United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to ___________
Commission file number : 33-23489
BIOGAN INTERNATIONAL, INC.
(Formerly known as Biogan Medical International, Inc.)
(Exact name of business issuer in its charter)
DELAWARE 58-1832055
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7213 Potomac Drive, Boise, Idaho 83704
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (208)-376-8500 Fax: (208) 376-4663
- --------------------------------------------------------------------------------
(Former Address)
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) Yes _X_,
No ___, and (2) has been subject to such filing requirements for the past 90
days. Yes _X_ No.___
The number of shares of common stock outstanding as of June 30, 1998, is
88,409,775.
Transitional Small Business Disclosure Format. Yes ___, No _X_.
BIOGAN INTERNATIONAL, INC.
10-QSB - 98 (September 30, 1998)
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements are filed as part of this report:
1. The Financial Statements of the Company as of September 30, 1998, have
been prepared by Wadsworth & Smith, Chartered, certified public
accountants, without audit. (Pages 1F-1 through 1F-14)
Item 2. Management's Discussion and Plan of Operation:
Results of Operations:
Operations for the 3nd quarter ended Septembere 30, 1998, resulted in an
operating loss of $63,760 or about $0.0007 per share. During the 3nd quarter
Management continued to focus its efforts on locating and developing financing
for the continued development and marketing of the IntorCorp Motor (previously
referred to as Smart-Power Motor) for its subsidiary IntorCorp, Inc., and on
developing its business plan for continued independent business activity.
Funding and Capital Resources:
The Company's cash balances and liquidity were exhausted by the end of the
first quarter of 1998. Management anticipates arranging short term loans to
continue operations of the Company through the calendar year 1998. Management
presently anticipates that additional working capital for continuing the
business of the Company will be located by a combination of one or more private
placements of common and/or preferred stock, joint venture development, debt
financing, or other means, all of which are being explored and implemented by
Management.
Plan of Operation:
The Plan of Operation for Biogan is to (i) continue locating financing for
developing and marketing of the IntorCorp Motor through its subsidiary
IntorCorp, Inc., (ii) develop a consulting and management service for small
companies, and (iii) locate and acquire other businesses.
BIOGAN INTERNATIONAL, INC.
10-QSB - 98 (September 30, 1998)
2
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. As previously reported in the June 30, 1997, Form
10-Q.B., on June 11, 1997, the Company filed a Complaint in the United States
District Court for the District of Idaho against Frank Wright, Defendant, to
enjoin Wright from transferring 6,000,000 shares of Biogan common stock, and for
the return of said 6,000,000 shares to the Company. The action is based on an
earlier default judgement in favor of Biogan against Tower Enterprises
International, Inc. for cancellation of some 15,150,000 shares of common stock
for failure to pay the subscription consideration. The subject 6,000,000 shares
are allegedly part of the said 15,150,000 shares previously owned by Tower. The
defendant has filed an answer denying the allegations, raised several
affirmative defenses to the complaint, and has requested a jury trial.
As of August 20, 1998, the parties agreed to settle the case with Mr.
Wright returning to Biogan the common stock remaining in his possession, i.e.
3,853,000 shares of common stock, and Biogan will in turn issue 300,000 shares
of common stock to Mr. Wright which he agrees to hold for one year. After the
agreed holding period, Mr. Wright has agreed that he will not sell more than
10,000 shares per month in the market. When the settlement is concluded and the
shares are returned to Biogan, the number of shares issued and outstanding will
be reduced by 3,853,000 shares and increased by the 300,000 shares issued to
him, for a net reduction of 3,553,000 shares outstanding. As of September 30,
1998, the final documentation to consummate the settlement was still in the
process of final completion and exchange of shares.
Item 2. Changes in Securities.
(a) None
(b) None
(c) None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Matters.
Biogan and Collective Technologies, L.L.C., an Idaho electrical engineering
firm, entered into a Preincorporation Agreement effective February 25, 1998, in
which Biogan and Collective Technologies each agreed
(i) to transfer to IntorCorp, Inc., an Idaho corporation formed March 11,
1998, their respective rights to all of the intellectual technology of
the "IntorCorp Motor" each in exchange for a 50% ownership interest.
