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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 June 30, 2000
[ ] Transition Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from To
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Commission File Number: 0-17119
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A-Fem Medical Corporation
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(exact name of small business issuer as specified in its charter)
Nevada 33-0202574
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10180 SW Nimbus Ave., Suite J5
Portland, OR 97223
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(Address of principal executive offices)
(503) 968-8800
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(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 July 31, 2000, the issuer had outstanding 9,596,558 shares of its $.01 par
value Common Stock.
Transitional Small Business Disclosure Format: (Check one) Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION
See "Basis of Presentation."
ITEM 1. FINANCIAL STATEMENTS
A-Fem Medical Corporation
BALANCE SHEETS
<TABLE>
<CAPTION>
As of
June 30, December 31,
2000 1999
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<S> <C> <C>
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 196,618 $ 428,845
Accounts receivable 44,940 6,622
Inventory 52,944 65,581
Prepaids and other 72,684 86,649
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Total current assets 367,186 587,697
EQUIPMENT, FURNITURE and LEASEHOLDS, at cost 1,043,895 1,286,012
Less: accumulated depreciation (634,546) (640,331)
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409,349 645,681
PATENTS and LICENSES, net 84,394 54,700
LOANS RECEIVABLE - officers and directors 67,417 65,675
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Total assets $ 928,346 $ 1,353,753
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 34,886 $ 64,101
Current portion of capital lease 6,588 31,664
Current portion of note payable 400,000 50,000
Accrued expenses 70,544 83,796
Accrued salaries and related liabilities 100,420 84,857
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Total current liabilities 612,438 314,418
LONG-TERM LIABILITIES
Long-term portion of capital lease obligation 1,576 4,660
Long-term note payable 0 400,000
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Total long-term liabilities 1,576 404,660
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Total Liabilities 614,014 719,078
STOCKHOLDERS' EQUITY:
Series A Convertible Preferred Stock, $0.01 par value; authorized
8,200,000 shares; issued 7,231,720 and 6,971,305 shares at
June 30, 2000 and December 31, 1999 72,317 69,713
Common Stock, $0.01 par value; authorized 33,000,000 shares;
issued 9,596,558 and 9,563,225 shares at June 30, 2000 95,965 95,632
and December 31, 1999
Warrants issued for Series A Convertible Preferred Stock 1,542,726 1,152,148
Warrants issued for common stock 76,491 76,491
Additional paid-in capital 18,248,003 18,093,143
Accumulated deficit (19,721,170) (18,852,452)
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Total stockholders' equity 314,332 634,675
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Total liabilities and stockholders' equity $ 928,346 $ 1,353,753
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</TABLE>
The accompanying notes are an integral part of these
balance sheets.
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A-Fem Medical Corporation
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Sales, net $ 9,073 $ 18,076 $ 18,397 $ 43,538
Cost of sales 54,548 58,644 117,921 128,265
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Gross Margin (45,475) (40,568) (99,524) (84,727)
Operating expenses:
Research and development 207,607 261,721 408,692 509,897
Marketing and selling 5,605 89,591 22,207 240,870
General and administrative 219,826 248,945 418,901 492,071
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Total operating expenses 433,038 600,257 849,800 1,242,838
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Net operating loss (478,513) (640,825) (949,324) (1,327,565)
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Other income (expense) 38,734 (12,421) 80,606 (21,796)
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Net loss (439,779) (653,246) (868,718) (1,349,361)
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Basic and diluted net loss per share $ (0.05) $ (0.07) $ (0.09) $ (0.14)
=========== =========== =========== ===========
Weighted average shares
outstanding 9,579,708 9,498,249 9,567,335 9,485,135
=========== =========== =========== ===========
</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 Six Months
Ended June 30,
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2000 1999
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<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (868,718) $(1,349,361)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 49,081 64,962
(Gain) loss on disposal of assets (8,060) 3,595
Other non-cash expenses 10,853 16,328
Other non-cash income (1,742) (1,741)
Changes in working capital:
Accounts receivable (38,318) 23,467
Inventory 12,637 (9,766)
Prepaid expenses and other 3,112 83,698
Accounts payable (29,215) (236,367)
Accrued expenses (13,252) 7,537
Accrued salaries and related liabilities 15,563 12,564
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Net cash used in operating activities (868,059) (1,385,084)
Cash Flows From Investing Activities:
Purchases of equipment, furniture and leaseholds (8,357) (27,788)
Net proceeds from sale of equipment 204,456
Other assets (30,482) --
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Net cash provided by (used in) investing activities 165,617 (27,788)
Cash Flows From Financing Activities:
Net repayments of lease obligations (28,160) (102,450)
Net repayments of note payable (50,000)
Net proceeds from sale of common and preferred stock, exercise of
options and warrants, net of expenses 548,375 976,585
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Net cash provided by financing activities 470,215 874,135
Net Decrease in Cash and Cash Equivalents (232,227) (538,737)
Cash and Cash Equivalents, beginning of period 428,845 668,369
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Cash and Cash Equivalents, end of period $ 196,618 $ 129,632
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</TABLE>
The accompanying notes are an integral
part of these statements.
