<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO______________
COMMISSION FILE NUMBER 0-28328
------------------------
UROCOR, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2117882
(State of incorporation) (IRS Employer Identification No.)
840 RESEARCH PARKWAY, OKLAHOMA CITY, OK 73104
(Address of principal executive (zip code)
offices)
</TABLE>
(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 July 25, 2000 was 9,794,661 shares.
--------------------------------------------------------------------------------
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<PAGE>
UROCOR, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets as of June 30, 2000 and
December 31, 1999 3
Consolidated Statements of Operations for the three and six
months ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 5
Notes to Unaudited Interim Consolidated Financial Statements
-June 30, 2000 6-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 10-14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
ITEM 5. OTHER INFORMATION
CAUTIONARY STATEMENTS 17-25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 26
Signatures 27
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UROCOR, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 6,976,985 $ 5,259,218
Short-term marketable investments......................... 3,348,501 3,107,392
Accounts receivable, net of allowance for doubtful
accounts of $5,895,443 at June 30, 2000 and $5,173,414
at December 31, 1999.................................... 10,111,549 11,032,693
Prepaid expenses.......................................... 822,716 824,164
Laboratory supplies, at average cost...................... 575,760 616,087
Inventory................................................. 550,367 210,013
Deferred tax asset - current, net......................... 3,246,419 3,817,722
Other current assets...................................... 866,103 782,962
------------ ------------
Total current assets.................................. 26,498,400 25,650,251
------------ ------------
LONG-TERM MARKETABLE INVESTMENTS............................ -- 2,687,292
PROPERTY AND EQUIPMENT, net................................. 9,712,998 8,868,120
NON-CURRENT DEFERRED TAX ASSET, net......................... 1,857,926 1,842,018
GOODWILL, net of amortization of $49,817 at June 30, 2000... 4,048,439 --
INTANGIBLE AND OTHER ASSETS, net............................ 3,999,559 3,114,094
------------ ------------
Total assets.......................................... $ 46,117,322 $ 42,161,775
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 3,101,160 $ 3,457,851
Accrued compensation...................................... 407,279 401,657
Current installments of obligations under capital
leases.................................................. -- 8,454
Accrued contract payments................................. 1,000,000 --
Other accrued liabilities................................. 321,097 162,768
------------ ------------
Total current liabilities............................. 4,829,536 4,030,730
LONG-TERM DEBT.............................................. 175,000 --
DEFERRED COMPENSATION....................................... 413,393 256,810
------------ ------------
Total liabilities..................................... 5,417,929 4,287,540
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized 6,000,000
shares at June 30, 2000 and at December 31, 1999; no
shares issued and outstanding at June 30, 2000 or at
December 31, 1999....................................... -- --
Common stock, $.01 par value, authorized 20,000,000 shares
at June 30, 2000 and at December 31, 1999; 10,989,265
shares issued at June 30, 2000 and 10,769,102 shares
issued at December 31, 1999............................. 109,893 107,691
Additional paid-in capital................................ 59,361,207 59,265,256
Common stock held in treasury at cost, 1,176,404 shares at
June 30, 2000 and 1,576,266 at December 31, 1999........ (5,312,206) (7,174,508)
Accumulated deficit....................................... (13,459,501) (14,324,204)
------------ ------------
Total stockholders' equity............................ 40,699,393 37,874,235
------------ ------------
Total liabilities and stockholders' equity............ $ 46,117,322 $ 42,161,775
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
UROCOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE................................... $12,320,146 $11,295,113 $24,360,703 $23,572,217
OPERATING EXPENSES:
Direct cost of services and products.... 4,655,424 4,899,091 9,031,747 9,695,193
Selling, general and administrative
expenses.............................. 6,673,435 6,769,889 13,429,687 12,602,883
Research and development................ 388,092 429,862 786,807 808,014
Special charges......................... -- 7,409,777 -- 7,409,777
----------- ----------- ----------- -----------
Total operating expenses............ 11,716,951 19,508,619 23,248,241 30,515,867
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS)................... 603,195 (8,213,506) 1,112,462 (6,943,650)
OTHER:
Interest income, net.................... 164,742 229,705 336,271 486,234
Other expense........................... (4,459) (43,032) (28,642) (43,032)
----------- ----------- ----------- -----------
Total other income, net............. 160,283 186,673 307,629 443,202
----------- ----------- ----------- -----------
Income (loss) before income taxes......... 763,478 (8,026,833) 1,420,091 (6,500,448)
Income tax provision (benefit)............ 305,875 (2,830,944) 555,395 (2,249,965)
----------- ----------- ----------- -----------
NET INCOME (LOSS)......................... $ 457,603 $(5,195,889) $ 864,696 $(4,250,483)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE:
Basic:
Net Income (Loss) Per Common Share...... $ .05 $ (.52) $ .09 $ (.41)
=========== =========== =========== ===========
Weighted Average Common and Common
Equivalent Shares Outstanding......... 9,768,329 10,077,465 9,568,243 10,286,192
=========== =========== =========== ===========
Diluted:
Net Income (Loss) Per Common Share -
Assuming Dilution..................... $ .05 $ (.52) $ .09 $ (.41)
=========== =========== =========== ===========
Weighted Average Common and Common
Equivalent Shares Outstanding -
Assuming Dilution..................... 9,962,083 10,077,465 9,805,686 10,286,192
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
UROCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 864,696 $(4,250,483)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 1,438,955 1,394,970
Deferred income tax provision (benefit)................. 555,395 (2,249,965)
Deferred compensation expense........................... 156,583 4,576
Stock option compensation expense....................... 4,126 116,483
Loss on disposition of equipment........................ 3,857 43,032
Loss on asset write downs............................... -- 3,226,846
Changes in assets and liabilities:
Decrease in accounts receivable......................... 921,145 5,590,597
Decrease in prepaid expense............................. 69,024 472,177
(Increase) decrease in laboratory supplies.............. 40,327 (102,722)
(Increase) decrease in inventory........................ (296,970) 14,820
(Increase) decrease in other current assets............. (83,141) 230,856
Decrease in accounts payable............................ (622,431) (531,535)
Increase in accrued compensation........................ 5,622 546,403
Increase (decrease) in accrued liabilities.............. 158,329 (86,853)
----------- -----------
Net cash provided by operating activities............. 3,215,517 4,419,202
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities (purchases) of short-term marketable
investments, net....................................... (241,109) 3,872,980
Maturities (purchases) of long-term marketable
investments, net....................................... 2,687,292 (732,724)
Cash acquired in acquisition of subsidiary.............. (30,543) --
Cash paid for acquisition of subsidiary................. (650,000) --
Capital expenditures.................................... (1,683,823) (3,173,927)
Milestone payments for therapeutic product.............. (750,000) --
Intangibles and other assets............................ (866,643) (466,019)
----------- -----------
Net cash used in investing activities................. (1,534,826) (499,690)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from employee stock purchase plan.............. 55,687 63,065
Repurchases of Common Stock............................. (311,996) (4,953,005)
Proceeds from exercise of stock options................. 274,839 42,066
Proceeds from exercise of warrants...................... 27,000 --
Principal payments under capital lease obligations...... (8,454) (140,128)
----------- -----------
Net cash provided by (used in) financing activities... 37,076 (4,988,002)
----------- -----------
Net increase (decrease) in cash and cash equivalents........ 1,717,767 (1,068,490)
CASH AND CASH EQUIVALENTS, beginning of year................ 5,259,218 11,034,123
----------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 6,976,985 $ 9,965,633
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................ $ -- $ 8,386
Cash paid for income taxes............................ $ -- $ 300,000
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Obligations under therapeutic product distribution
agreement............................................ $ 1,000,000 $ --
Current liabilities assumed in acquisition of
subsidiary........................................... $ 265,740 $ --
Long-term liabilities assumed in acquisition of
subsidiary........................................... $ 175,000 $ --
Issuance of 477,700 common shares in acquisition of
subsidiary........................................... $ 1,910,800 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
UROCOR, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
NOTE 1--BASIS OF PRESENTATION:
The accompanying unaudited consolidated 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 Annual Report
on Form 10-K for the year ended December 31, 1999 filed with the Securities and
Exchange Commission on March 10, 2000.
