UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
================================================================================
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended Commission file number
September 30, 2003 33-27042-NY
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BARRINGTON SCIENCES CORPORATION
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(Exact name of registrant as specified in its charter)
(Formerly known as: Financial Express Corporation)
Nevada 93-0996537
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1107 Bennet Drive
Port Coquitlam, British Columbia, Canada V3C 6H2
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (604) 868-7400
Securities registered pursuant to Section 12(b) of the Act:
NONE NONE
(Title of Each Class) (Name of Each Exchange
on which Registered)
Securities registered pursuant to Section 12 (g) of the Act:
Common
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No (2) Yes X No
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The number of shares of the Common Stock of the registrant outstanding as of
September 30, 2003 was 24,156,517. The aggregate common stock held by
non-affiliates on September 30,2003 was 8,514,417.
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FORM 10-K INDEX
PART I
Item 1. Description of the Business 3
Item 2. Properties 16
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholders Matters 18
Item 6. Selected Financial Matters 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 19
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 19
PART III
Item 10. Directors and Executive Officers of Registrant 20
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial Owners and Management 23
Item 13. Certain Relationships and Related Transactions 24
Item 14. Controls and Procedures 25
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 26
Signatures
Financial Statements
Officer Certifications
2
Item 1. Description of the Business
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Forward-Looking Statements. The following information contains information
concerning possible future results, and accordingly, are what the Securities and
Exchange Commission ("SEC") has defined as forward-looking statements. You
should not consider this information about the future to be either accurate or
reliable. The future performance of the Company is subject to many uncertainties
and risk factors (see "Risk Factors" below for a discussion of major risks).
Although they represent Management's present plans, no assurance can be given
that actual results will approximate current plans.
GENERAL
Financial Express Corporation (the "Company") was originally incorporated in the
state of Nevada on January 5, 1989 as Harley Equities, Ltd., to purchase, merge
with or acquire any business or assets which management believed had the
potential for being profitable. During May of 1991, through a series of
transactions, Harley acquired all of the outstanding stock of Financial Express
Corporation; a company organized to develop and commercialize a distinctive
nationwide service for processing and clearing checks and related bank
transactions. The only assets of the acquired Company consisted of intangible
assets comprised of intellectual properties, vendor relationships and customer
relationships established during the development of the service. Concurrent with
the acquisition, the Company changed the corporate name to Financial Express,
Corporation. The Company expended all of its liquidity during 1991 in the search
for financing in order to properly develop and market its product.
During 1995, the development of this business was abandoned and the intangible
assets were written off.
The Company continued in existence, searching for financing and/or potential
merger candidates to carry on the Company's existing or other business
opportunities.
In an Asset Purchase Agreement dated October 17, 2002 (the "Asset Purchase
Agreement") between Barrington Sciences International Corporation
("Barrington"), as seller, and the Company, as purchaser, the Company agreed to
acquire all of the assets of Barrington. Barrington is engaged in the
development of specialized medical diagnostic test kits. Barrington is also
engaged in a joint venture in China with Shandong Weigao Group to facilitate the
manufacture and distribution of the company's diagnostic test kits in China and
for export.
The shareholders of Barrington approved the transaction as required by the Asset
Purchase Agreement and the transaction was closed, effective as of December 31,
2002.
Pursuant to the terms of the Asset Purchase Agreement, the Company acquired all
of the assets of Barrington, including all cash, equipment, machinery,
inventory, material contracts, goodwill, trademarks, patents and other
intellectual property, as well as all of the issued and outstanding shares in
the stock of Barrington's wholly-owned subsidiary, ABP Diagnostics Limited, a
company incorporated under the laws of England.
The Company also has acquired all unfilled orders and all other contracts,
engagements or commitments to which Barrington was entitled in connection with
Barrington's on-going business, and it is the Company's intent to assert all
rights and perform all related obligations under such contracts. None of these
contracts or rights are material.
3
On December 30, 2002, the Company (FEC) entered into an "Asset Purchase
Agreement" with Barrington Sciences International Corporation ("BSIC") including
its wholly owned subsidiaries. The transaction was accounted for as a "reverse
acquisition" since FEC was an inactive shell company and no change of ownership
of the BSIC assets occurred
As consideration for the sale of the assets, the Company issued to Barrington
19,701,653 shares of the company's common stock. After this issuance, there are
now 23,446,354 shares issued and outstanding, 563,567 warrants at Cdn $0.75
outstanding. There are also 422,400 warrants outstanding they are 211,200 at
$5.50 and 211,200 at $6.00
Subsequent to the closing of the asset acquisition, the Company changed its name
to Barrington Sciences Corporation, and continues to pursue the business of
developing, manufacturing and distributing medical diagnostic test kits and
related products.
For the years from 1995 through 2002, the Company conducted no material business
and as of December 31, 2002, prior to the acquisition of Barrington's assets,
had stockholder's equity of ($22,153).
The Company currently has no full time employees. The Company uses the part time
services of 5 individuals.
HISTORY AND DESCRIPTION OF COMPANY'S CURRENT BUSINESS
The Company's current business was initiated on August 27, 2001 with the
incorporation of Barrington Sciences International Corporation ("Barrington").
After the incorporation, Barrington purchased the assets of Lexington
Laboratories Inc. and Barrington Sciences Corporation on October 1, 2001 by
issuing shares to those companies. The predecessor companies had spent $1.2
million on product and joint venture development. Neither company had been
engaged in sales. The only activities were searching for products and developing
the relationship in China with the Joint Venture Partner. On May 31, 2002,
Barrington purchased ABP Diagnostics Ltd. of England for shares and obtained its
formulas and technology. ABP's activities to this date had been spent on
acquiring reagents and developing flow through test kits. The company had also
entered into a licensing agreement with Vacsera in Egypt. ABP had not got to
revenue with the exception of the sale of some samples for testing.
PRODUCTS
DIAGNOSTIC TESTS
The Company has developed a distribution business to sell diagnostic tests as
well as other products that can be sold through its distribution network. The
Company also continues to look for opportunities to acquire new technology for
distribution through the network it has developed.
In addition, the Company is working on the commercialization of its in vitro
diagnostic tests, based upon the technology developed by the entities it has
acquired as well as manufacturing and distributing other diagnostic technologies
such as Elisa tests (Enzyme-linked-immunosorbant-assay tests).
4
The Company's rapid in vitro diagnostic tests can be administered in a
three-to-eight minute visual screening process that is a highly accurate method
for the detection of antibodies specific to a target virus found in the
bloodstream. These tests utilize synthetic and recombinant peptides that are
100% non-infectious and are specific to the antibody detection. The peptides are
immobilized onto a membrane, whereby a patient's small blood sample flows
through and detects the peptides to produce a positive or negative result for
the specific virus. All of the Company's reagents and rapid in vitro diagnostic
test kits are reliable, low cost, non-invasive, and produce rapid or instant
results.
At this stage, the Company is focusing on initial distribution of its products
outside Europe and Canada. Testing that has been conducted on the products being
currently commercialized have demonstrated their effectiveness
The medical diagnostic kit and reagent industry worldwide is estimated to be
over US $28.5 billion by 2005, with a continued growth rate that will continue
at a healthy pace. The struggle to control infectious diseases has become
increasingly difficult. Diseases that seemed subdued, such as tuberculosis and
malaria, are fighting back with renewed ferocity. Some, such as cholera and
yellow fever, are striking back in regions once thought safe from them. Other
infections are now so resistant to drugs that they are virtually untreatable.
Furthermore, deadly new diseases such as ebola hemorrhagic fever, for which
there is no cure or vaccine, are emerging in many parts of the world. At the
same time, the sinister role of hepatitis viruses and other infectious agents in
the development of many types of cancer is becoming increasingly evident. The
result amounts to a global crisis. No Country is safe from infectious diseases.
Most importantly, the Company's tests can save lives through early detection.
Since the availability of the HCV (hepatitis C virus) assay in 1990, the
incidence of post-transfusion HCV has declined significantly. The tests can also
improve health through prompt diagnosis. Rapid bacterial test systems can reduce
the mortality rate associated with infection by over 45%. NOTHING CAN BE TREATED
UNTIL IT IS DIAGNOSED.
The Company's targeted markets for its in vitro diagnostic tests are in
developing nations where there is an immediate need for large volumes of
infectious diseases tests to be conducted.
The Company has entered into a joint venture agreement with Shandong Weigao
Group ("the Weigao Group"). The joint venture is designed to facilitate the
manufacture and delivery of the Company's products in China. Weigao is the
largest manufacturer and distributor of medical devices in China. Weigao will
use their extensive network of sales offices and distributors to sell the
Company's tests throughout that country.
The Company's initial primary selling initiative will be focused in Asia
excluding China.
The Joint Venture plant is under construction in Weihai China and should be
ready to be in production testing by the end of 2004. Licenses are being applied
for, for the products that the Company plans to sell through the joint venture.
5
The Company expects sales to begin in Asia during the first (calendar) quarter
of 2005. The joint venture plans to sell between $2 Million and $3 Million of
tests in the first year of sales. The Company expects to average about a 40%
gross profit (profit after cost of goods) on sales. For further information
regarding this operation, see Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, below.
