-----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, FDa9Liiaz2cloULLlS0p2+w0lFlV88uyfJylvzygk7fAYVT5fIo589fU9gNy0Fn2 W+vUrtiZxToT/1VWKtYhEw== 0000950130-97-002320.txt : 19970514 0000950130-97-002320.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950130-97-002320 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIFE MEDICAL SCIENCES INC CENTRAL INDEX KEY: 0000889428 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 141745197 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20580 FILM NUMBER: 97602199 BUSINESS ADDRESS: STREET 1: 379 THORNALL ST CITY: EDISON STATE: NJ ZIP: 08837-2227 BUSINESS PHONE: 6094520707 MAIL ADDRESS: STREET 1: 379 THORNALL ST STREET 2: 15TH FLOOR CITY: EDISON STATE: NJ ZIP: 08837-2227 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________ to__________ Commission file number 0-20580 LIFE MEDICAL SCIENCES, INC. (Exact name of registrant as specified in its charter)
DELAWARE 14-1745197 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
379 THORNALL STREET, EDISON, NJ 08837 (Address of principal executive offices) (Zip Code) (908) 494-0444 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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[ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. COMMON STOCK, $.001 PAR VALUE - 7,914,820 SHARES OUTSTANDING AT MAY 13, 1997 LIFE MEDICAL SCIENCES, INC. INDEX PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Statements of Operations (unaudited) for the 1 three month periods ended March 31, 1996 and 1997 Balance Sheets as of December 31, 1996 2 and March 31, 1997 (unaudited) Statements of Cash Flows (unaudited) for the 3 three month periods ended March 31, 1996 and 1997 Notes to Financial Statements (unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition 5 and Results of Operations PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 7 Signatures 8 Exhibit Index 9 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LIFE MEDICAL SCIENCES, INC. STATEMENTS OF OPERATIONS (unaudited)
Three months ended March 31, ---------------------------- 1996 1997 ----------- ----------- Royalty income $ 62,205 $ 9,139 ----------- ----------- Operating expenses: Research and development expenses 541,285 1,132,712 General and administrative expenses 421,416 857,676 ----------- ----------- Operating expenses 962,701 1,990,388 ----------- ----------- (Loss) from operations (900,496) (1,981,249) Interest income 37,610 167,440 Interest expense (736) (999) =========== =========== Net (loss) $ (863,622) $(1,814,808) =========== =========== Net (loss) per share $ (0.16) $ (0.23) =========== =========== Weighted average shares outstanding 5,446,386 7,914,820
1 LIFE MEDICAL SCIENCES, INC. BALANCE SHEETS
(unaudited) December 31, March 31, ------------- -------------- 1996 1997 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 11,235,976 $ 7,995,012 Short-term investments 3,041,993 4,776,175 Other current assets 311,330 358,796 ------------ ------------ Total current assets 14,589,299 13,129,983 Furniture and equipment-at cost (less accumulated depreciation of $59,830 and $71,605) 182,349 179,730 Deposits 29,190 29,190 ============ ============ TOTAL $ 14,800,838 $ 13,338,903 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Capital lease obligation $ 6,798 $ 6,968 Accounts payable 111,265 145,648 Accrued expenses 349,447 282,599 ------------ ------------ Total current liabilities 467,510 435,215 Capital lease obligation 34,128 32,321 Deferred royalty income 504,877 495,738 ------------ ------------ Total liabilities 1,006,515 963,274 Stockholders' equity: Preferred stock, $.01 par value; shares authorized - 5,000,000; none issued Common stock, $.001 par value; shares authorized - 23,750,000; issued and outstanding - 7,914,820 and 7,914,820 7,915 7,915 Additional paid-in capital 33,951,059 34,347,173 Accumulated deficit (20,164,651) (21,979,459) ------------ ------------ Total stockholders' equity 13,794,323 12,375,629 ============ ============ TOTAL $ 14,800,838 $ 13,338,903 ============ ============
2 LIFE MEDICAL SCIENCES, INC. STATEMENTS OF CASH FLOWS (unaudited)
