<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X Quarterly Report pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
Transition Report Under Section 13 or 15(d) of the
--- Securities Exchange Act of 1934
For the transition period from To
----- -----
Commission File Number: 0-17119
---------
A-Fem Medical Corporation
-----------------------------------------------------------------
(exact name of small business issuer as specified in its charter)
Nevada 33-0202574
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10180 SW Nimbus Ave., Suite J5
Portland, OR 97223
----------------------------------------
(Address of principal executive offices)
(503)968-8800
---------------------------
(Issuer's telephone number)
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
----- -----
As of November 7, 1997, the issuer had outstanding 12,798,694 shares of its $.01
par value Common Stock.
Transitional Small Business Disclosure Format: (Check one) Yes No X
----- -----
<PAGE> 2
PART I - FINANCIAL INFORMATION
See "Basis of Presentation."
ITEM 1. FINANCIAL STATEMENTS
A-Fem Medical Corporation
BALANCE SHEETS
as of September 30
(unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 1,878,612 $ 329,599
Restricted Cash 79,715 --
Accounts Receivable, trade 24,554 36,740
Inventory 101,828 356,531
Prepaids and Other 205,305 181,188
------------ -----------
Total Current Assets 2,290,014 904,058
EQUIPMENT, FURNITURE and LEASEHOLDS, at cost 1,067,452 788,253
Less: Accumulated Depreciation (338,768) (207,581)
------------ -----------
728,684 580,672
PATENTS and LICENSES, net 57,889 45,764
LOANS RECEIVABLE - Officers and Directors 57,840 171,948
============ ===========
Total Assets $ 3,134,427 $ 1,702,442
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 269,360 186,209
Current Portion of Capital Lease Obligation 208,913 130,767
Accrued Expenses 25,259 21,150
Accrued Salaries and Related Liabilities 156,736 6,144
------------ -----------
Total Current Liabilities 660,268 344,270
Long-Term Portion of Capital Lease Obligation 203,532 129,098
------------ -----------
Total Liabilities 863,800 473,368
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value, authorized 33,000,000
Shares; 12,593,694 and 9,458,597 shares issued
and outstanding at September 30, 1997 and
September 30, 1996 125,936 94,586
Additional Paid-in Capital 12,215,760 9,337,254
Accumulated (Deficit) Earnings (10,071,069) (8,202,766)
------------ -----------
Total Stockholders' Equity 2,270,627 1,229,074
============ ===========
Total Liabilities and Stockholders' Equity $ 3,134,427 $ 1,702,442
============ ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
PAGE 2
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A-Fem Medical Corporation
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30 September 30
------------------------ --------------------------
1997 1996 1997 1996
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Sales, net $ 2,374 $ 33,645 $ 33,474 $ 189,446
Cost of Sales 71,407 16,754 413,855 71,449
---------- --------- ---------- -----------
Gross Margin (69,033) 16,891 (380,381) 117,997
Operating Expenses:
General and Administrative 694,532 734,613 1,982,930 2,918,363
---------- --------- ---------- -----------
Net Operating Loss (763,565) (717,722) (2,363,311) (2,800,366)
Other Income 16,975 -- 2,027,756 --
---------- --------- ---------- -----------
Net Loss $ (746,590) $(717,722) $(335,555) $(2,800,366)
========== ========= ========== ===========
Net Loss Per Share ($0.06) ($0.08) ($0.03) ($0.31)
========== ========= ========== ===========
Weighted Average Shares Outstanding 12,345,115 9,198,742 11,325,314 9,035,089
========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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A-Fem Medical Corporation
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
(unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30 ended September 30
------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (746,590) $ (717,722) $ (335,555) $(2,800,366)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Depreciation and amortization 34,747 41,560 101,831 118,620
Loss on disposal of assets (654) -- 351 --
Changes in working capital:
Restricted cash 26,856 -- 79,660 --
Accounts receivable 2,056 (28,289) 6,218 (34,675)
Inventory (61,097) 31,785 88,990 (196,911)
Prepaid expenses and other 85,500 101,167 (78,362) 77,302
Accounts payable (31,355) 45,975 179,888 (10,338)
Accrued salaries and related liabilities (22,471) (11,641) (135,757) (9,576)
Accrued expenses 5,982 4,950 (30,962) (48,850)
---------- ---------- ---------- -----------