The consolidated financial statements include the accounts of all
majority-owned subsidiaries. All significant intercompany transactions have been
eliminated. Operating results for the six month period ended June 30, 2000 are
not necessarily indicative of the results that may be expected for the full year
ending December 31, 2000.
NOTE 2--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 considered available-for-sale as of June 30, 2000
and December 31, 1999. 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 June 30, 2000 and December 31, 1999,
there was not a material net unrealized gain or loss on these investments.
NOTE 3--COMMITMENTS AND CONTINGENCIES:
In July 1998 and March 1999, the Company received Civil Investigative
Demands ("CID") from the Department of Justice ("DOJ"). If the DOJ were to
pursue and prevail on matters that may arise from this investigation, any
significant recoupment of funds or civil or criminal penalty or exclusion from
federal and state health care programs potentially resulting from such
proceedings could have a material adverse effect on the financial condition and
results of operations of the Company.
NOTE 4--SPECIAL CHARGES:
During the second quarter of 1999, the Company recognized special charges
consisting of the following:
<TABLE>
<S> <C>
Increased provision for accounts receivable................. $3,941,833
Information systems restructuring costs..................... 2,893,700
Settlement of certain Urology Support Services ("USS")
claims.................................................... 348,146
Severance costs for workforce reduction..................... 226,098
----------
Total special charges..................................... $7,409,777
==========
</TABLE>
During the second quarter of 1999, the Company discontinued certain managed
care and payor related marketing programs and identified significantly aged
segments of its accounts receivable for which the likelihood of collectibility
was doubtful, or the processing cost could exceed the expected benefit.
Accordingly, a provision of $3,941,833 was made for those receivable balances.
6
<PAGE>
NOTE 4--SPECIAL CHARGES: (CONTINUED)
During the second quarter of 1999, the Company accelerated an information
systems initiative to increase productivity, decrease costs and more efficiently
collect billings. As a result of this new operational focus on information
systems, the Company restructured its information systems function and
terminated certain existing systems and internal software development projects.
The write-offs for systems and software projects related to this restructuring
totaled $2,893,700. Severance and outplacement costs associated with
restructuring this function and ending certain development projects totaled
$226,098 for seven people employed by the information systems function and three
people employed in other areas of the Company that were involved in terminated
projects.
At the end of the third quarter of 1998, the Company made the decision to
exit the USS business and accrued estimated costs associated with exiting this
business. During the second quarter of 1999, the Company settled claims by two
of the former clients of the USS business, which together with legal fees
incurred by the Company resulted in costs of $348,146 in excess of amounts that
had been previously accrued for these purposes.
NOTE 5--STOCK REPURCHASE PROGRAM:
On April 20, 1999, the Board of Directors of the Company authorized the
repurchase by the Company of up to $10 million of UroCor common stock.
Management expects that the repurchase program will be conducted from time to
time on the open market or in privately negotiated transactions, depending upon
market conditions, securities regulations and other factors. As of July 25,
2000, the Company had repurchased approximately $7.6 million (or approximately
1.7 million shares) of common stock and reissued 477,700 treasury shares for the
acquisition of Mills Biopharmaceuticals, Inc. Management also expects that,
depending upon the number of shares purchased, the Company may elect to
supplement its cash position with new debt.
NOTE 6--ACQUISITION
On April 17, 2000, UroCor acquired Mills Biopharmaceuticals, Inc., the
manufacturer of UroCor's ProstaSeed-Registered Trademark- I-125 sources for
radiation treatment of prostate cancer. The terms of the purchase agreement
called for a combination of $650,000 cash, assumption of certain liabilities and
the treasury stock described above for a total value of $4.3 million, including
the milestone payments previously made, in addition to certain royalty payments
dependent upon the achievement of future sales levels. Under the agreement,
Dr. Stanley Mills, Mills Biopharmaceuticals' president and founder, was
appointed UroCor's Vice President Product Development for radiation therapies
subject to a separate employment agreement and the Company agreed to lease the
production facilities from Dr. Mills. This acquisition has been accounted for
under the purchase method of accounting. The Company has made a preliminary
allocation of the purchase price based on estimated fair values at date of
acquisition, pending final determination of certain acquired balances. This
preliminary allocation has resulted in acquired goodwill of approximately $4.0
million, which is being amortized over 20 years. The results of the acquired
businesses have been included in the consolidated financial statements since the
acquisition date.
NOTE 7--SEGMENT REPORTING:
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information", requires selected
information about reportable segments in interim financial reports that is
consistent with that made available to management to assess financial
performance. With the regulatory approvals for two therapeutic products
occurring in the first quarter of 2000 and the purchase of manufacturing
capabilities of Mills Biopharmaceuticals, described above, the Company is now
operating in two reportable segments--1) diagnostic services and 2) therapeutic
products. The
7
<PAGE>
NOTE 7--SEGMENT REPORTING: (CONTINUED)
diagnostic services segment provides testing services to urologists for
diagnosing, selecting appropriate therapies and managing patients with urologic
diseases. The therapeutic products segment now offers
ProstaSeed-Registered Trademark-for early stage prostate cancer, PACIS
BCG-Registered Trademark- for bladder cancer and Persist-Registered Trademark-
for incontinence; the therapeutic revenue activity prior to 2000 was related to
a co-promotion agreement with Zeneca, Inc., which entailed the Company's sales
force selling two prostate cancer products to urologists, however, the Company
had no other direct costs related to sales of these co-promotion products. The
Company's management evaluates performance based on several factors. However,
the primary measurement focus is "Gross Profit" (revenue less direct costs) and
"Operating Income", excluding special charges and any other unusual items. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies contained in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
year ended December 31, 1999. Corporate expenses include overhead expenses not
allocated to specific business segments, including administrative expenses and
information services expenses. The expenses that are allocated to business
segments after the gross profit calculation to result in the operating income
figures include sales and marketing expenses, certain administrative expenses
directly attributable to the segments and bad debt expense. Asset information by
segment is not reported, because the Company does not yet produce such
information internally. The following table presents information about the
Company's segments for the three and six months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
DIAGNOSTIC THERAPEUTIC
SERVICES PRODUCTS TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 2000:
Revenue...................................... $12,040,407 $ 279,739 $12,320,146
Gross Profit................................. $ 7,812,194 $ (147,472) $ 7,664,722
Operating Income (Loss)...................... $ 3,707,035 $ (915,407) $ 2,791,628
THREE MONTHS ENDED JUNE 30, 1999:
Revenue...................................... $10,840,010 $ 455,103 $11,295,113
Gross Profit................................. $ 6,177,825 $ 218,197 $ 6,396,022
Operating Income (Loss)...................... $ 1,950,825 $ (126,103) $ 1,824,722
SIX MONTHS ENDED JUNE 30, 2000:
Revenue...................................... $24,025,727 $ 334,976 $24,360,703
Gross Profit................................. $15,460,213 $ (131,257) $15,328,956
Operating Income (Loss)...................... $ 6,957,109 $(1,530,553) $ 5,426,556
SIX MONTH ENDED JUNE 30, 1999:
Revenue...................................... $22,466,194 $ 1,106,023 $23,572,217
Gross Profit................................. $13,225,601 $ 651,423 $13,877,024
Operating Income............................. $ 4,831,401 $ 109,871 $ 4,941,272
</TABLE>
Reconciliation of operating income above to corresponding totals in the
accompanying financial statements:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
2000 1999 2000 1999
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Total for reportable segments........ $2,791,628 $ 1,824,722 $5,426,556 $ 4,941,272
Less: Special charges................ -- 7,409,777 -- 7,409,777
Corporate expenses.............. 2,188,433 2,628,451 4,314,094 4,475,145
---------- ----------- ---------- -----------
Operating income..................... $ 603,195 $(8,213,506) $1,112,462 $(6,943,650)
========== =========== ========== ===========
</TABLE>
8
<PAGE>
NOTE 7--BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE:
Basic earnings per share of common stock has been computed on the basis of
the weighted average number of shares outstanding during each period. The
diluted net income per share of common stock includes the dilutive effect of the
outstanding stock options and warrants.
For the three and six months ended June 30, 1999, the otherwise dilutive
impact of outstanding stock options and warrants is excluded from the
computation of Diluted Net Loss Per Share because such impact is antidilutive in
the period of a net loss (i.e., consideration of such shares would result in a
lower Diluted Net Loss Per Share in comparison to the Basic Net Loss Per Share).