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A-Fem Medical Corporation
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
A-Fem Medical Corporation (the Company or A-Fem) is a medical technology
company with multiple product platforms targeting women's health needs. A-Fem
has developed three proprietary technology platforms: one based on its inSYNC(R)
miniform interlabial pad, another based on its RAPID-SENSE(R) diagnostic tests
and the third based on its PADKIT(R) SAMPLE COLLECTION SYSTEM. A-Fem currently
markets the inSYNC miniform as an alternative to tampons, pads and liners for
light flow, or in combination for heavier flow protection. The PADKIT, currently
in clinical trials, utilizes a miniform as a noninvasive sample collection
method for use in testing for certain cancers and sexually transmitted and
infectious diseases. A-Fem has also entered into several joint relationships to
develop point-of-care diagnostic products that use its proprietary RAPID-SENSE
technology.
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
A-Fem 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 A-Fem 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 A-Fem's Annual Report on Form
10-KSB for the year ended December 31, 1999.
Net Loss Per Share
Basic and diluted loss per share are required to be computed using the
methods prescribed by Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS 128). Basic loss per share is calculated using the
weighted average number of common shares outstanding for the period and diluted
loss per share is computed using the weighted average number of common shares
and dilutive common equivalent shares outstanding. A net loss was reported in
each of the quarters ended June 30, 2000 and 1999. Stock options for the
purchase of 3,409,484 and 3,583,560 shares at June 30, 2000 and 1999,
respectively, and warrants for the purchase of 1,593,939 and 2,461,673 shares at
June 30, 2000 and 1999, respectively, were not included in loss per share
calculations, because to do so would have been anti-dilutive. In
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addition, shares of A-Fem's convertible preferred stock and warrants covering
shares of A-Fem's convertible preferred stock outstanding at June 30, 2000 were
not included in loss per share calculations because to do so would have been
anti-dilutive.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). This statement establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS 133 also requires that changes in the derivative instrument's
fair value be recognized currently in results of operations unless specific
hedge accounting criteria are met. In June 1999, the FASB issued Statement of
Financial Accounting Standards No. 137 (SFAS 137) which deferred the effective
date of SFAS 133. SFAS 133 is now effective for fiscal years beginning after
June 15, 2000. The Company expects that adoption of SFAS 133 will not have a
material impact on the Company's financial condition or results of operations.
Reclassifications
Certain amounts have been reclassified in the prior year financial
statement presentation to conform to the current year presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
A-Fem Medical Corporation is a medical technology company with multiple
product platforms targeting women's health needs. A-Fem has developed three
proprietary technology platforms: one based on its inSYNC(R) miniform
interlabial pad, another based on its RAPID-SENSE(R) diagnostic tests, and the
third based on its PADKIT(R) SAMPLE COLLECTION SYSTEM. A-Fem currently markets
the inSYNC miniform as an alternative to tampons, pads and liners for light
flow, or in combination for heavier flow protection. The PADKIT, currently in
clinical trials, utilizes a miniform as a non-invasive sample collection method
for use in testing for certain cancers and sexually transmitted and infectious
diseases. A-Fem has also entered into several joint relationships to develop
point-of-care diagnostic products that use its proprietary RAPID-SENSE
technology.
