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, 1999.
[ ] 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 ___,
No _X_ , 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 September 30, 1999, is
85,386,710.
Transitional Small Business Disclosure Format. Yes ___, No _X_.
BIOGAN INTERNATIONAL, INC.
10-QSB - 99 (Sept.30, 1999) 1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements are filed as part of this report:
The Financial Statements of the Company for the three months ended
September 30, 1999, prepared by Wadsworth & Smith, P.C., certified public
accountants, without audit.
Item 2. Management's Discussion and Plan of Operation:
Results of Operations:
Operations for the 3rd quarter ended September 30, 1999, resulted in an
operating loss of $6,341 or about $0.0001 per share. During the 3rd quarter
Management of Biogan International accomplished the following:
1. R-Tec Holding, Inc. Stock Dividend: On August 19th , 1999, Biogan organized
its wholly owned subsidiary R-Tec Holding, Inc, an Idaho corporation, into which
Biogan transferred its 50% ownership interest in IntorCorp, Inc. in exchange for
4,266,797 shares of common stock. On September 27, 1999, Biogan payed a stock
dividend of all of its R-Tec Holding common stock to its September 15, 1999,
shareholders of record, at the rate of one share of R-Tec Holding for each 20
shares of Biogan, rounded up. The stock dividend was paid to American Securities
Transfer & Trust, Inc., the Transfer Agent, in escrow until such time as an
Information Statement is sent to each of the shareholders receiving such R-Tec
Holding dividend stock, and the Form 10SB to be filed with the SEC by R-Tec
Holding, Inc. is effective. Management of R-Tec Holding is presently preparing
an Information Statement to be mailed to the shareholders receiving R-Tec
Holding stock and Form 10SB for filing with the Securities and Exchange
Commission.
The spin-off of R-Tec Holding, Inc. preserved for Biogan shareholders of
the record date (September 15, 1999) their proportionate interest in the
IntorCorp Motor project, with their shares in R-Tec Holding, Inc., and cleared
the financial records of Biogan International, Inc. for its negotiations with
Tiara Bay described in item 3 of this report.
2. R-Tec Holding, Inc. Recapitalization Agreement with R-Tec Corporation: On
October 11, 1999, R-Tec Holding, Inc. entered into a definitive agreement with
R-Tec Corporation and its shareholders under the terms of which (i) the
shareholders of R-Tec Corporation would transfer 80% of the common stock of
R-Tec Corporation to R-Tec Holding in exchange for 4,266,797 shares of common
stock (50% ownership) of R-Tec Holding; and (ii) R- Tec Holding would contribute
its common stock of IntorCorp to R-Tec Corporation. The closing of the
transaction was made on November 3, 1999. R-Tec Corporation is an engineering
company with sales for the nine months ending September 30, 1999, of $1,021,393,
and a net profit before tax of $82,731(unaudited), and a balance sheet equity of
$218,500 (unaudited). In addition to the customary conditions, the primary
contingency for closing the transaction was the ability of R-Tec Holding, Inc.
to raise approximately $450,000 working capital to finance expansion of R-Tec
Corporation's business. Under the terms of the agreement, the insider
shareholders of R-Tec Holding descended from Biogan will agree to enter into a
voting
BIOGAN INTERNATIONAL, INC.
10-QSB - 99 (Sept.30, 1999) 2
agreement to enable the shareholders descendent from R-Tec Corporation to
nominate a majority of the directors of R-Tec Holding for a period of five years
from the date of closing.
R-Tec Corporation personnel have previously assisted in the development of the
IntorCorp Motor, and a major incentive of the reorganization is the continued
development by R-Tec Corporation of the IntorCorp Motor project.
The parties intend to comply with registration and reporting requirements under
the Exchange Act, in order that the distribution of R-Tec Holding, Inc. shares
to Biogan shareholders will be in compliance with the Exchange Act and with the
NASD so that when such registration is effective, the stock of R-Tec Holding
Inc. may be publicly traded.
