-----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, B75Y8BXkIwfDDnuFwpBgoFlSOEmF6oTW7LkOqBJxFC3GoASXHHvsxheSRfPl8jAv 0L/zv1oCsiRHKnUJgPFhGw== 0000950005-98-000688.txt : 19980814 0000950005-98-000688.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950005-98-000688 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUMAN PHEROMONE SCIENCES INC CENTRAL INDEX KEY: 0000878616 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 943107202 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23544 FILM NUMBER: 98686816 BUSINESS ADDRESS: STREET 1: 4034 CLIPPER CT CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5102266874 FORMER COMPANY: FORMER CONFORMED NAME: EROX CORP DATE OF NAME CHANGE: 19940307 10QSB 1 FORM 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (MARK ONE) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1998 [ ] TRANSITION REPORT UNDER SECTION 13 OR A5(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (no fee required) Commission file number 0-23544 HUMAN PHEROMONE SCIENCES, INC. (Name of small business issuer in its charter) California 94-3107202 (State or other jurisdiction of (I.R.S. employer incorporation or organization) Identification No.) 4034 Clipper Court, Fremont, California 94538 (Address of principal executive offices) (Zip code) Issuer's telephone number: (510) 226-6874 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 [ ] (APPLICABLE ONLY TO CORPORATE REGISTRANTS) State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 10,289,488 shares of Common Stock as of August 5, 1998. Total Pages: 15 HUMAN PHEROMONE SCIENCES, INC. INDEX Page ---- PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets (Unaudited) as of June 30, 1998 and December 31, 1997..............................................2 Statements of Operations (Unaudited) for the Three Months and Six Months Ended June 30, 1998 and 1997............................3 Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 1998 and 1997...............................4 Notes to Condensed Financial Statements (Unaudited)...............5 Item 2. Management's Discussion and Analysis Management's Discussion and Analysis of Financial Condition and Results of Operations.........................................7 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................................11 SIGNATURES...................................................................12 PART I FINANCIAL INFORMATION Item 1. Financial Statements HUMAN PHEROMONE SCIENCES, INC. Balance Sheets
June 30, December 31, 1998 1997 ------------ ------------ Assets Current assets: Cash and cash equivalents $ 70,452 $ 248,617 Accounts receivable, net of allowances of $598,456 854,436 3,084,784 and $822,813 in 1998 and 1997, respectively Inventory 3,230,320 3,421,298 Other current assets 106,984 128,817 ------------ ------------ Total current assets 4,262,192 6,883,516 Property and equipment, net 82,336 99,491 ------------ ------------ $ 4,344,528 $ 6,983,007 ============ ============ Liabilities and shareholders' equity Loan payable, bank $ 209,296 $ 548,000 Accounts payable 822,799 800,648 Other accrued expenses 1,052,084 1,205,069 ------------ ------------ Total current liabilities 2,084,179 2,553,717 Commitments -- -- Shareholders' equity: Convertible preferred stock, issuable in series, no par value, 10,000,000 shares authorized, 1,433,333 shares issued and outstanding at June 30, 1998 and December 31, 1997, respectively 2,145,535 2,145,535 Common stock, no par value, 40,000,000 shares authorized, 10,289,488 shares issued and outstanding at June 30, 1998 and December 31, 1997, respectively 17,667,024 17,667,024 Accumulated deficit (17,552,210) (15,383,269) ------------ ------------ Total shareholders' equity 2,260,349 4,429,290 ------------ ------------ $ 4,344,528 $ 6,983,007 ============ ============ See accompanying notes.