The following table summarizes the calculation of basic earnings per share
("EPS") and the diluted EPS components:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 2000 THREE MONTHS ENDED JUNE 30, 1999
-------------------------------------- --------------------------------------
INCOME SHARES LOSS SHARES
(NUMERATOR) (DENOMINATOR) EPS (NUMERATOR) (DENOMINATOR) EPS
----------- ------------- -------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income/shares................ $457,603 9,768,329 $(5,195,889) 10,077,465
Basic EPS........................ $ .05 $(.52)
Effect of Dilutive Securities
(stock options/warrants)....... 193,754
Adjusted net income/shares....... $457,603 9,962,083 $(5,195,889) 10,077,465
Diluted EPS...................... $ .05 $(.52)
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000 SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------- --------------------------------------
INCOME SHARES LOSS SHARES
(NUMERATOR) (DENOMINATOR) EPS (NUMERATOR) (DENOMINATOR) EPS
----------- ------------- -------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income/share................. $864,696 9,568,243 $(4,250,483) 10,286,192
Basic EPS........................ $ .09 $(.41)
Effect of Dilutive Securities
(stock options/warrants)....... 237,443
Adjusted net income/shares....... $864,696 9,805,686 $(4,250,483) 10,286,192
Diluted EPS...................... $ .09 $(.41)
</TABLE>
NOTE 8--RECLASSIFICATIONS:
Certain reclassifications have been made in the 1999 financial statements to
conform with the 2000 presentation. Total assets and net income for 1999 were
not affected by the reclassifications.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of financial condition and results of operations of
UroCor, Inc. ("UroCor" or the "Company") should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere in this
Quarterly Report on Form 10-Q. Special Note: Certain statements set forth below
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. See "Special Note Regarding Forward-Looking Statements"
and "Cautionary Statements" included elsewhere in this Report.
OVERVIEW
UroCor markets a comprehensive range of integrated products and services
directly to urologists and managed care organizations to assist in detecting,
diagnosing, treating and managing prostate cancer, bladder cancer, kidney stones
and other complex urologic disorders. The Company's primary focus is helping
urologists improve patient care and outcomes while reducing the total cost of
managing these diseases.
During the six months ended June 30, 2000, the Company derived over 97% of
its revenue from diagnostic products and services that UroCor Labs-TM- 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, such
as private insurance, managed care plans and governmental programs (e.g.,
Medicare), as well as individual patients and physicians. During the six months
ended June 30, 2000, approximately 54%, 36%, 6% and 4% of the Company's
diagnostic revenue was attributable to Medicare, private insurance and managed
care, individual patients, and physicians and hospitals, respectively.
During the six months ended June 30, 2000, the Company derived approximately
3% of its revenue from initial sales of two therapeutic products, ProstaSeed and
PACIS BCG. ProstaSeed is a UroCor-branded line of radiation implants (also
referred to as "seeds") used in brachytherapy for early stage prostate cancer.
PACIS BCG is a therapeutic product used in treating certain types of bladder
cancer, that received clearance by the United States Food and Drug
Administration (the "FDA") for marketing in the United States in March 2000. The
Company also markets Persist, a therapeutic product for the treatment of
incontinence.
RESULTS OF OPERATIONS
REVENUE. Revenue for the three months ended June 30, 2000 increased 9.1% to
approximately $12.3 million compared to $11.3 million for the three months ended
June 30, 1999, and increased 3.3% from approximately $23.6 million to
$24.4 million in the first six months of 2000.
Diagnostic services revenue increased 11.2% for the three-month period and
6.8% for the six-month period resulting primarily from the Company's price
increase effective January 1, 2000 and an increase in Medicare's reimbursement
allowance for most of the Company's tests. The Company's price increase and the
increase in Medicare reimbursement allowance resulted in approximately a
$2.0 million increase in revenue for the three months ended June 30, 2000
compared to the same period in 1999 and $3.9 million for the six months ended
June 30, 2000 compared to the 1999 period. This increase was partially offset by
a 14.4% decrease in case volume for the three months ended June 30, 2000
compared to the three months ended June 30, 1999 and a decrease of 12.3% in case
volume for the six months ended June 30, 2000 compared to the six months ended
June 30, 1999. Diagnostic volumes declined during the second quarter of 2000
primarily as the result of the elimination of certain managed care related
marketing programs during the second quarter 1999 and related collection
efforts, in addition to the revision of pricing on other contractual programs
during the first quarter of 2000, that resulted in the loss of some clients and
10
<PAGE>
decreased product usage from other clients. In the 2000 second quarter, the
Company's client base was approximately 2,470 urologists of which about 46% used
two or more products compared to approximately 2,650 urologists and about 48%
using two or more products for the second quarter of 1999. The Company intends
to continue focusing its marketing and sales efforts for the remainder of 2000
on improving the diagnostics growth rates and shifting the product mix to its
most profitable products.
Therapeutic products revenue decreased 38.5% from approximately $455,000
during the three months ended June 30, 1999 to approximately $280,000 during the
three months ended June 30, 2000, and decreased 69.7% from approximately $1.1
million for the six months ended June 30, 1999 to approximately $335,000 for the
six months ended June 30, 2000, principally due to the termination on December
31, 1999 of a co-promotion agreement with a product manufacturer. The Company's
marketing of ProstaSeed accounted for substantially all of the therapeutic
products revenue for the first six months of 2000. Therapeutic products revenue
in subsequent periods is contingent upon the successful marketing of ProstaSeed,
PACIS BCG and Persist and any future acquisition of rights to other therapeutic
products that could be marketed by the Company.
DIRECT COST OF SERVICES AND PRODUCTS. As a percentage of revenue, direct
expenses decreased to 37.8% for the three months ended June 30, 2000 from 43.4%
for the three months ended June 30, 1999 and decreased to 37.1% for the six
months ended June 30, 2000 from 41.1% for the six months ended June 30, 1999. In
the aggregate, direct cost of services and products decreased 5.0%, from
approximately $4.9 million for the six months ended June 30, 1999 to
approximately $4.7 million for the three month period ended June 30, 2000 and
6.8% from approximately $9.7 million for the six months ended June 30, 1999 to
approximately $9.0 million in the six months ended June 30, 2000.
Direct costs for diagnostic services, as a percentage of revenue, decreased
to 35.1% for the three months ended June 30, 2000 from 43.0% for the three
months ended June 30, 1999 and decreased to 35.7% for the six months ended
June 30, 2000 from 41.1% for the six months ended June 30, 1999. The Company's
price increase discussed above in Revenue contributed to these decreased
percentages, along with shifts in volume mix towards the Company's higher margin
tests. In the aggregate, direct costs for diagnostic services decreased 9.3%,
from approximately $4.7 million for the three months ended June 30, 1999 to
approximately $4.2 million for the three months ended June 30, 2000, and
decreased 7.3%, from approximately $9.2 million for the six months ended June
30, 1999 to approximately $8.6 million for the six months ended June 30, 2000.
These decreases are primarily related to the decreases in case volumes for both
periods, as discussed above in Revenue.