3. Biogan and Tiara Bay Agreement: On September 9, 1999, Biogan entered into an
Agreement and Plan of Reorganization with Tiaro Bay Resources, Inc., a Canadian
corporation, under the terms of which Biogan agrees to (i) change its name to
HMZ, Metals, Inc., (ii) effect a 1 for 12 reverse stock split, and (iii) issue
33,300,000 shares of stock (approximately 82% of Biogan stock post reverse
split) to shareholders residing in foreign countries, to acquire 100% of Hechi
Industrial Company Ltd. of Guangxi, a mining and refining company incorporated
under the laws of the Peoples Republic of China. As part of the agreement Tiaro
Bay agrees to provide funds for the payment of identified liabilities of Biogan,
and to date has made a $ 23,000 advance payment therefore. By amendment the
closing of the transaction is presently scheduled for November 30, 1999. Under
the terms of the agreement Tiaro Bay may by 30 days written notice terminate the
agreement.
Hechi Industrial Company Ltd. had as of June 30, 1998, (audited statements)
in excess of 51 Million in assets, and a shareholders equity of in excess of 31
Million, and revenues for the 6 months ended June 30, 1998, in excess of 28
Million and a net profit in excess of 2 Million. Tiaro Bay is providing
management in mining and refining expertise, and is currently arranging 11.3
Million of capital for modernizing the refining equipment and operation which is
expected to increase production and profits. Products from the mining company
include blister copper, copper cathodes, silver, gold, and concentrates of zinc,
tin, lead, titanium, rare earth, antimony, coal and sulfuric acid.
As of the date of filing this report the parties to the Plan of
Reorganization are preparing to close the transaction as scheduled on November
30, 1999, and at that time funding or other assets will be available to retire
the current liabilities of Biogan.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities.
(a) None
(b) None
(c) None
BIOGAN INTERNATIONAL, INC.
10-QSB - 99 (Sept.30, 1999) 3
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Matters.
Item 6. Exhibits.
(a) No exhibits
(b) (i) The Company filed a Form 8-K on August 18, 1999, in connection with
its letter of intent with R-Tec Corporation to complete the transaction
described in paragraph 2 of Item 2 of this 10QSB report for September 30, 1999.
(ii) The Company filed a Form 8-K on October 27, 1999, in connection with
(A) the formation and spin off of R-Tec Holding, Inc., as described in paragraph
1 of Item 2 of this 10QSB report for September 30, 1999, (B) the definitive
Agreement for Recapitalization with R-Tec Corporation as described in paragraph
2 of this 10QSB report, and (C) the Agreement and Plan of Reorganization with
Tiaro Bay Resources, Inc., involving the acquisition of Hechi Industrial Company
Ltd. of Guangxi as described in paragraph 3 of Item 2 of this 10QSB report.
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: November 10, 1999. By /s/ Ronald J. Tolman
---------------------------------------
Ronald J. Tolman, Acting Vice-President
Date: November 10, 1999 By /s/Rulon L. Tolman
---------------------------------------
Rulon L. Tolman, Vice-President
BIOGAN INTERNATIONAL, INC.
