U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(MARK ONE)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of Securities
Exchange Act of 1934 (Fee Required)
For the quarterly period ended June 30, 1997
|_| Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _______ to _______.
Commission File No. 0-21739
GENETIC VECTORS, INC.
---------------------
(Exact Name of Small Business Issuer in Its Charter)
Florida 65-0324710
- ------- ----------
(State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification
or Organization) No.)
5201 N.W. 77 Avenue, Suite 100, Miami, Florida 33166
- ---------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(305) 716-0000
--------------
(Issuer's Telephone Number, Including Area Code)
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, and (2) has
been subject to such filing requirements for the past 90 days. Yes |X| No |_|
There were 2,339,634 shares of Common Stock outstanding as of August 12, 1997.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
Genetic Vectors, Inc., and Subsidiaries
(A Development Stage Company)
Index to Consolidated Financial Statements
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PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
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Page
----
Consolidated Balance Sheet 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
2
Genetic Vectors, Inc., and Subsidiaries
(A Development Stage Company)
Consolidated Balance Sheet (Unaudited)
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June 30 1997
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Assets
Current
Cash & Cash Equivalent $ 1,839,485
Accrued Interest 29,057
- --------------------------------------------------------------------------------
Total current assets 1,868,542
Certificates of Deposit 1,758,974
Net Fixed Assets 155,837
Other Assets 37,999
Deferred Patent Costs 161,938
- --------------------------------------------------------------------------------
$ 3,983,290
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Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 189,018
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189,018
- --------------------------------------------------------------------------------
Stockholders' Equity
Common Stock, $.001 par value, 10,000,000 shares authorized,
2,339,634 shares issued and outstanding 2,340
Additional paid-in capital 6,150,201
Deficit accumulated during the development stage (2,358,269)
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Total stockholders' equity 3,794,272
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$ 3,983,290
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See accompanying notes to consolidated financial statements.
3
Genetic Vectors, Inc., and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------------------------------------------
Cumulative
from
January 1, For the For the
1992 three three For the six For the six
(inception) months months months months
through ended ended ended ended
June 30, June 30, June 30, June 30, June 30,
1997 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------
Expenses:
Research and development $ 1,039,132 $ 175,727 $ -- $ 291,681 $ --
General and administrative 1,418,401 443,348 28,651 710,376 30,763
Depreciation and amortization 12,330 3,557 370 5,395 739
- --------------------------------------------------------------------------------------------------------------------
Total expenses 2,469,863 622,632 29,021 1,007,452 31,502
Other Income 111,594 35,897 -- 54,447 --
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Net loss $ (2,358,269) $ (586,735) $ (29,021) $ (953,005) $ (31,502)
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Weighted average number of common
shares outstanding -- 2,339,634 1,692,500 2,339,634 1,692,500
- --------------------------------------------------------------------------------------------------------------------
Net loss per common share $ -- $ (.25) $ (.02) $ (.41) $ (.02)
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See accompanying notes to consolidated financial statements.
4
Genetic Vectors, Inc., and Subsidiaries
(A Development Stage Company)
Consolidated Statements of Cash Flows (Unaudited)
- --------------------------------------------------------------------------------------------------------------------
Cumulative from
January 1, 1992 For the For the
(inception) through six months ended six months ended
June 30, June 30, June 30,
1997 1997 1996
- --------------------------------------------------------------------------------------------------------------------
Operating Activities:
Net loss $ (2,358,269) $ (953,005) $ (31,502)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 11,890 4,955 739
Stock options granted for services 56,250 -- --
Increase in interest receivable and other (67,056) (67,056) --
assets
Increase in accounts payable, accrued
liabilities, accrued payroll and
consulting fees 321,840 53,491 (9,068)
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Total adjustments 322,924 (8,610) (8,329)
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Net cash used in operating activities (2,035,345) (961,615) (39,831)
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Investing Activities:
Purchase of equipment (167,727) (143,547) --
Deferred patent costs (161,938) (6,587)
Purchase of Certificates of Deposit (1,758,974) (1,758,974) --
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Net cash used in investing activities (2,088,639) (1,909,108) --
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Financing Activities:
Increase (decrease) due to parent 413,518 -- 39,099
Payment of note payable -- (35,000)
Net proceeds from issuance of common stock
5,049,951 -- 185,100
Capital contribution 500,000 -- --
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Net cash provided by financing activities 5,963,469 (35,000) 224,199
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Net increase (decrease) in cash 1,839,485 (2,905,723) 184,368
Cash at beginning of period 0 4,745,208 99
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Cash at end of period $ 1,839,485 $ 1,839,485 $ 184,467
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Supplemental Disclosures:
Conversion of due to parent in
exchange for stock $ 413,518 $ -- $ --
Conversion of accrued wages for stock $ 132,822 $ -- $ --
Common stock issued for
subscription receivable $ 295,000 $ -- $ 295,000
Cash paid for interest $ -- $ -- $ --
Cash paid for taxes $ -- $ -- $ --
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See accompanying notes to consolidated financial statements.
