-----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, HWlWmXsMv0qWs9NQ5ZoUvoN8JkMRSplI7aY74fR7RY7fkC7mdGmgGHI2yWwUQt0q 22yr0pPmqDeqtb0eH4z68g== 0000891020-99-001421.txt : 19990817 0000891020-99-001421.hdr.sgml : 19990817 ACCESSION NUMBER: 0000891020-99-001421 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFEM MEDICAL CORP CENTRAL INDEX KEY: 0000820608 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 330202574 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-17119 FILM NUMBER: 99692290 BUSINESS ADDRESS: STREET 1: 10180 SW NIMBUS AVE STE J 5 CITY: PORTLAND STATE: OR ZIP: 97223-4340 BUSINESS PHONE: 5039688800 MAIL ADDRESS: STREET 1: 10180 SW NIMBUS AVE STREET 2: SUITE J-5 CITY: PORTLAND STATE: OR ZIP: 97223 FORMER COMPANY: FORMER CONFORMED NAME: XTRAMEDICS INC /NV/ DATE OF NAME CHANGE: 19920703 10QSB 1 FORM 10QSB 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 June 30, 1999 Transition Report Under Section 13 or 15(d) ----- 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 (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 June 30, 1999, the issuer had outstanding 9,530,208 shares of its $.01 par value Common Stock. Transitional Small Business Disclosure Format: (Check one) Yes No X ---- ---- 2 PART I - FINANCIAL INFORMATION See "Basis of Presentation." ITEM 1. FINANCIAL STATEMENTS A-Fem Medical Corporation BALANCE SHEETS
As of June 30, December 31, 1999 1998 ---------------------------- ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 129,632 $ 668,369 Accounts receivable 36,268 59,735 Inventory 80,621 70,855 Prepaids and other 173,905 257,603 ------------ ------------ Total current assets 420,426 1,056,562 EQUIPMENT, FURNITURE and LEASEHOLDS, at cost 1,259,423 1,235,173 Less: accumulated depreciation (585,119) (524,484) ------------ ------------ 674,304 710,689 PATENTS and LICENSES, net 55,488 59,872 LOANS RECEIVABLE - officers and directors 63,934 62,193 ------------ ------------ Total assets $ 1,214,152 $ 1,889,316 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 63,104 $ 299,471 Note payable 433,673 417,345 Current portion of capital lease 114,502 183,339 Accrued expenses 81,612 74,075 Accrued salaries and related liabilities 150,958 138,394 ------------ ------------ Total current liabilities 843,849 1,112,624 Long-term portion of capital lease obligation 7,994 41,607 ------------ ------------ Total liabilities 851,843 1,154,231 STOCKHOLDERS' EQUITY: Series A Convertible Preferred Stock, $0.01 par value; authorized 7,200,000 shares; issued 6,242,165 and 5,773,405 shares at June 30,1999 and December 31, 1998 62,422 57,734 Common Stock, $0.01 par value; authorized 33,000,000 shares; issued 9,530,208 and 9,471,875 shares at June 30, 1999 and December 31, 1998 95,302 94,719 Warrants issued for Series A Convertible Preferred Stock 940,948 761,882 Warrants issued for common stock 76,491 76,491 Additional paid-in capital 16,894,791 16,102,543 Accumulated deficit (17,707,645) (16,358,284) ------------ ------------ Total stockholders' equity 362,309 735,085 ------------ ------------ Total liabilities and stockholders' equity $ 1,214,152 $ 1,889,316 ============ ============
The accompanying notes are an integral part of these balance sheets. PAGE 2 3 A-Fem Medical Corporation STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------------- -------------------------- 1999 1998 1999 1998 ---------- ----------- ----------- ----------- Sales, net $ 18,076 $ 167,882 $ 43,538 $ 267,933 Cost of sales 58,644 105,942 128,265 228,847 ---------- ----------- ----------- ----------- Gross Margin (40,568) 61,940 (84,727) 39,086 Operating expenses: Research and development 261,721 210,377 509,897 397,625 Marketing and selling 89,591 496,006 240,870 1,302,208 General and administrative 248,945 246,659 492,071 435,016 ---------- ----------- ----------- ----------- Total operating expenses 600,257 953,042 1,242,838 2,134,849 ---------- ----------- ----------- ----------- Net operating loss (640,825) (891,102) (1,327,565) (2,095,763) ---------- ----------- ----------- ----------- Other expense (12,421) (19,183) (21,796) (23,729) ---------- ----------- ----------- ----------- Net loss (653,246) (910,285) (1,349,361) (2,119,492) ========== =========== =========== =========== Basic and diluted net loss per share $ (0.07) $ (0.07) $ (0.14) $ (0.16) ========== =========== =========== =========== Weighted average shares outstanding 9,498,249 13,698,454 9,485,135 13,596,713 ========== =========== =========== ===========
The accompanying notes are an integral part of these statements. PAGE 3 4 A-Fem Medical Corporation STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash (unaudited)