10-QSB - 99 (Sept.30, 1999) 4
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT - STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
SEPTEMBER 30, 1999
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
[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, 1999, and the related statements
of operations, stockholders' equity, and cash flows for the three month period
ended September 30, 1999, and the period from February 5, 1988 (inception),
through September 30, 1999, 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, 1999
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
BALANCE SHEET
As of SEPTEMBER 30, 1999
ASSETS
CASH $ 5,405
PAYROLL ADVANCE 400
-----------
TOTAL CURRENT ASSETS $ 5,805
FURNITURE/EQUIPMENT 34,716
ACCUMULATED DEPRECIATION (18,028)
-----------
TOTAL FIXED ASSETS $ 16,688
INVESTMENT IN SUBSIDIARIES --
TOTAL ASSETS $ 22,493
===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY)
ACCOUNTS PAYABLE $ 75,835
NOTES PAYABLE - STOCKHOLDERS 120,000
NOTES PAYABLE - OTHER 20,000
ACCRUED SALARIES - OFFICERS 171,219
ACCRUED EXPENSES (ACCRUED INTEREST DUE STOCKHOLDERS $27,361) 28,162
-----------
TOTAL CURRENT LIABILITIES $ 415,216
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, 85,386,710 ISSUED 85,387
ADDITIONAL PAID IN CAPITAL 4,346,475
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (4,824,585)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) $ (392,723)
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY) $ 22,493
===========
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT
2
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF OPERATIONS
FROM INCEPTION
FOR THE THREE MONTH PERIOD FEBRUARY 5, 1988
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
SALES
REVENUE - FEES $ -- $ 7,150
RENTAL INCOME -- 1,470
----------- -----------
TOTAL SALES -- 8,620
EXPENSES
WAGES $ -- $ 503,889
STOCK SUBSCRIPTION LOSS -- 101,006
DEPRECIATION EXPENSE 1,472 18,177
INTEREST EXPENSE 3,994 48,290
INCENTIVE BONUS -- 149,364
LEGAL & ACCOUNTING FEES 52,710 341,311
RENT -- 37,287
START UP COSTS -- 127,441
RESEARCH AND DEVELOPMENT (22) 343,681
SUBSIDIARIES LOSSES -- 158,380
OTHER OPERATING EXPENSES (NOTE 12) (52,025) 328,179
----------- -----------
TOTAL EXPENSES $ 6,129 $ 2,157,005
----------- -----------
NET OPERATING INCOME (LOSS) (6,129) (2,148,385)
STOCK RESTITUTION EXPENSE (NOTE 5F) -- (2,676,409)
INTEREST INCOME -- 5,463
OTHER INCOME -- 238
MISCELLANEOUS EXPENSE (212) (5,492)
----------- -----------
TOTAL OTHER $ (212) $(2,676,200)
----------- -----------
NET INCOME (LOSS) $ (6,341) $(4,824,585)
=========== ===========
PRIMARY INCOME (LOSS) PER SHARE ($ 0.0001) ($ 0.1158)
=========== ===========
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT
3
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (FEBRUARY 5, 1988)
THROUGH SEPTEMBER 30, 1999
DEFICIENCY
ACCUMULATED
COMMON STOCK AMOUNT ADDITIONAL DURING THE STOCKHOLDERS'
- --------------------------------------------------------------- PER PAID-IN DEVELOPMENT EQUITY
ISSUED: SHARES AMOUNT SHARE CAPITAL STAGE (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
December 31, 1998 25,545 26 0.0010 0 -- 26
July 1, 1999 235,350 235 0.0340 7,778 -- 8,013
July 31, 1999 (150,000) (150) 0.3838 (57,420) -- (57,570)
August 20, 1999 178,476 178 0.0476 8,311 -- 8,489
September 20, 1999 -- -- -- 20,000 -- 20,000
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
December 31, 1998 240,564 241 0.2696 64,625 -- 64,865
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
November 20, 1998 (3,553,000) (3,553) 0.2500 (884,697) -- (888,250)
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 -- -- -- (4,824,585) (4,824,585)
----------- ----------- ----------- ----------- -----------
85,386,710 85,387 4,346,475 (4,824,585) (392,723)
=========== =========== =========== =========== ===========
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
