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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
Commission File No. 0-21721
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CLINICOR, INC.
(Name of Small Business Issuer as Specified in Its Charter)
NEVADA 88-0309093
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1717 WEST SIXTH STREET, SUITE 400, AUSTIN, TEXAS 78703
(Address of Principal Executive Offices) (Zip Code)
(512) 344-3300
(Issuer's Telephone Number, Including Area Code)
--------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
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As of August 13, 1997, 4,086,400 shares of the Issuer's Common Stock, $.001
par value, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
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TABLE OF CONTENTS
Page
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Balance Sheets - June 30, 1997 and December 31, 1996 3
Condensed Statements of Operations - six months ended June 30, 1997
and 1996 4
Condensed Statements of Cash Flows - six months ended June 30, 1997
and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Clinicor, Inc.
Balance Sheet
- --------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1997 1996
(uNAUDITED) (NOTE A)
----------- ------------
ASSETS
Current assets:
Cash, restricted cash and cash equivalents $ 145,808 $ 1,483,974
Accounts receivable 2,222,871 1,489,555
Prepaid and other current assets 88,878 143,992
----------- -----------
Total current assets 2,457,557 3,117,521
Property and equipment, net 1,238,888 1,118,877
Other assets 14,409 39,739
----------- -----------
TOTAL ASSETS $ 3,710,854 $ 4,276,137
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of obligations under capital
leases $ 32,768 $ 11,733
Accounts payable and accrued liabilities 2,142,386 1,088,061
Line of credit - 850,000
Deferred revenue 67,928 35,000
Dividends payable 702 444
Notes payable to shareholders 76,000 181,000
----------- -----------
Total current liabilities 2,319,784 2,166,238
Obligations under capital leases, less current
portion 69,115 16,047
----------- -----------
Total liabilities 2,388,899 2,182,285
----------- -----------
Shareholders' equity:
Common stock, $0.001 par value, 75,000
shares authorized, 4,086,400 shares issued
and outstanding 4,086 4,086
Convertible preferred stock, no par value,
5,181 shares authorized, 3,776 shares issued
and outstanding 3,776,000 3,631,000
Additional paid-in-capital 2,273,658 2,418,915
Deferred compensation (145,846) (224,800)
Accumulated deficit (4,585,943) (3,735,349)
----------- -----------
Total shareholders' equity 1,321,955 2,093,852
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,710,854 $ 4,276,137
=========== ===========
Note A: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date, but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The accompanying notes are an integral part of these financial statements.
3
CLINICOR, INC.
STATEMENT OF OPERATION
- --------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- -------------------------
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
---------- ---------- ---------- ----------
Service revenue:
Gross revenue $2,850,789 $ 702,876 $5,396,891 $1,557,534
Reimbursable costs 958,609 65,618 2,082,836 322,284
---------- ---------- ---------- ----------
Net service revenue 1,892,180 637,258 3,314,055 1,235,250
---------- ---------- ---------- ----------
Operating costs and expenses:
Direct costs 1,223,686 406,141 2,185,332 812,686
Selling, general and administrative 896,156 310,766 1,724,185 549,997
Depreciation and amortization 125,109 31,333 244,359 51,072
---------- ---------- ---------- ----------
Total operating costs and expenses 2,244,951 748,240 4,153,876 1,413,755
---------- ---------- ---------- ----------
Loss from operations (352,771) (110,982) (839,821) (178,505)
Other income and expenses:
Interest income 9,371 - 20,731 -
Interest expense 13,749 11,893 31,504 18,911
---------- ---------- ---------- ----------
Other income and expenses (4,378) (11,893) (10,773) (18,911)
---------- ---------- ---------- ----------
Net loss $ (357,149) $ (122,875) $ (850,594) $ (197,416)
========== ========== ========== ==========
Net loss $ (357,149) $ (122,875) $ (850,594) $ (197,416)
Preferred stock dividends (72,628) - (145,258) -
---------- ---------- ---------- ----------
Net loss applicable to common stock $ (429,777) $ (122,875) $ (995,852) $ (197,416)
========== ========== ========== ==========
NET LOSS APPLICABLE TO COMMON
STOCK PER SHARE $ (0.11) $ (0.03) $ (0.24) $ (0.05)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES EQUIVALENT OUTSTANDING 4,086,400 4,075,851 4,086,400 4,020,967
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
4
CLINICOR, INC.
