-----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, IHBb5C27UySwDgOPtmzQlnhUOOnC0un+5424jH0dPU+jM1P1yTc/y282PGFqseIl haYqWvUBKFZUlyK8HHCDPA== 0000897101-02-000568.txt : 20020814 0000897101-02-000568.hdr.sgml : 20020814 20020814104831 ACCESSION NUMBER: 0000897101-02-000568 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 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: 1934 Act SEC FILE NUMBER: 000-13092 FILM NUMBER: 02732278 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 FORMER COMPANY: FORMER CONFORMED NAME: GV MEDICAL INC /MN DATE OF NAME CHANGE: 19931119 10QSB 1 spectra023989_10qsb.txt SPECTRASCIENCE, INC. FORM 10-QSB 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 JUNE 30, 2002 ------------- [ ] 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) (763) 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 August 9, 2002 was 7,153,813. Transitional Small Business Disclosure Format (Check one): Yes _____ No __X__ SPECTRASCIENCE, INC. FORM 10-QSB JUNE 30, 2002 INDEX PAGE NO. Part I -- Financial Information................................................3 ITEM 1. Financial Statements.............................................3 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................7 Part II -- Other Information...................................................9 ITEM 1. Legal Proceedings................................................9 ITEM 2. Changes in Securities............................................9 ITEM 3. Defaults Upon Senior Securities.................................10 ITEM 4. Submission of Matters to a Vote of Security Holders.............10 ITEM 5. Other Information...............................................10 ITEM 6. Exhibits and Reports on Form 8-K................................10 Signatures....................................................................11 Page 2 SPECTRASCIENCE, INC. FORM 10-QSB BALANCE SHEET
JUNE 30, DECEMBER 31, 2002 2001(1) ------------ ------------ (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $ 86,911 $ 969,861 Inventory 497,085 510,141 Other current assets 70,001 86,780 ------------ ------------ Total current assets 653,997 1,566,782 Net fixed assets 154,254 197,728 Other assets 85,922 70,936 ------------ ------------ TOTAL ASSETS $ 894,173 $ 1,835,446 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 82,156 $ 178,086 Note payable - trade creditors 8,514 50,209 Accrued compensation and taxes 144,947 58,259 Accrued expenses 86,585 71,913 Accrued clinical research fees -- 1,304 ------------ ------------ Total current liabilities 322,202 359,771 SHAREHOLDERS' EQUITY Common stock, $.25 par value: Authorized--17,000,000 shares Issued and outstanding-- 7,153,813 shares on June 30, 2002 and December 31, 2001 1,788,454 1,788,454 Additional paid-in capital 53,797,013 53,797,013 Accumulated deficit (55,013,496) (54,109,792) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 571,971 1,475,675 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 894,173 $ 1,835,446 ============ ============
(1) THE BALANCE SHEET ON DECEMBER 31, 2001 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. Page 3 SPECTRASCIENCE, INC. FORM 10-QSB STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ----------------------------- ----------------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Operating expenses: Research and development 229,326 508,728 488,917 1,119,160 Selling, general and administrative 196,510 319,100 418,159 610,892 ------------ ------------ ------------ ------------ Total operating expenses 425,836 827,828 907,076 1,730,052 Interest and other income 1,000 29,685 3,373 75,342 ------------ ------------ ------------ ------------ Net loss $ (424,836) $ (798,143) $ (903,703) $ (1,654,710) ============ ============ ============ ============ Net loss per share $ (0.06) $ (0.11) $ (0.13) $ (0.23) Weighted average common shares outstanding 7,153,813 7,143,335 7,153,813 7,074,270
SEE NOTES TO FINANCIAL STATEMENTS. Page 4 SPECTRASCIENCE, INC. FORM 10-QSB STATEMENTS OF CASH FLOW (UNAUDITED)
SIX MONTHS ENDED JUNE 30 ----------------------------- 2002 2001 ---- ---- OPERATING ACTIVITIES Net loss $ (903,703) $ (1,654,710) Adjustments to reconcile net loss to cash used in operating activities: Depreciation 43,473 43,299 Changes in operating assets and liabilities: Decrease in inventories 13,056 (177,253) Decrease in other current assets 1,793 28,035 Decrease in current liabilities (37,569) (117,467) ------------ ------------ Net cash used in operating activities (882,950) (1,878,096) INVESTING ACTIVITIES Purchase of property and equipment -- (12,100) ------------ ------------ Net cash used in investing activities -- (12,100) FINANCING ACTIVITIES Proceeds from issuance of common stock -- 557,247 ------------ ------------ Net cash provided by financing activities -- 557,247 ------------ ------------ Net decrease in cash and cash equivalents (882,950) (1,332,949) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 969,861 3,734,422 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 86,911 $ 2,401,473 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS. Page 5 SPECTRASCIENCE, INC. FORM 10-QSB JUNE 30, 2002 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this Quarterly Report, or in our future filings with the SEC, in our press releases and in oral statements made with the approval of an authorized executive officer, the words or phrases "anticipates," "estimates," "expects," "will likely result," "projects," "believes," "intends," or similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the results discussed in the forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date made. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances after the date of such statements. Readers are urged to carefully review and consider the various disclosures made by us in this report and other reports we file with the SEC that attempt to advise interested parties of the risks and factors that may affect our business. Such forward-looking statements are qualified in their entirety by the cautions and risk factors set forth under the "Cautionary Statement" filed as exhibit 99.1 to the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. NOTES TO FINANCIAL STATEMENTS NOTE A BASIS OF PRESENTATION The accompanying unaudited financial statements of SPECTRASCIENCE, Inc. (the "Company" or "we") 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 six month period ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. 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, 2001. NOTE B NET LOSS PER SHARE Basic earnings per share is based on weighted average 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. Page 6 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 spectrophotometry systems capable of determining whether tissue is normal, pre-cancerous or cancerous without removing tissue from the body. The WavSTAT(TM) Optical Biopsy System ("WavSTAT(TM) ) is SPECTRASCIENCE's first fully developed product to incorporate its proprietary Laser Induced Fluorescence technology for worldwide clinical use. It is approved for use during endoscopy of the colon when screening for colon cancer. The Company's second application of this technology for detecting esophageal cancer is ready to begin a Phase II clinical trial. SPECTRASCIENCE believes its core technology is a platform technology that can be developed for use in many areas of the human body. The Company's corporate offices are located at 14405 21st Avenue N, Suite 111, Minneapolis, Minnesota 55447. The Company's telephone number is (763) 745-4120, its fax number is (763) 745-4126, and its e-mail address is INFO@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) CRITICAL ACCOUNTING POLICIES We have identified the policies below as critical to our business operations and the understanding of our results of operations. For a detailed discussion on the application of these and other accounting policies, see Note 3 in the Notes to the Consolidated Financial Statements in Item 7 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001, beginning on page F-6. Note that our preparation of this Quarterly Report on Form 10-QSB requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amount of revenue, if any, and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. Research and Development Costs: Our current policy classifies all current research and development expenses as expenses when incurred. Inventory: The Company uses certain estimates and judgments to properly value inventory. The Company's inventories are recorded at the lower of cost or market. Each quarter, the Company evaluates its ending inventories for obsolescence. This evaluation primarily includes analyses of inventory levels and obsolescence of product due to technology changes or regulatory changes. Inventories that are considered obsolete are written off. Other Long-Lived Assets: Property, plant and equipment and certain other long-lived assets are amortized over their useful lives. Useful lives are based on management's estimates of the period that the assets will generate revenue. (c) RESULTS OF OPERATIONS The Company recorded no revenue for the three and six months ended June 30, 2002 and June 30, 2001. Page 7 Overall research and development expenses for the three and six months ended June 30, 2002 were $229,326 and $488,917, compared to $508,728 and $1,119,160 for the same periods in 2001. Research and development expenses related specifically to new product and application development for the three and six months ended June 30, 2002 were $179,027 and $394,225, compared to $429,386 and $973,301 for the same periods in 2001, reflecting expense decreases of 58.3% and 59.5% respectively. For the three month period ended June 30, 2002, the Company's decreased expenses were related primarily to (i) reduced consulting expenses, (ii) reduced expenses related to clinical studies, and (iii) reduced expenses related to design research and development. During this same period in 2001 the Company was still developing and testing the WavSTAT(TM) III System; incurring research and development design expenses and utilizing increased consulting services. During this period in 2002 the Company had completed the design process for WavSTAT(TM) III reducing the need for certain continuing consulting services. The Company also reduced salary expenses and reduced legal expenses related to regulatory filings and intellectual property. The 59.5% decrease for the six months ended June 30, 2002 was primarily due to reduced expenses related to clinical studies, new product development and related consulting expenses, and reduced salary expenses. Research and development expenses related to the development of manufacturing operations and processes for the three and six months ended June 30, 2002 were $50,299 and $94,692, compared to $79,342 and 145,859 for the same periods in 2001. The decrease was primarily due reduced salary, consulting, and tools and supplies expenses. Selling, general and administrative expenses for the three and six months ended June 30, 2002 were $196,510 and $418,160 compared to $319,100 and $610,892 for the same periods in 2001. The 38.4% and 31.5% decrease for the three and six months ended June 30, 2001 was primarily due to reduced salary and consulting expenses in the sales and marketing department, and reduced travel and convention expenses. The decrease was partially offset by increased legal and insurance expenses. Interest and other income for the three and six months ended June 30, 2002 was $1,000 and $3,374, compared to $29,685 and $75,342 for the same periods in 2001. The decreases were primarily due to lower balances in cash and cash equivalents. As a result of the above, the net loss for the three and six months ended June 30, 2002 was $424,836 and $903,703, compared to a