4
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF CASH FLOWS
FROM INCEPTION
FOR THE THREE MONTH PERIOD FEBRUARY 5, 1988
ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
CASH FLOWS FROM OPERATIONS
NET INCOME (LOSS) $ (6,341) $(4,824,585)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED BY OPERATING ACTIVITIES:
ADD BACK STOCK ISSUED FOR:
MANAGEMENT -- 61,294
CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL
SERVICES, AND RESEARCH AND DEVELOPMENT (41,067) 427,485
RESTITUTION -- 2,676,409
INTEREST EXPENSE -- 28,920
DISPUTE SETTLEMENTS -- 10,603
OTHER ADJUSTMENTS:
SUBSIDIARIES LOSSES -- 158,380
STOCK SUBSCRIPTION LOSS -- 101,006
FIRST DEVELOPMENT STAGE LOSS -- 142,733
DEPRECIATION AND AMORTIZATION 1,472 18,177
----------- -----------
TOTAL ADJUSTMENTS (39,595) 3,625,007
ADVANCES -- (400)
ACCOUNTS RECEIVABLE -- --
ACCOUNTS PAYABLE 12,291 75,835
ACCRUED LIABILITIES 3,994 199,381
----------- -----------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ $ (29,651) $ (924,762)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
PURCHASE FURNITURE/EQUIPMENT -- (35,113)
DISPOSAL FURNITURE/EQUIPMENT -- 475
INVESTMENT IN BIOMAGNETRONICS -- (103,937)
INVESTMENT IN BIOLINK -- (54,443)
----------- -----------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES $ $ -- $ (193,018)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
NOTE PAYABLE-STOCKHOLDER 10,000 90,000
NOTES PAYABLE - OTHER RECEIVED 15,000 245,141
PAYMENT OF NOTES PAYABLE - OTHER (10,000) (53,680)
ISSUANCE OF COMMON STOCK 20,000 841,952
OTHER -- (228)
----------- -----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES $ $ 35,000 $ 1,123,185
----------- -----------
NET INCREASE(DECREASE) IN CASH $ $ 5,349 $ 5,405
BEGINNING CASH BALANCE $ $ 56 $ --
----------- -----------
CASH ENDING BALANCE $ $ 5,405 $ 5,405
=========== ===========
SUPPLEMENTAL INFORMATION
CASH PAYMENTS FOR INTEREST EXPENSE $ $ -- $ 2,711
CASH PAYMENTS FOR INCOME TAXES -- --
NONMONETARY TRANSACTIONS
STOCK ISSUED FOR:
DEBT REDUCTION -- 141,461
MANAGEMENT -- 61,294
CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL
SERVICES, AND RESEARCH AND DEVELOPMENT (41,067) 427,485
RESTITUTION -- 2,676,409
INTEREST EXPENSE -- 28,920
DISPUTE SETTLEMENTS -- 10,603
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT
5
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
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 accomplished the following during the
three month period ending September 30, 1999:
A. R-Tec Holding, Inc. Stock Dividend: On August 19th, 1999, Biogan
organized its wholly owned subsidiary R-Tec Holding, Inc., an Idaho
corporation, into which Biogan transferred its 50% ownership interest
in IntorCorp, Inc. in exchange for 4,266,797 shares of common stock.
On September 27, 1999, Biogan paid a stock dividend of all of its
R-Tec Holding, Inc. common stock to its September 15, 1999,
shareholders of record, at the rate of one share of R-Tec Holding,
Inc. for each 20 shares of Biogan, rounded up. The stock dividend was
paid to American Securities Transfer & Trust, Inc., the Transfer
Agent, in escrow until such time as an Information Statement is sent
to each of the shareholders receiving such R-Tec Holding, Inc.
dividend stock, and the Form 10SB to be filed with the SEC by R-Tec
Holding, Inc. is effective. Management of R-Tec Holding, Inc. is
presently preparing an Information Statement to be mailed to the
shareholders receiving R-Tec Holding, Inc. stock and Form 10SB for
filing with the Securities and Exchange Commission.
The spin-off of R-Tec Holding, Inc. preserved for Biogan shareholders
of the record date (September 15, 1999) their proportionate interest
in the IntorCorp Motor project, with their shares in R-Tec Holding,
Inc., and cleared the financial records of Biogan International, Inc.
for its negotiations with Tiaro Bay described in item 3 of this
report.