For The Six Months Ended June 30, -------------------------- 1999 1998 ----------- ----------- Cash Flows From Operating Activities: Net loss $(1,349,361) $(2,119,492) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 64,962 81,853 Loss on disposal of assets 3,595 (134) Other non-cash expenses 16,328 458,333 Other non-cash income (1,741) (1,741) Changes in working capital: Restricted cash -- 52,500 Accounts receivable 23,467 (60,749) Inventory (9,766) (3,691) Prepaid expenses and other 83,698 7,340 Accounts payable (236,367) (238,122) Accrued expenses 7,537 (46,628) Accrued salaries and related liabilities 12,564 (65,407) ----------- ----------- Net cash used in operating activities (1,385,084) (1,935,938) Cash Flows From Investing Activities: Purchases of equipment, furniture and leaseholds (27,788) (37,175) Other assets -- 350 ----------- ----------- Net cash used in investing activities (27,788) (36,825) Cash Flows From Financing Activities: Net repayments of lease obligations (102,450) (126,746) Net proceeds from sale of common and preferred stock, exercise of options and warrants, net of expenses 976,585 1,871,032 ----------- ----------- Net cash provided by financing activities 874,135 1,744,286 Net Decrease in Cash and Cash Equivalents (538,737) (228,477) Cash and Cash Equivalents, beginning of period 668,369 525,767 ----------- ----------- Cash and Cash Equivalents, end of period $ 129,632 $ 297,290 =========== ===========
The accompanying notes are an integral part of these statements. PAGE 4 5 A-Fem Medical Corporation NOTES TO FINANCIAL STATEMENTS June 30, 1999 ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES The Company A-Fem Medical Corporation is a medical technology company with multiple product platforms targeting women's unmet 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(TM) diagnostic tests and the third based on its PadKit(TM) Sample Collection System. A-Fem markets the inSync miniform as an alternative to tampons, pads or liners for light flow protection. A-Fem is also developing point-of-care diagnostic products that provide quantified results using its proprietary Rapid-Sense technology. The PadKit, currently in clinical trials, utilizes a miniform as a non-invasive sample collection method for use in testing for certain cancers and other diseases. 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, 1998. 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 three and six-month periods ended June 30, 1999 and 1998. Stock options for the purchase of 3,583,560 and 3,045,693 shares at June 30, 1999 and 1998, respectively, and warrants for the purchase of 2,461,673 and PAGE 5 6 2,570,006 shares at June 30 1999 and 1998, respectively, were not included in loss per share calculations, because to do so would have been anti-dilutive. In addition, shares of A-Fem's convertible preferred stock and warrants covering shares of A-Fem's convertible preferred stock outstanding at June 30, 1999 were not included in loss per share calculations because to do so would have been anti-dilutive. Recent Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). This statement establishes standards for reporting and displaying comprehensive income and its components in a full set of general purpose financial statements. The objective of SFAS 130 is to report a measure of all changes in equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. The Company adopted SFAS 130 during the first quarter of 1998. Comprehensive loss did not differ from currently reported net loss in the periods presented. In June 1999, the FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 137). SFAS 137 is an amendment to SFAS 133, "Accounting for Derivative Instruments and Hedging Activities" 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 137 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. SFAS 137 is effective for fiscal years beginning after June 15, 2000. The Company expects that adoption of SFAS 137 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. PAGE 6 7 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 unmet 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(TM) diagnostic tests and the third based on its PadKit(TM) Sample Collection System. A-Fem markets the inSync miniform as an alternative to tampons, pads or liners for light flow protection. A-Fem is also developing point-of-care diagnostic products that provide quantified results using its proprietary Rapid-Sense technology. The PadKit, currently in clinical trials, utilizes a miniform as a non-invasive sample collection method for use in testing for certain cancers and other diseases In the last year our corporate strategy for the inSync miniform has been modified from aggressive introductory support of a regional roll-out, followed by on-going advertising and promotion, to one requiring modest upfront and on-going promotion utilizing retailers, catalog and on-line, web-based (internet) retailers such as Transitions for Health and SOMA. InSyncminiform.com, launched in July, will