Three months ended March 31, ------------------------------ 1996 1997 ----------- ------------ Cash flows from operating activities: Net (loss) $ (863,622) $ (1,814,808) Adjustments to reconcile net (loss) to net cash provided by (used in) operations: Depreciation 7,022 11,775 Deferred royalty income (44,215) (9,139) Fair value of options issued as compensation 412,252 Changes in operating assets and liabilities: (Increase) in other assets and deposits (184,464) (47,466) Increase (decrease) in accounts payable and accrued expenses 331,512 (32,465) ----------- ----------- Net cash (used in) operating activities (753,767) (1,479,851) ----------- ----------- Cash flows from investing activities: Purchase of equipment (3,662) (9,156) Purchase of investment securities (1,734,182) ----------- ----------- Net cash (used in) investing activities (3,662) (1,743,338) ----------- ----------- Cash flows from financing activities: Payments on capitalized lease (579) (1,637) Proceeds from issuance of common stock upon exercise of options 163,119 Deferred offering expenses of common stock to be issued (229,281) Cost of registration of common stock previously issued (16,138) ----------- ----------- Net cash (used in) financing activities (66,741) (17,775) ----------- ----------- Net (decrease) in cash and cash equivalents (824,170) (3,240,964) Cash and cash equivalents at beginning of period 3,827,530 11,235,976 ----------- ----------- Cash and cash equivalents at end of period $ 3,003,360 $ 7,995,012 =========== ============
3 LIFE MEDICAL SCIENCES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) A) BASIS OF PRESENTATION The accompanying condensed financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles, but in the opinion of management, contain all adjustments (which consist of only normal recurring adjustments) necessary for a fair presentation of such financial information. Results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 1996 included in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission. B) NET (LOSS) PER SHARE The net loss per share is computed using the weighted average number of common shares outstanding during each period. Outstanding options and warrants have not been considered since their effect would be antidilutive. C) OPTIONS The Company applies APB Opinion 25 and related Interpretations in accounting for its options to employees. Although no compensation cost has been recognized for its stock option grants to employees, the Company has included stock based compensation costs associated with options granted under consulting agreements, in research and development expenses and general and administrative expenses of $81,123 and $331,129, respectively. 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Life Medical Sciences, Inc. (the "Company") is engaged in the development and commercialization of innovative and cost-effective medical products for therapeutic applications. The Company's proposed products are derived from its two proprietary platform technologies: (i) its in-situ (occurring on or at a body site) tissue culturing technology, and (ii) its bioresorbable polymer technology. Products currently under development focus on wound healing, stimulating hair regrowth, improving the success rate of autologous fat transplantation and preventing or reducing post-operative surgical adhesions. Since its inception, the Company has been engaged primarily in research and development of its technologies, commercialization of the Sure-ClosureTM System ("Sure-Closure") and organizational activities. In September 1993, the Company began selling the Sure-Closure products. The Company built and supported a direct sales organization calling on surgeons. In July 1994, the Company sold its Sure-Closure product line for initial payments aggregating $4 million plus a 10% royalty on net sales through June 2004. Following the sale of the Sure-Closure System, sales and marketing expenses were eliminated. To date, all revenue has been derived from sales of the Sure-Closure products or royalties thereon. Certain statements in this Form10-Q (the "Report") under this Item and elsewhere constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding future cash requirements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: delays in product development; problems or delays with clinical trials; failure to receive or delays in receiving regulatory approval; lack of enforceability of patents and proprietary rights; lack of reimbursement; general economic and business conditions; industry capacity; industry trends; demographic changes; competition; material costs and availability; the loss of any significant customers; changes in business strategy or development plans; quality of management; availability, terms and deployment of capital; business abilities and judgment of personnel; availability of qualified personnel; changes in, or the failure to comply with, government regulations; and other factors referenced in this Report. RESULTS OF OPERATIONS The Company earned revenues from royalties on product sales of Sure-Closure of $9,139 and $62,205 for the three months ended March 31, 1997 and 1996, respectively. The royalty income recognized during the three month period ended March 31, 1997, represents royalties from Sure-Closure product sales of the fourth quarter of 1996. The Company incurred research