HUMAN PHEROMONE SCIENCES, INC. Statements of Operations
Three months ended June 30, Six months ended June 30 ------------------------------- ------------------------------- ------------ ------------ ------------ ------------ 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Net sales $ 1,905,257 $ 3,817,542 $ 5,268,418 $ 8,913,831 Cost of goods sold 627,074 981,957 1,671,273 1,889,643 ------------ ------------ ------------ ------------ Gross profit 1,278,183 2,835,585 3,597,145 7,024,188 Expenses: Research and development 100,316 73,086 182,448 164,856 Selling, general and administrative 2,560,547 6,677,523 5,560,142 10,584,801 ------------ ------------ ------------ ------------ Total expenses 2,660,863 6,750,609 5,742,590 10,749,657 ------------ ------------ ------------ ------------ Loss from operations (1,382,680) (3,915,024) (2,145,445) (3,725,469) Interest income 106 491 162 12,471 Interest (expense) (10,514) (34,285) (21,469) (36,828) Other (expense) (2,783) 918 (2,189) 2,392 ------------ ------------ ------------ ------------ Loss before income taxes (1,395,871) (3,947,900) (2,168,941) (3,747,434) Income taxes -- (9,983) -- 800 ------------ ------------ ------------ ------------ Net loss $ (1,395,871) $ (3,937,917) $ (2,168,941) $ (3,748,234) ============ ============ ============ ============ Net loss per common share-basic $ (.14) $ (.38) $ (.21) $ (.37) ============ ============ ============ ============ Net loss per common share- assuming dilution $ (.14) $ (.38) $ (.21) $ (.37) ============ ============ ============ ============ Weighted average shares used in calculation of net loss per share 10,289,488 10,284,323 10,289,488 10,252,966 ============ ============ ============ ============ Weighted average shares and equivalents, if dilutive, used in calculation of net loss per common share 10,289,488 10,284,323 10,289,488 10,252,966 ============ ============ ============ ============ See accompanying notes.
HUMAN PHEROMONE SCIENCES, INC. Statements of Cash Flows
Six Months ended June 30, ------------------------------- 1998 1997 ----------- ----------- Cash flows from operating activities Net loss $(2,168,941) $(3,748,234) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 29,612 31,695 Changes in operating assets and liabilities: Accounts receivable 2,230,348 1,433,515 Inventory 190,978 (1,899,981) Other current assets 21,833 (19,839) Accounts payable and accrued liabilities (130,834) 507,579 ----------- ----------- Net cash generated by (used in) operating activities 172,996 (3,695,265) Cash flows from investing activities Purchase of property and equipment (12,457) (91,928) ----------- ----------- Net cash used in investing activities (12,457) (91,928) Cash flows from financing activities Proceeds from (repayments of) bank borrowings (338,704) 292,289 Proceeds from issuance of common stock -- 1,443,706 ----------- ----------- Net cash provided by financing activities (338,704) 1,735,995 Net decrease in cash and cash equivalents (178,165) (2,051,198) Cash and cash equivalents at beginning of the year 248,617 2,059,084 ----------- ----------- Cash and cash equivalents at end of the period $ 70,452 $ 7,886 =========== =========== See accompanying notes.
Human Pheromone Sciences, Inc. Notes to Condensed Financial Statements (unaudited) June 30, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Rule 10-01 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 months and six months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 1998. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 1997. Inventory Inventories are stated at the lower of cost (first in - first out method) or market. The inventory at June 30, 1998 consists of finished goods inventory valued at $1,220,587, work in process of $259,848 and raw materials of $1,749,885. At December 31, 1997, these balances were $1,665,393, $151,143 and $1,604,762, respectively. Net (Loss) Income Per Share In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 (SFAS 128), Earnings per Share. Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is similar to the previously reported fully diluted earnings per share. All per share amounts for all periods have been presented, and where necessary, restated to conform to Statement 128 requirements. Basic net (loss) income per share is computed using the weighted-average number of common shares outstanding. Diluted net income per share is computed using the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period. Dilutive common share equivalents consist of employee stock options using the treasury stock method and dilutive convertible securities using the if-converted method. Diluted loss per share is computed using the weighted-average number of common shares outstanding during the period. Common stock equivalents are excluded from the diluted loss per share computation as their effect is antidilutive. The following table sets forth the computation for basic and diluted (loss) income per share:
Three months ended Six months ended ------------------------------- ------------------------------- June 30, June 30, ------------------------------- ------------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Numerator: Net loss from operations $ (1,395,871) $ (3,937,917) $ (2,168,941) $ (3,748,234) Denominator: Denominator for basic earnings per-share-data 10,289,488 10,284,323 10,289,488 10,252,966 Denominator for diluted earnings per-share data 10,289,488 10,284,323 10,289,488 10,252,966 Basic net loss per share (.14) (.38) (.21) (.37) Diluted net loss per share (.14) (.38) (.21) (.37)