BIOGAN INTERNATIONAL, INC.
10-QSB - 98 (September 30, 1998)
3
(ii) that a consulting agreement will be entered into with Collective
Technologies, Inc. providing for compensation compatible with industry
standards in the locality, for the continued development and testing
of the "IntoCorp Motor".
Reference is made to the 1997 year end 10KSB for a copy of the
Preincorporation Agreement, resumes of the members of the Board of Directors of
IntorCorp, Inc., and resumes of key engineers of Collective Technologies, L.L.C.
All of the members of the board of directors of IntorCorp, Inc. met April
30, 1998, and authorized the acquisition of the intellectual technology and the
issuance of stock pursuant to the terms of the Preincorporation Agreement and in
all other respects authorized and directed that IntorCorp, Inc. proceed with all
of the actions necessary to consummate the terms of the Preincorporation
Agreement. Mr. Scott DeHart was appointed president and Mr. George Wadsworth was
appointed secretary of IntorCorp pending the selection of a chief executive
officer.
Item 6. Exhibits.
(a) No exhibits
(b) No Form 8K filings
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BIOGAN INTERNATIONAL, INC.
(Registrant)
Date: December 9, 1998 By /s/ Ronald J. Tolman
-------------------------------------
Ronald J. Tolman, Acting Vice-President
Date: December 9, 1998 By /s/ Rulon L. Tolman
-------------------------------------
Rulon L. Tolman, Vice-President
BIOGAN INTERNATIONAL, INC.
10-QSB - 98 (September 30, 1998)
4
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
SEPTEMBER 30, 1998
CONTENTS
Accountants' Compilation Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity
(Deficiency) 4
Statement of Cash Flows 5
Notes to Financial Statements 6-13
1-F
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
[LETTERHEAD OF WADSWORTH & SMITH, P.C.]
To the Board of Directors
Biogan International, Inc.
Boise, ID
Board of Directors:
We have compiled the accompanying balance sheet of Biogan International, Inc. (a
development-stage company) as of September 30, 1998, and the related statements
of operations, stockholders' equity, and cash flows for the three month period
ended September 30, 1998, and the period from February 5, 1988 (inception),
through September 30, 1998, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management (the owners). We have not
audited or reviewed the accompanying financial statements and, accordingly, do
not express an opinion or any other form of assurance on them.
We are not independent with respect to Biogan International, Inc.
/s/ Wadsworth & Smith, P.C.
Wadsworth & Smith, P.C.
November 10, 1998
-1-
2-F
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
BALANCE SHEET
As of SEPTEMBER 30, 1998
ASSETS
CASH $ 12,417
PAYROLL ADVANCE 400
-----------
TOTAL CURRENT ASSETS $ 12,817
FURNITURE/EQUIPMENT 35,113
ACCUMULATED DEPRECIATION (12,285)
-----------
TOTAL FIXED ASSETS $ 22,828
