-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uxs2q+qUkHfHuAZxykTyS55aMiSbIGMSnQ/r4qyAcrD7x8eOXZq593xwg2ICmGOi Uz50/yFh3rhiJxm7Iz2Mzg== 0001005477-99-000612.txt : 19990217 0001005477-99-000612.hdr.sgml : 19990217 ACCESSION NUMBER: 0001005477-99-000612 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRA BIOSYSTEMS INC CENTRAL INDEX KEY: 0000888999 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 330408436 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26234 FILM NUMBER: 99538907 BUSINESS ADDRESS: STREET 1: 265 N WHISMAN RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 4159039100 MAIL ADDRESS: STREET 1: 265 NORTH WHISMAN RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 940433911 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 METRA BIOSYSTEMS, INC. ---------------------- (Exact Name of Registrant as specified in its charter) 0-26234 ---------------------- Commission File Number California 33-0408436 - ------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 265 North Whisman Road, Mountain View, CA 94043-3911 ----------------------------------------------------- (Address of Registrant's principal executive offices) (650) 903-9100 --------------------------------------------------- (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. |X| Yes |_| No. The number of shares of the Registrant's common stock outstanding as of January 29, 1999 was 12,721,401. METRA BIOSYSTEMS, INC. INDEX Page No. -------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets At December 31, 1998 and June 30, 1998 3 Condensed Consolidated Statements of Operations For The Three and Six Months ended December 31, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows For The Six Months ended December 31, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 6-8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-12 PART II. OTHER INFORMATION 13 ITEM 1. LEGAL PROCEEDINGS 13 ITEM 2. CHANGES IN SECURITIES 13 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 13 ITEM 5. OTHER INFORMATION 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14 SIGNATURE 15 2 PART I. FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS METRA BIOSYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) ASSETS December 31, June 30, 1998 1998 ---- ---- (unaudited) (1) Current assets: Cash and cash equivalents $ 4,496 $ 6,976 Short-term investments 12,627 12,831 Accounts receivable, net 1,612 1,831 Interest receivable 172 275 Inventories 1,073 869 Prepaid expenses and other current assets 656 615 ------------ ------------ Total current assets 20,636 23,397 Property and equipment, net 2,712 3,302 Long-term investments 5,312 7,410 Other assets 543 454 ------------ ------------ $ 29,203 $ 34,563 ============ ============ LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Accounts payable $ 751 $ 1,058 Accrued expenses 1,751 1,834 Current portion of capital lease obligations 782 630 ------------ ------------ Total current liabilities 3,284 3,522 Long-term portion of capital lease obligations 485 944 Shareholders equity: Preferred stock -- -- Common stock and additional paid-in capital 95,367 95,342 Accumulated other comprehensive income (loss) (369) (245) Accumulated deficit and other equity (69,564) (65,000) ------------ ------------ Total shareholders equity 25,434 30,097 ------------ ------------ $ 29,203 $ 34,563 ============ ============ (1) Derived from audited consolidated financial statements at June 30, 1998 See accompanying notes to condensed consolidated financial statements. 3 METRA BIOSYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended December 31, December 31, 1998 1997 1998 1997 ---- ---- ---- ---- Revenues Product sales $ 1,527 $ 1,676 $ 2,634 $ 3,198 Partner revenues 116 158 232 203 -------- -------- -------- -------- Total revenues 1,643 1,834 2,866 3,401 Operating expenses: Cost of product sales 779 903 1,304 1,461 Research and development 1,222 1,595 2,439 2,849 Sales and marketing 1,050 2,420 2,785 5,015 General and administrative 832 677 1,524 1,301 -------- -------- -------- -------- Total operating expenses 3 ,883 5,595 8,052 10,626 -------- -------- -------- -------- Loss from operations (2,240) (3,761) (5,186) (7,225) Interest income, net 289 450 619 927 -------- -------- -------- -------- Net loss $ (1,951) $ (3,311) $ (4,567) $ (6,298) ======== ======== ======== ======== Basic and diluted net loss per share $ (0.15) $ (0.26) $ (0.36) $ (0.50) ======== ======== ======== ======== Shares used to compute basic and diluted net loss per share 12,699 12,642 12,694 12,638 ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements. 