UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
[ X ] SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1998
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
[ ] EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM ______ TO______
COMMISSION FILE NUMBER: 0-26520
NEOPROBE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-1080091
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
425 METRO PLACE NORTH, SUITE 300, DUBLIN, OHIO 43017
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 614-793-7500
Indicate by check 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
--- ---
22,885,017 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
(Number of shares of issuer's common equity outstanding as of the close of
business on November 3, 1998)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 9,921,025 $ 4,422,252
Available-for-sale securities 14,672,496 1,674,893
Accounts receivable, net 793,376 1,323,637
Inventory 413,024 775,961
Note receivable 1,500,000 0
Prepaid expenses and other current assets 2,001,378 1,259,528
----------- -----------
Total current assets 29,301,299 9,456,271
----------- -----------
Property and equipment at cost:
Equipment, net of accumulated depreciation 6,667,763 6,054,992
Construction in progress 3,757,133 4,306,195
----------- -----------
10,424,896 10,361,187
----------- -----------
Intangible assets, net of accumulated amortization 1,715,834 2,131,704
Other assets 131,375 1,615,988
----------- -----------
Total assets $41,573,404 $23,565,150
=========== ===========
The accompanying notes are an integral part of
the consolidated financial statements.
2
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
1997 1998
---------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,848,172 $ 1,316,897
Accrued expenses 2,743,293 2,201,722
Notes payable to finance company 202,615 424,250
Capital lease obligation, current 156,140 112,274
---------------- -----------------
Total current liabilities 6,950,220 4,055,143
---------------- -----------------
Long term debt 1,813,437 4,479,555
Capital lease obligation 255,355 180,977
---------------- -----------------
Total liabilities 9,019,012 8,715,675
---------------- -----------------
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred Stock; $.001 par value; 5,000,000 shares
authorized at December 31, 1997 and September 30, 1998;
none outstanding (500,000 shares designated as Series A,
$.001 par value, at September 30, 1998; none outstanding) 0 0
Common stock; $.001 par value; 50,000,000 shares
authorized; 22,673,430 shares issued and outstanding at
December 31, 1997; 22,885,017 shares issued and
outstanding at September 30, 1998 22,763 22,885
Additional paid in capital 120,034,876 120,231,097
Deficit accumulated during development stage (87,362,531) (105,292,162)
Unrealized loss on available-for-sale securities (9,290) 13,879
Cumulative foreign currency translation adjustment (131,426) (126,224)
---------------- -----------------
Total stockholders' equity 32,554,392 14,849,475
---------------- -----------------
Total liabilities and stockholders' equity $ 41,573,404 $ 23,565,150
================ =================
The accompanying notes are an integral part of
the consolidated financial statements.
3
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
NOVEMBER 16,
1983
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER 30,
--------------------------------- ---------------------------------- ---------------
1997 1998 1997 1998 1998
------------- ------------- ------------- ------------- ---------------
Net sales $ 1,274,786 $ 1,702,338 $ 3,451,631 $ 3,821,262 $ 13,008,176
Cost of goods sold 295,514 454,024 988,423 1,019,081 4,723,077
------------- ------------- ------------- ------------- -------------
Gross profit 979,272 1,248,314 2,463,208 2,802,181 8,285,099
------------- ------------- ------------- ------------- -------------
Operating expenses:
Research and development 4,149,621 2,232,530 13,334,609 11,074,695 75,630,833
Marketing and selling 977,961 1,561,904 2,790,308 3,780,418 9,618,724
General and administrative 1,543,060 1,236,696 5,170,029 4,403,232 35,482,847
Facility closure costs 0 1,961,804 0 1,961,804 1,961,804
------------- ------------- ------------- ------------- -------------
Total operating expenses 6,670,642 6,992,934 21,294,946 21,220,149 122,694,208
------------- ------------- ------------- ------------- -------------
Loss from operations (5,691,370) (5,744,620) (18,831,738) (18,417,968) (114,409,109)
------------- ------------- ------------- ------------- -------------
Other income (expense):
Interest income 338,072 105,861 1,545,737 555,317 6,477,497
Interest expense (4, 959) (100,886) (14,807) (152,982) (720,467)
Other (54,519) 134,682 (73,101) 86,002 3,359,917
------------- ------------- ------------- ------------- -------------
Total other income 278,594 139,657 1,457,829 488,337 9,116,947
------------- ------------- ------------- ------------- -------------
Net loss $ (5,412,776) $ (5,604,963) $ (17,373,909) $ (17,929,631) $(105,292,162)
============= ============= ============= ============= =============
Net loss per common share
(basic and diluted) $ (0.24) $ (0.24) $ (0.76) $ (0.79)
============= ============= ============= =============
Weighted average shares
outstanding during the period 22,766,834 22,884,528 22,723,007 22,823,382
============= ============= ============= =============
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
NOVEMBER 16,
1983
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER 30,
1997 1998 1997 1998 1998
------------- ------------- ------------- ------------- -------------
Net loss $ (5,412,776) $ (5,604,963) $ (17,373,909) $ (17,929,631) $(105,292,162)
Other comprehensive (losses) gains 70,074 26,959 (146,724) 28,369 (112,347)
------------- ------------- ------------- ------------- -------------
Comprehensive loss $ (5,342,702) $ (5,578,004) $ (17,520,633) $ (17,901,262) $(105,404,509)
============= ============= ============= ============= =============
The accompanying notes are an integral part of
the consolidated financial statements.
