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 SEPTEMBER 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 November 13, 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
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
9/30/97 12/31/96
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $3,010,600 6,413,100
Investments 6,354,100 6,096,400
Prepaid expenses 48,000 115,600
------------ ------------
Total current assets 9,412,700 12,625,100
Property, plant and equipment, net 715,300 480,700
Other assets 1,736,800 1,363,200
------------ ------------
Total assets $11,864,800 $14,469,000
============ ============
Liabilities and Stockholder's Equity
Current Liabilities:
Accounts payable 86,400 215,600
Accrued expenses 1,158,700 1,200,900
Obligations under capital lease 9,200 8,300
------------ ------------
Total current liabilities 1,254,300 1,424,800
Obligations under capital lease, noncurrent portion 28,600 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 (4,270,000) (1,843,400)
------------ ------------
Total stockholders' equity 10,581,900 13,008,500
------------ ------------
Total liabilities and stockholders' equity $11,864,800 $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 Nine Months Ended September 30, 1997
and 1996 and for the period from December 27, 1994
(date of inception) to September 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
Three Months Ended Nine Months Ended from 12/27/94
-------------------------- ------------------------- (date of inception)
9/30/97 9/30/96 9/30/97 9/30/96 to 9/30/97
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest income $135,000 $68,500 456,100 $71,600 $713,800
----------- ----------- ----------- ----------- -----------
Operating Expenses:
Facility costs 358,200 13,200 865,700 17,500 967,500
Marketing expenses 166,000 32,300 501,200 71,000 826,500
General and administrative expenses 379,700 260,200 1,013,300 506,300 2,104,700
Clinical development expenses 221,100 57,700 498,000 65,300 703,000
Interest expense 1,400 2,400 4,600 365,800 382,200
----------- ----------- ----------- ----------- -----------
1,126,400 365,800 2,882,800 1,025,900 4,983,900
----------- ----------- ----------- ----------- -----------
Net loss ($991,400) ($297,300) ($2,426,700) ($954,300) ($4,270,100)
=========== =========== =========== =========== ===========
Net loss per common share ($0.13) ($0.06) ($0.31) ($0.31) ($0.81)
=========== =========== =========== =========== ===========
Shares used in computing
net loss per share 7,720,313 4,653,058 7,720,313 3,072,412 5,293,713
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
- 3 -
<PAGE>
HumaScan Inc.
(A Development Stage Enterprise)
Condensed Statements of Cash Flows
For the nine months ended September 30, 1997 and 1996
and for the period from December 27, 1994 (date of inception)
to September 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months Period from
ended September 30, December 27, 1994
---------------------------- (date of inception)
1997 1996 to September 30, 1997
------------ ------------ ----------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($2,426,700) ($954,300) ($4,270,100)
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 85,900 7,700 110,700
Changes in operating assets and liabilities:
Increase in other assets (246,500) (152,300) (345,700)
Decrease (increase) in prepaid expenses 67,500 (61,600) (48,000)
Increase (decrease) in accounts payable (129,100) -- 86,400
Increase (decrease) in accrued expenses (42,200) (42,000) 98,700
------------ ------------ ------------
Net cash used in operating activities (2,691,100) (849,000) (4,007,500)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (320,500) (7,600) (776,000)
Payments for production line (127,200) (615,000) (1,391,100)
Payments in connection with license agreement -- (400,000) (550,000)
Purchase of investments (257,600) (6,007,400) (6,354,100)
------------ ------------ ------------
Net cash used in investing activities (705,300) (7,030,000) (9,071,200)
------------ ------------ ------------
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 (6,100) (4,100) (12,100)
Proceeds from initial public offering -- 14,021,100 14,001,400
Proceeds from private placement -- 1,047,400 1,047,400
------------ ------------ ------------
Net cash provided by financing activities (6,100) 15,433,400 16,089,300
------------ ------------ ------------
Net increase (decrease) in cash (3,402,500) 7,554,400 3,010,600
Cash and cash equivalents, beginning of period 6,413,100 218,500 --
------------ ------------ ------------
Cash and cash equivalents, end of period $3,010,600 $7,772,900 $3,010,600
============ ============ ============
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
============ ============
</TABLE>
See accompanying notes to unaudited condensed financial statements.
