UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 


FORM 10-Q

(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended       June 30, 2010                                                  
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from to                                  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 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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ¨  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Act.)
Yes ¨  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  82,280,216 shares of common stock, par value $.001 per share (as of the close of business on August 6, 2010).
 

 
NEOPROBE CORPORATION and SUBSIDIARIES

INDEX

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

 
2

 

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

Neoprobe Corporation and Subsidiaries
Consolidated Balance Sheets

   
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  

Continued

 
3

 

Neoprobe Corporation and Subsidiaries,
Consolidated Balance Sheets, continued

   
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  

See accompanying notes to consolidated financial statements

 
4

 

Neoprobe Corporation and Subsidiaries
Consolidated Statements of Operations
(unaudited)

   
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  

See accompanying notes to consolidated financial statements.

 
5

 

Neoprobe Corporation and Subsidiaries
Consolidated Statement of Stockholders’ Deficit
(unaudited)

   
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  

See accompanying notes to consolidated financial statements.

 
6

 

Neoprobe Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)

   
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  

See accompanying notes to consolidated financial statements.

 
7

 
  
Notes to Consolidated Financial Statements
(unaudited)
 
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.

Our consolidated financial statements include the accounts of Neoprobe, our wholly-owned subsidiary, Cardiosonix Ltd. (Cardiosonix), and our 90%-owned subsidiary, Cira Biosciences, Inc. (Cira Bio).  All significant inter-company accounts were eliminated in consolidation.

In August 2009, the Company’s Board of Directors decided to discontinue the operations of Cardiosonix and to attempt to divest our Cardiosonix subsidiary.  This decision was based on the determination that the blood flow measurement device segment was no longer considered a strategic initiative of the Company, due in large part to positive events in our other development initiatives.  Our consolidated statements of operations have been reclassified, as required, for all prior periods presented to reflect Cardiosonix as a discontinued operation.  Cash flows associated with the operation of Cardiosonix have been combined within operating, investing and financing cash flows, as appropriate, in our consolidated statements of cash flows.  See Note 2.

 
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:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  In determining the appropriate levels, we perform a detailed analysis of the assets and liabilities whose fair value is measured on a recurring basis.  At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.  In estimating the fair value of our derivative liabilities, we used the Black-Scholes option pricing model and, where necessary, other macroeconomic, industry and Company-specific conditions.  See Note 3.

 
8

 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

 
(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.

 
9

 

2.
Discontinued Operations

In August 2009, the Company’s Board of Directors decided to discontinue the operations of Cardiosonix and to attempt to sell our Cardiosonix subsidiary.  This decision was based on the determination that the blood flow measurement device segment was no longer considered a strategic initiative of the Company, due in large part to positive events in our other device product and drug development initiatives.  We are in the process of identifying potential buyers, but our efforts thus far have not resulted in any definitive offers.

As a result of our decision to hold Cardiosonix for sale, we reclassified certain assets and liabilities as assets and liabilities associated with discontinued operations and reduced them to their estimated fair value at that time.  The following assets and liabilities have been segregated and included in assets associated with discontinued operations or liabilities associated with discontinued operations, as appropriate, in the consolidated balance sheets:

   
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  

We recorded an impairment loss of $1.7 million related to the assets of Cardiosonix during the third quarter of 2009 and have reclassified all related revenues and expenses to discontinued operations for all periods presented.  Until a sale is completed, we expect to continue to generate minimal revenues and incur minimal expenses related to our blood flow measurement device business.  The following amounts have been segregated from continuing operations and included in discontinued operations in the consolidated statements of operations:

   
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 )

 
10

 

3.
Fair Value Hierarchy

The following tables set forth, by level, financial liabilities measured at fair value on a recurring basis:

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  

The following tables set forth a summary of changes in the fair value of our Level 3 liabilities for the three-month periods ended June 30, 2010 and 2009:

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  

 
11

 

The following tables set forth a summary of changes in the fair value of our Level 3 liabilities for the six-month periods ended June 30, 2010 and 2009:

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  

There were no transfers in or out of our Level 1 and Level 2 fair value measurements during the six-month period ended June 30, 2010.  During the six-month period ended June 30, 2009, we transferred $7.7 million into our Level 2 liabilities.  The transfer was a result of the required January 1, 2009 adoption of a new accounting standard which clarified the determination of whether equity-linked instruments, such as warrants to purchase our common stock, are considered indexed to our own stock.  As a result of adopting the new standard, certain warrants to purchase our common stock that were previously treated as equity were reclassified as derivative liabilities.

