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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, 1997
OR
[_] 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: 000-20985
CALYPTE BIOMEDICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1226727
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
1440 FOURTH STREET, BERKELEY, CALIFORNIA 94710
(Address of principal executive offices) (Zip Code)
(510) 526-2541
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The registrant had 10,470,874 shares of common stock outstanding as of
April 29, 1997.
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CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
FORM 10-Q
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets at
March 31, 1997 and December 31, 1996......................... 3
Consolidated Condensed Statements of Operations
for the Three Months Ended March 31, 1997 and
1996......................................................... 4
Consolidated Condensed Statements of Cash Flows
for the Three Months Ended March 31, 1997 and
1996......................................................... 5
Notes to Consolidated Condensed Financial
Statements................................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 9
PART II. OTHER INFORMATION
Item 5. Other Information............................................ 12
Item 6. Exhibits and Reports on Form 8-K............................. 12
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
3/31/97 12/31/96
(Unaudited)
----------- ---------
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 5,653 $ 7,924
Accounts receivable........................................ 3 24
Inventory.................................................. 164 205
Other current assets....................................... 350 170
-------- --------
Total current assets.................................. 6,170 8,323
Property and equipment, net of accumulated depreciation of
$2,375 at March 31, 1997 and $2,187 at December 31, 1996... 1,582 1,761
Other assets................................................. 256 263
-------- --------
$ 8,008 $ 10,347
======== ========
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................... $ 407 418
Accrued expenses........................................... 759 768
Capital lease obligations - current portion................ 439 443
Deferred revenue........................................... 613 627
-------- --------
Total current liabilities............................. 2,218 2,256
Deferred rent obligation..................................... 48 55
Capital lease obligations - long-term portion................ 661 764
-------- --------
Total liabilities..................................... 2,927 3,075
Mandatorily redeemable Series A preferred stock, $0.001 par
value; no shares authorized, 100,000 shares issued and
outstanding; aggregate redemption and liquidation value of
$1,000 plus cumulative dividends............................ 1,886 1,856
Commitments and contingencies
Stockholders' equity (deficit):
Preferred Stock, $0.001 par value; 5,000,000 shares
authorized; no shares issued and outstanding.............. - -
Common Stock, $0.001 par value; 20,000,000 shares
authorized; 10,469,784 and 10,459,501 shares issued and
outstanding as of March 31, 1997 and December 31, 1996,
respectively.............................................. 10 10
Additional paid-in capital................................. 46,280 46,270
Deferred compensation...................................... (355) (363)
Deficit accumulated during development stage............... (42,740) (40,501)
-------- --------
Total stockholders' equity (deficit).................. 3,195 5,416
======== ========
$ 8,008 $ 10,347
======== ========
See accompanying notes to consolidated condensed financial statements.
-3-
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Period from
February 18,
1988
(inception)
through
Three Months Ended March 31, March 31,
------------------------------ ------------
1997 1996 1997
------------ ------------- ------------
Revenues:
Product sales.......................................... $ 15 $ - $ 145
Revenue earned under research and development
contracts, substantially from related parties........ - - 2,390
------- ------- --------
Total revenue...................................... 15 - 2,535
------- ------- --------
Operating expenses:
Product costs.......................................... 534 - 1,619
Research and development............................... 1,158 1,828 27,256
Purchased in-process research and development costs.... - - 2,500
Selling, general and administrative.................... 593 896 14,853
------- ------- --------
Total expenses..................................... 2,285 2,724 46,228
------- ------- --------
Loss from operations........................... (2,270) (2,724) (43,693)
Interest income.......................................... 86 37 922
Interest expense......................................... (55) (134) (998)
Other income............................................. - 5 86
------- ------- --------
Loss before income taxes and extraordinary item..... (2,239) (2,816) (43,683)
Income Taxes............................................. - - (63)
------- ------- --------
Loss before extraordinary item...................... (2,239) (2,816) (43,746)
Extraordinary gain on debt extinguishment................ - - 485
------- ------- --------
Net loss............................................ (2,239) (2,816) (43,261)
Less dividend on mandatorily redeemable Series A
preferred stock.................................. (30) (30) (886)
------- ------- --------
Net loss attributable to common stockholders............. $(2,269) $(2,846) $(44,147)
======= ======= ========
Net loss per share attributable to common stockholders... $ (0.22) $ (0.41)
======= =======
Weighted average shares used to compute net loss per
share attributable to common stockholders.............. 10,465 6,934
======= =======
See accompanying notes to consolidated condensed financial statements.
