UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934, FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________
to _____________.
Commission File Number
0-21015
HUMASCAN INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-3345046
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
125 Moen Avenue, Cranford, New Jersey 07016
(Address of principal executive offices)
(908) 709-3434
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 .
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 14, 1997, Issuer had
outstanding 7,720,313 shares of common stock, par value $.01 per share.
Transitional small business disclosure format (check one): Yes No X .
---- ----
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HumaScan Inc.
(A Development Stage Enterprise)
Condensed Balance Sheet
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
6/30/97 12/31/96
(Unaudited)
----------- --------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 4,426,200 6,413,100
Investments 6,267,400 6,096,400
Prepaid expenses 46,800 115,600
------------ ------------
Total current assets 10,740,400 12,625,100
Property, plant and equipment, net 655,400 480,700
Other assets 1,409,400 1,363,200
------------ ------------
Total assets $ 12,805,200 $ 14,469,000
============ ============
Liabilities and Stockholder's Equity
Current Liabilities:
Accounts payable 31,400 215,600
Accrued expenses 1,160,700 1,200,900
Obligations under capital lease 8,900 8,300
------------ ------------
Total current liabilities 1,201,000 1,424,800
Obligations under capital lease, noncurrent portion 31,000 35,700
Stockholders' Equity:
Common Stock, $0.01 par value, 25,000,000 shares authorized;
in 1997 and 1996, 7,720,313 shares issued and outstanding 77,200 77,200
Additional paid-in capital 14,774,700 14,774,700
Deficit accumulated during the development stage (3,278,700) (1,843,400)
------------ ------------
Total stockholders' equity 11,573,200 13,008,500
============ ============
Total liabilities and stockholders' equity $ 12,805,200 $ 14,469,000
============ ============
</TABLE>
See accompanying notes to unaudited condensed financial statements.
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<PAGE>
HumaScan Inc.
(A Development Stage Enterprise)
Condensed Statements of Operations
For the Six Months Ended June 30, 1997 and 1996
and for the period from December 27, 1994 (date of inception) to June 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
Three Months Ended Six Months Ended from 12/27/94
------------------ ---------------- (date of inception)
6/30/97 6/30/96 6/30/97 6/30/96 to 6/30/97
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Interest income $ 160,800 $ 1,900 321,000 $ 3,100 $ 578,800
----------- ----------- ----------- ----------- -----------
Operating Expenses:
Facility costs 329,200 2,300 507,500 4,200 609,300
Marketing expenses 179,400 20,000 335,200 38,700 660,500
General and administrative expenses 338,500 116,100 633,600 246,100 1,725,000
Clinical development expenses 143,900 6,300 276,900 7,600 481,900
Interest expense 1,500 275,900 3,100 363,500 380,800
----------- ----------- ----------- ----------- -----------
992,500 420,600 1,756,300 660,100 3,857,500
----------- ----------- ----------- ----------- -----------
Net loss ($ 831,700) ($ 418,700) ($1,435,300) ($ 657,000) ($3,278,700)
=========== =========== =========== =========== ===========
Net loss per common share ($ 0.11) ($ 0.08) ($ 0.19) ($ 0.14) ($ 0.68)
=========== =========== =========== =========== ===========
Shares used in computing
net loss per share 7,720,313 5,124,926 7,720,313 4,725,822 4,841,620
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
- 3 -
<PAGE>
HumaScan Inc.
