UNITED STATES 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 quarterly period ended September 30, 2005
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[ ] TRANSITION REPORT UNDER SECTION 13 OR A5(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 0-23544
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HUMAN PHEROMONE SCIENCES, INC.
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(Name of small business issuer in its charter)
California 94-3107202
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(State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation or organization)
84 West Santa Clara Street, San Jose, California 95113
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(Address of principal executive offices) (Zip code)
Issuer's telephone number: (408) 938-3030
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Not applicable
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(Former name or former address, 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 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 [ ]
Indicate by a checkmark whether the registrant is a shell company (as
defined in Rule 12-2 of the Exchange Act).
Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 4,151,954 shares of Common
Stock as of October 31, 2005.
1
HUMAN PHEROMONE SCIENCES, INC.
INDEX
Page
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
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Balance Sheets as of September 30, 2005 (Unaudited) and December 31, 2004 . . . . . . . . . 3
Statements of Operations (Unaudited) for the Three and Nine Months Ended
September 30, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows (Unaudited) for the Nine Months Ended
September 30, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Notes to Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis
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Management's Discussion and Analysis of Financial Conditions and Results of Operations . . . .7
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
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PART II
OTHER INFORMATION
Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .12
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SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Human Pheromone Sciences, Inc.
Balance Sheets
September 30, December 31,
(in thousands except share data) 2005 2004
- -------------------------------------------------------------------------------- -------- --------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 622 $ 1,201
Accounts receivable, net of allowances of $3,000 and $5,000, respectively 75 259
Inventories, net 48 63
Other current assets 35 8
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Total current assets 780 1,531
Property and equipment, net 11 17
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$ 791 $ 1,548
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 56 $ 41
Accrued professional fees 58 58
Accrued employee benefits 27 35
Accrued sales returns 13 40
Accrued income tax 2 3
Other accrued expenses 9 18
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Total current liabilities 165 195
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Commitments and Contingencies
Shareholders' equity:
Common stock, no par value, 13,333,333 shares authorized, 4,151,954 shares
issued and outstanding at each date 20,809 20,809
Accumulated deficit (20,183) (19,456)
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Total shareholders' equity 626 1,353
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$ 791 $ 1,548
======== ========
See accompanying notes to financial statements.
3
Human Pheromone Sciences, Inc.
Statements of Operations
(unaudited)
Three months ended Nine months ended
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September 30, September 30,
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(in thousands except per share data) 2005 2004 2005 2004
------- ------- ------- -------
Net revenues $ 91 300 $ 348 708
Cost of goods sold 12 44 70 117
------- ------- ------- -------
Gross profit 79 256 278 591
Operating Expenses:
Research and development 38 27 132 43
Selling, general and administrative 242 364 887 1,053
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Total operating expenses 280 391 1,019 1,096
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Loss from operations (201) (135) (741) (505)
Other income
Interest income, net 3 5 14 12
Other expense -- (1) -- (1)
------- ------- ------- -------
Total other income 3 4 14 11
------- ------- ------- -------
Loss from on-going operations (198) (131) (727) (494)
Net gain from sale of assets -- 21 -- 22
------- ------- ------- -------
Net loss $ (198) $ (110) $ (727) $ (472)
======= ======= ======= =======
Net loss per common share - basic and fully diluted
From on-going operations $ (0.05) $ (0.03) $ (0.18) $ (0.12)
From assets sold $ (0.00) $ 0.01 $ (0.00) $ 0.01
------- ------- ------- -------
Net loss per common share - basic and fully diluted $ (0.05) $ (0.02) $ (0.18) $ (0.11)
======= ======= ======= =======
Weighted average common shares outstanding -basic and
fully diluted 4,152 4,152 4,152 4,121
======= ======= ======= =======
See accompanying notes to financial statements.
4
Human Pheromone Sciences, Inc.
Statements of Cash Flows
(unaudited)
Nine months ended
September 30,
--------------------
(in thousands) 2005 2004
- ------------------------------------------------------- ------- -------
Cash flows from operating activities
Net loss from ongoing operations $ (727) $ (494)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 7 5
Changes in operating assets and liabilities:
Accounts receivable 183 (55)
Inventories 15 (31)
Other current assets (26) (25)
Accounts payable and accrued liabilities (30) 28
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Net cash used in operating activities (578) (572)
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Cash flows provided by (used in) investing activities
Acquisition of property and equipment (1) (16)
Sale of Realm assets -- 1
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Net cash used in investing activities (1) (15)
Cash flows used in financing activities -- --
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Net cash used in financing activities -- --
Net decrease in cash and cash equivalents (579) (587)
Cash and cash equivalents at beginning of period 1,201 1,950
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Cash and cash equivalents at end of period $ 622 $ 1,363
======= =======
See accompanying notes to financial statements.
5
Human Pheromone Sciences, Inc.
Notes to Financial Statements
(unaudited)
September 30, 2005
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
Human Pheromone Sciences, Inc. (the "Company") was incorporated in the
State of California in 1989 under the name of EROX Corporation. The Company
changed the name to Human Pheromone Sciences, Inc. in May 1998. The Company is
engaged in the research, development, manufacturing and marketing of synthesized
human pheromones and consumer products containing synthetic human pheromones as
a component. The Company initiated commercial operations in late 1994 with a
line of fine fragrances and toiletries. In April 2000, the Company licensed the
sale of its REALM(R) fragrance products and in April 2003 the Company sold the
REALM and innerREALM(R) brands and trademarks to Niche Marketing Group, Inc. The
Company's strategic focus is now on expanding the market for its existing
patented pheromones to other consumer product and fragrance companies and to the
development of its internally developed brand of pheromone-based products under
the Natural Attraction(R) brand, and mood based products under the licensed
Demeter Natural Attraction label. The Company will seek to add to this group of
products new, patented compounds that might be developed through the research
efforts that the Company is now directly managing.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form
10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States of America 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 and nine months ended September 30, 2005 are not
necessarily indicative of the results that may be expected for the calendar year
ending December 31, 2005. 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, 2004.
Revenue Recognition
Revenue is recorded at the time of merchandise shipment, net of provisions
for returns. The Company records revenues from sales, initiated by sales agents,
net of the sales commissions earned following the interpretative guidance
provided by FASB Emerging Issue Task Force (EITF) EITF No. 99-19 Reporting
Revenue Gross as a Principal versus Net as an Agent. License fees are earned
over the license period according to the terms of the license agreement and
interpretative guidance provided by Staff Accounting Bulletin (SAB) No. 101 and
No. 104. The majority of the Company's sales are to distributors and licensees,
and these distributors and licensees have no right to return products.
Inventories
Inventories are stated at the lower of cost (first in - first out method)
or market. A summary of inventories follows (in thousands):
September 30, December 31,
2005 2004
---------- ----------
Components (raw materials) $ 37 $ 62
Finished goods 33 18
Reserve for shrinkage and obsolescence (22) (17)
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$ 48 $ 63
========== ==========
6
Earnings (Loss) Per Share
The Company follows the provisions of SFAS No. 128, Earnings Per Share.
SFAS No. 128 provides for the calculation of "Basic" and "Diluted" earnings per
share. Basic earnings (loss) per share is computed using the weighted-average
number of common shares outstanding. Diluted earnings (loss) per share is
computed using the weighted-average number of common shares and dilutive common
shares outstanding during the period. For the nine months ended September 30,
2005 and 2004, options to purchase 130,002 and 140,001 shares of common stock,
respectively, were excluded from the computation of diluted earnings per share
since their effect would be antidilutive.
As of September 30, 2005 and 2004, the unaudited components of basic and diluted
earnings per share are as follows (all amounts are in thousands):
2005 2004
--------- ---------
Net income (loss) available to common shareholders $ (727) $ (472)
========= =========
Weighted-average common shares outstanding during the period 4,152 4,121
========= =========
Capital Stock and Stock Options
During the three months ended September 30, 2005 no common stock or
preferred stock was issued. During the quarter options to purchase 60,000 share
of common stock under the 2003 Non-Employee Directors Stock Option Plan were
granted, no issued options were exercised and no stock options expired under the
initial Non-Employee Directors Stock Option Plan.
The Company applies APB 25 and related Interpretations in accounting for
its stock options. Had compensation expense been determined based upon the fair
value of the awards at the grant date and consistent with the method under SFAS
No. 123, the Company's net income (loss) per share would have been increased as
shown by the proforma amount indicated in the following table (in thousands):
Three months ended Nine months ended
September 30, December 31,
2005 2004 2005 2004
--------- --------- --------- ---------
Net income (loss):
As reported $ (198) $ (110) $ (727) $ (472)
Add stock based employee compensation expense
Included in net income, net of tax -- -- -- --
Deduct total stock based employee compensation
expense determined under fair value method for
all awards, net of tax (22) (34) (22) (34)
--------- --------- --------- ---------
Pro forma $ (220) $ (144) $ (749) $ (506)
========= ========= ========= =========
Basic and diluted loss per share:
As reported $ (0.05) $ (0.02) $ (0.18) $ (0.11)
Pro forma $ (0.05) $ (0.03) $ (0.18) $ (0.12)
For purposes of computing the pro forma disclosures required by SFAS No.
123, the fair value of each option granted to employees and directors is
estimated using the Black-Scholes option-pricing model with the following
weighted-average assumptions for the nine months ended September 30, 2005 and
2004;
7
2005 Option Grants 2004 Option Grants
------------------ ------------------
Weighted Average Interest Rates 3.8% 3.3%
Dividend Yield 0% 0%
Volatility factor of the Company's common stock 159% 177%
Weighted average expected life beyond each
respective vesting period 5 years 5 years
The weighted-average fair value of options granted during the nine months
ended September 30, 2005 and 2004 for which the exercise price was equal to the
market price on the grant date was $0.40 and $0.60, respectively, and the
weighted-average exercise price was $0.40 and $0.60, respectively. No stock
options were granted during the nine months ended September 30, 2005 and 2004
for which the exercise price was greater than or less than the market price on
the grant date.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which do not have vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.
2. SEGMENT INFORMATION
Revenues by geographic markets for the three and nine months ended
September 30, 2005 and 2004 were as follows:
Three months ending Nine months ending
September 30, September 30,
---------------------- ----------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Markets:
U.S Markets $ 88 $ 278 $ 263 $ 628
International Markets 3 22 85 80
--------- --------- --------- ---------
Net Revenues $ 91 $ 300 $ 348 $ 708
========= ========= ========= =========
3. SUBSEQUENT EVENT
On September 28, 2005 the Company signed a term sheet with Rubinson &
Associates, Inc. ("Rubinson") under which Rubinson will purchase 833,333 units,
each consisting of one unregistered share of common stock of the Company,
together with five year warrants for the purchase of four additional shares of
common stock. The amount to be initially invested will be $500,000. If fully
exercised, the warrants would result in an aggregate additional investment of
$2,416,666, however there can be no assurance that any of the warrants will be
exercised.
The terms agreed by the Company and Rubinson are subject to the completion of
mutual due diligence, which is expected to be completed by the end of November
2005, and execution of definitive agreements and completion of all legal,
corporate and securities compliance requirements. The understanding with
Rubinson also provides that Mitchell Rubinson, Chairman of Rubinson &
Associates, Inc., will be employed by the Company at a base salary of $1.00 per
year, be eligible to receive the Company's benefits and elected as Chairman of
the Board of Directors. As the closing of the agreement is subject to the
completion of certain due diligence procedures, the transaction has not been
recorded by the Company at September 30, 2005.
8
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
- ------ ------------------------------------------------------------------------
of Operations
-------------
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.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial conditions and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of financial statements require management to make
estimates and judgments that affect the reported amounts of assets and
liabilities, revenues and expenses and disclosures on the date of the financial
statements. On an on-going basis, we evaluate our estimates, including, but not
limited to, those related to revenue recognition and license fees. We use
authoritative pronouncements, historical experience and other assumptions as the
basis for making judgments. Actual results could differ from those estimates. We
believe that the following critical accounting policies affect our more
significant judgments and estimates in the preparation of our financial
statements.
Revenue Recognition
Revenue is recorded at the time of merchandise shipment, net of provisions
for returns. The Company records revenues from sales, initiated by sales agents,
net of the sales commissions earned following the interpretative guidance
provided by FASB Emerging Issue Task Force (EITF) EITF No. 99-19 Reporting
Revenue Gross as a Principal versus Net as an Agent. License fees are earned
over the license period according to the terms of the license agreement and
interpretative guidance provided by Staff Accounting Bulletin (SAB) No. 101 and
No. 104. The majority of the Company's sales are to distributors and licensees,
and these distributors and licensees have no right to return products.
COMPANY OVERVIEW
The Company is engaged in the research, development, manufacturing and
marketing of consumer products containing synthetic human pheromones and other
mood enhancing compounds. The Company initiated commercial operations in late
1994 with a line of fine fragrances and toiletries. Licensing of the Company's
technology is currently the core business of the Company while directly managing
the on-going development of identified compounds for potential new products. The
Company's patented compounds are sold to licensed customers and included as
components in their fragranced consumer products. The Company also offers
private label manufacturing services for third party consumer product licensees.
Results of Operations
Three Months ended September 30, 2005 compared to the Three Months ended
- --------------------------------------------------------------------------------
September 30, 2004
- ------------------
Net revenues for the third quarter of 2005 were $91,000, representing a 70%
decrease from the prior year's revenues of $300,000. Domestically, revenues were
$190,000 less than the prior year, attributable to decreased pheromone reorders
from existing licensees and established accounts. Sales were expected to decline
9
as established fragrance lines mature and their life cycle shorten. The Demeter
Natural Attraction(R) product line was launched in April 2004 and generated 14%
of the domestic revenues during the 2004 period which the Company did not expect
to maintain in 2005. International revenues were $19,000 less than the prior
year due to decreased private label production reorders this quarter.
Net revenue for the quarters ended September 30, 2005 and 2004 were as
follows (in thousands):
2005 2004
-------- --------
Markets:
U.S Markets $ 88 $ 278
International Markets 3 22
-------- --------
Net Sales $ 91 $ 300
======== ========
Gross profit for the quarter ended September 30, 2005 of $79,000 is 69%
less than last year's gross profit of $256,000. As a percentage of sales, gross
profit of 87% was higher than last year's of 85%. The increased gross margin was
caused by a favorable sales mix of higher margin products for the current period
compared to last year's sales mix. The decrease in gross profit is attributed to
the lower sales level.
Research and Development expenses for the second quarters of 2005 and 2004
were $38,000 and $27,000, respectively. The increase of the research
expenditures was the result of the Company increasing research activity
operations at the University of Utah. The Company is directly managing and
conducting all research and development efforts from this facility as well at
testing performed at another facility.
Selling, general and administrative expenses of $242,000 are $122,000 less
than last year's $364,000. Selling, marketing and distribution expenses were
$42,000 less than the prior year as the Company did not spend at the same level
as in 2004 to support the Natural Attraction(R) from Demeter line of fragrances
in the U.S. marketplace. General and administrative and facility costs decreased
by $80,000, a result of a reduction in consulting costs associated with the
Company's efforts to expand new investment potential and increase its
shareholder base, reduction of payroll related costs and reduced legal expenses.
The Company earned $3,000 and $5,000 in net interest income in both of the
periods, respectively. The decrease is due to lower cash balances.
The Company recorded no income tax provision in 2005 or 2004, due primarily
to a valuation allowance on deferred tax assets being recorded and the expected
utilization of net operating losses carried forward from prior years to offset
any significant tax liability. As of September 30, 2005, the Company's gross
deferred tax asset, which relates primarily to net operating losses carried
forward was $6,762,000. However, a full valuation allowance is provided for the
gross deferred tax asset as management could not determine whether its
realization is more likely than not.
Nine Months ended September 30, 2005 as compared to the Nine Months ended
- --------------------------------------------------------------------------------
September 30, 2004
- ------------------
Net revenues for the nine months ended September 30, 2005 were $348,000.
This was a 51% decrease from net revenues of $708,000 for the first nine months
of 2004. Domestically, revenues were $365,000 less than the prior years
$628,000. Domestic customers seem to have altered their historical purchasing
patterns which resulted in increased sales in the last quarter of 2004 and
decreased revenues in the current year. The Company's domestic fourth quarter
2004 sales were $360,000, a $228,000, 173%, increase from the 2003 fourth
quarter revenues. . Since the Company is not always aware of its customer's
manufacturing and marketing plans revenue fluctuations due to the customer
schedules will occur periodically. The Company has been anticipating that it
would see some sales declines as established fragrance lines mature and their
life cycle shorten. International revenues were $5,000 greater than the prior
year due to increased sales in the Asia and Latin America markets two areas
targeted for future growth internationally.
10
Net revenues for the nine months ended September 30, 2005 and 2004 were as
follows:
- --------------------------------------------------------------------------------
Markets 2005 2004
- --------------------------------------------------------------------------------
U.S Markets $ 263 $ 628
International Markets 85 80
---------- ----------
Net Revenues $ 348 $ 708
========== ==========
Gross profit for the first nine months of 2005 decreased 53% to $278,000
from $591,000 in 2004. The decrease is the result of the reduced sales due to
the customer ordering patterns noted above. Gross margin decreased to 80%
compared to 83% in 2004 due to a slightly unfavorable sales mix of lower margin
products.
Research and Development expenses for the first nine months of 2005 and
2004 were $132,000 and $43,000, respectively. The increase of the research
expenditures was the result of the Company inaugurating operations at the
University of Utah and initiating preliminary testing of a new pheromone
compound at another facility. The Company is now directly managing and actively
conducting all research and development efforts from this facility.
Selling, general and administrative expenses for the first half of 2005
were $887,000 and $1,053,000 for the comparable period of 2004, a $166,000
reduction. Selling, marketing and distribution expenses are $111,000 less than
the prior year as the Company did not launch any new products lines in 2005, as
it did in 2004. General, administrative and facility expenses were $ 55,000 less
than last year due to decreased payroll related costs, decreased consulting fees
and overall decreases in corporate related expenses.
The Company's cash balances generated $14,000 in net interest income during
the first nine months of 2005, as compared to $12,000 in 2004. The increase is
due to increased interest rates.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2005, the Company had cash of $622,000 with no outstanding
bank borrowings and working capital of $615,000. At December 31, 2004, it had
cash of $1,201,000 with no outstanding bank borrowings and working capital of
$1,336,000. For the first nine months of 2005, net cash used in on-going
activities was $578,000 comparable to the prior year's $572,000 and is the
result of collections from the higher than usual accounts receivable balance at
December 31, 2004.
The Company did not renew its Business Loan Agreement with Mid-Peninsula
Bank of Palo Alto, California which had been providing for a revolving line of
credit, secured primarily by the Company's trade receivables and inventory. The
agreement which expired on May 3, 2005 was never drawn upon by the Company.
Assuming the Company's activities proceed substantially as planned, the
Company's current cash position and projected results of operations for the next
twelve months are expected to require additional outside financing. On September
28, 2005 the Company signed a term sheet with Rubinson & Associates, Inc.
("Rubinson") under which Rubinson will purchase 833,333 units, each consisting
of one unregistered share of common stock of the Company, together with five
year warrants for the purchase of four additional shares of common stock. The
amount to be initially invested will be $500,000. If fully exercised, the
warrants would result in an aggregate additional investment of $2,416,666,
however there can be no assurance that any of the warrants will be exercised.
The terms agreed by the Company and Rubinson are subject to the completion
of mutual due diligence, which is expected to be completed by the end of
November 2005, execution of the definitive agreements and the completion of all
legal, corporate and securities compliance requirements. The understanding with
Rubinson also provides that Mitchell Rubinson, Chairman of Rubinson &
Associates, Inc., will be employed by the Company at a base salary of $1.00 per
year, be eligible to receive the Company's benefits and elected as Chairman of
the Board of Directors.
Risk Factors
The Company's future results may be affected to a greater or lesser degree
by the following factors, among others:
The Company has not had sustained profitable operations since 1997. Since
1997, the Company has incurred losses from operations. In May 2000 the Company
refocused its business model based on product licensing agreements. While the
Company anticipates that this change in its business will result in profitable
operations, it has not to date, and the Company's license based business model
may not be successful in the future.
11
The Company's marketing strategy may not be successful. The Company may not
be able to establish and maintain the necessary sales and distribution channels.
Consumer product and traditional fragrance companies may choose not to license
or private label the Company's products.
The Company may not be able to protect its technology or trade secrets. The
Company's patents and patent applications may not protect the Company's
technology or ensure that the Company's technology does not infringe another's
valid patent. Others may independently develop substantially equivalent
proprietary information. The Company may not be able to protect its technology,
proprietary information or trade secrets.
The Company may not be able to develop new patentable compounds. The
Company's success substantially depends upon developing and obtaining patents
for new mood and sensory enhancing compounds. The Company requires that its
products be scientifically tested validating the human responses to the
compounds. The Company may not be successful in validating that the desired
human responses are obtained.
The Company may not be able to recruit and retain key personnel. The
Company's success substantially depends upon recruiting and retaining key
employees and consultants with research, product development and marketing
experience. The Company may not be successful in recruiting and retaining these
key people.
The Company relies upon other companies to manufacture its products. The
Company and its distributors/licensees rely upon other companies to manufacture
its pheromones, supply components, and to blend, fill and package its fragrance
products. The Company and its distributors/licensees may not be able to obtain
or retain pheromone manufacturers, fragrance suppliers, or component
manufacturers on acceptable terms. This would adversely affect operating
results.
Item 3. Controls and Procedures
- --------------------------------
Evaluation of Disclosure Controls and Procedures. Based on their evaluation
as of the end of the period covered by this Quarterly Report on Form 10-QSB, our
chief executive officer and chief financial officer have concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934) are effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
Changes in Internal Control Over Financial Reporting. There were no changes
in our internal control over financial reporting identified in connection with
our evaluation that occurred during our third fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
12
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
a. Exhibits
Exhibit 31.1 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act
Exhibit 31.2 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act
Exhibit 32 Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. 1350
b. Reports on Form 8-K
The Company filed Form 8-K on September 28, 2005 in connection
with the signing of the term sheet with Rubinson & Associates,
Inc. for the future purchase of stock and warrants.
13
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.
Date: November 9, 2005 /s/ William P. Horgan
-------------------------------------
William P. Horgan
Chairman and Chief Executive Officer
Date: November 9, 2005 /s/ Gregory S. Fredrick
-------------------------------------
Gregory S. Fredrick
Chief Financial Officer
14