 from 48.3% for the first nine months of 1995.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development costs did not
change from $0.5 million in the three months ended September 30, 1995 to $0.5
million in the three months ended September 30, 1996, and increased 11.8%, from
$1.6 million in the first nine months of 1995 to $1.8 million in the first nine
months of 1996. The nine-month increase was due principally to an increase in
internal research laboratory personnel, offset by a decrease in costs associated
with the scheduled conclusion of certain external collaborative research
projects that were sponsored and funded by the Company. As a percentage of
revenue, research and development expenses decreased to 8.3% for the three
months ended September 30, 1996 from 11.3% for the three months ended September
30, 1995, and decreased to 9.7% of revenue for the first nine months of 1996
from 11.5% for the first nine months of 1995.
OTHER INCOME (EXPENSE). Interest income increased in the three- and
nine-month periods ended September 30, 1996 compared to the same periods of
1995, due principally to the increased cash, cash equivalents and investments
that resulted from the proceeds of the Company's initial public offering in May
1996. Interest expense decreased in the three- and nine-month periods ended
September 30, 1996 compared to the same periods of 1995, due to a decrease in
the average principal balance of the Company's bank credit facility.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had cash and cash equivalents of $22.3
million, short-term investments of $4.0 million and long-term investments of
$8.0 million. The Company's working capital was $32.2 million.
In addition to such capital resources, the Company has a bank credit
facility pursuant to which it may borrow up to $3.0 million, secured by accounts
receivable and all tangible assets of the Company. The credit facility expires
in February 1997, and as of September 30, 1996, there were no amounts borrowed
thereunder.
The Company also has available a lease financing arrangement that it may
utilize for up to $1.5 million in capital expenditures made through March 1997.
Accounts receivable, net of allowance for doubtful accounts, totalled $6.4
million at September 30, 1996, an increase of $2.0 million from December 31,
1995. At September 30, 1996, the Company's average number of days sales in
receivables was approximately 90 compared to 71 at December 31, 1995. During
1995 and 1996, the Company's Medicare intermediary and certain other third-party
payors have continued a general trend of increased time between their receipt of
claims for reimbursement and payment to the Company. This trend has resulted in
a lengthening of the overall collection cycle and the Company's accounts
receivable increasing at a rate greater than the revenue growth rate. Such
delays also have affected the Company's cash flow from operations.
8
<PAGE>
Net cash used in operating activities was $0.8 million for the nine months
ended September 30, 1996, which was primarily the result of net income of $1.3
million and depreciation and amortization of $0.8 million offset in part by a
$2.0 million increase in accounts receivable, $0.4 million increase in prepaid
expenses and $0.4 million increase in laboratory supplies. Prepaid expenses
increased primarily due to the timing of payment of insurance premiums, and
laboratory supplies increased primarily due to increased test volume and the
introduction of new products.
The Company received approximately $34.6 million (net of expenses and
underwriting discount) from an initial public offering of the Company's Common
Stock in May 1996. Net cash provided by financing activities was $33.2 million
for the first nine months of 1996, consisting primarily of the net proceeds from
the initial public offering, offset by net payments on the bank credit facility
of $0.7 million and principal payments under capital leases and other
indebtedness of $0.7 million. Net cash used in investing activities was $13.3
million and consisted primarily of purchases of short-term investments of $4.0
million, long-term marketable investments of $8.0 million and capital
expenditures of $1.5 million.
The Company's capital expenditures of $1.5 million for the nine months ended
September 30, 1996, were primarily for computer hardware and software, office
equipment and software development for the Company's information services. Of
this amount, $202,000 relates to internal software development costs for
information services. While future capital expenditures will depend upon a
number of factors, the level of expenditures is expected to increase over the
historical level of such expenditures as the Company expands to deliver
therapeutics and information services and continues to enhance current
diagnostic services.
In December 1994, the Company obtained distribution rights to a therapeutic
product currently under review for marketing approval by the United States Food
and Drug Administration (the "FDA"). The total cost of the distribution rights
is $3.0 million, which is being paid in installments based on achievement of
certain milestones by the manufacturer. An initial payment of $750,000 was made
in December 1994, and a second installment of $500,000 was paid in 1995 after
the product was submitted for FDA review in April 1995. The Company is obligated
to pay an additional milestone payment of $1.75 million when or if the product
is approved for marketing in the United States by the FDA.
The Company anticipates that its operations and growth strategy will be
financed through proceeds from its initial public offering, operating cash flow,
capital leases and an existing bank credit facility. The Company believes that
these sources of funds will be sufficient to satisfy the Company's capital
requirements for at least 18 months. There may be circumstances, however, that
would accelerate the Company's use of such financing sources. If this occurs,
the Company may, from time to time, incur indebtedness or issue, in public or
private transactions, equity or debt securities. The Company currently has no
arrangements, however, for additional financing and there can be no assurance
that the Company will be able to obtain requisite financing when needed on
acceptable terms.