and development expenses of $1,132,712 and $541,285 for the three months ended March 31, 1997 and 1996, respectively. The increase in the three month period ended March 31, 1997 compared to March 31, 1996 is due to increased spending for the preclinical and clinical studies of the bioresorbable polymer adhesion prevention products, and the clinical studies of the in-situ tissue culturing technology products; and increased expenditures supporting the management of the research and development function. Research and development expenses are expected to continue to increase in future quarters as the Company continues to develop its in-situ tissue culturing technology products and bioresorbable polymer technology products and expand clinical trials for these and other products. General and administrative expenses, which consist of compensation for management, professional fees, investor relations expenses and materials, consulting expenses and travel expenses, were $857,676 and $421,416 for the three months ended March 31, 1997 and 1996, respectively. The increase is attributable to salaries and related expenses 5 associated with additional management. Additionally, a non-cash expense for stock based compensation costs of $331,129 was recorded during the three months ended March 31, 1997. There was no such expense during the corresponding period of 1996. General and administrative expenses are expected to continue to increase in future quarters as the Company continues to increase its scale of operations. Interest income was $167,440 and $37,610 for the three months ended March 31, 1997 and 1996, respectively. The increase for the three months period ended March 31, 1997 is primarily attributable to an increased cash balance. Interest expense of $999 and $736 for the three months ended March 31, 1997 and 1996, respectively, was from a capital lease entered into to acquire office equipment. The Company's net loss was $1,814,808 and $863,622 for the three months ended March 31, 1997 and 1996, respectively. This increase is due primarily to the increased scale of operations. The Company expects to incur additional losses in the future. LIQUIDITY AND CAPITAL RESOURCES The Company had cash, cash equivalents and short term investments of $12,771,187 and 14,277,969 at March 31, 1997 and December 31, 1996, respectively. The decrease in cash from December 31, 1996 to March 31, 1997 results from expenditures made for funding the Company's operations which primarily consists of continued clinical trials, research and development costs, and commercialization of our product portfolio. Although the Company believes that the available cash will be sufficient to meet its cash requirements for approximately the next 18 months, there can be no assurance that the Company will not require additional financing during that time or that financing will be available on acceptable terms or at all. The Company will be required, however, to raise substantial additional funds to continue the clinical development and commercialization of its products and to fund the growth that is expected to occur if any of its products are approved for marketing. The Company plans to seek such additional funding through collaborative arrangements with strategic partners, licensing arrangements for certain of its products and additional public or private financings, including equity financings. Any additional equity financings may be dilutive to stockholders. There can be no assurance that such arrangements or financings will be available as needed or on terms acceptable to the Company. Insufficient funds may require the Company to delay, scale back or eliminate some or all of its research and development programs and manufacturing and marketing efforts or require it to license to third parties certain products or technologies that the Company would otherwise seek to commercialize itself. 6 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27. Financial Data Schedule (b) Reports on Form 8-K None 7 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. LIFE MEDICAL SCIENCES, INC. (REGISTRANT) DATE: MAY 13, 1997 /S/ DONALD W. FALLON --------------------- DONALD W. FALLON VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER (Duly Authorized Officer & Principal Financial Officer) 8 EXHIBIT NO. DESCRIPTION PAGE NO. - ---------- ----------- -------- 27 Financial Data Schedule 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FORM 10Q FOR THE PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 7,995,012 4,776,175 0 0 0 13,129,983 251,335 71,605 13,338,903 435,215 0 0 0 7,915 12,367,714 13,338,903 0 9,139 0 0 1,990,388 0 999 (1,814,808) 0 (1,814,808) 0 0 0 (1,814,808) (.23) 0
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