x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
NEOPROBE
CORPORATION
|
(Exact
name of registrant as specified in its
charter)
|
Delaware
|
31-1080091
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
425
Metro Place North, Suite 300, Dublin, Ohio
|
43017-1367
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(614)
793-7500
|
(Registrant’s
telephone number, including area code)
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Large accelerated filer
¨
|
Accelerated filer ¨
|
Non-accelerated filer
¨
|
Smaller reporting company
x
|
PART
I – Financial Information
|
||
Item
1.
|
Financial
Statements
|
3
|
Consolidated
Balance Sheets as of June 30, 2010 (unaudited) and December 31,
2009
|
3
|
|
Consolidated
Statements of Operations for the Three-Month and Six-Month Periods Ended
June 30, 2010 and June 30, 2009 (unaudited)
|
5
|
|
Consolidated
Statement of Stockholders’ Deficit for the Six-Month Period Ended June 30,
2010 (unaudited)
|
6
|
|
Consolidated
Statements of Cash Flows for the Six-Month Periods Ended June 30, 2010 and
June 30, 2009 (unaudited)
|
7
|
|
Notes
to the Consolidated Financial Statements (unaudited)
|
8
|
|
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
23
|
Forward-Looking
Statements
|
23
|
|
The
Company
|
23
|
|
Product
Line Overview
|
23
|
|
Results
of Operations
|
27
|
|
Liquidity
and Capital Resources
|
29
|
|
Recent
Accounting Developments
|
32
|
|
Critical
Accounting Policies
|
32
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
33
|
Item
4T.
|
Controls
and Procedures
|
33
|
PART
II – Other Information
|
||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
35
|
Item
6.
|
Exhibits
|
35
|
June 30,
2010
(unaudited)
|
December 31,
2009
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 3,944,782 | $ | 5,639,842 | ||||
Accounts
receivable, net
|
1,896,956 | 1,331,908 | ||||||
Inventory
|
1,326,780 | 1,143,697 | ||||||
Prepaid
expenses and other
|
138,243 | 474,243 | ||||||
Assets
associated with discontinued operations
|
5,531 | 27,475 | ||||||
Total
current assets
|
7,312,292 | 8,617,165 | ||||||
Property
and equipment
|
2,265,914 | 1,990,603 | ||||||
Less
accumulated depreciation and amortization
|
1,779,731 | 1,693,290 | ||||||
486,183 | 297,313 | |||||||
Patents
and trademarks
|
532,561 | 524,224 | ||||||
Less
accumulated amortization
|
446,769 | 445,650 | ||||||
85,792 | 78,574 | |||||||
Other
assets
|
7,421 | 24,707 | ||||||
Total
assets
|
$ | 7,891,688 | $ | 9,017,759 |
June 30,
2010
(unaudited)
|
December 31,
2009
|
|||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 1,372,286 | $ | 763,966 | ||||
Accrued
liabilities and other
|
1,041,438 | 1,048,304 | ||||||
Capital
lease obligations, current portion
|
11,958 | 11,265 | ||||||
Deferred
revenue, current portion
|
587,786 | 560,369 | ||||||
Liabilities
associated with discontinued operations
|
15,894 | 18,743 | ||||||
Total
current liabilities
|
3,029,362 | 2,402,647 | ||||||
Capital
lease obligations
|
13,404 | 19,912 | ||||||
Deferred
revenue
|
545,245 | 534,119 | ||||||
Note
payable to Bupp Investors, net of discount of $54,093
|
— | 945,907 | ||||||
Notes
payable to investor
|
— | 10,000,000 | ||||||
Derivative
liabilities
|
1,569,271 | 1,951,664 | ||||||
Other
liabilities
|
30,057 | 33,362 | ||||||
Total
liabilities
|
5,187,339 | 15,887,611 | ||||||
Commitments
and contingencies
|
||||||||
Preferred
stock; $.001 par value; 5,000,000 shares authorized;
|
||||||||
3,000
Series A shares, $1,000 face value, issued and
|
||||||||
outstanding
at December 31, 2009
|
— | 3,000,000 | ||||||
Stockholders’
equity (deficit):
|
||||||||
Preferred
stock; $.001 par value; 5,000,000 shares authorized;
|
||||||||
10,000
Series B shares and 1,000 Series C shares issued
|
||||||||
and
outstanding at June 30, 2010
|
11 | — | ||||||
Common
stock; $.001 par value; 150,000,000 shares authorized;
|
||||||||
82,151,043
and 80,936,711 shares outstanding at
|
||||||||
June
30, 2010 and December 31, 2009, respectively
|
82,151 | 80,937 | ||||||
Additional
paid-in capital
|
249,007,591 | 182,747,897 | ||||||
Accumulated
deficit
|
(246,385,404 | ) | (192,698,686 | ) | ||||
Total
stockholders’ equity (deficit)
|
2,704,349 | (9,869,852 | ) | |||||
Total
liabilities and stockholders’ equity (deficit)
|
$ | 7,891,688 | $ | 9,017,759 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues:
|
||||||||||||||||