The Company believes that it is poised to become a leading supplier of both
unique point-of-care in vitro diagnostic test kits and the reagents that are the
key component of the test. Maintaining its focus on infectious diseases, it is
the Company's goal to continue development and acquisition of state-of-the-art
leading technologies in the rapid point-of-care and testing in the in vitro
diagnostics market. The Company will engage in research and development that
will lead to the direct sale of reagents and the joint venture development of
sales programs for its products.
It is the Company's goal to initiate its distribution and sales and marketing
initiatives through its strategic alliance with Shandong Weigao Group, located
in China. The tests have been subjected to substantial clinical and other test
studies performed in hospitals, government agencies and independent laboratories
throughout the world. Participating analysis has been conducted by the
Department of Microbiology at Mt. Sinai Cancer Research Hospital in Toronto,
Biomedical Associates, Maidstone in Kent, England, the Uganda Virus Research
Institute in Entebbe, Uganda, and the South African Institute for Medical
Research in Johannesburg, and Immuno Science Inc. of Las Vegas, Nevada. All of
these organizations have consistently rated the test as very high in terms of
sensitivity and specificity.
The Company's significant value is its distribution network and that it
recognizes the need for the deployment of rapid response, point-of-care in vitro
diagnostic tests specifically for infectious diseases such as tuberculosis, HIV,
H. pylori and hepatitis B & C. The Company has targeted an initial market that
will give it credibility and presence in the long-term.
ANTIGEN/CONJUGATE - REAGENT
Antigens and conjugates are the chemical components of what make the Barrington
rapid result diagnostic tests perform properly. The antigens and conjugates work
in concert with each other, but each is a separate entity of its own. They exist
in liquid form, are prepared in the laboratory setting and are integral to the
proper performance of the test kit.
An antigen, by definition, is any substance that, as a result of coming into
contact with appropriate cells (in the case of the Barrington tests, cells from
antibodies in the patient's blood, serum or plasma) induces a state of
sensitivity and/or immune responsiveness after a latent period (approximately
three minutes) and which reacts in a demonstrable way with antibodies of the
sensitized subject. These antigens, which are spotted on the membrane within the
Barrington tests, react with the antibodies in the patient sample being tested
to show either a positive or a negative response to the disease for which the
patient is being tested.
The conjugate is a biochemical substance prepared with an IgG that is specific
to the disease for which testing is being done. The conjugate is subsequently
joined with a colloidal gold solution and recombinant peptides that bind the
antigens to the membrane within the test. This allows the antigens to be stable
during the administration of the test and to give a reliable result.
6
SPECIFIC TEST PRODUCTS
The Company has created several specific tests for infectious diseases. These
tests are for tuberculosis, HIV 1&2, hepatitis C and H.pylori. The Company also
has other tests under development.
Mycobacterium Tuberculosis - Mycobacterium tuberculosis is a lateral Flow test
that indicates the presence or absence of the active tuberculosis disease. It is
a three-minute visual screening test that detects antibodies to M. tuberculosis.
The test utilizes a proprietary mixture of protein and lipopolysaccharide
antigen that detects the M. tuberculosis antibody on a membrane enclosed in a
cassette. The antigens are 100% non-infectious and are highly specific for
tuberculosis antibody detection. The antigens are immobilized on a membrane; the
patient's sample flows through and reacts with the antigen. A wash buffer then
removes the unreacted specimen and a signal solution containing colloidal gold
is applied. At this time the signal solution binds to human antibodies that are
attached to the antigen on the membrane. The excess signal solution is removed
by applying additional wash buffer. Within 30 seconds of this step the results
appear under "T" as the red dot on the membrane.
There is also a control area on the membrane under "C" that will react with the
reagent to form a second dot showing that the test is functioning as designed.
Two red lines approximately 2 ml in diameter indicate an M. tuberculosis
reactive or positive specimen. All positive tests must be confirmed with a
second confirmation test or culture. The patient's sample should not be turbid
or it will clog up the membrane, causing a decrease or a complete cessation of
flow rate. Presently tuberculosis is the most rapidly growing infectious disease
in the world. Since 1998 more people have died from tuberculosis related
diseases than from any other infectious disease. In fact, tuberculosis related
diseases kill more people annually than the next three infectious disease
killers combined.
HIV 1&2 - The HIV 1&2 (AIDS) test is also a lateral Flow test, which indicates
the presence or absence of HIV infection. It is a three-minute visual screening
test that simultaneously detects antibodies to HIV 1&2. The test utilizes
synthetic and recombinant cross-linked peptides that represent the envelope
glyco-proteins of the HIV 1&2 virus immobilized on the membranes enclosed in the
cassette. The membrane has a proprietary blend of peptides for the detection of
HIV 1&2 antibodies present in plasma or serum. These peptides are 100%
non-infectious and highly specific for HIV antibody detection.
This type of test is gaining popularity in the screening of at risk patients.
The test is a sensitive immunoassay used to detect the presence of antibodies to
the two types of human immunodeficiency viruses, collectively designated as HIV
(AIDS). The virus is only transmitted by sexual contact, by exposure to blood or
certain blood products and from an infected mother to her fetus or child through
childbirth or breastfeeding.
HIV 2 virus is similar to the HIV 1 virus. The test contains peptides
immobilized on a membrane. The patient sample flows through and reacts with the
peptides. A wash buffer then removes the unreacted specimen and a signal
solution is applied. At this time the signal solution binds to the human
antibodies that are attached to the peptide on the membrane. The excess signal
solution is removed by applying a washer buffer. Within 30 seconds of this step
the results appear on the membrane.
7
There is also a control area on the membrane that will react with the reagents
to form a second line showing that the test is functioning as designed. Two red
lines approximately 2 ml in diameter indicate HIV reactive or a positive
specimen.
Hepatitis B and C
The hepatitis B test is a test used for screening blood samples or individuals
for infection. The hepatitis C test is delivered as a lateral flow test. The
test for hepatitis B is a three-minute screening test that detects hepatitis B
surface antigen. The test utilizes monoclonal and polyclonal antibodies. The
antibodies to the principal antigen determinates are immobilized on a membrane
enclosed in the test cassette. The membrane is coated with affinity-purified
antibodies to the common sub-types of hepatitis B, for detection of the virus
present in plasma or serum. These antibodies are 100% non-infectious and highly
specific to hepatitis detection.
H. pylori
The helicobacter pylori test is a lateral flow test that indicates the presence
or absence of H. pylori infection. H. pylori is a bacterium associated with and
known to cause peptic and duodenal ulcer disease and gastritis. It is also
classified as a carcinogen and is a cause of stomach cancer. The Company's
H.pylori test is a test for the qualitative determination of human IgG antibody
specific to H.pylori in human serum and plasma. The test utilizes a sandwich
principal: purified proteins from the whole cell sonicates of H.pylori are
immobilized on the surface of the membrane. The patient sample is allowed to
react with the antigens. The human IgG antibodies specific to H.pylori, if
present in the human serum or plasma, bind to the antigens.
PLAN FOR 2005
The products have been in the testing and evaluation phase to date.
The Company believes that the following products will be ready for commercial
distribution in 2005 in the following locations:
Product Location Planned Date of Estimated
Initial Distribution Revenue
Diagnostic Tests Asia 1st Q 2005 1st Year $.5 to 1 Million
Diagnostic Tests Africa 2nd Q 2005 1st Year $.5 to 1 Million
Diagnostic Tests China 3rd Q 2005 1st year $.3 to .5 Million
Assuming that there are sales of $2.5 million, the Company would expect to make
a gross profit after cost of goods of approximately $1 million. The Company
believes that is sufficient to cover the other on-going operating costs of the
Company that will be incurred during that period.
However, in order to reach this goal, The Company needs to raise sufficient
capital to fund the production of initial inventories as well as other operating
costs. The Company estimates that need at approximately $2 million.
8
In order to implement its full business plan, the Company needs to raise
approximately $2 million in additional capital.
If the Company is able to raise the needed capital to implement its product
development and commercialization plans, it is expected that the Company will
increase its employment from the current 5 part time employees to a total of
approximately 7 full time employees by the end of 2005, including 2 employees
involved with research, testing and development and 2 employees focused on
marketing and distribution of products.
OPERATING CAPITAL REQUIREMENTS
As is discussed in greater detail under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" below, at this time, the Company
has nearly exhausted the capital it has previously raised.
In order to achieve the Company's goals for 2004 and beyond, the Company
estimates that it needs to raise approximately $2 million in additional cash
investment (see the "Budget for 2004/2005" under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" below).
AVAILABLE INFORMATION
The Company files annual and quarterly reports (Forms 10-K and 10-Q with the
U.S. Securities and Exchange Commission and such other supplemental current
reports (Form 8-K) as may be required or appropriate from time to time.
These reports may be found at HTTP://WWW.SEC.GOV/EDGAR.SHTML.
Information about the Company may also be found at the Company's WEB site at
www.barringtonsciences.com
RISK FACTORS
At this early stage in the development of the Company, an investment in the
Company's Common Stock involves a high degree of risk. You should carefully
consider the risks and uncertainties described below and all other information
contained in the Form 10-K before deciding to invest in the Company. Although
the Company has described the risks and uncertainties that it believes to be
material to its business, it is possible that other risks and uncertainties that
affect the Company's business will arise or become material in the future.