Direct costs for therapeutic products for the three and six months ended
June 30, 2000 are principally for the manufacturing and overhead costs related
to ProstaSeed. These direct costs exceeded revenue by 52.2% for the three-month
period and by 37.8% for the six-month period ended June 30, 2000. In aggregate,
the direct costs for therapeutic products were approximately $426,000 for the
three month period and approximately $465,000 for the six month period ended
June 30, 2000. The Company expects to attain positive gross profit margins for
therapeutic products as the products move past initial launch, seed
manufacturing operations are further refined and assuming sales volumes increase
in accordance with the Company's expectations. Direct costs for the three and
six months ended June 30, 1999 consisted primarily of an allocation of the
Company's sales force costs for the co-promotion of two cancer products pursuant
to an agreement that terminated at December 31, 1999. In aggregate, these direct
costs were approximately $237,000 for the three month period and approximately
$455,000 for the six month period ended June 30, 1999. This allocation of costs
ended with the termination of the agreement at year-end 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenue,
selling, general and administrative expenses decreased to 54.2% for the three
months ended June 30, 2000 from 59.9% for the three months ended June 30, 1999
and increased to 55.1% for the six months ended June 30, 2000 from 53.5% for the
six months ended June 30, 1999. In the aggregate, selling, general and
administrative expenses decreased 1.4%, from approximately $6.8 million in the
three months ended June 30, 1999 to
11
<PAGE>
approximately $6.7 million in the three months ended June 30, 2000 and increased
3.0%, from approximately $12.6 million in the six months ended June 30, 1999 to
approximately $13.4 million for the six months ended June 30, 2000. The decrease
in selling, general and administrative expenses for the three-month period was
due principally to decreased personnel costs of approximately $818,000, offset
by costs related to personnel, marketing and information systems for the
Company's therapeutic products of approximately $381,000, an increase in the
provision for doubtful accounts of approximately $239,000 and the absence of an
allocation of the sales force to direct cost similar to the allocation for the
three months ended June 30, 1999 of approximately $224,000. The increase in
selling, general and administrative expenses for the six-month period was due
principally to increased costs related to personnel, marketing and information
systems for the Company's therapeutic products of approximately $813,000, an
increase in the provision for doubtful accounts of approximately $441,000 and
the absence of an allocation of the sales force to direct cost similar to the
allocation for the six months ended June 30, 1999 of approximately $439,000,
offset by decreased personnel costs of approximately $496,000 and decreased
conventions and meetings costs of approximately $193,000.
RESEARCH AND DEVELOPMENT EXPENSES. As a percentage of revenue, research and
development expenses decreased to 3.2% for the three months ended June 30, 2000
from 3.8% for the three months ended June 30, 1999 and 3.2% for the six months
ended June 30, 2000 from 3.4% for the six months ended June 30, 1999. In the
aggregate, research and development costs decreased 9.7%, from approximately
$430,000 in the three months ended June 30, 1999 to approximately $388,000 in
the three months ended June 30, 2000, and decreased 2.6%, from approximately
$808,000 in the six months ended June 30, 1999 to $787,000 in the six months
ended June 30, 2000.
SPECIAL CHARGES. During the second quarter of 1999, the Company recognized
special charges related primarily to two items. First, as part of its ongoing
assessment of accounts receivable and reserve adequacy, the Company terminated
certain managed care related marketing programs and identified significantly
aged segments of its accounts receivable for which the likelihood of
collectibility was doubtful. A provision of approximately $3.9 million was made
for these receivable balances. Second, the Company launched an information
systems initiative to increase productivity, decrease costs and more efficiently
collect billings. As a result of this new operational focus for information
systems, the Company restructured its information systems function and
terminated certain existing systems and internal software development projects,
resulting in approximately $2.9 million in asset write-offs and approximately
$226,000 in severance and outplacement costs. Additionally, the Company settled
claims with two former clients of the Urological Support Services business,
which the Company exited in late 1998. These settlements totaled approximately
$348,000 in excess of amounts that had been accrued in 1998. The aggregate
charges for these three items totaled approximately $7.4 million for the three
months ended June 30, 1999.
The following table sets forth the effects of the special charges on
UroCor's operating income, net income and diluted earnings per share for the
three and six month periods ended June 30, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
------------------ ----------------
<S> <C> <C>
Operating loss, as reported........................ $(8,213,506) $(6,943,650)
Operating income (loss), excluding special
charges.......................................... $ (803,729) $ 466,127
----------- -----------
Net loss, as reported.............................. $(5,195,889) $(4,250,483)
Net income (loss), excluding special charges....... $ (394,354) $ 595,511
----------- -----------
Diluted loss per share, as reported................ $ (.52) $ (.41)
Diluted earnings (loss) per share, excluding
special charges.................................. $ (.04) $ .06
</TABLE>
OTHER INCOME (EXPENSE). Other income net of interest expense decreased
14.1%, from approximately $187,000 in the three months ended June 30, 1999 to
approximately $160,000 in the three months ended
12
<PAGE>
June 30, 2000 and decreased 30.8%, from approximately $443,000 for the six
months ended June 30, 1999 to approximately $307,000 for the six months ended
June 30, 2000. The decline was due principally to decreased cash, cash
equivalents and investments compared to the same 1999 periods, resulting from
the use of such resources to fund stock repurchases, the acquisition of the
manufacturer of its ProstaSeed product and capital expenditures.
INCOME TAXES. Income tax expense recorded in the three months ended June
30, 2000 was approximately $306,000 compared to income tax benefit of
approximately $2.8 million recorded in the three months ended June 30, 1999
based on a 35.3% effective combined federal and state income tax rate for the
three months ended June 30, 1999 and a 40.1% effective combined federal and
state tax rate for the three months ended June 30, 2000. For the six months
ended June 30, 1999, an income tax benefit of approximately $2.2 million was
recorded based upon a 34.6% effective tax rate, while an income tax expense of
approximately $555,000 was recorded for the six months ended June 30, 2000 based
upon a 39.1% effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, cash, cash equivalents and marketable investments
totaled approximately $10.3 million, and the Company's working capital was
approximately $21.7 million. As of June 30, 2000, the components of cash, cash
equivalents and marketable investments were approximately $7.0 million of cash
and cash equivalents and approximately $3.3 million in short-term marketable
investments, consisting principally of high-grade fixed income securities with
maturities of less than one year.
Accounts receivable, net of allowance for doubtful accounts, totaled
approximately $10.1 million at June 30, 2000, a decrease of approximately
$921,000 from December 31, 1999, or 8.3%, principally attributable to increased
collections, including payment of $500,000 from a therapeutic product
manufacturer relating to the termination at December 31, 1999 of a co-promotion
agreement between the Company and the manufacturer.
At June 30, 2000 and December 31, 1999, the Company's average number of days
sales in net diagnostics receivables was approximately 75 and 90, respectively.
Virtually all of the Company's diagnostic services are rendered on a
fee-for-service basis. Accordingly, the Company assumes the financial risk
related to collection, including potential inability to collect accounts, long
collection cycles for accounts receivable, difficulties in gathering complete
and accurate billing information and delays attendant to reimbursement by
third-party payors, such as governmental programs, private insurance plans and
managed care organizations.
The Company monitors the collection quality of its accounts receivable
through analytical review of aging categories by payor group and collections
performance. While the Company maintains what it believes to be an adequate
allowance for doubtful accounts, there can be no assurance that the Company's
ongoing assessment of accounts receivable will not result in the need for
additional provision for doubtful accounts. Such additional provision could have
an adverse effect on the Company's financial position and results of operations.
Therapeutic products revenue for the remainder of 2000 and subsequent
periods are contingent upon the successful marketing of ProstaSeed, PACIS BCG
and Persist and any future acquisition of rights to other therapeutic products
that could be marketed by the Company.
Operating activities provided net cash of approximately $3.2 million for the
six months ended June 30, 2000 compared to net cash provided of approximately
$4.4 million for the six months ended June 30, 1999. The net cash provided by
operating activities was primarily the result of net income of approximately
$865,000 and related income tax expense of approximately $555,000, a decrease in
accounts receivable of approximately $921,000 resulting from increased
collections including payment of the co-promotion
13
<PAGE>
agreement termination fee and depreciation and amortization of approximately
$1.4 million, partially offset by a decrease in accounts payable of
approximately $622,000.
Net cash used by investing activities was approximately $1.5 million for the
six months ended June 30, 2000 and consisted primarily of capital expenditures
purchases of approximately $1.7 million, an increase in other assets of
approximately $867,000, milestone payments due to FDA clearance of a therapeutic
product of approximately $750,000, payments related to the acquisition of Mills
BioPharmaceutical, Inc. of approximately $650,000, and purchases of short-term
marketable investments of approximately $241,000, offset by maturities of
long-term marketable investments of $2.7 million.
Net cash provided by financing activities was approximately $37,000 for the
six months ended June 30, 2000, consisting primarily of approximately $312,000
for the purchase of treasury shares offset by exercises of stock options by
employees, warrants by shareholders and issuances of stock pursuant to the
Company's employee stock purchase plan.
