-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VqWM+lCIQjMFwzyZL8O429bf1u6pvPh3PRogSFzecaNt9ip7qParWtBEWMP20xkf ix/shW68uGV4g8VXg1Abrw== 0000897101-99-001095.txt : 19991117 0000897101-99-001095.hdr.sgml : 19991117 ACCESSION NUMBER: 0000897101-99-001095 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRASCIENCE INC CENTRAL INDEX KEY: 0000727672 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 411448837 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13092 FILM NUMBER: 99755138 BUSINESS ADDRESS: STREET 1: 3650 ANNAPOLIS LANE STREET 2: STE 101 CITY: MINNEAPOLIS STATE: MN ZIP: 55447-5434 BUSINESS PHONE: 6125099999 MAIL ADDRESS: STREET 1: 3650 ANNAPOLIS LANE STREET 2: STE 101 CITY: MINNETONKA STATE: MN ZIP: 55447-5434 FORMER COMPANY: FORMER CONFORMED NAME: GV MEDICAL INC DATE OF NAME CHANGE: 19920703 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 0-13092 SPECTRASCIENCE, INC. ---------------------------- (Exact name of small business issuer as specified in its charter) MINNESOTA 41-1448837 - -------------------------------------- --------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification Number) of incorporation or organization) 14405 21ST AVENUE N, SUITE 111 -------------------------------------- MINNEAPOLIS, MINNESOTA 55447 (Address of principal executive offices) (612) 745-4120 --------------------------- (Issuer's telephone number) 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 The number of shares of the Registrant's common stock, par value $.25 per share, outstanding on November 12, 1999 was 5,321,720. Transitional Small Business Disclosure Format (Check one): Yes _____ No __X__ SPECTRASCIENCE, INC. FORM 10-QSB SEPTEMBER 30, 1999 INDEX PAGE NO. -------- PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Balance Sheets -- September 30, 1999 and December 31, 1998 3 Statements of Operations -- Three Months Ended September 30, 1999 and 1998 Nine Months Ended September 30, 1999 and 1998 4 Statements of Cash Flows -- Nine Months Ended September 30, 1999 and 1998 5 Notes to Financial Statements -- September 30, 1999 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6 PART II -- OTHER INFORMATION 8 ITEM 1. LEGAL PROCEEDINGS 8 ITEM 2. CHANGES IN SECURITIES 8 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8 ITEM 5. OTHER INFORMATION 8 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8 SIGNATURES 9 EXHIBIT 27: Financial Data Schedule pursuant to Article 5 of Regulation S-X 10 2 SPECTRASCIENCE, INC. FORM 10-QSB BALANCE SHEETS
September 30, December 31, 1999 1998(1) ------------- ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 832,123 $ 301,970 Inventories 189,939 185,625 Other current assets 76,294 85,253 ------------- ------------- Total current assets 1,098,356 572,848 Net property and equipment 224,234 247,531 ------------- ------------- TOTAL ASSETS $ 1,322,590 $ 820,379 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 95,533 $ 281,986 Accrued compensation and taxes 124,150 99,263 Accrued expenses 180,154 56,990 Accrued clinical research fees 95,564 162,400 ------------- ------------- Total current liabilities 495,401 600,639 SHAREHOLDERS' EQUITY Common stock, $.25 par value: Authorized shares--10,000,000 Issued and outstanding shares-- 5,296,720 on September 30, 1999 and 4,737,804 on December 31, 1998 1,324,180 1,184,451 Additional paid-in capital 47,626,744 45,586,659 Accumulated deficit (48,123,735) (46,551,370) ------------- ------------- TOTAL SHAREHOLDERS' EQUITY 827,189 219,740 ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,322,590 $ 820,379 ============= =============
(1) THE BALANCE SHEET ON DECEMBER 31, 1998 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. SEE NOTES TO FINANCIAL STATEMENTS. 3 SPECTRASCIENCE, INC. FORM 10-QSB STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------------- ------------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Revenue $ -- $ -- $ -- $ -- Cost of products sold -- -- -- -- ------------- ------------- ------------- ------------- Gross profit -- -- -- -- Operating expenses Research and development 322,665 344,005 866,112 1,286,912 Selling, general and administrative 260,339 170,309 760,689 610,231 ------------- ------------- ------------- ------------- Total operating expenses 583,004 514,314 1,626,801 1,897,143 Interest and other income (expense) 15,322 13,403 54,436 51,132 ------------- ------------- ------------- ------------- Net loss $ (567,682) $ (500,911) $ (1,572,365) $ (1,846,011) ============= ============= ============= ============= Net loss per share $ (0.11) $ (0.11) $ (0.30) $ (0.40) Weighted average common shares outstanding 5,296,720 4,714,627 5,168,604 4,640,659
