During the second quarter of 2009, Neoprobe recorded a mark-to-market adjustment of $13.7 million related to accounting for certain of its financial instruments as derivative liabilities under current accounting rules which resulted in a net total mark-to-market adjustment of $12.2 million for the first half of 2009. In addition, the Company reported total derivative liabilities of $25.6 million on the Company??™s balance sheet as of June 30, 2009. Under the applicable accounting rules for financial instruments, embedded features of the Company??™s notes and preferred stock and the 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. As the share price of the Company??™s common stock has increased over the past several months, significant mark-to-market adjustments have been recorded as non-cash expense in the Company??™s statement of operations. Neoprobe??™s management believes 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 revenue, development expenses and income (loss) from operations.
On July 24, 2009, Neoprobe agreed with the holder of a majority of the instruments with derivative characteristics, Platinum-Montaur Life Sciences, LLC (Montaur), 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. During the third quarter of 2009, the Company will record an additional $5.6 million in mark-to-market adjustments related to movement in the price of the Company??™s common stock from June 30th through July 24th. As a result of the extinguishment treatment associated with the elimination of the price reset features, the Company will also record $16.2 million in non-cash loss on the extinguishment during the third quarter and will then reclassify approximately $27 million in derivative liabilities to additional paid-in capital. Following the extinguishment treatment, the Company??™s balance sheet will reflect the face value of the $10 million in notes due to Montaur.
Neoprobe??™s President and CEO, David Bupp, and Vice President and CFO, Brent Larson, will provide a business update and discuss the Company??™s results for the second quarter and first half of 2009 during a conference call with the investment community scheduled for 11:00 AM ET, Wednesday, August 12, 2009. The conference call can be accessed as follows:
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