SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- -----------
Commission File No. 0-26422
ANSAN, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 94-3171943
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
400 Oyster Point Blvd. Suite 435
South San Francisco, California 94080
(Address of Principal Executive Offices)
(415) 635-0200
(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 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
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at May 15, 1996:
Common Stock, $.001 par value 2,768,164 shares
Traditional Small Business Disclosure Format
Yes X No
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<PAGE>
INDEX TO FORM 10-QSB
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Financial Statements:
Condensed Balance Sheets as of March 31, 1996
and December 31, 1995....................................3
Condensed Statements of Operations for the Three
Months ended March 31, 1996 and 1995.....................4
Condensed Statements of Cash Flows for the Three
Months ended March 31, 1996 and 1995.....................5
Notes to Condensed Financial Statements....................7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operation............9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................11
SIGNATURES .........................................................12
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
ANSAN, INC.
(a development stage company)
CONDENSED BALANCE SHEETS
<TABLE>
MARCH 31, December 31,
1996 1995
------------------ -----------------
(UNAUDITED) (Note A)
<S> <C> <C>
Assets
CURRENT ASSETS:
Cash and cash equivalents $ 118,778 $ 45,202
Short-term investments 3,362,278 3,809,110
Prepaid expenses and other current assets 75,570 108,089
Total current assets 3,556,626 3,962,401
Furniture and equipment, net 77,299 18,244
$3,633,925 $ 3,980,645
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 105,277 $ 80,276
Payable to Titan Pharmaceuticals, Inc. 66,348 57,791
Accrued sponsored research expense 32,890 32,890
Accrued legal expense 50,000 50,000
Other accrued liabilities 130,773 117,006
------------------ -----------------
Total current liabilities 385,288 337,963
STOCKHOLDERS' EQUITY
Common stock, at amounts paid in, $0.001 par value; 20,000,000 shares
authorized, 2,768,164 shares issued
and outstanding at March 31, 1996 and December 31, 1995 10,678,061 10,678,061
Deferred compensation (222,228) (236,118)
Deficit accumulated during the development stage (7,207,196) (6,799,261)
Total stockholders' equity 3,248,637 3,642,682
------------------ -----------------
$3,633,925 $3,980,645
================== =================
</TABLE>
Note A: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
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<PAGE>
ANSAN, INC.
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Period from
Incorporation
Three Months Ended (November 6,
March 31, 1992) to
-------------------------------------------
March 31,
1996 1995 1996
-------------------------------------- -----------------
<S> <C> <C> <C>
COSTS AND EXPENSES:
Research and development $ 257,362 $ 293,253 $5,056,815
General and administrative 199,581 134,199 1,856,413
Loss from operations (456,943) (427,452) (6,913,228)
Other income/(expenses)
Interest income 49,008 - 141,181
Interest expense - - (435,149)
Net loss $(407,935) $(427,452) $(7,207,196)
================= ================= =================
Net loss per share $(0.17)
=================
Shares used in calculating
net loss per share 2,404,404
=================
Pro forma net loss per share $(0.45)
=================
Shares used in calculating
pro forma net loss per share 950,145
=================
</TABLE>
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<PAGE>
ANSAN, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
PERIOD FROM
INCORPORATION
(NOVEMBER 6,
THREE MONTHS ENDED 1992) TO
MARCH 31 MARCH 31,
1996 1995 1996
--------------- ---------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(407,935) $(427,452) $(7,207,196)
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation expense 5,288 - 6,947
Amortization of debt discount - - 400,000
Amortization of deferred compensation 13,890 - 55,556
Forgiveness of stockholder receivable - - 205
Issuance of common stock in exchange
for consulting services - - 19,984
Changes in operating assets and liabilities:
Prepaid expenses and sponsored research 32,519 - (75,570)
Accounts payable 25,001 (24,367) 105,277
Accrued legal - - 50,000
Accrued sponsored research - 26,658 32,890
Other accrued liabilities 13,767 121,947 130,773
Net cash used in operating activities (317,470) (303,214) (6,481,134)
--------------- ---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and fixtures (64,343) - (84,246)
Purchase of short-term investments (53,168) - (3,862,278)
Proceeds from sale of short-term investments 500,000 - 500,000