-4-
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Period from
February 18,
1988
(inception)
through
Three Months Ended March 31, March 31,
------------------------------ ------------
1997 1996 1997
------------ --------------- ------------
Cash flows from operating activities:
Net loss................................................ $(2,239) $(2,816) $(43,261)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 188 187 2,802
Loss on sale or disposal of equipment................. - - 115
Extraordinary gain on debt extinguishment............. - - (485)
Amortization of deferred compensation................. 45 44 548
Compensation paid by stock issuance................... - - 47
Forgiveness of note receivable from officer........... - - 85
Purchased in-process research and development costs... - - 2,500
Changes in operating assets and liabilities:
Accounts receivable................................ 21 - (3)
Inventory.......................................... 41 - (164)
Other current assets............................... (180) (159) (111)
Organizational costs............................... - - (123)
Other assets....................................... 7 (17) (579)
Accounts payable, accrued expenses and deferred
revenue......................................... (34) 676 1,681
Deferred rent obligation........................... (7) (10) 47
Note payable in exchange for expenses paid on
behalf of the Company........................... - - 192
------- ------- --------
Net cash used in operating activities.......... (2,158) (2,095) (36,709)
------- ------- --------
Cash flows from investing activities:
Proceeds from disposition of equipment.................. - - 25
Purchase of equipment, net.............................. (9) 152 (2,256)
Investment in Pepgen Corporation........................ - - (1,000)
------- ------- --------
Net cash (used in) provided by
investing activities......................... (9) 152 (3,231)
------- ------- --------
Cash flows from financing activities:
Proceeds from sale of stock............................. 3 1,300 48,486
Expenses paid related to sale of stock.................. - - (2,994)
Prepaid license fee..................................... - - 500
Principal payments on notes payable..................... - (8) (4,174)
Principal payments on capital lease obligations......... (107) (66) (603)
Proceeds from notes payable............................. - - 2,692
Capital contributions................................... - - 75
Joint ventures' capital contributions................... - - 1,611
------- ------- --------
Net cash (used in) provided by
financing activities......................... (104) 1,226 45,593
------- ------- --------
Net (decrease) increase in cash and cash equivalents..... (2,271) (717) 5,653
Cash and cash equivalents at beginning of period......... 7,924 2,559 -
------- ------- --------
Cash and cash equivalents at end of period............... $ 5,653 $ 1,842 $ 5,653
======= ======= ========
See accompanying notes to consolidated condensed financial statements.
-5-
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Period from
February 18,
1988
(inception)
through
Three Months Ended March 31, March 31,
---------------------------- -------------
1997 1996 1997
------------ ------------ -------------
Supplemental disclosure of cash flow activities:
Cash paid for interest.............................................. $ 55 $ 96 $ 892
Cash paid for income taxes.......................................... - - 62
Supplemental disclosure of noncash activities:
Acquisition of equipment through obligations under capital leases... - 217 1,703
Accrued liabilities converted to notes payable...................... - - 363
Accrued liabilities converted to common stock....................... - - 39
Notes payable converted to common stock............................. - - 459
Notes payable converted to Series B convertible preferred stock..... - - 50
Notes payable issued upon investment in Pepgen Corporation.......... - - 1,000
Options issued upon investment in Pepgen Corporation................ - - 500
Dividend on mandatorily redeemable Series A preferred stock......... 30 30 886
Deferred compensation attributable to stock grants.................. 37 45 903
See accompanying notes to consolidated condensed financial statements.