Human Pheromone Sciences, Inc. Notes to Condensed Financial Statements (unaudited) June 30, 1998 2. LOAN PAYABLE, BANK At June 30, 1998, the Company was not in compliance with certain balance sheet ratio covenants of its line of credit bank loan with Mid-Peninsula Bank. The bank has waived compliance with these covenants for the period ended June 30, 1998. Item 2. Management's Discussion and Analysis This report 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. Except for the historical information contained in this discussion and analysis of financial condition and results of operations, the matters discussed herein are forward looking statements. These forward looking statements include but are not limited to the Company's plans for sales growth and expansion into new channels of trade, expectations of gross margin, expenses, new product introduction, and the Company's liquidity and capital needs. These matters involve risks and uncertainties that could cause actual results to differ materially from the statements made. In addition to the risks and uncertainties described in "Risk Factors", below, these risks and uncertainties may include consumer trends, business cycles, scientific developments, changes in governmental policy and regulation, currency fluctuations, economic trends in the United States and inflation. These and other factors may cause actual results to differ materially from those anticipated in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Risk Factors The Company's future results may be affected to a greater or lesser degree by the following factors among others: Competition: The prestige fragrance market is volatile and extremely competitive. Consumer preferences and demands can shift dramatically reflecting changes in fashion and current fads. There are numerous fragrance products that are better known than the products marketed by the Company. There are also many companies which have substantially greater resources than Human Pheromone Sciences, and which have the ability to invest heavily in new product development and introduction. The Company can expect that its competitors will attempt to compete with the Company through the introduction of new products and promotion of existing products. In addition, the product life cycle of fragrances is shortening. Traditional fragrance companies now introduce a new fragrance every one to two years compared to every four to five years as in the past. This increase in competing fragrances makes it difficult for any one fragrance to hold the consumer's attention on a long-term basis. Although the Company believes the inclusion of human pheromones as a component clearly differentiates its products, other fragrances are competing for space with the Company's products at both the store level and in print and media advertising. Marketing: The failure to establish and maintain the necessary sales or distribution channels could have a material adverse effect on the Company's business. Although the Company believes its marketing strategy is the most cost-effective way to introduce its products, there can be no assurance that broader-scale retail launches will be successful. The Company cannot guarantee that retail outlets or catalogs will continue to carry Human Pheromone Science products. If the current strategy is unsuccessful, marketing of the Company's products would require a new strategy and may require a significantly more expensive sales effort for which the Company may not have sufficient funds. Retail environment: Continued consolidation in the retail trade has led to the emergence of four major retail players who control the major share of the market. Federated Department Stores, The May Company, Dayton Hudson/Marshall Fields and Dillard Department Stores now comprise the majority of US upper end department stores. This consolidation could lead to price and promotional pressure and increased credit risk for the Company. The retail environment in better department stores is increasingly challenging. Retailers have aggressively cut inventories across the board. Promotional support in the form of co-op advertising dollars is being cut back and retailers are feeling pressure to become more promotional in order to compete with price conscious chains appealing to bargain hunters. Fragrances and cosmetics are increasingly being sold in secondary markets such as discount perfumeries, drug chains and lower priced department stores. It is not anticipated that the department store class of trade in the U.S. will become more profitable in the near future. Seasonality: Sales in the fragrance industry are generally seasonal, with generally higher sales in the second half of the calendar year as a result of increased demand for fragrance products in anticipation of and during the Christmas holiday season. The anticipated seasonality of the Company's sales could cause a significant variation in its quarterly operating results. Patent protection: The Company's ability to compete successfully in the consumer market place and to attract licensing partners will depend, in part, on its ability to protect its proprietary technology. There can be no assurance that any patent or patent application owned or controlled by the Company will not be challenged, invalidated