Net
sales
|
2,513,876 | $ | 1,778,999 | $ | 5,171,748 | $ | 4,436,220 | |||||||||
License
revenue
|
25,000 | 25,000 | 50,000 | 50,000 | ||||||||||||
Total
revenues
|
2,538,876 | 1,803,999 | 5,221,748 | 4,486,220 | ||||||||||||
Cost
of goods sold
|
811,754 | 576,082 | 1,700,621 | 1,402,445 | ||||||||||||
Gross
profit
|
1,727,122 | 1,227,917 | 3,521,127 | 3,083,775 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
1,737,501 | 1,303,581 | 4,139,173 | 2,525,550 | ||||||||||||
Selling,
general and administrative
|
918,342 | 801,641 | 2,046,544 | 1,638,964 | ||||||||||||
Total
operating expenses
|
2,655,843 | 2,105,222 | 6,185,717 | 4,164,514 | ||||||||||||
Loss
from operations
|
(928,721 | ) | (877,305 | ) | (2,664,590 | ) | (1,080,739 | ) | ||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income
|
1,947 | 3,761 | 3,761 | 13,708 | ||||||||||||
Interest
expense
|
(268,551 | ) | (461,585 | ) | (552,989 | ) | (918,719 | ) | ||||||||
Change
in derivative liabilities
|
(154,315 | ) | (13,730,204 | ) | (583,607 | ) | (12,204,839 | ) | ||||||||
Loss
on extinguishment of debt
|
(41,717,380 | ) | — | (41,717,380 | ) | — | ||||||||||
Other
|
(2,122 | ) | (1,357 | ) | (2,578 | ) | (1,631 | ) | ||||||||
Total
other expense, net
|
(42,140,421 | ) | (14,189,385 | ) | (42,852,793 | ) | (13,111,481 | ) | ||||||||
Loss
from continuing operations
|
(43,069,142 | ) | (15,066,690 | ) | (45,517,383 | ) | (14,192,220 | ) | ||||||||
Discontinued
operations – loss from operations
|
(717 | ) | (50,244 | ) | (12,590 | ) | (110,593 | ) | ||||||||
Net
loss
|
(43,069,859 | ) | (15,116,934 | ) | (45,529,973 | ) | (14,302,813 | ) | ||||||||
Preferred
stock dividends
|
(8,096,745 | ) | (60,000 | ) | (8,156,745 | ) | (120,000 | ) | ||||||||
Loss
attributable to common stockholders
|
$ | (51,166,604 | ) | $ | (15,176,934 | ) | $ | (53,686,718 | ) | $ | (14,422,813 | ) | ||||
Loss
per common share (basic and diluted):
|
||||||||||||||||
Continuing
operations
|
$ | (0.64 | ) | $ | (0.21 | ) | $ | (0.67 | ) | $ | (0.20 | ) | ||||
Discontinued
operations
|
$ | — | $ | — | $ | — | $ | — | ||||||||
Attributable
to common stockholders
|
$ | (0.64 | ) | $ | (0.21 | ) | $ | (0.67 | ) | $ | (0.20 | ) | ||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
and diluted
|
80,260,077 | 71,316,657 | 79,917,641 | 70,908,835 |
Preferred Stock
|
Common Stock
|
Additional
Paid-In
|
Accumulated
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||||||||||||
Balance,
December 31, 2009
|
— | $ | — | 80,936,711 | $ | 80,937 | $ | 182,747,897 | $ | (192,698,686 | ) | $ | (9,869,852 | ) | ||||||||||||||
Issued
stock in payment of interest on convertible debt and dividends on
convertible preferred stock
|
— | — | 347,832 | 348 | 476,319 | — | 476,667 | |||||||||||||||||||||
Issued
stock upon exercise of options, net of issuance costs
|
— | — | 152,460 | 152 | 1,036 | — | 1,188 | |||||||||||||||||||||
Issued
stock in connection with stock purchase agreement, net of
costs
|
— | — | 660,541 | 661 | 776,797 | — | 777,458 | |||||||||||||||||||||
Issued
stock to 401(k) plan at $0.76
|
— | — | 53,499 | 53 | 40,570 | — | 40,623 | |||||||||||||||||||||
Issued
Series B and Series C convertible preferred stock, net of issuance
costs
|
11,000 | 11 | — | — | 64,661,789 | — | 64,661,800 | |||||||||||||||||||||
Stock
compensation expense
|
— | — | — | — | 303,183 | — | 303,183 | |||||||||||||||||||||
Preferred
stock dividends, including deemed dividends
|
— | — | — | — | — | (8,156,745 | ) | (8,156,745 | ) | |||||||||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||||||
Net
loss
|
— | — | — | — | — | (45,529,973 | ) | (45,529,973 | ) | |||||||||||||||||||
Balance,
June 30, 2010
|
11,000 | $ | 11 | 82,151,043 | $ | 82,151 | $ | 249,007,591 | $ | (246,385,404 | ) | $ | 2,704,349 |
Six Months Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (45,529,973 | ) | $ | (14,302,813 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
112,217 | 204,014 | ||||||
Amortization
of debt discount and debt offering costs
|
16,109 | 364,838 | ||||||
Issuance
of common stock in payment of interest and dividends
|
476,667 | 411,333 | ||||||
Stock
compensation expense
|
303,183 | 145,314 | ||||||
Non-cash
inventory adjustment
|
324,000 | — | ||||||
Change
in derivative liabilities
|
583,607 | 12,204,839 | ||||||
Loss
on extinguishment of debt
|
41,717,380 | — | ||||||