OVERVIEW
A-Fem continued to experience operating losses during the year ended
December 31, 1999, and into the first half of 2000, and has never generated
significant revenues from operations to offset expenses. A-Fem expects that
significant ongoing expenditures will be necessary to successfully implement its
business plan and develop, manufacture and market its products. These
circumstances raise substantial doubt about A-Fem's ability to continue as a
going concern. Execution of A-Fem's plans and its ability to continue as a going
concern depend upon its acquiring substantial additional financing. Management's
plans include efforts to obtain additional capital, through the sale of equity
securities and by licensing its RAPID-SENSE technology, and to seek partnering
opportunities for the inSYNC miniform. A-Fem has raised operating funds in the
past by selling shares of its common and preferred stock for consideration
totaling approximately $2.4 million during 1999 and $0.6 million during the
first half of 2000.
A-Fem may not be able to raise additional funding or enter into a
strategic alliance. If A-Fem is unable to obtain adequate additional financing,
enter into such strategic alliance or generate sufficient sales revenues,
management may be required to curtail A-Fem's product development, marketing
activities and other operations, and A-Fem may be forced to cease operations.
During the first half of 2000, A-Fem shifted the emphasis of its
technology development efforts to focus on the PADKIT, and will continue
RAPID-SENSE technology development solely for third-party development contracts.
A-Fem is in the process of evaluating alternative product strategies for the
PADKIT that will affect the magnitude of PADKIT clinical studies to be
undertaken. Results from initial clinical trials revealed additional product
claims for the PADKIT, and larger and more complex clinical studies would be
required to support such claims. In addition to seeking funding to support
additional clinical studies, A-Fem will seek strategic partnerships for the
PADKIT.
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RESULTS OF OPERATIONS
Net sales for the quarter ended June 30, 2000, were approximately
$9,000, as compared to approximately $18,000 for the quarter ended June 30,
1999. For the six-month period ended June 30, 2000, net sales were $18,000, as
compared to $44,000 for the same period in 1999. This decrease was the result of
decreased levels of promotional support for the inSYNC miniform as compared to
the levels maintained during the prior year.
Marketing and selling expense for the second quarter of 2000 was
approximately $6,000, as compared to approximately $90,000 for the quarter ended
June 30, 1999. For the six-month period ended June 30, 2000, marketing and
selling expense was approximately $22,000, as compared to approximately $241,000
for the same period in 1999. The decrease in marketing and selling expense
resulted from decreased advertising and promotional support in 2000 as compared
to the expenditures required to support the product roll-out in 1999.
Research and development expense for the quarter ended June 30, 2000,
was approximately $208,000, as compared to approximately $262,000 for the same
quarter of the prior year. For the six-month period ended June 30, 2000,
research and development expense was approximately $409,000, as compared to
approximately $510,000 for the same period in 1999. This decrease resulted from
a reduction in headcount as research and development efforts focused on PADKIT
clinical studies that utilize contract resources. We anticipate an increase in
research and development expense in the second half of 2000 as additional PADKIT
clinical studies are initiated.
General and administrative expense was approximately $220,000 for the
quarter ended June 30, 2000, as compared to approximately $249,000 for the same
period in the prior year. For the six-month period ended June 30, 2000, general
and administrative expense was approximately $419,000, as compared to $492,000
for the same period in 1999. This decrease resulted from decreased payroll
expense due to a reduction in the number of employees, and a decrease in travel
expense and banking fees.
A-Fem's operating loss for the quarter ended June 30, 2000, was
approximately $479,000 as compared to approximately $641,000 for the same
quarter of the prior year. For the six-month period ended June 30, 2000, the
operating loss was approximately $949,000, as compared to a loss of
approximately $1,328,000 in the prior year. This decrease resulted from lower
expenses in all operating departments in 2000 as compared to the expenses in
1999.
A-Fem's other income (expense) is composed primarily of income from
development contracts, interest income and interest expense. For the quarter
ended June 30, 2000 other income was approximately $39,000, as compared to other
expense of approximately $12,000 for the same period in the prior year. For the
six-month period ended June 30, 2000 other income was approximately $81,000, as
compared to other expense of approximately $22,000 for the same period in the
prior year. The period-to-period fluctuations reflect the receipt of $40,000 and
$80,000 in the quarter and six-month period ended June 30, 2000, respectively,
related to a
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development contract for a RAPID-SENSE diagnostic test and a reduction of
interest expense on a note payable.