If the Company is unable to effectively address these and other potential risks
and uncertainties, its business, financial condition or results of operations
could be materially and adversely affected. In this event, the value of the
Company's Common Stock could decline and an investor could lose all or part of
the investor's investment.
Lack of Public Market for the Company's Common Stock
There is no public or trading market for the Company's Common Stock, and no
assurance can be given that any such market will develop in the future, or that
a public offering of any of the Company's Common Stock will ever take place. No
broker-dealer presently intends to make a market in the Company's Common Stock.
An investment should be considered a long-term investment.
9
No Revenues reported to Date and No Guarantee of Revenues to be reported in the
Future The Company has not achieved any material revenue to date and there is no
guarantee that the Company will achieve revenues in the near future or at any
time. The Company's financial future is premised upon certain factors beyond the
Company's control including: (1) market acceptance of the Company's products;
(2) the quality of the Company's research; (3) the quality and pricing of the
Company's test kits; (4) the ability of the Company's competitors to develop and
market comparable or superior products; and (5) the Company's maintenance and
establishment of certain strategic relationships and alliances, as well as on
other factors, many of which may be beyond the Company's control. If the Company
fails to achieve success in these areas or if the Company's competitors develop
superior products, the Company's investors may lose all or part of their
investment in the Company.
Additional Capital Is required and No Guarantee that the Company can obtain such
Capital In order to continue its operations and its growth strategies, the
Company is seeking additional equity and debt financing. If the Company is
unable to obtain adequate financing, there can be no assurance that the Company
will be able to successfully implement its business plan or meet its working
capital requirements. In addition, the Company may experience rapid growth and
may require additional funds to expand its operations or enlarge its
organization. While the Company intends to explore a number of options in order
to secure alternative financing in the event anticipated financing is not
obtained or is insufficient, there can be no assurance that additional financing
will be available when needed or on terms favorable to the Company. The failure
to obtain sufficient financing may materially affect the Company's ability to
expand or to remain in business.
Ability to Attract and Retain High-Quality Management and Employees
The Company's shareholders are fully dependent upon and will rely on the
Company's Management to conduct the Company's business. Success of the business
depends on the skills and efforts of management and, to a large extent, on the
active participation of the Company's executive officers and key employees, as
well as on the efforts and successes of the Company's researchers. The inability
to attract, retain and motivate qualified senior management, scientists, and
other skilled employees will adversely affect the Company's business.
Inability to Commercialize Products and Services
If the Company receives any revenues, the revenues may decrease after an initial
period of market introduction due to factors such as:
o Increased competition;
o Changes in consumer preferences;
o Changes in customer specifications;
o Market saturation;
o Changes in demand; and
o Changes in economic conditions.
as well as other factors, many of which are beyond the Company's control.
Ability to Compete Effectively in Competitive Market
If the Company fails to execute its strategy in a timely or effective manner,
its competitors may be able to seize the opportunity the Company has identified
to address the disease testing needs of developing countries. The Company's
10
business strategy is complex and requires that the Company successfully and
simultaneously complete many tasks, and the failure to complete any one of these
tasks may jeopardize the Company's strategy as a whole.
Certain of the Company's competitors may have substantially greater financial,
technical and marketing resources, larger customer bases, longer operating
histories, greater name recognition and more established relationships in the
industry than the Company. As a result, certain of these competitors may be able
to:
o Adapt to new or emerging research and biotechnology developments and to
changes in customer requirements more quickly;
o Take advantage of joint venture, acquisition, alliance, and other
opportunities more readily; and
o Devote greater resources to the marketing and sale of their services and
adopt more aggressive pricing policies than the Company.
The Company's competitors in the biotechnology industry may include companies
with strong brand recognition and experience. Also, as a result of increased
competition, the Company's period-over-period growth rates may decline.
Variations in Revenues and Operating Results Expected
As the Company's business develops and expands, the Company may experience
significant quarterly fluctuations in its results of operations. Because of
these fluctuations, comparisons of the Company's operating results from period
to period may not necessarily be meaningful and should not be relied upon as an
indicator of future performance. The Company expects to continue to experience
significant fluctuations in its quarterly and annual results of operations due
to a variety of factors, many of which are outside the Company's control. These
factors include:
o Demand for and market acceptance of the Company's services;
o Introductions of products or services or enhancements by both the Company
and by the Company's competitors;
o Customer retention;
o The timing and success of the Company's advertising and marketing efforts;
o The timing and magnitude of capital expenditures, including equipment costs
relating to the expansion of the Company's infrastructure;
o Changes in the Company's pricing policies and the pricing policies of the
Company's competitors; o Gains or losses of key strategic relationships;
and o Other general and industry specific economic factors.
Risks Associated with International Business Activities
There are significant risks associated with the Company's international
operations including:
o Regulatory limitations restricting or prohibiting the sale or other
distribution of the Company's goods or services;
o Unexpected changes in regulatory requirements;
o Tariffs, customs, duties and other trade barriers;
o Difficulties in staffing and managing foreign operations;
o Political risks;
o Fluctuations in currency exchange rates;
11
o Foreign exchange controls, which restrict or prohibit repatriation of
funds;
o Technology export and import restrictions or prohibitions;
o Delays from government agencies;
o Seasonal reductions in business activity during the summer months in
certain countries; and
o Potentially adverse tax consequences resulting from operating in multiple
jurisdichtions with different tax laws.
The Company has invested heavily in developing its ability to provide products
and services originating in China and in developing and expanding its market
presence, and the Company may be subject to certain additional risks associated
to doing business in developing countries. If the Company expands its operations
into other parts of the world, including developing countries, an increasing
portion of its revenue and expenses will be denominated in currencies other than
dollars, and changes in exchange rates will likely affect the Company's results
of operations. Depending on the countries involved, any or all of the foregoing
factors could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, there can be no
assurance that laws or administrative practices relating to taxation, foreign
exchange or other matters in countries within which the Company operates will
not change. Any such change could have a material adverse effect on the
Company's business, financial condition and results of operations.
Risks Associated with Foreign Currency Fluctuations
At the present time, some of the Company's activities are carried on outside of
Canada and the United States. Accordingly, it is subject to risks associated
with fluctuations in the rate of exchange of the American and Canadian dollar
and foreign currencies.
The Company is currently not engaged in currency hedging to offset any risk of
exchange rate fluctuation and currently has no plans to engage in currency
hedging.
Uncertain Prospects for Growth
The market for the Company's disease testing kits has only recently begun to
develop in developing countries, and is evolving rapidly. The Company's future
growth, if any, will depend upon the willingness of these countries to purchase
the Company's tests and on the quality, pricing, and effectiveness of these
tests in preventing the spread of various diseases.
In addition, the Company must be able to differentiate itself from its
competition through the quality and price of its tests. The Company may not be
successful in differentiating itself, achieving market acceptance of its
services or by selling additional products to its existing customer base, and
the Company may experience difficulties that could delay or prevent the
successful development, introduction or marketing of its products. If the
Company incurs increased costs or is unable, for technical or other reasons, to
develop and introduce new products or enhancements to existing products in a
timely manner, or if new services do not achieve market acceptance in a timely
manner or at all, the Company's business could be materially harmed.
Ability to Adapt to Evolving Technologies and Customer Demands
The Company's future success will depend in part upon its ability to offer
low-cost, and high quality products that incorporate leading medical
technologies and which respond to technological advances and emerging industry
standards and practices on a timely and cost-effective basis.
12
Impacts by Government Regulation and Legal Uncertainties
The Company may be subject to direct federal, state or local government
regulation, in addition to regulations that apply to businesses generally.
Specifically, in the United States, the Food and Drug Administration ("FDA") and
comparable regulatory agencies in state and local jurisdictions impose
substantial requirements on new product research and the clinical development,
manufacture and marketing of certain pharmaceutical products, including testing
and clinical trials to establish the safety and effectiveness of these products.
The Company's products may require regulatory approval before commercialization.
Governments in other countries have similar requirements for testing, approval
and marketing. In the United States, in addition to meeting FDA regulations, the
Company may also be subject to other federal, state and local environmental and
safety laws and regulations, including regulation of the use and care of
laboratory animals.
Before marketing in the United States, any pharmaceutical or therapeutic
products require rigorous pre-clinical testing and clinical trials and an
extensive regulatory approval process implemented by the FDA under the federal
Food, Drug and Cosmetic Act. The FDA regulates, among other things, the
development, testing, manufacture, safety and effectiveness standards, record
keeping, labeling, storage, approval, export, advertising, promotion, sale and
distribution of pharmaceutical products. The regulatory review and approval
process, which includes pre-clinical testing and clinical trials of each
applicable product candidate, may be lengthy, and uncertain. Securing FDA
approval requires the submission of extensive pre-clinical and clinical data and
supporting information to the FDA for each indication to establish a product
candidate's safety and effectiveness. Additional animal studies, other
pre-clinical tests or clinical trials may be requested by the FDA, which may
delay marketing approval. The approval process takes many years, requires the
expenditure of substantial resources and may involve ongoing requirements for
post-marketing studies.