4.
Stock-Based Compensation

At June 30, 2010, we have instruments outstanding under three stock-based compensation plans;  the Amended and Restated Stock Option and Restricted Stock Purchase Plan (the Amended Plan), the 1996 Stock Incentive Plan (the 1996 Plan), and the Second Amended and Restated 2002 Stock Incentive Plan (the 2002 Plan).  Currently, under the 2002 Plan, we may grant incentive stock options, nonqualified stock options, and restricted stock awards to full-time employees and directors, and nonqualified stock options and restricted stock awards may be granted to our consultants and agents.  Total shares authorized under each plan are 2 million shares, 1.5 million shares and 7 million shares, respectively.  Although instruments are still outstanding under the Amended Plan and the 1996 Plan, these plans are considered expired and no new grants may be made from them.  Under all three plans, the exercise price of each stock option is greater than or equal to the closing market price of our common stock on the day prior to the date of the grant.

Stock options granted under the Amended Plan, the 1996 Plan and the 2002 Plan generally vest on an annual basis over one to three years.  Outstanding stock options under the plans, if not exercised, generally expire ten years from their date of grant or 90 days from the date of an optionee’s separation from employment with the Company.  We issue new shares of our common stock upon exercise of stock options.

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 stock option award is estimated on the date of grant using the Black-Scholes option pricing model to value share-based payments.  Expected volatilities are based on the Company’s historical volatility, which management believes represents the most accurate basis for estimating expected volatility under the current circumstances.  Neoprobe uses historical data to estimate forfeiture rates.  The expected term of stock options granted is based on the vesting period and the contractual life of the options.  The risk-free rate is based on the U.S. Treasury yield in effect at the time of the grant.

 
12

 

Compensation cost arising from stock-based awards is recognized as expense using the straight-line method over the vesting period.  For the three-month periods ended June 30, 2010 and 2009, our total stock-based compensation expense was approximately $80,000 and $75,000, respectively.  For the six-month periods ended June 30, 2010 and 2009, our total stock-based compensation expense was approximately $303,000 and $145,000, respectively.  We have not recorded any income tax benefit related to stock-based compensation in either of the three-month or six-month periods ended June 30, 2010 and 2009.

A summary of the status of our stock options as of June 30, 2010, and changes during the six-month period then ended, is presented below:

   
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  

A summary of the status of our unvested restricted stock as of June 30, 2010, and changes during the six-month period then ended, is presented below:

   
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  

Restricted shares vest upon occurrence of a specific event or achievement of goals as defined in the grant agreements.  As a result, we have recorded compensation expense related to grants of restricted stock based on management’s estimates of the probable dates of the vesting events.

As of June 30, 2010, there was approximately $844,000 of total unrecognized compensation cost related to unvested stock-based awards, which we expect to recognize over remaining weighted average vesting terms of 1.1 years.

 
13

 

5.
Comprehensive Income (Loss)

We had no accumulated other comprehensive income (loss) activity during the three-month and six-month periods ended June 30, 2010, or for the three-month period ended June 30, 2009; therefore, our total comprehensive loss was equal to our net loss for those periods.  Due to our net operating loss carryforwards, there are no income tax effects on comprehensive income (loss) components for the six-month period ended June 30, 2009.

   
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

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares and, except for periods with a loss from operations, participating securities outstanding during the period.  Diluted earnings (loss) per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued.  Potential common shares that may be issued by the Company include convertible securities, options and warrants.