TOTAL ASSETS $ 35,645
===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY)
ACCOUNTS PAYABLE $ 40,051
NOTE PAYABLE - STOCKHOLDERS 80,000
NOTES PAYABLE - OTHER 95,141
ACCRUED EXPENSES 191,494
-----------
TOTAL CURRENT LIABILITIES $ 406,686
STOCKHOLDERS' EQUITY (DEFICIENCY)
PREFERRED STOCK $.001 PAR VALUE,
10,000,000 SHARES AUTHORIZED NO SHARES ISSUED
COMMON STOCK $.001 PAR VALUE 300,000,000
SHARES AUTHORIZED, 88,409,775 ISSUED 88,410
ADDITIONAL PAID IN CAPITAL 5,187,879
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (5,647,330)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) $ (371,041)
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY) $ 35,645
===========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
2
3-F
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE THREE FROM INCEPTION
MONTH PERIOD FEBRUARY 5, 1988
ENDING THROUGH
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
SALES
REVENUE - FEES -- $ 7,150
RENTAL INCOME -- 750
----------- -----------
TOTAL SALES -- 7,900
EXPENSES
WAGES 36,351 $ 499,693
INCENTIVE BONUS -- 149,364
STOCK SUBSCRIPTION LOSS -- 101,006
DEPRECIATION EXPENSE 1,482 12,285
INTEREST EXPENSE 4,063 33,954
LEGAL & ACCOUNTING FEES 7,642 248,912
RENT 4,900 33,561
START UP COSTS -- 127,441
RESEARCH AND DEVELOPMENT -- 343,703
STOCK RESTITUTION EXPENSE -- 3,564,659
OTHER OPERATING EXPENSES 9,322 382,532
SUBSIDIARIES LOSSES -- 158,380
----------- -----------
TOTAL EXPENSES 63,760 $ 5,655,490
----------- -----------
NET OPERATING INCOME (LOSS) (63,760) (5,647,590)
INTEREST INCOME 1 5,447
MISCELLANEOUS EXPENSE (503) (5,187)
----------- -----------
TOTAL OTHER (502) $ 260
----------- -----------
NET INCOME (LOSS) (64,262) $(5,647,330)
=========== ===========
PRIMARY LOSS PER SHARE ($ 0.0007) ($ 0.1386)
=========== ===========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
4-F
3
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (FEBRUARY 5, 1988)
THROUGH SEPTEMBER 30, 1998
DEFICIENCY
ACCUMULATED
COMMON STOCK AMOUNT ADDITIONAL DURING THE
- ----------------------------------------------------------- PER PAID-IN DEVELOPMENT STOCKHOLDERS'
ISSUED: SHARES AMOUNT SHARE CAPITAL STAGE EQUITY (DEFICIENCY)
- ----------------------------------------------------------- ------ ---------- ----------- -------------------
July 27, 1988 2,250,000 2,250 0.0111 22,750 -- 25,000
January 25, 1989 17,750,000 17,750 0.0060 88,750 -- 106,500
January 29, 1989 3,637,347 3,637 0.0309 108,602 -- 112,239
To management:
September 14, 1995 41,955,173 41,955 0.0010 -- -- 41,955
September 14, 1995 906,667 907 0.0030 1,813 -- 2,720
September 14, 1995 452,600 453 0.0100 4,073 -- 4,526
October 4, 1995 61,980 62 0.1000 6,136 -- 6,198
December 8, 1995 23,580 24 0.2500 5,871 -- 5,895
For professional services:
September 14, 1995 120,000 120 0.0100 1,080 -- 1,200
October 4, 1995 100,000 100 0.0100 900 -- 1,000
December 8, 1995 100,000 100 0.0100 900 -- 1,000