The Company's capital expenditures of approximately $1.7 million for the six
months ended June 30, 2000, were primarily for leasehold improvements, furniture
and fixtures, and computer equipment and software. Of the total amount,
approximately $360,000 related to internal software development costs for
information services. While future capital expenditures will depend upon a
number of factors, the Company expects such expenditures to be comparable to
recent levels as the Company continues to expand to deliver therapeutics and
information services and to enhance current diagnostic services and operational
capabilities. The Company intends to finance the majority of these capital
expenditures with existing cash and investment balances and possibly new debt.
In March 2000, a therapeutic product for bladder cancer for which the
Company has distribution rights received clearance from the FDA for marketing in
the United States. The total cost of the distribution rights for the product is
$3.0 million, of which the Company has paid $2.0 million. With the FDA clearance
of this product, all milestones have been met. The Company now is obligated to
pay the remaining $1.0 million in two payments during 2000. The next payment of
$500,000 is due in July 2000 and the final payment of $500,000 is due in October
2000. The Company intends to pay these amounts out of existing cash and
investment balances or possibly new debt.
In April 2000, the Company acquired the manufacturer of its ProstaSeed
product. Pursuant to the terms of the purchase agreement, the Company paid
approximately $650,000 in cash and issued 477,700 shares of its common stock.
The Company also is obligated to pay certain royalties dependent upon the
achievement of future sales levels. The Company expects to make additional
investments relating to the purchased assets intended to improve production
capabilities. The Company intends to make any additional payments for such
manufacturing capabilities from its existing cash and investment balances or
possibly new debt.
In April 1999, the Company's Board of Directors authorized the repurchase of
up to $10 million of the Company's common stock. As of June 30, 2000, the
Company had repurchased approximately $7.5 million (or approximately 1.7 million
shares) of its common stock and reissued 477,700 treasury shares for the
acquisition of the manufacturer of its ProstaSeed product. The Company intends
to fund any such purchases using available cash and cash flow from operations,
and may elect to supplement its cash position with new debt.
The Company believes that its existing capital resources will be sufficient
to provide the funds necessary to maintain its present level of operations and
implement its currently planned growth strategy. However, there may be
circumstances or new business opportunities that would require additional
resources. In such event, the Company may be required to seek additional
financing and there is no assurance that the Company would be able to obtain
such financing on a timely basis or on acceptable terms.
14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 and are classified as Available-for-Sale. Marketable securities at June
30, 2000 consisted primarily of debt securities with maturities as long as one
year. 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 June 30, 2000 and December 31, 1999, there were no
material net unrealized gains or losses on these investments.
15
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT ISSUANCES OF UNREGISTERED SECURITIES
During the quarter ended June 30, 2000, the Company issued a total of
477,700 shares of Common Stock pursuant to the acquisition of Mills
Biopharmaceuticals, Inc. The foregoing transaction did not involve
underwriters. The Company considers these securities to have been offered
and sold in a transaction not involving a public offering and, therefore, to
be exempt from registration under Section 4(2) of the Securities Act of
1933, as amended.
USE OF PROCEEDS:
The effective date of the registration statement for the Company's
initial public offering of Common Stock and for which this use of proceeds
information is being disclosed was May 16, 1996. The Commission file number
assigned to the registration statement was 333-3182.
From the effective date of the registration statement through June 30,
2000, the following table identifies the purposes and amounts of the net
proceeds paid directly or indirectly to others:
<TABLE>
<CAPTION>
<S> <C>
Construction of plant, building and facilities.............. $ --
Purchase and installation of machinery and equipment........ 6,953,252
Purchases of real estate.................................... --
Acquisition of other business(es)........................... --
Repayment of indebtedness................................... 2,375,404
Working Capital............................................. 3,641,287
TEMPORARY INVESTMENTS:
Short-term Commercial Paper............................... 2,402,609
Long-term Corporate and Treasury Notes.................... --
Cash Equivalents.......................................... --
OTHER PURPOSES:
Development and Expansion of Diagnostic Product Line...... 6,231,192
Development of Information Products and Services and
Urological Disease Databases............................ 2,815,623
Development of Therapeutic Product Line................... 6,188,356
Development and Expansion of Clinical and Research
Laboratories and Lab Information System................. 3,942,136
</TABLE>
None of the net proceeds have been paid directly or indirectly to directors,
officers, general partners or their associates, to persons owning 10% or more of
any class of equity securities or affiliates.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
16
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 20, 2000, at the Company's annual meeting of stockholders:
A) The stockholders elected the individuals listed below to serve as
Class II directors until the 2003 annual meeting. Set forth below is the
tabulation of votes cast:
<TABLE>
<CAPTION>
Name Shares Voted For Shares Withheld Broker Non-Votes
<S> <C> <C> <C>
Herbert J. Conrad 7,496,895 1,040,766 0
Louis M. Sherwood, M.D. 7,496,895 1,040,766 0
</TABLE>
B) The stockholders approved an amendment to the UroCor, Inc. Second Amended
and Restated 1992 Stock Option Plan, as amended to increase the number of
shares for which options may be granted under such Plan from 2,300,000 to
2,700,000. The tabulation of votes with respect to this item was as follows:
<TABLE>
<CAPTION>
Shares Voted For Shares Voted Against Shares Abstained Broker Non-Votes
<S> <C> <C> <C>
7,046,270 1,404,730 86,661 0
</TABLE>
C) The stockholders approved an amendment to the UroCor, Inc. 1997
Non-Employee Director Stock Option Plan, as amended, pursuant to which the
number of shares granted annually under the plan would be increased from
5,000 to 7,500 and an additional 2,500 shares would be granted annually to
the Chairman of the Board of Directors. The tabulation of votes with respect
to this item was as follows:
<TABLE>
<CAPTION>
Shares Voted For Shares Voted Against Shares Abstained Broker Non-Votes
<S> <C> <C> <C>
7,038,778 1,412,822 86,061 0
</TABLE>
ITEM 5. OTHER INFORMATION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this Report, including
without limitation, statements regarding the Company's financial position,
business strategy, products, products under development, markets, budgets and
plans and objectives of management for future operations, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations are
disclosed in statements set forth under "Cautionary Statements" and elsewhere in
this Report, including, without limitation, in conjunction with the
forward-looking statements included in this Report. All subsequent written and
oral forward-looking statements attributable to the Company, or persons on its
behalf, are expressly qualified in their entirety by the Cautionary Statements
and such other statements.
CAUTIONARY STATEMENTS
RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH. Over the last several years,
the Company has experienced substantial growth and expanded its operational
capabilities. The Company also intends to continue to expand its diagnostics and
therapeutics businesses. This growth and expansion has placed, and will continue
to place, a significant strain on the Company's management, production,
technical, financial and other resources. There can be no assurance that the
Company will be able to manage successfully the operation and expansion of its
diagnostics or therapeutics businesses.
17
<PAGE>
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. The Company's quarterly and
annual operating results are affected by a variety of factors, many of which are
outside the Company's control, which have in the past and could in the future
materially and adversely affect revenue, operating expenses and income. These
factors include seasonality, the quantities and timing of specimens received,
competitive pricing pressures, reimbursement changes, availability and cost of
diagnostic supplies, availability and cost of logistics and delivery services,
changes in the mix of products sold, 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 Company relies principally upon Federal Express, UPS and
Airborne Express for inbound and outbound shipping of specimens and kits for its
diagnostics operations; any disruption in the availability of such logistics and
delivery services could have a material adverse effect on the Company's
operating results. 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's operating results
may continue to fluctuate in the future.
UNCERTAINTIES RELATED TO GOVERNMENT REGULATION AND ENFORCEMENT. As a
provider of health care related services, the Company is subject to extensive
and frequently changing federal, state and local laws and regulations governing
licensure, billing, financial relationships, referrals, conduct of operations,
purchase of existing businesses, cost-containment, direct employment of licensed
professionals by business corporations and other aspects of the Company's
business relationships. The various types of regulatory activity affect the
Company's business by controlling its growth, restricting licensure of the
business entity or by controlling the reimbursement for services provided. The
Company cannot predict the timing or impact of any changes in such laws and
regulations or their interpretations by regulatory bodies, and any such changes
could have a material adverse effect on the Company's financial condition and
results of operations.