B. R-Tec Holding, Inc. Recapitalization Agreement with R-Tec Corporation:
On October 11, 1999, R-Tec Holding, Inc. entered into a definitive
agreement with R-Tec Corporation and its shareholders under the terms
of which (i) the shareholders of R-Tec Corporation would transfer 80%
of the common stock of R-Tec Corporation to R-Tec Holding, Inc. in
exchange for 4,266,797 shares of common stock (50% ownership) of R-Tec
Holding, Inc.; and (ii) R-Tec Holding, Inc. would contribute its
common stock of IntorCorp to R-Tec Corporation. The closing of the
transaction was made on November 3, 1999. R-Tec Corporation is an
engineering company with sales for the nine months ending September
30, 1999, of $1,021,393, and a net profit before tax of $82,731
(unaudited), and a balance sheet equity of $218,500 (unaudited). In
addition to the customary conditions, the primary contingency for
closing the transaction was the ability of R-Tec Holding, Inc. to
raise approximately $450,000 working capital to finance expansion of
R-Tec Corporation's business. Under the terms of the agreement, the
insider shareholders of R-Tec Holding, Inc. descended from Biogan will
agree to enter into a voting agreement to enable the shareholders
descendent from R-Tec Corporation to nominate a majority of the
directors of R-Tec Holding, Inc. for a period of five years from the
date of closing.
See Accountants' Report
-6-
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT- STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1999
R-Tec Corporation personnel have previously assisted in the
development of the IntorCorp Motor, and a major incentive of the
reorganization is the continued development by R-Tec Corporation of
the IntorCorp Motor project.
The parties intend to comply with registration and reporting
requirements under the Exchange Act, in order that the distribution of
R-Tec Holding, Inc. shares to Biogan shareholders will be in
compliance with the Exchange Act and with the NASD so that when such
registration is effective, the stock of R-Tec Holding, Inc. may be
publicly traded.
C. Biogan and Tiaro Bay Agreement: On September 9, 1999, Biogan entered
into an Agreement and Plan of Reorganization with Tiaro Bay Resources,
Inc., a Canadian corporation, under the terms of which Biogan agrees
to (i) change its name to HMZ, Metals, Inc., (ii) effect a 1 for 12
reverse stock split, and (iii) issue 33,300,000 shares of stock
(approximately 82% of Biogan stock post reverse split) to shareholders
residing in foreign countries, to acquire 100% of Hechi Industrial
Company Ltd. of Guangxi, a mining and refining company incorporated
under the laws of the Peoples Republic of China. As part of the
agreement Tiaro Bay agrees to provide funds for the payment of
identified liabilities of Biogan, and to date has made a $23,000
advance payment of which $20,000 was paid by September 30, 1999.
Therefore, by amendment, the closing of the transaction is presently
scheduled for November 30, 1999. Under the terms of the agreement
Tiaro Bay may by 30 days written notice terminate the agreement.
Hechi Industrial Company Ltd. had as of June 30, 1998, (audited
statements) in excess of 51 Million in assets, and a shareholders
equity of in excess of 31 Million, and revenues for the 6 months ended
June 30, 1998, in excess of 28 Million and a net profit in excess of 2
Million. Tiaro Bay is providing management in mining and refining
expertise, and is currently arranging 11.3 Million of capital for
modernizing the refining equipment and operation which is expected to
increase production and profits. Products from the mining company
include blister copper, copper cathodes, silver, gold, and
concentrates of zinc, tin, lead, titanium, rare earth, antimony, coal,
and sulfuric acid.
As of the date of filing this report the parties to the Plan of
Reorganization are preparing to close the transaction as scheduled on
November 30, 1999, and at that time funding of other assets will be
available to retire the current liabilities of Biogan.
Management presently does not have any plans for the purchase or
acquisition of any significant plant or other equipment. Since Biogan may
be unsuccessful in completing the transaction with Tiaro Bay, it is
uncertain whether the Company will be capable of continuing in existence.
See Accountants' Report
-7-
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1999
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 develop- ment 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 period 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 and there are no plans for
future operations. As of September 30, 1999, neither company has
assets of any value.
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 INCOME (LOSS) PER SHARE
The net income (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 period ended September 30, 1999, and
the period from February 5, 1988 (inception), through September 30,
1999, was 85,194,622, and 41,645,444 respectively. Stock options have
not been considered in the calculation of loss per share because they
are antidilutive. Of the 85,386,710 shares outstanding 59,353,166 are
restricted and 26,033,544 shares are unrestricted.