STATEMENT OF CASH FLOWS
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Six Months Ended June 30,
-------------------------
1997 1996
(Unaudited) (Unaudited)
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OPERATING ACTIVITIES:
Net loss $ (850,594) $(197,416)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 244,359 51,072
Noncash stock option compensation expense 78,954 -
Net changes in assets and liabilites:
Account receivable (733,316) 74,053
Prepaid expenses and other assets 80,444 (1,195)
Accounts payable and accrued liabilities 1,054,325 (108,273)
Deferred revenue 32,928 (10,000)
---------- ---------
Net cash used in operating activities (92,900) (191,759)
---------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment (270,525) (128,935)
---------- ---------
FINANCING ACTIVITIES:
Payments on capital leases (9,901) (9,420)
Net proceeds from issuing common stock - 224,810
Payments on shareholder (105,000) -
Proceeds from certificate of deposit 1,000,000 -
Net repayment of line of credit (850,000) -
---------- ---------
Net cash provided by financing activities 35,099 215,390
---------- ---------
Net decrease in unrestricted cash
and cash equivalents (328,326) (105,304)
Unrestricted cash and cash
equivalents at beginning of year 474,134 267,281
---------- ---------
Unrestricted cash and cash
equivalents at end of year $ 145,808 $ 161,977
========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 37,710 $ 11,671
========== =========
Non-cash financing activities:
Preferred stock dividends $ 145,000 $ -
========== =========
Capital lease obligations $ 84,005 $ -
========== =========
The accompanying notes are an integral part of these financial statements.
5
CLINICOR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instruction to Form 10-QSB 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
accruals) considered necessary for a fair presentation have been included.
Operating results for the three- and six-month periods ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on
Form 10-KSB filed on April 15, 1997 for the fiscal year ended December 31, 1996
(Commission File No. 0-21721).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain amounts related to the prior year have been classified to conform to the
current year presentation.
NOTE 2 - NET INCOME (LOSS) PER SHARE
- ------------------------------------
Net loss applicable to common stock per share has been calculated by dividing
the Company's net loss applicable to common stock by the weighted average number
of shares of the Company's outstanding common stock. Common stock equivalent
shares are not included in the per share calculations where the effect of their
inclusion would be antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share" ("FAS 128") establishing a new methodology for
calculating earnings per share. FAS 128 must be adopted as of December 31, 1997,
and earlier adoption is not permitted. Had net income (loss) applicable to
common stock per share been determined under this new standard, there would have
been no change from amounts reported for the three- and six-month periods ended
June 30, 1997 and 1996.
NOTE 3 - SUBSEQUENT EVENT
- ------------------------
On July 1, 1997, the Company closed a $1,000,000 term loan with Oracle Partners,
L.P., which netted approximately $900,000 after related closing costs. The loan
has a term of six months and an interest rate of 10%. The Company issued a
warrant to purchase 200,000 shares of common stock in conjunction with obtaining
this financing. The terms of the loan require that it be repaid at an earlier
date if the Company completes a private placement of equity securities.
The Company entered into discussions with an institutional investor to sell, in
a private placement transaction, equity securities. The terms of this
transaction are yet to be fully negotiated. There can be no assurance that the
Company will be able to complete such a transaction under acceptable terms.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The information set forth and discussed below for the three and six months
ended June 30, 1997, are derived from the Condensed Financial Statements
included elsewhere herein. The financial information set forth and discussed
below is unaudited but, in the opinion of management, reflects all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
such information. The Company's results of operations for a particular quarter
may not be indicative of results expected during other quarters or for the
entire year.
OVERVIEW
The Company is a contract research organization ("CRO") providing Phase I
through Phase IV clinical trials management, patient recruiting, monitoring,
regulatory consulting, biostatistical and data management services for the
pharmaceutical, biotechnology and medical device industries ("sponsors"). The
Company commenced operations in September 1992 and has achieved its growth
through internal development.
The Company's contracts for services generally vary from a few months to
over one year in duration. A portion of the contract fee is typically required
to be paid when the contract is initiated, with the balance payable in
installments over the contract's duration. The installment payments are either
performance-based, relating payment to previously negotiated events such as
patient enrollment, patient completion or delivery of databases, or periodic,
based on personnel fees and actual expenses, typically billed on a monthly
basis.