February 23, 1996 115,222 115 0.2149 24,643 -- 24,759
July 29, 1996 493,034 493 0.2149 105,448 -- 105,941
December 2, 1996 417,893 418 0.3691 153,835 -- 154,253
January 31, 1997 250,774 251 0.2460 61,436 -- 61,687
February 28, 1997 56,621 57 0.2600 14,665 -- 14,721
March 15, 1997 76,173 76 0.2600 19,729 -- 19,805
March 29, 1997 15,400 15 0.2600 3,989 -- 4,004
June 2, 1997 225,597 226 0.1492 33,441 -- 33,667
August 12, 1997 224,269 224 0.1465 32,626 -- 32,851
October 31, 1997 304,546 305 0.1892 57,322 -- 57,626
December 31, 1997 (352,634) (353) 0.2070 (72,650) -- (73,003)
February 28, 1998 120,000 120 0.1872 22,340 -- 22,460
June 30, 1998 342,820 343 0.0191 6,213 -- 6,556
For loan payments:
September 14, 1995 61,000 61 0.1000 6,039 -- 6,100
November 1, 1995 50,000 50 0.1000 4,950 -- 5,000
December 8, 1995 10,000 10 0.1000 990 -- 1,000
August 12, 1997 41,600 42 0.2000 8,278 -- 8,320
August 31, 1997 66,666 67 0.1500 9,933 -- 10,000
October 1, 1997 57,692 58 0.2600 14,942 -- 15,000
December 30, 1997 240,000 240 0.2504 59,856 -- 60,096
For restitution:
September 14, 1995 2,668,967 2,669 0.2500 664,573 -- 667,242
October 4, 1995 2,180,600 2,181 0.2500 542,969 -- 545,150
November 1, 1995 372,270 372 0.2500 92,695 -- 93,068
December 8, 1995 7,353,248 7,353 0.2500 1,830,959 -- 1,838,312
February 23, 1996 744,444 744 0.2500 185,367 -- 186,111
May 3, 1996 125,929 126 0.2500 31,356 -- 31,482
June 21, 1996 350,863 351 0.2500 87,365 -- 87,716
July 29, 1996 310,567 311 0.2500 77,331 -- 77,642
September 11, 1996 2,667 3 0.2500 664 -- 667
December 2, 1996 73,480 73 0.2500 18,297 -- 18,370
January 31, 1997 4,000 4 0.2500 996 -- 1,000
February 28, 1997 38,000 38 0.2500 9,462 -- 9,500
June 2, 1997 18,000 18 0.2500 4,482 -- 4,500
August 12, 1997 11,200 11 0.2500 2,789 -- 2,800
October 31, 1997 4,400 4 0.2500 1,096 -- 1,100
For dispute settlement:
October 4, 1995 25,000 25 0.1000 2,475 -- 2,500
November 1, 1995 31,030 31 0.1000 3,072 -- 3,103
December 8, 1995 50,000 50 0.1000 4,950 -- 5,000
For private offering:
September 14, 1995 75,000 75 0.1000 7,425 -- 7,500
November 1, 1995 5,000 5 0.2500 1,245 -- 1,250
December 8, 1995 256,000 256 0.2500 63,744 -- 64,000
February 23, 1996 672,923 673 0.2208 147,875 -- 148,548
May 3, 1996 353,667 354 0.2208 77,718 -- 78,072
June 21, 1996 606,900 607 0.2208 133,366 -- 133,973
July 29, 1996 252,000 252 0.2201 55,206 -- 55,458
December 31, 1996 54,350 54 0.4600 24,946 -- 25,000
March 29, 1997 154,000 154 0.2500 38,346 -- 38,500
December 4, 1997 640,000 640 0.2500 159,360 -- 160,000
December 31, 1997 708,750 709 0.1422 100,041 -- 100,750
February 18, 1998 30,000 30 0.1300 3,870 -- 3,900
June 8, 1998 62,500 63 0.0800 4,938 -- 5,000
NET LOSS -- -- -- (5,647,330) (5,647,330)
---------- ---------- ----------- ----------- -----------
88,409,775 88,410 5,187,879 (5,647,330) (371,041)
========== ========== =========== =========== ===========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT.