9
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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
Cautionary Statements:
The Company's expectations with respect to future results of operations that
may be embodied in oral and written forward-looking statements, including any
forward-looking statements that may be contained in this Quarterly Report on
Form 10-Q, are subject to risks and uncertainties that must be considered when
evaluating the likelihood of the Company's realization of such expectations. The
Company's actual results could differ materially. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below.
NEED FOR FUTURE FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL. The Company's
growth since 1991 has required, and any future growth will require, significant
amounts of working capital. The Company believes that existing cash, cash
equivalents and investments, cash flow from operations, capital leases and an
existing bank credit facility, will be adequate to fund its anticipated business
expansion, capital expenditures and working capital needs for the next 18
months. There can be no assurance that additional capital will not be required
sooner, or, if required, that it will be available on a timely basis or on terms
satisfactory to the Company.
UNCERTAINTIES RELATED TO THIRD-PARTY REIMBURSEMENT; POTENTIAL HEALTH CARE
REFORM. The Company typically bills governmental programs such as Medicare and
other third-party payors such as private insurance and managed care plans for
its products and services. Such third-party payors are increasingly negotiating
prices with the goal of lowering reimbursement rates, which may result in lower
profit margins for the Company. Reimbursement rates have been established for
most but not all of the services performed by the Company. The Company cannot
collect from Medicare or other third-party payors for services that those payors
have not approved for reimbursement. There can be no assurance that the
Company's Free/Total PSA product or any other products under development will be
approved for reimbursement by Medicare or other third-party payors. From time to
time, the public and federal government focus significant attention on reforming
the health care system in the United States. Any future changes in Medicare and
other third-party payor reimbursement which may result from health care reform
or deficit reduction legislation will likely continue the downward pressure on
prices. Because of the uncertainties surrounding the nature, timing and extent
of any such reform initiatives, the Company is unable to predict the effects of
any such changes on the Company.
DEPENDENCE ON CERTAIN PRODUCT LINES. A significant portion of the Company's
revenue has been, and is expected to continue to be, dependent upon the
Company's prostate tissue analysis and bladder cellular analysis product lines.
Any negative event related to these product lines, such as increased
10
<PAGE>
competition, pricing pressures and clinical or technological obsolescence would
have a material and adverse effect on the Company's financial condition and
results of operations.
NO ASSURANCE OF SUCCESSFUL ACQUISITION OF DISTRIBUTION RIGHTS FOR
THERAPEUTIC PRODUCTS. Through its UroTherapeutics Group, the Company is
developing a therapeutic products distribution business. To date, the Company
has acquired distribution rights for one therapeutic product. There can be no
assurance that the Company will be successful in negotiating any additional
distribution or other agreements related to therapeutic products in the future.
Additionally, the Company has never marketed or distributed any therapeutic
products, and there can be no assurance that the Company's efforts will be
successful.
UNCERTAINTIES RELATED TO THE FDA APPROVAL OF THERAPEUTIC PRODUCT. The
Company has a distribution agreement with IAF BioVac, Inc. ("BioVac"), for a
therapeutic product for use in treating certain types of bladder cancer. BioVac
is responsible for obtaining approvals from the United States Food and Drug
Administration (the "FDA") for marketing the therapeutic product in the United
States. In April 1995, BioVac filed its initial applications with the FDA. In
April 1996, the FDA advised that the application was not approvable and
requested additional data regarding certain aspects of manufacturing and testing
of the product, which BioVac filed with the FDA in August 1996. Although BioVac
has advised the Company that it believes it can satisfy FDA requirements, there
can be no assurance that approval will be obtained.
UNCERTAINTIES RELATED TO MANAGED CARE. Managed care organizations are
gaining increasing control over access to health care for an increasing number
of patients with urological diseases. There can be no assurance that the Company
will be able to maintain its existing contracts with managed care organizations
or that it will be able to obtain additional contracts with such organizations
in the future which could preclude the Company from serving large groups of
patients in certain markets. The Company has experienced increasing pricing
pressure from managed care organizations, and such pressure is expected to
continue. There can be no assurance that such pricing pressure and any contract
restrictions will not have a material adverse effect on the Company's financial
condition and results of operations.
NO ASSURANCE OF ACCESS TO AND DELIVERY OF NEW DIAGNOSTIC TECHNOLOGY. The
markets for the Company's diagnostic products and services are characterized by
rapidly changing technology, frequent new product introductions and enhancement
and, therefore, rapid product obsolescence. There can be no assurance the
Company will be able to identify new products, trends or opportunities, develop
and bring to market new products, respond effectively to new technological
changes or product announcements by others, develop or obtain access to advanced
materials and technologies, or receive commercial acceptance for its products.