Net cash used in operating activities (707,026) (532,215) (123,698) (2,904,794)
Cash Flows From Investing Activities:
Purchases of equipment, furniture and
leaseholds (74,409) (615) (212,294) (243,974)
Net proceeds from sale of equipment 50 -- 1,650 --
Acquisition of licensing rights -- -- -- (33,000)
---------- ---------- ---------- -----------
Net cash used in investing activities (74,359) (615) (210,644) (276,974)
Cash Flows From Financing Activities:
Additions to notes receivable, net of
repayments (871) (51,729) 66,253 (55,188)
Net proceeds from long-term lease
obligations, net of repayments (28,880) (47,687) 38,400 259,864
Proceeds from sale of Common Stock,
exercise of options and warrants 171,857 827,750 1,436,806 842,650
---------- ---------- ---------- -----------
Net cash provided by financing
activities 142,106 728,334 1,541,459 1,047,326
Net Increase (Decrease) in Cash and
Cash Equivalents (639,279) 195,504 1,207,117 (2,134,442)
Cash and Cash Equivalents, beginning
of period 2,517,891 134,095 671,495 2,464,041
---------- ---------- ---------- -----------
Cash and Cash Equivalents, end of period $1,878,612 $ 329,599 $1,878,612 $ 329,599
========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
PAGE 4
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A-Fem Medical Corporation
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
1. ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
The Company
A-Fem Medical Corporation ("A-Fem" or the "Company") is a product development
company dedicated to women's healthcare. A-Fem has developed two core
technologies, one related to feminine protection and the other related to
diagnostic products. Each of these core technologies has a variety of product
applications that the Company is developing for the short and long-term.
The Company's feminine protection product is an interlabial pad. It is the first
generation of a product which is intended to create an entirely new segment
within the feminine protection category.
The Company is developing its proprietary RapidoSense(TM) diagnostic technology
which enables the visual quantification of a desired substance (such as tumor
markers) in any desired biological sample (i.e. blood, urine or saliva).
Basis of Presentation
The interim financial data are unaudited; however, in the opinion of management,
the interim data include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods. The financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. 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, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading. Operating results
for the periods presented are not necessarily indicative of future results.
These financial statements should be read in conjunction with the financial
statements and notes to financial statements included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1996.
Per Share Data
The net loss per share was computed by dividing the net loss by the weighted
average number of shares and dilutive common stock equivalents of the Company
outstanding during the periods. Warrants and options outstanding are not
included as the effect would be anti-dilutive.
2. COMMON STOCK OPTIONS AND WARRANTS
Under the provisions of its 1994 Incentive and Non-Qualified Stock Option Plan,
as amended July 1997 (the "Plan"), the Company has reserved 3,300,000 shares of
its common stock for issuance under qualified options, non-qualified options,
stock appreciation rights, and other awards as set forth in the Plan. The Plan
provides for administration by a committee comprised of not less than two
non-employee members of the Company's Board of Directors. Such committee (or the
Board of Directors in its absence) determines the number of shares, option
price, duration and other terms of the options granted under the Plan. Incentive
stock options may only be awarded to employees of the Company. Non-qualified
options are available for issuance to consultants, advisors and others having a
relationship with the Company, on terms determined by the committee.
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As of September 30, 1997, options for a total of 2,631,775 shares of Common
Stock have been awarded, options for 1,247,780 shares have been exercised, and
options for 1,383,995 shares are outstanding. Of the options awarded and
outstanding, options for 1,171,245 shares are incentive stock options, and
options for 212,750 are non-qualified stock options. There were options to
purchase 32,728 shares granted, options to purchase 557,140 shares exercised and
options to purchase 154,581 shares surrendered during the quarter ended
September 30, 1997.