4 METRA BIOSYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Six months ended December 31, -------------------- 1998 1997 ---- ---- Net cash used in operating activities $ (4,261) $ (7,697) Cash flows from investing activities: Purchases of investment securities (11,849) (7,294) Maturities and sales of investment securities 13,990 17,772 Purchases of property and equipment, net (80) (158) -------- -------- Net cash provided by investing activities 2,061 10,320 Cash flows from financing activities: Repayments of capital leases (305) (277) Proceeds from issuance of common stock 25 66 -------- -------- Net cash used in financing activities (280) (211) -------- -------- Net increase (decrease) in cash and cash equivalents (2,480) 2,412 Cash and cash equivalents at beginning of period 6,976 1,709 -------- -------- Cash and cash equivalents at end of period $ 4,496 $ 14,121 ======== ======== Supplemental disclosure of cash flow information: Cash paid for interest $ 77 $ 124 -------- -------- See accompanying notes to condensed consolidated financial statements. 5 METRA BIOSYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 and 1997 (Unaudited) 1. INTERIM FINANCIAL INFORMATION (a) The Company Metra Biosystems, Inc. (Metra or the Company), a California corporation, is engaged in the development and commercialization of diagnostic products for the detection and management of metabolic bone and joint diseases and disorders. The Company primarily markets its products for clinical and research use in the United States, Europe, and Pacific Rim countries. (b ) Basis of Presentation The accompanying interim condensed consolidated financial statements of the Company have been prepared in conformity with generally accepted accounting principles, consistent in all material respects with those applied in the Annual Report on Form 10-K for the year ended June 30, 1998. The interim financial information is unaudited, but reflects all normal adjustments which are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. The interim financial statements should be read in connection with the financial statements in the Companys' Annual Report on Form 10-K for the year ended June 30, 1998. 2. INVENTORIES Inventories consist of the following (net of reserves): December 31, June 30, 1998 1998 ---- ---- (in thousands) Raw materials $ 331 $ 298 Work in process 25 275 Finished goods 717 296 ----------- ------------ $ 1,073 $ 869 =========== ============ 3. NET LOSS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share, (SFAS 128) which was adopted by the Company for the three and six month periods ended December 31, 1998. Earnings per share for the three and six month periods ended December 31, 1997 have been restated in accordance with SFAS 128. Under the new requirements for calculating basic earnings per share, the dilutive effect of stock options is excluded. Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share incorporates the incremental shares issuable upon the assumed exercise of stock options and warrants, if dilutive. Shares from stock options and warrants have been excluded from the computation of diluted earnings per share for all periods presented, as their effect is anti-dilutive. 6 The following table sets forth the computation of net loss per share:
Three months ended Six months ended September 30, September 30, ------------- ------------- (in thousands, except per share amounts) 1998 1997 1998 1997 ---- ---- ---- ---- Numerator for basic and diluted net loss per share: Net loss $ (1,951) $ (3,311) $ (4,567) $ (6,298) ======== ======== ======== ======== Denominator: Weighted average shares 12,699 12,642 12,694 12,638 Weighted average non-vested shares subject to repurchase -- (12) -- (10) -------- -------- -------- -------- Denominator for basic and diluted net loss per share 12,699 12,630 12,694 12,627 ======== ======== ======== ======== Basic and diluted net loss per share $ (0.15) $ (0.26) $ (0.36) $ (0.50) ======== ======== ======== ========
4. COMPREHENSIVE INCOME In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income (Statement 130) which the Company adopted as required in the first quarter of fiscal 1999. Statement 130 establishes standards for reporting and display of comprehensive income and its components. Components of comprehensive income for the Company include items such as net income, changes in the value of available-for-sale securities, and translation gains and losses. The components of comprehensive income are as follows (in thousands): Three months ended Six months ended September 30, September 30, 1998 1997 1998 1997 ------- ------- ------- ------- Net loss $(1,951) $(3,311) $(4,567) $(6,298) Change in unrealized gain (loss) on available-for-sale investments (242) 70 (161) 274 Change in accumulated foreign currency translation (4) (16) 37 (21) ------- ------- ------- ------- Comprehensive Income (loss) $(2,197) $(3,257) $(4,765) $(6,045) ======= ======= ======= ======= Accumulated other comprehensive income presented on the accompanying condensed consolidated balance sheets consists of the accumulated net unrealized gain (loss) on available-for-sale investments and the cumulative foreign currency translation adjustment. 