or circumvented or continue to provide commercially significant protection of the Company's technology or ensure that the Company may not be determined to infringe valid patents of others. In addition, the laws of certain foreign countries may not protect the Company's proprietary rights to the same extent as do the laws of the United States. No assurance can be given that others will not independently develop substantially equivalent proprietary information or otherwise gain access to the Company's trade secrets or that the Company can meaningfully protect its technology, proprietary information or trade secrets. Although the Company does not believe that its products infringe the proprietary rights of any third parties, there can be no assurance that infringement or invalidity claims (or claims for indemnification resulting from infringement claims) will not be asserted against the Company or that any such assertions will not materially adversely affect the Company's business, financial condition or results of operations. Irrespective of the validity or the successful assertion of such claims, the Company could incur significant costs with respect to the defense thereof which could have a material adverse effect on the Company's business, financial condition or results of operations. Attraction and retention of key employees: The success of the Company's future operations depends in large part on the Company's ability to recruit and retain key employees and consultants with research, product development and marketing experience, as well as other professionals who are in considerable demand. There can be no assurance that the Company will be successful in retaining or recruiting such key personnel. Dependence on third parties for manufacturing: The Company does not have facilities to manufacture its products and relies on Pherin to manufacture its pheromones and third parties to supply components and to blend, fill and package its fragrance products. The Company believes that such manufacturing services are the most effective method of producing its products. The majority of the fragrance industry uses contract fillers, and the Company has no current plans to set up its own filling facilities. However, as with any business that is not vertically integrated, if the Company is unable to obtain or retain fragrance suppliers, component manufacturers or third party manufacturing on acceptable terms, it may not be able to obtain commercial quantities of its products, which would adversely affect results. Results of Operations Three Months ended June 30, 1998 as compared to the Three Months ended June 30, 1997 Net sales for the second quarter of 1998 were $1,905,257 representing a decrease of 50% from sales of $3,817,542 for the prior year's quarter. The Company attributes the sales decrease to a sharp decline in department store orders for inner REALM(R). During the second quarter of 1997, inner REALM accounted for 28% of the Company's gross sales volume compared to 10% for the same period in 1998. In addition to the decline in department store inner REALM orders, the Company has accepted returns of inner REALM from certain retailers in order to bring store inventories into balance with retailer forecasts. Of the $1.9 million year-to-year decrease in sales, the Company attributes 50% to gross sales decreases in inner REALM, 27% to decreases in REALM Men(R) and 23% to decreases in REALM Women(R). Sales of REALM Men were lower in the 1998 quarter due to lower sales of promotional sets to Department store customers. The Company has decreased the overall offerings and number of available promotional sets to Department stores in order to increase gross margins and encourage sales of regularly priced products. The decline in sales of REALM Women due to decreased set offerings was partially offset by increased volumes of sales in regularly priced, in-line products. Sales volume comparisons were also affected by shifts in ordering from alternative classes of trade. During the second quarter of 1997, the Company made initial shipments to distributors for sales to secondary markets. These initial launch order volumes were not repeated in the second quarter of 1998; however, reorder volumes have been consistent with expectations, and distributor sales continue to expand. Also in 1998, international shipments increased with expansion into selected European markets for both retail and direct marketing. The Company plans to aggressively pursue these outlets as they offer a cost-effective method of distribution. Net sales for the quarters ended June 30, 1998 and 1997 were as follows: - -------------------------------------------------------------------------------- Markets 1998 1997 - -------------------------------------------------------------------------------- U.S. Markets $1,580,844 $3,499,259 International Markets 324,413 318,283 ---------- ---------- Net Sales $1,905,257 $3,817,542 Gross margin declined in 1998 due to the decrease in inner REALM shipments and due to the change in the overall makeup of the Company's sales from a heavy reliance on department store sales to an increased presence with distributor sales. In the second quarter of 1998, the Company reduced its reliance on Department stores by 9% of total net sales. The Company feels this shift will be beneficial to the Company in the long run as the cost of doing business with Department stores continues