Other
|
42,487 | 38,902 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(552,843 | ) | 497,529 | |||||
Inventory
|
(541,511 | ) | (172,788 | ) | ||||
Prepaid
expenses and other assets
|
113,456 | 101,700 | ||||||
Accounts
payable
|
608,320 | (195,413 | ) | |||||
Accrued
liabilities and other liabilities
|
(131,075 | ) | (66,763 | ) | ||||
Deferred
revenue
|
38,543 | (11,993 | ) | |||||
Net
cash used in operating activities
|
(2,419,433 | ) | (781,301 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Maturities
of available-for-sale securities
|
— | 494,000 | ||||||
Purchases
of equipment
|
(253,797 | ) | (58,652 | ) | ||||
Proceeds
from sales of equipment
|
— | 251 | ||||||
Patent
and trademark costs
|
(12,202 | ) | (60,967 | ) | ||||
Net
cash (used in) provided by investing activities
|
(265,999 | ) | 374,632 | |||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from issuance of common stock
|
1,044,400 | 95,250 | ||||||
Payment
of stock offering costs
|
(48,212 | ) | (12,867 | ) | ||||
Payment
of notes payable
|
— | (102,826 | ) | |||||
Payments
under capital leases
|
(5,816 | ) | (5,684 | ) | ||||
Net
cash provided by (used in) financing activities
|
990,372 | (26,127 | ) | |||||
Net
decrease in cash
|
(1,695,060 | ) | (432,796 | ) | ||||
Cash,
beginning of period
|
5,639,842 | 3,565,837 | ||||||
Cash,
end of period
|
$ | 3,944,782 | $ | 3,133,041 |
1.
|
Summary
of Significant Accounting Policies
|
|
a.
|
Basis of
Presentation: The information presented as of June 30,
2010 and for the three-month and six-month periods ended June 30, 2010 and
June 30, 2009 is unaudited, but includes all adjustments (which consist
only of normal recurring adjustments) that the management of Neoprobe
Corporation (Neoprobe, the Company, or we) believes to be necessary for
the fair presentation of results for the periods presented. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted
pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission. The balances as of June 30, 2010 and the results for the
interim periods are not necessarily indicative of results to be expected
for the year. The consolidated financial statements should be read
in conjunction with Neoprobe’s audited consolidated financial statements
for the year ended December 31, 2009, which were included as part of our
Annual Report on Form 10-K.
|
|
b.
|
Financial Instruments and Fair
Value: The fair value hierarchy prioritizes the inputs
to valuation techniques used to measure fair value, giving the highest
priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of the
fair value hierarchy are described
below:
|
|
(1)
|
Cash,
accounts receivable, accounts payable, and accrued
liabilities: The carrying amounts approximate fair value
because of the short maturity of these
instruments.
|
|
(2)
|
Note
payable to Bupp Investors: The carrying value of our debt is
presented as the face amount of the note less the unamortized discount
related to the initial estimated fair value of the warrants to purchase
common stock issued in connection with the note. At December 31,
2009, the note payable to the Bupp Investors had an estimated fair value
of $3.9 million, based on the closing market price of our common
stock. During June 2010, the Bupp Investors exchanged their note for
preferred stock, resulting in extinguishment of the debt. See Note
10.
|
|
(3)
|
Notes
payable to investor: The carrying value of our debt is
presented as the face amount of the notes. At December 31, 2009, the
notes payable to investors had an estimated fair value of $31.0 million,
based on the closing market price of our common stock. During June
2010, the investor exchanged their notes for preferred stock, resulting in
extinguishment of the debt. See Note
10.
|
|
(4)
|
Derivative
liabilities: Derivative liabilities are recorded at fair
value. Fair value of warrant liabilities is determined based on a
Black-Scholes option pricing model calculation. Fair value of put
option liabilities is determined based on a probability-weighted
Black-Scholes option pricing model calculation. Unrealized gains and
losses on the derivatives are classified in other expenses as a change in
derivative liabilities in the statements of operations. During June
2010, certain investors exchanged their notes for preferred stock,
resulting in extinguishment of our remaining put option liabilities.