In addition to regulations enforced by the FDA, the Company may also become
subject to regulation under the Occupational Safety and Health Act, the
Environmental Protection Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act, the Controlled Substances Act and other present
and potential future federal, state or local regulations. The Company's research
and development programs may involve the controlled use of hazardous materials,
chemicals, biological materials and various radioactive compounds. Although the
Company intends its safety procedures for handling and disposing of such
materials to comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company
could be held liable for any damages that result, and the extent of that
liability could exceed the Company's resources.
Reliance on Third-party Suppliers
In general, the Company purchases raw materials and supplies on the open market.
Substantially all such materials are obtainable from a number of sources so that
the loss of any one source of supply would not have a material adverse effect
upon the Company. Additionally, the Company is not dependent on any one supplier
for any of its component parts, and the Company believes its test-kit assembly
and production costs to be relatively low. However, the Company may be unable to
adequately develop its products following its inability to purchase the material
components of its test kits.
14
Reliance on Certain Key Customers
The Company expects to be dependent on certain key customers, and the loss of
any one of them could significantly reduce or eliminate the Company's revenues,
which would decrease the value of its Common Stock.
To the extent the Company depends upon key customers for a large percentage of
its revenues, the loss of one or more of them could have a material adverse
effect on the Company and on the value of its Common Stock. The Company
anticipates that a large portion of its revenues will come from products sold
and manufactured for a limited number of key customers including ABP Diagnostics
("ABP") and WBBC.
The Company will rely on third parties to supply development, manufacturing,
marketing and distribution expertise, which will make the Company's success
dependent upon their efforts. If they are not successful, it could negatively
impact the Company and an investment in its Common Stock.
Reliance on Certain Strategic Relationships
The Company's future success is dependent on the development and maintenance of
strategic relationships. If the Company's strategic partners or third parties
fail to perform effectively, the Company may not generate any revenues or a
profit. The Company may rely upon strategic partners:
o To assist the Company in the research and development of the Company's
products;
o To participate in the later stage development and testing of commercial
prototypes; and
o To market and distribute the Company's products.
Lack of Diversification
The Company does not intend to invest at this time in any other assets or
businesses other than those described in this Memorandum. The Company will be
subject to the risks associated with lack of diversification.
No Dividends Declared on Common Stock
The Company currently intends to retain the Company's future earnings, if any,
to finance the growth, development and expansion of the Company's business and
marketing efforts, and accordingly, the Company does not currently intend to
declare or pay any dividends on the Common Stock for the foreseeable future. The
declaration, payment and amount of future dividends, if any, will be at the sole
discretion of the Company's Board of Directors after taking into account various
factors, including, among others, the Company's financial condition, results of
operations, cash flows from operations, current and anticipated capital
requirements and expansion plans, the income tax laws then in effect and any
applicable state law requirements.
Uncertainty of Market and Scientific Data Included in this Memorandum
The Company operates in a dynamic and rapidly changing industry.
Thus, certain market data set forth in this Form 10-K may become rapidly
obsolete. Additionally, as the Company is a high-technology company, certain
scientific data presented in this Form 10-K may be superseded by more recent
scientific developments and data. The Company cannot guarantee the continued
reliability of any market data or scientific information presented in this Form
10-K after the date of this Form 10-K.
Ownership and Control of the Outstanding Common Stock is Concentrated
The Company's directors, executive officers and principal stockholders
beneficially own approximately 67% of the Company's outstanding Common Stock.
Two of the Company's stockholders, Charles Payne and George Moore, who are both
officers and directors or the Company, collectively control approximately 33% of
the Company's outstanding shares of Common Stock. See "Principal Stockholders."
14
Shares Eligible for Future Sale May Adversely Affect the Market
In general, Rule 144 under the Securities Act of 1933, as amended ("Rule 144")
provides that securities may be sold without registration if there is current
public information available regarding the Company and the securities have been
held at least one year. Rule 144 also includes restrictions on the amount of
securities sold and the manner of sale, and requires notice to be filed with the
SEC. Under rule 144, a minimum of one year must elapse between the later of the
date of the acquisition of the securities from the issuer or from an affiliate
of the issuer, and any resale under the Rule. If a one-year period has elapsed
since the date the securities were acquired, the amount of restricted securities
that may be sold for the amount of any person within any three-month period,
including a person who is an affiliate of the issuer, may not exceed the greater
of one percent (1%) of the then outstanding shares of common stock of the issuer
or the average weekly trading volume in the over-the-counter ("OTC") market
during the four calendar weeks preceding the date on which notice of sale is
filed with the SEC. If a two-year period has elapsed since the date the
securities were acquired from the issuer or from an affiliate of the issuer, a
seller who is not an affiliate of the issuer at any time during the three months
preceding a sale is entitled to sell the shares without regard to volume
limitations, manner of sale provisions or notice requirements.
Outstanding shares, including shares held by affiliates, will be eligible in the
future for resale in the open market, if any, in compliance with Rule 144. The
sale in the public market of these shares of restricted Common Stock under Rule
144 may depress prevailing market prices of the Common Stock.
No Assurance of Public Trading Market
Although the Company desires to trade on an exchange such as the OTC Bulleting
Board, there can be no assurance that the Company will ever be listed on either
trading market or, if a listing is obtain, that a regular trading market for the
securities will be sustained in either trading market.
The OTC Bulletin Board is an unorganized, inter-dealer, over-the-counter market,
which provides significantly less liquidity than the NASDAQ Stock Market. Quotes
for stocks included on the OTC Bulletin Board are not listed in the financial
sections of newspapers, as are those for the NASDAQ Stock Market. Quotes for
stocks listed on the OTC Bulletin Board may be obtained on an Internet website
maintained by OTC Bulletin Board at www.otcbb.com, which requires investors to
have Internet access. Therefore, prices for securities traded solely on the OTC
Bulletin Board may be difficult to obtain and holders of common stock may be
unable to resell their securities at or near their original offering price or at
any price. Furthermore, the NASD has proposed certain regulation changes that
affect the OTC Bulletin Board, which if and when implemented, will affect both
issuers and market makers. The effect on the OTC Bulletin Board cannot be
determined at this time.
"Penny Stock" Regulations May Impose Certain Restrictions on Marketability of
Securities
A "penny stock" is generally defined by the regulations of the SEC to
be any equity security that is not traded on a national securities exchange or
NASDAQ that that has a market price of less than $5.00 per share or an exercise
15
price of less than $5.00 per share, subject to certain exceptions. If the
Company's securities are trading at less than $5.00 per share on the OTC
Bulletin Board or the TSX, the Company's securities may become subject to rules
that impose additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
investors. Accredited investors generally have assets in excess of $1,000,000 or
an individual annual income exceeding $200,000 or together with the investor's
spouse, a joint income of $300,000. For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchase of
such securities and have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction involving a
penny stock, unless exempt, the rules require, among other things, the delivery,
prior to the transaction, of a risk disclosure document mandated by the SEC
relating to the penny stock market and the risks associated therewith. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative and current quotations for the
securities. If the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the penny stock rules may restrict
the ability of broker-dealers to sell the Company's securities and may affect
the ability of shareholders of the Company to sell their securities on the
secondary market.
Item 2. Properties
----------
The Company does not currently lease or own any properties.
Item 3. Legal Proceedings
-----------------
None
Item 4. Submission of Matters to a Vote of Security Holders
----------------------------------------------------
Although the Company did not submit any matters to its shareholders for a vote
in the fourth quarter of 2002, the agreement to acquire the assets of Barrington
was submitted for approval of its shareholders at a shareholder meeting that was
held on November 13, 2002. A vote of 13,262,180 shares for and zero shares
against out of a total of 19,277,304 shares outstanding approved the agreement.
No other maters were submitted for shareholder approval in the fourth quarter of
2002.
In March 2003, the Amended and Restated Articles of Incorporation of the Company
were approved by the written consent of holders of 23,109,654 shares of the
Company's common stock out of 23,446,354 then outstanding. Notice of this action
was then provided to the remaining shareholders in accord with Nevada Law. The
amendment increased the authorized capital from 50 million common shares to 100
million common shares and authorized of 50 million preferred shares.
16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Market Information
There is no market information established for the Company.
(b) Holders
The approximate number of shareholders of record of the Common Stock of the
Company as of September 30, 2003 was 468.
(c) Dividends
The Company has never paid a cash dividend and intends to retain earnings, if
any, for use in its business and does not presently intend to pay any cash
dividends on its Common Stock.
(d) Stock transactions
The following summarizes stock transactions by the Company during 2002 and 2003.
The company issued 14,120,332 shares for $594,539 prior to the reverse merger
acquisition. In May 2002 the company issued 4,552,570 for $1,424,859. These
shares were issued for acquisitions. In September 2002 the company issued
952,344 shares for $1,163,069 to satisfy debts.
From October 1, 2002 to September 30, 2003 the company issued 1,339,409 shares
for $824,656. For services rendered 91,266 for $68,450. Shares for the reverse
merger with Financial Express Corp 3,744,701 and the company reacquired 644,105
shares. Total shares outstanding at September 30, 2003 24,156,517 Common Shares.
For additional detail see shareholder Equity Section of the financial
statements.