4
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOVEMBER 16,
1983
NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, TO SEPTEMBER 30,
1997 1998 1998
----------------- ---------------- -----------------
Net cash used in operating activities $ (16,496,677) $ (18,674,539) $ (95,038,133)
Cash flows from investing activities:
Purchases of available-for-sale securities (9,915,474) (1,738,512) (109,901,702)
Proceeds from sales of available-for-sale securities 1,828,927 3,741,357 51,615,619
Maturities of available-for-sale securities 15,739,201 11,050,000 56,753,943
Purchase of property and equipment (4,090,456) (2,405,865) (13,614,463)
Other (127,815) (430,870) (1,467,902)
----------------- ---------------- -----------------
Net cash provided by (used in) investing activities 3,434,383 10,216,110 (16,614,505)
----------------- ---------------- -----------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 750,381 196,343 102,732,033
Proceeds from bank loan credit 708,835 2,666,118 4,479,555
Proceeds from line of credit 0 700,000 700,000
Repayment of line of credit 0 (275,750) (275,750)
Other (250,797) (320,886) 8,475,839
----------------- ---------------- -----------------
Net cash provided by financing activities 1,208,419 2,965,825 116,111,677
----------------- ---------------- -----------------
Effect of exchange rate changes on cash (11,159) (6,169) (36,787)
----------------- ---------------- -----------------
Net (decrease) increase in cash and cash equivalents (11,865,034) (5,498,773) 4,422,252
Cash and cash equivalents at beginning of period 30,168,412 9,921,025 0
----------------- ---------------- -----------------
Cash and cash equivalents at end of period $ 18,303,378 $ 4,422,252 $ 4,422,252
================= ================ =================
The accompanying notes are an integral part of
the consolidated financial statements.
5
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The information presented for September 30, 1997 and 1998, and for the
periods then ended is unaudited, but includes all adjustments (which
consist only of normal recurring adjustments) which the management of
Neoprobe Corporation (the "Company") 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 generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The results for
the interim period are not necessarily indicative of results to be
expected for the year. The financial statements should be read in
conjunction with the Company's audited financial statements for the
year ended December 31, 1997, which were included as part of the
Company's Annual Report on Form 10-K. Certain 1997 amounts have been
reclassified to conform with the 1998 presentation.
Included in other assets at September 30, 1998 is an investment in XTL
Biopharmaceuticals Ltd. ("XTL"). The investment resulted from the
conversion of a note receivable from XTL, which was held by the Company
related to an Investment Research and Development Agreement. The
debenture was due on February 13, 1998 and bore interest at 5% payable
annually. On January 30, 1998, the Company exercised its option to
convert the debentures into 443,690 shares of Class A Common stock of
XTL. Since the date of conversion, the Company has accounted for its
approximate 15% investment in XTL on the cost method. There is
currently no publicly quoted market value for shares of XTL; however,
management believes, based on a recently completed private security
transaction, that the market value of its investment in XTL
approximates book value.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No.130 ("SFAS 130")
"Reporting Comprehensive Income." This Statement establishes standards
for reporting and display of comprehensive income in a full set of
general purpose financial statements. The Company adopted SFAS 130 as
of January 1, 1998. Other comprehensive losses of the Company include
the effects of translation gain or loss related to the Company's
foreign operations and unrealized gains and losses on
available-for-sale securities.
In June 1997, the FASB issued SFAS No.131 "Disclosures about Segments
of an Enterprise and Related Information." This Statement establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. This Statement is
effective for financial statements for periods beginning after December
15, 1997. In the initial year of application, comparative information
for earlier years is to be restated. This Statement need not be applied
to interim financial statements in the initial year of its application.
The Company intends to adopt SFAS No.131 effective December 31, 1998.
Management does not believe adoption of this Statement will have a
significant effect on the financial disclosures of the Company.
The Company is a development stage enterprise engaged in the
development and commercialization of technologies for the diagnosis and
treatment of cancers. There can be no assurance that the Company will
be able to commercialize its proposed products. There can also be no
assurance that adequate financing will be available when needed or on
terms attractive to the Company.
6
2. INVENTORY
The components of inventory are as follows:
DECEMBER 31, SEPTEMBER 30,
1997 1998
----------------- ------------------
Materials and component parts $ 36,890 $ 0
Work-in-process 145,234 393,860
Finished goods 230,900 382,101
================= ==================
$ 413,024 $775,961
================= ==================
3. LONG-TERM DEBT
Neoprobe (Israel) Ltd. ("Neoprobe (Israel)"), a 95%-owned subsidiary of
the Company, is completing construction of a radiolabeling facility
near Dimona, Israel, for use in future operations of the Company.
Construction of the facility is being partially financed under a $9.9
million investment program approved by the state of Israel's Finance
Committee (the "Committee"). Under the approved program, Neoprobe
(Israel) is entitled to government grants and government loan
guarantees equal to a percentage of the total loan taken for the
construction and operation of the facility. Amounts received under the
agreement are collateralized by certain property obtained through the
use of proceeds received. The loan portion of the investment program
has expired but will cover capital costs incurred through September 12,
1998; however, the Company successfully negotiated an extension of the
grant portion of the program for an additional year. As of September
30, 1998, Neoprobe (Israel) has received $4.5 million and $1.3 million
in the form of loans and grants, respectively.
In September 1998, the Company renegotiated the terms of its $3 million
revolving line of credit arrangement with a bank. The maximum eligible
borrowing limit was decreased to $1 million and is secured by cash and
investments of the Company. Interest on the line of credit is based on
the prime rate or LIBOR, as elected by the Company. As of September 30,
1998, $424,000 was outstanding and $576,000 was available under the
line of credit.
4. EQUITY
During the first nine months of 1998, the Board granted options to
employees and certain directors of the Company under the 1996 Stock
Incentive Plan (the "Plan") for 608,000 shares of common stock,
exercisable at an average exercise price of $5.42 per share, vesting
over two to four years. As of September 30, 1998, the Company has 1.9
million options outstanding under two stock option plans. On September
28, 1998, the Company repriced 367,000 outstanding options with
exercise prices of $5.06 to $17.75 held by non-officer employees of the
Company. In exchange for surrendering the outstanding options, these
employees were granted 183,440 options with an exercise price of $1.50
per share, and the average vesting term of the options was extended by
one year from their original term. Of the outstanding options, 1.1
million options have vested as of September 30, 1998, at an average
exercise price of $6.09 per share.
During the third quarter, the Company issued 45,000 shares of
restricted stock to its President and CEO. This stock vests and becomes
transferable only on a change in control of the Company.