enable women nationally to purchase our product. Additionally we are exploring partnering opportunities to assist in the marketing and distribution of the product in retail outlets. A Rapid-Sense test for the detection of Cotinine (a metabolite of nicotine) is currently being evaluated for sales into the insurance testing market. A-Fem plans to manufacture the product and plans that sales and distribution would be handled through third parties. In addition, A-Fem continues development of a proprietary test using A-Fem's Rapid-Sense technology for Konica, a large Japanese industrial chemical firm. A-Fem plans to continue to seek strategic partners to fund the research and development for, and assist in the marketing and distribution of, specific applications of its Rapid-Sense technology. The company is conducting clinical studies to submit to the FDA for clearance of the PadKit as an alternative to the cervical scrape as a sample-collection system for tests that screen for cervical cancer. OVERVIEW A-Fem experienced significant operating losses during the year ended December 31, 1998. Further, A-Fem has continued to incur losses in the first half of 1999 and has never generated significant revenues from operations. 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. PAGE 7 8 Management's plans include efforts to obtain additional capital and to seek potential partnering opportunities. A-Fem has raised operating funds in the past by selling shares of its common and preferred stock for consideration totaling approximately $4.7 million during 1998 and $1.2 million through July 1999. 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, manufacturing and marketing activities, and A-Fem may be forced to cease operations. RESULTS OF OPERATIONS Net sales for the quarter ended June 30, 1999, were approximately $18,000, as compared to approximately $168,000 for the quarter ended June 30, 1998. For the six-month period ended June 30, 1999, net sales were $44,000, as compared to $268,000 for the same period in 1998. This decrease for the quarter and six-month period was the result of decreased levels of promotional support for the inSync miniform as compared to the levels maintained during the product introduction and roll-out in the prior year. Cost of sales for the quarter ended June 30, 1999 was approximately $59,000 as compared to approximately $106,000 for the quarter ended June 30, 1998. For the six-month period ended June 30, 1999, cost of sales was approximately $128,000 as compared to approximately $229,000 for the same period in 1998. This decrease for the quarter and six-month period primarily resulted from decreases in the volume of products sold in 1999 as compared to 1998. Gross margin for the quarter ended June 30, 1999 was -224.4% as compared to 36.9% for the quarter ended June 30, 1998. For the six-month period ended June 30, 1999, gross margin was -194.6% as compared to 14.6% for the same period in 1998. Because certain of A-Fem's manufacturing costs are fixed, the decrease in manufacturing volume in 1999 as compared to 1998 created a situation of worsening gross margin in 1999 as compared to the prior year. Marketing and selling expense for the second quarter of 1999 was approximately $90,000, as compared to approximately $496,000 for the quarter ended June 30, 1999. For the six-month period ended June 30, 1999, marketing and selling expense was approximately $241,000, as compared to approximately $1,302,000 for the same period in 1998. The decrease in marketing and selling expense for the quarter and six-month period resulted from decreased expenditures for advertising, marketing and sales consultants in 1999 as compared to the expenditures required to support the product roll-out in 1998. Research and development expense for the quarter ended June 30, 1999, was approximately $262,000, as compared to approximately $210,000 for the same quarter of the PAGE 8 9 prior year. For the six-month period ended June 30, 1999, research and development expense was approximately $510,000, as compared to approximately $398,000 for the same period in 1998. This increase resulted from the initiation of additional clinical studies in support of the PadKit. General and administrative expense was approximately $249,000 for the quarter ended June 30, 1999, as compared to approximately $247,000 for the same period in the prior year. For the six-month period ended June 30, 1999, general and administrative expense was approximately $492,000, as compared to $435,000 for the same period in 1998. This increase resulted from increased payroll expense due to an additional employee not included in the prior year periods. A-Fem's operating loss for the quarter ended June 30, 1999, was approximately $641,000, as compared to approximately $891,000 for the same quarter of the prior year. For the