Existing federal laws governing federal health care programs, including
Medicare, as well as some state laws, regulate certain aspects of the
relationship between health care providers, including the Company, and their
referral sources, including physicians, hospitals and other facilities. The
federal Anti-Fraud and Abuse Amendments to the Social Security Act (the "Federal
Anti-Kickback Law") generally prohibit providers and suppliers of health care
services from soliciting, offering, receiving or paying, directly or indirectly,
any remuneration in return for either making or recommending or arranging for a
referral for a service or item covered by a federal or state health care
program. The physician self-referral and payment prohibition (commonly referred
to as the "Stark law") prohibits physicians, subject to certain exceptions, from
making referrals of certain designated health services to entities in which they
have an investment interest or with which they have a compensation arrangement.
Violation of these prohibitions may be punishable by disallowance of submitted
claims, civil monetary penalties or criminal penalties and/ or exclusion from
Medicare and other federally funded programs. The federal government has
expanded its investigative and enforcement activities in these areas. The
federal government also has become more aggressive recently in examining billing
by laboratories and other health care providers, and in seeking repayments and
even penalties based on how the services were billed (e.g., the billing codes
used), regardless of whether carriers had furnished clear guidance on this
subject.
In July 1998, the Company received a Civil Investigative Demand ("CID") from
the United States Department of Justice (the "DOJ") concerning allegations that
the Company may have submitted false claims in connection with bills for
services submitted to Medicare and other federal insurance programs. The Company
received a second CID from the DOJ in March 1999 concerning allegations that the
Company may have submitted false claims for payments, submitted false statements
in support of false claims or conspired to submit false claims to government
officials in connection with bills for services submitted to Medicare and other
federal insurance programs by, among other things, bundling tests, billing for
medically unnecessary tests and upcoding. Pursuant to the CIDs, the Company
produced documents to the DOJ and is cooperating with the DOJ at this stage in
the investigation. Although the Company seeks to
18
<PAGE>
structure its practices to comply with all applicable laws, no assurances may be
given regarding the resolution of this matter. If the DOJ were to pursue and
prevail on matters that may arise from this investigation, any significant
recoupment of funds or civil or criminal penalty or exclusion from federal and
state health care programs potentially resulting from such proceedings could
have a material adverse effect on the financial condition and results of
operations of the Company. In addition, even if the DOJ chose not to pursue any
matters arising from its investigation, if an individual filed a QUI TAM or
"whistleblower" action under the Federal Civil False Claims Act relating to the
investigation, such QUI TAM plaintiff or "whistleblower" would be free to pursue
the allegations in such a complaint against the Company. If any such plaintiff
were to prevail, any judgment resulting from such litigation or administrative
penalties, including potential exclusion from federal and state health care
programs, could have a material adverse effect on the financial condition and
results of operations of the Company.
The Company's diagnostic laboratory operations currently are required to be
certified or licensed under the federal Clinical Laboratory Improvement Act of
1976, as amended in 1988, the Medicare and Medicaid programs and various state
and local laws. In some instances, the Company also is subject to licensing or
regulation under federal and state laws relating to the handling and disposal of
medical specimens, infectious and hazardous waste and radioactive materials, as
well as to the safety and health of laboratory employees. Although the Company
seeks to structure its practices to comply with such laws and regulations, no
assurances can be given regarding compliance in any particular factual
situation. The possible sanctions for failure to comply with these licensing
provisions or regulations may include denial of the right to conduct business,
significant fines and criminal penalties. Any exclusion or suspension from
participation in the Medicare program or certain state programs, any loss of
licensure or accreditation or any inability to obtain any required license or
permit, whether arising from any action by the Department of Health and Human
Services ("DHHS") or any state or any other regulatory authority, would have a
material adverse effect on the Company's business. Any significant civil
monetary or criminal penalty resulting from such proceedings could have a
material adverse effect on the Company's financial condition and results of
operations.
Additionally, with the acquisition of Mills Biopharmaceuticals, Inc., the
manufacturer of its ProstaSeed product, the Company now is subject to regulation
by the United States Environmental Protection Agency, the United States Nuclear
Regulatory Commission (the "NRC") and other federal, state and municipal
regulatory agencies for the hazardous waste generated through the Mills
manufacturing facility. Such waste is segregated and disposed of through
hazardous waste transporters. Although the Company believes that it is currently
in compliance in all material respects with applicable environmental
regulations, failure to comply fully with any such regulations could result in
the imposition of penalties, fines or sanctions that could have a material
adverse effect on the Company's financial condition and results of operations.
While the Company currently knows of no FDA plans has to require FDA
approval of assays developed by laboratories for in-house use, the FDA has in
the past considered drafting guidelines for such regulation. If in the future
the FDA were to issue guidelines for the clinical laboratory market sector, such
guidelines might require the Company to meet certain FDA medical device approval
requirements for the Company's in-house assays. Such regulations, if promulgated
in a way that affects the Company, would increase the cost of development and
approval of new products, slow their introduction to the market and could have a
material adverse effect on the Company's financial condition and results of
operations. Additionally, an FDA rule provides that in some circumstances
involving in-house assays, laboratories must indicate that the assay has not
been cleared by the FDA. There can be no assurance that such disclosure will not
have an adverse impact on reimbursement.
The FDA currently regulates a number of the products that the Company
purchases from third parties for use in its diagnostic services. The
manufacturers of such products are responsible for compliance with FDA
regulations relating to such products. There can be no assurance, however, that
action by the manufacturers or by the FDA would not impair the Company's ability
to obtain and offer certain services.
19
<PAGE>
The unavailability of certain services and materials used in the Company's
diagnostics business would have a material adverse effect on the Company's
financial condition and results of operations.
The FDA currently regulates products that the Company licenses or otherwise
acquires from third parties for distribution or marketing by the Company. The
manufacturers of such products are responsible for compliance with the approval
and marketing regulations of the FDA. The ability of third parties to address
their FDA regulatory issues is outside the Company's control. Failure of such
third parties to address their FDA regulatory matters adequately could have a
material adverse effect on the Company's financial condition and results of
operations.
The FDA currently also regulates the sale, manufacturing, labeling and
record-keeping of the therapeutic products that the Company currently
manufactures and markets and that it may market in the future. In addition, most
users of the Company's ProstaSeed product are required to possess licenses
issued by the state in which they reside or by the NRC. The Company has received
510(k) marketing clearance from the FDA and NRC approval for the ProstaSeed
product. Future discovery of previously unknown problems may result in
restrictions on a product's marketing, or withdrawal of the product from the
market. The commercial distribution in the United States of any new products
developed by the Company will be dependent upon obtaining the prior approval or
clearance of the FDA and/or other regulatory agencies, which can take many years
and entail significant costs.
Although the Company's existing and proposed information services products
currently are not subject to regulation by the FDA, the FDA could determine in
the future that the predictive applications of these products are deemed to be
medical devices subject to FDA regulation. In that event, the Company could
experience delays in developing and marketing new services, the possibility of
the regulation of existing services and increases in research and development
costs.
The Company also is required to adhere to the applicable FDA quality system
regulation ("QSR") and other applicable regulations, and is subject to periodic
FDA inspections to assure compliance with these regulations. The regulations
require that devices, such as the Company's ProstaSeed product, be manufactured
in a prescribed manner and that certain documents be maintained. Failure to
comply with applicable QSR requirements could have a material adverse effect on
the Company.
In countries where the Company's products are not currently approved, the
use or sale of the Company's products may require approval by local government
agencies with missions comparable to the FDA's. The process of obtaining such
approvals may be lengthy, expensive and uncertain.
UNCERTAINTIES RELATED TO THIRD-PARTY REIMBURSEMENT. The Company typically
bills governmental programs such as Medicare and Medicaid 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 only may collect from
Medicare and Medicaid or other third-party payors for services that those payors
have approved for reimbursement. The Company routinely bills for direct
reimbursement for both medical services and products. As is common with all
suppliers of medical items and services, there is a certain amount of
variability with respect to reimbursement among third party payor sources. The
Company's Persist product currently is not widely accepted for reimbursement
within the healthcare market and remains a relatively new approach to treating
incontinence. The Company recently obtained a Durable Medical Equipment ("DME")
supplier number to allow for direct provision and billing of Persist to Medicare
beneficiaries if Medicare reimbursement is approved. There can be no assurance
that Persist or any other new products the Company may develop or acquire in the
future will be accepted for reimbursement by Medicare or Medicaid or other third
party payors. Such uncertainty makes the amount and timing of such products'
reimbursement difficult to predict, which potentially subjects the Company to
reimbursement risks with respect to accounts receivable. Furthermore, Medicare
or Medicaid and other third party payors have, on occasion, denied reimbursement
when certain tests are ordered for
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patients with certain diagnoses while approving reimbursement when those tests
are ordered for other diagnoses deemed appropriate by the payor. This practice
has recently become more prevalent with respect to Medicare. Medicare may
retroactively audit and review its payments to the Company and may determine
that certain payments for services must be returned.
