U.S. 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 period ended JUNE 30, 1995
or
[ ] Transition report under section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Transition period from __________ to __________
Commission file number O-13092
SPECTRASCIENCE, INC. (FORMERLY GV MEDICAL, INC.)
(Exact name of small business issuer as specified in its charter)
MINNESOTA 41-1448837
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5909 BAKER ROAD, SUITE 580
MINNEAPOLIS, MINNESOTA 55345
(Address of principal executive offices) (Zip Code)
(612) 931-9000
(Issuer's telephone number)
(Formerly GV Medical, Inc., 3750 Annapolis Lane, Minneapolis, MN 55447)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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
There were 2,873,348 shares outstanding of the issuer's $.25 par value common
stock, as of August 14, 1995.
This Form 10-QSB consists of 10 pages (including exhibits).
BALANCE SHEETS
(UNAUDITED)
SPECTRASCIENCE, INC.
(FORMERLY GV MEDICAL, INC.)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
1995 1994
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 613,611 $ 58,298
Accounts receivable - net 159,496 781
Inventory 178,707 200,468
Other current assets 77,236 78,245
Total current assets 1,029,050 337,792
EQUIPMENT 577,430 973,781
Less accumulated depreciation (499,106) (870,328)
78,324 103,453
OTHER ASSETS -- 37,444
$ 1,107,374 $ 478,689
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 38,881 $ 139,890
Accrued compensation & taxes 34,615 29,337
Accrued expenses 84,653 122,836
Deferred income -- 26,000
Notes payable -- 300,000
Total current liabilities 158,149 618,063
STOCKHOLDERS' EQUITY (DEFICIT)
Convertible preferred stock, $1.00 par value --
authorized 20,000,000 shares;
shares issued and outstanding --
June 30, 1995 -- 675,000 675,000
December 31, 1994 -- none --
Common stock, $.25 par value --
authorized 4,000,000 shares;
shares issued and outstanding --
June 30, 1995 -- 2,873,348
December 31, 1994 -- 2,785,348 718,337 696,337
Additional paid-in capital 40,322,157 38,765,897
Accumulated deficit (40,166,269) (39,601,608)
1,549,225 --
Less stock subscriptions receivable (600,000) --
Total stockholders' equity (deficit) 949,225 (139,374)
$ 1,107,374 $ 478,689
</TABLE>
See accompanying notes to the financial statements
STATEMENTS OF OPERATIONS
SPECTRASCIENCE, INC.
(FORMERLY GV MEDICAL, INC.)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue $ -0- $ -0- $ 166,088 $ -0-
Cost of products sold -0- -0- 108,144 -0-
Expenses
Research and dev. 197,660 185,090 319,611 550,142
Selling, general and
administrative 174,510 259,946 297,327 457,269
Less interest and other
(income) expense (3,824) (15,912) 5,666 (71,353)
Total expenses 368,346 429,124 622,604 936,058
Net loss ($ 368,346) ($ 429,124) ($ 564,660) ($ 936,058)
Net loss per share ($ 0.13) ($ 0.16) ($ 0.20) ($ 0.34)
Weighted average
common shares 2,859,502 2,750,348 2,825,282 2,750,348
</TABLE>
See accompanying notes to the financial statements
STATEMENTS OF CASH FLOW
(UNAUDITED)
SPECTRASCIENCE, INC.