- 4 -
<PAGE>
HUMASCAN INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 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 September 30, 1997 and its results of operations and
cash flows for the three and nine months ended September 30, 1997 and 1996 and
for the period December 27, 1994 (date of inception) to September 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 September 30, 1997, the Company accumulated a deficit of $4,270,100.
Operating expenses consist of facility costs, marketing expenses, general
and administrative expenses, clinical development expenses, and interest
expense. Operating expenses increased $760,600 and $1,856,900, respectively,
during the three and nine month periods ended September 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 September 30, 1997, the Company had
cash and cash equivalents of $3,010,600 and investments of $6,354,100. 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 $8.2 million at September 30, 1997
reflected a decrease of $3.0 million from December 31, 1996.
As of September 30, 1997, the Company had $28,600 outstanding on an
obligation under a capital lease. No lines of credit were outstanding at
September 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
postponed the initial introduction of the BreastAlert device in order to install
manufacturing refinements that were required to achieve consistent, high quality
production. The Company anticipates proceeding with its national launch in
December 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
- 6 -
<PAGE>
contemplated cash requirements through at least the fourth quarter of 1998. The
Company's future liquidity and capital funding requirements will depend on
numerous factors, including the following: the 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, or 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 June 30, 1997, the Company has granted options to purchase an
aggregate of 24,000 shares of Common Stock. Options for 24,000 shares were
granted on August 13, 1997 under the Company's 1996 Stock Incentive Plan
("Plan") to employees and a consultant, all of which have an exercise price of
$6.75. Options for 4,000 of such shares vest at the rate of 20 percent per year
over five years and options for 20,000 shares vest 50 percent 90 days from the
date of grant and 50 percent one year from the date of grant. 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.
On August 9, 1996, the Securities and Exchange Commission declared the
Company's registration statement on Form SB-2, File No. 333-6607, effective, and
the offering commenced on August 14, 1996. Such registration statement
registered the sale at an offering price of $6.00 per share of 2,700,000 shares
of common stock by the Company and the sale, pursuant to an over-allotment
option granted to the underwriters, of up to an additional 405,000 shares of
common stock by the Company. In addition, such registration statement registered
the sale to Keane Securities Co., Inc., the managing underwriter of the
offering, of common stock purchase warrants to purchase 270,000 shares of common
stock at $7.80 per share during the four year period commencing August 19, 1997.
On August 19, 1996, the Company sold 2,700,000 shares of the Company's common
stock for an aggregate of $16,200,000. The underwriters' over-allotment of
405,000 shares was not exercised; these shares were deregistered by
post-effective amendment filed on October 25, 1996.
Total expenses incurred were approximately $6.8 million, consisting of $1.3
million of underwriting discounts and commissions, and an estimated $0.9 million
of accounting, legal and other expenses. After deducting the Company's
underwriting commissions and other expenses, the net proceeds to the Company
were approximately $14.0 million. None of such expenses were paid, directly or
indirectly, to directors or officers of the Company or to any person owning 10%
or more of any class of equity securities of the Company or to any affiliates of
the Company.
Of the approximately $14.0 million of net proceeds to the Company from the
offering, $1.0 million has been spent on construction of plant, building, and
facilities, $1.4 million for purchase and installation of machinery and
equipment, $0.8 million on sales and marketing expenses, $0.7 million for
clinical studies, and $0.7 for working capital. Approximately $9.4 million of
the proceeds have been temporarily invested in short-term investment grade
securities. Except for amounts paid to officers and directors as compensation
for services in such capacities, none of the net proceeds were paid, directly or
indirectly, to directors or officers of the Company or to any person owning
- 8 -
<PAGE>
10% or more of any class of equity securities of the Company or to any
affiliates of the Company.
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule (9/30/97)
(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: November 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,354,100
<SECURITIES> 3,010,600
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,412,700
<PP&E> 715,300
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,864,800
<CURRENT-LIABILITIES> 1,254,300
<BONDS> 0
0
0
<COMMON> 77,200
<OTHER-SE> 10,504,700
<TOTAL-LIABILITY-AND-EQUITY> 11,864,800
<SALES> 0
<TOTAL-REVENUES> 456,100
<CGS> 0
<TOTAL-COSTS> 2,882,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,426,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,426,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,426,700)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