Net cash provided / (used) by investing activities 382,489 - (3,446,524)
--------------- ---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of series A preferred - - 992,592
stock
Proceeds from issuance of common stock, net - - 5,955,280
Deferred offering costs - (45,000) -
Proceeds from related party notes - - 220,000
Payment on note from related party - - (190,000)
Issuance of notes payable - - 1,025,000
Repayment of note payable - - (1,425,000)
Issuance of warrants to purchase common stock - - 400,000
Proceeds from stockholder receivable - - 1,900
Payable to Titan Pharmaceuticals, Inc. 8,557 258,292 3,066,664
Net cash provided by financing activities 8,557 213,292 10,046,436
--------------- ---------------- ---------------
</TABLE>
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<PAGE>
ANSAN, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<S> <C> <C> <C>
Net increase (decrease) in cash and cash
equivalents 73,576 (89,922) 118,778
Cash and cash equivalents, beginning of period 45,202 96,704 -
Cash and cash equivalents, end of period $118,778 $6,782 $118,778
=============== ================ ===============
SUPPLEMENTAL CASH FLOW DISCLOSURE AND NONCASH
FINANCING ACTIVITIES
Forgiveness of note payable to related party $ - $ - $30,000
=============== ================ ===============
Interest paid on related party notes $ - $ - $4,409
=============== ================ ===============
Conversion of payable to parent into Series A
Preferred Stock $ - $ - $1,449,064
=============== ================ ===============
Conversion of payable to parent into Common $ - $ - $1,551,252
Stock
=============== ================ ===============
</TABLE>
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<PAGE>
ANSAN, INC.
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
The Company
Ansan, Inc. (the "Company") was incorporated in the State of Delaware on
November 6, 1992 to engage in the development of analogs of butyric acid for the
treatment of cancer, blood disorders and other serious diseases. The Company is
in the development stage.
Relationship with Titan Pharmaceuticals, Inc.
Titan Pharmaceuticals, Inc. ("Titan"), a biopharmaceutical company engaged,
through the operations of its subsidiaries and affiliates, in the development of
new proprietary therapeutic products for use in the fields of cancer,
immunology, viral diseases, and disorders of the central nervous system, was the
Company's parent until the Company's initial public offering (the "IPO") in
August 1995. Subsequent to the IPO, Titan's ownership interest was reduced to
44%. The Company had previously contracted with Titan for facilities and
equipment, and certain executive, administrative, financial, regulatory,
business development and human resource services. Subsequent to December 31,
1995 the Company contracts with Titan only for limited financial and
administrative services. Titan has previously supplied working capital financing
to the Company and may in the future provide such financing. As part of its
affiliation with Titan, the Company and Titan have a number of mutual members of
their boards of directors.
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principals for interim financial
information and with the instructions to form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principals for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered for fair presentation have been
included. Operating results for the three month period ending March 31, 1996 are
not necessarily indicative of the results that may expected for the year ended
December 31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's 1995 Annual Report on
form 10-KSB.
The Company's activities since incorporation have consisted primarily of
recruiting personnel, conducting research and development, performing business
and financial planning and raising
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<PAGE>
ANSAN, INC.
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
capital. Accordingly, the Company is considered to be in the development stage,
and expects to incur increasing losses and require additional financial
resources to achieve commercialization of its products.
The Company also depends on third parties to conduct certain research on the
Company's behalf through various research arrangements. All of the Company's
current products under development are the subject of license agreements that
will require the payment of future royalties.
Net Loss Per Share
Net loss per share for the three months ended March 31, 1996 is computed using
the weighted average number of common shares outstanding, reduced by the number
of shares held in escrow (see Note 3 of the Notes to the Financial Statements
included in the Company's 1995 Annual Report on Form 10-KSB). Common equivalent
shares are excluded from the calculation as their effect is antidilutive.
Pro forma net loss per share for the three months ended March 31, 1995 is
computed using the weighted average number of common shares outstanding, common
equivalent shares from convertible preferred stock which automatically converted
upon the closing of the Company's IPO, and certain other common equivalent
shares as mandated by SEC Staff Accounting Bulletins.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements in this report that are not descriptions of
historical facts may be forward-looking statements that are subject to risks and
uncertainties. Actual results could differ materially from those anticipated.
Results of Operations
The Company is in the development stage. Since its inception
in November 1992, the Company's efforts have been principally devoted to
research and development, securing patent protection and raising capital. From
inception through March 31, 1996, the Company has sustained cumulative losses of
$(7,207,196). These losses have resulted from expenditures in connection with
research and development and general and administrative activities including
legal and professional activities.
Through March 31, 1996, research and development expenses have
been, in the aggregate, $5,056,815 and general and administrative expenses have
been, in the aggregate, $1,856,413. Total research and development expenses were
approximately $257,000 during the three months ended March 31, 1996 (the "1996
Quarter"), compared with $293,000 for the three months ended March 31, 1995 (the
1995 "Quarter"), a decrease of approximately 12%. During 1995 the Company
reorganized much of its research and development activities that are performed
by outside vendors by establishing new vendor relationships, and moving some of
the functions in-house. This has produced a cost savings to the Company.
Total general and administrative expenses were approximately
$200,000 during the 1996 Quarter, compared with $134,000 for the 1995 Quarter,
an increase of approximately 49%. The higher level of expenditures in the 1996
Quarter is associated with increased staffing levels. The Company had four
full-time employees during the 1996 Quarter, compared with one full-time
employee for the corresponding period in 1995.
Interest income was approximately $49,000 for the 1996 Quarter
resulting from investment of the remaining proceeds from the Company's initial
public offering (the "IPO") in August 1995. There was no interest income earned
during the 1995 Quarter.
The Company expects to continue to incur substantial research
and development costs in the future due to ongoing and new research and
development programs, manufacturing of products for use in clinical trials,
patent and regulatory activities, and preclinical and clinical testing of the
Company's products. The Company also expects that general and administrative
costs necessary to support clinical trials, research and development,
manufacturing and the creation of a marketing and sales organization, if
warranted, will increase in the future. Accordingly, the Company expects to
incur increasing operating losses for the foreseeable future. There can be no
assurance that the Company will ever achieve profitable operations.
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<PAGE>
Liquidity and Capital Resources
In August and September 1995, the Company completed the IPO
which resulted in net proceeds to the Company, after deduction of underwriting
discounts and commissions and other expenses of the IPO, of approximately
$5,950,000. As of March 31, 1996, the Company had working capital of $3,171,338.
Titan Pharmaceuticals, Inc., the Company's principal
stockholder ("Titan"), is a party to a master capital equipment lease, and the
Company and three other majority-owned subsidiaries of Titan have entered into a
sublease and assignment with Titan under such lease for which the Company is
jointly and severally liable. At March 31, 1996, the amount outstanding under
the equipment lease was $920,481 with current monthly payments of $30,459.
The Company believes that the proceeds from the IPO will
provide the necessary liquidity and capital resources to sustain planned
operations through 1996. In the event that the Company's internal estimates
relating to its planned expenditures prove materially inaccurate, the Company
may be required to reallocate funds among its planned activities or to curtail
certain planned expenditures. In any event, the Company anticipates that it will
require substantial additional financing after such time in order to continue
its research and development activities, fund operating expenses, pursue
regulatory approval, and build production, sales, and marketing activities, as
necessary. There can be no assurance as to the availability or terms of any
required additional financing, when and if needed. In the event that the Company
fails to raise any funds it requires, it may be necessary for the Company to
curtail its activities significantly or to cease operations altogether.
Release of Escrowed Shares and Options
In connection with the IPO, certain stockholders of the
Company placed an aggregate of 363,760 shares of Common Stock (the "Escrow
Shares"), and the current holders of certain options which are exercisable at
less than the initial public offering price of $5.00 placed options to purchase
36,260 shares (the "Escrow Options"), into escrow pending the Company's
attainment of certain revenue or share price goals. The Securities and Exchange
Commission has taken the position with respect to the release of securities from
escrow that in the event any of the shares or options are released from escrow
to directors, officers, employees or consultants of the Company, the release
will be treated, for financial reporting purposes, as a compensation expense to
the Company. Accordingly, the Company will, in the event of the release of the
Escrow Shares and Escrow Options recognize during the period in which the
earnings or market price targets are met, what could be a substantial one-time
charge which would substantially increase the Company's loss or reduce or
eliminate earnings, if any, at such time. The amount of compensation expense
recognized by the Company will not affect the Company's total stockholders'
equity.
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<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1* -- Amended and Restated Certificate of Incorporation of the Registrant
3.2* -- Form of Amendment to Amended and Restated Certificate of
Incorporation of the Registrant
3.3* -- By-laws of the Registrant
4.3* -- Form of Warrant Agreement
4.4* -- Form of Underwriter's Unit Purchase Option
4.5* -- Investor Rights Agreement between the Registrant and Titan
Pharmaceutical, Inc.
4.6* -- Form of Option Agreement between the Registrant and Titan
Pharmaceuticals, Inc.
11 -- Statement Re Computation of Net Loss Per Share
- - ---------------------------
* Incorporated by reference from the Company's Registration Statement on Form
SB-2 (File No. 33-92886)
(b) No reports on Form 8-K were filed during the three months ended
March 31, 1996.
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<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.
TITAN PHARMACEUTICALS, INC.
May 15, 1996 By: /S/ S. MARK MORAN
----------------------------------------
S. Mark Moran, President
May 15, 1995 By: /S/ JAMES AHLERS
----------------------------------------
James Ahlers, Chief Accounting Officer
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<PAGE>
EXHIBIT INDEX
3.1* -- Amended and Restated Certificate of Incorporation of the Registrant
3.2* -- Form of Amendment to Amended and Restated Certificate of
Incorporation of the Registrant
3.3* -- By-laws of the Registrant
4.3* -- Form of Warrant Agreement
4.4* -- Form of Underwriter's Unit Purchase Option
4.5* -- Investor Rights Agreement between the Registrant and Titan
Pharmaceutical, Inc.
4.6* -- Form of Option Agreement between the Registrant and Titan
Pharmaceuticals, Inc.
11 -- Statement Re Computation of Net Loss Per Share
- - ---------------------------
* Incorporated by reference from the Company's Registration Statement on Form
SB-2 (File No. 33-92886)
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Exhibit (11) -- Statement Re: Computation of Earnings Per Share
<TABLE>
THREE MONTHS ENDED
MARCH 31,
------------------------------------------
1996 1995
<S> <C> <C>
Net Loss $ (407,935) $ (427,452)
================= =================
Weighted average shares of
Common Stock outstanding 2,768,164 387,956
Shares related to staff accounting bulletin topic 4D:
Stock Options 57,012
Conversion of payable to parent 352,557
Escrow Shares (363,760) (227,583)
Shares used in calculating net loss per share 2,404,404 569,942
================= =================
Net loss per share (0.17) (0.75)
================= =================
Pro forma net loss per share information:
Shares used in calculating net loss per share 569,942
Adjusted to reflect the effect of the assumed
conversion of Preferred Stock 532,651
Escrow Shares (152,179)
-----------------
Shares used in computing pro forma
net loss per share 950,414
=================
Pro forma net loss per share $ (0.45)
=================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 118,779
<SECURITIES> 3,362,278
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,556,626
<PP&E> 84,246
<DEPRECIATION> (6,947)
<TOTAL-ASSETS> 3,633,925
<CURRENT-LIABILITIES> 385,288
<BONDS> 0
0
0
<COMMON> 10,455,833
<OTHER-SE> (7,207,196)
<TOTAL-LIABILITY-AND-EQUITY> 3,248,637
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (407,935)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (407,935)
<INCOME-TAX> 0
<INCOME-CONTINUING> (407,935)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (407,935)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.04)
</TABLE>