(FORMERLY GV MEDICAL, INC.)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ($ 564,660) ($ 936,058)
Adjustments to reconcile net cash
used in operating activities:
Depreciation 26,301 33,502
Recognition of deferred income (26,000) --
Non-cash interest expense 3,260 --
Disposal of other assets 37,444 --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (158,715) 23,713
Decrease in inventories 21,761 --
Decrease in other current assets 1,009 33,283
(Decrease) in current liabilities (133,916) (95,433)
Net cash used in operating activities (793,516) (940,993)
INVESTING ACTIVITIES
Purchase of fixed assets (1,171) 5,564
Net cash used in investing activities (1,171) 5,564
FINANCING ACTIVITIES
Proceeds from issuance of notes payable 225,000 --
Proceeds from issuance of common stock 225,000 --
Proceeds from issuance of convertible preferred stock 900,000 --
Net cash provided by financing activities 1,350,000 --
Net increase (decrease) in cash and
short term investments 555,313 (935,429)
CASH AND SHORT-TERM
INVESTMENTS AT BEGINNING OF
PERIOD 58,298 1,250,686
CASH AND SHORT-TERM
INVESTMENTS AT END OF
PERIOD $ 613,611 $ 315,257
SUPPLEMENTAL DISCLOSURE:
$525,000 of notes payable were converted into stockholders' equity in the first quarter of 1995
</TABLE>
See accompanying notes to the financial statements
NOTES TO FINANCIAL STATEMENTS
SpectraScience, Inc.
(formerly GV Medical, Inc.)
NOTE A - BASIS OF PRESENTATION
The financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, which consist of normal recurring
items, considered necessary for a fair presentation of results have been
included. For further information refer to the financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1994.
ITEM 2.
Management's Discussion and Analysis
Financial Conditions and Results of Operations
The Company is a publicly-held company headquartered in Minnetonka, Minnesota.
From its inception on May 4, 1983 until mid 1993, the Company, then named GV
Medical, Inc., was engaged in the laser angioplasty business. In May, 1993, the
Company's name was changed to SpectraScience, Inc. to reflect the Company's new
focus on design, development, manufacturing and marketing of laser enhanced
spectroscopic diagnostic systems for the detection of atherosclerosis, thrombus
and normal healthy tissue. The Company has 7 full-time employees. Its executive
offices are located at 5909 Baker Road, Suite 580, Minnetonka, Minnesota 55345.
Its telephone number is (612) 931-9000 and its fax number is (612) 933-9090.
Results of Operations
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
Revenue $-0- $-0- $166,088 $-0-
% Change 0% 100%
Cost of products sold -0- -0- 108,144 -0-
% Change 0% 100%
The Company recorded no revenue for the quarters ended June 30, 1995 and 1994.
Revenues for the six months ended June 30, 1995 reflect the first international
sales of the Company's Spectroscopic Guidewire(TM) Systems and disposable
products.
Cost of products sold during the second quarter of 1995 and the second quarter
of 1994 were $-0-. As a result, the Company reported a Gross Profit of $-0- for
the quarters ended June 30, 1995 and June 30, 1994.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
Research/development $197,660 $185,090 $319,611 $550,142
% Change 7% -42%
Selling, General and 174,510 259,946 297,327 457,269
Administrative
% Change -33% -35%
Total Expenses 372,170 445,036 616,938 1,007,411
% Change -16% -39%
Research and Development Expenses in the quarter ended June 30, 1995 of $197,660
represent an increase of 7% from those expenses incurred in the quarter ended
June 30, 1994. Research and Development Expenses for the six months ended June
30, 1995 of $319,611 represent a decrease of 42% from those expenses incurred in
1994. The decrease in the six months ended June 30,1995 is due to the Company
incurring fewer expenses in the development of the Spectroscopic Guidewire(TM)
System.
Selling, General and Administrative expenses of $174,510 for the quarter ended
June 30, 1995 declined 33% from those expenses incurred in the quarter ended
June 30, 1994. Selling, General and Administrative expenses of $297,327 declined
35% from those expenses incurred in 1994. The reduction in the quarter ended
June 30, 1995 and for the six months ended June 30, 1995 occurred in salary and
travel expenses as a result of a decrease in the number of employees in 1995
compared to 1994.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
Interest and other (income) ($3,824) ($15,912) $5,666 ($71,353)
expense
% Change -76% -108%
Interest and other (income) of $3,824 were 76% lower in the quarter ended June
30, 1995 than in the quarter ended June 30, 1994. Interest and other expense
(income) of $5,666 for the six months ended June 30, 1995 were 108% lower than
in 1994. The reduction in the quarter ended June 30, 1995 and for the six months
ended June 30,1995 is due to lower interest income and fewer gains on the sale
of assets in 1995 compared to 1994.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
Net Loss ($368,346) ($429,124) ($564,660) ($936,058)
% Change -14% -40%
As a result of all the above factors, the Company reported a net loss for the
quarter ended June 30, 1995, of $368,346, which is a 14% decrease from the
$429,124 loss reported for the quarter ended June 30, 1994. The loss per share
declined to $0.13 per share in 1995 from $0.16 per share in 1994, principally as
a result of lower operating expenses.
