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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934. For the quarterly period ended March 31, 1996.
--- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from to .
------ ------
Commission File Number: 0-19749
CHEMTRAK INCORPORATED
Delaware 77-0295388
(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
929 E. Arques Avenue, Sunnyvale, CA 94086
-----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 773-8156
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.001 par value
----------------------------
(Title of Class)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class: Common Stock $.001 par value Outstanding at April 30, 1996: 9,751,147
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CHEMTRAK INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION PAGE
NO.
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Item 1: Financial Statements
Condensed Balance Sheets as of March 31, 1996 and December 31, 1995 3
Condensed Statements of Operations for the three months ended
March 31, 1996 and 1995 4
Condensed Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 5
Notes to Condensed Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-9
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 10
SIGNATURES 11
EXHIBITS 12
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CHEMTRAK INCORPORATED
CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
Current assets:
Cash and cash equivalents $ 3,906,000 $ 4,251,000
Short-term investments 504,000 2,003,000
Accounts receivable, net 636,000 136,000
Inventories 795,000 434,000
Prepaid expenses and other current assets 142,000 245,000
------------ ------------
Total current assets 5,983,000 7,069,000
Property and equipment, net 3,174,000 3,248,000
Other assets 66,000 66,000
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Total assets $ 9,223,000 $ 10,383,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 615,000 $ 632,000
Accrued payroll and benefits 178,000 121,000
Other accrued liabilities 464,000 258,000
Accrued royalties 157,000 114,000
------------ ------------
Total current liabilities 1,414,000 1,125,000
Accrued rent 254,000 240,000
Stockholders' equity:
Common stock 10,000 10,000
Additional paid-in capital 37,541,000 37,528,000
Deferred compensation (18,000) (38,000)
Accumulated deficit (29,978,000) (28,482,000)
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Total stockholders' equity 7,555,000 9,018,000
------------ ------------
Total liabilities and stockholders' equity $ 9,223,000 $ 10,383,000
============ ============
See accompanying notes.
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CHEMTRAK INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
March 31,
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1996 1995
----------- -----------
Net revenues:
Product sales $ 856,000 $ 1,426,000
Funded research and other revenues 150,000 390,000
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Total net revenues 1,006,000 1,816,000
Cost and expenses:
Cost of product sales 731,000 1,397,000
Research and development 744,000 547,000
Marketing, general and administrative 1,094,000 822,000
Purchase of in-process research and development 0 1,500,000
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Total costs and expenses 2,569,000 4,266,000
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Operating loss (1,563,000) (2,450,000)
Interest income 67,000 83,000
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Net loss $(1,496,000) $(2,367,000)
=========== ===========
Net loss per share $ (0.15) $ (0.25)
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Shares used in calculating per share amounts 9,732,000 9,514,000
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See accompanying notes.
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CHEMTRAK INCORPORATED
CONDENSED STATEMENTS 0F CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
Three months ended
March 31,
---------------------------
1996 1995
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Operating activities:
Net loss $(1,496,000) $(2,367,000)
Adjustment to reconcile net loss to net cash and
cash equivalents used in operating activities:
Depreciation and amortization 217,000 213,000
Accrued rent 13,000 13,000
Stock option compensation and other 1,000 12,000
Purchase of in-process research and development for
common stock 0 900,000
Changes in operating assets and liabilities:
Accounts receivable (500,000) 174,000
Inventories (361,000) 456,000
Prepaid expenses and other current assets 103,000 104,000
Accounts payable (17,000) (83,000)
Accrued payroll and benefits 57,000 (349,000)
Other accrued liabilities 249,000 (275,000)
----------- -----------
Net cash and cash equivalents provided
by (used in) operating activities (1,734,000) (1,202,000)
----------- -----------
Investing activities:
Proceeds from available-for-sale securities 1,499,000 3,002,000
Aquisition of property and equipment, net (142,000) (72,000)
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Net cash and cash equivalents provided
by (used in) investing activities 1,357,000 2,930,000
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Financing activities:
Proceeds from issuance of common stock 32,000 35,000
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Net increase (decrease) in cash and cash equivalents (345,000) 1,763,000
Cash and cash equivalents at beginning of period 4,251,000 2,280,000
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Cash and cash equivalents at end of period $ 3,906,000 $ 4,043,000
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See accompanying notes.
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CHEMTRAK INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1996
(unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements include all adjustments
consisting of normal recurring adjustments which the Company's management
believes to be necessary to fairly present the Company's financial position as
of March 31, 1996, and the results of operations for the three months ended
March 31, 1996.
The operating results of the interim periods presented are not
necessarily indicative of the results for the full year. The accompanying
financial statements should be read in conjunction with the financial statements
for the year ended December 31, 1995, included in the ChemTrak Incorporated
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (the
"Form 10-K"), and the 1995 Annual Report to Stockholders (the "Annual Report").
The information set forth in the accompanying balance sheet as of December 31,
1995, has been derived from the audited balance sheet included in the
above-referenced Form 10-K and Annual Report.
Note 2. Net Loss Per Share
Net loss per share is computed using the weighted number of shares outstanding.
Common equivalent shares from stock options are excluded in the computation as
their effect is antidilutive.