The following table sets forth the reconciliation of the weighted average number of common shares outstanding to those used to compute basic and diluted earnings (loss) per share for the three-month and six-month periods ended June 30, 2010 and 2009:

   
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  

Earnings (loss) per common share for the three-month and six-month periods ended June 30, 2010 and 2009 excludes the effects of 60,242,500 and 58,796,178 common share equivalents, respectively, since such inclusion would be anti-dilutive.  The excluded shares consist of common shares issuable upon exercise of outstanding stock options and warrants, or upon the conversion of convertible debt and convertible preferred stock.

 
14

 

The Company’s unvested stock awards contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid (referred to as “participating securities”).  Therefore, the unvested stock awards are included in the number of shares outstanding for both basic and diluted earnings per share calculations, except in the event of a net loss from operations.  Due to our net loss, 1,719,000 and 964,000 shares of unvested restricted stock were excluded in determining basic and diluted loss per share for the three-month and six-month periods ended June 30, 2010 and 2009, respectively.

7.
Inventory

From time to time, we capitalize certain inventory costs associated with our Lymphoseek® product prior to regulatory approval and product launch based on management’s judgment of probable future commercial use and net realizable value of the inventory.  We could be required to permanently write down previously capitalized costs related to pre-approval or pre-launch inventory upon a change in such judgment, due to a denial or delay of approval by regulatory bodies, a delay in commercialization, or other potential factors.  Conversely, our gross margins may be favorably impacted if some or all of the inventory previously written down becomes available and is used for commercial sale.  During the three-month and six-month periods ended June 30, 2010 and 2009, we did not capitalize any inventory costs associated with our Lymphoseek drug product.  During the three-month period ended June 30, 2010, we expensed $324,000 of previously capitalized pharmaceutical materials to research and development as they were no longer considered to be usable in the production of future saleable final drug product inventory.

The components of net inventory are as follows:

   
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

The major classes of intangible assets are as follows:

     
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  

1 The weighted average remaining life is calculated for issued patents and does not include pending patent applications or trademarks which are not currently being amortized.

 
15

 

The estimated amortization expenses, related to those patents and trademarks currently being amortized, for the next five fiscal years are as follows:

   
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

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, except in cases where the product has a limited use as designed.  Our accrual for warranty expenses is adjusted periodically to reflect actual experience and is included in accrued liabilities and other on the consolidated balance sheets.  Our primary marketing partner, Ethicon Endo-Surgery, Inc. (EES), a Johnson & Johnson company, has reimbursed us for a portion of warranty expense incurred based on end customer sales they make during a given fiscal year.  Payments charged against the reserve are disclosed net of EES’ estimated reimbursement.

The activity in the warranty reserve account for the three-month and six-month periods ended June 30, 2010 and 2009 is as follows:

   
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

In July 2007, David C. Bupp, our President and CEO, and certain members of his family (the Bupp Investors) purchased a $1.0 million convertible note (the Bupp Note) and warrants.  The Bupp Note bore interest at 10% per annum, had an original term of one year and was repayable in whole or in part with no penalty.  The note was convertible, at the option of the Bupp Investors, into shares of our common stock at a price of $0.31 per share.  As part of this transaction, we issued the Bupp Investors Series V Warrants to purchase 500,000 shares of our common stock at an exercise price of $0.31 per share, expiring in July 2012.  See Note 17(a).

In December 2007, we entered into a Securities Purchase Agreement (SPA) with Platinum Montaur Life Sciences, LLC (Montaur), pursuant to which we issued Montaur a 10% Series A Convertible Senior Secured Promissory Note in the principal amount of $7,000,000, $3.5 million of which was convertible into shares of our common stock at the conversion price of $0.26 per share, due December 26, 2011 (the Series A Note); and a five-year Series W Warrant to purchase 6,000,000 shares of our common stock at an exercise price of $0.32 per share.  The SPA also provided for two further tranches of financing, a second tranche of $3 million in exchange for a 10% Series B Convertible Senior Secured Promissory Note along with a five-year Series X Warrant to purchase shares of our common stock, and a third tranche of $3 million in exchange for 3,000 shares of our 8% Series A Cumulative Convertible Preferred Stock and a five-year Series Y Warrant to purchase shares of our common stock.  Closings of the second and third tranches were subject to the satisfaction by the Company of certain milestones related to the progress of the Phase 3 clinical trials of our Lymphoseek radiopharmaceutical product.