In accordance with the terms of the Company's contracts, sponsors may
terminate or delay the performance of a contract, potentially causing the
Company to experience periods of excess capacity and reductions in service
revenue and net income. Trials may be terminated or delayed for a variety of
reasons, including unexpected or undesired results, production problems
resulting in shortages of the product or delays in supplying the product,
adverse patient reaction to the product, or the sponsor's decision to de-
emphasize a particular trial. If a trial is terminated, the contract generally
provides for a short continuation or wind-down period, as the Company manages
required investigator obligations through the termination date. Therefore, the
Company is typically entitled to all amounts owed for work performed through the
notice of termination and all costs associated with termination of the study.
In addition, contracts may require the payment of a separate early termination
fee, the amount of which usually declines as the trial progresses.
7
Revenue from contracts is recognized as work is performed. Some contracts
contain a fixed price per patient plus either fixed or variable fees for
additional service components such as monitoring, project management,
advertising, travel, data management, consulting and report writing. Other
contracts are time and materials based. Payments received on contracts in
excess of amounts earned are recorded as deferred revenue.
The Company's gross revenue backlog consists of anticipated service revenue
from clinical trials and other services that have not been completed and that
generally specify completion dates within 24 months. To qualify as "backlog"
anticipated projects must be represented by contracts or letter agreements or
must be projects for which the Company has commenced a significant level of
effort based upon sponsor commitment and approval of a written budget. Once
work commences, service revenue is recognized over the life of the contract. At
June 30, 1997, the Company's gross revenue backlog was approximately $18.4
million, as compared with approximately $16.5 million at December 31, 1996. The
Company believes that its backlog at any given date is not necessarily a
meaningful predictor of future results, and no assurances can be given that the
Company will fully realize all of its backlog as service revenue.
Reimbursable costs can include patient and investigator stipends,
Institutional Review Board fees, laboratory and medical supplies, patient
recruitment advertising, travel and consulting fees. Reimbursable costs that
are paid to the Company directly by the client, and for which the Company does
not bear the risk of economic loss, are deducted from gross service revenue in
accordance with standard CRO industry practice.
Direct costs include project personnel costs and related overhead costs
such as rent, supplies, postage, express delivery and telecommunications as well
as study-related costs not reimbursed by clients. Selling, general and
administrative expenses consist primarily of compensation and benefits of
marketing and administrative personnel, professional services, facility costs,
and other overhead items.
8
RESULTS OF OPERATIONS
Three months ended June 30, 1997 compared with three months ended June 30, 1996
- --------------------------------------------------------------------------------
The following table sets forth, for the periods indicated, certain items
included in the Company's unaudited statement of operations for the three months
ended June 30, 1997 and 1996, and the percentage of net service revenue for each
item. Any results or trends illustrated in the following table may not be
indicative of future results or trends.
For the quarter ended June 30,
------------------------------
1997 1996
---- ----
Service revenues $ 2,850,789 $702,876
Reimbursable costs 958,609 65,618
----------- --------
Net service revenue 1,892,180 100.0% 637,258 100.0%
Operating costs and expenses:
Direct costs 1,223,686 64.7% 406,141 63.7%
Selling, general and administrative 896,156 47.4% 310,766 48.8%
Depreciation and amortization 125,109 6.6% 31,333 4.9%
----------- --------
Total operating costs and expenses 2,244,951 118.7% 748,240 117.4%
----------- --------
Loss from operations (352,771) -18.6% (110,982) -17.4%
Net interest income (expense) (4,378) - .2% (11,893) -1.9%
----------- --------
Net loss $( 357,149) -18.8% $(122,875) -19.3%
========== =========
Net service revenues increased approximately $1,255,000, or 197%. The
increase is primarily attributable to an increase in the volume and size of
clinical trials and, to a lesser extent, an increase in data management and
consulting engagements.
Reimbursable costs increased to approximately 34% of gross revenue for the
three months ended June 30, 1997 as compared to 9% of gross revenue for the
same period in 1996. This increase is a direct result of the contract mix for
which revenue was recognized during the respective periods. Revenue during the
second quarter of 1997 contained a higher amount of reimbursable costs as
compared to revenue during the second quarter of 1996. Part of this increase in
the reimbursable cost component resulted from a higher ratio of time and
materials based contracts.
Direct costs increased approximately $817,000, or 201%. The increase in
direct costs is primarily attributable to the increase in project personnel
costs resulting from additional full-time study, patient and data management
staff and the related associated overhead. As a percentage of net service
revenues, direct costs remained constant at approximately 64%.