The following table summarizes outstanding options to purchase shares of the
Company's common stock as of September 30, 1997:
QUALIFIED STOCK OPTIONS
<TABLE>
<CAPTION>
Titles of Securities Weighted Average
Issuable: Common Stock Shares Under Option Exercise Price Per Share
- ------------------------------------------ ----------------------- -------------------------
<S> <C> <C>
Number exercisable at September 30, 1997: 561,784 $3.09
Number exercisable thereafter: 609,461 $3.35
</TABLE>
NON-QUALIFIED STOCK OPTIONS
<TABLE>
<CAPTION>
Titles of Securities Weighted Average
Issuable: Common Stock Shares Under Option Exercise Price Per Share
- ------------------------------------------ ------------------------ ------------------------
<S> <C> <C>
Number exercisable at September 30, 1997: 110,250 $2.98
Number exercisable thereafter: 102,500 $2.76
</TABLE>
As of September 30, 1997, warrants to purchase an aggregate of 2,691,416 shares
were outstanding. There were no warrants granted, warrants to purchase 105,000
shares exercised, and no warrants surrendered during the quarter ended September
30, 1997.
The following table summarizes warrants outstanding for the purchase of shares
of the Company's Common Stock as of September 30, 1997:
WARRANTS
<TABLE>
<CAPTION>
Titles of Securities Shares Subject Weighted Average
Issuable: Common Stock to Warrants Exercise Price Per Share
- ------------------------------------------ ------------------------ ------------------------
<S> <C> <C>
Number exercisable at September 30, 1997: 2,691,416 $2.26
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
The Company is a product development company dedicated to women's healthcare.
The Company has two core technologies, one related to feminine protection, the
other related to diagnostic products. The Company has not had material revenues
from operations. At its current stage of operations, the Company's financial
position and operating results may be materially affected by a number of
factors, including the availability of additional capital, competition and
technological change.
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Results of Operations
In the first half of 1997, the Company has focused its efforts on plans for its
marketing roll-out of the interlabial pad, which is scheduled for early 1998.
During the quarter ended September 30, 1997, the Company has begun implementing
its marketing plan by establishing a sales force, securing warehousing, aligning
production scheduling. There have been no material net operating revenues to
date, nor does the Company expect to have any material net operating revenues
during the remainder of 1997.
Other income was approximately $2,027,756 in the nine months ended September 30,
1997, due primarily to a license of certain technology to The Procter & Gamble
Company in May 1997. There was no other income in the comparable periods in
1996.
For the quarter ended September 30, 1997, the Company's net loss increased
$28,868, or 4.0%, to $746,590 compared to $717,722 during the same period in the
prior year. This increase in net loss is attributed to the marketing and sales
preparation for the interlabial pad marketing roll-out. For the nine month
period ended September 30, 1997, the Company's net loss declined $2,464,811, or
88.0%, to $335,555 from $2,800,366 for the same period in the prior year. The
year-to-date loss for 1997 in comparison with the loss during 1996 for the same
period is impacted by the $2 million received from Procter and Gamble for the
rights to certain licenses and technologies. Higher revenues in 1996 were
principally associated with non-recurring sales in China.
The Company reduced operating expenses by $40,081 and $935,433 in the three and
nine months periods ended September 30, 1997, respectively, from comparable
periods of the prior year. The reduction of expenses was attributable to the
reduction in external consultants and elimination of marketing expenses related
to the test market in Florida.
The Company expects operating expenses to increase significantly during the last
quarter of 1997 and beyond, as the Company commences the marketing roll-out of
its interlabial pad.
Liquidity and Capital Resources
As of September 30, 1997, the Company had cash and cash equivalents of
$1,878,612 and working capital of $1,629,746. The Company's net cash position
was reduced by $639,279 between June 30 and September 30 as a result of the
Company's preparation for the marketing roll-out of its interlabial pad in early
1998.