 
16

 

In connection with the SPA, Montaur requested that the term of the $1.0 million Bupp Note be extended approximately 42 months or until at least one day following the maturity date of the Series A Note.  In consideration for the Bupp Investors’ agreement to extend the term of the Bupp Note pursuant to an Amendment to the Bupp Purchase Agreement, dated December 26, 2007, we agreed to provide security for the obligations evidenced by the Amended 10% Convertible Note in the principal amount of $1,000,000, due December 31, 2011, executed by Neoprobe in favor of the Bupp Investors (the Amended Bupp Note), under the terms of a Security Agreement, dated December 26, 2007, by and between Neoprobe and the Bupp Investors (the Bupp Security Agreement).  As further consideration for extending the term of the Bupp Note, we issued the Bupp Investors additional Series V Warrants to purchase 500,000 shares of our common stock at an exercise price of $0.32 per share, expiring in December 2012.

In April 2008, following receipt by the Company of clearance from the United States Food and Drug Administration to commence a Phase 3 clinical trial for Lymphoseek in patients with breast cancer or melanoma, we amended the SPA related to the second tranche and issued Montaur a 10% Series B Convertible Senior Secured Promissory Note in the principal amount of $3,000,000, which was convertible into shares of our common stock at the conversion price of $0.36 per share, also due December 26, 2011 (the Series B Note, and hereinafter referred to collectively with the Series A Note as the Montaur Notes); and a five-year Series X Warrant to purchase 8,333,333 shares of our common stock at an exercise price of $0.46 per share.

In December 2008, after we obtained 135 vital blue dye lymph nodes from patients who had completed the injection of the drug and surgery in a Phase 3 clinical trial of Lymphoseek in patients with breast cancer or melanoma, we issued Montaur 3,000 shares of our 8% Series A Cumulative Convertible Preferred Stock (the Series A Preferred Stock) and a five-year Series Y Warrant to purchase 6,000,000 shares of our common stock at an exercise price of $0.575 per share (hereinafter referred to collectively with the Series W Warrant and Series X Warrant as the Montaur Warrants), for an aggregate purchase price of $3,000,000.  The “Liquidation Preference Amount” for the Series A Preferred Stock was $1,000 and the “Conversion Price” of the Series A Preferred Stock was set at $0.50 on the date of issuance, thereby making the shares of Series A Preferred Stock convertible into an aggregate 6,000,000 shares of our common stock, subject to adjustment as described in the Certificate of Designations.

In July 2009, we entered into a Securities Amendment and Exchange Agreement with Montaur, pursuant to which Montaur agreed to the amendment and restatement of the terms of the Montaur Notes, the Series A Preferred Stock, and the Montaur Warrants.  The Series A Note was amended to grant Montaur conversion rights with respect to the $3.5 million portion of the Series A Note that was previously not convertible.  The newly convertible portion of the Series A Note was convertible into 3,600,000 shares of our common stock at $0.9722 per share.  The amendments also eliminated certain price reset features of the Montaur Notes, the Series A Preferred Stock and the Montaur Warrants that had created significant non-cash derivative liabilities on the Company’s balance sheet.  See Note 11.  In conjunction with this transaction, we issued Montaur a Series AA Warrant to purchase 2.4 million shares of our common stock at an exercise price of $0.97 per share, expiring in July 2014.  The change in terms of the Montaur Notes, the Series A Preferred Stock and the Montaur Warrants were treated as an extinguishment of debt for accounting purposes.  Following the extinguishment, the Company’s balance sheet reflected the face value of the $10 million due to Montaur pursuant to the Montaur Notes, which approximated fair value at the date of the extinguishment.