Medicare reimbursement amounts for brachytherapy products, such as
ProstaSeed, are currently significantly less than for an alternative treatment,
a radical prostatectomy. Although brachytherapy requires less physician time
than a radical prostatectomy, lesser reimbursement amounts, combined with
physician familiarity with a radical prostatectomy, may provide disincentives
for urologists to perform brachytherapy. Current or future limitations on
reimbursement by Medicare or Medicaid or other third party payors for prostate
cancer treatment could materially adversely affect the market for the ProstaSeed
product and there can be no assurance that such reimbursement will continue at
rates that enable the Company to maintain prices at levels sufficient to realize
an appropriate profit. The occurrence of any such factors could have a material
adverse effect on the results of operations and financial condition of the
Company.
POTENTIAL HEALTH CARE REFORM. From time to time, the public and federal
government focus significant attention on reforming the health care system in
the United States. In 1997, Congress enacted the Balanced Budget Act that
effected numerous changes to the Medicare and Medicaid programs that could
affect health care providers, including clinical laboratories. The 1997 act also
revised the resource-based relative value scale system that could affect health
care providers that offer physician pathology services. These 1997 changes and
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. A number of other legislative
proposals have been introduced in Congress and state legislatures in recent
years that would effect major reforms of the health care system and otherwise
reduce health care spending. In addition, the Health Care Financing
Administration has made a number of proposals regarding the payment and coverage
of clinical laboratory services including the development of national coverage
policies. Because of the uncertainties surrounding the nature, timing and extent
of any such reimbursement changes, audits and reform initiatives, the Company is
unable to predict the effects of any such matters on the Company.
UNCERTAINTIES RELATED TO MANAGED CARE. Managed care organizations have
gained increasing control over access to health care and payment for an
increasing number of patients with urologic 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. If the Company is unsuccessful in its efforts,
it could be precluded 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. In addition, the Company is focused on the field of urology, and
managed care providers tend to contract exclusively with companies that serve a
wider breadth of the healthcare market. There can be no assurance that the
Company will be able to overcome this managed care trend. If the Company is
unable to become an approved participating provider under certain managed care
programs that cover a number of patients of any particular physician, that
physician, to simplify purchasing and billing, may elect to use a competitor of
UroCor that is approved by such managed care organizations for all of his or her
needs, regardless of whether other patients are covered by Medicare or other
third party payors. The loss of business from key urologists and their patients
could have a material adverse affect on the Company's financial condition and
results of operations.
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
competition,
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pricing pressures, reimbursement changes 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 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.
NO ASSURANCE OF SUCCESSFUL MARKETING ARRANGEMENTS FOR OR MANUFACTURING OF
THERAPEUTIC PRODUCTS. The Company conducts marketing activities for therapeutic
products. The Company currently markets three therapeutic products. The Company
has entered into marketing and distribution agreements with other product
distributors for sales of the Company's ProstaSeed product. These agreements can
be terminated by either party. While the Company has previous experience in
marketing two other therapeutic products in 1998 and 1999, there can be no
assurance that the Company's future efforts will be successful or that the other
product distributors' efforts will be successful. UroCor's future therapeutics
marketing efforts are dependent, in part, upon acquiring, licensing and
co-promoting additional therapeutic products from others. Other companies,
including those with substantially greater resources than the Company, are
competing with UroCor for the rights to such products. There can be no assurance
that UroCor will be able to acquire, license or co-promote additional
therapeutic products on acceptable terms, if at all. The failure to acquire,
license, co-promote or market commercially successful therapeutic products could
have a material adverse effect on the Company's financial condition and results
of operations. There can be no assurance that, once it has obtained rights to a
therapeutic product and committed to payment terms, UroCor will be able to
generate sales sufficient to create a profit or otherwise avoid a loss on such
product. Additionally, the Company has not previously marketed directly to the
radiation oncology and medical oncology markets that are being pursued for sales
of the Company's ProstaSeed product, and there can be no assurance that the
Company will be successful in these marketing efforts.
The Company is also dependent on third party manufacturers to produce PACIS
BCG and Persist products. In addition, in the case of the Company's ProstaSeed
product, UroCor, through its wholly-owned subsidiary, Mills Biopharmaceuticals,
has not previously manufactured this therapeutic product nor any other product
in large quantities, and there can be no assurance of UroCor's ability to
produce quantities effectively or in a manner compliant with all regulatory
requirements. Also, if the Company is unable to produce ProstaSeed, produce
adequate quantities or produce them in a manner that is compliant with all
regulatory requirements, the Company's marketing and distribution agreements are
subject to termination and potential liabilities that could have a material and
adverse effect on the Company's financial condition and results of operations.
DEPENDENCE ON KEY CUSTOMERS. The Company currently markets its ProstaSeed
product pursuant to agreements with Mallinckrodt, Inc. ("Mallinckrodt") and
Prostate Services of America ("PSA"), and, on a limited basis, through its own
sales force. During the first six months of 2000, sales to Mallinckrodt
accounted for approximately 85% of the Company's therapeutic products revenue.
Significant customers may continue to account for a substantial percentage of
the Company's therapeutic products revenue in the future. In particular, the
Company expects that Mallinckrodt and PSA will continue to be significant
customers in the future for the distribution of the ProstaSeed product. There
can be no assurance that such customers will maintain their volume of business
with the Company. A loss or significant decrease of the Company's sales to such
customers could have a material adverse effect on the Company's financial
condition and results of operations.
POTENTIAL THERAPEUTICS PRODUCT LIABILITY OR RECALL. UroCor intends to
increase its marketing of therapeutic products; if the Company is successful in
these efforts, it will face increasing exposure to product liability claims in
the event that the use of any of its therapeutic products is alleged to have
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resulted in adverse effects. Such risks will exist even with respect to those
products that receive regulatory approval for commercial sale. While UroCor has
taken, and intends to continue to take, what it believes are appropriate
precautions, there can be no assurance that it will avoid significant product
liability exposure or product recalls. UroCor currently has product liability
insurance; however, there can be no assurance that the level or breadth of any
insurance coverage will be sufficient to cover potential claims. There can be no
assurance that adequate insurance coverage will be available in the future at
acceptable costs, if at all, or that a product liability claim or recall would
not have a material adverse effect on the Company's financial condition and
results of operations.
UNCERTAINTIES RELATED TO ACCOUNTS RECEIVABLE. Virtually all of the
Company's diagnostic services are rendered on a fee-for-service basis.
Accordingly, the Company assumes the financial risk related to collection,
including potential inability to collect accounts, long collection cycles for
accounts receivable, difficulties in gathering complete and accurate billing
information and delays attendant to reimbursement from and to third-party
payors, such as governmental programs, private insurance plans and managed care
organizations. At times, the Company's accounts receivable have increased at a
rate greater than revenue growth and, therefore, have affected the Company's
cash flow from operations. In addition, in 1998, the Company determined that it
had not sent invoices timely to certain patients, primarily managed care
patients, for certain co-pays, deductibles and other amounts relating
principally to services rendered in 1998. In December 1998, the Company
commenced collection efforts for certain of these amounts. As a result of delay
in sending such invoices, the Company had difficulty in its collection efforts.
During the second quarter of 1999, the Company discontinued certain managed care
and payor related marketing programs and identified significantly aged segments
of its accounts receivable for which the likelihood of collectibility was
doubtful and recorded an additional provision. The Company has previously taken
steps to implement systems and processing changes intended to improve billing
procedures and related collections results and, in response to the unsent
invoices, it has undertaken additional initiatives to further improve claims
efficiencies and collections results, in addition to assessing the ultimate
collectibility of outstanding balances. While the Company's management believes
it has made progress by reorganizing and streamlining its accounts receivable
and billing functions, and the Company maintains what it believes to be an
adequate allowance for doubtful accounts, there can be no assurance that the
Company's ongoing assessment of accounts receivable will not result in the need
for additional provision for doubtful accounts. Such additional provision could
have a material adverse affect on the Company's financial condition and results
of operations.