Item 6. Selected Financial Data
-----------------------
2003 2002
=========================
Revenue 0 10,736
Profit (Loss) (2,087,698) (1,881,306)
Net Loss per share 0.09 0.14
Total Assets 522,110 269,923
Working Capital (411,858) 120,353
17
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
----------------------
LIQUIDITY.
The Company currently has a short-term liquidity problem, as evidenced by its
current working capital deficit of $411,858. However, management believes that
it will able to raise additional equity capital, due to the prospects for
success with the Company. However, no assurance can be given that sufficient
additional capital can be raised. See "Business Plans for 2005" below for a
further discussion of the Company's capital requirements.
OPERATIONS.
The Company had no material operations in 2003. In 2003, the Company incurred
operating expenses of $816,586. These expenses consisted primarily of $260,161
for professional fees, $327,534 for Wages and Fees, $69,341 for travel and
$35,123 for Bank Charges and interest.
BUSINESS PLANS FOR 2003/2004
Forward-Looking Statements. The following financial information and projections
contain possible future results, and accordingly, are what the Securities and
Exchange Commission ("SEC") has defined as forward-looking statements. You
should not consider this information about the future to be either accurate or
reliable. The following projections are subject to many uncertainties and risk
factors (see "Risk Factors" above for a discussion of major risks). Although
they represent Management's present plans, no assurance can be given that actual
results will approximate current plans.
The Company's products are still in various stages of development as described
in Part I, Item 1, Description of the Business. The Company's continued
development of its products and successful marketing and distribution of these
products is contingent upon the Company raising additional capital.
In order to implement its plans for 2005 the Company is seeking approximately
$2,000,000 in financing.
If this financing is obtained, the Company has established the following budget
for 2004/2005.
The Company requires $2 Million of cash investment in order to carry out its
business plan. Providing the investment is acquired, the Company projects the
following range of results.
Sales are expected to begin in Asia in the first quarter of 2005 and into the
other countries in the second quarter 2005.
The following projections are for a one-year period after obtaining funding of
$2 Million.
Sales: $1.3 to 2.5 Million
Gross Profit: $520,000 to $1 million based on 40%
Operating Expenses: $400,000 to $600,000.
Profit from the Joint Venture operation in China: $.05 to .1 Million
(this is in addition to the above gross profit on sales.
18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
None
The Company does not hold any material market risk sensitive instruments.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Reference is made to the financial statements included later in this report
after Item 15.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None
19
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The following individuals currently serve as the Directors and executive
officers of the Registrant. Each Director serves for a term of one year or until
their successors have been elected at the annual meeting of shareholders in the
year each director's term expires. The year each director's term expires is
noted below. Under the Company's Articles of Incorporation, three-year staggered
terms are authorized. At the next annual shareholders meeting, it is anticipated
that Directors will be nominated for terms of one, two and three years to
implement this staggered Board provision.
Name Age Position
- ---- --- --------
Phil E. Pierce 73 Chairman, and Director Term expires 2003
George Moore 61 President & Chief Executive Officer and
Director Term Expires 2003
Charles Payne 56 VP Investor Relations & Director Term
Expires 2003
Dr. A.E.J. Reynolds 54 Director Term Expires 2003
Lorne Broten C.M.A., CMC 62 CFO and Director Term Expires 2003
The Officers are elected annually by the Directors and serve at the discretion
of the Board of Directors
Phil Pearce
- -----------
Director & Chairman of the Board
Mr. Pearce has been an independent business consultant with Phil E. Pearce &
Associates since 1990, Chairman and Director of Financial Express Corporation
since 1990. Prior to 1990, Mr. Pearce was Senior Vice President and a director
of E.F. Hutton, Chairman of the Board of Governors of the National Association
of Securities Dealers and was closely involved in the formation of the NASDAQ
Stock Market, a Governor of the New York Stock Exchange and a member of the
Advisory Council to the United States Securities and Exchange Commission on the
Institutional Study of the Stock Markets. Mr. Pearce also is a director of XR
Medical, a diagnostic laboratory company and Bravo! Foods International
Corporation and Xybernaut Corporation. Mr. Pearce is a graduate of the
University of South Carolina (B.A. 1953) and the Wharton School of Investment
Banking at the University of Pennsylvania.
George Moore
- ------------
President & Chief Executive Officer & Director
In 1982, Mr. Moore was a founder of Uni-Ray Inc., a consulting company and was a
Senior Partner until 1992. His client list included many well-known
international companies such as IBM, Xerox, Nortel, Decorating Den Systems and
Travelodge. In 1993, he served as the Executive Director of the foundation for
the Advancement of Canadian Entrepreneurship. From 1994 to 1996, he served as
20
Director of Franchise Development for Decorating Den Systems Inc. From 1996 to
1999, Mr. Moore was Manager of Business Development, Western Canada, for
Travelodge Canada. In 1999, he joined the original Barrington Sciences
Corporation and served as its President until the fall of 2001. From 2001 to the
present he has served as President and CEO of BSC.
Charles Payne
- -------------
Vice President Investor relations & Director
From 1974 to 1976 Mr. Payne was the Export Division Manager for North Pacific
Lumber. From 1977 to 1984 he was VP Sales for Canwood Exports and from 1984 to
1999 VP for Humanics Corporation. 1996 to 1999 a self employed consultant and
from 1999 to 2001 President of Lexington Laboratories Inc. one of the companies
that was purchased to form Barrington Sciences International Corporation. He has
served as VP for BSIC since its inception. Mr. Payne received his education from
Morehead State University in Kentucky where he graduated from studies in
business, political science and speech. He then attended Vanderbilt University
for graduate studies.
Dr. A.E.J. Reynolds
- -------------------
President ABP Diagnostics Ltd and Director
Dr. Reynolds was with Dixon Group PLC, in the position of the General Sales
Manager, Regional Manager and Commercial Manager from 1977 to 1990. From 1990 to
1993 he was Managing Director of Crawford Door Limited and Managing Director of
Eco Carpet Tiles (UK) Ltd from 1996 to 1998. In 1998 he formed ABP Diagnostics
Ltd and is the Managing Director. Dr, Reynolds has a Master of Business
Administration and a Doctor of Business Administration.
Lorne H. A. Broten, C.M.A. CMC
- ------------------------------
CFO and Director
Mr. Broten has been a self employed Management Consultant since 1967. Over the
past five years he has been involved in two start-up companies, Barrington
Sciences Corporation and a privately owned technology company. In addition he
has had a number of consulting jobs for private companies. Mr. Broten is a
Certified Management Accountant and a Certified Management Consultant.
The following individuals serve on the Company's technical Advisory Board.
- --------------------------------------------------------------------------
William A. Gibbons Ph. D., B. Sc, M .Sc
- ----------------------------------------
Dr. Gibbons has been a professor and researcher for his working career. He was
Professor and Head, Department of Pharmaceutical and Biological Chemistry, The
School of Pharmacy, University of London, England, and Director,
University-Industry Centre for Pharmaceutical Research, London University.
Jonathan H. Davis, Ph.D.
- ------------------------
Dr. Davis is a Senior Scientist in the New Technologies Group of Lexigen
Pharmaceuticals in Lexington, Massachusetts. He received his PhD in Biophysics
at the University of California, San Francisco and did his postdoctoral work at
Harvard.
Thomas Suleiman, Ph.D.
- ----------------------
Dr. Suleiman practices medicine in Surrey, B.C. with a special interest in
cardiovascular diseases, diabetes and infectious/tropical diseases. Dr. Suleiman
is also a part of the teaching staff of the University of B.C. as Clinical
21
Associate Professor. He is fluent in Indonesian, Malay, Mandarin, German and
English. Dr. Suleiman graduated from medical school in West Germany with his
Ph.D. He has passed the US and Canadian Medical Board Exams.
Section 16(a) Beneficial Ownership Reporting Compliance.
To the best of Registrant's knowledge, based solely upon a review of Forms 3 and
4 and amendments thereto furnished to Registrant pursuant to Rule 16a-3(e)
during the Company's most recent fiscal year (2003) and Form 5 and amendments
thereto furnished to the Registrant with respect to its most recent fiscal year,
the persons in the following table served as a director or officer of the
Company or owned more than 10 percent of any class of Registrant's equity
securities during Registrant's fiscal year ended December 31, 2003.
During 2003 and through the date of the filing of this Form 10-K, there has been
no trading of the Company's Common Stock or any other securities issued by the
Company. Although the Company continued to voluntarily file Form 10-Q's for
quarters ending during 2002 and a Form 10-K for 2001, the Company is not aware
of any filing by the Directors, Officers or 10% shareholders until after the
acquisition of Barrington was closed as of December 31, 2002.
Therefore, any such forms have been filed in 2003. The Company believes that all
of its Officers and Directors are now current on their filings of applicable
forms.
The following table lists all of the Company Officers, Directors and known 10%
or more shareholders during 2002.