See Note 10.
|
|
c.
|
Recent Accounting
Developments: In January 2010, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-6,
Improving Disclosures
about Fair Value Measurements. ASU 2010-6 amends FASB ASC
Topic 820, Fair Value
Measurements and Disclosures. ASU 2010-6 requires new
disclosures as follows: (1) Transfers in and out of Levels 1 and 2 and (2)
Activity in Level 3 fair value measurements. An entity should
disclose separately the amounts of significant transfers in and out of
Level 1 and Level 2 fair value measurements and describe the reasons for
the transfers. In the reconciliation of fair value measurements
using significant unobservable inputs (Level 3), an entity should present
separately information about purchases, sales, issuances, and settlements
(that is, on a gross basis rather than as one net number). ASU
2010-6 also clarifies existing disclosures as follows: (1)
Level of disaggregation and (2) Disclosures about inputs and valuation
techniques. An entity should provide fair value measurement
disclosures for each class of assets and liabilities. A class is
often a subset of assets or liabilities within a line item in the
statement of financial position. An entity needs to use judgment in
determining the appropriate classes of assets and liabilities. An
entity should provide disclosures about the valuation techniques and
inputs used to measure fair value for both recurring and nonrecurring fair
value measurements. Those disclosures are required for fair value
measurements that fall in either Level 2 or Level 3. ASU 2010-6 is
effective for interim and annual reporting periods beginning after
December 15, 2009, except for the separate disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level
3 fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods
within those fiscal years. We adopted the initial provisions of ASU
2010-6 beginning January 1, 2010. As the new provisions of ASU
2010-6 provide only disclosure requirements, the adoption of this standard
did not impact our consolidated financial position, results of operations
or cash flows, but did result in increased
disclosures.
|
2.
|
Discontinued
Operations
|
June 30,
2010
|
December 31,
2009
|
|||||||
Accounts
receivable, net
|
$ | 3,144 | $ | 15,349 | ||||
Inventory
|
2,387 | 12,126 | ||||||
Current
assets associated with discontinued operations
|
$ | 5,531 | $ | 27,475 | ||||
Accounts
payable
|
$ | 5,400 | $ | 5,400 | ||||
Accrued
expenses
|
10,494 | 13,343 | ||||||
Current
liabilities associated with discontinued operations
|
$ | 15,894 | $ | 18,743 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
sales
|
$ | 21,790 | $ | 29,744 | $ | 36,235 | $ | 72,559 | ||||||||
Cost
of goods sold
|
5,227 | 11,553 | 11,616 | 33,724 | ||||||||||||
Gross
profit
|
16,563 | 18,191 | 24,619 | 38,835 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
10,557 | 4,397 | 10,808 | 20,486 | ||||||||||||
Selling,
general and administrative
|
6,660 | 64,122 | 26,522 | 128,847 | ||||||||||||
Total
operating expenses
|
17,217 | 68,519 | 37,330 | 149,333 | ||||||||||||
Other
income (expense)
|
(63 | ) | 84 | 121 | (95 | ) | ||||||||||
Loss
from discontinued operations
|
$ | (717 | ) | $ | (50,244 | ) | $ | (12,590 | ) | $ | (110,593 | ) |
3.