to escalate, and by selling through distributors the Company can concentrate on developing overall marketing and consumer awareness programs that benefit both sales of existing products and increase consumer knowledge and desire for products containing synthesized human pheromones. Research and Development expenses for the first quarters of 1998 and 1997 were $100,316 and $73,086, respectively. These costs principally reflect payments and costs under the Company's contract with Pherin Corporation. Operating expenses decreased $4,116,976 to $2,560,547 in the second quarter of 1998 from $6,677,523 in the second quarter of 1997. During the 1997 quarter, the Company incurred advertising and promotional costs to support the launch of inner REALM. Due to the fact that the majority of these expenditures were for print advertising vehicles committed to months in advance, the Company was unable to change or alter these programs in the short term when sales did not materialize to support these levels of expenditure. Additionally, the Company subsequently received unanticipated chargebacks against accounts receivable payments from many of its department store customers that were not authorized within Company established procedures. The Company increased its controls on cooperative advertising expense authorization and communicated these tightened policies to all employees, customers and suppliers. Headcount in the sales area decreased due to attrition and the restructuring of the field sales force. The Company used this opportunity to change its focus to emphasizing "selling-through" at the retail level from "selling-into" Department stores. The Company replaced regional managers primarily responsible for making headquarters calls with field selling staff responsible for in-store activities geared toward selling directly to the retail consumer. The Company anticipates this change in selling strategy will increase retail turns and lead to higher volume sales to its department store customers. Distribution and general and administrative costs decreased as well as selling and marketing in the second quarter of 1998. MIS consulting costs were lower in the 1998 quarter due to the 1997 completion of automated warehousing and EDI systems installation. Interest income was $106 and $491 for the second quarters of 1998 and 1997, respectively. The Company paid $10,514 in interest expense in the second quarter of 1998 on balances on its revolving bank line of credit. This compares to $34,285 interest expense in the second quarter of 1997. Six Months ended June 30, 1998 as compared to the Six Months ended June 30, 1997 Net sales for the six months ended June 30, 1998 were $5,268,418. This was a 41% decrease from net sales of $8,913,831 for the first half of 1997. The Company attributes the decrease entirely to declines in re-order levels for inner REALM. Initial launch quantities shipped in the first half of 1997 were not duplicated by reorders in the first half of 1998. The Company's first fragrance offerings: Realm Women and Realm Men have shown modest declines in reorder quantities between the two years. During the first six months of 1997, the Company made its first shipments to a distributor servicing alternative distribution channels. Sales to this class of trade continued to expand in the first half of 1998. During the first six months of 1998, foreign sales and sales to alternative classes of trade increased 25% from the prior year and constituted and as a percentage of total net sales increased by 16%. - -------------------------------------------------------------------------------- Class of Trade 1998 1997 - -------------------------------------------------------------------------------- U.S. Markets $4,533,071 $8,251,360 International Markets 735,347 662,471 ---------- ---------- Net Sales $5,268,418 $8,913,831 Gross margin for the first half of 1998 was 68% compared to 79% for the same period in 1997. This decrease is the result of decreases in sales of the Company's inner REALM products to the department store class of trade. The Company conceived inner REALM as a higher gross margin product than its original Realm Women and Realm Men's lines in order to increase overall gross margin. The lower sales of inner REALM to department stores in the first half of 1998 has had a negative impact on gross margin for the period when compared against the same period in the prior year. Research and Development expenses for the first half of 1998 and 1997 were $182,448 and $164,856, respectively and are principally comprised of payments under the Company's contract with Pherin Corporation. Selling and marketing expenses decreased to $4,239,700 in the six months ended June 30, 1998 from $9,290,583 in the period ended June 30, 1997. In 1997, the Company incurred expenses to launch its second women's fragrance: inner REALM. In 1998, the Company carefully evaluated advertising plans to suit specific regional and consumer preferences. The Company continues to evaluate advertising spending and the effectiveness of co-operative advertising programs and in-store support personnel. Future cost reductions in this area will result from the shift in the Company's overall business focus from one of developing and distributing products to developing and licensing products to serve the needs of partners with established distribution networks. In 1998, the Company's general and administrative