9
Selling, general and administrative expenses increased approximately
$585,000 or 188%, primarily due to increased personnel costs resulting from the
additional accounting, information technology, marketing and administrative
employees. During the three months ended June 30, 1997, a noncash charge of
approximately $40,000 for compensation expense was recorded related to certain
performance-based stock options. Professional fees increased due to costs
associated with becoming a public company and general corporate legal matters.
Office expenses, which include rent, supplies, and telecommunication costs,
increased due to the increase in personnel. Selling, general and administrative
expenses were approximately 47% of net service revenue for the three months
ended June 30, 1997, as compared to 49% for the corresponding 1996 period.
Depreciation and amortization expenses increased approximately $94,000 or
300%. This increase is primarily a result of the purchase of approximately $1.2
million in property and equipment during the past 12 months. Included in the
capital purchases were additions to the Company's computer information systems,
facility expansion costs, and office furniture and equipment related to the
Company's growing staff and its move to a new corporate office.
The Company recorded no income tax benefit as a result of the net operating
losses for the three months ended June 30, 1996 and 1997, due to the uncertainty
that the loss carryforwards will be utilized.
Six months ended June 30, 1997 compared with six months ended June 30, 1996
- ----------------------------------------------------------------------------
The following table sets forth, for the periods indicated, certain items
included in the Company's unaudited statement of operations for the six months
ended June 30, 1997 and 1996, and the percentage of net service revenue for each
item. Any results or trends illustrated in the following table may not be
indicative of future results or trends.
For the six months ended June 30,
---------------------------------
1997 1996
---- ----
Service revenues $ 5,396,891 $1,557,534
Reimbursable costs 2,082,836 322,284
----------- ----------
Net service revenue 3,314,055 100.0% 1,235,250 100.0%
Operating costs and expenses:
Direct costs 2,185,332 65.9% 812,686 65.8%
Selling, general and administrative 1,724,185 52.0% 549,997 44.5%
Depreciation and amortization 244,359 7.4% 51,072 4.1%
----------- ----------
Total operating costs and expenses 4,153,876 125.3% 1,413,755 114.4%
----------- ----------
Loss from operations (839,821) -25.3% (178,505) -14.4%
Net interest income (expense) (10,773) - .4% (18,911) -1.5%
----------- ----------
Net loss $ (850,594) -25.7% $ (197,416) -15.9%
=========== ==========
10
Net service revenues increased approximately $2,079,000, or 168%. The
increase is primarily attributable to an increase in the volume and size of
clinical trials and, to a lesser extent, an increase in data management and
consulting engagements.
Reimbursable costs increased to approximately 39% of gross revenue for the
six months ended June 30, 1997 as compared to approximately 21% of gross
revenue for the same period in 1996. This increase is a direct result of the
contract mix for which revenue was recognized during the respective periods.
Revenue during the first six months of 1997 contained a higher amount of
reimbursable costs as compared to revenue during the corresponding period in
1996. Part of this increase in the reimbursable cost component resulted from a
higher ratio of time and materials based contracts in 1997.
Direct costs increased approximately $1,373,000, or 169%. The increase in
direct costs is primarily attributable to the increase in project personnel
costs resulting from additional full-time study, patient and data management
staff and related associated overhead. As a percentage of net service revenues,
direct costs remained constant at approximately 66%.
Selling, general and administrative expenses increased approximately
$1,174,000 or 213%. These increased expenses primarily related to the growth in
marketing, accounting, information technology and administrative personnel and
related costs. In addition, legal expenses increased due to the costs of
becoming a public reporting company. During the six months ended June 30, 1997,
a noncash charge of approximately $80,000 for compensation expense was recorded
related to certain performance-based stock options. Office expenses, which
include rent, supplies, and telecommunication costs increased due to the
increase in personnel and the Company's move to larger corporate office
facilities. Selling, general and administrative expenses increased to 52% of
net service revenue from 45% in the prior period. This increase is primarily
attributable to the fact that the growth in personnel exceeded the growth in net
service revenue. Management expects this percentage to decrease should the
growth in net service revenues continue to increase in the future.
Depreciation and amortization expenses increased approximately $193,000 or
378%. This increase is primarily a result of the purchase of approximately $1.2
million in property, plant and equipment during the past 12 months. Included in
the capital purchases were additions to the Company's computer information
systems, facility expansion costs, and office furniture and equipment related to
the Company's growing staff and its move to a new corporate office.
The Company recorded no income tax benefit as a result of the net operating
losses for the six months ended June 30, 1997 and 1996, due to the uncertainty
that the loss carryforwards will be utilized.