 
17

 

On June 25, 2010, we entered into a Securities Exchange Agreement with Montaur, pursuant to which Montaur exchanged the Montaur Notes and the Series A Preferred Stock for 10,000 shares of Series B Convertible Preferred Stock (the Series B Preferred Stock), convertible into 32,700,000 shares of common stock.  The Series B Preferred Stock is convertible at the option of Montaur, carries no dividend requirements and participates equally with our common stock in liquidation proceeds based upon the number of common shares into which the Series B Preferred Stock is then convertible.  As consideration for the exchange, Neoprobe issued additional Series B Preferred Stock which is convertible into 1.3 million shares of common stock.  Also on June 25, 2010, we entered into a Securities Exchange Agreement with the Bupp Investors, pursuant to which the Bupp Investors exchanged the Amended Bupp Note for 1,000 shares of Series C Convertible Preferred Stock (the Series C Preferred Stock), convertible into 3,226,000 shares of common stock.  The Series C Preferred Stock has a 10% dividend rate, payable quarterly until December 31, 2011, and participates equally with our common stock in liquidation proceeds based upon the number of common shares into which the Series C Preferred Stock is then convertible.  The exchange of the Montaur Notes, the Series A Preferred Stock and the Amended Bupp Note were treated as extinguishments for accounting purposes.  As a result, the Company recognized a loss on extinguishment of debt of $47.1 million, recorded a deemed dividend of $8.0 million, and wrote off $966,000 in put option derivative liabilities during the second quarter of 2010.  As a result of these exchange transactions, all security interests in the Company’s assets held by Montaur and the Bupp Investors were extinguished.

During the three-month periods ended June 30, 2010 and 2009, we recorded interest expense of $6,000 and $156,000, respectively, related to amortization of the debt discount related to our convertible notes.  During the six-month periods ended June 30, 2010 and 2009, we recorded interest expense of $12,000 and $307,000, respectively, related to amortization of the debt discount related to our convertible notes.  During the three-month periods ended June 30, 2010 and 2009, we recorded interest expense of $2,000 and $29,000, respectively, related to amortization of the deferred financing costs related to our convertible notes.  During the six-month periods ended June 30, 2010 and 2009, we recorded interest expense of $4,000 and $58,000, respectively, related to amortization of the deferred financing costs related to our convertible notes.

11.
Derivative Instruments

Effective January 1, 2009, we adopted a new accounting standard which clarified the determination of whether equity-linked instruments (or embedded features), such as our convertible securities and warrants to purchase our common stock, are considered indexed to our own stock.  As a result of adopting the new standard, certain embedded features of our convertible securities which were extinguished in the quarter ended June 30, 2010, as well as warrants to purchase our common stock, that were previously treated as equity are now considered derivative liabilities.  We do not use derivative instruments for hedging of market risks or for trading or speculative purposes.