-6-
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1997 and 1996
(1) THE COMPANY AND BASIS OF PRESENTATION
Calypte Biomedical Corporation (the "Company") was incorporated on November 11,
1989 and is a development stage enterprise. The Company's primary activities
have been to obtain funding, to perform research and development and to obtain
approval for its urine-based diagnostic tests.
The accompanying unaudited consolidated condensed financial statements have been
prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC), and reflect all adjustments (consisting of normal
recurring adjustments) which, in the opinion of management, are necessary for a
fair presentation of the Company's financial position as of March 31, 1997 and
the results of its operations for the three months ended March 31, 1997 and 1996
and its cash flows for the three months ended March 31, 1997 and 1996. Interim
results are not necessarily indicative of the results to be expected for the
full year. This information should be read in conjunction with the Company's
audited consolidated financial statements for each of the years in the three
year period ended December 31, 1996 included in Form 10-K filed with the SEC
on March 28, 1997.
Certain information in footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted pursuant to the rules and regulations of the SEC.
The data disclosed in these notes to consolidated financial statements for these
periods is unaudited.
(2) SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the results of
operations of the Company and its wholly owned subsidiary, Calypte, Inc. and
Calypte Biomedical Company (the Joint Venture). All significant intercompany
accounts and transactions have been eliminated in consolidation.
The Company accounts for its 49% interest in Pepgen Corporation (Pepgen) under
the equity method.
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Except as noted below, net loss per share attributable to common stockholders is
computed using the weighted average number of shares of common stock
outstanding. Common equivalent shares from stock options and warrants are
excluded from the computation as their effect is antidilutive, except that,
pursuant to the SEC Staff Accounting Bulletin No. 83, common stock issued for
consideration below the Company's $6.00 per share Initial Public Offering (IPO)
price and warrants exercised, warrants granted and stock options granted with
exercise prices below the IPO price during the 12-month period preceding May 20,
1996, the date of the initial filing of the Registration Statement, even when
antidilutive, have been included in the calculation of common equivalent shares
for periods prior to April 1, 1996, using the treasury stock method based on the
$6.00 per share IPO price, as if they were outstanding for all periods
presented.
Furthermore, common equivalent shares from convertible preferred stock that were
converted upon the completion of the Company's IPO are included using the "as if
converted" method.
-7-
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1997 and 1996
(3) INVENTORIES
Inventories are stated at the lower of cost or market and the cost is determined
using the first-in, first-out method. Inventory as of March 31, 1997 and
December 31, 1996 consisted of the following:
3/31/97 12/31/96
(in thousands) (in thousands)
------------- --------------
Raw Materials $ 51 $ 80
Work-in-Process 113 108
Finished Goods - 17
-------- ---------
Total Inventory $ 164 $ 205
======== =========
(4) FDA DATA SUBMISSION
WESTERN BLOT CONFIRMATORY TEST
In March 1997, the Company submitted to the U.S. Food and Drug Administration
(FDA) the additional data requested by the FDA in October 1996. The FDA
requested the data before it would approve an amendment to Cambridge Biotech
Corporation's product license application for its HIV-1 Western Blot kit.
Cambridge Biotech Corporation's HIV-1 Western Blot kit serves as a confirmatory
test for the Company's FDA-approved HIV-1 urine screening assay.
(5) SUBSEQUENT EVENT
LINE OF CREDIT
In April 1997, the Company entered into a line of credit agreement with a bank
to borrow up to $2,000,000 at an interest rate of prime plus 2%. The agreement
requires the Company to maintain certain financial convenants and comply with
certain reporting and other requirements. In addition, borrowings under the
line of credit agreement are secured by the Company's assets.