The Company expects to continue to incur losses each month during the remainder
of 1997 and through 1998, as the costs of marketing during the roll-out of its
interlabial pad will continue to exceed income from product sales. In order to
carry out its marketing plan for its interlabial pad, the Company estimates that
it will need to raise substantial capital over the next two years. The Company
does not expect significant amounts of debt financing to be available to it in
the near term and expects that it will have to issue additional equity to meet
its financing needs.
The Company may not be able to secure investment on terms favorable to the
Company, or at all. Inability of the Company to obtain financing will adversely
affect the Company.
Certain statements in this Form 10-QSB contain "forward-looking" information (as
defined in Section 27A of the Securities Act of 1993, as amended) that involve
risks and uncertainties which could cause actual results to differ materially
from those predicted in the forward looking statements. Such risks and
uncertainties include,
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<PAGE> 8
but are not limited to: the effect of economic conditions generally and within
the women's healthcare industry, lack of revenues from products, uncertainty
associated with product development, continuing operating losses, results of
financing efforts, availability and cost of raw materials and labor, potential
need for additional capital equipment, market acceptance risks, risks of
international business, the impact of competitive products and pricing and the
additional factors listed from time to time in the Company's SEC reports,
including but not limited to, the Company's report on Form 10-KSB for the fiscal
year ended December 31, 1996.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
3.1(1) Articles of incorporation, as amended
3.2(1) Bylaws, as amended
4.1(1) Stock Purchase Agreement between the Company and certain
investors dated December 6, 1996.
11.1 Statement Re: computation of per share earnings
27.1 Financial Data Schedule
(1) Incorporated by reference to the exhibits to the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30,
1997.
b) Reports on Form 8-K
None.
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<PAGE> 10
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
A-Fem Medical Corporation
Date: November 13, 1997 S/J. PETER BURKE
---------------------------------
J. Peter Burke
President, Chief
Operating Officer and
Chief Financial Officer
(authorized officer
and principle financial
and chief accounting
officer)
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EXHIBIT INDEX
Exhibits
3.1(1) Articles of incorporation, as amended
3.2(1) Bylaws, as amended
4.1(1) Stock Purchase Agreement between the Company and certain
investors dated December 6, 1996.
11.1 Statement Re: computation of per share earnings
27.1 Financial Data Schedule
(1) Incorporated by reference to the exhibits to the Company's Quarterly Report
on Form 10-QSB for the quarter ended June 30, 1997.
<PAGE> 1
EXHIBIT 11.1
A-FEM MEDICAL CORPORATION
CALCULATIONS OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30 September 30
-------------------------- ---------------------------
1997 1996 1997 1996
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Actual weighted average
shares outstanding for
the period 12,345,115 9,198,742 11,325,314 9,035,089
Dilutive common stock,
options and warrants using
the treasury stock method(1) -- -- -- --
---------- --------- ---------- -----------
Total shares used in per
share calculations 12,345,115 9,198,742 11,325,314 9,035,089
---------- --------- ---------- -----------
Net loss ($746,590) ($717,722) ($335,556) ($2,800,366)
---------- --------- ---------- -----------
Net loss per share ($0.06) ($0.08) ($0.03) ($0.31)
========== ========= ========== ===========
</TABLE>
(1) Warrants and options outstanding are not included, as the effect would be
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,958,327
<SECURITIES> 0
<RECEIVABLES> 24,554
<ALLOWANCES> 0
<INVENTORY> 101,828
<CURRENT-ASSETS> 2,290,014
<PP&E> 1,067,452
<DEPRECIATION> 338,768
<TOTAL-ASSETS> 3,134,427
<CURRENT-LIABILITIES> 660,268
<BONDS> 0
0
0
<COMMON> 125,936
<OTHER-SE> 2,144,691
<TOTAL-LIABILITY-AND-EQUITY> 3,134,427
<SALES> 2,374
<TOTAL-REVENUES> 2,374
<CGS> 71,407
<TOTAL-COSTS> 71,407
<OTHER-EXPENSES> 694,532
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,527
<INCOME-PRETAX> (746,590)
<INCOME-TAX> 0
<INCOME-CONTINUING> (746,590)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (746,590)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0
</TABLE>
