Neoprobe Corporation (OTCBB: NEOP), a diversified developer of innovative biomedical surgical oncology products, today announced consolidated results for the first quarter of 2010. First quarter 2010 revenues were $2.7 million, consistent with the record revenue reported for the first quarter of 2009. Gross profit for the first quarter of 2010 was $1.8 million, compared to $1.9 million for the first quarter of 2009. Operating expenses increased to $3.5 million for the first quarter of 2010 from $2.1 million for the first quarter of 2009. Neoprobe's loss from operations for the first quarter of 2010 was $1.7 million compared to $203,000 for the first quarter of 2009.
For the first quarter of 2010, Neoprobe reported a net loss attributable to common stockholders of $2.5 million, or $0.03 per share, compared to net income attributable to common stockholders of $754,000, or $0.01 per share, for the first quarter of 2009. As discussed more fully below, the first quarter 2009 net income attributable to common stockholders was primarily due to mark-to-market adjustments related to derivative accounting treatment required for certain financial instruments on the Company's balance sheet.
Brent Larson, Neoprobe's Vice President, Finance and CFO, said, "Gamma detection device revenue for the first quarter of 2010 remained steady compared to the same period in 2009. Increased probe sales volumes offset declines in console sales and a minor decline in sales prices. Gross margins from our device sales declined slightly to 67% for the first quarter of 2010 compared to 69% for the same period in the prior year due to net changes in product mix and the impact of the decline in sales prices. Our gamma detection device line continues to show strong overall results and generate cash flow to cover our corporate overhead and contribute to our product development costs."
David Bupp, Neoprobe's President and CEO, said, "Our operating expenses increased for the first quarter of 2010 compared to last year as chemistry, manufacturing and control activities and other development expenses associated with preparing to submit a new drug application (NDA) for Lymphoseek® have accelerated. During the first quarter of 2010, we were pleased to announce the positive outcome of a meeting with FDA regarding a review of results from our Phase 3 clinical trial for Lymphoseek in subjects with breast cancer or melanoma. Related to the positive outcome of the regulatory meeting and the activities necessary to support the NDA, we have added headcount and geared up other activities to prepare for and to support the filing of the NDA. We believe the positive outcome of this FDA meeting and our other activities have positioned us well for the filing of the NDA later this summer. Our general and administrative costs for the first quarter also increased compared to the prior year primarily related to increased stock and compensation costs."
During the first quarter of 2009, the Company was required to adopt certain authoritative guidance related to the accounting treatment for derivative liabilities. Under the applicable accounting rules for financial instruments, embedded features of the Company's notes and preferred stock and the related warrants to purchase common stock were considered derivative liabilities because these instruments contained language that provided for the resetting of the instruments' exercise/conversion prices in the event that the Company issues common stock at prices below the exercise/conversion prices of the respective instruments. Treatment of these instruments as derivative liabilities resulted in them being required to be reflected on the Company's balance sheet at their fair values (i.e., marked to market) based on certain assumptions, including the trading price of the Company's common stock. The adoption of these rules resulted in our recording $1.5 million in non-cash income for the first quarter of 2009 related to marking such derivative liabilities to market as required by the guidance. Excluding the $1.5 million mark-to-market adjustment, the Company would have generated a net loss attributable to common shareholders of $771,000 for the first quarter of 2009. Neoprobe's management believes, however, that the inclusion of such mark-to-market adjustments in the Company's financial results does not appropriately communicate the results of the Company's operating performance and development activities to our investors. As a result, Neoprobe's management believes the ability of investors to analyze Neoprobe's business trends and to understand Neoprobe's performance may be better served from reviewing certain operational measures such as revenues, development expenses and income (loss) from operations. During the third quarter of 2009, Neoprobe agreed with the holder of the instruments with derivative characteristics to eliminate the price reset features that had substantially caused the derivative treatment of the instruments, thereby permitting the Company to effectively extinguish the majority of its derivative liabilities. This action should minimize the subsequent impact on our financial results which might have otherwise resulted from fluctuations in the trading price of the Company's common stock.
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