expenses decreased 13% over the prior year period due to decreases in headcount and spending controls. Interest income was $162 and $12,471 for the first half of 1998 and 1997, respectively. In 1998, the Company paid $21,469 in interest expense related to advances under its bank line of credit. During the first half of 1997, the Company had interest expense of $36,828. This higher expense in 1997 was due to larger bank borrowing balances incurred during the launch of inner REALM. LIQUIDITY At June 30, 1998, the Company had borrowed $209,296 against its $3,000,000 line of credit. Working capital was $2,178,013. At June 30, 1997, the Company had net borrowings of $1,943,706 and working capital of $1,741,911. For the first six months of 1998, operating activities generated net cash of $172,996. During the first six months of 1997, net cash used in operating activities was $3,695,265. Assuming the Company's activities proceed substantially as planned, the Company's line of credit and anticipated revenues from product sales should be adequate to meet its working capital needs over the next twelve months. Working capital requirements will primarily be for the supply of inventory and accounts receivable financing. Additional working capital may be required should the Company's continued operations fail to generate anticipated consumer response levels. Furthermore, additional working capital may be required should the Company experience a greater than planned success with its product and retail expansion. Funds would be needed for inventory build, accounts receivable financing and staffing purposes. If the Company fails to achieve significant revenues from its 1998 marketing efforts, or if retail expansion proves to be more capital intensive than planned, the Company may require additional funding. On April 1, 1998, the Company signed a renegotiated loan agreement with Mid-Peninsula Bank of Palo Alto, California (the "Bank") providing for a continued line of credit. The Company may borrow up to $3,000,000 at an interest rate equal to the Bank's prime rate plus .75% with borrowings secured primarily by the Company's trade receivables and inventory. The agreement, which expires in April, 1999, contains certain debt-to-equity and working capital covenants. There are no charges for any unused portions of the line. PART II OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders Registrant held its annual meeting of shareholders (the "Annual Meeting") on May 20, 1998. At the Annual Meeting, the shareholders voted on two proposals and elected six directors, Bernard I. Grosser, MD, William P. Horgan, Michael D. Kaufman, Helen C. Leong, Robert Marx and Michael V. Stern to serve until the next annual meeting and their successors are elected. In addition, the shareholders approved an amendment to the Company's Articles of Incorporation to change the name of the Company from Erox Corporation to Human Pheromone Sciences, Inc. and an amendment to the Non-Employee Directors Stock Option Plan to increase the number of shares available for issuance by 200,000 shares. The number of votes cast for, against or withheld as well as the number of abstention and broker non-votes as to each director and with respect to the name change and stock option plan proposals are set forth below: Director: For Withheld - --------- --- -------- Bernard I. Grosser, MD 9,028,636 51,440 William P. Horgan 9,028,335 51,741 Michael D. Kaufman 9,028,636 51,440 Helen C. Leong 9,028,636 51,440 Robert Marx 9,028,636 51,440 Michael V. Stern 9,028,636 51,440
Proposal: For Against Abstained Broker - --------- --- ------- --------- ------ Non-Votes --------- Amend the Company's Articles of Incorporation to change the name from Erox Corporation to Human Pheromone 9,030,669 21,271 28,136 0 Sciences, Inc. Proposal: For Against Abstained Broker - --------- --- ------- --------- ------ Non-Votes Amend the Company's Non-Employee Directors' Stock Option Plan to increase the number of shares 5,182,320 182,454 60,600 3,654,702 available for issuance by 200,000 shares.
Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27.01-Financial Data Schedule..........................E-13 (b) During the three months ended June 30, 1998, the Company filed Form 8-K on June 6, 1998 reporting the Amendment to the Company's Articles of Incorporation changing the name of the corporation to Human Pheromone Sciences, Inc. from Erox Corporation. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant had duly caused this Report to be signed on behalf by the undersigned thereunto duly authorized. Human Pheromone Sciences, Inc. Registrant Date: August 13, 1998 /s/ William P. Horgan ------------------------------------ William P. Horgan Chairman and Chief Executive Officer Date: August 13, 1998 /s/ Maxine C. Harmatta ------------------------------------ Maxine C. Harmatta Vice President, Finance and Administration EX-27.01 2 FINANCIAL DATA SCHEDULE
5 The Schedule Contains Summary Financial Information Extracted From Balance Sheets and Statements of Income 0000878616 Human Pheromone Sciences, Inc. 1 6-MOS DEC-30-1998 JAN-01-1998 JUN-30-1998 70,452 0 1,452,892 (598,456) 3,230,320 4,262,192 802,923 (720,587) 4,344,528 2,084,179 0 0 2,145,535 17,667,024 (17,552,210) 4,344,528 5,268,418 5,268,418 1,671,273 5,560,142 182,448 0 21,469 (2,168,941) 0 (2,168,941) 0 0 0 (2,168,941) (0.21) (0.21)
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