5
Genetic Vectors, Inc., and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
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1. Notes to Genetic In the opinion of the Company, the accompanying
Vectors, Inc.'s unaudited financial statements include all
interim unaudited adjustments (consisting only of normal recurring
financial statements. accruals) which are necessary for a fair
presentation of the results for the periods
presented. Certain information and footnote
disclosures normally included in the financial
statements prepared in accordance with generally
accepted accounting principles have been omitted.
It is suggested that these financial statements
be read in conjunction with the Company's Annual
Report for the year ended December 31, 1996. The
results of operations for the period ended
June 30, 1997 are not necessarily indicative of
the results to be expected for the full year.
6
Item 2. Management's Plan of Operation.
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Forward-Looking Statements and Associated Risks. This Quarterly Report
contains forward-looking statements, including statements regarding, among other
things, (a) the Company's growth strategies, (b) anticipated trends in the
Company's industry and (c) the Company's future financing plans. In addition,
when used in this Quarterly Report, the words "believes," "anticipates" and
similar words are intended to identify certain forward-looking statements. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, many of which are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements as a result of changes in trends in the economy and
the Company's industry, reductions in the availability of financing and other
factors. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this Quarterly Report will in
fact occur. The Company does not undertake any obligation to publicly release
the results of any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances.
Additional Fund Raising Activities. Based solely on expenditures in the
absence of significant product sales, the Company believes that the funds raised
in its initial public offering (the "Offering"), which was closed on December
26, 1996, will last for approximately eighteen months after the date of the
Offering. The Company anticipates, however, that limited product sales will
occur in the year following the Offering. If significant product sales are
realized during the first eighteen months after the Offering, the Company should
not need to raise additional funds within such time period unless the Company
achieves significant and unexpected rapid development of new products which
require additional personnel, capital expenditures and working capital or in the
event of unforeseen difficulties.
Summary of Anticipated Product Research and Development. Although the
development of new products can never be fully anticipated, the Company believes
that it has a feasible plan for product development during 1997 and 1998. The
major components of this plan are as follows:
1997 . Product launch for modified EpiDNA Picogram Assay kit (Approximately
nine months after the Offering)
. Completion of EpiDNA Nanogram Assay development
. Development of automated production protocols for the EpiDNA Assays
. Completion of first DNA labeling product for test marketing in the
molecular biology research market 1998
. Continued research in applications of Genetic Vectors' nucleic acid
labeling technology
. Introduction of EpiDNA Nanogram Assay kits and new DNA labeling
products for use in molecular biology research laboratories
. Research in the application of automated techniques of DNA analysis for
EpiDNA
. Initiation of EasyID DNA probe product development for quality
assurance in the food and beverage industry
7
Significant Plant or Equipment Purchases. Management anticipates the
purchase of approximately $550,000 of equipment (including approximately
$400,000 of research and development equipment) during 1997 and 1998. The only
items whose cost will exceed $25,000 are a high performance liquid chromatograph
and associated hardware (which is used in the analysis and preparation of high
purity chemicals for both production and research purposes), an autoclave and a
telephone system.