Liquidity and Capital Resources
Cash and short-term investments increased $584,170 during the second quarter to
a balance of $613,611 at June 30, 1995. The increase is mainly attributable to
the funds received from a private placement offering of the Company's
Convertible Preferred Stock. During the second quarter, the Company sold 500,000
shares of convertible stock for $1,500,000. The non-dividend yielding shares of
Convertible Preferred Stock are first convertible into an equivalent number of
shares of registered Common Stock on March 31, 1996. Holders of shares of
Convertible Preferred Stock also received a warrant to purchase, at $5.00 per
share, one (1) share of Common Stock for each three (3) shares of Convertible
Preferred Stock held.
The Company intends to apply the net proceeds of the private placement to
accelerate product development, to finalize its IDE clinical studies required to
obtain FDA approval in the United States, to conduct its clinical feasibility
studies targeting additional medical applications of its spectroscopic
technology, to expand the scope of its international and future domestic sales
and marketing activities and for general corporate purposes, including working
capital.
Management believes the Company has sufficient resources to satisfy its minimum
cash requirements through March 31, 1996. However, the Company will seek to
raise additional funds during such period to satisfy the longer-term
requirements of the Company's business plan and for other prudent business
reasons.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A) THE ANNUAL MEETING OF SHAREHOLDERS OF THE COMPANY WAS HELD ON
JUNE 29, 1995.
B) THE FOLLOWING INDIVIDUALS WERE RE-ELECTED TO SERVE AS DIRECTORS
OF THE COMPANY:
Brian T. McMahon
Henry M. Holterman
Nathaniel S. Thayer
C) THE FOLLOWING MATTERS WERE VOTED UPON AT THE ANNUAL MEETING:
1. Election of Directors
Nominee Votes For Votes Withheld
Brian T. McMahon 2,470,904 66,315
Henry M. Holterman 2,469,223 67,996
Nathaniel S. Thayer 2,469,217 68,002
2. Ratification of Amendments to 1991 Stock Option Plan
To increase the number of shares authorized for issuance to
all participants as a group and to the non-employee directors
and to effect other minor revisions to the Plan.
For Against Abstention Broker Non-Votes
1,375,695 105,509 26,863 1,029,152
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS ON THIS FORM 10-QSB
No exhibits are filed with this report
B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter
covered by this report.
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.
Dated: AUGUST 14, 1995 SPECTRASCIENCE, INC.
(Registrant)
/s/ Brian T. McMahon
BRIAN T. MCMAHON
President and Chief Executive Officer
(Principal Executive Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 613,611
<SECURITIES> 0
<RECEIVABLES> 159,496
<ALLOWANCES> 0
<INVENTORY> 178,707
<CURRENT-ASSETS> 77,236
<PP&E> 577,430
<DEPRECIATION> 499,106
<TOTAL-ASSETS> 1,107,374
<CURRENT-LIABILITIES> 158,149
<BONDS> 0
<COMMON> 718,337
0
675,000
<OTHER-SE> (444,112)
<TOTAL-LIABILITY-AND-EQUITY> 1,107,374
<SALES> 166,088
<TOTAL-REVENUES> 166,088
<CGS> 108,144
<TOTAL-COSTS> 108,144
<OTHER-EXPENSES> 616,938
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,666
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (564,660)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> 0
</TABLE>