Name Offices Held in 2002 Forms Filed
- ---------------------------------------------------------------------
Phil Pearce President, Treasurer & Director Form 3, March 26, 2003
Resigned as President & Treasurer
December 13, 2002. He remains a
Director
Frank Baldwin Secretary & Director He resigned None
both positions Dec 13, 2002
George Moore President & CEO, Director from Form 3, March 26, 2003
Dec. 13, 2002
Charles Payne VP Investor Relations, Secretary, Form 3, March 26, 2003
Director From Dec 13, 2002
Lorne Broten CFO, Treasurer Director From Form 3, March 26, 2003
December 13, 2002
Dr. Tony Reynolds Director from December 13, 2002 Form 3, March 26, 2003
22
Item 11. Executive Compensation
----------------------
The Company did not pay any compensation to its Officers or Directors during
2002. However, in the interest of complete disclosure, Barrington and its
subsidiaries did pay the following compensation to its Chief Executive Officer
in 2003 there were no other Executive Officers who received total compensation
of over $100,000 during 2003.
- ------------------- ------------ ------------------------------------- --------------------------------------------- ------------
Name and
Principle Annual Compensation Long-Term Compensation
Position Year/
term of All Other
service Compen-sation
- ------------------- ------------ ------------------------------------- ------------------------------- ------------- ------------
Awards Payouts
- ------------------- ------------ ------------------------------------- ------------------------------- ------------- ------------
Salary Bonus All Other
Compen- Restrict-ed Securities LTIP Payouts
Sation Stock Awards underlying
(fees) SARs/Options
- ------------------- ------------ ---------- ---------- --------------- -------------- ---------------- ------------- ------------
George Moore,
CEO 2003 84,000 *
- ------------------- ------------ ---------- ---------- --------------- -------------- ---------------- ------------- ------------
* Consulting fees.
The Chief Executive Officer has not received any other compensation than that
reported above, including any options or other rights to acquire any stock or
other interest in the Company. Neither the Chief Executive Officer nor any other
executive officer or Director of the Company holds any such rights as of the
date of this Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following table is current as of September 30, 2003. The table assumes that
all of the following individuals will exchange any stock they hold in Barrington
for stock in the Company as described in this Form 10-K. It is the Company's
understanding that they all intend to do so.
Name and Address of Number of Shares of Percentage
Beneficial Owner Common Stock Owned of Ownership
- ------------------- ------------------- ------------
Phil E. Pearce 1,725,000 7.3%
6624 Greenleaf Court
Charlotte, NC 28270
Joy Baldwin 1,683,001**** 7.1%
P. O. Box 974
Rancho Santa Fe, CA 92067
George Moore 3,820,633 * Note 1 16.3%
15826 - 98th Ave.,
Surrey, BC V4N 2V3
Lorne Broten 2,289,009 ** Note 1 9.8%
1107 Bennet Dr
Port Coquitlam BC V3C 6H2
Charles Payne 4,093,925 *** Note 1 17.5%
3213 W. Wheeler St PBM 249
Seattle, WA 98199
USA
Dr. Tony Reynolds 2,144.018 Note 1 9.1%
Keats House, Barnes Croft,
Hilderstone, Stone, Staffs,
ST15 8XU, England
---------- -----
All Officers and Directors
and affiliates as a group 15,755,586 67.1%
---------- -----
23
* Peter Moore son of George Moore owns 250,000 of these shares and George Moore
does not have any control of them and Anne Moore his wife owns 168,966. The
balance of the shares are held George Moore.
** Marc Broten son of Lorne Broten owns 700,000 of these shares and Lorne Broten
does not have control of them. Broten Holdings Inc. a company owned Lorne Broten
Family Trust. Lorne Broten is the President & Director of the Company but is not
a shareholder or a beneficiary of the trust.
*** Of these shares 3,897,648 are owned by Udici Ltd. PO Box 150 Leeward Highway
Providenciales Turks & Caicos Islands B.W.I. Estelle Payne, wife of Charles
Payne, controls this company.
**** 1,166,667 of these shares are owned by Family Investment Group LLC. Joy
Baldwin is the Managing Director. Family Investment Partnership LP owns 516,334
shares; Her husband Frank Baldwin is the General Partner.
Note 1: on December 31, 2002 the shares were still owned by Barrington Sciences
International Corporation. The numbers reflect the ownership after the shares
are exchanged in Barrington for shares in FEC.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
None.
24
Item 14. Controls and Procedures
-----------------------
(a) With the participation of management, including the CEO and CFO, we
conducted an evaluation of our disclosure controls and procedures; as such term
is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), within 90 days of the filing date of this
Form 10-K. Based on this evaluation, our CEO and CFO concluded that our
disclosure controls and procedures are effective.
(b) There have been no significant changes (including corrective actions with
regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in paragraph (a) above.
25
PART IV
Item 15. Exhibits, Financial Statements Schedules and Reports on Form 8-K
----------------------------------------------------------------
(a) The financial statements are set forth below. Financial statement schedules
have been omitted since they are either not required, not applicable, or
the information is otherwise included.
(b) Reports on Form 8-K
No Form 8-K was filed during the last quarter covered by this report,
however a Form 8-K was filed on February 13, 2003, describing the acquisition
transaction more fully described in this Form 10-K that was effective as of the
last day of the quarter ended December 31, 2002. That Form 8-K included the
financial statements for Barrington International Sciences Corporation for its
fiscal year ended September 30, 2002.
(c) Exhibit Listing (all previously filed)
3.1 Restated Articles of Incorporation of Barrington Sciences Corporation
3.2 Bylaws of Barrington Sciences Corporation
4.0 Warrant Certificate for the Cdn $0.75 warrant.
10.1 Asset Acquisition Agreement between the Company and Barrington
International Sciences Corporation (previously filed with Form 8-K
filed on February 13, 2003)
10.2 Bill of Sale documenting closing of Asset Acquisition Agreement
effective as of December 31, 2003
10.3 Licensing Agreement with Vacsera Egypt
10.4 Joint Venture Agreement with Shangdon Weigao Group Co. Ltd. China
10.5 Certificate of Approval to Establish Foreign Investment in China
10.6 Agreement for Acquisition of ABP Diagnostics Limited
11. Statements re computation of per share earnings - None
12. Statements re computation of ratios - None
26
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
Barrington Sciences Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of Barrington
Sciences Corporation and Subsidiaries as of September 30, 2003 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Barrington Sciences Corporation and Subsidiaries as of September 30, 2003 and
the results of their operations and their cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company had suffered significant losses, had a working
capital deficit as of September 30, 2003 and no ongoing source of income.
Management's plans to address these matters are also included in Note 2 to the
financial statements. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty
JAMES E SCHEIFLEY & ASSOCIATES, P.C.
Denver, Colorado
January 30, 2004
27
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheet
ASSETS
- ------ September 30,
2003
----
Current assets:
Accounts receivable $ 3,682
-----------
Total current assets 3,682
Property and equipment, net of accumulated
depreciation of $44,521 118,428
Investment in joint venture 400,000
-----------
Total assets $ 522,110
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ 132,706
Accounts payable 106,452
Total current liabilities 239,158
Loans from related parties 176,382
Minority interest in equity of consolidated subsidiary 1
Preferred stock, $.001 par value
25,000,000 shares authorized --
Common stock, $.0001 par value,
100,000,000 shares authorized, 24,156,517
shares issued and outstanding 24,157
Additional paid in capital 4,051,416
(Deficit) accumulated during
development stage (3,969,003)
-----------
106,570
$ 522,110
28
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
Years Ended September 30, 2003 and 2002
For the Period From Inception (August 22, 2001) to September 30, 2003
Period From
Years Ended Inception To
September 30, September 30,
2003 2002 2003
----- ----- -----
Sales $ -- $ 10,736 $ 10,736
Costs and Expenses
Cost of sales -- 17,437 17,437
Selling, general and administrative 816,586 1,312,262 2,128,848
Write-down of goodwill 910,249 -- 910,249
Write-down of intangibles and inventory 255,773 556,773 812,546
Write-down of other assets 69,967 -- 69,967
------------ ------------ ------------
2,052,575 1,886,472 3,939,047
------------ ------------ ------------
(Loss) from operations (2,052,575) (1,875,736) (3,928,311)
Other income (expense)
Interest expense (35,123) (5,570) (40,693)
------------ ------------ ------------
(35,123) (5,570) (40,693)
Net (loss) $ (2,087,698) $ (1,881,306) $ (3,969,003)
============ ============ ============
Per share information:
Basic and diluted (loss)
per common share $ (0.09) $ (0.14)
============ ============
Weighted average shares outstanding 22,923,189 13,484,296
============ ============
See accompanying notes to financial statements.