5. AGREEMENTS
In April 1998, the Company executed an agreement with Ethicon
Endo-Surgery, Inc. ("EES"), a Johnson & Johnson company, to market and
promote the Neoprobe(R) 1500 Portable Radioisotope Detector and its
14mm and 19mm reusable probes for gamma guided lymphatic mapping and
minimally invasive surgery in the United States. During October 1998,
the agreement with EES was amended to cover marketing and promotion of
the aforementioned products in Europe. During the initial one-year term
of the agreement, EES will promote and sell the aforementioned products
and train physicians in the use of Neoprobe's devices. In exchange for
promoting and selling the device products, EES will receive sales
commissions based on qualifying net sales of the aforementioned
products.
7
The Company and Cira Technologies, Inc. ("Cira") entered into a License
and Option Agreement (the "Agreement") dated April 1, 1998 which
replaced the Technology Option Agreement between the Company and Cira
dated March 1996. The Company's chairman is a director and shareholder
of Cira. Under the terms of the Agreement, Cira granted the Company an
exclusive, royalty bearing license to make, have made, use and sell
products ("Licensed Products") containing activated lymph node derived
cells for the treatment of human immunodeficiency virus ("HIV")
infected human patients including HIV-infected human patients
co-infected with other viruses. In exchange for the license, the
Company agreed to continue funding of an ongoing pilot study on HIV, to
pay Cira up to $50,000 to fund research activities at Cira as incurred,
to pay royalties at variable rates based on sales of Licensed Product,
and to prepare a research plan outlining the research to be conducted
to support a Biologic License Application ("BLA") or a New Drug
Application ("NDA") to be filed with the United States Food and Drug
Administration ("FDA"). No royalties are due to Cira until the Company
recovers out-of-pocket expenditures for research and development
through net sales of Licensed Product, up to a maximum of $2 million.
6. SUBSIDIARIES
Due to anticipated changes in the production of RIGScan CR49, the
Company determined during the second quarter of 1998 that Neoprobe
Europe AB ("Neoprobe Europe"), the Company's biologics manufacturing
and purification facility located in Lund, Sweden, was no longer
critical to the manufacturing process, and that research and
development activities being carried on at the facility could be
performed more efficiently elsewhere. As a result, the Company took
action in the second quarter to initiate the sale of Neoprobe Europe.
As of June 30, 1998, activities regarding the potential sale were in
the preliminary stages, and management was unable to estimate the
effect on the Company's financial position. However, management did not
believe the $2.5 million book value of the net assets of Neoprobe
Europe to be impaired at that time.
During October 1998, the Company reached an agreement to sell
substantially all of the assets of Neoprobe Europe to a Swedish
company. In exchange for the assets, the Swedish company agreed to pay
the Company $125,000 and assume certain obligations of Neoprobe Europe,
such as the lease commitment. In connection with this agreement, the
Company has recorded a provision of approximately $2.0 million as of
September 30, 1998, principally to write down the remaining assets of
Neoprobe Europe to their estimated realizable value of approximately
$200,000. These assets are classified as held-for-sale and included in
Other Assets at September 30, 1998.
7. CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position of the Company.
As of September 30, 1998, the Company had cash and cash equivalents and
available-for-sale securities of $6.1 million. Of this amount, $2.0
million is pledged as security associated with the Company's revolving
line of credit and the debt outstanding under its financing program for
the construction of Neoprobe (Israel). However, an additional $576,000
is available and unused under the line of credit at September 30, 1998,
bringing total available cash to fund fourth quarter operations of $4.7
million. The Company currently anticipates that approximately $4.5
million in cash will be used to finance operating activities during the
fourth quarter of 1998, and that the Company will end the year with a
limited amount of cash which is not contractually restricted. The
Company is actively pursuing other sources of improving its projected
liquidity position as of December 31, 1998. Potential sources of
capital include, but are not limited to, sale of non-strategic assets
and raising of funds through private security placements. However,
there can be no assurances that the Company will be able to raise funds
on a timely basis, in the amounts required, at terms acceptable to the
Company, or at all. The Company anticipates an approximate 45% increase
in sales during the fourth quarter of 1998 compared to the same period
in 1997 due to increased sales volumes of its gamma guided surgery
products, at prices and margins similar to what has been achieved year
to date in 1998. However, there can be no assurance that the increase
in sales volumes and revenue will occur or that the prices and margins
achieved on instrument sales in the fourth quarter of 1998 will be able
to be maintained. The Company is engaged in discussions regarding the
sale of approximately $2.0 million non-strategic assets. However, there
can be
8
no assurance that these discussions will be successfully concluded
prior to December 31, 1998, at terms acceptable to the Company, or at
all. If the Company does not receive adequate anticipated funds, it
will need to further modify its business plan and seek other financing
alternatives. Such financing may require sales of equity securities
that could be dilutive to current holders of common stock, debt
financing which may be on unfavorable terms, or asset dispositions that
could force the Company to further change its business plan.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this Report contain forward-looking statements
that involve risks and uncertainties. The Company's actual results in 1998 and
future periods may differ significantly from the prospects discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, government regulations, absence of
government approval for marketing the Company's products, limited revenues,
continuing net losses, accumulated deficit, uncertainty of capital funding for
future capital needs, dependence on patents, proprietary technology and trade
secrets, limited marketing experience, limited manufacturing capacity and
experience, dependence on principal product line, uncertainty of market
acceptance, no assurance of continued rights to targeting agents, royalty
payments, competition, limited third party reimbursement, risk of technological
obsolescence, possible volatility of stock price, anti-takeover provisions,
product liability, dependence on key personnel, ability to attract new
personnel, and ability to manage a changing business.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private and public offerings of its equity securities, from which it has raised
gross proceeds of approximately $120 million. As of September 30, 1998, the
Company had cash, cash equivalents, and available-for-sale securities of $6.1
million. However, portions of these funds secure the outstanding debt of the
Company. The Company has access to approximately $4.7 million in unrestricted
funds to finance its operating activities for the fourth quarter of 1998. The
Company is actively pursuing sources of funds to improve its projected liquidity
position as of December 31, 1998. Potential sources include, but are not limited
to, sale of non-strategic assets and private security placements. However, there
can be no assurances that the Company will be able to raise funds, on a timely
basis, in the amounts required, at terms acceptable to the Company, or at all.