A-Fem's net loss for the quarter ended June 30, 2000, was approximately
$440,000, as compared to approximately $653,000 for the same period in the prior
year. For the six-month period ended June 30, 2000, the Company's net loss was
approximately $869,000, as compared to a net loss of $1,349,000 for the same
period in the prior year. These decreases reflect the receipt of payments
related to a development contract for a RAPID-SENSE diagnostic test, offset by a
reduction in interest expense for the first half of 2000 as compared to the
comparable period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, A-Fem had cash and cash equivalents of $196,618.
A-Fem's net cash position decreased by $232,227 between December 31, 1999 and
June 30, 2000, as a result of normal operating expenses.
A-Fem expects to continue to incur losses through 2000 and 2001, because
the costs of development are expected to continue to exceed income from product
sales. A-Fem incurs approximately $160,000 per month of operating expenses. In
order to carry out its development plans for the PADKIT, A-Fem estimates it will
need to raise approximately $3 to 6 million in addition to the funds needed for
its monthly operating expenses. This estimate has been increased due to the
possibility that larger and more complex clinical studies may be needed to
support additional product claims for the PADKIT that were revealed by earlier
clinical trials. If A-Fem were able to raise the entire $3 to 6 million at once,
it would take approximately 18 months to complete A-Fem's development plans and
receive US approval to market for the PADKIT. A-Fem does not expect significant
amounts of debt financing to be available to it in the near term, and therefore
expects that it will have to issue additional equity. A-Fem cannot predict on
what terms any such financing might be available, but any such financing could
involve issuance of equity below current market prices and result in significant
dilution of existing stockholders.
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
The statements contained in this report that are not statements of
historical fact may include forward-looking statements (as defined in Section
27A of the Securities Act of 1933, as amended) that involve a number of risks
and uncertainties. Moreover, from time to time A-Fem may issue other
forward-looking statements. The following factors are among those that could
cause actual results to differ materially from the forward-looking statements
and should be considered in evaluating any forward-looking statements: need for
additional financing; uncertainty associated with need for regulatory approvals;
continuing operating losses; results of financing efforts; lack of revenues from
products; market acceptance risks; uncertainty associated with product
development; the impact of competitive products and pricing; the effect of
economic conditions generally and within the medical technology industry; and
the additional factors listed
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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, 1999.
PART II - OTHER INFORMATION
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
On July 21, 2000, the Company issued 86,805 shares of Series A Preferred
Stock and warrants to purchase an additional 79,861 shares of Series A Preferred
Stock at an exercise price of $.01 per share to one entity, Capital Consultants,
LLC (formerly Capital Consultants, Inc.), acting as an agent for individual
investors, for cash consideration of $166,666. The warrants become exercisable
two years after the date issued and expire 10 years after the date issued.
Shares of Series A Preferred Stock are convertible into shares of the Company's
Common Stock on a one-for-one basis, subject to adjustment under certain
circumstances to prevent dilution. Capital Consultants, LLC, represented that
such entity and each individual represented by such entity was an "accredited
investor" within the meaning of Rule 501(a) of the Securities Act. Jeffrey L.
Grayson, the chairman and chief executive officer of Capital Consultants LLC,
shares voting and dispositive power with such entity with respect to the shares
it owns as agent. In issuing these securities, the Company relied upon an
exemption from registration pursuant to Section 4(2) of the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
See Exhibit Index.
b) Reports on Form 8-K
None
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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: August 11, 2000
/s/ Steven T. Frankel
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Steven T. Frankel
President and Chief Executive Officer
/s/ Martin Harvey
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Martin Harvey
Controller
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
3.1 Articles of Incorporation, as amended
3.2 Amended and Restated Bylaws(1)
11.1 Statement re: computation of per share earnings
27.1 Financial Data Schedule
</TABLE>
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(1) Incorporated by reference to the exhibits to A-Fem's annual report
on Form 10-KSB for the year ended December 31, 1998, as amended.