-8-
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for historical information contained herein, the following contains
forward-looking information that is subject to certain risks and uncertainties.
The Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, set forth in
the Form 10-K filed with the Securities and Exchange Commission (SEC) on March
28, 1997. The following discussion should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Form 10-K.
OVERVIEW
- --------
Since commencement of operations in 1988, Calypte Biomedical Corporation ("the
Company" or "Calypte") has reported its results as a development stage company,
engaged in research, development and commercialization of its products. The
Company's efforts have been primarily focused on developing and obtaining
approval for its urine-based diagnostic tests for sexually transmitted diseases.
In August 1996, the Company received a product license and an establishment
license from the FDA to manufacture and sell in interstate and foreign commerce
the Company's urine-based HIV-1 screening test for use in professional
laboratory settings. In October 1996, Calypte received notification that the
FDA would require additional data before it would approve an amendment to
Cambridge Biotech Corporation's product license application for its HIV-1
Western Blot kit to allow use of the Western Blot kit as a confirmatory test
with Calypte's HIV-1 urine screening assay. On March 17, 1997, the Company
submitted to the FDA the additional data requested by the FDA in connection with
such requested amendment to Cambridge Biotech Corporation's product license
application.
In January 1997, the Company announced that it had entered into a collaborative
research and product development agreement with Trinity Biotech plc of Dublin,
Ireland to develop a rapid, one-step HIV test which can be performed on urine
samples.
The Company has a limited history of operations and has experienced significant
operating losses since inception. As of March 31, 1997, the Company had an
accumulated deficit of $42.7 million. The Company expects operating losses to
continue as it initiates marketing and sales activities and additional research
and development. The Company's marketing strategy is to use distributors,
focused direct selling and marketing partners to penetrate certain targeted
domestic markets. The Company plans to maintain a small direct sales force to
sell the Company's urine-based HIV-1 test to 12 major laboratories serving the
life insurance, military, immigration and criminal justice markets. Other U.S.
and all international markets will be penetrated utilizing diagnostic product
distributors. The Company does not have experience in manufacturing, marketing
or selling its products in commercial quantities. There can be no assurance
that the Company's products will be successfully commercialized or that the
Company will achieve significant product revenues. In addition, there can be no
assurance that the Company will achieve or sustain profitability in the future.
-9-
RESULTS OF OPERATIONS
- ---------------------
The following represents selected financial data:
(in thousands)
--------------------
Three Months Ended
March 31,
--------------------
1997 1996
--------- --------
Total revenue $ 15 $ -
------- -------
Operating expenses:
Product costs 534 -
Research and development 1,158 1,828
Purchased in-process research & development - -
Selling, general and administrative 593 896
------- -------
Total expenses 2,285 2,724
------- -------
Loss from operations (2,270) (2,724)
------- -------
Interest income (expense) and other income 31 (92)
------- -------
Loss before income taxes $(2,239) $(2,816)
======= =======
Three Months Ended March 31, 1997 and 1996
- ------------------------------------------
In the first quarter of 1997, Calypte continued to make shipments of its urine-
based HIV-1 screening test. Revenues from Calypte's HIV-1 screening test
totaled $15,000 for the first quarter. The HIV-1 screening test margin was
negative during the quarter due to the overhead expense incurred in relation to
the number of units produced.
Research and development expense, consisting primarily of research,
manufacturing and quality assurance personnel and materials related to the
development of the urine-based HIV-1 test, decreased 37% to $1.2 million for the
three months ended March 31, 1997 from $1.8 million for the three months ended
March 31, 1996. The decrease was principally due to the recognition of certain
product costs and inventory as separate financial statement items following FDA
approval of the Company's HIV-1 screening test.
Selling, general and administrative expenses, consisting primarily of personnel,
outside consultants, facility operating leases and related expenses, decreased
34% to $593,000 for the three months ended March 31, 1997 from $896,000 for the
three months ended March 31, 1996. The decrease was primarily due to an October
1996 reduction in workforce and a general expense reduction program.