5. YEAR 2000 The Company is currently upgrading its financial and manufacturing information system software to a Year 2000 compliant version. The Company has completed the testing of this system upgrade and expects to fully implement by June 30, 1999. The Company has assessed the Year 2000 compliance of its other computer system software and manufacturing equipment and expects to complete all necessary upgrades to be Year 2000 compliant no later than June 30, 1999. In addition, the Company has contacted all vendors and suppliers 7 regarding Year 2000 compliance and has received no responses indicating that any vendor or supplier will not be Year 2000 compliant. The Company has also created a Year 2000 project team that periodically reviews relevant issues regarding compliance. The costs of Year 2000 initiatives have primarily been incurred and are not expected to be material to the Company's results of operations or financial position in future periods. The Company has incurred approximately $75,000 in Year 2000 compliance costs as of December 31, 1998 and has identified, to date, future expenditures approximating $5,000 in order to be fully Year 2000 compliant. Failure to timely complete the Company's Year 2000 initiatives could result in the Company's software being rendered inoperative. Although the Company has no formal contingency plans in place, in such event, the Company would attempt to perform its MIS functions, and other functions currently implemented by software, manually through the dedication of additional personnel to performing such functions. While the Company believes its planning efforts are adequate to address its Year 2000 concerns, there can be no assurance that the systems and products of other companies on which the Company's operations rely will be converted on a timely basis and will not have a material adverse effect on the Company's results of operations. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company's principal sources of revenue are product sales and partner revenues. Product sales are principally derived from sales of the Company's biochemical tests for research and clinical use. Partner revenues result from certain collaborative relationships and primarily consist of milestone payments, licensing fees and royalties received from these partners, and revenues from sales to these partners of proprietary reagents for use with the automated test formats of these partners. The Company commenced its clinical marketing efforts in the United States upon receiving 510(k) clearance for several of its key products in late 1995, and does not anticipate significant revenues from clinical sales of its products in the United States unless and until the results of its market education efforts are realized. Achieving increased sales growth and improved product margins depends upon increased awareness and acceptance of the Company's products among clinicians, the success of the Company's programs with pharmaceutical partners, adequate levels of third-party reimbursement for clinical use of its diagnostic tests, the Company's ability to successfully launch new products including the QUS-2(TM) ultrasonometer, continued sales growth of the Company's manual test formats and successful market penetration of automated test formats by the Company's diagnostic partners to the extent that this substantially increases market demand versus conversion of existing manual kit business. There can be no assurance the Company can successfully achieve any of the above items in a timely manner or at all, and failure to do so could have a material adverse effect on the Company's business, financial condition and results of operations. RESULTS OF OPERATIONS Three and Six Months Ended December 31, 1998 and 1997 Revenues Product sales for the three months and six months ended December 31, 1998 were $1,527,000 and $2,634,000, respectively, as compared to product sales of $1,676,000 and $3,198,000 in the comparable periods of the prior fiscal year. The product sales decreases resulted primarily from clinical market transitions from manual to automated testing, weakened sales in the Asian markets due to economic conditions and currency devaluations, and a reduction in distributor inventory levels in the German marketplace as the Company transitions the sales from distribution to a direct market. Partner revenues for the three months and six months ended December 31, 1998 were $116,000 and $232,000 as compared to $158,000 and $203,000 in the corresponding periods of the prior fiscal year. The decrease for the second quarter of fiscal 1999 can be attributed to an $82,000 one-time milestone payment recorded in the comparable period of the prior year. Royalty revenues from automated test sales increased 71% and 273%, respectively, as compared to the prior fiscal year. 9 Operating Expenses Product costs were $779,000 for the second quarter and $1,304,000 for the first six months of fiscal 1998, as compared to $903,000 and $1,461,000 in the corresponding periods of fiscal 1998. These decreases in product costs are primarily related to lower product sales and the associated kit volume. The product margin for the first six months of fiscal 1999 was 50% as compared to 54% in the prior year primarily due to slightly lower production volumes. The Company expects that the product margin will fluctuate from quarter to quarter and will be dependent upon future sales volume and product mix, as well as the Company's ability to continue to achieve efficiencies and improvements in the manufacturing process. Research and development expenses for the three months and six months ended December 31, 1998 were $1,222,000 and $2,439,000 as compared to $1,595,000 and $2,849,000 in the corresponding periods of the prior fiscal year representing a 23% and 14% decrease in research and development expenditures, respectively. These decreases are primarily due to reduced personnel and consulting costs offset partially by increased expenditures for clinical trials. The Company believes that research and development expenses will decrease in subsequent periods as clinical trials are completed and product development costs for the QUS-2(TM) are phased out of ongoing development expenditures. Sales and marketing expenses were $1,050,000 in the second quarter and $2,785,000 for the first six months of fiscal 1999, as compared to $2,420,000 and $5,015,000 in the corresponding periods of fiscal 1998, a decrease of 57% and 44% respectively. These decreases are primarily related to reduced expenditures associated with the Company's Co-Promotion Agreement with Berlex Laboratories, Inc. (Berlex). In December 1998, the Company and Berlex reached a negotiated settlement which temporarily placed on hold all direct selling activities by Berlex representatives until the Company receives QUS-2(TM) FDA approval in the United States and launches a point-of-care instrument. At that time, the Company and Berlex will resume negotiations to develop a new promotional agreement. As a result of the negotiated settlement, the Company paid Berlex $445,000 in the second quarter which was accrued at September 30, 1998 and expects no further cash outlays for the remainder of the fiscal year. The Company believes that sales and marketing expenses will slightly increase for the remainder of the fiscal year due to start-up costs for direct operations and promotional expenses associated with the product launch of the QUS-2(TM) in Europe. General and administrative expenses were $832,000 and $1,524,000 for the three and six months ended December 31, 1998, as compared to $677,000 and $1,301,000 for the corresponding periods in the prior fiscal year. The increases in administrative expenses are primarily related to increased consulting and legal fees associated with strategic opportunities that the Company is pursuing. The Company expects that general and administrative costs will remain relatively flat for the remainder of the fiscal year as strategic opportunities continue to be evaluated. Net Interest Income Net interest income for the second quarter and first six months of fiscal 1999 was $289,000 and $619,000 as compared to $450,000 and $927,000 in the corresponding periods of fiscal 1998. The reduction in net interest income is primarily the result of reduced cash resources available for investment. FINANCIAL CONDITION Liquidity and Capital Resources The Company had cash and investments of $22.4 million at December 31, 1998. The Company's use of cash in operating activities was $4.3 million in the first six months of fiscal 1999 compared to cash usage of $7.7 million 10 in the first six months of fiscal 1998, a reduction of approximately 45%. This reduction in cash usage is primarily related to reduced operating expenses and the corresponding $1.7 million decrease in net loss in the first two quarters of fiscal 1999 as compared to the corresponding periods of fiscal 1998 and a $1.5 million prepayment made to Berlex in the first half of 1998 to cover marketing activities in the second half of fiscal 1998. Net cash proceeds from investing activities were $2.1 million for the six months ended December 31, 1998 which included the maturity of longer term investment securities which were reinvested as cash and cash equivalents. Net cash used in financing activities in the first two quarters of fiscal 1999 was $280,000 which was related to the repayment of the Company's capital leases offset partially by purchases of stock through the Company's Employee Stock Purchase Program. Net capital expenditures for the first six months of fiscal 1998 were $80,000, compared to $158,000 for the corresponding periods of fiscal 1998. The Company has made a concerted effort to reduce capital expenditures. The Company