|
Fair
Value Hierarchy
|
Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2010
|
||||||||||||||||
Quoted Prices
in Active
Markets for
Identical
Liabilities
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
Balance as of
June 30,
|
|||||||||||||
Description
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
2010
|
||||||||||||
Liabilities:
|
||||||||||||||||
Derivative
liabilities related to warrants
|
$ | — | $ | 1,569,271 | $ | — | $ | 1,569,271 |
Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2009
|
||||||||||||||||
Quoted Prices
in Active
Markets for
Identical
Assets and
Liabilities
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
Balance as of
December 31,
|
|||||||||||||
Description
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
2009
|
||||||||||||
Liabilities:
|
||||||||||||||||
Derivative
liabilities related to warrants
|
$ | — | $ | 985,664 | $ | — | $ | 985,664 | ||||||||
Derivative
liabilities related to put options
|
— | — | 966,000 | 966,000 | ||||||||||||
Total
derivative liabilities
|
$ | — | $ | 985,664 | $ | 966,000 | $ | 1,951,664 |
Three Months Ended June 30, 2010
|
||||||||||||||||
Description
|
Balance as of
March 31,
2010
|
Unrealized
(Gains)
Losses
|
Purchases,
Issuances
and
Settlements
|
Balance as of
June 30,
2010
|
||||||||||||
Liabilities:
|
||||||||||||||||
Derivative
liabilities related to conversion and put options
|
$ | 966,000 | $ | — | $ | (966,000 | ) | $ | — |
Three Months Ended June 30, 2009
|
||||||||||||||||
Description
|
Balance as of
March 31,
2009
|
Unrealized
(Gains)
Losses
|
Purchases,
Issuances
and
Settlements
|
Balance as of
June 30,
2009
|
||||||||||||
Liabilities:
|
||||||||||||||||
Derivative
liabilities related to conversion and put options
|
$ | 5,601,681 | $ | 5,687,741 | $ | — | $ | 11,289,422 |
Six Months Ended June 30, 2010
|
||||||||||||||||
Description
|
Balance as of
December 31,
2009
|
Unrealized
(Gains)
Losses
|
Purchases,
Issuances
and
Settlements
|
Balance as of
June 30,
2010
|
||||||||||||
Liabilities:
|
||||||||||||||||
Derivative
liabilities related to conversion and put options
|
$ | 966,000 | $ | — | $ | (966,000 | ) | $ | — |
Six Months Ended June 30, 2009
|
||||||||||||||||
Description
|
Balance as of
December 31,
2008
|
Unrealized
(Gains)
Losses
|
Adoption of
New
Accounting
Standard
(See Note 10)
|
Balance as of
June 30,
2009
|
||||||||||||
Liabilities:
|
||||||||||||||||
Derivative
liabilities related to conversion and put options
|
$ | 853,831 | $ | 5,131,104 | $ | 5,304,487 | $ | 11,289,422 |
4.
|
Stock-Based
Compensation
|
Six Months Ended June 30, 2010
|
|||||||||||||
Number of
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding
at beginning of period
|
5,689,500 | $ | 0.44 | ||||||||||
Granted
|
20,000 | 1.72 | |||||||||||
Exercised
|
(200,000 | ) | 0.43 | ||||||||||
Forfeited
|
(18,333 | ) | 0.74 | ||||||||||
Expired
|
— | — | |||||||||||
Outstanding
at end of period
|
5,491,167 | $ | 0.44 |
4.9 years
|
$ | 7,468,223 | |||||||
Exercisable
at end of period
|
4,794,167 | $ | 0.38 |
4.4 years
|
$ | 6,804,093 |
Six Months Ended
June 30, 2010
|
||||||||
Number of
Shares
|
Weighted
Average
Grant-Date
Fair Value
|
|||||||
Unvested
at beginning of period
|
1,719,000 | $ | 0.76 | |||||
Granted
|
— | — | ||||||
Vested
|
— | — | ||||||
Forfeited
|
— | — | ||||||
Unvested
at end of period
|
1,719,000 | $ | 0.76 |
5.
|
Comprehensive
Income (Loss)
|
Six Months
Ended
June 30, 2009
|
||||
Net
loss
|
$ | (14,302,813 | ) | |
Unrealized
losses on available-for-sale securities
|
(1,383 | ) | ||
Other
comprehensive income
|
$ | (14,304,196 | ) |
6.
|
Earnings
(Loss) Per Share
|
Three Months Ended
June 30, 2010
|
Three Months Ended
June 30, 2009
|
|||||||||||||||
Basic
Earnings
Per Share
|
Diluted
Earnings
Per Share
|
Basic
Earnings
Per Share
|
Diluted
Earnings
Per Share
|
|||||||||||||
Outstanding
shares
|
82,151,043 | 82,151,043 | 73,031,986 | 73,031,986 | ||||||||||||
Effect
of weighting changes in outstanding shares
|
(171,966 | ) | (171,966 | ) | (751,329 | ) | (751,329 | ) | ||||||||
Unvested
restricted stock
|
(1,719,000 | ) | (1,719,000 | ) | (964,000 | ) | (964,000 | ) | ||||||||
Adjusted
shares
|
80,260,077 | 80,260,077 | 71,316,657 | 71,316,657 |
Six Months Ended
June 30, 2010
|
Six Months Ended
June 30, 2009
|
|||||||||||||||
Basic
Earnings
Per Share
|
Diluted
Earnings
Per Share
|
Basic
Earnings
Per Share
|
Diluted
Earnings
Per Share
|
|||||||||||||
Outstanding
shares
|
82,151,043 | 82,151,043 | 73,031,986 | 73,031,986 | ||||||||||||
Effect
of weighting changes in outstanding shares
|
(514,402 | ) | (514,402 | ) | (1,159,151 | ) | (1,159,151 | ) | ||||||||
Unvested
restricted stock
|
(1,719,000 | ) | (1,719,000 | ) | (964,000 | ) | (964,000 | ) | ||||||||
Adjusted
shares
|
79,917,641 | 79,917,641 | 70,908,835 | 70,908,835 |
7.