Interest income (expense) and other income, consisting primarily of interest
earned on cash and cash equivalents, interest paid on equipment lease financing
and interest paid or accrued on outstanding notes payable, increased $123,000 to
$31,000 for the three months ended March 31, 1997 from $(92,000) for the three
months ended March 31, 1996. The increase was primarily due to interest on the
proceeds from the Company's Initial Public Offering and the retirement of debt
during the third and fourth quarters of 1996.
-10-
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Financing Activities
- --------------------
The Company has financed operations from inception primarily through the private
placement of preferred stock, the Initial Public Offering (IPO) and, to a lesser
extent, from payments related to research and development agreements, a bank
line of credit, equipment lease financings and borrowings from notes payable.
Since inception through March 31, 1997, the Company has received approximately
$33.9 million in net proceeds from private placements of the Company's equity
securities and $13.2 million in its IPO. In addition, approximately $1.7
million was borrowed by the Company through equipment lease financings, of which
approximately $1.1 million was outstanding as of March 31, 1997, and $2.4
million was received from research and development agreements.
During 1996, the Company completed its IPO of 2,536,259 shares of its Common
Stock at $6.00 per share. After deducting underwriters' discounts and
commissions and additional expenses associated with the IPO, the Company
received net proceeds of $13.2 million.
In April 1997, the Company entered into a line of credit agreement with a bank
to borrow up to $2.0 million at an interest rate of prime plus 2%. The
agreement requires the Company to maintain certain financial convenants and
comply with certain reporting and other requirements. In addition, borrowings
under the line of credit agreement are secured by the Company's assets.
Although the Company believes current cash, together with available borrowings
under the bank line of credit agreement, will be sufficient to meet the
Company's operating expenses and capital requirements through the current fiscal
year, the Company's future liquidity and capital requirements will depend on
numerous factors, including regulatory actions by the FDA and other
international regulatory bodies, market acceptance of its products, and
intellectual property protection. The Company is spending approximately between
$500,000 to $600,000 each month. The Company's cash balance at March 31, 1997
was approximately $5.7 million. Accordingly, the Company may be required to
raise additional capital within the next 9-11 months. There can be no assurance
that the Company will not be required to raise additional capital or that such
capital will be available on acceptable terms, if at all. There can be no
assurance that the Company's products will be successfully commercialized or
that the Company will achieve significant product revenues. In addition, there
can be no assurance that the Company will achieve or sustain profitability in
the future.
Operating Activities
- --------------------
For the three months ended March 31, 1997 and March 31, 1996, the Company's cash
used in operations was $2.2 million and $2.1 million, respectively. The cash
used in operations was primarily to fund research and development expenses
related to the urine-based HIV-1 test along with selling, general and
administrative expenses of the Company.
-11-
PART II. OTHER INFORMATION
---------------------------
ITEM 5. OTHER INFORMATION
On January 27, 1997, Calypte announced that it had entered into a
collaborative research and product development agreement with Trinity
Biotech plc of Dublin, Ireland to develop a rapid, one-step HIV test
which can be performed on urine samples.
On March 17, 1997, Calypte submitted to the U.S. Food and Drug
Administration the additional data requested in October 1996 regarding
Cambridge Biotech Corporation's product license application for its
HIV-1 Western Blot kit. Cambridge Biotech Corporation's HIV-1 Western
Blot kit serves as a confirmatory test for Calypte's FDA-approved HIV-1
urine screening assay.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 11 - Computation of Loss Per Share
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K - None
-12-
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.
CALYPTE BIOMEDICAL CORPORATION
------------------------------
(Registrant)
Date: May 7, 1997 By: /s/ John J. DiPietro
------------------------
John J. DiPietro
Vice President - Finance, Chief Financial Officer
and Secretary (Principal Accounting Officer)