5-F
4
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE THREE FROM INCEPTION
MONTH PERIOD FEBRUARY 5, 1988
ENDING THROUGH
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
CASH FLOWS FROM OPERATIONS
NET INCOME (LOSS) $ (64,262) $(5,647,330)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
ADD BACK STOCK ISSUED FOR:
MANAGEMENT 61,294
CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL
SERVICES, AND RESEARCH AND DEVELOPMENT -- 468,526
RESTITUTION -- 3,564,659
NOTES PAYABLE PAYMENTS -- 105,516
DISPUTE SETTLEMENTS -- 10,603
OTHER ADJUSTMENTS:
SUBSIDIARIES LOSSES -- 158,380
STOCK SUBSCRIPTION LOSS -- 101,006
FIRST DEVELOPMENT STAGE LOSS -- 142,733
DEPRECIATION AND AMORTIZATION 1,482 12,285
----------- -----------
TOTAL ADJUSTMENTS 1,482 4,625,002
ADVANCES -- (400)
PREPAID EXPENES 2,619 --
ACCOUNTS PAYABLE 6,864 40,051
ACCRUED LIABILITIES 30,038 191,494
----------- -----------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ (23,259) $ (791,183)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
FURNITURE/EQUIPMENT -- (35,113)
INVESTMENT IN BIOMAGNETRONICS -- (103,936)
INVESTMENT IN BIOLINK -- (54,443)
----------- -----------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES $ 0 $ (193,492)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
NOTE PAYABLE-STOCKHOLDER -- 80,000
NOTES PAYABLE - OTHER RECEIVED 35,000 138,822
NOTES PAYABLE - OTHER PAID -- (43,680)
ISSUANCE OF COMMON STOCK -- 821,950
OTHER -- --
----------- -----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES $ 35,000 $ 997,092
----------- -----------
NET INCREASE(DECREASE) IN CASH $ 11,741 $ 12,417
BEGINNING CASH BALANCE $ 676 $ --
----------- -----------
CASH ENDING BALANCE $ 12,417 $ 12,417
=========== ===========
CASH PAYMENTS FOR INTEREST EXPENSE $ 2,711 $ 2,711
CASH PAYMENTS FOR INCOME TAXES $ 0 $ 0
NONMONETARY TRANSACTION
366,000 SHARES ISSUED FOR DEBT REDUCTION -- 81,320
=========== ===========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
6-F
5
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. BUSINESS AND ABILITY TO CONTINUE IN EXISTENCE
Biogan International, Inc. (Biogan), is a development-stage company. See
Note 5 "Stockholders' Equity" for a history of Biogan's securities issuance
and accumulated deficit. Management presently intends to focus aggressively
on the continued further development and prototype testing of the
Motor/Controller system as well as entering into strategic alliances for
both manufacturing and marketing of the motor. Additional capital will be
required to fund the growth and expansion and provide working capital for
continued operations. See Note 10 "Private Placement Offering."
Biogan and Collective Technologies, LLC (Collective) negotiated a joint
venture Preincorporation Agreement effective February 25, 1998, in which
Biogan and Collective Technologies each agreed:
(i) to transfer to "IntorCorp, Inc." (a new Idaho corporation ) their
respective rights to all of the intellectual technology of the
"IntorCorp Motor", each in exchange for 50% ownership interest,
and
(ii) that a consulting agreement will be entered into with Collective
for the continued development and testing of the "IntorCorp
Motor" compatible with industry standards in the locality.
The Business Plan incorporated in the Preincorporation Agreement
acknowledges that:
(i) the 5HP DC Feasibility Prototype has been developed and tested,
and
(ii) management is currently considering the options of developing (a)
a large power (40HP) motor or (b) a duel development of a 5/10HP
motor.
Under either of the options the cost to develop support functions, conduct
the laboratory prototype phase development and testing, complete production
prototype phase development, and field test the motors will take
approximately two years and will cost approximately $6,000,000. Management
is currently of the opinion that the risks are lower and the market
potential higher with 5/10 HP motors, however, the final decision will be
made at such time as financing is located and committed.
See Accountant's Report
-6-
7-F
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT- STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1998
The directors of IntorCorp, Inc. are Scott DeHart, Wayne Stewart, George
Wadsworth, CPA, and John R. Hansen, Jr, attorney. Reference is made to the
Part III of the December 31, 1997, 10K for resumes of the key consultants
in Collective who will be responsible for the continued development of the
"IntorCorp Motor".
Management presently does not have any plans for the purchase or
acquisition of any significant plant or other equipment. It is anticipated
that additional employees will be required by the Registrant as the
acquired operations meet their expected growth. Since it is uncertain
whether Biogan will be successful in these ventures and whether it can
obtain sufficient capital to finance these ventures, it is uncertain
whether the Company will be capable of continuing in existence.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRESENTATION
The accompanying financial statements have been prepared in accordance with
the Statement of Financial Accounting Standards No. 7 "Accounting and
Reporting by Development-stage Enterprises". A development stage enterprise
is one in which planned principal operations have not commenced or if its
operations have commenced there has been no significant revenue there from.