|
Inventory
|
June 30,
2010
(unaudited)
|
December 31,
2009
|
|||||||
Pharmaceutical
materials
|
$ | 201,000 | $ | 525,000 | ||||
Gamma
detection device materials
|
263,270 | 137,695 | ||||||
Gamma
detection device finished goods
|
862,510 | 481,002 | ||||||
Total
|
$ | 1,326,780 | $ | 1,143,697 |
8.
|
Intangible
Assets
|
June 30, 2010
|
December 31, 2009
|
||||||||||||||||
Weighted
Average
Remaining
Life1
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
|||||||||||||
Patents
and trademarks
|
3.2
yrs
|
$ | 532,261 | $ | 446,769 | $ | 524,224 | $ | 445,650 |
Estimated
Amortization
Expense
|
||||
For
the year ended 12/31/2010
|
$ | 2,755 | ||
For
the year ended 12/31/2011
|
1,256 | |||
For
the year ended 12/31/2012
|
980 | |||
For
the year ended 12/31/2013
|
263 | |||
For
the year ended 12/31/2014
|
244 |
9.
|
Product
Warranty
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Warranty
reserve at beginning of period
|
$ | 77,624 | $ | 69,593 | $ | 61,400 | $ | 62,261 | ||||||||
Provision
for warranty claims and changes in reserve for warranties
|
12,473 | 20,273 | 50,571 | 57,356 | ||||||||||||
Payments
charged against the reserve
|
(16,280 | ) | (26,425 | ) | (38,154 | ) | (56,176 | ) | ||||||||
Warranty
reserve at end of period
|
$ | 73,817 | $ | 63,441 | $ | 73,817 | $ | 63,441 |
10.
|
Convertible
Securities
|
11.
|
Derivative
Instruments
|
12.
|
Stock
Warrants
|
13.
|
Common
Stock Purchase Agreement
|
14.
|
Income
Taxes
|
15.
|
Segment
and Subsidiary Information
|
($ amounts in thousands)
Three Months Ended June 30,
2010
|
Oncology
Devices
|
Drug and
Therapy
Products
|
Corporate
|
Total
|
||||||||||||
Net
sales:
|
||||||||||||||||
United
States1
|
$ | 2,479 | $ | — | $ | — | $ | 2,479 | ||||||||
International
|
35 | — | — | 35 | ||||||||||||
License
revenue
|
25 | — | — | 25 | ||||||||||||
Research
and development expenses
|
83 | 1,655 | — | 1,738 | ||||||||||||
Selling,
general and administrative expenses, excluding depreciation and
amortization2
|
54 | — | 814 | 868 | ||||||||||||
Depreciation
and amortization
|
31 | 2 | 17 | 50 | ||||||||||||
Income
(loss) from operations3
|
1,559 | (1,657 | ) | (831 | ) | (929 | ) | |||||||||
Other
income (expense)4
|
— | — | (42,140 | ) | (42,140 | ) | ||||||||||
Income
(loss) from continuing operations
|
1,559 | (1,657 | ) | (42,971 | ) | (43,069 | ) | |||||||||
Loss
from discontinued operations
|
— | — | (1 | ) | (1 | ) | ||||||||||
Total
assets, net of depreciation and amortization:
|
||||||||||||||||
United
States operations
|
3,251 | 441 | 4,194 | 7,886 | ||||||||||||
Discontinued
operations
|
— | — | 6 | 6 | ||||||||||||
Capital
expenditures
|
— | 142 | 21 | 163 | ||||||||||||
($ amounts in thousands)
Three Months Ended June 30,
2009
|
Oncology
Devices
|
Drug and
Therapy
Products
|
Corporate
|
Total
|
||||||||||||
Net
sales:
|
||||||||||||||||
United
States1
|
$ | 1,715 | $ | — | $ | — | $ | 1,715 | ||||||||
International
|
64 | — | — | 64 | ||||||||||||
License
revenue
|
25 | — | — | 25 | ||||||||||||
Research
and development expenses
|
344 | 960 | — | 1,304 | ||||||||||||
Selling,
general and administrative expenses, excluding depreciation and
amortization2
|
35 | — | 713 | 748 | ||||||||||||
Depreciation
and amortization
|
39 | 1 | 14 | 54 | ||||||||||||
Income
(loss) from operations3
|
810 | (961 | ) | (727 | ) | (877 | ) | |||||||||
Other
income (expense)4
|
— | — | (14,189 | ) | (14,189 | ) | ||||||||||
Income
(loss) from continuing operations
|
810 | (961 | ) | (14,916 | ) | (15,067 | ) | |||||||||
Loss
from discontinued operations
|
— | — | (50 | ) | (50 | ) | ||||||||||
Total
assets, net of depreciation and amortization:
|
||||||||||||||||
United
States operations
|
2,036 | 23 | 4,282 | 6,341 | ||||||||||||
Discontinued
operations
|
— | — | 1,784 | 1,784 | ||||||||||||
Capital
expenditures
|
1 | — | 17 | 18 |
($ amounts in thousands)
Six Months Ended June 30, 2010
|
Oncology
Devices
|
Drug and
Therapy
Products
|
Corporate
|
Total
|
||||||||||||
Net
sales:
|
||||||||||||||||
United
States1
|
$ | 5,116 | $ | — | $ | — | $ | 5,116 | ||||||||
International
|
56 | — | — | 56 | ||||||||||||
License
revenue
|
50 | — | — | 50 | ||||||||||||
Research
and development expenses
|
254 | 3,885 | — | 4,139 | ||||||||||||
Selling,
general and administrative expenses, excluding depreciation and
amortization2
|
115 | — | 1,820 | 1,935 | ||||||||||||
Depreciation
and amortization
|
64 | 15 | 33 | 112 | ||||||||||||
Income
(loss) from operations3
|
3,089 | (3,900 | ) | (1,853 | ) | (2,664 | ) | |||||||||
Other
income (expense)4
|
— | — | (42,853 | ) | (42,853 | ) | ||||||||||
Income
(loss) from continuing operations
|
3,089 | (3,900 | ) | (44,706 | ) | (45,517 | ) | |||||||||
Loss
from discontinued operations
|
— | — | (13 | ) | (13 | ) | ||||||||||
Total
assets, net of depreciation and amortization:
|
||||||||||||||||
United
States operations
|
3,251 | 441 | 4,194 | 7,886 | ||||||||||||
Discontinued
operations
|
— | — | 6 | 6 | ||||||||||||
Capital
expenditures
|
— | 220 | 34 | 254 | ||||||||||||
($ amounts in thousands)
Six Months Ended June 30,
2009
|
Oncology
Devices
|
Drug and
Therapy
Products
|
Corporate
|
Total
|
||||||||||||
Net
sales:
|
||||||||||||||||
United
States1
|
$ | 4,268 | $ | — | $ | — | $ | 4,268 | ||||||||
International
|
168 | — | — | 168 | ||||||||||||
License
revenue
|
50 | — | — | 50 | ||||||||||||
Research
and development expenses
|
637 | 1,888 | — | 2,525 | ||||||||||||
Selling,
general and administrative expenses, excluding depreciation and
amortization2
|
69 | — | 1,462 | 1,531 | ||||||||||||
Depreciation
and amortization
|
76 | 2 | 30 | 108 | ||||||||||||
Income
(loss) from operations3
|
2,301 | (1,890 | ) | (1,492 | ) | (1,081 | ) | |||||||||
Other
income (expense)4
|
— | — | (13,111 | ) | (13,111 | ) | ||||||||||
Income
(loss) from continuing operations
|
2,301 | (1,890 | ) | (14,603 | ) | (14,192 | ) | |||||||||
Loss
from discontinued operations
|
— | — | (111 | ) | (111 | ) | ||||||||||
Total
assets, net of depreciation and amortization:
|
||||||||||||||||
United
States operations
|
2,036 | 23 | 4,282 | 6,341 | ||||||||||||
Discontinued
operations
|
— | — | 1,784 | 1,784 | ||||||||||||
Capital
expenditures
|
1 | — | 58 | 59 |
1
|
All
sales to EES are made in the United States. EES distributes the
product globally through its international
affiliates.
|
2
|
General
and administrative expenses, excluding depreciation and amortization,
represent costs that relate to the general administration of the Company
and as such are not currently allocated to our individual reportable
segments. Marketing and selling expenses are allocated to our
individual reportable segments.
|
3
|
Income
(loss) from operations does not reflect the allocation of selling, general
and administrative expenses, excluding depreciation and amortization, to
our individual reportable segments.
|
4
|
Amounts
consist primarily of interest income, interest expense and changes in
derivative liabilities which are not currently allocated to our individual
reportable segments.
|
17.
|
Subsequent
Events
|
|
a.
|
Warrant
Exercises: In July 2010, a Bupp Investor exercised
120,000 Series V Warrants in exchange for issuance of 120,000 shares of
our common stock, resulting in gross proceeds of $37,200. See Notes
10 and 12.
