SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-26422
ANSAN, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 94-3171943
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
400 Oyster Point Blvd. Suite 435
South San Francisco, California 94080
(Address of Principal Executive Offices)
(415) 635-0200
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at July 31, 1996:
Common Stock, $.001
par value 2,786,798 shares
Transitional Small Business Disclosure Format
Yes No X
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INDEX TO FORM 10-QSB
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Financial Statements:
Condensed Balance Sheets as of June 30, 1996
and December 31, 1995.............................................3
Condensed Statements of Operations for the Three- and Six-
Months ended June 30, 1996 and 1995...............................4
Condensed Statements of Cash Flows for the Six
Months ended June 30, 1996 and 1995...............................5
Notes to Condensed Financial Statements.............................6
Item 2. Management's Discussion and Analysis
or Plan of Operation................................................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................11
Item 2. Changes in Securities....................................11
Item 3. Defaults Upon Senior Securities..........................11
Item 4. Submission of Matters to a
Vote of Security-Holders...........................11
Item 5. Other Information........................................11
Item 6. Exhibits and Reports on Form 8-K.........................11
SIGNATURES ........................................................12
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
ANSAN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1996 1995
------------------ -------------------
(UNAUDITED) (NOTE A)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $69,562 $45,202
Short-term investments 3,002,393 3,809,110
Prepaid expenses and other current assets 28,500 108,089
Total current assets 3,100,455 3,962,401
Furniture and equipment, net 65,778 18,244
$3,166,233 $3,980,645
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $118,442 $80,276
Payable to Titan Pharmaceuticals, Inc. 82,451 57,791
Accrued sponsored research expense - 32,890
Accrued legal expense 50,730 50,000
Other accrued liabilities 46,792 117,006
---------- ------------
Total current liabilities 298,415 337,963
STOCKHOLDERS' EQUITY
Common stock, at amounts paid in, $0.001 par value; 20,000,000
shares authorized, 2,768,164 and 2,786,798 shares issued and
outstanding at December 31, 1995 and
June 30, 1996, respectively 10,687,037 10,678,061
Deferred compensation (208,339) (236,118)
Deficit accumulated during the development stage (7,610,880) (6,799,261)
Total stockholders' equity 2,867,818 3,642,682
$3,166,233 $3,980,645
============= ===========
Note A: The balance sheet at December 31, 1995 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 condensed financial statements.
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ANSAN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Period from
Three Months Ended Six Months Ended Incorporation
June 30, June 30, (November 6,
------------------------------------- ---------------------------------- 1992) to
June 30,
1996 1995 1996 1995 1996
------------- --------------- ---------------- -------------- -------------
COSTS AND EXPENSES:
Research and development $205,614 $541,183 $462,976 $834,436 $5,262,429
General and administrative 242,345 528,818 441,926 663,017 2,098,758
Loss from operations (447,959) (1,070,001) (904,902) (1,497,453) (7,361,187)
Other income/(expenses)
Interest income 44,275 13,250 93,283 13,250 185,456
Interest expense - - - - (435,149)
Net loss $(403,684) $(1,083,251) $(811,619) $(1,510,703) $(7,610,880)
============ ============== =========== ============ ============
Net loss per share $(0.17) $(1.90) $(0.34) $(2.65)
============ ============== =========== ============
Shares used in calculating
net loss per share 2,407,885 569,672 2,406,145 569,672
============ ============== =========== ============
Pro forma net loss per share $(1.14) $(1.59)
============= ============
Shares used in calculating
pro forma net loss per share 950,145 950,145
============= ============
See notes to condensed financial statements.
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ANSAN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
PERIOD FROM
INCORPORATION
(NOVEMBER 6,
SIX MONTHS ENDED 1992) TO
JUNE 30, MARCH 31,
1996 1995 1996
---------------- -------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(811,619) $(1,510,703) $(7,610,880)
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation expense 9,251 - 10,910
Amortization of debt discount - - 400,000
Amortization of deferred compensation 27,779 13,889 69,445
Forgiveness of stockholder receivable - - 205
Issuance of common stock in exchange
for consulting services - - 19,984
Changes in operating assets and liabilities:
Prepaid expenses and sponsored research 79,589 - (28,500)
Accounts payable 38,166 135,284 118,442
Accrued legal 730 - 50,730
Accrued sponsored research (32,890) -
Other accrued liabilities (70,214) 194,934 46,792
Net cash used in operating activities (759,210) (1,166,596) (6,922,872)
----------------- --------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and fixtures (56,785) - (76,688)
Purchase of short-term investments (93,283) - (3,902,393)
Proceeds from sale of short-term investments 900,000 - 900,000
Net cash provided / (used) by investing activities 749,932 - (3,079,081)
----------------- --------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of series A preferred stock - - 992,592
Proceeds from issuance of common stock, net 8,976 - 5,964,256
Deferred offering costs - (210,065) -
Proceeds from related party notes - - 220,000
Payment on note from related party - - (190,000)
Issuance of notes payable - 1,058,333 1,025,000
Repayment of note payable - - (1,425,000)
Issuance of warrants to purchase common stock - 400,000 400,000
Proceeds from stockholder receivable - - 1,900
Payable to Titan Pharmaceuticals, Inc. 24,660 366,504 3,082,767
Net cash provided by financing activities 33,636 1,614,772 10,071,515
----------------- --------------- -------------
Net increase (decrease) in cash and cash
equivalents 24,360 448,176 69,562
Cash and cash equivalents, beginning of period 45,202 96,704 -
Cash and cash equivalents, end of period $69,562 $544,880 $69,562
================= =============== =============
SUPPLEMENTAL CASH FLOW DISCLOSURE AND NONCASH
FINANCING ACTIVITIES
Forgiveness of note payable to related party $- $- $30,000
================= =============== =============
Interest paid on related party notes $- $- $4,409
================= =============== =============
Conversion of payable to parent into Series A
Preferred Stock $- $- $1,449,064
================= =============== =============
Conversion of payable to parent into Common Stock $- $- $1,551,252
================= =============== =============
See notes to condensed financial statements.
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ANSAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
-----------
Ansan, Inc. (the "Company") was incorporated in the State of Delaware on
November 6, 1992 to engage in the development of analogs of butyric acid
for the treatment of cancer, blood disorders and other serious diseases.
The Company is in the development stage.
Relationship with Titan Pharmaceuticals, Inc.
---------------------------------------------
Titan Pharmaceuticals, Inc. ("Titan"), a biopharmaceutical company engaged,
through the operations of its subsidiaries and affiliates, in the
development of new proprietary therapeutic products for use in the fields
of cancer, immunology, viral diseases, and disorders of the central nervous
system, was the Company's parent until the Company's initial public
offering (the "IPO") in August 1995. Subsequent to the IPO, Titan's
ownership interest was reduced to 44%. In August 1995, the company granted
Titan a one year option to purchase up to 400,000 shares of Common Stock.
In July 1996, the Company extended the option through September 8, 1996, in
order to allow the Company and Titan an opportunity to renegotiate the
terms of such option as well as other possible financing transactions. The
Company had previously contracted with Titan for facilities and equipment,
and certain executive, administrative, financial, regulatory, business
development and human resource services. Subsequent to December 31, 1995
the Company has contracted with Titan only for limited financial and
administrative services. Titan has previously supplied working capital
financing to the Company and may in the future provide such financing. As
part of its affiliation with Titan, the Company and Titan have a number of
members in common of their respective boards of directors.
Basis of Presentation
---------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principals 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
principals for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered for
fair presentation have been included. Operating results for the three- and
six-month periods ended June 30, 1996 are not necessarily indicative of the
results that may expected for the year ending December 31, 1996. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's 1995 Annual Report on Form
10-KSB. The Company's activities since incorporation have consisted
primarily of conducting research and development, performing business and
financial planning and raising capital. Accordingly, the Company is
considered to be in the development stage and expects to incur increasing
losses and require additional financial resources to achieve
commercialization of its products. The Company also depends on third
parties to conduct certain research on the Company's behalf through various
research arrangements. All of the Company's current products under
development are the subject of license agreements that may require the
payment of future royalties.
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ANSAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Net Loss Per Share
------------------
Net loss per share for the three- and six-month periods ended June 30, 1996
is computed using the weighted average number of common shares outstanding,
reduced by the number of shares held in escrow (see Note 3 of the Notes to
the Financial Statements included in the Company's 1995 Annual Report on
Form 10-KSB). Common equivalent shares are excluded from the calculation as
their effect is antidilutive. Pro forma net loss per share for the three-
and six-month periods ended June 30, 1995 is computed using the weighted
average number of common shares outstanding, common equivalent shares from
convertible preferred stock which automatically converted upon the closing
of the Company's IPO, and certain other common equivalent shares as
mandated by SEC Staff Accounting Bulletins.
Collaborative Agreements
------------------------
In May of 1996, the Company signed a licensing agreement with Boehringer
Ingelheim GmbH to acquire the rights in the United States and the European
Union to develop a new intravenous formulation of the drug apafant for all
clinical indications. The company intends to proceed with the further
development and, if possible, clinical testing of the drug. Pursuant to the
agreement, the Company may be obligated to make future milestone and
royalty payments to Boehringer Ingelheim GmbH. However, under certain
circumstances, Boehringer Ingelheim GmbH may participate in the further
development and commercialization of apafant and would, in such
circumstances, be obligated to make milestone and royalty payments to
Ansan.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Statements in this report may contain forward-looking statements, involving
risks and uncertainties that may or may not be identifiable in advance. Actual
results may differ materially from those anticipated.
RESULTS OF OPERATIONS
The Company is in the development stage. Since its inception in
November 1992, the Company's efforts have been principally devoted to research
and development, securing patent protection and raising capital. From inception
through June 30, 1996, the Company has sustained cumulative losses of
$7,610,880. These losses have resulted from expenditures in connection with
research and development and general and administrative activities, including
legal and professional activities.
Through June 30, 1996, research and development expenses since
inception have been approximately $5,262,000 and general and administrative
expenses since inception have been approximately $2,099,000. Total research and
development expenses were approximately $206,000 and $463,000 during the three-
and six-month periods ended June 30, 1996, respectively, compared with
approximately $541,000 and $834,000 for the three- and six-month periods ended
June 30, 1995, respectively, a decrease of approximately 62% and 44% for the
three- and six-month periods, respectively. The higher level of expenditures in
1995 is attributed to costs incurred in anticipation of the Company's clinical
trial that commenced in the first quarter of 1996. These costs included
expenditures for preparation and compilation of investigational new drug
applications (IND), toxicology studies and manufacturing. Also, during the
second half of 1995 the Company reorganized much of its research and development
activities that are performed by outside vendors by establishing new vendor
relationships, and moving certain functions in-house. This reorganization has
produced a cost savings to the Company.
Total general and administrative expenses were approximately $242,000
and $442,000 during the three- and six-month periods ended June 30, 1996,
respectively, compared with approximately $529,000 and $663,000 for the three-
and six-month periods ended June 30, 1995, respectively, a decrease of
approximately 54% and 33% for the three- and six-month periods, respectively.
The higher level of expenditures in 1995 are associated, in part, with
underwriting commissions and other costs associated with a private placement of
debt. Interest income was approximately $44,000 and $93,000 for the three- and
six-month periods ended June 30, 1996, respectively, compared with approximately
$13,000 for both the three- and six-month periods ended June 30, 1995. This
increase is the result from investment of the remaining proceeds from the
Company's IPO in August 1995.
The Company expects to continue to incur substantial research and
development costs in the future due to ongoing and new research and development
programs, manufacturing of products for use in clinical trials, patent and
regulatory activities, and preclinical and clinical testing of the Company's
products. In May of 1996, the Company signed a licensing agreement with
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Boehringer Ingelheim GmbH to acquire the rights in the United States and
the European Union to develop a new intravenous formulation of the drug
apafant for all clinical indications. The Company expects to incur
substantial research and development costs related to this acquisition. The
Company also expects that general and administrative costs necessary to
support clinical trials, research and development, manufacturing and the
creation of a marketing and sales organization, if warranted, will increase
in the future. Accordingly, the Company expects to incur increasing
operating losses for the foreseeable future. There can be no assurance that
the Company will ever achieve profitable operations.
LIQUIDITY AND CAPITAL RESOURCES
In August and September 1995, the Company completed an IPO which
resulted in net proceeds to the Company, after deduction of underwriting
discounts and commissions and other expenses of the IPO, of approximately
$5,950,000. As of June 30, 1996, the Company had working capital of
approximately $2,802,000.
In August 1995, the Company granted Titan, the Company's principal
stockholder, a one-year option to purchase up to 400,000 shares of Common Stock.
In July 1996, the Company extended the option through September 8, 1996, in
order to allow the Company and Titan an opportunity to renegotiate the terms of
such option as well as other possible financing transactions.
Titan is a party to a master capital equipment lease, and the Company
and three other majority-owned subsidiaries of Titan have entered into a
sublease and assignment with Titan under such lease for which the Company is
jointly and severally liable. At June 30, 1996, the amount outstanding under the
equipment lease was $864,964 with current monthly payments of $30,459.
The Company believes that the proceeds from the IPO will provide the
necessary liquidity and capital resources to sustain planned operations through
1996. In the event that the Company's internal estimates relating to its planned
expenditures prove materially inaccurate, the Company may be required to
reallocate funds among its planned activities or to curtail certain planned
expenditures. In any event, the Company anticipates that it will require
substantial additional financing after such time in order to continue its
research and development capabilities, fund operating expenses, pursue
regulatory approval, and build production, sales, and marketing activities, as
necessary. There can be no assurance as to the availability or terms of any
additional financing, when and if needed. In the event that the Company fails to
raise any funds it requires, it may be necessary for the Company to curtail its
activities significantly or to cease operations altogether.
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RELEASE OF ESCROWED SHARES AND OPTIONS
In connection with the IPO, certain stockholders of the Company placed
an aggregate of 363,760 shares of Common Stock (the "Escrow Shares"), and the
current holders of certain options which are exercisable at less than the
initial public offering price of $5.00 placed options to purchase 36,260 shares
(the "Escrow Options"), into escrow pending the Company's attainment of certain
revenue or share price goals. The Securities and Exchange Commission has taken
the position with respect to the release of securities from escrow that in the
event any of the Escrow Shares or Escrow Options are released from escrow to
directors, officers, employees or consultants of the Company, the release will
be treated, for financial reporting purposes, as a compensation expense to the
Company. Accordingly, the Company will, in the event of the release of the
Escrow Shares and Escrow Options, recognize during the period in which the
earnings or market price targets are met what could be a substantial one-time
charge which would substantially increase the Company's loss or reduce or
eliminate earnings, if any, at such time. The amount of compensation expense
recognized by the Company will not affect the Company's total stockholders'
equity.
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PART II
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 4.1 -Form of Unit Purchase Option *
4.2 -Form of Warrant Agreement (including forms of Class A
and Class B Warrant Certificates) *
4.3 -Escrow Agreement *
10.11 -License Agreement dated May 31, 1996, between
Boehringer Ingelheim GmbH and the Registrant **
11.0 -Statement re Computation of Earnings of Per Share
27.0 -Financial Data Schedule
* Incorporated by reference to the Company's Registration Statement
on Form SB-2 (file no. 33-92886)
** Confidential treatment has been requested with
respect to portions of this exhibit.
(b) No reports on Form 8-K were filed during the six months ended
June 30, 1996.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunder duly authorized.
ANSAN, INC.
By: /S/ S. Mark Moran Date: August 13, 1996
--------------------------------------------
S. Mark Moran, President and
Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)
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