Changes in the Number of Employees. The Company has hired a Director of
Quality Systems and a technician in connection with the quality control of its
manufacturing processes and product development. In addition, the Company has
hired a Director of Sales due to its launch of the EpiDNA Picogram Assay ahead
of schedule. The Company currently has ten employees. As shown in the following
chart, the Company anticipates hiring additional personnel during 1997 in
connection with its research and development and product development plan. The
Company believes that these personnel will be adequate to accomplish the tasks
set forth in its plan. In 1997 the Company expects to hire additional research
and development and production personnel. In 1998, additional sales and
production staff are expected to be hired to meet the Company's sales goals.
Proposed Personnel Addition Plan 1997 1998
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Sales and Administration
Administrative Personnel .............................. 3 0
Secretaries ........................................... 1 0
Salespersons .......................................... 1 1
Technical Info/Inside Sales ........................... 1 1
Supervisors ........................................... 0 1
Technicians ........................................... 4 2
Scientists ............................................ 1 2
Clerical .............................................. 2 4
==== ====
Total Proposed New Employees .......................... 13 11
==== ====
Total Employees at end of year......................... 23 34
==== ====
8
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits.
Exhibit
No. Description Location Page
- -------- ----------- -------- ----
3.1 Articles of Incorporation of the Company, Incorporated by reference to Exhibit
as amended No. 3.1 to Registrant's Registration Statement
(the "Registration Statement") on Form
SB-2 (Registration Number 333-5530-A).
3.2 By-laws of the Company Incorporated by reference to Exhibit No.
3.2 to the Registration Statement.
4.1 Form of Common Stock certificate Incorporated by reference to Exhibit No.
4.1 to the Registration Statement.
4.2 Form of Underwriters' Warrant Incorporated by reference to Exhibit No.
4.2 to the Registration Statement.
4.3 Form of 1996 Incentive Plan Incorporated by reference to Exhibit No.
4.3 to the Registration Statement.
10.1 License Agreement dated September 7, 1990 Incorporated by reference to Exhibit No.
between the University of Miami and its 10.1 to the Registration Statement.
School of Medicine and ProVec, Inc.
10.2 Assignment of License Agreement dated Incorporated by reference to Exhibit No.
January 20, 1992 between ProVec, Inc. and 10.2 to the Registration Statement.
EpiDNA, Inc.
10.3 Agreement between University of Miami and Incorporated by reference to Exhibit No.
its School of Medicine and the Company 10.3 to the Registration Statement.
dated August 21, 1996
10.4 Employment Agreement dated August 15, 1996 Incorporated by reference to Exhibit No.
between Mead M. McCabe, Sr. and the Company 10.4 to the Registration Statement.
10.5 Stock Option Addendum to Employment Incorporated by reference to Exhibit No.
Agreement dated August 15, 1996 between 10.5 to the Registration Statement.
Mead M. McCabe, Sr. And the Company
10.6 Employment Agreement dated August 15, 1996 Incorporated by reference to Exhibit No.
between Mead M. McCabe, Jr. and the Company 10.6 to the Registration Statement.
10.7 Stock Option Addendum to Employment Incorporated by reference to Exhibit No.
Agreement dated August 15, 1996 between 10.7 to the Registration Statement.
Mead M. McCabe, Jr. and the Company
10.8 Employment Agreement dated July 24, 1996 Incorporated by reference to Exhibit No.
between Richard H. Tullis and the Company 10.8 to the Registration Statement.
9
10.9 Stock Option Addendum to Employment Incorporated by reference to Exhibit No.
Agreement dated July 24, 1996 between 10.9 to the Registration Statement.
Richard H. Tullis and the Company
10.10 Consulting Agreement dated June 19, 1996 Incorporated by reference to Exhibit No.
between James A. Joyce and the Company 10.10 to the Registration Statement.
10.11 Letter Agreement dated December 16, 1994 Incorporated by reference to Exhibit No.
among Nyer Medical Group, Inc., the 10.11 to the Registration Statement.
Company, Mead M. McCabe, Sr. And Mead M.
McCabe, Jr.
10.12 Investors Finders Agreement dated Incorporated by reference to Exhibit No.
June 9, 1994 among Nyer Medical Group, 10.12 to the Registration Statement.
Inc., and the Company and Gulf American
Trading Company
10.13 Industrial Real Estate Lease dated June 12, Provided herewith
1997 among the Company and Jetex Group, Inc.