The estimated fair values of the derivative liabilities are recorded as non-current liabilities on the consolidated balance sheet.  Changes in the estimated fair values of the derivative liabilities are recorded in the consolidated statement of operations. The net effect of marking the derivative liabilities to market during the first half of 2009 resulted in a net increase in the estimated fair values of the derivative liabilities of $12.2 million which was recorded as non-cash expense during that period.  On July 24, 2009, we entered into a Securities Amendment and Exchange Agreement with Montaur, pursuant to which Montaur agreed to the amendment and restatement of the terms of the Montaur Notes, the Series A Preferred Stock, and the Montaur Warrants.  As a result, the Company recorded an additional $5.6 million in mark-to-market adjustments related to the increase in the Company’s common stock from June 30 to July 24, 2009, and reclassified $27.0 million in derivative liabilities related to the Montaur Notes, the Series A Preferred Stock, and the Montaur Warrants to additional paid-in capital.  Also on July 24, 2009, Montaur exercised 2,844,319 of their Series Y Warrants, which resulted in a decrease in the related derivative liability of $2.2 million.  The net effect of marking the Company’s remaining derivative liabilities to market from July 25 through December 31, 2009 resulted in a net increase in the estimated fair values of the derivative liabilities of $298,000 which was recorded as non-cash expense during the second half of 2009.  The effect of marking the Company’s remaining derivative liabilities to market at March 31, 2010 resulted in a net increase in the estimated fair values of the derivative liabilities of $429,000 which was recorded as non-cash expense during the first quarter of 2010.  On June 25, 2010, we entered into a Securities Exchange Agreement with Montaur, pursuant to which Montaur exchanged the Montaur Notes and the Series A Preferred Stock for 10,000 shares of Series B Convertible Preferred Stock.  Also on June 25, 2010, we entered into a Securities Exchange Agreement with the Bupp Investors, pursuant to which the Bupp Investors exchanged the Amended Bupp Note for 1,000 shares of Series C Convertible Preferred Stock.  As a result of these exchange transactions, the Company wrote off $966,000 in put option derivative liabilities during the second quarter of 2010.  The effect of marking the Company’s remaining derivative liabilities to market at June 30, 2010 resulted in a net increase in the estimated fair values of the derivative liabilities of $154,000 which was recorded as non-cash expense during the second quarter of 2010.  The total estimated fair value of the remaining derivative liabilities was $1.6 million as of June 30, 2010.  See Note 10.

 
18

 

12.
Stock Warrants

During the first six months of 2009, David C. Bupp, our President and CEO, exercised 50,000 Series Q Warrants in exchange for issuance of 50,000 shares of our common stock, resulting in gross proceeds of $25,000.  The remaining 325,000 Series Q Warrants held by Mr. Bupp expired during the period.  During the same period, another Bupp Investor exercised 50,000 Series V Warrants in exchange for issuance of 50,000 shares of our common stock, resulting in gross proceeds of $16,000.  Also during the first six months of 2009, certain outside investors exercised a total of 1,010,000 Series U Warrants on a cashless basis in exchange for issuance of 541,555 shares of our common stock.

At June 30, 2010, there are 17.8 million warrants outstanding to purchase our common stock.  The warrants are exercisable at prices ranging from $0.31 to $0.97 per share with a weighted average exercise price of $0.48 per share.  See Note 17(a).

13.
Common Stock Purchase Agreement

Under a previously existing agreement, in March 2010, we sold to Fusion Capital Fund II, LLC (Fusion Capital), an Illinois limited liability company, 540,541 shares for proceeds of $1.0 million under a common stock purchase agreement, as amended.  In connection with this sale, we issued 120,000 shares of our common stock to Fusion Capital as an additional commitment fee.   Subsequent to this sale, the remaining aggregate amount of our common stock we can sell to Fusion Capital under the amended agreement is $9.1 million.

14.
Income Taxes

We account for income taxes in accordance with current accounting standards, which include guidance on the accounting for uncertainty in income taxes recognized in the financial statements.  Such standards also prescribe a recognition threshold and measurement model for the financial statement recognition of a tax position taken, or expected to be taken, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  As a result, no liability for uncertain tax positions was recorded as of June 30, 2010.  Should we need to accrue interest or penalties on uncertain tax positions, we would recognize the interest as interest expense and the penalties as a selling, general and administrative expense.

15.
Segment and Subsidiary Information

We report information about our operating segments using the “management approach” in accordance with current accounting standards.  This information is based on the way management organizes and reports the segments within the enterprise for making operating decisions and assessing performance.  Our reportable segments are identified based on differences in products, services and markets served.  There were no inter-segment sales.  We own or have rights to intellectual property involving two primary types of medical device products, including oncology instruments currently used primarily in the application of sentinel lymph node biopsy, and blood flow measurement devices.  We also own or have rights to intellectual property related to several drug and therapy products.

 
19

 

The information in the following table is derived directly from each reportable segment’s financial reporting.

 
($ 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  

 
20

 


($ 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