To date, the Company has devoted substantially all of its efforts and resources
to research and clinical development of innovative systems for the
intraoperative diagnosis and treatment of cancers. During the first quarter of
1998, the Company implemented a business plan to reduce operating expenses and
focus on three main business activities: commercializing the Company's first
RIGS(R) system (radioimmunoguided surgery) product, called RIGScan(R) CR49
((125)I - CC49 monoclonal antibody) for the surgical detection of metastatic
colorectal cancer, increasing the Company's market position in gamma guided
surgery applications, and developing activated cellular therapy ("ACT") products
for cancer and viral diseases.
During the second quarter of 1998, the Company engaged the services of Lehman
Brothers to assist in securing development partners and in the strategic
assessment of the Company's business. To date, the Company has not entered into
any definitive development agreements as a result of these efforts. There can be
no assurances that a development partner will be identified on a timely basis,
on terms acceptable to the Company, or at all. During the third quarter of 1998,
based on further assessments of its RIGScan CR49 development plans with clinical
and regulatory advisors and on discussions with Lehman Brothers, the Company
further modified its business plan.
The Company's modified business plan focuses the Company's operating activities
on its core gamma guided surgery instrument business for use in intraoperative
lymphatic mapping ("ILM") while efforts are made to identify business partners
who would assume financial development responsibility for RIGScan CR49 and ACT.
The modified plan also involves marketing certain non-strategic assets, and
performing only non-product specific plant validation at the Company's facility
in Israel. Additionally, the Company will record approximately $170,000 during
the fourth quarter in severance expenses related to employees identified for
separation in October 1998. Since the beginning of the year, the Company has
decreased its worldwide headcount by approximately 60% and has ended or is in
the process of ending the majority of its research and development activities
that are not related to ILM. In addition, the Company is liquidating its
subsidiary in Sweden, Neoprobe Europe, in order to realize additional future
cost savings. These actions were taken to arrive at the minimum support
structure
9
management believes is necessary to support the gamma guided surgery business
and to move the Company towards profitability.
In October 1997, the Company launched the Neoprobe(R) 1500 Portable Radioisotope
Detector in response to an emerging surgical technique called ILM for treating
patients with melanoma, a potentially deadly form of skin cancer, and for
patients with breast cancer. Physicians use ILM to help trace the lymphatic
patterns in a patient to evaluate tumor drainage and, therefore, potential
metastatic tumor spread. ILM represents a less invasive surgical technique than
existing techniques for staging cancer or determining whether the cancer has
spread to the lymph nodes. ILM gives surgeons a map to find the first lymph
nodes (i.e. sentinel node(s)) to which tumor is likely to drain or spread. For
cutaneious malignant melanoma, ILM has become the standard of care in major
cancer centers and community hospitals in the U.S. and is beginning to be
adopted in countries outside the U.S. For breast cancer, the technique is
rapidly becoming the standard of care at major cancer centers.
In an ILM procedure, a patient is injected at the site of the main tumor with a
nonspecific radioactive tracing element. The surgeon tracks the agent's path
with a hand-held radiation detection probe. ILM identifies the appropriate lymph
nodes to be biopsied for determination of cancer spread. Clinical studies,
involving nearly two thousand patients and published in well-known peer review
medical journals, have shown ILM is 97% accurate in predicting the presence or
absence of disease spread in melanoma or breast cancers. Physicians are also
evaluating the application of ILM to other solid tumors.
The Company is currently selling the Neoprobe 1500 Portable Radioisotope
Detector for ILM applications and is expanding its line of instruments to
provide a variety of gamma-detecting probes for specialized uses. In March 1998,
the Company introduced a smaller (14mm diameter) detection probe whose
performance has been optimized for use in lymphatic mapping procedures. In
October 1998, the Company launched its newest product, the neo2000(TM). The
Company intends to continue to sell the Neoprobe 1500 as a basic ILM system
without the additional features of the neo2000. The Company intends to expand
its current gamma guided surgery product line with products which would produce
positive cash flow in the near term. However, there can be no assurances that
the Company will be successful in developing or acquiring additional products or
that such products will contribute positive cash flow once developed or
acquired. The Company recorded revenue of $1.7 million and $3.8 million during
the third quarter and the first nine months of 1998, respectively, related to
sales of instruments used in application of ILM.
Also, the Company holds proprietary development and marketing rights to the RIGS
surgical system. The RIGS system integrates radiolabeled targeting agents and
radiation detection instruments. Prior to 1996, the Company completed testing in
Phase III clinical trials for the detection of metastatic and primary colorectal
cancer using its first generation antibody, RIGScan CR49, as a targeting agent.
During 1996, the Company submitted applications to the European regulatory
agencies and to the FDA to request permits to begin marketing and selling the
Company's RIGS products for the detection of metastatic colorectal cancer. In
late 1997, the european regulatory agency (EMEA) requested additional
manufacturing and clinical information for RIGScan CR49 before approval could be
granted. Under EMEA guidelines, the Company's original application could not be
amended to supply the requested information. As a result, the Company withdrew
its application for European regulatory approval. At approximately the same
time, the FDA indicated that the BLA for RIGScan CR49 was not approvable without
the submission of additional information. Both the FDA and the EMEA required
additional clinical data to demonstrate prospective clinical benefit of RIGScan
CR49 in addition to the diagnostic findings demonstrated in the Phase III
studies which the Company has determined cannot be obtained without the
completion of additional clinical studies.
During the first half of 1998, the Company engaged in discussions with the FDA
to address the clinical and manufacturing questions outlined in its December
1997 response letter. Subsequent to these discussions, the Company determined in
discussions with expert clinical and regulatory advisors that regulatory action
plans with respect to the RIGScan surgical methodology would be most effectively
implemented with a second generation antibody. Because of the costs and risks
associated with this research and development activity, the Company has
determined that it will not commit additional financial resources to RIGScan
CR49 or the second generation antibody. Clinical trial activity and
product-specific manufacturing validation activities related to RIGScan CR49 or
the second generation antibody would be the financial responsibility of a
development partner. However, the Company will move forward with the
manufacturing validation of the Neoprobe Israel facility to better support the
viability of a partnership or outsourcing opportunities at the facility. To
date, the Company has not entered into
10
any definitive agreements with a development partner for the RIGS technology.
There can be no assurances that a development partner will be identified on a
timely basis, on terms acceptable to the Company, or at all.
As a result of its RIGScan CR49 research, the Company has been studying the
safety and efficacy of a RIGS based autologous Activated Cellular Therapy
(RIGS/ACT(TM)) for cancer, which boosts the patient's own immune system by
removing lymph nodes targeted by RIGScan CR49 during surgery and then, in a cell
processing facility, activating and expanding "helper" T-cells found in the
nodes. Within 10 to 14 days, the patient's own immune cells, now activated and
numbering more than 20 billion, are infused into the patient to trigger an
effective immune response to the cancer. An in vitro program has shown
significant chemotherapy enhancement in a number of tumor cell lines for a
variety of chemotherapeutic agents. The in vitro assessment correlates with an
observation of potential chemotherapy enhancement in an earlier Phase I clinical
study of unresectable colorectal patients. During 1998, the Company opened its
first Investigational New Drug (IND) application for Phase I/II and Phase II
multicenter trials with RIGS/ACT for resectable and unresectable colorectal
cancer patients.
In addition, the Company has begun to evaluate the application of a non-RIGS
based ACT therapy for the treatment of chronic viral diseases. Non-RIGS/ACT uses
peripheral lymph nodes, obtained in an outpatient setting, as its initial
culture material. After using the Company's activation and expansion procedures,
the cells are infused in 10-14 days. A Phase I study has been completed with
HIV/AIDS patients with encouraging results. Also, the Company recently opened a
new Phase I trial in additional viral diseases, extending the use of activated
cellular therapy in patients co-infected with HIV/AIDS and chronic active
hepatitis B or C. In addition, the Company has been working with researchers to
isolate and characterize a soluble factor which appears to be present in the
lymph nodes of both cancer and viral disease patients.
Results of the aforementioned ACT trials will give direction and targeted
endpoints for designing larger multicenter pivotal trials, to be pursued by a
strategic partner. The Company does not currently intend to expend financial
resources on further research and development or clinical evaluations of ACT
without financial assistance from a development partner. To date, the Company
has not entered into any definitive agreements with a development partner for
ACT. There can be no assurances that a development partner will be identified on
a timely basis, on terms advantageous to the Company, or at all.
For the period from inception to September 30, 1998, the Company has incurred
cumulative net losses of $105 million. The Company's only approved products are
instruments used in gamma guided surgery related to the application of ILM. The
Company does not currently have a RIGS drug product approved for commercial sale
in any major market. Based on the Company's modified business plan which focuses
Company resources on ILM, the Company does not anticipate commercial sales of
sufficient volume to generate positive cash flow from operations until the year
2000, at the earliest. The Company has incurred, and will continue to incur,
substantial expenditures for research and development activities related to
enhancing and expanding its current gamma guided surgery product portfolio and
to fund marketing development in bringing its products to the commercial market.
The Company currently estimates it will require approximately $15 million to
fund research and development, marketing, and general and administrative
activities in 1999. The Company anticipates a significant portion of the cash
necessary to fund such operating activities will be generated from sales of its
gamma guided surgery products. There can be no assurance that additional gamma
guided surgery products will be approved for marketing by the FDA or any foreign
government agency, or that any such products will be successfully introduced or
achieve market acceptance.
As of September 30, 1998, the Company had cash and cash equivalents and
available-for-sale securities of $6.1 million. Of this amount, $2.0 million is
pledged as security associated with the Company's revolving line of credit and
the debt outstanding under its financing program for the construction of
Neoprobe (Israel). However, an additional $576,000 is available and unused under
the line of credit at September 30, 1998, bringing total available cash to fund
fourth quarter operations of $4.7 million. The Company currently anticipates
that approximately $4.5 million in cash will be used to finance operating
activities during the fourth quarter of 1998, and that the Company will end the
year with a limited amount of cash which is not contractually restricted. The
Company is actively pursuing other sources of improving its projected liquidity
position as of December 31, 1998. Potential sources of capital include, but are
not limited to, sale of non-strategic assets and raising of funds through
private security placements. However, there can be no assurances that the
Company will be able to raise funds on a timely basis, in the amounts required,
at terms acceptable to the Company, or at all. The Company anticipates an
approximate 45% increase in sales during the fourth quarter of 1998 compared to
the same period in 1997 due to increased sales volumes of its gamma guided
surgery products, at prices and margins similar to what has been achieved
year-to-
11
date in 1998. However, there can be no assurance that the increase in sales
volumes and revenue will occur or that the prices and margins achieved on
instrument sales in the fourth quarter of 1998 will be able to be maintained.
The Company is engaged in discussions regarding the sale of approximately $2.0
million non-strategic assets. However, there can be no assurance that these
discussions will be successfully concluded prior to December 31, 1998, at terms
acceptable to the Company, or at all. The Company also expects to experience
cost savings during the fourth quarter of 1998 as a result of modifications to
its business plan regarding RIGS and ACT. If the Company does not receive these
anticipated funds, it will need to further modify its business plan and seek
financing alternatives not currently being considered. Such financing may
require sales of equity securities that could be dilutive to current holders of
common stock, debt financing which may be on unfavorable terms, or asset
dispositions that could force the Company to further change its business plan.
At December 31, 1997, the Company had U.S. net operating tax loss carryforwards
of approximately $75.8 million to offset future taxable income through 2012.
Additionally, the Company has U.S. tax credit carryforwards of approximately
$2.2 million available to reduce future income tax liability through 2012. Under
Section 382 of the Internal Revenue Code of 1986, as amended, use of prior tax
loss carryforwards is limited after an ownership change. As a result of
ownership changes which occurred in March 1989 and in September 1994, the
Company's tax loss carryforwards and tax credit carryforwards are subject to the
limitations described by Section 382. The Company's international subsidiaries
also have net operating tax loss carryforwards in their respective foreign
jurisdictions.
The Company has executed various agreements with third parties that supplement
the technical and marketing capabilities of the Company. The Company is
generally obligated to such parties to pay royalties or commissions upon
commercial sale of the related product. The Company's estimate of its allocation
of cash resources is based on the current state of its business operations, its
current business plan, and current industry and economic conditions, and is
subject to revisions due to a variety of factors including without limitation,
additional expenses related to marketing and distribution, regulatory licensing
and research and development, and to reallocation among categories and to new
categories. The Company may need to supplement its funding sources from time to
time.
Neoprobe Europe AB, formerly called (New)MonoCarb AB, is a wholly-owned
subsidiary of the Company, located in Lund, Sweden, where it operated a
biologics manufacturing and purification facility. The Company used the
facility to perform research and development activities and prepare the CC49
monoclonal antibody for final radiolabeling. Due to anticipated changes in the
production of RIGScan CR49, it was determined that the facility was no longer
critical to the manufacturing process, and that research and development
activities being carried on at the facility could be performed more efficiently
elsewhere. As a result, the Company took action in the second quarter to
initiate the sale of Neoprobe Europe. During October 1998, the Company reached
an agreement to sell substantially all of the assets of Neoprobe Europe AB to a
Swedish company, In exchange for the assets, the Swedish company agreed to pay
the Company $125,000 and assume certain obligations of Neoprobe Europe, such as
the facility lease commitment. In connection with this agreement, the Company
has commenced liquidation of Neoprobe Europe and has recorded a provision of
$2.0 million as of September 30, 1998, to reflect the estimated realizable
value of the remaining assets of Neoprobe Europe as well as the estimated
$200,000 in cash exit costs expected to be incurred during the fourth quarter.
In 1994, the Company formed Neoprobe (Israel) to construct and operate a
radiolabeling facility near Dimona, Israel, for radiolabeling of the Company's
targeting agents. The Company owns 95% of Neoprobe (Israel), with Rotem
Industries Ltd. ("Rotem"), the private arm of the Israeli atomic energy
authority, owning the balance and managing the facility. Construction of the
facility is being financed through a financial program approved by the state of
Israel's Finance Committee (the "Committee"). The total amount of the approved
program is $9.9 million. Neoprobe (Israel) is entitled to receive grants based
on a percentage of its investment and a government guarantee of 75% to 85% of
the principal balance of bank loans taken to build and operate the facility. The
loan portion of the investment program expired in September 1998; however, the
Company still expects to receive funds related to capital costs incurred prior
to the expiration of the loan program. The Company has successfully negotiated
an extension of the grant portion of the program for an additional year. During
nine months ended September 30, 1998, the Company received loan proceeds of
approximately $2.7 million under the government sponsored program. The Company
expects to receive an additional $500,000 in loan and grant proceeds under the
approved program during the remainder of 1998. The Company anticipates advancing
$300,000 to Neoprobe (Israel) to fund operations during the remainder of 1998.
12
As many computer systems and other equipment with embedded chips or processors
(collectively, "Business Systems") use only two digits to represent the year,
they may be unable to process accurately certain data before, during or after
the year 2000. As a result, business and governmental entities are at risk for
possible miscalculations or system failures causing disruptions in their
business operations. This is commonly known as the Year 2000 ("Y2K") issue or
Century Date Change ("CDC") issue. The CDC issue can arise at any point in the
Company's supply, manufacturing, distribution and financial chains. The Company
and each of its operating subsidiaries are in the process of implementing an
assessment and readiness plan with the objective of having all their significant
internal Business Systems functioning properly with respect to the Y2K issue
before January 1, 2000 and minimizing the possible disruptions to the Company's
business which could result from the Y2K problem.
As part of its readiness plan, the Company is in the process of conducting a
company-wide assessment of its Business Systems to identify elements which are
not Y2K compliant. Based on assessment activity to date, the Company presently
believes that the majority of its critical Business Systems have been purchased
and installed in recent years and are already Y2K compliant. The Company's
internal Business Systems have not internally generated programmed software
coding to correct, as substantially all of the software utilized by the Company
has been recently purchased or licensed from external vendors. At the completion
of the assessment phase, the Company intends to perform comprehensive testing of
its Business Systems in early 1999.
Those Business Systems which are not presently Y2K compliant are anticipated to
be replaced, upgraded or modified in the normal replacement cycle prior to 2000.
The Company estimates the total cost to the Company of completing any required
modifications, upgrades or replacements of its internal systems will not have a
material adverse effect on the Company's business. This estimate is being
monitored and will be revised as additional information becomes available.
The Company has also initiated communications with third parties whose Business
Systems functionality could impact the Company. These communications will
facilitate coordination of Y2K solutions and will permit the Company to
determine the extent of which it may be vulnerable to failures of third parties
to address their own Y2K issues. Because the manufacturing and distribution of
the Company's products are almost entirely outsourced to other entities, the
failure of these third parties to achieve Y2K compliance could have a material
impact on the Company's business, financial position, results of operations and
cash flows. The Company has attempted, where possible, to establish contractual
requirements for Y2K compliance by such third parties. However, the Company has
limited control over the actions of these third parties on which the Company
directly or indirectly places reliance. There can be no guarantee that such
systems that are not now Y2K compliant will be timely converted to Y2K
compliance.
The Company has also assessed the potential Y2K related exposure it may have
with respect to gamma detection instrumentation which it has delivered to
customers. The Company does not believe products it has distributed to date or
that may be distributed in the future face any significant Y2K problems which
will affect their functionality or utility by the customer.
The Company does not yet have a comprehensive contingency plan with respect to
the Y2K issue but intends to establish such a plan during calendar 1999 as part
of its ongoing Y2K compliance effort.
The foregoing assessment of the impact of the Y2K problem on the Company is
based on management's best estimates at the present time and could change
substantially. The assessment is based on numerous assumptions as to future
events. There can be no guarantee that these estimates will prove accurate, and
actual results could differ from those estimates if these assumptions prove
inaccurate.
RESULTS OF OPERATIONS
Since inception, the Company has dedicated substantially all of its resources to
research and development of its RIGS technology for the intraoperative diagnosis
and treatment of cancer. Until the appropriate regulatory approvals are
received, the Company is limited in its ability to generate revenue. During the
third quarter and nine months ended September 30, 1998, the Company generated
sales of Neoprobe 1500 systems of $1.7 and $3.8 million, respectively. Results
of operations for the first three quarters of 1998 include approximately
$800,000 in costs associated with the reorganization activities of the Company
during the first quarter.
Research and development expenses during the first three quarters of 1998 were
$11.1 million, or 55% of operating expenses for the period. Marketing and
selling expenses were $3.8 million, or 19% of operating
13
expenses during the period, and general and administrative expenses were $4.4
million, or 21% of operating expenses for the period. The Company anticipates
that 1998 total operating expenses will decrease over 1997 in relation to
expected increases in sales. The Company expects research and development and
general and administrative expenses to decrease from 1997 levels as a result of
the refocused business plan adopted in February. However, the Company also
expects marketing and selling expenses to increase from 1997 levels. In
addition, the Company recorded a $2.0 million change in the third quarter,
related to the closure of its facility in Lund, Sweden.
Three Months ended September 30, 1998, and 1997.
Revenue and Other Income
The Company had net sales of approximately $1.7 million during the third quarter
of 1998, compared to $1.3 million during the same period in 1997. Net sales in
both years were composed almost entirely of instrument sales. Instrument sales
in 1997 reflect contributions from the Company's marketing arrangement with the
United States Surgical Corporation which was terminated in October 1997.
Instrument sales during the third quarter of 1998 were based on leads generated
primarily by the Company's clinical specialists' sales force and representatives
of EES. Other income during the third quarter of 1998 and 1997 was $488,000 and
$1.5 million, respectively, and represented primarily interest income earned
during both periods.
Research and Development Expenses
Research and development expenses decreased during the third quarter of 1998 to
$2.4 million from $4.1 million for the same period in 1997. The decrease in
research and development expenses reflects decreased activity in all phases of
the Company's development programs consistent with the implementation of the
Company's modified business plan. Expenses related to RIGScan CR49, including
internal headcount and overhead costs, continued to decrease as clinical and
manufacturing validation activity declined pending identification of a
development partner. Instrument-related expenses decreased due to the wind-down
of the design phase of next-generation products. Pipeline projects development
decreased related to the refocused business plan. Clinical trial activity in
both periods related to the Company's therapeutic projects and remained
constant.
Marketing and Selling Expenses
During the third quarter of 1998, marketing and selling expenses increased by
$584,000 over the same period in 1997. The increase in marketing expenses during
the third quarter of 1998, as compared to the same period in 1997, relates to
increased internal marketing efforts to meet competitive pressure and further
penetrate the lymphatic mapping market. The increased expenses were the result
of a greater number of sales and marketing personnel in 1998, coupled with
relative increases in travel and entertainment as well as promotional costs
associated with new product launched during the second quarter.
General and Administrative Expenses
General and administrative expenses were $1.2 million for the third quarter of
1998 compared to $1.5 million for the same period in 1997. The decrease is due
primarily to lower average headcount and related overhead costs during the third
quarter of 1998 compared to the same period in 1997.
Facility Closure Costs
During the third quarter of 1998, the Company recorded a $2.0 million expense
related to costs to close its antibody production and research facility located
in Lund, Sweden. The majority of the costs ($1.7 million) related to impairment
of fixed assets down to their estimated realizable value. The remainder of the
costs related to accruing severance costs during the closure period.
Nine Months ended September 30, 1998 and 1997
Revenue and Other Income
The Company had net sales of approximately $3.8 million during the first nine
months of 1998, compared to $3.5 million during the same period in 1997. Net
sales in both years were composed almost entirely of instrument sales.
Instrument sales in 1997 reflect contributions from the Company's marketing
arrangement with the United States Surgical Corporation which was terminated in
October 1997. Instrument sales during the first nine months of 1998 were based
on leads generated primarily by the Company's clinical specialists' sales force
and representatives
14
of EES. Other income (loss) during the first nine months of 1998 and 1997 was
$488,000 and $1.5 million, respectively, and represented primarily interest
income earned during both periods.
Research and Development Expenses
Research and development expenses decreased during the first nine months of 1998
to $11.1 million from $13.3 million for the same period in 1997. The decrease
reflects the Company's efforts to reduce costs consistent with the refocused
business plan announced in February 1998, which was further modified in the
third quarter of 1998. Year-to-date costs in 1998 include approximately $800,000
related to severance and other separation-related costs, but such costs were
offset by decreases in expenses related to RIGScan CR49 pending identification
of a development partner. Instrument-related expenses decreased due to the
wind-down of the design phase of next-generation products. Pipeline projects
decreased related to the refocused business plan. Clinical trial activity
related to the Company's therapeutic projects increased approximately $200,000
in 1998 over 1997 levels.
Marketing and Selling Expenses
During the first nine months of 1998, marketing and selling expenses increased
by $1.0 million over the same period in 1997. The increase in marketing expenses
during the first three quarters of 1998, as compared to the same period in 1997,
relates to an increased marketing effort to meet competitive pressure and
further penetrate the lymphatic mapping market. The increased expenses were the
result of a greater number of sales and marketing personnel in 1998, coupled
with relative increases in travel and entertainment as well as promotional costs
associated with the launch of new products.
General and Administrative Expenses
General and administrative expenses were $4.4 million for the first nine months
of 1998 compared to $5.1 million for the same period in 1997. Severance and
other overhead and employee separation costs related to the February
reorganization were offset by an overall lower headcount during the first half
of 1998 than the same period in 1997.
Facility Closure Costs
During the third quarter of 1998, the Company recorded a $2.0 million expense
related to costs to close its antibody production and research facility located
in Lund, Sweden. The majority of the costs ($1.7 million) related to impairment
of fixed assets down to their estimated realizable value. The remainder of the
costs related to accruing severance costs during the closure period.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST OF EXHIBITS
3. ARTICLES OF INCORPORATION AND BY-LAWS
Exhibit 3.1
Complete Restated Certificate of Incorporation of Neoprobe
Corporation, as corrected February 18, 1994 and as amended
June 27, 1994, July 25, 1995 and June 3, 1996 (incorporated by
reference to Exhibit 99.2 to the Registrant's Current Report
on Form 8-K dated June 20, 1996; Commission File No. 0-26520).
Exhibit 3.2
Amended and Restated By-Laws dated July 21, 1993 as amended
July 18, 1995 and May 30, 1996 (incorporated by reference to
Exhibit 99.4 to the Registrant's Current Report on Form 8-K
dated June 20, 1996; Commission File No. 0-26520).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
Exhibit 4.1
See Articles FOUR, FIVE, SIX and SEVEN of the Restated
Certificate of Incorporation of the Registrant (see Exhibit
3.1).
Exhibit 4.2
See Articles II and VI and Section 2 of Article III and
Section 4 of Article VII of the Amended and Restated By-Laws
of the Registrant (see Exhibit 3.2).
16
Exhibit 4.3
Rights Agreement dated as of July 18, 1995 between the
Registrant and Continental Stock Transfer & Trust Company
(incorporated by reference to Exhibit 1 of the registration
statement on Form 8-A; Commission File No. 0-26520).
10. MATERIAL CONTRACTS
Exhibit 10.4.26
Letter amendment dated October 14, 1998 to the Sales and
Marketing Agreement dated April 21, 1998 between the
Registrant and Ethicon Endo-Surgery, Inc., an Ohio corporation
(filed pursuant to Rule 24b-2 under which the Registrant has
requested confidential treatment of certain portions of this
Exhibit).
Page 22 in the manually signed original.
Exhibit 10.4.27
Promissory Note, dated September 25, 1998, issued by
Registrant to Bank One, NA.
Page 24 in the manually signed original.
Exhibit 10.4.28
Addendum to the Promissory Note dated September 25, 1998
issued by Registrant to Bank One, NA.
Page 26 in the manually signed original.
Exhibit 10.4.29
Covenant Agreement dated September 25, 1998 between the
Registrant and Bank One, NA.
Page 32 in the manually signed original.
Exhibit 10.4.30
Assignment of Deposit Account dated September 25, 1998 between
Registrant and Bank One, NA.
Page 35 in the manually signed original.
Exhibit 10.4.31
Asset Purchase Agreement dated October 14, 1998 between the
Registrant, Neoprobe Europe AB, a corporation organized and
existing under the laws of Sweden, and Bioinvent Production
AB, a corporation organized and existing under the laws of
Sweden.
Page 39 in the manually signed original.
11. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Exhibit 11.1
Computation of Net Loss Per Share.
17
27. FINANCIAL DATE SCHEDULE
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC
information only).
(b) REPORTS ON FORM 8-K.
No current report on Form 8-K was filed by the Registrant
during the third quarter of fiscal 1998.
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.
NEOPROBE CORPORATION
(the "Registrant")
Dated: November 16, 1998
By: /s/ David C. Bupp
-----------------
David C. Bupp,
President and Chief Executive Officer
(duly authorized officer; principal
executive officer)
By: /s/ Brent Larson
----------------
Brent Larson
Vice President, Finance and
Administration (principal financial
and accounting officer)
18
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
NEOPROBE CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE FISCAL QUARTER ENDED:
SEPTEMBER 30, 1998
EXHIBITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19
INDEX
Exhibit 3.1
Complete Restated Certificate of Incorporation of Neoprobe Corporation, as
corrected February 18, 1994 and as amended June 27, 1994, July 25, 1995 and
June 3, 1996 (incorporated by reference to Exhibit 99.2 to the Registrant's
Current Report on Form 8-K dated June 20, 1996; Commission File No. 0-26520).
Exhibit 3.2
Amended and Restated By-Laws dated July 21, 1993 as amended July 18, 1995 and
May 30, 1996 (incorporated by reference to Exhibit 99.4 to the Registrant's
Current Report on Form 8-K dated June 20, 1996; Commission File No. 0-26520).
Exhibit 4.1
See Articles FOUR, FIVE, SIX and SEVEN of the Restated Certificate of
Incorporation of the Registrant (see Exhibit 3.1).
Exhibit 4.2
See Articles II and VI and Section 2 of Article III and Section 4 of Article VII
of the Amended and Restated By-Laws of the Registrant (see Exhibit 3.2).
Exhibit 4.3
Rights Agreement dated as of July 18, 1995 between the Registrant and
Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit
1 of the registration statement on Form 8-A; Commission File No. 0-26520).
Exhibit 10.4.26
Letter amendment dated October 14, 1998 to the Sales and Marketing Agreement
dated April 21, 1998 between the Registrant and Ethicon Endo-Surgery, Inc., an
Ohio corporation (filed pursuant to Rule 24b-2 under which the Registrant has
requested confidential treatment of certain portions of this Exhibit).
Exhibit 10.4.27
Promissory Note, dated September 25, 1998, issued by Registrant to Bank One, NA.
Exhibit 10.4.28
Addendum to the Promissory Note dated September 25, 1998 issued by Registrant to
Bank One, NA.
Exhibit 10.4.29
Covenant Agreement dated September 25, 1998 between the Registrant and Bank One,
NA.
Exhibit 10.4.30
Assignment of Deposit Account dated September 25, 1998 between Registrant and
Bank One, NA.
20
Exhibit 10.4.31
Asset Purchase Agreement dated October 14, 1998 between the Registrant, Neoprobe
Europe AB, a corporation organized and existing under the laws of Sweden, and
Bioinvent Production AB, a corporation organized and existing under the laws of
Sweden.
Exhibit 11.1
Computation of Net Loss Per Share.
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information only).
21