(A Development Stage Enterprise)
Condensed Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
and for the period from December 27, 1994 (date of inception)
to June 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Six months Period from
ended June 30, December 27, 1994
-------------- (date of inception)
1997 1996 to June 30, 1997
---- ---- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($ 1,435,300) ($ 657,000) ($ 3,278,700)
Adjustments to reconcile net loss to net cash used in
operating activities:
Noncash miscellaneous expenses -- 10,000 17,000
Noncash interest expense -- 343,500 343,500
Depreciation expense 52,800 4,600 77,600
Changes in operating assets and liabilities:
Increase in other assets (23,300) (162,400) (122,600)
Decrease (increase) in prepaid expenses 68,800 5,000 (46,800)
Increase (decrease) in accounts payable (184,200) -- 31,400
Increase (decrease) in accrued expenses (40,300) 46,000 100,700
------------ ------------ ------------
Net cash used in operating activities (1,561,500) (410,300) (2,877,900)
============ ============ ============
Cash flows from investing activities:
Purchase of property, plant and equipment (227,500) -- (683,000)
Payments for production line (22,900) (615,000) (1,286,900)
Payments in connection with license agreement -- (400,000) (550,000)
Purchase of investments (171,000) -- (6,267,400)
------------ ------------ ------------
Net cash used in investing activities (421,400) (1,015,000) (8,787,300)
============ ============ ============
Cash flows from financing activities:
Proceeds from issuance of common stock -- -- 208,600
Proceeds from officer loan -- -- 125,000
Payments on officer loan -- (91,000) (91,000)
Proceeds from borrowings of notes payable -- 460,000 810,000
Principal payments on obligation under capital lease (4,000) (2,300) (10,000)
Proceeds from initial public offering -- -- 14,001,400
Proceeds from private placement -- 1,072,600 1,047,400
------------ ------------ ------------
Net cash provided by financing activities (4,000) 1,439,300 16,091,400
============ ============ ============
Net increase (decrease) in cash (1,986,900) 14,000 4,426,200
Cash and cash equivalents, beginning of period 6,413,100 218,500 --
Cash and cash equivalents, end of period $ 4,426,200 $ 232,500 $ 4,426,200
============ ============ ============
Supplemental disclosure of noncash transactions:
Amounts due in connection with license agreement $ 1,050,000 $ 1,050,000
============ ============
Dollar value of common stock issued in connection with license agreement $ 3,300 $ 12,300
============ ============
Dollar value of equipment acquired under capital lease $ 50,000 $ 50,000
============ ============
Conversion of notes payable to preferred stock $ 810,000 $ 810,000
============ ============
Conversion of officer loan to preferred stock $ 34,000 $ 34,000
============ ============
See accompanying notes to unaudited condensed financial statements.
- 4 -
</TABLE>
<PAGE>
HUMASCAN INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1997 and 1996
(UNAUDITED)
(1) Basis of Presentation
The unaudited condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission and in accordance with generally accepted
accounting principles. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These unaudited financial statements should be read in conjunction
with the 1996 financial statements and notes thereto included in the Company's
annual report on Form 10-KSB.
In the opinion of the Company's management, the accompanying unaudited
condensed financial statements have been prepared on a basis substantially
consistent with the audited financial statements and contain adjustments, all of
which are of a normal recurring nature, necessary to present fairly its
financial position as of June 30, 1997 and its results of operations and cash
flows for the three and six months ended June 30, 1997 and 1996 and for the
period December 27, 1994 (date of inception) to June 30, 1997. Interim results
are not necessarily indicative of results for the full fiscal year.
Net loss per share was calculated by dividing the net loss by the
weighted average number of common shares outstanding for the period adjusted for
the dilutive effect of common stock equivalents which consist of stock options
and warrants using the treasury stock method.
- 5 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATION
Plan of Operation
The Company is devoting substantially all of its present efforts to
establishing a new business by commercializing the BreastAlert(TM) device. The
Company has generated no revenues to date and, from inception (December 27,
1994) until June 30, 1997, the Company accumulated a deficit of $3,278,700.
Operating expenses consist of facility costs, marketing expenses,
general and administrative expenses, clinical development expenses, and interest
expense. Operating expenses increased $571,900 and $1,096,200, respectively,
during the three and six month periods ended June 30, 1997 over the comparable
year earlier period due to the hiring of personnel and increased clinical and
marketing expenses in anticipation of commercializing the BreastAlert device.
The Company anticipates that selling, general and administrative expenses will
increase during the next several years due to the expansion of its corporate
infrastructure, primarily in manufacturing, sales, marketing and finance.
Liquidity and Capital Resources
On August 19, 1996, the Company completed an initial public offering of
2,700,000 shares of its common stock at a price of $6.00 per share, which
generated net proceeds to the Company of approximately $14.0 million after
underwriting fees and offering expenses. At June 30, 1997, the Company had cash
and cash equivalents of $4,426,200 and investments of $6,267,400. Cash balances
in excess of those required to fund operations have been invested in
interest-bearing government securities or short-term investment grade
securities. The Company's working capital of $9.5 million at June 30, 1997
reflected a decrease of $1.7 million from December 31, 1996.