RISKS ASSOCIATED WITH INVESTMENTS IN MANAGEMENT INFORMATION SYSTEMS. The
Company has been and expects to continue investing in the development of
information-based capabilities and services which it plans to introduce or use
in the future related to the clinical management of urologists' patients. The
Company has developed and introduced, on a limited basis, disease outcomes
reporting capabilities in one disease state. Further development and delivery of
these new services may require substantial additional investment and represents
an expansion of the type of services the Company presently provides to
urologists. There can be no assurance that any future revenues directly or
indirectly from these services will be sufficient to cover or otherwise justify
the costs of development and introduction.
RISKS ASSOCIATED WITH DEVELOPMENT OF DATABASES. The confidentiality of
patient medical records is subject to considerable regulation by the state and
federal governments. Most state and federal laws and regulations govern both the
disclosure and the use of confidential patient medical record information.
Legislation and regulations governing the dissemination and use of medical
record information are being proposed continually at both the state and federal
levels. For example, pursuant to requirements under the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA"), in November 1999, the
Secretary of the DHHS published proposed regulations governing privacy standards
for individually identifiable health information that is electronically
transmitted or maintained. The final regulations are expected to be published
later this year. Additional proposed legislation may require that holders or
users of confidential patient medical information implement measures to maintain
the security of such information
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and may regulate the dissemination of even anonymous patient information.
Physicians and other persons providing patient information to the Company also
are required to comply with these laws and regulations. If a patient's privacy
is violated, or if the Company is found to have violated any state or federal
statute or regulation with regard to the confidentiality, dissemination or use
of patient medical information, the Company could be liable for damages, or
civil or criminal penalties. The Company believes that it complies in all
material respects with all applicable state and federal laws and regulations
governing the confidentiality, dissemination and use of medical record
information. However, there can be no assurance that differing interpretations
of existing laws and regulations or the adoption of new laws and regulations
would not have a material adverse effect on the ability of the Company to obtain
or use patient information which, in turn, could have a material adverse effect
on the Company's plans to develop and market its urology disease information
database and related treatment. The Company intends to continue to monitor and
review the interpretation and enactment of laws and regulations which affect the
Company's plans to develop and market its urology disease information database.
In addition, the American Medical Association (the "AMA") has issued an opinion
to the effect that a physician who does not obtain a patient's consent to the
disclosure of the patient's medical record information violates the AMA's
ethical standards. While the AMA's opinions are not law, they may influence the
willingness of physicians to obtain patient consents or to disclose patient
medical information to the Company and thus could have a material adverse effect
on the Company's plans to develop and market its urology disease information
database.
UNCERTAINTIES RELATED TO PATENTS AND PROPRIETARY RIGHTS. UroCor has
licenses or license rights to certain United States patent and patent
applications. While UroCor's success does not depend on its ability to obtain
patents, there can be no assurance that it can operate without infringing upon
the proprietary rights of others. On UroCor's own patent applications, there can
be no assurance that patents, United States or foreign, will be obtained, or
that, if issued or licensed, they will be enforceable or will provide
substantial protection from competition or be of commercial benefit, or that
UroCor will possess the financial resources necessary to enforce or defend any
of its patent rights. Federal court decisions establishing legal standards for
determining the validity and scope of patents in the field are in transition.
There can be no assurance that the historical legal standards surrounding
questions of validity and scope will continue to be applied or that current
defenses as to issued patents in the field will offer protection in the future.
UroCor also must avoid infringing patents issued to competitors and must
maintain technology licenses upon which certain of its current products are, or
any future products under development might be, based. Litigation, which could
result in substantial cost to the Company, may be necessary to enforce its
patent and license rights or to determine the scope and validity of proprietary
rights of third parties. If any of UroCor's products are found to infringe upon
patents or other rights owned by third parties, it could be required to obtain a
license to continue to utilize or market such products. There can be no
assurance that licenses to such patent rights would be made available to the
Company on commercially reasonable terms, if at all. If UroCor does not obtain
such licenses, it could encounter delays in marketing affected products or be
precluded from marketing them at all.
The Company also relies to a significant degree on trade secrets,
proprietary know-how and technological advances that are either not patentable
or that the Company chooses not to patent. The Company seeks to protect
non-patented proprietary information, in part, by confidentiality agreements
with suppliers, employees and consultants. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach or that the Company's trade secrets and proprietary know-how will
not otherwise become known or independently discovered by third parties. The
disclosure to third parties of proprietary non-patented information could have a
material adverse effect on the Company's financial condition and results of
operations.
COMPETITIVE PRESSURES. The industry in which the Company's diagnostics
business operates is characterized by intense competition with many different
types of competitors including specialty laboratories, diagnostic kit and
instrumentation manufacturers, local, regional and national pathology services,
hospital
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laboratories and general reference clinical laboratories. 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
and with managed care organizations. There can be no assurance that the Company
will be able to compete successfully with such entities in the marketing of
products and services and in the acquisition of new technologies.
Many companies, including large pharmaceutical firms with financial and
marketing resources and development capabilities substantially greater than
those of UroCor, are engaged in developing, marketing and selling therapeutic
products that compete with the therapeutic products currently offered by the
Company. The selling prices of such products frequently decline as competition
increases. Further, other products now in use or under development by others may
be more effective than UroCor's current or future products. The industry is
characterized by rapid technological change, and new or presently competing
products may prevent the Company's products from gaining sufficient market share
to attain profitability. There can be no assurance that the Company will be able
to compete successfully in marketing therapeutic products.
As a result of increasing competition in marketing to urologists, the
Company's ability to attract and retain sales representatives and management may
also affect its ability to compete in the marketing of both diagnostic services
and therapeutic products.
SOURCES AND AVAILABILITY OF RAW MATERIALS. The Company is dependent upon a
limited number of outside unaffiliated suppliers for its radioisotopes. To date,
the Company has been able to obtain the required radioisotopes for its products.
The Company believes that it will be able to continue to obtain required
radioisotopes from these or other sources, although there can be no assurance
thereof. The delay or unavailability of radioisotopes could have a material
adverse effect on the Company's production and sales levels and consequently
upon its financial condition and results of operations.
ACCESS TO CAPITAL. Historically, the Company's growth has required, and any
future growth will require, significant amounts of working capital. Although the
Company believes that existing capital resources will be adequate to fund its
present level of operations and implement its currently planned growth strategy,
there may be circumstances or new business opportunities that would require the
Company to seek additional resources. There is no assurance that the Company
would be able to obtain such financing on acceptable terms.
POSSIBLE VOLATILITY OF STOCK PRICE OF COMMON STOCK. There has been a
history of significant volatility in the market prices for shares of companies
engaged in the health care and biotechnology fields, and the market price of the
shares of the Common Stock may be highly volatile. Factors such as fluctuations
in the Company's quarterly revenues and operating results, announcements of
technological innovations or new analytical services by the Company and its
competitors and changes in third-party reimbursement and governmental regulation
may have a significant effect on the market price of the Common Stock. In
addition, any regulatory announcements or action with respect to the DOJ
investigation could have a negative impact on the Common Stock market price
pending and regardless of the ultimate outcome of any matter under
investigation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Amendment to UroCor, Inc. Second Amended and Restated 1992 Stock
Option Plan, as amended.
10.2 Amendment to UroCor, Inc. 1997 Non-Employee Director Stock Option
Plan, as amended.
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(b) Reports on Form 8-K
None.
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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.
<TABLE>
<S> <C> <C>
UROCOR, INC.
By: /s/ MICHAEL W. GEORGE
-----------------------------------------
Michael W. George
PRESIDENT AND CHIEF EXECUTIVE OFFICER
July 27, 2000
By: /s/ BRUCE C. HAYDEN
-----------------------------------------
Bruce C. Hayden
SENIOR VICE-PRESIDENT, CHIEF FINANCIAL
OFFICER, TREASURER AND SECRETARY
July 27, 2000
</TABLE>
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