|
|
·
|
Completion
of a successful meeting with the United States Food and Drug
Administration (FDA) to review the Phase 3 (NEO3-05) clinical study
results and discuss development plans to support a New Drug Application
(NDA) submission for Lymphoseek as a lymphatic tissue tracing
agent;
|
|
·
|
Completion
of successful pre-NDA dialogue with FDA on Lymphoseek pre-clinical
data;
|
|
·
|
Completion
of successful pre-NDA dialogue with FDA on Lymphoseek chemistry,
manufacturing and control data;
|
|
·
|
Initiation
of a third Lymphoseek Phase 3 clinical study in subjects with breast
cancer or melanoma (NEO3-09) to support expanded post-marketing product
labeling;
|
|
·
|
Validation
of the first lot of commercial drug product of Lymphoseek that will be
used for the commercial launch of the product in the United States upon
NDA clearance;
|
|
·
|
Election
of two new directors to Neoprobe’s Board, bringing significant drug
development and medical product industry
expertise;
|
|
·
|
Completion
of exchange transactions that effectively converted all of the Company’s
outstanding debt to equity; and
|
|
·
|
Filed
a shelf registration on Form S-3 to allow the Company to raise capital as
necessary to provide us with additional financial planning flexibility and
to support the diversification of our share ownership to new
institutions.
|
|
·
|
Stock-Based
Compensation. Stock-based payments to employees and
directors, including grants of stock options, are recognized in the
statement of operations based on their estimated fair values. The
fair value of each option award is estimated on the date of grant using
the Black-Scholes option pricing model to value share-based
payments. Compensation cost arising from stock-based awards is
recognized as expense using the straight-line method over the vesting
period.
|
|
·
|
Inventory Valuation.
We value our inventory at the lower of cost (first-in, first-out
method) or market. Our valuation reflects our estimates of excess,
slow moving and obsolete inventory as well as inventory with a carrying
value in excess of its net realizable value. Write-offs are recorded
when product is removed from saleable inventory. We review inventory
on hand at least quarterly and record provisions for excess and obsolete
inventory based on several factors, including current assessment of future
product demand, anticipated release of new products into the market,
historical experience and product expiration. Our industry is
characterized by rapid product development and frequent new product
introductions. Uncertain timing of product approvals, variability in
product launch strategies, regulations regarding use and shelf life,
product recalls and variation in product utilization all impact the
estimates related to excess and obsolete
inventory.
|
|
·
|
Impairment or Disposal of
Long-Lived Assets. Long-lived assets and certain identifiable
intangibles are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net
undiscounted cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell.
|
|
·
|
Product Warranty.
We warrant our products against defects in design, materials, and
workmanship generally for a period of one year from the date of sale to
the end customer. Our accrual for warranty expenses is adjusted
periodically to reflect actual experience. EES also reimburses us
for a portion of warranty expense incurred based on end customer sales
they make during a given fiscal
year.
|
|
·
|
Fair Value of Derivative
Instruments. Derivative instruments embedded in contracts, to
the extent not already a free-standing contract, are bifurcated from the
debt instrument and accounted for separately. All derivatives are
recorded on the consolidated balance sheet at fair value in accordance
with current accounting guidelines for such complex financial
instruments. Fair value of warrant liabilities is determined based
on a Black-Scholes option pricing model calculation. Fair value of
conversion and put option liabilities is determined based on a
probability-weighted Black-Scholes option pricing model calculation.
Unrealized gains and losses on the derivatives are classified in other
expenses as a change in derivative liabilities in the statements of
operations. We do not use derivative instruments for hedging of
market risks or for trading or speculative
purposes.
|
|
·
|
pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
Company;
|
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the Company
are being made only in accordance with authorization of management and
directors of the Company; and
|
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets that
could have a material effect on the financial
statements.
|
|
(a)
|
During
the three-month period ended June 30, 2010, we issued 108,075 shares of
our common stock in payment of April and May 2010 interest of $166,667 on
the 10% Series A and Series B Convertible Senior Secured Promissory Notes
held by Platinum Montaur Life Sciences, LLC (Montaur). The issuances
of the shares to Montaur were exempt from registration under Sections 4(2)
and 4(6) of the Securities Act and Regulation
D.
|
10.1
|
Manufacture
and Supply agreement, dated November 30, 2009, between the Company and
Reliable Biopharmaceutical Corporation (portions of this Exhibit have been
omitted pursuant to a request for confidential treatment and have been
filed separately with the
Commission).*
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
32.1
|
Certification
of Chief Executive Officer of Periodic Financial Reports pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350.*
|
|
32.2
|
Certification
of Chief Financial Officer of Periodic Financial Reports pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350.*
|
|
*
|
Filed
herewith.
|
NEOPROBE
CORPORATION
|
|
(the
Company)
|
|
Dated:
August 10, 2010
|
|
By:
|
/s/ David C.
Bupp
|
David
C. Bupp
|
|
President
and Chief Executive Officer
|
|
(duly
authorized officer; principal executive officer)
|
|
By:
|
/s/ Brent L.
Larson
|
Brent
L. Larson
|
|
Vice
President, Finance and Chief Financial Officer
|
|
(principal
financial and accounting
officer)
|