Development-stage companies report cumulative costs from the enterprise's
inception. Biogan has had two stages of development (Note 5G).
B. INVESTMENT IN SUBSIDIARIES
Biogan owns 50% of the voting stock of BioMagnetronics, Inc. and Biolink ,
Inc. Biomagnetronics, Inc. and Biolink, Inc. were both development-stage
enterprises and neither company had any operating activities during the
current quarter of operations. The investments were accounted for by the
equity method whereby the purchase of stock shares was recorded at cost and
increased and decreased by 50% of any profits or losses respectively.
Biogan invested $103,937 in Biomagnetronics, Inc. and $54,443 in Biolink,
Inc. The carrying amount of the investments have been reduced to $0 for
each company since both companies have had no operating activities during
the past three quarters and there are no plans for future operations. As of
September 30, 1998, neither company has assets of any value.
The Board of Directors of IntorCorp, Inc. met on April 30, 1998 and at that
time approved the issuance of stock to Biogan and Collective in exchange
for the transfer of their respective rights of their Intellectual
Technology. Biogan will own 50% of the voting stock of the new Corporation.
The other investor in the new corporation is Collective, an engineering
group. The two groups are forming this new corporation in order to continue
further development of the motor. The new corporation will be a development
stage company. Stock has not yet been issued.
See Accountant's Report
-7-
8-F
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1998
C. STOCK VALUATION
Stock issued for non cash consideration has been valued at market value or
above from $.001 to $.25 per share (see Statement of Stockholders' Equity
"To Management" Note 5D). Stock issued for restitution (Note 5F) is valued
at $.25 per share.
D. NET LOSS PER SHARE
The net loss per share has been calculated using the weighted average
number of shares of common stock outstanding during the development stage
period. The weighted average number of shares of common stock outstanding
for the three month period ended September 30, 1998, and the period from
February 5, 1988 (inception), through September 30, 1998, was 88,118,215
and 40,752,593 respectively. Stock options have not been considered in the
calculation of loss per share because they are antidilutive. Of the
88,409,775 shares outstanding, 59,591,851 are restricted and 28,817,924
shares are unrestricted.
E. INCOME TAXES
At September 30, 1998 Biogan had net operating losses (NOL) carry forwards
as follows:
YEAR NOL YEAR EXPIRES
Feb 5, 1988
to Dec. 31, 1993 $ 142,733 2008
1994 11,782 2009
1995 3,251,790 2010
1996 1,134,736 2011
1997 736,051 2012
----------
$5,277,092
No deferred asset will be recognized on the tax benefit resulting from the
NOL until the Company becomes profitable. While management believes the
loss recorded due to the stock restitution loss ($3,564,659) is a tax
deductible expense, it could be subject to an IRS disallowance.
F. FURNITURE AND EQUIPMENT
Furniture and equipment are carried at cost. Depreciation of furniture and
equipment is provided using the straight-line method of depreciation and
the accelerated cost recovery method for federal income tax purposes.
Depreciation is calculated over useful life ranging from 5 to 10 years.
See Accountant's Report
9-F
-8-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1998
3. NOTES PAYABLE AT SEPTEMBER 30, 1998, CONSISTED OF THE FOLLOWING:
Notes Payable - Other:
Notes payable to Ryan Industries, Ltd. with interest at 10%
per annum from March 10, 1998. Note is unsecured and is payable
on demand. 6,000
Notes payable to Ryan Industries, Ltd. with interest at 10%
per annum from March 12, 1998. Note is unsecured and is payable
on demand.
39,141
Notes payable to Ryan Industries, Ltd. with interest at 10%
per annum from April 1, 1998. Note is unsecured and is payable
on demand.
10,000
Notes payable to Ryan Industries, Ltd. with interest at 10%
per annum from May 1, 1998. Note is unsecured and is payable
on demand.
5,000
Notes payable to an individual with interest at 10% per annum
from July 1, 1998. Note is unsecured and is payable on demand.