As of June 30, 1997, the Company had $39,900 outstanding on an
obligation under a capital lease. No lines of credit were outstanding at June
30, 1997.
In June 1997, the Company announced a revised timetable for the launch
of the BreastAlert device. The product was originally scheduled to be introduced
locally in the New York metropolitan area on June 30, 1997. The Company
anticipates a delay of up to six months in the initial introduction of the
BreastAlert device due to manufacturing refinements it believes are required to
achieve consistent, high quality production. The Company anticipates proceeding
with its national launch in the fourth quarter of 1997.
The Company anticipates, based on its currently proposed plans and
assumptions relating to its operations, that its existing cash resources will be
sufficient to satisfy its contemplated cash requirements through at least the
third quarter of 1998. The Company's future liquidity and capital funding
requirements will depend on numerous factors, including the following: the
- 6 -
<PAGE>
progress of manufacturing activities, results of clinical trials, the extent to
which the BreastAlert device gains market acceptance, the costs and timing of
expansion of sales and marketing and competition. There can be no assurances
that any required additional financing can be obtained, and if obtained, will be
on reasonable terms.
- 7 -
<PAGE>
HUMASCAN INC.
(A Development Stage Enterprise)
Part II. OTHER INFORMATION
Item 2. Changes in Securities
Since December 31, 1996, the Company has granted options to certain
directors, officers, employees and others to purchase an aggregate of 68,700
shares of Common Stock. Options for 12,000 shares were granted on March 18, 1997
under the Company's 1996 Stock Incentive Plan ("Plan") to employees of the
Company, all of which have an exercise price of $13.125 per share, have a ten
year term and vest at the rate of 20 percent per year over five years. Options
for 46,700 shares were granted on June 26, 1997 under the Plan to directors,
employees and a member of the Company's medical advisory board, all of which
have an exercise price of $7.6875 per share and a ten year term. Options for
4,200 of such shares vest at the rate of 20 percent per year over five years and
options for 42,500 of such shares vest 33-1/3 percent upon grant and 33-1/3
percent each year for two years. Options for 10,000 shares were granted on June
26, 1997 outside the Plan to Travelers Insurance Company in lieu of options not
granted under the Plan to Jack L. Rivkin, a director of the Company. Such
options have an exercise price of $7.6875 per share and a ten year term and vest
33-1/3 percent upon grant and 33-1/3 percent each year for two years. The
issuances of all of these options are claimed to be exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 as transactions by an
issuer not involving a public offering.
Item 4. Submission of Matters to a Vote of Security Holders
(a) On June 26, 1997, the Company held its annual meeting of
stockholders.
(b) At the annual meeting of stockholders, the following persons were
elected as directors of the Company: Donald B. Brounstein, Steven
S. Elbaum, Jack L. Rivkin, John F. Sasen, Sr., and Udi Toledano.
(c) At the meeting, the following numbers of shares were voted for, and
withheld, in respect of the election of each of the nominees:
For Withheld
--- --------
Donald B. Brounstein 5,808,588 47,550
Steven S. Elbaum 5,808,588 47,550
Jack L. Rivkin 5,807,388 48,750
John F. Sasen, Sr. 5,807,683 48,455
Udi Toledano 5,808,388 47,750
Item 6. Exhibits and reports on Form 8-K.
- 8 -
<PAGE>
(a) Exhibits.
27. Financial Data Schedule (6/30/97)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which
this report on Form 10-QSB is filed.
- 9 -
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HUMASCAN INC.
(Registrant)
/s/ Kenneth S. Hollander .
-------------------------------
Kenneth S. Hollander
Chief Financial Officer (Principal
Financial and Accounting Officer)
Date: August 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,426,200
<SECURITIES> 6,267,400
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,740,400
<PP&E> 655,400
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,805,200
<CURRENT-LIABILITIES> 1,201,000
<BONDS> 0
0
0
<COMMON> 77,200
<OTHER-SE> 11,496,000
<TOTAL-LIABILITY-AND-EQUITY> 12,805,200
<SALES> 0
<TOTAL-REVENUES> 321,000
<CGS> 0
<TOTAL-COSTS> 1,756,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,435,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,435,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,435,300)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