11
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow from operating activities improved to $93,000 net cash used
for the six months ended June 30, 1997, from $192,000 net cash used in the
corresponding period in 1996. The improvement was primarily attributable to the
increase in accounts payable exceeding the increase in accounts receivable by
approximately $321,000. Overall there was a decrease of approximately $328,000
in unrestricted cash during the six months ended June 30, 1997 compared to a
decrease of $105,000 in the corresponding period in 1996. The decrease is
primarily attributable to approximately $270,000 of property and equipment
purchases. Cash collections for the six months ended June 30, 1997, totaled
approximately $4,697,000 as compared with $1,622,000 for the corresponding
period in 1996. During the six months ended June 30, 1997, purchases of
property and equipment increased by approximately $226,000 from the same period
in 1996. This increase was primarily related to the additional personnel hired
to support the increase in clinical trials and data management engagements.
Typically, cash flows from contracts include a payment at the time a
contract commences and the balance in installments over the contract's duration,
in some cases on a milestone completion basis. Consequently, cash receipts do
not necessarily correspond to costs incurred and revenue recognized on
contracts. The Company's cash flow is influenced by changes in levels of
accounts receivable. Accounts receivable increased to approximately $2,223,000
at June 30, 1997 from approximately $1,490,000 at December 31, 1996. The
increase of approximately $733,000 is a result of the growth in revenues and the
timing of payments by sponsors.
Since its inception, the Company has financed its operations and growth
with proceeds from private placements of equity securities, advances from
shareholders and borrowing arrangements under capital lease obligations and
lines of credit. Investing activities have consisted of capital expenditures,
primarily for leasehold improvements, information systems, furniture and office
equipment.
The Company has completed three private placements of equity securities in
the past two years, which raised approximately $5,684,000 in gross proceeds and
approximately $5,200,000 in net proceeds. The Company desires to complete a
private placement in 1997. The Company is in discussions with investment
bankers and other interested parties regarding such a transaction. In July
1997, the Company began discussions with an institutional investor regarding
the investor's purchase of equity securities in a private placement transaction.
The parties have agreed in principle as to certain terms of the proposed
transaction, but other terms have yet to be negotiated. There can be no
assurance that the Company will be able to complete a private placement under
acceptable terms.
In September 1996, the Company obtained a $1,000,000 secured line of credit
with an independent financial institution of which $1,000,000 was outstanding as
of March 31, 1997. The line of credit was secured by a $1,000,000 certificate
of deposit. This line was repaid in May 1997 with the proceeds from the
certificate of deposit which secured it.
12
On July 1, 1997, the Company entered into a six month term loan agreement
with Oracle Partners, L.P. Oracle is the Company's current preferred
stockholder. The term loan is secured by all the assets of the Company and was
put into place to supplement the Company's working capital while the Company
pursued its efforts to complete a private placement of equity securities and a
permanent working capital line of credit.
Based on expected increases in the Company's revenues, receivables and
backlog, the Company will require additional working capital to finance its
business. The Company's principal cash needs on both a short-term and long-term
basis are for the funding of its operations and capital expenditure
requirements. Although accounts receivables have increased, the Company has
limited cash reserves. As a result, the Company is funding its operations with
cash generated from operations, from the increase in accounts payable, from
shareholder and officer loans and from capital lease transactions. To fund its
growing business, the Company requires additional working capital which can be
comprised of a line of credit and/or additional equity capital. The Company is
in discussions with several financial institutions in an effort to obtain such
funding. However, there can be no assurance that the Company will be able to
obtain this funding under acceptable terms.
Management believes that the proceeds from the Oracle term loan and from
the proposed private placement, if obtained, will be sufficient to fund current
operations and the expected continued growth of the backlog. Without additional
funding, the Company will have to rely on internally generated working capital,
which consists primarily of accounts receivable collections and customer advance
contract payments, in order to fund its operations. In addition, either the
private placement or a permanent working capital line of credit will have to be
completed by December 31, 1997, in order for the Company to repay the loan when
due. The term loan can be extended at the lender's option for an additional
three months.
INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
Certain statements made in this Form 10-QSB, in other SEC filings or
written materials, or orally by the Company or its representatives may
constitute "forward-looking" statements within the meaning of the federal
securities laws. The Company notes that a variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results expressed in the Company's forward-looking statements. The
risks and uncertainties that may affect the operations, performance, development
and results of the Company's business include the factors discussed on pages 11
through 14 of Management's Discussion and Analysis or Plan of Operation set
forth in the Company's Annual Report on Form 10-KSB for the year ended December
31, 1996.