UNCERTAINTIES ASSOCIATED WITH COMPETITIVE PRESSURES. The industry in which
the Company operates is characterized by intense competition with many different
types of competitors including specialty laboratories, diagnostic kit and
instrumentation manufacturers, local and regional pathology services, hospital
laboratories, large general reference clinical laboratories, pharmaceutical
companies with therapeutic products and providers of health care information
services. Many of the Company's competitors are significantly larger and have
significantly greater financial, technical and administrative resources than the
Company; many also have long established relationships with the Company's
current and prospective customers. There can be no assurance that the Company
will be able to withstand the pressures exerted by such competitors in regards
to the Company's ability to acquire new technologies or the Company's ability to
successfully market its products and services.
RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH. The Company has recently
experienced substantial growth and expanded its operational capabilities. The
Company is also planning to offer a therapeutic product line and information
services. This growth and expansion has placed, and will continue to
11
<PAGE>
place, a significant strain on the Company's management, production, technical,
financial and other resources. To date, the Company primarily has experience in
managing a diagnostics business. There can be no assurance that the Company will
be able to manage expansion into and operation of a therapeutics or information
services business.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. The Company's quarterly and
annual operating results are affected by a wide variety of factors, many of
which are outside the Company's control. Such factors have in the past and could
in the future materially and adversely affect revenue, operating expenses and
income. These factors include the quantities and timing of cases received,
competitive pricing pressures, availability and cost of diagnostic supplies,
changes in the mix of products sold, seasonality, timing and costs of new
product and technology introductions by the Company or its competitors,
retention and expansion of the sales force and timing of payments from Medicare
and other third-party payors. The need for continued investment in research and
development and expansion of its product lines could limit the Company's ability
to reduce expenses quickly. As a result of these factors, the Company expects
its operating results to continue to fluctuate.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND DESCRIPTION PAGE
- --------------------------------------------------------------------------------------- -----
<S> <C>
11.1 Computation of Earnings per Share................................................ 14
</TABLE>
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UROCOR, INC.
By: /s/ WILLIAM A. HAGSTROM
-----------------------------------------
William A. Hagstrom
CHAIRMAN OF THE BOARD
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
November 12, 1996
By: /s/ SOCRATES H. CHOUMBAKOS
-----------------------------------------
Socrates H. Choumbakos
VICE-PRESIDENT CORPORATE
DEVELOPMENT AND CHIEF
FINANCIAL OFFICER
November 12, 1996
13
<PAGE>
EXHIBIT 11.1
UROCOR, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ----------------------------
1996 1995 1996 1995
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income (loss)................................... $ 634,981 $ 78,603 $ 1,332,911 $ 300,925
-------------- ------------- ------------- -------------
Divided by;
Weighted average shares outstanding (1)........... 11,189,263 6,881,155 9,261,512 6,382,109
Plus:
Supplemental shares (2)........................... -- 390,999 129,857 650,447
-------------- ------------- ------------- -------------
Total weighted average shares outstanding........... 11,189,263 7,272,154 9,391,369 7,032,556
-------------- ------------- ------------- -------------
Earnings per share.................................. $ .06 $ .01 $ .14 $ .04
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
</TABLE>
- ------------------------
(1) Convertible Preferred Stock, Class A Stock and Class B Stock are reflected
on an "as if converted" basis for periods prior to the Company's initial
public offering. Common Stock issuable upon exercise of outstanding options
and warrants is reflected using the treasury stock method.
(2) Reflects common and common stock equivalent shares issued in the 12 months
prior to the Company's initial public offering at an exercise price below
the public offering price of $11.00 per share. After the first three months
of 1996, such common stock equivalent shares are included in the calculation
of the "weighted average shares outstanding" above.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET FOR SEPTEMBER 30, 1996 AND THE STATEMENT OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 22,252,710
<SECURITIES> 4,002,594
<RECEIVABLES> 7,220,217
<ALLOWANCES> 782,149
<INVENTORY> 586,552
<CURRENT-ASSETS> 34,418,340
<PP&E> 5,743,254
<DEPRECIATION> 2,612,138
<TOTAL-ASSETS> 47,471,098
<CURRENT-LIABILITIES> 2,183,719
<BONDS> 0
0
0
<COMMON> 100,170
<OTHER-SE> 44,373,677
<TOTAL-LIABILITY-AND-EQUITY> 47,471,098
<SALES> 0
<TOTAL-REVENUES> 18,832,561
<CGS> 0
<TOTAL-COSTS> 7,104,132
<OTHER-EXPENSES> 10,079,476
<LOSS-PROVISION> 877,407
<INTEREST-EXPENSE> 170,782
<INCOME-PRETAX> 1,332,911
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,332,911
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,332,911
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