net loss of $798,143 and $1,654,710 for the same periods in 2001. The net loss per share for the three and six months ended June 30, 2002 was $0.06 and $0.13 compared to $0.11 and $0.23 for the same periods in 2001. (d) LIQUIDITY AND SOURCES OF CAPITAL Cash and cash equivalents on June 30, 2002 were $86,911, compared to $969,861 on December 31, 2001. The decrease in the cash position from December 31, 2001 to June 30, 2002 was primarily due to the net loss incurred during the period. The working capital of the Company on June 30, 2002 was $331,795, compared to $1,207,011 on December 31, 2001. The decrease in working capital was primarily due to the reduction of cash and cash equivalents used for operations. Net cash used in operating activities for the six months ended June 30, 2002 was $882,950, compared to $1,878,096 for the same period in 2001. This decrease was primarily due to the lower net loss for the six months ended June 30, 2002, and to a lesser extent, a decrease in inventory purchased. Page 8 Net cash used in investing activities for the six months ended June 30, 2002 was $0, compared to $12,100 for the same period in 2001. The decrease was primarily due to no fixed asset purchases during this period in 2002. Net cash provided by financing activities for the six months ended June 30, 2002 was $0, compared to $557,247 for the same period in 2001. The cash provided for this period in 2001 was a result of warrant and stock option exercises to purchase shares of common stock. The Company raised gross proceeds of $535,000 during July 2002 in connection with a private placement offering of the Company's convertible promissory notes and warrants. The applicable conversion or exercise price of the promissory notes and warrants is based on the average of the closing sale price of the Company's common stock for the consecutive fifteen day period immediately preceeding the applicable date of issuance of such promissory notes and warrants. Unless converted earlier, the promissory notes will mature on and be payable on demand at any time after December 31, 2002, together with interest at 8% per annum. The promissory notes will be automatically converted prior to such time upon the occurrence of certain change in control events involving the Company. Management anticipates that the Company may issue additional warrants and notes in connection with the same offering prior to September 30, 2002. Management believes that the Company currently has sufficient cash to fund operations through September 30, 2002, without accessing additional funding. However, management estimates that the proceeds from such additional issuance will only be sufficient to fund Company operations for an additional one to two months after September 30, 2002. Additional cash will be required to fund continued operations. The amount and timing of any future financing will be impacted by market conditions as well as other factors. Financing efforts were initiated in August 2001, however, an economic recession accelerated by the events of September 11, 2001, changed the availability of equity financing. The Company continues to explore all viable options with regards to strategic partnerships and additional financing. In addition to the aforementioned private placement offering, SPECTRASCIENCE will need to complete another financing transaction in 2002 in order to be able to financially execute the current business plan. Assuming SPECTRASCIENCE obtains financing sufficient to fund continuing business operations and research and development activities, it intends to: * complete outcome based clinical studies, both in the United States and the United Kingdom, * publish in peer-reviewed journals, * submit to HCFA, an application for reimbursement codes for use of the WavSTAT(TM) System upon completion of the outcome based clinical study in the United States, * begin Phase II clinical studies with our Barrett's esophagus application, * continue to develop the market with key physician opinion leaders, both international and domestic, for our approved product as well as for a Barrett's esophagus application, * begin sales both domestically and internationally, and * continue to develop strategic relationships for distribution and marketing. PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not Applicable ITEM 2. CHANGES IN SECURITIES Not Applicable Page 9 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 Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Form 8-K: No reports on Form 8-K were filed by the Company during the quarter covered by this report. Exhibit 99.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Page 10 SPECTRASCIENCE, INC. FORM 10-QSB JUNE 30, 2002 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) AUGUST 14, 2002 /s/ SCOTT G. ANDERSON - --------------------------- ----------------------------------- Date SCOTT G. ANDERSON President, Chief Executive Officer (Principal Executive and Financial Officer) Page 11 EX-99.1 3 spectra023989_ex99-1.txt CERTIFICATION EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SS.1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of SpectraScience, Inc. (the "Company") on Form 10-QSB for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott Anderson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ SCOTT G. ANDERSON ---------------------------------------- Scott G. Anderson Chief Executive Officer August 14, 2002 Page 12 EX-99.2 4 spectra023989_ex99-2.txt CERTIFICATION EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SS.1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of SpectraScience, Inc. (the "Company") on Form 10-QSB for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott Anderson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ SCOTT G. ANDERSON ---------------------------------------- Scott G. Anderson Chief Financial Officer August 14, 2002 Page 13 -----END PRIVACY-ENHANCED MESSAGE-----