13
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
In connection with the loan to the Company from Oracle Partners, L.P.
("Oracle") more fully described under Item 5 below, the Company issued to Oracle
a warrant to purchase 200,000 shares of the Company's Common Stock at an
exercise price of $5.50 per share. The warrant is subject to anti-dilution
protection and to other adjustments to the exercise price in certain events.
The warrant was issued in reliance upon exemption pursuant to Section 4(2)
of the Securities Act of 1933, as amended. The investment fund to which the
warrant was issued is an institutional accredited investor. Extensive due
diligence was conducted in connection with the loan transaction of which the
warrant issuance was a part. The warrant is not transferrable except upon
compliance with all applicable securities laws.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Shareholders of the Company was held on May 13,
1997. At the meeting, the holders of the Company's Common Stock and Preferred
Stock elected five directors of the Company. The holders of Common Stock
elected Messrs. Thomas P. O'Donnell, Arthur P. Haag and Robert S. Sammis as
directors, and the holders of Preferred Stock elected Dr. Zola P. Horovitz and
Dr. Stuart T. Weisbrod as directors.
As to the election of the directors by the holders of the Company's Common
Stock, there were 3,428,353 votes for the election of Messrs. Thomas P.
O'Donnell, Arthur P. Haag and Robert S. Sammis as directors, no votes against
any of these nominees and no abstentions or broker non-votes. As to the
election of the directors by the holders of the Company's Preferred Stock, there
were 2,420,666 votes for the election of Dr. Zola P. Horovitz and Dr. Stuart T.
Weisbrod as directors, no votes against either nominee and no abstentions or
broker non-votes.
The only other matter voted on at the meeting was the ratification of the
appointment of Price Waterhouse, L.L.P., independent accountants, as auditors
for the fiscal year ending December 31, 1997. As to this ratification, there
were 5,849,019 votes by the holders of the Common and Preferred Stock for the
ratification, no votes against the ratification and no abstentions or broker
non-votes.
On June 9, 1997, the holders of Preferred Stock acted by a unanimous written
consent to approve the expansion of the Board from five to seven members and to
elect Mr. Joseph L. Dowling to serve as a director of the Company.
ITEM 5. OTHER INFORMATION
Subsequent to the Annual Meeting of Shareholders, on May 13, 1997, the Board
of Directors of the Company voted, contingent upon the approval of the holders
of Preferred Stock, to increase the number of members of the Board of Directors
from five to seven members and to elect Mr. James W. Clark, Jr. as a director of
the Company. As described in Item 4 above, on June 9, 1997, the holders of
Preferred Stock approved the expansion of the Board and elected Mr. Joseph L.
Dowling to occupy the other newly-created Board seat.
On June 24, 1997, Mr. Robert S. Sammis was elected to serve as President of
the Company. Mr. Thomas P. O'Donnell relinquished the title of President and
will continue as Chairman of the Board and Chief Executive Officer of the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
3(a) Amendments to the Amended and Restated By-Laws of the registrant
adopted by the Board of Directors on June 24, 1997
4(a) Warrant to purchase shares of the registrant's common stock issued to
Oracle Partners, L.P. on July 1, 1997
4(b) Registration Rights Agreement dated as of July 1, 1997 between the
registrant and Oracle Partners, L.P.
14
10(a) Stock Option Agreement dated May 12, 1997 between the registrant and
James W. Clark, Jr.
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K. During the quarter ended June 30, 1997, the Company
filed the following Current Report on Form 8-K with the Securities and
Exchange Commission. No financial statements were filed with this report.
Date of Event Date of Filing Item Reported and Description
------------- -------------- -----------------------------
May 13, 1997 May 16, 1997 Item 5--press release reporting election of
Board of Directors, preview of first
quarter results and election of Chief
Financial Officer
15
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CLINICOR, INC.
Date August 13, 1997 By /s/ THOMAS P. O'DONNELL
--------------------- ----------------------------------------------
Thomas P. O'Donnell
Chairman of the Board and Chief Executive
Officer
Date August 13, 1997 By /s/ JAMES W. CLARK, JR.
--------------------- ----------------------------------------------
James W. Clark, Jr.
Vice President and Chief Financial Officer
(Principal Financial Officer)
16