29
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity
For The Years Ended September 30, 2003 and 2002
Common Stock Additional
------------ Paid-in
ACTIVITY Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
Balance at inception (August 22, 2001) -- $ -- $ -- $ -- --
Shares issued for cash prior to
reverse acquisition 14,120,332 14,120 580,419 -- 594,539
Shares issued for acquisitions
May 2002 at $.31 per share 4,552,570 4,553 1,420,306 -- 1,424,859
Shares issued for debt conversion
In September 2002 at $1.22 per share 952,344 952 1,162,117 -- 1,163,069
Net loss for the year ended
September 30, 2002 -- -- -- (1,881,306) (1,881,306)
----------- -----------
Balance September 30, 2002 19,625,246 19,625 3,162,842 (1,881,306) 1,301,161
Shares issued for cash:
October 2002 at $.48 per share 743,796 744 361,632 -- 362,376
January 2003 at $.75 per share 533,333 533 399,467 -- 400,000
March 2003 at $1.00 per share 8,066 8 8,058 -- 8,066
April 2003 at $1.00 per share 11,714 12 11,702 -- 11,714
May 2003 at $1.00 per share 15,000 15 14,985 -- 15,000
June 2003 at $1.00 per share 12,500 13 12,488 -- 12,500
July 2003 at $1.00 per share 15,000 15 14,985 -- 15,000
Shares issued for services in
2003 & $.75 per share 91,266 91 68,359 -- 68,450
Shares issued for reverse merger with
Financial Express Corporation 3,744,701 3,745 (3,745) --
Shares reacquired and cancelled (644,105) (644) 644 -- --
Net loss for the year ended
September 30, 2003 -- -- -- (2,087,698) (2,087,698)
----------- -----------
Balance September 30, 2003 24,156,517 $ 24,157 $ 4,051,416 (3,969,004) $ 106,569
=========== =========== =========== =========== ===========
See accompanying notes to financial statements.
30
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
Years Ended September 30, 2003 and 2002
For the Period From Inception (August 22, 2001) to September 30, 2003
Period From
Years Ended Inception To
September 30, September 30,
2003 2002 2003
---- ---- ----
Net income (loss) $(2,087,698) $(1,881,306) $(3,969,003)
Adjustments to reconcile net income to net
cash provided by operating activities:
Services provided for common stock 68,450 -- 68,450
Depreciation 26,281 20,869 47,150
Asset impairment losses 1,103,527 1,412,388 2,515,915
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 19,290 (22,972) (3,682)
Inventory 51,688 (51,688) --
Prepaid expenses 7,590 (7,590) --
Recoverable tax credit 20,593 (20,593) --
Deferred charges 35,000 (35,000) --
Increase (decrease) in:
Accounts payable 28,236 78,217 106,453
Bank overdraft 108,884 23,822 132,706
----------- ----------- -----------
Total adjustments 1,469,539 1,397,453 2,866,992
----------- ----------- -----------
Net cash provided by (used in)
operating activities (618,159) (483,853) (1,102,012)
Cash flows from investing activities:
Acquisition of property & equipment (6,988) (2,754) (9,742)
Investment in joint venture (400,000) -- (400,000)
Additions to intangible assets -- (3,443) (3,443)
Purchase of bank indebtedness of subsidiary -- (80,380) (80,380)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (406,988) (86,577) (493,565)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock 896,296 522,899 1,419,195
Loans from related parties 128,851 47,531 176,382
----------- ----------- -----------
Net cash provided by (used in)
financing activities 1,025,147 570,430 1,595,577
----------- ----------- -----------
Increase (decrease) in cash -- -- --
Cash and cash equivalents,
beginning of period -- -- --
----------- ----------- -----------
Cash and cash equivalents,
end of period $ -- $ -- $ --
=========== =========== ===========
31
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
Years Ended September 30, 2003 and 2002
For the Period From Inception (August 22, 2001) to September 30, 2003
Period From
Years Ended Inception To
September 30, September 30,
2003 2002 2003
---- ---- ----
Supplemental cash flow information:
Cash paid for interest $ 35,123 $ 5,570
Cash paid for income taxes $ - $ -
Non-cash Investing and Financing Activities:
Common stock issued for debt conversion $ - $ 1,163,069
Common stock issued for acquisitions $ - $ 1,424,859
Common stock issued for joint venture costs $ - $ 855,615
See accompanying notes to financial statements.
32
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Organization and Nature of Business
Financial Express Corporation ("FEC") was originally incorporated in
the State of Nevada on January 5, 1989, as Harley Equities, Inc.
During December 2002, the Company completed its acquisition of
Barrington Sciences International Corporation's ("BSIC") net assets,
subsequently FEC changed its name to Barrington Sciences Corporation
(together with its subsidiaries, the Company). The acquisition was
accounted for as a reverse acquisition and the comparative amounts
represent BSIC's financial position, results of operations and
cash-flows.
The Company is a development stage enterprise and through its
subsidiaries, has been engaged, since August 2001, in the research,
development, manufacture and distribution of specialized medical
diagnostic test kits.
Note 2 Summary of Significant Accounting Policies
----------------------------------------------------------------------
Going Concern
----------------------------------------------------------------------
The Company experienced significant operating losses since inception
totalling approximately $4 million. In addition, as at September 30,
2003, the Company has a working capital deficit amounting to
approximately $235,000. The consolidated financial statements have
been prepared assuming the Company will continue to operate as a going
concern which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. No
adjustment has been made to the recorded amount of assets or the
recorded amount of classification of liabilities which would be
required if the Company were unable to continue its operations.
----------------------------------------------------------------------
Principles of Consolidation
----------------------------------------------------------------------
The consolidated financial statements include the accounts of
Barrington Sciences Corporation and the following subsidiaries:
ABP Diagnostics Ltd.
Fluid Separation Ltd. (ABP Diagnostics Ltd. owns 70%)
Barrington Sciences Corporation SDN BHD
All material inter-company accounts and transactions have been
eliminated.
Accounting Estimates
--------------------
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenues and expenses. Actual
results could vary from the estimates that were used.
33
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2 Summary of Significant Accounting Policies - (cont'd)
Accounts Receivable
-------------------
Accounts receivable are reported at the customers' outstanding
balances less any allowance for doubtful accounts, marketing credits
and allowance for possible sales returns.
Allowance for Doubtful Accounts, Marketing Credits and Allowance for
Possible Sales Returns
The allowance for accounts receivable is charged to income in amounts
sufficient to maintain the allowance at a level management believes is
adequate to cover any possible losses, credits or returns.
Inventory
Inventory is stated at the lower of cost (determined on the first-in,
first-out method) or market.
Property and Equipment
Property and equipment are stated at cost. Major renewals and
improvements are charged to the asset accounts while replacements,
maintenance and repairs, which do not improve or extend the lives of
the respective assets, are expensed. At the time property and
equipment are retired or otherwise disposed of, the asset and related
accumulated depreciation accounts are relieved of the applicable
amounts. Gains or losses from retirements or sales are credited or
charged to income.
The Company depreciates its property and equipment for financial
reporting purposes using the straight-line method based upon the
following useful lives of the assets:
Furniture and equipment 20% Declining Balance
Machinery and equipment 20% Declining Balance
Income Taxes
------------
Provisions for income taxes are based on taxes payable or refundable
for the current year and deferred taxes on temporary differences
between the amount of taxable income and pre-tax financial income and
between the tax basis of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently
enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, Accounting for Income
Taxes. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income
taxes.
34
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2 Summary of Significant Accounting Policies - (cont'd)
Net (Loss) per Share
--------------------
The Company adopted Statement of Financial Accounting Standards No.
128 that requires the reporting of both basic and diluted (loss) per
share. Basic (loss) per share is computed by dividing net (loss)
available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted (loss) per share
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock. In accordance with FASB 128, any anti-dilutive effects
on net (loss) per share are excluded.
Long-Lived Assets
-----------------
Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment of Long-lived Assets and for Long-Lived Asset to be
Disposed Of," requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset in question may not be recoverable.
Disclosure about Fair value of Financial Instruments
----------------------------------------------------
The Company estimates that the fair value of all financial instruments
as of September 30, 2003 and 2002, as defined in FASB 107, does not
differ materially from the aggregate carrying values of its financial
instruments recorded in the accompanying consolidated balance sheets.
The estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation
methodologies. Considerable judgement is required in interpreting
market data to develop the estimates of fair value, and accordingly,
the estimates are not necessarily indicative of the amounts that the
Company could realize in a current market exchange.
Foreign Currency Translation
----------------------------
For the Company's subsidiaries outside of the U.S., the local currency
is the functional currency. In accordance with the Statement of
Financial Accounting Standards (SFAS) No. 52, "Foreign Currency
Translation", the financial statements of these subsidiaries are
translated into U.S. dollars as follows: assets and liabilities at
year-end exchange rates; income, expense and cash flows at average
exchange rates; and stockholders' equity at historical exchange rates.
For those subsidiaries for which the local currency is the functional
currency, the resulting translation adjustment is recorded as a
component of accumulated other comprehensive income (loss) in the
accompanying consolidated balance sheet. Translation adjustments are
not tax-effected since they related to investments, which are
permanent in nature.
For certain other subsidiaries, operations are conducted primarily in
U.S. dollars, which is therefore the functional currency. Monetary
assets and liabilities, and the related revenue, expense, gain and
35
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2 Summary of Significant Accounting Policies - (cont'd)
Foreign Currency Translation (Continued)
----------------------------------------
loss accounts, of these foreign subsidiaries are re-measured at
year-end exchange rates. Non-monetary assets and liabilities, and the
related revenue, expense, gain and loss accounts, are re-measured at
historical rates.
Shipping and Handling Costs
---------------------------
The Company's policy is to classify shipping and handling costs as
part of cost of sales in the consolidated statement of operations.
Note 3 Recent Accounting Pronouncements
In 2002 and 2003, the FASB issued the following statements:
SFAS No. 141 - Business combinations
SFAS No. 142 - Goodwill and other intangible assets
SFAS No. 143 - Accounting for asset retirement obligation
SFAS No. 144 - Accounting for the impairment of disposal of
long-lived assets
SFAS No. 145 - Recession of FASB statements, 4, 44 and 64 and
amendment of FASB 13
SFAS No. 146 - Accounting for costs associated with exit or
disposal activities
SFAS No. 147 - Acquisitions of Certain Financial Institution
SFAS No. 148 - Accounting of Stock-based Compensation -
Transition and Disclosure, an amendment of
FASB statement No. 123
SFAS No. 149 - Amendment of Statement No. 133 on Derivative
Instruments and Hedging Activities
SFAS No. 150 - Accounting for Certain Financial Instruments
with Characteristic's of Both Liabilities and
Equity.
The Company followed the guidance of SFAS No.s 141 and 142 in
recording the acquisitions of ABP Diagnostics Ltd. and Barrington
Sciences International Corporation. SFAS No.s 143-147 and 149 did not
have a material impact on the Company's financial position and results
of operations.
The disclosure and valuation method provisions of SFAS No.148 have
been adopted by the Company, however, the Company did not issue any
stock options to its officers and employees during the years. SFAS
No.150 is effective for financial instruments entered into or modified
after May 31, 2003 and is otherwise effective at the beginning of the
first interim period beginning after June 15, 2003. SFAS No. 150 did
not have a material impact on the Company's financial position and
results of operations.
36
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 4 Reverse Acquisition
On December 30, 2002, the Company (FEC) entered into an "Asset
Purchase Agreement" with Barrington Sciences International Corporation
("BSIC") including its wholly owned subsidiaries. The transaction was
accounted for as a "reverse acquisition" since FEC was an inactive
shell company and no change of ownership of the BSIC assets occurred.
Application of reverse take-over accounting results in the following:
a) The consolidated financial statements of the combined entity are
issued under the name of Barrington Sciences Corp. (formerly
FEC), but constitute the continuation of the financial statements
of BSIC. However, the capital structure of the consolidated
entity at September 30, 2003 and for all periods presented is
that of BSC.
b) As BSIC is deemed to be the acquirer for accounting purposes, its
assets, liabilities and operations since incorporation are
included in these financial statements at their historical
carrying value. The operations of FEC are not significant and are
included from December 30, 2002. The accumulated deficit of FEC
was eliminated against additional paid-in capital as of the
purchase date.
c) Control of the assets and operations of FEC is considered to be
acquired by BSIC in exchange for 3,100,596 shares of newly issued
restricted common stock. Additionally, certain controlling
shareholders of BSIC transferred an aggregate of 644,105 of
founders shares of BSIC to FEC shareholders to complete the
transaction.
All direct costs relate to the reverse take over acquisition have been
included in the Company's results of operations.
Note 5 Property and Equipment
2003
----
Property and equipment and accumulated depreciation
consists of:
Furniture and equipment $ 45,801
Machinery and equipment 117,148
---------
162,949
Less accumulated depreciation (44,521)
---------
$ 118,428
=========
37
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 6 Deferred Charges
During the year ended September 30, 2002, BSIC incurred the cost of
$35,000 in relation to the sale of its consolidated assets to BSC,
formerly FEC. The costs were expensed in current year in which the
sale of assets was completed.
During the year ended September 30, 2003, the Company incurred the
cost of $15,000 in relation to its plan to acquire the assets of
Memco-Tec Limited of Guangzhou, China. The acquisition plan was
abandoned and the costs were expensed in the year.
Note 7 Investment in Weihai Barrington Biological Engineering Co. Ltd
(Joint Venture)
The Company and Shangdon Weigao Group of Weihai own Weihai Barrington
Biological Engineering Co. Ltd., the joint venture in China equally.
During the year, the Company has contributed $400,000 as registered
capital of the joint venture. The joint venture has not yet commenced
its business operations and the Company's capital contribution remains
on deposit with a Chinese bank. The Company plans to account for the
joint-venture an unconsolidated subsidiary using the equity method.
Note 8 Goodwill and Other Intangible Assets
The Company adopted the provisions of FASB 142 for the accounting for
goodwill and other intangibles. According to the FASB requirements,
these intangible assets and goodwill are capitalized and not
amortized. Each year, management is required to review the intangible
assets and goodwill to determine if there has been an impairment loss
to recognize on their carrying value. Management believes that there
has been an impairment of its intangible assets for the year ended
September 30, 2003 and has accordingly wrote down the balance of
goodwill relating to the acquisition of ABP Diagnostic Ltd. in the
amount of $910,249, licenses in the amount of $45,796, trademark and
patents in the amount of $147,482. Technology rights received in
connection with the acquisition of ABP Diagnostic Ltd. in 2002
amounting to $556,773 were considered by management to represent
purchased research and development costs and were charged to expense
in that year. Management believes that it will utilize the technology
rights in connection with manufacturing its medical diagnostic test
kits in future periods.
Note 9 Business Acquisitions
Acquisitions of Lexington Laboratories Inc. and Barrington Sciences
Corporation
On October 1, 2001, the Company acquired all the business assets of
Lexington Laboratories Inc. and Barrington Sciences Corporation. The
consideration includes assumption by the Company of the two acquired
companies' debt and issuance of 1,102,570 the Company's shares.
38
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 9 Business Acquisitions (Continued)
Acquisitions of Lexington Laboratories Inc. and Barrington Sciences
Corporation (Continued)
The business combination is accounted for using the purchase method.
The fair value of the assets acquired at the date of acquisition are
as follows:
Current assets $ 7,376
Furniture, equipment and machinery 45,604
Intangibles 900,898
-----------
Net assets acquired at fair values $ 953,878
===========
Total consideration:
Liabilities assumed $ 399,745
1,102,570 common shares of the Company 554,133
-----------
$ 953,878
===========
Acquisition of ABP Diagnostic Ltd.
On May 31, 2002, the Company acquired 100% of the outstanding common
stock of ABP Diagnostic Ltd. The results of ABP Diagnostic Ltd.
operations have been included in the consolidated financial statements
since that date. ABP has available technical information relating to
the manufacture of a cassette and the assembly of a range of
individual diagnostic rapid test kits.
The business combination is accounted for using the purchase method.
The fair value of the assets acquired at the date of acquisition are
as follows:
Current assets $ 62,795
Furniture, equipment and machinery 100,228
Intangibles 647,662
Goodwill 910,249
-----------
Net assets acquired at fair values $ 1,720,934
===========
Total consideration:
Liabilities assumed $ 850,208
3,450,000 common shares of the Company 870,726
-----------
$ 1,720,934
===========
39
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 9 Business Acquisitions (Continued)
Acquisition of ABP Diagnostic Ltd. (Continued)
Had the acquisition been completed as of the beginning of the fiscal
year ended September 30, 2002, the results of operations would be as
follows:
Revenues $ 27,200
Net (loss) $ 1,904,586
Net (loss) per share $ (0.14)
Note 10 Share Capital and Commitments
Share Purchase Warrants
As at September 30, 2003, the Company has 563,567 share purchase
warrants outstanding which are exercisable at the option of the
shareholders, with an exercise price of CDN$0.75 per common share.
Note 11 Related Party Transactions
2003 2002
---- ----
Due to directors and officers $ 176,382 $ 47,531
The amounts due to directors are non-interest bearing and have no set
terms of repayment.
During the years, the Company, pursuant to the terms of various
management and service agreements, paid or made provision in the
accounts for the payments of the following amounts to its directors
and officers.
2003 2002
---- ----
Management fees $ 327,534 $ 220,000
Consulting fees 87,683 42,895
---------- ----------
$ 415,217 $ 262,895
========== ==========
40
BARRINGTON SCIENCES CORPORATION AND SUBSIDIARIES
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 12 Material Contracts
On September 3, 2003, the Company entered into an agreement with
VicTorch Meditek Inc.("VicTorch), a California diagnostic products
company, pursuant to which the Company will acquire all of the
outstanding shares of VicTorch in exchange for 1,200,000 shares of the
Company's common shares plus $330,000 in cash. Payment of $30,000 has
been made during the year. The Company is committed to pay the balance
of $300,000 by December 31, 2003. Subsequent to December 31, 2003,
merger negotiations with VicTorch were suspended and the Company has
charged the $30,000 deposit to operations.
Note 13 Comparative Figures
Certain of the comparative figures have been restated to conform with
the current year's presentation.
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.
BARRINGTON SCIENCES CORPORATION
By: /s/ George Moore Date: October 20, 2004
----------------------------
George Moore
President and CEO and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the date indicated.
NAME & POSITION DATE: October 20, 2004
/s/ Phil E. Pearce
- -------------------------------
Phil E. Pearce
Chairman, and Director
/s/ George Moore
- -------------------------------
George Moore
President CEO and Director
/s/ Lorne Broten
- -------------------------------
Lorne Broten
CFO and Director
/s/ Dr. Anthony Reynolds
- -------------------------------
Dr. Anthony Reynolds
Director
/s/ Charles F. Payne
- -------------------------------
Charles Payne
VP Investor Relations & Director
42