5,000
Notes payable to an individual with interest at 10% per annum
from August 18, 1998. Note is unsecured and is payable on demand. 15,000
Notes payable to an individual with interest at 12% per
annum from September 29, 1998. Note is unsecured and is payable
on demand. 15,000
Total Notes Payable - Other
$ 95,141
========
Notes Payable - Stockholder:
Notes payable to Ronald J. Tolman with interest at 10% per annum
from November 13, 1996, note is unsecured and is payable on
demand. Payments are applied first to any unpaid interest. $ 40,000
See Accountant's Report
10-F
-9-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1998
Notes payable to Rulon L. Tolman with interest at 10% per annum
from November 13, 1996, note is unsecured and is payable on
demand. Payments are applied first to any unpaid interest. 40,000
--------
Total Notes Payable - Stockholder $ 80,000
========
4. STOCK OPTIONS
On December 8, 1988, the board of directors of Biogan allocated 2,000,000
shares of the Company's authorized common stock shares for a stock
incentive plan to be issued as determined by the board at an option price
of not less than placement offering of any private placement offering of
the Company's common stock. No options have been granted or exercised under
this stock incentive plan.
5. STOCKHOLDERS' EQUITY (Deficit)
Following is a table of Biogan International Inc.'s stock and equity
transactions:
In (000)
Common .001/share Paid-In Accumulated Total
Shares Amount Capital Deficit Equity
- ---------------------------------------------------------------------------------------------------------------------
A) Ronney shares 2,250 $ 2,250 $ 22,750 $ $ 25,000
B) Biogan merger 17,750 17,750 88,750 106,500
C) Stock Subscriptions 3,637 3,637 108,602 112,239
D) Expenses/Service Mgmt Grp 43,400 43,400 17,894 61,294
E) Shares for Cash 7,115 7,115 1,399,482 1,406,597
F) Shares for Restitution 14,258 14,258 3,550,401 3,564,659
G) Deficit:
2/5/88 - 6/26/94 (142,733) (142,733)
6/27/94 - 6/30/98 (5,504,597) (5,504,597)
------------------------------------------------------------------------------------
Totals 88,410 $ 88,410 $ 5,187,879 $(5,647,330) $ (371,041)
=========== =========== =========== =========== ===========
A. Issuance of 2,250,000 shares of Ronney, a Delaware Corporation.
B. Exchange of Biogan (an Oregon Corporation), 5,000,000 shares for
17,750,000 shares of Ronney. Ronney and Biogan merged and changed its
name to Biogan International, Inc.
C. Issuance of a stock subscription to Tower Enterprises International,
Inc. (a European Corporation), a former 84% shareholder in Biogan
International, Inc. 11,512,653 of the 15,150,000 original stock
subscription has been canceled as of September 30, 1998.
See accountant's Report
-10-
11-F
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1998
D. Shares issued to new management for expenses/services incurred in
re-starting Biogan International, Inc. were valued at or above the
market value of the common stock listed on NASDAQ BB at $.001 to $.25
per share at the time the expenses were incurred; the services were
rendered; and the Board of Directors' resolution approving the
issuance was made. See "Statement of Stockholders' Equity" and Note 7.
E. Cash shares and shares issued for services rendered and for loan
payments by parties other than management.
F. From 1990 through May 1994 Biogan International, Inc. was under the
control of prior management and affiliates. Effective December 31,
1996, the Company completed its review and has issued 14,258,635
shares of common stock as restitution to investors who substantiated
their claims. In addition, the Company has obtained a court judgment
canceling 15,150,000 shares of common stock issued in "C" above, and
4,117,653 shares issued to Tower Enterprises International, Inc. in
"B" above. The company is continuing its litigation to recover damages
as a result of questionable stock transactions.
G. Biogan International has effectively had two development stages: (1)
From February 5, 1988, through June 27, 1994. During this period the
company was dormant for approximately four years. (2) The second
development stage (June 27, 1994, through September 30, 1998) is and
continues under the new management group set forth in D above.