SEE NOTES TO FINANCIAL STATEMENTS. 4 SPECTRASCIENCE, INC. FORM 10-QSB STATEMENTS OF CASH FLOW (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30 ------------------------------- 1999 1998 ---- ---- OPERATING ACTIVITIES Net loss $ (1,572,365) $ (1,846,011) Adjustments to reconcile net loss to cash used in operating activities: Depreciation 41,654 137,908 Changes in operating assets and liabilities: Decrease in accounts receivable -- -- (Increase) decrease in inventories (4,314) (118,374) Decrease (Increase) in other current assets 8,959 (30,519) (Decrease) in current liabilities (105,238) (63,478) ------------- ------------- Net cash used in operating activities (1,631,304) (1,920,474) INVESTING ACTIVITIES Purchase of property and equipment (18,357) (18,968) ------------- ------------- Net cash used in investing activities (18,357) (18,968) FINANCING ACTIVITIES Proceeds from issuance of common stock 2,179,814 978,062 ------------- ------------- Net cash provided by financing activities 2,179,814 978,062 ------------- ------------- Net increase (decrease) in cash and cash equivalents 530,153 (961,380) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 301,970 1,638,173 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 832,123 $ 676,793 ============= =============
SEE NOTES TO FINANCIAL STATEMENTS. 5 SPECTRASCIENCE, INC. FORM 10-QSB SEPTEMBER 30, 1999 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements contained in this Form 10-QSB constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words or phrases such as "may," "expects," "will continue," "is anticipated," "management believes," "estimate," "projects," "hope" or expressions of a similar nature or the negatives thereof identify forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical, currently anticipated or projected results. We caution you not to place undue reliance on forward-looking statements. Please refer to Exhibit 99 of the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999, for certain important cautionary factors, risks and uncertainties related to forward-looking statements. NOTES TO FINANCIAL STATEMENTS NOTE A BASIS OF PRESENTATION The accompanying unaudited financial statements of SPECTRASCIENCE, Inc. (the "Company") have been prepared in accordance with generally accepted accounting principles 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 principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and nine-month periods ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. These statements should be read in conjunction with the financial statements and related notes which are incorporated by reference in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1998. NOTE B NET LOSS PER SHARE Basic earnings per share is based upon the weighted average number shares outstanding and excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share for the Company is the same as basic earnings per share because the effect of options and warrants is anti-dilutive. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) BUSINESS SPECTRASCIENCE, Inc. (the "Company" or "SPECTRASCIENCE") develops and manufactures innovative, Laser Induced Fluorescence systems capable of determining whether tissue is normal, potentially cancerous or cancerous. The "Virtual BiopsyTM System" is presently pending an FDA panel review and is SpectraScience's first fully developed product to incorporate its proprietary Laser Induced Fluorescence technology. The Company's corporate offices are located at 14405 21st Avenue N, Suite 111, Minneapolis, Minnesota 55447. The Company's telephone number is (612) 745-4120, its fax number is (612) 745-4126, 6 and its e-mail address is spsi@spectrascience.com. The Company also has a web-site that can be accessed at http://www.spectrascience.com. The Company's Common Stock is traded on the Over-The-Counter Bulletin Board under the symbol SPSI. (b) RESULTS OF OPERATIONS The Company recorded no revenues for the three and nine months ended September 30, 1999 and September 30, 1998. Research and development expenses for the three and nine months ended September 30, 1999 were $322,665 and $866,112 compared to $344,005 and $1,286,912 for the same periods in 1998. The decrease of 6.2% for the three months ended September 30, 1999 was primarily due to a decrease in expenses related to clinical trial agreements. This was offset in part by an increase in salary expense, and an increase in expenses related to obtaining ISO certification. The 32.7% decrease for the nine months ended September 30, 1999 was primarily due to decreased expenses related to clinical trial agreements, decreased consulting expenses, and decreased legal fees for patent related matters. In addition, the Company had an inventory revaluation which substantially increased research and development expenses during this same period in 1998. Selling, general and administrative expenses for the three and nine months ended September 30, 1999 were $260,339 and $760,689 compared to $170,309 and $610,231 for the same periods in 1998. The 52.8% increase for the three months ended September 30, 1999 was due to increased consulting expenses related to the finance and administration function, increased legal expenses related to the filing of the Form S-3 Registration Statement, and increased salary expense related to the hiring an Executive Vice President. The increase of 24.7% for the nine months ended September 30, 1999 was primarily due to increased legal and shareholders expenses which were partially offset by reduced investor relations expenses, and an increase in consulting expenses mostly offset by a reduction in salary expense. Interest and other income for the three and nine months ended September 30, 1999 were $15,322 and $54,436 compared to $13,403 and $51,132 for the same periods in 1998. These increases were due to slightly higher balances in cash and cash equivalents. As a result of the above, the net loss for the three and nine months ended September 30, 1999 was $567,682 and $1,572,365 compared to a net loss of $500,911 and $1,846,011 for the same periods in 1998. The net loss per share for the three and nine months ended September 30, 1999 was $0.11 and $0.30 compared to $0.11 and $0.40 for the same periods in 1998. (c) LIQUIDITY AND SOURCES OF CAPITAL Cash and cash equivalents on September 30, 1999 were $832,123 compared to $301,970 on December 31, 1998. The increase in the cash position from December 31, 1998 to September 30, 1999 was the result of warrant exercises and a private placement of the Company's Common Stock during the first quarter of 1999, offset by the net loss during the nine-month period that ended September 30, 1999. The working capital of the Company on September 30, 1999 was $602,955 compared to ($27,791) on December 31, 1998. This increase was primarily due to a higher cash position and a lower net loss. Net cash used in operating activities for the nine months ended September 30, 1999 was $1,631,304 compared to $1,920,474 for the same period in 1998. This decrease was primarily due to the lower net loss for the nine months ended September 30, 1999 compared to the same period in 1998. Net cash used in investing activities for the nine months ended September 30, 1999 was $18,357 compared to $18,968 for the same period in 1998. The cash was used to purchase additional property and equipment in 1999. 7 Net cash provided by financing activities for the nine months ended September 30, 1999 was $2,179,814 compared to $978,062 for the same period in 1998. The increase was primarily due to warrant exercises and a private placement of the Company's Common Stock during the first quarter of 1999. Management believes that the amount of cash and cash equivalents is adequate to fund operations at least through December 1999. The Company has circulated a private placement memorandum in an effort to raise between $2,500,000 and $5,250,000 in additional capital. The offering period expires January 14, 2000. PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On or about September 4, 1998, the Company was served with a Complaint in the case of Paul Gibson v. SpectraScience, Inc. (Minn. 4th Jud. Dist.), claiming that the plaintiff, who was at one time a financial consultant to the Company, had a contract that entitled him to receive options for 50,000 shares of Common Stock at an exercise price of $2.50 per share. On November 3, 1999, the court issued an order holding that Mr. Gibson was entitled to enforce the contract relating to such options. No final judgment or order has been entered in the case, and the company has not yet issued Mr. Gibson any stock. 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 Not Applicable ITEM 5. OTHER INFORMATION (a) MOVING OF COMPANY HEADQUARTERS On October 2, 1999, the Company moved from its previous location at 3650 Annapolis Lane, Suite 101, Minneapolis, Minnesota 55447, to a new facility located at 14405 21st Avenue N, Suite 111, Minneapolis, Minnesota 55447. The new telephone number is (612) 745-4120 and the new fax number is (612) 745-4126. The Company entered into a three-year sublease agreement for this approximately 13,000 square foot facility. Monthly lease expense for the current facility, including taxes and maintenance, is $11,943, compared to $6,045 for the previous facility. (b) OPTION EXERCISE In November 1999, stock options to purchase 25,000 shares of Common Stock were exercised. This resulted in net proceeds to the Company of $75,000. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBIT 27: Financial Data Schedule pursuant to Article 5 of Regulation S-X. (b) FORM 8-K: No reports on Form 8-K were filed by the Company during the quarter covered by this report. 8 SPECTRASCIENCE, INC. FORM 10-QSB SEPTEMBER 30, 1999 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPECTRASCIENCE, INC. (Registrant) NOVEMBER 15, 1999 /S/ CHESTER E. SIEVERT, JR. - --------------------------- -------------------------------------- Date CHESTER E. SIEVERT, JR. Chairman and Chief Executive Officer (Principal Financial and Accounting Officer) NOVEMBER 15, 1999 /S/ STEPHEN M. BLINN - --------------------------- -------------------------------------- Date STEPHEN M. BLINN Executive Vice President 9 EX-27 2 ARTICLE 5 - FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS SUBMITTED IN THIS QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED SEPTEMER 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1999 SEP-30-1999 832,123 0 0 0 189,939 1,098,356 825,826 (601,592) 1,322,590 495,401 0 1,324,180 0 0 (496,991) 1,322,590 0 0 0 0 583,004 0 (15,322) (567,682) 0 0 0 0 0 (567,682) (0.11) 0
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