Note 3. Inventories
Inventories are stated at the lower of standard cost (which
approximates actual costs on a first-in, first-out basis) or market. Inventories
consisted of the following:
March 31, 1996 December 31,1995
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Raw materials ................... $195,000 $145,000
Work in process ................. 23,000 41,000
Finished goods .................. 577,000 248,000
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Total ....................... $795,000 $434,000
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CHEMTRAK INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In December 1995 ChemTrak regained the exclusive rights to market its
AccuMeter Cholesterol Self-Test in the United States retail market. Previously
sold as the Advanced Care Cholesterol Test by Direct Access Diagnostics ("DAD"),
a Johnson & Johnson company, it has been relaunched under the trade name
CholesTrak. CholesTrak is the first and only over-the-counter cholesterol test
to be cleared by the U.S. Food and Drug Administration (the "FDA"). The
Company's position in this market was solidified earlier in 1995 when the FDA
cleared our High Density Lipoprotein, or so called "good cholesterol", test for
professional use.
On February 5, 1996, the Company announced it had filed for U.S. FDA
510(k) clearance of its H. pylori test for use in physicians offices. In March
1995, ChemTrak entered into an exclusive distribution and supply agreement for
its H. pylori test in the U.S. market with Astra Merck, Inc. a major
pharmaceutical company.
The Company has several products currently in development, some of
which are based on the AccuMeter technology, and other product applications have
only reached the laboratory feasibility stage. Factors that affect the Company's
success include ChemTrak's ability to develop future products, its ability to
manufacture its products, obtain regulatory clearance for marketing its
products, and have its products marketed successfully, all on a timely basis.
There can be no assurance that the Company's current product development efforts
will be successfully completed, that products will be manufactured in the
required commercial quantities, that timely required clearances will be obtained
for the Company's future products, if at all, or that the Company's products
will be marketed successfully.
As of March 31, 1996 the Company had an accumulated deficit of
$29,978,000. Profitability is highly dependent upon numerous factors including,
but not limited to, the Company's ability to provide product in sufficient, cost
effective quantities and the ultimate success of its products in the U.S. OTC
market. Due to the uncertainty of these factors, it is difficult to reliably
predict when such profitability may occur, if at all.
The Company has historically experienced significant fluctuations in
its operating results and anticipates that these fluctuations may continue. The
market price of the shares of the Company's common stock, like those of other
emerging medical technology companies, has been highly volatile. Various
factors, including but not limited to fluctuations in the Company's operating
results, technical and regulatory developments, general market and economic
factors, may have a significant effect on the market price of the Company's
common stock.
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RESULTS OF OPERATIONS
NET REVENUES
Total net revenues decreased to $1,006,000 for the three months ended
March 31, 1996 from $1,816,000 for the three months ended March 31, 1995.
Product sales decreased to $856,000 in the three months ended March 31, 1996
from $1,426,000 in the three months ended March 31, 1995, primarily due to the
lack of United States OTC sales to DAD. Funded research decreased to $150,000
for the three months ended March 31, 1996 from $390,000 for the three months
ended March 31, 1995. The funded research of $390,000 for the first quarter of
1995 included a $250,000 milestone payment received in connection with signing a
distribution and supply agreement with Astra Merck Inc. for the development
stage test for detecting the presence of H. pylori.
COST OF PRODUCT SALES
For the three months ended March 31, 1996, the cost of product sales
decreased to $731,000 from $1,397,000 for the three months ended March 31, 1995.
The decrease was principally due to the decrease in product sales volume.
Product gross margin as a percentage of product sales increased to 15%
on the three months ending March 31, 1996 from 2% for the same period in 1995.
The increase was due to efforts made by the company to decrease manufacturing
costs.
RESEARCH AND DEVELOPMENT
Research and development expenses increased to $744,000 in the three
months ended March 31, 1996 from $547,000 for the three months ended March 31,
1995 primarily due to increased research spending associated with the Company's
H. pylori test.
MARKETING, GENERAL AND ADMINISTRATION
Marketing, general and administration expenses increased to $1,094,000
for the three months ended March 31, 1996 from $822,000 for the three months
ended March 31, 1995, primarily due to selling and advertising expenses
associated with the relaunch of the Company's CholesTrak total cholesterol test.
INTEREST INCOME
Interest income decreased to $67,000 in the three months ended March
31, 1996 from $83,000 for the three months ended March 31, 1995. The decrease
was primarily due to reduced levels of short term investments.
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LIQUIDITY AND CAPITAL RESOURCES
From August 1985 through January 1992 the Company was financed through
private placements of equity securities. In February 1992, the Company completed
its initial public offering, raising approximately $23,500,000 net of issuance
costs.
At March 31, 1996, the Company had approximately $4,410,000 in cash and
short-term investments.
The Company had no long-term debt at March 31, 1996.
The Company believes that its existing capital resources, together with
internally generated funds, will be sufficient to meet its operating needs as
well as its purchase requirements for property, plant and equipment for at
least the next twelve months.
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CHEMTRAK INCORPORATED
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K Page
-------------------------------- ----
a) Exhibits
11.1 Statement re: computation of income (loss) per share 12
b) Reports on Form 8-K
None
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CHEMTRAK INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: May 14, 1996 CHEMTRAK INCORPORATED
____________________________________________
Prithipal Singh, Ph.D.
Chief Executive Officer, President and
Chairman of the Board
(Principal Executive Officer)
____________________________________________
Kevin M. McCurdy
Acting Chief Financial Officer
(Principal Financial and Accounting Officer)
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