six-month period ended June 30, 1999, the operating loss was approximately $1,328,000, as compared to an operating loss of approximately $2,096,000 for the same period in 1998. This decrease resulted primarily from lower marketing expenses in 1999 as compared to the expenses associated with the rollout of the inSync miniform in 1998. A-Fem's net loss for the quarter ended June 30, 1999, was approximately $653,000, as compared to approximately $910,000 for the same period in the prior year. For the six-month period ended June 30, 1999, the Company's net loss was approximately $1,349,000, as compared to a net loss of $2,119,000 for the same period in the prior year This decrease reflects the higher levels of expenses incurred in 1998 to support the roll-out of A-Fem's inSync miniform. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1999, A-Fem had cash and cash equivalents of $129,632. A-Fem's net cash position was reduced by $538,737 between December 31, 1998 and June 30, 1999, as a result of normal operating expenses. A-Fem expects to continue to incur losses through 1999 and into 2000, because the costs of research and development are expected to continue to exceed income from product sales. A-Fem incurs approximately $200,000 per month of operating expenses. In order to carry out its development plans for Rapid-Sense products and the PadKit, A-Fem will need to raise approximately $3 million in addition to the funds needed for its monthly operating expenses A-Fem does not expect significant amounts of debt financing to be available to it in the near term, and 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. PAGE 9 10 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 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, 1998. YEAR 2000 A-Fem has conducted a review of its computer systems' devices, applications and manufacturing equipment to identify those areas that could be affected by Year 2000 noncompliance. All of the computer hardware and software currently used by A-Fem, including embedded technology that we use in our manufacturing processes, is Year 2000 compliant. A-Fem believes that a material failure by one or more of its vendors or customers to comply with Year 2000 requirements in a timely fashion will not have a material effect on A-Fem's operations. PAGE 10 11 PART II - OTHER INFORMATION ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES On each of April 15, 1999, May 10, 1999, June 17, 1999, and July 21, 1999, the Company issued 104,170 shares of Series A Preferred Stock and warrants to purchase an additional 20,834 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 $200,006.40. The warrants expire 10 years from their respective dates of issue. 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. 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 3.1 Articles of Incorporation, as amended(1) 3.2 Amended and Restated Bylaws(2) 11.1 Statement re: computation of per share earnings 27.1 Financial Data Schedule - ----------------- (1) Incorporated by reference to the exhibits to A-Fem's quarterly report on Form 10-QSB for the quarter ended September 30, 1998. (2) 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. b) Reports on Form 8-K None PAGE 11 12 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 13, 1999 /s/ Steven T. Frankel ------------------------------------- Steven T. Frankel President and Chief Executive Officer /s/ Martin Harvey ------------------------------------- Martin Harvey Controller EX-11.1 2 CALCULATIONS OF NET LOSS PER SHARE 1 EXHIBIT 11.1 A-FEM MEDICAL CORPORATION CALCULATIONS OF NET LOSS PER SHARE
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30 JUNE 30, ----------------------------- ---------------------------------- 1999 1998 1999 1998 ------------ ------------- --------------- --------------- Actual weighted average shares outstanding 9,498,249 13,698,454 9,485,135 13,596,713 Dilutive common stock, options and warrants using the treasury stock method(1) -- -- -- -- ------------ ------------- --------------- --------------- Total shares used in per share calculations 9,498,249 13,698,454 9,485,135 13,596,713 Net loss $ (653,246) $ (910,285) $ (1,349,361) $ (2,119,492) Net loss per share $ (0.07) $ (0.07) $ (0.14) $ (0.16)
(1) Preferred stock, warrants and options outstanding are not included, as the effect would be anti-dilutive. EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM A-FEM MEDICAL CORPORATION'S FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 130 0 36 0 81 420 1,259 (585) 1,214 844 0 0 62 95 205 1,214 44 44 128 128 1,243 0 41 (1,349) 0 (1,349) 0 0 0 (1,349) (0.14) (0.14) *This information has been prepared in accordance with SFAS No. 128. Basic and diluted EPS have been entered in place of primary and fully diluted EPS, respectively.
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