11. Statement re: computation of earnings Not applicable
15. Letter on unaudited financial information Not applicable
18. Letter on change in accounting principles Not applicable
19. Reports furnished to Security holders Not applicable
22. Published Report regarding matters Not applicable
submitted to Vote
23. Consents of experts and counsel Not applicable
24. Power of Attorney Not applicable
27. Financial Data Schedule Provided herewith
(b) Reports on Form 8-K.
None.
10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: August 13, 1997 GENETIC VECTORS, INC.
By:/s/ Mead M. McCabe, Jr.
-----------------------------------------
Mead M. McCabe, Jr.
President and Principal Financial Officer
11
EXHIBIT INDEX
Exhibit
No. Description Location Page
- -------- ----------- -------- ----
3.1 Articles of Incorporation of the Company, Incorporated by reference to Exhibit No.
as amended 3.1 to Registrant's Registration Statement
(the "Registration Statement") on Form
SB-2 (Registration Number 333-5530-A).
3.2 By-laws of the Company Incorporated by reference to Exhibit No.
3.2 to the Registration Statement.
4.1 Form of Common Stock certificate Incorporated by reference to Exhibit No.
4.1 to the Registration Statement.
4.2 Form of Underwriters' Warrant Incorporated by reference to Exhibit No.
4.2 to the Registration Statement.
4.3 Form of 1996 Incentive Plan Incorporated by reference to Exhibit No.
4.3 to the Registration Statement.
10.1 License Agreement dated September 7, 1990 Incorporated by reference to Exhibit No.
between the University of Miami and its 10.1 to the Registration Statement.
School of Medicine and ProVec, Inc.
10.2 Assignment of License Agreement dated Incorporated by reference to Exhibit No.
January 20, 1992 between ProVec, Inc. and 10.2 to the Registration Statement.
EpiDNA, Inc.
10.3 Agreement between University of Miami and Incorporated by reference to Exhibit No.
its School of Medicine and the Company 10.3 to the Registration Statement.
dated August 21, 1996
10.4 Employment Agreement dated August 15, 1996 Incorporated by reference to Exhibit No.
between Mead M. McCabe, Sr. and the Company 10.4 to the Registration Statement.
10.5 Stock Option Addendum to Employment Incorporated by reference to Exhibit No.
Agreement dated August 15, 1996 between 10.5 to the Registration Statement.
Mead M. McCabe, Sr. And the Company
10.6 Employment Agreement dated August 15, 1996 Incorporated by reference to Exhibit No.
between Mead M. McCabe, Jr. and the Company 10.6 to the Registration Statement.
10.7 Stock Option Addendum to Employment Incorporated by reference to Exhibit No.
Agreement dated August 15, 1996 between 10.7 to the Registration Statement.
Mead M. McCabe, Jr. and the Company
10.8 Employment Agreement dated July 24, 1996 Incorporated by reference to Exhibit No.
between Richard H. Tullis and the Company 10.8 to the Registration Statement.
10.9 Stock Option Addendum to Employment Incorporated by reference to Exhibit No.
Agreement dated July 24, 1996 between 10.9 to the Registration Statement.
Richard H. Tullis and the Company
12
10.10 Consulting Agreement dated June 19, 1996 Incorporated by reference to Exhibit No.
between James A. Joyce and the Company 10.10 to the Registration Statement.
10.11 Letter Agreement dated December 16, 1994 Incorporated by reference to Exhibit No.
among Nyer Medical Group, Inc., the 10.11 to the Registration Statement.
Company, Mead M. McCabe, Sr. And Mead M.
McCabe, Jr.
10.12 Investors Finders Agreement dated Incorporated by reference to Exhibit No.
June 9, 1994 among Nyer Medical Group, 10.12 to the Registration Statement.
Inc., and the Company and Gulf American
Trading Company
10.13 Industrial Real Estate Lease dated June 12, Provided herewith
1997 among the Company and Jetex Group, Inc.
11. Statement re: computation of earnings Not applicable
15. Letter on unaudited financial information Not applicable
18. Letter on change in accounting principles Not applicable
19. Reports furnished to Security holders Not applicable
22. Published Report regarding matters Not applicable
submitted to Vote
23. Consents of experts and counsel Not applicable
24. Power of Attorney Not applicable
27. Financial Data Schedule Provided herewith
13