expects that future capital expenditures will remain flat or decrease in subsequent periods. The Company's future capital requirements depend upon, among other things, the pace of market acceptance of the Company's products, the costs of research and development programs, the funding of clinical and regulatory related studies, the expansion of marketing and selling activities, costs involved in filing, prosecuting, enforcing, and defending patent claims, and the time and costs associated with obtaining regulatory approvals for future products. Funds may also be used for investments in, or acquisitions of, complementary businesses, products or technologies, in expanding the Company's manufacturing capacity or in improving its existing facilities. Although the Company believes its current cash, cash equivalents and investment securities will be sufficient to meet the Company's operating expenses and capital requirements into fiscal 2000, the Company's future liquidity and capital requirements will depend on the factors noted above, among others. The Company may, however, seek additional equity or debt financing to fund further expansion of its manufacturing capacity, or to fund other projects or acquisitions. There can be no assurance that if it becomes necessary to raise additional capital, such capital will be available on acceptable terms, if at all. 11 DISCLOSURE PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements contained in the report on Form 10-Q that are not purely historical are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended including, without limitation, statements regarding the company's future product development and commercialization, product sales and other revenues, market opportunities and acceptance, beliefs, expectations, goals, financial performance, and future strategies, all of which are dependent on certain risks and uncertainties that may cause actual results to differ materially from those expressed in these or any other forward looking statements made by or on behalf of the Company. These risks and uncertainties include the uncertainty of realizing increased market awareness and acceptance for the Company's products, the success of the Company's collaborative relationships, the uncertainty of obtaining adequate levels of third-party reimbursement for clinical use of the Company's products, and the uncertainty and variability of continuing sales growth of the Company's products. For a more detailed discussion of these risks, see the risk factors discussed in the Company's Annual Report on Form 10-K for the year ended June 30, 1998. 12 PART II. - OTHER INFORMATION ITEM 1. - LEGAL PROCEEDINGS None ITEM 2. - CHANGES IN SECURITIES None ITEM 3. - DEFAULTS UPON SENIOR SECURITIES None ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS At the Company's Annual Shareholders Meeting, which was held on December 14, 1998, the shareholders adopted the following management proposals: 1. The election of the following individuals as directors of the Company: Claude D. Arnaud, M.D. For 11,573,462 Against 58,519 Abstain 0 ---------- ------ --------- Mariann Byerwalter For 11,573,462 Against 58,519 Abstain 0 ---------- ------ --------- John L. Castello For 11,573,462 Against 58,519 Abstain 0 ---------- ------ --------- George W. Dunbar, Jr. For 11,571,782 Against 60,199 Abstain 0 ---------- ------ --------- Gregory B. Lawless, Ph.D. For 11,573,462 Against 58,519 Abstain 0 ---------- ------ --------- Mary Lake Polan, M.D., Ph.D. For 11,573,462 Against 58,519 Abstain 0 ---------- ------ --------- Craig C. Taylor For 11,573,462 Against 58,519 Abstain 0 ---------- ------ --------- 2. The ratification of the appointment of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending June 30, 1998 For 11,538,798 Against 60,633 Abstain 32,550 ---------- ------ ------ 13 ITEM 5. - OTHER INFORMATION None ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K Exhibits Description -------- ----------- 27 Financial Data Schedule b. Forms 8-K The company filed a report on Form 8-K, dated November 10, 1998, reporting the approval of an amendment to the Rights Agreement to institute a mechanism to exempt a transaction from trigerring the Rights Plan, and to increase the ownership threshold required to trigger the Rights Plan to 28%. 14 SIGNATURE 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. /s/ George W. Dunbar February 12, 1999 - ------------------------------ George W. Dunbar Chief Executive and Chief Financial Officer (duly authorized principal financial and accounting officer) EX-27 2 FDS
5 THE METRA BIOSYSTEMS, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1998. 1,000 6-MOS JUN-30-1999 JUL-01-1998 DEC-31-1998 4,496 17,939 1,612 0 1,073 20,636 2,712 0 29,203 3,284 0 0 0 13 25,421 29,203 1,527 116 779 3,883 0 0 0 (1,951) 0 (1,951) 0 0 0 (1,951) (0.15) (0.15)
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