See Accountants' Report
-8-
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1999
E. INCOME TAXES
At September 30, 1999, Biogan had net operating losses (NOL)
carryforwards and research & development tax credit as follows:
YEAR NOL YEAR EXPIRES TAX CREDITS YEAR EXPIRES
1995 2,887,130 2010
1996 1,122,539 2011 12,197 2011
1997 736,051 2012 9,665 2012
---------- -------
$4,745,720 $21,862
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
($2,676,409) 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.
3. NOTES PAYABLE AT SEPTEMBER 30, 1999, CONSISTED OF THE FOLLOWING:
Notes Payable - Other:
Notes payable to an individual with interest at
10% per annum from September 7, 1999. 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 8%
per annum from July 26, 1999. Note is unsecured
and is due April 28, 2000. 10,000
--------
Total Notes Payable -
Other $ 20,000
========
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 Accountants' Report
-9-
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1999
Notes payable to Ronald J. Tolman with interest at
10% per annum from August 18, 1998. Note is
unsecured and is payable on demand. 15,000
Notes payable to Ronald J. Tolman with interest at
12% per annum from September 29, 1998. Note is
unsecured and is payable on demand. 15,000
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
Notes payable to Rulon L. Tolman with interest at
10% per annum from April 29, 1999. Note is
unsecured and is payable on demand. Payments are
applied first to any unpaid interest. 10,000
--------
Total Notes Payable -
Stockholder $120,000
========
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 46,299 46,299 462,480 508,779
E) Shares for Cash 4,639 4,639 987,693 992,332
F) Shares for Restitution 10,812 10,812 2,676,200 2,687,012
G) Deficit:
2/5/88 - 6/26/94 (142,733) (142,733)
6/27/94 - 09/30/99 (4,681,852) (4,681,852)
------------------------------------------------------------------------
$ 85,387 $ 85,387 $ 4,346,47 $(4,824,585) $ (392,723)
========== ========== ========== =========== ==========
See Accountants' Report
-10-
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1999
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 December 31, 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 stock transactions and has issued 14,364,665
shares of common stock as restitution to investors who substantiated their
claims of purchasing stock from the Company but had not received stock
certificates. 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 recovered 3,553,000 shares relating to the above court
order on November 20, 1998. This transaction results in a net total of
10,811,665 shares for restitution being issued.
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,
1999) is and continues under the new management group set forth in D
above.
6. COMMITMENTS AND CONTINGENCIES
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.
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 Accountants' Report
-11-
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1999
Name Date Numbered of Market Issue Expense/
Expense/Service shares issued Price Price Service
Rendered per share per share Amount
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 1995 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, 1988, until September 30, 1999, amounted
to $10,233. See Note 3 for details on notes payable due stockholders. Ron
Tolman, Rulon Tolman and Jacque Tolman have accrued wages for the two-year
period ending December 31, 1998, of $96,600, $63,800 and $10,800
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, 1999. The Company is
presently on a month to month lease.
Rental expense for the three months ended September 30, 1999, amounted to
$611. Rental expense for the period from inception February 5, 1988,
through September 30, 1999, amounted to $37,287. See Note 7 for related
party rental transactions.
10. 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 Accountants' Report
-12-
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
SEPTEMBER 30, 1999
11. YEAR 2000 COMPLIANCE
The Company will begin a Year 2000 compliance project in June 1999. The
project will encompass upgrading the server and all proprietary software
and non-proprietary software. The project will be completed by September
1999.
The Company is in the process of assessing Year 2000 issues not related to
its internal systems, including issues with suppliers and consultants. Due
to the general uncertainty of the Year 2000 readiness of suppliers and
consultants, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the
Company's results of operations, liquidity or financial condition. The
Company believes that interruptions of normal operations will not be
affected.
Total expenditures for the Year 2000 project are estimated to be $5,000 in
fiscal year 1999. There were no Year 2000 related costs in the current
fiscal year.
The Company is currently formulating contingency plans in the event of a
Year 2000 failure. The Company expects that a contingency plan will be in
place by December 31, 1999.
12. OTHER OPERATING EXPENSES
150,000 shares of common stock were canceled, that resulted in a credit to
other operating expenses of $57,570.
See Accountants' Report
-13-