6. COMMITMENTS AND CONTINGENCIES
A. SHARES FOR RESTITUTION
As set forth in Note 5F "Shareholders' Equity" Biogan was committed
through December 31, 1997, to issue shares to replace shares sold by
Tower International's US agent, Tower Holdings, Ltd.
B. OTHER
In connection with the Company's plans to become operational, various
verbal commitments and a letter of intent has been issued and they are
in the negotiation stage with various manufacturers and distributors
as of June 30, 1998. However, as discussed in Note 1 the Company
remains a development stage company.
7. RELATED PARTY TRANSACTIONS
Pursuant to a board of directors meeting held in July 1995, the Company
issued common stock to the following related parties in exchange for
expenses incurred on behalf of the Company and for services rendered: (The
schedule below has been adjusted to reflect shares issued to the Advisory
Board from each of the related parties listed below - see Note 12)
Name Date Numbered of Market Issue Expense/
Expense/Service shares issued Price Price Service
Rendered per share per share Amount
Glazier Family Trust
during 1994 10,079,178 $ .001 $ .001 $ 10,079
during first quarter of 1995 245,000 .001 .003 735
during second quarter of 1995 148,300 .010 .010 1,483
during third quarter of 1995 20,830 .100 .100 2,083
during fourth quarter of 1995 6,692 .125 .250 1,673
---------------------------------------------------------------------------------------
10,500,000 $ 16,053
See Accountant's Report
-11-
12-F
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1998
Ronald J. Tolman Family Trust
during 1994 8,982,729 $ .001 $ .001 $ 8,983
during first quarter of 1995 328,333 .001 .003 985
during second quarter of 1995 154,300 .010 .010 1,543
during third quarter of 1995 21,150 .100 .100 2,115
during fourth quarter of 1995 6,888 .125 .250 1,722
--------------------------------------------------------------------------------------------
9,493,400 $ 15,348
Rulon L. Tolman
during 1994 9,386,667 $ .001 $ .001 $ 9,387
during first quarter of 199 333,333 .001 .003 1,000
during second quarter of 1995 150,000 .010 .010 1,500
during third quarter of 1995 20,000 .100 .100 2,000
during fourth quarter of 1995 10,000 .125 .250 2,500
--------------------------------------------------------------------------------------------
9,900,000 $ 16,387
Biogan sub-leased office space (month to month) from a company owned by
Ronald J. Tolman until December 31, 1996. Total rental expense for the
period from inception February 5, 1998, until September 30, 1998, amounted
to $10,233. See Note 3 for details on notes payable due stockholders. Ron
Tolman and Rulon Tolman have accrued wages for the period ending September
30, 1998, of $76,600, and $63,800 respectively.
8. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
9. LEASES
The Company conducts its operations from facilities that are leased under a
noncancelable operating lease that expired on May 31, 1998. The Company is
presently on a month to month lease.
Rental expense for the quarter ending September 30, 1998, amounted to
$4,900. Rental expense for the period from inception February 5, 1988,
through September 30, 1998, amounted to $33,954. See Note 7 for related
party rental transactions.
10. PRIVATE PLACEMENT OFFERING
On August 5, 1997, the Company commenced a Private Placement offering of
8,000,000 shares of its common stock at $.25 per share the proceeds of
which are expected to be used primarily for furthering research and
development on the 5HP prototype motor, for development of 5HP motor to
irrigation pump application, for developing larger size motors, and for
working capital of the Company. Consent was received from the Idaho
Department of Finance to proceed with the offering to residents of Idaho
who qualify as accredited investors or other investors who are both
sophisticated and existing shareholders of the Company.
See Accountant's Report
-12-
13-F
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1998
11. CORPORATE NAME CHANGE
The Board of Directors consented to change the name of the corporation from
Biogan Medical International, Inc. to Biogan International , Inc. This
action was deemed necessary to avoid the confusion that has developed from
the word "medical" in the name when the main emphasis of the company is to
promote the development of the electro-magnetic motor. The name change was
recorded by the state of Delaware on September 5, 1997.
See Accountant's Report
14-F
-13-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS